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A year and a half ago, President Biden signed the Inflation Reduction Act, the biggest climate law in American history — and arguably in world history. The law will spend an estimated $500 billion in grants and tax credits to incentivize people and businesses to switch from burning fossil fuels to using cleaner, zero-carbon technologies.
That’s the goal, at least. But is the IRA actually working? Now, 18 months after its passage, we’re starting to be able to answer that question. A new report from a coalition of major energy analysts — including MIT, the Rhodium Group, and our cohost Jesse Jenkins’ lab at Princeton — looks at data from the power and transportation sectors and concludes that yes, the law is starting to decarbonize the American economy.
But it isn’t working in the way many people might expect, because while electric vehicles are on track to meet the IRA’s climate goals, the power sector is not.
That’s the opposite of what you might think from reading the popular press, which has bemoaned an alleged slowdown in new EV sales. But the new report finds that the transportation sector actually came in at the upper end of what modelers expected to see this year. About 9.2% of new cars sold last year in the United States were zero-emissions vehicles; after the IRA passed, modelers had expected EVs to come in anywhere from 8.1 to 9.4% of sales.
But the power sector is lagging behind what modelers had expected to see. While the three groups had projected that 46 to 79 gigawatts of new zero-carbon power would come online last year, only 32.3 gigawatts of new capacity actually did. That is primarily due to a drop in new onshore wind projects, which fell below the installation levels achieved in 2020 and 2021. While solar and batteries continued to go gangbusters, exceeding previous records, they could not make up for the drop in wind. That means that the power sector is not on track to cut emissions 40% by 2030, as compared to 2005 levels, as the bill’s supporters have hoped.
Jesse Jenkins, an energy systems expert and professor at Princeton University, and I dive into the details on the latest episode of Shift Key.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: First, let's do the moment of truth. Let’s just first get into the data. So in the power sector, what do we see?
Jesse Jenkins: What we see in the electricity sector is a new record set for zero carbon electricity generation and storage capacity additions. So that's new power plant and battery storage construction.
In aggregate, we saw over 32,000 megawatts or 32 gigawatts of new zero carbon generation and storage added to the U.S. grid in 2023. That's about a 32% increase from the rate in 2022. And it edges out a previous record that we saw in 2021 of about 31.6 gigawatts. So good news is we're setting new record growth rates in total in terms of wind and solar and battery additions.
Unfortunately, that does fall on the lower end of what we were projecting in most of the modeling results. We were looking for, on average, about 46 to 79 gigawatts, so call it 40 to 80 gigawatts on average of additions in 2023 and 2024. We fell short of the low end of that range at 32.3 gigawatts. So unless the pace accelerates substantially in 2024, we're probably going to fall a bit behind schedule in terms of capacity additions.
Meyer: And do we have a sense of what's driving that? Because I think that's a very surprising finding, that we're behind schedule in the power sector, where I think people feel pretty good generally about the pace of decarbonization. Or I think where the common wisdom, at least, is that the pace of decarbonization is like proceeding apace. What's driving this underperformance of the model?
Jenkins: So it's really the difference between solar and wind additions.
The solar sector added about 18.4 gigawatts of capacity in 2023. That's up massively from just about 11 gigawatts in 2022. It's about double what we had seen in 2020, which was kind of our reference when we were doing our modeling as we started the REPEAT project in 2021. And so that's looking encouraging and in fact is running ahead of schedule with the average pace of additions that we saw in REPEAT project results.
Batteries are growing way faster than we expected.
And that helps really make the most of those solar capacity additions because solar and batteries are kind of like peanut butter and jelly, they go together quite well. And that's because solar has this nice, regular daily fluctuation, right? From the sun rising and setting. And that pairs really well with batteries, which today in a way lithium ion batteries are best suited for, you know, only a few hours of storage. So they'll charge for three or four hours in the middle of the day when we've got an abundance of sun. And then they'll discharge in the evening to help meet the evening peak of demand when everybody's coming home from work.
The batteries basically helped shift the solar output from the middle of the day to hit that evening peak. And that's, that's really helpful. Where things are running behind schedule is really in the wind sector, where we only built about half of the peak rate, actually less than half that we've seen historically in 2023. Additions of wind power in 2023 were only about 6.3 gigawatts, and that's down from nearly 15 gigawatts in each of 2020 and 2021.
