Outlook for the U.S. energy industry

Globally we get the largest amount of our energy from oil, followed by coal, gas, then hydroelectric power. But renewable sources are now growing. The global energy market is in transformation and renewable energy sources will gradually gain in importance. Demand for oil and gas is still growing so there is still much upside for Saudi Arabia, Russia, and the U.S. in terms of oil and gas export and revenue streams. The U.S. has seen a significant growth in oil and gas export as a result of the conflict in Ukraine and U.S. sanctions against Russia, Iran, Venezuela, and others. This has enabled the U.S. to grow the energy market share in Europe, which has been a strategic goal for a while.   

The year 2023 saw electric vehicles (EV) commanding 7.6% of total U.S. sales, an increase from 5.9% in 2022 and 3.2% in 2021. Forecasts suggest that this figure is expected to surpass the 10% mark for the first time in the coming year. Most consumers are still EV skeptical given the much higher prices for EVs, limited charging stations, and the long charging time. There is a long way to go before EV has taken over the U.S. market and if it happens, it will be due to government mandates and regulations. Most consumers are looking for the cheapest transportation solution and that is gas. Not everyone wants to save the world and go green.

Petroleum and natural gas sources accounted for 72% of energy consumed in the U.S., while renewable and nuclear sources accounted for 17%. Coal was 10% of energy consumption. Coal was the most common fossil fuel produced in the United States from the late 1980s until 2011, but coal will continue to decline. Nuclear energy production, the nation’s leading non-fossil fuel energy source since the mid-1970s, has remained flat for more than two decades. It is seen as potentially too dangerous but could remain flat for some time and eventually decline. Wind and solar energy are both growing energy sources.  

The tandem push of federal investments flowing into clean energy and pull of decarbonization demand from public and private entities is growing. The main obstacle is still costs and distribution. In pure market conditions, without government involvement, there would likely only be a limited development into renewable energy sources.  

High financing, balance of plant, labor, and land costs outweighed commodity and freight price falls in 2023, pushing up the levelized costs of energy (LCOEs) for wind and utility-scale solar. The government’s investment tax credits and production tax credits have made utility-scale solar and onshore wind competitive with marginal costs of existing conventional generation. It is all a matter of government subsidies and regulations. Projects claiming the maximum available credits could capture the world’s lowest solar and wind LCOEs.

Twenty-nine jurisdictions, representing around half of US electricity retail sales, have mandatory renewable portfolio standards; 24 jurisdictions, including two new states in 2023, have zero greenhouse gas (GHG) emissions or 100% renewable energy goals spanning 2030 through 2050. Renewable portfolio standards and clean energy standard policies are expected to require 300 terawatt hours (TWh) of additional clean electricity by 2030. More states, localities, and public utilities are expected to invest in renewables in 2024.

In 2024, the renewable energy industry could expect to see the historic climate legislation take greater effect as tax credit guidance is finalized, more Loans Program Office loans are issued, and more government programs release grant funding, only 10% of which has been disbursed thus far. The massive channeling of capital toward the clean energy transition could propel solar to continue soaring, onshore wind to recover, and residential technologies to pick up speed. Offshore wind and green hydrogen industries could establish a foothold, while underdeveloped renewables could play a greater role in clean energy portfolios.

Bottom line is that the new era of renewable energy is predominantly spearheaded by the government. New regulations and rules combined with funding and loans is driving this transformation. Also, the U.S. government is limited development of oil and gas by banning LNG project and limiting permits for drilling. This is part of the strategy. Global geopolitical events are not impacting the U.S. domestic energy agenda. There will always be unexpected global events such as the Red Sea uncertainty due to Houthi rebel attacks. This is primarily impacting the pricing but does not have any long-lasting impact on the overall U.S. energy outlook.

The main development is that the government is driving increased renewable energy usages, and it is using all means possible. Globally, the main U.S. goal is to grow and cement energy export to Europe. The U.S. has quickly become the biggest exporter of LNG to Europe, as EU countries have raced to replace Russian fuel. The U.S. government is following a clear strategic energy path to increase energy exports and to grow renewables domestically.

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