JULY 17, 2024

Hello,

In today’s edition:

• Reporting from the Philippines and as part of our partnership with The Associated Press, Bill writes on the growing popularity of a novel kind of insurance for extreme weather.
• We have a Voices article about navigating a finance valley of death for climate tech.
• Amena has an exclusive for our latest Data Dive on the kinds of communities receiving cleantech investments.

Was this email forwarded to you? Sign up here.

Send your energy photos, story tips and more to news@ciphernews.com.

Joemar Flores looking across his farmland, in Mindanao, Philippines in May 2024. Photo by Bill Spindle.

Extreme weather prompts growth of parametric insurance, offering faster, more flexible payments after disasters

BY: BILL SPINDLE

As the impacts of climate change become increasingly widespread and severe, communities need to find new ways to build resilience and protect themselves. Insurance almost certainly will need to play a central role in that effort.

There's a problem, though: traditional insurance is least effective in the vulnerable communities that most need it to work. Standard insurance against natural disasters such as a typhoon or earthquake requires an on-site inspection to assess the damage. That often is too time consuming and difficult, if not impossible, in many rural areas of agricultural and low-income countries.

A novel kind of insurance is helping address that challenge. Dubbed “parametric” insurance, the policies are paid out based on satellite measurements of rainfall, heat and wind speed. That means insurers can pay out quickly — within days often — without any need for expensive and time-consuming damage assessments.

The growing use of these policies, which Bill Spindle wrote about after journeying to some rural outposts in the Philippines, is part of a larger industry rethink among insurers facing new sorts of challenges with climate change.

Read the full story on Cipher’s website.

Editor’s note: This story is a collaboration between Cipher News and The Associated Press, Global Climate Desk. Learn more about this partnership here.

Lunchtime Reads and Hot Takes

Why Is the Oil Industry Booming? — The New York Times

Bill’s take: This article takes a disconcerting deep dive into the surging fortunes of the U.S. oil and gas industry, even in the face of rapidly rising renewables. The report underscores that the transition AWAY from fossil fuels part of the energy transition is still a long way off — as the oil and gas industry likes to remind us.

Extreme Heat Is Causing Billions in Damages That Insurers Won’t Cover — The Wall Street Journal
Amena’s take: Climate risk should not be limited to sudden shocks like flooding and disasters. The frequency of heat events has increased and that is causing billions in damages.

The World’s Power Grids Are Failing as the Planet Warms — Bloomberg
Cat’s take: Upgrading infrastructure is becoming increasingly urgent. Bottom line: “The whole power system was built and designed in one climatic era and now is being asked to work in a different climatic era.”

How to decarbonize the world’s cement — Sustainability by numbers
Amy’s take: I found this an incredibly helpful primer on how to think about the different technologies at play here.

Nations gather to negotiate deep sea mining code as opposition mounts — Reuters
Anca’s take: The world is hungry to access more raw materials to spur the energy transition but concerns about the economic and environmental risks are mounting as undersea mining could destroy ecosystems.

Battery maker’s surge raises hope of turnaround for EV vehicle sales — Financial Times (subscription)
Bill’s take: A deal with Volkswagen for solid state batteries and rising sales at Ford boost optimism the market will expand quickly, if in fits and starts.

Climate change included in new federal flood risk standards — Axios
Amena’s take: After reading this article, I do hope the cleantech developers are climate-proofing their projects in Texas, especially the ones being constructed close to the coast.

A.I. Needs Copper. It Just Helped to Find Millions of Tons of It. — The New York Times
Cat’s take: The underlying drive for the search is that key metals like copper are necessary to make batteries, which are a foundational linchpin of efforts to electrify and decarbonize.

Germany awards tender to Fertiglobe for green ammonia from Egypt — Reuters
Anca’s take: Interesting to see the hydrogen trade take off. Another German-language article also said that the ammonia will have to be reconverted into hydrogen. There will be questions about efficiency.

DiCaprio-Backed Green Finance Startup Unraveled on Dubious Deals — Bloomberg
Amy’s take: Stories like this are going to become increasingly important as more companies try — and often times fail — to help play a key role in tackling climate change.

