Navigating Energy Tar-"iffs"

Energy Markets Update

In this newsletter, we cover key factors impacting US energy markets. We report on the abundant relevance of tariffs as they relate to natural gas, market fundamentals, and renewable energy development. More content includes the Carolinas' potential nuclear investments, as well as updates to FERC's question of independence and federal staffing cuts affecting energy-related departments.

Weekly Natural Gas Inventories

Source: EIA

Market Update

Tariffs are the word of the week, month, and year in 2025 as markets adjust to the sobering reality that President Trump’s threats on tariffs are now reality.
On April 9, a barrage of new tariffs went into effect on America’s global trading partners. While a minimum tariff of 10% was opposed on all nations, some of its largest trading partners saw substantially higher rates, e.g., China @ 104%, China and Mexico @ 25% with some exceptions, Europe @ 20%, and much of Southeast Asia at between 30-46%.
After a sharp selloff in global financial assets, the Trump Administration announced a 90 day pause on “reciprocal” tariffs, with the exemption of tariffs on China, which was increased from 104% to 125%. As of today, most other nations face a 10% tariff on any exports into the US. China has retaliated with a 125% tariff on US imports.
In North America (US-Canada-Mexico), "compliant" goods are imported tariff-free when traded among the three countries, while non-compliant goods are tariffed at 25% — except for energy and potash, which are tariffed at 10%. To be considered "USMCA compliant," a product must meet the specific rules of origin outlined in the agreement, generally meaning it is obtained or produced in the territory of the US, Mexico, or Canada.
Global markets have been seesawing on any announcements, even rumors of announcements, from the Trump Administration. Energy markets have been no exception. In energy commodities, oil prices were most aggressively in retreat; both Brent crude lost 20% in the past week, but these losses were trimmed to about 16% after the 90 day pause announcement. WTI crude has recently traded as low as $55/bbl, flirting with a $50 threshold that some analysts believe would result in withdrawal of drilling activity, and the associated gas that is linked with the oil market. As much as 20% of the daily gas supply is associated gas, a byproduct of oil E&P.
Natural gas and power forwards began showing some weakness in the early part of this week as concerns that tariffs may result in demand destruction took hold. Some of the major banks have assessed the risk of a recession at > 50%.
The volatility and uncertainty that the tariffs have introduced to energy markets, to all markets, is unprecedented. Our fundamental view is that there is still value in the futures market, particularly in the 2-4 year time frame. This is also a time period when we would expect the risks associated with AI demand growth and prolonged tariffs with China (or others) to really cause disruption. Budget client customers would be wise to establish some triggers over the next 12-36 months to take advantage of potential dips in the market.
The increase in demand presented by LNG export growth is also significant. Now approaching 16 bcf/d in feedgas demand, exports are up 3bcf/d year over year and are likely to grow significantly yet. Some analysts predict that Plaquemines LNG, currently taking around 2 bcf/d of feedstock, could reach a max of 3.6 bcf/d by the end of the year. Furthermore, lower prices in the near term could drive higher prices in the mid-term.
The best way to manage this volatility is with a flexible contract that allows for quick buy-side decisions when opportunities present. And with all the tension largely unresolved, there are likely to be more opportunities over the coming months. Prepare and stay nimble my friends!

Well That's Just TARRIFFIC

Tariffs have wide reaching impacts on the cost of energy. Here we explore some of the leading implications with a focus on the renewable energy and LNG sectors, which appear particularly prone.

The Energy Infrastructure Cost Stack

Energy infrastructure is broadly impacted by the cost of metals, raw commodities, and finished products such as controls and transformers. The US imports approximately 21% of its steel. It is estimated that the incremental cost of drilling a new oil well for example, could be +10-20% based on the higher cost of steel alone.
The US imported approximately $1.9 billion in lithium ion batteries from China in 2024. China supplies approximately 70% of the lithium stock for these batteries, so there really are no other options and the lead time for new lithium mines can be greater than ten years.
In 2024, the U.S. imported $4 billion of transformers, converters, and inductors from China, as much as 30% of the US market. Readers will recall the massive shortages in supply of transformers that were, and still are, a major cause of energy project delays since emerging from Covid.

