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Everything you need to know — including one big (potential) drawback.
The humble water heater, like your fridge or septic tank, is the type of home technology that you only notice if and when it breaks. For most homeowners, that’s every 13 years. But if you’re on a mission to decarbonize your life, you might want to rethink your current set-up, and perhaps consider a makeover. Per the Department of Energy, water heating accounts for roughly 18% of the average household’s energy use, making it the second largest energy expense in any home.
Back in April, the DOE released new residential water heater standards that it says will save American households approximately $7.6 billion per year on their energy bills “while significantly cutting energy waste and harmful carbon pollution.” The standards will also, in effect, phase out electric resistance water heaters, which currently account for half the U.S. market, in favor of more energy-efficient heat pump water heaters by 2029. If any of that confuses you, read on. We’re breaking down everything you need to know about this oft-forgotten, basement-dwelling home technology, from the taxonomy of water heater types to tax credit and rebate tips to product recommendations.
Andy Meyer is a senior program manager at Efficiency Maine, an independent agency that implements energy efficiency programs in the state. His team is responsible for providing resources on heat pump water heaters to Maine residents, who buy one out of every 10 purchased in the U.S.
Ben Foster is vice president of operations at Barnett Plumbing & Water Heaters, a leading heat pump water heater contractor in California. He’s also developed loaner water heater programs supported by TECH Clean California, and notes that most contractors don’t have access to loaner programs:
Joseph Wachunas is a senior project manager at the New Buildings Institute, a nonprofit working to reduce emissions and deliver climate solutions through the built environment. At NBI, he heads up the Advanced Water Heating Initiative, which aims to decarbonize water heating through heat pump water heaters.
“Heat pump water heaters are simple to install — any plumber or handy person can do it — but plumbers may not be familiar with them. So if you talk with a plumber who has concerns, consider calling another plumber,” Meyer told me. “Again, Mainers have installed over 70,000 in the last 12 years. They are no longer new.”
A heat pump water heater is made up of a compressor, storage tank, condenser, evaporator coil, fan, backup heating elements, and refrigerant. The compressor, located in the upper compartment of the water heater, uses refrigerant to heat the water in the storage tank (via the condenser, which acts as a heat exchanger). The evaporator coil and fan work to change refrigerant from liquid back to gas after the water has been heated. The backup electric heating elements kick in only in periods of high demand to ensure consistent hot water supply.
A common misconception about heat pumps in general is that they don’t work in colder climates. This is not at all the case — half of electric water heaters in Maine, for instance, are now heat pumps. As long as they are installed indoors and in an area where pipes won’t freeze (typically, a basement), heat pump water heaters work throughout the year in all climates, according to Meyer and Wachunas. The rule of thumb, per the DOE, is to install your heat pump water heater in locations that remain in the 40 degree to 90 degree Fahrenheit range year-round.
Per the DOE, replacing your standard electric water heater with a heat pump water heater can save you up to 10% on your electricity bill, reducing your water heating energy consumption and costs by up to 70%.
The number one mistake homeowners make when it comes to their water heaters is waiting until they’re broken to replace them. This severely limits your options for new water heaters — as Foster notes, no one “wants to go days without hot water, let alone weeks,” and it can take weeks or even months to fit your home for a heat pump water heater. (We’ll get into why a bit later.)
“A lot of contractors, if you want a heat pump and you have a leaking water heater that needs to be replaced today, they're just going to convince you to go with gas,” Foster said.
Some contractors have loaner water heater programs, so you can temporarily use a gas heater in an emergency situation, but these programs are few and far between. If you’ve had your water heater for 10 years or more — even if it’s working just fine — it might be time to think about replacing it. If you do, you’ll need to consider a few things about your home and lifestyle, especially if you’re considering a heat pump water heater:
Heat pump water heaters require a significant amount of space. Per Pacific Northwest National Laboratory, heat pump water heaters can require more than 6 feet of height clearance to account for their air filters, as well as a 3-foot diameter space to provide clearance for the drain pan and other connections. Additionally, the heat pump water heater should be positioned so the exhaust outlet is at least 8 inches away from a wall, door, or ceiling.
