#Solar100's Tim Larrison: The Vince Lombardi of Solar Finance

Previously posted in Forbes.

In this #Solar100 Interview, Richard Matsui, Co-Founder & Chief Strategy Officer of kWh Analytics, speaks with Tim Larrison, CFO of Primergy Solar.

Over his long career in renewable energy, Tim Larrison has steered companies through periods of significant growth with his keen insight on the energy industry’s biggest finance problems and his focus on fundamentals. Like the legendary Vince Lombardi, Larrison has a relentless commitment to the blocking and tackling of managing a business, and the success of this strategy has culminated in his current position at Primergy Solar, which melds his operational finance background with opportunities to do large, creative structured financing.

In this Solar100 interview, Larrison discusses his career in energy, solar’s project finance problem, emerging storage technology, solar’s next major hurdle, and career advice for future CFOs.

THE LONG AND WINDING ROAD TO RENEWABLES

RICHARD MATSUI: You’ve obviously had a long career in solar, but I didn’t realize you also had experience in different sectors. Can you walk me through your career trajectory and how you ended up at Primergy Solar?

TIM LARRISON:

It has been a long road to Primergy Solar, I’ve been in and out of the energy industry, but I’ve always been on the finance side of things. 

I started nearly 30 years ago at Ernst and Young and was involved in advisory for Eastern European energy companies as they were coming into the international fold. I was assigned to work in Kazakhstan when it first became an independent country. It really was the Wild West – pre-internet and no international landlines. This sparked my interest in international emerging markets, and I decided to go to London Business School for my MBA. 

During business school, Enron was on the rise, and I got a job as a summer associate. The first project I worked on resulted in a $2.4 billion acquisition of Wessex Water Company and I was hooked. I stayed on after I graduated, and that’s when my infrastructure and power work began. 

When I left Enron, I knew that I wanted operational finance experience versus the pure transactional experience I had up until that point.  Operational finance is a different animal and I felt that I needed it to round out my skill base. I had a couple of senior level operational finance jobs and ultimately ended up as the founding Chief Financial Officer (CFO) of CLEAR in New York. It was a great role, but ultimately, I missed being a part of the energy industry. 

A lifetime later, I took a job at as the CFO of a venture-backed startup that was mining lithium in the Salton Sea. They had a great idea, but major project finance problems. I saw this problem across Silicon Valley: people forgot that they were in the energy business, where 20x multiples just don’t happen. There was a massive disconnect between venture capital expectations and the realities of the energy industry. 

From there, I joined Yingli and had a great run with a phenomenal team. This was at the beginning of the solar ramp up in the US and I think there was a point that we brought in 20-25% of all the panels in the US.  It was a fantastic job because I was able to get exposure to the whole solar market and understand where the market was headed.

Although the solar sector was booming, the industry was missing something critical. It became apparent quickly that solar is an incredible opportunity, but it requires a different lens.  I remember visiting SunEdison and seeing hundreds of employees managing what was essentially three mid-sized solar power plants; it was never going to work. They weren’t doing anything differently from managing a coal plant or a gas-fired power plant…there was a lot of overhead.

At the end of 2019, an Operating Partner at Quinbrook Infrastructure Partners asked me if I wanted to build out Quinbrook’s investment platform for solar and storage, Primergy Solar. The people at Primergy understand that solar needs to be managed as an energy business rather than a venture-backed startup. A perfect combination of being an operational CFO and being able to work on large, creative structured financing; this ties all my experience together and I couldn’t be happier.

LESSONS LEARNED & CURRENT TRENDS IN SOLAR

MATSUI: How does it feel to be back in the energy industry, where your career started?

LARRISON: It’s an exciting time to be in renewable energy and I am very happy to be in the industry now because we’re doing a lot of good work.  Primergy is a perfect place to have an impact – we are growing and have the backing of a fantastic investment fund that is committed to zero carbon investing. We are fortunate to have a leadership team that are all operators who understand the challenges of being in the energy business. But, at the end of the day, it’s still the energy business. And I can’t stress that enough.

There’s an incredible amount of innovation within renewables; kWh Analytics is a great example of that constant innovation. I love the fact that there’s always twists on what has happened before. It builds on old ideas. 

MATSUI: Thanks, Tim. We draw inspiration from history, and credit enhancements like the Solar Revenue Put are an old idea. As a former consultant, you learn that there are very few, truly novel ideas. 

One of the smartest people I met in solar, Dan Pillemer, once observed the same dynamic you did. He said, “I don’t understand why all of these solar lease/PPA companies, a consumer finance business, are locating their teams in the Bay Area, one of the most expensive cities in the world.” 

What else has your prior experience taught you about solar?

LARRISON: One of the hot topics for me – though it’s a cliché – is maturity. With maturity, we’re seeing bigger projects. In fact, we just announced momentum on our cornerstone Gemini Project, which is one of the largest solar + storage projects in the United States. But it won’t be the largest for long. With the way that financing tends to be set up, it’s around a lot of value on tax equity. For reference, the tax equity check for Gemini is 4-5% of the total tax equity market. 

I don’t think the way these projects are being financed is sustainable. The industry needs to look at traditional power financing. You often hear that if the ITC went away, it would be the end of the world. But change happens all the time. The energy industry survives. When the industry comes across issues that prevent it from growing, it’s time to do something different. 

MATSUI: A great colleague of mine, Alex Deng, has the dubious honor of having financed the industry’s first truly merchant utility-scale solar project in his past life. No tax equity was involved. It’s painful, but it can be done. Our industry is kind of addicted to these “25% off” coupons from the federal government.

LARRISON: Right, and the problem is that there aren’t enough coupons for everything that everyone wants. There are better ways than tax credits to incentivize renewables, and the industry would welcome those rather than the on-again off-again of the current tax credit extension cycle, which isn't healthy for the industry.  Eventually, I hope that the reliance on tax credits will disappear and that more efficient financing and incentives will emerge. 

STORAGE: THEN & NOW

MATSUI: One of the topics I wanted to hit on was storage – you were early to that, starting with Green Charge Networks in 2016. I remember the way we met was through your co-founder, Vic Shao. Vic and I had lunch and were talking about developing the Storage Revenue Put. We thought we’d hit on this brilliant idea, and then Vic took me back to your office and introduced me to you. 

You said, “This is never going to work. Our technology doesn’t work very well. You could guarantee our technology, but it would not be a good business for you.” It was an incredible amount of straight-up honesty from someone I’d just met. That’s something I’ll never forget and really appreciate about you.

LARRISON: Yes, and I think we both believe that maturation of storage technology is a critical piece of the renewable story. There have been huge strides since our first conversation, but a lot of improvements are still needed before the technology will be widely implemented.  Gemini is huge, and with more and more large-scale storage coming online, the industry has more potential than ever to turn the corner, it’s at our fingertips.

MATSUI: You’ve clearly been part of guiding improvement in this area; you also were kind enough to help us as we were thinking through how to do an insurance policy for storage. What do you think will be an indicator of success for storage?

LARRISON: The big milestone will be the emergence of a bond offering with storage. This hasn’t happened yet, but I expect there probably will be one in the next 12 months or so. The ability to do bond offerings means that you’ve grown up. 

LOOKING FORWARD

MATSUI: As the industry strives for 30% solar by 2030 (according to SEIA’s Solar+ Decade), what do you see as the biggest challenges for meeting this goal?

LARRISON: The next challenge is bridging the disconnect between these newer technologies and the financial community. kWh Analytics is working towards that, using technology to create extra value for the financial community. 

I don’t think the trajectory for storage is going to mirror the solar ramp. Solar is not a new technology, while lithium-ion batteries are still relatively new. And in my view, lithium batteries are the storage technology. While there are other new storage technologies, the challenge is: can these new technologies plausibly get competitively financed near-term? The financing process is incredibly arduous. I saw it with my experience at Simbol, where the technology was great, but you just couldn’t convince the banks. It’s 11 years later, and I know people are still working on that. 

ADVICE FOR FUTURE CFOs

MATSUI: Over the coming decade, if solar continues on its current trajectory, we’re going to go from 5% to around 50% of the energy mix. This industry is going to need dozens, if not hundreds, of leaders like you. Obviously your path is not exactly replicable, but what advice might you have for the person who’s going to be a CFO in 5 to 10 years?

LARRISON: My advice to future CFO’s would be this – doing deals is fun, but running businesses responsibly is even more essential and impactful. Operational finance is the blocking and tackling of managing the business. There’s no glory, no celebratory closing dinners, but it’s absolutely vital in the energy infrastructure business. 

#Solar100's Nat Bullard: The H.G. Wells of Clean Energy

Previously posted in Forbes.

In this edition #Solar100, Founder and CEO of kWh Analytics Richard Matsui speaks with Nat Bullard, Chief Content Officer at BNEF.

Nat Bullard is known for his research and reporting in the clean energy industry. He has spent almost 15 years analyzing the market and informing everyone from senior executives to the broader public about how the industry is evolving. Like H.G. Wells, he’s a prominent, forward-looking thought leader, who has devoted his talents to advancing one of the most critical causes of our time — the development of clean energy.

In this Solar100, Nat weighs in on his experience researching the industry, how solar technology has evolved over time, his predictions for battery storage and hydrogen, and his advice for young professionals.

—

RICHARD MATSUI: Starting all the way back — I know you studied art history and architecture as an undergrad, then went on to a graduate degree in international studies. Can you walk me through that career arc and how you landed at BNEF?

NAT BULLARD:  Yes, I studied art history as an undergraduate. I picked that major, because it was a small department, and I was able to get a lot of face time with professors. The major also focused on what they called “formal analysis,” which is a structured way of inquiry. I realize it sounds like an unusual segue into thinking about business, but it was actually quite useful – a structured way of looking at something, considering it, and describing it. It would have been a fine background for a management consultant (and I had classmates in the department who did just that). But I ultimately decided I didn’t want to be a business or management consultant, so I took a job as a teacher at the American International School in Cairo instead.

I returned from Cairo thinking I would study international affairs or international relations development, but I also realized I wanted to focus my studies on something measurable. In my case, that ended up being energy trade growth, and that’s where I ended up in graduate school.

When I graduated, I was looking for a job and I did not have the traditional technical skills that someone would need to work in energy at the time. Most people came from an engineering background, a physics background, or a finance background. However, I was one of a few people that had a background in development economics and climate science, which was useful in the fast-changing part of the global energy sector, so I managed to get hired by Ethan Zindler and Michael Liebreich, at what was called “New Energy Finance,” based in London (I worked from DC).

The trajectory for me and for our research firm followed a familiar arc: I focused on solar, we got acquired, and we became part of a much bigger company, Bloomberg. That’s when I moved to San Francisco, and then I continued to broaden out my research from there — more content direction roles, overseeing some of our custom work, and later four years of living and working in Asia before returning to the U.S.

MATSUI: Is that where your focus remains today?

BULLARD: I would say my role is divided into three equal parts. The first is our management committee. Our group has a small management committee, since the whole company is roughly 250 people. We support the business of BNEF, the research group. There is another third that is external facing, which includes channeling our work for senior clients into materials like a board briefing or a Bloomberg event. Finally, the last third is my weekly writing.

I developed that last part about seven years ago now. We were discussing new projects and my team asked me what I wanted to do. I said I want to write an email to people, but I want to send it to them on the weekend and I didn’t want to send it to everybody — I want to send it the boss of the people that we typically worked with. So, we put together a weekly briefing for executives that I sent out on Saturdays. I started out with a distribution of about 175 people, and it’s now grown to 160,000.

It’s hard to keep good information bounded, so we opened it up with subscriptions and then eventually moved to Bloomberg Opinion. Then about two years ago, Bloomberg began a new editorial vertical called Green, and the editors asked if I would join that vertical instead. That’s where we’ve been since then. Today, the email still has my name on it, but it includes a broader package of topics that we write about, including transportation, climate, finance, climate science.

LESSONS LEARNED & CURRENT TRENDS IN SOLAR

MATSUI: Over those years you’ve written about so many different angles on solar. What are your thoughts on how far we’ve come as an industry and what are the latest trends you’re seeing?

BULLARD: I’m perpetually trying to determine how far along the journey we are. I often try to think about the electricity sector in the United States as a whole and how renewables fits into that story. On the renewable energy side, for wind and solar specifically, we’re at about 10% of the total electric capacity. So, on a linear basis, there’s 90% of capacity left which might become wind or solar.

Now, we may run into limits of exactly how much of that capacity becomes renewables, because it’s not going to necessarily be 100%. Part of figuring out how much capacity becomes renewables hinges on whether we’ve done the groundwork to substantially decarbonize the global economy through other means.  

In terms of the latest trends, something I wrote about recently is the slowing of

“asset rotation” in the industry, which essentially means projects are changing hands less. This is happening, because the stable returns from renewables look positive on a balance sheet and companies are increasingly able to refinance their assets advantageously – some with the help of your Solar Revenue Put — to gain more capital without actually selling the project. It’s unclear how this will impact the industry in the long-term.

MATSUI: Any surprises, from the research?

BULLARD: Solar provides a very particular lens on thinking about the energy transition. It’s a field with an extraordinary amount of aggregate success and an extremely high specific failure rate. If we think about many of the companies that we would have dealt with a decade ago, more likely than not, they no longer exist due to acquisition or exiting the industry altogether.

Certainly, the history of the solar business was the aggregation of millions of marginal transformations, but it was generally the people with a bit of a crazy vision and the skills to implement that vision that succeeded. In retrospect, I think many companies survived by having allocated part of their vision to a particular part of their staff. Good developers were generally agnostic about technology, but absolutely rigorous about location, planning, permitting, money, all those kinds of details and making sure they had the right people to execute on them.

MATSUI: As a market watcher, what makes for good business in the renewables industry? 

BULLARD: That’s a great question. One of the advantages of solar and wind is that you might have locked up some land, but that does not preclude other people from employing sun or wind – it’s not an exclusive resource. However, being early is definitely beneficial. Being thoughtful about where you build a pipeline is good. Having capital helps, especially the ability to recycle capital if you’re an asset owner. Creditworthiness is big. The things I’m describing here are rather dull in the sense that these are attributes of other industries as well, like the real estate business.

MATSUI: Relatedly, what do you think makes for a sustainable competitive advantage that one can have in solar? Is there such a thing?

BULLARD: It’s a fundamental question. I think the combination of balance sheet, domain expertise, and human capital helps determine a company’s competitive advantage, although I’m not sure that any advantage will be perpetual. I think this sector as a whole has, outside of probably wind turbines, relatively little durable competitive advantage at a company level, but the renewables industry and solar, in particular, is still so young and a lot can change.

MATSUI: You’ve been watching the industry for a long time.  Can you remember times when people in the industry were right or wrong about where the industry was headed?

BULLARD:  Yes, definitely. Over a decade ago, everyone – including myself — believed that solar thermal would win out in power generation versus solar photovoltaic (PV). They were competing architectures and competing logics, if you will.

Solar thermal was a solar inflected version of industrial architecture. Downstream of the solar field, you basically maintained the same thermal-energetic system, so everyone in the sector was familiar with how that worked: you had a lot of things that were hot, you had things that rotated, and you had things that needed integration. The pitch for solar thermal was that the plants were very reliable and the grid operator could treat it like a gas plant.

On the other side was PV. PV was run with batch manufacturing in the early days, and then later on small scale manufacturing. It had measurable unit success, so you could look at each plant and measure cost and efficiency. The pitch for these projects was that the plant will be able to deliver some significant savings in time on large pieces of unused land.

As we know, PV won, because you could measure it, and it had a lot of visible iterations. Also, frankly, you had a lot of good sharing of information. We were able to find out more information about what was happening in the PV world.

In short, there was a competing logic of high frequency, low latency development on one side with mega projects on the other [solar thermal] side. It's been ten years now, yet I still return to this as my durable learning on logic — Megaprojects versus high volume manufacturing.

My other lesson from the PV versus thermal debate was about being perpetually on the margin. PV is the marginal new unit of power in almost any power system in the world right now. That means that it can be built at whatever scale is needed at the time and place – be it a gigawatt of capacity, or a module on a roof. That position, being on the margin, is a great place to be! You have the chance to try new things, to provide new products and services, to meet incremental demand growth and displace retiring capacity.

MATSUI:  What other innovations do you think enabled the growth of solar?

