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Pacific Gas & Electric is one of the oldest and largest utilities in the United States. It’s also one of the most notorious.
The company serving Northern California was driven into bankruptcy after being found liable for the deadly 2018 Camp Fire, which destroyed the town of Paradise, California. After restructuring and emerging in 2020, it was again found liable for the 2021 Dixie Fire. Needless to say, PG&E has since gotten the message that it needs to better fortify its equipment and surrounding environment. So while utilities aren’t generally renowned for their enthusiastic adoption of novel technologies, PG&E has been going all in on startups that can help prevent future disasters.
“More than half of our northern and central California service areas are within high fire threat areas, and a third of our assets are located in those areas,” PG&E spokesperson Paul Doherty told me. While PG&E’s service area doesn’t overlap with the L.A. fires, the growing list of gridtech and climate tech companies that it’s partnered with could serve as an example for other utilities in the state and country as a whole. In PG&E’s catalogue are vegetation management robots, power pole sensors, advanced fire detection cameras, and autonomous drones, with much of this enhanced by an artificial intelligence-powered analytics platforms.
In some ways, the 120-year-old utility is starting to act like a tech incubator. It hosted its first-ever innovation summit in 2023, where Doherty said it held a Shark Tank-style pitch fest to source ideas for a variety of grid challenges, including wildfire-related ones like system monitoring and vegetation management, ultimately receiving over 600 applications. Out of that, PG&E chose 24 concepts to move forward with in some form.
“My experience has been that they’re very focused on reducing risk,” Dave Winnacker, co-founder of the AI-powered risk visualization and mitigation platform XyloPlan, told me. “That attention is probably focused by the fact that they were held accountable and they had significant monetary losses, reputational losses.”
Last year, XyloPlan partnered with PG&E to pilot its software in the wildfire-prone Lake County, California. The platform provides insight into the areas most at risk from fast-moving fires, which Winnacker told me are much more damaging to communities and critical infrastructure than hot fires, known to be more destructive in forests. “So in our model and our future state, you can still have plenty of fire on the landscape, and you can even have plenty of fast-moving fire, but we have prioritized treatments that would disrupt those fast-moving fires that have the greatest consequences,” Winnacker, the former fire chief of the Moraga-Orinda Fire District, told me. XyloPlan’s algorithm makes recommendations on where various resiliency efforts such as vegetation management would have the greatest impact.
Winnacker acknowledges though that for utilities, “it’s really difficult and risky to take something new on.” Not only could money be wasted if it doesn’t work out, but as Winnacker told me, “It can be perceived as an admission of your doing things wrong before. The tendency to assign blame makes it harder to adopt new and innovative things.”
“I think the toughest thing for a utility is to trust a technology,” Christina Park, senior director of energy strategy at the autonomous drone company Skydio, told me. A former veteran of the utility industry herself, Park spent 15 years at the New York Power Authority and understands why utilities would be reluctant to tweak at least formerly reliable services and infrastructure that millions of households depend upon. But as climate change brings drought and more extreme weather, and as utility infrastructure ages, evolution seems like the only option. “Based on all the confluence of factors that are kind of putting their backs against the wall, they are more open to change,” Park told me. “It’s just not possible to keep doing things the old way.”
Skydio, which was last valued at $2.2 billion after its 2023 Series E funding round, operates in three main markets — defense, public safety, and utilities. PG&E has been a customer of the company since 2022, and became the first California utility to conduct fully remote drone inspections of its assets in 2023. This was made possible after the utility secured a much-coveted waiver from the Federal Aviation Administration that allows it to fly drones beyond the visual line of sight.
“An operator could fly a drone to a location that’s up over a mountain, right up over super steep, rugged terrain that would normally be really hard to access via helicopter, via foot, via vehicle, and now we have the capability to go inspect that,” Doherty told me. Six navigation cameras as well as onboard artificial intelligence and advanced computing allow Skydio drones to operate autonomously, docked and deployed at PG&E substations.
Park told me that PG&E, which has had a drone program since 2019, has used its aviation expertise to help Skydio develop key capabilities. “They have the knowledge in the drone space to really ask for more advanced features — being able to pick out when there is a zoom quality that they would really like to see or a certain lens.” After Skydio’s drones gather reams of visual data, algorithms can pinpoint the location and severity of any infrastructural defects. PG&E has developed its own A.I. model in house to do this.
