Stephen Lacey: What is up, Boston? Wait, wait, sorry, the Boston metropolitan region, Somerville, Massachusetts, what's up? Do we have any Energy Gang listeners in the house? Alright, cool, cool. So that makes me feel a little welcome. I need that to boost my confidence when I'm at a place like this and there are all these really intelligent engineers and entrepreneurs and investors around. I get paid to sit up here and talk about what you all are doing. You guys get to do what you're doing without getting paid, so we all know our roles, right? Speaking of role-
Katherine Hamilton: Wait, do we get paid for this? Are we supposed to be getting paid?
Jigar Shah: Beer, you get paid in beer.
Stephen Lacey: Speaking of roles, I'm Stephen Lacey, the editor in chief of Greentech Media, and this is the Energy Gang, a weekly digest on energy, clean tech and the environment. We are in Somerville, Massachusetts at Greentown Labs, let's hear it from the folks in front of us.
Greentown, as you all know, is the biggest accelerator, incubator in the country for clean tech. It's hardware focused. Greentown is in expansion mode right now. There's some construction going on around us. Tens of thousands of new square feet, new lab space, new coworking space. It's really incredible. When I walked in the door they gave me a hard hat immediately, and I was like, "Man, they take this hardware stuff really, really seriously."
Speaking of seriousness, these folks are going to take it really seriously too. They sat me down before we started recording and were like, "We're coming into startup land. We need to establish our start up bona fides. Why don't we just change our names a little bit to make sure that we sound a little bit more startup-y." So Jigar was like, "Just add an LY at the end of my name and make me Jigarly." And then Katherine, who spells her name with a K, was like, "Okay, all these startups, they start their C names with a K. I'll be Catherine with a C." So, Katherine Hamilton and Jigar Shah, Catherine with a C, welcome. Welcome these folks.
Katherine is a partner at 38 North Solutions. She's a co-founder there and she is a clean tech warrior in Washington DC. Jigar Shah is the president and co-founder of Generate Capital. He's doing a lot of work to deploy money to the entrepreneurs who are in this room and spread throughout the country. How are you guys doing?
Katherine Hamilton: Great.
Stephen Lacey: Yeah?
Katherine Hamilton: I got here a little early.
Stephen Lacey: You flew in here from a crazy, crazy day in Washington.
Katherine Hamilton: Yeah. So to try to get my core center back I went to the Museum of Fine Arts, which is absolutely amazing. That was worth it.
Stephen Lacey: So you both live in D.C. now, right?
Katherine Hamilton: Yes.
Jigar Shah: Yes.
Stephen Lacey: You were in New York City, you moved back to D.C. You've been in D.C for a while. I was there for about five years. You know, we talk a lot about D.C. politics, New York City, what's going on in New York, the Bay Area companies. But the Northeast, very important cleantech market, we don't talk about it as much and we probably should. So coming into the Boston area, I'm curious, what's this area got that you think D.C. doesn't have?
Jigar Shah: Science-loving Republicans.
Katherine Hamilton: Science-believing Republicans. Yeah, I mean the MFA was amazing. I love the T. I mean, it runs, sometimes the D.C. metro doesn't run.
Stephen Lacey: They're neck in neck for poor serviceability.
Katherine Hamilton: Yeah.
Stephen Lacey: Alright, alright. Well, let's talk about what we're going to discuss this evening shall we? We're going to be taking a slightly different approach since we're here at Greentown amongst these fine entrepreneurs and investors. First up, we're picking our top startup related stories of the year. What grabbed our attention, made us think differently or reinforced our thinking.
Then it's a virtual coffee date. We got a lot of request for coffee or drink meetings from scrappy aspiring clean tech tycoons, and we're going to share our sage advice to the most common questions we get asked. Then we're going to do a news circuit. We're going to go around the top headlines of the week and help put some of them into context. We will of course at the end of the week tell you something you may not know. Let's hear it Katherine, what's your top startup story of the year? It could be a trend, a technology, a company. What grabbed your attention?
Katherine Hamilton: I love all of them, first, I just have to say that. I have four kids so you can never say which one you like the most. I love all y'all. But I've been following LO3 Energy, it's a blockchain company. What they're doing is, in addition to doing something that nobody knows how to describe, they're actually taking this backdoor approach to doing what I've been working to try to get to happen in New York, which is a DSO, a Distributed System Operator. They're coming in the backdoor of that.
I think they're really cool. It's not just, they don't think of themselves necessarily as a blockchain company, that's just what they use as their ledger. But it's all transactive energy, and I think what it will do is connect all the dots for all the solar entrepreneurs, all the demand-response entrepreneurs, all the inverter folks. It connects everybody in a way that consumers are really going to be able to have a lot more power.
In my mind, that is going to be the biggest transition, is when consumers are actually able to take decisions and become a resource and not just a load. We've been talking about this a long time. I think this is going to make it happen. It could be another company too, but I've been following them because they're doing this in Brooklyn. They also have a couple of projects in Germany with DSOs. I'm pretty excited about it.
Stephen Lacey: Jigar's checking his phone right now. He's like, "What the hell is blockchain?" Do you think blockchain is actually going to be transformative in the energy industry? We have seen some very interesting startups, some who've had initial coin offerings, that have raised a bunch of money. They seem to have pilot projects that are actually interesting. What does this actually mean for energy?
Jigar Shah: I think blockchain is different from ICOs. So I don't know that they're the same. Blockchain to me is really more about figuring out how to dramatically reduce transaction costs by having radical transparency around who gets what when and how, and recording everything in the ledger, which I think is extraordinary.
I do think that as we move to transactive energy, which is I do think where we're headed, around demand-response, load control and all these other pieces. People will earn like 31 cents a day or $245 a year, or whatever it is, and doing full due diligence on every single payment just won't work. So you need something like blockchain to make it work. But that's separate from whether cryptocurrencies will work.
Stephen Lacey: Do you though? Do you really need it to work?
