Today's guest is Timothy Hade, Co-Founder & COO of Scale Microgrid Solutions. Scale Microgrid sells modular microgrid products to commercial and industrial customers. It addresses the problem of replicability, as microgrids tend to be highly particular to each customer and can be challenging to scale and price cost-effectively. The company recently secured a $300 million commitment of investment from Warburg Pincus. In this episode, Tim talks about his motivation to work on this problem, what he was doing leading up to the founding of the company and the company's origin story. Tim also provides me with an overview of the microgrid market, how it works, and why it matters. In addition to covering microgrids, we also discuss how everyone can (and should) play a part in addressing climate change! Enjoy the show! You can find me on twitter @jjacobs22 or @mcjpod and email at firstname.lastname@example.org, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
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Jason Jacobs: Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. The show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today's guest is Tim Hade.
The Co-Founder and COO of Scale Microgrid Solutions. Scale Microgrid sells modular microgrid products to commercial and industrial customers. They tackle the problem of replicability. Microgrids tend to be highly particular to each site and customer, which makes it difficult to scale production cost effectively.
The company recently won a $300 million commitment from investment from Warburg Pincus. We have a great discussion in this episode where Tim talks about his motivation to work on this problem, what he was doing leading up to the founding of the company and the company's origin story. Tim gives me an overview of the microgrid market, how it works, why they matter.
How widely deploy they are today, how they help, how cost effective they are versus other alternatives, et cetera. And we also have a great discussion about climate change and not only where microgrids fit in, but what else matters in the climate fight. What some barriers are holding us back in the clean energy transition and what people like you and I can do to help.
Well, I thought I was weird during these COVID-19 times to be sitting on my bed in my running clothes. But you are actually taking this call from your bathroom in your house.
Tim Hade: Yeah, it's weird times, dude. We have a two and a half year old at home who can find me anywhere. So I apologize if you hear someone burst into the room, what we're doing this, but the spare bathroom is the easiest place to hide.
So here we go. We'll make it happen now.
Jason Jacobs: Did you ever see the clip of that newscaster who was broadcasting out of his home office and like the toddler waddled in and then like the wife or the nanny or someone went like chasing after and tried to like yank the kids out of there as he's done live TV.
Tim Hade: Yeah, that's exactly right. And I thought that was a lot more funny when I saw it than I do now. I think everyone's coming to grips with working from home and that that's quite a challenge.
Jason Jacobs: Well, this thing is prerecorded, but I can promise you this, if that happens to you where you're not editing out.
So why don't we take it from the top? Do you go by Scale Microgrids? Scale, scale, microgrid solutions, SMS? What do I call you?
Tim Hade: Either. Both. I mean, companies name is Scale Microgrid Solutions, and it's a company. I actually started with my best friends and growing up and his dad in 2016 three of us had been working together for about seven, eight years before that and had another distributed energy company.
Really what our focus is, is trying to build behind the meter microgrid solutions for commercial and industrial customers, primarily on the coast. So we're primarily working in sort of the Pittsburgh DC, Boston triangle, and then out West in California. And when you talk a little bit more about that and about what behind the meter microgrids are, but that's kind of our thing.
And you know, it's been a crazy journey to get where we are. We're hopefully just getting started with the impact we're going to have. But you know, this is a tricky industry and so I'm really happy to be on here. I'm really grateful for what you're doing with My Climate Journey. Cause I think, you know, we're trying to fight this monster, right?
And there's not enough of us. And so I think we need over the next, you know, five, 10 years to bring all these smart and talented people who are doing other things right now. We need to bring them into the fold. And I think part of the challenge with doing that is this seems like, you know, the most complicated thing in the world when you get started, right?
But I think through, you know, programs like this and what a lot of other people are doing nationwide, we're starting to make it easier for people to learn about this type of work and how they can contribute and where their fit is. And that's what we're going to need, man. This is going to be an all hands on deck thing.
Jason Jacobs: Well, one of the tricks I learned in doing this podcast is what I don't know the answer to something. I can still pretend I'm the expert by just saying, Hey, for any listeners out there that aren't familiar with, if I just couch the questions that way, then I can ask you whatever I want. So for any listeners that aren't familiar, what does behind the meter mean and what's a microgrid?
Tim Hade: Yeah, so if you think about the technical definition of a microgrid, right? It's literally just something that can both generate electricity in parallel with the big grid. And then also has the capability to island. So when the big grid fails, the microgrid keeps working, and so that's technically what it might, the definition of a microrid is.
Problematically, there's a lot of things that fall into that category of technology systems that can work. Both with the big red and in Island mode. And so there's a bunch of different types of microgrids, things that people commonly talk about when they think about microgrids tend to be more community microgrids.
So that's a situation where you might have a town and you build a microgrid for a town. And when the transmission network fails, you can isolate that distribution network. And that's kind of the future of where this industry is going. But there's a lot of both technical and regulatory challenges to getting and building those types of systems.
And so what we focus on is single facility microrids essentially, how do you turn a building into its own power plant? And that typically is. Right, right now the sweet spot for doing that is kind of, you know, 250 KW and above loads, which is, you know, a big grocery store is sort of where we start and all sorts of different types of, you know, hospitals and hotels and industrial complexes and things like that.
Those are the types of clients we build these systems for.
And what about the behind the meter park?
