American Renewables: A Markets Story with Julie McLaughlin

Podcast Briefing: an Edited Q&A

The following Q&A has been adapted from the HC Commodities Podcast and edited for clarity and length.

Market Discipline and the Renewables Correction

Paul Chapman: When we last spoke in 2023, you argued that the renewables sector needed more discipline. Looking back, what was the market getting wrong?

Julie McLaughlin: Too much value was being placed on development pipelines and not enough on execution. Capital was abundant, project portfolios expanded rapidly, and many investors assumed most projects would eventually become operating assets.

The reality is that large infrastructure projects face permitting challenges, interconnection delays and cost pressures. Markets eventually started to adjust to the fact that not every project in the pipeline succeeds. 

Economics Over Politics

Paul Chapman: Many people associate the slowdown in renewables with politics. Was that the main driver?

Julie McLaughlin: Not initially. Higher interest rates increased the cost of capital, project expenses rose and development timelines became more challenging. The correction reflected economic realities as much as anything else.

Permitting and interconnection constraints also became increasingly difficult to ignore. Those issues affected project viability regardless of the broader political environment. 

The IRA and the Reality of Tax Credits

Paul Chapman: The Inflation Reduction Act was presented as transformational. How do you assess its impact today?

Julie McLaughlin: The IRA created a great deal of optimism because it promised a clearer and longer-term framework for tax credits. Historically, renewable incentives have been regularly extended, revised, and reintroduced, making long-term planning difficult.

The legislation improved project economics and financing flexibility. However, some of the certainty investors expected disappeared when elements of that framework later changed. 

Demand Returns to the Power Market

Paul Chapman: Sentiment feels much more positive today. What's changed?

Julie McLaughlin: Demand. The power sector is experiencing growth that few anticipated several years ago. Data centres, electrification and broader industrial activity are creating substantial demand for new generation capacity.

That has fundamentally changed the conversation. The industry is no longer debating whether new power will be required. The focus is now on how quickly it can be built. 

AI and the New Power Imperative

Paul Chapman: How important is AI to that demand outlook?

Julie McLaughlin: It's becoming one of the defining drivers of power demand.

For hyperscalers and data centre operators, access to electricity is now one of the biggest constraints on growth. They need increasing amounts of power to support more sophisticated models and growing computational requirements.

In many ways, electricity has become a strategic resource rather than simply an operating cost.

Why Operating Assets Are Back in Favour

Paul Chapman: What is the market rewarding today?

Julie McLaughlin: Investors place significant value on operating assets that are already generating electricity and connected to the grid.

We're seeing a convergence in valuations across technologies because markets increasingly care about access to reliable electrons. Whether the asset is gas or renewable, generation that can be dispatched today carries meaningful value. 

Renewables Without Subsidies

Paul Chapman: There's still a perception that renewables only work because of government support. Is that fair?

Julie McLaughlin: No. Solar has become cost-competitive in many markets around the world, including places where incentives are limited or absent.

The more important discussion is how subsidies affect competition. If one developer benefits from lower costs, others need similar economics to remain competitive. That's very different from saying the technology itself is uneconomic. 

Gas, Renewables and the Convergence Trade

Paul Chapman: One of the interesting developments has been the convergence in value between gas and renewable assets. Why is that happening?

Julie McLaughlin: Gas has become more attractive because of growing demand for dependable generation from data centres and other large power users.

At the same time, expectations around renewables have become more realistic. The result is that operating assets across different technologies are increasingly being valued within a similar range because the market's focus has shifted towards reliable power supply. 

Affordability, Demand Response and Grid Reform

Paul Chapman: What does all of this mean for electricity prices?

Julie McLaughlin: Power prices are already rising, but affordability remains a major priority for utilities and regulators.

That's driving renewed interest in demand response programmes, virtual power plants, and mechanisms that encourage consumers to participate more actively in grid balancing. The goal is to meet rising demand while limiting the impact on households and businesses. 

The Long-Term Outlook for American Renewables

Paul Chapman: Looking ahead, are you optimistic?

Julie McLaughlin: Yes. The long-term case for renewables is now supported by something more durable than policy alone: demand growth. Electricity consumption continues to rise and every credible pathway points to the need for additional generation capacity.

The mix of technologies will continue to evolve, but renewables remain an important part of the solution. Ultimately, markets will determine the most efficient balance between gas, renewables, storage and emerging technologies as the power system continues to expand.