Jigar Shah: I think so, because I think ultimately it works if you are small and don't care. So when you're small and you're basically not really auditing all of your books and all that stuff, then it doesn't matter. But at the time at which you get big enough to matter, and you're actually saving the northeast from the polar vortex, or whatever it is that you're doing in terms of the total amount of this transactive energy work that you're doing, the numbers get pretty big and it's really expensive to hire lawyers and accounting firms to make sure that everyone got paid the right amount.
Katherine Hamilton: Yeah. I agree. I think it will make everything simpler.
Stephen Lacey: So what is that vision of the DSO that you've talking about for so long? What does transactive energy look to you? Today, we have so many enabling technologies and emerging regulatory mechanisms, is it much different than the way you imagined it 10 years ago, 15 years ago?
Katherine Hamilton: Yeah, completely, because there are technologies we didn't imagine 10 and 15 years ago. So absolutely, I think conceptually we've had this thought that consumers should be able to engage more. When I was running the GridWise Alliance we talked a lot about consumers being part of the grid and the smart grid would enable this, but there wasn't really a great mechanism to do it. A lot of people just put out smart meters and they're just siting there, collecting data and nobody's doing anything with it.
Now there's a mechanism for doing that. I think chugging along all this time were innovators who are bringing all these new applications that would enable us to transact and to really become part of the system. We have been talking about consumers being part of the system for a long time, but this is a tool that we didn't have.
Stephen Lacey: I'm sold on the need for some kind of ledger to verify transactions, but I'm not sold on the micro transactions that people keep talking about. Large companies in the space, like IBM, are talking about these micro transactions where your coffee maker turns on and off, or your dishwasher runs at a certain time and you make a couple bucks a week but you're not really thinking about it. You're maybe either buying the solar power from your neighbor, or your appliances are turning on and off and you have a system to verify those transactions and events. I don't know that I'm completely sold on the extremely granular use of those technologies to create a peer-to-peer marketplace.
Jigar Shah: But that's be you only just closed on a house today. You never had any reason to be sold on this stuff because you were renting. But no, I think that you're not going to get sold on it, because that's not the model.
Stephen Lacey: I'm not supposed to care about it basically?
Jigar Shah: Yeah. You're going to get Google Home or Alexa or whatever it is, and then someone's going to say, "Hey, do you want to pay your electricity bill via your credit card and get points?" You're like, "Yeah of course, I'll sign up on that." And then suddenly you'll forget to uncheck a box and then they're going to start demand-responsing your house, and making all sorts of really cool stuff. Then you're going to be like, "Wait a second, I want to opt out of this."
Stephen Lacey: Demand-responsing as verb, I like that.
Jigar Shah: That's right. That's how this goes. This notion that we're going to have a 45 minute conversation with every single consumer and to explain all the complexity, this is ridiculous. We're going to say, "You just bought a new refrigerator. Hey, it's got this new feature that allows you to check to see your refrigerator temperature by your phone." You never ask, "Why do I need that feature?" You don't, but I need that feature to control your refrigerator from a demand-response point of view.
Then when you plug it, it will automatically be hooked up because I'll say, "You know that your utility is going to give you a $20 rebate for having this refrigerator." Then the fine print at the bottom, it's going to say, "In exchange for accepting that $20 rebate and cashing the check, I get to do demand-response on your refrigerator." That's how this goes. Then there's going to be consumer protection board issues and people are going to say, "Oh great, let's create a bunch of rules around how that works," et cetera. But in the end, what will end up happening is we'll have a much lower cost way to manage the grid than having natural gas peaker plants that run 14 days a year.
Katherine Hamilton: Yeah, and this is all happening while a lot of these plants are shutting down, while there are a lot of retirements. I think it's timely, because by the time we need more energy it's going to be on the other side of the grid.
Stephen Lacey: Where I am sold is LO3's initial use case, which is developing a micro-grid and then using that as bespoke way to sell artisanal energy. You can buy the farm to table electrons and know that you're getting your Brooklyn rooftop solar delivered to your espresso maker. People, I think that's how they're marketing it and people eat it up.
Jigar Shah: No, no, they drink it up with their coffee maker. It's going to be better-tasting coffee.
Katherine Hamilton: Yeah, but it's not just home owners, it's also small businesses. Small businesses have such small margins, this is going to help everybody. I think that's where you're going to see the biggest bang for the buck. It's not necessarily, yeah, you're going to get home owners that have Tesla shingles and car, but I really think they're going to help the business side more than anything.
Jigar Shah: Yeah, I also think that you're not thinking about this from an event driven standpoint. Like for instance, last week, I live in this crazy county called Montgomery County in Maryland, which always has power outages. We just live with them. Last week we had four power outages. It averaged eight seconds.
Stephen Lacey: We've heard you talk about PEPCO before.
Jigar Shah: Yeah, they suck. But in any case, I guarantee you, the next time the laws are enabling, I could go onto my Facebook listserv and just say, "Hey, who wants to make this neighborhood into a micro-grid?" They're going to say, "Yeah. Screw the Pepco people. I'll do that." Then you say, "Great. Here's how we do that," and everyone will opt in because they just had like eight second power outages last week and their alarm clock was flashing and they had to go around the house and fix all the clocks. They're like, "Screw these people. I'm going to sign in with Jigar and do this thing." That's how this goes, is something happens, you have a hurricane, or a trade show, a thing, whatever, a power line goes down and someone says, "There's got to be a better way." Well in fact there is, here you go.
Katherine Hamilton: Yeah, and we're not going to stand for having week and two week outages anymore. People just expect better.
Jigar Shah: Unless you're in Puerto Rico and then it's out for a year.
Katherine Hamilton: They still don't have power, yeah.
Stephen Lacey: Why the hell did you move back to Montgomery County? Your sandwiched by the two things you hate most, Pepco and the Energy Information Administration.
Jigar Shah: But there's a whole of extraordinary people like Katherine around.
Stephen Lacey: That's right, she makes DC tolerable for sure.
Katherine Hamilton: Gosh, that's so scary.