So that's a step backwards at a time when we should be smashing new record growth rates across all of these sectors. And that's giving me the biggest concern as we look at in the next couple of years.
Meyer: And that's, I mean, last show we talked about offshore wind and the troubles in offshore wind and how it seems like some big offshore wind projects that we thought might be coming online in the middle of this decade might not be coming online till the end of the decade. But when we talk about wind underperforming in terms of the whole country over the past year, we're really still talking about onshore wind. This is like big turbines in the middle of the Great Plains, not big turbines off the coast of New York, New Jersey, right?
Jenkins: That's right. Yeah, I think I don't think we had any significant offshore wind capacity additions coming in 2024. You know, most of that we were expecting would come in between 2026 and 2030 or 2035. So this is really a story about onshore wind, where if we look at the economics of onshore wind across the country, there's a tremendous number of sites that look very economic given the incentives provided by the Inflation Reduction Act.
And unfortunately, we're just not building out at the pace that would be economically justified. And that is really an indicator that there are a substantial number of other non-economic frictions or barriers to deployment of wind in particular at the pace that we want to see.
The full transcript is here.
This episode of Shift Key is sponsored by Advanced Energy United, KORE Power, and Yale …
Advanced Energy United educates, engages, and advocates for policies that allow our member companies to compete to power our economy with 100% clean energy, working with decision makers and energy market regulators to achieve this goal. Together, we are united in our mission to accelerate the transition to 100% clean energy in America. Learn more at advancedenergyunited.org/heatmap
KORE Power provides the commercial, industrial, and utility markets with functional solutions that advance the clean energy transition worldwide. KORE Power's technology and manufacturing capabilities provide direct access to next generation battery cells, energy storage systems that scale to grid+, EV power & infrastructure, and intuitive asset management to unlock energy strategies across a myriad of applications. Explore more at korepower.com — the future of clean energy is here.
Build your skills in policy, finance, and clean technology at Yale. Yale’s Financing and Deploying Clean Energy certificate program is a 10-month online certificate program that trains and connects clean energy professionals to catalyze an equitable transition to a clean economy. Connect with Yale’s expertise, grow your professional network, and deepen your impact. Learn more at cbey.yale.edu/certificate.
Music for Shift Key is by Adam Kromelow.
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Ambient Carbon is doing the methane equivalent of point source carbon capture in dairy barns.
In the world of climate and energy, “emissions” is often shorthand for carbon dioxide, the most abundant anthropogenic greenhouse gas in the world. Similarly, talk of emissions capture and removal usually centers on the growing swath of technologies that either prevent CO2 from entering the atmosphere or pull it back out after the fact.
Discussions and frameworks for reducing methane, which is magnitudes more potent than CO2 in the short-term, have been far less common — but the potential impact could be huge.
“If you can accelerate the decrease of methane in the atmosphere, you actually could have a much more significant climate impact, much faster than with CO2,” Gabrielle Dreyfus, chief scientist at the Institute for Governance & Sustainable Development, told me. “People often talk about gigatons of CO2 removal. But because of the potency of methane, for a similar level of temperature impact, you’re talking about megatons.”
Over the past year or so, this conversation has finally started to gain traction. Last October, the National Academies of Sciences, Engineering, and Medicine released a report on atmospheric methane removal, recommending that the U.S. develop a research agenda for methane removal technologies and establish methodologies to assess their impacts. Dreyfus chaired the committee that authored the report.
And one startup, at least — Denmark-based Ambient Carbon — is trying to commercialize its methane-zapping tech. Last week, the company announced that it had successfully trialed its “methane eradication photochemical system” at a dairy barn in Denmark, eliminating the majority of methane from the barn’s air. It’s also aiming to deploy a prototype in the U.S., at a farm in Indiana, by year’s end.
