Accountability for All Agencies

Energy Policy Perspectives Vol. 5 - February 20, 2025

Latest executive order with broad implications. On February 18, President Trump issued his latest executive order (EO), “Ensuring Accountability for All Agencies,” that aims to give the Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President greater authority over Federal agencies/departments. This order effectively claims an interesting constitutional argument for more direct executive oversight over the various quasi-independent regulatory agencies/departments of the Federal government (the order specifically excludes claims to authority over the Federal Reserve with the exception of its banking/financial regulation functions).

Intent. The EO suggests that the OIRA will now have the authority to review and presumably modify/rescind or remand back any proposed agency regulations/rules that do not meet with the stated administration policy objectives. It also suggests some influence over the establishment of the relevant agency/department policy. The EO also asserts control over agency budgets.

The new apprentice. Some have argued that President Trump is consolidating power in the executive branch at the expense of the broader distribution of power within the Federal government. This latest EO certainly suggests that part of the intent of new oversight is for the Executive Branch to directly influence the employment within each of these agencies (the ability to review employee performance). In addition to the assertion of control over agency budgets, one could certainly argue that the effective control over the personnel within the agencies is one effective way of assuring that the regulatory policy forthcoming from agencies/departments is consistent with the Trump administration’s previously stated EO policy objectives. A further significant wave of agency leadership turnover might be expected to be in the cards for these government offices.

Energy agencies of particular interest. The EO suggests that significant changes in policy may be in the offing at the key Federal Energy Regulatory Commission (FERC) and Nuclear Regulatory Commission (NRC) among numerous other agencies that affect regulations that influence energy project permitting. Presuming that the EO is effective in achieving its objectives, the EO this week provides further insight into how the administration expects to achieve its stated policies to speed the permitting of new energy production capacity among other key issues.

Areas of focus for investors. The EO has broad implications that are constructive for the energy policy initiatives that the administration began to elucidate in its EOs beginning on January 20. We believe the EO also has significant implications for investors to consider. The administration energy policy has focused on a number of key areas that warrant attention for investors: 1) broad support for fossil fuels; 2) policy to facilitate new electricity generation to support AI compute and data center growth; 3) intent to reduce infrastructure project permitting burdens to facilitate new energy supplies in general; 4) support for an increase in dispatchable electricity generation capacity (natural gas, coal, nuclear, biofuels, geothermal and hydro); 5) more support for electricity and fossil fuel transmission capacity; 6) less potential support for wind and solar generation, and energy storage; and 7) increased support for increasing U.S. critical mineral production (including uranium).

Environmental oversight. While we have some environmental concerns related to some of the Trump administration energy policy initiatives, it is hard to deny that reduced environmental regulation could be favorable for facilitating energy project permitting. On February 16, the administration filed an interim final rule, “Removal of National Environmental Policy Act Implementing Regulations,” that is another step toward that effort in addition to the EO.

Expect change. It is becoming increasingly clear that significant change is coming, particularly for energy policy. Frankly, something had to give in order to facilitate the massive new electricity infrastructure that we expect to be needed. More efforts from FERC and the NRC similar to PJM’s recent Reliability Resource Initiative that aims to fast-track new generation capacity within the PJM region are needed nationally. Despite the extraordinary efforts of power generation developers and utilities to add over 200,000 megawatts (MW) of renewable solar and wind generation since 2015, the U.S. has only added a net of about 59,000 MW to the electricity generation supply over the period (< 7%) due to the retirements and de-rates of other electricity generation resources. The addition of electricity transmission capacity has been even less inspiring overall. In order to achieve the doubling or tripling of electricity demand over the next few decades that is expected (from about 4,100 TWh today to as much as 12,000 TWh), in Exhibit 1 below, we show our estimates for the rough requirement to increase U.S. electricity generation capacity by 2x-4x by the 2050s to achieve a 12,000 TWh U.S. power market. We cannot continue the additions required at the same rate of the past decade to achieve this objective.

This EO could help alleviate some constraints on future electricity supply. Data centers and AI compute are the current hot topic related to electricity demand growth. However, the demand growth we expect covers demand growth from the entire spectrum of the U.S. electricity sector consumers. While we have concerns about reducing the administration’s support for clean energy that reduces the “all of the above” options for new generation capacity, and frankly, the market is sorting out the clean energy versus dispatchable energy issues already, the administration’s energy policy initiatives appear generally constructive toward improving the speed of new electricity infrastructure investment.

Exhibit 1: Range of Est. Electric Generation Capacity Required to Enable a 12,000 TWh U.S. Power Market

Another Wildfire Liability Opportunity. As we discussed in Energy Policy Perspectives Vol. 4 yesterday, the wildfire liability risk issue remains an investor focus and a drag on utility stocks. The President’s new National Energy Dominance Council along with the apparent more liberalized energy policy likely to come from U.S. agencies/departments as a result of the EO could be an important opportunity for utilities to get traction addressing the issue with the administration through multiple channels. A similar “wildfire” Price-Anderson Act (PAA), that was essential to facilitate the nuclear electricity generation capacity boom beginning in the 1950s is essential again today, in our view. Without it, the utility sector could be challenged to efficiently fund the huge electricity infrastructure investments that we estimate at over $10 trillion that are required over the next few decades.

Second recent fire at Moss Landing could put greater scrutiny on BESS industry. On a separate note, Vistra Energy’s (VST, $169.35, NR) lithium-ion battery energy storage system (BESS) facility near Moss Landing Harbor in California reignited on February 18^th after a January 16^th fire at the facility drove evacuations in the Monterey Bay area. As one of the world’s largest BESS projects at a total of 750 MW/3,000 MWh across its three phases, this has attracted significant scrutiny around the safety of BESS systems. Safety remains paramount to the industry which has seen growing adoption (over 50% YoY growth in deployments globally in 2024) as a tool to maintain reliability as aging electrical infrastructure struggles to cope with a growing number of stressors. Fire safety codes and the BESS industry have already made significant improvements on the safety front since the first phase of the Moss Landing Energy Storage Facility entered service over four years ago. Lithium-iron phosphate (LFP) battery cells, not the nickel manganese cobalt (NMC) chemistries used at Moss Landing are now industry standard for BESS systems due to lower costs, longer cycle life and greater thermal stability. LG Energy Solution is expected to start production at its first US BESS-focused LFP battery production line (estimated 17 GW capacity) at its Michigan plant in the second half of this year.

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