Episode 109: Danny Kennedy, New Energy Nexus
Today's guest is Danny Kennedy, CEO of New Energy Nexus.
Danny is a clean energy veteran, who has worked in environmental advocacy, solar entrepreneurship and in the public sector. The nonprofit he leads, New Energy Nexus, is an organization that connects entrepreneurs globally with capital for the purpose of building an abundant clean energy economy. Danny has also served as the managing director of the California Clean Energy Fund (an early-investor in Tesla), which includes overseeing the $25 million Cal Seed Fund. He's an advisor to young green tech entrepreneurs in China with the Asia Society as well as the president of Cal Charge, a public private partnership working to advance energy storage. In 2007, he cofounded Sungevity, which worked on remote solar design.
We have a great discussion in this episode, covering a wide range of topics including Danny's background and experience, what led him to become an activist, his interest in climate change and how that interest has manifested over the years. In addition, we touch on how his views on the problem have evolved and also where he's spending his portfolio of time today.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
How Oakland, CA has become the clean tech capital of the Bay Area
Danny’s work as an activist and entrepreneur to address climate change
How addressing climate change requires a war effort
How renewable energy presents not only a climate opportunity but also a much-needed employment opportunity
How Danny got into climate work and his underlying motivation
Danny’s journey into solar and founding his first startup
How the problem of climate change has evolved since Danny began his work
How clean tech and U.S. leadership in the movement represents a huge economic opportunity
How grassroots entrepreneurship is making up for an absence of government action
What government leadership to address climate change would need to look like
How the government-command of industry priorities to respond to COVID-19 is emblematic for what is required to address climate change
What the viable renewable energy mix for the future looks like
How Danny would address the main contributing sectors to GHG emissions
How effort needs to be focused on Africa and Asia, which will be the long-term contributors to carbon
How financial and software engineering are ripe areas of innovation
What is New Energy Nexus (NEN) and its mission
How NEN’s Clean Energy Fund invested in Tesla and other clean tech companies
How the “puck” of opportunity and innovation is headed to Asia
NEN’s clean energy accelerator in Indonesia
How Danny thought about incorporating NEN as a non-profit vs. for-profit model
Danny’s role in co-founding Oakland-based incubator, Powerhouse
Links to topics discussed in this episode:
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Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today's guest is Danny Kennedy, the CEO of New Energy Nexus. Danny is a clean energy veteran. Who's done a number of things over the years on the advocacy side, on the entrepreneurship side and in the public sector, New Energy Nexus as an organization that connects entrepreneurs everywhere to capital to build an abundant clean energy economy that benefits all. Danny's also managing director of the California Clean Energy Fund, which includes overseeing the $25 million Cal Seed Fund. He's an advisor to young green tech entrepreneurs in China with the Asia Society, he's president of Cal Charge, which is a public private partnership working to advance energy storage.
And he was also co founder of Sungevity back in 2007, which created remote solar design. We have a great discussion in this episode, covering a wide range of topics, including Danny's background and experience, starting from a young age, interested in climate change and how that interest has manifested over the years to the great breadth of experience that he has today.
We've also talked about how his views on the problem have evolved and also where he's spending his portfolio of time today and the things he thinks will be most impactful in the climate fight. And also just some of the barriers and hurdles and what we can and should be doing to try to unlock making progress faster.
Danny Kennedy, welcome to the show.
Danny Kennedy: Thanks for having me.
Jason Jacobs: You, my friend are a legend. I feel like every other person, if not more, that I've talked to you in the last year and a half that has spent any meaningful time in this space have all pointed me in your direction. So I'm so glad that we're finally getting the opportunity to have this discussion.
Danny Kennedy: Well, likewise, thank you. That's the legacy of long lived work in the space more than anything just been around doing it.
Jason Jacobs: And, you know, through, through some, some turbulent times and, and it didn't scare you away. So right there, I think it takes a certain kind of grit. You, you know, you either want it really badly or you're crazy.
I don't know which one, maybe both.
Where does this discussion find you today geographically? I know we're smack in the middle of a pandemic.
Danny Kennedy: So Oakland, California, where I'm based and we have the sort of headquarters of New Energy Nexus, the organization. Been here about 12 years.
Jason Jacobs: In Oakland.
Danny Kennedy: Yeah.
Jason Jacobs: For all the trips that I had taken to San Francisco over the years, until I started focusing on climate, I had actually never been to Oakland, but it's a great place.
Danny Kennedy: It is the Cleantech Valley, if you will, of the Bay area. There's been a lot of great startups come up there and, you know, it's sort of set between the two big campuses, UC Berkeley and the Stanford campus. In some sense, the mayors on the East Bay side of the Bay area have done a lot of work over the years to try to attract that industry and grow it.
And it's been successful for them, created a lot of jobs, a lot of activity; it's been good.
Jason Jacobs: Maybe there's some learnings we can incorporate here in the Boston area. Not that the infrastructure doesn't exist, but as an entrepreneur in my bones, I'm always thinking about how to do things better. So in 30 seconds or less, no, I'm just joking about the 30 seconds or less part, but I guess first, just, I mean, you've done so many different things over the years in clean tech and hit it from so many different angles.
How do you describe. Who you are and what you do.
Danny Kennedy: I am basically an activist using companies and capital formation to drive success in the energy transition, which is inevitable, that needs to speed up a lot. So every company I helped start as sort of a campaign. A campaign or something. There's some play on words that I can't quite pronounce, but it sort of comes out of my history as an actual activist, like professional Greenpeace guy and doing other work in the 20th century way back when, and just sort of seeing social change as a thing that entrepreneurs are actually very good at making markets and changing behaviors.
Moving policy as a function of their enterprise. And so I've become adept at doing that too.
