Speaker 1: With a round segle and from London and Gerard read
Speaker 1: from Berlin. This is redefining Energy.
Speaker 2: Today.
Speaker 3: On Redefine Energy, we're going to talk about climate tech
Speaker 3: and what we've done is that we have compiled an
Speaker 3: extraordinary debate between Gerard our co host, and Shale Can,
Speaker 3: the managing partner at Energy in part Partners. Both of
Speaker 3: them had been invited to a conversation organized by Carbon
Speaker 3: Equity that's a fund of fund led by its co
Speaker 3: founder Lisa Rubinstein Manamoud. Originally there was their guest with
Speaker 3: the turn of Johan Venture, but we have fully edited
Speaker 3: his contribution in order to keep the length at reasonable
Speaker 3: thirty minutes. Our produgies to Will and to your listeners
Speaker 3: enjoy the better Rayale for climate tech. But first of
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Speaker 1: Good afternoon everyone, to the Climate Tech Outlook twenty twenty
Speaker 1: six webinar. We're so excited to have you. I'm Lisa.
Speaker 1: I'm one of the founders karminactcy a leader strategy on
Speaker 1: the platform. And then our climate approach Carbon equity. What
Speaker 1: do we do. We believe capital can be a force
Speaker 1: for good and we think capital can help solve climate
Speaker 1: change by investing in climate solutions. And we do that
Speaker 1: by building private equity, fun and fund. We currently have
Speaker 1: about four hundred million assil managements. We are working with
Speaker 1: thirty investment managers so far, and in total we'd helped
Speaker 1: fund two hundred and seventy five companies. First, we'll quickly
Speaker 1: talk about twenty twenty five highlights, and then we'll talk
Speaker 1: a little bit about the drivers of climate tech, go
Speaker 1: a bit into funding, what's been happening, what we think
Speaker 1: will happen, and then all the families prepare some hot takes,
Speaker 1: some strong opinions on what might happen in twenty twenty six.
Speaker 1: Now with me here today with the incredible guests, I'm
Speaker 1: so honored to have them first there. Shill can he
Speaker 1: leads the EERP Frontier Fund, which is one of the
Speaker 1: first ones we invested in doing really exciting deep tech,
Speaker 1: mostly in US and a bit in Europe. And he
Speaker 1: also hosts one of my favorite podcasts, Catalysts, which is
Speaker 1: really for the climate tech nerds amongst us, diving in
Speaker 1: deep and all sorts of technologies. There with Gerard Reed,
Speaker 1: really pronounced energy expert, works with a few of the
Speaker 1: big instituced world economic form Energy Transition Forum, also does
Speaker 1: a lot of advisory for founders and investors on fundraising
Speaker 1: and how to scale up. And he has another incredible
Speaker 1: podcast called Redefining Energy, which I think is really the
Speaker 1: best European energy transition podcasts out there. So Gerard Shill,
Speaker 1: so glad to have you here. Let's start with a
Speaker 1: few hot quick takes on what happened in twenty twenty five.
Speaker 1: So first of all, let's go to Shill. What was
Speaker 1: and according to you, the biggest technological breakthrough in twenty
Speaker 1: twenty five in climate.
Speaker 5: Sech First of all, thanks for having me and great
Speaker 5: to beer with such distinguished co guests. I would say
Speaker 5: the biggest technological breakthrough for me was not a single technology,
Speaker 5: but maybe a category of technologies, which is grid enhancing technologies.
Speaker 5: This is a class of technologies that basically allow you
Speaker 5: to run more power through existing transmission lines. And the
Speaker 5: context is that, like, we need an enormous amount of
Speaker 5: additional power and transmission, both to deal with all of
Speaker 5: the increased load that we're seeing from electrification and from
Speaker 5: AI data centers, but also just to integrate all the
Speaker 5: new renewables, largely that we're building on the grid. Building
Speaker 5: new transmission in both the US and Europe has become
Speaker 5: a really hard problem and one that's difficult to solve
Speaker 5: a technology alone. But this class of technologies that are
Speaker 5: called gets allow you to get significant, sometimes up to
Speaker 5: thirty percent more capacity on an existing line with pretty
Speaker 5: low cost solutions. We have one company in our portfolio
Speaker 5: that is called asset Cool, which deploys robots to deploy
Speaker 5: a line coding on transmission lines that makes them more
Speaker 5: reflective and that basically allows them not to heat up
Speaker 5: as much, and you can run fifteen to thirty percent
Speaker 5: core capacity on an existing line. It's super simple when
Speaker 5: you think about it, and it's basically a no brainer
Speaker 5: from an economic perspective. The reason for me, it's that
Speaker 5: twenty twenty five technological breakthrough is just that a class
Speaker 5: of these technologies that one included, but a few others
Speaker 5: as well, really all reached a pretty critical proof point,
Speaker 5: Like they all deployed on act of lines, showed that
Speaker 5: they could increase capacity, and so basically all of them
Speaker 5: are exiting the pilot phase and entering the full scale
Speaker 5: commercial phase. And it's hard to overstate the impact. If
Speaker 5: you could deploy those things widely, it would just get
Speaker 5: you the equivalent of tens of thousands kilometers of additional
Speaker 5: transmission without actually having to build more transmission.
Speaker 1: And save tens of billions of dollars in process.
Speaker 5: Yeah, enormously economically efficient.
Speaker 1: Yeah, you almost wonder why wasn't it inventive before?
Speaker 5: Well, we didn't have as much of a need before.
