Is cleantech overhyped?
I cover energy and about a year ago my group pivoted heavily towards clean tech. Because of the Inflation Reduction Act there was an enormous amount of capital flowing into CCS, hydrogen, renewables etc to take advantage of tax credits and subsidies. However, recently, our clients have started to realize that cleantech isn't all that it was made out to be. One of our client's stock crashed 30% last week after cancelling its offshore wind program, and another cancelled its carbon capture project when it realized that the economics didn't work. We haven't been able to generate any fees from cleantech, whereas our oil and gas dealflow has never been better.
Is cleantech overhyped? Is crude oil / natural gas going to remain the dominant energy source going forward?
Personally, I think the fact the stock crashed that much speaks to the demand and desire for clean technologies within the public market. I agree, maybe carbon capture hasn’t reach economic scale yet but there is certainly demand for renewables
Way overhyped and NOT economical, esp. in a high rate environment. Costs to build out projects have increased substantially.
Even ESG is going by the wayside.
I think people are coming to the realization that the transition to clean/renewable energy can’t be done nearly as fast as some were pushing for. In a lot of cases the technology still isn’t advanced enough for us to stop relying on gas/oil in the short term. Most of these projects were also only economically viable when there were historically low interest rates AND government subsidies. Long term there is a lot of opportunity here in my opinion, but the transition will be much longer and at a slower adoption rate.
I think everyone just got overzealous because of the subsidies but the reality is the emerging tech & solutions just aren't where they need to be and won't be for some time. When you think about it, policymakers, etc are essentially trying to upend ~200+ years of established, modern energy practices. For this reason, the "transition" in the Energy Transition should really be considered to be a misnomer because it really is a civilizational undertaking to shift entrenched fuel, living, consumption, and transportation patterns. It is even more staggering of an undertaking when the touted and unproven technologies must be implemented in a high rates, supply chain constrained, inflationary environment.
Think about the addressable market for these unproven technologies - munis, IOUs, and Fortune 500s (to some extent). All are prioritizing reliability and affordability in the energy trilemma. Muni utility systems are generally rate-sensitive, community-focused and will be reluctant to adopt these technologies if there is potential for substantial cost overruns that could harm their rate base. IOUs will also be conservative and are constrained by PUC regulations/oversight (with regard to rates). Also, I reckon many CEOs & boards will be trying to keep it boring after seeing what Tom Fanning went through with Vogtle. So what's my point? Cleantech (primarily any emerging solution being touted as generation or an energy source & CCUS) is stuck in a quagmire; in thinking about the adoption curve, the industry needs early adopters but utilities by their very nature are conservative and have no qualms about being late adopters especially if there are concerns about reliability and affordability. That's not to say that there won't be any early adopters or innovators for some of the solutions (look at Minnkota with Project Tundra) but most don't want to be 1st, 2nd, or even third in this industry.
I am bullish on storage, transmission, and natural gas long-term. My thesis for natural gas is: 1) It is perceived as cleaner and perceived in some circles to be an intermediate solution until the technologies develop (remains to be seen if the emerging tech are the silver bullets that some think they are); when utilities usually say they've decarbonized by x% over the past 2 decades, they typically mean they've reduced coal use, added renewables but replaced the bulk of their power needs with natural gas 2) Natural gas does not have the PR issues and construction risk of nuclear 3) Natural gas plants are firm, dispatchable capacity which is extremely valuable in increasingly tightening power markets. ERCOT was just given a $7.2 billion mandate for construction of gas plants. The only caveat here is if we get overly reliant on natural gas for heating & power, expect more fatal (and even worse than Uri) events from winter storms. That FERC/NERC report on Winter Storm Elliott was scary. It highlighted how close the grid was to failing in certain parts of the country and showed how most of the plant outages during the storm were from gas units. Uri also caused lots of gas plant outages due to freezing and fuel issues.
TLDR- Be patient with clean tech or go build & operate nat gas plants.
Has nothing to do with hype or cleantech not being the future or whatever.
High interest rates, supply chain delays, inflation, and a handful of other negative headwinds made the economics less palatable in the short term. Long-term, it's still very much the direction the world is heading.
O&G bros obviously aren't the best and the brightest, but surprised to see you don't even understand the basic fundamentals of your own industry.
Not sure why you felt triggered. I’m simply posing the question, not taking a side.
Offshore is kinda boned in the U.S. as long as the Jones Act is in place and Hamptons NIMBYs are at all relevant to the permitting process
Orsted?
Yes
Est ea saepe suscipit qui. Repudiandae asperiores eos ad. Non deserunt est exercitationem alias ut. Sequi laboriosam inventore dicta fugiat quibusdam sunt nihil. Rerum beatae quae nemo ratione doloribus voluptates cupiditate.
Fugit architecto distinctio voluptatibus ad possimus. Quos adipisci excepturi inventore ut.
Modi facilis itaque et minima vel labore aut et. Reprehenderit dolores alias aut alias temporibus. Est sint sequi accusantium aliquam ut id.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...