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Welcome to the Experts Only podcast, sponsored by CleanCapital, where we explore the intersection of energy, innovation and finance. Our host is CleanCapital’s co-founder and former Federal Chief Sustainability Officer Jon Powers. Learn how CleanCapital is revolutionizing clean energy finance, and find more episodes at cleancapital.com, iTunes or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five star review high star review.

Jon Powers:

Hi, this is Jon Powers, the host of CleanCapital’s Experts Only podcast. Thanks so much for joining us here at the Experts Only podcast, we explore the intersection of energy, innovation and finance. And today we’re joined by Brandon Hurlbut. Brandon is the co-founder and a partner Boundary Stone Partners. But I first met Brandon when he was serving as the Chief of Staff at Department of Energy to the then Secretary of Energy, Steven Chu. With Brandon today, we’re going to explore the different roles that the federal government can play in terms of innovation and how it can help grow, and what it’s doing to help grow the advanced energy economy, how some of that is changing within the current administration, and also look at the different languages of tech, finance, and policy, the importance of bringing these all together.

Jon Powers:

Brandon, thanks so much for joining us and the Experts Only podcasts. I really appreciate you being one of our first guests.

Brandon Hurlbut:

It’s an honor. Thanks for having me.

Jon Powers:

Yeah, absolutely. You and I first met in government. And I want you to sort of step back and talk, we met when you were the Chief of Staff for the Department of Energy for Secretary Chu. How did you end up there?

Brandon Hurlbut:

It’s a long, strange journey, Jon, but I’ll try to be concise. I knew from the time when I was a kid that I really wanted to have an impact and I wanted to be a public servant and I got involved in politics very early, right out of college. I worked on political campaigns, governor’s race in Illinois. I worked for Bill Bradley’s presidential campaign. So I tended to work for very progressive candidates who would lose. And so I felt like I had to go get a real job. And so I went to law school. That’s so I got to DC. I went to Georgetown. And then I piled on all this debt, taking student loans, so I felt like I had to go practice law for a little bit.

Brandon Hurlbut:

So I went to a corporate law firm. And there we did some work with Environmental Defense Fund as they were getting started. And it really opened my eyes to what was happening with climate change and the environment. And then in early 2007, when Barack Obama announced he was running for president, I really wanted to be a part of that. So I left my third year associate corporate law job, and moved to New Hampshire, slept on a fold out couch, worked really hard for two years on that campaign. And when we won, you had to put your resume in for jobs in the administration. And I talked about my work as a lawyer with Environmental Defense Fund. And then I was fortunate to get chosen for a White House job in Cabinet Affairs. And they sort of grouped the different agencies by topic. And so there was the energy and environment topic, which was the portfolio of DOE, EPA, agriculture, transportation, interior. And because I’d done some work with Environmental Defense Fund, they thought I was a fit for that portfolio. And that’s the one I wanted, so that’s how it started.

Brandon Hurlbut:

And I spent a year working with all of those agencies. It was such a unique time to be in that job because we were starting the administration. We’d been out of power for eight years. And there’s no manual, as you know Jon, when you show up in the White House for like, “How does it work? How does a decision get made? What’s the process?” So Cabinet Affairs sort of serves as that nerve center, especially in the early days for determining what that process is, who makes the decision, who needs to be a part of it.

Brandon Hurlbut:

And so I got this great exposure to all those agencies. And I was most excited about what was happening at DOE I was attracted to what was happening with technology, innovation, and making this a foundation of our economy as a way to address climate change. And I really liked Secretary Chu, and so I was lucky to go over there. I was offered a job to be deputy Chief of Staff, which I did for a little bit, and then became Chief of Staff. And so I spent four years at DOE. And it was the most rewarding experience in my life.

Jon Powers:

How is it for a campaign person to work for a scientist?

Brandon Hurlbut:

Secretary Chu, it was such an honor. I mean, scientists are very different. Right? They have a different way of thinking. He was constantly in search of the truth. That’s what drove him. So that can be very difficult for somebody trying to deal with the Congress-

Jon Powers:

Right.

Brandon Hurlbut:

… if your basis is I’m trying to search for the truth. He would show up in these meetings with Senators, and he was like, “I’m not political, I’m a scientist. You’re entitled to your own opinion, but there are certain facts here that we have to address.” And these guys, that was a different language for them, and it was challenging. But what he did with him that I’m sure we’ll talk about is, in the political community, he was not well known, but in the science community, Secretary Chu is like the Beatles. I mean, he’s like a rockstar. And so he was able to attract all of this scientific and technology talent to the department, because they all wanted to work with him. And so that’s why we were able to be so successful in some of the things that we did, because he brought really talented people in with him who would not normally serve in the government.

