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E&E News
7 hours ago
- Business
- E&E News
3 big questions about the megalaw's impact on renewable energy
President Donald Trump's megalaw is expected to stunt growth of wind and solar power, but one of the biggest hits to renewables may be yet to come. The Treasury Department is preparing guidance for release by mid-August to clarify requirements for wind and solar developers to receive lucrative tax credits, a move that could determine whether thousands of projects get built before the end of the decade or come online at all. The guidance is the result of an executive order after the law's passage focused on slashing federal support for 'green' industries. 'Ending the massive cost of taxpayer handouts to unreliable energy sources is vital to energy dominance,' the order from July 7 says. Advertisement But many questions remain about how far the administration will go to further restrain wind and solar, and whether its plan will spur lawsuits. Ethan Zindler, a climate counselor at Treasury during the Biden administration and an analyst at BloombergNEF, said he didn't expect the guidance to be long, considering the quick turnaround mandated by Trump's order. 'Writing something really … comprehensive and in-depth and thoughtful in 45 days, strikes me as quite far-fetched,' said Zindler. 'So then the question is … how is the [order] interpreted, and how aggressive is it?' Trump also risks angering Republicans who may be needed in future close votes in Congress no matter what the guidance says. On one side are moderates like Alaska Sen. Lisa Murkowski, who said at a congressional hearing this month that the order's directive on renewables 'really guts the effort for a compromise.' Many conservatives, meanwhile, are pressing the president to go further in reducing Inflation Reduction Act credits. Simultaneously, a flood of new analyses are shedding light on where renewable projects may be headed in the next decade because of the law. Here are three issues to watch with wind, solar and grid batteries as the administration takes the next steps to implement the One Big Beautiful Bill Act. The Treasury Department is seen in Washington on Dec. 7, 2024. | Jose Luis Magana/AP What will Treasury do? Under the new law, wind and solar projects can qualify for incentives if they are placed in service by the end of 2027 or begin construction before July 4 of next year. If they make the latter deadline, they have four years to come online — and potentially longer if they show annual progress on projects — under Treasury guidance from 2013. That means many wind and solar projects could continue to receive credits through the end of the decade, a lifeline that could bolster their supply chains for years. But Treasury's coming framework could change that. Trump's order directed the agency to 'ensure that policies concerning the 'beginning of construction' are not circumvented.' Treasury did not respond to a request for comment. It's to be determined what that means on paper, but analysts say Treasury could take a range of actions that add to barriers for wind and solar. It could, for example, say in the guidance that projects beginning construction must come online much faster than four years to obtain incentives, hindering developers that need more time to address supply chain or grid connection challenges. Treasury could redefine entirely what commencing construction means, so it no longer refers to projects that incur 5 percent of project costs or do 'significant' physical work. In the past, developers have met those 2013 Treasury rules by doing things such as ordering equipment for solar trackers. If the agency increased the 5 percent threshold significantly, developers could have to spend much more money upfront, posing a threat to projects. 'All this is unprecedented,' said David Burton, a partner at the Norton Rose Fulbright law firm. Any changes to Treasury definitions that would require companies to speed up construction and deployment could be more challenging for wind than solar, although both industries are expected to take a hit from the guidance. In a research note Thursday, BloombergNEF said onshore wind projects that don't begin construction this year could be delayed until the end of the decade or later. 'Unlike solar, wind developers face long permitting and grid interconnection queue timelines,' the note said. Many solar projects can be built in a year. The executive order resulted from a promise from Trump to members of the House Freedom Caucus before a final vote that the administration would take further action to crack down on renewable subsidies. The deal was important 'because it has the White House attention. It's top of mind,' said Tom Pyle, president of the conservative think tank Institute for Energy Research and leader of Trump's 2016 Department of Energy transition team. Pyle, who supports rolling back IRA incentives, said he was 'cautious' about Treasury's guidance, as the agency has to be careful to not go too far in restricting tax credits or else increase the risk of lawsuits. If there's overreach, 'the courts could say this wasn't the intent' of the law, he said. 'I don't want the perfect to be the enemy of the good.' According to legal experts, Treasury could run into trouble if the guidance is viewed as 'arbitrary and capricious' under the Administrative Procedure Act, perhaps by seeming to target wind and solar but not other technologies. Kelsey Merrick, director of litigation at the tax law center at New York University, said Treasury also must consider 'the longstanding position of the IRS with respect to beginning of construction.' But Zindler said there are concerns that Treasury may release a document that is not 'legally defensible,' and that industries may have little recourse to challenge it if so, considering they will be dealing with additional requirements set to kick in in January that restrict companies from using components sourced from China. 