As the news sinks in that Trump will now be the president of the USA we wanted to take a specific look into what this means for the energy industry in the USA. Talking to the wider community in the UK, many have compared the similar shock of the election results in the USA to the Brexit announcement, yet the implications of this are potentially much larger and wider on a global scale.
A recent survey delivered by Energy Jobline indicated that 40% of renewable energy professionals were actually in favour of Trump, despite her preference for a strong renewable energy future. In contrast, the survey highlighted that 65% of oil and gas professionals would not be voting for Clinton, presumably favouring a supporter of the oil and gas industry for when it does show signs of recovery.Trump has made his feelings towards climate change and the environment fairly clear but how will this impact on the current energy industry, particularly the renewable energy sector and the current unstable future of the oil and gas industry?
The initial reaction to Trump becoming president…
Just last week Trump had constantly vowed to eradicate all federal spending on clean energy research and development. His plan would also include removing all other spending on any climate change related activities, including any of the Government’s climate science and research work.
The implications of his view on climate change and announcement of winning the election instantly impacted companies within the renewable energy industry. Shares in the world’s biggest maker of wind turbines plunged amid fears that a Donald Trump presidency will be disastrous for the renewable energy industry. Danish firm Vestas fell as much as 14 per cent before regaining some losses to trade 6.6 per cent lower at 440.20 kroner (£52.60). Vestas shares had already lost ground as the race tightened in the days before the vote.
Trump has promised an ‘energy revolution’ based largely around unleashing the untapped shale, oil and natural gas reserves, as well as the large ‘clean’ coal reserves. Within his manifesto he plans to ‘reduce all barriers to responsible energy production’ which he believes will lead to cheaper energy. The removal or general reduction of renewable energy subsidies will hit companies such as Vestas harshly.
Quite simply, the Vestas share reaction is a result of concerns that Trump will focus predominantly on fossil fuels. There is overall concern how companies such as Vestas will perform in the US under a president that essentially is more interested in the coal industry and disregards renewable energy research and views climate change as a hoax. According to an Ernst & Young survey that was published last month, the US is likely to lose its position as the top-ranked renewable energy market for investors under a Trump administration.
A more positive outlook…
Let’s be clear, having a President who favours fossil fuels over renewable energy and disregards the implications of climate change is a major concern for clean energy companies and environmental organisations tackling climate change. However, there are many experts that believe the renewable energy industry is in such a strong position that despite Trump’s beliefs and support for fossil fuels the renewable energy industry will continue to thrive due to its strong fundamentals. Renewable energy sources accounts for approximately 20% of generating capacity in the U.S. The demand for residential rooftop solar continues to be incredibly strong too. The industry recently hit the 1 million solar installation mark earlier this year. It's expected that it will only take two years before we reach 2 million solar customers. Clean energy continues and is likely to continue providing the most cost-effective option to utilities, businesses and homeowners nationwide.
Despite the policies ranted by Trump, the underlying fact remains that renewable energy is the most popular and cost effective option for the new generation. President Obama did not shut down the drilling industry in the USA. The drilling industry declined due to oil prices.
There is also the concern what will happen to the Clean power plan put in place by Obama to reduce carbon pollution from power plants. There are currently 18 states that are on track to hit the CPP’s 2030 targets and current trajectory indicates there will be no change here. It is the respective costs of each energy source, not the regulations, that is driving the change and resulting in the coal industry employing less than 150,000 people whilst the solar industry employers more than 200,000.
Trump will need to support competitive energy markets and modernized grid infrastructure that will allow consumers to become more active participants in the energy market. More competition in the energy sector and engagement by customers means that consumers come out ahead by getting access to cheaper, cleaner and safer electricity that will help create jobs and grow our economy.
The energy sector is ultimately being driven by market forces and consumer demand, not by the politicians who make promises that they are incapable of achieving. The market will be the force, dictating which sources of energy the USA will rely on in the future and as a result it is likely the clean energy industry will continue to expand.
Sources: CNBC, The Guardian