Yeah, so it's pretty interesting, right? And I think. One of the things that you, you know, you're doing a great job learning about and I think people need to recognize is there are a lot of challenges that we have to overcome in order to get where we want to be with respect to climate action.
But there are also a lot of administrative and regulatory challenges. And so right now, the way that utilities are structured in the United States. Utilities are monopolies when it comes to owning the transmission and the distribution grid, right? So depending on where you are in the country, it works a little bit differently.
But throughout the country, the utility has the exclusive right to own the wires. So if you're a microgrid developer or microgrid company like us and you want to use those wires to deal electricity around when the big grid is off, that becomes really problematic because you have to work with utility and you have to go through a public planning process.
And there's a lot of these things in the works, but they tend to take like three, four years just to kind of get the paperwork sorted out before you can go on and start building them. And so a much easier way to do it is to just do it behind the meter. So every customer of ours has a utility meter where power comes in.
We build our system behind that meter. So that we're not using any of the , the utilities, electrical infrastructure when we island. So you think about the grocery store and sort of an example, they'll have their incoming feed or coming in from the utility we'll tie in behind that. If the grid goes down, we can still power that whole facility and we're just using the end use client or the grocery stores' existing wires.
We're not using any of the utility stuff. And so from a regulatory standpoint, that's pretty easy to get approved in most areas of the country today. And that's part of the key to building a business in this space, right? Is investors don't like regulatory risks. So when you go to investors and you try and talk to them about, Hey, we've got this plan to deploy 50 or a hundred million dollars, or whatever it is.
But it's contingent on us, you know, sitting down with utility, coming up with a common, you know, strategy that's gonna work for both of us. And then we got to go to the PUC, public utilities commission, and we have to get them to approve it and a bunch of this other stuff. That tends to scare a lot of investors away.
When you can go to them and you can say, look, we have a project here, or the client wants to do the project. There's a simple application utility requires that we file in order to do this project, but it's, you know, pretty much just check the boxes type of thing. Then you know, those are the types of projects where you can really start to, where investors can really start to understand, you know, how they can make returns and have some confidence in that.
And so, you know, that's a big aspect of sort of how we got to here and why we focus on those types of projects.
Jason Jacobs: So if it's not behind the meter, what is it called?
Tim Hade: In front of the meter? Yeah. So, so two types of microbeads generally sort of front of the meter and behind the meter, and then from a technical standpoint, they work very similarly.
From a regulatory standpoint, it's a really key to distinction.
Jason Jacobs: So why would anyone want to put a microgrid in front of the meter then?
Tim Hade: Yeah. So there's all sorts of reasons why you want to do that. So the best example right now is probably what's going on in California, right? So, and I think, you know, there's a lot of great companies doing great work on this.
I think Sunrun is one of the companies that's kind of leading the charge. On how we can build more innovative front of the meter systems. And Audrey Lee who works there and is kind of a like a genius in this space, just published and as part of her team published a white paper about how you would do this, that I would recommend anyone who's interested in this type of stuff read. But you know, the basic premise is if you look at a situation like California where the shutting the power off multiple types of times a year to mitigate wildfire risk. When they shut that power off it affects a lot of people and it disproportionately affects middle and low income communities who can't necessarily afford to buy a behind the meter system.
And so the idea would essentially be that if you can cut this down at the community level and you know, build an infrastructure where people who do have behind the meter resources can share that power with their community in the event of an emergency, there's a pretty good argument that that's like the greatest good, right?
That's the way that we can invest money, the smartest, and have the biggest impact for the people who need these systems the most. The problem with that is that there's no existing regulatory structure under which you can do that. And so essentially, if you want to do that, you have to get a bunch of regulations changed before you can even start to seriously consider designing one of these systems.
And you know, that takes time, right? So you're talking about, I don't know, maybe two or three years of working in California with the CPUC and utilities and all these various stakeholders to figure out how to do this. Meanwhile, like they're shutting off the power next fall. Right? And so our approach to the California market is we're trying to build as many behind the meter systems as we can as quickly as possible.
Cause it's what we can do. But if you want to sort of have an impact on a big social scale, that's really when, you know, front of the meter microgrids have to be part of the sort of ingredients list. And again, there's a lot of work to do on the regulatory side to get there, but lots of smart people working on it.
Jason Jacobs: Well, I have a bunch of questions about the meat and potatoes, if you will, of what you do. But before, but before we get into that, let's talk about the origin story. How did all of this come about?
Tim Hade: Luck and happenstance played a big role, but I guess, you know my, my background was I was a military guy, so I went to the Air Force Academy for undergrad and then six years active duty after that.
And I think the big thing I took away from that experience was just, there's a lot of problems in the world and I wanted to spend my life trying to work on some of those problems. And so when I got out of the military, I went to grad school. I spent a lot of time thinking about what I wanted to do, and to be frank, I kind of ran out of time, right?
I was in a two year program and the end of the two years came and I didn't really know exactly what I wanted to do. There were a bunch of things I sort of had on a whiteboard that I was interested in. Climate change. Climate action was one of those things, but it wasn't yet something I had really gotten into.
It just so happened about the time I was graduating, my best friend from growing up. Left his sort of high paid consulting gig and went and took over his family business, which was traditionally a standby diesel generator company. And the idea was he was going to transform that company into a sustainable energy company.
