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It’s official: Minnesota Governor Tim Walz got the rose.
On Tuesday morning, after days of frenzied speculation that floated names including Governor Josh Shapiro of Pennsylvania, Arizona Senator Mark Kelly, and Governor Andy Beshear of Kentucky, Kamala Harris announced that Walz’s name will be the one to underline hers on the presumptive Democratic presidential ticket.
Many on the climate left will likely be thrilled by the pick: Of all the finalists reportedly in contention for VP, Walz had the most impressive clean energy and environmental accomplishments. An Army veteran and former congressman of a rural, otherwise conservative Minnesota district, Walz has a record of working across party lines to get things accomplished. In 2009, he memorably voted for the doomed cap-and-trade bill and defended his position to tough crowds of Midwestern farmers and ranchers.
Within months of being sworn in as Governor of Minnesota in 2019, Walz set a goal for his state to get its electricity from 100% carbon-free sources by 2050. At the time, only a few other states had similar goals. “Climate change is an existential threat. We must take immediate action,” Walz argued at the time. “If Washington is not going to lead, Minnesota will lead.”
By the time Walz signed actual emissions legislation into law last year, he’d set an even more ambitious timeline — carbon-free electricity by 2040. The bill also streamlined permitting, set a minimum wage for employees constructing large-scale utility projects, and included an environmental justice provision to keep energy from waste incineration plants in frontline communities from counting toward the 2040 goal. Minnesota continued “crushing it on climate action” in the months that followed, with Walz securing a $2 billion budget package that included grid improvements, solar panels on state-owned buildings, an electric-vehicle rebate program, heat pump grants and rebates, a green bank, and more. He also signed a transportation bill to overhaul transit hubs, expand passenger rail service, improve infrastructure, and offer electric bike credits.
And he hasn’t stopped. Earlier this summer, Walz announced a $200 million grant to reduce food-related pollution, including protecting and restoring carbon-absorbing peatlands, improving food waste programs, and replacing gas-powered agricultural machinery with trucks that run on electricity or clean fuel. The state is also considering bills that would reform building codes to improve access to affordable housing — an issue Walz has taken a personal interest in. Walz is also, apparently, a YIMBY on energy permitting.
YIMBYs to the white house!
"We have permitting that takes too long...and prohibits or makes more expensive doing renewable energy projects. I think that same thing applies to housing. We put up barriers to making it more affordable." - Democratic VP Candidate Tim Walz https://t.co/MAiy3Ct5B5 pic.twitter.com/EnswfMw67g
— Jordan Grimes 🚰 (@cafedujord) August 6, 2024
Walz’s canny communication skills have already been much remarked upon, and he’s openly recognized that many on the left struggle with a messaging problem regarding climate change. “The surest way to get people to buy in is to create a job that pays well in their community,” the governor told Time’s Justin Worland. “All of us are going to have to be better about our smart politics, about bringing people in.”
Walz’s record isn’t spotless, though. During his congressional career, he earned a score of just 75% from the League of Conservation Voters. Earlier this summer, a coalition of 16 environmental groups, including the local Sierra Club chapter, called out Walz and his administration for being too soft on regulation, including state agencies’ reliance on farmers voluntarily complying with nitrate pollution limits, the Minnesota Pollution Control Agency’s failure to adequately police air quality violations from a foundry in a low-income neighborhood, and what the group argued was a flawed permitting process for a crude oil pipeline built through wetlands. North Dakota Republicans — including Governor Doug Burgum, who’s been floated for a potential Trump cabinet — have pressured Walz to include carbon capture as a carbon-free energy technology under the state’s emissions law (currently, decisions over CCS and hydrogen are under the purview of Minnesota’s Public Utilities Commission).
There’s also the small matter that Harris and Walz have to actually win to be able to enact any of their climate goals. At least on paper, the math had looked slightly better for Pennsylvania Governor Shapiro, who is an incredibly popular governor in a must-win state. “Minnesota is very unlikely to be the tipping point state — less than a 1% chance,” Nate Silver wrote Tuesday morning, arguing that Shapiro would have been a better pick despite mounting criticism from progressives.
Within hours of the news, though, the climate left had already enthusiastically circled around Walz. In a statement, Evergreen Action Executive Director Lena Moffitt applauded Walz’s “masterclass in how to govern in a way that meaningfully improves people’s lives and sets the state up for a thriving future.” Cassidy DiPaola, the communications director at Fossil Free Media and a spokesperson for the Make Polluters Pay campaign, likewise acknowledged Walz’s progress on green issues, nodding to his “evolution into a climate champion.” She added that Walz has more than proven himself at the state level and that “his ability to connect climate policy to the everyday concerns of Midwestern and rural voters could prove invaluable in building broader support for climate action.”
