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See also: federal policy, batteries, and electricity demand.
The clean energy industry is beginning to report to investors and the public on its first brush with Donald Trump’s trade policy. While earnings season has only just begun, already some broad themes are emerging across the sector: Tariffs hurt. Batteries are getting more expensive. And there’s big demand for power, especially natural gas.
Four big clean energy companies that have reported results so far — inverter and battery maker Enphase, turbine manufacturer GE Vernova, electric vehicle giant Tesla, and developer and utility NextEra — mentioned tariffs prominently in either their earnings reports or their analyst calls. GE Vernova said that tariffs would result in $300 million to $400 million of additional costs. Enphase said that tariffs would take off two percentage points from its margin in the second quarter and six to eight points of gross margin in the third quarter. Tesla said that “increasing tariffs may cause market volatility and near-term impacts to supply and demand.”
Tesla’s executives — including chief executive Elon Musk — expanded on that market volatility later in a call with investors and analysts, with Musk saying that he was an “advocate of predictable tariff structures, free trade, and lower tariffs.” Musk added that economic uncertainty could continue to weigh on Tesla’s auto sales, which notably declined in the first three months of the year. “When there is economic uncertainty, people generally want to pause on doing a major capital purchase like a car,” he observed.
NextEra chief executive John Ketchum said the company had “dramatically diversified where we source our solar panels” and was not affected by the recent announcement of high tariff rates on solar panels from Southeast Asia. He also specified to analysts that “we source our wind turbines from the U.S., with manufacturing in Florida.” The company estimated that it has “$150 million in tariff exposure through 2028, on over $75 billion in expected capital spend,” Ketchum said.
Enphase chief executive Badri Kothandaraman attempted to tread delicately on the tariff issue. “While the global policy environment remains fluid with tariffs, with interest rates and subsidies constantly evolving, we are moving quickly to realign our supply chain to minimize downside across a range of scenarios,” he said. “While we cannot control the macroeconomic conditions, we can absolutely control our response.” GE Vernova chief financial officer Ken Parks described tariffs as a “continued increase in the cost base,” and said that the combined tariffs on steel plus various imports from Canada, Mexico, China — which is facing import duties of 145% or more, depending on the product — affect about a quarter of its spending.
A lot of that tariff impact comes from the battery supply chain, which China dominates. For Tesla, that means its fast growing energy storage business is particularly at risk. While the company has made some efforts to onshore stationary storage battery production, its chief financial officer, Vaibhav Taneja, said that domestic production would ultimately account for only a “fraction” of its battery needs, and even that would “take time.”
Enphase was similarly upfront about the impact on its battery supplies. “We are no exception. We use Chinese sources for the cell packs,” Kothandaraman said. He explained that thanks to the tariffs, making batteries domestically with Chinese cells “therefore turns out for us that whether we make it domestically or whether we make it outside the U.S., our costs are becoming approximately the same. And the cost impact is significant.” In other words, the tariffs make domestic battery production less appealing than it was before. Kothandaraman said that the company is working on establishing a non-Chinese supply chain, which will take six to nine months.
NextEra’s Ketchum said that the company had made “arrangements” to buy batteries made in the U.S. “for a significant portion of our backlog,” and that its contracts for non-Chinese-sourced batteries required the supplier to cover any tariff-related costs. Ketchum did say that the domestic batteries meet local content requirements for tax subsidies under the Inflation Reduction Act, however “there are certain components that come in from outside the United States.” Overall, Ketchum said, “our tariff exposure on batteries is expected to be negligible.”
All four companies are heavily exposed to various energy regulatory and subsidy plans that may or may not survive the double-whammy of the congressional Republicans’ budget-making priorities and the Trump administration’s desire to roll back environmental regulations.
Tesla’s revenue from emissions credits that other carmakers buy to comply with California’s fleet emissions standards was $595 million in the first quarter of this year, compared to $409 million of net income — implying that the company would have lost money if not for the credits. This Trump administration has already attempted to take away California’s ability to set emissions standards, as it did the first time around. Then it was not successful, and this time it might not have to be — the Supreme Court on Wednesday indicated that it would be open to a lawsuit from the fossil fuel industry challenging California’s limits.
