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 ushered in a new era for the growing renewable energy industry .
President Biden acted last week to rejoin the Paris climate agreement, which aims to reduce the world’s carbon footprint in the coming decades, and revoked the license to build the controversial Keystone XL pipeline. He also signed an order that reversed reversals in vehicle emissions patterns and reinstated a working group on the social costs of greenhouse gases. He previously outlined a $ 2 trillion plan to put the country on “an irreversible path” for net zero carbon emissions by 2050.
“A cry for survival comes from the planet itself,” said Biden in his inaugural speech last week. “A cry that cannot be more desperate or clearer.”
Biden’s swift action on climate change ricocheted off the oil industry. The American Petroleum Institute, an industry lobbying group, said it supported the resumption of the Paris agreement, but called Biden’s order to revoke the Keystone pipeline “a slap in the face for thousands of union workers”.
“Revoking the Keystone XL pipeline is a significant setback for both environmental progress and our economic recovery,” the group said in a press release. “This wrong move will undermine America’s economic recovery, undermine US energy security and undermine relations with one of America’s greatest allies.”
Some European oil companies have already started the move to renewable energy. Royal Dutch Shell told investors in April that by 2050 it aims to achieve zero net emissions from its operations and invest in hydrogen fuel, a zero-carbon fuel burned with oxygen that can fuel airplanes and cars. Last year, BP began switching from oil to renewable energy under the leadership of its new CEO, Bernard Looney. In September, the company launched an initiative that will reduce oil exploration and increase its renewable generation capacity by 20 times.
“Our new strategy will transform BP into a very different company, not overnight, due to our size and scale, but quickly because the world needs change,” Looney told investors. “And, most importantly, we want to be part of that change.”
While some latecomers in the United States oil industry are at risk of losing ground in this new era, there is a new list of winners. Wall Street dollars have flowed into green energy stocks since Biden showed his promise to win the White House, according to Steve Fleishman, senior analyst at Wolfe Research. Since the summer, a solar energy stock index called Invesco Solar ETF has seen its price skyrocket about 150 percent, compared to just 18 percent for the S&P 500.
“Clean energy stocks have been performing better for a long time, but have reached a whole new level,” said Fleishman. “It is growing after the Democrats won the Senate.”
Investors are betting that the Biden government will accelerate the renewable energy industry, from green energy to electric vehicles, battery-powered wind farms and zero-emission commercial buildings. The industry was already growing in part due to a series of state and local tax credits that encourage investment in green energy. Those credits paid off: in 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 Suisse Securities.
According to Biden’s climate policies, demand for clean energy could potentially double in the next 15 years, Weinstein told investors last week. The clean energy sector is already on track to see annual growth of 5-10% in profits over the next two decades, which will require an investment of $ 58 trillion by 2040, according to Mark Haefele, an analyst at UBS.
“With governments and companies putting more and more emphasis on climate issues, we believe that 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 policy priorities are focused on the demand side to unlock the market,” said Miranda Ballentine, CEO of Renewable Energy Buyers Alliance and former director of sustainability for global renewable energy at Walmart. “These are iconic American brands that put their names on political priorities, which is quite unusual because they are not energy companies.”
But new lobby groups have emerged around the Capitol. The Zero Emission Transportation Association, launched in November, plans to lobby Congress to help finance the construction of new electric car charging stations and provide tax credits for consumers and businesses to purchase zero-emission vehicles. In September, the American Clean Power Association launched, under the command of Heather Zichal, a former climate adviser to the Obama administration, the defense of solar and wind power companies.
Group members include Google, which operates two wind farms in North Dakota; and NextEra, a lesser-known renewable energy company, whose market valuation is approaching the oil giant ExxonMobil. Separated from the lobby group, Florida-based NextEra has spent billions of dollars slowly building its empire in the renewable energy industry across the country. The company sued state utility commissions over laws that encourage suppliers to use local electricity companies in Texas and the loss of a public service contract with a competitor in Massachusetts.
The company declined to comment on the lawsuits for policy reasons, according to David Reuter, a spokesman for NextEra.
Similar to other sectors, small businesses in the renewable energy industry have been hit by the coronavirus, leaving larger companies in a better position to gain from future federal tax credits that may arise from the new administration.
“These deals are not easy to negotiate and usually come with a lot of upfront legal costs that developers and smaller investors may have more trouble digesting to make the deal worthwhile,” said Adam Wilson, an analyst at S&P Global Market Intelligence.
“I don’t want it to appear that smaller players cannot take advantage of these deals – that is certainly not true. But the configuration, as it stands, favors bigger players, ”said Wilson.
Biden has not yet specified how his government will structure tax credits to stimulate the growing market for large-scale solar and wind projects.