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Can the state decarbonize without bailing out its dicey projects?
This hasn’t been a good month for the offshore wind industry in New York, but the state is pushing ahead to try to reach its aggressive decarbonization goals. Governor Kathy Hochul announced on Tuesday contracts for three big offshore wind projects slated to go into operation in 2030 and bring four gigawatts of renewable energy to the grid.
As evidenced by the attendance of a senior White House official, Ali Zaidi, at the announcement, both the Hochul and Biden administrations are excited about New York’s offshore wind plan — or at least committed to making it work, despite the challenges and setbacks it has faced. And you can see why: Combine the three projects announced Tuesday with the four previously contracted out and the total is over eight gigawatts by 2030, almost the state’s goal of nine gigawatts by 2035.
But plans written down on paper are not steel in the sea and turbines in the air.
Up and down the East Coast, many states’ offshore wind projects are seeing rapidly accelerating costs from higher interest rates and supply chains that are throwing their plans to decarbonize their electricity sectors into doubt. Some projects, like Commonwealth Wind in Massachusetts, were mothballed while others, like Ocean Wind 1 in New Jersey, are eligible for fresh infusion of subsidies thanks to action by the legislature.
New York itself has so far failed to follow New Jersey’s lead. Two weeks ago, the state’s utility regulators denied a request by offshore wind developers to have their existing contracts readjusted for their new reality. An industry group warned the denial would likely lead to canceled projects, imperiling the state’s decarbonization goals.
So I was curious, does Hochul’s plan tackle the cost issue at all? It turns out it does, but not in a way that will rescue already troubled projects.
Before Tuesday’s announcement, she released a “10-point action plan” for renewables that included a provision to “launch an accelerated renewable energy procurement process for both offshore and onshore renewable energy projects, aiming to backfill any contracted projects which are terminated.”
These new contracts would have mechanisms to address rising costs without special payments or cancelling the deals. In short, the state’s strategy to address rising costs largely rests on coming up with new contracts that allow costs to rise (or are just more expensive in the first place), as opposed to going back and adjusting deals it has already struck with developers.
“Whereas in the earlier projects developers bore the risk of cost increases, in this current solicitation prices would be somewhat lower because risk is somewhat shifted to ratepayers,” Fred Zalcman, the director of the New York Offshore Wind Alliance, told me.
Emily Cote, a spokesperson for New York State Energy Research and Development Authority told me that the “strike price” of $145 per megawatt (an estimate of the all-in cost of the project divided by megawatt-hour — basically, it’s what developers are guaranteed to get paid) for the three announced is “approximately 28 percent higher” compared to the four existing projects, but 13 percent less than the what developers were asking for in inflation adjustments.
“This award group will also support a comparable amount of [offshore wind] development (4 gigawatts of new offshore wind projects) at a lower cost to ratepayers than the amount requested by these companies to the [New York state regulators],” Cote said.
Outside analysts think this system will work, at least for the new developers. Tancrede Fulop, an analyst at Morningstar, estimated that one of the three developers selected in this round, Community Ocean Wind (a consortium of the German energy company RWE and the utility National Grid), would ultimately get a strike price of $171 per megawatt after adjustments, compared to the $110 per megawatt that Orsted and Eversource’s Sunrise Wind received.
Community Ocean Wind’s deal, Fulop wrote, “impl[ies] good value accretion.” Morgan Stanley analysts wrote that the deal was “supportive of value creation even at conservative assumptions.”
But whether that approach will work to meet the state’s goals remains to be seen. All four of the existing wind projects may not be viable, their developers warned after the state decided not to adjust their contracts. While it’s possible the projects could end up being cancelled and bid on again under the new, more flexible contract arrangements, that could still add up to serious delays.
“The proponents of earlier projects have made clear that without relief ... the projects were in economic peril,” Zalcman said.
It’s also unclear if New York’s existing offshore wind developers will be around for a re-start.
Two of the groups currently building wind projects in New York — Equinor and BP plus Orsted and Eversource — bid in the latest round, but neither were picked. Both groups had asked for a version of the inflation adjustment present in this round to be retroactively applied to their current projects. Their rejection was an ominous sign for their chances of that happening.
