Catalyst with Shayle Kann - More 2023 trends: EVs, onshoring, and the three ages of decarbonization

Episode Date: March 2, 2023

Come watch a live episode of The Carbon Copy! Canary Media and Post Script Media are hosting a live event at Greentown Labs in Somerville, Massachusetts on April 6 with some very special guests. Get your tickets today. We had so much to cover in Nat Bullard’s monster climate trends deck that we’re back for another episode. Haven’t heard the first part yet? Listen here.  Nat was the chief content officer at BloombergNEF until last year. He is now a senior contributor at BNEF and Bloomberg Green as well as a venture partner at Voyager Ventures.  Shayle and Nat dig into topics like: EVs. From 2017 to 2022, internal combustion engine car sales globally declined by nearly a third. Yet EV sales are on the rise. Will growth in EVs stave off the decline of passenger vehicle sales? Onshoring of supply chains. Companies have announced plans to bring manufacturing facilities to the U.S. or nearby countries. In the EV value chain alone, there were $70 billion worth of announcements in 2022. Will this onshoring trend have lasting power?  The three ages of decarbonization. First came renewable energy, then the energy transition, and starting in 2019, the net zero age. It builds on everything we did before, but now with a focus on molecules, calories, industry, and pressure on the boardroom. Plus: What we can do with old coal sites and the types of projects that tend to have cost overruns. For a full transcript, click here Recommended resources: Nathaniel Bullard: Decarbonization: The long view, trends and transience, net zero Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Antenna Group. For 25 years, Antenna has partnered with leading clean-economy innovators to build their brands and accelerate business growth. If you're a startup, investor, enterprise, or innovation ecosystem that's creating positive change, Antenna is ready to power your impact. Visit antennagroup.com to learn more. Catalyst is supported by EnergyHub. The company’s platform lets consumers turn their smart thermostats, EVs, batteries, water heaters, and other products into virtual power plants that keep the grid stable and enable higher penetration of solar and wind power. And they are hiring! Learn more and see open roles at energyhub.com/catalyst Catalyst is brought to you by Sealed: The experts in home weatherization and electrification upgrades. Sealed is leading the way, with over a decade of experience being accountable to homeowners because they only get paid based on actual energy reductions. Visit Sealed.com/measuredsavings to learn more.

from the studios of PostScript Media and Canary Media. I'm Shale Khan, and this is Catalyst. Net Zero is like so much harder to do than everything else that has come before, and it leaves nothing unaffected. This week, we continue our whirlwind journey through the land of decarbitization with Nat Bullard. When utilities need flexible capacity they can count on,

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That's F-I-S-C-H-Fish-Tankpr.com. And we're back. I'm Shail Khan. I invest in revolutionary climate technologies at energy impact partners. Welcome. So last week, Nat Bullard and I covered, I don't know, five or six of my favorite insights from his first annual decarbonization trends report. But there's more fun in there than we were able to get to.

So this week, we finish the job. As always, leave us a voicemail if you want to get in touch at 919. 808-5832 or email us at Catalyst at PostScript Audio.com. You can also tag us on Twitter. But for now, here's Nat. Nat, welcome back. Thank you, Shail. Good to be back. All right, let's keep digging in.

And I've got a new set of my favorite slides from your decarbonization opus to talk through. So we're going to jump right into it. I want to go to slide 55, which is about overall vehicle sales. over time. And EVs is a portion of that, which is something I had not fully realized, which is that vehicle sales, motor vehicle sales, have been declining over time overall. Can you just talk through what the dynamic is, as we understand it, that's driving that? I think intuitively, I would have said, out of global basis, like, sure, maybe we've hit peak car

in the West, but you'd think that would be more than made up for by growth in China and India and Indonesia and wherever else. You're right. So the data show that on a trailing 12-month basis, we hit the sort of peak of cars, not vehicle sales necessarily, but car sales, you know, in about 85 million, and that was now almost six years ago when that happened.

That's a function, like so many of the things that we end up talking about here of China. China was during the interval, I've got from 2010 on rapidly on its way to becoming the world's biggest new car market. Supplanting, I'll give you one guess, which market is the biggest new car market in the world. But then, you know, running to a certain extent against perhaps some limits of urbanization everywhere, running against a global economy as you get further on. But I think most importantly, running up against the limits of the sales of internal combustion engines.

