greentech - L'Atelier BNP Paribas

GREENTECH How can digital technologies help accelerate the energy transition in the US?

Author

Benjamin Lesage Senior Analyst at L’Atelier BNP Paribas Americas @BenjaminThewise /in/benjaminlesage

Acknowledgments Special thanks to Astrid Behaghel, Raphaëlle de Marliave, Sophia Qadiri, Quentin Delzanni, Matthieu Soulé, Molly Maeda, for their contribution, their time and precious insights.

L’Atelier BNP Paribas Americas 44 Tehama street San Francisco, CA 94105 United States of America @atelier_us https://atelier.bnpparibas/en

About L’Atelier BNP Paribas Present in three innovation hotspots, Paris, San Francisco and Shanghai, L’Atelier BNP Paribas is the innovation studio of BNP Paribas who helps the bank and its clients to create new business opportunities. L’Atelier operates beyond the borders of the banking sector and has been scouting digital innovation cross industries for 40 years to identify new use-cases, build innovation roadmaps, launch new products, services, and innovation programs.

Table of Contents Executive summary Part 1

A diversified US energy mix

4 11

1.1 Fossil fuels are hard to kill 1.2 Green energy: producing and delivering reliable and affordable Zero-carbon energy in the US 1.3 Green energy consumption: a new paradigm

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Part 2

27

Innovation assisting the energy transition

12 15

2.1 Greentech: the first wave 2.2 Greentech and digital: the game changers?

28 35

Part 3

The US energy ecosystem is complex: who is leading the energy transition?

43

3.1 The public sector: filling the Federal government void 3.2 The emergence of new types of investors to power the energy transition 3.3 US corporations are going green 3.4 Startups: who will be the “Green” Google? 3.5 The prosumer: a new role to help make the energy transition

44 50 54 56 57

Focus on California

62

Conclusion

67

Appendix: Mapping of US Energy & Power Greentech startups

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3

Executive Summary

4

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Energy & Power supply in the United States is shaped by various abundant natural resources. Renewable energy sources (RES), such as solar and wind, have enjoyed a boom in recent decades, but still only account for a minor share of the US electricity generation mix (17% in 2017). Shale gas is also seeing a boom and setting new production records. Abundant, versatile, and economically attractive, natural gas was the leading electricity generation source in the US in 2017 (32%), ahead of coal (30%) and nuclear (20%). Although renewable energies have already overcome numerous barriers to become competitive with fossil fuels, they still face major obstacles, one of which is the existing ageing grid infrastructure, which is not suited to decentralized power generation. However, consumer demand for green electricity and products is steadily growing, a situation which was inconceivable only a few decades ago,

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The US has been at the forefront of the Greentech revolution since the first silicon solar cell was invented at the Bell Labs in New Jersey in 1954. Over the last few decades, technologies such as solar panels, wind turbines and batteries have gained in efficiency and become more affordable. Now the game changers could come from digital technologies. Behind the hype, breakthroughs in IoT, Artificial Intelligence and Blockchain hold the promise of decarbonizing, decentralizing, digitizing and democratizing (the ‘4Ds’) access to clean energies and clean technologies.

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The US energy Greentech sector was severely hit by the 2008 financial crisis and never really recovered from it. VC in the US Greentech sector is today running about 30 percent below its 2011 levels. Nevertheless, there are huge business opportunities and the World Economic Forum estimates that, globally, more than $2.4 trillion worth of investments will be needed to drive forward the transformation of the electricity business over the next 10 years. To answer this call, new types of investors and investments are emerging and Greentech companies stand to benefit from them. Indeed, the emergence of new business models, such as Energy-as-a-Service, pushed by Greentech startups demonstrates that Greentech can be both profitable money-wise and beneficial for the environment.

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The Energy ecosystem is highly complex. Meanwhile utility companies do not have a monopoly on energy anymore. We have recently seen the emergence of new leaders such as U.S. corporations, states, and cities working together, taking action to accelerate the energy transition in the country, setting clear and ambitious objectives and timelines to transition to renewable energies. Empowered by accessible and smarter technologies, any individual or corporation can now produce its own electricity and sell any surplus to the grid.

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Technology is part of the equation but is not the only factor in the energy transition. Technology provides the tools to meet the technical challenges – for example when it comes to energy supply or storage – created by renewable energies. The Californian model is showing the world that while it is necessary to develop the right technology, this is not enough: it also needs to be accompanied by a social transition. California stands out among all the US states as the one that has made the most progress towards its target of achieving a 100%-renewable energy system by 2045.

Who is the report for?

+ Corporations that work in the field of energy & power + Individuals who want to better understand the evolution of green technologies

What is the report for?

+ To help understand the new trends in Greentech and the impact of digital tools in the energy field

+ To provide an overview of the main actors in the field + To forecast the impact of this trend on the various different actors

What is the report not for? + It is not intended to provide prescriptive strategic guidelines for investing in Greentech

5

Greentech or Greentechnologies: products and services that reduce negative environmental impacts through improving energy efficiency and sustainability . 6

Where is Greentech? E N E R G Y & POW E R

T RAN S PO RTAT IO N

B UI L DI NG

WASTE

F O OD

WATE R

The Electric Power System Greentech covers various sectors and industries. For the sake of this study, we will focus on the impact of Greentech in the generation, distribution and consumption of electricity.

G E N E RAT IO N

DI ST RI B U T IO N

+ Nonrenewable fuels: oil + High voltage transformers & gas, coal and nuclear + Renewable energies: sun, wind, hydro, ...

and transmission lines + Low voltage transformers and distribution lines

CO N SU M P T IO N + + + +

Industrial Transportation Residential Commercial

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Introduction The role of digital technology in the energy transition in the US

“There is no planet B”. Those were the words of thousands of protesters marching in the streets of Washington D.C on Earth Day in April 2017. Although newly-elected president Trump decided to withdraw from the historic Paris Agreement on climate change action in June 2017, scientists from all over the world almost unanimously agree that the situation is now critical: Planet Earth is warming up at an unprecedented pace and this is likely to have a critical impact on our planet and its inhabitants. In the meantime, new global leaders for the energy transition are emerging, including China, which recently announced investment of $360 billion in renewable energy and technology by 2020.1 Most influential leaders of the green economy – though with the conspicuous absence of any US government representative – gathered at the One Planet Summit in Paris in December 2017 to find and encourage new investments. Meanwhile, the United States is facing a significant drop in Greentech Venture Capital since the historic peak of 2008, where more than $5 billion were raised. Energy transition involves both a structural change in the sources of energy used in our systems and also a shift in mindset in society as a whole. Mankind has already been through several energy transitions during its history, driven either by resource scarcity or demand for new products, such as the shift from wood to coal in the late 19th century with the advent of the steam engine. The world is now facing one of its greatest challenges, which is going to require a shift away from fossil fuels, which are major emitters of greenhouse gases, to renewable energies such as wind and solar. Although the United States was one of the first countries in the world2 to embark upon this energy transition, with California leading the way, the US is nevertheless the highest consumer of petroleum in the world and is the leading emitter of CO2 per capita.3 However, because of the urgency of the situation, we are now seeing a variety of new actors advocating an exit from fossil energies and encouraging the transition towards more sustainable energies such as solar energy and wind power. Supported by the emergence of new technologies, which are widely known as ‘Greentech’, this transition is creating a wide range of business opportunities for corporates, entrepreneurs and energy companies. Renewable energy sources (RES) are expected to 8

represent almost three quarters of the $10.2 trillion the world will invest in power generating technology until 2040.4 This report seeks to identify whether Greentech is really able to play the role of driving the energy transition forward. It is no coincidence that the term ‘Cleantech’ – which is used interchangeably with the term ‘Greentech’ – originated in California at the beginning of the 21st century. Supported at its genesis by the hippy movement, the expected green revolution is now being taken forward by a multitude of actors. Startup entrepreneurs have turned into green gurus. US Greentech startups are dreaming big and betting on the widespread take-up of new technologies, such as new ways of producing green electricity or capturing CO2 directly from the atmosphere. These entrepreneurs are looking for action, hopefully for the best. From its offices located in San Francisco, with Silicon Valley – one the hottest spots for Greentech innovation – nearby, L’Atelier BNP Paribas has analyzed the field of technological innovations in the Greentech sector in order to reveal the growth potential in this sector, both for companies and society as a whole. Examining developments in the IoT, Blockchain, Artificial Intelligence and other promising technologies, L’Atelier BNP Paribas summarizes in this report how the Californian startup ecosystem has taken up the challenges of the energy transition, potentially setting an example for the rest of the United States and indeed the rest of the world.

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Part 1: A diversified US energy mix Energy can be drawn from various different sources, which are generally categorized as fossil fuels (including oil, natural gas and coal), nuclear power and renewable energy sources (RES) (including wind, solar and geothermal energy, wave-power, smaller hydroelectric installations, and others). The term ‘energy mix’ refers to the combination of the various energy sources used to meet the energy needs of a country. These energy sources can be used to generate electricity, provide fuel for transportation and the heating and cooling of residential or industrial buildings, to name but a few requirements. To ensure that we cover every aspect of the energy transition in the United States, it is important to understand that the US stretches across several different climate regions (e.g. from the Arctic climate in Alaska to the hot, dry conditions in Arizona) and geographies (from the Hawaiian Islands to the Rocky Mountains). This can be seen as a challenge but also – and perhaps primarily – as an opportunity, especially when it comes to energy supplies. While most experts predict relatively flat energy demand in the US, electricity generation alone accounts for 40% of all the energy consumed in the country, followed closely by transportation and industrial use. Recent findings from the 2018 ‘Sustainable Energy in America Factbook’, published each year by the Business Council for Sustainable Energy in conjunction with Bloomberg New Energy Finance, show that in 2017 natural gas was the leading provider source of electricity with 32%, followed by coal with 30%, nuclear power with 20%, and by RES (including hydroelectric) with just 18% of the net electricity generation mix.

0.4% 1.3% 1.6%

NATU RAL GAS COAL 6.3%

0.5%

NUCLEAR

7.5%

HYDRO 31.7%

WIND BIOMASS

20%

SOLAR GEOTHERMAL 30.1%

OIL SOU RCE: L’ATELIER BASED ON EIA NUMBERS

11

At state level, Wyoming (with the smallest population of any state but boasting 40% of all US coal production), Texas and Pennsylvania are the three top net energy suppliers. The United States is known for being a large energy-consuming country, with energy consumption per capita on average five times higher than in other countries.5 The US energy sector is also the third-largest industry in the US. Below we examine what lies behind this broad situation.

Part 1.1 Fossil fuels are hard to kill

At world level, fossil fuels still account for over 80% of the total energy mix. So how does this compare with the US? 6

F OS S I L F U E L P RODUC T IO N AN D DI ST R I B U T IO N According to the Energy Information Administration (EIA), Fossil fuels still dominate overall energy production in the US. The three main fossil fuels – oil, natural gas and coal – accounted for the majority (78%) of the nation’s energy supplies in 2017. The United States is the world’s third largest producer of oil, the leading producer of natural gas and the second-biggest coal producer, behind China.

OI L Over the past decade, oil production in the USA nearly doubled and the Energy Information Administration (EIA) predicts that US oil output will hit its highest level ever in 2018, topping 10 million barrels of crude per day and thus overtaking the previous record periods of the 1970s. Who would have predicted that? Many commentators now say that, boosted by Texas shale oil and benefiting from a favorable external macroeconomic environment, the US could even outdo Saudi Arabia and Russia in the coming years or even months. Oil companies now enjoy the support of the Federal administration, which has become more open to further exploration and drilling and is keen to reduce US dependence on foreign imports. In November 2016, the US Geological Survey discovered the Wolfcamp Shale formation, the largest continuous oil and gas reserve ever found in the United States. Located in Texas, the Wolfcamp Shale contains 20 billion barrels of oil, i.e. the equivalent of several years of continuous oil production. Meanwhile, although oil demand forecasts are a vastly debated topic, some oil companies have revised their estimates upwards and are not expecting to see a global peak in 12

US C RU DE OI L AV E RAG E P RODUC T IO N (1950–2019) M I L L IO N BAR R E LS P E R DAY 12

10

8

6

4

2 SOU RCE: L’ATELIER BASED ON EIA NUMBERS 1950 1955 1960

1965

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

2019*

* FORECAST

demand before 2040. Oil is still a key element in the US economic and energy independence strategy, which the Federal government is not ready to give up on, sometimes in spite of environmental concerns – as demonstrated by the recent drilling mandates granted in the Alaska National Wildlife Refuge.

NAT U RAL GAS Natural gas production is also booming, driving by an increase in shale gas production, enabled by competitive prices and more efficient extraction technologies. In 2017, US D RY NAT U RAL GAS P RODUC T IO N (1950–2019) B I L L IO N CU B IC F E E T P E R DAY 90 80 70 60 50 40 30 20 10 SOU RCE: L’ATELIER BASED ON EIA NUMBERS 1950 1955 1960

1965

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2019*

* FORECAST

13

shale gas accounted for 60% of the total dry production of natural gas in the United States. However, the fracking process used to extract shale gas – injecting water and chemicals underground in order to force out the gas trapped under the earth’s surface has prompted environmental concerns because of the huge amount of water it uses.7 Fracking is also suspected of leading to a sharp rise in emissions of climate- changing greenhouse gases (GHGs) by releasing methane into the atmosphere.8 Still, natural gas remains the “greenest” of all fossil fuel and could play an important role in the transition to renewable energies by providing stability and addressing electricity peaks on the grid. Pennsylvania and Texas are the largest natural gas producers, with more than half of all US production. Texas also hosts the port terminals for exporting US-produced oil & gas to the rest of the world, thus underpinning US ambitions to sustain the country’s current position as a net natural gas exporter. Meanwhile, many climate activists have opposed the construction of pipelines used to transport oil and gas, arguing that they are having a negative environmental impact by increasing our reliance on fossil fuels and so further delaying the energy transition, quite apart from the risk of leaks, which would be catastrophic for the environment. After several months of negotiations, the US Federal government gave its agreement to continue the construction of the controversial Keystone XL pipeline with Canada.9 On February 2018, Washington released its $1.5 trillion infrastructure plan for renewing ageing infrastructure. It would be earmarked for pipelines and also announced that they would be allowed to cross National parks.10

COAL In the US energy sector, coal is by far the largest contributor (68%) of CO2 emissions. Despite Federal efforts to restore coal to the forefront of the energy scene, this fossil fuel has in the recent years seen a general decline in production (a fall of 36% on the 2006 volume), due to lower demand from electricity generators. Coal prices have fallen by 50% since 2011 and the coal mining business is no longer sustainable. Unfortunately, this also means that burning coal is now a cheap way to generate power. Coal still accounts for 30% of all electricity produced in the United States.

