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It’s potentially one of the most important — but least understood — provisions in the Inflation Reduction Act, and it’s finally out in the world. Last month, the Environmental Protection Agency spent $27 billion to set up new green banks across the country.
These new lending institutions could direct billions of dollars to supercharging decarbonization nationwide, financing new solar farms, geothermal projects, EV chargers, and more. They’ll also recycle their funding indefinitely, meaning they will likely last longer than any other provision in the law.
On this week’s show, Rob and Jesse bring you a user’s guide to these new green banks and what they might mean for decarbonization. The episode features two conversations: First, Rob speaks with Jahi Wise, the former director for the Greenhouse Gas Reduction Fund program at the Environmental Protection Agency. Second, Rob and Jesse chat with Dawn Lippert, the founder and CEO of Elemental Impact, a climate tech investment and nonprofit organization. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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:
Jesse Jenkins: We’ve talked for a long time about this “valley of death” that companies face as they reach that scale-up phase where they’re coming out of the phase where they’re trying to just prove the technology works and de-risk it and into the phase where they have to deploy at scale and need project financing for that, or they need to build factories to get to economies of scale to produce their product at a competitive cost. And that burns a lot of capital, both, direct equity investment in the company and project finance and loans to get projects built and online. Is that the real gap that you’re seeing right now?
It seems like we’ve had such a big wave of venture capital coming into this space over the last few years that there are a lot of really well capitalized companies through series A or B, but now they’re … you know, if they were stood up two, three, four years ago, now they’re coming into this new phase. Is that where you’re trying to position your fund? And maybe more broadly, the green banks that were supported by GGRF?
Dawn Lippert: Yes — I think, overall, yes. And it’s nuanced. So what we’re seeing is, we published a report earlier this year that there’s essentially this financing gap, if you can think of it that way, or the valley is at least $150 billion, where companies are going from exactly what you said of venture capital-backed and then need other kinds of financing.
And then on the other side of the gap, there’s actually a lot more financing than ever.
Jenkins: Yeah, tons. Infrastructure funds and others, right?
Lippert: Yes, absolutely. And so it’s really about building this bridge and being really smart about that. So I would say there’s a couple of things. One is that we see three main issues to crossing the bridge. One is capital. We’ve talked about that, and I’ll talk about a little bit more. The second is project expertise — companies going from technology companies to project companies. I would say that’s one of the key things that we see as being a real challenge and also a huge opportunity.
And Rob, you talked about talent coming into this space. That tidal wave really changed in 2018 when the skies turned orange over San Francisco. We just saw so much talent coming in from tech, and it just hasn’t stopped. It really kept flowing. But this project expertise of operational expertise — how you develop, how you permit and get entitlements, how you structure the financing, but also just do the actual construction of projects — we need to build so many things. That’s where we see a huge need. And we did a recent analysis with our partners at Vibrant Data Labs and found that only about less than 30% of companies in climate right now have project expertise or deep project expertise on their team to build stuff.
So that’s a place where Elemental has leaned in a ton where we were dropping CFOs and fractional CFOs and developers and residents and all kinds of folks to help fill that gap. But there’s a huge amount of work that needs to be done there.
This episode of Shift Key is sponsored by …
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
As a global leader in PV and ESS solutions, Sungrow invests heavily in research and development, constantly pushing the boundaries of solar and battery inverter technology. Discover why Sungrow is the essential component of the clean energy transition by visiting sungrowpower.com.
Antenna Group helps you connect with customers, policymakers, investors, and strategic partners to influence markets and accelerate adoption. Visit antennagroup.com to learn more.
Music for Shift Key is by Adam Kromelow.
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Tom Ferguson, founder of Burnt Island Ventures, has bigger concerns.
Water — whether too much or too little — is one of the most visceral ways communities experience the impacts of a warming world. It’s also a $1.6 trillion global market that underpins much of the world’s economy. As climate-related risks such as droughts, floods, and contamination converge with systemic challenges like aging water infrastructure and clunky resource management, the need for innovation is becoming painfully obvious.
