Article
Founder Note
Investment Memo
min read

Why we invested in WattCarbon

January 24, 2023

This edition of the Nexus Newsletter is brought to you by SkySpark and Jaros, Baum & Bolles.

Hey friends,

Last fall, we launched the Nexus Labs Syndicate and started off with an investment in Xeal. Today, I’m excited to announce our second investment in WattCarbon!

WattCarbon, led by Nexus Pro member McGee Young, allows energy consumers to offset their energy use on a time and locational basis from renewable energy projects, demand response dispatch, and electrification projects sourced from their own communities, turning local buildings into decarbonization assets.

Our investment was part of WattCarbon’s $4.5 million seed round led by True Ventures, with participation from Village Global, Jetstream, Not Boring Capital, Keiki Capital, Greensoil PropTech Ventures, and others.

Founding story

McGee started WattCarbon after realizing that the same problems he had spent the past five years solving in energy efficiency measurement and verification were hindering efforts to calculate the carbon emissions needed to decarbonize buildings. Instead of using real-time hourly energy and emissions data, most estimates of carbon emissions would fall back on years-old annual averages. The more renewable energy on the grid, the more EVs that were charging, the more misleading these annual emissions estimates were. Cobbling together data from his utility account, his PV production, his EV charging, and the California grid operator, McGee realized that:

  1. His home’s emissions were actually double what annual estimates would have predicted;
  2. Reducing his emissions would cost $1,800 per ton of CO2 because his utility rates incentivized using carbon-based energy; and
  3. Faster, more cost-effective pathways to net zero were desperately needed in order to reach existing corporate and governmental decarbonization goals.

How it works

Accurate carbon accounting for buildings requires hourly grid fuel-mix data matched up with hourly metered energy data. When combined with transparent, replicable, and auditable analytics, carbon emissions reductions become quantifiable and transactable, the same way that has been done for demand response and energy efficiency.

The best way to reach decarbonization goals is to prioritize the lowest cost, most immediate opportunities. Net zero goals enable companies and governments to target the low-hanging fruit of decarbonization. Rather than wait around for capital expenditure cycles, the principle of net zero allows an organization to meet decarbonization goals immediately, by funding the reduction of carbon emissions outside of its own organizational boundary.

WattCarbon’s One Click to Net Zero marketplace connects net zero companies to third-party emission reduction opportunities. Companies can find and fund decarbonization projects in communities of their choice and earn decarbonization credits verified by WattCarbon’s open-source methodologies and revenue-grade data.

WattCarbon’s software platform tracks both a company’s emissions and its offset reductions in real time for unrivaled visibility into net-zero achievements.

Why now

Almost 40% of carbon emissions are from buildings. We (as a human race) need to retrofit >85% of buildings to nearly zero carbon by 2050. That means 2.5-4% per year, roughly 200,000 buildings in the US alone.It’s becoming clear that the real estate organizations left behind will face substantial fines, penalties, and reputational risks if they don’t do their part. As a result, more and more real estate owners are setting zero commitments with aggressive timelines.

But despite flashy announcements about their ambitions, most real estate organizations are still stuck in the reporting phase. Few have assembled the resources to actually plan and implement a net-zero strategy.

Meanwhile, the public is souring on nature-based offsets, as colorfully detailed by John Oliver. The pressure for higher quality and more transparent solutions will continue to ratchet up expectations on real estate owners.

Finally, longer-term capital is moving into the market, sensing an opportunity around the technologies and methods for decarbonizing buildings. The long payback periods that often don’t meet the investment criteria for real estate owners (even when their assets risk obsolescence) are attractive targets for patient capital. Decarbonization is now an asset, in and of itself, and buildings represent a rich vein for intrepid speculators.

Why the tech is special

First, WattCarbon’s technology fills a gap in the software marketplace for accurate carbon accounting. The buildings industry needs help calculating, understanding, and valuing carbon and uniting energy consumed (or produced) in buildings with the carbon-intensity of the grid at that location and time. WattCarbon’s data platform can supplement and improve virtually every energy related software product on the marketplace today, simply by turning a building’s energy meter data into carbon data.

Second, WattCarbon’s team pioneered the concept of Automated Measurement and Verification of avoided energy use. They’re now extending that concept to include avoided carbon emissions from retrofit projects, renewable energy deployments, and grid flexibility. It’s the perfect recipe for creating a credible carbon offset from a project in a building.

