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The enhanced geothermal darling is spending big on capex, but its shares will be structured more like a software company’s.
How China emerged the victor of the war with Iran.
Chicago-based Clean Core is set to announce a pilot deal to manufacture thorium-based fuel.
The nearly California-based company is buying a pipeline of projects from an unnamed Japanese developer.
The losers are myriad and most definitely include Gulf oil producers.
That means more electrification, more stockpiling, and more coal.
News from Octopus Energy, Crusoe, Arbor, and Scalvy, plus more of the biggest money moves of the week.
I’ve said it before and I’ll say it again. It feels like overnight, every climate tech startup has suddenly become a data center startup. They’re either supplying power to hyperscalers, optimizing their operations, or divining ever more creative ways for them to circumvent the backlogged interconnection queue. Nearly all of the companies I highlight this week are helping data centers get up and running as quickly (not to mention cleanly) as possible, whether that was their original mission or not.
We’ve got Arbor, an energy startup built on rocket engine tech targeting data center customers as it signs a major power deal with GridMarket; power electronics startup Scalvy raising capital to bring its power electronics to server racks; renewable energy company and U.K. utility Octopus Energy acquiring a controlling stake in another VPP company that promises to help data centers come online faster; and data center developer Crusoe cutting two major battery deals at the CERAWeek energy conference.
In an attempt at balance, I’ve also included two pieces of non-data center news: A big fundraise for a fossil fuel industry-backed climate investment firm, and a report on a scrappy artificial intelligence startup, Everstar, which is partnering with the federal government to accelerate licensing for new nuclear reactors.
The energy company Arbor recently signed a deal with GridMarket, a company that helps facilitate the design and deployment of distributed energy projects for data centers and other industrial users, worth somewhere “in the single-digit billions of dollars,” Techcrunch reports. The nonbinding agreement will see Arbor providing up to 5 gigawatts of zero-carbon power to GridMarket beginning in 2029, contingent on its ability to hit manufacturing milestones.
Like so many other energy businesses, Arbor has adapted its strategy in response to the data center boom. Founded by SpaceX alums in 2021, the company developed a small, highly efficient turbine inspired by advances in rocket engine turbomachinery that gasifies biomass and combusts the resultant syngas with pure oxygen to generate electricity. The waste CO2 is then transported via pipeline for permanent storage. Because biomass has already sequestered carbon from the atmosphere, the process counts as carbon negative. But to meet soaring data center electricity demand, Arbor has now evolved its strategy to burn natural gas, too — making data center deployments easier to finance and build, while allowing projects to scale beyond the inherent fuel limitations of waste biomass.
Theoretically, Arbor’s data center customers could switch between different fuel sources if they so wish. “We see fuel flexibility as really important,” Arbor’s CEO Brad Hartwig told me earlier this month. “You can actually start at zero-emissions and then later go carbon negative. So we expect that will actually be a pretty compelling and central part of our offering, is this ability to not be locked into one fuel source.”
Arbor’s natural gas-fueled turbines will still be low-carbon because of the sequestered emissions, but not fully neutral due to unavoidable methane leaks in the natural gas supply chain. The 3D-printed machines ship as pre-assembled, 25-megawatt units, which can be combined into larger systems as needed. By 2030, the company aims to deliver over a gigawatt of new power capacity annually — still only a fifth of the total capacity outlined in its deal with GridMarket.
Like Arbor, distributed power company Scalvy wasn’t founded with data centers in mind. Its initial mission was to build modular powertrain electronics for electric vehicles, but the company has since pivoted to managing power flow on data center server racks. While power electronics typically take up their own shelves, Scalvy’s small, distributed units can work within the racks themselves to convert the AC power coming off the grid to DC directly at the load point, conserving space and thus allowing for higher-density computing.
Scalvy’s push into the booming AI data center market is looking like a wise move, as it announced an oversubscribed $13.9 million Series A funding round this week, which included participation from some climate tech venture firms such as Azolla Ventures and Climate Capital. The company hasn’t abandoned its roots, though, as it still lists electric mobility and energy storage among its priorities.
The value proposition is essentially the same across all these industries, Mohamed Badawy, Scalvy’s co-founder and CEO, explained in a statement — higher power without sacrificing space, cost, or system design. The startup will use this new capital to accelerate product certification, run field tests, and begin deployments with real-world customers. While Scalvy hasn’t disclosed any names, Azolla Ventures’ Matthew Nordan told me last year that the company has an agreement in place with a major data center operator that, as he put it, is “one of the large names that you would expect.”
