Election Analysis: Sizing up the Electric Industry's Winners and Losers

Source: Doug Houseman, Smart Grid News, August 14, 2012.  Mr. Houseman is Vice President of Technology Innovation at EnerNex, a Tennessee-based research, engineering, and consulting firm.

Obama vs. Romney: Sizing up the electric industry’s winners and losers

Having looked at the Energy Policy Guidelines on both President Barack Obama’s website and that of former Massachusetts Governor Mitt Romney, the one thing that is for sure is that they lack details. But that said, it’s still worthwhile to sort out the winners and losers in the electric industry under each person as president (assuming that they could get all of their energy policy in place).

The results are pretty stark. The positions of both candidates, while light in detail, point to very different winners and losers. It is slightly surprising to see how different the policies really are when you look at them in a winners/losers context as I have done below. (In all cases, the winners and losers described here focus on U.S. based companies. What will happen to foreign companies and their exports to the U.S. is not part of this analysis.)

Overall analysis (regardless of who wins the November election)

Overall winners:

  • Gas-fired generation – It will likely fare better under Romney than Obama, because the priority to build pipelines and transmission lines will be higher under Romney’s policy.
  • Security providers – Any company that works on any aspect of infrastructure security can expect to win under either administration. DHS and its contractors will probably fare better under Obama than Romney. Private companies will probably do better under Romney.

Overall losers:

  • Coal-fired generation – The phase out will likely be slower under Romney, but the owners see the writing on the wall
  • Transmission and distribution – With the focus on generation, most utilities and infrastructure owners are going to have little money left over to spend on transmission and distribution improvements. The federal government has encouraged leaving transmission projects to the states because they need to decide if they are willing to increase the rate base to cover improvements.

Surprise Winner:

  • Great Lakes shipping – With the West Coast refusing to open a coal terminal, look for one of the Great Lakes iron ore docks to be repurposed for coal shipment. With the larger locks being completed in Panama, expect that shippers will think hard about moving coal from the Midwest via ship to China and other Asian markets. This situation has a higher chance of succeeding under Romney than under Obama.

Under Obama

Winners:

  • Wind and solar manufacturers, installers and owners
  • Battery manufacturers
  • Cleantech manufacturers
  • Electric vehicles and electric vehicle infrastructure manufacturers and installers

Losers:

  • Nuclear manufacturers, engineers and installers – Reading carefully you will find that it will be impossible to build a plant under an Obama Administration, even though a quick read sounds positive.
  • New transmission infrastructure – Regulatory hurdles will slow any investment significantly.
  • Appliance manufacturers – Increasing efficiency standards will hurt overall profitability and drive down sales as prices rise to deal with the increased cost from changes to design.
  • State regulators and RTO/ISO – Look for increasing federal regulation, reducing the ability of any state or market to make policy decisions.

Unknown:

  • Small hydro and other non-conventional renewables – President Obama has been silent on these issues. Many have strong opponents.

Under Romney

Winners:

  • Nuclear manufacturers, engineers and installers – With the changes in regulations, expect any utility that has a site available will want to get a shovel in the ground within two years.
  • Gas pipeline and electric transmission engineers and installers – With the reduction in regulation, both industries will be able move forward.
  • Basic research firms and universities – look for money to be re-targeted to basic research and small grants for startups through ARPA-E and the National Science Foundation.
  • State regulators – We should see a reduction in new regulations at the federal level that push on the boundaries between federal and state jurisdiction. Some new and some proposed federal regulations may be scrapped as part of the reduction in regulation effort.
  • Energy markets – Expect FERC to review energy market rules and roll back some of them making energy markets more open. Also expect that many rules now in process to reduce emissions or force other changes will move to a market mechanism where possible.
  • Small hydro – This is a low-cost way to increase renewable energy and make use of existing structures or run-of-the-river hydro. Reduction in regulation should open hundreds of small dams for repowering.

Losers:

  • Wind and solar manufacturers, installers and owners – Reduction in subsidies, loans and grants will reduce incentives to build. State renewable portfolio standards will drive a significant amount of construction, but the level of profit will decline for owners.
  • Cleantech – Subsidies and regulations that require cleantech may disappear, reducing the profit available in the market. Expect strong export support for surviving companies.

Unknown:

  • Battery and EV manufacturers – Romney is silent about electric transportation.

This analysis is based of material provided by the candidates websites and has not been reviewed with either candidate or their staff. I would welcome a chance to discuss this analysis and have corrections made by either candidate or their senior staff.

 

1 thought on “Election Analysis: Sizing up the Electric Industry's Winners and Losers

  1. Just interested in people’s opinions on who they think the best United States President was! Please no arguing and fighting between which President you think is best, just simply state your opinion and enjoy reading other people’s opinion!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.