What do you do within the renewable energy sector and why is it essential?
Quantified Ventures advises organizations in the social, public, and private sectors in designing and structuring impact investment transactions, primarily through a Pay for Success model in which payments for services are based on the outcomes achieved. We work to deploy impact capital to scale proven solutions that will make a difference in achieving social and environmental outcomes Can you describe 2 of your most impactful past projects or engagements? Quantified Ventures is leading the way in applying the ‘Pay for Success’ model to the environmental sector. We recently helped the DC Water and Sewer Authority issue the nation’s first ‘Environmental Impact Bond’ to fund implementation of green infrastructure, and are working to apply this approach in addressing other environmental issues such as in agriculture, forestry management, fisheries, and energy. What are you most excited about for the renewable energy industry in 2017-2018? Quantified Ventures strongly believes that the Pay For Success model can be used to de-risk public investment in renewable energy and look forward to pursuing such transactions in 2017-18. What is the role of impact capital going to be moving forward? There is now $16B in ‘Impact Capital’ available for investment to scale innovations that will make a difference in the world. All the major financial institutions, plus foundations and high-net worth families have Impact Investing units that are an attractive source of capital for companies that can deliver both financial and social returns. What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? Jump in and innovate on Day 1 to advance/scale what works and shed what doesn’t. Energy Infrastructure Finance Lead, IronOak Energy Capital Co-founder and Managing Partner, Energy Intelligence Partners (EIP) What do you do within the renewable energy sector and why is it essential?
EIP provides insight, expertise, and operational support to startups and large corporates alike. Our backgrounds allow us to not only support innovation, but also financing, growth, and strategic decision making. This full “life-cycle” experience gives us the ability to make recommendations, but then, if needed, step in and help execute on a day-to-day basis to make those recommendations realities. Can you describe 2 of your most impactful past projects or engagements? We were engaged by one of the world’s largest R&D organizations to help build a business model around a new grid-edge technology they had developed. Initially, we helped assess the opportunity and delivered go-to-market recommendations. As the engagement evolved, we were asked to become more and more involved resulting in us helping to spin out a new company. I took the role of CFO and VP of business development of the new entity, helped secure several million dollars in seed financing, signed the first two large customers as we deployed the technology in a commercial setting. Being able to not only identify the opportunity, but also help execute, is very rewarding. In a more challenging situation, we were engaged by an investor with a large interest in a project that was not going as planned. They realized they needed not only financial support, but also energy and project expertise to totally understand their risks, opportunities and options. We were able to accurately assess the situation both operationally and financially, quantify the risks and opportunities within the decision matrix, as well as provide new options that were previously not available. Having investment, operational, and technical experience from financing and operating power plants allowed us to provide a one-stop-shop to resolve this difficult situation. What are you most excited about for the renewable energy industry in 2017-2018? Non-battery energy storage. We are seeing a lot of innovative ways to store energy at well below the cost of batteries and there are lot of very smart people developing the technologies to leverage these novel approaches. We have helped groups take advantage of these resources and leverage utility tariff structures to save significant amounts of money. This trend will only grow, and it could be a game changer for the power grid and the environment. What are you most concerned about for the renewable energy industry in 2017-2018? The pace of innovation is far outstripping the grid’s ability to understand and incorporate it. The result is often a reluctance to test and implement new technologies, or a sporadic deployment that has suboptimal results. Energy decisions often have very long term implications. For example, for every gas plant that is built instead of implementing demand side management technologies, we lose years of potential cost and performance benefits. We see massive changes happening as technologies are being deployed that allow consumers to manage when they use electricity which the grid must deal with. What is one trend in the renewable energy sector that few are paying attention to? Biofuels and biomass. This sector has been really beaten up over the last 8 years, after being the darling of the clean tech revolution. Much of the failure of the sector was a poor understanding of the challenges beyond just the technology. We have a lot of experience in this sector and have seen a number of new ideas that could make the promise from 8 years ago a reality. If you asked one of your early stage clients what they value most from an engagement with you, what would they say? Early stage companies and investors are often short on resources and time, but need expertise and execution support from professionals who understand the sector and the challenges of startups. We have found they appreciate our experience and insight into their business, and come to truly value our ability to provide flexible hand-on support as they execute over the long term. What has surprised you most about your career in the renewable energy sector? The rapid evolution of the demand side. Consumers have so many options and are impacting the grid like never before in both good and bad ways. As an example, our experience with isolated and island grids has taught us that even efficiency can have unintended negative impacts. What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? Success in the energy sector takes a long time, so be patient. While it would be great if we could replace certain infrastructure overnight, the reality is that these are long-lived high cost assets. Having said that, hold on tight, because there are few industries as volatile. Energy Storage Finance Lead, IronOak Energy Capital Co-founder and Managing Partner, Energy Intelligence Partners (EIP) What do you do within the renewable energy sector and why is it essential?
