TheChek News Flow

Trump election victory deals blow to US clean energy industry

Developers of solar and battery recycling projects put plans on hold amid concern about policy and federal funding support

Donald Trump’s US election victory has dealt a blow to the renewable energy industry, prompting at least half a dozen developers to put projects on hold and investors to dump shares. 

Canadian solar manufacturer Heliene is pausing progress on its $150mn plan to manufacture solar cells in the US until it gets more policy clarity from the incoming Trump administration. Battery recycling start-up Princeton NuEnergy is reconsidering its timeline to build a $300mn factory in 2028, the companies told the Financial Times. 

Clean energy fears Trump’s re-election spells doom for the industry. The president-elect has vowed to turbo-charge the country’s oil and gas production and do away with President Joe Biden’s climate policies on the campaign trail, including repealing the Inflation Reduction Act, the strongest action the US has taken to boost renewable energy. 

“We’re holding our breath before further investments can go ahead,” said Martin Pochtaruk, chief executive of Heliene. Solar Energy Manufacturers for America, a coalition which includes the largest US solar manufacturers, estimates about a “half a dozen” projects are waiting for more clarity from the new administration.

“They need more certainty before they can make those hundred million dollar, billion dollar bets,” said Mike Carr, the association’s president. 

Trump’s election and the likelihood of a Republican-controlled Congress have sent renewables stocks tumbling, as investors fear a slowdown in the country’s pace of decarbonisation under a Republican trifecta government.

The iShares Global Clean Energy ETF, which tracks renewables companies, fell 7 per cent after Trump’s defeat of vice-president Kamala Harris, while shares for First Solar and Denmark’s Vestas slipped around 10 per cent. Fuel cell maker Plug Power and residential solar service provider Sunnova were down by more than a quarter.

Funds that were positioned short against renewable names scored more than $1 billion in profits off the trade.

“Everyone’s now just kind of in a wait-and-see mode, as well as a contingency planning mode,” said Alan Alexander, a partner at Vinson & Elkins, a law firm that works on energy projects.

Enacted in 2022, the IRA transformed the US into a top market for clean energy investment and turbocharged the country’s pace of decarbonisation, spurring nearly $450bn in private investment since its passage, according to the Clean Investment Monitor. 

Trump has repeatedly attacked the IRA on the campaign trail, calling it a “green new scam” and vowing to “terminate” the $370bn in federal support for clean energy under the law. He’s also vowed to unleash the country’s oil and gas production and stop offshore wind projects and electric vehicle mandates on “day one” if elected. 

Wood Mackenzie estimates renewable deployment could fall 30 per cent if the tax credits are phased out and there are new tariffs on equipment and restrictions on permitting. 

“It is a big challenge to net zero,” David Brown, director of the energy transition practice at Wood Mackenzie. “It’s likely that this election could put us on a delayed transition trajectory.”

Multiple executives and analysts told the FT that the economic case for renewable projects will continue under Trump and expect IRA tax credits for power generation and manufacturing to remain intact. Despite interest rate pressures, solar and onshore wind remain the cheapest sources of new electricity, according to Lazard.

“We feel good about the future and how it’s going to go under a Trump administration,” said Eric Dresselhuys, chief executive of ESS, a battery storage manufacturer in Oregon.

While Trump rolled back restrictions on fossil fuel production and emissions standards, he also renewed tax credits for solar and wind projects and electric vehicles. Solar and wind installations grew 32 per cent and 69 per cent during Trump’s first term as president while electric vehicle sales more than doubled, according to a Raymond James analysis. 

Analysts expect offshore wind and electric vehicles to be hardest hit under Trump. Unlike solar and onshore wind, offshore wind projects require federal permits, and electric vehicles have become a culture war issue since Trump’s first term.

Chao Yan, chief executive of Princeton NuEnergy, warned that Trump’s proposed tariffs could increase the cost of components and equipment for renewable production and hurt domestic manufacturers.

