Insider's Guide to Energy
The Energy Industry is uniquely evolving as traders are under increasing pressure to manage costs, cash, limits, and risks. The Insider’s Guide to Energy Podcast addresses current and emerging challenges business executives face daily through stories shared from peers and industry experts while covering topics such as innovation, disruptive technologies, and emerging trends.
Insider's Guide to Energy
193 - Corporate Leadership in Clean Energy: Thomas Byrne on Power Demand & Tax Equity Solutions
In this episode of the Insider’s Guide to Energy, host Chris Sass sits down with Thomas Byrne, CEO of Clean Capital, to discuss the critical role corporates play in driving the clean energy transition. Byrne emphasizes the urgent need for companies to step up their investments in renewable energy to meet rising power demands, driven by data centers and AI growth. He explains how clean energy leaders can accelerate the transition by engaging in tax equity markets and leveraging their financial power to support sustainable initiatives.
Byrne shares insights on the evolving energy landscape, highlighting the challenges of rising energy demand and the slowing decommissioning of fossil fuel plants. He discusses how Clean Capital is helping corporates navigate these complexities, stressing the importance of strategic collaboration between energy providers and large companies to meet both economic and environmental goals. Byrne also touches on the impact of regulatory changes, including the Inflation Reduction Act and Basel III, on clean energy financing.
Listeners will gain valuable knowledge about the future of renewable energy, the increasing demand for power, and how corporates can lead the way in funding and supporting clean energy solutions. This episode is a must-listen for energy leaders, corporate decision-makers, and anyone interested in the intersection of clean energy, corporate responsibility, and the financial mechanisms driving the energy transition.
We were pleased to host: https://www.linkedin.com/in/thomas-byrne-b72ab524/
Visit our website: https://insidersguidetoenergy.com/
Transcript
00:00:00 Thomas Byrne
And if we do business the same way that we have done business in our industry and the solar, the wind, the clean energy industry for the next 10 years, we will feel the large impacts of climate change much more than I think people realize.
00:00:22 Chris Sass
Your trusted source for information on the energy transition. This is the Insider’s Guide to Energy podcast.
00:00:34 Chris Sass
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00:00:52 Chris Sass
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00:01:04 Chris Sass
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00:01:23 Chris Sass
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00:01:37 Chris Sass
Welcome to another edition of the Insider's Guide to Energy. I'm your host Chris Sass, and with me is Thomas Byrne, CEO of Clean Capital. Thomas, welcome To the program.
00:01:45 Thomas Byrne
Thank you, Chris. It's awesome to be.
00:01:47 Chris Sass
Here. Well, I am happy to have you here. I I guess we probably should start out by talking a little bit about what is we're going to talk about today and what clean capital is and what that means to you.
00:01:58 Thomas Byrne
Sure, Clean Capital is a clean energy investor in the clean energy transition. One of the things that I know we're going to talk about on this podcast is the role of corporates in the growth of clean energy and in the clean energy transition. And I come to all your guests saying that we're not doing enough. We've been working with a bunch of corporates who are leading the way.
00:02:18 Thomas Byrne
To finance to invest in the clean energy transition.
00:02:21 Thomas Byrne
But at the same time, the urgent need is not meeting the moment and they need to do more. They need to get off the sidelines with all of their corporate profits and do more to invest in the clean energy transition. The urgent needs here, and they need to step up even more than they.
00:02:36 Chris Sass
Already have. All right, so you're you're throwing the gauntlet down very early in the interview?
00:02:42 Chris Sass
To to the industry out there or the large corporates, what they can do.
00:02:48 Chris Sass
Let's let's take a step back and say, what are they doing today? Let's let's let's baseline this and then let's.
00:02:54 Chris Sass
Figure out what?
00:02:54 Chris Sass
Would be better to do in the future in your recommendation.
00:02:57 Thomas Byrne
Yeah, and my urgent call shouldn't minimize the great work that is being done.
00:03:03 Thomas Byrne
I'm simply saying that the needs are more, and if we do business the same way that we have done business in our industry and the solar, the wind, the clean energy industry for the next 10 years, we will feel the.
00:03:21 Thomas Byrne
Large impacts of climate change, much more than I think people realize there's a massive increase in corporate demand in data center demand for power that is not only increasing overall electricity demand over the next 10 years that is slowing the decommissioning of fossil fuel plants.
