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The R2 reveals — in its smallest details — the automaker’s aggressive new focus on keeping costs low.
Let’s get the big news out of the way: The new Rivian cars are very cool. The airy R2 is a two-row SUV that, if released today, would rival anything else on the American electric vehicle market; Rivian claims that its entry level trim will cost $45,000 and that it will get more than 300 miles of range. After including the Inflation Reduction Act’s incentives, that means the starting price for this car — for many Americans — will be $37,500.
Even more exciting are the company’s R3 and performance-oriented R3X, a hot-hatchback-slash-crossover concept that will be even cheaper than the R2 and has “the soul of a rally car,” according to Rivian’s lead designer Jeff Hammoud. It looks at once like a Volkswagen Golf GTI, an AMC Gremlin, and — could it be? — a Yugo. I love it.
It was a good day for Rivian after a disappointing year. Many things about its business are still working well. The brand evokes a fusion of Apple’s and Patagonia’s sensibilities, although it’s historically been priced more like Porsche, and it has become a favorite of high-earning Millennial dads. I saw more Apple Watch Ultras on Thursday than I have ever seen in one place before. RJ Scaringe, Rivian’s chief executive officer, was wearing one of them.
But Thursday, more importantly, signaled a new phase in Rivian’s life. After years of aggressive spending, the Irvine, California-based company is cutting costs and trying to find a financially sustainable — and profitable — footing. It’s one more sign that in the global electric vehicle sector, an industry that will be central to the fight against climate change, the startup phase has definitively ended.
This shift to profitability can be seen in virtually every aspect of Rivian’s business right now — and even in the design of the R2 itself.
Courtesy of Rivian.
If Rivian can make it, its prospects are good. It is one of a handful of American electric-vehicle makers that has a shot at competing with Tesla and surviving for the long term. But that will require it to get through the next few years and cross the “EV valley of death.” This is the period after a company has fully ramped up production and has very high costs, but before its revenue has grown to compensate. Tesla made it across this valley in 2021 and 2022; now Rivian is making its own attempt. This was the deeper message of Thursday’s event: Now is Rivian’s make-or-break moment, and the company’s leadership knows it.
To get across the valley of death, Rivian must become obsessive to the point of maniacal about its costs. The company’s survival is going to be an exceptionally close thing, and every dollar will matter. That’s why possibly the event’s most important news came right at the end, when Scaringe disclosed, almost as an aside, that Rivian is indefinitely delaying work on its new Georgia factory. That will save it about $2.25 billion, a significant sum for a company that burned roughly twice that amount last year. Rivian’s shares leapt 13% on the news.
“Every single thing we do within the business is focused on driving costs on this,” Scaringe told CNBC on Thursday. Other Rivian executives kept the message going: Walking through the R2’s design with reporters, Jeff Hammoud, Rivian’s design chief, mentioned the company’s efforts to cut costs at least six times. (Form follows function, indeed.)
The team kept asking itself “how can we simplify things — and not only simplify things from a design perspective, but also from a cost perspective,” he said, adding that “we’re not trying to make this thing feel or look cheap — that’s not what we do.”
He’s right: The R2 does not look cheap (as for feel, I wasn’t allowed to touch it), but some of the R1 series’s more premium touches are gone. Rivian has moved the R2’s speakers out of the driver and passenger doors and put them in the center console, a cost-saving measure that Hammoud suggested would give people more space for their water bottles. One of the panels in the car’s rear is made of mold-injected plastic, not sheet metal, which Hammoud said will save money and make the car easier to repair after a fender bender.
Then there are changes most drivers will never notice. The R2’s dashboard panels have a wood-like finish, and Hammoud wanted us to know that they are made of actual wood. And unlike other cars, which use wood purely as a decorative element — I assumed he was talking about the BMW i3 here — the R2’s wood is structurally integral to the dashboard. In other words, they look good and save money on underlying structural material. “With our vehicles and the R2, [the wood] literally holds the screen, it creates the shape for the vents,” Hammoud said. “If you were to take it out, literally the panel would fall apart.”
Courtesy of Rivian.
You can see, too, how other business needs are shaping how the vehicle looks and works — and even what kind of vehicle it is in the first place. Rivian only sells vehicles in the United States and Canada now, but wants and needs to expand into global markets in the coming years. It might be most famous for its pickup trucks, and yet Rivian didn’t announce a next-generation pickup on Thursday. Hammoud told me that that’s partly because Rivian is thinking about what will work well abroad, and mass pickup truck ownership remains a profoundly American phenomenon.
