Clean Energy Financing Update

August 25, 2025

• China this year will add eight times as much electric capacity through solar alone as the U.S. will add from all sources, putting the American adversary in a strong position to develop AI and transformative manufacturing.
• In the race for energy dominance, renewables are playing a key role. Why discourage them?
• Utility rate increase requests and approvals rise at twice last year’s rate.
• Op-ed authors urge the EPA to allow green banks to help solve the electricity crisis through public-private investments like community solar.BESS systems are booming in Texas. They store power in slack times for use during peaks, cutting utility bills and boosting reliability.
• Puerto Rico and California create “virtual power plants” by aggregating tens of thousands of home batteries, boosting capacity and saving money.

In our last newsletter, we looked closely at Texas. In the four years since the lights and heat went out in the state during Winter Storm Uri, killing more than 200, Texas has made a massive effort to increase its capacity to produce power. And Texans have chosen renewables to meet their needs. In just the last year, Texas has added 13.5 gigawatts (GW) of capacity to its electric grid, and 95% of that power has come from new solar, wind and battery storage projects.

Now, let’s examine China, our number-one economic and national security adversary. It’s worth displaying this graphic we used in our Newsletter No. 2:

Like Texas, China has decided on renewables to provide electricity to power advanced robotic manufacturing, electric vehicles and data centers to develop Artificial Intelligence (AI) computing.

The pace at which China is adding power is astounding. Consider this YouTube video conversation between two Council on Foreign Relations (CFR) fellows, Rush Doshi, who leads the China Strategy Initiative, and Varum Sivaram, who directs the Climate Realism Initiative. The video is titled, “China Is Powering the Future. America Needs to Catch Up.” That’s an understatement.

China is engaged in a race with the U.S. to achieve AI dominance. Sebastian Elbaum, professor of computer science at the University of Virginia, and Adam Segal, director of the Digital and Cyberspace Policy Program at CFR, wrote in Foreign Affairs:

Technology executives, national security analysts, and U.S. officials all seem to agree that the United States must win the AI competition with China. In October 2024, Biden administration National Security Adviser Jake Sullivan warned that the United States risked “squandering [its] hard-earned lead” if it did not “deploy AI more quickly and more comprehensively to strengthen [the country’s] national security.” And in one of its first executive orders, the second Trump administration declared its goal “to sustain and enhance America’s global AI dominance.”

In a speech at the Hamm Energy Institute in Oklahoma, Chris Wright, the Secretary of Energy, gave said winning the AI race was a second Manhattan Project, the effort during World War II to develop a nuclear bomb.“[AI] will have enormous implications on national security and our military, both offensively and defensively,” Wright said. “There is no other option but for the United States to lead in artificial intelligence.”

An important application for AI is developing grid architecture to cope with the growth in demand for electricity. The Department of Energy advocated the use of AI for this purpose in a report in April 2024, stating:

The electrical grid of the United States is among the most complex machines on earth. It consists of tens of thousands of power generators delivering electricity across more than 600,000 circuit miles of transmission lines, 70,000 substations, 5.5 million miles of distribution lines, and 180 million power poles.

The report added: “This system evolved organically over a century of piecemeal additions, and now operates at the heart of America’s $28 trillion economy…. This infrastructure is becoming old and overburdened.” The report noted that energy flows are “unidirectional…with very little performance information from sensors.” It is precisely the kind of problem that the application of AI have a good chance of solving.

If China gets a big head start, the U.S. risks a key opportunity. (We will be examining the grid’s deficiencies and how to fix them in the next newsletter.)

The U.S. can’t win the race if it doesn’t have the electric power to run AI data centers, and the Administration is, at best, ignoring renewables. The press release announcing the Oklahoma visit of Wright and Lee Zeldin, who heads the Environmental Protection Administration (EPA), said that the purpose of the trip was to “unleash American energy.” Yet nowhere in the release were renewables mentioned — even though Oklahoma gets 45% of its power from these sources (nearly all of it, wind), up from just 19% in 2013, according to the U.S. Energy Information Administration (EIA).

China, on the other hand, is making renewables the centerpiece, and, as a Fortune headline on Aug. 14 put it, “AI experts return from China stunned: The U.S. grid is so weak, the race may already be over.”

In the U.S., said a Goldman Sachs analysis on Aug. 11, “AI’s insatiable power demand is outpacing the grid’s decade-long development cycles, creating a critical bottleneck.”

A Deloitte industry survey found that stress on the power grid is the limiting factor in U.S. development of AI. Meanwhile, says Fortune, “The public is growing increasingly frustrated over increasing energy bills. In Ohio, the electricity bill for a typical household has increased at least $15 this summer from the data centers, while energy companies prepare for a sea change of surging demand.” (For more on rising utility bills, see below.)

