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Investors lose confidence in renewable energy as China halts subsidies

Austin Wang

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renewable energy

Over two months ago, the Chinese National Energy Administration (NEA) announced it would stop providing subsidies for onshore renewable energy projects. The announcement seems to have shaken investor confidence. In the first half of 2019, renewable energy investment in China dropped by 39%.

Since China accounts for around 24% of global investments in renewables, it led the charge in a global slowdown of investments in renewables. Overall renewable investment dropped around 14% with U.S. investment dropping 6% and European investment dropping 4%.

Will China Bounce Back?

Still, China’s future looks fairly green. Despite a decrease in investment, China is still providing incentives and power-purchase agreements for solar companies.

Furthermore, China’s goal is grid parity (making solar energy reach the price of coal power). China’s not known for its laissez-faire economics, so the country will probably support the solar industry more in the future.

Chinese renewables will also likely perform much better in the second half of 2019. Twenty-one gigawatts of new renewable energy projects were announced in late May, so investments in them should rise significantly.

Global Renewable Energy Investment Outlook

Even if China bounces back, global renewable investment does seem to be on the downturn. While the U.S. and Europe only experienced small decreases in investments, the world needs to significantly increase renewable capacity to stop climate change.

A combination of factors including detrimental tariffs and shifts in conservatism has caused renewable slowdowns in many developed areas. However, several countries have continued to expand renewable energy development. India increased investments in renewables by 10% and the U.K. increased investment by 35%.

The Big Picture for Renewable Energy

In the grand scheme of things, renewable energy is definitely gaining ground. Despite decreases in investments, renewable-generated-electricity has been growing in volume.

Despite decreases in investments, renewable energy has been growing in volume.
Despite decreases in investments, renewable energy has been growing in volume.

In the United States, renewables comprised 23% of the national energy supply in April. This April marked the first month in U.S. history where renewables contributed more electricity than coal. Although renewable energies always perform better in the Spring, this milestone still signals that renewable energies are becoming more and more cost-competitive.

Conclusions

Short term volatility is inevitable but the overall trend is clear: new technology favors renewables, and we can only expect the capacity of renewables to grow in the long run.

The real question is: will renewable energies scale up fast enough to prevent the worst effects of climate change?

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Climate change poses a serious threat to power grids

Austin Wang

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It’s common knowledge that the oil and natural gas industries are bad for the environment, but the fact that oil and gas threaten electricity supply is much more counterintuitive. Climate change and the resulting extreme weather are a growing cause of blackouts, and as “dirty” energies contribute to climate change, they also indirectly threaten the stability of the power grids they supply.

Blackouts become a rapidly-growing threat

While it may seem far fetched that climate change has caused significant increases in outages, there has been a huge rise in blackouts over the past decade. A report by Climate Central finds that from the mid-1980s to 2012, blackout rates increased tenfold. From 2003 to 2014, an estimated 147 million people were affected by weather-related blackouts.

Storms, tornadoes, and extreme heat all cause blackouts, and climate change only increase the frequency of these events. As global warming continues to raise temperatures, blackouts will become more and more frequent.

Heatwaves make electric grids unusable

Today, heat waves are a serious threat to energy security. Yesterday, one of the largest electric grids in Texas declared an energy conservation emergency as temperatures rose above 100 degrees. As residents scrambled to use air conditioning, electricity demand spiked across Texas. The Energy Reliability Council of Texas suggested that residents reduce energy demand from 3 to 7 pm to prevent blackouts.

Similar energy emergencies could happen all across hot arid regions of the U.S. A study from UCLA’s Institute of Energy and Sustainability found that climate change could cause sweeping blackouts in LA. The combination of a growing population and rising temperatures could easily increase air conditioner use and trigger power grid shutdowns.

Blackouts during extreme heat can be incredibly dangerous as people struggle to cool their homes. In the 1995 Chicago heat wave, an estimated 739 people died due to extreme temperatures and power failures.

Detroit takes a stand to improve power grid security

In Michigan, the state with the most weather-related power outages, citizens are advocating for change. An estimated 800,000 Michigan residents suffer from weather-related blackouts every year and outages are expected to become more frequent.

Detroit has taken steps towards improving power grid security. Utility DTE Energy proposed a $4.2 billion dollar plan to modernize Detroit’s energy grid and make it more resilient to weather-related disasters. However, some argue against fixes that fail to target the root of the problem.

Instead, many activists in Detroit are advocating for the expansion of solar energy. Using solar panels to create community-based micro-grids would allow communities to continue using power during blackouts. Decentralizing the energy supply could also make utility bills cheaper and reduce citizens’ reliance on large utility companies. On a larger scale, solar energy would also slow climate change and the resulting extreme weather effects.

