Template.png

Daniel Goldman

Managing Director

Clean Energy Ventures

November 23, 2021
  • iTunes
  • Spotify
  • YouTube
  • Twitter
Ep 51: Daniel Goldman - Managing Director, Clean Energy Ventures
00:00 / 01:04

Michael Crabb
Hi, everyone. Welcome to another episode of the Energy Impact podcast. Super excited here to host Dan Goldman, Managing Director of Clean Energy Ventures. Dan, welcome to the show.

Dan Goldman
Thank you, Michael. It's great to be here. Thanks for having me.

Michael Crabb
Well, we're super excited to hear about what you're doing now, but before we get into that, maybe tell us a little bit about your background. Where did you grow up? And what led you down this path?

Dan Goldman
Yeah, oh, all the way back to where I grew up.

Michael Crabb
All the way back, yeah.

Dan Goldman
Well, I grew up in suburban New Jersey, so not that exciting, but had a good childhood. And so I started my career, really, in the oil and gas industry. I got kind of passionate about it in college, sort of understanding how this massive industry works, how it evolved over time. I started really in the consulting business and was quickly sent out to Singapore, to Asia to manage the energy consulting practice there.

Michael Crabb
Real quick, before you- so you grew up in New Jersey like all oil and gas. I mean, if you grew up in Oklahoma or Texas it makes more sense. Connect those dots for us a little bit.

Dan Goldman
It was a professor at Cornell who really got me kind of interested in energy, about oil and gas and power and how the industry works, kind of levelized cost analysis, kind of a financial policy, regulatory side of it. And it just sparked an interest. And so after some grad school work specifically focused on some areas of interest, I decided to be a consultant. We moved out to Asia in the early 90s and I spent four years really focused on advising large oil companies - national oil companies, majors - on strategy, organization< investments. And at the time, there was a really huge transition going on, kind of globally, but especially in Asia, where this independent power boom was starting. Private companies were developing power projects and entering into long term contracts with governments to sell the energy. While I was a consultant in Singapore, I got recruited to join a company that was a power development company and it was owned by Bechtel and Pacific Gas and Electric originally, and then it became Bechtel Shell joint venture. And we developed, financed, owned, and operated large scale energy infrastructure around the Asia Pacific region. And so I did that. I was part of development of about $4 billion worth of power projects across the region. And then -that was all fossil powers, mostly natural gas, but some coal - but then when I came back to the US in the late 90s and saw what was happening here, I got involved in clean energy. In the early 2000s, really started focusing my career on how could you take what you learn from both the global energy industry, which I kind of learned as a consultant, and then how we develop projects in the power industry and apply that to wind and solar and biomass-based power generation, biofuels, and other things. I was fortunate to meet up with two colleagues and we formed a partnership and started investing with third party capital in projects, in the clean energy space. Like I said, biofuels, wind, solar biomass and we did that for about four years. While we were doing that in the early 2000s, there was a real kind of mad rush by private equity into that space and so we ended up selling the portfolio. From the time we started to the time we finished, a whole new market had been created which was private equity investment in clean energy projects. We were there at the very beginning of that and I'm glad we hopefully catalyzed that market to some extent, but there was plenty of money flowing into that market. What I saw kind of around 2006 was there was a lack of capital flowing into technology. And that was going to be really, really important, eventually, for these projects, if they wanted to come down the cost curve and be competitive with natural gas fired generation or diesel fuel or gasoline. With other partners, we formed kind of an early stage angel group called Clean Energy Venture Group. The idea was to invest really small amounts of our own money in early stage technologies that we thought were promising. We had a lot of energy experience in this group, so we could diligence and mentor and support the leadership teams. We've invested in 30 plus companies as an angel group and that ultimately brought more people into the group. It also brought a lot of investors who wanted to co-invest with us. Over time, the group grew, we started managing third party money about eight years ago, and then that led to us forming a dedicated venture capital fund, really, as a result of what we saw as an opportunity that was growing in scale. We were seeing more opportunities. We were seeing better opportunities. And we felt like we needed a dedicated fund more than just investing out of our own pockets and with some third party investors. That's the origins of Clean Energy Ventures, which is the $110 million fund we're running now.

