Brookfield Invests Billions in Carbon Capture and Decarbonization

Brookfield Asset Management is betting its money into the carbon capture sector with plans to invest over $2 billion, while charging the energy transition with nuclear power.

Brookfield expects a lot of new investment opportunities to come from 3 main global trends that they dubbed the “Three D’s” – Digitalization, Decarbonization, and Deglobalization.

The asset manager’s investment in 3 project developers in 2022 alone reached a total of $1.3 billion, believing that many firms will commit to slashing their emissions.

Here are the key highlights of the Toronto-based infrastructure investor’s series of investments under its “decarbonization” trend.

Betting Big on Carbon Capture

This summer saw Brookfield and its $15 billion Global Transition Fund invest billions into carbon capture ventures.

Brookfield’s renewable power and transition group manages $67 billion and runs over 6,000 power plants.

Carbon Transformation by LanzaTech:

The investor recently committed $500 million to LanzaTech, a Chicago-based carbon capture and transformation company. Its plants convert CO2 from industrial emissions into products people use everyday such as perfume, clothes, and fuels.

Brookfield’s investment will be for scaling up LanzaTech’s carbon capture and transformation technology. If milestones are met, the investor said that it’s even ready to pour in another $500 million, making it a billion-dollar investment.

Entropy’s Carbon Capture System:

Earlier this year, the asset manager also invested $300 million in Entropy Inc. It’s a developer of systems that capture CO2 emissions and store it underground.

Alberta-based Entropy is a subsidiary of Canadian oil-and-gas producer Advantage Energy Ltd.

Entropy’s system uses a proprietary solvent to “scrub” the gas from emissions before release into the air. Heat separates the gas from the solvent so that CO2 can be stored underground.

California Resources Corporation and CCS:

After Entropy, Brookfield also pledged $500 million in a joint venture with California Resources Corporation (CRC). The investment will build carbon capture and storage projects in Elk Hills Field.

Brookfield’s initial commitment will de-risk CRC’s projects and promote the decarbonization of California.

The initial investments of Brookfield in carbon capture ventures can rise to more than $2 billion as planned projects materialize.

As per Natalie Adomait, a managing partner in Brookfield Renewable,

“We see an immense opportunity both from a financial perspective but also to buy us time in the carbon budget…[for] the cost of other decarbonization technologies to come down… Carbon-capture technology has become proven and well understood so that it can be deployed in a very material way today.”

Adomait further added that the declining costs of carbon capture projects make them economically viable to reduce emissions.

She cited direct air capture (DAC) as one example of carbon-reducing technologies still in development.

More Investments from Private Firms

Private investment firms are also betting on carbon capture infrastructure operators as well as startup companies.

For instance, TPG Inc. invested $300 million in Summit Carbon Solutions LLC. The fund will help build a project serving ethanol producers and other industrial firms in the Midwest.

Likewise, Partners Group Holding AG co-led a $603 million funding in Climeworks, a DAC company that filters CO2 from the air.

Meanwhile, research estimates that carbon tech startups received a total of $5.6 billion in investments in the first half of 2022.

Add to this the Inflation Reduction Act that raises carbon capture incentives to $85 per metric ton from $50. With this law, many carbon capture projects are now economically viable at $85.

Yet, few companies have outperformed Brookfield’s bet on the sector so far.

There are plenty of energy transition funds like Brookfield’s Global Transition Fund seeking to invest in well-defined infrastructure investments. But the industry is not there yet.

This calls for partner investors who understand the risks in developing projects. This is where the most recent venture of Brookfield with Cameco comes in.

Charging Energy Transition Through Nuclear Power

With Cameco’s expertise in the nuclear industry and Brookfield Renewable’s expertise in clean energy, their partnership brings nuclear power at the heart of the energy transition.

It also creates a powerful platform for strategic growth across the nuclear sector.

Mark Carney, Brookfield Vice Chair and Head of Transition Investing, said:

“Every credible net-zero pathway relies on significant growth in nuclear power. It is an essential, reliable zero-carbon technology that directly displaces fossil fuels and supports the growth of renewables by providing critical baseload to our grids.”

He also noted that the partnership of Brookfield and Cameco will help drive forward the growth of nuclear power needed for clean energy transition.

Cameco and Brookfield, together with its institutional partners, form a strategic collaboration to acquire Westinghouse, one of the world’s largest nuclear services firms.

Acquiring Westinghouse brings several benefits to the investors and consortium partners. These include the following market trends:

Critical transition technology. Nuclear power is the one of the only zero-emission, baseload sources of electricity currently available at scale.

An estimated 400 GW of additional nuclear capacity will be needed by 2050.

Accelerating growth plans. Nuclear power is experiencing a resurgence around the world. 20+ countries are pursuing new projects or plant extensions.

More than 60 GW of new-build reactors are expected between 2020-2040.

Energy security. Energy supply chains are under stress due to geopolitical uncertainties. As countries look to boost energy security, demand for a stable supply of nuclear power will grow.

So, besides record financial performance, 2022 has been an active year for Brookfield’s quest to help decarbonize the economy.

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