BULLARD: One of the biggest innovations happened in the polysilicon industry. Around 2004, solar panels were essentially using the offcuts of the semiconductor grade polysilicon industry. People started buying polysilicon at 5 or 6 “9s” purity levels for solar, rather than at 13 “9s” purity levels for chips for computers. The polysilicon product for solar was technically an inferior product, but the industry used it. It started as a small piece of a high-margin business, then became a separate business where that “inferior” product was being produced intentionally. The story of polysilicon and solar is a very classical disruptive innovation in that way.

Back then, solar only made up a small part of the polysilicon industry. I remember when we developed a tracker to identify when solar became the main driver on a volume basis for polysilicon. It was a while ago, but interestingly, we saw a similar pattern happening with lithium-ion batteries rotating their main demand driver from consumer electronics to vehicle applications.

PREDICTIONS FOR BATTERY STORAGE & HYDROGEN, THE NEXT FRONTIERS IN ENERGY

MATSUI: Has developing a framework for solar’s growth helped you in your other, more current iterations of technologies in the Energy Transition?

BULLARD:  Absolutely. I’m always thinking about the governing laws for different aspects of the industry. For instance, the wind sector has one set of governing laws, manufacturing has another, and so on. So, the companies that were the leaders in wind turbine manufacturers a decade ago are still the leaders. There are new ones, but there is sort of the industrial logic that that process hasn’t changed. As we look at the new technologies that are arriving, it’s worth us asking how they compare to existing technologies.

That kind of interrogation helps me think about the future of emerging technologies, like direct air capture. For example, I often ask myself questions like, “What’s the future of direct air capture? How many direct air capture units are we going to build? Are we going to have 200? 2,000? 200,000?” Any of those figures might work and they may even have similar economics, but the logic of getting there and the ownerships behind them will be very different. That’s when I use the PV-thermal metaphor I described earlier.

Lately, I’ve been using that line of thinking to investigate hydrogen specifically.  

MATSUI: What’s your take on how hydrogen will unfold?

BULLARD: I think what’s going to be the most interesting aspect to watch is the margin of competition, similar to solar PV and thermal. Three years ago, most people thought heavy-duty trucking would likely be molecular (e.g., liquid fuels), because that’s how we would energize these kinds of vehicles. What we’re now seeing, though, is that the molecular side does not move as fast as the electron side (e.g., electricity). So, now we’re seeing manufacturers producing high volumes of batteries and providing me a forward curve of what the batteries are going to cost in the future. This kind of behavior is obviously going to support the growth of the electron side and I think that’s where the industry is headed today.

CARRER ADVICE FOR RENEWABLES

MATSUI: What advice would you give to someone looking to get into renewables?

BULLARD: There are a lot of companies in this industry – both established and start-ups. So, my advice for people entering this sector is to ask yourself what needs to be true for the industry to thrive and from there, narrow down where their time and talents may be best suited.

So, I’m looking at a company, a technology, a sector. What needs to be true for it to be net zero emissions within its domain? Is that a question of science, a question of policy, a question of money?

Take policy for example. What kind of policies do we need to enact? Does the industry require a national net zero standard? Does it require a tax benefit? Does it require land access? Does it require intellectual property regulation? Then on the technical side, does it have a learning curve that we can measure, or might it? And again, back to my industrial logic, are there a small number of very large things, or a very large number of very small things that are going to make the industry move? The other factor to consider is competition. And then one might consider the type of people that are going to be attracted to this work.

Asking these questions can help people figure out which companies to target in their job search. There are lots of facts that need to be true for companies to be successful and impactful, and if you build it up your case in an evidentiary way, then I would encourage someone to try it out.

#Solar100's Alain Halimi: The John Madden of Clean Energy

Originally posted in Forbes.

In this edition #Solar100, Founder and CEO of kWh Analytics Richard Matsui speaks with Alain Halimi, Executive Director of Natural Resources and Energy at Commonwealth Bank of Australia.

Alain Halimi is known for his significant experience in clean energy financing. He has spent over 15 years supporting the development of renewable energy in the US and internationally and has provided his insights at numerous conferences over the years. Like John Madden, he’s coached and supported his teams on numerous successful clean energy deals and he’s a known color commentator in the industry.

In this Solar100, Alain Halimi weighs in on his experience financing renewable energy assets, how the renewable energy market has evolved over time, predictions for energy storage, and his thoughts on how the industry can continue to advance diversity and inclusion.

STARTING OFF IN RENEWABLE ENERGY FINANCING

Richard Matsui: You’re a Frenchman, working for an Australian bank, living in New York City, financing renewable energy. Can you talk me through how you ended up here?

Alain Halimi: I think that’s the way the world works now. Everything and everyone is becoming more and more integrated. It’s also a good reflection of what’s happening with the clean energy movement — it’s happening all over the world.

In terms of my career, I studied banking in college in France and found a job at a French-Belgian bank called Dexia. We actually started working on our first wind deals there in 2004-05. They were very active in clean energy at the time and were already closing 10 to 15 wind farm deals a year. Then, Dexia gave me the opportunity to move to the United States and I wanted the opportunity to learn about other international markets, so I came here in 2006.

Once I arrived in the US, I worked on my first wind deals. At the time the renewable energy market started to be fairly active with large wind projects due to the establishment of Renewable Portfolio Standard (RPS) targets and the Production Tax Credit (PTC). Then around 2010, I wanted to explore new industries, so I moved to BNP Paribas. There, my focus was more around natural resources. I had a great experience working there across Investment Banking and Debt Capital Markets, but in 2014, Commonwealth Bank of Australia (CBA) had an open position in its Natural Resources and Energy group. Given my experience at Dexia in clean energy and at BNP Paribas in Natural Resources, the role was a perfect fit.

Seven years later, the CBA platform has materially grown where we are now leading large wind, solar, and standalone battery storage projects across the US. CBA was an early mover in the space and at the forefront of this major energy transition. Over the years, we have been able to provide financing solutions assisting our clients to fund their renewable energy projects in the US.

RENEWABLE ENERGY FINANCING MARKET EVOLUTION

Matsui: How has the market evolved since ‘04?

Halimi: The market has evolved a lot in terms of competitiveness, understanding the technology, financial structure and risk appetite. Everyone from banks to equity investors have been getting up to speed, so financial institutions have increased their risk appetite over the years, especially given the historically strong track record the sector has experienced.

In the beginning, I remember we had to rely on only one year of data for some of the first wind farm deals we completed, and some of the assets we financed didn’t necessarily perform as planned; but, the market has certainly learned a lot from those early deals. Similarly, on the solar side, I remember working on my first solar project in 2008. It was an 11MW solar project and was probably considered one of the largest projects in the US at the time. However, over the past few years, solar projects have now become a key asset class within the renewables space with an average deal size of 150+MW. Additionally, the cost of solar modules has fallen by 94% over the past decade and is now undeniably one of the cost effective sources of power generation in the US.

Standalone battery storage is poised to follow a similar arc to solar, based on where the solar market was a decade ago. For example, the cost of lithium-ion batteries, has fallen by 86% and efficiency has grown dramatically over the same period. I think the industry will continue to grow quickly with larger scale battery projects, since storage is one of the key technologies and solutions available to green our power grid.

Matsui: There have been a lot of macro changes in the past year: we are in a global pandemic and now, we have the Biden administration pushing to deploy more renewables. How have the last 12 months impacted renewable energy financing and the market as a whole?

Halimi: Generally, the market has continued to grow. All industries are somewhat in competition with each other to attract capital, but in the past 12 months, even with everything that has happened, there has still been significant support for clean energy. That is just a reflection of a few factors. First, the renewable energy sector has historically been a solid asset class given its contracted nature and resilience to macro shocks. This asset class has been far less volatile than other asset classes, historically speaking. Those features have naturally attracted more capital. Second, there has been a growing awareness of the energy transition. COVID has certainly accelerated the trend to do more in the space and key players from governments to investors to boards have made a renewed commitment to taking the conversation to the next level. We are certainly at the beginning of a global energy transition and in the US, the industry will continue to grow an increasing share of the market within the power grid.

RENEWABLE ENERGY FINANCING TRENDS: PREDICTIONS FOR 2021 REFINANCINGS

Matsui: We recently surveyed lenders for our annual Lendscape update and interestingly, almost all the lenders said that they focused on financing new-build projects in 2020, rather than refinancing operating projects. Commonwealth Bank of Australia is an obvious exception, since we were fortunate to be able to work with you on a sizable refinancing last year. What role do you think refinancing will play for the rest of 2021?

Halimi: I think refinancing will likely play a bigger role in the market this year and next, since a lot of projects were built five to seven years ago and will be reaching the end of their loan terms. We track this closely.

On our side, we completed one sizable refinancing last year, but that happened because the sponsor simply wanted to optimize the terms and also ensure the credit aligned with the asset’s strong performance. We are working on another refinancing and we are looking at a few financing solutions to further optimize the structure for the developer, given the good performance of the underlying solar project. The Solar Revenue Put can certainly help to sharpen those returns for the sponsor and mitigate production risk for the lenders. For instance, on the refinancing we led, the Put allowed the sponsor to hedge themselves against energy production risk while optimizing underlying leverage. That was an effective solution and the process was fairly straightforward to execute on. The kWh team made that process simple for everyone, including the sponsor and the banks that were new to it.

THE NEXT FRONTIER IN FINANCING: ENERGY STORAGE

Matsui: For the most part, everyone agrees that storage is the next frontier, but there haven’t been many deals completed to-date. So, can you give me a snapshot of your perspective on storage today? What’s financeable and what’s not?

Halimi: Project financing for battery storage really varies based on the project.

One type of project is where you have co-located solar and storage and the solar assets feed the battery. For those deals, it’s generally straightforward to finance as it’s considered a fully integrated solution, so you can apply similar principles to wind or solar financing.

The second type of project is where the battery serves as a peaker plant. For instance, we recently closed a financing as a bilateral credit facility where the project is partially contracted with Southern California Edison (SCE) to install a standalone battery to act as a peaker to replace gas units. In this case, the challenge on the financing side is securing a revenue stream. You usually have a capacity contract with the utility, but that does not generate much revenue. The real revenue will come from arbitrage, but the challenge becomes figuring out how to buy and sell electricity from the battery at the right time.

So, that’s where we’re focusing on now – understanding the location of the asset, the market it will be operating in, how the developer is managing energy deployment and the software it plans to use for that process...etc.

LOOKING AHEAD

Matsui: Lastly, moving forward into 2021, we’re going to be asking everyone in the Solar100 series about racial equity in the solar industry. The thought is that the solar industry is of course important because of climate change, but it’s also important because of jobs—there are a lot of people who work in this industry or want to work in this industry. As a respected renewables leader, what are your thoughts on how the industry can continue to improve in this important area?

Halimi: I agree that is an important topic to discuss. In clean energy, there’s a huge value chain – from manufacturing to operations to finance – which requires a lot of different types of expertise and all together, can bring social justice with economic advantages to local communities.

Our economy has been reliant on fossil fuel and that has had significant impacts on the health and pollution of communities, particularly those that have already suffered from other negative socioeconomic factors. The renewable energy sector can be a key tool, not only by contributing to the energy transition, but also in providing opportunities and support for those that the fossil fuel industry has impacted by offering access to affordable and safe power.

So far, the industry has been a key job creator and has provided opportunities for training throughout the entire value chain. The industry has also enabled entrepreneurship opportunities, although we could do additional work to ensure these opportunities are equitable and fair to everyone. There have been some positive initiatives in the US to support diversity and inclusion, including dedicated funding and tax credits for Opportunity Zones and initiatives from industry groups such as the Solar Energy Industries Association (SEIA) and American Council on Renewable Energy (ACORE). Also, some developers have made direct commitments and specific targets to build a diverse and inclusive workforce. 

However, a lot more still needs to be done. Although the level of awareness has increased, this needs to be translated into action. Trying to use examples from other industries, one idea that may improve equity is to offer asset ownership to local communities to build equity and align interests. Companies and governments should also work together to invest in developing a more diverse, equitable and inclusive workforce by creating a culture of inclusivity and accountability.

#Solar100's Audrey Lee: The Marie Curie of Clean Energy

Originally posted on Forbes. In this edition of #Solar100, CEO and founder of kWh Analytics Richard Matsui speaks with Clean Energy For Biden co-chair, ArcLight Clean Transition director, and senior director of energy strategy at Microsoft, Audrey Lee.

Audrey Lee is known for her significant public and private sector impact on the clean energy and sustainability industry. Like Marie Curie, Audrey has channeled her scientific background into developing practical and actionable solutions for the industry’s toughest challenges. Her career highlights include co-founding Clean Energy For Biden and serving as a senior executive for notable industry brands, like Sunrun, Proterra (via ArcLight), and now, Microsoft’s energy team.

In this Solar100, Audrey Lee weighs in on her experience mobilizing nationwide support for Clean Energy For Biden, identifying target companies for ESG-focused Special Purpose Acquisition Companies (SPACs), and her advice for building a career in renewables.
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INSPIRATION FOR WORKING IN THE ENERGY INDUSTRY

Richard Matsui:   Starting from the beginning -- I saw that you started off in physics and then went on to receive your doctorate in electrical engineering. What inspired you to get started in energy in particular? 

Audrey Lee: In grad school, I wanted to do something in sustainability. At that time, there was only one professor in my department working on solar cells, and it was hard to find something to do in that space. So, I started talking to people in the public policy school at Princeton and really got into energy policy.  

What attracted me to energy is that it’s just so critical to society and the economy; it’s a basic piece of infrastructure. There is a great opportunity within the energy industry to take basic infrastructure and be able to put in new technology to make it more sustainable, and I think that’s a basic requirement for the electricity grid: you want it to be both sustainable and reliable. Also, you want customers to have a choice in the kind of energy that they’re getting. 

Matsui:  Building on that sense of dualism and thinking about your career, I noticed you’ve held roles in both the public and private sector. How do you think one sector informs the other and vice versa?

Lee: Because energy is such a regulated industry, I don’t think you can disentangle the public and the private sector. And for our industry to grow, I think we need more exchange between the two. 

CLEAN ENERGY FOR BIDEN

Matsui: You’re currently a co-chair for Clean Energy For Biden. Can you give a brief overview of the organization and what you’re trying to achieve?

Lee: Honestly, we were a bunch of people in the clean energy industry that wanted to see Biden elected, really just a loose network of business leaders and advocates. Our goal was to advance policies, technologies, and investment to address climate change.

We had three simple goals: one was fundraising, two was to get out the vote, and three was policy. We started around April with just a handful of us, when it became apparent that Biden would be the Democratic nominee. Since then, we’ve grown to 15,000 members.

Matsui: That’s incredible! At least ten times more than I would have guessed.

Lee: Yeah! It’s a testament to how much the clean energy industry has grown. It’s been really awesome to see the response.

What makes Clean Energy For Biden unique is how grassroots it is and how we’ve gotten so many volunteers involved. We’ve had hundreds of volunteers helping us organize. 

In total, we raised more than $3.2 million and had more than 100 fundraisers. We also have 30 state and affinity teams across the country. Because the policies from different states and different regions can be so different, and what clean energy means in different states can be different as well, we wanted to make sure we had that regional representation in our teams. How the teams organized and talked to voters was really important. 

Then, we made an announcement at our Inaugural Ball that we’re transitioning to Clean Energy For America. So, now we’re hiring a CEO while trying to keep that grassroots and matrixed national and regional team structure.

Matsui: I come from a background in diplomacy, and one of the things you learn in diplomacy is that there’s a fundamental tension in coalition building. To some extent, you want the biggest tent possible. But it’s also true that the bigger the tent, the harder it is to actually get stuff done. So with that line of thinking -- what are the priorities that this group would want the Biden administration to execute? 

Lee: That’s a very good question, and I’m going to encourage you and many others to join and help us figure it out!  We want to keep that grassroots nature of the organization and work with our volunteers to decide how we can continue to be impactful  – choosing which elections to engage in, advocating for clean energy policy, and educating the public about clean energy. We also plan to raise funding to support resources for these grassroots teams. 

Matsui: To your point, it’s surprising to hear that this grew from ten people in a room to 15,000. Any experiences there that surprised you, given the diversity of people and regions participating in Clean Energy for Biden? 

Lee: Actually, it was only six people on a Zoom call at the end of March 2020. 

Yes, I think you can look at what we did for the Georgia Senate Race. After the election in November, we provided support for the runoff and the messaging there was directed to that audience. We already had an existing Georgia team that was organized to elect Biden, and we were sensitive to what would be successful there to elect the two Democratic candidates for Senate. 

