But I’ve also been asking myself what it even means to be in “climate” and what makes a company a “climate company”. Does making the planet better have to be measured in carbon emissions or directly ladder up to the 1.5C global warming goal? Yes, we need all the solar panels, batteries, and EVs that we can build. And we should also be cognizant of how complex and interconnected everything is, like how healthcare, LLMs, and food production are all inextricably linked with climate.

The focus on carbon emissions coordinates efforts towards a common goal, but if we fixate on this singular goal, other aspects will be neglected. When I envision a better planet, reaching net zero is of course included, but so is conserving natural resources, eliminating pollution, and balancing biodiversity.

As a reluctant omnivore, I’ve gone back and forth in my relationship with animal resources. On one hand, I know reducing livestock emissions is a major pathway towards net zero, along with the moral implications of consuming conventionally-raised livestock. On the other hand, like any other stereotypical gym bro, I eat a high protein diet, but there’s only so much tempeh, Greek yogurt, and protein powder that I can wolf down before I feel sick. If I could have it my way, I’d probably follow a similar approach as Michael Pollen or Zuck and stick to locally-grown produce and wild animals, but in reality, I’m usually at Trader Joe’s or Costco, just like everybody else.

Defining what “climate” means to me and trying to be a responsible global citizen while still maintaining gains is what ultimately led me to Maui Nui Venison. In my eyes, they are a climate company. But I’m not trying to justify my diet or discount the impact of reducing meat intake (especially beef). I’m sharing the Maui Nui story to showcase the complexity of reality and to encourage us to think about a better planet beyond solely carbon emissions.

The Origins of Maui Nui Venison

Maui Nui didn’t start out as a methodically planned business model on a spreadsheet. The creation of the company naturally emerged from founder and CEO Jake Muise’s background growing up in northern Canada and curiosity in the axis deer. To rewind a bit, the story begins with Jake’s childhood. Growing up in Rainbow Lake, technically part of the Arctic Circle, Jake’s family relied on subsistence hunting to survive. For up to ten months each year, there wouldn’t be any growing vegetation, so they resorted to ice fishing and hunting for moose, pheasant, and other wild game. The vast majority of their diet came from wild animals.

Fast forward to college and Jake is now playing volleyball at the University of Hawaii. Just like any other broke college student, he had to find creative ways to eat while on a budget. But unlike you or me stuffing ourselves at the dining hall or looking for campus events offering free pizza, Jake would go on hunting trips on the neighboring Hawaiian islands. It was during one of these trips on the small island of Moloka’i that Jake first encountered the axis deer. On this isolated land of only 40 miles long and 10 miles wide, with a population of only 7,000 humans, there were over 70,000 invasive deer running around, with hundreds dying of malnutrition. This moment is what ultimately led Jake on a multi-year endeavor, beginning with founding the non-profit Axis Deer Institute to conduct research and six years later, co-founding Maui Nui Venison with his wife Ku’ulani Muise.

The Axis Deer

By definition, every invasive species has a story of how they were introduced to their new home. Eight axis deer first arrived in Hawaii in 1867, as a gift from the then British colony Hong Kong to King Haehameha V. Jake explained on The Tim Ferris Show that a kapu (Hawaiian for forbidden) was placed for 15-20 years, banning the killing of these new critters. By 1902, sharpshooters from California had to be hired because there were already 7,000 of them roaming around.

Native to India and neighboring parts of Asia, the axis deer are used to natural predators in the form of wolves, tigers, leopards, and pythons. But in Hawaii, they have no natural predators. The axis deer are one of the only deer species that don’t lose their antlers which means their sperm is always viable, resulting in the ability to breed all year long. According to Maui Nui’s data, 94% of the female population are lactating or pregnant at any given point.

The absence of natural predators, viral birth rates, and physical constraints of an island have led to overpopulation and other consequences. With a limited amount of feedstock on each island, the axis deer population grows out of balance, resulting in one third of the population dying of famine every ten or so years. Even without human intervention, by Maui Nui or individual hunters, axis deer would continue to breed at unsustainable rates and go through these cyclical die-offs.

However, the impact of the axis deer in Hawaii goes beyond overpopulation. There are far-reaching ripple effects on the entire ecosystem. Herds of axis deer graze in the thousands, denuding acres of vegetation in days before moving on to terrorize other landscapes. Destroying the undergrowth of the canopy affects how condensation is formed when clouds come into contact with trees, which has led to some watersheds operating at just 50% capacity. Not only is that bad for an island that needs naturally occurring freshwater storage, it’s also harmful for coral. With less vegetation to capture rainwater, any significant storm washes away layers of topsoil, eventually flowing into the ocean and smothering coral reefs. The coral die off, impacting fish population and local fisheries that depend on them for a living. The axis deer roam freely, both on public and private land, which poses a threat for ranchers and farmers. In order to keep the axis deer out, 10 foot tall fences have to be erected which doesn’t come cheap at $45 a foot.

Without human intervention, the axis deer could swell to 240,000 in under five years, putting immense pressure on the ecosystem, both on land and in water, as well as local communities. By harvesting axis deer in a safe and responsible manner, Maui Nui is helping to manage the population of this invasive species. But beyond improving biodiversity and creating local jobs, Maui Nui may be selling the most humanely-harvested and nutritious meat beyond going hunting yourself.

Maui Nui’s operations

We get about a message a week from a vegan that says, “I’m finally able to come back to eating meat,” because they understand why the animal has to be managed and why that animal’s dying, and then they agree and connect strongly with that process. It’s truly the only stress-free harvesting or slaughter of an animal within our food system.
- Jake Muise on The Tim Ferris Show

As a reluctant omnivore, I was intrigued by Maui Nui’s operations, which although seem significantly more complex than a conventional meat factory, seem to deliver superior results with the same USDA regulations. They have a 99.9% render rate, which is better than the conventional standard, despite operations occurring in the dynamic nature of the wilderness and nighttime. By hunting at night, they’re able to achieve stress-free harvesting which is a far cry from the slow, stressful slaughtering that conventionally-raised animals must go through. The whole process is very dialed in, with a USDA agent on site every night making sure that they stay within the one hour window from when the animal is rendered to when it’s fully processed and cleaned. That’s a pretty tight timeline when you’re out in the wild and each 250 pound animal has to be carried on a crew member’s shoulders to the mobile processing facility.

From a nutrient density perspective, the results are impressive. I guess that’s what happens when you are able to harvest a truly wild animal that chooses what it eats in a stress-free manner. A study by the Van Vliet Lab out of Utah State University shows that wild axis deer meat scored multiples higher across many phytochemicals when compared to grass-fed beef. Backed by data, Maui Nui’s product has gone on to be promoted by the biggest doctors-turned-celebrities, AKA Dr. Andrew Huberman and Dr. Peter Attia.

During my interview with Jake, I joked that this might be the first crossover between the hunting and climate communities. Given most of Jake’s prior appearances on podcasts and other publications have been focused on hunting or nutrition, I focused my questions towards biodiversity and the implications that an invasive species can have on a delicate ecosystem. We discuss the complexity of the natural world, what balance means and what it looks like, as well as the long-term vision for Maui Nui.

Note: The following interview has been lightly edited for clarity and length.

In the very beginning before Maui Nui was even a company, what were you seeing on the ground with the axis deer in Hawaii?

They were introduced to me from a multi-generational subsistence family on Moloka'i. My knowledge of them started with viewing them as a resource. We love these animals, and they're of significant value to the community. I don't think I completely understood their collective impact for several years after introduction. The initial trigger point was when I saw my first die off.

On the island of Moloka'i, they have an established population that is only going up and down with available feed each year. When I was still in college, there was a prolonged period of drought and we went to our favorite hunting area. I saw three or four hundred deer basically laying there, dying of malnutrition. They had essentially eaten all available feed. The area was basically dirt and dust with trees and they were going through this die-off period. In talking to the community and family, I learned that it was happening every 10 or 15 years. That was the way populations were being balanced. Every so often, when there's a period of drought, there'd be too many deer and 30-50% of the population would die, acting as a natural reset to what the area can actually hold.

What happened next?

I started digging into their collective impact on ecological and food systems and started to realize that when it's a dust bowl and it rains, all of that soil and sediment — which took eons to make — runs into our reef that then chokes it. It holds all that coral and then it sits and stays there so not only are we losing soil resources on the land, but we're also losing near-shore fishery resources at the same time. It’s now a known fact that any of our watersheds with axis deer established nearby, collect 50% less water.

Why is that?

They eat the vast majority of the understory and that understory interacts with the canopy to collect fog. So you can think of it as this giant fog catcher. When the understory transitions from native species that evolved over eons to collect water to invasive plants and weeds that don't collect water, there’s a substantial impact on recharge.

It's fascinating how complex all of this is. You're talking about deer and coral being interconnected and I never would’ve thought of them together. What are some of the data and trends that you’ve seen since the inception of Maui Nui?

Yeah, I wish there was more data because then the story you can share with the community is so much more clear, but there really isn't, which is so interesting. My wife translates Hawaiian newspapers and literally for the last 110 years, we've been having the exact same conversation about axis deer. “There's too many of them.” “Why can't they be food?” “Why can't hunters have more axis deer?” and “What impact are they having?”

You would think after 120 years, with such a prolific problem, state or federal agencies or local nonprofits — somebody would have stepped up to start keeping score… Nobody has.

So we have a very clear understanding of population dynamics, i.e. how much they grow, how much we take. We keep an absurd amount of data every night. Like every time we see deer stop, every bullet, etc. We understand how they grow and the impact we have on their collective growth. We also have a really good understanding of their impact on dry feed because we can equate 6.5 deer to one cow. So we can measure collective loss of dry feed. Everything else is just visual and anecdotal. So I can stand up on Haleakalā at 7,000 feet and I can look down at the area we manage and it's green and I can look down at the area we don't manage and it's red. Same thing with rain. We can look down at the areas we manage and the ocean is blue below and for the places we don't, the ocean is red.

So I think it's blatantly obvious to [the] community what the impact is, but nobody has taken the steps to measure something like the soil loss per acre with established populations. Or what does the grazing habits of access deer do to pastured or forested areas? Well, we know it — I can tell you they are fringe grazers that will transition an entire pasture to weed. So they'll take an entire pasture of native Kikuyu grass and transition it to invasive weeds that don't capture moisture and hold water.

So there's lots of this anecdotal stuff, but I'm oftentimes perplexed why an issue that's been so profound for so long doesn't have more data around it because we're just a private company trying to do what we can, but this has been a state and federal issue for a hundred years.

Hypothetically, if your primary goal was purely to improve biodiversity and not necessarily to make the most profit, what would you do? Where are the bottlenecks?

Well, on a landscape level, the most biodiverse places throughout the Hawaiian Islands are at the higher elevations. So the higher you go, the more intact the forests are, the more biodiversity there is. Those are areas that live outside of the food system, i.e. farming, ranching, et cetera. So protecting those places first has the most immediate impact on increasing biodiversity.

A plan to continue to remove deer from these critical watershed areas and turn them into food would be a giant step number one. Fortunately and unfortunately, the vast majority of those places are controlled by the state and/or federal government and we are not allowed to operate in those areas. There are private areas with landowners who are really attuned to what we do and we put the vast majority of our focus in those areas.

Step number two is increasing biodiversity in food system areas, but more importantly how they impact our near shore fisheries and reefs. That is a conversation of balance. So that is a conversation of getting populations from 70,000 back down to 40,000 so that rain and runoff aren't impacting reef systems. When I think of biodiversity, I think of everything that's supposed to be living in that place, native or otherwise. When you cover an entire reef with red dirt, I can't even guess what is lost. I like to dive and spearfish and I know that when I dive in those areas and I'm there and I don't see any fish, I understand the loss of biodiversity from a food systems and fisheries standpoint.

So this year, we're already on track to balance populations. We already have all of the systems; we already have the infrastructure, staff, equipment, and customers. And I think we're gonna achieve balance this year. Now, we only work on a third of Maui, so we'll be able to balance populations within the places we manage, but ultimately, populations are going to continue to grow in other areas. Getting access to and getting to those other places early is probably one of the best ways we can avoid more biodiversity loss.

What does balance mean to you?

When I think of balance I think of all of the systems in our community being healthy. So, our food system right now is pretty healthy because we've been able to introduce hundreds of thousands of pounds of some of the best protein on the planet. But deer are still impacting other parts of the food system i.e. cattle, farming.

Having our food system be balanced is one step to balance. We also need to have our economic system be in balance. We are one of the bigger employers on Maui now, and we have amazing people working for us. Lastly, our ecological system is probably the most important thing.

When I think of balance, I think of all of our systems being healthy and trying to figure out what the balance between those looks like. It would be completely out of balance to let axis deer populations grow out of control so that we have a strong economic system, but at the cost of ecological systems. That doesn't make any sense, right? That's not balance. So it's having all the different systems within our community balanced as it relates to axis deer.

From a tactical standpoint, we do some of the most advanced mammal surveys by utilizing forward-looking infrared (FLIR). Practically speaking, to physically balance populations, we say to the land steward, “This is how many deer you have. How many do you want?” That density varies for each one of them. They each find different levels of value in different densities. We ultimately don't decide what that final number is, but we know based on anecdotal stories, the tipping point to where it becomes too much for the community is around 30,000 to 40,000 deer for the current areas we manage, about 140,000 acres.

This problem solving is going to be constant and forever. So we’ll get it to a good place and all of a sudden, we’ll get two years of drought and that number would come down. A great example is after the Maui fires, our community was in drastic need of short-term protein resources, so we utilized the resource to feed the community, which ultimately accelerated the number of deer we were harvesting.

Balance is a very, very loaded word. But we ultimately know it's something that we constantly look to achieve.

Your entire company rests on a very natural thing and all of the natural systems that go along. What I'm hearing you say about balance suggests you might not want to extract profits and grow as much as possible.

We absolutely need to be profitable to grow and scale, and then potentially take this solution to other places… But if you are truly solving a problem, shouldn't you get smaller as a solution?

It doesn't matter the scale, if you are truly solving a problem, shouldn't there then be a period of time where the curve should start moving the other way? It's not a small problem, but we view this as a project. If we solve the problem, we are absolutely gonna make less. Hopefully the line continues to move up and to the right, but that's not the line we're looking at. We're looking at the line that flattens the curve of population growth. It's my job as CEO to make sure that we are profitable and can move that solution forward and continue to learn. We know what we look like when we solve the problem. A lot of other people may have never even thought that far.

How did you go about building the company with community in mind from day one?

Even though this is an “invasive species”, it is also a community resource. If we were planning to utilize or manage a community resource, we have the community in mind to start. For example, we built our operating agreement to kinda do whatever we want. We fought really hard to make sure the governing portions of that document allowed us to involve the community as we see fit (donate, etc.) The investors that got on board had to be okay with that. They knew from day one that we were going to take care of and involve the community. It's like a part of the founding document. But we also knew without the community's support, we would never solve the problem.

Making sure our investors understood the importance of community was really important. To their credit, I think the operating agreement was only signed, maybe a year or so before COVID hit. Then COVID hit and all of the food banks were empty. And we were like, “Okay, everybody, we're pivoting 30% of supply to donation.” Everybody had already signed up for that level of community support and interaction, so I didn't have to deal with, “Well, what about the bottom line?” It was a part of how we were going to operate. I think if the problem you're trying to solve is going to involve the community at any point, you better plan for it from the first day of operating.

Resources

Mahalo to Jake for taking the time to chat! If you’re interested in learning more, check out these resources:

• Jake Muise on Peter Attia’s podcast

• Jake Muise on The Tim Ferris Show

• Maui Nui as part of Elemental Excelerator’s Cohort 12

• The Struggle to Contain, and Eat, the Invasive Deer Taking over Hawaii

• Maui Nui’s own mini-documentary “From invasive species to food source”

• Buy “the healthiest red meat on the planet” at https://mauinuivenison.com/

Problem

Within circles of techno-optimists and clean energy nerds, it seems like solar, wind, and storage dominate the headlines. Pundits point to solar’s insane learning curve and rapid deployment, but the reality is we’re nowhere near a 100% decarbonized economy. The trend lines are promising, but hiccups are inevitable. We’ve seen this recently with billions of dollars being written down and gigawatts of projects getting canceled in the wind industry. To address intermittency in solar and wind, storage is required. Batteries are often lauded as a promising solution, but there is no such thing as a silver bullet. There are still plenty of unknowns that come with anything complex. Supply chain crunches, geopolitical conflicts, and ethical labor concerns pose significant risk.

Solar and wind will still continue to dominate the renewable energy mix, but different, complementary types of energy are needed. A clean, reliable grid needs both variable energy sources that are at the mercy of Mother Nature and controllable energy sources that can be dispatched on a dime. The intermittent resources fluctuate over time which results in demand changing at a high rate. Therefore, energy sources that can ramp up and down quickly are needed. Nuclear and coal aren’t efficient in this regard, but natural gas and geothermal are. Choosing geothermal over natural gas is a no-brainer for the emissions, but there’s additional benefits as well. Compared to alternatives like solar and storage, geothermal takes up relatively little land and requires few minerals.

Enter Enhanced Geothermal

The application of the Earth’s natural underground heat for electricity generation has been around for a while. The first geothermal power plant was built in 1904 in Italy and in the US, we’ve had geothermal plants since the 60s. If geothermal has been around for decades, how come it’s not that prevalent today?

A successful geothermal site must have three things: heat, fluid, and permeability. Existing geothermal plants are hydrothermal, meaning they have naturally occurring heat, fluid, and permeability. While it’s nice that little modification is needed to hydrothermal sites, the downside is that they’re geologically rare. There’s only so many places in the world that resemble Old Faithful in Yellowstone.

The next generation of geothermal plants is referred to as enhanced geothermal systems (EGS). An EGS doesn’t come with pre-existing conditions of the three key attributes. With EGS, you pick a location with naturally occurring heat, add your own fluid, and create your own permeability.

Every EGS project starts with site selection. The most promising regions have hotter temperatures at shallower depths because when heat is closer to the surface, you don’t need to drill as deep. So far, most geothermal has been developed near places where we already know it’s very hot. For example, the Ring-of-Fire region which runs along the periphery of the Pacific Ocean and Iceland, where geothermal makes up over 65% of their energy supply. In the US, Utah and Nevada are good candidates and so is anywhere near known hydrothermal sites such as Yellowstone National Park in northwest Wyoming.

However, building geothermal successfully requires more than picking the right spot. Much of the answer to “Why now?” can be attributed to drilling. The ability to drill down and perform hydraulic fracturing changes the game on two of the three key factors, heat and permeability. By being able to drill effectively and create fractures in the rock where fluid can flow, geothermal becomes way more accessible as an energy source. The potential is large. We only need to access 0.1% of the Earth’s heat content to supply our energy needs for 2 million years. In the US, there’s 5 TW of electric generating potential, which is nearly five times the total US generating capacity today.

In theory, geothermal could play a major role in saving the planet, but in reality, we’re still at the very beginning. Like any new and advanced technology, a lot still needs to improve. In the US, geothermal power currently only makes up 0.4% of annual electricity generation. The DOE announced its target of reducing the cost of EGS by 90% to $45 per megawatt hour by 2035. With low penetration rate, high costs, but lots of opportunity, the question is how this all unfold for enhanced geothermal? What kind of talent, capital, and policy is needed to deploy, prove, and scale geothermal?

I initially chose to cover geothermal because of its unique story with the oil & gas industry. For EGS in particular, drilling seems to be the crux of the matter and no easy feat. Fortunately, for decades, one industry has been motivated by trillions of dollars to innovate on drilling technology. The narrative that critical drilling innovation will be borrowed and repurposed from the oil & gas industry is compelling to me. Much of what you read online paints the oil & gas industry as the main culprit in the climate crisis and rightly so. But what gets lost in the message is that not everyone and not every aspect of the industry is evil. There’s a lot of Houstonians employed at ExxonMobil, Chevron, and Shell that simply want to support their families and don’t actually want to burn the planet down. One oversimplification I observe with the transition of fossil fuel jobs to clean energy jobs is assuming that a coal plant worker can magically switch to becoming an electrician. It’s not a 1:1 shift. Perhaps there’s a more easeful transition that can be made from oil well driller to geothermal well driller. And maybe, just maybe, the transition to a decarbonized energy sector will involve a massive transfer of talent, capital, and drilling expertise from oil & gas to geothermal.

Introducing Gabe and Wilson!

Gabriel Malek is Chief of Staff at Fervo Energy, a startup building enhanced geothermal systems. In November 2023, Fervo unveiled its first-of-its-kind power plant in Nevada which powers Google’s data centers there. In August 2022, Fervo raised $138M in funding led by DCVC. Gabriel began his career at Environmental Defense Fund and then went on to serve as Deputy Chief of Staff for Mark Carney, UN Special Envoy on Climate Action and Finance.

Wilson Ricks is a Mechanical & Aerospace Engineering PhD Candidate and a Member of the Zero-carbon Energy systems Research and Optimization (ZERO) Lab at Princeton University. His current focus is on evaluation of emerging clean energy technologies and energy policy design. Wilson has also interned with the U.S. Department of Energy and Breakthrough Energy.

The rest of this newsletter includes responses from my interviews with Gabe and Wilson. Together, we discuss:

• Historically why there hasn’t been more geothermal

• Geothermal drilling

• Site selection

• EGS as a form of energy storage

• The flexibility of EGS to fill energy market gaps

and more. Without further ado, let’s get into it 👇.

What problem is Fervo Energy solving and how are you all solving it?

Gabe: Fervo is trying to support full grid decarbonization through next-gen geothermal. I'd say maybe the sub problem that we're trying to solve is we're trying to make geothermal scalable and cheap enough to play a meaningful role in the last stretch of decarbonization for the power sector. If wind and solar and storage can get you 60 to 80 percent of the way there, how can we make sure the geothermal fills that remaining gap to ensure reliability, affordability, and sustainability in power consumption? We're doing that by applying proven oil and gas technology from shale, so horizontal drilling and hydraulic fracturing. We're applying that to geothermal development to ensure reliability.

Historically, what are some reasons why there hasn’t been more geothermal?

Gabe: The reason attempts at enhanced geothermal systems have failed is because the geothermal industry has used largely outdated drilling technology. Imagine trying to code something really complex on a computer from 1970. You wouldn't be able to generate the latest and greatest in AI or machine learning. The same is true in hard tech and geothermal. If you're using a drilling rig and frack plugs and wireline logging all from the 1980s, but the drilling innovations have advanced substantially over those decades, then you're not going to be able to solve those hard problems that come in geothermal reservoirs, which are higher temperature, higher pressure, and harder rock than you find in shale oil and gas.

That gets to geothermal's history as an industry. A lot of geothermal developers started off as power plant manufacturers. Then they decided to vertically integrate and create a customer base using the technology they already know how to build. These are companies with no drilling expertise entering into a field that's largely dependent on drilling success.

Many of the failed attempts were by firms without much drilling background, trying to make the drilling side of the business work when really their expertise was in power plants. Fervo's innovation is essentially closing the technology gap between oil & gas and geothermal. We know this advanced subsurface data analytics technology and drilling technology exists. It's been used time and time again in upstream oil and gas. All we need to do is to transfer that to geothermal, and if we can close that technology gap, then we should see as solid results as we've seen in shale oil and gas.

Drilling seems like the centerpiece. I think people in climate including myself don't know much about drilling. Perhaps there’s an aversion because it comes from Oil & Gas. So what are some of the milestones that have been made in drilling?

Gabe: So it's funny. I'll share a quick story from earlier this year. We brought a reporter out to our site in Nevada where we have our commercial pilot project. This person was walking around the site, looking at the drilling rig, and marveling at some of the technology that they saw including the big computer monitors where we're analyzing rock formations, temperature, and pressure in real time.

The reporter said to us, “It's really remarkable how much you all have innovated as Fervo in just a few years.” And we're sort of laughing to ourselves because Fervo didn't develop any of that technology that the reporter saw. This was all oil and gas. And I think the reason why climate reporters often overlook this innovation is because we see oil and gas as the old, dirty form of energy, and that can often shroud just how sophisticated oil and gas drilling has gotten.

To answer your question more directly, the biggest innovation was hydraulic fracking to ignite the shale oil and gas revolution. As a country, we were at a point where we thought we were going to have to start importing a ton of oil and gas from the Middle East because we thought we were reaching peak supply.

Now nobody talks about the peak supply, it's all a question of peak demand, because hydraulic fracking unlocked hydrocarbons in basins that were previously considered inaccessible. Such as the Permian Basin in West Texas, the DJ Basin in Denver, the Bakken in the Dakotas, and of course, the Marcellus in Pennsylvania and New York.

All of those became hotspots for oil and gas development because you no longer had to go toward a traditional reservoir. You could go to a reservoir that's mostly rock, create fractures in that rock, and then access the hydrocarbons that were trapped in small permeable areas. After you have that main innovation, subsequent innovations follow. So the PDC drill bit — the development of that type of drill bit that can drill efficiently through rock. That works incredibly well in shale, but we're actually using PDC drill bits in geothermal because we found that they can actually drill through granite, which is even harder than shale.

Then you have a whole suite of data analytics tools that didn't previously exist. We line our wells with distributed fiber optic cables. Those fiber optics allow us to map pretty precisely where fluid is flowing in the reservoir using acoustics. And oilfield services companies that we work with like National Oilwell Varco or Schlumberger, or Halliburton have sophisticated software tools where we can track our drill bit in real time 8,000-10, 000 feet below the earth. We can see how fast it's spinning and understand what downhole pressure exists. We can understand what the fluid flow back rate looks like.

Drilling seems crucial since most natural hydrothermal resources are already tapped into. What bottlenecks are there in drilling? How easy is it to repurpose drilling innovations and the physical equipment from O&G?

Wilson: There has actually been quite a lot of advancement in geothermal drilling lately. New polycrystalline diamond drill bits have allowed drilling operations at the Utah FORGE site to progress four times faster than what had been assumed to be the state of the art in hard rock drilling just five years earlier. The advances in horizontal drilling and hydraulic fracturing in the O&G industry over the last decade have also been nothing short of revolutionary, and though there is some learning that needs to occur when applying these techniques to EGS, the fact that they have been de-risked elsewhere is huge. One of the main challenges in using off-the-shelf drilling equipment for EGS is the higher temperatures, as much of this equipment was simply never designed to operate in those conditions. But that's more a matter of there never having been a need to develop high temperature equipment before than it being an enormous technical challenge.

What are the major steps in developing an enhanced geothermal system?

Gabe: We have a process that maps development of a project from idea generation to selling power to a power buyer. It starts with identifying acreage to lease. We have a general sense of where the best geothermal acres are in the US, but when we go the next layer deeper, we're trying to understand the temperature gradient, that's the key piece of information.

So, how deep do you need to go to hit around 190 degrees Celsius? The shallower you can hit that temperature, the better that prospect is going to be, because you don't have to drill as deep and costs are lower. Our first phase is all of that subsurface analysis. Without doing any drilling, we're trying to understand whether there are any existing data sources that can help us figure out that temperature gradient and what the geologic profile of that resource might look like. We're using well logs that oil and gas companies have collected if they've tried to do any exploration in that region before. Sometimes you can find that data through a university. Sometimes you have to buy that data from a company. But we'll collect that data and we'll then make a determination on how deep you have to drill to hit the right temperature for our development. If we think we've found an attractive depth, then we will lease that acreage, either from the federal government, state governments or private leaseholders. Most of our acreage is on federal land because it's in the Western US.

After we've leased that acreage, we go into the next stage of development. We are still just focused on diligencing that resource, but now we're starting to go out to the field, we're filing permits to begin exploration drilling, doing surface studies, and running gravity and magnetic surveys. These are all things you can do without drilling and they give you a sense of what the rock formation might look like. At the same time, we’re having conversations with potential power buyers because we don't want to start drilling until we've lined up a buyer for this resource. It's just too much capital on the line to start drilling without knowing that you're gonna have a buyer. By the time we've reached the end of the second stage, we feel confident enough in the resource that we want to start doing exploration drilling and we've secured an offtaker through a power purchase agreement.

That takes us to stage three where we're doing exploration drilling. There you're just getting high fidelity information about the resource because you're going to the required depths and you're seeing whether the heat is really there. We’re completing the well, which means we're fracking the rock and flowing water between the injection well and the production well to see if the wells connect the way that we expect. Once we've drilled a few well pairs and connected them, then we go to full on development.

The final stage is all about drilling wells. It almost becomes a manufacturing process. Each well is going to look pretty similar to the next, and you're rinsing and repeating, drill, drill, drill. Simultaneously, we're starting to construct the power plant. We're using off-the-shelf organic Rankine cycle technology. The geothermal industry has historically been strong with power plant manufacturing. Throughout this fourth stage, we're finishing the drilling process and building the power plant simultaneously. By the time we complete this final stage, we have a full project that can connect to the grid and sell power.

Why 190 degrees C in particular?

Gabe: That temperature profile and hotter temperatures allow for economic electricity production given existing power plant technology. Cooler temperatures would yield suboptimal/uneconomic electricity production.

What site surveying data are you looking at?

Gabe: The data that we can access ranges in quality. It's hard to say with a broad brush. There are some locations where the most recent data that we can get our hands on is from an old oil well that was drilled near there in 1980. There are others where there was exploration taking place just a few years ago and we can collect that information and feel pretty confident in it. So it depends. That's why the critical stage for us is always going out to the field and doing those gravity and magnetic surveys ourselves and then ultimately drilling a test well and seeing how it turns out because you just don't know fully until you try.

There was an exciting announcement a few weeks ago from Project Innerspace, a geothermal industry association and research group, and they just announced a collaboration with Google to publish a Google Earth equivalent for the subsurface for geothermal. That will hopefully give the public more clarity on where geothermal exists.

How will the role of identifying and validating site selection evolve over time?

Wilson: Site selection will always be very important, though right now it is arguably easier since there are a known set of conventional hydrothermal sites that could host EGS. As those run out, EGS development will need to go further afield and site discovery and characterization will become increasingly important (and costly). One advantage is that unlike conventional geothermal, where identification of a site can lead to maybe a few tens of megawatts of development, discovery of a good EGS basin could enable gigawatts of development in that area.

What are the co-benefits to developing geothermal power plants?

Gabe: We believe that geothermal can and should be core to economy wide decarbonization. We think the best way to get geothermal there is to start by de-risking power development. If we can sell our power to credit worthy utilities, then over time we can start selling to more creative buyers. We agree from a technology perspective that geothermal has the right attributes to fit into a lot of other decarbonization initiatives, whether it's direct air capture, hydrogen, sustainable aviation fuel, or industrial greenhouses.

All of these processes require power and they require heat. Geothermal is differentiated from other renewables in that we can provide both power and heat. We've actually gotten a grant from the Department of Energy for its DAC Hubs initiative, and we were the only power developer that was the lead applicant for DAC Hubs award and ultimately received it.

Our reason for applying to DAC Hubs is because transmission is a huge constraint for renewable power developers. We don't always want to have to wait in the interconnection queue to be able to sell our power to an offtaker and we know that DAC needs a lot of power and also heat. So let's create DAC hubs around strong geothermal resources because heat and power will be, in the long term, the highest costs for DAC developers.

Even with Fervo’s project in NV coming online, much of EGS seems theoretical. What are the biggest bank-for-buck ways to close the gap between theory and reality? Is it as simple as just building more real, full-scale sites?

Wilson: Right now the name of the game is demonstration projects and funding to that end. The pilot in NV was an important step, but for energy offtakers and financiers to take EGS seriously they need proof of successful deployment at the scale of hundreds of megawatts. Drilling an initial batch of projects successfully, at scale, and with consistency will be key to unlocking financing, policy support, and cost reductions via learning. But of course, the earliest demonstration projects will also have the highest capital requirements and the most risk associated. This is where government initiatives like the DOE's Office of Clean Energy Demonstrations and Loan Programs Office have typically come in to support other technologies, though at the moment there's relatively little funding dedicated to EGS specifically.

Right now, it seems like the main bottleneck is in constructing EGS projects (which includes getting the funding). When do you think we’ll approach the limit on known, promising candidates for site location?

Wilson: It depends how you think about limits. Because subsurface heat is such a variable and ultimately uncertain resource, I think site identification and better resource mapping will be important at all stages of deployment. At any given time you want to be targeting resources that are shallowest, hottest, and closest to demand. Even though there's a huge amount of resources out there, the value of finding the very best of it will always be significant. Regarding known sites, it seems likely that most early EGS developments will target the periphery of known conventional geothermal areas. That could likely support a few gigawatts of EGS nationally, but to unlock the theoretical terawatt-scale potential of the technology you really need to get down to greater depths (4+ km) where there are huge volumes of high-temperature rock spread over large swaths of the country. Exploration will definitely be key to identifying areas where this deep geothermal resource is highest quality.

You said on the Volts podcast, “The costs kind of decrease with higher temperature very quickly, and they increase with lower temperatures.” At a high level, what would an optimization function between drilling (in depth and complexity) and temperature vs. fluid vs. permeability look like?”

Wilson: The tradeoff between depth and temperature is very interesting, as costs of drilling increase substantially with greater depths, but so too does the temperature of the resource. For this reason the supply curve ends up looking flatter than might be initially expected, as the higher cost of deep drilling is offset by the greater productivity. In general sites where you get high temperatures at shallow depths (e.g. near hydrothermal features) will be the most desirable. Permeability and fluid presence are less important for EGS projects, but they are generally nice to have.

How stable are EGS sites when it comes to temperature, fluid, and permeability? How should project developers / investors think about risk?

Wilson: This is one of the major unknowns that needs to be addressed through demonstration projects. There has been a lot of simulation work done to characterize the long-term response of EGS reservoirs (especially how long it will take to deplete their heat content), but at the end of the day we need real-world data to increase certainty.

What are the second order effects of fracturing rock to create permeability? Critics of geothermal may point to this as a potential risk.

Wilson: The main risk is probably induced seismicity, and preventing this is a key condition of successful EGS demonstrations. One bright side is that in O&G fracking, most of the seismicity actually comes not from the fracking itself, but from the re-injection of wastewater that needs to be pumped back out of the well and deposited somewhere else after the treatment. EGS can just keep the fracking water in the well and use it as the basis for the system's working fluid, so re-injection isn't an issue at all.

The potential of EGS to also include energy storage via fluid manipulation is fascinating. Especially since it’s kind of “built-in”. How does this compare to other forms of storage like batteries? And what are the unknowns?

Wilson: Our modeling and simulation work suggests that EGS flexibility could enable thousands of hours of energy storage at efficiencies comparable to those of lithium-ion batteries, and significantly higher than those of most competing long-duration storage technologies. The primary constraint on this storage is the need to build an EGS power plant in order to utilize it, and so the major risks are the same as those that remain for EGS as a whole: Can it be engineered consistently and with good long-term reservoir integrity and thermal/hydrological performance? For storage specifically, the biggest unknowns have to do with the subsurface characteristics of a given site: what is the permeability, how hydrologically confined is the reservoir, what are its dimensions etc. These parameters can vary by quite a bit, though our research showed that the ultimate value of flexible EGS is not terribly sensitive to these variations.

How much modification can be made to a site once it's constructed? With a utility scale solar plant, you can relatively easily make repairs, recycle panels, etc., but it seems like with EGS, you have one shot to get it right.

Wilson: This is an important thrust of current R&D efforts. There is certainly the possibility that reservoirs could be expanded or modified after being created (e.g., cutting off specific flow pathways that cool down too quickly), but for the most part these exercises remain theoretical while developers work on getting the basic reservoir engineering right in the first place.

You previously said “This is a levelized cost in the $50 to $60 to $70 range compared to wind and solar that are at like sub-$20. Even though the costs are high, the flexibility raises the value by so much that it still becomes a good economic proposition.” Does the math make sense because you’re assuming that you can ramp up/down tightly coupled to the real-time market price of electricity?

Wilson: I'll note that even without flexibility in the picture, the levelized cost of energy is only half the story when it comes to the economics of a technology. You also have to consider the value of the power it generates at the time it is delivered, and a technology that can generate at all times will necessarily hold a higher value than one whose output is concentrated in specific times (e.g. solar). For flexible geothermal, the ability to concentrate even more of its output in times of high power prices is key to its value. The time value of energy is highly variable, so just generating the same amount of power in a different set of hours can have an enormous impact on a technology's economics. We found for example that a flexible EGS technology could cost 37% more than an inflexible equivalent and still achieve the same level of deployment.

The ramping speed is helpful, but the main benefit is really just the ability to shift its generation to times when power is more valuable. Conventional geothermal plants can reduce their power output at any point in time, but the potential generation is just lost when that occurs. For a flexible EGS plant, reductions in generation at one point in time can actually enable greater generation at other times.

It seems like the candidates for sites are predominantly in the west (UT, NV). What does that indicate for decarbonizing the grid for the east coast?

Wilson: EGS will certainly be much more relevant in the West (see the below figure), but there are still regions of the US south and east with some resource potential. Other areas of the world also certainly have large potential (e.g. East Africa), but these aren't nearly as well mapped as the US. If you go really deep (like >10 km) you can find good resource temperatures basically everywhere, but achieving this cost-effectively would likely require a step change in drilling technology. In the meantime transmission will certainly help, but it's still unlikely that we could get away with using only wind, solar and geothermal in all areas of the country/world.

Is it possible to run out of “good” EGS site locations?

Gabe: I think what we're seeing in geothermal is what you see in most subsurface industries. Every time you think you've hit peak supply, you realize through tech innovation on the exploration side that there are actually way more resources than you had previously expected. That was true in oil & gas, it's been true in mining and minerals, and it's already playing out in geothermal.

The 2019 GeoVision report from the Department of Energy put enhanced geothermal potential around 250 gigawatts. Earlier this year, an updated report from NREL upped that number to well over 300 gigawatts. That's not even taking into account resources at deeper depths. I think we'll just continue to see that as more money and more attention goes into geothermal, probably going to be more geothermal potential than we appreciated.

Credits

Thanks again to Gabe and Wilson for contributing to this piece!
If you’re interested in joining Fervo, they’re hiring.
And if you wanna learn more about geothermal, I highly recommend checking out Wilson’s research digest (first link below).

Further Reading

• The Role of Flexible Geothermal Power in Decarbonized Electricity Systems by Princeton’s ZERO Lab

• Wilson Ricks discussing enhanced geothermal on the Volts podcast

• Eli Dourado’s overview on geothermal

• Eli Dourado’s investment memo on Quaise

• USV’s short investment memo on Zanskar

• GeoVision Report - Department of Energy

TL;DR: Over the last two years, we’ve seen a huge jump in US homes with heat pumps. To further accelerate heat pump installations, start-ups should focus on increasing the supply side (e.g. contractors, equipment available) over getting more demand from consumers. This means improving the perception for high school students and workers entering the trades, increasing the scale of trade schools through technology, and digitizing contractor upskilling platforms. Finally, we also need more hardware innovation to improve efficiency and adapt to various physical layouts.

Before reading this deep dive, I recommend brushing up on the initial overview about heat pumps written by Matt in April 2023.

Angela in her own words

I’ve been passionate about the built environment since my foray into construction tech from 2017 to 2020. During that time, I worked closely with general contractors to digitize their preconstruction workflows and learned about their challenges in onboarding more skilled workers into their fields. Over the last 12 months, I’ve been exploring the intersection between the built environment and climate tech to understand how we can be carbon neutral in the construction and maintenance of our homes. 

In the last few months, I’ve gone down a rabbit hole talking to dozens of HVAC contractors, trade schools, manufacturers, and climate tech founders to understand how heat pumps have evolved, how labor dynamics have shifted and how the software landscape has grown.

The world for heat pumps is continuing to grow - the next 10 years will continue to see scalable growth in the United States*.

As a child, I grew up in South East Asia in Singapore, China and Vietnam. I spent my youth taking xe oms (motorcycle taxis) in Hanoi, taking martial arts classes in Shanghai and first learning how to swim in Singapore when I was 4. 

The weather during my time in Asia was humid and hot. The summers were sweltering: summers could peak at ~90F and the humidity hovered at 90%. This translated into a critical need for cooling systems. Twenty years later, I’m surprised how far ahead Asia was. For example, Japan boasts 90% of households having installed heat pumps in 2021. In comparison, only 15% of households in the United States used a heat pump in 2021. 

That low penetration in the US is quickly changing. As of May 2023, the shipment of heat pumps to the US has risen 5.1% year over year, while the shipped volume of air conditioners fell. Heat pump sales overtook gas furnace sales the year before in 2022 (IEA).

The switch to heat pumps has become even more time sensitive. According to the IEA, the global heat pump stock will need to almost triple by 2030, to cover at least 20% of global heating needs and the United States has a goal of decarbonizing the economy by 2050. As HVAC equipment lasts on average 15 years, we will only be able to reach a fully decarbonized economy in 2050 if all new HVAC installations are heat pumps starting in 2035. That’s only ~10 years away. The need to transition is urgent and there’s a strong financial investments from the IRA’s and state subsidies to make it happen.

