The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Ratings update: BP Wind Energy, USA

Donald Trump’s victory in the US presidential election has caused alarm among US renewables investors concerned that his campaign rhetoric suggests a lack of support – but existing wind farms like BP’s Fowler Ridge currently appear unlikely to face significant negative impacts.

Key Developments

  • BP Wind Energy operates the Fowler Ridge 1, 2 and 3 wind farms in Indiana. One of the largest wind farms in the US, Fowler Ridge is spread across 42,000 acres and its 355 turbines have a total generating capacity of 600 MW. It has been on-line since 2008.
  • Donald Trump’s election victory has created uncertainty throughout the US renewables sector – including for existing installations (like Fowler Ridge) and for investors considering future developments. While the details of Trump’s planned energy policy are not yet known, his campaign rhetoric suggested support for coal fired power generation, and he cast doubt on the necessity of the US meeting its carbon reduction targets. Shares in Vestas Wind Systems, the world’s largest manufacturer of wind turbines, plunged 13 per cent following Trump’s victory, demonstrating the bearish outlook.

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Evaluation

  • Donald Trump’s victory could negatively impact Fowler Ridge, particularly if his administration was to eliminate the federal tax credits that benefit the renewables sector. However, doing so would likely be difficult to achieve – such a move would likely face strong resistance in Congress – and the president-elect never explicitly called for the removal of these subsidies during his campaign. Renewables have enjoyed broad-based bipartisan support thanks, in part, to the majority of wind projects being located in Republican congressional districts. Commenting on the possibility of Donald Trump eliminating the tax credit, Republican Senator Chuck Grassley has said, “He’ll have to get a bill through Congress and he’ll do it over my dead body.”
  • Following his election in 2013, Indiana’s state Governor Mike Pence – now Trump’s Vice-President-elect – rolled back support for clean energy by eliminating an energy efficiency programme designed to reduce state energy demand. In addition, he refused to meet carbon emissions reduction targets set out in President Obama’s Clean Power Plan (CPP) – but neither had a material impact on Fowler Ridge, which is located in the state. Moreover, Fowler Ridge appears to enjoy considerable community support. While some local residents have raised concerns about noise and visual pollution, the project is a major source of revenue for landowners who receive annual rent payments.
  • While the impacts on Fowler Ridge may not be significant, the president-elect’s plan to abolish clean energy legislation like the CPP could shake investor confidence, which may limit further investment in renewables projects in the US. The CPP aims to reduce CO2 emissions from the electricity sector by, in part, incentivizing renewables development. In contrast, Trump has pledged to “bring back coal” and “unleash America’s $50 trillion in untapped shale, oil, and natural gas reserves,” but the specifics of whether this would be used for domestic electricity generation remain unclear. Given this uncertainty, markets will likely be cautious in valuing US renewables companies, and investors may be minded to deploy capital to projects outside of the US.
  • Nevertheless, even without tax credits, wind power is becoming increasingly competitive. If in coming years the costs of storage technology fall at the same rate as the costs of solar and wind generation have fallen over the past few years, renewables could become an economically viable alternative to coal or gas, irrespective of climate considerations.
  • Donald Trump’s victory could also have ramifications for the global renewables sector. His pledge to cut US$2.5 billion of funding committed to the UN’s Green Climate Fund (GCF) and threats to ignore the emissions targets of the Paris Agreement are a cause for concern for environmentalists. Political ambitions to limit global warming have been gaining momentum, largely due to the US and China’s twin leadership in ratifying the Paris Agreement following the COP21. If the US were to renege on its commitments, it could seriously affect other countries’ willingness to take action – potentially slowing the growth of demand for new renewables capacity globally.

This article uses Critical Resource’s LicenseSecure™ model to assess the likely level of political and stakeholder risk. Our updates provide a rapid overview of new or updated ratings in our database, with a focus on projects in the news. Please note that these ratings updates are provisional, based in part on open source analysis and are not from client projects. Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.

 

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