LNG market fundamentals in the wake of tariffs

LNG Exporters say, “Lets Not Get into this” to broad sweeping tariffs
Despite Trump's stated policy goal of expanding US LNG exports and ending the Biden-era moratorium on export permits, the new tariff regime creates a contradictory message that undermines market confidence.

LNG exports from the US have increased every year since 2016, rising from 0.5 Bcf/d in 2016 to 11.9 Bcf/d in 2024, making the United States the world’s largest LNG exporter in 2023 and 2024, according to the EIA. The industry has reached 15.7 Bcf/d this past month.

This month, major US LNG exporters, including Chevron, ExxonMobil, and Cheniere likely have worries about possible retaliatory tariffs from trading partners and other emerging markets having hesitancy to commit to future Sale and Purchase Agreements (SPAs), rather than the direct impact of US-imposed tariffs.
The threat of retaliatory tariffs introduces major uncertainty into the LNG industry, which relies heavily on long-term contracts. This uncertainty could jeopardize several pending US LNG projects awaiting final investment decisions and potentially shift Asian buyers toward other suppliers. These alternatives include established exporters like Qatar, which intends to remain a dominant supplier with its North Field expansion reaching 126 mtpa by 2027. And then there are the emerging players like Canada, where the $40 billion Kitimat facility in British Columbia is approaching completion with an expected initial capacity of 14 mtpa later this year.
We look to a few key markets around the globe:
- China became the first country to counter with a 15% retaliatory tariff in February, which completely halted US LNG imports. According to S&P Global Commodity Insights data, US LNG exports to China dropped from 21.5 million tonnes in 2023 to zero following the tariff implementation.
- The European Union, which receives approximately 50% of US LNG exports and has become heavily dependent on US supply since the Russian pipeline disruption, may be forced to implement reciprocal tariffs despite their energy security needs. S&P Global Market Intelligence reports that Europe plus Turkey received over 80% of US LNG volumes in Q1 2024, valued at approximately $12.5 billion annually (see chart below).
- South Korea stands as the largest individual buyer of US LNG since 2016, and may respond to their 25% US tariff with matching measures, potentially redirecting their purchases to closer suppliers like Australia or Qatar.

Source: S&P Global Commodity Insights

Despite the Administration’s stated policy goal of expanding US LNG exports and ending the Biden-era moratorium on export permits, the new tariff regime may already have created a contradictory message that undermines market confidence.

Renewable Energy Trends in 2024 and Tariff Implications

Starting with the positive news: this March marked a turning point in the U.S. energy landscape as electricity generation from renewable energy sources surpassed fossil fuels for the very first time.
Fossil fuel-generation dropped below 50% of the total mix while zero-emission sources maintained the production majority, driven by a solar and wind surge which together contributed ~25% of the total mix, combined with steady nuclear production.