For this blog post, we will do a deep dive into two challenges and how start-ups can tackle them: 1) the labor shortage from the lack of skilled labor to install heat pumps at a reasonable price and 2) the quickly evolving knowledge that is required to work in heating and cooling. 

Without further ado, let’s get into it.

1) We need to solve the skilled labor shortage problem to accelerate heat pump adoption

I believe that the biggest challenge to more heat pump adoption is the increased ability for contractors to install heat pumps, more than consumer awareness. Training and placing highly qualified contractors is the first step. 

To accelerate heat pump adoption, we need to increase the number of HVAC contractors that can install and maintain heat pumps as opposed to increasing consumer awareness. Even if we have more homeowners that are interested in creating a sustainable self-reliant home and reduce their carbon footprint, if they can’t do that at an economically viable price point, they will continue to buy the more affordable short-term heating/cooling option for their homes. 

Industry experts predict more than 400,000 HVAC technician job openings in the next 10 years alone. However, many roles are expected to stay unfilled, which contributes to high labor costs to switch HVAC equipment. 

There are a couple of reasons for this labor shortage and we are barely scratching the surface: there aren’t enough high school graduates transitioning into jobs in the space because of poor brand perception of the trades, trade schools haven’t scaled to their platform enough to accommodate the volume of contractors needed in the next 5-10 years, and domain expertise is needed from contractors to handle IOT devices and electrical needs for heat pumps that today’s contractors haven’t been trained on. 

Negative perception of the trades

The perception of entering the trades has changed as college has become ubiquitous. Having spoken to HVAC contractors in California, Illinois and Virginia, a big issue that I’ve regularly heard of is the lack of interest from high school students to enter the trades as a valid alternative to college. Skipping college and entering a blue collar job is perceived negatively with lower income opportunities. 

However, perception is different from reality. Entering the trades has a higher income opportunity in the long run than getting a college degree. Average annual earnings for someone with a college degree is around ~$60k. Counterintuitively, going into the trades with a high school degree and an apprenticeship could bring in more an income ~$84k. That’s the average income for HVAC contractors. The median salary is ~$69k (still above $60k). And yet, most high school students view it as a bad career path. Driving awareness of this for high school students is critical to increase the potential labor entering the trades. 

In addition, once the HVAC contractor gets their state license, they have the opportunity to run their own business and create generational wealth. These opportunities mean becoming a contractor might actually be more rewarding than going to college. 

The reason for this high income opportunity is because demand is inelastic and we’re today facing a low supply of skilled contractors. No one will stop heating their house if their heater breaks down in the winter, even if the installation is too expensive. The high cost of labor and high upfront investment for a heat pump means a rational economic homeowner would choose a gas furnace or AC over a heat pump (without subsidies), as the heat pump has a higher initial upfront investment and only pays itself over time with lower utility bills.

We need more educational start-ups focusing on giving high school students awareness of these opportunities and creating an opportunity for apprenticeships with contractors.

Smaller scale of today’s trade schools

The best way to enter the field is through a union apprenticeship. On average, unions command a higher wages and more job opportunities. However, unions can only take in so many students. Looking at the adjacent industry of construction, in 2019, only 12.6% of contractors were unionized. Private trade schools take on the rest of the industry’s need to train and onboard the next generation of contractors. 

Today, scaling up vocational training is slow and apprenticeships are hard to find. The poor adoption of digital platforms by trade schools is partially to blame. Today’s private trade schools are entirely service-based, utilizing instructors for each class who build up their own curriculum. For example, a Chicago trade school director trains ~40 students per class and has two classes a year because each class is in person. With a lack of digital platforms and virtual learning on VR platforms, it becomes harder to scale up the number of students per class and upskill contractors each year to install heat pumps. Interplay Learning is a company that is leaning in to provide trade school training programs through VR programs to help students run through various different scenarios of fixing HVAC equipment and is gaining traction in the trades. 

These are a few start-ups focused on helping increase the talent supply to accelerate the transition to heat pumps are. They focus on a combination of a labor marketplace to match employees with employers, upskilling through digital upskilling for employees and increasing employee productivity for employers.

Classet, Faraday, illu, Interplay Learning, Smalt, Upsmith

Additional domain expertise required from today’s contractors

In addition to onboarding new HVAC contractors, we also need to upskill today’s labor with the new skill sets required to handle heat pumps. Skilled contractors will need to master electrifying homes and hire a licensed electrician as well as understand software as IOT devices become prevalent.

As an HVAC contractor, installing heat pumps requires understanding the theory of electricity and tactically, understanding if an electrical panel upgrade is needed. Older homes, even homes that were only built 20 years ago, have electrical panels that only run 100 amps. The electricity needs were minimal when homes ran on natural gas. However, moving from a gas furnace to a heat pump draws a lot more electricity. Depending on the house, this will require electrical panel upgrades to 200 amps. This upgrade could mean an additional cost of $6k, and up to $15k if you’re in the Bay Area to account for labor costs. Homeowners need to work with a licensed electrician to upgrade the electrical panel when homes are outdated. Therefore, HVAC contractors now need to have that electrical knowledge and a licensed electrician on their team. This is pushing some contractors to consolidate their businesses to provide both HVAC and electrician services to accommodate the heating and cooling needs of homeowners. 

As equipment evolves, contractors will need to feel comfortable with software. Large manufacturers have improved analog devices to become more adaptable by building a software and firmware layer that controls the IOT devices.

Some of the most experienced contractors have gained their knowledge over a 40-year career however when they started, they only needed to fix and troubleshoot equipment by hand. In the past, they would have needed to be adept with their hands, understanding how thermodynamics work tactically, and making sure they were handling refrigerants correctly. 

As heat pumps become more powerful with IOT interfaces, highly experienced contractors with long careers need to be upskilled to understand all three layers of a heat pump: the software to manage settings and tweak heating/cooling preferences, firmware to diagnose any issues with the equipment and hardware if the equipment itself has failed. 

In addition, we need more hardware start-ups in the space of home electrification to accelerate the volume of energy efficient heat pumps, beyond today’s largest manufacturers such as Carrier, Daikin, and Mitsubishi.

2) We need more hardware innovation to decarbonize

In the last 30 years, venture capital focused on investing in software: start-ups could scale software products fast with low unit costs and potential for 100x returns. However, with the lower cost of entry for new start-ups to build software and an oversaturation of the software landscape, venture capitalists have adjusted their return expectations and are looking at investments in hardware. This is a win-win situation since climate tech needs further investment in innovative hardware to reduce the amount of GhG emitted.

One place for start-ups to lean in is creating more efficient heat pumps. In the heating and cooling world, there’s an important metric called COP that measures efficiency: Coefficient of performance. A heat pump with a COP of 5.0 generates 5kW of heat from a 1kW electrical input. Gas furnaces, on the other hand, operate at around a COP of 1. Generally the latest generation of heat pumps are more energy efficient and operate at a COP of 3-5. However, they can continue to increase their efficiency as heating and cooling needs continue to increase globally. 

We also need more heating/cooling equipment to fit various physical environments, from large open rooms to narrow and tiny apartments. For example, Gradient has innovated in the window-ledge heat pump for small apartments that New Yorkers are all too familiar with. 

As we innovate with hardware, pairing heat pumps with a smart device that lets you control temperature at home, and control energy usage through a smart electrical panel, we can make homes more efficient.

There’s a few start-ups focused on building new hardware with a simple and intuitive software layer. Kapacity focuses on smart metering, Span.io focuses on IOT electrical panels and Quilt, Gradient, Helios that focus on innovative heat pumps and an accelerated installation process.

3) While start-ups are effective in innovating for contractor workflows, they are less effective in building consumer awareness for heat pumps

While start-ups use fast experimentation and innovation to positively disrupt the built environment, they aren’t as effective at creating universal standard consumer awareness nor standardizing heat pump labels to influence purchasing decisions as they can only influence a small segment of consumers purchasing their product rather than the general population. 

Today, most household consumers want a sustainable way of cooling and heating their homes; however, they don’t have a strong understanding of heat pumps or how to choose the right heat pump. It’s easy to misunderstand that heat pumps don’t only provide heat, but also cooling.

Consumer education campaigns for homeowners run by government and state agencies are important to understand the benefit of heat pumps and the considerations when purchasing a heat pump to provide standard terminology and common understanding through big campaigns. 

Some states have done a great job building heat pump awareness, creating websites where consumers can understand the benefits of a heat pump, rebates available and contractors who can install the heat pump. New England has some state agencies that are leading the effort: MassSave for Massachusetts, NYSERDA in New York and Efficiency Maine in Maine provide customer education, financial options available for homeowners and contractors that can be contacted for installation. 

In addition, the government needs to step in to rectify certain misperceptions around heat pumps. After having spoken to different house owners, there’s still a common myth that heat pumps don’t work efficiently in cold weather as previous generations haven’t been efficient in colder winters. However, heat pumps have become highly efficient and a lot more operable in cold climates since the last generation. 

Government agencies can step in to build more consumer awareness and build a foundational understanding of efficient heating and cooling systems while rectifying common misperceptions of heat pumps. 

Government agencies can also raise minimum efficiency standards and publish more guidance for consumers on the single best label to use when purchasing HVAC equipment as there are multiple labels that cause consumer confusion as to which one to use when purchasing their heating/cooling unit: the EnergyStar rating, the heating season performance factor (HSPF), or the seasonal energy efficiency ratio (SEER). 

Standardizing labeling across various pieces of equipment requires manufacturers to gather data and translate it to energy usage and innovate to increase energy efficiency. To keep manufacturers accountable and to help consumers choose an HVAC system, government can step in to keep manufacturers accountable to ensure that manufacturers are in fact using the right standardized label and penalize them if they knowingly use the wrong label or omit them entirely. 

The SEER 2 label is the label encouraged by the DOE that is used to manufacture new units in 2023 and onward and will ideally make it easier for consumers to compare not only amongst heat pumps but also with other HVAC equipment that they might consider. To drive conformity, starting in 2023, government entities should require the clear placing of SEER 2 labels on all  HVAC equipment for consumers to be able to use it to compare and choose a performant air conditioner, gas furnace, or heat pump. 

There’s a big opportunity for new startups within the built environment and in particular in the heat pump space. There are certain challenges that start-ups are particularly adept at tackling: namely helping the labor shortage of skilled installers and technicians and upskilling existing labor in the space. 

On the other hand, there are other areas that are tarpit ideas for start-ups, namely focusing on consumer education and awareness or creating labeling standards for equipment. 

I’d love to chat if you’re an engineer or data scientist passionate about decarbonizing the built environment and meeting more fellow builders in the home services / contractor space. Feel free to email me at angela.santurbano@gmail.com. 

* : For this article, I focused on air-to-air heat pumps that provide heating and cooling needs for a home. This is the biggest opportunity where the technology is proven, the manufacturing volume has increased to support demand and the pricing is on the right trajectory to become widely accessible for consumers. 

Will in his own words

Will Yoo was previously an early product manager at Misfits Market where he helped scale their grocery delivery platform through COVID-19 nationwide. In his spare time he can be found enjoying sci-fi and movies. He’s currently open to exploring bold climate solutions and meeting collaborators interested in climate related projects.

Credits (pun-intended)

Shoutout to Allen Kramer (Crux Climate), Bryan McLaughlin (PwC), Jack Shadid (Hinshaw & Culbertson LLP), Phil Mixon (The Wilson Firm), David Burton (Norton Rose Fulbright), Andy Moon (Reunion Infrastructure), Alfred Johnson (Crux Climate), and Erik Underwood (Basis Climate) for contributing to this post.

Tax Incentives in Energy Are Not New

Tax policies impact the literal air we breathe.

For example, take the oil and gas industry. Since 1916, intangible drilling costs (IDCs) can be immediately expensed by oil & gas developers. Everything that’s not drilling equipment is an IDC - drilling mud, fuel, wages. And they are 70-85% of the cost of an oil well. This preferential tax treatment for oil and gas massively subsidized the industry and has been going on for over 100 years.

Thankfully, over the years industrial tax policy has shifted from supporting the oil & gas industry to encouraging the use of renewable energy. The Energy Policy Act of 2005 subsidized and extended tax credits for wind and hydropower. During a period in which tax equity investors were few and far between due to the banking crisis, the American Recovery Act of 2009 bridged renewable energy by providing grants and extending the availability of tax credits.

The Inflation Reduction Act of 2022 (the IRA) is the next giant leap forward for U.S. energy policy and supports renewable energy and certain related infrastructure on an unprecedented scale. It’s the largest investment in energy policy, in any country, ever.

The Tax Credit Value Chain

To understand the IRA tax incentives it helps to understand the adjacent world of tax equity.

There are many stakeholders involved when it comes to structuring a traditional tax equity transaction. This is typically how renewable energy developers have monetized the subsidies Congress has provided them.

With the IRA in place, creating value from tax credits will change due to the new transferability rules. Transferability opens up an entire new market in who can benefit from tax credits by making them transferrable.

In the old world of tax credits, the ability to monetize tax credits was concentrated in a small number of financial institutions. In the past, banks would execute complicated tax-equity transactions that were often in the form of partnerships that had ownership of the project. These bespoke and complex deals take a lot of legal and tax expertise. JP Morgan and Bank of America are two of the major players in this $20 billion market. These transactions allow the financial institutions to reduce their tax bills while still receiving some of the returns in cash. 

This market structure comes with a few issues though. It’s highly specialized and controlled by a few major financial institutions. Also, it’s demand constrained. If tax liabilities decrease in a certain year, the market for tax equity could shrink. Since there are only a few “buyers” like JP Morgan and BoA, the size of the market fluctuates frequently.

Traditional tax equity partnerships are still going to exist. But with transferability rules in place, any corporate entity with tax liabilities can now buy tax credits. The demand side for tax credits has gone from a few big banks with the proper expertise and staff to any C corporation with a material tax burden.

Changes with the IRA

With the new transferability rules within the IRA, the market will shift and new opportunities will emerge.

Now that entities unaffiliated with the actual project can purchase and lower their tax liabilities, more buyers are incentivized to come in. This is a new asset class that corporate tax professionals have never had access to.

Imagine leading retailers like Target or pharmaceutical companies like Bayer purchasing tax credits directly from project developers. The universe of buyers would proliferate, and the market could move a lot more tax credits. Democratizing monetization of tax credits supercharges the development of clean energy infrastructure.

We’re already starting to see corporations participate in transfers. Vitol, one of the largest private energy traders with $505B in revenues and $15B in net profits recently reached an agreement to purchase $100 million in production tax credits (PTCs) from Avangrid, a $41B publicly traded renewables developer. When asked about the potential for the IRA, Avangrid’s CEO Pedro Azagra said “the Inflation Reduction Act offers an unprecedented stable framework, enhancing the attractiveness of renewables.” Expect to see more profitable companies like Vitol make massive purchases in the coming years. Another major deal was First Solar selling $700 million of 45X manufacturing tax credits for $.96 on the dollar to Fiserv, Inc., a fintech company.

But how do the credits actually work? 

Energy developers can earn credits and sell them to someone else. This enables 30-50% of project costs to be monetized immediately. To get to the maximum of the 30-50% range, the project must qualify for bonuses. The main bonus is the wage & apprenticeship bonus (W&A). This W&A bonus is super important because it ties energy policy to labor policy and is a massive commitment to creating green jobs.

W&A is also the largest bonus, providing 5x the amount of incentives if a project qualifies. To be more specific, W&A gets a project from for instance a 6% ITC to a 30% ITC. (this bonus would not be a 5x of 30% to 150%.) 

Specifically, the IRA includes 13 different tax credits across industries. There are consumer credits like for purchasing electric vehicles or upgrading your home, but for the purpose of this piece, let’s focus on corporate credits because they’re transferrable and therefore can be monetized by corporations.

Tax credits impact a wide variety of industries and companies. For example, Charm Industrial uses plants to capture CO₂ from the atmosphere. They qualify for the carbon sequestration credit. Other companies may qualify for advanced manufacturing production under section 45X, by producing batteries, wind turbines, inverters, or other manufactured goods.

We can break tax credits down further by separating them into two buckets: production tax credits (PTCs) which incentivize production of clean energy and investment tax credits (ITCs) which subsidize the capital investment in new plants and projects.

PTCs are earned over time based on how much clean energy is produced. The PTC base rate is .3c per kWh produced and there’s a 1.5c bonus if the project meets wage & apprenticeship bonus requirements. These amounts don't reflect the inflation adjustment.

The ITC is a credit on the cost of new equipment and installation. Imagine that when the project is placed in service, the developer recoups 30-50% of the cost in the form of tax credits subject to meeting quality & assurance requirements. And with transferability, they can sell those credits to a buyer.

Each of the credits can be monetized in a couple of ways. First, the IRA allows for direct-pay which means that the government will pay cash to a qualifying entity whether they have tax liabilities or not. But these are typically difficult to qualify for since direct-pay eligibility requires status as a non-profit, tax-exempt organization, or a public utility. Certain credits like the 45Q, 45V and 45X qualify for direct pay even when the project is owned by a for-profit entity.

Transferability is key here. Project developers don’t have a ton of income tax liabilities to take full advantage of their earned tax credits. But with transferability, tax credits can be bought by companies with a lot of profit and tax liability.

Developers can transfer portions or the entirety of the tax credits to new buyers that have an incentive to lower their federal tax liabilities. Of course, developers accept some discount on the sale of a credit, in some cases, say 10%, of the value of the credit, in exchange for the liquidity. Experienced tax attorneys have seen credits trade at $.85 on the dollar or even lower.

Developers receiving cash for selling tax credits does not mean their projects are much less risky to start, but rather they can more easily recover a portion of the investment. This recoverability will attract more willing investors and more capital which in turn will result in more projects being developed. More projects means more green jobs. If all goes well, the IRA will set off a positive feedback loop of clean energy development.

Over the next decade, it won’t be surprising if corporations' tax and treasury functions have to learn the ins and outs of tax credits. With all of these changes, there will be a boom in business not only for project developers and financiers but for lawyers, software companies, specialized insurance providers and other market participants that add liquidity and efficiency to the tax transfer marketplace.

Produced by innovative developers and backed by the government’s guarantee, tax credits may be a key catalyst of this clean energy golden age.

How To Sell Tax Credits

Imagine you’re a solar developer planning a new project. In the planning stages, you’ll engage with specialized advisors on tax equity and the IRA changes including an accounting firm like CohnReznick or a law firm like Norton Rose Fulbright to understand which credits you’re eligible for. They’ll also help you prepare for the buyer’s due diligence and document the sale transaction. These service providers provide guidance on how to comply with bonuses and maximize the value of credits. 

Specialized software providers like Crux, Basis and Reunion have all taken different approaches to making liquid marketplaces to transact credits for new corporate buyers and developers. Facilitating these complex transactions adds efficiencies and liquidity to what historically has been a bespoke transaction. These startups have the potential to greatly improve the transparency and liquidity of tax credits just like how AngelList and Carta transformed investing in startups and managing equity. In the near future, a buyer on one of these marketplaces may be a large, profitable brand like Nike that wants to both lower their tax liability and help new energy projects get off the ground.

This whole ecosystem is permitted by the IRA until at least 2032 or until CO2 emissions are below 25% of 2022 levels. Some firms like Wood Mackenzie are stating it could take until 2044 to reach the 25% levels. Given that the IRS also allows for projects to go into production years after qualifying for credits and the phase-out period, credits could continue flowing into the 2050s.

Wood Mackenzie on IRA phase-out:

Once the 25% threshold is reached, the three-year phaseout ensures that projects entering service through at least 2047 will be eligible for the technology-neutral tax credits. However, the Internal Revenue Service’s (IRS) Continuity Safe Harbor provision provides an additional nuance to this expectation. Under this provision, projects are allowed to reach commercial operations up to four years after they initially qualify for either the PTC or ITC.

Thus, a project qualifying for a tax credit in 2047 has until the end of 2051 to commence commercial operations. If the IRS continues to allow for Continuity Safe Harbor in the future, we expect projects entering service for nearly the next 30 years to receive the technology-neutral tax credits.

Still, the market remains very early. The IRS continues to publish new information. In December 2023, the IRS published guidance on new credits. The IRA has kicked off a swath of “mega-deals” amongst the world’s largest developers and most profitable companies. Champions of older tax equity structures like Bank of America are making multi-billion dollars deals with giants like Blackstone and Invenergy. Meanwhile an ecosystem of startups are emerging to facilitate what the IRA provisions. 

Increased Role of Intermediaries

Intermediaries play a crucial role within the tax transferability market. This is nothing new. Specialized intermediaries have existed for other, ‘non-climate’ types of tax credits. For example, in order to qualify for R&D tax credits a company could engage a provider like MainStreet or Neo.Tax. In particular, IRA tax credits are special because they’re specialized and high value. There’s over a dozen of them and they could be worth billions of dollars per transaction. With numbers that size, compliance becomes important.

Given the size of the transactions, specialized insurance firms offer indemnity and protection in case something goes wrong, like if a project doesn’t get finished or doesn’t produce the amount of energy it thought it would. Professional services firms like PwC assist with both supplier and buyer education, due diligence, and verifying the value of a credit. Due diligence can get difficult because of the “adder” requirements and the fact that firms have to keep track of payroll records for a long time, even after the credits are monetized.

Keep in mind these are bespoke, specialized, high value transactions. Even in the future, a corporate tax professional isn’t going to be transacting tax credits on eBay or Coinbase. It’s more likely that the tooling, marketplaces, and software will resemble AngelList, Carta, and specialized brokerages. Improving the user experience in transacting tax credits is helpful to some extent, but these transactions are complex and require industry expertise that go beyond nice-looking websites.

Just How Big is the Market?

This is going to be a very large market with many transactions. Many of these tax credits are uncapped which means there’s no upper limit in terms of how much they can be redeemed. This explains why Credit Suisse estimates of ~$576b are triple of the Congressional Budget Office estimate.

Credits can be divisible and sold by a single developer to many buyers. On the supply side, given the diversity of credits, from solar to wind to advanced manufacturing and clean hydrogen, there will be 1000s of suppliers tapping into tax incentives.

Given the pace of the market, venture-funded companies like Crux, Reunion and Basis are creating platforms to connect buyers and sellers of tax credits. Each of the companies are founded by extremely experienced teams, either working on massive energy and renewables projects. The founders of Crux, Reunion, and Basis said this is the fastest growing market they have ever seen. One of the main challenges is simply keeping up with the pace of the marketplace developing and the insatiable appetite for tax credits coming from buyers and sellers. The founders also believe the market is likely to be demand constrained in the long term. They stressed the importance of educating the corporate buyer base. Many corporations who are potential buyers still aren’t even aware that these tax credits exist.

All in all, the tax credit market is a many-winner market that will be large enough for multiple startups, service providers, and developers.

Innovations in the Market

With mega projects, nearly 30% of CAPEX are subsidized by tax incentives with the other 60% usually debt and 10% in the form of equity. Being able to de-risk up to 30% of the return profile of a project makes U.S. projects a lot more attractive to investors. The second order effects of these policies means that foreign capital will invest far more in the United States. 

Credits and capital allow for developers to be more ambitious for their projects because there’s less risk and more capital. There are already massive first-of-a-kind (FOAK) projects and transactions that are using these incentives at scale. For example, the purchase of American Electric Power’s 1.37GW renewable energy portfolio for $1.5 billion.

On the enablement side, companies like Crux, Reunion, and Basis are making what are these bespoke transactions with many stakeholders far more efficient and liquid. In the tax credit world, these startups serve as multi-sided marketplaces where financiers, developers, and buyers can transact tax credits efficiently.

Impact on Jobs

The inclusion of wage & apprenticeship (W&A)  requirements to get the full 30% rather than 6% on certain credits emphasizes the importance of skilled labor in the global energy transition. Meeting W&A requirements is the only way to get the full value of the tax credits. The labor bonus is how energy & labor policy intersect in their goals.

Developers must pay union wages and employ certified apprentices in order to qualify for bonus rates. They don’t have to hire union labor, but they do have to pay union wages. The qualifying apprenticeship condition states that the labor must come from registered apprenticeship programs. This obviously puts a burden on the entity applying for bonus rates, but also, the incentives are massive. If W&A requirements are met, the credits are 5x’d. If all goes well, the IRA should have a massive impact on the skilled labor base. Hopefully, this 5x bonus for projects that employ certified apprentices and pay union wages will greatly accelerate the creation of viable apprenticeship opportunities.

Every developer is putting in the effort. Almost everyone I spoke to echoed that it’s table stakes to pay prevailing wages, make an effort to recruit apprentices, and go after the maximum amount of credits possible.

On the other hand, it’s unclear how many net new jobs will be created due to the IRA. One professional services provider who has advised billions of dollars in tax equity transactions is skeptical. He mentioned that most developers were already paying prevailing wages due to tight labor markets. 

The extent to which these requirements are met are covered in the insurance products coming to market, and companies will have to keep detailed payroll records for prevailing wages, employing apprentices, and making good faith efforts to provide opportunities. 

Overall, every guest I spoke to is a fan of the intent behind the policy to create good green jobs. The Biden Administration is following through on the campaign promise that Green Jobs are Good Jobs and is making a bet that it can incentivize investment into the skilled labor workforce. Director of the Office of Energy Jobs Betony Jones believes tax policy will be a key part for the department to meet its goals. 

Still, the policy is a massive step in the right direction and aligns incentives of developers with the increasingly important role of registered apprenticeship programs. A clean energy economy can not only coexist, but thrive with a growing labor base. Whether or not there is net new job creation is a question for the future. At least incentives for good faith efforts have clearly been put in place.

Carbon vs. Tax Credits

There is an important question to ask about the role of tax driven policy in industrialization versus new markets that are emerging, like voluntary carbon markets. Another hot area of alternative finance to compare to is the development of advanced market commitments (ACMs) and the purchasing of carbon offset credits.

There have been incredible developments in the realm of voluntary carbon offset markets. Stripe Frontier for example started as a $1M commitment to purchasing voluntary carbon offsets from innovative providers like Charm Industrial. They have since upped that commitment to $1B. Still, the market for voluntary offsets remains early and speculative. There are no government backed guarantees that create a market structure for transactions to take place in voluntary carbon markets. 

The total amount of removals purchased is estimated at $2.1b as of December 2023. Compared to the government-backed market of tax credits at $800b, it looks small in comparison. Researching the state of tax credits vs. carbon removals made me think of a bunch of open questions:

• On the buyer side, how should corporations think of allocating funds towards tax credits vs. voluntary carbon removal markets? Will they do both?

• On the supply side, how well do current carbon removal methods scale? Could they meet the demand if it was there?

Considering tax credits have explicit government backing and a long-running history of effectiveness in spurring industrial activity, they seem more promising than the voluntary carbon market. This is not to say we shouldn’t embrace both on the path towards sustainable industrial policy, but that the tax credits market is less speculative than voluntary carbon markets.

Our community of climate leaders have to ask really hard questions about what solutions are the most promising and where investments in talent, capital, and energy should be made. Regardless of where these two markets are in relation to one another though, we must explore every avenue to encourage innovation in how we transition to a clean future. In terms of measuring relative benefits, I believe we should focus far more on maximizing the value of tried and true market interventions like tax credits. With that said, I’d be interested to hear from a corporate buyer of both removals and tax credits to understand how they think about purchasing.

Tax Industrial Optimism

There has never been a more exciting time to dive into tax credits! Using the levers of tax policy is how the U.S. originally developed a reliance on fossil fuels. We’ve come full circle with the IRA enabling market tax transferability which will hopefully finance a far cleaner energy transition. We’re already seeing real transactions, but it’ll take at least another decade to play out.

Still, questions remain for the wider climate community to think about:

• How effective will this market be in creating green jobs? 

• How should we think about the relative importance of tax credits versus carbon credits?

• What is the long-term durability of tax credits as an asset class?

Credits & Careers

Again, a special thanks to all of the guests: Allen Kramer (Crux Climate), Bryan McLaughlin (PriceWaterhouseCoopers), Jack Shadid (Hinshaw & Culbertson LLP), Phil Mixon (The Wilson Firm), David Burton (Norton Rose Fulbright), Andy Moon (Reunion Infrastructure), Alfred Johnson (Crux Climate), and Erik Underwood (Basis Climate) for contributing to this post.

If you want to make a big impact with your skills consider working with some of our guests on making tax credits transferable. 

A few impactful roles are linked below:

Careers at Reunion

• Business Development Manager

• Strategy and Operations Manager

• Finance and Transactions Associate

Careers at Crux

• Marketing & Events Intern

• Markets & Transactions Principal

• Markets & Transactions Principal, Buyer Focused

• Product Lead

• Revenue Operations

• Senior Manager, Markets & Transactions

👋 Matt again. If you made it this far, just two last things:

• Feel free to reach out to Will over LinkedIn

• If you’re interested in writing a future guest post, reach out to me!

When I initially decided to research geothermal, all I knew was that the Earth is hot underneath. I quickly learned that geothermal startups, while they all leverage subsurface heat as the primary resource, vary significantly in what they do. There’re many ways to slice and dice it, and I view the landscape in two distinct categories: heating & cooling and power generation. This newsletter will focus on the former, using geothermal energy directly to heat and cool buildings. The next issue will cover how geothermal energy can be used to generate low-emissions, renewable electricity.

Geothermal Basics

Just underneath the Earth’s surface, the ground temperature remains a constant 55-75°F (7-21°C) throughout the year. This is ideal for geothermal heating and cooling. During the summer, hot air gets moved into the cooler ground which results in air conditioning. During the winter, heat from the warmer ground gets moved into your home.

Even with just understanding the basics, there’s already a distinction between geothermal for heating & cooling and geothermal for power generation. For heating & cooling use cases (AKA shallow geothermal), you don’t have to drill as deep as for power generation. Drilling deeper comes with more access to heat, but is also more expensive and complex.

For geothermal heating & cooling, we’re mostly referring to drill depths ranging from a couple hundred feet up to 2,000 feet which maps to shallow and deep geothermal probes in this diagram:

What goes into a geothermal system?

The presence of this stable 45-75°F range is great, but it’s just a raw resource that needs to be harnessed. Finding the heat is not the challenge; getting that heat into buildings is. This is one of the key distinctions between geothermal for heating & cooling vs. power generation. So, how do you actually move the underground heat around?

A geothermal system consists of a few physical components: ground loops, a geothermal heat pump, and often ductwork. Ground loops are plastic pipes that get placed underground for thermally conductive liquid to pass through and facilitate heat transfer. “Thermally conductive liquid” is just fancy talk for typically water mixed with some antifreeze. The geothermal heat pump is the device that replaces the furnace and air conditioner. Lastly, ductwork is the series of passageways inside the building that delivers the heated or cooled air to each room.

Beyond physical components, companies like Dandelion and Bedrock also provide a series of services that enable a safe, functional, and complete installation:

1. Design: A combination of remote software-enabled simulations and in-person consultations to determine the system: drill depth, borehole location, number of loops, etc.

2. Permitting: Similar to installing rooftop solar, setting up geothermal heating & cooling requires permission from the local municipality.

3. Financing: Geothermal systems are expensive upfront investments. A combination of tax credits, other incentives, and pay-over-time plans lower the upfront cost to purchase a geothermal system.

4. Drilling: This may be the most important step from an innovation perspective. Geothermal heating & cooling has actually existed for a while, but has never taken off until now. When you dig in (pun intended), the primary reason has been cost, which largely comes from drilling and all the associated dependencies like designing the right system upfront to avoid costly mistakes. Thanks largely to the oil & gas industry, drilling has gone through decades of innovation. However, drilling still needs to be re-engineered for geothermal, which still has to be proven out. With the IRA and other incentives, the math is finally starting to make more sense for geothermal.

5. Installation: Once the borehole is created, a crew of skilled workers must install the ground loops, replace the furnace and AC with the geothermal heat pump, and connect everything. Even geothermal heating & cooling is a sector of climate that is impacted by the skilled labor shortage.

6. Monitoring & Alerting: Sensors embedded in the geothermal system measure the real-time performance of the system and can detect any irregularities or anomalies.

Why does this matter?

Heating and cooling buildings is responsible for at least 10% of global emissions. Breaking it down further, space heating, air conditioning, and water heating make up 70% of home emissions. Meanwhile, the vast majority of HVAC systems are still burning natural gas, fuel oil, and propane. Switching to a geothermal heat pump system can result in upwards of 75% emissions reduction, but in the US, geothermal makes up less than 1% of HVAC. It’s also worth noting that according to Dandelion, even switching from an air source heat pump to a geothermal heat pump can result in emissions reductions of nearly 50%.

Historically, geothermal projects have faced significant challenges across three dimensions: cost, space, and time. The high upfront cost effectively priced out most real estate types, leaving only special buildings like military bases, embassies, and museums. Even then, payback periods were upwards of 20-30 years. In the past, more primitive drilling techniques led to both shallower drilling and laying out group loops horizontally (as large as a football field!). This required a ton of space which most real estate owners don’t have. Lastly, in the past, the high cost of drilling resulted in shallower depths and horizontal loops which take a lot of time to build. Developers were spending up to a year drilling holes which further exacerbated project costs from a labor perspective.

While the hurdles have been around for decades, there are signs that we’re at a turning point. In Sweden, roughly 20% of homes have geothermal heat pumps installed. In fact, in one case, a Swedish homeowner was able to reduce his heating emissions by 95% while also cutting down his heating bill by 80%! Although some other countries are clearly ahead of the US, it’s not due to geographical or geological reasons. Policy and culture have played a larger role in shaping the adoption of geothermal heat pumps (since we’re only doing relatively shallow drilling). With enough customer awareness and political momentum, geothermal in the US has the potential to reach similar levels of adoption as Sweden.

If the 2010s were solar’s time to shine, then the 2020s could be the decade of geothermal. If you’re also an optimist, then we are at the very beginning of geothermal’s exponential curve.

Introducing Joselyn and Kathy

While Bedrock and Dandelion are two distinct companies tackling different customer segments each in their own unique way, I couldn’t help but notice some similarities. Both operate at the intersection of technology and logistics. Both use a combination of software and hardware. It’s not just about design software, IoT, and financing. Manual, physical processes like trenching, managing crew operations, ductwork, and ensuring the electrical panel is capable are equally important. Drilling — specifically, vertical group loop systems — came up multiple times as the crux of the entire operation. The key themes below reflect this attitude of utilizing new tools to bring old energy (as old as the Earth) to the masses. There’s a balance in galvanizing adoption with modern technology, but also realizing that software alone is not going to be the silver bullet.

Together, we’ll cover:

• The current state of the geothermal heating & cooling industry

• The critical role of drilling

• Finding customers vs. finding sites to drill

• Comparing geothermal to the solar industry

• The role of subsurface energy modeling

• The skilled labor shortage in geothermal

• Balancing new home development vs. retrofitting existing homes

and more! Let’s dive in👇

What is the Goldilocks-sized (not too small, not too big) building for Bedrock?

Joselyn from Bedrock: We wouldn't do a single family home because they might only need one borehole. Some single family homes only need 400 feet of bore, but for us, that's not even a full borehole. So it isn't great economics for us to mobilize our technology and team to do a system that isn't even leveraging half of a Bedrock bore. Since our bores can provide somewhere between four and six tons of heating and cooling load, if a building only needs two or three tons, it's just not really a fit.

On the larger side, once buildings are really large, like massive campuses of millions of square feet, we can certainly drill for that geothermal system, but those kinds of campuses are big engineering feats. Usually there's some kind of district energy system. A lot of these university campuses that do geothermal are actually pairing the geothermal borefield with a broader district energy or combined heat and power system. There's a lot going on that's beyond our specialization.

Customer acquisition vs. site selection

Matt: Compared to geothermal for power generation, it seems like the site selection process may be fundamentally different and you might instead prioritize customer acquisition and try to reach those who would save the most or have the most pressure from policy to decarbonize.

Joselyn from Bedrock: Exactly.

Matt: Is it solely looking at the customer or are there a series of natural world data that you're also using to prioritize?

Joselyn from Bedrock: One big thing is just the climate. The hotter the temperature or the colder the temperature, the more money you save. And the more money you save, the more likely the economics look good for doing geo[thermal] instead of the conventional gas option. If you have high temperatures, then you're doing a lot of air conditioning. If you're doing a lot of air conditioning, it is more likely that the grid in your area is going to be strained in the summer. As a result, you might have expensive demand charges for using electricity during peak summer days.

There are places where you can save a lot of money by doubling the energy efficiency of your air conditioning because ground source heat pumps are so efficient no matter how hot it gets. And then if it's very cold, you may be using a lot of natural gas or even fuel oil for heating, and in those situations you also save a lot of money from getting the 5x cost energy efficiency by switching to geothermal heating.

What have you learned about customer demand?

Joselyn from Bedrock: Geothermal is definitely a sector that needs more education. I think one of the benefits of working with commercial & industrial real estate is that these are big portfolios. Once somebody is interested in geothermal, their brain is like “How do I decarbonize my whole portfolio?” However, to even get over the hump of the initial projects, folks are always just thinking “Well, what's the payback period?” Even if it is overall a strong IRR, people generally do want to see a 3-5 year payback period, which is pretty aggressive. In our country, natural gas is still relatively cheap compared to how expensive it is in most of the rest of the world.

For us to prove that with Bedrock's technologies that we can get to a 3-5 year payback period, there's a good amount of education to get over the hump. Even if people are willing to handle a 3-5 year payback period, the question is, where are they going to get the capital? The industry is not doing great. WeWork just went bankrupt. There are definitely some headwinds in this sector. People may not be willing to take on debt even if there is a 3-5 year payback. They might say “I just don't have the capital right now to make investments.” As a result, it's important for the energy transition sector to mature and start providing more access to capital that can enable folks to overcome needing to provide their own capital to invest in these types of installations.

What’s the current state of Dandelion — how things are going and what are you all focused on right now?

Kathy from Dandelion: Where to begin? When I first launched the company, we had to prove customers would even want this product because not a lot of people had heard of geothermal as a way to heat and cool their home. So in the first couple of years, we set out to prove we could sell it and we absolutely could. We had a problem all the time of overselling what we could install. So then, for the next two years of the company the major challenge was growing our installation capacity quickly enough. We had to do some pretty hard things to grow quickly enough including totally vertically integrating which includes drilling, because there just weren't enough drillers in the market to handle all the customers that wanted geothermal in our markets.

Now, in this phase of the company that we're in, I would say there are two focuses that are occupying most of our time. One is, now that we've shown that we can sell and we've shown that we can grow quickly, we're trying to show that we can grow profitably. The second thing is becoming more and more efficient at what we do. Which is a good place to be in. That's basically our reason for existing — to show that geothermal is a scalable product that people want. They definitely want it, we've shown we can scale it, and the last part is demonstrating that it's an attractive and sustainable business.

The other thing is in the past, we've focused on retrofit. So if you're a homeowner and you have an oil furnace, we'll replace it with a geothermal heat pump. Now, we’re also taking on new construction work by working with developers to install hundreds of geothermal systems in new homes. That way, home builders are not just installing furnaces that need to be replaced later. That business is really taking off. We just started it in 2023. This effort is very new, but it's already grown to become a significant part of our business.

Does Dandelion’s vertically-integrated model carry over into the future? Or do you see a world where you can actually scale faster by working with contractors?

Kathy from Dandelion: I think the latter. To predict what will happen in the residential geothermal market, I look to the [residential] solar industry. For rooftop solar at the beginning, the companies that were the most successful were vertically integrated. I think that’s because when you have a new industry, there are a lot of things that are missing. There isn’t a trained workforce and there's a lot of complexity to manage. There aren’t products and services that are purpose built to serve the industry. For solar today, there's design software that calculates where to put the panels based on sunlight, rooftop angle, and tree shadowing. None of that existed at the beginning. You also have racks on the roof that make it super simple to install solar panels. Over the course of the lifetime of that industry, so much has come into existence.

Now, it's possible for a local company to become a solar company. They can buy all the products that make it simple for them to do a good job and it's not ridiculously expensive. The [solar] industry started out vertically integrated and now it's become quite distributed. I think the same thing will happen with geothermal. We had to vertically integrate even though we didn't want to at the beginning. My vision was not to be a vertically integrated company, but we were forced into it because there was too much complexity with things like quality control and cost. We just couldn't achieve what you needed to using a subcontracted model given the state of the industry at the time. But if we're successful in continuing to create the products that make installations simpler and cheaper, we will accomplish our goal of making it cheap and simple enough for local contractors to put in geothermal. That's how we'll achieve our mission of scaling the product quickly enough to replace fossil fueled heating systems with heat pumps on a scale that matters nationally.

Sticking with the solar analogy, you mentioned satellite imagery, tree shadowing, rooftop angle. I read that Dandelion is able to reduce costs by 30%. I’m curious what is the geothermal version of Aurora when it comes to inputs for system design?

