Fighting Words: The Energy Transition in 2026 | Michael Cembalest | J.P.Morgan | Report

1. TL;DR

• Downgrade pure-play energy transition momentum: Renewables and EVs face severe economic friction, as solar-plus-storage remains structurally more expensive than natural gas baseload, and reduced Trump Administration subsidies threaten to stall US decarbonization efforts (p. 2).

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2. Key Findings

• Utility-scale solar paired with storage remains more expensive than an all-natural gas system, even when factoring in 40% ITC subsidies (p. 46).
• The global EV industry is largely profitless, with legacy manufacturers and startups suffering deeply negative operating margins (p. 65).
• Reduced Trump Administration subsidies for wind, solar, and EVs will likely pin the US in the middle of the pack for global energy decarbonization (p. 2).
• Geothermal power (flash/binary) provides baseload capacity, but its LCOE of $70–$103/MWh remains more expensive than wind and solar (p. 56).
• A Strait of Hormuz closure would disrupt 20% of global oil consumption, but only 3% of global natural gas consumption (p. 3).
• Despite global transition efforts, atmospheric CO2 emissions are currently rising faster than at any time in modern history (p. 86).

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3. Macro / Sector Context