Jason Jacobs: And, you know, in all the discussions that I've had so far, and it's many hundreds at, at this point, this is the first that I've ever heard someone describe the company formation process as a campaign. And I also come to think of it I don't know that I've talked to anyone who has made that transition from being an actual activist to the innovation side. Is it, is that rare in, in your experience as well?
Danny Kennedy: No, probably less rather than you think it is. People just don't talk about it as part of their pedigree. You know, it's not a badge of honor, necessarily in some sectors of business.
But it makes a lot of sense when you're an activist out there trying to make change in a policy, whatever it may be. You do a lot with nothing. You don't take no for an answer and you are an athlete and do whatever it takes. Lobbying civil disobedience. Publication communication, research, science, whatever you need to do, you get done.
And that's very entrepreneurial. Actually, if you think about it just it's in a nonprofit form to some degree. So I think that the transition is actually somewhat natural, but in terms of thinking about each business in this space as a campaign. I mean, it may be just the mental model that I inherited from my past, but I think every niche, you know, as big as they are becoming is something that requires, you know, some seed to grow into it, to make it as big as it needs to be.
And that's kind of the campaign piece, you know, we have trillions of dollars of work to do to go through this wheel of creative destruction, where we displace fossil fuels that have had a hundred plus years of dominance with an insurgency of startups that we need to foster and feed with capital. And that work needs to be very intentional and strategic in time sequence and in space in geography, which is very much like a campaign strategy.
It's the other metaphor that is often used as a war footing. You know, which hill are you going to take this year? Which theater of engagement are you in? What stage of battle?
Jason Jacobs: We see trillions, but I mean, the government just sprinkled trillions around just today as it relates to disaster assistance with the pandemic.
So it's, it's amazing how that, I mean, it's not that we don't need it. We certainly do, but it's amazing how we seem to be able to find it when we want to find it, but have no idea how we would ever get it when we don't.
Danny Kennedy: It is amazing. You know, it's a good lesson to learn with COVID-19 that we can, as a society, do this when we need to and want to.
And that's how we should approach climate and the energy transition. We haven't had that war footing mentality. From government before, but it has also been true and it's been known for a long time that it is only that sort of level, you know, you need a Manhattan project plus a Marshall plan plus Apollo project, plus plus scale of effort to really get to the level of deployment and innovation around clean energy and then displacement of dirty energy for steel and industry and cement and, you know, reworking the world's agriculture and so on. All those things require such huge volumes of investment. It's really only government that can ultimately do that.
And it hasn't chosen to till now maybe post COVID. We will have had the lived experience of it in face of the crisis, choose to do it now, climate, and it may be coincident with the job need, you know, same day that we put another couple of trillion dollars down, which we'll continue to do for months and years here I believe we've announced another 6 million jobless this week after last week's shocking 6 million. So jobs, jobs, jobs will be the catch cry of our time for a year or two. The good news is what we do in energy is actually also a job creation machine. So, for both the reason, it's a climate solution and that it is an economic salve to the crisis we've created in our hand, by crushing whole sectors of the economy as a government intervention, we will now lean in and intervene as a government to lift up energy because it is the most job dense investment strategy that a government can make.
Jason Jacobs: I definitely want to dig in on a number of things that you just mentioned, but before we do, maybe we can just take a step back and talk about how you got into doing all this. And, and also why, when you initially made the decision so many years ago, what is it that brought you here?
Danny Kennedy: The why is almost sort of, you know, obvious passion about it and, and commitment to future generations.
You know, now my kids are my motivation, but I started when I was a kid in my teens working on that historic issues, ozone in Australia and then climate science. I helped organize the sort of public event around this, which was weirdly bi-partisan at the time. I think it was 1989 Greenhouse Action Australia was the name of the conference and it was, you know, kind of a nice consensus building thing that we should take action.
And here we are, 30 years later, plus you're starting governments now raving over it and unable to act because of its protection of vested interests. But so I did that sort of work, activist work, for more than a decade.
Jason Jacobs: And why, what, like, where did that come from? I mean, was it from your parents or other role models?
Was there, did you hit your head in the shower? What, what led you down that path? Initially?
Danny Kennedy: Honestly, probably I did it as a teenager and I just fell in love with it and got into it and became my social crew and, you know, my sense of identity to some degree and where I met girls and my now wife and, you know, a fantastic career and life actually, I loved it, you know, and ended up sort of seeing your management at Greenpeace, you know, running a hundred campaigns around the Pacific region and Papua New Guinea and Fiji, and Australia and elsewhere. And it had a really interesting time of it, but I also evolved perhaps from being just a reactionary boy, chasing certain fun things and developed a sense of what makes for social change? And I think the work we did in the nineties and noughties was sort of incredibly important to prove that business as usual of the 20th century was going to ruin us and cook us with carbon. But we got to a point early in the 20th century where we knew that we had a problem, Houston. What we then needed was to know that we had real solutions. So around 2006, I decided to basically change careers as it were and start a company instead as a demonstration of solution at scale. And that was a residential solar business. And so I, I began what became before I left at the largest privately held residential solar company in the country.
And a couple of others along the way, you know, got involved with mosaic, which is still in the business, got involved with a company out of Fiji, doing solar as a service, kind of got good at solar finance games and businesses like that. And I've spent the better part of the last 20 years doing that, I guess, while been taking on this role as an investor and entrepreneur support person, which is what we do at New Energy Nexus.
Jason Jacobs: Gosh. I mean, that, that makes me think. And granted, I mean, yours is just kind of an, an N of one, but that maybe we should be spending less time recruiting at, at Stanford and MIT and more time recruiting out of Greenpeace and other activist organizations for the next crop of entrepreneurs.