PG&E is far from alone in its excitement over Skydio’s capabilities. The dronemaker has over 200 utility partnerships to date, and Park told me that across all of them she’s seeing more and more integration of new tech into the standard workflow. “Their business as usual, it just looks different than it did five years ago,” she told me. But while there might be an increased appetite in the industry for novel solutions, Winnacker warns that there are numerous logistical and financial barriers that can get in the way of promising tech moving from pilot to full-scale implementation.
“The challenge on these things always is that the benefit is very widespread, but there has to be someone who is the lead, and ultimately someone has to make the investment,” Winnacker told me. “That’s challenging, because there is a federal component, there’s a state component, there’s a local government component, there’s a non-government, land-owning agency component, and then there’s a small private property component. We have to mesh all of these.”
Sometimes, good companies with good ideas can languish as these various stakeholders with different perspectives and priorities wait for someone else to step up and foot the bill. As of now, Winnacker said he doesn’t know if PG&E is going to make a more significant investment in XyloPlan, although he said last year’s partnership proved fruitful.
But if PG&E does move forward with XyloPlan, or any other gridtech or wildfire mitigation tech for that matter, the success of that program will depend not just on the utility, but also on all the other governmental and non-governmental players that Winnacker mentioned. “There’s a need for really tight alignment, so that the work of one group compliments the other, and we don’t end up in this disjointed manner, where a lot of effort is occurring, but because it’s not coordinated, it’s not aligned, you don’t get that the reinforcing benefit of the network,” Winnacker told me.
Not to mention the fact that in rural and urban areas alike, there’s always competing demands and only so much money to go around. Especially in a state like California, which is facing a severe housing crisis, the perpetual question of prioritization looms over every budget decision. And while tech companies often promise to save utilities money in the long term — via both efficiency gains and avoided disaster costs — implementing new programs often means big upfront expenses, which typically leads to higher customer rates. And, well, everybody hates that.
Suffice it to say, there’s no perfect solution here, but inaction is the worst option of all. As Winnacker put it, “you eat an elephant one bite at a time.” So as Los Angeles recovers from some of the most destructive fires in the state’s history and utilities across the state open themselves up to new ways of doing business, “we need to start with these small bites to get moving so that we can get past the either nothing can be done, this is an act of nature discussion or this pie in the sky, oh, you know, a single tech silver bullet will just make this problem go away,” Winnacker told me.
“This is an all of the above approach, and the time is probably now, with regard to having everyone’s undivided attention on this for a very brief period of time.”
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Between the budget reconciliation process and an impending vote to end California’s electric vehicle standards, a lot of the EV maker’s revenue stands to go poof.
It’s shaping up to be a very bad week for Tesla. The House Committee on Energy and Commerce’s draft budget proposal released Sunday night axes two of the primary avenues by which the electric vehicle giant earns regulatory credits. Congress also appears poised to vote to revoke California’s authority to implement its Zero-Emission Vehicle program by the end of the month, another key source of credits for the automaker. The sale of all regulatory credits combined earned the company a total of $595 million in the first quarter on a net income of just $409 million — that is, they represented its entire margin of profitability. On the whole, credits represented 38% of Tesla’s net income last year.
To add insult to injury, the House Ways and Means committee on Monday proposed eliminating the Inflation Reduction Act’s $7,500 consumer EV tax credit, the used EVs tax credit, and the commercial EVs tax credit by year’s end. The move comes as part of the House’s larger budget-making process. And while it will likely be months before a new budget is finalized, with Trump seeking to extend his 2017 tax cuts and Congress limited in its spending ability, much of the IRA is on the chopping block. That is bad news for clean energy companies across the spectrum, from clean hydrogen producers to wind energy companies and battery manufacturers. But as recently as a few months ago, Tesla CEO Elon Musk was sounding cavalier.
After aligning himself with Trump during the election, Musk came out last year in support of ending the $7,500 consumer EV tax credit, along with all subsidies in all industries generally. He wrote on X that taking away the EV tax credit “will only help Tesla,” presumably assuming that while his company could withstand the policy headwinds, it would hurt emergent EV competitors even more, thus paradoxically helping Tesla eliminate its competition.
