In a recent report from Wood Mackenzie, Director of Energy Transition Research David Brown provides insight into the future of the energy industry in the United States. The report suggests that with increased support for low-carbon energy in legislation such as the Infrastructure Investment and Jobs Act (IIJA) 2021 and the Inflation Reduction Act (IRA) 2022, wind and solar power capacity could expand sixfold by 2050. Additionally, low carbon hydrogen is expected to account for 5% of the energy mix, while fossil fuel demand is projected to peak by 2030.
However, there are potential obstacles that could affect this trajectory, particularly in the event of a victory by former President Donald Trump in the upcoming election. Brown highlights that a new administration could reduce incentives for electric vehicle sales and slow down the growth of green hydrogen and carbon capture technologies. The report also suggests that economic nationalism, a key feature of both the Trump and Biden administrations, would likely persist under a second Trump presidency.
Wood Mackenzie’s analysis outlines a delayed energy transition scenario for the US and explores critical areas that could be impacted. The report poses five key questions for decision-makers to consider, including the possibility of delayed, rather than eliminated, peak fossil fuel demand. In this scenario, peak demand is projected to occur around 10 years later than in the base case, prompting the need for continued low-carbon investments by the oil and gas sector to ensure business resilience.
Another factor that could impede the energy transition in the US is the imposition of tariffs on renewables, which could hinder investment in the sector. A potential re-shoring of industrial activities and the increasing adoption of artificial intelligence technologies could also impact power demand growth. Wood Mackenzie’s analysis suggests that while load growth is expected to accelerate, it may not follow a linear trajectory, with industrial demand likely to exhibit an s-curve profile.
In terms of low-carbon hydrogen production, the report indicates that electrolytic hydrogen may face challenges in a delayed transition scenario, with preference given to blue hydrogen. The US Treasury Department could potentially adjust tax credit eligibility rules to benefit blue hydrogen producers, enabling them to claim tax credits based on reported carbon intensities of gas feedstock or the use of renewable natural gas as a feedstock.
Additionally, Wood Mackenzie’s analysis predicts a lower boundary on electric vehicle deployment in a delayed transition scenario, with EV stock expected to be around 50% lower than the base case. Potential policy changes under a new administration could impact EV sales, leading automakers to focus on hybrid vehicles to meet emissions standards. This shift could also affect the demand for key metals used in EV batteries, with a potential decrease in demand for high-cost metals like cobalt in favor of lower-cost alternatives.