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Of all the eerie paradoxes of climate change, one of the most unsettling has got to be Christmas shopping in wildfire smoke.
This weekend, ice skaters seeking early holiday cheer in New York’s Bryant Park did so not to the usual scent of honey-roasted nuts but to the reek of brush fires burning in New Jersey, Brooklyn, and the Bronx. When workers hoisted the Rockefeller Center Christmas tree into place on Saturday, they did so in a strange golden wash of sunlight defused through smoke. In Queens, I received an air quality warning while deleting early Black Friday emails from my phone.
The driest October in New York history turned the region into a tinderbox that has produced a whopping 600 fires in the past month. After one erupted in Prospect Park on Friday, the city banned outdoor grilling and told nearby residents to keep their windows closed. An 18-year-old New York State Parks employee died over the weekend while clearing dry underbrush to help fight the 3,000-acre Jennings Creek Fire in the Hudson Valley. And when rain finally did arrive Sunday evening, it marked the first measurable precipitation in the tri-state area since late September — but the 0.18 inches wasn’t enough to alleviate the 6- to 7-inch deficit that has built up over the past two months, city officials have asked New Yorkers “not to flush unnecessarily.”
New Yorkers will be piqued to learn their experience isn’t singular. The U.S. Drought Monitor’s most recent report found that as of the first week of November, every state except Alaska was experiencing “moderate drought” conditions or worse — the greatest number since the Monitor’s record-keeping began.
Brian Fuchs, a climatologist at the National Drought Mitigation Center, which runs the Monitor, told me it’s understandable to wonder where all the rain has suddenly gone. “Three months ago, we only had a little over 21% of the country in drought, and in three months, that’s jumped to just under 52%,” he said.
Much of the country has been warmer than usual since the start of fall, with some areas 10 to 15 degrees Fahrenheit above average “consistently,” Fuchs went on. “I’m in Nebraska, so typically in the fall, I’m thinking, ‘Oh, it’s going to be cool in the morning, I’ll grab a jacket, and maybe some nice sun in the afternoon will warm it up, and then it’s cool in the evenings.’ And a lot of the country has not had that. They’ve really had an extended summer.” Those increased temperatures have also meant increased moisture loss, which is what triggers a formal drought designation.
But while 2024 is on track to be the hottest year on record, the United States is not, in fact, in one giant drought. Rather, “there are different factors” driving several droughts happening simultaneously, Fuchs explained. “It’s not all tied to the same mechanism.”
In the Northeast, for example, the drought is linked to eastward-tracking storms dissipating before they reach the region, as well as activity in the tropics during late September and October, which robbed the atmosphere of moisture and contributed to “a stronger upper high-pressure area dominant over the Ohio Valley, Midwest, Great Lakes,” Paul Pastelok, a senior meteorologist at AccuWeather, wrote to me in an email on Friday. That high-pressure area has acted “like a block to prevent any significant precipitation for weeks in these areas.” It’s also why drought experts expect “potential improvement” in the coming weeks.
There are severe drought conditions across the Southeast, too, which may be a surprise if flooding from Hurricane Helene is still top of mind. But much of that water quickly ran off into streams, rivers, and the ocean, and “since then, there has not been a lot of rain in this area, and the top soil has dried out,” Pastelok said. Other areas experiencing drought include the Southwest, where a mild summer monsoon season has extended emergency declarations, and the central and northern Plains, which have been dry since early September and where drought conditions are expected to last through at least the early winter. Reservoirs in California, meanwhile, are in “great shape” after last winter’s snows; still, due to “months without rain in many areas, the topsoil has dried out, resulting in an abnormal dryness level — a lower category of drought,” Pastelok said.
Brett Anderson, another senior meteorologist at AccuWeather, pointed out that drought is a natural part of the climate cycle, and reassured me, “This is not unprecedented.” He added that there is “no real trend in U.S. drought severity over the past 25 years.”
That doesn’t mean these droughts don’t bear signs of climate change. Fuchs noted that “rapid swings from very wet conditions to very dry conditions, right on top of each other,” is a pattern associated with global warming, and one that can be seen both in the post-Helene dry spell in the Southwest and the deluge last week that broke up a drought in Oklahoma and Missouri, which are having some of their wettest Novembers on record. Anderson also noted that the unusual warmth in many parts of the U.S. has led to “much higher evaporation rates compared to normal,” which also feeds the development of droughts.
As for New York City — again under a red flag warning, this time through Tuesday — there is no rain in the forecast through at least next weekend. If you were looking for a beautiful bluebird day to go ice skating (and can ignore that it’s almost 70 degrees out), then now’s your chance.
