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It’s boom times in carbon management.
There’s a lot of money in carbon management. Like, a lot. Investment in the full suite of technologies designed to capture, store, and transport carbon has skyrocketed this year, according to data from Rhodium Group and Massachusetts Institute of Technology’s Clean Investment Monitor.
Overall investment in clean energy technology — which includes manufacturing of batteries, vehicles, and solar panels, clean energy generation, and retail products like heat pumps — was $284 billion in the last year, with $76 billion in the second quarter of this year alone, a record figure.
The fastest growth came from “emerging climate technologies,” which includes carbon management, which had $3 billion in investment in the second quarter — more than the $1.7 billion invested in wind generation. Compare that to the same time last year, when wind investment stood at $2.6 billion and carbon management investment was just under half a billion dollars. (Solar generation, meanwhile, had $9.3 billion in investment in the second quarter of this year, while storage saw $5.4 billion poured in.)
What changed?
Basically, wind — and its tax incentives — are hardly new to the U.S. economy, and while the Inflation Reduction Act expanded and extended those tax incentives, it was building on an existing policy. And in that post-IRA period up to today (almost exactly two years from the day the law was signed), wind, which requires long construction periods and substantial upfront spending, has been hampered by high interest rates. That’s true for solar, too, although to a lesser extent, explained Trevor Houser, a parter at the Rhodium Group, as wind projects take more time to build and so rely more on borrowed money.
With carbon management, on the other hand, the IRA was a complete gamechanger, hugely boosting the 45Q tax credit for carbon sequestered underground to as much as $85 per metric ton for capturing emissions where they happen, and then to as high $180 per metric ton for direct air capture.
“The majority of the growth that we’re seeing right now is due to that incentive,” Houser told me, as the tax credits have opened up the field to something beyond just using carbon for literal oil drilling.
Jack Andreasen, who runs carbon management policy at Breakthrough Energy, told me basically the same thing. “The boom in carbon management is driven nearly entirely by the support made available in the [Bipartisan Infrastructure Law] and IRA,” he said.
That scale of investment will be necessary to build out any reasonably sized carbon management sector, Andreasen told me. Building out new industrial and generation facilities equipped with carbon capture will be extremely capital-intensive, as will retrofitting existing facilities.
“That is the brilliance and importance of the federal funding — there is money for new builds and for retrofits. And both of these will be key in our net-zero future,” Andreasen said.
But while carbon management does have a fair amount of bipartisan political support, as with any large project, the necessary infrastructure — industrial facilities and especially pipelines — can attract local opposition. The nearly 700-mile-long planned Summit pipeline, which is supposed to link dozens of ethanol plants to a carbon sequestration site in North Dakota, has been strenuously opposed by environmental groups and landowners in Iowa, uniting progressives with a group of Republican lawmakers against the state’s powerbrokers and much of its agribusinesses interests.
“Carbon management does face similar siting and permitting barriers, particularly around pipelines,” to renewables like wind, Houser told me. And while that could potentially slow down development, “it’s starting from a lower base — you can get pretty rapid growth if you’re starting from zero.”
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Elgin Energy Center is back from the dead.
At least one natural gas plant in America’s biggest energy market that was scheduled to shut down is staying open. Elgin Energy Center, an approximately 500 megawatt plant in Illinois approximately 40 miles northwest of downtown Chicago was scheduled to shut down next June, according to filings with the Federal Energy Regulatory Commission and officials from PJM Interconnection, the country’s largest regional transmission organization, which governs the relevant portion of the U.S. grid. Elgin’s parent company “no longer intends to deactivate and retire all four units ... at the Elgin Energy Center,” according to a letter dated September 4 and posted to PJM’s website Wednesday.
The Illinois plant is something of a poster child for PJM’s past few years. In 2022, it was one of many natural gas plants to shut down during Winter Storm Elliott as the natural gas distribution seized up. Its then-parent company, Lincoln Power — owned by Cogentrix, the Carlyle Group’s vehicle for its power business — filed for bankruptcy the following year, after PJM assessed almost $40 million in penalties for failing to operate during the storm. In June, a bankruptcy court approved the acquisition of the Elgin plant, along with one other, by Middle River Power, a generation business backed by Avenue Capital, a $12 billion investment firm, in a deal that was closed in December.
The decision to continue operating the plant past its planned deactivation comes as PJM set a new price record at its capacity auction in July, during which generators submitted bids for power that can be deployed when the grid is under stress due to high demand. The $14.7 billion auction was a massive jump from the previous one, which finished at just over $2 billion. Ironically, one reason the most recent auction was so expensive is that PJM gave less credit to natural gas generators for their capacity following Winter Storm Elliott, which then drove up auction prices, leading to large payouts for gas plants. PJM said the high auction prices were “caused primarily by a large number of generator retirements.”