US COAL AV E RAG E P RODUC T IO N (1950–2019) M I L L IO N S HO RT TO N S 1200

1000

800

600

400

200 SOU RCE: L’ATELIER BASED ON EIA NUMBERS 1950 1955 1960

14

1965

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

2019*

* FORECAST

N UC LEAR Home to 99 nuclear power plants (NPPs), the United States is the largest producer of nuclear power (805 billion kWh in 2016), accounting for over 30% of nuclear-based electricity generation worldwide. In the USA, most of the energy produced by nuclear plants is for electricity generation purposes and NPPs generated almost 20% of US electricity in 2016. The industry requires a lot of capital (both initial and operating expenditure) and the pace of innovation is rather slow. Nevertheless, efficiency and security at nuclear plants have improved over the last 50 years. In addition, nuclear power reactors generally operate at or near their full capacity throughout the year and have relatively high annual capacity factors. This leads to rather stable energy prices: average nuclear power generation costs came down from $40/MWh in 2012 to $34/MWh in 2016. Producing nuclear power requires huge infrastructure and long-term investments that have been challenged recently by cheaper alternative energy sources. Several nuclear projects have been abandoned lately because of economical unviability and construction challenges. On July 2017, South Carolina utilities abandoned two unfinished reactors that were once hailed as the start of a U.S. nuclear power renaissance On top of that, the Three Mile Island accident in 1979, raised public concern in the country and caused general trust in this technology to plummet. Approval was eventually granted in 2013 for the construction of two new nuclear reactors. A further challenge is that most of the NPP park is on average 50 years old and there have been no new construction projects during the last 30 years. It should also be stressed that, while nuclear power is a carbon-free energy source, accounting for 63% of all US carbon-free energy, nuclear energy undoubtedly has a long-term impact due to the long-lived toxic wastes that it produces.

W RAP U P The US will enjoy abundant fossil energy resources for several years to come. Driven by shale oil & gas and competitive prices, the output of fossil fuels is now setting new records in the US and this momentum could, in the short term at least, potentially jeopardize the energy transition in the United States. Nevertheless, US energy demand projections show that renewable energies are expected to play a bigger role. Below we explore how.

Part 1.2 Green energies: producing and delivering reliable and affordable zerocarbon energy in the United States So, what exactly is behind the term ‘green’ energy? As a simple definition, we could say that this is a source of energy collected from nature, theoretically inexhaustible and eternally renewable, such as sun, wind and water. In the context of the acceleration of global warming, ‘green’ energies, aka renewable energies, are central to the next energy transition, whose basic purpose is to reduce the environmental impact of energy production and use. Altogether, about 16.69% of US electricity needs were generated from RES in 2017. According to the US Department of Energy (DoE), there is enough sunlight hitting the earth’s surface in one hour to supply the world’s entire energy demand for 15

“We are like tenant farmers chopping down the fence around our house for fuel when we should be using Nature’s inexhaustible sources of energy–sun, wind and tide. I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.” –Thomas Edison Inventor (1847–1931), reported conversation with his friends Henry Ford and Harvey Firestone

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a year. So, if solar is so powerful, why are we still using so little of it? To sustain RES efforts and accelerate the transition, governments have over the last few years been granting subsidies and tax breaks for the production and consumption of renewable energies. Now the Trump administration is putting the future of those support mechanisms in doubt. So, while renewable energies are not new in the history of the human race, are they ready to compete with fossil fuels and win the battle that will lead to a widespread energy transition? From production and distribution to consumption, we have drawn up a panoramic picture of RES in the United States.

R E N E WAB LE E N E R G Y G E N E RAT IO N The United States has some of the most abundant and accessible renewable natural resources in the world. On paper, the USA has all the natural resources – sun, wind, water, etc. – to enjoy a varied, complementary power mix based on clean energies. In fact, a recent study from the DoE’s National Renewable Energy Laboratory (NREL) shows that, with currently available technologies, the US could generate 80% of its electricity from RES by 2050.11

S O LAR As of end-2016, the United States, with 40 gigawatts, ranked 4th behind China, Germany and Japan in terms of installed photovoltaic capacity. More significantly, installed solar capacity in the US doubled within one year to become the number 1 provider of new electricity in 2016! However, solar energy generation capacity can vary drastically from one geographical region to the next. The latest report from the US Energy Information Agency shows that California is the top net producer of solar energy in the country, generating so much power from the sun that it is able to resell the surplus to 7 other neighboring states. O P E RAT I NG S O LAR G E N E RAT I NG CAPAC I T Y ( GW ), TO P 5 STATE S , DEC 2016

California

98

N. Carolina

23

Arizona

19

Nevada Georgia

16 1

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

The rapid expansion of solar power in the US, is led by a few states such as California or Arizona and is a result of substantial subsidies, both at Federal and State levels, improved efficiencies and declining cost. There is clearly huge room for growth as solar energy accounted for only 1.3% of total electricity generation in 2016. Of all the renewable energies, solar has the biggest capacity and generation potential if coupled with efficient energy storage systems. 17

WI N D Wind power has also expanded quickly in recent years and is noted for being one the most affordable sources of power (2.5¢/kWh in 2016). Of all the states, it is Texas that has installed the most wind turbines, now enjoying a total installed capacity of 20,321 MW. Meanwhile Iowa is a leading state as regards wind power generation, with an average of 36.6% of the total power mix, versus the national average of 6.3% in 2017. These wide discrepancies from one state to another can simply be explained by the fact that wind does not blow consistently throughout the country. On average, wind power is only being available 30% of the time. Nevertheless, a team of researchers and engineers who compiled a report commissioned by the DoE say that wind power could make up 35% of US power production by 2050, thus avoiding the emission of 12.3 gigatons of greenhouse gases. O P E RAT I NG WI N D G E N E RAT I NG CAPAC I T Y ( GW ), TO P 5 STATE S , DEC 2016

Texas

20.2

Iowa

6.7

Oklahoma California Kansas

6.6 5.7 4.5

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

H YD RO The US is naturally gifted with rivers that flow from the Rocky Mountains in the West and from the Great Lakes in the North East of the country. Hydropower has been the most prominent renewable energy source since the 1930s (as illustrated by the Hoover Dam which was built during the Great Depression). With around 84,000 dams and reservoirs,12 the United States is the fourth-largest producer of hydropower in the world. Most hydro plant output is used for power generation: in 2017, hydroelectric plants produced 7% of the country’s electricity. Hydroelectric power also represents approximately 40% of total renewable energy in the US electricity mix.13 There are however huge variations from one state to another: for instance, Washington state generates more than 70% of its electricity from hydropower. This sub-sector has now reached a certain maturity in terms of power generation and its capacity to generate electricity mostly depends on rain precipitation levels. Given the obvious environmental impact that they exert, the number of dams in the country is expected to remain unchanged. Meanwhile, the future of hydropower could lie in capturing ocean and tidal energy.

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G E OT H E R M AL Lastly, the US is also a big geothermal energy producer (4th worldwide). Most of the power generated by geothermal activity is used for heating. Geothermal power is a rather reliable and highly available source of power that can provide baseload energy 24/7. Most geothermal plants are located in the Rocky Mountains, which makes consumption difficult to scale across the country. Nevertheless, the potential is huge, and experts’ estimates put available resources at 1,000 GW. The US energy market is centralized and organized around state-level bodies. Briefly, the way it works is that regional transmission organizations (RTOs) and independent system operators (ISOs) operate the grid and use free-market auctions and/or longterm agreements to purchase and sell electricity. In the United States, roughly 50% of generation capacity is used 100% of the time. Electricity in the United States travels long distances from generation plants to local distribution substations through a grid of nearly 160,000 miles of high-voltage transmission lines. The first grid put in place by Thomas Edison in lower Manhattan in 1882 powered 59 customers. Today the US grid serves more than 140 million customers both residential and industrial. It consists of over 450,000 miles of high-voltage transmission lines and is actually composed of three smaller grids, known as ‘interconnections’, that move electricity around the different states. The Eastern Interconnection operates in states east of the Rocky Mountains, The Western Interconnection runs from the Pacific coast to the Rocky Mountain states and the smallest, the Texas Interconnected system, covers the Southeast of the country. Most of the current US grid infrastructure was built in the 50s and 60s and is expensive to maintain. Moreover, substantial grid upgrades will be required to accommodate the growing volumes of renewable energies. Finally, with the anticipated growth of renewables in the energy mix, the United States will need to add 20 gigawatts of peaking capacity to its grid over the next 10 years and will need to rely on modern technology to increase its flexibility, resilience and reliability going forward. Since 2000, installed capacity of photovoltaics in both the US residential and commercial sectors has risen 57-fold to reach 53.3 gigawatts of total installed capacity in 2017, enough to power 10.1 million US homes.

W RAP - U P The US benefits from generous and varied natural energy resources which, in theory, should enable the country to meet its energy demand entirely from RES. Unfortunately, the infrastructure in place today is not in a condition to support such a transition. A new paradigm shift is now needed.

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Part 1.3 Green energy consumption: a new paradigm Energy consumption in the United States shifted from 70% dependency on wood in 1870 to 70% reliance on coal in 1900 and to 70% use of oil and gas by 1960. The US has already embarked upon its latest energy transition towards greener energy but what will it take to speed up this process? Today, 81% of all energy consumed in the United States still comes from fossil fuels. In 1990, this figure was 86%. Moreover, we have just seen that, while oil & gas resources are not infinite, the reserves in the US would still be sufficient for several decades to come. Behind the numbers, history shows that one of the most successful drivers of energy transitions has always been the demand for new products, such as automobiles propelled by the internal combustion engine, which largely drove petroleum consumption in the early 20th century. A paradigm shift that would give millions of US Americans a real stake in a clean energy future is therefore probably needed. In fact, both ordinary people and organizations are becoming keener to play a role in the energy transition. They are often motivated by financial return, but many are also driven by other considerations, such as energy independence or environmental protection. The challenge will not be easy to take up. The United States is one of the biggest energy consumers in the world. Estimates indicate that the US alone, with only about 5% of the entire world’s population, accounts for approximately 23% of world energy consumption.14 EIA forecasts show that US consumption is likely to initially remain stable and then decrease slowly. Of all US states, Texas is the one that consumes the most energy, mainly because of industrial sites with intensive energy consumption. In 2016, renewable energies (including hydroelectric power) only accounted for around 10% of the energy consumed in the United States. Out of this, biomass (wood, waste and biofuels) accounts for around half of RES production, with hydropower supplying 25%, wind 20% and solar only 5%. Still, renewable energy use grew an average of 5% per year over 2001-2014.15 The main energy-consuming sectors are electricity generation, transportation, industry and residential and commercial buildings. In 2016, power generation, industry and transportation accounted for respectively 39%, 32% and 29% of all the energy consumed in the US. The electric power sector generates most of the electricity and the other sectors consume most of that electricity. At the same time, electricity production is responsible for the largest share of GHG emissions in the US (36% in 2016), a statistic that illustrates the urgency of making the shift to a new energy and power model.

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US P R I M ARY E N E R G Y CO N SU M P T IO N BY S OU RC E AN D SEC TO R , 2016 TOTAL = 94,7 Q UAD RI L L IO N B RI T I S H T HE R M AL UN I TS ( B T U ) 92

Petroleum 35.9 (37%)

71

3

23

5

Transportation 27.8 (29%)

5 1 2

Natural Gas 28.4 (29%)

34 27 36

Coal 14.2 (15%)

8 1 91 14

Renewable Energy 10.2 (10%) Nuclear Electric Power 8.4 (9%)

38 43 6 11 17 74

1 1

8

27

55

34

S OU R C E S (%)

Residential & Commercial 10.5 (11%)

5

23

100

Industrial 21.3 (22%)

Electric Power 37.8 (39%)

15 22

S EC TO R (%)

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

Across the various sectors, the share of renewable energies is growing at a slow pace and still makes up a minor portion of all energy consumed: 15% in electric power, 11% in industry, 8% in residential and commercial buildings and just 5% in the transport sector, which is still dominated by petroleum products. The latest EIA forecast for energy consumption in the United States sees the RES share in the mix growing to only 16% by 2035. In 2017, some 4,015 billion kilowatt-hours (kWh) of electricity were generated at utility-scale facilities in the United States. The US administration estimates that an additional 24 billion kWh of electricity was generated from small-scale solar photovoltaic systems.

