Generation RENEW:  Innovation Changes Everything  

 

“If I had asked the public what they wanted, they would have said a faster horse.” – Henry Ford 

 

It’s easier to count the people who don’t own smart phones versus those that do. The phone that fits so neatly into your hand (and probably seldom leaves it!) has 100,000 times more processing power and over seven million times more storage than the Apollo 11 computer that brought the first earthlings to the moon in 1972.  If you predicted these advancements back in 1972, you’d more likely find your views published in “The Magazine of Fantasy and Science Fiction” than “Scientific American”. 

 

Image:  NASA engineers operating IBM System/360 Model 75 mainframe computers.

 

The transition to renewable energy relies heavily on innovation, and this means history is on our side. Humans are ingenious, having dreamt up, created, and improved upon many previously hard-to-imagine things.  The wheel is one of those amazing inventions. Later, someone else thought of attaching it to an axle, and our ability to transport ourselves and heavy objects over land was forever altered. While no match for today’s internet, the invention of the printing press enabled much faster and wider dissemination of knowledge, which allowed the mechanics of older machines to play a key role in the development of new machines. The internal combustion engine ushered in the Industrial Age. Fast forward to today, where the sum total of prior human innovation and achievement helps explain the incredible speed and efficacy of the Covid-19 vaccines, a testament to human’s ability to solve big problems quickly.

So just like the wheel was greatly improved with the axle, technology innovations in renewables are seldom stand-alone. The International Renewable Energy Agency (IRENA) outlines four broad categories of innovation required to transform the electric power sector towards net zero. These integrated innovations go well beyond just technology, embracing business models, market design, and system operations. 

 

Source:  International Renewable Energy Agency (IRENA)

 

Enabling technologies like electric vehicles, battery storage, and solar panels get most of the public’s attention because they’re both “cool” and you can own them. Seldom understood technologies like blockchain, artificial intelligence, big data, and super grids also play a large role in the transformation of the grid. Completely behind the scenes though equally important are the evolution of business models, market design, and system operations. (Increasing the time granularity in electricity markets, while super nerdy, is essential to improving energy efficiency.) 

All of these innovations – whether high profile like Electric Vehicles (EVs) or behind-the-scenes like advanced forecasting of renewable power generation, have contributed to the 90% decline in solar generation costs, the 80% decline in wind generation costs and the 77% decline in battery storage costs in the past decade.  As investment capital pours into renewables, we have no reason to believe the pace of development and innovation will slow in the decades ahead.

As has been the case throughout history in solving big problems, innovation’s contribution to de-carbonization will likely exceed expectations. Those of us who are disappointed that we aren’t (yet) flying around in jetpacks will be handsomely rewarded for our optimism in humankinds’ genius and willpower when it comes to solving the challenges of climate change. 

 

Renewables Roundup

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Michael Cerasoli, CFA

Michael leads the Renewables effort at Eagle Global Advisors, including the development of active and passive strategies, and portfolio management. He is also the Co-Head of the Energy Infrastructure team and Co-Chair of the Energy Infrastructure Investment Committee.  He shares Portfolio Manager responsibilities for the firm’s four separate Energy Infrastructure strategies. Prior to joining Eagle in May 2014 Michael was employed by Goldman, Sachs & Co. for ten years where he covered Midstream for seven years and small/mid cap Oil Services for three.  Prior to Goldman, Michael worked for three years as a sell-side equity trader at various Wall Street firms. He earned bachelor’s degrees in Economics and History from Union College, and an MBA from the Hagan School of Business at Iona College. Michael holds the Chartered Financial Analyst designation.

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Curt Pabst

Curt is a Managing Director in the Energy Infrastructure Business, a member of the Energy Infrastructure Investment Committee, and co-head of the Renewable Energy Business at Eagle Global. Prior to joining Eagle, Curt held a similar position at an Midstream Energy-dedicated asset management firm in Dallas, Texas. He has 39 years of investment experience. He has served as a partner/principal in both a hedge fund of funds and a venture capital fund. Curt earned his BA in Economics from Grinnell College and a professional certification in Energy Innovation and Emerging Technologies from Stanford University.

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