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You can find the details

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in today's show notes. Hello

0:59

and welcome to The Energy Gang. I'm Ed

1:01

Crooks. On the show today we're going to

1:03

be talking about what is arguably the most

1:05

important single factor in the whole of the

1:07

energy transition and that is investment.

1:09

The art of turning money into

1:12

steel and concrete and software

1:15

and everything else that we need to

1:17

reduce emissions and build a low carbon

1:19

energy system. To talk about that

1:21

subject, I'm joined today by Amy Myers-Jaffee, who's the

1:23

director of the Energy Climate Justice and Sustainability Lab

1:25

at New York University. Hi, Amy. Great to have

1:27

you back, Elam. Great to be here, Ed. And

1:30

it's also a great pleasure to welcome a newcomer

1:32

to the show. Dan Goldman is a co-founder and

1:34

managing director at Clean Energy Ventures, which is a

1:36

venture capital firm focused on investing in early stage

1:38

climate tech. Hi, Dan. Welcome to The Energy Gang.

1:41

Thanks very much for joining us. Ed, so great

1:43

to be here. Thanks for having me. Yeah, it's

1:45

great to have you on. Now, Dan, before we

1:47

get into the meat of the show, something we

1:49

always like to do when we have new people

1:52

on the show is ask them to talk a

1:54

little bit about their careers in energy and how

1:56

they got to be doing what they're doing today.

1:58

So what's your question? story in that

2:00

what got you interested in energy, how did you

2:03

get your start in energy, and how did you

2:05

get into this world of energy investing? Yeah, well,

2:07

I've been in energy for over 30 years now,

2:10

and I started my career in oil and gas,

2:12

advising oil and gas companies all over the world.

2:14

I moved to Asia in the early 1990s,

2:17

and while I was there, I made

2:20

this transition from oil and gas to

2:22

really more about development and finance of

2:24

energy infrastructures. That ultimately led me to

2:26

create the first private equity fund that

2:29

was focused exclusively on clean energy in

2:31

the early 2000s. And

2:34

then when I came back to the US, I saw

2:36

a real opportunity to take what I

2:38

learned and apply that to the clean

2:40

energy market. So of course,

2:42

over the early 2000s, a huge amount

2:44

of money flowed into that structured finance

2:46

for clean energy projects. And so after

2:49

we sold our first portfolio, I was

2:51

much more interested in solving some of

2:53

the critical challenges of how do you

2:55

get clean energy technologies, climate

2:57

technologies, out of the lab,

3:00

out of the incubators, and into the market

3:02

as fast as possible to address climate change,

3:04

but also fast because that

3:06

helped align financial returns as well. And

3:09

even today, looking back over the last 20 years,

3:12

this continues to be one of the biggest challenges

3:14

for climate tech and clean energy, and we can

3:16

talk more about that later. What

3:18

I did is started an angel group, and we started making

3:20

really small investments in deep tech

3:22

companies. Three of us split off from the

3:25

angel group, and we formed Clean Energy Ventures.

3:27

So maybe I'll stop there. Yeah,

3:29

that's fantastic. Thanks very much for that great introduction.

3:32

And it clearly makes you the perfect person

3:34

to be talking about what we want to

3:36

talk about today. And I want

3:38

to start off really at the highest possible

3:41

level and just look at the general

3:43

picture of clean energy investments. As you say,

3:45

you've got a fantastic amount of experience in

3:47

this field, decades of experience. It does

3:49

feel like at the moment, we're in

3:52

a downturn in that business.

3:54

Obviously, it is sick of gold there

3:56

have been ups and downs throughout the

3:58

history of clean energy. as an industry,

4:01

but it feels like 2023 was a pretty bad

4:03

year for low carbon energy investment in lots of

4:05

ways. 2024 also seems

4:07

to be starting off pretty badly as

4:09

well. We've had that combination of rising

4:11

interest rates, fears about policy maybe not

4:14

being so supportive in the future for

4:16

low carbon energy, perhaps also a

4:18

bit of a correction to some earlier over

4:20

exuberance, whatever the reasons were, and we'll probably

4:22

kind of dig into a few of those

4:24

reasons in a moment. But whatever the reasons

4:26

are, shares in clean energy companies have typically

4:28

underperformed the market over the past year or

4:30

so. Good metric for this is the iShares

4:32

Global Clean Energy ETF, sometimes described as the

4:35

flagship for the sector in terms of lifted

4:37

companies. That has a total cumulative return over

4:39

the past three years of negative 43%, or

4:41

so in other words, for

4:43

loss of about 43%. If you look

4:45

at some of the big individual names in clean

4:48

energy, look at Tesla, their shares are down about 55%

4:50

from their peak back in 2021. If you look at

4:52

Ersted, the Danish

4:55

company, big renewable energy company, formerly oil

4:57

and gas and fossil fuel power got

4:59

into renewables, was seen for a

5:01

while as the great sort of shining success story

5:03

of how you could make that transition. They're going

5:06

through a really rough time at the moment. And

5:08

at the same time that this is going on,

5:10

you've had capital flows into climate focused funds falling

5:12

sharply. I was looking at a story in the

5:14

Financial Times the other day that was quoting some

5:16

data from Morningstar. And that said that

5:18

climate focused funds attracted about $38 billion of new investor

5:22

money last year. And that was down about 75% from

5:25

what they'd attracted in 2021. And then

5:27

Dan, bringing

5:29

it back perhaps a bit more closely to what

5:31

you do in terms of private markets venture capital

5:34

flows into clean energy also seem to be well

5:36

down. Amy, you were showing some numbers with us

5:38

earlier in 2023, growth investment was down 41% and

5:40

C receive funding was down 35%. And that's data

5:46

from SITELINE who collect data on VC

5:48

investment and so on. Anyway,

5:50

put all that together. As I say, it looks

5:53

like a bit of a downturn. The picture does

5:55

not look great, I would say for clean energy

5:57

investment right now. Dan, how do you see it?

5:59

Is that an unfair picture that I've just

6:01

painted? Are things actually better than some of

6:04

those indicators would suggest? Or is it fair

6:06

to say that we're in a bit of

6:08

a downturn of a cycle right now? You've

6:10

characterized it quite accurately, but I would say

6:12

when you peel the onion a bit on

6:15

the numbers, there are some

6:17

interesting dynamics. Maybe starting out at the

6:19

macro level, there have been a lot

6:21

of reports from Swiss Rea, Goldman Sachs,

6:24

a variety of other analysts who

6:26

have looked at what we need to be

6:28

spending every year for the next couple of decades

6:31

to basically address climate change and reduce

6:33

greenhouse gases and stabilize temperatures in the

6:35

atmosphere to less than 2 degrees, not

6:38

even 1.5. If 1.5

6:40

degrees is out the

6:42

window, as it were now. But this

6:44

is an extraordinary tall order given

6:46

the annual spend level over

6:49

the past two years, which

6:51

has been about $1.2 trillion

6:53

across venture capital, private equity,

6:55

infrastructure, pretty much everything that

6:57

can reduce greenhouse gas emissions.

7:00

And it's woefully low when you consider that half of

7:02

that 1.2 trillion was

7:05

spent in China, which is a good thing

7:07

because China does need to decarbonize. But

7:09

when we look at Western Europe, we look

7:11

at the US, we look at emerging markets,

7:13

we are under spending significantly what we need

7:15

to be to address climate change.

7:18

These reports by Swiss Rea, Goldman

7:20

Sachs estimate we need to be

7:23

spending somewhere between $6 trillion and

7:25

$9 trillion a year for

7:27

the next couple of decades. And so we

7:29

have a real problem if we don't increase our

7:31

spending. And like you pointed out,

7:34

we have had declines in venture capital,

7:36

we've had declines in growth stage capital,

7:39

we've had declines even in infrastructure.

