When President Trump kicked off an aggressive trade war, a lot of people predicted economic doom. But it didn’t happen.
We’re seeing something similar in clean energy right now with ever-shifting tariffs, half-written rules on foreign sourcing, and the weaponization of permitting. But capital hasn’t fled. In fact, it increased last year. So what is happening here?
According to new market intelligence from the clean energy finance platform Crux, project finance, construction lending, and bridge lending all grew at a modest rate – with renewable electricity and batteries accounting for 80% of activity.
This week, we’re going to take a look at where capital is leaning in, where it’s pulling back, and how new changes to tariffs and foreign sourcing rules will influence the market.
And then we’ll turn to solar and batteries, which are weathering the storm of uncertainty, but still facing plenty of turbulence. What’s driving that resilience?
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Transcript
Caroline Golin: How does your wife deal with that?
Jigar Shah: Oh, no. Well, she deserves real apologies. Stuff on the show, are you kidding me? In business, they may not want to hear it and they may be like, well, I don’t know. You just hurt me on this investment banking transaction. I’m like, it’s not my job to protect you.
Caroline Golin: Well, if anyone’s listening to this podcast before they do final due diligence on an investment and that is demonstratively changing the way they invest, they probably don’t have a very good team.
Jigar Shah: I’ve certainly gotten disinvited to events because of things that I’ve said.
Caroline Golin: Well, yeah, we’re not skiing this month because of that.
Stephen Lacey: We were supposed to be skiing this weekend with a bunch of investors.
Caroline Golin: And now we’re not.
Stephen Lacey: Words matter.
Stephen Lacey: From Latitude Media, this is Open Circuit. When President Trump kicked off an aggressive trade war, a lot of people predicted doom. Tariffs would spike prices, markets would seize, the economy would slow sharply. That didn’t happen. Growth cooled at times, volatility rose, but the system absorbed it. We’re seeing something similar in clean energy right now.
Stephen Lacey: Ever-shifting tariffs. A Supreme Court ruling striking them down and the new ones immediately put in place. Half-written rules on foreign sourcing and energy supply chains. But capital hasn’t fled either. In fact, it increased last year, although at a slower rate.
Stephen Lacey: So what is happening here? This week, we’re going to take a look at where capital is leaning in, where it’s pulling back, how new changes to tariffs and foreign sourcing rules will influence the market. And then turn to solar and batteries, which are weathering the storm of uncertainty, but still facing plenty of turbulence. Let’s dig in.
Stephen Lacey: Welcome to the show. I’m Stephen Lacey, the Executive Editor at Latitude Media. I’m here with my co-host Jigar Shah and Caroline Golin. Jigar, how’s it going?
Jigar Shah: It’s great.
Stephen Lacey: You have been busy. While we have been on February break, Caroline and I have been on February break. You dropped a new project. What are you working on?
Jigar Shah: We have a new podcast called Energy Empire and it’s completely different than Open Circuit, so I’ll be doing both and super excited about our partnership here at Open Circuit. When I looked at the landscape, we focus so much on new technologies and startups and all that stuff, but I don’t think that we really dig into the people behind the $2.2 trillion of investment that goes into deployment every year into climate solutions. And so we launched with Abby Hopper’s exit interview from SEIA. We talked to Dean Solon, who’s one of our few billionaires, and he made another billion on this transformer IPO. It’s crazy how much good stuff is happening in the world, and so it’s been great to work on this new project.
Stephen Lacey: Tell me a little bit more about the thinking behind it, the audience that you’re trying to reach with Energy Empire. So as you said, Open Circuit, we’re very focused on an energy-specific or energy adjacent investment audience. People who are in the business really want to understand the up-to-date current events that are happening in clean energy markets. I think you’re focused a little bit more holistically on telling this greater wealth creation story. So who is it for and tell me more about the thesis.
Jigar Shah: Well, I think as you know, let’s pick a random number, let’s say 500,000 to a million people who care deeply about the broader ecosystem of what’s happening on a day-to-day basis around how we’re getting energy, et cetera. And I would suggest that there’s one thing on the capital flow side. So think big companies like First Solar or Next Power or some of the other folks who are doing great work. But the other side of it is Pakistan changed their entire electricity mix in three years to solar. And you’ve got countries like Brazil, Mexico, India, Indonesia, that moved 10 percentage points of their car sales to electric vehicles in one year.
Jigar Shah: And I don’t think people really understand just how powerful the technologies are that we’re working on, that they’re terraforming the entire markets in many countries around the world. And I think that we just focus so much on green steel or green cement or this new startup company that’s figured out how to get critical minerals out of some esoteric feedstock that I think that we’re not really focused on, but who’s actually moving 20% of the market next year. And there are people doing that in this sector. And so it’s really focused on that. I feel like people know the household names in oil and gas. They don’t know the household names in clean energy.
Stephen Lacey: Okay, so the show is Energy Empire. It’s co-hosted by you and Jamie Nolan, and I presume you can find it everywhere. You can get it on YouTube and everywhere you get podcasts.
Jigar Shah: Well, we have to exclude somebody. I don’t know who we excluded, but I think we’re on everywhere except for one place that we forgot to put it on, but there’s a lot of YouTube followers already.
Stephen Lacey: Caroline, did you launch any new podcasts while we’ve been away for two weeks?
Caroline Golin: No, no, this is enough for me.
Jigar Shah: You’re a slacker, Caroline.
Caroline Golin: I should get myself together.
Stephen Lacey: Caroline Golin is the CEO of Envision Energy Advisors. How are you?
Caroline Golin: I’m great. I’m great. I’m coming back from a week on the mountain, so I’m great.
