12/05/2021 The trillion dollar opportunity in grid decarbonization | by Shayle Kann | Energy Impact Partners | Medium

The trillion dollar opportunity in grid

decarbonization
Shayle Kann
Jan 29, 2020 · 5 min read

The rise of renewable energy over the past decade has been staggering. Whereas ten
years ago wind and solar were expensive niche players in the electricity mix, this year
they could represent more than three quarters of new electricity generation capacity,
due primarily to their newly superior economics.

Despite much hand-wringing about the failures of Cleantech 1.0 and the challenges of
scaling a business in the energy sector, the growth of these technologies spawned
multiple categories of successful companies over the past decade. Among them:

Residential solar pioneers — Sunrun, Vivint Solar, Sunnova, SolarCity (all IPOs)

Differentiated system technology providers — NextTracker (acquired by Flex),

SolarEdge (IPO), Enphase Energy (IPO), Zep Solar (acquired by SolarCity)

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12/05/2021 The trillion dollar opportunity in grid decarbonization | by Shayle Kann | Energy Impact Partners | Medium

Utility-scale project developers — Recurrent Energy (acquired by Sharp), sPower

(acquired by AES), Geronimo Energy (acquired by National Grid)

Early suppliers of grid flexibility — EnerNOC (IPO, acquired by Enel), Nest

(acquired by Google), Greensmith (acquired by Wartsila), Sonnen (acquired by
Shell)

But the hard work has only just begun. Zero-carbon sources comprised around 36% of
all generation in the U.S. last year, of which wind and solar combined for just 11% (the
remainder was largely hydro and nuclear). Meanwhile, a dizzying array of actors —
including states, utilities, cities, and enterprises — are setting goals of 100% clean or
renewable energy by midcentury or sooner.

In order to fully (or nearly) decarbonize the grid, especially absent a game-changing
technology like nuclear fusion, we will need a massive mobilization of technology and
capital for decades.

Here’s a rough idea of what might be in store as we decarbonize the grid over the
coming decades (all back-of-the-envelope math; come at me, energy nerds):

As a baseline, to build out enough wind and solar* to decarbonize the current U.S.
grid, we would need to increase their combined capacity nearly 5X (from ~200 GW
to >900 GW). This alone would mean the mobilization of, say, $700 billion of
capital (assuming $1/watt across technologies and markets).

But in fact, we’ll simultaneously be hoping to decarbonize the rest of the economy
in part by electrifying other sectors — chiefly transportation, but potentially also
space heating and industrial processes. If all those sectors were fully electrified (a
tall order, to be sure), they would nearly double total electricity load in the U.S.
And so in order to decarbonize while fully electrifying, we would instead need up to
~2,000 GW of renewables and ~$1.8 trillion of capital investment (not even
accounting for the capital required for added transmission and grid infrastructure).

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12/05/2021 The trillion dollar opportunity in grid decarbonization | by Shayle Kann | Energy Impact Partners | Medium

Source: Energy Impact Partners. Note: Long-term figures are meant to be illustrative of an upper-bound
scenario for renewables; assumes decarbonization entirely via wind/solar and full electrification of
light/heavy duty vehicles, building space heating and industrial heat.

Assuming this decarbonization is achieved primarily through wind and solar*, we

would face an enormous amount of what I call “grid weirding” — higher volatility
in electricity prices, periods of negative pricing/curtailment, fast-ramping load
requirements, seasonal swings, high weather-driven variability, etc. Each of these
bits of weirding will be a challenge that requires further investment in grid
flexibility resources — energy storage, demand flexibility, and flexible zero-carbon
generation.

Meanwhile, assuming climate change continues to worsen, we’ll see rising

temperatures, increased frequency and magnitude of natural disasters, and an
upwelling of demand — both from consumers and enterprises — for solutions that
support greener choices and provide climate resilience.

*While wind and solar are on the clearest path to massive scale, I should note the exciting
prospects for so-called “baseload zero-carbon resources” like next-generation geothermal
and nuclear, any of which could help mitigate grid weirding.

This will be a monumental challenge. Fortunately, a rich ecosystem of startups has

already emerged to tackle many of the component issues, from making cheaper
renewable systems through integrating them on the grid:

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12/05/2021 The trillion dollar opportunity in grid decarbonization | by Shayle Kann | Energy Impact Partners | Medium

Source: Energy Impact Partners

We at Energy Impact Partners have already invested in a number of companies driving

this transformation, including those who sell clean power (Arcadia), those who deploy
flexible resources (ecobee, Enchanted Rock) those who finance and maintain those
resources for homes and businesses (Mosaic, Sparkfund), and those who help manage
them on the grid (Autogrid, Opus One, Innowatts, Sense).

But the opportunity here is enormous, and there is much innovation still to come. Here
are a few additional areas where I believe there will be significant value creation over
the next few years:

Tools to better serve enterprises — Companies have emerged as key actors

driving the energy transition, and there will be big opportunity both in helping
them procure clean energy and in automating/improving their sustainability and
ESG accounting and actions.

Solutions to mobilize and direct sustainable capital flows — There are

enormous volumes of capital newly dedicated to sustainable assets; they’ll need
help finding a suitable home.

Viable solutions to accelerate bulk power replacement cycles without

significant ratepayer impact.

Scalable ways for monetize demand flexibility while maintaining a delightful

customer experience. We estimate that flexible customer-sited resources (electric
vehicles, thermostats, batteries, smart water heaters, etc.) could shift up to 30% of
peak electricity demand in five years — but getting them to actually do so will be
the hardest and most rewarding challenge.

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12/05/2021 The trillion dollar opportunity in grid decarbonization | by Shayle Kann | Energy Impact Partners | Medium

Brands that unlock pent-up consumer demand for conscious consumption,

particularly around climate change, via carbon transparency and easy, trustworthy
lifestyle greening.

Business models that combine resilience with grid flexibility, particularly at the
residential level.

And more. There are opportunities in better weather analytics, long-duration energy
storage, green hydrogen, heating electrification, GHG tracking/monitoring, power
market forecasting, and on and on.

I’ve been heartened over the past year to see an impressive new guard of innovators
enter the space, hoping to make their mark on the planet. With any luck, they’ll
succeed.

Shayle Kann (@shaylekann) is Managing Director at Energy Impact Partners, a $1.2

billion venture capital fund backed by a coalition of the world’s leading energy companies.
Get in touch: decarb@energyimpactpartners.com

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