Newsletter: What do clean energy infrastructure and the railroad era have in common?

There’s so much happening right now. Get ready for:

• An antidote to a bullish VC narrative

• A ​“bearish” VC that just raised its biggest fund yet for clean energy

• New York’s attempt at fixing America’s transmission problem

• What the railroad era teaches us about federal clean energy investment

The contrarian take on the hottest clean energy sector

Yesterday I wrote about the tangible commercial success coming to the early innovators in grid batteries. Today, as a sort of counterpoint to that, Eric Wesoff pens a contrarian view on the recent VC enthusiasm for a long-shot breakthrough on long-duration energy storage.

In recent months, investors threw previously unthinkable sums at this sector, which promises to weave intermittent wind and solar power into a fully reliable 24/7 grid. 

That may well be doable. But Eric has seen enough cycles of cleantech investment to be wary of hundreds of millions of dollars flowing to products that may be years away from commercialization in a market that doesn’t quite exist yet. 

Commercial LDES technology exists almost exclusively in the minds of entrepreneurs, investors and analysts (with the exception of pumped hydro). Unlike short-term energy storage, which has become a booming market with real commercial products that are increasingly being integrated with grids, LDES remains mired largely in the realm of the theoretical.

Despite the lack of an actual market, the LDES investment scene has teetered toward the downright irrational since we cataloged the players in the already-frothy market that existed back in April.

Take a look, and if you think Eric’s way off base here, let us know (on Twitter or email us). The energy transition has already wrought a number of changes that experts didn’t see coming. But it’s also generated waves of excitement for things that ultimately didn’t pan out.

Long-duration storage could still go either way. Which is one of the reasons we keep a close eye on it here at Canary Media.

Speaking of VCs, a new $150 million fund for Blue Bear 

In yet another data point about the acceleration of clean energy investment, Blue Bear Capital just closed a $150 million round for early-stage venture investment at the intersection of AI and climate.

The firm closed its first round in 2017 with $30 million (they grow up so fast!). This time Blue Bear tried to raise $100 million and then hit the hard cap of $150 million.

• Backers include a subsidiary of Goldman Sachs Asset Management, the Rockefeller Brothers Foundation, the McKnight Foundation and others.
• The firm expects to deploy this fund in 15 to 20 investments in post-revenue companies (a higher bar than those set for many a clean energy special-purpose acquisition company these days). 
• The current fund has closed 10 investments so far.*

I’ve found that an obsession with AI can be a red flag for clean energy startups, particularly if they talk too much about their shiny but vaguely defined algorithms and not enough about the real-world problems they can solve.

But the Blue Bear team takes a less frothy approach, seeking what partner Ernst Sack calls the ​“unsexy but critical” applications of AI for the hard work of scaling clean energy.

“We really focus on what we call the industrialization of renewables, and that’s driven by a lot of data and decision-making,” he told me.

That orientation leads to investments in companies that help operate and maintain solar plants after they’ve been built (Omnidian). Or a software platform to govern manufacturing in fast-moving, highly iterative industries like clean energy (First Resonance).

Can New York break the national impasse on transmission?

With more clean energy, we need more wires to deliver it to customers. But the U.S. has a lousy record of getting large transmission projects built, especially in recent years.

New York state hopes to break through the hang-ups that can delay or sink valuable transmission projects, Jeff St. John reports.

• The state just picked two projects to bring clean power from upstate New York and Canada down to New York City.

• Both projects will hide the wires underground and below the Hudson River to minimize visual disruption for communities along their paths.

They still need final contracts and regulatory approval, and they aren’t expected to be done for years. But if they happen, they’ll do vital work by supplying the power-hungry New York City area with clean electrons from places where it’s cheaper and easier to generate. 

And they could set a new paradigm for getting these necessary but controversial projects done.

For a senator’s perspective on this issue…

Check out the latest episode of our podcast Political Climate to hear New Mexico Senator Martin Heinrich (D) talk about how the pending infrastructure legislation in Congress would create ​“a very different landscape on transmission.”

Heinrich has been one of the wonkiest senators when it comes to clean energy, thinking deeply about the nuts-and-bolts questions underlying the big-ticket goals.

I was struck by how he frames the clean energy legislation first and foremost as a generational decision point on the future of the American economy. He’s not just thinking about what’s good for clean energy companies right now, but rather about how a shift to a low-carbon economy will reinvigorate jobs across America at a level we haven’t seen in decades. For instance:

“If you look at wind energy [in New Mexico], which is an export because we generate a lot more power than we consume…those jobs are going exclusively to small, rural communities and building economic capacity in places that haven’t seen this scale of investment since the railroad came to town.”

Juxtaposing the clean energy revolution with the legacy of the railroad requires a shift in timescales that rarely happens in today’s discourse. It’s a provocative exercise for thinking through how a timely federal investment in infrastructure can shape the nation for decades, even centuries, to come.

*Clarification: While Big Bear’s current fund has closed on 10 investments, the firm has closed on additional deals with its previous fund, for a total deal count of 22.