September 23, 2020
By: Chris Amstutz
Never have we had Presidential candidates with such diametrically opposed energy policies. We have spoken in previous blogs about the intertwined climate/energy policy debate, and now we have been led up to the fork in the proverbial yellow brick road. Will we get behind the Tinman, Joe Biden, and grease the gears of a “green energy revolution”? Or will we continue down the path of the Lion, Donald Trump. In this blog we strive to reveal the men behind the curtain, and discuss potential implications for a few frequently discussed policies.
Drilling/Pipelines
The first part of the climate/energy debate focuses on the extraction of fossil fuels and their subsequent movement across the United States. In the last 8 years, the U.S. has grown to be arguably THE energy superpower of the world through an innovation in drilling, notoriously known as hydraulic fracturing (fracking). Oil and Natural Gas production has risen dramatically and has seemingly only been capped by the ability to physically move the commodities on pipelines. Policies being proposed would aim at hindering new drilling, either completely or more likely on federal lands. This, coupled with a more stringent and selective review of new pipelines, would likely slow the growth of fossil fuels and increase the future price of natural gas. Both candidates have made it known that natural gas will remain an important part of our energy mix, but to what extent the commodity could be slowed in the next 4 years will depend upon the election.
Green Energy/Power
The toughest part of the journey to the emerald green city of the imagined US energy future, will be in the power sector. Proposals in this election call for carbon free power generation by 2035. Like a tornado across Kansas, this would shake up our generation fuel mix, currently 40% natural gas, 20% coal, 20% nuclear, 8% hydroelectric, and 12% from wind, solar, geothermal.
- As we mentioned in past blogs, Nuclear Power Parts 1 & 2, this fuel source is considered carbon free, but draws its own criticism. Neither candidate has come out enthusiastically supporting expanded nuclear energy, but they have been open to it.
- It has been proposed that natural gas generation be used as a bridge fuel source as we phase out coal power and build out renewable sources. This path to a carbon-free power sector would financially strand (end before costs are recovered) 100-300 billion dollars in fossil fuel generation assets (coal and natural gas). The labor and capital needed to build enough wind and solar generation with needed battery backup systems, would be on the order of 10+ trillion dollars in government/private investment.
Any new, unplanned costs would likely be passed on to businesses and consumers or levied through a federal tax, potentially on carbon. While these dollar estimates do not factor in the hidden costs/benefits of the health of citizens and the climate, these are the known real numbers for a structural energy change. Good, bad, or indifferent, a path towards a green energy future could begin after the election.
General Attitudes
Regardless of your preferred or projected outcome for energy policy in the US, it is no secret that this is an important election for the industry. Certain policies being proposed are further left politically, but it takes support from the scarecrow, tinman, and lion (all branches of the government) to enact policy change. This could delay or even fully prevent new policy from being enacted. Donald Trump and the Republicans have been more supportive of the fossil fuel industry through word and action. Joe Biden and the Democrats aim to start the process of change in the industry to save the climate. Naturally, change brings volatility and unplanned costs in complex markets. Morality and politics of the issues aside, Choice! Energy Management will be here as the Good Witch of the North, monitoring and guiding clients through sound Risk Management involvement.
Choice! Energy Management takes no political stance towards any energy policy discussed. The goal of this blog is to present, without bias, energy policy positions of each candidate in a light-hearted and informative manor.
Confidential: Choice Energy Services Retail, LP.
