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Tue, Apr 22

The real impacts of Trump 2.0 on energy finance

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What does a change in U.S. presidential administrations have to do with stalled solar farms in Sub-Saharan Africa or wind projects in Southeast Asia? As it turns out, quite a lot.

On this episode of Power Perspectives, we explore how U.S. policy shifts are sending ripples through the global financial system—impacting everything from renewable investments in developing countries to grid upgrades on Main Street USA. We’re joined by Gautam Jain, Senior Research Scholar at Columbia University’s Center on Global Energy Policy and Adjunct Professor at SIPA, to dig into the high-stakes intersection of climate finance, currency risk, and energy geopolitics.

Gautam walks us through why the international green finance system is under pressure as the U.S. government scales back funding commitments under the Trump administration. With global investors growing increasingly wary of geopolitical instability, what’s next for the energy transition? And how should utility leaders, policymakers, and financial stakeholders respond?

Note: The news in this space is moving fast, so to set context this conversation was recorded on April 4.

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Thanks to the sponsor of this episode of the Power Perspectives: West Monroe

 

Key Links:

Gautam Jain on Energy Central: https://energycentral.com/member/profile/gautam-jain

Ask a Question to Our Future Guests: Do you have a burning question for the utility executives and energy industry thought leaders that we feature each week on Power Perspectives? Leave us a message here for your chance to be featured in an upcoming episode: www.speakpipe.com/EnergyCentralPodcast 

 

TRANSCRIPT

Jason Price:

Why is the change of administration changing the world of financing energy projects outside the US? When it comes to finance, we cannot ignore basic economic principles that make an investment prudent. Currency risk is an important determinant of the investment and we're seeing a lot of green investors pull back from such investment, particularly

But the risk also impacts us here in the United States. Many US based green energy investments are dependent on the global financing system. And with the federal government scaling back and in some cases canceling pledges, currency risk is being watched more closely than ever before. Today, we're going to discuss how modernizing the grid, like upgrading those wires and poles outside on Main Street are impacted on Wall Street, in London, in Frankfurt, Germany.

Shanghai, Sydney and financial hubs throughout the world. We're going to dive into these timely questions and more on today's episode of Power Perspectives, navigating the intersection of energy, finance and geopolitics. And guiding us on that journey will be Gautam Jain, senior research scholar at the Center on Global Energy Policy at Columbia University and an adjunct professor at Columbia SIPA Program.

Gautam's expertise focuses on mobilizing capital for the energy transition through various financial instruments. And we're going to pick his brain on this evolving landscape of climate finance and the impact of the Trump administration's early policy moves and what utility leaders need to know about global investment trends. I'm Jason Price coming to you from New York City. And as always, I'm joined by my co-host, Matt Chester, Energy Central producer and community manager from Orlando, Florida. Matt.

We're coming up on that widely reported 100-day benchmark of President Trump's second term. What are the discussions taking place at energycentral.com community platform when it comes to early trends from the impact of financial market?

 

Matt Chester:

Yeah, thanks, Jason. And you're right, that 100 day mark is something that the Energy Central community has talked about and looked at. when it comes to the markets, know, maybe I'd be answering this question in a different way if it was a week ago than I would today as the world's still digesting all of the tariff announcements that came out this week. But in other time frame, we've been seeing utility leaders, project developers, financial professionals, all on energycentral.com asking.

Some version of the same question, which is what does this mean for our access to capital and for market and for project certainty and especially in that global context and concerns like the ones you highlighted, inflation, currency risk, inconsistent federal support. They're all making it more difficult. making projects have to be a little bit more hesitant. That's directly impacting new technology development and project implementation at the utility level. So what I'm seeing on Energy Central is, you know, this isn't just a Washington story, it's a Wall Street story, and it's a global capital story. So it's one that's all too real for anyone in our community who's trying to build or finance energy projects in today's climate.