So, like, not only did sales peak at about $85 million and decline to below $70 million as of the third quarter last year on a traveling 12-month basis. I just want to note, that's pretty substantial. It's not like it peaked and then flattened. Like, it's a meaningful decline over 60 million. And it, obviously, it has some COVID action going on in there, for sure. But, yeah, it peaked and declined significantly. But then there is a growth market within that, which is EVs.

And so, like, another way to think about this is that more than 100% of the auto industry's growth is coming from electric vehicles. Like, they are the only growth cohort within cars. I mean, obviously, probably models of cars are growing more and certain chassis are growing more of certain frames. Like, we see more SUVs, certainly. But from a propulsion perspective, EVs are the only growing market. And I think to an extent, this helps, is this sort of a simple lens on thinking about why companies care about EVs? Because they're growth. Like, they're the growth platform within a big market. And I think sometimes we have the tendency to overcomplicate this thinking strategically when you could simply identify, you know, the top line growth in EVs and the top line shrinking for everything else in a shrinking market means that EVs are a growing share of a shrinking market. And I think that most manufacturers are well aware of that fact at this point.

Okay, so one of the interesting questions, though, is, so we have this overall declining passenger vehicle sales trend. EV is bucking that trend and gaining a bigger share of what appears to be an overall declining market. The way you framed it was like, automakers know that this is the growth engine, but it's sort of a chicken or an egg question. Like, is it that the total number of vehicles that are going to get sold is a fixed number, and that number is declining, and if you introduce more EVs, they will take a bigger share

of that. Or is it that by introducing EVs, you can, to some extent, stave off the decline in overall passenger vehicle sales? I mean, this is probably an unknowable question, but... I think it is. It's a sort of a collective action question, if anything, right? Like, if every, you know, you, if you sense that EVs are the future, then you want to capture as much of that market share for yourself as you can as a automaker. I think that that's the biggest attempt. Of course, if everybody does that, you end up in an intense competition, which I think is also more or less what is happening. There are very, very few holdout companies that have no electrification plans.

You know, even the supercar makers are doing electrics to an extent because they're being competed with directly by purely electric startup supercar makers. And it's a strategic challenge in a way that they haven't had. except amongst themselves in decades probably. I just want to draw out one more data point embedded within this that I think is particularly striking. So, as you said, the overall passenger vehicle sales since the peak in 2017 have declined from whatever it is to $85 million to $68 million or thereabouts. Okay, but if you just take the ICE vehicles, right, so separate out EVs, the decline has been

really precipitous, because there it's from... from, what, like, 84 million or so at the peak to, it looks like you could tell me the exact number, but somewhere in the realm of 60 million. It should be, it'll be, and at the end of the year date, it will be below 60, because there were 10.6 million electric vehicles, including plug-in hybrids sold last year. That's like a 30% decline over six years. It is, it is, exactly, it is very significant. And it's eating right into the heart of a way a two plus trillion dollar sector in terms of annual sales operates and organizes itself.

You know, electrification is fascinating because it can be very much a sustaining innovation if you're a big automaker. It can be profoundly disruptive, though, to other parts of your value chains. And I think potentially create some new champions. Tesla qualifies, right? Tesla is a company that is electric first and electric only and is now on its way to being one of the biggest automakers in the world. But so too, for that matter, is B.Y.D. In China. So, like, we're going to see if we don't see not just sort of new champion drive trains, like electric drive trains come around and dominate, but also do we see new champion companies? You know, if I think about it, we really haven't had to be.

had new breakout global high-quality automakers since probably the Korean companies were doing this in the 1980s and 1990s. There are other places that have their own automaking firms. There are certainly Eastern European companies that are affiliated with or are a subsidiary of a big German company. There are car companies, car manufacturers in Malaysia and in Mexico that serve largely domestic markets. And some of them even have their own brands. But are we going to see the case that, you know, that BID becomes a global auto brand that everybody buys, that is sort of electric first and oriented around the principles of electric from the manufacturing perspective, from a service perspective, from a sales perspective, and everything.

Okay, so let's stay on the EV trend for a minute and move down two slides to 57, which I think is an interesting one. Basically breaking down, you know, what we were just talking about is passenger vehicles, which is what we probably talk about the most. But as, as a As you point out in this other slide, that's sort of, if you want to categorize the electric vehicle market, that's really one out of four of the sort of distinct EV markets that are emerging today. So walk me through the other three. Right.

