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And that’s on top of the constitutional questions.
One of the biggest stories of the new Trump administration is the president’s attempt to block congressionally mandated spending. So far, most of the discussion over this freeze has focused on whether it violates federal law and the Constitution. But another front is likely to open soon in that legal battle — and it has received much less attention.
On his first day in office, Trump froze all federal spending tied to the Inflation Reduction Act and the $1 trillion infrastructure law passed during Joe Biden’s presidency. Although Trump has since relented on other spending freezes — such as a short-lived block on virtually all federal payments — he has continued to withhold these energy, climate, and infrastructure funds, even after a federal judge ordered their release on Monday.
Continuing this freeze for longer than 45 days would take an act of Congress, and it’s unclear whether the Trump administration intends to get one. It seems to be gearing up to fight a Supreme Court battle over whether the president has an inherent “impoundment” authority to block federal funding unilaterally (more on that later).
That constitutional fight will obviously be extremely important. But as hundreds of CEOs and local government officials are now surely realizing, this battle is not the only legal front on which the Trump administration’s spending freeze will be fought.
That is because — as long as the freeze continues — the Trump administration is going to start violating hundreds or even thousands of contracts and legally binding spending agreements. The Trump spending fight is not only about policy and the Constitution, in other words, but also about contract law.
The companies and local governments that are now being strung along by the Trump administration did not make a vague handshake agreement with the Biden administration. Instead, they signed a contract with the federal government to receive a certain amount of money in exchange for doing a certain activity. The administration might have changed since then. But the government is still bound by its debts and obligations.
Those companies have now spent money — in some cases more than tens of millions of dollars — to fulfill their side of the contract. They have bought equipment, purchased land, and hired workers. Those companies’ contracts with the federal government are as legally binding as any other contract between two parties — and the courts are as empowered to defend those contracts as they are any others.
There is a significant amount of money tied up in these agreements. By the end of 2024, the Biden administration had “obligated” more than $96 billion of grants from the Inflation Reduction Act, while the Department of Energy’s loans office had “finalized” more than $60 billion in lending. Both terms generally mean that a contract has been signed.
As Heatmap has written before, just because the government has signed a contract for a certain amount of money doesn’t mean that the money has gone out the door. Many federal contracts are designed, basically, as ongoing invoicing relationships: A private party agrees to do something for the government, the private party does it, and then the private party brings back its receipts and asks the government for reimbursements.
The government has been refusing to make those private parties whole, even though those private parties have kept up their side of their agreements. (Note that at no point, ever, has the Trump administration claimed on the record that the private entities it’s now refusing to pay are in breach of contract. It is simply saying that it would rather not pay them just yet for political reasons.)
This has several important consequences for what is about to happen next.
The first is that the Trump administration is about to face dozens and perhaps hundreds of lawsuits over breach of contract. The president cannot simply announce that the contracts are void, like Michael Scott declaring bankruptcy in The Office. If the president or his officials want to cut off funding to IRA and infrastructure law grant and loan recipients, then they will need to give specific reasons under the contract for terminating and then defend those claims in court — provided that the recipient sues. Under a law called the Tucker Act, companies can sue the federal government for breaching a contract in the Court of Federal Claims, a special court in Washington, D.C. These lawsuits will not be about MAGA policies, but rather about the facts of each contract and whether the parties are in compliance with them.
At the same time, the Trump administration will likely be waging a fight over “impoundment.” Some officials in the Trump administration — including Russ Vought, the Project 2025 architect who now leads the White House budget office — profess that the president has an inherent authority that allows him to unilaterally block federal funding. This is despite the fact that the Constitution does not mention such a capacious authority, and the Supreme Court has historically rejected other presidential ploys, such as President Bill Clinton’s use of the line-item veto, to accept some parts of the federal budget and ignore others.
This will create, at least at first, a two-track legal fight over the Trump administration’s spending freeze. At the high level, President Trump will be fighting over the political and constitutional question of whether he can unilaterally block funding that has been appropriated by Congress. But at the lower level, federal agencies may be sparring with hundreds of companies about whether they can wriggle their way out of the contracts they have already signed. These dozens of potential smaller fights will command an enormous amount of time and personnel attention — not only from the companies, nonprofits, and local governments trying to secure what they are owed, but also from the Trump administration, which has finite resources.
