How will Donald Trump affect the UK energy market?

How will President Trump affect the UK energy market?

When we last wrote about Donald Trump, we have to admit that we didn’t actually think that he’d win the election. But of course he did, and the drama has been a mile a minute since.

Since his inauguration, Trump has detailed an ‘America First’ energy plan that bears little mention of renewables and instead promises to revive America’s coal industry. But what do the president’s plans mean in action, and how will they affect the UK energy market?

Rick Perry – Energy Secretary

Trump’s pick for Energy Secretary is former Texan Governor Rick Perry. Perry once famously  called for an end to the very department he now heads up, although he changed his tune after discovering the extent of the department’s work. Despite worries about the Trump administration’s approach to climate change, Perry has promised to protect climate scientists in his department, saying during his confirmation hearing that at least some level of climate change is due to carbon emissions. Perry is also notable for his belief in the importance of wind power, something that is directly at odds with Donald Trump, who has repeatedly voiced his dislike of wind turbines:

“They’re horrible looking structures. They make noise. They kill birds by the thousands. They’re really destructive,” he adds of wind turbines. “And I don’t care who the environmentalist is; they are not good.” Source

The overall consensus on Rick Perry seems to be that he’s somebody who puts profits first, something that, as we will see, may mean he becomes a vocal proponent for low carbon energy.

Reviving Coal

Energy was a linchpin of Donald Trump’s election campaign, in particular his vow to reinvigorate the flagging US coal industry. The notion of the American worker who has been ‘left behind’ by progress, and ignored by politicians, is something that is central to the Trump brand. An overwhelming majority of ‘Rust Belt’ states voted for Trump, invigorated by his promises to bring industry and jobs back to their towns. Whilst the US has seen a return to economic growth since the recession, 7 million manufacturing jobs have been lost since 1980, many due to the collapse of coal.

“We will unleash the full power of American energy, ending the job killing restrictions on shale, oil natural gas and clean, beautiful coal. And we’re going to put our coal miners back to work,” Trump said. Source

Whilst the promise of ‘bringing back’ coal is appealing to many, how realistic is it? Trump believes that the coal industry has declined due to environmental regulations imposed by the Obama administration.  However, others argue that the falling costs of alternative energy sources, including natural gas, are the real reason for the demise. Automation has also contributed to the decline, which started as far back as 1980. By the year 2000, well before current environmental regulations were introduced, coal jobs had already decreased by 57%. This is why some people worry that even if the factories came back, the jobs may not. On the flipside, alternative energy sources are creating jobs, albeit not in rust belt states. 2014 figures showed that over 200,000 jobs were supported by the natural gas industry, whilst 260,000 Americans now work in the solar industry.

The popularity of natural gas in particular is a threat to coal, partly due to the fracking boom. Despite this, Trump is keen to ramp up investment in this sector, recently signing an executive order that would expedite approval of the controversial Keystone XL and Dakota Access pipelines. Any expansion of natural gas production is likely to hinder, rather than help, the coal industry.

If the markets are now saying that natural gas and solar are the way forward, then levelling the playing field towards fossil fuels would likely require subsidies, something that may not go down well with Republicans, who are typically averse to market interference. Additionally, even if the playing field were levelled, jobs may not return if automation continues apace.

Another alternative?

One alternative option to reviving the coal industry is to invest in carbon capture and storage (CCS). CCS can capture the bulk of carbon emissions from coal-fired power plants, which vastly limits their harmful emissions. Despite being a cost effective method of producing energy and the subject of a joint op-ed by Bill Clinton and George Bush’s assistant energy secretaries, CCS has been stuck in a sort of political no man’s land: ignored by the Republicans, as to embrace it would acknowledge the existence of climate change, and discounted by Democrats as it involves continued investment in fossil fuels. Given his apparent profits-orientated mindset It will be interesting to see if CCS is something that Rick Perry considers during his tenure.

On top of his fondness for fossil fuels, Donald Trump has been sceptical about climate change and the economic costs of the measures that have been introduced to combat it. He has stated that he will repeal many of Obama’s environmental regulations and withdraw the US from the recently ratified Paris Accord.

So we have some idea of where things stand at the moment with regards to Trump and energy, but what will it mean for the UK?

Trump and the UK

If the US dollar strengthens under a Trump presidency, as many hope it will, the UK will have to pay more to import US oil, potentially causing a rise in energy bills. However, Trump has also floated the idea of weakening the dollar in order to boost the export sector, something that could have a positive effect on UK energy prices.

Whilst investment in oil and gas may help the US economy, it could also result in an oversupply, especially considering the fact that electricity demand in America has remained flat over the past three years. This would lead to lower prices, which may be reflected in UK bills.

There is nervousness that the US’s withdrawal from the Paris Accord will cause other countries to lose environmental motivation. If the Paris Accord falls apart, global emissions targets are unlikely to be met.

After Theresa May’s visit to Washington, Donald Trump stated that a swift US-UK trade deal was on the cards. Of course, we can’t negotiate trade deals until we have actually left the EU, so even a swift deal would be at least two years away, and trade deals are naturally lengthy processes. Whilst the prospect of a US-UK trade deal has been seized upon by some in the wake of Brexit, it’s worth noting that Trump’s ‘America First’ viewpoint means he’s unlikely to make concessions in negotiations: this will not be an easy win for Britain. A US trade deal is likely to come at the cost of some level of access to British industry – be that opening up the NHS to competition from American companies, encouraging the UK to relax its food standards to allow for the trade of consumables, or – most relevant to this article – allowing the UK energy market to be opened up to US competition, something that could adversely affect our renewables industry.

The Trump presidency has been nothing if unpredictable but the next few months should give us more of an idea about how energy will look under a Trump Administration. Keep checking back for updates. 

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