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Trump victory raises climate law questions

  • Market: Electricity, Emissions
  • 06/11/24

Federal tax incentives enacted through US President Joe Biden's signature 2022 climate law could survive in some fashion during a second Donald Trump administration, but their ultimate fate could depend on a Republican majority in Congress.

While details of president-elect Trump's plans will unfold in the coming months, the Inflation Reduction Act (IRA), which established tax incentives for clean electricity and the related supply chain, is very much up for review, according to panelists during a post-election webinar hosted by US law firm Bracewell.

Beyond the presumed policy shift, the Biden administration is still working to finalize guidance for some of the IRA's incentives, such as production and investment tax credits for clean energy, and regulators have yet to outline other provisions in the law beyond cursory notices. The confluence of those factors could chill renewable energy development, at least in the near term.

"Investors stand the risk of being whipsawed to some degree in terms of not having the comfort they need to make a billion-dollar investments on new clean energy facilities," Bracewell tax policy lead Tim Urban said.

In addition, an expected 2025 tax bill could move around several trillions of dollars, "and some of that bill could either end up being IRA fixes or IRA repeals or curtailments," he said.

Much will depend on whether Republicans retain a majority in the House of Representatives, which would give them control of Congress after they regained a Senate majority on Tuesday. That would open the door for budget reconciliation — the same process through which Democrats passed the IRA in 2022 — and allow Republicans to make changes to the law with a simple majority vote rather than the 60 typically required to bypass the Senate's filibuster rules. In other words, Republicans would not have to reach across the aisle to compromise with Democrats.

While some Republicans have objected to outright ending the IRA, they have not yet faced the "horse trading" and intraparty pressure that accompanies negotiations around major legislation, according to Urban.

"I'm still optimistic that that much, if not all the IRA may be salvageable, but I think there's a lot of work to be done," he said.

Project developers have signaled a similar outlook, noting that renewable energy expanded during the first Trump administration, despite investment in newer sectors like offshore wind flagging ahead of the 2024 election. Even for offshore wind, they expect a slower pace of development rather than a complete abandonment of the industry by the US. The biggest change could come from competing priorities, with Trump's policies potentially making the all-in cost of resources like natural gas more attractive than renewables.

Even without details, Trump's desire to see oil and gas producers "drill, baby, drill", and his first term in the Oval Office offer some broad insight into how his policies could manifest.

"One hallmark of the first Trump administration was to not pick winners and losers on technologies or type of energy," said United States Energy Association chief executive Mark Menezes, who served as US deputy secretary of energy in 2020-21.

That meant making sure nuclear could be treated equally with other sources and "renewables weren't forced on a particular group if they didn't want to have renewable power, for example," he said.

The incoming administration is likely to pursue a "rather aggressive approach to fossil fuel expansion", with a raft of "immediate" executive orders to support that goal, according to Scott Segal, co-chair of Bracewell's policy resolution group.

But the IRA will likely be handled with a "scalpel" rather than a "sledgehammer", he said.


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11/12/24

Cop 29 grids, storage pledge signatories released

Cop 29 grids, storage pledge signatories released

London, 11 December (Argus) — The final list of signatories for pledges on expanding energy storage and grid capacity taken at the UN Cop 29 climate summit, was released today, almost four weeks after the commitment was first finalised, with 58 countries out of almost 200 Cop parties taking part. Signatories commit to a collective goal of increasing electricity storage capacity to 1500GW by 2030, a sixfold increase from 2022. Another pledge is to add or refurbish 25mn km of grid infrastructure by 2030, and recognise the need for an additional 65mn km by 2040. Lack of firm, clean power generators to back up intermittent renewables is a major barrier to increasing renewable penetration, while distributed resources require large investments in power grids to transport electricity to consumers. The list of 58 signatory countries includes the so-called troika of Cop host countries the UAE, Azerbaijan and Brazil. The US and all other G7 member states are present, with the exception of France. Also absent among major economies are China and Russia, while Saudi Arabia spoke in support of the pledges during Cop but does not appear on the list of signatories. In comparison, almost 120 countries had signed a pledge to triple global renewable capacity double global energy efficiency by 2030 during the Cop 28 summit in Dubai last year. The grids and storage pledges were one of the centrepiece announcements made by the Azeri host, following on from the calls made in Dubai on renewable capacity and energy efficiency, but also on transitioning away from fossil fuels in energy systems. But divergences on mitigation — actions to cut greenhouse gas emissions — during the summit this year, meant that the completed pledge, as well as any other specific mentions of fuels and energy transition technologies, were not included in final outcome texts. By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Brazil's inflation accelerates to near 5pc in November