As Heatmap’s own polling shows, water is also becoming an increasingly large part of the data center story, with many Americans opposing these facilities in part due to concerns over their water usage. That anxiety may not be entirely rational, Tom Ferguson, founder of the water-focused investment firm Burnt Island Ventures, told me.
He’s spent the better part of his career funding water-related innovation, focusing on where new technologies stand to have the greatest impact. So I believed him when he said that while data centers don’t merit quite so much worry, water as a resource deserves a far greater role in the climate tech conversation.
“Everybody assumes that water is a dog of a market because nobody really speaks water. It’s not within their circle of competence,” Ferguson told me, explaining that many firms simply don’t have employees with industry expertise. “But it’s awfully helpful to work with people who can give you a reasonably sized check — ideally two reasonably sized checks, maybe even more — and then also be helpful on that journey to help you better diagnose reality.”
That’s the goal of Burnt Island, which just closed a $50 million fund — its second overall — dedicated to backing early-stage water innovators. Ferguson’s team may have announced the close today, but the firm has already deployed the majority of the fund’s capital into companies working on everything from advanced water treatment and filtration to infrastructure resilience and climate adaptation. At the same time, Burnt Island is also raising money for a $75 million growth fund, designed to invest in later-stage startups with more proven tech.
Ferguson is a veteran of the industry, having previously run an innovation accelerator at the water nonprofit Imagine H2O, which vets hundreds of water startups every year. He’s also solution-agnostic — Burnt Island has already backed a startup developing an underwater desalination plant, a “defrosting innovation company” pioneering a water-efficient way to thaw frozen food, and an effort to build an algae-based wastewater treatment system.
One area Ferguson is not interested in backing, however, is data center cooling systems. Most large data centers cool servers by circulating water through heat exchangers that absorb heat from the equipment. The hot water is then sent to cooling towers where a portion is evaporated. This releases heat into the air, allowing the cooled water to be recirculated. More novel and efficient — but much less proven — cooling methods include applying coolant directly to the chips themselves or submerging entire servers in a non-conductive liquid.
Those approaches are simply too risky, Ferguson told me — both for him and for the hyperscalers. Cooling, he explained, represents a relatively small fraction of a data center’s project cost, but the cost of failure is enormous. If a novel cooling system goes awry, valuable computer chips will fry and operations will grind to a halt. “Under those circumstances, why would you take that chance?” he asked. “You want to use something that has already been proven, that is totally reliable.”
Ferguson told me he’s happy to let firms with larger pocketbooks bet their money on these solutions, but he’s also assuming that hyperscalers will wind up building a lot of these systems themselves. “They’re going to develop their own stuff in house because they want to have the end-to-end control over the architecture,” he told me. “All of this adds up to a pretty tough market.”
That doesn’t mean he’s bearish on data center water efficiency in general. Many of his portfolio companies see opportunities to, say, use metering and sensing tech to track data center water use, or treat water coming into and out of the facilities. And he’s well aware of the public’s growing scrutiny of the industry’s water intensity, having followed the $3.6 billion data center project in Tucson, Arizona that was cancelled in August amidst community-led drinking water concerns.
But he thinks kerfuffles such as this are often more about perception than reality. “The water impact is slightly overblown,” he told me. Data centers “still use a lot less water than golf courses.” And while the rapid expansion of artificial intelligence infrastructure will inevitably put data centers ahead of golf courses one day, Ferguson trusts that this cash-rich industry will be able to reduce water intensity on its own, as developers have a direct incentive to expand in as many geographies as possible.
Even the canceled Arizona project, he told me, had a reliable plan to replenish the local watershed. Microsoft, Amazon, and Google have all pledged to be “water positive” by 2030, returning more water to data center communities than their facilities use by making their operations more efficient while also restoring local ecosystems and replenishing watersheds. But now that the water use narrative has gained steam, “it actually doesn’t matter what you do physically. It’s what people believe about the resource hungriness of these things,” Ferguson explained.
The more important question, he believes, is whether AI’s overall impact on the world will end up justifying the water it consumes. And as he told me, “the jury is really out” on that for now.
