Tag: Green

Shell’s plan to roll out 500,000 electric charging stations in just four years is the latest sign of an EV charging infrastructure boom that has prompted investors to pour cash into the industry and inspired a few companies to become public companies in search of the capital needed to meet demand.

Since the beginning of the year, three companies have been acquired by special purpose acquisition vehicles and are on a path to go public, while a third has raised tens of millions from some of the biggest names in private equity investing for its own path to commercial viability.

The SPAC attack began in September when an electric vehicle charging network ChargePoint struck a deal to merge with special purpose acquisition company Switchback Energy Acquisition Corporation, with a market valuation of $2.4 billion. The company’s public listing will debut February 16 on the New York Stock Exchange.

In January, EVgo, an owner and operator of electric vehicle charging infrastructure, agreed to merge with the SPAC Climate Change Crisis Real Impact I Acquisition for a valuation of $2.6 billion — a huge win for the company’s privately held owner, the power development and investment company LS Power. LS Power and EVgo management, which today own 100% of the company, will be rolling all of its equity into the transaction. Once the transaction closes in the second quarter, LS Power and EVgo will hold a 74% stake in the newly combined company.

One more deal soon followed. Volta Industries agreed to merge this month with Tortoise Acquisition II, a tie-up that would give the charging company named after battery inventor Alessandro Volta a $1.4 billion valuation. The deal sent shares of the SPAC company, trading under the ticker SNPR, rocketing up 31.9% in trading earlier this week to $17.01. The stock is currently trading around $15 per share.

Not to be outdone, private equity firms are also getting into the game. Riverstone Holdings, one of the biggest names in private equity energy investment, placed its own bet on the charging space with an investment in FreeWire. That company raised $50 million in a new round of funding earlier this year.

“The writing is on the wall and the investors have to take the time. There’s been a flight out of the traditional investment opportunities in markets,” said FreeWire chief executive Arcady Sosinov, in an interview. “There’s been a flight out of the oil and gas companies and out of the traditional utilities. You have to look at other opportunities… This is going to be the largest growth opportunity of the next 10 years.”

FreeWire deploys its infrastructure with BP currently, but the company’s charging technology can be rolled out to fast food companies, post offices, grocery stores or anywhere people go and spend somewhere between 20 minutes and an hour. With the Biden administration’s plan to boost EV adoption in federal fleets, post offices actually represent another big opportunity for charging networks, Sosinov said.

“One of the reasons we find electrification of mobility so attractive is because it’s not if or how, it’s when,” said Robert Tichio, a partner at Riverstone in charge of the firm’s ESG efforts. “Penetration rates are incredibly low… compare that to Norway or Northern Europe. They have already achieved double-digit percentages.”

A recent Super Bowl commercial from GM featuring Will Farrell showed just how far ahead Norway is when it comes to electric vehicle adoption. 

“The demands on capital in the electrification of transport will begin to approach three quarters of a trillion annually,” Tichio said. “The short answer to your question is that the needs for capital now that we have collectively, politically, socially economically come to a consensus in terms of where we’re going and we couldn’t say that 18 months ago is going to be at a tipping point.”

Shell already has electric vehicle charging infrastructure that it has deployed in some markets. Back in 2019 the company acquired the Los Angeles-based company Greenlots, an EV charging developer. And earlier this year Shell made another move into electric vehicle charging with the acquisition of Ubitricity in the U.K.

“As our customers’ needs evolve, we will increasingly offer a range of alternative energy sources, supported by digital technologies, to give people choice and the flexibility, wherever they need to go and whatever they drive,” said Mark Gainsborough, executive vice president, New Energies for Shell, in a statement at the time of the Greenlots acquisition. “This latest investment in meeting the low-carbon energy needs of US drivers today is part of our wider efforts to make a better tomorrow. It is a step towards making EV charging more accessible and more attractive to utilities, businesses and communities.”

 

Royal Dutch Shell Group, one of the largest publicly traded oil producers in the world, just laid out its plan for how the company will survive in a zero-emission, climate conscious world.