The incoming president has pledged a 10-20 per cent tariff on all imports and a 60 per cent tariff on products from China, the dominant producer of clean technologies.

“It’s too much unknown. It’s hard to move,” Yan said. “We need to have time to internally discuss and also discuss with investors whether we need to keep the current speed or if we should be slowing down.” 

The Biden administration has set a target to reduce emissions by 50 per cent to 52 per cent from 2005 levels. Wood Mackenzie estimates a second Trump term could result in 500mn tonnes of additional carbon emissions in the energy sector by 2030.

“The clean energy boom is not going to stop . . . it’s a question of will President Trump allow America to keep being a leader in this space, or will he cede America’s leadership role to other countries, especially adversaries like China,” said Andrew Reagan, executive director of Clean Energy for America, which in October co-launched a six-figure ad campaign in support of Harris.

Latin America’s hydro power bet suffers effects of climate change

Drought and floods have played havoc with production across region where almost half of electricity comes from water sources

It was Ecuador’s biggest-ever energy project, capable of powering every home in the country, gushed then-president Rafael Correa as he inaugurated the Chinese-built $2.2bn Coca Codo Sinclair hydroelectric dam in November 2016. 

The dam was one of eight planned by Correa, a leftwing populist, as he pushed for his nation to generate as much as 90 per cent of its electricity from hydro power, using billions of dollars of loans and construction expertise provided by Beijing.

Less than a decade later, that bet has gone disastrously wrong. Ecuador is experiencing power cuts of up to 14 hours a day as the government rations scarce electricity because unusually dry weather has left its hydro dams short of water. 

“There’s a huge deficit of around 1,000 megawatts of energy,” says Nicolás Mongardini, a Miami-based entrepreneur who has just visited his parents in Ecuador.

“Part of that is because of El Niño [the climate phenomenon] and the huge drought season that has struck Ecuador in the past months,” he says. “There’s a lot of water missing from the rivers and that is affecting hydroelectric power production. It started with eight-hour power cuts, then it went to 10, and now it’s 14, depending on the region.”

Ecuador’s hydropower plants have also been tarnished by construction faults. US army engineers have been called in to advise on how to save Coca Codo Sinclair from river erosion and a build-up of sediment that threaten its ability to generate power. In the meantime, the plant is running at around 30 per cent of capacity.

Neighbouring Colombia and Peru are facing drought-related problems with hydroelectric generation, as well, though not on the scale of Ecuador, which relies on water power for about 75 per cent of its electricity.

“Hydro power was the low-hanging fruit in terms of electricity development options, particularly in the Andes,” says David Purkey, Latin America regional director for the Stockholm Environment Institute, a research organisation. “It was the obvious choice — there was lots of water and lots of elevation loss which you could use to generate electricity.”

But, he adds, “anybody who was relying on water resources and the stability of water resources . . . got tricked by climate change”.

During the 20th century, Latin America seemed the ideal location for generating hydroelectric power. The continent harbours 31 per cent of the world’s fresh water in its rivers, lakes and glaciers, and has large tracts of uninhabited land that could be flooded for dams.

Multilateral development banks and governments provided assistance for a huge programme of hydroelectric plant-building between the 1970s and 1990s. Today, the region generates around 45 per cent of its electricity — some 200 gigawatts — from hydro, giving it one of the world’s greenest grids.

But rising global temperatures, sharply fluctuating rainfall patterns, melting glaciers, and the increasing frequency of droughts and floods are playing havoc with power generation.

Making matters worse, more recently built dams tend to have smaller reservoirs because of environmental pressure to flood less land, meaning they are much more vulnerable to fluctuating rainfall than older projects, experts say.

The International Energy Agency warned in a report in 2021 that Latin America’s average hydropower capacity could fall by as much as 10 per cent in the decades to 2060 as a result of the changing climate.

