What does the massive Spain power black-out suggest about needed climate-tech solutions?
Reports have explained the blackout this way:
Spain has long had the goal of achieving net-zero carbon emissions. In 2011, Spain’s renewable energy fueled 31% of its electricity, according to Statista data. The share grew to 57% last year, meaning a significant drop in the combined use of fossil and nuclear fuels.
On April 16th, for the first time, Spain achieved the net-zero goal across the entire grid.
But the massive increase in low-cost wind and solar generation sent power prices tumbling. On Jan. 20, electricity in Spain’s spot market cost $165 per megawatt hour, according to Trading Economics data. That fell to $12 by March 21. Those falling prices meant Spain’s nuclear power plants temporarily stopped operating, and natural gas plants cut back on generating electricity. The result is an inability of the grid to quickly add generating capacity when the renewable generators provide insufficient output. Hence, blackouts.
If this explanation is correct, what opportunities exist for climate tech startups and their investors?
Energy storage! For example, by investing in companies creating vanadium redox flow batteries, iron-air batteries, and other next-gen storage solutions.
But these technologies are hard tech. Hard tech requires significant capital and time to reach broad deployment. And it can be difficult for investors to pick the winners and losers. For example, university researchers frequently claim battery chemistry breakthroughs. Which breakthroughs will find commercial success?
- To manage these challenges, investors need to stick to the basics:
Is the technology proven and protectable?
Is there a practical and cost-effective go-to-market approach?
Does the technology provide a near-term ROI for its users?
Can the startup be successful assuming a reasonable total capital raise?