PRESS RELEASE
US November election results could
decelerate energy transition, with $1 trillion in energy investment
on the line
A Republican victory in 2024 could roll
back decarbonisation policies and usher in a delayed energy
transition for the US. Low carbon supply investment occurs, just
not at the pace for net zero
LONDON/HOUSTON/SINGAPORE,
16 May 2024 - The Infrastructure Investment and Jobs Act
(IIJA) of 2021 and the Inflation Reduction Act (IRA) of 2022
catapulted the US to global leadership in decarbonisation. But a
victory for former President Donald Trump in the November 2024
election, combined with long-standing issues around the US
relationship with China and US government deficits, could
significantly alter the path of US energy policy and usher in a
delayed transition scenario, according to a new Horizons report
from Wood Mackenzie.
While investments for technologies that support the energy
transition and low carbon technology may decelerate, the opposite
effect might take place for fossil fuels, which could see expanded
investment and push out peak fossil fuel demand, according to the
report, “Hitting the brakes: how the energy transition could
decelerate in the US."
“This election cycle will really influence the pace of energy
investment, both in the next five years and through 2050.
Investments in low carbon supply need to be made in the near term
to realize longer-dated decarbonization targets. US carbon
emissions could grow, putting net zero out of reach in our delayed
transition scenario,” according to David Brown, director of Wood
Mackenzie’s Energy Transition Research.
“It is not likely that the IRA will be fully repealed,” said
Brown. “However, a second Trump presidency would likely issue
executive orders that would abandon the 2035 net zero target for
the power sector, establish softer emissions goals from the EPA,
and issue tax credit regulations that could favour blue
hydrogen.”
Brown added that the fiscal environment may prove challenging as
well, as US government spending could be limited to address the
country’s debt burden – the US Congressional Budget Office
expects the US debt-to-GDP ratio to reach 109% by 2030 and hit 155%
by 2050.
Wood Mackenzie’s base case projects about US$7.7 trillion in
investment for the US energy sector over 2023-50. However, in the
delayed transition scenario in the US, less policy support for
things such as low-carbon energy and infrastructure improvements
decreases investment for the US energy sector by US$ 1 trillion
compared to the base case.
US capital investment in the energy sector, cumulative,
2023-2050, in US$ trillion.
Source: Wood Mackenzie. Total capital investment for the US
includes upstream oil and gas, power generation, power grid and EV
infrastructure, hydrogen and CCUS. US$11.8 trillion dollars in
capital investment in US energy is required on a cumulative basis
from 2023-2050 to reach our net zero scenario. Investment is 55%
lower in our delayed transition scenario
According to the report, where policy support for low-carbon
energy is cut back, CCUS and low-carbon hydrogen would face a
slower investment pathway. Total US natural gas demand would rise
to be 6 billion cubic feet per day (bcfd) higher than our base case
by 2030, a jump of 6%.
“It is important to note that peak fossil fuel demand does occur
– it is just around 10 years later than the 2030 prediction in our
base case. With a peak still on the horizon, companies will need to
continue diversifying into low carbon technologies to build a
business model that is resilient through the energy transition.
Each sector, from transport to power and emerging technologies,
will be affected by a nuanced set of drivers.”
US net energy-related CO2
emissions by outlook, in billions of tonnes
Sector impacts:
- EV sales stumble: A
look at new car sales in the US so far in 2024 offers clear
indications that a slower energy transition is plausible. While
sales of hybrids have leapt 57%, EV sales have undershot
expectations, growing by only 19%. Weakening federal greenhouse gas
(GHG) emissions and fuel economy regulations continue this trend,
and the total stock of EVs by 2050 would be 50% lower than in Wood
Mackenzie’s base case.
- Zero carbon power supply
faces strong headwinds: With less financial support from
the Department of Energy Loan Program Office, fewer grid
improvements, and continued trade tension with China, the delayed
transition scenario for the US projects that wind and solar and
energy storage capacity would be about 500 gigawatts (GW) by 2050,
25% lower than the base case.
- Coal would remain in the mix
for longer. In the delayed energy transition scenario, the
pace of electrification would ease in the near term. However,
industrial, residential, electrolytic hydrogen and EV usage would
still combine to increase power demand by 2.0 petawatt-hours (PWh),
a 45% jump from 2030 to 2050. With less policy support for
renewables and continued load growth, there would be no way out of
using coal. As a result, by 2040, coal generation capacity would be
four times higher than the base case, with 104 GW on the
system.
- Low-carbon hydrogen could
falter. The lack of federal demand-side targets,
reductions in federal funding and cost inflation would challenge
the investment case for low-carbon hydrogen. Eligibility for tax
credits under the IRA could be adjusted to tilt incentives towards
blue hydrogen. Near-term growth shifts to export markets in Europe
and Asia; Wood Mackenzie’s delayed transition scenario would still
foresee a two million tonne export market emerging by 2050.
