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In an exclusive interview, the White House advisor tells Heatmap that rules around hydrogen, manufacturing, and aviation fuel are weeks away and offers a window into his thinking.
The rules governing virtually all of the remaining policies in President Joe Biden’s climate law — including some of its most important and generous provisions — will come out in the next several weeks, signaling a new era in the law’s implementation, a senior White House advisor told Heatmap in an exclusive interview.
Speaking on the sidelines of the United Nations climate conference in Dubai, the advisor John Podesta said that the Treasury Department will publish rules governing some of the law’s biggest remaining subsidies by the end of the year. The former White House chief of staff and veteran political strategist also offered a window into his thinking about the implementation of the policies, which he has been charged with overseeing since last year.
The upcoming subsidies include some of the most important tax credits in the law. They are aimed at boosting climate-friendly aviation fuel, low-carbon hydrogen, and new factories building EVs and other clean-energy equipment. Podesta said that guidance for all three tax credits will be published by the end of the year. When they are released, every active subsidy in the Inflation Reduction Act will be usable and open for business.
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Podesta has spent much of the past year immersed in the tax code, the site of many of the law’s most sweeping policies. On Sunday, he walked Heatmap through his thought process behind some of the biggest unreleased rules.
He expressed particular worry about the rules governing “green hydrogen,” which is produced by using electricity to separate water into oxygen and hydrogen.
“This has been the most challenging piece of policy that we’ve had to contend with” while implementing the IRA, Podesta said.
Many energy scholars believe that hydrogen, which produces no climate pollution when burned, could potentially replace fossil fuels in many sectors. But the IRA’s tax credit is so generous — providing companies with up to $3 for every kilogram of hydrogen produced — that some experts have argued that exceptionally strong rules must govern it, so as to make sure it actually serves to reduce emissions.
Hydrogen “has the potential to pay enormous dividends in 2030 and 2040 in reducing emissions from the industrial sector, from heavy duty transportation, et cetera,” Podesta said. “But at the same time, not do it in a way that lacks environmental integrity.”
He described the White House’s work as trying to balance between two bad outcomes: On the one hand, it could stifle the production of green hydrogen so much that “blue hydrogen,” produced using natural gas and carbon capture technology, dominates; on the other, it could boost green hydrogen so much that it distorts electricity markets nationwide.
“We could kind of blow it in either direction, I think,” Podesta said. “We can either be in a context in which we’re not really driving deployment, and therefore driving innovation, particularly on the electrolyzer side, so that we end up kind of filling the gap with a lot of blue hydrogen rather than green hydrogen. On the other hand, if we go the other way, we sort of blow emissions on the grid.”
The big question confronting the Treasury Department is how to measure climate pollution produced from the electricity used to create green hydrogen. One sticking point is whether hydrogen producers will be allowed to buy power from existing zero-carbon power plants, like nuclear power plants and hydroelectric dams. That could be a boon for Constellation Energy, the country’s largest owner of nuclear facilities.
But researchers at Princeton and MIT have argued that if hydrogen companies aren’t required to bring new clean energy resources onto the grid to account for the power that they’re using to make hydrogen, then they will inadvertently increase climate pollution. That is because if a nuclear reactor stops serving homes and businesses and starts powering hydrogen production, then natural gas and coal plants will likely produce electricity to fill the gap, at least in the near term.
“You could see a world where all of the U.S. nukes pivot to supplying electrolyzers and just print money that way,” Dan Esposito, a policy analyst at the think tank Energy Innovation, told Heatmap earlier this year. “There’s just a lot of layers to how bad this can get.”
But speaking in Dubai, Podesta appeared to reject some of these more extreme scenarios.
“I think a lot of the model runs just have assumptions that are very, very — you know,” Podesta said. “Like, all nuclear power plants are not going to stop sending power to the grid and start making hydrogen. That is not going to happen. I guarantee you that.”
“So you can have an upside estimate of what that means, but to what end?” he added. “It’s tricky, because the [hydrogen] industry essentially does not exist. So we're making judgment calls about what we need to do to get the green side of the industry really going, in this decade.”
Podesta was more sanguine about the other two tax credits. “We’ve got a game plan on [the sustainable aviation fuel tax credit], and I think it’s going to be fine,” he said, although he added that it would require updating a key Department of Energy model that governs the policy.
“We’ll be able to both stimulate production but also create environmental integrity in that program,” he said.
That policy is expected in the middle of December. The last remaining tax credit, which will subsidize new factories in America to build clean-energy equipment, will be out next week, a Treasury Department spokesperson told Heatmap.
Once rules are written for those three programs, virtually all of the active subsidies in the Inflation Reduction Act will be ready to use. The IRA contains another set of subsidies — “technology-neutral” tax credits that will boost zero-carbon power generation until the country hits certain decarbonization goals — that the Treasury Department has not yet written rules for. But that program will not go into effect until 2025.
