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January 28, 2025

Industry Insights with Jon Semingson

It’s hard to keep up with everything happening in energy news right now, as we have had a dizzying number of changes with the new administration, advances in AI, and major announcements from legacy energy players trying to get into the race to power data centers. 

Here are some of the highlights:

Executive Orders

Several Executive Orders were issued this week, impacting renewable energy. These include:

IRA (Inflation Reduction Act)

“Unleashing American Energy” is the Executive order that mandates an immediate pause on the disbursement of funds appropriated through the IRA. This pause is set to last for 90 days while federal agencies review their processes to ensure alignment with the administration’s energy policies.

Key Developments:

  • Legal Challenges Anticipated: There will be legal opposition from stakeholders who argue that pausing congressionally approved funds may be unlawful. Congress passed the IRA into law and only Congress can repeal it. Many Republicans have come out to support the IRA and the manufacturing jobs it has created in places like Texas, Florida, and Georgia.
  • 45X Manufacturing Credits: It is likely that some restrictions will be placed on 45X manufacturing credits going to foreign owned entities.  
    • Example: Trina Solar recently sold its module factory for $340M and will lease the facility back. We expect to see similar deals in the future as rules around 45X may change.

EV Pause

  • The executive order does not directly repeal the $7,500 federal EV tax credit, but will likely remove the federal exemption that CA used to phase out gas power vehicles by 2035.
  • This does pause, but not eliminate federal funding for EV charging stations under the IRA.  
  • It is also likely that the federal government will be backing out of or canceling the purchase of EVs for fleets like the postal service.

Additional Insight:
Norton Rose Fullbright has a great article summarizing what all these orders mean and how they will affect Project Finance.

AI and Data Centers

We have all been talking about load growth coming from the electrification of everything and datacenter power needs for AI.  Two things popped up this week that could have an impact on both markets.

DeepSeek

A new Chinese AI platform, DeepSeek, came out this week and disrupted the market with an open-source AI model.  What makes them unique is that they seem to have built a very strong competitor to market leaders like ChatGPT using less high-powered chips, which means much less energy consumption.  NVIDIA lost $600M in a day on the news.  The big question is: Will new, less power hungry AI models reduce new need for all the expected load growth?

New Player Entering the Market to Power Off-Grid Data Centers

Chevon announced a new JV with Engine 1 to power off-grid data centers with fully islanded natural gas plants as large as 4 GW.  It’s unclear if they have any data centers on deck ready to partner with them, but a JV this large will generate interest.

Expect more whiplash in the markets with additional tariffs on solar and storage components and adjustments to the IRA over the next few months.

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