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CERAWeek, Day Four: Top five cleantech investing moments

05 March 2021

Day Four of the 2021 virtual iteration of CERAWeek by IHS Markit featured an embarrassment of riches for cleantech investors, with presentations from wind and solar industry leaders, utility sector CEOs, and top regulators, as well as discussions with bankers.

In the wake of the sweeping Texas blackouts in late February, a consistent theme across the wide diversity of panels was balancing resiliency with the energy transition. While wind generation wasn't primarily responsible for the blackouts last month, the potential challenges of intermittency and a lack of large-scale storage were made clear and present for a day of events aimed at the power sector's leading role in cleantech adoption.

Below are five key observations compiled by Peter Gardett and the EnergyView Climate and Cleantech team at IHS Markit:

  • Expect the energy transition focus of the big Biden recovery bill to be jobs, particularly in manufacturing, White House National Climate Director Gina McCarthy told Carlos Pascual. McCarthy is a former US Environmental Protection Agency administrator with financial sector experience from a tour as operating advisor at private equity firm Pegasus Capital, and she has been charged with coordinating the domestic policy response to meeting the US' nationally determined contribution under the Paris Agreement. She emphasized that one Biden theme will be reshoring manufacturing so the US can "grab back" zero emissions vehicle production from other countries and support jobs (specifically, union jobs). This will be matched by a willingness to deploy the federal government's spending and investment power to support that jobs-based approach across the cleantech sector, she pledged.
  • Electrifying the economy means an unprecedented level of investment in power sector additions. Edison International CEO Pedro Pizzaro sketched out $250 billion of investment in California alone, as demand growth for electricity from the transport sector and beyond requires 80 gigawatts (GW) of additional capacity, most of it from renewables, and 30 GW of storage. For context, California's peak load today is 60 GW. On the other side of the Atlantic, Germany's EnBW will be spending €12 billion over the next five years across its international portfolio, most of it in utility-scale wind and solar, the company's CEO Frank Mastiaux said. Digital cleantech spend will be part of the investment as well, Pizzaro told the panel led by IHS Markit Chief Energy Strategist Atul Arya, with edge computing and sensors deployed as part of hardening the grid.
  • The hunt is on for "dispatchable" zero-carbon generation resources in post-Texas blackout power market planning. Both Duke Energy and Xcel Energy have added a lot of renewable energy sources over the last few years and have significant expansions in both wind and solar planned for the coming decade, as electrification continues across the economy. The final 20% of peak generation demand is the hard part to displace with traditional renewables as they build out their load forecasts, Duke CEO Lynn Good and Xcel CEO Benjamin Fowke told IHS Vice Chairman Daniel Yergin in a morning panel. To move natural gas generation out of their portfolios will require new cleantech that isn't currently commercially viable, including larger-scale battery storage, they said.
  • Scenario analysis is acting as a key driver of capital allocation choices within cleantech finance. A trio of representatives of major financial players noted that while the path to net-zero emissions remains very unclear, the demand for cleantech assets from their investors and for a re-evaluation of risk from regulators remains high. To handle the evolving understanding of risk from carbon pricing, operations, and legacy infrastructure requires using scenario assumptions to drive asset allocation, Global Infrastructure Partners' Salim Samaha said at a panel led by IHS Markit's Roger Diwan, vice president, financial services. Executives from HSBC and Blackrock also laid out credit risk, price volatility, and government stimulus crowding out private investment as potential risks, but returned to the "catalytic" events of the past year in driving the financial sector towards whole-business transformations led by cleantech adoption and emissions mitigation.
  • Distributed generation, distributed storage, and distributed efficiency platform plays may focus more on domestic energy consumers in coming years. The pandemic may barely have dented the pace of renewable energy installations, but utility executives said during multiple panels it has altered the characteristics of their load forecasts, with energy use expected to outpace commercial. That has implications for the aggregated platform cleantech firms, which have traditionally targeted the largest energy consumers first. Aggregated cleantech platforms for storage and electric vehicle charging remain attractive investments for large-scale capital allocators like BlackRock, the firm's Jim Barry said.

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