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And more of the week’s top news about renewable energy conflicts.
1. Nassau County, New York – Opponents of Equinor’s offshore Empire Wind project are now suing to stop construction after the Trump administration quietly lifted its stop-work order.
2. Somerset County, Maryland – A referendum campaign in rural Maryland seeks to restrict solar development on farmland.
3. Tazewell County, Virginia – An Energix solar project is still in the works in this rural county bordering West Virginia, despite a restrictive ordinance.
4. Allan County, Indiana – This county, which includes portions of Fort Wayne, will be holding a hearing next week on changing its current solar zoning rules.
5. Madison County, Indiana – Elsewhere in Indiana, Invenergy has abandoned the Lone Oak solar project amidst fervent opposition and mounting legal hurdles.
6. Adair County, Missouri – This county may soon be home to the largest solar farm in Missouri and is in talks for another project, despite having a high opposition intensity index in the Heatmap Pro database.
7. Newtown County, Arkansas – A fifth county in Arkansas has now banned wind projects.
8. Oklahoma County, Oklahoma – A data center fight is gaining steam as activists on the ground push to block the center on grounds it would result in new renewable energy projects.
9. Bell County, Texas – Fox News is back in our newsletter, this time for platforming the campaign against solar on land suitable for agriculture.
10. Monterey County, California – The Moss Landing battery fire story continues to develop, as PG&E struggles to restart the remaining battery storage facility remaining on site.
A conversation with Biao Gong of Morningstar
This week’s conversation is with Biao Gong, an analyst with Morningstar who this week published an analysis looking at the credit risks associated with offshore wind projects. Obviously I wanted to talk to him about the situation in the U.S., whether it’s still a place investors consider open for business, and if our country’s actions impact the behavior of others.
The following conversation has been lightly edited for clarity.
What led you to write this analysis?
What prompted me was our experience in assigning [private] ratings to offshore wind projects in Europe and wanted to figure out what was different [for rating] with onshore and offshore wind. It was the result of our recent work, which is private, but we’ve seen the trend – a lot of the big players in the offshore wind space are kind of trying to partner up with private equity firms to sell their interests, their operating offshore wind assets. But to raise that they’ll need credit ratings and we’ve seen those transactions. This is a growing area in Europe, because Europe has to rely on offshore wind to achieve its climate goals and secure their energy independence.
The report goes through risks in many ways, including challenging conditions for construction. Tell me about the challenges that offshore wind faces specifically as an investment risk.
The principle behind offshore wind is so different than onshore wind. You’re converting wind energy to electricity but obviously there are a bunch of areas where we believe it is riskier. That doesn’t mean you can’t fund those projects but you need additional mitigants.
This includes construction risk. It can take three to five years to complete an offshore wind project. The marine condition, the climate condition, you can’t do that [work] throughout the year and you need specialized vehicles, helicopters, crews that are so labor intensive. That’s versus onshore, which is pre-fabricated where you have a foundation and assemble it. Once you have an idea of the geotechnical conditions, the risk is just less.
There’s also the permitting process, which can be very challenging. How do you not interrupt the marine ecosystem? That’s something the regulators pay attention to. It’s definitely more than an onshore project, which means you need other mitigants for the lender to feel comfortable.
With respect to the permitting risk, how much of that is the risk of opposition from vacation towns, environmentalists, fisheries?
To be honest, we usually come in after all the critical permitting is in place, before money is given by a lender, but I also think that on the government’s side, in Europe at least, they probably have to encourage the development. And to put out an auction for an area you can build an offshore wind project, they must’ve gone through their own assessment, right? They can’t put out something that they also think may hurt an ecosystem, but that’s my speculation.
A country that did examine the impacts and offer lots of ocean floor for offshore is the U.S. What’s your take on offshore wind development in our country?
Once again, because we’re a rating agency, we don’t have much insight into early stage projects. But with that, our view is pretty gloomy. It’s like, if you haven’t started a project in the U.S., no one is going to buy it. There’s a bunch of projects already under construction, and there was the Empire Wind stop order that was lifted. I think that’s positive, but only to a degree, right? It just means this project under construction can probably go ahead. Those things will go ahead and have really strong developers with strong balance sheets. But they’re going to face additional headwinds, too, because of tariffs – that’s a different story.
We don’t see anything else going ahead.
Does the U.S. behaving this way impact the view you have for offshore wind in other countries, or is this an isolated thing?
It’s very isolated. Europe is just going full-steam ahead because the advantage here is you can build a wind farm that provides 2 or 3 gigawatts – that’s just massive. China, too. The U.S. is very different – and not just offshore. The entire renewables sector. We could revisit the U.S. four or five years from today, but [the U.S.] is going to be pretty difficult for the renewables sector.