Stephen Lacey: Are you sold on LO3 as a company, or are you just more interested in blockchain?
Katherine Hamilton: They're the ones I know the best, because I've worked with the more. I've learned more about them, but I think that others could do it. I'm not as familiar with all the other companies that are doing this, but I think blockchain is going to be important. I'll tell you a story.
When I was in, I do this World Economic Forum gig and this is sort of my second go-around. The last time I did it it was four years ago, and I walked in and I said, "Energy storage," and everybody looked at me like I had a second head. They said, "Is that a thing." I said, "Yes, energy storage is amazing. We have to build it into everything we do."
This time, energy storage was part of what they talked about. We walked in and they said, everybody said, "Oh, we have to do energy storage." When I started bringing up blockchain they started looking at me like I had another head. Just wait, next time we're here we're going to be talking about it because it will be fully there. I think it's like every other innovation that's really got a lot of uses and a lot of value. I think it will keep moving.
Stephen Lacey: Jigar, what's your story of the year?
Jigar Shah: My story is a company called Sinode. The reason I care so much about is, they're a company that came out of Northwestern University and they created a much more efficient silicon anode.
Stephen Lacey: Like a graphene anode.
Jigar Shah: Graphene-coated anode. A very specific use case and provides a much more efficient battery. But what they did was they only raised a million dollars worth of VC money, or angel money in their case. What they did was they really forced their customers to fund them, and said, "Look, if you really want this innovation then you guys have to pitch and prepay for some our development expenses to get us to commercialization, and then utilize the product once it gets there."
I found the whole model was quite fascinating because it guarantees you that you have alignment with your customer. Because otherwise you end up going down the pathway of burning a whole bunch of cash and then ending up not in a place where the customers are demanding your product. Where in this case they're already invested some money, such that they're actually in it with you.
Stephen Lacey: Yeah. It's another really good story, because I think it's very consistent with what we've been talking about tonight here at Greentown Labs, and what Greentown tries to do, which is connect hardware, material startups, with corporate players who can give them the capital, the expertise and the equipment to test that stuff. Sinode has done exactly that.
It's a process and materials innovation, and then they've worked with GM, Chrysler, Ford in partnerships to actually test the anode. You've got this marriage of something that can be dropped into existing lithium-ion battery production, and you're partnering with corporate players who are interested in those process innovations that can really improve the performance of the batter.
Jigar Shah: Yeah, and I think that's it's a business model that's actually available to many more companies than actually try it. Hopefully they're inspired other folks to look at their own businesses and see whether they can benefit from the same model.
Katherine Hamilton: So you have a market, you know your market.
Jigar Shah: Yeah.
Stephen Lacey: I was thinking about a company that is the opposite of Sinode. The one that came to mind was this Australian company called Redflow that's developing a vanadium flow battery for the residential sector. It tried to invent an entirely new battery, own the entire supply chain, deploy it for an unproven sector where lithium-ion is king. They have had nothing but troubles.
So they've since scaled the battery for remote uses for cell towers and communications towers, but it's the exact opposite. You look at a company like Sinode, which has been able to grow off of a very small investment, and a company like Redflow that has had a lot of trouble because they're trying to own every piece of the supply chain.
Jigar Shah: Yeah. Look at any company that Vinod Khosla has invested in. They're all the same.
Stephen Lacey: That's the reason why biofuel companies have all failed, because they're trying to reinvent an entirely new process.
Jigar Shah: They don't validate themselves with the customer. That's the thing, is like, there are lots of people who use-
Stephen Lacey: There have been a few that have validated themselves with customers.
Jigar Shah: Not really, they give like 100,000 gallons to Delta and say, "Hey, we've done three or four of these test pilot things," or whatever. It's more about ... It's a high bar for us to have to get and sign a PPA with a customer before we build a solar system. But they could do the same thing, they could go to Delta or United and say do a 10 year PPA for these biofuels, and then charge an extra 21 cents per passenger at the airport to actually make sure it all gets paid for. A lot of these airports would do it, because they actually want to support a biotech industry in their hometown or in their area. But it takes a lot of work, it takes a lot of discipline to do that model, and I think a lot of folks just don't have the discipline for it.
Katherine Hamilton: On a batter side, I do think there are going to be a lot of other chemistries that come along that do different things, but you have to ask yourself what's the problem you're trying to solve? What's the problem that no one else is solving? Where are the gaps? Fill them, rather than trying to replicate what lithium's doing fine.
Stephen Lacey: Yeah. In Australia they don't need necessarily an eight or 10 house residential battery. They need fast responding batteries. A lot of consumers are interested in backup power because the South Australian grid is in terrible shape.
Jigar Shah: Not anymore. There was 100 megawatt battery that went in in 60 days.
Stephen Lacey: That's right. We'll talk about that. We'll table that conversation for now. My story is about a topic that we've discussed a couple of different times in different iterations. It's about the role of large energy corporates, particularly global utilities but also materials companies, automotive companies, making bold acquisitions and partnerships in distributed energy companies.
We just actually heard some great pitches from a bunch of interesting startups who are now getting funding through DSM, very large global materials company. This is the type of partnership that Greentown is trying to foster and that is becoming increasingly important. In 2016 and particularly in 2017, that's where we saw this trend play out.
I sat down and tried to think through some of the major acquisitions from the end of 2016 through this year. The list is crazy. It's super long. Here are just a few of them, Enel the Italian utility acquired Demand Energy. Tynemouth Energy Storage in the UK, EnerNOC and eMotorWerks. I do have to issue a correction on eMotorWerks, we talked about this on the podcast and I said it was a company with 14 employees. I heard from their PR person who was like, "You have to say this in the next podcast, it's 55 employees." So, I was wrong. But anyway, kudos to them.
Ormat, the major geothermal developer and power plant developer, which is really interested in energy storage and energy management, acquired Viridity Energy. Shell acquired ... Shell who's a huge partner here for a lot of the startups, acquired NewMotion, the EV charging networking company. The wholesale energy provider MP2 Energy in Texas. ENGIE acquired EV-Box, it invested in the distributed energy controls company OpTerra, acquired the C&I resource management company Ecova, and it's partnering with Tendril and then a bunch of other-
Jigar Shah: And bought Green Charge Networks.
