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Episode 79: Michael Eyman

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Transcript

Jon:

Mike, thanks so much for joining us at Experts Only.

Mike:

Happy to be here, Jon. This is great.

Jon:

Really love your background as an Army guy. I won’t make Navy jokes, but I’m going to talk about your military experience in a second. But you grew up in Texas. What got you interested first in joining the military, and then later on in the energy space?

Mike:

Yeah. I graduated from Texas A&M Galveston in ’94, and was teaching school through an AmeriCorps program for a high school dropout, 17 to 21 year old inner city kids. It was called Seaborne Conservation Corps, and it was a military style program. And had the gentleman who was running the program was a retired colonel, and he just had a big impact on me. He was a Marine Corps guy. Aviator.

Mike:

And so as a young man, I just I figured I would see what I could do, and went down to the recruiting district, took some tests, and they said, “Well, what do you think about being a pilot?” And I made the decision with all the forethought that I could muster at 23, and decided to go for it. And so, that was the beginning of that.

Mike:

I really didn’t have a plan. I would love to say that I would love to drape myself in the flag, but I didn’t have a long term plan. It was a moment in time that lasted 21 years.

Jon:

Yeah, that’s amazing. I was an ROTC guy. And I think coming out of high school, it wasn’t all about I had a scholarship, it was a good opportunity, I thought it was a chance to travel. It was obviously probably for you, too, pre-9/11, so that was a major shift.

Mike:

Yeah. It was a different world. It completely changed, right?

Jon:

Yeah, absolutely. And is there anything? Because I know you were in Afghanistan, right?

Mike:

Yup, yeah.

Jon:

Anything in those experiences? I talked to a lot of vets who work in the clean energy space that got you interested in the energy side. What started to drive that transition?

Mike:

Yeah. It just really had to do with we were deploying, even before 9/11, constantly to the Middle East, right? Following the Gulf War, really the moment in time when I really started thinking about it was I was flying to mission one night over Iraq, and we had two SA3s shot in our direction. And it was a big, slow plane, so we didn’t have any maneuvers to try to dodge or anything. You were just sitting there waiting to hear a loud noise. And these were called sandbushes back then.

Mike:

And I just remember thinking like, “Why are we here? Why are we doing this?” And I had a real sense of service and purpose, but at the same time, I felt like our national policy had been just chained to a region that often didn’t want us there. Right? And we can have philosophical discussions about different governments and the different policies, but that’s really the meat of it.

Mike:

And yet we had to be there, right? Because 60% of the oil and gas we used in the United States came from the light sweet crude from the Middle East. And so, we had to sustain those supply chains to sustain our plastics industry, pharmaceuticals, you name it, across the board.

Mike:

And energy. And so, it really came down to, when I finally got out, wanting to be a part of changing that, right? I had a mission when I was in, and when I got out, I wanted a mission again. And this seemed a place where I could be a help to try to push us away from that necessity, and allow us to make choices at a national level versus being forced.

Jon:

I had a very similar experience, right? When I transitioned out, I started looking at this issue maybe originally as an energy security issue. And then, I began to understand climate change, and the role that … I wasn’t some climate change activist, environmentalist. I was always an environmentalist, but coming out of the military.

Jon:

But once I really got into the nuts and bolts of all of the ways that this worked, and went back to school, and focused on it, that’s for me really when I began to get interested more in the climate and clean energy side of it versus just pure …

Jon:

Because you could talk energy security, you could talk being up in Oklahoma, not too far North from you, and they’re fracking gas wells, right? As a way to have true energy security. What was the trigger that got you into the clean energy side and the climate side?

Mike:

It was really just wanting to break that connection, right? That connection to national strategy. Again, I’d like to wrap myself in the green energy, but that’s not really where my heart was at the time. Certainly, I’m an environmentalist. My undergraduate degree was in oceanography. The climate science and what’s going on is critical. But for me personally, it was about I felt like we needed to be able to be free to make better decisions as a country.