By contrast, according to Fortune, “in China, building enough power for data centers is no longer up for debate.”

The numbers are stunning. China is on track this year to deploy 380 GW of solar capacity after adding 300 GW last year. By contrast, the EIA projects that the U.S. will add 63 GW of electric-generating capacity of all kinds in 2025.

Through May, China had 180 GW of utility-scale solar and 159 GW of wind power under construction, reports the Global Energy Monitor. The total of the two is enough to power all of South Korea. Through last year, the U.S. had 248 GW of solar capacity while China had 887 GW. China is well positioned to power many more data centers – especially with the addition of cheaper and cheaper batteries to store energy.

The Fortune piece cited David Fishman, an expert on Chinese energy, as saying that “China’s quiet electricity dominance…is the result of decades of deliberate overbuilding and investment in every layer of the power sector, from generation to transmission to next-generation nuclear.” The article continued:

The country’s reserve margin has never dipped below 80%–100% nationwide, meaning it has consistently maintained at least twice the capacity it needs, Fishman said. They have so much available space that instead of seeing AI data centers as a threat to grid stability, China treats them as a convenient way to “soak up oversupply,” he added.

Both the U.S. and China have benefited from the declining cost of renewable infrastructure. In 2020, solar and onshore wind were each more expensive in China than coal per megawatt hour. Now, the unsubsidized cost of wind power is about 70% less than coal; solar, about 50% less, as this graphic from a Financial Times report shows.

“That view,” said a report in CipherNews, “puts the former regulator in line with a rising chorus of data center developers and some fellow Republicans arguing that renewables will be required to meet enormous energy demands to win the AI race.”

The basic laws of science and economics have spurred the addition of more solar, wind and battery in the electricity-generating mix. Subsidies have helped, but they are not the reason renewables are more financially attractive. As we reported in our Newsletter No. 3, Lazard, the investment firm, recently issued its annual Levelized Cost of Energy Report, which compares energy sources for new-build power generation on an unsubsidized (that is, no tax breaks) basis. Lazard found:

Renewable energy remains the most cost-competitive form of generation. As such, renewable energy will continue to play a key role in the buildout of new power generation in the U.S. This is particularly true in the current high power demand environment, where renewables stand out as both the lowest-cost and quickest-to-deploy generation resource.

No wonder renewables – solar, especially — have taken off. Look at this graphic showing clean-power capacity in the U.S. more than tripling since 2019.

She concludes: “If we’re serious about ‘energy abundance,’ instead of energy scarcity, we need permitting reform that covers all generation and transmission.”

This is a crisis, and while the administration wants to help gas-fired plants add power to the grid, there are other obstacles besides permitting hold-ups. As John Ketchum, the CEO of NextEra, America’s third-largest electricity provider,  said earlier this year. “You can build a wind project in 12 months, a storage facility in 15, and, you know, a solar project in 18 months.” Delays in getting turbines for a gas plant can run five to seven years.

Renewables projects can add capacity quickly, and it appears inevitable that policy makers who want to address the electricity crisis in a serious way will encourage solar, wind and battery storage.

It is no secret that rising demand means that households and businesses are going to pay a lot more for electricity. PowerLines reported last month that “utility rate increases requested and approved totaled…$29 billion in the first half of 2025.” That’s a record. During the same period last year, the figure was $12 billion.

The EIA in May projected that, on average, Americans will be paying 13% to 18% more for electricity next year than they were in 2022. That rate of increase is 2% to 4% higher than the expected increase in inflation. The research firm ICF predicts that residential electric bills will rise another 15% to 40% between a base year of 2023 and 2030 as demand increases 25%.

In the auction, power providers offered commitments at a price to provide back-up energy needed on the grid from mid-2028 to mid-2029. Because of high demand and constrained supply, capacity prices in the auction rose 22% from a year ago for most of PJM, setting a new record.

Last year, the auction shocked the energy world when the price came in at $269.92 per megawatt (MW) per day for much of the PJM footprint, compared to $28.92/MW-day for the previous year’s auction – an increase of about 800%.

The 22% increase this year, on top of last year’s, was no surprise. “This is what the load-growth era looks like for PJM,” said Molly Jerrard, head of flexibility at Enel North America, which helps communities transition to an electrified economy. Jerrard commented on the tightness of the supply-demand situation in a Utility Dive piece.

Still, in a Heat Map Daily article, Jonah Goldman of the infrastructure investment firm Generate Capital makes a bullish case for renewables, arguing that marketplace realities will overcome ideological or cultural opposition.

“As electricity demand rises for the first time in over a decade,” says the article, “the need to deploy cost-competitive grid energy is only increasing. Thus, Goldman sees plenty of reason to continue investing in a renewables buildout — solar especially, which can often be deployed more quickly, flexibly, and economically than any other form of generation, politics aside.”