Stephen Lacey: And Green Charge Networks, that's right. Other notable investments are Oracle bought Opower, GE acquired Daintree Networks, the smart lighting company. Southern Company bought micro-grid developer PowerSecure. Mitsui bought up SunEdison's CNI assets, because they want this holistic corporate energy management, whatever the hell that means these days, and ENGIE invested in Green Charge.
That's just some of the bigger acquisitions, there were dozens and dozens more. I think through this year we'll probably see upwards of four billion in acquisitions in the last four or five years. It's really incredible.
Katherine Hamilton: Yeah, and wouldn't you say that most of those have a proven business model and-or workable business model and a proven use case?
Stephen Lacey: Yes.
Katherine Hamilton: Each of those companies have a use case.
Stephen Lacey: But there is one difference, and that is most of these acquisitions, these high profile acquisitions, they're not tech companies or materials innovators. They are service providers and they're tech integrators. So, I'd say the big acquisitions we're seeing are for a different type of business model.
Jigar Shah: Yeah, but I would say that the DSM approach I think is more interesting, because they are a very large materials company and they basically are an essential part of a lot of their customers' supply chains and products. Having these kinds of investments gives them one, like a insight into what the future is going to look like. So they can actually figure out where they should be positioning themselves.
But second of all, they actually have something really interesting to talk to their customers about, because their customers are sort of bored. They come in and say, "Well, we've been buying from you for 20 years. Why don't we need to meet with you every quarter?" They're like, "Well, because we have interesting stuff to talk to you about now. Here are the companies that we invested in and here's the stuff.
Here are more insights." You see that a lot with roofing companies and others, where their customers are so used to working with them, that they're like, "We're going to keep buying from you, you don't have to keep coming by the office every quarter." So they actually need something interesting to say every quarter, and say, "Look, here's interesting stuff that we're working on." It's a weird dynamic but it's different than I think DNLs and NG and GE and Oracle stuff.
Stephen Lacey: There's a pretty easy bullish case for this, at least for startups. Is there a bearish case? I've tried to express my bearish sentiments about this. I think where I'm a little bit more skeptical is the surge of acquisitions among bit utilities that are just desperate to find companies that are going to upend them or that already are upending them. I don't think that they have a clear coherent strategy often.
I could very well be proven wrong but at least for the large players, like Edison International and GE, who've attempted to throw together this kitchen sink strategy on the CNI management side. They've had to split up their businesses, they've had to lay people off. They haven't been able to do it correctly. So there's this vision of the future for layering all these tech and solutions together.
No one's proved it could work and I worry that utilities that start making all these acquisitions in the hopes that they're going to combine all these businesses into one holistic service are potentially going about it all wrong. I don't think we have enough data points to know yet, but I think we've seen some struggles from people who've tried that. I wonder if you all agree, because I've tried to get you to agree and you don't.
Jigar Shah: Yeah, exactly. I think you're the definition of insanity, you're asking the same question over and over again expecting different answers.
Stephen Lacey: It's only the second time, once I get three then I'll be insane. Do you agree with any of that? I really fundamentally believe that you're looking at some-
Jigar Shah: Can I just say no?
Stephen Lacey: Sure, sure. But why? Why?
Jigar Shah: We have this conversation ... Look, I think that we're in a different place today. Now that you own a home you'll know that all these things can be automated. No look, I believe that these utility-
Stephen Lacey: But first of all, they haven't even figured out the retail contract game here in the competitive market in Massachusetts. The competitive electricity suppliers that approach me and attempt to sell us a new service are horrible. We haven't even gotten to a level where they can deliver a good service there.
Jigar Shah: Right, but I'm just saying, Enel is one of the largest utility companies in the world, with 70 million meters that they control. These companies can provide so much efficiency within their own electric utility business, that they don't actually even have to sell externally to pay for the cost that they paid for. So I think that you are basically suggesting that if these companies acquire, if these utility companies acquire these companies and then can't make them household names, then they're a failure.
I'm saying that wasn't their intention. For one, the entrepreneur hopefully got a payday out of it. So now they can live to fight another day and startup three more companies, which is awesome. Two, these utility companies can actually gain a huge amount of savings in-house, which is great. And then three, they do actually have these established customer bases and established products, that they're buying with these companies, which they probably do have some internal expertise by which to help them sell wider and farther. Which may or may not work, and it hasn't worked in the past but it something that they have available to them if they used it correctly.
Katherine Hamilton: Yeah, I think it's different from what happened with SunEdison, where I was like, "Don't eat anything bigger than your own head," and everything fell apart. But these feel different, because they are-
Stephen Lacey: And they're so much smaller.
Katherine Hamilton: Yeah, they're smaller, they're proven. They have teams on the ground that understand all the policies and their business models. They can go forth, it's not like they're trying to everything that they don't know how to do. They're better fits.
Stephen Lacey: Let's move on. It's coffee time now, I guess cocktail time depending on your preference time of day.
Katherine Hamilton: I wanted a beer.
Stephen Lacey: We're sitting here, Jigar's drinking his beer. We're all networkers here, we're all looking for own mentors, and we also get a lot of queries up here from folks who want to pick our brains so to speak. So when an entrepreneur asks you out for coffee, lunch or a drink, what's the single most important common question that they have? And how do you answer it?
Katherine Hamilton: May I have two?
Stephen Lacey: Sure, as many as you want.
Katherine Hamilton: Alright, the first is job related. A lot of people are looking to do policy, "How do I get into policy? How do I get a job in policy? What do I do to do what you do?" With that one, I always say, "You have to live life. You have to know how things work." You can't just jump in and expect to understand how everything works if you don't go through the process of it.
