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The PJM Interconnection can’t seem to figure out supply and demand anymore, which could be good news for natural gas.
Here’s a dilemma: Large chunks of fossil fuel-powered energy generation are scheduled to fall off the U.S. electric grid in the next decade thanks to economic and regulatory pressures. Even larger chunks of renewable energy generation have not yet been approved to connect to the grid and may not be for years, if ever. Meanwhile, data centers and electrification have kicked off the first notable demand growth for electricity markets in over 20 years. On top of all that, the grid has become increasingly vulnerable to climate change-fueled disruptions, whether from solar power being knocked out by hail or natural gas lines freezing in an ice storm.
In some parts of the country, the solution to this dilemma is relatively simple. In much of the Southeast and -west, large utilities that own power plants are simply building more natural gas power plants. In California, regulators are mandating that utilities procure enormous amounts of energy storage, and have rejiggered residential solar rules to encourage more combinations of solar panels and batteries. And Texas is planning to lend billions of dollars at low interest rates to help finance natural gas plant construction.
Then there’s the PJM Interconnection, the 13-state electricity market serving much of the East Coast and Midwest, run by the country’s largest regional transmission organization. Despite PJM’s constant warnings about natural gas and coal generation retiring, it has not been able to bring new generating resources online in a reasonable timeframe. The grid operator — technically a non-profit — has neither the regulatory muscle nor the financial firepower to shape new energy generation to its preferences; its interconnection queue got so long, it instituted a two-year pause on reviewing new applications.
While many of PJM’s problems are unique to its particular circumstances, they’ve gotten so severe in recent months, it calls into question whether the decades-long project of structuring electricity generation, transmission, and distribution into something like a market is even working anymore.
“The whole premise is that a capacity market is about efficient entry and efficient exit,” Abe Silverman, an assistant research scholar at Johns Hopkins and former New Jersey utility regulatory official, told me. “We’re squeezing the tube on the entry side and letting very few new entrants in.”
According to PJM’s independent market monitor, at the end of last year, there were just over 7 gigawatts of natural gas projects in the queue, about half of which it expected to go into service eventually, while some 24 gigawatts to 58 gigawatts of coal and natural gas is expected to retire by 2030. There were over 200 gigawatts of renewables projects in the queue, the market monitor said, but only around 30 gigawatts that’s expected to go into service, and for the purpose of a capacity auction, only about 11 would count.
But for power market observers, the sirens really started going off at the end of July, when PJM held what’s called a capacity auction, which determines the price companies get paid to supply energy-generating capacity over and above forecasted peak demand in order to avoid blackouts. By the end of the five-day process, the cost of that capacity came out almost 10 times higher for than the previous PJM capacity auction — $14.7 billion, compared to just over $2 billion in 2022 — a signal that supply, demand, and reliability dynamics within PJM are seriously imbalanced.
That almost certainly means rate increases for consumers. In Maryland specifically, some residential electricity bills could rise anywhere from 2% to 24%, a monthly change of $4 to $18, according to the state’s Office of People’s Counsel.
What that almost certainly does not mean is a huge amount of new generation coming online. “In an efficient capacity market structure, the market starts sending higher price signals and generators start coming on-line,” Silverman told me. “Usually when you see high prices, you would expect more of a response from the supply side.”
In PJM, however, “new generation cannot come online quickly,” according to a letter from a group of consumer advocates in PJM states, therefore “the high capacity market prices are not an effective signal for new entry but instead a windfall for the owners of existing generation.”
Ironically, the high prices were due, in part, to PJM applying a formula it typically reserves for renewables to coal and gas plants, which “derates” the capacity they’re able to offer in times of stress, e.g. during a winter storm. Historically, coal and gas got high ratings because high winds and cold temperatures was considered unlikely to disrupt their production, while solar and wind scored much lower. But after 2022's Winter Storm Elliott, during which natural gas lines froze and caused a mass blackout, PJM knocked down the rating for combined cycle gas plants — the most efficient kind of gas plant, which recaptures heat exhaust to produce more power — from 96% to 79%, and for combustion turbine natural gas plants from 90% to 62%. Wind got a bump, while solar was rated down.