The charging port on the new Rivian models is on the rear passenger side, a move that confused many Americans who have come to prefer the charging port on the drivers’ side. (That’s where Tesla and the Rivian R1 put it, and the location is seen as better for home charging.) But think about it, Hammoud said. Many people in left-hand-drive countries charge their vehicles on the street, and a passenger-side setup — which becomes a driver’s side setup — makes more sense for them. The new setup also puts the charger closer to the battery, reducing the amount of high-voltage wires needed in the car. That cuts the car’s weight and — ding ding ding — lowers its cost. (Tesla puts its charger in the car’s rear for the same reason.)
The company hasn’t always been like this. During the first decade of its existence, interest rates sat nearly at zero, and Rivian could spend with abandon. It planned for its sprawling Georgia factory and could plan to sell more expensive cars to consumers who had access to cheap credit to buy them. The R2 carries forward the R1 tradition of having a flashlight in the drivers’ side door, but it lacks the hidey holes and air suspension of its predecessor. “With the R1, it was our premium flagship. We got to say yes to a lot of things,” Hammoud said. With R2, the question was “what do we have to say no to.”
Courtesy of Rivian.
This spring, Rivian will close down its Normal, Illinois, factory for a series of process upgrades. These will speed up its assembly lines and allow it to make its existing vehicles, the R1T and R1S, faster, with fewer internal computers and less wasted material; Rivian expects these improvements to carry it most of the way to profitability.
Even if it achieves its goal of turning a technical profit by the fall, it will still have a long way to go to become an actually sustainable business — and it will have to survive another year with no new products. The R2 is not due to go on sale until the first half of 2026, and the R3, which is built on the same platform as the R2, won’t start deliveries until “after the R2.” (No price or firm release date for the R3 has been announced.) The American EV market will change significantly by then. By the end of this year, some 50 different EV models in the U.S. will get more than 300 miles of range. Hyundai, Kia, Ford, and GM are all capable of bringing new cars to market during that interval that could smoke the R2 or R3, in part because they will be benchmarked off of them. The R2 and especially R3 seem like perfect cars for today’s market — and perfect cars for Rivian’s cash-saving situation. Whether they’ll be as perfect two years from now is anyone’s guess.
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Jesse gives Rob a lesson in marginal generation, inframarginal rent, and electricity supply curves.
Most electricity used in America today is sold on a wholesale power market. These markets are one of the most important institutions structuring the modern U.S. energy economy, but they’re also not very well understood, even in climate nerd circles. And after all: How would you even run a market for something that’s used at the second it’s created — and moves at the speed of light?
On this week’s episode of Shift Key Summer School, Rob and Jesse talk about how electricity finds a price and how modern power markets work. Why run a power market in the first place? Who makes the most money in power markets? How do you encourage new power plants to get built? And what do power markets mean for renewables?
Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
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Here is an excerpt from our conversation:
Jesse Jenkins: If I’m just a utility operating on my own, I want to basically run my fleet on what we call economic dispatch, which is rank ordering them from cheapest to most expensive on a fuel or variable cost basis, and trying to maximize my use of the less expensive generators and only turn on the more expensive generators when I need them.
That introduces this idea of a marginal generator, where the marginal generator is the last one I turned on that has some slack to move up or down as demand changes. And what that means is that if I have one more megawatt-hour of demand in that hour — or over a five-minute period, or whatever — or 1 megawatt-hour less, then I’m going to crank that one generator up or down. And so the marginal cost of that megawatt-hour of demand is the variable cost of that marginal generator. So if it’s a gas plant that can turn up or down, say it’s $40 a megawatt-hour to pay for its fuel, the cost on the margin of me turning on my lights and consuming a little bit more is that that one power plant is going to ramp its power up a little bit, or down if I turn something off.
And so the way we identify what the marginal value of supplying a little bit more electricity or consuming a little bit more electricity is the variable cost of that last generator, not the average cost of all the generators that are operating, because that’s the one that would change if I were to increase or decrease my output.
Does that make any sense?
Robinson Meyer: It does. In other words, the marginal cost for the whole system is a property of the power plant on the margin, which I realize is tautological. But basically, the marginal cost for increasing output for the entire system by 1 megawatt-hour is actually a property of the one plant that you would turn on to produce that megawatt-hour.
Jesse Jenkins: That’s right, exactly. And that can change over the course of the day. So if demand’s really high, that might be my gas plant that’s on the margin. But if demand is low, or in the middle of the day, that gas plant might be off, and the marginal generator during those periods might be the coal plant or even the nuclear plant at the bottom of the supply curve.
Mentioned:
Jesse’s slides on electricity pricing in the short run
Jesse’s lecture slides on electricity pricing in the long run
Shift Key Summer School episodes 1, 2, and 3
This episode of Shift Key is sponsored by …
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Music for Shift Key is by Adam Kromelow.
Generate Capital’s Jonah Goldman makes his case.