So, yeah, we generally, if we are in United States, North America, if we're in Western Europe, we are, if not car dependent, then at least very well aware of the automobile as kind of the prime mover of personal transport. So yeah, we have about 10.6 million cars, EVs sold last year. We had 32, almost 33 million electric two-wheeler's that are sold. Almost none of them here in North America or in Western Europe. And then we have another fraction, like about 400,000 each electric buses and electric commercial vehicles, smaller commercial vehicles.

not the scale of like a semi-trailer, but something that would be working in a city or doing last-mile delivery or things like that. And these markets are just very, very different in scale. So EVs were like 13% of the car market. Of the new vehicle sales market. Yeah, a new vehicle sales market.

39% of the new market for scooters and two-wheelers, almost 50% of the market for buses, and not even 4% of the market for commercial vehicles. And then there's the fleet size question, which is the really interesting bit, which is that we've now reached 27 million electric vehicles, passenger vehicles on the road. We have 287 million electric two-wheeler's on the road, and fewer than a million electric buses and electric commercial vehicles. Yeah, I mean, there's a few striking components here, obviously.

One being, maybe this is somewhat intuitive, but I don't think at least I realized how quickly electrification is taking over that two-wheeler market, and as a result, how big that fleet is. As you said, it's roughly an order of magnitude larger than the fleet of passenger vehicles that are electric. The other thing is, I think we also probably all know that electrification of buses has been kind of the fastest mover, at least amongst larger vehicles, but the fact that we're almost at 50% penetration of new vehicle sales is really striking there. And I think that also, as many of the these things in the big global market context comes down to China, right? Absolutely.

Another function of China, which made this incredibly rapid and very, very intense shift to mostly buying electric buses. And it really didn't take very long to rip through. And I think a large part of this is just the lack of sort of dependency, path dependency, I guess you could say, within the sector there. but also infrastructure definitely helps with this. If you ever talk to, let's say, the person in charge of a bus divo here, they're like, we would love to do this.

Do you know what kind of upgrade we need to do to our electrical system in order to support 50 buses with like 250 kilowatt hour packs charging at once? It's really intense. And look, it's not an impossible problem to solve. But we have in many of our cities the challenge of how. having to invest to do this. You know, you might already have site. You've got property plant and equipment that's obviously built around serving and servicing all of the internal combustion bus fleet that you've got and you want to swap that out. You know, it's an energetic shift,

but it also means a huge amount of capex, right? It doesn't just mean like a pump and a tank underground. It means all kinds of stuff happening in the grid. And it might mean a new kind of relationship. Like there's no, there's no such thing as demand charging for gasoline. You can get squeezed on price. But when you receive your shipment of diesel and it's stored in your depot, that price is then fixed. It does not vary over time. If your electricity, you're going to be possibly paying demand charges for it. If you don't time your or optimize your charging correctly, you could be paying peak rates. There's lots of things that are still left there to negotiate. But I think, you know, we're starting to see, at least over on our side of the world,

a lot of interest in these things for what I would say are very good local, local and localized reasons, like air quality, noise, lower footprint driving through residential neighborhoods. I think in the long run we'll be surprised to tell our children that, you know, we used to have to sit and like breathe in diesel exhaust fumes in an unair-conditioned vehicle for sometimes hours a day. to drapes around the city, I think that that will be substituted and is starting to be substituted with electric buses here.

So I think one of the interesting questions is going to be, are we going to have a fifth category that emerges over the next few years, which is the heavy-duty, you know, class eight electric semi-truck category, which, you know, we're seeing the first deliveries now of the Tesla semi and the E-Cascadia is coming and, you know, Volvos and all this kind of stuff.

So it seems like it's starting to show up, but obviously not, probably not going to be at the penetration levels. Really, any of these other markets, either from a total volume or just portion of the market perspective over the next few years. But ultimately, right, that should be its own category. I think, and I think actually we can apply a pretty fine microtome to thinking about these various markets as they are, right? Is there a, you know, a drage market is going to be, I think, huge for electric vehicles. You know, we're already starting to see that, get rolled out into ports. these are places where you have high utilization, but like sort of limited fundamental range that you're traveling.