It’s a plan that rests on five main pillars that include the massive rollout of electric vehicle charging stations; a greater emphasis on lubricants, chemicals and biofuels; the development of a significantly larger renewable energy generation portfolio and carbon offset plan; the continued development of hydrogen and natural gas assets while slashing oil production by 1% to 2% per year; and investing heavily in carbon capture and storage.

These categories cut across the company’s business operations and represent one of the most comprehensive (if high level) plans from a major oil company on how to keep their industry from becoming the next victim of the transition to low emission (and eventually) zero emission energy and power sources (I’m looking at you, coal industry).

“Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society,” said Royal Dutch Shell Chief Executive Officer Ben van Beurden in a statement.

To keep those shareholders from abandoning ship, the company also committed to slashing costs and boosting its dividend per share by around 4% per year. That means giving money back to investors that might have been spent on expensive oil and gas exploration operations. The company also committed to pay down its debt and make its payouts to shareholders 20% to 30% of its cash flow from operations. That’s… very generous.

The Plan

Shell is a massive business with more than 1 million commercial and industrial customers and about 30 million customers coming to its 46,000 retail service stations daily, according to the company’s own estimates. The company organized its thinking around what it sees as growth opportunities, energy transition opportunities and then the gradual obsolescence of its upstream drilling and petroleum production operations.

In what it sees as areas for growth, Shell intends to invest around $5 billion to $6 billion to its initiatives, including the development of 500,000 electric vehicle charging locations by 2025 (up from 60,000 today) and an attendant boost in retail and service locations to facilitate charging.

The company also said it would be investing heavily in the expansion of biofuels and renewable energy generation and carbon offsets. The company wants to generate 560 terawatt hours a year by 2030, which is double the amount of electricity it generates today. Expect to see Shell operate as an independent power producer that will provide renewable energy generation as a service to an expected 15 million retail and commercial customers.

Finally the company sees the hydrogen economy as another area where it can grow.

In places where Shell already has assets that can be transitioned to the low carbon economy, the company’s going to be doubling down on its bets. That means zero emission natural gas production and a trebling down on chemicals manufacturing (watch out Dow and BASF). That means more recycling as well, as the company intends to process 1 million tons of plastic waste to produce circular chemicals.

Upstream, which was the heart of the oil and gas business for years, the company said it would “focus on value over volume” in a statement. What that means in practice is looking for easier, low-cost wells to drill (something that points to the continued importance of the Middle East in the oil economy for the foreseeable future). The company expects to reduce its oil production by around 1% to 2% per year. And the company’s going to be investing in carbon capture and storage to the tune of 25 million tons per year through projects like the Quest CCS development in Canada, Norway’s Northern Lights project and the Porthos project n the Netherlands.

“We must give our customers the products and services they want and need – products that have the lowest environmental impact,” van Beurden said in a statement. “At the same time, we will use our established strengths to build on our competitive portfolio as we make the transition to be a net-zero emissions business in step with society.”

Money talk

For the company to survive in a world where revenues from its main business are cut, it’s also going to be keeping operating expenses down and will be looking to sell off big chunks of the business that no longer make sense.

That means expenses of no more than $35 billion per year and sales of around $4 billion per year to keep those dividends and cash to investors flowing.

“Over time the balance of capital spending will shift towards the businesses in the Growth pillar, attracting around half of the additional capital spend,” the company said. “Cash flow will follow the same trend and in the long term will become less exposed to oil and gas prices, with a stronger link to broader economic growth.”

Shell set targets for reducing its carbon intensity as part of the pay that’s going to all of the company’s staff and those targets are… eye opening. It’s looking at reductions in carbon intensity of 6-8% by 2023, 20% by 2030, 45% by 2035 and 100% by 2050, using a baseline of 2016 as its benchmark.

The company said that its own carbon emissions peaked in 2018 at 1.7 giga-tons per year and its oil production peaked in 2019.

The context

Shell’s not taking these steps because it wants to, necessarily. The writing is on the wall that unless something dramatic is done to stop fossil fuel pollution and climate change, the world faces serious consequences.

A study released earlier this week indicated that air pollution from fossil fuels killed 18% of the world’s population. That means burning fossil fuels is almost as deadly as cancer, according to the study from researchers led by Harvard University.

Beyond the human toll directly tied to fossil fuels, there’s the huge cost of climate change, which the U.S. estimated could cost $500 billion per year by 2090 unless steps are taken to reverse course.

