microphone on table background

Experts Only Podcast #93

With Energy Storage Expert John Carrington

[ CEO, Stem Inc. ]

Listen now:

Transcript

Jon Powers:

John, thanks so much for being on Experts Only.

John Carrington:

Thanks. Great to be here, Jon.

Jon Powers:

Really looking forward to diving into the exciting time you guys are having at Stem, but I want to talk a little bit about your background, which is maybe a little bit unique to this industry. You came from a different industry, but had really developed leadership chops through GE. As we were talking earlier, you grew up in a couple of different places in the country. When you went to school and you ended up in… You said in Corning, right?

John Carrington:

Owens Corning. Yeah.

Jon Powers:

Owens Corning. Yeah.

John Carrington:

In beautiful, beautiful Toledo, Ohio.

Jon Powers:

Yeah. Was that on the engineering side or on the marketing side?

John Carrington:

It was actually on the sales marketing. They had a remarkable training program that really intrigued me coming out of the University of Colorado. I liked to do it. It was six months’ training, and you had three months in the field, three months at corporate. I just felt like the investment they were putting in their team was compelling. I think there was a class of maybe 10 or 12 of us, and that was my first role right out of school.

Jon Powers:

Yeah. Then what led to GE?

John Carrington:

Well, it was interesting. It’s funny. I went up to Toledo. I was living in Indianapolis, and as you do as a younger, aggressive sales guy, I felt like I should have a bigger job. I was named the salesman of the year, and it’s time for me to run Owens Corning, of course. I went to corporate, and they were like, “Yeah, right.”

Jon Powers:

You’d make a great millennial, John. You’d make a great millennial.

John Carrington:

Yeah. Yeah, unfortunately. I said, “Look, let’s talk about the next role.” I just looked back and shake my head at all as far as probably what they were thinking, but they said, “Look, there’s a couple of things we can look at.” I felt like they were laterals. I remember I went back to the airport, and back in the payphone days, and I checked my voicemail. There was a call from a recruiter for an opportunity with GE, and they had been recruiting a lot of people. That was the first step, and I ended up spending 16 years at that company.

Jon Powers:

Yeah. Amazing. GE is famous for its leadership development for their employees. As somebody who came out of the military and had that experience in a little bit of a different way, but how did that sort of leadership development, and I guess even in a different industry, help position you to lead what you’re doing today at Stem?

John Carrington:

I was there 16 years. I was very fortunate in that Jack Welch did these city tours, they were called, and I happened to be in Phoenix at the time. He came out. He had been in the plastics business for the majority of his career at GE, in fact. I did my presentation. At the end of it, he said, “Where’s Carrington? Come on.” We walked through the car together. When we got to the car, he said, “I want to have you up to Fairfield. I want to spend more time with you.” He really took a liking to the plastics business, to what I was doing, and was very instrumental. Then when he retired and Jeff Immelt took over… Jeff had been in plastics when I was there, so I worked closely with him.

John Carrington:

I was very fortunate to have such interaction with the leadership there, but I would say I was also lucky in that Immelt decided to put four leaders from each of the businesses into Asia because the mix shift for the company was really going there. I went to Tokyo. I was responsible for the commercial and marketing operations and moved there. I think I was about 34 years old was all. I’d never seen Tokyo. Really, the objective was to hire leaders in each of the major countries. In the end, we hired 2,000 people. What was great about the experiences I learned how to do business with Koreans, Chinese, Japanese, Indians, and Southeast Asians, and all are very nuanced. You don’t get that going there a couple of times a year. I felt like I was very fortunate to have that.

John Carrington:

When you ask what I bring to Stem, that global mindset’s a big one. I would also say some of the other things that I took away was really a big focus, and this was more on Welch, of just hiring the best and brightest and get domain expertise. Now with the new transaction that we’ve done and the balance sheet we have, I think we’re able to even get more domain expertise. We’ve had an amazing team that got us here, but I’m more focused on that. I think the other one is really thinking about revolving the company around core values. GE was very good at that. I brought a lot of that here to Stem, and it’s integrity, innovation, customer centricity. There’s a lot around the execution piece, of course, and then obviously diversity and inclusion.