And so the timing just kind of worked out. I needed a job. He had a job. I went and worked for my best friend and I figured it'd be like a six month thing. Well, I kind of figured out what I wanted to do. And about two weeks after I got there, I was sold. I was in, right, because I was talking to him and I was talking to his dad, who was the owner of the business and a lot of the employees and you know, just seeing that there's this need out there for really innovative technical solutions.
And at the time we were doing this, there weren't a lot of other people doing it. And so I got hooked pretty quick. Right. And. Then there was, there was kind of a transition period, right? So for the next two, three years, I didn't make anyone any money. Let's just put it that way. I kind of went backwards in my career from where I was and started doing a lot of like.
Ground up fundamentals, blocking and tackling.
Jason Jacobs: And this is not Scale Microgrid Solutions. This is the seven or eight years leading up, right?
Tim Hade: This was a previous business that we built by the name of Energy Rudox, that was acquired by Centrica in 2015 and yeah, I was doing a lot of blocking, tackling, right?
So just trying to learn how the business works. I mean, one of the things that's tough about getting into this is the energy industry has its own language, right? So. You know, talking about kilowatts and kilowatt hours and volts and amps and all this stuff, right? It's, it's complicated. So you kind of have to go back to like electrical engineering one-on-one and start learning, you know, how does this actually work?
What's a one line diagram? That kind of stuff. And it's tough, right? I think that's the toughest period in this transition for people coming into the climate movement is just that initial period where you know, you'll watch a lecture on TV or you know, go to a conference and hear people speak and you don't understand half the words that are coming out of their mouth.
And so it's intimidating, right? But I think what I would say to people is it's not impossible to learn far from it. There's a lot of really great resources out there to do so. And I think if you just kind of start with the basics and, you know, find mentors. And one of the things that's awesome about this community is that there's all sorts of people who are willing to take time out of their day to answer questions and help you learn. I mean, you've found this, right? This is what, like the hundredth episode of, of people being willing to, to, you know, spend time with you and I, and I think, you know, there's a really supportive community that will help you.
You just gotta be ready for that sort of first year or two to. You learn a lot, right? You gotta learn a lot, and then you start to understand the language and you start to understand how things work, and that's really where you can start to have an impact, I think. But yeah, that's kind of the process I went through and then spent kind of on the back of that three, four years doing project development for that company, had a bunch of successes on a project scale.
Again, that company then got acquired. We were kind of sitting around thinking about what to do next and Scale Microgrid Solutions is what's fun out of that.
Jason Jacobs: And so what, what was the initial aha or kind of white space that you saw and then what was the entry point? How did you initially get rolling with the company?
Tim Hade: So I think, you know, one of the insights that we had from our early work in the space was that a lot of people were approaching this from a component technology standpoint, right? So there are a lot of companies that were building solar rays, and there are a lot of companies that were putting, I guess fewer at the time, but there were starting to be the beginning of the lithium ion battery boom.
And a lot of companies that were focused on storage. And there are a lot of companies that were spooked, focused on standby and emergency generation and you know, diesel and natural gas generators and that type of thing. But ultimately we felt that the best value proposition to the end use customer wasn't a component technology, but rather a system that incorporated a number of different component technologies, what we call this as hybrid microgrids.
So our microgrids aren't built on a single technology. They're built with a combination of things. Typically solar storage and natural gas are the three technologies that are most prevalent in our systems. But we've done projects with diesel and we've done projects with solar storage only, and it's kind of, you know, tailored to the specific end user and the client.
But that was, I think, the initial breakthrough. Was was thinking about these things at a system level, not a component technology level. And we saw a real need in the space. Right. And so...
Jason Jacobs: Can I just stop you for one minute? So what, what is the advantage of systems microgrid versus component microgrids?
Tim Hade: I guess, you know, the thing to think about is, you know, you put yourself in the, in the shoes of the end-use customer, right?
And typically what customers are looking for is a value proposition. That consists of three things. They want cheaper energy, they want more resilient energy, and they want more sustainable energy. And so I think, you know, in order to deliver the best value proposition across those three streams, that's really where the multi technology platform comes in.
So, as an example, in a lot of projects we work on, we can use solar storage to reduce customers' energy bills and improve their carbon footprint. But when the power goes out, we can use that battery for two or four hours depending on how we designed the system. And then you're done. And so you think about that from a grocery stores perspective and they're like, that's great, but you know, when we lose power, we're going to lose all our inventory four hours after the power goes out instead of instantly.
So that doesn't really help us. So in that case, you bring in and dispatchable asset, be it a diesel or natural gas generator, and now you've solved the resiliency piece, right? Which is you say, okay, now we have an asset there that, you know, when the power goes out, this can run more or less indefinitely.
As long as there's a fuel supply and that sort of solves that problem. And then you get into the next level of sort of engineering these systems, which is, okay, now we're using natural gas and diesel, and we need to do that in order to satisfy our customer's need for resiliency. But we're also a sustainable energy company at the end of the day, right?
And so how can we use those assets in the most sustainable possible way? So we're still hope helping the customer reduce their carbon footprint, and we're still generating revenue that that can offset some of these costs. And the math gets really complex. Right? And I think trying to think about how you do that on the systems level is I find very intellectually stimulating.
But. No one's really figured out the optimal mix yet. I think there's a bunch of companies that are getting close and we're probably in that group, if that makes sense.
Jason Jacobs: So before you guys came along, what do these solutions look like? So if it's components only, is it, what is it lacking? Is it lacking kind of a management layer across these components from different vendors or...?
