Startup Series: TeraWatt Infrastructure
Today's guest is Neha Palmer, CEO of TeraWatt Infrastructure.
TeraWatt Infrastructure is building tomorrow's permanent EV charging infrastructure through a robust combination of property assets, financing vehicles, and deep energy expertise. The company designs, operates and owns on-site distributed energy systems that take the cost and complexity out of EV charging infrastructure while providing market protection and upside opportunities through capital backing and ownership.
Neha brings two decades of leadership experience in the energy industry to her role at TeraWatt. Most recently, she led energy strategy for Google's global data centers. As the first hire focused on data center energy, Neha built out and led the team developing electric infrastructure and electricity procurement for the global fleet, covering dozens of sites over four continents. Before Google, Neha held leadership roles at Pacific Gas & Electric and worked as an investment banker at Goldman Sachs. She holds an MBA in Finance from the Kellogg School of Management at Northwestern University and a BS in Civil Engineering from California Polytechnic State University-San Luis Obispo.
In this episode, Neha shares what led her to focus on energy, her role as CEO at TeraWatt, and the startup's business model and customer base. We also compare the progress between transportation fleets and passenger vehicles, how Neha thinks about private v public EV charging infrastructure, and the way government can accelerate the EV revolution. This is a must-listen episode for those interested in understanding more about the future of electrifying transportation.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded January 10th, 2022
In Today's episode, we cover:
Overview of TeraWatt Infrastructure
What drew Neha's into energy and a review of her professional career thus far
Transportation fleets' as a massive source of emissions, the existing landscape, and the path of electrification of fleets
The progress EV fleets have made in comparison to passenger vehicles
Short-, medium-, and long-haul fleets and why each is unique
TeraWatt's origin story and the founders' journey
How Neha thinks about public v private regarding EV and charging infrastructure
The barriers of private and closed fleet charging systems and how it affects fleet infrastructure
What TeraWatt offers and the business model
The customer base and what makes a good profile for a TeraWatt customer
Aside from TeraWatt, what the existing options are for customers
How TeraWatt provides consistent and reliable charging stations
TeraWatt's funding to date and the company's investors
The future of TeraWatt
Ways the government can accelerate EV fleet infrastructure
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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 Neha Palmer, CEO of TeraWatt Infrastructure. TeraWatt Infrastructure was established in the absence of anything like it to provide solutions for the large scale electric vehicle charging infrastructure required to meet the rapid electrification of medium and heavy duty transport and fleets. The company serves as a crucial intermediary between customers, electric vehicle charging service providers, electricity suppliers, grid operators, and capital markets for organizations of all types looking to electrify their fleets.
We have a great discussion in this episode about Neha's journey from the world of data center infrastructure to the world of EV infrastructure. We talk about the state of EV adoption and specifically for commercial fleets. We talk about the role that infrastructure plays and where it is today versus where it needs to be. We talk about some of the bottlenecks and barriers that are holding back the adoption that is so sorely needed. And of course, we talk about TeraWatt Infrastructure's unique approach. The origin stories of the company, how they're funded. We talk about the different vehicles where they've got a, a real estate and land vehicle That's more like a fund and they've got a separate vehicle that's more like a, a holding company with equity financing. We talk about their traction and progress to date, their long vision, what's coming next. And of course, where you and I can help if we're inspired by what they're doing, which I am. So Neha, welcome to the show.
Neha Palmer: Thank you.
Jason Jacobs: Wow. I am excited for this discussion and gosh, in prepping for it, you have such an interesting background. I mean, who goes from Goldman Sachs to PG&E to Google to now doing an EV infrastructure startup? I mean, it, it's impressive and pedigree, but it, it's got some hops in there that it would be really fun to dig into and learn more about.
Neha Palmer: Sure. Sounds good.
Jason Jacobs: Well, typically on these shows, we just start from the top with what you're doing now. So what is TeraWatt Infrastructure?