7:41

Now the declines in early stage

7:43

venture have not been as significant

7:45

as growth stage venture capital and

7:48

private equity. And so we're seeing

7:50

still a pretty strong market in

7:53

the area that we focus, which is

7:55

really the Series C and Series A

7:58

rounds that companies are raising. to

8:00

begin to get their technologies out

8:02

of the lab, commercialize them in

8:04

demonstration projects and ultimately scale those

8:06

technologies. The interesting thing

8:08

is in the context of these declines,

8:11

we do have a pretty robust end-to-end

8:13

ecosystem with university research, grants

8:15

from the Department of Energy, the

8:18

NSF, state grants, philanthropic capital

8:20

for high risk, we would

8:22

call science projects, early

8:24

stage venture capital, and onwards. So

8:27

we do have investors at all

8:29

stages, but the one area

8:31

that we are missing quite a bit

8:33

of is what's called the missing middle

8:35

by STG Builders Vision, which is the

8:37

fund that was set up by Lucas

8:39

Walton, one of the Walton family members,

8:41

the owners of Walmart. And

8:44

that fund has identified that

8:46

that commercialization capital is really

8:48

a huge gap in the

8:50

market. If we can't take

8:52

technologies like our 25 companies in

8:54

our portfolio and commercialize those

8:56

technologies, scale them up and get them in

8:58

the market and get them to be

9:00

adopted by industry participants, we have no

9:03

hope of addressing climate change. And

9:05

obviously, like you point out, if capital is not

9:07

flowing into those areas, it's because the risk-return balance

9:09

is not right. Yeah, that's a fantastic point. I

9:11

want to dig into that question of commercialization in

9:13

a moment. Amy, first, I want to give you

9:15

a chance to come in. Well, you

9:17

know, clearly the statistics you cited are

9:19

daunting. And of course, Dan knows a

9:21

lot about what he's talking about, but

9:23

just a few bright spot things.

9:26

You mentioned that I had taken a

9:28

look at the sight line data. So

9:31

their series A cumulative data for

9:33

2023 is not nearly as

9:35

negative. And actually, the number of

9:38

new climate tech companies

9:41

is actually still rising. So like Dan

9:43

is saying, you've got a lot of

9:45

people coming out of universities, coming out

9:47

of these incubator or

9:49

just mindset ecosystems with

9:51

really interesting technologies or

9:54

projects or ideas. And

9:56

so that size, I think, even though

9:58

overall deal size, with smaller, yeah, it'll

10:01

actually a lot more companies. So that's like

10:03

a good thing. It means a lot of

10:05

people are coming up with thoughtful, interesting ideas.

10:08

And then the other thing that's happened

10:10

is that we're getting a shift and

10:13

we're getting to a shift where the numbers

10:15

have to be much, much bigger. And

10:18

so when you're an economist like me,

10:20

you know, you're always telling people, we

10:22

write these fancy articles about whether or

10:24

not public investment in something then

10:27

deteriorates private sector funding in it. And

10:29

so one of the big things that

10:31

people said about the ILA legislation is,

10:34

you know, public-private partnerships and the government's

10:36

going to get together with

10:38

industry. And you know, you

10:40

see that with like Redwood and some

10:42

of these other big ticket items that

10:44

got invested in. But there has been

10:46

this shift and the sight line data

10:48

really shows this to the industrial side.

10:51

So investing more in heavy

10:53

industry and clean steel and

10:55

recycling metals and some of

10:57

these sort of bigger ticket

10:59

items. And that interests me just

11:01

because people are always saying, oh, we're never going

11:03

to get anywhere in the hard to abate sectors.

11:06

And you and I have debated a thousand

11:08

times whether are we at the time for

11:10

hydrogen or is hydrogen still just some fantasy

11:12

that's not actually going to make it to commercialization.

11:14

So I do think that there's a bit of

11:17

a trend in that and that the negative stories

11:19

are a bit focused. A lot

11:21

of bankruptcies in the automobile sector,

11:23

right? A lot of really bad news

11:25

in the deep offshore wind sector, which

11:28

I think is critical for addressing

11:30

climate change. So that's a really big

11:32

negative. But that's a lot of

11:34

the focus of these statistics that you

11:36

are reeling off, Ed, come really

11:38

from the bankruptcies in auto and these

11:41

setbacks in big wind. And so

11:43

I think that that's relevant to

11:45

think about what's still hot and what

11:48

isn't. And then I think, you know,

11:50

Dan's point about commercialization on the what's

11:52

still hot is worth exploring. Yeah,

11:55

thanks very much. So Dan, just going back to that point about

11:57

commercialization and the value of death. So what you and Amy have

11:59

both been saying. is actually essentially at the

12:01

kind of the early stages when we're

12:03

talking about people having great ideas and

12:06

getting those ideas funded, that's still pretty

12:08

active. The ecosystem, as you said, is

12:10

healthy. People can raise money for those

12:12

ideas. What happens next? I

12:14

mean, then presumably, you build up your company, you

12:16

have a brilliant idea, you start your company, you

12:19

build up a bit, then you're aiming to, I

12:21

guess, we'll eventually maybe IPO it or get new

12:23

kind of private equity funding, or

12:25

you're looking to find a corporate buyer to

12:27

take it on and take on the technology

12:29

and develop it. Is that really the problem

12:31

then that there aren't enough buyers of various

12:33

kinds, both financial and corporate or whoever else,

12:35

and the stock market is not strong enough

12:37

to enable companies to kind of take it

12:39

to the next level in that way? I

12:42

think there's a part of the market

12:44

that reflects what you just said, that

12:46

the risk profile of a

12:48

company that has sort of

12:50

developed a small demonstration project and

12:52

now wants to build something larger,

12:54

maybe even a cashflow positive demonstration

12:56

project. The market is not

12:59

willing to take that risk. So that

13:01

might mean tens or hundreds of millions

13:03

of dollars to build something like that.

13:05

So you're really moving more into the

13:08

kind of private equity sphere or significant

13:10

growth capital sphere. And if you

13:12

look at those investors, they

13:15

want to see technology risk mitigated

13:17

before they were to fund one

13:19

of those projects. I think

13:22

we see a pullback in

13:24

that market. That's why growth capital

13:26

has declined faster than early stage.

13:29

And at the same time, we

13:31

have higher interest rates. So that

13:33

has driven returns higher as well,

13:35

expectations for returns higher as well.

13:37

And what is partially offset that

13:40

is that you have a number

13:42

of groups, some philanthropic, some

13:45

commercial, that are starting to see

13:47

that there is this gap, that

13:49

you can earn attractive risk adjusted

13:51

returns in that commercialization

13:54

stage. And if you

13:56

do your technology diligence adequately, then

13:58

you can understand What risks

14:00

you're taking, what risks you

14:02

need to be paid more for, what

14:05

risks you can offset on an

14:07

engineering procurement construction contractor, maybe

14:09

risks that you can insure against, but

14:11

looking across and doing much more diligence

14:14

as we would do as an early

14:16

stage investor to really understand where some

14:18

of those opportunities are attractive. We're seeing

14:20

more and more of that. I won't

14:22

say that's a groundswell of capital flowing

14:24

into that space, but I would

14:27

say there's a clear identification

14:29

of the problem and

14:31

many smart people out there who want to solve

14:33

it. I have a

14:35

question about that in the sense

14:38

that when you're talking about these

14:40

financial players, whether it's institutional investors

14:42

or whether it's PE firms, how

14:44

do people get equipped to

14:46

even make judgments about technologies? Because

14:50

I think that's like a critical avenue.

14:53

What do firms do to really make

14:55

sure that they could themselves evaluate the technologies

14:57

and they're not just calling the most randomly

15:00

interesting science professor they know of the school

15:02

where they went and saying, hey, I'm thinking

15:04

of buying this thing, what do you think?