Further complicating matters for energy grid planners, the IEA said the effects of climate change would not be spread evenly across the region. Some plants, such as those in Mexico and Central America, would be much more exposed than others. In Ecuador, many of the new dams built by the Correa administration were located in the same water basin, increasing their vulnerability in the event of drought.

Ecuador’s long power cuts have hurt businesses, made life miserable for residents, and are complicating the electoral chances of incumbent President Daniel Noboa in February. He faces an opponent backed by Correa, who fled the country before being convicted of corruption and now lives in Belgium.

Noboa has slashed taxes on imports of diesel-powered generators and batteries, created new incentives for the private sector to invest in energy projects, and has even drafted in a Turkish barge to generate emergency power. But he faces criticism for not acting sooner to preserve dam water levels to mitigate the crisis.

Arturo Alarcón, a senior energy specialist at the Inter-American Development Bank in Washington, says Latin America needs to deal with the climate threat to its hydro dams by broadening its energy mix, while keeping carbon emissions as low as possible.

This would mean more solar and wind power generation and balancing the management of the power grid by cutting back on electricity generation from large dams during sunny or windy days, to conserve the water for use in cloudier or stiller periods.

Building more interconnectors between national grids could also help ensure greater resilience, although this is not a guaranteed solution.

Colombia recently refused to sell Ecuador power through their shared connection because it wanted to conserve power in its own dams, which were running short.

Although climate change is making it harder to guarantee the reliable production of green electricity, hydropower will remain a big part of the solution to Latin America’s power needs, Alarcón says.

“We have 200 gigawatts of hydroelectric power in the system,” he explains. “We can’t just substitute that with other sources. You have to keep them working . . . and diversify your energy mix.”

Chinese stimulus

Holders of Chinese equities got mixed news on Friday. At the National Peoples’ Congress meeting, the government announced an Rmb10tn ($1.4tn) fiscal package to bail out local governments’ bad debts. The package itself, following the pattern of recent stimulus measures, is underwhelming. The Shanghai and Shenzhen CSI 300 stock index and the Rmb edged down on the news: 

Bad debt is a problem for China. Chinese local governments, which are not able to issue their own bonds, have traditionally used financing vehicles similar to investment companies to borrow money; after the real estate market crash, many provinces could no longer use land sales to pay back those loans, resulting in bad “hidden” debt not on their official balance sheets. Swapping out the debt will limit financial risks and free up spending capacity, at a moment when many local governments have cut back on public services. But the size of the relief is relatively small. From Tianlei Huang at the Peterson Institute:

Rmb10tn is probably not enough to make a lasting dent in the hidden debt problem. While Lan said there is around Rmb14.3tn ($2tn) in hidden debt on provinces’ balance sheets, the IMF put the number at Rmb60tn in a report last year. On top of that, the Rmb10tn number is not all new commitments. While Rmb6tn of new debt will be issued for the debt swap facility, Rmb4tn is debt that was already available to local governments for related purposes. 

Without more muscular stimulus, chances that the economy will hit the government’s 5 per cent growth target this year remain low. But more may be forthcoming. The MOF meeting in October laid out four goals of the stimulus, of which resolving local hidden debt was the first (followed by boosting bank lending, stabilising the real estate market, and supporting consumers). While we are not sure they will continue to be rolled out in the announced order, statements made by Lan imply the government will deliver on the other three goals. 

Markets have been impatient for details on the stimulus. The timing of this package, right after the US election, suggests that the Chinese government was waiting to learn who would win the White House before making strong financial commitments. And the scale of this package raises the possibility that the government is saving its fiscal firepower in order to respond to the Trump administration’s eventual China policies. A more concrete and substantial fiscal package may emerge soon.

Under-investment in the grid, natural gas shortages and ban on dirty fuel lead to energy supply crunch

Iran has started implementing rolling power blackouts across the country as the Islamic republic struggles with a shortage of natural gas ahead of winter.