About a decade ago, a multinational consortium of 12 oil and gas majors including ExxonMobil, Chevron, Saudi Aramco, and Shell, started the venture firm Climate Investment with a mission to back the next generation of infrastructure, which they supposedly believe will be “climate-based.” It can be hard to take the fossil fuel industry seriously on things like this, as the biggest companies in the space continually walk back their climate commitments and investments. But this week, Climate Investment announced a new commitment to climate initiatives — a $450 million growth fund intended to scale-up decarbonization technologies and help them bridge the dreaded “missing middle,” the gap in climate financing between a company’s early-stage funding rounds and its commercial deployment.
This is the firm’s second fund. The first — a $1 billion vehicle — focused primarily on carbon capture and storage as well as methane abatement across the natural gas value chain. This second fund, however, suggests a shift in priorities. Its four initial investments span AI-enabled infrastructure modeling, data center cooling systems, offshore geospatial data collection, and vapor recovery tech for oilfield emissions control.
To date, Climate Investment has backed more than 40 companies that it says have delivered over 150 million metric tons of cumulative emissions reductions.
Renewables-focused Octopus Energy has extended its tentacles across the U.K. to become the state’s largest energy supplier. Now it’s looking to further expand its footprint in the U.S., where it’s currently confined to Texas’ deregulated electricity market. With its recent acquisition of a majority stake in the distributed energy resource platform Uplight, Octopus is now positioned to become a key partner for a whole host of U.S. utilities seeking innovative ways to manage the rapid growth in data center-driven electricity demand.
Uplight, last valued at $1.5 billion in 2021, builds platforms for utilities and energy providers that aggregate distributed energy resources into so-called virtual power plants. VPPs respond in real-time to grid demands by ramping these distributed resources up or down, coordinating them to operate like traditional power plants while also shifting energy to off-peak hours as needed. If data center operators can finance or otherwise support the buildout of VPP infrastructure in their communities, they can essentially bring their own capacity to the market, making it faster to get online by avoiding the need to build additional energy infrastructure.
Octopus now has access to Uplight’s 85 utility partners and 8.5 gigawatts of distributed energy resources. Also participating in the deal was Schneider Electric, a previous investor that will remain a minority partner in Uplight, although the deal amount and other financial details have not been disclosed.
Data center developer Crusoe — which is reportedly eyeing a pre-IPO fundraise — cut two big deals at the CERAWeek conference this week. The first is a contract with Form Energy to buy 120 megawatts of its iron-air batteries, which would provide 12 gigawatt-hours of multi-day battery storage for AI data centers starting in 2027. Form — which has raised $1.4 billion to date — is on a tear recently, having just announced that it’s going to build a 30-gigawatt-hour battery for a Google data center in Minnesota.
Second, Crusoe announced an expansion of its existing partnership with the battery recycling-turned-energy storage company Redwood Materials, which recently raised a $425 million Series E round following its pivot to using second-life EV batteries for data center power. Redwood is already operating its first microgrid pilot in partnership with Crusoe in Nevada, where a 12-megawatt battery system with 63 megawatt-hours of energy storage supplies four of Crusoe’s modular, off-grid, and renewable-powered data centers.
Having deemed this initial deployment a success, Crusoe now plans to add an additional 20 modular data centers onsite, increasing the total compute capacity by nearly sevenfold.
Taken together, these two deals underscore just how far Crusoe has come from its original model of utilizing stranded natural gas from oilfields — which would otherwise be flared — to power bitcoin-mining operations.
Crusoe didn’t disclose terms for either deal.
Everstar, a startup building AI software to help nuclear companies speed up their regulatory timelines, announced a collaboration with the Department of Energy, multiple national labs, and Microsoft as a part of DOE’s Genesis Mission, a program designed to leverage advanced AI and other tools to accelerate scientific discoveries, including how energy systems are designed, tested, and deployed.
To demonstrate its capabilities, Everstar converted a required DOE safety analysis document into Nuclear Regulator Commission licensing documents in a single day — a process that typically takes a team four to six weeks. “We’re often looking at like 5,000- to 10,000-page documents submitted ad nauseam, until you reach 2 million pages to get approval,” Everstar’s CEO and founder Kevin Kong told me. Licensing applications are the first problem the startup has trained its models to handle, but it aims to extend into other areas of the nuclear value chain such as streamlining reactor design, plant operations, and manufacturing workflows.
“The ultimate goal of the company is to reduce costs of building American reactors on American soil by an order of magnitude, so we’ve got a much longer journey ahead of us,” Kong told me.
The effective closure of the Strait of Hormuz and destruction of Gulf fossil fuel assets is already having effects we’ll be dealing with in months and years to come.
