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BFD Expert Voices - Climate Deals

BFD Expert Voices

The International Finance Corporation is teaming up with a handful of startups on a $10 million fund for investing in carbon credits and selling them back on a blockchain, Megan reports.

Why it matters: Treating carbon credits akin to traditional financial assets could bolster the nascent carbon market. 

Of note: Aspiration, a fintech startup, and Cultivo, a project-financing startup, will primarily run the $10 million Carbon Opportunities Fund with backing and support from IFC and blockchain startup Chia Network.

How it works: The fund will invest in so-called nature-based carbon capture projects, where carbon is removed from the air through natural means such as reforestation or algae farming. 

The projects generate verified carbon credits that the Carbon Opportunities Fund can then sell to corporations and financial institutions, and use the profits to reinvest back into the fund to back bigger projects down the road.

Steve Glickman, president of international at Aspiration, tells Megan that the fund will invest in up to 700,000 metric tons worth of carbon credits in the first year.

"The more they are seen as assets, the more people will solicit investment in the projects to get access to the credits," Glickman says of the Fund's long-term goal.

State of play: The carbon market has remained a tough nut to crack for large financial institutions and corporations looking to meet ESG commitments or offset emissions.

Carbon credits are difficult to verify and can have variable value due to lack of standardization across the market.

Some investors have argued that credits allow bigger corporations to buy their way into net-zero goals instead of taking meaningful steps to change dirtier aspects of their businesses.

1 big thing: IFC backs $10M carbon credit fund

Illustration of a pattern made up of pieces of coal connected by glowing blockchain lines, with one piece of coal glowing.

Intersect Power is seeking to build a sprawling 1,000-MW solar-plus-storage project in eastern Arizona — one of several such projects under construction in the U.S., Alan reports.

Why it's the BFD: The 1 GW project is huge — nearly double the capacity of the biggest operating solar farm in the U.S. 

What's happening: The Bureau of Land Management yesterday held an information session on the proposed Hopper Renewable Project.

Intersect Power is seeking a variance to build the solar facility on federal land. 

The project would span more than 9,500 acres, or about 14 square miles, in the San Simon Valley, roughly 130 miles northeast of Tucson.

Once complete, it would interconnect with Tucson Electric Power or the Arizona Electric Power Cooperative. 

Zoom out: Intersect, based in Oregon, raised a $75o million growth equity round in July led by TPG Rise Climate.

Intersect is building 2.2 GW of solar and 1.4 GWh of co-located energy storage that it expects to complete this year, and plans to bring more than 8.5 GW of solar and 8 GWh of energy storage online in later stages.

Meanwhile: Other major solar projects in the works include the 1.3-GW "Mammoth North" solar project in northern Indiana, developed by Israel's Doral Renewable Energy Group. The first 400 MW are expected to come online next year.

Primergy Solar, which is part of Quinbrook Infrastructure Partners, this spring secured $1.3 billion in financing for its 690-MW "Gemini" solar-plus-storage project in Nevada.

Editors note: The bullet under Zoom out was updated to reflect more precise details regarding the Intersect buildout. 

2. The BFD: Here come the giant solar projects

Illustration of a man working on a solar panel with a money overlay

Voltus last week canceled its SPAC merger with Broadscale Acquisition Corp., a deal that had valued Voltus at $1.3b. Alan reached out to Voltus with followup questions about the busted deal, and Kelly Yazdani, VP of marketing, responded. 

Why it matters: Voltus, which connects distributed energy resources (DERs) with electricity markets, has described itself as the Airbnb of the electric grid. 

But even those lofty aspirations — and marquee customers like Coca-Cola and Home Depot — couldn't overcome a SPAC market that's all but ground to a halt.

Voltus and Broadscale "mutually called off" the SPAC, Yazdani says.

How does Voltus plan to raise capital now that the SPAC is not moving forward?

We are currently updating our financial and operating plan for the remainder of 2022 and 2023 and, depending on the results of that exercise, will determine how and when to capitalize the business.

With the SPAC now canceled, how does that impact Voltus' financial position and available cash going forward?

All of our efforts are aimed at improving and growing our business, providing the most value to our customers and improving outcomes for all electricity consumers within wholesale power markets and beyond. 

The termination of the merger should not have a significant impact on our growth plans. Electricity markets still have an increasingly acute need for DERs, which are enabled by our platform. 

3. Voltus on its canceled SPAC: It was mutual

Illustration of a stop sign with SPAC written on it

📈The eve of the offshore wind boom: The U.S. is on its way to shedding its longtime role as a "potential" global player in the growing offshore wind power market, our Generate colleague Ben Geman reports.