“What is not a question really anymore is whether these projects are going to get built,” Goldman said. “There’s just not another option.”

A RealClearPolitics opinion piece on Aug. 5 addressed the U.S. electricity shortage by showing what can be done to increase capacity and hold down utility bills. The headline stated, “Memo to EPA: Let Green Banks Solve America’s Electricity Shortage.”

“Renewable energy, which in recent years has become far less expensive and faster to deploy, is a big part of the answer,” wrote Jorge Vargas, CEO of Aspen Power, a New York-based platform for distributed energy, and Jared Haines, CEO of Houston-based Catalyze, a firm that empowers renewable energy developers.

The two authors, however, added, “Recent moves by policy makers, including presidential orders and the Big Beautiful reconciliation bill, have tried to thwart solar and wind generation. That is a mistake. Wind and solar may no longer need massive tax credits, but these resources should not be put at a disadvantage to natural gas and coal.” (See above for more on Trump Administration obstacles to developing more electric power.)

Vargas and Haines pointed to solar, the fastest-growing source of new electric power in the U.S. today. “More than 5 million U.S. homes have solar panels on their roofs,” they wrote. “Solar panels can be installed quickly and save customers money, but the vast majority of Americans can’t take advantage of solar in this way. Either they are renters, or their roofs face the wrong direction or can’t support the panels.”

But there is a solution that is growing in popularity: community solar. Ground-mounted solar panels located near subscribing customers generate electricity, which, they write, “is fed directly into the power grid through a dedicated meter. The utility provides subscribers with credits for the electricity their system generates, lowering their monthly energy bills.” Vargas and Haines add:

You don’t have to own your home to be a subscriber, and it doesn’t matter which way your roof faces. Community solar has become an immensely popular program, and New York is the nation’s leader, with about one-third of total U.S. capacity. New York has more than 800 installations, producing enough power for 400,000 homes.

They note that “this growth would not have happened without the New York Green Bank [NYGB], established in 2013 with $1 billion in one-time funding from customers’ electric bills. Since then, the bank has made investments in over 100 projects, using its initial capital to leverage far more private financing in a process called ‘crowding in.’”

What the NYGB has achieved is being spread across the country. The piece cites a July 15 energy summit in Pennsylvania that was attended by President Trump and Treasury Secretary Scott Bessent. At the event, Energy Capital Partners, a leading investment firm, announced “plans to develop 51 community solar projects designed to power 224,000 homes,” according to a press release from Sen. Dave McCormick (R-PA), who organized the summit.

Green banks have bipartisan support, and, write Vargas and Haines, they are “poised to be key partners in addressing America’s growing energy needs. The White House and Congress have to understand that renewables are no longer boutique luxuries – if they ever were. Policies should encourage collaboration among the EPA, green banks, and the private sector to help deliver more clean power – faster and at lower cost to Americans nationwide.”

At an event in New York on Aug. 18, EPA Administrator Zeldin highlighted what he said were the dangers of Battery Energy Storage Systems, which the global infrastructure giant ABB describes this way:

The battery energy storage system’s (BESS) essential function is to capture the energy from different sources and store it in rechargeable batteries for later use. Often combined with renewable energy sources to accumulate the renewable energy during an off-peak time and then use the energy when needed at peak time. This helps to reduce costs and establish benefits for the user. BESS has flexibility with grid connection and can be operated in local mode when the grid is not available.

This schematic from the EIA shows the uses of battery storage for the grid.

Said Zeldin, “Many New Yorkers, especially in New York City and on Long Island, have made their voices clear – they do not want Battery Energy Storage Systems built in their neighborhoods. Residents are looking across the country where dangerous lithium battery fires at BESS facilities have caused widespread damage, and they are concerned with New York’s partisan push to fill yet another delusional ‘green’ goal, which the state itself admits it cannot meet.”

Concerns about safety are always appropriate, but unnecessarily limiting the use of BESS will almost certainly raise utility bills. Without BESS, many utilities will need to invest in traditional “peaker” plants, that is, natural-gas-fired plants to meet peak demand.

The Daily Caller emphasized the ideological content of Zeldin’s remarks under the headline, “Trump Admin Sounds Alarm Over Green Tech Climate Zealots Are Counting On.”

But EPA’s own guidance document on the safe installation of BESS, which was reproduced by the Daily Caller, states that “since 2020, BESS failure incidents have decreased, but some recent fires have gained attention in the media.” The document includes a graphic that shows that failure incidents have fallen precipitously: from 1.5 per gigawatt hour (GWh) in 2018 to less than 0.1 per GWh in 2024.

