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If the “nuclear renaissance” is here, it’s happening only in certain kinds of places. California and New York aren’t getting new reactors capable of generating massive amounts of always-on, carbon-free power — instead projects are being completed and planned in Tennessee, Georgia, and Idaho. It’s not all red state friendliness to new development and blue state fears of nuclear waste either. It’s really about how electricity markets are organized across the United States.
There’s simply little new nuclear activity in the vast swaths of the country, like much of the Northeast and Midwest, Texas, and California, where electricity markets have been partially or completely “deregulated,” meaning that utilities largely buy electricity from generators and distribute it to consumers in something like a free market. Instead, nuclear projects are popping up in markets, like those in the South and Mountain West, where utilities still control both electricity generation (think power plants) and the distribution of that electricity to customers and where public power companies can still predominate in the market. In these areas, energy companies have the scale, authority, access to investment, and captive customer base necessary to embark on capital intensive projects like nuclear generators.
This is of note because the Department of Energy estimates that in order to decarbonize the power system, some 550 to 770 gigawatts of new clean firm capacity, meaning generators that can be turned on 24/7, will be necessary. While this could include geothermal, solar or wind paired with batteries, or pumped hydro, there’s already some 94 gigawatts of existing nuclear capacity that the Energy Department anticipates could scale to around 300 gigawatts by 2050.
Where that’s been expanded recently is not necessarily the parts of the country that have an aggressive mandate to decarbonize.
Consider Georgia’s Vogtle-3 reactor, the United States’ first new nuclear reactor in years. The end result is a staggering amount of non-carbon-emitting power, but delivered at an eye-wateringly high cost (some $16 billion overbudget) in a market set-up where an investor-owned, vertically integrated utility — Georgia Power, a subsidiary of Southern Company — is able to charge ratepayers for high construction costs. Or Watts Bar Unit 2, a new reactor built by the Tennessee Valley Authority, a government power company with a monopoly on electricity in Tennessee and bordering states (it had its own set of delays — for decades — and cost overruns).
A similar dynamic is at work when it comes to the next generation of nuclear technology. The Carbon Free Power Project is a planned set of small modular reactors at the Idaho National Laboratory that a coalition of Mountain West public utilities have been working on and hope to make operational by the end of the decade.
The dream of small modular reactors is that, by standardizing construction processes and parts and also by literally making the projects smaller, construction costs for nuclear power can be brought down as more projects get completed. That being said, the Carbon Free Power Project has still reported large cost escalations. And it’s doing so with funding from the Department of Energy that could amount to around $1.3 billion of the over $9 billion it’s expected to cost if the project actually starts generating power as scheduled in 2029. Some members of the coalition have already dropped out and the projected price of power generated by the reactors has increased.
That’s not a huge surprise. Cost is really what’s holding back nuclear power.
The great scaling of renewable power across the country has been, its advocates always like to say, a triumph of the market. Wind and solar projects, while expensive to set up, are cheap to operate over time, in part because they have no fuel costs, compared to thermal plants which must acquire and combust coal, oil, or natural gas. In fact, around two thirds of the price of natural gas-generated power comes from the fuel itself, which actually hasn’t been a huge problem for natural gas over the past 15 years since it’s been so cheap.
On the other hand, the vast majority of the costs of nuclear power come from the expense of building its generators, according to an analysis by Brian Potter, a fellow at the Institute for Progress and a contributor to Heatmap. With gargantuan capital requirements and long construction timelines, interest payments on financing can end up doubling the total costs of nuclear plants. When those costs get reflected in the price of nuclear energy on so-called deregulated electricity markets, it becomes uncompetitive.
Regulated markets are a different story, however. Utilities that own power plants have massive cash flows and legally mandated profits that let them borrow huge amounts of money at the lower costs necessary to finance large, capital-intensive construction projects like nuclear plants — and then put the costs directly into ratepayers' bills.
“These larger utilities have a larger balance sheet, they can carry a larger project on their books without it being a huge percentage of their net debt at any point in time,” Adam Stein, the director of the Nuclear Energy Innovation program at the Breakthrough Institute, told me. The Tennessee Valley Authority also has a large capacity to carry debt, while public power companies “have experience and expertise internally in how to engage in the DOE grant process,” Stein said.
Critics of deregulation and advocates for nuclear power argue that the way those markets work does not properly value power that is not variable, like wind and solar, and can keep their fuel stored on site, unlike gas, which relies on pipelines. Despite the unique role it can play on the grid, nuclear power still has to compete on the same playing field as other assets which are intermittent or rely on getting fuel, Stein explained.
But utilities that control both generation and distribution aren’t immune from market forces, even if they can withstand them better. One reason why deregulation took hold in much of the county is precisely because there was so much backlash to utilities’ nuclear power plant projects that were more expensive than projected and assumed more electricity demand than there actually was.
