by Bob Shively, Enerdynamics President and Lead Facilitator

Last week we looked at how the incoming Trump administration may or may not significantly impact the energy industry, particularly the natural gas and coal sectors. This week we continue the discussion but are examining how a Trump presidency may impact renewables, energy efficiency, and electric transmission/distribution sectors.

Renewables

Possible Trump policies impacting the renewable energy 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 has 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.

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.

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.

So, in conclusion, what can we say about a Trump administration’s impact on energy markets? In this case, it appears that markets trump (sorry for the pun) presidential politics. While the new administration may seem like an extreme departure from Obama’s policies, it appears that when actual market impacts are considered, the change may prove to be not much at all.