Big Fed rate cut will add needed juice to NY Climate Week
Welcome to Callaway Climate Insights, your daily analysis of climate finance news and markets. Please enjoy and share with your colleagues.
Today’s edition of Callaway Climate Insights is free for all our readers. We really want to bring you the best and latest in climate finance from around the world. But we need your support. Please subscribe.
What was shaping up to be a bit of a depressing NYC Climate Week next week, with lots of talk of executives moving away from sustainable commitments and banks gearing up their oil and gas investments, got a boost from the Federal Reserve’s 50-basis point rate cut this week.
While about half of economists had expected the Fed to cut 50 basis points instead of 25, the bigger cut will cheer investors in cleantech and renewable energy companies who so badly rely on raised funds to build their heavy-capital companies. Stocks such as First Solar FSLR 0.00%↑, GE Vernova GEV 0.00%↑ and NextEra Energy NEE 0.00%↑ have all rallied in the past week or so in anticipation of a new era of easy money.
The shift in the rate cycle will certainly add juice and enthusiasm to the discussions at Climate Week and the United Nations Summit of the Future conference, which will feature speeches from President Joe Biden, Brazil President Luiz Inácio Lula da Silva, and more than 80 other world leaders.
Beyond geopolitics such as Gaza and Ukraine at the UN, and the obvious U.S. presidential election, climate investors expect focused sub-events around the city tied to creating a global carbon price, a new era in nuclear energy, the increasing threat of energy demand on electric grids from new AI data centers, and the impact of the flood of inexpensive Chinese renewable products such as electric vehicles and solar panels.
The renewable industry, despite making massive gains in energy produced in recent years, has been a difficult investment. The energy crisis resulting from Russia’s invasion of Ukraine shook up global oil demand while Covid hit supply chains. But higher interest rates were the main culprit. Now that is changing. We expect to hear a lot more excitable talk next week as a result.
We’ll be on the ground as of Monday and will bring you the latest in new innovation and entrepreneurial ideas from some of the events around town, including our own event with The Independent next Wednesday celebrating The Independent Climate 100 list of sustainable heroes. Registration details and times below.
Hope to see you there.
Don’t forget to contact me directly if you have suggestions or ideas dcallaway@callawayclimateinsights.com.
Follow us . . . .
Twitter | LinkedIn | Facebook | Instagram
. . . . We’re joining The Independent for a special event for climate investors and advocates later this month at New York Climate Week in Manhattan. We’ll be unveiling a Climate 100 List of the most passionate climate advocates from business, entertainment, academia, fashion, and travel, among other industries, and many of Callaway Climate Insights’ top sources will be on the list. The event, which you can register online here to watch for free, will feature former British Prime Minister Theresa May, interviewed by Independent Editor Geordie Greig. For more info or to register for free, click here.
New evidence the 'greenium' exists in climate projects
. . . . For years, climate investors have speculated about the presence of a so-called “greenium” in sustainable investment projects, that is whether the cost of capital raised to support the project is less than the cost for non-climate, brown projects, writes Mark Hulbert. Now a new study suggests that there is at last evidence of a greenium and it thanks the proliferation of sustainable funds and other investment assets for revealing it. According to the study’s authors, the perception among corporate executives that in those new funds there are assets to support their projects itself creates the incentive to push them through and reveal the greenium. Hulbert dissects the study as only he can. . . .
Thursday’s subscriber insights
With new AI infrastructure fund, BlackRock has jumped on the data center craze
. . . . Anyone wondering where BlackRock BLK 0.00%↑, once Wall Street’s climate champion, has been lately won’t be surprised by this week’s news that it’s been following the AI gold rush like everyone else. The world’s largest asset manager is reportedly setting up a $100 billion fund along with Microsoft MSFT 0.00%↑ to invest in new data center projects to handle the expected surge in demand from the tech industry’s AI applications.
AI data centers are the hottest investment in tech right now, and companies such as Microsoft, Amazon AMZN 0.00%↑, Salesforce CRM 0.00%↑ and Alphabet GOOGL 0.00%↑ are scouring the world for good spots for their new centers. Ireland, which already boasts 80 data centers, is already warning tech companies that they will be required to share energy demand with the rest of the country.
So it’s no surprise big asset managers will want a slice of the new infrastructure pie. The big question is where all of this energy will be sourced. If done right, it will come from renewable energies such as wind and solar, and BlackRock will be able to help connect its investments in cleantech with this new demand. If the energy suck is too great, the danger is tech companies will just plug into oil and gas sources, making the climate challenge exponentially worse.
