Navigating the Clean Energy Transition: Insights from Clean Capital's Thomas Byrne | EP219

In this episode of the Clean Power Hour, host Tim Montague sits down with Thomas Byrne, CEO and co-founder of Clean Capital, to discuss the evolving landscape of clean energy investment and development. Byrne shares insights from his journey in the industry, from his beginnings as a project finance lawyer to founding Clean Capital in 2016.

The conversation delves into the challenges and opportunities presented by the ongoing energy transition. Byrne and Montague explore the unexpected surge in electricity demand due to the rise of data centers and artificial intelligence (AI), and how this impacts the push for a renewable energy grid. They discuss the complexities of meeting increased energy needs while simultaneously working to curb greenhouse gas emissions.

Byrne offers a unique perspective on Clean Capital's role in the middle market of clean energy projects, ranging from 1 to 75 megawatts. He highlights their focus on "quirkier" projects, including the development of brownfields, Superfund sites, and reclaimed coal mines. The discussion also touches on Clean Capital's ventures into emerging markets, such as their projects in Alaska and Guam.

The episode provides valuable insights into the financial aspects of clean energy development, including the impact of recent legislation like the Inflation Reduction Act. Byrne and Montague also explore potential technological advancements that could shape the future of the industry, from robotics in solar installation to innovative software platforms for project management.

This conversation offers listeners a comprehensive look at the current state of clean energy investment and development, as well as thought-provoking predictions for the future of the industry. It's a must-listen for anyone interested in the financial and practical aspects of the ongoing energy transition.

Social Media Handles
Thomas Byrne
Clean Capital

Transcript

Thomas Byrne: 0:38

big institutional capital players tend to shy away from smaller scale middle market type assets for exactly the reasons you highlight Tim, they are. They have the each project has their own challenges each project has its their own nuances. And to be able to diligence that in an efficient manner and still get the scale to get your capital out is not an easy task. We have fortunately built a system to do exactly that. So doing those types of projects is our DNA. We

intro: 1:12

Are you speeding the energy transition. Here at the Clean Power Hour, our hosts, Tim Montague and John Weaver bring you the best in solar batteries and clean technologies every week, want to go deeper into decarbonisation? We do two, we're here to help you understand command the commercial, residential and utility, solar, wind and storage industries. So let's get together we can speed the energy transition.

Tim Montague: 1:40

Today on the Clean Power Hour, investing in the energy transition, my guest is a very storied energy professional. His name is Thomas Bryne. He is the CEO and co founder of clean capital. Welcome to the show. Tom.

Thomas Byrne: 1:53

Tim is great to be here. Thank you very much for having me.

Tim Montague: 1:56

I'm really honored to have you on the show. Clean capital is very, very well known in the solar industry, and we're grateful for your work. You know, every solar project on Earth needs capital behind it. And so you're a major player in that space. And we're gonna geek out on what clean capital is doing, what are the challenges and opportunities of the energy transition. But first, Tom, please tell our listeners a little bit about yourself.

Thomas Byrne: 2:24

Thanks, Tim. So from I started my career in clean energy as a lawyer, I was a project finance lawyer at Chad horn Park, which no longer exists, and then ultimately moved over to Akin Gump. And spent a number of years working for behalf of developers, lenders, any host of stakeholders in the industry, representing them on a wide variety of clean energy deals, mostly wind actually, back when I started, and then navigate my way to ultimately founded clean capital, founded clean capital in 2016, with three co founders to build on, on my experience as a lawyer and as an investor in the space.

Tim Montague: 3:09

Yeah, I thought I would work in the wind industry before the solar industry, because we got a major tranche of wind in around 2008 here in the Midwest. But lo and behold, here I am working in photovoltaics happily. So you know, I love the intersection of technology, people and sustainability. It's such a feel good. And now we truly have all the technology, we need to completely clean the grid and netzero the economy. And that's about 50 Giga tons of pollution. There's a trillion tons I like to remind my listeners, there's a trillion tonnes in the atmosphere. So there is a bigger problem there that we all also have to put our eye and ears and brain on. But what, let's let's go into clean capital, you guys have been at this now for over a decade, financing clean energy projects. What is the sweet spot for you all? And how has that changed over the years? When

