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🍹 Sip of the week: The Cape Codder, made up of cranberry juice and vodka, is a favorite at the pool or beach, editor Mike Flaherty says. It also must be ordered in a Boston accent: a "Cape Caw-dah."

The Inflation Reduction Act has spurred nearly a half-trillion dollars of public and private investment since President Biden signed the landmark climate law in August 2022.

Why it matters: Despite the impact, some parts of the law have yet to be implemented and uncertainty lingers about where things go from here.

Zoom in: We spoke to investors about the legislation and the general sentiment around the climate tech sector at the moment, as the IRA turns 2 years old this week. Given that backdrop, here are what these experts pointed to when asked about what areas they're watching right now.

State programs using IRA money to turn homes green have finally started getting federal approval.

After two years of huge manufacturing announcements, Abe Yokell of Congruent Ventures expects "more activity in low- and moderate-income home electrification incentives."

Project developers, equipment installers, retailers and homeowners are just starting to learn who qualifies, especially for bonus incentives for low- and moderate-income neighborhoods.

"I have seen examples where a developer believes a project is in an energy community and then learns the map has changed," says Benjamin Baker of Greenbacker Capital Management.

That uncertainty is echoed by investors backing more conventional clean-energy projects, such as big manufacturing plants.

"Cash flows and conditions to disbursement by the U.S. government are still slow and not 100% clear," Peter Gajdoš, partner and deputy chief investment officer at Fifth Wall, says.

Many of those large projects have been paused. Some backers are awaiting the outcome of the November presidential election; others are reevaluating in the face of perceived slower demand and tougher market conditions.

"Large investment — especially coupled with venture investments — often end up over-subsidizing technologies that don't demonstrate the value proposition to survive over the long term when the incentives or financing go away," Rachel Holt of Construct Capital says.

👀 What we're reading: "America's Promised Hydrogen-Fueled Future Is Stalled Over Tax Credits," Bloomberg reports this morning.

The IRA outlook, Part II

Illustration of a telescope reflecting the earth

Battery maker Natron Energy plans to invest $1.4 billion into a huge plant in North Carolina that would make its sodium-ion batteries.

Why it's the BFD: Global momentum around sodium-ion batteries has opened a window for startups to innovate and try to build supply chains outside of China.

Catch up quick: Lithium-ion batteries have long been the best option for both electric vehicles and grid storage, providing a lot of energy in a small size.

But in recent years companies, mostly in China, have started to scale sodium-ion batteries as a low-cost challenger.

These batteries are typically less expensive — sodium is cheap, and the batteries don't require some problematic materials like cobalt and nickel. But the batteries are also less energy-dense.

Zoom in: According to sources familiar with the matter, Natron Energy's 1.2 million-square-foot factory is planned for eastern North Carolina's Edgecombe County and could create 1,200 jobs. The Wall Street Journal and local media first reported the news.

The Santa Clara, Calif.-based company will have to raise funding to get the plant built but is expecting $50 million in state and local grants for the project.

The plant would be the second one for Natron Energy, after its factory in Michigan. The North Carolina factory could make 24 GW of batteries per year at full capacity, a 40 times scale-up of Natron's Michigan factory.

Natron Energy is targeting customers like companies building data centers or microgrids for its batteries.

The big picture: It's a tricky time to raise funds for a next-gen battery factory.

Last year investors supercharged the energy storage sector, led by some megadeals. But a chill hit climate venture funding in the first half of this year.

Natron's N.C. battery plant

Illustration of three batteries increasing in size overlaid with money and surrounded by abstract shapes.

The long term success of the IRA needs permit reform, says Veery Maxwell, Partner at Tom Steyer's Galvanize Climate Solutions.

Why it matters: The historic climate law has drawn in massive private and public funds for climate tech projects, but many of those projects are hitting permitting roadblocks.

Catch up quick: Maxwell, who's also the co-head of innovation and expansion for Galvanize, helps steer the billion-dollar fund for climate-tech startups.

Maxwell sits on the boards of cement data company Alcemy, transit software startup The Routing Company, and energy data firm Voltus, among others.

Zoom in: If there isn't permit reform, that's going to be a major drag on the long-term success of the IRA, says Maxwell.

"The thing that is huge is just the amount of private capital that has crowded in with the public dollars in what is a very short period of time.

The IRA has had amazingly widespread benefits around the whole country."

"One of the things that we are very focused on is the need for permitting reform continues. In a way, the IRA shined an even sharper light on that.

When we pass the IRA, that's all about the deployment of technology, you need to actually be able to deploy things."

"We wanted to see faster clarity around how green hydrogen is defined and treated.

Also more of a pointed focus on some of the hard-to-decarbonize sectors: steel, cement, maritime. These are really non-trivial challenges that were either lightly touched or not touched in the original bill."

"Given the fact that the benefits have been spread all over the country and all kinds of districts, I think it will be quite politically challenging to walk a lot of this back.

I do think it's a poor investment signal to change the rules of the road.

No matter what happens in the election, there is going to be a lot of pressure to do permit reform."

On the slower pace of funds for some projects:

"Any company that you talk to that's trying to access direct federal government support, 100% of them would say it's gone slower than they expected and would like.

There's a confluence of factors driving that: macro pieces, higher interest rates, permitting delays.

There is also the fact that a lot of these programs are run in a very conservative way, because everyone wants to double- and triple-check the work, which, I would say is a positive for the companies that come out the other side of it. But it is slow."

