The controversial success of businessman and television personality Donald Trump in the US presidential election has certainly raised a lot of questions about the future, including those surrounding the energy industry.
Of course when Trump becomes the US president he will have plenty of pressing issues to deal with, and so we will be looking to Rick Perry, his appointee for secretary of state, to see how energy policy will change over the course of Trumps 4 year tenure.
In terms of energy prices, since Trump became president elect the dollar has gained in strength which has in turn meant that the price of oil which is largely traded in dollars will be relatively high in the UK. It will take more pounds to buy the dollars to trade in oil.
UK firms such as Drax Group and Centrica may feel the upward pressure on wood pellet and gas import prices, however the forward contracts held by the two companies should be able to negate any potential loss.
Since Trump is an avid oil and gas supporter, his election has strengthened prices in these sectors, although the latest agreement by the OPEC is possibly more relevant. The OPEC nations have agreed a reduction in production to reduce the global oil glut and underpin weak “spot” prices. The OPEC nations have a long history of not always maintaining their agreements but currently they seem to be holding firm and so prices have risen to over $50 a barrel compared to the same time last year when it was under $30 per barrel.
One of the reasons that this is so important to UK energy is that oil prices directly affect gas prices, which usually follow the oil price curve. They provide the fuel source for many of our power stations. So, increases may be felt at a retail level for both gas and electricity.
It is well known that Trump does not believe that climate change is real and is so vehemently against wind power that he said that it personally offends him! I can’t see that the wind generation sector in the US will be well supported for the next 4 years.
The renewable sector could be set to decline under the Trump administration, either way the European green energy sector will be keeping a close eye on US developments. Although Trump makes no bones about his dislike of wind turbines, he doesn’t seem to have the same issue with solar generation. Perhaps there is some light for the renewables industry.
The green energy sector is rightly concerned that The Paris Agreement, which centred around global climate change, will be scrapped in America, Trump has made statements in the past that showed he did not approve of these long-term agreements and has argued that the agreement itself is largely unenforceable. The problem is that if such a major player withdraws then it is difficult to envisage the agreement holding together.
One UK company that has grown in confidence since the election result is National Grid who have interests in North America benefited from a strong dollar and a move away from renewables but also Trump’s policy regarding renewing US infrastructure, which would include heavy investment in new transmission lines in which it is expected that National Grid will play an important part in.
One thing is certain about Trump; that most things are uncertain. We’ll endeavour to keep you updated on policy that might affect you and your business.