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:
A little insulation goes a long way toward decarbonizing.
When you think about ways to decarbonize, your mind will likely go straight to shiny new machines — an electric vehicle, solar panels, or an induction stove, perhaps. But let’s not forget the low-tech, low-hanging fruit: your home itself.
Adding insulation, fixing any gaps, cracks or leaks where air can get out, and perhaps installing energy efficient windows and doors are the necessary first steps to decarbonizing at home — though you may also want to consider a light-colored “cool roof,” which reflects sunlight to keep the home comfortable, and electric panel and wiring upgrades to support broader electrification efforts.
Getting started on one or multiple of these retrofits can be daunting — there’s lingo to be learned, audits to be performed, and various incentives to navigate. Luckily, Heatmap is here to help.
Cora Wyent is the Director of Research at Rewiring America, where she conducts research and analysis on how to rapidly electrify the entire economy.
Joseph Lstiburek is the founding principal at the Building Science Corporation, a consulting firm focused on designing and constructing energy efficient, durable, and economic buildings.
Lucy de Barbaro is the founder and director of Energy Efficiency Empowerment, a Pittsburgh-based organization that seeks to transform the home renovation process and help low and middle-income homeowners make energy efficiency improvements.
Definitively, yes! When people hear the word “insulation” they often think of how it can protect them from the cold. And while it certainly does do that, insulation’s overall role is to slow the transfer of heat both out of your home when it’s chilly and into your home when it’s hot. That means you won’t need to use your air conditioning as much during those scorching summer days or your furnace as much when the temperatures drop.
Quite possibly! The most definitive way to know if your home could be improved by weatherization is by getting a home energy audit —- more on that below. While a specific level of insulation is required for all newly constructed homes, these codes and standards are updated frequently. So if you’re feeling uncomfortable in your living space, or if you think your heating and cooling bills are unusually high, it’s definitely worth seeing what an expert thinks. And if you’re interested in getting electric appliances like a heat pump or induction stove, some wiring upgrades will almost certainly be necessary.
Energy efficient appliances like electric heat pumps or induction stoves are fantastic ways to decarbonize your life, but serve a fundamentally different purpose than most of the upgrades that we’re going to talk about here. When you get better air sealing, insulation, windows, or doors, what you’re doing is essentially regulating the temperature of your home, making you less reliant on energy intensive heating and cooling systems. And while this can certainly lead to savings on your energy bill and a positive impact on the environment at large, these upgrades will also allow you to simply live more comfortably.
This is the starting point for making informed decisions about any energy efficiency upgrades that you’re considering. During a home energy audit, a certified auditor (sometimes also referred to as an energy assessor or rater or verifier) will inspect your home to identify both the highest-impact and most cost-effective upgrades you can make, including how much you stand to save on your energy bills by doing so.
Wyent told me checking with your local utility is a good place to start, as many offer low-cost audits. Even if your utility doesn’t do energy assessments, they may be able to point you in the direction of local auditors or state-level resources and directories. The Residential Energy Services Network also provides a directory of certified assessors searchable by location, as does the Department of Energy’s Energy Score program, though neither list is comprehensive.
Audits typically cost between $200 and $700 depending on your home’s location, size, and type, as well as the scope of the audit. Homeowners can claim 30% of the cost of their audit on their federal taxes, up to $150. To be eligible, make sure you find a certified home energy auditor. The DOE provides a list of recognized certification programs.
Important: Make sure the auditor performs both a blower door test and a thermographic inspection. These diagnostic tools are key to determining where air leakage and heat loss/gain is occurring.
Your energy audit isn’t the only thing eligible for a credit. The 25C Energy Efficient Home Improvement Credit allows homeowners to claim up to 30% of the cost of a variety of home upgrades, up to a combined total of $1,200 per year. This covers upgrading your insulation, windows, doors, skylights, electrical wiring, and/or electrical panel. Getting an energy audit is also included in this category.