Mike:

And so, oil and gas, traditional forms of power, they’re going to be there for a long time. I don’t necessarily have an issue with them per se, but going forward, it just doesn’t make sense. Right? It just doesn’t make sense. We as a country need to be free to make different decisions, and not just fettered with that infrastructure.

Mike:

And I think people don’t understand how much that drives the decisions we make, and have made in the past. Yeah, as a nation-

Jon:

As a nation. Oh my God, so much. Yeah exactly.

Mike:

Enforced them. Realistically, we had to make those decisions the way we did. Again, people can argue about whether you should or shouldn’t do this war or that war. I’m talking about our broad engagement and our policies. And so, that’s –

Jon:

Spending billions protecting the Strait of Hormuz, right?

Mike:

Yeah, exactly. You have this narrow strait with where the people on either side just hate each other. And we, particularly in the Navy, are there ensuring it for decade after decade. Why?

Jon:

Right. Yep, exactly. You stayed in the reserves, but then you ran your career path on, before getting to where you are today, you were at SunPower, you actually had a background a little bit in technology as well. Walk me through your career progression before you got to where you are at Origis.

Mike:

Yeah. When I got out, I couldn’t find a job. I spent about a year and a half, two years trying to figure out what I was going to do. I worked for a streaming –

Jon:

I was substitute teaching, Mike, at one point.

Mike:

Yeah. Yeah, exactly. Right? I worked for a streaming company called [Kulabyte 00:11:38]. I was a COO for a small video game company. We delivered a couple of projects. And it was really just project to project. Because people didn’t understand my resume. They didn’t know what to do with it.

Jon:

Yeah. So common, too, for people coming out of the military.

Mike:

Yeah. I didn’t know how to translate it, and I had almost 15, 16 years of experience that according to the real world accounted for nothing.

Jon:

Yup, yup.

Mike:

And so, I needed to be able to plant my foot and pivot. So, UT had a great MBA program that’s recognized nationally, and I’ve always been a big believer in education. I already had one master’s degree, but I was like I realized that I needed credibility. So, I went back to school, and I can’t say enough about that program. UT, and what Dr. Burrows and his team have done for so many students is really incredible.

Jon:

Is there a dynamic though coming as a former A&M guy into UT where you’ve got to change t-shirts and hats? Is there a lot of team commitment?

Mike:

I tell people sometimes I have to pick which ring to wear. But since A&M went to SEC, there was a little less conflict.

Jon:

All right. There you go.

Mike:

Yeah.

Jon:

That’s good.

Mike:

I also found that A&M guys were much more focused on UT than UT was on A&M. UT was more focused on OU, so really wasn’t that big of deal as it turns out. But yeah.

Jon:

Right. That’s hysterical. So, you’re coming out of school. Is that when you went into SunPower?

Mike:

No. It was about halfway through. I had blanketed the country with resumes. I had zeroed in on energy and renewables, and I had sent resume after resume at SunPower, and they just kept bouncing off like a super ball. And eventually, I basically just networked in, and got to Marty [Neece 00:13:32], who was the only C-level leader at SunPower with a military background. Marty’s still a good friend and mentor of mine. And Marty, he was an army guy, right?

Jon:

Yup. You got it.

Mike:

And so, he was willing to give me a chance when no one else would.

Jon:

That’s great.

Mike:

Just really comes down to that.

Jon:

No, I hear you. When I was at Bloom, our chief sales guy was a former Navy guy, and he was dedicated to hiring vets for the reason you laid out earlier is people don’t know how to translate the resume, so they miss the leadership that’s been developed, and from a career perspective for veterans along the way.

Jon:

So, you go into SunPower, and just looking at your career path, you really start to focus in on the operations side of these things. When having been the CEO of another company, having been obviously in the Navy, having been an officer in charge of different stuff, did you like that idea of diving into the operations side and managing these systems? What stoked your interest there?

