1 00:00:00,160 --> 00:00:02,840 Speaker 1: This is Tom Rowland's Reese and you're listening to Switched 2 00:00:02,840 --> 00:00:06,000 Speaker 1: on the podcast brought to you by BNF. The first 3 00:00:06,000 --> 00:00:08,480 Speaker 1: one hundred days of Donald Trump's second term in office 4 00:00:08,520 --> 00:00:10,720 Speaker 1: have now passed, and in this short period of time, 5 00:00:10,880 --> 00:00:13,520 Speaker 1: the impact of his administration has already been deep and 6 00:00:13,600 --> 00:00:17,119 Speaker 1: wide ranging. Prior to retaking the presidency, Trump threatened to 7 00:00:17,160 --> 00:00:20,440 Speaker 1: cut some of the Biden administration's Inflation Reduction Act tax credits, 8 00:00:20,480 --> 00:00:23,919 Speaker 1: clamped down on ESG investing, and repeal clean energy policies, 9 00:00:24,120 --> 00:00:26,400 Speaker 1: only for some court states and members of Congress to 10 00:00:26,440 --> 00:00:30,800 Speaker 1: steiny his immediate efforts. Having assumed office. Elsewhere, his Liberation 11 00:00:30,920 --> 00:00:34,639 Speaker 1: Day tariff announcement created significant turbulence on global markets as 12 00:00:34,720 --> 00:00:37,879 Speaker 1: funds and investors struggled to find certainty in safe havens. 13 00:00:37,960 --> 00:00:40,599 Speaker 1: With most tariffs now being paused, some rolled back, and 14 00:00:40,680 --> 00:00:44,120 Speaker 1: others entering negotiations. The current political landscape in the US 15 00:00:44,200 --> 00:00:46,920 Speaker 1: is confusing, with some decisions taken at pace and with 16 00:00:47,040 --> 00:00:49,640 Speaker 1: little warning, and overall, the impact on the clean energy 17 00:00:49,640 --> 00:00:51,920 Speaker 1: sector seems hard to weigh. To help get a better 18 00:00:51,960 --> 00:00:53,800 Speaker 1: understanding of what has happened up to this point, on 19 00:00:53,840 --> 00:00:56,400 Speaker 1: today's show, I'm joined by Derek Flakol Bloomberg and EF 20 00:00:56,480 --> 00:00:59,440 Speaker 1: Senior Policy Associate for North America, and together we discussed 21 00:00:59,440 --> 00:01:01,640 Speaker 1: what has unfold under the first hundred days of the 22 00:01:01,680 --> 00:01:05,160 Speaker 1: second Trump administration. B ANYF clients can find related notes, 23 00:01:05,280 --> 00:01:08,520 Speaker 1: including analyst reactions to breaking news stories at BNF go 24 00:01:08,600 --> 00:01:11,440 Speaker 1: on the Bloomberg terminal or on bf dot com. All right, 25 00:01:11,520 --> 00:01:13,639 Speaker 1: let's get to talking about one hundred days of Trump 26 00:01:13,720 --> 00:01:26,880 Speaker 1: with Derek. Derek, thank you for joining us today. Happy 27 00:01:26,920 --> 00:01:29,440 Speaker 1: to for those of you that are BNF clients and 28 00:01:29,480 --> 00:01:33,640 Speaker 1: that show any interest in US politics. I presume that 29 00:01:33,800 --> 00:01:38,000 Speaker 1: Derek doesn't need any introduction because he is our main 30 00:01:38,080 --> 00:01:41,119 Speaker 1: man when it comes to figuring out what is going 31 00:01:41,160 --> 00:01:44,800 Speaker 1: on in Washington. I would also add that he has 32 00:01:45,280 --> 00:01:48,360 Speaker 1: knowledge of many other topics. At Bloomberg, we have this 33 00:01:48,520 --> 00:01:50,600 Speaker 1: thing on our internal system where we can put a 34 00:01:50,600 --> 00:01:53,880 Speaker 1: comment about ourselves, and Derek says approximate knowledge of many things. 35 00:01:54,040 --> 00:01:56,800 Speaker 1: This is a bold face lie. He has in depth 36 00:01:56,840 --> 00:01:59,160 Speaker 1: knowledge of many things. I have many times try to 37 00:01:59,200 --> 00:02:03,080 Speaker 1: outflank him on esoteric knowledge, whether it is physics, the 38 00:02:03,080 --> 00:02:07,160 Speaker 1: philosophy of Carl Popper, Japanese anime. So Derek knows many things, 39 00:02:07,200 --> 00:02:10,880 Speaker 1: but we are truly playing on his home turf right now. 40 00:02:11,000 --> 00:02:13,600 Speaker 1: So I'm really looking forward to this conversation and I 41 00:02:13,600 --> 00:02:15,240 Speaker 1: will let you speak in a moment, Derek. But just 42 00:02:15,400 --> 00:02:18,320 Speaker 1: one other sort of point of framing here is that 43 00:02:18,520 --> 00:02:21,520 Speaker 1: with this latest US election, it has been a lot 44 00:02:21,560 --> 00:02:23,200 Speaker 1: of work for him. For those of you, again who 45 00:02:23,200 --> 00:02:25,760 Speaker 1: have been F clients, you will have remembered the series 46 00:02:25,800 --> 00:02:27,560 Speaker 1: of election notes we did in the build up to 47 00:02:27,600 --> 00:02:31,079 Speaker 1: the election, and then the subsequent analysis that Derek has 48 00:02:31,160 --> 00:02:33,720 Speaker 1: been working on himself or collaborating with others covering all 49 00:02:33,720 --> 00:02:36,400 Speaker 1: of the changes of this latest administration. And as a 50 00:02:36,440 --> 00:02:39,960 Speaker 1: particular moment that I want to cast Derek's mind back to, 51 00:02:40,080 --> 00:02:42,320 Speaker 1: which is when we did and ask BNF, which is 52 00:02:42,720 --> 00:02:45,639 Speaker 1: a webinar for our clients on the day after the election, 53 00:02:45,960 --> 00:02:50,399 Speaker 1: analyzing what we expected to happen based on the results 54 00:02:50,639 --> 00:02:53,640 Speaker 1: of the previous day. So, Derek, do you remember that 55 00:02:53,720 --> 00:02:57,880 Speaker 1: conversation that we had and what was our take on 56 00:02:58,240 --> 00:03:01,120 Speaker 1: where things were likely to be did from the offset 57 00:03:01,160 --> 00:03:02,239 Speaker 1: with this new administration. 58 00:03:02,760 --> 00:03:07,240 Speaker 2: So we tried to assess the different possible outcomes of 59 00:03:07,240 --> 00:03:10,760 Speaker 2: the election based on control of Congress. Both houses could 60 00:03:10,760 --> 00:03:13,120 Speaker 2: be Republican or Democratic, and both needed to agree on 61 00:03:13,160 --> 00:03:15,960 Speaker 2: any legislative changes and control of the presidency, which is 62 00:03:16,040 --> 00:03:20,880 Speaker 2: really primarily about administering and implementing regulations for loss that 63 00:03:20,960 --> 00:03:24,320 Speaker 2: Congress passes, whether those are tax credits where the Treasury 64 00:03:24,360 --> 00:03:27,120 Speaker 2: Department gets to write the rules for how those were claimed, 65 00:03:27,320 --> 00:03:30,000 Speaker 2: or grants and loans where places like the Department of 66 00:03:30,080 --> 00:03:33,720 Speaker 2: Energy or Environmental Protection Agency can select the recipients and 67 00:03:33,720 --> 00:03:36,600 Speaker 2: the process by which they're chosen. So our whole thought 68 00:03:36,680 --> 00:03:40,920 Speaker 2: overall was that generally speaking, while this would vary depending 69 00:03:40,960 --> 00:03:43,480 Speaker 2: on the mix of power in the legislature and the 70 00:03:43,520 --> 00:03:47,360 Speaker 2: executive branch, intermittent renewables like wind and solar and some 71 00:03:47,400 --> 00:03:51,360 Speaker 2: related sectors like storage would be most compromised, I guess, 72 00:03:51,440 --> 00:03:54,720 Speaker 2: or face the biggest downgrade in their prospects from a 73 00:03:55,080 --> 00:03:57,920 Speaker 2: republican control of government. The sectors that would face the 74 00:03:57,920 --> 00:04:00,560 Speaker 2: best improvement in their prospects from real and control the 75 00:04:00,600 --> 00:04:03,600 Speaker 2: government would be fossil fuels, coal, oil, and gas, and 76 00:04:03,640 --> 00:04:07,520 Speaker 2: then a few dispatchable or so called baseload renewables like 77 00:04:07,600 --> 00:04:10,720 Speaker 2: hydro power and potentially biofuels as well. And then somewhere 78 00:04:10,760 --> 00:04:14,800 Speaker 2: in the middle were different kinds of emerging technologies like 79 00:04:14,880 --> 00:04:17,880 Speaker 2: hydrogen and carbon capture, which are fairly close to the 80 00:04:17,880 --> 00:04:21,400 Speaker 2: oil and gas industry, but maybe we're dependent on government 81 00:04:21,400 --> 00:04:23,640 Speaker 2: subsidies that could end up facing cuts, as well as 82 00:04:23,640 --> 00:04:26,400 Speaker 2: some things like transmission, which has some resilience in national 83 00:04:26,480 --> 00:04:30,280 Speaker 2: security characteristics, but are also seen as closely tied to renewables. 