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Some interiors are quite protected from air pollution. Others aren’t.
As the Northeast endures one of the worst wildfire days in recent history, the advice has been pretty simple: stay indoors, filter your air. And chances are, people who can follow this advice are getting it.
Marshall Burke, an economist at the Stanford Doerr School of Sustainability who has been remarkably helpful to this publication, has looked at past examples of severe smoke events and found there isn’t any big demographic gaps in who is seeking out information about what’s going on and how to respond. “On days like this, we actually see evidence that most folks are seeking out information,” Burke told me, “We can look at Google searches in English, we can look at Spanish, we can look in different zip codes. And we see pretty similar searches. Folks notice that things are bad, and they search for information.”
What people can do with that information is where the disparities start to show up.
There are essentially two levels of response to the kind of smoke New York is experiencing now or California has experienced in the past few years: whether you’re inside or outside, and what’s happening to the air inside your home or another building.
Burke’s research has shown that even indoor air quality can still be quite bad during a wildfire — something that is at least anecdotally confirmed today (I am writing this from my bedroom. My office and living room have older, leakier windows and have been abandoned to the smoke).
“Indoors, especially at the levels that New York City is seeing today, you'll see substantial infiltration of smoke into indoor environments. And so you need active mechanical filtration to get the rest of that smoke out,” Burke said.
Citing data from indoor air monitors sold by Purple, which then creates maps of air quality, Burke warned that “right now in New York, I was just looking, they're quite high,” referring to particulate concentration, “so I think that should make us pretty worried about how much of this stuff gets inside and for those who can to really double down on filtration.”
That’s typically achieved by buying air filters, which can run up to hundreds of dollars per device and may require multiple devices in a single home. There can also be runs on these devices during smoke events. My local hardware store, for example, was out of them and Amazon wasn’t delivering several recommended brands until Friday.
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When Burke and a team of researchers analyzed air quality data in the Bay Area in 2020, they found that concentrations of particulate matter inside homes were not related to how smokey it was outside. The homes they looked at "experienced nearly identical daily outdoor concentrations" on bad smoke days, but indoor pollution was "starkly different." Some homes saw concentrations of particulates more than five times the World Health Organization recommended limit while others were able to keep the concentration levels at one third the WHO limit.
Burke and the researchers found that wealthier households “can more easily stay home, are more likely to seek information on protective technology, and are more likely to own indoor pollution monitors.” In short, the public health advice you’re hearing now from elected officials is more likely to be followed — and easier to follow — for the wealthy.
Burke pointed to programs in California that provide air filters to low-income households as well as to ways people could construct their own filters. All you need is a fan and some MERV filters. “it works surprisingly well,” Burke said.
He also pointed to the need to outfit schools and homeless shelters with filtration. “We're going to need to make those investments. Of course, we can't do that today. But this will happen again, and we could be more prepared.”
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A conversation with Biao Gong of Morningstar
This week’s conversation is with Biao Gong, an analyst with Morningstar who this week published an analysis looking at the credit risks associated with offshore wind projects. Obviously I wanted to talk to him about the situation in the U.S., whether it’s still a place investors consider open for business, and if our country’s actions impact the behavior of others.
The following conversation has been lightly edited for clarity.
What led you to write this analysis?
What prompted me was our experience in assigning [private] ratings to offshore wind projects in Europe and wanted to figure out what was different [for rating] with onshore and offshore wind. It was the result of our recent work, which is private, but we’ve seen the trend – a lot of the big players in the offshore wind space are kind of trying to partner up with private equity firms to sell their interests, their operating offshore wind assets. But to raise that they’ll need credit ratings and we’ve seen those transactions. This is a growing area in Europe, because Europe has to rely on offshore wind to achieve its climate goals and secure their energy independence.
The report goes through risks in many ways, including challenging conditions for construction. Tell me about the challenges that offshore wind faces specifically as an investment risk.