Multiple estimates show the U.S. coming close to meeting — or even exceeding — the White House goal of 30 GW of installed offshore capacity by 2030. 

⚔️The SEC is getting an earful on its ESG proposals: Conservative state attorneys general — led by Patrick Morrisey of West Virginia — are attacking the efforts as outside of SEC authority, including provisions requiring some funds to disclose emissions linked to their investments, Ben writes.

What we're watching: House Republicans plan to make an assault on ESG a central part of their legislative and investigative agenda if they take back the majority in November's midterms.

🥵 "Isn’t this a textbook example of 'corporate climate change risk'?" That’s from our Pro Rata colleague Kia Kokalitcheva, who shared this CNN piece in one of our Slack channels: “China’s worst heat wave in 60 years is forcing factories to close.”

“China’s Sichuan province has ordered all factories to shut down for six days to ease a power shortage in the region as a scorching heat wave sweeps across the country,” the outlet reports. 

​​🫡 Flying taxis go military: Next-generation aircraft companies are increasingly turning to the U.S. Defense Department to accelerate their path to commercial flight, our What’s Next colleague Joann Muller reports.

Military contracts can fill near-term revenue gaps and get test vehicles into the sky more quickly, helping to speed commercial development. The latest example: Joby Aviation, which said last week that it is nearly doubling its existing contract with the U.S. Air Force's Agility Prime program.

⚖️ Courts keeping Big Oil on the hook: “The 3rd U.S. Circuit Court of Appeals ruled on Wednesday that lawsuits brought by Delaware and Hoboken, N.J., seeking compensation for the impacts of climate change should be decided in state, not federal courts,” per Seeking Alpha.

State and local governments are seeking to hold oil majors like ExxonMobil, Chevron and Shell liable under state laws, as similar efforts under federal laws have faltered. The strategy seems to be gaining traction: The decision was the sixth ruling to keep such climate cases in state court..

4. 🌡️ Temperature check

Illustration of an earth emoji combined with a sick face emoji.

• ArcLight Capital Partners has launched OnPoint Energy, a retail electric provider for residential, commercial and industrial markets in ERCOT. https://axios.link/3CkqxC9 

• Aurora Capital Partners, a middle-market private equity firm, has closed its sale of VLS Environmental Solutions to I Squared Capital. https://axios.link/3CfMEJY 

• The Kingdom of Bahrain has launched a tender offer for a 20-year contract for a minimum 72-MWac solar plant. https://axios.link/3T23ySf 

• Kit Carson Electric Cooperative in New Mexico says it’s completed the final payment of the $37m it owed to exit its contract with Tri-State Generation and Transmission. https://axios.link/3K5DBgd 

• FlexGenPower Systems, an energy storage technology provider, has signed contracts to supply SMT Energy with storage systems and software for 10 energy storage projects in Texas. https://axios.link/3dFDuvZ 

• The Canadian Northern Economic Development Agency is investing about $15.5m (~$12m) in the Copper Niisüü Limited Partnership, the development corporation of White River First Nation, to develop the Beaver Creek Solar Project. The project, with 1.9 MW of solar and 3.5 MWh of battery energy storage, will be the largest in the Yukon. https://axios.link/3Przs7C 

• North American Helium opened its third helium purification facility, near the Village of Mankota in southwest Saskatchewan. https://axios.link/3AuJlgE

• EDF Renewables North America says that its Palen Solar site in Riverside County, California, is operational. The site consists of four projects totaling 620 MWdc of solar and 200 MWh of battery energy storage. https://axios.link/3T1YBJ9

• Duke Energy Florida has completed two lithium-ion battery sites in Alachua and Hamilton counties, of 8.25 MW and 5.5 MW, respectively. https://axios.link/3QLpS0A 

5. Hot deals

• McDermott Will & Emery hired Fredrick (Fritz) Lark as a partner on its transactions practice group in New York. Lark will primarily focus on energy and digital infrastructure transactions. https://axios.link/3cagMLT

6. It's personnel

🚧 Megan's monsoon cleanup continues after a big storm rolled through Tuesday afternoon. Many of the roads were cleared yesterday and she fished the pool furniture out of the very murky pool, but there's still plenty to do.

😑 Copyeditor Phoebe Neidl, in a Slack message to Alan this morning: "I was just reading the newsletter over your shoulder, and I have excellent news for you: It's Thursday, not Wednesday!" Alan apparently is ready for the weekend.

Thanks for reading Climate Deals! Please share with your friends, family and road graders.

August 18, 2022

1 big thing: IFC backs $10M carbon credit fund