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  • Writer's pictureVilma Arceo

The carrot and the stick: hot topics at Keyframe

Every quarter, we host a happy hour at the Keyframe office focused on a specific aspect of the energy transition. Our goals are simple: provide a space for smart people to come together – and pick a punny name for an accompanying cocktail. In the last year, we’ve discussed everything from smart buildings over Dirty IOTinis to the intersection of energy and real estate over Chargaritas. Two weeks ago, we gathered founders, investors, policy makers, and policy nerds in our office for a “Carrot and Stick” conversation on the roles that regulation and subsidy play in the energy transition. Attendees debated the impacts of tax credit transferability and traded notes on how to get organized about federal funding. We even took carbon removal into our own hands (see proof below).

While we can’t publish the top-secret recipes for our Direct Pay-lomas or spicy Regulator Margaritas (kidding, the puns are our only invention), here are some of the carrots and sticks the Keyframe team is watching:

  • Building energy efficiency standards in Europe. In 2021, the European Union announced a target rate of renovation that put the continent on pace to renovate nearly its entire building stock by 2050. As we explored earlier this year, meeting this target will present a challenge across the energy efficiency landscape from HVAC to insulation.

  • Domestic content requirements and advanced manufacturing incentives. Under the Inflation Reduction Act, facilities and projects meeting domestic content requirements could receive up to a 10 percent bonus to the base ITC or PTC. In May, the IRS provided key guidance defining critical terms, clarifying that requirements do not apply to subcomponents, and explaining applicability to retrofitted projects. However, key questions remain – especially for the steel and iron industries. Businesses across the energy transition supply chain, who build and depend on everything from batteries to offshore wind, are relying on quick and clear answers to these questions.

  • EPA plant emissions rules vs. 45Q. In May, the EPA announced a rule that would require coal- and natural gas-fired power plants to reduce or capture nearly all their CO2 emissions by 2040. While the IRA increased the amount of available tax credits for CCUS, questions remain about the power industry’s ability to adopt and scale the technology in time to remain operational. We’re interested in how the timeline for that adoption will coincide with compliance for EPA rules. Additionally, the impacts to power market volatility will be important to understand.

  • The rollout of funding for school bus electrification. Every day, an estimated 500,000 school buses carry kids to and from school around the US. While a small fraction of those – about 1,800 – are currently electric, more than 5,000 have been committed to by school districts. These commitments have been spurred by a stream of federal- and state-level funding for bus electrification: the IRA included $5 billion in funding through its Clean School Bus program. The upfront cost to electrification is high, with electric buses costing up to $200,000 more than diesel buses. We’ll be following these funding rollouts and are excited to see what opportunities they create for fleet optimization (and private operators like HopSkipDrive).

  • Permitting reform. The IRA’s passage warranted celebration – but we expressed concern about whether bottlenecks in renewable energy development would slow the deployment of its needed billions. In 2022, renewable energy deployment in the US fell as we added 16% less capacity than we did in 2021. Recently, the Biden Administration’s debt ceiling bill changed how environmental reviews are led and set deadlines for the issuance of environmental assessments. We’ll continue to follow the implementation of these reforms, their expected impacts, as well as state-level approaches like CAISO’s zonal-level planning.

Policy and regulatory issues across the energy transition create a complex web. We want to know what you’re following, whether it’s the same or different as the issues above. If you’re interested in joining us at a future event, shoot us a note at or subscribe on our website here to keep in the loop.

PS—here’s the proof that we’re doing direct-air capture in the Keyframe office:




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.


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