The principle behind offshore wind is so different than onshore wind. You’re converting wind energy to electricity but obviously there are a bunch of areas where we believe it is riskier. That doesn’t mean you can’t fund those projects but you need additional mitigants.
This includes construction risk. It can take three to five years to complete an offshore wind project. The marine condition, the climate condition, you can’t do that [work] throughout the year and you need specialized vehicles, helicopters, crews that are so labor intensive. That’s versus onshore, which is pre-fabricated where you have a foundation and assemble it. Once you have an idea of the geotechnical conditions, the risk is just less.
There’s also the permitting process, which can be very challenging. How do you not interrupt the marine ecosystem? That’s something the regulators pay attention to. It’s definitely more than an onshore project, which means you need other mitigants for the lender to feel comfortable.
With respect to the permitting risk, how much of that is the risk of opposition from vacation towns, environmentalists, fisheries?
To be honest, we usually come in after all the critical permitting is in place, before money is given by a lender, but I also think that on the government’s side, in Europe at least, they probably have to encourage the development. And to put out an auction for an area you can build an offshore wind project, they must’ve gone through their own assessment, right? They can’t put out something that they also think may hurt an ecosystem, but that’s my speculation.
A country that did examine the impacts and offer lots of ocean floor for offshore is the U.S. What’s your take on offshore wind development in our country?
Once again, because we’re a rating agency, we don’t have much insight into early stage projects. But with that, our view is pretty gloomy. It’s like, if you haven’t started a project in the U.S., no one is going to buy it. There’s a bunch of projects already under construction, and there was the Empire Wind stop order that was lifted. I think that’s positive, but only to a degree, right? It just means this project under construction can probably go ahead. Those things will go ahead and have really strong developers with strong balance sheets. But they’re going to face additional headwinds, too, because of tariffs – that’s a different story.
We don’t see anything else going ahead.
Does the U.S. behaving this way impact the view you have for offshore wind in other countries, or is this an isolated thing?
It’s very isolated. Europe is just going full-steam ahead because the advantage here is you can build a wind farm that provides 2 or 3 gigawatts – that’s just massive. China, too. The U.S. is very different – and not just offshore. The entire renewables sector. We could revisit the U.S. four or five years from today, but [the U.S.] is going to be pretty difficult for the renewables sector.
What I’m hearing from developers and CEOs about the renewable energy industry after the Inflation Reduction Act
As the Senate deliberates gutting the Inflation Reduction Act’s clean electricity tax credits, renewable energy developers and industry insiders are split about how bad things might get for the sector. But the consensus is that things will undoubtedly get worse.
Almost everyone I talked to insisted that solar and wind projects further along in construction would be insulated from an IRA repeal. Some even argued that spiking energy demand and other macro tailwinds might buffer the wind and solar industries from the demolition of the law.
But between the lines, and beneath the talking points and hopium, executives are fretting that lots of future investments are in jeopardy. And the most pessimistic take: almost all projects will have their balance sheets and time-tables impacted in some way that’ll at minimum increase their budget costs.
“It’s hard to imagine, if the legislation passes in its current form, that it wouldn’t impact all projects,” said Rob Collier, CEO of renewable energy transaction platform LevelTen.
Even industry analysts with the gloomiest views of the repeal say there’s plenty of projects that will keep chugging along and might even become more valuable to investors if they’re close enough to construction or operation. This aligns with recent analysis from BloombergNEF, which found the House bill would diminish our nation’s renewables build-out – but not entirely end its pace.
“The more useful way to break down which project may be hit the hardest is where the projects are going to fall in their development life-cycle,” Collier said. “Projects that have either started construction or have the ability to start construction … are going to very likely rise in terms of their appeal and attractiveness and those projects will be at a premium, if they’re able to skate through the legislative risk and qualify for tax credits.”