Source: Ember

This ramp-up of renewable generation is both promising and critical, given the exponential demand growth projected for the next decade (15-20%), which will necessitate low-cost, sustainable energy solutions at a greater scale.
However, the momentum comes at a time of major uncertainty within the clean energy industry, shaped by recent policy moves such as President Trump’s freeze on offshore wind leasing, rollbacks on regulations for coal production, and renewed emphasis on “drill baby, drill,” leaving many worried about the outlook for renewable project development.
U.S. renewable energy companies that import physical equipment for solar, wind, and battery systems are particularly prone to the impacts of tariffs.
To understand the potential impact, let’s break down the costs associated with developing a solar project. The core cost components fall under two buckets: hard costs, which includes physical equipment like solar panels, inverters, and mounting equipment, accounting for ~40-45% of project expenses, and soft costs, such as financing for design studies, permitting fees, interconnection costs, and installation labor, which account for ~55-60%.
Tariffs have the most direct impact on the cost of hardware, given that the U.S. relies heavily on imported solar equipment from Southeast Asia, a region that has been the primary target of tariffs to date. In 2024, the U.S. saw a record-high number of solar equipment imports – up 31% YoY. This is attributable to the cost competitiveness of Southeast Asian manufacturers and the reality that the U.S. supply chain is not adequate to meet domestic demand.
China controls about 80% of the global supply chain for major solar components from polysilicon to finished solar modules. While the U.S. has in recent years reduced direct imports from China, much of its current supply from Southeast Asia is still supplied by China indirectly, since many Chinese manufacturers have moved their export bases to Vietnam, Malaysia, Thailand, and Cambodia to sidestep steep tariffs (the irony!)

Source: BloombergNEF | Financial Times

Grid batteries, which are often coupled with solar projects, are also facing major exposure. With China supplying 70% of U.S. battery imports, the implementation of a 125% tariff threatens to substantially increase costs for both electric vehicles and grid storage installations.
While this might seem to create opportunity for domestic battery manufacturers, the reality is more complicated. The U.S. has limited battery manufacturing capacity, and factories remain largely dependent on Chinese imports for lithium and other precious metals, which would still be subject to tariffs.
Despite the administration’s insistence that these tariffs will be a force for good - driving domestic production and job growth - increasing equipment costs through tariffs risks slowing the deployment of much-needed clean energy infrastructure. Projects will likely be delayed or even derailed, hampering the U.S.’s ability to meet ever-growing power needs.

Will the Carolinas go nuclear?

Amid the rapid increase in demand for low carbon power sources by datacenters, nuclear power is positioned to be a long term solution. but the immense capital and long timelines for development of new reactors is a challenge. Duke Energy in the Carolinas could be positioning itself for new investment in the sector.

In 2016, Duke was issued a license with the US Nuclear Regulatory Commission (NRC) to construct two AP1000 reactors totaling up to 2,234 MW.
The initial project, planned at the William States Lee III Nuclear Station in Cherokee County, South Carolina, fell apart after the bankruptcy of Westinghouse, the developer of the AP1000 reactor. In a filing last week, Duke has revived the Lee site as the best prospect for a new reactor. Other possible sites listed were the sites of the Shearon Harris Nuclear Power Plant in Wake County, North Carolina, and the 2,220-MW Belews Creek gas-fired plant in Stokes County, North Carolina.
The other very relevant wrinkle in this timeline is that Duke’s neighbor utility in South Carolina, Santee Cooper, recently launched an RFP for interest in taking over its own partially constructed AP1000 project, in Jenkinsville, SC. The project, V.C. Summer Units 2 and 3, was a historic debacle for Santee Cooper and SC regulators. The project started in 2013 and was ultimately abandoned in 2017 after a $9 billion investment, due to the bankruptcy of Westinghouse and ballooning costs. Another contemporaneous project, Vogtle in Georgina, ultimately trod forward and was put into service last year.
Experts have estimated that the timeline to revive V.C. Summer Units 2 and 3 would be about 5-8 years, compared to the 10-13 years estimated by Duke for a new build at Lee. Initial responses to the RFP are due May 5.
After completion of Vogtle last year, no large buyer in the US has yet committed to another new large reactor project. Other announcements, such as the deal between Constellation and Microsoft to recommission the 3-mile Island reactor, are significant, but not on the scale of a new reactor commitment.
There are legitimate reasons for cold feet. The two units at Vogtle were completed at a total cost of $35 billion, compared to an initial estimate of $14b. They were also roughly six years behind schedule.
On the other hand, this was really the first new reactor since the 80s. Lessons have been learned, presumably. A large workforce has been trained and primed to redeploy on another project. There is a clear need to clean baseload power. While the three sites that Duke has recently put forward are interesting, a bid by Duke on the VC Summer site would make sense. Duke had initially expressed interest in taking a financial stake in the project back in 2017, but it ultimately backed away. Maybe the timing and price will be more appealing now. We will have to wait until after May 5 to find out.