Thomas Byrne: 4:10

we first started cleaning capital, we thought there was an interesting opportunity, just buying small scale operating solar projects. It was back in 2016 2017. It was a relatively untapped market. There weren't a lot of acquirers of these cash flowing assets. And for a wide variety of reasons that were too small. The underwriting was kind of quirky with SRX, or virtual net metering, there was all these different programs to navigate. So it was quite an untapped market, we focused on buying those assets, and had a really good run of that from 2016 till about 2020 2021. But it was at that around 2021 When two pretty important things happened for clean Capital One we recapitalized our business with Manulife and John Hancock who came in and they started funding the entirety of our business and two, we started to get into development. So we went from just buying operating assets to expanding our mandate into investing in developers and funding their development. And at the same time, also started to get into storage. And so in 2021, a handful of things kind of expanded what we do. And fast forward to today. We are invested in a wide variety of developers, storage and solar predominantly for now. Building a wide variety of different types of solar and storage projects building small community solar Behind the meter front of the meter, all with an eye towards being a thoughtful investor, that's advancing the clean energy transition.

Tim Montague: 5:48

And as you and I discussed in the pre show, you know, here in the US and across the globe, we humans are consuming more and more electricity. And as we make the energy transition, this is going to accelerate, right, because we're electrifying transportation, we're electrifying heavy industry. And H things like HVAC across the board. And so we're going to triple maybe even quadruple the grid. And this is, you know, math that's been done by some very, very smart people at the National Laboratories, etc. So it's a well documented phenomenon. And of course, we can, we can replace that, or, you know, replace that added load. With solar wind and batteries, there's no question that we can do that. It's a question of how quickly we can do that, and how many bumps along the road we're going to meet? So give our listeners a high level analysis, I guess, from where you sit, Tom? How is the energy transition going? And what are some of the obstacles that you are currently in the process of overcoming?

Thomas Byrne: 6:56

From from when we started cleaning capital, or even dating back prior to that, the expectation was that climate would be solved, climate change would be solved simply by putting more wind more solar, and ultimately, in the last five years or so batteries on the grid and load would stay relatively stable. And, and it was just a matter of time. And how quickly can we transition the grid to an all renewable energy sustainable grid. What has become abundantly clear in the last number of years is that there's going to be a massive uptick in load, in part from the increase the conversion to the transition to electric vehicles and art. In most part, however, due to the increase from data centers, artificial intelligence, chat, GPT, all these things are just sucking a ton of energy. And that was part of the calculus that I think we took for granted, or perhaps we just couldn't have foresaw it only five or 10 years ago, and now we have a new reality, which is the the increase in electricity demand over the next number of years is going to be far more than we anticipated. Far more than the flat demand over the last the prior 20 years. And now we have to ask ourselves, well, how are we going to address this increased demand with that same focus on brand renewable energy to the grid?

Tim Montague: 8:34

Yeah. I mean, it is kind of sad, Tom, I have to say, all this wind, solar and batteries that we're putting on the grid, in the last decade is just keeping up with the additional demand that we're putting on the grid, by building data centers, which I have nothing against data centers, I use AI tools, I use datacenters, I use Cloud Storage every day, right? It's part of my work day, I can't survive. I can't be a you know, an energy professional without those things. And, and, and so I guess I'm I'm just, I'm left wondering, how do we, how do we break out of that box? And is it you know, we have some wonderful things happening, right, we have the IRA, the inflation Reduction Act, and the chips act. And you know, this reshoring of solar panel manufacturing, and battery manufacturing, and Evie manufacturing, those are like a really, really good things for the US economy, good for workers, ultimately good for the environment. And yet, it's not enough somehow. So what what are we to do about this?

Thomas Byrne: 9:57

It's interesting, because the the year correct that with the IRA and certain other policy measures, both at the state and federal level, and in other countries as well. The issue is not are we going to build a lot of renewable energy in the next 10 years, we're going to build a massive amount of renewable energy in the next 10 years. The questions are one, is it sufficient enough to put a dent in the increase in temperatures and to is it sufficient to meet the load growth that we're going to see from the technology industry and the And the answer, unfortunately, on both of those is no. And that's why you're seeing a lot of utilities starting to change their policies to try increasing their capex expectations over the next few years to deal with a lot of the increase in demand. So therefore, if it's insufficient to get us to the place that we need to be both in satisfying the increased demand, and to curbing greenhouse gases, then there has to be a massive policy measure, if we're serious about addressing climate change.