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US E LEC T RIC I T Y G E N E RAT IO N BY F U E L T Y P E S 100%

9%

11%

10%

13%

12%

13%

13%

14%

15%

18%

22%

24%

24%

25%

31%

28%

28%

33%

34%

32%

20%

20%

20%

19%

19%

19%

19% 20%

20%

1%

1%

1%

1%

19%

1%

1%

1%

1%

90% 80% 70% 60% 50%

1%

40%

1%

30% 48%

44%

45%

42%

37%

39%

39%

33%

30%

30%

2 008

2009

2 0 10

2011

2012

2013

2014

2015

2016

2017

20% 10% 0%

NATU RAL GAS

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

COAL NUCLEAR OI L RES

Looking at the energy & power sector, we see that the fuel mix used for electricity generation has evolved over time. In 2016, around 65% of utility-scale electricity generation in the United States was based on fossil fuels (mostly natural gas and coal), about 20% came from nuclear plants and 18% was produced from RES (including hydro). Natural gas is now expected to surpass coal as the leading energy source used to generate electricity and within 10 years, the RES share in the power generation mix is expected to double. The US electricity generation mix also varies drastically from one state to another: nearby natural resources, political or cultural factors… The “states of energy” is a complex map, and the degree of transitioning towards Renewable Energy Resources differs from one state to another. Actually, some states, such as Rhode Island or West Virginia mostly rely on fossil fuels to generate their electricity (see map) This expected growth and recent upward trend in the renewables sector may well be due to competitive energy prices, supported by government grants and tax incentives which are now in danger of disappearing. In fact, the power source which has seen the most significant cost decrease is solar: between 2010 and 2017, the cost of residential PV has been divided by 2.5. During the same period, the price of onshore wind power fell by 63%. On the EIA’s 2020 projection shown below, the forecast for the Levelized Cost of Energy in the US shows RES directly competing with fossil fuels. 22

T H E “ STATE S O F E N E R G Y ” – E LEC T RIC I T Y G E N E RAT IO N BY S OU RC E , 2017 WA

CA

68 % H YD RO 1 0 % NAT U RAL GAS 9 % N UC LEAR 7 % WI N D 4% COAL 2 % OT H E R

IA

4 9 % NAT U RAL GAS 15 % H YD RO 10 % S O LAR 10 % OT H E R 1 0 % N UC LEAR 7% WI N D

IL

4 7% COAL 3 7% WI N D 9% N UC LEAR 6% NAT U RAL GAS

VT

53% N UC LEAR 3 2 % COAL 9% NAT U RAL GAS 6% WI N D

56% H YD RO 2 5% OT H E R 1 5% WI N D 4 % S O LAR

WA

VT

RI WV

IA IL CA

SC

TX

HI

TX 50 % NAT U RAL GAS 2 7 % COAL 1 3 % WI N D 9 % N UC LEAR

HI 6 7% OI L 16 % COAL 9 % OT H E R 7% WI N D

SC 58% N UC LEAR 2 2 % COAL 1 7% NAT U RAL GAS 3 % OT HE R

WV 94 % COAL 2 % WI N D 2 % H YD RO 2 % S O LAR

RI 96% NAT U RAL GAS 4 % OT H E R

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

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AV E RAG E P RO J EC TE D LCO E I N T HE US BY 2022 ( AS O F 2016)

TOTA L U S $ / M W h ( M I N / M A X )

50

100

150

200

250

300

350

400

R E N E WA B L E

Solar PV Solar Thermal Wind Onshore Wind Offshore Hydro Geothermal F OS S I L

Nuclear Coal Natural Gas ( c o nve n t i o n a l s )

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

Easy and affordable access to renewable energies could also help to change consumer behavior. There is a clear trend underlying the increasing demand for products using clean energies such as in the food sector, the fashion business and even the automobile industry. There are tremendous business opportunities for companies. According to a Gallup poll from March 2016, 64% of the US population is now concerned about global warming. Reaching to the end-consumer and promote efficient way to consume electricity is key to achieve a successful energy transition. Recognized by 90% of the US population Energy Star, governmental-backed initiative initiated in 1992, help US consumers to purchase products that save them money and protect the environment. Overall, over 3.5 trillion kilowatt-hours of electricity have been saved while also achieving broad emissions reductions. 24

In the US, Electric Vehicle (EV) sales were up by 47% in 2017. Although they only make up a little more than 1% of all vehicles in the US today, EVs are expected to account for 65% of all new light vehicles sales in the US by 2050.16 In other words, the fate of the energy transition is closely linked to the future shape of mobility, which could play in favor or against the energy transition, depending on the original source of the electricity used to power the EVs. Still, driven by attractive prices and greener societies, electrification of day-to-day products is expected to drive up the demand for Renewable Energies sources and new grid infrastructures. As energy consumption is evolving towards renewable energies, US energy suppliers and utilities are also in the midst of a major paradigm shift. In some states, there is a very real view that renewable energies, such as solar, are competing against fossil fuels. According to latest report from Greentech Media Research, residential solar power has achieved grid parity in 20 US states. Grid parity occurs when an alternative energy source (such as a commercial solar panel plant) can generate power at a Levelized Cost of Electricity (LCOE) that is less than or equal to the price of purchasing power from the electricity grid. In the RES awakening, utilities will also have to anticipate the ‘duck curve’, a phenomenon that arises from the energy consumption peak in the evening. In states relying on solar energy, such as California and Arizona, the utilities need to switch to other, more conventional, sources of energy such as gas plants, in order to compensate for the drop-in energy that occurs as the sun sets. The answer to this lies in improving flexibility between storage facilities for RES-generated power, which could then be used by utilities to displace the peak, both reducing the cost of firing up fossil fuel power plants and reducing GHG emissions. Scenario analysis from Greentech Media Research shows that energy storage systems in the US could become competitive with conventional plants within 5 years.

W RAP U P The US is a vast country with varied and abundant natural resources at its disposal. Generation and consumption of wind and solar energy have surged in recent decade and these energies now compete directly with fossil energies. Driven by shale oil & gas production, fossil fuels are holding up well, even while research shows that energy demand could be addressed through renewables. As in any energy transition, a paradigm shift will be needed. Energy cannot decide for itself. We can and must. Large centralized energy sectors such as coal and nuclear have become non-economically viable compared to other source of electricity such as natural gas, solar PV or wind, also easier to operate. The US still consumes a lot of energy and a lot of fossil fuels, whether to produce electricity or to drive from one place to another. For this to change, consumers will have to behave differently, orienting their choices towards green products such as electric vehicles and better manage their energy consumption. Energy transition is happening, but in order to reach the next level, it will be necessary to reach the end-user energy’s consumer and link it with new patterns of electricity generation, distribution and consumption.

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So, what can digital technology do to help drive things forward?

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Part 2: Innovation assisting the energy transition New technologies supporting new and more efficient ways of producing clean energy have been developed in recent years. So, let us take a look at how innovation and the latest technology trends could accelerate the green energy revolution.

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Part 2.1 Greentech: the first wave G R E E N TEC H I S N OT N E W Some observers say we are now in the middle of a new industrial and energy revolution, which this time will be propelled by an array of technologies commonly known as Greentech.17 This term is also used to describe sustainable energy generation technologies such as photovoltaics or wind turbines. However, our ancestors were of course already drawing on natural elements, especially windmills, to produce energy. Research on technologies supporting ‘alternative’ energies started just after WW2. External factors such as the space race and the oil crisis forced US government to anticipate and invest in new sources of energy, which did not reach maturity and enter the commercialization phase before the 1990s. This was finally made possible by technological breakthroughs on the energy converters, which enabled substantial improvements in the quantity and quality of the renewable energy produced. Most of the innovations in the Greentech sector have also benefited from the technological developments and the burgeoning ecosystem of Silicon Valley. Silicon semiconductors designed for the first computers are also today used in solar panels. The term ‘Cleantech’ first made its appearance in 2002, when used by Nicholas Parker, the founder and CEO of the Cleantech Group, which played a major role in the development and marketability of clean technologies (Note: in this report we do not differentiate between the terms ‘Cleantech’ and ‘Greentech’). At that moment, a first wave of development of commercial solar and wind farms was underway, and this was only the beginning.

Solar and wind power generation are expected to lead the renewable energy revolution. P HOTOVO L TAIC S ( P V ) Solar power systems create clean, renewable energy from the most abundant – indeed infinite – energy resource: the sun. The most common types of photovoltaic (PV) solar panels are made of silicon cells. Energy production from photovoltaic cells has reached an average efficiency of approximately 25%, attained by US manufacturer Sunpower.18 The prospects for further efficiency improvements are good and the latest experimental equipment has exceeded 40% energy efficiency. Photovoltaics can also be manufactured from organic cells made of industrial components such as polymers, which are 28

lighter and less expensive to produce. They are also said to have a lesser environmental impact than silicon cells. According to the EIA, the electricity source which had the most decrease in estimated costs over the period 2010 to 2017 were solar photovoltaic (down 81%). In the year 2017 alone, utility-scale solar PV system cost fell by nearly 30%. Top US solar companies including Sunpower, First Solar or Suniva, face fierce competition from Chines PV manufacturers who have been able to flood the market with low cost cells. A different sun-based technology, solar thermal systems, can also be used to heat water directly from the sun’s rays in order to produce steam to drive electricity generation turbines or for various industrial uses. Skyfuel, headquartered in Denver, Colorado, is one of the leaders in this market with its patented Concentrated Solar Thermal Power (CSP). A critical and valuable feature of CSP systems is their ability to store heat for power generation at night, during cloudy weather, or to coincide with peak utility demand. In the US, the demand for PV has mostly been driven by ground-mounted PV, that accounted for over 70% of all installed PV capacity since 2016.19 Optimal energy production can also be obtained through the use of ground-mounted structures equipped with solar trackers. US company NEXTracker (a Flex company), has designed one of the most advanced single-axis trackers to enable to harvest the sun more efficiently, at lower costs and with more flexibility. The latest trends in solar energy include solar windows, which could meet the challenge of producing electricity from the sun, mainly in cities. US-based Solar Window is looking to partner with property managers so as to install their systems on the readily-available vast window glass surfaces of tall towers and skyscrapers. Their solar window installation could cover 30 - 50% of a skyscraper’s energy consumption needs. We have also seen the recent development of solar roads. Sidewalks along the iconic Route 66 highway were chosen as the testing location for solar-powered pavement tech. One major challenge faced by solar power is storage. We do not need to point out that the sun does not shine at night or through thick clouds, which has a direct impact on the efficiency of a solar PV installation and makes it difficult for utility companies to rely on this type of energy to deliver a constant flow of electricity to their customers. On the other side of the spectrum, in some states, such as California, solar panels produced too much solar energy than the grid could support. The California Independent System Operator (CAISO), on very sporadic occasions, had to sell the generated surplus of energy to the neighboring States. This is one of the main reasons why solving the storage issue, as of the grid, is key if there is to be a widespread transition to solar energy in the US. Fortunately, in this field as well, industry has achieved major technological breakthroughs which now enable energy from the sun to be stored and subsequently released when needed on the grid. In Arizona, the public service provider has recently partnered with First Solar Inc to store solar energy in batteries for use during evening peak hours. First Solar is a US PV manufacturer that also provides services including financing, construction, maintenance and end-of-life panel recycling. On top of the improvements made on the batteries, we have also seen solar light being used in a quite different manner. Oakland-based company Brightsource Energy concentrates the sun’s rays in a field of mirrors which are all oriented towards a solar receiver/boiler placed at the top of a tower. Concentrated sunlight converts water into high-temperature steam 29

that can then either be used to drive the turbines that generate electricity, channeled into other industrial processes, or used for night storage. In a nutshell, thanks to enhanced efficiency and falling prices, ‘plug and play’ photovoltaic technology is now playing a key role in the energy transition in the United States, and both utility-scale and end-use solar are expected to make a significant contribution to the solar revolution.

WI N D T U R B I N E S Drawing on the ancient technology of windmills, wind turbines use the inexhaustible flow of air to power generators. However, the amount of energy produced is highly variable and depends on wind intensity and steadiness. Utility-scale turbines are concentrated into farms – either onshore or offshore, where the winds are steadier but where the one-off installation cost is more expensive and operational maintenance more complicated. In December 2016, one of the first offshore wind farms in the US was inaugurated off the coast of Rhode Island. The wind turbine industry is now reaching a certain maturity in term of technology and is expected to generate more than $85 billion in revenue across the United States by 2020. Many other wind farms projects have been launched recently in the US (52,000 in-production turbines have been counted). As a result, employment in the wind industry has been hitting record levels and more than 100,000 jobs have been created in the space of just a few years. Overall, technological advances have resulted in more efficient turbines, with recent generation sets achieving an average 40% efficiency. As the wind does not always blow, the main challenge for wind power lies in the power management techniques used and the connectivity to city electricity grids. In 2016, wind power generators accounted for 8% of operating electric generating capacity in the United States. By 2050, total projected wind capacity is expected to reach 404 GW. Looking to the future, California-based startup Makani, which was acquired by Google in 2013, sends kites up to high altitude to harvest the energy from the almost-constant strong winds. The wing, with 8 rotors on it, is tethered to a ground station and can generate up to 600 kilowatts of electricity. It is still early days for large-scale deployment, but the technology looks promising. According to the last EIA Energy outlook, solar and wind power generation volumes are expected to pass coal by 2030.

T HE B R EAK T H ROU G H I N AL TE R NAT IV E E N E R G Y STO RAG E TO HE L P D RIV E T H E E N E R G Y T RAN S I T IO N F O RWAR D Many observers are now calling for a breakthrough to be made in energy storage technology. In the energy sector, batteries are mostly used to help balance the electricity grid during peak consumption or to cope with intermittent renewable energy such as wind and solar. Thanks to improvements in the technology, batteries are now able to ‘give back’ to the grid, thus taking on the role of conventional power generators. Combined with solar panel installations, they can enable households to make and consume their own power, on demand and off the grid. Energy storage has also become more accessible as the overall cost of generating and storing solar power has dropped from $800 per kilowatt hour to $281 over the past 4 years. This breakthrough is driven by the rise in quality and capacity of lithium-ion batteries and fuel cell batteries, both of which have seen advances due to the development of both electric and hydrogen vehicle batteries. 30

Tesla has set out to become the largest producer of lithium-ion batteries with its Gigafactory. The company claims to have doubled the life of its batteries and, in the near future, could improve their capacity by another 20 - 30%. Overall, the cost of lithium-ion batteries has fallen by 73% since 2010 and, in certain specific situations, lithium-ion batteries can actually compete with natural gas plants as a means of compensating for power demand peaks.20 Fuel cell technologies can also be used to produce energy (e.g. for hydrogen-propelled cars). Another advantage of this technology is that it can also easily store energy (though it is highly inflammable). Latest research shows that the fuel cell market is growing and is likely to reach 50 GW capacity by 2020.21 Fuel cells reach their full potential when used in cogeneration with another renewable energy. In the US, the Stuart Island Energy Initiative has built a closed-loop system where solar panels power an electrolyze, which makes hydrogen that can be stored for later use or for other purposes.