Meanwhile, one of the winning bidders includes Rise Light & Power, which had actually publicly opposed the adjustments when much of the renewable industry was united in requesting them. Observers interpreted the move as Rise making a play for future renewable energy deals with the state.
“We are disappointed that New York did not select Sunrise Wind 2 in its latest offshore wind solicitation. Sunrise Wind 2 prioritized our commitment to financial discipline while delivering new economic activity and local jobs,” an Orsted spokesperson told me, noting it would “continue to evaluate opportunities.”
The spokesperson also reiterated that its South Fork Wind project’s construction is “underway and ongoing” with “turbine installation expected to begin imminently,” and electricity actually expected to flow by the end of the year. But the spokesperson also noted that for Sunrise Wind, a 924 megawatt project, its “viability and therefore ability to be constructed are extremely challenged without this adjustment.”
“We’re optimistic, but if experience tells us anything, these are exceedingly challenging projects that require a number of different elements coming together. It won’t be easy,” Zalcman said.
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Climate shouldn’t be only a story for documentaries.
Paranormal: Caught on Camera is not the kind of television show you’d typically expect to read about in a research paper. Recent episodes include “Haunted Doll Bites Child” and “UFO Takes Off in Argentina”; a critic once described it as unsuitable for viewers who have developed “some powers of critical thought.” But credit where credit is due: Caught on Camera cites “climate change” as a possible cause of increased sightings of the Loch Ness monster.
This, alas, is the kind of meager victory the climate movement is often forced to celebrate.
According to research by USC Annenberg’s Norman Lear Center, there were just 1,228 mentions of “climate change” in the nearly 200,000 hours of unscripted TV that aired in the U.S. in the six months between September 2022 and February 2023. (Fifty-eight of those mentions were on “paranormal/mystery” programs, including Caught on Camera.) The situation is even worse for scripted film and TV: Between 2016 and 2020, just 0.6% of 37,453 scripts used the words “climate change” during their runtime. While there are notable exceptions — An Inconvenient Truth won the 2007 documentary Oscar, and The Day After Tomorrow and Don’t Look Up were mainstream hits — climate mostly remains off-screen even as nearly half the population says it has affected their lives.
Starting a Climate Film Festival, then, might seem foolish — because what would you even program? But New Yorkers are about to find out: The inaugural CFF will open Friday with a sold-out screening of the documentary Searching for Amani at the Explorer’s Club in Manhattan, with the festival’s 58 other films to be screened primarily at the Firehouse Cinema over Saturday and Sunday in a de facto kick-off to Climate Week. “Once we started digging, we found that there were an incredible number of these stories being told, but no one was really bringing them together under this rubric,” Alec Turnbull, who co-founded CFF with his wife, J. English Cook, told me.
The supply, however, is noticeably lopsided. CFF received “well over 300 submissions” during its open call for movies this past spring, according to Turnbull — enough that he and the volunteer screeners were able to winnow their broad interpretation of a “climate movie” from anything with “an environmental lens that didn’t have explicit climate themes” to movies specifically about climate.
In the end, though, unscripted documentary-style films and shorts came to dominate roughly 63% of the CFF slate. Only two of the program’s full-length features — the found-footage film Earth II and DreamWorks’ animated movie The Wild Robot — are fictional climate narratives.
This disparity might lead to the impression that there are too many climate documentaries in the world. (Seriously, how many more movies and shows can be made about regenerative farming?) While that isn’t the case — at least compared to something like the oversaturated true crime genre — documentary filmmaker might have more access to the subject than their peers in Hollywood because the medium has a “long history of addressing social issues,” Erica Lynn Rosenthal, the director of USC Annenberg’s Norman Lear Center, told me.
At least some mismatch is also likely due to “self-selection bias,” according to Turnbull. He told me that narrative filmmakers might not have submitted to something called the “Climate Film Festival” simply because they “don’t think about the work they’re doing as a climate story.” Another reason might just be endemic to film festivals. “Documentaries are really great for the festival circuit, for impact screenings, and for coupling with resources and workshops,” which boost their visibility even if they “don’t always make it to a broader audience” afterward, Tehya Jennett, whose short scripted horror film “Out of Plastic” is playing at CFF, told me.
According to the Norman Lear Center, however, nearly half of mainstream audiences said they want to see fictional stories that “include climate-related storylines” on screen. That’s far from trivial. “We know from decades of research that stories have the power to shift people’s hearts and minds and move them to action on a variety of topics, whether it’s health behavior or social issues,” Rosenthal said.