Kathy from Dandelion: In terms of reducing cost for geothermal, I wish that there was more to do with software alone. There are some, but a lot of the major wins that we've had have been through things like the type of drilling equipment we use, which has really lowered the cost. Even something as simple as the shape of the ground loops impacts whether you need one or two ground loops for an average house and that is a big difference in cost and time. Drilling or installing projects with fewer people also makes a big difference. Doing  more installs and increasing throughput has a huge impact on cost.

About 20% of homes in Sweden today use geothermal heat pumps for heating, and most new homes there are built with geothermal installed. We wanted to figure out what the Swedes were doing that had enabled them to scale this technology, so in the summer of 2021 a few of the leaders of our drilling initiatives took a trip to Sweden. We saw they were using compact, agile and inexpensive Comacchio drilling rigs to drill holes for ground loops. The drills themselves were just a small part of the puzzle though.

One of the lessons we learned early on is that when drilling for geothermal ground loops, it's all about logistics. For example, even if you can drill quickly into the ground, if it takes a lot of people, the labor will be too expensive. If it's time consuming to move the rig from one house to another, it will be too expensive. If the rig is too fancy and can only be operated by very skilled technicians, the labor will be too expensive. What the Swedes figured out is a system of equipment - including the rig - that was simple to train on and operate, inexpensive, and efficient to take from one house to another.

These Comacchio rigs already existed, so we did not need to design them. What we did need to do is translate some of the Swedish equipment and logistics to their American equivalents. There are enough differences between Sweden and the US that it wasn't possible to do exactly what they were doing, but it provided an extremely helpful baseline for us to work off of.

We’ve gotten pretty far using Sweden as a baseline. Their drilling equipment is smaller, cheaper, and easier to use. Everything is lighter so you don't need as many people and you don't need as much support equipment. It's actually a lot safer. They have a system of capturing the dirt and rock that comes out of the hole very easily in a dumpster so it's not going all over the yard, which was a big problem in the past. They also have a whole system of trucks that transport the rigs from house to house.

Then with the inside of the house, most heat pumps in the U.S. today are built for cooling in new homes. Since the Southeast has traditionally been the leading market for heat pumps, a lot of geothermal heat pumps are cooling optimized. They also do heating, but in our use case, because we primarily serve the Northeast and other cold places, there’s a benefit in optimizing the equipment for heating and then having it also do cooling. I can't go into the details yet, but we have been doing quite a bit of work on the technology side for the inside of the house to create equipment that's more appropriate for cold climate retrofit because the existing equipment just really isn't built for that. We are working on solving problems like the required main panel upgrades, and the undersized ductwork that’s all over the place in retrofits. 

Do you think geothermal will experience the same exponential decrease in cost as solar?

Joselyn from Bedrock: I think there needs to be a cost compression in the asset itself. What came down the most in solar was the solar photovoltaics. The panels just got cheaper to make. So as heat pumps become more widespread, costs will come down with scale.

The one difference is that in geothermal, there's a big part of the cost that's not the asset. It's not the equipment; it's actually the drilling. That's what we focus on at Bedrock. At the end of the day, installing geothermal will always be some level of a construction project. Drilling holes, putting loops down, routing it back up, and connecting to the building will always be there. Our goal at Bedrock is to push that cost down by 50% and then eventually 60-70%. That is our goal so that ultimately we can see geothermal heating and cooling have a similar cost curve to what we've seen in solar.

Kathy from Dandelion: I do think geothermal will beat expert predictions on how quickly it will scale. I also think that new homes will play an important role; if you have a brownfield construction site, it's actually a lot less expensive to put in geothermal heating and cooling systems. For example, one of our projects is in Colorado, and the state government recently made developers pay for the cost of extending a natural gas line to the new home development. It used to be that this cost was socialized and paid for by other utility members. Now that developers have to pay for it, geothermal is actually less expensive than natural gas. This represents an incredible turning point.

Geothermal is already the lowest cost option in a few states. We still have work to do in other states, but once we get there and as developers become more familiar with geothermal as an option, it’ll feel lower risk and then it’ll take off. Once it's the lowest cost option and it doesn't feel risky, there's no reason a developer will not do it. Everyone will do it. I'm biased, as you know, but geothermal is the best solution. It’s the most climate friendly and it's the least expensive to run. If it's also the least expensive to install upfront, I just don't know why you wouldn't go with it. There's no reason not to do it.

With retrofit, we're seeing a lot more interest every year, with people just becoming more familiar that it's even an option. When I first started Dandelion in 2017, a lot of our marketing was just education and awareness building. Now we don't have to do nearly as much of that. A lot of people already know what it is or they know somebody who has it. We get a lot of referral customers. So it's good. There's been a fast change already in the industry.

What’s the secret sauce with your geothermal drilling?

Joselyn from Bedrock: The oil & gas industry has done some phenomenal technology engineering , but also drilling engineering, which is basically the engineering of handling the complexities of the geological earth.

Oil and gas has put so many billions of dollars into the tools, equipment, and the know-how of additives, chemicals, and the crazy conditions underground. That whole spectrum of technology and field engineering has been optimized for the extraction of hydrocarbons over the past decades. However, if you reengineer them for geothermal, there are some fundamental differences. Geothermal has shallower, narrower, simpler boreholes. We're not trying to take anything out of the borehole — we actually want to keep them stable so we can put a plastic pipe in, fill it back up, and keep it stable to enable thermal energy transfer.

The conditions are extremely different from the hydrocarbon space, but we’re essentially looking for the same things: higher rate of penetration, lower nonproductive time while drilling, better stability, and lower costs of completing the bore.

Our technology is rebuilding these tools that come from oil and gas, but doing so for the purposes of geothermal specifications and outcomes. Specifically for us, that’s low temperature geothermal heating and cooling. There's a huge element of simply building these tools at a price point suitable for geothermal heating and cooling.

These tools exist in the hydrocarbon space, but in oil and gas they're making $50,000-60,000 day rate for a tool this big. So why would you ever reengineer that tool to be smaller and to be used in the United States in urban construction when the opportunity costs of doing that is $50,000 a day out in Saudi Arabia? There's a bit of a chasm where the technology engineering is not making its way over. So we are focused on building all the same equipment, the same tools, but making it that much smaller, lighter, and cost effective to build, use, and maintain.

Since you mentioned a lot of business is coming from referrals, would it ever make sense to combine installations? Maybe I tell my next door neighbor and we commit together, but also could you drill one big set of loops that we’d share that or is that not really practical?

Kathy from Dandelion: I would say it's not really practical, but it's a dream that many people have. A geothermal heat pump install is a pretty big project. It'd be like trying to convince a bunch of neighbors to buy a car at the same time to all share a discount. It's a large purchase and the task of coordinating a bunch of people to make that decision together is not practical in most cases. Well, at least I haven't figured out a way to do that. The cost of sales, I think, would far exceed the savings in operational efficiency that you would get. I don't think that combining the loops would actually save you anything because you'd have to just do more loops and have longer trenches.

Even in the case you did manage to sell a bunch of homes at once, they still likely all be different from each other and therefore require highly individualized attention.  The nice thing about new construction is not only do you get to do them all at once (which is very efficient), but they're all predictable because they're all the same. So there's a simplicity and a predictability that’s absent in residential retrofit.

Matt: That makes sense on why to also have this new construction line of business. Because I assume you can do multiple homes in one pass.

Kathy from Dandelion: We absolutely can. The homes are so much simpler because when you know you're going to put a heat pump in, you can design the home to accommodate the heat pump. You can make sure it has enough electrical capacity and the ductwork is large enough and the space to put the pump in is sized correctly. You simply design the home to have a heat pump. We're not vertically integrated for our new construction business because it's simple enough. This is very different from the retrofit business, where many homes were not designed for heat pumps, so you might need to upgrade the electrical or upsize the ductwork. There’s also all the complexities and differences inherent in all individual homes. This isn’t limited to geothermal heat pumps. All companies installing heat pumps in old homes face these problems.t's just not easy to retrofit a home for a heat pump, and generally the older the home, the more difficult it is.

Skilled Labor: What has the process been like with building a talented, capable workforce? Is there a similar bottleneck with drillers and ground loop installers like there is with electricians and HVAC technicians?

Kathy from Dandelion: There are shortages of both electricians and HVAC techs and drilling / ground loop installers. The shortage of drilling installers is far worse because there is no scaled geothermal heat pump industry within the US today. This was a significant challenge for Dandelion in our early days, because the demand for geothermal heat pumps quickly exceeded the available labor pool to install ground loops. To meet this challenge, Dandelion took a few actions:

• We acquired a CT-based environmental drilling company and retrained those talented drillers to install geothermal ground loops;

• We brought leaders of one of the top geothermal ground loop installation companies in Sweden over to the US to train our team members in this type of drilling;

• With these experts to lean on, we've built a pipeline where we hire people with no geothermal ground loop installation experience and train them to drill and install loops.

There are enough electricians and HVAC technicians in the market today that we've been able to hire externally in addition to training, but state-level licensing requirements add a layer of challenge to what is already a tight labor market.

What is subsurface energy modeling and how is it used?

Joselyn from Bedrock: The inputs to our subsurface model are all this data that we collect while we drill, and we understand the subsurface. This is really important because every bit of earth is actually a little bit different. Two boreholes 50 feet away from each other might have groundwater start at different depths. Those different rock, soil, and hydrological characteristics inform the thermal conductivity or thermal performance of this whole borefield.

You can think of a borefield as a battery. It's a thermal battery that you are drilling into the Earth and you want to know how it will perform. But the Earth is not consistent. With batteries, you know exactly how it operates because it's a manufactured lithium ion battery. But with the Earth, every bore is different and the conditions change a little bit. We are reading those soil and rock characteristics and then modeling how that borefield will perform over many decades. Then using those insights, we may go a little bit deeper on this bore, space this bore a little bit further out, add another bore, or you might be able to save money by removing a bore. We may realize that you don't need that 120th bore — you could actually make do with 119, and then save $20,000 from not adding that final one.

These are the kinds of optimizations that we can do because of being able to read the earth and provide exactly the optimal borefield (the optimal thermal battery) that this building needs.

What’s the purpose of monitoring performance over time?

Joselyn from Bedrock: The pre-drilling design can only tell you so much. As you drill, you get more data and you're able to optimize that. There are risks in the existing industry with thermal creep or some people call it thermal drawdown or thermal buildup.

Thermal drawdown is when you're in a cold place and you start taking heat out of the ground faster than the earth can replenish it. Basically, the borefield is not big enough to serve the heating needs of a building. Thermal buildup is the opposite. It’s when you're in a cooling dominant place and the borefield is not big enough to support all of the heat you're putting into the ground. In either of these conditions, thermal degradation may result in the borefield not lasting the 50-100 years that it's supposed to last. It might only last 10-15 years.

Thermal drawdown or buildup has happened often enough in the industry over the past few decades that it is still something that comes up in a lot of conversations. An engineering firm or a real estate owner will say “I've heard the Department of Energy says geothermal is amazing, but I've heard whispers that it could degrade over time.” Because of that, it's actually quite important that as we drill, we continue to monitor the borefield to ensure the borefield is designed optimally. By understanding the thermal characteristics of the subsurface, we can vary the way the system is pumped by varying the way water flows through it and do heat exchange such that you can also optimize the longevity of the system.

Technology: I know you said that it's mostly a logistics problem, but I am curious with the current geothermal systems, just how "smart" are they today and how much "smarter" could they become?

Kathy from Dandelion: Don't get me wrong, there is a lot of technology to be created here; I made the point about logistics because I think it can be overlooked by those looking to innovate in the space (me included, those were hard lessons learned) -logistics is absolutely vital to success. Heat pumps in the market today have IoT, monitoring and alerting, although these features aren't always great - I'm sure they will improve over time. That said, I don't think the IoT and monitoring is where the biggest opportunity for technology innovation exists in heat pumps. The biggest barriers to retrofitting homes with heat pumps are that most homes in the US weren't built for heat pumps, they were built for furnaces and boilers. Because of this, houses tend to have many features that are incompatible with heat pumps, including: undersized electrical systems, radiators that require water that's hotter than heat pumps can efficiently produce, ductwork that's undersized for heat pumps, not enough insulation, making it difficult for heat pumps to meet the heat load requirements. These issues require hardware innovation, and this is the heat pump innovation that needs to happen to make heat pumps more effective and less expensive for existing homes.

Regarding new construction vs. existing homes, how do you think about balancing proving to investors that you can grow profitably vs. trying to save the planet?

Kathy from Dandelion: One of the best things about the fact that our company makes money whenever we replace a furnace or a boiler with a geothermal heat pump is that our interests are 100% aligned to the environment's interests.

Even as we take on new construction, we're not lessening our commitment to retrofit. In fact, 90% of our employees are still focused on retrofit. So I don't want to overstate our shift to new construction. It's not a shift in focus. In the past, we were exclusively retrofit and now we're also taking on new builds. We have to fix both. I think it's a travesty that new homes continue to be built with fossil fuel systems when we know the systems are just going to have to be replaced. The sooner we can just stop adding fossil fueled systems to the mix  and start putting heat pumps into new homes, the better.

If we can continue to show that it's cost effective, convenient, and low risk for builders to do that today to make heat pumps the default, we will be  servicing the environment. At the same time I totally agree with you that we have millions and millions of buildings in the United States that need to be retrofitted, and in many ways it's a harder problem, but one that needs to be addressed, and we've been focused on it for the past — wow, I guess — almost seven years.  By showing we can sell these systems, grow our company, and revenue quickly, and make profit doing this, we can make a compelling case to investors, who should be eager to invest more in this project and that money will be used to accelerate the project of replacing furnaces and boilers with heat pumps. So it does feel to me that we're lucky that our interests as a company and our interests with respect to investors are actually very aligned to our environmental mission.

Matt: Yeah, awesome. Sounds like one massive flywheel where the learnings from more homes being built with Dandelion systems will actually help the retrofit business. So it's all one virtuous cycle.

Kathy from Dandelion: I think so. As we normalize the idea of geothermal heat pumps, and it becomes more mainstream, it won’t feel as much like an early adopter product. It's the same as EVs and with solar.

Conclusion

A big thank you to Joselyn and Kathy for teaching me about geothermal heating and cooling! In the next piece, I’ll cover the other main way geothermal is used — to generate electricity.

To get involved:

• For homeowners: Visit dandelionenergy.com and sign up to learn more about getting geothermal for your home!

• Bedrock is hiring for product and engineering roles -- visit bedrockenergy.com/careers for more info.

• Reach out to info@bedrockenergy.com if you are interested in decarbonizing your commercial & industrial property's heating and cooling with clean, efficient geothermal energy!

Subscribe now

As always, thanks for the support 🙏

TLDR: Fleets are an important, yet complex portion of the transportation sector that will need to be electrified. I interviewed Katie from Flipturn, Darren from Cruise, and Ethan from Keyframe to learn more.

A fleet is simply a collection of vehicles. You could have a fleet of one or a fleet of thousands. Although a wealthy household with many children could technically have a fleet of cars, we typically refer to fleets as vehicles associated with commercial use cases.

There’s many types of fleets. Within logistics, there’s cross-country semi-trucks that travel thousands of miles across interstate highways. There’s last-mile delivery vans like UPS and Amazon. There’s also drayage — the big trucks that transport shipping containers on short trips from coastal port to shipping facility. For transportation, there’s public transit, school buses, and ride-hail fleets. Fleets can also be owned by companies whose main business isn’t directly operating the fleet. For example, Genentech operates their own fleet that safely and reliably moves their drugs around.

Even though fleets and their respective businesses can vary significantly, they have a lot in common. Whether it’s heavy-duty trucks or customer-engineered vans equipped with cold chain, these vehicles tend to come at a high price point and serve a critical purpose in a company’s operations. Running a profitable business comes first, so unit economics is often more important than brand, comfort, or even sustainability. Fortunately for the planet, as the cost curves of renewables, electric vehicles, charging infrastructure, and batteries come down, switching your fleet to electric will become a no-brainer — if it hasn’t already.

Comparing fleets to consumer vehicles, there’s a few key points to be made. First, fleets are heavier emitters than consumer vehicles on a per vehicle basis. Even if you commute to the office everyday, that pales in comparison to the miles that an Uber driver or Amazon delivery driver would do. By targeting the most carbon intensive transportation segments, we’ll get more bang for our electrification buck.

The other difference is what I’ll call charger type tolerance. Residential EVs can be easily charged overnight in your garage via a Level 2 charger. With fleets, there’s less flexibility. Since fleets put on more miles, tend to be heavier, and have a higher aggregate power demand (since there’s multiple of them all in the same place), higher power chargers are needed.

Today, a majority of EV news coverage goes to consumer EV brands like Tesla, Rivian, and Lucid Motors. In fact, I didn’t understand the sheer scale of fleets until I started researching for this piece. In keeping a steady aim towards the goal of net zero, it’s important to objectively seek out the most impactful solutions. Even if it means electrifying a bunch of big trucks tucked away in warehouses instead of drooling over Cybertrucks.

Introducing Katie, Darren, and Ethan

Since I know very little about fleets, I reached out to three experts who do:

Flipturn is the unified control center for EV fleet and charger operations. By integrating with vehicle telematics systems (devices that sit in the vehicle and send data like GPS, fuel level, state of charge, etc), Flipturn enables fleets to maximize uptime and minimize utility costs by optimizing energy usage with charger management, analyzing cost and range, avoiding operational issues, and more.

On the charger side, they are hardware agnostic and able to connect to any private charger. Since the product can directly talk to on-site chargers, Flipturn can directly control the power level of the chargers. The centralized dashboard enables fleet operators to manage all of their chargers and vehicles.

At Cruise, his teams cover charging operations and service, product strategy for what hardware and software to buy, and infrastructure automation which includes prototyping and deploying robotic chargers. Fun Fact: all of Cruise’s autonomous vehicles are fully-electric and Cruise is one of the world’s largest fully-electric fleets at this moment.

TeraWatt is an asset-heavy business that owns real estate, develops fleet charging depots, and contracts them out to a variety of customers. The physical product is complemented by software that coordinates charger reservations, energy management, billing, maintenance, and 24/7 customer support.

I’m excited to share what I learned from these three experts because they have each been/are founders and also bring other perspectives. From the inside of Cruise, Darren has seen how problems morph as a fleet scales and how sometimes the job gets done with Frankenstein-y solutions. From starting TeraWatt in 2018, Ethan was relatively early to the fleet electrification transition and is now trend-spotting across adjacent areas as an investor. And of course, Katie brings her own experience with fleets from Samara which then has the additional layer of electrification added on top. So without further ado, let’s get right into it!

Charging needs of fleets and consumer vehicles are different

Ethan from Keyframe: We founded TeraWatt with the thesis that fleet charging was going to have a different set of needs than consumer vehicle charging. For example, fleet operators were going to heavily prioritize location, access, and the ability to charge according to their existing schedules and fleet operating parameters. Similarly, the sheer scale of implementation is significantly different for fleet operators. Instead of charging 10 vehicles at a time, they would need to charge tens or hundreds of high-powered commercial vehicles at a time. This amounts to megawatt hours of power at a single site, resulting in very large scale energy projects.

Fleets care about uniformity and will electrify in step-change patterns

Ethan from Keyframe: We believe that we're going to see a step-change adoption of electric vehicles by commercial vehicle fleets of all vehicle classes. We see the total cost of operation as a primary factor driving this step-change adoption. Because fleet operators are almost exclusively driven by economics, once we squarely reach total cost of ownership parity or better, we believe it will be clearly advantageous to electrify. With this clear economic advantage, we expect fleets to make the economic choice to switch in a step-change function instead of a huge overhaul needing mass education and time. The passenger vehicle market, on the other hand, might need that mass education to electrify over a much longer period of time.

Another primary reason for the step-change pattern is that fleets like uniformity, at least on an operating site basis. Operating a fleet is very complicated, so removing as many variables and having as much uniformity as possible is a huge priority. Therefore, to preserve uniformity on a location-by-location basis, we expect fleet operators to transition full locations at a time to EVs.

Matt: That's an interesting insight that I hadn't thought of. It seems like there's sort of activation energy needed. What are some of the key moments leading up to when a fleet is ready to fully electrify?

Ethan from Keyframe: Well, there’s a caveat to my prior statement regarding location-by-location adoption. Many fleets are currently testing one or two EVs per site. They do that before making the decision to transition the entire site to EVs. The number one question that they're asking is “How are we going to charge all of these vehicles?” Fleets initially expected to be able to charge them all on their existing operating sites. While they can do that for one or two vehicles, by the time they start thinking about their entire fleet, the power and physical space needs become limiting factors at their existing site. Off-site solutions – that’s where Terawatt comes in!

What problems do fleet operators face?

Katie from Flipturn: There are so many problems. One example is: a bunch of vehicles from your fleet come into the depot where you have the charters installed (since a lot of fleets install private charging behind the fence). All these vehicles come in and more of them come in than usual. Power demand spikes and you end up with a fee of thousands of dollars from the utility.

Another example: You plug in your vehicles and you expect them to be charged overnight. You arrive back in the morning and the charge session spontaneously stopped at 3 a.m. due to an issue with the charger and your vehicle isn’t charged. So you can't leave the next morning.

I'll give you a third example: You're running an EV program and you've heard on the news that EVs are cheaper to run than diesel vehicles because of the fuel costs. There's no way for you to know whether it's actually less expensive today because doing so requires you to calculate exactly how many kilowatts went into each time-of-use period from the utility company and then cross-reference that with the vehicle data that is difficult to access.

There's a long list of problems that fleet managers run into. It boils down to lack of ability to minimize charging costs when they're running their own chargers, and lack of cross-system visibility across vehicle, charging, and utility data. As well as the lack of analytics tools to understand how your fleet is doing so you can make the necessary efficiency and optimization improvements (that you currently have the visibility for your diesel vehicles).

Darren from Cruise: There’s a lot of hype in the space, but the biggest problems fleets have are foundational. The first one is getting access to grid power - this is where working together with your utility is really important. For example, there was a site that we were evaluating where the utility initially estimated the timelines for power upgrades could be over 2 years. Through continued engagement with the utility, they eventually proposed time-based access to power. They knew that at certain times of the day, other customers were not pulling as much power, so they gave us several additional megawatts during those times. We didn’t expect a utility to be that flexible on that front and were pleasantly surprised. A lot of people like to say that utilities are the problem and while utility timelines can be slow, I think they are partners and they can have creative ideas.

This is an example of a positive outcome, but sometimes you just won’t get access to power for years and need to stand up charging capacity regardless. That's one of the things that my team has dealt with. We’ve worked with a bunch of startups in the space to assemble what I call a Swiss army knife of stopgap power solutions. Depending on the volume of energy you need, you can use different technologies. For example, some service providers will perform battery swapping, charging those batteries up at one warehouse and then transporting them to your site. You can also use renewable fuels to power generators that charge your equipment. Obviously, we want to stay away from dirty fuels — and even carbon-neutral fuels have local emissions and noise impacts, but the fact of the matter is oftentimes the grid just isn't available. So we want to work with startups to find creative solutions that are as clean as possible to address the power shortage.

Another problem has been reliability and uptime of our chargers, especially with the fragmented non-Tesla ecosystem. By definition, you have a lot more complexity if you have to manage different suppliers because there’s no one holistically responsible for everything from the hardware to the service to the data. Essentially, uptime of the third party ecosystem is challenged. That can be due to a lot of different issues. It could be communications, robustness of the power electronics, HMI issues, payment module issues, etc.

There have been studies out there that estimated the uptime of chargers in the Bay Area to be 75-85%. For a consumer, it's very inconvenient and causes range anxiety. For a fleet, that's a no-go because there's a business imperative to keeping the vehicles running. If only 80% are working at any given time, you have to build in 125% of your chargers just to make sure that you can satisfy the fleet. That's very expensive. So, you have to proactively establish the tools and processes to achieve high uptime.

Nuances with an autonomous ride-hail fleet

Darren from Cruise: Let me first address the usage profile first. If you’re a last-mile delivery fleet that operates only during certain hours of day, you may have around 8 to 10 hours to charge overnight at the depot. In this situation, it makes sense to use Level 2 charging, which is almost two orders of magnitude less expensive than DC fast chargers. You can also leverage managed charging to minimize your grid upgrades and demand charges.

Cruise, on the other hand, expects over time to have 24/7 operations. That doesn’t mean that demand will be constant throughout the 24/7 hours. We do expect peaks and troughs that are similar to ride-share. But Cruise believes that as it scales its business and as the fleet matures and the costs go down for the consumer, that ride-hail demand will likely smooth out more than what we see in the typical peaky Uber and Lyft cycles. Because of this, Cruise needs to rely primarily on DC fast charging. You can think of the situation like an airline. You have really expensive assets that you want to keep utilized as much as possible so it can earn revenue for you. Since asset utilization is so important, you need the short turnaround times enabled by DCFC.

Matt: How do you think about the battery threshold levels and how that’s related to ride-hail marketplace dynamics? So for example, a static set of thresholds could recall vehicles when they’re below 20% and then release them at 80%. More intelligent logic could dynamically recall and deploy vehicles based on how much demand there is for ride-hail at any given time. The overall battery charge of the autonomous fleet is analogous to driver supply of human-operated rideshare.

Darren from Cruise: There are basically two ways to deal with this. One way is to think of it from a reactive standpoint and calling a vehicle back when a static or dynamic threshold is hit. But if you're reactive, you may not see a wave in demand coming, although it should be something that you can predict. One of the challenges in the ride-hailing business is that demand is stochastic, so there aren’t fixed scheduled routes that a bus or a last mile delivery fleet might have. As a result, you can't schedule cars to be charged at a given point in time. But what you can do is look at aggregate levels of demand and fleet level energy to create a confidence interval that can inform an SLA. You’re able to optimize charging and fleet scheduling at the macro level.

Power constraints and space constraints

Matt: If you took a city, like San Francisco, at what point do you start to think about having multiple charging depots? If you have just one and start adding more, you'll eventually hit the power limit. At some point, it might make sense to split, like how in biology, cells divide once as they grow.

Darren from Cruise: Not only is there a potential power constraint, there's also space limitations. You need a parking stall for a charging stall, but that physical space may not exist in one single location. You’d also want to consider additional locations to reduce deadhead miles. If constantly recall vehicles to one central location, they may be racking up unnecessary empty miles. We'd like to avoid that, both from an asset utilization perspective, but also from a climate perspective.

Overlap between optimal business and optimal charging geography

Matt: What does the overlap of the ride-hail business and the overlap of charging infrastructure look like? I visualize two heat maps. One is a heat map of ride-hail demand and the other heat map would be the optimal places to build charging infrastructure When you put those two heat maps on top of each other, what do you see?

Darren from Cruise: We've done some investigation on this front. You can certainly apply some simple algorithms to figure out the ideal placement, location, and size of charging depots based on ride-hail demand. The challenge is that we don't operate in an ideal situation. When you’re actually building this infrastructure, you have to operate with constraints, and some of those constraints would include zoning — are you allowed to even build commercial EV charging in this area? It might be a residential area. Maybe you can build charging, but you're not allowed to build it for commercial fleets. The second constraint is what's actually on the market. You may want to build a charging depot in one neighborhood and maybe it's zoned appropriately, but if there's nothing on the market, you can't build there. So there's just a lot of practical constraints.

What does the ideal charging depot location look like?

Matt: How would you describe the ideal location for a fleet charging site? Is it in relation to the proximity to the warehouse? The cost of the land? The power potential? How directly is it on route? What are all the sort of factors that go into an ideal location?

Ethan from Keyframe: I think you touched on several of them- like interconnection and route location. Other aspects of the site are also important, such as ingress, egress, or if it’s on a corner lot. For corner lots, you could do a drive-through charging (pull in one corner, pull out on the other.) Direct access to major thoroughfares and zoning is also extremely important, as municipalities often have specific requirements around the movement of truck and commercial traffic. Then of course, economics is key. We have to think about the purchase price of the underlying property as well as the full development expense. For example, it might make more economic sense to develop a site into a distribution center instead of an EV charging hub. The last one I'll add is the potential to build other amenities on the site. The potential to add, say, a driver lounge, office space, or even a warehouse can make a site more attractive.

Private vs. public charging

Matt: How do fleets think about what’s the right mix of private and public charging?

Katie from Flipturn: I think that many fleets are thinking about a mix of solutions and we're working with them to make it happen. You’ll often see fleets that want to install private charging because public charging is notoriously unreliable.

What we’ve found is that when they can, people want to install private chargers. But we're also seeing the rise of charging-as-a-service and fleet-as-a-service offerings. You could have a fleet that has their own private chargers, but they also have a deal with a charging-as-a-service company to top off or do opportunity charging at a different location if needed. It's also really important that this infrastructure exists so that there's an option to charge when needed, especially if it's far away from their depot.

Matt: Does charging ever take a top priority over the routing? In other words, would a fleet operator ever shift routes to optimize for charging? Today, I’d assume that fleets prioritize their deliveries or trips over fueling at a gas station. But with electricity and the way it's different than fueling, do you ever see that behavior changing in the fleets?

Katie from Flipturn: I think that the biggest issue is that a vehicle is often on a schedule, so it’s suboptimal to take a charging detour in the middle. Fleets often opt out of public charging and prefer to charge at the depot because it's cheaper and more predictable. As a result, instead of going on your route and being able to stop at any time at a gas station, you have to make it back to the depot. The reality is a fleet manager will not send a vehicle out on a route if it can't make it back. This is why it's going to be really difficult for long haul trucking to electrify, and that's why there's programs like NEVI to install chargers every 50 miles on the highway because of the range limitations.

What’s the role of software for fleet electrification?

Ethan from Keyframe: There are two important things I’d mention here about software. One is making sure that operations are working. One of the biggest pain points with charging today is uptime. It might seem relatively simple, but a critical part of building a business like TerraWatt is ensuring they are maintaining a high level of uptime. Software is what will enable that.

The second is optimization. A lot of this has to do with recharging vehicles at the optimal time across operations, cost of power, and charging availability of a site. That's a massive optimization problem that can be tackled with some planning, but also needs to happen in real-time. Software is going to be the solution here as well.

Load balancing with power controls

Katie from Flipturn: When fleets electrify, the two main complaints that we hear over and over again are range and charging. If you're installing private charging, getting your site hooked up to the grid to send enough electricity is pretty tricky. A system like ours can definitely help because we can control the power of the chargers. You can install more chargers than the capacity of the site, and then our software will load balance to keep it under that limit. That way you can have more vehicles simultaneously charging. You can rely on Flipturn to make sure that you stay below that limit and avoid tripping the breaker or incurring an extra fine from the utility company.

Matt: Even just the concept of setting the power limit is something that's unique to fleets compared to consumer vehicles, where in consumer, you just buy a charger off the shelf, you plug it in and you don't think about setting any of those limits. In fleets, it sounds like there's just more layers of complexity that you have to think about. It's not just the limit to avoid the fees, but it's also what you just mentioned about having multiple vehicles to think of.

Katie from Flipturn: Totally. It's completely night and day from residential charging. Fleet charging is a totally new problem and the reason why we're able to find success in the market is because a lot of existing solutions were built first for residential charging. You can imagine that all those assumptions break when you try to install a big depot of chargers with many vehicles needing to get out on time combined with the higher power needs. You need to tie it together with all these additional fleet systems.

The value of centralizing fleet operations in one tool

Katie from Flipturn: The area we get the most positive feedback on is simply the fact that you can see everything in one place. Fleets that adopt EVs sometimes often end up in a situation where they have one vehicle data platform for their diesel vehicles, another dashboard for your EVs, and then for each charging brand has an individual dashboard. So it's like 10 different places you need to look at just to understand what's going on with your fleet.

Fleet managers have to answer the question of “When will this vehicle be ready to go?” Or “Is this vehicle even charging?” It ends up being like a complicated problem to solve. If you're responsible for sending your drivers out continuously, it's extremely painful to have to go look into all these different systems so consolidating it into this single dashboard is extremely helpful.

Data flows and interoperability

Darren from Cruise: With regards to why the ecosystem overall is challenged on reliability, I think it's a few things. It's usually not because of the power electronics failing because manufacturing companies are very good at producing robust power electronics for industrial applications.

The charger is a complex system with a lot of parts. Just like cars have OEMs with different tiers of suppliers, the same thing happens with chargers. You may be buying a charger from a company like ABB or Tritium, but they may be integrating with parts from other suppliers - for instance, the payments system or cellular modem or HMI displays. I don't think any of these companies manufacture the charging cables internally. When you're piecing together all these different pieces, there's just more room for interoperability issues.

When something goes wrong, how do you quickly get through that chain to diagnose and resolve the issue? I think data sharing among the industry would really help the players across the value chain. There certainly are people who hold tightly to their data and think that there's some competitive advantage there. While that may be true, my take from the customer perspective is if holding tight to your data gets in the way of resolving the issue quickly, then nobody wins.

This is why Tesla is doing well. They made themselves the sole responsible party. They build the hardware, they have the teams doing O&M, they control the data flows that help them do the diagnostics, and at the end of the day, there's one party that's responsible if things don’t work. It's Tesla. In the third party ecosystem, it's more complicated. You play a game of telephone and even if people have really good intentions, that can be challenging. Now there are standards out there, like OCPP and OCPI that are meant to help with interoperability. I would say that they're not fully solving the problem because OCPP is a little bit more like guidance. Every manufacturer implements it differently. If you talk with any of Cruise’s suppliers, they'll tell you “We always have to do interoperability checks even though there is technically an interoperability standard out there”.

So I think there is space for improvement here. One of the companies is eDRV and they’re basically trying to become the Twilio of EV charging. They handle all the OCP integration with various manufacturers and they also manage some of the value add functions as well. For example, you’ll be able to know if someone's finished a charge session. Sometimes there are dropped messages and that can be an issue. They'll manage things like plug & charge from ISO 15118-20, which is also pretty complex. To the end user, they just have to hit an API endpoint since they’ll handle all of the OCPP and complexity behind it.

Skilled Labor in fleet charging

Darren from Cruise: Achieving high uptime requires hiring good people. I've built a team of craftsmen who care about the quality of their work, are safety focused, and have kind of a unicorn skill set. It's not a good idea to take a typical electrician and tell them to work on chargers because chargers are actually fairly complex.

You need someone who understands low voltage systems, but also high voltage systems. When you’re working with 480V 3 Phase or 800V DC, those are hazardous voltages. You need someone who understands how to do things mechanically, like torquing things to the right spec, doing pull tests, strain relief… all of these things.

Then you also need people who know how to debug. They need to be able to use software systems like a terminal. We like working with one of the companies in the space called ChargerHelp because they have a dual mission of training more technicians while offering this service.

Matt: You're mentioning skills that a technician would need to have that I wasn't even aware of. I guess in my head, I just visualize the car pulling up at the charger depot, a technician comes and plugs it to any of the chargers since they're all the same and then it just works. But what you're describing seems a lot more complex because chargers don't always work and there might be different types. If you plug it in and it doesn't work, then you need to troubleshoot.

Darren from Cruise: That's right. Frankly, in terms of processes, we've been trying to push as much of the early diagnosis further down to the user as possible. Sometimes when a charger doesn't work, the first thing you should do is just reset the software and try again. Training operators is pretty crucial as well. When we first started, we had a lot of cable breakages from the connectors being dropped. When they hit the ground and cracked, it became a safety issue. We had to replace multi-thousand dollar charger cables, so we worked on training procedures to reduce the number of these occurrences. I’m pleased to say we barely see any of these connector drops anymore.

The future of fleet electrification

Matt: What are you excited about today to invest in?

Ethan from Keyframe: In terms of things that interest me right now — or maybe things that are just top of mind —are battery development and stationary storage spaces. As we see renewable energy penetration increasing on the grid, we see with it an increasing need for storage to dynamically shift according to generation and consumption of energy. As battery prices decline, we believe the grid-tied, stationary storage market will benefit, largely driven by technology advancements in the electric vehicle space.

Matt: What’s needed as fleets continue to electrify?

Darren from Cruise: I think the data flows need to be integrated with a variety of charger data sources so that you have real time visibility of what's available and what's not. Charging optimization will also be needed and for a fleet like Cruise where you can actually control the fleet itself, it's going to be a bit of a joint optimization between the fleet and the chargers. I also think charging depots should become a point of resiliency, not stress. What happens if there's a blackout? Can you still operate your service? Do you have backup power? Lastly, how do you be a good citizen of the grid? These charging depots can pull megawatts of power and that can cause a lot of strain on the grid. Can you implement some managed charging scheme or fleet scheduling scheme that supports the grid rather than stresses it?

Matt: What does the future look like for fleet electrification?

Katie from Flipturn: The [fleet] industry has to adopt EVs. It's the number one form of clean transportation today and gets at the heart of transportation emissions. If we can't electrify large segments of transportation, it's gonna really hurt our efforts to combat climate change. So I see that there's going to be this widespread adoption of EVs across the commercial sector and there's going to be a ton of opportunity in providing software tools to help make charging seamless and easy. This starts with fleet charging. There's not a lot of support right now for fleets that need to charge and especially not a lot of support for fleet's specific needs, but in the future, I think there's an opportunity to bring together this entire ecosystem, connecting with charging-as-a-Service, bringing in data from public charging bringing in data from even being connected to residential chargers, all into a centralized platform.

Interested?

• If you own EVs and/or chargers and are interested in management solutions, check out Flipturn!

• Reach out to Darren if you want to talk about operating a fleet of hundreds of vehicles, how to procure and manage charging, and how to make fleet ops easier with data. He also wrote a great blog post called Why charging sucks and what to do about it.

• Keyframe Capital is hiring an Investment Associate! You can apply here and let them know I sent you :)

Keyframe Capital Partners, L.P. (“Keyframe”) manages funds that hold this position within its portfolio.  The information contained herein is for informational purposes only and is not intended to, nor shall it be, construed as legal, tax or investment advice.   Keyframe makes no express or implied representation or warranty as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein.  Neither Keyframe, nor any of its employees or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this interview or its contents or otherwise arising in connection with this interview.

This interview contains forward-looking statements that involve risks, uncertainties and assumptions. If such risks or uncertainties materialize or such assumptions prove incorrect, the results stated herein could differ materially from those expressed or implied by such forward-looking statements and assumptions.

Unless you’re an energy nerd, you only ever think about the grid when the power goes out or when you spot utility linemen cutting tree branches in your neighborhood. As consumers, the fact that we don’t need to ever think about electricity is an amazing feat of modern technology. I know my phone is going to start charging when I plug it in and the lights will turn on when I flick the switch. Unfortunately, this magical abstraction that pipes power everywhere is now at risk due to a confluence of factors.

What is the grid?

The grid is an abstraction that is made up of multiple stakeholders who collectively work together to ensure reliable electricity delivery. The US power grid consists of three fragmented interconnections (Eastern, Western, and ERCOT). They don’t talk to each other at all. The next layer consists of 12 different transmission planning regions who coordinate, control, and monitor across many states. This furthers the us vs. them mentality and limits the ability to plan in a centralized and coordinated manner. Furthermore, in the US, there are over 1,600 electric utility companies who maintain the lines, wires, poles and transformers that deliver electricity to homes and buildings.

Brian Potter of Construction Physics sums it up well: “Today, the electrical grid has over 500,000 miles of high-voltage transmission lines and more than 5 million miles of lower voltage distribution lines, which supply power from nearly 6,000 large power plants. Together, this system supplies more than 4 trillion kilowatt-hours of electricity to the US each year. The extent of it has led the US electrical grid to be called ‘the largest machine in the world.’”

The grid is being pulled in different directions

Like any complex large-scale infrastructure, managing the grid has never been easy so why now in particular? The easiest way to explain what’s going on right now is with a meme:

The grid is aging and runs on old software

The majority of today’s grid was built in the 1960s and 1970s. With a projected 50 to 80-year lifespan, the time to replace large amounts of grid facilities is upon us. In some cases, we’re really testing our luck. The Whiting hydroelectric power plant was built in 1891 and is still running. The deadliest wildfire ever in California, the 2018 Camp Fire, was caused by a PG&E transmission line that was built in 1921.

Not only is the physical grid aging, the software that utilities rely on is also fall behind. The software running the centralized, simpler grid has struggled with the increased decentralization and complexity as intermittent generation emerges and energy demand increases.

Extreme weather events are becoming more common and more destructive

By using billions of dollars in damages as a proxy, the NOAA shows that things are getting worse.

The implications of extreme weather events on the grid are quite severe. In 2021, the winter storm Uri caused 70% of Texans to lose power, 50% to lose water, and cost upwards of $130B in economic damages. As global warming worsens and extreme weather events become normalized, the need for reliable electricity grows. On a 107°F summer day in Arizona, the utility shut off 72-year old Stephanie Pullman’s power due to an unpaid electricity bill. Her body was found days later. More extreme weather also means more health complications. A [study of the Virginia healthcare system](https://www.americanprogress.org/article/the-health-care-costs-of-extreme-heat/#:~:text=Extrapolated nationally%2C heat event days,health care costs each summer.) found that extreme heat adds approximately $1B in health care costs every summer. As extreme weather events exacerbate, maintaining a healthy power grid will become even more challenging and even more important for keeping our communities safe and healthy.