00:03:42 Thomas Byrne
So we have to think much more holistically as an industry and as corporate leaders who are active in the industry and how they can do more.
00:03:51 Chris Sass
And and you say solar and wind from a baseline of you came from those industries, right. You've you've worked in those spaces?
00:03:59 Thomas Byrne
Yeah, I've done everything humanly possible in these industries. I I started off as a lawyer in, in the clean energy industry, working in the project finance groups of big law firms, quickly moved into in house with the private equity firm and then ultimately launched clean capital with my cofounders in 2016.
00:04:20 Thomas Byrne
To be an investor in the clean energy space.
00:04:23 Chris Sass
Alright, and unpacking what you said before that the demand increase for power is actually adding to fossil fuels. Is that what you were implying that since we need so much power that we?
00:04:37 Chris Sass
Aren't going to be able to make enough clean energy. Is that the problem statement?
00:04:40 Thomas Byrne
The I've seen, I've seen a wide array of estimate estimates about how much.
00:04:47 Thomas Byrne
How much of an increase in demand for power there will be in the next 5-10 years, primarily driven by data centers, the growth of AI, the growth of technology also to some extent from the electrification and some on onboarding of domestic manufacturing.
00:05:07 Thomas Byrne
But mostly from data centers. So there's going to be there was for the last 20 years, we had relatively flat electricity demand and now projections, whether you look at the projections from wood Mackenzie or you look at the projections from the local utility and the ice.
00:05:21 Thomas Byrne
Those all of them are saying the same exact thing. Demand is going up and we're now starting to see over the last year more and more folks saying we can't decommission coal plants as fast as we had anticipated. So while there's no new addition of coal plants.
00:05:41 Thomas Byrne
There's going to be addition of natural gas plants to service this demand, and there's going to be a slowing of the decommissioning of coal plants, which has the same effect of of keeping more emissions in the atmosphere.
00:05:54 Chris Sass
But that also means we are slowing the decommissioning of nuclear plants as well.
00:05:58 Thomas Byrne
Yeah. Which is, which obviously from a fossil fuel perspective is is a positive thing. People could have a separate argument over whether the safety of nuclear power is sound enough. That's not my expertise, nor will I comment on that. But from a CO2 perspective, nuclear plants are much better than coal plants.
00:06:18 Chris Sass
Right. And and I I know from our previous conversations you know we I think we talked a bit about electrification. We talked about EV's and data centers, but data centers seem to be prevalent and on the front center of.
00:06:29 Chris Sass
Mind today is it that they're that much more, or is it that rapid of growth? Is AI really hitting the world at the pace that we don't understand?
00:06:39 Thomas Byrne
Yeah, I think we are. I think we are starting to understand it much more than we did even a year ago. We are as an industry relatively we are not we as an industry are in the business of power generation. We are not in the industry of forecasting technology changes and software changes and algorithm changes that come out of Silicon Valley.
00:07:00 Thomas Byrne
That's a different segment, but we are now catching up as as an industry.
00:07:04 Thomas Byrne
A year ago, if you sat down with an investment bank in our line of business or a private equity firm, there might be some discussion on the fringes about data centers and the power generation. I've had those same conversations in the last month and it is the focal point of the conversations that.
00:07:24 Thomas Byrne
How are we as an industry? How is the energy industry on a big level on a small level, how is the clean energy industry gonna support that growth and how are we gonna do it in a way?
00:07:35 Thomas Byrne
That is meeting the moment of climate change. They are very much at odds with these rather, and it's a reconciliation that we have to do as an industry, but more broadly socially to to figure out.
00:07:49 Chris Sass
So the enterprises that need these data centers, you're saying they should do more, what's more right, their core competence is data, right? They're not energy providers. They buy energy. What do you want them to do?
00:08:01 Thomas Byrne
So there's they are the the corporate, the the big.
00:08:06 Thomas Byrne
Corporates who are leading on clean energy and climate, the big tech companies of of which you might be using their computer right now or you might be on their social media later, those those big guys, they are unequivocally leading the charge on buying corporate buying buying.
00:08:26 Thomas Byrne
Clean energy for their corporate needs to meet their demands.
00:08:29 Thomas Byrne
Now there's an argument that, well, they're also increasing their demands because they are pursuing AI, so shouldn't they necessarily, because that is going to be directly in the face of climate, shouldn't they be responsible for that? Supporting that with clean energy? Correct. I believe that is absolutely the case. They have to do a lot. They have to be getting as much of their energy from clean energy.
