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.
M&A of operating clean energy projects that qualified for ITC after the 5-year standstill.
REAP finance of $5.7 MM ME wood pellet project.
Landfill gas project development at NH closed landfills.
Storage at the centre of Asia transition to renewable energy.
Storage investment 1H18 $1.5 BN, 2x 2017. $16.7 BN to install conventional battery factories. $42 BN of facilities are expected to be operational by 2022. After 2025 new technologies likely to enter market. Lithium-ion dominates in the short-term.
Hydrogen as a form of storage for renewable energy on a large scale.
New York State has 500 MW storage in development. Target 1,500 MW by 2025.
2017 utility demand response 18 GW. Residential storage capacity additions grew 202% from 2016 to 2017, C&I 9%.
CA 3GW BTM energy storage by 2026. Extends SGIP 5 years.
Flow batteries 14% efficient targeted to be 25%.
Macquarie raising debt for 50 MW portfolio of storage projects in CA.
10 MW solar + 6.5 MWh storage in the Carribean. Islands fossil-fuel free by 2020.
Microgrid project finance outlook.
Roll-up of technology providers to microgrids. Targets C&I, hospital and schools.
Most microgrids are C&I, universities and military. Located in the Northeast and CA. Biggest barrier to entry is low cost power.
Expect economic growth to taper in 2019, stall 2020. Energy major’s have forecast $100/bbl oil since mid 2018. Most countries can accelerate GPD growth by reducing emissions. 34% rise in methane released from overall energy production over the past 25 years. 2017 VC investment into agtech $1.9 BN across 238 deals. IndoorAg investment peaked in 2017 with $346 MM across 37 deals. IndoorAg produce box subscription service. 500 IndoorAg projects globally in development. 50% of the indoor grow operations in the US are in urban areas. EVs are expected to reach price parity with internal combustion engine vehicles by 2025
NJ expects 50% renewables by 2030. 150 EV charging stations.
MA SMART program expects 1.6 GW solar and storage. Replaces SRECs.
3 GW of annual deployments of energy storage by 2023.
Energy storage earning ITC when added to existing clean energy.
100% clean energy goals will depend on storage replacing thermal power.
Growth of renewables and storage will marginalize gas-fired generation.
Energy majors investing in C&I renewables and offering solar + storage.
Energy management company for storage and microgrids.
YTD 2018 M&A $3.3 TN highest since 2007. Investor appetite for renewable energy platforms. US $1.5 TN Infrastructure Plan, China “One Belt, One Road", and EU 500 BN Juncker Plan. Boutiques strategy to focus on sell-side advisory as opposed to offering credit. Every time since 1960 the yield curve has inverted, a recession has followed. Many economists believe it will invert next year. Build-transfer opportunities with utilities. China will add US-sized fleet to coal capacity. Energy Desk. Brent oil at 5-year high. Forecast of $80 and $90+. EU hydrogen production facilities for use in trains.
Hybrid storage market is set to “take off”in 2018. US will leadthe trend.
Solar + Storage cheaper than thermal power.
Energy storage funding for innovation of long duration flow batteries and electrolysis of salt water
Energy storage market size for US Data Centers is about $1.3 BN.
US energy prices at a 5-year high. Energy M&A FERC review threshold increased to $10 MM. Replacing 16% of natural gas supply with RNG can achieve GHG reductions equivalent to converting 100% of buildings to electric-only energy by 2030. Investor interest in social impact investing. Capital-as-a-Service for early stage investing. 40 MM EV charging points will be installed by 2030. EIA, BP, and OPEC have revised their future projections for EV sales upward by 5.5x, 2.9x, and 5.5x respectively. Electrolyzer manufacture for hydrogen production. Shell 10MW electrolyser in the EU, JV with Sumitomo targeting Asia and Australia. China 100 hydrogen refueling stations and 5,000 fuel cell vehicles by 2020 rising tenfold by 2025. Toyota plans to raise its fuel cell stack production from 3,000 to 30,000/year.
Onshore wind unsubsidized LCOE range of US$30–60/MWh, solar PV LCOE range US$43–53/MWh and natural gas US$42–78/MWh
Technologieseligible for subsidies in NYSexpanded to include storage.
CA plans 3 GW energy storage by 2026.
C&I microgrid M&A.
New England market attractive for behind the meter solar and microgrids.
PE purchases 4.2x investments for every exit. Improved US economic outlook. US the world's #1 oil producerfor the 1st time since 1973. US expected to invest US$90 TN in infrastructure to 2030. Hydrogen market expected to be $200 BN to 2020. EV fast charging stationsfunding from the DOE expected to market by 2020. Energy forecast to 2050: Less energy, 50% renewables, peak oil 2020's, power production more than 2x.