'Even if you wanted to challenge it in court, the clock will be ticking quite quickly towards the start of 2026,' he said about the guidance. The guidance is less relevant for rooftop solar, which is expected to hit a downturn because of a separate tax credit for residential systems being phased out by the end of the year. Wind turbines operate in Palm Springs, California. | Ashley Landis/AP Will there be new foreign entity requirements? Another wild card for renewables is how the Treasury guidance could affect implementation of the law's 'foreign entities of concern' rules, which require industries to verify that a percentage of components in their products are not from China, North Korea, Russia and Iran. For wind and solar, projects beginning construction next year must use 40 percent of their content from non-FEOC countries like the U.S., an amount that ramps up to 60 percent by 2029. Other foreign entity restrictions vary by year and industry. The language could force companies to set up a tracking system of their components that is costly, according to observers. 'It will require a lot of time setting up the necessary tracing,' said Robbie Orvis, senior director of modeling and analysis at climate policy think tank Energy Innovation. Also, there may be 'instances of projects that would fail the tests even after setting up tracing,' he said. Under Trump's order, Treasury should take 'prompt action' by mid-August that Treasury Secretary Scott Bessent deems 'appropriate and consistent' with the FEOC language in the law. It's unclear how that will be interpreted, but the agency could take various additional steps to crack down on renewables. Options include adding new administrative requirements for companies or changing the calculation method used to determine what percentage of components come from countries like China, analysts said. The agency could require developers 'to provide high degrees of disclosure about where they got their equipment from, which is something that is not a good thing for companies trying to protect their own supply chains' competitive information from their rivals,' said Zindler. Because of the uncertainty, BloombergNEF said that wind and solar projects seeking tax credits essentially need to break ground this year — rather than waiting until next July as technically allowed — to avoid obstacles from FEOC restrictions. 'While in principle it should not be difficult to source 40-45% of the value of a solar or wind plant from companies without strong links to China … the definitions around what proof is required could render the rule burdensome or impossible to meet,' the research note said. A rush to start construction will force developers 'to take aggressive bets on supply chain deals, grid connection, local permits and locking capital,' it said. The FEOC language could be particularly difficult for smaller developers that don't have the legal or policy staff to help navigate the rules, said Dan O'Brien, a modeling analyst at Energy Innovation. 'It's the smaller companies that have less assets and capital to spend on that are going to hesitate to … claim any of the credits until it's very clear whether they are allowed to do so,' he said. Overall, meeting FEOC requirements could be more challenging for solar than wind, which has a more localized supply chain. Grid batteries, which are often tied to renewable projects, are facing more restrictive FEOC rules than other industries and are required to obtain the majority of their components from the U.S. or non-FEOC countries as of next year. The battery industry currently obtains most of its equipment from China. Solar manufacturing, which has grown exponentially since the climate law, also could see headwinds from the FEOC rules, as many industry components come from Chinese-linked companies in Southeast Asia. Other solar manufacturers say they support stricter FEOC rules to boost domestic production but are unhappy about the law's removal of 'adder' credits for companies that use components made in the U.S. Grid batteries are facing more restrictive rules on foreign entities of concern than other industries. Pictured is a worker checking battery storage infrastructure at Orsted's Eleven Mile Solar Center lithium-ion battery storage energy facility in Coolidge, Arizona. | Ross D. Franklin/AP What do forecasts say? The debate over the order comes as new reports are providing a clearer picture of where renewables may be headed by the end of the decade because of the law. While the analyses differ in their conclusions somewhat, most signal a sharp dropoff in wind and solar growth in the end of the decade, when tax credits phase out and projects already under construction reach completion. BloombergNEF's forecast, for instance, concludes that new wind, solar and energy storage additions could decline 23 percent through 2030 versus what would have occurred before the law, a drop of about 117 gigawatts of power. The projected plunge is particularly sharp — 50 percent — for wind because of permitting and regulatory obstacles. FTI Consulting similarly reported Friday that 100 GW of planned utility-scale wind and solar projects could be jeopardized because of the law. Over a 10-year period, research firm Wood Mackenzie estimates, wind and solar project installations could decline roughly 20 percent. 