New Energy Sector Changes and Investment Opportunities in the Context of Carbon Neutrality – Part I｜FutureX Webinar
On July 12, 2022, FutureX held an online seminar on the topic of " Changes and Opportunities in the New Energy Sector in the Era of Carbon Neutrality", and invited world-class experts to share and discuss the topic.
Ms. Xianling Zheng (strategic investment advisor of CIMC Group, independent writer of Industry Observer, expert on hydrogen energy)
Mr. Zhou Erzhong (Chief Architect of China Electric Power Research Institute, special expert of State Grid Corporation, currently his main research interests are power system simulation modeling technology, grid digital twin technology, big data technology and its application in large grid dispatch operation monitoring)
Our View --- by Mr. David Dong (Partner of FutureX Capital)
From the macro perspective, China is at the forefront of global change and stands a chance to become a global standard setter in new energy, ranging from solar energy, wind energy, electric vehicles, and even to hydrogen energy.
When looking back at the history and path of the U.S. in defining the landscape for high technology, we notice that they first did it by establishing an industry standard, followed by building the platforms and ecosystems, and finally allowing customers to build loyalty. The process in new energy sector is like that of ICT industry - we can therefore draw an analogy between energy and computing power, different output but similar end purpose of bringing high energy efficiency.
In new energy, China is leading the development of global standards in many fields. For example, CATL in the battery field has been setting standards as well as building its platform and ecosystems, with a market value of over a trillion RMB.
In the past, the two main battlefields of technology were computing power and communication. First, the need to achieve sufficient computing power. Second, the need to complete the process of sending and receiving of data information through communication networks in a very short period. By making analogy to new energy structure architecture, computing power can be compared to power plants and hydrogen plants, being the source of energy. The communication network can be likened to the power transmission network. Electricity transmission is supported through the high and extra-high voltage network, with energy storage applications (e.g. EV batteries) and energy storage power plants under construction on the end side. In hydrogen energy sector, there are hydrogen transportation network and hydrogen storage bottles. Coming back to the analogy, in the new energy architecture, that is, the source is the computing power and transmission network being the communication network.
How to define the solutions for energy? In terms of energy storage means, there are sodium, lithium, and hydrogen batteries, as well as in the future manganese-based batteries. We believe that electrical energy is the final form of energy, and all other energy will be converted into electrical energy and applied in the form of electricity.
With the participation of silicon materials and semiconductors, electrical energy can be very easily structured in a simple way, from control to application. For example, the hydrogen fuel cell converts the chemical energy of hydrogen into electrical energy, which is also an application of electrical energy as the final form – leaving us to think about where the electricity is being generated and how is it being transmitted.
In terms of transmission, with Chinese advanced grid technology, the structure of power generation is outlined very clearly and can be replicated to other countries. China has been developing rapidly in the construction of UHV, especially in DC UHV, and has an advantage. In the past, the ICT leader was the US. But we believe that in the next 30 to 50 years, in the new energy sector, China can re-define the industry standards and to develop global platform and ecosystems. In this context, many investment opportunities will emerge in China.
FutureX Capital’s investment roadmap for Carbon Neutrality
The key to carbon neutrality is to increase the proportion of clean energy use and achieve energy efficiency. For efficient energy consumption, we also look at energy efficiency in the construction of 5G infrastructure, such as the use of Silicon Photonics Technology. In clean energy use, we focus on the new energy use and EV in the transportation sector.
Our six main investment focus in achieving carbon neutrality:
1. Energy Saving in Electronic Control - SiC power device
2. Lightweight Vehicles - Carbon fiber composite materials
3. High Energy Densities – Solid-State Batteries (and Semi-solid-state Batteries)
4. New Energy Vehicles - High/mid-end passenger cars & Low-cost and low-speed commercial vehicles
5. Battery-swapping asset management
6. L2/3 Autonomous driving – both chips and ADAS algorithms
We first started by looking at solutions for energy control and decided to focus on SiC components. By the end of 2020 to early 2021, we talked to more than 5 car manufacturers and found that SiC technology would be developed and be applied in cars by 2022. Therefore, we decided to complete the research and investment decision under three months. As of today, our early insight has been confirmed and supported by the fact that there are more than eight domestic EV using SiC devices – And there would be more in the future.
Our investee PN Junction Semiconductor (PNJ), which was valued at RMB 500 million when we entered exclusively, has been valued at RMB 1.3 billion after this round of investment. PNJ has adopted the Fabless model, with its advanced technology, efficient model, huge potential market, being in line with carbon neutral trend, the company is set to grow exponentially this year and next year.
As of now, in achieving carbon neutrality, we have invested in
1) the first luxurious EV in China – NIO,
2) low cost, low speed last-mile delivery solution - Kaiyun Motors,
3) the high-end brand with brand new EV – Lotus,
4) carbon fiber composite-enforced lightweight vehicle supplier behind NIO, XPENG AEROHT, Li Auto, GAC AION – Feize Composites Tech,
5) the most advanced solid-state battery developer – Welion New Energy Technology, solid-state batteries have many advantages: 1. High degree of safety, 2. Higher energy density (1.5 times more than that of ternary lithium battery), 3. Lower cost (At 20MW, requires less cobalt and nickel than that of ternary lithium battery). Semi-solid-state battery packs are expected to be used in commercial vehicles in early 2023.
6) leading dark horse companies in ADAS chip Black Sesame Intelligence and ADAS algorithm Nullmax.