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The New York-based startup aims to create a market for clean energy tax credits.
One of the least-noticed changes in the Inflation Reduction Act may be one of the most important.
For years, the government has encouraged developers, power utilities, and other companies to build clean energy by offering tax credits. But those tax credits were difficult to transfer to other companies, meaning that complicated financial instruments had to be created to allow them to share in the wealth.
The IRA continues to employ tax credits. But for the first time, it allows companies to buy and sell tax credits to each other.
A new crop of startups have appeared to help companies trade these new “transferable” tax credits. One of the largest is Crux, a New York-based startup backed by Andreessen Horowitz and Lowercarbon Capital.
On Tuesday, Crux announced that it has now brought some of the country’s largest energy developers into its fold. Clearway Energy, Intersect Power, Pattern Energy, and Électricité de France (commonly known as EDF) have all made strategic investments in Crux, the company announced. It had not previously disclosed their involvement in January’s $18.2 million Series A round.
“We had an opportunity to bring in some of the leading developers who collectively represent a pipeline of more than 100 gigawatts of power,” Alfred Johnson, Crux’s CEO, told me.
Crux has now raised more than $27 million in capital since its founding early last year. The offshore wind developer Orsted, as well as the energy developers LS Power and Hartree, have previously joined as strategic investors.
Under the Inflation Reduction Act, as in the past, companies can claim money on their taxes by building zero-carbon electricity generation, new factories, buying electric vehicles, and more.
But energy developers and utilities rarely need to use all the tax credits that they generate from their projects. A $30 million solar farm might generate as much as $10 million of tax credits, for instance — far too much for most companies to use in a reasonable amount of time.
That meant that developers had to bring in a third-party firm — usually a bank or another financial institution — that could pay for the privilege of using those tax credits. Before the IRA passed, many clean energy projects were therefore structured as complicated “tax equity” deals, where the bank or tax credit “buyer” owned part of the project so that it could claim its tax credits. About $20 billion in tax equity deals happened last year, according to research from the law firm Norton Rose Fulbright.
The IRA aimed to make that process easier by, in essence, creating a market for tax credits.
Crux estimates that $7 to $9 billion of these new “transferrable tax credits” were sold in that new market last year. It believes that the opportunity will grow rapidly. The advisory firm Evercore has projected that the transferrable tax credit market could exceed $100 billion by 2030.
Crux is not the only company that hopes to capitalize on that burgeoning market, potentially speeding the energy transition at the same time. Basis Climate, another New York-based startup, is also trying to serve as a key platform in the space.
Ilmi Granoff is an expert on climate finance, a senior fellow at the Sabin Center for Climate Law, and an advisor to Basis Climate. “The market is going to be diverse and large enough to support a number of pure play platforms that are specialists in this — and you’re going to have the banks moving in, consultancies, the tax advisors, and more,” Granoff told me. “For those looking for an environmental commodities market that really drives climate change, you can stop looking at the voluntary carbon market and just monetize the tax credit market for carbon solutions. It is going to be a very reliable market, backed by the government.”
Johnson, the Crux chief executive, also pointed to the scale of climate-related investment on the horizon. “We just have to build so much in the next 10 years. The level of infrastructure investments that have happened up to this point — and the scale of what will be built — is really, really dramatic,” Johnson said.
Crux’s product is a standardized platform where developers, utilities, and manufacturing companies can describe and sell their tax credits to buyers.
When a buyer first uses Crux, all tax credits available on the service are presented anonymously. They can then anonymously contact a specific seller. The buyer and seller can gradually reveal information to each other throughout the ensuing negotiation, culminating in a Crux-hosted “data room” where each teams’ accountants and lawyers can trade and view documents relevant to the sale.
“This is not a point and click transaction,” Johnson told me. “These are still complicated transactions with lots of moving pieces, with many underlying documents and lots of stakeholders at the table.” The goal of Crux, he said, is to make these transactions “efficient and standardized.”