SBIC as a potential funding sourcefor clean energy businesses.
63 renewable energy deals in 2Q18representing US$12.9 BN.
Expect 10GW solar + 2GW storageto take advantage of high evening power prices.
By 2040 energy will be 48% wind and solar, 50% by 2050.
Cost of solar PV will fall 71%by 2050.
Energy storage grid connection issuessimilar to early stage wind and solar.
Energy storage projects apply for market-based rates.
US in 2017 installed 216.7 MW, 523.9 MWh of energy storageacross 2,588 systems. In total 922.8 MW, 1,293.6 MWh across 5,167 systems.
Grid-connectedenergy storage grew 68% in 2017in the US.
Median time of angel & seed rounds 3 years. Medium seed rounds $2 MM. Pre-seed valuations $3.4 MM. US utility ESG and sustainability reports. Development focus on smaller DG facilitiesas well as energy services. IndoorAg annual sales expected to be $25 BN by 2021, 28% annual growth rate.
Capital for new renewable energy technology limited outside wind and solar.
Muni purchase of renewable energy.
MA plans emissions 25% below 1990 levels by 2020 forcing closure of thermal power. Thermal power projects close at the end of their PPA.
Battery costs are expected to fall 40% to $200/kWh and BOS fall 25% by 2025.
Private markets overtaking public markets for finding growth. Leading potential PE investors. Most PE deals 1H18 were add-ons. Median time of angel & seed rounds 3 years. Medium seed rounds $2 MM. Pre-seed valuations $3.4 MM. Green bonds have raised $442 BN worldwide since 2013. MLP structure lost luster in renewableand energy markets. Expect 5 MM EV sold by 2019, 25% in the US, 1.6% US car sales. MA plans 400 EV charging stations in 5 years. Food waste $1.2 TN issue and challenge is “enormous”. Revenue Puts common in wind and thermal power applied to solar PV. Energy production insurance. Fuel cell incorporated into microgrids. Energy majors embrace future of microgrid. Primer on valuation:
1. Use peers with similar prospects for ROIC and growth
2. Use forward-looking multiples
3. Use enterprise-value multiples
4. Adjust the enterprise-value-to-EBITA multiple for non-operating items
Clean energy represents addition not transition. Renewables need to increase 10x from 2018 levels to provide, together with nuclear, more than 25% of global energy.
30% C&I plan to invest in CHP.
Lithium Ion storage to grow 8x by 2022. Prices expected to fall 82% from $219/kWh in 2017 to $39/kWh in 2040.
Lithium-ion batteries for the electric grid currently cost $280-$350/kWh expected to fall to about $100/kWh.
NY 1,500 MW of storage by 2025. Storage deployment to support renewables.
Storage added to existing solar, wind and hydro.
Goal to replace cobalt from storagewith nickel and disordered rock salt.
Non-bank financial firms large and near majority of real estate lending. CMBS finance of real property. C&I expect onsite generation 25% by 2025. Expect reduced legal fees as law firms compete for new business with PE and VC. R&D support for "two dozen" hydrogen projects. 7 MM EVs by 2025, from 567,000 in 2016 representing 7% of new car sales. New uses of power:
Solar + Storage expected to disrupt utility decentralized model. It can eliminate 70% cost of energy that is transmitted and distributed, or demand charges.
Developers propose replacing thermal power with renewables + storage.
Data center solar + storage behind the metercosts are coming down. Ability to share and load shift.
Green Bank financingof community solar, C&I solar and solar aggregation.
140 US companies pledge of 100% renewables could lead to 100 GW of new build by 2030. US corporate PPAs driven by virtual PPA and aggregation.
US expect 71GW coal-fired power to close by 2030, lowest generation levels since 1965.
Utilities propose to build over 60 GW of thermal power over the next 5 years.
PE $500 BN loans in 2017 to midsizecompanies, up from $300 BN in 2012. Microgrids shift from ownership to service providermodel. Service provider data centers will add almost 7 GW of capacity in 2018. HVAC as a servicemodel. NYC to reduce GHG emissions 80% by 2050. 2% of buildings produce almost 50%of CO2 emissions. EU recycling target for plastic packaging 50% by 2025 and 55% by 2030. Plastics to fuels process 1 MM TPY plastics by 2020. AD to Power from manure. Gas used in transportation. Underground AD. Technology first deployed at landfills. Market update on project finance and M&A:
(1) Contracted Debt: L+75-100bps.
(2) Merchant Debt: L+275bps
(3) Solar asset sales: 6.5% to 7.5% on an unleveraged 35-year after-tax basis
(4) Wind asset sales: 8% to 9.5% on a 30-year unleveraged after-tax basis