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Good morning and happy Friday,
On Wednesday, President Trump gave the keynote address at an AI summit in Washington, D.C., after which he signed a trio of executive orders to fast-track data center construction. Observers warn, however, that the president’s AI plan is about to run headfirst into a stressed American electric grid.
Despite surging electricity demand and soaring power prices (see Must Read, below), Trump has “unleashed a regulatory and legislative blitz against wind and solar projects,” including new requirements for “elevated review” and “enhanced oversight” from the Interior department, a move that has sparked concerns about a shadow ban for renewables and which ACP slammed as obstruction.
As debate over the merits of clean energy continues in America, the UN reports that globally, wind and solar have reached a “positive tipping point” and will become “even cheaper and more widespread,” noting that in 2024, “92.5% of all new electricity capacity added to the grid worldwide…came from renewables.”
And no wonder…the latest report from IRENA finds that last year, on average solar PV was “41% cheaper than the lowest-cost fossil fuel alternatives…with renewables helping avoid $467 billion in fossil fuel costs.”
Read on for more.
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Capacity Crunch
Electricity prices are rising across the country, a trend that shows no signs of abating as data center construction continues apace. The latest capacity auction for PJM, the nation’s largest power grid, saw prices spike 22% for the 2026-27 delivery year. Here’s a closer look at the issue:
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The record-setting prices mean PJM will pay $16 billion to secure power supply between June 2026 and May 2027, costs that will be passed on to its 67 million customers.
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As noted in the intro, the Trump administration is working to accelerate data construction, which is expected to exacerbate electricity shortages. Analysts with Capstone say the administration “will likely seize on the auction results to justify keeping thermal power plants, namely coal, in PJM from retiring.”
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This prediction is supported by the fact that some Big Tech companies are turning to natural gas to power their growth, and Wood Mackenzie sees an extended ‘sunset’ for costly coal-fired power; and in related news, FERC has approved fast-track interconnection processes for MISO and SPP that are expected to favor natural gas development.
⚡️ The Takeaway
Who pays the price? States are justifiably concerned that surging energy use from data centers will have serious economic and public health consequences for their populations, who are getting stuck with higher bills and dirtier air. The U.S. is home to more than 3,800 data centers, “but about 80 percent of them are concentrated in 15 states.” Meanwhile, the DOE announced this week the termination of a $4.9 billion loan guarantee for the Grain Belt Express, which is intended primarily to move clean energy and is the largest transmission line currently under development in the U.S. Undeterred, Invenergy says it will move forward with private financing.
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Wait and See
In the aftermath of the OBBB’s passage, wind and solar developers are bracing for the next milestone: guidance from the Treasury Department regarding implementation of the megalaw, which is expected mid-August and will determine eligibility for tax incentives under the reshaped IRA. In a helpful article, E&ENews outlines three big questions on industry participants’ minds:
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The elephant in the room is the definition of “start of construction.” If Treasury’s 2013 ruling that projects incurring 5% of project costs meet the threshold is upended, developers could have to spend much more – or potentially be unable to qualify if they can’t secure deals. A range of other barriers could be introduced; any that pertain to construction and deployment are expected to hit wind harder than solar, since wind projects have longer timelines.
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Foreign entity of concern (FEOC) rules are another “wild card.” It’s anticipated that compliance will require setting up systems to track and trace the provenance of equipment and materials, but this will take time and money, and some projects might still “fail the tests.” Solar projects are expected to be affected more than wind, and BloombergNEF says the best bet is to break ground this year if possible to avoid FEOC obstacles.
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E&E concludes with an overview of current industry forecasts, which range from bleak to not-so-bad. Noting that projects already under construction are unaffected and “the AI boom is expected to keep demand robust for wind and solar over the long term,” a BloombergNEF analyst says “It’s definitely not the death of the industry.”
⚡️ The Takeaway
Projecting serenity. In Q2 earnings calls held this Wednesday, some clean energy CEOs expressed confidence in their ability to “advance projects already in development despite political headwinds in Washington.” Zen-master-in-Chief was NextEra’s John Ketchum, who “projected serenity,” reassuring call participants that the company would be able to cover “our development expectations through 2029,” while noting that smaller companies might not fare as well…a situation that “creates bigger opportunities for us.” Analysts on the call were skeptical the company can avoid taking a tax-credit hit, and in any case, industry leaders need to move fast to respond to the IRA rollback, says one observer.
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Sponge Bob Carbon Rock
If you – or perhaps your kids – are of a certain age, you’re likely familiar with Fraggle Rock, the popular television series. But how about spongy rock?
It turns out that porous sandstone – sometimes colloquially referred to as “spongy rock” – is a great place to store carbon dioxide. Located in Øygarden, a municipality on Norway’s coast (near Bergen), the Northern Lights CO2 transport and storage facility sits about a mile and a half above just such a rock formation.
Backed by Equinor, Shell, and TotalEnergies, as well as the Norwegian government, the project is designed to receive deliveries of liquified carbon dioxide, which might be captured from industrial smokestacks, and then inject it into sandstone that sits 1.6 miles beneath the seabed.
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This summer saw “the world’s first carbon shipment” arrive at Northern Lights. While it was small – just 7,500 metric tons of liquified CO2 – the project’s sponsors say the plant will be able to sequester 5 million metric tons of CO2 annually.
As the New York Times notes, carbon capture has supporters as well as detractors, the latter of which see it as a loophole that allows polluters to continue polluting. But, for “hard-to-clean-up industries such as cement, steel and chemicals,” it offers a “promising way to cut emissions.”
Additional carbon shipments to Northern Lights are planned. For now, the efforts are experimental and subsidized to offset the high costs of carbon capture. And just how “captured” the carbon remains is, ahem, an open question. But as the saying goes, if you don’t try, you’ll never know.
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Thanks for diving into the Developer Dispatch with us.
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Building American power requires a powerful team. |
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