Clean Energy | October 27, 2020

Economics trump politics as the smart money bets big on clean electrification

Amy Cortese and David Bank
ImpactAlpha Editor

Amy Cortese

ImpactAlpha Editor

David Bank

ImpactAlpha, Oct. 27 – Joe Biden need not be defensive about his accidentally honest statement at last week’s debate, “I would transition from the oil industry, yes.” U.S. political campaigns at best represent a lagging indicator. Financial markets and investors already have voted for a full-throttle transition away from oil and gas and toward solar, wind and batteries.

The hunt for greentech at scale is on. From private equity to the SPAC frenzy, institutional capital is going long on cleaner tech and renewable energy. In the first three quarters of 2020, global investors have poured $4.7 billion into battery storage, smart grid, and energy efficiency sectors of the energy market – almost double the level of investment of this time last year.

A dozen U.S. companies making electric vehicles, batteries and charging infrastructure plays like ChargePoint are projected to bring in about $6.5 billion from public market investors, via special purpose acquisition companies, or SPACs.

Distributed, digitized, decarbonized

The electrical infrastructure buildout now getting underway recalls the telecom buildout of the mid to late 1990s, when aging grids also were updated into distributed, two-way networks – and put massive amounts of capital to work. In a new handbook, “Rewiring America,” Saul Griffith outlines the need for, and feasibility of, “a massive war-time mobilization effort to transform the fossil fuel economy into a fully electrified one,” powered by renewable energy.

Solar and wind are cheaper to develop than fossil fuels in most regions. Solar offers “some of the lowest-cost electricity ever seen,” says the International Energy Agency.

Shutdown accelerates shift to digitized, decentralized, decarbonized electricity



In the battleground state of Pennsylvania, Biden could point out that the 74,000 clean-energy jobs are more than triple the 23,000 petroleum-related jobs, according to The Washington Post. In Texas, cleantech firms are hiring laid off oil and gas workers. It’s not Biden’s policies driving the transition.

At under $40 a barrel, oil prices are below the breakeven prices for most new wells, and barely above the operating costs for existing wells. More than three dozen frackers have filed for bankruptcy in just the first eight months of this year.

Will the public bear the cost of the oil industry’s unfunded liabilities?

Banks are placing restrictions on fossil fuel funding, as they’ve already done with coal. “Momentum is building against financing oil and gas projects,” says the Institute for Energy Economics’ Tim Buckley. At least 50 global financial institutions have restricted financing of oil sands and/or Arctic drilling projects, including HSBC, Banco Santander, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Citigroup, Wells Fargo and Morgan Stanley.

Voter mandate

The compelling economics – along with wildfires, flooding and extreme weather events – are driving a shift in public opinion. A recent Morning Consult/Politico poll found 57% support for a shift from oil to renewables, vs. 28% in opposition. In a recent Pew poll, nearly two-thirds said the government was not doing enough to address climate change; 79% said it should prioritize alternative energy development.

Biden’s climate plan “would entail one of the most radical infrastructure overhauls in US history,” says Wood MacKenzie’s Ed Crooks, expanding onshore wind and utility-scale solar seven-fold. A Trump win would dash hopes of decarbonizing the power sector before 2050.