Emerging green energy technologies F U E L C E L LS According to the DoE definition, “a fuel cell uses the chemical energy of hydrogen or another fuel to cleanly and efficiently produce electricity with water and heat as the only product.” Fuel cells can be used for a wide range of applications, including transportation and backup power. Fuel cells are highly efficient and can convert energy to electricity with efficiency up to 60%. There are more than 235 MW of large stationary fuel cells currently operating in the U.S. Easy to deploy, fuel cells initiatives have been reported in 43 states. Fuel cells can be configured to operate off-grid, (to serve as back up or emergency power generator for example) or in a distributed generation model to lessen the burden on the grid. In California, Ikea has plugged in fuel cell systems, in complement of roof solar array, to generate more onsite power in 4 stores location. The technology is gaining traction and the U.S. Department of Energy (DOE) announced on March 208, up to $32.5 million in federal funding for research and development (R&D). Also promising is the work being done by US-based startup Terravia (formerly Solazyme) to develop advanced biofuels derived from microalgae, which are more efficient and cleaner than petroleum in propelling cars.

E N HAN C E D G E OT H E R M AL S YSTE M S ( EG S ) Natural geothermal power production relies on the availability of natural hot water and steam in very specific locations. To overcome this limitation, Enhanced Geothermal Systems (EGS) enables the artificial creation of geothermal systems from the hot dry rock that underlies most of the American west. The company uses micro-fracking techniques to circulate water in a closed loop, miles down into the earth, where it comes to the boil and is then brought back to the surface as steam power. In July 2017, California-based startup Altarock announced a proposal to deploy this technology in one of the hottest wells in the world at Newberry Volcano, Oregon. This promises an output 10 times superior to the geothermal activity average. Only a few projects like this one are underway in the USA, but the technology, which is based on highly available resources, has the potential to move geothermal energy from being a localized source of power to a significant countrywide source of power supply.

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WAV E POW E R Buoys, turbines and other technologies are able to capture the power of waves and tides and convert it into clean electricity. In the USA, only a few projects currently exist, such as the Ocean Sentinel buoy offshored a few miles North of Newport, Oregon. The first wave-produced power was inaugurated in Hawaii in September 2016. Nevertheless, the technology is advancing rapidly and has virtually unlimited potential for generating power, especially on the US coastline in Alaska or the north-eastern coast, which experience strong tides and currents. By some estimates, the ocean’s endless motion could create enough power to meet a quarter of US energy needs. However, while the energy potential would seem infinite, turbines require strong currents, which are to be found only in locations that create difficulties for deployment, maintenance and grid connectivity.

T HE T RAN S I T IO N TO R E S M IG H T N OT SU F F IC E TO K E E P G LO BAL WAR M I NG B E LOW 2 ° C Now that some governments have set out ambitious targets for braking their carbon dioxide emissions, some scientists are already warning that this is not enough and that we should be aiming for carbon ‘neutrality’ or even carbon ‘removal’. Installed close to large emission sources, such as fossil fuel power plants, carbon dioxide scrubbers absorb the CO2, which is then transported to a storage site, usually an underground geological formation, where it is prevented from re-entering the atmosphere. Carbon Capture and Storage (CCS) technology remains very costly but latest research from the International Energy Agency (IEA) shows that we will need CCS to keep global warming to less than 2°C above the pre-industrial baseline. Initiatives remain rather isolated and the sector under-invested. The Petra Nova plant in Texas is one of the few power plants in the world that captures directly from air most of the CO2 it emits. Another example is Austin-based Carbonfree Chemicals, a company that transforms greenhouse gases produced by industry into products such as PVC pipes and glass, or even cattle feed!

W RAP - U P To date, most innovation activity in this field has focused on boosting the efficiency of clean energy products and storage enablers. Attractive prices, boosted by cheap PV production cost and subsidies, have opened a new era for solar energy in the US. On top of that, new battery storage developments now enable energy producers to break their dependence on the grid and become self-sustainable in electricity. Last but not least, other technologies such as CO2 absorption, look promising and could play a vital role ahead of the full transition to renewable energies. However, we see a great deal of variation in solar and wind installations from one US state to another depending of their natural assets and economic interests. The transition is also being slowed down by the existing infrastructure, which is not well-suited to renewable energies. The dots need to be connected between the producers, distributors and consumers of energy if the entire country is to transition to widespread use of renewable energies. The real game-changers are yet to come.

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A NEW, TECH-POWERED & GREEN, ENERGY PARADIGM The technology is here, and will impact the generation, distribution and consumption of power. If implemented to its full extent it will bring about a new green energy ecosystem.

Machine learning helps to find the best angle to the wind Connected solar panels equipped with trackers

Biofuels are produced from microalgae

Electricity is generated from tides and currents

Dynamic billing models leveraging smart contracts

Smart grids bring stability, efficiency and transparency on the grid

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Thanks to smart thermostats, energy consumption is optimized and customers reduce their electricity bills

Big data and predictive analytics help to optimize distributed energy storage from RES

Community microgrids that autonomously and automatically trade green electricity on the Blockchain

Smart buildings leverage sensors to optimize energy consumption

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EV charging transaction fees are settled on the Blockchain

Decentralized solar energy producers are remunerated with tokens © L’Atelier BNP Paribas 2018

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“It’s no longer enough to have emissions-reducing technologies... We must scale them up and spread them globally at unprecedented speeds.” –Gabrielle Manoli Postdoctoral associate at Duke’s Nicholas School of the Environment, December 2016

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Part 2.2 Greentech and Digital: the game changers? Digitally-enabled products and services based on information, data and technologies that are now omnipresent in our daily lives, recently started to address environmental issues and energy and resource constraints. Enabling enhanced customer engagement, they offer a great deal of potential to help drive the adoption of renewable energy. From production to consumption, the energy sector is now being rapidly transformed by technologies such as the Internet of Things, data analysis, Artificial Intelligence and even the Blockchain. So how exactly can they accelerate the energy transition?

S M ART G R I DS AN D T H E IOT : T H E P E R F EC T S O L U T IO N F O R T HE E N E R G Y T RAN S I T IO N TO R E S According to the most recent research, innovation around smart grids holds a lot of promise: improving the efficiency of the US electricity grid by 5% alone would be the equivalent of eliminating the fuel use and carbon emissions of 53 million cars.22 In fact, the current power grid is generally regarded as obsolete, and the latest estimates indicate that it would require $1.5 to $2 trillion to modernize it. A smart grid is an electricity network which incorporates a variety of technological upgrades to the current infrastructure, including smart meters, smart appliances, and renewable and efficient energy resources. Power grids were originally centralized, controlling the energy flow on demand to passive electricity consumers. With the advent of new ways of producing energies, such as wind and solar power, the need for more sophisticated, flexible and efficient infrastructure has become more acute. Another paradigm shift is that the end-consumer has also become an energy producer. Smart grids rely on the creation of a data hub able to support the energy market with additional services such as solar and wind power generation capacity, consumer preferences and real-time power generation. The most advanced solutions have been developed around distributed residential and commercial solar generation, so that we now speak of a ‘solar as a service’ model. As in any ‘as a service’ model, the idea is to provide flexibility in the products/services on offer so as to, for instance, enable customers to either share the cost of the system or simply buy power from the grid. Solar City was one of the first companies to popularize this model. Last but not least, distributed generation can benefit the environment by harnessing energy that might otherwise be wasted. The new services that have emerged due to the smart grid also act in favor of the energy transition. Just as the construction of highways accelerated the use of automobiles, smart grids hold out the promise of helping to popularize the use of green energies by everyone. ‘Decentralized’ can also mean ‘local’, which can have the advantages of eliminating the ‘line loss’ effect – i.e. wasted energy during long-range transmission and distribution in the electricity delivery system – and giving back the management of energy choices to local communities. As a result, the traditional grid is expected to morph into a series of interconnected networks known as microgrids, that could turn into a pragmatic solution notably for the US rural areas. 35

The 3 benefits of the Smart Grid

R E L I AB I L I T Y + Overhauls aging existing

ECO N O M IC

+ Anticipates and meets infrastructure energy consumption + Smooths the flow of powpeaks er and reduces outages + “Pay what you use” + Proactive and efficient maintenance

I N DE P E N DE N C E + Enables power generation from renewable sources

+ Consumer can better manage his energy consumption

The market is huge and a number of IT sector leaders such as Cisco and IBM have got in on the act by launching their own smart meters and other ancillary devices. Although the situation varies from one state to another, 51% of all US households had access to smart metering infrastructure in 2015.23 In fact, the Internet of Things (IoT) revolution is already happening in the energy sector. Silver Spring Networks, in which Google Ventures (GV) invested at an early stage, was one of the first US startups to commercialize products and software for the smart grid, including IP standard and wireless communication devices. The company has also developed a number of initiatives in conjunction with US energy utilities in Florida, Oklahoma and California, deploying smart meters to millions of customers and laying the basis for a multitude of new products and services such as smart thermostats and inhouse electric vehicle charging equipment. It was acquired by Itron in January 2018 for $830 million, to also include smart water and gas management. Along the lines of the IoT, we now also speak of an Internet of Energy (IoE) underpinning connected, smarter management of energy production, distribution and use. The IoE is being built by integrating Internet connectivity into all types of devices and connecting them to intelligent networks. Examples of the IoE include sensors now available to the entire energy ecosystem, which can for instance enable you to control remotely the angle of a solar panel to the sun and hence optimize its power production. In similar vein, also due to the smart grid, Elon Musk envisages that his car batteries will be able to re-inject unused power back into the grid in order to help manage peak-time consumption. Electric cars could then also provide back-up power to the smart grid, springing into action when needed. This is only a start, of course, but the day when human beings will no longer be needed to control and manage the power grid will be here sooner than anticipated. Smart sensors, when applied to the energy industry, can be relatively inexpensive to deploy and are easily and quickly scalable. However, the real potential of the IoT means that a tremendous amount of data that may lead to a whole new range of business opportunities will made available. The Internet of Energy holds the promise that connected energy assets will substantially boost efficiency and promote smarter energy use. 36

ART I F IC I AL I N TE L L IG E N C E : A K E Y E NAB LE R O F T HE E N E R G Y T RAN S I T IO N This is precisely where data analytics and Artificial Intelligence may well have a role to play. In addition to the data collected by sensors, powerful algorithms and Artificial Intelligence can be leveraged along the entire energy value chain from production to storage and distribution, taking the smart grid to another level. AI needs data and the energy sector produces lots of data! Artificial Intelligence can be described as a set of tools, including machine learning and natural language processing, that can be applied as an extra layer on to existing energy assets that produce data. As the RES share in the mix grows, power utilities, whose basic mission is to deliver electricity regardless of weather conditions, could make good use of AI-powered tools to remove uncertainty and predict demand more accurately. On this point, solutions such as Orchestrated Energy developed by US company Tendrill prepare utilities for the Distributed Energy Resources (DER) grid, by making grid-edge resources visible, predictable and easy to dispatch, leveraging the data collected by the smart meters. Another use case, developed by California-based Stem, is to combine Big Data and predictive analytics so as to optimize distributed energy storage and help customers to reduce their electric bills. On the power generation optimization side, The Weather Company, which was acquired by IBM in October 2015, leverages the data and AI platform Watson to enable any energy producer to access 15 days of weather forecast data. It enables the company to anticipate renewables demand for the coming hours or days more accurately and provide actionable insights, for instance, assessing whether it is better to store or to use the power generated during the day depending on the upcoming weather forecast.24 Another use case is the application of machine learning to top-connected sensors on wind turbine blades, so that they can learn by themselves and find the best angle to the wind in order to optimize power generation. US wind turbine manufacturer General Electric claims to be able to boost energy production from wind farms by as much as 20% by leveraging this kind of technology. Applied to wind farms, neural networks have been trained using data exemplifying the performance of a set of wind turbines in order to predict future power generation more precisely. For similar patterns, such prospective methods could help identify wind turbines that perform less well or require maintenance. Muir Data Systems has developed a solution designed specifically for the wind turbine industry. Through large scale data aggregation and predictive analysis, it has demonstrated an ability to reduce overall operations and maintenance costs by as much as 50%. The US Department of Energy worked with IBM under its Solar Forecasting funding program to enable grid operators to forecast more accurately how much solar power will be added to the grid and to speed up the integration of these forecasts into energy management systems used by grid operators and utility companies. IBM was able to demonstrate a 30% improvement on solar forecasting using its AI-powered platform Watson. More recently, IBM has also been looking at wind and hydropower electricity generation forecasts. As in other industries, AI can also study human behavior and help people with their decision-making. For example, in the context of residential energy consumption optimization in smart homes, Nest, the smart thermostat device specialist which was acquired by Google in 2014, is looking at using machine learning to learn from people’s habits or 37

schedules in order to reduce their energy use. Nest has already sold over 11 million devices since 201124 and recently announced that they would be embedded in most of the relevant Google devices, including Google Home. Meanwhile, Google announced that it was drawing on AI in order to cut electricity consumption at its data centers by 15%. AI can also be applied to provide people looking for energy choice with a more customized experience and greater transparency. Seattle-based startup Drift uses machine learning to build a virtual plant network that enables customers to choose their sources of energy (which must be at least 50% made up of RES). In a seamless customer experience, the company will provide detailed weekly bills to users, splitting the cost by energy source in direct competition with power utilities, without the need to sign any contract. As a wide range of new services related to energy management emerges, startups such as FirstFuel sell a platform approach targeting specific needs (weather forecasts, bill comparisons, savings estimates, etc.), which utilities can easily integrate through their APIs. As we move into the digital era, some of the challenges around the smart grid have to do with the quality of data available and the need for a high-performance, fully-secure Cloud. Electricity is of course a key commodity, and everyone must ensure that the smart grid is protected from cyber-attacks. On February 2018, US Secretary of Energy Rick Perry at the DoE announced the creation of a new Office of Cybersecurity, with $96 million in funding. At the state level, only a few regulators, such as in California, Illinois and Texas have defined rules and framework about the data of the utilities’ customers. The US is leading the way here and companies such as Cylance and Mocana have developed solutions for the energy industry. Meanwhile the Blockchain, which is by its very nature difficult to hack, could potentially be used to address this challenge in an efficient way.

