Greenify #102: Is the UK a climate laggard?
March 16, 2024
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📌 Fact of the week
The U.S. Chamber of Commerce said on Thursday it has filed a lawsuit against the U.S. Securities and Exchange Commission's new rules that require public companies to report climate-related risks. 😳
Hottest news of the week…
Regulation 🗃 – UK is lagging behind
What happened: The debate surrounding the UK's plan to build new gas-fired power stations appears to be endless. The government faces heightened criticism following court rulings that identified deficiencies in its Net Zero Strategy. Proponents of the plan contend that the plants will incorporate technologies to enable net-zero operations; however, these technologies have yet to be proven. This approach further fuels criticism of the government for depending on unproven technologies rather than investing adequately in proven ones, such as renewables.🧐
Zoom out: The strategy of the government is to prioritize energy security over climate change targets… however with the recent disruptions in the gas supply chain and network, gas-fired power plants do not seem the best way to increase energy security… maybe doubling down on renewables could be better a better options? 🤔
Business 💰 – Eni’s green units
What happened: As we navigate through full year earning season, we noted an interesting update from Eni, Italy’s flagship energy company. At its full year presentation, the company announced it would develop two separate energy transition units: carbon capture and biochemicals. On carbon capture, the company has already got a project in the pipeline in partnership with Italy’s grid operator Snam. The separation of business units is not a new thing for Eni, as the company has already got two existing separate business units related to the green transition: renewable energy and biofuel subsidiaries.🎖
Zoom out: The idea behind creating separate business units is ultimately to attract investment to those units. For an investor wanting to play carbon capture/renewables themes, it is easier to be able to invest in a company focused only on that rather than investing in a conglomerate like Eni where you would get exposure to all kind of businesses, including obviously fossil fuels. Eni’s CEO also provided a rough estimate of how much these two new businesses could be worth, pointing to “between 6-8 times expected EBITDA” for the carbon capture unit and “between 8-10 times expected EBITDA” for its biofuel unit.💸
Innovation 💡 - Aira’s heat pump proposition
What happened: Swedish heat pump start up Aira is looking to break into Europe’s heat pump market and revolutionize it. The company, created by Swedish private equity firm Vargas, manufactures and installs heat pumps. A couple of differentiated points which make up Aira’s value proposition: 1) Aira’s heat pumps are highly efficient: the company claims they can generate four units of heat for every unit of power they use, vs a 3:1 ratio on average in the industry; 2) The company offers its customers a monthly payment plan, which reduces the significant upfront cost consumers face when installing a heat pump; 3) Product comes with a 15 year warranty, thereby reassuring customers on their investment.⚡️
Zoom out: The heat pump market in Europe does not lack suppliers: manufacturers of heat pumps are everywhere, Viessmann and Nibe just to name a few. However, installers of these heat pumps are an important bottleneck: there are not many in Europe and most of them are legacy gas boiler installers who need to be retrained in order to install a completely different product such as a heat pump is. Aira aims to install heat pumps serving 5 million customers in Europe: by contrast, Europe’s current largest heat pump installer Thermondo aimed to sell around 10,000 units in 2023. The jump is a massive one, and won’t be easy to achieve.📊
Deep dives of the week…
Chart of the week - Heat pumps taking a breath 😮💨
The European Heat Pump Association reported a fall in heat pump sales in 2023, the first drop in over a decade. Sales across 14 countries, representing 90% of the European market, fell by 5% in 2023. In total, heat pumps sold in 2023 were about 2.6 million, compared to 2.8 million for 2022. Reduction in incentives, high interest rates and low gas prices were cited as the main culprits. Italy saw a notable decline in sales through 2023, likely driven by less generous subsidies around energy efficiency measures. 🇮🇹
Deal of the week - Big round for carbon capture!
CarbonCapture, a carbon removal company based in Los Angeles, raised $80 million in a Series A round to build machines that remove carbon dioxide directly from the air. One if their leading project, located in Wyoming, aims to capture 5 million metric tons of CO2 annually by 2030.
This funding is one of the biggest investments in direct air capture (DAC) technology in the last five years.Investors in the Series A round include Prime Movers Lab, Amazon's Climate Pledge Fund, Siemens Financial Services, Idealab X, and Marc Benioff's TIME Ventures.
👋 See you next Friday, for the best sum up of this coming week!
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