Economics

Demand for solar is surging around the world as high oil and gas prices drive an unprecedented acceleration in the global energy transition. The March data from the Chinese customs authority gives us one of the first clear signals of how the world is responding. The direction is unmistakable. Solar exports from China - a leading indicator for global solar adoption - surged in March, doubling to 68 GW. That's equivalent to the total installed solar capacity of Spain. And it's the regions most affected by the unfolding energy crisis that are seeing the sharpest increases in demand. The March data shows just how broad this surge is: ✅ 50 countries set all-time records for solar imports ✅ Exports to Africa rose 176% - in particular Nigeria +519%, Ethiopia +391% and Kenya +207% ✅ Exports to Asia doubled - in particular India +141%, Malaysia +384% and Lao PDR +108% Records were also set in other markets exposed to high fuel costs, including Japan, Australia and the EU. Another trend is emerging. Exports of solar cells and wafers have now overtaken exports of panels, as countries in Africa and Asia begin moving up the value chain, building their own solar manufacturing and assembly capabilities. We're witnessing how quickly countries respond to rising fossil fuel costs and risks – accelerating solar and electrification more broadly.

The latest reporting from the Financial Times highlights a point that energy analysts have been making for years: geopolitical shocks consistently strengthen the case for renewables, electrification and storage. Microsoft’s global vice-president for energy notes that oil and gas price spikes linked to the Middle East conflict reinforce the value of wind, solar and batteries in providing price stability. Once installed, renewables offer predictable cost profiles and reduce exposure to volatile global fuel markets. We saw this dynamic after Russia’s invasion of Ukraine. Europe accelerated solar deployment, heat pump uptake increased in several countries, and governments revisited questions of energy security through the lens of diversification and electrification. The underlying issue remains unchanged. Fossil fuels must continuously flow through complex global supply chains. When those flows are disrupted, prices spike and economies are exposed. Renewables, by contrast, are capital intensive upfront but deliver long term domestic supply and insulation from commodity shocks. There are short term risks. Inflation, higher interest rates and supply chain constraints can slow clean energy investment. Some governments may also respond by doubling down on gas infrastructure. The policy challenge is to avoid locking in further structural vulnerability. Energy security and climate policy are not competing objectives. In a world of recurrent geopolitical instability, they are increasingly aligned.

The Centers for Medicare & Medicaid Services has proposed that Medicare Advantage plan revenues will remain flat going into 2027 at a moment when underlying medical costs, labor expenses, and pharmaceuticals continue to rise materially. What does this mean in practice? For beneficiaries: Over time, beneficiaries should expect less generous benefits, tighter utilization management, and narrower provider networks. Access may become more constrained—not necessarily through explicit benefit cuts, but through fewer participating provider groups and more selective contracting. The tradeoff between affordability and choice will become more acute. For brokers and distribution partners: Distribution costs in Medicare Advantage are largely fixed, particularly commissions and marketing infrastructure. As margins compress, plans will continue to reassess how (and how much) they pay for growth. This may include lower upfront commissions, greater reliance on retention-based compensation, or shifts toward more direct-to-consumer enrollment strategies. For provider groups: Provider organizations seeking rate increases will face a much tougher negotiating environment. With plan revenues constrained, upward pressure on provider rates becomes difficult to absorb. As a result, some provider groups may choose to exit Medicare Advantage entirely, while others will narrow participation to fewer plans. The result may be increased network fragmentation and heightened tension between plans and providers over risk, quality expectations, and total cost of care. For managed care company employees: Cost discipline will extend inward. Plans will be slower to hire, more selective about new investments, and may pursue workforce reductions. Expectations will shift toward higher productivity, flatter organizational structures, and doing more with fewer resources. For Investor-backed Medicare Advantage plans: The economics of growth will change. Longer payback periods, lower internal rates of return, and greater regulatory uncertainty will make Medicare Advantage investments less immediately attractive. Capital will still flow to the sector, but it will be more discriminating, favoring scale, operational excellence, and differentiated capabilities rather than growth at any cost. For small and regional health plans: Scale matters more than ever. Smaller plans will struggle to compete. Many may exit the market or seek partnerships, mergers, or acquisitions. Consolidation pressures are likely to intensify as fixed administrative and compliance costs consume a greater share of revenue. Time will tell whether the rate decisions outlined in the Advance Notice hold through the Final Rule. Regardless of the ultimate number, one thing is clear: Medicare Advantage is entering a period of transition. The era of easy growth is ending, and the next phase will be defined by tradeoffs—between generosity and sustainability, growth and discipline, innovation and affordability.

As expected, the Fed cut rates by 25 basis points and announced an end to quantitative tightening—both steps toward further easing. However, the meeting revealed some notable divisions within the Federal Open Market Committee. One member voted against the rate cut, while another favored a larger, 50 basis point cut. This dissent was a bit unexpected. Chair Powell also highlighted strong differences of opinion about a potential December rate cut and discussed the “neutral rate”—the level at which the Fed is neither stimulating nor restraining the economy. Powell suggested a range between 3 and 4%, higher than the 3% median estimate from FOMC members. These factors led markets to pause and reassess the likelihood and pace of future rate cuts. While markets still anticipate a December cut, the path ahead may be shallower than previously expected. Both stock and bond markets reacted with caution. For investors, this complexity is a sign that the Fed is weighing risks carefully—balancing the dangers of being too easy or too tough in today’s environment.  