Two-hour daily outages will be enforced in Tehran, the capital city that is home to 9.5mn people, from Monday and will affect homes and businesses, local media reported. Several provinces were also hit by the power cuts on Sunday.

Iran is suffering from an energy supply crunch despite having the world’s third-largest oil reserves and second largest natural gas reserves. Years of under-investment in electricity generation and poor maintenance of existing infrastructure have resulted in recurrent power blackouts during summer, when hotter temperatures led to a surge in the use of air conditioning. 

The power cuts also follow a decision to ban mazut, a high-polluting fuel oil, at three power plants in Arak, Isfahan and Karaj. The alternative to natural gas has contributed to high levels of air pollution in Iran. 

“By halting the burning of mazut at three thermal plants, the government is bound to implement scheduled blackouts across the country,” said Shina Ansari, vice-president and head of the environment department. “This is a valuable step towards reducing the health risks associated with air pollution.”

As temperatures drop in winter, Iran’s supply of natural gas is insufficient to meet surging demand, so its power plants are forced to rely on mazut as feedstock. Experts estimate that the country will face a natural gas shortfall of at least 260mn cubic metres a day this winter. It is in talks to increase imports from neighbouring Turkmenistan.

Iran’s energy crisis is exacerbated by sanctions on its nuclear programme. Since taking office in July, President Masoud Pezeshkian has left the door open to talks with the US and other western countries with the hope of securing some sanctions relief.

After Donald Trump won a second term as president this week, Pezeshkian said “it will make no difference” who will lead the US, arguing that Iran “will not apply a limited view to the development of relations with other states”. In his first term, Trump withdrew the US from Iran’s 2015 nuclear deal with world powers and reinstated sanctions as part of his “maximum pressure” campaign against Tehran.

Sanctions impede Iran from building new power plants or optimising grid operations. Industry experts say some power stations need to be overhauled or replaced.

Ahmad Moradi, a member of the parliament’s energy committee, said on Sunday that the national grid had a shortfall of 20,000MW of electricity, which he blamed on “insufficient generation capacity, problems at power stations and ageing transmission lines”. 

The Islamic republic is also seeking to manage high demand for petrol, which is blamed on fuel inefficient domestic cars, substandard fuel quality and inadequate public transport, amid limited refining capacity for the motor fuel.

Iran has one of the world’s cheapest petrol prices at about $0.02 a litre. Pezeshkian has questioned the viability of huge subsidies on petrol, fuelling speculation of a rise in prices next year.

LVMH is going through a tough transition phase. Not only is the French luxury giant facing the worst downturn in decades, it’s parted ways with roughly half of its executive committee since the beginning of the year. This week, another head rolled: that of Chantal Gaemperle, LVMH’s powerful head of human resources and synergies and one of the closest lieutenants of controlling shareholder and CEO Bernard Arnault. Gaemperle was abruptly dismissed, along with Alessia Gargano, HR chief of the group’s beauty division.

What’s going on? Arnault, who has a reputation for staying cool and calculating, has been making mistake after mistake. “Arnault has been making some really strange decisions recently,” one former close associate said, citing as an example the recent flurry of management changes at the group.

It looks as though the 75-year-old luxury king is no longer as well advised as he was before – when all his trusted captains were standing by his side. In the past year, he has let got go of many key individuals as part of his grand plan to rejuvenate the group’s leadership. That process happened quite quickly, perhaps more than would have been reasonable. Identifying young leaders of the same caliber and with the same deep understanding of the luxury sector to replace the veterans Arnault recently pushed out is proving more difficult than he perhaps initially expected.

The list of blunders Arnault has made recently is getting long and risks damaging LVMH’s reputation and ability to attract young talents, sources say, citing concerns expressed by senior leaders at the group. In September, French media outlet La Lettre published a copy of an email Arnault sent to staff in January banning them from talking to journalists from independent media such as La Lettre, Miss Tweed and other ad-free publications such as Le Canard enchaîné and Médiapart. That ban backfired and portrayed Arnault as an opponent of freedom of the press, one of the pillars of our democracy. It also exposed his drive to control the largest number of media possible. His empire already includes Les Echos, Le Parisien and the recently acquired Paris Match.

