Podcast Summary: Open Circuit – "Tariffs, Localization, and a New Global Energy Order"

Release Date: April 4, 2025

Hosts: Stephen Lacy, Katherine Hamilton, Jigar Shah
Producer: Latitude Media

Introduction to the New Global Energy Order

In this episode of Open Circuit, hosts Stephen Lacy, Katherine Hamilton, and Jigar Shah delve into a transformative shift in the global energy landscape. Moving beyond the established climate-focused framework of the past decade, the discussion centers on how energy security is becoming the paramount driver of clean energy investment worldwide.

Historical Context: Post-WWII Framework and US Dominance

Stephen Lacy sets the stage by contrasting the current energy dynamics with the post-World War II era. Historically, the United States played a pivotal role in maintaining global oil trade routes, ensuring the stability and security of energy supplies for its allies.

Stephen Lacy [06:15]: "The US has always been the dominant security force ensuring that global oil trading lanes remain safe and open, providing a security umbrella that allowed countries to depend on consistent energy imports."

This dominance was underpinned by the Bretton Woods system, establishing the US dollar as the world reserve currency and solidifying America's role in safeguarding global energy flows.

Energy Security as the New Primary Driver

The conversation transitions to the contemporary shift where energy security overtakes climate concerns as the main impetus for clean energy investments. Jigar Shah references a report by Jeffrey Curry of Carlyle, highlighting that national priorities have pivoted towards securing energy sources amid geopolitical tensions and supply chain disruptions.

Jigar Shah [07:13]: "We've reached rather than peak oil, we've reached peak trade. Security is now our premium."

This paradigm shift suggests that nations are prioritizing the stability and reliability of their energy supplies, potentially accelerating the adoption of clean energy technologies more swiftly than climate policies alone could achieve.

Shift from Climate Concerns to Security in Investment

Katherine Hamilton expands on Curry's thesis, emphasizing that the impetus for clean energy investment is no longer solely environmental but deeply rooted in economic and national security.

Katherine Hamilton [08:48]: "Because of the need to shift to energy security, that could actually spur us toward more climate action, not in the name of climate, but in the name of security."

This perspective challenges the previous narrative, suggesting that the alignment of energy policies with security objectives may lead to more robust and rapid implementation of clean energy solutions.

Tensions Between Nationalism and Globalization in Energy Supply Chains

The hosts discuss the fracturing of global supply chains, exacerbated by events like the COVID-19 pandemic and geopolitical conflicts such as Russia's invasion of Ukraine. This has led to a resurgence of nationalistic policies, with countries striving to localize critical industries like semiconductors and clean energy.

Katherine Hamilton [13:58]: "What's interesting about this Carlyle paper is that it is saying now that the U.S., through the Biden administration's Inflation Reduction Act, and the Europeans are also on board with this thesis that the Chinese and the Indians have been on board with for probably two decades."

The move towards localization is seen as a strategic response to ensure energy security, reducing dependency on volatile international markets.

Investment Strategies: Tolling vs. Trading Assets

Jeffrey Curry introduces a nuanced framework distinguishing between tolling assets and trading assets in the context of energy investments.

• Tolling Assets: Characterized by fixed costs and stable, predictable revenues. Examples include renewable or nuclear plants that sell electricity through long-term contracts.

  Katherine Hamilton [30:38]: "Tolling assets provide stable power while trading assets provide flexibility."

• Trading Assets: Dependent on price volatility and market conditions, such as natural gas, oil, and batteries. Their profitability fluctuates with market dynamics.

Curry argues that recognizing this distinction is crucial for investors to align their strategies with the evolving energy landscape focused on security.

Washington D.C. Clean Energy Funding Cuts and Impact

A significant portion of the episode is dedicated to recent developments in Washington D.C., where the Trump administration has initiated cuts to clean energy funding. The Department of Energy (DOE) is reviewing and potentially canceling programs that have utilized less than 45% of their allocated funds, predominantly targeting hydrogen-related projects in blue states.

Jigar Shah [44:24]: "The Department is looking less like a budget-cutting exercise and more like a targeted elimination of clean energy."

These cuts are perceived as politically motivated, with California, New York, and Massachusetts being the hardest hit. The uncertainty surrounding the fate of these grants and loans has sparked concern within the clean energy sector.

Consequences and Industry Responses

The reduction in funding poses substantial challenges for ongoing and future clean energy projects. Companies fear the erosion of trust in government partnerships, which could drive innovations to seek support from other countries with more stable policies.

Katherine Hamilton [52:34]: "If we destroy everyone's trust in a partnership with the US Government, then they're by definition going to license their technology to China or license it to someone else."

In response, the industry is exploring alternative avenues such as international partnerships or state-level initiatives to sustain momentum in clean energy development.

Final Thoughts and Future Prospects

Despite the setbacks in federal support, Katherine Hamilton remains optimistic about the resilience and strength of the clean energy sector. The ongoing electricity super cycle and increased investment in the sector indicate sustained growth and innovation.

Katherine Hamilton [57:50]: "Clean tech has never been stronger. Investment in the clean tech sector is up 80% from a year ago."

The episode concludes with a look ahead to future discussions, including the impact of tariffs and the evolving investment landscape under the new global energy order.

Notable Quotes

• Stephen Lacy [06:15]: "The US has always been the dominant security force ensuring that global oil trading lanes remain safe and open, providing a security umbrella that allowed countries to depend on consistent energy imports."

• Jigar Shah [07:13]: "We've reached rather than peak oil, we've reached peak trade. Security is now our premium."

• Katherine Hamilton [08:48]: "Because of the need to shift to energy security, that could actually spur us toward more climate action, not in the name of climate, but in the name of security."

• Katherine Hamilton [30:38]: "Tolling assets provide stable power while trading assets provide flexibility."

• Jigar Shah [44:24]: "The Department is looking less like a budget-cutting exercise and more like a targeted elimination of clean energy."

• Katherine Hamilton [52:34]: "If we destroy everyone's trust in a partnership with the US Government, then they're by definition going to license their technology to China or license it to someone else."

• Katherine Hamilton [57:50]: "Clean tech has never been stronger. Investment in the clean tech sector is up 80% from a year ago."

Conclusion

This episode of Open Circuit provides a comprehensive analysis of the shifting priorities in the global energy sector, highlighting the move from climate-centric policies to a security-driven approach. The discussion underscores the complexities and challenges posed by this transition, including geopolitical tensions, investment strategies, and the implications of policy changes in the United States. As the global energy order evolves, the insights shared by the hosts offer valuable perspectives for investors, policymakers, and industry stakeholders navigating this transformative period.