Danny Kennedy: Amen. You know, I think the evidence is not just in this small sample, but more in the failure of that market of venture capital in the light to really deliver meaningful solutions for communities' big problems. You know, let's not sugar coat it it's failed. It's LP set as an asset class for over a decade, and it's also failed to really crack any big nuts. Whereas we've left on the table, you know, almost all women and they're good ideas of, you know, 96% of venture it goes to white guys and most minorities and most ideas outside of, you know, the few that can get to Sand Hill Road.
But anyway, another conversation perhaps, but yes, we need to diversify the pool from which we draw innovation and ideas to address this crisis because clearly what we've done to date has failed. And we need to accelerate rapidly, what's working.
Jason Jacobs: And so maybe talk a bit about what your perception was of the nature of the problem of climate change.
When you first started working on this at Greenpeace, or even before that, it sounds like back in, in your teenage years and how that is the same and how that's different from how you think about the nature of the problem today and how the problems evolved.
Danny Kennedy: You know, unfortunately it probably hasn't changed too much.
It's a problem of arithmetic. It's a carbon logic that I learned at the hands of the guy that actually drafted the first kind of carbon logic models that the UN FCCC adopted a guy called Bill Hare. Who's now at Potsdam Institute and drives a lot of the weather and climate science thinking around this stuff, you know, we know what the atmospheric limits are and that we're filling the tub or whatever you want to say.
So we have to stop doing that. That then becomes a socioeconomic issue and a cultural one to some degree around the ways in which we get things like electricity and mobility services, food, steel, cement, et cetera. And there are unfortunately strong incumbents in those economic sectors that are very politically powerful and have obfuscated action and change and withstood.
The wheel of creative destruction, that the normal economic processes through political patronage for a couple of decades, even while pretending to give a shit and worry about it, you know, and, and that extends not just to the companies themselves, but to the financiers that back them and the insurance industry that underwrites them and all the risks.
You know, I was involved in early days of working on the reinsurance industry with Greenpeace, where they. You know, try it into their, their bowls, that the risks would rise and undo them and that they couldn't possibly, you know, do the actuarials on how to contemplate. The extreme weather events that we're having today, you know, they knew they were coming then. This was in the nineties. What they did is just price them into their premiums or excluded people from insurance. They didn't actually divest their equity holdings, which as you know, is how insurance industry operates or did they stop underwriting the fossil fuel businesses that were causing the problem.
They just perpetuated it. So, you know, there was a cohort of companies basically, and state owned enterprises in some markets that were responsible for doubling the CO2 in the 30 year period. We're talking about, you know, when I say it's a failure, I feel it very deeply because the amount of that carbon budget that was in the sky when I was a kid is twice as much today, despite 30 years of travail, trying to reverse that.
And that set of people devoted to perpetuating business as usual have been very successful as often as the case with incumbents and holding for all of our politicians and politics. But as I say, you know, perhaps this moment in history that we're in the middle of, as we talk is one in which we realize that, you know, all that stuff about, you got to let the market operate is bullshit.
You know, when you have a public health crisis, government reaches in and crushes, whole sectors of economies, the cruise industry, the tourism sector, restaurants, retail gaming, you name it, they're all mainstays. And we just chose to shut them down as an act of centrally planned economic thinking in order to protect the public health interest.
We now made to enact something akin to that in order to just shut down fossils and move on to a much better, cheaper, faster, cleaner way of doing the things we need, which are electricity and mobility services and steel and cement and agriculture.
Jason Jacobs: What do you think the challenges are that inhibit climate from being treated with the urgency that it sounds like you feel that is warranted and required.
Danny Kennedy: Basically, some people make a lot of money out of the status quo. Boiled down to that there are behavioral issues, but you know, they're, they're really not that insurmountable. You know, it's about the politics, getting the policy, right.
In order to change the economic system, which means replacing some companies, we have to stop worrying about companies and start worrying about communities. And if we make that transition in our heads and hearts and congresses and parliaments and elsewhere, what's amazing is we'll have a period of abundance unlike any humanity has ever experienced much greater than the industrial revolution. That we're the center of the fossil fuel based revolution because the power of the figurative power, as well as the literal power, which is, you know, the commanding heights of an economy as it's been called will be much more distributed and much more in the hands of the community itself.
That however is a threat as a mental model, which is one of the reasons why it's resisted, but not nearly as, as much as just the simple pecuniary self-interest. I think there's also a liar, honestly, Jason, you know, what, what did Winston Churchill say? Never look for a conspiracy when sheer and competence will explain the facts.
You know, I just think we're we're shit at this making big moves. We have 7 billion people now on earth were dependent on fossil fuel based technologies like turbines and the internal combustion engine and, you know, sort of significant shifts are hard, but hard shouldn't be a reason not to it's actually entrepreneurs.
Jason Jacobs: You were talking before about, you know, Apollo meets Marshall Plan meets these different kind of big government-led initiatives. Do you think that a wartime posture is the right one as it relates to the climate change problem?
Danny Kennedy: You know, if we had leadership. Uh, you know, which you trusted and could go into battle with, but we don't.
So probably not. That's why it's not the metaphor that works for me. I think it's going to be a bottoms up thing, which is why I've turned to, you know, the creative class of startups and entrepreneurs that, you know, if, if we do the numbers again, a trillion dollars a year or call it 2 trillion with mobility and the other sectors training of investment required between now and 2040, you know, 20 plus years of couple of trillion dollars a year, $40 trillion to spend, you know, as you point out, we've already put $4 trillion into the market in the last month. So it's not that big a number relative to the global economy, but we've got to create $40 trillion worth of value over the next 20 years. That's, you know, $40,000 billion dollar businesses, if I'm doing my maths right. You know, so think about, say a Tesla, how long it took to get to a billion dollar valuation. You got to do that 40,000 times in the next couple of decades. So we need to bring up lots and lots of startups, social enterprises solutions to bring about this transition because unfortunately the top down military model ain't going to happen when we've got a bunch of buffoons as we do, and places of political power.