Also, since heat pump water heaters work by drawing heat from the surrounding air, they require 700 cubic feet of unenclosed space surrounding the water heater location. While it is possible to install a heat pump water heater in a location with insufficient air volume (for instance, by installing the water heater with a door equipped with top and bottom grills), this would require extra work from your contractor. Taking all these measurements into account, this basically means that a heat pump water heater requires a 10-foot by 9-foot room with an 8-foot-tall ceiling.
Heat pump water heaters also require monthly and yearly service, Meyer told me. You should change the water filter every two to six months, and clear the condensate lines to ensure your unit doesn’t get clogged with mold or bacteria. Additionally, if your unit is a hybrid, you’ll have to keep an eye on its anode rod, which can become corroded over time and lead to heating issues. You’ll have to flush your heat pump water heater annually to avoid corrosion.
If you’re going to DIY it, understanding your household’s water needs is key to sizing and installing a new heat pump water heater. First, determine your house’s peak hour demand (the maximum amount of water your house uses in one hour per day) using this worksheet from the DOE. You can then use that number (measured in gallons) to determine what size heat water heater to buy — look at the heater’s first hour rating, a.k.a. the amount of hot water the heater can supply per hour, starting with a tank full of hot water. You’ll want your heater’s first hour rating to be equal to (or ideally, higher than) your peak hour demand.
Though you should use the worksheet to determine your unique peak hour demand, a general rule is that households of one to two people should use a 50-gallon water heater, while households of three or more people should use a 65- to 80-gallon tank. The average family uses 50 gallons of hot water per day, Wachunas explained. “So even if you have lots of showers in the morning, your heat pump in two to four hours will heat that water back up and you have plenty of extra supply.”
If you’re between two sizes of heat pump water heaters, always upsize, Foster said. This ensures that the heat pump is the primary source of heat, as opposed to the much less efficient backup electric mechanisms. In other words, it’s far more efficient (and less expensive!) for a larger heat pump water heater to heat a few extra gallons of water using the heat pump than it is for a smaller heat pump water heater to have to use its electric elements to keep up with excess demand.
Since many heat pump water heaters have certain voltage requirements, you may have to upgrade your electrical panel for 240-volt hardwired service. The cost and time involved in having your service upgraded can vary and depends on whether the power lines coming into your house are above ground. If they’re underground, Foster explained, a contractor will have to excavate and run new cables, which can take over a year. The best way to determine if you’ll need to upgrade your service is to have a trusted contractor do an assessment on your home. (This is also why it’s essential to plan in advance.)
Basements are always the best places for heat pump water heaters, regardless of climate. Other common locations for installation include garages, interior rooms, and rooms outside the thermal envelope, like attached sheds and utility rooms. The garage does not have to be insulated if outdoor temperatures are usually above 50°F, but if temperatures dip below freezing and the garage is uninsulated, it’d be best to consider another location. Interior rooms, like laundry or IT rooms, are a great choice because a heat pump water heater can utilize any waste heat generated by the equipment in the room. Finally, rooms outside the thermal envelope, like attached sheds, can be even more efficient than interior spaces in hot or warm climates because of the excess hot air.
Feeling ready to go shopping? Here’s everything you need to know about the buying and installation process.
This plug-in model caused quite a stir when it came out two years ago, and for good reason. Its low voltage allows it to be plugged into a standard outlet, making it a great fit for smaller homes with fewer residents, or anyone in need of a quick fix. (This is also a relatively foolproof choice for DIYers because of the quick and easy installation process.) For those wanting a model with a bit more flexibility but still an easy install, there’s the A.O. Smith Signature 900Plug-in Hybrid, which is more expensive but has the added benefit of back-up electric resistance elements that help with higher hot water demand. Alternatively, you can go for the 120-Volt Rheem ProTerra Plug-in Water Heater with HydroBoost, which utilizes a mixing valve for maximum hot water output.
