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Scale Microgrid Solutions, a sustainable-energy company that designs and finances energy projects, wants to tackle the urban solar conundrum in the shadow of Capitol Hill, the company tells Megan exclusively.

Why it matters: A successful solar project in an urban area is much harder to come by than those in open spaces. Overcoming the complex challenges and space limitations is key to wide-scale solar deployment. 

Driving the news: Scale Microgrid Solutions developed and financed an energy project for Washington, D.C.,-based Gallaudet University.

The project's design is already underway, Scale CEO Ryan Goodman tells Megan, and the university is expected to flip the switch by late 2023.

By the numbers: Goodman says the Gallaudet project was particularly challenging due to its urban location.

Its microgrid consists of 2.5 megawatts (MW) of solar photovoltaic panels spread across numerous campus rooftops, dorms and parking garages.

It also includes a Tesla Megapack 1.2MW/2.5MWh lithium-ion battery for energy storage. 

The last component is a 4.5 MW combined cooling, heat and power system.

It is forecast to generate much of the university's energy needs, Scale says, with any additional power going to buildings in the community.

State of play: Urban solar deployments remain out of vogue for many energy producers, largely because of the engineering feats associated with constructing rooftop solar on buildings of various sizes and heights. 

It is still most common for energy producers to transport energy from far-flung solar farms to higher-density areas, losing some of that power in the process.

At Gallaudet, instead of laying new cable to connect the university's grid to the utility, Scale's design connects directly to the university's existing electrical infrastructure that is monitored by the utility, cutting a costly component of urban microgrid deployment.

💭 Our thought bubble: Scale's project is still more than a year away from generating meaningful power, so it's too early to tell whether the project could be a model for further urban solar projects.

But the project itself indicates a growing risk tolerance of project designers and financiers to look beyond traditional solar farms as the overall costs of solar components continue to drop.

1 big thing: A new test for urban microgrids

Illustration of a solar panel coming out of the dome of the US Capitol building.

As the solar market has matured, attracting larger pools of capital, investors hoping to escape that pricier competition have launched firms focused on the earliest stages of the development cycle.

Why it matters: Smaller players face a changed landscape where they now have increased competition for projects traditionally too early and too risky for the big players.

What's happening: "If you're just a couple of guys putting one or two projects together, you can be getting these big-dollar premiums," Anthony Sibilia, who leads the acquisition team at Primergy, tells Alan. "It's almost easier when you're putting less money to work."

"This market is lending itself to near, early-stage developers — and new, early-stage investment shops," he says.

The details: Two firms that have dived in are Lacuna Sustainable Investments, founded in 2019, and Segue Sustainable Infrastructure, launched in July.

"We tend to see deals about as early as one can imagine, and that drives a higher return, because the amount of risk is about as high as one can imagine," Joseph Song, a partner at Segue, tells Alan. "But I can underwrite the fact that some of these projects might die." 

Yes, but: "The irony, of course, is the degree to which it’s gotten crowded over the last 8-10 months," Song says. "Then it was quiet, and now it’s not."

In a matter of months, private equity and asset managers have pushed their mega-yachts of capital far upstream. 

"Folks are trying to pursue a more vertically integrated model with big private equity behind them," Lacuna managing partner Patrick McConnell tells Alan.

What's next: Between supply chain challenges, inflation and potential expanded tariffs, those big vessels might founder. 

"Those same folks probably should, and we think many will, be way more careful and less aggressive about doing this in an environment where the tariff-uncertainty risks are hanging over everything," says Segue managing partner David Riester. 

2. The BFD: Davids vs. Goliaths in early-stage solar

Green Rock Energy Partners, a new private equity firm, is drawing on old energy (read: fossil fuels) for leadership, which it says will give it an edge.

Why it matters: The firm will focus on transportation fuels, particularly what it's calling renewable natural gas, renewable diesel and renewable jet fuel, managing partner and co-founder Cody Myers tells Alan.

The details: The firm will focus on growth equity deals, targeting $5-$20 million investments in deals of $50-$100 million.

Of note: Green Rock closed its first deal in Q3, involving renewable natural gas in Indiana.

What we're watching: Oil and gas firms are regularly criticized for talking the talk on investing in decarbonization technologies — but lacking the expertise (or, often, the willingness) to walk the walk. Can former executives from those sectors do so more effectively?

