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Companies are racing to finish the paperwork on their Department of Energy loans.
Of the over $13 billion in loans and loan guarantees that the Energy Department’s Loan Programs Office has made under Biden, nearly a third of that funding has been doled out in the month since the presidential election. And of the $41 billion in conditional commitments — agreements to provide a loan once the borrower satisfies certain preconditions — that proportion rises to nearly half. That includes some of the largest funding announcements in the office’s history: more than $7.5 billion to StarPlus Energy for battery manufacturing, $4.9 billion to Grain Belt Express for a transmission project, and nearly $6.6 billion to the electric vehicle company Rivian to support its new manufacturing facility in Georgia.
The acceleration represents a clear push by the outgoing Biden administration to get money out the door before President-elect Donald Trump, who has threatened to hollow out much of the Department of Energy, takes office. Still, there’s a good chance these recent conditional commitments won’t become final before the new administration takes office, as that process involves checking a series of nontrivial boxes that include performing due diligence, addressing or mitigating various project risks, and negotiating financing terms. And if the deals aren’t finalized before Trump takes office, they’re at risk of being paused or cancelled altogether, something the DOE considers unwise, to put it lightly.
“It would be irresponsible for any government to turn its back on private sector partners, states, and communities that are benefiting from lower energy costs and new economic opportunities spurred by LPO’s investments,” a spokesperson wrote to me in an email.
The once nearly dormant LPO has had a renaissance under the Biden administration and the office’s current director, Jigar Shah. The Inflation Reduction Act supercharged its lending authority to $400 billion, from just $40 billion when Biden took office. Then a week after the election, the office announced that it had recalibrated its risk estimates for the loan guarantees that it makes under the Energy Infrastructure Reinvestment program, which works to modernize and repurpose existing energy infrastructure to make it cleaner and more energy efficient. As the office explained, these projects “may reflect a relatively moderate risk profile in comparison to typical projects LPO finances with higher project risk.” When there’s less risk involved, LPO doesn’t have to set aside as much money to cover a possible default, which in this case has allowed the office to more than quadruple its funding for qualifying projects.
It’s not just that LPO staffers are working fast, though that’s part of it — it’s also that loan beneficiaries have picked up their pace in responding to the LPO. As Shah emphasized today at the LPO’s second annual Demonstrate Deploy Decarbonize conference, finalizing conditional commitments largely depends on companies getting their ducks in a row as quickly as possible. “I do think that right now borrowers are sufficiently motivated to move more quickly than they have probably a year ago,” Shah said. “It's up to the borrowers. Our process hasn’t changed. Their ability to move through it faster is in their control.”
Shah noted that though timelines may be accelerating, the office’s due diligence procedures have remained the same. Thus far, the project that has moved the fastest from a conditional commitment to a finalized loan was for a clean hydrogen and energy storage facility in Utah. That took 43 days, and there are 46 left in Biden’s presidency. Let’s see what the LPO can do.
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The leaders of both countries reached deals with the U.S. in exchange for a 30-day reprieve on border taxes.
U.S. President Donald Trump and Mexican President Claudia Sheinbaum announced a month-long pause on across-the-board 25% tariff on Mexican goods imported into the United States that were to take effect on Tuesday.
In a post on Truth Social, Trump said that Sheinbaum had agreed to deploy 10,000 Mexican troops to the U.S.-Mexico border, “specifically designated to stop the flow of fentanyl, and illegal migrants into our Country.” Secretary of State Marco Rubio, Secretary of the Treasury Scott Bessent, and Secretary of Commerce Howard Lutnick will lead talks in the coming month over what comes next.
“I look forward to participating in those negotiations, with President Sheinbaum, as we attempt to achieve a ‘deal’ between our two Countries,” Trump wrote.
In her own statement, Sheinbaum said the U.S. had committed to work on preventing the trafficking of firearms into Mexico.
There has still been no pause on planned tariffs on Canadian imports, which would likely affect the flow of oil, minerals, and lumber, as well as possibly break automobile supply chains in the United States. Canadian leaders announced several measures to counter the tariffs at both the federal and provincial level.
Trump and Canadian Prime Minister Justin Trudeau have spoken today, and are scheduled to do so again this afternoon. Canadian officials are not optimistic, however, that they’ll be able to get a similar deal, a Canadian official told The New York Times.
UPDATE 4:55 p.m. ET: Trudeau announced that he had reached a similar deal that would stave off the imposition of tariffs for a month. Following a “good call” with Trump, Trudeau said in a post on X that he would deploy personnel and resources to his country’s southern border. “Nearly 10,000 frontline personnel are and will be working on protecting the border,” Trudeau wrote. He also said that Canada would have a “Fentanyl Czar” and would “launch a Canada- U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering.”
PJM is projecting nearly 50% demand growth through the end of the 2030s.
The nation’s largest electricity market expects to be delivering a lot more power through the end of the next decade — even more than it expected last year.
PJM Interconnection, which covers some or all of 13 states (and Washington, D.C.) between Maryland and Illinois, released its latest long-term forecast last week, projecting that its summer peak demand would climb by almost half, from 155,000 megawatts in 2025 to around 230,000 in 2039.
The electricity market attributed the increased demand to “the proliferation of data centers, electrification of buildings and vehicles, and manufacturing,” and noted (not for the first time) that the demand surge comes at the same time many fossil fuel power plants are scheduled to close, especially coal plants. Already, some natural gas and even some coal plants in PJM andelsewhere that were scheduled to close have seen their retirement dates pushed out in order to handle forecast electricity demand.