 

Jason Price:

Yeah, that's right, Matt. And it's been quite a week for sure. Before we dive in, I just want to give a quick thanks to West Monroe, our sponsor of today's episode. Now let's pull in today's guest. And we're really excited to hear from Godin. So thank you, Godin, Jane. Thank you for joining Energy Central's Power Perspectives podcast.

 

Gautam Jain: 

It's my pleasure. Thank you for having me.

 

Jason Price:

Fantastic. So let's just dive in. So Gautam, to set the stage, can you briefly explain what climate finance entails? How do financial mechanisms like thematic bonds, blended financing, carbon markets all play a role in mobilizing capital for clean energy projects?

 

Gautam Jain:

So when you think about the energy transition, broadly speaking, it has three necessary components, technology, policy, and finance. So obviously we need technological advances as well as a proper policy framework and regulations to support the transition. We also need financing to deploy these technologies and to follow the regulations that are proposed. All this essentially refers to as climate finance.

So climate finance broadly encompasses financial instruments, mechanisms, and structures to support climate action related to mitigation, adaptation, and loss and damage. All these comprise climate finance. So thematic bonds, benefit finance approaches, and common markets that you mentioned are some of these financial instruments and mechanisms that can help mobilize capital for clean energy, resilience, and major projects.

particularly in emerging and developing economies.

 

Jason Price:

That's really helpful. Nice way to set the context here. I want to talk about your research. So one of your key research areas is managing currency risk with climate finance. So could you break down for us why this is such a critical issue for investors and how it impacts the ability to scale renewable energy projects in emerging markets, which is where I believe a lot of your focus is.

 

Gautam Jain:

Yeah, thank you for asking that question. It is definitely one of my primary areas of research. So currency risk is a major bottleneck for international investments in emerging economies. emerging market, currencies tend to be quite volatile. And because these countries typically have a higher inflation than the US, their currencies tend to depreciate over time. As such, neither the borrower nor the lender wants to take on the currency risk.

Let me explain with an example to make it easier to understand. So let's say there's a private company in a developing country trying to build a solar power, the electricity from which will be sold to some power utility in the country. Because the consumers of this electricity are local, the revenue stream for this company will be in the local currency. As such, the company would not want to borrow in dollars because it exposes it to currency risk. Essentially, if the currency depreciates, the loan amount increases. So the amount

that it's owed may become prohibited for that company. Now let's think of this from the perspective of the international investor who would actually like to invest in this solar farm because he or she sees attractive returns coming from this solar farm investments. However, they would typically prefer to lend the dollars and receive the investments back in dollars with the return because they don't want to take on the currency risk either.

So essentially we are left in a situation where there's potential supply of projects and there's potential demand for investments in these projects. But there's some sort of a mismatch between the two and sort of almost like a market failure that's occurring because of currency risk. As a result of this, it's possible that that solar farm never gets built just basically because of this currency risk.

 

Jason Price:

That's really helpful. Thank you for that. And it's very practical in many respects, especially as the United States exports a lot of technology, know-how into actual capital and so on. This all plays into these challenges, no matter where the business is done. It impacts because of the global economy that we're in. And no doubt tariffs, and I'm sure you'll get the tariffs at some point in this conversation, but tariffs just plays another level of complexity here. So how about this? Before we go down that path.

Based on what you just shared, are there practical solutions in place today or are new mechanisms needed to mitigate these types of risks?

 

Gautam Jain:

Yeah, I mean, the short answer is both exist. There's some solutions in place today and there are also some new proposals being put forward. The main challenge that everybody is facing is how to scale up these solutions. First, some of the countries have liquid currency markets, liquid forward and cross currency markets that can be used to hedge exposures. But the problem is these can be quite expensive and not every country has liquid currency markets.

