You’re out of free articles.
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
Sign In or Create an Account.
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Welcome to Heatmap
Thank you for registering with Heatmap. Climate change is one of the greatest challenges of our lives, a force reshaping our economy, our politics, and our culture. We hope to be your trusted, friendly, and insightful guide to that transformation. Please enjoy your free articles. You can check your profile here .
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Subscribe to get unlimited Access
Hey, you are out of free articles but you are only a few clicks away from full access. Subscribe below and take advantage of our introductory offer.
subscribe to get Unlimited access
Offer for a Heatmap News Unlimited Access subscription; please note that your subscription will renew automatically unless you cancel prior to renewal. Cancellation takes effect at the end of your current billing period. We will let you know in advance of any price changes. Taxes may apply. Offer terms are subject to change.
Create Your Account
Please Enter Your Password
Forgot your password?
Please enter the email address you use for your account so we can send you a link to reset your password:
Whatever happens to the Inflation Reduction Act, high interest rates could still hurt.
The Federal Reserve’s interest rate cuts were supposed to be a bonanza for the clean energy business. Renewables, with their high upfront costs compared to their costs of operating (the “fuel” — i.e. the wind and the sun — is free), are especially sensitive to the cost of borrowing money. When rates go up, it becomes more difficult for projects to hit the profitability targets necessary to lure investors without jacking up prices for customers beyond the realm of the possible. When rates comes down — which the Fed has been working on doing since September — suddenly those investments start to look a lot more appealing.
But there’s more to financing costs than the Fed. There’s also the president.
While much of the focus on Donald Trump’s electoral victory has been trying to discern what a Republican trifecta could do to the Inflation Reduction Act, Trump’s effect on the bond market may be just as important. We may still living in James Carville’s world, where the bond market can “intimidate everybody.” And it’s rearing its head against the president-reelect.
Since Trump came to be seen as the likely winner in the months before election day, yields on U.S. government debt — that is, the returns bondholders and issuers have to offer to entice investors — began to shoot up. Interpreting moves in the bond market is always tricky, but many market commentators interpreted the recent run-up as at least in part a reaction to Trump, whether they thought he was going to juice economic growth or stoke inflation, or some combination of the two.
“If Trump is proposing a broadly inflationary high-tariff, low-tax agenda, anyone expecting inflation is looking for a higher return,” explained Advait Arun, a climate and infrastructure finance analyst at the Center for Public Enterprise.
Each of these policies — high tariffs and low taxes — could have an inflationary effect. Tariffs could lead to higher consumer prices (especially the kind of broad-based tariffs Trump has proposed) while tax cuts act as stimulus by keeping more cash in the economy. Combined with higher defense spending and a reduced labor force if Trump follows through on his plan for mass deportations, the whole policy agenda could wind up reversing some of the progress the economy has made recovering from the high inflation of the immediate post-COVID period, or at least make it so the Federal Reserve sees no further need to cut interest rates.
“Tariffs, especially if universally placed on all imports, is broadly viewed as an inflationary policy, which may pose a risk to the outlook for lower interest rates,” Morgan Stanley analyst Andrew Perocco wrote in a note to clients. “All else equal, higher rates are seen as a headwind for the renewable energy sector due to higher financing costs.”
Yields on the 10-year Treasury note, a widely used benchmark throughout the global economy, were sitting at around 3.6% in mid-September when the Fed began cutting rates, but had risen to 4.36% the week before the election. Yields shot up again last week after Trump’s win, which confirmed the market’s suspicion that his inflationary plans will be realized. Today they’re around 4.43% and rising.
“Interest rates are moving higher in much the same way they did when he won in 2016,” aid Skanda Amarnath, executive director of Employ America told me. “There’s a Trump trade people do — the dollar gets stronger, interest rates are higher.” These policies may be “more stimulative to the economy on some level,” and in turn, “maybe this means the Fed is more cautious about lowering interest rates.”
The market certainly seems to think Trump will run the economy hot. Expectations for where the federal funds rate could end up by the end of 2025 have risen from 3% in September to about 3.8%, Gautam Jain, a senior research scholar at Columbia University’s Center on Global Energy Policy. Several analysts have scaled back their forecasts for the number of future Federal Reserve rate cuts next after the Fed lowered rates by another quarter percentage point last week. Yields on two-year Treasury notes, which are considered to be highly sensitive to expectations of Federal Reserve action, have risen from 3.55% in mid-September to 4.34% today, the highest level since July.
And sustained high rates mean sustained high costs for renewable energy companies. Jain had previously estimated that a 2 percentage point drop in the cost of debt would lower offshore wind costs by as much as $10 per megawatt-hour and utility-scale solar by as much as $12 per megawatt-hour, which would help make them more competitive even in the absence of federal subsidies. If the cost of capital stays high, that potential boost goes away.
“For renewables, they are more capital intensive, so they are more impacted” by rising rates, Jain told me. “The headwind will hurt them more.”
Bipartisan budget watchdogs have been skeptical of Trump’s policies, typically projecting larger deficit increases than would have arisen from the policy agenda of Democratic nominee Kamala Harris. That said, not everyone is worried.