This is just the latest eye-popping projection of forthcoming electricity demand from PJM and others — last year, PJM forecast summer peak demand of about 180,000 megawatts in 2035, a figure that jumped to around 220,000 megawatts in this year’s forecast.
While summer is typically when grids are most taxed due to heavy demand from air conditioning, as more of daily life gets electrified — especially home heating — winter demand is forecast to rise, too. PJM forecast that its winter peak demand would go from 139,000 megawatts in 2025, or 88% of the summer peak, to 210,000 megawatts in 2039, or 95% of its summer peak demand forecast for that year.
Systems are designed to accommodate their peak, but winter poses special challenges for grids. Namely, the electric grid can freeze, with natural gas plants and pipelines posing a special risk in cold weather — not to mention that it’s typically not a great time for solar production, either.
Aftab Khan, PJM’s executive vice president for operations, planning, and security, said in a statement Thursday that much of the recent demand increase was due to data centers growing “exponentially” in PJM’s territory.
The disparity between future demand and foreseeable available supply in the short term has already led to a colossal increase in “capacity” payments within PJM, where generators are paid to guarantee they’ll be able to deliver power in a crunch. These payments tend to favor coal, natural gas, and nuclear power plants, which can produce power (hopefully) in all weather conditions whenever it’s needed, in a way that variable energy generation such as wind and solar — even when backed up by batteries — cannot as yet.
Prices at the latest capacity auction were high enough to induce Calpine, the independent power company that operates dozens of natural gas power plants and recently announced a merger with Constellation, the owner of the Three Mile Island nuclear plant, to say it would look at building new power plants in the territory.
The expected relentless increase in power demand, power capacity, and presumably, profits for power companies, was thrown into doubt, however, when the Chinese artificial intelligence company DeepSeek released a large language model that appears to require far less power than state of the art models developed by American companies such as OpenAI. While the biggest stock market victim has been the chip designer Nvidia, which has shed hundreds of billions of dollars of market capitalization this week, a number of power companies including Constellation and Vistra are down around 10%, after being some of the best stock market performers in 2024.
It’s not just AI companies taking a beating today.
It’s not just tech stocks that are reeling after the release of Chinese artificial intelligence company DeepSeek’s open-source R1 model, which performs similarly to state-of-the-art models from American companies while using less expensive hardware far more efficiently. Energy and infrastructure companies — whose share prices had soared in the past year on the promise of powering a massive artificial intelligence buildout — have also seen their stock prices fall early Monday.
Shares in GE Vernova, which manufactures turbines for gas-fired power plants, were down 19% in early trading Monday. Since the company’s spinoff from GE last April, the share price had risen almost 200% through last Friday, largely based on optimism about its ability to supply higher electricity demand. Oklo, the advanced nuclear company backed by OpenAI chief executive Sam Altman, is down 25%, after rising almost 300% in the past year. Constellation Energy, the independent power producer that’s re-powering Three Mile Island in partnership with Microsoft, saw its shares fall almost 20% in early trading. It had risen almost 190% in the year prior to Monday.
“DeepSeek’s power implications for AI training punctures some of the capex euphoria which followed major commitments from Stargate and Meta last week,” Jefferies infrastructure analyst Graham Hunt and his colleagues wrote in a note to clients Monday. “With DeepSeek delivering performance comparable to GPT-4 for a fraction of the computing power, there are potential negative implications for the builders, as pressure on AI players to justify ever increasing capex plans could ultimately lead to a lower trajectory for data center revenue and profit growth.”
Investors fear that the proliferation of cheaper, more efficient models may hurt the prospects of technology companies — and their suppliers — that are spending tens if not hundreds of billions of dollars on artificial intelligence investments.
Just last week, both Altman and Mark Zuckerberg, the founder and chief executive of Meta, announced huge new investments in artificial intelligence infrastructure.
Altman’s OpenAI is part of Stargate, the joint venture with Microsoft and SoftBank that got a splashy White House-based announcement and promises to invest $500 billion in artificial intelligence infrastructure. There was already some skepticism of these numbers, with Altman-nemesis Elon Musk charging that certain members would be unable to fulfill their ends of the deal, Microsoft Chief Executive Satya Nadella told CNBC from Davos, “I’m good for my $80 billion.”
Zuckerberg, meanwhile, said late last week that his company was building a data center “so large it would cover a significant part of Manhattan,” which would require 2 gigawatts of electricity to power. (For scale, reactors 3 and 4 of the Vogtle nuclear plant in Georgia are a little over 1 gigawatt each.) He also said that Meta had planned up to $65 billion of capital expenditure this year.
These escalating announcements have been manna to investors in any company that provides the building blocks for large artificial intelligence systems — namely chips and energy, with companies like Nvidia, the chip designer, and power companies and energy infrastructure companies posting some of the best stock market performances last year.
But exactly how cheaper artificial intelligence plays out in terms of real investment remains to be seen. Late Sunday night Redmond, Washington-time, Nadella posted a link on X to the Wikipedia page for Jevons Paradox. The idea dates from 19th century Britain, and posits that increased efficiency in using a resource (in Jevons’ case, coal) could actually accelerate its depletion, as the resource becomes cheaper for the same economic output, encouraging more use of it (in Jevons’ case, iron).
“Jevons paradox strikes again!,” Nadella wrote. “As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can't get enough of.”
Investors in chips and energy companies are hoping that’s the case; at least so far, the market doesn’t appear to agree.