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Experts Only Podcast #96: with Energy Efficiency Expert Cullen Kasunic

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Transcript

Jon Powers:

Cullen, thanks so much for joining me at Experts Only.

Cullen Kasunic:

Hey, thank you, Jon. Great to be here.

Jon Powers:

So you grew up in New York city. What got you interested in finance first? Or was it finance or was it energy, what was your first path?

Cullen Kasunic:

So it’s actually funny that you mentioned it. I grew up just a couple blocks from wall street when I was in New York city. But there was not finance, that was the first thing that brought me into it. My parents were in the arts and so got into it through an environmental lens and an innovation lens. And seeing that this is something that the world needed, right? To try to do something with climate change and technology around that. And so this was in my mind as I was actually finishing up a business school. I’m a geographer. Originally studied urban planning and geography. And after, and that fits in as well, like urban issues, issues of energy usage and land use. But after finishing college, I really wanted to get involved with, MBA, I wanted to get involved with a startup in the clean tech space and wound up just walking into an incubator in New York city, at the ACRE incubator.

Cullen Kasunic:

And I really got one introduction to one person, but we hit it off and we built a wind energy analysis system. I brought my software and a geography background, and he brought some business and finance backgrounds. And we built this company that is called Wind Analytics. Where the word at the time was, Hey, we want to do these backyard wind turbines, right? This was, solar was so much more expensive. And it’s like, Hey, backyard wind turbines can be a real thing. They still can. Right? But with solar so cheap, it’s a harder competition right now. But anyway, you couldn’t install a backyard wind turbine without doing some analysis, right? So people were putting up these monitoring towers and spending a year or two, and to put in something that’s going to cost you $100,000 or even $1,000,000 to do a one or two year monitoring campaign, you just don’t have the time and money for that. So we actually built this system in partnership with a bunch of wind experts to figure out what the wind energy was like at a given location remotely, right? With remote data.

Cullen Kasunic:

And so actually interesting, it’s the same thing that BlocPower does, right? Where I’m working now, with buildings. For energy efficiency opportunities. But anyway, we realized we built the system to do this analysis. Everyone said, we really want this analysis. But when push came to shove, they didn’t really want the analysis. Some of the existing in the market, they just want it to be able to put their thumb on the scale a little bit and say, oh yeah, your wind is great, buy a turbine. And so we said, hey, for us to be successful for anyone to be successful with this, the truth needs to be out there for the wind data, but maybe we need to control the process, right? Maybe we need to be part of the sale. And so this was probably 2011 and SolarCity was starting to hit it big. And so we said, Hey, let’s adopt the SolarCity’s, Sunrun, Sungevity kind of model. And that’s where I really got into the financing. Right? In MBA, I never thought I would get into it.

Cullen Kasunic:

I said, if I can get through finance, I’ll be doing great. I’m all about the innovation and the strategy and whatever else. But it really turns out that this is where we can make a really big impact here in climate tech. And so that’s what we’re doing. So anyway, we flipped United Wind into, we flipped Wind Analytics into United Wind to do wind turbine leasing. And that ran very successfully for a while, even after I left for a few years, a few years after I left. And I wound up doing other things in the financing world for this. Really trying to say, Hey, how can we take these energy technologies and get them more adopted, right? How can we use financing to increase the adoption of these technologies that we all need? And so wound up working with wind, of course, solar of various different stripes. Bio-diesel, bio fuels with wood, energy efficiency, both on the single family and the multifamily/ commercial side, like at BlocPower now>.

Jon Powers:

Yeah. It seems like you’ve got a pretty holistic view of the market after touching all those different technologies.

Cullen Kasunic:

Yeah. I mean, generally on the distributed side, less on the utility side, but certainly with some of the wind and solar, some more of that. But, I think the distributed side is where, I don’t know how to put it. Where there’s maybe more opportunity to use financing to change things. Right?

Jon Powers:

So to clean capital. I mean a hundred percent.

Cullen Kasunic:

Yeah.

Jon Powers:

That’s our market. We call it the middle market. So when you, first of all, how did you get introduced to the BlocPower team?