84 00:04:30,360 --> 00:04:33,839 Speaker 2: As we all know, the Republicans won both Houses of 85 00:04:33,839 --> 00:04:36,720 Speaker 2: Congress and the presidency, so that's the scenario we're dealing 86 00:04:36,760 --> 00:04:37,080 Speaker 2: with now. 87 00:04:37,360 --> 00:04:40,800 Speaker 1: So that was our expectations back then, and obviously there's 88 00:04:40,800 --> 00:04:43,360 Speaker 1: been a huge amount of activities since then. I'm sure 89 00:04:43,360 --> 00:04:46,599 Speaker 1: that has translated into many late nights and very busy 90 00:04:46,680 --> 00:04:49,719 Speaker 1: days for you personally. And I'm sure that no day 91 00:04:49,839 --> 00:04:52,720 Speaker 1: was more frantic than that first day in office, where 92 00:04:52,720 --> 00:04:55,200 Speaker 1: there were so many executive orders signed. So this has 93 00:04:55,240 --> 00:04:57,480 Speaker 1: been one of the themes of the presidency so far. 94 00:04:57,560 --> 00:04:59,680 Speaker 1: The use of EXECUS fielders, particularly on that first day, 95 00:04:59,760 --> 00:05:02,440 Speaker 1: did play out how we expected in terms of the 96 00:05:02,760 --> 00:05:04,680 Speaker 1: immediate actions taken. 97 00:05:04,400 --> 00:05:07,239 Speaker 2: Initially on the first day pretty much. Yes, we saw 98 00:05:07,320 --> 00:05:10,520 Speaker 2: Trump's early executive orders, such as declaring a National Energy 99 00:05:10,520 --> 00:05:15,560 Speaker 2: Emergency and unleashing American energy focus on trying to reduce 100 00:05:15,680 --> 00:05:19,720 Speaker 2: barriers and ease permitting for the buildout of fossil fuel infrastructure, 101 00:05:19,760 --> 00:05:24,800 Speaker 2: but also for biofuels and bio energy, geothermal, hydropower, nuclear, 102 00:05:24,839 --> 00:05:28,120 Speaker 2: and critical minerals, all of which are either dispatchable or 103 00:05:28,160 --> 00:05:31,800 Speaker 2: base load energy sources or have certain national security characteristics. 104 00:05:31,880 --> 00:05:33,839 Speaker 2: At the same time, a lot of these executive orders 105 00:05:33,880 --> 00:05:38,120 Speaker 2: also called for pulling back funding for clean energy related 106 00:05:38,160 --> 00:05:41,760 Speaker 2: programs and removing regulations that try to promote a transition 107 00:05:41,920 --> 00:05:45,240 Speaker 2: away from fossil fuels. So this included specifically called out 108 00:05:45,400 --> 00:05:49,520 Speaker 2: electric vehicle charging funding, but also looking at trying to 109 00:05:49,839 --> 00:05:53,000 Speaker 2: pull back money from the Inflation Reduction Act Infrastructured Investment 110 00:05:53,000 --> 00:05:55,240 Speaker 2: of Jobs Act, the major sort of clean energy investment 111 00:05:55,279 --> 00:05:58,240 Speaker 2: programs under his predecessor Joe Biden. And I should also 112 00:05:58,360 --> 00:06:02,200 Speaker 2: note some specific executive orders that try to target permit 113 00:06:02,279 --> 00:06:04,640 Speaker 2: and leases for offshore wind and to lustser extent on 114 00:06:04,720 --> 00:06:05,680 Speaker 2: shore wind as well. 115 00:06:05,839 --> 00:06:09,599 Speaker 1: I could categorize executive orders into three buckets, maybe ones 116 00:06:09,920 --> 00:06:13,680 Speaker 1: that have an impact, you know, indisputably ones and this 117 00:06:13,760 --> 00:06:17,520 Speaker 1: is a specific I think Trump phenomenon that don't immediately 118 00:06:17,520 --> 00:06:20,280 Speaker 1: have an impact because they are trying to do things 119 00:06:20,320 --> 00:06:22,839 Speaker 1: that he doesn't have the power to do without Congress 120 00:06:23,160 --> 00:06:27,240 Speaker 1: or support from the legislature, but maybe will lead to 121 00:06:27,320 --> 00:06:29,640 Speaker 1: activity as they fight it out in the courts, So 122 00:06:29,720 --> 00:06:31,920 Speaker 1: things that could make a difference. And then the third 123 00:06:31,920 --> 00:06:36,400 Speaker 1: category is executive orders that are as much symbolic as 124 00:06:36,440 --> 00:06:41,039 Speaker 1: they are actually impactful. So which of the of the 125 00:06:41,080 --> 00:06:44,080 Speaker 1: actions taken on that first day and in subsequent executive 126 00:06:44,160 --> 00:06:47,760 Speaker 1: orders as well, how does it fit between those three 127 00:06:47,880 --> 00:06:48,880 Speaker 1: categories overall? 128 00:06:49,240 --> 00:06:52,839 Speaker 2: If we're to speak to some of the symbolic actions, 129 00:06:53,080 --> 00:06:56,080 Speaker 2: you could maybe point to a series of orders on 130 00:06:56,160 --> 00:06:59,560 Speaker 2: a beautiful clean Call that President Trump signed after his 131 00:06:59,560 --> 00:07:02,120 Speaker 2: first day office. That's getting a little bit further in 132 00:07:02,120 --> 00:07:05,200 Speaker 2: their chronology, but it's the easiest to explain this way effectively. 133 00:07:05,240 --> 00:07:08,440 Speaker 2: There's a lot of discussion of trying to promote more 134 00:07:08,440 --> 00:07:12,240 Speaker 2: capacity market payments for coal in particular and fossil fuel 135 00:07:12,280 --> 00:07:15,240 Speaker 2: generation generally, and this is kind of a repeat of 136 00:07:15,280 --> 00:07:17,200 Speaker 2: what he did in his first term. There were executive 137 00:07:17,280 --> 00:07:19,120 Speaker 2: orders to that effect, and they didn't really stop the 138 00:07:19,120 --> 00:07:21,480 Speaker 2: general decline in coal power in the US or the 139 00:07:21,560 --> 00:07:25,200 Speaker 2: rise of natural gas and renewables. In terms of your 140 00:07:25,440 --> 00:07:28,680 Speaker 2: first category, the things that will sort of bear fruit, 141 00:07:28,840 --> 00:07:31,040 Speaker 2: it should be noted that there were some immediate action 142 00:07:31,280 --> 00:07:34,880 Speaker 2: on trying to designate projects for accelerated permitting. The Army 143 00:07:34,880 --> 00:07:37,840 Speaker 2: Corps of Engineers has produced a list. The Department of 144 00:07:38,000 --> 00:07:41,720 Speaker 2: Interior has tried to put out environmental impact statement guidelines 145 00:07:41,760 --> 00:07:44,320 Speaker 2: as fast as twenty eight days for fossil fuel infrastructure. 146 00:07:44,320 --> 00:07:47,080 Speaker 2: But here's the tricky part. It's very hard to tell 147 00:07:47,240 --> 00:07:49,760 Speaker 2: the sort of first category of executive orders you're talking 148 00:07:49,800 --> 00:07:53,280 Speaker 2: about with the second category. Generally speaking, the Trump approach 149 00:07:53,320 --> 00:07:56,840 Speaker 2: has been to basically make pretty sweeping claims and then 150 00:07:56,880 --> 00:07:58,880 Speaker 2: fight things out in the courts. Some of the recent 151 00:07:59,000 --> 00:08:02,920 Speaker 2: permitting reform procedures from places like the Department of Interior 152 00:08:03,000 --> 00:08:05,960 Speaker 2: fall into that. If you're trying to accelerate permitting under 153 00:08:06,000 --> 00:08:08,720 Speaker 2: the National Environmental Policy Act, there's actually nothing in the 154 00:08:08,800 --> 00:08:11,880 Speaker 2: law to my knowledge, that allows for a faster emergency procedure, 155 00:08:11,960 --> 00:08:14,800 Speaker 2: unlike the Endangered Species Act, Clean Water Act, and other 156 00:08:15,080 --> 00:08:17,600 Speaker 2: laws that other agencies from acting under, and so you 157 00:08:17,600 --> 00:08:19,600 Speaker 2: can be sure that that's going to be challenged in 158 00:08:19,600 --> 00:08:22,480 Speaker 2: the courts a bit more. Another area where there's a 159 00:08:22,480 --> 00:08:26,320 Speaker 2: bit more ambiguity isn't spending. Shortly after President Trump signed 160 00:08:26,320 --> 00:08:28,720 Speaker 2: in order to try and pull back clean energy spending 161 00:08:28,720 --> 00:08:32,120 Speaker 2: from the Inflation Reduction Act, we've seen a major move 162 00:08:32,240 --> 00:08:36,000 Speaker 2: from different government agencies, led by Elon Musk's Department of 163 00:08:36,000 --> 00:08:40,600 Speaker 2: Government Efficiency, to basically pull back not even spending that 164 00:08:40,679 --> 00:08:44,480 Speaker 2: hasn't previously been contracted, but contracted funding which had previously 165 