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April 1st, 2020 — The clean energy community has spent decades tackling a crisis that has unfolded in slow motion. As temperatures rise and entire regions burn, entrepreneurs, investors, and corporate leaders have developed and deployed terawatts of clean energy and made solar and wind the cheapest sources of electricity across two-thirds of the world.
In recent weeks, a completely different crisis has emerged in full force: the novel coronavirus is shutting down nations, overwhelming hospitals, and moving the world towards a global recession. Meanwhile, oil prices have plummeted as reduced demand has converged with an increase in supply after OPEC nations failed to reach an agreement earlier this month.
At Powerhouse, we’re working to build a decarbonized future to create a healthy planet and society. As we do our part to protect the health and wellbeing of our communities in the face of the coronavirus, our minds have also turned to the impact COVID-19 will have on the climate crisis and the entrepreneurs building technologies to address it.
Reshuffling the Clean Energy Landscape
The immediate impacts of the virus were felt early in supply chain issues at startups, factories, and corporations around the world. Yet as supply chains have started to rebound, it is clear that the much larger impacts will be felt in the coming months and years. The virus and the oil price collapse have already caused the top 10 oil majors to slash capital expenditures by nearly $30 billion, which could impact their spending on renewable portfolios. Conversely, oil price volatility could lead oil majors to increase renewables investments, which produce more stable returns. For the first time in history, some of the world’s largest oil and gas companies are seeing their wind and solar assets outperform their oil assets, and their investors are taking note.
For startups, the economic downturn has similarly led to a drop in investment, with CB Insights projecting seed-stage funding to drop 22% this quarter and Pitchbook expecting the crisis to hit mobility startups especially hard.
Many industry leaders had hoped for a clean energy stimulus that failed to materialize in the $2 trillion bill passed on March 27th. However, as BloombergNEF founder and senior contributor Michael Liebrech pointed out, the real opportunity lies in the economic rebuilding phase, during which it is essential that we not bail out industries or business models that are not viable in a low-carbon future. Subsequent bills should focus on downstream clean energy technologies like storage, digitization, and demand response, shoring up already-cheap wind and solar. In addition, a massive infrastructure investment plan that upgrades our electricity system, public transportation, and electrifies our industries could create immediate employment, generate long-term economic value, and shift the world towards a carbon-free future.
Opportunities for Startups on the Difficult Road Ahead
The coronavirus does not change the fact that wind and solar—unsubsidized—are cost-competitive or cheaper than fossil fuels almost everywhere in the world. While clean energy and mobility startups will be hit hard, they also may have the most to offer and gain during the crisis. As consumers and corporations look to save money and cut costs, startups that increase efficiency and utilize smart financial mechanisms are particularly well-positioned. For example:
Terabase, which reduces cost and deployment timelines by digitizing solar power plants, continues to see growth in their pipeline; PPA rates are lower than local fossil fuel production costs in markets where they operate including Qatar and Saudi Arabia.
Raptor Maps, which uses aerial imagery to help develop, construct, operate, and rate utility-scale solar, is ensuring that renewable assets outperform oil and gas not just now but on an ongoing and long-term basis.
WattBuy, which enables residents in deregulated energy markets to compare and select electricity providers, has seen an uptick in customers looking to switch to cheaper energy plans. In almost every location WattBuy operates in, 100% renewable rates are less than the average price from utilities.
Station A, which models and predicts the performance of clean energy assets, has set usage records this month. Their technology has identified $14.4B in positive annual bill savings opportunities across the United States.
Ensemble Energy, which provides predictive analytics for wind and solar assets, is poised to work with even more energy companies looking to increase efficiency and allow for remote work via their comprehensive platform.
Energetic Insurance, which insures against barriers to financing clean energy, has seen demand for their C&I solar credit insurance spike in the last two weeks as developers and project owners seek to access financing and stabilize cash flow.
Despite these encouraging trends from founders who we know and support, it will not be an easy road ahead. We’re heading towards a recession that may prove far worse than that of 2008, and many startups will fail along the way. But saving costs for clients and customers alike, combined with the unchanging trajectory of decreasing renewable and storage asset costs, will continue to create opportunity throughout the industry.
What the Coronavirus Crisis Can Tell Us About the Climate Crisis
Some have written about the “silver lining” of coronavirus, arguing that the current drop in emissions and air pollution should be celebrated. This drop is a direct function of the halting of economic and social activities and does not represent the livable future we are helping to build at Powerhouse. Suggesting that short-term coronavirus-related emissions reductions are “good for climate change” sends a false message that human thriving and economic activity are incompatible with emissions reductions.
Rather, the coronavirus has shown us the scale of the response needed to fight the climate crisis. Neither of them are being properly addressed, and both require a response with unprecedented urgency that directs our resources and political will to prevent millions of deaths.
No matter the crisis, people matter. You matter. From public health to clean energy, from organizing to innovating, the world needs people like you working on the most important issues of our time. Like the coronavirus, the climate crisis is not a distant threat. It is at our doorstep, affecting billions of lives right now.
To the nurses, doctors, and everyone on the front lines enabling us to have a livable future, your work has never been more meaningful. Both the virus and the climate crisis require all of us to give with the same level of selflessness and heroism.
Special thanks to Ry Storey-Fisher.
To read more about our work at Powerhouse and Powerhouse Ventures, visit our Insights page.