Jon Powers:

Yeah, you talked about some of the different departments that you were touching in Cabinet Affairs. And I want to come back to that, because I think most people don’t think about, when you think about energy and the environment, you talk about agriculture and interior. What do they have to do with energy? I want to come back to that in a second. But so after leaving government, you launched Boundary Stone, talk a little bit about what you guys are doing at Boundary Stone Partners, and some of the folks you’re working with.

Brandon Hurlbut:

Yeah. The easiest way I can describe it is what I learned in my time in government is there’s almost three different languages. There’s the technology and innovation language. A lot of that is happening on the West Coast, Silicon valley. There’s the finance language. How do you finance this stuff? A lot of that happens in New York. And then there’s the policy language. And so I think in order for this industry to succeed, you have to bring all three together. They’re almost like three legs of the stool; policy, technology, finance, and you need … The stool, can’t stand without all three legs. So at my firm, we’re trying to bring those things together under one roof. And so we work with many different companies from big companies like Tesla, to think tanks, to start-ups, to help them sort of bring those tools together, and scale up their companies, and grow them.

Jon Powers:

I like your definition of the three different languages. That’s really what we’re trying to address here in this podcast, is be able to talk with folks covering it, either in specific verticals, or like yourself, sort of being able to touch all three. So let’s run with that a little bit. When you were at DOE specifically, how did you view the role of the federal government, focusing first on sort of the fact that we didn’t have a federal energy policy really, per se, to start to shape that, and then also really start to shape innovation?

Brandon Hurlbut:

Yeah. I was lucky to have a front row seat to some of the greatest advancements made in the last decade. On the technology innovation, the DOE plays such an important role in providing support for early stage R&D and technology advancements. So I saw what was happening with programs like SunShot, where Secretary Chu said, “We want to make solar cost competitive with traditional fossil fuels, without subsidy in the next 10 years.” That was a very ambitious goal. And there was a lot of work done by some really smart people to help drive down the cost of solar. You have programs that are even earlier than that, providing seed funding to people with ideas for companies to start. And so I saw that part of it. And you have the National Labs, which are this crown jewel of innovation for the United States.

Brandon Hurlbut:

And so we have a lot of support for, and we had a lot of support when I was there for the technology innovation piece. And Secretary Chu was such a leader on that. But I also saw that there were challenges in financing these things. So especially when it comes to deployment. And so what I learned is that banks are very conservative. They do not want to finance the first of anything. They’ll maybe do the second, but you have to prove it first. And so there’s this argument out there that, well, the private sector should just do this. But the private sector doesn’t like to do it first. And so that’s a great role for government, is to utilize our National Laboratories and early stage R&D to advance the technology.

Brandon Hurlbut:

And then when it’s ripe, there’s ways, there’s tools that you can use to provide some deployment support, just to prove that it can be done. And then the private sector can come in, and is happy to take it from there. And then you need the right policies to incentivize both of those approaches. So they really do work hand in hand together. And they’re very crucial. And I learned a lot while I was there.

Jon Powers:

I want to specifically talk about, so as the technology started to come to fruition and begin to prove itself out right, I’m taking that technology and actually turning that into a company, turning that into the … breaking into the market with that. A lot of great ideas die, and what’s known as the valley of death. Right? Where they may have some initial funding, maybe from the government, maybe from a foundation or a university, but then can’t get themselves into production, and maybe can’t break into the market, especially the energy market, which is so regulatory and policy driven. So one of the things you guys were working on was how to sort of take those ideas that were coming out of the of the world and move them into reality. Can you talk a little bit about what you saw happen there and then maybe what else we sort of need to continue that momentum?

Brandon Hurlbut:

Yeah. So the DOE tried to be involved in every part of that sort of spectrum. So the National Labs, they do a lot of the earlier stage basic science research. Secretary Chu started energy innovation hubs. The whole mindset was modeled after the Manhattan Project, where basically you bring the smartest people together from academia, industry, and government, with a goal in mind, just like we did with the Manhattan Project. They said, “We need to build this weapon to end this war. And they were able to do it quickly, because they brought the best and brightest together.” In energy, Secretary Chu created innovation hubs. One of them is the battery storage hub. That’s based at Argonne National Laboratory outside of Chicago. And what they’re trying to do is reduce the energy density of a battery by five X, reduce the cost by a fifth and do this in five years.