00:08:44,520 --> 00:08:48,280 Speaker 2: been considered pretty sacro sayct. So this has gone to courts, 166 00:08:48,520 --> 00:08:51,400 Speaker 2: but operationally there's been a lot of back and forth 167 00:08:51,440 --> 00:08:55,720 Speaker 2: and mixed reporting and changes about who and whether different 168 00:08:55,960 --> 00:08:59,040 Speaker 2: businesses or nonprofits can access loans of the Department of 169 00:08:59,120 --> 00:09:02,360 Speaker 2: Energies Loan Program Office, grants from the doe's Office of 170 00:09:02,400 --> 00:09:05,480 Speaker 2: Clean Energy Demonstrations or the EPA, and so forth. So 171 00:09:05,600 --> 00:09:09,520 Speaker 2: this is still really being litigated, but right now Congress 172 00:09:09,520 --> 00:09:12,520 Speaker 2: hasn't been pushing back too much, largely because they're of 173 00:09:12,559 --> 00:09:15,040 Speaker 2: the same party as President Trump. It remains to be 174 00:09:15,080 --> 00:09:19,760 Speaker 2: seen how much of these grants and programs will ultimately survive, 175 00:09:20,040 --> 00:09:22,120 Speaker 2: not only you know, legally and in terms of the 176 00:09:22,120 --> 00:09:24,440 Speaker 2: staffing which has also been cut back, but in terms 177 00:09:24,480 --> 00:09:27,480 Speaker 2: of trust from the business sector, and in terms of 178 00:09:27,559 --> 00:09:31,000 Speaker 2: how many grantees can really survive without some of the 179 00:09:31,040 --> 00:09:33,880 Speaker 2: government loans and guarantees being accessible to them as they 180 00:09:33,880 --> 00:09:35,520 Speaker 2: face rise and costs and other pressures. 181 00:09:35,760 --> 00:09:39,280 Speaker 1: So what you're saying is even if ultimately it proves 182 00:09:39,480 --> 00:09:42,440 Speaker 1: to be the case that Trump has proven wrong in 183 00:09:42,480 --> 00:09:44,480 Speaker 1: his assertion that he has the right to make some 184 00:09:44,559 --> 00:09:47,120 Speaker 1: of these cuts and some of these changes, it's too 185 00:09:47,200 --> 00:09:50,400 Speaker 1: late because for those areas, the damage is done. 186 00:09:50,520 --> 00:09:53,280 Speaker 2: Yeah, we've already seen this happen with some specific projects. 187 00:09:53,559 --> 00:09:56,800 Speaker 2: The battery manufacturer core Power, if I recall correctly, had 188 00:09:56,800 --> 00:09:59,440 Speaker 2: a conditional commitment from the Department of Energy's Loan Program's 189 00:09:59,480 --> 00:10:02,160 Speaker 2: office to build a battery manufacturing plant in Arizona, and 190 00:10:02,200 --> 00:10:05,280 Speaker 2: it's had to cancel that because they are aware that 191 00:10:05,280 --> 00:10:07,080 Speaker 2: they're not going to get funded in time. The effect 192 00:10:07,160 --> 00:10:10,320 Speaker 2: is going to be particularly intense, not only for manufacturing 193 00:10:10,600 --> 00:10:13,480 Speaker 2: for existing clean energy technologies like wind and solar, but 194 00:10:13,600 --> 00:10:16,360 Speaker 2: especially for new ones that haven't really scaled yet. The 195 00:10:16,760 --> 00:10:20,520 Speaker 2: Office Clean Energy Demonstration's Industrial Demonstrations Program, for example, was 196 00:10:20,559 --> 00:10:23,600 Speaker 2: meant to fund major first projects to off take clean 197 00:10:23,679 --> 00:10:26,480 Speaker 2: hydrogen or to implement carbon capture and industrial processes, and 198 00:10:26,520 --> 00:10:30,400 Speaker 2: to help create low emission materials like steal aluminum and cement. 199 00:10:30,640 --> 00:10:33,760 Speaker 2: And without some indial help to get those mergence sectors 200 00:10:33,760 --> 00:10:36,160 Speaker 2: off the ground, we might see considerably less progress on 201 00:10:36,160 --> 00:10:38,599 Speaker 2: those in the United States than we could otherwise expect. 202 00:10:38,280 --> 00:10:40,319 Speaker 1: Got it. And even if that help proves to be 203 00:10:40,400 --> 00:10:44,559 Speaker 1: legally secure, the uncertainty has already had its effect, is 204 00:10:44,600 --> 00:10:45,160 Speaker 1: what you're saying. 205 00:10:45,240 --> 00:10:47,680 Speaker 2: Yeah, there's also something to keep in mind. There's something 206 00:10:47,720 --> 00:10:50,880 Speaker 2: called the Impoundment Control Act, which allows the President to 207 00:10:51,000 --> 00:10:55,320 Speaker 2: submit something called recisions basically cuts to Congress, and if 208 00:10:55,320 --> 00:10:57,440 Speaker 2: they approve, they can pull that back. The House and 209 00:10:57,440 --> 00:10:59,920 Speaker 2: Senator currently voting on a giant budget package, and it's 210 00:11:00,040 --> 00:11:03,079 Speaker 2: part of that. They might agree to rescind some of 211 00:11:03,120 --> 00:11:06,320 Speaker 2: that spending. Now, it's possible that that will fall out 212 00:11:06,360 --> 00:11:09,080 Speaker 2: of the usual legislative time window when you're allowed to 213 00:11:09,080 --> 00:11:10,720 Speaker 2: do that. But this is going to be a live 214 00:11:10,800 --> 00:11:14,600 Speaker 2: area of contention, not only in courts, but also in 215 00:11:14,600 --> 00:11:15,199 Speaker 2: Congress too. 216 00:11:15,360 --> 00:11:17,600 Speaker 1: This is the first time I've heard of was it 217 00:11:17,640 --> 00:11:20,839 Speaker 1: the Impowerment Control Act? Yes, I told you that Derek 218 00:11:20,920 --> 00:11:23,000 Speaker 1: knew his stuff that we're playing on his home turf 219 00:11:23,120 --> 00:11:26,040 Speaker 1: right now. While on the topic of things that President 220 00:11:26,080 --> 00:11:30,520 Speaker 1: Trump and his administration would symbolically like to impact but 221 00:11:30,679 --> 00:11:34,240 Speaker 1: maybe don't have the leavers to impact them in its 222 00:11:34,280 --> 00:11:37,120 Speaker 1: own way, and there's this whole area of things that 223 00:11:37,520 --> 00:11:40,760 Speaker 1: he can't legally control. But there's another area, which is 224 00:11:41,080 --> 00:11:45,680 Speaker 1: where a president, whoever they are, they can't change fundamental economics. 225 00:11:45,880 --> 00:11:48,240 Speaker 1: And so one of the things that seems and people 226 00:11:48,240 --> 00:11:49,680 Speaker 1: have been calling this out a little bit in the 227 00:11:49,679 --> 00:11:51,599 Speaker 1: public domain, but is a bit of a paradox, is 228 00:11:51,640 --> 00:11:55,360 Speaker 1: this idea of bringing down gasoline prices, which I believe 229 00:11:55,440 --> 00:11:58,320 Speaker 1: is something that Trump has spoken about wanting to do 230 00:11:58,360 --> 00:12:00,360 Speaker 1: a lot, and then this idea of drill baby drill, 231 00:12:00,480 --> 00:12:05,040 Speaker 1: because cheap gasoline prices means cheap oil. Cheap oil means, 232 00:12:05,080 --> 00:12:08,640 Speaker 1: particularly given the marginal cost of a barrel in the US, 233 00:12:08,679 --> 00:12:11,040 Speaker 1: which is not at the bottom of the supply stack, 234 00:12:11,080 --> 00:12:14,000 Speaker 1: it's one of the more costly barrels globally, the US 235 00:12:14,120 --> 00:12:17,840 Speaker 1: shale industry needs high oil prices to drill baby drill. 236 00:12:18,040 --> 00:12:20,680 Speaker 1: So there's this paradox. Do you have a sense from 237 00:12:20,679 --> 00:12:23,720 Speaker 1: any of the actions that the administration has taken, which 238 00:12:23,760 --> 00:12:29,280 Speaker 1: of those two seemingly conflicting ideals they are in favor of, 239 00:12:29,559 --> 00:12:31,880 Speaker 1: or anything to resolve that paradox? 240 00:12:32,600 --> 00:12:35,920 Speaker 2: Well, as with a lot of things, the trum administration 241 00:12:36,080 --> 00:12:38,320 Speaker 2: is kind of trying to pursue both objectives at once, 242 00:12:38,559 --> 00:12:42,120 Speaker 2: but it's hard to be really confident that that'll work. 243 00:12:42,280 --> 00:12:44,959 Speaker 2: I think on the cost side, they're trying very hard 244 00:12:45,000 --> 00:12:49,560 Speaker 2: to remove regulatory barriers, including you know, pollution controls and 245 00:12:49,800 --> 00:12:53,520 Speaker 2: long permitting timelines in order to allow projects to get built. 