The company says it’s already having some success speeding up the average sale. It recently facilitated a deal between an electricity utility, which was selling tax credits, and a Fortune 100 company, which was buying them, in just 22 days, Johnson told me. By contrast, a traditional tax equity deal would take six to nine months to structure and close, he said.
Many of the company’s leaders once helped shape high-level Democratic policy. Johnson, a former White House aide under President Barack Obama, was deputy chief of staff to Treasury Secretary Janet Yellen until 2022. He and Crux’s cofounder, Allen Kramer, previously cofounded the startup Mobilize, which helped organizations manage and recruit volunteers.
William Daley, a former Obama White House chief of staff and Commerce Secretary under President Bill Clinton, joined Crux as a senior advisor last week.
In an interview, Daley told me that — with the defense industry excepted — he could not remember the government investing in a strategic industry the way it is now investing in clean energy. “These are economic decisions that investors are making — they’re not just going out there and doing things that may or may not be financially rewarding,” he told me. “For every dollar the government puts forward in a subsidy or credit, the private sector is investing $5.”
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The department creates a seemingly impossible new permitting criteria for renewable energy.
The Interior Department released a new secretarial order Friday saying it may no longer issue any permits to a solar or wind project on federal lands unless the agency believes it will generate as much energy per acre as a coal, gas, or nuclear power plant.
Hypothetically, this could kill off any solar or wind project going through permitting that is sited on federal lands, because these facilities would technically be less energy dense than coal, gas, and nuclear plants. This is irrespective of the potential benefits solar and wind may have for the environment or reducing carbon emissions – none of which are mentioned in the order.
“Gargantuan, unreliable, intermittent energy projects hold America back from achieving U.S. Energy Dominance while weighing heavily on the American taxpayer and environment,” Interior Secretary Doug Burgum said in a statement included in a press release announcing the move. “By considering energy generation optimization, the Department will be able to better manage our federal lands, minimize environmental impact, and maximize energy development to further President Donald Trump’s energy goals.”
Here’s how this new regime, which I and many in the energy sector are now suddenly trying to wrap their heads around, is apparently going to work: solar and wind facilities will now be evaluated based on their “capacity density,” which is calculated based on the ratio of acres used for a project compared to its power generation capacity. If a project has a lower “capacity density” than what the department considers to be a “reasonable alternative,” then it may no longer be able to get a permit.
“On a technology-neutral basis,” the order states, “wind and solar projects use disproportionate Federal lands relative to their energy generation when compared to other energy sources, like nuclear, gas, and coal.” The document going on to give an example, claiming that data from the U.S. Energy Information Administration shows an advanced nuclear plant uses less federal acreage than an offshore wind farm and “thus, when there are reasonable alternatives that can generate the same amount of or more energy on far less Federal land, wind and solar projects may unnecessarily and unduly degrade Federal lands.” The order also includes a chart comparing the capacity density of wind and solar facilities to conventional nuclear, gas, and coal, as well as geothermal, and claims that these sources are superior as well. The document does not reference hydropower.
There’s also a whole host of other implications in this order. Crucially, does the Interior expect that by choking off the flow of permits, cities and companies will just pony up to build what the Trump administration considers “reasonable alternatives” instead? Is the federal government going to tell communities in Nevada, for example, that they must suddenly build gas plants in the desert instead of solar farms to meet their increasing energy needs?
In any case, much more is coming, as this order simply built off of a separate secretarial order earlier this week commanding staff to prepare a litany of recommendations on ending alleged “preferential treatment” for solar and wind facilities. In other words hold my beer – and hold onto yours, too.
That’s okay for clean energy firms, terrible for manufacturers, and a big risk for everyone.
Over the past few months, you could put together three different — and somewhat conflicting — pictures of the American economy.
