APG’s infrastructure team: “Rising energy demand will offset Trump’s anti-climate policies”
Cheap renewable energy, the growth of US data centres and other macroeconomic factors will help preserve the US energy transition
Trump’s return to the White House has been a tumultuous period for clean energy infrastructure investors attempting to calculate the political risk in their US exposures.
The new US president, known for his fossil-fuel-first rhetoric and disdain for renewables, is temporarily suspending all clean energy development, though not oil and gas, on federal land.
He has also declared an “energy emergency” as a justification to bolster “crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal” but not solar, wind or other clean energy technologies.
The administration has frozen $7bn in funding for residential solar in low-income communities and put more than $300bn of potential federal infrastructure funding at risk. However, renewables grew under the first Trump administration, with many analysts expecting a slowdown in the US energy transition but not a cessation.
Simple economics may help override ideology as the cost of renewable energy production is now often lower than the fossil fuel alternatives. This has already happened in Texas. No matter the anti-ESG stance of its legislators, the oil-rich state of Texas has the largest renewables build out in the US, surpassing California in terms of output.
This picture is reflected in the Netherlands, where Europe's largest pension fund ABP faced anti-ESG pushback last year, with conservative politicians questioning its divestments from fossil fuel assets.
But APG, the investment manager for ABP has over the last few years ramped up its investments in renewable infrastructure and says it intends to continue doing so, despite the challenges.
Jan-Willem Ruisbroek, managing director CPI/infrastructure & private natural capital at APG, says that APG still has an appetite for investing in renewable energy in the US.
APG manages over €500bn for its pension fund clients, which include ABP, which is one of the largest pension funds in the world.
“While climate policy may shift, this won’t necessarily change the case for sustainable energy,” Ruisbroek says. “Renewable energy production has been rising consistently for years. This growth trend is expected to continue and even accelerate in the coming decades.”
Rising electricity demand
Ruisbroek’s main cause for optimism is that federal policy, although a useful incentive for clean energy developers, is but one of many considerations investors take into account when allocating capital to the energy transition.
Other factors that set the pace of the transition include “macroeconomic conditions, commodity prices, consumer sentiment, capital formation, and corporate strategy”.
Moreover, most renewable energy targets and standards are set at the state level. “We expect that States will continue implementing strong policies that support their clean energy and net-zero targets,” he says.
This expectation is reinforced by the ongoing rise in renewable electricity demand in the US, which is supported by sources that are not solely driven by policy.
Those sources include technological advancements such as artificial intelligence (AI), data centre expansion, new domestic manufacturing, and electrification across various sectors, the US is entering a period of rising electricity demand.
Total energy consumption is projected to grow by approximately 15-20% over the next decade.
Data centre demand
The US is a global leader in data centres: there are currently 5390 data centres in the US as opposed to just 2101 data centres in Western Europe.
“Data centre deployment, partially driven by the increasing power needs of AI applications, is a significant driver of near-term electricity demand growth,” says Ruisbroek.
The Electric Power Research Institute (EPRI) estimates that data centres could account for up to 9% of US electricity generation annually by 2030, up from 4% in 2023. “At a national level, data centres are essential for supporting economic growth, enabling businesses, and maintaining the US’s leadership in innovation, including AI advancements,” Ruisbroek adds.
These demand dynamics are “unlikely to shift meaningfully based on the political landscape, as they are underpinned by broader macroeconomic factors”.
Meeting this rising energy demand in a cost-efficient manner strongly favours investment in renewable energy over building new fossil fuel-fired power plants.
“The production costs of renewable energy are now often lower than those of fossil-fuel-generated power,” Ruisbroek concludes. “As a result, the continued expansion of renewables is no longer driven solely by environmental or ideological motives but also by rational economic considerations. We expect the US to prioritise maintaining its global competitiveness, for which access to affordable energy is essential.”
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