Trump and Renewable Energy

When the winds of change blow, some people build walls. Others build windmills.

[a version of this post first appeared in Construction Manager magazine on 10 November 2017]

The election of a President who thinks "climate change is bullsh*t" and a hoax propagated by the Chinese is not exactly fantastic news for the US renewable energy industry. Trump’s stance on regulation, his disdain for environmental protection and his new-found support for blue collar workers in the old heavy industrial sectors means he is likely be much more friendly to the fossil fuel industry than the Obama administration has been. 

Among his many proclamations during the campaign, Trump has promised to ‘save’ the US coal industry. Whilst he may be able to slow its malaise by rolling back on regulation and carbon emissions commitments, it's unlikely that he will be able to save it. Coal in the US is in terminal decline – the abundance of shale gas and the inexorable rise of renewables is killing it off. 

It is well documented that Trump is no huge fan of renewables. When our Supreme Court had the temerity to rule in favour of the construction of a small off-shore wind farm near his Aberdeenshire golf resort, much to his disdain, he labelled the Scottish Government as “foolish, small-minded and parochial” and the development of solar and wind projects as “a dangerous experiment”.

Strong words, but even the staunchest critic of renewables would hardly argue that solar and wind technology is dangerous or experimental, at least not credibly. Trump’s motivation of course was selfish rather than philosophical – a windfarm a few miles off the coast might spoil the vista for his millionaire chums teeing off on the 9th hole.  Now that Trump is the President in waiting one would hope that his personal business interests will not impact on his administration's policies. Alas, Trump has shown himself to be a man with a long memory for anything and everything he considers has wronged him and does have a certain predilection for petty vengeance. The US wind power industry might have cause to be a little nervous: hell hath no fury like a narcissist scorned, especially one that’s about to be the planet’s most powerful person. 

All that said, the US renewables sector has made great strides in recent years and is now one of the World's top generators of clean energy. In many respects this is now market-led although President Obama's policies certainly got the ball rolling. It will be very difficult if not impossible for Trump to reverse the renewables revolution.

For the big energy utilities now, think Kodak or Blockbuster Videos fifteen years ago.  Unlike the President Elect’s complexion, for the US utility companies, the future is most certainly not orange.

The solar industry in particular has taken off and is now a sustainable business model without the need for state subsidy.  The increased investment in solar means cost keeps falling (every time solar capacity doubles, cost drops by about a quarter) and competition and innovation means panel efficiency keeps increasing. The US has an extensive network of localised solar schemes made possible by the domestic ‘finance-procure-install’ models offered by the likes of SolarCity. Add to this the increasing viability and cost-effectiveness of battery storage technology and innovative products such as Tesla's solar roof tiles – which address the aesthetic issues regarding unsightly rooftop solar panels – and the localised (predominantly renewable) energy generation sector is now a serious challenge to America's existing centralised utilities.

Indeed, many commentators believe the larger centralised energy generation industry will be defunct in fifteen or so years because it simply cannot compete. The cost of transmission of centralised energy alone, that is the cost of getting it from the power station to your house, will be greater than the total cost of localised generation. For the big energy utilities now, think Kodak or Blockbuster Videos fifteen years ago.  Unlike the President Elect’s complexion, for the US utility companies the future is most certainly not orange.

So, whilst renewables stocks, and in particular solar, have taken a bit of a pounding on Wall Street in the immediate aftermath of the election result, this is probably more to do with reactive nervous traders coming to terms with the unexpected result rather than a true devaluation of the renewables industry. The only thing likely to get in the way of the dominance of localised renewable energy generation is if Trump permits the utility companies to impose charges (i.e. taxes/penalties) on local / self-generation, thereby allowing the utilities to compete – and as already happens in Arizona. Such an interventionist approach is not likely find favour with the laissez-fair favoring Republican Party base, but Trump hasn't thus far shown much interest in keeping them on-side.

There’s an old Chinese proverb: “When the winds of change blow, some people build walls. Others build windmills”. It seems particularly apt for this President Elect, who we must assume is likely to forsake building windmills and instead focus on building his wall. His beautiful, tremendous, bigly wall, but nonetheless just a wall.