| Welcome back. Donald Trump’s administration has scrapped rules limiting greenhouse gas emissions from US power plants — its latest move to drive growth in the country’s fossil fuel sector. But the ongoing conflict with Iran is creating new threats to that “energy dominance” agenda — and new drivers for clean energy investment, as I explain below. Clouds gather over the LNG outlook | | | | Trump returned to power last year promising a new age of international growth for US sales of liquefied natural gas. On his first day back in office, he signed an order reversing Joe Biden’s pause on approvals for new LNG export terminals — part of a drive to boost the uptake of US fossil fuel resources and “unleash energy dominance”. But the conflict that Trump entered into this year has created new risks to the outlook for US LNG sales, as the developing markets that were meant to drive long-term growth recoil at soaring prices and turn increasingly towards low-cost renewables. To be clear, the turmoil in gas markets since the Iran war began in February has meant a short-term windfall for US LNG exporters. The blockage of shipments through the Strait of Hormuz from Qatar — which previously accounted for nearly a fifth of global LNG supplies — has created a shortage with inevitable price consequences. The Japan-Korea Marker for LNG prices, a key benchmark, which started the year below $10 per million British thermal units (MMBtu), reached more than $22 per MMBtu in March. Having moderated somewhat over the summer, it has been surging again over the past month, reaching a new high for the year this week above $25 per MMBtu. This has brought bumper revenues for US exporters, who have increased their LNG shipments to “near maximum output levels”, according to a recent update from the government’s Energy Information Administration. Helpfully for the sector, new terminal capacity approved before the Biden pause has now come into action, enabling a 23 per cent rise in US LNG exports in the first half of the year. But while the price jump is boosting LNG profits for now, it is threatening the foundations of future growth — especially in the developing Asian economies that the sector has been counting on to drive increases in long-term demand. These countries have been cutting back their gas power generation in response to the higher prices — in India, for example, it fell 25 per cent in the second quarter of the year. In India and other Asian economies such as Vietnam, that has brought a near-term bounce in coal-fired generation, the most carbon-intensive fossil fuel. But the gas squeeze has strengthened policy moves in the region to accelerate the structural shift to renewables. This month, Thailand announced a goal of helping 1mn households install 5 gigawatts of rooftop solar panels in an effort to reduce reliance on gas, which at present fuels most of the country’s power generation. Recent government strategy documents envision a far smaller long-term role for gas-fired power than had been the case previously, noted Christopher Doleman, Asia gas specialist at the Institute for Energy Economics and Financial Analysis. Similar dynamics are emerging across much of Asia. Vietnam’s Vingroup has cancelled a $6.8bn plan for the country’s biggest gas-fired power station, instead moving to build a plant using solar and wind power backed by battery storage. Prices for large-scale batteries have declined dramatically over the past three years, offering a newly cost-effective source of grid flexibility that threatens one of the key arguments for gas plants, which can be fired up more quickly than coal power stations. This has enabled countries including Pakistan to significantly increase their plans for the deployment of renewable power. Last month, Pakistani power minister Awais Leghari announced a new national target of achieving 90 per cent clean generation in the national power mix by 2035, saying battery storage would be “a strategic asset for our energy sovereignty” by reducing reliance on imported gas. Within the US, solar and wind plants now account for the vast majority of new generation capacity being added to the grid. Gas power is, however, getting a boost from the surge in data centre construction to serve the AI needs of US tech companies. Many developers are building on-site gas plants to power their new data centres rather than endure long waits for grid connections. Yet the increased US demand for gas power is causing yet another barrier to international growth — by creating huge delivery backlogs for gas plant turbines and sending their prices surging. This is a major factor behind the strategic rethink on gas power in south-east Asian countries such as Thailand, said Doleman at the IEEFA. In its recent annual report, the International Gas Union predicted that global gas demand would resume its strong upward trend after a decline in demand this year. “The longer-term structural role of gas in meeting accelerating global energy demand will continue,” the trade body’s president Andrea Stegher. But in many of the developing economies driving that energy demand growth, doubts about gas’s role appear to be rising. “It is about the energy transition,” Thai energy minister Akanat Promphan said after this month’s rooftop solar announcement, “because otherwise we’ll be subjected to what’s happening in the Middle East forever.” | 
