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Data: S&P Global Commodity Insights; Chart: Axios Visuals

Government subsidies helped once-expensive clean energy sources like wind and solar grow until their costs dropped. That may not be the case for so-called renewable natural gas.

Why it matters: Natural gas captured from landfills, dairy farms and other non-fossil sources is booming — but the growth is heavily dependent on taxpayer dollars, Alan writes.

Zoom in: RNG production for transportation has posted double-digit growth every year for the past decade, per data released by S&P Global Commodity Insights.

Production took off when the federal government and states like California began paying farmers and landfills to make RNG.

Yes, but: RNG volumes are just 0.2% of those for conventional natural gas.

Background: The federal Renewable Fuel Standard and state measures like California's Low-Carbon Fuel Standard have created generous incentives for RNG.

How generous? The assessed value of RNG from landfills was about $26-$30, per S&P. The benchmark Henry Hub spot price for conventional natural gas: $2.60.

Catch up fast: RNG basically functions the same as natural gas. But instead of coming from the ground, it comes from sources like cows, manure or decomposing trash that would otherwise just vent greenhouse gas.

RNG can use existing pipeline infrastructure and be integrated with conventional fuels. That's made it an appealing investment, especially by industry incumbents.

Yes, but: Energy subsidies are generally supposed to help a nascent industry reach economies of scale: Bring costs down for early adopters, then recede as the product becomes cost-competitive on its own. Just look at the wind and solar sectors as examples. 

That's not quite possible with RNG. Take farm waste, for example: The more RNG you need, the farther trucks have to travel to collect the wheat stalks or corn stovers to supply the production plant.

What they're saying: Investors are putting money into developing enzymes that can break down the raw materials for RNG more quickly and cheaply. But that goal so far remains elusive.

"Without that type of breakthrough, there’s really no glide path to seeing the costs of these going down tremendously," Alex Klaessig, research and analysis director at S&P Global Commodity Insights, tells Alan.

What we’re watching: Farmers, refiners and environmentalists actively lobby for RNG subsidies, but policy can prove soft ground to build a business on — especially when faced with the hard realities of market economics.

1 big thing: Uncle Sam fuels RNG

Investment firm NGP Energy Capital Management has raised $1.23 billion across two funds to seek new deals in the clean energy and traditional energy sectors, the Wall Street Journal reported on Monday.

Details: More than 30 investors backed the clean-energy fund, NGP Managing Partner Chris Carter told the WSJ.

Of note: NGP has invested in companies such as battery-tech developer Form Energy, fleet-charging firm EV Realty, and geothermal systems operator Dandelion Energy.

2. The BFD: NGP Raises $1.23B for energy funds

Illustration of an EV charger cable in the shape of a capital D. 

Data: American Clean Power; Chart: Axios Visuals

Last year saw an 11% jump in projects planned on paper — but the first drop since 2017 in those actually built and switched on, Alan writes.

Why it matters: The slowdown in putting steel in the ground seems to be carrying over to this year, with Q1 seeing the slowest pace of clean energy development since 2020.

By the numbers: Developers installed 25.5 GW of new solar, wind and battery storage. That's down 15% from the record year in 2021, per American Clean Power's year-in-review market report.

You've read all about the reasons: trade disputes with China, shortages of skilled labor, backlogs for permitting and interconnection, and some supply chain problems left over from the pandemic.

Plus: The wind sector's been having costly mechanical problems all its own.

Meanwhile, announced projects swelled to 137 GW, returning to 2021 levels. The bulk of those are solar, followed by on-shore wind, battery storage, and offshore wind. 

Indeed, investors are raining cash on wind and solar.

What we're watching: How soon the backlogs clear. This year is already off to a glacial start, with new installations in Q1 falling 36% compared to the same period last year.

That's the slowest Q1 since 2020, Axios' Ben Geman points out in Generate.

The bottom line: Send all the press releases you want about projects on paper. Putting steel in the ground and connecting to the grid remain the big challenges.

Yes, but: Texas lawmakers may be doing all they can to kill renewables, and yet the state was once again the U.S. leader in clean-energy deployment. 

It added twice as much generating capacity from renewables and storage as any other state.

3. A whole bunch of projects on the whiteboard

👨‍🍳 José Andrés unveils U.S. food and climate institute: The celebrity chef and World Central Kitchen founder is teaming with George Washington University to launch a new research institute focused on the intersection of food production and climate change, our colleague Ayurella Horn-Muller reports.

Among advocating for structural change in global food strategies, the newly-formed research organization is slated to develop solutions to disruptions in the food system associated with climate change.