“The ratepayers were paying a lot for the nuclear plants, and they were unhappy with it,” Meredith Angwin, an energy analyst and critic of deregulation, told me. “Cost per megawatt of nuclear plants, it’s just rising. There’s a learning curve that makes things less expensive — with nuclear it goes the other way.” Figuring out exactly why this happened — and how to reverse it — has been the great challenge of the nuclear industry and energy policy experts.
Many advocates for increased use of nuclear power see new construction techniques, plant designs, and more well-tailored regulation as the answer to these rising costs.
And while there have been large declines in the cost of renewables over the past decade, wind and solar projects have run into cost issues recently thanks to economy-wide inflation and specific issues with supply chains.
Offshore wind in the United States, which currently has a few dozen megawatts of capacity that the Biden administration wants to scale up to 30 gigawatts, is facing a crisis of high costs, with wind developers demanding more money to complete projects and even threatening to cancel them altogether, lest they get access to more subsidies. It’s a story we’ve heard before.
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Lower borrowing costs aren’t enough to erase the threat of tariffs and Trump.
It won’t rescue the renewables industry, but at least it’s something.
The Federal Reserve announced today that it will cut the federal funds rate by 0.25 percentage points, bringing it down to between 4% and 4.25%. Fed officials also projected quarter-point rate cuts at the last two meetings of the Federal Open Markets Committee this year.
This may provide some relief to renewables developers and investors, who are especially sensitive to financing costs. “On the financing side, high rates are never going to be exactly a good thing,” Advait Arun, a climate and infrastructure analyst at the Center for Public Enterprise, told me. “I think in this case, it’s going to be good that we’re finally seeing cuts.”
Because the fuel for solar and wind energy is essentially free, the lion’s share of the cost to develop these energy sources comes up front, meaning that interest rates can have a disproportionate effect on how projects pencil out. Renewable projects also tend to carry more debt than fossil fuel projects, according to energy consultancy Wood Mackenzie. When interest rates rise by 2 percentage points, the consultancy estimated, the levelized cost of electricity for renewables rises by 20%, compared to 11% for a gas-fired power plant, which might have higher operating costs but less need to borrow.
But the challenges for the renewables industry go well beyond financing. Developers are still wondering how they will be able to use Chinese-linked components without losing eligibility for clean energy tax credits. Those tax credits now come with a ticking clock after the passage of this summer’s One Big Beautiful Bill Act, which shortened the eligibility period for wind and solar projects. The Treasury Department also tightened the definition of what it means to “start construction,” making qualification even more of a race. All the while, the Trump administration’s regulatory assault on the sector, especially wind, has led to project cancellations across the industry.
“High interest rates obviously impact the business, but there are a lot of other headwinds and other things going wrong, as well,” Gautam Jain, a senior research scholar at the Center on Global Energy Policy at Columbia University, told me. “If anything, compared to the beginning of the year, rates have come down quite a bit.”
Maheep Mandloi, an analyst at the investment bank Mizuho Securities, wrote in a note to clients that renewable stocks rose last week in part because investors saw yields falling on 10-year government bonds. Ten-year Treasuries are a widely used benchmark for corporate debt, and when they get cheaper, it often means that companies can access financing more cheaply.
Falling 10-year yields are also a sign that the market anticipates a Fed rate cut. So far this year, the 10-year Treasury bond yield has fallen from 4.57% to 4.00% as of Wednesday afternoon after the rate cut was announced.
Lower borrowing costs are a welcome transition for the industry. Borrowing costs started to rise dramatically in 2022, as the Fed hiked interest rates to combat the worst inflation the U.S. had seen since the early 1980s. Annual price increases had been bouncing around or even below 2% since the 2008 recession before climbing to as high as 9% in the summer of 2022, following Russia’s invasion of Ukraine, which led to an energy price shock. The uneven and stimulus-fueled economic recovery from Covid-19 also created price instability throughout the economy, including the renewable energy industry.
Renewable energy businesses in particular were hammered by higher interest rates, as well as higher costs for commodities like steel and for final products like solar panels.
Even as unprecedented government support flowed into the renewables industry from the Inflation Reduction Act, signed in August 2022, clean energy stocks continued to stagnate, with the iShares Clean Energy ETF falling over 30% from the beginning of the Biden administration through the end of 2023. (Despite the assault from the Trump administration, the index has actually risen about 30% so far this year after falling in the fall and winter of 2024, as uncertainty around the IRA’s tax credits has dissipated.)
One of the poster children for renewables dysfunction is the Danish wind developer Orsted, which has been a victim of just about every brickbat thrown at the industry. In its most recent financial statement, the company said that its future earnings estimates were imperiled by “assumptions with major uncertainty,” which included “investment tax credits, interest rates, imposed tariffs in the U.S., and the supply chain.”
