The Biden administration wasted no time making climate policy a major focus, with the president rejoining the Paris Agreement last week and planning to introduce new executive orders on climate change this week.
Energy innovation will be central to this agenda. It’s a trend that energy policy experts have been emphasizing for a while and the financial world has taken notice as well. Since 2013, entrepreneurs in clean tech have seen financial investments balloon from $418 million to $16.1 billion in 2019, with no sign of slowing down, according to PwC.
What can intrepid startups or carbon-free tech developers do to secure some of that funding and see their solutions deployed in the effort to reduce carbon emissions?
To answer this question, NEI’s Monica Trauzzi recently sat down with James Schaefer on an episode of "Off the Menu." Schaefer is senior managing director at Guggenheim Securities and connects young companies to Wall Street dollars.
“If we’re advising proven solar, proven wind, proven battery technology—such as lithium-based battery technology—then there’s a tremendous amount of money available from both equity and debt investors,” Schaefer said.
“For other technology, such as new battery technology, advanced nuclear technology, advanced solar” that is “three to seven or 10 years off on the horizon, what we really look for and what investors look for are relationships with customers” and “some sort of proven demonstration-level technology,” he said.
But what really drives investment in this type of technology?
“At the end of the day … marrying advanced technology with Wall Street money oftentimes requires either federal or state government support.”
Schaefer is not alone in this assessment. Melanie Nakagawa—former head of climate initiative at investment firm Princeville Capital and recently appointed National Security Council senior director for climate and energy by Biden—added that “policy signals are truly driving … investment into those solutions because [investors] see a real policy signal pulling those solutions into the marketplace.”
One carbon-free technology that has seen increasing government support through both bipartisan policy and public-private partnerships is nuclear energy. At the end of 2020, the Senate Environment and Public Works Committee passed the American Nuclear Infrastructure Act, which included provisions to speed advanced reactor development, with Republican and Democratic support. What’s more, the U.S. Department of Energy last year rolled out nearly $3.9 billion in funding to support the design, construction and building of multiple advanced reactor designs through the Advanced Reactor Demonstration Program.
Schaefer sees the momentum growing behind advanced nuclear.
“Batteries combined with solar and wind are addressing a big part of the decarbonization plans of many today [but] at some point as we continue to shut down baseload generation, the only option will be advanced nuclear,” he said.
As the Biden administration, energy policy experts, policymakers, climate activists, investors and now entrepreneurs have seen: we will need every kind of carbon-free technology we can get to address climate change, including several that don’t exist yet. Policy and investment have already boosted many carbon-free options, including advanced reactors, and any effort to protect our planet will require more of both.
View the full episode with Schaefer—the second in a series on financial investment in carbon-free energy—and check out other episodes of Off the Menu with Monica Trauzzi.
Transcript
Monica Trauzzi
Young industrial tech companies are looking for Wall Street dollars and he's the guy making it happen. In my second of three conversations on ESG (environmental, social, and governance criteria) and carbon-free energy financing, I talked to Jim Schaefer of Guggenheim Securities. We're at Albi today. I'm Monica Trauzzi. This is Off the Menu.
James Schaefer
Great to be here, Monica.
Monica Trauzzi
So tell me a little bit about how you advise clean tech companies and how you make that connection between the work that they're doing, some of them much younger companies, and you're connecting them to Wall Street and the money that they're really seeking in order to move their products forward.
James Schaefer
Right now one of the big challenges is raising money for industrial tech, whether it's battery technology, nuclear technology, advanced solar technology, anything that is going to be carbon-free off into the future, including carbon capture technology, really hard to raise money. It really depends on the proven-ness of the technology. If we're advising proven solar, proven wind, proven battery technologies, such as lithium-based battery technology, then there's a tremendous amount of money available from both equity and debt investors. For other technologies, such as new battery technology, advanced nuclear technology, advanced solar, could be a variety of subcategories. If that technology is, let's say three to seven or 10 years off on the horizon, what we really look for and what investors look for are relationships with customers, some sort of proven demonstration level of technology. In other words, something not just in a science lab, a little bit bigger than in science lab that shows that this technology is actually feasible on an industrial scale, but at the end of the day, there's another part of this, which is marrying advanced technology with Wall Street money oftentimes requires either federal or state government support.
Monica Trauzzi
There are folks on Wall Street though that really questioned the feasibility of advanced nuclear. Why do you actually look at it in a positive way?
James Schaefer
In my mind, given the demands of the grid off into the future and the fact that we are shutting down coal right now, and also there's a real concern period about carbon, which means that natural gas is also in the crosshairs. So we're going to need baseload generation that is clean. My premise is hydro alone, which is clean, will not solve the baseload dilemma. And the only solution is advanced nuclear. Batteries combined with solar and wind are addressing a big part of the decarbonization plans of many today. At some point, as we continue to shut down baseload generation, the only option will be advanced nuclear. So I look at that—
Monica Trauzzi
Is it not too expensive?
James Schaefer
Well, look at the moment when you compare it to natural gas, and where electricity prices on the grid, it is expensive. But at the end of the day, you know, the combination again of solar, wind, batteries and also energy efficiency as well, which is something that this nation and other nations haven't really tackled as of yet, that's not going to be enough. So we are going to have to invest in the grid and in new technology, it's going to take a massive undertaking to restructure baseload generation, but I see it on the horizon. And I do believe that investors can be educated around the technology. And I think some of these companies can be financed now.
Monica Trauzzi
Does there continue to be an appetite among investors for more traditional sources of energy that perhaps are not carbon-free?
James Schaefer
The crowd is shrinking in size. So what we've seen of late is that, and I'll pick on the gas LDC (load distribution company) universe as an example. Gas LDCs truly are agnostic when it comes to, whether it comes to whether they're pulling natural gas to their pipelines or hydrogen, but at the end of the day, those entities are trading much worse than they were 18 months ago, 24 months ago.
Monica Trauzzi
So when you look at all the technologies that are on the horizon, I know you mentioned advanced nuclear. Is there anything that really sticks out to you that you're excited about, that you think is just super cool?
James Schaefer
Love that over the last 20 years, the rise of solar and wind and now battery technology. I think that arena, in North America alone, will have at least a couple of trillion dollars to be invested in over the next 10 years. If you buy into that, and if you buy into the idea that some of these technologies are in fact potentially competitive with natural gas or at least close to it, then it's a win for consumers.
Monica Trauzzi
Thank you. That was excellent. Thank you. I really appreciate your insight.