EIP provides expertise and operational support to clients in the energy sector. We serve startups and large corporates alike. We are differentiated by our backgrounds and the fact that we can also step in and help execute after assessments and recommendations are made. Can you describe 2 of your most impactful past projects or engagements? I have over 15 years of experience with energy storage technologies and markets. Assisting with investor due diligence on energy storage investment opportunities is always impactful. I recently supported an investor group as they considered investing in a new energy storage technology. In these cases, I’m able to leverage my technical, startup, and investing experience to identify the key risks and provide feedback on the technology, market, and deal terms. This is particularly helpful for groups new to the energy storage space. Another impactful engagement involved a client that needed help assessing the opportunity for a new energy technology developed in-house that was complementary to their core business. We determined three commercialization options, ultimately focusing on one market that was an ideal fit based on the client’s technology, capabilities, and goals. EIP also developed and secured two strategic partners for future joint ventures, and even procured strategic partner hardware for preliminary testing. What are you most excited about for the renewable energy industry in 2017-2018? We see a lot of market dynamics that others do not because we are working with clients every day that are striving to disrupt markets. What most excites me is that the way we consume and produce energy is changing fast thanks to the convergence of low cost hardware, a fast and robust communications network, and smart devices behind-the-meter. We are witnessing the start of new distributed energy infrastructure that will ultimately make our energy mix cleaner, more efficient, and more stable. It’s happening a lot faster than people think, and with change there is opportunity. What are you most concerned about for the renewable energy industry in 2017-2018? I’m most concerned that there is a looming shake-out in the energy storage industry. There is so much OEM competition and pricing has dropped so quickly that I suspect many companies will exit the sector in the next few years. Also, I’m concerned that the energy storage industry’s reputation may suffer a setback because expectations are so high. It’s time to deliver on the promise. What is one trend in the renewable energy sector that few are paying attention to? Few people are paying enough attention to the fact that the regulatory and policy frameworks that utilities operate within are not keeping up with energy innovations. This is going to make it more challenging to manage the grid in the short-term because behind-the-meter assets are being rolled out at an increasing pace. Electricity consumers are benefiting at the expense of the utilities, who will continue to lose visibility, control, and revenue. Established business models are also at risk because utilities will start changing the rules of the game. Why would a large corporation engage EIP rather than a larger, traditional consulting firm? Our boots-on-the-ground experience provides large corporate clients with assessments and analysis from a real-time market perspective. As an example, we work with early stage companies on a regular basis and see market changes first-hand and often before others. The insights we have from these experiences are highly valuable when large companies are making important strategic, product, and go-to-market decisions. What has surprised you most about your career in the renewable energy sector? I am surprised how much attention energy storage has garnered over the past three years and how much and how fast lithium ion battery prices have come down. What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? Come to the industry with an appreciation of the enormous infrastructure in place and the scale of the industry. It is very challenging to introduce disruptive energy technologies and business models. However, there are a lot of market inefficiencies and thus opportunities. By: Dr. Chris Wedding, Managing Partner The storage market is projected to grow over 100x from 2013 to 2022. That’s great. Let’s go celebrate. Or maybe the famous William Gibson quote is worth highlighting: “The future is here — it’s not very evenly distributed.” When it comes to battery storage, that “future” today is defined as Hawaii, California, and the Mid-Atlantic (i.e., PJM power territory), with some random outliers such as Kentucky and Michigan as well. However, the financial feasibility of energy storage will grow quickly. Analysts project that commercial storage pencils today in 7 states. But that number is projected to rise to 19 U.S. states by 2021. (Minor footnote: The assumption for that math is that investors accept a 5% IRR. I hope that will be true. But today our investor network suggests a higher return threshold, perhaps in the mid-teens.) Battery costs are, of course, a