No matter how much longer the United States and Israel’s war with Iran lasts, the world’s energy system will be grappling with its consequences at least through the end of the year, if not for far longer.
The biggest short-run effects of the Iran energy crisis will be felt in Asia, where economies that run on Persian Gulf oil and gas face shortages and higher prices. The supply shock has — and will — drive up prices, leading oil and gas producers who aren’t stuck behind the Strait of Hormuz to seek higher returns. Much of the continent is already in the midst of an energy crisis, complete with fuel rationing and top-down policies to reduce oil and gas consumption.
In Australia, gas stations are running out of diesel. The government of the Philippines adopted a four-day workweek to reduce commuting. Pakistan announced a two-week school closure. Nepal is rationing cooking fuel. Thailand’s prime minister told civil servants to take the stairs, and the government set air conditioning to a minimum 79 degrees Fahrenheit.
Around the world, coal use is rising. Gasoline prices are on the way up, even in the United States, which is a net exporter of crude oil and petroleum products. Even if the war were to end tomorrow, oil and gas markets are likely to remain tight for many months to come.
Just as the oil shocks of the 1970s transformed the economies of the then-rich world — spurring the takeoff of nuclear power to in Japan and France; pushing the U.S. to direct R&D funding and subsidies to solar and shale gas; motivating carmakers around the world to developer smaller, more fuel-efficient vehicles — so too will this crisis likely transform how the entire world structures its dependence on oil and gas. It maybe already has.
Let’s take an industry-by-industry look:
The year began with a global oil glut. That has long since vanished. No matter what happens in Iran over the near to medium term, expect the oil market to remain tight.
Before hostilities with Iran ramped up, the consensus was that the market was “oversupplied,” Greg Brew, an analyst at the Eurasia Group, told me. “Demand growth was expected to be fairly sluggish. Production from OPEC states and the U.S. was expected to be fairly high, and prices were going to be in the $60s and potentially $50s [per barrel]. Obviously that is now completely out the door.”
Both Goldman Sachs and Morgan Stanley analysts speculated that the Brent crude benchmark could hit or even exceed its 2022 high of around $122 a barrel. It might even break through its all-time high of around $150, reached in 2008, should the closure persist.
Even if the strait were to reopen tomorrow, it would leave a large “air pocket” in the oil market, Morgan Stanley oil analyst Martijn Rats wrote in a note to clients last week, referring to oil that will never come to market because of shut-in production. That would keep prices high through the second and third quarters of the year as supply catches up to demand.
Oil analyst and author of the Commodity Context newsletter Rory Johnston estimated that the size of this “air pocket” is in the hundreds of millions of barrels. “Inventory will start dropping like a rock” over the coming weeks, he told me, “even if we could snap fingers and just go back to where we were two, three weeks ago.”
That squares with what Brew told me, as well. “Even when Hormuz reopens, the price band through the rest of the year is unlikely to fall below $75 a barrel, given the size of the physical disruption that we’re experiencing,” he said. A barrel of oil cost around $60 at the end of last year, before the price began to creep up as the U.S. gathered forces around Iran.
There will likely still be a “sustained risk premium” for any tanker leaving the strait as long as the current Iranian regime remains in power, Brew said. “The most likely outcome from this war is one where Iran is weakened but has not collapsed — where it retains the capabilities to threaten traffic through the strait and to threaten [Gulf Cooperation Council] states.”
A supply squeeze that could have resolved quickly once the Strait of Hormuz reopened and Qatar’s Ras Laffan facility got up and running again turned into a years-long interruption when Iran knocked out 17% of Qatar’s liquified natural gas export capacity, taking out almost 13 million tons per year of gas production, according to Morgan Stanley. As recently as a month ago, Qatar supplied about a fifth of global LNG capacity. The damage will likely take several years to fix, the chief executive of QatarEnergy told Reuters.
“What started as a transitory (but significant) capacity outage has escalated to a multi-year loss of supply,” Morgan Stanley analysts wrote in a note to clients Thursday. “Even with near-term resolution, the global gas market will need to contend with refilling inventories amid a large supply loss, creating upside price risks.”
European and East Asian LNG importers will likely choose to pay the higher prices. Poorer countries in South and Southeast Asia, however, may have to go without.
“There is now no longer going to be an LNG glut in 2026. There’s going to be a tight gas market,” Brew told me. “That’s going to keep regional prices high. That’s going to keep European prices high. That’s going to keep Asian prices high. That’s going to mean emerging markets in South Asia and Southeast Asia that would otherwise be able to buy LNG cargoes are going to have a tougher time.”