Speaker 5: You know, we've been living in a world in the
Speaker 5: West where electricity load growth has largely tracked GDP growth,
Speaker 5: and so till just a couple of years ago, we
Speaker 5: saw two percent per annum in the North America and
Speaker 5: Europe sort of average annual load growth for like a
Speaker 5: couple of decades. So we just didn't have the need
Speaker 5: to expand our transmission capacity nearly as much. It's also
Speaker 5: it takes a long time to kind of restart that momentum,
Speaker 5: and so now we're in the phase where clearly we
Speaker 5: do need to expand it, but it's going to take
Speaker 5: a long time before we actually candled new transmission. So
Speaker 5: we're just at a sweet back from a timing perspective.
Speaker 5: The other thing is robotics because a lot of these
Speaker 5: things they're hard to deploy with manual labor for a
Speaker 5: variety of reasons, especially on energized lines. So the technology
Speaker 5: of robotics is coincided with the need in a way
Speaker 5: that's sort of a perfect storm.
Speaker 1: Jerard, I feel like I have to give you the
Speaker 1: next question, which is what was the most exciting funding
Speaker 1: round in twenty twenty five and is it the company
Speaker 1: in your background or another one in.
Speaker 2: My background is Cracking I absolutely do that for those
Speaker 2: who are Doda who Kracken is. This is part of
Speaker 2: the Opticus group, which is a UK utility and this
Speaker 2: is the I suppose maybe the best in class sort
Speaker 2: for a platform for managing frustumity in Europe. Let me
Speaker 2: talk a little bit about you asked me really about
Speaker 2: what went on last year. What's an interesting situation is
Speaker 2: that there are certain areas where there's massive amounts of
Speaker 2: money going Okay, just take the case of nuclear nuclear figiffusion,
Speaker 2: huge amounts of model dot into that space. And then
Speaker 2: there's certain areas software area where again huge amounts of
Speaker 2: money going on. But I would also say I'm portionately
Speaker 2: aside and I'm really put my Europeanto that on here.
Speaker 2: What you do see is an not of stress in
Speaker 2: the climate change area. And this is not a political thing.
Speaker 2: This is reading with the businesses just not being able
Speaker 2: to scale, and I see a lot of European venture capitals.
Speaker 2: If I many say under pressure, Listen, I'm att E World,
Speaker 2: which is the biggest electrical energy conference for a trade
Speaker 2: show in Europe, and that's what I'm getting out of
Speaker 2: this as well. It's just stress. And actually the stress
Speaker 2: is an interesting thing to talk Then why is it
Speaker 2: the system stressed? In the European perspective, that stressed because
Speaker 2: we've got too much renewables in the system. There's too
Speaker 2: much renewables on the large scale system, which means you
Speaker 2: sort of go from a financing perspective, why would I
Speaker 2: build more solar when I'm going to get negative prices first.
Speaker 2: And actually there's another thing happening, which is that we're
Speaker 2: building so much renewable in the middle that that's also
Speaker 2: stress in the system as well. And it's actually back
Speaker 2: to the whole point that that's why I actually really
Speaker 2: please technology, which is from the wings the system, because
Speaker 2: of the fact that system stress. And so I wouldn't
Speaker 2: single out one big cap on thevent last year, but
Speaker 2: I would say that you also have to look at
Speaker 2: that the money that is going in in general into
Speaker 2: infrastructure that I know we're not just talking about infrastructure,
Speaker 2: but what he saw last year was record on stalls
Speaker 2: the solar across the world, record and solved the PAS
Speaker 2: storage across the world. And it looks like we also
Speaker 2: had record install the wind across the world. Why is
Speaker 2: this happening? This has happened just because the cost production
Speaker 2: that you're seeing particular and solar are literally off the chart.
Speaker 2: So we talked about the best technology change last year,
Speaker 2: but we're done for me, I go and I say,
Speaker 2: it's the ongoing continuous reduction in prices and solar and
Speaker 2: storage and also then the pieces of performance and if
Speaker 2: I was he asked me, what's the technology of the year.
Speaker 2: The technology of the year for me is Balcony solar.
Speaker 2: And for those who don't know what Falcony solar is,
Speaker 2: Balcony solar is plugging play sol. You don't need an electrician,
Speaker 2: you don't need to put it in your roof. You
Speaker 2: can plug it in anywhere. And in Europe this has
Speaker 2: been regulated at an email level and certain countries have
Speaker 2: putting in. One of them is Germany. And so to
Speaker 2: give you an idea, what you're doing is when you
Speaker 2: put Balcony solar in, you're generating electricsitm below the wholesale POWERUS. Okay,
Speaker 2: this is a revolution because this technology cannot be stopped.
Speaker 2: And so they asked me to look at what really
Speaker 2: has excited me. It's that it's really the beginning of
Speaker 2: this plug and play solar. And also you'll have to
Speaker 2: plug and play storage at touched it and those two
Speaker 2: technologies will revolutionize our world. Yeah.
Speaker 1: I couldn't agree with you more. The cheaper seller gets
Speaker 1: some more tracks that gets to buy, and the more
Speaker 1: creative we get on how to get it on the grid.
Speaker 1: We're already touching on a lot of important teams where
Speaker 1: the renewals are here to stay the greatest under pressure.
Speaker 1: I hear a lot of stress. I'd love to hear
Speaker 1: from you that going into twenty twenty six, do you
Speaker 1: expect that stress to continue? Very specifically, what do you
Speaker 1: think will be the biggest headwind and we'll will be
Speaker 1: the biggest tailwind for climate tech?
Speaker 2: Shill?
Speaker 5: Do you want to take it first from a headwind perspective.