Such attitude towards the media is revealing of Arnault’s authoritarian streak and makes him look like he does not want anyone to write about the group’s harsh corporate culture and management upheavals happening within his group. There is a fine balance between being loyal to your company and keeping its strategic secrets to yourself and fulfilling your basic human need to share your experience with others, particularly when you’ve been mistreated. Richemont and Chanel share with LVMH the same secrecy-at-all-cost kind of internal policy.

LVMH likes to portray itself as a well-wishing group but the reality is that the mentality is very top-down. Arnault does not welcome feedback or criticism and allows senior managers to humiliate and mistreat others. LVMH is the industry leader and best-in-class in many aspects of the luxury business such as retail, advertising and customer service. But its performance would be even stronger if there was more of a team spirit – like in the French Navy – and staff trusted one another without having to worry about being potentially backstabbed. Admiral Loïc Finaz, former head of France’s War School and captain of a nuclear submarine, explained how the naval crew spirit can help reform the luxury industry in the book La liberté du commandement, L'esprit d’équipage, which he presented at Miss Tweed’s Luxury at the Summit in April 2023. (Link to see his conference)

La Lettre and Miss Tweed both reported on Thursday that Gaemperle was fired. Gargano was dismissed without any justification and asked to leave the building on Tuesday while Gaemperle was ousted on Nov. 1, several sources said.

Both were escorted to the door by security guards. Such brutal methods shed light on the ruthless corporate culture that has taken hold at LVMH. “It’s the LVMH method,” one source close to the group said. “Security guards force you to take your things and leave the building immediately.”

Parting ways with Gaemperle was not an easy decision for Arnault. The 62-year-old Swiss national was his confidant and served him in a very loyal fashion for 17 years. She was the mastermind behind his plan to rejuvenate the group’s top leadership. She had also done a lot of work to promote craftsmanship and develop training programs for artisans.

“They have a very close, almost symbiotic relationship which few people at the group understand,” one source close to LVMH told Miss Tweed a few months ago about Gaemperle and Arnault. “Sometimes it looks as if Arnault is under her spell, he trusts her judgment more than that of anybody else.”

However, Gaemperle’s exacting demands and management methods were increasingly frowned upon internally, particularly by Arnault’s children. Also, the group’s HR supremo did not really see eye to eye with Stéphane Bianchi, Arnault’s new strongman and managing director of the group who replaced Toni Belloni earlier this year, industry sources say.

Bianchi and Arnault’s children also disagreed with some of Gaemperle’s nominations, such as that of Pierre-Emmanuel Angeloglou as VP of the Fashion Group, who was later appointed has as CEO of Italian fashion brand Fendi. “It’s open war between Chantal and Arnault’s children,” one source close to the group said several months ago. In July, La Lettre published a story saying that Gaemperle was losing Arnault’s support.

She was known for demanding gifts from CEOs of the group’s brands and borrowing luxury items such as jewelry pieces that she would not return. Gaemperle’s behavior was becoming increasingly embarrassing for the group and an internal inquiry was launched to gather details. “Arnault could not afford to keep Chantal,” one senior industry source said.

Officially, LVMH staff cannot accept presents from brands and people from outside of the group but this rule does not apply to gifts from brands within the French group. “At Christmas, Chantal’s office was always full of gifts from the CEOs of brands,” the former head of one of LVMH’s brands told Miss Tweedon condition of anonymity. “Some executives felt they had to do that to remain in her good books and keep their jobs.” Some sources close to LVMH said her habit of piling up presents was the excuse the group used to kick her out.