Cullen Kasunic:

I got introduced to the BlocPower team through another person who I worked on financing projects with. Yeah. Guy named, named Sid Singh. And so he connected me and then I knew BlocPower from around the web because I always stayed involved with the ACRE Incubator, the clean tech incubator there. Actually really enjoyed talking with all the different startups over the time.

Jon Powers:

Did Bloc spin out of ACRE?

Cullen Kasunic:

Bloc was in ACRE at an early stage. Yes.

Jon Powers:

Yeah. Interesting. I’d be interested to see a case study of all that. You hear about ACRE all the time for folks that are in the New York clean energy space. It really was a great hub for activity.

Cullen Kasunic:

Yeah. We had a really nice office too. It was a great place to work as a startup from other startups, to be able to go in there. Nice. Yeah.

Jon Powers:

So tell me about, well, let’s just step back from the personal side, which I think is interesting. And I’m going to come back more to that. But let’s talk about BlocPower for a second.

Cullen Kasunic:

Yeah.

Jon Powers:

For folks that don’t know, BlocPower is not only an interesting company, it’s got a fascinating story with your founder and CEO, tell a little bit about that history and how black power came to be?

Cullen Kasunic:

Sure. So Donnel now is our CEO, African-American, right? Spent time growing up in Brownsville in Brooklyn and…

Jon Powers:

I should know by the way, this podcast happened because of a Washington post story that you guys posted on Twitter and someone tagged that we should have you guys on Experts Only. And literally, I was reading the Washington posts, I’m like, these guys are fascinating.

Cullen Kasunic:

Great. Yeah. And so Donnel has quite a story and I encourage all of you guys to read this Washington post story, because it really gets into some interesting things about why we really need to not focus just on climate change, but climate change for every, climate change mitigation and climate justice for everybody. So Donnel was living some point in Brownsville and Brooklyn, very poor part of Brooklyn and managed to work his way into a couple of good schools. Managed to later join the Obama campaign and, in some of its early stages. And get into the department of energy to do building energy efficiency after that. Right? And he had a strong interest in bringing decarbonization, right? And efficiency. And not just the energy efficiency, but the comfort efficiency and the health efficiency to all of these inner city buildings, right?

Cullen Kasunic:

And so in doing this, he found it, right. He went to business school and got the concept said, look, I’m going to found BlocPower with a whole bunch of his business school colleagues and some other folks. And they did this. They got a DOE grant to launch this whole thing. And really have been working ever since on how can we fight these climate change issues in these inner city buildings? How can we green these buildings that are a huge part of the carbon emissions of the country, and yet are overlooked so often? Because maybe the credit of the building owner is not great, or the location is just, it’s a lower income location or a community of color that just gets overlooked.

Jon Powers:

Yeah. Let me, let’s dive into that a little bit. So just step back for the audience. We talk a lot about obviously generation of air transportation, we don’t dive as deep into buildings. But buildings, 40% of our carbon footprint comes from billings. Is that right? Something of that nature?

Cullen Kasunic:

Yeah. America.

Jon Powers:

Yeah. In the U.S. Right? So to really address climate change, driving down that impact is critical. And the work you guys are doing really what I love about it, it’s a marriage of that aspect with really, not just the finance and efficiency piece, but the climate justice piece as well.

Cullen Kasunic:

Yeah.

Jon Powers:

But take us through a case study of like, okay, so how does BlocPower approach a, is it a, would you guys be working with of a residential commercial building and in a community and go in?

Cullen Kasunic:

Sure.

Jon Powers:

Walk us through the steps.

Cullen Kasunic:

Yeah. So I mean, we really are working in a bit of a white space, right? Because 40% of emissions are buildings and of those buildings, a large portion of them are overlooked because they’re mid-sized buildings, right? And in areas that are often overlooked. And those are the buildings that we really focus in most on. There’s a lot of folks that work with single family. We can handle some of that. There’s a lot of folks that work with commercial, like offices and retail. We can handle that. Right? We do that. But what we really focus on, what’s really core of these midsize buildings, the multi-family four to four unit buildings to maybe a hundred unit building something in there. And these are everywhere, right? And they’re hard to tackle. Because they have some of the problems, they have some of the challenges that the big buildings have and some of the challenges that the small buildings have. Right?