In other words, “PJM doesn’t view all these megawatts as reliably as they did before Elliott,” Nicolas Freschi, a senior associate at Gabel Associates, which does energy and environmental consulting for federal agencies, told me. That meant some 26 gigawatts of projected coal and gas capacity disappeared from the auction, according to S&P Global Commodity Insights.
The environmental activist community has long argued that gas is less reliable than utilities and the public seem to think it is, and that this should be taken into account with grid planning. The gas derating was “a good thing,” Claire Lang-Ree of the Natural Resources Defense Council told me, “because that means what we're paying for in this auction is actually reliable. It's a truing-up of the system.”
At the same time, she acknowledged, the auction result was “a bad thing insofar as it was the driving cause of the price spike,” which also means huge payouts for power companies.
“Despite the decrease in capacity credit, the higher capacity prices will impact the capacity revenue received for projects in PJM, generally increasing it,” S&P analysts wrote in August. By way of example, S&P looked at one natural gas plant in Ohio and found that its project per-megawatt-hour net revenue in 2026 would increase by 40%.
Morgan Stanley estimated that major power producers such as Texas-based Vistra and Maryland’s Constellation Energy would see a boost to their earnings before interest, taxes, and amortization of $700 million to $800 million each.
And yet in both Texas and PJM, many analysts (not to mention the gas industry) still see gas as the solution to a shortfall exacerbated by gas’s documented vulnerability. That’s due to its ability — at least on paper — to generate large amounts of power at any time of day.
So far, however, only one power producer with a large natural gas fleet, Calpine, has publicly indicated that it will aggressively pursue development in PJM. Calpine operates a 76-facility fleet that includes 66 fossil fuel-fired plants from California to Massachusetts. “The PJM market needs and values reliable, dispatchable, non-duration-limited power” the company said in a press release. (These are all industry code words for natural gas.) Calpine said it was “accelerating its PJM electricity generation development program following market signals indicating higher demand for reliable power,” and that it was looking at “multiple new locations in the PJM region, particularly in Ohio and Pennsylvania.”
Other companies have been more cautious. “It is only one auction, of course, and not long enough out in the future to be starting a new project,” Vistra chief executive Jim Burke said in an August earnings call. Morgan Stanley analysts noted that because the next auction is in December, “we don't foresee enough time to build significant new generation capacity. There are only 18 months between the auction and the start of the delivery year, which doesn’t leave time for permitting, interconnection queue timing, and construction because they are behind.”
S&P forecast that only one natural gas project under construction in Ohio could possible bid into the next auction. And while stock and bond analysts are more focused on the prospects for new natural gas plants, they are not particularly optimistic they’ll come online any time soon. “Merchant newbuilds remain marginal under our assumptions, indicating price signals may need to improve further to incent merchant new entry,” Guggenheim analyst Shahriar Pourreza wrote in a note.
Todd Snitchler, the head of the independent power generator trade group Electric Power Supply Association, noted to me that the July auction price was “coming off a record low,” and that the “abnormally” low prices in the previous two auctions — which were then followed by a lengthy delay — “suggested that assets should be leaving, and not coming on” — a trend PJM and other electricity market overseers have been warning about for years.
“One auction does not make a trend make,” Snitchler said.
If prices stay high, however, some analysts think power producers will eventually start trying to build new natural gas plants in PJM. “Investors don’t want to start building extremely expensive projects until they’re sure this price environment is sustainable,” Freschi told me.
Instead of beckoning new gas construction, clean energy and ratepayer advocates want PJM to focus on interconnection reform so that its existing queue — which is overwhelming renewables — can finally make its way onto the grid.
In a statement to Heatmap, PJM said its new system of evaluating projects in groups instead of on a first-come, first-served basis will lead to 230,000 megawatts being processed over the next three years. The PJM spokesperson also pointed to Calpine's announcement as a sign that the capacity auction was bringing new investment.
“We need investment in real projects that can get connected to the grid quickly, as opposed to the speculative projects that have clogged the queue in the past,” the spokesperson said. “Our reformed interconnection process encourages projects with the best chance of being built, and we are weeding out some of those that have been hanging on for years past receiving an interconnection agreement from PJM and who have not moved to construction.”
“Generators should submit their new project queue positions today,” the spokesperson added.
But like so many projects clogging the queue, these reforms are speculative, and in the end the restructured market, where new supply supposedly responds to high prices, simply may not work on its own terms. Some of this is due to policy in PJM states — you’re unlikely to be able to build a new natural gas plant in Democratic-controlled states like Maryland, New Jersey, or Illinois, and Guggenheim’s Pourreza wrote that “any new gas generation will be clustered in [Pennsylvania, Ohio, and West Virginia],” which could both lead to lower capacity prices in some areas and a more unbalanced market as new gas capacity becomes concentrated geographically.
But even in areas that are famously friendly to fossil fuels and have less complicated market and interconnection processes, demand for new gas has not smoothly resulted in gas plant construction. In Texas, which has closest thing to a free electricity market that exists in the United States, the state has had to turn to a multibillion low interest rate financing program to entice developers to build new natural gas plants.
May that be a warning to regional transmission planners everywhere. As S&P analysts wrote, “High prices signal the need for new generation, but do not guarantee it.”
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On defending wind, Russian gas, and NREL layoffs
Current conditions: A state of emergency is in effect in Manitoba, Canada, due to multiple wildfires • 17 million people in the south-central U.S. are at risk of severe storms on Tuesday • The Interior Department has reportedly suspended air quality monitoring for National Parks, including California’s Joshua Tree, where the AQI today is moderate.
Attorneys general from 17 Democratic states and Washington, D.C., filed a lawsuit on Monday challenging President Trump’s executive order pausing approvals, permits, and loans for onshore and offshore wind projects. The lawsuit argues that Trump exceeds his authority with the indefinite pause, which threatens “thousands of good-paying jobs and billions in investments, and … is delaying our transition away from the fossil fuels that harm our health and our planet,” in the words of New York Attorney General Letitia James, who is leading the coalition.
In a response to the lawsuit, a White House spokesperson told The Associated Press that “the American people voted for the president to restore America’s energy dominance, and Americans in blue states should not have to pay the price of the Democrats’ radical climate agenda.” As my colleague Emily Pontecorvo has written, however, state climate goals “become nearly impossible if no additional [wind] projects are able to get through the permitting process until at least 2029,” with New York state’s especially in jeopardy after the administration ordered the halt of construction on the fully permitted Empire Wind project south of Long Island.
The European Union plans to announce on Tuesday a 2027 deadline for companies to end any remaining energy contracts with Russia, the Financial Times reported Monday. Though the EU’s use of Russian oil and coal virtually ended with sanctions after the invasion of Ukraine in 2022, Europe still bought 49.5 billion cubic meters of Russian gas through pipelines in 2024, and another 24.2 billion transported on ships as liquified natural gas, per Rystad Energy (though some of that LNG was resold). Another way of looking at it: “The EU purchased a total of [$26 billion] in Russian energy in 2024, exceeding its military assistance to Ukraine last year,” Bloomberg writes, with imports accounting for about 19% of the bloc’s total gas purchases.
The proposed measures will need to be approved by a majority of EU member states and the European Parliament before they can be adopted, according to FT. Without Russian LNG, Europe is expected to turn to the U.S. to meet its energy needs.
Share of European Union gas demand met by Russian supply, 2001-2024
IEA
More than 100 employees at the National Renewable Energy Laboratory lost their jobs in a round of layoffs on Monday, Mother Jones reports. The cuts included non-probationary employees, or those who’ve worked at the Department of Energy division for over two years.
Though NREL has more than 3,000 employees on staff, sources who spoke with Mother Jones described the cuts as “rather haphazard and unorganized,” while others stressed that “if I am suddenly the only person on my team, I can’t handle that work.” The layoffs also notably come after President Trump’s “skinny” budget proposed $15 billion in cuts to Infrastructure Investment and Jobs Act funding. The White House Office of Management and Budget has said that the budget aims to reorient the Department of Energy’s funding away from “unreliable renewable energy” and “toward research and development of technologies that could produce an abundance of domestic fossil energy and critical minerals, innovative concepts for nuclear reactors and advanced nuclear fuels, and technologies that promote firm baseload power.”
The Federal Emergency Management Agency plans to end door-to-door survivor outreach in disaster areas for the upcoming hurricane and wildfire seasons, Wired reported Monday, based on a FEMA memo dated May 2. Previously, the agency would canvass disaster survivors to inform them about how to register for federal aid, a policy that one emergency management coordinator told Wired was critical given how many survivors don’t get adequate information about recovery resources otherwise. Instead, FEMA’s memo said the agency will “focus survivor outreach and assistance registration capabilities in more targeted venues.”
Last year, Republicans on the Oversight Committee singled out FEMA’s outreach program over alleged “widespread discrimination against individuals displaying Trump campaign signs on their property” in the wake of Hurricane Milton. The White House’s budget has also cited FEMA for supposedly “skipping over homes when providing aid.” But the Trump administration has also sought to pare back the agency aggressively: Earlier this year, it denied a request for federal aid from Arkansas’ Republican Governor and former White House Press Secretary Sarah Huckabee Sanders after severe tornadoes that left more than 40 people in the region dead, arguing the disaster was not “beyond the capabilities of the state, affected local governments, and voluntary agencies” to address.
Kevork Djansezian/Getty Images
The Los Angeles Dodgers have faced calls from activists and fans to end their sponsorship deal with Phillips 66’s 76 gas station brand — but the partnership might face a natural end due to the Olympics coming to L.A. in 2028, Legal Planet reports. Dodger Stadium will be an official Olympic venue during the summer games, and its 76 gas ads will violate the Olympic Charter prohibiting “commercial installations and advertising signs … in the stadia, venues or other sports grounds.”
The Dodgers are under mounting pressure to drop the Phillips 66 partnership even earlier. There are 76 gasoline ads “plastered throughout the ballpark, from the visiting team’s bullpen to the ribbon board screens lining the stands … Even the on-deck circles on the field, where batters prepare to hit, are orange-and-blue 76 logos,” the Los Angeles Times’ Sammy Roth wrote last year in a column calling for the team to break up with the oil company. As of November, the Houston-based energy company was facing six counts of violating the U.S. Clean Water Act by illegally discharging 790,000 gallons of wastewater from its Carson refinery into the L.A. County sewer system. “The lead up to the 2028 Olympic games period would seem to be a natural time for the Dodgers to reset a marquee sponsor for years to come — and to do so on their own terms — or else be forced to by Olympic rules,” Legal Planet writes.
“C’mon Ford, c’mon GM, c’mon Chrysler, let’s roll again/Build something useful that people need, build us a safe way for us to be/Build us something that won’t kill our kids, that runs real clean, that runs real clean.” —Lyrics to Neil Young’s new single “Let’s Roll Again.”
House Republicans’ new plan to transform NEPA, explained
A powerful House Republican committee has proposed shaking up one of the country’s key permitting laws as part of the ongoing process to write President Trump’s tax bill.
A new bill, drafted by the House Natural Resources Committee would transform the National Environmental Policy Act, or NEPA. Under NEPA as it stands today, the government must study the environmental impact of any “major” federal action. Any time a federal agency adopts a new policy, builds a new project, spends federal dollars, or issues a license or permit, that choice gets a full environmental review.
Crucially, this also means that the federal government must study the environmental impact even of privately developed projects that require some kind of federal sign-off. But the new bill would quicken this process and likely shield it from court review.
The law represents a “big step” for permitting reform, Nicholas Bagley, a University of Michigan law professor, told us. “It’s creative and extremely aggressive.” If it passes, Republicans’ budget measure could speed up the construction of energy projects around the country. But it could also reduce local or environmental groups’ ability to sue to slow down or block development.
The bill would allow companies to pay a fee to access a faster, more streamlined NEPA process that would not be reviewable by the courts, according to the bill. That means environmental groups would likely have a harder time suing the government for failing to account for various environmental maladies in their study.
Under the draft legislation, companies would pay 125% of the cost of preparing the report to get an expedited review. But avoiding a lengthy court fight is so valuable that many companies would likely take advantage of this new process, Bagley told us.
“You can read it as effectively creating a price for a litigation shield — the federal government is allowing developers to buy themselves out of litigation risk with a flat fee,” he said.
It would change the status quo in two important ways.
First, many federal agencies already require project sponsors to pay the full cost of preparing a NEPA report for a private project, such as a solar farm or geothermal well. The House Republican proposal would increase this cost by just 25% on the front end.
Second, under the law today, agencies take more than four years on average to prepare a NEPA report, which can regularly stretch into the hundreds of pages. Congress has periodically tried to impose tighter deadlines and shorter page limits on the NEPA process — including in a 2023 debt ceiling law — but it hasn’t been successful.
That’s because the threat of lawsuits ultimately drives the NEPA process, Bagley said. Civil servants write lengthy, meticulous NEPA reports not because statute requires them to do so, but because they’re afraid of losing their work in a lawsuit, he said.
“The thing driving lengthy timelines is litigation risk,” Bagley told us. “Unless and until you correct for the threat of judicial review, NEPA reform isn’t going to go that far.” This proposal is the first modern NEPA report to offer protection from judicial review.
The proposal could help speed up all types of energy projects.
But it could help some more than others. Certain fossil fuel projects — especially those involving fracking — have already received some form of exemption from the NEPA process. But renewables and clean energy projects broadly don’t have such a carve-out. Neither do some other types of natural gas infrastructure, such as pipelines and export terminals. These projects could benefit from a faster and less court-reviewable NEPA process.
This is the big question. To comply with the strictures of what’s known as the “Byrd Rule,” provisions in reconciliation must be primarily budgetary in nature, i.e. related to taxing and spending.
Provisions that have a budgetary effect but are “merely incidental” to their non-budgetary components can be ruled by the Senate Parliamentarian to be “extraneous” and excluded from the bill.
Parliamentarian rulings helped shape — and narrow — Democratic proposals in 2021 and 2022, including stripping out immigration provisions and minimum wage hikes from various bills that were working their way through the reconciliation process.
So where does overhauling NEPA fit in? The 125% fee makes the provisions of the House language arguably germane to the budgetary purposes of the reconciliation package. Supporters of the language will cite a precedent in the Inflation Reduction Act that waived judicial review for the program’s negotiation of drug prices in Medicare.
One way the parliamentarian will try to answer this question is by asking, “‘Is that big policy change necessary in order to achieve the budgetary impact?’ That’s the place where this could fail,” Thomas Hochman, the director of infrastructure policy at the Foundation of American Innovation, told us.
NEPA isn’t the only law that requires the government to study the environmental or cultural impact of its decisions. A handful of other laws — including the Endangered Species Act, the National Historic Preservation Act, or the Clean Water Act — mandate their own permitting process, which can also be lengthy.
Many of these laws impose substantive obligations on government decisions. The NHPA, for instance, requires the government to study whether any decisions will affect Native American cultural sites and to reach an agreement about how to mitigate that impact. These decisions can then be reviewed by the courts — NHPA was at the heart of the Dakota Access pipeline and SunZia cases.
Under the law today, the government often satisfies its duties under these laws as part of a broader “NEPA process,” with one agency essentially handling the paperwork for all the federal permitting laws that matter to a project together.
The House Republican proposal wouldn’t weaken or affect any of these laws, Hochman and Bagley told us. The government would still need to satisfy its obligations under all other federal permitting laws, and the courts could still review those decisions. It’s unclear how those laws would fit into the new streamlined NEPA process.
Senator Joe Manchin of West Virginia led two efforts during the Biden years to pass permitting reform legislation through the conventional lawmaking process. The bills tended to combine policy asks from Republicans and Democrats — that is, oil and gas interests as well as green energy and transmission developers — in an effort to build a broad consensus in favor of policy change.
What that looked like in practice was specific carveouts designed to facilitate the building of long-range transmission lines alongside, say, changes in schedules for leases for extracting fossil fuels on public lands.
This time, Republicans alone are driving the permitting reform process, because the reconciliation bill is expected to be approved (or not) on party lines.
The reconciliation language says nothing specific about transmission, for example, but it includes specific provisions favored by the oil and gas industry like mandating lease sales on a quarterly basis. The American Petroleum Institute praised the bill, and the Sierra Club said that “the only way it could be friendlier to Big Oil CEOs would be if they wrote it themselves.”
But the reform to how NEPA is — and isn’t — litigated is a genuine breakthrough in years of drawing up failed permitting reform plans.
“We haven’t yet seen one bipartisan bill on permitting that broadly amends judicial review,” Xan Fishman, senior managing director of the energy program at the Bipartisan Policy Center, told us.
“One of the difficulties in doing permitting reform is that there isn’t just one problem that needs solving. There are a bunch of things that all add up to a really difficult process that takes a long time and has massive degrees of uncertainty,” Fishman said.
To the extent clean energy projects face sometimes fatal delays due to the specific rigors of the NEPA process, the bill would remove a barrier to their development.
NEPA has proven to be a significant barrier to solar development. About two thirds of solar projects that were assessed under NEPA between 2010 and 2018 faced litigation, as well as almost one third of pipelines and 38% of wind projects, according to Stanford researchers Michael Bennon and Devon Wilson.
Even when agencies win court cases — which can be filed up to six years after a federal agency decision — “litigation overwhelmingly functions as a form of delay,” according to Breakthrough Institute research.
It’s unclear whether the House Republican proposal will ultimately speed up federal energy project approvals, or whether litigants will shift to opposing projects under other permitting laws, such as the Endangered Species Act or NHPA. But permitting reform advocates agree that the proposal nonetheless represents a big step.
“It would be a pretty good shield for persnickety criticisms of [environmental reviews] that are now de rigueur, but it might not provide complete protection from the full run of environmental objections waged against a project,” Bagley said.
“I am firmly convinced that NEPA is a big problem for helping to create and reinforce defensiveness on the part of agency officials. But it’s part of a big web of accountability run maybe too amok,” he said. “One answer is to start clipping parts of the web — it doesn’t fix the whole problem, but it might help you see what else becomes salient.”
Not even the companies that — on the surface, at least — seem most likely to benefit from them.
Amidst the chaos of President Donald Trump’s tariff regime so far, there has been one constant — the 25% levies on steel and aluminum imports applied in February, with no country-specific exemptions. I’ve been a bit befuddled as to what these tariffs may, or may not, mean for the companies trying to green these notoriously hard-to-decarbonize sectors. And it turns out, some of them are a bit befuddled, too.
“It’s a mixed bag,” Cody Finke, CEO of the Bay Area-based clean cement and aluminum startup Brimstone told me. Brimstone’s core breakthrough is figuring out a way to co-produce cement and alumina — the core material in the critical mineral aluminum — using carbon-free calcium silicates such as basalt rather than limestone, which releases a lot of CO2 when it’s processed.
At least on the surface, a company like Brimstone should fall squarely among the beneficiaries of Trump’s trade policy — the whole point of the tariffs, after all, is to increase demand for domestic steel and aluminum by making foreign metals more expensive. That will likely allow U.S.-based producers to raise prices, too, generating even more revenue.
Then again, green steel and aluminum producers rely on imports of these same materials to build their own plants. Tariffs on these vital construction materials — plus exorbitant levies on all goods from China — will make building new production facilities significantly costlier. (As Keith Norman, CEO of the domestic battery manufacturer Lyten told me last month, “The reality is, the energy transition is a manufacturing transition.”) Not to mention the fact that the auto industry — a heavy user of both steel and aluminum — is facing its own 25% tariffs on imported vehicles and auto parts. That stands to raise the price and thus lower the demand for cars, in turn reducing demand for the materials needed to build them, green or not.
Large industry players such as Nucor and Cleveland Cliffs — both of which have plans to produce green steel — have seen mixed responses since the tariffs were announced. “Nucor recently said on an earnings call that they have huge backlogs, suggesting increased demand. [Cleveland] Cliffs, on the other hand, is idling plants due to low demand,” Hilary Lewis, the steel director at Industrious Labs, a nonprofit advocating for heavy industry decarbonization, told me via email. But it’s difficult to know how much a company’s recent performance is attributable to the tariffs. “The impact of the steel tariffs are uneven and subject to other disruptions in the market,” Lewis said.
Industrious Labs aluminum lead Annie Sartor told me that Trump’s first term tariffs on aluminum failed to revitalize the industry, which she said “saw a continued downturn.” So while the latest tariffs are more robust, Sartor is hesitant to to think that “this will be a real game changer.” As she explained, “The biggest challenge that the industry faces is access to electricity, and specifically renewable electricity.”While the tariffs won’t directly address that, Sartor said that an optimistic analysis would suggest that with their extra revenue, companies that rely on electrification to clean up their operations “could use those additional funds to help them access the renewable energy that they want.”
At least for now, many of the leading companies have expressed strong support for Trump’s trade agenda. Century Aluminum’s CEO Jesse Gary said the tariffs “will help drive the resurgence of domestic aluminum production,” while Cleveland Cliff’s CEO Lourenco Goncalves stated they would “penalize the foreign competitors who have been playing by a different set of rules.” And while Leon Topalian, CEO of Nucor, acknowledged that the tariffs will increase the price of the raw materials for steel, such as iron ore, he told investors that he thinks this will be outweighed by “the overall macroeconomic trends in the industry, a healthy, vibrant steel industry.”
