The Top Public Companies for an Energy Transition

This data-file compiles all of our insights into publicly listed companies and their edge in the energy transition: commercialising economic technologies that advance the world towards ‘net zero’ CO2 by 2050.

Each insight is a differentiated conclusion, derived from a specific piece of research, data-analysis or modelling on the TSE web portal; summarized alongside links to our work. Next, the data-file ranks each insight according to its economic implications, technical readiness, its ability to accelerate the energy transition and the edge it confers on the company in question.

Each company can then be assessed by adding up the number of differentiated insights that feature in our work, and the average ‘score’ of each insight. The file is intended as a summary of our differentiated views on each company.

The screen is updated monthly. At the latest update, in February-2021, it contains 200 differentiated views on 100 public companies.

Solar inverters: products, costs and companies?

This data-file tracks some of the leading companies making solar inverters and their products’ costs. Our utility-scale solar models assume up to $0.1/W might be paid for an inverter, usually less, and this is borne out by the data-file.

However, there are caveats. Costs per watt approximately double for every 10x reduction in inverter size. Chinese manufacturers also appear to sell inverters for 30-50% less than Western companies, suggesting strong competition and margin pressure.

The competition appears to be lowest for micro-inverters. In which category, lower pricing is also linked to lower efficiency ratings. This may augur well for leaders in this sub-space.

Stem: grid-scale battery breakthrough?

Stem Inc. went public via SPAC in April-2021, in a combination with Star Peak Energy Transition Corp, valued at $1.35bn.  Its offering is concentrated on software to manage and optimize grid-scale batteries, which can lower energy bills by 10-30% and uplift IRRs. Revenues are targeted to grow at a c50% CAGR.

Stem’s patents are visibly focused on software (>80%) rather than hardware (c20%). What surprised us about the patents is that they are mostly focused on smoothing short-term, second-by-second, minute-by-minute volatility caused by increasing renewables deployment (70%). Not moving excess renewable power over longer timeframes.

Stem scored well on our usual patent framework. We found the high-level problem statements and proposed solutions in its patents to be compelling and innovative. But it is also inherently harder to assess the fine details of optimization software with patent analysis.

Specific challenges, solutions and back-up is outlined in the data-file.

Solar power: decommissioning costs?

This data-file aims to break down the costs of decommissioning solar projects. Gross costs are estimated within a range of $0.03-0.20/W, which is around 3-20% of the initial installation costs.

This is better than nuclear, offshore wind and coal decommissioning costs, but worse than natural gas (data are shown in the file).

What might help the economics for solar is the ability to re-use old panels, in markets that are particularly price sensitive. In the best cases, this could allow zero-cost decommissioning of solar assets or possibly even a small profit.

Re-deploying old solar panels could also accelerate the global deployment of solar by c5%.  Our notes, conclusions and numbers are built up in the data-file.

Power generation: sensitivity to high-temperature heatwaves?

This data-file aims to provide a simple model for how generally well-covered grids can fail catastrophically during a heatwave.

We have modeled a simple grid with 1,000MW of typical generation capacity, which should be enough to cover 333-500MW of typical demand by a factor of 2-3x.

Drawing on technical papers, we have also quantified how wind, solar, gas turbines and transmission & distribution line losses all degrade at higher temperatures.

Thus during a heat wave, this seemingly well-supported grid falls over.

Moore’s law: causes and new energies conclusions?

Moore’s law entails that computing performance will double every 18-months. It was proposed in 1965. And since then, chips have consistently sustained this pace. We argue such exponential progress has been driven by three positive feedback loops. Can these same feedback loops unlock a similar trajectory for new energies costs? We find mixed evidence in this short, six-page note.

Turquoise hydrogen from methane pyrolysis: economics?

Turquoise hydrogen is produced by thermal decomposition of methane at high temperatures, from 600-1,200◦C.

The advantage of this process is that 3 kg of ‘carbon black’ are produced per kg of methane. This allows passable IRRs at lower costs than blue of green hydrogen.

The disadvantage is that methane decomposition is endothermic, thus an exterior energy source is required. If this energy source is natural gas, then around 2.6kg of CO2 will be produced by kg of hydrogen.

In turn, low-carbon turquoise hydrogen could be produced from low-carbon electricity (most likely a mixture of wind, solar, nuclear and hydro). Now the cost is more than blue hydrogen, but still very competitive versus green. This data-file quantifies the economics (above) and capex costs (below)

Remaining challenges are high capex costs at small scale, monetizing carbon black, the tendency of carbon ‘coking’ to clog up catalysts and reactors, the hunt for a reliable catalyst and ‘molten’ reactor design, and early technical readiness, as summarized in the final ‘notes’ tab of the model.

 

Array Technologies: solar tracking breakthrough?

Array Technologies IPO-ed in October-2020, listing on NASDAQ. It manufactures solar tracking systems, supporting 25% of US solar modules installed to date, and 22GW of projects globally. Its systems can uplift solar generation by 5-25%.

Array cites seven advantages of their solar tracker systems in its presentation materials, and we found clear, specific, intelligible patents, back-stopping six of these seven areas. The patent library looks concentrated, focused and may confer a moat.

This data-file screens Array Technologies’ patents, using our usual framework.

Inter-correlations between offshore wind farms?

The purpose of this data-file is to examine the correlations between different wind farms’ generation rates. Specifically, we obtained and cleaned-up half-hour-by-half-hour power generation data from c20 wind assets around the UK, in Megawatts (MW).

The output from individual wind farms was 67% correlated on average, at any given point in time. This correlation varies with distance, reaching as high as 90% within a 100km x 100km area, and dropping to 50-60% within a 750km x 750km area.

Auto-correlation was also high, as each wind farm’s generation was 80% correlated with its own generation 5-hours earlier or later; and the correlation still held at c25% c24-hours later. Windy and non-windy periods routinely last several 2-10 days.

What implications? This all makes it challenging to back up a wind-powered grid with batteries, but it is advantageous for demand-shifting.

Solar costs: four horsemen?

Solar costs have deflated by an incredible 90% in the past decade to 4-7c/kWh. Some commentators now hope for 2c/kWh by 2050. Further innovations are doubtless. But there are four challenges, which could stifle future deflation or even re-inflate solar. Most debilitating would be a re-doubling of CO2-intensive PV-silicon. Our 15-page report explores re-inflation risks for solar developers.