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BFD Expert Voices - Climate Deals

BFD Expert Voices

In Climate Deals' first live event, Jigar Shah, director of the Department of Energy's Loan Programs Office, told Megan he is optimistic about private and public investments in climate technology.

Why it matters: Shah manages LPO's more than $40 billion tranche for loans to climate technology and energy companies in the U.S.

Context: LPO allows companies to apply for commercial debt to help fund projects like solar or wind farms that are often capital intensive and sometimes unappealing to equity investors looking for bigger returns.

On April 27, LPO made a conditional commitment to provide up to $504.4 million in loan guarantees for the massive Advanced Clean Energy Storage hub in Utah.

On April 18, it made another conditional commitment to lend up to $107 million to expand production capacity for a critical minerals plant in Louisiana.

The latest: Shah says there are more sources of equity funding than ever before for startups looking to bridge the "valley of death," a reference to the high-risk, high-reward time when a company is in the throes of plant production at the cusp of commercialization.

"I'd say that the valley of death is far shallower than it's ever been. There's more equity available today than ever," Shah says.

Yes, but: There's a bit of a chicken-or-the-egg problem in the market, Shah says. Startups can often use their LPO approval as a way to better raise equity funding, but they need to hit a certain level of commercialization and project development — which requires a fair amount of early equity funding — to meet LPO's requirements for approval.

The intrigue: Finding ways to support the nascent offshore wind sector has been on LPO's radar for a while, and Shah said those talks are heating up, Generate's Ben Geman writes.

But Shah signaled that offshore wind is entering a new phase, and he name-checked ways to support the development of vessels needed to build and support wind farms in particular.

"We have been facilitating that conversation for I'd say the better part of seven months now, and I finally got a couple of proposals from the industry last week," he said.

1 big thing: "Shallower than it's ever been"

Photo illustration collage of Jigar Shah, money, an earth and sun

Photo illustration: Annelise Capossela/Axios. Photo: Torsten Blackwood/AFP via Getty Images

Just a handful of large sales are driving the ESG bond market's performance, and that's setting up a treacherous balance in green ETFs.

Why it's the BFD: Green ETFs have outperformed the S&P so far this year amid global instability and market pressures.

What's happening: A handful of large sales from just two companies are propping up the market for ESG bond sales, Bloomberg reports.

TenneT executed the single largest green bond sale ever on May 1, €3.85 billion (~$4.06 billion) to fund sustainable electricity grid projects in Europe.

Investors placed more than €8 billion in bids following a slowdown of green bond issuance in Europe following Russia’s invasion of Ukraine, Bloomberg reports.

Bloomberg also reported that more than $1.2 billion went into ESG-focused ETFs just last week while the S&P dropped 3.8% due to concerns about inflation, increasing interest rates and Russia’s war on Ukraine.

Yes, but: Bloomberg Intelligence issued a report last week noting that "a slowdown after record growth could be prolonged, at least in the U.S., as ESG returns continue to face challenges" following a Q1 decline. 

The analysts attributed the lack of diversification among sellers and market-moving one-off sales as one of the main causes of concern even as inflows remain positive.

2. The BFD: Bond market correction looms

Today we're talking with Trenton Allen, who leads Sustainable Capital Advisors.

Why he matters: SCA is focused not simply on sustainable finance, but on backing energy and infrastructure projects that provide lasting impact at the community level. 

What was this week’s big story, in your view?

By far, I would cite the two largest reservoirs in the country — Lake Powell and Lake Mead — reaching historically low water levels. Coincidentally, I visited both in April during a family spring break vacation and saw firsthand the devastation caused by the drought. While the decision by the Interior Department to delay the release of water from Lake Powell will provide some relief to communities in Utah and Arizona, the unfortunate reality is that there is not a quick fix for this issue.

If the current trends persist, communities across the West will have to make very difficult decisions related to not only electricity production and water availability but the economic challenge of replacing these much-needed life resources as well.

Let’s just say that the published pictures do not capture the sense of loss felt when you look out and see the diminished state of that environment.

What do you feel is being under-covered or under-noticed?

For the first time ever, the state of California was powered by 99.9 percent renewable energy with a huge assist by solar energy. While it lasted for only a few minutes, it demonstrates that we have what it takes to meet the challenge of climate change by decarbonizing our electricity industry. 

