Jon Powers: Welcome back to Experts Only. I’m your host, John Powers. I’m the co-founder of Clean Capital and serve as President Obama’s chief Sustainability Officer. On this podcast, we explore solutions to climate change by talking to industry leaders about the intersection of energy, innovation and finance. You can get more episodes@cleancapital.com. Jon Powers: Jigger great to see you here in Las Vegas. Jigar Shah: So good to see you. I don’t think I’ve ever had one of these headsets on. I feel like Chris Berman on E S P N. I’m like going, going, gone. Jon Powers: As a Bills fan, I’m going to make no football references today of your last night’s football game. One exciting time to be out here with record breaking numbers of folks attending the Super Bowl. I said no football references, but the Super Bowl of our industry conference. I wanted to, you’ve been really around incubating this industry from when it started. Would love to get your view of where are we today from when you first decided to get into this space and really helping to create the platform that have really got us to the momentum that we have built. And we’ll talk more about some of that stuff in a minute. Where do you see us as an industry today? Jigar Shah: Well, I think when we started, the whole point of our work was to prove that we could be something one day, that our technology could get cheap enough that we could actually be material to the grid. We were like 0.001% or whatever. And then when we entered the 2010s, it was really more like, Hey, we’ve actually gotten our cost down. Where’s the respect? When are we going to get some of that? And I think this is what respect looks like. This is 40,000 people. You’re talking about all the biggest investors in the country that are here. You’re talking about federal government officials, you’re talking about all sorts of folks here. And ultimately what they expect out of our industry is to continue to add 60 to 70% of all new capacity going on the grid every single year is coming from solar in this country. That’s respect, Jon Powers: That’s respect, that’s respect. And that’s how we’re going to solve the climate crisis. Jigar Shah: That’s Jon Powers: Right. So before we get into the nuts and bolts of some of the things that you’re doing today, you and I talked years ago when I was serving in the White House and we talked about public service, and someday there was going to be a role that was perfect for you. You are in that role today and it’s helping to shepherd the industry forward in an incredible way. Can you talk first a little bit about just your job, what are you doing? And then just the successes that you guys have already taken just in the first few years of this administration putting real dollars to work, getting projects and manufacturing and all other things in the ground that are helping our industry. Jigar Shah: Well, thank you my brother. Look, I think where we are is that the loan programs office has been around for a while. It obviously was made famous with the loan that we made with Tesla, the Made with Ford. We did the first 500 megawatt solar projects in the US transmission, geothermal wind. Now I think the question becomes like, how do we help the next sort of 17 sectors? And the first piece of that was gaining their trust after a lot of the scandals and whatever else. Folks weren’t sure that they wanted to use our money. They weren’t sure whether it was going to be safe, whether they’re going to be treated fairly. I think we’ve overcome that now. And now we’ve got 145 billion of loan requests, additional 10 billion last month alone. And so we’ve got about 157 applications across all of the states, and we’ve got a couple of US territories. And so we’re now in a place where people want to work with us. Now we’ve got a bunch of data that’s coming off of that. Jon Powers: Can I pause you for one second? I want to give you credit for you putting your brand on that. That was critical in building the trust if there would’ve been, we’ve worked with some amazing bureaucrats, but you brought a level of credibility back to the office after years of it unfortunately being in a tough position. And that brand has helped attract folks back to the room. So I just want to give you props because people look at the office and they see the success that you are helping to bring, but because they trust you and they trust putting their applications in, they trust where your vision is. And of course, this has all been amplified by the I R A and the other things the administration Jigar Shah: Are doing well, for sure. Well, I appreciate you saying that and we certainly keep trying to earn that trust every day. But I think one of the challenges I’d say that we have is that the ecosystem is not really well-functioning, right? So when folks want to use our loans, they don’t just have somebody they can pay as a consultant to fill out the paperwork to get through. And so it’s a lot of effort. But when I walk the floor here, we see, I don’t know, like 20 or so booths upstairs where people are announcing big manufacturing plants coming back to the United States. Jon Powers: Yeah, it’s