Miss Tweed has received messages from people saying they were pleased to hear she had finally been given the boot. “Many staff hated her,” one person who still works for the group said. “I think a lot of people are super happy she’s finally gone.”

It’s not yet clear who will replace Gaemperle. Arnault’s children would like an external hire to bring a fresh perspective. But there could also be some internal candidates. One of them is Olivier Sastre, who is deputy managing director at Christian Dior Couture in charge of human resources and sustainable development. “Sastre has Delphine’s complete trust,” one person close to LVMH said. “He would be a strong candidate.” But there could be others too.

Another senior person who was pushed out is Jean-Jacques Guiony, the group’s longstanding chief financial officer. Arnault started to resent Guiony’s criticism of his strategy and thought it was also time for him to leave.

At Belloni’s goodbye party last spring, Arnault publicly humiliated Guiony, saying that “at least he (Belloni) knows his numbers,” implying that Guiony did not. Many staff were shocked to hear Arnault say that. Guiony is set to be replaced by Cécile Cabanis who was Danone’s CFO.

LVMH said Cabanis had has strong experience in mergers and acquisitions. However, some people in the industry say her track record in terms of acquisitions at Danone was not particularly stellar. She will replace Guiony next year. Several people close to LVMH say that Cabanis is good friends with Xavier Niel, partner of Delphine, Arnault’s oldest child and CEO of Dior. Niel referred her to replace Guiony, several sources said.

Last week, Arnault let Stéphane Rinderknech, head of LVMH’s beauty and hospitality division, sack Gargano, HR head of the beauty division. Several people close to the group said Gargano was getting complaints from employees that made Rinderknech look bad. One of them was that Rinderknech treated staff with disrespect and had a habit of promising people jobs they would never get – even after moving with their family to the city where they were supposed to work. Gargano was left with the thankless task of having to explain to them why Rinderknech had changed his mind.

As Rinderknech’s erratic management style became well documented, the executive got rid of Gargano, helped by Maud Alvarez-Pereyre, currently LVMH’s chief people and transformation officer. “That could have never happened while Chantal (Gaemperle) was still there,” one person with knowledge of the situation said. Gargano was brutally ousted from the building by Alvarez-Pereyre and given no reason for her dismissal, several sources said.

Alvarez-Pereyre is close friends with Rinderknech’s sister and was the one who suggested to Belloni that LVMH hired hire him to oversee the group’s beauty division. Rinderknech, who spent 21 years at L’Oréal, joined LVMH in 2022 to oversee the group’s hospitality division. He could not work immediately in the beauty field because of the non-competition clause in his contract with L’Oréal which lasted a year.

In 2023, Rinderknech took over the beauty division. Many people at LVMH were surprised he was hired in light of the moral and sexual harassment cases against him at L’Oréal which are public knowledge.

There have also been reports of moral and sexual harassment at Moët Hennessy, LVMH’s wines and spirits division. Bloomberg and La Lettre reported last month that Philippe Schaus, the head of the division, was leaving. LVMH denied that was the case. Up until now, it’s not clear what’s going on at Moët Hennessy and whether Schaus will leave or not.

Gaemperle and Gargano are not the only ones to have been brutally dismissed. In June, Charles-Henri Levaillant, CEO of Make Up For Ever, was also ousted without warning, several sources close to the group said. “Levaillant had complained too openly about how things were run at the beauty division,” one source close to the group told Miss Tweed after he was sacked.

Within a few days, Levaillant was swiftly shown the door, several sources said. Levaillant could not be reached for comment.

Once it’s official, Gaemperle’s departure will mark the end of an era. “For LVMH, her exit is no less than a tsunami,” one industry source said. “People did not expect it,” another one said. “It’s like there is a revolution going on inside the palace.”

Maybe Arnault needs to stop being paranoid about what journalists write about his group and just explain to staff, partners and shareholders what his plan is. Such transparency is not his style but in 2024, being too authoritarian and trying to mask things can backfire, as did his blacklisting of journalists. LVMH declined to comment for this report.