What I’m hearing from developers and CEOs about the renewable energy industry after the Inflation Reduction Act
As the Senate deliberates gutting the Inflation Reduction Act’s clean electricity tax credits, renewable energy developers and industry insiders are split about how bad things might get for the sector. But the consensus is that things will undoubtedly get worse.
Almost everyone I talked to insisted that solar and wind projects further along in construction would be insulated from an IRA repeal. Some even argued that spiking energy demand and other macro tailwinds might buffer the wind and solar industries from the demolition of the law.
But between the lines, and beneath the talking points and hopium, executives are fretting that lots of future investments are in jeopardy. And the most pessimistic take: almost all projects will have their balance sheets and time-tables impacted in some way that’ll at minimum increase their budget costs.
“It’s hard to imagine, if the legislation passes in its current form, that it wouldn’t impact all projects,” said Rob Collier, CEO of renewable energy transaction platform LevelTen.
Even industry analysts with the gloomiest views of the repeal say there’s plenty of projects that will keep chugging along and might even become more valuable to investors if they’re close enough to construction or operation. This aligns with recent analysis from BloombergNEF, which found the House bill would diminish our nation’s renewables build-out – but not entirely end its pace.
“The more useful way to break down which project may be hit the hardest is where the projects are going to fall in their development life-cycle,” Collier said. “Projects that have either started construction or have the ability to start construction … are going to very likely rise in terms of their appeal and attractiveness and those projects will be at a premium, if they’re able to skate through the legislative risk and qualify for tax credits.”
There is a more optimistic industry view that believes increased project costs will just be passed along to consumers via higher electricity prices. The American people will in essence have to pick up the tab where the federal tax code left it. Optimists also cite the increased use of power purchase agreements, or PPAs, between renewables developers and entities who need a lot of electricity, like big tech companies. By signing these PPAs, buyers are subsidizing the construction of projects but also insulating themselves from the risk of rising electricity prices.
The most bullish perspective I heard was from Nick Cohen, the CEO of Doral Renewables, who told me deals like these combined with rising premiums for quick energy on the grid may obviate lost credits in a “zero-incentive environment.”
“It’s not the end of the world,” Cohen told me. “If you’re in construction or you’re going to be in construction very soon, you’re fine.”
But Collier called Cohen’s prediction an “experiment” in customers’ willingness to pay for new energy: “If we’re talking about 40%, 50%, 60% of a project’s capital stack now being at risk because of tax credits, those are pretty large price increases.”
I spoke to multiple companies that have been inking massive deals as this legislation has progressed — although many were not nearly as sanguine about the industry’s future prospects as Doral. Like rPlus Energies, which disclosed last week that it closed a commitment for more than $500 million in tax equity investments for a solar and storage project in Utah. rPlus CEO Luigi Resta told me that the legislation “certainly has posed concern from our investors and from the organization” but the project was so far along that the tax equity investment market wasn’t phased by the bill.
“Many people in my company, myself included, have been doing this for more than 20 years. We’ve seen the starts and stops related to ITC and PTC in solar and wind, in multiple cycles, and this feels like another cycle,” Resta told me. “When the IRA passed, everybody was exuberant. And now the runway looks like it may have a cliff. But for us, our mantra since the beginning of the year has been ‘proceed with caution, preserve and protect.’”
However, crucially, it is important to focus on how that caution looks: Resta told me the company has completely paused new contracting while the company is completing the projects it is currently developing.
One government affairs representative for a large and prominent U.S. renewables developer, who spoke on the condition of anonymity to preserve relationships, told me that “whatever rollback occurs will just result in higher electricity prices over time.” In the near term, the only language that would truly gut projects in progress today would be “foreign entity of concern” restrictions that would broadly impact any component even remotely connected to Chinese industries. Similar language all but kneecapped the entire IRA electric vehicle consumer credit.
“It included definitions of what it means to be a foreign company that were really vague,” the government affairs representative said. “Anyone who does any business with China essentially can’t benefit from the credit. That was a really challenging outcome from the House that hopefully the Senate is going to fix.” If this definition became law, this source said, it would be the final straw that “freezes investment” in renewable energy projects.
Ultimately, after speaking to CEO after CEO this week, I’ve been left with an impression that business activity in renewables hasn’t really subsided after the House bill passed, and that it’ll be the Senate bill that undoubtedly defines the future of renewable energy for years to come.
Whether that chamber remains the “cooling saucer” it once was will be the decider.