So to address this issue, there are new approaches and structures being used and being proposed. So for example, there are multilateral development banks like IFC and others who are issuing local currency bonds in some emerging economies. The idea is that they can issue cheaply because of their high ratings, and then they can go ahead and lend to local counterparties in an emerging economy, basically passing on their savings to them.

to these companies who would otherwise not be able to borrow or borrow at much more expensive rates. But they are doing this only in relatively small sizes, partly because of the risk constraints that are there on multinational developing banks. The approach that I like actually better and one that I've written about, mainly because I think it's more scalable, is a publicly funded facility that pulls currency risk.

basically currency exposures and can be managed by a private entity that has expertise in managing these kinds of exposures. So effectively it can become a public private partnership of sorts. So managing a diversified portfolio of currencies is efficient because currency risk can be managed much more cost effectively because of the diversification that lowers the risk considerably. It's a much better way than trying to hedge. individual currencies, which can be quite expensive, as I mentioned, and you can generate a positive return from such a portfolio, a broad currency portfolio, which can then help mitigate costs even further.

 

Jason Price:

Interesting. The idea is not new, this sort of collective pool of investors, right? We're seeing it really blossom since the supply chain challenges, particularly around transformers and other big machinery that the risk is just too heavy for one company to take and you get a bigger buyer pool to collect and manage that risk in one form or another. So very interesting.

I want to ask you about something you wrote recently. You basically published a paper around the potential shift in U.S. climate finance policy under the new Trump administration. Can you walk us through the most immediate policy changes you see in the first 100 days and how are they affecting global clean energy investments today?

 

Gautam Jain:

Sure. You mentioned tariffs a couple of minutes ago. So we have obviously been inundated with executive orders coming out of this administration from day one, including the one on tariffs basically this week that is causing major market mayhem. United States can no longer continue with a policy of unilateral economic surrender. cannot...

pay the deficits of Canada, Mexico, and so many other countries. I think tomorrow the United States will implement reciprocal tariffs on other nations. One may not remember one of the first, but one of the first executive orders that was issued by this administration was about the US withdrawal from the Paris Agreement. The same executive order also notified that the US international climate finance plans would be revoked and rescinded immediately. This was a plan that was launched by President Biden in 2021. And as a result of this plan, something like $11 billion were invested in climate finance, basically going to emerging economies from the US. Revoking this plan basically means that there will be no more climate finance that will be going to emerging economies from the US. So the net effect of this, while not immaterial, should not

be significant. The reason for this is when you think about what's coming out of the COPs, the Conference of Parties, these are the events that are held once a year for climate negotiations. And so the old climate finance target that was set at the COP in 2009 was for 100 billion pledges made by developed countries to be sent to emerging economies for climate finance. This was 100 billion per year.

So last year, the COP in Baku, this number was raised to 300 billion. So the lack of the US funding, which was going billion, again, is not insignificant. But again, it shouldn't be fatal. Already a few countries in Europe and Japan, for example, are willing, saying that they're willing to step forward and at least fill in some of the gap that's left behind by the US leaving. The same thing goes for investments in clean energy. While there's a policy push,

coming from this administration for some forms of renewable energy, particularly wind. And they could also be pulling back of some of their credits in the IRA, including EV credits and potentially credits related to battery, investments in batteries. Ultimately though, what I believe is market dynamics, or development policy. If these technologies are cost effective as they're supposed to be and cost efficient,

as it's supposed to be, then they will get deployed. Maybe not in the pace that they would have otherwise without these actions or pushbacks.

 

Jason Price:
All right, so, Gautam, you talked about U.S. commitments being pulled back, the ripple effect that it's playing in the global energy market. You mentioned Japan as one of those companies that's filling in the gap. So can you help the audience understand what are some of those actions that Japan is doing in any other country that has stepped in to fill in some of the gaps from the U.S. pullback?

 

Gautam Jain:

Yeah, good question. So as I mentioned earlier, there are some countries stepping up and I will give examples of Germany and Japan. So one example of this is what is called the JetP initiative. It stands for Just Energy Transition Partnership. It was an initiative launched by advanced economies, including the US was one of the biggest backers of this, but also countries in Europe and Japan. The idea was advanced economies can financially support

the energy transition in a few emerging economies while also factoring in socioeconomic concentration, which is quite important. So for example, the idea was that you could phase out coal plants and replace them with renewables. But because there's so many jobs attached to coal, you want to do it in a way that you take care of the people who are attached to coal and the communities that are attached to coal so they get new employment in this renewable energy sector.

