ENERGY IMPACT CENTER
ENERGY IMPACT CENTER
Michael Crabb [00:00:57] All right. Welcome to the next episode of the Energy Impact Podcast. I'm your host, Michael Crabb, and I'm really excited to be joined today by Alex O'Cinneide. I hope I got the Gaelic accent right. You can correct me.
Alex O'Cinneide [00:01:11] That was great, Michael.
Michael Crabb [00:01:12] He's the CEO and founder of Gore Street Capital and quite generous. Alex, welcome to the show.
Alex O'Cinneide [00:01:18] Thank you. Thank you for having me on.
Michael Crabb [00:01:20] So before we get into hearing more about the firm and your views on the market, tell me a little bit about yourself. Where are you from?
Alex O'Cinneide [00:01:27] Well, as you rightly identified, Irish. So I'm Irish, came out of Dublin, went to college in Dublin. It's funny, I was saying to somebody the other day, I was probably part of the last generation that immediately qualified from college. Everybody got on the plane, right? So we went to London or New York or Tokyo or Frankfurt or the like, and after that Ireland started actually, you know, making some money and people started sticking around. So like many others, I got on the plane, I worked out of London, worked out of New York, spent a chunk of time in the Middle East.
Alex O'Cinneide [00:01:57] Overall, I ended up in investments and because I'm old, I've been in investments for about 20 years. The majority of that time was investing in the world of renewables. So I've been working since 2006 nearly exclusively in the world of renewables. I was head of investments for a sovereign fund in Abu Dhabi called Masdar, and that was large scale deployments to solar or wind, a bunch of clean tech stuff as well. So I was doing a lot of deals out in Silicon Valley in terms of tech companies and clean tech. But, you know, I've been focused on the world of climate change and renewables for a long time. I'm engaged broadly across the sector. I have a PhD in renewable energy policy, I do some teaching and work on some of the research stuff. But yeah, my focus has been investments and I've done that in a few different locations.
Michael Crabb [00:02:50] Awesome. That's plenty of content for us to dig into. Let's start at the beginning. So you go to university in Ireland. Was the focus on investments? I mean, at that time it wouldn't have been climate, or are you just kind of exploring different things?
Alex O'Cinneide [00:03:05] No, no, I read history at undergrad, right? I was looking at Irish history and Japanese history. I was involved in political stuff. I was a good, signed up, member of the Socialist Workers so I didn't believe in the rights of property and the like.
Michael Crabb [00:03:20] Don't tell your LP's that now, right?
Alex O'Cinneide [00:03:22] Yeah. I mean, hopefully they don't hear this. But, you know, I lived in a socialist squat in East Berlin after the wall came down and those kind of things. But no, my undergrad was general arts history. For my other studies, I went to the London School of Economics where I did a Master's in Political Philosophy, but then discovered this thing called money and also went to London Business School where I did a Master's of Finance. So I think the charitable way to be described would be to have an eclectic academic background.
Michael Crabb [00:03:53] Yeah, that's fascinating. Can you tell us more about the process of that transition? Did you go to your PhD immediately after undergrad in London or what? What was the impetus that you're like, "Oh, man, I need money to live."
Alex O'Cinneide [00:04:09] Well, so along the way. I didn't think the podcast... but it's really interesting. So when I left undergrad I started working in tech, actually. It was the time of the kind of coming up of the dot com, right? So there was lots of stuff going on the Internet. I got interested in the Internet. I worked in two technology startups, one where I owned no equity in it and it did really, really well. One where I had a whole lot of equity and we had to wind the company up. But the first one was in Dublin. It was doing things on the internet and did very well in terms of what it's services were. And then I went to London at 24, founded a startup and tried our best to do things on the Internet. Didn't work, as is the majority of startups, but gave me an interest in the idea of business and the idea of putting things together. I then decided that after two startups, I probably should have something a little bit more establishment, perhaps on my CV. So I joined KPMG. I was working in KPMG in London, in New York and various different roles in the consultancy side, and that then led to thinking about other things such as the world of investments. So I started working with a lot of our clients in KPMG who were private equity houses and the like, and really got interested in the idea of how to create companies, how to create new business models. Decided to be able to get into that, I needed to go to business school. So then my decision went off to London Business School.
