2019 Rear View Mirror: What Happened In Cleantech, And What Does It Mean For 2020 And Beyond?
At the beginning of the year, I try to take some time and look back on the year to remember what happened, what I thought about it at the time, and what it might mean for the future. I recently reviewed the last year's worth of Cleantech Roundups to conduct a similar exercise. Below, I’ll touch on a few common themes below from 2019 Cleantech Roundups, and will tee up some thoughts and questions about how these stories might play out in 2020.
Tesla and the Electric Vehicle Transition
Tesla is seemingly always in the news, from its financial struggles to Elon Musk violating securities law, to a growing list of positives and successes (including scaling up Model III production). I actually made a prediction at the beginning of 2019 that Elon Musk was going to have a quiet year and stay out of the news. Fool me once, shame on you; fool me twice, shame on me. I think we should expect a string of loud headlines about Tesla one way or another, as they continue to produce at scale and set the pace for the electric vehicle (EV) transition.
On this note, 2019 was also awash with automakers announcing their plans for new EVs. This should continue to pick up steam in 2020, and some of these plans will actually start to come to fruition.
One question I have — when does the EV story become about more than just Tesla? In 2019, 79% of the battery EVs sold in the US were made by Tesla. Until there is another breakout success, I think EVs will continue to ‘feel’ niche (and sales will reflect that feeling). What will that model be? I think the Ford Mach E has a good chance to be this star, although this wouldn’t happen until 2021 (the Mach E will go on sale in Fall 2020, but only in a limited release of more expensive trims). If I had to pick a model for 2020, it’d be the Hyundai Kona, a small crossover SUV with 250 miles of range that will retail for under $30,000 after the tax credit (although that is still about $10,000 more than the internal combustion version). At the end of the day, most Americans buy SUVs, and we are just now getting to the point where there are electric SUVs for sale for under $40,000 — as options grow and prices decline, I imagine we’ll see a significant uptick in EV sales in 2020 and 2021. Then again, it’s possible my hypothesis is wrong and that people are afraid of buying EVs due to range anxiety (or are more price-sensitive than I think), and demand remains sluggish even as models proliferate. Either way, it will be an interesting space to watch.
PG&E Wildfire Fallout / Climate Change Risk-Related Bankruptcies
PG&E will undoubtedly continue to be in the news but the story is much broader than just one company. As we increasingly feel the impacts of climate change, the risk profile of certain businesses and sectors will change substantially, and we are assured to see more situations of financial distress and bankruptcy in 2020 and beyond.
Presumably, this will impact other utilities, but also a variety of businesses like ski resorts at low elevation, location-specific fishing tourism, and golf clubs in desert areas with depleted aquifers — and these are not predictions, these are all examples of businesses that are struggling to deal with the changing climate. It’s not like these sectors are all going to disappear in the next 6 months, but as the increased cost of dealing with natural disasters and changes to their credit risks profile weigh on their books, marginal actors are likely to bite the bullet.
Carbon Tax Proposal Competition
Despite the lack of legislative action on climate, 2019 was still an interesting year for carbon tax policy. Numerous groups issued or tweaked policy proposals, from political candidates and conservative think tanks to large oil companies and corporate trade groups. Meanwhile, in progressive circles, carbon tax policy has been de-emphasized as a solution and some Presidential candidates don’t advocate for a carbon tax at all (although all of the Democratic candidates do support climate action). Even though the window is closed right now, interest groups are laying the groundwork for debate and action in the future.
While climate change is likely to be a motivating issue in the 2020 election, there will not be anything happening until 2021 at the earliest on the policy front. That said, there are early signs there may actually be a window for policy action that could start to open up. As corporations start to embrace carbon tax policy proposals, even as progressive activists are less excited about them, there might actually be room for a compromise where everyone is a little bit unhappy. One enormous caveat is that while corporate America is signaling openness to pricing carbon, even relatively moderate Republican elected officials at the national level are not, so there still needs to be some fundamental change that takes place before we can expect new policy. That said, sometimes politicians evolve quickly (as with the gay marriage debate, as well as contemporary views on impeachment processes).
Oil Majors Thinking About the Future
In 2019, oil majors continued to be major investors in and acquirers for cleantech businesses, especially European firms such as Shell, BP, and Total. While the oil majors’ investments in cleantech have been small relative to their overall businesses (around 1% for US oil companies, and around 5% for European businesses), this is still much higher than it was a few years ago and should be expected to increase going forward. Interestingly, these acquisitions aren’t just in carbon capture and technologies that fit into their core business — they are branching out into new areas: over the last several years, Shell, Total, and BP have each bought EV charging networks. Shell has also been bidding on retail energy providers and utilities in Europe — it appears they are trying to leverage their well-known brand to establish themselves as an integrated provider of energy services to consumers; I’ll be interested to see what moves they make in 2020.
And these investments aren’t happening in a vacuum — oil companies are facing questions about whether they are appropriately estimating the potential for climate policy to decrease the value of their oil and gas assets. Meanwhile, oil majors are starting to incorporate Scope 3 emissions in their climate targets (making these targets more meaningful). Shell, Total, and Respol have included Scope 3 emissions, and Respol became the first oil major to establish a 2050 zero-emissions target.
It is not an accident that oil majors headquartered in countries who are implementing climate policy (in Europe) have more forward-leaning stances when it comes to their emissions reductions targets, nor is it an accident that the companies who are most forward-leaning on their climate targets have also been the most active investors in clean energy technologies.
In 2020, I expect to see more oil companies publish emissions reductions targets which include Scope 3 emissions, and more large corporations commit to 2050 zero-emissions targets as well.
Batteries and Birds
In addition to the specific thru-lines mentioned above, 2019 saw a lot of news about the development of energy storage (in new investments, new innovations, and new deployments) and the growth of micro-mobility — primarily scooters.
For energy storage, it will be interesting to see how quickly utility-scale customers shift to procuring solar plus storage as the default (as opposed to just solar on its own) — this is a multi-year transition but is already starting to take place.
For micro-mobility, while we’ll likely see more scooters on the streets, I’ll be interested to see what new and interesting mobility solutions are developed by companies that are in the scooter space. Right now, there’s a pretty big gap between riding a scooter from Lime or Bird and riding a car or motorcycle; I expect that gap to narrow and blur as these companies develop devices that can stabilize themselves, drive themselves, and potentially have additional safety and comfort features.
Also, amid a macro early-stage environment where investors are emphasizing profitability more than they were last year, it will be interesting to see to what extent downsizing and consolidation occurs in the micro-mobility space. This is already starting to occur, but will likely continue throughout 2020. Meanwhile, as scooters abound, shared dockless bikes may have a shrinking presence, as operators struggle to turn a profit with their bike programs.
From corporate pledges, government policies, and corporate bankruptcies, to the burgeoning EV market, to new batteries and forms of transportation, there was no shortage of news in 2019. I think we’ll hear about all this and more in 2020. As for new themes that will make the headlines more in 2020? I think alternative protein (plant-based meat and lab-grown meat) will be a big one; plastic bag bans and restrictions (and general concern over single-use plastics) is another consumer trend that I think will show up more as well. Regardless of what the new cleantech news is, you can rest assured will cover it in the Cleantech Roundup.