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Sunnova Energy Becomes Latest Solar Financier To Plan IPO

Steven Li

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Sunnova

Texas-based Sunnova Energy, one of the solar market’s leaders working on residential solar and energy management, has reportedly made plans to IPO later this year. Though Sunnova declined to comment on the Reuters report that initially broke the news, anonymous sources close to the company appear to be credible.

Financially, Sunnova’s cap table is a lot more crowded than its closest competitors, including Sunrun, the current market leader in residential solar ownership, and Solar City, now part of Tesla.

The company has reportedly raised over $2.5 billion in funding, a mix of debt and equity fundraising. Its competitors, on the other hand, raised at most in the hundreds of millions prior to IPO. Despite publicly announced round-sizes, Sunnova’s valuation is a black box. As such, Sunnova’s IPO price is far from clear.

Either way, Austin Perea, a solar analyst at research firm, Wood Mackenzie, believes that a Sunnova IPO could clarify investor interest in residential solar. Specifically, with respect to Sunnova’s localized distribution model, market interest is largely unclear. An IPO by a unicorn like Sunnova would offer unprecedented clarity into the private company.

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Interview with Jigar Shah: Operating A $200 Million Venture Fund and The Future of Clean Energy

Steven Li

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Jigar Shah

Many are skeptical about the prospect of shifting over the more renewable and clean energy. After all, America gets over 80% of its energy from coal, oil, and gas. But some entrepreneurs and venture capitalists are bullish about the future of cleantech and sustainability, and that includes Jigar Shah, Co-Founder and President of Generate Capital, a $200 million fund that backs cleantech entrepreneurs.

Recently, we had the opportunity to chat with Shah and pick his brain on the future of sustainability and why he’s confident that investing in it will both generate enormous wealth and help lead positive systemic change.

Shah’s Start In Investing And His Idea Of The Future of Clean Energy

How were you influenced to capitalize on sustainability and pursue a career in clean energy, both as an operator and as an investor?

This really came from a book I read as a child. I was captivated and the more I learned to more it reinforced my hypothesis. Once hooked I kept going and got lots of encouragement along the way.

What was your motivation for starting Generate Capital?

We didn’t have a go-to investor when we started SunEdison. Generate Capital is that go-to investor and we want to make sure every entrepreneur that works hard has fair access to project finance for their ideas.

What is your vision for the future of energy and tech, and how do you believe climate change can generate that enormous of wealth?

The numbers come from Bloomberg New Energy Finance and the Intergovernmental Panel on Climate Change reports on what is needed. The work I have done is work bottoms up to see what is possible and how many entrepreneurs we need to make it happen. 

It is a remarkably small number. Just a million folks around the work pushing in their hometowns for $1 million of deployment per year gets us to a $1 trillion annually. This is already happening. What I do is work to empower these folks with access to projects financing.

Shah On Solar Energy

What spurred your commitment to solar energy in particular?

Frankly solar is just amazing. Almost every electricity source comes from a spinning mass with magnets – but not solar power. It is brand new, empowering, small, and distributed. Just amazing. I don’t think solar power can give us 100% or even 30% of our direct energy, but I do think it can be substantial.

You pioneered “no money down solar.” Can you elaborate on this idea?

In general, people are not used to buying an electric plant that serves them.  Buying a solar power plant is not normal or in the budget. No money down means someone else owns it and leases it to you which included maintenance and all other headaches. You get the best prices because of competition and a worry-free experience.

Shah On Climate Policy And Corporations

Some politicians say climate change is one of our most pressing issues today. Would you agree?

Climate changes the way the Earth and its complex systems work.  I don’t know what will happen, but the warnings from scientists have us bracing for the worst.

What do you wish more politicians and big corporations would do in order to combat the issue of climate change?

The main thing is to recognize that we have all the tools we need already to reduce carbon emissions by 50% in 12 years. We simply need the will power and motivation to get it done. The technologies exist and are cost-effective.  We just need the mandates to deploy at scale.

Getting the Word Out About Clean Energy

You currently co-host Energy Gang, a podcast over at Greentech Media. What’s the goal?

Honestly, it is about giving people a little color behind the news. Clean Energy news can be dry and the nuances matter. We are trying to give people a little insight into how things work and how folks can use the information to further their careers.

How would you encourage people to help build a more sustainable nation? What can young people do specifically to help?

Frankly, it is just by doing.  Figure out what you are good at and use your skills to good use. Whether you are a musician, marketing major, business person, or an engineer, we need you. We need everyone to pitch in. Talk to your sphere of influence – family, friends, elected officials, and others. We need more people to know that the technology is cost-effective and ready to be deployed at scale.

Conclusions

The Future of Clean Energy | The Rising

Investors like Shah (who’ve been operators in the past) are going to be essential in the transition over to cleaner and renewable energy. It’s not enough to have investor support though; founders and operators are also essential.

Fortunately, in Shah’s words, anyone can help. With investors like Shah’s Generate Capital on board to support cleantech initiatives, it’s now up to founders and the next generation to act.

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