🌏 Headwinds for offshore wind #173

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In news, clean energy developers continue to face the headwinds of rising interest rates - with especially strong gusts hitting offshore wind. Others are taking a hit as well, with Sunrun’s $1.2B writedown of its Vivint Solar purchase and Summit’s CO2 pipeline setback. Meanwhile, the DOE is boosting transmission, buying capacity on transmission projects for the first time and UAW strikes come to a close.

In exits, Ford snaps up EV charging company AMP and in funding, ~$200M for air-core motors and $100M for 3D metal printing.

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Offshore wind adrift at sea

Orsted tested

Last week, Danish wind developer Orsted announced a $4B writedown (with the possibility of more to come) after canceling 2.2 GW-worth of planned offshore wind farms off the New Jersey coast. Ocean Wind 1 and 2, both FOAK projects in the state, would have powered ~900,000 homes. The news follows a trend of abandoned projects that could capsize the White House’s hopes for 30 GW of offshore wind by 2030.

Cancel culture

A supply chain crunch, permitting delays, and waves of interest rate hikes are crashing up against offshore wind-specific PPA structures unmoored from macroeconomic realities. Case in point: 5.5 GW of project cancellations this year alone, with market uncertainty in the forecast.

bp and Equinor are reassessing their New York offshore wind plans after taking $540M and $300M impairments respectively following state officials’ refusal to revise power prices upward.
Vattenfall also canceled 1.4 GW of UK offshore wind owing to a 40% increase in tech costs. The project was locked into a 15-year PPA at record-low prices.
Both Fitch and Moody’s downgraded Orsted partner Eversource for expected lower sales prices and longer transaction times on the sale of 3 offshore wind projects.

Offshore windfalls and pitfalls

Orsted wrote in a press release on Wednesday it had “updated its view” on “tax credit monetization and the timing and likelihood of final construction permits.” The developer’s comments sum up a litany of offshore headwinds:

Supply chain: Offshore wind projects face delays and significant inflationary pressure due to longer development timelines and constrained supply chains and construction resources. There were only 9 highly specialized 10 MW+ turbine installation vessels worldwide in 2020. And US investment for offshore wind ports, installation vessels, and manufacturing facilities would have to step up 5X to $22B to supply 4 to 6 GW of projects per year.

Source: NREL Supply Chain Roadmap for Offshore Wind

Advance contracts: While the cost base has increased, contracted rates for power have already been locked in, reducing project margins and probability of success. Offshore wind contracts are signed far in advance of finalizing cost, financing, and tax credit qualifications. Meanwhile, for other renewables like solar, storage, and onshore wind, costs are typically fixed at contract signing (not before).
Tax credits: The IRA equips offshore wind with the same 30% credits as other renewables, but the 10% bonus for “energy community” projects is more difficult to secure. Additional domestic manufacturing incentives are equally elusive (the first US turbine blade factory is currently under construction).

Rising tides to come

The current headwinds are generally tied to macro-cyclical impacts of higher rates, so offshore wind may rise again - especially with a turbo boost from governments.

The Department of Interior just approved Dominion’s 2.6 GW offshore plant off the coast of Virginia, the country’s largest ever. Connecticut has implemented a bidding system that promises a 15% flex in power pricing indexed to inflation.
The EU also announced a “Wind Power Package” to speed up project permitting, improve auction design, and index auction prices and tariffs to better absorb increasing costs.

Deals of the Week (10/30-11/5)

Late-Stage / Growth

🚗 Infinitum Electric, an Austin, TX-based air-core motors manufacturer, raised $185M in Growth funding from Just Climate, Ajax Strategies, Chevron Technology Ventures, Cottonwood Technology Fund, Galvanize Climate Solutions, and other investors.

🏭 Seurat Technologies, a Wilmington, MA-based 3D metal printing developer, raised $99M in Series C funding from NVentures, Capricorn's Technology Impact Fund, Honda Motor, Cubit Capital, True Ventures, and other investors.

Early-Stage

💧 Fibracast, a Hamilton, Canada-based water and wastewater treatment developer, raised $45M from Cycle Capital and Export Development Canada.

⚡ Talus Renewables, an Austin, TX-based green ammonia system developer, raised $22M in Series A funding from Material Impact, Xora Innovation, Cavallo Ventures, Wilbur-Ellis, and Rice Investment Group.

🧪 Triplebar, an Emeryville, CA-based biomaterials discovery platform, raised $20M in Series A funding from Synthesis Capital, The Production Board, Stray Dog Capital, and iSelect Fund.

🛰 Kuva Space, an Espoo, Finland-based earth observation technology developer, raised $18M in Series A funding from Nordic Foodtech VC, Earth VC, Business Finland and Voima Ventures.

💧 Aclarity, a Mansfield, MA-based wastewater treatment system developer, raised $16M in Series A funding from Aqualateral, HG Ventures, Bidra Innovation Ventures, MassVentures, Burnt Island Ventures, and other investors.

🌱 Redex, a Singapore, Singapore-based Renewable Energy Certificates marketplace, raised $10M in Series A funding from Aramco Ventures.

📦 Fibmold Packaging, a Mumbai, India-based eco-friendly, molded fiber packaging developer, raised $10M from Accel and Omnivore.

♻️ TVARIT, a Frankfurt am Main, Germany-based zero-waste metal manufacturer, raised $7M in Series A funding from 4impact, Futury Capital, Matterwave Ventures and Momenta.

