What Donald Trump’s presidency means to energy & environment

GOP 2016 Debate

The Trump presidency was not great news to climate change supporters. It was not the outcome many hoped for, and could potentially pose a significant threat by demolishing any progress made in the Obama administration for climate and environment.

Calling climate change a hoax that the Chinese fabricated to gain unfair advantage, he vowed to pull out of the Paris agreement on climate change first thing he comes on board. He will also remove any form of carbon taxing and deregulate any bans on drilling or fracking. Many coal workers voted for Trump in hopes that he can revive the coal industry to its glorious past. However, this proves to be unrealistic and likely impossible.

Renewables aside, coal is no longer competitive on any front. Successful fracking for natural gas in tight shale formations has enormously increased America’s natural gas production, keeping prices low, and outcompeting all other energy sources, especially coal and nuclear. It doesn’t make a lot of financial sense to expand coal use again within the United States.

As for the renewable energy sector, wind companies saw their shares tumble the first few days after the election. Fears have been building up in the renewable industry that his win means a big loss to them. Trump has a personal history with some wind projects which he thinks are against the advancement of his private businesses. One example is his fight against wind farms built across his golf course in Scotland, because it “blocked the views” of his golf course.

Tax credits are the lifeblood of renewables. Concerns about Trump rewinding the tax credits and hurting the renewable energy industry have been raised but may not crystallize in the way we envisioned. The Republican-controlled Congress already extended the renewable energy Production Tax Credit to 2021, and there also are various state tax credits and the Renewable Portfolio Standards — laws requiring a certain portion of a state’s power generation mix to come from renewable sources — to consider.

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Pure economics will dictate the fate of the futures of renewable energy. The price of wind per MW is already cheaper than coal and solar is quickly catching up. Time-wise, it is also smarter to invest in solar farms as they take only a few months to come online where as coal-fired plants can take up to years. Solar and wind will continue rising at a fast pace in the next few years, and their growth will be driven mostly by state rather than federal policies. Even without tax credits, their prices are falling, making them naturally competitive.

However, let’s remember: all talk of Trump’s actions may deem futile as his words are rarely gone to fruition at the end of the day. Case in point: he has started reconsidering his stances on climate change and expressed that he would like to see “clean air and crystal clear water”.

Trends in wind in the US

Image result for wind turbine

US Dep of Energy published their annual wind technologies market report, containing a lot of insightful information for the US wind industry. Some of the highlights will be summarized in this post.

Average price of new wind contracts are 2 cents/kwh 2015, compared with solar which is around 4 cents/kwh. Globally, it is 3 cents/kwh. So US wind contracts are really insanely cheap now.

Some useful things to note are as follows:

  • LNG prices have also declined. But it will rise later over time, this will put wind at stronger competitive advantage.
  • Although prices are low at the moment, the fate of wind prices is out of the control of the industry. It could change drastically over the next few years due to regulations and policy. For eg. if the PTC goes away, 2 cents/kwh may then rise to 4cent/kwh which puts it at a disadvantage over the wholesale market which is priced in the middle. LNG is 3.5cent.
  • 80% of wind plants are manufactured domestically in the US. This is due to the economic sense of shaving off shipping costs of imported large/heavy components.
  • Typically, the market is dominated by 3 players: GE, Vestas and Siemens. About 3/4 of the installations come from two companies: GE and Vestas.
  • OEM has consolidated over the past decade, now the second and third tier wind OEMs are declining as their supply chains dry up. Only those with capabilities to serve the larger players can stay in the market.

One thing is clear: What is keeping the renewable sector afloat is the PTC and RPS. Whether these will continue to give incentives and much-needed fuel for progress in this industry remains to be seen. It is forecasted that the PTC will be reduced gradually beginning 2017. Hopefully, the degree of impact it will have on the wind industry will not be too substantial.

Glossary/Key Terms:

PTC: Production Tax Credit.
RPS: Renewable Portfolio Standard. Regulation that requires increased production of renewable energy.
Nameplate capacity: Term classifying the power output of a power station usually expressed in megawatts (MW)

DNV GL’s Wind-Powered Water Injection Tech

On 10 November, DNV GL gathered in Norway for a launch meeting on their industry project, wind-powered water injection system. In this fairly cosy setting, the industry leaders and experts came together to explore possibilities of expanding this line of business as future development of combining the technologies of water injection and wind energy (in particular, offshore wind). The ultimate goal is ironically, to lower the cost and raise efficiency of extracting oil reserves near the shore. I’m unsure what the environmental offsets to such a technology is. This is clearly a hybrid of both clean technology and traditional one, with the latter being the main driver (and the former as a tool to support this).

DNV GL suggest new EOR concept: wind powered water injection

The main challenge the project seeks is: how to lift the oil off the ground with reduced CO2 emissions and lower cost. I watched the video from DNV GL’s website and learned quite a fair bit about the wind technology portion. Here are some of my takeaways:

Wind is the largest energy source in energy storage capacity. Then, 30% is PV (Solar) and 5% is coal. In China, it is targeted to increase to 200 Gigawatt by 2020. The technology now is gearing towards floating wind turbines. However, the dominating one is still onshore wind which stands about 85% now. Offshore taking about 10-15% of the pie.

Offshore wind turbines can generate about 3 times the energy of onshore ones. The benefits of offshore ones are that bigger components can be used. There are 3 types of offshore turbines: 3 MW, 3.6MW and 5MW with tripods.

The focus is increasingly on floating offshore turbines as opposed to fixed offshore ones. Floating offshore turbines are made of stronger materials and can go deeper into the waters, allowing for bigger blades, higher capacities. Prototypes of floating offshore turbines are already installed in various countries like Norway (forefront), Scotland, Spain France and Portugal. USA and Japan as well. Japan is slightly special due to Fukushima incident and loss of major nuclear plant. 7MW turbines were since installed there.

It was difficult to perform a cost analysis on this new technology. Questions were mostly centered on how much cost savings it can achieve. There are also other things to consider such as regulatory requirements and commercial frameworks (buying equipment vs renting), system reliability and uptime.