'Permitting bottlenecks threaten to push completion dates outside eligibility windows,' it said in a research note. And Rhodium Group projects the law would cut new clean power capacity by as much as 59 percent over the next decade. Trump supporters say the law will fortify the grid and create jobs in areas like nuclear power. The law will 'turbocharge energy production by streamlining operations for maximum efficiency and expanding domestic production capacity,' the White House said in a statement this month. Clean energy advocates disagree, arguing that solar and wind are needed to meet growing electricity demand from artificial intelligence. It's not all gloom and doom for renewables, though. 'Legacy' projects that were already under construction as of last year are not affected by the law, a timeline that could boost some renewable companies through the end of the decade. The AI boom is expected to keep demand robust for wind and solar over the long term. 'It's definitely not the death of the industry,' Zindler said. The midterm elections also could be a factor. 'The long window between now and November 2026 elections gives proponents of expanded renewable energy time to focus opposition to tax credit reversals in states and House districts where seats could be in play and there are strong pro-renewable constituencies,' said Barry Rabe, a professor emeritus of environmental policy at the University of Michigan. He said the midterms offer a test for support for the subsidies. If electricity prices rise after the law as some models predict, it could be politically challenging for Trump, he said. 'Long before the next election, Trump will own energy prices with an electorate that has anticipated swift price reductions,' said Rabe. In the meantime, there is expected to be surging growth for renewables this year as developers rush to avoid the FEOC provisions. 'It's going to be a boom of every company when they get their regulatory approval putting shovels in the ground,' said O'Brien.
The Hill
14 hours ago
- Business
- The Hill
White House, Philippines make trade deal
The Philippines has agreed to a trade deal with the United States that will lower U.S. tariffs on its experts to 19 percent, President Trump announced Tuesday following a meeting with that country's president, Ferdinand Marcos Jr. U.S. exports to the Philippines will not face tariffs, Trump said. 'President Ferdinand Marcos, of the Philippines, is just leaving the White House, with all of his many Representatives. It was a beautiful visit, and we concluded our Trade Deal, whereby The Philippines is going OPEN MARKET with the United States, and ZERO Tariffs. The Philippines will pay a 19% Tariff. In addition, we will work together Militarily,' Trump said on Truth Social. He added, 'It was a Great Honor to be with the President. He is Highly Respected in his Country, as he should be. He is also a very good, and tough, negotiator. We extend our warmest regards to the wonderful people of The Philippines!' The deal only reduces the U.S. tariffs on Philippines imports from 20 to 19 percent. Trump had announced a 17 percent duty on imports from the Philippines in the Spring on his so-called 'Liberation Day' before warning that figure would rise to 20 percent last month. It was not immediately clear if there was more to the deal from the Philippines perspective. When he greeted Marcos at the White House on Tuesday morning, Trump said he was hopeful the two leaders could strike a trade deal. The president has sent out letters to about two dozen trading partners setting the rates including 25 percent on Japan and Malaysia, 40 percent on Myanmar and 36 percent on Thailand. Canada, the European Union and Mexico — some of the U.S.'s top trading partners — were hit with updated tax rates as well. Treasury Department Secretary Scott Bessent earlier on Tuesday said the Aug. 1 date set for tariffs to hit countries that fail to negotiate deals with the U.S. is a 'hard deadline.'
Yemen Online
15 hours ago
- Business
- Yemen Online
US Sanctions Houthi-Linked Oil Smuggling Network Operating Between Yemen and UAE
The United States has imposed fresh sanctions on a petroleum smuggling and money laundering network accused of financially supporting Yemen's Houthis. The action, announced by the Treasury Department on July 22, targets two individuals and five entities operating across Yemen and the United Arab Emirates. Among those designated is Muhammad Al-Sunaydar, a prominent Yemeni businessman who manages Arkan Mars Petroleum Company, which allegedly coordinated the delivery of $12 million worth of Iranian petroleum products to Houthi-controlled ports in Hudaydah and Ras Isa. The network also includes UAE-based affiliates—Arkan Mars Petroleum DMCC and Arkan Mars Petroleum FZE—linked to the same smuggling operations. Other entities sanctioned include: - Al-Saida Stone for Trading and Agencies, suspected of laundering funds through coal imports. - Amran Cement Factory, reportedly used to fortify Houthi military infrastructure in Saada. The Treasury stated that these actors 'enable the Houthis' access to the international financial system' and generate hundreds of millions of dollars annually through illicit petroleum imports and taxation schemes. The sanctions were issued under Executive Order 13224, which targets entities supporting terrorism. All assets of the designated individuals and companies within U.S. jurisdiction are now frozen, and American citizens are prohibited from conducting business with them. This move follows a series of U.S. actions aimed at disrupting Houthi revenue streams and weapons procurement networks, as the group continues its missile and drone attacks on Israel and commercial shipping in the Red Sea.