key driver. So let’s consider four trends for investors to keep in mind. 1. Energy cost is not the most important driver in assessing financial returns “Wait, what? But you just said that costs were critical.” Let me explain. Capital costs get most of the attention in discussions about energy storage investment opportunities. And there’s good news: Prices are falling quickly. (Statistics below) However, capital costs are not the only consideration in achieving an attractive IRR. Instead, here is the key question. (Be prepared for some rocket science.) Is value greater than cost? As the Lazard figure below illustrates, when “stacking benefits” from energy storage projects, more and more project opportunities will begin to make financial sense. These benefits, or potential revenue streams, can include grid benefits (e.g., regulating frequency, deferring major capital cost upgrades) as well as host-user benefits (e.g., lowering demand charges on power bills). Unfortunately, policy and technology are still barriers to the realization of multiple sources of revenue for the same storage system. Both are slower to adapt to market possibilities than entrepreneurs and investors would like. Energy Value Proposition: Value vs. Cost (Source: Lazard) Furthermore, if you’re coming from the wind or solar industry, it’s helpful to remember that energy storage is not an industry where one size fits all. There is not one energy storage market. There are many. Finding battery investment opportunities that make sense require the right match among technology, geography, utility territory, customer, and business model. (See the figure below.) Energy Storage Feasibility: The Nexus of Technology, Market, and Business Model (Source: Deloitte) 2. The costs for batteries has fallen about 50% since 2010 According to a 2015 Moody’s report, energy storage costs have fallen by half in the last six years. They predict “significant market impacts” for power producers. But even greater costs reductions have been seen in recent months. For example, over the 18 months prior to June 2016, energy storage provider Stem saw a 70% reduction in their costs for batteries. The falling prices can be attributed to a number of factors, such as the overall scale of production among all manufacturers, the volume of production on an individual company basis, and the balance of supply versus demand. 3. Storage costs are projected to fall another 25-50% by 2020 First, be aware that storage cost projections vary depending on the technology (e.g., lithium, flow, flywheel, sodium, zinc, compressed air) and the use case (e.g., commercial, residential, microgrid, island grid, transmission-level, peaker replacement, frequency regulation). Below is a snapshot of expected storage price drops on an annual and five-year basis. The outlier, not included in this chart, comes from Telsa. (Are you surprised?) Its Nevada-based Gigafactory is expected to drive down the costs of its lithium-ion batteries by at least 50% by 2020. Average Projected Energy Storage Cost Reduction: 2016-2020 (Source: Lazard) 4. Battery cost dynamics are closely linked to electric vehicles in two ways First, let’s be clear: We’re just talking about lithium-ion batteries. (Apologies if you’re now shaking your head saying, “Duh, of course.”) First, lithium batteries will fall, in part, because EV sales have increased dramatically in the last five years — a nearly 600% increase in annual sales between 2012 and 2016. Furthermore, EV sales are poised to grow more significantly in the years ahead. BP predicts 100 million EVs by 2030, for a 6% market penetration, while other analysts project 15% to 35% market penetration, where EV sales account for 8 out of 10 new car purchases. See the two graphs below. And be sure to compare the EV sales for 2016 on both graphs. Wow, indeed. Get your motors running… Just like we see in so many sectors, with greater scale comes lower costs for all lithium batteries, not just those for EVs. (Again, common sense comes in very handy.) Annual EV Sales: 2010-2016 Source: EV Volumes PEV = Plug-in EV Correlation: Projected Cost for EV Batteries vs. Growing Demand for EV Source: BNEF The second reason that battery costs and EV sales are connected is this: Like U.S. Marine drill sergeants, EVs demand a lot from their batteries. Once the battery capacity gets below about 75%, the EV needs a replacement. But the battery still has lots of useful life in less intensive applications, such as stationary uses serving the grid, industry, or homes. Car companies like BMW and Nissan are already working on second-life uses for their EV car batteries for the home storage market. It seems like an obviously great idea — preserve that supply-constrained lithium, don’t throw away a perfectly good technology, and most importantly, get cheaper batteries for the masses. But, it’s not that easy. (Is it ever?) How do you combine used batteries from different manufacturers? Or those from the same manufacturer but made in different years with different technology? How do you assess useful remaining battery life in a