Donald Trump is the best thing to happen to renewables

@realDonaldTrump – The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive

Donald Trump loses wind farm battle at Supreme Court – The Daily Telegraph 16/12/15

Intro

Donald Trump is the best thing to happen to renewables. Renewables need to show they have graduated from a fledgling, nascent industry to becoming the cornerstone of a new low carbon economy. For years renewables and clean-tech have been arguing that they are close to standing on their own two feet. Trump means it may now be time to prove it.

Renewables have come a long way in a short time. There have been ups and downs but the overall trends have been positive for renewable investment. In 2014, renewables surpassed coal to become the largest source of installed power capacity in the world. The World Economic Forum has said “that renewable energy has reached a tipping point – it now constitutes the best chance to reverse global warming”.

However, it has not been easy. Renewables have had to work against powerful incumbents that form the basis of the fossil fuel economy. So renewables have to win arguments and make friends in three important worlds – public, political, and financial.

These worlds are intrinsically linked. It is difficult to talk about one without the other. But it is important to remember that Trump now inhabits the political world and over the past decade renewables have started to live more and more in the financial and public world. This has been achieved through setting up the following foundations – strong scientific evidence, credible business case, public support and binding legislation. These foundations are now deep enough to withstand Trump.

Public world

Renewable investment or deployment at local level may become clouded by issues such as nimbyism or regulatory minutiae. But at the heart of any public debate around renewables is a single truth – we need to tackle man-made climate change.

95% of scientists believe that man-made climate change is taking place. This fact is often the knee-jerk response to any accusations that climate change is not man made or even happening. It can be banded around with little thought to what it actually means. However, this body of scientific evidence is going to prove its true value. Climate Change deniers, like Trump, claim it is a “hoax”. Well now he is going to have to prove it. Any attempt to repeal US environmental policies, including the Clean Power Plan, will inevitably end up in the courts after numerous public consultations and Democrat filibustering. It is going to prove immensely difficult to disprove climate change in the courts. In fact, there will be a good chance that interrogation of a climate sceptic’s evidence could help to put the issue to bed once and for all.  

One area that Trump is able to have some control is over the Paris Climate Change Agreement. He has two options. He can pull out formally which will take four years. Or throw his toys out the pram and leave the UNFCCC altogether. This last option could be done within a year but it does run the risk of diplomatic or trade backlash.

Political world

The public support for tackling climate change has fuelled political support. Political support has taken the form of both positive rhetoric, legislation and subsidies. The latter has been understandably one of the biggest issues around renewables. The justification for government subsidy was to support nascent technologies in the hope that they will be able to stand on their own two feet.

Solar and wind are now either the same price or cheaper than new fossil fuel capacity. Plus improving technology improvements and efficiencies means cost of renewables are only predicted to go one way. The IEA predicts that over the next five years, renewables will remain the fastest-growing source of electricity generation. But this predicted growth is not due to increased levels of government support. In fact all modelling accounts for declining subsidies. These cost reductions are achieved through economies of scale and technological innovation.

Equally we should not forget the important role legislation can have. Of course legislation was necessary to help create a framework for renewables to develop and build. But its symbolic functions and ability for to hold Government’s feet the fire should not be underestimated. In the UK the symbolism of the Climate Change Act is what keeps Government cute on renewables. It isn’t the threat of judicial review. Legislation does requires horse-trading which can lead to natural watering down. But it also requires good will and the finding of common ground. So with the Paris Climate Change Agreement a tremendous amount of goodwill was generated. Enough to bring both China and US to the table. Even if the US does decide to walk away it could be argued that enough good will has been generated for the markets and business to take over. 

Financial world

Renewables are starting to make good on their promise of standing on their own two feet. It is outgrowing the political world and moving firmly into the financial world. This could be argued as the last piece of the puzzle.

Renewable investment has come a long way from angel investors making investments in one or two millions. We are now seeing investments in the trillion of dollars. Bloomberg New Energy Finance Outlook 2016 predicts that $11.4 trillion will be invested in power generation globally between now and 2040, of which $7.8trn will be invested in renewable energy, compared with $3.2trn in fossil fuels and nuclear. What started as trickle has become a flood.

Investors are voting with their wallets and clearly looking to back renewables. This is resulting in changing corporate mindset, which has seen the value of investment funds committed to selling off fossil fuel assets jump to $5.2 trillion. In fact hundreds of U.S. CEOs signed a letter to the president-elect urging him to stay the course on global climate action and building the clean economy.

The global renewable global market is now too big and too attractive to ignore, with Europe, Asia and China able to pick up the slack if America walks away. China alone has pledged to invest £292bn in renewable power by 2020, meaning that renewable investment will stay strong in the 4 or 8 years of Trump’s time in the White House.

It also would be foolish to walk away from the clean economy from a domestic stand point for Trump. The owner of Trump Towers has been promising a coal miners’ revolution. However, history has proved that long term economic growth doesn’t come through turning back the clock. It comes through innovation. Clean tech presents this opportunity. Bill Gates has launched a $1 Billion Breakthrough Energy Investment Fund and tech giants are fighting over each other to be the first to hit a 100% renewable energy goal.

Donald Trump prides himself on being a business man but if he turns his back on renewables he could be turning his back the jobs and economic growth he promised. We just have to hope he is the business man he professes to be.

Conclusion

There is no denying that Donald Trump is renewables or climate change’s greatest test and if he had come into power 10 years ago it would be a completely different story. But Donald Trump may possibly be finding out an important lesson that many in politics have been learning for the past several decades. That when the markets and business are determined, even the will of the most powerful politician is at the will of economics and market forces. 

Douglas McIlroy

Hill & Knowlton Strategies Search