🆕 Following extensive consultations with our stakeholders, the European Commission has proposed a Steel Regulation that should help restore balance to the EU #steel market. WHY❓Global overcapacity, driven by non-market policies, is threatening the long-term competitiveness of European steel. In just a decade, the EU's steel trade balance has deteriorated dramatically: from a 11 million tonne surplus to a 10 million tonne deficit. Meanwhile, other economies are rapidly expanding their steel sectors. This is no longer just one country issue. WHAT❗️A new import regime, replacing the current safeguard that expires on 30 June 2026, will: ✔️ Cut the tariff-free import quota by 47%, from 33 million tonnes to 18.3 million tonnes. ✔️ Introduce a prohibitive 50% out-of-quota tariff. ✔️ Imports from all third countries - except our EEA partners - will be covered. ✔️ While importers must disclose where the steel was melted and poured. 🔜 These measures are WTO-compatible, clearly allowed under existing rules. Unlike others, the EU continues to be largely open and will transparently engage with partners under GATT Article XXVIII, offering compensation. We're committed to rules-based trade but must defend our interests. 👉 https://lnkd.in/ecmuXZSD 👉 https://lnkd.in/egGRdXpx EU Trade

Something VERY cool just happened in California and… it could be the future of energy.   On July 29, just as the sun was setting, California’s electric grid was reaching peak demand.   However, instead of ramping up fossil fuel resources, the California Independent System Operator (CAISO) and local utilities decided to lean on a network of thousands of home batteries.   More than 100,000 residential battery systems (made up primarily by Sunrun and Tesla customers) delivered about 535 megawatts of power to California’s grid right as demand peaked, visibly reducing net load (as shown in the graphic).   Now, this may not seem like a lot but 535 megawatts is enough to power more than half of the city of San Francisco and that can make all the difference when a grid is under stress.   This is what’s called a Virtual Power Plant or VPP. It’s a network of distributed energy resources that grid operators can call on in an emergency to provide greater resilience to our energy systems. Homeowners are compensated for the dispatch, grid operators are given another tool for reliability, and ratepayers are saved from instability. It’s a win-win-win.   Now, this was just a test to prepare for other need-based dispatches during heat waves in August and September. But it’ historic.   As homeowners add more solar and storage resources, the impact of these dispatch events will become even more profound and even more necessary. This was the second time this summer that VPPs have been dispatched in California and I expect to see even more as this technology improves.   Shout out to Sunrun, Tesla, and all companies who participated. Keep up the great work.

A couple of news items have me thinking. And frankly, getting a bit agitated. The first was the news that the Kiwisaver gender gap has got worse in the past year. New research from Te Ara Ahunga Ora The Retirement Commission shows a 36 percent gap between the amount men and women are putting into KiwiSaver each year, far outpacing the actual gender pay gap. Men and women are contributing the same percentage of their salaries, but women are disadvantaged by working part-time and taking greater (unpaid) care responsibilities. The other bit of not-unrelated news, is the NZ Herald’s list of top-earning CEOs. Of the top 10 - just one woman. In the 54 CEOs surveyed: seven women. In the immortal words of Carrie Bradshaw: I couldn’t help but wonder… WTF is going on here? How have we not come further? Of those top 10 CEO’s companies, how many are reporting on their gender pay gaps? (The answer, according to the Mind the Gap registry: 4) Is there a relationship between perimenopause/menopause support (or lack of it) and the lack of women in CEO roles in our top organisations? AND between perimenopause/menopause and the Kiwisaver gender gap? I think there might be. We know, for example, from the work of Sarah Hogan who found in her NZIER research that 14% of women said they had to reduce their working hours to manage their menopause symptoms, and 6% had changed roles. Twenty percent of women who experienced symptoms said it would have been helpful to be able to make adjustments, but they never requested any, mostly because of menopause and gendered ageism stigma. All of us who are working in menopause education have heard stories from women who - at a critical stage in their careers in midlife - have made the call to step back rather than step up into senior roles, because of the challenges of menopause and the lack of support for them in their organisations. We have to talk more about this. In fifty years we’ve made so little progress… we REALLY don’t want our granddaughters to be still facing these kinds of shocking statistics in fifty years’ time. 