John Carrington:

Finally, I’d say I learned a lot there about creating a great culture. GE is remarkable in that area. The GE executives… It’s like my second family. You stay in touch with all of them. My former CEO of the GE Plastics business, I had dinner at his house two weeks ago. He lives in Tokyo now. I’ve known these people for 20 plus years, and it’s a very tight network. I want to try to create that environment at Stem, and I think we have. We have a Stem surf team, volleyball, biking. There’s all these different teams that I’m very encouraged that they do that. I think it’s fabulous for retention as well, and it just in general builds a better culture for all.

Jon Powers:

That’s amazing. Before we dive into the Stem piece, for a second, you worked in a pretty mature industry, the plastics industry, as it was growing internationally. You were coming to a… I like to call one of the biggest emerging markets in the world, the clean energy space. What parallels do you see or what lessons have you learned from having worked in the plastic space that you can bring in to help accelerate the clean energy market?

John Carrington:

Yeah. I think, again, a lot of it is around the say-do ratio. I think what I saw when I got to Silicon Valley was you had the two types of people, one that wanted to go have coffee, beer, or whatever and talk about all the great things this company that they worked for was going to go do and then another group that said, “We’re going to make this happen. Here’s how we’re going to do it.” I got rid of a lot of the sit-at-the-coffee-shop types and put in people that wanted to go get it done. I think that kind of metrics / execution focus has been very influential to what has happened at Stem and why we’ve been as successful as we have.

Jon Powers:

John, you have a fascinating background, and now you’re working at one of the most fascinating companies in the clean energy space today. For folks that don’t know about Stem, can you talk a little bit about the history of the company and what you’re doing today?

John Carrington:

Sure. The company has been around since 2009. The impetus behind it was really, how do you build out a software platform that can provide virtual power plants to a variety of customers, that we can network and integrate those to provide grid stability and obviously save the host customer money. We’re not too far afield from that initial vision. Today, we’re the market leader, and we think of it as an AI-driven storage solution that is really built to enable rapid adoption of renewables on the electricity grid. What we do is provide our customers a complete clean energy storage solution that integrates battery hardware and battery optimization from a proprietary software platform that we call Athena. In this integrated system, Jon, we basically are delivering value to our customers by reducing their energy cost, reducing carbon emissions, and stabilizing the grid.

John Carrington:

From a customer standpoint, those include commercial/industrial, utilities co-ops, renewable asset owners, and renewable developers. On the C&I side, we’re saving our customers up to 30% on their monthly energy bill. On the developer asset owners, we can help them lever up returns by anywhere from 10% to 30%. We’re excited about the market. We feel like it’s an inflection point. What McKinsey is saying, it’ll grow at 25 times over the next 10 years and become a $1.2 trillion TAM, so probably one of the biggest market segments you can be a part of. We’re the leader in that, and we have about 1.2 gigawatt hours of assets under management. It’s a long way, Jon, from where I started with… I think we had four or five sites, and here we are at nearly 1,000.

Jon Powers:

Yeah. It’s incredible.

John Carrington:

It’s been a great run, and we continue to build out in a variety of new geographies.

Jon Powers:

What I love about the team that you’ve built at Stem… You guys really do harness the industry expertise of this emerging market. Can you talk a little bit about how you work with developers, who… Many folks who’ve been in the solar space for a long time on the development side are really trying to get into energy storage but may not have the true expertise to break in like you’d need to. Can you talk a little bit about how your team works with those developers to develop solutions?

John Carrington:

Yeah. We have focused again on the domain expertise side on the developer front, and we were financing deals in the beginning of the company. We would like not to do that, obviously, and we’re very excited about some things we’re doing with you, but I would say that from a developer standpoint, they really… Not only aren’t they aware of how to work in the storage side of things, they probably, in many cases, don’t want to work in that. They are developers. They’re focused on that. They understand that world. Stem comes in, and we can provide them with all of the proformas around the financials, all the opportunities that they can participate from a market participation perspective.

