Ep62 Audio Blog: US Policy Shakeup: A Global Clean Energy Shift? ft Joseph Jacobelli, Bougie Impact Capital Ltd

In this special audio blog, host Joseph Jacobelli dives into the seismic shifts in US clean energy policy under the new administration. Discover how these changes are introducing uncertainty, leading to project cancellations, and potentially redirecting investments to Europe and Asia. With global clean energy markets expanding rapidly, could this shakeup fuel growth elsewhere? Join us as we explore the implications and opportunities arising from this pivotal moment in the energy transition.

ABOUT JOSEPH: Giuseppe ‘Joseph’ Jacobelli is an Asia finance and energy industry veteran. He is the Managing Partner of Bougie Impact Capital Ltd , a dedicated single-family office. Prior to B.I.C., he spent over 26 years in equity analysis with leading global investment banks covering China and other Asian energy stocks as well as five years as senior executive at a large utility and at a clean energy start-up. His book on energy transition, “Asia’s Energy Revolution: China’s Role and New Opportunities as Markets Transform and Digitalise”, was published in 2021.

FEEDBACK: Email Host | HOST, PRODUCTION, ARTWORK: Joseph Jacobelli | MUSIC: Ep0-29 The Open Goldberg Variations, Kimiko Ishizaka Ep30-50 Orchestra Gli Armonici – Tomaso Albinoni, Op.07, Concerto 04 per archi in Sol - III. Allegro. | Ep51 – Brandenburg Concerto No. 4 in G, Movement I (Allegro), BWV 1049 Kevin MacLeod. Licensed under Creative Commons: By Attribution 4.0 License

Transcript

Ep62 Special Audio Blog: US Policy Shakeup: A Global Clean Energy Shift? ft Joseph Jacobelli, Bougie Impact Capital Ltd

 PLEASE NOTE: Automatically generated transcript may contain errors. For accuracy, rely on the original recording.

 Welcome to episode 62 of the Asia Climate Finance Podcast. In this episode, I will not start by introducing our guest as usual today we exceptionally do not have a guest. Instead it's an audio blog by yours truly. It's about a major shakeup in the global energy landscape. A shakeup created by what is happening in the United States policy-wise. It is a shakeup, which I believe will deeply affect the energy transition worldwide, at least in the very short term.

Regular listeners know that the objective of the Asia Climate Finance Podcast is to talk about climate, business and climate finance trends which are important for decarbonisation in Asia, and which are important over the long term, and so it is not a news driven podcast. However, the reason why we focus on the shakeup that is occurring right now is because current events are absolutely exceptional. One final quick point. Those of you who are not regular listeners of the Asia Climate Finance Podcast should be aware that the podcast is apolitical, independent and nonprofit. 

So what are we talking about today?

In mid-March, I published a commentary on the shakeup in The Energy Industry Times an excellent monthly publication, which you can find at teitimes.com, that's teitimes.com. This audio blog is an extension of that op-ed. So I will be examining three areas. One is a bit of relevant background on climate business in the United States. Two is a discussion of the US shakeup. In other words, "what's changed". And finally, I will offer some thoughts on the global repercussions of the US shakeup.

So to begin, let's cover some relevant background details. Now, for a good few years, the US has presented a highly attractive prospect for those looking to put their money into clean energy. And in the past three years or so, it enjoyed significant milestones. If we look at 2023, for example, the International Energy Agency, the IEA, tell us that the sector in the US captured nearly a sixth of all the global investment in clean energy, that amounted to a hefty $280 billion, marking a substantial 40% increase just since 2020. Another perspective comes from a joint report by the Rhodium Group and the MIT Centre for Energy and Environmental Policy Research. They calculate clean technology investment across various sectors -that is retail energy industry and manufacturing -hit $274 billion in 2024. This is a remarkable leap from a mere, $75 billion back in 2018. 

We saw unprecedented levels of policy backing, uh, for these investments during this time with landmark legislation like the Bipartisan Infrastructure Act and the Inflation Reduction Act, i.e., the IRA, really paving the way. The growth, largely catalysed by the IRA's, $369 billion investment. This funding sparked unprecedented private sector engagement with 272 new manufacturing facilities announced, and approximately 170,000 jobs created between 2022 and 2024. Solar capacity expanded by 55% while installation costs fell 12% and wind power development accelerated with 17 gigawatts of offshore projects approved, alongside 15% growth in land-based capacity. Battery storage tripled to over 15 gigawatts. With costs dropping about 25% while electric vehicle adoption reached 12% of new car sales, supported by a hundred thousand plus new public charging stations. Grid modernisation, also advanced with new regulation, streamlining transmission development, accompanied by a 70% increase in smart grid investments.

