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One of Joe Biden’s first acts as president was to sign a wave of executive orders on inauguration day to undo former President Donald Trump’s legacy of ignoring climate change – a move that ushers in a new era for the booming renewable energy industry.
President Biden decided last week to join the historic Paris climate accord, aimed at reducing the global carbon footprint over the next few decades, and revoked the permit to build the controversial Keystone XL pipeline. He also signed an order that rolled back cuts to vehicle emissions standards and reinstated a task force on the social costs of greenhouse gases. Previously, he laid out a $ 2 trillion plan to put the country on “an irreversible path” to zero net carbon emissions by 2050.
“A cry for survival comes from the planet itself,” Biden said in his inaugural address last week. “A cry that cannot be more desperate or clearer.”
Biden’s swift action on climate change has ricocheted through the oil industry. The American Petroleum Institute, an industry lobby group, said it supports the return of the Paris agreement, but called Biden’s order to revoke the Keystone pipeline “a slap in the face to the thousands of workers unionized “.
“The revocation of the Keystone XL pipeline is a significant step backwards for both environmental progress and our economic recovery,” the group said in a press release. “This ill-advised move will hamper America’s economic recovery, undermine North American energy security, and strain relations with one of America’s greatest allies.”
Some European oil companies have already started the transition to renewable energies. Royal Dutch Shell told investors in April that by 2050 it aims to achieve net zero emissions across all of its operations and invest in hydrogen, a zero-carbon fuel burned with oxygen that can power planes and cars. Over the past year, BP began to shift from oil to renewables under the leadership of its new CEO Bernard Looney. In September, the company launched an initiative that will cut oil exploration and increase its renewable energy production capacity twenty-fold.
“Our new strategy is going to transform BP into a very different company, not overnight given our size and scale, but quickly because the world needs change,” Looney told investors. “And most importantly, we want to be part of this change.”
While some laggards in the US oil industry risk losing ground in this new era, there is a whole new list of winners. Wall Street dollars have been invested in green energy stocks since Biden vowed to win the White House, according to Steve Fleishman, senior analyst at Wolfe Research. Since the summer, a solar energy equity index called Invesco Solar ETF has seen its price skyrocket by around 150%, compared to just around 18% for the S&P 500.
“Clean energy stocks had already outperformed for a long time, but they just hit a whole new level,” Fleishman said. “It’s just a crescendo after Democrats won the Senate.”
Investors are betting that the Biden administration will accelerate the renewable energy sector, from green power and electric vehicles to battery-powered wind farms and zero-emission commercial buildings. Already, the industry had grown in part thanks to a number of state and local tax credits that encourage investment in green energy. These credits have paid off: Over the past four years, the price of renewable energy has dropped dramatically, making it cheaper than coal or gas for consumers, according to Michael Weinstein, research analyst at Credit. Switzerland Securities.
Under Biden’s climate policies, demand for clean energy could potentially double over the next 15 years, Weinstein told investors last week. UBS analyst Mark Haefele says the clean energy sector is already on track for 5-10% annual profit growth over the next two decades, which will require an investment of $ 58 trillion by 2040.
“With governments and businesses increasingly focusing on climate issues, we believe sustainable strategies will benefit in a post-pandemic world,” Haefele told investors on Thursday.
Some of the country’s largest clean energy companies already had a growing presence in Washington, DC, through organizations such as the Renewable Energy Buyers Alliance, which represents Amazon, Google, Facebook, General Motors and 300 other companies.
“Our political priorities are demand driven in order to unlock the market,” said Miranda Ballentine, CEO of Renewable Energy Buyers Alliance and former sustainability director for global renewable energy at Walmart. “These are iconic American brands that put their name on the political agenda, which is quite unusual because they are not energy companies.”
But new pressure groups have sprung up around the Capitol. Zero Emission Transportation Association, launched in November, plans to lobby Congress to help fund the construction of new electric car charging stations and provide tax credits for consumers and businesses to buy zero vehicles. program. In September, the American Clean Power Association launched under the leadership of Heather Zichal, a former climate advisor to the Obama administration, to advocate for solar and wind companies.
Members of the group include Google, which operates two wind farms in North Dakota; and NextEra, a lesser-known renewable energy company with a market valuation close to that of oil giant ExxonMobil. Separated from the lobby group, Florida-based NextEra has spent billions of dollars to slowly build its empire in the renewable energy industry across the country. The company has sued state utility commissions over laws that encourage suppliers to use local power companies in Texas and the loss of a utility contract to a Massachusetts competitor.
The company declined to comment on the lawsuits on principle, according to David Reuter, a spokesperson for NextEra.
Like other sectors, small businesses in the renewable energy sector have been hit by the coronavirus, leaving large companies in a better position to take advantage of future federal tax credits that could flow from the new administration.
“These deals are not a piece of cake to negotiate and usually come with a lot of upfront legal fees that small developers and investors might find it harder to digest to make the deal worth it,” said Adam Wilson, analyst at S&P Global Market Intelligence.
“I don’t want to give the impression that smaller players can’t take advantage of these offers at all – that’s certainly not true. But the setup, as it is, favors the big players, ”Wilson said.
Biden has yet to say how his administration will structure tax credits to boost the burgeoning market for large-scale wind and solar projects.
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