non-invasive manner that doesn’t destroy part of the battery in the process? How do you ensure safety? And get relevant warranties and insurance needed for selling thousands of second-hand systems? Conclusion Energy storage costs have fallen about 50% since 2010, and are projected to fall another 25-50% by 2020. That said, costs are not the sole determinant of investor interest. The value of storage systems is severely constrained today because policy and technology has not yet enabled the potential multiple revenue streams from the same under-utilized storage systems. But that is changing. So, will you dip your toe into the energy storage market today? Or will you wait for it to make progress on its 100x market growth trajectory between 2013 and 2022? Said differently… How do you feel about the risks today versus the risks tomorrow, when there are far less technology and policy challenges, but far greater competition to invest in the best projects? U.S. Energy Law and Policy Lead, IronOak Energy Capital Associate Dean for Academic Affairs, Hugh B. Brown Presidential Endowed Chair in Law, and Presidential Scholar, University of Utah What do you do within the renewable energy sector and why is it essential?
My work focuses on law and policy analysis for renewables and other clean and emerging energy technology sources. It is an extraordinarily exciting time to be working in this area. Law and policy for renewable energy are moving fast; they need to. The sector is rapidly evolving, and the old rules of the game are quickly being changed. Can you describe 2 of your most impactful past projects or engagements? Last year, Sanya Carley and I conducted an assessment of the factors that led to changes in the net metering laws in Nevada, compared against other jurisdictions that have considered moving away from net metering but decided not to. This work has been very useful, I think, to those concerned about what is going to come next in rooftop solar, and where possible solutions might be found. I have also provided analysis to the Korean government about green growth as well as about how feed-in tariffs and renewable portfolio standards function. That experience was very rewarding. What are you most excited about for the renewable energy industry in 2017-2018? Opportunity. I think that’s what this year holds first and foremost. There is opportunity emerging at every turn as prices for different technologies continue to fall, as the public becomes increasingly interested in participating in the energy sector, and with the promise of new infrastructure across the nation. States like Nevada are looking to build electric vehicle corridors. Rooftop solar has transitioned from a minority position to a major player. And there are so many more opportunities that are only now emerging or are about to. In these and other opportunities that we cannot yet see, there is significant potential for the renewable energy industry to contribute—to change the way we make energy, to improve the security of our nation, to help forge new paths forward. For those of us who work in the industry, that makes these very exciting times. Our task is to capitalize on these opportunities—to be leaders and innovators. What are you most concerned about for the renewable energy industry in 2017-2018? Uncertainty. We already were living in quite uncertain times, and that uncertainty has only heightened as the new administration has assumed office. Conventional wisdom is that national efforts to curb carbon emissions are likely to be allayed—or evaporate—but exactly how and when that will happen remains to be seen. At the same time, energy is often a more bipartisan issue in Washington, D.C. than other topics, so there is good chance there will be federal legislative movement on energy this year. Meanwhile, the states have been very active in their own right, and I only expect that to continue. While uncertainty is always difficult to deal with, it also opens doors for new and innovative solutions. So, while the uncertain times of today of course concerns me, I remain eager to help find those solutions going forward. What is one trend in the renewable energy sector that few are paying attention to? Breadth and diversity. I think many people view the renewable energy industry as one particular thing, when in fact that is not true. Both the scope and the differences within the industry are wide, and important. Renewable energy is not just wind or solar or distributed generation. It’s that but a lot else as well, including large centralized projects, storage, and a million other imminently creative solutions that are not receiving adequate attention, are just emerging, or are not yet discovered. Why does renewable energy law and policy matter? I can’t emphasize enough how important it is that every part of the renewable energy industry works together. What this industry is really building is a massive, new, emergent ecosystem. So law and policy cannot get lost in that mix, just as finance, engineering, sales, and every other part of the industry can’t be forgotten. It all