These combined efforts had reduced power sector emissions by 18% and had at the time, as in 2024, positioned the US favourably towards meeting its then 2030 climate goal. 

Renewable sources had formed the backbone of the new power generation capacity and manufacturing facilities for clean energy technologies were springing up across the nation.

With this background let's turn to the second area of discussion. What's changed? In other words, the major shakeup in the US clean energy growth and energy transition path. 

Since the new federal administration took the reins on the 20th of January, several hurdles have emerged that threaten the continued expansion of the clean energy sector in the US. I can highlight at least four key areas that really exemplify these challenges.

The hurdles are policies uncertainties, legal uncertainties, wind sector- specific uncertainties, and macroeconomic uncertainties. And given the apolitical nature of this podcast, I will not go through political uncertainties of course.

The first is policy. We are seeing a significant degree of uncertainty creeping in at the federal policy level. What is being termed? The Trump 2.0 presidency has initiated policy reversals, particularly weakening support for renewables. I will not go through the great many proclamations from the White House regarding climate, energy, and the environment as it is a very long laundry list. Suffice to say that they include cuts to tax credits as well as easing regulations on fossil fuels, clearly prioritising oil and gas expansion, and even coal over federal clean energy incentives. 

There are a number of great repercussions, of course. For example, there is also potential risk that policies from the Federal Energy Regulatory Commission, FERC could end up favouring fossil fuels within the transmission markets. Now, granted, it is still early days, and we might see some sharp policy shifts or even U-turns down the line.   

The second significant hurdle is the legal challenges and the stalemate they create. As of April 2025, there are already many, many legal challenges to the Trump administration's new policies on climate, energy and the environment, primarily targeting executive actions and rollbacks on environmental regulations.

We could see legal battles also unfolding between the federal government and various district and states, even in areas represented by Republicans. Interestingly, the study I mentioned earlier by the Rhodium group and MIT points out that between the third quarter of 2022 and the end of 2024, a substantial 77 percent of the total $289 billion in clean energy related investments actually occurred in districts represented by Republicans. 

I should add that there is one school of thought with experts believing that certain Republican lawmakers may actually push back against efforts that could jeopardise clean energy investments within their own states. Now, whether they will actually do so remains unclear at this particular junction. All in all, potential legal clashes are inevitably going to make both domestic and international investors rather uneasy. 

The third barrier we are observing is particularly related to wind energy. 

President Trump has frequently voiced criticisms of wind projects, especially those located offshore. An executive order from his administration is certainly detrimental to wind development as it proposes a temporary halt on issuing federal leases and permits. Projects will experience delays in obtaining necessary permits. This situation will probably worsen as the administration significantly reduces staffing levels at various regulatory agencies. 

Now turning the coin over. There is a counter argument offered by some experts who suggest that interventions by the federal government might have only a limited direct impact on the adoption of clean energy related projects. These experts argue that. The primary forces driving this adoption should remain state level policies and broader market dynamics. Local governments and private sector players, these experts, content play pivotal roles in implementing new technologies and shaping investment strategies. 

Now, the fourth and last challenge is the worsening macroeconomic environment. We are seeing again as of 20th of April, some initial indications of investment jitters. I want to briefly summarise what a variety of financial institutions and think tanks are saying. 

One, many are cutting GDP growth rate expectations for 2025 and 2026, driven by import tariff related disruptions and policy uncertainty. 

Two, many have raised inflation forecasts while others simply highlighted clear upward pressures to inflation.

Three, most expect consumer spending to weaken. 

 Four, many financial institutions have been raising the probability of a recession with the likelihood at 40% to 60%. 

Finally, and most importantly is monetary policy. The expectation in the number of interest rate cuts by the US Central Bank, the Fed have fallen with some suggesting cuts may be unlikely if inflation soars. Still what is currently certain is that the level of uncertainty is high. It is worth highlighting that interest rates are standing at 4.5% or so. Right now, they stand at a hundred basis points below their peak, but still remain quite elevated, relatively speaking, especially when we consider they were just 0.25% in early 2022. 

So in short, there is a lot of doom and gloom in the US economic outlook. 

So far, we've covered some relevant background and the challenges facing the clean energy industry in the US.