Utility-scale renewables and distributed energy resources are creating complex logjams in the interconnection queue

Times were simpler before renewables. Prior to the proliferation of solar and wind, generation and distribution was straightforward. Fossil-fueled power plants could be turned off and on based on demand fluctuations and there were far fewer nodes on the electricity generation map. Nowadays, with utility-scale solar, wind, and storage facilities, grid balancing is far more complex. Due to the variable nature and sheer scale, planners have to think through many more permutations of grid scenarios to ensure reliability.

Other distributed energy resources like rooftop solar, EVs, and heat pumps change the paradigm of how the grid has historically operated. Power used to only be generated in large central locations that flowed into the distribution system via high voltage power lines. Those power plants still exist, but now there are a lot more smaller decentralized nodes of both generation and demand. In the case of rooftop solar, net metering policies allow homeowners to sell back excess electricity to the grid. This new behavior of bidirectional flow is something that the actual grid and grid simulation software isn’t prepared to handle today with full fidelity.

This brings us to interconnection, the required process in which renewable project developers request to be connected to the grid prior to construction. The average time spent in queue used to take <2 years in 2008 but has since increased to 5 years as electrification has ramped up. The interconnection queue is currently slammed with requests because there’s about 2,000 gigawatts of generation potential waiting to be connected to an existing capacity of 1,250 gigawatts.

Here’s an example of what could happen: In 2017, the Oceti Sakowin Power Authority, a project developer based in South Dakota, put down a $2.5M deposit, thinking that would be the total costs associated with interconnection. Five years later, the regional grid operator finally came back with the new $48M price tag for all the additional required transmission upgrades. They were only given three weeks to come up with the extra $45.5M and understandably dropped out of the interconnection process.

Unfortunately, this story is not uncommon. As a result of the unexpected fees and long delays, only 14% of solar and 20% of wind projects are actually completed.

Demand for electricity is increasing and demand profiles are changing

For the next decade, demand for electricity will increase by an average of 3.7% per year as gas guzzlers switch to EVs and fossil fuel furnaces shift to heat pumps, among other electrification trends. Not only do grid operators have to retire fossil fuel power plants while adding new renewable projects, they also have to ensure net generation capacity continues to meet demand.

Also, consumer behavior will shift due to electrification in terms of both time and geography. Taking EVs as an example, the curve of electricity demand throughout the day will shift as drivers plug into L2 chargers for overnight fueling. On a geographical basis, charging depots and warehouse districts will shape demand as fleets electrify.

Introducing Pearl Street and Rhizome

With the context out of the way, we can finally get into the real meat of it.

Pearl Street Technologies builds interconnection software to safely and reliably add new utility-scale renewable projects to the grid. For grid operators and utilities, their software helps to accelerate modeling and simulation studies which are frequently the bottleneck for the interconnection queue. For project developers, Pearl Street’s scenario analysis and risk assessment capabilities offer certainty throughout the interconnection lifecycle. In building for both grid operators and project developers, they aim for consistency so that everybody is on the same playing field.

Rhizome helps electric utilities assess what their climate risks are in precise terms and assign dollar values to that risk. They’re currently focused on the distribution part of the grid. By ingesting datasets on historical events from the utility, combined with past weather forecasts, they’re able to simulate what would’ve happened if additional resiliency investments were made on time. By incorporating climate models of varying time horizons and geographical scale, they’re able to backcast climate risk and offer grid upgrade options across a variety of scenarios. Since grid resilience plans need to be approved by regulators, Rhizome provides detailed cost-benefit analysis so that they can justify their proposals.

The reason why I decided to write about interconnection and grid resilience in the same issue may not be immediately obvious. Rather than view Pearl Street and Rhizome as two siloed solutions, I see them both converge at the same problem. Antiquated grid software hasn’t been able to keep up with interconnection studies or grid resilience planning. A common phrase in climate is “physical problems require physical solutions”. Well, here’s an example of two physical problems existing because of bad legacy software. While Pearl Street is focused on interconnection and Rhizome is focused on resilience, I see some similarities. At a high level, they’re both solving complex grid problems through simulation — something that software is really good at. It’s expensive to test anything that’s asset-heavy in the physical world. It’s also not wise to A/B test the grid because that could be pretty catastrophic.

Simulating the grid with circuit design simulation software

David from Pearl Street: Pearl Street's background comes from simulation and design tools for computer chips. A computer chip is physically small, but under the hood, they are massively complex electronic systems with tens of billions of components that have extremely complicated physics. The software platforms that are used to design, simulate, and optimize those chips work really well because there's been decades of investment in R&D.

Companies like Intel, Apple, or Qualcomm can't just go out and build a new line of chips unless they are confident that those circuits will work when they come out of the fabrication facility. This incentivized the development of powerful software for designing and simulating computer chips.

When we started the research at Carnegie Mellon that would later lead to the founding of Pearl Street, we approached this from an academic perspective of taking algorithms from computer chip simulation and applying them to power grid simulation. We wondered, “What if we tried to model and simulate the power grid like every other circuit on the planet?”Over time, we were able to show powerful advancements in grid and transmission planning leading to the development of our first product, SUGAR™, an automation tool for power grid analysis and generation interconnection (GI) studies.

Simulating asset fragility using historical outages and weather forecasts

Mish from Rhizome: We ingest datasets from the utilities to characterize their assets and what component types they have across the system. If we can get any maintenance and inspection records (which many of the large utilities have), then those are also extremely helpful for understanding the current state of infrastructure. We also take a historical record of their outages to help understand when those assets have failed as a result of some sort of extreme weather stressor.

So we merge that with a variety of high-resolution historical weather datasets to understand the causal natures of how utility assets fail. It’s primarily geographic, so vegetation is a really important one. Understanding the distance to power lines, tree species, and the height of a canopy is crucial.

note from Matt: just over 50% of all power outages are caused by vegetation combined with wind, storms, hurricanes, etc. When overhead power lines make contact with vegetation, it creates a spark and can cause a wildfire.

We also look at the topography and terrain. In some cases, soil conditions might also be somewhat informative. And it's all to construct bottoms-up machine learning algorithms that take these data sets and identify patterns of failure. We refer to this concept as asset fragility. We're aiming to quantify asset fragility for a variety of extreme weather threats and then couple that with climate projection data. These are global climate models that are dynamically downscaled to project what that risk profile and asset fragility are going to look like in the future.

What we turn around is a probability metric for every lateral segment of a utility’s distribution system. If you think about the breakdown of distribution, starting with the substation, you have a main backbone feeder. It's usually a three-phase line. Then you have a one-phase line which is what you would picture as a power line going down your neighborhood and that’s a lateral. We can get a probability of failure for each lateral segment because that's how utilities make investment decisions on the grid. By getting that probability function, we then layer on a consequence. If a given asset were to fail, what does it mean in terms of power outages and what does it mean in terms of the anticipated restoration costs in labor and materials? That's how we get to the financial metric of risk at the granularity of the lateral level.

AI for the grid

Mish from Rhizome: Over the past 20 years, utilities have been implementing systems to house information related to their assets and also capturing outage information on their system. These have been in deployment by major software companies like Oracle, Siemens, Schneider Electric over the last 10 to 20 years. The trouble is largely around data quality and completeness and we run into that quite a bit. If you do have incomplete data, then having a large enough sample size is something that we look for. Machine learning is highly conducive as a technology to weeding out and tuning out variables that might not make sense. That also means being able to adjust for inconsistencies in data sets, which makes it a decent technology to use under the circumstances of unclean data. But then we want to enrich that data set as much as possible. So we’ve been applying some generative AI techniques when there are missing assets to approximate the asset component type, age, and condition.

A cascading series of assumptions in interconnection

David from Pearl Street: The interconnection study of a specific cluster, let’s say a 2022 cluster, still involves all of the generators that came before it. So the 2021 cluster, 2020 cluster, etc. could still be under active study, meaning they're not real generators on the grid. They're just generators that are further along in the interconnection study process, but are still hypothetical.

This is where things get complicated. Not only do you have to build the model for the 2022 cluster, but you also have to keep track of the prior years’ clusters because all of the grid upgrades that are associated with projects in these clusters are hypothetical. Projects from these clusters could still withdraw or change capacity and service type, resulting in changes to the 2022 cluster’s base model and cost allocations. 

This type of analysis is very complex and can take weeks-to-months of engineering time to get to a solved state. Our software was developed to automate these types of time-consuming processes, providing robust scenario analysis given user-defined assumptions, such as the aforementioned changes.

Matt: It's like a cascading series or a waterfall of assumptions. One assumption rests on another assumption.

Game Theory applied to interconnection clusters

David from Pearl Street: Developers, at least to some extent, are competing with other developers in the same interconnection cluster to get connected at low cost. But not for every project because projects that you're not sharing potential cost with don't matter as much.

If your project is sharing a potential grid upgrade with another project, that matters a lot because if they withdraw, maybe the constraint goes away and you don't have to pay anything anymore if you stay in. Or maybe they withdraw and now the constraint is still there, and instead, more of the cost is allocated to you. This gets even more complicated when it's not just two projects, but five or ten projects sharing costs for a specific set of grid upgrades.

Our Interconnect platform allows developers and other stakeholders to strategize the actions they should take to secure the best outcomes. With interconnection, this would look like aa developer using Interconnect to evaluate different cost profiles based on scenarios such as withdrawals in current or prior-year clusters, and capacity or service changes.

Speculative projects clogging up the interconnection queue

Matt: You previously said, “If you're not getting your study results for years, that's a lot of risk and uncertainty. So to hedge your bet as a developer, you may submit multiple positions into the interconnection queue in the hopes that one of them pays off.” This reminded me of when I was in Bangalore, India and had to request multiple Ubers and Olas just to get one car due to mapping and marketplace issues. What’re the implications of multiple requests in the interconnection queue per project?

David from Pearl Street: That’s one of the big issues from the grid operator and utility side of things, which they refer to as speculative projects. Speculative projects are projects that the developer has submitted into the interconnection queue with possibly no intention of actually building them, or little hope they can be developed. The problem with that is by adding more volume to the queue, you're increasing the time and complexity of the studies which just adds more uncertainty. If you're a developer, you don't know if that other project is speculative or not and maybe you're sharing costs with it. It's part of this vicious cycle where developers may hedge their bets by having multiple queue positions which just makes the studies take longer. It can get very messy.

Backcasting on historical utility outages and weather events

Mish from Rhizome: Every time we do an implementation with utility, it always starts with a backcast analysis. This gives us the ability to create models to understand the performance of investments that they've made historically. By using a double-sided machine learning technique combined with a pre- and post-analysis on investments, we can identify where the utility has benefited off of their investments. Consequentially, if they made an investment on a part of the grid prior to a storm hitting, we can actually simulate those storms and anticipate what the reduction in risk would have been. The backcast analysis is fundamental in getting to that baseline level of climate risk across the system, and then the climate projections coupling comes in afterward to project forward what that risk profile looks like.

Matt: How do you take the backcasting and demonstrate value starting from the present and then forecasting into the future? Because you can't really A/B test the real world, right?

Mish from Rhizome: Effectively what we do is a validation for the historical backcast. We have validation metrics according to how good our model anticipates the fragility of an asset, according to some function of extreme weather that occurs. Say you have a given level of wind gusts over a period of time; you can anticipate within a certain degree of confidence which overhead lines are likely to be impacted.Then climate modeling is important to understanding what future extreme weather events are going to look like and of which likelihood. So there are two types of probabilities at play when looking to the future.

First, there's the probability of an extreme weather event like the concept of a 1 in 100-year storm or a 1 in 10-year storm. Those profiles are changing, which is why it's important to model the probabilities of intense extreme weather events occurring.

Second, assuming that you have the probabilities that these events will occur in the future, you can calculate the likelihood that it'll cause failure in the system. Since we've already done the backcast analysis, we actually already have an idea within a certain confidence of what the results are likely to be.

So it's probabilistic by nature, but we are able to forecast from a validated asset fragility model and then also a model for extreme weather that can be coupled onto it to further understand probability of failure. We look at it as an annual risk metric — so what's the probability that this asset will fail in any given year? Then that changes from year to year moving forward.

Validation of climate modeling

Matt: How do you think about the reliability of the climate models and the weather forecasting that you're leaning on? Do you take an indexed approach where you're not purely betting on one source? How do you think about this from an upstream data perspective?

Mish from Rhizome: We look for the best weather data sets [across weather stations, NOAA, or local universities] that are available in the specific region that we're working within. We validate everything. We're trying to get to the best predictive model using the data sets that represent the actual conditions. When you look at climate and weather data sets, not only do you have to ensure that you're getting a good resolution both temporally and spatially, you also have to make sure that you're also correcting for any biases that may exist within a speicfic climate model. We prefer to have at least six months all the way out to three years of historical data on both weather and climate with real-time observed conditions.

We're looking at it from a historical perspective which we have good data on and you can always just check it for ground truth data. We're also looking at climate projections at the multi-decade scale. For the multi-decade climate projections, there is a lot of uncertainty the further out that you go. However, since we've been collecting data related to climate projections on temperature, pressure, wind, etc., we can start validating recent years compared to what we've actually been observing.

The importance of good workflows — it’s not just about AI and fancy climate models

Mish from Rhizome: We started this company with the planning tools format because we wanted to build a product that utilities are really going to enjoy using and stick with. It's not all about the modeling. Obviously the modeling is extremely important, but what's tough for utilities right now is all of the multi-team collaboration and all of the time sunk with the limited tool sets that they have to create billion dollar capital plans annually. These are annual plans that require progress tracking, reporting, collaboration, and data ingestion. We've built a platform that increases the efficiency of those teams while providing them with a better modeling solution to make better decisions.

So in our view, we're a decision intelligence tool. Decision intelligence is only as good as the information and the quality of that information, as well as the ability to integrate that information into actual decision making. We're trying to satisfy that entire decision intelligence framework to ultimately help the grid become more resilient.

Overlap between Interconnection and Climate Resilience

Mish from Rhizome: There is this concept that the more intermittent renewables that you bring onboard, the lower resilience you have. It's highly dependent on the characteristics of the grid conditions. The grid has been stress-tested as time goes on with longer spells of heat waves or the Texas freeze for instance. It's convenient to blame one resource or another for those resilience challenges.

I believe you have to do the scenario modeling to understand when resources are going to be responsive at what point. The intermittency of solar and wind will, in some instances, contribute to a lower resilience than firm generation during certain circumstances. But when you have a cold event, wind tends to be more productive and it tends to be longer lasting. With solar, especially during the extreme heat days, the coincident peak of solar along with temperature is not entirely perfect, but it's really close. So having solar available on those days of extreme heat can actually add to resiliency. But what's going to truly flexibly increase the resilience of the system is storage. There's no one-size-fits-all technology to improve resilience. Rather you have to model each part of the grid and identify what that is.

How optimistic are you about the grid transition?

David from Pearl Street: What gives me optimism is the fact that the DOE, FERC, grid operators, utilities, transmission businesses, and renewable energy developers are all aligned in the need for transmission build out. There's been some real progress made in the past couple years.

A great example is MISO and SPP coordinating on their JTIQ effort. It's basically looking at the seams between those two regional operators and figuring out what new transmission is needed to support generator interconnection requests where the two systems meet. MISO is also conducting its own long range transmission planning and looking at potential needs of their footprint independent of their interconnection studies.

There's alignment that this needs to be done and it's not just talking heads saying we have to do this. The actual stakeholders agree and they've made real progress on getting it done. So, yeah, I'd say cautiously optimistic.

Further Reading

• Intro to Interconnection by Pearl Street

• The simple reason why most power utilities suck by David Roberts

• The Grid, Part III: The Dream of Deregulation by Brian Potter

• The Grid, Part IV: The Hard and Soft Paths of Energy Strategy by Brian Potter

Subscribe now

As always, thanks for the support 🙏

TLDR: The EV charging pie is bigger and has more slices (use cases) than I thought. I dug into 3 different unique solutions in my interviews with the founders of ElectricFish, It’s Electric, and Voltpost.

When I ask you to visualize “EV charging” in your head, what do you see? Perhaps you see a charger neatly tucked away in a single family home’s garage. Maybe you see a row of Tesla Superchargers in a bougie suburban parking lot like Whole Foods in Palo Alto. Today, our understanding of EV charging is largely based on what we can currently see, whether it’s in real life or in advertisements. As EVs become more affordable and the cost of gas guzzlers continues to increase (not just financially), charger distribution will need to mirror where the EVs are.

Forecasting the future is hard, but it’s easy to see where some of the biggest gaps are today. Or maybe I should say not see. Outside of high income neighborhoods and upscale retail districts, large population segments remain un-electrified. The average luxury apartment building still only has a few parking spaces with chargers. Townhome neighborhoods which often come with street-side parking haven’t figured out how to solve curbside charging.

Let’s take a more concrete example. Recently, NYC passed the Green Rides bill which requires the rideshare industry to be all zero emission vehicles (ZEVs) by 2030. As of today, there are 78,000 Uber and Lyft drivers and 13,587 taxi drivers in NYC. In order for the combined 90,000 rideshare drivers to transition to ZEVs, they’ll need a reliable and consistent way to charge. After all, their livelihood depends on it. The big problem is that in NYC, there are currently only 200 DC fast chargers and 1,000 Level 2 chargers available to the public. Yikes!

By 2030, EV sales are projected to reach over 40 million. Currently there are 37,000 Level 3 chargers and 126,000 Level 2 chargers. By 2027, we’ll need 109,000 Level 3 chargers and 1.2 million Level 2 chargers. That’s 3x the number of Level 3 chargers and 10x the number of Level 2 chargers that we need over the next four years. If you compare vehicles to chargers, it’s clearly not going to be a 1:1 ratio. This means that chargers need to be shared among vehicles and high utilization rates will be key.

Folks are starting to understand the scale of this energy transition. The ones who understand it the most are those who have everything to lose which explains why the $110B oil & gas giant BP announced they’re buying $100M of Tesla Superchargers.

Before we go any further, it’s important to provide some context on EV charging. There are three levels of chargers: Level 1, Level 2, and Level 3. The higher the level, the faster the charging, but this also requires higher voltage (power). Level 1 uses the common 120V outlet, but charges so slowly that it’s rarely included in any serious EV charging conversations. With a voltage range of 208-240V, Level 2 is often referred to as the overnight charger because it can completely charge a car in 12 hours. At the top of the class, Level 3 (AKA Fast Charging) chargers operate in the 400-900V range. They charge extremely fast, but are so expensive that you only see them out in public. Tesla Superchargers are included in the Level 3 category.

It’s important to understand the basics because it’s all intertwined. For example, European cities like London and Amsterdam have a head start on curbside charging because their roadways are wired with 220V which allows them to install Level 2 chargers without infrastructure upgrades. Similarly, for some historical urban planning reason, LA’s street lamps are also wired with 240V which explains why they have more EV chargers than other US cities. As the electrification of the built environment and transportation sector plays out, demand for electricity will increase which further stresses an already fragile grid. Playing the EV charging game optimally requires placing the different pieces (chargers) strategically based on how the board is laid out (the grid).

Subscribe now

Introducing 3 EV Charging Startups

First up, we have Vince Wong, Co-founder and COO of ElectricFish. They’re focused on low-voltage geographies where the grid infrastructure isn’t going to easily upgrade to Level 3 capability without significant resources (upwards of $50,000-$800,000 per DC Fast Charging port). With an integrated battery coupled with patented power electronics design and software optimization, their 350², charger is able to be dropped in and connected to the grid without any major infrastructure upgrades and it also charges faster than a Tesla Supercharger.

Next, I spoke with Nathan King, Co-founder and CEO of It’s Electric. They are focused on the estimated 40-60 million drivers who park on city streets by building a curbside charger. By partnering with host properties with a revenue-sharing model and drawing electricity from them (at 220V for Level 2 charging), they’re able to avoid curbside infrastructure upgrades and the subsequent interconnection queue.

Then I chatted with Jeff Prosserman, Founder and CEO of Voltpost. They’re also tackling the curbside charging problem, but rather than go around existing street infrastructure, they’re going directly to it. There are an estimated 26 million lamp posts in the US. Voltpost retrofits and integrates lamp posts into EV chargers. By leveraging existing structures, they’re able to minimize noisy and expensive construction.

EV Charging Is More Like The Grid Than EVs

Before I started researching, I had this misconception that EV charging is more about the relationship between charger and car than charger and grid. After speaking with these three founders, it’s abundantly clear to me that problems with the centralized grid are the exact same problems that EV charging companies are dealing with.

Framing EV charging as one major pathway under the umbrella of decarbonizing the grid makes this space more compelling to me. When viewed through the vehicle lens, charging is just one aspect of car ownership. Refueling your car is often taken for granted as an errand. However, when viewed through the grid lens, EV charging’s complexity is revealed. Interconnection, permitting, grid balancing, real estate, network optimization and other factors become highly relevant. Viewing EV charging as interdependent with the grid also shows the sheer scale of this energy transition.

Vince from ElectricFish: Most utilities expect it'll take a decade to modernize their grid infrastructure for all this unprecedented net-new demand for electrification. On average, the US grid’s transformers are at least 40 years old. But fleet owners already have electric vehicles. On one hand it's great that they have EVs, but it's gonna take 14 to 24 months to complete permitting, site evaluations, and construction (if you're lucky). Some never make it past the site evaluation phase. Your utility might do a 9-month study and just say “Nope, not happening.” The US currently suffers from $150 billion in economic damages per year from grid outages. Over the 10+ years it’ll optimistically take to modernize the grid, that's another trillion dollars going down the drain.

Design Tradeoffs

Skeuomorphism is a term used to describe objects that retain ornamental design elements to make something new feel familiar in how the user can interact with them. This is why the email icon is an envelope and attaching a file uses a paperclip. Since EV charging is entering uncharted territory, there’s creative tension between making the experience resemble gas pumping and doing what makes the most sense for this new modality irrespective of prior patterns.

With the understanding that almost all EV drivers today used to be gasoline car drivers, ElectricFish set out to mimic the fueling experience which currently is still faster than even Level 3 charging. They intentionally made the tradeoff to prioritize a fast charging experience over a complete charge.

Vince from ElectricFish: We're never going to charge you from zero to a hundred. It’s not a good use of our system because batteries taper off after 70-80% state of charge, but you get the most bang for your buck when you're at 20% trying to go to 60%. That's still several hundreds of miles of range. Some OEMs quote 180 miles in 10 minutes.

With It’s Electric, their chargers are cordless. This BYOC (bring your own charger) approach ingrains a sense of personal responsibility to care for the cord while keeping the charger sleek and dangle-free. The drawback is that there are now more cords because each driver has one rather than each charger having its own. The company also has to deal with the logistics of shipping each driver their own cord before they can start charging.

Nathan from It’s Electric: The detachable cord model is the way to go. It keeps the footprint of the chargers down to a minimum. This means that people don't have to look at things in front of their building that look like a gas pump. Right now damaged cords are a huge problem for property managers and municipalities that have public chargers. There's vandalism with people cutting cords thinking that there's copper in there. The cords also get damaged when people drop the cord nozzle onto the ground when they're done. My cofounder calls it a mic drop. It might land in a puddle and then road salt can get in there. The little plastic clips that you actually need to have a connection between the vehicles also get damaged. There's UV degradation. We've talked to municipalities that have to replace their chargers 2-3 times a year because of the cord. So for us, the more you can keep the cord not exposed to the elements, the longer it will last.

Then when the cord does break we don't have a down charger. The next driver that comes along is still able to use that charger. The other nice thing I'll say too about the detached cord models, we don't have to make any decisions about what charger end we put on our cord. Earlier this week, ChargePoint announced that they’ll retrofit their chargers with a Tesla type, because OEMs are switching from the old charging standard to the Tesla standard, but we're still going to have these two different charging standards on the road for the next decade. For us, we don't need to worry about that. We'll give drivers a Tesla cord if they're a Tesla driver or anybody else who has that Tesla standard. Or we’ll give you the older standard if that’s what you have. So we get to kind of step aside from all of the standards discussions that are going on.

By retrofitting existing infrastructure, Voltpost is able to provide curbside charging without building any new objects on the sidewalk, curb, or street. The combined lamppost + charger is definitely beefed up from the original, but it doesn’t add a significant footprint or get in the way of anything. They intentionally chose to include an integrated cable, but from the image above and my own experience of seeing it in person, I think it’s quite elegant. While they’ll still have to face issues of wear-and-tear and potential vandalism, the ability for the cord to retract means that it’s not just a wet noodle flopping on the ground.

Jeff from Voltpost: We've designed the Voltpost charging platform in a modular way to enable flexibility of services and quickly swap faulty modules within a few minutes. We can monitor this through our dashboard and maximize uptime across the entire network. With the integrated cable, we significantly reduce friction for drivers rather over the bring your own cable approach. It’s also more equitable from a cost perspective. It's more sustainable in that you're not creating a bunch of cables that everybody has to carry around in their trunk. And it creates a streamlined view of liability. If somebody plugs in any random cable curbside, you're creating a trip hazard. You're also creating the potential of frayed cable being plugged in. Who's going to own that liability if there's truly an issue? So we thought deeply about the bring your own cable approach, but went in the integrated cable direction recognizing the clear benefits with this direction.

Partnering with Municipalities

Climate tech is unique because of the larger role that policy plays compared to “general” tech. The Thiel-like libertarian startup playbook is hard to replicate in climate when physical sectors like energy, transportation, and cities are so dependent and reliant on government regulations and incentives. Beyond just handing out free money via the Inflation Reduction Act or Bipartisan Infrastructure Law, the government (of varying jurisdictions) has an outsized role to play.

One salient example of this is how Voltpost builds, partners, and sells charging services to municipalities. Their business model is hardware-as-a-service which includes the licensing of hardware, software, data, and operations & maintenance. The municipality or private partner still owns the lamppost and because they’re paying for the Voltpost charging platform, they’re incentivized to maximize utilization rates. One way to do that is by designating parking spots next to Voltposts as dedicated EV charging spots. This isn’t that controversial. Retail parking lots already have EV-only parking spots with chargers next to them. What’s neat is that Voltpost built a reservation feature in their app so that municipalities can actually make this a reality.

Jeff from Voltpost: If a municipality or private partner sees the value in reservations and wants to enforce that the same way they would enforce parking tickets in that jurisdiction, then we can offer that to them. If they don't, then that’s fine with us. We have flexibility to turn the feature on and off in that sense.

Why reservations? When you think of densely populated cities, people park by the curbside. If you don't designate EV-only spots, then you're going to have significantly lower utilization. It also provides reliability, not just in the charger’s uptime. Think about the average driver; if you're coming home from work and want to park curbside overnight with a certain amount of miles remaining, then if you can book with assurance that you have that spot, then I would assume that 6 or 7 nights of the week, that charging spot will get booked. Another example could be an employee coming to work and being reliant on that charger. They don't know if another employee is going to be charging that day. In this scenario, they may choose to charge somewhere else.

Distributing Chargers Equitably

The transition to a decarbonized transportation sector requires all drivers to convert to EVs, not just the Tesla tech bros or suburban soccer moms who think they’re middle class when they’re actually upper-middle class. In the beginning, early EV customers were predominantly living in high income neighborhoods so focusing on at-home and retail charging made sense. However, as EV adoption spreads to the masses, putting chargers in low and middle income neighborhoods will be critical. In fact, it’s actually where most of the carbon emissions reduction potential lies. Think about it - what type of people drive a lot of miles every day? It’s those who operate vehicles for their job - think rideshare drivers, delivery people, and fleet operators. Incentivizing the drivers who drive the most miles to switch to EVs is actually the highest impact customer segment to focus on from a climate perspective.

Nathan from It’s Electric: We're addressing the vehicles that emit the most amount of carbon and other forms of pollution. We want to focus on the neighborhoods where the rideshare and TNC drivers live. These drivers would be great customers because they put a lot of miles on their car.

If you look at a map of Boston, Chicago, New York City, or D. C., and you see where the publicly accessible chargers are located on an aggregator map, like PlugShare or ChargeHub, they're all clustered in high income neighborhoods in garages or parking lots. They're not truly public chargers; you have to pay an entry fee. There's a barrier to entry. By going into these low and middle income neighborhoods that are further away from the city centers, we're also solving this problem around access.

There's just an equity question here: Who gets to participate in the EV charging transition? Is it just people that can afford expensive parking space in New York City? Or is it everybody in the city? Once you start to line these things up on top of each other, it starts to make business sense. It starts to make equity sense.

Climate Adaptation And Mitigation Combined

My anecdotal pulse on the climate tech community is that climate mitigation gets the lion’s share of attention while climate adaptation doesn’t get enough. It’s sexier to talk about carbon removal or nuclear fusion than how to flood-proof New Orleans or prevent wildfires from suffocating us. Net zero isn’t going to happen overnight so climate resiliency initiatives are the bridge to keep us afloat until we actually solve the problem. The vast majority of climate solutions are one or the other, but occasionally you stumble upon hybrids that do both mitigation and adaptation. In ElectricFish’s case, they help with decarbonizing the grid via EV charging, but also protect us from climate change symptoms. When blackouts occur, their battery storage serves as a microgrid and can provide backup power for EVs, to the site location, or back to the grid itself.

Matt: On climate resilience, how do you think about educating people about this? I think the tricky part here is you don't think about it at all until you experience it. You just think the lights will stay on and the water will always flow until a blackout happens and you're like “Oh shit, I need to solve this problem.” One analogy is with home renovation, you typically don't replace the roof until it's nearly falling apart.

Vince from ElectricFish: There's actually quite a few [customer segments] that already get it because they've been screwed in the past by this. They’ve acutely experienced it directly as a municipality or as a fleet. So they value resiliency from the get go. They're looking specifically for co-located storage and DCFC [direct current fast charging] that can also provide backup power.

For instance, if you're a convenience store owner, you know your highest margins are from the store, not the gas pump typically so you need to have full uptime your refrigeration and facilities. There was a parking lot owner that came to us and told us about when their gate lost power. They had to just give out free parking for a couple days and that was so much foregone revenue.

We try to make the case that it's like insurance. Even if you haven’t experienced it in your work as a city employee or fleet operator, you probably have as a consumer. California has wildfires, New York has hurricanes, Texas has deep freezes.

Conclusion

It’s still early days for the EV transition. Look around. Unless you’re in a wealthy Bay Area town, you’re not going to see a ton of EVs or chargers. All those gas guzzlers are still emitting dinosaur juice fumes to go vroom vroom. Charging infrastructure is at the crux of decarbonizing transportation.

It’s not going to be a one size fits all solution. Dealerships, affordable housing complexes, gas stations, curbsides, entertainment districts, municipal fleets, and trucking fleets all need reliable EV charging. For each use case, there are nuances. Level 2 is perfect for overnight charging, but terrible for road trips. Level 3 is super fast, but is an order of magnitude more expensive and requires a lengthy approval processes. The needs of a consumer EV owner are completely different than of a fleet owner.

That’s it! Thanks for reading. Stayed tuned for next week’s issue on interconnection and grid resilience. I’m stoked to share it with you all ✌️

Share Build in Climate

I appreciate y’all! Let’s keep the momentum going.

Now let’s dive into this week’s newsletter on healthcare, something I’m stoked to share, especially because it is so underdiscussed.

Growing up, I hated getting my blood tested because I was so chubby that the nurse would have to prick my little arm multiple times just to find the blood vessel. In my teenage years, I tried avoiding the dentist as much as possible because they’d always scold me for not flossing daily. Now that I’m an adult with visible veins and improved dental hygiene, I no longer feel the need to avoid medical professionals. In fact, once I learned that the US healthcare industry is responsible for 10% of overall domestic emissions, I knew I had to dig in and learn more.

With the help of Betty Chang and Chethan Sarabu, I put together this overview on Climate x Healthcare, which I think is one of the most overlooked areas in climate tech. These two have quite the stacked background. Betty was most recently Chief of Staff at a healthcare startup and also put together this wonderful deep dive on Climate action in healthcare. Chethan is currently Director of Clinical Informatics at Sharecare and is also a Pediatrician at Stanford Medicine.

Today we’ll cover:

• Why the US healthcare industry is responsible for 10% of overall emissions

• Climate Mitigation via anesthetics, asthma inhalers, plastics, carbon account, and supply chain

• Climate Adaptation via wildfires, heat, and connecting environmental data with healthcare data

• Tangible solutions and how to implement them

The Problem

The initial sticker shock that the US healthcare industry contributes 10% of overall emissions is less surprising once you remember that the sector also represents 18.3% of GDP. That’s not really a valid excuse though because with just 4% of the global population, the US healthcare industry disproportionately contributes 27% of global healthcare emissions:

Zooming in, we see that the majority of global healthcare emissions come from energy, followed by facility operations, manufacturing, and food:

There are a few broad reasons that explain the high emissions from the healthcare industry, particularly in the US:

First, the combination of private and state-led public programs creates complex incentive structures which result in multiple parties not moving together in lockstep. For example, moving from single-use material to sterilized equipment would require coordination across many layers of complexity in order to be fully adopted. The clunkiness of this tangled system of systems is already evident with staggering statistics. The same inefficiencies that drive 30% of all health care to be unnecessary or wasteful are also generating excessive emissions and pollution.

Second, the industry suffers from interoperability silos. Patient data is stored on an Electronic Health Record (EHR), but that information isn’t easily sharable. The largest EHR companies have closed off their data infrastructure, which results in the “walled garden” problem. Without real-time open access, every layer across the healthcare stack lags behind. Optimization opportunities are stifled by the rigidity and opacity of monopolistic behemoths.

Third, like other longstanding, bureaucratic industries, change is met with inertia. For example, if you wanted to change the type of inhalers or anesthetic gases you're using, the pre-existing supply chain purchasing agreements may impact pharmaceutical companies that are creating those products.

Fourth: awareness. Chethan told me: “I think the awareness that healthcare contributes so much to greenhouse gases, especially in the US, is still relatively new. Most doctors, even hospital leaders, are really not aware of the greenhouse gas impact of health care.”

Lastly, the healthcare industry is primarily focused on saving lives. As it stands today, healthcare orgs aren’t incentivized to market themselves as greener because they don’t actually make money from being greener. At the end of the day, health customers (patients) care more about the quality of care (can they treat me effectively) and convenience (how close is the facility) than the hospital’s emissions profile. Also, despite what mainstream media makes it out to seem, the healthcare industry is a tough business (40% of hospitals aren’t profitable). Until healthcare outcomes and sustainability practices converge further or incentive structures change, consumers will continue to make healthcare decisions that optimize for their individual outcome, which I think is fair.

What makes healthcare interesting from a climate perspective

While the healthcare industry contributes emissions, it’s also often the first-in-line in experiencing the effects of climate change. From what I’ve seen, healthcare may be one of the few industries that has its hands full with both climate mitigation and adaptation. Transitioning to a net zero future will require the industry to decarbonize, but also prepare for an increasingly scary stream of demand to treat the effects of wildfires, heat, and other symptoms of an ecological crisis.

In writing this, I realized that there’s a gap between the healthcare and climate communities. The vast majority of clinicians are not actually thinking about climate mitigation or adaptation. There’s a small percentage of healthcare professionals which is now forced to pay more attention due to being on the frontlines of climate disasters, but most are unaware of the climate implications in healthcare. Unfortunately, as the climate crisis continues to unfold, the healthcare industry will increasingly be under the spotlight for climate mitigation and adaptation.

On the flip side, the climate tech scene rarely ever acknowledges the healthcare industry and tends to orient itself towards mitigation solutions (decarbonization, electrification, carbon removal) rather than adaptation. Perhaps that’s because mitigation is perceived as more directly solving the problem. Ultimately both mitigation and adaptation pathways will be needed because a) we need to solve the problem and b) the problem will take a long time to fully solve.

Mitigation

When it comes to reducing emissions within the healthcare system, there’s a plethora of solutions. To highlight a few, I’ll briefly cover anesthesia, asthma, single use plastics, supply chain, and carbon accounting.

Anesthesia

Anesthetic gases are a marvelous invention that allow us to receive surgeries that would otherwise be prohibitively painful. Unfortunately, some of them are quite bad for the environment and inevitably get emitted into the air during surgery. For example, desflurane, an inhaled anaesthetic agent, has 2540x the global warming potential of CO2 over 100 years (GWP100). The good news is early advocates from within the healthcare industry are finding win-win-win situations that reduce emissions and produce meaningful savings while maintaining patient efficacy. One case study to highlight is the work of Dr. Chesebro at Providence. From his work in anesthetic greenhouse gas emissions, “Providence has decreased greenhouse gas emissions from anesthesia by 78% and reduced overall carbon emissions by 11.5% by the end of 2022 compared to our baseline year of 2019. The reduction produced annual savings of $3.5M for anesthesia and a total of $10.8M compared to 2019.”

Asthma

Chethan: Inhalers are a really particularly double-edged sword for people with asthma or COPD who are exposed to wildfire smoke. They may increasingly rely on an inhaler to help them deal with climate driven health change. At the same time, certain inhalers are actually really potent greenhouse gases, much more so than methane or carbon. The most commonly used type of inhaler works by having a gas canister, and it's called a metered-dose inhaler. So when you puff it to get the medication, it releases some gas into the atmosphere that's quite potent. Other types of inhalers called dry powder inhalers or mist inhalers don't use that same greenhouse gas.

note from Matt: Switching inhaler types can reduce an individual’s carbon footprint more than going vegetarian 🤯

Single-use plastics

At first glance, the need for safe patient outcomes seems to be at a crossroads with reducing single-use plastics. I sure am thankful I’m treated with clean equipment whenever I see a bunch of plastic wrapped being opened up at the doctor’s office. The assumption that safe, clean, and effective health care must be delivered with single use materials is starting to unravel. One case study looked at the environmental impact of cataract surgery at the Aravind Eye Care System in southern India. By sterilizing reusable instruments, Aravind was able to produce comparable outcomes as the United Kingdom’s health system with just 5% of the carbon footprint. Although shifting the US healthcare system towards reusable materials would require big, slow stakeholders to move together, this example shows that it may very well be worth the effort.

Supply chain

The healthcare industry has an obvious requirement of always having materials and equipment in stock in order to provide care. We saw how disastrous it could get during COVID when basic PPE was in shortage. Due to this fundamental constraint, combined with legacy systems, healthcare organizations purchase materials in slow, long-term cycles. It’s not like how you or I can make last minute purchases on Amazon and get it the next day. From a climate perspective, inefficient purchasing behavior from inaccurate forecasting results in wasted supplies and expired materials.

Carbon

There are tailwinds behind decarbonizing healthcare. The Department of Human and Health Services led the climate pledge to reduce emissions by 50% by 2030 and achieve net zero by 2050 — with 100+ organizations already signed on.

The vast majority of emissions (71%) in the healthcare industry are Scope 3 emissions. This type of emissions is notoriously difficult to accurately track and with such a high proportion, legitimate carbon accounting is much needed. Given the sheer size of the industry and the primary focus on caring for patients, I foresee increased demand for carbon offsets and removal because the industry won’t be able to transform overnight.

Betty: From my conversations with healthcare execs, the most attractive carbon offset projects to healthcare orgs are local and community-based. Improving the health of the community has co-benefits because community health and resilience initiatives are often a dedicated function within a health system with their own budget.

Adaptation

Shifting gears to adaptation, we’ll look at how human health is already being impacted through the lens of wildfires, heatwaves, and lack of environmental data in healthcare systems.

Wildfires

If you’ve ever experienced wildfire smoke in your neighborhood, then it’s obvious what negative effects it might have on our health. But wildfire smoke harms us beyond just coughing, bloodshot eyes, and difficulty with breathing. In a California study between 2006 to 2012, wildfires were linked to premature births. During this year’s streak of wildfires in Canada, emergency departments saw an increase of 17% in asthma-related visits. While those who are healthy and privileged can avoid breathing in wildfire smoke from the confines of their homes with air filters, those who have health conditions or lower income will disproportionately suffer. For a more take on wildfires, you can check out my blog on through-hiking 22 miles in the Enchantments while smothered in smoke.

Heat

In June of 2021, the Pacific Northwest experienced a heat dome with trapped hot air resulting in 118°F days. On the hottest day, June 28th, there were over 1,000 heat-related visits to the emergency department. Compared to 2019, there were only 9. Hundreds of people died, most of which were home alone without air conditioning. People say that the four human needs are: food, water, air, and shelter. Sadly, we soon may need to add “air conditioning” as the fifth.

Chethan: A lot of people were getting heat-related illnesses like dehydration or heat stroke and didn't have a place to go to so they ended up in the emergency department. That huge spike actually affected people coming in with heart attacks and strokes to the point where they couldn't be seen on time. If the people with milder illnesses were able to go to a community cooling center to get air conditioning and IV fluids, then there would be more resources to treat those with heart attacks and strokes.

