Energy storage market doubled in value in 2018 to $973 MM.
Oil & Gas
Oil & Gas industry returns in 2019 will be driven by consolidation and simplification.
2018 US VC funding that highest level since 2010 at almost $100 BN. Global growth is expected to slow to 2.9% in 2019. States committed to 100% RE include NJ, NY, CA, HI and Puerto Rico as well as over 100 cities. Solar PV 1.6% of US energy generation at the end of 2018. Energy hedges provided by the financial markets. The challenge in fusion power is the economics.
$26 MM equity funding for energy storage involving salt and rocks.
Oil & Gas
Oil prices continue to fall and gas prices rise. WTI lost 40% of its value in 4 years.
Fed raised rates by 25 bps to a range between 2.25% and 2.5%. Fed cut its projections for 2019 from 3 rate hikes to 2. Unemployment is still at its lowest level since 1969. Fed lowered forecast on growth. Investment-grade rated sponsors are paying UST + 1.4% up from UST + 1%in 2017. Below investment grade sponsors are paying UST + 4.5%, up from 3.2% PE 1-year rolling IRR 18.9%. VC net cash flow $36.3 BN. HNW focus on impact investing as a means to achieve social and economic goals. Family offices control $4 TN of assets, that is more than hedge funds and equivalent to 6% of the value of the world's stock markets. Indicative PE term sheet. $15/ton carbon tax not expected to be approved. Real risk of a credit bubble. PE raised a record of nearly $750 BN globally in 2017. Textbook M&A transaction. Acquisition, add-ons, and IPO within 5 years. Investment in sustainable business can lead to better results.
Solar PV module prices down 15% yoy.
Solar PV promoted on brownfield sites. 1 GW of clean energy and 20,000 jobs by 2020. EPA has vetted 80,000 brownfield sites in addition to it’s national program.
Capital markets opportunities in renewable energy: Standardize, securitize, scale.
Lack of offtake arrangements globally expected to lead to more merchant project finance. Indicative project finance: merchant power 55-60% leverage and an expected DSCR of 1.8-2x, contracted power 85% leverage with a ratio of 1.25-1.3x.
Oil & Gas
Oil prices expected to increase 2Q19. US oil net exporter for the 1sttime since 1973.
Green Bonds used to finance clean energy projects that count towards LEED certified buildings. The issuance is the first for an apartment REIT. Market expects 2 business cycles before mass adoption of sustainable business. Climate investment was $70 BN in 2016. 990 institutions with $7.2 TN of AUM declared some form of fossil fuel divestment. Going forward, 2,400 asset managers representing $82 TN have agreed to UN PRI commitment on ESG issues. Total AUM committed to PRI has grown 19% in the past 12 months. US had 205 IPOs in 2018 raising $52.8 BN, a 14% YOY rise by volume and 31% by proceeds. Asset management and automation are leading factors for investment in new technology. Carbon tax will reduce emissions 40% by 2030. Legislation will impact emissions and have emissions implications that will have an effect on distribution. CA will require market-based rates by 2020. Other states are following close behind. US has 71 MM advanced meters, about 50% meters installed in 2016. s45Q energy tax credit of $35/ton of carbon capture used for EOR and $50/ton for carbon capture and storage. Previous credits were $10 and $20, respectively. Most installed facilities use carbon capture for EOR. 10 of the world’s operating CCS facilities are located in the US. Lower return expectations for buyout, growth, VC and real assets funds. Fees are under pressure. LPs expect to increase their private markets allocation. Return expectations:
Energy efficiency at big box stores through remote PPAs, lighting and HVAC.
Electrolysis of water to create hydrogen fuel used in CHP projects. No CO2 emissions. Efficiencies greater than 90%.
Hydrogen generation from renewables could be mixed with gas to produce power.
Energy storage using silicon. Salt can heated to only 1,000 degrees, silicon 4,000 degrees. Light from silicon used by solar PV to generate power.