These skirmishes will have economic consequences — and while these might be small in the context of America’s $29 trillion economy, they will gradually deepen. By refusing to honor its contracts, the Trump administration is forcing private companies to bear public costs. Those companies will delay hiring employees and investing in new equipment as they await repayment; some will furlough workers and go bankrupt. The burden will become more and more significant every day that the Trump administration continues its spending freeze.
These costs will not be randomly distributed through the economy, but rather concentrated primarily in sectors located in rural areas and affecting working-class Americans. Professional environmentalists in Seattle will continue to have a job regardless of what happens to some rural school district’s microgrid project. But the construction workers and electricians set to build that grid will lose income.
For this reason, the energy and infrastructure freeze does not strike me as a very wise move, politically — particularly as U.S. economic sentiment is worsening. One reason it is politically prudent for lawmakers, and not the president, to make spending decisions is that representatives understand their districts much better than federal officials in Washington, D.C.
This suggests the final takeaway: The Trump administration is beginning to play a very dangerous game with the United States. The American economy’s strength and prosperity arises from its territorial resource wealth, its educated and productive workforce, its secure defensive position, and — crucially — a set of financial intangibles that are ultimately backed up by federal contracts. The federal government is the largest counterparty in the global economy because it can be relied upon to pay its debts. If it begins to back out of contracts hither and thither, especially if primarily for partisan political reasons, then it will ultimately damage every American.
This is not a new or novel thought. Writing in 1790, Treasury Secretary Alexander Hamilton said that the “punctual performance of contracts” was the key to maintaining the United States’ good credit. “States, like individuals, who observe their engagements, are respected and trusted: while the reverse is the fate of those who pursue an opposite conduct,” he said. “Every breach of the public engagements, whether from choice or necessity, is in different degrees hurtful to public credit.”
It isn’t unusual for new administrations to pause some spending at the beginning of their terms, and perhaps the Trump administration will soon prove the worriers wrong and lift the spending freeze. But I fear it will not. It is very possible that in the next several months, the administration will begin to breach dozens of its public engagements. This will hurt the energy, automaking, and construction sectors in the near term. It will cause grief for the president — and, I worry, all of us — soon after.
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The department creates a seemingly impossible new permitting criteria for renewable energy.
The Interior Department released a new secretarial order Friday saying it may no longer issue any permits to a solar or wind project on federal lands unless the agency believes it will generate as much energy per acre as a coal, gas, or nuclear power plant.
Hypothetically, this could kill off any solar or wind project going through permitting that is sited on federal lands, because these facilities would technically be less energy dense than coal, gas, and nuclear plants. This is irrespective of the potential benefits solar and wind may have for the environment or reducing carbon emissions – none of which are mentioned in the order.
“Gargantuan, unreliable, intermittent energy projects hold America back from achieving U.S. Energy Dominance while weighing heavily on the American taxpayer and environment,” Interior Secretary Doug Burgum said in a statement included in a press release announcing the move. “By considering energy generation optimization, the Department will be able to better manage our federal lands, minimize environmental impact, and maximize energy development to further President Donald Trump’s energy goals.”
Here’s how this new regime, which I and many in the energy sector are now suddenly trying to wrap their heads around, is apparently going to work: solar and wind facilities will now be evaluated based on their “capacity density,” which is calculated based on the ratio of acres used for a project compared to its power generation capacity. If a project has a lower “capacity density” than what the department considers to be a “reasonable alternative,” then it may no longer be able to get a permit.
“On a technology-neutral basis,” the order states, “wind and solar projects use disproportionate Federal lands relative to their energy generation when compared to other energy sources, like nuclear, gas, and coal.” The document going on to give an example, claiming that data from the U.S. Energy Information Administration shows an advanced nuclear plant uses less federal acreage than an offshore wind farm and “thus, when there are reasonable alternatives that can generate the same amount of or more energy on far less Federal land, wind and solar projects may unnecessarily and unduly degrade Federal lands.” The order also includes a chart comparing the capacity density of wind and solar facilities to conventional nuclear, gas, and coal, as well as geothermal, and claims that these sources are superior as well. The document does not reference hydropower.
There’s also a whole host of other implications in this order. Crucially, does the Interior expect that by choking off the flow of permits, cities and companies will just pony up to build what the Trump administration considers “reasonable alternatives” instead? Is the federal government going to tell communities in Nevada, for example, that they must suddenly build gas plants in the desert instead of solar farms to meet their increasing energy needs?
