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Defenders of the Inflation Reduction Act have hit on what they hope will be a persuasive argument for why it should stay.

With the fate of the Inflation Reduction Act and its tax credits for building and producing clean energy hanging in the balance, the law’s supporters have increasingly turned to dollars-and-cents arguments in favor of its preservation. Since the election, industry and research groups have put out a handful of reports making the broad argument that in addition to higher greenhouse gas emissions, taking away these tax credits would mean higher electricity bills.
The American Clean Power Association put out a report in December, authored by the consulting firm ICF, arguing that “energy tax credits will drive $1.9 trillion in growth, creating 13.7 million jobs and delivering 4x return on investment.”
The Solar Energy Industries Association followed that up last month with a letter citing an analysis by Aurora Energy Research, which found that undoing the tax credits for wind, solar, and storage would reduce clean energy deployment by 237 gigawatts through 2040 and cost nearly 100,000 jobs, all while raising bills by hundreds of dollars in Texas and New York. (Other groups, including the conservative environmental group ConservAmerica and the Clean Energy Buyers Association have commissioned similar research and come up with similar results.)
And just this week, Energy Innovation, a clean energy research group that had previously published widely cited research arguing that clean energy deployment was not linked to the run-up in retail electricity prices, published a report that found repealing the Inflation Reduction Act would “increase cumulative household energy costs by $32 billion” over the next decade, among other economic impacts.
The tax credits “make clean energy even more economic than it already is, particularly for developers,” explained Energy Innovation senior director Robbie Orvis. “When you add more of those technologies, you bring down the electricity cost significantly,” he said.
Historically, the price of fossil fuels like natural gas and coal have set the wholesale price for electricity. With renewables, however, the operating costs associated with procuring those fuels go away. The fewer of those you have, “the lower the price drops,” Orvis said. Without the tax credits to support the growth and deployment of renewables, the analysis found that annual energy costs per U.S. household would go up some $48 annually by 2030, and $68 by 2035.
These arguments come at a time when retail electricity prices in much of the country have grown substantially. Since December 2019, average retail electricity prices have risen from about $0.13 per kilowatt-hour to almost $0.18, according to the Bureau of Labor Statistics. In Massachusetts and California, rates are over $0.30 a kilowatt-hour, according to the Energy Information Administration. As Energy Innovation researchers have pointed out, states with higher renewable penetration sometimes have higher rates, including California, but often do not, as in South Dakota, where 77% of its electricity comes from renewables.
Retail electricity prices are not solely determined by fuel costs Distribution costs for maintaining the whole electrical system are also a factor. In California, for example, it’s these costs that have driven a spike in rates, as utilities have had to harden their grids against wildfires. Across the whole country, utilities have had to ramp up capital investment in grid equipment as it’s aged, driving up distribution costs, a 2024 Energy Innovation report argued.
A similar analysis by Aurora Energy Research (the one cited by SEIA) that just looked at investment and production tax credits for wind, solar, and batteries found that if they were removed, electricity bills would increase hundreds of dollars per year on average, and by as much as $40 per month in New York and $29 per month in Texas.
One reason the bill impact could be so high, Aurora’s Martin Anderson told me, is that states with aggressive goals for decarbonizing the electricity sector would still have to procure clean energy in a world where its deployment would have gotten more expensive. New York is targeting a target for getting 70% of its electricity from renewable sources by 2030, while Minnesota has a goal for its utilities to sell 55% clean electricity by 2035 and could see its average cost increase by $22 a month. Some of these states may have to resort to purchasing renewable energy certificates to make up the difference as new generation projects in the state become less attractive.
Bills in Texas, on the other hand, would likely go up because wind and solar investment would slow down, meaning that Texans’ large-scale energy consumption would be increasingly met with fossil fuels (Texas has a Renewable Portfolio Standard that it has long since surpassed).
This emphasis from industry and advocacy groups on the dollars and cents of clean energy policy is hardly new — when the House of Representatives passed the (doomed) Waxman-Markey cap and trade bill in 2009, then-Speaker of the House Nancy Pelosi told the House, “Remember these four words for what this legislation means: jobs, jobs, jobs, and jobs.”
More recently, when Democratic Senators Martin Heinrich and Tim Kaine hosted a press conference to press their case for preserving the Inflation Reduction Act, the email that landed in reporters’ inboxes read “Heinrich, Kaine Host Press Conference on Trump’s War on Affordable, American-Made Energy.”