Sam Read, a CFF jury member and the executive director of the Sustainable Entertainment Alliance, an advocacy consortium that works to reduce the entertainment industry’s environmental impact, confirmed that the demand for climate narratives “currently outstrips the supply.” But he stressed to me that what makes a climate moment in a script doesn’t have to be something preachy, moralistic, alarmist, or even terribly overt, pointing to examples like the most recent season of Hacks, which included a bottle episode about climate change, and True Detective: Night Country, with its environmental and Indigenous plotlines.
“If you’re writing a sitcom and the mom is an office worker, could you make the mom a solar panel technician?” he asked, adding: “There are ways to both help people see what a clean energy future can look like while also exploring how this is affecting communities and how people are responding to it.”
Scripted examples, though, remain relatively rare. In the Norman Lear Center’s research, just 10% of the thousands of mentions of extreme weather in film and TV shows actually made any sort of link to global warming, perhaps because producers or executives worry that referencing climate change is political and might estrange half their audience. “The idea that [climate change] is going to alienate or turn off audiences is really an outdated perception,” Rosenthal said. Still, it’s even harder to push for experimentation and risk-taking when the film industry at large is struggling. And despite how it might look at CFF, it’s the documentarians who have been hit extra hard by the post-COVID turbulence in the movie world.
Of course, none of this is to say that documentaries are any less creative, ambitious, or worthy of being in a festival slate than their scripted counterparts. In fact, the Climate Film Festival’s centerpiece, The Here Now Project, is a documentary entirely composed of found footage of real people filming weather disasters during 2021. “Two people in the film actually say, ‘This is a horror movie,’” Greg Jacobs, who co-directed the documentary with Jon Siskel, told me.
Maybe it doesn’t really matter, then, in what exact form these stories are getting told: in a world with a changing climate, truth and fiction are equally strange.
Constellation Energy inked the deal, but the whole industry stands to benefit.
After Three Mile Island, what’s next?
That’s the question the nuclear industry and those who follow it were asking after news broke Friday that Constellation Energy was planning to reboot the facility’s Unit 1, which shut down in 2019. The deal is being anchored by Microsoft, which will purchase the power in order to balance out the emissions generated by its facilities in the PJM Interconnection, the multi-state power market that includes Pennsylvania. The plant is expected to be operational by 2028, Constellation said, and will be called the Crane Clean Energy Center, in honor of the company's former chief executive.
The demand for non-carbon-emitting power — and all power — has grown since Unit 1 closed and is expected to continue to in the future, especially as tech companies like Microsoft seek to build more datacenters while complying with their pledges to power their operations without greenhouse gas emissions.
The days of nuclear power plants shuttering not because of old age, safety concerns, or local opposition, but because of the economics of subsidized wind and solar and cheap natural gas, are likely over. New York, New Jersey, Connecticut, and Illinois all provided subsidies to their state’s nuclear fleet as plants were threatened with closure. California’s Diablo Canyon plant has seen its decommissioning delayed and received federal aid to help stay open. At a time when states representing a big chunk of US power consumption have aggressive emissions reduction goals and worries about power reliability, money is often easily found to keep nuclear plants open.
And now much of that cash might be coming from the private sector, specifically technology companies and independent power producers like Constellation.
“What we’re seeing is the fruits of previous labors coupled with the first-time-in-a-generation demand signals we had not yet seen,” Brett Rampal, a senior director at Veriten, an energy advisory company, told me.
These companies want the 24/7 carbon-free power that nuclear can uniquely provide. The federal government and several state capitals are also committed to bolstering the economics of America’s largest non-greenhouse-gas emitting, firm power source.
The Inflation Reduction Act contains considerable subsidies for both investing in and producing nuclear energy, as well as tools to finance nuclear power.
If history is any indication, having public and corporate policy rowing in the same direction can provide a huge boost for clean energy. For wind and solar, the two biggest demand boosters pulling forward their adoption has been technology companies wanting to buy clean power and federal subsidies for their construction and operation.