Now let's explore how this shakeup might impact the global clean energy landscape. In a nutshell, I think that the shakeup should be positive for the development of clean energy in some of the larger markets around the world, especially Asia and Europe. 

Domestic and international investors may be reluctant to invest in clean energy and energy transition related projects in the US given all of the hurdles that I mentioned. Also, if the US reduces its demand for new clean energy related projects, including manufacturing of clean technologies, could this help to ease cost pressures on the global supply chain?

This is particularly relevant for equipment and essential input materials like rare Earths and other commodities. Might this result in lower costs for things like solar panels, wind turbines, and batteries in Asia, Europe, and beyond? I do not think that answering yes to these questions is too farfetched. 

But while we currently have little empirical evidence to support these arguments, as we're still at a very early stage of the unfolding shakeup, there are, however, already some early signs that suggests the possibility. So what may be scaring investors? It is the policy and uncertainty of course. 

I would like to mention four examples. 

One, nearly $8 billion in investments and 16 new large-scale factories and other projects have been cancelled, closed, or downsized in the first quarter of 2025. 

Two, the administration directed the Bureau of Ocean Energy Management to halt construction of Empire Wind, a fully permitted offshore wind project developed by Norwegian company Equinor. 

Three, the administration cancelled $20 billion in climate grants, part of the Greenhouse Gas Reduction Fund, created to support clean energy projects for community organisations, nonprofits, credit unions, housing agencies, and solar energy initiatives.

Four, trump issued an executive order halting the development of the Lava Ridge Wind Project in Idaho, a project that would've span 104,000 acres and include over 200 turbines.

So these are just four examples of many, many, many examples. 

So apart from worries is over getting their projects approved, investors seeking to directly invest into renewable energy generation projects or clean energy related manufacturing projects may also worry about costs. 

 Firstly, equipment costs may rise because of higher import tariffs, which may even impact US made equipment as these may import a portion of the materials or parts.

Secondly, construction costs could rise due to delays caused by slow approvals. 

Thirdly, the cost of funding itself may rise as lenders perceive clean energy projects as being a riskier asset. 

And finally, insurance and reinsurance costs for the projects could also rise for the very same reasons. 

While stock markets really only offer a very short-term view of global capital movements, it is worth noting that European stock markets and some Asian stock markets have substantially outperformed US indices. From the start of the year to date, we have observed a significant outflow of capital from US stock markets with investors favouring markets in Europe especially. Of note, the S&P 500, Russell 2000 and NASDAQ indices all underperformed many European and Asian stock markets.

Again, here we're just talking about stock markets, which are very short term by nature. But still it's an indicator. So could this situation actually bode well for clean energy investments outside the US if less capital focused on clean technologies being directed towards the US markets?

Frankly, the picture emerging is far from positive for the US. Though it is still premature to definitely conclude that corporations, private equity firms, infrastructure funds and other investors will definitely redirect their capital towards clean energy related investments in Europe, Asia, and other jurisdictions.

This is because many factors come into play. Any target market must, of course offer projects that promise attractive returns on investment beyond being consistent and transparent, regulation in these markets must be conducive to streamlining processes and cutting down on red tape. Capital simply cannot afford to sit idle for months or even years waiting for the necessary permits to clear. Countries in the European Union alongside nations like India, Indonesia, Vietnam represent a very small selection of places currently on the list of being potentially considered by investors. 

So in conclusion, while the US has recently been a clean energy powerhouse with strong momentum, shifts in federal policy are introducing considerable uncertainty. This has led to the cancellation, postponement of significant projects, which could deter both domestic and international investors. However, I must emphasise that clean energy markets continue the rapid expansion globally. This situation in the US might open up substantial opportunities for investments in other regions.

The movement of capital away from US, stock markets towards Europe and Asia could just be a very early indication. Again, small indication of this trend. 

While it's too soon to say for certain the challenges emerging in the US clean energy sector could inadvertently fuel growth in investment elsewhere.

Provided of course that those markets offer attractive returns, transparent and consistent regulation and efficient permitting processes. I will certainly be keeping a very close eye on this. Uh, as a footnote, I am recording this on the 20th of April 2025, which is only the 90th day of the second Trump presidency. 

So thank you for joining me for this special audio blog. I hope this has provided some useful insights into the evolving landscape of global clean energy investments. From the next episode, episode 63, we will be back to our normal interview format and as always, please do send us comments, uh, ideas for guests, ideas for topics.

Thank you again.