Latest / Trumponomics / Will Trump’s Bill Trigger a ‘Big, Beautiful’ Energy Crunch?

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Will Trump’s Bill Trigger a ‘Big, Beautiful’ Energy Crunch? · Trumponomics

0:02
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is not the
0:09
Speaker 1: death of the US renewable energy industry in the United States,
0:12
Speaker 1: but it is a major setback.
0:22
Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg.
0:25
Speaker 2: Welcome to Trumponomics, the podcast that looks at the economic
0:29
Speaker 2: world of Donald Trump. Now he's already shaped the global economy,
0:32
Speaker 2: and what on earth is going to happen next? This
0:35
Speaker 2: week we're talking about the big Beautiful assault on renewable energy.
0:41
Speaker 2: Will the Republican megabill pass last week bring on a
0:44
Speaker 2: new American energy crisis? What could be the impact on
0:47
Speaker 2: electricity bills, the broader economy, and America's leadership in the
0:52
Speaker 2: race for artificial intelligence. We're recording this on Tuesday, the
0:56
Speaker 2: eighth of July. And of all the elements of the
0:58
Speaker 2: one Big Beautiful Bill, as Donald Trump called it, that
1:01
Speaker 2: he signed going into the July fourth holiday, one I
1:05
Speaker 2: find particularly hard to get my head round is the
1:07
Speaker 2: decision to get rid of tax credits for clean energy.
1:10
Speaker 2: As a result of that, wind and solar projects will
1:13
Speaker 2: cost more and more likely there will be a lot
1:15
Speaker 2: fewer built. In fact, in an analysis this week, a
1:18
Speaker 2: climate policy think tank called Energy Innovation forecast that the
1:22
Speaker 2: bill would put an end to three hundred gigawatts of
1:24
Speaker 2: wind and solar projects that would have otherwise come online
1:27
Speaker 2: in the next fifteen years. That's the equivalent of about
1:30
Speaker 2: three hundred nuclear reactors. Now, obviously that set back the
1:33
Speaker 2: fight against climate change and the decarbonization of the US economy.
1:38
Speaker 2: And that may not be much of a worry for
1:40
Speaker 2: the supporters of the big bill, but there could be
1:42
Speaker 2: more concern about another very likely consequence, higher electricity prices.
1:47
Speaker 2: That matters for voters facing rising utility bills, but it
1:50
Speaker 2: also matters for tech firms chasing the next breakthroughs in AI.
1:55
Speaker 2: The country that reigns supreme in AI will rule the world.
1:58
Speaker 2: Everyone seems to think that these days, including Donald Trump.
2:01
Speaker 2: In fact, you might remember on the day after his
2:02
Speaker 2: inauguration he announced the creation of Stargate, a project to
2:06
Speaker 2: expand AI infrastructure in the US.
2:09
Speaker 3: But to announce the largest AI infrastructure project by far
2:12
Speaker 3: in history. And it's all taking place right here in America.
2:18
Speaker 3: As you know, there's great competition for AI.
2:21
Speaker 2: And projects like Stargate need electricity, lots of it, And
2:24
Speaker 2: in fact, that's part of the reason electricity demand in
2:27
Speaker 2: the US is rising faster now than it has at
2:29
Speaker 2: anytime in the last twenty years. The tax credits in
2:32
Speaker 2: the Inflation Reduction Act on the President Biden helped the
2:35
Speaker 2: US keep up with that rising demand in theory by
2:38
Speaker 2: making clean power sources cheaper. Investments in wind, solar, and
2:42
Speaker 2: battery storage had spiked in the years after the IRA
2:46
Speaker 2: was passed, But now the Big Bill has changed all
2:49
Speaker 2: that and a lot of people including me, scratching their
2:52
Speaker 2: heads wondering what the plan is now. And this week
2:56
Speaker 2: I'm delighted to say I'm in the Washington Studio with
2:58
Speaker 2: two guests who have a good perspective on this topic
3:01
Speaker 2: and can help me think through the consequences for the
3:03
Speaker 2: US economy. First up, Ethan Zindler, the head of Country
3:07
Speaker 2: and Policy Research at Bloomberg NEF. That's the part of
3:10
Speaker 2: Bloomberg Research that's focused on the energy transition. And we
3:14
Speaker 2: should say that before joining US, Ethan served as Climate
3:17
Speaker 2: Counselor to the US Treasury Secretary of Janet Yellen from
3:21
Speaker 2: July twenty twenty three to January twenty five, so he
3:24
Speaker 2: was across a lot of policy efforts then, including helping
3:28
Speaker 2: to write and implement the Inflation Reduction Act.
3:31
Speaker 1: Welcome Ethan, thanks for having.
3:32
Speaker 2: Me and also with us Emily Bernbaut, who's a Bloomberg
3:35
Speaker 2: reporter here in DC who covers corporate lobbying and influence.