"There’s a big story out there on how the oil majors are moving too slowly," Myers tells Alan. The reality is there is the technology and there is the intent — but you need someone to actually build a business and implement that." 

3. Green Rock draws from old energy

Illustration of three cars with one ahead of the other two.

The apple of my eye: Apple suppliers surpassed 10 gigawatts of clean power operation, nearly doubling clean-energy use across the tech giant's supply chain in the past year, the company tells Megan.

The majority of Apple manufacturers — 213 plants across 25 countries — have agreed to power all Apple production with renewables, with an unusual uptick in sustainable energy use in South Korea and Japan, notoriously difficult markets for renewable energy. 

Apple says its partners have signed on to nearly 16 gigawatts in total commitments in the coming years, and is eyeing U.S. facilities for future projects as well.

Where the rubber meets the road: LanzaTech and Bridgestone are teaming up to reinvent the wheel. 

A Chicago-based carbon capture startup, LanzaTech has been chipping away at real-world applications of circular goods in fashion, fragrance and footwear. Now, it can add tires to its menu.

The company's tech relies on gas fermentation to break down old tire rubber that is then used in new tire production.

4. 🌡️ Temperature check

Illustration of three emojis: a thermometer, a hot face, and a cold face.

Util, a machine learning ESG metric investment tool, raised seed funding led by Eldridge. http://axios.link/CUhE

Lowercarbon, the climate VC firm from Chris Sacca, raised a $350m fund dedicated to backing carbon removal startups. http://axios.link/ysJT

BlackRock Real Assets and Mubadala Investment Company are investing 40b rupees (~$525.8m) in India's Tata Power Company for a 10.53% stake, Reuters reports. http://axios.link/OCPs

Moltex Energy Canada Inc., developing advanced nuclear technologies, has entered a partnership with SNC-Lavalin Group (TSX: SNC), an integrated professional services and project management firm. http://axios.link/2bj0

EV automaker VinFast has partnered with EV charging company Electrify America to provide VinFast motorists with free charging and access to Electrify America's charging network in the VinFast mobile app. http://axios.link/1MYQ

Energy group Vitol acquired three operating wind farms in Pennsylvania, totaling 244.4 MW, from a BlackRock-managed fund for an undisclosed sum. Vitol affiliate Vitol PA Wind LLC will acquire The Highland North, Twin Ridges and Patton wind farms. http://axios.link/NK5S

Vistra (NYSE: VST) announced that its Brightside Solar Facility, a 50-MW solar PV project in Live Oak County, Texas, is online and generating electricity. http://axios.link/Y6Ct

5. Hot deals

Daniel Yergin was appointed vice chairman of S&P Global Inc. following the completion of its merger with IHS Markit. He was previously vice chairman of IHS Markit. http://axios.link/Vvkq

The Electric Power Research Institute (EPRI) elected new chairs: 

Stanley Connally, Jr., of Southern Company and Southern Company Services, was appointed to serve as chair of EPRI’s board of directors.

Maria Pope, of Portland General Electric, will become board first vice chair.

Lisa M. Barton, of American Electric Power, will be board second vice chair.

Additionally, EPRI's board elected three new directors: Matthew Ketschke, of Consolidated Edison Co. of New York; John Larsen, of Alliant Energy Corporation; and Brian Savoy, of Duke Energy. http://axios.link/bBiY

6. It's Personnel

🕺🏻 Happy Friday eve, Climate friends.

🎤 You're invited to a crypto trends conversation today at 12:30pm ET, led by Axios Cypto author Brady Dale and Axios Pro Fintech co-author Lucinda Shen. 

Guests include Coin Center executive director Jerry Brito and George Mason University associate professor of law J.W. Verret. Register here.

We've got another full day for you, so let's get to it.

🎙️ Last night was the last trivia at Megan's local pub. The building was sold to a fancy glamping site and the pub is getting an Instagram-friendly makeover for its guests that decidedly does not include low-stakes trivia.

🎵 Continuing with the theme of listening to albums 15 years too late, Alan's soundtrack this week is "In Rainbows."

Thanks for reading Climate Deals! Please share with your friends, family and co-working peers.

April 14, 2022

1 big thing: A new test for urban microgrids