Energy storage will be a $4.5 BN by 2023. Energy storage Q3 2018 deployments in MWh rose 3x YOY. Energy storage annual deployments will reach 3.9 GW by 2023.
Energystorage to be $620 BN by 2040. Large-scale lithium-ion storage costs will fall another 52% by 2030, already had a 80%+ cost decline since 2010.
Record surge in venture funding of AgTech. Megatrends: Decentralization, decarbonisation and gas replacing diesel.
Energy storage where particles are heated to 1,100 degrees and moved through a heat exchanger to generate power.
Industry seeks clarification that energy storage qualifies for ITC.
Energy storage targeting the C&I sector. 600 solar + storage installed.
Energy storage allowing for energy as a service. Project financing of energy storage projects have reached a risk parity with conventional power projects.
EU energy storage prices collapse. Prices fell 65% in 2 years. AD to Gas using covered lagoons. Reduce our greenhouse gas emissions 25% by 2025. Utility executives generally optimistic on future energy: development of innovative technologies, increased investment in disruption detection and innovation processes, and setting up accelerator or incubator programs for start-up firms. Energy efficiency production insurance. 10-30% guaranteed savings. Global market for energy-efficient building technologies expected to be $360 BN by 2026. Building energy waste from existing assets valued at over $100 BN.
US solar generation will rise 26.4% from 212,000 MWh/d in 2017 to 268,000 MWh/d in 2018 and increase 13.1% to 303,000 MWh/d in 2019.
L-Ion battery capacity to increase 3x from 175 GWH to 630 GWH by 2022.
TX 89 MW storage, 1.8 GW in the queue. Lack of a winning business model makes it unlikely that mass storage deployments will begin any time soon.
Energy storage devises planned to resemble a piece of paper. Potential uses for C&I customers.
Microgrid energy service pursued by energy majors, among others.
Horticultural lighting market is estimated grow from a $2.43 BN market this year to $6.21 BN in 2023. LED lighting cost $30/SF number for lights for a large facility. YieldCos continue to sell operating assets and use proceeds to repay debt.Energy company that provides EaaS to buildings. Awarded EaaS on 60 buildings. Relies on IoT and asset management. Offers 3 solutions (1) energy analytics, (2) emission and air quality compliance and (3) distributed energy infrastructure. 25-30% energy savings. No guaranteed savings. Addressable market: (1) 90 BN SF commercial real estate, (2) $2/SF annual energy cost and (3) 30% energy wasted. Energy developers teaming with capital providers to drive new business. 60 projects representing 46.9 MW. Electrolysis of water to produce hydrogen. CO2 mixed with hydrogen and microbes to produce protein. Animal meal supplement. Requires EPA approval. Commercial project if approved could produce protein by 2022. 20% energy savings from smart windows on commercial buildings. Global smart glass market of $3.12 BN in 2017, could be $14.24 BN by 2026. Gobal market for construction glass is forecast as $115 BN by 2020. 100% sustainable aluminum by 2020.High volatility in natural gas prices.
16 GW coal-fired power projects will retirein 2018. Coal power capacity has fallen by 1/3 since 2010.
Energy storage of Aluminium-Air batteries to extend life by lowering degradation. Adds oil around anodes during periods of no activity to restrict loss of charge.
Microgrid service with a full finance package.
Microgrid projects development in locations traditionally dominated by solar PV.
Energy storage replacing thermal power. 1.3 GW of energy storage by 2020.
Energy goals will rely on wind, solar and new technologies like CCUS, hydrogen and storage.
Oil & Gas
Natural gas supply is at a 15-year seasonal low. Natural gas prices are up more than 50% this year.
Project finance ratings criteria. Large valuation gains in early stage energy companies. Most early stage equity is in the form of convertible debt that is looking for an equity conversion, like a Series A. Opportunity zone funds created for property owners. Plastics to fuels project that recycles plastics waste at the end of its useful life using pyrolysis. 100,000 TPY of plastic waste into 16 MM GPY of ultra-low sulfur diesel fuel and naphtha blend. Offtake agreement with BP. JV to commercialize the pyrolysis technology.