I think that with the class eights, it'll be curious to see what particular fleet runs are being done. And I think it's interesting to know that Tesla's first one is with Frito. Is it with Frito-Lay or is it with Pepsi? Isn't Frito-Lay owned by Pepsi? Potentially. I'm just trying to remember which site it is specifically that it's rolling from. I don't remember. It's a good question.

We can come back on that. But this is serving a market that I think probably largely internal to California. I don't know that necessarily the processing catchment area for that plant is serving things in Illinois or in Mississippi. So the duration of runs that's happening with those vehicles is likely to be within the range where maybe they can come back in charge overnight, as opposed to charging on the road. Right. Okay.

So let's sort of move on from EVs, though this next topic is going to be relevant. to EVs as well. Jumping ahead to slide 121. This is one that I think is really interesting, and it's not specific to climate tech necessarily, but it's definitely relevant to climate tech, which is about onshoreing, reshoring, and nearshoring of supply chains,

which is a big topic right now. We're seeing, you know, in the U.S., there's this bevy of announcements, which I think have been expected ever since the IRA passed, of new manufacturing facilities for batteries and battery materials and all the way up the value chain there. We've got Europe, which is sort of mad,

at the U.S., about the IRA, and so coming up with its own policies and talking about how these new industries as they develop need to be different from how some of the other industries that have been built, like solar, ended up being basically entirely based on imports. So you have some interesting data on mentions in quarterly earnings calls about onshoreing, reshoring, and near-shoring. So what are we seeing in the trend line there? So the series that I have here from Bloomberg starts with the first quarter of 2020, which, as we all know, is when COVID hit home here in the U.S. Very, very little mention of this.

This was not like a strategic priority. I'm like in the range of like 12 to 15 mentions in total. By the second quarter, it's jumped up to like 125 mentions of onshoreing, reshoring, and near-shoring. And then by the second quarter of last year, it's more than 175 mentions in total, of which most of the mentions are about on-shoring. probably a good chance to sort of define what we mean by these. So on-shoring would be you are making a new production decision

and you decide that you're going to do it here in the United States. Reshoring would be bringing something back that had been previously done overseas. And then near-shoring, and its sort of near-neighbor friend shoring, is bringing it somewhere close by. So maybe within NAFTA or somewhere that at least you're not going to have a lot of challenge in terms of trade or distance barriers to your supply chains. And then, of course, as I mentioned, friend shoring, which is not in here, is probably not something really getting mentioned much in calls, but it's definitely top of mind from a policy level for so many

sort of national level discussions between countries. So I think it's an interesting question how much this trend has lasting power, right? You could imagine a couple of possibilities. One being that this is this like beginning of relatively early days of a megatrend, which is we went through decades of globalization, and now we're sort of unwinding that as we realize some of the challenges that globalization presented politically and economically in these new industries as we build them. And that the future supply chains in a decade for all these new markets, batteries and hydrogen and whatever else, are going to be much more distributed. and we're going to see more domestication of supply chains. On the other hand, you could also imagine that there was this confluence of events that made this particularly acute right now, ranging from Russia, Ukraine, to these individual legislative actions like the IRA and whatever comes out of Europe. And that'll last a few years. And then, you know, wins will change, politicians will change and we'll kind of revert back to what has been the means.

for a few decades, which is globalization, most manufacturing taking place in low-cost regions, et cetera. Do you have a view on which of those is more likely? So I think that there's an urge sort of across the most savvy supply chain management companies to be a little bit more diversified, because an intense exposure to one particular market is very, very brittle. It's not that easy, however, to make. that kind of a substitution. It takes time. It takes planning. It takes support from wherever else it is that you're going to go. It takes personnel. It takes a great deal of human capital to make these moves. I think that this is going to be the challenge moving like precision

manufacturing away from the places in East Asia where it's certainly been for a very long time. And then the other question is cost. Like to an extent you can you can create more, you can create more sort of social welfare here in the United States perhaps by having a more robust manufacturing base, it will have a cost associated with it. It might even be inflationary, too, in terms of needing a lot more input to get us to the point of being able to manufacture. And I think sector by sector is going to be very different. I mean, I have elsewhere here that there's about $70 billion worth of announcements last year in the EV value chain in the United States. And I think that's going to pale in comparison to this year. Right.