Brandon Hurlbut:

So that’s an example of the type of support that we’re doing on the early stage side. And then you have the SunShot grants go to these companies that may need a little help. They’ve sort of proven their technology, and they need some help scaling up. And why that’s necessary is venture capital, they expect returns within five years, and they want five year exits. And if you’re doing something like Instagram, you’re producing an app that is totally realistic. But an energy, it takes a little bit more time for some of these technologies to mature, or these companies to grow. It’s not necessarily an app. And so that’s where the government can provide some key financing along the way.

Brandon Hurlbut:

Mosaic is a great example of a SunShot grant where they got a couple million dollars at a crucial time, they were able to grow their company. And then private equity came in, and they had a several hundred million dollar investment. And now they’re really scaling up, and they’re able to produce home loans for people that want to go solar. And then you go to the other end of the spectrum, which is the DOE loan guarantee program, which got a lot of attention over Solyndra. But that was a highly successful program. We invested 30 billion and had about a 2% default rate, which if you’re a bank, a 2% default rate is an unbelievable success. And we were required to take innovative technology risk. But the story there is several of those first deals were building utility scale solar plants, which at the time nobody was doing, because the banks would not provide the capital for it. They would not lend. They said, “This is a new technology. We’re not sure how this is going to work. So we won’t go first.”

Brandon Hurlbut:

Because the DOE provided a loan to build those projects, which those companies are paying back, and the taxpayer is getting interest on those payments, after a few of those were done, the bank said, “Okay, we see how this can work. We’ll take it from here.” And now after the DOE did the first six projects, they’re not doing anymore. The private sector is financing these. And we’re building utility scale, solar projects all across the country. And that’s just a great example of how the government can play a role to get something off the ground, and get the private sector comfortable. And then they can take it from there.

Brandon Hurlbut:

And Jon, we have a long history of doing this in this country. I am concerned that we’re having this debate, because we did it with aircraft. We did it with railroad. We’ve done it with semiconductors. We did it, even the iPhone technology came out of the National Labs. So this is stuff that the government has always had a role in, and has been a great benefit to our economy. And I don’t understand why we’re having this debate over whether government should be doing this.

Jon Powers:

Yeah. There was a strange around the loan guarantee office specifically because of Solyndra, which was one of a plethora of projects. And if you actually look at the overall portfolio, the returns for that fund per se were fantastic. And the taxpayers are not only making their money back, they’ve made anything that was lost in that transaction back. But because of the politics of it, and because of the anti, maybe renewable community held that up, and began to push on it, because of just that. And there were some definite mistakes made within the administration, and communications, and things like that. But the reality is the overall portfolio, and you sat on the board of the investment fund, it worked. How do you see now in the new administration, that specific office continuing to function? Or where do you sort of see it going? If I was an investor looking to tap into that market, what would I be looking at?

Brandon Hurlbut:

They called to eliminate it. The Trump White House wants to eliminate the program. There’s many in the House of Representatives that want to do that as well, which again is baffling because as you mentioned, that program created a lot of jobs. It helped drive down the cost of solar. It reduced pollution, and it created a whole industry of utility scale projects that are now happening without the government. And the taxpayers got paid back on those investments with interest. So it wasn’t just a grant where you hand the money over and that’s it, which that is necessary in some cases. This is a loan and the taxpayers are being repaid with interest. So it’s a great program. There are things that can be done going forward with it. We’re combining things like solar and batteries in the home for smart home. There’s things we’re doing with providing grid services, with battery storage that again, this is new ways to combine these technologies.

Brandon Hurlbut:

And the banks may not say, I want to go first. So this is a perfect role for the government to do some grid modernization, grid services, smart home type projects, that they can provide loans for, and then once it’s proven, the banks will be happy to provide those loans going forward, which is what we want. And so I think if we eliminate that program, we’re going to miss out on that. We’re going to miss a huge opportunity to continuing to help this industry evolve. And they’re doing it in other countries Hon. The government is involved in providing support in this way in China, in India, in Germany, across the world. They see this and they’re going after it. And if we stop, we’re at risk of losing a great, not only economic opportunity for this country, but also in addressing the issue of climate change.

Jon Powers:

So just to add some context for the listeners that may not understand all of this, put a name or two on a company that came out of the loan guarantee office, and obviously we’re probably better off for it, but is actually thriving now, doesn’t require that type of government funding, outside of projects.