But when it comes to weighing water consumption against the pure economic value of data centers, Christopher Gasson, owner and publisher of the market intelligence firm Global Water Intelligence, has actual numbers.
As Gasson asserted in a presentation that Ferguson attended, in terms of the amount of fresh water used per dollar of revenue generated, data centers perform quite well compared to the world’s other leading industries. Their so-called “revenue intensity” is far lower than that of the semiconductor, power generation, food and beverage, and chemicals sectors, for example.
So for Ferguson, the AI-water intersection that feels most relevant is actually “vertical AI” — models trained specifically on water industry data to address targeted problems in the sector. Training these smaller, specialized models is not only far less resource-intensive, it also allows for much more accurate results than general purpose models, which often hallucinate when trying to address niche queries and concerns.
One of Burnt Island’s portfolio companies, SewerAI, trains its model on reams of sewer inspection data. Using video footage, the software can then perform automated sewer inspections to identify defects in pipes, eliminating the timely, costly, and often inaccurate process of manual video review. Another portfolio company, Daupler, uses its specialized model to automate how water utilities respond to service incidents, categorizing and prioritizing customer reports, dispatching crews, and tracking progress. Burnt Island led Daupler’s Series A round and has already supported it with additional capital through its growth fund.
“You have these really, really high quality, very compelling business models that are being built relatively quietly,” Ferguson said. But he expects these opportunities to gain more attention soon — because while the headlines and community uproar around the water intensity of AI may sometimes be hyperbolic, the necessity of water to human life is anything but.
“You can’t believe in water in the same way that people have chosen to believe in the impact of emissions,” Ferguson told me. “You don’t get to choose when it comes to water issues, because once they get real, they get really real.”
On Japan’s atomic ‘Iron Lady,’ Electra’s supercharge, and a mineral deal Down Under
Current conditions: Tropical Storm Melissa is barreling toward Haiti and Jamaica carrying a payload of as much as 16 inches of rain for certain parts of the Caribbean • A coldfront is set to drop temperatures by as much as 15 degrees Fahrenheit over the Great Lakes states • Temperatures in the French overseas territory of Juan de Nova hit nearly 94 degrees Tuesday, the hottest October day in the history of the French Southern Territories.
US Wind told a federal court that it will go bankrupt if President Donald Trump succeeds in revoking its building permits. The Baltimore-based developer testified on the fate of its 2.2-gigawatt Maryland Offshore Wind project in response to a lawsuit brought by the Department of the Interior and the City Council of Ocean City, Maryland. “If the plan is lost, surrendered, forfeited, revoked or otherwise not maintained in full force and effect, US Wind’s investors have the right to declare US Wind to be in default on the repayment of the company’s debt and/or refuse to extend the additional financing needed to complete construction of the project,” the company told the court, according to an update on the energy consultancy TGS’ 4C Offshore news website. “Either of these consequences could result in US Wind’s bankruptcy.”
The Trump administration’s “total war on wind,” as Heatmap’s Jael Holzman described the multi-agency onslaught against offshore projects, has drawn a backlash in recent months. As I reported last month in this newsletter, a federal judge temporarily stayed Trump’s stop-work order on a 80% complete wind farm off Rhode Island’s coast. Even the oil industry has come out to support the wind sector, as I wrote earlier this month, with Shell’s top U.S. executive warning that the precedent the administration had set would harm fossil fuel producers once Democrats return to power. Yet the effects of the administration’s policies are starting to pinch.
Electra announced a series of major deals on Tuesday as the green iron startup unveiled its debut demonstration facility in Boulder, Colorado. Just a month after Microsoft agreed to buy green steel for its data centers from Sweden’s green steelmaker Stegra, Facebook owner Meta agreed to buy environmental attribute credits linked to emissions cut from Electra’s clean iron. The startup also announced three major offtake agreements — the steelmaker Nucor, the European metal trader Edelstahl Group, and Japanese steel-trading giant Toyota Tsusho all signed deals for Electra’s iron. Meanwhile, Electra brought on new financing. Bill Gates’ Breakthrough Energy invested $50 million in grants into the company, while Colorado Governor Jared Polis provided the five-year-old startups with an $8 million tax credit from the state’s clean industrial financing program. And all that is just what the company announced Tuesday. Earlier this year, as Heatmap’s Katie Brigham reported, Electra closed a $186 million Series B round.
