Trump’s security-focused policies and tariffs could inadvertently cause an upsurge in domestic renewable energy, according to the paper, ”New Joule Order,” by Jeff Currie and James Gutman of Caryle, an international investment group.
Currie and Gurtman see “nations creating a diversified energy mix of joules across multiple sources to insulate themselves (and investment portfolios) from geopolitical, macro, and financial risks.”
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This will drive the development of renewables and nuclear and dampen the growth of fossil fuels, which are largely traded commodities.
“If trade is under threat, then so are fossil fuels,” says the paper. “Non-fossil fuels are generally not traded and hence are local. These types of fuels thus become more demanded when security is paramount, which historically drives a more profitable, cleaner, and faster transition.”
The paper offers several other turns of thought:
—Local energy can command a premium as nations are willing to pay more to secure supply. Thus, a tariff and a security premium are analogous to a carbon tax and a green premium—and may be more effective at spurring transitions
—Fossil fuels are not disappearing any time soon. However, we are now likely seeing “Peak Oil Trade,” particularly from China
—There is no diversification without electrification. Different fuels will compete to supply joules through an increasingly connected grid. The grid will connect markets that are geographically close, with batteries bridging short-term gaps. Natural gas will serve as the balancing joule, providing the marginal joule needed over longer periods. Electrification helps to further unlock the embedded optionality in energy assets, thus increasing their value.