Connecting Data

In my conversation with Chethan, I learned that virtually no healthcare systems have access to or incorporate environmental data. A concrete example is in the case of asthma-related visits, there’s no system of record that feeds in weather or AQI data so that a clear association can be drawn between the air quality and this specific type of visit.

Chethan: Right now, if someone came in to the emergency department with an asthma exacerbation because they were exposed to wildfire smoke, when you look at their note, there might be a part of the note where in the free text section, it might say, “Patient was exposed to wildfire.” But then if you look at the structured data part of the note, (the code that gets identified), it'll just say asthma exacerbation. It won't have anything attributable to the wildfire.

This big problem of lack of environmental data in healthcare can be addressed in two ways. To tackle the free form text sections, LLMs can be used to detect key words and phrases that can link certain environmental conditions with the patient. To address the structured data, physicians need to advocate for updating legacy coding systems like ICD10, CPT, and SNOMED to incorporate environmental scenarios.

How to create action within the healthcare system

A solution is only as good as its potential impact multiplied by the feasibility of adoption. For an industry that is so culturally entrenched and adapts at the speed of molasses, any proposed change should be properly evaluated through the lens of feasibility. With Betty’s help, we brainstormed a stack rank of solutions for healthcare systems to consider in descending confidence in feasibility of adoption:

1. Energy reduction and electrification

2. Recycling and Reducing food waste

3. Anesthetic gasses

4. Single use plastics

5. Transportation routing (non-emergency medical transportation)

6. In-person appointments that could be done via telehealth

7. Unnecessary appointments / treatment (~30% of all appointments)

8. Unwalling the Walled Gardens (EHRs) - the data opaqueness / challenges with interoperability could be solved with carbon accounting or other solutions

How to implement

While change often starts out with a climate champion among the rank-and-file, it takes buy-in from higher-ups to move the needle. Here is the simple four-step playbook to enact change from within:

1. Evidence-based research trials that clinicians actually trust.

2. Show that proposed solution is just as effective, if not better.

3. Rally the troops and decision-makers. Convince the leaders to adopt these practices by demonstrating the financial ROI.

4. Educate, train, and advocate the healthcare workforce (Betty: Healthcare workers are really burnt out in the US, we need to find ways to change their workflows in an already rigid industry).

Parting thoughts

This is yet another example of climate being a theme, not an industry. By viewing climate as a future decarbonized state or transitionary process to get us to net zero, we can analyze specific sectors and find unique pockets of opportunities. In the case of Dr. Chesebro, he was able to find a solution that reduces emissions without sacrificing profits or treatment outcomes.

As much as we should remain laser focused on reducing emissions, I believe we’ll begin to see more appreciation for climate adaptation solutions. We will inevitably need to adjust our way of living to the reality that we’ve created.

In the past, we’ve chosen human progress over environmental wellbeing. But now we’ve realized that planetary health and human health are deeply intertwined. In the coming years, I hope we act with that in mind.

Further Reading

• Climate Action: A Playbook for Hospitals

• Betty’s article on Climate Action in Healthcare

• ‘If I were a hospital, I’d be reading the tea leaves’: Pressures grow on the health care industry to reduce its climate pollution

• Climate Health Innovation & Learning Lab (CHILL) - Betty and Chethan are both involved!

The Problem

Ready? Here comes a flurry of figures.

Globally, food waste represents 8% of overall emissions.

In the US, 40% of food is wasted. When converted from calories into dollars, this nets out to costing a household of four an average of $1,800 annually. This makes even less sense considering 42 million Americans are food insecure. Reducing food waste by just a third (even though the goal is all of it) would be enough to solve food insecurity in the US.

This begs the question where are all these emissions coming from? Food production and consumption happens through a complex global web of farms, distributors, grocery stores, restaurants, and households. So where are the biggest opportunities to reduce food waste?

The answer is not so simple. Like many other pockets of climate, the problem becomes more complex the more layers you peel back. There’s a number of emissions pathways:

• 🚜 Emissions that result from food production (farming and animal agriculture)

• 🚛 Energy associated with transportation of food from production site to human mouth

• 🧊 Energy used to keep food fresh (cold chain)

• 🗑️ Methane which is released as food decomposes. Landfills and wastewater represent 20% of overall methane emissions. Methane is responsible for 30% of global warming.

Subscribe now

The emissions breakdown varies from country to country depending on consumer behavior and food distribution systems. In the US, households are the biggest source of food waste:

We can further break it down by actual food category. Here, we see that seafood and fresh produce are the most commonly thrown out foods:

The US is not unique with this food waste problem. Around 40% of the food that’s produced in India is also wasted. There is a key distinction though. In the US, the problem lies primarily with households and restaurants. The final destinations in the farm-to-mouth journey. On the contrary, in countries like India, a high proportion of food waste occurs at the source. With limited storage, cold chain, and proper transportation, not all of the food that is grown makes it to the grocery store or restaurant. Given a finite amount of refrigeration, developing countries accordingly prioritize their cold chain systems for dairy, meat, and eggs which often results in an insufficient amount of infrastructure for fresh produce. For example, 60% of banana biomass is left to waste (India is the largest producer of bananas).

Diagnosing the problem correctly

As I’ve alluded to before, climate is a complex adaptive system. Therefore, looking at single-threaded metrics and trying to map direct 1:1 solutions can often result in missing the big picture. Taking the earlier pie chart as an example, 43% of US food waste comes from households. One might think that an appropriate solution would be to fund educational awareness programs or perhaps even shame people for throwing out food. This kind of straightforward thinking over-indexes on consumer willpower and undervalues the power of systems and incentives.

Policy (or lack of good ones) can sometimes leave us scratching our heads. Did you know that states have different definitions and regulations when it comes to date labeling?

City regulations sometimes conflict with state rules. For example, Baltimore forbids the sale of food past its labeled date. Even when a product is regulated, the specific rules vary across states. Take milk, for instance. Florida requires that all milk products “be legibly labeled with their shelf-life date,” though this date is never defined. In Montana, milk must have a sell-by date within 12 days of pasteurization, while Pennsylvania requires it within 17 days. In New Hampshire, a sell-by date is required for cream but not milk. On the other hand, New York, Texas, Wisconsin, and other states have no requirements for date labels on milk or dairy. - NRDC

The lack of consistency in food labeling regulation results in conservative consumer behavior. No one wants to drink spoiled milk. With terms like “Best Before”, “Best By”, “Use By”, and “Sell by” being used interchangeably, it’s impossible to know what to actually do. A study showed that 75% of participants felt unsafe to consume foods beyond the date indicated on the labels. Literal tons of edible food are being thrown away just from unclear and inconsistent food labeling!

In order to operate a successful restaurant, the staff must aim to have all the necessary ingredients in stock. It sucks when you excitedly order a dish that is no longer available. Some excess food is understandably a byproduct of being in the restaurant business. But that’s not the full story.

Up until the passing of the Good Samaritan Food Donation Act, businesses were hesitant to donate excess food because they were afraid of getting sued. By legally protecting food donors who give to non-profits, the Good Samaritan Act unlocked the routing of excess food from grocery stores, restaurants, and manufacturers to shelters, food pantries, and food rescue programs. This not only helps reduce food waste, but also feeds those who need help the most.

While poor policy creates problems like labeling confusion and donation hesitancy, there are plenty of ways for climate tech to make a dent in the food waste problem. In the next section, I highlight four companies (Apeel, Afresh, Rescuing Leftover Cuisine, Mill) across four layers of the food waste sequence (farm, grocery, restaurant, household).

Starting at the source: Farm

Apeel is a late-stage startup that helps keep produce fresh for longer. The actual product is a plant-based protective coating that gets applied to avocados, cucumbers, citrus fruits, and more. According to their impact page, in 2022 they saved 44M pieces of fruit from waste which equates to 7K metric tons of CO₂-eq of greenhouse gas emissions avoided and 1.7B liters of water conserved. To dig in further, I got in touch with Apeel (emphasis is mine):

Matt: Fruits and veggies come in all sorts of shapes and sizes. What type of produce performs best with Apeel?

Apeel: We’ve tested and seen the efficacy of Apeel’s plant-based protection on countless types of fruits and vegetables. From strawberries to peppers, every fruit and vegetable has a peel or skin that helps keep it fresh. Apeel is an extra “peel” of protection made by applying another layer of what already naturally exists on fruits and vegetables. Adding this microscopic, breathable layer to the surface of fresh produce slows down water loss and oxidation, the main causes of spoilage. The challenge we need to overcome when approaching different varieties of produce relates to how to apply our product at commercial scale. We’ve started with produce that typically goes through a post-harvest packing process, in which we can easily integrate into existing tools to apply Apeel. This includes fruits / vegetables with both inedible peels, like avocados or citrus, or edible peels like organic apples. We have also developed an application process that works for non-spherical produce categories such as our commercially available product for cucumbers, which replaces the plastic shrink wrap typically used on cucumbers.

Matt: I saw that cucumbers with Apeel no longer need to be wrapped in plastic, which of course cuts down on another type of waste. What other benefits does Apeel-coated produce have beyond prolonged shelf life?

Apeel: Many behaviors and solutions exist within the food system to help match the supply of fresh produce, with the demand, all while accounting for its inherent perishability. Apeel’s technologies give the supply chain more time and flexibility to explore sustainable alternatives to transportation (i.e., changing from trucks or air freight to sea freight), storage (i.e., reducing reliance on a continuous cold chain) and packaging methods (i.e., single-use plastic on English cucumbers), all while preventing food waste in the supply chain, at retail or even at the consumer's home.

Grocery

If you’re like me, whenever you need to grab a box of spring mix to chef up a salad, you inevitably turn it upside down and check the bottom to see if any of the leaves have already started to rot. Just last week at Costco, I had to pivot from broccoli to zucchini because literally all of the broccoli was already starting to go bad. We’ve experienced something like this.

Taking the data perspective, Afresh is arming grocery stores with a treasure trove of hidden insights. The operations of coordinating food around the world is an already difficult task that is further complicated when you add the additional requirement of freshness. As traditionally offline businesses like grocery stores come online, there’s always a gap in data quality. Data from the coordination of physical things can often be missing or in an unstructured format. Without the complete picture, grocery stores lack the insights to make dynamic, predictive decisions. By serving as the inventory management system and powered by ML recommendations, Afresh is able to smooth out unstructured data and surface insights that result in fresher produce, fuller shelves, and of course, less wasted product.

Restaurant

Robert Lee, Co-founder and CEO of Rescuing Leftover Cuisine (RLC), is a food waste OG with over a decade of experience connecting food donors to those who need it the most:

Back in 2009, when I was doing food rescue as a club at NYU, people thought it was illegal. In 2013, people literally told me “Don't do this because it's illegal.”

In our conversation, Robert helped me understand the incentives behind donating food as well as just how many different stakeholders are entangled in this food frenzy.

The key is aligning the donations to financial incentives. There are incentives for businesses to donate their excess food that the IRS provides. Congress is also looking to enhance tax deductions for donating excess food. This is the primary piece that needs to be more well known, but also less complicated. Right now, the calculation for the enhanced tax deductions is either twice your basis cost or half the profit margin plus your basis cost. The reality is a lot of businesses don't even know what their basis cost is. Especially small mom and pops and restaurants; they don't really know how to calculate their basis cost. In a world where I can wave a magic wand, I would align the financial incentives so that people want to work with a food rescue by donating excess food instead of throwing it away. My thought is that we just need to make it easy and convenient and financially aligned. So the same convenience that has brought us here is kind of what allows us to get back to a more circular economy.

This section is called “Restaurant”, but it’s just a placeholder term. Robert reminded me of all the other institutions besides restaurants that end up with excess food.

There's so many culprits. Just in terms of the food supply chain by itself, there's farms, suppliers, and wholesalers. Then the retailers that include the supermarkets and restaurants. There's also catering companies, event venues, production companies, and offices that have cafeterias. There's hospitals that have food halls. Even in the military there are food systems. Public school systems, private school systems - they all have food.

It's all of these disparate stakeholders that can make a difference in this. There’s also government agencies that put on conferences which results in diffused responsibility because the clients who buy the food aren’t the same entity as the catering companies. Both of them end up pointing at each other in terms of who should be the one donating food and paying the fees.

In terms of distribution, the US is much more developed in the sense that there's a lot of homeless shelters, food pantries, and community centers that actually can distribute the food.

The way I see it, we are the bridge between those and we are a kind of transportation company (just in non-profit form) to transport that excess food to those in need.

Household

Our own homes - the smallest, most intimate level of the food waste system. More specifically, our trashcan is the final destination before food heads out to waste management. By designing an analog to the trashcan, Mill has created a tech-enabled bin that compresses and dries peels, bones, and stalks into compact cubes of food scraps that then get picked up and delivered to chicken farms to be used as animal feed. The way I interpret Mill’s philosophical approach to addressing the climate crisis is: collective change is just a lot of individual action combined. There’s already been a lot of press on Mill (like MCJ or TechCrunch) so I’ll stop here, but my first impressions are:

1. The price point seems prohibitive, but should come down naturally as they scale.

2. The psychological and quality of life benefits of products like these are underrated. Making trash more fun is not a bad strategy.

3. It’ll be interesting to see how Mill positions itself for enterprises like offices and governments. (Mill announced a partnership with the City of Tacoma back in February).

Conclusion

The food waste problem is significant and can already be solved today without any new moonshot technologies. We don’t need synthetic biology, direct air capture, or nuclear energy to prevent food from being wasted. Although there’s many players across farms, grocery stores, restaurants, and households, the seeds of progress can be sown from any layer. Eat your leftovers before cooking new food or eating out again. If your bananas are at peak ripeness, make banana bread or freeze them for smoothies instead of throwing them away. And don’t buy a sack of 20 pounds of potatoes from Costco if you live alone and don’t even like potatoes that much.

Further Reading

• Food Waste: Fixing the World’s Dumbest Issue by Javier Gascón

• We are what we eat by Owen Wang

• The ReFED Inc Roadmap To Reducing Food Waste

• A Roadmap to Reduce US Food Waste by 20%

• What do you want for dinner three days from now by Nitin Iyer

Support Me by Supporting Others

I’m running the NYC Marathon! Since securing a spot and committing to raise $3,000 for Organization for Autism Research, I’ve obviously been running a lot, but I’ve also been spending time to understand what it means to live with autism. From talking to the founder of an autism care startup and my neurodivergent friends, I’ve learned about the various misconceptions around autism and how OAR’s mission of funding research can help.

In addition to the $300 marathon registration fee, I’ve also donated $250 to OAR. We’re 2/3 of the way there! I hope join me and contribute to the fundraiser! I truly appreciate every donation 🙏.

Normally I write through an optimistic lens that fundamentally believes technology is a force for good. Today may be a bit more somber. I try to stay away from mainstream news for the most part, but the current events unfolding in Gaza compel me to pay attention. How could I not?

In between moments of trying to focus, I go through my Instagram stories. A friend shares a video of a Palestinian father wailing while cradling his dead baby. The next story is polaroids of fancy dining and lowlight clubbing. Another friend reposts the woman who held up a swastika at an anti-Israel rally in Times Square. Then it’s back to the humdrum of selfies, food, and memes.

I try to enjoy a stroll among the fall foliage that’s started to emerge here in NYC, but I don’t get far. My friend who grew up in Israel shares a long, heavy post that includes “My aunt’s house was hit by a rocket and another rocket hit a building next to my grandma.” I text him “I hope everyone is able to stay safe” while feeling helplessly confused. It seems like everyone is suffering, no matter which side you’re on — If there are even sides to begin with.

Subscribe now

The Interconnectedness of Climate

While humans wage war on their fellow neighbor, the planetary challenge of sustaining life on earth persists. The past four months have been called “a summer of extremes” due to record-breaking temperatures. Yet, most days still seem the same. Unless there’s a nearby wildfire, I’m still able to do all the things I want without feeling the effects of climate change. While the short-term symptoms are infrequently felt, the long-term consequences are quite literally existential. You may disagree and say that climate change is already affecting us — which is fair — I am only selfishly describing my life as a privileged American who spends most of his time between California and New York.

Climate change suffers from the boiling frog syndrome; we’re less likely to take action on problems that get worse gradually rather than suddenly. So then — why climate? Working in climate sometimes comes with the urge to justify choosing this abstract global mission over other important problems like education, healthcare, or AI alignment.

I reject that premise. Instead of viewing things as separate, I believe everything is interconnected.

On the surface, it’s hard to see how a war between two countries far far away is relevant to climate change. But I’m not just referring to the current war between Israel and Hamas. Last year, the combination of Russia invading Ukraine and Europe’s heavy reliance on energy imports from Russia resulted in electricity prices tripling.

As droughts, wildfires, and hurricanes result in the total reshaping of the earth’s human geography, billions of people will be forced to abandon their homes. This will have irreversible effects on our food systems, cities, and politics.

In an era of ever-increasing complexity, we try to simplify by deciding between climate mitigation vs. adaptation, individual action vs. collective change, and what we deem as climate-relevant vs. not climate-relevant. These are false dichotomies.

Everything is interconnected.

Climate Change is Borderless

Climate change carries no passport and knows no national borders.

- UN Secretary-General Ban Ki-moon

The construction of man-made languages, identities, and borders divide us which poses a threat to solving the ecological crisis. There’s a reason why it’s called “global warming” and not “national warming”.

Our planet getting warmer is independent of man-made lines in the sand which we call national borders. Yet, we are still playing zero-sum games. Superpowers like the US and China compete head-to-head and wage economic warfare on each other rather than collaborate on solutions.

While global leaders fight for strategic advantages in critical minerals and scale up local manufacturing capabilities, developing countries are left to bear the brunt. The Global South will disproportionately suffer even though the Global North is responsible for 92% of excess emissions. People in places like India, Africa, and the Middle East will experience more destruction than we do, even though we (the Global North) are contributing to global warming far more than they are.

Yes — we need to rapidly decarbonize the grid, food systems, and the built environment in America. But we also need to play an active role in shepherding smaller, developing countries towards net zero. The bystander effect is especially dangerous at this level of urgency and scale.

Instead of trying to win first place in the race to decarbonize, maybe we should be aiming to make sure everyone is actually still alive to cross the finish line.

Borderless Problems Require Interconnected Solutions

The story of separation is what got us into this mess in the first place. Individuals fending for themselves instead of looking out for their neighbors. Nations prioritizing domestic GDP over international prosperity. We can’t keep living in abstractions that create “us vs. them” conflicts while kicking the can down the road.

You cannot solve a problem with the same mind that created it.

- Albert Einstein

So what does interconnected actually mean? There are multiple levels to consider.

What exactly does it mean if something is “climate”? With the Ukraine war example, it’s clear that seemingly unrelated events have far-reaching ripple effects. Labeling things as “climate” or “non-climate” further disconnects us from an interconnected reality. There is more to climate beyond just carbon markets, renewable energy, and electric vehicles. Inversely, things that appear to be on the periphery like geopolitical conflicts, labor shortages, and supply chain crunches are just as climate-relevant.

Even within the sphere of climate, it’s unclear if the singular goal of limiting global warming to 1.5°C by reaching net zero by 2050 is optimal for planetary health. A centralized narrative is a tradeoff that prioritizes the global and the abstract over the local and the concrete. A singular quantifiable metric that represents the collective climate effort risks missing the forest for the trees.

There is a danger that the climate change issue occludes other important environmental issues: deforestation, eutrophication, fishery depletion, radioactive waste, nuclear accidents, wetlands destruction, genetic pollution, toxic waste, pharmaceutical pollution, electromagnetic pollution, habitat destruction of all kinds, soil erosion, species extinction, aquifer and freshwater depletion and pollution, and biodiversity loss.

- Charles Eisenstein

What is the role of the individual in this problem of planetary scale? What is the role of a single community in this global society? What can one country do when there are 194 others? The answer lies in Matryoshka dolls. The world is composed of countries which are just groups of people. If you peel back enough layers, what’s left is just you. Remember that collective change is just a lot of individual action.

The Wisdom of Nature

In a time when so much is at stake and also up in the air, it’s crucial to ground ourselves in what we know to be true. Politicians and CEOs can (and often do) make empty promises, but nature can’t. Nature simply exists. As adults we often take nature for granted as something solely reserved for beautiful views while on a weekend getaway. But as kids we learned just as much from experiencing our first snowfall, rolling around grass fields, and chasing after butterflies as we did in the classroom. It’s time we return back to that childlike curiosity.

Man-made technology brought us chemical fertilizers, computers, and the internet, but when overly relied on, symptoms of overabundance arise. Today, 74% of Americans are overweight, we are lonelier than ever, and life expectancy has declined for the second year in a row. These are just a few examples that show economic growth and wellbeing — both human and planetary — are starting to decouple. Maybe there is something we can learn from nature.

By viewing the world through a human-first lens, we fail to recognize the intelligence that surrounds us.

Earth teems with sights and textures, sounds and vibrations, smells and tastes, electric and magnetic fields. But every animal can only tap into a small fraction of reality’s fullness. Each is enclosed within its own unique sensory bubble, perceiving but a tiny sliver of an immense world.

- Ed Yong

The existence of the tetrachromatic mantis shrimp, 9-brained octopus, and 200-eyed scallop humble us in our understanding of the world.

While often reserved for purely inspiration and awe, nature is actually an experiment that’s still running after millions of years. Simulations, A/B tests, and MVPs are no match for the eons of ecological adaptation. What we see today and call “wild” is a product of evolution. Everything is here for a reason. And it’s all interconnected.

Fortunately, since reaching peak emissions in 2007, there’s been a reversal in the right direction. While I am an advocate for innovative moonshots like nuclear and green hydrogen, I can’t help but notice that many climate solutions are drawing on the wisdom of nature. Regenerative agriculture incorporates contour farming and crop rotation which indigenous tribes have been doing for millenia. Enhanced rock weathering is basically just using rock dust to suck CO2 out of the air. Kelp is being farmed in large volumes because they’re a great natural carbon sink. The entire field of synthetic biology is dedicated to engineering living organisms. I also can’t help but notice the similarities between the proliferation of solar photovoltaics today and the worship of the sun god Ra during Ancient Egypt. It took us a few thousand years, but we seem to finally remember the life-giving qualities of the sun.

Returning to Nature

I have learned so much from nature. The jagged majesty of the mountains and the cyclical rhythm of the ocean have taught me some of the most practical lessons in life. After a few chaotic, exciting months in the Big Apple, I’m longing to be back in an environment where I can take a step back.

So much of climate news perpetuates a dire need for constant progress because of the urgency. Speed however, is not the same thing as velocity. Amidst the buzz, it can be easy to feel overwhelmed and experience climate anxiety. Sometimes we need to remember why we started in the first place. Sometimes we need to retreat to reorient.

“The times are urgent; let us slow down.” - Bayo Akomolafe

On November 9-10, I’ll be attending A Deep Breath Amidst the Storm: A Climate Leaders’ Retreat in Boulder, CO. As described by the co-facilitators Brooks and Dom, the retreat is an “exploration of what it looks like to step into climate action from a place of alignment, presence and peace — and in mystical, animistic relationship with nature.”

As someone who’s still fairly young in his career and 9+ months into his sabbatical, committing to this type of experience was honestly not an instant yes. However, after talking with Dom and realizing that we may be approaching the climate problem with the wrong frame of consciousness, I decided this was worth the try.

Brooks and Dom have kindly offered Build in Climate readers a reduced price. To join, register here and use code BUILD at the checkout page to save $100. I hope you’ll consider attending and hanging out with me in Boulder! If you have any questions, reply to this or email me.

Yes - climate is a physical problem that requires physical solutions. But building all this stuff will take a lot of money. We have some of it already (the IRA is a great start) and still need plenty more, but there’s already inefficiencies to getting existing money. Navigating the complexities of policy and renewable project development are two problem areas where software can help. Not just software; not just AI; specifically large language models (LLMs).

When it comes to largely text-based, unstructured data, LLMs have the capability to organize and streamline information to eliminate tedious requirements and reduce time spent on indirect work. By “indirect work” I’m referring to all the mundane climate-relevant tasks that aren’t actually saving the planet. Things like applying for grants, sending documents to stakeholders, filing for interconnection, and applying for permits. Although LLM-based software is not literally producing renewably generated electricity or sucking carbon out of the air, it has the potential to turbocharge climate in game-changing ways.

When it comes to the latest AI trends, I’ve been living under a rock so I sat down with two founders building at the intersection of Climate x AI to understand how LLMs can be applied in climate. Julia Wu is exploring the renewable project development space and is also the creator of SolarGPT, a chat bot that answers your questions on all things clean energy. Helena Merk is the Co-founder and CEO of Streamline, helping climate companies access money via grant sourcing, qualifying, and drafting.

In our conversation, we cover:

• Framing Climate x AI

• Identifying Good Problems for LLMs

• The Role of LLMs in Climate

• Unstructured vs. Structured Data

• Complexities in Renewable Project Development

• Risks and Bottlenecks

What do you think of this intersection of two themes: Climate x AI ? How do you even frame it? What is your model?

Helena: These two themes, Climate and AI, represent perhaps the most significant ongoing trends in the world right now. When it comes to AI, I would narrow it down further to emphasize that much of the recent progress we've witnessed pertains to Language Models (LLMs).

For climate, the issue has been deteriorating gradually over an extended period. There's currently a rapid surge in funding; brought by new legislation such as the bipartisan infrastructure law, the CHIPS Act, the IRA. On top of this, we’re seeing the emergence of other countries' equivalents to the IRA. This sudden global push places us on a more favorable path towards channeling appropriate investments into the necessary areas.

However, the current funding, impressive as it might be, falls short of the mark. To genuinely achieve the net-zero objectives set forth by various nations we’ll need trillions annually invested. Globally, this figure hovers around $4 trillion for clean energy alone, necessitating substantial financial commitment from governments to fuel climate-oriented initiatives. The gist is that to get to net zero, we’ll need a complete overhaul of our built environment – a comprehensive reimagining and reconstruction process spanning everything from food production to supply chains and even the composition of concrete.

Now we finally have the political will to push things in the right direction. Similarly, with AI’s recent breakthroughs, so much more is possible. Combining the two is what I’m currently most excited about — we can use LLMs to navigate policy and accelerate deployment of funding to impactful causes. Policy is traditionally this text-heavy, hard-to-navigate bureaucratic system that moves slowly because of real world stakeholders at risk and moving too quickly would be bad. That said, there are parts of it that are moving slowly for (what I would argue) no reason.

Julia: We started having conversations with developers of commercial and community solar and noticed people asking the same questions over and over. They asked “What does the IRA say about low-income communities?” or “How do I apply evidence that I am meeting the prevailing wage requirement as dictated by the IRA?” “How much domestic material do I need to qualify for the domestic content stuff?”

So you have people doing the same process of, to Helena's point, plowing through policy documents, analyzing it, and then putting the paperwork together, which gets analyzed by more and more people. There's a lot at stake when you're talking about tax credits. the risk of tax credit fraud, and credits getting clawed back.

There's a huge policy aspect to all of this. There's a lot of repetitive work being done but also in addition, at the utility-scale projects, they have a lot of paperwork that analyzes beyond policy; so interconnection, permitting design, feasibility and engineering, feasibility studies, engineering reports, and appraisal reports. These are all hundreds of pages in total.

Identifying the problem first, Building the solution second

“If all you have is a hammer, everything looks like a nail." It would be a mistake to build the solution (LLMs) and then go looking for the right problem to tackle. What was your journey to uncover the problem before realizing that LLMs could be a potential solution?

Julia: Somebody was like “Julia, you should read the IRA with a magnifying glass.” And I was like, I don't wanna do that. It's hundreds of pages and it's a very important document, but I don't wanna read the whole thing. So I just kept thinking “Where are the summaries of the IRA? What are the key points? Where do I find all the synthesis?”

For my own sake of understanding the IRA, I would love for there to be a Q&A bot for this. People want to get fast answers and I also saw forums where people kept asking the same questions. I realized how much repetitive work and paperwork there is, and how much time people are spending to try to understand all of this.

But there's also the non-AI part. Developers of distributed solar, wind, and storage are scrambling to understand what they need to do in order to either develop in a new state or territory. It's a lot of work. They miss documents and by the time they go through due diligence either to get funding or to sell their portfolios, their underwriters and acquirers are coming back to them and saying “Hey, you're missing this study about endangered species.” or “You haven't looked at this yet.” and so they have to go back.

Helena: I fan-girled over the IRA. For a good amount of time it looked like it was not going to pass— in case you don’t remember, we had the Build Back Better Act and that totally fell through. Then, seemingly out of nowhere, the IRA passes and I'm like holy crap! I need to go into a deep dark hole, bundle up with some tea, and read this end-to-end, and then read it again.

At this point in time, myself and my co-founder were 9 months into building a company focused on pre-financing carbon credit projects. Pre-IRA, working on increasing liquidity for project developers was the highest leverage way to accelerate regeneration. Even though our approach today is very different, it's always been about “How do we get money to climate companies?”

When the IRA passed, it became obvious that it would change a lot. History tends to repeat itself, and a working thesis was that the winners would be chosen just how solar became a winner for renewables a decade ago. Studying the IRA helped build a mental model around which companies would suddenly have viable business plans, how companies should pivot, and more. What also stood out, was that while there was all this money, it was extremely hard to access.

To validate this assumption we started talking to everyone we knew in climate. Everyone was overwhelmed by how to navigate the IRA, had no bandwidth to do the research, and started asking me for my advice and pointers to where to start diving into policy.

Long story short, our process didn't start with “Oh, there's LLMs. Can we shove this into climate?” It was more like “This is a problem. Let's help companies navigate it.” Then Language Models like GPT4 launched and suddenly there was a new way to navigate paperwork heavy sectors like policy.

The Solution and the Role of LLMs

How are you thinking about solving the problem and the role that LLMs play?

Helena: Our mission is to accelerate funding for climate technologies — given much of the funding comes via government funding, it’s been a priority to build tools to navigate said policy.

Our current focus is grants, a non-dilutive funding option for technologically risky projects. We’re building workflows for grant sourcing, drafting, and reviewing that heavily lean on LLMs. As we expand past grants to other capital planning tools, we see the focus on LLM features evolving.

As an aside: my higher level opinion on LLMs, is that they are very much an ingredient and should be an ingredient in almost every company. In a few years, saying you are an “LLM company” will be akin to saying you’re a “cloud company.” Every product will have components that are enhanced by semantic search or LLMs.

Beyond grants, there’s several other government based funding opportunities for the climate transition— from loans to debt to product financing. All of these pathways involve similarly challenging application workflows (ex applying to the Loan Programs Office). Right now this is solved by hiring entire teams of finance and policy experts. Streamline exists to help companies navigate this messy capital journey from SBIR Grants to LPO.

Julia - How are you thinking about tackling this equally complex web of renewable energy stakeholders for project development?

Julia: One thing just to add to Helena's point around sometimes you apply to these grants and you realize that it was never meant for you. It actually happened to me. I applied a few months ago to the Community Power Accelerator by the DOE. It's meant to support small-scale developers of community solar, but I thought, maybe they’ll offer grants to people that are building technology to support developers, but nope. So I filled out the whole application and answered so many questions in depth and they came back to me and of course, it's written somewhere in the fine print that you need to at least have a plan for developing projects.

In the world of distributed generation, we help developers speed up their process by organizing their documents and helping them develop an understanding of the requirements and incentives for each jurisdiction. So instead of hiring a policy analyst whose role is to identify new markets and study new guidelines, what if you could just use a tool? To find the optimal sites from a real estate perspective, but also to know what the incentives, requirements, and interconnection process is like for each location? Once you're ready to develop, imagine LLM-powered software tools that can help you identify optimal sites, track applications for interconnection and permitting, and parse through the legalese for state-specific policies or incentives in your area of interest.

Unstructured vs. Structured Data

Helena you had this point on the power of LLMs for unstructured data. What is the difference between structured and unstructured data in climate policy?

Helena: To start we should define what is unstructured vs structured data.

Structured data you can think of as like an Excel sheet. You have nice headings and columns. Every field has some kind of label and you can apply an equation to, make a cool model, etc.

So much of building an AI model involves cleaning data. For images, this includes tagging and labeling. It's associating unstructured data with the structure of a label. The goal is to get things into a structured data format so that we can manipulate it and connect the dots and create logic. It's really hard to create logic if all you have is a blob of text.

On the second part of your question - Why does this unstructured restructured data actually matter to understand policy?

Rules are not structured or “code-ified” in any way. Rules and regulations are presented in long narrative documents. Sifting through this is currently very manual. Let’s take a simple example of parsing a grant opportunity:

You want to check if you meet the requirements. You can scroll through looking for it, or can Command F on a document and search for the word “requirement”. Then, you click through all the matches and manually sift to understand what applies to you. You then manually see if you meet these requirements before continuing. In your head, you are matchmaking between your understanding of the policy, and your understanding of your own organization/proposal.

There’s really two high level solutions to making this entire process easier. The first, is to present policy in a structured way. The second, which is only possible now, is to use language models that have been trained on the entire internet.

What's possible with language models is semantic search. I can pretty much search based on meaning. Rather than searching requirements and then having like command F my way through the document, I could ask a question like “Based on my profile, what are the requirements specific to me?”

The problem only gets more interesting from here.

Not only are single documents hard to parse through, they are also dispersed through the internet on various local gov website. As an example, we can look at a bike rebate programs. If you wanted to build a map for bike rebates, you’d first have to go city by city — or state by state — and collect all of the policies. You’d have to establish if they have a policy in place, find the details, and put it into a spreadsheet or other database. Finally you could create an interface that points to this spreadsheet. These policies likely change every quarter, so you need to redo a lot of this work.

This isn’t a theoretical problem - it’s the core of building a planning tool for any real world infrastructure. Paces does this for renewable energy and Nira for do injection points. They all face the same problem where you have decentralized data in very messy formats. They turn it into a clean, structured format and then create planning software on top of it.

Now that language models are around, these companies are most likely thinking about different ways of doing this than doing it by hand. Because that's before language models, the only way of creating planning software on top of decentralized data like this was done by hand.

Now you can theoretically create agents that go and scrape every single local government website, turn that into structured data and help people create planning software on top of it. So back to the bike example. Every government is putting out documents, PDFs, etc. 20+ pages of what are the different rules to follow and for the first time, we can create logic rules. Like If This, Then That rules. That's extremely exciting and hasn't been possible in policy before. That's why I think the LLM x Policy is probably one of the most interesting things.

The Complexity of Renewable Project Development

Julia: To your point, Matt, the financing piece and the construction piece and the consumption, AKA offtake, that's the tip of the iceberg. The reality is that by the time something is even fundable, it's already significantly de-risked.

In order to even get there, there are a few steps that involve a lot of different stakeholders. The first step is just making a decision about where to build a solar project. This might be out in the open, on top of a shopping mall, but regardless of where there's that initial decision of “Where do I even place this?”

How feasible is this? Where do I go if I look at aerial images? Which ones are closest to an interconnection point? Have healthy transmission feasibility around? The highest likelihood of passing the permit? Getting the appropriate environmental approvals? This is all a lot of text, applications, PDFs, financial models, and conversations and phone calls with property owners and utilities.

These solar and storage portfolios are cash-generating products that will generate a recurring stream of cash over the next 15 to 20 years. There's an upfront investment that goes into it. And then at any point in these stages, M&As might happen. Whenever portfolios trade hands, documents need to trade hands. Documents as in PDFs, text files, financial models, and beefed-up Excel spreadsheets. I have never seen such complex and robust spreadsheets. These professionals dedicate hours to putting these spreadsheets together and one small input may influence the entire project’s profitability. There’s fragmentation among stakeholders like policy analysts, developers, external parties, etc.

Let me share a bit about why people use SolarGPT. People want Q&A against external legislation and resources. One person said “Our group in Arizona is facing some horrible hurdles to get community solar up and running. We're hoping that there might be something in the law that circumvents or nullifies some of the utilities’ opposition to community solar.”

Some people want quick answers to IRA-related questions. Some people want incentive structure information. And some actually want advice on grant writing. Others want internal Q&A against internal development documents.

I used to think that it was just for external use cases, but because there's so much internal data, it’s easy to lose track of things. In terms of actual queries, people are asking “Are there grants for community solar projects in Arizona?” “Does solar work in Alaska?” “Can you summarize the solar crediting policy for the Dakota Valley Electric co-op in North Dakota?” “What are the steps to develop a community solar project in Illinois?” As you can see, there are a lot of very specific questions state by state. And some people know exactly what policy they're looking for answers to, but they just don't know if the policy is ready yet.

What risks and bottlenecks are you aware of?

Helena: The largest risk is that the amount of funding that we need from governments doesn't actually manifest.

Julia: I had one developer say that they're spending millions every year on project valuation reports. The reason why it costs so much is that consultants manually generate these appraisals. One challenge is if we generate appraisal reports using LLMs by parsing through the same things these consultants parse through and spit out a valuation, will it be considered credible? If it is credible, then we can save developers a lot of money. But there might also be opposition from companies that generate these reports. So there's a question of “Does AI-generated output carry the same weight even if they are created with the same decision process as whatever a human is doing?”

The other risk is developers saying, “Yeah, my biggest bottleneck is permitting and interconnection takes forever to get approved. Can you go just talk to the utilities? Can you make them more willing?” Just like governments don't have any incentives to make their workflows better, utilities don't want to do solar developers a favor. So are you really going to innovate from the utility side? I really hope people are pushing for that, but it's really hard. So I'm worried that one bottleneck is going to be just purely external one that would require policy to change.

Further Reading

• The unexpected role of software in catalyzing climate solutions

• A16Z’s AI Canon

Turning it to you 🫵

I’m curious - what other topics do you want me to look into? Are you fired up about a particular thing? If you wanna collab (potential guest post?) or just casually chat, let me know in the comments or via email!

We live in an era of abundance. Not to dismiss the importance of solving food insecurity, but most of us today no longer need to worry about our next meal. We have more than what we need. Fortunately, with the modern marvels of supply chain and refrigeration, I don’t have to walk to a fruit tree or pull out my bow and arrow and scan the horizon for wild game every time I get hungry. I simply walk to the kitchen. If I’ve been on top of my game, then I will thank the past me for stocking the fridge and pantry. Thanks to food preservation methods like fermentation, refrigeration, and drying, we’re able to extend the shelf life of food AKA energy for humans. It’s nice to have forms of human energy storage like a pantry and refrigerator because my demand peaks (when my tummy rumbles) rarely ever matches when and where the supply (food) is created.

Unfortunately, that’s not how the grid operates. Both shortages and surpluses can lead to blackouts. The grid must constantly balance the demand and supply of electricity. Energy consumption and energy generation curves don’t perfectly match, just like my hunger fluctuations and when food is readily accessible. Peak times for energy consumption tend to be when we’re at home: getting ready in the morning and having dinner with the fam in the evening. Once the supply side, production happens whenever the sun is shining and the wind is blowing. If you overlay the energy consumption and generation curves on top of each other, you get a duck:

Due to the inherent constraint of always keeping the flow of electricity in homeostasis, whenever there’s more power being generated than consumed, the utility company will need to figure out a way to reduce production, which often results in temporarily shutting off parts of the grid. During periods of curtailment, super expensive utility-scale renewable infrastructure sits idle, a complete waste of resources.

The good news is that there actually are ways we can store energy. And just like the multiple forms of food storage (refrigerate, ferment, dry), there are different forms of energy storage. Thermal stores energy in the form of heat and then converts it to electricity whenever needed. Mechanical uses gravity (pumped hydro) or tight spaces (compressed air) to store energy for later. And then there’s electrical - the one we’ll be focusing on today.

Batteries, the electrical type of energy storage, are compelling for many reasons, but especially because they’re a flexible, adaptive technology (not everyone has a hill for pumped hydro) that continues to exponentially decrease in cost just like other climate-relevant technologies (solar, DNA sequencing, growing meat in a lab).

To further understand the role of batteries in the transition to a decarbonized economy, I called up Nicholas Yiu, battery buff and co-founder of Intercalation Station, the best* resource on batteries out there (*according to me). Our conversation starts out broad with the basics so that we can build up from first principles. From there, we go on to discuss:

• Battery Type Breakdown

• Use Cases for Batteries

• Batteries for EVs

• Renewables and Storage Duration

• Minerals and Supply Chain

• Software for Batteries

• Future Predictions

The Current State of Batteries

Nicholas: Lithium ion batteries have been around since the 70s and they've only recently become popular from a commercialization standpoint because of the downwards trending cost. Today, they're more or less about a hundred dollars per kilowatt hour (unit of energy for batteries).

When you translate that to a car battery pack, it would've cost over $50,000 in 2013. There wasn’t much interest in 2015 and it wasn’t until 2019 onwards when costs started dropping due to a higher volume of Asian production and new manufacturing technologies coming online to produce better batteries faster. It’s now much more affordable, generally between $100 to $200 per kWh (and even between $50-100 per kWh at some sites) and that's why they’ve become so popular over the last few years for all applications like mobility and stationary storage.