Speaker 5: I guess I'll speak as our resident United States citizen here,
Speaker 5: which is that we underwent and are continuing to undergo
Speaker 5: a pretty big c change from a political standpoint in
Speaker 5: the US with regard to climate change policy, which is
Speaker 5: becoming lack thereof as of it sounds like this week
Speaker 5: the EPA in the US is going to kill the
Speaker 5: endangerment finding, which is like the underlying principle for the
Speaker 5: EPA or Environmental Protection Agency regulating carbon emissions. That's obviously
Speaker 5: one of many, many things that this administration has done
Speaker 5: to try to tamp down on the concept of climate
Speaker 5: change is something that needs policy action in the first place.
Speaker 5: That's a headwind in the US. Certainly it's a bigger
Speaker 5: headwind for some subcategories of climate tech than others, and
Speaker 5: so I think it's important not to paint climate tech
Speaker 5: with too broad a brush here, because we really are
Speaker 5: seeing the tale of two cities right now, where if
Speaker 5: you are in one of the subcategories in the US
Speaker 5: that is completely reliant on either sort of new government
Speaker 5: policy or voluntary corporate action, which is kind of downstream
Speaker 5: of policy in the US, that's challenged. On the other hand,
Speaker 5: we have and this will be the tailwind. I guess
Speaker 5: for me, we have by far the most dynamic and
Speaker 5: rapidly evolving energy sector that we have had in decades.
Speaker 5: The amount of demand growth, the need to get. Term
Speaker 5: of art in this industry right now is speed to power.
Speaker 5: That's basically all that matters. It just so happens that
Speaker 5: a lot of the technology that can deliver speed to
Speaker 5: power are the ones that you've been talking about. The
Speaker 5: fastest new generation to get online is solar, and fastest
Speaker 5: new capacity to get online as batteries. Actually, anything that
Speaker 5: is attached to that trend, whether it be generation, storage, transmission, distribution,
Speaker 5: load side management, all these things sees this enormous tailwind
Speaker 5: that is sort of it's not driven by the fact
Speaker 5: that it is decarbonized, but it benefits from that fact
Speaker 5: because a lot of the biggest customers in that market,
Speaker 5: Google it probably the forefront, but including the other Hyperscale
Speaker 5: do still have these commitments that they intend to keep
Speaker 5: to the extent that they can. So there's a headwind
Speaker 5: for companies that are not attached to this macro factor,
Speaker 5: and there's a tailwind for any company that is.
Speaker 1: Which of the two would you say is a stronger driver?
Speaker 5: The tailwind is the stronger drive. I mean, it's hard
Speaker 5: to overstate how big a deal it is. We haven't
Speaker 5: seen this type of a capex cycle. Actually, we've never
Speaker 5: seen this type of a capex cycle as far as
Speaker 5: total capex going into data centers relative to GDP, we
Speaker 5: have never seen that. Back to like the way you know,
Speaker 5: we look at data back to the eighteen hundreds, there's
Speaker 5: never been this kind of a capex build out. And
Speaker 5: that capex build up happens to be very energy oriented, right,
Speaker 5: It's not a coincidence that the size of a data
Speaker 5: center is measured in megawatts. That's an energy term. So
Speaker 5: the entire world of tech and AI and all the
Speaker 5: financial infrastructure that underpins it has woken up to energy
Speaker 5: being basically the core challenge to get this capacity online.
Speaker 5: And that means if you have a solution that has
Speaker 5: something to offer, you can just ride onto this wave
Speaker 5: and it's an enormously powerful force.
Speaker 1: It's so fascinating how these two things are happening at
Speaker 1: the same time. Where As we're seeing policy support and
Speaker 1: certent geographies decrease, there is this utter bigger driver emerging.
Speaker 1: Is right, would you say biggest headwind, biggest steel wind.
Speaker 2: I'm not going to actually answer the question, rapt. The
Speaker 2: reason is is because a lot of the headwinds are
Speaker 2: also tailwinds. But I let you frame it a different way.
Speaker 2: The way I'd frame it is we're in the biggest
Speaker 2: industrial revolution in the history amount of and every industrial
Speaker 2: revolution needs an energy source. So geral combustion engine, it
Speaker 2: needed all that light, AI needs electrystal, and it needs
Speaker 2: really quick So that's the revolution. But the revolution is
Speaker 2: that it doesn't just impact the way the energy world.
Speaker 2: It all is going to radically impact the way we
Speaker 2: work and the way our lives are run in the future.
Speaker 2: It's also going to impact I call that the economic
Speaker 2: power of countries. It's already impacted geopolitics across the world,
Speaker 2: so it's far ranging That's really what we're in the
Speaker 2: positive about it is it's a technological revolution. And what
Speaker 2: happens with technologies is they get cheaper otherwise they're not good.
Speaker 2: Technology will look to market and we've got great technologies.
Speaker 2: And again AI is also in a neighbor of electrification,
Speaker 2: and AI also leeds electricity. I'm not actually worried about
Speaker 2: the AI local. The reason or not is because we're
Speaker 2: going to electrify everything going forward anyway. So guess what
Speaker 2: if it's not used for AI and was a bubble
Speaker 2: in it, then electricity will be used for other things
Speaker 2: going forward. But I would add that the revolution go
Speaker 2: back to the technological revolution. It's solar storage. And there's
Speaker 2: another technology as well, which is semis because all of
Speaker 2: this AI revolution would not be possible with the revolution
Speaker 2: that we're seeing in and around and video chips, etcetera, etcetera. Yes,
Speaker 2: they use massive amounts of power, but if you look
Speaker 2: at the amount maid amounts data that is being processed
Speaker 2: on a daily basis. If you look at Google and
Speaker 2: you compare Google what they're processing today to a year
Speaker 2: and a half ago, it's like one hundred times more.
Speaker 2: This is like we've never seen anything like that at it.
