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BFD Expert Voices - Climate Deals

BFD Expert Voices

The market for aggregating energy load from devices like smart thermostats and EVs has big potential, but it's facing a series of challenges, writes Katie.

Why it matters: So-called virtual power plants could save billions of dollars and gigawatts of energy. VPPs can lower carbon emissions and make grids more resilient too.

Yes, but: VPPs haven't been adopted at levels desired due to issues like regulatory lag, lack of consumer acceptance, and wholesale market barriers.

Driving the news: Two VPP deals broke last week, highlighting how companies are looking to partner up to navigate a slow-moving market dependent on regulators, utilities and consumer adoption.

Google's Nest Renew service and energy management startup OhmConnect said last week that they were combining to form a new company called Renew Home. Sidewalk Infrastructure Partners — a spinout of Google's parent company Alphabet and an investor in OhmConnect — plans to fund it.

Software company Uplight said it's acquiring VPP company AutoGrid from Schneider Electric, which bought the company in 2022. Schneider is also an investor in Uplight.

Zoom in: The biggest future growth potential for VPPs could come from managing EVs and EV chargers, according to a report from the Department of Energy released in September.

Sidewalk Infrastructure Partners' Co-CEO Jonathan Winer told Axios he sees the future growth of VPPs coming from providers managing multiple devices and new regions opening up.

Kenneth Schisler, Senior Vice President, Regulatory & Government Affairs, for VPP company CPower predicts that there will be a "domino effect" of states in the West and Midwest beginning to allow VPP providers to participate in wholesale markets next year.

Zoom out: Yet VPPs "currently are adopted well below their market potential," wrote the Brattle Group's Ryan Hledik in a report released earlier this year.

The sector needs to address regulatory and customer experience challenges to grow. 

The DOE highlights a host of VPP barriers: it's hard for consumers to sign up; lack of operational standardizations; and complexities with entering wholesale markets.

Big picture: It's clear that if some hurdles are overcome, VPPs could bring benefits to utilities, consumers, and the planet.

The DOE says that tripling the scale of VPPs — deploying 80-160 GW — by 2030 could help manage the clean electricity boom.

The Brattle Group says that VPPs could save utilities $15 billion to $35 billion in capacity investment over the next decade.

What's next: Hledik said big VPP opportunities will grow with consumer adoption of electric vehicles and batteries, and that will still take some time to evolve.

1 big thing: VPP potential and pitfalls 

Illustration of a some plugs plugged into a cloud with outlets, and some plugs unplugged on the ground.

We asked climate investors about key parts of the deal landscape this year. Here are their responses, plus some views of our own.

Joshua Posamentier, Congruent Ventures: "Wildfire mitigation investment really took off — from analytics, to sensing, to on-the-ground mitigation, to preemptive treatment."

Vaughn Blake, Blue Bear Capital: "The Fed's interest rate hikes broke the back of climate tech SPACs and slowed offshore wind development by half a decade."

Murray McCaig, ArcTern Ventures: "Big institutional money entering the game, particularly the new $30 billion Climate Fund the UAE is building with Brookfield, Blackrock and TPG. This is on top of other multi-billion funds from each of these groups separately."

Meera Clark, Redpoint Ventures: "2023 will be remembered as the year that data entered the discussion as carbon offset and enterprise SaaS buyers sought increasing data-driven transparency in every step of their emissions accounting and reduction journeys."

Jameson Hartman, RET Ventures: "The collapse of [prefabricated home builder] Veev. These nex-gen development platforms need to be incremental. ... While everyone loves to see the 'next best thing since sliced bread,' there is a substantial risk, especially in the real estate industry when you isolate yourself from existing methodologies."

Alan: The DOE unlocking huge sums of money for VPPs, hydrogen, school buses, heat pumps, and much else. Plus a solar tracker manufacturer posting one of the year's biggest IPOs; infrastructure players like Macquarie starting to write checks; the collapse of NuScale's advanced nuclear deal in Utah; and, by contrast, Canada leading the way with what will likely be North America's first small modular reactor.