246 00:12:53,720 --> 00:12:55,560 Speaker 2: We've seen a lot of this in particular, and trying 247 00:12:55,559 --> 00:12:59,840 Speaker 2: to expand global loqui financial gas exports by approving new 248 00:13:00,160 --> 00:13:03,720 Speaker 2: export terminals which the DOE has control over. At the 249 00:13:03,760 --> 00:13:07,120 Speaker 2: same time, fundamentally, it seems like there's a very strong 250 00:13:07,160 --> 00:13:11,120 Speaker 2: interest in low oil and gasoline or petrol prices. Certainly, 251 00:13:11,360 --> 00:13:15,120 Speaker 2: some have attributed the recent OPEC plus production cuts partly 252 00:13:15,160 --> 00:13:17,280 Speaker 2: to an attempt to curry favor with the president, and 253 00:13:17,320 --> 00:13:19,240 Speaker 2: I believe there's been some cheer leading of the general 254 00:13:19,280 --> 00:13:21,719 Speaker 2: decline and oil prices. But of course, if you look 255 00:13:21,720 --> 00:13:25,040 Speaker 2: at the Federal Reserve Bank of Dallas survey of energy producers, 256 00:13:25,040 --> 00:13:27,800 Speaker 2: there's not a lot of happiness with Trump's recent policy 257 00:13:27,840 --> 00:13:31,120 Speaker 2: moves and tricle support for lower prices. In particular, the 258 00:13:31,240 --> 00:13:34,320 Speaker 2: sense that the tariffs might hit global aggregate demand and 259 00:13:34,360 --> 00:13:37,600 Speaker 2: thereby drive oil prices down has caused a great deal 260 00:13:37,640 --> 00:13:41,640 Speaker 2: of ajitah among some of the major oil and gas 261 00:13:41,679 --> 00:13:45,520 Speaker 2: industry backers of Trump's administration. So ultimately it seems like 262 00:13:45,559 --> 00:13:48,079 Speaker 2: there might be a little bit more of a hope 263 00:13:48,200 --> 00:13:51,839 Speaker 2: or a prioritization for cheap consumer prices, with the sense 264 00:13:51,840 --> 00:13:55,000 Speaker 2: that in the longer run, removing regulatory barriers opening more 265 00:13:55,120 --> 00:13:57,760 Speaker 2: federal land for oil and gas production will make things 266 00:13:57,840 --> 00:14:01,920 Speaker 2: cheap enough to expand supply. Ultimately, the real growth in 267 00:14:02,080 --> 00:14:04,320 Speaker 2: US supply has mostly been from the shale patch, which 268 00:14:04,360 --> 00:14:07,839 Speaker 2: has those surprisingly rapid price sensitivities, even if they're often 269 00:14:07,880 --> 00:14:10,520 Speaker 2: able to undercut other producers. In short, we're going to 270 00:14:10,520 --> 00:14:12,199 Speaker 2: have to see what happens, but I'll just leave you 271 00:14:12,240 --> 00:14:14,920 Speaker 2: with the classic commodity traders point of view. The solution 272 00:14:15,000 --> 00:14:16,920 Speaker 2: to high prices is high price, and the solution to 273 00:14:16,920 --> 00:14:18,960 Speaker 2: low prices as low prices. We're going to be on 274 00:14:19,000 --> 00:14:20,800 Speaker 2: a bit of a merry go round for quite a 275 00:14:20,800 --> 00:14:23,240 Speaker 2: while going forward, based purely on economics, to say nothing 276 00:14:23,280 --> 00:14:23,880 Speaker 2: of the policy. 277 00:14:24,160 --> 00:14:26,800 Speaker 1: Yeah, I mean well, based purely on the economics and 278 00:14:27,200 --> 00:14:30,400 Speaker 1: what OPEC decides to do, which is always this uniqueness 279 00:14:30,400 --> 00:14:33,640 Speaker 1: to the oil market, and presidents of the United States 280 00:14:33,640 --> 00:14:36,680 Speaker 1: are famously not able to influence that. You touched on 281 00:14:36,720 --> 00:14:39,160 Speaker 1: something else, which is a major topic here, which is 282 00:14:39,200 --> 00:14:43,920 Speaker 1: Tariff's What was the date of liberation day? April second April. Second. 283 00:14:44,320 --> 00:14:46,760 Speaker 1: I don't know how you have been able to sleep 284 00:14:46,800 --> 00:14:49,560 Speaker 1: since then, because I'm sure that one piece of analysis 285 00:14:49,600 --> 00:14:51,440 Speaker 1: you've been working on, you wake up the next day 286 00:14:51,600 --> 00:14:54,080 Speaker 1: find you have to delete it because there's new news 287 00:14:54,240 --> 00:14:57,760 Speaker 1: and the things have changed again. Have things sort of 288 00:14:58,000 --> 00:15:00,240 Speaker 1: settled down? I mean, are you starting to see a 289 00:15:00,280 --> 00:15:03,640 Speaker 1: little bit of a an equilibrium setting in, you know, 290 00:15:03,680 --> 00:15:05,720 Speaker 1: because there's been a lot of flip flopping, and you know, 291 00:15:05,920 --> 00:15:09,040 Speaker 1: Trump detractors will say that that's because keeps changing his mind. 292 00:15:09,120 --> 00:15:12,320 Speaker 1: His supporters will say this is all negotiation tactics. We're 293 00:15:12,320 --> 00:15:14,560 Speaker 1: not here to determine which one it is. But the 294 00:15:14,560 --> 00:15:17,360 Speaker 1: fact is is that what has been said has changed 295 00:15:17,560 --> 00:15:21,800 Speaker 1: pretty frequently. So are we seeing an equilibrium on tariffs generally? 296 00:15:21,800 --> 00:15:23,640 Speaker 1: And where are you seeing the biggest impacts? 297 00:15:23,880 --> 00:15:26,120 Speaker 2: Well, I think the calm that we're seeing now isn't 298 00:15:26,120 --> 00:15:28,280 Speaker 2: so much the calm before after the storm as the 299 00:15:28,280 --> 00:15:30,720 Speaker 2: eye of the hurricane, right, a sort of calm patch 300 00:15:30,920 --> 00:15:34,560 Speaker 2: before further progress continues. Just as a reminder, we are 301 00:15:34,560 --> 00:15:37,520 Speaker 2: in the middle of a ninety day pause on high 302 00:15:37,600 --> 00:15:40,560 Speaker 2: tariff rates on a select set of countries such as 303 00:15:40,600 --> 00:15:43,560 Speaker 2: the European Union and Southeast Asia, but there's still a 304 00:15:43,600 --> 00:15:46,720 Speaker 2: general ten percent tariff on all imports to the United States, 305 00:15:46,720 --> 00:15:48,920 Speaker 2: with a handful of exceptions which are mostly following into 306 00:15:48,920 --> 00:15:52,080 Speaker 2: other categories like autos, steel and a lunium or Mexican 307 00:15:52,120 --> 00:15:55,040 Speaker 2: Canadian goods that were tariffed separately by Trump earlier. All 308 00:15:55,080 --> 00:15:57,640 Speaker 2: of these are kind of in the midst of ongoing negotiations. 309 00:15:57,680 --> 00:16:01,000 Speaker 2: The administration has touted good talks with nor Way, South Korea, 310 00:16:01,160 --> 00:16:03,600 Speaker 2: and Japan, just to name a few, But the real 311 00:16:03,760 --> 00:16:06,960 Speaker 2: big enchilada here is effectively the tariffs on China, which 312 00:16:06,960 --> 00:16:09,160 Speaker 2: are currently at one hundred and forty five percent based 313 00:16:09,160 --> 00:16:11,200 Speaker 2: tariffs for every good, with higher tariffs on a lot 314 00:16:11,240 --> 00:16:14,120 Speaker 2: of goods, particularly in the energy sector, especially on batteries, 315 00:16:14,200 --> 00:16:16,840 Speaker 2: on electric vehicles, which China doesn't really sell much to 316 00:16:16,880 --> 00:16:19,840 Speaker 2: the US, and for solar which China has not directly 317 00:16:19,880 --> 00:16:22,000 Speaker 2: sold to the US for a long time because those exist. 318 00:16:22,200 --> 00:16:25,320 Speaker 2: In short, we're seeing a bit of a deadlock between 319 00:16:25,360 --> 00:16:29,120 Speaker 2: the Trump administration, which is claiming that it might be 320 00:16:29,200 --> 00:16:32,400 Speaker 2: willing to flower some tariffs for a deal, and reports 321 00:16:32,440 --> 00:16:34,920 Speaker 2: out of China suggesting that there might be some reduced 322 00:16:34,920 --> 00:16:38,080 Speaker 2: tariffs at least for industrial inputs. However, there's disagreement between 323 00:16:38,080 --> 00:16:40,120 Speaker 2: the two sides on whether talks are even happening right 324 00:16:40,160 --> 00:16:42,720 Speaker 2: now at all. There's disagreement about protocol, with Trump preferring 325 00:16:42,760 --> 00:16:45,040 Speaker 2: a face to face with Chinese leader she's in pink 326 00:16:45,120 --> 00:16:48,840 Speaker 2: and the Chinese bureaucracy preferring a more formal process. In short, 327 00:16:49,000 --> 00:16:52,560 Speaker 2: we are waiting to see what happens with a lot 328 00:16:52,600 --> 00:16:54,800 Speaker 2: of these things. The Canada and Mexico tariffs are further 329 00:16:54,800 --> 00:16:56,600 Speaker 2: complicated by the fact that probably by the time this 330 00:16:56,640 --> 00:16:59,520 Speaker 2: pot is out, will have a final determination