You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
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 900 Plug-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.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
The assembly line is the company’s signature innovation. Now it’s trying to one-up itself with the Universal EV Production System.
In 2027, Ford says, it will deliver a $30,000 mid-size all-electric truck. That alone would be a breakthrough in a segment where EVs have struggled against high costs and lagging interest from buyers.
But the company’s big announcement on Monday isn’t (just) about the truck. The promised pickup is part of Ford’s big plan that it has pegged as a “Model T moment” for electric vehicles. The Detroit giant says it is about to reimagine the entire way it builds EVs to cut costs, turn around its struggling EV division, and truly compete with the likes of Tesla.
What lies beneath the new affordable truck — which will revive the retro name Ford Ranchero, if rumors are true — is a new setup called the Ford Universal EV Platform. When car companies talk about a platform, they mean the automotive guts that can be shared between various models, a strategy that cuts costs compared to building everything from scratch for each vehicle. Tesla’s Model 3 and Model Y ride on the same platform, the latter being essentially a taller version of the former. Ford’s rival, General Motors, created the Ultium platform that has allowed it to build better and more affordable EVs like the Chevy Equinox and the upcoming revival of the Bolt. In Ford’s case, it says a truck, a van, a three-row SUV, and a small crossover can share the modular platform.
At the heart of the company’s plan, however, is a new manufacturing approach. The innovation of the original Model T was about the factory, after all — using the assembly line to cut production costs and lower the price of the car. For this “Model T moment,” the company has proposed a sea change in the way it builds EVs called the Ford Universal EV Production System. It will demonstrate the strategy with a $2 billion upgrade to the Ford factory in Louisville, Kentucky, that will build the new pickup.
In brief, Ford has embraced the more minimalist, software-driven version of car design embraced by EV-only companies like Tesla and Rivian. The vehicles themselves are mechanically simpler, with fewer buttons and parts, and more functions are controlled by software through touchscreen interfaces. Building cars this way cuts costs because you need far fewer bits, bobs, fasteners, and workstations in the factory. It also reduces the amount of wiring in the vehicle — by more than a kilometer of the stuff compared to the Mustang Mach-E, Ford’s current most popular EV, the company said.
Ford is in dire need of an electric turnaround. The company got into the EV race earlier than legacy car companies like Toyota and Subaru, which settled on more of a wait-and-see approach. Its Mustang Mach-E crossover has been one of the more successful non-Tesla EVs of the early 2020s; the F-150 Lightning proved that the full-size pickup truck that dominates American car sales could go electric, too.
But both vehicles were expensive to make, and the Lightning struggled to make a dent in the truck market, in part because the huge battery needed to power such a big vehicle gave it a bloated price. When Tesla started a price war in the EV market a few years ago, Ford began hemorrhaging billions from its electric division, struggling to adapt to the new world even as carmakers like GM and Hyundai/Kia found their footing.
The big Detroit brand has been looking for an answer ever since, and Monday’s announcement is the most promising proposal it has put forward. Part of the production scheme is for Ford to build its own line of next-gen lithium-ion phosphate, or LFP batteries in Michigan, using technology licensed from the Chinese giant CATL. Another step is to employ the “assembly tree,” which splits the traditional assembly line into three parallel operations, which Ford says reduces the number of required workstations and cuts assembly time by 15%.
Affordability has always been a bugaboo for the American EV industry, a worry exacerbated by the upcoming demise of the $7,500 tax credit. And while Ford’s manufacturing overall will go a long way toward building a light-duty pickup EV that sells for $30,000, so too will a fundamental change in thinking about batteries, weight, and range. The F-150 Lightning isn’t the only pickup with a big battery and an even bigger price. That truck’s power pack comes in at 98 kilowatt-hours; large EV pickups like the Rivian R1T and Chevy Silverado EV have 150 or even 200 kilowatt-hour batteries, necessary to store enough power to give these heavy beasts a decent driving range.
InsideEVs reports, however, that the affordable Ford truck may have a battery capacity of just over 50 kilowatt-hours, which would dramatically reduce its cost to make. The trade-off, then, is range. The Slate small pickup truck that made waves this year for its promised price in the $20,000s would have just 150 miles of range in its cheapest form. Ford hasn’t released any specs for its small EV truck, but even using state-of-the-art LFP chemistry, such a small battery surely won’t deliver many more miles per charge.