While $1,200 is the max amount you can claim for all retrofits combined, certain renovations come with their own specific limitations. Let’s break it down:
State and local incentives:
Depending on where you live, there may be additional state and local incentives, and we suggest asking your contractor what you are eligible for. But since incentive programs change frequently, it’s a good idea to do your own research too. Get acquainted with Energy Star, a joint program run by the Environmental Protection Agency and the DOE which provides information on energy efficient products, practices, and standards. On Energy Star’s website, you can search by zip code for utility rebates that can help you save on insulation, windows, and electrical work.
“Starting by looking at your local utility programs can be a great resource too, because utilities offer rebates or incentives for weatherizing your home or installing a new roof,” said Wyent.
Everyone wants to minimize the number of times they break open or drill into their walls. To that end, it’s useful to plan out all the upgrades you might want to get done over the next five to 10 years to figure out where efficiency might fit in.
Some primary examples: Installing appliances like a heat pump, induction stove, or Level 2 EV charger (all of which you can read more about in our other guides) often require electrical upgrades. Even if you don’t plan to get any of these new appliances now, pre-wiring your home to prepare for their installation (with the exception of a heat pump — see our heat pump guide for more info on that) will save you money later on.
De Barbaro also notes that if you’re planning to repaint your walls anytime soon, this would also be a convenient time to add insulation, as that involves drilling holes which then need to be patched and repainted anyway. Likewise, if you were already planning to replace your home’s siding, this would be a natural time to insulate. Finally, if you’re planning to get a heat pump in the coming years, getting better insulation now will ensure this system is maximally effective.
Conversely, if you’re cash-strapped, spreading out electrical and weatherization upgrades over the course of a few years allows you to claim the full $1,200 tax credit every year. Whether those tax savings are enough to cover the added contractor time and clean-up costs, though, will depend on the particulars of your situation.
“Come in with a plan and talk to the contractor about everything that you want to do in the future, not just immediately,” said Wyent.
Unlike solar installers, which are often associated with large regional and national companies, the world of weatherization and electrical upgrades is often much more localized, meaning you’ll need to do a bit of legwork to verify that the contractors and installers you come across are reliable.
Wyent told me she typically starts by asking friends, family, and neighbors for references, as well as turning to Google and Yelp reviews. Depending on where you live and what type of work you want done, your local utility may also offer incentives for weatherization and electrification upgrades, and can possibly provide a list of prescreened contractors who are licensed and insured for this type of work.
These questions will help you vet contractors and gain a better understanding of their process regardless of the type of renovation you’re pursuing.
Common wisdom says you should always get three quotes. But that doesn’t mean you should automatically choose the cheapest option. Lstiburek says the old adage applies: “If it sounds too good to be true, it's probably too good to be true.” Be sure that your contractors and installers are properly licensed and insured and read the fine print of your contract. Beyond this, how to find qualified professionals and what to ask largely depends on the type of upgrade you are pursuing. So let’s break it down, starting with the biggest bang for your buck.
Air sealing and insulating your home is usually the number one way to increase its energy efficiency. Energy Star says nine out of 10 homes are underinsulated, and many also have significant air leaks. In general, homes lose more heating and cooling energy through walls and attics than through windows and doors, so air sealing and adding insulation in key areas should be your first priority.
“People don't realize how collectively, small holes everywhere add up. So on average here in Pennsylvania, typically those holes would add up to the surface of three sheets of paper, continuously open to the outdoors,” said de Barbaro.
Determining where air is escaping is the purpose of the blower door test and the thermographic inspection, so after your energy audit you should have a good idea of where to begin with these retrofits. This guide from the Department of Energy is a great resource on all the places in a home one might consider insulating.
Choosing an insulation type:
Every home is different, and the type of insulation you choose will depend on a number of factors including where you’re insulating, whether that area is finished or unfinished, what R-Value is right for your climate, and your budget. You can check out this comprehensive list of different insulation types to learn about their respective advantages and use cases. But when it comes to attic rafters and exterior walls, De Barbaro said that one option rises above the rest.