Starting on January 1, a new era will begin in the law’s implementation, as the government moves to award the climate law’s more than $100 billion in grants, Podesta said. “It’s going from, ‘This money is available, please apply,’ to, ‘Here’s the money, go put it to work,’” Podesta said.
In the spring, the Greenhouse Gas Reduction Fund — a new $27 billion in-house investment fund created at the Environmental Protection Agency — will begin distributing its funding, he added.
“I think that could be very, very powerful and important, not just from the perspective of reducing costs for consumers and reducing emissions, but in terms of the goal of deploying against the justice part of the president’s agenda,” he said. “That’s really where you can see the community impact happen.”
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A conversation with Mary King, a vice president handling venture strategy at Aligned Capital
Today’s conversation is with Mary King, a vice president handling venture strategy at Aligned Capital, which has invested in developers like Summit Ridge and Brightnight. I reached out to Mary as a part of the broader range of conversations I’ve had with industry professionals since it has become clear Republicans in Congress will be taking a chainsaw to the Inflation Reduction Act. I wanted to ask her about investment philosophies in this trying time and how the landscape for putting capital into renewable energy has shifted. But Mary’s quite open with her view: these technologies aren’t going anywhere.
The following conversation has been lightly edited and abridged for clarity.
How do you approach working in this field given all the macro uncertainties?
It’s a really fair question. One, macro uncertainties aside, when you look at the levelized cost of energy report Lazard releases it is clear that there are forms of clean energy that are by far the cheapest to deploy. There are all kinds of reasons to do decarbonizing projects that aren’t clean energy generation: storage, resiliency, energy efficiency – this is massively cost saving. Like, a lot of the methane industry [exists] because there’s value in not leaking methane. There’s all sorts of stuff you can do that you don’t need policy incentives for.
That said, the policy questions are unavoidable. You can’t really ignore them and I don’t want to say they don’t matter to the industry – they do. It’s just, my belief in this being an investable asset class and incredibly important from a humanity perspective is unwavering. That’s the perspective I’ve been taking. This maybe isn’t going to be the most fun market, investing in decarbonizing things, but the sense of purpose and the belief in the underlying drivers of the industry outweigh that.
With respect to clean energy development, and the investment class working in development, how have things changed since January and the introduction of these bills that would pare back the IRA?
Both investors and companies are worried. There’s a lot more political and policy engagement. We’re seeing a lot of firms and organizations getting involved. I think companies are really trying to find ways to structure around the incentives. Companies and developers, I think everybody is trying to – for lack of a better term – future-proof themselves against the worst eventuality.
One of the things I’ve been personally thinking about is that the way developers generally make money is, you have a financier that’s going to buy a project from them, and the financier is going to have a certain investment rate of return, or IRR. So ITC [investment tax credit] or no ITC, that IRR is going to be the same. And the developer captures the difference.
My guess – and I’m not incredibly confident yet – but I think the industry just focuses on being less ITC dependent. Finding the projects that are juicier regardless of the ITC.
The other thing is that as drafts come out for what we’re expecting to see, it’s gone from bad to terrible to a little bit better. We’ll see what else happens as we see other iterations.
How are you evaluating companies and projects differently today, compared to how you were maybe before it was clear the IRA would be targeted?
Let’s say that we’re looking at a project developer and they have a series of projects. Right now we’re thinking about a few things. First, what assets are these? It’s not all ITC and PTC. A lot of it is other credits. Going through and asking, how at risk are these credits? And then, once we know how at risk those credits are we apply it at a project level.
This also raises a question of whether you’re going to be able to find as many projects. Is there going to be as much demand if you’re not able to get to an IRR? Is the industry going to pay that?
What gives you optimism in this moment?
I’ll just look at the levelized cost of energy and looking at the unsubsidized tables say these are the projects that make sense and will still get built. Utility-scale solar? Really attractive. Some of these next-gen geothermal projects, I think those are going to be cost effective.
The other thing is that the cost of battery storage is just declining so rapidly and it’s continuing to decline. We are as a country expected to compare the current price of these technologies in perpetuity to the current price of oil and gas, which is challenging and where the technologies have not changed materially. So we’re not going to see the cost decline we’re going to see in renewables.
And more news around renewable energy conflicts.
1. Nantucket County, Massachusetts – The SouthCoast offshore wind project will be forced to abandon its existing power purchase agreements with Massachusetts and Rhode Island if the Trump administration’s wind permitting freeze continues, according to court filings submitted last week.
2. Tippacanoe County, Indiana – This county has now passed a full solar moratorium but is looking at grandfathering one large utility-scale project: RWE and Geenex’s Rainbow Trout solar farm.
3. Columbia County, Wisconsin – An Alliant wind farm named after this county is facing its own pushback as the developer begins the state permitting process and is seeking community buy-in through public info hearings.
4. Washington County, Arkansas – It turns out even mere exploration for a wind project out in this stretch of northwest Arkansas can get you in trouble with locals.
5. Wagoner County, Oklahoma – A large NextEra solar project has been blocked by county officials despite support from some Republican politicians in the Sooner state.
6. Skagit County, Washington – If you’re looking for a ray of developer sunshine on a cloudy day, look no further than this Washington State county that’s bucking opposition to a BESS facility.
7. Orange County, California – A progressive Democratic congressman is now opposing a large battery storage project in his district and talking about battery fire risks, the latest sign of a populist revolt in California against BESS facilities.
Permitting delays and missed deadlines are bedeviling solar developers and activist groups alike. What’s going on?
It’s no longer possible to say the Trump administration is moving solar projects along as one of the nation’s largest solar farms is being quietly delayed and even observers fighting the project aren’t sure why.
Months ago, it looked like Trump was going to start greenlighting large-scale solar with an emphasis out West. Agency spokespeople told me Trump’s 60-day pause on permitting solar projects had been lifted and then the Bureau of Land Management formally approved its first utility-scale project under this administration, Leeward Renewable Energy’s Elisabeth solar project in Arizona, and BLM also unveiled other solar projects it “reasonably” expected would be developed in the area surrounding Elisabeth.
But the biggest indicator of Trump’s thinking on solar out west was Esmeralda 7, a compilation of solar project proposals in western Nevada from NextEra, Invenergy, Arevia, ConnectGen, and other developers that would, if constructed, produce at least 6 gigawatts of power. My colleague Matthew Zeitlin was first to report that BLM officials updated the timetable for fully permitting the expansive project to say it would complete its environmental review by late April and be completely finished with the federal bureaucratic process by mid-July. BLM told Matthew that the final environmental impact statement – the official study completing the environmental review – would be published “in the coming days or week or so.”
More than two months later, it’s crickets from BLM on Esmeralda 7. BLM never released the study that its website as of today still says should’ve come out in late April. I asked BLM for comment on this and a spokesperson simply told me the agency “does not have any updates to share on this project at this time.”
This state of quiet stasis is not unique to Esmeralda; for example, Leeward has yet to receive a final environmental impact statement for its 700 mega-watt Copper Rays solar project in Nevada’s Pahrump Valley that BLM records state was to be published in early May. Earlier this month, BLM updated the project timeline for another Nevada solar project – EDF’s Bonanza – to say it would come out imminently, too, but nothing’s been released.
Delays happen in the federal government and timelines aren’t always met. But on its face, it is hard for stakeholders I speak with out in Nevada to take these months-long stutters as simply good faith bureaucratic hold-ups. And it’s even making work fighting solar for activists out in the desert much more confusing.
For Shaaron Netherton, executive director of the conservation group Friends of the Nevada Wilderness, these solar project permitting delays mean an uncertain future. Friends of the Nevada Wilderness is a volunteer group of ecology protection activists that is opposing Esmeralda 7 and filed its first lawsuit against Greenlink West, a transmission project that will connect the massive solar constellation to the energy grid. Netherton told me her group may sue against the approval of Esmeralda 7… but that the next phase of their battle against the project is a hazy unknown.
“It’s just kind of a black hole,” she told me of the Esmeralda 7 permitting process. “We will litigate Esmeralda 7 if we have to, and we were hoping that with this administration there would be a little bit of a pause. There may be. That’s still up in the air.”
I’d like to note that Netherton’s organization has different reasons for opposition than I normally write about in The Fight. Instead of concerns about property values or conspiracies about battery fires, her organization and a multitude of other desert ecosystem advocates are trying to avoid a future where large industries of any type harm or damage one of the nation’s most biodiverse and undeveloped areas.
This concern for nature has historically motivated environmental activism. But it’s also precisely the sort of advocacy that Trump officials have opposed tooth-and-nail, dating back to the president’s previous term, when advocates successfully opposed his rewrite of Endangered Species Act regulations. This reason – a motivation to hippie-punch, so to speak – is a reason why I hardly expect species protection to be enough of a concern to stop solar projects in their tracks under Trump, at least for now. There’s also the whole “energy dominance” thing, though Trump has been wishy-washy on adhering to that goal.
Patrick Donnelly, great basin director at the Center for Biological Diversity, agrees that this is a period of confusion but not necessarily an end to solar permitting on BLM land.
“[Solar] is moving a lot slower than it was six months ago, when it was coming at a breakneck pace,” said Patrick Donnelly of the Center for Biological Diversity. “How much of that is ideological versus 15-20% of the agencies taking early retirement and utter chaos inside the agencies? I’m not sure. But my feeling is it’s less ideological. I really don’t think Trump’s going to just start saying no to these energy projects.”