Michael Crabb [00:05:40] Fascinating. Yeah. So you're really an operator turned investor, which I think is somewhat unusual. I mean, maybe today there's more specialization, but do you find that that gives you somewhat of a leg up that you've been in both successful and unsuccessful companies, you've advised a whole host of companies, and now do you have frameworks that you can apply to your investment vehicles and projects?
Alex O'Cinneide [00:06:05] Well, I think, we'll come to it later, but storage, which is our thing where we really spend our time... To be a good investor in renewables, just taking renewables, you need to understand finance, you need understand technology, you need to understand policy. There's some Venn diagram that you need to sit in the middle of around those. I think when it comes to storage, which I've been spending the last seven or eight years on, I mean it's even more amplified. So we're dealing with a new asset class and brand new business models, complex assets which are doing complex, different types of things. As I look at the development of the firm that I run, I never thought when we set the firm up back in 2015, 2016 that more than half my colleagues would be electrical engineers, project managements, traders or construction guys. But we made the decision that we are investors. We manage a significant amount of capital. But we manage that and then we own the process about delivery. We own the process; for us, it's been built. We own the process for those assets to generate returns. And we think that's really important. And I'm sure, you know, way back in the depths of time... We're all a set of our experiences, right? Our experiences sit here and we're the sum of those experiences to a lesser or greater extent. And being an operator or being an owner of businesses, being an advisor to businesses, seeing what works and what hasn't worked for sure, I hope has had a benefit to what we're trying to do for our investors.
Michael Crabb [00:07:38] Yeah, fascinating. So sorry I sort of jumped ahead, talk to us about the path that led to founding Gore Street. So you become an investor, what attracted you to energy in the first place, or was it luck? And then how did that evolve into having your own firm?
Alex O'Cinneide [00:07:56] I don't know whether it's a Kurt Vonnegut line or one of those lines, you know, don't berate yourself for your mistakes and don't congratulate yourself too much for your successes. Right? You know, because most of it's just luck anyway. Is it Kurt Vonnegut? It might be Kurt Vonnegut? It sounds like it could be Kurt Vonnegut. But what brought me to renewables? So before I moved out to the Middle East to take that role and focus on renewables, I was in more diversified investments, more venture capital, actually, looking at energy tech, looking at tech in general. And we all have choices about where we want to spend our time, right? I don't particularly want to spend my time investing in arms companies. I don't particularly want to spend my time investing in oil and gas companies. We have a choice about what impact we can make in, the little bit of impact we as individuals can make. And I thought there was an interesting opportunity, both personally, but also an interesting opportunity in terms of growth wise about... Why not be part of what is the most important effort that we have to make as a society right now, which is our fight against climate change. And, you know, even back then when I made that decision in 2006, there was good reason to make that decision, not just from that kind of societal one, but we need to do things that we find interesting and we need to do things we find enjoyable, but I also think we need to do things that we think are worthwhile.
Michael Crabb [00:09:29] 2006 is sort of far before that was the norm or socially, maybe not accepted. I mean, today there's so much momentum and tailwinds around the energy transition. 2006 was really still kind of a valley or maybe was even before like EnergyTech 1.0, right?
Alex O'Cinneide [00:09:49] Yeah, I think there was a burst of interesting technology stuff coming out of the Valley in the early 2000s. That kind of faded. There was a big kind of push then from 2006 on. But for sure, you still had a huge amount of comments coming to the universe going, "This is never going to work. This is not appropriate," and things of that. But I still see that. I was on a panel recently, before COVID. I have to kind of define everything as pre and post COVID, right? Before COVID, a big energy panel in Boston and there was a bunch of investors beside me. They were all much better than me and much cleverer and they earn much bigger bonuses and stuff like that. But yet, I heard them say things such as, "We're very confident in oil and gas exposure. We're very confident that there'll be no markdowns, it'll all be good, and that these are critical assets that continue to have loads of value.".