amazing. That’s a big Jigar Shah: Deal. That’s the I r A and then all those folks are coming through the loan programs office to get debt to support their efforts. But the other piece is that you look at that HESTY loan that we announced, we now have an ability to help the residential solar marketplace actually serve low income customers. And folks in Puerto Rico, both of whom Wall Street basically said weren’t worth serving because they were too much risk. We showed with D O E data that actually they weren’t too much risk and that people pay back their loans. And so now they can increase the percentage of Puerto Rico and low income from 3% of portfolio up to 20% of the portfolio. And that’s going to be critical as we continue to grow this. You got to serve everybody. Jon Powers: Yeah. Well, what’s really interesting about a lot of the alumni of the Obama administration and others that came in to serve in this round is you had folks that had gone out into the private sector, had cut their teeth in understanding where the markets are going. And then last summer when the I R A did come through, and candidly I think across the industry, no one expected it. And it was an amazing opportunity that we should all be celebrating, but it was built around a phenomenal checklist of stuff that we needed to help bring and catalyze more private investment. So when you’re thinking about the loans that you guys are looking at, I think people think about government money and it’s, oh, they’re going to put the public money and it’s going to be No, you guys are really catalyzing the private stuff. Can you give an example or two outside of the one you just did of where you see really the next opportunity for private capital to come and top of the investments that you’re making? Jigar Shah: So when you think about private sector capital, there’s a ton of it. I mean, obviously we had a lot of it in 2021, a little too much maybe, and then we had some 2022. Let’s get it cooled off a little bit. But there’s a lot of equity to go into space. The problem is you can’t really make equity returns without having debt available. And for a lot of these projects, debt’s slow or really expensive. So when you think about, for instance, there’s a whole bunch of electric vehicle fleets that are going in to serve Uber, Lyft, Instacart, DoorDash, drivers, et cetera. And those are the ones you want to convert to electric driving 40,000 miles a year. But the collateral curve on them are really weak. So when you go to Kelley Blue Book, a lot of them are saying, we don’t think this car’s going to be worth very much in five years, and they’re not provided good quality financing options without someone like us coming in. And so then the equity is like, well, I don’t want to own the whole car. I was expecting 80% of it to come from debt and then I was going to put in 20%. So a lot of these things get sort of left on the launching pad because the equity is waiting for debt to come in. Right? Yeah. I think you see the same thing around next generation hydrogen projects where a lot of folks are saying, look, these electrolyzers have been around for a long time, but they’ve been upgraded. We need to figure out how to pair these wind and solar projects with hydrogen, figure out the pipeline. How do you get the hydrogen to who wants to buy it? And folks are nervous. And so they’re saying, well, who’s going to come in with debt that’s going to be us? And so when you think about even long duration energy storage with a Texas heat dome, the two to three hour batteries didn’t work. They were fine, they did, but they actually needed to be six to 10 hours to really meet the needs of the state. And they were only two to three hours. And so we gave conditional commitment to EOS in Turtle Creek, Pennsylvania. Those guys are using zinc IDE technology, and that technology has been around for 10 years. Ge, we looked at it, Siemens looked at it. So everybody knows that it works. Now with lithium ion batteries, they got to scale up 10 15 x to get their cost down, but we need long duration energy storage if solar and wind is going to continue to grow as a percentage of the overall market. And so we’re doing that too. So I think when you look across the spectrum, the equity investors are bought in. They really believe in these stories. Absolutely. But they need to know that debt is going to show up otherwise they can’t make their rate of returns. Jon Powers: Yeah, absolutely. And I mean, I think for all of us in the market, just even in the vanilla solar stuff that we’re doing in the debt markets have changed wildly in the last year and understanding how we can communicate the email out to developers so they recognize where the compression is moving forward. So if you looked at a gap of now that you’ve got a really strong pipeline of stuff coming in, is there, you and I talked a little bit about the commercial industrial middle market space. Jigar Shah: Yeah, they’re nowhere. We got to get them there. I mean, you and I both know that when you look at residential, 20% of all the homes who have solar on them got ’em in the last year, Jon Powers: Right? 