Implications of a Second Trump Presidency on the US Energy Industry and Investment

Donald Trump's second presidency, which is expected to begin in 2025, could have significant implications for the energy industry. While fossil fuels may receive renewed attention, coal is likely to remain stagnant due to economic factors and limited access to capital. Investment in various energy sectors, including oil and gas, renewables, energy storage, and transmission, could increase due to growing demand and incentives for new supply. However, potential policy changes in areas such as trade, regulation, and fiscal and monetary policy could hinder new energy investment. Despite the tension between renewables and fossil fuels during the 2024 presidential campaign, investment in fossil fuels is expected to continue due to robust demand.

Renewable energy has strong support from corporate champions and trade associations with bipartisan backing in Washington, D.C., despite opposition from the Trump administration. Even some of Trump's supporters, such as Elon Musk and investors in crypto currencies, rely on federal subsidies for EVs and EV charging infrastructure. State policies and incentives, such as renewable portfolio standards and transmission planning, also provide support for renewables. Renewable energy is already cost-competitive with gas and coal and will continue to see massive investment in added capacity in states like Texas and California.

State policies promoting renewable energy, such as renewable portfolio standards and transmission planning, are driving investment in renewables even without federal incentives. Renewable energy is already cost-competitive with gas and coal and provides reliable power. Texas, California, and other states are investing heavily in renewable energy and storage capacity, while also adding or retaining natural gas-fired power plants to meet growing demand from digital infrastructure. The Inflation Reduction Act (IRA), which includes tax incentives for energy investments and production, is unlikely to be repealed and benefits both renewables and natural gas.

The energy sector could be impacted by trade policies and deglobalization, which could lead to higher costs and disruption of supply chains. Protectionist tariffs and trade barriers could slow domestic investment and contribute to inflation, while also hurting the economy through deglobalization. Regulatory uncertainty and political risk could also undermine investor confidence in the United States as a place to invest in the energy sector, with permitting delays and obtaining grid access being the main factors impeding new projects.

Investors may be deterred from investing in U.S. energy and infrastructure projects and companies due to perceived political risk, which can arise from an unpredictable, biased, chaotic, or corrupt national government. Changes in federal fiscal or monetary policy, such as a new federal tax bill or a reduction in federal spending, could also negatively impact energy investments. These changes could make development and investment in U.S. projects more expensive, riskier, and harder to finance, ultimately leading to a reduction in energy investments.