By integrating carbon accounting with genuine carbon offsets from buildings, WattCarbon can become the place where building owners can accurately quantify their emissions, decide how to reduce their footprint, and then transact with others by either purchasing reductions elsewhere or reap financial rewards from reductions they pursue in their own buildings. Critically, creating investable assets out of decarbonization projects will increase the return on investment, resulting in more projects getting done earlier, further accelerating the decarbonization of the built environment.

Value for building owners

Building owners need carbon accounting software today. A sustainability VP told the Nexus community last fall:

“We need to change our tracking and reporting lexicon from energy to Scope 1, Scope 2, Scope 3. We’re looking at platforms right now. It’s a project we’re going to implement in the next year.”

Plans like this aren’t unique.

Once they get accounting in place, they will rationally seek the lowest cost, most credible way to get to net zero, but today they face a frustrating set of options. Popular approaches such as purchasing nature-based offsets lack transparency and credibility; long-term renewable energy contracts are complicated and risky; cutting-edge science projects are years away from being able to scale.

WattCarbon’s building-sourced offsets are fully additional, verifiable, and auditable, providing buyers with confidence that savings are materializing. The One Click to Net Zero marketplace gives building owners a modern ecommerce experience, unlike anything else available today. Consider, for example, the opaque and archaic system for purchasing Renewable Energy Credits (RECs) organized by PJM - literally a bulletin board. Instead, building owners will be able to select from actual projects and trace impacts down to the gram of carbon emissions avoided.

As WattCarbon integrates finance partners, net zero purchases for emission reductions will start to resemble existing PPA agreements for renewable energy. Finance partners will underwrite the upfront costs of projects. Tax equity partners will purchase the tax credits flowing from the Inflation Reduction Act. The value of the carbon offset will lower the uncertainty for finance partners to enable larger pools of capital to enter the market at lower costs to the project developer, accelerating the pace of decarbonization across the built environment.

Value for suppliers of decarbonization projects

WattCarbon is introducing a new value stream for suppliers of decarbonization solutions. Their products currently generate significant environmental benefits, but the value is limited to economic benefits (e.g., lower energy bills or grid services contracts). By selling offsets and therefore adding a new cash flow based on the carbon emission reductions from a project, WattCarbon can allow these companies to scale faster into more markets.

Climate impact

Investing in WattCarbon is aligned with our need to accelerate the decarbonization of all buildings through deep retrofits, electrification, and deploying more renewable energy. The buildings industry needs an accurate, transparent, and trustworthy way to turn utility data into carbon data. Once that product is available, it carries the potential to become the gold standard that everyone uses—or else they risk losing credibility in their calculations.

---

To hear me and McGee go deeper on this and all of the above, check out McGee’s recent appearance on The Nexus Podcast: 🎧#120: Fixing Offsets and Decarbonizing Buildings with McGee Young.

—James Dice, Founder of Nexus Labs

P.S. WattCarbon is also the first company in our Partner Program focused specifically on decarbonization. To join them in the new Partner Hub on our website and in creating original content on decarbonization, reach out to us at partners@nexuslabs.online.

️️☁️ A message from our sponsor, SkySpark ☁️

SkySpark is a comprehensive software platform for connecting, storing, analyzing and visualizing data from smart devices and equipment systems. SkySpark’s automated analytics, KPIs, Energy and GhG Apps, turn your data into actionable intelligence providing improved performance, reduced downtime, and operational savings.

Head over to SkyFoundry.com for insightful white papers, case studies, and blog posts, as well as a link to sign up for a free demo.

✖ At the Nexus

Here’s everything worth sharing from Nexus HQ this week:

---

★ PODCAST: 🎧 #134: The building operator's role in decarbonization and digitizationEpisode 134 is a conversation with Comly Wilson, CMO at Enertiv.

I enjoyed this one because I believe in a lot of what Comly was saying about workflows being the key to decarbonizing buildings. And not just decarbonization, really implementing any new technology or changing the way things are done in any way requires you to start with the way people work currently and meet them where they’re at.