Tim Hade: Yeah, so then the controls aspect of it is really big. Right? So thinking about. From a technology standpoint, how you build a system that has a solar array and a battery and dispatchable generator, and how you make those work together in the optimal way. Is really, really complicated. So building a software way or on top of that and using things, we have what we call machine learning algorithms, but everyone uses machine learning.
They're just algorithms that sort of look at all these different parameters and dispatch the assets based on these different scenarios. And it's complicated that software layer on top of it, but that's really what the game is right. The, the customer has this value proposition that they want and all these different companies are racing to try to figure out how do we satisfy that value proposition while still being able to build a sustainable business.
And that's kind of where we are as an industry right now.
Jason Jacobs: Just to repeat back to make sure that I, that I understand it. It's the management software layer that can tune the different dials across these disparate components and equipment. That's, that's the special sauce of, of Scale Microgrid Solutions?
Tim Hade: Yeah. I would say there's, there's two components to this, right? So the first is definitely the software and controls layer. The second piece is what we do on the hardware side, which is an ongoing process. But the goal here is to try to standardize and modularize system components to the maximum extent possible.
So like part of the problem with multi technology microgrids is traditionally how they've been built is very custom and bespoke. So if you wanted a microgrid, Ken, years ago you went go find a microgrid company. You would go hire an electrical engineering company who would come in. They would sort of bespoke design this thing for you.
And there's a ton of intellectual capital that goes into the design portion of the project upfront. And so the problem that created right is that soft costs on each one of these deals are really, really high. Which meant that you could only really do these projects above, like let's say $30 million in cap X, or you know, two megawatts and woods, something like that.
But there was sort a floor on where you could do these things. And the problem with that is 95% of commercial and industrial customers in the United States, we're below that floor. And so in order to try to sort of build a mass market solution, you have to try to figure out how to build the hardware in a way where instead of going in with sort of an unlimited set of options, you're going in with sort of, we like to think about it as like Legos, right? Where you have all these different component technologies that are set up, ready to be plugged into the system. And that takes a lot of work. And so, you know, we've, we're, we have a bunch of, you know, hardware partners, Schneider electric, Mitsubishi, Stanford, new edge companies like that.
That worked with us to sort of standardize this system. And so those are kind of the two things that differentiate us in the market. One is sort of the modular approach to building these things. And then the second thing is the software and controls layer that sits on top of that and makes all these assets work together.
Jason Jacobs: Got it. And so that modular approach, is that something. That you bring kind of almost like a, like a consulting engagement with architectural expertise from engagement to engagement. Or it's more about piecing together cookie cutter approaches that you kind of internally in a proprietary way, certify that you can reuse but that, but that recipe isn't available for general consumption.
Tim Hade: So it varies a little bit. But I think the best example of this is what we're doing in California right now. So what we're doing in California is we're building every single microgrid out of the same, essentially 15 components, right? So we have a menu of sort of 15 things. We have a battery energy storage system that's available in six different size ranges.
We have a dispatchable generator solution that's available in six different size ranges, and then they'll really, the only custom part of the job is the solar array because for behind the meter systems, that has to be kind of be. Custom tailor to the host, but you know, trying to sort of mitigate to the extent possible, the upfront engineering and design.
So then you sort of give this menu to the engineering team and you say, here's the load profile of the facility, build the them out of these 15 components instead of any component. And that really helps to sort of narrow the scope. Now, you know, for most of the projects we're doing. The downside is if we did, you know, custom engineer all these things, the NPV of the project would probably be slightly better for our end use customer.
But you know, we're building these things now in six to nine months, which is at least 50% faster than these types of systems have traditionally been built. And that matters a lot when you're talking to people who are worried about the fire season that really ramps up in October. And so when you're going to a customer and you're saying, look, I can save you an additional 5%.
If you give me two years, they tend to say, no, no, no. We'll take the standard approach and let's get this done by October. That's kind of where we're going as a company, is trying to make these as easy to deploy as possible.
Jason Jacobs: So who owns the microgrid itself? Is it the customer or you?
Tim Hade: It varies on a case by case basis, but the overwhelming number of customers that we do this for now, acquire these systems through energy as a service agreements.
What that means is that. We fund the upfront capex of the deal and then sell the electricity output of the system back to the customer over a 10 to 20 year term, just like the utility does. And that's what pays down the cost of the system. And so, you know, the reason we do that, and the reason I think that's become the preeminent model in our space is because there aren't a lot of people out there, facility managers, you know, executives at companies, things like that, that really understand microgrids. So they don't want to take that risk on their balance sheet. But if we can come in and say, look, this isn't gonna cost you anything up front, you're just going to sign a pay for performance contract with us.
And if we do what we say we're going to do, you're going to pay us money. And if we don't, you don't have to. That sort of reduces that barrier and gets customers a lot more comfortable with doing this type of thing. So probably like 90% of the deals we're doing right now, are through that energy as a service model.
And you know, we have a great partner in Warburg Pincus that helps us sort of execute that. But yeah, we on a case by case basis, we find customers who say, no, I just want to own this thing. And you know, we work with them too.
Jason Jacobs: And then are you typically, has the customer already decided that they want a microgrid and they're just evaluating who the right partner is to bring it to life?
Or are you actually convincing them to consider a microgrid where they otherwise might not have?