States would be the future
A look at state-level policies shows that momentum for
low-carbon investment can be independent of federal policy. Since
2020, California’s utility-scale battery capacity has expanded
eight-fold to 8.4 GW. By the end of the year, Wood Mackenzie
expects battery capacity to reach 11.7 GW.
State-level renewable portfolio standards and voluntary
renewable energy targets supported wind and solar capacity
expansions of over 13% a year on average between 2016 and 2020,
during the last Trump administration. California’s Low Carbon Fuel
Standard (LCFS) will help underpin investments in low-carbon
hydrogen, direct air capture (DAC) and bioenergy across the
country.
“A slower transition scenario for emerging technologies does not
mean the story is over,” said Brown. “The emerging technology
sector in the US will need to reassess costs, project sizes, and
subsidy reliance. This should be approached through a position of
confidence. The US has a track record of innovation – the US went
from a net LNG importer to the world’s largest LNG exporter over
the last decade.”
Read the entire report here.
ENDS
Kevin Baxter +44 330 124
9400Kevin.Baxter@woodmac.com
Vivien Lebbon+44 330 174
7486Vivien.lebbon@woodmac.com
Mark Thomton+1 630 881 6885
Mark.thomton@woodmac.com
Hla Myat Mon +65 8533
8860Hla.MyatMon@woodmac.com
The Big Partnership (UK PR
agency)woodmac@bigpartnership.co.uk
You have received this news release from Wood
Mackenzie because of the details we hold about you. If the
information we have is incorrect you can either provide your
updated preferences by contacting our media relations team. If you
do not wish to receive this type of email in the future, please
reply with 'unsubscribe' in the subject header.
About Wood MackenzieWood
Mackenzie is the global insight business for renewables, energy and
natural resources. Driven by data. Powered by people. In the middle
of an energy revolution, businesses and governments need reliable
and actionable insight to lead the transition to a sustainable
future. That’s why we cover the entire supply chain with
unparalleled breadth and depth, backed by over 50 years’ experience
in natural resources. Today, our team of over 2,000 experts operate
across 30 global locations, inspiring customers’ decisions through
real-time analytics, consultancy, events and thought leadership.
Together, we deliver the insight they need to separate risk from
opportunity and make bold decisions when it matters most. For more
information, visit woodmac.com.
PRESS RELEASE
US November election puts $1 trillion in
energy investment on the line
A Republican victory in 2024 could roll
back decarbonisation policies and usher in a delayed energy
transition for the US. Low carbon supply investment occurs, just
not at the pace for net zero
LONDON/HOUSTON/SINGAPORE,
16 May 2024 - The Infrastructure Investment and Jobs Act
(IIJA) of 2021 and the Inflation Reduction Act (IRA) of 2022
catapulted the US to global leadership in decarbonisation. But a
victory for former President Donald Trump in the November 2024
election, combined with long-standing issues around the US
relationship with China and US government deficits, could
significantly alter the path of US energy policy according to a new
Horizons report from Wood Mackenzie.
While investments for technologies that support the energy
transition and low carbon technology may decelerate, the opposite
effect might take place for fossil fuels, which could see expanded
investment and push out peak fossil fuel demand, according to the
report, “Hitting the brakes: how the energy transition could
decelerate in the US."
“This election cycle will really influence the pace of energy
investment, both in the next five years and through 2050.
Investments in low carbon supply need to be made in the near term
to realize longer-dated decarbonization targets. US carbon
emissions could grow, putting net zero out of reach in our delayed
transition scenario,” according to David Brown, director of Wood
Mackenzie’s Energy Transition Research.
“It is not likely that the IRA will be fully repealed,” said
Brown. “However, a second Trump presidency would likely issue
executive orders that would abandon the 2035 net zero target for
the power sector, establish softer emissions goals from the EPA,
and issue tax credit regulations that could favour blue
hydrogen.”
Brown added that the fiscal environment may prove challenging as
well, as US government spending could be limited to address the
country’s debt burden – the US Congressional Budget Office
expects the US debt-to-GDP ratio to reach 109% by 2030 and hit 155%
by 2050.
Wood Mackenzie’s base case projects about US$7.7 trillion in
investment for the US energy sector over 2023-50. However, in the
delayed transition scenario in the US, less policy support for
low-carbon energy decreases investment for the US energy sector by
US$ 1 trillion compared to the base case.
US capital investment in the energy sector, cumulative,
2023-2050, in US$ trillion.
Source: Wood Mackenzie. Total capital investment for the US
includes upstream oil and gas, power generation, power grid and EV
infrastructure, hydrogen and CCUS. US$11.8 trillion dollars in
capital investment in US energy is required on a cumulative basis
from 2023-2050 to reach our net zero scenario. Investment is 55%
lower in our delayed transition scenario
Net zero out of reach. Peak fossil fuels delayed, not
eliminated
“In our delayed transition scenario, net zero quickly becomes
out of reach, and a new, slower pathway emerges for the energy
transition,” said Brown.