Right now the most advanced commercially available energy storage system is based on lithium ion batteries. They’re crucial for renewable energy storage, mobility applications, and other applications. There are a lot of areas that can be electrified via batteries and displace fossil fuel usage.

Battery Type Breakdown

Nicholas: When we're talking about rechargeable batteries, the lithium ion battery is the most commercially dominant battery out there. There are several components inside the battery but the main idea is that it's an electrochemical sandwich. You have the current collector, which is a thin sheet of metal to help conduct electrons. Then there are battery electrode materials - these are the active materials that actually hold the lithium. The electrolyte is sort of the jelly in between your electrodes that allow the lithium ions to move between electrodes. This is all connected via an external electrical circuit to power the load.

Looking at other non-lithium based technologies, there are different sorts of alternate chemistries. The main one is sodium ion which is popular these days - basically replacing your lithium ions with sodium ions. The upside is that sodium is widely available and doesn’t rely on as many critical metals as lithium ion batteries. In addition, the performance of sodium ion cells can be competitive with lithium ion in certain applications. The downside of sodium ion is it's a bit bigger which means it doesn't hold as much energy per mass. It also could mean that it's slower in diffusion, so it doesn't charge or discharge as quickly. Not ideal for high power situations where you might need to use a big burst of energy when you're taking off and landing, for example, in an electric helicopter. Lithium and sodium are the two main chemistries right now. There are a few more in the research infancy, for example, aluminium or magnesium which are also in early commercialization days.

Use Cases for Batteries

Nicholas: The main applications that everyone is really excited about are largely investor driven. This means technologies with massive markets. Sometimes, they will be really excited about things that are really flashy as opposed to what makes the most sense from a climate perspective.

The first and foremost is mobility which includes electric vehicles, scooters, and electric vehicle takeoff and landing (eVTOLs). There’s some exploration into maritime; so some electric boats that can cross short distances, as well as an exploration into electric planes. The downside for these applications is that batteries are always going to be very comparably heavy and not as energy-dense as kerosene. It’s going to be difficult to electrify things like commercial aeroplanes or larger boats where weight is a determining factor. For vehicles like cars and trucks, the battery size is reasonable for these applications compared to what you would need for a plane. Typical sizes for that are 30 kilowatt hours for a Prius, all the way up to several hundred kilowatt hours for commercial trucks and buses. Hummers are excessive and just way too big for just one vehicle. No one needs a battery that big.

When it comes to using lithium ion batteries for grid storage applications, the diversity in designs and capacities can be as varied as those of fossil fuel plants. These storage systems can be paired with renewable energy generation to help store the energy generated from solar plants and wind farms. They can also deliver meaningful financial returns by doubling as energy trading machines, doing various forms of energy arbitrage where power is bought when grid prices are cheapest and sold when grid prices are highest. In terms of scale, these renewable energy storage systems are similar scale to hundreds of vehicle batteries combined. Grid storage for renewable energy storage and batteries for electric mobility are the two main applications with the biggest markets where you can get the most impact on the environment.

There are also smaller applications like consumer electronics: smartphones, laptops, smartwatches, etc. This is also a big market, but I find it's often used as a stepping stone to get to the bigger markets. For example, a company will develop a new chemistry and prove that it works in a small system like a smartwatch. [ex: Sila Nanotechnologies working with Whoop] The batteries can be the size of a coin and it’s a good way to demonstrate that your battery chemistry works in a small system. The next step is to put it in cars. The development type process to go from watch-size to car-size is really expensive so it’s good to start small, especially with new processes and new chemistries, and fine-tune your manufacturing.

In terms of novel tech that is very expensive (and likely wouldn’t have a buyer in the average market), a lot of battery companies turn to military applications because there is no price sensitivity. They just want smaller, better and highest-performing batteries, and they don't care very much about the price. I would bucket those (mobility, energy storage, consumer electronics, military) as the main four branches of battery applications.

Electric Vehicles (EV weight, range anxiety, charging experience)

Nicholas: I do spend a lot of time on the fast-charging side of things. First of all, there are some very good studies led by London battery consultancies Exawatt and Minviro. You don't even need studies to be honest. I can look at my own daily life patterns.

Say I do a long road trip where I might be thinking actively about where can I charge my car after four hours of driving. Where do I take a break? Is this a good time to charge? Will there be enough chargers? Will my car make it to the charging station? That might happen to me once a year. Otherwise, I'm just driving to the tube station in London which is 10 minutes away, or just doing groceries which is a five-minute drive. This links back to the white paper that 80% of trips are under 10 miles for the average UK driver, but I suspect similar habits in many places around the world.

But at the same time, many consumers have this slightly irrational fear that this is just the way cars need to be and they always want to be able to “fill up” in three minutes and drive until the gas runs out and then just top up again at the nearest gas station. A switch in driver mindset needs to occur with customer education because fast charging like that is going to wreck your batteries pretty quickly.

There are a lot of new chemistries coming out that will help facilitate fast charging with different materials and longer lifetimes. Niobium anodes are a well-known material that fast charges quickly [example companies: Echion, Nyobolt]. A lot of the silicon anode tech [Sila Nano, Nexeon] can fast charge quickly and lithium metal anodes too [SES, Cuberg]. These are all things in various levels of commercialisation and will be fun to watch this decade. There’ll be new charging infrastructure as well, including better software for your battery management systems and different types of charging station hardware. For example, there are a handful of wireless charging companies coming to fruition. Tesla recently acquired Wiferion, a German wireless charging startup, for $76 million. I currently consult for a London-based startup called Gaussion, working on using magnetic fields to reduce ionic resistance and enable fast charging with minimal battery degradation. But we will definitely need more customer education so they realize that it's okay to stop once in a while and charge at home overnight, and it won’t be the same as refuelling with fossil fuels (and that’s okay).

Renewables and Storage Duration

Nicholas: Storage duration is how long the energy in your system can last. For a typical lithium ion system, if you are using your car at 0.5 C rate [C-rate is the rate at which a battery is charged or discharged relative to its capacity], you can use it for two hours. That’s the typical kind of storage duration that you can expect for vehicle batteries. With 10 hours, maybe you'll charge it once a week if you drive an hour-ish per day.

For other systems, that’s not enough. Cities might want energy storage backed up for multiple days or even multiple weeks. That's when you start needing to either expand your lithium-ion storage in that city, which becomes very expensive or you look for larger systems, which can potentially hold a lot more energy for longer and be cheaper. Hydropower, for example, has been around for a long time… It's just water on a hill. That could potentially last for years, and you can extract it when you want, which is helpful and cheap because all you need is water on a dam. Since it's an infrastructure project, it can last for a long time. The downside to that is you need a big hill and a region that has water. If your country just doesn't have hills, then you are struggling with deploying that kind of storage.

So you might look at alternative chemistries and one that comes to mind is iron-based chemistries which are dirt cheap. They're basically rusting and de-rusting and using the reactions from that to drive energy storage. It’s a much cheaper system, and it’s less energy dense therefore the system will be bigger, but for these applications, it doesn't really matter because size isn't the priority here. The priority is storing energy for a long time. I think Form Energy systems can last 100+ hours.

The majority of batteries in vehicles are only used a couple hours a day and so they're just sitting around for the rest of the 24 hours. It's a big waste that they're just sitting there. Companies are starting to think about ways to use lithium ion batteries in homes or in the workplace so you have a virtual network of batteries in vehicles to feed back into the grid to smooth out demand and store energy when you have high output (vehicle-to-grid).

This is a non-exhaustive list of energy storage technologies, and many others could be talked about including mechanical (like gravity storage or compressed air), thermal (molten salt), hydrogen, and others.

Minerals and Supply Chain (geopolitical tensions, ethical dilemmas, shortage?)

Nicholas: There's a shortage declared if demand outpaces supply. It’ll depend on how demand is forecasted by these companies. Forecasts have been wrong in the past, but yes, I do believe that there will be a shortage of critical battery minerals. Even in the case that there isn't a shortage, the question is: Do we want to continue buying a supply of certain materials from certain countries?

Right now, the majority of nickel comes from Indonesia. They will cut down rainforests and displace local populations to mine nickel in those areas. Likewise, the majority of cobalt is mined in the Democratic Republic of the Congo where there's a lot of child labor through artisanal mining practices. While there is enough supply from there, the question is: Do we want to continue mining from those areas to get the cobalt and the nickel to feed into our batteries?

One alternative solution is to use batteries that don't require these materials.

This comes back to the initial conversation. For example, there is potential for sodium ion batteries which are not reliant on those metals. There's potential for lithium Iron phosphate (LFP) batteries. And that's completely not linked to nickel and cobalt at all. It's an iron-based chemistry so it’s more environmentally- and socially-friendly. There are some pros and cons to LFP compared to nickel and cobalt-based batteries and I think ultimately there’ll always be nickel and cobalt-based batteries because they’re higher performing and there will always be non-negligible market demand for higher-performing applications.

Factories right now are producing batteries and competing based on price point, but moving forward, there's going to be a lot more focus on the environmental footprint, where metals come from, and how much carbon is emitted per battery in the factory. The European battery passport has started to implement this where they're requiring a certain amount of battery to come from within Europe if it's a local battery. Similar things will be implemented in the US I believe.

So then the question is if we're not getting cobalt on nickel and other metals from these countries, where do we get it from? I've been spending loads of my free time researching deep sea mining, which I also know is a pretty controversial thing, but is it truly worse than what we're doing right now? This question is open for debate, and I don’t know if we will have an answer in the next few years, and I welcome people to DM me to chat and challenge me about it.

Software's role for batteries (battery life, charging rates)

Nicholas: So many things! I'll start with battery life. The way a battery works from a controls standpoint is you'll apply a current when you want to use (charge or discharge) it. In an EV context, you draw current when you are accelerating (discharging) and then you plug it back into a wall (charging) when it's not in use.

This current needs to be controlled by something inside the car - something like a chip in your battery pack, or maybe it's computed in the cloud. You can measure performance parameters in the battery, like the voltage that’s going up and down between a few preset points of the system. You might also measure the temperature of different areas of the battery pack. Temperature is a big deal because nothing lasts forever and batteries will degrade at a faster rate at higher temperatures.

It’s crucial to understand how your batteries are being operated. Even within the same area in a pack, one cell (an individual component in a battery pack) on the left-hand side might behave differently from one cell on the other side. So having a good software system to measure all the data that's coming from these cells, from voltage to power to temperature can be critical to optimize the lifetime of the battery. Choosing good voltages, knowing which batteries are failing, and catching batteries that will overheat before they do overheat are just some ways that software can be used.

I want to give a shoutout for what I do today - I currently work for a London-based startup called About:Energy which makes digital twins for battery systems. It takes a lot of time, money, and resources to build a battery pack just to see how it’ll perform. We want to cut this problem out. Designers of battery packs can use our software tools to virtually experiment with cells from various manufacturers, for example, a simulated Panasonic or Samsung cell. They can run these virtual cells through simulations to assess their voltage, current, and temperature responses, along with a lot of other physics-based metrics like lithium plating amount or lithium-ion concentration. This allows engineers to determine the most suitable option for their specific needs without having the high costs of building a real-life pack.

One more point when thinking about the end-of-life of the batteries and when you want to take the battery out because it’s no longer fit for purpose… what happens now? Do I put it into recycling or do I put it into a second life? If I put it in a second life, it could be another 10 years in operation. This is another place where software could be handy because you get the entire lifetime data point for the battery. You can basically say, “Based on how this cell was used before, it’s now best for using it in home storage or maybe now it's just unusable for everything because it's just so burned out.” So you might just wanna recycle it at that point.

Future of Batteries / Predictions

Nicholas: The reason I'm always so excited is because it's not just a tech game anymore - it's a geopolitical race. All countries are racing to set up their manufacturing and Asian countries have done a really good job for the last couple decades in manufacturing and they're investing a ton of capital into churning out these batteries. The US and EU are trying to make as many factories as possible.

In terms of how crazy I think things will get, it's probably a bit of a bleaker prediction. Firstly, there are going to be supply shortages of certain materials. However, there's more attention to building factories than figuring out where these materials are gonna come from to feed those factories. It's a possibility that these factories will only be operating at much less than 100% capacity either because they can’t get their materials or they have manufacturing teething problems… Factories are playing catchup with the engineering and manufacturing experience that an Asian manufacturer has.

It’s going to be hard to compete and catch up with Asian manufacturers. What we can do to stay one step ahead (which we've done well in the past) is battery tech innovation. For example, there is currently a lot of innovation in electrode tech for better performance, sodium ion batteries for stationary storage, novel manufacturing techniques to reduce waste, improved software for better system designs, new ways to use batteries altogether with second life, etc. But if it's making standard lithium-ion batteries and trying to compete against Asia, I think that's gonna be difficult in the current iteration. Every factory starting now is at least a handful of years behind the Asian companies.

Look at how well China has done in the past and how quickly they can do things and how strong their workforce is. A lot of factory operations right now in the US have a talent shortage. There are many plans for gigafactories in certain states in the US - now we just need to make sure we can fill those factories with a large number of staff with specific skills and talent. This is easier said than done. It’s going to be a long and hard journey that’s exciting to participate in.

Further Reading on Batteries

• Intercalation Station

• The Solar Duck Curve by CTVC

• Loans Program Office Powering US Battery Production by CTVC

• An Energy Storage Analogy by Keep Cool

• From Back-up to Game-changer? by Keep Cool

• Battery Technology Changed the World…and Then It Stalled by Anna-Sofia Lesiv

• Decade of the Battery by Noahpinion

• Contrary Research’s deep dive on Redwood Materials, a battery recycling startup

Looking for more?

Intercalation is currently open to consulting engagements in battery-related projects! Reach out to Nicholas if you’re interested!

When it comes to a problem that is as vital, complex, and urgent as the environmental crisis, hope is not a strategy. Neither is spreading ~good vibes~, doing the opposite by shaming people for eating meat, or de-growth for that matter. In a special situation where everything is seemingly interconnected, untangling this mess can at times feel futile. By zooming out and observing the systems and incentives that steer us in subtle, but powerful ways, we can begin to understand how we might enact a different vector of change. One that’s just as powerful, but in a different direction than how we’re currently headed.

There are multiple types of incentives and perhaps financial incentives are the most powerful. They enable rapid coordination of change through abstraction and compression. Imagine if we still had to barter for everything. Back in the day, if you were a fisherman looking for shoes, you couldn’t just go to the shoe cobbler and buy them. You’d need to figure out what the shoe cobbler wanted and trade your fish with other merchants until you had what could be swapped for shoes. We’ve come a long way since. Cash is only something I get from the ATM when I’m craving $4-for-10 dumplings in Chinatown. I don’t even need to carry a wallet anymore because I can Apple Pay my way through life. It’s easy to take for granted financial technology because as products approach 100% adoption, we view them no longer as actual products and more embedded like “it’s just how things work”.

From the bartering system, rudimentary currencies such as cowry shells emerged in Mesopotamia. Then came paper money in China during the 7th century and the initial forms of debt called bills of exchange were invented in the 12th century to facilitate long-term trade. Government bonds in the 18th century, insurance in the 19th, and mutual funds in the 20th. The seemingly ubiquitous credit card wasn’t around until the 1950s. Stock exchanges and financial derivatives like options are financial products as well. Through this framing, we can begin to understand the potential of today’s climate-relevant financial products: financing, rebates, tax credits, and other financial incentives. It was Adam Smith’s invisible hand of unrestricted free markets that incentivized individuals to act in their own self-interest. Now there’s a green visible hand giving out billions of dollars in financial incentives (the IRA + its friends) that will accelerate deployment of climate-positive technology if well executed.

Starting decades ago with solar, we’ve seen learning curves that benefit from positive feedback loops where cost dramatically decreases while adoption scales up rapidly. Another example is the rapid onset of heat pump demand caused by the EU energy crisis which shows how negative financial incentives (high natural gas prices) influence people to act accordingly. Regardless of the end product, incentives shape our behavior. In the climate context, they lower the activation energy required to catalyze adoption of proven technology that still has limited penetration rates (electric vehicles, heat pumps, insulation, induction cooktops, etc.)

Subscribe now

Money Talks

To learn more about how financial incentives are shaping climate solutions, I chatted with Abhi who leads product at Tenet, an EV financing startup, and Dasha, Co-founder of Line Build (YC S23). On the surface, EVs and heat pumps seem like two completely different things, but they actually both play a key role in electrification as we transition to a decarbonized grid. Ultimately, they both converge at home electrification. Through this couplet of interviews, we navigate the role of financing, utility rebates, and government incentives on the deployment of climate-relevant solutions.

Together we cover:

• The financial incentives that are available today

• Bottlenecks in adoption of climate-relevant solutions

• The role of financial incentives in climate

• How this could all play out

What does Line Build do?

Dasha: We are trying to make it easy to find all of the available rebates and financing related to energy efficiency upgrades for the built environment - think getting a heat pump installed in your house. We're targeting the folks that are doing the installations because they're the ones proverbially at the kitchen table when consumers make a buying decision. When your furnace breaks you call a contractor, and 90% of replacements happen as a result of a breakage. Right now, replacing an old gas furnace with a new gas furnace is still a lower up front cost than getting a heat pump - by a factor of 3! We know we need the economics to work out for consumers to be willing to make the switch. There’s also incentive alignment with the contractor - if they can reduce the cost to the consumer, they get a higher conversion rate. Our goal is to make heat pump financing as ubiquitous as auto loans.

What does Tenet do?

Abhi: The mission of Tenet is to be your partner in financing the electrification of your home, starting with electric vehicles. The thesis of Tenet is based on a couple trends that are playing across in the industry right now. First, we see a higher consumer awareness of climate change and consumer impact of climate change and therefore higher adoption of climate positive and electric technologies.

Another one is government incentives. So with the IRA especially, tax credits are incentivizing customers and businesses to buy more climate-positive. Then we have investors who increasingly want ESG assets in their portfolios. Finally we have the OEMs (original equipment manufacturers) which in auto are companies like Tesla and they're leapfrogging and building electrification technologies such as electric vehicles.

Tenet sort of sits at the intersection of each one of these. Our first product is effectively to provide loans to customers that reduce the sticker price of an electric vehicle. We wanna start at EVs, but we don't wanna stop at that. We wanna help you with your vehicle and also get add-ons. So we'll help finance the charger or the warranty or gap insurance. Eventually in the future we wanna help you do that for other things in your home. Solar panel, heat pump, et cetera. But we're starting with EVs because that's where customer attention and need is right now.

What’s the full breadth of these financial incentives? Across the IRA, utility incentives, and other policies?

Dasha: There's a surprising amount of different organizations that are interested in funding energy efficiency, and one of the top ones is your utility company. We've all heard of the grid strain when it's extremely hot or extremely cold out. For example, in California, you probably know that there's a risk of rolling blackouts whenever the temperature is really hot because all of us turn on our air conditioners, and for most folks, your air conditioner is something like 15 years old. It's not particularly energy efficient. About 40% of the load on the grid (depending on where you are) is coming from just space heating and cooling. If you think about it from the perspective of the utility company, they could either fund new generation capacity - new solar, wind, natural gas - or they could reduce the demand on the grid, especially at these peak times.

You might notice if you have an investor-owned utility like PG&E in California that there are some specific line items on your bill that aren't related to your consumption. Usually it's like a buck or two and all of that goes into a big pool of money that the industry refers to as “rate payer funded programs”. The California Public Utilities Commission, or the local utility regulator, sets rules on how how that money can be spent. A lot of it is used for funding energy efficiency projects. For example, you might get $75 off a smart thermostat or $2,000 off a heat pump.

There's also cities and states that are making net zero commitments and care about the environmental impact. For example, if you live in Redwood City and you're a homeowner, you can get an additional $500 to do energy efficiency upgrades. Meanwhile, Washington state is getting billions of dollars from the Climate Commitment Act, and a large portion of those funds will be allocated towards funding energy efficiency projects in homes.

And of course, there’s federal dollars - I’m sure many of your readers are familiar with the IRA. The IRA is a combination of things under the hood. The first, which is already live, are tax credits. If you owe taxes, which is about 50% of Americans, you can use the 25C tax credit to deduct a portion of the cost from your tax liability. For heat pumps its 30% of the cost, up to $2,000. So if you owe $10,000 in taxes you can claim the $2,000 credit and your tax bill now goes down to $8,000. Disclaimer, not a tax lawyer.

In addition to tax credits, the IRA created two rebate programs - which are still in the process of being launched at a state by state level (with the exception of Florida who chose not to participate). One is called HOMES and the other one is called HEEHRA (High-Efficiency Electric Home Rebate Act). HOMES is focused on actual energy savings. So the way that you would access the rebate is getting paid essentially per kilowatt hours saved based off of the changes that you make. That’s accessible to any income level. HEEHRA is a different program that based off of the equipment that is being replaced and it’s targeted at folks that are below a certain average median income. Each state gets to choose exactly how these two programs are going to roll out. Most states probably won't be rolling these out until 2024.

And we haven't yet touched on private capital and green banks, which are also another super important portion, and I expect will be growing in the coming years. The reality is that we need a lot more capital. Here’s some stark back of the envelope math - the $4.2B in HEEHRA rebates are capped at $14K per household, which means about 307,142.85 households will benefit... or not even 10% of the housing units in LA County.

The four stakeholders you said are investors, OEMs, the government, and the end customer. If these four stakeholders were nodes in a graph and there's edges that define the relationship between these stakeholders, what’s the dynamic of these relationships and how does Tenet sit in the middle to facilitate activity?

Abhi: Let's start with a customer. So where are customers right now? They are starting to have an understanding of electric vehicles and want that technology, but there's been a couple deterrents. The first of which has been sticker price.

Even now, electric vehicles are more expensive than other technologies. So now how do you get customers to adopt these EVs? This is where you see all these players come in. So start with the manufacturers. As you get to scale, they're gonna be able to drop their prices. We've seen Tesla do this again and again. Rivian is gonna start doing this. As you get scale, the fixed costs get distributed across more units so you can drop prices.

Second is the government. So the IRA provides federal tax credits for you to purchase and also to lease electric vehicles, and you can leverage those. This also propagates the state and even in some cases, local governments have their own credits so that is a big plus.

Finally you have the investors who are ESG investors that want to contribute towards this trend and make climate positive investments and they're financing in a couple ways. Some of these players are actually buying or backing these OEMs and the supply chain of these OEMs or they're working with players like Tenet.

There's a lot of earmarked money coming online. What does the process look like today for homeowners and contractors with the current paperwork to redeem these financial incentives?

Dasha: The unfortunate answer is it varies and depends on where you are. So California is a great example because they have multiple rebate programs coming from different funding sources at the same time. You as the homeowner might qualify for more than one of them.

But how you go about redeeming each one is actually different. And so one challenge is that someone, whether it's you or the contractor (probably both of you) is gonna have to have a high tolerance for paperwork - to do the research, to document everything, and then ultimately to submit it. And that's one of the things that we see as a bit of a challenge. It's unclear to folks how much they actually qualify for and what they need to do to redeem it.

For some utility programs, it's relatively easy. You log into where you would normally pay your utility bill, and there's some “fill out a form”. For others, you need to discover some PDF, print it out, fill it in, mail it somewhere. Sometimes your contractor has to do the paperwork on your behalf and you, the homeowner, may just provide information to them and they'll do it.

The process is non-linear and unpredictable. You're getting different information from different people. We've seen a challenge in folks wanting to take advantage of the incentives who say: “I know they're out there, but it seems hard. It seems like I'm gonna have to do a lot of research. I don't know how to do that.” That’s one of the problems we’re looking to solve at Line.Build.

What are the major bottlenecks to EV adoption?

Abhi: There’s a couple bottlenecks I think. First is education and awareness. When EVs first started, people didn't understand how they worked, why they were better, and what the positive incentives could be. Electric vehicles, unlike internal combustion engine vehicles, have a slightly more limited range that you can drive them for. So on a full charge, a Tesla could probably go somewhere between 200 and 300 miles before you need to charge again. What that means is that if you are someone who is using your car day-to-day in a city or for residential use, this is probably not even a problem. But everyone has that thought in their head that one day I wanna make a trip to Tahoe or from New York to Boston. How am I gonna make that trip? And that's a deterrent.

There are two things here. One is manufacturers are working to make better batteries, which can provide better charge, and they're led by Tesla creating better charging networks. Superchargers make it so that you can find a charger across most populated routes in the US and the charging shouldn’t take long. It could be 15 minutes.

What exactly is the Tenet product? Describe its relation to the EV purchasing journey.

Abhi: So very simply, the product is a loan. We're offering you financing so you can get the vehicle. What's perhaps important to talk about is what is the experience and where does Tenet fit in? Let's say you’re interested in buying your first vehicle and it's gonna be a Tesla Model Y. Sticker price is around $50,000. You go and realize that you're interested in buying it, but you may not have $50,000 sitting in a bank or you just decide that you don’t wanna spend $50,000 right now. You'd rather finance it. So you can pay down a little bit. There's a lot of people in this bucket right now in this current high interest rate environment. And so that $50,000 or however much is sitting in the bank could be earning in your S&P 500 fund. That's why a lot of people choose to finance, even if they do have the capital.

How the experience works is you go to Tesla or to other OEMs. For Tesla and Rivian, you can buy directly. For other cases, you go to a dealer. In both of these cases, they'll ask you, Hey, are you gonna pay in cash or you want financing? Once you say you want financing, that's where Tenet comes in. So at that point, once you've reserved a vehicle or have interest in a vehicle, you can come to Tenet's website and figure out what loan you can get.

Why we're different than other lenders that operate in the EV space is we provide a fully digital best-in-class experience. If you go to a traditional lender like Wells Fargo, you have to get on the phone with multiple people and go back and forth over emails. It's gonna take a long time. We pride ourselves in being completely digital, providing a great experience, and getting it done fast because we know time is important to our customer base. The second thing is we will give you competitive rates. We're gonna be competitive with what's in the market, often better than the financing rates that the OEMs provide themselves.

And finally what Tenet does differently than probably any other player I've seen is our deferred payment option. So the difference between an internal combustion engine gas vehicle and an electric vehicle is that an electric vehicle has a longer lifetime. And also electric vehicles have this tax credit of $7,000, $7,500 or $10,000 depending on where you are. What we've created with our financing terms is allowing you defer some of the payment of that vehicle to later on in the lifetime, which reduces the monthly payment.

So what a lot of people do is that they come to us and they're like, okay, I have this $50,000 Tesla Model Y that I wanna buy. I'm gonna get a tax credit on this next year so if I buy it this year, I'm gonna get a tax run of $10,000 next year. So that'll come in my refund. So what we do is provide you financing with monthly payments on $40,000 and that $10,000 deferred, just pay it whenever you get it to the $10,000. Whenever you get it, you'll pay it. And this works because we know that they’re gonna get tax credits. And it also works for ESG investors because the lifetime of an electric vehicle is longer. Since this is a secured loan, it makes it less risky for us to be able to defer the payments out in the future.

So all those things are kind of what differentiate Tenet from the other customers. At that point, we wire you the funds, you hopefully get the car, but we don't stop there, right? In that process, we’re also gonna be offering you additional add-ons. A lot of people want a home charger because that's another way you could be saving money. You want warranty or you want gap insurance. Once you've got the vehicle, we also are the ones who service the loan. So we'll be the ones who manage the payments experience. Over the lifetime of the vehicle, we want to continue providing you value. So we've got a dashboard on our website, which shows our customers how much they’re saving on a monthly or annual basis both in terms of dollars and CO2 savings. So if you had gotten a gas vehicle versus now here's how much you're saving. I think that's super useful and insightful for our customers.

I've seen manufacturers offer in-house EV financing. Let's say someone is buying a Model 3 and they see an option to finance via Tesla. Why would someone choose Tenet over in-house financing options?

Abhi: Yeah, I think there's two distinctions to be made here.

Companies like Tesla don't do the financing themselves. They have partners that they work with, so Tesla will partner with Wells Fargo for example. And Wells Fargo is actually the one providing financing because Tesla does not wanna deal with the financing business. It's a completely different business than the supply chain business that they operate in.

Tesla is not forcing you at all to go with their partners. You can go wherever you want and what Tenet offers is often the same or more competitive rates, a deferred payment, a better experience relative to this type of lender.

So that's one story. Then you have like the big auto companies, like for GM, who actually do have their own financial arms, right? Their own credit arms are billion dollar businesses themselves. And these companies do offer financing, but the dynamic here is a little different because these vehicles you're buying at the dealer.

So when you go to the dealer there's an interesting dynamic where the dealer sometimes tries to sell you financing based on whoever they're partnered with. So in a lot of cases, dealers will be exclusive partners with the OEM. In other cases, the dealer will be partners with other loan providers, including Tenet. So we are actually partnering with dealers as well. So the dynamic here is a little bit different because now you have the dealer involved in the equation and they have their own incentives. But in both cases, customers can choose to go with another lender.

What we've found is that a lot of people don't go with the default option that's shown to us because people are price sensitive, right? Go back to the customer. They're making a good amount of money, but it does matter if your rate is 6% versus 5.8% versus 6.5%. So most customers are actually gonna go search and see what are the other options available, how's the experience, what are the add-ons they can provide, and price shop. And that's where we have the opportunity to win with customers.

How does Line Build align with the goals of installers?

Dasha: HVAC companies spend a ton of money on marketing every year - because HVAC replacements are something a homeowner does rarely, they’re constantly having to acquire customers. One of the key metrics contractors care about is conversion rate. As a homeowner you're kind of classically given the advice of “get at least three to five bids and choose one.”

Well, that's a huge cost on the contractor because they're rolling their trucks to your house. They're sending a qualified person to figure out what needs to happen in your home and give you a bid. But if they're only winning one in three, one in five, and that's very large overhead for them. The workforce shortage, which I know you've written about before, is very real. Everyone is focused on how they maximize getting more work done with the resources that they have.

Most consumers (90%) didn’t plan and budget for their furnace breaking, so they’re going to be price sensitive - lowering the up front cost of the installation is really valuable. And as there's more consumer awareness that there is money available, if a contractor not able to answer “What are the rebates? What are the credits?” then consumers lose trust.

For Tenet, what comes after EV financing?

Abhi: So it's a good question and I think it's something that candidly, I'm brainstorming with you. We don’t have a firm answer yet. I'll also say, there's still a ton of work we need to do on the first product.

We've currently in an interesting situation where we have more demand than we can even service. There's more customers that we say no to and we want to be able to get to the point where we can grow our operations and our product to be able to provide loans to a bunch of customers. It's an interesting problem to have where the demand is actually more. We spend very little on marketing. So I actually spent a majority of my time on growing our existing business, but just brainstorming - if you think about what are other potential opportunities to provide value to the customers or cross-sell in the future…

I think about it in a couple different buckets. If you think about a 2x2 framework here, the first axis here is Financing vs. Optimization. and the second axis is Related to your vehicle vs Related to other assets in the home.

So in the vehicle financing bucket, you can think of other things that you might want to do with a vehicle. So when interest rates go down, some folks might wanna refinance. Another is we could maybe provide you a better auto insurance package when your auto insurance expires.

In the home financing bucket, solar panel, heat pump, HVAC, right? Those are the opportunities that we have. Then you can think about the other parts of the 2x2. So just speculating here, for a lot of customers when they buy an EV, that's the first time they really start thinking about their utility bill.

Most customers are kind of defaulted into whatever bill you have. But when you actually go on your utilities website, so if you go on Con Edison's website, there's actually multiple different types of rates that are available to you. You can optimize to find the best rate that works for you. So a lot of EV buyers actually switch to something called a time-of-use rate, which is paying based on the peak demand periods.

So you will be paying more for electricity, let's say between 6-9 PM versus 8-11 AM because that's when people are out of the house. So what we can help customers do is figure out what are the right rates they can get towards and help them save money through switching to better plans and deciding when’s the right time to charge your car. Like, don't charge your car between 6 to 9 PM; charge it overnight.

What are the opportunities we have in the future? I think it's too early to say what we'll prioritize. I expect us to try out multiple things and see what is the most valuable for the customer.

How do you think this all plays out? In terms of how complex climate is and the role of financial incentives.

Dasha: I think this is where knock-on effects are really important for us to take a look at.

It is not true that everywhere in the country switching from a gas furnace to an electric heat pump will lead to a lower energy bill.

This notion of the energy burden is a huge deal. I'd have to go back and look it up, but something like 40% of Americans have chosen whether to pay utility bills or buy groceries. There are some policies that are effectively creating gas bans that are getting a lot of criticism in states like Washington and California where people are saying they aren't going to be able to afford this.

It turns out that insulating your home first and foremost can give you a huge amount of energy savings without touching any of the HVAC equipment. So while heat pumps are the proverbially hot thing right now, we can’t overlook some of the other interventions. I’d love for someone to make insulation a hot topic.

In addition, while we are pushing for electrification, many utility companies are hugely backlogged in supporting electrical panel upgrades. When you upgrade your panel, say from 100amp to 200amp, you may need the utility to actually do a new drop to your house. You might be waiting 6-9 months for that. That might be okay if you’re planning ahead for installing an EV charger, but if you need the upgrade to switch your space or water heating from gas to electric, it is quite unlikely you will wait that long. So how these things are connected, literally and figuratively, is hugely important.

It's interesting to hear you talk about second order effects. And it is unfortunate that less wealthy communities are often the ones that have to shoulder the change.

Dasha: It's a really complex situation. For example, this notion of energy burden that we just chatted through, it's hyperlocal. It's really dependent on energy prices for both gas and electricity in any given market. We've been notoriously bad at predicting those prices. I mean, look at what happened with ERCOT in Texas and kilowatt hours costing thousands of dollars during spikes or the price of natural gas for spiking and then coming back down. There's a lot of nuance here. What happens as more homes do electrify? How do we ensure that those who could not afford the up front cost aren’t also stuck paying super high gas bills as the cost of maintaining gas infrastructure is spread across fewer users? I think that as much as we want to reduce the complexity, removing it entirely is also a failure mode.

Thanks for reading!

If you found this useful, please like or comment so more people can discover this through Substack. And lastly a note from Dasha:

“We'd love to hear your experience if you've either applied for a rebate to offset the cost of a heat pump or maybe didn't get a heat pump because of the up front cost. We're hoping to lower the up front costs and your feedback would be very valuable.”

After exploring animal agriculture and regenerative agriculture, it felt natural to keep going down the food production rabbit-hole. In many ways, indoor farming (AKA vertical farming or controlled environment farming) is diametrically opposed to regenerative farming. The former recognizes the limitations of flat, traditional outdoor farming and addresses it through maximal control over the environment (temperature, humidity, water, light). The latter recognizes the inherent ecological value in how things used to be before the Industrial age of mass mono-crop farming. Although both employ modern day technology, there’s a fundamental difference in philosophy. One approach believes we solve the present-day problem by going back to the past (albeit with better tools). The other posits that we fix the problem that hyper-growth global capitalism caused by doubling down with even more modification to the natural world.

As kids, it was socially acceptable to ask anything. Our teachers and parents encouraged us with “There’s no such thing as a stupid question.” But as we got older and our curiosity waned while fear of judgement creeped in, we lost our ability to wonder. We’ve all at one point looked up at the sky and asked why the sky is blue. In exploring indoor farming, I embraced the naiveté of childhood and asked “Why can’t we just rotate land 90 degrees?” Land is expensive and flat. Why not go up? As we’ll see, there’s a lot more to indoor farming than just the dimensional transformation from 2D to 3D.

For this issue, I tapped three different indoor farming startup operators who spend every day thinking about the problem of healthy, sustainable food production at scale. I deliberately chose to include multiple perspectives over the typical one-on-one interview. To form my own climate beliefs and potential solutions, I’ve found it to be tremendously useful to absorb a range of opinions and then see what sticks. Climate is a nebulous, complex concept with far-reaching implications across every industry. Executing tangible, effective solutions requires rigorous thinking rather than betting that every approach is equally viable.

What follows is a synthesis of three interviews (conducted separately) with Mike Ross, Co-founder and CEO of Beanstalk (YC W18), Ryan Schools, Group Manager of Supply Chain at Plenty, and Jake Felser, CTO of Freight Farms. Rather than stack them one after another, I identified and interwove key themes together. It was insightful to learn that the three different approaches to indoor farming result in far less direct competition than I thought. Like many other areas of climate tech, the jury is still out for who comes out on top.

Introduction

Some quick context on the three companies:

• Plenty is a vertically-integrated, vertical farming late-stage startup that’s raised over $900M in funding and has over 400 employees. They grow various lettuces and sell them to companies like Whole Foods, Bristol Farms, and Instacart.

• Beanstalk grows lettuces in addition to other crops like herbs and microgreens. They take a slightly different approach to the larger, wholesale-facing vertical farming companies by using a soil-based approach (instead of hydroponics) and also sell direct-to-consumer.

• Freight Farms doesn’t grow any produce themselves. Instead they create the indoor farm itself out of shipping containers and sell that (with additional products and services) to organizations and companies who will do the growing themselves. Their customer base ranges from non-profits to universities to five-star tropical island resorts (and more).

Topics

• The Problem

• Produce as the Product

• Climate Mitigation vs. Climate Adaptation

• The Role of Capital

• Interconnectedness (Energy, HVAC)

• Standardization

The Problem

What are the biggest problems with conventional agriculture?

Mike Ross from Beanstalk: Right now climate is the biggest issue. It's taking away farmland. We're losing millions of acres of farmland a year across the globe. It's also creating these unbelievable once in a hundred year type storms. We've seen that from both the mega drought that starved all of the crops of water.

We've seen crazy heat waves that come through and destroy an entire strawberry crop. And then now we've got the flooding and torrential downpour from the atmospheric river that is also wreaking havoc on farmland out west in the US.

Second to that is the seeds. We're using very specific seeds that have been selected for disease resistance, pest resistance, and for crops that are transportable. [Conventional farming] is not selecting crops that have nutrition or flavor. As a result, we've lost a lot of nutrition in our fresh foods.

The last one is the pollution of it. 70% of freshwater goes to agriculture and all of that runoff is full of pesticides and that's causing issues with our freshwater sources - so rivers, ponds, lakes. It creates these huge algae blooms and destroys ecosystems.

Plus the pesticides. It's a pretty rough environmental issue. There's very limited options in fighting any of those major issues. On top of all of that, there's a labor issue where immigrant workers aren't being paid enough. They're not being taken care of enough. And we still need more people.

So there's a huge lack of availability in the labor markets and the wages have to go up, which means food is gonna have to get more expensive. Those are the really major ones with climate absolutely number one.

…

We've discovered that the modern food system is almost entirely processed foods. In fact, roughly 60% of the average Americans’ calories come from ultra-processed food, which leads to a 41% obesity rate. In the US, it's just really, really difficult to eat fresh food.

It's so much of a special commodity that it's quite literally a specialty crop in the USDA's classification of food. Our mission is to build a new food system that’s based on fresh foods. To do that, we had to come up with a new method of farming that increases the taste, convenience, and sustainability of fresh produce.

Beanstalk is able to grow with 95% less water. Why is conventional agriculture so wasteful? And how are you so efficient?

Mike Ross from Beanstalk: Yeah, that's a really good question. So, On the traditional side you cannot give plants exactly the amount of water that they need because the weather is so variable. You're also not able to direct the water to plants that precisely. So there is a system of drip irrigation that's used for really valuable crops. Trees, vines, bushes, like anything that's gonna be multi-year. But as soon as you get into annuals, things that you have to replant every year the irrigation is much more wasteful. You also lose a lot to evaporation. And so you have to account for that with a hydroponic system or something like what we're using.

We know exactly to the milliliter how much a plant needs because we're controlling the environment it's in. And so we just give it exactly that much. Plus a very small buffer that can be recirculated. And provide it again to the plant. The other thing is plants will drink water to cool themselves.

It doesn't necessarily contribute to that plant's growth, which means it doesn't contribute to the final weight of the product. If you've got the right environment, that plant will always kind of drink its water with the nutrition it needs to continue to grow, and so that water contributes to yield and so you get even more efficiency that way.

What problem is Plenty tackling?

Ryan Schools from Plenty: Our mission statement is to improve the lives of plants, people, and the planet. In our current agricultural system, we've optimized around calories but not around nutrients. And the system that we've designed is hyper-efficient at producing a ton of calories to keep everyone more or less fed, but it doesn't take into account a lot of the externalities that come from the crazy supply chain of shipping food all around the world.

Heavily subsidizing crops that use a ton of fertilizer and a lot of land and water. The company is changing that system to bring nutritious food close to the point of consumption and to produce it in a more efficient way by using less land, less water, and with renewable electricity.

The final piece is the people. Not only by having the food close to them - it's also more nutritious. You can grow crops that can be available year round right now if someone lives in Chicago or on the East Coast in the winter.

All of their leafy greens, berries, etc. Largely, it's coming from a warmer climate. And it's getting shipped and flown through these refrigerated supply chains that stretch around half the world. There's a big carbon footprint associated with all of that.

What problem is Freight Farms tackling?