AI’s thirst for energy sealed the deal between Microsoft and Constellation on the plant, where memories of a partial meltdown in 1979 still resonate

At a small gathering for CEOs last year, OpenAI co-founder Sam Altman made a stunning pronouncement: Future data centers for some artificial-intelligence models would require as much power as a large city.

Among those taken aback in the group gathered at Microsoft’s MSFT -0.68%decrease; red down pointing triangle headquarters was Joe Dominguez, the chief executive of Constellation Energy CEG -0.92%decrease; red down pointing triangle, which produces more than a fifth of U.S. nuclear power.

“My first reaction is, ‘Wow, these guys are going to be in for a rude awakening about how much power is actually going to be available,’” he said. “It was like a lightning bolt hit me.”

Dominguez returned to Baltimore after the May 2023 meeting with an audacious idea: What if his company restarted the undamaged reactor at Three Mile Island, the site of the country’s most infamous nuclear-power accident?

Reopening an existing nuclear plant could address several problems, Dominguez thought. Tech companies need power 24/7 for AI and prefer clean-energy sources. But accessing the nation’s packed grid is difficult in many places, and the intermittence of power from new wind and solar projects makes them an imperfect solution.

What ensued was months of engineering work, including the frantic restoration of a training simulator that had been cannibalized for parts. It also involved a grueling meeting with Pennsylvania Gov. Josh Shapiro, whose support would be critical in greenlighting a politically sensitive project that had become synonymous with nuclear disasters.

Company executives used a code name for the project: Tetris, after the 1980s-era videogame in which players stack descending geometric shapes, and fast.

After 17 months, Constellation and Microsoft announced in September that the tech giant has signed a 20-year power-purchase agreement to pair its data centers with round-the-clock clean power from Three Mile Island. Constellation expects to spend around $1.6 billion on the unprecedented effort to resuscitate a reactor already undergoing decommissioning.

For Constellation, the deal could restore its relevance in an industry that had lost enthusiasm for nuclear power. Meanwhile, Microsoft may have scored an early victory in a fierce competition among tech giants to secure nuclear power to cut rising carbon emissions and power AI.

The energy puzzle

Within a few years, the most advanced AI models are projected to need five gigawatts of power, as much as five nuclear reactors, or roughly what Manhattan consumes at any given time. There is nowhere in the U.S. where it will be easy to connect data centers of that magnitude.

The prospect has caused electricity demand forecasts to skyrocket in many pockets of the country, prompting a tug of war over how to shoulder costs and concerns about whether emissions reductions targets set by tech firms and the federal government are still viable.

In Pennsylvania, Shapiro had questions. The Democratic governor had campaigned in part on accelerating the state’s clean-energy transition.

Shapiro and Dominguez met for the first time last December in Philadelphia. Dominguez, who said it was generous to describe most of his conversations with politicians as vague, didn’t know what to expect.

Shapiro, though, wanted details on the plant’s physical condition, whether the company had spoken to labor leaders, if it could find workers and equipment, and whether a restart could happen safely and without cost to Pennsylvanians.

Three Mile Island’s undamaged Unit 1 reactor sits next to Unit 2, which was shut down after a partial core meltdown in 1979. It was the biggest civilian nuclear power accident in the U.S. and became a major factor in America’s ambivalence about nuclear power. The 835-megawatt Unit 1 closed only five years ago because it had been losing money.

“He grilled me, literally grilled me for well over an hour, maybe an hour and a half,” Dominguez recalled of the governor.

At the end of the meeting, Shapiro said that if Constellation thought it could do the project, he would support it. But Constellation had to be perfect in executing it.

Shapiro spokesman Manuel Bonder said the administration has talked for a year with Constellation, legislators and stakeholders about the restart “to create thousands of good-paying union jobs and ensure the reliability of our energy grid.” Bonder noted it requires no state subsidies.