3:39
Speaker 2: Thank you so much for being on Trumpenomics. Emily.
3:41
Speaker 4: Thank you.
3:46
Speaker 2: So people will have heard quite a lot about that bill,
3:50
Speaker 2: but it's probably useful to just take stock of how
3:55
Speaker 2: that turned the tables for the renewable industry. What are
3:59
Speaker 2: the species measures that are going to be painful for
4:03
Speaker 2: that part of the US energy industry.
4:05
Speaker 4: There was a lot of last minute wrangling over the
4:08
Speaker 4: details of what this bill will do to the clean
4:13
Speaker 4: energy industry. The top line is that it's very bad.
4:18
Speaker 4: It's not as bad as it could have been. What
4:21
Speaker 4: ended up in the bill was pretty aggressive timelines for
4:26
Speaker 4: phasing out tax credits. But elements of the bill would
4:31
Speaker 4: encourage companies to begin construction over the next year, and
4:35
Speaker 4: if they're able to do so, it's likelier that they'll
4:38
Speaker 4: be able to get some of these important tax credits.
4:41
Speaker 4: But overall, they're going to have to begin construction very quickly,
4:47
Speaker 4: and these tax credits are going away on a more
4:50
Speaker 4: aggressive timeline than had initially been anticipated.
4:54
Speaker 2: Yeah, And that was what was interesting, because when it
4:56
Speaker 2: went from the House to the Senate, there was some
4:57
Speaker 2: expectation that the Senate would want to extend the time
5:03
Speaker 2: frame a little bit. The investments that drawer have been announced,
5:06
Speaker 2: give them a bit more time to get up and running.
5:09
Speaker 2: But if anything, the bills seemed to get worse.
5:12
Speaker 4: Yes, and at the last minute there was something that
5:15
Speaker 4: would have dealt a huge blow to the industry, which
5:18
Speaker 4: was this excise tax. There was basically panic in the
5:21
Speaker 4: industry and among moderate Republicans who said this excise tax
5:25
Speaker 4: would so dramatically increase costs for solar and wind projects,
5:31
Speaker 4: it would effectively make it untenable for a lot of
5:35
Speaker 4: these projects to move forward or begin construction. So right
5:38
Speaker 4: before the Senate passed it, they removed the excise tax,
5:41
Speaker 4: which is a huge relief, but they still are dealing
5:44
Speaker 4: with pretty aggressive phase outs.
5:46
Speaker 2: Ethan, you were saying just before we started that even
5:50
Speaker 2: though parts of the renewables industry was kind of breathing
5:53
Speaker 2: a sigh of relief or having at least dodged that
5:55
Speaker 2: particular bullet, not having this extra tax that the administration
5:59
Speaker 2: has already of vindicated that it's not done with the
6:01
Speaker 2: renewable industry. Yet what happened earlier this week.
6:05
Speaker 1: Yeah, things have kind of gone from bad to worse,
6:07
Speaker 1: even within the last less than twenty four hours. Basically,
6:10
Speaker 1: there's been some real questions about whether projects could qualify
6:14
Speaker 1: so long as they were quote unquote under construction, and
6:18
Speaker 1: the irs historically is to find under construction fairly liberally.
6:23
Speaker 1: And yesterday the White House issue to executive order basically
6:27
Speaker 1: saying that they are ordering the Treasury Department within the
6:30
Speaker 1: next forty five days to rewrite that rule, and if
6:33
Speaker 1: they do that in such a way, they can make
6:35
Speaker 1: it very challenging for projects to qualify. It is not
6:39
Speaker 1: even beyond the realm of the possible that they would
6:42
Speaker 1: write something that is essentially retroactive and effectively make it
6:46
Speaker 1: much more challenging for projects to actually be able to
6:48
Speaker 1: qualify for the credit. So, from our perspective at Bloomberg
6:51
Speaker 1: f we're trying to go back and sharpen our pencils
6:54
Speaker 1: and try and think about how much stuff is going
6:56
Speaker 1: to get built. But I think the one thing that's
6:57
Speaker 1: pretty clear as of this morning is that many who
7:00
Speaker 1: are in the wind and solar and storage industry are
7:02
Speaker 1: probably scrambling to get as much stuff as they can
7:05
Speaker 1: essentially under construction at this very moment, while they are
7:08
Speaker 1: concurrently probably lobbying the Treasury Department about what this new
7:12
Speaker 1: regulation is going to look like.
7:13
Speaker 2: I'm going to come back to you on some of
7:15
Speaker 2: the dynamics on the hill, But Ethan, let's just step back,
7:19
Speaker 2: and I know that's what Bloomerginny f likes doing. They
7:21
Speaker 2: tend to do the twenty five year horizons consider to
7:24
Speaker 2: be quite short term. But if you do take that
7:29
Speaker 2: kind of longer term, you know what has been happening
7:32
Speaker 2: to energy demand and electricity demand within that in recent years?