Jake Felser from Freight Farms: I suspect Freight Farms’ answer to this is different than Plenty. The main difference with Freight Farms is that we have a giant network of small farms rather than a small network of really big farms.

There's a whole bunch of reasons why you might want that or might not want that, and we can talk about those. Freight Farms’ mission is making quality food accessible to people. That's where we got started and where we still see ourselves. A lot of that is less about competing in grocery.

It's more about what are all the places that don't have good food that’re a little bit smaller. And we can compete in all of those spaces all at once because our product scales in a different way than some of the big players. One way of thinking about it is like niche at scale.

Obviously there's a lot of economic headwinds in CEA (controlled environment agriculture) right now, so it's definitely an interesting time to be talking about CEA. Energy costs are high. CEA is generally pretty energy intensive. But this has always been true to some extent - which is that the cost of produce from CEA is relatively high compared to other methods of growing.

But the quality is better as well. And this is true across all the growers. I'm sure it's true for Plenty as well. But for grocery stores and mass market adoption, they're not necessarily looking for that. So how do we position our customers’ products in a way that makes the most sense?

It comes down to the economics that work best for CEA. And this goes to CEA's place in climate. The economics work best when the farm is in a place that is limited in its natural resources, whether that's light or land or water. Those things all make it really hard to grow in traditional ways, and so CEA makes more sense there, but a lot of those places are smaller islands or more isolated markets, and it can be hard to compete at a grocery scale there with a giant farm.

Who are your archetypical customers and locations?

Jake Felser from Freight Farms: So I think food deserts is partially what I mean. But if you think about limitations in land or light or water, for instance, Caribbean Islands: lots of light, but there's actually not much [fresh]water. And there's not much land. So that's a place where CEA makes more sense because the alternative to CEA is not to have giant fields of lettuce like you might in the US. The alternative to CEA is to import and then that's gotta go on a boat, which is expensive and is a big hit to quality. There might be customs or tariff-type considerations as well.

Far north in places like Sweden, you wouldn't consider it a food desert per se, but they have very short growing seasons. So similar constraints apply. We have a lot of farms in Alaska or in Northern Canada where the temperatures are really extreme and there's not a lot of light.

In the Middle East there's not much [fresh]water so CEA works well there. Energy prices there are also lower. Literal deserts more so than food deserts to some extent.

Produce as the product

How do you decide what to actually grow? Is it demand-driven from consumers or is it by what infrastructure and technology can best grow?

Mike Ross from Beanstalk: It's entirely driven by product. So because we're in soil, we can grow anything. In fact, we've done roots, fruits, and even flowers. We currently grow salads, herbs, and micro-greens because we're focusing on these heirloom pre-made salads. And so we make some educated guesses as to what the consumer is going to really want from a product standpoint.

As engineers, we do a ton of testing. But we know the market wants ready-to-eat salads, and so that’s definitely been a resounding success. Now it's about continuing to develop recipes and continuing to improve on all aspects of the experience. But we’re not limited by what we can grow as we can grow anything we would need to.

Why hydroponics?

Jake Felser from Freight Farms: So there are a decent number of studies that show better nutritional content for CEA crops. A lot of that is control and consistency in the nutrient delivery. There's also some more novel crops that are best grown in CEA like the Norfolk Produce Purple Tomatoes.

I don't know if you've seen those, but they're these tomatoes that are super high in a bunch of antioxidants. At the end of the day, it comes down to what can be grown profitably. Really, you can grow just about anything in a CEA setup, Freight Farms or not.

The question is, does the spacing work? Does the amount of labor it takes to put it together work? And if you're not efficient with your use of space, then your ratio of sort of CapEx to what you're selling is gonna be off, and it won't make sense. So you could grow corn in a Freight Farm, but you wouldn't make money.

That's where you get to the leafy greens. Leafy greens and herbs grow really well hydroponically. The cost to sell them is pretty appropriate - you can make money doing it. It ends up being a good business for our customer.

One thing you said earlier which I wanted to touch on, you alluded to, is that it's a human centered product. I think that is absolutely the way to think about a lot of this. The way that Freight Farms works is we sell farms. We don't actually sell lettuce, we sell farms. And most of our customers - what we call small business farmers wanna run a business and be profitable, but that's just part of it. They're getting into it because they care about their community and they want to make food for their neighbors and friends.

Hydroponics vs. Soil-based

What makes Beanstalk different than Bowery or Plenty, where they’ve gone down hydroponics route?

Mike Ross at Beanstalk: We are the first ones to come at it from an infrastructure level and focus on simplifying the infrastructure needed to grow crops indoors. We are a vertical farm. In fact, we're the densest vertical farm in the world. And we did that by inventing a new form of farming.

So we're not hydroponic. We do use soil. But we're able to grow faster than hydroponic farms. We have more nutrition than hydroponic farms. And we're able to go denser because we've removed irrigation. So what happens is we've got these containers that hold everything that the plant needs, all the soil, the water, the seeds of course, and then we can put that into racking that is tended to by a robot.

Basically this farm looks like a giant vending machine. It's incredibly dense and it's got this machine that goes across the face of it, a crane or an automated forklift that pulls things out, pushes things in. So that makes it incredibly dense. We’ve removed about 80% of the components that would typically be in a vertical farm which makes this incredibly cheap. So we're an order of magnitude cheaper to build than any other farm in the world. It is much cheaper to operate because we can perpetually reuse all of our inputs since soil can be reused indefinitely. We currently buy seeds from a variety of vendors all over the globe, but we can produce our own seeds when we get to proper scale.

That eliminates a ton of the costs. And then of course, we develop our own automation. Which are one to two orders of magnitude cheaper than comparable vendors in the indoor farming space. So it's a collection of things, but it starts with our novel farming method that uses this soil container that enabled us to do it.

It created a lot of other problems by going that dense. We had to invent our own airflow system and our own air conditioning system to keep everything uniform. Those were a few big technical hurdles that we had to overcome. But really it is about production density.

Climate Mitigation vs. Climate Adaptation

How would you put Freight Farms in regards to the spectrum of climate mitigation vs. climate adaptation?

Jake Felser from Freight Farms: Yeah, so I think all of CEA I would put pretty squarely in the adaptation category. And I think this is a mischaracterization that's pretty common in the broader industry that people get really focused on food miles.

But if you look at the LCA of a traditionally grown head of lettuce, food miles don't dominate. It's still dominated by water and sort of other resource uses, not the food miles at the end. So people get hooked on the food miles, but CEA is so energy intensive.

And so few CEA facilities are using renewable energy that it's hard to make a mitigation argument today. You can definitely make an adaptation argument, which is that in 10 years or 20 years we still want to eat vegetables. We better work on the technology that we're gonna need to do that.

And I do think part of tackling the climate crisis is also recognizing that we all have a role to play. I'm not an expert in nuclear fusion but there are people who are. So if they solve that problem, then all of a sudden CEA is a mitigation strategy. Because in a world with cheap energy or cheap from a carbon standpoint it's a great option because it's much more efficient in water and chemicals in general land impacts - land that could be used for sequestration or other things.

So that's kind of how I see it. I think today it's largely adaptation, solving the energy problem in parallel. It's both. Yeah.

The Role of Capital

If you could wave a magic wand, what's something that would make your life easier and help accelerate the business?

Ryan Schools from Plenty: If we could get a bunch more funding fronted from partners, we could go out and build a bunch more farms. The more that we can scale and have higher demand for all of the equipment that goes into these facilities, the cheaper all of those pieces of equipment are gonna become and the easier to manufacture them at scale.

Right now we're on a pace of building and deploying a farm every two to three years. It's very batch based. All of our partners that fabricate our equipment get turned on for a year and then they sit and wait until we're ready to deploy the next one. Just like any early stage industry that is coming up the scale curve, there's a breaking point where you can switch from batch-based to continuous manufacturing of all these inputs, and you're gonna see pretty dramatic efficiencies come out of that.

It's difficult as a 400-person startup for us to go out and continue to raise the $200-300 million it takes for each of these facilities to go and build them ourselves, right? It's kind of like the airline industry. Boeing goes out and they get a huge backlog for hundreds of jets that they have on their order books, because jets are really expensive and complicated to build.

If we can do the same thing and build up that backlog where we have guaranteed work for years and years, then we can go out to our suppliers and show them that and basically just turn the lines on and start building all the stuff that we need to go and make those farms.

Interconnectedness

I remember I asked you where you would put the farm if you could put it anywhere and you said wherever energy is the cheapest. Something I've been learning about climate is how interconnected things are. Can you say more on the interconnectedness in this space?

Jake Felser from Freight Farms: Everything is interconnected. It's honestly hard to overstate that. So energy pricing is interconnected. Energy pricing is a big lever on a lot of things. For a lot of the bets around home electrification and broad electrification, there is an efficiency gain there. Your actual energy input for an electric car is lower because it's more electric drive. Trains are more efficient than ICE drive trains, for instance.

There's actually a Sankey diagram for savings and doing that. But if you're creating electricity from coal, it's not necessarily better from a carbon standpoint. So a lot of things do go back to energy. If you had limitless clean energy you would solve a lot of issues because you'd basically say, well, anything electrified is now good.

But energy is tied to the grid. That's a bet that says we have actually electrified enough stuff to make that work. If you electrify more and more things, you have other grid impacts, those things are tied together. There's software that controls everything. There's all these endpoints to the system and there's all these systems that could be more efficient.

For instance, if energy was free, then do you care about HVAC efficiency or do you just care about whether your refrigerant has a high GWP? If energy is free, maybe you don't care about efficiency so much anymore in a lot of places. So everything's interconnected and I think the challenge of that is it's hard.

It's hard to focus on any one problem. To have an impact on that one problem, you have to focus on one problem and you have to understand the threads it pulls on. But let's say you spend 20 years focused on efficiency and actually the right thing to do is to focus on electrification. That might be a wasted effort to some degree.

The other danger is that you get paralyzed by all the interconnectedness and don't do anything. And there's a third danger that you do something, but it's interconnected in a way you don't see and causes a negative impact. But I think the opportunity and things being interconnected and the bet we all have to make is basically I solve my part, you solve yours, and we have to talk enough that lets us all stay aligned and make sure that there's no interconnections that are gonna bite us.

HVAC

I remember you talked about heat pumps because you have to think about HVAC and temperature control and humidity for Freight Farms. Why did you even have to deal with that?

Jake Felser from Freight Farms: Yeah, so I mean, HVAC systems for indoor farming are very unique and different from sort of traditional residential HVAC because there's a much, much higher humidity load. So Freight Farms has custom developed an HVAC system for our farms that is different to go back to the interconnectedness element here. Where it gets really complicated - you touched on labor shortage earlier - that's definitely a part of it, right? If you want to build a custom HVAC system and work with a good vendor to do it, there's not that many places to do it.

Then if you want to service that system in the field at scale like we do, we have hundreds and hundreds of HVACs out there. You need a network of support technicians. But what we find is that the quality of the service that you get is wildly dependent on what technician you call. So and so you end up relying on the manufacturer for that.

Does that scale? I was talking to a friend of mine at a party over the weekend. Who works at an HVAC company in operations in New England. I was just talking about pricing and I tried to get a heat pump in my house in the fall, and the pricing was just prohibitive. And so I was asking him about it and he basically said that whoever gets the most trained people wins, because that is the primary constraint in the HVAC market right now from his perspective. So how does that all kind of tie back, right? I mean, Innovation in HVAC makes it. Without innovation in HVAC, the CEA doesn't work, right?

You basically need those innovations to happen. So you need trained HVAC techs out there. You need people in the trades who are gonna build stuff and install these things. All of that stuff has to happen, even if you're training people today who aren't necessarily installing electrified appliances off the bat.

And then there's a regulatory tie-in too. So if you look at some of the regulations coming out around heat pumps, there's regulations that are gonna come out in California, for instance, that require heat pumps everywhere. No more one-way air conditioners. Now the interesting thing about that is that makes total sense for residential, especially in California where it's temperate and you're gonna have to heat and cool so you get both with one shot. Makes sense. And the cost is coming down. But for a specialized system in a farm, it doesn't make sense because we're always generating a lot more heat and we're always gonna have to dehumidify. So we're already looking at some of these regulations and trying to figure out how to engineer around them. But we're a small company and we can't go lobby, for instance.

Matt: This is an interesting example of a pro-climate bill negatively impacting a company that is also trying to do good for the climate.

Jake Felser from Freight Farms: Yep, totally. Yeah, it's an example of those interconnections where if you're not thinking about it fully or all the way through you can run into trouble. But in the grand scheme of tradeoffs, complexity of legislation isn't necessarily a great thing. So do you wanna make it super complicated with a lot of carve outs? Do you wanna not have the legislation? Probably not, because I think it's really positive for residential. So you have to weigh the impact of it.

Standardization

How variable or unpredictable is the growing process? I imagine there’s some formula of water, sunlight, temperature, etc. If you run that a million times on the current process, is it gonna look very different or is it fairly reliable?

Ryan Schools from Plenty: In my opinion, that's one of the biggest challenges - how do you standardize everything when you're dealing with a living product? Everything is not going to be the same, even with the same inputs. You can hope to contain the distribution so that things fall within a certain tolerance band. At the end of the day, it's not manufacturing, not non-biological hardware, right? Plants are living and they're complicated biological systems.

How can you select seed cultivars and place your set points for all of these environmental factors like the light load, nutrients, water? - all these things that the plants need to grow. And then dump all that into the black box that is the plant system and get a consistent output that doesn't mess up your automation. Because you want the plants to be the same height after the same amount of growing time so that you can have an automated robot come and cut them all off for harvest and not have leaves that are different sizes or shear incorrectly because nobody wants to see that in their box of leafy greens that they're buying at the grocery store.

It's a huge problem and one that's not fully solved. Leafy greens are one of the easier ones to solve that problem for and that's why they're kind of the first to market. And then, I think more and more products will be coming as that equation gets fleshed out a little bit more for other types of produce.

What do you believe about this industry that's different than everyone else?

Mike Ross from Beanstalk: Our focus is on nutrition and human health. We're focused on developing products that make it easier for people to eat healthier and tastier food. I think a lot of indoor farm companies have focused entirely on innovation for innovation's sake. I think that's been the reason for a lot of the companies that unfortunately didn't make it. We put it simply: we have three success criteria for the business: to improve the taste, convenience, and sustainability of fresh produce. If we improve the taste, you'll crave it. If we improve the convenience, you'll default to it. And if we are a sustainable process, it'll be around forever. And that's it. That's all we need to do for this to become a true success.

Conclusion

I hope this was useful! My key takeaways were:

• Everything in climate is interconnected, from energy to skilled labor to HVAC to food production.

• Indoor farming solutions tackle a wide range of problems (nutrition, food deserts, climate adaptation, traditional agriculture) with a variety of solutions (hydroponics, soil-based, the farm itself)

• Indoor farming as a climate adaptation solution is not how I initially thought, but I find it compelling now.

• I didn’t expect nutrition and the human-centric view to be as emphasized as it was. Hopefully we can all get more nutritious, nourishing food, whether it’s grown on the same ole’ flat land or in a big manmade box.

I just had lunch, but I still can’t seem to stop thinking about food. For myself and wealthier parts of the world, feeding ourselves is mostly a solved problem. We might wake up hungry, but all we need to decide is what to eat rather than how to actually obtain those calories. How our food actually gets produced is so many layers of abstraction from us that we take it for granted.

In fact, we’ve never been more detached from how our food is actually grown. With the press of a few buttons on an app, we can get a delicious, hot meal delivered to our doorstep (and without any human interaction if that’s what we prefer). Or even better, we stroll two minutes from our desk down the hallway to our tech company’s cafeteria. In one (privileged) corner of the world, overworked investment bankers and consultants trade stories about their comped fancy steak dinners. In another not-so-fortunate corner, farmers struggle to make a living and famine is a part of everyday life. Things don’t add up.

We live on a planet that increasingly demands more and more food. In the last 50 years, the global population has doubled. But we also rely on a strained agriculture system that’s been perverted by conglomerates that myopically optimize for short-term profits over long-term wellbeing. We need to take care of our air, soil, and waterways but we also need to make sure we can feed everyone. How do we balance planetary health with global human health?

In order to feed a rapidly growing population with limited resources, we have two levers to grow more food: Expand or Intensify. We could increase the surface area that crops are grown on, but land use in agriculture threatens wildlife and biodiversity through deforestation. The dodo bird was long gone by the time I was born and I wouldn’t want the same to happen to pandas, rhinos, and tigers. To put it in perspective, of the 28,000 species threatened with extinction, 24,000 (86%) of them are threatened by agriculture.

The other option, Intensify, seems to be working. Compared to 60 years ago, we’ve managed to triple crop yields in cereal while using less land on a per person basis. But that came at a cost. Starting in the 1960s, the ‘Green Revolution’ unraveled, resulting in the proliferation of synthetic fertilizers and pesticides, machinery like tractors, irrigation technologies, and high-yielding crops (GMOs). While these innovative practices and a global supply chain fulfilled a necessary goal of feeding a growing population, the pendulum has swung too far. Realizing this, the industry is inching (too slowly) towards ‘regenerative agriculture’ (we’ll unpack what that actually means).

Peeling back the layers of agriculture is a series of never-ending discoveries of increasing complexity and interconnectedness. To make matters more convoluted, there isn’t a single, shared vision for sweeping adoption of regenerative practices. To uncover why, let’s dive into:

• The Problem - How Did We Get Here?

• An Umbrella Of Solutions

• Challenges With The Regenerative Vision

• How Can Software Help?

• Open Questions

Subscribe now

The Problem - How Did We Get Here?

First, a snapshot of where we’re at. Today, 26% of greenhouse gas emissions (GHGs) come from food, 50% of the world’s habitable land is used for agriculture, and 71% of all birds are poultry. That’s a heavy contributor to global warming, literally half our land, and a shit ton of chickens.

What ultimately caused all these problems with emissions, pollution, and reduced biodiversity? Looking back, we have the perspective to connect the dots. There’s not one clear answer. In terms of specific practices, it’s some amalgamation of monocropping, tillage (plowing farmland with tractors), lack of cover-cropping, wasted freshwater, and too much synthetic fertilizers. Did large agricultural corporations know what they were doing? Or did they choose to ignore the facts just like how Exxon knew about climate change but kept it from the public for decades?

Luckily, we don’t need to dive into conspiracy theories in order to find out. The incentives and data speaks for itself. Today, half of the 300 million farmed acres in the US are planted with corn and soy. With policies like the Farm Bill that subsidize commodity crops (corn, soy, wheat) with more favorable insurance and pricing programs, farmers are steered towards monocropping. With policy playing such an important role, power has become concentrated in just a few mega agribusinesses.

One concrete example is Cargill, the largest private US company with 160,000 employees and $165 billion in revenue for 2022. In order to produce that much food, Cargill needs a ton of land and it’s not always properly cared for. Their massive global soybean and palm oil supply chains have been linked to deforestation activities in the Amazon rainforest. They’ve also been sued by the US government for violating the Clean Water Act for discharging pollutants into waterways without proper permits. It’s hard to believe that these are just accidents when they have a track record of consistently F’ing things up - such as spilling toxic waste into the Bay Area waterways six times in seven years. I picked on Cargill because they’re the biggest culprit, but it’s not just them. The industry as a whole needs to get its act together before it’s too late.

There’s further evidence that conventional farming methods are approaching their breaking point. Soil erosion is a serious problem and topsoil, the layer that we grow crops on, is being destroyed at an unsustainable rate. Synthetic fertilizers, which release nitrogen into runoff, result in algal blooms that block sunlight from vital underwater grasses. When these plants can’t do photosynthesis, pH levels rise, oxygen diminishes, and carbon dioxide remains which results in dead fish. For us humans, we also experience harmful effects of synthetic fertilizers through groundwater contamination and air pollution.

Unfortunately, it’s not that simple. Synthetic fertilizers shouldn’t be blindly painted as the villain. In fact, they’ve played a crucial role in global development. The Haber-Bosch process which is required to create synthetic fertilizer is considered one of humanity’s great inventions. Case in point: currently, nitrogen-based fertilizers support approximately half of the global population:

The introduction of fertilizers, along with other farming techniques, enabled us to increase crop yields without a significant increase in land use. Many would argue that this wouldn’t have been possible without synthetic fertilizers. The same substance that’s also causing these environmental problems today.

In addition to it’s not that simple, another key theme in agriculture (and climate, to be honest) should be It’s not all about the gigatons referring to the fixation on GHG emissions as the primary success metric. While a shared goal is necessary to coordinate change, fixating on carbon emissions overlooks harmful ecological effects, many of which are harder to quantify.

For instance, take biodiversity - something that I haven’t seen any climate tech people talk about. There’s two angles to this. As corn, soy, and wheat continue to dominate, what we grow and eat will become more concentrated in these monocrops. Wildlife is also at risk if we don’t improve crop yields as the pressure for food production will push governments and businesses to encroach on wilderness habitats.

Whether it’s through the lens of emissions, land use, pollution, or biodiversity, it’s clear we need to do something. Not just something, but actually several things…

An Umbrella Of Solutions

Out of all possible descriptions, Natural Resources Defense Council’s best captures the ethos of regenerative agriculture (emphasis mine):

As a philosophy and approach to land management, regenerative agriculture asks us to think about how all aspects of agriculture are connected through a web—a network of entities who grow, enhance, exchange, distribute, and consume goods and services—instead of a linear supply chain.

Rather than a well-defined playbook or set of quantifiable metrics, regenerative agriculture is a mindset that recognizes the interconnectedness of agriculture. Therefore, the changes that embody regenerative principles are a holistic suite that impacts fertilizers, water, crops, livestock, and soil. I couldn’t help but notice that the menu of regenerative improvements tends to be more qualitative and less prescriptive than other climate areas, like energy. This is in stark contrast to organic farming which has a dedicated Standards Board that’s a part of the Department of Agriculture. While we can easily spot the certified organic stickers (and prices) on organic produce at Whole Foods, “certified regenerative” has yet to become a thing, which is reflected in the actual list of regenerative solutions. We know that all the following solutions are helpful, but to what extent and in what proportion, we don’t know.

Fertilizers play an important role in increasing food production without having to expand in land use, but there’s also consequences. Synthetic fertilizers are derived from fossil fuels via the Haber-Bosch process and excess runoff leads to pollution and algal blooms. An obvious critique of reducing fertilizer use is the potential reduction in crop yields. However, in a decade-long study with 21 million smallholder farmers, yields increased by 11% while nitrogen fertilizer use decreased by around 15%. The result of producing more goods while also reducing costs: $12.2B. The results, accomplished through evidence-based management recommendations indicate that it’s totally possible to reduce fertilizer use without having to sacrifice yield size.

How we manage crops also plays a huge role in this complex web of systems. Today, the vast majority of farms grow one crop (often corn, soy, wheat or cotton) and one crop only. This monocrop approach wrecks soil health which is highly correlated with carbon sequestration potential. To solve this, just do the opposite. In between harvest and planting seasons, grow cover crops which help with soil erosion, nutrient management, and weed suppression.

Since crops each have their own specific nutrient requirements, growing too much of one crop type can lead to nutrient depletion. Rotating between cereals, legumes, oilseeds (and cover crops) is an effective mitigation. Especially legumes because they can actually offset synthetic fertilizers through this nifty process called nitrogen fixation. Avoiding tillage is also key because plowing through farmland to prepare it actually destroys soil structure which exacerbates erosion.

To me, water is an underemphasized part of climate because it often isn’t considered a direct part of the emissions equation. Which is kinda ironic because the planet is mostly water (71%) and so are we (60%). Globally, we use 70% of freshwater withdrawals for agriculture with the proportion decreasing as a country becomes wealthier and presumably more advanced in agricultural practices. In order to avoid erosion, droughts, and further risks, efficient irrigation is critical. In keeping up with the theme of interconnectedness, it turns out when soil is healthy, it retains water more effectively. We can also draw on the wisdom of our ancestors. Across the world, farmers have relied on contour cultivation (terracing) to control water flow efficiently and reduce erosion. You may have already seen this if you’ve been to Bali or Cusco:

Here’s where it starts to get interesting. The integration of livestock is the most controversial aspect of regenerative agriculture because it doesn’t perfectly fit the rest of the climate narrative. In this situation, what’s good for the crops and soil is also introducing emissions. However, bringing in livestock like chickens in conjunction with cover cropping is actually quite helpful. Livestock takes plant biomass and converts it into nutrients for soil via their “natural fertilizer”. This just goes to show that it’s not as simple as getting rid of all livestock. In reality, the buzzword-y “integration of livestock” is simply going back to the natural way of letting animals eat and poop.

Last, but certainly not least: Soil - the most critical piece of the agricultural pie. Soils remove ~25% of global emissions each year and sadly, modern agricultural practices have already led to the loss of 50-70% that they once held. The scale we’re talking about is massive:

The Earth’s soils contain about 2,500 gigatons of carbon—that’s more than three times the amount of carbon in the atmosphere and four times the amount stored in all living plants and animals. - Columbia Climate School

A quick primer on how soil carbon sequestration works:

From an emissions perspective, soil is the most important of all the aspects of regenerative agriculture. Crops, fertilizers, water management, and livestock integration all ultimately impact soil health and carbon sequestration potential. Once again, everything is interconnected in this complex system. A helpful framework is: increase carbon inputs into soil, decrease the output of carbon from soil, and increase efficiency of soil’s ability to store carbon:

Everything under the umbrella of regenerative agriculture seems to point towards returning back to the natural way of farming. In theory, we could scrap all of these modern techniques like synthetic fertilizers that were once heralded as humanity’s greatest inventions, but I don’t think that’s the solution. Sure, in theory a farmer could be regenerative without any sensors or sophisticated equipment, but this viewpoint fails to remember something critical: we need to feed the global population and care for the planet. In my own words, regenerative agriculture combines the wisdom of historical (and often indigenous) farming practices that honored and respected the land, water, plants, and animals with modern tools that help us understand and leverage long-view farming practices.

Challenges With The Regenerative Vision

Keeping it real, there’s a long way to go. The vision of regenerative agriculture sounds amazing, but there’s a number of hurdles. To start off, there’s no standard definition for regenerative agriculture. Without any legal or regulatory definition of the term, it’s harder to make collective progress. If it can’t be defined, then how will we create a shared playbook that can be deployed across the 500 million farms around the world?

Even if we have a sense of what we should do, that doesn’t equate to reality. The majority of farms operate fixated with conventional practices and mindsets. Switching from conventional to regenerative (still to be clearly defined) requires upfront capital and farmers need to be convinced that it’ll be worth it. Another common concern is potentially lower yields, but research shows that regenerative farming can actually increase and stabilize yields, although the breakeven point may take several years to realize. To make the transition process easier for this already tough, low-margin business, policies like the IRA help smooth out the investment payback period.

Lastly, with soil carbon sequestration, we still lack the proper measurement, reporting, and verification tools to confidently and accurately prop up a soil carbon market. This is not consensus within the climate community and just my opinion, but I don’t think you can charge for carbon sequestration if you aren’t sure how much carbon is actually being stored and how long it’ll be stored for. To be clear, just because we can’t measure it doesn’t mean we shouldn’t do it. We just probably shouldn’t sell it as a product to companies with ESG commitments.

How Can Software Help?

Although most of the solutions seem quite physical at first glance, software still has a role to play. Precision technologies like GPS, remote sensing, and drones help us to measure and monitor soil health. Analytics and modeling tools incorporate soil health data with pest & disease patterns as well as weather forecast to inform farmers on risks and influence decision making. General farm management software, like any vertical-specific project management tool, helps to streamline operations. There’s also an entire soil carbon market full of startups, but after 93% of the carbon offsets Chevron turned out to be junk, I’m hesitant to advocate for anything related to the voluntary carbon offset space.

Open Questions

• Can regenerative agriculture still advance even without the carbon market? Does the math still work for farmers to transition even if they can’t get paid for carbon sequestration?

• Is it realistic to try and make “certified regenerative” a thing? As consumers, we associate organic food to be healthier and better tasting, but is the same true for regeneratively farmed food?

• Can the soil carbon market thrive even if soil carbon MRV remains not 100% verifiable / permanent? What is the margin of error that buyers, verifiers, and regulators are comfortable with assuming that 100% is very hard to achieve?

• What is the stack rank of regenerative farming practices and in what order? Throughout my research, I couldn’t find this which suggests maybe it’s not a one-size-fits-all approach.

I started out this week thinking I would aggregate all the helpful resources I’ve consumed over the last ten months. Then I’d summarize my learnings on what I’ve found most helpful. I did a brainstorm session, wrote an outline, and even had my headings all laid out nicely. But then I kept procrastinating on the actual writing. Why?

After enough pacing around and distractions, I became self-aware of the strong resistance to put out another climate resource guide. The world doesn’t need another list of climate resources. There’s already some great resource guides (example A and example B).

Not long ago, the mere existence of climate change was heavily debated. Today, there’s an abundance of climate tech content. Whether it’s books, newsletters, podcasts, or social media, the sheer volume of climate content is staggering. We need to galvanize the masses to take action, but there’s also a separate issue of how to keep up with climate. It seems like every day there’s a new bill being passed, startup raising funding, or groundbreaking technological breakthrough. The pace at which climate tech moves combined with the breadth of information often feels overwhelming.

When it comes to drinking from the firehouse of climate tech content, I’ve found tightening the knob to be more helpful than trying to have a bigger mouth. That’s all to say: approach learning about climate with the proper search and filter rather than trying to consume everything.

In starting Build in Climate, I’ve consistently felt imposter syndrome because I’m writing about topics that I start out knowing very little about. Every two weeks, I research and share what I learned (and that’s also in addition to my personal blog and podcast). While I’m far from an expert on any topic in climate, I can confidently say that I’ve had to get good at learning. Every iteration of this newsletter reinforces the meta-skills of information consumption, synthesis, and compression. To combat the information overload in climate, I’m sharing the absolute must-have resources along with the frameworks on how I keep a pulse on what’s going on in climate. Thinking about thinking is a pretty nerdy topic if you ask me, but I think it’s worth the investment given human attention is the scarcest resource in the world.

Today, we’ll be covering the following sequence:

1. Foundations

2. Climate Frameworks

3. Thinking About Thinking

4. Climate Spectrums

5. Getting Specific

6. Finding A Job

7. Keeping Up With Climate

Subscribe now

Foundations

First things first. Before diving in (and before experiencing information overload), everyone should familiarize themselves with the foundations. It’s worth the upfront investment of ~5 hours to ramp up on climate-relevant science and historical data to understand how big the problem is and get an initial sense for what we can do about it. These are must-read for anyone getting into climate:

• To understand just how bad it could get, read Is climate change the greatest threat facing humanity today? - 80,000 Hours

• To get a top-down systems level view on the problem, check out Project Drawdown Foundations

• For a comprehensive deep dive on energy (and adjacent sectors), dive into A guide to the energy transition - Tsung Xu

• And lastly, tinker around with the charts on Our World in Data. There’s ton of topics ranging from energy to pollution to agriculture.

Framing the boundaries of the problem will come in handy because the edges are well-defined. Now we can start to explore and investigate the surface areas within climate.

Climate Frameworks

Frameworks help us think clearly about something, but at the end of the day they’re just abstractions. They’re a tool that’s only worth using if they’re helpful. With that said, here are four of my favorite climate frameworks - two to understand the problem and two to advance towards solutions. Rather than try and memorize them all, only keep what’s useful for you!

Sources and Sinks

At a high-level, the problem of global warming exists due to an imbalance between mostly man-made greenhouse gas emission sources and sinks that store those emissions. Viewing climate change through inputs and outputs simplifies the complexities and sets us up for the next framework for defining what the main objective is.

Reduce and Remove

As Head of Climate at Stripe Nan Ransohoff describes, the goal is to limit global average temperature increase to 1.5°C above pre-industrial levels. Ultimately, every climate solution falls under one of two levers: reduce or remove. In order to address sources of emissions, we must reduce, through carbon-free energy sources, sweeping electrification, and a revamped food system. Without direct intervention, naturally occurring sinks won’t be enough to meet our goal. We’ll have to create entirely new systems that can remove carbon from the atmosphere, at scale.

Atoms vs. Bits

If atoms represent the physical world and bits represent the digital world, then any climate solution can be oriented on this spectrum of atoms vs. bits. The reality is that there are boundless opportunities across pure software, pure hardware or hard science, and solutions that incorporate both. On one end of the spectrum you have Terra, a completely online climate education community and on the other end you have Running Tide which uses oysters for carbon sequestration. Laying it out like this way is another helpful framework to see just how wide-ranging climate tech is.

Software in Climate

In Ben and Nathan’s Guide to Software in Climate Tech, they clarify that we need all hands on deck when it comes to software in climate:

Software can be the product, output the product, deploy the product, enable the product, or design the product.

From financing to marketplaces to running physical devices (bits coordinating atoms if you’ve been following along), there’s opportunities abound for software - the fastest, most scalable lever that we have.

Thinking about thinking

I’ve been framing “climate” as the transition to a decarbonized economy, which helps to convey how climate is a theme, not a specific sector or space. Under the umbrella are potential solutions so diverse that the only thing connecting them is climate. For example, imagine someone who works in consumer marketing for a sustainable fashion brand. Now imagine a battery cell engineer at Tesla. What they have in common is that they’re both “working in climate”, even though they may have little to no overlap in work and live completely different lifestyles.

From how we feed ourselves to transportation to how we work, just about everything has some amount of climate relevancy. What exactly defines a climate company? Do we label them based on their reduction or removal of carbon? Is that potential or proven impact? If it’s proven, then Zoom would be more of a climate company than many climate startups for how many business flights they’ve saved with virtual meetings. If potential, then we’re talking about hypothetical futures, not the practical reality. Rather than paint climate as a black and white landscape, I’ve found it more useful to view things based on how relevant they are to climate.

Which leads me to climate branding. It could be part of their mission statement or embedded in their products. It could be as subtle as using green throughout the company’s website. Different than greenwashing, which is making environmental commitments without any evidence, climate branding is a neutral term. A company branded as climate tech that recruits potential employees by emphasizing its environmental impact could be making a serious dent in carbon emissions. But the inverse is equally valid. A company without any green on their products and doesn’t self-identify as a “climate company” could definitely be a part of the solution. For example, any electrician contracting firm is going to play a key role in the transition to a decarbonized economy, although they may do zero climate branding.

Hot take: Slapping a “climate” sticker on your company’s LinkedIn page or product is mostly just a branding exercise and requires deeper examination. Ultimately, everything is connected.

A few examples:

• Scaling clean energy requires robust software for streamlined deployments, enough skilled workers to install the physical equipment, and an efficient supply chain for materials procurement.

• Climate and AI are not two separate industries. They’re both themes, cutting across just about every industry you can think of and it turns out, there’s a ton of overlap.

• Real estate and adjacent areas (like cement) are so deeply intertwined with emissions that there’s an entire VC firm called Fifth Wall (with billions in AUM) investing at the intersection of climate and real estate.

• Family planning and Education is the third most impactful climate solution according to Project Drawdown due to the ripple effects of lower fertility on energy, building usage, food waste, and transportation. Access to education leads to sustainable consumption choices, helps spur climate action, and steers people towards climate relevant jobs.

Lots of inputs and a strong filter

What’s the best way to learn about climate? Well, it’s probably the same as you would learn about anything. Morgan Housel shares why information consumption relies on many inputs, but a narrow filter:

Without flooding your brain with inputs you’ll be stuck in the teeny tiny world of what you’ve personally experienced. But without a strong filter you’ll be overwhelmed with choice and paralyzed by inaction.

But then the question remains - how do you get a strong filter? After grasping the foundations and familiarizing yourself with climate frameworks, it’s time to start forming your own opinions. Through your own climate beliefs, you’ll naturally start to pay attention to specific climate areas. The “strong filter” that Morgan refers to can only organically emerge through intentional, directed curiosity.

Climate Spectrums

I’m a proponent of the abundance agenda, the notion that in order to move forward as a society, we need more. More clean energy, more housing, more doctors, etc. Specifically in climate, we need to adopt a “yes, and” mentality. In the aggregation of all climate solutions, we’ll need individual and collective action. We’ll need distributed energy resources like solar panels and a grid with robust transmission. Lab-grown meat and reducing food waste both help to decarbonize our food systems.

Ben and Nathan agree:

everyone who works deeply in the space knows that we have no silver bullet. We need more solar and nuclear and to replace every gas appliance we can and to electrify transport and to revolutionize agriculture and to build a new financial stack and and and and. The scope of this transition requires us to blow on hundreds of dandelions to scatter thousands of seeds of ideas and talented people to build over the decades to come.

However, this is all from the perspective of how do we, as a collective society, solve the problem. At the individual level, answering “What do I do in climate?” with a hodgepodge of climate solutions can result in information overload and subsequent decision fatigue.

Along the way of my own climate journey, I’ve started to form my own beliefs about how we move forward in climate. I often find myself in some amount of disagreement with other folks in climate which I think is actually a good thing. It’s important that we debate ideas rigorously and hold opposing viewpoints since we all care about solving the same problem. If everyone in climate was in consensus, then we’d all be in an echo chamber full of seemingly tree-hugging hippies.

Examining your climate beliefs will help guide you towards a more specific, tangible role to play. In reality, the set of climate solutions will be a weighted portfolio. Exploring climate through a series of spectrums can help you figure out which specific area(s) to bet on. You can think of it like one of those silly Buzzfeed quizzes that tells you which Hogwarts house you’d be sorted in. Useful if the result resonates, but otherwise just a thought exercise.

There’s many ways to organize the possible climate solutions and here are just some. See where you sit on these and if you’re pulled towards a particular topic or pushed away from others. Either way, it’s helpful to narrow down on what to pay attention to within climate:

• individual vs. collective action

• de-growth vs. green industrialism

• scaling existing solutions (like solar + wind) vs. future bets (green hydrogen and direct air capture)

• distributed Energy Resources vs. the grid

• carbon tax vs. carbon removal

• EVs everywhere vs. public transit

• carbon insetting vs. carbon offsetting

• plant-based protein vs. cultivated meat

• vertical farming vs. regenerative agriculture

Getting specific

Through researching various topics for several months now, I’ve realized that finding resources is not the main challenge. In the grand scheme, finding things to read or people to talk to is not that hard. The real challenge is in constructing a reality tunnel customized for your personal beliefs that optimizes between exploring broadly and going deep on specific areas.

Finding information more or less will feel like stumbling into insights if you’re already paying attention to the right places. Like any good historian or archaeologist, it’s best to get as close as possible to the primary source. Talking to engineers, scientists, founders, and investors who spend their days immersed in one idea is by far the highest leverage way to learn. Getting on the phone with experts can be tricky so the second best way is to carefully and thoroughly digest deep dives written by people who are already putting in the work. Deep dives like this one on materials by Tsung Xu or this one on carbon dioxide removal by Jamie Wong.

Going beyond articles which are inherently one-time and one-directional, communities are another great way to ramp up fast. There’s larger, general climate communities like My Climate Journey or Work on Climate which have dedicated channels for specific topics. That works, but I’ve found that the more focused the community is, the greater the concentration of curious, dedicated people. Some examples include AirMiners for CDR, DER Task Force for energy, and Activate Fellows for the hard sciences.

Finding a job

Although finding a job and founding a startup both require rigorous learning, they have fundamentally different objectives. While the majority of employees are hired through public job postings, startups are founded on hidden insights. There are plenty of climate job boards out there like ClimateTechList. On the other hand, finding “the right idea” can often feel like wandering blind through a maze that keeps shape-shifting.

When deciding on a job offer, you have to reach a level of comfort in someone else’s idea in exchange for a paycheck. When starting your own startup, you have to feel even more confident because you’re committing to work on something very hard for a long time that has a statistical track record of mostly failures. Emerging founders also have a higher conviction threshold than prospective employees because they’re signing up for a bigger commitment. The average tenure of a tech employee is only three years while it usually takes between seven to ten years for a startup to exit.

Finding a climate job often requires choosing from a pre-determined, well-defined set of options. Building a startup is threading the needle between recognizable problems and non-consensus potential solutions. While the former has a looser, wider set of constraints like “I want to work on clean energy software for at least $150K”, the latter requires a tighter, narrower scope like “We streamline residential solar installations by helping installers automate their design phase using Lidar and geospatial data”.

If you’re seeking a job in climate, I recommend reading Nan Ransohoff’s Finding a job in climate and checking out Work on Climate. Also, don’t sell yourself short! As discussed earlier, climate touches every sector. Chances are, you already possess valuable skills and experience - even if it’s from a “non-climate job”.

Keeping up with climate

I’ve already referenced a few foundational readings and deep dives, but truly keeping up with climate requires some amount of recurring information (and I’m not talking about the news). It sounds obvious, but staying in the loop requires following sources that consistently share new information. In keeping up with the whole “there’s already enough climate content out there” theme, I’ll distill my recommendations to only a few:

For newsletters, check out:

• Keep Cool

• Climate Tech VC

And consider following climate folks on Twitter. Start with these four and then you’ll be able to find more people to follow from there:

• Nat Bullard

• Nan Ransohoff

• Zeke Hausfather

• Hannah Ritchie

I hope you found this useful! Today, there’s an abundance of opportunities in climate and there’ll only be more in the future. Progress starts with a mindset that fosters long term, intentional learning.