Updates on Federal Energy Policy and Staffing Cuts

Below is a high level overview of some of these initiatives as it pertains to the Department of Energy and related agencies.

Executive Orders to Revive the Coal Industry

On April 8, President Trump signed four executive orders to support the coal industry, including designating coal as a critical mineral and promoting its use for AI datacenters. The orders also remove barriers to coal mining, prioritize coal leasing on federal lands, and rescind policies that steer the US away from coal.
One of the orders would give the US energy secretary at DOE authority to veto decisions related to the uneconomic retirement of coal-fired plants.

Independence of Federal Appointees at FERC

In a highly followed series of court cases impacting the judicial independence of "independent" federal agencies, two recently fired independent board members of the National Labor Relations Board (NLRB), were brought back to work after an appeals court voted that the President cannot fire independent board members without a cause, relying on Supreme Court decision Humphrey’s Executor. This decision is not final, it just reverses the previous judgement of the US Court of Appeals for the District of Columbia Circuit that originally allowed the firings to proceed.
We covered concerns surrounding the independence of FERC in a previous newsletter. The uncertainty surrounding the viability of Humphrey’s Executor under the Trump administration is continuing to sound alarms for potential policy swings at FERC. Generally speaking, politicization adds uncertainty to the procedural process necessary for infrastructure developments, particularly as we switch administrations. Many developers of large energy infrastructure projects are waiting on the sidelines to make an informed assessment about how FERC will preside over their proposed projects, and the extent to which the executive branch may influence those outcomes.

Government Energy Job Losses

On January 20th, the Office of Personnel Management (OPM) sent a memo to federal agencies requesting a list of all probationary employees and asking agencies to consider which of those employees should be retained. This order supports the hiring freeze instated on January 20th, which is set to expire after 90 days on April 20th. These actions, as well as other staffing cuts, are a part of the new administration’s plan to reduce the workforce of the federal government through the Department of Government Efficiency’s (DOGE) Workforce Optimization Initiative.
To date, FERC has not announced staffing cuts and/or major personnel changes impacting other federal agencies.
Other agencies such as DOE and NOAA (DOC) have been reporting staffing reductions between 15-20%

The National Oceanic and Atmospheric Administration (NOAA), which oversees the National Weather Service, laid off 880 recently hired or promoted probationary employees, and plans to fire 1,029 more. Critical weather forecasting services, such as weather balloon launches, were halted due to the shutdown. These launches are especially vital in regions of the United States prone to severe weather, and the lack of data could result in forecasting errors.
Some smaller groups with agencies have been cut back more significantly. The Trump administration laid off the entire 20-person staff of the Low Income Home Energy Assistance Program (LIHEAP), a federal program that provides energy bill assistance for 6.2 million low-income American families. This raises concerns over the $378 million in unreleased LIHEAP funding facing delays, which would put many families in need of emergency help at risk. Groups such as the National Institute of Occupational Health & Safety, which among other things analyzes mine safety and occupational hazards, was almost entirely eliminated, with almost 900 layoffs.
It is widely anticipated that more layoffs are coming. In response to a request from DOGE, the Energy Department submitted a report titled “Agency RIF and Reorganization Planning (ARRP) Phase 1,” estimating that 43% of its 16,000 employees are non-essential.

The Private Sector Impacts

Newly announced jobs in renewable energy are being threatened or removed due to threats or cancellations of clean energy projects across the country. It is estimated that over 40,000 announced jobs have been threatened, delayed, or cancelled since January of this year.
As unpermitted wind projects are threatened and progress is halted, companies like Atlantic Shores and Attentive Energy are letting go of half or more of their staff.

Market Data

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