Michael Crabb
Absolutely. Great. I'm gonna unpack that a little bit before the Clean Energy Ventures, because I think there are a couple really important sort of macro events in that trajectory that we don't talk about enough. Maybe the first is sort of the deregulation of power markets, which you were referring to at the very early stages. It's not something that we've talked about a lot on this podcast, but I think is really fundamental as we think about where we sit today and the policy changes that we may or may not need moving forward,aybe unpack what that meant, how that felt in that moment, as we are shifting from a very utility central command and control type market to the deregulated markets that we have today.

Dan Goldman
There are so many different waves of deregulation. I mean, in the 90s it was really about disaggregating generation, transmission, distribution, and creating a generation market where utilities could by least cost power. And I think that brought an incredible efficiency into, not only the US market, but also international markets and it created a whole new industry. And now we're seeing the benefits of that, because we see wind and solar coming into that market in the same way where you can be a generator, you can enter now into a power purchase agreement with a a corporate or a utility or whoever. So we have a much more liquid market and a much more competitive market to drive costs lower. That's been a really important feature of the markets since the early 1990s when PURPA was effectively put in place. And then, of course, some of the other important areas of deregulation are around things like demand response and behind the meter generation, where utilities have to buy back power. And those have created kind of this prosumer, consumer new environment and that creates a really different grid, creates different resiliency, creates the utility that can effectively use distributed resources in new ways. But I would say that our regulatory environment around those things needs to go a lot further. We're really at a very immature state in terms of what utility regulators are willing to accept and how far they're willing to go in terms of support for new models that are going to support this move to a decarbonized grid. I think we still have a ton of work to do on the regulatory environment. And just as one example of that, at the federal level, with FERC, getting smart grid technologies into the market - grid enhancing technologies, as they're being turned now - has been really challenging. But those are technologies- and we have one company, LineVision, that is very much focused on transmission line monitoring at very low cost. If we want to avoid building billions of dollars of new grid infrastructure and figure out new technologies that can help manage and use the existing grid more effectively, we need better regulation, both at the federal level and at the at the state level to make sure we implement those things.

Michael Crabb
Yeah, it's always a hot subject. And I appreciate you moving forward into that next evolution of deregulation, or whatever you might call it. And we don't want to get political, but how we effectuate rapid change in a way that sort of brings all the stakeholders along. I mean this is a challenge that all these distributed resources and new climate tech I think is struggling with. That's super fascinating. So you're kind of there at the early wave, oil and gas side, and then you're pretty early in solar and wind. I mean, the early 2000s, still a lot of questions around its cost competitiveness. Maybe talk us through, I'm sure there are periods of doubt like, Oh, I think it'll work. But walk us through what that was like,

Dan Goldman
Well, a funny story is, Jigar Shaw, who's famous, now running the loan program at the Department of Energy. I remember looking at Sun Edison's first project and I think it was highly economic. It's just the tax environment back then was so imprecise and so you didn't have a good understanding of how tax treatment would be on investment tax credits or production tax credit. It was a little bit of a wild west environment then. And I think what we tried to do was really focus on projects that were truly economic. Biofuels was, of course, really taking off then - ethanol, biodiesel projects - and so we had a pretty significant focus on that area. But there were a lot of new technologies coming to market that could bring down the cost pretty dramatically. It's just that technology commercialization, that valley of death of building out pilot projects was really challenging. So we stuck really very much on proven technologies, maybe a little bit more expensive, but we knew that they were going to work. And it was really conventional project finance, project equity structures where we had off-takes and EPC contracts, so what I would call a tightly structured model around that. You have to make the economics work or else you wouldn't invest in the projects. Of course, the costs we were talking about then compared to today were radically different, but with the market incentives, they weren't.

Michael Crabb
And economic in a project finance context, right, but still pretty- maybe out of market is unfair, but high revenue contracts in order to justify the technology at that time, but because those customers - utilities, presumably - were sort of willing to support some of that early technology development.

Dan Goldman
Yes, I think the utility market then was as much a function of renewable portfolio standards that utilities had to meet, as compared to today where utilities can go out and procure solar or wind as the least cost generation option. We don't need portfolio standards, I would argue, anymore. We have the lowest cost options that are renewable and zero carbon.

Michael Crabb
But it certainly highlights this theme, which I didn't expect to go down in this conversation, but sort of the deregulated market is still sort of somewhat regulated, just the interwoven nature of the different stakeholders here. And I think that sometimes gets lost in this subsidized or not subsidized discussion. It's just far more nuanced than that. It needs to have a much longer term lens, in my view, so you're just hitting on a subject that I'm pretty passionate about.