Jason Jacobs: Well, there's two different directions. I'd like to go with that. One is if we have the right leadership in place, what do you think the right mindset would be? So I guess, let me start there and then I'll come back to the other one.
Danny Kennedy: So that one, you know, sure. If we had a great sort of do a bottoms up and a top down thing, I think ideally you'd meet in the middle and then you'd leverage, you know, market force where it makes sense.
You'd also have, you know, industry policy as what we used to call it, social democracies around the world. You choose which sectors you are going to lean in on and you'd make them go. And, you know, the United States is very good at this. In fact, for example, ICT, you know, we, we did it in spades when we wanted to beat the Russians at microchips for missile control systems.
So we flooded the field South of Stanford university with money. We called it Silicon Valley and we spun up thousands of computer companies, which all consolidated into Fairchild and its children. And then they in turn evolved into, you know, the seven semiconductor companies we know today and on all their children in the web world and ancillary services that have evolved from that.
But it was a function of deep DOD spend billions and billions and billions of dollars over decades that created that sector, which we dominate and continue to dominate. That's the kind of model I'd be looking for if we had leadership, but, you know, unfortunately, as you know, we don't and the fish rots from the head.
Jason Jacobs: And then that kind of model, it's some combination of, I mean, I would imagine there's R and D are there subsidies, is there a price on carbon? Like what, what type of government action would bring that type of. Innovation revolution about?
Danny Kennedy: Yes, yes, yes. You know, all of the above and more, I mean, you know, a few things that would really work would be sending a sustained signal to the market, you know, so certainty around things like say the transition, you know, we are gonna say by 2030, no more ICE vehicles.
And we mean it. And you've got 10 years to work it out. OEMs, autos, et cetera. Plus, we're going to put incentives are now to create infrastructure, to make that real for EV charging or whatever it may be. Plus we're going to ratchet up the standards progressively. I mean, California is actually a great laboratory for the world in this regard, you know what it's done with LED lighting's by doing lighting standards, plus some of the R and D plus some incentives for switching out stuff.
Has dramatically changed the lighting sector and allowed this state to keep its emissions from that load center flat while also turning the world on to LEDs and off incandescents, you know, I mean, without too much trouble, right. You know, a couple of companies screamed like, you know, what's for a couple of months.
And then I moved on. And, and, you know, we, we have the capacity to move on. You know, GM can come become a ventilator company when it's told to; Ford can make tanks when the president calls and tells it to. And there's self interest in doing that. Ultimately, when the market is made for you and you know, you're going to be able to sell into it, which is basically what the Chinese are doing.
I mean, the reason China has come to dominate solar, wind batteries, electric vehicles, the future. In other words, the entire giant sector of, you know, the majority of new generation, the majority of new electricity grid infrastructure, the majority of growth in automobiles is because they've set mandates.
They've done R and D and they've applied incentives. It's a pretty simple formula.
Jason Jacobs: And it sounds like in an absence of the government, doing those things that you believe that innovation is really the key driver to bring these things about.
Danny Kennedy: Right. Right, but we should pass kind of what we mean by innovation. Yes.
There's an innovation agenda, like an invention agenda de novo innovation, which is still needed, but it's actually quite different to what it was even when I started my first company back in the noughties or at the turn of the century, when we were having a legitimate conversation about what is the energy source that's going to power all this, you know, is it nukes?
Is it hydro? Is it geothermal, is it wind? Is it solar? Is it's all a thermal? CSP? Is a PV? The answers become very clear in the first 20% of the century. It's solar, largely; a flat plate semiconductor that becomes cheaper the more you make it. A learning curve we're very familiar with having gone through it with the other flat plate semiconductor we talked about before, and then there's going to be some of the things around the edges.
There's going to be a lot of wind. Because that's a nice complement to solar. There might be some geothermal and some hydro and some stuff around the bits, but generation, we now know the answer to, so it's no longer really about innovation in sort of the cliched sense of the term. It is about innovating business models and finance products to pay for a capex intensive deployment. To get to 70% of terawatt hours produced on earth by 2050, which is kind of what we need to do with solar, we need to jazz up the finance markets. We need to work out how do you underwrite a solar panel? Not for 30 years, but for 50 years, because only if it's a lived product for 50 years, does it make sense in the market.
You know, all these things. They're the innovations we now need to work around with that, but otherwise there's just a massive deployment. It's about a three or four X, depending on whether we electrify all vehicle platforms in that couple, three decades. So we have to do, when I say three or four X, three or four X of what we've done to date in the century.
So, you know, so far we've, we've put in, you know, from less than a gigawatt to hundreds of gigawatts. Now in the system, we have to put in thousands of gigawatts in the next few decades, three or four X, the rate of deployment per decade. And we have to innovate some technologies we don't even have today, which are the sort of things that work at low capacity factor in the electricity grid.
So, you know, it looks and sounds like a long duration battery, but basically it's the stuff that makes an enormous amount of variable, renewables, wind, and solar makes sense to power, not just the electricity grid, but all the mobility solutions, the transport options we take in the future, whether they're private vehicles or scooters or trucks or the Hyperloop or whatever, the mobility thing is, it's going to be powered by electricity in this model.