The way the company’s process works is more akin to point source carbon capture, in which emissions are pulled from a smokestack, than it is to something like direct air capture, in which carbon dioxide is removed from ambient air. Inside a dairy barn, cows are continually belching methane, producing high concentrations of the gas that are typically vented into the atmosphere. Instead, Ambient Carbon captures this noxious air from the barn’s ventilation ducts and brings it into an enclosed reactor.
Inside the reactor, which uses electricity from the grid, UV light activates chlorine molecules, splitting their chemical bonds to form unstable radicals. These radicals then react with methane, breaking down the potent gas and converting it into CO2, water, and other byproducts. The whole process mimics the natural destruction of atmospheric methane, which would normally take a decade or more, while Ambient Carbon’s system does it in a matter of seconds. Much of the chlorine gets recycled back into the process, and the CO2 is released into the air.
That might sound less than ideal. Famously, carbon dioxide is bad. This molecule alone is responsible for two-thirds of all human-caused global warming. But because methane is over 80 times as potent as CO2 over a 20-year timeframe, and since it would eventually break down into carbon dioxide in the atmosphere anyway, accelerating that inevitable process turns out to be a net good for the climate.
“The amount of CO2 produced by methane when it oxidizes has about 50 times smaller climate effect than the methane that produced it,” Zeke Hausfather, a climate scientist and climate research lead at Stripe, told me. “So you get a 98% reduction in the warming effects by converting methane to CO2, which I think is a pretty good deal.”
As he sees it, preventing methane emissions in the first place or destroying the molecules before they’re released, as Ambient Carbon is doing, is far more impactful than pursuing after-the-fact atmospheric methane removal. Because while CO2 can linger in the air for centuries — making removal a necessity for near-term planetary cooling — when it comes to methane, “if you cut emissions, you cool the planet pretty quickly, because all that previous warming from methane goes away over the course of a decade or two.”
Agriculture represents 40% of global methane emissions, the largest single source, making the industry a ripe target for de-methane-ization. Ambient Carbon’s tech is only really effective when methane concentrations are relatively high, the company’s CEO, Matthew Johnson, told me — which still leaves a large addressable market given that in many parts of the world, cows are mostly kept in dairy barns, where methane accumulates.
In its trial, Ambient Carbon’s system eliminated up to 90% of dairy barn methane at concentrations ranging from 4.3 parts per million to 44 parts per million. But while the system can theoretically operate at the lower end of that range, Johnson told me it’s only truly energy efficient at 20 parts per million and above. “It’s a question of cost benefit, because we could remove 99% [of the methane from dairy barns] but if you do that, that marginal cost is more energy,” Johnson explained, telling me that the company’s system will likely aim to remove between 80% to 90% of barn methane.
One reason methane destruction and removal technology hasn’t gained much traction is that capturing methane — whether from the atmosphere, a smokestack, or a ventilation duct — is far more challenging than capturing CO2, given that it’s so much less prevalent in the atmosphere. Atmospheric methane is relatively diffuse, with an average concentration of just about 2 parts per million, compared with roughly 420 parts per million for CO2. “I heard the analogy used that if pulling carbon dioxide out of the atmosphere is finding a needle in a haystack, pulling methane out of the atmosphere is pulling dust off the needle in that haystack,” Dreyfus told me.
Because of methane’s relative chemical stability, removing it from the air also requires a strong oxidant, such as chlorine radicals, to break it down. CO2 on the other hand, can be separated from the air with sorbents or membranes, which is a technically simpler process.
Other nascent approaches to methane destruction and removal include introducing chlorine radicals into the open atmosphere and adding soil amendments to boost the effectiveness of natural methane sinks. Among these options, Ambient Carbon’s approach is the furthest along, most well-understood, and likely also lowest-risk. After its successful field trial, “there is not much uncertainty remaining about whether or not this does the claimed thing,” Sam Abernethy, a methane removal scientist at the nonprofit Spark Climate Solutions, told me. “The main questions remaining are whether they can be cost-effective at progressively lower concentrations, whether they can get more methane destroyed per energy input. And that’s something they’ve been improving every year since they started.”
Venture firms have yet to jump onboard though. Thus far, Ambient Carbon’s funding has come from agricultural partners such as Danone North America and Benton Group Dairies, which are working with the company to conduct its field trials. Additional collaboration and financial support comes from organizations such as the Hofmansgave Foundation, a Danish philanthropic group, and Innovation Fund Denmark. Johnson told me the startup also has a number of unnamed angel investors.