15:07

What's the process? Well, I'd say there

15:09

are a lot of private equity firms out

15:11

there today who have recognized this problem and

15:14

have built very deep technical and engineering teams

15:16

to help them not only understand the problem

15:19

before they invest, but support

15:21

the companies to mitigate those

15:23

risks as they're designing, engineering,

15:25

and constructing that project, commissioning

15:28

and operating that project. I

15:31

think there are a number of players in the market.

15:33

I would point to someone like Aera Partners that

15:36

has about $4 billion of capital under management,

15:40

maybe a bit more now, and

15:42

has really taken an

15:44

engineering approach and a technical approach

15:47

to working to scale up, to acquire

15:49

and scale some of these clean energy

15:51

technologies, waste to energy, and a variety

15:53

of other things, plastics

15:56

and chemicals. There

16:00

are a lot of different mixes of

16:02

capital pots out there that can address

16:04

the technology risk problem. Another

16:07

area is strategic and industry

16:10

partners. There's hundreds

16:12

now of firms, whether you're

16:14

talking about cement companies, steel

16:16

companies, oil companies, chemicals companies,

16:19

who have corporate venture capital arms.

16:22

Not only are they investing at the early

16:24

stage or the Series A, Series B stage,

16:27

sort of pre-growth stage, they're also

16:29

interested in forming partnerships with the

16:31

companies and joint ventures

16:33

and building projects. So you

16:36

look at cement companies that have huge

16:38

challenges on how they decarbonize

16:40

their operations and they're leaning

16:42

into using different carbon,

16:45

low carbon cement technologies. They're

16:47

looking into electrifying their thermal

16:49

energy, going into cement plants,

16:52

and a variety of other things. That's just

16:54

one example, but the steel industry is doing the

16:56

same thing, the mining industry is doing the same

16:58

thing, the oil and gas industry is doing the

17:00

same thing. I would say we

17:03

need to do more than we need to do faster. I

17:05

think one of the interesting things about that point

17:07

actually is if you look at who

17:10

were the biggest merger for exits

17:12

for companies, it was

17:14

Shell and BP, followed by Schneider Electric.

17:18

That was not like an exchange-based

17:20

thing, going to NASDAQ or Expansive

17:22

or whatever. So it

17:25

is really true, but it's still not

17:27

a big universe. And of course,

17:30

some people are probably listening and offended

17:32

by the idea that BP or Shell

17:35

are the biggest off-ramp for

17:37

commercialization of these companies.

17:40

It's a great point. We think all

17:42

avenues are needed. We

17:44

like to be the carrot, but I

17:46

have friends who are

17:48

in litigation against oil companies for

17:51

climate change, and I call them

17:53

the stick. I think

17:55

it may take all angles

17:57

to move the planet toward

18:00

decolonization. So what does that process

18:02

look like then when it goes well and

18:04

you get that idea that comes out

18:06

of the lab into demonstration to a

18:08

pilot and then gets commercialized and deployed

18:10

well? Can you give us an example

18:12

of one you'd point to and say, look, this is really how

18:14

the process should work? Well, I'm not

18:16

sure there are a lot of perfect examples,

18:18

but I would say that there

18:21

are a number of examples where

18:23

companies have used more or less

18:25

an inefficient capital stack by raising

18:27

hundreds of millions of dollars of

18:29

equity. Now, they've raised that equity,

18:31

so those equity providers have felt

18:33

like the technology works, they

18:35

can deploy it at scale, and they're willing to take

18:38

that risk. And Redwood

18:40

is a pretty good example of that. I mean, Redwood

18:42

now has a loan guarantee, but Redwood

18:44

has raised, I think, upwards of

18:46

$4 billion of equity

18:48

for recycling critical minerals, recycling

18:51

waste from battery plants,

18:54

and turning them into cathode materials.

18:56

So that's an example of perhaps

18:58

not the most efficient capital stack

19:01

because it's all equity. You know,

19:03

in that $4 billion, there's no

19:05

project finance, there's no corporate debt,

19:07

there is a DOE loan guarantee associated

19:09

with that. But that's an example where

19:12

investors were willing to take the risk.

19:14

There are examples of companies

19:17

that have raised hybrid corporate

19:19

equity capital and corporate debt

19:21

to basically deploy more solar, deploy more

19:23

wind, and that's not necessarily taking a

19:25

lot of technology risk, but some of

19:27

them have a little bit of technology

19:29

risk. And that's where

19:31

that structure, I think, has been useful

19:33

to help the equity providers get

19:36

adequate returns for taking that risk. So,

19:38

I mean, I think that, you know, what

19:40

Dan's saying makes a lot of sense. And

19:43

of course, to my point that the US

19:45

government played a role because one of the

19:47

reasons why people feel really comfortable doing utility

19:50

scale solar, and even now utility sales solar

19:52

with batteries, is because the loan office took

19:54

that risk during the era in 2009 to

19:56

2012 and

19:59

proved out all the projects. And people did well

20:01

with those projects. The government didn't really have a

20:04

failure with any of those utility scale

20:06

projects, so people were able to turn

20:09

them over. Ironically, some of

20:11

them got sold out to buyers from

20:13

South Korea and other foreign countries, so

20:15

the ownership didn't even stay in the

20:17

United States, but basically a lot of

20:19

those projects were proven out. I think

20:22

where it starts to be more difficult

20:24

is we keep trying to come up

20:26

with innovative ways of doing the same

20:28

thing without the US government. So you

20:30

know the big great vision

20:33

was to do it using special

20:35

purpose vehicles, the SPACs, and of

20:37

course those SPACs just did unbelievably

20:39

poorly. And there was a lot of

20:42

catastrophe in the SPACs, especially in the

20:44

sort of EV charging and some of

20:47

the other spaces where we really needed

20:49

it to succeed. And there were just

20:51

some companies that were over-evaluated and it

20:54

was a great company, you know, like

20:56

Proterra, right, where just the whole frenzy

20:58

and then the post frenzy was really

21:00

damaging. And how do we square that

21:03

knot? And Dan, I'd like to hear

21:05

your opinion on this because, you know,

21:07

especially in the SPAC world, but I

21:10

think in general too, there was this

21:12

thing, you know, co-invest and take equity

21:14

because that's the way you're gonna

21:16

make big money with these companies and

21:18

you're gonna profit from these giant valuations.

21:20

And you know, Tesla was the model

21:22

story, but then now a

21:25

lot of investors that did that

21:27

lost money and some of these

21:29

guys went under and so

21:31

now you have the reverse appetite where

21:33

now you're afraid to do that. And it

21:35

turned out to be very damaging. So

21:37

we need these sort of innovative finance structures,

21:39

but you know, SPACs are 100% I think

21:42

off the table. What do you think Dan?

21:45

I agree with everything you said about SPACs

21:47

and the public markets in general. When you

21:49

look back at the SPAC market and, you

21:51

know, being down over 90% from their

21:54

offering prices, many of

21:56

those companies were not in a position to

21:59

go public. There's a

22:01

huge difference between raising

22:03

low-cost capital and creating

22:05

liquidity events. And I believe that

22:07

most of the investors who wanted

22:09

to emerge their climate

22:12

tech companies into SPACs were

22:14

looking for liquidity. They weren't necessarily looking

22:16

for low cost of capital in the

22:18

public markets, which it actually is. So

22:22

what you had was misaligned incentives.

22:25

And for those reasons, you had companies that

22:27

had no business going public. They were not

22:29

ready to be public companies. They didn't

22:32

have stable revenues and earnings. They didn't

22:34

have enough revenues and earnings. Most

22:36

of them were pre-revenue. And we

22:38

saw a frenzied market where

22:41

demand pushed valuations higher

22:44

only to be rationalized over

22:46

time. And those valuations went

22:48

way below the offering price, close to back

22:51

to where the companies were valued in the

22:53

private markets, which is where they

22:55

still should be. So I think,

22:57

yeah, you characterize it quite well. But

22:59

that was also kind of

23:01

the whole how do we commercialize a

23:04

good company, because it just burned so

23:06

much capital to launch these

23:08

companies, especially when you're in a

23:11

big infrastructure play or you're in

23:13

a big manufacturing play. And

23:16

I don't have it at my fingertips,

23:18

but I've seen the, like, Bloomberg New

23:20

Energy Finance, you know, tracks the capital

23:23

requirements of companies. And a lot of

23:25

companies went from positive to negative in

23:27

2022, 2023 as they matured. There

23:32

was just this deep cash requirements that

23:34

went way beyond revenues. And that was

23:36

really the big problem in the sector.