By 2050, up to 90% of OECD generation will be from renewables. IEA predicts renewables will be 40% global power generation by 2040. 400 global companies, cities, states and regions set 100% renewable energy targets
Energy storage will be 7% global installed power capacity by 2040. Global energy-storage market 942 GW by 2040, will need $1.2 TN in investment. Utility-scale Li-ion storage system costs will fall 52% by 2030. CA electricity to come from carbon-free sources by 2045.
Li-ion battery cost has dropped from $599/kWh to $208/kWh.
Li-ion battery cost will be $73/kWh by 2030. Zinc-hybrid batteries currently $100/kWh. Economic benefits of energy storage (i) peak shaving, (ii) resilience and (iii) self generation.
Energy storage project using concrete blocks.
Microgrid behind-the-meter segment is poised for high growth.
Federal Reserve left rates unchanged. $6.1 TN of capital eligible for reinvestment in Opportunity Zones. Lack of readily available metrics to measure sustainability. Sustainable investment $30 TN market by 2030. Enzyme that eats plastics and enables plastics recycling.
RPS have initially increased GHG emissions, then reduced emissions over time.
CO proposes 50% energy from renewables by 2026. CA 100% by 2045.
$1.8 BN geothermal power project allows for recovery of 91% L-Ion from brine. 76,000 TPY L-Ion.
C&I attempting to physically rather than financially meet 100% RE goals.
Guaranteed but not shared savings on energy efficiency. Saves building owners $0.40-$0.60/SF, boosts net profit $5-10/SF.
Thermal power once installed will need carbon capture to reduce carbon emissions.
Oil and Gas
Top 15 oil and gas companies account for 58% of remaining oil and gasreserves. Own just 30% of developed renewable energy assets.
Proposed changes that might lead to lower CO2 emissions with storage. Presently,adding storage increases CO2 emissions. New GHG rules expected 2019.
MA has a goal of 1 GW energy storage by 2025. There are 19 MWs of energy storage facilities participating in the New England markets and 800 MW proposed.
No "hard-and-fast models yet" for storage finance.
Market expects Fed to further increase rates regardless of market activity. Sensor as a Service. Microgrid as a Service. Energy as a Service offered in partnership with the incumbent utility. PE middle market funding through 3Q 2018 of $311.7 BN total deal value across 2,171 deals. $88.1 BN total capital raised (19.5% YTD increase) across 99 funds. Sound sustainability standards lower the cost of capital. Leading project finance lenders MUFG, SMBC, ING, SocGen, BNP and CA. Tax credits disallowed for (i) mobile solar PV platforms where seller and buyer were closely relatedand (ii) pass-through entities where costs were inflated. 8,700 Opportunity Zones created a $6 TN opportunity. Electrolysis of water to create hydrogen and oxygen. Volume Firming Agreements in lieu of PPA. Corporate agreements + insurance. Corporate PPA 3.5 GW YTD 2018.
Energy as a Service offered in partnership with the incumbent utilities. Debt from SBA-funded EIP that has also financed CHP and microgrids.
Expect long delays in placing solar PV on landfills.
Energy storage faster, smarter, cheaper, and more reliable than fossil fuel generators. It can provide more services than previously expected:
(1) it can operate in standalone mode;
(2) it has grid-forming capability, and;
(3) can provide frequency control by acting as a virtual generator.
194 M&A deals YTD 2018 in IndoorAg sector, 130 in 2017. Volume Firming Agreements in lieu of PPA. Corporate agreements + insurance. Corporate PPA 3.5 GW YTD 2018. 152 companies of various sizes have made a commitment to go 100% renewable. Carbon tax proposed on C&I and residential. Majority of emissions in industry and in the residential and commercial sector are entirely unpriced. Carbon pricing gap highest for industry, residential and commercial sectors.