Cullen Kasunic:

But we’ve built a whole software so that we can analyze these buildings. And so we can figure out from the beginning, where is there a good opportunity and then how do we tackle that opportunity? What’s the scope? So you asked, for example, we’ll look at maybe a 20 unit building, right? And the first step will be okay, gather information about the building. We’ve got a web funnel tool where people can go in onto our website. And if you have a building, you can put this in yourself, onto our website, and you just start to enter up some high-level information about your building. How big is it? How many square feet, how many floors, what type of construction, what age, all these things. And so that information will come in. And even if we’re talking to someone, one-on-one, we’ll be asking the same questions, or we’ll just for convenience, say, Hey, go to our website, let’s walk through this together.

Jon Powers:

Is that data being addressed by a facility manager or usually the, because those things can be owned by a variety of people, right?

Cullen Kasunic:

Yeah. It can be a property manager. It can be a super. It can be the owner themselves. Right? A lot of the folks who work with our direct owners and managers, this is their job, right? They might own, and in New York city, you might have a family that over the years has bought three, 10 unit buildings.

Jon Powers:

Right.

Cullen Kasunic:

And so for a New York city landlord, they’re not a huge landlord. But for anyone, that’s a solid investment. And that’s a real asset that they have. That’s their family assets, that they’ll work on. Right?

Jon Powers:

Sure. Yeah.

Cullen Kasunic:

And so these are the folks that we might work with. And so…

Jon Powers:

They also may not have access to the capital requirements needed to do…

Cullen Kasunic:

Absolutely. Yeah. So they might not have access to all the capital that the larger players would. And also all the information, right? They’re focused on running their business and running their operations. There’s not an energy manager who’s thinking about these issues. So we have to come in and we have to, we have to provide a balanced picture of what’s happening at the building. What they can do to save money and to increase comfort and really improve their building as a whole. Right? Because when we look at the building holistically. We gather all of this information. We might recommend HVAC upgrades. We might recommend installation upgrades. We might also contribute and help them work through an asbestos or lead paint remediation or something like this. Right? So anyway, we’ll gather all of this information. We have the first call and the information that we take, we put into a preliminary needs assessment study.

Cullen Kasunic:

Again, some software that we’ve built that really allows us to take the building information that we have, apply it against a whole database of other buildings and then with that come up with some recommendations for the building. So then we’ll say, okay, here are the items we recommend. Very often we’ll recommend moving to an air source heat pump, which is a clean, high efficiency electrical system for heating and cooling. And we’ll recommend some insulation, some air sealing, some led light retrofits. These are the basics that we may see in a lot of cases.

Jon Powers:

Yeah.

Cullen Kasunic:

And then from there, we’ll talk with them about what’s the value? What do you want to do? What can we do? And we try to provide a turnkey solution for building owners this way, right? And then we will walk them through the whole process. We have a financing product that’s 15 years. So we can stretch out the payments so that they can pay as they save. And we have engineers on staff who can help build things. And we have construction expertise that we tap into to get the projects built as well. And we try to hold the hand through the whole thing. And then associated with the financing, which I really think of more as a subscription, we take care of all the system for them. We fix them if they break. We answer questions for them. And we really try to make this like, heating as a service, energy efficiency as a service, opportunity for building owners.

Jon Powers:

Do you guys consider yourself like a small ESCO from that perspective?

Cullen Kasunic:

Yes. Yeah. We don’t, as you might think of with other ESCOs that might say, Hey, we’ll do a shared savings model. We don’t dive into shared savings. Principally because for the buildings we work with, it’s a big level of complexity that they don’t want to deal with, nor do we. And maybe even more importantly, behavior is a very hard thing to work with, especially in multi-family buildings. Right? If someone gets a new system, they decide they want to keep the heat on at 80 in the winter and 60 in the summer for the air conditioner, it’s hard for us to say, oh yes, you just saved a lot of money. Because that’s their choice though, to how they use the system.