Those are just, that's just the beginning of the projects. And remember, the IRA wasn't even passed until we were almost eight months into the year. Yeah, it's kind of astounding how quickly it's moved since then. I mean, clearly a lot of companies were already thinking about it. They were thinking about it, but it was an incredible sort of inception moment for being like, okay, you could call it another way perhaps as social license to say, all right, now I'm going to do this. Like, this is the kind of thing that now is going to be viewed as sort of within the boundaries of not only normal but like good competitive behavior and perhaps national behavior as a company to bring a lot of capacity back here. So I think I think it's quite possible we have

a, you know, a robust sector built up around EVs that goes further, you know, further down the value chain than just assembling a battery that you bought from somewhere else into a vehicle that you're stamping in, in Michigan or in Tennessee. And the other question will be how much further up the ladder, does that go in terms of do we have more mining here? Do we have processing here for all of the critical minerals that need to go into these value chains over time? You know, the determining step for so many of these things is not fundamentally, you know, access or availability within the earth's crust, but where it is that it gets processed. And so I think that's going to be really interesting to see if we have the stomach,

for bringing that kind of capacity back to the United States. I also think that, you know, the biggest volume of announcements has come from the battery supply chain, but it's important also to keep an eye on all the other parts of climate tech where you're seeing be these big announcements. I mean, solar is a good example, right?

Like Hanwa, which is a big Korea-based solar manufacturer, is setting up like a $2.5 billion manufacturing facility in the U.S. First solar is expanding capacity in the U.S. You've got companies elsewhere in the solar supply chain who are making trackers and racking systems, you're making inverters. All this stuff is getting domesticated right now. And that's just in solar, right? And then take all these other emergent industries, where are we going to make all of our electrolyzers, where are we going to make all of our direct air capture machines, whatever you want to call them, like all this stuff, right?

So batteries, I think, are getting the rightly getting the most attention because it's sort of happening the fastest at largest volume. but it feels to me like it's sort of, it's pan climate tech. No, I think so. And, you know, we have the advantage here in the United States of being a large market, right? We were a large market for basically anything. And we're adjacent to two other reasons of being large markets, Canada and Mexico. And I think that if you're confident in the sort of path of climate technologies, then you as an executive could see the path to doing things here.

because of the strength of your own market and becoming an exporter elsewhere. The question is, like, how, sort of how small of an economy can you do this effectively? Like, could you do this at the scale of Germany? I think so. Could you do this at the scale of Vietnam? Open question. Could you do it at the scale of an Indonesia? Also an open question. But I think a lot of countries are sort of doing this right now. They're trying to decide, are we capturing something for ourselves, for I wouldn't, let's not call it autarchy economically, but for reduced interdependence on other countries, or are we ourselves trying to become a new export hub, a new friend for globalization? Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling

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That's F-I-S-C-H-F-TankPR.com. Okay, let's talk about something I think I've sort of known intuitively but never seen data around, which is about mega projects. This is slide 111. I think everybody's probably familiar with the fact that, for the most part, when we've tried to build new nuclear power, particularly in the U.S., which there are very few examples of, but tried to build new nuclear power at large scale of late. there have been a lot of cost overruns.

What I think is interesting in the data that you pulled is that it's not unique to nuclear, though. Maybe it's worse to nuclear. So what do we see in terms of when you're building a really big energy project, or not even just energy, what the costs end up being relative to what you think they're going to be?

So, look, very basically, the first of a kind of anything is laid in over budget. You know, that's a sort of an aphorism that you could apply to anything that's being done new. and is first of a kind. But what the data here, and it's coming from Professor Ben Fliburg, who's at Saeed Business School in Oxford, his data points that the bigger the things are,

the more they tend to overrun, roughly speaking. So nuclear power has a mean cost overrun of 120%. And 55% of projects have a 50% plus cost overrun. So, I mean, there's almost no way, if you look at those numbers, that you can expect nuclear power in most markets. to ever come close to what it was mooted to cost. Hydro dams have a 75% mean cost ever run.

Big oil and gas projects, 34%, mining, 27%. Go all the way down towards a sort of traditional energy transition, renewable energy technologies. Wind power, 13% cost ever run. Transmission, 8. The mean cost overrun for solar power is 1%. And only 2% of solar projects ever have a cost overrun of more than 50%.

