🌏 The data center power shift #226

Happy Monday! We know the year’s almost over, but who’s had a bigger year than AI and data centers? A handful of new announcements from Exxon, Shell, Google, and more show how emerging clean firm technologies are scaling up to power the sector.

In deals, $600m in data centers, $44 in lithium-ion energy storage and $35m in drone monitoring.

In other news, US climate policy whiplash, big nuclear plans in Asia, and clean energy FOAK project progress.

💰 ICYMI: We released our new report on the 2024 Climate Capital Stack and Funds, which you get here.

Download Now

🔮 Plus, as we gear up for next year, take our climate tech oracle survey to give us your 2025 predictions (and have the chance to be featured when we write about them in January).

Thanks for reading!

Not a subscriber yet?

Subscribe Now

📩 Submit deals and announcements for the newsletter at [email protected].

💼 Find or share roles on our job board here.

The siren server’s call

Data centers have been racking up new players and partners this week, with a handful of new announcements tackling the load growth challenge with three different approaches to bringing more clean firm power generation online.

What happened?

💨 Gas + CCS: ExxonMobil announced this week it is entering the power generation market, developing a 1.5GW natural gas-fired power plant with carbon capture, designed for behind-the-meter use at data centers. Chevron’s CEO also said that the company has similar plans.
☀️ Renewables: Google announced a partnership with clean energy developer Intersect Power and TPG Rise Climate that takes a “power-first” approach to create industrial parks with co-located data centers and clean energy plants, aiming to address grid constraints and support AI development.
⚡Hydrogen: Data center developer ECL announced plans to build an $8bn half grey, half blue hydrogen-powered data center near Houston with 50MW initial capacity, expanding to 1GW, using fuel cells and battery storage. Its has already signed AI cloud operator Lambda as a tenant.

Why it matters

AI’s substantial computational demands are driving up power consumption in data centers, the backbone of today’s computing infrastructure. In response, key players are racing to meet these energy demands — and in the process, accelerating clean firm technologies. Already, Google partnered with enhanced geothermal developer Fervo for the Nevada-based Project Red, and Amazon signed an agreement with SMR developer X-energy to install four 80MW small modular reactors at Columbia Generating Station in Washington. This is in part due to the unique characteristics of data centers:

Massive, consistent power plays with clean energy mandates: Data centers require 24/7 electricity, while tech companies have committed to carbon-neutral or carbon-free electricity targets. This unlocks the ability for hyperscalers and co-locators to sign lengthy power purchase agreements, effectively serving as anchor offtakers — and they’re willing to pay extra for it, as this creates a strategic advantage.
Meanwhile, the cost of energy is a small piece of the AI pie. “The cost of energy appears to be on par with the cost of smoothies in the breakroom,” as EIP’s Andy Lubershane puts it. This representative graphic from Epoch AI shows that the current cost estimates for running energy-intensive training and experiments on AI models range from 2-6% of total costs, although Epoch says energy and hardware costs are rising, while other estimates show varying numbers. Still, while AI is a big deal for energy, energy isn’t that big of a deal for AI (yet).

Now, Exxon and Chevron are firing up gas power plants with CCS in order to enter the power generation race, bringing new investment that could help scale the sector. (Exxon also recently confirmed plans on a big CCS bet in Indonesia). Meanwhile, Google has proven that it’s willing to create markets to meet its needs, by developing new financing structures like the Clean Transition Tariff in the past, helping create pathways that others can follow.

