U.S. President-elect Donald Trump’s nomination of Liberty Energy CEO Chris Wright as energy secretary has been both widely celebrated and condemned because of the latter’s views on oil, gas, and climate change. The Wall Street Journal summed up the appointment with the headline: “Trump’s Choice for Energy Secretary Is a Fracking Booster and Climate Skeptic.” The coverage is consistent with post-election commentary on the energy implications of Trump’s return to power that has focused almost exclusively on his push to deregulate oil and gas production and his promise to withdraw from the Paris climate agreement for a second time. Yet if Trump wants to keep his promise to cut energy costs, bolster the U.S. economy, and respond to voter anxiety about inflation, his administration should focus less on oil and gas and more on something less polarizing: modernizing and expanding the country’s aging electric power system.
The current oil outlook suggests little reason for concern about pump prices, with sluggish Chinese economic growth, rising electric vehicle sales, and the return of more OPEC barrels to the market. As for the trajectory of U.S. oil and gas supply, markets will matter far more than policy. Indeed, for all the political rhetoric, it is hard to tell which party was in control when looking back over the past two decades of steady U.S. oil and gas production growth.
U.S. President-elect Donald Trump’s nomination of Liberty Energy CEO Chris Wright as energy secretary has been both widely celebrated and condemned because of the latter’s views on oil, gas, and climate change. The Wall Street Journal summed up the appointment with the headline: “Trump’s Choice for Energy Secretary Is a Fracking Booster and Climate Skeptic.” The coverage is consistent with post-election commentary on the energy implications of Trump’s return to power that has focused almost exclusively on his push to deregulate oil and gas production and his promise to withdraw from the Paris climate agreement for a second time. Yet if Trump wants to keep his promise to cut energy costs, bolster the U.S. economy, and respond to voter anxiety about inflation, his administration should focus less on oil and gas and more on something less polarizing: modernizing and expanding the country’s aging electric power system.
The current oil outlook suggests little reason for concern about pump prices, with sluggish Chinese economic growth, rising electric vehicle sales, and the return of more OPEC barrels to the market. As for the trajectory of U.S. oil and gas supply, markets will matter far more than policy. Indeed, for all the political rhetoric, it is hard to tell which party was in control when looking back over the past two decades of steady U.S. oil and gas production growth.
The real energy supply and price risk Trump must confront in his second term will not be about oil but rather electric power. Without concerted action to upgrade and modernize the electric transmission and distribution network, as well as update and grow the nation’s electric generating capacity, there is a risk of significant power price increases and grid reliability problems. Electric power costs have already begun going up for customers across the United States, with some places seeing significant increases. Electricity prices rose 6.3 percent in 2023—the highest growth rate this century. One electric grid operator’s most recent auction for reserve capacity—the price paid to generators to ensure power is available when needed—yielded a price nine times higher than last year, and this price hike will soon show up in consumers’ bills. In Maryland, one of the affected states, customers could soon see their electricity bills increase up to 24 percent.
Producing more oil and gas over the past decade has given the U.S. economy a boost, but today’s economy and Americans’ everyday lives are far more dependent on electricity—and will be increasingly so in the future. After two decades of nearly flat growth, U.S. power demand is set to rise rapidly again. As the International Energy Agency put it recently, the world is moving from the age of oil to the age of electricity. On top of booming demand for data centers and artificial intelligence, other sectors, like transportation and heating, are increasingly being electrified.
All that electricity needs to be reliable, affordable, and clean. No American wants to relive the power blackout of 2003 that affected multiple states or the acid rain of the 1980s, which was caused by coal-burning power plants. Yet much of the nation’s electric power system—built decades ago and long before the era of AI or even the internet—is not ready for the coming age of electricity. Today, many parts of the power grid are suffering from worsening storms and wildfires, lengthy permitting delays, local opposition to building new infrastructure, and retirements of coal, nuclear, and natural gas plants before new generating capacity can fully take their place.