on the 331 00:16:59,520 --> 00:17:02,720 Speaker 2: government and Ottawa in Canada, and that'll contribute to questions 332 00:17:02,760 --> 00:17:06,200 Speaker 2: of whether the US Mexico Canada agreement, Trump's revamped version 333 00:17:06,200 --> 00:17:09,240 Speaker 2: of NAFTA gets renegotiated yet again this year or next. 334 00:17:09,440 --> 00:17:12,800 Speaker 2: The current Prime Minister Mark Carney of Canada has argued 335 00:17:12,840 --> 00:17:15,560 Speaker 2: that they should accelerate the USMCA renegotiation, which is due 336 00:17:15,600 --> 00:17:18,359 Speaker 2: next year, and so we could see a bit more 337 00:17:18,600 --> 00:17:22,040 Speaker 2: instability and uncertainty moving forward before things settle down. 338 00:17:22,240 --> 00:17:24,360 Speaker 1: Just reflect on what you said about China, like really 339 00:17:24,440 --> 00:17:28,960 Speaker 1: highlights the complexity of analyzing geopolitics. The fact that China 340 00:17:29,080 --> 00:17:32,159 Speaker 1: and the US cannot even agree on whether they are 341 00:17:32,200 --> 00:17:37,600 Speaker 1: talking to each other it's publicly wow, But I want 342 00:17:37,600 --> 00:17:39,399 Speaker 1: to I want to actually drill down a little bit 343 00:17:39,400 --> 00:17:42,320 Speaker 1: on China because you know, you mentioned the tariffs on 344 00:17:42,440 --> 00:17:45,920 Speaker 1: sola specifically, So when I think about what the US 345 00:17:46,000 --> 00:17:48,879 Speaker 1: is importing in terms of energy equipment, and you mentioned 346 00:17:48,920 --> 00:17:51,920 Speaker 1: the US doesn't actually buy that many evs from China. 347 00:17:51,960 --> 00:17:54,560 Speaker 1: Maybe batteries is a different topic, I'm not sure. But 348 00:17:54,920 --> 00:17:58,040 Speaker 1: one thing that comes indirectly from China that the US 349 00:17:58,240 --> 00:18:01,239 Speaker 1: does import in large volumes solar. So, for those of 350 00:18:01,240 --> 00:18:03,560 Speaker 1: you not familiar with this, there's for a long time 351 00:18:03,680 --> 00:18:06,920 Speaker 1: been really high tariffs on Chinese solar from the US, 352 00:18:06,960 --> 00:18:09,480 Speaker 1: and that goes all the way back to Obama. But instead, 353 00:18:09,720 --> 00:18:14,040 Speaker 1: Chinese solar manufacturers have been setting up factories in Southeast Asia. 354 00:18:14,119 --> 00:18:17,080 Speaker 1: A lot of the equipment, the upstream equipment is imported 355 00:18:17,080 --> 00:18:20,280 Speaker 1: into Southeast Asia from China. The later stages of assembly 356 00:18:20,320 --> 00:18:23,119 Speaker 1: happened in Southeast Asia. Then it's exported to the US, 357 00:18:23,280 --> 00:18:26,480 Speaker 1: thus circumventing these tariffs. And I feel like that has 358 00:18:26,520 --> 00:18:29,440 Speaker 1: been a situation that everyone has been kind of content 359 00:18:29,560 --> 00:18:32,880 Speaker 1: with because there's sort of this very public facing We're 360 00:18:32,920 --> 00:18:34,879 Speaker 1: not being flooded with solar from China, but on the 361 00:18:35,440 --> 00:18:38,120 Speaker 1: reality for the industry, they still have access with maybe 362 00:18:38,160 --> 00:18:39,760 Speaker 1: a little bit of a markup to all the cheap 363 00:18:39,800 --> 00:18:42,560 Speaker 1: solar from China. Now, with these very high tariffs on 364 00:18:42,640 --> 00:18:46,480 Speaker 1: Southeast Asia, that loophole appears to have been shut. And 365 00:18:46,520 --> 00:18:48,680 Speaker 1: I've been to our solar analysts about this. I thought 366 00:18:48,680 --> 00:18:50,679 Speaker 1: they would be freaking out, and they were like, oh, no, 367 00:18:50,920 --> 00:18:53,440 Speaker 1: you know, because all of the major developers they've built 368 00:18:53,480 --> 00:18:55,880 Speaker 1: up inventory of solar. They've got enough for at least 369 00:18:55,960 --> 00:18:58,199 Speaker 1: the next year or so of build. So then the 370 00:18:58,280 --> 00:19:01,520 Speaker 1: question is is do we see this situation still being 371 00:19:01,800 --> 00:19:03,720 Speaker 1: as it is in a year's time, if that's the 372 00:19:03,840 --> 00:19:06,760 Speaker 1: rough timeline of whether tariffs really start to impact the 373 00:19:06,840 --> 00:19:09,240 Speaker 1: energy transition in the US. Do you think that the 374 00:19:09,359 --> 00:19:13,119 Speaker 1: current tariffs on Southeast Asia are part of a negotiation 375 00:19:13,520 --> 00:19:16,520 Speaker 1: or are they likely to stay in place and you know, 376 00:19:16,560 --> 00:19:19,320 Speaker 1: would impact the solar industry in the ways that it could. 377 00:19:19,400 --> 00:19:22,080 Speaker 2: Well, there's two different tariffs to be speaking about here, 378 00:19:22,119 --> 00:19:25,240 Speaker 2: a set of tariffs on all goods from Southeast Asia 379 00:19:25,240 --> 00:19:28,760 Speaker 2: that the Trump administration imposed, then paused, and seems to 380 00:19:28,800 --> 00:19:30,960 Speaker 2: be negotiating about as we speak. It's hard to be 381 00:19:30,960 --> 00:19:34,680 Speaker 2: predictive of those. But the recent solar specific tariffs were 382 00:19:34,680 --> 00:19:39,240 Speaker 2: the result of investigations at US agencies initiated by labor 383 00:19:39,280 --> 00:19:42,359 Speaker 2: unions and US manufacturers. So those tariffs, you might have 384 00:19:42,400 --> 00:19:45,960 Speaker 2: heard the eyewatering number of three thousand percent on Cambodian 385 00:19:46,000 --> 00:19:49,680 Speaker 2: solar imports, several hundred percentages on imports from certain manufacturers 386 00:19:49,680 --> 00:19:53,119 Speaker 2: in Vietnam and elsewhere. Those certainly raise prices, no question. 387 00:19:53,359 --> 00:19:55,679 Speaker 2: But when I've spoken to our colleague poll about this, 388 00:19:55,760 --> 00:20:00,560 Speaker 2: who covers this, there's not a lot of concern there. Ultimately, 389 00:20:00,640 --> 00:20:04,119 Speaker 2: even when you add costs, solar is generally still fairly cheap. 390 00:20:04,320 --> 00:20:07,720 Speaker 2: There's been a tendency in Southeast Asia to shift production 391 00:20:07,800 --> 00:20:10,720 Speaker 2: and onshore some of the upstream aspects to minimize some 392 00:20:10,720 --> 00:20:13,520 Speaker 2: of these so called anti circumvention and anti dumping tariffs 393 00:20:13,560 --> 00:20:16,520 Speaker 2: that target assembly of Chinese components in Southeast Asia, and 394 00:20:16,560 --> 00:20:19,440 Speaker 2: more to the point, there's growing capacity in other markets 395 00:20:19,560 --> 00:20:22,240 Speaker 2: like Turkey and India, to say nothing of the US itself, 396 00:20:22,440 --> 00:20:26,720 Speaker 2: where there's somewhat economically competitive production. At the end of 397 00:20:26,720 --> 00:20:29,600 Speaker 2: the day, it should be noted that Southeast Asian solar 398 00:20:29,680 --> 00:20:32,560 Speaker 2: still tends to be the cheapest thing that the US 399 00:20:32,760 --> 00:20:35,679 Speaker 2: can import, and it still remains economically competitive when you 400 00:20:35,720 --> 00:20:39,000 Speaker 2: consider the higher costs of upstream imcore components that are 401 00:20:39,000 --> 00:20:41,720 Speaker 2: then assembled in the US and to US made solar modules. 402 00:20:41,840 --> 00:20:44,720 Speaker 2: So things will be a bit more expensive, but the 403 00:20:44,840 --> 00:20:48,560 Speaker 2: hit isn't necessarily going to be as intense, at least 404 00:20:48,600 --> 00:20:51,959 Speaker 2: for commercial and industrial or utility scale solar. You might 405 00:20:52,000 --> 00:20:54,760 Speaker 2: see more damage to the rooftop solar market, which is 406 00:20:54,760 --> 00:20:55,800 Speaker 2: a bit more price sensitive. 407 00:20:56,200 --> 00:20:58,560 Speaker 1: So while it's talk about global trade and tariffs, a 408 00:20:58,600 --> 00:21:02,600 Speaker 1: few weeks ago, we did a podcast with our colleagues 409 00:21:02,800 --> 00:21:05,440 Speaker 1: Andy Leach from our batteri's team and Matthew Hill's from 410 00:21:05,440 --> 00:21:07,840 Speaker 1: our Global Trade and supply chains team, I'm talking about 411 00:21:07,840 --> 00:21:11,480 Speaker 1: the EU's battery strategy, which has somewhat similarities with the 412 00:21:11,560 --> 00:21:16,119 Speaker 1: US's in that it is about creating a space for 413 00:21:16,440 --> 00:21:19,480 Speaker 1: a homegrown industry to develop. They're they're using joint ventures 414 00:21:19,480 --> 00:21:22,280 Speaker 1: with Chinese companies and that's how you can access the market. 