AI and the future of Energy

G E N E RAT IO N + Renewable energy prediction and optimization + Virtual power plants

DI ST RI B U T IO N + Smart grid balancing + Proactive maintenance

CO N SU M P T IO N + Energy savings and

smart billing systems + Consumers’ energy habits and routines understanding

B LOC K C HAI N : T H E N E X T R EVO L U T IO N O F T H E E N E R G Y SEC TO R Quite apart from the finance industry, from which the Blockchain concept first emerged, a number of different industries, including the energy sector, have been looking into the potential of the blockchain to streamline their processes. The Blockchain is a transparent and secure information storage and transmission technology, which is able to 38

operate without any central control body. This approach is of major interest to the energy sector. Energy is a good candidate for trading on a Blockchain platform as it involves a chain of interdependent actors, including suppliers, distributors, retailers and consumers, plus a complex supply chain comprising electricity generation, distribution, storage and consumption. Blockchains can be public or private. There is a wide range of use cases here. The Blockchain could be used to optimize and secure the decentralized grid, at the same time enabling new ways of distributing and monetizing power (Energy-as-a-Service). There are several types of Blockchains suitable for different purposes, such as supporting the exchange and storage of Bitcoin, which can be accessed by different levels of actors both public and private. The potential uses claimed for the Blockchain are very real, but the concept is rather recent and only a few initiatives related to the power sector were launched in the US in 2017. According to a Greentech Media study published in March this year, there are a total of 122 Blockchain startups operating in the energy space globally. From the same report we learn that blockchain-in-energy pilot tests in the United States have mostly been carried out without any utility involvement. Driven by the anticipated rise in demand for RES power, decentralized energy systems are expected to account for some 25% of the energy market by 2025.26 Nevertheless, in the context of the energy transition, the current centralized energy market does not enable decentralized energy producers to be rewarded at their fair value. Moreover, the recent deployment of smart grids and sensors is leading to the production of huge amounts of data, which today unfortunately remain unused because they are trapped in silos between the various different actors and stored in private databases. The Blockchain could be deployed to manage a unified public log of all the transactions, on behalf of all actors concerned. US-based startup Filament proposes to integrate the Blockchain, all along the energy value chain, on top of hardware and software solutions, thus enabling real-time and highly secure information sharing and access. The way this works is that first of all, all the energy assets must be listed on a decentralized ledger. Then, governance and oversight roles need to be assigned to the different parties listed on the ledger with a digital identity. At that point the trading of energy can begin, and each transaction will be recorded on the ledger. The ‘mining’ stage of the transaction then ensures that the transaction is unique and valid. By doing so, Blockchain holds the promise of being able to remove all intermediaries and avoid all friction in the energy trading process, thus making energy management more efficient and secure. By removing intermediaries, we can also assume that this approach will enable more affordable access to RES power. In this scenario, the role of the decentralized producer is strengthened, as he does not need to go through a utility to buy or sell electricity. In a different scenario, utilities could develop their own Blockchain to streamline the electricity buy/sell process on the grid. A number of companies, including several startups, are currently developing their own Blockchain solutions targeting the energy sector. Electricity was bought and sold via a Blockchain for the first time in April 2016, in Brooklyn, New York. Led by Siemens and a startup called LO3 Energy, this initiative, which was designed on a microgrid, enabled residents who were producing excess solar power to sell it to neighbors who needed it, on a peer-to-peer Ethereum-based transaction platform. In term of energy distribution and trading, some Blockchains, such as Ethereum, offer the capacity to support ‘smart contracts’, which can be defined as digital protocols that 39

automatically execute predefined processes of a transaction agreed upon between different actors. Applied to the energy sector, this approach could be deployed to support an electricity transaction between a utility and an individual power producer. Smart contracts run autonomously, and virtually instantaneously, as soon conditions agreed upon in the contract are triggered (e.g. when the electricity price reaches a certain level). In addition, if one of the parties to the contract defaults, the smart contract could automatically action payment recovery from his account. Power Ledger is a peer-to-peer trading platform provided by an Australian startup of the same name, which offers RES power producers the opportunity to trade their surplus electricity between themselves. They use Ethereum’s Blockchain smart contract capability to action transaction settlement and receive payment almost in real time. In February 2018, Power Ledger – whose CEO is in fact the former head of the US DoE’s Efficiency and Renewable Energy program – partnered with US non-profit Help Answers to launch hundreds of decentralized applied projects in the United States.27 Another field of application is carbon trading, smart contracts could assure digital transactions across the different participating organizations and support the reporting of carbon credits to the regulatory authorities. Meanwhile the best-known application of the Blockchain – cryptocurrencies – can also be used in order to incentivize the transition to a more sustainable energy system. The SolarChange project is one example of this kind of initiative. It was set up for the purpose of remunerating solar power producers with a virtual currency called SolarCoin. This cryptocurrency can be stored in a digital wallet or exchanged for other cryptocurrencies such as Bitcoin. One SolarCoin represents one MWh of solar electricity. Other example relating to smart grids is the work done by New York-based startup Grid+, which uses peer-to-peer (P2P) technology and data collected from smart meters to offer, via a smart agent device, the opportunity to buy and sell electricity at the best rates. Payments are automated and aggregated on a Blockchain (Ethereum). Electricity can be bought with BOLT tokens, which can simply be purchased by credit card and entitle the customer to buy power on the system. In contrast to the standard utility model, the payment is made almost in real time and power purchases can even be made in advance. The company has set a target of attracting 20,000 customers by end-2018 and 100,000 by the end of 2019. The best part: their solution can be built as a layer above the existing grid. Blockchain also holds the promise of extending to everyone the ability to obtain RES power. Various consortiums have been formed to popularize the use of the Blockchain in the energy field. They assume that technology will be able to reduce transaction costs in the sector, enabled by the active participation of greater numbers of players in the market. For example, the Energy Web Foundation is building an open source ‘Blockchain AppStore in Energy’. The Foundation is also looking to bring together electricity, gas and water suppliers, among other players in the sector, in order to test and disseminate energy trading via the Blockchain and stimulate debate on an appropriate regulatory framework. Another example is startup Sun Exchange, which has partnered with Oakland-based accelerator Powerhouse to offer interested parties the opportunity to become owners of or investors in part or a full portion of solar panel facilities located elsewhere in the world. According to CEO Larry Temlock, Sun Exchange then enables the investors to reap the benefits of renting out the solar panels “to another house, a school, a company or someone who needs this energy but cannot afford to invest to buy his own equipment.” This type of Blockchain-powered solution is helping to bring down both the entry barrier 40

Blockchain disruption opportunities in the energy sector

G E N E RAT IO N + Crowdfunding of green

energy generation project + Carbon market on distributed registry

DI ST RI B U T IO N + Community microgrids, that autonomously and automatically buys and sells power + Distributed grid balancing + Secured and unified energy assets registry

CO N SU M P T IO N + Peer to peer energy trading

+ Peer to peer energy lending

+ Smart contracts and

dynamic billing models

+ Efficient energy con-

sumption on top of IoT

+ EV charging payment settlement

for potential investors and the knowledge barrier to accessing the market, thus opening many business opportunities in the solar power field. The startup accepts payments in cryptocurrencies and uses smart contracts to automatically execute recoveries and payments from accounts. Smart contracts are also used to enable users to transfer or exchange among themselves their investments in one or another solar panel facility. In short, the technology behind Blockchains shows a lot of potential but it is still at an early stage. Starting with individual producers on microgrids, this technology has the capacity to radically transform and disrupt the entire energy market. Before that happens however, further successful initiatives and concrete applications must be developed, as some questions regarding the profitability of the various business models used by different players need to be answered. It is very unlikely that the Blockchain will be able to disrupt the US energy market all by itself. Nevertheless, as is the case in other industries such as Fintech, incumbents – utilities, in our case – could make use of the Blockchain to meet the increasing demand from customers for decentralized supplies of cleaner energy. In the UK, startup Electron won government support to partner with the National Grid in order to scale up its grid-balancing solutions platform. Lastly, it should be stressed that in the context of global warming, it is important to ensure that these technologies work in favor of, and not against, the energy transition. They can after all be used to process or ‘mine’ large amounts of data, thus requiring a lot of computing power, and unless this power is sourced from renewable energy this process could indirectly contribute to the release of extra CO2 into the atmosphere. This is an urgent issue, as the volume of cryptocurrencies being exchanged is now skyrocketing. Today, the Bitcoin Blockchain alone consumes 100 times more than the power used by all of Google’s servers put together. Fortunately, we have spotted several players who are aware of this issue and have decided to tackle it. Envion, a Swiss based company, is for example developing mobile mining units which are placed close to solar or wind farms and then use their surplus power to mine cryptocurrencies at a very attractive price and with little or no impact on the environment. No similar startups in the US have however been identified at this date. 41

W RAP - U P As stated by Marc Andreessen, the noted Silicon Valley-based entrepreneur and investor through Andreessen Horowitz funds, “Software is eating the world”28 and Greentech is no exception to this process. The commoditization of Information and Communication Technologies (ICTs), born in the US, coupled with the popularization of clean energy technologies such as solar panels, is accelerating the rapid growth of distributed power generation. It is helping to extend the reach of RES beyond the early-adopters and provide Greentech access to the vast majority of customers, which will potentially serve to accelerate the energy transition. A real shift towards digitally-enabled technologies is therefore underway, and the commoditization of first-generation Cleantech hardware coupled with the rapid proliferation of digital technologies carries with it a lot of new business opportunities that are expected to disrupt one of the biggest industries in the country. We could soon be able to trade energy as we exchange information on the Internet. The transition to digital energy systems is underway in the United States, although for the moment mostly concentrated in a few states such as California and New York. It may also take time before all the different energy sector players agree on a new business model that suits them all. Nevertheless, the popularization of the Energy-as-a-Service approach is also opening the door to partnerships between all the various players and stakeholders in the energy sector and beyond.

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Part 3: The US energy is complex: who is leading the energy transition? The energy ecosystem is made up of a number of players. Politicians, and especially the recently-installed Trump administration, has taken a 180-degree turn on climate policy versus the previous US administration. Venture Capitalists who have poured millions of dollars into the first wave of Greentech do not have the same enthusiasm about the sector as they did a few years ago. Utilities, which have dominated the electricity market for several decades now, are seeing the emergence of new competitors in the production, distribution and management of electricity. So, who is leading the energy transition in the United States?

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Part 3.1 The public sector: filling the Federal government void F E DE RAL G OV E R N M E N T, E N VI RO N M E N TAL AG E N C I E S AN D R EGULATO R S The US government has the difficult task of coping with the challenges related to energy supply, availability, affordability, security, and environmental impact. While the energy transition is mostly led by governments in Europe with highly subsidized programs, what is the situation in the United States? The US Federal government has always been part of the energy debate, and this also applies to the subject of energy transition. One example is the debate that took place during the last presidential campaign and the controversial stance taken by the candidate (now President) Donald Trump as regards the preservation of the mining industry in the US. There is a lot at stake. Energy is one of the biggest industries in the country, providing 6.4 million jobs in 2017. Driven by the transition to renewable energies, the solar power industry has created more jobs than any other industry in the country: in 2016, 1 out of every 50 new jobs created in the US was in the solar field, amounting to a total of around 260,000 new jobs! It has never been so true that two consecutive US administrations seem to hold completely opposite opinions on the topic. In this context, it is very difficult for the energy players to find the right balance. The Obama administration (2009-2017) consistently encouraged the transition to renewable energy sources. President Obama committed to reducing US emissions of greenhouse gases by 26-28% below 2005 levels by 2025, and supported a number of Federal programs, such as the Clean Power Plan, aimed at cutting the carbon pollution while fostering the development and deployment of green technologies. Overall, the federal government under Obama invested more than $80 billion in clean energy. On the other hand, the Trump administration recently pledged to drive an “energy renaissance” across the coal, oil, gas and nuclear industries. More importantly, against virtually unanimous world scientific and government leaders’ opinion, several senior members of President Trump’s administration have repeatedly cast doubt on the scientific consensus that CO2 from human consumption of fossil energies is driving climate change in our era. In June 2017 he also announced the withdrawal of the US from the Paris climate agreement, whose purpose was to reach a global consensus on action to reduce GHG emissions. As soon as he had been elected, President Trump appointed new heads of the Energy Protection Agency (EPA), a Federal agency whose role is to protect human health and the environment by enforcing regulations based on laws passed by Congress, such as the application of Climate Action Plan (CPP) enacted under President Obama, which had paved the way for the further development of renewable energies in the United States. He also appointed former Texas Governor Rick Perry to head up the Department of Energy. Clearly, the new administration has a different set of priorities, which contrast with the clean energy policies initiated by his predecessor and the next moves are still unclear. 44

“A full decarbonization of the electricity system by 2050 is possible for lower system cost than today based on available technology. Energy transition is no longer a question of technical feasibility or economic viability, but of political will.” –Christian Breyer Chairman of the Energy Watch Group Scientific Board

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President Trump is looking to cut some Federal budget expenses. He is thinking about eliminating several Federal programs such as the Advanced Research Projects Agency-Energy (ARPA-E), a United States government agency tasked with promoting and funding research and development to private actors or university labs. The program has already granted several million dollars to R&D initiatives and early-stage, heavily technology-related projects. Among these were initiatives relating to customized tidal power conversion devices and solar modules designed to improvement the efficiency of solar power generation. The 2018 budget would cut some $3 billion from Department of Energy, and the Loan Guarantee Program (LGP), managed under the DoE, that is providing funds and guarantees to promising not-yet-commercialized technologies (such as Tesla in 2009), is now also under threat. In the meantime, the Trump administration is expected to open up more Federal lands to oil and gas exploration and production and ease restrictions on coal mining. Regarding renewable energies, the White House announced on February 2018 that, in an effort to protect and ramp up solar power manufacturing production in the United States, a 30% import surcharge would be applied to solar panels made outside the US. While some regard this as a positive sign for US jobs, others fear a slowdown in promoting the transition to solar power, as domestic production will simply not suffice to meet the demand and might also increase the cost of solar. Regarding coal and nuclear, the Trump administration tried to rejuvenate them as top power sources. Quite unexpectedly, this move was stopped by the Federal Energy Regulatory Commission (FERC), controlled by the Republican and in charge of setting the rules of interstate electricity transmission. This decision was supported by the abundance of natural gas in the US and plummeting cost of renewables. Federal decisions are often criticized as they rarely satisfy the needs of the various different energy sectors, but it is certain that energy innovation, which calls for heavy long-term investment before products can be brought to market, is highly dependent on Federal money.