7:37
Speaker 2: And what was you know, until this bill, what was
7:40
Speaker 2: that basic plan for meeting it?
7:42
Speaker 1: Yeah, So the United States, like other wealthy developed countries,
7:45
Speaker 1: has been able to grow its economy without growing demand
7:48
Speaker 1: for electricity. Really for twenty years, essentially, we've had flat
7:52
Speaker 1: demand overall, largely because of energy efficiency improvements and new
7:56
Speaker 1: technologies and the desire to save costs. The last couple
8:00
Speaker 1: of years that started to change, and we think that's
8:02
Speaker 1: going to continue to change going forward. The number one
8:05
Speaker 1: driver in the short run has been AI and the
8:08
Speaker 1: demand from new data centers. We also think electric vehicles,
8:11
Speaker 1: as you look further out, are going to start to
8:13
Speaker 1: play a much bigger role as well. In the US,
8:16
Speaker 1: we think we're going to see demand for electricity double
8:18
Speaker 1: from about forty one hundred tarawad hours at the moment
8:21
Speaker 1: up over six thousand by the time you get to
8:24
Speaker 1: twenty fifty overall, and by twenty thirty five, we think
8:27
Speaker 1: that about eight percent of capacity in the United States
8:31
Speaker 1: is going to go specifically to powering data centers, which
8:34
Speaker 1: is a really considerable portion overall. One other quick just
8:38
Speaker 1: note in terms of trends, is that really over the
8:40
Speaker 1: last ten years or fifteen years or so, the US
8:42
Speaker 1: has really been rapidly decarbonizing our power generation sector. We
8:48
Speaker 1: went from about half our power coming from coal to
8:50
Speaker 1: well under twenty percent as the last year, could be
8:52
Speaker 1: even under fifteen percent this year depending on conditions. And meanwhile,
8:56
Speaker 1: renewables have grown from almost nothing to about twenty percent
8:59
Speaker 1: of generation. Nuclear is about twenty percent, so we're about
9:02
Speaker 1: forty percent zero carbon here, and the natural gas is
9:05
Speaker 1: a huge part of the story, which is a lot
9:07
Speaker 1: cleaner than coal overall. So the general trend has been
9:10
Speaker 1: towards cleaner sources of energy going forward. And if you
9:13
Speaker 1: look at what's gotten built in the last several years
9:15
Speaker 1: and what would get built in the next several years
9:17
Speaker 1: in terms of purely cost, it's renewables. The vast majority
9:21
Speaker 1: of new stuff that's due to come online is renewables,
9:24
Speaker 1: and so that is why it's so questionable that you
9:26
Speaker 1: would go out of your way to essentially raise the
9:29
Speaker 1: cost of those technologies, which is effectively what Congress is
9:32
Speaker 1: now done.
9:33
Speaker 2: Those of us who kind of looked on the outside
9:35
Speaker 2: and seen the US go from being a net consumer
9:39
Speaker 2: of energy or oil, I should say to an exporter,
9:44
Speaker 2: have been very familiar with a rather different story, which
9:46
Speaker 2: is America had this fracking revolution which was not environmentally friendly,
9:51
Speaker 2: but did bring an enormous amount of gas online, which
9:55
Speaker 2: has brought down the price of energy for US consumers.
9:58
Speaker 2: So I guess the story that you might tell against
10:01
Speaker 2: your story at least be sort of well, hang on
10:03
Speaker 2: a minute, it's fracking that has made this a kind
10:05
Speaker 2: of golden era for US energy prices, and the renewables
10:10
Speaker 2: is not completely reliable and is more is a sort
10:13
Speaker 2: of side show to that basic story.
10:15
Speaker 1: So yeah, really good points. I mean, certainly, we have
10:17
Speaker 1: the lowest price natural gas in the world in terms
10:20
Speaker 1: of production, and that has allowed a lot of manufacturing
10:23
Speaker 1: to be very competitive in the United States. I would
10:26
Speaker 1: note though, that first of all, that renewables plus storage
10:29
Speaker 1: gets you maybe not to twenty four hours of generation,
10:31
Speaker 1: but can get you enough production of electricity into the
10:34
Speaker 1: sort of key hours of the evening. And we're starting
10:36
Speaker 1: to see solar plus storage be very cost competitive in
10:39
Speaker 1: many markets around the world. Not all markets in the
10:42
Speaker 1: United States, but a bunch of markets. But then just
10:45
Speaker 1: purely speaking practically in the United States in terms of
10:48
Speaker 1: what we're going to build over the next five years,
10:50
Speaker 1: You're absolutely right that gas is cheap, and gas is
10:53
Speaker 1: cost competitive in a number of markets in the United States.