Stephen Lacey: Amazing. In a t-shirt, skiing.
Caroline Golin: In a t-shirt, skiing like the best of us in the Southeast. Yeah.
Jigar Shah: Caroline went to the mountain
Caroline Golin: Like Moses.
Stephen Lacey: All right. Well, it’s been a busy couple of weeks. It feels like an eternity in the news cycle, but I want to talk about some broader stories over the arc of 2025. We launched this show, Open Circuit, a year ago, and the through line of nearly every episode over the last year was uncertainty, policy whiplash, tariff roulette, OBBB, drama shifting foreign entity of concern, guidance. It felt like every week the ground was moving in some way and now we have a clearer picture of how that has impacted the flow of capital. There’s a new market intelligence report out this week from the clean energy finance platform Crux, and it shows that project finance, construction, lending, bridge lending all grew at a modest rate with renewable electricity and batteries accounting for about 80% of activity.
Stephen Lacey: And that activity was frontloaded in the first half of the year before policy turbulence really intensified. Developers rushed to safe harbor projects ahead of shifting tax credit deadlines. They built up a huge amount of wind and solar capacity that’s now insulated from new rules, but at the same time manufacturing investment fell 20% year over year with more than $22 billion in project cancellations. So the money was flowing but it flowed more selectively. I want to start with an overview on this report and some of these findings and then bring in some discussion about the changes to tariffs and foreign entity of concern guidance and how that will influence the market. Caroline, what’s the underlying story for you in some of these numbers?
Caroline Golin: Well, I think you started to summarize it in the beginning, which was that policy certainty drives investment certainty. And so I think what we’re seeing is that the investment market is unclear where Trump is going and unclear what the administration is going to use as a lever in terms of what is I think a broader geopolitical trade war. And if energy gets caught in the crossfires there, that creates uncertainty on the cost of capital. And so if the cost of capital is uncertain, I mean energy is capital intensive, longstanding financed industry, that is going to drive the margins to sort of slow down. So I think what you see is that projects that had some certainty around other cost of capital were able to be safe harbored and probably had offtake in hand. I think there’s a big story here around bilateral and PPA financed versus merchant financed, which we should definitely get into.
Caroline Golin: I think the projects that you see having those boxes checked are safe and feel like they can go forward. The problem with that is that demand is going to continue to grow. And what this is really doing I think is making it hard for new entrants. And when you make it hard for new entrants, you make a lot of ambiguity around how you’re going to meet demand growth moving forward and that’s bad for competition, that’s bad for long-term pricing and that just breeds more instability. I think for me it’s just a very simple story, which is that prices can rise, but policy uncertainty creates the most amount of volatility, which is ultimately going to drive up the cost the most.
Stephen Lacey: And just to unpack what you mean by new entrants? Are you talking about developers? Volunteers?
Caroline Golin: I think both. I think a lot of these clean tech companies and a lot of these projects run on the margins and some are running on single digit return models. And if you raise the cost of capital because you have to price in tariff uncertainty or policy uncertainty, if you raise that cost of capital and your internal return goes down, you’re going to lose new entrants in the market, you’re going to lose new projects in the market and that may not seem like much and a portfolio perspective, but that can add up to gigawatts of projects that don’t go through because they don’t pencil anymore and that is a problem. When you are already short on capacity in this country.
Stephen Lacey: Jigar, where are you seeing green lights here and where are you seeing any red blinking lights?
Jigar Shah: Well, it’s green lights all the way on Caroline’s microphone.
Caroline Golin: I love this thing. This is great.
Jigar Shah: The thing that I find fascinating about this report is that we are just so big that we’re not talking anymore except for completely uneducated people about the future of our industry. The industry is fine, everybody works here. It’s fantastic. There are people that have allocated $100 billion to the sector, they’re going to keep investing $100 billion to the sector. They have no other place to put that money. It’s not like that money is fungible somewhere else. They’ve already raised it and allocated it for our sector. Now, it’s clear that there’s $170 billion or so of safe harbor that got done by July 4th. So all of that stuff is free and clear of FEOC rules, all the other stuff. All of that basically gets to just be built. Sorry, 170 gigawatts of protected deals, that’s a lot. We only did 30 or 40 gigawatts of solar last year.
Jigar Shah: So in general that’s a lot of gigawatts and that all has to be built by 2027 if you’re being careful. And then early ’28 if you’re stretching it a little bit. So that means from the perspective of sheer volume, we’re crushing it. So I mean, kudos to the industry for getting their act together and knowing that they needed to get all that stuff in place before President Trump signed the OBBB and they were ready to go. Then I think when you talk about new entrants, I mean those folks basically have to come up with a new scheme. So I got pitched two schemes this week where people are basically hoovering up all of the projects for pennies on the dollar of projects that are going to come online in ’29 and ’30 and they’re just warehousing them and working on them so that they can start construction of them later.
Jigar Shah: And so okay, that’s an entrepreneurial opportunity. So folks are doing that, which I think is great. I saw my first two deals that got pitched to me that use no tax credits, which I was fascinated by and they’re like, the numbers work because electricity prices are higher and the numbers work without the tax credits. So I think that the market is going through a huge shift. I don’t think that our volumes are going to be impacted at all. I think there’s a huge amount of increase coming over the next few years. The part of the story that I found fascinating in this report though was just the general blending of the tax credit marketplace around the 45X credits for manufacturing with the traditional solar and battery storage tax credits that people have been buying for a long time.