For instance, when you phone bank in the south, it’s better to call someone ‘sir’ or ‘miss’ and be very polite and call them by their last name. Usually in the scripts, you don’t use genders; you say their first name. You say, ‘Hello, Jane.’ But in the south, it should be ‘Hello, Mrs. Smith.’ So, it was the little things like that that we learned from the Georgia team.

Matsui: A good friend from college was recently elected in Georgia, and I’ve been surprised to learn that when it comes to clean energy, that my home state of Hawaii and Georgia actually share a lot in common. Everyone wants good jobs and clean air.

SPECIAL PURPOSE ACQUISITION COMPANIES (SPACs)

Matsui:  In addition to being a part of Clean Energy for Biden, you’re a board member on ArcLight’s SPAC.  SPACs are making big waves in our industry. Based on your experience at ArcLight, what type of company makes for a good target for a SPAC nowadays?

Lee: ArcLight Clean Transition went public in September of last year, and when we came out, our goal was to identify and take public a leading clean energy or sustainability company. We had raised $278 million and we were looking for a company around the $750 million to $2.5 billion valuation range. 

We are very excited about our transaction with Proterra, a leader in commercial vehicle electrification. Under the agreed deal, the company was valued at $1.6 billion enterprise value and we raised an additional $415 million, meaning that Proterra will have $825 million in cash to continue to invest in the business.

What’s really exciting about Proterra is that it’s not just about electric buses. They have Proterra Transit, as well as Proterra Powered, which provides power train and battery packs for vehicles, and also Proterra Energy, which provides charging infrastructure management. And so, if you look at their public documents, you can see that a lot of the growth opportunity is not just in electric buses, but also these other areas. 

Matsui: Right. But there’s such a wide range of companies getting support from SPACs right now. Can you expand upon the criteria that people in your shoes are using other than valuation? Shayle Kann from EIP says that there has been 40 SPAC mergers in climate tech announced so far.

Lee:  I can’t speak for other SPACs, but we looked for strong revenue growth, a large near-term order backlog that gave us financial performance visibility, and a clear plan for profitable growth. Additionally, we assessed how the target would use the proceeds to accelerate their growth. I recommend looking at the Proterra/ArcLight investor deck to see how Proterra answered these questions. 

Another, probably obvious, thing to note is that SPACs turn private companies into public ones. So, part of our role is looking for companies that public investors can understand and want to invest in. From that perspective, electric vehicles are not too esoteric. 

Matsui: Following that line of thinking, my impression is that the ESG SPACs have first chosen to invest in electric vehicle (EV) space. I suppose EVs are easy for a retail investor to understand -- thanks to Telsa -- but I would have thought that solar would be equally easy. Do you have any thoughts as to why SPAC investment in solar appears to be a step behind? What does that say about what SPACs tend to be looking for?

Lee: The SPAC phenomenon has come upon us so quickly that everyone is trying to learn about them and understand whether it’s the right fit for their company and for what the company wants to do to grow. So, I think part of it is letting the whole SPAC formula catch up. 

Matsui: I can understand that. What structural changes do you think the SPAC trend will cause in our industry?

Lee: I personally see it related to the momentum that we are gaining in terms of addressing climate change.  I think there’s real hope that we will be more ambitious in passing climate change policy and developing more clean energy, and that excitement is related to the excitement in investing in clean energy.  

I’m also seeing investors rethink their approach. Firms generally have an approach for investing in oil and gas or even utility-scale renewables. But, they now need to think about how our electricity grid and transportation is going to evolve and how distributed energy and all these other types of resources will interact. This adds complexity for investors, because it’s not like investing in a centralized power plant. This means we need to develop new investment mechanisms for these new types of technologies, because we see this clean energy transition coming.

If you take a firm like ArcLight, which has traditionally invested in gas or large-scale utility and wind assets, they have an infrastructure fund to do that. And in this case, by using a SPAC, the firm had the ability to invest in software, services, and technology in the energy space that their traditional infrastructure fund can’t invest in. 

MOVING FORWARD: ADVICE FOR YOUNG PROFESSIONALS & INDUSTRY OUTLOOK ON DEI

Matsui:  What lessons learned from your career can you share with young professionals looking to work in clean energy?

Lee: Honestly, I found it challenging to join the private sector from the public sector, because I didn’t have any product or business development experience in my resume. People didn’t really know what to do with the skills that I had in public policy and government. Luckily, Susan Kennedy also had a background in government and recognized how transferrable my skills could be. And that was a great opportunity to be able to prove myself, to be able to make that shift.

I also think being at a start-up was great, because I was able to wear many hats. I was the first employee at AMS, and I learned so much. Being at a smaller company was a great way to prove myself. Then Sunrun recruited me to work on their technology platform and more and my previous experience gave me the authority to run the P&L (profit and loss) for energy services there, expanding my responsibilities from data science, software, and product to business development, go to market, and financing. 

My advice is to pursue what you’re curious about. I want to learn new things and learn new skills. I think what I found challenging in graduate school is that I didn’t get a lot of exposure to what’s possible -- what you see around you is academia. And so, I had to push myself to talk to people. I would cold call people, get informational interviews, and try to understand how the world outside academia works. I probably interviewed a hundred people. So for those earlier in their career, don’t be shy! People love to give unsolicited advice.

Having my doctorate was a nice credential on my resume as well. I remember I was at a dinner meeting in Texas with about 80 people and people at my table said, “You look 18...You have  Ph.D.!? Okay maybe you’re 22... You have two children!?... Okay maybe you’re 25.” I was 39.

Matsui: I personally run into a similar problem, and honestly, I don’t have a great solution to it. Do you have any recommendations about how to approach those situations?

Lee:  I try to launch into the discussion immediately. I like to get in front of the whiteboard and start solving some problems together. It can be annoying in the first five minutes when you’re exchanging pleasantries and people think that I’m an assistant, but then I can get into the subject and quickly disbar that.

Especially in the energy industry where you have people with decades of experience, it becomes a question about how can you learn from people with that experience, while also bringing in new ideas and new models. Having diversity helps with that.

Matsui: Certainly. Do you see any group modeling the kind of behavior that you think the industry should be adopting in terms of DEI?

Lee:  I think you can take my experience being on the board of ArcLight Clean, which is a public company in a way, although not a standard public company. Generally, the standard mold for a board of directors is to look for someone with decades of experience -- an ex-CEO or CFO -- and instead, I’ve been given this great opportunity to join the board and provide my perspective as someone with a greater understanding of the customer, the technology, and policy and the implications of that. In that sense, I think board diversity will continue to be really important. 

Going back to our discussion about my early career and how I wanted to work on sustainability and I didn’t know how, reminds me of what’s great about our industry: we come from all sorts of backgrounds and it’s important to continue to add more diversity.

#Solar100's Dawn Lippert: The Bruno Mars of Clean Energy

Originally posted on Greentech Media. In this edition #Solar100, Founder and CEO of kWh Analytics Richard Matsui speaks with founder and CEO of Elemental Excelerator Dawn Lippert.

Dawn Lippert’s gained national prominence with a growing list of top hits—in her case, a roster of successful clean energy startups. And like the famous Grammy winner, Lippert’s roots are in Hawaii. As the Founder and CEO of the Hawaii- and California-based Elemental Excelerator, Lippert has built an ecosystem and invested $43m to help scale clean energy startups.

In this Solar100, Dawn Lippert weighs in on what she’s learned from over a decade of investing in and supporting entrepreneurs, and reasons for optimism in the fight against climate change.

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STARTING IN RENEWABLES

Richard Matsui: Kicking off with the origin story—you majored in environmental studies at Yale and have worked in this space ever since. What first drew you to working in clean energy?

Dawn Lippert: I got into energy because I was studying environment, biology, and conservation, and it just became strikingly clear how everything will become much more difficult because of climate change.

Once you realize that, addressing climate change then becomes the overarching storyline to anything else you’re interested in—from biology to planetary systems to just keeping life on the planet.

I’m an optimist, and spending too much time on climate policy could be a difficult place to live with that mindset. So I started working with some professors at Yale around energy and just found so much momentum. You can be a true optimist because the trajectory of energy technology and green technology was and is so positive, and you can have a role in making that transition faster. It can be a really exciting and inspiring place to try to make a difference. And that has now circled back to climate, because we are seeing the same kind of momentum across all kinds of climate solutions.

Richard Matsui: You’re a fellow ex-management consultant, having worked with Booz Allen Hamilton’s alternative energy practice in Washington D.C. I’m curious—how does that work and training influence what you bring to the Founder and CEO role today? 

Dawn Lippert: Management consulting is about facilitating change and thinking about all the levers to make that happen.

In particular, as a consultant to the US Department of Energy for the Hawaii Clean Energy Initiative, it was special to play a true, supportive role to the holistic energy transformation we’re trying to achieve here. My job was to help make the state’s goal of 100% clean energy happen, and to learn how to flip an economy from fossil fuel to clean energy. My day-to-day included asking questions like, “Who are the people we need in the room? Who is not in the room who will be impacted? What are the stories or numbers or analyses we need? What is right around the corner that will impact how this can or will unfold?”

Richard Matsui: Classic stakeholder management—a lot of people with different objectives.

Dawn Lippert: Exactly. It’s very similar to implementing technology solutions within a community. I was looking for the right platform to bring different parties together to find a win for the entrepreneur, a win for the investor, a win for the community, and a win for the policy maker.

That role is probably where I came into the idea for what is now Elemental Excelerator.

Richard Matsui: Speaking of Elemental, it can be especially tough in the early days of any organization. What was the biggest problem you had to solve at the start of Elemental?

Dawn Lippert: For us, it’s been a constant learning process. We initially started funding projects very similarly to how the Department of Energy does for early-stage companies with new technology. And it became clear early on in that process that you could fund a lot of one-off projects, but the most difficult part was figuring out how to make the projects scale. As a result, we now think about how every project we fund can scale at least 10x within two to three years. Using that framework impacts the companies we select, what we do with project design, and who we invite to the conversation.

But in those early years, we just weren’t seeing that. This was around the time that Y Combinator and other software and tech-focused accelerator programs were starting to gain traction in Silicon Valley.

So, when we started funding these projects and seeing if they were working, I flew around the country for a couple of months to learn what we could do differently. I talked to literally anyone who would talk to me that had any role in the investing, commercialization, and entrepreneurial ecosystem. The vast majority of them told me that Elemental was not a good idea, because the idea behind these tech accelerators was to be three months, software-based, super quick turnaround, week over week results. And that’s just very different from the world of climate technology.

But even with these differences in timelines, I learned a lot from those conversations and how to apply what traditional tech and Silicon Valley were doing right and how we can model our work at Elemental. For example, this idea of working in a community of entrepreneurs, focusing on business models, scaling a company, and being able to focus very early on what a customer wants. There are a lot of things that Silicon Valley’s doing right that we really need in climate around the rest of the country—and the world.

SOLAR STARTUPS: IMPROVING SYSTEMS THAT IMPACT THE PLANET AND PEOPLE’S LIVES

Richard Matsui: To date, Elemental Excelerator has awarded over $43 million to 117 portfolio companies. After over a decade working with and supporting startups, what are some of your key takeaways about challenges startups face and what makes a startup successful?

Dawn Lippert: We've found that huge problems are inherently motivating for entrepreneurs— which is why we invest in them to help solve climate change. They're wired to scale solutions. Entrepreneurs are already scaling up solutions to climate change. The most successful entrepreneurs have unbelievable amounts of ambition, and you can sense that the first time you meet them. They know they can have a huge impact, and they barely even have to convince you.

As to the challenges startups face, they navigate a lot of interconnected pieces to come to market. Technology innovation, market entry, connecting with corporates and deployment partners, policy barriers. Our entrepreneurs are creative, nimble generalists, and learning machines.

Richard Matsui: When you said, “Entrepreneurs are already scaling up solutions to climate change,” it reminded me of our first Solar100 interview with inveterate solar advocate Danny Kennedy in which he said, “Small businesses can be agents of change, and entrepreneurs are the classic ‘won’t take no for an answer’ activists, really. They just use business tools rather than community organizing.” What are ways you’ve seen entrepreneurs scaling up solutions to climate change?

Dawn Lippert: You can point to any company in our portfolio and they’ll be able to tell you how they are driving down emissions or democratizing clean energy or building the transportation systems of tomorrow. A few recent examples: Ampaire recently flew the world’s first hybrid electric plane on a commercial route with Mokulele Airlines, proving zero emission air travel is coming sooner than you think. In fact, it’s already here. Proterra is set to go public through a SPAC and has delivered hundreds of electric buses. In partnership with us and Conservation International, SOURCE Global installed 40 hydropanels in Binta’t Karis, one of the most remote villages in the Philippines, providing clean drinking water to 100+ families.

LOOKING FORWARD

Richard Matsui: What are you thinking about, moving forward?

Dawn Lippert: I’ve been thinking about the moment we’re in. We’re seeing a confluence of huge clean energy know-how, rapid velocity driven by favorable economics, unprecedented commitment from large companies who know they can’t afford to miss out on this transformation, and a surge of promising startups who see an enormous market opportunity. There’s broad consensus around the need to address the climate crisis.

This change is actually driving economic growth and progress on the ground level. For example, in Hawaii we’re seeing massive investment in solar and energy storage. In Hawaiian Electric’s (the utility supplying power to 95% of Hawaii’s population) latest tender to date, we will bring online 460MW of PV and 3GWh of storage capacity. These projects are pulling billions of dollars into Hawaii, which will largely go to support local landowners, suppliers, and workers. This is instead of shipping out millions of dollars for oil and getting a barge of oil in return.

So what is really exciting about this moment is the potential to solve many problems at once. We can address climate change and energy independence while also being thoughtful about how we support new waves of talent coming into the clean energy workforce. That’s what I would love to see. We can all meet this moment together.

Richard Matsui: That’s a powerful visual, that we’re collectively shipping a barge full of cash out and then getting a barge full of oil back. So it sounds like Biden’s plan of a modern, sustainable infrastructure and an equitable clean energy future is right on track with your thinking then?

Dawn Lippert: In a way. There’s definitely a need for national leadership, and the Biden  Administration is demonstrating how the government can pull levers in international policy, environmental justice, federal procurement, and everything in between. At the same time, a lot of the important progress must be made at the  state and local level. State and city government, universities, community colleges, and local coalitions can be really powerful and make the difference. While national support is always important, I’m a big believer in state and local action and for things that can happen on the ground in our communities.

Richard Matsui: Lastly, moving forward into 2021, we’re going to be asking everyone in the Solar100 series about racial equity in the solar industry. The thought is that the solar industry is of course important because of climate change, but it’s also important because of jobs—there are a lot of people who work in this industry or want to work in this industry. As a respected renewables leader, I’m happy to have you weigh in if you’re game.

Dawn Lippert: Certainly. At Elemental Excelerator we believe climate change and social inequality are directly tied, and that providing cleaner and more sustainable options for a small few will never allow us to solve for climate change or reach the regenerative economy we’re striving for.

Elemental uses a framework of “Equity In/Equity Out.” Equity In includes hiring practices, inclusion, professional development, representative leadership, and supply chains. Equity Out is about how a technology impacts communities, including unintended consequences and how to create mutual benefit particularly with frontline communities. In the solar industry, this is essentially jobs and opportunities on one side and deployment on rooftops and in communities on the other. From an innovation perspective, we’re interested in companies that are democratizing solar, deploying community solar, and otherwise increasing access to solar in multi-family buildings and low-income households.

Currently, 88% of solar executives are white men and only 8% of the solar workforce is Black. When you start looking at who’s benefited from the solar boom, it becomes clear that we haven’t yet tapped into the talent who should be part of this movement. So as part of our  “Equity In” work, we are supporting entrepreneurs in building a more inclusive and effective workforce and supply chain.

When teams are more reflective of the communities and customers they serve, they are much more likely to achieve the equitable outcomes that are critical to solving climate change.

Richard Matsui: Are there people or groups in solar that you think are modeling the kind of actions that we as an industry need to take?

Dawn Lippert: Yes! We believe that in order for technology to truly succeed, it has to be rooted in the community. We fund $5-8 million dollars of climate tech projects with a dozen startups each year. For many of these projects, we employ a square partnerships model, where we will work with startups, a customer or deployment partner, and a community partner to deploy technology. Through square partnerships, we start to weave community values into innovation projects, bringing together grassroots perspectives and technology startups. These are two groups that don’t often work closely together, but we see enormous potential in close partnership and bringing community values into technology design and implementation.

