For anyone who knows anything about the automotive world, or like I am fortunate to have partners who do – Ethan Goldsmith and John Rapaport – who know just about everything there is to know, electric vehicles have been inevitable since the very beginning. There have been design, technology, and competitive reasons for their 100-year delay that my team or the internet would be happy to share with you, but more importantly, this inevitability has becoming a pressing reality over the past decade.
With the growth of companies like Rivian and Tesla, and over the past few years, this pressing reality has accelerated. By 2018, global auto-OEMs like GM, Toyota, Daimler, VW, Ford, and others had announced of >$90b of investments in their electric vehicle platforms, which we’re now beginning to see materialize in retooling of plants, announcements of vehicle production schedules (last count >130 in the US), large commercial orders, and celebrity filled Super Bowl commercials comparing the US to Norway.
Take a look at how Morgan Stanley predicts electric vehicle penetration over the coming decades from their March 2021 EV Tracker Report (Source 1) to get a sense for how the world expects electric vehicles to proliferate into society – upwards towards 95% over the next twenty five years. Pretty remarkable, right?
That said, this shift is more than just about the automotive industry. That said, this analysis is incomplete. And in 2017, John, Ethan, and I each gave up our respective career paths to begin working together over a shared view that this analysis (and every single one we could find like it) had one, massive missing element… the fact that fleets of vehicles would experience an S-curve adoption that would shatter the energy industry as well.
We believe fleets will experience an S-Curve primarily because they have a lower per mile cost (TCO / total cost of ownership) – so when an operator makes the decision to turn the fleet, they have the bottom line business incentive to go as quickly as possible.
Electric vehicles get more mileage (spread out depreciable asset cost)
Electric vehicles have fewer parts, therefor cost less to maintain (lower OpEx)
Electric vehicles rely on electricity, therefor cost less to refuel (lower OpEx)
This is a well-covered topic by like 1000 companies at this point so I won’t go deeper. If you want more information or are interested in evaluating your fleet, I listed a few good tools here (Amply, Electriphi). There are other reasons, like how operating a mixed fleet adds operating complexity to transportation that managers simply don’t need the extra headaches of, but economics always reigns supreme when they can. And here, they do.
This ultimately matters most because when you plug a bunch of very big batteries in at the same place at the same time to recharge, they can consume as much energy as a skyscraper. And that is something that the world has NOT been talking about or appropriately been planning for. Well, other than us.
The existing electricity grid, or the sites that transportation operate at today, was not developed with the load from fleet electric vehicle charging in mind, creating a need for significant investment. It also was not developed with the thought that fleets were going to purchase vehicles with S-Curve adoption, so we’re going to need that investment, and development of the grid – which traditionally happens at half the pace of a snail’s – with unprecedented speed.
In other words, we are going to need a new electricity project basically every place we have a fleet of electric vehicles. And we are going to need them all within the next 10 years. Holy S%&T.
Take a fleet like UPS for example (Source 2), who is committed to both vehicle electrification and renewable energy. Many companies make these commitments, they’re quite a big fleet. Independently, UPS’ alternative fuel vehicle target and renewable energy targets are notable. However, combined - they become even more interesting, as transitioning 25% of UPS’ 35,000 last mile delivery vehicles will have a significant impact on UPS’ total energy consumption. This new fleet of electric vehicles could consume 640,000 MWhs of additional electricity. Meeting the UPS 25% goal with solar would require over a 100 MW of solar generation projects to be installed – not bad. If UPS were to meet 100% of their increased electricity need with solar, it would require $720m, or 400 MW, of upfront investment in solar development. For reference, UPS invested $18m in 2017 to install 10 MW of rooftop solar.
UPS exemplifies why it is important for organizations transitioning their fleets to electric vehicles to think comprehensively about their transition. Not only are these massive power demands that local grids were not constructed for, those are some big dollar numbers… and that’s just ONE COMPANY. and did you read the Morgan Stanley chart? EVERY VEHICLE IN THE UNITED STATES. EVERY VEHICLE. (well... 95%...)
So what did we do about it? We started building that company immediately. We called it Pearl Street then, but now we call it TeraWatt Infrastructure. And we started buying the quality properties next to every logistics location in the United States that is going to need one of these projects. In addition to this, we provide fleet operators and the companies that sell to them solutions and asset financing as an enabling capability at their own sites.
This week, it was publicly announced that we hired Neha Palmer, ex-head of Energy for Google, as our CEO.
As Google’s first hire focused on data center energy, Neha built out and led the team developing electric infrastructure and electricity procurement for its global fleet, covering dozens of sites over four continents. When she joined Google, they had only eight data centers with under 3 TWh of annual electric consumption; by the time she left, they were operating dozens of data centers on four continents with over 13 TWh of annual electric consumption. She was instrumental in making Google the largest corporate buyer of renewable energy in the world, and the first company of its size to achieve 100 percent renewable energy for operations, which it has done every year since 2017.
She is one of the most formative energy leaders in the world, and has come to bring transportation what she brought to data centers over the last decade. Welcome to the team Neha!
Read more about the TeraWatt launch here: https://www.businesswire.com/news/home/20210505005188/en/Former-Google-Head-of-Energy-Strategy-Neha-Palmer-Joins-TeraWatt-Infrastructure-to-Address-Critical-Gap-for-Electric-Vehicle-Charging-Infrastructure
******
The views expressed here are those of the individual Keyframe Capital personnel quoted and are not the views of Keyframe Capital or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by Keyframe Capital. While taken from sources believed to be reliable, Keyframe has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation.
This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by Keyframe Capital. Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by Keyframe Capital, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