Jigar Shah: I think that you’re seeing a huge increase in the tax credit market. So when I was doing all this stuff, there was this natural ceiling of around $18 billion a year of tax credits basically, that’s who was actively buying and trading tax credits from the early low income housing tax credit days all the way through solar and wind. I think Crux had talked about $50 billion was the market now annually. That’s a pretty big increase through that glass ceiling. So that I thought was fascinating too.
Stephen Lacey: Does it concern you at all that we saw the softening of tax credit prices toward the end of the year?
Jigar Shah: No.
Stephen Lacey: Is that-
Jigar Shah: I mean, when you look at the FEOC rules that came out recently, it basically says that the tax credit buyers and the transaction itself has to be liable for FEOC compliance for six years. So basically there’s a six-year compliance period where folks can go after people. I mean, that introduces some risk. Got it. And so as the ebbs and flows of risks get figured out by the different market participants, some of them are going to be taken by the sponsor equity, so by the NextEras or the Intersects or now Google, others of the world that will take that risk and some of them will be shared.
Jigar Shah: So the reason why weaker players are getting shorter shrift here is because they want to take those risks, but the tax credit buyers are like, what’s your balance sheet look like? If something happens in year four, are you going to be bankrupt or are you actually going to be able to make good on this? Can I find an insurance policy from Allianz or somebody else to protect you? All of that is getting sorted through now. So as a result, the weaker balance sheet players are having a harder time getting some of these better pricing tax credits, which I think is normal.
Caroline Golin: I think the capital markets are being more disciplined and there’s stress testing projects more and they have to. And I don’t think that there’s an investment market out there right now that is expecting normalization within the next five to eight years. And so if you’re looking at a 30-year asset, you’re just going to price that in. I think the question remains to me, which is that what does this do for our historical view of merchant markets? The best way to ensure a revenue stream is going to be through signing a secure PPA to underwrite those costs. And so that flies in the face of what we’ve needed and what I think a lot of us see is the best way to organize, which is around merchant competitiveness. And I think the other challenge here, and this was know Jigar got to this, was that on the one hand you have higher cost of capital and you have stronger due diligence and discipline and more stress testing to underwrite projects.
Caroline Golin: On the other hand, that’s pushing entities to look for secure PPAs and to look for that bilateral as opposed to taking merchant risk. The problem is, and we talked about this earlier in another episode, is that there aren’t a lot of players anymore on the demand side, largely in the digital infrastructure space that have the balance sheet to take a lot of that because a lot of their collateral is now wrapped up in these regulatory requirements to get into the queue. So capital’s getting squeezed on both sides and it’s really going to, I mean to me, I think it’s going to create an opportunity for those entities that do have the balance sheet to really set market prices in a way which could be good or could be bad depending on which way that goes.
Stephen Lacey: So we’re seeing more hybrid tax credit deals, more transferability trades, more bridge financing tied to domestic content. Any other trends in how deals are packaged together? You pointed out a couple.
Jigar Shah: I mean, I think over the next two or three years you’ve got a lot of folks locked in. So this is the 170 gigawatts or so of safe harbor. But I think for times after that, I do think that one of the things that I find fascinating about our industry is it changes so rapidly, but also 80% of the people can’t change and then they just start fading into the background and the other 20% change. So when you think about where some of our players are going, I’m seeing people pricing PPAs right now at $30 a megawatt hour higher than they were before, and that’s a lot of money. And the customers are still saving a lot of money or it’s still cheaper than buying natural gas at $120 a megawatt hour. So I think that’s fine.
Jigar Shah: And so one of the things I feel like is going to be interesting is I think there’s going to be a big comeback in the YieldCo structure because you could imagine that the thing that people don’t understand about YieldCos is for a long time they were trying to get them to look and feel more like real estate investment trusts or things that had stable cash flows and stable dividends, but they can also look like fracking companies.The way the fracking companies worked, if you remember was they were corporate equity largely from family offices from Dallas and Houston and then $300 billion of junk bonds that they raised on Wall Street.
Jigar Shah: And then Bill Ackman was like, “These guys are Ponzi schemes.” And then da, da, da, whatever. But at the end of the day, they have made all of their investors a lot of money and they’ve returned all of their capital back and they’ve done all the things that they want to do. And so it’s a really simple corporate equity corporate debt structure and you can raise a lot of debt that way. And so when you think about what that looks like, the weighted average cost of capital of those structures are like 10% basically. That’s not terrible. And so if you’re going to take full-
Caroline Golin: Well, that’s traditional infrastructure debt and that’s what we’re heading towards, I think.
Jigar Shah: And so if you’re going to take full merchant risk, which is what the frackers are, their frackers are full merchant risk, oil prices go up and down regularly. There’s no real hedges that maybe there’s like an 18-month hedge but not much, and you get 10% cost of capital. That’s way better than the private credit people who are at 15% cost of capital. And so my sense is that you are going to see a greater utilization of public markets in ways that the solar and battery storage industry have really never relied on. They’ve always been in the private space with Brookfield or with other people. And I think you’re going to start to see a lot of interest in the public markets again, which I find fascinating because it means retail investors are going to be able to participate again.
Stephen Lacey: Caroline, any other innovative things you’re seeing in the deal structure front right now? You’ve talked a lot about moving beyond traditional PPAs. Are there any models that are interesting to you right now?
Caroline Golin: Well, I do think that the entities that have the balance sheet to do this are going to start directly investing CapEx into projects to lower long-term OpEx. And I think they’ll do that on spec up to a certain amount, probably no more than half a billion or $1 billion. But I do think that they’re going to start using their capital because it’s secure and also it’s going to be tied to their own offtake. And I think that’s a model that a few of the digital infrastructure equity investment groups have modeled and a few of the hyperscalers have modeled, and I could see that growing.