P U B L IC I N C E N T IV E S TO DE P LOY G R E E N TEC H Over the time, government, at Federal or state level, has always played a role in the energy sector, sometimes by financing giant projects such as the Hoover Dam during the Great Depression. Government has often played a role in financing projects which directly or indirectly influenced this or that source of energy. In addition, the Federal government has a range of financial tools at its disposal to sustain its energy policy targets, including R&D programs, direct loans and loan guarantees, plus tax incentives. It is worth noting that under President Obama renewable energies benefited from the largest share of Federal support. As regards renewable energy companies, R&D for Greentech was doubled under the Obama administration, which alongside other incentives represented around $12.3 billion worth of government support. One of the biggest energy tax credits available is for solar power: and is called solar Investment Tax Credit (ITC). Introduced in 2005 by President Bush under the Energy Policy Act, this Federal tax credit equates to 30% of the cost of buying and installing a solar power system. It has been extended several times under the Obama administration and should be made available till 2021. On average, it enabled to decrease the cost of going solar for average shoppers by $5,000 in 2017. Today, the Trump administration is debating the efficiency and impact of these programs. Wind and solar power, which have benefited from large subsidies in recent years, 46

are in jeopardy. This is a real maturity test for RES, whether they can compete vs fossil sources without subsidies. Under the Energy First Energy Plan, the current government promised to leave more room for free market forces and reduce government action, also proposing to eliminate “harmful and unnecessary policies”29. It is also making considerable efforts to ensure that the Climate Protection Plan drafted under the Obama administration never sees the light of day. Under the CPP, moves were due to start to control greenhouse gases from existing fossil fuel power plants. The Plan also called for a carbon tax. During the election campaign, President Trump tweeted that this kind of initiative would never be undertaken during his mandate. The 2017 Global Cleantech Innovation Index30 report published by the Cleantech Group in conjunction with WWF shows that “countries that are facilitating investment in innovation, either through public R&D, cleantech-friendly policy, or any other of the inputs measured, tend to also reap benefits from the commercialization of cleantech companies.” With its free-market pronouncements, the Trump administration is setting a challenge to green energy companies, which will now have no other choice than to deliver affordable energy. Moreover, it is still unclear how the different Federal programs will be impacted. In the absence of a clear steer from Washington, some US states are reacting and taking the lead for themselves.

STATE S AN D C I T I E S STE P F O RWAR D F O R T H E E N E R G Y T RAN S I T IO N Some states, in response to the Federal ‘drift’ and the sudden volte-face on energy preference, have seized the opportunity to develop green energy investment programs or put in place favorable state-level regulations to provide viable business opportunities and investment support for renewable energies. In addition, several states have set up ‘green banks’ to foster ongoing investment in green technologies. States are also filling the empty seat when it comes to taking the lead on the energy transition. All in all, 13 Governors (both Democrats and Republicans) have joined the United States Climate Alliance, a group pledged to support the Paris Agreement following the US withdrawal announced by President Trump. Fully 29 states have put in place regulation to force regional utilities to deliver a certain amount of electricity from green energy sources. Some states, including California, have not waited for the Federal government to put in place a carbon tax. Others, such as Arizona, have put forward the

“In the US energy ecosystem, it’s critical to understand that there are activities at the Federal level, the state level and the local level. Each of these levels has dynamics that interplay with the others and influence the others.” –Amanda Sabicer

Senior Vice President, Market Transformation at Los Angeles Cleantech Incubator (LAIC)

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biggest energy storage and clean energy targets yet. This sunny state has set a target of 80% clean energy by 2050 and 3,000 megawatts of energy storage by 2030. Meanwhile several states have teamed up to put in place a cap-and-trade program for CO2 emissions. The Regional Greenhouse Gas Initiative (RGGI), a cooperative effort among ten Northeastern US states, is the first mandatory market-based program in the United States for reducing GHG emissions. More and more exposed to a series of natural disasters impacting their immediate vicinity, city mayors are also now taking initiatives. New York City, which is one of the cities most exposed to rises in the sea level caused by global warming, plans to meet more than half of its new energy demand from renewable energies. This may look like a mere drop in the ocean, but more than 25 US cities31, including large cities such as San Diego in California and Salt Lake City in Utah, have committed to switching entirely to renewable energy within the next few years. In fact, three cities – Greensburg, KS ; Burlington, VT; and Aspen, CO – have already switched to 100% RES-power within the last three years.

U T I L I T I E S : A N E W F RO N T L I N E I N T H E US E N E R G Y T RAN S I T IO N The US utilities are numerous and diverse, while also depending on the geography. In the country, utilities are mostly vertically integrated and still control the generation, transmission, and final retail sale of power in many US states. In a nutshell, there are three main types of electric utility in the United States: + Publicly-Owned Utilities (POUs), such as the Tennessee Valley Authority, accounting for 15% of net electricity generation and nearly 50% of the nation’s electric distribution lines. + Investor-Owned Utilities (IOUs), private owned, such as PG&E in California. They account for 38% of the net electricity generation of the country. + Independent power producers, that accounts for 40% of the net electricity generation. Over the last decade, innovation within the utility sector has been rather limited in scope, as these firms have devoted between 0% and 1% of their revenues to R&D. Still, utilities have embraced the shift to Renewable Energy Sources. Overall, nearly 50% of all net new utility-scale capacity installed in the US in 2017 was based on renewable sources. The utilities’ transition to new business models also varies widely from one state to another. In California, the law mandates utilities to supply 33% of California’s electricity from renewable energy sources by 2020. To transform their business models, utilities are eager for new partnerships with startups. American Electric Power has invested as a limited partner in Braemer Energy Ventures, which seeks to make investments in the Greentech sector. In California, PG&E partnered with Silver Spring Networks (now Itron) to support its smart meter upgrade program. However, initiatives remain rather isolated and partnerships with startups are few and far between. Utilities are facing the threat of being disrupted as decentralized generation is gaining traction, we see that they will have a key role to play in enabling the energy transition in the US. Meanwhile, they no longer enjoy a monopoly on energy supply and are exposed to a new competitor: their customers!

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W RAP - U P The role of the public sector in the energy transition, especially that of the Federal government, should not be under-rated. All energy sector players are asking for more stability and greater predictability from the Federal government as regards its energy policy. In any case, budget cuts in Federal programs could jeopardize the recent progress made by green/clean technology and put a hard stop to the energy transition in the United States. This regulatory uncertainty could hold back business decisions and put the brakes on investment from the private sector.

Part 3.2 The emergence of new types of investors to power the energy transition According to latest analysis by the World Economic Forum32, globally, more than $2.4 trillion of investments will be needed to accompany the transformation of electricity over the next 10 years. Traditional VCs continued decline: what’s next? Today’s most famous US ‘green’ VCs include Chrysalix (Primus Power) DBL Partners (Tesla, Solar City, Advanced Microgrids Solutions) and Energy Impact Partners (Mosaic).

TOTAL US G R E E N TEC H VC I N V E ST M E N T

TOTAL DEAL VO L U M E

$ 7B

70 0

$ 6B

600

$5B

500

$4B

40 0

$3B

300

$ 2B

200

$1B

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

50

2015

2016

SOU RCE: L’ATELIER BASED ON EIA NUMBERS

Cleantech VC investment plummeted as a share of total US VC investment from 16.8% in 2011 to 7.6% in 2016. The number of deals fell from 649 in 2011 to 455 in 2016 and investments have also shifted from early-stage to more mature companies (which now account for 87% of all investments). This means that it is becoming an ever-greater challenge for early-stage Cleantech companies and entrepreneurs to obtain VC dollars and other investment.

0%

5%

10%

15%

20%

25%

Energy Efficiency Transportation Solar Bioenergy Energy Storage Advanced Green Materials Recycling & Waste Convential Fuel Smart Grid Water & Wastewater Air Wind Hydro & Marine Power Geothermal

R E N E WAB LE E N E R G I E S E N E R G Y DI ST RI B UT IO N AN D CO N SUM PTIO N OT HER GREENTECH SECTO R SOU RCE: L’ATELIER BASED ON EIA NUMBERS

We see from above, that between 2011 and 2016, investments were mostly concentrated in just a few areas such as renewable energy technologies, energy efficiency technologies and transportation. Investments in renewable energies technologies account for approximately 28% of all investments, with solar power accounting for 15.6%, followed by bioenergy technologies with 10.2%. Wind technologies only represented 0.9% of all Greentech investments. The second main focus for investment was energy efficiency (including smart grid projects) with 24.1% of the VC activity during those years. As a whole, $253.9 million were invested in the US energy efficiency sector. Energy storage, which is expected to be one the main drivers of the energy transition, only took 8.1% of all Greentech investments between 2011 and 2016. All in all, Greentech investment has been disproportionately concentrated in a few technology areas. Looking more closely on the energy and power sector, after having hit a peak in 2008, with more than $5bn (equivalent to 20% of total US VC investment that year), investment has subsequently suffered a huge slump and today stands at a third or less of 51

what it was in 2008. The financial crisis that hit the country in 2008 created an unstable financial environment. VCs began to fear a Greentech bubble and became more cautious with their investments. The sector has also seen some major failed investments, such as the collapse of Solyndra, which still haunts investors. Solyndra was a manufacturer of tubular solar panels made of film solar cells, based in Fremont, California. It raised more than $1bn from private investors and had benefited from the DoE’s guaranteed loan program. The company filed for bankruptcy in 2011, leaving taxpayers liable for $535 million in Federal guarantees. From 2006 to 2011, Venture Capital firms spent over $25 billion funding clean energy technology startups and lost over half their money. This tragedy in the Energy and power VC world, is also reflected in the story of the now-legendary investor John Doerr, who saw in Greentech one of the greatest economic opportunities of the 21st century – something “bigger than the Internet” – and lost millions of dollars. He subsequently acknowledged that he had misjudged the sector, which, he now asserts, follows much longer patterns than the usual VC cycles. A recent study by the MIT Energy Initiative postulates that Venture Capital is not suitable for the Clean Technology sector due to its combination of high risk and low returns. Another fact worth noting is that VC investments have also been concentrated in four major cities: San Francisco, San Jose, Los Angeles and Boston, which together garnered more than 50% of all investments. Clean Technology deal activity has nevertheless shown the strength of green software investment, which is not necessarily labeled as ‘Greentech’. The emergence of new technologies is changing the Cleantech investment landscape, placing greater emphasis on technologies related to the Internet of Things or data analytics platforms. Overall, VC activity in software developers has really taken off (accounting for 50% of all US VC activity) and Greentech startups are certainly benefiting from this trend one way or another.

CO R PO RATE VC : T RADI T IO NAL E N E R G Y CO M PAN I E S AR E I N V E ST I NG I N R E N E WAB LE TEC H N O LO G I E S Corporations are trying to fill the gap through direct investment and corporate ventures, but this may not be enough. In 2016, corporations, mostly through their VC arms, invested in 23 energy-efficiency startups, which accounted for 23% of all corporate-backed deals. Oil and gas companies, which are highly dependent on the availability of natural resources and also exposed to public opinion and investor pressure, are now rethinking their strategies and business models in order to capture the new value streams offered by RES-power generation and new related services. As they are now preparing for a greener future, they have recently become more interested in green technologies and are currently out in front of all other energy players in the United States as regards investment activity. Over the last 10 years, Chevron has invested through its Technology Venture arm in several energy and power Greentech startups, mostly in the field of biofuels production, including Canadian firm Ensyn Corporation and in carbon sequestration technology with Cool Planet Energy Systems. It is also important to note that oil & gas companies also benefit from the digital revolution as an aid to increasing their productivity and improving operational efficiency in the extraction of fossil fuels. For example, the recent investment by Chevron and Shell in Big Data company Maana is designed to facilitate exploration and optimize the extraction of oil and natural gas. 52

F I NAN C I AL SEC TO R : A M UL T I P L I E R E F F EC T TO ACC E LE RATE T HE E N E R G Y T RAN S I T IO N The transition to a low-carbon economy also represents an enormous opportunity for the financial sector, as both the public and private sector are involved in the energy transition. There is an increasing demand for capital to finance long-term environmentally-friendly projects. Such initiatives can be financed through Green Bonds. These instruments saw a boom in 2017, with over $100 billion worth of bonds issued and the US is the third-largest issuer worldwide.34 As more and more states and cities look to finance green initiatives in the future, the growth potential of the US Green Bond market is huge. Banks can thus help to achieve a multiplier effect in the move towards a low-carbon economy.

FA M I LY F OUN DAT IO N S AN D P H I LAN T H RO PY : A LO NG TE R M AN D SUSTAI N E D SU P PO RT TO G R E E N TEC H Private philanthropists and family foundations are also highly active in the Greentech investment field. The Cleantech Syndicate, one of the best-known and most active groups, is backed by thirteen prominent US families. The Syndicate has already invested over $1.2 billion in Greentech companies and is looking to invest an additional $1.4 billion over the next five years, especially technologies with long-term promise. Microsoft founder Bill Gates, one the richest men on the planet, has already committed several billion of his personal fortune to Research & Development in the RES field. He has also launched the Energy Breakthrough Coalition, a massive initiative to support zero-carbon energies. Several billionaires, including Mark Zuckerberg and Jeff Bezos, have answered the call to inject money into a $1bn investment fund.

I N I T I AL COI N O F F E R I NG S : I N TE R NAT IO NAL F UN DI NG F O R A G LO BAL C HAL LE NG E Lastly, traditional investment approaches have been challenged recently by a surge in alternative investment models such as Initial Coin Offerings (ICOs) based on cryptocurrencies. Using a decentralized platform such as the Blockchain, startups have been able to raise large amounts of money through cryptocurrencies, sometimes within a matter of seconds. The approach, which enables anyone in the world to take part, is similar to a crowdfunding presale and it lowers the entry barriers for both the investors and the startups. The results have been genuinely impressive and energy startups are reported to have raised a total of nearly $200 million through ICOs in 2017 alone. In September 2017, New York startup Grid +, owned by New York Blockchain development house ConsenSys, had to shut down the ICO presale of its GRID tokens due to “overwhelming interest”. Overall, the company claimed to have raised $29 million. According to a Greentech Media study35 on Blockchains, ICOs currently make up 75% of all Blockchain-based funding in the energy industry. Nevertheless, as ICOs are operating in a legal gray zone in the United States, this new model requires investors to perform their own due diligence and manage new risk analysis models. While this phenomenon is definitely growing, the US Securities and Exchange Commission has already prevented a number of ICOs from going ahead in the US market.