20%. Jigar Shah: But residential solar is like five times bigger than C N I solar, right? I don’t know what’s going on. I mean, look, I love residential solar, but rooftop, C N I, solar comes in at almost the same cost as utility scale solar. And you save the transmission upgrades, the distribution upgrades, and the interconnection queue costs. The reason that people aren’t doing it is because you’ve got all sorts of issues around C N I, for whatever reason, is not allowed to ever lose money. They want an investment grade credit. They only want Walmart rooftops. But most of the rooftops are owned by real estate investment trusts who have bankruptable LLCs, but they’re full. And you guys are filling ’em up with all your solar panels. Exactly. And so they’re full, right? So when you look at residential financing, residential financing is done on a portfolio basis where you plan for some of the portfolio to fail every single year. Commercial industrial can be funded the exact same way, but it’s not today. And so we need to basically g i s map the country, which Google I’m sure has already done. And then we just got to say, you got a perfect roof. We’re putting solar on there, and we just need to start blanketing all those big roofs with solar panels on them. And then when you’re there, you put reflective roof coating and there you put some facial panels in there so you get more output. I think we have all the technology here, but I think that for whatever reason, people have been focused a lot more on utility scale and residential. So we have a big hole in our applications in C N I solar. Jon Powers: And for those that are not familiar with the process, I think there’s a lot of companies out there that would love to get involved, but I think they get scared of just entering the process. Can you talk for a second about what that process looks like on the application side? Jigar Shah: Yeah. So basically we’ve got almost 50 people now that work for us in our outreach and business development group. And they talk to, I think over a thousand companies so far. And so you call ’em up, that’s all it is, and here’s what I want to do. And they’ll tell you pretty quickly whether it’s something that works within our statute or whether it’s not legal for us to get involved. And so we could tell you pretty quickly like, Hey, this is worth spending time on. Or if you make these three changes, then it probably would qualify, but the way you presented it, it won’t qualify. So that process is pretty fast. And almost all the people that work for us are former executives. So they’re former people that would’ve applied to the office. So they feel your pain, and then they ask you to fill out a part one application. No one comes in to the loan programs office without an invite. So when I say we have 157 applications seeking over 145 billion, those are people that we invited to apply, right? And then it’s whatever it is, it’s a hundred hours worth of work. You put in the part one application, we then say, yeah, everything you told us verbally checks out. And then you go into full due diligence, right? Then you go into part two, put a data room together. It’s exactly the same as a commercial transaction debt process, and it’s like eight to nine months to get due diligence to get through the process. So it’s not easier than a commercial bank, but I don’t think it’s harder either. Jon Powers: And it’s got better terms these days. Jigar Shah: Yeah. Well, that’s true. Jon Powers: So one of the things that I think you guys have recently put out a report around virtual power plants, and I think one of the most exciting things about the industry today is you have an alignment of policy, technology and finance in a way that those of us that are becoming, even in the DG space, we can begin to create virtual power plants and begin to message it to concept of virtual power plants. For those folks that are not as familiar with the idea, first of all, could you just define that a little bit in the market opportunity around VPPs that the report defines? Jigar Shah: Yeah. Our virtual power plant is really just a collection of assets, right? Electric vehicles, backup batteries, thermostats, water heaters that are basically configured such that they can actually provide valuable services to the grid, whether it’s frequency, regulation, voltage, energy, et cetera, et cetera. I think what’s different today than what you and I experienced in let’s say 2019, is that the electric utilities were unsure whether they really needed this service to be able to provide the resiliency and reliability. But I think after a lot of these superstorms, a lot of these heat domes, polar vortex, but also real load growth. I mean, they’re now fielding megawatts of interconnection every Jon Powers: Week Jigar Shah: For electric vehicles, right? EV chargers. But now because of the bipartisan infrastructure law and the inflation reduction act, you now have a place where you have gigawatts in gigawatts of new load from manufacturing facilities. And remember, utilities have an obligation to support economic development in their community. They can’t just say, well, it’s going to