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The surge in electricity demand unleashed by AI and data centers has troubling implications for certain sectors of the energy transition.

State of play: The future of green steel and green hydrogen rests on access to cheap electricity, and these nascent, thin-margin startups have to compete with ultra-profitable tech giants.

Context: Veteran climate investor Daniel Goldman talked with Alan at the CERAWeek energy conference in Houston this spring, and again yesterday.

This interview has been edited for length and clarity.

"There is a fundamental risk-return imbalance that is leading infrastructure development to be developed much slower than it otherwise would be.

There are structural problems: interconnection, an outdated, balkanized grid, higher interest rates, supply chain, continuing inflation.

Then there's the challenge of load growth. Even if we had 0% load growth, we would have a huge decarbonization challenge. Now we've got doubling in the next decade or so.

The need to decarbonize is an insurmountable problem. I wake up at night thinking, 'That's an impossibility.'"

"As viewed from today it's insurmountable. Electrons are going to float to their highest value. That's probably data centers. So if you need electrons to make hydrogen, if you need green electrons to decarbonize steel or cement or manufacturing, it's going to be really challenging.

One question we've been asking is, what does it take for data centers to go off the grid? There's also opportunity in efficiency."

That term "insurmountable" — does that mean that the climate crisis is insurmountable? The energy transition is insurmountable?

"If we believe that green hydrogen is necessary to decarbonize industry, it's going to be really tough to develop the scale of green hydrogen, at least in North America, to address the climate crisis.

There are other parts of the world that might do it effectively. China's building some 25 nuclear plants — we are not building more than one or two nuclear plants, because we can't figure out how to do it in a structured, very low-cost modular approach.

That would be a huge help: to bring large, firm, zero-carbon power onto the grid in a shorter period of time. But it takes 10 years for us to build a nuclear plant. If every nuclear is going to take 10 years, we're not going to be able to depend on that power source.

Geothermal could provide alternatives for firming low-cost power. That's a promising area, but also a long timeframe for development."

"Energy efficiency. There's a massive amount of low-hanging fruit across residential, commercial and industrial."

In yesterday's conversation, Goldman added, "The intelligence we're getting out of AI could have tangible benefits to the grid. There's this other side, where we may be able to do things faster, cheaper, in a more cost-effective and easily financed way with AI aids."

Are there industrial sectors that have been trying to electrify, which before you were open to, but because of scarcer electrons you're moving away from?

"Not yet. We tend to think globally about electrification, and some of this is going to move offshore.

If you think about the desire to on-shore mining and the whole supply chain, that becomes challenging with more expensive or fewer electrons.

Electrons are going to be available. They're just going to have some price associated with them. We're not going to run out of power, we're just going to have higher prices."

1 big thing: An electron reality check

Photo illustration of Daniel Goldman of Clean Energy Ventures with a photo of electric transmission towers and blocks of color

Photo illustration: Sarah Grillo/Axios. Photo: Courtesy of Clean Energy Ventures

Battery recycling startup Li Industries has closed a Series B round of $36 million to build its next recycling facility, Katie writes

Why it's the BFD: Lithium iron phosphate (LFP) batteries are quickly gaining market share but aren't easily recycled. Li Industries says it's cracked that code.

How it works: Li Industries claims it can economically and sustainable recycle LFP batteries, which are powering a growing wave of EVs and have been a challenge to recycle.

Zoom in: The round, which will ultimately close at $42 million, was co-led by Bosch Ventures, Khosla Ventures and LG Tech Ventures, and included new investors Formosa Smart Energy Tech Corp., Anglo American Decarbonization Ventures and Chevron Technology Ventures.

Existing investors Shell Ventures and Myriad Ventures also joined.

The Pineville, N.C.-based company, founded in 2017, will use the funds to build a 10,000-ton recycling facility using its tech.

The big picture: The Inflation Reduction Act has helped kick-start momentum around new battery recycling infrastructure in the U.S.

To qualify for tax credits, a portion of critical minerals in EV batteries have to originate from extraction or processing in the U.S. or countries with free trade agreements.