415 00:21:22,320 --> 00:21:25,040 Speaker 1: But the question I asked them at the time is 416 00:21:25,400 --> 00:21:28,160 Speaker 1: are they shooting themselves in the foot a little bit? 417 00:21:28,240 --> 00:21:32,320 Speaker 1: Because the real prize is dominating the automotive industry. And 418 00:21:32,359 --> 00:21:35,320 Speaker 1: so if we believe the future of the automotive industry 419 00:21:35,359 --> 00:21:38,639 Speaker 1: is electric vehicles, by kind of fixating on trying to 420 00:21:38,640 --> 00:21:42,760 Speaker 1: have their own battery supply chain. Are they stemying themselves 421 00:21:42,920 --> 00:21:45,720 Speaker 1: from what actually matters, which is dominating vehicles And shouldn't 422 00:21:45,720 --> 00:21:49,960 Speaker 1: they just be importing Chinese batteries. So with that in mind, 423 00:21:50,560 --> 00:21:53,840 Speaker 1: what are the tariff specifically on on batteries and I 424 00:21:53,960 --> 00:21:56,240 Speaker 1: for the US and are we seeing a sort of 425 00:21:56,280 --> 00:21:59,320 Speaker 1: a similar I would say maybe paradox at the heart 426 00:21:59,359 --> 00:22:01,440 Speaker 1: of the strat I'm not front. 427 00:22:01,400 --> 00:22:05,520 Speaker 2: Well, the Trump administration isn't particularly eager to transition the 428 00:22:05,640 --> 00:22:08,520 Speaker 2: US auto industry to electric vehicles. They've cut back or 429 00:22:08,520 --> 00:22:11,200 Speaker 2: tried to cut back a fareantom of regulations on that front. 430 00:22:11,320 --> 00:22:14,119 Speaker 2: But accepting the premise that evs are probably going to 431 00:22:14,119 --> 00:22:15,680 Speaker 2: be the future of the auto market, which I think 432 00:22:15,680 --> 00:22:19,640 Speaker 2: we believe, there's decent economic reasons to want the batteries 433 00:22:19,680 --> 00:22:21,760 Speaker 2: at home. That's kind of a lot of the value 434 00:22:21,760 --> 00:22:23,359 Speaker 2: of the car and a lot of the jobs associated 435 00:22:23,359 --> 00:22:26,280 Speaker 2: with art could be associated with making the battery. Right now, 436 00:22:26,520 --> 00:22:29,320 Speaker 2: the US has already sort of erected higher trade barriers 437 00:22:29,359 --> 00:22:33,480 Speaker 2: against batteries for electric vehicles than it has for stationary storage. 438 00:22:33,720 --> 00:22:36,440 Speaker 2: That was true even under the Biden administration, and certainly 439 00:22:36,560 --> 00:22:39,560 Speaker 2: while it takes some time to scale up domestic battery production, 440 00:22:39,720 --> 00:22:43,000 Speaker 2: it's going to be a real challenge to raise the 441 00:22:43,000 --> 00:22:45,920 Speaker 2: costs of them further by raising the costs of imported batteries. 442 00:22:46,040 --> 00:22:48,600 Speaker 2: On top of that, even US made batteries might depend 443 00:22:48,600 --> 00:22:52,320 Speaker 2: on upstream components from China, particularly critical minerals which are 444 00:22:52,400 --> 00:22:55,399 Speaker 2: largely processed in China lithium, nickel, and so forth, and 445 00:22:55,440 --> 00:22:58,080 Speaker 2: the Trump administration is considering raising additional tariffs on those 446 00:22:58,280 --> 00:23:02,000 Speaker 2: and also graphite and which are a critical component of 447 00:23:02,119 --> 00:23:04,480 Speaker 2: the cost of battery and which could face tariffs of 448 00:23:04,480 --> 00:23:08,040 Speaker 2: over nine hundred percent under another investigation that's ongoing. As 449 00:23:08,080 --> 00:23:11,320 Speaker 2: our colleague Eli Gomez Callus has written about, on the 450 00:23:11,359 --> 00:23:14,760 Speaker 2: stationary storage side, the effects are actually more immediate and 451 00:23:14,840 --> 00:23:17,720 Speaker 2: somewhat more dire, because the US really does import the 452 00:23:17,760 --> 00:23:21,440 Speaker 2: vast majority of its stationary storage lithium ion batteries from China, 453 00:23:21,480 --> 00:23:23,320 Speaker 2: and it's not going to be able to upgrade its 454 00:23:23,520 --> 00:23:27,200 Speaker 2: manufacturing capacity soon enough to fill that gap, if at all. 455 00:23:27,280 --> 00:23:29,600 Speaker 2: Really imports would still be a critical component, and so 456 00:23:29,680 --> 00:23:32,159 Speaker 2: that means it's going to be considerably more expensive to 457 00:23:32,560 --> 00:23:35,399 Speaker 2: import something that makes renewables a bit more competitive, especially 458 00:23:35,440 --> 00:23:37,919 Speaker 2: at peak power demand times. In the evening with natural 459 00:23:37,960 --> 00:23:38,960 Speaker 2: gas and peaker plants. 460 00:23:39,119 --> 00:23:42,440 Speaker 1: Yeah, that's interesting, and that will potentially have an impact 461 00:23:42,600 --> 00:23:46,639 Speaker 1: on markets like California and on KOT the power market 462 00:23:46,680 --> 00:23:49,720 Speaker 1: in Texas which have high penetrations of solo and whose 463 00:23:49,760 --> 00:23:52,680 Speaker 1: battery markets were then following suits. So we will see 464 00:23:52,720 --> 00:23:55,159 Speaker 1: what happens there, and in particular in Texas, if you 465 00:23:55,200 --> 00:23:59,240 Speaker 1: can't manage peak load, then that can have serious impacts 466 00:23:59,240 --> 00:24:02,480 Speaker 1: on power price. And that's a region where there is 467 00:24:02,800 --> 00:24:06,679 Speaker 1: ambitions to develop AI data centers on the basis partly 468 00:24:06,760 --> 00:24:08,600 Speaker 1: of having a stable power supply. So it will be 469 00:24:08,640 --> 00:24:11,560 Speaker 1: really interesting to see how that particular impact that the 470 00:24:11,640 --> 00:24:14,920 Speaker 1: knock on effects that could happen. That's just my two cents, 471 00:24:14,960 --> 00:24:18,240 Speaker 1: just adding that in As because my jam is analyzing 472 00:24:18,280 --> 00:24:21,320 Speaker 1: power markets. So final angle, I want to look at 473 00:24:21,320 --> 00:24:24,119 Speaker 1: this first hundred days from and I can't believe we 474 00:24:24,160 --> 00:24:25,960 Speaker 1: haven't really talked about it yet, but I kind of 475 00:24:26,000 --> 00:24:27,760 Speaker 1: wanted to save one of the big ones to last, 476 00:24:27,840 --> 00:24:31,840 Speaker 1: which is the Inflation Reduction Act. Looking more and more like, 477 00:24:32,080 --> 00:24:34,639 Speaker 1: I don't know, this sort of ship in the water 478 00:24:34,760 --> 00:24:37,040 Speaker 1: that is going to just have holes put in it 479 00:24:37,080 --> 00:24:39,080 Speaker 1: from all sorts of different angles. I don't know, but 480 00:24:39,160 --> 00:24:44,920 Speaker 1: it is certainly endangered, at least in terms of the rhetoric. So, firstly, 481 00:24:45,359 --> 00:24:47,760 Speaker 1: is it actually that endangered. I know that there's a 482 00:24:47,760 --> 00:24:50,320 Speaker 1: little bit of nuance there, and has anything happened in 483 00:24:50,359 --> 00:24:52,680 Speaker 1: the first hundred days that gives us any more insight 484 00:24:52,840 --> 00:24:58,240 Speaker 1: into whether the tax credits for wind, solar storage, electric vehicles, 485 00:24:58,680 --> 00:25:02,280 Speaker 1: hydrogen carbon c from storage, how are they all faring 486 00:25:02,440 --> 00:25:04,680 Speaker 1: or have they fed in this first hundred days. 487 00:25:04,920 --> 00:25:07,399 Speaker 2: Well, it's important that you mentioned the tax credits because 488 00:25:07,440 --> 00:25:10,240 Speaker 2: those really are the bulk of the Inflation Reduction Acts 489 00:25:10,440 --> 00:25:14,080 Speaker 2: funding for clean energy technologies, at least about seventy five 490 00:25:14,119 --> 00:25:18,080 Speaker 2: percent of the clean technology deployment funding that we cataloged 491 00:25:18,080 --> 00:25:20,240 Speaker 2: back when it was passed, and in fact probably more 492 00:25:20,280 --> 00:25:22,480 Speaker 2: because the tax credits are uncapped a percentage that would 493 00:25:22,520 --> 00:25:26,119 Speaker 2: really only grow as certain grant your loan programs get 494 00:25:26,200 --> 00:25:29,040 Speaker 2: rolled back. So