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With emissions from transportation rising, it’s up to the states to fix it.

Last September, Jeanie Ward-Waller, a deputy director at California’s state transportation department, was called into her supervisor’s office and told she was being removed from her role, no explanation given. But Ward-Waller thinks she knows what happened.
A few weeks earlier, she’d threatened to blow the whistle on the agency for a highway repaving project that she believed was covertly — and illegally — going to widen the road. Under state law, highway expansions require environmental review and public input. It was also exactly the kind of project the agency was supposedly moving away from, according to its climate action plan, which said it would prioritize alternative forms of transit.
“Caltrans leaders believe they are widening highways in the public interest, despite decades of empirical research proving otherwise, and the agency’s own policies requiring solutions that reduce driving,” Ward-Waller wrote in an essay for the San Francisco Chronicle after leaving the agency.
Ward-Waller’s firing riled up climate advocates and sustainable transit proponents, and not just in California. (Multiple people I interviewed for this story mentioned it to me.) State transportation agencies all over the country are stuck in this kind of outdated thinking, critics say. Transportation is the biggest source of emissions in the U.S., and one of the only sectors where emissions grew last year. But most state transportation agencies are still funneling most of their budgets into road expansion projects. Few have taken on addressing climate change as part of their mission.
“State departments of transportation are kind of the next frontier for climate advocacy to conquer,” Justin Balik, the state program director for Evergreen Action told me. “There’s a lot of blue states where the transportation decisions are still divorced from the climate conversation.”
It’s a pivotal moment to change that, Balik argued. The Bipartisan Infrastructure Law, signed in 2021, has been sending billions of dollars of flexible funding into states for transportation projects. The Biden administration will also soon begin requiring these agencies to set greenhouse gas reduction targets. Although the targets are non-binding and states won’t be penalized for failing to achieve them, they will have to regularly report on their progress.
States have until February 1 to submit their initial plans to the federal Department of Transportation. So on Monday, climate and clean transportation advocates around the country sent letters to the governors of 22 states urging them to set targets consistent with reaching net-zero emissions by 2050. The letters ask officials to consider what’s achievable both through vehicle electrification and by reducing highway expansion.
“Electrification is critical and essential, but it’s not enough, just looking at the math, in terms of how long it's going to take for the vehicle fleet to turn over,” said Balik. “We need to think about the transportation system holistically and stop digging the hole deeper when we’re making transportation investment decisions.”
He directed me to a report published by the Georgetown Climate Center after the infrastructure law passed. The policy think tank modeled two scenarios, one where about a third of the $600 billion of flexible funding went to highway expansion, and one where states put more toward public transit and road maintenance. It found that the first scenario would increase emissions 1.6% by 2032, compared to business-as-usual, whereas the second would enable deeper emissions cuts — 1.3% more — than would otherwise have been expected with market forces and existing policies.
The reason is an effect called “induced demand,” and it’s at the center of this whole story. When state departments of transportation evaluate projects, they use models that assume building new roads or adding lanes increases the flow of traffic — thereby reducing congestion and reducing emissions. But real-world evidence has shown that expanding highways, especially in dense areas, actually encourages more people to drive — and within a few years, the traffic is just as bad as before.
“They’re vastly overestimating the benefits of expansion projects,” Miguel Moravec, a senior associate at RMI told me. “If the models are not capturing the reality that expanded lanes lead to more traffic, then you can’t really seriously engage with the pollution problem.”
The modeling is a symptom of a more entrenched issue. State Departments of Transportation are big agencies that can have thousands of staff, many of whom have been in their roles for decades. (Caltrans, for example, has more than 22,000 people.) The culture of these offices is built around an old paradigm where the primary metric of performance is to relieve traffic congestion — to help people drive places more quickly and easily.
“There’s a new movement to say, maybe it’s about helping people get to where they need to go efficiently, affordably, and safely,” Matt Frommer, the senior transportation advocate at the Southwest Energy Efficiency Project, told me. “But that is a really hard shift to make in a giant institution like a state DOT. Because all of the models and all of the policies and funding decision processes have been set up around the old paradigm.”
Even in places where that’s beginning to shift, there are still long-term challenges. California, for example, has had a law on the books for a decade that says the state must assess the impacts of transportation projects by measuring the amount of driving they induce or reduce — not by their effect on congestion. But local advocates like Jamie Pew, a climate advisor at NextGen Policy, say this has failed to move the state meaningfully away from highway expansion.