Dan Goldman
Yeah, I mean, it's a great question. And I think one thing, if we try to imagine the future, could we imagine a future where the utility market, where electricity doesn't need to be regulated? I mean, could we go- or lightly regulated? Maybe like the telecoms market is lightly regulated? Could we have trading regimes and grids that operate effectively independent from regulation and protect consumers in the way they need to be protected? That would be an amazing thing. I think there's a lot of technology that's coming to market now that could enable that kind of environment. We saw a radical reduction in telecoms costs and much greater degree of service and options. After deregulation. So the question is, could we have a similar type of environment? For electricity?

Michael Crabb
Really interesting. And you could certainly argue that cell phones are as much a human need as electricity, for better or worse. Okay, so really great. Let's come back to that sort of evolution. You were in sort of project development land and project finance and ended up sort of transitioning more early stage. Maybe walk us through the thought process there: that was just a market opportunity, or something that you saw that needed to evolve moving forward, or dumb luck, or some combination of the three?

Dan Goldman
Maybe dumb luck is the best explanation. No, I think what I saw was a real need in the market. I think, if we weren't going to get new technologies commercialized sooner - I think this still holds true today - we weren't going to bring that cost curve down and we're working to get widespread adoption. We started really seeing some amazing technologies coming out of university labs, coming out of incubators and accelerators. But there was very little funding for that early stage of the market, because most VCs that were investing in clean energy and climate tech back then really didn't want to take that early stage risk. They also didn't have the capacity necessarily to advise and mentor teams, leadership teams, in these companies. That was something we really wanted to do, we felt could be very helpful, kind of carve out a niche in the market. And in doing so, we felt like we brought technologies to market that otherwise wouldn't necessarily have gotten there and got them funded. I mean, we didn't invest very much money in these 30 or so companies. But the companies themselves went on to raise 500 million plus of venture and project capital. And that's really a result of kind of seeding them to the stage where they were ready for traditional venture capital. Now, I think the ecosystem is much more sophisticated and mature and evolved to having philanthropic capital and seed capital and angel investment and early stage venture and late stage venture and growth capital. We have a really, I think, mature market today in terms of financing that wasn't really existing back then. And we just wanted to fill one of those holes, which was getting things out of the lab, proving them, and getting some customers to start scaling.

Michael Crabb
Yeah. In that valley of death, right? Maybe explain a little bit today where you're focused in that company age or company status for Clean Energy Ventures?

Dan Goldman
Right. We've leveraged what we've been doing since 2005 when we formed the fund. And the idea was to really leverage our success and that strategy. We had a number of exits and a lot of companies who grew to scale, so we learned a lot over the years as to what worked and what didn't work. And we had a really low failure rate, which was kind of interesting. We attribute that to always being quite focused on technology diligence and understanding what's differentiated about a technology, what intellectual property there is, and how that brings value to the company. On the back of that, we established the fund really to invest at the early stages of seed and Series A rounds and to reserve capital for follow on rounds as well. Our focus is on climate tech companies that can have a material impact on greenhouse gas emissions. We use a very specific metric, which is two and a half gigatons of greenhouse gas emissions reduction, cumulatively over a period from today to 2050. We look at- we don't look at kind of an annual number, because we invest in a company, it may take five years for them to get to market or scale. And so it's really kind of this S curve that we have over which a company scales exponentially and then more slowly when they reached maturity. We thought it would be more appropriate to use a long term gigaton level metric. And so every company we invest in goes through a process of evaluating their emissions reduction through our simple emissions reduction calculator - which is on our website, publicly available. We want more people- want everyone to use it, quite frankly, because it helps guide investments in the things that can be the most impactful. That's kind of one of our key criteria. The other key criteria is to invest in in companies that can grow to scale, be financially successful, and offer the fun top decile returns, risk-adjusted returns. We have these two metrics, fundamental metrics, that- they're not in conflict with one another, because if you have a company that's financially successful or to scale, that's going to have climate impact. And if it can have climate impact, we think it's going to grow to scale. So those, in addition to obviously, not investing in sort of capital intensive businesses, investing in top tier leadership teams, investing in things that have a strong competitive advantage, sustainable competitive advantage, and where we can also be helpful to the company. Those are some of the most important criteria that we use in terms of assessing opportunities in the fund.