Much of the rationing of electricity or the shutdown of fertilizer plants in South and Southeast Asia was already happening before this week’s catastrophic attacks, the result of Qatar cutting off production due to earlier strikes.
No matter how long the war lasts, European and Asian gas buyers will have to refill their gas reserves before winter sets in again, which will further strain an already tight market. The Morgan Stanley analysts said prices are more likely to go up than down through the rest of the year even if there’s deescalation soon.
Jefferies analyst Julien Dumoulin-Smith wrote in a note to clients Wednesday that “even if the disruption proves temporary, LNG’s perceived risk profile has likely shifted structurally.”
“The conflict has underscored how concentrated global LNG supply remains around a narrow choke-point. That realization alone may embed a higher risk premium in LNG pricing,” he wrote. “Over time, higher prices could slow demand growth among some price-sensitive buyers and alter how buyers assess long-term LNG investment decisions.”
Just like in 2022, countries that suddenly find themselves short on natural gas will almost certainly turn to coal. “My sense is that this is going to be great for coal as 2022 was,” Brew said, referring to the uptick in coal usage following the Russian invasion of Ukraine, which cut off a major source of natural gas supply for Europe.
In both Europe and Asia, the “coal equivalent” price of gas has shot up, meaning that natural gas is now much more expensive on a dollars-per-unit-of-energy basis. This will incentivize switching to dual use gas and coal plants, or else bringing under-utilized coal-burning power plants into service, especially in Asia.
South Korea said earlier this week that its nuclear and coal power plants could raise their output in light of reduced LNG availability. South Korea is heavily dependent on both fossil fuels and imported energy — 84% of its energy supply is imported on net; almost 80% of its energy supplies are fossil fuels, and about 15% of its LNG imports come from Qatar.
The energy consulting firm Wood Mackenzie estimated that coal-fired power plants in Japan and South Korea could offset 70% and more than 100% of their gas-fired generation, respectively. But, Wood Mackeznie noted, that’s only in the current “shoulder season,” when mild weather means less electricity demand. “If disruptions persist into peak summer demand, the effectiveness of coal as a buffer will diminish, increasing exposure to tighter supply conditions.”
In Europe, which invested heavily in renewables and gas imports (largely from Norway and the United States) following the Russian invasion of Ukraine, coal’s cost favorability to natural gas is improving, but overall demand has been falling as days get longer and warmer. In Germany, coal’s share of electricity generation rose 2% in March compared to February.
There are already anecdotal reports of enthusiasm for renewables picking up in light of the fossil fuel supply shock. Bloomberg reported that electric vehicle showrooms are filing up across Asia with interested buyers looking to avoid expensive and sometimes rationed fuel.
Oil demand, particularly in Asia, “will be lower than it was before the war in terms of the expectation,” Johnston said. “There is no possibility, in my mind, that we do not see an enhanced drive toward energy efficiency, electrification, and other forms of diversification. It’s just the obvious outcome of this.” He said the amount of vulnerability Asia has to oil and natural gas is “existential” and “not tolerable.”
“Energy security and affordability is a much more compelling political argument” for a transition to clean energy than moral arguments about preventing future climate change, he added.
The same could be true for natural gas, especially LNG. The “next leg” for LNG growth globally, Dumoulin-Smith wrote, was supposed to be “price-sensitive demand in South/Southeast Asia.” That growth could be put at risk by “sustained higher prices” that induce “demand destruction, fuel switching (notably coal), delayed downstream infrastructure investment, or possibly ‘skipping’ LNG as a transition fuel in favor of renewables.”
In a note sent to clients Friday, Dumoulin-Smith wrote, “We see a constructive demand tailwind for U.S. clean energy peers beyond 2026,” due to “the multi‑year energy challenges implied by the escalation” of attacks on energy infrastructure in the Persian Gulf.
Even in the United States, which is more insulated from some of the worst shocks (we’re not going to run out of natural gas anytime soon), now may be a good time to “be stepping back and thinking a little bit more holistically about how we’re structuring our energy policy and our energy systems,” Francis O’Sullivan, managing director at S2G Investments, told me.
“We need to take a more all-of-the-above type approach to our energy system and our energy policymaking than is currently the case.”
There are ever-so-slight signs of a thaw toward renewables and in favor of an all-of-the-above strategy in the U.S. The federal government late last week declined to appeal a federal court ruling in favor of offshore wind developers who sued the Department of the Interior over its stop work orders. Senate Democrats have said they’re once again open to a deal with Congressional Republicans and the White House to ease permitting for all types of energy projects.