If app functionality is especially important to you, Rheem’s ProTerra line might be particularly appealing. The EcoNet app allows users to monitor the hot water heater from their phone, with status updates on potential leaks as well as compressor health, hot water availability and the unit’s set water temperature.
Another solid choice for larger families, for roughly the same price, is A.O. Smith’s Signature 900 80-Gal.For further durability, consider Bradford White’s Aerotherm Series water heaters, which can only be purchased through a qualified contractor, but are frequently praised for their resilience and anti-microbial technology.
Split-system heat pump water heaters are the answer for truly huge houses, where the heat pump itself is outside while the storage tank remains inside. “You can chain together as many heat pump units as you want with as many storage tanks as you want,” Foster said. “So you can create as big a system as you want.” While split-system heat pump water heaters are much less widely-available in the U.S. than they are in Asia and Europe, you can purchase this one online. SANCO is also shipping a new fifth generation unit soon, Quit Carbon advises, which may prove more cost-effective and will qualify for more rebates in California.
The quietest HPWH on the market, at 45 decibels, is made by A.O. Smith, according to Foster. It’s available in 50, 65, and 80 gallon sizes, so it can accommodate a variety of household types. Another quiet option is LG’s Inverter Heat Pump Water Heater, though LG is much newer to the heat pump water heater game than Rheem and A.O. Smith, so it may be more difficult to find qualified contractors.
Three more expert contractors I spoke with — Nate Adams, a longtime HVAC insulation and sealing contractor in West Virginia who specializes in electrification retrofits for homeowners; John Semmelhack, an HVAC consultant and the owner of Think Little, a building science consulting firm specializing in mechanical system design for passive house and net-zero energy homes; and Tim Portman, the owner of Portman Mechanical, specializing in electrification, heating and cooling, and home performance — had concerns about heat pump water heater installations.
Adams said heaters he’s installed have had a 50% failure rate, while Portman and Semmelhack cite a 60% failure rate. These issues have seemingly cropped up after 2018 and are almost entirely occurring with A.O. Smith and Rheem’s fifth generation of water heater models; older generations performed and continue to perform much better. “All my installs from 2014-2018 are still running to my knowledge,” says Adams. “Which is a big part of my frustration— we had this figured out already.”
The specific causes of these failures vary, spanning from tanks bursting to heat pumps losing charge, according to Adams. Semmelhack and Portman, meanwhile, pointed mainly to refrigerant leaks and compressor issues. (A.O. Smith and Rheem did not respond to requests for comment.) “All of the failures are happening inside the first year of operation,” noted Semmelhack. “So it's happening pretty quick, which makes us think that it's a factory problem and not an environmental problem inside the household.”
Semmelhack and Portman are hopeful about Cala’s new heat pump water heaters, which use an AI-powered control system to forecast hot water demand and heat the water in the tank accordingly with a heat pump. They’re aiming to start shipping those units in 2025, and you can preorder and learn more here.
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The EV-maker is now a culture war totem, plus some AI.
During Alan Greenspan’s decade-plus run leading the Federal Reserve, investors and the financial media were convinced that there was a “Greenspan put” underlying the stock market. The basic idea was that if the markets fell too much or too sharply, the Fed would intervene and put a floor on prices analogous to a “put” option on a stock, which allows an investor to sell a stock at a specific price, even if it’s currently selling for less. The existence of this put — which was, to be clear, never a stated policy — was thought to push stock prices up, as it gave investors more confidence that their assets could only fall so far.
While current Fed Chair Jerome Powell would be loath to comment on a specific volatile security, we may be seeing the emergence of a kind of sociopolitical put for Tesla, one coming from the White House and conservative media instead of the Federal Reserve.
