Even among energy insiders, there are certain areas that get less attention than others.
But that lack of talk doesn’t necessarily mean a lack of dollars, or a lack of potential. At the American Council on Renewable Energy’s finance forum in New York this week, investors and developers named the subsectors and technologies that they’re particularly bullish on.
The challenge for these newer subsectors and technologies, though, is access to capital. Dan Cary, managing director of the Macquarie Green Investment Group, said he sees a gap in between the institutional, larger-scale asset managers and the venture capitalists and other funders focused on first projects and on early-stage companies.
“There’s this kind of gap in the middle, that’s taking that first plant and bridging to the point where you can get institutional capital,” he said. “It’s about…creating bankable projects, and then finding the pockets of capital” to make those projects attractive to investors.
Geothermal
Ted Brandt, CEO and founder of Marathon Capital, is betting on geothermal.
Despite its being around for over a century, enhanced geothermal is still a fairly niche technology in the United States, translating to just 0.4% of the country’s electricity generation.
Brandt said drilling for geothermal tends to have about the same amount of risk as for oil or gas, but the returns are essentially locked in: “when the drilling doesn’t go well, you lose the project,” he told the audience.
“But there’s a lot of new money that has come into that sector over the last couple of months, mostly oil and gas money, and they’re going to outsmart all the geothermal drilling folks from before,” Brandt said. “It’s baseload, zero-carbon energy, and it’s probably as valuable as anything that’s going to come out of the sector until nuclear becomes cost-effective.”
Hydrogen storage and transportation
David Siegel, principal at Lotus Infrastructure Partners, said he is “very bullish” on the potential of storing and transporting hydrogen.
“Think about the natural gas market: it’s very robust,” Siegel said. “We need something like that for hydrogen as well.”
More specifically, exporting blue ammonia could be “the perfect way to transport hydrogen overseas,” he added, where it can be used as either a fuel or a feedstock.
Cary, at Macquarie, also said that hydrogen derivative solutions could have a big trajectory, given early demand signals.
“There are buyers, and ways [that] we can use technologies like hydrogen to produce more mature, actual products,” he said, citing ammonia fertilizer and methanol.
Distributed, localized solutions
On the demand side, Cary said localized and distributed solutions have the potential for “major impact” in the near-term.
These solutions, he clarified, include geothermal as well as battery technologies.
“We’re spending a lot of time on decentralized energy and then the software that sits on top of that,” Cary told the audience.
In this respect he concurs with Jigar Shah, the direct of the Department of Energy’s Loan Programs Office, who sees aggregating distributed resources and then scaling — and simplifying — virtual power plants as key to making the most of the existing grid.
Supply solutions
For Ray Wood, Bank of America’s head of global natural resources, integrated supply chain solutions can be a good way to secure returns. As the grid becomes more complex, he said, companies won’t be able to build out transmission as fast as they’d like.
“In an upward price market, the supply business is a challenge,” he said. “The role of supply is a capital-light, or lighter, way for somebody to really make a difference and earn a good return on capital.”
Specific technologies aside, though, Wood said that it may be that the integration of multiple resources is the most promising path of all.
“Geothermal, modular nukes and gas, solar: all of the above are going to get built,” said Ray Wood, head of global natural resources at Bank of America. “And so somebody who can integrate them and drive returns above the unit economics for the one resource is a winner.”