Alex O'Cinneide [00:10:41] And I felt like I was in that scene in, you know the Big Short? Have you seen The Big Short? There's a scene where everybody's talking about how everything's fine, everything's great, nothing's ever gonna go wrong, everything's gonna be perfect and we're all going to be all good. And I was like, "Look, guys, at some point, society will not allow you to avoid the cost of your activities. At some point the hydrocarbons that you're producing or managing will be viewed as detrimental to society. Society will exact a cost on you because it will need that capital to go other places So I'm like, "I don't buy you guys that it's just fine, let's keep doing shale, we'll just keep doing this, that there's a free ride, and society will not exert some pressure on you." So that's not that long ago, right? So, yes, I think there is definitely a whole change in how we're viewing the industry of renewables, viewing the industry of energy transition. There's really exciting things happening, there's more and more great people coming into the sector. But, you know, oil and gas is still the dominant energy sector of the globe, it has more government subsidies than any other sector. And, you know, we have big investors from the big investment houses saying, "Everything's still fine, don't worry about it." I hope I'm not rambling.
Michael Crabb [00:12:06] No, it's great. It's great. I've got some follow up, but keep going, keep going.
Alex O'Cinneide [00:12:08] One of the biggest cons I think we've been subjected to by all our governments is this idea that it's all about individuals. "Don't worry. You do your recycling, it'll all be good. Do this." I'm like, "Yeah, okay, you should do your recycling." Give me a break. What we need is governments, we need governments implementing enormous policies, enormous programs, and we need them also doing the counter to that, which is disincentivizing the other side. Now, I say that, you know, the Inflation Reduction Act that you guys brought in, a landmark deal, I really believe that is a game changer globally. So there is movement, right? But we as individuals need to do something, but we also need to keep this pressure on our governments to actually not go, "oh, no, you should make sure that you're moving your plastics into one bag and and your metal into another," and think that's going to solve climate change.
MIchael Crabb [00:12:58] Yeah. Couldn't agree more. The individual impact is so de minimis and it's so easy for those of us in the U.K. or the U.S. to say, "Well, we can reduce our consumption 10%." There's probably not a huge impact for us reducing energy consumption 10%.
Alex O'Cinneide [00:13:20] It's good but I don't think it does anything.
Michael Crabb [00:13:21] Yeah, there's 400 million people, you know, maybe there's a billion people in that boat, but then there's like 3 billion people that don't have regular access to energy. I feel like the consumption argument is just poorly founded. I would love to hear your thoughts. How does government transition? I mean, because oil and gas is still such a dominant energy source, whether we're talking about heat or transport or electricity. How can that transition actually happen? Because there's this negative feedback loop of pricing that negative externality that society has benefitted from. Yes, investors have benefited from it, but society benefits from it as well because it's used in so many areas. So how do you see that transition actually being implemented? What would you argue for if I was a minister?
Alex O'Cinneide [00:14:20] I mean, so I think what COVID is amazing... I mean, COVID's obviously terrible and tragic, and I think we all probably got PTSD from COVID, right? From the lockdowns and stuff like that, I'm not sure I'm still processing it correctly. But what it did strike me as is two things. One, "Hey, we can send everybody to their basement." Everybody go to the basement, everybody go to the basement, and we did it one day, right? And everybody's like, "Oh my God, everybody's in their basement," right? And society kept going. Right now we have lots of pressures and lots of things happening. And so I go, one, government can do something as radical as that. Absolutely everybody go home and stay home. I mean, I remember walking the streets of central London in Soho one time and there was no one there on a Saturday afternoon. It was totally deserted. One of the global cities, the most populous cities. So if we can do that, why is it too hard to remove oil and gas from our society? I just start to question this argument that's always there. "It's too hard it's too embedded." You know, we hear all these things. That's the first thing I would say.
Alex O'Cinneide [00:15:26] The second thing I would say, and you know, I have Master's in Finance and Economics, I understand finance and economics, but, you know, we just turned on the taps in all of our governments to pay for stuff, right? I'm like, okay, you know, if we could do that, maybe we should we should do that, right? So I look at the decisions that we make and I think to myself, they are incremental and they are continuing to benefit some groupings in society.