“We intend to build the Standard Oil of renewable energy,” said James McGinniss, the co-founder and chief executive of David Energy, in a statement announcing the company’s new $19 million seed round of debt and equity funding. 

McGinniss’ company is aiming to boost renewable energy adoption and slash energy usage in the built environment by creating a service that operates on both sides of the energy marketplace.

The company combines energy management services for commercial buildings through the software it has developed with the ability to sell energy directly to customers in an effort to reduce the energy consumption and the attendant carbon footprint of the built environment.

The company’s software, Mycor, leverages building demand data and the assets that the building has at its disposal to shift user energy consumption to the times when renewable power is most available, and cheapest. 

It’s a novel approach to an old idea of creating environmental benefits by reducing energy consumption. Using its technology, David Energy tracks both the market price of energy and the energy usage by the buildings it manages. The company sells energy to customers at a fixed price and then uses its windows into energy markets and energy demand to make money off the difference in power pricing.

That’s why the company needed to raise $15 million in a monthly revolving credit facility from Hartree Partners. So it could pay for the power its customers have bought upfront.

There are a number of tailwinds supporting the growth of a business like David Energy right now. Given the massive amounts of money that are being earmarked for energy conservation and energy efficiency upgrades, companies like David, which promise to manage energy consumption to reduce demand, are going to be huge beneficiaries.

“Looking at the macro shift and the attention being paid to things like battery storage and micro grids we do feel like we’re launching this at the perfect time,” said McGinniss. “We’re offering [customers] market rates and then rebating the savings back to them. They’re getting the software with a market energy supply contract and they are getting the savings back. Bringing that whole bundled package together really brings it all together.”

In addition to the credit facility, the company also raised $4.1 million in venture financing from investors led by Equal Ventures and including Operator Partners, Box Group, Greycroft, Sandeep Jain and Xuan Yong of RigUp, returning angel investor Kiran Bhatraju of Arcadia and Jason Jacobs’ recently launched My Climate Journey Collective, an early-stage climate tech fund. 

“Renewable energy generators are fundamentally different in their variable, distributed, and digitally-native nature compared to their fossil fuel predecessors while customer loads like heating and driving are shifting to electricity consumption from gas. The sands of market power are shifting and incumbents are poorly-positioned to adapt to evolving customer needs, so there’s a massive opportunity for us to capitalize.” 

Founded by McGinniss, Brian Maxwell and Ahmed Salman, David Energy raised $1.5 million in pre-seed financing back in March 2020.

As the company expands, its relationship with Hartree, an energy and commodities trading desk, will become even more important. As the startup noted, Hartree is the gateway that David needs to transact with energy markets. The trader provides a balance sheet for working capital to purchase energy on behalf of David’s customers.

“Renewables are causing fundamental shifts in energy markets, and new models and tools need to emerge,” said Dinkar Bhatia, co-head of North American Power at Hartree Partners. “James and the team have identified a significant opportunity in the market and have the right strategy to execute. Hartree is excited to be a commodity partner with David Energy on the launch of the new smart retail platform and is looking forward to helping make DE Supply the premier retailer in the market,” said McGinniss.

David now has retail electricity licenses in New York, New Jersey and Massachusetts and is looking to expand around the country.

“David Energy stands to reinvent the way that hundreds of billions of dollars a year in energy are consumed,” said Equal Ventures investor Rick Zullo. “Business model creativity and finding ways to change user behavior with new models is just as important if not more important than the technology innovation itself.”

Zullo said his firm pitched David Energy on leading the round after years of looking for a commercial renewable energy startup. The core insight was finding a service that could appeal not to the new construction that already is working with top-of-the-line energy management systems, but with the millions of square feet that aren’t adopting the latest and greatest energy management systems.

“Finding something that will go and bring this to the mass market was something we had been on the hunt for really since the inception of Equal Ventures,” said Zullo.

The innovation that made David attractive was the business model. “There is a landscape of hundreds of dead companies,” Zullo said. “What they did was find a way to subsidize the service. They give away at low or no cost and move that in with line items. The partnership with Partree gives them the opportunity to be the cheapest and also the best for you and the highest margin regional energy provider in the market.”