Jigar Shah: And that in the past, Caroline is what we called a prepaid PPA. So basically there’s a certain percentage of the PPA in the future that you can legally put in upfront and then still get third party treatment and tax equity and all that stuff.
Caroline Golin: I think it’s just going to be a different stack model because I think there is going to be a need to move things quickly and I think that there’s going to be a willingness to go back to sort of get through some of the minutia of this risk. I will say though, to Jigar’s point, especially from the hyperscaler perspective, that whack is way higher than 10%. So it could go faster, but it’s going to result in maybe less returns on the back end.
Stephen Lacey: Jigar, you mentioned the 170 gigawatts of safe harbor. Let’s just bring in the foreign entity of concern rules now to the conversation. So these were created under the one big beautiful bill. OBBB. They determine whether projects qualify for federal tax credits based on supply chain exposure to Chinese or other restricted entities. Treasury recently issued guidance. As far as I understand it stopped short of answering a pretty big question around how deeply developers have to trace components. Tell me about where that 170 gigawatts brings the industry, if that much is safe harbored and what new about the FEOC rules is worth noting here?
Jigar Shah: So I think that the 170 gigawatts is a lot. I just want to make sure that everyone understands that we do maybe 40 gigawatts a year and this is safe harbored through ’27 and then maybe the first half of ’28. So that means that that’s a lot of growth in the solar industry. So I just want to make sure that people are crystal clear and then there was more stuff safe harbored by 12/31/2005 and then they were subject to some of the FEOC rules, but not all of the rules. And then there’s even more safe harbored that’s going to happen by July 4th of this year, the one-year anniversary of the OBBB. So there’s those three different safe harbor time periods that people are going through and each one comes with more risk and more FEOC compliance and some of that stuff. So that’s point number one.
Jigar Shah: Point number two though is that the supply chains are rapidly moving towards FEOC compliance. So when you think about Elon’s hundred gigawatt announcement, that’s part of the reason why they’re doing that is because they want to do that. You see Corning moving forward with investments within Hemlock around wafers and silicon. And so you’re starting to see that, which I think is great. I think that the actual FEOC rules were fine, and I think that part of the thing that I find fascinating in this moment is just how yellow-bellied everybody is. When you think about how we’ve had to deal with the Obama tariffs in 2012 and then again in 2015, and then you had the accidental tariffs by Trump in 2019 and then you had the tariffs with the Biden administration. If you’re not good at tariffs, you have no business being in the solar industry. Everyone in the solar industry is an expert at class five roller coaster rides, and if you’ve got a queasy stomach, you shouldn’t be on this ride.
Jigar Shah: And so now we’re talking about FEOC compliance and the FEOC compliance basically says that you can’t have any form of Chinese ownership or operational control or any of those things in your capital stack. And so everyone is moving fast to fix that problem. Some of it is being done by completely redoing the ownership structures of the projects that were already built in the United States. Some of them are being done in China. I still haven’t figured this out, but I think Canadian Solar is trying to become a Canadian company again and losing all of their Chinese background.
Jigar Shah: And I think Shawn Qu is a close personal friend of mine and a hero frankly for me, I think is stepping back from a lot of his operational responsibilities there. And so I think you’re going to see a lot of those changes that get done to make this happen. But the other piece of this is that a lot of these compliance pieces are going to be done by an IRS in 2029. And so I think a lot of people are saying, “We can control an IRS in 2029, and so we’re not worried about how this is going to get done in the future and no future Treasury secretary and no future president is going to want to upset the apple cart on all of these financial transactions with a willy-nilly status in the future.”
Jigar Shah: And you see that frankly, from even the president’s State of the Union address yesterday was really focused on getting AI data centers done, not having this cost shift against consumers, et cetera. And the more that they screw around with this stuff, when the energy information administration under this leadership of the US department of Energy is saying that 90% of everything that’ll get added to the grid this year is going to be solar and battery storage and wind. And so I think that the vast majority of people that I’ve talked to on my side have said, “We got this. We know exactly which law firms we’re going to hire. We know exactly which lobbyists we’re going to hire, and we got this handled.”
Stephen Lacey: Caroline, what are you hearing? I know you’ve been talking to some folks about FEOC eligibility. I mean, because there are still some questions. Are we in an environment where developers can’t confidently model tax credit eligibility? What are you hearing?
Caroline Golin: No, no. I mean, I don’t think that the FEOC rules are killing projects. I think they will slow projects. I think that there’s a lot of directional clarity, but I think ambiguity around operational details slows projects and that is most acute for solar and storage and EV infrastructure right now and critical minerals for that matter. And so I do think that the due diligence process takes longer. And I do think that investors are asking more questions, and I disagree with what Jigar, I don’t think anyone’s kicking the can to say, we’ll just see what happens in 2029. I think that a lot of… I do agree with Jigar that a lot of the… Well, you’re only worth your salt in solar if you understand tax. I mean, that was true 15 years ago. That’ll be true over the next 10 years, whether it’s permitting local community, state, federal, international tax.
Jigar Shah: You can’t TurboTax this.
Caroline Golin: You can’t TurboTax this. That is very true. And honestly, and if you look at the history of the solar industry, being able to maneuver and manipulate the tax regime has been the reason why it’s succeeded against many odds. And I think that that continues and those entities that are demonstratively more nimble will win in that game. I don’t think anyone’s rolling the dice on 2029. I think what’s interesting is we’re raising this question of, well, if Trump adds a flat tax across the globe or a 15% tariff or a flat rate on Chinese goods, what would that do? I actually think that type of predictability is probably a better scenario for the solar industry and for the investment industry than having to maneuver through the whiplash of a tax regime. But I think generally speaking, most investors are not saying no capital doors are closed, they’re just saying it’s going to take a little longer and that some projects that may have been penciling in ’29 aren’t going to pencil until ’30. And I think there is going to have to be some re orchestration of ownership and the way things are deployed.