There is a more optimistic industry view that believes increased project costs will just be passed along to consumers via higher electricity prices. The American people will in essence have to pick up the tab where the federal tax code left it. Optimists also cite the increased use of power purchase agreements, or PPAs, between renewables developers and entities who need a lot of electricity, like big tech companies. By signing these PPAs, buyers are subsidizing the construction of projects but also insulating themselves from the risk of rising electricity prices.
The most bullish perspective I heard was from Nick Cohen, the CEO of Doral Renewables, who told me deals like these combined with rising premiums for quick energy on the grid may obviate lost credits in a “zero-incentive environment.”
“It’s not the end of the world,” Cohen told me. “If you’re in construction or you’re going to be in construction very soon, you’re fine.”
But Collier called Cohen’s prediction an “experiment” in customers’ willingness to pay for new energy: “If we’re talking about 40%, 50%, 60% of a project’s capital stack now being at risk because of tax credits, those are pretty large price increases.”
I spoke to multiple companies that have been inking massive deals as this legislation has progressed — although many were not nearly as sanguine about the industry’s future prospects as Doral. Like rPlus Energies, which disclosed last week that it closed a commitment for more than $500 million in tax equity investments for a solar and storage project in Utah. rPlus CEO Luigi Resta told me that the legislation “certainly has posed concern from our investors and from the organization” but the project was so far along that the tax equity investment market wasn’t phased by the bill.
“Many people in my company, myself included, have been doing this for more than 20 years. We’ve seen the starts and stops related to ITC and PTC in solar and wind, in multiple cycles, and this feels like another cycle,” Resta told me. “When the IRA passed, everybody was exuberant. And now the runway looks like it may have a cliff. But for us, our mantra since the beginning of the year has been ‘proceed with caution, preserve and protect.’”
However, crucially, it is important to focus on how that caution looks: Resta told me the company has completely paused new contracting while the company is completing the projects it is currently developing.
One government affairs representative for a large and prominent U.S. renewables developer, who spoke on the condition of anonymity to preserve relationships, told me that “whatever rollback occurs will just result in higher electricity prices over time.” In the near term, the only language that would truly gut projects in progress today would be “foreign entity of concern” restrictions that would broadly impact any component even remotely connected to Chinese industries. Similar language all but kneecapped the entire IRA electric vehicle consumer credit.
“It included definitions of what it means to be a foreign company that were really vague,” the government affairs representative said. “Anyone who does any business with China essentially can’t benefit from the credit. That was a really challenging outcome from the House that hopefully the Senate is going to fix.” If this definition became law, this source said, it would be the final straw that “freezes investment” in renewable energy projects.
Ultimately, after speaking to CEO after CEO this week, I’ve been left with an impression that business activity in renewables hasn’t really subsided after the House bill passed, and that it’ll be the Senate bill that undoubtedly defines the future of renewable energy for years to come.
Whether that chamber remains the “cooling saucer” it once was will be the decider.
At a conference in New York, solar and wind developers warn of spiking electricity prices if IRA tax credits are cut.
As the renewable energy industry fights for relief from the House reconciliation bill’s harsh tax credit phaseouts, its members have coalesced around a dire and pragmatic message: America needs electricity, we’re the only ones who can provide it quickly, this bill will make that harder — and it’s electricity consumers who will have to pay the price.
“Now we have a different paradigm,” Jim Murphy, the chief executive officer of the energy developer Invenergy said Thursday at a conference hosted by the renewables trade group ACORE. Whereas in previous decades renewables largely replaced retiring fossil plants on the grid, today, “we need it all, and we need it all as fast as we can get.”
Even if customers want gas-fired power plants, the developers that build them likely can’t get them up and running until near the end of the decade. “We’re getting a lot of customer inquiries for gas-fired, as well,” Murphy said. “We can’t deliver that immediately the way we can deliver renewables immediately. 90% of what we have in the queue is renewables. Gas projects won’t be ready until the end of the decade.”
Sitting beside Murphy on the same panel, Sandhya Ganapathy, chief executive of EDP Renewables North America, described renewable deployment in the coming years as “not about ideology,” or even “one technology being better than the other.” Instead, “this is about pragmatism,” she said. “What does it take for the economy to be resilient? What does it take for the economy to be dominant out there?”
