Investors braced as Trump takes charge


January 20, 2017

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Growing numbers of people are threatening to boycott Donald Trump’s inauguration this afternoon – celebrities, Democrats, R.Kelly – but we are not among them. We’re strangely excited because, as usual with Trump, there will be plenty to watch.

Indeed, the first days of his presidency could shape appetite for investment in US renewables for the next four years. This might look like a bold statement, but look at his in-tray.

Last week, ten North Carolina Republican lawmakers, including Senate leader Phil Berger and House Speaker Tim Moore, sent a letter to the Trump administration to urge it to shut down a $400m nearly-complete wind farm located near Elizabeth City.

The 208MW, 104-turbine project is being developed by Avangrid Renewables, the US arm of Spanish utility Iberdrola, and Amazon has already committed to purchase the entire output produced by the wind farm to power its Virginia data centres. It would be the state’s first wind project, all the turbines have already been installed and it is now weeks away from completion.

However, according to the lawmakers, the wind farm would represent a threat to the national security as the turbines would interfere with a Navy’s long-range radar located in Chesapeake, Virginia. Avangrid has rejected that claim.

Paul Copleman, a spokesman for Avangrid, said that in 2014 the Navy agreed to let the project proceed after insisting on a reduced size of the project and smaller turbines. But, according to the lawmakers, the Pentagon gave green light to the scheme just because of the “political correctness” of the Obama administration. It is a strange accusation that wind is solely a ‘PC’ choice.

North Carolina Republican legislator Bob Steinburg, who did not sign the petition, said to Coastal Review Online, a North Carolina news service, that “the letter is less about the military and more about a long-running fight against renewables”.

And North Carolina is not the only US state fighting renewables.

Wyoming has also recently started its own battle against renewable energy. State legislators are seeking to stop utilities selling power generated by solar and wind to local residents. The plan is to protect the coal sector, as Wyoming is the US state with the largest coal production. It really wants to keep its first place.

Wyoming has already in place the only tax in the US, which charges $1 for each MWh of wind energy produced in the state.

Why is this important? Well, first of all, because both assaults on wind have started in the two weeks before Trump take office; and, more importantly, because there is a risk that these actions would damage investors’ confidence. If Trump was to revoke consent for a project nearing completion then it would do major damage to the confidence of investors in US wind, and infrastructure more widely.

This is already happening with Avangrid: “I think we look at this effort as a negative sign about doing business in North Carolina”, a spokesman has said. If Trump does what North Carolina Republicans want, then that negativity would surely spread.

Not that everyone thinks he will. Speaking at the World Economic Forum annual meeting in Davos this week, Innogy’s chief executive Peter Terium said Trump could not deter investment in wind because “all the wind parks are being built locally, maintained locally and operated locally, so it really fits into the policy that he also has set to enhance local value creation”.

This gives autonomy to individual states to decide whether they want renewables or not. However, if more states begin to oppose renewables, that would help Trump build a case against a sector of which he has been heavily critical in the past. And, in that case, investors will turn their attention to other sectors or other countries.

Wind is getting cheaper but it still needs political support.

Of course, we could be worrying about nothing. Trump’s motto to ‘Make America Great Again’ could include the local value creation that comes with wind. Either way, his approach to North Carolina will tell us a lot about his approach to renewables. Investors should watch closely – even if it is through their normal-size fingers.

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