be three or four years or else before you get interconnected. So whereas were, even Jon Powers: Though some of ’em are, yeah, well, Jigar Shah: They’re trying, but whereas they were shy, I’d say four years ago, I think we buried the hatchet with the utility companies, and they’re now coming to this industry and saying, we need you. There is no other way to build something fast than with you guys. We need your technology. We need your expertise, and frankly, we need your people power to actually be able to get this stuff done. And so I think that people are still playing off the 2019 playbook. Agree. And they’re afraid to do bold things with utilities, even though those utilities are actually, they’ve come around. And part of what this liftoff report is about, right? It’s not official d o e strategy and policy, it does describe the 20 plus programs that we already do. But what it really reflects is the 200 interviews that my colleague Jen Downing did to figure out what is the status of the marketplace? What are investors investing in, where are the utilities? Where are the consumers? Where’s everybody? And it turns out the regulators, the utilities, have never been more excited about getting this stuff deployed. And so part of what our message is here is that you’re no longer the DG solar industry. You’re now the V P P industry. Yeah, Jon Powers: I agree. I mean, one of the challenges, and I’ll say this, put my clean capital hat on, is for a decade, folks have focused on a technology or two, right? Solar. Now you have to look at this holistic play and how do you underwrite that? And I think this report really helps shine a light on taking those steps forward. And I agree with you a hundred percent. This is sort of where the market’s going. And the opportunity for those of us that can get ahead of it and finance these things in a way that’s unique is going to be incredibly important moving forward. I do want to, without working out the report for a second, I want to go back to the I R A and the bipartisan infrastructure bill. We talked about this offline in the past. This is a monumental generational piece of legislation that got done in a marriage between those two pieces of legislation, including the CHIPS Act that’s putting incredible dollars of work on multiple technologies on manufacturing and deployment, the work you’re doing. And there’s folks in the industry that look at it like, well, only if it does this and this, I think there needs to be a realization we’re not getting another chance here. This is what we have, which is really Jigar Shah: Sad. There are a lot of needy people in this industry, Lord Almighty. People come to me going like, Hey, jigger, can you call up your senator friend and have this thing change for me? No, I cannot. But look, I think that in general, what you’re saying is true. So we failed to pass Waxer market in 2008, and I think largely we failed because it was an environmental and clean tech industry only effort. This effort passed because labor and justice communities help shape the bill. And I think that the solar industry needs to recognize that the only way that these incentives become durable is if we’re delivering on labor and we’re delivering on justice. I feel like people are like, well, now that I got mine, I’m just going to do what I need to do over the next two years. And that’s fine. But you know that we have elections all the time, and the way this stuff works is if you want durable progress, then those small towns that are currently fighting solar need to see that there’s something in it for them. Absolutely. Right? And all these places that have old industrial plants, which are now being converted into a solar manufacturing plant, needs to know that folks are doing the reach out to make sure that folks who didn’t know that they could get a job in that plant are going to get a job in that plant. And so I think when you think about the opportunity here is that the solar industry is going from this moniker of being alternative energy to becoming mainstream energy and mainstream energy has the responsibility of actually doing all of these things. And so I feel like for whatever reason, that message hasn’t gone through to the solar industry yet. But it will, right? I mean, I think we are going to be deploying hundreds of billions of dollars into these new manufacturing facilities for batteries, solar for, I mean, I saw some of the inverter manufacturers are doing stuff here. Next Tracker did their big announcement here in Vegas. I think when you think about what’s happening here, it’s truly transformational as you suggested. But to keep it going, I think people need to think more about the entire country and what we need than just their company. Jon Powers: We’re seeing projects on coal mines in West Virginia these days in Kentucky. We just cut the largest solar array in Alaska just last week, and we’ve got 200 megawatts more behind it. It’s Jigar Shah: Amazing there, Jon Powers: Which is incredible. So the one thing, and I know you can’t say this, working at D u e, so I’ll say it to the folks in the industry, is that while that legislation has been