Why Trump's Biggest Energy Impact Won't Be Coal

Americans are continuing to digest Trump's upset election victory on Nov. 8, but the continuing debate and uncertainty over what's ahead isn't limited to social issues.

Two major energy policy issues in particular - Trump's promise to make America energy independent and his stated desire to renegotiate or cancel the "nuclear deal" with Iran - have insiders all over the world concerned as well.

A great many of those insiders are here with me in the United Arab Emirates for meetings on the future of energy, particularly over the next four years.

But amid all the uncertainty, there's a big issue out there that isn't really being addressed. It's on the table here in the Emirates because it could have the biggest impact of all.

This Should Be the Ultimate U.S. Policy Goal

I've said throughout the election season that, whoever won, the pursuit of a balance of sources, above all else, must be the target.

And this single element may have a greater impact.

This approach requires us to optimize the usage of oil, natural gas, coal, nuclear, and renewables in a multi-sourced environment. The key is to provide as much interchangeable energy as possible.

That allows one source to compensate for others in a more efficient and available network. But for this to happen, there needs to be continued expansion in all of the major energy categories and some serious attention given to the production and delivery infrastructure among them.

But Trump's campaign pledge to make the U.S. "energy independent" has largely been regarded as nothing more than a move to support more oil and natural gas drilling, as well as an increasing reliance on coal.

To focus on any one at the expense of another would be a big mistake.

Today, I want to focus on a necessary cog in the energy balance and national energy self-sufficiency: renewables. Specifically solar and its place in the national energy sector under a Trump administration...

Trump's Administration Seems Set to Deprioritize Solar

At the outset, nobody associated with the incoming White House has voiced any particular opposition to solar. After all, in many parts of the country, solar has made significant gains over the past several years and reached grid parity, that is, equal or lower power generation cost with more conventional sources of power generation, like coal and gas.

The problem comes from elsewhere.

Republicans kept their majorities in both houses of Congress, and many Republican members of Congress have long voiced disapproval about the subsidies that solar and other renewables have been provided.

But they're looking for subsidies in the wrong place.

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Solar power's recent move toward grid parity has actually taken place without subsidies. Rather, the falling costs there are down to the completion of infrastructure capital needs: The required network and grid connectors are built and operating, which in turn reduces the comparative cost of power generation.

It's the end-user side where renewables subsidies are still in place. Some of them are at the state level. But federal assistance is likely to be under pressure when the 115th Congress convenes for business in January.

Then there are the strong signals coming from Trump's transition team that they are looking for ways to remove the United States quickly from the Paris Climate Accord. Renewables are a staple in that agreement's pledge to lower the global carbon footprint and move toward cleaner fuels.

However, the mood in the "new" D.C. seems to support a return of a national energy policy dominated by fossil fuels and an increasing indifference to what the rest of the world may think.

The market has recognized that shift, with solar stocks crashing more than 10% since Trump's victory.

The future of solar has dominated the discussions I'm having here in the Persian Gulf this week.

No Surprise, the Persian Gulf Is a Solar Hotspot

The Gulf of course has crude oil in abundance, but the sunny desert region is a natural solar hub, too. In fact, it happens to house one of the world's largest next-generation solar generating complexes.

The United Arab Emirates, where I'll be until Thanksgiving, and Saudi Arabia have the largest commitments in huge new solar plants worldwide.

Now, both these countries remain heavily dependent on crude oil exports for the bulk of central budget revenues. Yet they have also moved decisively into diversifying energy sources within each of their economies.

Among other things, they're wondering if the United States will play a role in solar's global future. (Also looming large is the OPEC production cap at the meeting in Vienna this month and the knock-on security issues that may arise should Trump scrap the Iran nuclear deal and re-impose sanctions on Tehran's oil sales.)

Tomorrow I'll be able to report on what's being discussed, and the path forward for the lucrative renewable energy sector in the Middle East, but especially in the United States.

You can get my report first, along with my other Oil & Energy Investor reports and my 2017 Crude Oil Investor Forecast, by clicking right here.

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About the Author

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.

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