Neha Palmer: Yeah, TeraWatt is a company that's been purpose built to develop large scale EV charging infrastructure focused on fleets. When you look at the need of fleets, that's pretty unique fleets of EVs, you oftentimes have many vehicles charging at once. You often have larger scale vehicles, so medium heavy duty vehicles, and that requires a level of infrastructure that really hasn't been built yet. Many of these vehicle classes are just rolling out and getting production started right now, but we know that in the next 12 to 18 months, there's gonna be a significant number of new vehicles hitting the market. So TeraWatt was really developed to provide some of those solutions. Kind of the stack of solution as we see it is, you need a site, you need a large amount of grid interconnect to bring that power to the site. You need onsite infrastructure like the chargers, but also things like behind the meter storage, onsite generation, and then you need the services to manage it all. You need charging services, you need energy management and TeraWatt really is here to provide that full stack of services for fleets wanting to electrify.
Jason Jacobs: And maybe talk a little bit about your journey that led you to where you are today. And, and specifically after both, how you made the decision professionally to work in the area of, of energy, but also personally, what it is that you to those worlds intersecting?
Neha Palmer: Yeah. It's a little bit of kiss me and it's, I find it interesting that you say that I hopped around because I feel like there's actually a pretty strong thread throughout my career, which really is electricity and energy. So, you know, I started off as engineer actually on the hydrocarbon side, designing gas pipelines, was my first job out of college. Did that for a bit actually then went to the financial side, started trading gas and decided that I really wanted to get more into the finance background that I didn't get as an engineer. Went back, got my MBA, and that's when I landed at Goldman Sachs and sounds like being an investment banker has nothing to do with working at a utility and designing pipelines. But while I was at Goldman Sachs, my clients were all electric utilities. So there is that thread of, you know, this utility electric company, convergence that I've had in my career.
So I did that for a bit, was really kind of a wild ride through the financial crisis. And, you know, I started working a little bit during that time with a lot of utilities that were thinking about how they were gonna clean up their stack. You know, they had a lot of different coal plants that they were looking at, either retiring or putting in new infrastructure and they were working with us to help them think about what's the best way to get the lowest cost of power to their customers. But also thinking about things like the time bill was out. People were thinking about how to deal with the things that might come out of that bill. So really got my first taste of kind of clean tech and clean energy, really focused on wind at the time. I decided to leave Goldman Sachs and come back to the West Coast where I'm from and ended up back at PG&E, where I was before business school.
And what attracted me at role was it allowed me to spend more time on renewable energy. I was negotiating a lot of the large scale PPAs that the utility had to do to meet its renewable portfolio standard goals that the state had set. So it was a really fun time where I got to see a lot of different technologies, everything from power towers, to solar tubes, all the way to just traditional things like wind and solar panels. And so, spent some time looking at all those technologies and negotiating really large scale, renewable energy contracts, 500 megawatt solar farms, that sort of thing. Did that for a bit and then moved to the other side behind the meter and learned a lot about companies like SolarCity, Sunrun at the time that were starting to do a lot of the behind the meter solar work.
Did that for a little bit, and then Google came knocking and decided to make the leap. And, you know, everyone thinks about Google as a tech company and they certainly are, and that's the focus of their business, but the backbone of all that technology is data centers. And so data centers, a lot of people don't realize, use a huge amount of power. And so I was one of the first hires to help figure out how to clean up that large amount of power that they were consuming. So kind of leaning on the work that I had done at PG&E and the experience I had with all those different renewable energy technologies, helping Google match all of its energy consumption with 100% renewable energy. And so really built a team from scratch there in terms of being able to buy clean energy, manage a large portfolio of clean power, everything from having a 24 hour desk that could schedule power from wind farms onto the grid, all the way to all of the risk management.
Once you start to have a really large portfolio, it starts to cost a lot of money, so did that. Really, I think what was so interesting about that time was it was really a transition for a lot of corporations. I think a lot of companies like Google were leading the way. They were saying, you know, we are large energy users, but we don't have to do it the way we always have by just taking what content is on the grid. And so we really started pushing and using our name essentially to work with utilities and our suppliers to provide us renewable energy, wherever we could get it. And that was a really fun transition to be part of. You know, Lily kind of started maybe with a tech cohort, but it really translated to all of kinds of companies across, you know, the economic spectrum. Everything from car companies like GM and, you know, even Procter & Gamble had gotten into the game and, you know, Candy Bars, Mars, a lot of different companies really kind of made that transition, so it was really fun to be a part of that.