Katie: The most surprising big deal I wrote about this year was oil giant Occidental buying direct air capture startup Carbon Engineering for $1.1 billion. I'll be watching to see what comes of that union in 2024.

2. The BFD: The year in review 

Illustration of the earth on a large pile of money

Bird Global has filed for Chapter 11 bankruptcy protection in Florida after the scooter rental company saw nearly its entire market value wiped out since listing two years ago, Kia Kokalitcheva reports.

Why it matters: Bird was part of both the scooter boom of 2018 and the special purpose acquisition company boom of 2021.

Details:  Apollo Global (via MidCap Financial) and Bird's second-lien lenders are providing the company with $25 million in capital through the bankruptcy process.

The company has agreed to sell Bird's assets to its lenders. The so-called stalking horse deal sets a floor on the price of the assets and allows Bird to entertain other offers.

Bird said in a press release that it expects to complete the sale in the next 90-120 days.

The company's Canadian and European businesses aren't part of the bankruptcy. Bird says it will continue to operate as usual during the court-supervised bankruptcy process.

Flashback: Bird went public in November 2021 by merging with Switchback II, a SPAC, at a $2.3 billion valuation. Prior to listing, it acquired fellow scooter company Spin for $19 million.

In September, the New York Stock Exchange began its delisting process for Bird after its average market cap fell below $15 million for more than  30 consecutive days.

The bottom line: The pandemic era's boom times are truly over.

3. Bird flies into bankruptcy bunker  

Illustration of a business man flying off of a scooter atop the BRDS letters on a stock ticker

🌰 Microsoft's carbon startup deal: Microsoft plans to buy carbon removal credits from Chestnut Carbon, a startup that plants forests in the U.S.

The deal is for credits for a period of 15 years from trees planted in the Mississippi Alluvial Valley. "This is, I believe, the largest U.S. afforestation project ever registered," Chestnut Carbon founder Ben Dell told Reuters.

🆗 Panasonic drops Oklahoma factory plans: Japanese battery giant Panasonic says it will not pursue building an EV battery factory in Oklahoma due to "a wide range of factors," per WSJ.

The company has an EV battery factory under construction in Kansas that has seen higher-than-expected costs. As we reported, as the U.S. sees a surge in new clean energy and battery factories, many companies building these factories are facing rising costs.

🛥️ Another e-boat startup: A former Tesla executive is barging in on the boating industry, Axios Tampa Bay's Selene San Felice reports.

John Vo's company, Blue Innovations Group, launched its new R30 solar- and battery-powered smart boat over the weekend at its Pinellas Park, Florida headquarters.

🔌 Tesla has won the plug wars: The electric car world's VHS-vs.-Betamax debate is over: Tesla's plug is the winner, Axios Closer's Nathan Bomey writes.

The White House is embracing Tesla's electric vehicle connector after SAE International — formerly known as the Society of Automotive Engineers — said it's doing the same, the Associated Press reports.

4. Temperature check

Illustration of a pattern of repeating thermometers with different temperature levels.

• Suena, a German energy-trading services provider, raised a €3m seed round led by Santander InnoEnergy Climate Fund and Energie 360, joined by EIT InnoEnergy, Raakwark Kaptaal, and Business Angels. https://axios.link/41xJk7B

• NextWind, a German portfolio company of Sandbrook Capital, acquired 10 wind farms from Qualitas Energy Deutschland. https://axios.link/3v8ZsAf

•  Aspen Aerogels, a Northborough, Mass.-based materials developer, announced a $75m direct offering with Hood River Capital Management and other institutional investors, selling ~6m shares at ~$12.37 per share. https://axios.link/3GP9NUz

• Hyliion Holdings, an Austin-based distributed power developer, announced a $20m stock repurchase program, at par value $0.001 per share. https://axios.link/3TFq4To 

• Altus Power, a solar company based in Stamford, Connecticut, will acquire the core business of Seattle-based Unico Solar Investors including the company's development platform, pipeline, senior leadership team, and offices in Denver and Seattle. https://axios.link/3tpI9u4