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W RAP - U P The slump in VC funding for Cleantech, which has directly led to a ‘hard stop’ in the funding of ‘deep technologies’, is yet another reason why the US needs more financing methods in order to ensure wide access to green energies and efficient technologies. Indeed, the only path forward to achieving a clean energy future is through investments in green technologies and effective business models across all stages of growth. While funding may no longer be coming from the Federal government, we are seeing different types of players, from traditional oil & gas companies to major banks and institutional investors, who are speaking in favor of renewable and are investing in Greentech startups.

Part 3.3 US corporations are going green The shift to cleaner energies is now disrupting entire industries and utilities are coming under threat as new players appear all along the energy chain. Electricity consumers want choice and the new wave of technologies will be able to give them what they want. SolarCity and Tesla, under the leadership of the charismatic Elon Musk, want to end our dependency on fossil fuels and draw our energy from the “giant fusion reactor in the sky”. SolarCity was part of the first wave of Greentech 1.0 that benefited from numerous investments whose aim was to raise solar power to the status of a mainstream source of energy. At some point, the company became the largest provider of residential solar power in the United States. Beset by financial problems it was then acquired by Tesla, whose goal was to unite the acquired solar energy expertise with its electric storage capabilities. In a groundbreaking announcement, Musk announced that with his expertise he could now provide enough power from facilities taking up only 100 square miles of land to supply the entire United States, thus calling into question the role of energy utilities. To support this effort, he also announced the creation of several ‘Gigafactories’ designed to meet the demand for storage batteries. Meanwhile, SolarCity has also come up with an innovative business model. The company installs and maintains free of charge solar panels on the roofs of individual dwellings and offers the occupants the opportunity to buy the power at an unbeatable price, especially so as to charge up their Tesla car during the night! As new players break into the energy market and exert influence, a number of tech players are working to promote the transition to green energies. One of the leaders of this movement is Google, the second-largest corporate buyer of renewable energy after Apple. In 2017, the company announced plans to power all its operations – including its data centers, which are big consumers of energy – with RES-power such as wind and solar. Google moved to secure its supplies by buying directly from wind farms, including via a 114MW contract in Iowa – the largest direct renewable energy purchase ever made by a non-utility. Some 40 other US corporations are also continuing to make commitments to purchase clean energy and to source 100% of their energy consumption from renewable energies through the ‘RE100’ initiative.

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T HE TO P 5 US CO R PO RATE WI N D & S O LAR O F F TAK E R S ( M W ), 2017

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200

536

245

35

200 WIND

200

SOLAR

Overall, corporations are playing a strong role in the energy transition, increasingly demanding cleaner energy so as to capture gains from energy efficiency at an attractive cost, while showing their customers the way. In the near future, reselling their surplus electricity back to the grid could also become a new source of revenue. Apple Energy, a new subsidiary of the famous company which was set up in 2016, is authorized to sell energy just like any US utility company.

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Part 3.4 Startups: Who will be the “Green” Google? US EEN NE ERG E RE R US GYY && POW POW

© L’Atelier BNP Paribas 2018

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Startups, by definition, have that capacity to quickly transform innovative ideas into successful business models. From power generation, to its distribution and use, startups are now in the process of disrupting the traditional energy industry. It is also not surprising to see that the United States is home to some of the biggest Greentech startup incubators and accelerators in the world. Los Angeles CleanTech Incubator (LACI), which has been working with startups in this field since 2011, has coached 67 firms, helping them to raise a total of $135 million, create 1,500 jobs and generate over $335 million in economic value. LACI has recently acquired CleanTech Open, an incubator which focuses more on companies at the very early (seed) stage of development, helping them to decide on a business model, raise funds and so on. LACI says that its mission is to accelerate the commercialization of clean technology and drive job-creation in the Los Angeles area. The incubator helps fledgling companies with their marketing, initial production and the raising of investment. In conjunction with the counties of Santa Barbara, Ventura, Los Angeles and Orange, LACI has launched the Energize California network – an ‘energy innovation hub’ whose purpose is to mobilize the region’s ecosystem so as to identify and support entrepreneurs in this field and accelerate the deployment of clean technologies. A similar initiative on the East coast is the Greentownlabs in Boston, the biggest Greentech startup accelerator in the US, which seeks to connect entrepreneurs with the rest of the ecosystem and encourage new profitable business models.

Part 3.5 The prosumer: a new role to help make the energy transition In what amounts to a real revolution in the energy business, the consumer, whether a private individual or an industrial user, has now become a ‘prosumer’ – i.e. both a producer and consumer of energy. One of the main drivers for a successful energy transition is consumer demand. Residential consumers in the US are now calling for new patterns of electricity generation and consumption, mostly driven by solar power, as easy and cheap panel installation can turn any garden, roof or parking lot into a mini power plant. As of December 2016, more than 45,000 businesses and nearly 600,000 homes across the United States had installed solar panels so as to produce their own electricity. We are now effectively in a situation where utilities no longer enjoy a monopoly on power supplies and in which consumers are starting to produce their own electricity, taking advantage of smart grids to sell any surplus power to their energy supplier or perhaps directly to their neighbors through what is known as a microgrid. Currently, the requirements for injecting home-generated RES-power to the electricity grid vary widely from one state to another and depend on local regulation and the local utility company. This could be one of the main challenges faced by ‘prosumers’. For instance, one Arizona utility recently imposed a $50-per-month charge on customers who wished to sell their surplus power to the grid. Meanwhile New York has set up a ‘sandbox’ to help them understand the phenomenon and adjust the regulations accordingly. Individual users can also decide to remain off-grid and aim for self-sustainability in energy as the cost is now as attractive as buying electricity from the standard grid. Today, the United States has more than 12 million distributed generation units. 57

Consumers also now have a better capability for optimizing their electricity consumption and are incentivized to do so. Californian startup Ohmconnect uses an app and text notifications on smartphones to pay consumers based on how much power they managed to save during the peak period (e.g. “turn off the AC for 1 hour”). The company has partnered with the California Independent System Operator (CAISO) to resell the unused power saved by the customers’ proactive behavior. This concept is called ‘demand response’. As shown in this example, it will be key to achieve a dynamic partnership between the utilities, grid operators and prosumers in the creation of new business models that will of course benefit the environment and also be profitable for the various stakeholders. This is where the startups could have a vital role to play. In summary, we can say that the different pieces of the puzzle in the energy ecosystem exist but need to be put together under the umbrella of strong leadership, together with the formation of new partnerships between the various different actors. As the promise of sustained Federal incentives is fading away the good news is that the market is moving itself instead.

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Interview In an interview with L’Atelier BNP Paribas, Curtis Tongue, co-founder and Chief Marketing Officer at OhmConnect, shared his vision of the future, both for the company and the energy sector as a whole.

L ’ ATE L I E R : How does OhmConnect work? CU RT I S : The way it works is very simple. When the users sign up on our platform, they enter in their email address, they let us know what zip code they’re in and based on that zip code we identify the utilities they are served by. The next step in the process is for the users to connect their utility account, authorizing OhmConnect to have access to their smart meter data. So we can see on a 15 min level, for every one of the users, what their energy consumption is. That’s how we’ll be able to measure it and pay them for the savings they made on their expected energy consumption. All this smart meter data is supplied when the user authorized us to access that data. When the electricity generating companies are about to turn on a peaking power plant, that’s when we send an invitation to all our users telling them: “Hey, this is a great time for you to save energy.” And if enough of our user community saves energy at that point, that power plant doesn’t need to turn on. This has a huge carbon impact: it results in a large amount of environmentally-damaging pollution being avoided because of those peaker plant not being admitted to the grid.

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L ’ ATE L I E R : How do you frame energy saving in a way that is acceptable and understandable for the consumers? CU RT I S : We’ve been very focused on building a streamlined, easy-to- use, fun, sticky, very gamified experience that makes it social, that allows people to see their collective impact, that allows people to kind of participate with their family. When we started, we initially thought that these energy savings events were potentially a burden for people, that we were inconveniencing our users, that when we said “Hey, can you save energy from this time to that time? That would be great,” they were gonna have to put off things that they wanted to do. And we actually failed. We should have connected the dots a little bit earlier because the most frequent question put to us was: “Can I control what amount per month I will receive? Can you help me to kind of map out the amount I’m gonna get?” What we found is that users don’t view these events as a burden, as a chore. They really look forward to these events, and there’s a couple of reasons for that. I think the first reason is that a lot of people look at these events as an excuse to unplug the TV and read for a while, or play board games, go outside, go for a run and do things that don’t require very intensive energy use. That’s when we really started to buildup on the gamification element. L ’ ATE L I E R : What are your ambitions for the next five years? CU RT I S : The future holds a couple of goals. The first is a national expansion. You know we’ve made great progress in California but I see a lot of other markets like New York, Chicago, the Eastern Seaboard, Texas and Toronto, where there’s a lot of opportunity for us. We do have a program that’s available for everybody across the US, where we’ll let them know when they’re using energy from a dirty power plant or from renewable resources and give them the prices – to enable them to save energy at that right time but to be able to have this direct payment for energy savings, in other states. That’s a big part of the future for us. Another thing we have our eyes on for the next five years is to continue that IoT trend, ride that smart home wave. We see more and more homes becoming smarter, with these new devices that are being connected and can respond adaptively to the grid, and we can only see that trend accelerating. So as that increases and that’s kind of our national footprint, where we’re able to extend out to other states – that’s what we’re really gonna have our eyes set on for the next five years. L ’ ATE L I E R : How do you see the future of the energy market? CU RT I S : Looking across the US, we see solar and wind and renewables becoming a bigger and bigger percentage of US power production. While, there is a certain volatility associated with these sources – solar for instance, there’s obviously a time of day when the sun goes down and there’s a drop in solar production. And it can be unpredictable. So an unexpectedly cloudy day or stormy day can also have an unexpected impact on the demand for energy, if there’s been a lot of solar backed up. The same with the wind: that energy production can also drop unexpectedly. With services like Ohm Connect, we’re able to respond quickly enough to address some of those energy production shortfalls. We monitor the grid and when we see there’s a spike in demand in a particular area – a supply-demand imbalance – services like OhmConnect are able to help bridge that gap. As far as renewables – solar and wind – are concerned, I can only see that trend increasing, microgrids also, more customer choice, additional utilities popping up. So I see services like OhmConnect becoming more integral, more central to managing those supply-demand imbalances.

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Focus on California

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California covers an area of 163,696 square miles. The state is rich in natural resources and is also one of the top economies in world (8th) with GDP equivalent to that of Brazil. Although California is in fact the number-three oil & gas producing state in the USA, it has nevertheless been a pioneer in the fight against global warming and embarked on the transition to a more sustainable energy system several decades ago. In the 1980s, the Golden State was one of the first to develop solar and wind power. According to the EIA, in 2016, California ranked third in the nation on hydroelectric generation, second on net electricity generation from all other renewable energy sources (RES) combined, and in first place as a producer of electricity from solar, geothermal, and biomass resources. In May 2017, the California Independent System Operator (ISO) reported that the state had (briefly) set a new renewable energy record, with non-hydro renewables providing 67.2% of the total electricity supplied to the grid. On average, taking 2016 figures, half of the electricity generated in California comes from natural gas, followed by RES, with approximately 25% (excluding hydro), almost a three-fold increase on 10 years ago. Solar energy officially accounts for 10% of all electricity generated in California but in fact represents slightly more than that as solar PV of less than 1 MW – i.e. most of the residential and small business installations – cannot be tracked. The hydroelectric share of total power generation in the state is falling due to the severe droughts that have been affecting California for several years now. Nuclear, which is not regarded as a renewable energy (same as large hydro) by the California Energy Commission (CEC), accounts for an average of 10% of the power mix, while coal, not represented in the graph below, accounts for less than 0.2%!