Whether or not this tech could ever become efficient enough to tackle more dilute methane emissions — and thus make true atmospheric methane removal feasible — remains highly uncertain. Questions also remain about how these technologies, if proven to be workable, would ultimately be able to scale. For instance, would methane destruction and removal depend more on government policies and regulations, or on market-based incentives?
In the short term, voluntary corporate commitments appear to be the main drivers of interest when it comes to methane destruction specifically. “A lot of food companies have made public pledges that they’re going to reduce their greenhouse gas emissions,” Johnson told me. As he noted, ubiquitous brands such as Kraft Heinz, General Mills, Danone, and Starbucks have all joined the Dairy Methane Action Alliance, which aims to “accelerate action and ambition to drive down methane emissions across dairy supply chains,” according to its website.
The way Ambient Carbon envisions this market working, its food industry partners would be the ones to encourage farms to buy the startup’s methane-destroying units, and would pay farmers a premium for producing low-emissions products. This would enable farmers to cover the system’s cost within five years, and eventually generate additional revenue. Whether the food companies would pass the green premium onto consumers, however, remains to be seen.
But as with the carbon dioxide removal sector, voluntary corporate commitments and carbon crediting schemes will likely only go so far. “Most of what’s going to drive methane elimination is going to be policy,” Hausfather told me. Denmark, where Ambient Carbon conducted its first trial, is set to become the first country in the world to implement a tax on agricultural emissions, starting in 2030. Europe also has a comprehensive greenhouse gas reduction framework, as do states such as California, Washington, and New York.
“It’s such a low-hanging fruit of climate impacts that it’s hard to imagine it’s not going to be regulated pretty substantially in the future,” Hausfather told me. But stringent regulatory requirements are often shaped by the technologies that have been established as effective. And in that sense, what Ambient Carbon is doing today could help pave the way for the ambitious methane targets of tomorrow.
“Moving from a lot of the voluntary pledges that we have towards more mandatory requirements I think is going to have a really important role to play,” Dreyfus told me. “But I think it’s going to be easier if we have more proven technologies to get there.”
On tax credit deadlines, America’s nuclear export hopes, and data center flexibility
Current conditions: Hurricane Erin’s riptides continue lashing the Atlantic Coast, bringing 15-foot waves to the eastern end of New York’s Long Island • In Colorado, the Derby fire tripled in size to more than 2,600 acres, prompting evacuations in the county north of the ski enclave of Aspen • Heavy rain in Sydney set a new 18-year record.
Trump is preparing to onshore turbines, likely shrinking their numbers. Scott Olson/Getty Images
The Trump administration launched an investigation into imported wind turbines and parts, teeing up what Bloomberg called a “potential precursor to adding more tariffs on the clean-energy components.” The Department of Commerce started a national security probe on August 13 to query whether the imports undermine domestic production and put the country at risk from foreign opponents, according to a notice posted Thursday on the agency’s website. The agency already said this week that it would include wind turbines and related parts on the list of products facing 50% steel and aluminum tariffs. As of 2023, at least 41% of wind-related equipment to the U.S. came from Mexico, Canada, and China, according to figures Bloomberg cited from the consultancy Wood Mackenzie.
Also on Thursday, the Treasury Department published an FAQ document outlining the phaseout dates for eight key energy efficiency tax credits repealed under the One Big Beautiful Bill Act. The rules all deal with zero-carbon vehicles or energy efficiency rebates for home improvements.
As Heatmap’s Emily Pontecorvo and Robinson Meyer wrote when the first tranche of data on the programs came out around this time last year, millions of Americans had already taken advantage of at least one of the credits. But the uptake was largely concentrated among households earning $100,000 per year or more.