As for other models, there’s EDICT, which stands for Empowering Diversity In Clean Tech, that was started by Devin Hampton of UtilityAPI and Jason Michaels of Leap, two of our Elemental portfolio company leaders. It’s a growing community of companies dedicated to making measurable progress in diversity and inclusion. We’re also huge fans of Earth in Color, which was started by a former Elemental intern, Darel Scott. And our Director of Innovation in Energy, Nneka Uzoh, recently launched Greentech Noir, a professional community for Black people working in climate tech. These and many more make me optimistic for the future!

#Solar100’s Jon Powers: The Chief Sustainability Officer of Solar

Originally posted on Greentech Media. In this #Solar100, Founder and CEO of kWh Analytics Richard Matsui speaks with the Cofounder of Clean Capital Jon Powers.

You know him as Cofounder of CleanCapital. You might not know that he’s also an army veteran, former Federal Chief Sustainability Officer under the Obama Administration, and a multi-hyphenate who’s dedicated his career to public service, renewable energy, and sustainability.

In this Solar100, Jon Powers weighs in on his unique career trajectory, lessons from successful asset management, and the implications of upcoming President-elect Joe Biden’s administration on the future of the solar industry.

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STARTING IN RENEWABLE ENERGY

RICHARD MATSUI: People in the solar industry of course know you as the Cofounder of CleanCapital, and before that, as the Federal Chief Sustainability Officer under the Obama administration. But before that, you studied elementary education and history in college and then served as a Captain in the U.S. army. Can you walk me through how and when you first decided to work in renewables?

JON POWERS: I joined the Army before 9/11, and for many of us in the military, 9/11 was a life-changing experience. I deployed to Iraq with my unit in 2003 and spent fifteen months on the ground. It was over in Iraq that I first began to understand energy and energy security. Like many veterans, I came home with the realization that we need a better path forward in terms of energy.

At the time, I didn’t really think of energy security in the context of climate change and clean energy, so before diving into renewables as a career, I actually stayed in national security. I joined a non-profit working with kids in Baghdad and spent a few years trying to prevent 16 to 25-year-olds from being recruited into extremist groups. It was challenging work—the whole reason we have ISIS today is because of that extremist targeting of children.

Following that experience, I ran for Congress in 2008 up here in Buffalo, New York. I lost that election, but losing was flat out the best thing that has ever happened to me. I ran on a platform of turning the Rust Belt into the ‘Green Belt’, and that got me more interested in clean energy. I went back to school at Johns Hopkins to focus my career on energy security and climate security. It was that work that led me, of course, to the Pentagon, and then to the White House and the Obama Administration.

RICHARD MATSUI: That’s incredible. How do you think your previous work informs what you bring to your Cofounder and President role today?

JON POWERS: I was drawn to the work here at CleanCapital from both a mission standpoint as well as an interest in finance as a tool for social change. That sense of mission that drew me to the military is also what led me to clean energy. I became interested in finance in my work in the government—we were doing over $6 billion in third party renewable finance contracts across federal agencies. Bringing those two things together, we founded CleanCapital with a mission to accelerate the flow of institutional capital into clean energy.

Some of the best lessons I learned in government were not about policy, but about how to lead teams. I learned how to play what I like to call ‘nine-dimensional chess’, which was what you had to do if you wanted the Pentagon to move climate policy forward. Many of those skills are transferrable across environments, such as strategy and team building. Other skills I picked up, like successfully navigating through bureaucracy, are not as necessary in my current work. It’s funny; flipping to working at a startup, sometimes I would look for a process of bureaucracy that didn’t exist. And then the challenge would be instead to find ways to make new processes on the fly. 

LESSONS FROM SUCCESSFUL ASSET MANAGEMENT

RICHARD MATSUI: When I think of CleanCapital, I think of a successfully executed rollout of operating C&I portfolios. Is that the right way to think about the business?

JON POWERS: Thomas Byrne, Marc Garrett, and I started CleanCapital with a thesis that there were technology solutions in other verticals like real estate and student loans that we could find and bring into clean energy and clean energy finance. Technology has been at the heart of what we do, in terms of our ability to successfully roll up assets, and our mission was to bring a more efficient cost of capital into the market. Each year we elevated our game in terms of who we partnered with for capital. Capital is so critical for solving the climate crisis—we can and need to get pension funds and other endowments to see clean energy as a desirable, necessary investment opportunity. They talk about it today, but we need to start putting money to work there. 

RICHARD MATSUI: It’s an interesting situation where you can very quickly become a victim of your own success. The market has gotten a lot more comfortable with C&I portfolios since you started the business. 

JON POWERS: That’s 100% right. But you’ve just got to keep one step ahead, and that’s everything in solar.

RICHARD MATSUI: Absolutely. As a large C&I asset owner, what challenges does your team face with financing or asset management compared to the utility-focused players?

JON POWERS: From an asset management perspective, we pride ourselves on building relationships with our off-takers. A lot of financing firms will keep an arm’s length and pay a third party to intermediate the energy manager for the state university, hospital system, school system, or even Amazon or FedEx. We intentionally build that relationship.

The value that strong relationship brings to us is twofold: one, a strong relationship makes problem solving more efficient. If a problem arises, the off-takers know who we are and can collaborate. Two, we gain more opportunities because off-takers view us as partners. For example, when the off-taker likes the solar asset and wants to add storage or another system, it’s just a conversation in an ongoing relationship.

At our scale, the challenge is keeping up with those relationships when you have hundreds of assets. It will only get more challenging as more and more states begin to accelerate the C&I space. 

RICHARD MATSUI: On that note, you’re uniquely experienced in dealing with operating portfolios. Of course, not all of them will perform perfectly. How do you handle that?

JON POWERS: We really focus on front-end diligence to understand any problems. This approach also allows us to highlight some of the B.S. we’re seeing, whether it’s from developers or just simple things like inverters. A system that was built 6 or 7 years ago may have a completely different inverter infrastructure, and you can’t just rip it out and replace it with what’s new to the systems today. Those types of problems are definitely challenging.

We also try to keep it as local as possible. Sometimes that’s an advantage, sometimes it’s a disadvantage. It is an advantage from a cost perspective, but it can also mean a decrease in the leverage you get from only working with large partners. We have some large partners, but we really try to keep it as localized as we can, which can be hard to manage. 

RICHARD MATSUI: I can see that. What processes or tools helped you to identify the ‘problem children’ and implement those O&M improvements?

JON POWERS: That’s a good question. Part of what allows us to identify problems is the way we structured our reporting, not just for our investors but internally as well. This enables us to track any problems and push for timely resolutions. But understanding where the asset management team should focus its O&M time is not always obvious. As an industry we still struggle to understand the drivers of underperformance, including weather and modeling assumptions. At CleanCapital, we approach this by leveraging industry data, including kWh Analytics’ STAR Comps product, which helps us identify addressable performance issues and validate our modeling assumptions. Insights from data products like STAR that utilize market data will inevitably be part of the maturation of the sector.

And to be completely candid, another advantage is that we have an outstanding team. Zoe Berkery, who now leads our asset management, was our first employee. When she started at CleanCapital, she didn’t have solar finance experience—her background was working with me at the White House. Asset management is not easy work, and sometimes it requires that we hold the providers’ ‘feet to the fire’. But Zoe’s a real rock star and has built a team under her that does this solutions implementation work in an incredibly efficient way.

PRESIDENT BIDEN AND IMPLICATIONS FOR THE SOLAR INDUSTRY

RICHARD MATSUI: What’s your forecast for what renewable-related policies we’re going to see under the Biden administration? I feel like you have a better sense than most because a number of your former White House colleagues are getting pulled into implementing policy now.

JON POWERS: I’m excited that this is no longer going to be about proving whether technologies like solar or storage work—we know they do. It’s going to be a question of how to accelerate the market. 

This next generation of leaders is coming in with an understanding of the fundamentals and history of renewables so that they can take this opportunity to seriously invest in infrastructure and accelerate the energy transition. That background knowledge lends itself to complex problems. For example, they might say, “Hey, the tax credit is good, but the tax equity markets are tight right now. So, is that the right solution or should we approach this with a cash grant?”

The President-elect is putting a very strong team together. You have climate people joining across all the agencies, including the Treasury, the Department of Interior, the Department of Energy, the Environmental Protection Agency, and the White House. So we’re not going to have just one or two offices, but an all-government approach to solve these problems.

And in terms of collaboration, for those of us who are working in the industry, we’re going to need to be champions for our policies. We can’t just hope that things will work out—we need to put in the work, too, and make sure that what we know and care about is incorporated into policy.

RICHARD MATSUI: Certainly. What’s the highest impact way of putting in the work for solar policy?

JON POWERS: I have a policy background, so we try to leverage policy partnerships. We’re members of SEIA, we work with the Clean Energy Council, and we’re in 12 different states and try to find local partners. In many cases, it’s a couple hundred bucks here, a couple hundred bucks there to join these memberships, but you get localized intelligence, you can bring your voice to the table, and you can find ways to partner to have an impact. For example, we partnered with different groups, including Tesla, to push back on net metering.

There is a new sophistication across our industry that really hasn’t existed before. Let’s join forces and put some real money to work. Most teams, especially in solar, don’t have money for their own policy shop, but we can contribute to these industry partnerships.

FUTURE OF THE INDUSTRY

RICHARD MATSUI: Moving forward into 2021, we’re asking everyone in the Solar100 series about racial equity in the solar industry. The thought is that the solar industry is of course important because of climate change; it’s also important because there are a lot of people who work in this industry or want to work in this industry. As a respected solar veteran, happy to have you weigh in.

JON POWERS: I’m glad you’re raising this question. It’s something I’ve been in conversation about as well—both what we can do as an industry, and what CleanCapital can do.

One thing we’ve done to tackle this issue as a company is to create an internal volunteer working group of employees to guide these changes. The turnout for this group has been phenomenal, and they brought forward recommendations on what we as a company can do to increase diversity within our hiring, how to support organizations doing important work in equity and inclusion, and how we can ensure that we’re spending money with companies that share our values.

Management has been impressed with their work, and the fact that this has truly been driven by the broader team. It hasn’t been a top-down initiative.

The group is passionate about diversity, and their recommendations have been well-researched and actionable. For example, we’re going to historically black colleges (HBCUs) to do outreach for our internships, something I would not have thought to do proactively.

Additionally, because many people in the working group have tech backgrounds, they’re trying to apply lessons from that industry as well. Tech of course has also struggled with creating a diverse and equitable workforce, and it’s an opportunity to learn both the positives and the negatives from that space, and bring those lessons into solar.

RICHARD MATSUI: That’s fantastic. Are there people or groups within our industry that you think are modeling the kind of actions we as an industry need to take?

JON POWERS: Individually, Devin Hampton from UtilityAPI has some really awesome leadership on this and has put out a challenge along with the Clean Energy Leadership Institute (CELI) that people should check out. It’s called the Edict Pledge, and CleanCapital and kWh Analytics are, as you know, both member companies. For those who haven’t yet heard of it, it’s a straightforward commitment of what you can do as a company.

From a systemic perspective, when it comes to broader questions of equity, I think climate and environmental justice is a significant theme that we’re going to see more of under this incoming administration. We need to have critical conversations on how we ensure that people with low to moderate income can have access to community solar. This is not a nice to have, but a need to have.

#Solar100’s William Demas: The Peter Parker of Renewable Finance

Originally posted on Greentech Media. In this #Solar100 interview, Richard Matsui, Founder and CEO of kWh Analytics, speaks with William Demas, Managing Director at Stonepeak Infrastructure Partners.

William Demas didn’t choose to work in renewables—at least, not at first. But, as it’s said: “With great power comes great responsibility.” As one of the earliest analysts in the renewable energy sector, Demas has since taken on the responsibility of helping to push our industry forward, through the 2008 recession and now in the uncertain times of COVID-19 and broader social unrest.

In this interview, Demas discusses his unlikely entry into renewable finance, investment strategies, and a call to action to make our sector more racially equitable.

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FROM A “HAPPENSTANCE” START TO “TURNING IT UP” IN RENEWABLE FINANCE

RICHARD MATSUI: You’ve had a longstanding career in renewable finance. Can you walk me through how you first decided to work in renewables?

WILLIAM DEMAS: To be honest, it was happenstance. I graduated from Harvard in 2005, which was around the time of Facebook and all the big internet IPOs. I had some relevant work experience and decent access to Silicon Valley folks, so I pitched myself as a tech banker—a lowly analyst who was going to bring the Facebook IPO to Lazard. Little did I know that one, an analyst doesn’t get a vote on what to work on, and two, that TMT wasn’t just internet IPOs but also included traditional tech like semiconductors.

The first project I got staffed on at Lazard was led by one of the senior guys that ran the semiconductor business and the telecom business. He had a vision to start the cleantech group at Lazard and said, “Will, I want you to be my analyst and help me put it all together.” At the time I said, “Why? I want to do Facebook IPOs.” But as an analyst I didn’t have a choice, right? I got staffed on that team.

One week later, I became enamored with it and realized it was a huge opportunity. From then on, I’ve been 100% focused on the renewable energy sector. It was a very fortunate happenstance.

Then I got a message from a recruiter about a private equity fund focusing on clean energy and thought, “How many other people out there are looking for a clean energy associate? And how many other people in the world are actually doing this other than me? This is mine.” I also wanted to move back to New York, and almost the day I moved back, I received an offer from Good Energies. At the time, it was the only focused cleantech shop, so it was a pretty incredible opportunity.

I was there for just about two years, through a period of transition. When I joined, it was all good days. Then the recession happened, and Good Energies quickly changed its business plan. Good Energies was backed by a European family that had historically been involved in much less volatile businesses such as retail and real estate, and when they saw the market contract and the valuations go south, they quickly unwound that platform. I was part of  a number of people who were unexpectedly asked to leave—I got laid off.

I remember my colleague who delivered the decision to me  saying, “We didn’t even know if you cared about renewable energy in particular, Will.” I said to myself, “You have no idea.” I remember that so distinctly. At that moment, I was determined that I’m not leaving this industry. I thought to myself, “I’m going to turn it up.” And that’s what I did.

ENERGY STORAGE: WHO CAPTURES VALUE?

RICHARD MATSUI: Where do you see relative value in the market?

WILLIAM DEMAS: First and foremost, the holy grail in renewables has been contracted returns, and we are very much focused on identifying those opportunities within the sector. However, it is increasingly difficult in North America to find such opportunities. It is harder to find in the current market, but the right network and relationships to secure projects on a bilateral basis is one way we find value.

Additionally, as with any other industry, you have to continue to evolve and look for the next opportunity. I believe we can take the learnings of the successful decarbonization of the power industry to other verticals within infrastructure, and that opportunity is a big reason as to why I am excited to join a platform like Stonepeak which covers all aspects of the sector, and not just renewable power. The entire grid is going to have to be reshaped, industrial processes will need to become sustainable and the way we move around will need to change, and these are opportunities.

RICHARD MATSUI: That’s the perfect segue. In retrospect, the early solar investors look very smart right now. In his Solar100 interview, Jigar talked about riding the wave of cost of capital down for clean infrastructure. Should we expect the exact same trend to occur with storage? Where are the exceptions or nuances?

WILLIAM DEMAS: You can’t think of storage as just a PPA or a traditional revenue contract; you have to think about a structure where you can deliver this really incredibly useful swiss army knife of technology to the utilities for their benefit and have them pay you for it. As the commercial framework for battery storage becomes clearer, utilities will say, “Alright, I’m willing to pay a lot of money for this contract because it’s incredibly valuable because in ten years my grid is going to be awfully difficult to manage.”

Neither traditional solar or wind investors nor the utilities have adjusted to that framework shift. Commercially, people have to get comfortable with the fact that storage is, for the offtaker, the utility, and for the developer, not just a simple PPA. We haven’t yet figured out a product that fully values all the moving parts of electricity generated, the ancillary services, capacity, and deficit, but once we do, or if we manage to get our heads around the multiple value stacks associated with storage and that they may not be able to be monetized simultaneously, these assets will be incredibly valuable. It’s going to take some time, but I think it’s slowly happening.

RICHARD MATSUI: You alluded to a framework and I want to try to play it back to you: When I think about wind and solar, it’s really an exercise in discounted cash flow modeling. When you’re describing how storage is a different mental framework, does it parallel ­real estate in that each asset should be viewed as a call option? What is the right mental framework here?  