The growing demand for EVs is also boosting the need for new battery recycling facilities.

State of play: There's a handful of investor-backed players building battery recycling plants in the U.S. including Redwood Materials, Ascend Elements, Li-Cycle and Green Li-ion.

2. The BFD: Series B for recycling LFP

The Department of Energy has selected 13 board members from across the investment community and industry for its newly formed foundation, the group tells Katie.

Why it matters: The DOE's foundation could help provide alternative ways to fund the energy transition by collaborating with the private sector, philanthropy and communities.

Catch up quick: The foundation, called the Foundation for Energy Security and Innovation (or FESI), will be the DOE's first nonprofit and was authorized by the CHIPS Act in 2022.

Other government arms like the National Institutes of Health and the Central Intelligence Agency have their own foundations that fund companies and projects.

Vanessa Chan, chief commercialization officer for the DOE, described FESI in an interview as "an additional tool in the toolkit for DOE to be driving important things including technology commercialization." Chan is the formal liaison between the DOE and FESI.

The foundation can raise philanthropic funding and pick projects that are being excluded from the current DOE programs.

The big picture: FESI is being launched with deep roots in climate tech investing and broader industry.

From the investment world: DBL Partners' Nancy Pfund, Bezos Earth Fund's Noël Bakhtian, Breakthrough Energy's Mike Boots, Builders Initiative's Noelle Laing and Yucatán Rock Ventures' Stephen Pearse.

From industry: Miranda Ballentine, former Air Force and Walmart leader, BP's Tomeka McLeod, National Grid's Rudolph Wynter, and Johnson Controls' Kathleen McGinty.

Former government officials Rita Baranwal and Vicky A. Bailey also joined the board, as did Purdue University president Mung Chiang and the BlueGreen Alliance's Jason Walsh.

Four non-voting members come from DOE leadership, including Secretary Jennifer Granholm and Chan.

What's next: The new board members will be inaugurated today in Washington.

The board will need to self-organize, appoint roles and start fundraising.

3. Exclusive: DOE foundation's new board

Illustration of a green round table with the Earth as the top of the table.

⚛️ Nuclear bill advances: The House passed a compromise ADVANCE Act nuclear licensing bill yesterday, inching it one step closer to President Biden's desk, Nick Sobczyk reports in Energy Policy.

The final ADVANCE Act is a bipartisan set of policy tweaks aimed at making it easier to get advanced nuclear reactors onto the grid. An effort is ongoing in the Senate to attach the bill to the FAA reauthorization.

💰 Meanwhile, nuclear spending: All eyes are on DOE to develop new nuclear energy funding programs after last week's Senate passage of the Russian uranium ban, Nick also writes.

The legislation, which President Biden is expected to sign, bans imports of Russian-enriched uranium, with waivers for companies to continue bringing it in until 2028. It also unlocks $2.7 billion in new funding for nuclear fuel supply programs at DOE, on top of $700 million already available from the IRA.

🏠 Michael Dell's son's startup: Base Power, a startup that sells residential batteries and electricity services, was founded last year by Zach Dell in Austin to help Texans power through outages, reports Bloomberg.

Base has raised $68 million from investors including Josh Kushner's Thrive Capital, Valor Equity Partners and Trust Ventures.

4. Temperature check

Illustration of an ice cream cone with a melted puddle of ice cream that looks like the earth.

• Hysata, an Australian green hydrogen electrolyzer developer, raised $111.3m led by BP Ventures and Templewater. POSCO Holdings, POSCO E&C, IMM Investment Hong Kong, Shinhan Financial Group, Twin Towers Ventures, IDO, TelstraSuper, and insiders IP Group Australia, Kiko Ventures, Virescent Ventures, Hostplus and Vestas Ventures joined. axios.link/3WzYTed

• ArkeaBio, a Boston startup developing a vaccine to reduce livestock methane emissions, raised a $26.5m Series A led by Breakthrough Energy Ventures, joined by the Grantham Foundation, AgriZeroNZ, Rabo Ventures, Overview Capital, and The51 Food & AgTech Fund. axios.link/3JU2w7i

