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
Expected continued growth of small-scale commercial CHPunits. Microgrids especially targeting hospitality, healthcare and multi-unit residential markets.
Thermal energy market to IndoorAg expected to grow 5x over 5 years.
Negative spreads drive investmentin small-scale distributed energy.
Storage technology L-Metal doubles energy output. Limitations takes 3-hours to charge, expensive and only 50 cycles. L-Ion can take over 1,000 charges.
$14 BN raised in 201 deals. Future in hydrogen to decarbonize heavy transport and store electricity. Indoor Ag nascent sector within agtech that is expected to trend higher. Increase in distributed generation to meet peaking demand. Creates opportunity for onsite generation.
$11.5 TN invested globally in new power generationbetween 2018 and 2050. $8.4 TN invested in wind and solar. 2/3rds renewables by 2050.
Energy storage expected to be 1,674 MW in 2018.
Future might be ‘next-gen’ batteries such as solid-state, with energy densities above 300 Wh/kg, which could come to the market in the late 2020s.
EV charging infrastructure expected to be $2.7 BN by 2020 and $18.6 BN by 2030. 12 MM residential and 1.2 MM public charging points in the US by 2030.
$548 BN invested in energy storage by 2050, 2/3rd at the grid and 1/3 behind the meter.
Microgrid global marketexpected to be $33 BN by 2023. CAGR 11.5%.
Green Bonds 2017 $170 BN. Funding infrastructure, energy efficiency and clean energy. $30 BN of green municipal bonds have been sold in the US, exceeds $25 BN of green sovereign notes. Infra funds are seeking $291.3 BN in capital to deploy across infrastructure and energy. Track record is king. 2/3rds Honda vehicles will be electricby 2030. 300 MM EVs by 2030 representing 50% new car sales, 15% fleet. Replace 5% of total oil demand. Demand for gasoline peaks in the early 2030s and diesel plateaus shortly after. Global oil demand will peak in the mid-2030s at 110 MM BPD, declining just 500,000 BPD to 2040. Asia will have about 120 MM EVs by 2040, Europe 80 MM and the US 70 MM. Potential market sizefor cannabis beverages is “staggering".
Bond league tables 1H18.
Wind and Solar
US wind investment 1H18 $17.5 BN, 31% increase over 1H17.
Wind energy project cost $1,600/kW in 2016. Interior US accounted for nearly 90% of incremental capacity.
Energy storage demand response incentivesin NY. Pilot program expected to be expandedinto other New England states.
Microgrid as a Servicefor C&I customers, hospitals, universities, and remote areas. Market valued at $775 MM in 2015 expected to be $2.2 BN by 2022.
Data Centers candidates for microgrids. 6 projects representing 437 MW.
Duke Energy Microgrid as a Service for corporate customers. 3GW storage, solar and wind projects.
PE 2Q18 2,247 dealscompleted totaling $263.9 BN. 50 funds raised $32.1 BN in 2Q. 2,974 PE funds seeking $945 BN of capital. Uninvested capital committed by investors $1.09 TN. Buyout EBITDA multiples 2017 10.2x, YTD 2018 9.5x. Buyout debt levels averaged about 5.7x EBITDA in May. 2009 3.7x, 2007 6.05x. Institutional investors $85 TN in AUM and expect $110 TN by 2020. 1% of asset allocated to infrastructure. 35-50% infrastructure investment will need to come from the private sector. Energy efficiency LCOE2.8c/kWh. $40 MM 130,000 SQ FT indoor farm. 3 project located in CT and TX, future sites in CA, the Midwest, GA and OK. 13 cities representing 80 MM people and around 60,000 buses signed the C40 Fossil Fuel Free Streets Declaration, pledging to purchase only zero-emissions buses from 2025 forward. Energy production insurancefor flow batteries. LaaS energy production insurance, shared savings contracts, 75% savings on lighting cost. Maintains systems for 5 years. If all lights in the US were switched to LED by 2030, the energy savings would be 20x all the solar power generated in the US. Free EV charginguses advertising model.
Energy storage overtakes gas-fired power as a compliment to wind and solar. Energy storage deployment.
$350 BN market for renewables and distributed energy resources through 2030. Avoids 3.5 BN tons of CO2 emissions.
EaaS could grow to a $221 BN global business by 2020.
Deal flow 1H18 for VC and PE at new highs. Over 1,500 deals. 2Q18 $23 BN invested in over 1,400 deals. First round 35% deals. PJM LCOE. Northeast represents 7 of the Top 10 (8 of 11) states in the US with the most expensive power. Lucrative era for agtech companies has arrived. IndoorAg Industry could be worth $25 BN by 2025.