Infra Step 1 Of Many. The bipartisan infra bill has gone through procedural step 1 but the real interesting part of the saga is contained in this article. While the bipartisan bill will pass the Senate and clear the filibuster hurdle, the same moderate democrats that negotiated the bipartisan bill are also saying that they will water down the $3.5trillion reconciliation bill. House progressives are hitting back though, saying that the House only has a 3 vote majority when their support is removed from the bipartisan bill all while the Speaker has said that the bipartisan bill won’t go to the floor without the reconciliation bill. We have an old-fashioned standoff at this point and we need to raise the debt ceiling soon too….
Consumers Should Be Paid. Power market operators continue to ask consumers to shed demand in order to keep the grid operating during more common weather events. The issue with this strategy is that it doesn’t actually put the financial pressure on those that are getting the capacity contracts at the benefit of those being asked to provide the flexibility. This comes back to letting the market create the right pricing signals. Load shedding at the peak, creating flexibility, should be monetizable by those that actually create that flexibility without being paid a standby fee to do so. Pricing signals, not requests, should be the driver of market behavior in power and pretty much anything else.
More On Platform Capital. Yesterday, I talked about the flow of capital to the energy market, most of that allocated to renewables. I want to shed more light on the capital that’s newer for the space. As a reminder, most of the capital has always been for the actual projects, infrastructure capital to be specific. The question is how do the tens/hundreds of billions of dollars actually source, vet and deploy their capital, and that is the platform plays. Taking a project from a piece of land without a lease, approvals or customers to the hopeful notice to proceed (NTP) is where the juice is made. Many infrastructure investments hope to partner with developers early in the process but few have historically wanted to actually be in this game and that is changing. Why? Money can be a commodity when everyone is bidding on an NTP project and winning a project just because you have the cheapest money can also make you feel like you missed something and won by accident. The other side of the pre-completion platform side is how these projects actually get done on time with quality. The integrators, the EPCs, the hardware providers have seen tremendous amount of new capital flow their way because getting it done right (especially on 25 year+ assets) is more important than ever. Investors always want quality, cheap and fast, but even in solar and storage, you can only pick two. Hope that gives you a bit more clarity on what I’m thinking about, shoot more of your questions my way.
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Does The House Pass It? The resentment for the lack of consideration in crafting the infrastructure bill is starting to show in the House. The noise that’s coming isn’t just from Pelosi but it seems like there could be real pushback from the democrats that they wouldn’t pass the bipartisan bill without the reconciliation also in tow, moreover that bill would have to do real work on climate change or risk being turned down as well.
Tesla Storage Sellout. Tesla is sold out well into 2022 and indication from Elon is that Megapack, their utility solution, is going to have create “significant unmet demand” going into 2023. Keep in mind that Tesla is not only using the battery cells for their megapack but also for a plan to build 20,000 powerwalls per week and of course their non-stationary power, their vehicles. You’d have to presume, and I say this with some knowledge, that the powerwall (resi solar/storage) market is going to be much more appealing for the company than the utility scale storage market which is filled with demanding infrastructure investors that want to carve up the contract and pick and choose the software solutions to align with their trading strategies.
CA Mixed Signals. California has some tall climate goals and challenges but when it comes to solving them with actual market policy, regulators seem more keen to be solving political issues than dealing with climate change. Aside from taking a strong view on net metering, their licensing board is voting to stop solar installers from installing behind the meter energy storage. Stay tuned for more updates from CALSSA on the topic and join the association if these issues impact your business.
Big Money On What? As private equity raises a seemingly endless pot of money for the energy transition and ESG investments, there are two apparent paths to deploy that capital. First is to invest into the infrastructure itself where the return expectation are directly tied to the risk associated with the project (contracted, credit and production exposure) and the second to the platforms that enable that capital to be deployed. It’s the latter that is very interesting to me because this used to be undervalued in the market, but as many of us know it’s the margin of the capital formation and the execution of those projects, i.e. the where the money is made.
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Financing EV Charging. Learn how to effectively model, finance and sell solar EV charging projects using SCF's free software, the SCF Suite. On July 28th, at 10am PST, Sustainable Capital Finance (SCF) will host the next webinar in its 2021 webinar series, providing an in-depth breakdown of SCF's new EV charging finance solution, how to use the SCF Suite to price projects and sell more EVC finance projects to C&I and non-profit customers. This webinar is recommended for solar developers and installers interested in increasing their range of offerings to include electric vehicle charging solutions, as well as combined solar+storage+EVC offerings. Click here to register for this exciting, free webinar.
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The Full Package Value. Lawrence Berkeley National Lab confirms what we already knew and what makes sense. When solar and batteries are attached to a consumer’s demand, i.e. their home, it provides value to them and the grid. That means that your neighbor with solar and batteries is lowering your non-solar home electric bill. I’d insert a physics metaphor here but unfortunately that is not how utility policy works. Utility commissions hire for profit firms to do rate studies instead of government labs that don’t have a bias to solve for a predetermined outcome.
What To Watch For. As we mentioned here last week, Senator Portman is taking the lead on the infrastructure drama. Today, you can expect republicans in the senate to open up the bipartisan bill and let it pass. Pelosi has said she would not put the bipartisan bill on the floor in the House unless the reconciliation bill is also passed by the Senate, basically saying both or nothing. Republicans will see whether they delay the bipartisan bill to get it closer to the August recess or pass it and make their case to the American people that Pelosi is hurting the economy. I think Pelosi may have learned that public opinion on policy doesn’t matter in DC, so I’d bet on the former strategy of delay, delay, delay.
Bankability Means Leverage. If you want to do solar deals in Iraq, creating leverage by also being a major oil partner is probably the only way to create bankability. Not a major market point for us in the US, but the leverage negotiation tactic is a good takeaway for all of you.
Reliability Pricing. Is an uncapped frequency response market the way to price signal reliability? Let’s see how ERCOT views its future.
Big Dollars For Rivian. Trucks are supposed to be delivering to early orders this year but since Q1, communications from Rivian to customers has been slow. Another $2.5billion should help grease the proverbial skids.
A New Metal Battery. Since Mateo Jaramillo left Tesla to start Form Energy, it’s been a mystery what chemistry the company would use to solve their multi-day energy storage challenge. The company released the secret on Friday and Iron-Air is the answer.
Financing EV Charging. Learn how to effectively model, finance and sell solar EV charging projects using SCF's free software, the SCF Suite. On July 28th, at 10am PST, Sustainable Capital Finance (SCF) will host the next webinar in its 2021 webinar series, providing an in-depth breakdown of SCF's new EV charging finance solution, how to use the SCF Suite to price projects and sell more EVC finance projects to C&I and non-profit customers. This webinar is recommended for solar developers and installers interested in increasing their range of offerings to include electric vehicle charging solutions, as well as combined solar+storage+EVC offerings. Click here to register for this exciting, free webinar.
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