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On financial shocks, severe flooding in the South, and data centers
Current conditions: Streets turned into rivers and at least 30 people were killed in the Democratic Republic of Congo after torrential rain • A month’s worth of snow is expected to fall over just two days in Moscow this week • Warm temperatures in Central Florida could break heat records Monday.
Financial markets in Asia and Europe plummeted this morning in response to President Trump’s tariffs. U.S. markets are also expected to tumble, with the S&P 500 approaching a 20% decline into a bear market. On the energy front, the fallout hasn’t spared domestic U.S. battery makers who will need to source affordable construction materials if they want to scale their operations. Bay Area-based lithium-sulfur battery producer Lyten told Heatmap’s Katie Brigham that the company needs to build a lot of infrastructure, and tariffs on building materials like steel, aluminum, cement, and drywall will likely make doing so much more expensive. “The building of physical factories, those materials, the infrastructure to do that, the equipment to do that, a lot of that is coming through international trade,” said Lyten’s CEO Keith Norman. And as Heatmap’s Emily Pontecorvo reported, the tariffs could scramble Trump’s plans to expand liquefied natural gas exports, with rising costs threatening to derail contracts for LNG export terminals. “The tariffs (not to mention the uncertainty about how long they’ll last) could also turn off potential buyers from signing long-term contracts with the U.S.,” Pontecorvo said. “They may begin to look elsewhere, or impose retaliatory tariffs, as China has already done.”
Meanwhile the fate of the Inflation Reduction Act hangs in the balance as Congress works on its joint budget resolution. Republican Rep. Mark Amodei of Nevada told Gabby Birenbaum from The Nevada Independent that preserving the 45X advanced manufacturing production credit and the 30D new clean vehicle tax credit is a red line for him. Birenbaum says Amodei is “the first Republican to take that stance.”
At least 18 people have died in violent storms that began last week and endured through the weekend, bringing tornadoes and severe flooding to states across the Midwest and South. Days of relentless rain caused rivers to overflow their banks in Arkansas, Kentucky, Missouri, Mississippi, Texas, Tennessee, Indiana, Illinois, and Ohio. More than a foot of rain was reported in parts of Kentucky and Tennessee. The storm systems rolled through at a time when the Trump administration has been cutting jobs within the National Oceanic and Atmospheric Administration and the Federal Emergency Management Agency. According toThe Associated Press, the National Weather Service’s forecast offices are currently critically understaffed, making it harder to issue storm warnings and survey damage.
Flooding in Missouri.Scott Olson/Getty Images
The Trump administration is considering closing the Department of Energy’s Office of Clean Energy Demonstrations, Bloombergreported. The OCED was created in 2021 under the Biden administration and is aimed at testing and scaling clean energy technologies including carbon capture, advanced nuclear, long-duration storage, and clean hydrogen. The proposed plan, according to Bloomberg, would see the agency’s staff and funding slashed significantly. Whatever remains will be rolled into the DOE. The administration has already been considering cutting funding for some of the OCED’s seven hydrogen hubs scattered across the country, something lawmakers on both sides of the aisle have pushed back against. Also up for elimination is a Texas direct air capture project run by Occidental Petroleum’s subsidiary 1PointFive that was selected to receive a slice of $1.2 billion from the Bipartisan Infrastructure Law.
Resources for the Future published its annual energy outlook Monday. The analysis collates and compares 13 possible scenarios from seven recent energy outlooks published by various companies and organizations like the International Energy Agency, BloombergNEF, and oil giants BP and OPEC. This year’s report forecasts significant headwinds for the energy transition as nations move to prioritize energy security over emissions reduction, the United States shifts its energy policies dramatically, and a surge in global electricity demand looms.
Across all 13 scenarios RFF examined, fossil fuel energy generation stays flat or declines through 2050, “but the degree of decline and share of generation in 2050 depends on the scale of climate ambition.” Solar and wind power grow substantially to account for up to 74% percent of global generation by 2050 in all scenarios. And while everyone is worried about how AI and data centers will spike electricity demand, the RFF report notes that “data center growth is only a small part of total growth in U.S. electricity needs” through 2050, and says the impact from data centers is assumed to be “modest relative to other sectors.” Thanks to improvements in energy efficiency, global energy demand grows slowly or even declines in all scenarios. The carbon intensity of energy falls, as well, which RFF notes marks “a change from the last several decades.”
But what does this all mean for emissions? The report finds that while emissions are expected to decline over the next 25 years, governments’ current efforts are not going to be enough to keep warming below 2 degrees Celsius by 2100. Just four of the scenarios have us reaching net-zero emissions by 2050. The wide range of emissions projections “highlights the gap between existing efforts and the goals articulated by countries” in their published climate plans.
RFF
Tesla’s shares are falling this morning after Wedbush Securities analyst Dan Ives, described as “one of Wall Street’s biggest fans of Tesla Inc.,” cut his price target for the company by 43% from $550 to $315. In a note to clients on Sunday, Ives indicated that new tariffs and growing backlash against CEO Elon Musk’s role within the Trump administration are both bad for business. “This situation is not sustainable and the brand of Tesla is suffering by the day as a political symbol,” Ives wrote. “Our longstanding bull view of Tesla remains, but there is no denying this is a pivotal moment of truth for Musk to turn things around … or darker days are ahead.” Tesla’s stock is down more than 10% in early trading today. The company’s share price rose on the back of President Trump’s election as it became clear Musk would be one of his key advisors, but that post-election bump has since vaporized. There have been recent rumors that Musk will soon step away from his role leading the Department of Government Efficiency.