“Trump’s war on the Inflation Reduction Act will kill American jobs, raise costs on families, weaken our economic competitiveness, and erode American global energy dominance,” Heinrich told me in an emailed statement. “Trump should end his destructive crusade on affordable energy and start putting the interests of working people first.”
That the impacts and benefits of the IRA are spread between blue and red states speaks to the political calculation of clean energy proponents, hoping that a bill that subsidized solar panels in Texas, battery factories in Georgia, and battery storage in Southern California could bring about a bipartisan alliance to keep it alive. While Congressional Republicans will be scouring the budget for every last dollar to help fund an extension of the 2017 Tax Cuts and Jobs Act, a group of House Republicans have gone on the record in defense of the IRA’s tax credits.
“There's been so much research on the emissions impact of the IRA over the past few years, but there's been comparatively less research on the economic benefits and the household energy benefits,” Orvis said. “And I think that one thing that's become evident in the last year or so is that household energy costs — inflation, fossil fuel prices — those do seem to be more top of mind for Americans.”
Opinion modeling from Heatmap Pro shows that lower utility bills is the number one perceived benefit of renewables in much of the country. The only counties where it isn’t the number one perceived benefit are known for being extremely wealthy, extremely crunchy, or both: Boulder and Denver in Colorado; Multnomah (a.k.a. Portland) in Oregon; Arlington in Virginia; and Chittenden in Vermont.
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America’s largest renewable developer is swallowing up the utility at the heart of the data center boom.
NextEra Energy, which also owns the utility Florida Power & Light, announced Monday morning that it had agreed to acquire Dominion Energy, the utility that operates in Virginia and the Carolinas. The deal would create an energy giant valued at around $67 billion. It would also — importantly for Virginia and PJM Interconnection, the 13-state electricity market of which the state is a part — create a battery electric storage giant.
The companies said in a Monday presentation laying out the case for the merger to investors that the combined entity would be the largest power company in the United States and the third largest energy company behind just ExxonMobil and Chevron. The companies projected that, when combined, they would be the domestic leader in total generation, market capitalization, rate base, annual capital expenditure, total generation built, and, specifically, battery storage capacity.
NextEra is already a storage leader. Its Florida utility is planning to add 7.6 gigawatts of battery storage over the next decade, and its development arm added almost a gigawatt of storage to its backlog in just the first quarter of this year.
NextEra’s storage expertise couldn’t come at a better time for Dominion. Virginia passed a law in April mandating that the utility procure 16 gigawatts of short-duration storage and 4 gigawatts of long-duration storage by 2045, with 4 gigawatts of short-term storage coming by 2030. Compare that to a previous state target for Dominion of around 3 gigawatts of storage 2035 and the challenge becomes apparent.
“With NextEra Energy’s world leadership in battery storage, there’s a potential to accelerate Dominion Energy’s capital plan to meet Virginia’s storage goals,” NextEra Chief Executive John Ketchum said on a call with analysts discussing the merger plans.
The market Dominion operates in in Virginia, PJM Interconnection, has long been a laggard in bringing new storage resources onto its grid, thanks to its famously dysfunctional interconnection queue. Although its newly refreshed queue has seen a large increase in storage projects compared to when the organization closed it to new projects in 2022, the market is still well behind storage-friendly peers like California and Texas.
PJM has also become notorious more recently for its capacity market, which has fueled price increases across the region in the billions of dollars, and yet failed to procure the reserve margin PJM typically aims for in its most recent auction. “Given that we’re the world’s leader in battery storage and the legislation that was just passed by Virginia, there is a tremendous opportunity to meet that capacity short quickly by deploying battery storage in the right places,” Ketchum said Monday. “We know what a big impact battery storage can have, and how quickly it can have it on capacity-short positions. And so we look at a Dominion in Virginia with [a] short capacity position — I think there’s a real opportunity to accelerate investment.”
The proposed deal comes at a time of rising prices and public anger at utilities up and down the Eastern Seaboard, and especially in the Mid-Atlantic. Dominion’s rates in Virginia have risen around 36% in the past four years, according to the Heatmap-M.I.T. Electricity Price Hub, while typical bills have risen from about $96 per month to $146 per month. Virginia’s rates have grown faster than average in PJM, but are still well below the increases in states like Maryland and New Jersey despite serving a fast-growing data center industry.