10:55
Speaker 1: The problem is you just cannot get your hands on
10:58
Speaker 1: a combined cycle gas at the moment for a number
11:01
Speaker 1: of years, anywhere from three to seven depending on who
11:04
Speaker 1: you asked. So in terms of what our next mega
11:07
Speaker 1: out of capacity is going to be, it basically has
11:09
Speaker 1: to be renewables because there isn't really any other sources,
11:13
Speaker 1: and if we have rising demand from AI, that means
11:15
Speaker 1: it's going to probably come from renewables. And again, if
11:18
Speaker 1: you take away essentially what has been a long standing
11:21
Speaker 1: tax credit and subsidy to the clean energy industry that
11:25
Speaker 1: is effectively socialized a discounted electricity production price in the
11:29
Speaker 1: United States, you're just simply going to concentrate it on
11:31
Speaker 1: certain markets. So the next place where you're going to
11:33
Speaker 1: build wind or solar project, potentially you're going to have
11:36
Speaker 1: to sign a higher price contract in order for the
11:39
Speaker 1: developer to make the return that they need without the
11:42
Speaker 1: tax credit.
11:43
Speaker 2: But if they're the only short term viable source of
11:46
Speaker 2: additional energy, then it surely must be cost effective to build.
11:50
Speaker 1: I mean, here's the question, and I think we're going
11:52
Speaker 1: to find this out over the next couple of years,
11:54
Speaker 1: is what's the breaking point for consumers? So, yes, you
11:57
Speaker 1: can pass on some form of higher electricity prices. But
12:01
Speaker 1: if you're a developer of a large scale data center,
12:03
Speaker 1: you're not necessarily entirely wedded to the United States. Just
12:07
Speaker 1: because the most AI has been built not that far
12:09
Speaker 1: from here, maybe thirty miles from here, just outside of Washington,
12:13
Speaker 1: doesn't mean that every next AI data center has to
12:15
Speaker 1: be here. To some large degree, AI is some the servers,
12:19
Speaker 1: not all To be clear, there's different types of servers
12:21
Speaker 1: and that's not my area of expertise, but some can
12:24
Speaker 1: really be anywhere in the world, and so they will
12:27
Speaker 1: go where the price of electricity is most affordable and reliable,
12:32
Speaker 1: and there are other options. Brazil is about seventy eighty
12:35
Speaker 1: percent hydropower, low cost. They've been trying very much to
12:39
Speaker 1: market Brazil as an AI place. Gulf States have enormous
12:43
Speaker 1: amounts of sun, very cheap solar. They don't put big
12:46
Speaker 1: tariffs sun solar equipment like we do, can build batteries
12:50
Speaker 1: to go along with it. They are certainly trying to
12:52
Speaker 1: market themselves as hubs for AI as well. So no
12:55
Speaker 1: foregone conclusion that the United States will be the one
12:58
Speaker 1: and only place where we build all this new capacity.
13:01
Speaker 2: But as far as you're concerned, the only way that
13:05
Speaker 2: this energy that we were expecting to come online, or
13:08
Speaker 2: electricity that we were expecting to come online in the
13:10
Speaker 2: US to meet this demand will actually come online is
13:13
Speaker 2: through higher prices.
13:15
Speaker 1: I mean, it seems inevitable. And I think one of
13:17
Speaker 1: the questions we're just trying to parse out, given the
13:19
Speaker 1: incredible complexity of what Congress has just done, is how
13:22
Speaker 1: many projects could still qualify for the tax credit if
13:25
Speaker 1: they get under construction basically yesterday, and how many of
13:29
Speaker 1: them will not And those that don't obviously are going
13:31
Speaker 1: to have to figure out some way to get compensated
13:33
Speaker 1: correctly so that they can earn the return that they want.
13:37
Speaker 1: The best guess at the moment is that if you
13:39
Speaker 1: get under construction sometime in this calendar year, you'll probably
13:42
Speaker 1: be okay. But the White House just created an additional
13:45
Speaker 1: uncertainty with this executive order.
13:47
Speaker 2: One I saw is that the future clean energy products
13:51
Speaker 2: that don't have these tax credits will cost fifty percent
13:55
Speaker 2: more to get built. Do you think that's in the
13:56
Speaker 2: right ball part?