The Department of Homeland Security subjected Cameron Hamilton, currently the acting administrator of FEMA, to a lie detector test to figure out whether he leaked information about meetings in which DHS Secretary Kristi Noem discussed curbing FEMA’s abilities to respond to natural disasters. Hamilton passed.
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Bay Area battery maker Lyten sources 80% of its components in the U.S. But its ability to scale still depends on trade.
China dominates the lithium-ion battery supply chain at nearly every level, from critical minerals processing and refining to cell manufacturing and battery pack assembly. So now that the nation faces a cumulative 54% tariff rate, one might think domestic battery manufacturers in the United States — especially those exploring lithium-ion alternatives — would be celebrating their good fortune.
But the actual picture is markedly more mixed. Take Bay Area-based lithium-sulfur battery producer Lyten. On the one hand, Lyten is particularly well positioned to take advantage of the administration’s focus on building out U.S. supply chains. The company has been around since 2015, and last year snatched up a shuttered 200-megawatt factory from Northvolt after the Swedish battery giant declared bankruptcy.
Lyten aims to use entirely domestic inputs in its battery — a goal it’s been chasing since well before Wednesday’s tariff announcement. It currently sources “well over 80%” of its core components domestically, which is largely possible because its lithium-sulfur battery chemistry doesn’t require critical minerals such as nickel, manganese, cobalt, or graphite, which are mined globally and almost always refined in China. Sulfur, Lyten’s key cathode material, is cheap and abundant in the U.S. The company has ambitious plans to start producing at the old Northvolt facility this year, and is planning a much larger gigafactory in Reno, Nevada for 2027.
But Lyten’s plans for scale will depend on its ability to source affordable construction materials. The company’s timeline hasn’t changed for now, but Trump’s tariffs have introduced a big new question mark into its future operations. “We're not drawing any conclusions quite yet,” Lyten’s CEO Keith Norman told me.
As Norman emphasized, Lyten is fundamentally “a hard tech company that needs to build a lot of infrastructure” in order to scale, and tariffs could make that a much more expensive proposition. “The building of physical factories, those materials, the infrastructure to do that, the equipment to do that, a lot of that is coming through international trade,” Norman told me.
“The reality is the energy transition is a manufacturing transition,” Norman told me. “There’s nothing in the energy transition that doesn’t require pretty significant investments in manufacturing and build out.” Therefore, tariffs that hit construction materials and equipment will put emergent domestic energy companies — climate friendly or not — at risk of a slowdown. “And so I think that’s the real question — are there ways to build a managed tariff strategy that creates that opening for accelerating U.S. manufacturing?” Norman questioned.
Import duties of 25% on steel and aluminum went into effect in March, so while these building materials are exempt from the sweeping tariffs announced on Wednesday, those additional costs are already shaking out through the economy. There were also plenty of other building materials that were not exempt, such as cement and drywall. What’s more, according to the consultancy Off-Highway Research, which provided its data to Construction Briefing, the tariffs are expected to add about $4.2 billion to the cost of imported construction equipment — think things like bulldozers, cranes, and dump trucks. Costs for HVAC systems, plumbing, and electrical equipment are also set to rise.
For his part, Norman is more worried about the impact of Trump’s tariffs on the EV market than the stationary energy storage market. The electric vehicle industry is still trying to figure out how to move beyond early adopters to achieve mass market success, he told me, a process that tariffs could seriously hamper as they raise the price of innumerable EV components. Battery storage, on the other hand, is already seeing “gangbusters growth,” as Norman put it. So while tariffs will almost certainly make energy storage systems — largely dominated by lithium-ion batteries — more expensive, “In general, we expect that market to continue to grow incredibly rapidly, partially on the backs of the fact that power demand is growing rapidly,” he told me.
Lyten sees itself as a part of that rapid growth. In theory, lithium-sulfur batteries could achieve a greater energy density than standard lithium-ion, though problems with conductivity and cycle life remain. So while Lyten ultimately wants to produce batteries for use in electric vehicles and energy storage systems that are cheaper and more efficient than the industry standard, earlier applications could include use in drones, satellites, and two- and three-wheelers, which don’t have as high performance requirements.
Norman thinks he’s set up the company to survive tough times, if not precisely a global trade war. “Bringing a new battery chemistry to market, we told ourselves we need to be able to survive two major market downturns,” Norman said. “And so we’ve designed the company, the cap structure, our funding strategy, all around being ready for things like this.”
Some producers were already renegotiating contracts due to rising costs. Then came “Liberation Day.”
Expanding U.S. liquified natural gas exports has been a key priority for Trump and part of his strategy to “unleash U.S. energy dominance.” But his tariffs could make it harder for projects that are still early in their development to succeed.