That, after all, will be the big question. Early voting for the next president of the United States begins in 41 days.
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And more of the week’s top news about renewable energy conflicts.
1. Nassau County, New York – Opponents of Equinor’s offshore Empire Wind project are now suing to stop construction after the Trump administration quietly lifted its stop-work order.
2. Somerset County, Maryland – A referendum campaign in rural Maryland seeks to restrict solar development on farmland.
3. Tazewell County, Virginia – An Energix solar project is still in the works in this rural county bordering West Virginia, despite a restrictive ordinance.
4. Allan County, Indiana – This county, which includes portions of Fort Wayne, will be holding a hearing next week on changing its current solar zoning rules.
5. Madison County, Indiana – Elsewhere in Indiana, Invenergy has abandoned the Lone Oak solar project amidst fervent opposition and mounting legal hurdles.
6. Adair County, Missouri – This county may soon be home to the largest solar farm in Missouri and is in talks for another project, despite having a high opposition intensity index in the Heatmap Pro database.
7. Newtown County, Arkansas – A fifth county in Arkansas has now banned wind projects.
8. Oklahoma County, Oklahoma – A data center fight is gaining steam as activists on the ground push to block the center on grounds it would result in new renewable energy projects.
9. Bell County, Texas – Fox News is back in our newsletter, this time for platforming the campaign against solar on land suitable for agriculture.
10. Monterey County, California – The Moss Landing battery fire story continues to develop, as PG&E struggles to restart the remaining battery storage facility remaining on site.
A conversation with Biao Gong of Morningstar
This week’s conversation is with Biao Gong, an analyst with Morningstar who this week published an analysis looking at the credit risks associated with offshore wind projects. Obviously I wanted to talk to him about the situation in the U.S., whether it’s still a place investors consider open for business, and if our country’s actions impact the behavior of others.
The following conversation has been lightly edited for clarity.
What led you to write this analysis?
What prompted me was our experience in assigning [private] ratings to offshore wind projects in Europe and wanted to figure out what was different [for rating] with onshore and offshore wind. It was the result of our recent work, which is private, but we’ve seen the trend – a lot of the big players in the offshore wind space are kind of trying to partner up with private equity firms to sell their interests, their operating offshore wind assets. But to raise that they’ll need credit ratings and we’ve seen those transactions. This is a growing area in Europe, because Europe has to rely on offshore wind to achieve its climate goals and secure their energy independence.
The report goes through risks in many ways, including challenging conditions for construction. Tell me about the challenges that offshore wind faces specifically as an investment risk.
The principle behind offshore wind is so different than onshore wind. You’re converting wind energy to electricity but obviously there are a bunch of areas where we believe it is riskier. That doesn’t mean you can’t fund those projects but you need additional mitigants.
This includes construction risk. It can take three to five years to complete an offshore wind project. The marine condition, the climate condition, you can’t do that [work] throughout the year and you need specialized vehicles, helicopters, crews that are so labor intensive. That’s versus onshore, which is pre-fabricated where you have a foundation and assemble it. Once you have an idea of the geotechnical conditions, the risk is just less.
There’s also the permitting process, which can be very challenging. How do you not interrupt the marine ecosystem? That’s something the regulators pay attention to. It’s definitely more than an onshore project, which means you need other mitigants for the lender to feel comfortable.
With respect to the permitting risk, how much of that is the risk of opposition from vacation towns, environmentalists, fisheries?
To be honest, we usually come in after all the critical permitting is in place, before money is given by a lender, but I also think that on the government’s side, in Europe at least, they probably have to encourage the development. And to put out an auction for an area you can build an offshore wind project, they must’ve gone through their own assessment, right? They can’t put out something that they also think may hurt an ecosystem, but that’s my speculation.
A country that did examine the impacts and offer lots of ocean floor for offshore is the U.S. What’s your take on offshore wind development in our country?
Once again, because we’re a rating agency, we don’t have much insight into early stage projects. But with that, our view is pretty gloomy. It’s like, if you haven’t started a project in the U.S., no one is going to buy it. There’s a bunch of projects already under construction, and there was the Empire Wind stop order that was lifted. I think that’s positive, but only to a degree, right? It just means this project under construction can probably go ahead. Those things will go ahead and have really strong developers with strong balance sheets. But they’re going to face additional headwinds, too, because of tariffs – that’s a different story.
We don’t see anything else going ahead.
Does the U.S. behaving this way impact the view you have for offshore wind in other countries, or is this an isolated thing?