And to make sense of massive amounts of wind and solar coming in on a Sunday when no one's moving and doing anything because we're all locked down for the latest wave of the plague that's coming through, we will need to be storing some of those electrons rather than curtailing them. And that will require storage solutions or technologies like hydrogen and things that really are not there yet at all and prototype. With the models that you run on this scenario, which is probably the best easiest one to look at as the new energy outlook Bloomberg, you need to have that technology set. They call it technology X in market by 2030, so 10 years from now. So we're going to invent something and scale it, get it to product market fit in 10 years. And then it has to become as big as the nuclear power sector is today by 2050. So over a 20 year period, subsequently, it has to do everything that nukes has done in 70 years since it was invented as part of a military industrial complex with all the subsidy and all the support and all the backing that nukes receive to get to where it is today, this technology set needs to become something and grow in just 20 short years. So yes, there's a, there's a very heavy lift in sort of hard science and hard technology challenges in the innovation game. And then there's this sort of what I call ingenuity, the ingenious combination of things to create innovations in finance, to spread and deploy the existing solutions we know we have and just have to get out there.
Does that make sense?
Jason Jacobs: It does. And I'm not talking about New Energy Nexus yet. I'm still just talking about kind of the bathtub of, for the carbon budget, if you will. But in that vein, how do you think about energy versus other areas of the economy? Whether it be food and ag or industrial processes or transportation, like is energy, the only thing we should be caring about or how should we be allocating our resources and time.
Danny Kennedy: Good question one that I struggled with, but you know, it's still the big one. And when we say energy, we're talking about the electricity system and then transport, which will be electrified. And, you know, and that's almost a given now economically. So you've got, you know, the two big segments of the carbon problem.
And then you also would address, I think, through that work, you know, say with these, these technology X type things that have low capacity factors that work you might address steel or cement making, for example, with those. So you can take out those segments, land use and ag and food systems is a, is a whole nother challenge, which requires a similar burst of ingenious innovation.
I think. Ingenuity around waste of food, which is such a sin anyway. And then the innovation around, you know, how to do protein and things probably better. And the opportunity space for an abundant future with things like kelp farming as a sink for carbon, as well as an amazing protein source. So. Yeah, I think the ag thing is a, is a fun one to talk about as is tree planting and that side of land use.
It's not something I've spent a lot of time on lately, partly because I have a feeling maybe I'm just getting old, but we aren't good at walking and chewing gum as humans. We have trouble doing two things at once and we've still not done the electricity thing. You know, here in California, we feel pretty smug, but you know, some days was 75% clean energy and old days were sort of 33%.
And you know, every year our cars get cleaner because there's less study energy in the system. We're going electric at 8% per annum or something like that. It's far from done. Just here and we no longer matter because we will get it done. That's by law now, 2045. We have to decarbonize all sectors of the economy in California, but we're 1% of future GHGs.
Anyway, the world is not here. It's not in America. It's not in Europe. It's not in Japan. And I know the economic profile will shift after COVID, but the demographic profile will not, you know, by 2050, 80% of people on earth are going to be in Africa and Asia. And so we have to focus a lot of fire power in the next years here on the electricity and mobility markets of Africa and Asia, and not get distracted by smaller segments of the problem. You know, I'm not trying to dissuade anyone listening from their passion, if it's, you know, fixing ag or working out how to plant a tree and trees, not a billion, that's important too. But I am saying, I think that the giant issue of our times is still remaking and rewiring the world and how we move goods and people around.
Once we fix that, we might be able to live on the other sectors. If we don't fix that, it doesn't matter if we address the other sectors.
Jason Jacobs: I think what I'm hearing from you is that deployment is key and that ideally the government would be helping, but in absence of the government, we should be doing what we can on the innovation side, too.
Accelerate that, how does that translate into tactics or specifics or I'd love to just kind of double click on that, like by doing what?
Danny Kennedy: Couple of things come to mind. One is finance engineering. You know, like the big things that have unleashed markets in solar say, or when the, you know, products that you've heard of like PPA is, and solar leases is what I was involved in, pioneering the Sungevity or solar loans at mosaic, or, you know, whatever the equivalent is.
You know, little startup I've been involved with is called kilowatt hour analytics that does the solar put so that it. Can I help finance as hedge the risks around performance. Those things actually matter a lot. You know, like I was saying before, I've been working with Department of Energy on thinking about extending solar products, live life cycle, so that the value as a productive asset is stretched over a 50 year not a 30 year amortization schedule makes an incredible impact on the LCOE. You know, as we get into storage and different chemistries working out, which at last, cost of storage is best for the financiers and the underwriters. It doesn't sound sexy. It's not as fun as some of the stuff that preoccupies our, our geeky friends, but it's very, very important.
So, you know, tactics. We're running a FinTech accelerator. How can we help standardize contracts for Southeast Asia to adopt solar products? How do we make the PPA that we genericize here in the States amenable to the laws and cultures and language of 190 other countries.
Jason Jacobs: Are these opportunities for companies to solve or things that someone should just do for the public good?
Danny Kennedy: Mostly companies. I mean, therefore the public good as well, but yeah, that's a business. Every one of those things I just mentioned is a, is a decent business. I mean, they may not be unicorns, but that's a whole other story there. There aren't any unicorns. It's my little hint; they're a mythical beast. The companies of law in this space, you know, the Generate Capital, the Solar City, Sunrun's stories, you know, this has been important to move the market and in deployment, it is a big part of it.
Another area of innovation is software, you know, streamlining things to reduce friction because we have to just move so much. I mean, to some degree, finance is already lining up, you know, for five years or more now, the majority of the world's investment in energy has gone into wind and solar. You know, fossils has been the alternative energy since 2012 by dollar value, but it's still hard to push new generation assets in particularly the markets like an Indonesia or Congo, cause it's just hard and streamlining that. And whether that's a design and engineering solution, taking advantage of satellite imagery and drone photography, or whether that's a contracting solution that helps sift and sort, you know, laws and liabilities for the financiers backing the build out of some asset in one of those places.
That stuff, you know, the machine learning of contracts may become incredibly important to this massive deployment that we have to do at a rate and scale that we've not even contemplated yet. So, you know, I would say tactically, there's two big areas to dive into and put the entrepreneurial genius of Silicon Valley.