To that end, we spent most of the episode unpacking Comly’s hot take that 2022 was all about tenant experience and 2023 is going to be all about operator experience. So stay tuned for exactly what that means.---

★ MEMBERS-ONLY EVENTS THIS MONTH:

  • Subject Matter Expert Workshop: Pro Member and Industry Analyst at Verdantix, Joy Trinquet, was our expert on an Introduction to The IWMS Tech Category.
  • Member Gathering: Real Estate Technology Leader, Charlie Miller, will provide a deep dive into Brookfield's Digital Masterplanning Program. January 25th @ 9am MT

Join Nexus Pro now to get the invites and access to the recordings.

---

★ ON LINKEDIN: We have all these computers running our buildings—many “panes of glass”...

️️🏢 A message from our sponsor, Jaros, Baum & Bolles 🏢

Building intelligence engineering allows OT and IT systems to seamlessly and securely integrate with each other and onto common platforms. Creating a successful building intelligence strategy entails translating the owner’s goals to outcomes, use cases, intelligent building technologies, and enhanced MEP systems.

To learn more about what JB&B is calling “MEP 3.0” and the value of building intelligence design, as well as the difference between smart and intelligent buildings, listen to JB&B’s Division Lead’s conversation with the global certification company WiredScore.

★ JOBS: Are you hiring? Searching for a job in smart buildings?—Check out the Nexus Labs Jobs Board.

🔥🔥🔥 Hot Jobs in Smart Buildings

👉Facilio is searching for an Enterprise Account Executive based in Australia and New Zealand. This is an exciting opportunity for someone with 5-10 years of experience selling enterprise software to the real estate market.

👉Gridium is looking for a US-based Technical Product Manager to manage their data services and design new product offerings. They are also seeking a Sales Executive based in California.

👋 That's all for this week. See you next Tuesday!

Whenever you're ready, there are 4 ways Nexus Labs can help you:

1. Take our shortcut to learning the Smart Buildings industry here (300 students and counting)

2. Join our community of smart buildings nerds and gamechangers here (400 members and counting)

3. (NEW) Join the Nexus Labs Syndicate on Angellist for opportunities to invest in the best smart buildings startups that cross my desk each month.4. (NEW) Our Partner Hub is launching soon. This is an opportunity to be featured on our website, get original content, and tap into the Nexus community. Email us at partners@nexuslabs.online

Upgrade to Nexus Pro to continue reading

Upgrade

This edition of the Nexus Newsletter is brought to you by SkySpark and Jaros, Baum & Bolles.

Hey friends,

Last fall, we launched the Nexus Labs Syndicate and started off with an investment in Xeal. Today, I’m excited to announce our second investment in WattCarbon!

WattCarbon, led by Nexus Pro member McGee Young, allows energy consumers to offset their energy use on a time and locational basis from renewable energy projects, demand response dispatch, and electrification projects sourced from their own communities, turning local buildings into decarbonization assets.

Our investment was part of WattCarbon’s $4.5 million seed round led by True Ventures, with participation from Village Global, Jetstream, Not Boring Capital, Keiki Capital, Greensoil PropTech Ventures, and others.

Founding story

McGee started WattCarbon after realizing that the same problems he had spent the past five years solving in energy efficiency measurement and verification were hindering efforts to calculate the carbon emissions needed to decarbonize buildings. Instead of using real-time hourly energy and emissions data, most estimates of carbon emissions would fall back on years-old annual averages. The more renewable energy on the grid, the more EVs that were charging, the more misleading these annual emissions estimates were. Cobbling together data from his utility account, his PV production, his EV charging, and the California grid operator, McGee realized that:

  1. His home’s emissions were actually double what annual estimates would have predicted;
  2. Reducing his emissions would cost $1,800 per ton of CO2 because his utility rates incentivized using carbon-based energy; and
  3. Faster, more cost-effective pathways to net zero were desperately needed in order to reach existing corporate and governmental decarbonization goals.

How it works

Accurate carbon accounting for buildings requires hourly grid fuel-mix data matched up with hourly metered energy data. When combined with transparent, replicable, and auditable analytics, carbon emissions reductions become quantifiable and transactable, the same way that has been done for demand response and energy efficiency.

The best way to reach decarbonization goals is to prioritize the lowest cost, most immediate opportunities. Net zero goals enable companies and governments to target the low-hanging fruit of decarbonization. Rather than wait around for capital expenditure cycles, the principle of net zero allows an organization to meet decarbonization goals immediately, by funding the reduction of carbon emissions outside of its own organizational boundary.