I always tell people, "Go ... I designed grids for utility. That was great, I know how electrons flow, I know how things work. So go and do that, or go and be with a business and understand how a business model works. Or go and work for a finance company, understand how you pull a project together and close a deal." Learn how things work, because then you'll understand how policy could affect it. That's the first thing, but it leads into the second.
Stephen Lacey: Can I comment?
Katherine Hamilton: Yes.
Stephen Lacey: My journalism teacher told me that the one thing I shouldn't study if I wanted to be a journalist was journalism.
Katherine Hamilton: Exactly.
Stephen Lacey: Now look where it got me.
Katherine Hamilton: But yeah, live life, go through and do things that are interesting.
Stephen Lacey: Get an area of expertise, yeah.
Katherine Hamilton: Yes, learn how things work. The other piece is that companies poo poo this issue of policy, "Well we don't have enough money to do policy. I'm just going to listen to Energy Gang, I don't need to invest in policy." I say, "Yes, you do. It should be part of your business mode. It should be what you think about as you think about growing your business." Because policy is the thing that can completely be the brick wall that you slam into and you're not able to go another step.
By policy I mean not just legislative policy but regulatory policy, interconnection policy, all of those things that happen on a local level, state level and federal level, that can shut everything down. I think of policy as not policies for policies' sake, but really as part of a business strategy. Or, a part of ... It doesn't have to be a business, it could also be an NGO, a campaign, an issue strategy, or if you're doing an environmental campaign, that strategy rather than a business strategy. But it's not policy for policy's sake. Those are the two big pieces.
Stephen Lacey: Yeah. This is moment in time of course where I think a lot of people are feeling overwhelmed and wondering how they can get more involved in policy making in some way, either through a direct lobbying effort, or even running for office. We're in a situation now where there's this horrendous abomination of a tax bill that's going forward that looks like it could destroy the tax equity market, or at least put a serious dent in it.
I'm wondering, when you have these moments where there's this bill going forward that seems unstoppable and a slave to this hideous political moment, how can startups sitting in this room go and make their voices heard, when it feels so difficult to do so?
Jigar Shah: It sounds like you're not getting paid on a pass-through LLC.
Katherine Hamilton: The reality is, sort of two sides. One is, yes the donor class is in charge of this tax bill, so it's going to go through. There's nothing we can do about that really, but then you have to say to yourself, "I have to at least try," so call your member of congress, call your senator, tell them what you think. Meet them at their office, talk about what you do. Educate them. You can't just go to a policy maker with a problem.
First you want to go to them with what you're doing. "Here's what I'm doing. It's really cool. It's a solution and it's something that you should care about. Here's why. Here's how it affects your constituents." I think that on a very granular grassroots level, introduce yourself, educate people. And then when something happens, you can call them and say, "Hey, remember that time I came and visited you and told you about this cool thing I was doing? You're just about to pull the rug out from under that cool thing." That's how you can do it. But when everybody in the community sees something that was slipped in that was completely unexpected at the last minute, setting yourself on fire is not really going to work.
Stephen Lacey: So how easy is it for a startup, an entrepreneur, to get a meeting with their representative or their senator? How likely is it that that politician will take a meeting? Or would they hand you over to their staff? What kind of questions will their staff ask you? These are the sort of things that people should know if they're really going to go and engage.
Katherine Hamilton: If you want to engage with a senator or a representative, go to a fundraiser and give him a bunch of money. That's the answer to that.
Stephen Lacey: Yeah, there's tons of money, these pockets are flush with cash.
Katherine Hamilton: But you will be meeting with staff, I meet with staff all the time. That is fine, because the staff is the brainpower behind that member of congress. The staff writes the memo that says, "This is what you should, or shouldn't, do." That's fine, find the right staff to meet with and then start educating them and letting them know what you do and why it's important, and that there's a community around it too.
I think something like this lab is great. They have a group of companies that as a group can have a voice. You just have to be able to talk about what you're doing in a way that's compelling. You might not use the same words for each kind of person that you meet with. You can use different words. You can use environmental words with some people in Massachusetts, it's easier to use those words with other people.
I went into a Republican office recently and I said the words, "Natural disaster," and they said, "Sounds like climate change." I was like, "Natural disaster, what should I use? Act of God? What are the appropriate words that I can use?" Because natural and disaster don't ... it's not a climate change thing necessarily, even though we all know it is. I think you have to learn how to speak. You need to be honest and upfront. You need to be okay to meet with staff, that's fine. It's what we do all the time.
Stephen Lacey: There's another end of this spectrum. This is something that Jigar's talked more and more about lately. That is something you mentioned on the previous panel, which is engaging the local community differently, becoming a part of the chamber of commerce, sponsoring that billboard on the little league field. You know, owning the town basically, like a lot of traditional energy companies have done.
Jigar Shah: That's right, throw some money around. No look, I actually find it quite shocking how few clean tech entrepreneurs do what Katherine is suggesting. When I moved back to Maryland I was like, "Who's my state delegate? Who's my state senator? Who's the person who represents me in Montgomery County?" I actually called them all up and said, "Hey, we should meet for coffee, we should do stuff."
It's honestly shocking to me how much people like to currently democracy and this and that, and how it's not working, whatever. But they don't actually participate in democracy, they don't actually call their elected officials. It's not just your house member, your senator or the president. It's also your city council member, your mayor, all these other people.
Katherine Hamilton: School board.
Jigar Shah: School board. I mean, these people all know each other, and then they actually help network you into the right places, et cetera. It's not that much time, you spend that much time on lots of other things. It's not that much money, even if you do have to pay money on a fundraiser or whatever else, it's really not that much money. As Katherine said, when you actually do need their help and you do need their attention, you will rue the day that you didn't like give them $250 six months earlier, such that you would have actually been able to have more influence on that thing.
Katherine Hamilton: Yeah, showing up is so important. On the regulatory front going, submitting testimony, testifying, and it doesn't have to be necessarily in legalese unless you're doing it for FERC. Otherwise you can go and testify, you can testify in your state house-
Jigar Shah: You can testify in church.