Speaker 2: And so the point I'm making is I look at
Speaker 2: it quite positive as these technologies you can't block them
Speaker 2: because the low cost of them is such that we
Speaker 2: are going to electrify our system. And by electrifying our system,
Speaker 2: this is how you're going to decarbonize quickly. And you're
Speaker 2: going to do this because electricity is the cheapest way
Speaker 2: to do it, and we have these technologies that are
Speaker 2: also cheap and becoming cheaper. So I actually look really
Speaker 2: positively about it. But it's not an easy revolution because
Speaker 2: the revolutions, people die, and what I mean by that
Speaker 2: is incumbnance die, and other businesses won't to buy. The
Speaker 2: biggest tailwind I'll go to say what I say, and
Speaker 2: being a little bit controversial is China. And the reason
Speaker 2: I say to China is the is the tail rent
Speaker 2: is because China is at the full hunt of developing
Speaker 2: all these technologies. Again, those three cork technologies I talked about,
Speaker 2: and they're not far behind an AI as well, and
Speaker 2: they're pushing these products to market in their own market
Speaker 2: and pushing them abroad at a scale that we've never seen.
Speaker 2: We have never seen, you know, an energy technology again,
Speaker 2: come to markets quickly a solar and I'm very positive
Speaker 2: about all common energy, but just comparing nuclear solar, good luck, chill.
Speaker 2: The first SMR comes on in twenty twenty nine. By
Speaker 2: twenty thirty three, the amount of solar that's put on
Speaker 2: the system is enough to power in the United States
Speaker 2: and South America put together, right, just to pull the scale.
Speaker 2: That's the technology for me. So again I just want
Speaker 2: to make that point is that we are that technology
Speaker 2: revolution and it's very difficult to predict what happen. That's
Speaker 2: the concern I would.
Speaker 1: Had sounds like a very good tipping point to move
Speaker 1: into twenty twenty six, but generally I hear stronger till
Speaker 1: Winston headwinds, which is an exciting moment. Let's quickly jump
Speaker 1: a little bit into funding. So I think twenty twenty
Speaker 1: five was a fiftil year because for the first time,
Speaker 1: after a few years of decreases, Climate tech VC funding
Speaker 1: went back up. It was a modest increase with eight percent,
Speaker 1: but still we hit forty and a half billion. At
Speaker 1: the same time, we saw the deal coon was down,
Speaker 1: and that's because much more capital is going to growth
Speaker 1: versus early stage. And we also see quite a bit
Speaker 1: of concentration of capital in a few sectors, specifically nuclear batteries,
Speaker 1: great tech evs. Schill, I'd love to hear from you.
Speaker 1: How are you reading these trends and is this good
Speaker 1: news or bad news?
Speaker 5: I think it's reflective of sort of what I was
Speaker 5: saying before. The Mostly what is happening is that the
Speaker 5: energy sector, and particularly the parts of the energy sector
Speaker 5: that are sort of tied to this load growth AI trend,
Speaker 5: are seeing enormous interests. You are seeing generalist investors look
Speaker 5: really hard at that space. It's been an interesting cycle
Speaker 5: there where there was a big wave of generalist investors,
Speaker 5: the sort of Silicon Valley folks getting into climate tech
Speaker 5: in and around like twenty twenty. A lot of them
Speaker 5: disappeared because AI showed up and it was sexier, and
Speaker 5: climate tech was in the sort of downcycle part of
Speaker 5: the hype curve, So they disappeared from climate tech and
Speaker 5: they would still tell you they don't do climate tech,
Speaker 5: but they would also tell you that they definitely do energy.
Speaker 5: Classic example of that in the US Base Power. It's
Speaker 5: a company that's run by Zachdel, who's the son of
Speaker 5: Michael delf Throader of Dell Computer. They are basically a
Speaker 5: combination of a residential electricity retailer and a virtual power
Speaker 5: plant company, so they deploy big batteries at people's homes.
Speaker 5: They're only in Texas so far today. They've been scaling
Speaker 5: very quickly. They raised a billion dollar venture capital around
Speaker 5: in twenty twenty five from actually almost no energy investors.
Speaker 5: There's an interesting dynamic in this market. If you look
Speaker 5: at the list, it's basically a who's who in Silicon Valley,
Speaker 5: and none of the energy specialists were in that cap team.
Speaker 5: So that tells you something kind of interesting about how
Speaker 5: the market is playing, which is to say that again,
Speaker 5: if you are attached to that trend, the pool of
Speaker 5: capital is broader for you, valuations are higher, There's a
Speaker 5: lot that you can benefit from. If you are not
Speaker 5: attached to that trend. I still think it's actually a
Speaker 5: pretty tough market to fundraising.
Speaker 1: Gerard have to hear from you. Do you think overall
Speaker 1: funding for climate SECH would it go up or down
Speaker 1: in twenty twenty six and why, Well, I.
Speaker 2: Think it's going down, and I'd be a little bit
Speaker 2: pessimistic about it, and I'd explain why it's going down.
Speaker 2: The reason's going down is because one nobody wants to
Speaker 2: talk about climate anymore. And it starts there, and it
Speaker 2: starts in the United States, but it's also spread into
Speaker 2: Europe as well. I've been in the climate area for
Speaker 2: twenty years. I don't mention clients because it's defined, so
Speaker 2: I'll call it something else, right, I'll say we need
Speaker 2: to invest in energy security or whatever. So I would
Speaker 2: just say there's definitely a change. You see this from
Speaker 2: the political level, That's the first thing i'd say. The
Speaker 2: second thing I would say from a European perspective is
Speaker 2: that Europe what's happened is the venture capitalist in Europe
Speaker 2: have had it really easy for a decade because what's
Speaker 2: happening is there's been more capitalive from the into climate
Speaker 2: areas and prices can go up and up and up.
