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:
To manage the clean energy transition, it may have to get into the leveraged buyout game.
The United States produces more natural gas and crude oil than any other country ― it isn’t even a contest. But these “molecules of U.S. freedom” aren’t free: They’re extracted and transported through a network of rigs, drills, pumps, and pipes that are, increasingly, controlled and operated by myriad private equity companies. As a society, we have a strong interest in winding down these climate-polluting assets in a swift yet orderly fashion. But as businesses, their private equity owners don’t.
Over the past decade, pressure from shareholders and activists has succeeded in pushing many fossil fuel majors to consider how best to reduce their emissions. (Although that, too, has come at a cost.) But rather than winding down or cleaning up their most polluting and least profitable assets, many have instead simply divested. Coal companies in West Virginia have sold off their mines to undercapitalized vulture firms, which rely on continued coal sales to (in theory) pay for expensive environmental remediation costs. The same is happening in the oil and gas industry, where private equity firms have rolled up many of the drilling sites and pipelines, the capillaries and veins of the country’s energy infrastructure.
Shielded from the scrutiny of public markets, private equity funds have thus become some of the country’s top methane emitters by asset ownership in the natural gas sector. These opaque owners, capitalizing on other companies’ disinterest in holding high-emitting assets, are betting that fossil fuel infrastructure will keep paying out for quite some time; recent massive increases in expected energy demand have only juiced this trend toward industry consolidation.
Private equity firms and private debt funds, with their short-term profit horizons, concealed balance sheets, and seeming imperviousness to tighter financial regulation and shareholder activism, work well with fossil fuel assets, particularly those sold at fire-sale prices by publicly traded fossil fuel majors. Despite those assets’ long-term market value instability, their near-term cash flow prospects are what matter.
But what’s been good for fossil fuel majors’ balance sheets has been bad for the planet. Many of these buyout firms — well-capitalized private equity funds and scrappy vulture funds, alike — are not budgeting anywhere near enough for environmental remediation. One company, Diversified Energy Co, has been purchasing the rights to operate almost-depleted natural gas wellheads at scale, extending many of their lifespans by decades; far too few wellheads are closed each year to stem the methane spewing unimpeded into the atmosphere.
Rather than accept a situation where utilities and fossil fuel majors toss their liabilities to unaccountable vulture funds, sustainability-conscious investors and shareholder groups have begun screening transactions for responsible asset phaseout plans. But the lack of a binding set of transition standards has revealed a huge coordination problem: What counts as a responsible phaseout, particularly when private asset owners get to decide? The federal government has put down guidelines, but not its foot. A disorganized drawdown of assets under a patchy regulatory framework, without a doubt, leaves vulnerable communities on the hook for the financial, environmental, and health damages.
Progressive analysts have long argued that nationalizing fossil fuel assets and folding them into a state holding company is the best solution to sidestep this particular problem. The federal government is well staffed with energy and electricity experts who, operating under a public mandate to preserve grid reliability, can phase out fossil fuel assets on a unified, coherent timeline responsive to community needs while continuing to operate those assets as the “peaker” or “reserve” capacity required to ensure grid stability. A series of climate shocks has even convinced conservative leaders in Texas of the importance of public power for grid resilience, achieved through state ownership of “peaker” gas plants. This course of action is far worse than investments in, say, battery capacity ― California, for instance, is now reaping the benefits of massive battery deployment, which reduces the state’s need for gas ― but the logic behind building public reserve capacity is sound.
What advocates of a state holding company-type model do not often discuss is how exactly a government goes about acquiring all these soon-to-be-stranded fossil fuel assets. As just one example, a recent proposal from the Roosevelt Institute suggests that a state holding company should be “free to engage in debt financing, make equity investments, and acquire assets.” Sure, proposals like these are meant to buttress the case for why nationalization is a far better way to achieve a managed phaseout than surrendering that process to yield-seeking investors, not to detail the financial mechanics of a buyout. But still: this is vague!
Actually thinking through the specifics suggests that, interestingly enough, a comprehensive state-led buyout program could work a lot like an existing private equity transaction, for two key reasons.