It’s very isolated. Europe is just going full-steam ahead because the advantage here is you can build a wind farm that provides 2 or 3 gigawatts – that’s just massive. China, too. The U.S. is very different – and not just offshore. The entire renewables sector. We could revisit the U.S. four or five years from today, but [the U.S.] is going to be pretty difficult for the renewables sector.
What I’m hearing from developers and CEOs about the renewable energy industry after the Inflation Reduction Act
As the Senate deliberates gutting the Inflation Reduction Act’s clean electricity tax credits, renewable energy developers and industry insiders are split about how bad things might get for the sector. But the consensus is that things will undoubtedly get worse.
Almost everyone I talked to insisted that solar and wind projects further along in construction would be insulated from an IRA repeal. Some even argued that spiking energy demand and other macro tailwinds might buffer the wind and solar industries from the demolition of the law.
But between the lines, and beneath the talking points and hopium, executives are fretting that lots of future investments are in jeopardy. And the most pessimistic take: almost all projects will have their balance sheets and time-tables impacted in some way that’ll at minimum increase their budget costs.
“It’s hard to imagine, if the legislation passes in its current form, that it wouldn’t impact all projects,” said Rob Collier, CEO of renewable energy transaction platform LevelTen.
Even industry analysts with the gloomiest views of the repeal say there’s plenty of projects that will keep chugging along and might even become more valuable to investors if they’re close enough to construction or operation. This aligns with recent analysis from BloombergNEF, which found the House bill would diminish our nation’s renewables build-out – but not entirely end its pace.
“The more useful way to break down which project may be hit the hardest is where the projects are going to fall in their development life-cycle,” Collier said. “Projects that have either started construction or have the ability to start construction … are going to very likely rise in terms of their appeal and attractiveness and those projects will be at a premium, if they’re able to skate through the legislative risk and qualify for tax credits.”
There is a more optimistic industry view that believes increased project costs will just be passed along to consumers via higher electricity prices. The American people will in essence have to pick up the tab where the federal tax code left it. Optimists also cite the increased use of power purchase agreements, or PPAs, between renewables developers and entities who need a lot of electricity, like big tech companies. By signing these PPAs, buyers are subsidizing the construction of projects but also insulating themselves from the risk of rising electricity prices.
The most bullish perspective I heard was from Nick Cohen, the CEO of Doral Renewables, who told me deals like these combined with rising premiums for quick energy on the grid may obviate lost credits in a “zero-incentive environment.”
“It’s not the end of the world,” Cohen told me. “If you’re in construction or you’re going to be in construction very soon, you’re fine.”
But Collier called Cohen’s prediction an “experiment” in customers’ willingness to pay for new energy: “If we’re talking about 40%, 50%, 60% of a project’s capital stack now being at risk because of tax credits, those are pretty large price increases.”
I spoke to multiple companies that have been inking massive deals as this legislation has progressed — although many were not nearly as sanguine about the industry’s future prospects as Doral. Like rPlus Energies, which disclosed last week that it closed a commitment for more than $500 million in tax equity investments for a solar and storage project in Utah. rPlus CEO Luigi Resta told me that the legislation “certainly has posed concern from our investors and from the organization” but the project was so far along that the tax equity investment market wasn’t phased by the bill.
“Many people in my company, myself included, have been doing this for more than 20 years. We’ve seen the starts and stops related to ITC and PTC in solar and wind, in multiple cycles, and this feels like another cycle,” Resta told me. “When the IRA passed, everybody was exuberant. And now the runway looks like it may have a cliff. But for us, our mantra since the beginning of the year has been ‘proceed with caution, preserve and protect.’”
However, crucially, it is important to focus on how that caution looks: Resta told me the company has completely paused new contracting while the company is completing the projects it is currently developing.
One government affairs representative for a large and prominent U.S. renewables developer, who spoke on the condition of anonymity to preserve relationships, told me that “whatever rollback occurs will just result in higher electricity prices over time.” In the near term, the only language that would truly gut projects in progress today would be “foreign entity of concern” restrictions that would broadly impact any component even remotely connected to Chinese industries. Similar language all but kneecapped the entire IRA electric vehicle consumer credit.
“It included definitions of what it means to be a foreign company that were really vague,” the government affairs representative said. “Anyone who does any business with China essentially can’t benefit from the credit. That was a really challenging outcome from the House that hopefully the Senate is going to fix.” If this definition became law, this source said, it would be the final straw that “freezes investment” in renewable energy projects.
Ultimately, after speaking to CEO after CEO this week, I’ve been left with an impression that business activity in renewables hasn’t really subsided after the House bill passed, and that it’ll be the Senate bill that undoubtedly defines the future of renewable energy for years to come.
Whether that chamber remains the “cooling saucer” it once was will be the decider.