President Trump has announced that the US will withdraw from the Paris Climate Accords, part of a sweeping pro-fossil fuel agenda. One way to look at this is through the lens of déjà vu. The first time this happened, some segments of the energy transition faltered, others continued much as before, and still others came into being for the first time, such as the battery energy storage industry.
One major difference this time is that the manufacturing and tariff introduced by President Trump has been implemented by President Biden in a manner which includes renewable energy. The IRA is not going to be completely reverted, and the investments made, often into red states, are not going to disappear. So there’s a tension – among major economies, the US is now second only to Russia in its disinterest in clean energy, at least where the top leadership is concerned. And yet the US still has a partial green manufacturing base put in place by the previous administration, and it is still a very lucrative market.
Another irony is that President Biden presided over an increase in oil output, and that both the US and global energy markets are in a tense state – due to sanctions on Russian exports, data centers rapidly adding load to the grid, and sustained economic growth in general. Just as President Biden couldn’t cut oil production without handing market share to Russia, now if renewables don’t find support from the Trump Administration, then they will find redoubled backing from the corporate sector.
Both administrations will end up pursuing an “all of the above” energy policy, in outcome if not in intention. The US solar fleet doubled during Trump’s first term, driven by economic realities and state-level policies even under a hostile federal regimen.
Offshore wind is the clear outright loser, but onshore wind has also been quietly declining in recent years due to high costs, both compared to other energy types within the US and to onshore wind in other markets.
Nuclear power development is the biggest question mark. The US has adopted a 200 GW growth target for 2050, but new nuclear developments are effectively going to come from a brand new industry after thirty years with almost no new nuclear built – that’s equally true whether large, GW-size, relatively traditional nuclear reactors are pursued, or whether the completely novel SMR concept takes. In any case, Trump’s pick of Chris Wright as energy secretary is a positive for nuclear energy, and the 4-year (or two-year) election cycle is rapid compared to the pace of a nuclear strategy.
The new paradigms for US renewables this time around are batteries, and the price variation and grid congestion they exist to solve; data center driven demand growth and the corporate backing that will bring for renewable energy; and an ever more restrictive trade policy, which at least in the case of solar will be softened by a growing domestic manufacturing base.
Outside of renewables themselves, another major question mark is the price of fossil fuels during President Trump’s second Administration. Will his agenda to increase US production of oil and gas result in lowered prices (bad for renewable energy investment) at home and globally? Or will increased US output be used to support further restrictions on the market share of rivals such as Russia and Iran, which would threaten to increase global energy prices on net?