And it was really exciting because you started seeing that there was significant uptake of this renewable energy from utility suppliers and you started seeing that amount of clean energy, the percentage of their, their total consumption, um, really kind of going up in terms of the clean content. So I was there for nine years. I did that for quite a while and saw the team grow quite a bit. And you know, we achieved the 100% renewable energy goal that we had set out to achieve. And I started thinking about, you know, what is the next big slug of emissions? And just to be clear, we're not there yet on the grid. Certainly there is room for more additional clean energy, but you can see that there is a roadmap there. There's lots of debate about, can you get to 100% can to stop at 80%, but you can see that there is a roadmap with the technology we have available today to get there to a very large percentage of our grid being clean.
So I started thinking about the next slug of emissions that we really wanted to hit if we were thinking about reducing, you know, carbon in this world and very quickly, I mean, immediately it comes to transportation. In the us today, it's about a third of our emission, depends on where you are in the US, but in California, it's definitely a significant component of our emissions as a state where I'm sitting here. And I realized that there were things that I had learned in my journey in terms of helping corporations clean up their power supply that could be applied to this world. So I met the founders of TeraWatt about a year ago and we started talking and, talking about this concept of large scale EV charging infrastructure. And it is interesting if you start to think about a large scale charging site, it starts to look a lot like a data center.
As I mentioned, you need a site, you need a large interconnect to the grid, you need onsite infrastructure. And the process of developing it is not that different from developing a data center. And when I was at Google, since I was on the data center team, I actually spent a lot of time working through that development process, working with utilities to get those interconnects. Before that, working with the team internally to find those sites. And so we started talking about the possibility of me coming on to take the helm here at TeraWatt. And it just, all of a sudden just made so much sense to me that it was a really great continuation of the scales I had developed over time that could be applied to this whole new area, which is gonna be so in demand here again, as these vehicles start coming off the lines in the next year or so.
Jason Jacobs: And before we get too far down the path of what TeraWatt does, can you talk a bit about, I mean, you, you mentioned that, that transportation is a huge source of emissions, how much of that comes from fleets and what does that landscape look like today in terms of the path for those fleets to electrify?
Neha Palmer: So I should know the exact step, but I know the exact step in terms of fleets. I think one thing that we're learning is what is a fleet, right? Many vehicles operating fleets, whether it's, if you think about companies like Uber and Lyft, is that a fleet? Those are individual passenger vehicles, but they're obviously used in a somewhat fleet configuration. So it's definitely a significant component of all transportation. I think the other thing to note is it's often sometimes the most polluting, right? You have, you know, very large scale, medium duty, heavy duty vehicles that are basically transporting goods all across the US. So the amount of emissions you can kind of lower if you're gonna electrify that segment is pretty big. You know, I think for fleets, the opportunity is really significant over the next couple of years. What we see right now is that the total cost of operation for electric vehicles and the medium and heavy duty class is already positive if you are going to electrify a vehicle.
There may be a slightly larger upfront cost for that vehicle, but the maintenance and wear and tear on the vehicle tends to be a lot less with a EV compared to a traditional ICE vehicle. Very true for medium and heavy duty class vehicles. And if you're running a business and have a fleet of vehicles and think about that total cost over time, certainly there's gonna be economic driver for that transition to happen. And I think that's what we also kind of going backwards a little bit in my journey. That's what really allowed us to move towards 100% renewable goal at Google. And many companies were seeing that the cost of renewable energy actually was lower than traditional electricity. And you could lock in these long term contracts that would kind of keep your flat over time.