Key takeaways

US energy majors go big on gas. While European energy majors like BP and Shell have pulled back on electricity generation, Exxon and Chevron are betting big on a natural gas and CCS-based generation strategy, sticking closer to their core competencies and existing assets.
TBD on CFP. There won’t necessarily be one clean firm power generation winner here. But there’s still a question of which approach makes the most sense given near-term load growth demands and long commercial and build timelines for tech like nuclear and geothermal. That leaves options like abated gas on the table, but gas plants with CCS are still largely unproven, with several still in development around the world (e.g. Teesside in the UK, and NetPower’s Texas plant, which is currently facing major delays). Meanwhile, hydrogen is still struggling to find a home, but it’s not an obvious data center fit. It’s good for storing energy over a very long time, but if energy demand requires load shifting by hours or days, then other LDES solutions have much better round trip efficiency.
All eyes on Intersect x Google x TPG. With Google’s leadership and willingness to invest in the space, it could set the pace in this race. Its “power-first” approach is bringing new power generation and data centers online at the same time, rather than siphoning existing capacity from the grid into data centers. Other hyperscalers and investors trying to make the best bet amid these plays will watch closely. While investors across industries increasingly view all things data center-related as an “AI infrastructure asset class,” many are still assessing risks before they come off the bench.

Deals of the Week (12/9 – 12/15)

Late-Stage / Growth

⚡ Crusoe Energy Systems, a Denver, CO-based developer of natural gas mitigation systems for data centers, raised $600m in Series D funding from Founders Fund, Fidelity (Management and Research Company), Long Journey Ventures, Mubadala, NVIDIA, and other investors.

🔋 Nanoramic Laboratories, a Boston, MA-based lithium-ion energy storage developer, raised $44m in Growth funding from Catalus Capital, General Motors Ventures, Fortistar, Samsung Venture Investment, Top Material, and other investors.

🛰 Raptor Maps, a Boston, MA-based drone monitoring platform, raised $35m in Series C funding from Maverix Private Equity, Blue Bear Capital, Buoyant Ventures, Congruent Ventures, MacKinnon, and other investors.

Early-Stage

🏗 Aisti, a Jyväskylä, Finland-based carbon negative acoustic tile producer, raised $30m in Series A funding from Finnish Climate Fund, Finnvera, Maki.vc, Norion Bank, South Savo ELY Centre, and other investors.

🏭 Embotech, a Zürich, Switzerland-based autonomous vehicles management platform, raised $26m in Series B funding from Emerald Technology Ventures, Yttrium, BMW i Ventures, Nabtesco Technology Ventures, RKKVC, and other investors.

🛰 Pixxel, a Bengaluru, India-based hyperspectral earth imaging software platform, raised $24m in Series B funding from Glade Brook Capital Partners and M&G Investments.

🏠 Next Sense, an Amsterdam, Netherlands-based energy efficiency software platform buildings, raised $12m in Series A funding from ETF Partners, Stichting Pensioenfonds ABP, Edge, SHAPE Capital, and Timeless Investments.

⚡ SpotmyEnergy, a Köln, Germany-based energy optimization and trading platform, raised $11m in Seed funding from Norrsken VC, Picus Capital, and Vorwerk Ventures.

🍎 Orbisk, a Utrecht, Netherlands-based automated food waste monitoring system, raised $8m in Series A funding from PeakBridge, Regeneration.vc, BOM, DOEN Participates, Kost Capital and other investors.

Other

⚡ WeaveGrid, a San Francisco, CA-based smart charging software, raised $28m in funding from Woven Capital, Activate Capital Partners, Collaborative Fund, Emerson Collective, HSBC, and other investors.

⚡ Modern Hydrogen, a Woodinville, WA-based distributed hydrogen production system developer, raised $25m in Debt funding.

🏭 Electrified Thermal Solutions, a Medford, MA-based on-demand renewable heat for industrials service provider, raised $19m in additional funding from Clean Energy Venture Group, EDP Ventures, GVP Capital, Holcim MAQER Ventures, MassVentures, and other investors.

⚡ Greencells Group, a Saarbrücken, Germany-based solar power plant developer, raised an undisclosed amount in PE Buyout funding from Davidson Kempner Capital Management LP and Nature Infrastructure Capital.

Exits

🔋 Granite Source Power, a Middletown, Delaware-based battery energy storage developer, was acquired by New Energy Capital for an undisclosed amount.

🚚 Loop Energy, a Burnaby, Canada-based zero-emission power systems developer, was acquired by Teralta Hydrogen Solutions for an undisclosed amount.

