Cleantech Roundup 2022 Summer Edition — Climate Policy | Climate Immigration | Solar Climate
Between our June investment committee meeting, our annual CEO summit, and the birth of my second child, the Cleantech Roundup took a back seat at the beginning of the summer.
Now it’s back as part of a mega summer edition of the Cleantech Roundup, covering May, June, and July. Suffice to say, a lot has happened. While we left a lot on the cutting room floor, in this edition we touch on climate change-related immigration, historic climate policy action in DC (good thing I waited a couple months to write this update), good news from the solar supply chain, EPA regulatory updates, and more!
Climate Change Migration
Crain’s Chicago published an interesting article about people who had moved (mostly from coastal areas experiencing weather disasters) to (primarily rural) parts of the Midwest. As extreme weather and climate related disasters become more common, this is a trend that can be expected to continue.
That said, I do think there’s a bit of a disconnect right now. These folks fleeing disaster, or ‘climagrants’ as the article calls them, may be the bleeding edge early adopters. After all, the locations that are currently experiencing the largest population growth are states like Arizona, Texas, Floria, and Idaho — a who’s who of locations that climate change is going to make less livable. Presumably, people are responding to what’s happening to their lives now (cost of housing, job opportunities, etc…), as opposed to what scientists model will happen in 15 or 20 years.
So, I think it’ll take a while before these trends balance out and then reverse. And while I know people who have fled to the coasts after harsh Chicago winters, once climate emergencies become more frequent, our hot, arid, and wildfire-prone metro regions such as Phoenix and the Texas Triangle are going to have the same thing happening to them — the climate will be a drag on attracting residents rather than a bonus. Also, as these places continue to grow, they’ll put more pressure on water systems and transportation networks, creating more nuisances for residents. Where will they go? I would guess it’ll be where economic opportunity and climate resilience overlap — to me that sounds a lot like the central Midwest, in places like Chicago, Minneapolis, and Columbus.
If you’re curious what the future has in store for you specifically, you can check out the predicted changes in temperature in your city (or a city you might move to) by 2050 in this interactive tool from Vox (note, this is just temperature, which is easier to model than extreme weather). I may be biased, but Chicago looks like it has a strong future in store for it — it’s currently the coldest of the largest 10 cities in the country, but is also expected to warm the most of the largest cities.
Inflation Reduction Act / We Got A Climate Bill
Good thing I took a two month hiatus on writing the roundup, as it avoided me being wrong like, 7 or 8 times on the reconciliation bill status. I’ll still probably be wrong a couple times this month, but things are looking way, way up after the climate and energy provisions agreed to by Senators Manchin and Schumer passed the Senate (after some tweaks on the revenue side of the ledger from Senator Sinema). Long term comprehensive zero carbon tax credits, incentives for reducing emissions of industrial facilities, incentives for electric vehicles, credits for carbon capture, support for disadvantaged communities, incentives for building electrification (heat pumps), and a fee on methane leaks? Plenty to be happy about!
One interesting wrinkle — the EV vehicle incentives are designed really specifically to incentivize sourcing supply chain components domestically. This adds complexity to the policy (and as things stand currently, it will be a significant lift to get the full credit around 2027 and beyond), but if they thread the needle right, could do a lot to encourage more robust investment in the domestic supply chain.
One argument that may have actually helped was Larry Summers (who has been more concerned about inflation than most economists in Democratic circles) making the case that this package of incentives and taxes (which will reduce the deficit) was de-inflationary, not inflationary. A couple of chapters ago, after Democrats in the Senate agreed to Senator Manchin’s demands on climate legislation, he stepped away because of concerns the package would increase inflation.
As quoted in this informative New York Times article on the inflation question,
“To fight inflation, we want policies that will increase supply or reduce demand. And this does both,” said Maya MacGuineas, president of the Center for a Responsible Federal Budget in Washington, which has pressed lawmakers to support policies that reduce the deficit. “Almost every one of these policies, in and of itself, will fight inflation. And on net, the entire package most certainly will.”