The hedge-fund investor Scott Bessent, widely tipped to be Trump’s pick for Treasury Secretary, has been promoting a “3-3-3” plan — deficits reduced to 3% of gross domestic product from around 7% currently by the end of Trump’s term; annual growth kicked up to 3% from around 2.8% today; and oil production increased by 3 million barrels, all of which could allow the Federal Reserve to bring down rates.
Trump “understands financial markets and the bond markets. He would not want deficits to get out of control,” Stephen Miran, a fellow at the Manhattan Institute and former Trump Treasury official told me. “There's a lot of focus to rein that in.”
Log in
To continue reading, log in to your account.
Create a Free Account
To unlock more free articles, please create a free account.
On the environmental reviews, Microsoft’s emissions, and solar on farmland
Current conditions: Enormous wildfires in Manitoba, Canada, will send smoke into the Midwestern U.S. and Great Plains this weekend • Northwest England is officially experiencing a drought after receiving its third lowest rainfall since 1871 • Thunderstorms are brewing in Washington, D.C., where the Federal Court of Appeals paused an earlier ruling throwing out much of Trump’s tariff agenda.
The Supreme Court ruled Thursday that courts should show more deference to agencies when hearing lawsuits over environmental reviews.
The case concerned a proposed 88-mile train line in Utah that would connect its Uinta Basin (and its oil resources) with the national rail network. Environmental groups and local governments claimed that the environmental impact statement submitted by the federal Surface Transportation Board did not pay enough attention to the effects of increased oil drilling and refining that the rail line could induce. The D.C. Circuit agreed, vacating the EIS; the Supreme Court did not, overturning the D.C. Circuit in an 8-0 decision.
The National Environmental Policy Act, or NEPA, requires the federal government to study the environmental impact of its actions. The D.C. Circuit “failed to afford the Board the substantial judicial deference required in NEPA cases and incorrectly interpreted NEPA to require the Board to consider the environmental effects of upstream and downstream projects that are separate in time or place,” Justice Brett Kavanaugh wrote for the court.
The court’s decision could sharply limit the ability of the judicial branch to question environmental reviews by agencies under NEPA, and could pave the way for more certain and faster approvals for infrastructure projects.
At least, that’s what Kavanaugh hopes. The current NEPA process, he writes, foists “delay upon delay” on developers and agencies, so “fewer projects make it to the finish line. Indeed, fewer projects make it to the starting line.”
Map of the approved railway route.Source: Uinta Basin Railway Final Environmental Impact Statement
The Department of Agriculture is planning to retool a popular financing program, Rural Energy for America, to discourage solar development on agricultural land, Heatmap’s Jael Holzman exclusively reported.
“Farmland should be for agricultural production, not solar production,” a USDA spokesperson told Heatmap. The comments echoed a USDA report released last week criticizing the use of solar on agricultural land. The report said that the USDA will “disincentivize the use of federal funding at USDA for solar panels to be installed on productive farmland through prioritization points and regulatory action.” The USDA will also “call on state and local governments to work alongside USDA on local solutions.”
The daughter of a woman who died during the Pacific Northwest “Heat Dome” in 2021 sued seven oil and companies for wrongful death in Washington state court, The New York Times reported Thursday.
“The suit alleges that they failed to warn the public of the dangers of the planet-warming emissions produced by their products and that they funded decades-long campaigns to obscure the scientific consensus on global warming,” according to Times reporter David Gelles.
Several cities and states have brought suits making similar claims that oil and gas companies misled the public about the threat of climate change. Earlier this week, a German court threw out a suit from a Peruvian farmer against a German utility, which claimed that the utility’s commissions helped put his town at risk from glacial flooding.
The seven companies named in the lawsuit are Exxon Mobil, Chevron, Shell, BP, ConocoPhillips, Phillips 66, and Olympic Pipeline Company, a subsidiary managed by BP. None of them commented on the suit.
Tech giant Microsoft disclosed in its annual sustainability report that its carbon emissions have grown by 23.4% since 2020, even as the company has a goal to become “carbon negative” by 2030. The upside to the figures is that the growth in emissions was due to a much larger increase in energy use and business activity, not from using dirtier energy. In that same time period, Microsoft’s revenue has grown 71%, and its energy use has grown 168%.
“It has become clear that our journey towards being carbon negative is a marathon,” the report read. The company said it had contracted 34 gigawatts of non-emitting power generation and had agreements to procure 30 million metric tons of carbon removal.
The company has set out to reduce its indirect Scope 3 emissions “by more than half” by 2030 from the 11.5 million metric tons it reported in 2020, as its Scope 1 and Scope 2 emissions fall to close to zero. It will become “carbon negative,” it hopes, by purchasing carbon removal.
Microsoft attempts to reduce emissions in its supply chain by procuring low- or no-carbon fuels and construction materials. Last week the tech giant signed a purchasing agreement with Sublime Systems for 600,000 tons of low-carbon cement.
The Nuclear Regulatory Commission announced it had approved a 77-megawatt small modular reactor design. This is the second SMR design approved by the NRC, following approval of a smaller design in 2020. Both are products of the SMR company NuScale, and neither has yet been deployed. A project to build the earlier design in Idaho was abandoned in 2023.