Communities should consult BESS safety experts when considering and designing installations. Communities should also note that despite some high-profile incidents, improvements in BESS quality and design have led to a decrease in the number of failure incidents per gigawatt hour deployed.

For a different view from Zeldin’s on the importance of batteries, look to Texas, where installed battery capacity is 5,707 MW, compared with just 225 MW in New York. Fiscal Notes: A Review of the Texas Economy, published by the Texas Comptroller’s Office, reported in November:

Texas leads the nation in both dispatchable natural gas-powered electricity generation and intermittent renewable energy production. But one of the challenges Texas faces is how to align renewable generation with demand, as these intermittent power sources often go offline while demand peaks. This misalignment can lead to extreme price volatility and can make maintaining grid reliability more complex and challenging….

Enter battery energy storage systems (BESS).

When intermittent energy sources like wind and solar go offline, batteries can release stored energy and provide greater reliability and stability to the Electric Reliability Council of Texas (ERCOT) system. Batteries also can be quickly deployed to shore up grid stability in tight conditions, like when a power plant suddenly trips offline.

Texas has benefited, says Fiscal Notes, from the “fast permitting process” in Texas as well as the “vast amount of land.” In addition, “the global price of lithium-ion batteries has plunged 82 percent over the past 10 years…. Another factor is the modular nature of batteries, which makes building new installations relatively fast and allows for a quicker return on investment compared with other energy infrastructure.”

Fiscal Notes explains, “Experts note, however, that fires and explosions at battery storage facilities are rare due to strict safety precautions.” Joshua Rhodes, a University of Texas expert quoted in the piece, “argues that battery storage facilities don’t pose a greater risk than facilities in other Texas industries.”

Battery storage represents only about 3% of total capacity in Texas, but BESS is a tool that can dramatically increase reliability and decrease costs. “For example,” says the Fiscal Notes piece, “when Winter Storm Heather impacted Texas in January 2024, BESS units generated $750 million in market savings by delivering ancillary services and freeing up to 3 GW of gas generation to meet demand and lower prices.

And when record hot temperatures strained the grid in September 2023, energy stored by BESS supplied electricity to approximately 434,000 homes and helped avoid grid failure.”

Tesla has a product called Powerwall, a home battery that stores energy generated by solar panels on the roof or simply from the grid. The stored energy can power your home or car, it can provide you with back-up during general outages, or it can be sent to the grid and provide savings on your electric bill.

There is another use as well that has received notice lately: Home batteries can be stitched together to create a “virtual power plant” (VPP) that can provide emergency power not just for a single home but for a community or city during peak hours or extreme weather. As the Department of Energy explains on its website:

Virtual power plants, generally considered a connected aggregation of distributed energy resource (DER) technologies, offer deeper integration of renewables and demand flexibility, which in turn offers more Americans cleaner and more affordable power.

On July 29, between 7 and 9 pm, some 100,000 households in California sent power from their batteries onto the grid, producing 535 MW of average output. “The aggregators conducted the event to assess the performance capability of their battery fleet heading into California’s summer peak season, when the VPP’s grid services will be needed most,” said an analysis by the Brattle Group, a research firm.

A firm called Sunrun was the largest aggregator of Powerwall participants. Nearly all the extra power was additive. “It would not have occurred in the absence of calling an event.”

“This network of Powerwall owners, each with their own solar and battery setup, has transformed the way Puerto Rico prepares for and responds to power challenges, especially after years of grid failures and hurricane disruptions.” According to Utility Dive:

What started as a modest pilot program in 2023 has grown into the first operational behind-the-meter virtual power plant in Latin America and the Caribbean, and a crucial support for the territory’s dilapidated energy infrastructure, said Javier Rúa-Jovet, chief policy officer of the Solar and Energy Storage Association of Puerto Rico. “It’s grown…in the blink of an eye,” he said. “It’s something to be proud of.”

The decision to dispatch the energy is solely that of each homeowner, who earns about $1 per kilowatt hour. As Jose Rivera, a local Tesla driver, put it: “The VPP isn’t just lights-on during storms—it’s peace of mind, and a little fun besides.”

Meanwhile, on Aug. 13, the Connecticut Green Bank, a part of the CGC network, announced a strategic partnership with GoodLeap, a finance and technology company, “to develop and operate Virtual Power Plants (VPPs) across Connecticut.”

The effort, “enabled through the State’s Energy Storage Solutions program, will focus on deploying residential solar systems and battery energy storage to help lower energy costs, improve grid resilience, and advance Connecticut’s clean energy goals,” said a press release. VPPs are only one example of innovative uses of renewables to help the U.S. to move quickly to add electric capacity quickly and cut costs for consumers.

The Connecticut Green Bank was founded in 2011 and has supported the creation of 30,000 jobs in the state, mobilizing $3 billion in public and private capital.