National Energy Policy: What Might We Expect with a Changing Administration?

National Energy Policy: What Might We Expect with a Changing Administration?

With a change in administration in Washington, and a Republican in the White House, and the same party controlling Congress, one might expect drastic changes in federal energy policy.

However, let’s look at the facts. States are leading the energy debate, by pursuing their own aggressive strategies to promote clean and distributed energy resource use and encouraging policies to support a growing clean energy economy, it’s apparent little if anything will change soon. Even if the incoming administration changes energy and environmental policy radically, it will take some time to trickle down to the states or to impact the investment portfolios of businesses in the energy industry.

What we might expect with a changing administration in Washington was a topic of great interest and speculation at the most recent meeting of the National Association of Utility Regulatory Commissioners (NARUC) in La Quinta, CA. Recognizing that comprehensive federal energy policy is lacking, and that states regulate gas and electric utilities, most policy innovations and infrastructure investment is overseen by the states. Regardless of the policy changes we might see germinating in Washington, the states’ interest in supporting technology innovations, energy efficiency, demand management, renewable energy development, and curbing greenhouse gas emissions will continue. Let’s dissect further:

  • The coal, oil, and nuclear industries are depressed, not because of federal or state energy policy, but because of current market economics.
  • Market conditions are such that we have plentiful supplies of natural gas due in large part to federal research and development spending and state policies supporting drilling, and low world oil prices from the lingering hangover of the 2008 global recession.

The overabundance of oil and gas supplies nationally and in world markets continues to depress prices, and cause electricity markets to favor gas use over coal or nuclear. While supplies of natural gas and oil are abundant, delivery capability is constrained in some parts of the country, and in particular, the northeast.

The incoming administration has signaled its intention to support more infrastructure investment which will bring more product to market and likely increase exports. Some thoughts to consider:

  • The impact of any federal policy change on oil and coal will be minimal, except to the extent the incoming administration begins an aggressive push to export our domestic energy resources.
  • Many other parts of the world have their own supplies of oil and coal to export, thereby creating a glut on world markets and keeping prices of our energy exports low.
  • Renewable energy in many parts of the country is already competitive with wholesale electricity prices and will continue to penetrate the market regardless of federal energy policy.
  • Coal will continue to struggle due to market economics and local resistance to siting new coal plants in local communities.
  • If pipeline and delivery infrastructure expands, oil and gas can reach more customers to enable fuel switching from coal to oil or gas in electric generation or industrial use, and from oil to gas for commercial and residential use. In either case, coal continues to lag, oil and gas proposer, and the environment benefits.

Whether environmental regulations are decimated or not, or coal is somehow advantaged, unless the economics or market dynamics drastically change, the incoming administration will be limited in its ability to move the needle significantly anytime soon.

 

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