An international lawyer, Alexandre Garese is also an investor specializing in the field of clean energy and sustainable mobility. When he founded Kouros Investments in 2016, there was no talk of an energy crisis. Today, geopolitical tensions and the climate emergency are bringing the topic into the spotlight. Now at the forefront of energy issues, Alexandre Garese shares his analysis of what is at stake and his strategy for a successful transition.
How did you come to invest in energy technologies?
There is an obvious need to re-design the energy system, which is a source of opportunity for both investors and entrepreneurs. Contributing with our own expertise in energy was therefore crucial in order to be able to design and deploy large scale solutions which are more respectful of both man and nature. Batteries and hydrogen are the two main sustainable solutions for this new paradigm. As each has its advantages and drawbacks, batteries and hydrogen are complementary solutions and implementation alone will determine which solution is better.
Kouros clearly focuses on hydrogen. Why have you made this choice?
Eager to concentrate on heavy mobility, Kouros has focused on hydrogen and developed substantial expertise over the past 4 years (with 6 investments and the creation of 2 hydrogen companies). Kouros notably founded Hyliko, the first fleet decarbonation service for trucks, which offers transport and logistics companies a packaged solution with leasing and maintenance included for hydrogen trucks, and a hydrogen supply originating from bio waste with a negative carbon footprint. This unique solution will enable the acceleration of decarbonization for trucks. Transport professionals have recognized and confirmed its value, and hundreds of hydrogen trucks have already been pre-ordered. Hyliko rose to the top of the hydrogen truck sector in Europe in under a year.
How would you summarize the current global energy situation?
The post-covid recovery and the Russian invasion of Ukraine have led to energy prices soaring, with some prices increasing tenfold. It may well be that these new prices are here to stay. Such inflation is bound to cause major economic disruptions for both businesses and households alike, and lead to an acceleration in the quest for cheaper and more virtuous alternatives.
The climate crisis is also increasing the pressure. In order to adhere to the climate targets set out by the Paris agreement, which aims to limit global warming to +1.5 °C by 2100, replacing fossil fuel with renewables will not suffice, massive amounts of carbon will also need to be quickly removed from the atmosphere. The energy sector is at the heart of this double challenge, as it is the world’s leader in emissions. Kouros holds itself to this double standard, as an investor and entrepreneur: replacing fossil fuel with renewable energy on the one hand, and withdrawing carbon from the atmosphere on the other.
What is the overall cost of the energy transition, and can we really afford it?
The foundations of the energy sector were built on highly carbonated energy sources: oil, coal and natural gas. We need to rebuild this entire energy system on new decarbonated foundations as fast as possible. The financing needed for this transition has been assessed by the IRENA (International Renewable Energy Agency), as exceeding 131 trillion dollars. Decarbonating energy will therefore require a commitment from both the public and private sectors. The public sector has levers (such as legislation and subsidizing, for instance) to orient energy sectors and stimulate innovation. As for the private sector, it has the tools to finance innovation and deploy new production and distribution infrastructures for decarbonated energy.
Is the financial profitability of new energy technologies already sufficient to attract investors on a massive scale?
The necessity of profit is not incompatible with responsible investing. But over the long term, we must protect profitability from blind and short-term speculation. What the energy transition demands from investors is the reintroduction of the variable of extended time, with the integration of the sustainability variable into the calculations of an asset’s profitability. Part of the world of finance is still under the influence of yesterday’s demons, but will enter withdrawal under the pressure of reality. Today, as it turns out, we need finance more than ever, so energy projects may shift from the culture of passive income to the culture of profitability.
How do you address the growing ESG demands from investors?
These criteria have become structural to investment strategies. This is a very good thing, as we need as many tools implemented as possible, on all levels, to set off the great capital migration from the carbonated system to the new decarbonated energy system. We are particularly mindful of this at Kouros, as it accelerates the development of our activity.
There is still resistance to the adoption of new energy technologies, especially in the private sector. How do you explain this?
A few sector-related annuities are clearly threatened by innovation. A small number of players, by doubling down on their support for the old world, are hampering the advent of the new one. This is the case for large groups, in which what is said conflicts with what is done, and where change is effectively hindered by management looking for short-term wins. But those who have spent years rebuffing the ethical, philosophical and political arguments which highlight the undeniable need for this transition, are today confronted with scientific realities, which in turn devolves into economic imperatives. One can be sensitive or indifferent to the environment, but the economic verdict is clear. Risk is no longer on the side of sustainable development. It is now on the side of any form of predation which destroys the very foundations of value creation.