The US obviously pulled out of this. The commitment of the US was for around, roughly around $5 billion. This is, 5 billion is about 10 % of the total 50 billion that has been pledged by advanced economies for this JetP initiative. So both Japan and Germany have said that they're going to step up. They've filled in already the role. The US had the leadership role in, for example, the Indonesia JetP.

So this has been launched for a few countries, Indonesia is one of them. So in Indonesia, JetP, US stepped away and now Germany and Japan are co-leading that effort. I would give more examples, same thing is true with the COT. With the exiting from the Paris Agreement, what I think, and this is more of a speculation, is that the main outcome would be that the US basically will be left out of most discussions and negotiations that will happen related to climate events, climate action at multilateral events. And basically, it may be just seeding up the leadership role to others, which could possibly include China. In terms of investments in renewable energy, as I said before, is true for US, like the market dynamics playing a much more important role, is even more true outside the US.

This is because most countries realize that for energy security, affordability and reliability, renewable energy makes a lot of sense for them. People have been impacted by rising fuel prices immediately after the Russian invasion of Ukraine, for example. So there is an appetite to build renewable energy infrastructure in many of these countries. So investments should continue to happen.

in this area around the world as a result.

 

Jason Price:

All right, so that's a good perspective of what's taking place now on a global scale. Now let's, why don't we, why don't you take out your proverbial crystal ball and tell us what you think the next 100 days or the next three years may look like around energy policy and big decisions. And keep in mind, we've got a utility and energy company audience here that are really interested in what's the next move with the administration.

Any insight, any prognostications you're willing to take, just putting the tea leaves together, anything you can share or pass along to our audience.

 

Gautam Jain:

Sure, yeah, I think one of the things that you've seen this week and we talked about this before is the kind of the mayhem and chaos that we're observing in the aftermath of the tariff announcements. What I would say is that should have, that can have pretty big impacts in the next year, potentially two years or longer. In the very near term, what you can see is these tariffs may lead to supply chain issues.

and almost certainly inflationary pressures. This has also become geopolitical and there'll be counter tariffs. In fact, you saw that this morning when China announced 34 % tariff in response to what US had announced earlier this week. So that net effect is that the cost of equipment will go up and even availability of some of these equipment could become an issue because of the tariffs. So that's kind of the first observation.

I would say for pretty much everybody, but for utility companies who are trying to build infrastructure, they need to be aware that this is coming or is already happening as we speak. The second observation is that we have entered a very uncertain economic period, which means the policy path forward is less clear, which means that businesses will be...

sort of uncertain of the decisions that they can make. So they will be postponing investment decisions. again, this may already be happening because it's not clear exactly what tariffs may apply to who. Maybe some of these tariffs that are there or have been announced for today can be taken off tomorrow. So this is an environment with very high level of uncertainty and no businesses will want to make decisions in such an environment. And essentially you can already see this reflected

in both the business and consumer sentiment, both of which have fallen dramatically. You can also see this in inflation expectations. And inflation expectations based on different indicators are, you know, when you look a few years out, they're at a 30 year high, which is quite surprising because we were on a downward path after the peak that we saw following the pandemic. So it seemed like inflation was coming under control, but because of the steps that have been taken, once again, we are saying inflation comes back. The worst thing is it's getting combined with economic uncertainty and likely economic slowdown that's coming. So we may be in a very difficult stagflationary kind of environment, at least in the near term. But we have to see how far these type of policies and other policies are pushed forward. And depending on that, we could potentially see a significant slowdown.