Tim Hade: Really interesting things that I think is, is changing in real time. Right. So historically, what, you know, my job was, and the team that works for me, our job collectively was, was more of the latter, right?
Where we would go out and we try to convince people that this is a microgrid and this is why your type of facility is good candidate for a microgrid. And I dunno, you know, your batting average is pretty low. Recently, I think, you know, as this type of technology has become more prevalent and there's been more focus on it from the media and things like, you know, hurricanes and wildfires and everything have shed a light on energy resiliency.
The market started to turn. And now we have a lot more inbound leads than we ever have before where people were actually coming to us saying, I want to micro upgrade. Can you help me build one? But that's a pretty recent development, I would say probably in the last 12 months. And so, you know, it's, it's, it's a nice thing to see, right?
I think. We're, we are excited when people come to us and say like, Hey, we want to do this. Can you help us do this? Because that's more fun for us, right? It's more fun to work on actually building these things and getting commissioned and all that stuff than it is to try to convince people that this is a good idea.
But we do a little bit of both.
Jason Jacobs: And then if you had a pie chart that spelled out the reasons why these customers are deciding to move forward with a microgrid, how does that break down?
Tim Hade: You know, again, I think it's shifting, right? So historically the driver has been economics. So typically the people who have installed microgrids are really high energy use customers, you know, think data centers, hospitals, paper mills, things like that.
And the driver is really been, we want to get our costs under control.
Jason Jacobs: As a replacement for their primary energy source?
Tim Hade: Yeah. So replacement isn't the right word. I like to think I used the word complement, right? So I think , you know, none of the systems, there's one system that we've built that's like an off grid system where the person doesn't no longer has a connection to the utility grid.
That's a cool project. Who can talk more about that? But, all the other customers that we have are in parallel with their utility grants. So typically when we do a project, you get about 60% of your energy from us, 40% of your energy from the electric grid, and then in the event of emergency, we can ramp up and provide 100% of that capacity.
But that's, you know, traditionally in our space, been the driver. Now this is another sort of pleasant development, right? Is that in the last, I don't know, 18 months, one, we started to see a huge transition from corporate America with respect to ESG goals or whatever people call them. And I think people are really starting to take sustainability seriously.
Right. Which is really nice to see and is needed. So, you know, now there are a lot of customers that come to us and their number one priority is we want to reduce greenhouse gases. I love working on those projects. And then, the third aspect of it, which is also really driving a lot of business right now is resiliency.
You know, whether it's in California or the Caribbean, where you have communities that have been exposed to long duration power outages, it becomes really quickly apparent how dependent modern society is on electricity. And you don't want that situation to occur. And so, you know, in those sort of areas, resiliency is a big driver for folks now as well.
So, you know, I think it's still probably, if you have the pie chart like 50% economics, 25% sustainability, 25% resiliency as the lead driver for our customers. But like two years ago, it was like 90 / 10 so it's, it shifted in that direction.
Jason Jacobs: And where are we in terms of how widely adopted these microgrids are?
Where are we in penetration is the word I was looking for.
Tim Hade: I mean, that's a quickly growing industry, but I think one of the things that. I don't know. Most people in our industry will say is that we're currently only capturing a very small fraction of the potential. Right. And so, you know, this ultimately gets back to a lot broader conversation, which is, what are we going to do about climate change?
And one of the things that's concerning about that is we as a nation, as of yet, don't have a plan. I mean, we've had pieces of a plan before. Those are basically on the back burner right now, and there's a lot of talk about, you know, what the plan is going to be, but right now what was your first day? They have to mitigate carbon emissions fairly drastically.
The second thing is we have to adapt, right? Because no matter what we do at this point, we've done irreversible damage and things are going to change and we have to build more resilient infrastructure to deal with that. And then the third thing is we have to figure out how to pay for it. And just to clarify, right?
That's what the Paris Agreement set. So the only thing the Paris Agreement said was those three things we have to mitigate. We have to adapt, we have to figure out how to pay for it. And so our argument on microgrids is that one of the inherent risks to the U.S. energy system right now is it's interconnected nature, and this doesn't only apply to climate change, by the way, it also has a lot to do with cyber threats, and we can get into that if you want, but you know having this essentially one interconnected system that supports our whole country. It's actually three independent grids, but it's all interconnected. Is is a big threat. And so what you want to do is you want to shift that in the direction of a more distributed energy system where you have more towns, communities, individual buildings that can island from the grid and the event of an emergency and sort of keeps society running.
And so, you know, I think right now, you know, this industry is very, very nascent. This is like a very crazy thing that people think I say. But. You know, my whole view on this is that like a hundred years from now, there aren't going to be wires because buildings are going to be able to make their own power.
And I can't really substantiate that cause a ton of stuff has to change in a hundred years is a long time. But I think we're now at the point where. What's traditionally worked in energy economics, which is economies of scale, which is the reason that we have central power plants connected by thousands of miles of transmission distribution systems.
Those economies of scale are changing. And so with new technologies and what we're seeing on the battery cost curve and all these different types of things, it's becoming easier and easier and easier for individual facilities or communities to be able to install these types of distributed systems. And it makes them more resilient system in a lot of different ways.
And you can do that in a way that drastically reduces carbon emissions. So, you know, if I were king for a day, right, we'd be building a whole lot more microgrids than we currently are. But I think that's the trajectory that we're on and where that kind of levels off and where the market ultimately settles.