John Carrington:

We buy several hundred million dollars of batteries a year, so we have very competitive cost, as well as very compelling warranties because of all the data that we’ve generated literally over the last 10 to 12 years. We’re providing really a turnkey solution, Jon, to them. They appreciate that. They want to do that with us. From an asset owner standpoint, they want one platform that they can manage all of their assets under. That’s where Stem comes in as well. We’re working with the large private equity funds, et cetera, that are out there and saying, “We want to put storage on all of our solar assets going forward. How can you help us do that? You understand the market. Tell us what we need to do,” and we provide that service for them.

Jon Powers:

Yeah, absolutely. It’s that expertise that you all have and the track record in the market that got us at CleanCapital excited about partnering. For the audience, in June, CleanCapital and Stem announced a really exciting new partnership to leverage this experience that they have and the expertise they have working with developers out there, and then lever the expertise we have at Clean Capital on the financing side to bring efficient capital into this market and really help it accelerate. I think what I’m really looking forward to seeing going forward is when developers… and working in a handful of states right now, but really starting to expand that. I think with the federal push, we’re going to see, and the steroid injection, hopefully, our industry gets, they’ll be able to work with your team and our team together to take a project, get it to the goal line, we’ll fund it and own it, and they know coming out at the back end that all that effort they’re putting in upfront is going to be worth it because they know what people are looking for on the financing side.

John Carrington:

Absolutely. Yeah. We’re really excited about it as well, Jon. As I said, having been in the renewables business since 2007, I think one of the key success factors is stable a legislative environment that in turn enables lower cost to capital and drives more throughput. I think we have that in this new administration in particular, and a lot of the states have kind of aligned around storage, but we are very much aligned on this, as you know. I think every one of those developers I spoke to have asked us about, “Do you have any thoughts around good partners around financing?” We answer that question very easily, but it’s also that we can be very transparent to make deals happen quickly. From the Stem standpoint, we have kind of a footprint of what we can go do together, and it’s not a one-off with a variety of different financing counterparties.

Jon Powers:

Exactly.

John Carrington:

Look, our developers want that and look to us for that. It’s just not a business we’re going to be doing in the future, so it’s a great partnership.

Jon Powers:

Yeah. We’re really excited about it. I think the idea that your expertise to manage these over time and help get them to the goal line, and really, for the developers out there, the way we view the world, I think, jointly is we want to rinse and repeat as many opportunities as we can with folks. Building those relationships, making them strong, and understanding how to all work together is so important. Now you’re going to have a team that views the world very much the same way to be able to finance and help you develop these things.

John Carrington:

Absolutely.

Jon Powers:

Just for a second, can you talk about the work that you’re doing in the federal marketplace? As you know, I oversaw the federal space for a long time. In the last four years, there’s definitely been a lull in activity in that space, but there’s a commitment here in the new administration to once again reestablish the federal government as a leader in terms of energy and sustainability.

John Carrington:

Yeah. Absolutely. Look, the federal business for me being at GE was always one of these, “Really? We’re going to do federal? My fourth successor will; get to reap the rewards of that,” but I think the administration is much more focused, to your point, and we are as well. We hired a new federal leader for us that’s located up in DC, and he’s great.

Jon Powers:

He’s a good guy. Yeah.

John Carrington:

In fact, he’s going to do the energy practice side, energy BD side, as well as the federal policy. Look, I think the Biden Administration… and quite frankly, we saw it in the Trump administration as well around a big focus on storage, but a lot of things got thrown into the pool before the bill was ever approved. This is the first time that we’ve seen in writing a standalone storage ITC. I also want to make sure that we’re a bigger part of the story up there. We now have a bigger balance sheet to hire people like Chris.

John Carrington:

We can do more lobbyist work. I want to spend more time up there. There’s really not a voice of storage today. When I was at First Solar, Mike Ahearn was… We’d have analyst meetings, and there’d be 3,500 people on the phone. It was amazing how many people look to him. I’m not saying that I’m Mike Ahearn per se, but I think we need more of a voice up there around the storage piece and more of the companies. We’re really the only standalone public company in a small storage space, and I think we can fill that void.