The company’s high-flying stock shed over $100 billion of value on Monday, falling around 15% and leaving the price down around 50% from its previous all-time high. While the market as a whole also swooned, especially high-value technology companies like Nvidia and Meta, Tesla was the worst hit. Analysts attributed the particularly steep fall to concerns that CEO Elon Musk was spending too much time in Washington, and that the politicization of the brand had made it toxic to buyers in Europe and among liberals in the United States.
Then the cavalry came in. Sean Hannity told his Fox News audience that he had bought a Model S, while President Donald Trump posted on Truth Social that “I’m going to buy a brand new Tesla tomorrow morning as a show of confidence and support for Elon Musk, a truly great American.” By this afternoon, Trump had turned the White House lawn into a sales floor for Musk’s electric vehicles. Tesla shares closed the day up almost 4%, while the market overall closed down after Trump and his advisors’ furious whiplash policy pronouncements on tariffs.
Whether the Tesla put succeeds remains to be seen. The stock is still well, well below its all-time highs, but it may confirm a new way to understand Tesla — not as a company that sells electric vehicles to people concerned about climate change, but rather as a conservative culture war totem that has also made sizable investments in artificial intelligence and robotics.
When Musk bought Twitter and devoted more of his time, energy, money, and public pronouncements to right wing politics, some observers thought that maybe he could lift the dreadful image of electric vehicles among Trump voters. But when Pew did a survey on public attitudes towards electric vehicles back in 2023, it found that “Democrats and Democratic-leaning independents, younger adults, and people living in urban areas are among the most likely to say they would consider purchasing an EV” — hardly a broad swathe of Trump’s America. More than two-thirds of Republicans surveyed said they weren’t interested in buying an electric car, compared to 30% of Democrats.
On the campaign trail, Trump regularly lambasted EVs, although by the end of the campaign, as Musk’s support became more voluminous, he’s lightened up a bit. In any case, the Biden administration’s pro-electric-vehicle policies were an early target for the Trump administration, and the consumer subsidies for EVs passed under the 2022 Inflation Reduction Act are widely considered to be one of the softest targets for repeal.
But newer data shows that the tide may be turning, not so much for electric vehicles, but likely for Tesla itself.
The Wall Street Journalreported survey data last week showing that only 13% of Democrats would consider buying a Tesla, down from 23% from August of 2023, while 26% of Republicans would consider buying a Tesla, up from 15%. Vehicle registration data cited by the Journal suggested a shift in new Tesla purchases from liberal urban areas such as New York, San Francisco, and Los Angeles, towards more conservative-friendly metropolises like Las Vegas, Salt Lake City, and Miami.
At the same time, many Tesla investors appear to be mostly seeing through the gyrations in the famously volatile stock and relatively unconcerned about month-to-month or quarter-to-quarter sales data. After all, even after the epic fall in Tesla’s stock price, the company is still worth over $700 billion, more than Toyota, General Motors, and Ford combined, each of which sells several times more cars per year than Tesla.
Many investors simply do not view Tesla as a luxury or mass market automaker, instead seeing it as an artificial intelligence and robotics company. When I speak to individual Tesla shareholders, they’re always telling me how great Full Self-Driving is, not how many cars they expect the company to sell in August. In many cases, Musk has made Tesla stockholders a lot of money, so they’re willing to cut him tremendous slack and generally believe that he has the future figured out.
Longtime Tesla investor Ron Baron, who bought hundreds of millions of dollars worth of shares from 2014 to 2016, told CNBC Tuesday morning, that Musk “believes that digitization [and] autonomy is going to be driving the future. And he thinks we’re … on the verge of having an era of incredible abundance.”Baron also committed that he hasn’t, won’t, and will never sell. “I’m the last in, I’ll be the last out. So I won’t sell a single share personally until I sell all the shares for clients, and that’s what I’ve done.”