The NRC review was set to be completed in July of this year. Coming in ahead of scheduled demonstrates “the agency’s commitment to safely and efficiently enable new, advanced reactor technology,” the Commission said in a press release.
Congress and the Biden and Trump administrations have pushed the NRC to move faster and to encourage the development of small modular reactors. No SMR has been built in the United States, nor is there any current plan to do so that has been publicly disclosed. NuScale’s chief executive told Bloomberg that he hopes to have a deal signed by the end of the year and an operational plant by the end of the decade.
Tesla veteran Drew Baglino’s Heron Power raised a $38 million round of Series A funding for a new product designed to replace “legacy transformers and power converters by directly connecting rapidly growing megawatt-scale solar, batteries, and AI data centers to medium voltage transmission,” Baglino wrote on X.
A conversation with Mike Hall of Anza.
This week’s conversation is with Mike Hall, CEO of the solar and battery storage data company Anza. I rang him because, in my book, the more insights into the ways renewables companies are responding to the war on the Inflation Reduction Act, the better.
The following chat was lightly edited for clarity. Let’s jump in!
How much do we know about developers’ reactions to the anti-IRA bill that was passed out of the House last week?
So it’s only been a few days. What I can tell you is there’s a lot of surprise about what came out of the House. Industries mobilized in trying to improve the bill from here and I think a lot of the industry is hopeful because, for many reasons, the bill doesn’t seem to make sense for the country. Not just the renewable energy industry. There’s hope that the voices in Congress — House members and senators — who already understand the impact of this on the economy will in the coming weeks understand how bad this is.
I spoke to a tax attorney last week that her clients had been preparing for a worst case scenario like this and preparing contingency plans of some kind. Have you seen anything so far to indicate people have been preparing for a worst case scenario?
Yeah. There’s a subset of the market that has prepared and already executed plans.
In Q4 [of 2024] and Q1 [of this year] with a number of companies to procure material from projects in order to safe harbor those projects. What that means is, typically if you commence construction by a certain date, the date on which you commence construction is the date you lock in tax credit eligibility, and we worked with companies to help them meet that criteria. It hedged them on a number of fronts. I don’t think most of them thought we’d get what came out of the House but there were a lot of concerns about stepdowns for the credit.
After Trump was elected, there were also companies who wanted to hedge against tariffs so they bought equipment ahead of that, too. We were helping companies do deals the night before Liberation Day. There was a lot of activity.
We saw less after April 2nd because the trade landscape has been changing so quickly that it’s been hard for people to act but now we’re seeing people act again to try and hit that commencement milestone.
It’s not lost on me that there’s an irony here – the attempts to erode these credits might lead to a rush of projects moving faster, actually. Is that your sense?
There’s a slug of projects that would get accelerated and in fact just having this bill come out of the House is already going to accelerate a number of projects. But there’s limits to what you can do there. The bill also has a placed-in-service criteria and really problematic language with regard to the “foreign entity of concern” provisions.
Are you seeing any increase in opposition against solar projects? And is that the biggest hurdle you see to meeting that “placed-in-service” requirement?
What I have here is qualitative, not quantitative, but I was in the development business for 20 years, and what I have seen qualitatively is that it is increasingly harder to develop projects. Local opposition is one of the headwinds. Interconnection is another really big one and that’s the biggest concern I have with regards to the “placed-in-service” requirement. Most of these large projects, even if you overcome the NIMBY issues, and you get your permitting, and you do everything else you need to do, you get your permits and construction… In the end if you’re talking about projects at scale, there is a requirement that utilities do work. And there’s no requirement that utilities do that work on time [to meet that deadline]. This is a risk they need to manage.
And more of the week’s top news in renewable energy conflicts.
1. Columbia County, New York – A Hecate Energy solar project in upstate New York blessed by Governor Kathy Hochul is now getting local blowback.
2. Sussex County, Delaware – The battle between a Bethany Beach landowner and a major offshore wind project came to a head earlier this week after Delaware regulators decided to comply with a massive government records request.
3. Fayette County, Pennsylvania – A Bollinger Solar project in rural Pennsylvania that was approved last year now faces fresh local opposition.
4. Cleveland County, North Carolina – Brookcliff Solar has settled with a county that was legally challenging the developer over the validity of its permits, reaching what by all appearances is an amicable resolution.
5. Adams County, Illinois – The solar project in Quincy, Illinois, we told you about last week has been rejected by the city’s planning commission.
6. Pierce County, Wisconsin – AES’ Isabelle Creek solar project is facing new issues as the developer seeks to actually talk more to residents on the ground.
7. Austin County, Texas – We have a couple of fresh battery storage wars to report this week, including a danger alert in this rural Texas county west of Houston.
8. Esmeralda County, Nevada – The Trump administration this week approved the final proposed plan for NV Energy’s Greenlink North, a massive transmission line that will help the state expand its renewable energy capacity.
9. Merced County, California – The Moss Landing battery fire is having aftershocks in Merced County as residents seek to undo progress made on Longroad’s Zeta battery project south of Los Banos.