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Economy

Renewable Energy Developers Eye Interest Rate Relief

On Fed deliberations, Senate negotiations, and investment stagnations

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Thursday
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Current conditions: 192 people are still missing after heavy rains set off a torrent of flash floods in the Indian state of Kerala • Spain’s heat wave is believed to have peaked after an observatory near Barcelona recorded an all-time high • Temperatures in Antarctica soar to more than 50˚F above normal.

THE TOP FIVE

1. A September rate cut could bring relief to renewable energy developers

The Federal Reserve once again voted to hold interest rates steady at 5.3% but signaled that a rate cut could arrive as soon as September. That rate cut would be music to the ears of renewable energy developers, who have struggled to cope with higher borrowing costs. Compared to fossil fuels, renewable energy is more vulnerable to interest rate changes because upfront capital expenditures comprise a greater share of the total project cost. As Joel Dodge wrote for Heatmap in March, high interest rates have hit the offshore wind industry particularly hard, contributing to cost overruns and even cancellations.

In a press conference on Wednesday, Federal Reserve chair Jerome Powell cited “further progress” towards the Fed’s goal of 2% inflation. “A reduction in our policy rate could be on the table” for the September meeting, said Powell. Renewable developers will certainly hope so.

2. Senate energy permitting bill passes through committee

The Senate Energy and Natural Resources Committee approved a bipartisan energy permitting bill in a 15-4 vote on Wednesday. The bill has a little something for everyone: sped-up permitting for renewable energy, requirements for oil and gas leases, and LNG approval time limits. It’s a joint effort by Republican Senator John Barrasso and Independent Senator Joe Manchin, who effused that the bill’s passage marked “a tremendous day for all of us.” Critics of the bill include over 360 environmental groups, who view the fossil fuel provisions as an affront to climate action. Three Democratic-caucusing senators and one Republican senator have already signaled that they will oppose the legislation. The White House has yet to weigh in, though senior climate policymakers have previously said that permitting reform is necessary to unlock the benefits of the Inflation Reduction Act.

3. Global battery investment declines for the first time this decade

After growing for four years straight, global investment in batteries is set to decline this year, according to analytics firm Rystad Energy. The main culprit, Rystad says, is a slump in the Chinese market, where industry consolidation and supply chain constraints have put a damper on the firehose of investment that marked 2021 and 2022. If the spending dip bears out, it could pose challenges for the global EV industry. Sustained technological improvements and cost declines – largely driven by Chinese investments – have made EVs more affordable and driven their adoption in Asian and Western markets alike.

What this means for the future of the battery industry is unclear, says Duo Fu, Rystad’s vice president for battery market research. He noted that “collaboration across the entire supply chain is crucial for the industry's health.”

4. Grid-enhancing technology gets a raise

TS Conductor closed a $60 million growth investment round, the company announced on Wednesday. The U.S.-based manufacturer of advanced power lines plans to use the money to open a second production facility, with its Southern California plant nearly at capacity. TS’s power lines offer an upgrade on the traditional stock by decreasing line losses, reducing sag, and accommodating up to triple the power during peak generation hours.

The National Renewable Energy Laboratory estimates that transmission capacity will have to nearly triple by 2035 if the U.S. is to integrate the renewable energy required to meet its climate goals. Transmission lines, however, are notoriously costly and time-intensive to build. Grid-enhancing technologies like TS’s can ease the burden on new construction by allowing grid operators to increase the capacity of their existing lines.

5. BYD and Uber strike a deal

Uber has announced that it will purchase 100,000 EVs from Chinese auto company BYD as part of an effort to shift Uber’s fleet of vehicles to electric. Uber drivers will be offered a host of discounts – on things like leasing, charging, and maintenance – to encourage them to make the jump to an EV. The vehicles will hit the streets first in Europe and Latin America, with Canada, Australia, New Zealand, and the Middle East further down the road.

The deal comes as political leaders in the United States and Europe scramble to stem the flow of low-cost Chinese EVs over worries that they will outcompete Western manufacturers. In May, the Biden administration announced that it would impose a 100% tariff on Chinese EVs, and European lawmakers imposed their own tariff (albeit smaller) on the cars in July.

THE KICKER

$120 billion — that’s the total cost of natural disasters in the first half of 2024, according to German insurance company Munich Re. It’s a slight decrease from the same period last year, but still well above the average for the past three decades.

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Daily Briefing

Think Congress Is Slow? Meet the Power Sector.

BAAJA would likely help speed up the U.S. transmission buildout, but there’s a chance we’re undercounting the benefits.

Power lines.
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This is Heatmap Daily, a weekday digest written by our executive editor. Subscribe here.

As you may have seen, my colleague Emily Pontecorvo and I got the first look at the Rhodium Group’s analysis of what the bipartisan permitting bill will do to emissions.

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AM Briefing

Neutral, at Worst

On Chinese hydrogen, Fermi upheaval, and British offshore wind

Smokestacks.
Heatmap Illustration/Getty Images

Current conditions: The Pineapple Express, an atmospheric river originating in the Pacific near Hawaii, is arriving in the Southwest laden with heavy rain that’s set to flood the region • Indonesia has the worst air quality in the world as forest fires rage along Sumatra’s southern coast • A cross-country storm will soak much of the United States on Tuesday’s Election Day.


THE TOP FIVE

1. Permitting bill’s worst-case climate scenario is still carbon neutral

The Senate’s grand compromise to simplify federal permitting on energy projects would likely drop emissions slightly as the benefits to accelerating deployments of clean energy infrastructure outweigh the boost the legislation could give to fossil fuels. Even under the worst-case scenario, emissions remain on the same trajectory as today. That’s according to a hotly anticipated new analysis by the Rhodium Group, the consultancy whose U.S. emissions estimates are among the most widely cited in American politics. The report, shared first with my colleague Emily Pontecorvo, found that provisions in the Bipartisan American Affordability and Jobs Act largely counteract each other on climate. The bill makes building transmission lines much easier, a key step to patching more renewables onto the grid. But it also makes new gas pipelines simpler to permit, clearing the way for a buildout of the infrastructure for the fossil fuel already dominating U.S. electricity and heating systems. Still, under the best-case scenario, the legislation could cut U.S. economy-wide emissions by 5% below where they would otherwise go in 2040. The bill could also slash energy bills by $78 per year and support construction of more than 200 gigawatts of clean energy capacity, as compared to a world where it didn’t pass. The Rhodium report is at least the second analysis yet to find that the bill could modestly lower emissions. The first, as I reported last week, came from the think tank Resources for the Future, which saw a slight drop in power-sector emissions relative to a world without BAAJA.

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Energy

Exclusive: New Modeling Finds Permitting Bill Would Likely Cut Emissions

Even in the worst-case scenario, BAAJA wouldn’t increase emissions, an analysis by the Rhodium Group concludes.

Pollution and the Capitol.
Heatmap Illustration/Getty Images

The bipartisan permitting reform bill is likely to slightly cut greenhouse gas emissions and lower electricity bills by 2040 — or at worst leave emissions on the same trajectory that they are on today — as compared to the status quo, according to a new analysis of many of its provisions by the Rhodium Group, an independent research firm.

The analysis examines the policies in the Bipartisan American Affordability and Jobs Act, or BAAJA, that would have the most-clear cut effects on climate pollution and the energy system. It is the most comprehensive account of the bill’s effects on emissions so far, although it does not examine all of its provisions.

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