The Inflation Reduction Act sparked a predictable surge in clean energy-related investments from the law’s signing in 2022 through the 2024 election, before President Trump’s second term ushered in an era of cancellations, closures, and downsizing. Of the domestic projects announced since the IRA’s passage, a total of 35 have been nixed or scaled back so far this year — more than in all of 2023 and 2024 combined, according to estimates from the environmental advocacy organization E2. This accounts for over $22 billion in lost investment and 16,500 in lost jobs.
“There’s a drastic decrease in the amount of new [clean energy] investments,” E2’s Michael Timberlake told me. After the IRA’s passage, he explained, nearly every month saw over a billion dollars invested in new clean energy projects. But since December of last year, monthly investment has come in below a billion dollars more often than not.
Domestic electric vehicle and battery manufacturing projects have been hit the hardest, as these sectors are staring down a federal bureaucracy clearly hostile to their tech on the one hand and Chinese competitors that are already leagues ahead of them on the other. But there is a bright spot: E2’s data shows that the grim outlook for clean energy projects is largely confined to the manufacturing sector. Many large-scale energy generation projects might actually, maybe, be mostly okay.
That’s what Jonah Goldman of the infrastructure investment firm Generate Capital is banking on. As electricity demand rises for the first time in over a decade, the need to deploy cost-competitive grid energy is only increasing. Thus, Goldman sees plenty of reason to continue investing in a renewables buildout — solar especially, which can often be deployed more quickly, flexibly, and economically than any other form of generation, politics aside.
“What is not a question really anymore is whether these projects are going to get built,” Goldman told me. “There’s just not another option. Even if you think of doubling our investment in gas generation, you still don’t get to this incredible increase in power demand that we need in order to reach the projections that we’re getting.”
Taking a closer look at the post-IRA projects that have been either canceled or scaled back shows that solar is indeed the most resilient investment of the bunch. Since the IRA’s passage, about 12% of announced solar projects have been canceled or downsized, compared to 25% of wind projects, 19% of EV projects, and 34% of EV battery projects. Only three of the 35 projects hit this year were related to solar, and only one of those was for solar generation.
Despite the overall dour domestic investment outlook, Timberlake thus agrees with Goldman that solar in particular isn’t grinding to a halt anytime soon. The market signal for clean energy, Timberlake said, is “indisputable.” The buildout might happen more slowly than it otherwise would have, as the administration continues to unspool regulatory red tape for these projects, but it’ll happen.
And, of course, it will get more expensive. Because while Trump’s One Big Beautiful Bill maintains investment and production tax credits for most clean energy technologies through 2033, it cuts credits for solar and wind projects that either start construction after July 2026, or, if they haven’t started by then, are placed in service after 2027.
While Goldman hates what that will do to electricity prices, he doesn’t seem too worried about it hurting Generate’s ability to invest. For the moment, he told me, this timeline leaves the firm with a strong pipeline of opportunities not only in solar, but also in other categories like battery energy storage, geothermal, and sustainable fuels that have largely retained their IRA incentives. “You’re still talking about hundreds of billions of dollars of available investments that don’t wear that risk at all,” he said.
In fact, there are also already so many renewables projects under construction or set to begin soon that “we’ve got more investable opportunities than we have capital to invest,” Goldman explained. Rather than a lull, the tax credit cutoff date is now creating an incentive for investors to throw their support behind projects that appear poised to meet the deadlines.
That won’t last forever. After the credits phase out, investment could certainly dip, Goldman said, “until either those incentives are restored — which they still could be — or the market figures out how to effectively price those projects without that incentive.” Because tax-credit eligible projects that began construction prior to July 2026 will still be coming online for the next few years, Goldman predicts the lull could start around 2029.
He’s not convinced the incentives are gone for good, though. Solar and wind tax credits have suffered through many periods of uncertainty during their decades-long history, always ultimately enduring. And while the industry shouldn’t bank on a mid-term congressional shakeup laying the groundwork for a credit extension, it’s always a possibility — especially given looming electricity price hikes. That could rile up voters enough to begin chipping away at the partisan divides that have formed around clean energy, fossil fuels, and how the heck to power all of these AI data centers.
“We’re no longer talking about a political issue, despite the fact that they made this a political issue.” Goldman told me. “What we need is more electrons on the grid for as affordable a price as possible. And some of those will be generated from gas, and some of those will be generated from renewables.”
The U.S. is also not the only place for infrastructure investors to make money. While domestic clean energy investment may be down, the first half of 2025 saw global private infrastructure funding increase significantly compared with the prior two years. Data center and renewables-focused funds drove the trend, making up 45% and 36% of total investment raised, respectively. The “power and transmission” sector — which includes fossil fuel-fired generation — comprised a mere 12%.
But given that climate funds from all corners of the globe do primarily invest in the U.S., this certainly points to a sustained interest in building domestic clean energy infrastructure. Or, as Goldman put it, “the fundamentals of the market are complicated but only pointing in one direction — a deep thirst for quick, buildable power. And there’s only certain technologies that can fill that deep thirst.”