I think it's really too early to tell, but this could potentially be a really big thing, and at a minimum, I think it's going to be a substantial thing and we're excited to be part of, you know, this initial group of companies that are really trying to take this to the next level.
Jason Jacobs: And then from a customer profile standpoint, what's the entry point where you feel like the fruit is the ripest and then how do you see that customer profile evolving over time and driven by what?
Tim Hade: That's a good question. So I guess to begin with, right, I think the lowest hanging fruit are people who have power, quality issues. And so, you know, electricity and, and you know, this is a broader point, but. We take electricity for granted as a society. I mean, I used to go home to my apartment in New York City and I never knew how the New York City electrical infrastructure was built.
You know, a hundred years ago that a hundred year old copper and every time I turned the light switch on, the lights go on. It's amazing, right? I mean, this is an amazing system. You know, I think the U S electricity grid was the engineering accomplishment of the 20th century. And so I think ultimately, right, this is really a conversation about the system that we've traditionally relied on is not necessarily the way we want to build the electrical infrastructure moving forward.
And that's a huge conversation, right? And there's a lot of sort of component parts, but getting back to your question, I think when people lose power, you know, be it for a week or two weeks or a month, or in Puerto Rico, six months, you start to see a shift in people's appreciation for having power.
And those customers tend to be the ones who are, you know, after those events are coming to us and saying. Well look like we can't have this happen again. You need to help us fix this. And that's what I would say in the industry right now is the lowest hanging fruit. So that's why you're seeing a lot of development in the Caribbean.
A lot of development in California. I mean, California is the center of the microgrid universe right now. You've seen a lot of positive things come out of hurricane Sandy and, and you know, different programs in New York, New Jersey, Connecticut, Massachusetts, places like that to sort of harden their infrastructure there.
But I think really moving forward, that resiliency aspect is going to be the driver of the market. But you know, again, I think sustainability and cost play a big role as well. And so it's really kind of a blended value proposition for everyone. And that's what customers are looking for, right? If you can give them more resiliency while simultaneously reducing their carbon footprint and you know, doing it in an economically viable way.
That's the recipe for success in this industry, right. And then doing these projects is really complicated. So even if you have, you know, the big picture sort of lined up broad agreement, there's still a bunch of things that can kind of deter it from becoming a project. That's kind of what we look for and when we're qualifying leads.
It's do they need resiliency? That's if the answer is yes to that, then that's probably a good customer.
Jason Jacobs: And you mentioned from the outset of the discussion that when you were trying to figure out what to do when you got out of school, that climate change was an area of concern, and that was driving your quest. How does the microgrid scratch that itch for you? How and why?
Tim Hade: I mean, I think distributed generation broadly, right, is a key component of what we're going to do to mitigate climate change. So again, if you sort of go back to the fact that we both have to mitigate emissions and adapt to the damage we've already done.
What you're fundamentally saying is we need to build a more sustainable, more resilient energy infrastructure. And that's what microgrids do, right? They, they help both on the resiliency side of things and the greenhouse gas emissions side of things. And so that blended profit value proposition is really what excites me about the technology as part of a broader climate action plan.
Now, you know, with that said, I think, you know, inside this like insular. Energy Twitter world that we live in, right? We have a lot of arguments and debates. Most of them are good spirited about, you know, either or trade offs, right? Should we have nuclear plants or solar panels, you know, that kind of thing.
And I think that's kind of silly at this point. I think right now where we are at as a society is, you know, all of the above, right? We should be trying to do this in every way, shape, and form, and then let the best technologies sort of show themselves over time. But, you know, not everyone agrees with that.
And so it's kind of a hotly contested point inside, you know, our industry, but you know, where microgrids ultimately end up as being, you know, if they're a big part of the climate solution or they're just a sort of small piece of it. Even a small piece of this opportunity is more than enough to build like a good sustainable business and to really make an impact.
And so I think that's what we're focused on, right? Is just trying to build the best company we can try to do as much as we can, try to reduce greenhouse gas emissions as much as we can. Try to push the innovation curve forward as much as we can. And then you know what will be, will be, right? If that means that this is a trillion dollar industry, that's great.
If it means it's a $5 billion a year industry, that's still enough work for us. So, you know, we'll figure it out.
Jason Jacobs: And then structurally, if you could wave your magic wand and make one or a handful of changes to help accelerate the adoption of microgrids, what would those be?
Tim Hade: I think about this a lot. So, I mean, I think the biggest thing is just, you know.
We have to fix the regulatory situation in the United States when it comes to energy infrastructure, period. Right. And you know, I'd actually be interested here when you think about this. I mean, I'm a decade into this journey right now, and I still hear, you know, ad from angles all the time. And I'm like, what's that?
Right? Oh, there's another agency that I need to get approval from. And like, I didn't even know they existed. And that happens all the time. Right? And so the way our energy system is regulated right now is. Crazy. You know, there's 2000 plus different electric utilities in the United States. Every one of those electric utilities has their own set of rules.
You layer are on top of that, you know, regional operators, right? RTOs, PJM, all this stuff. Then there's FERK at the national level that's regulating a lot of the stuff and it's just chaos and essentially the regulatory situation, the United States was designed to work inside a system that already existed.
And so now, fundamentally what we as the energy transition are saying is we need to change that system, but we don't have a regulatory construct that works to change the system. And so, you know, I think what's unfortunate about this, right, is if you think about, I dunno, the evolution of the internet over the past 25 years and the ridiculous growth curves and the ridiculous innovation curve and all these improvements we've seen.