So it's just like smaller and more distributed in this case is better. There is, for lack of a better phrase, there's more sunlight also on what's happening. You get more visibility on the cost structure for a project that's happening over the course of 18 months of build time

or four months or five months of build time than you do with something that has a build time of a decade. But also, somewhere's fairly standardized at this point. You have topographical decisions to make. You might have some siting decisions to make. But the configuration of Racker, inverter,

module is something that can be repeated at scale and speed. Most of the components are manufactured and then assembled on field, right? With solar. And that is a significant distinction from nuclear as it has

existed historically, from hydro dams, from oil and gas, from mining. Like a lot of this, these are big complex engineering projects. And they have, and they're in their critical path, there are often multiple things that are unique for that purpose. If you're building a nuclear power project, you are going to commission a turbine. It's not like you can call up, you know, Hitachi or GE.

And I'm like, sure, we've got one. We've got a, we've got a 1,500 megawatt turbine lying around. Like, that is, in and of itself a multiple year process and possibly a multiple year negotiation. And in that, in that process, it's like, okay, you've got to. You've got to cast the rotor. You've then got to form the blades. You've then got to ship this gigantic, complex thing in a probably completely bespoke shipping process to get it somewhere. And then you have to set it up with unique, site-specific attention to geology, to hydrology, to everything else.

And so, yes, in a sense, there's almost like an unfairness or an asymmetry to the competition between these technologies. If you're buying solar, there are optimizations you can get at the module level. But those themselves are distributed at a scale of probably tens of millions of products, or units rather, specific to any given subset of that technology. So this is one of the reasons why I think people often get excited about, for good reason, get excited about technologies that are more modular, potentially more distributed, certainly more manufacturable. And I think there's good reason for that.

I mean, you see this also in a lot of other sectors, right? This move toward like prefab and modular housing, for example, is sort of drawing upon the same thing. It should be cheaper and more predictable to build the thing if that thing can be built in a manufacturing facility and shipped to a site rather than having to get designed and built on the site. But I wonder how far, you know, you think we should take that logic, right?

Like what we're saying here is that stuff like solar that is more modular and manufacturable tends to be more predictable from a cost perspective. I think some people take that to a sort of an extreme and say, well, this is the reason that we need a fully distributed energy system, for example. Everything should be modular. We should never build another megaproject of any kind, right?

And I wonder how you think about that. Like, does this mean to you modular is better? or does this just mean like, I don't know, does it mean modular wherever we can? I mean, modular is different, I think is the best way to say it. Like, you know, it's a different modality. What I will say is I think that the success of these modular technologies means that the aperture for megaprojects is generally getting smaller over time, as well as the ability to integrate lots and lots of modular stuff.

You know, you and I date from a time when you could find a great engineer who would swear up and down we were never going to, to get past maybe 10% renewable power in any given grid. Things were going to work. Or nobody would ever figure out how to ramp up and down the large thermal plants that were already in the fleet. That's obviously not true. It obviously didn't happen that way because people have improved along the way

through another sort of modularity, iterative learning across grids everywhere to be able to put more of everything into play. So I don't think it's the case that we're going to need to have 60% base load power. In fact, I think we should probably, you know, sort of deprecate the notion as it is in terms of baseload probably forever. But we are going to have more acute needs that might actually be of shorter duration that do need things that are either very big or are designed to be very firm. And we will have to come up with a kind of regulatory societal financial compact on which we

can make those things happen. Who is responsible for them? how do they get paid for? Where are they built and who owns them? I think it's going to be very interesting to me. Like, you know, we don't have any merchant nuclear power being built in the United States. Where it's being built, in fact, worldwide is generally by a state-owned or peristatal financial institution or in the United States, one of the fully regulated entities in the Southeast.

Now, it'll be really interesting to see what happens when we, if when we reach the point where there's a lot of small modular reactors. Where do they fit within this structure? In theory, they're manufactured, you know, as compared to built, bespoke in each different iteration. And they're small, meaning that in order for them to make a meaningful impact on the energy system, they will have to be lots of them distributed around in various places. Another one of my arguments is that there's lots of people. potential sites, if you think about today's liability, you know, a Brownfield X coal plant in the Ohio

Valley as an asset, given its interconnection, given it's got feed water on site, given the land is already, to put it gently, perhaps disturbed. And we can see a place where there's an opportunity to distribute this modularity pretty quickly. I mean, undeniably, we're going to do a bunch of really, I mean, I think some folks are already paying attention to this. We're to do a bunch of really interesting things with Brownfield X coal sites in the U.S. over the coming years because there are particular incentives, even amongst all the big incentives in the IRA, there are particular incentives that pertain to those sites specifically, and they're stackable. You do lots of interesting things on those sites, and I think we're going to.

