Donald Trump's second presidency, which begins in 2025, will have significant implications for the energy industry. While there may be renewed emphasis on fossil fuels, coal is unlikely to see a revival due to economic factors and limited access to capital. Investment in various energy sectors, including renewables, oil and gas, and energy storage and transmission, is expected to increase due to growing demand and incentives for new supply. However, potential policy changes in areas such as trade, regulation, and fiscal and monetary policy could undermine new energy investment, leading to increased greenhouse gas emissions and the acceleration of climate change.
Renewable energy is already cost-competitive with gas and coal and provides reliable power with significant grid penetration. State policies promoting renewable energy, such as renewable portfolio standards and transmission planning, are driving investment in renewables even without federal incentives. Investment in renewable energy and storage capacity in states like Texas and California will continue to grow, with wind power, solar energy, and battery storage making up over 95% of new or planned projects seeking grid interconnection.
However, policies to bring manufacturing onshore and stymie imports may add significant costs and disrupt existing supply chains, potentially hurting the economy. Energy investments depend on liberal policies for the movement of capital, goods, and services, and nationalist or protectionist policies could impede investment and raise costs. Regulatory uncertainty and political risk could undermine investor confidence in the United States as a place to invest in new energy and infrastructure projects, with permitting delays and obtaining grid access being the main factors impeding new projects.
Investors may be deterred from investing in US energy and infrastructure projects and companies due to perceived political risk, which can arise from an unpredictable, biased, chaotic, or corrupt national government. Changes in federal fiscal or monetary policy, such as a new federal tax bill or reduced federal spending, could also negatively impact energy investments. These factors could lead to a higher cost of capital, less effective leverage, and lower returns on equity for energy investors.