Energy Transition Technologies: Accelerated Uptake

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Low- and zero-carbon investors are not ruling out the potential benefits of coexistence of all forms of energy.

The world has come a long way from the earliest days of “Clean Tech 1.0” when the energy industry initially began chasing hydrogen options and electric vehicles, said Alex Rozenfeld, founder and managing director, Climate Impact Capital.

“I think certainly the industry has seen a lot of opportunity since that time and learned a lot of lessons,” he said. “I believe this is the time that’s going to happen.”

Climate Impact Capital is determined to help. The firm focuses on ensuring that energy companies throughout the value chain can make the best out of the energy transition by understanding how to invest in technology.

“When you look at solar, wind, hydrogen, potentially nuclear … that exact mix and how it transpires is a big unknown. And it is the big risk to us.” —Sanjay Bhatia, Evolve Collective

Moreover, it’s not just about investing, he said. It’s also about learning how to make their organizations innovative and powerhouses that not only let them seamlessly transfer into the energy transition but to also profit and grow.

But first, those firms have to embrace the possibilities that exist in the future.

“We see a lot of opportunities, but often the companies are still hindered by looking at more of a Silicon Valley model or how they’ve done things in the past, especially from a corporate culture,” he said.

Careful of unicorns

The energy transition may benefit most from lessons learned by the fossil fuel sector, he added. The power created by integrating technologies had a profound impact on oil and gas, essentially allowing the shale revolution to take place, Rozenfeld said.

“I think it took most of the major companies off guard,” he said, noting the speed with which several different pieces of technology came together because different teams tested and adopted them.

Moreover, it drove down the learning curve in terms of capital and cost savings. “We see that as an opportunity to kind of build into that model of pulling technologies together,” he said.

“Rather than identifying and hoping for one or two unicorns in a portfolio, we’ve been working with upstream, midstream, downstream or power to find the biggest issues around the energy transition.”

Climate Impact finds companies to integrate various technologies early and, in doing so, craft an integrated solution. “Rather than corporate clients, private equity clients or the consumers having to find four or five different technologies, and then try to figure out how to make them work together, we say, ‘Let’s decide what that is beforehand,’” he said.

“And so we create portfolios for the utilities and then really try to make sure that those portfolios evolve and are deployed much faster than you would in any single technology or investment.”

‘Win no matter what’

Sanjay Bhatia, co-founder of the Evolve Collective energy consultancy, said, “We take the perspective that we don’t know exactly how this is going to turn out in 10 or 15 years.”

Bhatia’s team firmly believe natural gas will persist, and probably oil too, but he stops short of picking winners.

“When you look at solar, wind, hydrogen, potentially nuclear … that exact mix and how it transpires is a big unknown. And it is the big risk to us,” he said.

“Therefore, we’re looking for technologies that could win no matter what this world looks like.”

The U.S. has an opportunity to be the responsibly sourced gas supplier to the world, he said. “The world is hungry for natural gas as part of the energy transition.”

“All you’d have to do is collect the data, use AI to figure out how to use it and use it to predict what’s going to go down or start to flare.” —Patti Melcher, EIV Capital

When Evolve formed two years ago, “there was just kind of crickets coming from the traditional players,” Bhatia said. Now there is a chorus. “Almost every player we talk to, from oilfield services to the E&P side, has a group or a venue [where] we can start to introduce these startups.”

The uptake is exciting. And the investment interest is too. Smaller investors’ appetite is very revealing, he added.

Among these, “it seems that investing in technologies that help oil and gas, particularly gas, is a little bit less risky than betting on something that’s [for example] in the hydrogen area or the battery because it’s hard as a smaller investor to bet on what’s going to work.”

‘Low-hanging fruit’

2020 marked a turning point for energy in several ways. The pandemic forced a decrease in Scope 3 emissions, said Emily Easley, CEO of Novus Energy Advisers.

Patti Melcher, managing partner and co-founder of EIV Capital, added that new people with different expertise are entering the energy space via the transition.

Five years ago, Melcher’s firm had invested in a company to reduce oilfield emissions. At the time, few other investors were interested. “Now, everybody is coming onboard,” Melcher said.

Moreover, the simple application of some technology that already exists could assist traditional firms interested in reducing their emissions and appealing to investors.

“All you’d have to do is collect the data, use AI [artificial intelligence] to figure out how to use it and use it to predict what’s going to go down or start to flare,” she said.

“I think there’s a lot of low-hanging fruit that people are really focused on now in the industry. And I think that’s the very best thing that we can do.

“Not only new technology or hydrogen and all this, but let’s fix our current problems while we’re investing [in new projects].”