23:38

Yeah, I'd agree. I mean, when we look at

23:40

our portfolio, we are looking

23:42

for companies like Enthcycle, which is in

23:45

the critical minerals recovery space, Line Vision,

23:47

which we could talk about later in

23:49

the transmission line monitoring space, Connect DER,

23:51

which has a meter collar deployed at

23:54

the residential level. These are

23:56

all companies that they're scaling up their technologies.

24:00

at how we want them to scale. We want

24:02

them to scale as fast as possible, but

24:04

under reasonable and sustainable

24:07

capital stack positions. So

24:10

it's not feasible for them to take hundreds

24:12

of millions of debt onto their balance sheet.

24:15

It's feasible for them to take some equity, small

24:17

amounts of debt, scale up to the next level, raise

24:20

more equity, and eventually get to

24:22

commercialization, leveraging strategic partners wherever possible

24:25

because they often provide capital for

24:27

the projects. They often will invest

24:29

in the company, and they'll also

24:31

be an off-taker of your product

24:33

offerings so that you can

24:36

then, once you're operating, refinance

24:38

the project, take some equity out,

24:40

and layer some debt into that project.

24:43

You have to get through the construction and

24:45

early operations phase. So I

24:47

think part of the problem is

24:49

just the mindset, right? Because what

24:51

you're describing, even for

24:54

your own investors, takes a long

24:56

time. But everybody has these exit

24:58

plans. Is it a three-year window

25:00

for exit? If it's a five-year

25:02

window for exit? Nobody has a

25:04

10- or 20-year window for exit.

25:06

And then even the people who

25:09

are behind the founders or the

25:11

original investors would tell me if you think I'm

25:13

wrong. I'm going to be very unpopular with the

25:16

listeners for making the statement. I think there's

25:18

a group of people who viewed some

25:21

of these opportunities as a get-rich-quick.

25:24

Right. I would agree with you.

25:26

We've tried to stay away from investors

25:28

who have that mindset because we're quite

25:30

forthright and honest with our limited partner

25:32

investors about the historical timeframes that

25:34

it takes to invest in companies

25:36

and bring them to scale such

25:38

that they're an acquisition candidate or

25:41

it takes even longer if you want

25:43

them to be a public market opportunity.

25:45

So we look at strategic sale as

25:47

the primary exit vehicle. And we

25:49

say that takes at a minimum four years and

25:51

more like six or seven years. And we try

25:53

to be honest about that. We look at our

25:55

historical track record. I mean, we've been doing this

25:57

since 2005. we've

26:00

been in the space longer than most and

26:03

we have a lot of valuation discipline,

26:05

we have a lot of tech diligence

26:07

that we conduct. And so I'd like

26:09

to think that one, that results in

26:12

fewer failures but also in more rationality

26:14

around how we can offer outsized returns

26:16

by being very sensitive to valuation and

26:19

efficient about capital scale up and also

26:21

just realistic about time frames. I

26:23

won't say we have all the answers though. I mean,

26:25

does that conflict with the mindset of the

26:28

climate emergency, right? Because you know, you're telling

26:30

us we've got to go from 1 trillion

26:32

to 9 trillion. And if we're taking a

26:34

cautious approach so that we don't make these

26:36

giant mistakes or push companies to the brink

26:39

of bankruptcy by rushing them along, maybe we're

26:41

not going to do the job. So I

26:43

don't know. I mean, what's the solution? Yeah,

26:46

I think there's a disconnect there in

26:48

that we're not going to be able

26:50

to bring all the new technologies

26:52

we need into the market as quickly as we

26:54

need to. But we do

26:57

have sufficient technologies today to start

26:59

building out large scale wind, build out

27:01

more solar. If you look at

27:04

the last two years, residential solar is

27:06

almost dead because of interest rates. And

27:09

we have such challenges around

27:12

our grid and our transmission system

27:14

and interconnect cues that we aren't

27:16

able to put nearly enough wind

27:18

and solar into the market at

27:20

the utility scale as we

27:22

need to be doing. I mean, we could be

27:24

spending tens of trillions of dollars on

27:27

that alone, including offshore wind, which as

27:29

you pointed out, has hit

27:31

up against some really significant cost

27:33

challenges, as has most of the

27:35

industry. So there are challenges with

27:37

interconnect, there are challenges with interest rates

27:40

and capital costs. And that's part of

27:42

the reason we haven't seen the deployment.

27:45

So question, what more could governments be doing to help

27:47

both US government and other governments around the world? Everyone

27:49

says they are committed to the goals of the Paris

27:51

Agreement. That was what they all signed up to back

27:53

in 2015. As you say, it doesn't look

27:57

like investment at the moment is flowing at

27:59

anything like. the rate we need to

28:01

achieve those goals, therefore surely it should

28:03

be on governments to do more to

28:05

ensure that the capital does flow. But

28:07

as you said, you've talked about some

28:09

ways in which government can make a

28:11

difference, can help investors get comfortable with

28:14

investing in companies, loan guarantees, other things

28:16

that are done, grants, tax credits,

28:18

I guess you could also include in that,

28:20

which will help private capital to flow. Is

28:22

your point then that although the government already

28:25

seems to be doing quite a bit, it's

28:27

just nowhere near enough still? Is there much

28:29

more that could be done if they would?

28:31

Well, I would say that there's always more

28:34

that could be done. I was fortunate today

28:36

to be talking to a former very senior

28:38

White House official. And

28:40

my question for him was,

28:43

what do you think the US government

28:45

should be doing about our transmission

28:48

grid and distribution grid? Because I

28:50

view that as really a root

28:52

cause of our ability to

28:55

deploy more capital in wind and

28:57

solar. Now, the US

28:59

government only has some control

29:01

over fixing the challenges of

29:03

our transmission grid. We

29:05

have federal oversight, we have

29:07

state public utility commission oversight, we

29:10

have regional transmission organizations. It's a

29:12

balkanized system at many different levels.

29:15

And it's therefore extremely hard to

29:17

fix the problem and to get

29:20

utilities on the same page as

29:23

investors in terms of what is

29:25

needed to move more clean electrons

29:27

into the market. In fact,

29:30

the system that we have today

29:32

is really not designed for what we're

29:34

doing right now. It's designed for nuclear

29:36

power plants and coal power plants in

29:38

the locations they were. We have

29:41

to redesign our electricity system, perhaps

29:43

using things like AI to better

29:45

manage the movements across the grid

29:47

and things like Line Vision, grid

29:50

enhancing technologies to better monitor our

29:52

grid. But right now, the

29:54

chances of fixing the grid such that

29:57

we can bring more capacity on more

29:59

clean energy. capacity on looks very challenging.

30:01

There are only a few states that

30:03

are really starting to recognize the

30:06

transmission interconnect queue and address

30:08

it. But until we do

30:10

that, I think we have a root cause

30:12

of limiting our ability to deploy. Of course,

30:15

we have interest rates and higher costs, and

30:17

those play a factor. But I think

30:19

interconnect is the biggest factor. On

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30:56

the future of energy production. Right,

31:06

so that's a good point, I think, to get

31:08

into a couple of the specific companies that you're

31:10

investing in at Clean Energy Ventures. Let's talk about

31:12

LionVision, which you were just mentioning, as you say.