Before we get there, we should separate private equity’s deserved reputation as an opaque asset owner from the way the industry works. Private equity’s calling card, the “leveraged buyout,” is little more than the act of raising debt to 1) purchase equity in and, therefore, ownership over an asset, and 2) refinance the asset’s liabilities. To do so, private equity funds work with banks or, more commonly these days, private debt or private credit funds, to raise debt that is generally backed by the combined assets of the purchaser firm and purchased asset.
But leveraged buyouts themselves are technically something that any financial institution could do. Take the federal government, the country’s most liquid debt issuer, whose debt anchors the global economy and backstops private financial institutions. It could raise debt (leverage) to finance a buyout of fossil fuel assets at interest rates far lower than private investors could. And because private credit funds, like other institutional investors, already buy loads of government bonds to match their liabilities and hedge their risks, this kind of nationwide leveraged buyout ― which would require substantial new debt issuance ― could actually help stabilize the financial system against potential shocks from within notoriously inscrutable private markets. The government can do exactly what private equity does, only a lot better, and with wider benefits.
The government has already planted the seeds of a leveraged buyout program across the country’s coal ash heaps. The Loan Programs Office, thanks to the Bipartisan Infrastructure Law and the Inflation Reduction Act, now offers far-below-market-rate loan guarantees to developers, including state governments and utility companies, seeking to repurpose fossil fuel assets through its Energy Infrastructure Reinvestment program. This program’s authority allows borrowers to use their financing for “refinancing outstanding indebtedness directly associated with eligible Energy Infrastructure.” All policymakers have to do now is scrap the program’s 2026 end date and, ideally, endow a federal institution with the power to borrow from this authority to purchase and refinance fossil fuel assets, rather than leave that task solely in the hands of state governments and utilities, with their varying capacities for and interest in coordinating a coherent phaseout plan. And now that interest rates are poised to fall, this refinancing becomes much cheaper.
That’s reason number one. Reason number two has to do with private equity funds’ ability to shield the assets in their portfolio from valuation volatility on publicly traded stock markets. Private equity funds need not publicize how much their portfolios are worth, except at infrequent intervals and when they sell assets. But thanks to private equity’s reputation as a high-return investment, fund investors pay a premium for the illiquidity of not always knowing the value of their assets. Purchase assets, juice returns, sell, and repeat ― this is the conventional private equity playbook.
But macroeconomic conditions today are such that private equity companies are now struggling to sell their portfolios. High interest rates have made leveraged buyouts of new assets and refinancing debts on unsold assets much more costly, and have tempered rapid asset value growth. As this once-frenetic industry slows down, funds are anxious to get assets off their books ― hence the recent wave of consolidation.
This is an opportune moment for the Feds to step in. It’s not just that the government’s capacity for undertaking leveraged buyouts is the greatest; more importantly, it never needs to sell. The valuation volatility that first prompts fossil fuel majors to divest from dying, dangerous assets yet incentivizes private equity funds to pump as much as they can out of them to resell them later at a profit is simply not something the federal government needs to worry about. A state holdingcompany can siphon distressed assets off public markets and shut down the “merry-go-round” of asset sales and resales.
Objections to government intervention here are likely premised on the fact that, well, it’s the government. But the government would still be purchasing assets from private owners on financial markets, just like any market actor would. Today’s uncoordinated constellation of private fossil fuel firms and funds, on the other hand, cannot manage a coordinated phaseout, especially not under binding profitability constraints ― which the federal government does not share.
Local communities can’t finance phaseouts or cleanups themselves, and leaving hundreds of billions of dollars worth of stranded assets in the hands of under-regulated private firms will only accelerate climate catastrophe. The government must use the financial techniques that private equity funds have already pioneered to bring them to heel, in service of public goals.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Current conditions: Thousands are without power and drinking water in the French Indian Ocean territory of Réunion after Tropical Cyclone Garance made landfall with the strength of a Category 2 hurricane • A severe weather outbreak could bring tornadoes to southern states early next week • It’s 44 degrees Fahrenheit and sunny in Washington, D.C., where Ukrainian President Volodymyr Zelenskyy will meet with President Trump today to sign a minerals deal.