And some of it might be small modular nuclear, but some of it could be a bunch of other things. I mean, it will be really interesting, you know, as a slight a slide here, to see those sites as an inbound, not an outbound, so to speak. That already happened with Google's data center in Alabama. That was an old TVA coal plant. Basically, it becomes a load, a demand center, right? Or another example, to pitch my own book. So Form Energy, one of the companies we are invested in, which is making multi-day energy storage batteries, announced their first two sort of significant commercial installations a few weeks ago with Excel Energy. And both of them are at retiring coal sites. So they're going to replace a coal plant with a basically one gigawatt hour battery

in each case. Which is tremendous. If you think about how that truncates the critical path of planning permission development, it's just a win for everybody. And it's an argument that I've made in columns before. It's one I definitely make in this deck here is that I really hope that people look holistically at our fleet of objects and queries carefully whether or not they're a liability or an asset of a different kind. So look, I mean, it would be, I think in the long run it would be something of a shame to fully decommission every single coal plant site and remove all of the power and water infrastructure that exists there, if you can do something else with them.

Yep. Obviously, in the cleanest, greenest way possible. All right. Last topic. We're getting way high level on this one. You've got a riff, I'm going to call it, in this deck around the three ages of decarbonization, which you and I have talked about a little bit. You've put a much cleaner frame on it than we've talked about historically. But both of us having spent too much time in this, sector as it has evolved over the years, I think I like to think about how it has evolved and what has changed and where are we today in the trajectory of this market. So walk me through your view of

the three ages of decarbonization. I'm glad we're talking about this one. These are by far the simplest visual slides, I think in this deck of mine, by far the hardest to work out. I've been, I've been fiddling with these for months, you know, basically since the middle of the summer. But my thinking was that we've we're in the we've had three ages that overlap and are accretive of decarbonization the first was renewable energy when you and I were beginning this is starting in my case here not to go too far back in time with the the german and then the spanish feed and tariffs so starting in 2004 this is a world that is driven completely almost by regulation and tariffs. The financial structures are principal investment. The financing is very

cost more bespoke. And there's a really limited number of technologies that apply. Wind, solar, biofuels in the United States, and carbon dioxide in the form of carbon markets in Europe. Moving ahead, this is the next wave that's above that, you know, taking everything from before is still going on. The next wave is energy transition. Let's start that, again. 2012 era. And by the way, I'm based on Google Trends, searches for, you know, sort of hits and significance and interest for these terms. So let's start to 2012 and move forward. This is when you get, you know, beyond just regulations and tariffs, you start to have ESG as a big driver. You've got group strategy rather than just the principal investing team looking

at doing something. Rather than just getting assets or developing them yourselves, you might start acquiring things, and you might also might start divesting. And you shift into looking at other elements of things besides just power. Well, you have firm power, for one thing, a lot of power storage. And then you have electrified transport, you know, which is obviously very close in terms of total dollars spent now to anything happening renewable energy, but involves a whole other set of value chains. Let's go forward to the last one. Let's start 2019, 2020, if you will, and think about net zero. This sort of elevates further up into the company.

This is not just happening at the group strategy level. It's happening at the boardroom. And it's not just about like maybe taking one business line and deciding you're going to get that one to net zero scope one emissions by 2040. It means really transforming the business

and not being able to leave anything that isn't transformed. And it's about more than just power and it's about more than just biofuels and regulated carbon dioxide, it's about molecules, and it's about calories, and it's about all greenhouse gases, not just CO2. And it's about remaking industries. And so I think that, you know, I put this together because I feel like we have this view that net zero is like what comes next.

Okay, well, you know, we've already started all these other processes. So the next logical thing is to get ourselves to net zero, which is, I think, true. But net zero is like so much harder to do than everything else that has come before. And it leaves nothing unaffected. There's basically no economic activity that isn't going to have to be significantly re-engaged, let's say, by deciding that you're going to get down to net zero greenhouse gas emissions by the middle of the century. The other thing that I think is interesting about it is that, you know, phase one about renewable energy, you can just kind of get started

and you can go as far as you want to go. Phase two, energy transition, by its definition, by its name even, it's a transition. It's like this, with a sort of like undefined end state and you can be in transition, but, you know, the pace is TBD.