On Interior’s birdwatching, China’s lithium slowdown, and recycling aluminum
Current conditions: Hurricane Erin is gathering strength as it makes its way toward Puerto Rico later this week • Flash flooding and severe storms threaten the Great Plains and Midwest • In France, 12 administrative regions are on red alert for heat as temperatures surge past 95 degrees Fahrenheit.
Ford announced plans on Monday to deliver a $30,000 mid-size all-electric truck in 2027, in a potential shakeup of an EV market that’s been plagued by high costs. But the truck — which is rumored to revive the retro name Ford Ranchero — wasn’t really the main news. The pickup is part of Ford’s plan to “reimagine the entire way it builds EVs to cut costs, turn around its struggling EV division, and truly compete with the likes of Tesla,” Heatmap contributor Andrew Moseman wrote, which the company has dubbed its second “Model T moment.”
The strategy embraces a more minimalist, software-driven method of car design that EV-only companies such as Tesla and Rivian employ, allowing them to make mechanically simpler vehicles with fewer buttons and parts and more functions run by software through touchscreens. The push could “change everything” and “disrupt the U.S. auto industry,” wrote Inside EVs.
The Department of the Interior’s Fish and Wildlife Service is sending letters to wind developers across the U.S. asking for volumes of records about eagle deaths, indicating an imminent crackdown on wind farms under the auspices of bird protection laws, Heatmap’s Jael Holzman reported. The letters demand developers submit a laundry list of documents to the Service within 30 days, including “information collected on each dead or injured eagle discovered.”
The Trump administration has ramped up its assault on the wind industry in recent weeks, de-designating millions of acres of ocean for offshore wind development and yanking federal approvals for the Lava Ridge wind project in Idaho. Here’s Jael with more on the escalation.
An explosion at a U.S. Steel plant outside Pittsburgh killed at least two workers and injured nearly a dozen more. The first worker confirmed to have died was Timothy Quinn, 39, a father of three and caretaker to his mother, his sister, Trisha Quinn told CNN. She said officials did not alert her to her brother’s death until 4 p.m., hours after the explosion occurred. “My dad worked at the steel mill for 42 years,” she said. “He would be disgusted at the situation right now.” U.S. Steel executives said they do not yet know what caused the blast. The name of the second worker to have died was not yet confirmed.
The Clairton Coke Works facility, which has operated for more than 120 years, is a key node in the American steel supply chain, providing iron for the blast furnaces in Braddock, Pennsylvania, and Gary, Indiana. It was slated for potential investments under Nippon Steel’s $15 billion acquisition of the American giant. The extent of the damage is unclear, but the reconstruction of the plant could pose a test of whether Nippon will invest in newer, cleaner technologies or rebuild the existing coal-fired equipment.
Chinese battery giant Contemporary Amperex Technology, or CATL, said Monday it would halt production at a major lithium mine, sparking a surge in lithium futures and miners’ share prices, Reuters reported. The move is seen as part of Beijing’s broader attempt to rein in China’s overcapacity in the battery market, which created a global glut. Stock in lithium companies outside China surged on the news, as did spot prices. The license on the mine, located in the southeast province of Jiangxi, expired on August 9. The site previously supplied up to 6% of the world’s lithium.
“I am bullish on the move. It is proof positive that Chinese producers can only operate at a loss for so long before shutting in production. When they do, the floor under prices starts to take shape,” Ashley Zumwalt-Forbes, the Department of Energy’s former deputy director for batteries and critical minerals, wrote on LinkedIn. “This move will not fix the sector’s structural challenges overnight, but it is a meaningful signal that the worst of the oversupply pressure may be behind us.”
President Donald Trump’s 50% tariffs on imported aluminum could spur a recycling boom, industry experts told The Wall Street Journal’s Ryan Dezember. Primary aluminum production dwindled over the last 25 years. Two of the first new smelters planned in the U.S. in decades are facing increased competition for electricity from data centers. Production is likely still a few years away. By contrast, aluminum-recycling plants can be built faster and cheaper — roughly two years and $150 million — and consume 5% of the energy needed for primary production since they rely on chemical reactions to break down wasted metal. “Recycling is the answer,” said Duncan Pitchford, the executive in charge of recycling giant Norsk Hydro’s upstream business in the U.S. “The metal is already here.”
Scientists at the University of Illinois Urbana-Champaign and Princeton University re-engineered the metabolism of the yeast Issatchenkia orientalis to supercharge its fermentation of plant glucose into succinic acid, an important industrial chemical used in food additives and agricultural and pharmaceutical products. The natural fermentation process, relying on yeasts and renewable plant material, is far less carbon intensive than the conventional production using petrochemicals. “These advances bring us closer to greener manufacturing processes that benefit both the environment and the economy,” Vinh Tran, study’s primary author, said in a press release.