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APRIL 13, 2022

Anca and I will be in New York next week for a few energy events. If you will be too, reach out! anca@ciphernews.com and amy@ciphernews.com.

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Send your energy photos, story tips and more to news@ciphernews.com.

HARDER LINE COLUMN
Risky business: betting on climate tech in an uncertain world
BY: AMY HARDER

For nearly 50 harrowing days (and counting), Ukrainians have risked their lives defending their homeland from Russia.

For more than two years, all of us have weighed innumerable risks living through a relentless pandemic.

We are beginning to face the risks of a warming world, which will keep growing the longer we increase the level of greenhouse gases in the atmosphere.

The sheer amount of risk bombarding us can feel overwhelming. The world must mitigate all these different types of risk simultaneously.

Metaphors help convey the magnitude: If climate change is like unchecked diabetes for the planet, the pandemic and war are like deadly car crashes. All are bad in different ways.

If you get into a car crash, your diabetes doesn’t go away, even if another, temporally more urgent crisis demands your attention.

Here at Cipher, we scrutinize a particular kind of risk: The risks of the clean energy transition itself.

“The volume of the risk of the transition is so large and with significant uncertainties, we need to tackle specific pieces at a time.”
Harsh Vijay Singh, an expert on the energy team at the World Economic Forum


Will novel technologies work at an affordable price?

Will we have enough raw materials at an affordable price to make them?

Will communities support new infrastructure?

Can workers in fossil-fuel-related industries repurpose their skills?

Will governments pass enough laws fast enough to support new technologies at the pace scientists say we must?

The answers to these questions must be yes if we are to adequately combat climate change, but the risk looms large that the answer to some or all those questions is no.

Energy systems must achieve three priorities, according to WEF: 1) empower economic growth, 2) produce energy in a sustainable manner and 3) ensure security and affordable access.

“If we are not able to have a transition that balances these three priorities, then it can create unintended shocks,” Singh said.

Referring to Europe’s outsized dependence on Russian natural gas, Singh said: “We’re seeing now what happens when countries have low energy security.”

Eric Toone, a chemist who serves as the technical lead for Breakthrough Energy Ventures and co-chairs BEV’s investment committee, scrutinizes the new technologies that must underpin all three of WEF’s transition priorities.

Unlike most other venture funds, where making money is the only goal, BEV is looking to profit specifically from technologies that have the potential to make a comparatively big dent in emissions (a half gigaton a year of emissions).

Toone is intentionally going after the riskiest technologies, ranging from direct air capture, whose high cost remains formidable, to long-duration energy storage, which must grapple with electricity grids wired for older technologies.

“My job is to make sure that we’re really convinced we understand the risk,” said Toone. “You need to make sure the risk is commensurate with the reward.”

He puts the risks into two buckets: technological and business. Will the technology work and will it make enough money to offset associated risks?

“The most important contribution I can make is show the world there is a way to make money in this space,” Toone said.

BEV, launched in 2015 by Bill Gates with backing from numerous other billionaires, is considered the earliest and most prolific fund investing in climate technologies.

Unlike other technologies, such as software, many climate technologies with the biggest upside potential are the most affected by government policy, which investors often eschew.

“A lot of the markets we work in are some of the most regulated markets on Earth, and regulations are layers deep and arcane with strange personalities,” Toone said. “Those are the kind of risks you really hate.”

Toone is prepared for the inevitable downside of risks the fund takes: failure.

“There is definitely stuff in our portfolio that is going to die,” Toone said. “If we never had anything that died, shame on us for not taking enough risk.”

The types of risks Toone spends his time on every day are fast becoming everyday concerns for nearly all types of companies.

The U.S. Securities and Exchange Commission proposed a landmark rule last month that will require publicly traded companies to disclose various kinds of risks that both a warming world and the energy transition pose to their businesses.

Similar requirements are also increasingly likely in Europe and on a global level.

“The risk of acting can be mitigated,” Singh said. “We have some amount of time on which we can set pathways which can help minimize these risks. But the risks of not acting, those risks cannot be minimized.”

Editor’s note: BEV is affiliated with the broader Breakthrough Energy network, which supports Cipher.

Lunchtime Reads and Hot Takes
Pumped hydro resurfaces as a net-zero stalwartEnergy Monitor
Amy’s take: One important stat from this story is that 94% of the world’s current energy storage comes from pumped hydro. Also, I didn’t know Japan was such a big supporter of this (tried and true) tech.