It's about the permits

Photo illustration collage of Veery Maxwell surrounded by abstract shapes. 

Photo illustration: Axios Visuals. Photo: Courtesy of Galvanize Climate Solutions.

The Energy Department is steering around $50 million into six states to help small- and mid-sized auto suppliers convert facilities to serve EV value chains, Axios first reported.

Why it matters: The money is targeting states with big automotive workforces — both in 2024 swing states and in deep-red districts where EV jobs could keep the Inflation Reduction Act from being overturned. 

Follow the money: DOE today has made millions of dollars available for applicants from swing states Michigan and Ohio, plus GOP-leaning Indiana, Kentucky and Tennessee, as well as Illinois.

The IRA funds are being deployed through DOE's Office of Manufacturing and Energy Supply Chains.

Zoom in: The money could be used for things such as a high-tonnage press that makes EV components, DOE tells Axios.

Another example: work on marketing and sales contacts to meet the needs of the EV market.

Fed fuel

Illustration of a line of men in suits pushing an electric vehicle.  

😬 AI's disproportionate impact: Data centers and their power plants will be built near people of color, exposing communities to environmental harm and reducing access to affordable housing, Axios Pro's Maria Curi reports in Tech Policy.

Sen. Ed Markey, D-Mass. has introduced a bill that would create a voluntary reporting system for AI players to disclose their local impacts.

🔎 Case in point: In Northern Virginia, data center projects have damaged African American cemeteries and gotten ensnared in zoning and affordable housing battles, Maria also writes.

"They're driving up the price of land and it's hard for anyone else to compete with them. ... We're concerned that AI is going to push the price of land even higher," Deshundra Jefferson, chair of the Prince William Board of County Supervisors, tells Axios.

🌊 Separately, in offshore wind: Danish and German renewables giants Ørsted and EnBW said they'd be open to using Chinese offshore wind equipment, while Chinese manufacturer Mingyang Smart Energy last week agreed to open a factory in Italy.

The moves signal how Chinese manufacturers see a market opening as European manufacturers Vestas, GE, and Siemens continue to grapple with quality problems — and Europe's offshore wind developers and their shareholders start to lose patience.

Temperature check

Illustration of three emojis: a thermometer, a hot face, and a cold face.

• Re:Build Manufacturing, a Cambridge, Mass., manufacturing tech provider, raised $120m led by General Catalyst. Go deeper

• Flower, a Swedish grid software developer, raised a €25m Series A led by Northzone partner PJ Pärson, along with 82an Invest and Zebkei Invest. Go deeper

• CruxOCM, a Canadian industrial control-room automation software developer, raised a $17m Series A led by M12, joined by Oneok, Raven Indigenous Capital Partners, EIC Rose Rock Fund and insiders Angular Ventures, Bullpen Capital, Root Ventures, Industry Ventures, Cendana Capital, Pipeline Capital Partners, and Golden Ventures. Go deeper

• Promethean Particles, a UK carbon capture materials developer, raised an £8m Series A led by Mercia Ventures and Aramco Ventures, joined by Foresight, University of Nottingham, TSP Ventures, and British Business Bank. Go deeper

• Ørsted, the Danish renewables giant, booked $575m in impairment losses in Q2 citing construction delays at its 704 MW Revolution Wind project off Rhode Island and Connecticut. Go deeper

• InfraVia Capital Partners is seeking to sell Swiss data center operator Green for ~€1b, per Bloomberg. Go deeper

• Record heat in California has imperiled Heinz ketchup tomato crops, per Bloomberg. Go deeper

• The U.S. government has reversed course to now back a UN treaty to reduce plastics consumption, per Reuters. Go deeper

• Finnish state-owned energy company Fortum said that new nuclear plants aren't viable amid current cheap electricity prices in the region, per Reuters. Sweden's government is aiming to build 2.5 GW, or roughly two large reactors, of new nuclear power by 2035. Go deeper

Hot deals

• Caitlin Gubbels was promoted to Canada Pension Plan Investment Board's head of global private equity. Gubbels was previously head of private equity fund partnerships. She succeeds Suyi Kim. Go deeper

• John Clapp was named CEO of Deriva Energy, the Brookfield-backed renewables developer fka Duke Energy Renewables. Clapp was CFO of Scout Clean Energy. Go deeper

• Devin Lammers was named CEO of TerraClear, a rock-picking robot developer for farms. Go deeper

• Dan Donovan, former congressman, was appointed to the board of Nano Nuclear Energy. Go deeper

• Dwight Scott is retiring from Blackstone, where he's chairman of credit and insurance, per Bloomberg. Go deeper

It's personnel

"We have seen the trough in ESG fund flows." 

Deutsche Bank chief investment officer Markus Mueller

Mueller contends that the backlash to environmental, social, and governance-driven investing is easing — good news for climate-focused investment, he tells Bloomberg.

"Businesses are seeing the real-world impact of climate risks," Mueller said. "Industry is getting real about what ESG economically means."

Quote of the day

🎭 Katie is both looking forward to and dreading the fall climate event surge.

🚲 Now that Alan's biking the kiddo to preschool every day, he's planning to swap his old Lectric XP ebike for a longtail — likely an Aventon Abound. If you've got longtail recommendations, let him know!

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 IRA pundits.

August 15, 2024

1 big thing: The IRA outlook, Part II