Jon Powers:

No, absolutely. Having spent time in Washington, that voice is so critical to bring to the table. There’s enough industry groups. There’s enough folks who can come with the talking points, but when you have folks that are leading companies and you talk about the impact of these policies on jobs here in the United States, that goes a long way. How do you guys view the storage ITC being proposed this summer and some of the emphasis on… We feel pretty strongly that there’s a good chance you’re going to see that. You may see direct pay. There’s a really good potential of steroid injection for our industry.

John Carrington:

Yeah. We feel very confident in it as well. I think, look, it probably won’t be a 2021 impact to the company, but it will be in 2022. Look, what McKinsey just came out with, 25% TAM expansion within ITC, look, it’s terrific for us. It opens up a variety of new states, and we feel like it will happen. As I said, it’s the first time we’ve really seen it in writing in a bill, even though there’s been a lot of talk about it. I think it’ll come together. It’s really compelling too, for us, Jon, when you think about the retrofit side of existing C&I solar locations, and that is a huge market where you can now drop in storage with the ITC on that asset and even lever up the returns more.

Jon Powers:

Yeah. This is a message more for the audience, but for all of us that are in this industry, we need to actively be promoting these policies. Make sure to check out what’s going on at the Solar Energy Industry Association or Energy Storage Association or other places where you can really, at least, at a minimum, sign onto a letter, help push this forward, because this is going to be really impactful for our industry over the next decade as we look to continue to expand and grow.

Jon Powers:

With all the activity happening at the federal level, this continues to be a state-by-state play. There’s a lot of momentum at the state level for energy storage. Can you talk a little bit about how you guys see that playing out here in the future?

John Carrington:

Sure. We’re really seeing it nationwide, Jon. I would say that the Southwest is coming on. We’re seeing more activity in the Midwest and the Northeast. I think the Texas situation opened a lot of eyes. Look, when you talk to the state regulators, their view is, “We want to put more wind and solar,” depending on where they’re located. They’re all now keenly aware of the intermittency issues. When I was at First Solar working with regulators in California and the utility executives, I don’t think people really grasped just what the intermittency impact would be. They now have a solution in storage, so I think they’re really riding storage and everything, so a very good spot for both of us to be in as we look forward. But I think it’s a nationwide phenomenon. It’s not just a specific California story anymore. We’re engaging a lot of states, and we feel like the best days are ahead, and early innings of the game.

Jon Powers:

I always end with a last question to all of my guests. If you think about yourself coming, before you got to Toledo and started at or Owen Corning, and could sit down and have a beer with yourself and give yourself a piece of advice, what would you say?

John Carrington:

I think I would tell that younger John Carrington to… balancing ambition with enjoying the ride. I think that I was always looking ahead and like, “What’s the next job? What’s the next deal?” I lived in Asia for four years, and I probably could have done a lot more in Asia, even on the weekends, but it was just a very interesting… to just be so focused on work. I probably should’ve slowed down and enjoyed other things a little bit more. It was funny. My dad, who was a software guy and a successful software person, took a couple companies public, said to me one day…

John Carrington:

I said, “Dad, I got to do this and this and that.” It was a crazy calendar. I was traveling to Tokyo or whatever. He goes, “John, I would kill to have one more of those days.” I think you got to enjoy the ride because it won’t always be here. I think that’s what I probably would have told myself. Look, I think in the end, we’re all pretty ambitious, and it got us to where we are. It’s hard to tell that person that, but I think that’s what I would have said.

Jon Powers:

Yeah. That’s great advice. That’s great advice. Well, John, thanks so much for being on Experts Only. Our team is super excited to be working with the incredible team at Stem, and our partnership, and I look forward to a really successful a couple of years ahead.

John Carrington:

Likewise, Jon, and congratulations on this show. It’s great. You’ve got some terrific guests that I’ve listened to. Keep up the great work, and keep the message out there. I look forward to seeing you.

Jon Powers:

Absolutely. Thanks to the team at Stem, to Garrett and Tiffany for helping to put this together, and to our producers, Carly Battin and Colleen Young. As always, you can get more episodes at CleanCapital.com. I look forward to continuing the conversation.