• Kraken Technologies, a software division owned by U.K. energy retailer Octopus Energy, has acquired U.K. software company Sennen. https://axios.link/48tueSP

• Enphase Energy, the Fremont, Calif.-based solar microinverter supplier, announced plans to cut its global workforce by 10%, including about 350 contractors and employees, per PV Tech. https://axios.link/4avvc2M

• Colossal Biosciences, the Dallas-based de-extinction startup, formed a committee to study the return of the Tasmania Thylacine, aka the Tasmanian tiger. https://axios.link/41AcrXF

• The U.S. Nuclear Regulatory Commission agreed to review PG&E's application to extend the operating lifespan of the nuclear reactors at Diablo Canyon Power Plant. https://axios.link/3GUaHPD

• On.Energy, a Miami-based energy storage integrator and IPP, closed a $40m construction debt facility and permanent debt facilities from Live Oak Bank to develop an 80 MWh project portfolio in Texas. https://axios.link/4aFcJkm

• LG Energy Solution Vertech, the South Korean giant's U.S. energy storage arm, says it has lined up 10 GWh of battery grid projects across 10 U.S. sites in 2024. https://axios.link/3Tza1Xp

• LG Chem, the South Korean chemicals maker, started construction of an EV battery cathode plant in Clarksville, Tenn. https://axios.link/41vNOLI

• Danish renewables developer Orsted is moving ahead on what it says will be the world's largest offshore wind farm, the 2.9 GW Hornsea 3 project, off the British coast. https://axios.link/47au69s

• Gazelle Wind Power, an Irish floating wind platform developer with offices in the U.S., signed an MOU with Tugdock, a UK firm developing a road-transportable floating dry dock, to develop a modular offshore wind assembly system. https://axios.link/4855dgV

• Elope sustainably: Bliss Wedding Chapel in Vegas says it's the first on the Strip to replace its stretch limos with luxury EVs. https://axios.link/41s6mwB

• Cyrusher, a Logan, Utah-based e-bike maker, unveiled what it's calling the world's first electric snowboard. This is your reminder to wear a helmet. https://axios.link/486QkdN

5. Hot deals

• Timo Recker returned as CEO of Tindle Foods (fka Next Gen Foods), a Chicago plant-based chicken developer. Recker is executive chairman and the company's co-founder; he succeeds Andre Menezes, who stepped down as CEO. https://axios.link/3NvY5Sf

• Donald J. Jenkins will become COO of New York-based energy storage company Convergent Energy and Power. Jenkins was previously VP of global operations at Enel X. https://axios.link/4awNIYk

• Sagit Manor joined the board of Tigo Energy, a Campbell, Calif.-based solar company. Manor is CFO of Nayax. https://axios.link/3RPnxop

• Don Kelley joined Revolv, an SF-based services provider for electric fleets, as VP of fleet operations. Kelley was previously president of SVT Fleet Solutions.

6. It's personnel

We asked PitchBook to send us their data on climate-tech investment in 2023, Alan writes.

Of note: The data spans renewable energy, hydrogen, carbon credits, electric vehicles, and other climate sectors. 

Big picture: It's roughly in line with the decline in exit activity we reported on yesterday, and the broader slowdown in markets — though climate has remained more resilient than other sectors. We'll see if the chill lifts in 2024!

7. Chart of the day: A final look at dealmaking

Welcome to 🐪 day — and our last newsletter of 2023!

🎁 Climate Deals will be dark through Jan. 2 — but Katie and Alan will still be here, along with Pro's sparkling new homepage. So keep on sending us your news over the holidays!

❤️ Katie was very grateful to be in your inbox in 2023 and is excited about 2024!

🍽️ In the thick of traffic yesterday evening, Alan called an audible and took the 2-year-old to a nearby diner for dinner. He's thankful for a lot this year — not least this team and you, our readers. But he's also thankful for the peace and safety to be just a little bored while the kid worked her way through some chicken nuggets.  

Thank you to Michael Flaherty and Chris Speckhard for today's edits.

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

December 20, 2023

1 big thing: VPP potential and pitfalls