goes together; it all relies on each other. Law and policy set the ground rules for the game—and they can and do change, and can be influenced by those who must play within their constraints. What has surprised you most about your career in the renewable energy sector? In my prior career, I represented (usually large) investor-owned utilities. That knowledge is extremely useful, because the clean energy industry is growing in a world that the historical vertically integrated utilities created. There is also much room for synergies between that part of the energy industry and the renewable energy industry itself. Synergies matter. And they are available. What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? Buckle up. It’s a fun ride, but there is no question you’ll go fast. In many ways, what we are working on today is really a project in building the future. Transportation Innovation Lead, IronOak Energy Capital Founder, CBC Consulting (Global Transportation/Technology Consulting Firm) Board Director, Association for Commuter Transportation What do you do within the renewable energy sector and why is it essential?
I am the Founder for CBC Consulting, a global transportation technology consulting firm. We work with cities and transportation and technology organizations around the world. Our focus is to advance new transportation and municipal infrastructure options that are energy efficient and designed to deliver better mobility and living experiences. Examples include the high speed air/surface transportation options, drone travel, autonomous transport movement, municipal electric vehicle programs, electric buses/trolleys and more. Can you describe 2 of your most impactful past projects or engagements? I had the opportunity to be on the Vulcan/USDOT Advisory Council for the Smart City Challenge project in 2016 that promoted smart city planning in 80+ cities across the US. This project emphasized a reduction in greenhouse gas emissions in municipal energy grids, the advancement of electric vehicle programs, the launch of alternate transportation options (bike share/EV buses/trucking) and new energy options for cities (wind, solar and hydro power). This project spurred a whole new wave of smart city planning/investment in the US that continues today. Our firm also developed the first self-driving vehicle simulator comprised of a 3D printed electric vehicle and fully-immersive autonomous vehicle driving experience. We deployed our self-driving vehicle simulator in Seattle last year and have plans to bring this simulator to other facilities/markets in 2017. Our objective is to help educate the public on what it will be like to travel in self-driving vehicles and to gain some insight into the future of vehicle manufacturing - highlighting alternative manufacturing materials that promote energy efficiency and environmental sustainability via recycled vehicle platforms. What are you most excited about for the renewable energy industry in 2017-2018?
What are you most concerned about for the renewable energy industry in 2017-2018? The Paris Climate Meetings in late 2015 represented a groundbreaking moment for the future of renewable energy adoption. The gathering of 183+ countries and the subsequent agreement to reduce greenhouse gas emissions in order to achieve a 2-degree Celsius reduction in global warming was a huge first step toward reducing fossil fuel consumption around the globe. The outcome of these meetings was a global recognition that change is required in our energy production and consumption. Fast forward to February 2017. We are now seeing the Trump Administration signing executive orders to reverse advancements in alternative energy measures in favor of traditional coal, oil and natural gas exploration. Executive orders to approve the development of the Keystone Pipeline, the Dakota Access Pipeline and renewed shale fracking represent a stark reversal in earlier federal policy intended to promote renewable energy adoption. None of these Executive Orders align with the goals of the Paris Climate meetings and represent a roll-back in US GHG reduction goals. In addition, the Trump Administration has proposed the removal/reduction of EPA standards and guidelines that impact air quality restrictions for coal facilities and pave the way for a renewal in coal exploration. Lastly, the new Department of the Interior is being urged by the Trump Administration to reduce restrictions on offshore oil exploration and oil fracking operations by now allowing possible access to federally protected land for more energy exploration. None of the above activities help encourage renewable energy, better air quality, responsible management of federally protected land and a general focus on improving the environment. What is one trend in the renewable energy sector that few are paying attention to? Advancements in Graphene over the last 2-3 years are introducing new possibilities for renewable energy via hydrogen energy, kinetic energy and other fuel cell options. Graphene has the potential to be a real game changer in energy, industrial