While it looks like Musk will get his wish, he probably didn’t account for a small but meaningful carveout in the Ways and Means committee proposal that allows the tax credit to stand through the end of 2026 for companies that have yet to sell 200,000 EVs in their lifetime. While Tesla’s sales figures are orders of magnitude beyond this, the extension will give a boost to its smaller competitors, as well as potentially some larger automakers with fewer EV sales to their credit.
A number of other provisions in the Ways and Means committee’s proposal spell bad news for Tesla and EV automakers on the whole. These include the elimination of the $4,000 tax credit for used EVs as well as the $7,500 tax credit for commercial EVs — which leased cars also qualify for. This second credit, often referred to as the “leasing loophole,” allows consumers leasing EVs to redeem the full tax credit even if their vehicle doesn’t meet the domestic content requirements for the buyer’s credit. The committee also wants to phase out the advanced manufacturing tax credit by the end of 2031, one year earlier than previously planned. While not a huge change, this credit incentivizes the domestic production of clean energy components such as battery cells, battery modules, and solar inverters — all products Tesla is heavily invested in.
The domestic regulatory credits that comprise such an outsize portion of Tesla’s profits, meanwhile, come from a mix of state and federal standards, all of which are under attack. These are California’s Zero-Emission Vehicle program, which sets ZEV production and sales mandates, the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy standards, and the Environmental Protection Agency’s greenhouse gas emissions standards.
While the mandates differ in their ambition and implementation mechanisms, all three give automakers credits when they make progress toward EV production targets, fuel economy standards, or emissions standards; exceed these requirements, and automakers earn extra credits. Vehicle manufacturers can then trade those additional credits to carmakers that aren’t meeting state or federal targets. Since Tesla only makes EVs, it always earns more credits than it needs, and many automakers rely on buying these credits to comply with all three regulations.
It’s unclear as of now whether lawmakers have the authority to eliminate the federal fuel efficiency and greenhouse gas emissions standards via budget reconciliation. A Senate stricture known as the Byrd Rule mandates that provisions align with the basic purpose of the reconciliation process: implementing budgetary changes; those with only “incidental” budgetary impacts can thus be deemed “extraneous” and excluded from the final bill. It’s yet to be seen how the standards in question will be categorized. At first blush, fuel efficiency and greenhouse gas emissions standards are a stretch to meet the Byrd Rule, but that determination will take weeks, or even potentially months to play out.
What’s for sure is that California’s ZEV program cannot be eliminated through this process, as the program derives its authority from a Clean Air Act waiver, which was first granted to the state by the Environmental Protection Agency in 1967. This waiver allows California to set stricter emissions standards than those at the federal level because of the “compelling and extraordinary circumstances” the state faces when it comes to air quality in the San Joaquin Valley and Los Angeles basin. California’s latest targets — which require all model year 2035 cars sold in the state to be zero emissions — have been adopted by 11 other states, plus Washington D.C.
These increasingly ambitious goals would presumably cause the tax credits market — and thus Tesla’s profits — to heat up as well, as most automakers would struggle to fully electrify in the next 10 years. But the House voted at the beginning of the month to eliminate California’s latest EPA waiver, granted in December of last year. Now, it’s up to the Senate to decide whether they want to follow suit.
To accomplish this task, Republicans have called upon a legislative process known as the Congressional Review Act, which allows Congress to overturn newly implemented federal rules. Senate Majority Whip John Barrasso, for one, has been vocal about using the process to end California’s so-called “EV mandate,” writing in the Wall Street Journal last week that “it’s time for the Senate to finish the job.” And yet other Senate Republicans are reluctant to attempt to roll back California’s waiver. The Government Accountability Officeand the Senate Parliamentarian have both determined that the regulatory allowance ought not to be subject to the Congressional Review Act as it’s an EPA “order” rather than a “rule.” Going against this guidance could thus set a precedent that gives Congress a broad ability to gut executive-level rules.