Home solar giant Sunrun, too, has cited financing stresses. In its most recent quarterly report, the company disclosed that “rising interest rates, including recent historic increases starting in 2021 … [are] reducing the proceeds we receive from certain Funds.” It also acknowledged that “because our financing structure is sensitive to volatility in interest rates, higher rates increase our cost of capital and may decrease the amount of capital available to us to finance the deployment of new solar energy systems.” High rates, the company disclosed, “have impacted and may continue to impact our business and financial results.”
Even as rates come down, the renewable industry still has the Trump administration to contend with. The various agencies of the executive branch have shown little hesitation about getting in the way of renewable energy development, even for projects that are already nearly complete. The Treasury Department also has yet to issue guidance on complying with OBBBA’s rules about sourcing from Chinese suppliers, prolonging uncertainty for many in the industry. Trump’s tariff policy, too, remains a potential wildcard, as developers await a Supreme Court ruling on the legality of the president’s efforts thus far.
“In terms of being able to build more supply with the benefit of lower financing costs,” Arun told me, “I think this is where we’re running into all of the issues with delays in procuring components — the uncertainty regarding whether the tariffs will be struck down or not, and of course, changes to the inflation Reduction Act through the OBBBA.”
Last week, analysts at Rhodium Group projected that Trump’s policies could slow U.S. progress on reducing emissions by more than half.
For renewables developers, the rate cuts may be welcome, but everything else — and there’s a lot of everything else — may be what really matters, Jain told me. “All those things add additional uncertainty, and anybody who’s in the space will be aware that more could come,” he said. “Of course, lower rates will help, but it’s a combination of the two.”
On Democrats’ AI blueprint, more nationalized minerals, and the GOP’s anti-geoengineering push
Current conditions: Tropical Storm Mario is lashing the southwestern U.S. with rainstorms and potential flash flooding • The drought in the Northeast and the Ohio Valley is worsening, with rain deficits in major cities 15% below average • Tropical Cyclone Mirasol is bringing heavy rains to the Philippine island of Luzon.
The Trump administration announced a lawsuit Tuesday aimed at tanking Vermont’s Climate Superfund Act, which set up the nation’s first program to force fossil fuel companies to pay for adaptations to deal with the effects of warming temperatures. The Department of Justice said the legislation “will likely” impose “billions of dollars in liability on foreign and domestic energy companies for their alleged past contributions to climate change.” The motion, filed on Monday, comes months after the Justice Department filed an initial complaint in May targeting the law and similar legislation in New York, Hawaii, and Michigan.
“Like New York, Vermont is usurping the federal government’s exclusive authority over nationwide and global greenhouse gas emissions,” Acting Assistant Attorney General Adam Gustafson said in a press release. “More than that, Vermont’s flagrantly unconstitutional statute threatens to throttle energy production, despite this administration’s efforts to unleash American energy. It’s high time for the courts to put a stop to this crippling state overreach.”
Arizona Senator Mark Kelly. Chip Somodevilla/Getty Images
Arizona Senator Mark Kelly released a proposal Wednesday morning designed to give Democrats a roadmap to back the buildout of data centers to support the boom in artificial intelligence. The 16-page pitch makes no mention of novel tools grid operators are considering to force data centers to dial back electricity consumption when power supply is low, known as demand response. But the proposal does call for establishing a pipeline of projects to support large-scale clean electricity production from 24/7 sources. “While solar and battery storage dominate today’s pipeline, they alone can’t reliably power the AI,” the blueprint reads. “We must build an innovation pipeline for geothermal, nuclear, and other clean dependable sources, while also deploying near-term solutions that advance and strengthen our energy systems for the demands ahead.”
The value of finding ways to add more data centers before that large new power output is available is the big reason for supporting the curtailment of electricity usage at big server farms, Heatmap’s Matthew Zeitlin wrote last month. “Creating a system where data centers can connect to the grid sooner if they promise to be flexible about power consumption would require immense institutional change for states, utilities, regulators, and power markets.”
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The U.S. government is in talks to set up a multibillion-dollar fund for overseas mining projects to help counter China’s grip over the world’s critical mineral supply, the Financial Times reported. The Trump administration is discussing the effort with the New York investment firm Orion Resource Partners, and looking to establish the fund under the U.S. International Development Finance Corporation. The fund would invest in projects to produce minerals such as copper and rare earths. “These talks really show that the [Donald] Trump administration is trying to align its financial tools with its broader mineral ambitions,” Gracelin Baskaran, director of the critical minerals security programme at the Center for Strategic and International Studies in Washington, told the newspaper. “This public-private partnership stands to catalyze a significant amount of capital.”