Alex O'Cinneide [00:15:53] So let's take... transportation for me, EV. What are we talking about? Why do we think that we should subsidize or put capital, public capital, to work to help the car industry rather than build public transportation? But worse, why when you look across, even Europe is better than the states, U.K. is the same, why are we not building rail networks? What's going on? Everybody needs to have their own car, it's a massive waste of resources. So, there's these kinds of decisions we're making, which I think are to the benefit of keeping going the same ideas. Whereas actually beginning to go out and go, "Hold on a sec. Let's allocate capital to where the best outcome..." The best outcome in terms of decarbonizing transportation is not EV charging networks and the like. It is obviously public transportation infrastructure. So that kind of thing needs to be more apparent. It needs to be more clear when they make those decisions.
Michael Crabb [00:16:59] Yeah. I mean, in that example specifically, there's so many embedded incumbents, right? I mean, this could go back to your sort of social capital days, like they're all sort of different sides of a flawed coin. How do we break through that morass and say, "Look, it's kind of obvious." Maybe I'll ask it this way, are you optimistic?
Alex O'Cinneide [00:17:27] I think what will happen... I mean, this is now verging on areas that I don't know. I'm not an expert on climate change. I'm not a geologist or a weather expert or things like that. But it seems clear to me that weird things are happening. Over the Christmas period, I was lucky enough down to be down in the Mediterranean, I was on an island in the Mediterranean. It was 21 degrees, I know you don't understand that as Americans, it was 21 degrees Celsius, it was, whatever, something up to 100. No I mean, it was like, 80s, maybe, I don't know. That's insane. There were people in bikinis on the beach. That's not normal, right? In Poland, they were talking about it was hotter than it is in July. You know, I hear reports California looks like it's drowning right now, or it has been. Just enormous amount of... So people, it's permeating. People are like, "Hold on a sec." It used to be, and there's a term called a wicked problem. You ever heard about a wicked problem, right? So people would describe it as a wicked problem. Climate change is a wicked problem. It's happening slowly, it's far away, and it's kind of awkward for everybody, right? It's no longer a wicked problem. It's coming; it's a problem in front of us where we go, "This is not normal. What is the effect that's going to be?".
Alex O'Cinneide [00:18:46] So I think governments are lagging here. They continue to lag the public in terms of what the public and citizens want. Australia is an interesting example of that. They voted out a terrible, if I'm allowed to be, you know, terrible right wing government and they put in place a left wing, but also environmentally focused administration. I think that will happen more and more. And so I think our public representatives need to get with the program. They need to recognize that this is what the public wants and if the public doesn't get it, we're going to have to put in people who are going to do it.
Michael Crabb [00:19:23] Yeah. It is interesting to see how the message and or science and or discussion dilutes as it moves through the obvious, like the obvious impact, the social feedback loop, the social solutions set, and then the politicians that have to debate and horse trade to actually get something done. I don't know the answer to this. I don't necessarily expect you to know or have an answer to this, but I think the speed of that feedback loop is, in my mind, the biggest concern and the biggest hurdle. And then if you add all the embedded incumbents in it that are part of that feedback loop and distorting that feedback loop, I don't know. I don't know how... I think we need more impact to break out of that wicked problem and that feedback loop.
Alex O'Cinneide [00:20:15] Yeah, I suppose. I mean, this is an example coming out of left field but if you look at Brexit in the U.K., it's feedback loop meant there were four prime ministers, five prime ministers lost their job in the space of two years or something like that. So that feedback loop was fast because there was a problem the politicians couldn't solve, which is, "Hey, we voted. We did publically. People have been lied to, and you know, everybody did this decision. We've done this and now we can't implement it because there's no way to implement it while doing the other things." And that feedback loop just meant they kept losing prime minister's, which is incredible for the largest economy in the world, stable democracy, bah bah bah, right? It was like every 5 seconds there's a new English prime minister. So I'm not sure, Michael, that the feedback loops that we are engaged in around climate change won't accelerate to such extent that there will be kind of these changes which take place faster and faster. Because to be honest, the people in the bikini on 30 December in the Mediterranean, that's a pretty reasonable acceleration from when I was there last year when everybody was kind of bundled up and shivering and wandering around, you know?
