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BFD Expert Voices - Climate Deals

BFD Expert Voices

👀 What we're reading: Debate whether EV incentives lead to good-paying jobs has reached a boiling point in some of the tightest election races, our Energy Policy colleagues report.

Big Tech companies like Google and Amazon have emerged as top customers for advanced modular nuclear reactors.

Why it matters: Tech companies' soaring demand for clean energy could be a key force that gets small modular nuclear projects (or SMRs) deployed.

Driving the news: Amazon this morning announced several deals that could significantly advance the deployment of SMRs, reported Axios Generate.

In addition to a large equity investment in startup X-energy, Amazon is also committing capital to an SMR project in Washington state with utility Energy Northwest.

State of play: Amazon's news comes a day after Google announced a deal with startup Kairos Power for the deployment of SMRs.

Yesterday, Oklo, which is backed by OpenAI CEO Sam Altman, said it's making progress with its first SMR project in Idaho after the DOE approved its safety design report.

Oracle said during its earnings in September that it's planning to build a data center powered by three SMRs.

Zoom out: Tech companies' soaring demand for clean baseload energy, combined with their deep pockets and appetite for tech risk, have made the sector a top SMR buyer.

The early market pull could help drive the SMR sector, which is largely pre-commercial.

According to data from Wood Mackenzie from March, there are essentially no SMR projects that are operational, under construction, or in the advanced development phase. (Caveat: Wood Mackenzie says there are two operating SMRs, one ship-based and one in China, but these are different from the rest of the market).

Yet SMRs have a 22 GW global pipeline, up more than 65% from the 13 GW of capacity at the end of 2021, said Wood Mackenzie. The research firm said this week its pipeline numbers have risen 2 to 5% in capacity since March.

Reality check: Nuclear power plants, including SMRs, are highly regulated and dependent on approval by the Nuclear Regulatory Commission.

SMR project designs have also notoriously gone over budget in recent years, partly thanks to inflation.

The bottom line: Big Tech's SMR deals could kickstart project deployments and could act as a linchpin for the sector.

Big Tech driving SMRs

Illustration of Amazon logo surrounded by the nuclear symbol.

Advanced nuclear startup X-energy has closed a $500 million round led by Amazon's Climate Pledge Fund.

Why it matters: It's a game-changing investment for the company that could help bring up to 5 GW of advanced nuclear projects onto the grid within 15 years.

Zoom in: X-energy's round also included financing from Ken Griffin, founder and CEO of Citadel, affiliates of Ares Management Corporation, NGP, and the University of Michigan.

Amazon led and will take two X-energy board seats.

The company plans to spend the funds to continue to design and license the nuclear power plant and build the first phase of the fuel fabrication plant in Oak Ridge, Tenn.

The funding also provides X-energy with enough private capital to fulfill its financing obligation for the Department of Energy's advanced reactor demonstration program.

Catch up quick: X-energy had previously planned to go public via a SPAC, but canceled those plans last year due to market conditions. Instead, X-energy raised an $80 million Series C round.

X-energy CEO Clay Sell tells Axios it still intends to go public via a traditional IPO in the next two to four years.

How it works: X-energy has designed a high-temperature, gas-cooled modular reactor as well as the fuel used.

The company, based in Rockville, Md., licenses its reactor designs and plans to manufacture the fuel needed for the reactors.

The idea behind small modular reactors, or SMRs, is that they can be built in factories and delivered to project areas quickly and for a lower cost compared to a traditional large centralized nuclear plant.

X-energy is also working with Canada's nuclear utility Ontario Power Generation, which is also an investor, as well as chemical giant Dow.

The intrigue: Amazon isn't just an equity investor in X-energy, it's also committing capital directly into X-energy's project with Washington-based utility Energy Northwest.

That project has an initial size of 320 MW, but could be expanded to 960 MW.

X-energy's Sell said Amazon's investment into an SMR project is "completely new and different and transformative to the sector."

The big picture: Big Tech companies are racing to build data centers to support AI but are constrained by the lack of available clean energy.