Kothandaraman said that “the lack of certainty” around the fate of the Inflation Reduction Act, which is currently being hashed out in Congress, “is definitely a factor” in explaining what one analyst described as “a bit of paralysis on the customer side.” He was hopeful that “demand will be unlocked” once there’s “clarity” on IRA tax credits.
Meanwhile, GE Vernova said that offshore wind orders had fallen by 43%, “as a result of ongoing U.S. policy uncertainty and permitting delays.” It also took a $70 million charge related to the cancellation of a deal to supply 18-megawatt turbines in New York.
Musk bragged that Tesla’s Megapack utility storage system “enables utility companies to output far more total energy than would otherwise be the case,” and that “utility companies are beginning to realize this and are buying in our Megapacks at scale.” While the company deployed almost 40 gigawatt-hours of battery storage in the past 12 months — an impressive amount based on the current level of grid battery storage in the U.S. — Musk predicted that Tesla could end up deploying “terawatts” of storage on an annual basis.
NextEra has a large renewables development business, and Ketchum sees the uptick in demand for electricity as a boon: “When I look at the demand and the outlook in the renewable sector going … we just continue to see strong demand across the board, with hyperscalers being a nice sized part of that.”
GE Vernova competed with NextEra for the most investor-friendly demand growth story — though its is not a particularly climate-friendly one. The company says it has a backlog of 29 gigawatts of natural gas turbine orders, with an additional 21 gigawatts of reservations that will turn into future production. Its earnings before interest, taxes, depreciation, and amortization for its power business jumped from $345 million in the first quarter of last year to $508 million in the first quarter of this year, while its margins grew from 8.6% to 11.5%.
About a third of its reservations for turbines are for data centers, Scott Strazik, the company’s chief executive said. Some more were to provide baseload power. And the rest? “A healthy amount of these are also F-class gas turbines to just strengthen the durability and the resiliency on the grid,” he said.
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Amarillo-area residents successfully beat back a $600 million project from Xcel Energy that would have provided useful tax revenue.
Power giant Xcel Energy just suffered a major public relations flap in the Texas Panhandle, scrubbing plans for a solar project amidst harsh backlash from local residents.
On Friday, Xcel Energy withdrew plans to build a $600 million solar project right outside of Rolling Hills, a small, relatively isolated residential neighborhood just north of the city of Amarillo, Texas. The project was part of several solar farms it had proposed to the Texas Public Utilities Commission to meet the load growth created by the state’s AI data center boom. As we’ve covered in The Fight, Texas should’ve been an easier place to do this, and there were few if any legal obstacles standing in the way of the project, dubbed Oneida 2. It was sited on private lands, and Texas counties lack the sort of authority to veto projects you’re used to seeing in, say, Ohio or California.
But a full-on revolt from homeowners and realtors apparently created a public relations crisis.
Mere weeks ago, shortly after word of the project made its way through the small community that is Rolling Hills, more than 60 complaints were filed to the Texas Public Utilities Commission in protest. When Xcel organized a public forum to try and educate the public about the project’s potential benefits, at least 150 residents turned out, overwhelmingly to oppose its construction. This led the Minnesota-based power company to say it would scrap the project entirely.
Xcel has tried to put a happy face on the situation. “We are grateful that so many people from the Rolling Hills neighborhood shared their concerns about this project because it gives us an opportunity to better serve our communities,” the company said in a statement to me. “Moving forward, we will ask for regulatory approval to build more generation sources to meet the needs of our growing economy, but we are taking the lessons from this project seriously.”
But what lessons, exactly, could Xcel have learned? What seems to have happened is that it simply tried to put a solar project in the wrong place, prizing convenience and proximity to an existing electrical grid over the risk of backlash in an area with a conservative, older population that is resistant to change.
Just ask John Coffee, one of the commissioners for Potter County, which includes Amarillo, Rolling Hills, and a lot of characteristically barren Texas landscape. As he told me over the phone this week, this solar farm would’ve been the first utility-scale project in the county. For years, he said, renewable energy developers have explored potentially building a project in the area. He’s entertained those conversations for two big reasons – the potential tax revenue benefits he’s seen elsewhere in Texas; and because ordinarily, a project like Oneida 2 would’ve been welcomed in any of the pockets of brush and plain where people don’t actually live.
“We’re struggling with tax rates and increases and stuff. In the proper location, it would be well-received,” he told me. “The issue is, it’s right next to a residential area.”