New Funds

Trucks VC, a San Francisco,CA-based investment firm, raises $70m for its third mobility fund that invests in green transportation.

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

Request a Sightline Climate demo

In the News

In US political news, the outgoing Biden administration announced tariffs targeting imported climate technologies, including solar and wind components, in a move to boost domestic manufacturing. Meanwhile, the Trump campaign has proposed allowing major infrastructure projects to bypass environmental permitting requirements with a value over $1bn, aiming to streamline development. These contrasting approaches to environmental and economic policy show the whiplash that climate tech and energy developers are experiencing right now.

Meanwhile, the DOE is pushing ahead, with the LPO committing $305m to virtual power plant developer Nostromo Energy, supporting the deployment of 193 IceBrick systems (1.1MW/2.3MWh each). Plus, the DOE announced new awards of $2.7 billion in contracts to six companies for low-enriched uranium (LEU) to boost the domestic nuclear supply chain and reduce reliance on foreign uranium sources.

This week in international nuclear news, Japan unveiled plans to more than double its nuclear capacity by 2040, targeting a 20% share in its energy mix, while Vietnam resumed work on its first nuclear power plant at Ninh Thuan, signaling renewed interest in the technology across Asia. Meanwhile, the UK reiterated its commitment to nuclear as an essential part of its clean energy strategy. However, Poland’s nuclear ambitions hit a roadblock, with the country’s first nuclear power plant now delayed by three years, indicating that despite the sector’s momentum, it still faces ongoing challenges in scaling development.

This week in clean energy FOAK projects:

Mitsubishi Heavy Industries (MHI) is testing carbon capture technology from a chemical recovery boiler at a Japanese paper mill, marking the first application of MHI’s CO2 capture technology within the pulp and paper industry.
Anglo-Australian miner Rio Tinto plans to invest $2.5bn in its first commercial-scale lithium production project in Argentina, which comes just two months after announcing acquisition of Arcadium Lithium.
In parallel, Stellantis and CATL announced a joint venture to build a large-scale LFP (lithium iron phosphate) battery plant in Spain, with an investment of up to $4.1bn.

Biofuel company Gevo Inc. will acquire Red Trail Energy's ethanol production facility and its carbon capture and storage (CCS) assets, supporting Gevo's broader plans to scale sustainable aviation fuel (SAF) production by leveraging ethanol as a key feedstock. This announcement reflects a big player’s bet on ethanol as a use case for SAF as the sector scales.

Pop-up

Elemental Impact charges ahead with $18.6m in new investments for 16 companies.

A retro trend for killer whales is back from the 80s: wearing dead salmon as hats!

Dry spell: All but two states faced at least moderate drought conditions in the last week of October.

Wild world: The finalists for science photograph of the year include hunting sharks and emission nebulae.

Electrifying boats in New Zealand hover above the water.

Storm's brewing: Coffee prices are skyrocketing due to extreme weather conditions.

All aboard! Rail lines between Spain and Portugal are welcoming their first hydrogen train.

Arrested development: Studies show UK police arrest environmental protesters at three times the average global rate.

The EU charged ahead with a project looking at battery supply lines in preparation for the digital battery passport requirement in 2027.

Opportunities & Events

📅 Out in Climate Holiday Party: RSVP to attend the first-ever Out in Climate NYC Holiday Party on December 16th to network with LGBTQ+ professionals working in climate and their allies.

💡 Fundamentals of Building Climate-Conscious Products Course: Register for the new Climate Conscious Leaders course by December 31st to learn practical strategies and gain confidence using the Product-Market-Earth Fit framework with real-life case studies. (Register w/code CTVC for $100 off)

💡 Sage Impact Entrepreneurship Program: Apply for the Sage Impact Entrepreneurship program by January 1st for an opportunity to participate in an equity-free accelerator program for early-stage, underrepresented startups.

💡 Climatebase Fellowship: Apply to participate in the 7th cohort of the Climatebase Fellowship by January 6th and accelerate your climate career.