Katherine Hamilton: You can testify in ... absolutely. You can testify in regulatory proceedings. That makes a huge difference. We had, I don't know, it was four days or something to write testimony to submit in that Puerto Rico micro-grid thing. I was like, "Doggone it, I'm using my weekend. I'm going to write a testimony," because somebody's got to get something in the record. Do that, show up and submit.
Jigar Shah: That's how this works.
Stephen Lacey: Yeah. Any time something complicated is happening, I'm always like, "Katherine, what are you writing? What are you filing? Let me read it." So I can understand what the hell is going on. What about you Jigar? What do people ask you about? What's the most common question?
Jigar Shah: They usually ask me for money. I do find it a little bit strange. In general I would say that when asking people for money or advice or asking folks to join your advisory board, I've had lots of those types of flavors. I've always been so confused. It's like, you just go up to someone you've never met before, and you just ask them for money, or ask them to be on your advisory board. When you ask them questions to get to know them better, figure out what's going on, what they might invest in, what their interests are, et cetera, before you go, "Hey, you should invest in my company because it's so awesome."
I'm like, "I get it but I don't know you, so why don't we actually have a conversation first?" I actually find it really strange, because I don't have a problem asking, talking to people about money. That's what I do with Generate Capital, but I do find it odd that folks have lost this ability to actually connect at a personal level first before you get into all these other topics and issues and things.
Stephen Lacey: So you didn't just walk up to the manager of the Alaska Sovereign Wealth Fund and asked for $200 million?
Jigar Shah: I did not, and it was only 100 that we got from the Alaska Sovereign Fund. But no, I think that yeah, it's one of those weird things where I find it very strange. Because as someone that started a company and did all that stuff as well, I did my homework. David Busby was the first investor in Generate, and we figured out what he did and how he made his money and how to tie my presentation to his experiences. Some of that stuff, you do your research first. Listen to a couple of Energy Gang podcasts. Yeah, I just think that it is very peculiar to me, how fast paced everyone wants to make everything, as opposed to higher quality.
Stephen Lacey: Okay, so then what should the first question be if it's not, "How much money can you give me?"
Jigar Shah: I think the first thing is, first of all making sure that if it's a meeting for you to ask me for money, making sure that I'm prepared to actually answer. So sending me enough materials that I can review beforehand so I actually know something about your business before we meet.
And the second of all, it's actually like getting my advice first about the industry and how things are going, and how you fit into the industry and what niches your going after. Just learning more about your trials and tribulations and seeing if I'm a fit, if my experience even is one that could be helpful to what it is that you're doing. Because I'm not going to invest if there's nothing I can do to help you except give you money, if I don't have any special insights into what it is that you're going through or your business challenges, et cetera. Yeah, so I think that that's the biggest thing that people ask me about and I give people as advice.
Stephen Lacey: Both really, really good advice.
Katherine Hamilton: How about you?
Stephen Lacey: I get a lot of people who are like, "Why don't you cover us in Greentech Media?" I'm like, "Well, you've just got to get as rich as Peter Thiel and then file a lawsuit, fund that lawsuit, shut us down, buy us back up and then cover whatever the hell you want."
Jigar Shah: My mom doesn't think I made it unless I'm in Greentech Media.
Stephen Lacey: There are a couple things I think are interesting when you're a journalist covering a lot of different companies. We might cover some startups and not others, why is that? We might cover some big transactions and not others. It can from the outside feel a little lumpy, but we're often looking for good storylines. There are a lot of transactions happening all the time, but if we're not made to see, if we don't already see it if we're not made to see how this fits into a broader narrative, a broader storyline, it can be a lot harder to get your message to cut through.
So I think first and foremost, when you're pitching the press or you're thinking about what your message should be, you always try to think about this broader narrative of what's going on in the world, in the energy sector, in the tech sector, in politics. When you can start to connect those dots and in a very simple explain why what you're doing matters in that context, we're suckers for narratives and more often than not we'll respond to that email or have more of a detailed conversation.
I think that's really critical. Then there are a couple other small things that are important for people to do, and I'm not hucking GTM by the way, but stuff like webinars are really good for lead generation. If you want to target a certain number of people and give a presentation about what your company does, you can get a ton of names and provide thought leadership through things like that. Or pitch your CEO on a panel discussion somewhere. We hold conferences all the time and we get really shitty pitches from people, and some really good pitches from people.
Sometimes it's from a company that we're not following closely, but because they've couched this broader narrative and it fits into the things that we want to cover at a conference, we're like, "Oh yeah, that person should be on a panel, for sure." I think it's really thinking about storytelling. A lot of people, you'd be surprised, it sounds like common sense but a lot of people are so bad at it, and it does take practice.
Katherine Hamilton: That's part of how, when we do our show, you send the stories out ahead of time, and I try to think, "What is the thing that no one else is going to say?" It's going to be about policy probably, but what is the angle that I can hammer, policy, policy. It's finding what is the gap, or what is it that no one else is saying, that you can then tell a story about that's a little different.
Jigar Shah: Yeah, I always am trying to figure out how to say people need to move.
Stephen Lacey: Yeah, right, right. Dear God, here we go again.
Jigar Shah: How do I fit that into the story?
Stephen Lacey: Or you could just start your own podcast.
Katherine Hamilton: We've got a Charlie ticket right here for you, Jigar.
Jigar Shah: This will be my last episode.
Stephen Lacey: Let's do the news circuit, talk about some headlines, right?
Katherine Hamilton: Yeah.
Stephen Lacey: Tesla 100 megawatt battery was installed in South Australia. Elon Musk turned to Twitter and said that, "I will install this battery in 100 days or less, or you can have your money back." It'd be about a $50 million bet if he lost it. He did it. The battery is getting commissioned right now. What does this mean for the industry? You said, point, go to Jigar. Jigar, is this an important milestone or a one off novelty?
Jigar Shah: It's obviously all of the above, but I think-
Stephen Lacey: When you're talking about Tesla it's always a novelty in some ways.
