Clearway Energy, Inc. (CWEN)

Company website 2020 Financial Report Stock Analysis 2020 ESG Report

4.5

Gigawatts

of wind, solar, and energy storage assets in Clearway's portfolio

100^%

of Solar Projects

constructed from 2019 onwards will have bifacial panels, which convert sunlight on both sides

8.8

Million Metric Tons

of CO2 avoided in 2020

View Our Analysis

The Path to Drawdown: Solar, Wind, and District Heating

To fight climate change and remain below 1.5ºC of pre-industrial global temperature, the world needs to transition from using fossil fuels as an energy source and instead use 100% emissions-free sources.

Solar PV

One of the largest sources of clean energy is the sun. Photovoltaic solar panels (or PV solar panels -- those you see on rooftops) have emerged as the predominant way of converting sunlight into electricity.

The industry has grown fast: solar panels are now the cheapest source of electricity in most places on earth as of 2020.

Solar produces about 2% of global electricity today. According to Project Drawdown, to be on a path to remain under 1.5ºC of warming, rooftop and utility scale solar must be generating a combined ~40% of the world’s electricity by 2050.

To get there, the PV solar industry will need to continue to massively scale over the next few decades:

<::marker> 720 TWh of solar electricity generated in 2019
<::marker> 28,200 TWh needed by 2050
<::marker> CAGR of 12.56% from 2019 - 2050

Another analysis from the IEA predicts that, to reach a 100% clean electricity grid by 2050, annual solar panel manufacturing capacity will need to grow from 134 GWs in 2020 to 630 GWs in 2030 (p. 74).

Onshore Wind

Onshore wind turbines accounted for 4.36% of global electricity generation in 2020.

Global wind capacity has increased steadily, growing about 20% per year for the past decade, with an 11% capacity growth in 2019-2020. Owing to this expansion and advances in turbine design, the cost of electricity generation from onshore wind continues to fall, even in less breezy areas.

According to Project Drawdown, to be on a path to remain under 1.5C° of warming, onshore wind will need to be generating 28.85% of global electricity by 2050.

Getting there would require the onshore wind industry to continue to scale over the next few decades

<::marker> 1,150 TWh of onshore wind electricity generated in 2018
<::marker> 19,460 TWh needed by 2050
<::marker> CAGR of 9.38% from 2019 - 2050

The IEA forecasts (p. 74) that, to reach a 100% clean electricity grid by 2050, annual onshore wind capacity additions will have to increase from 109 GWs in 2020 to 310 GWs in 2030.

Importance of Yieldcos in Financing Renewable Energy

Yieldcos play an important role in financing renewable energy developers. Developers of utility-scale renewable energy take on significant risks and uncertainties when building new solar or wind plants. Yieldcos were established to protect investors in renewable energy stocks from these uncertainties and to give developers a steady source of capital for future projects.

Yieldcos are publicly traded corporate entities that own, operate and manage a portfolio of energy assets. Their assets generate long-term, low-risk cash flows, which are then distributed to investors as dividends. Sustained investor interest in yieldcos could continue to channel capital into renewable energy developers, making them competitive against high-carbon alternatives.

About

Headquartered in Princeton, NJ, Clearway Energy, Inc. (stock ticker: CWEN) owns and operates a diverse portfolio of utility scale solar, distributed solar, wind turbines, natural gas and thermal generation assets. Their renewable energy generation totals to ~4.2 GW.

CWEN's Role in Drawdown

In 2020, Clearway Energy’s wind and solar assets combined have a generation capacity of 4.22 GW. That’s 1.74% of estimated global capacity of 243 GW (p. 74). According to the IEA, this global capacity must increase to 940 GW by the year 2030 to achieve net-zero.

To maintain its market share, Clearway’s capacity will have to rise to 16.32 GW by 2030. This would require a CAGR of 14.5%, almost double the CAGR of 7.4% that Clearway achieved between 2017-2020. They therefore would need to ramp up their capacity acquisition and growth this decade.

