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BFD Expert Voices - Climate Deals

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📦 Return to sender: Boxes labeled as containing wind turbine components in fact contained Chinese military drones, per Italian authorities. 

Green hydrogen startup Verdagy is planning a second $150 million "multi-gigawatt scale" factory outside of California, Axios has learned.

Why it matters: The swift ramp-up shows how fast the green hydrogen market is moving.

Zoom in: Last month Verdagy filed an application for tax credits for the Department of Energy's 48C program to support a planned factory that would produce electrolyzer systems.

Verdagy CEO Marty Neese said that the second facility would help the company make more of the gear for the electrolyzer systems and help it stave off low-cost competition. "We're a young company, the clock is ticking," said Neese.

Neese said the company is eyeing the Gulf Coast, among other regions, for the new factory.

Next month Verdagy employees will start working out of its first manufacturing facility in Newark, Calif., which is supported with a $39.6 million DOE grant (pending negotiations). The company hopes to produce its first electrochemical cells at the facility in Q4 2024.

Catch up quick: Verdagy was born in 2021, using some of the tech and talent of Khosla Ventures' incubated company Chemetry.

The company raised funds from Khosla as well as Temasek, Shell Ventures, TDK Ventures, among others.

Verdagy makes advanced alkaline water electrolyzers, which can be ramped up and down to pair with clean energy. Electrolyzers produce hydrogen and oxygen from water using electricity.

The vibe: Last month I visited the company's 2MW hydrogen production facility, in Moss Landing, Calif., which sits next to the world's largest energy storage project and a series of indoor cannabis farms. Monterey Bay's coast, where kayakers can paddle among otters and pelicans, is just down the road.

Over a decade ago, the building was used by carbon-to-cement maker Calera, which went bust, followed by Chemetry.

Today inside the building, a container-sized blue unit houses ten of Verdagy's cells, sandwiched together, producing hydrogen that is currently vented off. Metal pipes snake around the room moving liquids and gases.

The company expects to have its first hydrogen plants under development in late 2025 or early 2026, likely starting with the green ammonia sector.

The big picture: Verdagy is just one of hundreds of both young and established companies, like Plug and Electric Hydrogen, that are vying for the nascent green hydrogen market as companies and governments invest in clean energy.

What's next: Verdagy is in a key phase of its growth as it tries to rapidly commercialize its technology and secure customers.

Verdagy's factory ramp-up

Verdagy's CEO Marty Neese standing in front of the company's 2MW hydrogen plant in Moss Landing, Calif.

Verdagy CEO Marty Neese stands in front of the company's 2MW hydrogen plant in Moss Landing, Calif. Photo: Katie Fehrenbacher/Axios

Private equity firm Orion Infrastructure Capital this week raised $370 million to loan to climate startups as they expand beyond the venture stage.

Why it's the BFD: The fund aims to close the financing gap that's often hamstrung climate startups developing tech seen as too novel for many lenders.

How it works: With about $4.5 billion AUM, Orion Infrastructure Partners (OIC) offers growth debt, infrastructure credit and structured equity for companies in low-carbon energy and climate tech.

The firm targets companies that are either still owned by their founders or backed by family offices.

Driving the news: The firm closed a growth debt fund backing companies generating cash-flow and eyeing expansion.

It's writing checks of $20 million to $200 million, with plans to back 10 to 12 companies through the fund.

The latest: The fund has backed six companies since 2022.

They span undersea cable recycling company Subsea Environmental, tidal power developer Ocurrent Power, battery efficiency startup Forge Nano, smart glass maker Gauzy, nickel-zinc battery company ZincFive, and EV fleet management provider Vemo.

What's next: OIC is raising a $1 billion structured equity fund and a $1.1 billion credit fund. It expects to close both this year.

The BFD: Orion fund raise

Illustration of hands holding money up towards Earth

The demise of Chevron deference might be the next hurdle for the Inflation Reduction Act's lucrative hydrogen tax credit, Axios Pro's Nick Sobczyk writes in Energy Policy.

