Trump’s Infrastructure Priority List: What Does It Tell Us About Trump’s Priorities in Energy and What is the Impact on Power?
Eric Selmon Hugh Wynne
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January 26, 2017
Trump’s Infrastructure Priority List:
What Does It Tell Us About Trump’s Priorities in Energy
and What is the Impact on Power?
A leaked presentation from the Trump transition team earlier this week listed what appears to be the Trump Administration’s 50 top priority infrastructure projects totaling $137.5 billion of investment. On the list are six power projects and one natural gas pipeline that together total over $20 billion of capex. In this brief note we examine these projects to better understand what the priorities of the Trump administration will be for the electric utility and renewable sectors and which companies could be most affected.
Portfolio Manager’s Summary
- A document from the Trump transition team was released earlier this week that lists what appears to be the administration 50 top priority infrastructure projects, totaling $137.5 billion in investment. While it is unclear if this is a draft or final list, the list does provide a glimpse into the priorities of the Trump Administration’s proposed $1 trillion infrastructure stimulus plan. Of the 50 projects listed:
- 37 of the projects are for transportation, primarily rail, highway and water;
- 6 are for electric power, of which 3 are High Voltage Direct Current (HVDC) transmission lines, two are renewable generation projects and one supports energy storage;
- 5 are for water resources;
- 1 is a gas pipeline; and
- 1 is a for a national infrastructure research laboratory.
- The list includes more power projects and fewer coal, oil and gas projects than we expected. Electric projects comprise >$16 billion, or more than 12% of the total value of the projects on the list. A unifying theme among the electric projects is integrating renewable generation onto the power grid.
- The two proposed generation projects, totaling $9.0 billion in investment, would add hydroelectric and wind power to the grid.
- The three proposed HVDC transmission projects are all designed to link wind or hydroelectric power resources to load centers.
- The final project is not a project but a broad policy statement – to promote energy storage and grid modernization to facilitate the integration of renewable resources on the power grid. If implemented, this policy could have the greatest long run impact of the six power initiatives on the list.
- The focus on integrating renewable generation, enhancing grid reliability and deploying energy storage is broadly consistent with the previous administration’s efforts to encourage new renewable generation – despite the Trump administration’s stated intention to roll back the Clean Power Plan – and is also consistent with recent initiatives by state regulators in California, Texas, New York and Massachusetts, and with a series of decisions by the Federal Energy Regulatory Commission.
- The construction of the HVDC and renewable projects listed will reduce wholesale power prices by integrating substantial additional renewable resources into regional power markets – compressing the margins of competitive generators, while opening opportunities for renewable developers.
- It is important to note, however, that the Trump administration has not indicated what type of support it intends to give the listed projects. With one exception, the power projects listed are privately owned and, to the best of our knowledge, have not sought financial support from the federal government.
- We would expect, however, that the Trump administration would seek to expedite the acquisition of federal permits and rights of way on federal lands for the transmission and other projects listed.
- In addition, it is possible, that the administration may seek to offer federal financing support, such as loan guarantees or federal loans, as has been offered in the past to support nuclear generation.
- The electric projects are (in order of priority on the list):
- Plains and Eastern Electric Transmission Lines (number 9 on the list):
- $2.5 billion, 4GW HVDC line connecting the Oklahoma panhandle to Memphis, Tennessee
- The 720-mile line would link Oklahoma’s abundant wind power capacity to load centers in the Southeast, while adding resiliency to the power grid.
- Hydroelectric Plants operated by the U.S. Army Corps of Engineers (#12):
- $4 billion program to modernize and replace existing hydroelectric turbines
- The Army Corp. of Engineers is the largest operator of hydropower in the U.S. with 20 GW of capacity and 68 million MWhs of annual output
- The list highlights that the Army Corp.’s hydroelectric capacity generates $5 billion of revenue – yet operates at only 80% efficiency as against a national average of 99%.
- The project thus could increase output by as much as 25%, implying $1 billion of additional revenue on an estimated ~17 million MWh increase in hydroelectric generation
- TransWest Express Transmission (#16)
- $3 billion, 3GW HVDC line connecting Wyoming to Arizona, California and Nevada
- Primarily being built to deliver the power from project 17 on Trump’s list, a 1,000-turbine wind farm in Wyoming
- Both are owned by Philip Anschutz, a conservative billionaire who appears to have been a late, but quiet supporter of Trump’s election after opposing it early on
- Chokecherry and Sierra Madre Wind Energy/Wyoming (#17)
- $5 billion, 3GW wind farm in Wyoming
- Champlain Hudson Power Express (#21)
- $2.2 billion, 1GW HVDC line from Quebec to New York City
- Supported by Governor Cuomo and expected to bring primarily hydropower from Quebec, it is also being relied upon now as one of the replacements for the 2.2GW Indian Point nuclear plant whose 2021 shutdown was recently announced by its owner, Entergy.
- Energy Storage and Grid Modernization (#49)
- No cost or size given
- Highlights the California Public Utility Commission’s recent use of storage to improve grid reliability and to increase the ability to use clean renewable energy throughout the day.
- Plains and Eastern Electric Transmission Lines (number 9 on the list):
- Although oil and gas infrastructure has been mentioned as a priority by the Trump campaign, only one of the fifty priority infrastructure projects is in this sector. That project, the Atlantic Coast Pipeline (number 20 on the list) is a $4-5 billion pipeline running south from West Virginia through Virginia and North Carolina that would transport natural gas produced in the Marcellus Shale to markets in the Southeast.
- Owned by Dominion Resources, Duke Energy and Southern Company, this is one of a number of pipeline projects planned from the Marcellus and Utica Shales to surrounding states.
- As noted, the construction of the HVDC and renewable projects listed would tend to reduce wholesale power prices by integrating substantial additional renewable resources into regional power markets. Specifically:
- The Champlain Hudson Power Express would significantly mitigate the impact of the closure of Entergy’s Indian Point nuclear plant in 2021 and reduce the benefit of the closure to merchant generators in the NY metropolitan area, particularly Dynegy and NRG Energy.
- Increasing the output of the U.S. Army Corps of Engineers’ 20 GW of hydroelectric capacity could create additional pressure on wholesale power prices, particularly in the Northwest and South, where 70% and 20% of their capacity is located.
- Among our universe of companies, Dominion and Duke would be most directly impacted as the primary owners of the Atlantic Coast Pipeline, with 40% and 45% stakes, respectively.
Exhibit 1: Heat Map: Preferences Among Utilities, IPP and Clean Technology
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