Ward-Waller’s firing brought long-simmering criticisms of the state’s climate strategy to a boil, he said. “For all of the money that we’re investing in new transit infrastructure, electrification, and green mobility options, as long as we continue to invest in freeway expansion, we’re not going to see the progress in emissions that we need to see.”
There are a few states that are starting to do things differently. Colorado, for example, has seen a significant shift in the way the state approaches transportation projects. In 2021, the state legislature passed a law directing its transportation agency to set regional greenhouse gas reduction targets and incorporate them into project planning. Frommer said the new approach has already resulted in real changes. In 2022, the state scrapped a long-planned highway expansion through downtown Denver after it was found that it would undermine the agency’s targets.
“That freed up hundreds of millions, if not over a billion dollars for other multimodal projects to help enable transit, biking and walking,” said Frommer.
The state that is leading the nation in innovative transportation policy, however, is Minnesota. Like Colorado, it has transportation-specific greenhouse gas targets. But it also has a specific goal to reduce “vehicle miles traveled” — a measure of how much people drive. Last year, lawmakers passed a big transportation package that gave more teeth to these goals, requiring the state’s DOT take them into account in decision making. It also went a step further and said that if the agency moves forward with any projects that induce demand, it has to offset them with additional projects that get people out of their cars.
The new federal rule requiring state transportation departments to report on their progress achieving declining greenhouse gas targets could help nudge more states in this direction. As climate advocates tell me on a weekly basis, “you can’t manage what you don’t measure.”
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The Treasury Department released partial guidance for the new “foreign entities of concern” restrictions on clean energy tax credits.
The Treasury Department published long-awaited guidance for claiming the clean energy tax credits on Thursday, ending the state of limbo in which project developers have languished since the One Big Beautiful Bill Act passed last summer. Well, sort of.
Trump’s tax law put new restrictions on many of the clean energy tax credits, limiting eligibility to projects that could prove they had minimal material inputs or oversight from a handful of countries labeled “foreign entities of concern,” i.e. Russia, North Korea, Iran, and, most problematically, China. The problem was that it was hard to suss out exactly how to follow these rules. The Treasury Department would have to provide clarification, or in the parlance of federal tax law, “guidance.” Without this, developers might unintentionally break the rules, get audited, and then owe the government a bunch of money — a risk that financiers are not keen to take.
Now, developers have, shall we say, partial guidance. The FEOC rules have two main components, and a notice published by the IRS Thursday covers one of them.
The guidance clarifies how to calculate the material assistance limits, which ask for proof that a certain percentage of the material inputs to the project did not come from a FEOC-owned or -influenced company. For a solar farm, for example, that includes the photovoltaic cells, the frame, the glass, the sealant, the circuit boards, etc. These limits apply to the clean electricity investment and production tax credits (48E and 45Y), as well as the clean manufacturing credit (45X), and went into effect on January 1 of this year.
The notice the Trump administration published this week demystifies the material assistance math for some project types, but not others. It says the Treasury will be publishing more on this by the end of the year.
Then there are foreign influence and “effective control” restrictions that have to do with the ownership structure of the project. Those apply to any project attempting to claim a tax credit, including carbon capture (45X), nuclear, (45X), and clean fuels (45Z), that started construction as of January 1, 2025. Even though these rules have been in effect for longer, the Treasury has yet to clarify how to follow them. The notice suggests the department will publish this along with the additional information on material assistance.
To be clear, development did not halt or even really slow as a result of this missing guidance, although that may have been starting to change. Many companies were able to avoid the arduous material assistance calculations by starting construction on their projects last year, before the new restrictions went into effect. They were also allowed to use past IRS guidance, including tables breaking out the various components of a project and their relative weights for determining the amount of domestic content in a project, which they could then apply to determine the amount of non-FEOC-produced materials as a temporary solution.
As for the ownership restrictions, “you just err on the side of caution,” David Burton, a partner at the law firm Norton Rose Fulbright, told me.
I spoke to Burton late last night right after he had gotten through reading the new 95-page IRS notice, and he walked me through some of his initial takeaways.
What are the questions that companies had about FEOC prior to this that this document clears up?
It’s pretty specific on how to calculate whether or not you meet the material assistance percentage restriction. So for instance, if you have a repowered project, there was a question of, do you have to apply material assistance to the new stuff you’re adding? Or do you also have to apply it to the old stuff? And the rules clarify, it’s just the new stuff. If you have a solar project that you’re repowering by replacing the modules but you keep the old inverters, the new modules are subject to material assistance, the old inverters are not. So it clarifies that type of thing.
