Jan Vesely: Can Techology Save Us from Climate Change?
Electricity demand in developed markets like the U.S. and Europe is expected to increase to record levels. To meet these needs, we will need to transform our energy systems by scaling proven technologies to new heights.
The world is hungry for power like never before, with electricity consumption surging even in developed markets after several years of flat, or sometimes declining, demand.
Economic growth, increased digitalization and AI, heatwaves, and the ongoing electrification of infrastructure such as transport, heating systems and industrial processes, are some of the factors piling pressure on energy systems, with International Energy Agency (IEA) data showing that electricity demand will grow at the fastest rate since 2007 over the next two years.
Further ahead, the energy consumption curve looks even steeper. In 2021, the U.S. Energy Information Administration (EIA) projected an almost 50 percent growth in world energy use by 2050 — a prediction made before big tech firms started ramping up spending plans for new data centers to grow their power-hungry AI services.
“People find themselves at a pivotal moment in time, where energy demands are increasing so rapidly that grids around the world are struggling to keep up.”
People find themselves at a pivotal moment in time, where energy demands are increasing so rapidly that grids around the world are struggling to keep up. If the world can't figure it out, the stakes are potentially big: AI won’t be able to revolutionize society, the U.S. won’t be able to build its own chip plants, and renewable energy won’t be able to fulfill its societal promise.
So how can anyone address these power demands? One way to do it would be for utility companies and public bodies to make massive investments in modernizing the grids — but given how highly regulated they are, that’s unlikely to happen quickly. A complementary alternative that could offer answers is to invest in proven infrastructure technologies that are ready to scale.
Consumers are already charging electric cars at home and at service stations, and so now we need commercial fleet operators to be able to do the same. Heat pumps are also being installed in people’s homes, so why not in industrial settings? Some data center providers are testing out on-site fuel cells — but instead of just having one or two, it needs to be possible for them to have 20 or more all working alongside each other. The first flights using sustainable aviation fuels have already landed, so how can more people make sure these biofuels are more readily available on the market?
Technologies like battery storage have been shown to work and has the possibility to unlock the ability to provide round-the-clock access to renewable energy, while distributed energy solutions make it possible for customers to generate their own power and operate without grid connections, which are taking years to obtain at this point. Finally, a renewed focus on domestic production and resource efficiency will also drive the need for resource efficiency and new recycling solutions. The production of batteries, for example, is largely concentrated in China; to satisfy demand at home it will be important to be able to reuse the cobalt, lithium, and other valuable metals they are made from.
Investors can’t just throw caution to the wind — and not every exciting net-zero technology fits the criteria needed for infrastructure capital. We aren’t in the business of making bets on things that may or may not work out, and when looking at technologies that don’t have that 20-plus year operating history to rely on, we want to see that the unit economics, alongside a path to scale and generate returns, are all there. Most importantly, there needs to be real demand — and customers that are willing to contract these assets. Sales cycles can be long in infrastructure, and many overestimate how quickly new technologies can be commercialized.
The sweet spot is where technology has been deployed (and working) for some time, but it hasn’t yet had access to the capital needed to develop sizeable sites and start operating on a whole new scale. A good example of this is charging infrastructure: there’s nothing new about it, and it’s a proven technology in the consumer space. What the world needs to do now is build dedicated sites for commercial fleets, where a lack of infrastructure has stopped these operators from electrifying sooner. In our portfolio, Voltera is one example of a company doing this — it’s using proven technology and building large-scale sites that provide EV charging facilities as a service, making it easier for transport companies to make the switch to electric.
Meanwhile, Statera has a well-established battery storage technology to build sizeable storage systems that stock up on renewable energy as it’s generated and then put it back onto the grid when it’s actually needed. Solutions like this could help to solve the problem of intermittency when it comes to renewable energy sources like solar and wind. There is also Cirba, a company that has been in the business of recycling batteries for more than 30 years, and is doing important work extracting materials like lithium, cobalt, nickel and manganese from batteries at the end of their lifecycle.
Other technologies that are interesting, but not quite there yet from an infrastructure investing perspective, include things like hydrogen, small nuclear and carbon capture. These are still hard to do at scale, and the economics aren’t quite clear yet. Technologies are advancing rapidly, and a lot can change in the space over a few years — and we’re following these spaces closely.
Jan Vesely joined EQT Partners in September 2010. Prior to joining EQT Partners, Jan worked as Analyst at Goldman Sachs in Frankfurt focusing on German and CEE transactions. He holds a master’s degree in Business Administration from the University of Mannheim and Portland State University.
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