00:08:50 Thomas Byrne
Support their increasing demand.
00:08:52 Thomas Byrne
But they are simultaneously leaving what I view as the a huge opportunity on the table. They are not in the United States as most of your listeners likely know. We are driven by the tax equity market, a couple of observations about the tax equity market right now. Basel 3 is going to.
00:09:12 Thomas Byrne
Is going to limit the amount that banks can put into the tax equity market at a moment when we so desperately need volumes more tax equity. So how are we going to meet that?
00:09:24 Thomas Byrne
I mean, it's my my view that the billions of dollars of profits from Apple, Microsoft, Meta go right down the list of your, your big corporates and your smaller corporates, by the way as well, those are the folks who have the capability to fund the entire tax equity needs of our industry over the next decade and they have to figure out a way.
00:09:45 Thomas Byrne
To unlock that capital and do so.
00:09:47 Chris Sass
And.
00:09:48 Chris Sass
I I guess you're saying you want them to do more. You're saying they have to do more? Are there shareholders willing to let them do more? I mean, they're they're they're trying to return shareholder equity, right. Shareholders want value.
00:09:58 Thomas Byrne
But it's good investment. Tax equity is an awesome investment investing so that they what I hear from from big corporates are they want to be leading the charge on clean energy and they wanna make shareholder returns and nothing I'm saying is inconsistent with that the returns on tax equity for the the banks who have been in the industry for the last 10 years are massive. They are there's a massive.
00:10:19 Thomas Byrne
Tax savings. There's a massive IRR boost that they get from investing in tax equity, and that could be the same for all of the big corporates out there.
00:10:28 Chris Sass
All right, now.
00:10:31 Chris Sass
We're saying we want them to do this. You're saying you're in conversations with them? Where is this in the reality of becoming a reality?
00:10:39 Thomas Byrne
In it's in. It's in conversation mode. It's Chris is the honest answer. It's uh, I I uh published a a small article or opinion piece a number of months ago, 668 months ago. I continue to beat the drum whenever I'm given the opportunity to beat the drum.
00:10:56 Thomas Byrne
And I wish I could tell you that I we've moved heaven and earth and and that that that Apple has the coffers open and they're funding the tax equity tax equity space, that's not happening and it needs to. I don't know what the I get that tax equity is an inherently challenging financial instrument.
00:11:16 Thomas Byrne
To understand and CFOs and treasurers and controllers at some of these corporate.
00:11:20 Thomas Byrne
Patients might not want to give it the time it needs, but.
00:11:27 Thomas Byrne
It it's it's an important thing for them to pursue. I don't know where we're going to get the US is leading the the charge in clean energy right now. The key financial instrument to unlocking the the potential of the of clean energy in this country.
00:11:46 Thomas Byrne
Is tax equity. It's written in by the IRA and we, I fear, do not have a sufficient answer into how tax equity is going to be supportive of this industry over the next 10 years, especially as banks will be tightening their tax equity exposure.
00:12:05 Chris Sass
Right.
00:12:07 Chris Sass
What is the solution? I guess so you're giving me the problem. You're you're saying you want people to be more involved? So the solution is?
00:12:14 Chris Sass
The the big players you mentioned, they step in and fill the gap is what you're telling me they're going to take over for the banks, is what you'd like to see.
00:12:22 Thomas Byrne
I think they, even the I don't want them to take over the banks. I want the banks to continue to do their their part what they've done. But there are limitations. And as I said at the outset, Basel 3 makes those limitations even.
00:12:35 Thomas Byrne
Even greater. So we need to replace it. We need to replace that capital.
00:12:41 Thomas Byrne
And then add to it.
00:12:43 Thomas Byrne
And add to it in large volumes. That is the problem. The solution is going to ultimately be in the balance sheet of many non traditional tax equity investors. We have clean capital, have our tax Equity Partners, we do have a a corporate is one of our favorite tax equity.
00:12:44
Sorry.
00:13:04 Thomas Byrne
Right now they do tons of deals with us every single year, so they have, they have taken the time to figure out the space, figure out how to invest, how to get great returns. And we are now on our, I think our third year of invest of investing and.
00:13:18 Thomas Byrne
During with them in the tax equity market, it's worked for them, but they're a relatively small group, small corporate relative to the big, the big guys that I'm talking about. So it's definitely and there's other new corporates who have come into the space and some are coming in because of transferability. But it's still not meeting the moment. It's still not at the.