Michael Crabb
Right. Yeah, a lot there. Let's pick apart some of that. So you describe sort of that S curve, that technology maturation curve. Where - and I think of seed Series A, sort of the very far beginning of that curve - where would you say you guys like to exit? I mean, is it still kind of in that early adoption? Maybe some follow on Series B, or C, but you're looking to maybe sell your stake at that point? Or are you truly along to support that full maturation to actually achieve those forecasted carbon reduction goals?

Dan Goldman
We're probably not along for the full 20 or 30 years, because we're a fund like most venture capital funds, so we have a pretty standard term in terms of the fund life. We typically invest at that first round with an eye toward a three to six year maturity and opportunity to exit. We're looking at a company that, maybe at the time we're investing could be pre-revenue, but has a large market opportunity, or in many cases, they have early revenues, million or $2 million in revenues. Our goal is to help them get to 20, 30, 50, 100 million dollars in revenues in that period, get to positive, and look for strategic exits that are now in the current market - SPACS or other types of opportunities. Really, we're pretty traditional, I think, in terms of the venture model, in terms of how we think about exits. But we certainly look at the companies through a lens of if they exit in a three to six year period, but that also helped to accelerate their adoption rate. Because in many cases, we have companies that historically have exited to strategics. If you have a really strong technology and you sell it to a strategic, then in many cases, the strategic might be able to devote more resources and be able to deploy that technology faster. We see that as having significant greenhouse gas emissions reduction benefits. If you can exit as the company of scaling and a strategic will really accelerate their growth to market. An example of that: we had a company - this was before the fund - called 7 Ac Technologies, which was in the heating, ventilation, air conditioning business and really innovative solution. And it was acquired by Emerson. We saw Emerson as really helping to accelerate their growth, both as an investor and then as an acquirer. That's an example of where strategics can really help the companies.

Michael Crabb
Yeah, that that makes sense. Do you follow, then, if you have this sort of underwriting criteria of long term emissions reductions, do you then follow that company through that lifecycle, or post-sale, it's probably tough to stay involved, especially if it's combined with a strategic. How do you think about continuing to really track that, based on the underwriting criteria?

Dan Goldman
That's a great question. And it's something we're trying to work out right now, as we start to see kind of exits emerging in the fund. What are we going to do after a company goes off and is part of another company? Can we still create that relationship with the company and ask them to assess performance? But I don't think we figured out any clear, easy answer to that, but it's certainly something we want to try to monitor, because it's very helpful for us for continuing to invest in this space to understand what happens after exit. A lot of times we know the acquirers really well, and so I think there is an opportunity to continue that relationship and ask them, even write it into the documents, perhaps, that they'll continue to report to us on emissions reduction.

Michael Crabb
Yeah, I don't know many lawyers that would like that term. It's in goodwill, I think you could probably get there. Have you talked about maybe moving - obviously, not under the existing fund - but moving capital investments sort of further along that adoption curve? There's this sort of trade-off between maximum disruption and maximum opportunity versus perhaps a risk-adjusted more of commercializing technology, hardware and software, and sort of solving that valley of death. Is that something that you've talked about or are thinking about?

Dan Goldman
Yeah, I mean, I think we try to do both. We want incremental solutions that we think can be impactful, but we also want some game-changing solutions. One of the areas we've had a particular focus is in solar tech. Solar, obviously, has gotten incredibly low cost now, but there are so many more things we can do to bring the cost even lower. We have two solar tech companies in our portfolio: one is really about reducing the cost of wafer production monocrystalline silicon wafers - bringing the cost down, improving the efficiency - and another is in the coating space on density, which provides a coating that allows more absorption of light and therefore radically improves the efficiency of a panel. Those are things that are game-changing, they're pre-revenue, but once commercialized, could really see significant adoption and have material impact on the market, both from a cost and of course, an efficiency standpoint.

Michael Crabb
Maybe we can dive in and talk a little bit about your criteria, your filtering process. How do you evaluate the likelihood that these companies can achieve that commercialization and when do you know it's not going to work and maybe what mistakes or or lessons learned that you could impart to our audience about pitching investors for this kind of business?