WILLIAM DEMAS: You can enter into what is basically a toll agreement with the utility. Like a co-op, they have the right to use the facility when they want to use it and they will pay you a fixed rent every month to have that available. But, when that utility is not calling on that battery, it still has a ton of value for other reasons. You can do energy arbitrage, ancillary services, and monetize that. You can build a battery in Washington and monetize in California. The issue is that those cash flows are not really contracted, maybe it will be in the future, when people understand the value, but right now these are just markets that are traded real-time, real-time ancillary services.

As an infrastructure investor, the struggle is that I’m used to telling my LPs that I’m the best in 20-year contracted cash flows. But number one, if I do that for ancillary services, I’m going to get paid nothing. But it’s valuable, so I need to be able to understand that, even though it’s kind of hard to put that commercial product into a fixed contract because it’s usually unpredictable and very hard to quantify the value at that specific time for the utility. I don’t have the answer, unfortunately, but I think these assets will feel merchant compared to solar. I think people see merchant as such a “four letter word”, that they don’t really take the time to understand the economic value proposition.

Fundamentally, you can either give up all your value to your utility—who will undervalue the asset tremendously--or you can take on an active management strategy and optimize as you go. I’ve seen this play out at Advanced Microgrid Solutions and see this is the foreseeable future of energy storage, versus contracted revenues.

FUTURE OF THE INDUSTRY

RICHARD MATSUI: From now into 2021, we’re going to be asking all the leaders in the Solar100 series about racial equity in the solar industry. The thought is that the solar industry is of course important because of climate change, but it’s also important because of jobs—there are a lot of people who work in this industry or want to work in this industry. As a respected solar veteran, I’d be happy to have you kick us off if you’re game.

WILLIAM DEMAS: Definitely.

RICHARD MATSUI: We’re in a moment of broader public protest and change. One, how does that impact (or not impact) the solar industry? And two, what role should the solar industry be taking in this time?

WILLIAM DEMAS: Those are very relevant questions. I think for me, one of the biggest questions of this current social time is: Why aren’t there more people of color in this industry?

I take some responsibility for being somewhat complicit; I’ve been around the sector for a while and have not spoken about this more. It is a shame that the solar and broader renewable energy sector look largely homogenous when it comes to race.

Part of the problem is that because of circumstances in life, a lot of people of color can’t take much risk. So they end up going into law or into medicine—professions where you can work hard and get a pretty stable job, everyone recognizes what you’re doing, and it’s clear you’re going to be able to be financially independent. There is so much new opportunity in the renewable energy sector, but there’s also been more risk. As a result, it doesn’t attract that disenfranchised talent that other fields like law and medicine attract.

Moving forward, I’m committing myself to establishing a senior network of people of color in the renewable energy sector. First and foremost, I want this to be a resource for one another, but I think it’s also important to show that there are people of color doing this work, and that people who look like you can and are flourishing in this sector. This is not just a ‘flash in the pan’ opportunity, but rather, a stable, very sizable industry in which people of color can build a good career. I think more awareness of that will go a long way.

RICHARD MATSUI: That’s an incisive observation. When you and I started in solar 15 years ago, solar was fundamentally an uncompetitive energy technology. Because the industry became so price competitive so quickly, I have forgotten that the industry was tremendously risky. So of course, what does that industry attract? It attracts people who could take that risk.

Are there people or groups in solar that you think are modeling the kind of actions that the broader industry should be considering?

WILLIAM DEMAS: Over the last few months I have been encouraged by the genuine focus that many people in this industry have had on the issue. However, we have a lot of work to do still. I have been speaking almost daily with people in the industry, including other people of color such as Brandon Martin and Richard Ashby, and we have some concrete initiatives and platforms under planning that we are looking forward to sharing with the broader community soon.

#Solar100's Jigar Shah and Van Skilling on The Evolution of The Solar Asset Class

Originally posted on Greentech Media. In this special edition #Solar100, Founder and CEO of kWh Analytics Richard Matsui speaks with Co-Founder and President of Generate Capital Jigar Shah and Former CEO of Experian and Chairman of CoreLogic Van Skilling on the future of the solar industry.

The solar industry continues to grow, even in these unprecedented times. In addition to being a source of nearly 250,000 jobs in America and a systemic response to climate change, solar is also a growing, maturing asset class.

In this special edition #Solar100, solar expert Jigar Shah and data expert Van Skilling meet to discuss the evolution of solar as an asset class

As the Founder and CEO of SunEdison, Jigar Shah unlocked a multi-billion-dollar solar market. He has led a number of the industry’s firsts, including hiring the first Independent Engineer for solar and pioneering “no money down solar.” He’s known as both an expert and as well as an influencer of solar’s history.

As the former CEO of Experian and Chairman of CoreLogic, Van Skilling has overseen the growth of industries ranging from consumer credit to home mortgages. He’s become the expert on all things asset class evolution.

Bringing their respective areas of expertise to bear, Shah and Skilling contextualize solar’s past and present, identify solar’s parallels with other investment asset classes, and forecast the future of the solar industry.

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Looking Back: The Early Days of Solar as an Asset Class

Richard Matsui: I am excited to be joined today by Jigar Shah and Van Skilling, both titans 

in their respective industries. Our company happens to be at the intersection of both asset classes, solar as well as consumer credit, and in this interview we’re inviting Jigar and Van to contextualize and lend insight into our industry’s past, present, and future.

Jigar, this first question on solar’s history is for you. We, alongside ten other solar firms, published this year's Solar Risk Assessment to share quantitative data on qualitative trends we’re seeing in the industry. Contributors included industry leaders Wood Mackenzie Power & Renewables and NextEra. A big headline-grabber this year: DNV GL reported that solar assets nowadays are underperforming by 5.4%, on average, even after adjusting for weather. In the early days of solar, solar was constantly overperforming estimates. Is this a trend you’re seeing in the industry as well, and can you help contextualize this?

Jigar Shah: Yes, and it's a natural phenomenon. When you think about where solar was in 2010, people were getting loan guarantees or being forced to sell their projects to Warren Buffett at highway robbery costs. Then in 2012 people started saying, "How about we make this more efficient?" Then the Chinese solar tariffs came in, and people began to ask, "Where do I flex to make my numbers work?”

Solar developers started shopping around for Independent Engineer reports, in an attempt to get a better fair market valuation and more tax equity. Every variable adjusted in the model was a couple basis points, then a couple more basis points, and so on.

Now that time has passed, I think people are going back through the data and realizing, "Hey, these estimates weren’t true. This valuation wasn't real, and now it's time for a correction." I don't think this course correction is going to kill anybody, though I think some of the returns will be lower for some of the equity holders.

The bottom line is, as an industry, I think that we can do better and we should do better. 

Richard Matsui: Let’s turn back the clock to the first deals you were financing with SunEdison—did this industry always use IEs? How did technical questions get solved in early deals? 

Jigar Shah: At SunEdison, we hired the first IE for solar. I remember we signed a deal with Goldman Sachs in 2005, and Goldman asked us, "Who are you going to use for an IE?" So I went out to the most skeptical solar people that I knew, and I hired them. And they gave me a crappy report that said it would generate 8% less than we all thought. Goldman and SunEdison financed the project using the IE’s estimates.

We were extremely conservative in the early days. We sold a lot of those projects to Wells Fargo in 2007. Today, most of those Wells Fargo projects outperform by about 6-8%. In terms of production, we swept the excess cash so it was a good deal all around. Terms got tighter and tighter after that, but we were forced to be pretty conservative in the early days of solar. 

Richard Matsui: You’ve summarized it well—any incentive structure guides behavior. Lenders, tax equity, and the entire financing edifice rely on IEs for production estimates. These production estimates come from IEs that are hired by either the sell-side or buy-side developer who have a profit incentive to see a certain number from these IEs. When you talk to the IEs with the mics off at a bar at SPI, they'll tell you that they're all competing with thirty other IEs for business, and that there's a very clear outcome that their client is trying to achieve. A prominent solar developer told me that for every large project they sell, they'll hire five different IEs to provide production estimates, and then they're going to pick the highest number. From a pure cost-benefit analysis, you can’t refute the strategy to pay $10,000 for each IE estimate, because they can get a higher P50 that translates to millions in the asset sale price. And over time, there’s a resulting drift in P50s as you said with -- “a couple basis points here, a couple basic points there; turning the soiling knob here, turning the shading knob there.”

It seems IEs haven't seen an end in sight because the industry just continues to push further and further in this direction. How does that line up with you? 

Jigar Shah: The buy-side is into this trend, too. A lot of players on the buy-side actually really wanted the volume and were willing to compete for it. Remember these were funds making fees. They didn't really care about what the LP returns were. 

It is the same in solar; the whole dynamic with IEs was basically the blind leading the blind. But as an industry, we've got another trillion dollars of solar to put to work over the next six years. It's time to course correct, address the problem of incentivized over-estimates, and make sure that everyone gets a more fair deal going forward. 

Richard Matsui: Right. All that behavior between IEs and developers is rational, but it's fundamentally changed the role IEs play; in practice, IEs are now hired to help the buyer or seller to achieve a better asset valuation. This reminds me of the role that lawyers play in the American legal system: Both sides hire lawyers not to find an objective truth, but to argue their respective strongest case. This is sensible in the subjective world of justice, but this is engineering, not philosophy. What do you see as the trajectory of this market incentive structure and its implications? 

Jigar Shah: Well, we're going to fix it now. When a report like the Solar Risk Assessment comes out, and the bosses of the people who had to put money out the door for projects read it, the bosses are going to confront this behavior and say, "Hey, let's stop doing that crap. As we go into the next phase of growth we have to do better.”

The reason our industry is in a good place is because it's inevitable that the industry begins using market data to shine a spotlight on the excesses and biases. With companies like kWh Analytics publishing these insights, we can then fix those estimates. 

It’s also an opportunity to realign the role of market participants and allow them to focus on their areas of expertise; IEs providing technical assessments and not solely relied on for financial estimates.

Van Skilling: Jigar, that realignment reminds me of how home inspectors and appraisers operate in tandem in real estate. Home valuations still leverage technical expertise, but appraisers and now databases like Zillow can help supplement with valuations data using market comps. 

Moving Forward: The Maturation of Solar as an Asset Class

Richard Matsui: Solar is still a relatively young industry. Van, when you look at the evolution of other asset classes, do you see any parallels? 

Van Skilling: I certainly do. Let’s look at an industry I’m very familiar with: consumer credit. Today, consumer debt drives the U.S. economy. And the fuel for that consumer debt is the consumer credit data, which allows the debt to be incurred and repaid.

Ten years from now, I both hope and expect solar, as a growing source of clean energy, to be our largest source of energy. So having the data to support that growth and to allow it, I think, is very important. 

Credit has been around for thousands of years, but it's really a relatively new business. Credit as we know it now was actually started in the 1930s by Sears, who was the Amazon of their time. A substantial number of houses in America had a Sears catalog, and you ordered whatever you needed from the Sears catalog. And so Sears kept credit records of their own customers.

As an industry, credit really didn't take off until 1950 when Diners Club came up with a credit card. With that success came other credit card companies: American Express, VISA, and MasterCard . These were credit companies, but they maintained their information on pieces of paper in these high-tech devices called Rolodexes, and they communicated between their offices by telephone.

In late 1960, one of the founders of TRW, which became Experian, said, "There's going to be a cashless society that captures data on computers. And we know more about using computers for data than anybody else. So we have to get into this business."

As a result, TRW, now called Experian, introduced computerization and data aggregation into a business that improved accuracy and efficiency in credit underwriting. This evolution in credit was inevitable given the availability of data in the market. And I think you're going to see a similar evolution in solar, where the use of data is going to make solar financing better, easier, faster and more reliable. 

Richard Matsui: You’ve pointed out an interesting parallel. To expand on that, today everyone knows what a FICO score is-- a universal market comp for lenders and consumers to assess credit risk. Obviously, there's a time when FICO scores didn't even exist. What was the inflection point that enabled TRW / Experian to gain market adoption and create that standard of comparables to the rest of the market?

Van Skilling: For context, FICO depends on Experian’s data for their model—FICO’s model relies on consumer credit database. FICO scores are universally accepted today, but that wasn’t always the case. What precipitated that change was that all credit investors found that it was in their best interest to contribute their information to the credit bureaus. The more information there was about the individual, the better credit records they could maintain. This enabled a source of truth for market participants to rely on and improved underwriting.

Prior to recognizing the value of contributing data, the consumer credit industry looked similar to the solar industry today, in the sense that each investor largely kept their own records of their assets in-house. If they shared those records, it was only shared on a local or regional basis. So each investor was dependent on a very narrow database to be making your decisions. Consumer credit hit an inflection point in the 90s when stakeholders realized they could improve efficiency and accuracy by granting data access to a database that they could use for finding new customers as well as maintaining their own customer base. Combined with computerization, the database became global. Now virtually everybody uses a FICO score, which is based on consumer credit data.

Jigar, going back to your earlier point about use of data, it sounds like you think solar will undergo a similar inflection point to use market data to fix inefficiencies?

Jigar Shah: Right, I think data will inevitably get reported, the truth will come out, and smart money will demand better. That ball has already started rolling because there's actually a dataset out there. kWh Analytics has a dataset. And there are others who have a dataset. So at some point, use of objective market data will be fully normalized. And to the extent that estimates deviate from that normalization, the buyer side will expose it very quickly, because they're going to say, "Well, the last three deals done nearby had X in their IE report so how is it that you think that your system's going to produce 6% more?" That level of transparency will force accuracy.

Then the fight will be over the next generation of tracking software or panel technology improvement. And frankly, we want to keep encouraging that level of innovation. 

It's constantly a cat and mouse game, but my sense is that the deviation will be lower over time. So instead of a 5% deviation, as we found this time, my sense is that deviation in the future will be 1% or a half percent. And I think that that means that there'll be a little bit more comfort within the financial soundness of the system. 

The people getting screwed now are very sophisticated equity investors who should know better, and what data they're using. So if they are not reading your market reports or listening to the Currents podcast or figuring out how to educate themselves, then shame on them. 

Richard Matsui: Fascinating. You’re right—as an industry, we have the tools to course correct and guide the evolution of solar. It is up to us to take that step forward.

#Solar100’s Brad Bauer: The Captain James T. Kirk of Solar Finance

Originally posted in Greentech Media. In this #Solar100 interview, Richard Matsui, Founder and CEO of kWh Analytics, speaks with Brad Bauer, Co-Founder and Partner of Lacuna Sustainable Investments.

As one of the first investors in the U.S. solar market, Brad Bauer’s led teams to “boldly go where no one has gone before.” In his fifteen years working in renewables, Bauer co-founded one of the industry's first private "YieldCos", raised nearly a billion dollars for one of solar's brightest burning stars, and started a new company built on the lessons learned from the last one.

In this #Solar100 interview, Bauer discusses lessons learned from Cypress Creek, the evolving market structure of the solar industry, and the future of development capital.

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STARTING IN RENEWABLES

Richard Matsui: You majored in political science and economics, got your JD, then started your career at KPMG focusing on M&A. When did you first decide to work in renewables?

Brad Bauer: I actually started out working at a law firm in Boston then tagged along with my then-girlfriend now wife when she finished school and started practicing in San Francisco. I wasn’t enamored with practicing law—it certainly wasn’t something I wanted to do for the rest of my life. So I joined KPMG, one of the Big Four accounting firms and was admitted to the partnership a few years later.

KPMG was a really incredible place, as it gave me the opportunity to build a proactive practice focused on increasing project returns and corporate profitability and afforded me the opportunity to work with large company CFOs and Board directors at a really young age. I realized what I enjoyed most about my work was the creativity required to advise sponsors and investors on project based transactions. I didn’t work on any solar projects at KPMG but was involved in what were, at the time, some good-sized wind transactions. I left KPMG thinking solar had many of the attributes that made wind attractive and thought I’d have a chance to use what I’d learned and the relationships I’d built in solar.

After leaving KPMG I co-founded MP2 Capital, which was one of the first equity investors in U.S. solar assets. There I had the opportunity to partner with Mark Lerdal, a brilliant lawyer and executive, not to mention a great person and Jeffrey Glavan. We weathered the global financial crisis and developed a good sized portfolio of operating assets that we sold-off in a piecemeal fashion throughout 2014 and 2015.