00:13:38 Thomas Byrne
Volumes and sums that that we're going to need. So yes, Chris, that is the problem. And then if I had a magic wand, I would just be able to tell every corporate every CFO at at at the big at the big tech companies.
00:13:52 Thomas Byrne
To get off the sidelines, but I have found that it's very, very challenging to to even engage in the conversation.
00:13:59 Chris Sass
Where where does clean capital play into that?
00:14:03 Chris Sass
Specifically, what what do you specifically do to help with this other than evangelizing and helping me, right.
00:14:08 Thomas Byrne
Now, yeah, evangelizing is part of it and we'll continue to to evangelize to anyone who will listen or anyone who will give us the platform. But the the place that we have is that we, we do deals on a on a a daily.
00:14:23 Thomas Byrne
Monthly basis that are that always need tax equity and when we are going out.
00:14:29 Thomas Byrne
To the tax equity market, we are including some new players, we whether we're doing it internally or whether we hire an advisor to help us with the tax equity with tax equity, we are we are trying to include new players in that market who have either expressed some interest or we want to get off the sidelines. That's not been successful yet though. We still have the same old.
00:14:49 Thomas Byrne
Buyers doing our tax equity deals because we have to get our deals done, so getting them over the getting new players over the finish line is is a long a long process and a tall, tall, tall order.
00:15:02 Thomas Byrne
But.
00:15:04 Thomas Byrne
Are we? We have seen new players, our our primary tax equity partner over the last two years as as I said is a corporate who was very new to the space in.
00:15:15 Thomas Byrne
2122 and now they're very active, not just with us, but with many of our peers in the industry. So that is a very good.
00:15:23 Thomas Byrne
Apple of how you can do it and and how a corporate can be led to the to the promised land.
00:15:31 Thomas Byrne
So to speak.
00:15:32 Chris Sass
Got it. Makes makes sense to me. I I guess I'm also looking if I look through you know things that we've talked before, I get that point. If I look at the overall impact of the costs and the economy and where we are today and the current market conditions where we are. So I get the regulation you, you, you highlighted changes in regulation. How is that weighing?
00:15:51 Chris Sass
Into where we're at.
00:15:53 Thomas Byrne
So costs costs are unpredictable in our business at best. And when you break down the costs that it takes to build, we we primarily do solar with with increasingly a good amount of storage. When you break down the.
00:16:14 Thomas Byrne
Costs of building these projects and to some extent operating them as well, you have to look at each line item and let's take.
00:16:22 Thomas Byrne
Panels panels have gone up so so historically for the 1st 10 years of my career they just kind of went in One Direction. Generally speaking, they went down and then somewhere around four or five years ago they started going up again and and panels there, there was, there was a moment in time.
00:16:40 Chris Sass
The cost of a panel or per kilowatt like what? What what metric of cost?
00:16:44 Thomas Byrne
A cost literally the cost of a panel on a per Watt basis. Yeah, yeah, yeah, they, they, they came down. They they were when I started in this business there was $6 a Watt or 550A Watt. And now I think you could buy panels in the range of.
00:16:47 Chris Sass
And for what? OK.
00:16:59 Thomas Byrne
You know less than $0.30 a Watt, so it's been a massive change in in 15 years, but those generally came down until five years ago. This sort of trending up and now you've seen them come come back down quite a bit. Alright. So that's one line item that that you have to try to solve for as a developer and owner of solar.
00:17:19 Thomas Byrne
Projects. But then you look at interest rates so so the the last two years panels have come down, but interest rate costs have gone up. We've all we all see the monthly announcement from the from Chairman Powell rates have not been coming down as fast as people had hoped at the beginning of the year. It seems like they're going to continue to just slowly.
00:17:39 Thomas Byrne
Evaluate. Maybe make a move or two this year so the interest rates have have gone up and then you just go right down the line items of each cost each input to a solar or storage project.
00:17:50 Thomas Byrne
And there is this continuing oscillation of costs to build a project and you're trying to develop a project. If we're getting land today in 2024, we're that's to build a project in 20262728 and we're trying to figure out if it's economical or what the economics of those projects.
00:18:11 Thomas Byrne
Are three years prior to even having a chance to to to hit the ground, so it's costs are always a challenge. It's not necessarily that costs are always going up, their costs have gone up on some fronts in the last number of years.