For companies exposed to the AI boom, business has been good — excellent, even. The surge in ongoing capital investment into data centers and electricity has been larger than other recent booms, such as the telecom buildout. Electricity demand is soaring, especially in Texas and the Mid-Atlantic. Technology companies have signed power offtake deals with nuclear and hydroelectricity companies. If anything, companies exposed to artificial intelligence are more afflicted by congested supply chains and shortages than by slack demand — see the yearslong waiting lists to get a new transformer or natural gas turbine.
Outside of the AI economy, though, the economy has been a fair bit colder. You might even say it’s been frozen by indecision. When you talk to business leaders, they confess confusion about where things are heading. President Trump’s constantly changing tariffs — and his administration’s mercurial policy shifts — have made it difficult for non-AI-exposed businesses to plan long-term capital investment.
You could hear this view from clean energy manufacturing and traditional fossil firms alike. When I talked to John Henry Harris, the CEO of the medium-duty truck maker Harbinger Motors, for an episode of Heatmap’s Shift Key podcast in June, he told me that his company was just about to shift a production process to Mexico when a last-minute Trump change made it cheaper to keep it in China. Meanwhile, an oil and gas executive recently told the Dallas Federal Reserve: “The Liberation Day chaos and tariff antics have harmed the domestic energy industry. Drill, baby, drill will not happen with this level of volatility.”
But the data contradicted that tepid view. This was the third picture that we were getting of the economy. Through the summer, federal surveys showed an economy that was performing okay. In May, according to the Bureau of Labor Statistics, the U.S. economy added 139,000 jobs; it gained another 147,000 jobs, apparently, in June. The AI boom was clearly contributing to those robust reports. But how could an economy that business leaders otherwise described as difficult be going so well?
Now we can finally square these disparate pictures.
On Friday, the federal government released its newest tranche of job numbers. The headline number was mediocre — the U.S. added a mere 73,000 jobs in July — but the guts of the report were worse. The government revised down its estimate of the May and June reports by a total of 258,000 jobs. With these new numbers in hand, it’s clear that the labor market has essentially stalled out since Liberation Day in April.
The unemployment rate slightly rose to 4.2%, which was in line with what economists predicted.
These new reports clarify that the broader American economy wasn’t actually thriving. Its summer strength was a mirage the whole time. Outside of AI, things are downright frigid. And as President Trump continues to shuffle tariffs and increase trade uncertainty, we can expect conditions to worsen. Trump seems hellbent even on clouding our ability to understand the underlying economy: on Friday afternoon, he fired the Bureau of Labor Statistics commissioner, a career civil servant.
If you squint, you can see a hazy “AI sector” versus “non-AI sector” distinction in the data, even among the energy and decarbonization companies we cover at Heatmap. But it’s not obvious. Contrary to what you might expect when power demand is surging, utility employment was basically flat last month. Heavy and civil engineering construction jobs were up by 6,000, and “nonresidential specialty trade contractors” — a category that can include electricians — gained nearly 2,000 jobs.
But manufacturing lost 11,000 jobs last month, with the motor vehicles industry driving 2,600 of those losses. Mining, quarrying, and oil and gas jobs were down. The Institute of Supply Management report, a private survey of U.S. manufacturing activity, showed the sector shrank in July for the fifth month in a row.
And even though the Department of Government Efficiency’s deferred buyout program for more than 150,000 people has yet to hit, the federal government bled 12,000 jobs.
In a way, the clean energy industry — or at least solar, battery, nuclear, and geothermal developers — might consider themselves lucky. Despite the best efforts of Trump’s officials, and despite the chaos of President Trump’s policies, they have been able to eke through the past few months because of the AI boom. Nearly 70% of all new power-generating capacity added to the U.S. grid in the first quarter of this year came from solar panels, and the government has thrown its weight behind next-generation nuclear and geothermal technologies. A tepid jobs report might even bring some interest rate relief from the Federal Reserve.
But if that AI boom slows down, we should all watch out below.
A conversation with Heather O’Neill of Advanced Energy United.
