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Beyond Renewables: Investing in Energy Infrastructure

Read the summary of key points from Walter Schindler's AIM Summit panel, "Beyond Renewables, Investing in Energy Infrastructure."
Dubai Sail Building

Co-Authored By Walter Schindler, Ed Hirs and Victoria Brodsky, Transformation LLC

I had the honor and the privilege of attending the AIM Summit in Dubai as an invited speaker on November 26-27. Not only was it my first AIM Summit, but it was also my first experience visiting the incredible and fabulous city of Dubai. As one might expect, the ambience and grandeur of the setting, combined with the professionalism of the Summit, well organized by Conference Director Raha Moradi, exceeded all of my expectations for the quality of the participants as well as the content, topics and substance of the speeches and panels.

I was welcomed as a VIP and was treated with the greatest respect.

My panel was entitled “Beyond Renewables, Investing in Energy Infrastructure.” This topic was not only a perfect fit with the focus of my new firm, Transformation, LLC, but it also allowed me to discuss and gather the latest reports from Transformation Managing Directors, including Ed Hirs on the status of solar, energy storage, LNG, and other related topics and the research and analysis by our Director of Projects, Victoria Brodsky.

Here is a summary of the key points:

Which category of energy technology do you consider particularly interesting within the energy transition from fossil fuels?

Solar – costs are continuing to decline, and conversion efficiencies are increasing, creating favorable leverage; new applications are being developed such as embedding solar collectors in transparent windows and in materials for roofing and external walls.

Battery technologies and advanced energy storage systems – advances in technology are promising lower costs and lighter weight; improved energy storage extends the useful range for solar power as well as other renewables. The cost effectiveness and system efficiency of energy storage are the issues to watch.

Fault-tolerant secure micro-grids – faster software and machine-learning algorithms create the promise of 100% uptime in micro-grids that can support data centers, robotics and defense and security mission-critical operations and systems

Waste-to-value and waste-to-energy – the economics are improving, and all of the technologies now exist to create 100% recycling of waste to value, if value includes both products and energy. This trend now offers two simultaneous benefits: managing municipal solid waste, agricultural waste and animal waste while increasing energy supply and system efficiency while decreasing pollution and harmful emissions. In addition, these technologies generally result in a lighter net carbon footprint.

Liquefied natural gas (LNG) offers the most pragmatic and effective solution to the challenge of producing cleaner energy and power on a large scale in many countries now dependent on coal and diesel, such as the Philippines. LNG is a composition of methane and some mixture of ethane used to convert natural gas to liquid form for ease and safety of storage transport. In its liquid state, natural gas takes up only 1/600th of the space, making it much easier to ship and store when pipeline transport is not feasible. On a planet-wide scale the LNG market is likely to grow as a relatively energy-efficient solution for many markets in order to achieve a comparative improvement in the environment.  While renewable purists may object, the current world economy requires massive and growing levels of energy and power, and for the time being LNG is the most practical way to navigate the transition beyond renewables.

Carbon Capture – Advances in this breakthrough area of research can actually transform fossil fuels into clean fuels and extend the useful life of existing infrastructure. Several technologies developed at Harvard, Yale and other universities are actually net carbon negative. These draw carbon dioxide from the atmosphere by passing air across a catalyst to create ethanol. Other technologies for sequestration include deep injection into basalt formations, whereby the carbon dioxide mineralizes with the magnesium in the basalt-creating magnesium carbonate that is permanent. Other technologies can convert the carbon dioxide to carbon nanotubes.  Carbon nanotubes have many beneficial uses because carbon nanotubes are 200X stronger than steel, one-tenth the weight of steel, and 1000X the electrical conductivity of copper! The greatest challenge at the present time is the cost. Viable technologies are available, but the end product is costly to make. Commercial profit is just not in the market equation for carbon capture right now.

Who are the principal drivers of the current and future energy transition ?

  • Technological innovation is one of the principal drivers. This results from research and development, and subsequently, from efforts to commercialize new products.
  • Government funding sources often play a role in R&D when a new technical concept appears too radical or too remote from commercialization. Once a prototype is developed that proves performance, the private sector may step in to deploy the new design commercially if they are profitable.
  • The electorate and government can also provide effective market incentives by imposing, for example, oil import restrictions; carbon emissions limits; and the imposition of a carbon tax. However, these actions require an enormous amount of both technical knowledge and political wisdom as well as determination.
  • We have much more technology than we have wisdom.

Which financial structures work best in today’s markets and who are the investors?

  • Government grants are best for the earliest stage R&D.
  • Private equity and venture capital are appropriate for new products near commercialization stage.
  • Private equity, private debt, sovereign funds and public/private partnerships can work for large scale infrastructure projects.
  • Strategic corporate investors are increasingly investing in new technologies within their targeted markets.
  • Although public-private collaborations are often necessary, the rates of return on capital are still too low.
December 21, 2018

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