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For years, Westinghouse has been locked in an intellectual property dispute with South Korea’s two state-owned nuclear companies, as the American atomic energy giant accused the Korea Electric Power Corporation and its subsidiary, Korea Hydro & Nuclear Power, of ripping off its reactor technology. This week, the companies brokered a settlement that would keep the Korean giants from bidding on projects in North America, Europe, Japan, the United Kingdom, and Ukraine, effectively eliminating what is arguably the United States’ most capable rival outside of Russia and China from the key markets Washington wants to dominate. That could spur a lot more bids for Westinghouse’s flagship gigawatt-sized AP1000 reactor, projects for which are already underway in Poland, Slovakia, and Ukraine. But KoreaPro reported on Thursday that South Korea is pushing back on a deal Seoul fears infringes on its sovereignty.
In Sweden, meanwhile, the U.S.-Japanese joint venture GE Vernova-Hitachi Nuclear Energy secured a new deal to build its 300-megawatt small modular reactor that the government in Stockholm explicitly pitched as a bid to strengthen its trans-Atlantic security ties. “This is the beginning of something bigger, in many ways,” Ebba Busch, Sweden’s deputy prime minister, wrote in a post on LinkedIn. “As in the NATO process, Sweden is part of a larger movement.”
The Department of Energy extended its emergency order directing the J.H. Campbell Generating Plant in Michigan to remain open past its planned retirement. Secretary of Energy Chris Wright initially ordered the 1,420-megawatt coal station to stay online three months past its May 31 shutdown date, citing risks of electricity shortages in the Midcontinent Independent System Operator, the electrical grid that runs from the Upper Midwest down to Louisiana. Starting Thursday, the latest order directs the plant’s owners to keep the station running November 19. The consultancy Grid Strategies estimated last week that if the Trump administration expands the effort to cover all 54 aging fossil fuel plants slated for closure between now and 2028, the program will cost upward of $6 billion. Last week, the Federal Energy Regulatory Commission approved a framework for the utilities that own the affected plants to recoup the costs of operating the power stations past the closure dates from ratepayers, despite surging electricity prices.
The Data Center Coalition, a leading trade association representing the burgeoning server farm industry, has endorsed adopting programs to curb electricity demand when the grid is under stress. In a filing Thursday with the North Carolina Utility Commission, the industry group said it “supports exploring well-structured, voluntary demand-response and load flexibility programs for large load customers that allocates risk appropriately, provides clear incentives and compensation, and allows customers to meet their sustainability commitments.”
Researchers at Duke University put out an influential paper in February that found the U.S. could add gigawatts of additional demand from new data centers without building out an equivalent amount of generating plants if those facilities could curtail power usage when demand was particularly high. Heatmap’s Matthew Zeitlin described the strategy as “one weird trick for getting more data centers on the grid,” boiling down the approach simply as: “Just turn them off sometimes.” When I interviewed Tyler Norris, the study’s lead author, he pitched the idea as a way “to buy us some time” to figure out exactly how much electricity the artificial intelligence boom requires before we build out a bunch of gas plants that are even more expensive than usual due to the years-long backorder of turbines.
Researchers at the University of Houston claim to have made two major breakthroughs in carbon capture technology. The first breakthrough, published in the journal Nature Communications, introduces a new electrochemical process for filtering out carbon dioxide that avoids using a membrane like traditional carbon capture technology. The second, featured on the cover of the journal ES&T Engineering, demonstrates a new vanadium-based flow battery that could be used both to capture carbon and to store renewable energy. “We need solutions, and we wanted to be part of the solution. The biggest suspect out there is CO2 emissions, so the low-hanging fruit would be to eliminate those emissions,” Mim Rahimi, a professor at the University of Houston’s Cullen College of Engineering, said in a statement. “From membraneless systems to scalable flow systems, we’re charting pathways to decarbonize hard-to-abate sectors and support the transition to a low-carbon economy.”
A conversation with Scott Cockerham of Latham and Watkins.
This week’s conversation is with Scott Cockerham, a partner with the law firm Latham and Watkins whose expertise I sought to help me best understand the Treasury Department’s recent guidance on the federal solar and wind tax credits. We focused on something you’ve probably been thinking about a lot: how to qualify for the “start construction” part of the new tax regime, which is the primary hurdle for anyone still in the thicket of a fight with local opposition.
The following is our chat lightly edited for clarity. Enjoy.
So can you explain what we’re looking at here with the guidance and its approach to what it considers the beginning of construction?
