Sustt: Cleantech firms feel the profitability pinch
String of high-profile cleantech bankruptcies highlights sector’s profitability challenges?
?? Written by Sam Robinson : "Although there are certainly profitability challenges hitting the US cleantech sector, it's not all doom and gloom. Bankruptcies are being filed at the fastest rate since 2014 and the macroeconomic environment is challenging, but investment from federal government and private equity is still flowing into the sector – cleantech firms will just have to vie harder to catch investor attention."
What’s happening? The highest number of US-based renewable energy and cleantech companies have filed for bankruptcy since 2014, reported the Financial Times. Despite attracting significant investment from multi-billion-dollar institutions such as Microsoft, Amazon and SoftBank, many now struggle to raise funds amid high interest rates and delays in federal tax credits. Wood pellet provider Enviva, battery company Moxion Power and solar power firm SunPower are just three of the biggest name bankruptcies in the space. The capital-intensive nature of cleantech, combined with rising competition from an increasing number of sectors like AI and defence, has made securing private funding more challenging. (Financial Times)?
Why does this matter? The fiscal struggles facing cleantech companies could jeopardise global efforts to combat climate change and meet renewable energy targets, particularly in the US, where President Biden has made ambitious climate investment policy a cornerstone of his tenure. The vast sums invested in these now bankrupt firms – Moxion Power raised $110m, while SunPower was acquired by oil giant Total as recently as 2022, for example – are proving insufficient as profitability becomes increasingly difficult to reach in a highly competitive, unforgiving macroeconomic environment.?
Cleantech giant struggles – Even in China – where the cleantech sector contributed to 40% of the country’s economic expansion in 2023 – some of the industry’s biggest names are struggling. Longi Green Energy Technology Co., the world’s largest producer of solar wafers, reported a significant loss of CNY 5.24bn ($739m) in the first half of 2024 due to severe overcapacity in China’s solar industry. The oversupply has driven prices to record lows, putting immense financial pressure on solar manufacturers globally. Although cleantech giants such as Longi can cope with the strain, smaller firms and startups typically face bankruptcy, restructuring or acquisition...
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?? Stat of the week – Tata Steel's transition
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The UK government confirmed it will contribute ￡500m ($653m) of state aid to build a greener electric arc furnace at the Port Talbot steel plant, with Tata Steel contributing ￡750m. While the new technology will reduce carbon emissions significantly, it will also lead to 2,500 job losses, as fewer workers are needed for the more efficient process. Unions and the government negotiated better redundancy and training packages for affected workers, but concerns remain about the future of British steelmaking. The transition is part of a broader push to decarbonise the industry, but experts warn that challenges and further investment are needed. (inews)
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?? Bite-sized insights?
??? California's weather whiplash – Heavy winter rains in California in early 2024 led to a surge in grass and shrub growth, which dried into fire fuel during the record hot summer. The increase in vegetation, known as "fine fuels," has contributed to a sharp rise in wildfires, burning 977,932 acres across 6,078 fires by September – 3.85 times the acreage compared to the same period in 2023. Fires like the Park Fire and Line Fire have been accelerated by "weather whiplash," where extreme wet seasons are followed by intense heat, creating ideal conditions for fast-spreading grassland fires that threaten communities. (Inside Climate News)
?? Jet stream heading north – The planet’s jet streams, bands of fast-moving winds, have been shifting towards the poles in recent decades due to climate change, with significant implications for weather patterns. A study of the North Pacific Jet Stream from 1980 to 2022 shows a northward shift of 30-80 kilometres per decade, likely driven by increased greenhouse gas emissions. This shift may exacerbate heat and drought in regions such as the western US and the Mediterranean, as these winds play a critical role in steering storms. Climate models suggest this poleward movement will continue under high-emission scenarios, affecting global weather systems. (New Scientist)
??? UK High Street woes – In the first half of 2024, 6,945 stores have closed on Britain’s High Streets, averaging 38 per day. Despite 4,661 new openings, the net decline of 12 stores per day was slightly worse than the previous year’s 11. Pharmacies, pubs, and banks accounted for over half of these closures, with chemists experiencing the biggest reduction at 481, followed by 432 pubs and 247 banks. Conversely, convenience stores saw the largest growth, with 85 new outlets. Retail parks were the exception to this decline, as chains expanded their presence, notably with new drive-throughs. (BBC)