At the same time, the U.S. economy has become more reliant than ever on electricity. The advent of power-hungry AI has only supercharged the demand for electricity. AI video is 10,000 times more energy-intensive than a common internet search. In Atlanta, to take just one example, power demand for data centers is booming. The local utility, Georgia Power, estimated that power demand by 2031 will grow 28 times more than it had projected in 2022, much of it because of the exploding power use by AI and data centers.
Grid operators and regulators are increasingly warning about the state of the U.S. electricity system. Much of the U.S. electricity generation, transmission, and distribution system was built when information searches relied on shelves of phone books and encyclopedias. And not enough new infrastructure has been built to keep up with increased demand. Instead of “drill, baby, drill,” the Trump administration’s focus should be “build, baby, build.”
Yet building infrastructure is too difficult. On average, it takes more than a decade to build a new high-voltage transmission line in the United States, and the current backlog of energy projects waiting to be connected to the power grid is twice as large as the nation’s current electric generating capacity. Utilities are refusing requests to connect more data centers to the grid because they cannot solve transmission and power generation issues fast enough. And local communities are increasingly opposing new data center projects over concerns about noise, environmental impacts, and stress on existing power infrastructure.
Big U.S.-based tech companies, such as Amazon, Google, Meta, and Microsoft are making headlines by signing deals for new nuclear power. But these projects are years away, whereas tech firms need massive amounts of power in the next few years. The Federal Energy Regulatory Commission recently rejected a proposed transmission agreement between a Pennsylvania nuclear power plant and Amazon, throwing more uncertainty into the mix.
To provide Americans with reliable, affordable, and clean electric power, the Trump administration should prioritize two reforms: making it easier to build energy infrastructure and changing how the power sector is regulated.
A bipartisan bill to reform the nation’s permitting system is currently waiting for action in Congress. It would take important steps to enable new transmission development and bolster grid reliability. It establishes a standard definition of the benefits of transmission so that the cost of projects can be allocated to customers in proportion to how much they benefit from the new transmission capacity. It also gives the federal government the authority to permit interregional transmission projects that are in the national interest.
Many environmental groups have opposed the bill because it includes provisions to expedite permits for export of liquefied natural gas (LNG) and to expand oil and natural gas leasing and permitting. Such concerns are exaggerated, as the fossil fuel provisions would have small effects on domestic markets and even smaller effects on global markets. The global LNG market is already at risk of being oversupplied, so few new projects are likely to move forward. And even if U.S. export capacity is constrained, foreign producers such as Qatar can ramp up supply instead. Similarly, the oil and gas leasing provisions for federal land only have a modest impact on production because most U.S. supply growth has been on private land, and current law already mandates more federal lease sales than recent experience suggests the industry is willing to buy.
In addition to permitting reform, the Trump administration should prioritize reforming the way power companies operate in order to increase their incentives to not just build new infrastructure but also use existing infrastructure more efficiently and keep prices low. Such measures could include deploying batteries to store renewable energy and rewiring old transmission lines with advanced conductors that can double the amount of power they move. It is also possible to wring additional efficiencies out of the existing electric power system by giving consumers incentives and digital tools to manage their power use and thus lower their bills. Finally, the new administration should continue encouraging competition in wholesale power markets, which can deliver lower-cost approaches to meeting the needs of the grid compared to traditionally regulated markets and let power companies bear more technology, cost, and permitting risks than consumers.
In announcing Wright as energy secretary, Trump spoke not only about more oil and gas, but also about nuclear, solar, and geothermal energies; innovation; inflation; “cutting red tape;” and winning the “AI arms race with China.” Both Republicans and Democrats should agree that these are urgent national priorities—and modernizing and expanding the nation’s power system is key to achieving all of them. By building the needed grid infrastructure and ensuring the system is reliable and cost competitive, the incoming Trump administration will have the best chance of keeping its promise to lower energy prices, bolstering the economy, benefiting consumers and businesses, and helping maintain Americans’ economic prosperity and national security.
The post The Key to a Successful Trump Energy Agenda Is Electricity appeared first on Foreign Policy.