Mike:

I think so. It was partly that I had a ton of background and experience to bring to bear, right? Operations is heavy on the leadership side. Because it’s 70% of the costs, and operations is manpower, right? So, you’re really leading large groups of people when you … And it’s accretive. Over time, as we keep generating more and more assets, they just build up, and get bigger, and bigger, and bigger in these portfolios. For companies like yours that are aggregating these assets over time.

Mike:

And so, I identified it as an area that was lacking in focus, and in that expertise a little bit. Not to say that there weren’t experts in the area. There were. But solar was transitioning. When I came into solar in 2012, a 100 megawatt project was massive. Unheard of.

Mike:

And we executed Solar Star, which was the largest project in the world at the time, 579 megawatts. And today, those are happening, they’re still big projects, but they’re happening by the 10s and 20s all over the country every single year. Just in Texas.

Mike:

And so, that transition where we’re generating these massive projects meant that the operations side actually delivering on all that promise, it required some more focus. And so, I just identified that it was an area that I had a skillset to bring to bear, and it was an opportunity where I could go there and hopefully make a difference. So, I navigated internally within SunPower to that side of the business, and gone on from there.

Jon:

And when you transitioned then from SunPower to Origis, so what led to that transition? And then, it’s great to see, just looking at your resume, how you went from being in the operation side to running the services company. Talk through the process. And then, obviously I want, just for folks that aren’t aware, talk about Origis, and talk about the work the company does on the services side.

Mike:

Sure. Yeah. It wasn’t a direct transition. I went from SunPower. MaxGen made an offer and brought me over to run their business development. I was there for about a year and a half, and then they changed directions about that same time. And that gave me exposure to another large top five operations entity. So, I got to see how did SunPower do it? And then, how is MaxGen doing it?

Mike:

Meantime, I really became a student of the other competitors in the industry, and what was happening. I spend a lot of time reading. I spent a lot of time looking at what’s happening with the market so I can look at where things are headed as much as I can. And then, started [RenewBot 00:17:23] about the same time with Tim [Maddis 00:17:26] about the same time that I got out of MaxGen.

Mike:

And then, Tim took over as CEO there, and then I started at Origis in September of 2018 when they took on the investment from Global Atlantic, who’s their owner. Which tied them as a developer to those projects long term, and they correctly realized that they needed someone who knew how to run those things long term to help ensure those investments really happened. That they delivered the power and the financial performance that they were designed for.

Mike:

And so, I came into the company. We did a round looking at M&A, and didn’t really find a matchup. So, we created Origis Services as a wholly owned subsidiary that year in 2018. And had been growing it from the ground up since that time.

Jon:

In that focus, originally it was focused on the assets themselves. And are you guys now managing for others as well?

Mike:

We are. We’re starting to. Josh Corbett, who is my director of business development, is out in the market participating in RFPs. We really had to grow the business to the point that we could offer that full scope of services first, and we across that line this year. It takes awhile to build up a full NERC facility, and build up all the capabilities, and the people. And it took us about a year and a half. So, we were operating our own facilities in parallel to putting those in place. But yeah, we –

Jon:

Talk about that for a second. Because I feel like a lot of folks probably in our audience may not be maybe in the finance side or the deal side, and aren’t thinking about the lifespan of these projects, and how you have to really own and manage them. First of all, what is a NERC? What does it take to put it together, and why the security around it’s such an important aspect?

Mike:

Yeah, sure. National Energy Reliability Council, I think that’s correct. I may be saying it wrong. Correct me if I’m wrong, Jon, but you put me on the spot with an acronym-

Jon:

We can Google NERC.

Mike:

… so then I had to say it, otherwise I’d look like an idiot. Bound to get something wrong. So, if that’s the – I think that’s fine. But all of the energy producing assets in the country have to meet certain requirements to move power around the grid. The grid’s a national asset, right? At the highest of levels. And so, that-

Jon:

grid scale projects. Not so much the – and the elementary school, right? We’re talking about red tide system.

Mike:

Right. These are on par with nuclear power plants, combined cycled gas, coal fire, oil fired plants. These are the foundations of our national grid system, which is broken down into the different ISOs in the different regions. ERCOT here in Texas.