generally speaking, this is a thing that 495 00:25:29,040 --> 00:25:31,920 Speaker 2: you would need Congress to take away. Ultimately. You know, 496 00:25:32,119 --> 00:25:34,399 Speaker 2: if you just pay the government lesson your tax forms 497 00:25:34,400 --> 00:25:37,080 Speaker 2: and show that you've documented and complied with the various 498 00:25:37,160 --> 00:25:39,440 Speaker 2: rules for your tax credits, that's a little bit safer 499 00:25:39,480 --> 00:25:42,480 Speaker 2: and harder for the executive branch to interfere with than 500 00:25:42,880 --> 00:25:45,440 Speaker 2: say a grant or loan that has to be continuously 501 00:25:45,440 --> 00:25:48,520 Speaker 2: funded from government bank accounts, although we'll also see what 502 00:25:48,560 --> 00:25:50,800 Speaker 2: IRS enforcement looks like later in the year. At the 503 00:25:50,880 --> 00:25:53,119 Speaker 2: end of the day. In the background, with all the 504 00:25:53,160 --> 00:25:58,280 Speaker 2: sort of sterm and drang of the Trump administration's executive policies, 505 00:25:58,359 --> 00:26:01,040 Speaker 2: there's been much quieter work going on in Congress to 506 00:26:01,119 --> 00:26:03,480 Speaker 2: try and arrange a tax bill by the end of 507 00:26:03,520 --> 00:26:05,680 Speaker 2: the year in an attempt to make individual tax cuts 508 00:26:05,680 --> 00:26:08,320 Speaker 2: in Trump's first term permanent. As part of that, they're 509 00:26:08,359 --> 00:26:11,680 Speaker 2: looking for everything they can find to sort of cover 510 00:26:11,720 --> 00:26:15,359 Speaker 2: the costs of that, and among those sources to funding, 511 00:26:15,480 --> 00:26:18,120 Speaker 2: the Inflation Reduction Act has looked like a prime target 512 00:26:18,240 --> 00:26:23,679 Speaker 2: due to controversies about supporting electric vehicles, about the intermittency 513 00:26:24,080 --> 00:26:27,280 Speaker 2: of solar and storage, and so forth. That said, the 514 00:26:27,359 --> 00:26:30,359 Speaker 2: vast majority of the sort of project funding for the 515 00:26:30,359 --> 00:26:34,240 Speaker 2: Inflation Reduction Act has gone into Republican states and districts. 516 00:26:34,440 --> 00:26:37,720 Speaker 2: We're seeing a lot of factories claim manufacturing or forty 517 00:26:37,720 --> 00:26:40,919 Speaker 2: five X tax credits, and a lot of those factories 518 00:26:40,960 --> 00:26:44,720 Speaker 2: have their off take dependent on keeping the existing Clean 519 00:26:44,840 --> 00:26:48,400 Speaker 2: Energy Deployment tax credits with their domestic content bonuses intact. 520 00:26:48,640 --> 00:26:51,600 Speaker 2: Twenty one Republicans in the House and four Republicans in 521 00:26:51,640 --> 00:26:55,919 Speaker 2: the Senate have both publicly put out letters saying that 522 00:26:56,040 --> 00:26:58,640 Speaker 2: any changes to the Inflation Reduction Act should be cautious 523 00:26:58,680 --> 00:27:01,520 Speaker 2: and they shouldn't jeopardize exists projects. All of which is 524 00:27:01,560 --> 00:27:03,800 Speaker 2: to say, the tax credits are probably going to survive 525 00:27:03,840 --> 00:27:05,800 Speaker 2: in some form, but we could still see some major 526 00:27:05,840 --> 00:27:09,959 Speaker 2: modifications through them, such as tougher rules on domestics content sourcing. 527 00:27:09,960 --> 00:27:12,720 Speaker 2: We're on keeping Chinese firms out of the tax credit 528 00:27:12,800 --> 00:27:17,280 Speaker 2: subsidization scheme, or potentially earlier phase outs for those tax 529 00:27:17,320 --> 00:27:20,240 Speaker 2: credits so as to reduce their effective fiscal impact. Now, 530 00:27:20,280 --> 00:27:22,439 Speaker 2: what's usually happened to the tax credits before the IRA 531 00:27:22,720 --> 00:27:25,160 Speaker 2: is they have a sunset date and then Congress swoops 532 00:27:25,160 --> 00:27:26,800 Speaker 2: in at the last minute to bring them back as 533 00:27:26,840 --> 00:27:29,600 Speaker 2: part of a negotiation. But if you make it seem 534 00:27:29,640 --> 00:27:31,600 Speaker 2: like it's going to phase out, then its scores better 535 00:27:31,800 --> 00:27:34,520 Speaker 2: in the Congressional Budget Office. We're not really sure which 536 00:27:34,520 --> 00:27:36,679 Speaker 2: of these things were ultimately going to see. We have 537 00:27:36,720 --> 00:27:39,280 Speaker 2: a few deadlines coming up. How Speaker Mike Johnson has 538 00:27:39,320 --> 00:27:42,560 Speaker 2: said that he wants to get a tax bill passed 539 00:27:42,640 --> 00:27:44,640 Speaker 2: by May. The federal government is going to hit its 540 00:27:44,760 --> 00:27:49,240 Speaker 2: debt ceiling sometime in probably September or October, at which 541 00:27:49,280 --> 00:27:51,159 Speaker 2: point they're really going to want to have passed some 542 00:27:51,240 --> 00:27:53,879 Speaker 2: kind of budget. So we're going to see by the 543 00:27:53,960 --> 00:27:57,040 Speaker 2: end of this year, unlikely sooner the final product, and 544 00:27:57,080 --> 00:27:59,880 Speaker 2: that's going to really dictate how the Inflation Reduction Act 545 00:28:00,080 --> 00:28:02,440 Speaker 2: changes and even if it survives, if it's the kind 546 00:28:02,440 --> 00:28:04,920 Speaker 2: of thing that can really drive the energy transition as 547 00:28:04,920 --> 00:28:05,760 Speaker 2: it was intended to do. 548 00:28:06,040 --> 00:28:08,960 Speaker 1: I mean, it's interesting what you mentioned about there's twenty 549 00:28:09,000 --> 00:28:12,840 Speaker 1: one Republicans in Congress in House of Representatives, and did 550 00:28:12,840 --> 00:28:15,800 Speaker 1: you say for senators from the Republican Party that are 551 00:28:15,880 --> 00:28:20,199 Speaker 1: somewhat supportive of the Inflation Reduction Act tax credits in 552 00:28:20,280 --> 00:28:23,639 Speaker 1: some form, And ordinarily I would say, well that's that. 553 00:28:23,800 --> 00:28:27,840 Speaker 1: Then it's not going to get repealed because as presuming 554 00:28:27,840 --> 00:28:31,480 Speaker 1: the Democrats will vote with it. But given this administration's 555 00:28:31,960 --> 00:28:34,159 Speaker 1: track record in these first one hundred days, which very 556 00:28:34,240 --> 00:28:38,280 Speaker 1: much seems to be make a declaration via executive order, 557 00:28:38,560 --> 00:28:41,520 Speaker 1: even if it falls outside of the bounds of what 558 00:28:41,560 --> 00:28:43,640 Speaker 1: it is legally allowed to do, and then fight about 559 00:28:43,680 --> 00:28:46,520 Speaker 1: it later in the courts and maybe with Congress, do 560 00:28:46,560 --> 00:28:48,520 Speaker 1: we see that being a potential outcome? And I suppose 561 00:28:48,520 --> 00:28:51,000 Speaker 1: what it fundamentally boils down to is what is the 562 00:28:51,040 --> 00:28:54,080 Speaker 1: Trump administration's view on these tax credits. 563 00:28:54,280 --> 00:28:58,280 Speaker 2: Well, generally speaking, you've heard a lot of conversation from 564 00:28:58,680 --> 00:29:02,560 Speaker 2: people like Energy Secretary is right saying that baseload power 565 00:29:02,600 --> 00:29:07,240 Speaker 2: is important, that technology neutral support for different energy sources 566 00:29:07,280 --> 00:29:10,040 Speaker 2: is important, and that certain things subsidized by the tax 567 00:29:10,040 --> 00:29:14,280 Speaker 2: credits like nuclear or geothermal are potentially important. However, you've 568 00:29:14,320 --> 00:29:17,800 Speaker 2: also heard a lot of criticism of particularly wind, but 569 00:29:17,840 --> 00:29:22,200 Speaker 2: also to a lesser extent, imports of solar and storage, 570 00:29:22,200 --> 00:29:25,640 Speaker 2: and have touched Chinese supply chains as a bit more controversial. 