10/12/24
News
10/12/24

Brazil's inflation accelerates to near 5pc in November

Sao Paulo, 10 December (Argus) — Brazil's headline inflation accelerated to a 14-month high in November, led by gains in food and transportation, according to government statistics agency IBGE. The consumer price index (CPI) rose to an annual 4.87pc in November from 4.76pc in the previous month, IBGE said. Food and beverage costs rose by an annual 7.63pc in November, accounting for much of the monthly increase, following a 6.65pc annual gain in October. Beef costs increased by an annual 15.43pc in November following an 8.33pc annual gain for the prior month. Higher beef costs in the domestic market are related to the Brazilian real's depreciation to the US dollar, with the exchange rate falling to a record-low R6.11/$1 at the end of November. The stronger dollar leads producers to prefer exports over domestic sales. Beef prices rose by 8pc for the month alone. Soybean oil prices rose by 27.75pc over the year. Transportation costs, another major contributor to the monthly acceleration, rose by an annual 3.11pc in November after a 2.48pc gain in October. On a monthly basis, transportation costs rose by 0.89pc in November, reversing a contraction of 0.38pc in October. Housing costs rose by 4pc over the 12-month period. Brazil's central bank last month hiked its target rate to 11.25pc, its second increase off a low of 10.5pc between May and September, to try to head off a resurgence in inflation. It was at a cyclical peak of 13.75pc from August 2022 through July 2023 as it sought to tamp down the post-Covid-19 surge in inflation. Fuel prices rose by an annual 8.78pc in November after a 7.22pc gain in October. Motor fuel costs fell by 0.15pc in November compared with a 0.17pc drop in October — thanks to lower ethanol and gasoline prices. Diesel prices contracted by 2.25pc in the 12-month period. Power costs slowed to an annual 3.46pc in November following a 11.58pc gain in October. Electricity prices contracted by a monthly 6.27pc after a decrease in power tariffs on 1 November. Monthly inflation slowed to 0.39pc in November from 0.56pc in October. The central bank's inflation goal for 2024 is 3pc, with a margin of 1.5pc above or below. By Maria Frazatto and Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Mexico’s CRE lays off officials after reform


10/12/24
News
10/12/24

Mexico’s CRE lays off officials after reform

Mexico City, 10 December (Argus) — Mexico's energy regulatory commission (CRE) has dismissed high-ranking officials and other staff shortly after congress approved constitutional amendments to eliminate independent regulators, market sources said. At least two unit chiefs — the heads of the legal and hydrocarbons units — were let go in recent days, sources with close knowledge of the matter told Argus . These positions are now marked as vacant in the CRE's online directory. In addition, seven subunits within the hydrocarbons division — overseeing natural gas, fuel and LPG markets, including storage and transportation — also appear vacant. The CRE did not respond to requests for comment. The CRE's commissioner president Leopoldo Melchi has designated Guadalupe Hernandez, a legal official in the hydrocarbons undersecretary at the energy ministry (Sener), to oversee certain functions, a source said. The layoffs are also expected to extend to the electricity unit, including its chief, Francisco Varela, according to market sources. Yet, these positions are still listed as filled in the online directory. These dismissals follow congress' approval of constitutional amendments to dismantle seven independent regulators, including the CRE and hydrocarbons regulator CNH. While the regulators will continue operating until laws implementing these changes are enacted — expected by early 2025 — the finance ministry has proposed a 33pc budget cut for the CRE and CNH in 2025. Some recent departures are linked to commissioner Luis Linares, who announced in November that he will step down on 1 January 2025. But the recent layoffs may signal a broader restructuring of the energy regulator. Under the amendments, the CRE's functions will be absorbed by a new office within Sener. The specifics of this transition will depend on the upcoming legal framework. Industry experts and companies are calling for the new regulatory bodies to retain technical independence and sufficient funding to oversee energy markets effectively, even after the constitutional changes. By Édgar Sígler Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Meta sites largest data center in Louisiana


