by Leslie Hodge and Joe Song
Introduction
We in the renewable space spend our days (and, often times, evenings) trying to solve humankind’s most pressing existential challenge. It’s exhausting. Sometimes our hopes dim. Sometimes it feels grim. But cheer up, dear reader; we have so much to be thankful for this year. We at Segue are thankful for:
- Lessons Learned
- A Just Transition
- Breakthrough Policy Tailwinds
- Robust Capital Markets
1. Lessons Learned
A global pandemic created unique and idiosyncratic situations. First, case studies emerged throughout the world, demonstrating the possibilities for deep penetrations of renewables on various grids - deeper than many experts initially thought prudent. Second, each link in the supply chain felt various shocks and aftershocks due to the pandemic. Overall, however, our industry navigated (and continues to navigate) those choppy waters. Third, archaic systems proved their sensitivities to slight changes. The limitations of a central power station model were highlighted. Distributed generation and non-wires alternatives are now matters of energy security.
2. A Just Transition
The Segue team has recently had the privilege of being introduced to these powerful organizations that teach us that the energy transition is about people, not electrons. Check out these special organizations making a difference at the human level, supporting the people who will build and use the infrastructure of tomorrow: Just Transition Fund; Bright Solar Futures; Soluz.
3. Breakthrough Policy Tailwinds
We are potentially on the precipice of landmark legislation that would, among other things, (a) extend the ITC and PTC, (b) give project owners a direct pay option for both the ITC and PTC, (c) offer the ITC for standalone storage, and (d) create strong incentives for environmental justice. The Build Back Better Act has not yet passed the Senate, but we remain optimistic. This could usher in a tidal wave of new private investment and job growth. Lastly, and not to be overshadowed, we celebrate the recent Department of Commerce rejection of the A-SMACC circumvention petition and the reinstatement of the exemption for bifacial modules from Section 201 tariffs. While the price implications of such decisions are valuable, the certainty of market conditions is the primary benefit and should alleviate some supply chain constraints.
4. Robust Capital Markets
Our list would be incomplete without recognition that we are experiencing an extraordinary moment. The economics of how energy is produced and delivered is undergoing rapid evolution while capital markets are awakening to (a) the widespread social awareness that climate change requires immediate investment and (b) the variety of compelling investment opportunities in the sector. Because capital markets have been steadily growing/improving since the Global Financial Crisis, there haven’t been many natural prompts to step back and appreciate the luxury of participating in an industry rarely starved of capital. But here we are, and Thanksgiving is probably as good a prompt as any to ensure we aren’t taking the current reality for granted. Sure – parts of the market are “overheated,” and we will incur some pain here and there as corrections occur, but the secular momentum driving capital market health seems unlikely to fade. On the money side of this equation, disciplined investors stand to do well, and access to the sector has improved/democratized. On the value-creation side of the market, new entrants have the opportunity and runway to test a thesis and bring new solutions to market. We all stand to benefit.
So, grab a piece a pie. Go ahead, grab the big piece. Take a night off from the grim realities of our plague-ridden, overheating world. We have so much to be thankful for!