00:18:29 Thomas Byrne
It's trying to forecast where they're going to be 3 or 4 years from now, coupled with where the energy markets are going to.
00:18:35
Be so so.
00:18:36 Chris Sass
Having unpredictable costs.
00:18:39 Chris Sass
How does your?
00:18:40 Chris Sass
Development strategy change or what do you do for a development strategy? Cause you you want as much clean energy as you can, but it's got to make economic sense. You talked about some constraints or law changes, you know coming in on the tax benefit which benefit you, what's your development strategy look like then?
00:18:57 Thomas Byrne
The development strategy is is for us at least, is spread yourself wide.
00:19:03 Thomas Byrne
Knowing that make a number of bets, knowing that some of your bets are not going to pan out, try to minimize your losses on those bets and hopefully lean into the successful ones and the successful ones the the whole.
00:19:19 Thomas Byrne
Thesis on development is that the successful ones far outweigh the the losses and you try to keep that ratio of success to loss on the healthy. On the healthy side of probability.
00:19:33 Chris Sass
And the IRA also had this domestic content part and you know there there's there's there's fear of more tariffs or tariffs going on. You know, we had our Secretary of State talking or going to China and talking about development of renewables. How does that impact all this? And you already talked about cost going.
00:19:51 Chris Sass
Up.
00:19:52 Chris Sass
How do you deal with?
00:19:53 Thomas Byrne
The.
00:19:53 Chris Sass
These kind of things that are.
00:19:54 Thomas Byrne
Unknown in my view, the domestic content.
00:19:58 Thomas Byrne
At or is a great was a great feature of the IRA. It will and has resulted in.
00:20:08 Thomas Byrne
A meaningful investment in domestic manufacturing. There's a whole lot of.
00:20:13 Thomas Byrne
Nuances to that and whether you know what, what, what actually has to be manufactured in the United States versus what actually can be cobbled together and put together in the United States, I'm not. You know, that's that's for someone else to to to get into the fine pieces of that. But at a high level, it's driving.
00:20:34 Thomas Byrne
Some manufacturing of panels, in particular here in the United States.
00:20:40 Thomas Byrne
I'm skeptical that that's going to be at a volume that is going to overtake the foreign foreign foreign imports.
00:20:52 Chris Sass
But but whether the the panel is made in the United States or in port at the end of the day, it's a straight business decision for you, right? So if the tax benefit for buying a domestic panels there, you'll do it. If it's cheaper to buy a four in one and pay the penalty, you'll do that, will you not?
00:21:06 Thomas Byrne
Yes.
00:21:07 Thomas Byrne
It's that simple. It's it's the the the challenge on procurement is forecasting our pipeline.
00:21:07 Chris Sass
So.
00:21:20 Thomas Byrne
Over.
00:21:22 Thomas Byrne
The next 12 to 24 months.
00:21:25 Thomas Byrne
Entering into procurement contracts.
00:21:28 Thomas Byrne
For projects we know will happen and then probably projects that we think are likely to happen, but some may fall. So that's there's a forecasting component for us and that's simply to your point, Chris, that's economics. Like if if domestic panels with the ITC.
00:21:47 Thomas Byrne
Better.
00:21:48 Thomas Byrne
Improve the returns of an investor like US of an owner like us. We're going to do that if it's getting them from foreign, non tariff countries.
00:22:00 Thomas Byrne
We're going to do that the the challenge for us is actually much more on forecasting our needs over a long.
00:22:08 Thomas Byrne
Period of time.
00:22:10 Chris Sass
And and that the the needs based on the fact there's demand is just the economics are I guess help me understand why that's the challenge. It sounds like it's a market hyper growth market, there's there's demand there so.
00:22:24
The.
00:22:24
We.
00:22:25 Thomas Byrne
We're we're always going to be building projects. Are we going to build is clean capital going to build 100 megawatts of solar projects and storage projects in the next 12 months or are we going to build 60 megawatts in the second year? Are we going to build 200, which we hope to do or will it end up being 140 that interplays also with the development risks that we talked about?
00:22:44 Thomas Byrne
Months ago, which is how many of those pipeline projects are actually going to turn out to be successful and that all the that's part of the challenges of development is you're at at once trying to trying to.
00:22:58 Thomas Byrne
Handicap.