31:15

So there is this fundamental problem that the United

31:17

States in particular has, but actually I think it's

31:19

true in many parts of Europe as well. And

31:21

now, for a fact, it's very much the case

31:23

in the UK and several other places around the

31:26

world. It's really hard to build new power transmission

31:28

infrastructure. And so you look at things like the

31:30

various ways you could measure this. But one of

31:32

the things that we follow up with Mackenzie is

31:34

the question of how long it takes a

31:37

new power generation project to get interconnection

31:39

to the grid. And a few

31:41

years ago, let's say five years ago, that might have been a couple

31:43

of years, it would take you now it's

31:45

up to six or eight years. Apparently,

31:47

we expect that by the end of this

31:49

decade, you'll be having to wait eight to

31:51

10 years typically to get a new project

31:53

connected to the grid. It's absolutely insane. I

31:55

mean, it's crazy, as you say, given in

31:57

particular, the urgency of the challenge we face.

32:00

It's absolutely mad that we have these very,

32:02

very long delays. But then you have various

32:04

companies doing things broadly coming out of the

32:07

category of what they call grid enhancing technologies

32:09

that offer ways around that, not for things

32:11

that you could do without actually physically putting

32:13

new power lines in. So do you want

32:15

to talk a little bit about Line Vision

32:18

then? What is it they do and

32:20

how can they help with this issue of grid congestion? Yeah.

32:23

First of all, I think it's important to

32:25

say that Line Vision was spun out of

32:27

a company called Genscape, which

32:29

became a Wood McKenzie company. Oh,

32:32

indeed. And there are lots

32:34

of great historical lineage to Wood McKenzie,

32:36

which we love to see. Yeah,

32:38

no, that's very true. There is a historic connection and also

32:41

actually full disclosure, I should say, that a colleague of mine,

32:44

a great guy called Chris Seiple, he's actually an

32:46

advisor to Line Vision. So as I say, just

32:48

in interest of full disclosure, I should put that

32:50

on the record, but not influencing anything we're going

32:52

to be saying about it now, I'm sure. Right.

32:55

So Clean Energy Ventures Fund 1 invested in

32:57

Line Vision in around 2020, 2019, 2020. And

33:03

what we saw was, back then even,

33:05

a situation where utilities

33:07

really had no idea how to

33:09

operate their grid between substations. So

33:12

you had all these wires, you had

33:14

lots of congestion, and they

33:16

didn't have localized weather forecasts,

33:19

they didn't understand wind speed

33:21

at different locations. And

33:23

so it was very hard to understand

33:25

what the dynamic line rating, in other

33:27

words, how much power you could flow

33:29

over transmission lines was at any given

33:32

location. And that caused huge amounts

33:34

of congestion on the system. And frequently,

33:36

that congestion prevented wind and

33:38

solar from getting onto the system. So

33:40

you had wind available, you had

33:42

the sun shining, but you couldn't

33:44

deploy those kilowatt hours onto the

33:46

system. And so when we looked

33:49

at Line Vision, studies by

33:51

Hepri projected that some 40% of

33:53

wind and solar

33:56

was not being dispatched because of

33:58

transmission constraints. We saw the use case

34:01

of Line Vision, which basically has a

34:03

technology for using LIDAR, which

34:06

I think most of us are

34:08

aware of for driving today for

34:10

autonomous vehicles, and then also using

34:12

thermal sensing to understand the

34:14

dynamic line rating, how much power you

34:16

can move across the transmission line at

34:18

any given moment in time. Their

34:21

technology can be deployed on a

34:23

tower rather than directly onto the

34:25

lines. It's much easier to

34:28

install, and it can look

34:30

down a few miles of the transmission line

34:32

span and provide the utility

34:34

with a huge amount of data about

34:37

dynamic line rating, line health,

34:39

whether there's any vegetation that's

34:41

impeding the line, and line

34:44

awareness. Things like

34:46

wind and storms are

34:48

also monitored by the technology. This

34:51

is a huge amount of information that you're

34:53

providing the utility that heretofore they never had

34:55

before. You mentioned

34:57

the UK, which Line Vision has done

35:00

pilot projects in the UK, and

35:02

an independent study in the UK estimated that

35:05

six million pounds is lost today due

35:08

to transmission congestion. For the course

35:10

of the year, you're talking about

35:12

hundreds of millions of dollars or

35:14

billions of dollars of losses as

35:16

a result of transmission constraints on

35:19

that system. Line Vision's

35:21

technology can easily correct many

35:23

of those constraints and reallocate

35:25

movement of power on

35:28

other lines. That's how we

35:30

saw the opportunity there as incredibly

35:32

interesting. We're very,

35:34

very thankful that Line Vision has

35:36

been scaling. They're in about 10

35:38

plus of US utilities, and of

35:40

course in the UK, the number

35:42

of other countries with scaled deployments.

35:46

They also took advantage of federal

35:48

infrastructure legislation that provided what was

35:50

called GRIP funding for utilities. They

35:53

partnered with a number of utilities,

35:55

received some federal funding so that

35:57

they could do scaled deployments in...