CWEN: What We Like

As one of the largest owners of renewable energy portfolios in the US, Clearway Energy has has shown its commitment to cut emissions

<::marker> 90% of electricity (p. 7) that they generate will be carbon-free by 2034
<::marker> 100% of of the 10 GW (p. 7) pipeline by Clearway Energy’s sponsor, Clearway Group, will consist of zero-emissions renewables

26.62% increase in avoided CO2 emissions between 2019 and 2020 -- from 6.95 million to 8.8 million metric tons, the difference of which is equivalent to taking more than 400,000 passenger vehicles off the road for 1 year.

What We Want to See Improve

Track GHG and Environmental Metrics Systematically

Clearway needs to track their climate and environmental metrics more systematically. They measure and publish their scope 1 and 2 emissions (p. 37), but scope 3 emissions from their supply chain are not tracked. We would like to see Clearway to start measuring scope 3 emissions to enhance transparency regarding the climate impacts of their suppliers and offtakers. With respect to all of the emissions metrics, we also urge Clearway to track greenhouse gases more generally, rather than simply carbon dioxide, given the fact that tracking CO2 emissions does not capture the predominantly GHG emissions from natural gas assets -- methane.We also want Clearway to report all of their environmental metrics. Their 2019 ESG Report (p. 8) promised to collect and report environmental data on 100% of the company’s sites by 2020. Yet their 2020 ESG Report (p. 37) only reports water usage in 51% of the sites in the company’s portfolio.

More Transparency

Clearway claims that their natural gas assets are environmentally-sound and highly efficient, but does not explain what this means in practice. It’s also difficult to find information about the fuel sources for Cleaway’s thermal infrastructure assets. Making these details explicit in their ESG reports would allow climate-conscious investors to evaluate the company more fully.

Shift to 100% renewable energy

Aside from their wind and solar assets, Clearway holds nearly 2.5 GW of natural gas and 39 MW of thermal infrastructure assets (pp. 39-41). These asset types account for all of Clearway’s 1.3 million metric tons of GHG emissions and 52.54% of their total revenue.As for their natural gas assets, a majority of them are located in California and contracted (p. 1) under power purchase agreements with utility operators. We acknowledge that these assets are intended primarily as capacity and reliability resources, ensuring that California can safely transition to using increasing levels of intermittent renewable sources and helping California’s electricity sector significantly reduce carbon emissions. Clearway’s thermal infrastructure assets (p. 9) consist mostly of district energy centers that provide steam and chilled water, as well as providing electricity generation. But as far as we can tell, oil (p. 88) is the fuel source for thermal generation from these assets, which also contributes to Clearway’s GHG emissions.We want Clearway to live up to its promise to help reduce the climate impacts of electricity generation (p. 1) by transitioning these natural gas and thermal assets to a low-carbon (waste-heat, waste-to-energy, renewable biomass) or ideally no-GHG fuel source like green hydrogen. This would allow them to cut scope 1 and 2 emissions, which have remained constant at 1.3 million metric tons since 2018.

Related Yieldco Stocks in the Climate Index

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Allocated	Company	Description
0.96%	Brookfield Renewable Energy Corporation (BEPC)	BEPC owns hydroelectric, wind, and solar assets across the world, offering clean energy to utilities. Yieldcos are key to expanding clean energy
0.45%	Clearway Energy, Inc. (CWEN)	Clearway Energy owns and operates a portfolio of solar, wind, and other energy sources. Yieldcos are key in expanding investments into renewables
0.42%	NextEra Energy Partners (NEP)	NextEra is a yieldco that operates wind and solar farms as well as natural gas pipelines in the US. Yieldcos help raise investments for clean energy
0.28%	Atlantica Yield (AY)	Atlantica Yield is a yield that owns 1.6 GW of renewable energy assets around the world. Yieldcos are valuable key in expanding investments in renewables