Enerdynamics
Energy Insider

Renewables « Back to Energy Insider

The Future of Energy: The Election Is Over: What's In Store for the Energy Industry Under the Next Administration?

by Bob Shively, Enerdynamics President and Lead Facilitator

 

 

President Obama took office eight years ago determined to address the United States’ emission of greenhouse gases (GHG). The President was unsuccessful in getting Congress to take much action other than extending renewable production tax credits. And when Obama attempted to use regulation instead of Congressional action to address greenhouse gases, the EPA’s Clean Power Plan (CPP) became tied up in court.

But interestingly, market forces aided by actions of federal agencies have surprisingly helped reduce greenhouse gas emissions. The U.S. Department of Energy (DOE) recently reported that U.S. energy-related greenhouse gases for the first six months of 2016 are the lowest since 1991. Federal policies fostered by the DOE, Defense Department, FERC, and other agencies helped stimulate growth of green technologies including renewables, storage, and smart grids. Increases in energy efficiency kept electric loads from growing even as the economy rebounded. The Obama administration also supported natural gas development — U.S. natural gas production grew by 33% since Obama took office, and U.S. exports of natural gas grew by 117%. So now as we transition to the Trump administration, what changes can we expect?

It's hard to predict as there seems to be a significant gulf between Trump’s campaign statements and his statements as president-elect. But looking at what we know, it appears that while regulatory direction and other policies will change, the ultimate market direction will surprisingly be no different than under Obama. This means we can anticipate more growth of natural gas and renewables, ongoing decline in coal, and more reduction in U.S. greenhouse gas emissions.

Let’s consider some of Trump’s statements and stances relating to the energy industry:

  • He said we need to “level the playing field” among energy sources
  • He believes the energy industry should play a role in job creation and economic expansion
  • He believes nuclear energy is an underutilized resource and strongly supports further development of nuclear resources
  • His position on global warming is unclear but in general he seems to discredit the idea of man-made climate change and opposes any regulation on carbon emissions including the CPP
  • He believes clean-energy initiatives endanger lower- and middle-class jobs by increasing the cost of energy; at times he has said he’s OK with subsidies; he often belittled renewables in his campaign speeches
  • He supports increased use of fossil fuels and hydraulic fracturing and hopes to resuscitate the coal industry by removing barriers to mining
  • He believes the U.S. should invest in infrastructure to grow the economy, the government should get out of the way of businesses, and the U.S. should cut corporate taxes

So given these positions, what might the future hold for the U.S. energy picture? Trump’s Administration may do more to foster renewables and less to protect coal than it seems. Click on the links below to learn how each energy sector may or may not change in the Trump era.

Natural gas

Coal

Renewables

Electric transmission and distribution

Energy efficiency

 


 

 

 

 

 

NATURAL GAS

Possible Trump policies impacting the gas business:

  • Ease in restrictions concerning drilling on federal lands
  • Reduction of federal environmental regulations of gas production
  • Strong federal support for hydraulic fracturing
  • Quickened approvals on new pipeline projects
  • Support for growth in gas exports
  • Support for growth of U.S.-based manufacturing
  • Support for coal

Possible impacts on market:

  • Costs of production may slightly decline due to cheaper land availability and less money spent on environmental protection.
  • But, given that we are already in a supply glut, this may not change dynamics much as producers don’t have the market for any new supplies they could theoretically access.
  • New pipeline projects could help move gas from regions with excess supply to markets, but currently the barriers to new pipeline development generally are either economic or due to local opposition, so this may not have much impact.
  • In theory, growth in gas exports and growth in U.S. manufacturing could boost demand for natural gas and thus help support price. Petrochemical development in the Northeast could help boost demand there. As for exports, there is already a global glut of LNG supply, so in the short term it appears that exports to Mexico are the primary growth engine. Trump has talked extensively about the negative aspects of trade with Mexico, which may impede this scenario.
  • If coal makes a comeback, it will primarily reduce gas-fired electric generation.  We don’t believe this will occur much (see coal section of this article), but if it does, it will offset any demand growth from manufacturing.

Net impacts on natural gas:

Not a significant change; perhaps lower overall natural gas prices and slightly more demand.

