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BFD Expert Voices - Climate Deals

BFD Expert Voices

The pandemic is "over," the Inflation Reduction Act is law, and hundreds of investors and policy folks are meeting in person this week in New York City and Anaheim to understand what it all means, Alan writes.

Why it matters: No matter where held, "any IRA conference session at any conference will be standing room only," says Activate Capital partner Jon Guerster, noting that everyone has to figure out how the climate bill will work in practice.

State of play: We keep hearing the same thing from our sources: Investors and entrepreneurs are hustling to figure out what the IRA means for their investments and their startups.

That includes reassurance from the market that the IRA will blunt or even reverse the impacts of a broader market downturn.

"Pre-IRA, we were seeing investors in this space take a step back while the macro environment stabilized," Sameer Reddy, managing partner at Energy Impact Partners, tells Alan. "The IRA has completely transformed the unit economics across so many segments of the climate space." 

The intrigue: It won't just be the usual suspects mingling over drinks and networking sessions, especially with new investment fuel from the IRA.

"We are seeing a tremendous amount of interest in our network for generalists that are pivoting to climate opportunities," John Tough, managing partner of Energize Ventures, tells Alan.

Other experts we spoke with agreed. Activate's Guerster adds, "Get ready for a ton more Expensify reports." 

What's happening: Climate Week NYC brings together the Big Thinkers in clean energy and climate tech. 

It tends to draw plenty of investors, capital-seeking founders and policy folks. And no shortage of protesters. (It's a good week to take the subway.)

What we're watching: These sorts of big climate gatherings tend to bring new investment announcements from corporates. (RIP, my inbox.)

Energy security will remain a big topic as will the role of advanced nuclear energy, namely small modular reactors and fusion. 

And, of course, eyes are on supply chain and labor bottlenecks. 

Meanwhile: RE+, a giant clean-energy trade show, is kicking off in Anaheim, California.

Next week brings a Clean Energy Ministerial gathering in Pittsburgh — the Global Clean Energy Action Forum. And the UN General Assembly is under way through next Tuesday.

Plus: Our very own Andrew Freedman is moderating a Climate Week panel Wednesday on corporate responsibility, featuring execs from Allbirds, Project Drawdown and Seventh Generation.

1 big thing: Real-world implications of IRA

Illustration of a magnifying glass examining the UN Climate Summit logo

Data: PitchBook; Chart: Nicki Camberg/Axios

The IPO market for ag tech is laying fallow as market volatility and cooling valuations have sharply reduced both the number of exits and exit size in the sector, per new data from PitchBook.

Why it's the BFD: The Inflation Reduction Act may be stoking chatter at climate gatherings this week, and it includes pots of money for agriculture. But, for now, the IPO window is all but closed in ag tech, Alan writes.

What's happening: The ag-tech sector, which focuses on making farming and ranching more efficient, has seen a steady decline in exit size and exit count since a peak in Q3 2021.

That broadly mirrors a turnabout in exits generally as markets have cooled.

By the numbers: Last quarter saw just three exits, down from a high of 18 near the end of 2021.

Meanwhile, exit value in Q2 bottomed out, from a peak of $16.7 billion in Q3 2021.

What they're saying: "The market volatility is the biggest driver here," Alex Frederick, senior emerging-tech analyst at PitchBook, tells Alan. "The IPO window has been shut for the past quarter, quarter-plus. That limits exit opportunities for startups."

👀 What we're watching: Whether M&A activity picks up, and in which sectors. Indoor farming, for example, was one of the few bright spots for funding last quarter.

"That is creating opportunities as companies become more attractive as valuations come down," Frederick says.

2. The BFD: Ag-tech exit activity plummets

We contacted a slew of funders and founders to learn what they'll be watching as this climate-conference frenzy kicks off. Here are excerpts of what they shared with us.

What they're saying: It's all about the IRA. 

Show us the money: "Entrepreneurs are now focused on better understanding the mechanics, hoping we don't see high friction in the funding mechanics," says Jon Guerster of Activate. 

New urgency in corporate investment: “Investors should look for signals that there is a global opportunity to ‘fast forward’ the clean energy transition, especially for corporates looking to rapidly reduce the West’s reliance on Russian energy well before 2030, and comply with the EU’s more ambitious GHG emission targets,” says Gina Domanig, managing partner of Zurich-based Emerald Technology Ventures.

Movement on manufacturing: “The tax credits and other grants that manufacturers will be awarded for onshoring clean energy equipment manufacturing: I don’t feel like this is getting as much attention. It’s a big opportunity for investment in domestic manufacturing, to a scale we haven’t seen before,” says Janice Tran, co-founder and CEO of Kanin Energy.

Deployment vs. R&D: “These conferences tend to have ‘dumbbell’ technology participants: on one side technologies with seven- to 10-year horizons; and on the other side, technologies that can deliver today," says John Tough of Energize, whose firm eyes digital tech that can deploy now.