36:00

new areas as well. So

36:02

Amy, what do you think about these companies

36:04

then? It's Line Vision and various others were

36:06

operating on the same kind of area which

36:08

are essentially trying to make better use of

36:10

existing infrastructure so you can get more power

36:12

down the same lines. Do you think this

36:14

is a promising area? I think

36:17

it's really promising and for all the

36:19

reasons that Dan said but also just

36:22

the opportunity over time between machine learning

36:24

and AI is just going to get

36:26

bigger and better and so

36:28

I think the interesting opportunity is

36:30

not only to need less

36:33

infrastructure because we're able to get the

36:35

existing infrastructure or some upgrade in the

36:37

infrastructure to work better but how do

36:39

you get utilities involved? Because one of

36:41

the things you know I got my

36:43

little piece of paper here wave it

36:45

around right with what were the most

36:47

active climate acquirers in 2023

36:51

and when I look down this

36:53

list of all the different companies that are

36:55

big players there's no utility. I

36:58

mean when you think about the opportunities

37:00

like the kind of opportunity Dan's talking

37:02

about and you think about the utility

37:04

sector first of all in the United

37:06

States that's like a crime that

37:08

there isn't more utility going

37:10

around and being able to take that

37:13

step everything's just so conservative and then

37:15

you have some players that act like

37:17

they're really incumbents and they're just trying

37:19

to squash anything that's innovative and then

37:21

when you go internationally it's an even

37:23

deeper problem because in places like India

37:26

and notably in say

37:28

South Africa and some of the

37:30

big emitting countries the utilities the

37:32

state utility which you know has

37:34

a giant market share or in

37:36

some cases their monopoly are deeply

37:38

indebted facing bankruptcy not able to

37:40

really raise capital can't do these

37:43

kind of upgrades that are just

37:45

so important and so you're having

37:47

to think about again you know

37:49

what's the financing paradigm

37:52

to help like S-COM of South Africa

37:54

or some of the Indian utilities like

37:56

how we going to manage that because

37:58

we're not going to really the

38:01

achievements that we need to do to

38:03

make progress on climate change without being

38:05

able to rescue those entities. Yeah,

38:08

so those are fantastic points Dan. I mean

38:10

as Amy's just saying, the utility industry is

38:12

inherently deeply conservative. Utilities very often stay owned

38:14

or own regulated returns and so the main

38:16

thing they really have to worry about is

38:18

keeping the lights on. If you're running utility

38:20

you just have to keep the lights on

38:22

for the best of your ability. Everything else

38:25

is secondary. You do not have a

38:27

massive incentive at all to innovate and also as I

38:29

was saying around the world in many places utilities

38:32

are under extreme financial pressure

38:34

and certainly don't have

38:37

the capital available to kind of back

38:39

innovation take risks. So how do you

38:41

persuade people that this kind of technological

38:43

advance, this kind of innovation is actually

38:45

something that's gonna pay them benefits and

38:47

is worth spending money on? Well I

38:49

think LionVision has it right in that

38:51

they would go in and talk to

38:53

the head of transmission in a utility

38:56

and say look we are not here

38:58

to replace your plans

39:00

to build new transmission lines. We

39:02

need new transmission lines. What

39:05

we're here to do is help you get

39:07

the most out of your existing system so that

39:09

you know in a more intelligent

39:12

fashion where to build new

39:14

lines. If you can fix a

39:16

transmission constraint where you're gonna build a new line,

39:18

don't build a new line there. Build a new

39:20

line where you need to put new generation. So

39:23

utilities have generally been very

39:25

open to the idea of

39:28

this combination of we need new lines

39:30

and we need grid enhancing technologies to

39:32

help us understand where those new lines

39:35

need to go. No one's trying

39:37

to tell the utilities that I think

39:39

no one believes that we don't need

39:41

a much improved transmission grid in the

39:43

United States because our transmission

39:45

grid is 100 years old. So

39:47

I think it's generally recognized that we have to

39:49

upgrade our transmission grid. Maybe there'll be

39:52

some new technologies like VIR or others

39:54

that are doing kind of superconducting transmission

39:56

lines but even so either

39:58

way we understand and the utilities

40:00

appreciate, because they are at a rate of

40:02

return on those lines, that more transmission is

40:05

needed. Got it. Yeah, well, certainly the future

40:07

of that company is going to be a

40:09

really interesting one to watch. And that whole

40:11

sector of grid-enhancing technology is definitely something to

40:13

keep a close eye on for the future.

40:16

I want to talk about another company also that

40:18

you've invested in. And well, I'll

40:20

talk a bit about why I'm so interested in

40:22

why it called it I. But first thing, I'm

40:24

not exactly sure how you pronounce their name. It's

40:26

spelled O-X-C-C-U. Do you say

40:29

O-X-C-C-U? Do you say OX-C-C-U? How do

40:31

you pronounce them? We say OX-C-C-U, and

40:33

that reflects its history of being spun

40:35

out of Oxford University. Right, right, got

40:37

it. So OX-C-C-U then is developing sustainable

40:39

aviation fuel, which is what they call

40:41

an E fuel, where they aim to

40:43

take hydrogen and carbon dioxide, react them

40:45

together to create an E fuel that

40:47

can be used in jet airliners. Of

40:50

course, as is pretty well known,

40:52

I think it's very hard to

40:55

find decarbonisation solutions for aviation. You

40:58

can have battery powered aircraft, they

41:00

probably can fly, but probably over short

41:02

distances. If you're thinking about going long

41:05

haul, you really need something else. And

41:07

so some kind of zero carbon

41:09

fuel is probably going to be the only

41:11

way you can do that. My big problem

41:13

with these E fuels though, the thing I

41:15

worry about is what I think of as

41:18

the Star Trek problem, as in that, you

41:20

know, the Scotty line, you cannot change the

41:22

laws of physics, chemistry, whatever, but my science

41:24

is probably being strained a bit at this

41:26

point. But the point being that combining carbon

41:28

dioxide and hydrogen to make a compound is

41:30

essentially hydrocarbon. It's basically what they call

41:33

an endothermic reaction. In other words, it

41:35

requires heat and obviously the reverse of

41:37

that, if you take gasoline or aviation

41:39

fuel, whatever, and burn it, you release

41:41

carbon dioxide and that's an exothermic reaction

41:43

which generates heat. And so that's a

41:45

lot easier to do. And that

41:47

feels like then those endothermic reactions, that feels

41:49

like that's what you're always trying to do.

41:51

You're sort of trying to push water uphill

41:53

if you like, and that's always going to

41:56

build in inefficiency and cost into that system

41:58

whenever you try and do it. As

42:00

I say, that is based on a

42:02

fairly cursory understanding of the science though.

42:05

So Dan, maybe I'm wrong about

42:07

that. I mean, when I think about these e-fuels,

42:09

what do you see in companies like OxyZU? What

42:11

makes you think that they can be viable and

42:13

they're worth backing? Well, Ed,

42:15

it's a great point. And there

42:17

are a number of considerations we

42:19

have to look at, efficiency, cost

42:21

being to the most important. If

42:24

our goal is to decarbonize or

42:26

certainly radically reduce the carbon intensity

42:29

of the fuels business, then

42:31

it's highly likely that if

42:33

we're using electrochemical processes and

42:35

starting with electricity, then making

42:38

hydrogen, then making e-fuels, we

42:40

probably aren't going to be as efficient

42:43

as a cracker in a refinery.

42:46

But a cracker in a refinery has an

42:48

enormous carbon footprint. So you can't

42:50

have it both ways. If we want to decarbonize

42:53

the fuel sector because we don't have any alternatives,

42:55

particularly in jet fuel, as you point out, then

42:57

we're going to have to maybe go to a

42:59

lower efficiency process compared to what we have. But

43:02

our goal, and

43:04

this is how we looked at OxyZU, is

43:07

to find a technology with a cost

43:09

entitlement that could ultimately at scale be

43:11

competitive with conventional jet

43:14

fuel. And we believe OxyZU is really the

43:16

only company that can do that. And

43:19

I would like to highlight on our team,

43:22

we have Mika Ben-Nayim who's

43:24

an electrochemical PhD. We

43:26

have Luzhiq who's a physicist, as you said,

43:28

the laws of physics and the laws of

43:30

chemistry. We have Jeff Weiss who is a

43:32

patent expert who reviewed their patents. We have John

43:34

Wisniewski who is one of

43:36

our venture partners who worked for Exxon Chemicals

43:38

for 30 years and really knows catalytic processes.

43:41

So when we went into diligence at OxyZU,

43:43

we brought a team that could really understand what

43:45

they were doing and whether this is something that

43:47

could work. And the simplest way

43:50

to describe OxyZU compared to other

43:52

eFuells companies is they are a

43:54

one-step process from CO2 and hydrogen

43:56

all the way to jet fuel.

44:00

When you look at other processes

44:02

in this space, they're generally two

44:04

steps. You have to first turn

44:06

CO2 into CO. That sounds simple, you

44:08

know, you're just kind of taking one oxygen

44:10

out, but it is an

44:13

incredibly hard process that involves a technology

44:15

called reverse water gas shift, really elegant

44:17

name, and it's an

44:19

expensive process and it's an energy intensive

44:22

process and it's a catalytic process. So,

44:24

effectively, if you want to make

44:26

jet fuel from CO2 and hydrogen,

44:28

and again, we want to do

44:31

it from CO2 because we

44:33

want to reduce CO2 from

44:35

all sorts of point source emissions

44:37

and biogenic CO2 and

44:39

turn it into something usable. But if

44:41

you take a traditional route, you have

44:43

two steps, two very expensive steps, because

44:46

after you turn that CO2 into CO,

44:48

then you have to put the hydrogen

44:50

and the CO into a Fischer-Tropsch

44:52

reactor. And that's how you

44:55

get the liquid out of

44:57

that reactor using a cobalt-based catalyst

44:59

traditionally. There are lots of interesting

45:01

variations on that theme, but by

45:03

and large, almost every CO2 and

45:06

hydrogen to jet fuel process requires

45:08

a two-step process. And OPC-CU

45:10

has come up with a new catalyst that

45:12

is a one-step process, and we believe that

45:14

offers a huge cost entitlement in this industry.