The answer, Ganapathy said, was whatever pushed electrons onto the grid fastest.
I heard the same idea repeated over and over on the panels I attended and from the people I spoke to: What makes renewables matter is how they serve the grid’s needs now, not how they help reduce emissions.
“For 25 years, what has happened in this industry is the retirement of coal plants, and to a lesser extent gas plants, and then the replacement of that capacity by renewables. That’s really the industry that we’ve all been part of,” Ted Brandt, the chief executive of Marathon Capital, said on Wednesday. “Right now we’re at an inflection point where we’re running out of retirements.”
The big buyer is a large technology company looking to power its data centers, Brandt said, and it’s willing to pay up.
“What hyperscalers really believe is that the acute constraint to AI and cloud is all about power,” Brandt said.
Though demand is high, there are roadblocks and costs that developers have to deal with even before worrying about the future of the Inflation Reduction Act — tariffs, high demand for scarce components such as transformers, interconnection and permitting delays. With tax credits of at least 30% (and often higher) possibly going away, the only way to solve the equation between high demand and high development costs is prices going up, Debbie Harrison, a partner at McDermott Will & Emery, told me.
One might wonder, then, exactly what the developers are so worried about. After all, if there’s rising demand for your product, why do you need a subsidy?
When I put this question to ACORE Chief Executive Ray Long, he emphasized that such a long pipeline of projects in response to demand from technology companies and utilities has accumulated in less than three full years since the IRA’s enactment.
“We have a two-and-a-half-year-old set of policy that was passed by the House and the Senate, signed by the president, that enabled and said to investors — and developers, and manufacturers, and everybody else — use these tax credits because we want you to come in and build and invest in everything that you’re doing,” Long told me.
“We need to be in a place in the United States where policy actually means something, that the people who are spending the money and doing all this can rely on,” Long went on. “The IRA is going to change. Everybody knows that if it’s going to change. It needs to be done in a responsible and balanced way that does not just discard all the investment.”
In the near term, moving up the deadline to qualify for clean energy tax credits to 60 days after the signing of the bill, as proposed in the House version, could cause a rush of construction starts. But that’s a thin silver lining, industry executives and analysts argued. Many projects simply may not happen at all.
Projects that would be eligible for tax credits “currently make up the vast majority of planned U.S. utility-scale electricity capacity additions,” analysts from Evercore wrote in a separate report released Wednesday. If the credits are “both rapidly terminated and rendered unworkable,” first by early phaseout and then by foreign entity of concern provisions (more on those in a minute), it would mean that many projects no longer pencil out economically, thus endangering “the United States’ ability to affordably meet growing electricity demand from data centers and other end users.”
Citing data from the U.S. Energy Information Administration, the Evercore analysts estimated that over 80% of the planned capacity additions could be eligible for clean energy tax credits, with 150 gigawatts of solar, battery, and wind projects planned but not yet under construction.
The foreign entity of concern provisions require tax credit recipients to isolate their business relationships and supply chains from a handful of U.S. adversaries, most notably China. This “introduces massive complexity” and is “very likely unworkable,” the Evercore analysts said. The FEOC provisions “would throw ongoing projects into uncertainty around post-2028 credit eligibility.”
The requirement to eliminate not just all Chinese companies, but also all Chinese “influenced” companies from the renewables supply chain would create numerous points of potential noncompliance for denying tax credits. And unlike the foreshortened timelines for starting construction on new projects in the House bill, the FEOC rules could mean “immediate uncertainty” around whether existing generation will remain eligible for credits they’d planned to claim through 2028 and beyond.
Executives at the ACORE conference were properly alarmed.
“FEOC is written so broadly because of components and subcomponents,” Murphy said Thursday. “The supply chain can not support that, and won’t be able to support that for several years. It’s just an unworkable provision.”