I think there’s going to be a lot of accountants doing spreadsheet work based on these calculations in the notice and the various elections and choices, trying to find the most advantageous path. I think it’s too early to tell if there’s some opportunities that the industry might benefit from, or some landmines that we weren’t anticipating, because there’s just … the calculations, there’s too many of them, they kind of link together, and it’s very complicated. So we need a little more than a couple hours to go through all that.
What do you mean by elections and choices?
You can use the domestic content safe harbor tables, or you can get a certification from a supplier. The notice says that if a supplier gives you a certification that says it’s not a prohibited foreign entity, and it’s not aware of any prohibited foreign entities in its supply chain, you can rely upon that. Or if it gives you a certification that says, I’m not a prohibited foreign entity, but 20% of the supply chain that feeds into my product is, you can rely upon that.
You’re unlikely to get top-to-bottom certifications that totally answer the question, but it is helpful.
We’ve talked in the past about how far up their supply chain companies will need to look to calculate material assistance. Does it answer those questions?
It does provide guidance on those questions, but really only for the technologies that are covered in the domestic content notices. So for instance, fuel cells or combined heat and power: If you’re not wind, solar, storage or some other technology, it doesn’t provide that much help. But it does clarify for wind, solar, and storage how to do the calculation. It provides some guidance for technologies other than wind, solar, and storage, but it’s still going to be pretty hard, I think.
What is still missing from the guidance? What are the open questions that certain projects might still face?
Foreign influence and foreign control, the notice doesn’t cover. For instance, there’s a rule that if 15% of your debt is held by Chinese banks, you don’t get tax credits. The notice doesn’t tell us how to apply that rule — how that applies if one lender transfers to another lender and syndications of debt, all that kind of stuff. It doesn’t even tell us at what level to apply that test. Do you apply it at the project company? Or at the ultimate parent company at the top of the ownership chain? So it gives us none of that.
How often are you running into that with clients?
Every deal where the project began construction after 2024 has that question. Most of the time it really shouldn’t be an issue, but you have to ask, who owns this entity? Who’s on your board? Who has the right to appoint people to your board? We’re starting to write a lot of memos about this stuff, but there’s not a lot of guidance.
How do you deal with that without guidance?
We have a statutory language, so it’s not like no guidance at all. You just err on the side of caution, and you err on the side of it being overbroad, and then you end up asking the parties involved a lot of due diligence questions. And they’re like, really? We have to answer your 1,000 questions here?
Do you think that, based on this guidance, this is workable for companies? This doesn’t seem to be the sort of backdoor way to kill the tax credits that some people initially feared.
I think it’s workable. I think it’s relatively even-handed. I think they are trying to make them administrable. Not easy, not simple — again, full employment for accountants. But at least you can spreadsheet it. It’s better to have to build a complicated spreadsheet than just be like, well, we don’t really know what the rule is, we’re not sure what the path is here.
Representatives Jake Auchincloss and Mark Amodei want to boost “superhot” exploration.
Geothermal is about the only energy topic that Republicans and Democrats can agree on.
“Democrats like clean energy. Republicans like drilling. And everyone likes baseload power that is generated with less than 1% of the land and materials of other renewables,” Massachusetts Representative Jake Auchincloss, a Democrat, told me.
Along with Republican Representative Mark Amodei of Nevada, Auchincloss is introducing the Hot Rock Act on Friday, focusing specifically on “superhot” or “supercritical” geothermal resources, i.e. heat deposits 300 degrees Celsius or above. (Temperatures in large traditional geothermal resources are closer to 240 degrees.)
The bill — of which Heatmap got an exclusive early peek — takes a broad approach to supporting research in the sector, which is currently being explored by startups such as Quaise Energy and Mazama Energy, which in October announced a well at 331 degrees.
There’s superhot rock energy potential in around 13% of North America, modeling by the Clean Air Task Force has found — though that’s mostly around 8 miles below ground. The largest traditional geothermal facility in the U.S. is only about 2.5 miles at its deepest.
But the potential is enormous. “Just 1% of North America’s superhot rock resource has the potential to provide 7.5 terawatts of energy capacity,” CATF said. That’s compared to a little over a terawatt of current capacity.
Auchincloss and Amodei’s bill would direct the Department of Energy to establish “milestone-based research grant programs,” under which organizations that hit goals such as drilling to a specific depth, pressure, or temperature would then earn rewards. It would also instruct the DOE to create a facility “to test, experiment with, and demonstrate hot dry rock geothermal projects,” plus start a workforce training program for the geothermal industry.
