‘Blue Wave’ Could Lift Korean Renewable Energy, Battery and ESS Shares, Surprise Outlook Stirs Retail Investors [Noh Jung-dong’s Accidental Investor]

Democrats to Restore Clean-Energy Tax Credits, Pledge Broader ESS Investment

A Democratic sweep of both chambers in the U.S. midterm elections this November could benefit renewable energy, battery and energy storage system, or ESS, shares in South Korea, according to an analysis from the brokerage industry.

Park Hye-ran, an analyst at Samsung Securities, said on October 4 that a Democratic victory would provide an additional driver for energy demand. Republican-led policies that have curbed renewable-energy subsidies and ended investment tax credits could be partly revised, she added.

In the November 3 midterm elections, all 435 seats in the House of Representatives, whose members serve two-year terms, will be contested. In the Senate, 35 of the 100 seats, or about one-third, are up for election. Gubernatorial races will also be held in 36 states.

In the House, Republicans currently hold 218 seats and Democrats 214, excluding one independent and two vacancies. With the gap narrow, Democrats would be able to take control if they gain four more seats.

The Senate is similarly close, with Republicans holding 53 seats and Democrats 47. A net gain of four seats would also give Democrats a majority there.

Prediction market platform Polymarket is pricing in a 62% chance of Democrats winning both the House and Senate. That is up from 51% in March, before the U.S.-Iran war broke out, with the odds rising sharply as the election approaches.

Samsung Securities named renewables and utilities as the sectors with the strongest rebound potential if a blue wave materializes. Democratic leaders have said they would restore clean-energy tax credits scaled back by the Trump administration and expand investment in ESS.

If Democrats win at least the House, some Republican-led policies could be revised, Park said, opening the door to policy support for renewable energy. Democratic control of the chamber would also strengthen the party’s leverage in next year’s budget and debt-ceiling negotiations. If Democrats use that as leverage to seek changes to some conditions attached to renewable-energy subsidies, Republicans would be likely to accept them, she said.

One of the biggest issues in the midterm elections is electricity costs, including those linked to data-center construction. Republicans are pushing to expand nuclear power generation and gas turbines to meet surging power demand and bolster fuel supply-chain security.

Democrats, by contrast, are emphasizing an expansion of renewable energy to ease inflation pressures.

In the U.S., investment tax credits for solar were set to end early through revisions to the Inflation Reduction Act, or IRA, made last year. Utility-scale solar projects will qualify only if they begin operating by the end of next year. Incentives for residential solar ended at the end of last year.

For onshore wind, the production tax credit, or PTC, will also expire earlier than under the IRA under the One Big Beautiful Bill Act, a tax-and-spending law passed in July last year. If projects planned for 2028 to 2030 that were shelved because the tax-credit expiry weakened their economics resume, wind-installation forecasts could rise sharply.

South Korea’s battery sector slumped last year after passage of the OBBBA and President Donald Trump’s signing of an executive order. The administration formally scrapped former President Joe Biden’s mandate calling for electric vehicles to account for 50% of sales by 2030. Weak sales in the U.S., a key end market for batteries, also lowered utilization rates at Korean companies.

Jang Jung-hoon, an analyst at Samsung Securities, said legislation to encourage EV consumption remains unlikely during Trump’s term even if a blue wave emerges. Still, because Democrats have explicitly called for upgrading the aging power grid and transmission network, the push for broader deployment of grid-linked ESS is likely to remain intact, he said.

Separately, the Kospi has tended to rise after U.S. midterm elections in election years.

Han Ji-young, an analyst at Kiwoom Securities, said returns over the six months and 12 months following past elections were generally positive. The rebound from the trough was also similar for the Kospi and the S&P 500, at around 10%. Rather than viewing the post-election rally as Korea-specific excess returns, it is more reasonable to interpret it as a recovery in risk appetite after uncertainty eases, he said.

Noh Jung-dong, Hankyung.com reporter dong2@hankyung.com