13:58
Speaker 1: That feels a little on the high side of me,
13:59
Speaker 1: But we need to do the analysis ourselves. I think historically,
14:03
Speaker 1: if you look around the world, the history of clean
14:05
Speaker 1: energy is you have a number of countries that have
14:07
Speaker 1: put in place very generous supports in the form of
14:10
Speaker 1: feed in tariffs like we've seen in countries in Europe
14:12
Speaker 1: and elsewhere, and when they disappear, it's terrible news for
14:16
Speaker 1: the industry. But we also find that the industry is
14:18
Speaker 1: incredibly innovative about finding ways to reduce costs the US
14:22
Speaker 1: is really not a low cost market when it comes
14:26
Speaker 1: to putting solar on people's views in particular, but also
14:29
Speaker 1: large scale projects. So there's definitely some room for cost reduction,
14:33
Speaker 1: I think for the industry overall. But there's no question
14:35
Speaker 1: this is going to boost costs. In the case of
14:37
Speaker 1: a typical solar project, the tax credit is thirty percent
14:40
Speaker 1: of CAPECK. So a billion dollar project, three hundred million
14:43
Speaker 1: right off the top was basically disappearing because of tax credits.
14:47
Speaker 1: That has to be dealt with somehow.
14:49
Speaker 2: And I've seen the Energy Innovation Thing Tank from what
14:51
Speaker 2: you're saying, suggests that maybe it'd be a little bit
14:53
Speaker 2: on the high side, but their estimate of the impact
14:56
Speaker 2: on bills would be that the average energy bill by
14:59
Speaker 2: twenty thirty five could be nearly five hundred dollars higher
15:03
Speaker 2: in Michigan, similar maybe more in Maryland, and six or
15:07
Speaker 2: seven hundred eight hundred dollars higher in Texas than it
15:10
Speaker 2: would have been if the credits had remained.
15:11
Speaker 1: Yeah, I can't, I won't. I guess I want to
15:13
Speaker 1: dispute that we haven't done that analysis ourselves. I've seen
15:15
Speaker 1: different numbers from other research firms as well. There's no question,
15:18
Speaker 1: particularly in a market like Texas, which is really deregulated
15:22
Speaker 1: and where pricing can get passed along directly to large
15:24
Speaker 1: scale consumers, there's no question this is going to have
15:27
Speaker 1: a real impact ultimately. I think the interesting question is
15:30
Speaker 1: what about businesses. I mean, we talk a lot about
15:32
Speaker 1: retail consumers, and eventually they are the ones who get hit,
15:34
Speaker 1: but more immediately and often cases it's wholesale purchases of
15:37
Speaker 1: electricity that feel the effects. And that is one of
15:40
Speaker 1: the puzzling things why in this debate where the utility
15:43
Speaker 1: is not more engaged in this, because ultimately they're the
15:45
Speaker 1: ones who are going to get bigger bills that they're
15:47
Speaker 1: going to have to pass along to their consumers. Or
15:50
Speaker 1: where were the manufacturers who are going to have to
15:52
Speaker 1: pay higher prices for electricity than they would if you're
15:54
Speaker 1: in the say Ercot market or PJM. I'm puzzled as
15:58
Speaker 1: to why there wasn't a more engage conversation around this,
16:01
Speaker 1: And you're.
16:02
Speaker 2: Really my mind, even because I was thinking about your title,
16:04
Speaker 2: Emily and the fact that you are a reporter focusing
16:06
Speaker 2: on corporate lobbying and influence. You know, people have focused
16:09
Speaker 2: on the impact and the influence of the fossil fuel
16:12
Speaker 2: lobby in driving part of this bill. And we know
16:15
Speaker 2: that there's some parts of that industry that have been
16:19
Speaker 2: big donors to Donald Trump. But there were awful lot
16:21
Speaker 2: of people on the other side of the argument, including
16:23
Speaker 2: as Ethan mentions, there's the utilities and sectors that would
16:28
Speaker 2: really be hurt by this, not to mention the tech
16:30
Speaker 2: firms who are lobbying to get more cheap electricity. So
16:35
Speaker 2: why is it those voices just weren't heard in the
16:38
Speaker 2: last few weeks.
16:39
Speaker 4: Ultimately, the reason this bill goes so aggressively against clean
16:45
Speaker 4: energy is because of House Speaker Mike Johnson's math issue,
16:51
Speaker 4: which was that he could only stand to lose a
16:54
Speaker 4: very small number of Republican votes, and so that made
16:59
Speaker 4: the House Freedom Caucus, the group of hardline conservatives in
17:03
Speaker 4: the House, that made them very powerful in this conversation,
17:08
Speaker 4: and a lot of them, for the most part, really
17:11
Speaker 4: leaned towards the oil and gas industry. So thinking about
17:15
Speaker 4: Chip roy from Texas, he was one of the most
17:20
Speaker 4: consistent voices saying we really need to phase out these
17:23
Speaker 4: subsidies very quickly. He was in communication very closely with
17:29
Speaker 4: a conservative activist named Alex Epstein who actually shaped a
17:34
Speaker 4: lot of this debate behind the scenes, and basically Alex
17:38
Speaker 4: Epstein's arguments are in favor of natural gas. He says
17:44
Speaker 4: that solar and wind are unreliable sources of energy. You know,
17:49
Speaker 4: I'll let you debunk some of what he has to say,
17:52
Speaker 4: but essentially that the subsidies artificially lowered the cost of
17:57
Speaker 4: electricity and we're creating lee And so there is a
18:01
Speaker 4: lot of arguments behind the scenes against the clean energy
18:05
Speaker 4: industry and ultimately I think oil and gas just really
18:09
Speaker 4: won in this bill.
