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💸 "The Current State of Investment in the Energy Transition"

The Energy Gang

Photo by Pepi Stojanovski | Unsplash
Host: Ed Crooks
Guests: Nneka Kibuule | Principal | Aligned Climate Capital &
Samuel Scroggins | Investment Banker | Lazard
Category: 💸 Investing | Energy Transition

Podcast’s Essential Bites:

[1:01] NK: “At Aligned Climate Capital, we are investing in decarbonisation for today. We have the perspective that for us to actively approach decarbonisation we need to take a portfolio approach. There are some people who are working on really amazing tech that will be ready in 5 or 10 years. But in the meantime, there [are] proven technologies that are available to us today. So we're investing [in] things like solar infrastructure startups that are [...] accelerating the clean energy transition infrastructure, building efficiency, you name it.”

[5:21] SS: “The levelized cost of energy over time has tracked the cost comparisons of renewable energy as compared to fossil fuel generation. And leading up to 2021, what you saw was pretty significant cost declines on a levelized basis for renewable energy technologies, particularly utility scale wind and solar, as compared to fossil fuel generations.”

[8:43] SS: “We have seen around a 65% drop in public market transactions for renewable energy companies in the first half of 2022, as compared to the first half of 2021. But what we have seen to counter that is increasingly active private market transaction activity. The first half of 2022 was a record high as compared to the first half of 2021. [...] But the private markets [...] do not seem to be slowing down for high quality renewable energy investment opportunities.”

[18:24] SS: "The platform value approach is meant to capture the value that these businesses are being ascribed for unidentified ability to grow into a market share in the future, and develop and deploy projects that do not exist today. [...] [This approach] is still working despite the turmoil in the markets that we're seeing."

[30:09] SS: “The first thing that we saw as [an] immediate impact of the IRA (Inflation Reduction Act) [...] is via the extension of the tax credits [to] help [utility scale] projects become more attractive from an IRR (internal rate of return) perspective. The second impact that we are noticing right away from the IRA are on these large scale developer owners and operators. [...] We expect [that it] will open up incremental development and project opportunities for them and create more opportunities to deploy more projects.”

[31:17] SS: "The third area that we are really focused on from an IRA perspective, outside of utility scale, wind, and solar generation, are the ancillary sectors that touch the entire circular energy transition [...]. One in particular is onshore or US domestic solar manufacturing. [...] The other area that is interesting to watch is the hydrogen sector and impacts that the IRA might have on the ability to commercialize and deploy green hydrogen."

[33:41] SS: "In practice, we are not seeing a slowdown of capital being deployed in the sector. So I don't think that investors are underwriting investments, assuming that there's a fundamental negative shift away from supportive policy. And [...] even outside of subsidies, renewable energy technologies are cost competitive with fossil fuel generation technologies."

Rating: ⚡⚡⚡

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🗓️ 10/21/2022
✅ Time saved: 58 min