Whatever the final product looks like, the new Ford truck and the infrastructure behind it are another reminder that, no matter the headwinds caused by the Trump administration, EVs are the future. Ford had been humming along through its EV struggles because its gas-burning cars remained so popular in America, and so profitable. But those profits collapsed in the first half of 2025, according to The New York Times. Meanwhile, Ford and every other carmaker are struggling to catch up to the Chinese companies selling a plethora of cheap EVs all over the world. Their very future depends on innovating ways to build EVs for less.
Governors, legislators, and regulators are all mustering to help push clean energy past the starting line in time to meet Republicans’ new deadlines.
Trump’s One Big Beautiful Bill Act put new expiration dates on clean energy tax credits for business and consumers, raising the cost of climate action. Now some states are rushing to accelerate renewable energy projects and get as many underway as possible before the new deadlines take effect.
The new law requires wind and solar developers to start construction by the end of this year in order to claim the full investment or production tax credits under the rules established by the Inflation Reduction Act. They’ll then have at least four years to get their project online.
Those that miss the end-of-year deadline will have another six months, until July 4, 2026, to start construction, but will have to meet complicated sourcing restrictions on materials from China. Any projects that get off the ground after that date will face a severely abbreviated schedule — they’ll have to be completed by the end of 2027 to qualify, an all-but-impossibly short construction timeline.
Adding even more urgency to the time crunch, President Trump has directed the Treasury Department to revise the rules that define what it means to “start construction.” Historically, a developer could start construction simply by purchasing key pieces of equipment. But Trump’s order called for “preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built,” an ominous sign for those racing to meet already accelerated deadlines.
While the changes won’t suppress adoption of these technologies entirely, they will slow deployment and make renewable energy more expensive than it otherwise would have been. Some states that have clean energy goals are trying to lock in as much subsidized generation as they can to lessen the blow.
There are two ways states can meet the moment, Justin Backal Balik, the state program director at the nonprofit Evergreen Action, told me. Right now, many are trying to address the immediate crisis by helping to usher shovel-ready projects through regulatory processes. But states should also be thinking about how to make projects more economical after the tax credits expire, Balik said. “Green states can play a role in tilting the scale slightly back in the direction of some of the projects being financially viable,” he said, “even understanding that they’re not going to be able to make up all of the lost ground the incentives provided.”
In the first category, Colorado Governor Jared Polis sent a letter last week to utilities and independent power producers in the state committing to use “all of the Colorado State Government to prioritize deployment of clean energy projects.”
“Getting this right is of critical importance to Colorado ratepayers,” Polis wrote. The nonprofit research group Energy Innovation estimates that household energy expenses in Colorado could be $170 higher in 2030 than they would have been because of OBBB, and $310 higher in 2035. “The goal is to integrate maximal clean energy by securing as much cost-effective electric generation under construction or placed in service as soon as possible, along with any necessary electricity balancing resources and supporting infrastructure,” Polis continued.
As for how he plans to do that, he said the state would work to “eliminate administrative barriers and bottlenecks” for renewable energy, promising faster state reviews for permits. It will also “facilitate the pre-purchase of project equipment,” since purchasing equipment is one of the key steps developers can take to meet the tax credit deadlines.
Other states are looking to quickly secure new contracts for renewable energy. In mid-July, two weeks after the reconciliation bill became law, utility regulators in Maine moved to rapidly procure nearly 1,600 gigawatt-hours of wind and solar — for context, that’s about 13% of the total energy the state currently generates. They gave developers just two weeks to submit proposals, and will prioritize projects sited on agricultural land that has been contaminated with per- and polyfluoroalkyl substances, the chemicals known as PFAS. (When asked how many applications had been submitted, the Maine Public Utilities Commission said it doesn't share that information prior to project selection.)
Connecticut’s Department of Energy and Environmental Protection is eyeing a similar move. During a public webinar in late July, the agency said it was considering an accelerated procurement of zero-carbon resources “before the tax increase takes effect.” The office put out a request for information to renewable energy developers the next day to see if there were any projects ready to go that would qualify for the tax credits. Officials also encouraged developers to contact the agency’s concierge permit assistance services if they are worried about getting their permits on time for tax credit eligibility. Katie Dykes, the agency’s commissioner, said during the presentation that the concierge will engage with permit staff to make sure there aren’t incomplete or missing documents and to “ensure smooth and efficient review of projects.”