“The magic word here is dense-packed cellulose insulation!” De Barbaro told me.
This type of insulation (which falls under the “loose fill and blown-in” category) is made from recycled paper products, meaning it has very low embodied carbon emissions. It’s also cheap and effective. For exterior walls and attic rafters, be sure to avoid loose-fill cellulose, as that can settle and become less effective over time — although for attic floors, loose-fill works well. Both are installed by drilling holes into the wall or floor space and blowing the insulation in under pressure.
We recommend discussing all of these options with your contractor, but here are the other materials you’re most likely to come across:
In addition to asking friends, family, and your local utility for contractor recommendations, Energy Star specifically recommends these additional resources where you can find licensed and insured contractors for insulation work.
While air sealing and insulation should definitely be number one on your weatherization checklist, plenty of heat gets lost through windows, doors, and skylights, as well. Single pane glass is a particularly poor insulator, and while fewer houses these days have it, upgrading to double or triple pane windows or skylights can be a big energy saver. Likewise, steel or fiberglass doors are much better insulators than traditional wooden doors.
But be warned: These can be pricey upgrades. The cost of installing windows alone ranges from hundreds of dollars up to $1,500 per window, and many homes have ten or more. It’s unlikely you’ll fully recoup the outlay through your energy savings, so before going about these retrofits, be sure that you’ve taken care of the easy stuff first.
Once you’ve done your research, it’s time to schedule a consultation with an installer, who can help you refine your project needs, discuss design and installation options, and provide you with a quote.
“So if you pick a Marvin window, make sure that you have a Marvin certified installer in your location, installing the Marvin window according to the Marvin instructions.” said Lstiburek.
Insulating your attic floor or your roof rafters is the best way to ensure that your home is sealed off from the elements. But if you live in a hot climate and need a new roof anyway (most last 25 to 50 years), then you might consider getting a cool roof, which can be made from a variety of materials and installed on almost any slope. However, they won’t lead to energy efficiencies in all geographies, so be sure to do your research beforehand!
Last but certainly not least is a retrofit that’s a little different from the rest. Unlike getting insulation, new windows, or a new roof, upgrading your wiring or electric panel doesn’t lead to greater energy efficiency by regulating the temperature of your home. What it does instead is enable greater energy efficiency by making it possible to operate an increasing number of electrified appliances and devices in your house.
For example, getting an electric or induction stove or dryer, a standard heat pump, a heat pump water heater, or an electric vehicle charger will require that you add new electric circuits to support these devices. And as these new loads add up, you may need to install a larger electric panel to support it all.
After sourcing electrician recommendations from family and friends, a good place to turn is Rewiring America’s contractor directory network. (Rewiring America is also a sponsor of Decarbonize Your Life.)Networks in your area can then provide you with a list of qualified electricians.
“Most people are really only using somewhere around 40% of what their current panels space. So you can actually add a fair amount of new circuits to your existing panel and upgrade your wiring while not having to upgrade your panel at all,” Wyent said.
Once you have three quotes in hand, all that’s left to do is evaluate your options, choose a contractor or installer, and sign a contract. Cost will likely be a major factor in the decision, but you’ll also want to ensure that the cheapest quote doesn’t mean corners will be cut. Here’s what to look out for.
Pay close attention to warranties. This applies both to the warranty for the work being performed and to the warranties for the products themselves. If an installation job or a product is well priced but comes with a short warranty, this should give you pause.
Avoid “same day signing specials.” If you’re being rushed into signing a contract, this is also a bad sign. Be sure to read the fine print — most cost estimates should be good for a few weeks at minimum.
Get specific. Your quotes should specify the type of work being performed, the scope of the work, cost (broken down by materials, labor, permits, and other expenses), payment method, and a tentative timeline for completion. A quote is much less formal than a contract, so if some of this information isn’t provided up front, don’t hesitate to ask for clarification so that you can make apples-to-apples comparisons between different contractors.