 

Jason Price:

Yes, I believe you're correct. I saw the same report this morning, the suggestion, and I believe it came from the Fed that these tariffs are going to be put pressure on inflation. And we could actually look at a reverse of the trend that we've been experiencing over the past couple of years, which would be really unfortunate. And it kind of feeds into my next question. So if inflation should creep back in, it's the cost of

of renting money will get more expensive and that will put a damper on any kind of growth. That's the general principle. In Trump's first term, Trump 1.0, he was not a fan of clean energy investments, but it still grew. Now in Trump 2.0, we have inflation risk.

get the tariffs a completely different dynamic that's going on. Do you expect that investments will continue to likely slow like it did last time, but do you anticipate it's still growing? Suggest the appetite and desire to make these kinds of investments outpace the financial calculations that come with it? Just what's your general impression of all this?

 

Gautam Jain:

Renewable energy is a little bit of a more of a complex situation, partly because these are projects that typically require quite a bit of capital expenditure early in the cycle. So what that means is you need to make that investments, most of the investments upfront. And typically when money's tight, so when inflation is high, interest rates are high, and if you're gonna slow down,

When investments, you're very picky about investments, you'll be careful about investing this. So renewable may be in relative terms, may be worse off in such a sort of sacrificial environment, but I would say it affects all kinds of investments and some more than others.

You know, we shall see. We'll see even in the United States, the level of investment at the utility scale, what kind of investments there'll be over the next few years based on what the market conditions are telling us.

 

Jason Price:

So, Gautam, I really want to appreciate and thank you for giving us your wisdom and some insight into your class at Columbia. And I'm sure it's a great class and probably one of more popular ones. Just imagine.

intensity and discussions that go on in your classroom around these topics sure it's fascinating love to love to be a fly on the wall at some point and go back to school and take advantage of thought leaders like yourselves on these topics because it's It's a fascinating discussion. I want to also Share with you that we have something called the lightning round which is where we we finished the set of hard questions and now we're getting to the harder questions which gives us an opportunity to learn a little bit more about you person rather than you the professional

So we're gonna throw a few questions at you. We ask you to keep your response to one word or phrase. So what's a fun or unexpected part of your job that people don't really know about?

 

Gautam Jain:

my students learn from me and I learn as much from them. And that's sort of a lot of fun to be here.

 

Jason Price:
If you could instantly gain a new skill with the snap of your fingers, what would you choose?

 

Gautam Jain:

So I speak two languages, but I think it's too few. I would love to speak five, seven languages.

 

Jason Price:

Well, this could help with your next question, which is when traveling internationally, what do you recommend when it comes to converting currency? When do you do this and where do you go to make the transaction?

 

Gautam Jain:

So I would suggest to people not to do it at the airport or any bank. Typically, transaction costs are very high. What I do typically is when you go to the country, use the ATM. That gives you the best exchange rate with little or no transaction fee. Or to the extent possible, use a credit card, especially one that has no transaction fees. Those are usually the best rates that you get.

 

Jason Price:

Good advice. going to deploy that next time I travel overseas. All right. We're we're collecting lightning round questions from past podcast guests. And we recently had a conversation with Hansen Chan of Nokia who challenged a future guest with the following. What are the most rewarding and enjoyable aspects of your career in the energy industry.

 

Gautam Jain:

So I'm fortunate to be in the energy field now. I used to work primarily in finance up until three years ago. What I would say is, and the reason for that is, energy is a topic that's on everybody's mind. Because investments for the next 30 years will be happening at such a rapid pace in energy infrastructure. The estimates that $5 trillion per year of investments are needed in clean energy and low carbon infrastructure in the coming years.

 

Jason Price:

All right, so now we want to turn it around and give you an opportunity to ask a future guest a question. So it can be topical, know, energy related, or it can be an off the wall question. So take it away.

 

Gautam Jain: 

So yeah, one thing that kind of I always think about is do people think that we could have a major innovation that basically helps us solve the climate crisis, you know, such much more effectively than we are currently fearing.

 

Jason Price:

And then lastly, this question is one that we often ask our guests, but we've never had to ask this question after the first hundred days of the new administration and all that's been coming out from that administration. So I'm going to ask you and I'll be interested to hear what you have to say. So the question is, what are you most hopeful for in the future?