WattCarbon’s One Click to Net Zero marketplace connects net zero companies to third-party emission reduction opportunities. Companies can find and fund decarbonization projects in communities of their choice and earn decarbonization credits verified by WattCarbon’s open-source methodologies and revenue-grade data.

WattCarbon’s software platform tracks both a company’s emissions and its offset reductions in real time for unrivaled visibility into net-zero achievements.

Why now

Almost 40% of carbon emissions are from buildings. We (as a human race) need to retrofit >85% of buildings to nearly zero carbon by 2050. That means 2.5-4% per year, roughly 200,000 buildings in the US alone.It’s becoming clear that the real estate organizations left behind will face substantial fines, penalties, and reputational risks if they don’t do their part. As a result, more and more real estate owners are setting zero commitments with aggressive timelines.

But despite flashy announcements about their ambitions, most real estate organizations are still stuck in the reporting phase. Few have assembled the resources to actually plan and implement a net-zero strategy.

Meanwhile, the public is souring on nature-based offsets, as colorfully detailed by John Oliver. The pressure for higher quality and more transparent solutions will continue to ratchet up expectations on real estate owners.

Finally, longer-term capital is moving into the market, sensing an opportunity around the technologies and methods for decarbonizing buildings. The long payback periods that often don’t meet the investment criteria for real estate owners (even when their assets risk obsolescence) are attractive targets for patient capital. Decarbonization is now an asset, in and of itself, and buildings represent a rich vein for intrepid speculators.

Why the tech is special

First, WattCarbon’s technology fills a gap in the software marketplace for accurate carbon accounting. The buildings industry needs help calculating, understanding, and valuing carbon and uniting energy consumed (or produced) in buildings with the carbon-intensity of the grid at that location and time. WattCarbon’s data platform can supplement and improve virtually every energy related software product on the marketplace today, simply by turning a building’s energy meter data into carbon data.

Second, WattCarbon’s team pioneered the concept of Automated Measurement and Verification of avoided energy use. They’re now extending that concept to include avoided carbon emissions from retrofit projects, renewable energy deployments, and grid flexibility. It’s the perfect recipe for creating a credible carbon offset from a project in a building.

By integrating carbon accounting with genuine carbon offsets from buildings, WattCarbon can become the place where building owners can accurately quantify their emissions, decide how to reduce their footprint, and then transact with others by either purchasing reductions elsewhere or reap financial rewards from reductions they pursue in their own buildings. Critically, creating investable assets out of decarbonization projects will increase the return on investment, resulting in more projects getting done earlier, further accelerating the decarbonization of the built environment.

Value for building owners

Building owners need carbon accounting software today. A sustainability VP told the Nexus community last fall:

“We need to change our tracking and reporting lexicon from energy to Scope 1, Scope 2, Scope 3. We’re looking at platforms right now. It’s a project we’re going to implement in the next year.”

Plans like this aren’t unique.

Once they get accounting in place, they will rationally seek the lowest cost, most credible way to get to net zero, but today they face a frustrating set of options. Popular approaches such as purchasing nature-based offsets lack transparency and credibility; long-term renewable energy contracts are complicated and risky; cutting-edge science projects are years away from being able to scale.

WattCarbon’s building-sourced offsets are fully additional, verifiable, and auditable, providing buyers with confidence that savings are materializing. The One Click to Net Zero marketplace gives building owners a modern ecommerce experience, unlike anything else available today. Consider, for example, the opaque and archaic system for purchasing Renewable Energy Credits (RECs) organized by PJM - literally a bulletin board. Instead, building owners will be able to select from actual projects and trace impacts down to the gram of carbon emissions avoided.

As WattCarbon integrates finance partners, net zero purchases for emission reductions will start to resemble existing PPA agreements for renewable energy. Finance partners will underwrite the upfront costs of projects. Tax equity partners will purchase the tax credits flowing from the Inflation Reduction Act. The value of the carbon offset will lower the uncertainty for finance partners to enable larger pools of capital to enter the market at lower costs to the project developer, accelerating the pace of decarbonization across the built environment.

Value for suppliers of decarbonization projects

WattCarbon is introducing a new value stream for suppliers of decarbonization solutions. Their products currently generate significant environmental benefits, but the value is limited to economic benefits (e.g., lower energy bills or grid services contracts). By selling offsets and therefore adding a new cash flow based on the carbon emission reductions from a project, WattCarbon can allow these companies to scale faster into more markets.