While elected Democrats in PJM states regularly bash utilities (see: New Jersey and Pennsylvania), it’s possible that both Virginians and Virginia might look favorably on NextEra, Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Monday. “If [NextEra] focuses on storage development under the new Democratic legislation recently passed, it could form a coalition of support; we believe this is [a] critical point that could make the deal approval process less bumpy than some other recent M&A deals.”
Morningstar analyst Andrew Bischof saw the deal as allowing each side to use the other’s expertise (and balance sheet) to ramp up investment. Dominion might be able “leverage NextEra’s strong balance sheet to accelerate investment, particularly in Virginia,” whereas NextEra “could accelerate its data center ambitions, which had trailed those of its regulated peers, by using Dominion’s expertise and relationships to expedite NextEra’s data center hub plans,” he wrote in a note to clients Monday.
Building out more storage could also be great for a regulated utility like Dominion, as it would get to put new resources into its rate base and garner a return on equity.
“The General Assembly just added new storage requirements for us, which we think are going to be great for our customers, being able to work with Nextera and this combined company on that,” Dominion chief executive Robert Blue said on the call. “I think this is really going to benefit our customers as we serve them better and will deploy capital faster that way.”
On Thacker Pass, the Bonneville Power Administration, and Azerbaijan’s offshore wind
Current conditions: New York City is bracing for triple-digit heat in some parts of the five boroughs this week • The warm-up along the East Coast could worsen the drought parching the country’s southeastern shores • After Sunday reached 95 degrees Fahrenheit in the war-ravaged Gaza, temperatures in the Palestinian enclave are dropping back into the 80s and 70s all week.
Assuming world peace is something you find aspirational, here’s the good news: By all accounts, President Donald Trump’s two-day summit in Beijing with Chinese President Xi Jinping went well. Here’s the bad news: The energy crisis triggered by the Iran War is entering a grim new phase. Nearly 80 countries have now instituted emergency measures as the world braces for slow but long-predicted reverberations of the most severe oil shock in modern history. With demand for air conditioning and summer vacations poised to begin in the northern hemisphere’s summer, already-strained global supplies of crude oil, gasoline, diesel, and jet fuel will grow scarcer as the United States and Iran mutually blockade the Strait of Hormuz and halt virtually all tanker shipments from each other’s allies. “We are taking that outcome very seriously,” Paul Diggle, the chief economist at fund manager Aberdeen, told the Financial Times, noting that his team was now considering scenarios where Brent crude shoots up to $180 a barrel from $109 a barrel today. “We are living on borrowed time.”
The weekend brought a grave new energy concern over the conflict’s kinetic warfare. On Sunday, the United Arab Emirates condemned a drone strike it referred to as a “treacherous terrorist attack” that caused a fire near Abu Dhabi’s Barakah nuclear station. The UAE’s top English-language newspaper, The National, noted that the government’s official statement did not blame Iran explicitly. The attack came just a day after the International Atomic Energy Agency raised the alarm over drone strikes near nuclear plants after a swarm of more than 160 drones hovered near key stations in Ukraine last week.
We are apparently now entering the megamerger phase of the new electricity supercycle. On Friday, the Financial Times broke news that NextEra Energy is in talks with rival Dominion Energy for a tie-up that would create a more than $400 billion utility behemoth in one of the biggest deals of all time. The merger talks, which The Wall Street Journal confirmed, could be announced as early as this week. The combined company would reach from Dominion’s homebase of Virginia, where the northern half of the state is serving as what the FT called “the heartland of U.S. digital infrastructure serving the AI boom,” down to NextEra’s home-state of Florida, where the subsidiary Florida Power & Light serves roughly 6 million customers. While Dominion dominates data centers in Northern Virginia, NextEra last year partnered with Google to build more power plants and even reopen the Duane Arnold nuclear station in Iowa.

