The One Energy Sector Trump Could Change the Most – and No, It’s Not Coal

As you read this, Marina and I are off again, this time to Doha and Abu Dhabi. I have no doubt I will hear quite a lot from colleagues in the Persian Gulf about recent events…

You see, the reaction abroad to the U.S. election is becoming more pronounced, as global interests readjust to an uncertain political climate in Washington. That not only complicates how they view international energy questions in the near-term…

It’s also likely to make my stay in the Persian Gulf that much more difficult. Yes, we’ll discuss OPEC’s ongoing negotiations over a deal to cap oil production, as well as the potential repercussions from Trump re-imposing sanctions on Iran…

But more importantly, I’ve just received word that a new item has been added to the agenda for my energy meetings in the Persian Gulf. It’s an issue I introduced to you last Tuesday, while votes were still being cast…

An issue crucial to energy companies both here in America and abroad…

Solar’s Place in the U.S. Energy Balance is Uncertain

Back at home, much of the American population is continuing to digest an unexpected Trump victory last week. A narrow electoral college win (the only one that matters under the Constitution) may offset a popular vote loss that may end up amounting to almost 2% of the total votes cast. But the fracas is not likely to simmer down any time soon.

In addition, as you saw last Thursday, two major policy issues will, as a result of the election, play a huge role in the energy sector moving forward: Trump’s promise to make America energy independent, and his desire to renegotiate or cancel the “nuclear deal” with Iran.

But on Election Day itself, while voting was still going on, I mentioned another issue that will be crucial to the next administration…

And this single element may have a greater impact.

As I noted in last Tuesday’s Oil & Energy Investor (the one released before the votes were counted), whichever candidate won, the pursuit of a balance among sources must be our domestic energy policy moving forward. This approach requires us to optimize the usage of oil, natural gas, coal, nuclear, and renewables in a multi-sourced environment. The key is to provide as much interchangeable energy as possible.

That allows one source to compensate for others in a more efficient and available network. But for this to happen, there needs to be continued expansion in all of the major energy categories and some serious attention given to the production and delivery infrastructure among them.

The Trump campaign’s pledge to make the U.S. energy independent has largely been regarded as a move to support more oil and natural gas drilling, as well as an increasing reliance on coal. I treated the pluses and minuses of that approach in last Thursday’s Oil & Energy Investor.

Today, I want to focus on a necessary cog in the energy balance and national energy self-sufficiency: renewables. Specifically solar, and its place in the national energy sector under a Trump administration…

The New Administration Seems Set to Deprioritize Solar

At the outset, nobody associated with the incoming White House has voiced any opposition to solar. After all, in many parts of the country, solar has made significant gains over the past several years, and reached “grid parity” (equal or lower power generation cost) with more conventional sources of power generation (coal and natural gas).

The problem comes from elsewhere. Republicans kept their majorities in both houses of Congress, and many Republican members of Congress have long voiced disapproval about the subsidies that solar (and other renewables) have been provided.

Now, solar power’s recent moves toward grid parity have taken place without subsidies. Instead, the falling costs of renewables are due to the completion of infrastructure capital needs. That is, the required network and grid connectors are in operation, thereby reducing the comparative cost of power generation.

Still, subsidies remain on the end-user side. Some of those are at the state level. But federal assistance is likely to be under pressure when the 115th Congress convenes for business in January.

Then there are the strong signals coming from Trump’s transition team that they are looking for ways to remove the U.S. quickly from the Paris Climate Accord. Renewables are a staple in that agreement’s pledge to lower the global carbon footprint and move toward cleaner fuels.

However, the mood in the “new” D.C. seems to support a return of a national energy policy dominated by fossil-fuels, and an increasing indifference to what the rest of the world may think. The market has recognized that shift, with solar stocks crashing by up to 10% since Trump’s victory.

This will certainly be a central part of my discussions in the Persian Gulf over the next week…

The Persian Gulf Has Huge Solar Resources

The region just happens to house some of the world’s largest next-generation solar generating complexes.

The United Arab Emirates, where I will spend most of my time between now and when we return on Thanksgiving, and Saudi Arabia have the largest commitments in huge new solar plants worldwide. Now, both these countries remain heavily dependent on crude oil exports for the bulk of central budget revenues. Yet they have also moved decisively into diversifying energy sources within each of their economies.

Already, issues are surfacing that will occupy my time over the next week. My Middle Eastern and global colleagues have placed on the talking agenda matters ranging from handicapping an OPEC oil production cap at its next meeting in Vienna (at the end of this month), to the effect on regional security from Trump’s pledge to cancel the Iranian nuclear deal (and re-impose sanctions against Tehran’s oil sales).

Now I have received word that the concern over balancing energy sources – the very issue I raised last Tuesday as an internal U.S. policy matter – is something we will address.

What’s said there will show the path forward for renewables in the Middle East and beyond, including here at home…

I’ll share as much as I can with you right here in Oil & Energy Investor.

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