(L-R) Toby Mitchenall, PEI Group, Joost Bergsma, Glennmont Partners; Doug Kimmelman, ECP; Pierre-Ettienne Franc, Hy24; Hans Kobler, Energy Impact Partners
(L-R) Toby Mitchenall, PEI Group, Joost Bergsma, Glennmont Partners; Doug Kimmelman, ECP; Pierre-Ettienne Franc, Hy24; Hans Kobler, Energy Impact Partners

What would a Trump presidency mean for investment into the energy transition? It is a question that people should spend less time thinking about, according to Doug Kimmelman, founder and partner of Energy Capital Partners.

“I spent a lot of time overseas; the fascination outside of the US with who our president is is astounding to me,” Kimmelman said, speaking at NEXUS 2024. He was responding to an audience question as part of a panel discussion on private capital’s role in the energy transition. At question was whether the Inflation Reduction Act, passed under the Biden administration to spur investment in the clean energy industry, would remain intact after a change of administration.

There are several reasons why the IRA would survive a change in president, said Kimmelman. One is the machinations of US government: “You have Congress, you have a senate, you have a president, you’ve got to get them all on the same page, and it’s rare to get them all on the same page to begin with.”

Another is the fact that to reverse tax credits – the major lever of the IRA – would have major long-term credibility ramifications. “The US uses tax policy to encourage investment behaviour,” said Kimmelman. “If someone has made a multi-billion dollar investment based on 10 years of tax credits and you took them away in the middle of the game… good luck next time the US comes around and says ‘We want to encourage something in healthcare’.”

‘A burgeoning crisis’

The topic of soaring energy demand was front and centre for the panellists. “We have, I’d say, a burgeoning crisis in the US in terms of the demand for electricity,” said Kimmelman. “And the Inflation Reduction Act interestingly is kind of culprit in terms of driving [battery and solar panel] manufacturing.”

Another culprit in terms of growing energy demand was one of the major talking points of the wider NEXUS conference: artificial intelligence.

“As a technology investor, our opinion is that without technology we will run out of electrons five years from now,” said Hans Kobler, founder and managing partner of Energy Impact Partners. “It’s just starting to dawn on people. A search on Chat GPT [a popular generative ai tool] is about 50 times more intensive and electron intensive than a Google search.”

Energy Impact Partners has around 25 utilities firms in its investor base, explained Kobler: “In each and every one of their states, the largest customer is a data centre operator.”

Referencing the CHIPS Act, which was designed to stimulate the domestic US chip supply chain, as well as incentives for electric vehicles and the growth of artificial intelligence, Kimmelman said: “We’re now facing a very challenging time and burning fossil fuel like never before, which I don’t think was an intended consequence of the Inflation Reduction Act.”

Elsewhere the discussion covered the role of government and regulators in the shift towards a decarbonised economy. There was agreement that investment strategies should not be predicated on government subsidy, but that the state does have a role to play.

“Where I think the regulators can play big roles [is] the technologies that tie [new power generation assets] together and make them more productive and allow for more electricity to come to the grid,” said Joost Bergsma, CEO and managing partner of Glennmont Partners, a clean energy infrastructure manager. “No investment should be sustained by government subsidies; that doesn’t work. But at the early stage, that is where you need a bit of a push from the government.”

“Yes, long term, business cannot be built on subsidies,” agreed Pierre Etienne Franc, CEO of clean hydrogen specialist Hy24. “But you would not have started the renewable industry without feed-in tariffs. It was because we had feed-in tariffs that the cost progressively came down.”