🌾 Bioomix, an Odense, Denmark-based microbial solutions for agriculture developer, raised $7M in Seed funding from Planetary Impact Ventures, PreSeed Ventures, West Hill Capital, and HBL Invest.

☀️ SunDrive Solar, a South Sydney, Australia-based copper-based solar cell developer, raised $7M in funding from the Australian Renewable Energy Agency.

🌱 ESG Flo, a New York City, NY-based ESG data management platform, raised $5M in Seed funding from Rho Capital Partners, Bain & Company, Contour Venture Partners, and Tola Capital.

🌬 Airloom Energy, a Laramie, WY-based utility-scale wind power developer, raised $4M in Seed funding from Breakthrough, Lowercarbon Capital, and MCJ Collective.

🌾 Tupu, a Berlin, Germany-based urban mushroom farming developer, raised $3M in Seed funding from FoodLabs, Clear Current Capital, IT-Farm, Coast Cap, and FoodHack.

🧪 Montinutra, a Kuhmo, Finland-based bio-based chemicals manufacturer, raised $2M in Seed funding from Metsä Spring.

⚡ Voltan Energy, a Helsinki, Finland-based ground-source heat systems developer, raised $2M in Seed funding from Kiilto Ventures.

Other

⚡ Zeno Power, a Washington D.C., DC-based radioisotope power system developer, raised $8M in Grant funding from the US Department of Defense.

Exits

🔋 AMP, a Santa Fe Springs, CA-based energy management for e-mobility developer, was acquired by Ford.

New Funds

Clay Capital (fka Vis Vires New Protein), a Central Singapore, Singapore-based investment firm, closed its $145M fund that invests in food & ag companies.

Bee Partners, a San Francisco, CA-based investment firm, closed its $50M fund that invests in early-stage deeptech companies.

Can’t get enough deals? See full listings and deal analytics on the Sightline Climate platform

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In the News

The Department of Energy is buying capacity on three transmission projects, aka serving as an anchor customer, buying the capacity with federal dollars, then selling the contract later to reduce the risk of incompletion. This $1.3B investment marks the first time that the DOE has bought capacity on transmission projects. In more transmission news, PJM selected seven applicants to build $5B of new transmission in the mid-atlantic region. [Tune into our recent issues on power markets and interconnection.]

Recent project cancellation woes are spreading far and wide as Navigator and Summit Carbon Solutions both faced setbacks on their CO2 pipelines, citing trouble with obtaining local permits. Summit delayed its pipeline until 2026 while Navigator completely canceled its Heartland Greenway pipeline project.

GM officially reached a tentative agreement with United Auto Workers (UAW) ending strikes against Detroit automakers and issuing a historic win for labor unions. The new contract will cost GM roughly $7B over the next 4.5 years.

China calls for more talks with the EU over the Carbon Border Adjustment Mechanism (CBAM), which imposes a levy on high-carbon goods imports. The tariffs entered a trial period in October and are estimated to increase China's export cost. Meanwhile, a trio of US republican senators introduced a similar initiative to impose a fee on products imported from high GHG-emitting countries, in a move aimed at protecting U.S. manufacturers from competition from China and other countries with lax environmental standards.

Manufacturing onshoring continues. Canadian Solar, a Chinese solar manufacturer, is investing $800M to build a 5 GW solar PV production facility in Indiana.

Rooftop solar hits a cloudy patch with Sunrun writing down $1.2B of its $3.2B Vivint Solar purchase, part of a broader solar decline as spooky season hits clean energy stocks and interest rates make consumers less willing to finance rooftop power systems.

The House GOP voted to slash the EPA budget by nearly 40%, the lowest budget in three decades. While unlikely to pass the Senate and become law, the budget slash sets back the starting line for Senate negotiations.

The UK government announced a temporary suspension of exploitation licenses for deep-sea mining until there is enough scientific data to understand marine ecosystem impact. The UK is joining 20 other countries including Brazil, France, Germany, Sweden and Canada who have also expressed support for pausing exploitation licenses.

Indonesia conducted its first SAF-powered commercial flight with the world's most controversial oil. As the largest producer of palm oil, Indonesia is actively promoting the use of palm oil-based biofuels with state owned energy firm PT Pertamina.

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Opportunities & Events

💡 MIT Climate and Energy Prize: Apply on Nov 6th to MIT’s Climate and Energy Prize to receive over $100k in prize money, and continued support for your startup.

💡 NextEra Energy Investments Seed Competition: Apply on a rolling basis to NextEra Energy Investments seed investment competition for pre-Series A companies for up to $500k seed capital investment.

🗓️ Addressing Carbon Emissions: Join RyeStrategy’s live webinar on Nov 7th discussing the top three drivers that motivate SMBs to pursue sustainability initiatives.

🗓️ TDK Energy Week: Join TDK Ventures and Climate Investment at Energy Week 2023 on Nov 8th and 9th to hear energy leaders (including Kim!) speak live from London about the latest advancements, challenges, and opportunities in the energy transition.

🗓️ Climate at Work: Join Work on Climate’s workshop on Nov 14th to learn about facilitating green community organizing.

🗓️ Climate Symposium 2023: Join the annual Climate Symposium hosted at HBS on Nov 18th to network with key innovators within the climate tech space.