When you get a contract in hand, double check that:
Then it’s time to sign, sit back, and enjoy the soothing sounds of hammering, drilling, insulation blowing, and wire tinkering, content in knowing that you’re decarbonizing your home down to its very bones!
Now that you’re living comfortably in a maximally energy efficient home, you’re probably wondering when you’ll start seeing all those incentives you researched pay off. First off, know that you must wait until all renovations are complete and paid for to claim your federal tax credit. That means that even if you purchased new windows this year, if you have them installed in 2025, you’ll file for a tax credit with your 2025 return. Here’s how to go about it.
For state and local incentives, check the website for your local utility as well your local and state government and energy office to see what documentation is required. When in doubt, keep all of your records and receipts!
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Zanskar’s second geothermal discovery is its first on untapped ground.
For the past five years or so, talk of geothermal energy has largely centered on “next-generation” or “enhanced” technologies, which make it possible to develop geothermal systems in areas without naturally occurring hot water reservoirs. But one geothermal exploration and development company, Zanskar, is betting that the scope and potential of conventional geothermal resources has been vastly underestimated — and that artificial intelligence holds the key to unlocking it.
Last year, Zanskar acquired an underperforming geothermal power plant in New Mexico. By combining exclusive data on the subsurface of the region with AI-driven analysis, the company identified a promising new drilling site, striking what has now become the most productive pumped geothermal well in the U.S. Today, the company is announcing its second reservoir discovery, this one at an undeveloped site in northern Nevada, which Zanskar is preparing to turn into a full-scale, 20-megawatt power plant by 2028.
“This is probably one of the biggest confirmed resources in geothermal in the last 10 years,” Zanskar’s cofounder and CEO Carl Hoiland told me. When we first connected back in August, he explained that since founding the company in 2019, he’s become increasingly convinced that conventional geothermal — which taps into naturally occurring reservoirs of hot water and steam — will be the linchpin of the industry’s growth. “We think the estimates of conventional potential that are now decades old just all need to be rewritten,” Hoiland told me. “This is a much larger opportunity than has been previously appreciated.”
The past decade has seen a lull in geothermal development in the U.S. as developers have found exploration costs prohibitively high, especially as solar and wind fall drastically in price. Most new projects have involved either the expansion of existing facilities or tapping areas with established resources, spurring geothermal startups such as Fervo Energy and Sage Geosystems to use next-generation technologies to unlock new areas for development.
But Hoiland told me that in many cases, conventional geothermal plants will prove to be the simplest, most cost-effective path to growth.
Zanskar’s new site, dubbed Pumpernickel, has long drawn interest from potential geothermal developers given that it’s home to a cluster of hot springs. But while both oil and gas companies and the federal government have drilled exploratory wells here intermittently since the 1970s, none hit hot enough temperatures for the reservoirs to be deemed commercially viable.
But Zanksar’s AI models — trained on everything from decades old geological and geophysical data sets to newer satellite and remote sensing databases — indicated that Pumpernickel did indeed have adequately hot reservoirs, and showed where to drill for them. “We were able to take the prior data that was seen to be a failure, plug it into these models, and get not just the surface locations that we should drill from, but [the models] even helped us identify what angle and which direction to drill the well,” Hoiland told me.
That’s wildly different from the way geothermal exploration typically works, he explained. Traditionally, a geologist would arrive onsite with their own mental model of the subsurface and tell the team where to drill. “But there are millions of possible models, and there’s no way humans can model all of those fully and quantitatively,” Hoiland told me, hence the industry’s low success rate for exploratory wells. Zanskar can, though. By modeling all possible locations for geothermal reservoirs, the startup’s tools “create a probability distribution that allows you to make decisions with more confidence.”