• Rapid Liquid Print, a Boston additive manufacturing developer, raised a $7m Series A led by HZG Group, joined by insiders BMW i Ventures and MassMutual. axios.link/4dwRORF

• Rev1 Ventures, a Columbus, Ohio, VC firm and studio, raised $6m for a seed and pre-seed fund focused on Central Ohio startups. axios.link/3QCgFKj

• Electricity Maps, a Copenhagen developer of grid demand-matching software, raised €5m from Transition and Revent. axios.link/4b0T0LD

• WinBat, a Portage, Wis., developer of hemp carbon batteries, raised a $5m seed round from Infinite Power Systems. axios.link/4bvAoTP

• Mycocycle, a Bolingbrook, Ill., startup using fungi to convert waste into reusable materials, raised $3.6m led by Closed Loop Partners, joined by Telus Pollinator Fund for Good. axios.link/4bxdsUq

• Phoenix battery tech developer SorbiForce raised $340k via crowdfunding. axios.link/3wpmdkr

• Yuon Control, a Swiss developer of predictive heating control systems, received an undisclosed investment from Kiilto Ventures. axios.link/4bso32K

• Renegade Plastics, a sustainable fabric coatings developer based in Golden, Colo., and Green Bay, Wis., raised an undisclosed pre-seed round led by Schneider Resources Holding. axios.link/3URravy

• Blackstone and Vista Equity Partners completed their purchase of Energy Exemplar, an Australian energy market software provider, from The Riverside Co. axios.link/479Thtk

• Bill Gates joined a roundtable discussion with German politicians, foundations, founders, and bank KfW Capital about a potential €1b project finance fund for first-of-a-kind climate projects. axios.link/3USDhc0

• Electric Hydrogen, a Natick, Mass., electrolyzer manufacturer, secured $100m in credit financing led by HSBC, joined by J.P. Morgan, Stifel Bank and Hercules Capital. axios.link/4ag1eyh

• KFC and parent Yum! Brands are aiming to cut restaurant franchise emissions by 46%. axios.link/4afocWm

• Range Energy, the Mountain View developer of battery-propelled truck trailers, is working with refrigerated transportation company Thermo King to develop electric refrigerated trailers. axios.link/4bb1sbl

• Ebike makers Rad Power and Supergo have started integrating more resilient "potted batteries" on their bicycles. axios.link/4b9JTIF

5. Hot deals

• Vikram Sharma joined VC firm S2G as operating partner focused on AI. Sharma was president of Crisp, risk intelligence provider acquired by Kroll in 2022. axios.link/44Ccy6B

• Jennifer Flake and Bill Strickland were named co-CEOs of Meyers Manx, the Costa Mesa, Calif. electric dune buggy maker. They succeed Freeman Thomas, who was named vice chairman. axios.link/3UTK1Fp

• Joel Vyduna joined Key Capture Energy, an Albany, N.Y., battery storage developer, as EVP of technology. Vyduna was previously SVP at Strata Clean Energy. axios.link/3WswGGm

• Taylor Quarles and Jim Brown also joined Key Capture Energy as EVP of development and EVP of engineering and construction, respectively. axios.link/3WswGGm

• Anthony Lo, head of design at Ford, is departing May 14 to "explore new opportunities," per Automotive News. axios.link/3Qyb4Ev

6. It's personnel

🍸 Sip of the week: A mocktail Moscow mule: Ginger beer, lime, simple syrup, CleanCo vodka, mint. (Editor's note: Yes, please.)

🥰 Katie is looking forward to spending time with her mama on this Mother's Day.

🐔 If Alan rebranded the local chicken-rental company as software-enabled chickens-as-a-service, how quickly could he hit $10 million in venture funding?

Thank you to Michael Flaherty, George Moriarty and Chris Speckhard for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and green industrials investors.

Climate Deals

May 09, 2024

1 big thing: An electron reality check