The European Commission has introduced a new carbon tax on imported goods called the Carbon Border Adjustment Mechanism (CBAM). This is meant to make sure that European companies and companies from other parts of the world are on the same page when it comes to carbon pricing and environmental commitments. Here are the main changes: 🔴 Emissions Reporting: Starting in October this year, companies have to start keeping track of how much carbon is linked to the goods they import. They need to start reporting this data by January 2024. This reporting will continue until the end of 2025. 🔴 Carbon Leakage Prevention: CBAM is a way to prevent companies from moving their production to places with weaker environmental rules to avoid carbon costs. It makes sure that European products and products made outside of Europe have similar carbon costs. 🔴 CBAM Certificates: Importers have to get CBAM certificates to match the carbon pricing between EU and non-EU products. They need to provide details about the product's carbon footprint, where it's from, how it's made, and its emissions data. This includes emissions during production and indirect emissions, like electricity use. 🔴 Covered Sectors: CBAM applies to industries with high carbon emissions like iron and steel, cement, fertilisers, aluminium, electricity, hydrogen, and some downstream products like screws and bolts. It also covers certain indirect emissions under certain conditions. Importers mainly need to report emissions during the transition phase until 2026. To help importers and producers outside of the EU adapt, the EU Commission is providing guidelines and tools to calculate emissions. They're also offering training materials and webinars. Some important data points to consider: 🟢 Carbon Leakage: A study by the European Environmental Bureau warns that unchecked carbon leakage could cause a 15% increase in global emissions, undermining climate efforts. CBAM aims to prevent this. 🟢 Emissions Differences: The World Trade Organization says that different countries have different emissions rules, leading to different carbon costs. CBAM aims to make this fairer. 🟢 Economic Impact: The European Commission estimates that the global carbon allowance market could be worth €4.5 billion per year by 2030. CBAM will significantly affect international trade and revenues. 🟢 Industry Shift: A study by the European Parliament Research Service shows that without CBAM, high-emission industries might move to places with weaker rules, leading to job losses and less competitiveness in the EU. 🟢 Green Transition: The International Monetary Fund says that well-designed carbon pricing like CBAM can encourage industries to become more environmentally friendly, contributing to a greener global economy. 🟢 Regulatory Challenges: CBAM's reporting requirements might be tough for importers initially. However, the long-term benefits of fair carbon pricing are expected to outweigh the challenges.

Amid rising tariffs and shifting geopolitics, the foundations of the rules-based global economy are being redefined. With the US policy shifts, the uncertainty is real. In fact, I just got back from New York, where I met with a number of CEOs – and for the first time, all of them said the same three words: “I don’t know.” It’s clear we’re not going back to “business as usual”. That’s why we felt it was crucial to bring our clients together today to hear from Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong at a closed-door conversation. He’s just been appointed Chairman of the new Singapore Economic Resilience Taskforce, and his perspectives were insightful, as he also listened to the concerns and questions our clients brought to the table. Looking ahead, I believe we’re in for more short-term volatility and uncertainty. My advice to clients: lock in good rates, manage your FX exposure, and address any supply chain constraints. Longer term, we need to think about the new world order more strategically. There are four key areas businesses need to focus on: • Supply Chain – Diversify sources and build in resilience • Logistics – Plan for the possibility of longer routes and ensure continuity • Financial and Payments – Prepare for alternatives beyond USD • Technology – Be ready for dual tech ecosystems and interoperability costs The silver lining is that we are in Singapore. While Asia does bear the brunt of tariffs, it is also home to 18 of the 20 fastest-growing trade corridors. Also, even though we have had slowdowns in our neighbourhood, we are still surrounded by big economies – China, India and Indonesia. Over the years, we’ve walked alongside our clients through many turning points, and we’ll keep showing up, especially when things get tough. Whether it’s navigating treasury decisions, managing volatility, or adapting supply chains. Storms may come, but like Singapore, we’ll stay steady – anchored, open, and here for the long haul.

Energy is once again dominating headlines all over the world. Gas and oil prices are volatile, key shipping routes face geopolitical pressure, and policymakers are concerned about supply risks. The renewed uncertainty is a reminder of an uncomfortable reality: the next energy crisis isn’t an if – it’s a when, and a question of how prepared we are. A defining challenge of this decade, and one that now feels more urgent than ever, is how to build a resilient energy system. One that minimises structural dependencies and is designed for rising electricity demand. The imperative of our time: The more we electrify, the less we import fossil fuels. The less we import, the more resilient we become. The course of action is clear: ▪️ Relentlessly scale renewables: Slowing the buildout will not reduce costs. Quite the opposite – delay compounds system costs for the entire economy. ▪️ Fix the grids: As fast as possible, as efficiently as possible, and at the lowest possible cost. Before they become even more of a bottleneck. ▪️ Secure 24/7 electricity supply: When the wind isn’t blowing and the sun isn’t shining, renewables need reliable backup in the form of battery storage and hydrogen-ready gas fired power plants. But gas should serve only as a backup, with renewables and batteries reducing its utilisation. ▪️ Reduce gas supply dependence with infrastructure and diversification: We must not replace old dependencies with new ones. Diversification of gas supplies is key. And the physical prerequisite is an import infrastructure with buffers. We need the planned LNG terminals, complemented by a nationally held gas reserve to help ensure secure supply in winter. ▪️ Electrify everything that makes sense: The more we can power with mostly homegrown electrons, the less dependent we become on fossil imports. Other energy import-dependent countries like Japan and China have electrification rates that are around 10 percentage points higher than Germany’s. This shows where the path forward lies. Electrification reduces reliance on imported fossil fuels, which in turn strengthens overall resilience. The time to act is now.