00:22:59 Thomas Byrne
How? How? What your needs are gonna be over the next two, two to three years. But you're doing that against some uncertainty, which is the develop which projects in the development pipeline are economical are viable two to three years from now. Are the PP rate PA rates supporting the costs, the costs that we discussed earlier like are the costs going to be in line with what we?
00:23:20 Thomas Byrne
In two to three years, what we think they are are now that.
00:23:23 Thomas Byrne
Is that's. That's like the puzzle that you're, like, trying to constantly put together as someone who develops to own, right, we we ultimately own all of our projects. We don't sell them for the most part. So that's that's that's a puzzle that we're constantly trying to manipulate.
00:23:41 Chris Sass
And what about land? Is is land?
00:23:44 Chris Sass
Weighing into this or is that a rounding error compared to the noise of what?
00:23:47 Chris Sass
We just talked about.
00:23:49 Thomas Byrne
I'd say it's closer to a rounding error. Honestly, we typically we identify states or geographies, areas that where we we we think are going to be for a wide variety of reasons attractive to build solar projects. Either there's a policy that's that's that we're hearing rumors of and we're tracking or there is an increase in demand from corporate.
00:24:11 Thomas Byrne
Acres.
00:24:12 Thomas Byrne
If if either of those things occur or multiple other things, we will make some strategic bets on land, the near term cost of land is typically a a lease option, which we pay to the land owner. That payment is not significant relative to our overall capital under management or balance sheet.
00:24:33 Thomas Byrne
It does become a meaningful rent if you build that project. It's not inconsequential by any stretch, but by that time it you you have a viable project that you know makes economic sense and supports the rent payments that you've promised to the landowner.
00:24:50 Chris Sass
So based on kind of this unpredictability.
00:24:55 Chris Sass
What does that mean for commercial energy prices? So if you're a large corporation that uses quite a bit of energy or data center, or you have process that needs a lot of energy.
00:25:05 Chris Sass
That must mean it's not predictable for them as well.
00:25:09 Thomas Byrne
The cost of energy.
00:25:13 Thomas Byrne
Historically, this business has benefited from the unpredictability of cost. We have a number of solar projects that were built 10 years ago.
00:25:25 Thomas Byrne
And we have off takers who entered into a fixed PPA with us either behind the meter or virtual PPA in the state like Massachusetts and the more fixed they were, the more fixed they were able to get their, their cost of energy, the better because it's just, it eliminates an unknown.
00:25:46 Thomas Byrne
And I think that still holds true and a lot.
00:25:48 Thomas Byrne
Of a lot of the corporate off takers that we're talking about continue to like the idea of having predictability of power pricing.
00:25:58 Chris Sass
Are we getting to the?
00:25:59 Chris Sass
Point though, where I mean the PP as we know it is evolved, right. You talked about virtual PA's.
00:26:06 Chris Sass
How do these get financed going forward? Do you think is it going to be the same that we've seen? Are you you historically you've been doing things one way, is that where we're going over the next couple of years the same?
00:26:17 Chris Sass
Kind of funding route.
00:26:18 Thomas Byrne
Finance.
00:26:18 Thomas Byrne
Financers, meaning lenders debt providers are are keeping up with the market, and they're adjusting how they look at the market the big.
00:26:28 Thomas Byrne
Segment boom. Probably in the last five years and solar has been community solar that when we first were looking at Community solar in 1718, I don't think lenders were were interested in looking at it at that point. The idea of having a whole bunch of cats and dogs.
00:26:48 Thomas Byrne
Residential customers who are accounting for all of the power from a solar project with variability in the price because it's just a discount to the retail rate that was not attractive to lenders. But now you're seeing.
00:27:03 Thomas Byrne
All lenders in in our segment in, in the Community solar business in one way or another, some are more conservative, some are more aggressive and more constructive because they know the the business. But but I don't know of a lender that we've worked with and we have.
00:27:18 Thomas Byrne
Probably 10 or 1515 or more lenders in our in our world that is averse to community solar. And I think the same will be the case going forward as.
00:27:31 Thomas Byrne
Offtake models evolve.
00:27:35 Thomas Byrne
As they feel a little bit more merchant EUM.
00:27:42 Thomas Byrne
Lenders will find a way to continue to lend into the business.
00:27:48 Chris Sass
How universal is this? Let's say across the North American footprint? Is it state by state or is the problem that we talked about?
