Net Zero

1. Carlyle’s AI gambit
2. Shell loses low-carbon exec
3. Carbon-removal brokerage
4. Tesla’s issues
5. Latin America’s drought

Shrinking rooftop solar, booming renewables, and costlier fossil fuels.

Carlyle sees a green-power cash cow

The private equity firm Carlyle Group is courting artificial intelligence-focused data centers as anchor customers for a series of large solar power farms it’s building in the Arizona desert.

Two years after Carlyle founded its own renewable-energy development company, Copia Power, construction is underway on its first project: a $2 billion, 1.5-gigawatt solar-and-storage project outside of Phoenix. A second, similar project is expected to break ground nearby later this year, and a third 1.5-gigawatt project is in development for the near future. Although the customers Copia Power initially locked in are fairly routine — the local utility and the hardware chain Lowe’s — the company is now shifting its focus to target tech companies, which have emerged as the U.S. power market’s most voracious buyers of low-carbon electricity, Pooja Goyal, Carlyle’s chief investment officer for infrastructure and head of renewables, told Semafor.

“We knew there was going to be a lot of demand from corporate customers for the energy from these projects,” she said. “But we definitely did not take into account the demand pull from AI that is happening right now. That’s become a major accelerator to the original investment thesis.”

With six sessions across two days and two stages, including the Gallup Great Hall, the 2024 World Economy Summit will showcase the most influential economic and business decision makers in the world, coming together for on-the-record interviews on the state of the global economic landscape.

Each session will be streamed live, starting today at 9:30 a.m. ET with the Global Growth and Digital Infrastructure sessions. Later this afternoon, tune in for The Future of Mobility session starting at 2:30 p.m. ET.

Shell loses a low-carbon exec

Shell’s senior vice president for low-carbon fuels, Sinead Lynch, is leaving the company, Semafor has learned.

Lynch joined Shell in 2016 as part of the company’s acquisition of the natural gas company BG Group, and was responsible for Shell’s growing production of bio- and synthetic fuels, including its fledgling sustainable aviation fuel business. In her LinkedIn profile, Lynch describes the biofuel division as “a prime example of Shell’s growing ambition to deliver more value with less emissions.” But her departure comes at a moment when the oil and gas industry is struggling to retain talent, as staff become increasingly disillusioned with their employers’ slow progress on climate change. In October, some of Lynch’s colleagues signed an open letter saying they were “deeply concerned” by the decision of CEO Wael Sawan to walk back the company’s investments in renewable energy. Last month, the company also weakened its near-term emissions targets. A Shell spokesperson told Semafor that Lynch “made her decision to leave well in advance of [the March energy transition strategy shift] and it had nothing to do with [that].”

A carbon-removal brokerage

The Swiss direct air capture company Climeworks today announced an expansion into what is in effect carbon-removal brokerage, selling clients packages of pre-vetted carbon-removal credits from varying technologies and suppliers. The company’s first customer is the Swiss luxury watchmaker Breitling, which signed a 12-year deal for an undisclosed number of credits, though Climeworks’ head of its new “climate solutions” team Adrian Siegrist said a further 50 companies had expressed interest in the new offering.

As part of the effort, Climeworks will sell direct air capture credits from its own facilities, as well as ones from other carbon-removal companies working in afforestation, biochar, enhanced rock weathering, and bioenergy with carbon-capture. The company says it will do the due diligence on behalf of clients — a major issue given Breitling itself acknowledged multiple controversies regarding the quality of credits in the carbon-offset market — and will continuously review whether carbon-removal suppliers meet Climeworks’ standards.

Though it has held discussions with over 100 carbon-removal suppliers in the past year, the only DAC supplier that Climeworks will sell to clients is itself — and that appears unlikely to change, given Siegrist said its vetting process relies both on publicly available information as well as engaging with the companies to understand their science and processes, which a competitor is unlikely to do.