Every time I’ve driven down I-5 from the Bay to LA, I seriously question why I still eat meat. I wish I could say it was the hours of solitude that provided ample breathing room to contemplate the health, ethical, and environmental impacts of animal agriculture, but that would be a lie. It’s more external and a bit suffocating. You see, about halfway in, I inevitably end up by Harris Ranch, California’s largest beef producer. They churn out 150 million pounds of beef per year, earning the nickname ‘Cowschwitz’. Thus, you smell it before you see it. Even with the car windows closed for aerodynamics and A/C, the putrid fumes ooze on in. As the smells of ammonia from concentrated urine and raw manure make my eyes water, my hands tighten on the steering wheel and morals get cross-examined.

I’m admittedly a reluctant omnivore. I still consume meat, eggs, and dairy sometimes even though I’m aware of the impact and of my lactose intolerance (ice cream is my kryptonite). I’ll even occasionally partake in the worst of them all: methane-burping beef (70% of livestock emissions are from beef and dairy cattle).

Although I’ve dabbled in going cold turkey and made strides in reducing overall meat intake, I still can’t seem to give it up. The reality is meat tastes good (and we’ll get into why this doesn’t need to be proven wrong in order to transition the meat industry). While this results in cognitive dissonance given my passion for climate, it also gives me the opportunity to examine this complex, societal problem through my individual behavior. I probably won’t be able to convince any Liver King fanboys or raw vegan hippies, but I can appeal to the majority.

In this piece, I cover the climate problem with animal agriculture, how cultivated meat is the next exponential technology after solar and genome sequencing, and what opportunities lie ahead. Hopefully I can be sufficient with stats and science so I don’t have to cover my body with fake blood and lie outside a butcher shop like some alumni from my alma mater (go bears!)

Subscribe now

Problem

There are a lot of issues with how we currently produce food. Feeding the world’s population constitutes 26% of global emissions, of which 57% comes from livestock. If you’re doing the math, that’s 15% of overall emissions or 4x worse for the planet than airplanes.

But what if the nutritional value justifies it? We can’t just eat leaves all day. Sadly for the gym bros and carnivores, the math doesn’t check out. We use 77% of agricultural land for animal products, yet only 37% of our protein comes from meat & dairy. From a pure calories perspective, meat also doesn’t make much sense. It takes 100 calories of grain to produce 12 calories of chicken or 3 calories of beef. As a result, two-thirds of all crops are produced for animal feed and almost 80% of agricultural land is livestock-related even though it contributes only 18% of global calories.

To reiterate the scale of this problem and why we need to embrace a “yes, and” attitude, a study found that “even if fossil fuel emissions were eliminated immediately, emissions from the global food system alone would make it impossible to limit warming to 1.5°C and difficult even to realize the 2°C target”. That’s a BFD.

We typically measure progress via tons of carbon avoided or removed as the north star metric, but that’s just one way to look at it. What we actually care about is the health of our fellow humans, other living organisms, and our home Earth. “Save the planet” doesn’t strictly mean minimizing GHGs. It’s an all-encompassing battle cry that includes prioritizing land use for living over slaughtering, keeping air and waterways pollution-free, and avoiding future pandemics. Ultimately, these things are all intertwined and unfortunately, the meat industry is failing us on all fronts.

In pursuit of growth and profit margins, the meat industry forcibly pumps animals with antibiotics from birth to death. Nearly 80% of all antibiotics produced in the U.S. are for animal agriculture. This intensive practice would be the equivalent of bathing in hand sanitizer to avoid the common cold. Although I prefer my food bacteria-free, there is a risk to dousing our food in germ-killer. Every soap bottle says it kills 99.9% of bacteria for a reason. The 0.1% survives and with enough iterations of natural selection, antibiotic resistance develops which results in black swan events (cough, cough pandemics).

Air pollution and the greenhouse effect are connected, but different. Going back to my road trip horror story, I practically choked on the thick polluted air, but not because it was densely packed with GHGs. These crowded meat prisons literally produce piles of sh*t which emit hazardous concentrations of ammonia into the air.

History shows that as societies get wealthier, its citizens consume more meat. We’d be more optimistic about the animal agriculture transition if we were already at “peak meat”, but sadly the opposite is true. We’re on track to eat even more meat:

Weighing in at 15% of global emissions, animal agriculture is one hefty contributor and for what? Juicy steak and a protein-rich diet? How can we still justify short-term, individual satisfaction over long-term preservation of the planet? From land use to antibiotics to nutritional efficiency, there’s plenty of non-climate reasons to get off conventional animal products. Answering why things haven’t changed much requires examining why I still eat meat.

Why do I still eat meat?

While I have gone through temporary periods of abstaining from beef or brief streaks of meatless meals, I have yet to fully commit to a vegetarian or vegan diet. Rather than profess my guilt and acknowledge the irony in writing about climate as a meat-eater, let’s look at the systemic forest instead of the individual tree.

Are the choices that we make actually made by our pure intentions or are they shaped by veiled incentives and our environment? In the Tyranny of Convenience, Tim Wu makes the case that “Convenience is the most underestimated and least understood force in the world today… Convenience seems to make our decisions for us, trumping what we like to imagine are our true preferences.” When I (and the vast majority of America.)) go out to eat, we’re greeted by a menu of mostly meat options. Trying something new, regardless of climate, requires first surmounting inertia. Experimenting (and actually sticking) with plant-based options requires convenience to switch, but also a superior or at-par product.

Simply put, today’s alternative protein products don’t meet the meat benchmarks. While plant-based meat is obviously better when it comes to the environment, the animal version still reigns supreme across protein, processing, and taste. Comparing Chipotle’s equal-priced protein options, the tofu-based sofritas has only 25% the protein of chicken.

At the grocery store, you might find brands that mimic meat with purposefully misspelled names like Chick’n, Toona, and Tofurkey. While these products wouldn’t exist unless they catered to a legitimate consumer base, I’m doubtful that these are our animal agriculture saviors. These soy-based, fake meats struggle to compete since they’re heavily processed, high in sodium, and even more expensive.

It’s impossible to discuss meat alternatives without highlighting the two players who have come the closest to breaking through to the meat-lovers crowd: Impossible Foods and Beyond Meat. At first, these two companies both backed by Bill Gates took the world by storm. But in the last couple years, the hype has sharply reversed. Since going public, Beyond’s ($BYND) stock price has declined sharply, but what’s more concerning is their decelerating growth rate:

At the beginning of 2022, McDonald’s partnered with Beyond to launch the McPlant burger, but that’s since been shut down. (note: BK went with rival Impossible and that’s still on the menu)

With inferior taste, texture, and a non-competitive price point, alternative proteins still have to reach the masses. “Despite the increasing alarm over climate change, the number of Americans who are vegetarian or vegan has remained relatively stable over the last 20 years.” That’s because the current alternatives aren’t actually meat; they’re plant-based. Even Impossible, which uses heme (what makes meat taste like meat), is still mainly composed of soy.

There is hope though. Rather than make plant-based as close as possible to real meat, some are growing meat in a lab. The end product would be nearly indistinguishable from real meat - because it would actually be meat.

Transitioning from plant-based to cellular agriculture

It’s easy to lump everything together every alt-meat company under one umbrella, but they’re not all the same. While the plant-based alternatives have failed to crack the meat market, there’s a more innovative challenger that many are betting on - cellular agriculture.

Cell-ag is the process of extracting animal cells and growing them in a controlled lab setting to produce cultivated meat akin to the real deal. Although there’s a number of challenges, this method is the most promising because it’s nearly identical to slaughtered meat in taste, texture, and nutrition.

Beyond taste, cultivated meat is also the better solution for the environment. When compared to conventional methods, it’s more efficient on every aspect:

It’s great that we have this hypothetical technology that combines tissue engineering, molecular biology, and synthetic biology, but there isn’t anything substantive (yet). So what gives? To put it directly, it takes time for new industries to not only form, but also replace incumbents as entrenched as the meat industry. The cultivated meat industry is still relatively young, but been steadily growing over the last 8 years:

To understand “why now?”, let’s look at the history of the underlying technology. Just ten years ago, it cost $300,000 to make just one cultivated meat burger. In 2021, a cultivated chicken breast cost $4. If this trajectory continues, we can project cultivated meat will follow a similar exponential cost reduction curve as semiconductors (Moore’s Law), solar panels, and human genome sequencing:

But how does it actually work?

Manufacturing meat in a lab is no easy feat. It requires high-precision equipment operated with expertise in a controlled environment. As a result, cultivated meat production facilities look more like a pharmaceutical lab than indoor animal farm:

At a high level, the four steps to cultivate meat are Extract, Cultivate, Grow, and Combine.

1. Extract: It starts off with a biopsy of the animal species. Different cell types are sampled including muscle, fat, and multiple kinds of stem cells.

2. Cultivate: Cells are sorted and selected based on quality and purpose.

3. Grow: Cells are grown in oxygen-rich bioreactors called cultivators by feeding them amino acids, glucose, vitamins, inorganic salts, and other proteins.

4. Combine: Tissues are harvested, combined, and layered in a technique called scaffolding. This process depends on the structural sophistication of the end product. For example, hot dogs are the easiest, followed by minced products like hamburger meat, with the most complex being steak or similar products.

All this takes anywhere from 2 to 8 weeks, depending on the kind of cultivated meat (significantly faster than conventional animal agriculture).

There are many ways to slice-and-dice the meat market

Painting a picture of the alternative meat landscape requires framing the boundaries first. Generally speaking, I think anything that reduces emissions generated from conventional animal farming should count. There’s a variety of approaches ranging from direct meat replacements to individual protein types to specific optimizations that all reduce emissions in their own way.

Direct Replacements (both plant-based and cultivated)

There’s a plethora of players here tackling every meat product each in their own way. Upside Foods (fka Memphis Meats) is the OG in the space with their cultivated chicken breast. Mosa Meat is going after the beef industry with their cultured burger. Black Sheep Foods makes predominantly pea-based lamb. Meati and The Better Meat Co are leveraging naturally protein-rich mushrooms. With its hybrid approach of blending plant-based and cultivated meat, Sci Fi Foods is aiming to solve the taste problem of plant-based while avoiding the high price point of a purely cultivated product. Last but not least, there are also dozens of alt-seafood startups, like BlueNalu with their cultured bluefin tuna.

Animal Products

Even though the main product is the meat itself, there are still massive markets for meat derivatives. Whether it’s Perfect Day for whey, Zero Cow Factory for casein, or GELTOR for collagen, there’s at least one challenger looking to flip the script.

Dairy

Out of all aspects, milk is perhaps the furthest ahead in the transition. 25% of the milk market is already non-dairy. In recent years, the two largest dairy factories Borden Dairy and Dean Foods, have gone bankrupt.

But you already see it with your own eyes. When you walk into a coffee shop and order your drink, they ask you what milk you want rather than assume. You might already know about Califia Farms and Ripple Foods with their plant-based products. There’s also Remilk and Better Dairy going the cultured route.

Eggs

Whether it’s baking, omelettes or simply hard-boiled, eggs play a key role in cuisine. The biggest player is JUST with their suite of scrambled products. But there’s also my friend Grace’s chickpea-based Peggs and EVERY with their version of egg whites.

Methane

This last section is cow-specific. With the beef industry responsible for 40% of methane emissions and 6% of global emissions, there’s a ton of attention on how to reduce or even eliminate these harmful burps and farts. The least-scientific, Zelp is putting muzzles on cows.

Then there are several startups that are tackling the problem through feed additives. By supplementing animal feed with algae and other similar compounds, companies like FYTO, Mootral, Rumin8, and AlgaBio are able to reduce methane from cows by up to 85%. The biggest moonshot of them all is ArkeaBio which is administering vaccines to reduce methane emissions in cows.

How is software relevant?

Even though growing meat in a lab is largely a function of combining hard sciences with hardware, software still plays a crucial supporting role. From an R&D perspective, researchers use software tools to design and simulate cell lines. For the actual production process, bioreactors (or cultivators) are controlled via software that can manage temperature and pH balance, as well as nutrients and waste management. To manage the inflow of materials and outflow of finished product, supply chain tools coordinate logistics. In conjunction with sensors, analytics software is used to identify patterns and detect insights. To maintain compliance with the FDA and other regulatory bodies, companies need specific tools that can streamline the reporting process.

Climate is a theme, everything is connected

Although I first decided to investigate the animal agriculture industry from a climate perspective, it’s clear that there’s so much more to this multilayered, complex problem. Beyond contributing to emissions, the meat industry is responsible for other types of harm and potential risks. Growing crops for animal feed and raising the animals themselves occupies land that could be used for housing. With 80% of overall antibiotics going towards the meat industry, there’s a risk of antibiotic resistance developing. Recent pandemics (COVID-19, Ebola, MERS, swine flu) are zoonotic, meaning they originated from animals. Relying on conventional methods for meat, but also deforestation which brings society closer to wild animals only increases the odds of another pandemic. I haven’t even touched on ethics that much, but it wouldn’t surprise if in 50 years we look at eating animal meat as this selfish, barbaric act just like we have changed our views on other relics of the more primitive past.

From an individual health standpoint, there’s tons of conflict advice. Carnivores say meat is supreme while a decent number of athletes have gone vegan for performance reasons, among others. Although there isn’t consensus on whether meat is good or bad for our health, there are two anecdotes that I find fascinating. Bryan Johnson is known for spending millions a year to meticulously follow his blueprint for living a long, healthy life. His vegan diet consists of just 2,000 calories per day and is largely vegetables, nuts, and legumes. With their traditional lifestyle and only a few thousand remaining, the Hadza have become the subject of several research studies. Located in Tanzania, the group of hunter-gatherers have a healthier gut microbiomes than that of modern societies. Studies have linked their robust microbiome to a fiber-rich diet and also shown that your microbiome changes dramatically based on what you eat.

Finally, it’s worth touching on food security. With conventional animal agriculture, meat is imported because the ideal environment to raise animals may be different from where demand is. Switching to a lab-based means of production removes this constraint because you can build the production facility just about anywhere. Without a large animal agriculture industry of their own and plenty of neighbors surrounding them, it’s no wonder why Israel and Singapore have been huge proponents of the cultivated meat movement.

Current and future cultivated meat production facilities:

Open questions

• Should rapidly developing countries like India, Nigeria, and China have the right to consume meat at similar levels as western societies without any pushback?

• Are there any existential risks to the future of cultivated meat? It seems like it’s still expensive and there’s more improvement needed on the actual product, but that will be addressed with incremental iterations over time.

• There’s at least a few climate spectrums. With energy, there’s DERs vs. greening the grid. In carbon, folks debate the necessity of pioneering removal technologies. With meat, it’s cultivated vs. plant-based meat and also lab-grown vs. improving current practices like reducing methane emissions from cows. We will try all of them, but I wonder which approach wins over the long run and to what extent?

• If lab-grown is the superior way to produce meat, then what’s the equivalent for plants? Vertical farming? (the topic for the next newsletter!)

• Can we just simply make plant-based meals taste better? This might come across as a joke, but consider for a second what proportion of the culinary industry and media still center meals around meat. If plant-based meals tasted as good as meat-y meals (and I’m sure it’s already happening), then I think more omnivores would convert or at least reduce.

  Thanks for reading Build in Climate! Subscribe for stay in the loop :)

Thus far, human civilization has continued to advance through increasing novel ways of combining and transforming existing resources into more useful products. Gasoline, plastic, and fertilizer were once (literally) ground-breaking inventions. Now we take it all for granted. We should acknowledge the technological and societal progress built off fossil fuels, but we also need to move on.

By delaying the tangible environmental symptoms from extracting resources into the future, our ancestors were morally freed to pursue progress without having to think about the long-term consequences. I don’t blame them though. If I didn’t have to deal with the repercussions, I would also get around via gas-powered car instead of horse-drawn buggy.

Prior generations observed the limitations of the natural world and took matters into their own hands by plundering and pillaging rainforests, oceans, and petroleum reservoirs. Less than 200 years later, we’re attempting the opposite. We’ve recognized the limits of man-made machinery that runs off finite resources and are embracing the regenerative natural world again. We’re programming biology to do what we thought it could never do.

Biology is the most powerful manufacturing platform

Let’s start off with a brief refresher on high school biology. Every living thing is made up of DNA, the software of life. Upon closer inspection, every ribbon of DNA is composed of nucleotide base pairs. Similarly, computer code is just a sequence of words that can be broken down into individual characters. Both systems of code can be broken down into the atomic units.

In DNA, it’s the four nucleotides: adenine (A), cytosine (C), guanine (G), and thymine (T). In software, it’s binary: 1s and 0s. While the names and properties might differ, both share a programmable -and therefore - transmutable nature. This revelation is what led researchers and engineers to ask: What if we could program DNA like code?

The machine code of the genes is uncannily computer-like. Apart from differences in jargon, the pages of a molecular biology journal might be interchanged with those of a computer engineering journal. - Richard Dawkins

But first, we needed a couple technological breakthroughs. In 1973, we got molecular cloning; allowing us to copy-and-paste DNA on a one-to-one basis. A decade later, PCR was invented, unlocking DNA replication at a one-to-many scale. With just a tiny sample, billions of copies could be produced, arguably resulting in the creation of the biotech industry.

As the cost to write specific DNA at scale declined, so did the ability to read, or sequence, entire DNA sets. Since 2001, the cost to sequence became 100,000x cheaper, even exceeding the trajectory of Moore’s Law:

The convergence in biology and computing is unfolding now. It’s only a matter of time before we can fully harness “the only functioning nanotechnology that we know of: living systems”. Armed with the triple-threat technological toolkit of measurement, modification, and mass-production, the field of synthetic biology was born.

Okay cool, but how is this relevant in climate?

As consumers living in the 21st century, we have access to the largest set of products ever in existence, but we also have the luxury of not having to know how those items are made. Whether it’s steak wrapped in saran wrap at the grocery store or stretchy Lululemon pants, the modes of manufacturing are abstracted away from us. We don’t need to slaughter the animal or drill the crude oil ourselves. But if we start to channel that long lost childlike curiosity like asking mommy and daddy how babies are made, then we arrive at a shocking finding: all these nice things are made from finite, GHG-emitting, raw materials.

It’s the petroleum industry’s world, we’re just living in it.

Trying to live a life without petroleum would be quite the sight because you would have to walk around naked everywhere. Yeah you read that right. Tires for cars are made from rubber and our clothes are made from synthetic fabrics like polyester, nylon and spandex.

It’s hard to picture a world where we collectively give up modern conveniences like toothbrushes, electronics, and medical devices. Then that leads to an interesting thought: What if we hold the end product constant and examine alternative means of production? How can we produce useful things like plastics, fertilizer, textiles, and consumer goods without relying on petroleum as the starting point? How can we make energy-intensive processes like agriculture more efficient and yield generating?

It turns out this is exactly where synthetic biology comes in. By decoding proteins that are traditionally found in animals, we now have cheese with casein and beef with heme (the thing that makes meat bleed), completely plant-based. Zero waste and zero footprint fertilizers are being developed to replace the standard nitrogen-based ones (2.5% of global emissions).

Within materials, there are upgraded, synbio versions of plastics, leather, and even wood being developed. These are just some examples of how synthetic biology is unlocking new ways to make things. There are even some folks working on methane-eating bacteria. If we can engineer biology to produce what we want, perhaps it’s possible for it to remove what we don’t want?

But rather than continuing this monologue of how synthetic biology will transform climate, I sat down with Austin Che, co-founder of Ginkgo Bioworks (the largest synthetic biology company), to learn more.

Interview with Austin Che, Co-founder and Head of Strategy at Ginkgo Bioworks

The following interview with Austin Che is intended for informational purposes only and should not be construed as financial advice. The information provided in this interview is based on publicly available information and the interviewee's personal views. Readers should conduct their own research and consult with a financial professional before making any investment decisions.

This transcription has been lightly edited for clarity and to remove any unnecessary elements. However, the content of the interview has not been altered in any way that would change its meaning.

Could you describe in your own words what Ginkgo Bioworks does and what you focus on nowadays?

What we do at Ginkgo is program cells. We re-engineer DNA and bring new functionalities to organisms. And so our view is that just like computers are programmable, biology is programmable. We can harness the capabilities of biology for human purposes. We're working with customers in all sorts of industries. We think that some bio could touch any industry that's physical, like it's basically programming matter, moving atoms around. Biology is the most complicated and global example of moving items around. We have customers in traditional bio areas like pharma, therapeutics and food and ag and so forth. But there are also materials, chemicals, in climate, in many different areas. I think the possibilities have just started. We haven't really tapped all the potential biology yet.

What do you think is the primary bottleneck right now?

I think our bottleneck is our understanding. Right now, even the most complicated thing we do is like tinkering with what nature has given us. And 99% is what's out there and we are just making small modifications. We don't really understand or we can't build from the ground up a new organism. So I think we're still in the play phase of understanding what we can do because we just don't know how to engineer things. Like the design part, like figuring out how to, how to do it. The way we are programming is sort of like the Stack Overflow type programmer. You're just searching for a snippet here and there and you copy and paste and that's it. We don't actually understand how to make something that well.

Why are all of these things converging in 2023? What needs to happen over the next five, ten years to continue this trajectory of change?

I think we are getting real good at the underlying, like reading and writing of DNA. The challenge is what to write, right? And so it's the design tools, it's the smarts, the intelligence, the training of the equivalent of programmers.

None of that exists. The art of programming biology is in infancy. Just because we can do it, doesn't mean we know how to do it. Some of that is collecting data, just trying and failing and learning, and that's Ginkgo's model. Our foundation is - we don't believe that you could yet have a black box software or even a person that just says “design something” and it works the first time.

It's not at the level of designing a bridge or complicated electronics or aircraft or like things that just work the first time. They have enough tools that even though they're very complicated, they know it'll work. In biology, we have to try a bunch of things and learn from it. And so that's why we built out the physical infrastructure to try lots of experiments and hopefully learn from that.

In terms of knowing what to program, would you say right up until now, the things that are being produced using Ginkgo's technology are a one-to-one swap out of existing products? By looking at what materials made expensively or inefficiently and then trying to find better ways to make them?

Some of our projects are direct replacements. We have projects to make a variety of chemicals. We have projects like replacing fertilizer. But there are also things that you couldn't do otherwise. We have a project in therapeutics to engineer your gut microbiome to have a therapeutic effect. And it's actually completely different than any replacement. It's a completely different modality for delivering a therapeutic to just engineer microbes.

And I think generally, live microbe applications is gonna be different. There's the category of using the microbe as a factory, where at the end of the day, the microbe doesn't exist anymore. So whatever product you're making may just be a dropdown replacement for whatever that already exists, or maybe a new, new thing. But at the end of the day, it's just a factory. It's just a tool.

And then there's the class of things where the organism is the product. And that's a new class of things which we don't really see otherwise elsewhere. It's living. Like what if our buildings were alive? What if things that we're creating were all alive and could adapt and heal and have all the properties of organisms? How would that change things? Does that open up new applications?

Last one - you started Ginkgo back in 2008. It seems like you're still cranking on this multi-decade long vision. I'm curious what keeps you going these days?

We haven't achieved it. Our vision is to make bio easier to engineer. I would say it's still not there. We have a much greater scale than when we started, but we've been talking about it -  it just still feels like we're just banging on the keyboard and hoping something good comes out. I would like to see you guys get to a much more rationally engineerable place where you can do cool stuff.

Back to Synbio x Climate

Synbio’s role in climate is just starting to play out. Starting in 2010, companies like Beyond Meat and Impossible Foods were formed, but there’s clearly still a long way to go with displacing the meat industry. A few years later, another wave was born, focusing on producing chemicals, textiles, and foods with engineered biology. While the first two waves are still playing out, a third wave is starting to form in synbio x climate: carbon dioxide removal. One day we may just be able to engineer living organisms to eat carbon dioxide and methane.

Actually that’s already happening today. Solugen, a $1.8B Houston based startup, builds biology-powered facilities that use enzymes (instead of petroleum) to produce a variety of chemicals. Their pitch to MIT’s Entrepreneurship Competition sums it up well: We use enzyme engineering to convert CO2 into high value chemicals. Even attempting to bucket the startup into climate tech vs. synbio vs. chemical manufacturing would be futile because in reality it’s all of the above. Although time will tell, Solugen’s strategy in competing directly on performance, price, and safety is what all climate companies should be striving for - avoiding the green premium and winning because of a superior product.

For further reading check out 1) CTVC’s interview with the founders and 2) Elliot Hershberg’s recap on his visit to Solugen HQ.

Something that Austin touched on in the interview is the reality that these nascent technologies all need to serve a market. Right now in climate, it’s hard to say how big or serious the market is, compared to the tried-and-true therapeutics industry (making drugs is lucrative). Merely solving for feasibility is not nearly enough. Bringing synbio x climate to life requires the crafty coordination of talent, capital, and policy.

Conclusion

I resonate with Elliot Hershberg’s framing of synbio’s orientation towards progress and abundance rather than stagnation and degrowth:

Synthetic biology is a technological discipline. It is also a philosophical and aesthetic preference towards green. In a world where people are asking themselves whether it is worth having children given their eventual carbon footprint, biotechnologists are thinking of ways to mitigate climate change and grow more life in the universe instead of less. Instead of moving increasingly inwards into the world of bits, partnering with biology offers the potential to realize abundance in the world of atoms.

Just as we can study history as a way to explore human nature, we can examine biology to find new means of production. Living systems are the most complex form of technology in existence and wrangling this biological code will usher in a new paradigm of manufacturing. And from chatting with Austin, it seems like we’re just getting started. 🔬🧪🧬🌍

Knowledge is power. It’s obtained through access to information, but also requires knowing what to do with it. We’re in the midst of an ever-evolving AI revolution with mind-bending products like ChatGPT and Midjourney, but what’s going on under-the-hood? I promise there’s a climate angle to all this, but first let’s look at AI-generated images of Deadpool.

Back in March, when Adobe launched their own AI image generator, Jim Fan put together a thread comparing Adobe Firefly to Midjourney:

As you can see, the differences are clear. Without a trained eye, Midjourney’s Deadpool (right) looks indistinguishable from Marvel’s own studio. On the other hand, Adobe’s… is just not even close. There’s a reason for all this.

In AI, the model is only as good as the training set. The world’s leading AI engineers could team up to develop the best algorithm, but if they don’t have access to the relevant data, then it’s pointless. This explains why Adobe, a $175B company with 26,000 employees, couldn’t come close to Midjourney, a 10 person startup. While Adobe relied solely on fully licensed images, Midjourney did not. Instead, they entered a gray area by training their models on millions of publicly available images.

Across data formats (text, audio, image, video) and functions (sales, marketing, education, design), multiple AI startups charge towards the next frontier. However, this is just the tip of the iceberg. Current AI applications were trained on the easiest to obtain data sets (online and publicly available text and images). There remains a plethora of unexplored data and therefore, undervalued use cases. In some instances, such as in healthcare, sensitive patient information is inaccessible. In other cases, the data isn’t even being measured, as we’ll see is the case in many areas of climate relevancy. That’s starting to change as we now have sufficient incentives to measure our energy usage, ocean waters, soil, air, and landscapes via satellite.

Subscribe now

The potential value of data isn’t evenly distributed

As consumers, we experience our data being measured, analyzed, and transformed back to us in delightful experiences everyday. Spotify has access to our listening behavior and offers personalized recommendations and a shuffle button that seems too good to be truly randomized. We improve our health with glucose monitoring from Levels and sleep tracking with Oura. Even the contentious domain of advertising provides some positive value to us. I’d much rather see relevant hyper-personalized Instagram ads from eCommerce brands than the past days of watching generic TV ads for antidepressants and osteoporosis meds.

As consumers, there are clear quality-of-life upgrades (and potential harm) that our data unlocks, but, when it comes to energy and the environment, we’ve been flying completely in the dark. Companies like Facebook and TikTok know so much about us, yet we know so little about our environment. As momentum builds to solve the environmental crisis, we’ll measure and expose new data types across ocean water, soil, air, energy usage, and satellite imagery. How might we use these data to curb emissions? And what other use cases will get unlocked as a byproduct? That’s what I set out to investigate.

The 5 elements of climate-relevant data

Throughout the history of civilization, humans have endured every major life-threatening crisis from pandemics to world wars. The optimist in me believes that at every existential junction, we embrace human nature and figure out how to survive. As the climate crisis has worsened, the incentives and motivation to address it have also risen (albeit not nearly enough). Given this complex, multifaceted problem affects every sector in the global economy, there is no “climate industry” or climate-specific data. Although greenhouse gas emissions (measured in gigatons) are climate-specific, myopically relying on carbon emissions as the sole metric fails to recognize how interconnected these systems are and how much signal upstream data can provide.

Rather than the binary labeling of climate or non-climate, I find it useful to view data through the lens of a climate relevancy spectrum since just about anything can be framed as climate-related. For example, using video calls instead of business-class flights and in-person meetings saves emissions, but we don’t necessarily view Zoom as a “climate company”. With GHG emissions established as the northstar metric in the climate community, I identified five additional data types that are climate-relevant and worth paying attention to: energy, water, soil, air, and satellite imagery. For each, there’s a mix of use cases that directly address the climate crisis, but also non-climate applications that will improve society in other substantial ways.

Energy 🔋

Several trends are playing out simultaneously. The proliferation of distributed energy resources (DERs) and subsequent increased demand for electricity will squeeze the already overloaded, centralized grid. Efforts to decarbonize the grid (without returning to the caveman era) require rapid electrification of buildings, manufacturing plants, and logistic networks. Electricity rates continue to rise and during bursts of peak demand we suffer from rolling blackouts or even worse, state-wide power outages that last several days. Strong demand to bring utility-scale renewables online balanced with stability has resulted in interconnection delays of months or even years. We need to integrate more renewables, beef up transmission lines, keep rates affordable, and avoid future disasters all at the same time. Measuring, unlocking, and then utilizing energy data will help us tackle these complex adaptive systems.

But first, we need to get the data

The first step to leveraging energy data is to actually get it. Until recently, the process to access energy consumption data was clunky and opaque. Even if it was just to simply look at your own home’s energy consumption. In 2021, Arcadia announced Arc, their API platform that enables developers to access rich utility data. Similar to how Plaid enables new ways to use money by connecting companies to consumer bank accounts, Arcadia enables energy use cases by connecting developers to utility energy consumption activity.

The API model is not the only approach. Australia-based Gridsight builds software for utility companies to better understand grid performance, proactively address safety issues, and verify DERs. In Europe, Gorilla is following a similar approach by aggregating and stitching together disparate data across smart meters, EVs, and IoT devices. By helping utilities understand energy traffic patterns like a moving heat map, they’re able to forecast demand more precisely and then price accordingly. These startups are able to facilitate information across different parties because they have root source access, down to the smart meter (the physical device that measures energy usage).

Use Cases

Once we’re able to actually measure and then responsibly expose energy data, a variety of use cases gets unlocked. Here are just a few examples:

• Optimize EV charging rates by only charging the car when rates are low. The opportunity: The average EV owner in California overspends on charging by approximately $4,300 over five years.

• Streamline the consultation and billing process for solar and storage installers by providing instant access to the homeowner’s energy consumption. Installers can use the current utility bill as a key input to design the appropriate solar panel system.

• To meet regulatory requirements and sustainability requirements, companies need to know how much water, natural gas, and electricity they’re consuming. Having instant access to utility data can reduce a lot of headaches and manual paperwork when it comes to ESG reporting.

• Demand response programs help stabilize the grid by incentivizing consumers and businesses to dampen demand during peak load times. Surfacing energy data insights to decision-makers is far more effective than shaming people or automatically cutting off their power.

As intelligent layers for energy data are created, the sheer volume of data will multiply and new opportunities will arise. With greater adoption for DERs and IoT devices, we’ll start to see the energy network look less like a strongly centralized grid and more like a large node (the grid) with many smaller nodes connected together. With vehicle-to-grid and home electrification picking up in momentum, new complexities such as bidirectional power flow will arise and the ability to measure, understand, and act on energy data will become even more important than it already is.

Further reading: Lessons from Plaid for a future energy unicorn

Oceans 🌊

Isn’t it crazy that we know more about outer space than our oceans? Ocean waters occupy 71% of Earth, yet 95% remains unexplored. When it comes to visualizing climate change, we see rising sea levels and that emaciated polar bear stranded on ice, but what else can we garner from the oceans? As it turns out, there are a few players today yearning to understand our oceans.

Sofar develops and deploys solar-powered buoys called Spotters. They float in the water and collect data on waves, currents, wind, and temperature. My personal experience with oceans is limited to surfing in them and observing from above on flights so I was surprised to learn that there’s significant enough variation in oceanic weather patterns to justify shipping companies paying for Sofar’s ocean intelligence platform to optimize their routes, saving 3-5% in fuel costs.

The aquaculture industry also benefits from measuring oceans. By deploying Spotters on site, fish farms are able to closely monitor fluctuations across a variety of data: conductivity, salinity, temperature, depth, eulerian marine currents, density, fluorescence and turbidity. These insights could also be useful for scouting potential aquafarm locations which require proximity to the proper logistics networks.

Another startup, Saildrone, is also tackling ocean data, but with larger unmanned autonomous vehicles and a different business model; they’re going after the surprisingly large $6B weather forecasting market. Did you know: one of the OGs in the space, Accuweather, generates $100M in revenue per year serving railroads, amusement parks, police departments, and Starbucks just to name a few. With a native weather app on every phone, we take for granted how valuable an accurate forecast can be. From my own experience of relying on the forecasts of Surfline for surfing and OpenSnow for skiing, I’ve seen firsthand how far we still have to go. Today’s forecasts are only accurate and reliable if you look 1-2 days out.

Recognizing the opportunity, Saildrone is approaching the problem of weather forecasting with a novel approach. They’re creating a proprietary data set measured by their robots in vast oceans that most weather stations can’t access. Not only are they logging previously undiscovered data, they’re also positioning in high value locations since most weather forms over the oceans. With its unique data set and accompanying forecasting models, they’re able to serve non-climate customers like sports teams, insurance companies and hedge funds, as well as climate-relevant government agencies like the National Oceanic and Atmospheric Administration and NASA. Saildrone exemplifies one of my core climate beliefs: the transition to a decarbonized economy will result in the convergence of pro-climate and pro-business products and companies.

Bringing new data types online has second-order effects that we’re only just starting to understand. With their capabilities, Sofar and Saildrone are pursuing their primary revenue opportunities in the freight and weather forecasting industries, but they’re also accelerating other climate businesses. For example, there’s currently a lot of hype around kelp’s potential to transform the food, textiles, and carbon market spaces. Kelp production will need to increase by orders of magnitude and understanding the aquafarms that it grows in will be vital. Kelp is just one example of a nascent climate solution leveraging climate-relevant data. In years to come, we’ll see more climate businesses that build off this newly unlocked data just how Uber depended on the smartphone’s GPS and Figma utilized the browser rendering technology WebGL.

Soil 🕳️

Nearly 50% of habitable land is used for food production (including land for animal feed and grazing), yet we know very little about the foundation for all agriculture: soil. In addition, there are some worrisome trends converging: 25% of agricultural land is highly degraded, soil degradation is reducing arable land in China and Africa, and population increase in developing countries is driving up demand for meat (and its associated land use). On the bright side, it’s estimated that soil could sequester up over 10% of all anthropogenic emissions in 25 years or over a billion tons of carbon each year.

The main constraint today is the cost to accurately measure and analyze soil organic carbon (SOC). Robust measurement, reporting, and verification (MRV) previously required manually digging up soil on-site and then mailing it to a lab where it would be incinerated to determine carbon density. This back-and-forth laborious process resulted in prohibitive costs to scale soil carbon sequestration. With cloud computing, satellite imagery, and sensors rapidly becoming more accessible, there’s a new crop (pun intended) of startups that are tackling the MRV component of the soil carbon market.

With Yard Stick’s handheld hardware device, users are able to collect and instantly measure the soil organic carbon. They couple the physical measurement device with an analytics dashboard that allows the user to map out soil carbon data and then share relevant insights with stakeholders (such as the businesses that are paying for carbon credits).

Taking a different approach, Perennial zooms out by combining soil sampling with satellite imagery and modeling techniques they claim is a lighter-weight approach than pure sampling. By leveraging a modeling approach that gets better with each incremental sample, they need fewer samples which results in faster, cheaper soil carbon measurement.

Although soil MRV is being accelerated by the carbon markets, understanding the underlying data will extend to all industries that rely on healthy soil to thrive, namely agriculture. One way to solve the declining collapse of arable land is to go upwards and denser with vertical farming, but another viable approach is to improve the efficiency of our existing farmlands, which requires this initial diagnostic layer. Whether it’s for carbon sequestration or simply improving crop yield performance, understanding the soil we stand on and live off of is a prerequisite worth building.

Air 💨

So far, we’ve been mostly discussing climate under the assumption that we’ll have enough time for the deployment and adoption of these solutions. I’m far from a doomer, but unfortunately, many signs point to more forest fires and droughts. Over the coming years, harsher conditions like forest fire season in California will require every household to stock up n95 masks and get an air purifier. As climate adaptation and mitigation becomes increasingly necessary, we’ll see more companies emerge to help bridge the gap between now and a future decarbonized world.

Companies like Clarity, Breezometer, Aclima, and Airly are all tackling air quality and greenhouse gas monitoring each in their own way. By leveraging sensor data and combining partner data aggregated from APIs, these startups are able to not only monitor air quality in one location, but also stitch together nodes to display and forecast trends.

Organizations like government agencies, schools, and relevant businesses like HVAC contractors are keen to leverage real-time air quality data to keep communities safe and healthy. Also, in order to form a comprehensive pulse on global GHG emissions, we’ll need a network of measurement devices that can paint the whole picture. Lastly, I wonder: What is the intersection of direct air capture and air quality monitoring? Could DAC technology be repurposed to also suck out particulates and pollutants?

Satellite Imagery 🛰️

The final element is both a data type and a technology. While the literal understanding is the physical equipment, the true value in satellites is derived from capturing images of relevant landscapes. For context, satellites have come down in cost from what was once $400M per unit to being manufactured in factories for less than $1M. As a result, the number of satellites being launched into space is exploding exponentially:

With each satellite equipped with imaging and Lidar, startups are leveraging satellite data in a variety of ways, including monitoring our forests. Pachama monitors forests, estimates carbon storage capacity, but also sells carbon offsets in the form of forests. The buyers of these carbon credits are large enterprises like Shopify, Salesforce, and Workday and they’ve all made public sustainability commitments to their shareholders. I’m sure the leaders of these companies have the right intentions, but the incentives are structured to try and get the most bang (carbon credits) for your buck. Even with satellite data augmented by remote sensing, drone-captured data, and trained by ML models, it's still impossible to be 100% accurate with the true carbon storage, so the question arises: how accurate is it currently? Perhaps this question of validity isn't being asked because it would nullify both the verifier and the buyer’s reputation. Take a step back from climate and ask how is it possible to verify and sell the thing you’re verifying without the waters getting muddied. Like Charlie Munger said, “Show me the incentive, and I will show you the outcome.” Even though I’m questioning one way that satellite imagery can be used, I still believe there is significant opportunity to leverage satellite data for climate use cases.

One day we might reach a point where energy becomes so cheap that we can manufacture and deploy autonomous drones to measure every tree on the planet, but we’re far from that fantasy. Today, I believe the opportunity is in areas where satellite imagery is still a step-function improvement from the status quo, but doesn’t demand the precision that carbon credits should. For example, Vibrant Planet is building a platform for planners and policy makers to map out forests and identify areas for reforestation.

Through an accessible UI powered by satellite imagery, Vibrant Planet is able to facilitate fire districts, the USDA Forest Service, state agencies, and local watershed groups to collaborate on forest management.

Similarly, Agreena services the agriculture MRV industry with remote sensing by measuring cover crops, tillage, and crop rotation. Monitoring these farming phases is critical for regenerative practices to restore soil and ecosystem health.

In the realm of mitigation and adaptation, there’s Floodbase, a startup leveraging satellite imagery, weather data, and on-the-ground sensors to provide flood-related insights and insurance.

Although I’m still hesitant on satellite imagery’s ability to precisely measure granular data like carbon storage potential, there will surely be more climate-relevant use cases as the number of deployed satellites continues to exponentially grow, even if they orbit at a lower data granularity.

Summing it all up

Climate-relevant data that was previously unavailable due to impractical economics is starting to become more accessible. As data across energy, ocean, soil, air, and satellite imagery comes online, there will be a new set of businesses that utilize this previously untapped data. It’s hard to know exactly how it all unfolds, but by continuing to ask "what if?", we’ll see how climate-relevant data can be leveraged, perhaps in ways that may even rival generative AI transforming media and culture.