Jigar Shah: The big winner, frankly, out of the tariff Supreme Court ruling is India.
Caroline Golin: Maybe.
Jigar Shah: Because they went from a 50% tariff down to 15% immediately. And all the friends that I’m talking to on supply chain India are like, they’ve got all of the boats filled and they’re shipping to the United States right now.
Caroline Golin: Well, something else, and maybe Jigar, maybe you know more about this than I do is the critical minerals and all the inputs that are going to be needed for batteries and for EV infrastructure and for solar for that matter, what a 15% flat would do in terms of domestic manufacturing here. I think there are winners and losers in that based on the regime we’ve been working with. And I think it’s something that that type of predictability actually may help us for a more stable domestic market as opposed to what has been the political whims of the administration.
Jigar Shah: That’s a whole other podcast.
Caroline Golin: Yeah.
Jigar Shah: Honestly-
Caroline Golin: [inaudible 00:32:25] second.
Jigar Shah: I mean, this administration’s policies on critical minerals are just, this thing is positive, this thing is negative, this thing is positive, this thing is negative. Which ones cancel each other out? Which one’s stronger? It’s complex.
Caroline Golin: It’s hard actually to navigate, I think. Yeah, and it’s unfortunate because I think we could all say, yeah, we’d love to have more solar and battery transformer manufacturers in the US. There’s probably a smarter way to do that than the way we’ve been doing it.
Jigar Shah: It’s called India.
Caroline Golin: But irrespective of that approach, all those critical minerals are still going to be imported. So we forget about that part. And what this doesn’t, we haven’t touched on it all really is what this does for labor if we think that this will impact labor availability. And as far as I can tell it won’t, and that’s still a big hurdle in getting a lot of these projects off the ground.
Stephen Lacey: Absolutely. I think it’s important to note that the Supreme Court decision, the six three decision striking down the administration’s tariffs was just one possible pathway for the Trump administration to create tariffs. So the two tariffs we’re talking about were the federal tariffs and the reciprocal tariffs under the International Emergency Economic Powers Act, but it left a lot of other tariff authorities intact. And that brings us to the conversation around the decline in manufacturing investment. I think the end of the EV tax credit whipsawing of tariffs has really slowed manufacturing, particularly EV battery manufacturing. Do the signs that you see the 22% reduction in manufacturing investment, does that worry you at all, Jigar or Caroline?
Jigar Shah: Well, what worries me is the overall thesis, which is that, so in places where we have robust like we are going to do this ride or die like solar, we’re seeing manufacturing investment and things are getting done and the supply chain is getting filled out. In places where we are taking American innovation funded by the US Department of Energy and actually saying, build your first of a kind plant here in the United States. That’s getting eviscerated because what happened to the end market that they were selling into? And so when you think about the purpose, in my opinion of manufacturing, what I was interested in is I’m tired of inventing everything here in the United States and then having to have it manufactured in a first of a kind way in Asia. And that trade has gotten weaker because the loan program’s office is dead as far as I can see.
Jigar Shah: They put out a loan today for Southern Company to build $7 billion worth of stuff guaranteed by Southern, but anything that’s not corporately guaranteed by an investment grade entity is not going to get through the office. And so if you’re a first-of-a-kind deployment company, how are you going to get the debt to build that project? And then if you need offtake, a lot of the folks who are going to sign offtake for that are saying, “Our EV sales are down.” or, “This thing is a problem.” or, “I don’t know where these rules at EPA are going to go.” or whatever it is. And so now the offtake is harder to get for those new manufacturing facilities. And so I don’t quite understand what signal this administration is sending around its desire to have technologies invented here in this country, built here in this country.
Stephen Lacey: And you see that reflected in the numbers. The bulk of investment is going to project conventional renewable energy and battery projects, not a wide range of other clean energy technologies that are maybe sitting at the margins. Does that lack of diversity concern you, Caroline? Is there a warning sign that Jigar is pointing to?
Caroline Golin: Yeah, of course. I mean, like any investment portfolio, you want diversity and you want new competitors for solutions in the market to drive a better product. I think one thing we’re not saying here though is that new manufacturing is competing for electrons just like data centers are. They’re competing for labor, they’re competing for land, and the same capital that the private equity markets are allocating right now. And so there’s another narrative here, which is that we have invested in the digital economy and prioritize the digital economy, and that’s clear from the way that the administration’s postures have played out and from the way that the capital markets are playing out.
Caroline Golin: I don’t see BlackRock raising $100 billion to invest in clean energy manufacturing and infrastructure. They’re raising $100 billion to invest in digital asset infrastructure, but there’s a real resource constraint. I mean, just take a look at Ohio right now. There’s a real resource constraint around this. So before we even get to questions around tax and tariff and investment strategies from a policy administration, this country can’t ramp quickly when it comes to economic development. It has proven that that is a challenge. And when that economic development is at bricks and mortar manufacturing and an economic development, and it has chosen for all the reasons that it is chosen, that the digital space for geopolitical reasons and for economic dominance, and because Google just put out 100-year bond, that that’s going to be the sector that it banks on, and that means that private capital and land and labor and electrons are going to go towards that. And I think that that’s material in this conversation.