State of play: The ruling will make it harder for the Treasury Department to defend the "three pillar" approach it used to determine who should be eligible for the 45V subsidy.

That's because the kind of climate guardrails the administration is contemplating aren't directly referenced in the text of the IRA.

Catch up fast: Treasury is still hammering out the criteria for which projects should qualify for the 45V credit.

Friction point: Environmentalists and fossil fuel groups have clashed over three areas:

Whether projects should be allowed to draw power from existing grid resources; whether they need to time their electricity consumption with precisely when clean electrons are being generated; and whether projects must rely only on clean power that's generated nearby. 

The latest: Those three pillars are sure to be at the center of lawsuits challenging the rule once it's finalized. 

Now that the Supreme Court has overturned the courts' deference to agency interpretation of ambiguous statutes, Treasury may have to show not simply that its interpretation of the law was reasonable but that it was "the best interpretation," per the Congressional Research Service.

Breaking down 'Chevron' and hydrogen

Illustration of the Great Seal of the United States, but the eagle is holding a pen and clipboard instead of arrows and an olive branch.

🤝 Microsoft+Occidental: Microsoft will buy 500,000 metric tons of CO2 removal credits over six years from Occidental Petroleum's direct air capture subsidiary, Ben Geman writes in Generate.

It's the largest-ever single purchase of carbon removal credits via DAC, Microsoft and the subsidiary, 1PointFive, said. The removals will occur at the Stratos DAC plant under construction in Texas. Terms were not disclosed.

🫣 Bipartisan carbon pricing: Don't look now, but a House bill that would at last lay the groundwork for an emissions trading regime has drawn 21 backers — including 10 Republicans, Axios Pro's Nick Sobczyk reports in Energy Policy.

The American Petroleum Institute backs the PROVE IT Act, but it's drawing intense opposition from other oil and gas groups as well as conservative lawmakers. The bill's sponsors hope it can clear Congress by riding on a year-end legislative vehicle.

🔎 Feds investigating Aspiration: Aspiration Partners, which introduced a debit card and investment accounts it promised would be fossil fuel-free, is under investigation by the Justice Department and the Securities and Exchange Commission, per Bloomberg.

The LA-based company had been planning to go public with an expected $2 billion valuation. It came under early scrutiny in 2021, when it was the subject of a ProPublica investigation which reported that "many of Aspiration's claims seem to fizzle."

🏎️ Carbon offsets for race cars: Formula E driver Lucas di Grassi plans to buy carbon offsets from Rubicon Carbon to offset his racing team's emissions.

Formula E is the electric open-wheel racing series from Formula 1. He won Formula E's first race, in Beijing, in 2014.

Temperature check

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

• Index Ventures has raised $2.3b for two new funds targeting AI investments. axios.link/3VRJK6a

• North Sky Capital, a Wayzata, Minn., impact investor, raised $250m for its Clean Growth VI impact secondaries fund. axios.link/3xHjJ1x

• Icelandic VC firm Frumtak Ventures raised $87m for its fourth fund, planning 10-15 early-stage investments in AI and deep-tech startups working in sectors including climate, energy, and ocean tech, per Sifted. axios.link/3xR0sdR

• Epilot, a German grid software developer, raised €10m from Expedition Growth Capital. axios.link/4cAm2Cr

• Very Food, a French plant-based ingredients developer, raised €850k from Apok Invest, Bpifrance, and angels Frédérick Bouisset and Pascal Viguié, per Vegconomist. axios.link/3W0w5Kh

• Spanish gas grid operator Enagas sold its 30.2% stake in Leawood, Kan., energy infrastructure company Tallgrass Energy for $1.1b to Blackstone to finance green hydrogen projects. axios.link/3WhpdcL

• Saudi Arabia raised $12.4b after selling more shares in Aramco, per Reuters. axios.link/3S11QkV