As a result, companies like Amazon, Google and Microsoft are getting creative and striking new deals with emerging sectors like SMRs.

The BFD: X-energy's $500M round

Illustration of dollar bills falling into a nuclear power plant.

King Energy has closed a $10 million seed round to install solar panels on commercial buildings and sell the electricity to tenants.

Why it matters: The startup says it's found a way to win over commercial landlords, who traditionally have little reason to go solar.

The big picture: Land at any airport, and you'll fly over seeming acres of sun-bleached shopping center roofs that seem ideal for rooftop solar.

Yes, but: There are generally few incentives for property owners to add the asset. 

They don't get the savings, billing each tenant individually is a complicated challenge, and like any property upgrade, there's always the risk of unexpected headaches.

The latest: King Energy, based in Durango, Colo., has developed software that it says automatically bills each storefront or office.

"We solve the split-incentives problem," CEO John Witchel says.

Context: Witchel previously founded or was part of the founding team of four software startups that went on to be acquired: XCom, BrowserCam, Common Assets, and GitPrime.

How it works: King Energy owns and operates its solar panels. It pays a building's landlord a flat monthly rental to install the systems. It then takes over each store or office's electric bill. 

King Energy calculates what the electricity would have been without the solar panels, and then charges each tenant at a 10% discount. 

The latest: ArcTern Ventures led the round, with partner Mira Inbar joining the startup's board.

Context: King Energy previously raised $26 million in equity funding, plus "hundreds of millions" in project finance to install the solar panels, Witchel says.

Exclusive: Commercial solar

Illustration of a solar panel rolled up like a blueprint.

💰 $671m for Aspen Aerogels: The Energy Department's Loan Programs Office this morning announced it's conditionally approved a nine-figure loan for the battery components maker.

Aspen Aerogels, based in Northborough, Mass., has developed thermal barriers that help keep batteries from catching fire. The Energy Department funding would go toward an expected $1 billion new factory in Georgia, per Bloomberg.

💥 $3.4b data center deal: Crusoe Energy, a Denver developer of sustainably powered data centers, yesterday announced a $3.4 billion joint venture with investors Blue Owl Capital and Primary Digital Infrastructure to develop a 206 MW data center in Abilene, Texas.

The site is reportedly leased to Oracle, though the final customer is OpenAI, with Microsoft acting as middleman, per Data Center Dynamics.

🚧 Meanwhile, data center constraints: Growing data centers will soon hit de facto limits imposed by grid or cooling constraints, Microsoft Azure CTO Mark Russinovich told Semafor.

Politicians are already starting to bristle at the infrastructure demands. Texas Lt. Gov. Dan Patrick, for example, has asked lawmakers to evaluate whether the state can keep pace with data centers' electricity appetite. Axios' AI+ has more.

🎶 The dawning of the "age of electricity:" Electricity use has grown at twice the pace of overall energy demand over the last decade, with China leading the way, per the International Energy Agency's latest world energy outlook.

AI, data centers, EVs, wider use of A/C, and commercial and industrial electrification are driving the boom, Ben Geman writes in Generate.

Without policy change, the world will blow past Paris Agreement decarbonization goals, the agency warns. 

Temperature check

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

• Buckley Ventures, an SF and NYC firm, is raising $250m for its fourth fund, per an SEC filing. Go deeper

• Node.vc, a Swedish early-stage VC firm, closed a €71m fund targeting Nordic founders. Go deeper

• CorPower Ocean, a Swedish wave-energy developer, raised €32m in a first close of its Series B from NordicNinja VC, SEB Greentech and InnoEnergy, joined by Santander Asset Management, Iberis Capital, and Cisco Investments. Go deeper

• PSV Hafnium, a Danish deep-tech venture fund with a focus on sustainability, received respective €24.8m and €13.4m commitments from the European Investment Fund and Export and Investment Fund of Denmark. Go deeper

• Autone, a UK retail supply chain tracking provider, raised a $17m Series A led by General Catalyst, joined by insiders Speedinvest, Y Combinator, Seedcamp, 2100VC, Motier and Financière Saint James, per TC. Go deeper