Stephen Lacey: Before we move on, I just wanted to mention that on Thursday, March 5th, I’ll be digging deeper into this Crux report with Alfred Johnson and Katie Bays of Crux. We’re going to go deep on the 2025 trends on clean energy, finance, tax credit, pricing, deal structures, et cetera. So you can go to latitudemedia.com/events and that event is on March 5th at 1:30 P.M. Eastern, and you can ask questions of Alfred and Katie, so make sure to sign up for that. I want to turn to solar and batteries specifically now. What’s interesting is that solar and battery supply chains have a lot of exposure to tariffs and FEOC rules that we’ve been talking about. Solar also saw some major changes to tax credits in last year’s OBBB spending bill, and yet the market for both technologies has been remarkably resilient. SEIA just released its latest storage market outlook, and the US installed more than 57 gigawatt hours of battery storage last year.
Stephen Lacey: That’s up 30% year-over-year utility scale deployments were just under 50 gigawatt hours. And the 2026 forecast looks like it’ll be around 70 gigawatt hours, which is about $25 billion in investment. And on the solar side, we just had inter-solar and I was passing around a couple pieces of analysis from TD Cowen and Jefferies that struck a really positive note coming out of the conference. They’re seeing steady utility scale demand, improving pricing clarity, a sense that the industry is finding workable paths through FEOC compliance and tariff risk. Of course, there are lots of headwinds. Residential is really choppy. Manufacturing investment has cooled a bit, FEOC guidance still has some unanswered questions, and solar is still swept up in the administration’s permitting war. But if the two sectors exposed to trade friction and supply chain scrutiny are also the ones pulling in the most capital, that’s a really positive sign. So Jigar, what do you see in those numbers for solar and batteries?
Jigar Shah: So I focused a lot more on the battery side of it, but I mean, I just thought that the numbers were breathtaking. When you think about what we’re talking about here, we talk about gigawatt hours, but the gigawatts also matter. It’s 19 gigawatts of capacity. That single-handedly saved the entire Texas market for the last two years. There is no chance that the Texas market is relevant around onboarding all of this digital infrastructure as Caroline is wanting to say now. Can we just say hyperscalers?
Caroline Golin: No, because I always forget a few and you get mad at me.
Jigar Shah: Well, that’s true. Digital infrastructure.
Stephen Lacey: I like digital infrastructure that’s very clean.
Jigar Shah: I find it extraordinarily boring in any case.
Caroline Golin: But I mean, then you can go tell STACK and Beale and everyone. They don’t count.
Stephen Lacey: I’m with you. Caroline, I’m with you. Digital infrastructure.
Jigar Shah: I am 100% that with boring. Okay, so I’m just saying when you think about the critical role that batteries played in Texas, and I think that it is very obvious to anyone who is running an ISO right now that the only way that they’re going to get out of their predicament over the next three years is batteries in their ISO. So whether it’s PJM or MISO or SPP, they can build as many natural gas generators as they want, but if they want to onboard these technologies and accomplish speed to power, I was fascinated by the article that came out yesterday about how Boston is now putting a 700 megawatt battery in as transmission to protect Boston. That’s going to happen 50 times next year. We always knew that batteries were the cheapest way of adding more transmission capacity, but now that they’ve done that deal, there’s a bunch of people who are pushing back on it that are now going to do their deal.
Jigar Shah: And so I think that this is just the tip of the iceberg and the fact that we’re going to go to 70 gigawatt hours this year, we’re going to go, I think this is now on hockey stick territory, and you’re going to start seeing just gargantuan amounts of batteries deployed, not just on the transmission circuit, which is I think where a lot of people have been focused, but actually largely on the distribution circuit moving forward. And then that means that you start to see huge fights around the spark fund model in Minnesota and other models where you start saying, “Wait, do you really need to upgrade that distribution circuit again? I think you can use batteries to do that instead of distribution.” So I found the entire battery report fascinating. The last thing I would say, just because I’m petty sometimes is that I thought it was fascinating that this report came out of SEIA and not ACP, because ACP was the group who absorbed the energy storage association. And so the fact that SEIA put out their support means that they’re now vying to become the new energy storage association.
Stephen Lacey: Interesting. Caroline, how are you reading the battery boom? What jumped out at you from these numbers?
Caroline Golin: Well, I mean, I see this next five years as the window for batteries to become the versatile player that I think many of us always knew they could and should be. And I’m hoping that to our earlier conversation that the ambiguity around ownership, around material inputs, anti-dumping, things along this line can be sorted out so that the cost of capital and the internal project structures don’t take any development off the margins because I think that this is hockey stick, maybe slightly-
Jigar Shah: USA. USA.
Caroline Golin: Oh, don’t talk. This is a half Canadian, half American family I have in my household. So we were reeling after that game.
Stephen Lacey: Oh yeah, they’re in the hockey game.
Caroline Golin: Oh, it was-
Stephen Lacey: Are you still talking to each other?
Caroline Golin: I don’t care. So yes, but there was a lot of angst. No, but back to what I was saying, I think this is the era of storage. If the contracting can change, and to Jigar’s point, if we can start Utilizing storage for multiple value streams, this is the era. I think one thing that I’m missing in these reports is a conversation around how single source contracting is limiting optionality for the capital stack. So if you are only going in as a non-wire alternative to satisfy an interconnection requirement, and you’re not also going in as a firming or shaping or ancillary or hybrid resource, that is going to ultimately drive up the cost of capital because you’re going to only have so many residual value streams. So what I’d like to see moving forward is some stronger conversation around that creativity that we were talking about that’s needed not from a tax equity perspective, but from a multi-use perspective in storage and how that can really, really drive down costs and create more value on the system.