Jon Powers:

So the building owner is motivated to do this because they are bringing significant upgrades to their facilities. And you guys then really are both financing and in essence, almost privatizing their utility.

Cullen Kasunic:

Yeah.

Jon Powers:

For lack of a better word.

Cullen Kasunic:

Yeah. We don’t take over their entire utility bill, but that’s something that other companies, in the single family space have done. And it’s something that potentially we could do as we roll out more and make it a whole full utility service. But what we are doing is giving them a managed solution for all of this. And the reason people upgrade is cost savings. Comfort for the folks that live in the property. That resonates a bit more with the condo and co-op folks. But then also, because it’s an upgrade, right? As our CEO will say very often, right? We’re turning buildings into Teslas, right? We’re bringing the whole thing. We’re electrifying it. We’re giving you a higher quality building. Right?

Jon Powers:

Easier to rent.

Cullen Kasunic:

And it’s all rolled in. It’s easier to rent. That’s right.

Jon Powers:

By the way it’s the same reason a lot of the larger owners are doing it too. Right? There’s a demand now for those type of locations.

Cullen Kasunic:

And it’s a piece of capital equipment too. It’s something that folks need in their building. Right? So you could get another dirty oil boiler or a dirty natural gas boiler. And what do you get from that? Maybe you’re using some of what you had before, but you’re just getting more of the same. You’re not getting the same quality of heat. You’re not getting the same control to use it within. And ultimately you need to replace that at some point.

Jon Powers:

Right.

Cullen Kasunic:

Right? You might as well replace it with something that’s better, especially if we can give you an even cost of payment. Right? Which is what we try to do. We try to make it so that your spend before, right? Your utility bills plus ONM, plus whatever you had to fix that thing, is the same as what we’re going to charge you. And then maybe we can save you even a bunch of money on top.

Jon Powers:

And how long are those contracts? Because I mean, you deal with a bunch of different technologies, right? HVAC, more or so. The life of those technologies may differ significantly. Are there, do you guys have a standard length of contract that you’re signing?

Cullen Kasunic:

Because HVAC is the big cost, we use the 15 year contract, pretty standard. We’ve extended some contracts longer.

Jon Powers:

So if I sell that building, that contract would have rolled over with it?

Cullen Kasunic:

Yeah. We have two options. You can either roll the contract over or you can buy it out generally when a building is sold, right? There’s some extra cash being transferred and you can simply buy it out. And then the next building owner prices that into the purchase price.

Jon Powers:

And then are guys, as you finance these, are you doing them off book and then securitizing them and rolling them out to the market or how are you guys from approaching the actual financing itself? Do you have lines of credit you’re pulling on?

Cullen Kasunic:

We’ve got some Multi-Draw credit facilities, right? So not revolvers, but Multi-Drug facilities where, so it’s not like a credit card, right? But it’s a facility where we have say $5 million in one and a $50 million commitment in another, where we can go and build projects. And then once the project is in one case completed, then we can fund back down a bunch of that as debt. And then in another case…

Jon Powers:

Pull them from the other location.

Cullen Kasunic:

Yeah. At this point, we’re self warehousing for that one. But the other larger facility we have will actually fund through construction. And that’s great because then we can just build and put the projects in as we get them set up.

Jon Powers:

That’s incredible. And I want to get back to the investment piece in a second. But geographically, are you mostly focused in New York now? I know you guys have like a 1000 buildings, is that right? I mean, you guys have a pretty large group.

Cullen Kasunic:

Yeah. We’ve done a lot of buildings. Not all of them are under this financing program. Our financing program is relatively new. But what we’ve done on all the other buildings is fundamentally the same thing that we’re doing in the financing. It’s working with building owners, helping them develop scopes, helping them get it built and then seeing that they’d get it financed. The only difference now is we actually have that financing in-house. And so geographically though, we are in New York city and the New York city Metro area. And throughout New York state, we’re very strong. DC as well is another place.

Jon Powers:

Is it in Buffalo yet?

Cullen Kasunic:

And then Oakland. Buffalo is actually a great community for us. And I’ll tell you why, because the HVAC retrofits that we put in, these air source heat pumps, they run on electric. Right?

Jon Powers:

Right.