Mike:

And so, this is what happens. This is all the layers and all the people behind what happens every time you turn the light switch on at your house, right? This is all the stuff that no one ever thinks about. And so, it’s really critical that that stuff meets certain requirements. From a physical security, cybersecurity perspective, just from a response time perspective.

Mike:

And so, there are levels that you have to meet for different sized projects. If you have a solar project that’s over 75 megawatts today, then you have to monitor and run that with a NERC facility. Those NERC compliant facilities have different levels. They have a low, medium, and a high. Low is like up to 700 megawatts that you’re moving on and off any given ISO. One and a half gigawatts takes you into the medium space. And so, when you get to a certain size, the size of the plant, and then the amount of power that you’re moving requires you to have different levels of interaction and accountability.

Jon:

From a NERC’s perspective, is it geographically constrained? You’re 75 megawatts in Texas, or if you have a system in Oregon, you can still manage that out of Texas?

Mike:

You can manage it out of Texas.

Jon:

That’s what I mean. The NERCs don’t have to be geographically focused or based?

Mike:

No, no. Not at all. We’re here in Texas today. We’re managing stuff from Arizona to Florida right now. And even have some stuff overseas still, in Greece actually. And so yeah, you don’t have to be in the region, but the level of your site, whether it’s a low, medium, or high, is based on the amount of power you move in any particular ISO. So from that perspective, the amount of power you move per region in your ISO, whether you’re ERCOT, or whatever, that does affect the level of compliance that you have to provide.

Jon:

Great. Step forward to help educate the market here. What are some of the misconceptions that when you’re seeing owners or financier coming in to want to work with you all, and maybe most of the stuff you’re doing is in-house right now, but as a team comes and says, “Hey, we’re modeling this out. How should we be looking at asset management?”

Jon:

One, how has it changed in the last couple of years? And two, how should people be looking at it over the next decade as it’s becoming more of a, I don’t want to say a commodity business because it’s not, but our industry as a whole has just gotten much better at it over the last 10 years, right? And it has to be pristine here going forward to hit our climate goals for us to be able to own and operate these things.

Mike:

Yeah. That was a lot. I’ll see if I can get to most of it.

Jon:

Yeah. Yeah, sorry.

Mike:

The team here, a lot of these guys-

Jon:

It was meant to be a softball, by the way.

Mike:

It was like six softballs all at once.

Jon:

Yeah, sorry.

Mike:

But the team here is more than just me, right?

Jon:

Of course, yeah.

Mike:

And they all came from MaxGen, they came from SunPower, they came from the industry, they came from connections. Most of the people here have, like myself, have done multiple rounds of gigawatts of solar in some place. And that’s a small group of people. There’s maybe 40 or 50 people in the country that have done that. And at an executive level, there’s maybe 12 to 15. And we all know each other. There’s not that many of us out there. Just because it’s still small, right?

Mike:

And so, that experience, although we’re still ramping here at Origis, is that experience is there. And so, we’ve seen the way these contracts have done evolve, right? In the early days of Sun Edison, SunPower, and Solar City dominance of the marketplace, and First Solar, you saw particularly utility scale and a lot of DG delivered with performance guarantees. And with Fullscope ONM contracts that were often as much as $16 a kilowatt. Which is if anybody wants to give me one of those today, I’ll take it immediately because that’s crazy money. No one touches that.

Mike:

And we saw those performance guarantees for a whole bunch of reasons fall away, and really move towards availability guarantees. Which is much easier for the ONM operator to control, right? Because so much about performance is outside of our ability to affect.

Mike:

And so, that all came with continued pricing pressure. The cost went down, down, down, down, down. And for a time over the last probably three, four, maybe five years, it’s been very common for companies to have preventive, maintenance only contracts. At a super low price.

Mike:

So, that serves, from the finance perspective, it serves to put this really low price on a spreadsheet, but it unfortunately doesn’t serve to really maintain the plants over time. Because whether you believe it or not, these things are going to break.