Dan Goldman
That's a great question. We dive very deep into diligence and a big part of that diligence is not just understanding the technology, but understanding the route to commercialization. We'll talk to industry players who might be customers, might be partners, and say, How would you view this technology? How much testing would you need to do on this technology? What would allow you to be like a scale adopter of this technology and either enter into purchase orders with a company or partner to build a plan, or whatever the situation demands. And that's extremely helpful for us, because we can then understand what milestones the company needs to meet over time to get to that point. We can understand how much capital they need to get to those milestones. Oftentimes, as part of this discussion with industry players, work backwards from an exit and think about, okay, the company needs to be here in terms of access. You need to have this level of revenues, this amount of production capacity, both financial and technology. And then, what are the milestones they need to, to meet to get to that point. And we'll also talk to other financial and strategic investors to understand along the route to those exits, what kind of milestones would they be looking for in order to invest, say, growth capital in the company? It's a whole kind of staged approach to thinking about how does this company evolve over time and it has to kind of hang together. And then, obviously, we'll go deep on the technology, understand how it works. We'll understand what competitors might be out there. What kind of intellectual property protection do they have. What does the leadership team look like? And that's where we use some very extensive experience. We have an outside leadership expert from a firm called Dialogos that supports our evaluation prior to investing and then often works with our leadership teams and our companies after we invest. Build out of that leadership team, understanding the culture, understanding how we can be helpful to them is a really important part of our assessment.

Michael Crabb
I guess one of the things that jumped out at me, as you were saying, talk a little bit about your sourcing criteria. Is it more of a demand pull? You're talking to all these customers, and you say, Oh, this solar panel process needs to be improved, or kind of supply push people, you're having new companies come to you and say, Would you like to invest? And you say, Great, let us take some time and see if it makes sense.

Dan Goldman
It's both. The latter part is just the inflow, which is quite extraordinary, now. Unmanageable, I would say. We've been doing this for over 15 years. We are somewhat known in the market by entrepreneurs and people know how to find us. We do get an amazing amount of very high quality deal flow that comes in. We ask all of the entrepreneurs to fill in a screening form, so we can really very quickly understand if it meets our criteria for investment. And that goes to the greenhouse gas emissions reduction, it goes to the scaling and the timeframe, intellectual property, the sustainable competitive advantage. We ask entrepreneurs to fill in our screening form. The other part of it is actually the really interesting part, which is we tend to do detailed roadmaps of different sub sectors in the industry. We'll look deeply at hydrogen. We've been looking at hydrogen deeply for six years now. We did some roadmapping. We tried to understand different sectors for hydrogen like, what would the use cases look like for hydrogen and transportation? What would the use cases look like for hydrogen in storage, as a storage alternative? What would they look like for industrial applications? Looked at economics, looked at policy, looked at finance, technology, and on the basis of that, it guided what kind of opportunities we'd want to invest in in hydrogen. And that led to us making an investment in the hydrogen sector based on our conclusions there, which were much more geared toward industrial uses of hydrogen than alternatives. And so our roadmaps instruct what we'll go out and look for and how we'll evaluate our deal flow. We've also done roadmaps on storage multiple times, on water technologies, on carbon-to-value, on vehicle to grid, and a bunch of other things. These are really important areas. We constantly evaluate what should we- what do we need to be smarter about? What do we need to learn? Deep thinking time is really, really important for all of us. We don't have enough of it. But that's the kind of thing we want to do during our deep thinking time.

Michael Crabb
And those that you mentioned some of the more immediate opportunities or areas that you're focusing on? Can you share some of those that are most prevalent as we sit here today?

Dan Goldman
Well, we've made investments in hydrogen. We've made investments in storage, not necessarily conventional electrochemical, but some interesting pieces of the supply chain. And then we've looked deeply at carbon-to-value and we're contemplating investments in that space as well. That's certainly one we've been focused on recently. We've also looked closely - I wouldn't say we do it on a roadmap, but look closely - at kind of circular economy opportunities. We ultimately made an investment in Nth Cycle, which is an electro extraction process for recovering minerals and metals from end of life batteries, e-waste, electronic waste, but also mining, ores, and tailings. Really broad application, very advanced technology that's 70% more efficient than conventional, like hydro and pyrometallurgical recovery techniques. That was- certainly circular economy was something we're really interested in and we found a great opportunity there. And then I should mention, the other thing is we spent a lot of time with accelerators and incubators, talking to strategics who are involved with them and also the accelerators and incubators themselves, to really understand kind of what they're seeing, what kind of companies are coming into their organizations, and also getting involved in some of the programming where we can be helpful.