Tribes, Industry Groups Reach Deal to Boost U.S. Hydroelectric Power The Wall Street Journal
Amy’s take: We need more stories like this that show how compromise among differing interests can lead to success for climate change.

Stripe, Alphabet and Others to Spend Nearly $1 Billion on Carbon Removal Bloomberg
Anca’s take: This kind of effort is exactly what’s needed to help scale up carbon removal technologies, which just last week scientists identified as critical in helping the world fight climate change. As we show in our Data Dive below, there’s a huge gap between where we are and where we need to be.

IPCC report | 'Clean hydrogen needed for net zero, but only where green electric solutions not feasible'Recharge News
Amy’s take: This story does a great job distilling what the recent U.N. report had to say about the potential applications for hydrogen and the likely challenges.

French election to pivot energy future back to nuclear pathway S&P Global Commodity Insights (paywall)
Anca’s take: The French will elect a new president at the end of this month, with incumbent Emmanuel Macron to face far-right leader Marine Le Pen. The article does a great job of summarizing (there’s a table!) where they stand on nuclear, wind and other energy policy.

High Energy Prices Challenge Wall Street’s Green ShiftThe Wall Street Journal
Amy’s take: The article doesn't really back up the headline. Also, high energy prices are challenging almost everything, but it seems unlikely banks will wholly swing back to fossil fuels because of them.

The oil giants drilling among the giraffes in Uganda Financial Times (paywall)
Anca’s take: Concerning read about how companies are planning to drill for oil in one of the world’s most sensitive environments. Key quote: “In a world where the effects of global warming are becoming more apparent, and the world’s biggest economies have pledged to slash emissions, the Lake Albert project has become a litmus test for large-scale oil development in the age of net zero.”

More of what we’re reading:   
  • Global renewable power prices soar on heavy demand, chaotic supply chain — Reuters
  • EU ban on Russian energy would spark ‘sharp recession’ in Germany — Financial Times (paywall)
  • Leading scientists pitch for annual IPCC reports to keep climate on the agenda — Climate Home
  • Truck Makers Face a Tech Dilemma: Batteries or Hydrogen? — The New York Times
  • Ørsted to burn more coal as Ukraine war hits wood pellet supplies — Financial Times (paywall)
  • Solar cell keeps working long after sun sets — Tech Xplore
  • Ask these 10 questions if you want to get rooftop solar — Canary Media
DATA DIVE

BY: ANCA GURZU

Technology that’s able to capture carbon dioxide directly from the sky is advancing rapidly, but it needs to grow much more to fill its role in combating climate change,
a new International Energy Agency report finds.

The analysis comes alongside a recent report by the United Nations Intergovernmental Panel on Climate Change (IPCC) identifying the technology (known as direct air capture, or DAC) as critical to the world’s attempts at avoiding dangerous overheating.

Eighteen DAC plants are operating worldwide: in Canada, Europe and the United States. Collectively, this means the world can absorb almost 8,000 tons of CO2 per year, according to the IEA. It’s significant progress compared to 2010, when the total volume stood at only 500 tons of CO2 per year.

But current numbers pale in comparison to what scientists say is needed to make a difference. DAC technologies need to be scaled to capture more than 85 million tons of CO2 per year by 2030 and about 980 million tons of CO2 a year by 2050 if the world wants to cut emissions to net zero, the IEA said.

The main obstacle is cost, especially without a carbon price that can financially measure the environmental impact of our emissions, as Cipher explored in an earlier edition.

The first large-scale DAC plant is currently in the works in the U.S., according to the IEA. It will be able to suck up to 1 million tons of CO2 a year and could become operational as of 2024.

Most of the plants currently operating are small and sell the captured CO2 for reuse, including for beverage carbonation and for the creation of various chemicals and fuels.

At the Orca plant in Iceland, Swiss company Climeworks and the academic-industrial partnership Carbofix capture CO2 from the atmosphere and turn it into rocks through mineralization—the first time such a technology is being used. That plant was expanded last year, making Orca the world’s largest DAC plant. This also explains the bump CO2 captured in 2021.

AND FINALLY...
Dog and Tesla show
In honor of Monday’s National Pet Day, Meet Freya. She is the pet of Dhileep Sivam, a Cipher reader—and Breakthrough Energy colleague! Here she is taking Dhileep’s Tesla for a (pretend) spin. We also want to give a shoutout to Dhileep, whose team helped come up with Cipher as our name! Cipher means zero—as in zero emissions.

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

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