To build these tools, Hoiland and his cofounder, Joel Edwards, both of whom have backgrounds in geology, tracked down and acquired long forgotten analog data sets mapping the subsurface of regions that were never developed. They digitized these records and fed them into their AI model, which is also trained on fresh inputs from Zanksar’s own data collection team, a group the company launched three years ago. After adding all this information, the team realized that test wells had been drilled in only about 5% of the “geothermally prospective areas of the western U.S.,” leaving the startup with no shortage of additional sites to explore.
“It’s been nine years since a greenfield geothermal plant has been built in the U.S.,” Edwards told me, meaning one constructed on land with no prior geothermal development. “So the intent here is to restart that flywheel of developing greenfield geothermal again.” And while Zanskar would not confirm, Axios reported earlier this month that the company is now seeking to raise a $100 million Series C round to help accomplish this goal.
In the future, Zanskar plans to test and develop sites where exploratory drilling has never even taken place, something the industry essentially stopped attempting decades ago. But these hitherto unknown sites, Edwards said, is where he anticipates “most of the gigawatts” are going to come from in the future.
Hoiland credits all this to advances in AI, which he believes will allow geothermal “to become the cheapest form of energy on the planet,” he told me. Because “if you knew exactly where to drill today, it already would be.”
On EPA’s climate denial, virtual power plants, and Europe’s $50 billion climate reality
Current conditions: In the Atlantic, Tropical Storm Gabrielle is on track to intensify into a hurricane by the weekend, but it’s unlikely to affect the U.S. East Coast • Most of Vermont, New Hampshire, and Maine are under “severe” drought warning • Southeastern Nigeria is facing flooding.
The Federal Reserve announced Wednesday its first interest rate cut of the year, a quarter percentage point drop that aims to bring the federal funds rate down to between 4% and 4.25%. This may, Heatmap’s Matthew Zeitlin reported, “provide some relief to renewables developers and investors, who are especially sensitive to financing costs.” As Advait Arun, a climate and infrastructure analyst at the Center for Public Enterprise, told him: “high rates are never going to be exactly a good thing … it’s going to be good that we’re finally seeing cuts.”
Since solar and wind rely on basically free fuel, the bulk of developers’ costs to build panels or turbines are upfront. That requires borrowing money, meaning interest rates have an outsize impact on the total cost of renewable projects. Renewables carry more debt than fossil fuel plants. When interest rates rise by 2 percentage points, the levelized cost of electricity for renewables rises by 20%, compared to 11% for a gas fired plant, according to a report last year by the energy consultancy Wood Mackenzie.
The United States’ leading scientific advisory body issued what The New York Times called a “major report” on Wednesday detailing “the strongest evidence to date that carbon dioxide, methane, and other planet-warming greenhouse gases are threatening human health.” The study, published by the National Academies of Sciences, Engineering, and Medicine, stands athwart the Environmental Protection Agency’s proposal to revoke the endangerment finding. Established in 2009, the legal determination that planet-heating gases cause harm to human health means that the Clean Air Act can be used to underpin regulations on emissions. But the Trump administration proposed rescinding the finding and insisted it could “cast significant doubt” on its accuracy. “
“It’s more serious and more long term damage for them to try to rescind the underlying endangerment finding because depending on what the Supreme Court does with that, it could knock out a future administration from trying to bring it back,” Harvard Law School’s Jody Freeman told Heatmap’s Emily Pontecorvo in July. “Now that would be the nuclear option. That would be their best case scenario. I don’t think that’s likely, but it’s possible.”
Get Heatmap AM directly in your inbox every morning:
It’s an unlikely scenario. But if all U.S. households built rooftop solar panels and batteries, and adopted efficient electric appliances, the country could offset all the growing demand from data centers. That’s according to a new report by the pro-electrification nonprofit Rewiring America. “Electrifying households is a direct path to meeting the growing power needs of hyperscale data centers while creating a more flexible, resilient, cost-effective grid for all,” Ari Matusiak, the chief executive of Rewiring America, said in a statement. “The household doesn’t have to be a passive energy consumer, at the whim of rising costs. Instead, it can be the hero and, with smart investment, the foundation of a more reliable and affordable energy future.”