All in all it’s been a long, strange chapter — and a book that is technically not fully written yet since it still needs to pass the House. But, it looks like this will be a major and effective set of incentives in this climate bill. After lots of reasons to feel down, this is some great news.
Solar Supply Chain Getting Un-Jammed
Progress has been made in un-jamming the solar supply chain. The Biden administration’s 24 month waiver on solar tariffs should help enable the industry to get back to normal after it was thrown into crisis by the actions of one small company (we covered this back in April).
Undoubtedly, the solar supply chain freeze is a huge mess that has caused many companies to think more about their supply chains. Sure enough, several of the largest US solar developers announced the new U.S. Solar Buyer Consortium, committing to buy $6 billion worth of US solar panels (estimated to be enough to double the capacity of US solar manufacturing).
This buying coalition is a bit like the corporate buying coalition commitments I like discussing, except in this case the companies aren’t committing to buy cutting edge solutions in the future, they are committing to buy standard solar panels over the next several years (starting in 2024), just ones built in the US.
It’s easy to like this sort of thing — in this case, it is free market actors helping to encourage re-investment in US manufacturing (and this was all before any movement on the domestic manufacturing or climate policy bills).
And while we’re talking about corporate coalitions in the clean energy space, I also wanted to draw attention to Frontier Climate’s first carbon removal investments (we talked about Frontier in April), the new Coalition for American Battery Independence (supporting the buildout of a US-based battery supply chain), and a German consortium to create a “battery passport” to track the origin and carbon footprint of materials for electric vehicle batteries in Europe.
Regulating Carbon Emissions
Circling back to inside the beltway topics, the Supreme Court dealt a blow to regulating pollution, stripping away authority Congress gave to the EPA. This will hamstring future regulatory efforts, although the ruling was somewhat narrow (it didn’t reject the idea that the EPA couldn’t regulate carbon emissions at all, it just limited that regulation to inside the fence line of power plants as opposed to an economy-wide approach).
One unintended consequence — this could make requirements for carbon capture even more likely for new natural gas plants (something EPA was considering even before the Supreme Court ruling).
The Biden Administration is using the Defense Production Act to help increase the supply of heat pumps for the United States (heat pumps make economic sense and can significantly cut emissions from heating and cooling buildings, but they are not a popular solution in many parts of the United States, so there is limited scale manufacturing of these products today). Link
EV charging infrastructure company Blink acquired fellow EV charging company Sema Connect. The EV charging industry consolidation has begun! Link
Ford, Tesla, and GM all recently announced deals related to securing batteries or battery materials for their growing numbers of electric vehicles. This will not be the last time we talk about companies trying to secure their electric vehicle battery supply chains.
Check out this profile of Evergreen Portfolio company C-Motive, who is developing innovative electrostatic motors. Link
Energy Vault is building a commercial scale deployment of its gravity-based storage in China. Link
Electric Last Mile Solutions was an EV company that did a SPAC less than two years ago; it has now filed for bankruptcy. It won’t be the last. Link
Analysis suggests that EV subsidies are going to people who are not the heaviest users of their vehicles, conceptualizing the opportunity for gains to be had by directing subsidies towards the people that typically drive the most. If the incentives in the Inflation Reduction Act pass, it’s likely this trend will adjust some, as income limits steer the incentives away from people who may use them as leisure vehicles and towards more folks who are driving them to work every day (although the tax credits are not directly connected to mileage). Link
Axios highlights the LACI Debt Fund for climate startups, which Evergreen is a partner on. Link
Arcadia Power acquired Urjanet. Arcadia started off as a provider of clean energy services for residential customers, but seems to have shifted to be more generally focused on energy data integration for utilities, with its purchase of the commercial utility data company Urjanet. The company also looks to be interested in tracking grid carbon intensity in order to help businesses offset their power sector-related emissions with renewables (important for the so-called 24/7 carbon-free energy push that Google pioneered). Link