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.
Opinion
Best, Yann