Finally, it would grant a categorical exclusion from the National Environmental Policy Act for drilling to explore or confirm geothermal resources, which could turn a process that takes over a year into one that takes just a couple of months.
Geothermal policy is typically a bipartisan activity pursued by senators and House members from the Intermountain West. Auchincloss, however, is a New Englander. He told me that he was introduced to geothermal when he hosted an event in 2022 attended by executives from Quaise, which was born out of the Massachusetts Institute of Technology.
It turned out the company’s pilot project was in Nevada, and “I saw it was in Mark Amodei’s district. And I saw that Mark is on Natural Resources, which is the other committee of jurisdiction. And so I went up to him on the floor, and I was like, Hey there, you know, there's this company announcing this pilot,” Auchincloss told me.
In a statement, Amodei said that “Nevada has the potential to unlock this resource and lead the nation in reliable, clean energy. From powering rural communities and strengthening critical mineral production to meeting the growing demands of data centers, geothermal energy delivers dependable 24/7 power.”
Auchincloss told me that the bill “started from the simple premise of, How do we promote this technology?” They consulted climate and technology experts before reaching consensus on the milestone-based payments, workforce development, and regulatory relief components.
“I didn't have an ideological bent about the right way to do it,” Auchincloss said.
The bill has won plaudits from a range of industry groups, including the Clean Energy Buyers Association and Quaise itself, as well as environmental and policy organizations focused on technological development, like the Institute for Progress, Third Way, and the Breakthrough Institute.
“Our grassroots volunteers nationwide are eager to see more clean energy options in the United States, and many of them are excited by the promise of reliable, around-the-clock clean power from next-generation geothermal energy,” Jennifer Tyler, VP government affairs at the Citizens' Climate Lobby, said in a statement the lawmakers provided to Heatmap. “The Hot Rock Act takes a positive step toward realizing that promise by making critical investments in research, demonstration, and workforce development that can unlock superhot geothermal resources safely and responsibly.”
With even the Trump administration generally pro-geothermal, Auchincloss told me he’s optimistic about the bill’s prospects. “I expect this could command broad bipartisan support,” he said.
Plus a pre-seed round for a moon tech company from Latvia.
The nuclear headlines just keep stacking up. This week, Inertial Enterprises landed one of the largest Series A rounds I’ve ever seen, making it an instant contender in the race to commercialize fusion energy. Meanwhile, there was a smaller raise for a company aiming to squeeze more juice out of the reactors we already have.
Elsewhere over in Latvia, investors are backing an early stage bid to bring power infrastructure to the moon, while in France, yet another ultra-long-duration battery energy storage company has successfully piloted their tech.
Inertia Enterprises, yet another fusion energy startup, raised an eye-popping $450 million Series A round this week, led by Bessemer Venture Partners with participation from Alphabet’s venture arm GV, among others. Founded in 2024 and officially launched last summer, the company aims to develop a commercial fusion reactor based on the only experiment yet to achieve scientific breakeven, the point at which a fusion reaction generates more energy than it took to initiate it.
This milestone was first reached in 2022 at Lawrence Livermore National Laboratory’s National Ignition Facility, using an approach known as inertial confinement fusion. In this method, powerful lasers fire at a small pellet of fusion fuel, compressing it until the extremely high temperature and pressure cause the atoms inside to fuse and release energy. Annie Kritcher, who leads LLNL’s inertial confinement fusion program, is one of the cofounders of Inertia, alongside Twilio co-founder Jeff Lawson and Stanford professor Mike Dunne, who formerly led a program at the lab to design a power plant based on its approach to fusion.
The Inertia team plans to commercialize LLNL’s breakthrough by developing a new fusion laser system it’s calling Thunderwall, which it says will be 50 times more powerful than any laser of its type to date. Inertia isn’t the only player trying to commercialize laser-driven fusion energy — Xcimer Energy, for example, raised a $100 million Series A in 2024 — but with its recent financing, it’s now by far the best capitalized of the bunch.
As Lawson, the CEO of the new endeavor said in the company’s press release, “Our plan is clear: build on proven science to develop the technology and supply chain required to deliver the world’s highest average power laser, the first fusion target assembly plant, and the first gigawatt, utility-scale fusion power plant to the grid.” Great, but how soon can they do it? The goal, he says, is to “make this real within the next decade.”
In more nuclear news, the startup Alva Energy launched from stealth on Thursday with $33 million in funding and a proposal to squeeze more capacity out of the existing nuclear fleet by retrofitting pressurized-water reactors. The round was led by the venture firm Playground Global.