Michael Crabb
That makes a lot of sense. How do you parse apart- I guess, let me say it this way. It strikes me that one of the differentiating things, one of the challenges in the energy space is that sort of technology component. There's a lot of software VC funds and Series A and seed money. I mean, that is a huge ecosystem. But people in that ecosystem have trouble sort of peeling apart the regulation and the technology specifically. How do you really peel apart non-commercial technology to see if it can actually achieve 70% reuse and it's never been done before? And every founder believes theirs is the one that changes the game. And it would be great if that were the case, but obviously everyone can't reach that commercialization. How do you think about that risk and approach it with optimism, but maybe tempered optimism?

Dan Goldman
You have to be careful, right? Of course, we're investing at a pretty early stage. There will be things that don't work, maybe at all. There will be things that don't work the first, second, third time. Or maybe they work, but instead of 70%, they're 50%. And so we'll kind of stress test the technology and the models and see what would happen if this is not as good as they say it's going to be, or costs double what they say it's going to be and, and you know that what are the risks around that? Obviously, there's no definitive, fact-based answer to this, but we try to get as smart as we can and talk to as many experts as we can in the industry. And of course, I think the other thing that is quite unpredictable in a lot of spaces- take lithium, for example. Direct lithium extraction technologies, which we've looked at a lot, is what's the competitive intensity of that space? Not only might you have a lower lithium extraction technology come along and displace you, but you might have batteries that don't need any or need a lot less lithium today. Could we move to batteries that have a totally different metallurgical makeup? And that would disrupt a technology that you think is going to be used for a long time in a market that is really growing fast. I think things like that, we try to evaluate the risk as best we can. But venture is a risky business. You're inevitably going to be taking some risks.

Michael Crabb
Absolutely. And maybe sort of continuing down that path, where are some of the holes in the capital stack or in the financial markets that you think still exist today that we could use more investors? I think there's a lot of competitiveness sort of bubbling up now around this Series A and seed, because there's at least a smaller check size. But how do we continue to commercialize some of these new technologies?

Dan Goldman
Well, Michael, I mean, I think what you said earlier was really accurate, which is there are a lot of investors in the space who are looking at software solutions. And maybe that's just because the background coming over from tech is more geared toward that. But there aren't that many investors who are willing to do deep, hard tech, science projects. And that is a whole different level of risk. And there's just not a lot of capital at the early stage to do that. There's more, obviously, coming into the market. I think we're fortunate to have partners like Breakthrough Energy Ventures and The Engine and a few others who are willing to take hard science risk. But there's an awful lot of capital flowing into software. And that that can be very helpful, but it maybe is limited, from our perspective, in terms of the actual magnitude of greenhouse gas emissions reduction. Then, the other part of it is most of the capital coming into the space is really growth oriented. There's still not a huge amount of capital at the early stage. And increasingly, the growth capital is wanting to write larger checks. Even Series A rounds, which are maybe in the 10 to $15 million range, might be too small for a lot of the climate tech investors these days, who were looking to deploy $30, $20, $50 million in a company. And then, of course, I think what we're seeing increasingly is more private equity focus on this space. We've seen KKR and TPG and Apollo and General Atlantic and sovereigns, like Temasek, all enter the space writing very significant checks, sometimes buying companies or buying control stakes in companies. And I think that growth capital is really important, because not every company is going to go public or go to a SPAC. Having alternatives for significant capital for that growth stage is fantastic. And we're going to need that as the companies mature.

Michael Crabb
You hit on kind of all the baskets. Maybe the only one is the policy - coming full circle, again, unintentionally - but the policy component of this and how tax incentives or direct investing or export guarantees and other sort of bank structures can maybe supplement that as well. You mentioned the private and infra, you mentioned the public markets, and government is the third leg of that stool.

Dan Goldman
It's a great point. I mean, ultimately, there needs to be a lot of project capital and then a lot of projects being built, whether those are just straight wind and solar, or other types of renewable projects, or building distributed energy resources and storage, but having loan guarantees, having government financing. And also there's a ton of middle market lending green bonds, so there's a very, very ripe market and very competitive market in debt right now. And I think that's critical for us to cost effectively get steel in the ground, whether that's building scaled hydrogen projects like, there was a $4 billion project announced by the industrial gas company in Louisiana. How is that going to be corporately financed? There's a lot of debt in the capital markets right now for financing projects like that. We do need a lot of government support, whether that comes at the state or federal level. Federal level has obviously been really challenged from a legislative standpoint, but hopefully we'll see an infrastructure bill and we'll see more support for project investment.