Climate impact

Investing in WattCarbon is aligned with our need to accelerate the decarbonization of all buildings through deep retrofits, electrification, and deploying more renewable energy. The buildings industry needs an accurate, transparent, and trustworthy way to turn utility data into carbon data. Once that product is available, it carries the potential to become the gold standard that everyone uses—or else they risk losing credibility in their calculations.

---

To hear me and McGee go deeper on this and all of the above, check out McGee’s recent appearance on The Nexus Podcast: 🎧#120: Fixing Offsets and Decarbonizing Buildings with McGee Young.

—James Dice, Founder of Nexus Labs

P.S. WattCarbon is also the first company in our Partner Program focused specifically on decarbonization. To join them in the new Partner Hub on our website and in creating original content on decarbonization, reach out to us at partners@nexuslabs.online.

️️☁️ A message from our sponsor, SkySpark ☁️

SkySpark is a comprehensive software platform for connecting, storing, analyzing and visualizing data from smart devices and equipment systems. SkySpark’s automated analytics, KPIs, Energy and GhG Apps, turn your data into actionable intelligence providing improved performance, reduced downtime, and operational savings.

Head over to SkyFoundry.com for insightful white papers, case studies, and blog posts, as well as a link to sign up for a free demo.

✖ At the Nexus

Here’s everything worth sharing from Nexus HQ this week:

---

★ PODCAST: 🎧 #134: The building operator's role in decarbonization and digitizationEpisode 134 is a conversation with Comly Wilson, CMO at Enertiv.

I enjoyed this one because I believe in a lot of what Comly was saying about workflows being the key to decarbonizing buildings. And not just decarbonization, really implementing any new technology or changing the way things are done in any way requires you to start with the way people work currently and meet them where they’re at.

To that end, we spent most of the episode unpacking Comly’s hot take that 2022 was all about tenant experience and 2023 is going to be all about operator experience. So stay tuned for exactly what that means.---

★ MEMBERS-ONLY EVENTS THIS MONTH:

  • Subject Matter Expert Workshop: Pro Member and Industry Analyst at Verdantix, Joy Trinquet, was our expert on an Introduction to The IWMS Tech Category.
  • Member Gathering: Real Estate Technology Leader, Charlie Miller, will provide a deep dive into Brookfield's Digital Masterplanning Program. January 25th @ 9am MT

Join Nexus Pro now to get the invites and access to the recordings.

---

★ ON LINKEDIN: We have all these computers running our buildings—many “panes of glass”...

️️🏢 A message from our sponsor, Jaros, Baum & Bolles 🏢

Building intelligence engineering allows OT and IT systems to seamlessly and securely integrate with each other and onto common platforms. Creating a successful building intelligence strategy entails translating the owner’s goals to outcomes, use cases, intelligent building technologies, and enhanced MEP systems.

To learn more about what JB&B is calling “MEP 3.0” and the value of building intelligence design, as well as the difference between smart and intelligent buildings, listen to JB&B’s Division Lead’s conversation with the global certification company WiredScore.

★ JOBS: Are you hiring? Searching for a job in smart buildings?—Check out the Nexus Labs Jobs Board.

🔥🔥🔥 Hot Jobs in Smart Buildings

👉Facilio is searching for an Enterprise Account Executive based in Australia and New Zealand. This is an exciting opportunity for someone with 5-10 years of experience selling enterprise software to the real estate market.

👉Gridium is looking for a US-based Technical Product Manager to manage their data services and design new product offerings. They are also seeking a Sales Executive based in California.

👋 That's all for this week. See you next Tuesday!

Whenever you're ready, there are 4 ways Nexus Labs can help you:

1. Take our shortcut to learning the Smart Buildings industry here (300 students and counting)

2. Join our community of smart buildings nerds and gamechangers here (400 members and counting)

3. (NEW) Join the Nexus Labs Syndicate on Angellist for opportunities to invest in the best smart buildings startups that cross my desk each month.4. (NEW) Our Partner Hub is launching soon. This is an opportunity to be featured on our website, get original content, and tap into the Nexus community. Email us at partners@nexuslabs.online

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⭐️ Pro Article

This article is for Nexus Pro members only

Upgrade to Nexus Pro

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