571 00:29:25,920 --> 00:29:30,960 Speaker 2: So there's some conflicting forces here that might raise questions 572 00:29:31,080 --> 00:29:33,560 Speaker 2: about how these tax credits are going to be allowed 573 00:29:33,640 --> 00:29:37,160 Speaker 2: or enforced. In particular, I would look to IRS actions 574 00:29:37,200 --> 00:29:39,520 Speaker 2: to see if there ends up being some form of 575 00:29:39,560 --> 00:29:42,800 Speaker 2: selective enforcement. That said, I think it's important to think 576 00:29:42,800 --> 00:29:45,400 Speaker 2: about the broader context here. The administration has claimed that 577 00:29:45,440 --> 00:29:48,160 Speaker 2: it wants to reindustrialize the United States, and it's certainly 578 00:29:48,200 --> 00:29:50,680 Speaker 2: shown a lot of active support for data centers and 579 00:29:50,720 --> 00:29:54,120 Speaker 2: AI and all of those really require power as of course, 580 00:29:54,200 --> 00:29:57,800 Speaker 2: to individuals' homes, and everybody wants that power cheaply and 581 00:29:57,840 --> 00:30:02,200 Speaker 2: fairly reliably. The vast majority of the new electricity sources 582 00:30:02,200 --> 00:30:03,880 Speaker 2: that are going to come online in the United States 583 00:30:03,960 --> 00:30:07,560 Speaker 2: are going to be wind and solar. Natural gas turbine 584 00:30:07,560 --> 00:30:10,040 Speaker 2: makers like giev Rnova, and I think believe Zemans have 585 00:30:10,200 --> 00:30:13,080 Speaker 2: said that they don't want to expand the production of 586 00:30:13,080 --> 00:30:16,120 Speaker 2: their natural gas turbines too quickly because that they've gotten 587 00:30:16,120 --> 00:30:18,520 Speaker 2: burned by that before and eaten into their profits. And 588 00:30:18,600 --> 00:30:22,640 Speaker 2: so the fastest and in many cases cheapest and most 589 00:30:22,680 --> 00:30:25,479 Speaker 2: reliable thing you can build across the US is solar 590 00:30:25,480 --> 00:30:29,160 Speaker 2: plus storage or similar technologies, and between that and support 591 00:30:29,280 --> 00:30:32,760 Speaker 2: for things like nuclear and geothermal. Pragmatically speaking, if you 592 00:30:33,120 --> 00:30:35,760 Speaker 2: want data centers, if you want AI if you want 593 00:30:35,800 --> 00:30:38,440 Speaker 2: new factories, and if you want consumers to not be 594 00:30:38,520 --> 00:30:40,600 Speaker 2: extremely mad at you because their power bills are rising, 595 00:30:40,680 --> 00:30:43,840 Speaker 2: you're going to want renewables that are partly paid for 596 00:30:43,920 --> 00:30:46,400 Speaker 2: by the federal government and rather than on rate payers bills. 597 00:30:46,520 --> 00:30:48,760 Speaker 2: So it remains to be seen, but I think there 598 00:30:48,760 --> 00:30:52,000 Speaker 2: are reasons to believe that pragmatism might have to win 599 00:30:52,000 --> 00:30:52,360 Speaker 2: out in the. 600 00:30:52,440 --> 00:30:56,440 Speaker 1: End, costing yourself back to when we did that, webinar 601 00:30:56,520 --> 00:30:59,320 Speaker 1: together and we talked about what the outlook would be 602 00:30:59,400 --> 00:31:02,400 Speaker 1: for you know, the Trump administration, and I realized that 603 00:31:02,480 --> 00:31:04,840 Speaker 1: the first hundred days is not the whole story, but 604 00:31:04,920 --> 00:31:07,760 Speaker 1: it is an interesting bell weather of what is perhaps 605 00:31:07,760 --> 00:31:11,960 Speaker 1: going to happen. So what has surprised you? What did 606 00:31:12,000 --> 00:31:15,560 Speaker 1: we not expect to happen that has happened or hasn't 607 00:31:15,560 --> 00:31:17,800 Speaker 1: happened that we expected to happen. What has happened that 608 00:31:18,000 --> 00:31:21,960 Speaker 1: is exactly as you expected? And what were things that 609 00:31:22,240 --> 00:31:24,480 Speaker 1: we talked about were you know, likely to happen with 610 00:31:24,560 --> 00:31:27,040 Speaker 1: this administration where we still don't have a good indication 611 00:31:27,080 --> 00:31:28,000 Speaker 1: of how that's going to go. 612 00:31:28,240 --> 00:31:33,000 Speaker 2: Excellent question. I think often the specifics were more surprising 613 00:31:33,080 --> 00:31:35,360 Speaker 2: than the general. I think we anticipated that the Trump 614 00:31:35,360 --> 00:31:37,800 Speaker 2: administration was going to try and take funding back, but 615 00:31:37,840 --> 00:31:40,720 Speaker 2: we didn't think that they would try to bring back 616 00:31:40,960 --> 00:31:44,560 Speaker 2: contractually obligated funding. So more seems to be at risk 617 00:31:44,640 --> 00:31:46,080 Speaker 2: than we had initially anticipated. 618 00:31:46,200 --> 00:31:48,120 Speaker 1: So it's just the just to put it into sort 619 00:31:48,120 --> 00:31:50,960 Speaker 1: of more in English, just the aggression with which they 620 00:31:50,960 --> 00:31:53,320 Speaker 1: are going after funding that has been committed to the 621 00:31:53,400 --> 00:31:54,160 Speaker 1: energy transition. 622 00:31:54,640 --> 00:31:56,960 Speaker 2: Yeah, and on top of that, there were more or 623 00:31:57,040 --> 00:32:00,280 Speaker 2: less the moves towards some form of permitting reform that 624 00:32:00,320 --> 00:32:03,880 Speaker 2: we anticipated, but there's also attempts to fast track it 625 00:32:04,280 --> 00:32:07,840 Speaker 2: to ignore the Administrative Procedure Act and some of the 626 00:32:07,960 --> 00:32:11,360 Speaker 2: rules that govern whether a regulatory change can be legally made. 627 00:32:11,600 --> 00:32:14,200 Speaker 2: That's someone in line with his first term, but again 628 00:32:14,280 --> 00:32:17,600 Speaker 2: more aggressive than before. And what the jury is really 629 00:32:17,680 --> 00:32:21,160 Speaker 2: still out on is this case I made for energy 630 00:32:21,200 --> 00:32:25,080 Speaker 2: pragmatism going to win out. Are we going to see 631 00:32:25,360 --> 00:32:29,600 Speaker 2: attention to the needs of consumers and data centers and manufacturers, 632 00:32:29,720 --> 00:32:32,920 Speaker 2: or are we going to see ideology kind of Trump that, 633 00:32:33,360 --> 00:32:37,040 Speaker 2: so to speak. And I have my bets, but as 634 00:32:37,040 --> 00:32:40,560 Speaker 2: we've seen, the only certainty with this administration has generally 635 00:32:40,560 --> 00:32:44,000 Speaker 2: been uncertainty. So as the President says, we'll see what happens. 636 00:32:44,080 --> 00:32:47,520 Speaker 1: I think that's a really excellent question, this idea of 637 00:32:47,680 --> 00:32:51,280 Speaker 1: particularly because the data sent question is relatively new. It's 638 00:32:51,320 --> 00:32:54,520 Speaker 1: an exciting new industry, and it does create just like 639 00:32:54,560 --> 00:32:58,000 Speaker 1: I was saying earlier with the cheap gasoline versus drill, 640 00:32:58,040 --> 00:33:02,040 Speaker 1: Baby drill, it creates a paradox between various things that 641 00:33:02,080 --> 00:33:06,080 Speaker 1: the administration says it wants to achieve. And I completely 642 00:33:06,080 --> 00:33:09,160 Speaker 1: agree with your assessment that is a really key question 643 00:33:09,400 --> 00:33:11,760 Speaker 1: that we don't know the answer to currently. That will 644 00:33:12,200 --> 00:33:14,840 Speaker 1: certainly have a really big bearing on what the ultimate 645 00:33:14,880 --> 00:33:17,480 Speaker 1: legacy of this administration is in terms of the energy 646 00:33:17,520 --> 00:33:20,920 Speaker 1: transition and the development of those industries. Derek, thank you 647 00:33:20,960 --> 00:33:23,400 Speaker 1: so much for joining us. It's been a really fascinating conversation. 648 00:33:23,640 --> 00:33:27,680 Speaker 1: It's always great to get your take on the political 649 00:33:27,720 --> 00:33:29,840 Speaker 1: aspects of the energy transition. You do such a great 650 00:33:29,920 --> 00:33:33,320 Speaker 1: job with managing to successfully weave it into the economic 651 00:33:33,400 --> 00:33:36,160 Speaker 1: and trade considerations that are all adjacent to that. So 652 00:33:36,280 --> 00:33:37,640 Speaker 1: real pleasure speaking to you. 653 00:33:38,040 --> 00:33:49,280 Speaker 2: It's been a pleasure to speak with you. Tom. Today's 654 00:33:49,320 --> 00:33:52,280 Speaker 2: episode of Switched On was produced by Cam Gray, with 655 00:33:52,400 --> 00:33:56,240 Speaker 2: production assistants from Kamala Shelling. Bloomberg NEF is a service 656 00:33:56,280 --> 00:33:59,560 Speaker 2: provided by Bloomberg Finance LP and its affiliates. This recording 657 00:33:59,560 --> 00:34:02,320 Speaker 2: does not constitute, nor should it be construed as investment 658 00:34:02,360 --> 00:34:05,800 Speaker 2: a vice, investment recommendations, or a recommendation as to an 659 00:34:05,800 --> 00:34:09,000 Speaker 2: investment or other strategy. 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