October Cleantech Roundup: Fires, Autonomous Shuttle Buses, Long-Duration Energy Storage Investments, and More!
Clean Energy Trust’s cleantech roundup highlights cleantech news and offers perspective on industry, technology, policy, and investing.
After PG&E cut off power to more than 700,000 earlier in October in a poorly-managed fashion in order to deal with increased wildfire risk, the company followed up the following week with additional cuts to hundreds of thousands of customers. There’s a political storm brewing here that doesn’t have many easy solutions. In addition to being bankrupt, PG&E represents one of the most progressive communities in the country. Meanwhile, one of the largest and best-run publicly owned utilities, the Sacramento Municipal Utility District (SMUD), is next door geographically and did not have to shut off their power. While addressing wildfire risk is complicated, the pressure to turn PG&E into a public entity or make other significant changes will undoubtedly grow. Link | For more, check out David Roberts’ coverage of this issue, including this easy-to-digest twitter thread.
Navaya recently announced they would be pivoting away from building autonomous shuttle buses to focus on third party development work. The autonomous shuttles being built were not quite ready for prime time (Navaya buses had some accidents in early operations in open road conditions); like all autonomous vehicle companies, they also faced regulatory challenges.
I’ve written positively about Navaya and autonomous electric shuttles in the past, and I am still very bullish on that modality. Navaya wasn’t wrong about the space, but it was early. Scaling a manufacturing business is difficult and capital intensive; if a company doesn’t have the sales growth to support a high level of utilization for their manufacturing facilities it can get into a difficult financial position quickly. In contrast, Optimus Ride has focused on providing the autonomy technology solution for shuttles, without trying to create its own hardware, which allows the company to be more flexible and requires less capital.
Meanwhile, Toyota is moving forward with its e-Pallette autonomous shuttle bus, which will be in use at the 2020 Olympics in Tokyo. Toyota obviously benefits from a large balance sheet and can afford to ride out a slower adoption cycle; a closed environment like private roadways at the Olympics is also a good fit for this technology at this point. Note the extremely similar form factors between these vehicles. They are good examples of early innovation in this space and what is possible if you remove the drivetrain and the driver. In addition to being able to carry small groups of people, both can be handicap accessible as well.
I still think the autonomous shuttle form factor will be extremely important to the future of transportation, although not necessarily the transportation of today. The potential for these vehicles to multi-task between pooled-rideshare, serve as an accessible transportation solution, and also operate as part of a municipal bus network make this type of vehicle very appealing. Link
Elsewhere in ‘building automobiles is hard,’ Dyson announced it was canceling plans to commercialize an electric vehicle. While the Dyson corporation has expertise in battery technology and electric motors from its work in home appliances, Dyson exited this segment before launching a product because they didn’t see a path to making any money in the space. There’s good reason for that skepticism- incumbent automakers are heavily investing in new product lines, many of which will launch in the 2021–2023 timeline; meanwhile, China (the largest EV market in the world) has numerous burgeoning automakers who are just beginning to export their vehicles to other early-adopting EV markets like Norway. Link
Energy Vault recently raised $110 Million from SoftBank. SoftBank operates the $100 billion Vision Fund, the largest venture capital fund in the world. We talked about Energy Vault in the December Cleantech Roundup — the company is developing longer duration energy storage based on moving around big heavy blocks with a giant crane — sort of a cross between pumped hydropower storage, a construction site, and a lego set. It is great to see another well-known investor engaged in the cleantech space, exploring the sorts of solutions we’ll need as we incorporate more intermittent energy resources onto the grid: long-duration storage that can operate at utility-scale is important in the emerging technology space.
That said, I think the investment strategy here is a bit odd, although not necessarily surprising from SoftBank (I mean the investment structure, not the quality of Energy Vault as a business). Although the company will require a lot of capital to deploy these solutions, it hasn’t yet built a full-scale facility. Intuition would suggest an investor might want to invest in tranches and fund the full-scale facility test before committing to a broader rollout.
