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Companies building power hungry data centers are looking at pumped hydro projects for storage, writes Katie.

Why it matters: AI is fueling demand for the facilities, which require massive amounts of electricity to run.

How it works: Pumped hydro storage projects are commonly designed with two water reservoirs at different elevations, storing energy via gravity. As the water flows from the upper to lower pool, it generates power.

The U.S. has 43 of these projects running today but no new projects under construction.

Driving the news: Last week, hydropower developer Rye Development was awarded an $81 million grant from the Department of Energy to help build a $1.3 billion, 287 MW pumped storage hydropower facility on a former coal mine in Kentucky.

The project is the first of its kind in more than 30 years.

"We're starting to see group interest from some of the folks in the data center space," says Rye Development CEO Paul Jacob. Jacob noted that the predominant off-takers today are still largely utilities.

The Biden administration, through the Inflation Reduction Act and the Bipartisan Infrastructure Law, is helping to incentivize pumped hydro storage projects.

Zoom in: Many of the biggest data center operators that are run by U.S. consumer companies want clean energy for their facilities.

But since wind and solar are intermittent, storage projects provide backup power when the sun and wind aren't generating energy.

Amazon says in its 2022 sustainability report that it has deals for 445 MW of energy storage capacity as of the end of 2022.

The big picture: The pumped hydro under pursuit reveals the lack of better commercial options for large, long-duration storage.

In fact, most new utility-scale storage projects are being built using lithium-ion batteries. Other technologies include new battery chemistries from Form Energy and new designs from Energy Vault and Energy Dome.

What's next: We'll be watching to see if data center operators become off-takers for pumped hydro storage projects, and in particular the Kentucky coal mine project.

1 big thing: Data centers + pumped hydro

Animated illustration of a glowing data center with four bolts of lightning feeding electricity into it.

Veir is preparing to raise at least $50 million to replace strained power lines with high-capacity superconductors, CEO Tim Heidel tells Alan exclusively.

Why it's the BFD: Upgrading existing grid infrastructure is one of the only ways to meet surging energy demand.

Big picture: Power-hungry data centers are driving an explosion in energy consumption.

Proposed power lines that would connect those load centers with solar, wind, batteries, geothermal and other clean energy sources face years-long permitting delays and interconnection backlogs.

Veir says it's found a way to free capacity on existing grids, mitigating the need for new transmission.

How it works: The startup replaces the aluminum and steel used in conventional wires with high-temperature superconductive tape, which it says has 5-10 times the capacity.

The tape isn't new technology. Veir's breakthrough is keeping the material cool at lower cost.

"Past attempts used large pipes that were very heavy, and because of that weight could only be built underground, which is expensive," Heidel says.

"We're using smaller pipes, which enables going overhead."

Veir to date has raised $40 million, including a $25 million round last summer, and $3.3 million from ARPA-E, the U.S. Energy Department's advanced energy research arm.

Investors include Engine Ventures, Breakthrough Energy, Galvanize Climate Solutions, and Congruent Ventures.

Veir plans to kick off its Series B in Q2. Company leadership is discussing the round's target, but it's aiming to at least double the raise last year.

The intrigue: Veir says it's gotten a leg up from another high-tech energy sector: nuclear fusion, which also relies on high-temperature superconductors.

As fusion developers have invested in building a superconductor supply chain, the material's cost has "dropped precipitously," Heidel says.

What's next: Veir completed a low-voltage outdoor demonstration near its headquarters in Woburn, Mass. It plans to use the Series B to build a 500-750-meter pilot.

2. The BFD: Super funding

Illustration of an electricity pylon with a dollar sign at the top.

BlackRock CEO Larry Fink said countries need to pursue "energy pragmatism" that incorporates natural gas alongside clean technologies like renewables and batteries, Alan writes.

Why it matters: The chief's annual letter this morning indicates that the world's largest asset manager is pushing forward on its energy-transition investments, even as it remains committed to fossil fuels.

Catch up quick: The top of Fink's letter this morning addresses America's retirement crisis. The rest dives into infrastructure investment and the energy transition.

Big picture: Fink argues for investing in climate tech companies such as Antora, which is developing a thermal battery, while also backing natural gas assets to make sure the grid has a reliable source of 24/7 electricity.

"Texas runs on 28% renewable energy — 6% more than the U.S. as a whole. But without an additional 10 gigawatts of dispatchable power, which might need to come partially from natural gas, the state could continue to suffer devastating brownouts," he writes.

The need to upgrade global infrastructure to both advance the energy transition while ensuring energy security was behind the company's $12.4 billion acquisition of Global Infrastructure Partners, Fink writes.

Between the lines: Fink is at least partly responding to GOP allegations that BlackRock is shortchanging shareholders by focusing too much on clean energy and other ESG principles.

The Texas Permanent School Fund, for example, last week withdrew $8.5 billion from BlackRock, making it the latest fund in the Republican-led state to pull away from the asset manager over practices concerning environmental, social, and governance-driven investing.

"Governments have been pursuing energy security since the oil crisis of the 1970s ... so this is not a new trend," Fink writes. "When I wrote my original 2020 letter about sustainability, I also wrote to our clients that countries would still need to produce oil and gas to meet their energy needs."

Alan's thought bubble: Fink's letter doesn't mention data centers, but they've unleashed a new era of soaring energy demand — meaning natural gas is here to stay for the foreseeable future.