Investors in the new fund, dubbed the Global AI Investment Partnership, and the new infrastructure unit at BlackRock that will set it up, will be keen to know where in the U.S. and elsewhere these new centers are planned, as will be people who live in those areas.
A new plan for home solar power — buy remote
. . . . Residential solar power has long been controversial here in California, one of the leading solar states, as homeowners grapple with ever-changing state subsidies and payback-on-investment times that can be as high as 10 to 15 years. At the same time, utility-scale solar projects have boomed, particularly in the California desert, as land once used for farming is adapted, in part because there is no longer enough water.
A local climate colleague, Richard Harkness, noted author of a 2019 book titled “Global Warming: The technical, economic, social, and political actions needed to defeat climate change,” is circulating a white paper in Sacramento that puts forth a unique idea. It suggests homeowners could more cheaply and easily tap into commercial solar farms for their energy rather than bulk up their roofs with costly, sometimes misplaced, and often rented solar panels.
According to Harkness, homeowners could tap into energy derived from utility-scale solar plants for on average about $4,100 in upfront costs, with a three-year payback and ultimate return of 30% a year. Those are far different numbers than the $15,000 project we were recently offered, with a 15-year payback period and rented equipment over a 25-year period.
Harkness claims remote solar can be eight times as cost effective as residential solar, and presumably eight times more effective in reducing carbon emissions by using the renewable energy. He said he has sent a whitepaper with his calculations, data backup, and a willingness to explore further to the California Public Utilities Commission but has not received a reply. Nor can he rouse any legislative aides, and he said he is wary of sending the whitepaper to the utility companies because the idea would cost them money.
So we’re presenting it here for what it’s worth. Check out Harkness’ website for his e-books and more information.
As California’s legislature meets this week in special session to debate further about oil and gas prices, it might make sense for the politicians to listen to their constituents once in a while.
Editor’s picks: Batteries keep the energy up at concerts; plus, long-range EVs
When batteries are running the show
Lollapalooza is trading in its diesel generators for batteries, reports Billboard. The industry publication reports that last month in Chicago, the Lollapalooza 2024 mainstage was powered by batteries. A rep for Lollapalooza tells Billboard that with this effort, the festival cut fuel use and greenhouse gas emissions by 67% over prior years. “This equates to the sparing of 26 metric tons of greenhouse gas emissions, or the equivalent to five homes’ electricity use for a year. The use of batteries also saved over 3,000 gallons of fuel. Lollapalooza says this initiative made it the first major U.S. festival to power its mainstage on a hybrid battery system,” the report says.
Peugeot’s planning long-range SUVs
Peugeot’s biggest electric SUVs — the e-3008 and all-new e-5008 — will both be capable of a range of more than 400 miles, the BBC’s Top Gear UK reports. According to the report, that would put the SUVs among the electric vehicles with the greatest range. The e-3008 Long Range will use a 233bhp powertrain with a 96.3kWh battery. That would amount to 435 miles from full and a 27-minute recharge from 20% to 80% using a 160 kW DC charger. Peugeot's mid-size eSUV, already on the market, has a smaller 73kWh unit (326 miles) — until, it says, the long range version arrives. Top Gear expects prices for the long range models to be confirmed at the Paris Motor Show in October.
Latest findings: New research, studies and projects
Challenges for clean transport
The ongoing energy transition is rapidly transforming traditional electric utilities, write the authors of new research titled Integration of Electromobility With the Electric Power Systems: The Key Challenges. From the abstract: While the energy transition attempts to combat the menace of climate change and stimulate green growth with clean transport (electromobility), renewable energies, and energy efficiency, it comes with new challenges for electric utilities. Some challenges are the technical, market design, and regulatory frameworks needed to integrate electromobility with the subsisting power systems. This paper discusses the integration challenges. Furthermore, it attempts to provide an analytical framework for the stakeholders and decision-makers (especially the policymakers and regulatory authorities) to address the market design and regulatory challenges. Authors: Yannick Perez, University of Paris-Saclay - CentraleSupélec; Wale Arowolo, University of Paris-Saclay - CentraleSupélec.
More of the latest research:
Words to live by . . . .
“As long as autumn lasts, I shall not have hands, canvas, and colors enough to paint the beautiful things I see.” — Vincent Van Gogh.