Tim Montague: 11:12

Yeah, or perhaps some kind of greater, for lack of a better expression, spiritual awakening, like, capitalism is an amazing tool, it has given us the good life that you and I enjoy here in the United States. And it works really well, right? When you incentivize investors with a return on investment, it happens. And it creates this, this perpetual motion machine in a way, right. And ultimately, we have all these free photons raining down on us from the sun 1000s and 1000s of times more than we actually need, which is the foundation for solar wind, and really all of life on Earth. And then you combine that with with capitalism, and you know, it truly is an amazing opportunity. A an engine for good. But there's also aspects of that of that capitalist system, of course, that is creating climate change, right? We're we're pumping fossil pollution into the atmosphere, it's it's invisible, largely right, when you look up, you don't see a garbage dump, you see the blue sky, and it still looks pristine. Unfortunately, you know, we're at 420 ppm ppm are going up, not down. So we're just putting on the brakes a little bit, right, we're slowing the rate of increase. But we're not putting a dent, we need to get back to 300. Actually, I would encourage my listeners to check out my interview with Peter for kowski. Peterfiekowsky.com, he is my favorite author, and scientist who's really going after some natural solutions to that problem of getting from 420 to 300. And I don't think capitalism is going to solve that problem. But there are some variants. And I don't want to go too deep down that rabbit hole, Tom, because I know that's not necessarily why we're here today. But I do think it's important, right, that we we stand on the shoulders of these really good platforms, right capitalism, democracy, clean energy technology, where you know, and we've we here in the United States have been very central, we're not the only ones. But in terms of inventing and, and bringing that stuff to, to the market. We are we are very much part of that, as is China as is Europe, etc. So, I guess what is your message to other professionals in clean energy as to how they can influence the energy transition?

Thomas Byrne: 13:49

I think the points that you bring up that I think are true are, are one, I don't think we should be unrealistic about the expectations of society, like we're not going to ask people to start turning off computers, not using cars right. Now, you know, that's, so you can absolutely encourage folks to be entered to increase their energy efficiency. But even that will only that will only do so much. So we are going to advance as a society, technology is going to continue to advance and continue to be a major energy consumer, an increasing energy consumer, in the next decade, the next two decades. And therefore, through that lens, you have to look at the solutions and you bring up you touched briefly on some interesting solutions. I think that there's more chatter about what used to be kind of pie in the sky solutions to climate. There's more chatter and more conviction around them and more momentum behind them than then there was you know, only two or three years ago. So I think looking at a holistic solution that a bridges us towards the 100% zero emission, renewable energy source. Renewable energy grid is very credible now and I think very it's a topic that needs to be discussed.

Tim Montague: 15:23

The Clean Power Hour is brought to you by CPS America. The maker of North America's number one three phase string inverter with over six gigawatts shipped in the US. The CPS America product lineup includes three phase string inverters ranging from 25 To 275 kW, their flagship inverter, the CPS 252 75, is designed to work with solar plants ranging from two megawatts to two gigawatts, the 250 to 75 pairs well, with CPS, America's exceptional data communication controls and energy storage solutions, go to chintpowersystems.com. To find out more. I mean, one of the themes that emerges in my interviews on this show time and time, again, is that we need to bring down the cost of clean energy. And to like a penny a kWh. With with solar and battery, right. And, and that unlocks a lot of things like green hydrogen, for example. What what do you and your colleagues at clean capital, think about, given the framework that we have in the US, right, where we have these? You know, we have these regulated monopoly utilities, that system has served us well. But it is very obvious to many energy professionals that that system is also outdated. But what is your what is your analysis of the system? So to speak? Yeah, we need better legislation, okay. But what is going to be a breakthrough in terms of reducing the cost of energy in the next 20 years, when it comes to clean energy?

