On November 3, voters went to the polls in the midterm elections across America and delivered a major victory for the Democratic Party. The Democrats flipped control of the Senate by a substantial margin and took control of the House of Representatives with a large majority. Crucially, they also won many tight races up and down state-level ballots, including in Republican strongholds such as Texas. This brief breaks down some of the most important results and focuses on what this election could mean for innovation, energy, climate tech, and AI.
Congressional races: The Democrats have secured congressional majorities
As of the time of writing, the Democrats have secured 54 seats in the Senate, flipping critical battleground states, including North Carolina, South Carolina, Ohio, Iowa, Texas, Maine, and Kansas. Democrats could pick up two more Senate seats, although these races are much closer. Combined with a newfound majority in the House, the Democrats can now do much more to oppose the Trump administration’s plans for climate tech and the economy, and to push their own objectives in the legislature. We are watching a handful of key impact areas:
- Permitting reform: Permitting reform has already drawn bipartisan agreement, although lawmakers have debated the details of a bill at length. Negotiations slowed in the past few months as members of the House and Senate waited for the midterms to decide who would hold the balance of power. Now firmly in the driver’s seat, Democrats are in a position to push for much more sustainability-friendly permitting reform. Such reform will largely benefit wind, solar, and distributed energy resource management systems (DERMS) like batteries. The final bill will likely resemble the deal already negotiated, but Democrats can use their new majority to win further concessions from Republicans. The broad bipartisan support means Trump is likely to sign it into law.
- War with Iran: Voters were clearly unhappy with prices at the pump and Trump’s decision to start a war with Iran. It remains to be seen, however, whether Trump will change course and move toward ending the war. Even if he does, Iran and other groups in the Middle East will have to accept such an end, and they may continue to put pressure on energy infrastructure and trade routes. No clear resolution to the conflict appears to be on the horizon.
- Data centers and AI: Data centers were one of the major issues of the election, and voters broke heavily for anti-data center policies and candidates. Congressional Democrats have proposed a wide range of policy solutions. These include a nationwide moratorium on data center construction, introduced by Sen. Bernie Sanders, and tighter restrictions on how data centers affect energy bills and water consumption. Many Democrats have also pushed to regulate AI directly, including limits on how companies use it and how they manage data collected from individuals. The outcome here is less clear. Data centers are deeply unpopular, and many Republicans suffered at the polls for supporting them. Congressional Republicans may feel they need to make concessions on national data center legislation to protect their popularity going forward. However, Donald Trump has strongly opposed any substantial AI regulation. If Congress couples these two issues, Trump may use his veto power to limit the impact. As we’ll discuss below, the biggest impacts on data centers and possibly AI are likely to come at the state level.
- Funding for clean tech: Over the past few years, funding for many clean tech R&D and rollout programs has either expired, as with programs supported by the Energy Act of 2020, or been cut by the Trump administration, mostly through executive action. Democrats will be in a much better position to support more funding for these programs. They may also contest some of the federal funding cuts, as many Democrats argue that these cuts were illegal or that Congress never authorized them. This funding will benefit clean tech generally, especially programs that support the rollout of energy efficiency and cost-saving technologies. Battery storage, heat pumps, and solar could benefit substantially.
- Federal agency independence: Donald Trump has gone to great lengths to exert control over traditionally independent federal agencies, including the Federal Energy Regulatory Commission (FERC) and the Nuclear Regulatory Commission (NRC). The Democrats could push for legislation that protects the independence of these agencies. They could also take other actions, such as subpoenaing senior members of the Trump administration, to try to restore these agencies’ independence.
- Tariffs: Democrats are very likely to try to push back on Trump’s tariffs. However, few Republicans currently support reining in Trump’s tariff powers. The fight is more likely to end up as damage control, with Democrats negotiating exemptions and carve-outs for economically significant sectors. Trump’s behavior may also be constrained by the deep unpopularity of his economic policies, particularly tariffs, and by the economic impacts of the war with Iran. Tariff escalation will likely slow significantly. But Democrats are unlikely to fully wrest control of tariff policy from Donald Trump. For real tariff reform, they will likely have to wait until 2028, when they could potentially elect their own president.