Forbes
2 days ago
- Business
- Forbes
August Tariff Wave Could Hit Pharma And Consumers Hard
Vaccine Production Facility. Medication Manufacturing Process. Glass Vials with Orange Caps on ... More Conveyor Belt. Medical Ampoule Production Line at Modern Pharmaceutical Factory. U.S. customs duties topped $100 billion for the first time ever in a single year this month. That number is even more remarkable when you consider that most of President Donald Trump's new tariffs haven't even taken full effect yet. U.S. revenue from tariffs surpassed $100 billion for the first time in a singler year As you've heard me say countless times before, government policy is a precursor to change. We've already seen some big changes in trade, but come August 1, we'll see even more. Investors are experiencing a mix of strong market performance on the one hand and growing economic friction on the other. Historic Tariff Revenues The U.S. pulled in over $27 billion in tariffs in June alone, according to the Treasury Department. That helped produce a surprise $27 billion budget surplus for the month, something we haven't seen in a long time. Treasury Secretary Scott Bessent suggests that tariff revenue could exceed $300 billion by year-end if the administration's plan stays on course. Tariffs are clearly working as a revenue generator for the federal government. But keep in mind that tariffs are taxes, paid by American businesses and passed on to consumers in many cases. Inflation may be creeping in already. June's consumer price index (CPI) rose to 2.7% year-over-year, the highest rate in four months, and core inflation—excluding food and energy—is at 2.9%. The culprits? Imported consumer staples like clothes, shoes, furniture and electronics, which are facing some of the highest tariff rates since the 1930s. For retirees and working families alike, that means higher prices at Walmart and Target, and fewer dollars left over to save or invest. Yale's Budget Lab estimates that this year's tariffs will cost the average U.S. household $2,500. Big Pharma Braces for Impact Auto prices, surprisingly, have dipped in recent months, likely due to an early surge in consumer demand ahead of new tariffs and incentives from dealers. I wouldn't expect that trend to last. Analysts at Cox Automotive say the added cost from tariffs—up to $5,700 per imported vehicle—could eventually hit the most affordable models the hardest. Meanwhile, the pharmaceutical sector is on high alert. Trump says his proposed drug import tariffs could begin at a low rate in August and ratchet up over the next year. According to the president, this is about bringing jobs home or making companies pay the price. Investors should watch this space closely, as health care stocks could be in for a wild ride. S&P 500 Closes at a Record Despite these headwinds, the S&P 500 closed at a record high on Thursday. And June's PPI (producer price index) inflation came in flat, defying predictions from every one of Bloomberg's surveyed economists. U.S. tariffs have still not impacted wholesale prices Earnings calls from S&P 500 companies show fewer concerns about inflation than at any time since 2021, according to Schwab's Liz Ann Sonders. Some of the tariffs may be getting absorbed by companies willing to take on lower margins. Others are rerouting supply chains through lower-tariff countries like Vietnam and Mexico, in a process known as transshipment. Manufacturing Execs Express Uncertainty Not all business leaders are thrilled. A recent survey from the Atlanta Fed shows that 70% of executives overall report tariff-related uncertainty. That number jumps to nearly 90% in manufacturing. I see that as a red flag because when uncertainty is this high, companies tend to pull back on hiring and investment. Percent of U.S. firms that reported tariff-related uncertainty Historically, uncertainty has been an enemy of bull markets and long-term growth. The longer companies wait on new projects, the more it drags on GDP. Yale's model suggests that U.S. economic growth this year will be approximately one percentage point lower due to tariffs, with a persistent 0.4% drag in the years to come. Pharma Tariffs Loom as the Next Inflation Shock Tariffs may bring in revenue and support reshoring efforts, but they also create friction. Certain sectors like industrials, autos and consumer discretionary will feel the pinch more acutely. Conversely, companies with domestic supply chains already in place and strong pricing power may fare better. Gold also deserves a second look. Tariff-induced uncertainty and fiscal imbalances have tended to support demand for hard assets, especially if the Fed is constrained on rate cuts due to sticky inflation. As always, I recommend a 10% weighting in physical gold and gold mining stocks. Again, keep your eye on August 1. That's when the next wave of tariffs is set to roll out, potentially including those on pharmaceuticals. Whether markets stay calm or not may depend on how quickly businesses and consumers adapt.
