Noah Brunell

AI is here to stay, but let me state a growing risk that few investors are not correctly pricing... In late 2021, expectations were set for a new dawn and global domination by Tesla in EVs. Fast forward a little more than 2 years Tesla's share price is down 63%. Over the same period, revenue has almost doubled to $97bn and operating profit is up 35%. How can that be? Expectations have changed. In late 2021, the market was not pricing correctly inflation (and its impact on bond yields and subsequent demand for EVs), competition from Chinese EV makers, and infrastructure bottlenecks in the EV ecosystem. What happened to Tesla and the EV industry could happen to the AI industry and Nvidia. In the Odd Lots podcast that I link to, the former Head of Energy at Microsoft, Brian Janous, describes how utilities are not prepared for the electricity boom due to AI. One year ago, Dominion Energy, a Virginia utility (where many datacenters are present) had expectations of almost zero growth in electricity over the next 10 years. Now, they expect it to double. Many utilities say that cannot meet this demand unless they build out natural gas power plants, and even if they do that the physical buildout will likely keep pace with AI adoption. Today, Arm's CEO says that energy systems could be overwhelmed by hungry datacenters tied to AI and that AI electricity consumption will equal India's electricity demand by 2030. The biggest risk to Nvidia and AI stocks is that the physical infrastructure supporting the industry, and which they don't control, cannot keep up. Secondly, I bet the market is mispricing the competitive landscape in just five years from now in AI chips. https://lnkd.in/g-wJcENz

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I wonder how the valuation and modeling service providers factor in these latest market conditions in their models. Thoughts?

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File under: energy regulatory observations, #RTO #complaints / #waivers when there are #tariff issues that don't make sense. I read a fair number of daily orders from / filings with the Federal Energy Regulatory Commission and this granting of a complaint against PJM stood out as a quick one to highlight for a few reasons. First, the level of tax-codification (like Shakespeare, I'll invent the words I need) that RTO tariffs have undergone. Read the intro paragraph of the order capturing the crux of the issue. My goodness. I cover issues across ISOs/RTOs from PJM, to NYISO, CAISO, and of course ISO-NE as well non-888/2000 regions like BPA and public utility districts and everyone has their own rules. For companies doing business in the US (which, for example, is common with generation, transmission developers, and large loads), it's like needing to be fluent in several languages. Observation: no wonder #FERC has some aspirations to more standardized language to at least create a bit of standardization in the tariff tower of Babel. Second, the complaint as a consensus tool. It's human nature to want to be right. Evolutionary, it's a mark of power. And power means safety. Humans are wired that way for survival, and it takes some self-awareness and reflection to engage the rational cortex over the non-verbal and much older limbic system and to hit the pause button to a challenge. The term "complaint" doesn't always help and neither does the "party v. party" case caption. The whole structure connotes conflict. Here, Dominion filed a waiver with a complaint in the alternative because PJM interpreted its tariff to not allow for a resource submission given a change in entity type. But instead of simply defending the tariff, PJM acknowledged the issue and supported a fix if the also supported waiver wasn't granted. FERC granted the complaint to fix the issue generally rather than a one off. While the stakeholder process - and all the interests that are encompassed therein - can make agreement to a change like this more difficult, the complaint and waiver processes are paths that can and should be used especially where time matters. One of the most critical things for those administering the rules to understand is: a delay is not harmless, a "comeback next time" is not without victims. Many projects have to have all elements align to move forward. Other issues may be more durable but can add needless costs to consumers, and those add up. This "how can we work with parties" approach is great to see and hopefully we'll see more of it. From capacity markets to interconnections, there is a lot of room for win-wins. Also, great to see Commissioner Rosner's name on these. #energy

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Hey good news, this week, the Federal Energy Regulatory Commission (FERC) voted to modernize long-distance high-powered transmission policies, aligning with the Biden Administration's decarbonization goals and fortifying the grid against extreme weather impacts. The transmission system must modernize and expand to meet 21st-century demands. With the growth of AI, data centers, and EVs powered by green energy, the U.S. must double regional transmission capacity. Key changes include: Increased Renewable Energy: Expect more renewable energy and less coal-fired power, though litigation is anticipated. Enhanced Grid Stability: Regional authorities can now improve grid stability, making the network more renewables-friendly. Improved Transmission Coordination: Transmission owners will plan every five years for future needs, thinking 20 years ahead. Notably, 260,000 MW of power generation is waiting to connect to the U.S. grid, with 95% from solar, wind, and battery storage. This ruling facilitates power movement from rural to urban areas, benefiting renewable energy. FERC’s new policies also revise backstop authority, allowing federal intervention when states fail to push through vital projects. This ensures no state can veto projects crucial for national interest. The changes aim to cut CO2 levels by 40% by 2030 and achieve carbon neutrality by 2050. Falling prices for wind and solar, coupled with increased clean energy capacity, signal a bright future for renewable energy and grid resilience. Rudy Garza of CPS Energy noted, "This transition is going to happen whether you like it or not." #Renewableenergy https://lnkd.in/gK4nJQB3

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Interesting thoughts on semiconductor industry. I think there is going to be a big oversupply in next few years as all the semi fabrication plants that governments around the world have supported for “security” purposes come online. Semiconductor share prices coming off hard already. Despite AI boom Q 1 semi shipments are down MoM each month since Jan.