Siegrist likened the deals more to power-purchase agreements prevalent in the wind and solar sectors, rather than a bank’s trading desk, but acknowledged in a call with reporters that Climeworks was taking on some financial risk. The upsides could be tremendous, though: The company’s co-founder and co-chief executive Christoph Gebald described the overall market as having “trillion-dollar potential in 2050.”

Tesla’s mounting issues

The number of staff the electric-vehicle giant Tesla will lay off, equivalent to a tenth of its workforce. Tesla is grappling with brutal competition from Chinese rivals as well as internal-combustion engine incumbents, all of which are debuting new models at lower prices, helping contribute to sharply lower sales for Tesla. Investors have been unimpressed, with the company’s stock price falling by more than a third so far this year. More challenges may be on the horizon: The layoffs may help further a push by the United Auto Workers union to organize Tesla workers in the United States, The New York Times noted.

Latin America’s drought issues

Ecuador began rationing electricity as a Latin America-wide drought linked to El Niño, a warm-weather pattern, depleted reservoirs at hydroelectric plants. El Niño has wreaked havoc on the water supplies of some of the region’s biggest cities, highlighting their vulnerability to rising global temperatures. Bogotá’s mayor asked residents to change their showering habits to reduce waste. Meanwhile Mexico City experienced its hottest day ever yesterday, raising risks that its dwindling water supplies will run out even faster than expected. Droughts in turn have led to water-trafficking: In some areas of Mexico, a local journalist wrote, powerful drug cartels have monopolized creeks and lakes to become the water providers of entire towns.

New Energy

• The U.S. market for rooftop solar is shrinking as the industry has been beset by high interest rates, limited access to credit, and cuts to incentives for installations. According to a forecast by the Solar Energy Industries Association, a trade group, installations could drop by as much as 13% this year.
• Wind, solar, and hydro energy production in California exceeded 100% of the state’s energy demand for a record 30 days, setting a benchmark in its energy transition. “This is not an anomaly,” Mark Jacobson, a professor at Stanford University, said. “It is the new reality.”

Fossil Fuels

• The Biden administration finalized a rule that makes drilling for oil and gas on federally owned lands more expensive. The rule raises the royalty share from 12.5% to almost 16.7%. Other provisions in the rule will also make it more expensive for drillers to abandon their wells after use instead of cleaning them up, The Hill reported. “These are the most significant reforms to the federal oil and gas leasing program in decades,” Interior Secretary Deb Haaland said.

Finance

• U.S. regional banks have rapidly increased lending to oil, gas, and coal clients, taking market share away from bigger European rivals as the latter scale back those loans. According to data compiled by Bloomberg, the number of fossil-fuel loans provided by Citizens Financial, BOK Financial, Truist Securities, Fifth Third, and US Bancorp since 2022 rose more than 70% on average annually compared to the previous six years.

Politics & Policy

• China announced plans to limit supply in its national carbon market in a bid to push large polluters to curb emissions. Under the proposed changes, the country’s power utilities would also be subject to a larger-than-expected reduction to emissions permits, Bloomberg reported.

Minerals & Mining

• A major lithium mine in Nevada moved one step closer to construction after the U.S. Bureau of Land Management released a preliminary environmental impact statement finding the developer, Ioneer, has taken steps to minimize the mine’s impact on endangered local plant species.
• The mining sector’s low rates of investment have put the global energy transition at risk, Dominic Barton, the chairman of mining giant Rio Tinto said. According to Barton, the supply gap for metals critical to the energy transition such as copper is widening. “The gap is humungous, and I am actually very worried about whether we will be able to close (it),” he said at the Ecosperity conference in Singapore.

Personnel

• Former Shell CEO Ben van Beurden joined private equity group KKR as a senior adviser for energy transition investments, his first role after stepping down from the oil major in 2022. “The more I get exposed to private equity, the more that I believe that this is a really crucial part of the overall societal puzzle to get right,” van Beurden told the Financial Times.

• Threats against US speaker play into Democrats’ hands, some Republicans worry.
• AI startup Tome makes cuts in pursuit of new focus.
• Europe, US divided over support for Ukraine’s strikes on Russian oil.