Speaker 2: And now what we're seeing is businesses not performing and
Speaker 2: we're seeing down rounds, restructure of business and stuff like this.
Speaker 2: And if I go and just take the wider situation,
Speaker 2: which is definitely do have certain times of the day
Speaker 2: too much solar, too much renewable, it's too much electricity
Speaker 2: in the system. You know, you need to build batteries.
Speaker 2: He's changed laws to be able to make flexibility come
Speaker 2: into the market, and that takes a little bit of
Speaker 2: a while, which means a lot of the climate tech
Speaker 2: businesses just and scale and so what you're seeing is
Speaker 2: valuations from the pressure. So I think this year is
Speaker 2: going to be a difficult year, I would say from
Speaker 2: a certainly from a European.
Speaker 1: Respective, maybe should love to hear a US this perspective.
Speaker 1: Do you think up or down?
Speaker 2: Up?
Speaker 5: Pretty confidently, I think it's gonna be up. I might
Speaker 5: I think it might triple this year. Like I'm willing
Speaker 5: to say, it's going to be way up. But it's
Speaker 5: going to be very concentrated in a specific set of categories.
Speaker 5: You know, you could list subcategories. If we're talking about agtech,
Speaker 5: we're talking about carbon removal, things like that, they're going
Speaker 5: to fall through the floor. There will be very little.
Speaker 5: But again, if you look at the sectors that are
Speaker 5: benefiting from this AI wave, and I think the money
Speaker 5: that's flowing is going to surprise everybody.
Speaker 2: He needs to just to add to that because I
Speaker 2: think it is important for me. There's a difference between
Speaker 2: climate technology and what's going into ALI. I know there's
Speaker 2: a lot of business shifting across. But if you're looking
Speaker 2: at businesses can be climate technologies, these businesses that are
Speaker 2: reducing demand for energy that are teaming up cobbon. But
Speaker 2: I think that's going to be very difficult. So it's
Speaker 2: there's no doubt the certain areas where and anything related
Speaker 2: to AI there's massive money going, there's no doubt about that.
Speaker 2: But there's a whole part of other areas where there's
Speaker 2: just got a very little capital.
Speaker 1: Final question on value of funding, because it's an important one.
Speaker 1: What will happen in the exit markets? So the exit
Speaker 1: bark's been tough for a few years, especially IPO's been
Speaker 1: very low, which means that a lot of companies have
Speaker 1: been spending a lot of time in private markets. What
Speaker 1: do you think for twenty twenty six will we see
Speaker 1: the IPO market open up?
Speaker 5: It's hard to know, a guy. I don't pretend to
Speaker 5: know where the macro environment is going to go in
Speaker 5: the overall markets. If the market holds up as it
Speaker 5: has so far, if it continues to look like it
Speaker 5: does today, or even if it heats up a little
Speaker 5: bit more, we're going to see a wave of climate
Speaker 5: tech IPOs this year. There are some companies. Fervo has
Speaker 5: filed an S one already confidentially, but that was reported,
Speaker 5: so we know they're trying to go in the next
Speaker 5: few months. They're a bunch more sitting behind them that
Speaker 5: are likely to go as well. And even you know,
Speaker 5: we've re entered twenty twenty one and there are a
Speaker 5: bunch of SPACs that have been announced with companies that
Speaker 5: are looking to d SPAC that are in the climate
Speaker 5: tech world. You could discount those to some extent, but
Speaker 5: even just in a traditional IPOs context, there's a line.
Speaker 5: And as long as the market's hold up and remain
Speaker 5: favorable to this trend, we'll see a lot of exit activity.
Speaker 1: Exciting here to watch. I think it's time to dive
Speaker 1: in a little bit deeper into climate technologies and twenty
Speaker 1: twenty six, and I've asked you all to prepare a
Speaker 1: few hot takes, so strong opinions on what will happen
Speaker 1: with specific technologies in twenty twenty six. Gerard love to
Speaker 1: hear one of your hot takes well.
Speaker 2: I think my hot take is that we will definitely
Speaker 2: say AI data centers in space missile and I think
Speaker 2: you're going to make a point that at some point
Speaker 2: once we go, well, one a day, that's one of.
Speaker 1: A one data space per day in wait six are
Speaker 1: in the future beyond.
Speaker 2: Six, the end of the the end of twenty six,
Speaker 2: by the end of one. I also make a point
Speaker 2: just to explain why what you've got up there is
Speaker 2: you need no Cooley and guess what you've got twenty
Speaker 2: four electricity from the sum Pretty simple, okay, So your
Speaker 2: operating costs are The challenge is can you make these
Speaker 2: AI data plaps the way we make in an iPhone,
Speaker 2: In other words, that there is zero problems, because obviously
Speaker 2: if there's a problem, under repair of them is not easy.
Speaker 5: Can I ask a clarifying question before we vote yes?
Speaker 5: You know on this one, when you say one a day.
Speaker 2: One spaceship will go every day with a data So.
Speaker 5: This is this is a starship and Starship launch per
Speaker 5: day is what.
Speaker 2: You starship lampoo exactly? Okay?
Speaker 1: All right, thumbs up, thumbs down?
Speaker 5: Oh, I mean I think Starship will end up doing
Speaker 5: a launch today. There's a zero percent chance that it
Speaker 5: is this year for launch per day for Starship optimistically
Speaker 5: five years. They have so far to go before they
Speaker 5: hit that cadence of one frequency I was also going
Speaker 5: to say orbital data centers, by the way, as like
Speaker 5: my twenty twenty six trend. I mean, we've already seen
Speaker 5: one of the company's Starcloud already deployed a GPU and
Speaker 5: Nvidia GPU into space and they made, you know, like
Speaker 5: it's not a real data center, but it's a proof
Speaker 5: of concept. By the end of the year, we might
Speaker 5: see something that actually can do some compute in the
Speaker 5: you know, hundreds of killowatts type scale. It's going to
Speaker 5: take quite a while before you could do math on this.