During his first term, Tesla CEO Elon Musk stood in firm opposition to efforts to roll back fuel efficiency standards. But lately, as the administration has started turning its longstanding anti-EV rhetoric into actual policy, Trump’s new best friend has been relatively quiet. Tesla’s stock is down about 25% since Trump took office, as investors worry that Musk’s political preoccupations have kept him from focusing on his company’s performance. Not to mention the fact that Musk's enthusiastic support for Trump, major role in mass federal layoffs, and, well, whole personality have alienated his liberal-leaning customer base.
So while Musk may have staged a Tesla showroom on the White House lawn in March, awing the President with the ways in which “everything’s computer,” he’s presumably well aware of exactly how Trump’s policies — and his own involvement in them — stand to deeply hurt his business. Whether Tesla will make it through this regulatory onslaught and self-inflicted brand damage as a profitable company remains to be seen. But with Musk planning to slink away from the White House and back into the boardroom, and with House leaders hoping to complete work on the reconciliation bill by Memorial Day, we should start to get answers soon enough.
On gutting energy grants, the Inflation Reduction Act’s last legs, and dishwashers
Current conditions: Eighty of Minnesota’s 87 counties had red flag warnings on Monday, with conditions expected to remain dry and hot through Tuesday • 15 states in the South and Midwest will experience “extreme” humidity this week • It will be 99 degrees Fahrenheit today in Emerson, Manitoba. The municipality hit 100 last weekend — the earliest in the year Canada has ever recorded triple digits.
Republicans on the House Committee on Energy and Commerce released their draft budget proposal on Sunday night, and my colleague Matthew Zeitlin dove into its widespread cuts to the Inflation Reduction Act and other clean energy and environment programs. Among the rescissions — clawbacks of unspent money in existing programs — and other proposals, Matthew highlights:
Those are just a few of the cuts, which the Sierra Club estimates would add up to $1.6 billion for programs related to decarbonizing heavy industry alone. You can read Matthew’s whole analysis here.
Republicans on the Committee on Energy and Commerce weren’t the only ones who’ve been busy. On Monday, the House Ways and Means Committee, which oversees tax policy, proposed overhauling clean energy tax credits. Heatmap’s Emily Pontecorvo took a look at those proposals, including:
There’s much more, which Emily gets into here.
In response to President Trump’s executive order last week ordering the Energy Department to “eliminate restrictive water pressure and efficiency rules” for appliances, the DOE published a list of 47 regulations on Monday that it has targeted as “burdensome and costly.” Appliances regulated by the DOE’s list include cook tops, dishwashers, compressors, and microwave ovens, with the agency claiming the deregulation effort would cut 125,000 words from the Code of Federal Regulations and “save the American people an estimated $11 billion,”The New York Timesreports. By the government’s own accounting, though, efficiency standards saved the average American household about $576 on energy and gas bills in 2024, and reduced energy spending for households and businesses by $105 billion in total. “If this attack on consumers succeeds, President Trump would be raising costs dramatically for families as manufacturers dump energy- and water-wasting products into the market,” Andrew deLaski, executive director of the Appliance Standards Awareness Project, said in a statement. “Fortunately, it’s patently illegal, so hold your horses.”
Environmental Protection Agency administrator Lee Zeldin said Monday that the Trump administration plans to target stop-start technology in cars. According to the EPA’s website, start-stop technology saves fuel “by turning off the engine when the vehicle comes to a stop and automatically starting it back up when you step on the accelerator,” improving fuel economy by 4% to 5%, especially in conditions like stop-and-go city driving. Zeldin, though, characterized the technology as when “your car dies at every red light so companies get a climate participation trophy. EPA approved it, and everyone hates it, so we’re fixing it.” Neither Zeldin nor the EPA offered further details on what that might entail.
More than 2,100 climate adaptation companies generated a combined $1 trillion in revenue last year by offering products and services mitigating the risks of climate change, a new study by London Stock Exchange Group found. “One question that we are getting a lot at the moment is: ‘With the Trump administration in office, what does that mean for the green economy?,’” Jaakko Kooroshy, LSEG’s global head of sustainable investment research, told Bloomberg in an interview about the report. The answer is “this thing is now so big and so robust, it’s not going to implode just like that,” he added.
The analysis looked at 20,000 companies worldwide and “found that adaptation-related revenues last year accounted for roughly a fifth of the $5 trillion global green economy,” with green buildings and water-related infrastructure being the most significant contributors, Bloomberg adds. LSEG further noted that if all companies related to the “green economy” were considered their own industry group, they’d have had the best performance of any equity sector over the past decade.