Wedbush Securities’ Dan Ives, one of the biggest Tesla bulls on the street, has told clients that he expects Tesla’s valuation to exceed $2 trillion, and that its self-driving and robotics business “will represent 90% of the valuation.”
Another longtime Tesla bull, Morgan Stanley’s Adam Jonas, told clients in a note Monday that Tesla remained a “Top Pick,” and that his price target was still $430, compared to the stock’s $230.58 close price on the day. His bull case, he said, was $800, which would give the company a valuation over $2.5 trillion.
When the stock lags, Jonas wrote, investors see Tesla as a car company. “In December with the stock testing $500/share, the prevailing sentiment was that the company is an AI ‘winner’ with untapped exposure to embodied AI expressions such as humanoid robotics,” Jonas wrote. “Today with the stock down 50% our investor conversations are focused on management distraction, brand degradation and lost auto sales.”
In a note to clients Tuesday, Ives beseeched Musk to “step up as CEO,” and lamented that there has been “little to no sign of Musk at any Tesla factory or manufacturing facility the last two months.” But his bullishness for Tesla was undaunted. He argued that the scheduled launch of unsupervised Full Self-Driving in June “kicks off the autonomous era at Tesla that we value at $1 trillion alone on a sum-of-the-parts valuation.”
“Autonomous will be the biggest transformation to the auto industry in modern day history,” Ives wrote, “and in our view Tesla will own the autonomous market in the U.S. and globally.”
The most effective put of all may not be anything Trump says or does, but rather investors’ optimism about the future — as long as it’s Elon Musk’s future.
The uncertainty created by Trump’s erratic policymaking could not have come at a worse time for the industry.
This is the second story in a Heatmap series on the “green freeze” under Trump.
Climate tech investment rode to record highs during the Biden administration, supercharged by a surge in ESG investing and net-zero commitments, the passage of the Infrastructure Investment and Jobs Act and Inflation Reduction Act, and at least initially, low interest rates. Though the market had already dropped somewhat from its recent peak, climate tech investors told me that the Trump administration is now shepherding in a detrimental overcorrection. The president’s fossil fuel-friendly rhetoric, dubiously legal IIJA and IRA funding freezes, and aggressive tariffs, have left climate tech startups in the worst possible place: a state of deep uncertainty.
“Uncertainty is the enemy of economic progress,” Andrew Beebe, managing director at Obvious Ventures, told me.
The lack of clarity is understandably causing investors to throw on the brakes. “We’ve talked internally about, let’s be a little bit more cautious, let’s be a little more judicious with our dollars right now,” Gabriel Kra, co-founder at the climate tech firm Prelude Ventures, told me. “We’re not out in the market, but I would think this would be a really tough time to try and go out and raise a new fund.”
This reluctance comes at a particularly bad time for climate tech startups, many of which are now reaching a point where they are ready to scale up and build first-of-a-kind infrastructure projects and factories. That takes serious capital, the kind that wasn’t as necessary during Trump’s first term, or even much of Biden’s, when many of these companies were in a more nascent research and development or proof-of-concept stage.
I also heard from investors that the pace of Trump’s actions and the extent of the economic upheaval across every sector feels unique this time around. “We’re entering a pretty different economic construct,” Beebe told me, citing the swirling unknowns around how Trump’s policies will impact economic indicators such as inflation and interest rates. “We haven’t seen this kind of economic warfare in decades,” he said.
Even before Trump took office, it was notoriously difficult for climate companies to raise funding in the so-called “missing middle,” when startups are too mature for early-stage venture capital but not mature enough for traditional infrastructure investors to take a bet on them. This is exactly the point at which government support — say, a loan guarantee from the Department of Energy’s Loan Programs Office or a grant from the DOE’s Office of Clean Energy Demonstrations — could be most useful in helping a company prove its commercial viability.
But now that Trump has frozen funding — even some that’s been contractually obligated — companies are left with fewer options than ever to reach scale.
