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.