18:10
Speaker 1: To be clear, they're subsidized too.
18:12
Speaker 2: Yeah, say, I was going to say, there's a hell
18:15
Speaker 2: of a lot of subsidy on that side, but somehow
18:18
Speaker 2: they need subs tody, but the clean energy doesn't. I mean,
18:22
Speaker 2: even Texas is a surprise, right. I Mean that was
18:24
Speaker 2: one of the things that we said after Donald Trump
18:27
Speaker 2: won the election, and there was obviously this question mark
18:29
Speaker 2: about where would he go on And there was some
18:31
Speaker 2: pushback initially on the idea that he would completely repeal
18:34
Speaker 2: the IRA the Biden era tax credits, in part because
18:38
Speaker 2: of the support from the tech industry, but also because
18:42
Speaker 2: it was noticed that partly because it's easier to build
18:46
Speaker 2: stuff in the red states, that there were a lot
18:49
Speaker 2: of Republican states that had actually benefited enormously from the RA,
18:53
Speaker 2: including Texas. I think most of its new electricity supply
18:57
Speaker 2: had come from renewables in the last couple of years.
19:01
Speaker 2: So it's interesting that the representat different Texas just doesn't
19:04
Speaker 2: seem to factor that in.
19:07
Speaker 4: Yeah, it just became such a political talking point, calling
19:11
Speaker 4: the IRA the green new Scam, making it democrat led
19:16
Speaker 4: project essentially that Republicans had to completely nix and create
19:23
Speaker 4: their own path forward when it comes to energy, And
19:27
Speaker 4: an interesting element of the bill is that it's a
19:30
Speaker 4: lot less aggressive when it comes to nuclear energy, which
19:34
Speaker 4: is an area that I know that tech companies have
19:37
Speaker 4: been investing a lot into. Obviously, that's a lot slower
19:41
Speaker 4: moving and it doesn't address the immediate energy needs of
19:45
Speaker 4: data centers. But the nuclear energy industry came out with
19:49
Speaker 4: far less battle scars than some other parts of the industry.
19:53
Speaker 4: And that's a part of this conversation too, is sort
19:55
Speaker 4: of like weighing things in favor of certain kinds of
19:58
Speaker 4: energy over others.
19:59
Speaker 2: That was again much conversation about the political fallout from
20:04
Speaker 2: this bill. You know, over the last few weeks people
20:07
Speaker 2: have wondered whether the Republicans are really kind of ready
20:10
Speaker 2: for what happens in their constituencies when the impact of
20:14
Speaker 2: Medicaid cuts and others come through. But you would think
20:17
Speaker 2: if there's a short term big increase in energy prices
20:21
Speaker 2: that hits people's utility bills, they're electricity bills, is there
20:25
Speaker 2: not a fear on the hill the finger will be
20:28
Speaker 2: pointed to this bill when it comes to that. I mean,
20:30
Speaker 2: it's cost of living is such a big element of
20:32
Speaker 2: the Trump pledge, the promise if you like to voters,
20:37
Speaker 2: do they just think they'll be able to blame other stuff? Yeah?
20:39
Speaker 4: I think part of the sleight of hand is that
20:41
Speaker 4: tax cuts are coming in more immediately than some of
20:45
Speaker 4: the spending cuts, So meaning in the more immediate term,
20:50
Speaker 4: some people are going to see their taxes decrease, whereas
20:55
Speaker 4: some of the potential added cost to electricity bills or
21:00
Speaker 4: some of the loss of Medicaid coverage comes farther down
21:04
Speaker 4: the line. So it is a lot about timelines as well.
21:08
Speaker 4: They've written it in a way that at least Republicans
21:11
Speaker 4: hope that people don't see the more negative effects until
21:15
Speaker 4: after the midterms in twenty twenty eight.
21:17
Speaker 1: If I could jump in, I think you're also maybe
21:19
Speaker 1: ascribing a much higher level of sophistication to this conversation.
21:23
Speaker 1: Then probably actually went on, I don't know that people
21:25
Speaker 1: on the hill understand the economics of power generation at
21:30
Speaker 1: the moment, and the fact that renewables are the most
21:32
Speaker 1: cost competitive, and the fact that it's impossible to get
21:34
Speaker 1: your hands on a natural turbine. These are things that
21:37
Speaker 1: only nerds like me know, So I don't know that
21:39
Speaker 1: stuff that they're kind of across.