Following that, I took a year off before joining Cypress Creek Renewables, where I was the Chief Capital Markets Officer and a member of the Board of Directors. While there we raised $450 million of corporate debt and another $300 million of equity.

I left Cypress last summer and formed Lacuna Sustainable Investments with Patrick McConnell and David Riester. We closed our fund in March of this year.

CYPRESS CREEK: THE THESIS, THE WHIPSAW, AND THE LESSONS LEARNED

Richard Matsui: I’d love to hear your experience of Cypress Creek, starting with the early days of the startup and its thesis.

Brad Bauer: What made Cypress unique was the identified opportunity to build solar at scale, quickly. We sold MP2 Capital because we didn’t see a path to scale without a great deal of third-party capital and resulting loss of control. Cypress, on the other hand, invested in a nascent market that evolved into a fantastic market, and used the resulting development investments as collateral for its initial corporate facility. As the development investments matured the company was able to borrow more money, which fueled additional investment. The market, of course, was North Carolina, where the combination of the public utility commission’s implementation of PURPA, the North Carolina state tax credit, the federal tax credit, and to a more limited extent, the state RPS and property tax abatement, created the market. In many ways, North Carolina was the perfect opportunity, not only did you have the financial characteristics just mentioned but you also had plenty of inexpensive land, clear interconnection and entitlement processes and reasonable labor costs. The speed at which equipment prices dropped didn’t hurt either.

All this allowed Cypress to acquire, build, and finance a large number amount of assets in a short period of time. It was uniquely exciting and yet unsustainable opportunity, with an unbelievably talented group of people motivated to do great things. 

Richard Matsui: As Cypress grew its headcount to 400+ people, everyone in the industry was talking about Cypress. Invariably the conversation would involve some version of, “Wow, that is incredibly aggressive growth,” followed immediately by, “But the team there is really strong.” I’m not a project developer myself so I can’t assess development skill, but I do closely observe reputations. Despite having such a strong team, things didn’t go to plan. What happened? 

Brad Bauer: Ultimately, Cypress developing at scale outside of North Carolina, while managing the growing cost structure, was problematic. And saying Cypress was a pure greenfield developer is a bit of a misnomer. While there was some early-stage development at work, Cypress had access to capital (corporate and project level) and went out and acquired projects from local developers at a pace and volume tacked to maximum use of available capital. The sheer number of acquisitions and the resulting need to move a large number of small projects through the system led the company to build an army of people focused on all aspects of design, engineering, construction and financing. And for a time, it worked when the market was lucrative and conditions relatively static. Unfortunately, value is ultimately determined at the company, rather than project level, and if your cost of production exceeds the value of what you have produced, well, that’s not a good thing.

The board dynamic was tough as the equity chose growth over value creation, the lenders took a laissez faire approach based on their underwriting of asset values and both decided to ignore the reality that the North Carolina market was unique and unlikely replicable elsewhere. As it turned out, the North Carolina market changed for the worse, new markets did not develop, asset valuations were overly optimistic and the company could not keep up with the constant need for capital. As a result, the company’s lenders became the equity and have spent the past couple years in the market looking for answers.

Cypress’s cost structure wasn’t that of a successful developer. It was structured more along the lines of a manufacturer with disparate groups tasked with moving a large number of small projects through design, engineering, construction and financing. Definitely not the sort of lean, value creation focus one sees in a successful developer. While we did raise some preferred equity late in the life-cycle, for most of its existing the company was funded almost entirely with debt, and a lot of it. To service the debt, it had to maintain a constant velocity and volume of projects that would generate a projected value. Overly optimistic assumptions as to development timelines, MWs or project values create massive problems when you have high SG&A and quarterly interest obligations.  If the sale market slows, a market doesn’t materialize or financing assumptions decline, the only way to meet your fixed and variable cost demands is to raise additional capital.  As these things occurred, the company  needed more, and more, and more money. But absent  profits or value creation this became an uphill battle. Development takes time and valuation is dynamic. So if you’re not able to build as many assets as you thought as quickly as you thought, and they don’t have as much value as you thought, it’s a whipsaw. You’re in trouble. 

Richard Matsui: You seem to be pointing out two sides of the same coin—the aggression is what enabled Cypress to have that scale of impact, but it also created some structural challenges. When you take a step back, what lessons do you draw from that?  Because in the end it’s not as simple as, “Don’t be aggressive,” right? 

Brad Bauer: Absolutely. Lesson number one: Profitability, value creation, and liquidity are absolutely necessary for long-term success.  If you’re not profitable or if you’re not creating value you are not going to have access to the cash you need for very long, And without it you are not going to survive.  

Lesson number two: Even a great culture needs a strategy. Cypress had an incredible group of extraordinary professionals focused on doing great things. A really great culture.

Lesson number three: Just because someone is willing to loan you money doesn’t mean you should take it.

Lesson number four: Owning assets isn’t for everyone.  If you think it is for you, you need to know what you’re trying to accomplish. Why do you want to own the asset? Can you afford to own the asset? What are you going to do with the asset? Are you the best, cheapest, owner of the asset? Is ownership the highest and best use of you limited resources?

Lesson number five: People who don’t prepare for a rainy day just haven’t been around solar long enough. This goes to capital structure. Make sure you are capitalized such that you can thrive in good times and survive the rocky ones. And choose the right partners.

Ultimately, you’ve got to focus on your “bottom line”; take actions consistent with your short and long-term goals; make sure if you take other people’s money you have a good use for it; and prepare for the inevitable cloudy day so you can get to the other side.

Richard Matsui: I’m reminded of a previous Solar100 interview with Ed Feo, in which he said that having a fixed annual MW target is a fundamental mistake for a development business, simply because markets change constantly. How do you think about that?

Brad Bauer: I agree. It comes down to capital structure. If you are capitalized with debt, the die is cast. You need to build X MW at Y margin in order to meet SG&A and capital obligations. If the markets change, you are in trouble. If you can’t meet your capital obligations, you are in trouble. That’s the challenge. People love the idea of preserving equity upside but often fail to recognize how it impacts risk.  It is hard to get off the debt treadmill . A capital raise feels great, but investors and lenders expect returns of and returns on capital and if you are not creating value in excess of these amounts all you are doing is making money for others.

Richard Matsui: Related, you’d written about choosing development capital paths, and I thought this line was really well put: “Alas, conservatism and prudence are not the first two words that come to mind when one considers developers, so the growth treadmill is common.”

MARKET STRUCTURE EVOLUTION

Richard Matsui: I’m intensely interested in theories of how the market structure of our industry will evolve, and so I really enjoyed the 3-part series your firm published on the future of development capital. Clear thinking is hard to come by. Can you outline that thesis?

Brad Bauer: In a sentence, it is that your choice of how you capitalize your company and assets ultimately dictates the actions you need to take. Developers frequently take the road that offers the greatest possible upside, but don’t think about how capital structure creates risk in achieving that upside. In that paper, we posit that anytime you take somebody else’s money, you’re giving up something. And you have to understand what it is that you’re giving up and how that impacts you personally. Which I think Dave, who wrote the article, does a great job of laying out.

Development is an incredibly cash-intensive business, and when you’re short on cash it ultimately takes away opportunities. So you really have to be thinking about capitalization at all times. There is no one right answer by any stretch of the imagination, but there are a few answers:

1.      Self-financing, if you can do that, is absolutely fantastic, but you have to have a lot of conviction or you need to have a heck of a lot of money.

2.      For developers trying to raise cash at the corporate level, you have to have a heck of a good thesis and you have to have a market that you can “exploit” and not have bigger dreams of going outside that market at the outset.

3.      Selling to larger developers can be a great situation, though it’s fraught with challenges because everybody is competing for capital. That inevitably creates a project hierarchy, and capital flows to the highest and best opportunities. And once your project is in somebody else’s pool, you’ve lost control over it.

4.      Raising project level development capital is challenging and costly, but it does allow for some of the benefits of both self-financing and corporate-level financing. It allows you to control your own destiny to a greater extent.

Richard Matsui: The article raised an interesting analogy with tech, real estate, and pharma: in other industries you see the emergence of early stage, true equity risk capital. Equity capital is able to take on that risk, despite the unique complexities to each of those asset classes. Why has 3rd party development equity been so scarce for our industry? I understand why it took a while for tech VC to emerge, but power plant development has existed for a long time. 

Brad Bauer: I think it comes down to the risk adjusted return potential and the effort required to source, diligence and monetize the investments.  When you think about an early stage technology or biotech investment, there is often an established market for the investment and a single investment can carry an entire fund.  There’s effectively unlimited upside to those investments because of the nature of what’s being produced.

In contrast, solar and storage development investments are pretty complicated and painful to invest in; it’s niche work with a lot of documents and models. There’s binary risk. The check sizes are pretty small. It’s a tough space to deploy large amounts of money, and there is a limitation on the upside potential of the investments. Along these lines it is not difficult to imagine owners and developers looking to Solar Revenue Puts as a means of eliminating downside risks, which would, in-turn, improve risk-adjusted returns for investors and decrease capital costs for developers.

Marketplace dynamics also change rapidly. As off-take contract terms get shorter and shorter, investors are who want to deploy money into the U.S. solar market are being forced to take more and more merchant risk, which will create winners and losers. 

Richard Matsui: I think the “low-upside, high-downside” observation is very astute; I haven’t heard it before. On merchant risk, I’ve been astounded by how quickly equity went from taking zero merchant risk to accepting the highest merchant curve it can find. One would have to assume the next logical step will be for investors to accept Ventyx at 3x.

Over the past three years there has been a strong shift towards the tie-ups between developers and the long-term asset owners. The asset owner’s motivation is clear: access to deal-flow. But it’s less clear to me why developers have taken this path. BlackRock with Distributed Solar Development, Capital Dynamics with Sol Systems, Osaka Gas with SolAmerica. What changed on the developer’s side?

Brad Bauer: Fundamentally, it’s a need for capital. Development pipelines are a very thirsty plant: they need a lot of cash at the outset, and even more cash as they mature. Most developers don’t have the cash to handle the magnitude of investment required to support PPA deposits, hedge deposits, and interconnection deposits on a project or portfolio basis. Further, as we’ve discussed, there are so many variables to juggle while developing solar. Locking in perhaps the biggest one—buyer pricing assumptions—even if it is not the top of the market, can be very attractive.

Richard Matsui: Does solar development become more or less fragmented over time? What I find fascinating about your post is that while it’s become less fragmented recently, it would appear that you think there will be more.

Brad Bauer: Large developers that can create a great deal of “product” for long-term investors are incredibly attractive. However, development is primarily local, and large national developers are hard-pressed to make that work. We’ve all seen this play out over the last 10 years.

The entrepreneurial nature of developers is that they generally want to be small shops. Developers want to take as much risk as they can—preferably with other people’s money—and taking project-level capital creates that opportunity. As the projects move toward NTP, the check sizes become larger and larger, and at that point in time you hope to be able to find the right long-term owner, as opposed to having that middle step along the way where it goes from local developer who created the opportunity, who sells it to the larger developer who takes their cut, and then it is ultimately sold to the right long-term owner. If the developer can skip that middle step there’s more money in the deal for them. 

Richard Matsui: If your thesis is correct and third-party development capital continues to grow in share, what are the second order effects that you anticipate? For example, do you see more “Cypress Creeks”, development platforms-turned-asset owners, emerging?

Brad Bauer: A successful development business must be good at managing capital and risk. As companies grow and attempt to capture more and more of the value chain, the necessary focus is often lost. So the core question has to be whether vertically integrated developer/IPPs can be as efficient and disciplined as necessary to be successful. Can they determine how best to allocate finite resources in a manner that allows them to be profitable and create equity value. It is hard to think of an example of a large developer that has gotten this right in the solar space.  The pages of solar magazines are filled with people who had aspirations of greatness but were unable to make it happen. Energy markets in the U.S. are fragmented, ebb and flow with public policy, and it is tough for large organizations to manage this dynamic. In contrast, smaller organizations that are nimble, quick, and have access to capital are often better positioned for success.

It is certainly possible that policies, economics, or costs will change in a way that large national developers and IPPs will have an advantage, just as it is possible that efficient organizations will grow out of new markets. But I think the former is going to take some time and the latter seems rather unlikely. So my money’s on the smaller nimble shops who pursue the right opportunities, pick the right partners and have the capital necessary to turn ideas and opportunities into projects.  

#Solar100’s Benoit Allehaut: The Ethan Hunt of Solar Investing

Originally posted on Greentech Media. In this #Solar100 interview, Richard Matsui, Founder and CEO of kWh Analytics, speaks with Benoit Allehaut, Managing Director of Capital Dynamics’ Clean Energy Infrastructure team.

Throughout his fifteen years working in renewables, Benoit Allehaut’s completed a number of ‘mission impossibles’: he's made a career in an emerging industry nicknamed 'the solarcoaster' for its ups and downs, he’s established himself as an expert on both development as well as financing, and he’s built up the second largest portfolio without relying on merchant risk.

In this #Solar100 interview, Allehaut discusses M&A in the post-virus environment, “detrimental investor behavior”, and advice for young people who want to work in renewables.

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FROM FOREIGN SERVICE TO RENEWABLE ENERGY

Richard Matsui: You have a surprising career background. It seems like almost everyone in solar comes from either real estate, finance, or law. You’re the first person I’ve met that started off in an embassy, which is also how I got my start. How did that become your first job out of college?

Benoit Allehaut: I was avoiding military service—in France it was mandatory at the time, and the only way you could avoid it was to either work for an administration abroad or a company abroad. I chose the administration option.

More interestingly, I had an opportunity to go to Guatemala, Taiwan, or Moldova. Moldova was probably the last place on earth  I wanted to go—so I chose it. When you’re in your early twenties, adventure is everything. And from a personal formation standpoint, if you take the easy path, you don’t learn. In Europe, everybody knows about Albania; nobody knows about Moldova. Moldova is the most economically challenged country in Europe. It’s a tiny country that’s split between the two regions of Moldova and a separatist region called Transnistria. My work was tough, but I learned a lot. The experience helped me get out of my comfort zone moving forward.

Richard Matsui: What prompted you to move on from that experience?

Benoit Allehaut: The embassy was very nice, but I was never going to be a civil servant. There was always an entrepreneurial side of me that wanted to work in the private sector.

During my foreign service, I had an extraordinary opportunity when the French president visited Moldova. People work in foreign affairs their entire lives and never have a presidential visit, and I got one. I was invited to decide who would be part of the presidential delegation and I chose Paris Mouratoglou, CEO of SIIF Energies, and Francois Roussely, CEO of EDF. Paris pitched to Roussely an investment in SIIF in exchange for the exclusivity in renewable energy. A few months later a deal was cut. And thus I played a role, albeit small, in the creation of what became EDF Renewable Energy!

Richard Matsui: Moving on to your work in renewables, you’ve been on the development side at General Electric (GE), then OptiSolar, which then subsequently became First Solar’s project development arm. Then you switched to the capital side with BlackRock, and finally Capital Dynamics. You have a wide range of experiences. How did you decide what roles to take?

Benoit Allehaut: I took the view that wherever I went, I had to give my best, make myself redundant, and move up. I prioritized learning, because I always felt that the day I stop learning in an organization would be the day I get bored.

Throughout my career, I also wanted to work for market leaders. I wanted to work for GE because when I first joined them, it was at the beginning of a J-curve in renewables. When I joined First Solar, similarly, there was an explosion in the solar market. Working with the dominant player in the market was incredibly useful at the time. That said, I also need an entrepreneurial environment to thrive. Now at Capital Dynamics we have both a market leader and an entrepreneurial team.

Richard Matsui: Having developed and financed renewables since the early days of this industry, what macro lessons have you pulled from those 15 years?

Benoit Allehaut: My biggest lesson is on alignment and investment behavior. Looking back at the wind business in particular, there was a lot of work being done with independent engineers to extract the most favorable reports to make an investment look good, and thereby extract the best financing terms. But when you’re a sponsor and long-term owner and you’re not flipping an asset, you’re a value-based investor. In wind, this has led to detrimental investment behavior.

STATE OF THE MARKET

Richard Matsui: Keith Martin says the “wall of capital” continues, which leads to behavior from sponsor equity that’s hard to explain. You were the first person to tell me about sponsors bidding negative IRRs during the contracted period, accepting aggressive merchant curves and IE “P50s”. This was already common behavior two years ago, so one would presume that it’s gotten progressively more aggressive. You’ve observed that there was a correction in wind. In solar, is there evidence that the coronavirus pandemic has fundamentally impacted behavior or are we still continuing on the same trajectory?