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The top U.S. solar trade group, the Solar Energy Industries Association, is looking for a new leader. After eight years in office, Abigail Ross Hopper, the lobby organization’s chief executive, announced her departure Tuesday amid what she called a “challenging” year for the industry in her public exit letter. When she took office in 2017, the solar industry had a total capacity of 36 gigawatts and just over 1 million residential customers. By today, the industry has grown to more than 255 gigawatts and more than 5.5 million residential customers. Despite struggles competing against China, U.S. solar manufacturing capacity vaulted from 14th globally to the world’s third-largest hub of photovoltaic factories. “The growth we’ve experienced over the years is a result of our collective grit and determination,” she wrote in the letter. “We’ve navigated fierce policy battles and market challenges, from trade cases to tax debates, and yet we’ve always emerged stronger. We fought — and won — historic policy battles, at every level of government.” While the Trump administration’s cuts to solar programs have dulled growth forecasts, she said she was “optimistic” about the future. Her last day will be January 30, 2026.
Australian Prime Minister Anthony Albanese and President Trump.Anna Moneymaker/Getty Images
After months of negotiations, the U.S. and Australia signed onto a two-way trade deal on critical minerals worth $8.5 billion. The move comes as China ratchets up export controls on rare earths and other metals over which Beijing dominates global supplies. Australia and Canada, whose economies heavily depend on mining, are widely considered the most dependable sources of minerals for the U.S., a dynamic highlighted last week by the cancellation of an American metal project by the leaders of a coup in Madagascar, as I reported for Heatmap. For Australia, the agreement “is a really significant deal,” Hayley Channer, the director of the economic security program at the United States Studies Centre at the University of Sydney, told The Guardian. “I’m surprised how good it is. The fact that any U.S. money is coming to Australian companies is huge; we really need this money. I don’t think it could have gone any better.”
Japan just elected its first female prime minister, the arch-conservative former minister of economic security Sanae Takaichi. Like Margaret Thatcher, the first woman to serve as British prime minister, Takaichi has been dubbed the Iron Lady due to her hard-line nationalistic views. But uranium may be a better metal for the nickname. Like Thatcher, Takaichi has vowed to restore Japan’s nuclear industry to its former might. Less than half of Japan’s 33 operable nuclear reactors are currently online and generating electricity, a legacy of the mass shutdown that followed the 2011 Fukushima-Daiichi plant. In lieu of atomic energy, Japan — which lacks the land for vast wind and solar installations — has turned instead to costly liquified natural gas imports. To Takaichi, who wants to remilitarize Japan and take a more aggressive stance toward China, this creates a vulnerability. Without domestic gas fields, Japan relies on imports whose routes the Chinese navy could disrupt in a conflict, weaponizing blackouts in much the same way Russia has in Ukraine. Japan’s offshore wind efforts are badly delayed. And Takaichi has warned that Beijing’s grip over global manufacturing of photovoltaic panels makes solar a threat, as well.
Japan isn’t the only country looking to revive its past atomic ambitions. South Africa’s government approved the state-owned utility Eskom’s integrated resource plan last week, which included starting work again on the company’s abandoned pebble-bed modular reactor program. First proposed in 1999, the technology is billed as safer than light water reactors and more versatile, with the potential for use in more heavy industry settings. But South Africa canceled the program in 2010 after spending $980 million developing the reactor. The country currently depends on coal for nearly 60% of its electricity.
Scientists discovered an ancient climate archive in a remote cave in northern Greenland. In a study published in Nature Geoscience, the researchers found calcite deposits that only form when the ground is unfrozen and water flows. The findings cast new light on past warm periods in the Earth’s climate, particularly the Late Miocene, which began about 11 million years ago. “These deposits are like tiny time capsules,” Gina Moseley, a geologist with the University of Innsbruck in Austria and an author of the study, said in a press release. “They show that northern Greenland was once free of permafrost and much wetter than it is today.”