In any case, much more is coming, as this order simply built off of a separate secretarial order earlier this week commanding staff to prepare a litany of recommendations on ending alleged “preferential treatment” for solar and wind facilities. In other words hold my beer – and hold onto yours, too.
That’s okay for clean energy firms, terrible for manufacturers, and a big risk for everyone.
Over the past few months, you could put together three different — and somewhat conflicting — pictures of the American economy.
For companies exposed to the AI boom, business has been good — excellent, even. The surge in ongoing capital investment into data centers and electricity has been larger than other recent booms, such as the telecom buildout. Electricity demand is soaring, especially in Texas and the Mid-Atlantic. Technology companies have signed power offtake deals with nuclear and hydroelectricity companies. If anything, companies exposed to artificial intelligence are more afflicted by congested supply chains and shortages than by slack demand — see the yearslong waiting lists to get a new transformer or natural gas turbine.
Outside of the AI economy, though, the economy has been a fair bit colder. You might even say it’s been frozen by indecision. When you talk to business leaders, they confess confusion about where things are heading. President Trump’s constantly changing tariffs — and his administration’s mercurial policy shifts — have made it difficult for non-AI-exposed businesses to plan long-term capital investment.
You could hear this view from clean energy manufacturing and traditional fossil firms alike. When I talked to John Henry Harris, the CEO of the medium-duty truck maker Harbinger Motors, for an episode of Heatmap’s Shift Key podcast in June, he told me that his company was just about to shift a production process to Mexico when a last-minute Trump change made it cheaper to keep it in China. Meanwhile, an oil and gas executive recently told the Dallas Federal Reserve: “The Liberation Day chaos and tariff antics have harmed the domestic energy industry. Drill, baby, drill will not happen with this level of volatility.”
But the data contradicted that tepid view. This was the third picture that we were getting of the economy. Through the summer, federal surveys showed an economy that was performing okay. In May, according to the Bureau of Labor Statistics, the U.S. economy added 139,000 jobs; it gained another 147,000 jobs, apparently, in June. The AI boom was clearly contributing to those robust reports. But how could an economy that business leaders otherwise described as difficult be going so well?
Now we can finally square these disparate pictures.
On Friday, the federal government released its newest tranche of job numbers. The headline number was mediocre — the U.S. added a mere 73,000 jobs in July — but the guts of the report were worse. The government revised down its estimate of the May and June reports by a total of 258,000 jobs. With these new numbers in hand, it’s clear that the labor market has essentially stalled out since Liberation Day in April.
The unemployment rate slightly rose to 4.2%, which was in line with what economists predicted.
These new reports clarify that the broader American economy wasn’t actually thriving. Its summer strength was a mirage the whole time. Outside of AI, things are downright frigid. And as President Trump continues to shuffle tariffs and increase trade uncertainty, we can expect conditions to worsen. Trump seems hellbent even on clouding our ability to understand the underlying economy: on Friday afternoon, he fired the Bureau of Labor Statistics commissioner, a career civil servant.
If you squint, you can see a hazy “AI sector” versus “non-AI sector” distinction in the data, even among the energy and decarbonization companies we cover at Heatmap. But it’s not obvious. Contrary to what you might expect when power demand is surging, utility employment was basically flat last month. Heavy and civil engineering construction jobs were up by 6,000, and “nonresidential specialty trade contractors” — a category that can include electricians — gained nearly 2,000 jobs.
But manufacturing lost 11,000 jobs last month, with the motor vehicles industry driving 2,600 of those losses. Mining, quarrying, and oil and gas jobs were down. The Institute of Supply Management report, a private survey of U.S. manufacturing activity, showed the sector shrank in July for the fifth month in a row.
And even though the Department of Government Efficiency’s deferred buyout program for more than 150,000 people has yet to hit, the federal government bled 12,000 jobs.
In a way, the clean energy industry — or at least solar, battery, nuclear, and geothermal developers — might consider themselves lucky. Despite the best efforts of Trump’s officials, and despite the chaos of President Trump’s policies, they have been able to eke through the past few months because of the AI boom. Nearly 70% of all new power-generating capacity added to the U.S. grid in the first quarter of this year came from solar panels, and the government has thrown its weight behind next-generation nuclear and geothermal technologies. A tepid jobs report might even bring some interest rate relief from the Federal Reserve.
