Hey gamechangers!
Welcome to The Lens, a monthly recurring series where I unpack the strategy and context behind the news in as few bullet points as possible. For past editions, check out Vol. 1 and Vol. 2.
Volume 3 is a special edition focused on climate change. We’re celebrating Earth Day by putting the latest [smart buildings] + [climate] news under the microscope.
Enjoy!
In recent years, more companies have pledged to reach 100 percent renewable electricity. In 2020, RE100, an organization promoting that goal, surpassed 260 members.
But 100% net renewable energy is not enough… if we’re going to mitigate climate change we also must remove fossil fuels altogether, every hour of the year. For example, an average “100% renewable energy” Google data center looks something like this today:
Google seems to be hoping to accomplish four main things here:
Use their purchasing power to accelerate the decarbonization of the electricity grid as a whole
Encourage other organizations to do the same, as their influence on the Biden Administration and others has shown
Show that we need better grid data in order to accomplish 24x7 CFE… more on that below
Show that traditional carbon emissions accounting is not good enough
Given widespread corporate and investor climate commitments, I see this as a look into the future. I think others will be soon following suit and organizations will be looking to methods like Google’s to prioritize capital spending decisions by avoided emissions.
“We will build a portfolio that balances CFE Score improvement, carbon emissions impact, cost, regional constraints, and longer-term strategic investments”
The other elephant in the room for us is of course that Google is building their own “platform” that they intend to sell to others:
“We’re also building the Industrial Adaptive Controls platform in collaboration with DeepMind, which provides AI control of cooling systems in commercial and industrial facilities. Now, the same AI technology that helps reduce the energy we use to cool our data centers by 30% will be available to the world’s largest industrial enterprises, building management software providers, and data center operators.”
The National Institute of Standards and Technology (NIST) released a new framework focused on interoperability: Smart Grid Framework Version 4.0.
The framework covers the confluence of several concepts that are relevant to you:
The economic and environmental benefits that could stem from enhanced interoperability
A new strategy for supporting the development of interoperable devices and equipment based on the concept of “interoperability profiles”,1 which are detailed requirements for specific devices that could provide the industry with clear targets for interoperability
How the profiles would guide the development of testing and certification programs—a critical ingredient for the widespread use of technology
Guidance and resources for grid cybersecurity, which is becoming increasingly important as greater numbers of devices connect with the grid
A recent analysis has indicated that even if all new power generators were zero carbon, continuing to operate the grid as usual will cause us to fall short of a major goal of the Paris Climate Agreement. This finding underscores the need to:
Displace emission sources with renewables (see Google section above)
Electrify the transportation, industrial, and buildings sectors
Match increasingly-distributed renewable electricity supply with flexible demand
The main hurdle is interoperability. This future requires interdependencies and information exchanges between previously distinct systems and actors. An interoperable smart grid capable of integrating diverse resources and technologies would provide an enabling platform for these interactions.
The main value add provided by this framework is the concept of “Interoperability Profiles” as a solution to this. Built upon concepts of physical and informational interoperability and drawn from existing standards, these Profiles describe a subset of requirements that—when implemented and verified through testing and certification—would ensure interoperability.
First, the Series A is made up of $8M in equity and $55M in debt financing. This means the bulk of the round is likely going towards project funding, which is repaid to investors as customers pay their utility bills. More on that below.
That said, BlocPower’s offering is differentiated from your average ESCO in four ways:
They focus on underserved communities—an untapped market for traditional ESCOs. The focus seems to be on installing air source heat pumps to replace window AC units and old, inefficient boiler systems.
Their financing solution, which requires no money down, no loans, and offers guaranteed utility bill savings, of which the company takes a cut. The key detail is that the lease is repaid on the utility bill itself, which gives investors confidence. This is similar to the model Sunrun developed for leasing and monitoring solar panels, which helped lead to massive scale and cost reduction.
Their platform and software match building owners with potential projects on one side with investors on the other. Cue the network effects producing a win-win-win. When more building owners join, the quality of projects increase, which attracts new investors, which incentivizes more building owners to join, etc. Their marketplace has the effect of increasing the size of the loan that building owners can get compared to similar funding mechanisms, meaning they can do deeper retrofits with larger first costs.