The structure Microsoft is using to purchase this power, the corporate power purchase agreement, was pioneered by Google in the late 2000s as a way for technology companies to support the development of clear power even when they couldn’t directly consume it. Now these tools are being used to support nuclear power. Constellation said Friday that the deal was the largest single power purchase agreement in history. According to figures worked out by Rampal, the deal will lead to some 135 terawatt-hours of generation over 20 years (a bit short of the annual electricity generation of Argentina), generating some $13.5 billion of revenue.
“Nobody would be moving forward with these projects,” explained Rampal, without tax credits or “extremely favorable loan support from the Loans Program Office.”
The other shuttered nuclear plant looking to restart, Michigan’s Palisades, has a $1.5 billion loan guarantee from the LPO.
“Constellation will be spending $1.6 billion of its own money to restart the plant – no state or federal aid. We may look at whether to seek a DOE loan for some of the financing, but that is not a given and not needed to make the project work. And even in that scenario, all the money is paid back in full. It’s just a slightly better interest rate,” Paul Adams, a Constellation spokesman, told me.
“The IRA contained nuclear production tax credits, which any nuclear plant is eligible for. The Crane Clean Energy Centerwould be no different once it is up and operating. That tax credit simply provides a floor price, in essence, to support nuclear production,” Adams said.
Almost immediately after the deal was announced attention turned to the Duane Arnold Energy Center plant in Iowa, which shut down in 2020 but whose owner, NextEra, has said could be a candidate for being relaunched.
After that, Rampal said, “there are tons of conversations around power uprates,” which is when nuclear plant operators install new equipment or alter the operation of existing plants to make them more powerful.
According to one study by Massachusetts Institute of Technology professor Koroush Shirvan, uprates could increase the capacity of America’s nuclear fleet by 50%. Actual uprates tend to be far more modest (and the paper acknowledges such dramatic uprates “are aspirational and may not be practical”). The last 10 uprates have averaged 1.6%, according to data collected by the Nuclear Energy Institute.
“Many more nuclear plants could be more aggressive with uprates. There’s technology out there that could produce more power,” Mark Nelson, managing director at Radiant Energy Group, told me.
The Loan Program Office can fund these upgrades and they will benefit from tax credits alongside other existing nuclear plants.
Microsoft is not the first technology company to get into the nuclear game, although many observers have long suspected it would. Alongside Google and Nucor, the company has committed to nurturing so-called clean-firm generation to help power operations on a 24/7 basis in a way that existing renewable generation cannot. The company has made several notable hires of nuclear industry veterans in the past few years.
“There’s nowhere in the USA where you can suddenly get power needed by Microsoft while making it additional,” besides bringing new nuclear power onto the grid, Nelson told me, referring to the concept that to fully prevent carbon emissions from new corporate activity, the non-carbon-emitting energy acquired has to be new to the grid. “Not just 24/7, but 24/7 at one location.”
Microsoft’s nuclear deal is also the second major one inked by a technology company just this year. Amazon purchased a data center site co-located at another Pennsylvania nuclear plant in March. That plan to link up a data center with the Susquehanna nuclear power plant has been controversial as it is “behind-the-meter,” meaning it would be powering Amazon’s facility directly, not providing power to the grid under a power purchase agreement like Microsoft will be doing with Constellation. Some argue it would still shift costs to others on the grid. The Amazon deal also does not provide any new clean power, it simply reallocates it to a big customer.
But there are only so many existing nuclear power plants that could uprate or recently-shut plants that could restart, but whatever new nuclear power does come online, there will likely be a technology company eager to scoop it up.
“We need to stamp out nuclear plants of designs that work now and lock in new construction,” Nelson told me. “We’re in a time of extreme scarcity.”
The CEO of Cleveland-Cliffs cast doubt on a new mill funded in part by $500 million in federal grants. What does that say about corporate commitments to decarbonization?
American steelmaker Cleveland-Cliffs cast doubt last week on the country’s most important green steel project. Chief executive Lourenco Goncalves suggested in an interview that the company was considering passing up $500 million of federal grants to build a new hydrogen-powered mill at its Middletown Works facility in Ohio, blaming fears that there won’t be buyers for the lower-carbon product, which he claimed could cost 40% more to produce than steel made by conventional methods. Cleveland-Cliffs later issued a short press release walking back Goncalves’s comments and reaffirming its commitment to the “transformational” project.