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Interesting article below on the NIETC process, meant to clear local hurdles from crippling large-scale transmission projects meant to enable better resource sharing from diverse energy production sources. The 2 things that jumped to my mind when I read this were: 1) If it works (meaning the courts don't block it given the explicit authorization as part of the IRA) and when completed (I'd guess 5-7 years ish from now), the identified areas should be able to attract energy-heavy users - like data centers, AI, cryptomining, etc. - that will feed off those lines (powered by what and from where is another story, as is water) leading to an economic uptick to surrounding cities, counties & states. 2) Regardless, energy-intensive end-users need to plan for their own needs like Google, Microsoft, etc. have done for years by either buying their power needs thru a PPA or building production (and now storage) behind the meter. And from my perch on the economic development side, I'd argue that granting entities should condition their support for incentives on these developers having demonstrated that they have their power needs fully met as set out above. https://lnkd.in/gDkKXdqt

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I know this headline sounds exciting, but it doesn't take an academic study to realize that if a) batteries charge when prices are low and discharge when prices are high; b) coal generation is cheaper than gas generation in some markets at some times; then c) batteries can increase coal generation during charging and displace gas generation during discharging. HOWEVER: the analysis around ancillary markets is a bit of a red herring in that these markets are small relative to the amount of batteries getting built. Moreover, in the type of energy transition world where battery economics make sense, you have to have frequent surplus renewables to push the charging costs sufficiently low. https://lnkd.in/g_PvuSqa

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Yesterday, our portfolio company, LineVision, announced the operationalization of LineVision's Dynamic Line Rating project with National Grid NY. This marks the single largest implementation of a #technology (#climatech) that can help operators determine in real time how much #power they can safely put through their lines leading to a more #efficient and more #reliable #grid - allowing #utilities to build a smarter grid; a grid that can welcome more #renewablepower sources faster! Congratulations to the people and teams at LineVision and National Grid! #decarbonization #gigacorn #electricity Kevin Kimsa Lilliana Paoletti Hudson Gilmer See the comments below for a link to the PR and launch video.

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Kudos to Duane Highley and the team at Tri-State Generation and Transmission Association, Inc. for seizing the benefits of the #InflationReductionAct to accelerate its transition to cleaner and lower cost #renewables. Power supply to its distribution coop members will hit 50% clean next year en route to a 89% reduction in #GHG emissions by 2030 ... with new resources additions focused on #windpower, #solarpower and #batterystorage with a small amount of #gas for peaker/reliability purposes. This is very much in line with the trajectory envisaged by the US Environmental Protection Agency (EPA) #CleanPowerRules and shows that those rules do not force a "major" change in the industry, rather they run totally with the grain of what makes economic sense, and what is happening on the ground, while of course reducing harmful pollution at the same time. A win all around for coop members and the planet. #climatecrisis #stopburningstuff c Dave Munk Alex DeGolia Keith Klesner, PE Kristen Bertuglia NRECA Jim Matheson Kent Singer Colorado Rural Electric Assn. Mark Jacobson Leah Stokes Michael E. Webber Holly Metzler Sonja Macys Will Toor Chris Hansen Lisa Tiffin Amy Robertson Alana Miller Jeffrey McManus Kendra Foley

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Four years ago, in the thick of the COVID pandemic, Rewiring America shared their #electrification handbook. We at Energize Capital had been investing at the intersection of renewables and electrification since our firm's inception back in 2016. Rewiring America's work crystallized the electrification of everything imperative in a way we hadn't seen before; communicating complicated concepts simply. It inspired our team at Energize to start sharing our own views and thesis on, you guessed it, Electrify Everything.   Fast forward to 2024, we are 5 years into researching and writing about how to "Electrify Everything." We can decarbonize, save people and businesses money, and make the industrial economy more efficient. Critically, electrifying faster with proven technologies like solar, energy efficient devices, batteries … has an outsized impact on the Earth's carbon stock now, not 30 years from now. We think enabling technologies that help us electrify faster can unlock many proven electrification technologies. In the process, they might make a lot revenue and profit. That is a good thing.   Every year, Energize shares the latest Electrify Everything trends we can't stop talking about. We also share 30 companies advancing electrification with digital platforms that we really admire. There are 100s if not 1000s of innovators developing hardware, deeptech, software, and tech-enabled services business models to electrify everything. We love it all. Come join the movement and #ElectrifyEverything. Read on below to learn about the Electrify Everything 2024: The Top 30 Software Innovators! https://lnkd.in/euMeUMZt