Speaker 1: Right.
Speaker 5: Elan is talking about trying to get one hundred gigawatts
Speaker 5: per year of data center capacity in this space. If
Speaker 5: you do the math on how much that is, that
Speaker 5: does require a full starship full of data center, full
Speaker 5: of data center satellites basically to be launched at least
Speaker 5: once a day. I think it's actually a little bit
Speaker 5: good once today, so I don't think we're anywhere near that.
Speaker 5: But you know, he's selling a longer term story than that,
Speaker 5: So I agree on the trend. I just don't think
Speaker 5: it's going to happen that quickly. Can I make one
Speaker 5: additional points on this as exciting and hype as it
Speaker 5: is in the long term. The reality is that the
Speaker 5: predominant driver of the cost of an orbital data center
Speaker 5: ends up being launched cost get delivering something into space
Speaker 5: is the cost. As you said, op X could be
Speaker 5: really low, though I should know operations and maintenance is
Speaker 5: an unsolved problem these things. Stuff breaks inside terrestrial data
Speaker 5: centers all the time. We have no idea how to
Speaker 5: fix that in space at this point, So let's kick
Speaker 5: that can down the road. Launch cost is what matters.
Speaker 5: In order for orbital data centers to be on the
Speaker 5: same order of magnitude in terms of total costs as
Speaker 5: terrestrial data centers are today, we need launch costs to
Speaker 5: be down in the like one hundred dollars per kilogram range,
Speaker 5: which is where SpaceX intends to be from a cost perspective,
Speaker 5: I should say, not from a price perspective. By the
Speaker 5: end of the decade or so, it's where they say
Speaker 5: they're going to be. So any data centers that we
Speaker 5: launch in this space right now, we're going to be
Speaker 5: purely uneconomic. It's like worth noting that, and so the
Speaker 5: only argument to do it is sort of to your point,
Speaker 5: will we have to hit such a ceiling we have
Speaker 5: to be so limited in terms of terrestrial data centers
Speaker 5: that we're forced and it relative to demand for compute,
Speaker 5: that we have to send this stuff into space, and
Speaker 5: we definitely have a problem in getting new data center
Speaker 5: capacity online terrestrially on the grid. But my twenty twenty
Speaker 5: six trend was going to be I think there will
Speaker 5: be a trifecta of potential solutions to that that are
Speaker 5: all going to gain lots of attention this year. One
Speaker 5: is orbital data centers, but that to me is third
Speaker 5: in line. The other two are edge data centers, where
Speaker 5: you build a network of small nodes that take advantage
Speaker 5: of access capacity that already exists on the grid, and
Speaker 5: that's not going to get you one hundred gigawatts right away,
Speaker 5: but it's going to get you something relatively meaningful. And
Speaker 5: then off grid, you can build off grid data centers
Speaker 5: much cheaper than you can build an orbital data center.
Speaker 5: We have no shortage of land, so it's not clear
Speaker 5: to me why we need to go off world rather
Speaker 5: than off grid.
Speaker 1: And off grid. Will it be solar winds and a
Speaker 1: little bit of gas back of power? How do you
Speaker 1: envision that?
Speaker 5: Realistically? It's going to be mostly gas backup power with
Speaker 5: a little bit of batteries initially, and then some of
Speaker 5: them might add some folks are going to build solar
Speaker 5: alongside that as well, and that'll add up to some
Speaker 5: meaningful amount to the capacity. You become a land constrained
Speaker 5: if you add up that much solar as well. So
Speaker 5: I think a lot of them, what you're gonna end
Speaker 5: up seeing is a lot of natur gas and they
Speaker 5: usually will have some storage.
Speaker 2: It does lead to another topic, which is what we
Speaker 2: were not sure about, and I just was the question
Speaker 2: I'm asking really is what happens if elam's large language
Speaker 2: models get commoditized. So if they get commoditized, there could
Speaker 2: be a view in the world that actually they get commoditized,
Speaker 2: And actually what really happens is everything becomes open source
Speaker 2: and then companies basically develop their own models, which means
Speaker 2: that all these data centers are not big centralized AI
Speaker 2: data centers the way we're anything in the US, but
Speaker 2: actually become grid age. Now this is very interesting because
Speaker 2: the European perspective will be we've actually got a really
Speaker 2: good electricity system, very good grid, and we've got spare
Speaker 2: capacity across a lot of it. So could be Europe's
Speaker 2: chance to actually really jump on AI if it does
Speaker 2: go that decentralized route. Now I'm not sure we're going
Speaker 2: to go that route. It's an interesting question to do that,
Speaker 2: and I will say the point about the US, there's
Speaker 2: no doubt when you say we're going off with it,
Speaker 2: they're not going off with it. What they're doing is
Speaker 2: they're going off the electricity grid, right, because that what
Speaker 2: you do is you have to connect to ask for it,
Speaker 2: because you need to make sure these are twenty four seven.
Speaker 2: What the big thrash like to ask is do you
Speaker 2: see Llm's moodetizing? And then we move to that decentralized
Speaker 2: world where it is all about if I'm a government,
Speaker 2: I'm going to go I want to have my own
Speaker 2: AI system and I want to have it close to
Speaker 2: where I am. I don't want to have it sitting
Speaker 2: in another country, etcetera, etcetera. You know, because it's an
Speaker 2: interesting question about the future of how AI bose.
Speaker 1: It's a really interesting question and also brings me to
Speaker 1: a question where we see an AI data center boom
Speaker 1: in Europe in twenty twenty six.
