Decarbon Daily - Decarbonization Themes Part 4

This is Part 4 of 5 in the decarbonization theme series. Please take a look at the previous thoughts on who and what could win in ESG and decarbonization.

Decarbonization Themes, Part 3

There are several emerging themes for decarbonization across industries. Here are the top 5 themes I will be covering in detail.
1. Electrification driving rare earth mineral demand
2. Natural gas becoming energy transition fuel
3. Emission reduction and avoidance comes in all shapes and sizes
4. Investors pushing towards climate + energy technology need scale
5. Global oil demand recovers to pre-pandemic levels in 2022, but slower growth thereafter

Investors Need Scale

Unlike other technology investments, energy and climate technology often needs physical assets that are suitable for different countries and continents in order to reach the economies of scale. Adhering to local, state, and federal regulations brings additional complexity depending on the location of the physical asset. As the assets become operational, utilization, supplier sourcing, and project learning become critical to reach the benefits of scale.

Over the last several months, I've shared articles on different types of investors focused on decarbonization and sustainability. Generally, you can think of:
- Accelerators. There are numerous incubators and accelerators to help with the early stages of your project. Greentown Labs and Rice Alliance Clean Energy Accelerator are two organizations in the Boston and Houston areas devoted to cleantech.
- Venture Capital. Breakthrough Energy Ventures, Climate Capital, and Lowercarbon Capital all have climate change as the primary thesis and invest across sectors. Corporate venture arms from Chevron, BP, and Equinor are active as well.
- Private Equity. General Atlantic is generalist growth capital provider, Ara Partners invests in industrial decarbonization, and EnCap's Energy Transition focuses on wind, solar, and energy storage.
- Project-based. The project-based investors are more traditional energy investors that look to scale project by project.

Lowercarbon Capital

Chris Sacca alongside his wife Crystal Sacca founded Lowercarbon Capital after huge technology successes through Lowercase Capital.

The firm is targeting three areas:
1. Slashing new emissions of CO2
2. Sucking up at least a trillion tons of CO2
3. Buying all of humanity more time by actively cooling the planet

Today, with shared lab space, massive computing clusters available for rent, proliferation of machine learning, cheap renewable electricity, the discovery of CRISPR/Cas9, breakthroughs in electrochemistry, and more streamlined tech transfer from universities, true seed-stage climate tech startups are possible at scale. Source: Lowercarbon Capital

Frost Methane, Solugen, and Charm Industrial are just a few example portfolio companies.

The Rise Fund

TPG Rise Climate fund closed $5.4 billion in July 2021. The fund will take a broad sector approach focusing on several different climate sub-sectors, including: clean energy, enabling solutions, decarbonized transport, greening industrials, and agricultural & natural solutions.

The Rise Fund shares an interesting framework on measuring economic and social gains:
1. Assess the Relevance and Scale. Using a metric called the Impact Multiple of Money, The Rise Fund is assessing the potential impact before a single dollar is committed.
2. Identify Target Social or Environmental Outcomes. Determine if there is existing research or evidence to indicate the outcomes are measurable and achievable.
3. Estimate the Economic Value of those outcomes to Society. Use an "anchor study" to translate outcomes into economic terms
4. Adjust for Risks. Calculate the an impact-probability score to categorize and assess risks.
5. Estimate Terminal Value. Determine present and historical impact to assess lifetime value of the investment.
6. Calculate Social Return. Take an extra step to account for partial ownership of the business.

You can find out more details on The Rise Fund website.

Generate Capital

In July 2021, Generate Capital raised $2 billion for sustainability investments across energy, mobility, water, waste, and agriculture.

Generate Capital is actively investing in battery storage, industrial solar, fuel cells, and other energy infrastructure asset classes.

CEO Scott Jacobs said Generate’s willingness to fund projects that others might not, including small-scale deals as well as backing early-stage technologies that some might deem too risky, sets it apart. Additionally, Generate’s capital has no time restrictions, meaning the firm isn’t incentivized to make decisions with short-term goals in mind. Source: CNBC

Based on the investments, Generate Capital is taking an "all of the above" approach to energy infrastructure. There is no single solution to climate change and energy infrastructure.

“Credit is a critical part of the financial ecosystem for clean energy and sustainable infrastructure solutions, and we are thrilled to expand access to this important tool that we’ve used to support our partners since inception,” said Scott Jacobs Source: Company website

Providing credit and equity solutions for infrastructure developers gives Generate Capital the flexibility to be included during various aspects of the project lifecycle.

Inside this Issue

💸 Ara Partners Closes Second Fund With $1.1 Billion of Capital Commitments
💨 DuPont Announces Virtual Power Purchase Agreement for Renewable Energy
☀️ SRP Signs Contract for its Largest Solar Power Plant in Arizona
💰 Talen Energy Corporation and Cumulus Growth Secure $175 Million of Capital from Orion Energy Partners