Thomas Byrne: 17:01

You've seen it with solar previously, and you're seeing in real time with batteries that just getting scale alone is going to bring down significant amount of costs in both solar and, and storage and wind. One challenge you face though, and it's again, it's like you can have this idealic goal in mind. But then you get into the details. And the details now are well, we're we're talking about tariffs on panels right now, that's going to increase the cost of solar. So as you on the one hand, as we discussed the idea of bringing costs down, which is the ideal goal, you're then brought back to Earth of the reality of the world we live in, which is the cost of solar and will probably go up from where it is today over the next 12 to 24 months, as tariffs are if tariffs are continuing to be rolled out. So that's the policy reality that we live in. And we've always lived in with solar and storage. So getting getting to $1? Or would you say, one, one cent? Per

Tim Montague: 18:18

Yeah, one cent per kWh or not? dollar a megawatt hour? Yeah.

Thomas Byrne: 18:25

That I mean, that I would love to see how our business would thrive if solar and storage got down to those levels. And that may indeed be what's needed to make it sort of a ubiquitous grid. But there's a lot of things in the way of getting down to those levels. Yeah.

Tim Montague: 18:45

Yeah, it's it's this, this whole business of onshoring manufacturing is, you know, it's great for our economy in many respects, right. But it's, it is challenging when you when you pay a living wage, to create solar panels at a price that's cheaper than what they can create in China. And,

Thomas Byrne: 19:06

yeah, and building projects, the biggest cost increase for us and solar projects over the last years has been the labor associated with it, that the power prices have actually come down quite a bit over the last 18 months or so. And storage, battery prices are coming down as well. But labor is going up. That could be in part because of demand for labor, there could be inflationary trends, whatever the reason is that the labor component of building, you still need people to build and operate solar projects, right? So how you can you're, you're not going to be able to eliminate that from the equation, and therefore there's always going to be a meaningful cost to building solar projects, regardless of the format. Yeah.

Tim Montague: 19:53

Do you have any thoughts about ways of cracking that nut Amin, I'm involved with a robotics company, I serve as an advisor to a company called autonomous, sorry, luminous, luminous, and they are making a robot to install solar panels. And it's technology that will augment the workforce and do some of the very repetitive heavy lifting, that today humans are doing. It doesn't supplant humans. It just augments what the humans are doing. Let the humans do the fine work, you know, the connecting of the wires, the bolting of the panel to the racking, but let the robot you know, carry a million solar panels right. Do You think we can automate our way to lower labor costs on solar construction, you'll

Thomas Byrne: 20:44

you're definitely going to be able to gain efficiencies through technology, to what extent it automates those. And we started using drones on on our sites to conduct Oh nm to check panels. And that that was, you know, we started doing that four or five years ago, in some cases. And that's an example of technology serving a role. So we don't have to actually roll trucks out to that site as often as we for sure. So there's, there's going to be continued technology advancements and how we're building these, these solar projects for sure. Whether we get to 90% automation, I don't know, I think you still need people to build these new solar projects, oh, yeah, I'm still need people to design them, though, that will probably, you can foresee an artificial intelligence or an automation component to that. So there's difference, I think there's going to be an unleashing of technology on all aspects of our business that make the development designing, building, and maintain maintenance, main defense and operations of solar projects, battery projects, when projects are much, much more efficient.

Tim Montague: 22:06

I'm curious, you know, in your own core business, the business of financing, and developing clean energy projects, does. Does technology or the development of technology platforms bear in any large way, we

Thomas Byrne: 22:26

we actually built our own technology platform to support the diligence of our projects. So we actually have first hand knowledge of building software ourselves. We had a technology team in house that actually did that. And it continues to be the diligence platform that that we use, it's called we call it doc, it's it has since spun off, it's its own freestanding business. But we see a lot of interesting technology, platform software platforms that we touch in all aspects of our business, that are just increasing processes and workflows. That's where I see it mostly focused. It helps us maintain projects being able to have much clearer visibility into the production of projects. That's where we're seeing it on a pretty regular basis. At this point. There's a lot of great platforms out there.