New York’s energy office is planning to do another round of procurement in September, the outlet New York Focus has reported, although the solicitation is late — it had originally been scheduled for June. The state has more than two dozen projects in the pipeline that are permitted but haven’t yet started construction, according to Focus, and some of them are waiting to secure contracts with the state.
Others are simply held up by the web of approvals New York requires, but better coordination between New York agencies may be in the works. “I assembled my team immediately and we are trying to do everything we can to expedite those [renewable energy projects] that are already in the pipeline to get those the approvals they need to move ahead,” Governor Kathy Hochul said during a rally at the State University of New York’s Niagara campus last week. The state’s energy research and development agency has formed a team “to help commercial projects quickly troubleshoot and advance towards construction,” according to the nonprofit Evergreen Action. (The agency did not respond to a request for more information about the effort.)
States and local governments are also planning to ramp up marketing of the consumer-based credits that are set to expire. Colorado, for example, launched a new “Energy Savings Navigator” tool to help residents identify all of the rebate, tax credit, and energy bill assistance programs they may be eligible for.
Consumers have even less time to act than wind and solar developers. Discounts for new, used, and leased electric vehicles will end in less than two months, on September 30. Homeowners must install solar panels, batteries, heat pumps, and any other clean energy or efficiency upgrades before the end of this year to qualify for tax credits.
Many states offer additional incentives for these technologies, and some are re-tooling their programs to stretch the funding. Connecticut saw a rush of demand for its electric vehicle rebate program, CHEAPR, after the OBBB passed. Officials decided to slash the subsidy from $1,500 to $500 as of August 1, and will re-assess the program in the fall. “The budget that we have for the CHEAPR program is finite,” Dykes said during the July webinar. “We are trying to be good stewards of those dollars in light of the extraordinary demand for EVs, so that after October 1 we have the best chance to be able to provide an enhanced rebate, to lessen the significant drop in the total level of incentives that are available for electric vehicles.”
As far as trying to address the longer-term challenges for renewables, Balik highlighted Pennsylvania Governor Josh Shapiro’s proposal to streamline energy siting decisions by passing them through a new state board. “One of the big things states can do is siting reform because local opposition and lawsuits that drag forever are a big drag on costs,” Balik told me.
A bill that would create a Reliable Energy Siting and Electric Transition Board, or RESET Board, is currently in the Pennsylvania legislature. (New York State took similar steps to establish a renewable siting office to speed up deployment in 2020, though so far it’s still taking an average of three years to permit projects, down from four to five years prior to the office’s establishment.) Connecticut officials also discussed looking at ways to reduce the “soft costs” of permitting and environmental reviews during the July webinar.
Balik added that state green banks can also play a role in helping projects secure more favorable financing. Their capacity to do so will be significantly higher if the courts force the federal government to administer the Greenhouse Gas Reduction Fund.
When it comes to speeding up renewable energy deployment, there’s at least one big obstacle that governors have little control over. Wind and solar projects need approval from regional transmission operators, the independent bodies that oversee the transmission and distribution of power, to connect to the grid — a notoriously slow process. The lag is especially long in the PJM Interconnection, which governs the grid for 13 mid-Atlantic States, and has generally favored natural gas over renewables. But governors are starting to turn up the pressure on PJM to do better. In mid July, Shapiro and nine other governors demanded PJM give states more of a say in the process by allowing them to propose candidates for two of PJM’s board seats.
“Can we use this moment of crisis to really impress the urgency of getting some of these other things done — like siting reforms, like interconnection queue fixes, that are all part of the economics of projects,” Balik asked. These steps may help, but lengthy federal permitting processes remain a hurdle. While permitting reform is a major bipartisan priority in Congress, as my colleague Matthew Zeitlin wrote recently, a deal that’s good for renewables might require an about-face from the president on wind and solar.
The Danish government is stepping in after U.S. policy shifts left the company’s New York offshore wind project in need of fresh funds.
Orsted is going to investors — including the Danish government — for money it can’t get for its wind projects, especially in the troubled U.S. offshore wind market.