The details are a little fuzzy, but there are also crowdfunding and community equity components to the model, meaning anyone can invest in these projects and communities can get a share of the profits. The financial product developed with Goldman Sachs creates a holding company that owns the clean energy equipment available to low-income building owners. The twist is these holding companies could be co-owned by low-income community members and nonprofits, allowing them to benefit from the dividends.
As the US federal government looks to push forward an infrastructure package, these types of investments seem like a win-win-win-win-win:
Win #1: As a percentage of income, Black households pay upwards of threefold more than white households for utilities. Their communities can then share in the profits.
Win #2: A recent MIT study found that ozone and lung-irritating particles from buildings are the nation’s biggest cause of premature death from air pollution. In one Brooklyn neighborhood, where 67 percent of rented homes suffer from maintenance defects, children are hospitalized for severe asthma at twice the citywide rate.
Win #3: Electrifying buildings in low-income neighborhoods allows cities to meet their climate targets.
Win #4: Investors put their money to work and get more than just a financial return.
Win #5: BlocPower doesn’t have a whole lot of competition with other ESCOs!2
That’s all for The Lens this month! Thanks for reading,
—James
P.S. Three questions for ya:
P.P.S. Thanks to Andrew Rodgers for the input on this one.
This isn’t totally new. It’s part of the NIST playbook: finding what they call the "critical points of interoperabilty" wherever they are in the stack. Along these lines, NIST has published other similar frameworks:
Although, as Sunrun founder Lynn Jurich said on the Watt It Takes podcast, this type of business is a tough one to build. It takes a lot of work and magic to make the stars align for all these players in the marketplace. Add M&V of energy savings on top of that? I don’t envy BlocPower, but sure hope they succeed.
Hey gamechangers!
Welcome to The Lens, a monthly recurring series where I unpack the strategy and context behind the news in as few bullet points as possible. For past editions, check out Vol. 1 and Vol. 2.
Volume 3 is a special edition focused on climate change. We’re celebrating Earth Day by putting the latest [smart buildings] + [climate] news under the microscope.
Enjoy!
In recent years, more companies have pledged to reach 100 percent renewable electricity. In 2020, RE100, an organization promoting that goal, surpassed 260 members.
But 100% net renewable energy is not enough… if we’re going to mitigate climate change we also must remove fossil fuels altogether, every hour of the year. For example, an average “100% renewable energy” Google data center looks something like this today:
Google seems to be hoping to accomplish four main things here:
Use their purchasing power to accelerate the decarbonization of the electricity grid as a whole
Encourage other organizations to do the same, as their influence on the Biden Administration and others has shown
Show that we need better grid data in order to accomplish 24x7 CFE… more on that below
Show that traditional carbon emissions accounting is not good enough
Given widespread corporate and investor climate commitments, I see this as a look into the future. I think others will be soon following suit and organizations will be looking to methods like Google’s to prioritize capital spending decisions by avoided emissions.
“We will build a portfolio that balances CFE Score improvement, carbon emissions impact, cost, regional constraints, and longer-term strategic investments”
The other elephant in the room for us is of course that Google is building their own “platform” that they intend to sell to others:
“We’re also building the Industrial Adaptive Controls platform in collaboration with DeepMind, which provides AI control of cooling systems in commercial and industrial facilities. Now, the same AI technology that helps reduce the energy we use to cool our data centers by 30% will be available to the world’s largest industrial enterprises, building management software providers, and data center operators.”
The National Institute of Standards and Technology (NIST) released a new framework focused on interoperability: Smart Grid Framework Version 4.0.
