Over the past 18 months, tariffs have been the most visible front in America’s economic competition with China. They are also the wrong battlefield, at least when it comes to energy and critical minerals.
The Trump-Xi summit earlier this year was a signal of burgeoning faith between the two industrial giants. However, any discussion of energy security and critical materials was surprisingly left off the table. Although the U.S. pushed for improved access to the rare earth minerals in China’s reserves, the countries didn’t strike a deal, reinforcing the need for the U.S. to strengthen its own energy and materials supply chains.
As attention in the U.S. federal government turns investing into domestic infrastructure, it’s instructive to look at how China established its clean energy dominance. China’s lead across refined critical minerals, solar manufacturing, and batteries is well-documented. Less appreciated, however, is how quickly China is extending that lead into advanced nuclear, energy storage, hydrogen, and electric vehicles. This is the result of a competitive financial architecture, not just lower labor costs or looser regulation.
China has built a state-backed system that redistributes risk in ways Western capital markets do not. State banks guarantee construction debt on novel industrial projects. State-owned enterprises act as early, creditworthy buyers for output from unproven technologies. Policy banks absorb first-loss risk that private investors won’t touch. The result is a coordinated financing machine that accelerates deployment, allowing companies to move rapidly down the cost curve even before technologies are profitable.
US-style technology commercialization
The United States needs our own version of this approach.
America’s advantage lies in the depth of its capital markets, the sophistication of its investors, and the strength of its innovation pipeline. U.S. companies lead in advanced geothermal, next-generation nuclear, grid-enhancing technologies, and critical-mineral processing technology. We could be winning the technology commercialization race, if not for the financing problem.
When a promising technology moves from pilot to full commercial deployment in the U.S., nearly all risks — technical, financial, and market — fall on developers and equity backers. For first-of-a-kind projects, this burden is often prohibitive. Traditional lenders hesitate to finance assets without operating histories. Insurers lack the data and appetite to underwrite novel technologies.
Corporate buyers typically commit to volumes too small to anchor large-scale financing. The result is a gap that forces early commercial projects to rely almost entirely on equity to grow, often at a cost of capital that is over 25%. Mature infrastructure projects financed with debt, meanwhile, operate closer to 8% to 10%.
The usual policy response calls for subsidies or patient capital. Both help, but neither addresses the root problem: the absence of a system that distributes and prices risk efficiently at the commercialization stage.
Corporates aren’t enough
Some progressive corporates in the private sector are beginning to adapt. A new cohort of technology giants – Microsoft, Google, Amazon, Meta, Nvidia – has started to play a catalytic role through more than just long-term purchase agreements. They are making direct investments and backing creative underwriting, effectively using their balance sheets to support emerging energy technologies.
Google’s partnership with geothermal innovator Fervo and utility NV Energy offers a case in point. Structured alongside investors such as Mitsui, Devon Energy, CalSTRS, and the Canada Pension Plan Investment Board, the deal combines corporate demand, project finance, and risk-sharing in a way that begins to resemble a scalable model. Similar structures are emerging in data-center power supply, nuclear energy, building materials, and critical minerals, but they remain the exception.
But corporate support isn’t enough on its own. The U.S. must also rebuild a base of financial intermediation that has largely atrophied over decades, including institutions capable of combining technical expertise with financial underwriting. Early-commercial projects require lenders who can extend credit based on engineering validation and forward-looking risk assessment. An emerging example is the collaboration between IFM Investors (an Australian asset manager) and Cambridge Consultants (a deep-tech innovation advisory firm) for debt financing of early-commercial projects. These projects also require insurers willing to price and absorb technology-performance risk, working alongside corporate guarantees, debt solutions, and developer capital.
Equally important is the development of a robust reinsurance market for these risks. Reinsurance enables insurers to take on exposures larger than any single balance sheet could support. When Hurricane Andrew strained the system in the 1990s, the industry responded by creating catastrophe bonds, drawing institutional investors into underwriting disaster risk.
That innovation unlocked new pools of capital and reshaped the market and serves as a useful example for diversifying risk across a wide-range of climate technologies. A single dollar of first-loss support can enable multiples of insurance capacity, which in turn supports multiples of project debt.
A new American model
This can be a distinctly American model: one that mobilizes corporate balance sheets, structured credit markets, and specialty insurance to achieve outcomes similar to China’s system, but without central government planning.
Hyperscalers, engineers, insurers, and investors must work together to pool and price risk more effectively. Done right, this approach would accelerate learning curves, reduce costs, and enable domestic scaling of critical energy and manufacturing infrastructure.
The stakes extend beyond industrial competition. Energy affordability, supply-chain resilience, and the future of artificial intelligence depend on reliable, low-cost domestic energy. Without the ability to scale new technologies quickly, the U.S. risks ceding manufacturing capacity, followed by the innovation ecosystem that depends on it.
If America wants to win the next industrial race, it should spend less time debating tariffs and more time building the financial plumbing that turns innovation into infrastructure.
Vanessa Z. Chan is vice dean of innovation and entrepreneurship at the University of Pennsylvania School of Engineering, and was the U.S. Department of Energy’s Chief Commercialization Officer from 2021 to 2025. Daniel P. Goldman is co-founder and managing partner at Clean Energy Ventures, an early-stage venture capital firm leading the development of new solutions for early commercialization project financing. The opinions represented in this contributed article are solely those of the author, and do not reflect the views of Latitude Media or any of its staff.