One investor who wished to remain anonymous in order to speak more openly told me that “a lot of the missing middle companies are living in a dicier world.” A 2023 white paper on “capital imbalances in the energy transition” from S2G Investments, a firm that supports both early-stage and growth-stage companies, found that from 2017 to 2022, only 20% of climate capital flowed toward companies at this critical inflection point, while 43% went to early-stage companies and 37% towards established technologies. For companies at this precarious growth stage, a funding delay on the order of months could be the difference between life and death, the investor added. Many of these companies may also be reliant on debt financing, they explained. “Unless they’ve been extremely disciplined, they could run into a situation where they’re just not able to service that debt.”
The months or even years that it could take for Trump’s rash funding rescission to wind through the courts will end up killing some companies, Beebe told me. “And unfortunately, that’s what people on the other side of this debate would like, is just to litigate and escalate. And even if they ultimately lose, they’ve won, because startups just don’t have the balance sheets that big companies would,” he explained.
Kra’s Prelude Ventures has a number of prominent companies in its portfolio that have benefitted from DOE grants. This includes Electric Hydrogen, which received a $43.3 million DOE grant to scale electrolyzer manufacturing; Form Energy, which received $150 million to help build a long-duration battery storage manufacturing plant; Boston Metal, which was awarded $50 million for a green steel facility; and Heirloom, which is a part of the $600 million Project Cypress Direct Air Capture hub. DOE funding is often doled out in tranches, with some usually provided upfront and further payments tied to specific project milestones. So even if a grant has officially been awarded, that doesn’t mean all of the funding has been disbursed, giving the Trump administration an opening to break government contracts and claw it back.
Kra told me that a few of his firm’s companies were on the verge of securing government funding before Trump took office, or have a project in the works that is now on hold. “We and the board are working closely with those companies to figure out what to do,” he told me. “If the mandates or supports aren’t there for that company, you’ve got to figure out how to make that cash last a bunch longer so you can still meet some commercially meaningful milestones.”
In this environment, Kra said his firm will be taking a closer look at companies that claim they will be able to attract federal funds. “Let’s make sure we understand what they can do without that non-dilutive capital, without those grants, without that project level support,” he told me, noting that “several” companies in his portfolio will also be impacted by Trump’s ever-changing tariffs on imports from Canada, Mexico, and China. Prelude Ventures is working with its portfolio companies to figure how to “smooth out the hit,” Kra told me later via email, but inevitably the tariffs “will affect the prices consumers pay in the short and long run.”
While investors can’t avoid the impacts of all government policies and impulses, the growth-stage firm G2 Venture Partners has long tried to inoculate itself against the vicissitudes of government financing. “None of our companies actually have any exposure to DOE loans,” Brook Porter, a partner and co-founder at G2, told me in an email, nor have they received government grants. If you add up the revenue from all of the companies in G2’s portfolio, which is made up mainly of sustainability-focused startups, only about 3% “has any exposure to the IRA,” Porter told me. So even if the law’s generous clean energy tax credits are slashed or the programs it supports are left to languish, G2’s companies will likely soldier on.
Then there are the venture capitalists themselves. Many of the investors I spoke with emphasized that not all firms will have the ability or will to weather this storm. “I definitely believe many generalist funds who dabbled in climate will pull back,” Beebe told me. Porter agreed. “The generalists are much more interested in AI, then I think in climate,” he said. It’s not as if there’s been a rash of generalist investors announcing pullbacks, though Kra told me he knows of “a couple of firms” that are rethinking their climate investment strategies, potentially opting to fold these investments under an umbrella category such as “hard tech” instead of highlighting a sectoral focus on energy or climate, specifically.
Last month, the investment firm Coatue, which has about $70 billion in assets under management, raised around $250 million for a climate-focused fund, showing it’s not all doom and gloom for the generalists’ climate ambitions. But Porter told me this is exactly the type of large firm he wouldexpect to back out soon, citing Tiger Global Management and Softbank as others that started investing heavily during climate tech’s boom years from 2020 to 2022 that he could imagine winding down that line of business.
