Episode Summary
Executive Summary: The episode argues that despite tariff whiplash, FIAC uncertainty, and shifting tax rules, clean energy capital markets remain resilient and selectively active. Investment is concentrating in safe-harbored solar, batteries, and infrastructure with strong off-take and balance sheets, while manufacturing and marginal technologies are slowing. The hosts see batteries, hybrid contracting, and more disciplined capital structures as central to the next phase.
Main Topics: Capital remains active but more selective: The Crux market report shows project finance, construction lending, and bridge lending growing modestly, but capital is concentrating in renewable electricity and batteries rather than broad-based clean tech. Policy uncertainty is slowing marginal projects and raising diligence requirements. Tariffs, tax credits, and FIAC rules reshape deal risk: The discussion centers on how foreign entity of concern guidance and tariff volatility are changing underwriting, increasing compliance work, and making balance sheet strength and legal sophistication more important for tax credit transactions and project financing. Safe harboring created a large near-term project pipeline: Developers rushed to lock in favorable rules ahead of deadlines, creating a huge stock of insulated projects that should support deployment through 2027-2028, even as future projects face more uncertainty and slower financing. Batteries are emerging as the dominant flexibility asset: The hosts emphasize that battery storage is moving beyond standalone storage toward transmission support, distribution deferral, shaping, firming, and multi-value-stack use cases, with Texas and other grids already benefiting materially. Manufacturing is under pressure: Manufacturing investment fell sharply, especially where end markets weakened and policy clarity faded. First-of-a-kind U.S. manufacturing is struggling to secure debt and offtake, while conventional solar/battery deployment remains more robust. New contract structures and ownership models are evolving: The episode highlights more hybrid tax credit deals, direct CapEx by large offtakers, prepaid PPAs, merchant exposure, yieldco-like structures, and a possible return of public-market financing for clean energy assets. Gas behind the meter is a hedge, not a long-term answer: The hosts argue that behind-the-meter gas for data centers is largely a short-term political and reliability hedge, constrained by pipeline limits and grid interconnection realities; batteries are positioned to play a bigger long-term role.
Key Arguments: Policy certainty drives investment certainty; when tariffs and FIAC rules are unclear, cost of capital rises and projects get delayed or killed. The clean energy industry is mature enough to absorb hostile policy shifts, especially because safe-harbored projects and existing capital commitments are already locked in. Balance sheet strength now matters more in tax credit and project finance markets because buyers need confidence that compliance and performance risks can be managed over many years. A large share of near-term solar and storage growth is protected by safe harboring, so deployment volumes should remain strong into 2027-2028. Manufacturing is the weakest part of the market because it depends on both favorable policy and a healthy end market; both have become less reliable. Battery storage is becoming a multi-purpose grid asset, not just an energy-shifting tool, and could be the most scalable supply chain in the sector. Behind-the-meter gas for data centers is being overestimated by some investors because pipeline and grid constraints make it harder to rely on than advocates suggest. More predictable tariffs may ultimately be better than tariff whiplash because investors can model stable rules, even if those rules are unfavorable. The next wave of storage growth will depend on contracting innovation, including stacking multiple value streams rather than relying on single-purpose projects.
Data Points: Project finance / construction / bridge lending growth: Modest increase - Crux report on 2025 clean energy capital flows Share of activity from renewables and batteries: About 80% - Crux report indicated most capital activity was concentrated in these sectors Manufacturing investment change: Down 20% year over year - Clean energy manufacturing investment weakened amid policy and demand uncertainty Project cancellations: More than $22 billion - Reported in manufacturing pipeline cancellations Safe-harbored capacity: About 170 gigawatts - Jigar described the volume of projects locked in before key deadlines U.S. solar deployment last year: About 30-40 GW - Used by Jigar to show the scale of safe-harbored volume relative to annual deployment Tax credit market size: About $50 billion annually - Crux estimate cited by Jigar for the current tax credit transaction market Historical tax credit market ceiling: Around $18 billion per year - Jigar said the market previously topped out near this level Battery storage installed last year: More than 57 GWh - SIA storage outlook cited in the solar and storage section Battery storage growth: Up 30% year over year - SIA market outlook Utility-scale storage installed: Just under 50 GWh - SIA outlook for utility-scale deployments 2026 battery storage forecast: Around 70 GWh - SIA forecast discussed as next-year outlook 2026 battery investment: About $25 billion - Implied value associated with the 70 GWh forecast PPA pricing increase mentioned: $30/MWh higher - Jigar said some PPAs are being priced above prior levels Texas battery buildout impact: Roughly 19 GW - Jigar said batteries have effectively saved the Texas market over the last two years Cost comparison for some battery deals: Under $200/kWh delivered vs. about $450/kWh delivered - Jigar contrasted non-FIAC Chinese battery deals with FIAC-compliant supply chains Data center / digital infrastructure scale: 2-5 GW - Used to describe projects essentially equivalent to building a city Duration to upgrade gas pipelines: 5-7 years - Jigar argued firm gas supply cannot be expanded quickly enough for behind-the-meter gas plans Battery market context in Boston: 700 MW battery project - Referenced as a transmission-like battery solution for Boston Corporate offtake share: About 80% - Caroline noted most renewable deals are still backed by corporate offtake, give or take
Pivotal Quotes: "Policy certainty sort of drives investment certainty, right?" — Caroline Golan: Explaining why tariff and FIAC ambiguity is slowing capital formation and raising cost of capital "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, all roads lead through solar and battery storage." — Jigar Shah: Summarizing why batteries and solar remain the core scalable solutions for grid and load growth "If you're not good at tariffs, you have no business being in the solar industry." — Jigar Shah: Arguing that the sector has always operated through trade-policy volatility and can adapt again
Implications: Capital is still flowing, but only to projects and business models that can survive higher compliance, tariff, and financing scrutiny. Expect more battery deployment, more hybrid structures, slower manufacturing growth, and a premium on balance sheet strength, contracting creativity, and supply-chain localization.
From the Episode
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? Well, I think you started to summarize it in the beginning. Which was that policy certainty sort of drives investment certainty, right? 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 a, I think, a broader geopolitical trade war. And if energy gets caught in the crossfires there, that Creates uncertainty on the cost of capital, right? And so if the cost of capital is uncertain, I mean, energy is capital-intensive, long-standing 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 their cost of capital were able to be safe-harbored, and probably had offtake in hand. I think there's a big story here around.
Right. 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. Right. 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. Caroline, what's the story here for you? Oh, it's absolutely resilience. I mean, listen, the demand is still there. You know, 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?
You know, like sort of tariffs in 2012, and then again in 2015. And then you had the, you know, like accidental tariffs by Trump in 2019. And then you had like the tariffs with like the Biden administration, right? Like, if you're not good at tariffs, you have no business being in the solar industry. Like, everyone in the solar industry is an expert at, you know, class five roller coaster rides. And if you've got like a queasy stomach, you shouldn't be on this ride. Right. And so now we're talking about fiat complaints. And the fiat compliance basically says that, like, you can't have any form of Chinese ownership or, you know, like operational, you know, control or any of those things in your capital stack. And so everyone is moving fast to fix that problem, right? 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. Like it's, I still haven't figured this out.
About Open Circuit
The energy transition, decoded. Every week, three industry veterans explore the business models, tech breakthroughs, and market shakeups that are driving the biggest industrial transformation in history.