Cullen Kasunic:

And so this is not the, yeah, this is not the electric that people may be familiar with where it’s an old electric resistance heating system. This is an air conditioner that can run both ways. And it can work in very cold climates. Right? Buffalo, actually, I came to learn recently is not that cold. It just gets a bunch of snow. But anyway, these systems run in very cold climates, even colder than that. And so, but they run on electricity still. So if you’re paying a little bit for electricity, we can have a spark spread here between, well, maybe we’re paying more for your natural gas and now you’re paying very little for electricity because it’s coming from hydro. Like you’d have it by Buffalo. So that’s a great place for us.

Jon Powers:

So in, as you guys are looking, as you guys are scaling, do you have a series of off the shelf technology, like you know you’re going to use this HVAC, you’re not going to use Nest, whatever the thermometers are? Who do you have a pretty, I imagine a pretty sophisticated engineering team. Because you’re not putting, mostly not putting, I’d like to comment, you’re turning buildings into Teslas. But you’re using technologies that are proven. Right? And you know you can finance them.

Cullen Kasunic:

That’s right. Yeah. I mean, all of our heat pump technologies, right? We haven’t standardized on one manufacturer now. And to the extent that we’re working with distributors, we won’t. But for the projects that we’re originating, we may at some point. But these are all large multi-national manufacturers like Mitsubishi, Fujitsu, Daikin, other…

Jon Powers:

Are you doing any storage and solar?

Cullen Kasunic:

Electrification is something that is really the direction that we’re going, where storage, solar, even car charging stations, these are things that we’ll be rolling into the solution increasingly. And I think we figured out some ways to roll solar in under the same financing programs so that we can utilize the tax credits.

Jon Powers:

That’s amazing. So going back to the financing side for a second.

Cullen Kasunic:

Yeah.

Jon Powers:

As you guys have ramped up and the business model is not just proving, but thriving now. Where do you see the next capital come from? Are you seeing more and more sophisticated ESG investing waning to come in here, or is this infrastructure folks, is this private equity, who’s really interested in what you guys are putting out?

Cullen Kasunic:

Well, I’ll mention one thing that is interesting. The public as a whole seems to be very interested in what we’re doing. We ran a crowdfunding campaign recently that we gave ourselves about two months to do it. We finished it in just over one month. We set $1,000,000 cap for ourselves and we achieved that early. There’s a lot of interests out there just from folks. And we encourage all the…

Jon Powers:

Fundrise at all?

Cullen Kasunic:

We have not joined Fundrise itself.

Jon Powers:

They don’t do what you guys do. They do real estate through crowdfunding. And they are…

Cullen Kasunic:

That’s why I’ve heard their name. Okay.

Jon Powers:

They do amazing work. We really looked at them really from clean capital’s perspective. And I mean, I’m a personal investor in Fundrise, but they had done a great job. And they have a significant amount of capital.

Cullen Kasunic:

Yeah. So to put this in context, we may do more in this direction. We’re really just evaluating options. And we used Raise Green for the platform, thus far. We may continue to use them for some or all, if we do anymore. And Republic is another good one that we look at, that has a very engaged and also large community. And so these would be options if we go to another one. But I say this because that’s definitely a direction. And there are offerings that are not just the crowd regulation CF, that goes up to 5 million. But there’s regulation A and A plus offerings that go up to 25 million or 100 million. So for the standpoint of a company trying to tackle, not just a climate problem, but also a climate and social problem, I think that something that’s very relevant for us.

Jon Powers:

Yeah. Super relevant.

Cullen Kasunic:

And then, oh yeah. I’ll say besides that, we’re also working on what we’re calling our green loan. We initially thought of it as a green bond, but really it’s a matter of semantics it’s a loan that gives us a bit more flexibility and it would be for projects. And we’re talking to some large fortune 500 companies, particularly fortune 500 tech companies that are socially engaged. And it is their of ESG departments that are driving some of this. But it’s also, we’re going to, we’re planning to give them real returns, right? Real returns on their investment. It’s not a donation. It’s a real investment to have us put these projects out there and for have their capital go to work. And we can give them associated with that, carbon credits or even environmental justice credits for activities in certain communities.