Net zero is this very specific endpoint. And the endpoint is, generally, for most companies that are committing to net zero, it's a ways out, right? I mean, I don't think anybody's saying full net zero, besides maybe like Microsoft who's going to not only go net zero, but then like remove all of their historical emissions. But most companies are saying net zero by 2035, 2040,

2050, something like that. And so, you know, what I wonder is, I do agree that we are in the age, we have been, at least in the past few years, in the age of net zero speak. Right. The question is, will we remain in that age? Because in theory, you could say net zero is the end state, right? This is the trend until we do it. And so it's going to last until 2040 or 2050. But as history has proven, we're on these, I don't know, eight-year cycles of, like, trends in this market. And so that would suggest that middle of this decade, we're going to do something else. So if we, let's play that tape forward.

Let's imagine that this is so successful that we're already reengaging the new master narrative around negative emissions. Right. And let's imagine that the next eight-year cycle is, okay, cool, actually looks like we're going to do this. looks like we're going to reach net zero. It's going to cost us $200 trillion. It's going to take 30 years. But now we need to start correcting for embedded error, let's say, in the Earth system, as it is right now. And let's start removing emissions.

I really don't know what would come after that, after negative emissions. Good problem to have. Exactly. If we reach that rhetorical cliff, we will be very much. very fortunate to have that be the problem that we have to deal with. Yeah, I think in my view, you know, each one of these phases, we've sort of amped up the difficulty of actually accomplishing it. Net zero is really difficult, as everybody listening, and you and I definitely both know. So I think what's more likely to happen is that it's going

to turn out that there are going to be a bunch of stumbling blocks on the journey to net zero. And the question is, will this trend, will the resolve amongst corporates, I guess is mostly we're talking about here, the resolve to hit Net Zero, will that hold in light of challenges accomplishing it, in light of economic challenges, both macro and micro, like, can this hold long enough for us to actually be on the trajectory to get to Net Zero, which we are definitely not as a society today? Think about it. The way I think about it is, and I alluded to it further on in the presentation, it's about personnel and about human capital involved in this. So the person making the

decision to talk about net zero is generally speaking, I would say, within five, maybe 10 years of retirement. It's a decision to make, it's a strategic decision to make, implementing it, the beginning of it is probably within your frame, actually dealing with it, making, you know, having to wrestle with it as an existential challenge for your company is probably after you've retired. You know, there are no 27 and 28-year-olds at a company who get to say, We're going to take this global pet chem's concern, and we're going to make it net zero. They're just not involved in the decision-making process. And I think, and I'm not really sure exactly how this is going to play in the long run,

but the data indicate that there's very little expertise about any of this stuff in the global boardroom. You know, like you find 1.2% of the Fortune 100 board knows anything about energy. Right? 5% knows something about work, like workplace. diversity. And these are both equally valid and equally important, but, you know, the number of people who know something about climate in the global boardroom is very, very low. And in fact, you know, like you and I are neither particularly young nor necessarily that old, but there are very few people our age that are on corporate boards, in particular of the companies where this is going to be difficult to do. Neither particularly young nor necessarily that old is a perfect description of

how I'd like to think about my current age. All right, Nat, this has been very fun. I'm very proud of you for finally putting together the first annual of many, I'm sure decarbonization trends reports. Everybody should go check it out, and I look forward to the next one when I will have you back on and we'll do a couple more episodes. Thank you, Shil.

The next one is probably already being written. I'm trying to give myself a week or two of not digging in too much, but the data just keep coming. Nat Bullard is a venture partner at Voyager Ventures and a senior contributor at Bloomberg Green. This show is a co-production of PostScript Media and Canary Media. You can head over to Canarymedia.com for links to Nat's tech and other topics we covered today. And as always, PostScript is supported by Prelude Ventures, a venture capital firm that partners with entrepreneurs to address climate change across a range of sectors, including advanced energy, food and ag, transportation and logistics, advanced materials and manufacturing and advanced computing. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquand, theme song by Sean Marquand.

I'm Shale Khan, and this is Catalyst.