Jigar Shah: It's all of the above. But I do think it's a milestone around the responsiveness of battery storage. That this huge crisis occurred and the fact that battery storage can be deployed in 60 days, versus a natural gas combined cycle plant that would have taken a lot long to put in, or other-
Stephen Lacey: Not just construct but permit.
Jigar Shah: Absolutely. You see that with solar projects all the time. People are always shocked when there's some build up, some permissions you need, et cetera, but then you can build a huge Walmart rooftop in 27 days or something. People are like, "Wait, how did that happen?" Well, because this is pretty modular and people are good at it and we can get stuff done quickly. That's the beautify of this distributed generation infrastructure that we're moving towards, and the fact that he was able to prove with this project I think was a big milestone.
Katherine Hamilton: It was proven with Aliso Canyon. They put that battery together really quickly but it didn't involve a series of breast-thumping Tweets.
Stephen Lacey: Yeah, can you explain what Aliso Canyon is for folks?
Katherine Hamilton: That was where there was a big gas leak and they needed to backfill instead of having gas having storage. They did in six months, it was super fast. Less than that, maybe three months.
Jigar Shah: Yeah and AES was a part of that too and did some pretty fast work there too.
Katherine Hamilton: Yes, a bunch of other folks were contributing to that. They were able to put it up in record time and there wasn't a lot of fanfare about it. It was a good story, and you all covered it, but it was not significantly different from what happened in Australia, it just didn't have a Tweet storm.
Jigar Shah: Well look, the Tweets are good.
Katherine Hamilton: Yeah, it's good for publicity.
Jigar Shah: I'm glad people know a lot about it. I'm glad that folks are thinking more about battery storage, as opposed to doing 20th century stuff all the time.
Stephen Lacey: Yeah, well our Ravi Manghani, who runs our storage team at GTM Research, their team has been working really hard and combining all this global market data from Wood Mackenzie, the company that acquired us. We're doing a lot of modeling on what storage looks like against peakers and different markets around the world. I think five years is going to be really difficult for a gas plant to get built in many, many countries. That's a lot of work that we're doing to evaluate those broad economics in really important regions where we've seen that shift.
Katherine Hamilton: Yeah, these slow capacity plants won't need to be there anymore for peaking.
Stephen Lacey: Alright Katherine, to this tax bill. So, we're probably going to open up the Arctic National Wildlife Refuge to drilling.
Katherine Hamilton: Yes we will.
Stephen Lacey: We're probably going to destroy the tax equity market or disrupt it.
Katherine Hamilton: No. No, no, no, no.
Stephen Lacey: Okay, so start with that then. Why should we not be as shocked or worried as the headlines should suggest?
Katherine Hamilton: I think we can be shocked and worried, but I don't think we need to self-immolate. I think we need to think about what this really does. It was a surprise. The house tax bill did some real damage to the PTC. It said you no longer will an inflation adjustment, that you don't have a safe harbor, it was retroactive. It was pretty damaging. That was awful.
When the senate bill came out, that wasn't in it. The PTC and ITC were not in it specifically, so everybody said, "Woo hoo, that's great." But then there was this other thing that was stuck in that was pretty sneaky, and it was called the BEAT, the Base Erosion Anti-abuse Tax. What that would do is it's for multinational banks, and it would tax, it would make corporate tax liability from the equity investments and the tax credits.
So it could have a bit of a dampening on tax equity, yes. It won't hurt everybody, it will only hurt those that are multinational. So that's a bunch of the market, but honestly this tax bill is a Frankenstein anyway. We do not know ... It will pass, pretty sure of that. But we don't know what it will really do, because I don't know what the-
Stephen Lacey: It's moving pretty fast.
Katherine Hamilton: It is moving very fast. I'm not sure how the senate and house bills will shape out. The house can't just take the senate bill as is because there are a bunch of state and local, the state and local tax issue is in there and the states that are going to be hurt the most, the house had the provision to help moderate Republicans such that they are in New York, in California, New Jersey, so they protected their state and local tax write-offs. But that's not in the senate bill and it really, really hurts those states.
So they can't just take the senate bill, they have to work something out. There will be some form of conference now, it won't be the way we used to do conferences, which is you name conferees on each side of the aisle and each chamber, and everybody gets in a room. I used to sit in these rooms and they would horse trade, that was also when they had earmarks so you were able to really trade projects and everybody got a little piece of something. They're not going to do that.
It will be the leadership, it will be like four guys in room saying, "Here's what we're going to do." It will only be one party, the Republicans, and they will decide what's going to happen. They'll throw a little bit back to the house and they'll probably get it done. The senate bill will probably pass this week.
Stephen Lacey: So when will Chuck Grassley roll in on a wind turbine blade and cut everyone up and say, "Don't touch this stuff."
Jigar Shah: Come on now.
Katherine Hamilton: See, this is the thing. He can still say he was a purist on this. Remember he has people in his state, like Berkshire Hathaway, who will not be affected by this provision. So there are people that are not in the same place on this, so I think that's why he's not laying down to die on it at all. I think this is not his sword to fall on. I think this will go through and something will come out the other end, and it will be next week probably. I assume it will pass both chambers, because they are super, super desperate.
Stephen Lacey: Is ANWR going to be in this?
Katherine Hamilton: I think they will resolve that issue. Well, it will be in litigation forever, but the trick with ANWR, it shouldn't be part of a tax provision by the rules of this budget reconciliation it should have 60 votes. I think they're going to resolve that because this is what Murkowski's been living for for a longtime. I think they'll figure out a way to get her that.
Stephen Lacey: Jigar, what about the Bonn climate talks? What interesting came out of those? They just wrapped up a week and half or two weeks ago, what should we be looking for out of there? Which is just more of a process than it was adhering to any type of goal.
Jigar Shah: Yeah, I think that there is a misnomer around what these talks are and what they're not. What they are is really a way for folks to coordinate on how to move things forward. I think one thing that came out of it is that Syria signed, and that now every nation in the world has signed on to the Paris Climate Agreement.