Michael Crabb [00:21:26] Yeah. Alex, it's a good point. No, it'll be really interesting. It'll be really interesting to see how that evolves moving forward. Maybe in the time we have left, tell us a little bit more about how you're a part of that feedback loop, if you will, at Gore Street and kind of a thesis and what you're building to help move us in the right direction.
Alex O'Cinneide [00:21:49] So, we founded Gore Street back there in 2015. We were in action in 2016. We founded the firm to have a material effect on energy transition through the world of investment activities. And though we have a track record and I've done lots of solar deals, lots of wind deals and things like that, and they're incredibly important assets in our transition, we just didn't feel that we could make that much of a difference, right? There's lots of guys already doing this. And so what we looked for in Gore Street when we set the firm up was what asset class do we think can make a difference, which is still not there yet, but will be critically important? And, you know, we were super lucky. We could have picked biomass, perhaps, and no one ever would have talked to us. I certainly wouldn't be on this podcast with you. You're like, "Alex who?" So we were really lucky that we decided energy storage was going to be this critical asset to enable our transition. Without storage, we can't build more renewables. Without more renewables, we're all going to just continue down these ever decreasing circles of climate change and terrible outcomes.
Alex O'Cinneide [00:22:55] So we started investing in energy storage back in 2016. No one really wants to talk to us about it, to be honest. It was a pretty lonely, lonely, cold walk. But, you know, we kept plugging away at it. It's interesting, our first six megawatts was when we had a commission in 2017 up in North Yorkshire. It was the largest lithium-ion doing grid balancing we believe in the world at the time. Our portfolio is gigawatts now. We have assets coming on stream with 200 megawatts, 400 megawatt hours, like really big significant parts of energy infrastructure. And so it's crazy to see this development. It's excellent, right? So we have been tracking that development. So we have been, you know, holding on to the coattails of how energy storage has developed. It's interesting in that it's renewables, but it's merchant, right? Our assets are doing 5 to 10 different types of activities on a daily, weekly, monthly basis. You own solar and wind, you make electrons, you sell electrons, you do it at a certain price. Hopefully it's a price more than your 20 year cost of depreciation. Here we're consuming, we're generating, we're trading, we're building capacity, we're doing grid balancing. And so we're in, I think, one of the most exciting parts of the sector. It's intellectually challenging, but it's also growing really well.
Alex O'Cinneide [00:24:22] So we started investing in G.B. Britain was the most important market for a long while. We moved into the Irish market in 2019, which is a small market, but tactically very advanced. It's got some interesting challenges. And then we moved over to North America. We acquired assets in Texas. So we're an operator of assets in Texas and we have assets under construction. We also have an asset in Germany, and we'll soon have more there. And so we're very focused on the U.S. opportunity. You know, I mentioned before the Inflation Reduction Act is really significant. I think that will help a lot. But storage was going to be big anyway in the States, even without. But we're active in the California market, we're active in the Texas market. We'll continue to grow there, and I think we're in a really interesting spot. Probably one of the only players globally who has storage assets in four high growth grids. So maybe utility. But, you know, we're pretty unique, got people on the ground now in Texas. And we'll continue to build out. It's exciting.
Michael Crabb [00:25:35] Yeah, fascinating. You sort of alluded to it, the complexity of the various ancillary revenue streams that you're dispatch model, dispatch software, operating parameters have to manage is extraordinarily complex. I imagine branching out into those different markets that have wildly different structures, generally similar products, but very different pricing mechanisms, right? Is it tough to get into the first market and then you really want to scale in that ISO?
Alex O'Cinneide [00:26:07] So for sure. What I would say, it's the same supply chain, right? So we're dealing with the same manufacturers. We had the same supply chains, same manufacturers, a lot of the same EPCs, so we had global EPCs. So that's familiar out of our experience in G.B. Same types of activities. Different ratios of what you might do them in, but basically, you're doing grid bouncing of capacity or trading. Now you'll do in different market contracts, a different construct, and that's where you have to take time to understand local conditions. We've been investigating the U.S. market for a long time. I've done a lot of deals there. We moved into the Irish market, which is a fundamentally differently organized energy system than G.B. That was a successful move for us in 2019. Same supply chain, same types of revenue activities. So you know, the difference is market conditions, not supply chain and not revenue opportunity. And then that gives us a diversified portfolio for our investors over the same investment thesis. And our investment thesis is very simple. Our investment thesis is if we continue to add renewables to the grid, we're going to have to have storage to help.