And everyone else that I mentioned before onto, which is financial engineering, software engineering, as well as the hardware and stuff that we also need to solve for.
Jason Jacobs: And usually we do this in the reverse order where I start with your company, and then we go into kind of the bigger picture, but for whatever reason, we started with the bigger picture and this discussion.
So maybe let's come back around and talk about New Energy Nexus if that's okay. So what is New Energy Nexus now that we have the frame for, for your worldview and what you think we need to do to take it out of this pickle then it's I think it's, it's a really nice segue into your slice.
Danny Kennedy: Right. New Energy Nexus is an international organization that supports startups to succeed in spreading clean energy solutions. We do it by running incubators, accelerators and funds in eight countries now, and we have affiliates in about 90 countries. We grew out of something that's quite venerable and maybe known to someof your listeners; it's called the California Clean Energy Fund, which was stood up in 2004 and was really, you know, probably the proto organization of this kind and the entrepreneur support organizations space for clean energy entrepreneurs. We had a little fund back then from the weirdly capitalize from the settlement of PG&E'S first bankruptcy in 2001. We invested in businesses like Tesla. You might've heard of them. You know, back when we did that, about the time Elon was getting involved, that was a wild gamble.
You know, the California state is obviously very happy with us having done that because it's become the largest manufacturer of the largest export by value of any company in the golden state, as it's grown to become the fifth largest economy in the world. Uh, that's a remarkable success story. It's also happened to disrupt categories and create an entire impetus to change the automobile as we know it.
So it was a good bet. We didn't take any significant advantage of that from a pecuniary point of view, we sold our stock shortly after they went public, but that's not the point we put the money. We took off the table because we're a nonprofit into the UC Davis energy efficiency center, which has become one of the key standard setting organizations in the country for things like lighting and HVAC, which, you know, unsexy like unlike Tesla, but incredibly important.
And the California initiatives to mandate appliance standards in the light, which has been driven by places like UC Davis in part has been incredibly impactful in the energy efficiency space we invested in bridge locks, which helped convert the well to LEDs. In solar century, you know, one of the big solar players.
So anyway, we have a storied history of 15 years in California, but in the last few years, we've sort of taken a step back and looked at this strategic question. You're asking like, you know, how do we move the dial now going into the 2020s, the decisive decade that it is. And we decided to go, you know, to use a Wayne Gretzky on you, go where the puck is going, which is West of here.
It's Asia. And, and it's not just China and India, which everyone talks about, although it's that too. And we have programs in China, in India, but it's, it's the 700 million people sort of South and East of there in Vietnam and me and Myanmar and the Philippines and Indonesia who currently are, you know, amongst the fastest growing economies in the world, surely to be set back by COVID, but still going to come up on the ladder of energy access and on the ladder of energy consumption. From say take an Indonesia,
300,000 people, a big, about 300 million people population in the U.S. currently consuming about a thousand kilowatt hours of electricity per capita, per annum. We're at about 10,000 in the U.S. They won't get to where the U.S. is for reasons of their demand, but also hopefully technology choices and efficiency and stuff.
But they'll get up to five or six or 7,000 sort of where Singapore is today. If they do that with coal, which is their current integrated resource plan or where they can't string wires from coal plants on Java to one of the 7,000 islands. They'll put diesel generators, which are twice as bad from a carbon point of view.
It doesn't matter what California does. Indonesia can cook us all. Just that one country. The good news is it's better for Indonesia to do the clean energy option. It's cheaper. They'll build it out faster. They'll get most stable, reliable electricity supply on 7,000 islands, micro grid around renewables and storage than they would on some fragile, brittle grid built around a few big coal power plants.
So we think we can get that going there, but to do that, we need a whole crop of companies coming up in Asia, offering that economic option. And so we've just three years ago, started a program of incubating accelerating startups in Indonesia, we have a, you know, a couple dozen now and a small fund to invest in them as a couple million dollars.
It's tiny, but it's literally the largest early stage, clean energy fund in the country of Indonesia. So that's what we do. We get into markets that matter. And we try to inoculate them to use the word at the moment with clean energy enterprises and entrepreneurs and startups, and we support their startups with training and curriculum and money where we can to go further, faster.
Jason Jacobs: And is this an independent nonprofit, New Energy Nexus or where does your funding come from?
Danny Kennedy: We have a range of revenue from government contracts. We run programs for the state of California, a fund here called Cal seed and another initiative with the university of California office of the president called Cal Testbed.
We have a program with NYSERDA in New York. We also receive philanthropic grants from big foundations, donors, and we have some sort of corporate members and sponsorships for different events and pieces of work. We have a big program in energy storage. That's been going for five or six years, and that involves the national labs and a bunch of big companies.
And we run a battery challenge for some of them and other things that get us to pay our way. We, you know, small team doing mighty work, really. It's 50 some people in the eight countries. I mentioned, you know, touching hundreds and thousands of startups annually, which in turn, hopefully serve thousands and tens of thousands of customers. Problem is, you know, our own goals for our little organization and we radically share everything and are finally opensourced about the strategies and methodologies of it. We want to get to a hundred thousand in the decade coming, but that's not even going to touch the side of either the opportunity or the need.
We think a hundred thousand is just the beginning in terms of the number of companies that need to be created to truly populate the space and do all that deployment and innovation that we mentioned.
Jason Jacobs: Was it a hard decision when you set up this organization for it to be a nonprofit, had you considered the, the for-profit route and what are the pros and the cons of each approach?
Danny Kennedy: So just to be clear, I sort of inherited the California Clean Energy Fund as its managing director in 2015 and with a colleague. Several colleagues obviously turned it around and became New Energy Nexus as a global program. And yes, and you know, we're not, not able to take on for profit like mechanisms, you know, we can invest in and take a return.