The Danish developer, which is majority owned by the Danish government, told investors on Monday that it would seek to raise over $9 billion, about half its valuation before the announcement, by selling shares in the company.
Publicly traded companies do not typically raise money by selling stock, which is more expensive for the company, tending instead to finance specific projects or borrow money.
But the offshore wind business is not any industry.
In normal times, Orsted and other wind developers will conduct “farm-downs,” selling stakes in projects in order to help finance the next ones. Due to “recent material adverse development in the U.S. offshore wind market,” however, the early-morning announcement said, “it is not possible for the company to complete the planned partial divestment and associated non-recourse project financing of its Sunrise Wind offshore wind project on the terms which would provide the required strengthening of Orsted’s capital structure” — a long way of explaining that it can’t find a buyer at an acceptable price. Hence the new equity.
While the market had been expecting Orsted to raise capital in some form, the scale of the raise is about twice what was anticipated, according to Bloomberg’s Javier Blas.
About two-thirds of the stock sale will be used to continue financing Sunrise Wind, a 924-megawatt planned offshore wind project off the coast of Long Island, according to Morgan Stanley analysts. Construction began last summer, just days after Orsted took full ownership of the project by buying out a stake held by the utility Eversource.
Despite all the sound and fury around offshore wind in the United States, the company said in its earnings report, also released Monday, that “we successfully installed the first foundations at Sunrise Wind, following completion of the wind turbine foundation installation at Revolution Wind,” a 704-megawatt project off the coasts of Rhode Island and Connecticut. “Construction of our offshore U.S. assets is progressing as expected and according to plan,” the company said.
But the report also said Orsted took a hit of over a billion Danish kroner in the first half of this year due to tariffs and what it gingerly refers to as “other regulatory changes, particularly affecting the U.S.,” a.k.a. President Donald Trump.
The president and his appointees have been on a regulatory and financial campaign against the wind sector, especially offshore wind, attempting to halt work on another in-construction New York project, Empire Wind, before Governor Kathy Hochul was able to reach a deal to continue. All future lease sales for new offshore wind areas have been canceled.
Even before Trump came back into office, the offshore wind industry in the U.S. had been hammered by high interest rates, which raised the cost of borrowed money necessary to fund projects, and spiraling supply chain costs and project delays, which also increased the need for the more expensive financing.
“Because of the sharp rise in construction costs and interest rates since 2021, all the projects turned out to be value-destructive,” Morningstar analyst Tancrede Fulop wrote in a note about the Orsted share issue. The company took large losses on scuttled projects in the U.S. and already cancelled its dividend and announced a plan to partially divest many other projects in order to shore up its balance sheet and fund future projects.
While the start-and-stop Empire Wind project belongs to Equinor, Orsted’s Scandinavian neighbor (majority-owned by the Norwegian government), Orsted management told analysts on its conference call that “the issues surrounding Empire Wind's stop-work order from April 2025 had negatively impacted financing conditions for Sunrise,” according to Jefferies analyst Ahmed Furman.
Equinor, too, has had to take a bigger share of Empire Wind, buying out the stake held by BP in January of this year. BP had bought 50% stakes in three Equinor wind projects in 2020, but last year wrote down its investment in the offshore wind sector in the U.S. by over $1 billion.
Why could Orsted not simply pull out of Sunrise Wind? “Orsted and our industry are in an extraordinary situation with the adverse market development in the U.S. on top of the past years’ macroeconomic and supply chain challenges,” Rasmus Errboe, who took over as the company’s chief executive earlier this year, said in a statement. “To deliver on our business plan and commitments in this environment, we’ve concluded that a rights issue is the best solution for Orsted and our shareholders.”
The Danish government will maintain its 50.1% stake in the company, putting the small Scandinavian country with its low-boiling trade and territorial conflicts against the Trump administration in direct capitalist conflict with the American president and his least favorite form of electricity generation.
In the immediate wake of the announcement, Jefferies analyst Ahmed Farman wrote to clients that the deal would “obviously de-risk the [balance sheet], but near-term dilution risk seems substantial,” citing the unexpected magnitude of the raise and no sign pointing to new growth. “As a result, we expect the initial stock reaction to be quite negative.”
And so it has been: The stock closed down almost 30%, its biggest-ever single-day drop and below the price at which it went public in 2016, according to Bloomberg data.