With new gas plants, nuclear reactors, and geothermal stations in the works, the U.S. is nowhere close to following a maximalist vision of distributed resources. But the findings highlight how much additional power could be generated on residential rooftops across the U.S. that, if combined with virtual power plant software, could comprise a large new source of clean electricity.
A scorecard highlighting all the ways the virtual power plant industry has grown.Wood Mackenzie
That isn’t to say virtual power plants aren’t having something of a moment. New data from Wood Mackenzie found that virtual power plant capacity expanded 13.7% year over year to reach 37.5 gigawatts. California, Texas, New York, and Massachusetts are the leading states, representing 37% of all VPP deployments. The market last year “broadened more than it deepened,” the consultancy’s report found, with the number of deployments, offtakers, and policy support spurring more adoption. But the residential side remains modest. Their share of the VPP wholesale market’s capacity increased to 10.2% from only about 8.8% last year, “still reflecting market barriers to small customers,” such as access to data and market rules.
“Utility program caps, capacity accreditation reforms, and market barriers have prevented capacity from growing as fast as market activity,” Ben Hertz-Shargel, global head of grid edge for Wood Mackenzie, said in a statement. He added that, “while data centers are the source of new load, there’s an enormous opportunity to tap VPPs as the new source of grid flexibility.”
Record-breaking heat, droughts, fires, and floods cost the European economy at least 43 billion euros, or $50 billion, a new European Central Bank study found. The research, presented this week to European Union lawmakers, used a model based on weather data and estimates of historical impact of extreme weather on 1,160 different regions across the 27-nation bloc. “The true costs of extreme weather surface slowly because these events affect lives and livelihoods through a wide range of channels that extend beyond the initial impact,” Sehrish Usman, an assistant professor at the University of Mannheim who led the study with two economists from the European Central Bank, told The New York Times.
Secretary of Energy Chris Wright believes nuclear fusion plants will be pumping electricity onto grids no later than 2040. In an interview this week with the BBC while traveling in Europe, Wright said he expected the technology to be commercialized in as little as eight years. “With artificial intelligence and what's going on at the national labs and private companies in the United States, we will have that approach about how to harness fusion energy multiple ways within the next five years," Wright told the broadcaster. “The technology, it'll be on the electric grid, you know, in eight to 15 years.” As Heatmap’s Katie Brigham put it recently, it’s “finally, possibly, almost time for fusion.”
Lower borrowing costs aren’t enough to erase the threat of tariffs and Trump.
It won’t rescue the renewables industry, but at least it’s something.
The Federal Reserve announced today that it will cut the federal funds rate by 0.25 percentage points, bringing it down to between 4% and 4.25%. Fed officials also projected quarter-point rate cuts at the last two meetings of the Federal Open Markets Committee this year.
This may provide some relief to renewables developers and investors, who are especially sensitive to financing costs. “On the financing side, high rates are never going to be exactly a good thing,” Advait Arun, a climate and infrastructure analyst at the Center for Public Enterprise, told me. “I think in this case, it’s going to be good that we’re finally seeing cuts.”
Because the fuel for solar and wind energy is essentially free, the lion’s share of the cost to develop these energy sources comes up front, meaning that interest rates can have a disproportionate effect on how projects pencil out. Renewable projects also tend to carry more debt than fossil fuel projects, according to energy consultancy Wood Mackenzie. When interest rates rise by 2 percentage points, the consultancy estimated, the levelized cost of electricity for renewables rises by 20%, compared to 11% for a gas-fired power plant, which might have higher operating costs but less need to borrow.