Rob and Jesse hang with Dig Energy co-founder and CEO Dulcie Madden.
Simply operating America’s buildings uses more than a third of the country’s energy. A major chunk of that is temperature control — keeping the indoors cool in the summer and warm in the winter. Heating eats into families’ budgets and burns a tremendous amount of fuel oil and natural gas. But what if we could heat and cool buildings more efficiently, cleanly, and cheaply?
On this week’s episode of Shift Key, Rob and Jesse talk to Dulcie Madden, the founder and CEO of Dig Energy, a New Hampshire-based startup that is trying to lower the cost of digging geothermal wells scaled to serve a single structure. Dig makes small rigs that can drill boreholes for ground source heat pumps — a technology that uses the bedrock’s ambient temperature to heat and cool homes and businesses while requiring unbelievably low amounts of energy. Once groundsource wells get built, they consume far less energy than gas furnaces, air conditioners, or even air-dependent heat pumps.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University. Jesse is an adviser to Dig Energy.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, 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:
Jesse Jenkins: We’ve been throwing a few different terms around here to describe this. We talked about geothermal heating and cooling, ground source heat pumps, geoexchange. There’s a little bit of ambiguity here in the language people used to talk about these things. What’s your favorite way to talk about this product and why?
Dulcie Madden: Ugh.
Jenkins: Or is this just an endless debate that is not resolved?
Madden: It is a great question. It’s a big debate. When I think of geoexchange, just so everyone knows, it’s really about, like, are you able to basically create a larger array, potentially, across buildings, more like exchanging heating and cooling, like both point source and — I think about it more in the context of Princeton, where it’s also across buildings, right? And that starts to move into what some people call a thermal energy network. And so there’s some work there.
There is a lot of back and forth between geothermal heat pump and ground source heat pump, and a lot of people will use them interchangeably. I think that there is technically a differentiation, but I don’t know if there’s a didactic, like, This is what it is. It’s just … you have to be interchangeable.
Jenkins: Yeah, I’m curious, I don’t know what the best marketing term is, what people actually resonate with beyond the technical crowd. I was describing what you guys were doing when you closed your seed series round on X or BlueSky, and somebody jumped into the replies. That’s not geothermal energy, it’s ground source heat pump. And it’s like, okay. And I guess the argument is that, because it’s basically just using it as a source for heat exchange in the heat pump operation as opposed to extracting heating out of the ground — which you can do. I mean, you can just do direct heating from geothermal.
Madden: Right.
Jenkins: Deep geothermal drilling, as well. It’s something that Eavor, which is an Alberta-based deep geothermal company that I advise, as well, is working on their first commercial project in Bavaria. That’s gonna go into a district heating system. So they’re going produce a little bit of power, but a lot of that is just direct heat. But again, they’re drilling, five, six kilometers deep and pulling out heat at high temperatures. And so it’s because it’s kind of back and forth, you’re using this kind of buffer for both heating and cooling. I think that’s why people might push back on the idea that it’s geothermal. But you’re using the heat in the ground.
Mentioned:
TechCrunch: “Geothermal is too expensive, but Dig Energy’s impossibly small drill rig might fix that”
Princeton University’s Geo-Exchange System
Jesse’s downshift; Rob’s downshift.
This episode of Shift Key is sponsored by …
Hydrostor is building the future of energy with Advanced Compressed Air Energy Storage. Delivering clean, reliable power with 500-megawatt facilities sited on 100 acres, Hydrostor’s energy storage projects are transforming the grid and creating thousands of American jobs. Learn more at hydrostor.ca.
A warmer world is here. Now what? Listen to Shocked, from the University of Chicago’s Institute for Climate and Sustainable Growth, and hear journalist Amy Harder and economist Michael Greenstone share new ways of thinking about climate change and cutting-edge solutions. Find it here.
Music for Shift Key is by Adam Kromelow.