• Treehouse, an SF software developer to speed installation of home energy upgrades, raised a $16.6m Series A led by Flourish Ventures, joined by Acrew Capital, CarMax, Eaton, Holman, Invest Detroit, InVest Ventures, MassMutual Ventures, Montage Ventures, Veriten, and Virta Ventures. Go deeper

• Octavia, a Kenyan DAC developer, raised $3.9m in seed funding led by Lateral Frontiers and E4E Africa, joined by Catalyst Fund, Launch Africa, Fondation Botnar, and Renew Capital. Go deeper

• Concretene, a UK developer of graphene-based materials to decarbonize concrete production, raised €3.5m led by Molten Ventures, joined by LocalGlobe. Go deeper

• Sallea, a Swiss developer of scaffolding tech for cultivated meat production, raised $2.6m in pre-seed funding led by Founderful, joined by Kost Capital. Go deeper

• Nomos, a German software developer for energy equipment manufacturers and installers, raised $2.1m in pre-seed funding led by Speedinvest. Go deeper

• 1s1 Energy, a Portola Valley, Calif., developer of green-hydrogen production tech using boron, raised a $1.4m seed round led by Faber Ventures and Asiri, joined by Rumbo Ventures, City Light, and Gibson Lane. Go deeper

• Circuland, a U.K. developer of "digital passports" to encourage recycling in the construction industry, raised €750k in pre-seed led by Apeiron Ventures, joined by Astylab Ventures. Go deeper

• Lumachain, an Australian food supply-chain tracking startup, received an undisclosed minority investment from Chipotle Mexican Grill. Go deeper

• EIT InnoEnergy, the Dutch sustainability investor, announced that Polish automotive and metals manufacturer Boryszew Group has joined as a shareholder through an undisclosed private placement round. Go deeper

• Wallround, a German energy-efficient upgrades provider for property owners, closed undisclosed funding from Founders Factory and Vonovia. Go deeper

• GM is committing $625m in cash and credit to acquire a 38% stake in Lithium Americas' Thacker Pass project in Nevada and form a JV with the Vancouver-based mining company, building on a $320m investment last year, per Bloomberg. Go deeper

• Shiftmove, a German-Swiss fleet-management software developer, is acquiring French fleet management service Optimum Automotive. Go deeper

• Hometree, a U.K. residential energy services provider, received £50m in mezzanine financing from CPP Investment to finance solar, battery and heat-pump installations. Go deeper

• Chargie, a Culver City, Calif., EV charger installer, received $9.3m in California grants to install and operate ~1,000 Level 2 chargers in the state, with most to be installed in low-income or disadvantaged communities. Go deeper

• The British Library is using a £1.5m solar thermal system from UK firm Naked Energy to maintain temperatures for sensitive documents such as Shakespeare's First Folio and copies of the Magna Carta, per Bloomberg. Go deeper

• Solarcycle, the Mesa, Ariz., solar recycling provider, signed a five-year 4 GW supply deal with Chinese solar manufacturer Runergy tied to the company's Alabama module factory. Go deeper

• Swedish battery maker Northvolt laid off 400 workers at its Skelleftea site. Go deeper

• German air-taxi developer Lilium, reportedly near insolvency, is in talks with the German government about potential state support, per Sifted, citing Der Spiegel. Go deeper

Hot deals

• George Guo was named CEO of Maxeon Solar Technologies. Guo was previously an advisor to the chairman of TCL Group. He succeeds Bill Mulligan, who is retiring. Go deeper

• Tim Pearson was named Duke Energy's South Carolina state president, effective Nov. 1. Pearson was previously VP of government affairs. He succeeds Mike Callahan, who was promoted to SVP and treasurer. Go deeper

It's personnel

🍿 Katie is excited to dig into SOSV's Climate Tech Summit this week.

🏊 Alan's local gym closed. After a 12-year hiatus from swimming, he's considering jumping back into masters.

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 tech energy-procurement chiefs.

October 16, 2024

1 big thing: Big Tech driving SMRs