But the challenges for the renewables industry go well beyond financing. Developers are still wondering how they will be able to use Chinese-linked components without losing eligibility for clean energy tax credits. Those tax credits now come with a ticking clock after the passage of this summer’s One Big Beautiful Bill Act, which shortened the eligibility period for wind and solar projects. The Treasury Department also tightened the definition of what it means to “start construction,” making qualification even more of a race. All the while, the Trump administration’s regulatory assault on the sector, especially wind, has led to project cancellations across the industry.
“High interest rates obviously impact the business, but there are a lot of other headwinds and other things going wrong, as well,” Gautam Jain, a senior research scholar at the Center on Global Energy Policy at Columbia University, told me. “If anything, compared to the beginning of the year, rates have come down quite a bit.”
Maheep Mandloi, an analyst at the investment bank Mizuho Securities, wrote in a note to clients that renewable stocks rose last week in part because investors saw yields falling on 10-year government bonds. Ten-year Treasuries are a widely used benchmark for corporate debt, and when they get cheaper, it often means that companies can access financing more cheaply.
Falling 10-year yields are also a sign that the market anticipates a Fed rate cut. So far this year, the 10-year Treasury bond yield has fallen from 4.57% to 4.00% as of Wednesday afternoon after the rate cut was announced.
Lower borrowing costs are a welcome transition for the industry. Borrowing costs started to rise dramatically in 2022, as the Fed hiked interest rates to combat the worst inflation the U.S. had seen since the early 1980s. Annual price increases had been bouncing around or even below 2% since the 2008 recession before climbing to as high as 9% in the summer of 2022, following Russia’s invasion of Ukraine, which led to an energy price shock. The uneven and stimulus-fueled economic recovery from Covid-19 also created price instability throughout the economy, including the renewable energy industry.
Renewable energy businesses in particular were hammered by higher interest rates, as well as higher costs for commodities like steel and for final products like solar panels.
Even as unprecedented government support flowed into the renewables industry from the Inflation Reduction Act, signed in August 2022, clean energy stocks continued to stagnate, with the iShares Clean Energy ETF falling over 30% from the beginning of the Biden administration through the end of 2023. (Despite the assault from the Trump administration, the index has actually risen about 30% so far this year after falling in the fall and winter of 2024, as uncertainty around the IRA’s tax credits has dissipated.)
One of the poster children for renewables dysfunction is the Danish wind developer Orsted, which has been a victim of just about every brickbat thrown at the industry. In its most recent financial statement, the company said that its future earnings estimates were imperiled by “assumptions with major uncertainty,” which included “investment tax credits, interest rates, imposed tariffs in the U.S., and the supply chain.”
Home solar giant Sunrun, too, has cited financing stresses. In its most recent quarterly report, the company disclosed that “rising interest rates, including recent historic increases starting in 2021 … [are] reducing the proceeds we receive from certain Funds.” It also acknowledged that “because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems.” High rates, the company disclosed, “have impacted and may continue to impact our business and financial results.”
Even as rates come down, the renewable industry still has the Trump administration to contend with. The various agencies of the executive branch have shown little hesitation about getting in the way of renewable energy development, even for projects that are already nearly complete. The Treasury Department also has yet to issue guidance on complying with OBBBA’s rules about sourcing from Chinese suppliers, prolonging uncertainty for many in the industry. Trump’s tariff policy, too, remains a potential wildcard, as developers await a Supreme Court ruling on the legality of the president’s efforts thus far.
“In terms of being able to build more supply with the benefit of lower financing costs,” Arun told me, “I think this is where we’re running into all of the issues with delays in procuring components — the uncertainty regarding whether the tariffs will be struck down or not, and of course, changes to the inflation Reduction Act through the OBBBA.”
Last week, analysts at Rhodium Group projected that Trump’s policies could slow U.S. progress on reducing emissions by more than half.
For renewables developers, the rate cuts may be welcome, but everything else — and there’s a lot of everything else — may be what really matters, Jain told me. “All those things add additional uncertainty, and anybody who’s in the space will be aware that more could come,” he said. “Of course, lower rates will help, but it’s a combination of the two.”