45:16

Okay, but it does sound interesting. And they've

45:18

got some big name partners, right? United Airlines

45:21

is involved in some way? Yeah, so when

45:23

we came in and started looking at this,

45:25

there were already a number of

45:27

oil companies and United Airlines looking

45:29

at investing. And the company,

45:31

I think, wisely wanted to have a

45:33

financial lead leading the round. And so,

45:35

we were happy once we did our

45:37

diligence to step into that role and

45:40

corral a number of very, very large strategics

45:42

who wanted to invest in the round, and

45:44

who I think are going to be critical

45:46

for their scaling up. Who else

45:49

is involved in it, apart from United

45:51

now? So, we have United Airlines, we

45:53

have Trafigura, which is in the energy

45:55

and minerals trading business, we have Saudi

45:57

Ramco sustainability fund, and we

45:59

have... have ENI, an Italian state

46:01

oil company. ENI Next has a very

46:03

good technology group. And so we're excited

46:06

to have all of them because we

46:08

think they're critical and can

46:10

be major customers of the technology. They're all

46:12

in the jet fuel business and they'll trade

46:14

jet fuel and use jet fuel in the

46:16

case of United Ventures. So

46:18

we're very excited to have that consortium. Yeah,

46:21

that is very interesting. And back to

46:23

Amy's point about your gas companies being

46:26

critical players, often in supporting the commercialization

46:28

of these innovations. Amy, what's your take

46:30

on e-fuels? Is it something you think

46:32

is promising? So

46:34

I think one of the interesting challenges for

46:36

the oil and gas industry, a lot of

46:39

times people are talking about they have an

46:41

oil field somewhere and is that going to

46:43

get stranded. But the challenge about how to

46:46

retire or repurpose downstream

46:48

refining units, I

46:50

think is a bigger challenge for the

46:52

industry. And that gets to, you know,

46:54

if you're going to start turning off plants

46:56

that make diesel fuel or you don't have

46:58

as much gasoline demand to sell that part

47:00

of the barrel, you know, what's your long

47:02

term jet fuel plan? Because of course, jet

47:04

fuel is this very premium product that comes

47:06

out of the refining system and you have

47:08

to make all the other products to get

47:11

it. You know, there's four or five products,

47:13

you don't just get jet fuel. So I

47:15

do think it's something that the companies really

47:17

need to focus on and always

47:19

looking for interesting opportunities. And

47:22

the competition right now is plain vanilla.

47:24

You know, am I going to take something

47:26

that's waste to energy or some kind of

47:28

biofuel and use that? So I'm always a

47:30

little skeptical on who's going to win. I

47:33

mean, the promising thing is that you do

47:35

have some flights operating today that are operating

47:37

not on traditional oil based jet fuel, but

47:39

we're the winner is going to be I

47:42

think is still kind of hard to say.

47:44

And I do think a key is that

47:46

this is a sector where having

47:49

a smart oil and gas partner and

47:51

having an oil and gas company that

47:53

realizes that there's going to be an

47:55

opportunity where it's going to be more

47:57

profitable to turn off refining some places.

48:00

and being able to make the jet feel in a

48:02

different process, there's going to be a smart company out

48:04

there that understands that and they're going to be a

48:06

winner. Yeah, no, thanks very

48:08

much. That is very interesting. So I think

48:10

we should just about wrap it up here.

48:13

I wanted just before we get onto

48:15

free electrons and the end, I just

48:17

wanted to kind of get a final

48:19

thought from you about where this leaves

48:21

you both, broadly speaking, in terms of

48:23

thinking about the climate challenge. And given

48:25

everything that we've been talking about for

48:27

the past hour or so, given where

48:29

we are in terms of this huge

48:31

gap, and that's still I think the

48:33

most alarming thing I've heard in the

48:35

course of our conversation is that gap

48:37

between the 1 trillion or so a year that's actually

48:40

been invested and the 6, 7, 8,

48:43

9 trillion that we actually need, but

48:45

also a lot of positive developments, a

48:47

lot of innovation, a lot of activity

48:49

going on out there, a lot of

48:52

people working really hard on this problem,

48:54

coming up with good ideas and getting

48:56

supported. How does this leave you feeling

48:58

about our ability as humankind to actually

49:00

tackle this threat of climate change and

49:03

address it in a way that's going

49:05

to avoid catastrophic outcomes for the planet?

49:07

Dan, what do you think? Well, I'm

49:10

both encouraged and discouraged.

49:12

I'm discouraged by the capital markets

49:14

and the deployment of capital.

49:16

I'm not blaming anyone. I'm saying it's

49:19

a function of the way capital markets

49:21

work. And we need to be

49:23

cognizant of that and try to repure it to

49:26

perhaps bring that risk return balance

49:28

back into equilibrium so that more

49:30

capital is deployed in the places

49:32

it's needed. I'm encouraged

49:35

by the level of innovation,

49:37

the number of companies that have

49:39

been created. They're not all going to

49:41

survive. We should not doubt that. But

49:44

we have some absolutely passionate

49:46

and amazing founders with

49:49

incredible technical expertise who

49:51

are commercializing radical innovations that really

49:53

can have an impact on climate

49:56

change. I'm really encouraged by

49:58

that and I love working. with

50:00

our leadership teams because they give

50:02

me a lot of inspiration and

50:04

encouragement and positive outlook

50:06

for the future. As another example,

50:09

not just the innovators, but companies

50:11

like Google are doing quite

50:14

amazing things. I was at a conference

50:17

and listened to someone from Google on the

50:19

AI side who's using AI to

50:22

reduce contrails of planes, which

50:25

cause effect according to Google, 1%

50:28

of GHG emissions in the atmosphere by

50:31

rerouting planes using AI. So

50:34

they've already got a plan

50:36

to use AI, reroute

50:38

planes using existing routing

50:40

systems, and eliminate or

50:43

at least reduce significantly contrails in

50:45

the sky that are causing greenhouse

50:47

gas. That's an amazing thing. It

50:49

doesn't cost a huge amount of money. You

50:51

don't have to build any huge projects, but

50:53

it has a material impact. I do think

50:56

the promise of AI is very, very

50:58

interesting. I don't think we should think

51:00

about it as solving every problem on

51:03

Earth, but I do think there's a

51:05

very significant role that AI can play

51:07

in helping us perhaps bring things to

51:10

market faster and address really

51:12

challenging technical and engineering issues. Yeah, that

51:14

is a fascinating example. As you say,

51:16

a very hopeful sign about some of

51:19

the ways that technological progress is going

51:21

to help address these issues. Amy, where

51:23

do you come out on this? More

51:25

encouraged, more discouraged? Well, I

51:28

agree with Dan. There's just

51:30

an explosion of amazing ideas and

51:32

people coming up with solutions.

51:35

Absolutely. I'm going to talk about AI

51:37

in a minute when we do free

51:39

electrons. There are just so many different

51:41

applications that could be really, really enabling.