It could be that $110 million worth of investment capital could just be a couple of years worth of run-rate for the business, assuming they develop a number of large capital-intensive projects. If the investors believe in the team and the technology, they may prefer giving them a bit more now in order to allow the team to stay focused on executing its technology business rather than spending a lot of time raising money 6 months from now. That said, an investor could still just tranche the investment and allow them to access a larger chunk once they hit a milestone, and perhaps they have done so in this case.
Indeed, my colleague Ben noted that if the fund has the conviction that this is the right team with the right technology to win, then making that large investment arguably makes more sense than making a series of smaller investments, especially if they are not particularly concerned about the technology risk of the business.
The fund also has a long-term view and can afford to make some longer-term bets without worrying about what the valuation will be next year (this investment is also only 0.1% of the fund, so unlikely to be a big factor in near-term fund performance either way). SoftBank also appears to like to invest more money than a startup actually wants or thinks they need when they are raising money, in order to hypercharge growth and crush the competition. This can have a huge upside; however, as we have seen from some high-profile company stumbles, this strategy is not without issues (see WeWork, Wag, etc…).
On a related note, Flow battery company ESS just announced they raised $30 million from SoftBank, Breakthrough Energy Ventures, and others (although this investment was from SB Energy, a SoftBank subsidiary, rather than the Vision Fund).
SoftBank has now made investments in two very different technology solutions that are addressing what is essentially the same problem: how to store and shift the energy produced from the enormous amounts of new renewable power that will come online over the next decade. This has some parallels to SoftBank’s approach to investing in ride-hailing: identify a space you think is interesting, and make large investments in a bunch of high potential companies in the space. Energy Vault Link | ESS Link
Scooter companies Bird and Wheels both raised large funding rounds — $75 million for Bird and $50 million for Wheels. Not too long ago, I thought that scale was the most important factor for these micro-mobility companies — the companies did too, as they were focused heavily on growth. As companies announced new editions of the hardware they were manufacturing, I was a bit skeptical of the ability for these companies to differentiate on scooter features and quality.
However, the hyper-competitive industry has been shifting its focus to improving the economics of the scooter business (at least at the unit level). Increased vehicle durability means these vehicles have a longer useful street life, which contributes significantly to improved unit economics. So, this focus on new product features is less about product differentiation from the consumer perspective (they aren’t adding cupholders and heated seats to these things yet), and more about developing equipment that lasts long enough to consistently recover the cost of the capital invested. Bird Investment Link | Wheels Investment Link
The Climate Leadership Council, a pro-carbon tax coalition whose members include oil giants and environmental groups, added new members and revised its core proposal to be more aggressive. This is the upside-down of climate policy we’re living in right now — Oil and gas-backed trade groups are moving left on policy while the conversation is ignored by the current administration. This is an example of the planning, thinking, and posturing occurring in preparation for the next opening on climate policy, which probably happens in 2021 following the next election. There are some parallels to the policy process for major legislation and the IPO cycle — everyone is getting their ducks in a row and waiting for the window to open; when it does, the pace of activity will shift dramatically. Link
Ford announced an electric vehicle charging network as well as 2 years of free access for new Ford EV owners. This seems directly targeted at addressing range anxiety — the charging network is not a new infrastructure commitment, they are just working with existing EV charging companies Greenlots and Electrify America to assemble a network. The idea here is that they’ll have data on their own chargers so they can route consumers to the closest ones that are not in use. At the end of the day, a Ford EV owner can plug in at any (non-Tesla) charging station, whether they are part of the Ford EV network or not; this network branding approach is really an education and awareness exercise for Ford. There is not much specifically innovative here, but if it helps provide peace of mind to would-be EV owners and speed that transition, then hey why not. Link
The Oil and Gas Climate Initiative released a report which indicated R&D spending on low-carbon energy rose by nearly 40% in 2018. Link
Tesla surprised market analysts with their Q3 results… in a good way! Link
Motiv Power Systems raised $60 million to scale up its medium-duty truck electric motor conversion business. Link
A University of Chicago study shows that electricity markets are more cost-effective than cost of service regulation (not surprising, but good to have data on this). Link
Here’s a time-lapse video of the world’s largest 3-D printer printing a 25-foot boat. Link
The danger of AI is weirder than you think. Link