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It's Too Early To Give Up On Renewables In The US

There were promises to launch an energy reform, but no one said they should be kept

11Nov

Over the last couple of years, multiple industries have made big steps towards a more environmentally friendly future and sustainability. Production lines are becoming cleaner and more companies are willing to substitute traditional sources of energy for renewable solutions. These initiatives are paramount as our planet is heating up at a dangerous rate, and if companies go back to burning coal and increasing the use of oil, drastic consequences won't be long to come.

During his election campaign, now president-elect Donald Trump made it clear that he wants to bring the fossil fuel industry back to health, by 'unleashing an energy revolution that will bring vast new wealth to our country,' which includes 'unleash[ing] America's $50 trillion in untapped shale, oil, natural gas, and coal reserves.' Additionally, Mr. Trump addressed the intention to withdraw the US from the historic Paris Agreement as well as end Barak Obama's clean energy plan. If promises are kept, the progress that businesses and the environmental advocates achieved in the last decade will collapse.

Market reaction on the morning of election results said it all as renewable energy stocks, including First Solar, Solar City, and SunPower were down a respective 6%, 17%, and 6%. Meanwhile, the stocks of the world's top coal trader Glencore Plc's and the mining equipment giant Caterpillar rose sharply by 5% and 7% (Nov 9).

Donald Trump's vision for the future of the American business is based on a strong belief that businesses are overregulated thanks to initiatives led by environmental and governmental advocates which stopped organizations from maximizing profits. However, president Trump should acknowledge that renewable initiatives act on behalf of those for profit generation too. In his statement, Tom Kimbis, interim president of the Solar Energy Industries Association (SEIA) said that the solar industry, which is 'creating thousands of jobs and billions of dollars in investments across American communities' will continue to thrive.

Tesla and SolarCity are among those who are likely to suffer if energy reforms take place. Prior to elections, the merger of these two companies has already been raising questions among the shareholders, following Tesla's plan to financially help the struggling SolarCity. The plan includes combining agendas on sustainability - production of more solar panels, electric cars, the building of more production facilities, and collaboration with other companies to maintain innovation. However, Trump's promise to cut environmental and solar subsidies, which have boosted SolarCity in recent years may force to put this plan on hold.

However, it may be too soon to give up on renewables, and here is why.

Firstly, undermining the clean power plan doesn't resonate with the goal of 'making America great again'. The coal industry has not been stagnating only due to overregulation and the environmental advocacy. The natural gas industry has been taking over the coal industry since 2009 when the amount fuel costs to generate power from gas collapsed, making it a cheaper alternative to coal, so the latter simply struggles to compete.

According to Bloomberg, even if the Clean Power Plan is abandoned, renewable energy capacity will continue to grow more than 4% a year until 2040 and will shape 23% share of generation. Additionally, last year, US lawmakers renewed tax credits for wind and solar companies for another 5 years. The move was of paramount importance for renewables as it boosted the installation of the solar and wind power units following their cost reduction. Also, by the time when the new tax credit expires, these will create the cheapest forms of new electricity across the country, and consequently, further attract investments and encourage production of sustainable products. The measure and the forecast gained bi-partisan support which means it would be hard for Trump to repeal it if he would ever want to.

It's too early to make any conclusions on Donald Trump's presidency, as it has only just begun. Promises made during the election campaign may never be kept, or there may simply be a change in direction of his overall strategy. If the aim is to accelerate the country's production of goods by making it easier for businesses to operate, then Mr. Trump should acknowledge that it would be extremely hard to ignore or abandon the initiatives which have massively changed the way businesses operate today.

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