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Aurora study finds policies would have limited effect on energy markets
Global energy market analytics provider Aurora Energy Research has released a new study quantifying the potential impact of November’s US presidential election on gas and power markets.
Trump has promised to “drill baby drill,” reduce energy costs for consumers by 50%, and slow the clean energy transition through major cuts to funding allocated to clean technology under the Inflation Reduction Act (IRA but the study found he is likely to have limited success in achieving the campaign’s stated goals, while a Harris administration would largely represent a continuation of current trends.
Aurora’s “Trump Presidency” scenario sees only a limited impact on the pace of the energy transition. While the prospect of repealing the IRA is remote, greater support for operational coal plants, weakening Biden-era environmental protections, and scrapping electric vehicle subsidies could reduce wind, solar, and battery deployment by up to 25GW by 2040 across the major power markets included in Aurora’s study –ERCOT, CAISO, PJM, MISO, NYISO, and ISO-NE.
Despite this, wholesale power prices will remain relatively unchanged across the country, with little to no impact on consumer bills, states the study.
Overall, it found the energy transition will continue apace, fuelled by rapid demand growth from AI and data centres, continued renewables cost declines, and the centrality of states and regional power markets in setting the policy agenda.
Meanwhile, Harris has offered relatively little substantive new policies that would move the needle on power markets compared to Aurora’s “business as usual” case.
The analytics provider also modelled a more extreme “Project 2025” scenario in which a Trump administration, under pressure to finance a massive $4.6tn extension of 2017 tax cuts, ignores opposition from red state communities who have benefitted from IRA incentives and instead moves to scrap tax credits for solar, wind, and batteries from 2025.
This would result in a much more significant slowdown in the pace of the energy transition, with 200GW fewer renewables and batteries projects by 2040.
However, this may not prove popular with consumers, since fewer clean energy projects leads to an increase in wholesale power prices up to 22% in the most impacted regions like Texas.
Trump has pledged to overturn Biden’s LNG export pause, increase oil and gas drilling on federal land, and scrap Biden-era environmental barriers to oil and gas permitting.
However, historical analysis has shown the President has limited ability to influence oil and gas prices, which are more influenced by macro-economic factors and international markets, as evidenced by Aurora’s scenario modelling.
On the supply side, capital discipline post-pandemic is forcing producers to focus less on increasing output and more on shareholder returns, said Aurora.
On the demand side, the report shows in the “Trump Presidency” scenario – the analyst’s take on the most likely outcome of a GOP win in November – tariffs of up to 50% on Chinese goods and 10% on imports from other countries are expected to increase domestic gas demand around 4% by 2040 as the US manufactures more of its own products.
Increased domestic demand puts upwards pressure on gas prices, but this is more than offset by a decrease in American LNG exports of 8% by 2040, resulting in Henry Hub prices remaining largely unchanged.
Tariffs are expected to marginally slow global economic growth, particularly in China, leading to reduced global gas demand and further impacting US LNG exports and the bottom line for exporters.
The outcome is similar to a “Harris Presidency” scenario in which no new LNG terminals are approved from 2025 onwards.
Pan-US team associate at Aurora Lizzie Bonahoom said: “Many trends we can expect to continue regardless of which candidate takes office next January – oil and gas production will continue to rise, renewables will continue to make up a growing portion of the power supply, and coal plants will continue to age and retire.
“If either administration makes energy a top priority, it will be hard to pass meaningful legislation without a House majority and Senate super-majority.
“We have tried to capture all potential outcomes by modelling both what is realistic for either candidate to achieve, and what is possible but less likely; the realistic outcome of either presidency has a more limited impact on long-term US power sector outcomes than we typically see in commentary surrounding the upcoming election.
“Harris largely represents the status quo, while Trump may struggle to honor his campaign promises.”
North American commodities team senior analyst at Aurora Sophie Parsons added: “Trump’s call to ‘slash energy prices’ under his leadership falls flat when you look at the data: a president has limited power over oil and gas markets and Trump’s plan to ‘unleash American energy,’ via additional oil and gas leases and expediting LNG terminal buildout, does not remove the barriers which are currently limiting market growth – it’s all on the demand-side.
“With gas prices setting power prices across most of the US over the next 10 years, the American consumer is unlikely to experience a meaningful change to their energy bills regardless of who is in the White House next year.” |
