Election Certainty & IRA Uncertainty
A lot has already been written about the election and its impact on climate tech, so in lieu of recreating the wheel I will share a few links that I think are relevant, while offering brief perspective below:
- Political Climate podcast
- Climate Tech Investor Optimism
- Reality of repealing green credits sinks in for divided GOP / House of Representatives dynamics
- Automakers to Trump: Please Require Us to Sell Electric Vehicles
At a high level, I think there will be continued uncertainty for the foreseeable future; there will be changes to the IRA (but it’s hard to undo things and I think there may be more lock-in than many expect, although almost certainly will be changes to some of the most salient programs like EV tax credits); and tariffs remain a big unknown factor. All the same, renewables, batteries, and electric vehicles are going anywhere – the policy levers are adjusting the rate of change, not the whether these industries exist.
These factors are unlikely to improve the difficult fundraising period that climate tech companies have been facing, and contribute to something of a shakeout over the next year (as companies that raised at aggressive valuations a couple years back come back to an evolving marketplace.
However, at the end of the day, many of these policy levers are beneficial but not existential for many early stage climate tech companies (for Evergreen, the CHIPS and Science bill has more tangible impact on our portfolio than the IRA given their stage). Some areas, like nuclear, geothermal, and geologic hydrogen may continue to see continued positive engagement from the next administration. And there are still a few other policy opportunities that cut across political stripes, like the strengthening of domestic supply chains and permitting reform, which offers the potential to be helpful to a variety of types of energy projects.
Critical Minerals
China is making moves to restrict the supply chain of certain rare earths (where they hold a dominant market share in the mining and processing of these materials). In addition to impacting the clean energy industry, this has significant implications for semiconductors and defense sectors as well. It is an early step of what could be an extremely dramatic and impactful trade war, although this specific move was intentionally narrow (targeting only a handful of materials)
Kolama Natural Hydrogen Exploration Site
Geologic Hydrogen
Geologic hydrogen is a pretty new topic, even for folks who follow climate tech news, but it is one that is likely to get a lot more attention in the coming years.
It is plausible that in certain parts of the world there could be enormous magnitudes of hydrogen which could be accessed using modern oil and gas industry drilling techniques and not produce emissions in the process. One of these places in Kansas, where Bloomberg highlighted a number of new efforts. The United States is already that largest producer of oil and gas in the world, and between that and a regulatory environment that assigns mineral rights to the landowner, is going to be extremely well suited to capture this opportunity. That said, it is very much an emerging field – while there are test wells, there is no one in the world selling geologic hydrogen today.
Tiiiimber
Microsoft announced it was building several data centers using cross laminated timber, a lower carbon material than traditional building materials like concrete and steel. We need lots more low carbon energy to power data centers, but there’s still plenty of opportunities for creative approaches to reduce carbon footprints. Another is the work of Nishant Garg at University of Illinois, which is using computation to change the concrete formulation data centers are built with, to use less concrete and thus reduce carbon footprint
Teleoperations!
Last month I mentioned Vay teleoperations, which I’d originally highlighted in the Cleantech Roundup last year. A very interesting tidbit is that Tesla appears to be building a teleoperations team themselves (to complement a robotaxi service). Instead of being two competing methodologies, it may be that teleoperations just ends up as an important enabling technology for deploying autonomous vehicles at scale. Two relatively lightly known facts (outside certain geographies) are that there are currently hundreds of thousands of autonomous vehicle rides completed each month, and also that there is some level of human intervention quite frequently, although not necessarily a human driving it per se (this New York Times story suggested Cruise vehicles required intervention every few miles last year).
Interconnection
PG&E is working to develop flexible interconnection agreements, where data centers can hook up to the grid if they are able to commit to shedding load or generating energy on-site in times of grid stress. This seems like a smarter, dynamic approach to dealing with the legitimate challenges of increasing grid constraints amidst significant new demand.
Hydrogen
Phase 1 of the Midwest MachH2 hydrogen hub was funded by the U.S. Department of Energy.
Rental Cars
A few years ago we talked about how Hertz was buying a lot of Teslas. This has not gone according to plan and the company is in the process of selling many of these vehicles at fire sale prices. A couple different things happened – one was that repair costs were higher than anticipated, but a big one was that Tesla rapidly cut its prices, which decreased the value of the cars that Hertz owned that they had purchased before the price cuts