Four years ago when Zach Jones went to do due diligence on C-Zero, a startup out of Santa Barbara, California commercializing a new approach to producing hydrogen, for the small family office he was working for, he had no idea he’d wind up as the company’s chief executive officer.

Or that the company would wind up raising money from Breakthrough Energy Ventures, the billionaire-backed investment vehicle focused on financing companies developing technologies to reduce greenhouse gas emissions, and some of the world’s largest industrial and oil and gas companies.

At the time, Jones was working for Beryllium Capital, a small investment office out of South Dakota, and had identified a potential investment opportunity in C-Zero, a company commercializing a new way of making hydrogen developed by Eric McFarland, a professor at UCSB.

There was only one problem — McFarland had the research, but didn’t know how to run a company. That’s when Jones stepped in. His firm didn’t make the investment, but when the former Economist science writer took over, the company was able to nab a seed round from PG&E and SoCal Gas, California’s two massive utilities.

The reason for their investments is the same reason Breakthrough Energy Ventures became interested in the young company. Even with renewable energy production coming on line at a breakneck pace, much of the world will still be using fossil fuels for the foreseeable future, and the greenhouse gas emissions from that fossil fuel production needs to go to zero.

C-Zero is developing a technology that converts natural gas to hydrogen, a much cleaner source of fuel, and solid carbon as the only waste stream for use in electrical generation, process heating and the production of commodity chemicals like hydrogen and ammonia. 

“Our CTO talks about running a coal mine in reverse,” Jones said.

The company’s technology is a form of methane pyrolysis, which uses a proprietary chemical catalyst to separate the hydrogen gas from other particles, leaving behind that solid carbon waste. The process, which is neither waste free (there’s that solid carbon) nor renewable (the feedstock is natural gas), is cleaner than current low-cost methods of hydrogen production and far cheaper than the more renewable ways of making hydrogen.

Making renewable hydrogen requires making electricity to send a charge through water to split the liquid into hydrogen and oxygen. And it takes far more energy to pull a hydrogen atom off of an oxygen atom than it does to split that hydrogen from a carbon atom.

“The reason that hydrogen is interesting is that it is a great supplement to intermittent renewables,” said Jones. “It’s really about energy storage… when you look at long duration storage on a daily and seasonal basis… it becomes exorbitantly expensive. Having a chemical fuel is going to be critical part of decarbonizing everything.”

Jones describes the technology as “pre-combustion carbon capture,” and thinks that it could be critical to unlocking the benefits of hydrogen for a range of industrial applications including heavy vehicle fueling, utility power generation and industrial power for manufacturing.

He’s not alone.

“Over $100 billion of commodity hydrogen is produced annually,” said Carmichael Roberts, Breakthrough Energy Ventures, the new lead investor in C-Zero’s $11.5 million funding. “Unfortunately, the overwhelming majority of that production comes from a process called steam methane reforming, which also produces large quantities of CO2. Finding low-cost, low-emission methods of hydrogen production — such as the one C-Zero has created — will be critical to unlocking the molecule’s potential to decarbonize major segments of the agricultural, chemical, manufacturing and transportation sectors.”

Joining the Bill Gates-backed Breakthrough Energy Ventures in the new round is Eni Next (the investment arm of the Italian oil and gas and power company), Mitsubishi Heavy Industries and the hydrogen technology-focused venture firm AP Ventures.

Mitsubishi Heavy Industries already has an application for C-Zero’s technology. The company is in the process of re-powering an existing coal plant to run on a combination of natural gas and hydrogen by 2025. It’s possible that C-Zero’s technology could help get there.

Beyond the lower-cost methods used in manufacturing hydrogen, C-Zero may be one of the first companies that could qualify for new tax credits on carbon sequestration established by the IRS in the U.S. earlier this year. Those credits would give qualifying companies $20 per ton of sequestered solid carbon — the exact waste product from C-Zero’s process.

Even as C-Zero begins commercializing its technology it faces some stiff competition from some of the largest chemical companies in the world.

The German chemicals giant BASF has been developing its own flavor of methane pyrolysis for nearly a decade and has begun building test facilities to scale up production of its own clean hydrogen.