We can't take it off the table for our own individual gain, obviously, but that model is not outside of our reach. The point though, is when you're in the incubation acceleration business. I think there's a pretty clear reason to be basically nonprofit, which is that if you're doing it for profit and you've invested in some of these companies, and I learned this by having helped set up a fairly successful private incubator in the solar space, you quickly become interested in the survival of your little cohort companies, right?
You want them to win because you put your stake into them and you want others to fail, actually, like that's, you know, every, every entrepreneur knows that when they pitch the VC and they don't get the VC to back them, but they backed a competitor in that category, that VC is out there gunning for you.
Right. So there's a channel conflict of a kind, whereas, at this stage in the portfolio, particularly where we live, which is very early stage companies, you know, it's sort of a bit of a mistake to imagine that we can actually control for the outcome. You know, that there's just too many variables. There's too many black swan events coming down the pike, to be able to say my, my version of that solar remote solar design software is going to be the winner or my version of that finance product is going to be the one that's going to go to scale and save the world.
Rather, you better off putting lots of companies on the starting line and hoping that some of them will get to the finish, which is a slightly different mentality to the, for profit early stage investor category. So I think we're very privileged to be able to run it as a nonprofit. We attract all sorts of patient capital as well.
And we put that to work. We, we have speak back as like the IKEA foundation that gave us $10 million to do work in energy access. You know, we have foundations that have helped capitalize a micro finance facility and in Uganda, for example, with our program there, which, you know, the loan book is not significant to many of your listeners, probably it's tens of thousands of dollars annually, but in populations that they serve, who are living on two and $3 a day, that's an enormous sum of funds and those companies a hundred or so, which are quite sustainable and produce a decent margin, and so on, are touching tens of thousands of families with solar products and services. So, you know, it's not really about the number so much as the impact of the capital that we catalyze and bring to bear. We run a bunch of things that I could bore you with sort of pilot facilities in different debt markets, as well as the equity and grant schemes that we have.
It depends on what you want to talk about.
Jason Jacobs: Well, one thing I didn't ask you about is Powerhouse because I know that you were a cofounder of Powerhouse, so I guess how did that come about? And, and, well, what is powerhouse for anyone that, that, that doesn't know? And what was it about that opportunity that made it worthy of allocating a portion of your time?
Yeah, that was the one I was talking about. And it's a great incubator accelerator. And now fund here in Oakland, also partnered with Emily Kirsch who runs it. And as the very charismatic leader of it today. We were friends. She was an activist also. So that's one of those examples of people you don't know, we're working in the sort of social movement scene and came to me when I was at Sungevity and said, we'd like to do more solution stuff. She'd help build some solar projects on community buildings with mosaic in Oakland. And we came up with this plan to use some spare office space that we had under our lease to house, some startups that we knew and host hackathons and get into the game of acceleration incubation, and lo and behold, whatever it is eight or nine years later, she's turned that into a powerhouse ha to make a pun of the solar and smart energy innovation space, you know, she's attracted a fund to it and, and is doing amazing work. I need to build one of those in every city in Asia and Africa. Over the next decade in order that we can meet this demand and abate the carbon going into the sky.
Danny Kennedy: And by the way, we also need to build one of those in every city in America. You know, Boston's got Greentown Labs where you are, and we've got Powerhouse and Cyclotron Road and a couple more plug and play and whatever here in the Bay, but every rust belt town should have an incubator. That's devoted to streamlining the deployment of wind and solar across America for hardening the grid, smartening it, getting behind the meter, deploying storage, doing the things that the advanced mobility solutions will demand. Those are small businesses. They, they may not be venture fundable in all cases, but you know, we've been working recently with a great little incubator in Ohio doing yeoman's work in terms of spitting out smart companies in an opportunity zone that we've been helping form capital around.
And as I say, you need because of the failure of government to go back to. You know that failure of markets and the government to address this crisis. As it's been coming down the pike for the last few decades, we now need to step in and do it at the local level and an incubator like the coworking space, literally, and figuratively becomes the hub of this economy of ideas and innovation that is needed to make that ramp of deployment and innovation possible.
Jason Jacobs: And given how much you're choosing to focus on innovation, I'm curious when I look at the landscape, cause I haven't really been focused on any one piece the last year and a half. I've just been, trying to learn about everything. Although you could argue that I, that it has an innovation bent, which would make sense because that's where I spent my whole career and where I'm passionate about.
But it seems almost like a rainforest where everything is interrelated, where like consumer sentiment and getting employers to change and scientists and government agencies and, and the climate press. And it's like every, you know, and, and innovation and capital and philanthropy and, and so on. Right. And so, if you're focused on one piece of this, regardless of the piece, how important is it that you interrelate interact, have a handle on what else is going on? Like, is it distracting to try to understand the big picture or is it essential? How do these pieces work together?
Danny Kennedy: Good question. I mean, I think. One of the things I learned both as an activist and entrepreneur, and I'm constantly relearning is that focus is the best resource you can find, you know, better than money, better than mentors, better than new ideas.
It's the ability to dive in deep on something rather than stretch yourself a mile wide; focus is actually it creates opportunity. If you can create time in your calendar to focus on delivering a great business, it's probably going to be that you deliver a great business. Whereas if you're distracted from it, you won't.
And yet, you know, in this game and at this rate of change that we're talking about, which is now, you know, a gale of creative destruction, I keep on coming back to that economic concept. You have to be situationally aware and conscious of things, but it's probably a bit like driving, you know, you had to learn how to understand what's in your peripheral vision, but be focused on the steering wheel and the gear stick and stuff that you have to control. And you know, if you're getting into the game of climate solutions yeah you want to learn about macroeconomics of fossil fuels subsidies to the tunes of trillions and why that's unfair and perverse.
