Solar and Wind
ITC safe harbor provisions: (1) construction begins before 2020, (2) solar energy property is in service before 2024, and (3) continuous progress to completion. At least 3 types of energy hedge providers, consistent with the past:
Energy Storage PE investment in storagewith 2 goals: (1) integration renewable energy and (2) reduce CO2 emissions. Energy storage by converting electricity to hydrogen, then to ammonia, and back, expected to be much larger once logistics in place. Energy storage expected to mirror the expansion that the solar sectortook between 2000 and 2015. Flow batteries discharge for up to 10 hours. < 5% market share. Utility IRP forward lookingthat includes storage and renewables. Renewable energy + Storagecan be combined into clean energy portfolios that can provide the same services as power plants, often at net cost savings. Oil and Gas Global gas demand growth rate 1.6%. Chinese gas demand is forecast to grow by 60% between 2017 and 2023. Macro events: (1) rising supplies from the US, (2) rising demand in China, and (3) more industrial demand everywhere Latest News 225 PE transactions representing $3.8 BN. Moody’s market data highlights. VC funding of food companies $2 BN, $1.6 BN YTD 2018. Indoor agriculture forward purchase agreementsattract debt and equity.
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Solar and Wind
Wind and solar expected to be 50% generation by 2050. First community Solar + Storage. 1MW rooftop solar + 1MW / 2MWh storage. MA 200 MWh energy storage target. Solar + Storage at a historically low priceof 3c/kWh for 20 years. Solar PV module prices expected 24c/Win 2018, down 35% from 37c/W in 2017. Energy Storage $548 BN being invested in battery capacity by 2050. Funding for long-term energy storage developmentof 10-100 hours. A key to succeeding at storage is to combinemany different applications: (1) Standalone battery (2) Tolling agreement where the battery owner stores electricity for the local utility for a fee – e.g. 110 MW AES Southland project in southern California. (3) Buy-sell model - Battery owner buys power during off-peak periods when the electricity is cheap and sells it back to the grid during peak hours. (4) Storage added to a solar or wind project - Regulates the ramp rate, earns additional revenue by providing ancillary services. Oil and Gas PE sponsored companies likely M&A candidatesinclude Oil & Gas. Latest News 223 transactions representing $7 BN. Solar and Wind
55% of new generation was solar. 13% increase over 2017 yoy. Installed solar PV capacity expected to more than double over the next 5 years PURPA contract challenges continuein IA, MI and OR. Federal cases expected to amend or remove utility obligation to acquire power from QFs. Thermal Power O&M key to successful deployment of thermal power projects. Energy Storage Annual global energy storage market will be 8.6 GW and 21.6 GWh by 2022. Latest News PE company holding time to sale 5 years, current age 3 years. Expect flow of sales. Credit agency key structuring considerations: (1) Repayment - Cash sweep. (2) Over collateralization - Adding projects to the portfolio. (3) Energy Hedges - Heat rate call options. (4) DSCR - Strong > 2.5x, > 20% FFO/debt. Weak < 1.5x, < 15% FFO/debt Energy Storage
Energy storage market expected to grow 12x2016-2022 to 2.6 GW. Energy Efficiency Energy consumption growth to 2050 expected to swamp energy efficiency gains. Latest News 198 M&A transactions representing $5.2 BN. Build Sell Operate model. “Wall of liquidity”. More portfolio sales at the HoldCo versus asset sales at the ProjectCo. 2017 impact investment $114 BN in assets, IRR 12.9%. Impact investment structured as guarantees, first-loss reserves and other structures. Impact investments over $22 BN in 2016, $25.9 BN in 2017. Investment in company's that promote sustainable practices, among others, outperform the market. Trend toward healthier and more sustainable food. Investments in 2016 $1.5 BN, 2017 $1.5 BN and YTD 2018 $1.3 BN. Renewable Energy
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February 2019
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