Trump digs lithium. In fact, he’s such a fan of Lithium Americas’ plan to build North America’s largest lithium mine on federal land in Nevada that he renegotiated a Biden-era deal to finance construction of the Thacker Pass project to secure a 5% equity stake in the publicly-traded developer. Yet the White House’s macroeconomic policies are pinching the nation’s lithium champion. During its first-quarter earnings call with investors last week, Lithium Americas cautioned that the Trump administration’s steel tariffs, coupled with inflation from disrupted shipments through the Strait of Hormuz, could add between $80 million and $120 million to construction costs at Thacker Pass. Most of the impact, Mining.com noted, is expected this year. Once mining begins, the project could spur new discussion of a strategic lithium reserve, the case for which Heatmap’s Matthew Zeitlin articulated here.
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The Department of Energy has selected Travis Kavulla, an energy industry veteran, as the 17th chief executive and administrator of the Bonneville Power Administration, NewsData reported. Founded under then-President Franklin D. Roosevelt in 1937, the federal agency is a holdover from the New Deal era before utilities had built out electrical networks in rural parts of the U.S. Unlike the Tennessee Valley Authority — which functions as a standalone utility that owns and sells power, though it’s wholly owned by the federal government and its board of directors is appointed by the White House — the BPA, as it’s known, is a power marketing agency that sells electricity from hydroelectric dams owned by the Army Corps of Engineers and the Department of the Interior’s Bureau of Reclamation. Kavulla currently serves as the head of policy for Base Power, the startup building a network of distributed batteries to back up the grid. He previously worked as the regulatory chief at the utility NRG Energy, and as a state utility commissioner in his home state of Montana. NewsData, a trade publication focused on Western energy markets, cautioned that the Energy Department may hold off on announcing the appointment for “the next few days or weeks” as sources warned that “it might be delayed while the department conducts a background check, or to allow the new undersecretary of energy, Kyle Haustveit, to be confirmed.”
Reached Sunday night via LinkedIn message, Kavulla politely declined to comment on whether he was appointed to lead the BPA.
Offshore wind may be spinning in reverse in the U.S. as the Trump administration attempts to, as Heatmap’s Jael Holzman put it, “murder” an industry through death by a thousand cuts. But elsewhere in the world, offshore wind is booming. Just look at Azerbaijan. Despite its vast reserves of natural gas, the nation on the Caspian Sea is looking into building its first offshore turbines. On Friday, offshoreWIND.biz reported that the Azerbaijan Green Energy Company, owned by the Baku-based industrial giant Nobel Energy, had commissioned a Spanish company to design a floating LiDAR-equipped buoy for the country’s first turbines in the Caspian. The debut project, backed by the Azeri government, would start with 200 megawatts of offshore wind and eventually triple in size.
Before the wealthy software entrepreneur Greg Gianforte ran to be governor of Montana, he donated millions of dollars to a Christian-themed museum that claims humans walked alongside dinosaurs and the Earth is just 6,000 years old. After winning the state’s top job, the Republican set about revoking virtually all policies related to climate change, including banning the projected effects of warming from state agencies’ risk forecasts. With drought withering the state, however, Gianforte has turned to perhaps the most ancient policy approach humanities leaders have called upon to fix devastating weather patterns: Pray. On Sunday, Gianforte declared an official day of prayer for rain. “Prayer is the most powerful tool we have,” he wrote in a post on X. “I ask all who are faithful to come to God with thanks and pray.”
With construction deadlines approaching, developers still aren’t sure how to comply with the new rules.
Certainty, certainty, certainty — three things that are of paramount importance for anyone making an investment decision. There’s little of it to be found in the renewable energy business these days.
The main vectors of uncertainty are obvious enough — whipsawing trade policy, protean administrative hostility toward wind, a long-awaited summit with China that appears to have done nothing to resolve the war with Iran. But there’s still one big “known unknown” — rules governing how companies are allowed to interact with “prohibited foreign entities,” which remain unwritten nearly a year after the One Big Beautiful Bill Act slapped them on just about every remaining clean energy tax credit.
The list of countries that qualify as “foreign entities of concern” is short, including Russian, Iran, North Korea, and China. Post-OBBBA, a firm may be treated as a “foreign-influenced entity” if at least 15% of its debt is issued by one of these countries — though in reality, China is the only one that matters. This rule also kicks in when there’s foreign entity authority to appoint executive officers, 25% or greater ownership by a single entity or a combined ownership of at least 40%.
Any company that wants to claim a clean energy tax credit must comply with the FEOC rules. How to calculate those percentages, however, the Trump administration has so far failed to say. This is tricky because clean energy projects seeking tax credits must be placed in service by the end of 2027 or start construction by July 4 of this year, which doesn’t leave them much time left to align themselves with the new rules.