Caroline Golin: But I think another thing to watch here is that storage is the Pandora’s box around the conversation that’s happening throughout PJM on what is the future of a competitive wholesale market, what is the future around ownership and generation? And there are a lot of traditional utilities that are happy to deploy storage throughout their grid if they can own it. And I think that what we’re going to see as a headwind moving forward for storage is ownership model.
Jigar Shah: I’m happy for them to own it, to be clear. So in Maryland, we have already changed the rules so that you can count batteries as part of the distribution grid, which the utilities can own. And so we just call it a distribution asset, not a generating asset. And so then it skirts by the ban on utilities owning generation.
Caroline Golin: And that maybe be fine to get it in there, but then that trigger that flies in the face of what I was saying earlier, which is like how do you create multiple value streams for that and optimize that asset? Who takes ownership and who gets what’s the cost allocation, what’s the benefit allocation?
Jigar Shah: Well, but this is where I think-
Caroline Golin: Storage is going to blow up a lot of this and I think it’s great, but I think we have to get ahead of it as an ecosystem.
Jigar Shah: But this is where I think the utilities have to fight the private sector. The private sector by definition wants to stack everything up because they want the highest possible rate of return. The utilities generally just want to get by their public service commission, and once they’ve gotten by their public service commission, they’re like, we’re not going to do anything else innovative. And so my sense is that if the utilities continue to have that point of view, they will be deemed to be the wrong owner of that asset. And the public service commissions after phase one and phase two will say, sorry, phase three is going to have to be private sector owned because we don’t trust that you’re going to unlock these other revenue streams.
Jigar Shah: So that part of it I am less worried about. What I’m more worried about is this challenge that we have around the FEOC requirements because what I find fascinating about the deals that I’m looking at right now is I’d say fully a third of the deals that I’m looking at right now have said, “Screw FEOC, we’re just using Chinese batteries and we don’t want to use the tax credit and it’s cheaper. It’s cheaper for us to use an entire FEOC supply chain than use the tax credit. We don’t need the tax credit. It complicates our financing. We’re just going to buy stuff from CATL directly, integrate it with all these other folks, and we’re not going to comply with FEOC.” Which I find fascinating.
Stephen Lacey: And for what applications are we talking about?
Jigar Shah: These are all three to eight megawatt distribution circuit, transmission circuit deals, and they’re just like, it doesn’t make any sense. We can install for less than $200 a kilowatt-hour delivered, and with all this FEOC compliant stuff, we’re at $450 a kilowatt-hour delivered. Why would we do that?
Caroline Golin: And the threshold is different. The threshold is different when you’re competing against massive transformer transmission upgrades as opposed to the margins in a wholesale energy or capacity market. That is interesting, Jigar, because I think what then you might see is that if storage gets deployed as a grid asset first, then I wonder what’s going to happen here in terms of solar being able to compete or hybrid resources being able to compete against natural gas. I think all of it needs to happen, but whatever path storage goes down first because it’s funneled into that path, whether it’s because of what you were just talking about or it’s just where can you stack capital quickly, it’s going to have tradeoffs for its other markets.
Stephen Lacey: I want to ask you a question, Jigar that I think I have a hunch you’ll have a strong response to.
Caroline Golin: When does he not have a strong-
Jigar Shah: Oh, come on.
Caroline Golin: Oh, come on.
Stephen Lacey: When we have had conversations about the administration’s push for co-location, generation co-location with data centers self supply, obviously the administration is pushing this thinking that it will be primarily gas behind the meter. I know that you had made an offhand comment saying we actually think that most of this will be batteries. What we’re seeing now is that it is mostly gas. So I’m wondering why you think it is going to be mostly batteries or if it’ll be hybrid batteries with gas. Tell me about why you don’t think it’ll be as much gas as it seems like there will be.
Jigar Shah: It never ceases to amaze me that in the energy space people make decisions all the time without doing any due diligence. And it’s just shocking to me. When you think about how much natural gas pipeline capacity we have in our country and how much of it can be firm, it’s minuscule. If you build a natural gas plant in Ohio and then you say, “I would like firm 8,760 hour access to that gas from that pipeline.” That doesn’t exist. And it’s five to seven years to upgrade that natural gas pipeline. And so everyone’s like, “Oh, Jigar, look at Caterpillar stock. It’s gone from $350 a share to 700 a share.” That’s because those people are idiots. And I just think that they’re going out and buying a bunch of solar turbines saying the natural gas grid is so robust. Fantastic. You do, man.
Jigar Shah: I have an engineering degree. I can read stuff. You went to Mar-a-Lago and paid $250,000, sat next to the wrong guy and got lied to. I get it, man. You do you, but it doesn’t work. It just doesn’t work and everybody wants it to work, and then they want to use the grid as backup. Then they want to say, “Well, don’t worry if something goes wrong with our natural gas system. We’ve got this grid and it’s going to catch up.” No, we don’t. The grid does not want to back you up if you’re going to be so bold as to say, I can build this thing off grid, go with God, go do it off grid and come back to me crying in your milk when you can’t make it work. But if you then have a 10% interconnection with the grid and then you’re expecting that to go to 100% and you’ve built all of this natural gas capacity behind the scene and you’re expecting the grid to be there for you, I don’t know, it might be there for you.