Jon Powers:

So with the new administration that came in this year, obviously. A lot of the issues that you and I care about in our day jobs, both on the, addressing climate change, new technologies that have been coming from department of energy, real money into solutions around climate justice. It seems like you guys are primed to really accelerate here going forward. What do you think the next couple of years looked like for BlocPower?

Cullen Kasunic:

Yeah. Well, a couple of things here. First of all, we are very engaged with the federal government and all of the programs there in regards to financing, in regards to support for energy efficiency and energy efficiency in disadvantaged communities. So the whole administration and all the folks we’ve been working with there, have been great. And I think this is a great direction for us and a great direction for the country as a whole. As far as the company and BlocPower. I mean, we see BlocPower being a nationwide electrification brand, right? A nationwide energy efficiency brand that could be similar to what Sunrun or SolarCity was in solar, where we can come in and solve this problem for building owners. Right?

Cullen Kasunic:

So right now I mentioned some of the geographic focus as we expand, as we go through a distributor networks and as we go through direct sales networks, we believe this is a direction that we can go, right? And it’s, when I say electrification as well, this is the big push, right? You can put in a efficient natural gas system, but it’s always going to be a fossil fuel system, right? You can green the grid though and then your electricity is green. And your grid may not be fully green right now, but it can be green. Your fossil fuel boiler in your property will never be fully green. It’s just not going to happen. So there’s this upwelling of, Hey, we need to electrify everything. We need to figure out efficient ways to electrify everything. And so it’s getting such that, I mentioned solar and storage for BlockPower. But also even appliances like induction cooktops, right? For stoves, instead of natural gas heaters, right? Sorry, natural gas stove tops. And induction stoves have performance qualities similar to natural gas. They’re not like old electric appliances. So we’re going in this whole direction.

Jon Powers:

It’s amazing. And it’s such an exciting time for, I think the work you guys do. If you want to learn more about BlocPower, you can go to their website, which is B-L-O-C, power P-O-W-E-R.io. Collin, so I can ask you a million more questions. This is super interesting to me. I do want to ask you one final question. And if you could go to yourself, coming out of college and especially the geography degree and could sit down and say, give yourself one piece of advice. What would it be?

Cullen Kasunic:

Well, it would be, there’s something that I realized and this comes even from the worlds of arts. Something that I think of as like the creative valley of death, right? You get into something that you maybe find you have some talent for and you enjoy doing it. And doing things that you have a talent for generally is enjoyable, right? But then you get into it and you realize, Hey, a lot of other people have this talent, right? A lot of other people can do these kinds of things that I can do. And maybe they have a background that’s different, or better or stronger in some way. And you start to evaluate yourself based on the folks who have been doing this for a while, who are very good. And you start to realize how not good you are sometimes, not good you can be, right? Like with the writer, as you’re starting writing, you realize, wow, there’s so many great writers out there.

Cullen Kasunic:

But this is what I call this creative valley of death. Where if at this point, after you have some talent, after you start working, you start to say, oh, there’s so many better people than me. I’m going to stop. Then you really lose out on a lot of things. Right? So I would encourage myself, my younger self to not stop. To stick with the thing that, if I have a talent in it, and I enjoy it, to stick with it and to work through the awkward silences, the mistakes, the bad speeches, whatever issues there are and to keep rolling. And get to a point where maybe you can start teaching other people things. And then at that point then, that’s where a transfer occurs. And I think a lot of people quit things just before they succeed. And so I would just say that, there’s a time to cut your losses. But don’t quit just before you succeed. Really try to stick with it.

Jon Powers:

That’s great. I appreciate it. And thank you so much for joining us at Experts Only.

Cullen Kasunic:

Thank you so much Jon.

Jon Powers:

I want to thank the team at BlocPower for helping to put this together and thank our producers, Colin young and Carly Baton. As always, you can get more episodes at cleancapital.com. If you really care about climate justice and some of the work that’s being done, make sure, follow BlocPower closely. It’s really impressive work. And it’s going to be really monumental the next decade. So thanks so much.

Cullen Kasunic:

Thank you.