It’s, of course, possible that Goncalves was just expressing personal concerns that do not reflect the company’s official position. But either way, those doubts were not only real, but revealing about our prospects for decarbonization by mid-century.
First, the episode is a stark indictment of the many attempts to create demand for cleaner products by conjuring up corporate ambition on climate change. The entire rationale for cajoling corporations to quantify the emissions in their supply chains, known as Scope 3 emissions, has been to pressure them into sourcing greener inputs. The steel sector produces 7% to 9% of emissions globally: if it were a country, it would be the world’s third-biggest emitter after the United States and China. And steel represents the biggest single source of Scope 3 emissions for many companies in other industries — on the order of 40% to 45% for auto companies and as high as 85% for construction, for example. This makes steel a litmus test for whether Scope 3 footprinting and corporate commitments to green their supply chains are delivering as promised.
Worse, these types of steel buyers have ostensibly already been organized to show demand for green inputs. Before he stepped down as President Biden’s special envoy for climate, one of John Kerry’s cornerstone initiatives was the First Mover’s Coalition, an effort to secure advanced purchasing commitments from corporate buyers for green steel and other industrial materials. The fact that the coalition’s members – many of which are major steel buyers like Ford and General Motors – were not publically jumping all over the outputs of Cleveland-Cliffs’s heavily subsidized project is itself troubling. After all, while the green premium on steel may be significant, the material is typically a relatively cheap input into much more expensive, high value-added products.
Goncalves’s comments also underscore how uncomfortable incumbent industries perceive the jump to new, low-carbon products to be. Assume that the new Cleveland-Cliffs mill does in fact pencil out at the cost originally expected and that it has a reasonable prospect of finding offtakers. The company still says it has to invest $1.1 billion to complete the project. It is not really enough, in the logic of the market, for that investment to be profitable: It has to compete against the opportunity cost of alternative investments, including manufacturing conventional steel. Even if both outputs would find buyers, conventional steel may still be more profitable.
Now imagine the company is looking at the larger direction of the industry. If they don’t do this project, they may well forestall a shift to cleaner steel and be able to keep the sector chugging along more profitably for a little longer. Complete the project, and they may bring about changes that, while maybe inevitable, are uncomfortable for the industry. After all, Cleveland-Cliffs and U.S. Steel produce the vast majority of American primary steel; they are steel production in the United States – and so they get to shape its transformation.
This behavior is similar to that of the American car industry. U.S. automakers have largely conceded that electric vehicles will eventually overtake their combustion-engine counterparts, but they are still clinging to the better margins that gas-powered SUVs provide. The short-term profits are hard to pass up, even if it means getting farther behind EV first-movers like Tesla, BYD, and Hyundai. Once the technology pathway to a sector’s transition becomes clear — even when it feels inevitable — incumbents may still have an extremely hard time ripping off the bandaid.
It’s as if decarbonization is a massive marshmallow test for corporate America, and it’s failing.
There are essentially two ways out of this dilemma.
The first is that society will need to rely on new entrants to each sector to disrupt the status quo. Companies developing entirely novel steelmaking technologies like Boston Metals become more important to the steel transition than Cleveland-Cliffs, just as Tesla has been to the American EV market. Sublime Systems may be vital for green cement, just as Fervo Energy may be for enhanced geothermal. The problem with this approach is that it is extremely expensive to build projects in heavy industries like steel, so most pathways assume that even technology developed outside of the incumbents will get deployed by them (Sublime just this week announced a tie-up with cement giant Holcim).
This leads to option two: comprehensive industrial policy. Cleveland-Cliffs may want to see not only that one green project pencils out, but that strategic opportunities and risks favor going green. This might means measures like implementing a U.S. carbon border adjustment mechanism (CBAM) to prevent foreign competitors from dumping dirty steel, the government guaranteeing offtake using public procurement programs like Buy Clean and Contracts for Difference, and ultimately policy sticks like carbon pricing that send a long-term signal favoring clean products over polluting ones, instead of relying on corporate social responsibility for a demand signal.
To decarbonize the economy, we will probably have to rely both on more robust industrial policy and the sector disruption from new entrants. While the story of this Cleveland-Cliffs project is far from over, the company’s apparent hesitancy, like that of U.S. automakers, may be teaching us a lesson that we have to learn quickly if we want to see decarbonization any time soon.