Plus: Don't forget your (recycled-paper/electronic) business cards. "We are also generally looking to see what new talent is emerging at these conferences," Tough says.

Yes, and: Does this firsthand insight on what insiders are looking for at Climate Week, RE+, and other places help? Let us know, and share your thoughts by replying to this newsletter. 

3. Word on the street

Animated illustration of Earth in the shape of a speech bubble with an ellipsis in the center to indicate typing

🔥 Heat recycling, so hot right now: Cities in Sweden and Norway are aiming to recycle the heat given off by data centers in an innovative effort to repurpose what's usually treated as a useless byproduct of computer servers' constant number-crunching, our What’s Next colleague Ivana Saric reports.

Data centers account for about 1% of global electricity use annually, and emit enormous amounts of heat that generally goes unused.

🏥 Health and the climate crisis: The newest stories in our Climate Truths Deep Dive series landed over the weekend and explore the health impacts of climate change.

One area to watch: mental health and climate anxiety.

🚗 “I feel like we’re stuck with Windows 7 and Clippy”: That’s the quote from history professor Jack Norton, who vented to the Bloomberg Green newsletter about not being able to find an affordable new EV.

Chevy is already rolling out ads for its electric $30,000 Equinox SUV. But the gap this summer “between advertised EV prices and sticker prices—i.e. the real numbers stuck on the windows of cars at the dealership—was almost 30%, according to Edmunds,” Bloomberg reports. “Why sell a $30,000 Nissan Leaf when you can sell one for $40,000?”

4. 🌡️ Temperature check

• Solo, a Utah-based software provider for solar sales, proposal and design, has received a minority investment from Bregal Sagemount, a New York-based growth firm. https://axios.link/3xBg69T 

• Volkswagen set terms of Porsche's upcoming IPO to €76.50-€82.50 (~$76.39-$82.39) per share, which works out to a valuation of between €70b and €75b. https://axios.link/3S7EKqM

• Goldbeck Solar, a German developer, has acquired the North American PV-EPC business unit of GP Joule. Goldbeck is now the sole shareholder of GP Joule PV Canada and GP Joule PV USA. https://axios.link/3qPTui6 

• Bunge, a Missouri-based agriculture business, has agreed to sell its oilseed processing business in Russia to Karen Vanetsyan, the controlling shareholder of Exoil Group. https://axios.link/3DC6gbJ 

• Titan America says it’s completed construction of a $20m sustainable fuels production facility at its Pennsuco Cement Plant in Medley, Florida. https://axios.link/3BRoFA1 

• Bloom Energy announced plans to install an electrolyzer at Xcel Energy’s Prairie Island Nuclear Generating Plant in Welch, Minnesota. https://axios.link/3BuQ751 

• Competitive Power Ventures, a Maryland-based owner and operator of generation facilities, says it’s selected West Virginia for a 1,800 MW combined-cycle natural gas power station with CCS. The project is expected to go online “later this decade.” https://axios.link/3xBZ3EJ 

• Azure Power, a renewable energy developer in India, has entered into an agreement for 600 MW of thin film PV solar modules from First Solar, which will be produced at First Solar’s new factory in Tamil Nadu, India. https://axios.link/3DCatMy 

• Brenmiller Energy, an Israeli thermal energy storage developer, has signed an MOU with renewable energy developers Green Enesys Deutschland and Viridi Energias Renovables Espana to perform engineering studies for incorporating thermal energy storage into proposed green hydrogen production facilities in Spain. https://axios.link/3DRR22D 

• Caddo Sustainable Timberlands, which say it’s the largest private timberland owner in Texas, has entered into an agreement for the evaluation and potential development of a geological CCS project on about 27,000 acres of the company’s holdings in Texas. https://axios.link/3QSB231 

5. Hot deals

• Global Infrastructure Partners has named Raj Rao as firm president and Michael McGhee as deputy chair. https://axios.link/3f0oDg4

• Eversource Energy president and CEO Joe Nolan will become chairman of the board of trustees. He succeeds executive chairman Jim Judge, who will retire effective Dec. 31. https://axios.link/3RX2o9t 

6. It's personnel

Alan's dad snapped this pic in Murray Hill. It's about a mile walk from where diplomats will be gathering for the UN General Assembly.

7. Photo o' the day: Climate spooky season

A photograph of a scary-clown decoration sitting in front of a brick townhouse in New York City, festooned with skeletons and ghosts and grave markers.

On-theme Halloween decorations in Murray Hill, New York City. Photo: Brett Neuhauser

😎 Happy Monday. Welcome back to another week of climate deals and confabs.

💃🏻 Megan's heart is very full after a much-belated wedding celebration with friends and family.

🔨 Alan and Terry started making a firm list of projects for their new home. The biggest challenge: Who watches the kiddo while Alan and Terry get to sanding, painting, etc.?

Thanks to George Moriarty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and trivia teammates.

September 19, 2022

1 big thing: Real-world implications of IRA