Biden’s carbon-free power plan equivalent to quadrupling renewables growth, says GlobalData
The new United States (US) administration under President Joe Biden is set to introduce significant policy shifts that will have massive impacts on the US renewable power and automotive sectors, says GlobalData, a leading data, and analytics company.
President Joe Biden’s moves to implement new climate policies upon taking office on January 20, 2021, including an executive order for the US to rejoin the Paris Climate Agreement and targets for decarbonizing the US power sector.
Biden’s target of a carbon-free power sector by 2035 is extremely ambitious and would require a massive acceleration in investment in renewable power generation and energy storage solutions. GlobalData’s current outlook for the US power sector sees renewables continuing to achieve rapid growth, increasing their share of total generation from around 20 percent currently to over 35 percent by 2035, driven by solar and wind. Fossil fuels, which represent around 60 percent of power generation today, are still expected to contribute half of US power generation as gas generation remains relatively stable while coal declines. The replacement generation needed to phase out fossil fuels would be equivalent to a quadrupling of the growth currently expected in renewables, said Will Scargill, Managing Oil and Gas Analyst at GlobalData.
Scargill suggests that there may be some room to meet the target of a carbon-free power sector while retaining some fossil fuel generation through the implementation of carbon capture and storage (CCS).
However, we would expect such a transition to relying primarily on renewables growth, which would also necessitate a parallel acceleration in energy storage capacity. The ambitious nature of the target does not mean it is unachievable though, as there is still plenty of room for growth in US renewables. In particular, the nascent US offshore wind sector is currently on track to be less than 25 percent of the size of the European sector by 2030, Will Scargill said.
Stricter vehicle fuel economy and emission standards?
In addition, Biden’s executive order for the US to rejoin the Paris Climate Agreement is likely to ripple the automotive industry.
That highly symbolic gesture is likely to precede the introduction of stricter emissions and fuel economy standards for vehicles sold in the US. While that will increase costs to US auto companies on their combustion-powered vehicles, they are transitioning to electrified vehicles anyway. On the plus side, they will benefit from greater clarity on future emissions requirements and the greater ease of exporting to markets with similarly stringent regulations, commented Mike Vousden, Automotive Analyst at GlobalData.
Under the Trump administration, vehicles sold in the US would only have to demonstrate a 1.5 percent increase in average fuel economy between 2022 and 2025, a sharp decrease from the 4.7 percent mandated by the previous Obama administration.
It is not yet clear whether Biden will return standards to the level they were under Obama, but they will certainly be raised from the level set by the Trump administration. Tighter fuel economy standards will encourage automakers to build more efficient vehicles, pushing them away from combustion-powered SUVs and pickup trucks that sell particularly well in the US. Automakers will increase the number of electrified models, especially electric SUV, and pickup options. We are already seeing this through the introduction of models including the Ford Mustang Mach-E, the GMC Hummer EV, the Cadillac Lyriq, and the Tesla Model Y and Cybertruck, said Mike Vousden.