The move is the latest effort by the Trump administration to take on a bigger role in the mining industry, which requires high upfront costs and years-long development timelines that pose problems for companies beholden to quarterly shareholder updates. In July, the Department of Defense took an ownership stake in MP Materials, the only active rare earths producer in the U.S., marking the most significant federal intervention in the private sector since Washington nationalized railways during World War I. In a sign of the dealmaking environment, Heatmap’s Katie Brigham wrote this month that “everybody wants to invest in critical mineral startups.”
The House of Representatives held a hearing Tuesday on the risks posed by weather modification and geoengineering technologies. Led by Georgia Republican Representative Marjorie Taylor Greene, the hearing — entitled “Playing God with the Weather — a Disastrous Forecast” — examined the idea of manipulating the makeup of the atmosphere to artificially cool the planet, which is an emerging, if hotly contested, idea among some commercial startups. GOP officials such as Greene and Secretary of Health and Human Services Robert F. Kennedy, Jr., have raised concerns over what such technology could do. The issue took on a new partisan valence after the flash flooding that killed more than 135 people in Texas this summer, which Fox News suggested could be linked to cloud-seeding experiments underway in the region.
In his testimony, Christopher Martz, a meteorologist and policy analyst at the Committee for a Constructive Tomorrow, warned that there were still major uncertainties about the potential deployment of geoengineering technologies. At times, however, the questioning devolved into debates over the reality of settled science about the effects of fossil fuel emission on warming itself.
“Did man create the Ice Age?” Greene asked Martz at one point.
“No,” he responded.
“Yeah, right, so none of us were alive back then to know for sure,” she said.
Solar developer PosiGen is planning to pull out of three of its projects in Connecticut. The company told state officials late last month it would need to shut down its facilities, eliminating 78 jobs, as financing dried up for the projects. The move highlighted the challenges ahead for the solar industry as federal tax credits barrel toward next year’s phaseout deadline. In 2015, the Connecticut Green Bank helped fund low-and moderate-income homeowners’ purchase of solar panels through PosiGen. But the federal program backing the effort, known as Solar for All, is set to unwind under the Trump administration. The company expects to start laying off workers in Connecticut next week, according to the news site CT Insider.
Robert Redford died Tuesday at 89 years old. During his lengthy career and filmography, the actor fashioned himself as an activist voice for a number of causes, including the U.S. effort to decarbonize its electrical sector. In February 2016, after the Supreme Court paused the Obama administration’s Clean Power Plan, Redford accused the conservative justices of rendering a verdict “on the wrong side of history” in an op-ed in Time magazine. “It was a clear departure from how our courts normally handle government oversight. And I cringe at how we will have to answer to history. When our children and their children ask, ‘When the majority of Earth’s citizens — its scientists, military professionals, industrialists, and more — realized the threat of climate change was real, why didn’t you do more? Why did you delay?’”
Rob talks with Sarah Kapnick about our new era of energy insecurity.
We live in a new energy era — one in which the inputs and technologies key to clean electricity production are at the heart of international politics. What will that mean for decarbonization? And how should climate tech companies prepare?
On this week’s episode of Shift Key, Rob chats about those questions and more with Dr. Sarah Kapnick. She is the Global Head of Climate Advisory at J.P. Morgan, where she advises the bank's clients on climate, energy, biodiversity and sustainability topics. She was the former chief scientist at the National Oceanic and Atmospheric Administration from 2022 to 2024, and was previously a research scientist at NOAA’s Geophysical Fluid Dynamics Laboratory in Princeton, New Jersey.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University. Jesse is off this week.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: When companies come to you looking for help navigating this particular moment — where federal policy is quite up in the air, where rates are coming down but kind of high, AI capex is surging — what advice do you give them for navigating this moment?
Sarah Kapnick: The advice that I give them is looking to some of those things that strategically are likely to have more consistency over time, and that they’re looking for those places of more consistency, and that they feel that they can invest in, that they will have support ongoing — particularly if it’s a project that lasts beyond administrations.
They’re really concerned with what they think is going to last. And then for the stuff that doesn’t, that there may be more volatility, they want to identify that volatility, and they want to think through, okay, how can I take opportunity now if I think there’s a small window for it? Or how do I plan for taking opportunity when the opportunity presents itself down the line?
And so, it’s a mixture of long-term planning and thinking through, strategically, where the world is headed and where they can fit in over time, yet also taking opportunities that either present themselves now or they have conviction that will present themselves soon, and then being ready to be the first when that opportunity presents themselves so that they can run with it.
Mentioned:
The New Map of Energy and Geopolitics
Previously on Shift Key: How China’s Industrial Policy Really Works
This episode of Shift Key is sponsored by …
Hydrostor is building the future of energy with Advanced Compressed Air Energy Storage. Delivering clean, reliable power with 500-megawatt facilities sited on 100 acres, Hydrostor’s energy storage projects are transforming the grid and creating thousands of American jobs. Learn more at hydrostor.ca.
Music for Shift Key is by Adam Kromelow.