Aluminum giant Alcoa, which has also expressed interest in producing green aluminum, is an outlier among industry leaders in its opposition to tariffs. The company’s CEO, Bill Oplinger, told the crowd at a metals and mining conference in February that the disruption caused by the tariffs could eliminate 100,000 jobs in the domestic aluminum industry. The company operates two smelters in Canada that will be subject to tariffs, while it’s closed down many older smelters in the U.S. that it’s in no rush to reopen. “It’s hard to make a restart decision based on tariffs that could change,” Oplinger said during an analyst call, the Wall Street Journal reported. “We just don’t know whether they will stick.”
Startups focused narrowly on green metals production, however, have generally been more circumspect in their responses. “At this point, we’re trying to just stay steady through all of it — not reacting to the day-to-day,” Adam Rauwerdink, senior vice president at the green steel startup Boston Metal, told me. His company uses renewable power to electrolyze iron ore at high temperatures to create molten iron, the feedstock for steel.
Boston Metal has yet to build its first demonstration plant, and while Rauwerdink told me the tariffs could provide some incentive to site the facility in the states, the increase in domestic materials demand that tariffs will presumably bring is by no means enough to guarantee a U.S.-based facility will be worth it. “Here in the U.S. right now, the challenge is just the grid not being sufficient,” he said.
With electricity demand on the rise, green metals companies are now competing for renewable resources with tech giants that are trying to scoop up as much clean energy as possible to power their artificial intelligence-focused data centers. “Innovations like that, which change the landscape on the grid, can definitely impact some of these other solutions that are going to be competing for electrons and are probably less profitable than an AI data center,” Rauwerdink told me.
Electra, a startup that’s also using electrolysis to decarbonize the ironmaking process, recently landed a $186 million Series B funding round to build its demonstration plant in Colorado. But the tariffs aren’t enough for them to commit to the U.S. market, either. As the company’s CEO, Sandeep Nijhawan, told me, building a facility in an area with easy access to renewables is of paramount importance to them too.
Adding to all of this tariff-related uncertainty is the fact that many of these demonstration plants or first commercial facilities, including Brimstone’s, aren’t even scheduled to come online until the latter half of Trump’s term, if not the next decade. “We don’t know what the policy of the United States will be at that time,” Finke told me. The plan is for the company’s first commercial demonstration plant to be operational in 2030. “Maybe the next president will extend those tariffs, or maybe they will cut them back,” Finke said. After all, Biden mostly kept Trump’s first term tariffs on steel and aluminum in place — although prior to this February, there were numerous country-specific exemptions in place.
At the end of the day, tariffs are only one of numerous policy unknowns plaguing these green producers. Another major one is the status of the funding many of them were granted from the Department of Energy but have yet to see. In Brimstone’s case, that’s a $189 million award from the Office of Clean Energy Demonstrations to build its first plant. While Finke told me the company has started spending that money scoping out potential sites, it hasn’t yet been reimbursed. I asked him if that was concerning. “It’s a good question,” he told me. “At this time, it’s too early to say that.”
Similarly, Century Aluminum and Cleveland Cliffs both have $500 million awards from OCED to produce green aluminum and green steel, respectively. While I reached out to both companies for comment on the tariffs and the status of their funding, neither got back to me. Boston Metal also has a $50 million DOE grant for a facility that would produce chromium, a critical material for many advanced energy technologies. That money is, of course, now mired in “limbo and uncertainty,” Rauwerdink told me.
Green aluminum manufacturers large and small also stand to benefit from the Inflation Reduction Act’s advanced manufacturing production tax credit, which incentivizes the domestic production of critical minerals, as well as certain types of clean energy components. This credit — along with so many others — may or may not be slashed as Republicans look to cut funding for a variety of IRA-related initiatives in the budget reconciliation process.
While Finke told me — as so many other companies did — that Brimstone does not rely on tariffs, tax credits, or the company’s DOE grant for its survival,it sure would be nice to have just a little certainty for once. “What we’d really like is to know what number to put in our financial model,” he told me.
Wouldn’t we all.