According to the report, where policy support for low-carbon
energy is cut back, CCUS and low-carbon hydrogen would face a
slower investment pathway. Total US natural gas demand would rise
to be 6 billion cubic feet per day (bcfd) higher than our base case
by 2030, a jump of 6%.
“It is important to note that peak fossil fuel demand does occur
– it is just around 10 years later than the 2030 prediction in our
base case. With a peak still on the horizon, companies will need to
continue diversifying into low carbon technologies to build a
business model that is resilient through the energy transition.
Each sector, from transport to power and emerging technologies,
will be affected by a nuanced set of drivers.”
US net energy-related CO2
emissions by outlook, in billions of tonnes
Sector impacts:
- EV sales stumble: A
look at new car sales in the US so far in 2024 offers clear
indications that a slower energy transition is plausible. While
sales of hybrids have leapt 57%, EV sales have undershot
expectations, growing by only 19%. Weakening federal greenhouse gas
(GHG) emissions and fuel economy regulations continue this trend,
and the total stock of EVs by 2050 would be 50% lower than in Wood
Mackenzie’s base case.
- Zero carbon power supply
faces strong headwinds: With less financial support from
the Department of Energy Loan Program Office, fewer grid
improvements, and continued trade tension with China, the delayed
transition scenario for the US projects that wind and solar and
energy storage capacity would be about 500 gigawatts (GW) by 2050,
25% lower than the base case.
- Coal would remain in the mix
for longer. In the delayed energy transition scenario, the
pace of electrification would ease in the near term. However,
industrial, residential, electrolytic hydrogen and EV usage would
still combine to increase power demand by 2.0 petawatt-hours (PWh),
a 45% jump from 2030 to 2050. With less policy support for
renewables and continued load growth, there would be no way out of
using coal. As a result, by 2040, coal generation capacity would be
four times higher than the base case, with 104 GW on the
system.
- Low-carbon hydrogen could
falter. The lack of federal demand-side targets,
reductions in federal funding and cost inflation would challenge
the investment case for low-carbon hydrogen. Eligibility for tax
credits under the IRA could be adjusted to tilt incentives towards
blue hydrogen. Near-term growth shifts to export markets in Europe
and Asia; Wood Mackenzie’s delayed transition scenario would still
foresee a two million tonne export market emerging by 2050.
States would be the future
A look at state-level policies shows that momentum for
low-carbon investment can be independent of federal policy. Since
2020, California’s utility-scale battery capacity has expanded
eight-fold to 8.4 GW. By the end of the year, Wood Mackenzie
expects battery capacity to reach 11.7 GW.
State-level renewable portfolio standards and voluntary
renewable energy targets supported wind and solar capacity
expansions of over 13% a year on average between 2016 and 2020,
during the last Trump administration. California’s Low Carbon Fuel
Standard (LCFS) will help underpin investments in low-carbon
hydrogen, direct air capture (DAC) and bioenergy across the
country.
“A slower transition scenario for emerging technologies does not
mean the story is over,” said Brown. “The emerging technology
sector in the US will need to reassess costs, project sizes, and
subsidy reliance. This should be approached through a position of
confidence. The US has a track record of innovation – the US went
from a net LNG importer to the world’s largest LNG exporter over
the last decade.”
Read the entire report here.
ENDS
Kevin Baxter +44 330 124
9400Kevin.Baxter@woodmac.com
Vivien Lebbon+44 330 174
7486Vivien.lebbon@woodmac.com
Mark Thomton+1 630 881 6885
Mark.thomton@woodmac.com
Hla Myat Mon +65 8533
8860Hla.MyatMon@woodmac.com
The Big Partnership (UK PR
agency)woodmac@bigpartnership.co.uk
You have received this news release from Wood
Mackenzie because of the details we hold about you. If the
information we have is incorrect you can either provide your
updated preferences by contacting our media relations team. If you
do not wish to receive this type of email in the future, please
reply with 'unsubscribe' in the subject header.
About Wood MackenzieWood
Mackenzie is the global insight business for renewables, energy and
natural resources. Driven by data. Powered by people. In the middle
of an energy revolution, businesses and governments need reliable
and actionable insight to lead the transition to a sustainable
future. That’s why we cover the entire supply chain with
unparalleled breadth and depth, backed by over 50 years’ experience
in natural resources. Today, our team of over 2,000 experts operate
across 30 global locations, inspiring customers’ decisions through
real-time analytics, consultancy, events and thought leadership.
Together, we deliver the insight they need to separate risk from
opportunity and make bold decisions when it matters most. For more
information, visit woodmac.com.