Michael Crabb
Lots of tools out there and part of a maturing market I mean, there are so many places- such a massive problem. There are so many places that we need to improve and move forward. Really makes it fun, I guess, at least for me. As you think about these roadmaps and some really interesting hold codes that you have, what does the future look like for you, for Clean Energy Ventures? If we're having this conversation 10 years from today, what are we talking about?

Dan Goldman
It's great. We try to get the crystal ball out and brainstorm every once in a while to think about where we should be heading, kind of skate to the puck type of analysis. But I do think right now there is somewhat of a US-centric view of opportunities within the financing community here. And the international market, I think, presents a lot of opportunity. And more importantly, if we're going to address climate change, we do need to focus on emerging markets. One of the things that we're conscious of is, if we look at places like Sub Saharan Africa, if we look at parts of developing Asia, we need to figure out how to stop installing diesel gensets. Because we have an unreliable grid in most places that has outages from eight to 12 hours a day. We need to think about how do we fund technologies, how do we fund companies that can address that challenge, because that is where a lot of growth is coming from. And if we don't do something about it, it will all be fossil power growth. Our ability to address climate change depends on introducing technologies to emerging markets. We have one company called SparkMeter which provides a metering solution as well as digital solutions to distribution utilities, as well as micro grids. What they're trying to do is help the grids get a lot smarter, so that they can have less outage time and they're metering their customers. That can dramatically reduce the need for diesel genset backups. We're super excited about that, but that's just one example of a company that is working to address emerging markets. We need a lot of technologies to move, leapfrog their existing roadmaps and get them to a decarbonized state much more rapidly than they are now. We really would like to see more focus by US investors and European investors on emerging market opportunities. And that doesn't necessarily have to be investing specifically in the emerging markets, but it's really trying to make these technologies available to developers and governments and utilities in emerging markets.

Michael Crabb
That's such a great point. I'm so glad you brought that up, because I think it's so easy for us living here domestically to forget about the demographic and just usage trends. If you read potential demand growth and an exponential demographic growth on top of that, I mean, everything we do here is almost for- not for naught, but is sort of immediately ruined on the other side of the globe. Maybe the one area I'd push back is, we really do- I mean, those are countries that really do need hardware, physical investment in the countries, and they need the software to enable that as well, but it induces a whole other host of challenges, right? I mean, sovereign risk, ForEx risk, and whatever else. Super fascinating. What are the next steps there? How do we go about that?

Dan Goldman
We need, obviously like you said, you need hardware. You need solar and renewable installations there. That's what many of the micro grids are doing. Quite frankly, that's what a lot of distribution utilities want to do, because for their kind of antiquated grids, if they can have distributed energy resources, it provides a lot of grid support. That's an easier thing for them to do than building a central generator coal plant and attaching it to the grid and trying to use distribution wires that can't take passing. There's a real opportunity. And again, this is where SparkMeter, through their hardware and software solutions, can come in and play a really important role in in metering and data analytics around what's happening on distribution utility grids. But there are lots of other companies who are either installing the solar or pay as you go solar, lots of really interesting models in those markets, but not enough capital flown there quite now.

Michael Crabb
Sounds like opportunity for a future fund. Well, we're running a little bit low on time. Anything else that- we covered a lot, so I appreciate you kind of coming with me on that journey. Anything else that we should talk about or that you think is relevant that we didn't cover?

Dan Goldman
No, I mean, just excited to see- again, when we started in early 2000s, there was a very immature ecosystem and the fact that we have such a robust and end-to-end financing ecosystem, but also an incredible community. I mean, we have- people in the community have created a really interesting aggregation of people from kind of all walks of life, really trying to focus on more diversity, equity, and inclusion in this market, which is an area that we are very focused on. We have about 45% women-led businesses. We are aiming to have more BIPOC-led businesses, so it's a real focus of our fund. And also just working on the ecosystem to improve diversity in what has historically been, just energy generally, a very white male business. I think that's a really important area for us all to try to focus on. It's going to take the entire community to help add more diversity.

Michael Crabb
And that's a subject we could probably spend another hour on or more. But it's an important one, so I appreciate you bringing that up and what a great note to end on. Dan, certainly appreciate you coming on and looking forward to following your continued success.

Dan Goldman
Thanks, Michael. It was great to talk to you today.

EIC_Logo_Final__Primary Icon Medium .png

Shownotes