But if that AI boom slows down, we should all watch out below.
A conversation with Heather O’Neill of Advanced Energy United.
This week’s conversation is with Heather O’Neill, CEO of renewables advocacy group Advanced Energy United. I wanted to chat with O’Neill in light of the recent effective repeal of the Inflation Reduction Act’s clean electricity tax credits and the action at the Interior Department clamping down on development. I’m quite glad she was game to talk hot topics, including the future of wind energy and whether we’ll see blue states step into the vacuum left by the federal government.
The following conversation has been lightly edited for clarity.
During Trump 1.0 we saw blue states really step into the climate role in light of the federal government. Do you see anything similar taking place now?
I think this moment we’re in – it is a different moment.
How are we handling load growth? How are we making sure consumers are not paying for expensive stranded assets? Thinking about energy affordability? All of those challenges absolutely present a different moment and will result in a different response from state leaders.
But that’s where some of the changes our industry has gone through mean we’re able to meet that moment and provide solutions to those challenges. I think we need aggressive action from state leaders and I think we’ll see that from them, because of the challenges in front of them.
What does that look like?
Every state is different. Take Virginia for example. Five years after we passed the Virginia Clean Economy Act – a big, bold promise of action – we’re not on track. So what are the things we need to do to keep the foot on the accelerator there? This last legislative session we passed the virtual power plant legislation that’ll help tremendously in terms of grid flexibility. We made a big push around siting and permitting reform, and we didn’t quite get it over the finish line but that’s the kind of thing where we made a good foundation.
Or Texas. There’s so much advanced energy powering Texas right now. You had catastrophic grid failure in Hurricane Uri and look at what they’ve been able to build out in response to that: wind, solar, and in the last few years, battery storage, and they just passed the energy waste reduction [bill].
We need to build things and make it easier to build – siting and permitting reform – but it’s also states depending on their environment looking at and engaging with their regional transmission organization.
You saw that last week, a robust set of governors across the PJM region called on them to improve their interconnection queue. It’s about pushing and finding reforms at the market level, to get these assets online and get on the grid deployed.
I think the point about forward momentum, I definitely see what you’re saying there about the need for action. Do you see state primacy laws or pre-emption laws? Like what Michigan, New York, and California have done…
I’m not a siting expert, but the reform packages that work the best include engagement from communities in meaningful ways. But they also make sure you’re not having a vocal minority drowning out the benefits and dragging out the process forever. There are timelines and certainty attached to it while still having meaningful local engagement.
Our industry absolutely has to continue to lean into more local engagement and community engagement around the benefits of a project and what they can deliver for a community. I also think there’s a fair amount of making sure the state is creating that pathway, providing that certainty, so we can actually move forward to build out these projects.
From the federal government’s perspective, they’re cracking down on wind and solar projects while changing the tax credits. Do you see states presenting their own incentives for renewables in lieu of federal incentives? I’ve wondered if that’ll happen given inflation and affordability concerns.
No, I think we have to be really creative as an industry, and state leaders have to be creative too. If I’m a governor, affordability concerns were already front and center for me, and now given what just happened, they’re grappling with incredibly tight state budgets that are about to get tighter, including health care. They’re going to see state budgets hit really hard. And there’s energy impacts – we’re cutting off supply, so we’re going to see prices go up.
This is where governors and state leaders can act but I think in this context of tight state budgets I don’t think we can expect to see states replacing incentive packages.
It’ll be: how do we take advantage of all the flexible tools that we have to help shape and reduce demand in meaningful ways that’ll save consumers money, as well as push on building out projects and getting existing juice out of the transmission system we have today.
Is there a future for wind in the United States?
It is an incredibly challenging environment – no question – for all of our technologies, wind included. I don’t want to sugar-coat that at all.
But I look at the whole picture, and I include wind in this: the technologies have improved dramatically in the past couple of decades and the costs have come down. When you look around at what resources are around to deploy, it’s advanced energy. We’re seeing it continue to grow. There’ll be headwinds, and it’ll be more expensive for all of us. But I look at what our industry and our technologies are able to offer and deliver, and I am confident we’ll continue to see growth.