Strategic investors such as oil companies have also been quick to dial back their clean energy ambitions and refocus their sights on the fossil fuels championed by the Trump administration. “Corporate venture is very cyclical,” Beebe told me, explaining that large companies tend to make venture investments when they have excess budget or when a sector looks hot, but tighten the purse strings during periods of uncertainty.
But Cody Simms, a managing partner at the climate tech investment firm MCJ, told me that at the moment, he actually sees the corporate venture ecosystem as “quite strong and quite active.” The firm’s investments include the low-carbon cement company Sublime Systems, which last year got strategic backing from two of the world’s largest building materials companies, and the methane capture company Windfall Bio, which has received strategic funding from Amazon’s Climate Pledge Fund. Simms noted that this momentum could represent an overexuberance among corporations who just recently stood up their climate-focused venture arms, and “we’ll see if it continues into the next few years.”
Notably, Sublime and Windfall Bio both also have millions in DOE grants, and another of MCJ’s portfolio companies, bio-based chemicals maker Solugen, has a “conditional commitment” from the LPO for a loan guarantee of over $200 million. Since that money isn’t yet obligated, there’s a good chance it might never actually materialize, which could stall construction on the company’s in-progress biomanufacturing facility.
Simms told me that the main thing he’s encouraging MCJ’s portfolio companies to do at this stage is to contact their local representatives — not to advocate for climate action in general, but rather “to push on the very specific tax credit that they are planning to use and to talk about how it creates jobs locally in their districts.”
Getting startups to shift the narrative away from decarbonization and climate and toward their multitudinous co-benefits — from energy security to supply chain resilience — is of course a strategy many are already deploying to one degree or another. And investors were quick to remind me that the landscape may not be quite as bleak as it appears.
“We’ve made more investments, and we have a pipeline of more attractive investments now than we have in the last couple of years,” Porter told me. That’s because in spite of whatever havoc the Trump administration is wreaking, a lot of climate tech companies are reaching a critical juncture that could position the sector overall for “a record number of IPOs this year and next,” Porter said. The question is, “will these macro uncertainties — political, economic, financial uncertainty — hold companies back from going public?”
As with so many economic downturns and periods of instability, investors also see this as a moment for the true blue startups and venture capitalists to prove their worth and business acumen in an environment that’s working against them. “Now we have the hardcore founders, the people who really are driven by building economically viable, long-term, massively impactful companies, and the investors who understand the markets very well, coming together around clean business models that aren’t dependent on swinging from one subsidy vine to the next subsidy vine,” Beebe told me.
“There is no opportunity that’s an absolute no, even in this current situation, across the entire space,” the anonymous climate tech investor told me. “And so this might be one of the most important points — I won’t say a high point, necessarily — but it might be a moment of truth that the energy transition needs to embrace.”
On the energy secretary’s keynote, Ontario’s electricity surcharge, and record solar power
Current conditions: Critical fire weather returns to New Mexico and Texas and will remain through Saturday • Sharks have been spotted in flooded canals along Australia’s Gold Coast after Cyclone Alfred dropped more than two feet of rain • A tanker carrying jet fuel is still burning after it collided with a cargo ship in the North Sea yesterday. The ship was transporting toxic chemicals that could devastate ecosystems along England’s northeast coast.
In a keynote speech at the energy industry’s annual CERAWeek conference, Energy Secretary Chris Wright told executives and policymakers that the Trump administration sees climate change as “a side effect of building the modern world,” and said that “everything in life involves trade-offs." He pledged to “end the Biden administration’s irrational, quasi-religious policies on climate change” and insisted he’s not a climate change denier, but rather a “climate realist.” According toThe New York Times, “Mr. Wright’s speech was greeted with enthusiastic applause.” Wright also reportedly told fossil fuel bosses he intended to speed up permitting for their projects.