Brandon Hurlbut:

Well, Tesla is the one that comes to mind most immediately. They received a $465 million loan to build their factory, to produce electric vehicles. And they paid back that loan in full, nine years early. So-

Jon Powers:

Nine years early.

Brandon Hurlbut:

And now you look at what Tesla’s doing. They have created thousands and thousands of jobs. And they now integrated with SolarCity and they’re doing batteries. Elon Musk built a Gigafactory in Nevada, which I think hired 6,000 people. And they’re producing electric vehicles. And now they have the Model 3 which just came out and is a more affordable electric vehicle with long range. So it’s got like a 240 or 250 mile range on a single charge. And it’s about $35,000 without the tax credits. So with all that, you can maybe get that car for about $30,000. So there are lots of jobs being created around that.

Brandon Hurlbut:

And none of that was possible without getting that initial loan. And that was at a time when the financial markets were in collapse in 2009. If you remember, everything was in a free fall. Nobody was going to give a loan to a start-up car company. But because of President Obama’s leadership, we stepped in, got them a loan that they couldn’t have gotten anywhere else. And now they have this great company that is creating jobs and innovating, and is a world leader. And without that support, none of that would’ve happened. And so we need to continue that to provide support for the next Elon Musk, the next Tesla.

Jon Powers:

As a Buffalonian, that’s where I grew up, they’re building a major factory up there, and now are going to be producing the solar tiles there. It’s just super exciting for the area, an area that needed an injection of some manufacturing. And it’s really taking the Rust Belt to the green belt and bringing some new opportunities for folks who never thought they’d be part of that innovation economy. It’s an exciting time. And look, they just overtook GM in terms of overall value, at least on the stock market perspective, which is pretty significant.

Brandon Hurlbut:

Yeah, one of the things that I thought was a missed opportunity in the presidential debates Jon, was Trump was talking about NAFTA. And he is like, “The largest factory in the world is now in Mexico.” That’s false. Actually the largest factory in the world is in Nevada, and it’s producing batteries for electric vehicles and home. And the one that you reference in Buffalo is in the top five. And their factory in California is I think in the top five as well. So one of the hardest things that we had with Solyndra, and why it was such an effective political attack, was our opponents were saying, “You’re going to create all these green jobs. You said, you’re going to create all these green jobs. Where are they? You’re actually losing jobs, because this company went bankrupt.”

Brandon Hurlbut:

At the time. We were in early stages of making those investments. And so there wasn’t a lot we could point to. We would show a picture in a desert, and be like, “Someday there’s going to be this project or this factory.” And it was hard to sell that, but now it’s happened. The jobs are there. Solar has over 300,000 jobs compared to the coal miners, which is about 50,000 jobs. So I don’t think people realize the advanced energy economy is booming with hundreds of thousands of jobs around the country. And we can now point to those.

Brandon Hurlbut:

The fastest growing job in America is a wind turbine technician. And those wind turbines are in rural areas. This is not just happening in cities. This is happening where farmers can lease their land and get payments. Or you can go up on a wind turbine. It has like 8,000 parts that need maintenance, so you can get up there and provide maintenance to those parts. So the jobs are there now. And we can actually point to them and show how real this is, where we weren’t able to do it necessarily as effectively when I was in the government with you.

Jon Powers:

So on the idea that the advanced energy economy is booming, we have probably, the best way to put it is an unfriendly administration towards some of these initiatives. But they have been responsive to the message of jobs. You recently wrote a Greentech Media article about sort of Trump’s energy independence executive order. Talk about what was really in that. And then how do we, whether you are a project developer, or a technology company CEO, or one of those folks working on wind turbines, how do you engage to try to make sure that we’re protecting what we need to protect to keep the momentum in this advanced energy economy?

Brandon Hurlbut:

Yeah, I think he’s telling, he’s just very disingenuous about the policies that he is supporting. So the executive order that you referenced, the energy independence executive order was to dismantle the Clean Power Plan, which you and I both worked on in the government. And basically what it was doing was working with utilities and independent power producers who are producing electricity, to limit their greenhouse gas emissions. And so the idea of the Clean Power Plan was to transition away from coal and towards cleaner sources, like solar, wind, or even natural gas. And so the Clean Power Plan was basically providing a cap on how much you can emit from those sources. And by providing that cap, you were incentivized to move to these cleaner sources of fuel. But we’re not importing any of that electricity. We’re not importing solar or wind, and we’re a net exporter of natural gas now.