One of the primary reasons for that is that the barrier to entry for tech entrepreneurs in order to get a viable product onto the internet. It's basically nothing, right? Like you and a few buddies can get in a garage and six to eight months later, you have a minimum viable product and you put it online and if people buy it great and, if they don't, you go on to your next thing. That's not how they like the electricity system works, right? So if you want to build the clean tech company and you want to get some new tap on the electric grid. I don't know. You probably got a five year period where you know you're going to be working just to get an approval to interconnect into that system and that barrier to entry is, is I think ridiculous, right?
I mean, we have to do whatever we can do to sort of get that to be feasible for entrepreneurs to be able to try to build and innovate and create new stuff. And so I think that would be, you know, the one thing I would do if I had a magic wand would be fix the regulatory system. Now the problem with that is I don't know how to do it.
So, you know, I spent a lot of time talking to people who are experts in electricity regulation specifically. And you know, while it's the most complex and sometimes frustrating system, it works. And I mean, the argument against it is like, generally speaking, the United States has really reliable, really low cost power.
And this is the system that creates that. And if you go in and you try to fix it, you run the risk of breaking it. And if you break it, then that's going to have a huge impact on a bunch of people. And so, you know, that's an area where I think not enough progress was being made, but there are a lot of really smart people.
Who were thinking about, you know, how can we build the regulatory structure of the future? And unfortunately, I just don't think those people have gotten the support they deserve to get yet. And hopefully that's going to change in coming years is as we start to take this more seriously.
Jason Jacobs: So I'll ask you a related but different question, which is if you had $100 billion and you could allocate it towards anything to accelerate this transition, where would you put it and how would you allocate it?
Tim Hade: Yeah. So it's, you know, this is not a question I've thought about a lot before cause no one's ever given me $100 billion or offered to do, so.
Jason Jacobs: You did just get a commitment for 300 million, right. Might be in tronches or phases or whatever. But that's, that's something.
Tim Hade: Yeah. No you don't, I think, I think it's really interesting, right?
I mean, one of, one of the things that I think is somewhat relevant to this is, you know. Jeff Bezos recently announced he's going to do $10 billion of his personal net worth in this sort of some sort of loosely defined climate investments. I found a really fascinating sort of reading through my Twitter stream and seeing what people came up with or ideas with respect to how to deploy that money.
But I think the number one thing right is for me it would be education. So. You know, getting back to a point I made a little bit earlier, right? It's like if you look at the climate community today, we're kind of like the Spartans at Thermopylae, right? Is a way to think about it. It's like this group of people who are all really smart and really talented, but there's this wave coming at us and like it's not going to hold.
So right now we're sitting there trying to do whatever we can just extend it, right? Buy ourselves more time, like let's figure out whatever we can figure out how to do, but like there's 300 of us and they have an entire army, right? And that's the situation right now. And so I think, you know what really has to happen if we want to do what we say we want to do. Right. You know, mitigate climate change is, again, this is, this looks a lot more like, you know, World War II than it does, you know, anything that I've been exposed to in my life. Because just the number of people we're going to need in, in different roles and different jobs, and you know, how are we going to ramp up our manufacturing capacity.
And all these huge questions that you have about the ability to really execute on any of these plans requires millions of people to come together and work towards a common goal. And I think the biggest barrier to that right now is people just aren't getting the tools they need to get started. And so, you know, thinking about, you know, how can you have dedicated climate action curriculum in universities throughout the country?
You know, why isn't climate action subjects that undergrad students take? You know, things like that. I think that's really where over the long term you'd get the biggest return on investment is if you just sort of educate this, this new wave of people. And you know, the thing I find optimistic about it, and I'm sure you've noticed this in your travels, is, you know, there's this whole generation of young kids who they're ready to go, right? Like they want to, they want to fix this. And there are a lot of people who want to dedicate their lives to doing this and want to see what they can do and how can they help. And I think if we could figure out a way to provide them with a better set of tools to sort of start that process, that could help a lot.
So that'd probably be the one area I'd isolate.
Jason Jacobs: And given that you're in your bathroom and in in my bedroom, I'd be remiss if I didn't ask you COVID-19 versus climate change, similar types of problems or apples and oranges?
Tim Hade: Yeah, I mean, so I guess I'll begin this by saying I'm not an expert on COVID-19 and I've been kind of doing the same thing you're doing, right.
Which is trying to watch what's happening and learn as much as I can and make decisions to keep my family and our employees and everyone as safe as possible during this time. But I mean, I think the biggest thing for me about this right is, you know, during times of crisis, you start to realize what matters.
And we're in a crisis right now, and I spent certainly myself a lot more time over the past two, three months thinking about, you know, what really matters, right? And, you know, you realize that like borders are just, you know, lines on a map, I mean, COVID doesn't care whether you're Canadian or an American or a citizen of Mexico, right near this climate change, right?
Like it doesn't care whether you're emitting in Canada or the United States or Mexico, right? And so this, these are both global problems. And I think, you know that that is the thing that, you know, I really think is going to be the defining metric of our generation and the generation below us, right? Is, you know, we've done a lot of work historically to sort of have this national approach to doing things right.
And the United States has done a lot of things, but in terms of trying to create a planet wide movement that addresses planet wide issues. We haven't done that before. And so I think this is an example of where we all need to come together and we need to figure out how to do this. Not as Americans, but as humans.