Gas is better than coal. But gas assets are multi-decade investments — meaning each that gets a green light now will lock in emissions for decades to come.

3. BlackRock's 'energy pragmatism'

Illustration of a man balancing on the edge of a hundred dollar bill

🛍️ Walmart's big energy buy: The world's largest retailer by revenue signed agreements for nearly 1 GW of new low-carbon energy projects, it announced this morning.

Walmart entered solar purchase agreements with developers NextEra Energy Resources, EDP Renewable North America, and Invenergy, and energy deals with electric utilities. The company is aiming for 10 GW of new clean energy projects by 2030.

🚘 China goes WTO on IRA over EVs: China has filed a complaint with the World Trade Organization over the Inflation Reduction Act in an attempt to challenge the IRA's EV localization rules.

The IRA excludes parts and products from China in order for EVs to qualify for a $7,500 consumer tax credit.

☀️ Germany's solar squeeze: Over a decade ago Germany was the world's largest producer of solar panels, but in the past year the country's solar sector is getting squeezed between low-cost panels from China and the strong incentives in the U.S.

Some in the German solar sector are calling for the German government to step up its incentives, while others are saying subsidies aren't the answer.

🏜️ State laws block U.S. lithium: Antiquated state laws and slow-moving state lawmakers are throwing up roadblocks for a new wave of companies trying to unlock lithium from brine projects in the U.S., reports Reuters.

Across Texas, Louisiana and other states it's unclear who owns the lithium in the brines, how it should be valued and who should pay to process it.

4. Temperature check

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

• Profluent, a Berkeley-based protein design startup, raised $35m led by Spark Capital, joined by Insight Partners, Air Street Capital, AIX Ventures, Convergent Ventures, and Google chief scientist Jeff Dean. https://axios.link/3vojvLv

• 900.care, a French supplier of refillable hygiene products to reduce waste, raised €21m led by Lombard Odier Investment Managers, joined by White Star Capital, Swen Blue Ocean, and Founders Future. https://axios.link/49dbhU8

• Evoloh, a Santa Clara-based electrolyzer manufacturer for hydrogen production, raised a $20m Series A led by Engine Ventures, joined by 3M Ventures and NextEra Energy. https://axios.link/4a6AMI1

• Iron Sheepdog, a Williamsburg, Va.-based short-haul trucking software developer, raised $10m in Series B funding. SJF Ventures led, joined by Grand Ventures and Supply Chain Ventures. https://axios.link/3TBN6sX

• Evari, a Peterborough, N.H.-based developer of efficient heat-pump compressors, raised $7.5m in seed funding from Clean Energy Ventures, joined by Clean Energy Venture Group angels and Farvatn Venture. https://axios.link/49eL1su

• SP Tech Solutions, a Polish software developer for optimizing rail transportation, raised €3m from the Vinci HiTech fund. https://axios.link/4cyDGHq

• UK-based Clean Food Group raised £2.5m led by Clean Growth Fund to develop sustainable oil and fat alternatives ahead of a planned commercial launch in 2025. https://axios.link/3TBhXFQ

• LIS Technologies, an NYC-based developer of laser technology for uranium enrichment, raised $1.3m in seed funding. https://axios.link/4cAdMmn

• Water Kinetics, also in the UK, raised £150k from the British Design Fund for its recirculating "pipe-within-a-pipe" water system, per Tech.eu. https://axios.link/43BAy9G

• Semcap invested $68m for a minority stake in Aloha, a Littleton, Colo.-based producer of plant-based protein products, per Axios Pro. https://axios.link/3x4jtc0

• Stonepeak, the NYC-based alternative investment firm, and Shizen Energy, a Japanese renewables developer, acquired respective 80% and 20% stakes in Austrian renewables developer TerraWind to develop land-based wind projects in Asia. https://axios.link/43vTrut

• NYSE halted trading of EV maker Fisker's stock. https://axios.link/3ISEFo1

• Chinese EV giant BYD reported annual profit that missed analyst estimates. https://axios.link/3TNxBPP

• French automaker Renault is in talks to extract and recycle lithium for EV batteries, per Reuters, which would make Renault the first European automaker to recycle batteries on an industrial scale. https://axios.link/43PqcmJ

• India's state-run natural gas company, Gail, plans to commission its first green hydrogen project in April, per Reuters. https://axios.link/3VvWpgr

5. Hot deals

• Gordon Brinser was named COO of Waaree Solar Americas, which says it's India's largest solar PV module manufacturer. https://axios.link/3PBOMl2

• Manoj Karwa joined Elektrobit, a Farmington Hills, Mich.-based mobility software developer, as chief revenue officer, Americas. Karwa was previously at Rhombus Energy Solutions. https://axios.link/4auy0w1

• Bertil Olsson, president and CEO of energy company insurance provider Everen, announced plans to retire next March. https://axios.link/3PDo5MV

6. It's personnel

😏 Hey there, Tuesday. You back again so soon?

❓ Trivia Tuesday: Where and in what year was Apple's first solar project to power data centers?

Last week's answer: Nvidia was founded in 1993. 

📺 Alan is enjoying the new season of "Top Chef," including new host Kristen Kish! 

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 data center denizens.

March 26, 2024

1 big thing: Data centers + pumped hydro