Two other big European corporations are also joining the hydrogen production game as the French chemicals company Air Liquide announced a joint venture with Siemens Energy to work on hydrogen production.

Jones acknowledges that the company’s technology is only a stopgap solution… for now. In the future, as the world moves to renewable natural gas production from waste, he envisions the potential of a potentially circular hydrogen economy.

“In 100 years will this technology be around? If it is it’ll be because we’re using renewable natural gas,” Jones said. There are a lot of steps that need to be traveled to get there, but Jones is confident in the near-term success of the project. 

“There’s always going to be a need for a very energy dense fuel. Liquid hydrogen is the most energy dense thing that’s out there outside of something that’s nuclear in nature,” he said. “I think that hydrogen is here to stay. At the end of the day the lowest cost of energy that has the lowest cost for avoided CO2 is what’s going to win.”

LanzaJet, the renewable jet fuel startup spun out from the longtime renewable and synthetic fuel manufacturer LanzaTech, has inked a supply agreement with British Airways to supply the company with at least 7,500 tons of fuel additive per year.

The deal marks the second agreement between the U.K.-based airline and a renewable jet fuels manufacturer following an August 2019 agreement with the British company Velocys. It’s also LanzaJet’s second offtake agreement. The company announced itself with a partnership between the renewable fuels manufacturer and the Japanese airline ANA.

Through the deal, British Airways will invest an undisclosed amount in LanzaJet’s first commercial scale facility in Georgia. The fuel will begin powering flights by the end of 2022, the companies said.

It’s part of a broader expansion effort that could see LanzaJet establish a commercial facility for the U.K. airline in its home country in the coming years.

Back in the U.S. the plan is to begin construction on the Georgia facility later this year, which will convert ethanol into a jet fuel additive using a chemical process.

Fuel from the plant will reduce the overall greenhouse emissions by 70% versus traditional jet fuel. It’s the equivalent of taking almost 27,000 gasoline or diesel-powered cars off the road each year, according to the company.

The deal is the culmination of years of research and development work between LanzaJet’s parent company, LanzaTech, and Department of Energy’s Pacific Northwest National Laboratory.

Spun off in June 2020, LanzaJet was financed by an investment group including parent company LanzaTech, Mitsui, and Suncor Energy. British Airways now joins the two other strategic investors as LanzaJet eyes an ambitious scale-up program through 2025. The company plans to launch four large-scale plants producing a pipeline of renewable fuels. 

“Low-cost, sustainable fuel options are critical for the future of the aviation sector and the LanzaJet process offers the most flexible feedstock solution at scale, recycling wastes and residues into SAF that allows us to keep fossil jet fuel in the ground. British Airways has long been a  champion of waste to fuels pathways especially with the UK Government,” said Jimmy Samartzis, the chief executive of LanzaJet. “With the right support for waste-based fuels, the UK would be an ideal location for commercial scale LanzaJet plants. We look forward to continuing the dialogue with BA and the UK Government in making this a reality, and to  continuing our support of bringing the Prime Minister’s Jet Zero vision to life.”  

The LanzaJet fuel is certified for commercial flight up to 50% blend with conventional kerosene. “Considering the aviation market is 90 billion gallons of jet fuel a year, having 50% or 45 billion of production capacity and reaching that max blend level will be a great problem to have,” said LanzaTech chief executive Jennifer Holmgren in an email.

LanzaJet’s manufacturing facility in Georgia is designed to produce zero-waste fuels, according to Holmgren, and British Airways will receive 7,500 tons of sustainable aviation fuel from LanzaJet’s biorefinery each year for the next five years.

The partnership is between British Airways, Hangar 51 (International Airlines Group’s accelerator) and others.

In addition to its biofuel work, British Airways is also working with companies like ZeroAvia, the hydrogen fuels company that also received backing from Amazon, Shell and Breakthrough Energy Ventures.

“For  the last 100 years we have connected Britain with the world and the world with Britain, and to ensure our success for the next 100, we must do this sustainably,” said British Airways chief executive Sean Doyle. 

“Progressing the development and commercial deployment of sustainable aviation fuel is crucial to  decarbonising the aviation industry and this partnership with LanzaJet shows the progress British Airways is making as we continue on our journey to net zero.”