Thermal Energy
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. Energy Storage 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. Latest News $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.
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Renewable Energy
$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 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%. Latest News 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 Energy storage demand response incentivesin NY. Pilot program expected to be expandedinto other New England states. Microgrid 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. Latest News 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
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. Energy Efficiency EaaS could grow to a $221 BN global business by 2020. Latest News 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. Energy Storage
Virtually every automaker is investing into battery pack production. Energy storage in 2016 was able to deliver about 5 GWh. By 2030, it is expected to double six times to about 300 GWh. Latest News Bank loan finance for NE merchant power project. Family offices and hedge funds are starting to buy into IndoorAg. Expect 7 MM EVs by 2025, result in around $6 TN in investment. Electrification of transport could result in growth of 80 TWh/year. EV expected to replace fossil fuel power vehicles. UK ban on new petrol and diesel car sale in 2040proposed to move forward. Generate hydrogen from water using solar. Hydrogen produced used in fuel cellsto generate power. Water cleaning technology that uses bugs to separate metals from water. Industrial synthesis of hydrogen, syngas, methanol and diesel could become competitive with fossil fuelswithin the next two decades. US southeast power project LCOE: (1) Biomass $84/MWh to $133/MWh. (2) Wind $55.6/MWh. (3) Solar $57.4/MWh. Energy Storage
L-Ion battery projects secure PPAs to provide storage in the short term. 50% new car sales will be electric by 2040. 75% spent batteries will be reused and recycled to harvest raw materials by 2025. Closed-loop cycle for solar energy can increase storage up to 50 days. Stored chemical energy could be converted directly into electrical energy. EV buses expected to account for 80% fleet by 2040. Latest News Corporate ESG programs. 3 indoor farms planned for ME and FL. Presold 100% of inventory for 10 years. Proposal to have wood pellets qualify as a renewable fuel. 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. 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. |
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February 2019
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