Thermasol
Wellness company Thermasol has introduced the first off-grid, solar-powered sauna in the U.S., which can reach 170 degrees Fahrenheit in about half an hour.
Rob and Jesse digest the Ways and Means budget bill live on air, alongside former Treasury advisor Luke Bassett.
The fight over the Inflation Reduction Act has arrived. After months of discussion, the Republican majority in the House is now beginning to write, review, and argue about its plans to transform the climate law’s energy tax provisions.
We wanted to record a show about how to follow that battle. But then — halfway through recording that episode — the Republican-controlled House Ways and Means Committee dropped the first draft of its proposal to gut the IRA, and we had to review it on-air.
We were joined by Luke Bassett, a former senior advisor for domestic climate policy at the U.S. Treasury Department and a former senior staff member at the Senate Committee on Energy and Natural Resources. We chatted about the major steps in the reconciliation process, what to watch next, and what to look for in the new GOP draft. Shift Key is hosted by Jesse Jenkins, a professor of energy systems engineering at Princeton University, and Robinson Meyer, Heatmap’s executive editor.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Jesse Jenkins: Let’s come back to this as a negotiation. This is the first salvo from the House. What does this tell you about where we go from here? Is this a floor? Could it get worse? Is it likely to get better as the lobbying kicks off in earnest by various industries threatened by these changes, and they try to peel things back? What do you think happens next?
Luke Bassett: If you run with the horror movie analogy here, this is scary. I think a lot of people, especially in any energy startups or folks who have been penciling out deals, to start really lining up new projects — or even folks looking for a new EV to buy are suddenly going to have to totally rethink what the next few years look like.
And, you know, whether or not they want to build a factory, buy a car, or have to switch from an electric heat pump to a whale oil burning stove. Who knows? That said, there are champions for each of these in very different ways in the Senate. There are lobbyists who —
Jenkins: — in the House, too.
Bassett: Exactly. There will be lobbyists weighing in. And I think it matters to really think through … I think we’ve been faced with gigantic uncertainty since January. And there’s a part where companies all across the energy sector are looking at this text as we speak and thinking, whoa, I didn’t sign up for this. And to combine this with tariffs, to combine it with the cuts to other federal programs in the other committees’ jurisdictions, it is just a nearly impossible outlook for building new projects. And I bet a bunch of people, CEOs and otherwise, are thinking, I wish Joe Manchin were back in the Senate. But you know, it is what it is.
Robinson Meyer: I will say that it could get worse from here because they will be negotiating with the House Freedom Caucus and with various other conservative House members. And they’ll also be negotiating against the president’s wishes, which is that this move and get done as soon as possible. And so when I talked to Senator John Curtis, Republican of Utah, who’s a supporter of the IRA, or wants to see it extended in large part, and I asked him questions like, what happens if Republicans really go to work in the House on the IRA and then it gets sent to the Senate? One dynamic we’ve already seen during this Congress is that te House Republican Caucus in this Congress is unusually functional and unusually strategic, and has been unusually good at passing relatively extreme and aggressive policy and then jamming the Senate with it.
And unlike what has happened in the past, which is the House Republican Caucus can’t really do anything, so the Senate passes a far more moderate policy, sends it to the House and dares the House to shut things down. This time the House, if folks remember back in March, the House passed a fairly aggressive budget and kicked it to the Senate and then dared the Senate to shut down the government, and ultimately the Senate decided to keep the government open.
I asked Curtis what happens if they do the same with the IRA. What happens if they really go to task on the IRA? They pass fairly aggressive cuts to it and they send it to the Senate. And his answer was, well, I don’t think the House is going to do that. I don’t think a bill that really savages the IRA could pass the House.
We’ll see, but I just don’t think there’s any floor here. I think there’s no floor for how bad this gets. And I think I just don’t, you know … Before we went into the administration, there was a lot of confidence that the Trump administration and the new Republican majority and the Congress was not going to do anything to substantially make the business environment worse. We’ve discovered there does seem to be a degree of tariffs that will make them squeal and pull back, but we actually haven’t found that in legislature yet.
Music for Shift Key is by Adam Kromelow.