There’s no transition without transmission. How can we make it easier to build?
May 28, 2024
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Regulators are working to improve transmission for clean energy. President Biden announced tariffs on clean energy products from China. Investment in low-carbon stocks is a key indicator of the energy transition. The podcast discusses challenges in US electricity transmission regulations and navigating protectionism in energy markets.
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Quick takeaways
FERC is reforming regulations to boost investments in new electricity transmission in the US for a cleaner energy system.
President Biden's tariffs on China aim to support domestic energy manufacturing and address global competition and supply chain challenges.
Regulatory uncertainty hampers clean energy investment, affecting investor confidence and project growth in the sector.
Deep dives
FERC's Efforts to Streamline Grid Investments and Regulatory Reform
The Federal Energy Regulatory Commission (FERC) is working on regulatory reform to facilitate investments in new electricity transmission in the US. FERC introduced order 1920 aimed at improving regional transmission planning and cost allocation. This order mandates 20-year planning for regional networks, default methods for cost allocation, and state agreements on the process. The order also grants FERC permitting authority in national interest transmission corridors, aiming to enhance system reliability and reduce costs through regional planning.
Debate Over FERC's Order Amid Partisan Views and Industry Responses
Debate surrounds FERC's order, with Democratic commissioners advocating for regional planning efficiency and cost-sharing benefits. However, 17 red state attorneys general oppose the order, citing states' rights concerns and potential violations. The order faces complexity and disagreements over its impacts, reflecting challenges in balancing state control, regional coordination, and federal oversight in transmission planning and grid investment.
US Tariff Measures and Industrial Strategy to Promote Domestic Energy Industry
President Biden's announcement of increased tariffs on selected imports from China, including EVs, solar cells, and lithium-ion batteries, seeks to protect American workers and businesses from unfair trade practices. While the tariffs may have limited immediate market impact, they reflect a broader industrial strategy to support domestic energy manufacturing capabilities for economic and national security reasons. The strategy aims to address challenges in global competition, supply chain resilience, and technological innovation in key energy sectors, aligning with geopolitical and industrial priorities for long-term industry sustainability.
Impact of Regulatory Uncertainty on Clean Energy Investment
The podcast delves into the impact of regulatory uncertainty on clean energy investment, highlighting how factors like varying government policies and geopolitical events contribute to a challenging environment for the sector. With clean energy indices showing underperformance compared to traditional energy sectors, the episode discusses how uncertainty hampers investor confidence, leading to delays in projects and lower growth forecasts. The discussion emphasizes the importance of removing uncertainties such as election outcomes and interest rate fluctuations to boost sentiment and attract more positive investment in clean energy technologies.
Privately Held Companies' Dominance in the Economy
The episode sheds light on the prevalence of privately held companies, revealing that 87% of firms with revenues exceeding $100 million are private entities. It underscores that these privately owned firms account for 80% of job openings, showcasing their significant contribution to the economy. The conversation emphasizes the necessity of considering private companies, often overlooked in favor of public markets, to better understand economic trends and investments within industries like clean tech.
Regulators are trying to clear the path to the grid that clean energy needs.
To go from an electricity system based on coal and gas to one based on solar and wind, the US needs a very different power grid. On some estimates, annual installations of new transmission capacity need to double. To help build the grid that a new clean electricity system will need, the US Federal Energy Regulatory Commission has been working on regulatory reforms, intended to smooth the path for new investments in transmission lines.
Ed Crooks is joined by Amy Myers-Jaffe of New York University and Shanu Mathew of Lazard Asset Management, to unpack the latest orders from FERC. What are the regulators trying to do, and why do some people object to their plans? And what will the proposed reforms mean for the energy transition in the electricity sector in the US?
It has been a busy few weeks for big announcements in energy. A new round of tariffs on clean energy products from China was announced this month by President Biden, with rates of 100% on electric vehicles, 50% on solar modules, and 25% on lithium-ion batteries. The goal is to revive clean energy manufacturing in the US, but critics say the tariffs could be counter-productive, because they will drive up the cost of low-carbon technologies for American businesses and consumers.
One important gauge of the state of the energy transition is the health of investment in low-carbon stocks. The news on that over the past couple of years has not been great. So what are the markets telling us about the future of clean energy? Shanu gives us his analysis, and joins Amy and Ed to debate investor sentiment and what it means.
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