Stephen Lacey: They're totally just trolling the US.
Jigar Shah: No, the US has signed as well. The US has not exited the Climate Agreement, and no matter what Trump says, he actually has to wait four years to get out of it. There's not much you can do about it. I think we're in a situation where every country in the world has agreed that this is largest wealth creation opportunity of our lifetimes and they want in on the action.
The conversation in Bonn is like, "How do get my access to all these technologies for my country? How do I finance them? Which financing industries or government bodies do I work with?" Whether it's the European Investment Bank or Overseas Private Investment Corp or Export Import Bank or other folks. Everyone is all in on it. Now folks are saying, "Well, which technologies do we need to go first on?" Is it LED lighting, or IEA came out very strongly and said it was going to be solar and wind. I thought that that was, it's a sea change compared to where we were just a few years ago. I think the notion that all these guys ... For India, 40 percent of all power capacity this year will be solar.
Stephen Lacey: The IEA numbers are incredible. $7 trillion in new investment in developing countries, and almost all of the energy access, energy use for energy access by 2030 will be renewables.
Jigar Shah: And developing countries can't raise $7 trillion. The fact that there's $7 trillion available for developing countries is a big deal. I think that folks are missing out on the nuances of this. In the US when we say, "We're going to do a trillion dollar stimulus bill," or whatever else, it just happens. In India, the number one thing that Piyush Goyal worries about every day when he comes to New York or other places to have these meetings is, how do I get more capital into India? How do I get more people to invest in India?
He actually ... even if all the projects were laid out and all of the PPAs were signed, everything was ready to go, there aren't that many investors ready to invest into 20 year assets into India. So all of that coordination on the side lines at Bonn matters. It matters a lot. They express their inclination to want that money to come, and the money folks come in and say, "Here's what the requirements are that we have." And then they go back to their countries and change some of the rules to allow for those rights to be pervade, and it's a really complicated process but it leads to a huge amount of increase investment.
Katherine Hamilton: Yeah, and they're trying to build more transparency into that too, so they can know where all the flows are, the money flows. They started that in Doha when they had the COP there. Some of the things that Fiji wanted to get done that they were able to do were they put together a gender action plan, they did a local communities and indigenous people's platform, and an ocean pathway partnership.
These are all about, how do we work together? They also have ... It's important for states to be involved, and when I states I mean on a national level, on a federal level, to be engaged. I know that there were a lot of states from the US that went. So sub-national players are really important, they can't negotiate for their country, and they shouldn't be able to. It's important to have one negotiating point for the country, but the good thing is you do pull together these partnerships and these coalitions, so this Powering Past Coal Alliance that is 20 countries and sub-nationals, so some states are signing on. That's great, because you pull these people together and you can get a lot done regardless of what the top leader is saying.
Jigar Shah: People walked out of the Trump coal forever presentation.
Katherine Hamilton: Yes.
Stephen Lacey: Yeah, but what's interesting is that there was this side event, the one official U.S. even was a pro-coal event. But you actually have people in the state department who are doing the work behind the scenes, who are not leaving their jobs, they're going there and they're actually still negotiating.
Katherine Hamilton: They're the same people who we've been negotiating the whole time. So they're still there and that's good.
Stephen Lacey: Yeah, it's complete bullshit. It's just he goes into the Rose Garden and then talks about leaving the agreement.
Jigar Shah: This week we had our 24th coal plant this year that shut down.
Stephen Lacey: I had a few other stories but I think we're running a little bit long on time, so let's tell our listeners something they may not know. Katherine, what's your story?
Katherine Hamilton: I was going to sort of glom onto the bond talks, by talking a little bit about the Kigal protocol. We have spoken about this on a previous episode. Where it's building on the Montreal protocol, that essentially has eliminated CFCs from the atmosphere by setting up certain rules around that. Now there's the next protocol, the Kigali protocol, that is HFCs. They are thousands of times more potent than CO2.
The EPA has authority under the Clean Air Act to go forward with this. We've been carrying out our obligations for 30 years. We've met all the obligations of the Montreal protocol, and it looks like we are not backing out of this one. This is a big deal, because this can have an enormous impact. Now there are some things we still have to get through, some legal issues, the senate. But right now, the Trump administration is staying in it, and that's really important.
Stephen Lacey: Jigar what's your story?
Jigar Shah: There's a publication in Denmark called Foresight Denmark. They've put together a huge amount of research which I thought was interesting, that basically showed that the optimal amount of battery storage in the grid is only about 3.5 percent of the total peak demand.
I thought it was interesting because we're not quite there yet, so we have a large amount of growth to go to get there, but I think there's this misnomer that folks believe that every wad of wind and solar has to be backed up by storage and all that stuff, and that's just not true. A small amount of storage goes a long way. Basically that's where the modeling work is coming out, about 3.5 percent of the grid that needs to be backed up with storage, and the rest can be done with demand-response load control and a lot of the other measures much more cost effectively.
Stephen Lacey: I'm going to pay deference to our host here. There are tens of thousands of people who are going to listen to this show outside of this room. For those who don't know Greentown Labs, again I mentioned that they're the largest clean tech incubator in the country. They're doing really incredibly work. This facility is already amazing, and they're expanding it by many, many, many thousands of square feet.
I got to tour the facilities the other day and I was taken aback by how gorgeous it is. If you are doing difficult hardware related clean tech stuff, I highly recommend you come and check out this place, because you all are doing fantastic work, so kudos to you. I think that's our show. Right? That's a wrap. Jigar Shah, Katherine Hamilton, I'm Stephen Lacey. We are the Energy Gang, thanks go Greentown Labs for hosting us here.
If you want to pull out those smartphones and write us a review, or give us a five start rating on iTunes, we'd appreciate that. It helps us find new listeners. You can also get us on SoundCloud, Stitcher, Google Play, Amazon Alexa, Apple Podcasts, anywhere. Send us an email at [email protected] if you want to touch base. Thanks a lot for joining us. Have a good night.