While the Treasury Department published preliminary guidance in February, it largely covered “material assistance,” the system for determining how much of the cost of the project comes from inputs that are linked to those four nations (again, this is really about China). That still leaves the issue of foreign influence and “effective control,” i.e. who is allowed to own or invest in a project and what that means.
This has meant a lot of work for tax lawyers, Heather Cooper, a partner at McDermott Will & Schulte, told me on Friday.
“The FEOC ownership rules are an all or nothing proposition,” she said. “You have to satisfy these rules. It’s not optional. It’s not a matter of you lose some of the credits, but you keep others. There’s no remedy or anything. This is all or nothing.”
That uncertainty has had a chilling effect on the market. In February, Bloomberg reported that Morgan Stanley and JPMorgan had frozen some of their renewables financing work because of uncertainty around these rules, though Cooper told me the market has since thawed somewhat.
“More parties are getting comfortable enough that there are reasonable interpretations of these rules that they can move forward,” she said. “The reality is that, for folks in this industry — not just developers, but investors, tax insurers, and others — their business mandate is they need to be doing these projects.”
Some of the most frequent complaints from advisors and trade groups come around just how deep into a project’s investors you have to look to find undue foreign ownership or investment.
This gets complicated when it comes to the structures involved with clean energy projects that claim tax credits. They often combine developers (who have their own investors), outside investment funds, banks, and large companies that buy the tax credits on the transferability market.
These companies — especially the banks, which fund themselves with debt — “don’t know on any particular date how much of their debt is held by Chinese connected lenders, and therefore they’re not sure how the rules apply, and that’s caused a couple of banks to pull out of the tax equity market,” David Burton, a partner at Norton Rose Fulbright, told me. “It seems pretty crazy that a large international bank that has its debt trading is going to be a specified foreign entity because on some date, a Chinese party decided to take a large position in its debt.”
For those still participating in the market, the lack of guidance on debt and equity provisions has meant that lawyers are having to ascend the ladder of entities involved in a project, from private equity firms who aren’t typically used to disclosing their limited partners to developers, banks, and public companies that buy the tax credits.
“We’re having to go to private equity funds and say, hey, how many of your LPs are Chinese?” David Burton, a partner at Norton Rose Fulbright, told me. This is not information these funds are typically particularly eager to share. If a lawyer “had asked a private equity firm please tell us about your LPs, before One Big Beautiful Bill, they probably would have told us to go jump in the lake,” Burton said.
Still, the deals are still happening, but “the legal fees are more expensive. The underwriting and due diligence time is longer, there are more headaches,” he told me.
Typically these deals involve joint ventures that formed for that specific deal, which can then transfer the tax credits to another entity with more tax liability to offset. The joint venture might be majority owned by a public company, with a large minority position held by a private equity fund, Burton said.
For the public company, Burton said, his team has to ask “Are any of your shareholders large enough that they have to be disclosed to the SEC? Are any of those Chinese?” For the private equity fund, they have to ask where its investors are residents and what countries they’re citizens of. While private equity funds can be “relatively cooperative,” the process is still a “headache.”
“It took time to figure out how to write these certifications and get me comfortable with the certification, my client comfortable with it, the private equity firm comfortable with it, the tax credit buyer comfortable with it,” he told me, referring to the written legal explanation for how companies involved are complying with what their lawyers think the tax rules are.
Players such as the American Council on Renewable Energy hope that guidance will cut down on this certification time by limiting the universe of entities that will have to scrub their rolls of Chinese investors or corporate officers.
“It’d be nice if we knew you only have to apply the test at the entity that’s considered the tax owner of the project,” i.e. just the joint venture that’s formed for a specific project, Cooper told me.
“There’s a pretty reasonable and plain reading of the statute that limits the term ’taxpayer’ to the entity that owns the project when it’s placed in service,” Cooper said.
Many in the industry expect more guidance on the rules by the end of year, though as Burton noted, “this Treasury is hard to predict.”
In the meantime, expect even more work for tax lawyers.
“We’re used to December being super busy,” Burton said. “But it now feels like every month since the One Big Beautiful Bill passed is like December, so we’ve had, like, you know, eight Decembers in a row.”