manufacturing, medical research, consumer electronics, transportation and more. Why are you motivated to do you what you do? The global warming trends of the last 10-15 years clearly cannot continue without causing irreversible harm to our environment, our long-term quality of life and our ability to sustain a planet that can support a rapidly growing population. The adoption of renewable energy measures is not a fad or trend but truly a recipe for a sustainable environment that balances growth with responsible resource management for generations to come. What has surprised you most about your career in the renewable energy sector? I never thought I’d see the day when solar energy could power an entire airport in India. Nor could I envision that a car could be 3D printed, equipped with an electric motor and driven down the street. The advancements in new technology and energy are changing how we move around the planet in ways I never thought were possible. What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? The renewable energy market is a gold mine of opportunity. This market represents perhaps some of our biggest potential breakthroughs in energy development, transportation, medical research, clean water options and urban development. What do you do within the renewable energy sector and why is it essential?
I help renewable energy (i.e. solar, storage, efficiency, etc.) business owners sell their companies by running a process to find the right buyer at the optimal purchase price. A healthy M&A market is an essential tool for companies looking to achieve scale and for equity-holders to realize returns on their investments. Can you describe 2 of your most impactful past projects or engagements? Leveraging Duke Energy’s acquisition of a wind energy services business to expand the company’s service offerings to other wind energy asset owners. Co-leading the 2014 Duke Energy NC Solar RFP and successfully acquiring 128 MW of solar projects and signing 150MW in new purchase agreements. What are you most excited about for the renewable energy industry in 2017-2018? I am excited to support the rapid maturity of wind and solar businesses in the market. As companies continue to consolidate with one another, the efficiencies gained will further drive down the costs of renewable energy installations making them more and more competitive with traditional fossil fuels. I am also confident that over the next two years the renewable energy industry will continue to shock and awe with dramatic increases in installed capacity of matured technologies and with its pace of innovation. What are you most concerned about for the renewable energy industry in 2017-2018? Policy or rather “bad” policy is always a concern for stewards of the clean energy industry. Uncertainty in any market can slow growth and stifle innovation. I am concerned about the resistance in the renewable energy industry for there to be winners and losers in terms of the types of technology and methods of deployment that win the day. If the industry tries to advocate for everyone to be a winner it will result in sub-optimal policies. Encouragingly, the renewable energy industry has time and time again proven its resilience to political uncertainty and I think is well on its way to being even less dependent on the whims of elected officials. What is one trend in the renewable energy sector that few are paying attention to? I think the trend of EVs becoming closer and closer to mainstream is sometimes lost in the noise created by Tesla, as if the whole EV industry depends on Tesla succeeding. At one point, I would have agreed, but now I see daily announcements for new EVs by all the major manufacturers and the cars actually look good. It feels like EVs are finally becoming mainstream enough that most consumers won’t see them as weird spaceships but rather consider them a viable, affordable, and attractive alternative to a gas-powered vehicle. Why hire an investment banker to sell your business? For the same reasons you would hire a lawyer to write an operating agreement or an accountant to do your books, you want experts to help you with non-core competencies. All we do as an investment banking firm is sell companies so we are good at it and know the pitfalls, the same way a good solar developer knows the permitting traps to avoid. What has surprised you most about your career in the renewable energy sector? I have been surprised by how much finance played a role in the success of the industry. The renewable energy economy has been built on innovations in financial structures sometimes for better or for worse (remember yieldcos). What are 1-2 pieces of advice you would give someone thinking about entering the renewable energy industry today? As a theater major, I never thought I would end up being an investment banker with a career in renewable energy. I am a testament to the fact that there are many paths to the same place. My advice to someone would be to try something scary, don’t get stuck in your comfort zone. |
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