The 16th United Nations Biodiversity Conference, known as COP16, ended this week with countries agreeing on a crucial roadmap for directing $200 billion a year by 2030 toward protecting nature and halting global biodiversity loss. Developed nations are urged to double down on their goal to mobilize $20 billion annually for conservation in developing countries this year, rising to $30 billion by 2030. The plan also calls for further study on the relationships between nature conservation and debt sustainability. “The compromise proved countries could still bridge their differences and work together for the sake of preserving the planet, despite a fracturing world order and the dramatic retreat of the United States from international green diplomacy and foreign aid under President Donald Trump,” wrote Louise Guillot at Politico. The decision was met with applause and tears from delegates. One EU delegate said they were relieved “about the positive signal that this sends to other ongoing negotiations on climate change and plastics that we have.”
The Trump administration yesterday fired hundreds of workers across the National Oceanic and Atmospheric Administration and the National Weather Service, key agencies responsible for monitoring the changing climate and communicating extreme weather threats. The National Hurricane Center and the Tsunami Warning Center both operate under NOAA, and the layoffs come ahead of the upcoming hurricane season. “People nationwide depend on NOAA for free, accurate forecasts, severe weather alerts, and emergency information,” said Democratic Rep. Jared Huffman, the ranking member of the House Natural Resources Committee. “Purging the government of scientists, experts, and career civil servants and slashing fundamental programs will cost lives.” A federal judge yesterday temporarily blocked the administration’s mass firings of federal workers, so the status of those affected in this latest round is unclear. Somewhat relatedly, Heatmap’s Jael Holzman reports that the Nature Conservancy, an environmental nonprofit, was told by NOAA it had to rename a major conservation program as the “Gulf of America” or else lose federal funding.
The FBI reportedly has been questioning Environmental Protection Agency employees about $20 billion in climate and clean energy grants approved under the Biden administration, which EPA Administrator Lee Zeldin has insisted were issued hastily and without oversight. According toThe Washington Post, the Justice Department has asked several U.S. attorneys to submit warrant requests or launch grand jury investigations, but those efforts have been rejected due to lack of evidence or “reasonable belief that a crime occurred.” “It’s certainly unusual for any case to involve two different U.S. attorney offices declining a case for lack of probable cause and to have the Department of Justice continue to shop it,” Stefan D. Cassella, a former federal prosecutor, told the Post. Several nonprofits said their Citibank accounts holding the funding have been frozen without explanation.
Some Democratic states are apparently freezing out Tesla in response to Elon Musk’s political maneuvers within the Trump administration. Tesla operates on a direct-to-consumer sales model, so it doesn’t have to go through dealerships. More than 25 states ban or restrict direct EV sales in some way. The company has been lobbying to get permission to sell directly in these states, but some Democratic lawmakers are “disgusted” by Musk’s moves in Washington and are rebuffing lobbyists or dropping their support for proposed legislation allowing direct sales.
Apple is in trouble for claiming some of its Apple Watches are “carbon neutral.” A group of customers are suing the company after learning its claims relied on carbon offsetting projects in protected national parks or heavily forested areas, instead of “genuine” carbon reductions. “The carbon reductions would have occurred regardless of Apple’s involvement or the projects’ existence,” the plaintiffs said in their complaint. “Because Apple’s carbon neutrality claims are predicated on the efficacy and legitimacy of these projects, Apple’s carbon neutrality claims are false and misleading.” The lawsuit seeks damages, as well as an injunction that prevents Apple from using the carbon neutral claim to market its watches. Apple has a goal of net-zero carbon emissions by 2030.
Researchers in Amsterdam have examined the nests of birds known as common coots and discovered plastic items dating back to the 1990s, including a McDonald’s McChicken wrapper from 1996, and a Mars wrapper promoting the 1994 USA FIFA World Cup. “History is not only written by humans,” said Auke-Florian Hiemstra, who led the research. “Nature, too, is keeping score.”