passed, the fight is far from over and we all need to get active in the fight. It wasn’t that long ago with the spring when the MAGA Republicans tried to turn this i r A into Obamacare and undercut stuff around the C R A. We have to go and fight and tell our story both at the national level, which I think you’re doing so well, but also at the local level. So it’s on all of us to tell those stories and bring the stakeholders into these conversations so they know about the success that we’re having and the jobs are created. Jigar Shah: And there’s just so much success. I mean, I’m a little tired of all this winning. Jon Powers: It’s a good problem for us to have. So it’s an exciting conference we’re at. There’s a lot of amazing things going on. I’m going to, for a second, just talk about public service. It is something that folks in the industry, some have been in and out. You’ve got your team from d o E here who are incredible. If you could go back to the day before you started d o e and give yourself just a piece of advice leading before you walked in the building, now that you’ve been in there for a while, what piece of advice would you give yourself? Jigar Shah: I was lucky. I knew what I was getting myself into. I had you and then also my wife, who is a senior executive service at the State Department. So I was lucky from that perspective. But I think the one thing that I think people just, they default the way into it is that you are always asking other people to do stuff for you instead of just figuring out what you can do for other people. And I think when I came in, I was sort of like, how’s the rest of the government going to help me fix L P O? And ultimately, no, it’s on us to actually show them that we were able to manage the risk, that we were able to bring all these people in. And frankly, the reception’s been extraordinary from throughout government. But I think that mindset shift around, look, you’re actually serving. You’re not doing them a favor. They’re doing you a favor. Let’s figure out how we can all give and how we can all contribute. And frankly, it’s been infectious. The thing that’s really been gratifying for me is that we’ve been able to get over 75 senior executives from the private sector to join us at the loan programs office in outreach, business development, and the origination team, but also in the strategy team. I think when you look at Jen’s background and her leading the effort on the virtual power plant report, I mean, there’s no way that we could have gotten that done without people of her expertise and quality deciding that this was a jump that she wanted to make. And so that’s gratifying to have that many different people decide. Jamie Nolan had a great practice, and I was like, no, you got to come back. And she’s been extraordinary. So I just think having all those people come back is a big deal, and you can’t ask for more than Jon Powers: That. So how do we take the success that’s been moving forward and ensure that it is sort of stable with future administrations, which I think to me is taking those success stories and trying to tell them in a bipartisan way back to Hill, which is very difficult. You live in Washington, I got out of there for a reason, but it is not a very bipartisan place in many places. How can we help you tell the success stories so that this becomes continue to become a success story going forward? Jigar Shah: Well, I think the first thing is, is that we have to be intentional about creating success stories. I think in general, folks are just hiring. They got a lot of open positions and they want to hire. But I think we got to be intentional to go after folks who we didn’t advertise jobs to in the past, and making sure that those folks know that these careers are amazing and bringing in other folks that our industry looks like America. But I think the other piece of it is that I think as we continue to morph ourselves from the solar industry to the virtual power plant industry, well now you have way more reasons for people to love you. I mean, the virtual power plant industry is being fully embraced by the regulators in Texas. They’re being fully embraced by all the folks in North Carolina. All these states are saying, we want to be on the cutting edge of this stuff, right? And so I think the solar industry is super important, and frankly, I think it’s still going to continue to be where we get a lot of our new generation from over the next decade. But at the same time, I think all these other features and all these other pieces is what I think makes us more interesting and more credible to all the different audiences. And so I think we just got to make sure we’re embracing all of it. Jon Powers: Well, jigger, thank you so much for your time. Thank you for being out here in Las Vegas with us. Thank you to the sponsors. Thank you to Nico and the Suncast team as always for putting together an awesome conversation here at plus any parting words of advice Jigar Shah: Going gone. Jon Powers: Thanks everybody. Now Jigar Shah: I love this headset. It’s extraordinary. Jon Powers: It is pretty amazing. Jigar Shah: Thanks everybody. Thank you so much.