💰 Charm edges out Climeworks: JPMorgan this morning announced $200 million of carbon removal purchases or plans aimed at "durably" taking over 800,00 metric tons of CO2 from the atmosphere, Ben Geman writes in Generate.

The deals include 28,585 metric tons of removal over five years from Charm Industrial — the SF-based startup that converts farm waste into bio-oil.

That's just a bit more than JPMorgan's concomitant deal with carbon-removal darling Climeworks. That $20 million-plus agreement calls for 25,000 metric tons of removal over nine years.

📚 Atlassian’s guide to the net-zero economy: The Australian-American software developer issued a how-to book for business leaders looking to keep tabs on and report their climate impacts.

"I think the worst part about climate change for businesses of any size is to feel like there's nothing I can do here. What's gonna happen is gonna happen," Atlassian co-CEO Mike Cannon-Brookes told Ben. "And I don't think that's the case."

📉 Tesla down, Patagonia up: Tesla, once seen as a shining example of innovation and opportunity, took one of the biggest reputational hits in this year's Axios Harris Poll 100 brand reputation survey, Mike Allen reports in Axios AM.

Tesla fell from 11th to 62nd place. Meanwhile, conservation-minded clothing company Patagonia took the top spot ahead of Costco, Chick-fil-A and UPS.

4. Temperature check

Illustration of an earth in space covered in red and blue meteorological color lines.

• The E3 Low Carbon Economy Fund for Africa, an Africa-focused climate tech fund managed by E3 Capital and Lion’s Head Global Partners, held a $48.1m first close on its $100 target. https://axios.link/3Iw8aMv

• Partners Group is considering an IPO or sale process for Techem, a German metering firm that could be valued at €8b, per Bloomberg. https://axios.link/3IzS9FD

• Antin Infrastructure Partners, KKR and InfraVia Capital Partners are vying to buy French renewable project developer Akuo Energy, which could fetch more than $3b, per Bloomberg. https://axios.link/3q7lCA7

• I Squared Capital is in talks to sell Peru-based power producer Inkia Energy for around $2b to China's State Power Investment Corp., per Bloomberg. https://axios.link/45qNhwb

• Spicewood Mineral Partners, a Dallas-based minerals and energy investment management firm, raised ~$120m in an initial close of its planned $500m Spicewood Mineral Partners II fund. https://axios.link/3IAr59a

• Silver Sustainable Solutions, a clean tech SPAC backed by Guggenheim Partners and led by former U.S. Energy Department loan program chief Jonathan Silver, withdrew registration for a $250m IPO. https://axios.link/43mlH1u

• Living Cities, a coalition of philanthropies and financial firms, partnered with finance and asset manager Known to house its $100m Fund III targeting investments in underserved BIPOC communities. https://axios.link/432DFWR

• Collaborative Fund committed $15m to launch a sustainable materials lab at Harvard University. https://axios.link/3Mxikha

​​• Encore Renewable Energy, a Burlington, Vt.-based community- and utility-scale renewables developer and EPC, received an undisclosed equity investment from Susi Partners, the Swiss infrastructure investment firm. The investment will fund Encore’s shift from developer and EPC to independent power producer. https://axios.link/43g2fDe

• Li-Metal, a Toronto-based lithium metal and lithium metal anode technologies developer, announced its first lithium metal from its pilot facility in Markham, Ontario. https://axios.link/3MR9Bry

5. Hot deals

• Tigo Energy, the Campbell, Calif.-based solar and storage hardware and software provider, hired Jeffrey Sullivan as COO. Sullivan was previously VP of analytical services at Covalent Metrology and founded eVolocity Systems. https://axios.link/3BRv5OQ

• EVgo, the LA-based EV charging network provider, added Paul Segal and Jonathan Seelig to its board of directors. Segal is CEO of LS Power; Seelig founded cloud-computing service Ridge. https://axios.link/3onRi3Z

• Encina Development, a circular materials producer from end-of-life plastics based in The Woodlands, Texas, appointed Allison Lin to its board of directors. Lin is global VP of packaging sustainability at Mars. https://axios.link/3MSbPXI

• Cam Integrated Solutions, a Houston-based energy EPC, hired Jason Hardwick as VP of project delivery. Hardwick was previously president of Excel Midstream Solutions. https://axios.link/3WsqtrI

6. It's personnel

😬 More turbulence ahead: A Barclay's research report this morning foresees yet more supply shocks ahead, which it says will further fan inflation. Driving the upheaval: the energy transition, labor shortages and chip manufacturing. 

📺 Alan is blown away by this final season of "Barry." Anyone got recommendations for another transcendent show to watch once this one's over next week? It's looking a little bare out there.

Thanks to Michael Flaherty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and local dairy farm.

May 23, 2023

1 big thing: Uncle Sam fuels RNG