Benoit Allehaut: The economic theory of market equilibrium can be frustratingly long to realize. We still see ERCOT deals being done with hedge contracts marketed as “PPAs” and basis risk being presented as positive. One of my favorite books and movies is the Big Short. In the movie there are some epic scenes, including one where the S&P employee says, “If we don’t give the banks the AAA rating, others will.” There is a lot of truth to that. As long as the market of investors continues to expand, there will always be a chance that investments get made without an understanding of the risks involved. A huge part of my job is to understand and mitigate risks.  For every investment that we make, we take pride in the fact that we do so with our eyes wide open. 

Richard Matsui: So, if not during a global crisis, what event will force market discipline? Is it 10 years from now when these closed-end funds need to liquidate? Or does it happen sometime sooner?

Benoit Allehaut: This is the crystal ball question and my answer is “I don’t know”. We regularly see new investors arrive in the U.S. market, and it is not always clear they understand the idiosyncrasies of the U.S. market.  For example, investors in the European wind industry where asset performance is fine because the standard deviation is lower, come to the United States think it’s going to be the same, but it’s not. They don’t understand tax equity structures, and they don’t know that resource risk in the U.S. is much higher.

The market is dividing between folks who have a good understanding of the risks being taken, and those who don’t have access to the deal flow and are dependent on the conveyor belt of sell-side advisors. In general, when you look at the deals available in the market, it’s a mixed bag. It’s easy to say this, but it’s important that the entire industry makes good investments because at some point there will be reputational damage. I think everyone would benefit from more discipline in PPA pricing, PPA tenors, merchant assumptions, but when will it happen? Not too soon.

Richard Matsui: What’s a good investor to do in this environment? You’ve built up the second largest portfolio without banking heavily on merchant risk, which still strikes me as mission impossible.

Benoit Allehaut: First of all, you have to come at the right time. I think if you were to try to do this today, it would be very difficult. We were very fortunate on Moapa, California Flats, and Mount Signal. 8point3 was a one-of-a-kind transaction, and there is no other 8point3 readily available. That gave us the scale to then do proprietary origination. We took a view that, while we were “private equity”, we were really infrastructure investors representing large, long-term institutional investors.  It was not about flipping but rather about long-term cash flows and value. This industry needs to move to making solid investments with balanced risk/return targets. Finally, you need to work with the right people, and I think the world of each member at Capital Dynamics and our affiliate Arevon.

We have a value based mindset. Our team quickly learned that it takes a lot of time and energy to address a problematic asset. We do our best to avoid them. I know that teams are under a lot of pressure, but it’s a reckoning with the agency issue: Why is somebody selling? Why is somebody buying? There is a whole protocol that needs to happen to make sure that good investments are made.

Richard Matsui: I think the Principal-Agent problem is a big one, and only discussed with heavy drinks. I spoke with a banker recently who said the job used to be about applying best judgment to structure good loans that would get repaid. But now, there is so much internal pressure to do more renewable deals that the job is now simply about presenting deals to credit and letting them decide, because there are good odds that those loans won’t get repaid. It’s strange to hear a banker say “I’m no longer sure that we actually care about getting our money back”, but that’s where we are now.

Benoit Allehaut: That’s terrifying, but I hear similar observations. Tax equity historically created very perverse incentives for wind projects because tax equity is remunerated based on PTCs, cash and depreciation, but PTCs follow cash. When a project underperforms, tax equity earns a higher multiple on invested capital, so there was almost an incentive for tax equity to have assets underperform. You still want the asset to flip, but if you underwrote for 10 years and the asset flipped in 20 years, that’s actually the best outcome for the bank. You have a piece of the capital structure that is fundamentally misaligned. It’s scary when a tax equity investor will underwrite knowing that the asset will fail because it might facilitate the sale of a wind turbine. We have to hope that there will be a return toward more traditional and rational investments because that will benefit the entire industry.

Richard Matsui: Where is relative value in the solar market today?

Benoit Allehaut: In the past, we all lived with Unit Contingent PPAs, which means whatever the plant produces, the buyer buys all of the power. The market now can offer something much closer to what gas or coal has historically provided with the combination of solar plus storage or solar plus energy management. That’s better risk management and better value, ultimately, for buyers of the power.

Richard Matsui: Everyone says, “Storage is where Solar was 10 years ago.” First, I’d love to hear if you agree or disagree, as you have a massive storage fleet under construction. Second, every analogy has flaws. What are the major points of difference that you see?

Benoit Allehaut: First of all, storage is much more complicated than solar. It is not plug and play. Solar farms today are blocks of panels with inverters being throttled to the MPPT so that the farm achieves the maximum output at the point of interconnection. Now suddenly you have a battery that will take energy and then re-dispatch it. From a SCADA standpoint and from a system architecture standpoint, it’s a lot of work.

Second, storage complexity really varies with application. Load shifting is much easier than if you provide multiple services simultaneously. You also have multiple players that come with storage. You’ll have the asset owner and also the energy manager sending the signal as to when to charge and discharge a battery. I think there is truth in the saying that storage is the early days of solar, but it’s not just about a cost reduction curve.  It’s a more complex product and has varying applications. It’s true that the storage industry is piggybacking on the EV market globally, but how fast costs will go down remains to be seen. It is very important to look at quality, given what’s in the box varies from one supplier to another. We see a lot of people on the development side but again, as a long-term owner, we tend to be more conservative and think through all the implications of what is in the box over the life of the asset. 

Richard Matsui: In a year defined already by uncertainty and unknowns, what’s your biggest non-consensus bet for the remainder of the year?

Benoit Allehaut: I think that the outcome of the election matters much more than we want to believe. We need to navigate through regulatory uncertainty in our decision making. 

ADVICE FOR NEW GRADS WHO WANT TO WORK IN RENEWABLES

Richard Matsui: When you meet a fresh MBA or a college senior who says they want to get into renewables but don’t know where to start, what do you recommend? Looking at your background, fifteen years ago, wind would have been a really good place to start, particularly because there the solar industry did not really exist then. Where is that good place to start today?

Benoit Allehaut: I tell all students the same thing: This industry attracts a disproportionate number of talented people. Unfortunately, it also creates a lot of competition. Everyone wants to work in an industry with meaning. What I recommend to everyone is to just get in the industry. Don’t set requirements—you’re here to learn. Start somewhere, be great at what you’re doing, and then look for the lateral move and the opportunity to create something. Coming in with demands and expectations is very dangerous because it really impedes long-term growth. You can even work on something as boring as insurance—kidding, Richard—it really does not matter. Talent and hard work is always rewarded in the long run.

#Solar100’s Todd Alexander, Emily Kirsch, and Stephen Lacey: Solar’s Podcast Experts

Originally posted on PV Magazine USA. In this special edition #Solar100, kWh Analytics’ Richard Matsui speaks with three solar podcast experts, Norton Rose Fulbright’s Todd Alexander, Watt it Takes’ Emily Kirsch, and Post Script Audio’s Stephen Lacey.

With over 700,000 podcasts out there, the medium has gained unprecedented traction. Leading the pack, here are three of the solar industry’s luminaries when it comes to all things podcasting:

Todd Alexander is host of Norton Rose Fulbright’s Currents, a top 200 podcast on Apple’s Business list. In spite of its very niche project finance focus, in 2020 Currents has surpassed 1 million downloads and now boasts a virtual auditorium of 20,000 people listening per episode.

Emily Kirsch is the host of Powerhouse’s Watt It Takes, a live podcast featuring clean energy founders and CEOs. Watt It Takes’ growing guest list includes powerhouses Sunrun’s Lynn Jurich, NEXTracker’s Dan Shugar, and Generate’s Jigar Shah.

Stephen Lacey is the founder of Post Script Audio and co-host of Energy Gang and Interchange. A podcast veteran of nearly fifteen years, he’s taken multiple energy podcasts from start to success.

In this special edition #Solar100, Todd Alexander, Emily Kirsch, and Stephen Lacey talk about the power of effective storytelling and what they’ve learned from starting and building some of the solar industry’s most popular podcasts.

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TODD ALEXANDER, PARTNER AT NORTON ROSE FULBRIGHT & HOST OF CURRENTS

Richard Matsui: Currents just hit a million downloads—it blows my mind that there are at least a million instances of people wanting to hear about project finance, and it really speaks to the work you and Emily Rogers are doing. Can you introduce Currents and speak to that milestone?

Todd Alexander: We did recently pass the million-download threshold, but to me the more impressive thing is the growth trajectory. When we started the podcast in 2016, it was geared toward training people who were already in the industry, and most of the initial listeners were at Norton Rose Fulbright. We’ve changed the focus to make it more outward-facing and started having guests on from outside of the firm, including industry thought leaders like yourself, clients of the firm, and only occasionally my partners and or an associate from Norton Rose Fulbright. Over the last 18 months, with that change in focus, listenership has grown exponentially. When we started out, we would have 1,000 to 2,000 listeners per podcast and now we’re at around 20,000 per podcast.

Richard Matsui: Given that shift over time, is there a prototypical audience member that you now envision when you’re inviting guests and putting together interview questions?

Todd Alexander: To be honest, I don’t think about the audience that much. When I was a kid growing up in the suburbs of Chicago, I listened to a talk radio host named Milton Rosenberg, a University of Chicago sociology professor. His show was every weeknight when there wasn’t a Cubs baseball game (because he shared the same station, WGN). I remember him having people like Margret Thatcher on one night, and the next night he would have a gardener from the Chicago Botanical Garden. The show was sufficiently popular, so people would want to be on it, and he could decide to have on whoever he wanted and the audience got to learn about whatever he wanted to learn about. He was one of these polymaths, spoke a few languages, and knew a little bit about everything. I remember thinking, “What a great job this guy has—he gets to find and talk with interesting people.”

A lot of the Currents guests are just people who I think have something to say that interests me and that I’d want to learn more about. My process for selecting guests has been, “Hey, I would love to talk to this person for half an hour and understand what’s going on here, and I think that there are other people out there who are interested as well.” So far, it’s worked.

With such a focused podcast, you’re not going to have Serial type numbers. But we know there are other lawyers like myself and a lot of people in our industry who listen to the podcast.

Richard Matsui: Despite the many podcasts out there and your niche focus area, Currents is still consistently ranked in Apple Top 200 Business podcasts. What’s helped Currents to earn the following that it has?

Todd Alexander: I think the first factor is that the projects group that I am part of is exposed to a lot of the cutting edge trends in the industry, which means I have access to a lot of people that I wouldn’t have access to if I were either at another firm or on my own. If I was part of some podcast network and I was based in a studio in Brooklyn, I wouldn’t have access to the same people.

The second success factor is that the producer of the podcast, Emily Rogers, makes it extremely simple for me. Our podcast topics are subjects I work on on a day-to-day basis, so I typically don’t have to do very much preparation for the podcast. Often, I’ll spend ten minutes before recording with the guest to make sure I know the topic and the person I’m meeting, and then Emily has everything set for me to go. We spend approximately half an hour recording, and then I’m done. With Emily’s commitment, editing skills and behind-the-scenes magic, we’re able to make Currents into what it is. Last year we produced 33 podcasts and we’re on target to do that again this year.

A third factor is consistency. The purpose of the podcast for me is to learn from and talk to people that I find interesting, keep abreast of industry trends, and create brand recognition for Norton Rose. We also want to share information among people in the industry and give the guests, like yourself, a platform to share things that are changing in the market. In that respect, our vision for the podcast is clear. And if you have a consistent product that comes out fairly regularly, people expect it and they know when it’s coming and may bookmark it as a favorite podcast on whichever platform they use.

Richard Matsui: You’ve been hosting for about two years now—what have you learned?

Todd Alexander: I’ve learned a couple things about technique. One is that my natural style of talking is to talk over people. In real life, when somebody is speaking I often don’t let them finish what they’re saying—if I have the gist of what they’re trying to say, I will speak over them. That is a terrible technique in recording a podcast because it’s very hard for the listener to understand. When you’re in a face-to-face discussion with somebody, it’s very common, but when you’re recording it sounds terrible. So one thing I’ve learned is to be more patient and let people finish their thought.

The second thing is, in daily life I like to joke around a lot and I’ve realized that my jokes are not that funny. When I listen to the podcast recordings, my jokes just don’t sound very funny. I’ve tried to make too many little jokes, and they don’t translate well without the body language and the interpersonal relationship. Maybe they never translated well, but I know for sure that they don’t translate well through the podcast.

Richard Matsui: I’m sure that’s overly harsh, but that is really funny.

In the world of project finance, are there types of stories that tend to capture the audience’s attention? Are there trends in what people find interesting?

Todd Alexander: There are definitely trends in terms of what people find interesting. Funnily enough, they’re often the types of complex matters that don’t translate well into a podcast, but they’re also the types of things that people don’t want to spend a few thousand dollars on getting a lawyer to explain to them over the phone.

It’s the topics that people want explanation on but don’t have access to an investment banker or a consultant to tell them what’s going on—how the Solar Revenue Put works, for example. From what I’ve seen, our most popular podcast every year is a recording of a presentation that we make for our clients called Cost of Capital that my partner Keith Martin hosts. It has been our most popular episode each of the last two years, and we just released this year’s version of it.

Anything on the cutting edge is interesting, so changes in tax equity, and changes in energy storage, those tend to be the most popular types of podcasts for which we might get over 20,000 downloads. Then I might do something that I find particularly interesting, like hedging, which is also very tough to follow because it’s very detailed and industry-specific, and that might get only a third of the downloads that something on energy storage or cost of capital would get.

Richard Matsui: Are there any changes to the vision of the podcasts that you want to pursue?

Todd Alexander: I love getting feedback from people in the audience. I often get emails from people saying, “Hey, your sound quality wasn’t so good on this one.” Or “I love this topic.” Or “Can you introduce me to this person?” That feedback is very helpful because it’s not live, which makes it difficult to know what’s effective and what’s not. We try to incorporate the constructive criticism that we receive.

I also want to continue bringing on as many ‘Tier One’ guests as possible, so that people keep coming back to the podcast and it continues to be a good place to educate people about the energy and project finance community in the U.S.

Richard Matsui: It’s stunning to think that every time I sit in that interview room with you, there’s a vast auditorium of 20,000 people listening. Who is your dream guest for Currents?

Todd Alexander: Emily asks me that all the time. I’ve been very fortunate, almost everybody that I’ve wanted to have on the podcast has agreed. We’ve had some people in state government, from the Public Utility Commission and NYSERDA, but I have wanted to get some elected officials on. It’s one thing to be a practitioner in the business, to be a consultant or a developer, and it’s another thing when you’re creating policy for energy more broadly. I would like the chance to pick their brains, and hopefully it would be interesting to people in the audience as well.

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EMILY KIRSCH, FOUNDER OF POWERHOUSE & HOST OF WATT IT TAKES

Richard Matsui: Can you kick us off by giving an overview of Watt It Takes and then tell us about why you started it?

Emily Kirsch: On Watt It Takes, I interview founders and CEOs of the most innovative companies in clean energy and mobility, and these leaders share how they built their businesses. We record the podcast monthly in front of a live audience at Powerhouse headquarters in Oakland, California.

We started Watt It Takes because the founder journey can be lonely, and as a founder, it’s easy to feel like you’re the only one who has made mistakes or who has ever come close to closing the doors. Watt It Takes shares the realities of that founder journey, both the highs and the lows. We want existing founders to feel a sense of comradery with one another and we want to inspire the next generation of entrepreneurs to start companies. We also want to inspire people in traditional tech companies to join our industry. Listeners of Watt it Takes range from founders to VCs to corporate executives.

Richard Matsui: How does Watt It Takes fit into your vision for Powerhouse?

Emily Kirsch: As both an innovation firm and a venture fund, Powerhouse backs entrepreneurs that are building the future of energy and mobility, so we’re focused on the people behind the most innovative startups in the industry. We connect these startups to our corporate partners like Schneider Electric and Enel as well as investors, with the ultimate goal of creating a decarbonized world. Watt It Takes represents that vision by focusing not just on companies and technology, but also on people. We share how these leaders navigate their journey and hope others are inspired to do the same.

Richard Matsui: There’s so many podcasts out there. Do you have some insights on how Watt It Takes has gained the following that it has?