• Eversource Energy, the Hartford, Conn., utility, sold its 50% stake in the 924 MW Sunrise Wind offshore wind project to Ørsted, grossing $230m. axios.link/3LeLlhA

• Gathered Foods, a Heath, Ohio, plant-based seafood producer, sold its production facility to shareholder and Indianapolis plant-based foods maker Ahimsa Companies. axios.link/4cTupJk

• LS GreenLink USA is investing $680m to build a submarine power-cable factory on a brownfield site in Chesapeake, Va. axios.link/3S14ZBf

• Maalexi, a UAE ag-focused fintech, raised $1m in venture debt from Stride Ventures. axios.link/3LfI29V

• Volkswagen warned it may shutter an Audi plant in Brussels due to slow EV demand, potentially the first such closure since Volkswagen closed a Pennsylvania plant in 1988. axios.link/4cEyGR1

• Canadian insurers Definity Financial, Desjardins, Fairfax, Intact Financial, and TD Bank have allegedly invested over C$19.5b in fossil fuels production even as climate change inflates risks for insurance industry, per shareholder advocacy group Investors for Paris Compliance. axios.link/4636955

• Images of Ford's forthcoming electric Capri crossover SUV leaked on Instagram. axios.link/4bBrns2

• Austin-based Credo Foods introduced what it's calling the first oat milk-based "spray cheeze." axios.link/4eUkvsB

Hot deals

• Monish Patolawala will join ag giant ADM as EVP and CFO, effective Aug. 1. Patolawala was previously president and CFO of 3M. He succeeds Ismael Roig, who's been interim CFO since January. axios.link/3zCY8b5

• Brian Dykes was promoted to EVP and CFO of UPS. Dykes was previously SVP, global finance and planning. axios.link/3xRaonF

• Jeff McDermott joined Energy Impact Partners as head of strategic finance. McDermott was previously global co-head of Nomura Investment Banking. axios.link/3XW7Jnu

• Kent Bartley joined Vanguard Renewables, a Weston, Mass., RNG developer, as president of organics solutions. Bartley was previously president of North Ridge Consulting. axios.link/3WgLVBG

• Nimmi Kavasery was named managing director of project finance at Arevon Energy, a Scottsdale, Ariz., solar and storage developer. axios.link/3xY6Pfq

• Geoffrey Martha joined the board at NextEra Energy. Martha is chairman and CEO of Medtronic. axios.link/45XgGic

• Jim Lambis was appointed to the board at Spectaire, a Watertown, Mass., air-testing developer. Lambis is VP of buildings and systems engineering at UPS International. axios.link/3Whf9k2

• Chris Stark was tapped to lead the U.K. clean energy taskforce. Stark previously headed the U.K.'s climate watchdog. axios.link/4bBiFtY

• Sarah Spencer-Workman joined Sparkfund, a D.C. project developer for commercial building energy upgrades, as EVP of customer solutions. Chenoa Warner also joined as VP of talent and culture, and Nicholas Mart as director of program commercialization.

It's personnel

Used car retailer Carvana says its website now not only highlights which of its electric vehicles qualify for the federal Clean Vehicle Tax Credit but also enables shoppers to apply for the credit while buying.

Why it matters: The EV tax credit is absurdly complicated, requiring shoppers to figure out which cars and trucks qualify and then figure out how to actually get the credit.

It's another hurdle keeping wary, first-time EV buyers from going electric. (It's even caused Alan, an EV enthusiast, to throw up his hands in frustration.)

Bottom line: Sure, the announcement from Carvana is prime PR material. But figuring out how to truly streamline the EV tax credits process is something every car seller should be doing.

Bonus: Well that's neat

Illustration of an inflatable used car inflatable tube man in the shape of a lightning bolt

🧑‍💻 Katie's head-down today working on a deep dive. She'll be shepherding the newsletter tomorrow. 

🐛 Alan learned yesterday that all his neighbors are dealing with earwigs. Fun.

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 hydrogen hounds.

July 10, 2024

1 big thing: Verdagy's factory ramp-up