And, you know, you need to understand the lack or dearth of true government subsidy and support for the alternatives. You know, you need to understand the policies and politics behind that. And yet you also just need to pick your path and just crush it, you know, go down that route and deliver. I think is my answer.
Jason Jacobs: Last two questions. So one is just, if you had a hundred billion dollars and you could put it towards anything to accelerate this clean energy transition, where would you put that money? And how would you allocate it?
Danny Kennedy: Did you say a hundred billion?
Jason Jacobs: A hundred billion.
Danny Kennedy: So there's, I've heard you say this before, but I hadn't expected to do it.
You know, I would start with what I said a moment ago, which is that we need in every city in Asia and Africa and America. You know, we're talking second tier cities, not just the Boston, the Bay area, but you know, the Wuhans as well as the Shanghai and Beijing and the Shenzhens and the Kinshasas as well as Lagos and Cape Town and, you know, ballet pop on summer into not just Jakarta.
We need hubs that are sustainably finance to support entrepreneurs. They may be privately motivated and run it as that system. Or they may be publicly, uh, driven, not for profit as it were, but you know, that's probably call it $10 million a year per one in a hundred cities across the globe. So 10 years like sustained funding.
So I think if my maths is right 10 by 10, but it's like $10 billion. That you could get through that network of a hundred of those. And there's probably more to do then I'd do some province building. I think there are going to be very big. Areas of the globe that will become centers of this industrial revolution, the fall for whatever it is that we're going to come into post COVID as we go into the clean energy, transitioning in earnesr this century.
So, you know, think about places that were centers of coal mining and burning. The rural valley of Germany or, you know, belts in China or the U S in fact, what are they? So Southern California, I think is ripe for the transportation electrification phenomenon. It's the largest market for automobiles in America.
It's got a huge port and infrastructure. It's got a dozen EV manufacturers already have scale and interest, and it's also sitting right next to the largest lithium resource in the world at the Salton sea. I think that needs to be developed as a public private initiative on the scale of Silicon Valley, that's probably a $10 billion sort of spend.
So I've spent 20 billion of your hundred billion. I'm trying to do this quickly. You know, there's probably other provinces like that in places like Nigeria, you know, these huge population countries that arising and the massive investments in manufacturing and scaling of these technology sets for their customers and audiences.
And then what could I do with some other change? I can pick up most of the coal sector right now. Put it to bed. Just, just bury it. Once. I think I was looking at this on Twitter, Peabody's now worth about $250 million. So can I have a billion dollars to buy Peabody in all its liabilities and just shut it down and take care of its workers.
That's one thing I do, the rest would just be this sort of heroic capital that we manage at New Energy Nexus. You know, we would put in structures. Equity and debt that a concessional probably, or as I call them heroic by which I mean, sort of more patients or positioned differently in the stack to favor other investors to make money in their return.
I still think we would make money out of it, but we can position loan loss, reserves of billions, of dollars for asset financing, solar farms in emerging markets that have high risk profiles. We've got a pilot fund for $5 million in India right now doing rooftop segments. You know, the default rates are good.
The, the characteristics of that market are great. That's gotta be a several billion dollar opportunity right there that I could spend some of the remaining cash on. Sort of depends on what return profile you want, Jason, what's your hurdle rate and when do you want it by? But, you know, we could definitely manage deploying a lot of loan loss reserves first lost money. Recoverable grants. We made a bigger machinery, so we'd spend a couple of hundred million dollars on building that out. But yeah, it's a fun exercise. Does that give you a sense of where I'd put it?
Jason Jacobs: Absolutely. And that was one of the more detailed answers that I've gotten on the show as well. So kudos for that. And the last question is just for anyone like me, who's coming into the space motivated by the problem, but without a lot of foundational knowledge and not exactly sure where their skill set can be best applied and is kind of on a journey to figure that out. What advice do you have for them?
Danny Kennedy: You know, great. Get involved. Thank you. You know, you're going to be part of the most important decade in history. So first off, kudos to you for jumping ship and doing it. Now, pick your hill. Using the military metaphor that I said, I didn't want to, you know, what is your brave and heroic goal, which one of these many mighty missions are you going to take on and deliver on and give yourself that resource of focus, choose it and stick with it.
And you know, lots of hard days of work, lots of weeks of good work and months and quarters. And you know, as, as Evan Williams jokes, you know, 10 years from now, you'll wake up and be an overnight success in, in the story of our times, you know, truly the one that will make it possible that, you know, seven generations from now, we'll look back at this first half of the 21st century and say, thank God they did that.
They were there thinking about us and made a transition from a, a literally planet destroying business as usual plan to one, which was more abundant had opportunity for all, as well as the goods that we expect, like electricity and mobility.
Jason Jacobs: And Danny, is there anything I didn't ask you that I should have, or any parting words for listeners?
Danny Kennedy: I guess I should encourage listeners to get online at newenergynexus.com and get involved. We have a great Slack community, actually a New Energy Nexus network Slack that you can find on our resource page or the website you can donate if you want to go to a nonprofit, you know, and, and just be engaged in the business of startups to drive solutions. We need hundreds of thousands in years to come. And I know your listenership, a technology enabled well heeled folk who know how to start up startups. So get going in the, in the space that makes history and abundance for everyone.
Jason Jacobs: Awesome. Well, this was great. Thank you so much for all of your work in the space and thank you for making the time to share some of it with all of us as well.
Danny Kennedy: Thank you.
Hey everyone, Jason here. Thanks again for joining me on my climate journey. If you'd like to learn more about the journey, you can visit us at my climate journey dot C O note that is dot C O not dot com. Someday. we'll get the.com, but right now dot CO. You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests.
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