Why the Electrify Everything-Revolution Won’t Go as Planned

(Bloomberg) --

One big goal of the effort to transition to more clean power is to electrify as much as humanly possible. The thinking goes that to really increase renewable energy use, more things in the real world will have to demand the electric power renewables provide. That means electric stoves and barbecue grills rather than natural gas versions, electric cars that replace internal combustion engines, and electric heat pumps and energy storage instead of fossil fuels and diesel generators.

Investors, however, are starting to think this revolution is going to look a little different in a Covid-19 recovery. This will especially be the case as cities manage large at-home workforces, rethink public transit, and individuals think twice before splurging on a Tesla, electric appliance or home-heating. If cash-strained consumers have to replace a car at all it might be a cheap gas guzzler. The oil crash has pushed a red-hot solar market off the roof and the pandemic has brought door-to-door sales to a near-standstill. While the Trump administration is keen to bailout out faltering dirty energy companies, it’s not necessarily focusing on clean energy companies. For the record, the clean energy sector has lost jobs, too: precisely 106,000 in the first few weeks of the pandemic, erasing one year’s worth of job gains for the sector, with more losses ahead. 

Some aspects of the electrify everything thesis will still hold in a recovery, while others will fall by the wayside. Interestingly enough, despite the shift to residential power during shutdowns, the reduction in how much electricity is used has been relatively modest.

Investors say there are a few ways to put the energy sector back to work while still reducing emissions: 

1) Focus on electrifying fleets, work vehicles and industry. Personal cars aren’t going anywhere while a large group of commuters stay home and budget pressures slow new car purchases. But commercial fleets are ripe for an electric overhaul. “We’re very concerned about passenger electric vehicles, but we’re still very bullish on electrifying fleet vehicles, warehouses, job sites, construction, mining and agriculture,” says Amy Francetic, managing general partner at Buoyant Ventures in Chicago. Those electric fleets often replace polluting diesel versions, and could see continued momentum because they save money for cities, Francetic said. Nancy Pfund, founder and managing partner at San Francisco venture capital firm DBL Partners, sees continued demand for electric business-to-business appliances, like coffee roasters for retail coffee shops. 

2) Keep building resiliency into the grid. “Greater resiliency around independent power and people’s businesses and homes are going to be important,” says Francetic, who thinks investors who lost money in the oil crash are going to want to rethink their energy exposure. In places like California, where wildfire risks have previously interrupted electricity service, homeowners working from the kitchen table might still want to invest in energy storage and rooftop solar. And some major utility-scale projects are still continuing, with the largest solar installation in U.S. history backed by Warren Buffett winning U.S. approval this week. 

3) Energy efficiency everywhere. As businesses struggle with commercial rents, there might not be a better time to invest in energy efficiency projects that can quickly reduce costs. “Any additional income they can find is going to be even more important now,” said Robyn Beavers, CEO at Blueprint Power, which works with buildings that have onsite clean energy, and sells their excess supply back to the grid. Commercial buildings in New York State, where Blueprint is based, still face aggressive energy efficiency requirements that will be key to meeting the state's clean energy targets, and could also help manage soaring unemployment. “If coordinated the right way, building upgrades and enhancements can create a lot of jobs,” Beavers said. 

Sustainable Finance In Brief

• Sustainability-linked loans haven’t faced the same declines as green bonds, with $9.8 billion of the debt issued in April, and the whole market outpacing last year’s issuance. The global loan market association put out  new guidelines for the loans last week. 
• Credit Suisse  sold its first green bond. The Swiss bank’s London branch will issue the 500 million-euro ($540 million) five-year bond, after getting more then 2.8 billion euros of orders.
• A green revolution could turnaround Australia’s steel industry. 
• The Bank of England postponed its climate stress tests to focus on its virus response.

Emily Chasan writes the Good Business newsletter about climate-conscious investors and the frontiers of sustainability.

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