Looking at the Bloom results and reflecting on our many recent client discussions, the low-cost providers of fuel cells and electrolyzers are going to win disproportionately in our view, but whether that is Bloom or others remains to be seen. Lower costs will come with scale, and this should allow the leaders to stay ahead, especially if they control their equipment production as Bloom does. The negative for Bloom is that its equipment production is in the US, which may add costs, but the positive is that it is on-shore and this gives the company more control over delivery in the US. Companies that can scale quickly in this space and other renewable sectors, should see the benefit of economies of scale and this should drive more wins and more economies.
Source: Bloom Energy – 1Q22 Earnings Results Presentation, May 2022
The Enbridge chart below does another good job of putting an investment dollar framework around the challenge of energy transition, but at the same time emphasizes the need for natural gas and growth in supply for decades. With the investment forecast, we hit the same hurdles that we have identified many times, notably that you cannot reach some of these goals without investments in the industries that support them. We talk about natural gas E&P spend above, but the other disconnect is the need for metals in the wind, solar, and EV projections and the lack of investment and investment incentives in the metals space. We still believe that the CCS estimates are too low in a practical path toward net-zero, but CCS will only work if there is enough natural gas to enable the processes that can be decarbonized through CCS.
Source: Enbridge – 1Q22 Earnings Result Presentation, May 2022
The Tesla chart below shows not just how well Tesla is doing but how rapidly EV adoption is picking up, and the news that VW is essentially sold out for 2022 this week is another indication of consumer interest in making the switch. The skepticism around EVs is gone and the business may be supply limited for years, even with a slowdown in consumer spending. The clear consequence of this more rapid adoption is the increased need for electrical power, and at the margin, EV adoption is impacting the European power shortage, and its importance as a power consumption will only grow from here. The flip side is that we might see gasoline demand peak sooner than expected, but current refining margins show no sign of that yet.
Source: Tesla – 2021 Impact Report (May 6 Publication), May 2022