00:27:56 Chris Sass
Exasperated in states like California or Texas or somewhere, are there areas where where this is worse than other parts of the US?
00:28:06 Thomas Byrne
The lender capital the finance ability.
00:28:09 Chris Sass
Yeah, yeah. Just just going through you. So you want to put a project in, you're saying that there's there's not necessarily going to be the the demand there. You're not gonna have the tax advantages where we're going to see this problem 1st and and worse where where is the the data center problem greater?
00:28:25 Thomas Byrne
The the data center problem. Well, two taking 2, two different questions. One, the first is will how how lenders look in particular States and lenders.
00:28:38 Thomas Byrne
Like right now, there's not a lot of lenders lending financing ERCOT batteries. Those are there are lenders, just not a lot of them. And those come with more structured products. They have some downside protection. They have features that make the lender those, those lenders who are involved.
00:28:58 Thomas Byrne
Feel safe in their with their their loan. So the more merchants like that the revenues are on a solar or storage project, the fewer lenders that you will probably have at your disposal.
00:29:13 Thomas Byrne
The higher the more contracted it is, the more lenders you will have at your disposal because it's very bankable. But lenders are getting you know we are seeing lenders who are engaged in more merchant like revenues and they're constructive there that will. So that will be state to state and you know where there's and and you see it mostly.
00:29:33 Thomas Byrne
In either where Ppas are the short term or whether it's where there's batteries in the battery market, that's very much front and center is just how financeable the revenue streams are. The revenue, the revenues of the project are the second point.
00:29:48 Thomas Byrne
Of the data centers is is actually an. A really interesting question because the the embedded in that question is where.
00:29:55 Thomas Byrne
Do you build?
00:29:57 Thomas Byrne
Energy projects to support data centers and everyone heard about like Virginia, is like a boon for data centers. We've heard that for the last few years, but the reality is data centers are now cropping up all throughout PJM in Texas, in many different markets, and those who are building the data centers.
00:30:18 Thomas Byrne
Want energy projects that it's very difficult to get them on site.
00:30:23 Thomas Byrne
But they want them nearby. The leaders in the corporate off take world are being very scrutinous on where these solar wind storage projects are being cited because their goal is to be able to say that they're net zero, that they've built a data center here that.
00:30:43 Thomas Byrne
Uses X amount of kilowatt hours on a daily basis, but they are getting locally nearby a.
00:30:52 Thomas Byrne
Clean energy. They're getting clean energy from a very someplace very close by. That is ultimately making their their emissions net zero. That's that's the for many of these corporate leaders. That is what they're trying to to achieve.
00:31:09 Chris Sass
And so I understand from your business model you work closely with these big corporates in in partnership type models with them. So when you're working with them, are you helping them site that are they helping you site where they want the?
00:31:22 Thomas Byrne
That's you. You're you're asking the question that.
00:31:22 Chris Sass
That location.
00:31:24 Thomas Byrne
Real time for for my company. We are on a getting into the corporate office space has been in the works for us for the last 15 months. Call it give or take and we have had we've been engaged with a number of corporates in during that period of time and we we've the more we've learned the more we've leaned in.
00:31:46 Thomas Byrne
And what you're seeing is there is that chicken and an egg that you still have that you're articulating, which is do the corporates tell you where you where they want you to be or do you tell the corporates where you're going to be and hope that they're there and that collaboration needs to be stronger on a go forward basis?
00:32:05 Thomas Byrne
If this is going to be a source of massive grow.
00:32:08 Thomas Byrne
Both for the energy sector, broadly clean energy, hopefully mostly, and the collaboration between those of us who provide energy, clean energy and those of those who use energy, meaning mostly the data center owners that that collaboration has to be strengthened going forward.
00:32:28 Thomas Byrne
And it is. There's a lot of evidence that we've experienced in only a short year that has brought us closer together with the corporate office community and has a much better sense of what their objectives.
00:32:40 Chris Sass
How? How do they go about? I mean I I get the partnership, right. So you sit and you talk through it, how do they go about bidding that out fairly so they bring multiple developers in, do they pick their favorite and short list them ahead of time or like because once you're given the site, you're going there you're you're kind of taking the IT out of a fair free market. So is that.
00:33:00 Chris Sass
How does that work?
00:33:00 Thomas Byrne
So there's, there's, there's, I. I've seen it from both angles. I've seen corporates who issue an RFP.