Speaker 5: This is a really important thing about data. I mean
Speaker 5: now This may change, right if bubble bursts, energy costs
Speaker 5: starts to matter. But in the context of the levelized
Speaker 5: cost of compute energy is actually pretty small. It's all chips,
Speaker 5: it's all capax basically. So the problem in Europe is more.
Speaker 5: It takes forever. I mean, I heard a hyperscaler told
Speaker 5: me that they put in an interconnection request for a
Speaker 5: new data center in the London area and they got
Speaker 5: a twenty thirty eight estimated interconnection timeline. So I worry
Speaker 5: about time more than I worry about cost.
Speaker 1: As exciting as AI and data centers are, I think
Speaker 1: it's important that we touch on a few more utter
Speaker 1: topics that at least the audience has been asking a
Speaker 1: lot of questions about and very curious get your views
Speaker 1: on Chill. Looking from a US perspective, what do you
Speaker 1: think europic sales at a collectrification.
Speaker 5: That's like the clear answer to me. You know, in
Speaker 5: the US we have started to go a little bit
Speaker 5: flat in terms of the ev penetration of new vehicle sales.
Speaker 5: I think it's going to bend back upward again, but
Speaker 5: it'll take some time. We've had a big policy change here.
Speaker 5: The Trump administration removed the big text credit that we
Speaker 5: had at the federal level. Meanwhile, Europe is still seeing
Speaker 5: EV penetration that it spans well beyond anything that we've
Speaker 5: seen here in the US in some countries obviously in
Speaker 5: the Nordics, like really really high penetration, So that seems
Speaker 5: to me like an area. And then like all the
Speaker 5: business models that surround that as well, I think are
Speaker 5: more mature in Europe than they are in the US.
Speaker 1: Are every Beth charging or what are you thinking about?
Speaker 5: Yeah, everything to do with charging and payments and clever models.
Speaker 5: Octopus has a sort of bundled six monthly EV plus
Speaker 5: retail electricity type of products. All these types of things
Speaker 5: that tie like homeowner experience with evs and payments for evs.
Speaker 5: All that is more mature and interesting I think in
Speaker 5: Europe than it is in the US.
Speaker 1: I heard the Octopus model also allows the battery to
Speaker 1: deliver back to the grips, and that is one of
Speaker 1: the key components of it.
Speaker 5: That's more of a well, it's a combination of a
Speaker 5: market challenge and a technical challenge. Most selectric vehicles don't
Speaker 5: allow you to do bi directional charging. Yet there's a
Speaker 5: small number of models, small but growing number of models
Speaker 5: that do. But those that do a pretty interesting I
Speaker 5: mean anecdotally. I drive a Key EV nine which has
Speaker 5: one hundred kilot hour battery in it. I mean I
Speaker 5: have like, what is a five Tesla power walls worth
Speaker 5: of power sitting in garage right now, and I currently
Speaker 5: can't use it to power my home if I have
Speaker 5: an outage. And I live in northern California where we
Speaker 5: have wildfires and outages, so it sure would be valuable
Speaker 5: for me, exactly.
Speaker 2: Sure.
Speaker 1: Art, where should Europe invest in? What kind of technology
Speaker 1: niches can you upe win it?
Speaker 2: Well? I think where Europe leads, Europe leeds and everything ridge, okay,
Speaker 2: whether it's cable manufacturers, transformer manufacturers, software, and actually I
Speaker 2: would say cutting edge technologies as well, because one thing
Speaker 2: that Europe has is it has an open power market, okay.
Speaker 2: And the result of this is that ultimately you can
Speaker 2: generate electricity in Finland and sell it to someone in Spain,
Speaker 2: and you've got the German power market. For example, we
Speaker 2: have twenty million trades a day. Just to give you
Speaker 2: an idea, this is all automized, it's all AI. This
Speaker 2: is not human beings sitting there because you can't manage
Speaker 2: to move this electricity around and trade it without technology.
Speaker 2: So that's where Europe leads and Europe needs to really
Speaker 2: build on that and going back to the grid space
Speaker 2: so I not to charge it to I'm certainly here
Speaker 2: this conference area. The global leader in vehicles good is
Speaker 2: called Mobility House. They've been doing it for many, many
Speaker 2: years and pole big roll out in France with Renold,
Speaker 2: and this is the type of thing that Europe is
Speaker 2: really big and the business models that come around that,
Speaker 2: because that's the interesting thing is the business models that
Speaker 2: come around it. And these are next generation energy services businesses,
Speaker 2: technology enable service platforms, all this type of stuff. You
Speaker 2: take the case of renewables. What we need to be
Speaker 2: able to do is to make sure the good is balanced.
Speaker 2: You need to be able to predict what the wind
Speaker 2: is going to be like the next day. Well guess
Speaker 2: what the leading whether prediction countrypanies are in Europe. That's
Speaker 2: where Europe is really good. In Europe needs to really
Speaker 2: focus on those core areas rather than trying to chase
Speaker 2: and compete with the Chinese five years after they need
Speaker 2: a particular area that doesn't make sense.
Speaker 1: Yeah, No, I think it's a very interesting point. Mber
Speaker 1: does some really interesting work there where the value pie
Speaker 1: of the profits that you can make renewable to the
Speaker 1: vast majority is in the software and the layer in between,
Speaker 1: and not the hardware itself. Yes, Gerard, the question from
Speaker 1: the audience Love the Area review. Will industry electrification accelerate
Speaker 1: in twenty twenty six?
Speaker 2: Oh yeah, yeah, absolutely. Well, First, obviously, because of AI,
Speaker 2: it does straight away. AI is in the streets. It's
Speaker 2: the new twenty first century industry, right, it does straight away.