Michael Crabb [00:27:21] Yeah. That makes a ton of sense. So tell us about projections. What are you focused on for the next five, ten years? Is it doubling, tripling down on new markets or batteries? Are you starting to think about other technologies? Are you starting to think about other funds? Where's your head at projecting forward?
Alex O'Cinneide [00:27:42] I think other technologies are interesting. Other technologies are interesting. We are technology agnostic. We don't care about what technology is, we care about the solution from a tier one manufacturer. So that's what we need to have. But the solution needs to be able to provide the services we believe the market needs. So we're making commercial market decision. Right now, that's lithium-ion. So our fleet is lithium-ion. Our technical colleagues work with the manufacturers around things like do we need nickel in it, are there different types of chemistry that might work, but in essence we got a lithium-ion fleet. I think long duration, we'll start to look at maybe different types of things. A super long duration up to about four hours I think is still lithium-ion. Post that, maybe flow, right? Though they're enormous chemical plants, really. Maybe hydrogen, though... I don't want to be skeptic about hydrogen, but the efficiency doesn't look that great to me.
Michael Crabb [00:28:49] Physics remains undefeated. Like until we really can solve some of that, it's hard to see how it works.
Alex O'Cinneide [00:28:54] I agree. And some of the other stuff I think is madness, right? These guys throwing rocks off of cranes and stuff like that. I think that's crazy. But, you know, I mean, they're listed, so.
Michael Crabb [00:29:11] How much time do you spend? Do you say that you've done, maybe not that example, but do you really dig into some of this stuff or is that just sort of...
Alex O'Cinneide [00:29:23] I wish I could say that was me digging into that kind of stuff but we have a group of really excellent engineers and technologists led by our Head of Technology, Alicja, and she's world leading. And so for sure. But what we want, we don't want to choose a technology, we want a solution. A solution which has the services that the market needs. So again, that's our motivation. It's not going, "We need to find good technology that does something." No, we need to understand what the market needs and then back from that go, "Okay. Who of the big balance sheet players can provide that to us?" Because we also need somebody to guarantee they can do this for 20 years.
Alex O'Cinneide [00:30:02] In the essence, we're an infrastructure investor. But there are these really exciting things coming down the line. I don't mean to be mean about the whole kinetic thing, because it is in essence just pump storage in a different way. A colleague of mine back in the day once said to me, we were talking about PV versus CSP, concentrated solar power, shows how old I am, people don't reall talk about CSP anymore. But he turned to me and he said, "Alex, there's no Moore's Law in mirrors." And I thought it was really clever, right? What he was saying is we can change the chemistry of a PV panel, we can change the chemistry of a battery, but mechanically changing a mirror or a turbine even, we can't get that exponential growth that we need to really be able to roll out very large scale infrastructure to get us the cheapest price for the cost of electricity, to get us the most efficient grid. And still I think back to what Steve said to me back in the day, I think that was a really good learning for me.
Michael Crabb [00:31:08] That is a great note to wrap up on, too, because that sort of first principles approach I think is so critical all across this transition. Kind of wrapping it all together, that momentum is so critical to maintain, that faster feedback loop, if you will, and really make that difference. Anything else? I'll give you the opportunity, anything else that we didn't talk about that you wanted to plug or mention here for our listeners?
Alex O'Cinneide [00:31:35] Oh look, we moved from socialist squats in East Berlin to private equity to the role of government to the role of consumers. I think we covered quite a lot here, Michael.
Michael Crabb [00:31:44] It's more fun that way and I appreciate you humoring me. Well, Alex, great having you on and great feedback. Looking forward to talking to you soon.
Alex O'Cinneide [00:31:52] Thank you, Michael.