Indeed, Oneida 2 would’ve been smack dab up against Rolling Hills, occupying what project maps show would be the land surrounding the neighborhood’s southeast perimeter – truly the sort of encompassing adjacency that anti-solar advocates like to describe as a bogeyman.
Cotton also told me he wasn’t notified about the project’s existence until a few weeks ago, at the same time resident complaints began to reach a fever pitch. He recalled hearing from homeowners who were worried that they’d no longer be able to sell their properties. When I asked him if there was any data backing up the solar farm’s potential damage to home prices, he said he didn’t have hard numbers, but that the concerns he heard directly from the head of Amarillo’s Realtors Association should be evidence enough.
Many of the complaints against Oneida 2 were the sort of stuff we’re used to at The Fight, including fears of fires and stormwater runoff. But Cotton said it really boiled down to property values – and the likelihood that the solar farm would change the cultural fabric in Rolling Hills.
“This is a rural area. There are about 300 homes out there. Everybody sitting out there has half an acre, an acre, two acres, and they like to enjoy the quiet, look out their windows and doors, and see some distance,” he said.
Ironically, Cotton opposed the project on the urging of his constituents, but is now publicly asking Xcel to continue to develop solar in the county. “Hopefully they’ll look at other areas in Potter County,” he told me, adding that at least one resident has already come to him with potential properties the company could acquire. “We could really use the tax money from it. But you just can’t harm a community for tax dollars. That’s not what I’m about.”
I asked Xcel how all this happened and what their plans are next. A spokesperson repeatedly denied my requests to discuss Oneida 2 in any capacity. In a statement, the company told me it “will provide updates if the project is moved to another site,” and that “the company will continue to evaluate whether there is another location within Potter County, or elsewhere, to locate the solar project.”
Meanwhile, Amarillo may be about to welcome data center development because of course, and there’s speculation the first AI Stargate facility may be sited near Amarillo, as well.
City officials will decide in the coming weeks on whether to finalize a key water agreement with a 5,600-acre private “hypergrid” project from Fermi America, a new company cofounded by former Texas governor Rick Perry, says will provide upwards of 11 gigawatts to help fuel artificial intelligence services. Fermi claims that at least 1 gigawatt of power will be available by the end of next year – a lot of power.
The company promises that its “hypergrid” AI campus will use on-site gas and nuclear generation, as well as contracted gas and solar capacity. One thing’s for sure – it definitely won’t be benefiting from a large solar farm nearby anytime soon.
And more of the most important news about renewable projects fighting it out this week.
1. Racine County, Wisconsin – Microsoft is scrapping plans for a data center after fierce opposition from a host community in Wisconsin.
2. Rockingham County, Virginia – Another day, another chokepoint in Dominion Energy’s effort to build more solar energy to power surging load growth in the state, this time in the quaint town of Timberville.
3. Clark County, Ohio – This county is one step closer to its first utility-scale solar project, despite the local government restricting development of new projects.
4. Coles County, Illinois – Speaking of good news, this county reaffirmed the special use permit for Earthrise Energy’s Glacier Moraine solar project, rebuffing loud criticisms from surrounding households.
5. Lee County, Mississippi – It’s full steam ahead for the Jugfork solar project in Mississippi, a Competitive Power Ventures proposal that is expected to feed electricity to the Tennessee Valley Authority.
A conversation with Enchanted Rock’s Joel Yu.
This week’s chat was with Joel Yu, senior vice president for policy and external affairs at the data center micro-grid services company Enchanted Rock. Now, Enchanted Rock does work I usually don’t elevate in The Fight – gas-power tracking – but I wanted to talk to him about how conflicts over renewable energy are affecting his business, too. You see, when you talk to solar or wind developers about the potential downsides in this difficult economic environment, they’re willing to be candid … but only to a certain extent. As I expected, someone like Yu who is separated enough from the heartburn that is the Trump administration’s anti-renewables agenda was able to give me a sober truth: Land use and conflicts over siting are going to advantage fossil fuels in at least some cases.
The following conversation was lightly edited for clarity.
Help me understand where, from your perspective, the generation for new data centers is going to come from. I know there are gas turbine shortages, but also that solar and wind are dealing with headwinds in the United States given cuts to the Inflation Reduction Act.