In three words, what one change would you make to accelerate investment in sustainable energy/climate tech?

3. Expert Voices: Sustainable Capital Advisors' Trenton Allen

Photo illustration of Trenton Allen, CEO of Sustainable Capital Advisors, with a building and trees and abstract shapes.

Photo Illustration: Gabriella Turrisi/Axios. Photo courtesy of Sustainable Capital Advisors

One person's trash is another's natural gas: Republic Services and Archaea Energy yesterday announced a $1.1 billion joint venture to capture and convert landfill emissions into pipeline-quality natural gas at dozens of locations across the U.S., Alan reports.

Landfills are the third-largest source of methane emissions in the U.S., accounting for about 17% of emissions in 2020, per the EPA.

This new effort by Republic and Archaea — which includes developing 39 sites over the next five years — opens a potential lucrative revenue stream for landfills, and one that's inherently tied to decarbonization, all while expanding U.S. supplies of "pipeline quality" natural gas.

DOJ sets sights on EJ: The Department of Justice is launching an Office of Environmental Justice, Attorney General Merrick Garland announced Thursday.

The DOJ also unveiled an environmental justice enforcement strategy developed with the Environment and Natural Resources Division (ENRD) and the EPA.  

It also issued an Interim Final Rule that will restore the use of supplemental environmental projects in appropriate circumstances. Prior to 2017, EPA and ENRD relied on these projects to support communities directly affected by federal environmental law violations.

4. 🌡️ Temperature check

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

DSD Renewables raised $70 million in tax equity from Morgan Stanley Renewables to support the development of more than 87 megawatts of distributed solar and storage systems this year. Morgan Stanley previously contributed to DSD's $250 million fundraise in 2019 to support a similar portfolio of projects. http://axios.link/jhET

Pachama, a satellite imaging startup for measuring forest growth, raised $55m in Series B funding led by Future Positive with participation from existing investors Breakthrough Energy Ventures and LowerCarbon Capital. New investors Ellen Degeneres and Portia de Rossi alongside Plus Capital, ReGen Ventures, 20VC and Alexis Ohanian participated in the round. http://axios.link/WFYl

Global Infrastructure Partners, an infrastructure investor, acquired the offshore wind business of wpd AG, a project developer and independent renewables power producer for onshore wind, offshore wind and solar. http://axios.link/jiJJ

 Primoris Services received approval for a solar project with an estimated value of $130 million. http://axios.link/TrUX

Romeo Power, an EV battery maker, will be the sole provider of lithium-ion batteries for a U.S. manufacturer of low-speed electric vehicles for its next-generation vehicle. http://axios.link/RyCH

The Fayetteville Public Works Commission and Bloom Energy, a distributed energy company, partnered to install and operate 1.5 megawatts of solid oxide fuel cells. http://axios.link/reB3

Iteris, a smart mobility infrastructure company, received task orders totaling more than $1m by the Virginia Department of Transportation for smart mobility, safety and sustainability programs. http://axios.link/TXQW

Li-Cycle, a lithium-ion battery resource recovery and recycler, partnered with Glencore, a primary metals provider for EV battery production. Glencore also invested $200m in Li-Cycle as part of the deal. http://axios.link/kuWa

Superior Propane and Charbone Hydrogen partnered to provide "green" hydrogen to commercial and industrial customers located initially in Quebec, Canada. http://axios.link/ukpP

5. Hot deals

Mark Weinswig joined Velodyne Lidar, a company that makes sensors for autonomous vehicles, as chief financial officer. Weinswig was previously chief financial officer at medical device company Avinger. http://axios.link/e40r

Brian Lehman joined Generate Capital as chief financial officer. He succeeds Jack Stark, who is retiring from the CFO role and will be staying on with the company as executive vice president. http://axios.link/EQMg

6. It's Personnel

🍻 Happy Friday, climate friends. We made it to the weekend! 

🎉 A big shout-out to everyone who joined our first Climate Deals event yesterday afternoon. We had a great conversation, and Megan can reliably say it had one of the best audience participation questions she's heard on a webinar in a hot minute. Be sure to tune into our Axios Pro event series from our sibling newsletters in the coming weeks. 

Thanks for reading Climate Deals! Please share with your friends, family, co-workers and events team.

May 06, 2022

1 big thing: "Shallower than it's ever been"