Brandon Hurlbut:

So to call that an energy independence executive order was just a flat out inaccurate. We do import oil and around the same time he signed the Keystone Pipeline. And that is where we’re taking oil from Canada and bringing it into the US, so that’s not energy independence. And if we really wanted to be energy independent, we would go towards electrification of vehicles, so we didn’t have to use any oil from the Middle East or from Canada. We could truly be independent if we are generating electricity from the sun and the wind and using it to power our vehicles with batteries made in Nevada. That would be real energy independence, not trying to bring back coal. That has nothing to do with it.

Jon Powers:

You talked before we started a little bit about your transition and your move to California, and sort of the enlightenment that you’re seeing out there towards, even in Sacramento right, where it’s the state capital, and you’ve got folks from both sides, from both parties, wrapping their arms around the opportunities that this presents. And they continue to do very progressive things that are really setting the stage for, I think hopefully lessons we can learn and take into other states, because I think at least in the next four years, this will continue to be a state level focused fight to make sure that we can continue the momentum that we’ve gotten.

Jon Powers:

I wanted to end with, and I end all my interviews, if you could go back to yourself, and you’ve had such an incredible career, and you could go back to yourself, sort of coming out of high school or college, and could sit down and give yourself some advice, what would that advice be?

Brandon Hurlbut:

Is this professional advice or personal advice?

Jon Powers:

Yeah, either, either.

Brandon Hurlbut:

I would say to whatever success I had, I was not afraid to take some risks. It was a risk for me to leave my corporate law job. I remember the leader of the practice group told me, “You’ll be back here in a year at this firm. Barack Obama is never going to win.” And we were 30 points down in the polls when I took that job. But I was willing to go sleep on a pullout couch, and take a risk, and a huge pay cut, because I believed in him. And I think that you have to take a risk, and not do the conventional wisdom. That has benefited me.

Brandon Hurlbut:

And I think on energy, one of the things that’s been helpful, and I think this has been helpful to you as well, is also learning a little bit about finance. If I had gone back and time, I think I would’ve gotten an MBA. That’s really important to what’s happening in this industry. We have a lot of the technologies now with solar, LED lights, wind, lithium ion batteries. How we deploy this stuff and how it gets financed are some big questions that we need to answer. And so I got a lot of experience in working with the loan program that we talked about. They were professionals from the finance industry that we’re working in that program. And so I was really fortunate to learn so much from them. But that’s a good tool to have as this industry evolves. Over the next few decades, we’re going to need trillions and trillions of dollars in investment if we’re going to address this issue. And so understanding how that capital is deployed and what’s needed to do that, I think is a good tool to have.

Brandon Hurlbut:

My dad told me when I was in college, I was a political science major, and he’s like, “I’ve never seen an ad for a political scientist in the paper. You should do finance.” And I didn’t listen to him. So I should have, and probably should have done a little bit more on that. But I’ve made up for it recently. But I think if I was talking to myself coming out of high school or college, that’s one skill in this particular industry that I would use. And I also just think it’s helpful to … Nobody thought it was a good idea for me to go work for the Barack Obama campaign. I’d already done that, been involved in politics, but when you take a risk over something you believe in, you can have some good results.

Jon Powers:

When I first started talking to Richard Kauffman, when I was at the Pentagon and he’d come over, this was the guy in charge of energy finance at DOE for a long time, I literally had to go buy Corporate Finance For Dummies so I could begin to understand what he was talking about. And that’s how I began to first get my first toe in the water on this. So I totally understand that advice. Well, Brandon, thank you so much for joining us, really honored to have you, on and look forward to hopefully seeing you here in DC next time.

Brandon Hurlbut:

Yes. Thanks for having me, Jon. I’m really excited about your show, and I’ll be listening. I’m flattered that you called me an expert. I’m happy to come on at any time. We could do this for hours.

Jon Powers:

I agree. I agree. Thanks so much.

Brandon Hurlbut:

Okay, bye.

Jon Powers:

Thank you for joining us today at CleanCapital’s Experts Only podcast. You can learn more at www.cleancapital.com. I’d like to thank our sponsor CleanCapital and thank our producers, Emily Connor and Lauren Glickman, for all the hard work of putting this together, and look forward to continue this conversation. If you have ideas on folks we should interview, please feel free to submit them through CleanCapital, and look forward to the next time we talk.