In a bankruptcy court filing in 2023, Lincoln Power’s chief restructuring officer said that the company “was experiencing a liquidity crunch” due to low prices in past capacity auction, which meant that it had “received significantly less revenues for the capacity they sold in those Capacity Auctions as compared to previous Capacity Auctions.” With higher capacity revenues in PJM, presumably Elgin's business has improved.
Many analysts are skeptical that PJM can quickly get new load onto the system to bring prices down meaningfully in subsequent auctions — the next one is in December — and the PJM queue for new projects is absurdly clogged. This only juices the incentives for older fossil plants to stay open.
“This shortage of capacity is happening immediately,” Nicholas Freschi, senior associate at Gabel Associates, told me last week. “There might be more resources, and PJM might be able to coerce some retiring or not participating plants to make up for the shortfall. It’s an immediate problem.”
Neither Middle River nor its attorney representing the company before FERC returned requests for comment.
In the closing minutes of the first presidential debate tonight, Donald Trump’s attacks on Kamala Harris took an odd, highly specific, and highly Teutonic turn. It might not have made sense to many viewers, but it fit into the overall debate’s unusually substantive focus on energy policy.
“You believe in things that the American people don’t believe in,” he said, addressing Harris. “You believe in things like, we’re not gonna frack. We’re not gonna take fossil fuel. We’re not gonna do — things that are going to make this country strong, whether you like it or not.”
“Germany tried that and within one year, they were back to building normal energy plants,” he continued. “We’re not ready for it.”
What is he talking about? Let’s start by stipulating that Harris has renounced her previous support for banning fracking. During the debate, she bragged that the United States has hit an all-time high for oil and gas production during her vice presidency.
But why bring Germany into it? At the risk of sane-washing the former president, Trump appears to be referencing what German politicians call the Energiewiende, or energy turnaround. Since 2010, Germany has sought to transition from its largest historic energy sources, including coal and nuclear energy, to renewables and hydropower.
The Energiewiende is often discussed inside and outside of Germany as a climate policy, and it has helped achieve global climate goals by, say, helping to push down the global price of solar panels. But as an observant reader might have already noticed, its goals are not entirely emissions-related: Its leaders have also hoped to use the Energiewiende to phase out nuclear power, which is unpopular in Germany but which does not produce carbon emissions.
The transition has accomplished some of its goals: The country says that it is on target to meet its 2030 climate targets. But it ran into trouble after Russia invaded Ukraine, because Germany obtained more than half of its natural gas, and much of its oil and coal besides, from Russia. Germany turned back on some of its nuclear plants — it has since shut them off again — and increased its coal consumption. It also began importing fossil fuels from other countries.
In order to shore up its energy supply, Germany is also planning to build 10 gigawatts of new natural gas plants by 2030, although it says that these facilities will be “hydrogen ready,” meaning that they could theoretically run on the zero-carbon fuel hydrogen. German automakers, who have lagged at building electric vehicles, have also pushed for policies that support “e-fuels,” or low-carbon liquid fuels. These fuels would — again, theoretically — allow German firms to keep building internal combustion engines.
So perhaps that’s not exactly what Trump said, to put it mildly — but it is true that to cope with the Ukraine war and the loss of nuclear power, Germany has had to fall back on fossil fuels. Of course, at the same time, more than 30% of German electricity now comes from wind and solar energy. In other words, in Germany, renewables are just another kind of “normal energy plant.”
Hunter Biden also made an appearance in Trump’s answer to the debate’s one climate question.
Well, it happened — over an hour into the debate, but it happened: the presidential candidates were asked directly about climate change. ABC News anchor Linsey Davis put the question to Vice President Kamala Harris and former President Donald Trump, and their respective answers were both surprising and totally not.
Harris responded to the question by laying out the successes of Biden’s energy policy and in particular, the Inflation Reduction Act (though she didn’tmention it by name). “I am proud that as vice president, over the last four years, we have invested a trillion dollars in a clean energy economy,” Harris noted.
The vice president immediately followed this up, however, by pointing out that gas production has also increased to “historic levels,” under the Biden-Harris administration. This framing, highlighting an all-of-the-above approach to energy, is consistent with Harris’s comments earlier in the debate, whenshe claimed to support fracking and investing in “diverse sources of energy.” Harris went on to reiterate the biggest wins of the Inflation Reduction Act, namely, “800,000 new manufacturing jobs,” and shouted out her endorsement from the United Auto Workers and its President Shawn Fain.
Trump, who earlier in the debate called himself “a big fan of solar” before questioning the amount of land it takes up, started off his response by once again claiming that the Biden-Harris administration is building Chinese-owned EV plants in Mexico (they are not). Then Trump veered completely off topic and rounded out his answer by ranting about Biden (both Joe and Hunter). “You know, Biden doesn’t go after people because, supposedly, China paid him millions of dollars,” Trump noted. “He’s afraid to do it between him and his son, they get all this money from Ukraine.”
Trump’s answer included no reference to climate or clean energy — but it did include a shout out to “the mayor of Moscow’s wife,” so there’s that.