 

Gautam Jain:

would say the younger generation, again, connecting with the climate crisis, we're in the midst of one. Obviously our generation hasn't done or carried its load as much as it should have. I'm hopeful that the younger generation will do a better job.

 

Jason Price:

Okay, well stated. All right, so Gautam, we're going to give you the final word, which gives you an opportunity to speak to the utility leaders and power industry professionals. And basically, you know, what we want to talk about is what we're learning today, which is around what utility leaders need to be thinking about as they make these long-term investment decisions. How should we be thinking about financing large-scale infrastructure projects amid the political and economic uncertainty?

 

Gautam Jain:

Sure. So what I would say is, obviously, currently, we may be in the midst of a period marked by economic uncertainty. But I would say the trends are still the same. As I mentioned, we need investments of the order of $5 trillion per year globally in energy infrastructure, especially low-carbon energy infrastructure. So obviously, will be challenges attached to this. But there are also many opportunities, especially those in the power sector, utility sector, and so on.

it's jumped to at least twice, if not more already. And this could be an under underestimation. And this is in the U.S. When you look outside the U.S., for much of the world's in the emerging and developing economies, the pace of increase is even more rapid. It's electricity demand is growing at five to 7 % per year in many parts of the world. This is because these are countries that are sort of facing the worst of the climate.

impact, so they're seeing temperatures rise very quickly. The demand for air conditioning, for example, is rising in parts of the world, such as India and many countries situated around the equator. So you're seeing very large and substantial investments that are happening in energy-related projects in these countries. So to me, this is actually for anybody related to energy, this is a golden period. And the idea should be to think

ahead, we will have, we've had quite a bit of technological advances. Solar and wind we take for granted today, but a decade ago, they were not cost effective at all. But they have come down the cost curve so quickly that we sort of take them as a given. And they now compete or much cheaper than coal in many parts of the world. Similarly, we will see other technologies potentially, let's say batteries and other storage.
technologies becoming more cost effective. And so the idea should be to think ahead, think of the technological changes that are coming and invest where the opportunities are. And there will be many opportunities going ahead. So to me, it's a great time to be part of this sector.

 

Jason Price:

Yeah, agreed. I think our, our listenership at Power Perspectives will also agree. And I'm sure that there'll be a lot of questions and follow up comments. So we'll make sure, Gautam, that we notify you and you can hop in and keep that conversation going. Until then though, I just want to thank you for your insight on today's episode. Thank you.

 

Gautam Jain:

much. Thank you to both of you. Thank you for listening. Thank you.

 

Jason Price:

We appreciate it. And you can always reach Gautam through the Energy Central platform where he welcomes your questions and comments. And we also want to give a shout out of thanks to today's podcast sponsor that made today's episode possible. Thanks to West Monroe. West Monroe is a leading partner for the nation's largest electric, gas, and water utilities, working together to drive grid modernization, clean energy, and workforce transformation. West Monroe's comprehensive services are designed to support utilities in advancing the digital transformation.

building resilient operations, securing federal funding, and providing regulatory advisory support. With a multidisciplinary team of experts, West Monroe offers a holistic approach that addresses the challenges of the grid today and provides innovative solutions for a sustainable future. And once again, I'm your host, Jason Price. So plug in and stay fully charged in the discussion by hopping into the community at energycentral.com. And we'll see you next time at the Energy Central Power Perspectives Podcast.

 

About Energy Central Podcasts

Power Perspectives features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

Power Perspectives is the premiere podcast series from Energy Central, a Power Industry Network of Communities built specifically for professionals in the electric power industry and a place where professionals can share, learn, and connect in a collaborative environment. Supported by leading industry organizations, our mission is to help global power industry professionals work better. Since 1995, we’ve been a trusted news and information source for professionals working in the power industry, and today our managed communities are a place for lively discussions, debates, and analysis to take place. If you’re not yet a member, visit www.EnergyCentral.com to register for free and join over 200,000 of your peers working in the power industry.

Power Perspectives is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

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