00:33:10 Thomas Byrne
And they just blank it, you know 100 developers and say, do you have any clean energy in this location that we can buy? And it's a typical RFP. People will people will submit to the RFP and they're going to shortlist 5 and then they they pick one that's from the the corporate.
00:33:30 Thomas Byrne
Users.
00:33:31 Chris Sass
That's more reactive, right? That's assuming you've already built and have capacity.
00:33:36 Chris Sass
But that's not generally going to grow. The capacity at the right. You may need the.
00:33:37
Yes.
00:33:40 Chris Sass
Facility.
00:33:40 Thomas Byrne
Correct. And then the flip side is we will build a project and we've done this a clean capital and then we similarly RFP out to the corporates and we say we are building a solar project. Do you want to buy the power and what's your what price of power do you want to pay pay for that neither of those.
00:34:01 Thomas Byrne
Both of those are reactive to your point, and neither of them are strategic and collaborative. That and.
00:34:09 Thomas Byrne
That's.
00:34:10 Thomas Byrne
That's the missing link right now. It's getting better though. It's like I I I give all your listeners confidence that there is an increasing collaboration, but it's it's still not you know there's still a lot of work to be done on.
00:34:26 Chris Sass
Well, I think we've gone round and round, but I I guess to bring this back together we we started out saying hey, we want to see more activity. I I think you shine a little bit of light saying we're getting there.
00:34:38 Chris Sass
What's the call to action that we want to end this episode with?
00:34:41 Thomas Byrne
The call the call to action is 2 important things. One to this last point, we focused a lot on corporates and what corporates can be doing and the reason for that is I think they have a lot of them are leaders in this industry, a lot of them care about this. It affects their bottom line and they are commercially focused.
00:35:01 Thomas Byrne
And they they that commercial focus is really important because they can negotiate deals to get things done and get things done quicker. I've seen that. So there's there's a lot of great that they're doing to advance clean energy. What I'm saying is that the the next five years of of growth in power demand.
00:35:21 Thomas Byrne
Requires and necessitates corporate developers, all constituents in the industry, to be working together to to satisfy the needs both of the off take, but then to the earlier point the capital needs of our industry. It's a great opportunity for corporates to be leaders and it's now that they've shown their proclivity.
00:35:42 Thomas Byrne
To to lead and now is the time to lean in even more and do more.
00:35:47 Chris Sass
So Thomas, you know, I I look at the IRA, I look at the adders, I look at domestic content and one of the things that appears to me is.
00:35:57 Chris Sass
We may not get economics to make our panels always cheaper or get enough of them, which means you might be in a position where you have to buy overseas panels or, you know, imported panels. What's your take on that?
00:36:10 Thomas Byrne
Yeah. And that's the the exact position that all of my peers are in right now is that you are looking at a new landscape in the clean energy market where domestic content and domestic manufacturing is finally returning to the United States. And that's a great thing. But at the same time, most of the panels.
00:36:31 Thomas Byrne
For the foreseeable future are gonna be continue to come from foreign panel panel manufacturers and clean capital when we assess when we're looking at particular projects, we are going to absolutely value the domestic content component of the potential domestic content.
00:36:50 Thomas Byrne
Component of of a panel, but we're we're also going to be looking at foreign panels like any other developer is going to be doing to ensure that the economics measure up.
00:37:03 Chris Sass
Do you have projects where it is so important to your your who you're doing the development for that they want to have US content only and only stuff manufactured on shore that they're willing to pay a premium, that they're willing to do that into a deal?
00:37:16 Thomas Byrne
We have not seen that yet. We have seen preference for projects that serve a broader mission than just clean energy like like, for instance, if they're being built in a built on a landfill built on a brownfield built in a community that's underserved, those stories resonate much more with some of the partners that we work with.
00:37:39 Thomas Byrne
Then does the domestic content feature of a project potentially?
00:37:45 Chris Sass
Awesome. Well, I want to thank you so much for coming on this episode of Insiders guide and sharing with the audience today. It's Been a pleasure having you on.
00:37:52 Thomas Byrne
Thank you, Chris. It's been a blast.
00:37:54 Chris Sass
And for audience, we hope you've enjoyed this episode. If you have, don't forget to subscribe and like and ask questions in the comments. Send us comments and we'll see you again next time on the Insider’s Guide to Energy.
00:38:04 Chris Sass
Bye for now.