21:41
Speaker 2: Would their argument be, Yeah, it's hard under Biden to
21:45
Speaker 2: get this stuff built, but we're going to lift all
21:47
Speaker 2: of these stupid restrictions, and so that natural gas power
21:50
Speaker 2: station could go up in a year.
21:52
Speaker 1: So that just I mean, again, hard to not get
21:54
Speaker 1: in the rabbit hole here. But if there's three or
21:56
Speaker 1: four companies that make these we're talking large scale turbine
22:00
Speaker 1: and so these are big things, specialized manufacturing that goes
22:03
Speaker 1: into them. If you're one of the three or four
22:04
Speaker 1: companies in the world that makes them, and you are
22:07
Speaker 1: selling them at a very high price at the moment,
22:09
Speaker 1: and you have a back order. I guess the question
22:11
Speaker 1: is do you ramp up your manufacturing of those turbines?
22:15
Speaker 1: And if you do, how long is it going to
22:17
Speaker 1: take you to ramp that up? At least a couple
22:19
Speaker 1: of years at the very very least, and then a
22:20
Speaker 1: few more years at least before you can get some
22:22
Speaker 1: more turbines out. And if you're one of those companies
22:25
Speaker 1: and you're looking at the US situation, the political situation here,
22:28
Speaker 1: I think you might very well ask yourself, well, is
22:30
Speaker 1: this the new world we're living in? Or are we
22:32
Speaker 1: going to see some flip back in two or three
22:33
Speaker 1: years back to renewables and suddenly I've got more gas
22:37
Speaker 1: turbine capacity, manufacturing capacity than I know what to do with.
22:40
Speaker 1: I'd be very surprised if there's big investment. But keep
22:43
Speaker 1: an eye on GE and some of the others to
22:44
Speaker 1: see whether they make announcements around that.
22:47
Speaker 2: And it is true when you say is that the
22:48
Speaker 2: world we're living in? I mean it's pretty clear that
22:50
Speaker 2: the world we're living in looks very different, looks more
22:52
Speaker 2: like the IRA world. As you noted, there's lots of
22:56
Speaker 2: countries that have got strong incentives in place for renewables,
23:01
Speaker 2: and we also see developing countries moving to electrify large
23:06
Speaker 2: parts of their grid because it is it's certainly cheaper
23:10
Speaker 2: for them if they're reliant otherwise on imported oil and gas.
23:13
Speaker 4: Yeah.
23:13
Speaker 1: No, I think you raise a very good question. This
23:15
Speaker 1: is not the depth of the US renewable energy industry
23:18
Speaker 1: in the United States by any means, because of the
23:21
Speaker 1: advancements that we've seen, but it is a major setback,
23:24
Speaker 1: and most importantly maybe at the bottom line, as it
23:26
Speaker 1: means our chances of coming anywhere close to reducing our
23:30
Speaker 1: CO two missions in line with address and climate chains
23:33
Speaker 1: are effectively over at the moment.
23:35
Speaker 2: I guess there's one argument, which if it's so unstoppable,
23:38
Speaker 2: we've had this period where we've ramped up production with
23:41
Speaker 2: these massive credits, which were extremely expensive. They blew at
23:44
Speaker 2: least a trillion dollar hole in the deficit, and of
23:48
Speaker 2: course we can say there are other things that are
23:50
Speaker 2: now going to blow a hole in the deficit over
23:52
Speaker 2: the coming years thanks to the last week's bill. But
23:55
Speaker 2: there is an argument that says it ought to be
23:57
Speaker 2: able to stand on its own two feet.
23:58
Speaker 1: No, well, two things the clean energy credits did not,
24:01
Speaker 1: on their own blow a trillion dollar hole in the deficit.
24:03
Speaker 1: They were projected potentially to have done so, but of
24:06
Speaker 1: course now we're living in a different world where they
24:08
Speaker 1: certainly are not going to cost as much as was projected.
24:11
Speaker 1: And even that number I would take a little issue
24:13
Speaker 1: with because it made certain assumptions about hydrogen and other
24:16
Speaker 1: things that haven't really come to pass. But you're right,
24:18
Speaker 1: they were living in a new world in which these
24:20
Speaker 1: industry is going to have to compete without the benefit
24:23
Speaker 1: of tax credits. Unfortunately, it's going to compete against, you know,
24:26
Speaker 1: some existing sources of generation that have been subsidized for
24:29
Speaker 1: a very long time. And of course the administration is
24:32
Speaker 1: also going to try and take steps whatever they can
24:34
Speaker 1: to try and make existing coal fire generation more cost competitive,
24:38
Speaker 1: although it's very unclear to me like what they can
24:40
Speaker 1: actually do that changes the economics of coal.