More of what we're reading:

• EU's green hydrogen goals not realistic, auditors say — Reuters

• Global fusion energy investment growth falls for second year — Reuters

• What J.D. Vance means for energy policy — Axios Pro (subscription)
• How Rivian became the Anti-Tesla — Bloomberg
• Houston property insurance is already expensive. Hurricane Beryl will make it worse. — Houston Landing
• Dominion eyes small reactors at Virginia nuclear plant — E&E news (subscription)

We denote ‘(subscription)’ when publications don’t provide any complimentary articles, but many others may ultimately allow you to read only a limited number each month before subscribing. We encourage those who can afford it to support the journalism you love most!

How to close the ‘missing middle’ 

Illustration by Nadya Nickels.

BY: HEATHER ZICHAL and RAMASWAMY VARIANKAVAL 

Zichal is the global head of sustainability at JPMorganChase. Variankaval is global head of corporate advisory & sustainable solutions at J.P. Morgan. They can be reached at sustainability.jpmc@jpmchase.com.

The first time doing something is usually the hardest. And accelerating climate solutions means doing lots of things for the first time.

Allocating capital to bring novel climate tech solutions online will be critical if we hope to go from developing promising innovations to electrifying everything. And you can’t have impact if you don’t have scale.

Unfortunately, there is a financing gap in the economy for getting so-called ‘first of their kind’ projects to scale.

Many companies ready to go big commercially will have already attracted hundreds of millions in venture capital and proven their technology works in a lab. But when they go to manufacture and deploy that technology at scale, they encounter a very different set of considerations, from operating costs to technical risks.

As companies once backed by early-stage venture capital move into more capital-intensive, project-oriented phases, they can face mismatches in risk-return profiles (the trade-off between the potential return on an investment and the risk of losing money) for available sources of capital. This is commonly called the ‘missing middle’ or the ‘valley of death.’

Until these climate tech companies can reach bankability — meaning they can check all the boxes to meet the risk/return profile investors need — they may be stuck.

Earlier this year, we convened knowledgeable leaders from the energy industry, the government sector and the financial services arena to discuss actionable solutions that could help crack this problem.

A few initial learnings emerged. Read the full article on Cipher’s website for more.

U.S. cleantech spending benefits marginalized communities

Source: Clean Investment Monitor, Rhodium Group and MIT CEEPR. • Community share of investments is culled from the manufacturing and energy and industry segments. The share of population is measured using U.S. 2020 Census data.

BY: AMENA H. SAIYID

An outsized share of clean technology spending in the United States is landing in the communities hit hardest by climate impacts, unchecked pollution and coal-related job losses, according to an updated Clean Investment Monitor analysis shared exclusively with Cipher.

President Joe Biden has made climate, justice and jobs a cornerstone of his climate agenda. One goal of the 2022 Inflation Reduction Act, the most significant U.S. climate law, is ensuring federal spending on clean technologies benefits marginalized communities. Nearly two years on, the analysis shows these communities are indeed receiving a meaningful portion of the law’s tax credits and grants.

“We find that these communities are now receiving an ‘outsized share’ of national clean energy investments” since the IRA’s passage, Hannah Hess, associate director in the energy and climate group for the Rhodium Group, told Cipher by email.

The findings are based on an analysis of data in the Clean Investment Monitor, a project led by the Rhodium Group and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research.

As of March 2024, the monitor’s analysis shows clean-technology investments of $91.4 billion in disadvantaged communities, those identified by the White House climate and economic justice screening tool as economically distressed and overwhelmed by pollution.

The analysis also showed $80 billion in investments in low-income communities, where household income is below 80% of the local median income or the poverty rate is above 20%. And they found $49 billion has gone to “energy communities,” or those with properties that have been abandoned due to environmental contamination or where coal mines were closed after 1999 and coal-fired generation ended after 2009.

The chart above shows those three types of communities are receiving a higher percentage of cleantech investment than those communities represent as a percentage of the national population.

Hess noted one community affected by a coal mine closure and harmed by pollution could fall into all three categories — energy community, low-income and disadvantaged. These numbers represent the investment in each category, and not total investment — meaning some investments could be counted more than once.

AND FINALLY...
Mountain power

Cipher’s associate editor Jillian Mock snapped this photo outside Glacier National Park in Montana. Look closely and you can see the power lines scaling the ridge next to the road. Electricity must be moved around mountains somehow!

Each week, we feature a photo that is somehow related to energy, the thing we all need but don’t notice until it’s expensive or gone. Email your ideas and photos to news@ciphernews.com.

Editor’s note: In addition to supporting Cipher, Breakthrough Energy also supports and partners with a range of entities working to tackle climate change, including nonprofits, corporations, startups and research firms. For more information on Cipher’s editorial policy, click here.