The startup plans to boost capacity by building new steam turbines and electricity generators adjacent to existing facilities, such that plants can stay online during the upgrade. Then when a plant shuts down for scheduled maintenance, Alva will upgrade its steam generator within the nuclear containment dome. That will allow the system to make 20% to 30% more steam, to be handled by the newly built turbine-generator system.
The company estimates that these retrofits will boost each reactor’s output by 200 megawatts to 300 megawatts. Applied across the dozens of existing facilities that could be similarly upgraded, Alva says this strategy could yield roughly 10 new gigawatts of additional nuclear capacity through the 2030s — the equivalent of building about 10 new large reactors.
Biden’s Department of Energy identified this strategy, known as “uprating”, as capable of adding 2 gigawatts to 8 gigawatts of new capacity to the grid. Alva thinks it can go further. The company promises to manage the entire uprate process from ensuring regulatory compliance to the procurement and installation of new reactor components. The company says its upgrades could be deployed as quickly as gas turbines are today — a five- to six-year timeline — at a comparable cost of around $1 billion per gigawatt.
Deep Space Energy, a Latvian space tech startup, has closed a pre-seed funding round to advance its goal of becoming a commercial supplier of electricity for space missions on the moon, Mars, or even deeper into space where sunlight is scarce. The company is developing power systems that convert heat from the natural decay of radioisotopes — unstable atoms that emit radiation as they decay — into electricity.
While it’s still very early-stage, this tech’s first application will likely be backup power for defense satellites. Long term, Deep Space Energy says it “aims to focus on the moon economy” by powering rovers and other lunar installations, supporting Europe’s goal of increasing its space sovereignty by reducing its reliance on U.S. defense assets such as satellites. While radioisotope generators are already used in some space missions, the company says its system requires five times less fuel than existing designs.
Roughly $400,000 of the funding came from equity investments from the Baltic-focused VC Outlast Fund and a Lithuanian angel investor. The company also secured nearly $700,000 from public contracts and grants from the European Space Agency, the Latvian Government, and a NATO program to accelerate innovation with dual-use potential for both defense and commercial applications.
As I wrote a few weeks ago, Form Energy’s iron-air battery isn’t the only player targeting 100-plus hours of low-cost energy storage. In that piece, I highlighted Noon Energy, a startup that recently demoed its solid-oxide fuel cell system. But there’s another company aiming to compete even more directly with Form by bringing its own iron-air battery to the European market: Ore Energy. And it just completed a grid-connected pilot, something Form has yet to do.
Ore piloted its 100-hour battery at an R&D center in France run by EDF, the state-owned electric utility company. While the company didn’t disclose the battery’s size, it said the pilot demonstrated its ability to discharge energy continuously for about four days while integrating with real-world grid operations. The test was supported by the European Union’s Storage Research Infrastructure Eco-System, which aims to accelerate the development of innovative storage solutions, and builds on the startup’s earlier grid-connected installation at a climate tech testbed in the Netherlands last summer.
Founded in 2023, Ore plans to scale quickly. As Bas Kil, the company’s business development lead, told Latitude Media after its first pilot went live, “We’re not planning to do years and years of pilot-scale [projects]; we believe that our system is now ready for commercial deployment.” According to Latitude, Ore aims to reach 50 gigawatt-hours of storage per year by 2030, an ambitious goal considering its initial grid-connected battery had less than one megawatt-hour of capacity. So far, the company has raised just shy of $30 million to date, compared to Form’s $1.2 billion.
Battery storage manufacturer and virtual power plant operator Sonnen, together with the clean energy financing company Solrite, have launched a Texas-based VPP composed exclusively of home batteries. They’re offering customers a Solrite-owned 60-kilowatt-hour battery for a $20 monthly fee, in exchange for a fixed retail electricity rate of 12 cents per kilowatt-hour — a few cents lower than the market’s average — and the backup power capability inherent to the system. Over 3,000 customers have already enrolled, and the companies are expecting up to 10,000 customers to join by year’s end.
The program is targeting Texans with residential solar who previously sold their excess electricity back to the grid. But now that there’s so much cheap, utility-scale solar available in Texas, electricity retailers simply aren’t as incentivized to offer homeowners favorable rates. This has left many residents with “stranded” solar assets, turning them into what the companies call “solar orphans” in need of a new way to make money on their solar investment. Customers without rooftop solar can participate in the program as well, though they don’t get a catchy moniker.