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Multiple channels reporting on domestic content bonus guidance from Treasury late last week. Some keys: "The US Treasury greatly simplified the calculations yesterday to determine whether solar, onshore wind and battery projects have enough domestic content to qualify for a 10% bonus tax credit. The new calculations are in Notice 2024-41. They are as simple as adding up percentages in a table for the various components of a project that are US-made." See https://conta.cc/4dPKwJg and https://conta.cc/4dQl71N #solar #energy #solarenergy #renewables #renewableenergy #electricity #energystorage #ESS #distributedenergy #solarpower #batteries #EVCharging #EV

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Now it's Goldman Sachs. Seems like every week we're reading about growth in demand not just for power, but for power traders. The east coast of the U.S. has been home to huge growth in data centers to keep all those AI bots up and running. That data center build out is expected to expand across the country and all that data is a tax on our power grid. In the article we learn the spark spread has increased by ~ 50% this year and has nearly doubled in two years. That growth in margin...roughly the cost of selling electricity vs. the cost of producing it...is drawing a ton of interest. Goldman notes hedge funds and asset managers are poking around about power derivatives and asking the questions that could lead to a change in the power trading market. Buyside firms often prefer screen-based trading rather than the OTC market that has dominated power. New entrants to the market seek greater price visibility and access. This makes a lot of sense as natural gas futures, a partner to power futures, already trade predominately on screens. The power markets are lit and there couldn't be a better time to be involved. #PJM #MISO #CAISO #NYISO #ERCOT #SPP #ISONE #powertrader #powertrading #electricity #powergrid #energy

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For the future of regulated wholesale energy markets in the U.S., its later than it seems. For many years now, the “missing money problem” highlighted that prices for energy in competitive wholesale electricity markets do not adequately reflect the value of investment in the resources needed for reliable electric service. And yet FERC continues to insist these RTO markets work and need to be expanded to the Southeast. Meanwhile, Big Tech is setting up camp next to our nuclear power plants for the next thirty to fifty years. Why? They want an affordable, reliable supply of clean electricity and they do not want to be mired down in lengthy and costly interconnection studies. The nuclear power plants want to be able to secure a PPA that guarantees a higher price than the wholesale markets. Both the buyer and supplier have strong attraction to sidestep broken wholesale energy trading markets. Whether it be the recent decision by the Texas Supreme Court to guarantee complete authority the Texas Public Utility Commission to establish prices or the recent and upcoming PPAs by Big Tech and our remaining nuclear power plants, we know there are clear winners and losers. The ratepayers are the losers. When a data center is directly served by an existing generator, it takes some of the unit's capacity away from the supply stack that serves other customers. The data centers will also apparently receive this power free of transmission charges. Southeastern utilities need to take notice and withstand the coming political pressure to create a Southeastern RTO. Wholesale energy markets are clearly broken. In some ways, they are quickly becoming irrelevant and powerless. “If the rate of change on the outside exceeds the rate of change on the inside, the end is near.” – Jack Welch. #FERC #NERC #Datacenters #utility #energymarkets #PUC #Southeast

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Interesting assessment on PV-hybrid grid.

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Grid Status is a great website for tracking US electricity markets. https://lnkd.in/dD4uSswg Yesterday at sunset prices reached near peak scarcity prices in ERCOT in the real time market (over $4000/MWh). Grid status summary page for ERCOT lets you see why https://lnkd.in/eZ4PSWSm (admittedly this is on the ERCOT website too but it is only easy to get to today's info on the ERCOT website - at least for me - and a lot less easy to get to yesterday or any day earlier than that there (e.g. today's data readily accessible here https://lnkd.in/gmk74yvz)). Grid status will remark on notable stuff on their linkedin page - here is their post about yesterday's ERCOT prices https://lnkd.in/eR8GFS6E The pic below is from their website summarizing April 16th with those notable realtime evening prices.

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**Greater than 600 GW of ☀️ capacity is being added per year!** Last week The Economist published an article titled “The Exponential Growth of Solar Power Will Change the World,” emphasizing a well-known trend at Energize Capital: energy technologies such as solar and batteries are rapidly expanding. Many attribute the growth of solar to the cost decline of the hardware. However, this cost decline isn’t solely due to hardware; advancements in software and services for utility-scale solar have also played crucial roles. At Energize we look to invest in long-term, enduring megatrends. The ecosystem around solar deployment demonstrates effective alignment of technology and system innovations. Energize’s portfolio includes companies deeply involved in the utility-scale solar sector: ☀️☀️ PVcase: utility scale solar siting & systems design Sitetracker: project management for high volume, highly distributed assets, including solar Banyan Infrastructure: finance software bringing together capitalization stakeholders for solar projects DroneDeploy: reality capture for the physical world. Autonomous drone flight and aerial analytics to monitor construction progress and operational performance Amperon: energy demand forecasting that enables energy suppliers to maximize /match generation to load Handle.com: construction payments tools, big presence in renewables Sourcemap: the Supply Chain Mapping Company: traceability for materials entering our energy supply chain https://lnkd.in/gSQ3CJtg David Trainavicius Giuseppe Incitti Will Greene Sean Kelly Patrick Hogan Jono Millin Amanda Li

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