One of the reasons for the guidance was a distinction in the final version of the bill that treated wind and solar differently for purposes of tax credit phase-outs. They landed on those types of assets being placed in service by the end of 2027, or construction having to begin within 12 months of enactment – by July 4th, 2026. But as part of the final package, the Trump administration promised the House Freedom Caucus members they would tighten up what it means to ‘start construction’ for solar and wind assets in particular.
In terms of changes, probably the biggest difference is that for projects over 1.5 megawatts of output, you can no longer use a “5% safe harbor” to qualify projects. The 5% safe harbor was a construct in prior start of construction guidance saying you could begin construction by incurring 5% of your project cost. That will no longer be available for larger projects. Residential projects and other smaller solar projects will still have that available to them. But that is probably the biggest change.
The other avenue to start construction is called the “physical work test,” which requires the commencement of physical work of a significant nature. The work can either be performed on-site or it can be performed off-site by a vendor. The new guidance largely parrotted those rules from prior guidance and in many cases transferred the concepts word-for-word. So on the physical work side, not much changed.
Significantly, there’s another aspect of these rules that say you have to continue work once you start. It’s like asking if you really ran a race if you didn’t keep going to the finish line. Helpfully, the new guidance retains an old rule saying that you’re assumed to have worked continuously if you place in service within four calendar years after the year work began. So if you begin in 2025 you have until the end of 2029 to place in service without having to prove continuous work. There had been rumors about that four-year window being shortened, so the fact that it was retained is very helpful to project pipelines.
The other major point I’d highlight is that the effective date of the new guidance is September 2. There’s still a limited window between now and then to continue to access the old rules. This also provides greater certainty for developers who attempted to start construction under the old rules after July 4, 2025. They can be confident that what they did still works assuming it was consistent with the prior guidance.
On the construction start – what kinds of projects would’ve maybe opted to use the 5% cost metric before?
Generally speaking it has mostly been distributed generation and residential solar projects. On the utility scale side it had recently tended to be projects buying domestic modules where there might have been an angle to access the domestic content tax credit bonus as well.
For larger projects, the 5% test can be quite expensive. If you’re a 200-megawatt project, 5% of your project is not nothing – that actually can be quite high. I would say probably the majority of utility scale projects in recent years had relied on the manufacturing of transformers as the primary strategy.
So now that option is not available to utility scale projects anymore?
The domestic content bonus is still available, but prior to September 2 you can procure modules for a large project and potentially both begin construction and qualify for the domestic content bonus at the same time. Beginning September 2 the module procurement wouldn’t help that same project begin construction.
Okay, so help me understand what kinds of work will developers need to do in order to pass the physical work test here?
A lot of it is market-driven by preferences from tax equity investors and tax credit buyers and their tax counsel. Over the last 8 years or so transformer manufacturing has become quite popular. I expect that to continue to be an avenue people will pursue. Another avenue we see quite often is on-site physical work, so for a wind project for example that can involve digging foundations for your wind turbines, covering them with concrete slabs, and doing work for something called string roads – roads that go between your turbines primarily for operations and maintenance. On the solar side, it would be similar kinds of on-site work: foundation work, road work, driving piles, putting things up at the site.
One of the things that is more difficult about the physical work test as opposed to the 5% test is that it is subjective. I always tell people that more work is always better. In the first instance it’s likely up to whatever your financing party thinks is enough and that’s going to be a project-specific determination, typically.
Okay, and how much will permitting be a factor in passing the physical work test?
It depends. It can certainly affect on-site work if you don’t have access to the site yet. That is obviously problematic.
But it wouldn’t prevent you from doing an off-site physical work strategy. That would involve procuring a non-inventory item like a transformer for the project. So there are still different things you can do depending on the facts.
What’s your ultimate takeaway on the Treasury guidance overall?
It certainly makes beginning construction on wind and solar more difficult, but I think the overall reaction that I and others in the market have mostly had is that the guidance came out much better than people feared. There were a lot of rumors going around about things that could have been really problematic, but for the most part, other than the 5% test option going away, the sense is that not a whole lot changed. This is a positive result on the development side.