There are a lot of stories out there about certain technologies coming out to the forefront to solve the problem, whether it’s gas generation or something else. But the scale and the scope of this stuff … I don’t think there is a silver bullet where it’s all going to come from one place.
The Energy Department put out a request for information looking for ways to get to 3 gigawatts quickly, but I don’t think there is any way to do that quickly in the United States. It’s going to take work from generation developers, batteries, thermal generation, emerging storage technologies, and transmission. Reality is, whether it is supply chain issues or technology readiness or the grid’s readiness to accept that load generation profile, none of it is ready. We need investment and innovation on all fronts.
How do conflicts over siting play into solving the data center power problem? Like, how much of the generation that we need for data center development is being held back by those fights?
I do have an intuitive sense that the local siting and permitting concerns around data centers are expanding in scope from the normal noise and water considerations to include impacts to energy affordability and reliability, as well as the selection of certain generation technologies. We’ve seen diesel generation, for example, come into the spotlight. It’s had to do with data center permitting in certain jurisdictions, in places like Maryland and Minnesota. Folks are realizing that a data center comes with a big power plant – their diesel generation. When other power sources fall short, they’ll rely on their diesel more frequently, so folks are raising red flags there. Then, with respect to gas turbines or large cycle units, there’s concerns about viewsheds, noise and cooling requirements, on top of water usage.
How many data center projects are getting their generation on-site versus through the grid today?
Very few are using on-site generation today. There’s a lot of talk about it and interest, but in order to serve our traditional cloud services data center or AI-type loads, they’re looking for really high availability rates. That’s really costly and really difficult to do if you’re off the grid and being serviced by on-site generation.
In the context of policy discussions, co-location has primarily meant baseload resources on sites that are serving the data centers 24/7 – the big stories behind Three Mile Island and the Susquehanna nuclear plant. But to be fair, most data centers operational today have on-site generation. That’s their diesel backup, what backstops the grid reliability.
I think where you’re seeing innovation is modular gas storage technologies and battery storage technologies that try to come in and take the space of the diesel generation that is the standard today, increasing the capability of data centers in terms of on-site power relative to status quo. Renewable power for data centers at scale – talking about hundreds of megawatts at a time – I think land is constraining.
If a data center is looking to scale up and play a balancing act of competing capacity versus land for energy production, the competing capacity is extremely valuable. They’re going to prioritize that first and pack as much as they can into whatever land they have to develop. Data centers trying to procure zero-carbon energy are primarily focused on getting that energy over wires. Grid connection, transmission service for large-scale renewables that can match the scale of natural gas, there’s still very strong demand to stay connected to the grid for reliability and sustainability.
Have you seen the state of conflict around renewable energy development impact data center development?
Not necessarily. There is an opportunity for data center development to coincide with renewable project development from a siting perspective, if they’re going to be co-located or near to each other in remote areas. For some of these multi-gigawatt data centers, the reason they’re out in the middle of nowhere is a combination of favorable permitting and siting conditions for thousands of acres of data center building, substations and transmission –
Sorry, but even for projects not siting generation, if megawatts – if not gigawatts – are held up from coming to the grid over local conflicts, do you think that’s going to impact data center development at all? The affordability conversions? The environmental ones?
Oh yeah, I think so. In the big picture, the concern is if you can integrate large loads reliably and affordably. Governors, state lawmakers are thinking about this, and it’s bubbling up to the federal level. You need a broad set of resources on the grid to provide that adequacy. To the extent you hold up any grid resources, renewable or otherwise, you’re going to be staring down some serious challenges in serving the load. Virginia’s a good example, where local groups have held up large-scale renewable projects in the state, and Dominion’s trying to build a gas peaker plant that’s being debated, too. But in the meantime, it is Data Center Alley, and there are gigawatts of data centers that continue to want to get in and get online as quickly as possible. But the resources to serve that load are not coming online in time.
The push toward co-location probably does favor thermal generation and battery storage technologies over straight renewable energy resources. But a battery can’t cover 24/7 use cases for a data center, and neither will our unit. We’re positioned to be a bridge resource for 24/7 use for a few years until they can get more power to the market, and then we can be a flexible backup resource – not a replacement for the large-scale and transmission-connected baseload power resources, like solar and wind. Texas has benefited from huge deployments of solar and wind. That has trickled down to lower electricity costs. Those resources can’t do it alone, and there’s thermal to balance the system, but you need it all to meet the load growth.