Jigar Shah: I don’t know that it will be there for you. And I just feel like all of these people are just expecting Chris Wright, the molecules guy to be an expert in electricity. There’s nobody who works at the Department of Energy in the political realm who knows shit about electricity. Every one of those people are molecules people, and even in the national, what is it? Energy Dominance Council, they’re all molecule people. And so do your thing, man. I love the fact that Caterpillar is at $700 a share. You should do whatever it is that you want to do, but don’t come crying to me later when it doesn’t work.
Stephen Lacey: All right, Caroline, what is the role of batteries going to be relative to gas when we’re seeing a lot of moves toward integrating gas behind the meter right now?
Caroline Golin: I think the move right now to integrating gas behind the meter is largely because the data centers were told to, and also because it’s a hedge. I mean, what’s interesting is when I started at Google and we needed to sell our renewables investments, we sold them internally as a hedge against long-term natural gas volatility. Yes, we were doing it for sustainability reasons, but a lot of our early portfolio was really cheap and it really was a very strong hedge around what we saw in volatility. Now, we’ve come full circle and this co-located gas play is in large part a hedge against the insufficiency of the market over the next five years. But I don’t think anyone who’s investing in natural gas right now is saying, “Oh, in seven years this is going to be cheaper than market prices.” No, they’re saying, “This is my short-term hedge so that I am not the reason why we don’t train.”
Caroline Golin: And it should be grid tied because in five to seven years market prices, when you’re going to see all of this capacity come online, market prices could potentially drop substantially. And when they drop substantially, you’re going to want to run this when it’s in the money and not run it when it’s not in the money, and then use it for flexibility or ride through or whatever. And that’s how these portfolios are shaping up. I think that the behind the meter play, I’m not talking to a ton of folks that want to stay behind the meter forever. I think they are co-locating and doing behind the meter natural gas in hopes to get out of the politics of the current cycle and eventually find a way to be grid tied and to use that as a hedge over what is real scarcity between now and 2029. Batteries can do that, but the model wasn’t there. I go back to this contracting situation. The model wasn’t there. That’s not where batteries started and that’s not where they were modeling their internal returns.
Caroline Golin: And honestly, the hyperscalers, not the digital infrastructure space, they weren’t pushing that. That’s not where they were pushing batteries. So a lot of this is a response to a political call. I do think, however, that there will be digital assets built completely off grid. I think that is short-sighted, but I think it is going to be necessary in this political environment. And ultimately when you’re building at a 2, 3, 4, 5 gigawatt scale, you are essentially building a city. And so where are you going to build a city that has some tie back into grid infrastructure? And that’s where you’ll see those pop up. I am not talking to anyone who’s looking at building five gigawatt massive data center in the middle of PJM and tying it to the grid. They just don’t think it can happen. So they’ll build that off grid in the west or Midwest somewhere.
Stephen Lacey: All right, to close this out, to bring this back around to the theme of the episode and the resiliency of the clean energy and capital markets in 2025, headed into 2026, what does this data tell us about the resiliency of the industry? Jigar, you hinted at it before. You think that this is a mature industry that can really ride any type of policy or market change? Wrap this up in a bow for us. What does this tell us about the health and maturity of the market right now?
Jigar Shah: I mean, I don’t think there’s any way to suggest that we are going to find a more hostile year for the industry than 2025. I mean, the level of sobriety in the folks in the Trump administration right now is so high because they know that their decisions are raising bills in a big way, and so they’re now rediscovering batteries or rediscovering grid enhancing technologies. They’re rediscovering all sorts of other stuff. And so I think that we’ve weathered the worst of it, and now we’re on the other side of it because people recognize these are the folks that are delivering gigawatts at scale.
Jigar Shah: And so I just think that the other thing that comes out of these reports, which I think people forget about, is this is the only supply chain that’s infinitely scalable. If you wanted to double or triple the amount of deployment of batteries next year, we could do that. And I just think that you can’t do that with natural gas. You can’t do that with all sorts of other supply chains. And so if you want to meet the moment and not just barely meet the moment, but exceed the moment so that you can actually get back to a healthy level of reserve margins and all the other things that we want to get to, all roads lead through solar and battery storage.
Stephen Lacey: Caroline, what’s the story here for you?
Caroline Golin: Oh, it’s absolutely resilience. I mean, listen, the demand is still there. 80% I think of most renewable energy deals are offtake by a corporate structure, give or take, wherever you are in the market in this country, that demand is still largely there. My only concern, of course, is that do we push projects out because of longer due diligence because of increased cost of capital to the point where a pipeline that may or may not have been necessary before it gets built? That I think is a small risk right now, but it’s still a risk that I think the industry has to take serious. And I think the more the creative the industry can be in working together and producing different contract structures, I think sky’s the limit. And I think this is storage story moving forward. And I’m here for it.
Stephen Lacey: Caroline Golin, CEO of Envision Energy Advisors, wonderful to see you as always. Thanks for your insights.
Caroline Golin: Same.
Stephen Lacey: Jigar Shah is the co-managing partner of Multiplier and the host of Energy Empire along with the co-host here at Open Circuit. Good luck with the podcast, Jigar and people would now see more of you each week.
Jigar Shah: If they like it or not.
Stephen Lacey: And of course, Jigar will be here every week or most weeks with us so you can stay up to date on the news. And we appreciate you all being here. Open Circuit is produced by Latitude Media. The show is edited by me, Stephen Lacey, Sean Marquand, and Anne Bailey. All of our Open Circuit episodes are now on YouTube, so go subscribe to Latitude Media on YouTube and you can find the audio versions anywhere you get your podcasts. Transcripts are available at Latitude Media, and if you want more in-depth reporting on the stories we cover here on the podcast, sign up for Latitude Media’s newsletter. Thanks a lot for being here. We will catch you all next week.