Jon:

Right. And so, they’re 25 year plus life cycles, right?

Mike:

Yeah. They’re going to break, right? Things go wrong, and they go wrong with alarming regularity. And I don’t mean that alarming from the perspective of, by comparison to other forms of power, the amount of people you need to man these plants is much lower than you need for a comparable thermal, or nuclear, or other, or hydro kind of plan. Because there’s really no moving parts. But lower doesn’t mean zero.

Mike:

And so, what we’re seeing now, and what we here are really pushing on is moving back towards including more corrective maintenance into the schedule so that the owners, the financiers and everybody have a really accurate and reasonable expectation of what these things are going to cost over time.

Mike:

And that’s really where we’re pushing as an industry is to say, “Guys, these things don’t fix themselves. You have to have people in the field. And we can provide them, but we’ve got to have rational contracts that protect both sides.” Right?

Jon:

Yep, yep. Interesting.

Mike:

I don’t know if I did all those softballs.

Jon:

No, no, no. It’s good.

Mike:

– one or two maybe hit the ground.

Jon:

I think that the key part of that though, I think there is oftentimes on the acquisition and the development side, they’re looking for the lowest dollar, right? As you said, the preventative maintenance. We’re just going to do this.

Jon:

But at the same point, I think we, at least on the DG side, one of the things we’re starting to look at is actually re-powering and optimization. Do you see that as a developing part? Maybe not so much the utility scale, I’m not sure, but a developing part of the space is how can we increase the efficiencies of these things over time as technology’s gotten better? Or on the utility scale, is it like we built it, it’s out there. This thing’s going to run until it doesn’t run anymore, and we’re going to suck every ounce of energy out of it.

Mike:

Yeah. And I think you guys probably do the same. Most financial models have some level of repower of major systems that they spread between years 15 and 25. Right? So, they’ll start, from a financial model perspective, they’ll start layering in, oh, in year 15, 5% of a repower cost is going to hit. We’re going to ramp it up on a curve, and ramp it back down again. And somewhere in there, we’ll have basically a new plant executing four year lifetime.

Mike:

I think that those numbers, so the question of whether or not that’s growing, the answer is obviously yes. But it’s on a delay from the rest of, right? Because you start seeing those things at 10 years. It becomes really clear at 15. It becomes critical at 20. And really, the only markets that are that mature, that have those types of plans in place. You get little ones in New Jersey’s, places like that, but in the large scale is Hawaii, and then California.

Mike:

And so, as the rest of the market ages and matures re-powering is going to become a bigger and bigger problem. And it’s not a small problem. Because the architecture changes. They went from 600 volts, to 1,000 volts, to 1,500 volt systems. People are talking about 2,000 or higher. When you go to repower, and you go to just drop in new inverters, it’s not like you can just do that.

Jon:

Pull a string and put a new string in. Yup.

Mike:

Yeah. You’re having to rework the entire electrical system. You can’t mix panels, from older panels versus new, because it doesn’t work on the site. What you end up doing is, for a period, cobbling together bits and pieces that function, and keeping less and less of the site running while you rebuild the other site. And then at some point in time, financially it makes sense to just rip all the other stuff out, and finish it out.

Mike:

So, it’s not really, people think of repowering as something that you decide to do one day. Like, “Hey, I’m going to repower the system. Go rip it out and redo it.” It really doesn’t happen like that. It’s really an evolution. You’re keeping it going and stringing it along for a time, then you’re starting to replace pieces of it. And then, you reach a point where financially it makes sense to pull the trigger, and you do the rest. And that is, for the most of the country, is still in the future.

Jon:

I got one more question. Looking out to … I talk a lot on this show about 2030. Because I think the next 10 years are just critical, not just for our market, but really for solving climate change. What has to change in the ONM industry as a whole, or the way maybe even how people view the ONM industry? For us to really get to the scale we need to be at in 2030 to settle the climate crisis.

Mike:

Yeah.

Jon:

Another softball, by the way, but that’s a tough one.

Mike:

Yeah, yeah.

