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When I was an analyst at the U.S. Treasury, my team’s work centered around promising private investors that we would make it easier for them to invest in renewable energy projects across the Global South. I kept hearing that our job was ultimately to make these projects “bankable.” As the logic went, “there is a sizeable universe of good projects that fall just below many private investors’ desired rate of return,” and therefore lowering the risks of investing in these “good projects” would put them within reach of private investors’ return expectations. To make decarbonization possible, we had to make decarbonization profitable.
This claim cuts straight through Brett Christophers’ latest book, The Price is Wrong: Why Capitalism Won’t Save the Planet, which argues that the cost of developing and generating renewable energy is not what will determine the speed or scale of its uptake. It might finally be cheaper to build solar panels and wind farms than a coal or gas plant, that’s for sure. But given the structure of our energy markets today, it does not follow that assets that are cheap to build are necessarily profitable enough to provide adequate returns to investors.
My old colleagues might have already been aware of this fact, but as Christophers highlights, it’s certainly not intuitive, even to many analysts. Nor are its implications: Decarbonization won’t happen if it’s not profitable enough ― and it’s not profitable enough.
Christophers is a professor at Sweden’s Uppsala University in its “department of human geography,” whose research focuses on how capitalism and the modern financial system shape our lives; in this book, that also includes our energy systems. To make his case, he highlights the vicious feedback loop affecting renewables endemic to today’s energy markets. Government support to build renewable energy drives down its marginal cost, but because there’s now more renewable energy available at any given moment, the falling costs cut into developers’ expected returns, requiring more government support to keep investors and developers interested in the sector.
Combine this dynamic with technical features endemic to renewable energy generation, including its intermittency, and the result is a wholesale electricity market with perennially unstable prices. This volatility throttles the expected returns on any investment in renewable energy. No matter how cheap it is to build renewable energy, private investors and developers won’t decarbonize our globe at the speed or scale we deserve ― not under these financial conditions, at least.
Christophers leans on two theoretical guideposts here. First, Andreas Malm, whose assessment of how the profit motive, not relative costs, drove Britain’s first energy transition from water-wheels to coal and steam is an unmistakable conceptual parallel to today’s transition. Second, Karl Polanyi, whose theory of “fictitious commodities” — referring to land, labor, and money, each of which the state and society must painstakingly regulateinto fungible market-friendly products ― Christophers aptly applies to electricity and the artificial markets created around it.
But rather than hew to theory to justify why the energy system needs to be socialized to achieve decarbonization ― which is definitely true, by the way; the profit motive is supremely unhelpful here ― Christophers embraces a holistic understanding of the economy as a set of financial relationships, supply chains, planned markets, and legal institutions connecting various public and private entities with different motives.
That means interviewing investors, who tell him things like: “Low returns and volatility don’t go. No bank in the world will take power price risk at low returns.” Christophers also produces a detailed and data-rich breakdown of the interlocking global energy crises in 2021 and 2022, jumping between Texas, China, India, Australia, and across Europe, to make a larger point about energy markets. These crises were “not taken to be evidence of the failings of markets, or even a reason to question their role as the pre-eminent mechanism of coordination to the state’s electricity sector,” he writes; “the market was regarded as the very means to manage the crisis.” But the markets aren’t working. Something has to give.
He ends the book with a call for socialized power, inspired by the Green New Deal and New York’s Build Public Renewables Act, championed by the state’s democratic socialists on the explicit grounds that, because delivering on the state’s emissions targets is not profitable enough for the private sector to do alone, the public sector must get the job done. With the force of the whole book’s arguments and evidence behind it, this policy prescription hardly appears radical.
Public developers can accept lower profitability thresholds, and public finance institutions can provide debt on more forgiving terms; under the public aegis, rates of return and costs of capital become policy choices. Christophers admits in his introduction that he is more focused on unearthing the fragile relationships among actors across the renewable energy industry than on describing the ways a New York-inspired socialized power sector could function. Given how much there is to unearth, it’s a reasonable choice, but it leaves readers without a working heuristic for the different ways states can intervene in the business of energy.
Here’s my attempt: Energy must be financed, generated, distributed, and consumed. Government intervention in favor of decarbonization looks distinct at each step.
Governments can provide consumption support by shielding ratepayers from the higher electricity bills that come from potential utility investments into renewable energy procurement and decarbonization-related grid management, backstopping utility investments through a demand guarantee. Consumption support is equitable, but it’s also indirect and incomplete — it might provide a utility with more financial breathing room to procure or develop renewables, but if renewables are not available to procure on the grid or are not easy to develop, this demand guarantee likely just pads the utility’s bottom line.
Governments can provide distribution support by encouraging utilities to purchase renewable energy. Distribution support most often takes the form of regulatory nudges: In the United States, mandates like Renewable Portfolio Standards force utilities to increase their clean energy procurement, guaranteeing purchase demand for clean electricity and Renewable Energy Certificates, which companies might buy to clean up their own energy portfolios.
These demand-guarantee interventions have helped speed up renewable energy development nationwide, but with limits. In particular, utility power purchase agreements don’t provide developers with adequate price stability because utilities fix the quantity of energy they purchase rather than the price; corporate PPAs, meanwhile, cannot be relied on at scale because there aren’t enough large creditworthy corporations like Google and Amazon willing to commit to buying energy from new projects at a fixed price. For these reasons and more, supporting utilities’ efforts to decarbonize will not call forth adequate renewable energy generation sources into existence.
Generation support is what most governments already do. Whether through feed-in tariffs, production tax credits, or contracts for difference, generation support entails propping up generators’ profitability, ensuring that the sale price of their energy is never too low. Christophers explains why this mechanism — that is, a revenue guarantee rather than a demand guarantee — is deeply necessary: Renewable energy sources and the energy markets they’re plugged into are both structurally volatile, so, no matter how much energy they generate, they never generate all that much profit. Withdrawing generation support would be, in no uncertain terms, a death knell for renewables development.
And, finally, financing support targets renewable energy sources as capital-intensive assets requiring huge amounts of upfront debt. Whether through the investment tax credit, viability gap funding, concessional financing, or other forms of cost-share plans, financing support is another form of direct price support for generation companies; by lowering a project’s cost of capital, it helps lower its developer’s threshold for project profitability, meaning that generators pay less debt service and keep more of their revenues. High interest rates have lately forced up the cost of debt for renewable energy projects to unsustainable levels, far above private developers’ prospective rates of return. Financing support is a must-have these days ― and it’s all the more necessary across the Global South, where the costs of capital are far higher.
None of this is to say that socializing generation and finance solves every problem ― as far as the United States is concerned, non-financial barriers abound, such as regulations and interconnection queues ― but within the existing structure of energy markets, public ownership does solve a lot.
What does direct government intervention into energy consumption and distribution look like? Public ownership of local distribution utilities is a start. Unlike private utility companies, they don’t need to promise ten percent returns to shareholders, and can use the financial breathing room that comes from lower profitability thresholds to tamp down rate hikes and, perhaps more importantly, rate volatility. Public utilities will not drive decarbonization, but they could potentially help advance transmission reform and better integrate distributed energy resources into the grid.
Christophers all but argues that the best thing governments can do for all four support categories is to redesign energy markets. Beyond simply incentivizing the deployment of clean firm and battery technologies to complement renewables, policymakers’ biggest task is to build an energy system where volatile wholesale energy prices ― which even publicly owned renewable energy developers will have to face for the foreseeable future ― are not the reason that a project fails to get built. That would be a policy failure, and we don’t have time for those.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.