Speaker 2: But the other trend you're definitely going to see, and
Speaker 2: I'm seeing this in projects that are the beginning. What
Speaker 2: you're doing is you're building an AI data center and
Speaker 2: because you've got access heat, guess what you can do.
Speaker 2: You can actually do other stuff around and you can
Speaker 2: do food processing or something where they need that heat
Speaker 2: and you can integrate it in. So I definitely see
Speaker 2: the AI aification of our world allows us to actually
Speaker 2: industrialize in a different way than before. I'd be very
Speaker 2: very positive. And I see a lot of projects starting
Speaker 2: with this, and now, don't get me wrong, they take
Speaker 2: a few years to come to fruition, but that's definitely
Speaker 2: very exciting. And the next thing I would say as
Speaker 2: well is that from a European perspective, we have to
Speaker 2: get away from gas. And this is just it's the
Speaker 2: addiction to gas is not good for economy, whether it's
Speaker 2: the Russian gas we all know that, or expensive LG
Speaker 2: gas that doesn't help us either. So the alternative is
Speaker 2: to electrified. And what you're going to see is more
Speaker 2: and more government incentifies an expectation for industry. So take
Speaker 2: the case of Germany. A heavy industry in Germany does
Speaker 2: not pay any good charge. Okay, that's a clear incentive
Speaker 2: for them to electrify. They're saying, guys, electrify that, let's
Speaker 2: to do so. I can see more and more countries
Speaker 2: in Europe doing that, because that's the way forward from
Speaker 2: a geopolitical perspective, but also from an economic perspective and
Speaker 2: also from an environment.
Speaker 1: Jill and a question from the audience, which technologies do
Speaker 1: you think will become investible for your strategy in twenty
Speaker 1: twenty six.
Speaker 5: We're spending a lot of time in the physical AI
Speaker 5: world applications of this new wave of AI technology into
Speaker 5: physical industries. I think robotics being the sort of cutting
Speaker 5: edge of that that there's a bunch of other things
Speaker 5: AI for materials discovery as an example. The first wave
Speaker 5: of AI that we've seen in this past few years
Speaker 5: has been around bits, not atoms for the most part,
Speaker 5: because you can train in LLM on the entire corpus
Speaker 5: of the Internet and build an incredibly powerful model. And
Speaker 5: the next thing that is a harder problem, but there
Speaker 5: are a lot of smart folks working on it right now,
Speaker 5: is trying to build sufficient training data to be able
Speaker 5: to do things in the real world and the physical world.
Speaker 5: And that's where it starts to matter in the categories
Speaker 5: that I spend time on and focus on. So lots
Speaker 5: of opportunities there. We've made a few investments already in
Speaker 5: robotics companies. I think there's a lot more to be done.
Speaker 1: There, sure, Aran one question, I love your view on
Speaker 1: which technologies will become bankable in twenty twenty six in
Speaker 1: the climate space.
Speaker 2: Well, actually, the key technology that's gon become a bank
Speaker 2: of is battery storage, because if you think of it,
Speaker 2: really we've had batteries, but like I'm going to say,
Speaker 2: from a European perspective, we've had the UK market. We've
Speaker 2: also had batteries in the techa market, but it's now
Speaker 2: becoming wide scale and it's becoming an asset class of
Speaker 2: itself where people are doing tolling arrangements, people are able
Speaker 2: to put death in and around them. So I think
Speaker 2: that it's really the big changes. People are getting their
Speaker 2: heads around the business models and how it works. And
Speaker 2: I think this is very, very important because batteries are
Speaker 2: are critical enabler of future electricity system and also getting
Speaker 2: electricity fast to bat centers and the like. So that's
Speaker 2: what I would say.
Speaker 1: I'd love to hear forty audience, like, if you would
Speaker 1: give them one message you want them to take away
Speaker 1: from this webinar about investing in climate tech in twenty
Speaker 1: twenty six, what would it be, Gerard?
Speaker 2: So go back to what I said earlier, which is
Speaker 2: that we're in a revolution. In a revolution, there's huge opportunities,
Speaker 2: but you also need to be really careful. That's what
Speaker 2: I would just say. Investing in the.
Speaker 1: Space, Yeah, where should you be careful?
Speaker 2: Sorry, I'd be very careful in the fossil fuelds area
Speaker 2: straight away, So some of the other areas. But if
Speaker 2: I'm talking about in the carbon area in particular, I
Speaker 2: would say carbons demuestration. I'd say hydrogen, there's a whole
Speaker 2: pilot technologies, whether we like it or not, have been
Speaker 2: pushed by a fossil full lobby, and they're there to
Speaker 2: slow things down, and you have to be really careful
Speaker 2: the tap.
Speaker 1: That's what I would say, chill, what's your key sake away?
Speaker 5: Climate tech was never really a category. It was always
Speaker 5: just a theme amongst a bunch of different categories, and
Speaker 5: it's important to remember it that way, because if sentiment
Speaker 5: is negative about climate tech, that also doesn't really mean anything. Actually,
Speaker 5: what it's important is the categories that have the theme
Speaker 5: of climate tech and what's happening in each of them individually.
Speaker 5: So don't over index on the overall market sentiment on
Speaker 5: climate tech. I should say that doesn't really have any
Speaker 5: direct impact on the actual markets.
Speaker 1: I fully agree with you there, and I think that's
Speaker 1: the biggest thing that happened in twenty twenty five where
Speaker 1: we shaped up the narrative. Thanks so much for joining.
Speaker 1: Thank you audience for joining, and I wish you a
Speaker 1: great evening. Thank you for listening to Redefining Energy.
Speaker 2: Don't forget to rate the show and subscribe on Apple podcast,
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