 

 

Go back to list of sectors


 

 

 

 

COAL

Possible Trump policies impacting the coal business:

  • Ease in restrictions on coal development on federal lands
  • Ease in environmental rules (or maybe ease in enforcement of current rules) on coal-fired generation
  • Maybe other federal policies concerning tax benefits or subsidies to try to maintain employment in coal industry
  • Desire to foster coal exports
Possible impacts on markets:
  • Trump policies may extend the life of some coal-fired power plants that are currently marginal since plant owners may not be required to install emissions technologies. But many of these units have been retired already or are uneconomic compared to alternatives.
  • And, given that it appears that Trump’s policies may reduce natural gas prices, coal will be less competitive vis-à-vis gas.
  • Paradoxically for units owned by utilities, older depreciated assets that do not require new capital investment become less attractive since capital investment is what generates utilities’ earnings. In some cases, this may reduce a utility’s interest in keeping older units open.
  • Possible ongoing growth in renewables mixed with low gas prices will reduce potential revenue for coal units in competitive markets.
  • Exports could grow, but federal policy is not likely the issue currently limiting exports. Most incremental global demand for coal is from Asia, whereas current U.S. export capability is on the East Coast. Recent attempts to expand port facilities in Washington and Northern California to foster coal shipping have met extreme local opposition that the federal government may be unable to overcome.

Net impacts on coal:

Not much impact, although the life of certain marginal electric generation units may be extended.

 

Go back to list of sectors


 

 

 

RENEWABLES

Possible Trump policies impacting the renewables business:

  • Support for fossil fuel development
  • Reduced support by federal agencies for renewables and reduced funds for research and grants
  • Possible reversal of environmental regulations and international agreements that foster renewables development, especially the CPP and the Paris Agreement
  • Reduction in corporate tax rates
  • Support for infrastructure development


Possible impacts on markets:

  • For utility markets, the current development is driven by two factors: state level renewable portfolio standards (RPS) and economics (in cases where renewables are chosen for economic reasons in the Integrated Resource Planning). It does not appear that federal policies will impact existing state RPSs. As long as the Production Tax Credit stays in place, federal policies will not adversely affect the economic attractiveness of renewables.
  • Many renewable projects are being driven by corporate buyers (numerous big corporations now have significant goals to buy renewable power for economic or business policy reasons). It does not appear that federal policy will impact these goals.
  • Full implementation of the CPP could mean states that do not strongly support renewables must move to renewables to achieve CPP requirements. If the Trump administration fails to implement or enforce the CPP, we may see reduced growth in states implementing new RPS requirements.
  • Reduction in research, grants, and federal agency support for renewables may restrict future growth that otherwise may have occurred.
  • Reduction in tax rates improves the economics of large capital projects such as renewables development.
  • If Trump’s support for infrastructure includes federal policies to stimulate modernization of electric transmission and distribution this could further the capability of the grid to economically absorb more renewables.

Net impacts on renewables:

The negative impact on renewables may be less than it appears on the surface. Since initial growth in renewables have been stimulated by market developements, support by states, cost reductions, and Obama administration polices, future federal policy may not be a big factor. And paradoxically, some policies such as lower tax rates and infrastructure support may provide a boost to renewables. Also, it’s important to remember that much of Trump’s support came from Midwestern states that have been successful in profiting from development of wind power resources. So repeal of the Production Tax Credit appears unlikely.

 

Go back to list of sectors

 


 

 

 

ELECTRIC TRANSMISSION AND DISTRIBUTION

Possible Trump policies impacting electric T&D:

  • Reduction in tax rates
  • Support for infrastructure development

Possible impacts on markets:

  • Reduction in tax rates would improve project economics.
  • If Trump includes the electric system in his apparent push for infrastructure development, policies could help stimulate growth and modernization of T&D systems.

Net impacts on electric T&D:

The potential impacts are uncertain, but we could see a boost in T&D modernization.

 

Go back to list of sectors


 

 

 

ENERGY EFFICIENCY

Possible Trump policies impacting energy efficiency:

  • Support for fossil fuel growth, reduction in regulations, and “getting government out of the way” would appear to foreshadow a lack of support for energy efficiency initiatives (though Trump has been very silent on the topic of energy efficiency).

Possible impacts on markets:

  • Reduced federal regulations such as appliance standards that foster energy efficiency may result in reduced growth in energy efficiency.
  • Reduced federal agency support could result in less government spending on energy efficiency.

Net impacts on energy efficiency:

Possible reduction in emphasis on and support for energy efficiency initiatives.

 

Go back to list of sectors

 

Enerdynamics
Click here for more information or call 866-765-5432 Fan us on Facebook Follow us on Twitter

Enerdynamics Corporation • 3101 Kintzley Court, Unit F • Laporte, CO 80535 • (866) 765-5432 • info@enerdynamics.com

Legal: The Energy Insider and the content within include statements, opinions and analysis relating to energy industry topics of interest. The purpose of this newsletter is to apprise readers of industry trends and news. The information contained in this newsletter is provided as general information for educational purposes. Enerdynamics takes no responsibility for the accuracy of forward-looking statements or opinions of third-party sources.

Unsubscribe Forward