Other things overheard at Day 1 of CERAWeek:
The premier of Canada’s Ontario province announced he is hiking fees on electricity exported to the U.S. by 25%, escalating the trade war kicked off by President Trump’s tariffs on Canadian goods, including a 10% tariff on Canadian energy resources. The decision could affect prices in Minnesota, New York, and Michigan, which get some of their electricity from the province. Ontario Premier Doug Ford estimated the surcharge will add about $70 to the monthly bills of affected customers. “I will not hesitate to increase this charge,” Ford said. “If the United States escalates, I will not hesitate to shut the electricity off completely.” The U.S. tariffs went into effect on March 4. Trump issued another 30-day pause just days later, but Ford said Ontario “will not relent” until the threat of tariffs is gone for good.
There was a lot of news from the White House yesterday that relates to climate and the energy transition. Here’s a quick rundown:
The EPA cancelled hundreds of environmental justice grants: EPA Administrator Lee Zeldin and Elon Musk’s so-called Department of Government Efficiency nixed 400 grants across environmental justice programs and diversity, equity, and inclusion programs worth $1.7 billion. Zeldin said this round of cuts “was our biggest yet.”
Transportation Secretary Sean Duffy rescinded Biden memos about infrastructure projects: The two memos encouraged states to prioritize climate change resilience in infrastructure projects funded by the Bipartisan Infrastructure Law, and to include under-represented groups when planning projects.
The military ended funding for climate studies: This one technically broke on Friday. The Department of Defense is scrapping its funding for social science research, which covers climate change studies. In a post on X, Defense Secretary Pete Hegseth said DOD “does not do climate change crap. We do training and war fighting.”
Meanwhile, a second nonprofit – the Coalition for Green Capital – filed a lawsuit against Citibank over climate grant money awarded under the Inflation Reduction Act but frozen by Zeldin’s EPA. Climate United filed a similar lawsuit (but targeting the EPA, as well as Citibank) on Saturday.
A new report from the Princeton ZERO Lab’s REPEAT Project examines the potential consequences of the Trump administration’s plans to kill existing EV tax credits and repeal EPA tailpipe regulations. It finds that, compared to a scenario in which the current policies are kept in place:
“In other words, killing the IRA tax credits for EVs will decimate the nascent renaissance in vehicle and battery manufacturing investment and employment we’re currently seeing play out across the United States,” said Jesse Jenkins, an assistant professor and expert in energy systems engineering and policy at Princeton University and head of the REPEAT Project. (Jenkins is also the co-host of Heatmap’s Shift Key podcast.)
REPEAT Project
The U.S. installed nearly 50 gigawatts of new solar power capacity last year, up 21% from 2023, according to a new report from the Solar Energy Industries Association (SEIA) and Wood Mackenzie. That’s a record, and the largest annual grid capacity increase from any energy technology in the U.S. in more than 20 years. Combined with storage, solar represents 84% of all new grid capacity added in 2024.
SEIA and Wood Mackenzie
Last year was “the year of materialization of the IRA,” with supply chains becoming more resilient and interest from utilities and corporate buyers growing. Installations are expected to remain steady this year, with little growth, because of policy uncertainty. Total U.S. solar capacity is expected to reach 739 GW by 2035, but this depends on policy. The worst case scenario shows a 130 GW decline in deployment through 2035, which would represent $250 billion in lost investments.
“Last year’s record-level of installations was aided by several solar policies and credits within the Inflation Reduction Act that helped drive interest in the solar market,” said Sylvia Levya Martinez, a principal analyst of North America utility-scale solar for Wood Mackenzie. “We still have many challenges ahead, including unprecedented load growth on the power grid. If many of these policies were eliminated or significantly altered, it would be very detrimental to the industry’s continued growth.”
Tesla shares plunged yesterday by 15%, marking the company’s worst day on the market since 2020 and erasing its post-election stock bump.