I don't know. Right. I see a lot of reason for optimism, right? I see. You know, communities all over the world coming together, scientists all over the world coming together, everyone's sort of working towards a common purpose and it gives me a lot of hope that, you know, we're going to beat this thing and we're going to come out better for it.
Now, the difference between COVID-19 and climate change. COVID-19 is easy to see, right? It's here now. Everyone's worried about what's going to happen to me and my family. If I go outside and I get exposed to this, what's gonna happen to my grandparents and my parents and my community, and it's here right now.
It's a clear and present danger. And I think the challenge with climate changes, is it's not clear and present. So it's something that, you know, we owe to our kids, we owe to our grandkids, we have to do this, but it's not necessarily going to change your Tuesday. And I think that's part of the inherent problem with getting people fired up about climate change, right?
Is it's not an immediate threat in the way people traditionally think about immediate threats. But you know, again, I think. We're in a much better position from a climate change standpoint now than we were 10 years ago than we were 10 years before that. And you know, we're making progress. I don't know, man, I'm going to die an optimist. Let me tell you that.
Jason Jacobs: It might even be soon. Tim might even be soon.
Tim Hade: It's like I, you know, I don't know. Right. In order to actually solve the climate change crisis. A lot of crazy stuff is going to have to happen over the next 20 - 30 years. And there's a lot of reason for skepticism, right? But what I choose to believe is that once we get to a point as a society where we really all buy into this, you know, the technology's there, and it's just really a matter of sort of ramping up.
And if you look at things like, you know what America did during world war II, right? We transformed our entire economy in four years. Wasn't 10 years, wasn't 20 years, it was four years. And so, you know, I think we're capable of doing great things. And I mean, I, you know, hopefully I'm going to be part of that great thing that we do and that's kind of what I want to do, but it's dependent on a whole heck of a lot more people than me.
Jason Jacobs: So last question is just for listeners out there who are maybe where you were coming out of business school where they care about this problem, but they don't necessarily know where to anchor, what advice do you have for them as they're trying to figure it out?
Tim Hade: Jump in. So, I mean, listen, there's a lot of reasons for, I think most people who are listening to this who are debating whether they should transition into climate tech or not.
There's a lot of reasons you can write down on a page in terms of why you shouldn't do it. I, I, you know, I was there myself and you know, is it, you know, sustainable from a financial standpoint, you know, is there going to be a big learning curve? Am I going to have to take a step back in my career? Right?
There's a lot of reasons not to do this, but the fact of the matter is like, we need you. And so like what we're doing right now, if we just keep doing that, we're fucked. Right? And we can't have it. And so, you know, the answer to this is like, yeah, it's going to be hard. Yeah, there's going to be a learning curve and yeah, you're going to have to figure a lot of stuff out, by the way, just like I'm doing right now, right?
Like half the stuff I do, I have no idea what I'm doing. I'm figuring out as I go, and that's part of this, right? But we're facing, you know, the greatest existential threat to humanity ever. And we need people and we need resources and we need talent. And so if you're thinking about doing it, just do it.
You're going to be part of something that hopefully is going to, you know, define our generation, right? We can be the generation that look this monster in the eye and killed it, and that's a good legacy for us. Right? And so I think, you know, there are a lot of people out there. That's a cool thing to be a part of, and I think you should just do it and then figure it out as you go.
It'll work out.
Jason Jacobs: And anything I didn't ask that I should have or any parting words for listeners beyond what you just said?
Tim Hade: No man. But you know, I actually had a question for you since I got your time. So I've been interested in this. I've been listening to a bunch of your pods, and I think, you know, as I said earlier, it's awesome what you've done.
I think, you know, this library is going to be amazing resource for a lot of people. But based on what you've learned today, are you still, are you an optimist or you're passing the test about our ability to get climate change done?
Jason Jacobs: I mean, I'm like you, I mean, I'm just gonna like do, even if I was a pessimistic, it doesn't serve like what's the point?
Cause the pessimists just means defeatist and I'll never fucking quit. So therefore, I guess I'm an optimist. Like it doesn't mean I don't have anxiety about it or stress about it or, you know, see hurdles and, you know, headway everywhere that I look right. But, but I also, I mean, we're chipping away at it in a lot of different places.
And I mean, there's a reason why they call these startups that like come out of nowhere overnight, but were toiling away, you know, in the struggle for a decade plus before they finally broke out. It's like they're an overnight success. It's like they're not an overnight success. It's just when it all came together, it came together fast and it seems like it was out of nowhere.
But actually there was so much more to the story, but you just didn't see it right or didn't care. Right. And I think, I think climate's going to be the same way and if it's not like I'll die on that hill, right. Because again, like I'll do everything in my power to make it that way.
Tim Hade: My man. Well, dude, you're a huge asset to the community and I'm really happy to spend the time with you and thanks for having me.
Jason Jacobs: Likewise, this was awesome. And what you're doing is awesome. I wish you every success and I wish us all safety as we get through this stupid virus.
Tim Hade: Yeah, man. Best wishes to you and your family. Stay safe out there, alright brother.
Jason Jacobs: Hey everyone. Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at My Climate Journey dot C O note that is dot C O not dot com.
Someday we'll get the .com, but right now got.com you can also find me on Twitter @jjacobs22 where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.