The framework covers the confluence of several concepts that are relevant to you:
The economic and environmental benefits that could stem from enhanced interoperability
A new strategy for supporting the development of interoperable devices and equipment based on the concept of “interoperability profiles”,1 which are detailed requirements for specific devices that could provide the industry with clear targets for interoperability
How the profiles would guide the development of testing and certification programs—a critical ingredient for the widespread use of technology
Guidance and resources for grid cybersecurity, which is becoming increasingly important as greater numbers of devices connect with the grid
A recent analysis has indicated that even if all new power generators were zero carbon, continuing to operate the grid as usual will cause us to fall short of a major goal of the Paris Climate Agreement. This finding underscores the need to:
Displace emission sources with renewables (see Google section above)
Electrify the transportation, industrial, and buildings sectors
Match increasingly-distributed renewable electricity supply with flexible demand
The main hurdle is interoperability. This future requires interdependencies and information exchanges between previously distinct systems and actors. An interoperable smart grid capable of integrating diverse resources and technologies would provide an enabling platform for these interactions.
The main value add provided by this framework is the concept of “Interoperability Profiles” as a solution to this. Built upon concepts of physical and informational interoperability and drawn from existing standards, these Profiles describe a subset of requirements that—when implemented and verified through testing and certification—would ensure interoperability.
First, the Series A is made up of $8M in equity and $55M in debt financing. This means the bulk of the round is likely going towards project funding, which is repaid to investors as customers pay their utility bills. More on that below.
That said, BlocPower’s offering is differentiated from your average ESCO in four ways:
They focus on underserved communities—an untapped market for traditional ESCOs. The focus seems to be on installing air source heat pumps to replace window AC units and old, inefficient boiler systems.
Their financing solution, which requires no money down, no loans, and offers guaranteed utility bill savings, of which the company takes a cut. The key detail is that the lease is repaid on the utility bill itself, which gives investors confidence. This is similar to the model Sunrun developed for leasing and monitoring solar panels, which helped lead to massive scale and cost reduction.
Their platform and software match building owners with potential projects on one side with investors on the other. Cue the network effects producing a win-win-win. When more building owners join, the quality of projects increase, which attracts new investors, which incentivizes more building owners to join, etc. Their marketplace has the effect of increasing the size of the loan that building owners can get compared to similar funding mechanisms, meaning they can do deeper retrofits with larger first costs.
The details are a little fuzzy, but there are also crowdfunding and community equity components to the model, meaning anyone can invest in these projects and communities can get a share of the profits. The financial product developed with Goldman Sachs creates a holding company that owns the clean energy equipment available to low-income building owners. The twist is these holding companies could be co-owned by low-income community members and nonprofits, allowing them to benefit from the dividends.
As the US federal government looks to push forward an infrastructure package, these types of investments seem like a win-win-win-win-win:
Win #1: As a percentage of income, Black households pay upwards of threefold more than white households for utilities. Their communities can then share in the profits.
Win #2: A recent MIT study found that ozone and lung-irritating particles from buildings are the nation’s biggest cause of premature death from air pollution. In one Brooklyn neighborhood, where 67 percent of rented homes suffer from maintenance defects, children are hospitalized for severe asthma at twice the citywide rate.
Win #3: Electrifying buildings in low-income neighborhoods allows cities to meet their climate targets.
Win #4: Investors put their money to work and get more than just a financial return.
Win #5: BlocPower doesn’t have a whole lot of competition with other ESCOs!2
That’s all for The Lens this month! Thanks for reading,
—James
P.S. Three questions for ya:
P.P.S. Thanks to Andrew Rodgers for the input on this one.
This isn’t totally new. It’s part of the NIST playbook: finding what they call the "critical points of interoperabilty" wherever they are in the stack. Along these lines, NIST has published other similar frameworks:
Although, as Sunrun founder Lynn Jurich said on the Watt It Takes podcast, this type of business is a tough one to build. It takes a lot of work and magic to make the stars align for all these players in the marketplace. Add M&V of energy savings on top of that? I don’t envy BlocPower, but sure hope they succeed.
Head over to Nexus Connect and see what’s new in the community. Don’t forget to check out the latest member-only events.
Go to Nexus ConnectJoin Nexus Pro and get full access including invite-only member gatherings, access to the community chatroom Nexus Connect, networking opportunities, and deep dive essays.
Sign Up
Nexus Labs exists to move the smart buildings industry forward, without the fluff.
On Tuesdays, we send out the renowned (and free) Nexus Newsletter. On Thursdays, we send out the (free) Nexus Podcast, where we interview leaders in our industry.