Tim Montague: 23:18

I'm looking at your website, and you have a lovely map of all the projects that you're involved in. And you know, it kind of reflects the solar industry. But if you were, if you're listening to this, and you're a project developer, looking to either get support for the development process or outright acquisition of your projects, give our listeners some, some information about what it is that clean capital is looking for in the world of clean energy. Clean

Thomas Byrne: 23:57

capital tends to look at projects, there's it falls into two buckets. One, the first bucket is what I would call middle market. And I use middle market to describe anything that's between residential and big utility. We have our largest project right now is a 37 megawatt utility project we sell to the utility. But we also have a bunch of behind the meter small scale projects where we're selling to most customers and corporate customers. So that that is the world in which we tend to operate is is the one megawatt 275 megawatt scale we do behind the meter in front of the meter, community solar. And we tend to do, we're increasingly looking at non utility utility scale, right. It's not selling to a utility off taker. We also take pride in doing projects that are a little quirkier, I would say we are one of the best in the business at developing brownfields and Superfund sites and reclaimed coal, coal mines and coal plants. That's a sort of bread and butter of what we do. We have a number of really exciting projects that are turning these disregarded discarded pieces of land into into electrons through solar power and storage. We also have a we've invested in a developer in Alaska. We now are the current owner of the largest solar project in Alaska. It's an eight megawatt project in Houston. And we are going We're currently in development of a project that's going to be even bigger than that. So we've we own a large project in Guam. Guam is a Guam is very old school there. They're generating most of their power from diesel and intense fossil fuels. So bringing renewable energy to a place like that actually has some pretty, pretty big impact on that islands emissions. So we tend to gravitate towards projects. We do that middle market stuff, and that's our bread and butter. But we also really like projects that are advancing clean energy in ways that perhaps people don't don't expect, or perhaps have an added value set to it. Yeah,

Tim Montague: 26:12

I'm glad you mentioned brownfields. We have 1000s of brownfields, including landfills and contaminated sites around the United States that really you can't do a whole lot with, you can turn them into parks and golf courses. In two weeks, I'm going to drop an interview. So by the time people hear this, it'll be out there in the wild, an interview with Scott tests at the city of Urbana here in my backyard in central Illinois, where they've developed several community solar projects on their closed municipal landfills. And I'm just a huge fan of landfill to solar or brownfield debris field as the expression is also did an interview with AC power, a developer dedicated to brownfield solar development. And so that's that's a great topic, I'm glad to hear that that's something that clean capital is paying attention to. It's not for everyone, it is trickier, right? It is more complex, to develop these projects. And so you need passionate developers and financiers like yourselves to get them across the finish line. I'm curious, you mentioned Guam, a island nation. And, you know, islands are some of the early adopters of clean energy, because they're, they're bringing all their fuel to the, to the islands by boats, everything they consume pretty much, many times. And so things are expensive. Electricity might be in the 30 Plus cent range on islands. And so solar batteries are a great opportunity. And I don't know if you want to say more about the types of projects, though, and the the profiles, so to speak of projects that you guys are interested in the middle market is obviously a big market. But in some in some regards, it is often it is also a more challenging market, right? Because every project tends to be nuanced and different. Yeah,

Thomas Byrne: 28:23

and we've taken advantage of that, to some extent is that you know, the big, big institutional capital players tend to shy away from smaller scale middle market type assets for exactly the reasons you highlight him. They are they have the each project has their own challenges each project has, its their own nuance. And to be able to diligence that in an efficient manner and still get to scale to get your capital out is not an easy task. We've fortunately build a system to do exactly that. So doing those types of projects is our DNA, we do smaller scale, quirkier projects. And we have an exceptional team and an exceptional platform to do it in a much more efficient way and therefore be able to get the scale to get to a meaningful, full scale. With respect to the Brownfields. It really is. brownfields landfills, everything that falls under that bucket to two things. One, we are finally having an incentive through the IRA to actually support the added cost of building on brownfields. I think that was a real positive thing that came out of the IRA so that we can have this really full cycle sustainability story where it's not just replacing greenhouse gases with clean energy, but it's actually reclaiming these sites that were used and no longer have a good use, to build to now use them to support clean energy.

Tim Montague: 30:02

When you look in your crystal ball, you know, you mentioned earlier that a lot of solar and battery projects are gonna get built in the next 10 years. There's just no doubt about that. Right. But what are your predictions for how your company is going to evolve as the markets evolve? Do you have any grand predictions are there are there things that you're gonna grow into as the energy transition matures?