Jon:

For sure.

Mike:

I would say the ONM industry doesn’t act in a vacuum, right? And we, I tell people all the time, we don’t get to choose how these plants are made, where they’re built, or what they’re made out of typically. We operate them as they sit. So, if you want to change the future, you have to take the lessons you’re getting from the field today, and you have to apply them upstream in how you design the sites, how you lay them out, how you look at the cost as a whole, what kind of equipment you buy. And I would say today, that’s generally not done well. You have IES that get involved when you’re later in the process on behalf of the owners, the ultimate owners. And I will say that ONM experience is not resident in those entities today. And they rarely ask.

Jon:

Yup. Interesting.

Mike:

And they rarely ask.

Jon:

Oh, that’s interesting. Yeah. If they did ask … It’s actually great feedback. Because we look at a lot of deals today, and obviously we bring IEs in. And to push them, and how do we take the best practices that we’re learning in the industry today and incorporate them? Where do you even find those? Where-

Mike:

Well, I would encourage the IEs as when they’re looking at these scopes to reach out to a third party operator, to weigh in from the operations perspective, and to give good information from that side of things.

Mike:

And generally, I would say if you’re reviewing a company, and you’ve got company A that’s going to be doing the ONM or that’s building it, you want to go to company B or C as a consultant, get an NDA in place, and have them come in and say, “Okay, this is good. This is bad. This is something you need to think about.” Right?

Jon:

Yeah. For us, we want to have a handful of providers. Right? We don’t want to have dozens of them. And having them weigh in on our deals is actually interesting. I haven’t really thought about that.

Mike:

It’s really critical. And even at the point that the IEs are involved, frankly the IES don’t have the ability to move the needle that much. Because the site design, the equipment, and all that stuff is already done. Procurements completed. EPC contracts typically are in place and underway. Normally, you’re at or past NTP. And so, it really, not just at that point, but also in the design phase, people need to be asking questions. How do I design this plan to operate most effectively in this region, with this weather, with this environment for extended period of time, right? And I see mistakes made there over, and over, and over again that are impossible to correct after the fact.

Jon:

Yeah. It’s in the ground, right?

Mike:

Yeah.

Jon:

Whole other conversation in the future of how to actually look at the climate impacts coming, and incorporate that as well. Because some of that ground is literally going to be changing over time here.

Jon:

Well Michael, first of all, thank you so much for joining. I always ask one final wrap up question. If you go back to yourself coming out of Arlington High I think you went to, or even Texas A&M, and could sit down and have a beer, what piece of advice would you give yourself?

Mike:

I think the same advice I give myself that I’d give to anybody, put energy, time into your networks and to people. Most people only reach out to those networks when they need a job. Suddenly, they’re really active on LinkedIn because they’re in between a job, or they want to make a change. And the way to have that stuff be valuable to you, and to help you move in the direction you want to move to have the impact you want on the world, is first to be of service and be of impact to others. Right?

Mike:

So, reach out to your network. When other people need help with a job, take the time to make those references. When other people need help with something, take the time to talk to them. It may not be obvious what the connection is, but that will come back and will enable you as an individual to have the impact that you want. It’s so rare that I see people really do that. We have to be of service to each other, right? That plays out over time.

Jon:

Do you think that comes a little bit from your military experience, leading and working with troops?

Mike:

I think so. Surely there’s a bit of a personal bias there that led me into that path to begin with. to some degree it’s who I am. But I think everybody can approach it that way, and I think we would all be better if we did.

Jon:

Yeah. Well Michael, thank you so much for joining. I want to thank Matthew Hirsch and Tara Kern for setting this up. And of course our producers at Clean Capital. At Experts Only, Colin Young and Carly Baton. Really enjoyed the conversation.

Mike:

Thanks, Jon. I really appreciate your time.

Jon:

You can always get more episodes at cleancapital.com. I look forward to advice on folks we should be talking to. And as always, look forward to tuning in next time. Thank you so much. Thank you, Michael.

Mike:

Thanks, Jon.