State-level races: Blue Texas
Amid many state level wins, Democrats claimed a truly seismic victory in Texas, securing not only the U.S. Senate seat with James Talarico but also the governorship and a number of state-level races. Governor-elect Gina Hinojosa has promised a moratorium on data centers. She has also proposed rolling back tax exemptions for data centers, setting stricter rules on water consumption, and freezing retail electricity prices. Democrats seem likely to gain control of the Texas House but will not be able to win the Texas Senate. Without a state government trifecta, their legislative agenda will be limited. But Hinojosa’s agenda is very likely to slow data center development in Texas, which has been the largest single growth market for data centers.
Democrats also won a seat on the three-person Texas Railroad Commission (RRC). Despite its name, the commission does not regulate railroads; it regulates the oil and gas industry in Texas. The win marks the first time since 1990 that Democrats have held a seat on the RRC. Jon Rosenthal’s priorities include stronger enforcement of existing sustainability and anti-pollution regulations, a crackdown on natural gas flaring and venting, a stronger focus on plugging oil and gas wells, and more regulation of data centers. Continued Democratic strength in Texas could hand Democrats control of the RRC in 2028, giving the party significant power to shape the global energy sector.
The net result of these changes is likely to be a significant slowdown in data center development, but the impact on clean tech rollout should be much more muted. The data center pullback could slow clean tech overall, as data centers are driving a huge amount of investment right now. Even so, support for grid stabilization, lower energy prices, and a stronger crackdown on natural gas flaring and venting could all help technologies like distributed energy resource management, energy storage, wind, and solar continue to grow.
Ballot initiaves: Data centers lose big on the ballot
Data centers were a critical political issue in many individual races, and they also appeared directly on the ballot. There were roughly 45 ballot measures at the state, municipal, and local levels across the country. They took the form of bans, moratoriums, new rules on data centers, and, in some cases, direct referendums on specific projects. An overwhelming majority of these measures have passed, often by very strong margins. At least 30 wins for the anti-data center movement have been confirmed, and the movement seems on track to win more than 40 of the 45 ballot measures. The wave of measures will slow data center construction across the country. The likely outcome is significant delays, potentially as long as 12 to 18 months in many key areas. As noted above, Texas is likely to see a significant slowdown in data center construction, but the trend seems set to play out across the country as well. The slowdown will drive up the cost of building data centers. Many tax credits are set to end, and new rules and requirements will add costs as data centers must address their impact on the power grid and on other resources like water.
Tinjauan
The midterms are likely to be a significant win for climate tech. At the national level, Democrats will be empowered to fight for funding that the Trump administration cut from many critical R&D and investment programs. Across the country, stronger Democratic control of state governments will clear the way for continued expansion of wind, solar, and other clean technologies. Affordability was the main issue, so expect real momentum for any climate tech that can reposition itself around affordability: wind, solar, EVs, batteries, and even recycling and other circular economy approaches.
The fly in the ointment is the backlash against data centers. Over the past two years, climate tech companies have pivoted to supporting data center expansion, as data centers have become the key source of funding and investment across the economy. Will Democrats be able to offset the slowdown in data center spending with support for clean technologies? The push to bring down residential electricity prices will be critical here. If Democrats can make the case that clean technologies like wind, solar, and grid management are key to cutting costs, these technologies will likely keep growing even as data center development slows. Technologies that were unable to make the pivot to data centers are also in a much stronger position now. These technologies include methane leak detection, bio-based plastics and chemicals, and carbon capture. If Democrats can restore some federal funding for both R&D and rollout support, these technologies will be in a much better position than they have been over the past two years.
Clients should take a measured approach. At a high level, political volatility in the U.S. is not going away. Future elections will likely bring more big swings, and betting on consistent long-term support for any particular innovative technology remains a major risk. It’s clear, however, that pocketbook issues dominated this race. Going forward, the winning strategy will be to position climate tech as a critical way to lower prices for consumers. Republicans may feel compelled to go along with these policies given the extent of their losses. Investments in technologies with a clear consumer-facing angle, like DERMS, will be best positioned. Technologies like carbon capture are still likely to benefit from greater Democratic control of national and state governments, but they will face an uphill battle, as they cannot make a clear case for reducing costs. Clients should focus on the technologies with the clearest pathways to lower consumer prices.