Emily Kirsch: It’s been great to see the listenership of Watt it Takes grow to over 30,000 listeners per episode. There’s a wealth of information about the energy transition, and there are a number of  podcasts that do a great job covering that including the ones that you’re featuring in this piece like The Energy Gang and Currents. What makes Watt It Takes unique and what draws people to it, are the personal stories.

One of the things I love most about Watt It Takes is that we record in front of a live audience of about 80 people at Powerhouse, and it’s so much fun. There have been many laughs, tears, and the occasional collective gasp. I think doing the shows in front of a live audience makes it feel intimate, like we’re experiencing the founder’s story together. That’s the whole purpose of Watt It Takes.

Richard Matsui: What are some things you’ve learned from hosting the podcast?

Emily Kirsch: We recently worked on a piece that highlighted the most harrowing and motivating founder stories from Watt It Takes from the past two years. There are two things that stood out to me from that review. One is that almost everyone we interviewed said that they thought the hardest thing was going to be the technology, and actually the hardest thing was people. Leading and managing people has been one of the most consistent challenges from founders that we’ve featured.

The other one that stands out is that almost everyone we’ve interviewed has talked about a time when they were a month, a week, days, if not hours from shutting the doors of their company. It’s something you don’t hear on other forums because founders are rewarded for telling everyone that we’re crushing it and it’s going great, but sometimes it’s just not going great. The guests we’ve featured have been willing to be vulnerable and share those tough times, and it speaks to their courage and bravery as leaders. Their vulnerability normalizes something that we all go through but don’t often talk about.

Richard Matsui: You talked about the vulnerability and courage of the people you’ve interviewed, but your podcasts are done with a live audience, in a room full of at least semi-strangers. I imagine it could be pretty intimidating for people to share their stories in a public facing event. How have you built a space that allows for that kind of vulnerability?

Emily Kirsch: It’s a combination of things. Oftentimes I already know the guest and have a relationship with them that’s built on trust. If I don’t know them yet, I’ll spend some time with them before the interview so they know they can trust me. I always tell them that the interview is in their hands and I’m not going to try to get them to say anything they don’t want to say. When people feel comfortable, they’re willing to be vulnerable in a way that they may not otherwise. Both Dan Shugar and Jigar Shah are known to have big personalities and aren’t known for their vulnerability, but those were two of the most humanizing interviews we had. It’s so important for people to see that side of leaders who are otherwise known for their exterior personality.

Richard Matsui: I remember listening to your interview with Jigar when he commented on the state of equality in the industry and his views on what gender equality in solar looks like. You’ve created space for some interesting and frank discussions that I’ve appreciated and found quite memorable.

Emily Kirsch: Women who have started companies so often get asked, “What’s it like being a parent and a founder?” but men don’t get that question. On Watt It Takes, if you’re a parent and a founder, man or woman, we ask how they balance those things. It’s so important to share those stories with our audience, who can relate to the founders we feature.

Richard Matsui: The comedian Ali Wong talks about that double standard in her Netflix special—the questions people would ask mothers but not fathers, who are (at least theoretically) also equally part of the parenting situation. You’re building that into the conversation, the portion that is often omitted, which is fantastic.

What’s the vision for Watt It Takes moving forward?

Emily Kirsch: There are so many inspiring founder stories yet to be told, and we’re excited to continue to bring people in and give them the opportunity to share what they’re doing with our listeners. We’ve featured founders of some of the companies that are most well known in the industry, like SunPower Founder Dick Swanson, the founder and CEO of Sunrun Lynn Jurich, and former CEO of NRG David Crane, but we’re also featuring founders who are much earlier in the process because we know that so many people in this industry are just getting started or are considering starting companies. We’ve featured founders like Etosha Cave, Co-Founder of Opus 12, Leila Madrone, Co-Founder and CTO of Sunfolding, and Christine Ho, Co-Founder and CEO of Imprint Energy; the point being that we want to highlight the next generation of founders and continue bringing those stories to our listeners.

Richard Matsui: Can you share a favorite episode or favorite moment?

Emily Kirsch: It’s really hard to choose a favorite episode, but one that stands out for personal reasons is my interview with Billy Parish, the founder and CEO of Mosaic. I’ve known Billy for 12 or 13 years now, long before he started Mosaic, and I worked with them in the early stages of the company. Ultimately, my experiences with Billy and Mosaic is what led me to start Powerhouse, so featuring Billy felt like we were coming full circle, and it meant so much to me. I’m grateful for his insights, and he’s one of the most thoughtful, intelligent, mission-driven people that I know, which says a lot given how many people fit that description that are part of the Powerhouse community.

Richard Matsui: We’re big fans of Mosaic here, too. Danny Kennedy has been hugely supportive of us from day one. He was our first Solar100 interview and he’s someone who is really supportive of folks who are new in the industry.

You talked about the vision for Watt It Takes moving forward and how you want to feature the next generation. Who would be some of your dream guests on the podcast?

Emily Kirsch: If we could fast forward to 2030, I would love to interview the founders who have done the most over the next 10 years to reduce emissions, to address the climate crisis, and to enable and scale energy and mobility solutions. I think some of the most important founders of our decade and century haven’t started their companies yet and maybe some of those are the very people who are listening to Watt It Takes or reading this piece right now. I would love to find that person who is inspired enough to take the plunge and feature them when they’ve had the kind of impact that the world is looking to entrepreneurs to fulfill.

—

STEPHEN LACEY, FOUNDER OF POST SCRIPT AUDIO & CO-HOST OF INTERCHANGE & ENERGY GANG

Richard Matsui: In the past we’ve gotten the chance to interview both your Interchange (Shayle Khan) and Energy Gang (Katherine Hamilton and Jigar Shah) co-hosts, so this one’s been a long time coming. To start, can you tell me how you first got started in solar and in podcasting?

Stephen Lacey: I first started in podcasting in early 2006. I have a media production background, and I got connected with a startup business-to-business publication called Renewable Energy Access. In the 90s, they were one of the first websites focused on the business of solar. They wanted to launch a podcast at the time when podcasting was really starting to emerge, and the founder of the company wanted to stay ahead of this trend. They brought me in to start the podcast because I had an audio production background, and that was how I got integrated into solar and also how I started my podcasting career.

That show took off and we were able to build a pretty sizable audience because we were the first movers in that space. Over time, however, the interest in podcasting waned a little bit in the dark ages between 2009 and 2013. We saw that audiences were continuing to increase, but there wasn’t as much enthusiasm about the world of podcasting. Over that period, I launched a small show at the Center for American Progress, and we did the Inside Renewable Energy podcast for about five years.

I have known Jigar Shah for a long time, so when I went over to Greentech Media in 2013, he called me up and said, “Hey, both of us love podcasts. I’ve been thinking about this for a long time. What do you think about doing a show where we break down the latest trends and news in clean tech?” And I said, “Okay, that sounds great.”  We’d both been following one of the first shows that did a round-table style conversation on politics, which is now a very common format. Katherine Hamilton was our policy expert over at Greentech Media, and we knew she’d be perfect for the show.” When we started the Energy Gang, there was still a paucity of energy and climate podcasts out there, so the show really took off because we were a first mover. I’ve since launched my own production company, and I’ve been doing a lot of shows in cleantech and in climate change, and beyond in tech and business. It’s been a long, interesting road.

Richard Matsui:  With Energy Gang, it sounds like you started with a combination of the idea, the content experts, and the podcasting. What have you learned about successful podcasting from that experience?

Stephen Lacey:  We knew that people were and are trying to figure out this space.  There are a couple of things that are important in podcasting.  One is consistency in co-hosting, because people get a special connection with the co-hosts. If you can pull together a few people who are able to digest trends and news consistently, that is compelling. People will get attached to that. It’s a really simple recipe, but when you pull it off, it creates something pretty special. We had been listening to podcasts and knew that to be true. Jigar is a big name as a business and finance expert, Katherine has a big name in policy, and I was a journalist, and because we all brought these unique experiences, it just came together and worked. We had some sense of a plan, but once those couple few pieces came together, the show really took off.

Richard Matsui:  It’s an interesting point that you’ve made regarding the trust a consistent host can build with an audience. There’s so much information out there that I can see the value in having someone who an audience can rely upon to filter out noise and help contextualize complex ideas.

Stephen Lacey:  That’s what’s brilliant about podcasting.  If you can communicate effectively, have good production, and have a good presence behind the mic, you can create a sense of authority that is helpful for people. That doesn’t mean that your audience has to agree with you. You can be a sounding board. That’s what the Energy Gang does—we debate. People disagree with us all the time, and that’s fantastic. What we do is provide context and a place for people to start thinking about the issues. We don’t have the definitive take; we don’t expect people to agree with us. What we have is three people who are entrenched in the industry thinking through the subject, and that helps listeners digest the big storylines of the energy transition.

Richard Matsui: According to Tech Crunch, 2019 was the breakout year for podcasts with both supply and demand on the rise. As the founder of Post-Script Audio, you’re now working on podcasting full time. With 700,000 plus podcasts out there, what are some other things that make a podcast stand out?

Stephen Lacey: Number one is investing in pre-production—think through what you’re trying to do. A lot of people assume that because they have something to say, they can just turn on a microphone and say it. That might work for some people, but it’s rare. The shows that really succeed are shows that have a purpose. That means investing a lot of time up front determining the show’s mission and sound.

Number two is investing in decent equipment. There is some pretty good equipment out there for a low cost, and you have to sound good. You can be the best host in the world with the most interesting things to say, but people will not stick around if your audio isn’t easy to listen to. If you put thought into the audio quality, you’ll have so much more credibility with your listeners. Bad quality will detract from the narrative no matter how good your questions are. Think about it—if I went to someone’s webpage to read their article, and it was in four different fonts, and all capital letters and the paragraphs were broken up, I wouldn’t read that article no matter how good the writer was. That’s basically what you’re doing if you have inconsistent audio.

Number three is consistency. There’s a term in podcasting called “pod-fading.” There are 700,000 podcasts out there, but a lot of those podcasts are not being updated. They petered out after ten or twenty episodes because they weren’t quite sure what their mission was or they weren’t getting an audience. Podcasting is a slow build. Podcasts don’t go viral, but when you do get an audience, people stay with you for long periods of time. You have to have consistency to grow a show.  The energy and climate space is starting to get crowded. That doesn’t mean that you shouldn’t be launching a show, but the most important thing for developing a new show is to survey the landscape and ask, “How can I do something differently? What can I do that is unique? And if I develop a show, will I develop something that my listeners will miss if it goes away?”

Richard Matsui: What are the most common pitfalls that you’ve seen?

Stephen Lacey: Bad scripting and the inability to tell a narrative. Conversations alone are not going to do the trick; you have to frame conversations. You have to make conversations matter. You have to create stakes. A lot of people who don’t come from a storytelling background assume that you can just have a conversation and it will matter on its own.  The majority of the time that isn’t the case. Good framing and thoughtfulness about why a listener should be listening is vital. I think that’s the biggest takeaway.

If you’re serious about doing a podcast, don’t just do it because you think that you have something interesting to say. Do it because you have a bigger goal, and you think you can do it uniquely. The podcasts that I see fail are podcasts that are clearly not thought out, or the host hasn’t really thought about her or his role. Thinking about why you want this show to exist in the world is important. In the early blog years, a lot of people thought, “Oh my god, everyone’s going to want to read my personal journey.” That was true for a little bit, but the quality shook out, and the people who were able to tell the best stories and adapt to the format were the ones who could make businesses and create really important messages. You have to have a clear direction and thoughtfulness about what you want it to be.

Richard Matsui: What I’m hearing is that podcasting is a medium, and it’s an important one that allows for a particular benefit and unique way of connecting, but at the end of the day, you also need to be able to tell a compelling story to use that medium effectively and to its best advantage.

What role do you think podcasts have in the solar media landscape, alongside more traditional print media and online articles?

Stephen Lacey: Podcasts create context and special connections to the people that are delivering information, which allows you to dig deeper into subjects. They’re really pivotal in this very crowded, disjointed, and troublesome media landscape. There are a lot of really important stories happening right now in renewables, and they’re underrepresented in the mainstream press. The industry is going through such enormous change, and it’s going to change the world in ways that a lot of people don’t understand. Podcasts enable us to tell those unfiltered stories, and  they give us access to the audience in a way that television news or even a lot of print reporting can’t do. The broader press has started to wake up to these stories, but podcasts still present a special connection with a listener that can tell these stories better. On the business side, they can deliver messaging about how the industry is evolving, what’s working and what’s not working, in ways that’s really compelling.

Richard Matsui: Which stories in solar have been thematically the most exciting to you over the course of your career?

Stephen Lacey: There are so many. One story that I think is misrepresented is just how ubiquitous solar has become in so many states. There has been a rapid rise in employment in workers throughout solar, in installation but also in sales, marketing, and office management. This is an industry that has become an important part of the American economy. Solar has far surpassed traditional industries like coal, and that story hasn’t been fully appreciated. Environmental groups and advocates predicted a rise in solar that a lot of people in the mainstream press and analysis didn’t appreciate, and now everyone’s realizing just how rapid that rise is. The rise in cheap renewables, particularly solar, has surpassed even the most ambitious expectations of ten or fifteen years ago, and the media is not quite grappling with just how transformative this industry is going to be. Is decarbonization happening fast enough? No. Absolutely not. But in terms of technology change and the way solar is going to force incumbent energy players to rethink how they do business, that is an extraordinary story that is still very much playing out. People who are not as familiar with solar don’t fully appreciate it.

Richard Matsui: Why do you think that story has been under-covered or under-discussed?

Stephen Lacey:  Well, you look around and you might think, “Okay, I see some solar on people’s houses, I might drive by a big solar installation on the highway, I can see that solar development is happening around me. But I’m still using natural gas to cook, I still drive my car, and I’m filling up with gasoline.” Solar isn’t around us in the same way.

People assume that something with transformative impact is going to happen in a way that will going to touch our lives  very quickly, and in reality, that energy change is happening behind the scenes. It’s in large companies’ plans, it’s in regulatory documents that influence utilities to build wind and solar and co-generation. It’s hidden, and I don’t think a lot of people who are outside of energy really understand it.

We aren’t going to wake up one day with solar everywhere. It’s really about the margins and how companies, governments, and eventually people change their energy plans.

Richard Matsui: What role do you see podcasts playing in moving that conversation forward and making it more a part of the mainstream consciousness?

Stephen Lacey: Podcasts can provide people with exposure to what is happening behind the scenes. That’s because there aren’t gatekeepers in the podcast space. It’s a very podcaster-to-listener relationship, so there’s an opportunity to do contextualized longform storytelling. Oftentimes you’ll hear professionals or analysts talk about these topics, and talk about why it matters. In my opinion, that’s more effective than just reading an article.

Richard Matsui: What are the parallels and differences between a podcaster and a journalist?

Stephen Lacey: You have to take your role seriously as a podcast host to the same degree that you would take it seriously as a journalist. I come from a journalism background, so I care about making information as factual as possible, as fair as possible, and with as much context as possible.  In podcasting, you have a lot of newcomers who don’t have a traditional journalism background, but you still need to be in service of context and facts. No matter what our backgrounds are, we need to be aware of our obligations to give the audience the best quality information possible, which is difficult. I think if you’re just focused on fairness and trying to get to the truth of something, you can do a lot of good and serve your audience well. Operating in good faith to the facts, the story, and your guests are the most important things.

Richard Matsui: Who is your dream podcast guest?

Stephen Lacey: I don’t have a specific dream guest,  But I have a dream outcome. I want to take a really complicated subject and tell the deepest story possible while keeping it accessible. For example, there was a lot of great journalism that came out of the financial crisis. It was very real to people’s pocketbooks, but people who weren’t connected in the world of finance (and even some who were) didn’t understand what happened. A lot of extraordinary storytelling has come of that. I always wanted to take an extremely complicated story like that and make it accessible to a lot of people. I’m still hunting for the right story around the energy transition or climate change that will have that kind of impact.

Richard Matsui: Are there any frontrunners that come to mind?

Stephen Lacey: It’s difficult for many people to understand how the energy transition is impacting businesses and therefore our lives. For example, we’ve seen these major shifts within huge capitalistic companies, and there’s an opportunity to tell a really deep, detailed story about why that really matters and what it represents.

The impact of climate change is also a very difficult story to tell. It’s a multi-generational, multi-decade story, and it’s becoming real for us for the first time. People are realizing that this is happening today, not far-off, decades from now. It’s happening right now. Telling that story in a way that makes people feel that urgency is something that I continue to strive for.