Shift In Power

Election result brings uncertainty to the power sector; what happens now?

The unexpected results of Tuesday night and early Wednesday morning sparked uncertainty in a number of industries across the country. One area that will now float into uncharted territory is the power sector. Many utilities were focusing on reducing carbon emissions, modernizing the grid, and transitioning to a new age where big data and renewable energy would be integral parts of the operation. Suddenly, all of these things are questionable. Here’s what some prominent sources have been saying over the past two days.

Oil, coal industries optimistic. Investors and workers alike rejoiced throughout coal and oil businesses in the energy sector following Tuesday’s surprise result. Hopes are that the new administration will move to clear the path for new pipelines, such as the Dakota Access Pipeline project currently under protest, end U.S. participation in global climate change pacts, and undo environmental regulations to boost American coal mining. According to the Wall Street Journal, the S&P 500 Energy Sector Index was up about 1.5% overall midday to 517.28. Despite the long-term decline of coal, production and generation will actually rise next year as the cost of natural gas ticks up and the markets adjust accordingly. According to the U.S. Energy Information Administration, coal will generate 31% of the country’s power next year, compared with 30% this year. Gas will decline from 34% this year to about 33% in 2017. Coal production is expected to decline 17% this year, to the lowest levels in for decades, but will rise in 2017. Gas prices will rise from $2.50/million British thermal units this year, to $3.12/MMBtu in 2017.

AWEA preps for new regime. The American Wind Energy Association released a statement swiftly on Wednesday morning reflecting the diplomatic reaction seen on many levels. As AWEA preps for the new regime, it no doubt is shaken by the possibilities of wind power usage being heavily compromised; but the organization did not show it. CEO Tom Kiernan’s statement said AWEA is “ready to work with President-elect Donald Trump and his administration to assure that wind power continues to be a vibrant part of the U.S. economy,” and described the shift to renewable energy over the last few decades as “unstoppable”. Kiernan also cited the President-elect’s victory speech, which mentioned pursuing “all forms of energy…this includes renewable energies and technologies of the future.” AWEA, like so many others, will have to wait for specifics of policy to be detailed, and is entrenching itself in the meantime.

Utilities sector jolted by widespread uncertainty. The immediate aftermath of the election wreaked havoc on a utilities sector that has been in constant transition for a time now. Many utilities have focus their efforts on incorporating renewable energy sources and new technologies, such as big data and grid modernization, into their portfolios, during the 8-year run of the current administration, if not prior. With such a short sample of time to analyze, stocks are perhaps the best indicator of what utilities companies were thinking following the result, and they weren’t good. The utilities sector dropped 2.41%, with major providers such as NextEra, Exelon, and Xcel taking some of the biggest hits. However, the uncertainty was almost immediately countered with hope, as some of Thursday’s utilities stocks rebounded. Bloomberg’s Liam Denning offered a positive long-term outlook:

“As mostly state-regulated entities, utilities are less beholden immediately to changes in Washington, D.C. Broadly, though, Trump’s election should be broadly positive for them…renewable energy is the one area where utilities have seen their local monopolies start to unravel. Any policy restraining those new entrants and prolonging the life of existing power plants will boost utilities’ bottom lines.”

Clean Power Plan in precarious position. If the Supreme Court were to hear the Clean Power Plan case with one seat vacant, Utility Dive reported from its energy lawyer sources that a 4-4 split would be plausible, which would uphold the D.C. Circuit decision. But if another conservative justice is appointed to the court, it could potentially give CPP opponents the five opposing judges they would need to overturn the Clean Power Plan.

COP22 summit affected. The COP22 global climate meeting in Marakkesh, Morocco was initially anticipated as a momentus event, given the landmark advances in clean power over the past year, especially in the past month. The Paris climate accord had been met October 5th by 55 countries representing 55% of global emissions, well ahead of schedule; October 6 saw governments construct the first global climate deal in history for aviation; and on October 15, a third deal was agreed upon that would phase out hdryofluorocarbons (HFCs).

“It is hard to think of another period when so much international action occurred in such a short time,” Pilita Clark, Environment Correspondent for Financial Times, wrote yesterday. Conference attendees went to Marakkesh beginning Monday, November 7th…one day before the election. Those who heard the news onsite were undoubtedly shocked and uncertain, and it has reportedly affected the path of the conference itself, which continues through next Friday, November 18th.

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