After taking office, Trump swiftly reversed the Biden administration’s slow-walking of permits for LNG export terminals and issued key approvals for two big new projects in Louisiana, Calcasieu Pass 2 and Commonwealth LNG. They add to a pipeline of roughly eight other projects that have received key federal approvals but have not yet reached a final investment decision, according to data from the Energy Information Administration.
Cost inflation was a concern for these projects prior to this week’s tariffs, said Ben Cahill, the director of energy markets and policy at the University of Texas at Austin’s Center for Energy and Environmental Systems Analysis. The previously announced 25% tariffs on steel and aluminum were already set to make building these projects more expensive, Cahill told me in an email.
Anne-Sophie Corbeau, a research scholar focused on natural gas at Columbia University’s Center on Global Energy Policy, noted that U.S. liquified natural gas companies were already trying to renegotiate contracts with buyers due to rising costs. “For the moment U.S. LNG is still interesting,” she said in an email, “but if costs increase too much, maybe people will start to wonder.”
The effect of the new round of global tariffs on these projects is much harder for experts to predict, and is changing by the day. Some countries may choose to increase their U.S. LNG imports to try to close their trade deficits and appease Trump. Morningstar analysts issued a note on Thursday predicting a favorable market for Venture Global, the developer behind Calcasieu Pass 2, as it’s looking for buyers, and “could offer the quick and easy victory both Trump and foreign leaders want.”
But the tariffs (not to mention the uncertainty about how long they’ll last) could also turn off potential buyers from signing long-term contracts with the U.S. They may begin to look elsewhere, or impose retaliatory tariffs, as China has already done.
China imposed 15% retaliatory tariffs on U.S. LNG back in February, in response to Trump’s first round of tariffs. Not a single tanker of U.S. LNG has gone to the country since then. Now the country has retaliated to this week’s escalation with an additional 34% tariff on U.S. goods.
That may sound bad for America’s LNG industry, but China is a relatively small buyer right now — only about 5% of U.S. exports went to China last year. That number is set to rise rapidly over the next few years, however, as Chinese companies have signed a number of long-term contracts with U.S. LNG projects that are about to come online. “In a few years from now, assuming nothing has changed and the volumes are growing, that will become more and more complicated,” Corbeau said. “That is very likely to force Chinese buyers to look elsewhere for new LNG contracts. I would bet that the Chinese companies will try to get out of the contracts with the U.S. LNG projects that have not taken [final investment decision] yet.”
Erica Downs, a senior research scholar focused on China at the Center on Global Energy Policy also noted that U.S. LNG developers may have been counting on additional financing for new projects coming from China. “I suspect that what's happening now with the trade war is going to mean that you're not going to see Chinese companies enthusiastic about investing in U.S. LNG projects — although who knows if the Trump administration even wants that,” she told me.
Nearly half of U.S. LNG exports went to Europe last year, and a third went to Asian countries. The biggest buyer was the Netherlands, followed by France, Japan, and South Korea. The U.K. and India were also major customers.
Leading up to this week, European leaders had suggested they were willing to buy more U.S. LNG if it would help avoid being slapped with tariffs by Trump. Clearly, that willingness to buy didn’t pay off. As Politicoreported, EU diplomats struggled even to begin talks with the Trump administration to work out a deal. They still could, but Corbeau pointed out in a LinkedIn post Friday morning that it would be tough for the EU — or any other country — to make up their trade deficit with the U.S. simply by boosting LNG imports.
It’s also unclear what leverage these leaders have, as EU governments mostly don’t have a financial stake in their energy companies and can’t tell them from whom to buy fuel. European utilities “may not be so keen to bow to political whims and contract U.S. LNG, or any LNG for that matter,” Corbeau wrote in a recent blog post. Gas consumption in the block is on track to decline, and upcoming environmental regulations on imported gas could rule out U.S. sourcing if Trump also makes good on his plans to repeal U.S. methane pollution regulations. “The EU needs U.S. LNG for the moment, but they may choose not to increase their exposure,” Corbeau told me.
Other countries may simply become wary of increasing their reliance on U.S. energy. “Nobody wants to have to rely on the trade relationship with Trump if this is how he's going to treat his trading partners,” Elan Sykes, the director of energy and climate policy at the Progressive Policy Institute told me. “The environmental and energy security considerations used to both favor the U.S.,” said Sykes. “Now one of them is somewhat unclear, and the president is actively destroying our country's export market value proposition.”
There were a lot of tariff losers, but only one tariff winner.
The U.S. stock market has taken its worst hit this week since March 2020, with the S&P 500 falling over 10% in just two days, while the tech-heavy Nasdaq is down 22% from its all-time high in December. The tremendous decline in stock values is a reflection of Donald Trump’s chaotic attempt at reordering the global economy, wrenching America’s average effective tariff rate to the highest level since 1909 — four years before the establishment of the federal income tax.
The clean energy economy has not been spared, although the effect has hardly been uniform. Some of the highest flying companies of 2024 and early this year — think Tesla or anyone selling power to a data center — have been some of the hardest hit, while some companies closer to the residential solar market have held their own.
Here’s a look at how some of these companies have performed over the past two days: