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- 🌎 Acclimate Weekly Debrief 9/14
🌎 Acclimate Weekly Debrief 9/14
Wind struggles, EV uprising, and Biden's battery boom
Welcome back! This is your weekly deep dive with insights and hot takes on what’s driving the clean energy transition.
This is my first attempt at taking all the knowledge and experience I’ve gained and turning it into meaningful insights.
As always, feedback is welcome - just reply to this email or contact me at [email protected].
In today’s edition:
America’s wind-farm revolution is broken
California leads the way in EV uprising
How Biden’s climate law is creating a battery boom
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HOTTEST TOPICS
These are the 3 most clicked stories from this week’s debrief.
Debrief: Even with generous green subsidies, offshore wind projects are being called off as developers struggle to make a profit
Key points:
Offshore wind farms are not financially profitable despite offering a viable solution to the climate crisis.
Ørsted, the world's largest offshore wind-farm developer, has seen a significant drop in market value due to complications in U.S. projects.
Rising costs, permitting delays, and higher interest rates erode the potential returns of wind farm projects.
Even with governmental support through subsidies, major industry players are contemplating the abandonment of projects due to financial strains.
Rising interest rates significantly impact offshore wind farm projects due to high upfront costs and longer construction periods.
🌶 Hot take: Renewable energy is important, and wind power is a great source. However, there are many obstacles to implementing offshore wind. Constructing anything offshore requires significant political and policy support, and the building process itself takes time.
The contracts from Ørsted that are being referred to were signed a few years ago, in 2018 and 2019. Since then, there have been some significant changes, particularly in the form of rising interest rates. The zero-interest rate policy is no longer in effect, and this is having a big impact on new construction projects, including renewable energy projects, which are facing challenges due to high capital costs that are causing their profit margins to shrink. Despite the favorable policy and pricing measures in place, these projects are still being affected.
It's tough for many companies in the offshore wind energy sector to keep their profits up, even though they're cutting costs. Despite having policies and regulations on their side, they're still facing financial difficulties. In addition, they're required to sell the power they create from their offshore wind farms at set prices based on their contracts.
This is beneficial for individuals and areas with abundant power supply. However, it presents difficulties in gaining profits during periods of high demand. To achieve significant offshore wind energy implementation, subsidies and tax credits are necessary. However, the lengthy processing time for these projects poses a risk.
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Debrief: EV sales in the Golden State jumped 70% last quarter, a prelude of what’s to come across the country.
Key points:
EV sales in California have increased by 70% compared to the same period last year. EVs now constitute 22% of new car sales in the state, up from 2% five years ago.
Tesla has replaced Toyota as the top-selling car brand in California.
The US is following California's trend with projections indicating 25% of new car sales could be electric by 2026.
The transition to mass EV adoption poses significant challenges to automakers due to the required substantial capital investments.
Some $200 billion is being invested in 100 US factories for electric vehicles and batteries, potentially the largest build-up in US automotive history.
🌶 Hot take: A couple things pop out here to me.
California can offer valuable insights into future electric vehicle trends. In my opinion, two things stand out. First, the commonly accepted 5% threshold for technology adoption has been surpassed.
I'm excited to share some great news with you! California is set to become one of the 23 countries paving the way for widespread electric vehicle adoption. In addition, Tesla has now surpassed Toyota as the top-selling brand in the state, despite Toyota's reputation for reliability.
But while that, as well as their manufacturing prowess via lean six sigma principles, helped overtake the major American car companies leading into the last recession. But they have not been able to innovate when it comes to electrification. Like, at all. They are way behind every other major automaker in embracing the EV future.
Debrief: President Biden's 2022 climate law is fostering growth in the U.S. battery market, with major investments being made in the industry, further aiding the U.S.'s ambition to become a key player in the battery sector, despite China's market dominance.
Key points:
New U.S. battery investments indicate strong confidence in domestic market growth, propelled by the 2022 climate law.
Significant investments include a $2-$3 billion joint venture by Daimler Truck, Cummins, and Paccar for making cells for commercial vehicles and industrial uses.
Global investment giants BlackRock and Temasek, together with Oman's wealth fund, have made substantial investments in U.S. battery-related companies.
This market activity follows a trend of federally supported industry plans and investments intended to position the U.S. as a major player in the battery sector.
🌶 Hot take: Batteries and energy storage are the picks and shovels of the energy transition. And with renewed interest in energy dependence for national security, we’ll likely see more investments in domestic battery manufacturing. But China still dominates the market and it remains to be seen whether the recent subsidies could actually drive prices down to be competitive if built in the US.
COMPANY SPOTLIGHT
Ascend Elements
The biggest startup funding of the week, Ascend Elements, raised $542 million to enhance its battery recycling operations and establish a lithium-ion battery recycling plant in Kentucky.
This investment will support the conversion of "black mass" into cathode materials for lithium-ion batteries.
Why is this interesting? A few thoughts…
It’s not just VC funding powering this startup. Ascend received a $480 million grant from the Department of Energy last year, representing a $1b+ example of the need for climate tech startups to have a mix of funding sources.
Lithium prices have dropped significantly over the past 10 years but it’s still a rare earth material with limited supply (not to mention the catch-22 of it being needed for the energy transition while mining is environmentally not great).
While lithium resources are concentrated in South America and other countries, recycling domestically offers an opportunity to keep these rare earth materials in the country.
➡️ Do you have a business you want highlighted in Acclimate? Contact me at [email protected]
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- Rick Jarrell, Founder of Acclimate
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