51:43

The problem is we have really a

51:45

broken financial system when it comes

51:48

to innovation, and that's both in

51:50

the United States. I think the

51:52

US government has embraced a good

51:55

positive step with the Inflation Reduction

51:57

Act because it's broad, it's not

51:59

focused. focused on, the way the

52:01

ARA was just focused on basically

52:04

solar deployment. I mean,

52:06

this year having this wide variety of

52:08

bets, some of which won't pay out,

52:10

but a lot of which are going

52:12

to bring more and more of these

52:15

technologies and ideas to market. I think

52:17

the real problem is we have a

52:19

justice issue the way finance is organized,

52:21

where we have countries that are dealing

52:23

with climate change. I

52:25

think the real challenge is not

52:28

just in the US ecosystem, how

52:31

to get consistent capital, but we have capital

52:33

sitting on the sidelines. Oh, it's

52:36

too risky, it's too risky. Oil

52:38

prices went up for one year because

52:40

of the crisis in Europe and for

52:42

everybody who piled in to go back

52:44

into investing in those companies. What

52:47

about why is this other technology is

52:49

just too risky, even if it's something

52:51

that's going to really, really promising? There

52:54

needs to be a way of

52:57

bringing in the sidelined institutional

52:59

capital. It has to

53:01

be beyond just philanthropic capital. We

53:04

have to make institutional capital comfortable

53:07

investing in these solutions and the

53:09

commercial scale up. But then when

53:11

we go abroad to the global

53:13

south, problems even bigger, where you

53:16

have financial stress partly

53:18

because of climate change and

53:20

partly because of other reasons. If

53:23

we can't bring capital to many, many

53:25

countries around the world because of their

53:27

debt structure and the way we have

53:29

an appetite or don't have an appetite

53:31

about investing in a particular place, whether

53:33

that's a place in Africa or Southeast

53:36

Asia, again, giant problem

53:38

not being tackled. So that

53:40

side of the equation really, really depresses

53:42

me. I spent a lot of

53:44

time thinking about it with unfortunately not too much

53:46

of a productive gain. I

53:49

believe that the carbon offsets

53:51

market has a huge potential,

53:53

but all this disarray we're

53:56

seeing in that market about

53:58

verification and credibility. is

54:01

really slowing that down and it's really unfortunate

54:03

because when you try to think about you

54:05

know how are we going to do this

54:07

the green bond market doesn't really solve the

54:09

problem because you have a lot of countries

54:11

that can't issue a bond period and a

54:13

lot of utilities that are bankrupt and can't

54:16

issue a bond so we really need to

54:18

come up with a different way of doing

54:20

this and I still think that carbon markets

54:22

and carbon pricing is going to be a

54:24

critical piece of that. Yeah I

54:26

think that's a great point I do definitely think that's something

54:29

we're going to hear a lot more about during the course

54:31

of this year and I'm sure we'll be talking about it

54:33

on the show a lot more during the course this year

54:35

because of course that is an absolute priority for the UN

54:38

during the course of 2024 aiming at COP 29 in

54:40

Azerbaijan in November which is meant

54:45

to be setting out this new collective quantified

54:47

goal for climate finance which is essentially Amy

54:50

addressing exactly that issue you've been talking about

54:52

how do you mobilize the capital that we

54:54

need around the world to address

54:57

climate change both in terms of reducing emissions

54:59

and in terms of adapting to the impacts

55:01

of climate change so certainly it is a

55:03

item that's kind of

55:05

top of the global agenda at the moment

55:08

it's absolutely something that people are addressing and

55:10

thinking about but as I say it's a

55:12

really difficult problem anyway more on that to

55:14

come we do have to leave it there

55:16

before we go our free electrons personal items

55:19

that we've brought in Amy you

55:21

were just talking about yours you say you've got one what's yours?

55:24

Well so when I was watching some

55:26

of the panels of Davos there was

55:28

a great AI panel and the head

55:30

of Pfizer was there and he talked

55:33

about how using AI has really sped

55:35

up the process for

55:38

testing different combinations of materials

55:40

to come up with a successful drug

55:42

I think we're going to be able

55:44

to do that in the battery space

55:46

and of course today the Chinese

55:48

announced that they see that

55:50

opportunity and as you know

55:53

I'm so very focused with my 2024 prediction

55:55

of what technology am

55:57

I watching on solid batteries.

56:00

So the Chinese announced they're having

56:02

a new all solid

56:05

state battery collaborative innovation

56:07

platform, so CASIP, that

56:09

is going to bring

56:11

cattle and BYD and

56:14

Goshen and NIO all

56:16

into the same grouping. They see

56:18

it as a competitive imperative

56:22

that Toyota and the

56:24

Korean companies and American companies don't

56:26

have a breakthrough in solid state

56:28

batteries and Chinese is left with

56:31

technologies that become obsolete. I

56:36

don't know could this be my mantra

56:39

this solid state battery thing I'm just

56:41

obsessing about it and apparently

56:43

maybe the Chinese are listening to the show

56:45

and they're becoming obsessive about it too. And

56:48

obviously not listening to me being quite

56:50

skeptical about solid state batteries which I

56:52

feel is that technology that has promised

56:54

very much down the years and still

56:57

so far delivered very little. But Dan

56:59

what's your free electron? Well

57:01

I'm gonna do a family plug

57:03

here because my wife Diana Goldman

57:05

is a plant-based chef, teacher, and

57:07

chemist and she is about to

57:10

publish a plant-based cookbook to

57:12

help the world reduce its GHG

57:14

footprint. As she likes to say,

57:16

the single most impactful thing you

57:18

can do for the environment is

57:21

eat plant-based. And

57:23

I fully believe that and of

57:25

course here we are talking about

57:27

energy. The intersection of energy agriculture

57:29

and processing of food to get

57:32

it to our grocery stores uses

57:34

an enormous amount of energy.

57:37

And if we can use plants instead

57:39

of animals then we will

57:41

reduce our greenhouse gas emissions footprint

57:44

rather considerably. So her cookbook is

57:46

called the Bean Town Kitchen cookbook

57:49

and it will be available in the coming months.

57:51

Thank you for that family plug. No it's

57:54

a pleasure. Certainly 100% agree with

57:56

you as you say the importance of shifting towards

57:59

a more plant-based diet. I've been doing

58:01

a bit of that myself. I certainly eat

58:03

a lot less meat now, I feel, than

58:05

I used to a few years ago. I've

58:07

not been able to go wholly plant-based but

58:10

perhaps once I get your wife's cookbook that'll

58:12

be the thing that'll just finally make it

58:14

possible before we unlock those doors. My

58:17

free electron very very quickly just watching

58:19

the Super Bowl and this is essentially

58:21

I'm just stealing an idea from Sammy

58:23

Roth who's a very good environment columnist

58:26

and reporter at the LA Times pointing

58:28

out about the commercials in the Super

58:30

Bowl where obviously it's

58:32

often kind of the theme of the

58:34

commercials in the Super Bowl often captures

58:36

the mood of the nation. I think a couple years

58:38

ago it was crypto seemed to be the thing, what

58:41

were the commercials about? Crypto. Last year

58:43

I feel like there was a lot of EV

58:45

advertising and it seemed like people were kind of

58:47

building up for 2023 to be the

58:49

year of EVs. Obviously it didn't quite happen

58:51

and EV performance was disappointing in some ways

58:53

in the US market last year so obviously

58:56

the Super Bowl is not always a great

58:58

guide. This year there seemed to be no

59:00

theme at all and certainly not a kind of

59:02

energy or climate related theme to the advertising. There

59:04

seemed to be a lot of TV stations advertising

59:06

themselves and some retailers advertising and so on. It

59:09

can work out really what was going on. General

59:11

quality of the of the commercials seemed very poor.

59:13

So although it was an

59:15

interesting development in terms of the energy

59:17

supply for the Super Bowl which is

59:20

the Allegiant Stadium signed a

59:22

deal with NV Energy for 100% renewable energy

59:24

and I think that it were true 100%

59:26

renewables in the sense that they weren't just

59:28

buying credits but they actually had a supply

59:32

from a solar and storage

59:34

plant that could provide enough power to

59:37

match the stadium's usage while the entire

59:39

game was on and using storage even

59:41

then after dark to keep the lights

59:44

on. So in that sense it

59:46

was interesting from climate energy perspective but as

59:48

I say the mood of the nation, the

59:50

kind of the temperature taking that you get

59:52

from watching Super Bowl

59:54

commercials did not seem very positive

59:56

for the energy transition and that

59:58

was certainly something which I guess you

1:00:01

could read as another negative sign. So, time

1:00:03

to watch out for next year, perhaps better

1:00:05

news then. So, unfortunately we do

1:00:07

have to leave it there. Many thanks to you, Amy. Thanks

1:00:09

very much for having me. And many thanks to you, Dan.

1:00:12

Thanks a lot for joining us today. I hope you'll join

1:00:14

us again another time. Thank you, Ed.

1:00:16

Thanks to our producers, Sam Nash and

1:00:18

Toby Biggin-Skilchrist. And above all, of

1:00:20

course, many thanks to all of you for listening.

1:00:22

Please do keep your feedback coming. You can find

1:00:24

us on a variety of social media platforms if

1:00:26

you want to get in touch. Comments, corrections, complaints,

1:00:29

whatever it might be. We're always very keen

1:00:31

to hear your feedback, even praise if you

1:00:33

have some of that. But for now, goodbye

1:00:35

from us. And we'll be back in two

1:00:37

weeks with all the latest news and views

1:00:39

on what's next for the Energy Transition.