10/12/24
News
10/12/24

Meta sites largest data center in Louisiana

New York, 10 December (Argus) — Facebook-parent Meta will build its largest data center ever in northeast Louisiana, near one of the largest US natural gas fields. Meta plans to invest more than $10bn in the Richland Parish data center, which will "play a vital role" in advancing Meta's ambitions in artificial intelligence software, the company said. Construction of the facility is expected to continue through 2030, Meta said. Richland Parish is "an outstanding location" for Meta to build a data center because of its "access to infrastructure", "reliable grid" and "business-friendly climate", the company said. Meta's siting decision also was driven in part by "the availability of reliable, low-cost energy", according to Grow NELA, the economic development agency of northeast Louisiana. The parish is close to the prolific Haynesville shale of east Texas and northern Louisiana, which last year accounted for about 14pc of US dry gas production, according to US Energy Information Administration data. Securing gas supplies in a major gas-producing state like Louisiana may be easier because of the simpler regulatory process behind the construction of intrastate gas pipelines. Gas pipeline construction across US state lines requires the involvement of federal energy regulators, resulting in longer and more uncertain construction timelines. Meta said it will partner with US gas and power utility Entergy to add "enough clean and renewable energy to the grid to cover 100pc of the electricity use" of the Richland Parish data center, with Entergy adding "clean, efficient power plants to its system" to meet power demand. Meta and Entergy have looked at "options to invest in multiple clean energy options, including nuclear energy," Meta said in a statement to Argus . But it did not respond to an inquiry asking if it had secured supply deals for the facility with electricity generated by any particular fuel source, such as nuclear, gas or coal. Amazon, Google and Microsoft in recent months have said they expect to fuel their own planned data centers with nuclear energy , which could provide baseload, low-emission electricity to the new facilities. But long timelines and large upfront costs for conventional nuclear power plants, alongside the uncertain emergent technology behind nuclear small modular reactors, or SMRs, present obstacles to nuclear-powered data center development. For those reasons, the surge in expected US electricity demand through the end of the decade to fuel new planned data centers could, in the short term, translate largely into increased gas demand, Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus earlier this month. Data center operators "are in such a hurry, they are just wanting the power", Armstrong said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Norway to end new international fossil fuel financing


10/12/24
News
10/12/24

Norway to end new international fossil fuel financing

London, 10 December (Argus) — Norway will from January no longer provide public finance for new unabated international fossil fuel projects, in line with a commitment it made in December last year. Norway's export credit agency, Eksfin, provides most of the country's financing for overseas fossil fuel projects. Eksfin provided between 8.78bn Norwegian kroner and 10.98bn NKr ($786mn- 983mn) over July 2021-June 2023 for fossil fuel projects, civil society organisation Oil Change International found. Norway signed the Clean Energy Transition Partnership (CETP) at the UN Cop 28 climate summit in 2023. The CETP aims to shift international public finance "from the unabated fossil fuel energy sector to the clean energy transition". The CETP, which now has 41 signatories, was launched at Cop 26 in 2021, with an initial 39 signatories including most G7 nations and several development banks. Signatories commit to ending new direct public support for overseas unabated fossil fuel projects within a year of joining. Abatement, under the CETP, refers to "a high level of emissions reductions" through operational carbon capture technology or "other effective technologies". It does not count offsets or credits. Australia, which also signed the CETP at Cop 28, said last week that it would no longer finance overseas fossil fuel projects. "Norway is also working to introduce common regulations for financing fossil energy within the international main agreement for state export financing in the OECD", the Norwegian government said today. Norway's policy "helps increase momentum" for an OECD deal that could end $41bn/yr in oil and gas export financing, Oil Change said. Countries are involved in "final negotiations" on the deal today, Oil Change added. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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