Auke-Florian Hiemstra
Did a battery plant disaster in California spark a PR crisis on the East Coast?
Battery fire fears are fomenting a storage backlash in New York City – and it risks turning into fresh PR hell for the industry.
Aggrieved neighbors, anti-BESS activists, and Republican politicians are galvanizing more opposition to battery storage in pockets of the five boroughs where development is actually happening, capturing rapt attention from other residents as well as members of the media. In Staten Island, a petition against a NineDot Energy battery project has received more than 1,300 signatures in a little over two months. Two weeks ago, advocates – backed by representatives of local politicians including Rep. Nicole Mallitokis – swarmed a public meeting on the project, getting a local community board to vote unanimously against the project.
According to Heatmap Pro’s proprietary modeling of local opinion around battery storage, there are likely twice as many strong opponents than strong supporters in the area:
Heatmap Pro
Yesterday, leaders in the Queens community of Hempstead enacted a year-long ban on BESS for at least a year after GOP Rep. Anthony D’Esposito, other local politicians, and a slew of aggrieved residents testified in favor of a moratorium. The day before, officials in the Long Island town of Southampton said at a public meeting they were ready to extend their battery storage ban until they enshrined a more restrictive development code – even as many energy companies testified against doing so, including NineDot and storage developer Key Capture Energy. Yonkers also recently extended its own battery moratorium.
This flurry of activity follows the Moss Landing battery plant fire in California, a rather exceptional event caused by tech that was extremely old and a battery chemistry that is no longer popular in the sector. But opponents of battery storage don’t care – they’re telling their friends to stop the community from becoming the next Moss Landing. The longer this goes on without a fulsome, strident response from the industry, the more communities may rally against them. Making matters even worse, as I explained in The Fight earlier this year, we’re seeing battery fire concerns impact solar projects too.
“This is a huge problem for solar. If [fires] start regularly happening, communities are going to say hey, you can’t put that there,” Derek Chase, CEO of battery fire smoke detection tech company OnSight Technologies, told me at Intersolar this week. “It’s going to be really detrimental.”
I’ve long worried New York City in particular may be a powder keg for the battery storage sector given its omnipresence as a popular media environment. If it happens in New York, the rest of the world learns about it.
I feel like the power of the New York media environment is not lost on Staten Island borough president Vito Fossella, a de facto leader of the anti-BESS movement in the boroughs. Last fall I interviewed Fossella, whose rhetorical strategy often leans on painting Staten Island as an overburdened community. (At least 13 battery storage projects have been in the works in Staten Island according to recent reporting. Fossella claims that is far more than any amount proposed elsewhere in the city.) He often points to battery blazes that happen elsewhere in the country, as well as fears about lithium-ion scooters that have caught fire. His goal is to enact very large setback distance requirements for battery storage, at a minimum.
“You can still put them throughout the city but you can’t put them next to people’s homes – what happens if one of these goes on fire next to a gas station,” he told me at the time, chalking the wider city government’s reluctance to capitulate on batteries to a “political problem.”
Well, I’m going to hold my breath for the real political problem in waiting – the inevitable backlash that happens when Mallitokis, D’Esposito, and others take this fight to Congress and the national stage. I bet that’s probably why American Clean Power just sent me a notice for a press briefing on battery safety next week …
And more of the week’s top conflicts around renewable energy.
1. Queen Anne’s County, Maryland – They really don’t want you to sign a solar lease out in the rural parts of this otherwise very pro-renewables state.
2. Logan County, Ohio – Staff for the Ohio Power Siting Board have recommended it reject Open Road Renewables’ Grange Solar agrivoltaics project.
3. Bandera County, Texas – On a slightly brighter note for solar, it appears that Pine Gate Renewables’ Rio Lago solar project might just be safe from county restrictions.
Here’s what else we’re watching…
In Illinois, Armoracia Solar is struggling to get necessary permits from Madison County.
In Kentucky, the mayor of Lexington is getting into a public spat with East Kentucky Power Cooperative over solar.
In Michigan, Livingston County is now backing the legal challenge to Michigan’s state permitting primacy law.