Thomas Byrne: 30:31

When we started the company storage was impossible. It was I think you could probably start we probably were starting to read about battery storage in 2016. But there was not any meaningful deployment of storage yet in the market, I don't think we saw our first storage deal till eighth 2018, or 2019. Community Solar was only done in Minnesota at the time. And that's now done in 20 or so states, there were 15 to 20 states have some version of community solar supporting it, we view ourselves as the on the front lines of investing and developing in the space, we, we are very mindful and pay very close attention to new verticals, new asset classes that crop up, as we as the clean energy transition continues to go in force. As an example, over the last year, we've paid much more attention to mobility and Evie infrastructure as the Evie market continues to grow. Both fleet, so Evie vehicles in terms of commercial fleets, and also for individual customers. That's a segment of the business that's tangential to what we do at clean capital as a clean energy provider. But it's logical, it's a logical and tangential place for us to start looking, we haven't invested in the dollars yet in, in EV infrastructure, but I could see that as a place where we go over the next year or two. And we continue to, I think any investor, any developer in the space has to continue to pivot and evolve as a company, we are paying much more attention to the technology, the corporate use of power, all of these big data centers that are that the all the big tech tech companies are going to be building over the next five years are going to need a lot of clean energy. So how did they become a customer of clean capital and our peers and our competitors? Because it's going to be an insatiable demand for it. And that's a sector we have to be be advancing in as well.

Tim Montague: 32:37

Yeah, it's almost as if you've, if you're a technology company, you are an energy company. Whether you develop those projects yourselves, or own them, or just work with partners one way or another, you need you need clean electrons for those data centers. So you're

Thomas Byrne: 32:58

seeing some of the the big tech companies buying, buying nuclear plants, right. And that's, they're figuring out ways to power their these data centers. It's they are power companies, to some extent, whether they like it or not,

Tim Montague: 33:15

well, I think we are out of time, Tom, unfortunately, I'm gonna let you go. I want all of our listeners to check out all of our content at cleanpowerhour.com. Give us a rating and review on Apple and Spotify. Subscribe to our YouTube channel. Please reach out to me on LinkedIn. I love hearing from my listeners. And you can also contact me via the website cleanpowerhour.com. How can our listeners find you, Tom,

Thomas Byrne: 33:41

You can find us on LinkedIn, we go to our LinkedIn page for clean capital and the corresponding team members cleancapital.com is our website. If you want to reach out to us there's contact information there. We'd love to talk to any developers and the owners of solar and storage projects that are looking for a good capital partner.

Tim Montague: 34:01

Very well, I want I want to thank Thomas Byrne, CEO and co founder of clean capital for coming on the show today. I'm Tim Montague, let's grow solar and storage. Hey, listeners. This is Tim, I want to give a shout out to all of you. I do this for you twice a week. Thank you for being here. Thank you for giving us your time. I really appreciate you and what you're all about. You are part and parcel of the energy transition whether you're an energy professional today, or an aspiring energy professional. So thank you, I want to let you know that the Clean Power Hour has launched a listener survey. And it would mean so much to me. If you would go to clean power hour.com click on the About Us link right there on the main navigation that takes you to the about page and you'll see a big graphic listener survey just click on that graphic and it takes just a couple of minutes. If you fill out the survey, I will send you a lovely baseball cap with our logo on it. The other thing I want our listeners to know is that this podcast is made possible by corporate sponsors. We have chin power systems, the leading three phase string inverter manufacturer in North America. So check out CBS America, but we are very actively looking for additional support to make this show work. And you see here our media kit. With all the sponsor benefits and statistics about the show, you know, we're dropping two episodes a week. We have now over 320,000 downloads on YouTube. And we're getting about 45,000 downloads per month. So this is a great way to bring your brand to our listeners and our listeners are decision makers in clean energy. This includes projects executives, engineers, finance, project management, and many other professionals who are making decisions about and developing, designing, installing and making possible clean energy projects. So check out cleanpowerhour.com both our listener survey on the about us and our media kit and become a sponsor today. Thank you so much. Let's go solar and storage