California’s electric generation breakdown (2016) 50% Natural Gases

7% Wind

15% Hydro

6% Geothermal

10% Nuclear

3% Biomass

10% Solar SOU RCE: CALIFORNIA ENERGY COMMISSION

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Along the lines of ‘Silicon Valley’, the state is sometimes nicknamed the ‘Solar Valley’ due to the boom in solar power it has seen in recent years (see graph below). In 2016, California produced 71% of all the solar electricity generated in the United States. CAL I F O R N I A ’ S S O LAR G E N E RAT IO N CAPAC I T Y (2003–2015)

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SOU RCE: CALIFORNIA ENERGY COMMISSION

Kern and Los Angeles counties host Solar Star, the world’s second-largest solar farm. The electricity generated by its 1.7 million photovoltaic panels is sufficient to power around 255,000 Californian households, at the same time avoiding annual CO2 emissions equivalent to 106,000 cars on the road. 36 California is also home to the largest wind farm in the United States: the Alta Wind Energy Center, which has an installed capacity of 1548 MW and generates electricity for 600,000 residential homes in Southern California. While the Pacific Ocean is too deep to anchor offshore turbines along California’s coasts, a US company called Trident Winds is nevertheless developing a wind farm project comprising a hundred floating offshore wind systems (FOWS) off Morro Bay in San Luis Obispo county. Commercial exploitation is scheduled to begin in 2025. California is the leading US state in terms of producing electricity from geothermal energy (which accounts for 5% of the state’s total power generation). The Geysers in Northern California is the largest geothermal complex in the world: 18 geothermal power plants channel steam from over 350 wells to produce sufficient electricity to power 900,000 homes. Meanwhile, California has done more than any other state in the USA to anticipate the renewable energy storage challenge and is leading the way with 230 MW of storage installations, ahead of Illinois, which has 119 MW of storage. Californians’ lifestyle and consumption habits are also driving the demand for renewable energies. The state has the highest number of installed solar panels in the country 65

and also hosts the lion’s share of electric vehicles in circulation – 77% of the entire US electric fleet. As a result of all these efforts to promote the generation and consumption of RES-power, the electric power sector’s share of total California’s greenhouse gas emissions has fallen to 19%, 26% lower than in the first eight months of 2014. Moreover, while California’s total energy consumption ranks among the highest in the United States, its per capita total energy consumption level is one of the lowest in the country. However, the state remains the second-largest emitter of CO2 in the USA, mainly due to the transportation sector, which represents 36% of all those emissions. As an illustration, more motor vehicles are registered in California than in any other state. In the 1970s, California began imposing a series of regulations in order to combat air pollution. Since, as mentioned above, California is one of the largest economies in the world, it is remarkable that the state has decided to take the lead on energy transition, transcending the political divide. In fact, Arnold Schwarzenegger is unquestionably the greenest Republican governor the United States has ever known. His successor, Democrat Jerry Brown, has taken over Schwarzenegger’s mantle and is driving efforts forward in this field. He succeeded in getting a bill passed that will require California’s utilities to obtain 50% of their electricity from renewable energy sources by the end of 2030 and 100% by 2045. According to the California Public Utilities Commission, this target, set only two years ago, could be met by 2020 – i.e. ten years ahead of schedule. California also has its own emissions cap-and-trade program, which is the fourth-biggest such program in the world and has been recently extended by Jerry Brown for an extra 10 years. California is attracting Greentech investments and, according to the Cleantech Group, the Golden State today has the greatest potential to produce entrepreneurial Cleantech startup companies that will commercialize clean technology innovations. In 2016, the state received more than half of all US venture capital investment.37 Last but not least, the state of California launched its own Green Bank in 2014 to facilitate more investment in clean energy projects and reduce the overall risk attaching to clean energy projects. Among its other notable assets, California is home to some of the best universities in the world. UC Berkeley, Stanford and the California Institute of Technology (Caltech), to name but three, each has a department and research lab focusing on this field. Meanwhile, California’s largest electric utilities – SCE, PG&E, SDG&E – and the Californian grid operator (CAISO) have switched to a demand-response approach in order to maintain a reliable flow of electricity to the areas that need it most, demonstrating their ability to adapt to new technologies and to the evolving needs of customers. PG&E has even announced that it is working on two Blockchain projects. At the city level, San Francisco has unanimously passed local legislation stipulating that the roofs of all new buildings of less than ten stories should be equipped with solar panels. On the other side of San Francisco Bay, Berkeley, once home to the hippie movement, now has the reputation of being the greenest city in the US. With all these achievements, it is now more crucial than ever that California should maintain its leadership in the field of clean energy innovation and collaborate with other state and national actors to help realize the transition to renewable energies. As part of the Under2 Coalition, California has also demonstrated its global leadership credentials by signing partnerships with Scotland, Sweden and Germany in the fight against global warming. 66

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General Conclusion The technology is here: propelled by digital tools, cost reductions and increases in efficiency, the transition to green energies seems unstoppable. However, it is still facing some major obstacles that are slowing down its deployment. The oil & gas rarefaction argument alone might not be sufficient to persuade the entire US energy sector to shift away from fossil fuels. Renewable energies are now coming under pressure due to the production records now being set by oil and gas in the United States, which could potentially delay the energy transition scenario. Meanwhile, recent reports indicate that sun and wind alone could power 80% of the country. The struggle between energy sources is only just beginning. Wind and solar power production is now able to compete economically in the United States with electricity generated from fossil fuels, but that might still not suffice. US energy consumption is also slowly turning green but will require huge infrastructure investments and incentives for the end user to shift to a mass decentralized energy market. To finance such a transition and make green energies economically viable in the long term, a number of players such as Elon Musk are calling for a price to be put on carbon. The main bad news is that the newly-elected Trump administration and the national energy policies recently enacted in the US do not seem to work in favor of renewable energies and a carbon tax is not likely to see the light of day at a Federal level anytime soon. This 180-degree policy shift is adding extra uncertainty for the energy sector and potentially jeopardizing the progress made by renewable energies to date in the US. Faced with this ‘retreat’ by the Federal government, states and cities are reacting by setting out clear goals and targets intended to drive forward the energy transition in their area. On the Venture Capital front, the outlook is also gloomy as investments have never regained the level attained during the first Greentech wave before the 2008 financial crisis. To close the gap, new types of investors such as corporates, financial institutions and even philanthropists are meeting the need for fresh capital to support the energy transition and backing green initiatives. Recent innovations have unlocked new ways of producing, distributing and consuming electricity. The next wave of technology developments holds out the promise of accelerating the energy transition by enabling the decarbonization, decentralization, digitization and democratization of the energy sector (the ‘4Ds’). But, aside from the buzzwords, digital technologies such as the Internet of Things, Artificial Intelligence and the Blockchain could prove to be the game changers. The status quo is being challenged and the so-called technological limitations inherent in renewable energies, such as energy storage, are now being solved. Power production will be shared between a variety of different actors and this will bring forward a new set of leaders who will take action to promote the energy transition. Last but not least, the electrification of transport, one of the main energy-consuming sectors in the United States, and innovation in the way US people consume their electricity could result in profound changes to the power system and drive up the demand 68

for clean energy. This kind of paradigm shift will put the individual at the heart of decision-making process. To answer this call, startups, leveraging their strong ability to innovate, will have a key role to play. In that situation, utilities will have to adapt their business models and could do so by partnering with startups. What we have learned from California’s example is that it takes strong political will and grassroots mobilization across a diverse set of stakeholders, including politicians, utilities, corporates and consumers, to achieve lasting change. Of all the US states, California is the one that is best placed to be on track to achieve the transition towards obtaining 100% of its energy from renewable sources by 2045.

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Appendix 1. Energy Production/Storage S O LAR SkyFuel is a designer and provider of thermal concentrating solar power equipment for utility scale power generation and industrial applications of steam

2007 Arvada, CO Funding: $30M

Solar electricity generation on transparent electricity-generating windows

2009 Columbia, MD Funding: $4.3M

Designs, develops, and deploys solar thermal technology to produce high-value electricity and steam for markets worldwide.

2004 Oakland, CA Funding: $615M

Suniva is a Chinese owned, U.S. based manufacturer of high-efficiency silicon photovoltaic solar cells and high-power solar modules.

2006 Norcross, GA Funding: $231.5M

American photovoltaic (PV) manufacturer of rigid thin film modules, solar panels, and provider of utility-scale PV power plants supporting services that include finance, construction, maintenance and end-of-life panel recycling.

1999 Tempa, AR Funding: N/A

World standard in solar electric systems for homes, businesses and utilities.

1985 San Jose, CA Funding: IPO

Specializes in combining solar power generation with crop production in greenhouses or open fields.

2012 Scotts Valley, CA Funding: N/A

Horizontal tracking for solar power systems

Totem Power is a distributed energy storage product that includes expansive smart city functionality. The platform combines solar energy and energy storage, Wi-Fi and 4G communications, electric vehicle charging, and smart lighting into a single, powerful product that weaves these capabilities directly into the built environment

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2013 Fremont, CA Funding: acquired by Flex for $330M 2015 Bedford, NY Funding: N/A

WI N D Makani Power is a California-based company that developed airborne wind turbines with the support of Google X and the U.S. Department of Energy office of ARPA-E.

2006 Alameda, CA Funding: $15M

Wind designs & manufactures wind energy systems for small wind turbine market designed for powering homes farms or businesses with clean energy

2010 Wilsonville, OR Funding: IPO

Deep water offshore wind project development company for North America and other markets with the initial focus in California

2015 Seattle, WA Funding: N/A

Turbine-free wind energy

2007 Ann Arbor, MI Funding: $4.5M

Provides a full suite of geothermal services including development, management, operations, performance improvement and reservoir maintenance for new and existing Enhanced Geothermal Systems (EGS)

2007 Seatle, WA Funding: $36.5M

Biology company that specializes in converting algal biomass into biofuels (now Terranova)

2003 San Francisco, CA Funding: IPO

Provides a solution to harness the renewable power of ocean waves to produce electricity and freshwater. CalWave is a winner of the US Wave Energy Prize in 2016

2014 San Francisco, CA Funding: $1.5M

On-site power generation systems that utilize an innovative new fuel cell technology

2001 Sunnyvale, CA Funding: $826M

acquired by X in May 2013

OT H E R R E N E WAB LE S

(DOE’s grant)

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1. Energy Production/Storage continued E N E R G Y STO RAG E Develops energy storage solutions for smart energy systems

2013 Oakland, CA Funding: $3.1M

Predictive analytics for batteries through their lifetime

2012 Brooklyn, NY Funding: $2M

Uses advanced energy storage for large commercial and industrial users and utilities.

2012 San Francisco, CA Funding: $52.7M

Liquid metal battery technology

2010 Cambridge, MA Funding: $50M

Offers a long lasting, durable solution for grid-scale energy storage customers

2002 Woburn, MA Funding: $63.2M

Technology-agnostic energy storage systems solutions.

N/A Part of IHI Corp.

Manufactures big batteries for the Smart Grid

2009 Hayward, CA Funding: $112M

2. Energy Distribution E N E R G Y O F T H I NG S

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Deploys a broad set of smart grid initiatives such as advanced metering, distribution automation, demand response and distributed energy resources.

1995 Redwood City, CA Funding: $146M

American technology company that offers products and services on energy and water resource management

2002 Redwood City, CA Funding: acquired by Itron in Sept. 2017

With their trackers, help solar developers increase location site options and maximize power generation

2014 San Francisco, CA Funding: $3M

Blueprint Power’s mission is to accelerate the transformation of buildings into intelligent power nodes.

2017 NYC, NY Funding: N/A

Enables connected machines and devices to transact and exchange value against a Blockchain

2012 Reno, NV Funding: $21.5M

Power Plant as a Service, combining solar, waste conversion, batteries, and other existing power technologies, to create a perfectly balanced microgrid. Headquartered at the Los Angeles Cleantech Incubator (LACI)

2014 Los Angeles, CA Funding: N/A

Machine learning for energy storage. Hosted at Powerhouse in Oakland.

2017 Oakland, SF, CA Funding: N/A

Organizes energy data and employs big data analytics to generate real-time predictions on the Grid.

2011 Redwood City, CA Funding: $41.8M

Leverages the Ethereum blockchain to give consumers direct access to wholesale energy markets.

2017 Brooklyn, NY Funding: $27.7M (ICO)

The company builds tools and develops projects to support and accelerate the proliferation of the distributed energy, utilities

2012 Brooklyn, NY Funding: $5.8M

Brings and optimizes energy consumption to business through its distributed storage technology.

2009 Millbrae, CA Funding: $295M

Provides integrated solar solutions for distributed generation and storage

2010 San Francisco, CA Funding: $54M

S M ART G RI D

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3. Energy use and efficiency E N E R G Y AS A SE RVIC E Creates data-driven software that appeals to people interests and desires, informs them about their energy use and makes saving energy social, fun, and simple.

2011 Boulder, CO Funding: $8.9M

Offers a cloud-based software as a service solution for wind turbine operations and maintenance management

2012 Pasadena, CA Funding: $100K (seed)

Provides an online platform that enables homeowners to apply, qualify, and contract for solar financing.

2011 Boston, MA Funding: $3.3M

Residential clean energy lending platform, offering financing for solar and home improvements

2011 Oakland, CA Funding: $487M

Solar location permit and interconnection data for lead generation and analytics. Hosted at Powerhouse.

2015 San Francisco, CA Funding: N/A

Online bidding platform for residential solar buyers.

2014 Los Angeles, CA Funding: N/A (angel round)

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US-based provider of residential solar electricity and services

2007 San Francisco, CA Funding: IPO

SolarCity Corporation is a subsidiary of Tesla, Inc. that specializes in solar energy services

2006 San Mateo, CA Funding: IPO

E N E R G Y USE Uses data analysis techniques on available data streams to determine the energy usage for the production lines and machinery in a manufacturing facility

2010 Cambridge, MA Funding: N/A

Home automation producer of programmable, self-learning, sensor-driven, Wi-Fi-enabled thermostats

2010 Palo Alto, CA

Empowers people with the freedom to buy and sell energy based on what is important to them.

2015 Seattle, CA Funding: $7M

Company that harnesses information to incentivize energy consumers to save energy and money.

2013 San Francisco, CA Funding: N/A

Energy and service providers of customizable software solutions to engage consumers to meet efficiency goals and improve customer service operations

2004 Boulder, CO Funding: $141.3M

Make energy-decisions simple for customers, through a mobile app, to ease the adoption of energy efficient products, distributed generation resources and time-based electricity pricing.

2012 Los Angeles, CA Funding: $1.3M

Energy monitoring and management solution for eco-friendly energy saving

2010 Sunnyvale, CA Funding: $51.6M

Funding: acquired by Google

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27 https://www.newsbtc.com/2018/02/07/power-ledger-makes-inroads-us-energy-trading-sector/ 28 https://www.wsj.com/articles/SB10001424053111903480904576512250915629460 29 https://cleantechnica.com/2017/01/30/trumps-america-first-energy-plan-actually-leaves-america-behind/ 30 http://info.cleantech.com/rs/151-JSY-946/images/Global_Cleatech_Innovation_Index_2017_FINAL.pdf 31 https://www.ecowatch.com/cities-commit-renewable-energy-2324917492.html 32 http://www3.weforum.org/docs/WEF_Future_of_Electricity_2017.pdf 33 https://www.brookings.edu/research/cleantech-venture-capital-continued-declines-and-narrow-geography-limit-prospects/ 34 https://www.bloomberg.com/news/articles/2017-03-10/new-shades-of-green-bonds-seen-as-market-setto-double-again 35 https://www.greentechmedia.com/articles/read/four-predictions-for-blockchain-in-energy-in-2018#gs. IocDqUI 36 https://www.bherenewables.com/solarstar_solar.aspx 37 https://ssti.org/blog/useful-stats-share-us-venture-capital-activity-and-capita-investment-state-2010-2016

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