Forbes
2 days ago
- Business
- Forbes
Trump, And Future Presidents, Will Battle The Fed Until It Reforms
Flags fly over the Federal Reserve Building in Washington, D.C. (Photo by) Getty Images President Trump's war against the Federal Reserve isn't unusual, historically. Until our central bank changes its ways, future presidents will also have their battles. It's no surprise that President Trump's intense fight with Fed boss Jerome Powell is generally portrayed as the short-sighted White House bully-battling the heroic head of a crucial, independent institution that's attempting to do what's right to stop inflation. If Trump takes Powell's scalp, most observers warn, terrible things will unfold because of the ballooning national debt. This narrative is wrong. Presidents going head to head with our central bank isn't that unusual. Presidents Reagan, Bush 41 and Clinton had occasional beefs with Fed bosses. It's unrealistic to think that commanders-in-chief wouldn't be sensitive to the Fed's slowing the economy. The Federal Reserve brings this on itself because of its long-time philosophy that prosperity causes inflation, and the cure for that is depressing economic activity. The real cure for monetary inflation is keeping the dollar's value steady, instead of letting it go up and down like a yo-yo. For a variety of reasons the best barometer for stability is the price of gold, and the second best is a broad index of commodities. When the price of gold fluctuates, it's not the real value of gold fluctuating, but the value of the dollar. When the Fed puts itself in the position of guiding the economy, it shouldn't be surprised when presidents get involved. The current spat between the White House and the Federal Reserve, rowdy though it may appear, is somewhat mild compared to fights in the past. During WWII, the Fed agreed to keep both short- and long-term interest rates low to help the government finance the war against Nazi Germany and Imperial Japan. But the rate-fixing persisted after the conflict. When the Korean War got underway, the Fed said it was going to stop the fix because inflation would skyrocket. President Harry Truman and his Treasury Department vigorously fought the move. Truman felt it was high interest rates after WWI that had depressed the economy, thereby bankrupting his new haberdashery. The issue was personal. The fight got ugly. Finally, an agreement was reached. Fed independence was reaffirmed and interest rates were allowed to rise. However, the head of the Fed was, in effect, fired and a Treasury Department official put in his place. The expectation was that the official, William McChesney Martin, would continue the low-rate policy. Instead, Martin, who would serve as Fed chairman for 19 years, raised them. Years later when Martin ran into Truman, the former president hissed at him, 'Traitor!' In 1965 Martin got into an ugly battle with President Lyndon B. Johnson. Martin wanted to raise rates because he feared the inflationary effects of Johnson's massive domestic spending and the huge Vietnam War outlays. When Martin wouldn't bend, Johnson ordered him and others to his Texas ranch. Johnson, a large man, got so angry he took Martin by the lapels and threw him against the wall. Martin eventually caved. In the early 1970s, President Nixon, who had taken the U.S. off the gold standard and imposed nationwide price and wage controls, wanted Fed chair Arthur Burns to pursue an easy-money policy to help Nixon win reelection. To make Burns more compliant, Nixon aides planted untrue stories about Burns' wanting a big salary increase while other wages had been frozen. Burns caved and a hideous inflation ensued. In these cases, the Fed was right and the presidents were wrong. But this hasn't always been so. For instance, Reagan had a valid point regarding Paul Volcker's tight-money policy in the mid-1980s. And in his fight with the central bank, Trump is also right. The Fed is playing anti-Trump politics. Hopefully, the president and his team will start making the valid case that the Fed's operating philosophy is profoundly wrong. If keeping the dollar stable and trustworthy were to become the Fed's goal in the future, then it would no longer try to manipulate the economy—and presidents would no longer have a reason to fight it.
