The energy crossroads: What a second Trump administration could mean for clean technologies
As the 2024 U.S. election looms, investors like Shomik Dutta, Co-Founder and Managing Partner, Overture, are gathering at SuperReturn Energy North America and bracing for a potential policy shift under a second Trump administration. Will clean technologies face a retreat, or will market forces and geopolitical imperatives propel them forward? Much like Warren Buffett’s famous observation—"you only find out who is swimming naked when the tide goes out"—the coming years will reveal which energy investments are built to last.
Will the second Trump administration mark a retreat for renewable energy and clean technologies? In Berkshire Hathaway’s 2001 annual report, written a year after the Nasdaq bubble burst, Warren Buffett remarked that, “you only find out who is swimming naked when the tide goes out.” So, the market will now cast its unsentimental eye towards clean technologies, scrutinizing each and every one with brutal clarity. Some investment opportunities will no doubt face a correction and fall from the heights of a hype cycle into a trough of disillusionment. But the instinct to overcorrect and condemn an entire sector would be a costly mistake for many - while affording generational returns for investors who remain clear-eyed.
I run an early-stage venture fund called Overture. We invest and energy and resilience and specialize in delivering deep government and regulatory expertise to our founders. If energy investors are fish, energy policy is the fish tank. The question is: what shape will policy take? That assessment requires an understanding of domestic politics, market forces, and geopolitics. When all three align, the future comes into focus.
Domestic politics: A populist realignment
American politics is undergoing a tectonic class realignment. Republicans are winning working-class voters as quickly as they are losing college-educated voters. This shift is fueling two major dynamics: First, a resurgent populist streak in the GOP is increasingly attuned to working-class concerns and less sympathetic to white-collar America. Second, Democrats are increasingly desperate to reclaim their working-class base, without whom Democrats will remain outcast to the wilderness of the minority. This dynamic will pressure energy policies to be legislated through a lens of cost and affordability. On this issue, Republican incumbents could soon be forced on defence.
Our constrained grid drove up the cost of electricity by nearly $9.0 billion in electricity price hikes in 2024, more than double the $4.4 billion approved in 2022. This price increase carries a household tax of nearly $100 per family per year. The political focus on costs and affordability intersects with the highest demand for electricity that America has seen in decades. It raises serious questions, particularly in the backdrop of a broader inflationary environment. According to data collected by Halcyon, Virginia’s largest power utility expects data center power demand in its territory to quintuple in two decades, much of it in the form of extremely large ‘hyperscale’ installations with unprecedented power demand. Is providing 4GW of power to a hyperscaler’s data center a public service? Who should be absorbing this? Should it be shouldered by large rate increases on someone’s grandmother?
At the wholesale level, wind and solar power are the cheapest source of electrons in the US grid. If renewables are the main flow of cheap power in the States, will the Trump Administration punish cheap power or allow voters to benefit from low-cost electricity? Our electorate is increasingly impatient for economic results and turns quickly against incumbents. If electricity costs continue to climb and impose a hidden tax on households, Democrats could have a potent populist issue to exploit in response. Only the supply of additional electrons and grid modernization can bring welcome relief.
The Trump White House wants that relief to come in the form of nuclear energy, natural gas, geothermal, hydroelectric, and coal. US Energy Secretary Chris Wright has created some room for renewables, citing an “all of the above” strategy for power. In nuclear energy, long-overdue NRC reform is coming. But if new large nuclear projects continue to carry Vogtle-level cost overruns and delays, which cost $14 Billion over budget and ran 15 years and a bankruptcy later, the backlash will be swift. In geothermal, there is friendly curiosity but questions on when those electrons will actually be delivered. Hydroelectric remains well understood and broadly popular but can be challenging in drought-prone environments. The Administration wants to revive coal, but the annual opex of a coal plant is more expensive today than the capex of an equivalent solar plant. In solar and wind, the Trump Administration faces a clear choice: either punish cheap renewable electrons or enable low-cost, abundant energy. Let’s now turn to the market to see what we can learn.
Power market realities: Be fast, be firm, be clean
While politics and policies shape incentives, markets determine outcomes. Today, the market is marching relentlessly towards electrification. In 2020, 20% of energy usage was electric, but by 2050, 50% will be electric. We are electrifying vehicles, heat-pumps, reindustrializing at home, and, of course AI data centers are endlessly hungry for power. In the long term, America must triple electricity generation and spend at least $2 Trillion into modernizing our grid. In the short term, hyperscalers like Google and Microsoft drive dynamics in electricity. The market prizes three things: fast power, firm power, and, when possible, clean power outcomes.
First, fast power. The world is now braced for a global AI arms race in which trillions of dollars are at stake, with the world’s most powerful governments and corporations leaned in. In the next 2-5 years, infrastructure and power are the bottlenecks to their ambitions. In this race of speed to power, solar is blazing fast. It prompted Elon Musk to declare, “solar is the future of humanity”. The data backs him up. According to the U.S. Energy Information Administration (EIA), utility-scale solar projects built in recent years had a median construction time of just one year—faster than wind (2 years), natural gas (3 years), and nuclear (10 years). Natural gas has been plagued by equipment procurement challenges and timeline lags, prompting French global power producer Engie to scrap a large gas project in Texas. In that blood red state, the market has picked clean energy as the logical solution - it has sprinted past all other forms of power, installing 10 Gigawatts of solar in front of the meter and another 10 Gigawatts of solar behind the meter. Though interconnection and storage remain chokepoints to solar dominance, innovations from AI startups like Gridcare are helping to clear queues. Dazzlingly cheap battery costs continue to climb down the curve thanks to technology from startups like Moment Energy, who unlock used batteries to perform like new. Sophisticated developers are now pairing cheap solar with cheap batteries and some linear gas for fast results.
The market also prizes firm power, and, because the largest companies in the world have made strong net-zero commitments, a significant chunk of load will prize firm green power. This commitment has increased focus on advanced nuclear and geothermal, with hyperscalers inking prominent deals with small modular nuclear reactor companies and advanced geothermal companies. Advanced nuclear startups like Blue Energy are already moving to tackle balance-of-plant costs and repeatability headaches that can otherwise handicap the deployment of small modular reactors. The advanced nuclear and geothermal companies hold great promise for the future but provide no immediate source of power at the very time when large companies are thirstiest for that power.
Geopolitics: The return of industrial policy
Geopolitics is the final force. The US enjoyed decades of unrivalled hegemony. We declared the end of history and globalized our supply chains in ways that made us hyper-dependent on other countries and, at times, fragile. That period is over. If we look to history as a guide, times of global contest that intersect with vital emergent technologies have always caused the US government to vigorously involve itself in markets. Think of the Manhattan Project, the Apollo Space Race, the early years of the semiconductor revolution. Artificial Intelligence is a trillion dollar arms race and the most important technological invention in the history of mankind. For America and China, the race for AI dominance will trump economic considerations. The U.S. Government will move quickly to reduce the time constraints in deploying real world infrastructure. Permitting and siting restraints will quickly be swept aside. NEPA reform is coming. Federal lands will become available for mega-sized datacenters. Though it may take a different name, the muscular industrial policy of the Inflation Reduction Act will survive to enable the speed and scale of all of this, including the supply chains that feed it.
The most valuable and constrained input to American AI dominance is energy. The geopolitical necessity for the U.S. to win the AI arms race rhymes with the market reality that solar and batteries today represent the fastest and cheapest source of reliable power. If clean energy continues to satisfy the domestic political focus on cost and affordability, it is indeed the future of humanity and cannot be ignored.