24:43
Speaker 2: I was going to ask you that actually that's the
24:45
Speaker 2: thing that Donald Trump has held out. You know, yes,
24:47
Speaker 2: it's hard to build a new gas power station, but
24:51
Speaker 2: if you have a coal powered station that you were
24:55
Speaker 2: about to close down, or you've maybe just closed down,
24:57
Speaker 2: how hard is it just to turn that back on?
24:59
Speaker 2: And how hard is it to get the mines up
25:01
Speaker 2: and running again, which is what he's talked about.
25:03
Speaker 1: Hard, is the short answer. You can issue executive orders
25:06
Speaker 1: to try and order certain plants to keep online, but
25:09
Speaker 1: the reality is that coal is not economically competitive for
25:12
Speaker 1: the most part in the United States, particularly with gas,
25:15
Speaker 1: but also with renewable So you can try and force
25:18
Speaker 1: operators to keep running plants, but no one. I'm not
25:20
Speaker 1: a lawyer here, but I think it's tough to force
25:22
Speaker 1: people to lose money on every megawat hour of electricity
25:24
Speaker 1: that they produce because you're trying to make a point
25:27
Speaker 1: about what you think the world should look like in
25:29
Speaker 1: terms of energy consumption that looks something like nineteen eighty seven.
25:33
Speaker 2: It is extraordinary to me as someone who kind of
25:36
Speaker 2: grew up with Margaret Thatcher's defining battle in the nineteen
25:39
Speaker 2: eighties against the uneconomic coal producing mines in the UK,
25:44
Speaker 2: and there was obviously enormous controversy ever trying to shut
25:48
Speaker 2: them down. But to have a republic administration trying to
25:50
Speaker 2: reopen a lot of uneconomic coal mines is an interesting site.
25:54
Speaker 1: I mean, the question is just is there money to
25:56
Speaker 1: do this right? Ultimately, if you want to mobilize private
25:58
Speaker 1: capital to go out and that then that money has
26:01
Speaker 1: to believe that this is the world that we're going
26:04
Speaker 1: to live in for the next five or ten or
26:05
Speaker 1: twenty years. And I think most investors look at this
26:09
Speaker 1: and say, Okay, certainly, this is a certainly regressive period
26:13
Speaker 1: that we're living through, but the end of the day,
26:15
Speaker 1: climate change isn't going anywhere. It's only going to get worse.
26:18
Speaker 1: And so if you believe there's an inevitability that eventually
26:21
Speaker 1: policy makers, whether they deal with climate change in the
26:23
Speaker 1: short run of the long run, they eventually deal with it.
26:26
Speaker 1: I think many people would find it very hard to
26:28
Speaker 1: swallow the idea of making a ten or twenty year
26:31
Speaker 1: investment in a new coal mine.
26:33
Speaker 2: But Emily it seems like there'd be plenty of appetite
26:36
Speaker 2: on the hill for that.
26:38
Speaker 4: Yes, I think there will be. I think this bill
26:42
Speaker 4: got held up in the House for just a couple
26:46
Speaker 4: of days after leaving the Senate because this group of
26:52
Speaker 4: Republicans said, we want to go harder against clean energy,
26:58
Speaker 4: we want more favorable for oil and gas, and they
27:03
Speaker 4: spent hours and hours in the White House at the
27:07
Speaker 4: eleventh hour trying to extract as many concessions from the
27:11
Speaker 4: administration on this as they possibly could, and they think
27:15
Speaker 4: that is bearing out that bore out yesterday in terms
27:18
Speaker 4: of this executive order, and we're going to continue to
27:22
Speaker 4: see the deals that were made, the agreements that they
27:26
Speaker 4: hashed out recreating the energy landscape in their image.
27:31
Speaker 2: So, as Ethan pointedly made clear, this is the end
27:34
Speaker 2: of the story for any expectation that the US would
27:38
Speaker 2: meet its climate change obligations, but apparently not the end
27:41
Speaker 2: of the story when it comes to the assault on renewables.
27:44
Speaker 2: Emily Ethan, thank you so much, Thank you, thanks for
27:52
Speaker 2: listening to Trumponomics from Bloomberg. It was hosted by me
27:55
Speaker 2: Stephanie Flanders and I was joined by Bloomberg reporter Emily
27:58
Speaker 2: Burnbaum and Bloomberg any Ethan Zindler. Trumponomics is produced by
28:03
Speaker 2: Summer Sadi and Moses and Am with help from Amy
28:06
Speaker 2: Keen and special thanks this week to Rachel Lewis Chrisky.
28:10
Speaker 2: Sound design is by Blake Maples and Sage Bowman is
28:14
Speaker 2: the head of Bloomberg Podcasts and please to help others
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