Now that we’re at the precipice, many are wondering, “What will the impact of a Biden administration have on the energy industry in America?” Great question! Since my job is to think about this for a living I’ve got a few thoughts. Tell me where I’m right or wrong.
If Joe Biden is elected, energy will most definitely become one of the hottest topics in America. His rise to power coincides with major paradigms shifts that are already underway in the energy industry. Think commodity, renewables, sustainability, resilience. Biden’s leadership (or lack thereof) will play a major role in determining our fate.
I’ve been an energy broker and consultant for 20 years. Things have not changed much since I started in 2001. However, I can assure you that over the next decade we will see the energy industry undergo more change than we’ve seen over the past 100 years. Whether the US will lead or follow will become increasingly clear in the next four years.
If Democrats Take The Senate
We know for a fact, the Democrat-led House of Representatives will pursue an aggressive legislative agenda. If Democrats manage to take the Senate as well, then buckle up! Green New Deal, here we come. Fast and furious policy changes could rock the energy industry on many fronts.
Without going into all the gory details, I can comfortably assure increased volatility in every energy market. No sector or niche will escape the winds of change. Natural gas and electricity prices will trend higher. Oil is more complicated as it’s a global market, but I think it’s safe to assume higher volatility for the foreseeable future. Geopolitical jockeying will play heavily on oil.
If Republicans Hold On
If the Republicans retain the Senate they will throttle the depth and rate of change. New legislation will require bi-partisan support. In my opinion, this is a good thing. We can only hope that being forced to work together will spare us from the really bad policies, while enabling changes that make enough sense to garner bi-partisanship. I implore both sides of the aisle to work together in good faith. Wouldn’t that be refreshing?
There are some really smart things we could do as a country and I would love to see sensible policy that furthers competition and innovation, without destroying the good parts of the legacy system, or backsliding in areas of recent progress. In this scenario, where Republicans control the Senate, I still expect increased volatility and higher electricity and natural gas prices, but nowhere near what I expect if the Democrats control the House, Senate and White House.
Fracking Is Only a Small Component
Seems like the campaigns focused solely on “the fracking” debate. While this is a significant issue that has the potential to significantly impact the market, there’s a lot more going on.
Renewables are already competitive with fossil fuels, without subsidies. Sustainability is no longer just a mechanism for virtue signaling. The rapidly improving economics of renewables is driving adoption purely on the merits. Renewables will increasingly shape the evolution of the energy markets as we work to solve for intermittency. Enter affordable battery storage and the game changes fast.
With the right policies, I think we can harness the promise of renewables without abrupt destruction of the oil and gas industry. To be clear, we’re not fully “transitioning” off of nuclear and fossil fuels anytime soon. The laws of physics and economics ensure that both nuclear and fossil fuels will play a role in delivering the energy we need globally for the foreseeable future.
The New Paradigm
We are experiencing a paradigm shift in how we generate, manage, and consume energy. The legacy system is one of centralization, monopolies, and forfeited opportunity. Monolithic, vertically integrated utilities have stymied innovation and desperately clung to power over the markets. But the times they are a-changin’.
The energy industry is being pried from the dead cold hands of the “Energy OGs”. Innovations in market design and technology are driving the shift. In the new paradigm, energy is no longer a one-way street where we’re simply passive takers of supply and price.
It is abundantly clear that the future is one where every load is also a (monetizable) resource. Every business should begin to think of themselves in this way. As a load and a resource. A buyer and a seller. Optimization of assets, participation in demand response, and energy efficiency initiatives are empowering businesses to exert more control over their energy spend than ever before. And we’re only getting started.
Biden : Hero or Zero?
A Biden administration has a massive opportunity to build on the momentum that already exists; to transform our energy industry in thoughtful and strategic ways. There is no reason to “tear down the whole industry” and rebuild it. The innovators are here. The solutions are here. We can see the promised land.
The US energy industry is certainly overdue for a recalibration of priorities. We need to carefully rethink the incentives and structural changes needed to move the industry forward. If Biden’s administration can thread that needle and unleash the full potential of American innovation, he may well preside over the biggest transformation in the energy industry since Edison created the lightbulb.
If Biden turns energy policy over to ideologues who don’t understand where we are today and fail to leverage current momentum, then we are doomed to repeat the mistakes that have been made around the world and in the US (think California electricity deregulation).
The world is riddled with examples of disastrous policies that could have easily been avoided if the bureaucrats simply tapped into the wisdom of those who are already on the ground, working to usher in a new era in energy. I am cautiously optimistic that bi-partisan efforts bolstered by the best minds in the energy industry can deliver the goods.
Let’s keep our fingers crossed.