This week’s conversation is with Heather O’Neill, CEO of renewables advocacy group Advanced Energy United. I wanted to chat with O’Neill in light of the recent effective repeal of the Inflation Reduction Act’s clean electricity tax credits and the action at the Interior Department clamping down on development. I’m quite glad she was game to talk hot topics, including the future of wind energy and whether we’ll see blue states step into the vacuum left by the federal government.
The following conversation has been lightly edited for clarity.
During Trump 1.0 we saw blue states really step into the climate role in light of the federal government. Do you see anything similar taking place now?
I think this moment we’re in – it is a different moment.
How are we handling load growth? How are we making sure consumers are not paying for expensive stranded assets? Thinking about energy affordability? All of those challenges absolutely present a different moment and will result in a different response from state leaders.
But that’s where some of the changes our industry has gone through mean we’re able to meet that moment and provide solutions to those challenges. I think we need aggressive action from state leaders and I think we’ll see that from them, because of the challenges in front of them.
What does that look like?
Every state is different. Take Virginia for example. Five years after we passed the Virginia Clean Economy Act – a big, bold promise of action – we’re not on track. So what are the things we need to do to keep the foot on the accelerator there? This last legislative session we passed the virtual power plant legislation that’ll help tremendously in terms of grid flexibility. We made a big push around siting and permitting reform, and we didn’t quite get it over the finish line but that’s the kind of thing where we made a good foundation.
Or Texas. There’s so much advanced energy powering Texas right now. You had catastrophic grid failure in Hurricane Uri and look at what they’ve been able to build out in response to that: wind, solar, and in the last few years, battery storage, and they just passed the energy waste reduction [bill].
We need to build things and make it easier to build – siting and permitting reform – but it’s also states depending on their environment looking at and engaging with their regional transmission organization.
You saw that last week, a robust set of governors across the PJM region called on them to improve their interconnection queue. It’s about pushing and finding reforms at the market level, to get these assets online and get on the grid deployed.
I think the point about forward momentum, I definitely see what you’re saying there about the need for action. Do you see state primacy laws or pre-emption laws? Like what Michigan, New York, and California have done…
I’m not a siting expert, but the reform packages that work the best include engagement from communities in meaningful ways. But they also make sure you’re not having a vocal minority drowning out the benefits and dragging out the process forever. There are timelines and certainty attached to it while still having meaningful local engagement.
Our industry absolutely has to continue to lean into more local engagement and community engagement around the benefits of a project and what they can deliver for a community. I also think there’s a fair amount of making sure the state is creating that pathway, providing that certainty, so we can actually move forward to build out these projects.
From the federal government’s perspective, they’re cracking down on wind and solar projects while changing the tax credits. Do you see states presenting their own incentives for renewables in lieu of federal incentives? I’ve wondered if that’ll happen given inflation and affordability concerns.
No, I think we have to be really creative as an industry, and state leaders have to be creative too. If I’m a governor, affordability concerns were already front and center for me, and now given what just happened, they’re grappling with incredibly tight state budgets that are about to get tighter, including health care. They’re going to see state budgets hit really hard. And there’s energy impacts – we’re cutting off supply, so we’re going to see prices go up.
This is where governors and state leaders can act but I think in this context of tight state budgets I don’t think we can expect to see states replacing incentive packages.
It’ll be: how do we take advantage of all the flexible tools that we have to help shape and reduce demand in meaningful ways that’ll save consumers money, as well as push on building out projects and getting existing juice out of the transmission system we have today.
Is there a future for wind in the United States?
It is an incredibly challenging environment – no question – for all of our technologies, wind included. I don’t want to sugar-coat that at all.
But I look at the whole picture, and I include wind in this: the technologies have improved dramatically in the past couple of decades and the costs have come down. When you look around at what resources are around to deploy, it’s advanced energy. We’re seeing it continue to grow. There’ll be headwinds, and it’ll be more expensive for all of us. But I look at what our industry and our technologies are able to offer and deliver, and I am confident we’ll continue to see growth.