Shapiro’s support was critical. An attempt to keep Three Mile Island open in 2019 with around $500 million in state funding had failed to garner widespread support among lawmakers and business groups.

Dominguez, a former federal prosecutor and lobbyist, had worked on securing state support for it while at Exelon, the plant’s former owner. He also had tried to find tech, industrial or commercial customers who would sign agreements that could keep the plant running. It didn’t work.

Many nuclear plants in competitive power markets have been marching toward closure for years because they couldn’t compete on cost against natural gas-fired plants or renewables. Since the 1990s, 16 U.S. reactors supplying more than 11,000 MW of power have shut down, according to the Nuclear Regulatory Commission.

But in a shift, the Biden administration was beginning to see nuclear power as critical in achieving its goal of decarbonizing the U.S. grid by 2035. Around the country, some coal-and gas-fired power plants were retiring more quickly than they could be replaced by wind and solar farms paired with battery storage, increasing the risk of supply shortages.

The Inflation Reduction Act, the sweeping climate bill passed in late 2022, included tax credits to support nuclear energy.

After the Microsoft meeting, Dominguez directed dozens of employees to compile a status update on new energy projects that produced the zero- or low-carbon electricity tech companies needed around the clock.

Employees analyzed plans for solar and battery projects, carbon capture and storage technology, and small modular nuclear reactors. Nothing was fast or cheap, which meant Three Mile Island’s undamaged reactor might be a moneymaker again.

Dominguez recalled telling executives, “Saddle up. I want to understand within five weeks whether we could do this.”

Constellation’s engineers determined that a restart of Three Mile Island could be done but not without challenges. The main transformer needed replacement. Because of the yearslong lead time for such switchgear, Constellation started talking to suppliers about how to jump the line.

The company moved quickly to halt the decommissioning and put a blanket prohibition on any kind of destructive work that would take components apart. Employees also started to restore a specialized training simulator. Every nuclear plant has its own; workers can’t simply be transferred from other locations.

Everybody wants some

By January 2024, Dominguez was ready to shop Three Mile Island to a few corporate clients. Competition for nuclear assets was starting to heat up. Microsoft was clear: It wanted first dibs.

Noelle Walsh, Microsoft’s corporate vice president of cloud operations and innovation, said the deal made sense because it would bring a large amount of reliable, carbon-free power to market more quickly and cheaply than other options.

“If we had walked from the deal, I’m sure somebody else would have stepped in,” Walsh said.

Though the companies haven’t released financial details, Walsh and Dominguez said price wasn’t a sticking point in negotiations. Analysts at Jefferies estimate Microsoft will pay between $110 to $115 per megawatt hour of electricity. Currently operating reactors cost far less, though estimates for new nuclear construction start around $142 per MWh, according to industry analysis and Lazard.

An array of state and federal approvals will be needed. The history of U.S. nuclear power is that things take longer and cost more than expected, a risk Constellation must manage. It says it will spend around $1.6 billion to restart the reactor. It is supposed to start delivering power in 2028 under the agreement.

Restarts are possible at sites in Iowa and in Michigan, where the federal government and the state are spending nearly $2 billion to revive Michigan’s Palisades nuclear reactor, mothballed in 2022 and targeting a restart next year.

Nuclear Regulatory Commission Chair Christopher Hanson said the task of backing out of decommissioning puts Three Mile Island in “uncharted regulatory territory,” though he is optimistic.

“There may be some unique issues, and there’s going to need to be some flexibility on both sides,” he said.

Microsoft hasn’t yet put money on the table—Constellation will have to start delivering power first—but investors are excited.

Constellation was spun out of utility Exelon in early 2022, when U.S. nuclear energy’s long-term path seemed uncertain. Since then, shares are up more than 400% and its market capitalization is nearly double that of Exelon.

“The first question that we’re getting from clients is, ‘how much more of this can you do?’” Dominguez said.