By Earl J. Ritchie, Lecturer, Department of Construction Management
Donald Trump’s rhetoric on climate change and other regulations sounds like bad news for renewables. But subsidies and abundant natural gas will also be factors in how quickly renewable energy grows.
There are varying opinions of Donald Trump’s likely effect on the growth of renewable energy in the U.S.: He’s bad for it; he’s not bad for it. Trump has called climate change a hoax and said he would abolish the Environmental Protection Agency, abandon the EPA’s Clean Power Plan, pull out of the Paris Agreement and boost coal and natural gas, positions which he has since largely moderated.
Certainly, Trump’s pre-election statements on fossil fuels and renewable energy were worlds apart from Hillary Clinton’s. A pre-election estimate of their comparative effects can be seen in this Platts analysis.
So, Clinton would have been great for renewable energy, Trump not so great. Everybody knows that. But, how bad would Trump be?
The pace of renewables growth will be affected by numerous separate policy decisions. These include the Clean Power Plan, the Investment Tax Credit and Production Tax Credit for renewables and the addition or reduction of restrictions on fossil fuel production and consumption.
Let’s look at the analysis in the EIA’s 2016 Annual Energy Outlook of the Clean Power Plan (CPP), which Trump said he would eliminate. In the base case, the impact of the CPP on renewables is actually relatively small. By 2030, the amount of electricity generated by wind and solar are 683 billion kWh; without it they are 571. These are annual growth rates of about 7.5% and 6%, respectively. The big impact is on coal, which declines by 28% under the CPP but grows by 5% without it.
The CPP mandates targets, not methods, so other scenarios are possible, some of which are shown in the EIA report.
The Clean Power Plan is only one factor in potential growth of renewables. As I pointed out in earlier blogs, subsidies have a big impact. The two important ones at the federal level are the Investment Tax Credit and the Production Tax Credit. The estimate in the graph below, modified from a National Energy Renewable Laboratory report which modeled the effects of the five-year extension passed in 2015, shows the difference that the extension of these credits makes. Added renewable generation capacity due to the credits is about 50 gigawatts in just five years, or about 25% of currently installed capacity. The growth rate with the credits is about twice the rate without.
Continued differences could be expected if subsidies are extended beyond 2020. Trump has not specifically threatened these credits, although he has promised to “cancel billions in climate change spending.”
Assuming the credits for renewables are not extended beyond 2020, natural gas prices, which will also be affected by Trump’s policies, will be a more significant factor. In the National Energy Laboratory’s analysis, both the extension and no extension scenarios show slower renewables growth when gas prices are low. In the extension scenario, renewable capacity in 2030 is about 100 gigawatts lower in the Low Gas Price case than in the Base Gas Price case; in the no extension scenario it is about 125 gigawatts lower.
The 2020 gas price in the low price scenario was about $3 per thousand cubic feet, significantly higher than the current price. If government policies favoring the industry result in continued low natural gas prices, it would further suppress renewables growth.
Arguments for the continued rapid growth of renewables include the possibility that the Clean Power Plan, Investment Tax Credit and Production Tax Credit will not be repealed, that state mandates and subsidies will continue and that the continuing cost decrease of renewables will make them more competitive. The latter two factors will almost certainly continue, so the important differences will be in the federal credits and fossil fuel policies.
It is impossible to tell which policies will be implemented at the national level. The Investment Tax Credit and Production Tax Credit may stay in force because they are favored by many Republicans in states that benefit from these credits. Policies favoring the oil industry and weakening or abandoning the Clean Power Plan seem likely.
It looks virtually certain that renewables growth will continue, but at a much-reduced pace.
Earl J. Ritchie is a retired energy executive and teaches a course on the oil and gas industry at the University of Houston. He has 35 years’ experience in the industry. He started as a geophysicist with Mobil Oil and subsequently worked in a variety of management and technical positions with several independent exploration and production companies. Ritchie retired as Vice President and General Manager of the offshore division of EOG Resources in 2007. Prior to his experience in the oil industry, he served at the US Air Force Special Weapons Center, providing geologic and geophysical support to nuclear research activities.