That's a similar kind of economic proposition that we're seeing here with fleets at EV fleets, that as you look over the life cycle of that vehicle, you're gonna see a better total cost for your business. So I think that's gonna be an interesting driver for EV fleets in particular. Other things that we're hearing anecdotally, you talk to of these companies where they're testing out these vehicles piloting them and they're just a better product. I think anyone who has spent time in an EV just knows, you know, they're generally newer vehicles, so they have a lot of bells and whistles, but just even the driving experience can be pretty spectacular with the EV that certainly translates to, uh, class eight semi-trucks. For example, we hear that the driver experience is significantly superior to what they see with ICE vehicles. So I think between the cost and the experience, you're gonna see a lot of fleets transitioning to EVs over time here.
Jason Jacobs: And where are fleets on the adoption curve for these medium to heavy EVs relative to passenger vehicles?
Neha Palmer: That's a great question. And I'm picturing a graph I have, you know, in our, what is TeraWatt deck here. And we're certainly earlier on that journey, but we think that that trajectory is gonna be significantly steeper. I think we're just about 2.5% in the US when it can to passenger vehicles in terms of EV penetration. Certainly increasing significantly as more vehicles come to market, but because of those drivers and the commercial focus of fleets in terms of the economic benefits, and then the driver benefits of being in EVs, we think that that trajectory is gonna be significantly steeper. We've had EVs on the passenger side for many years, obviously, but the vehicles are just coming to market now in the medium and heavy duty class. You know, I think there was some big announcements, the Ford F-150 is the most common fleet vehicle in the US, and that's gonna be a EV, offered in the EV format now.
So obviously, I think that that trajectory's gonna be significantly steeper than what we've seen in the passenger vehicle class. I also think that similar to renewable energy where the corporates have had a big influence in what the utilities are putting out there and putting into their, you know, supply stacks, there's a huge corporate commitment that's also coming through their supply chains and that translates into their fleets and how their goods get to market. And so the corporate commitments that are there are also gonna help accelerate that adoption curve past what we saw with the passenger vehicles.
Jason Jacobs: I've heard that this, this class of, of fleets being broken down by short haul, medium haul, long haul. How important is that when looking at that total cost of ownership model and viability for that matter?
Neha Palmer: Yeah, certainly every fleet has its own characteristics, which I'm learning. I learned very quickly over this last year, dipping my toe into, into these waters. You know, I think there are some applications that will obviously lend itself more quickly to that EV transition. It really depends on, you know, as you said, what the usage is for a vehicle. An average fleet gets replaced about 5% to 10% of a fleet gets replaced every year. And so, as you think about doing that analysis, I think, you know, as more vehicles come to market different use cases and different types of vehicles with different battery sizes, you'll start to see a better matching of what those needs are. And you'll see that the total cost of operation can be kind of matched to whatever that usage is.
Jason Jacobs: Uh-huh [affirmative]. And I, I know that you weren't around from day zero at TeraWatt, but to the extent that, that you're aware, it'd be great to hear a little bit about the TeraWatt origin story when it came about, why it came about and, and how it came about?
Neha Palmer: Yeah. So our founders, Ben Birnbaum and I think Goldsmith have been friends for a really long time since they were back in college. And they both come from different areas. Ethan was an automotive consultant and was very early employee at Rivian. Ben had spent a lot of time in the transportation industry, really focused on transit for cities. And so thinking about large scale buses and other types of transit that occur in cities, and they both kind of had this vision of this electrification happening and realized pretty quickly that the charging just wasn't there, that there certainly were gonna be locations that were gonna be required for charging and that there was gonna be all the other things that I mentioned, the power requirements. And so they started kind of noodling together and they met up with John Rappaport, another one of the founders who was a long time investor, and they started a company that basically allowed us to go out and start acquiring sites that are located in locations where we know that large scale charging will be required.
So along highway corridors, places where large vehicles congregate, industrial hubs, places like that. And so they were able to start to build out this portfolio of properties. And at the time, it wasn't really clear when the vehicles were coming. This is now back in 2018, when-
Jason Jacobs: It sounds like domain squatting back in the, in the mid nineties or something [laughs].
Neha Palmer: Yeah. Maybe, maybe, but with a lot more [inaudible 00:18:56].
Jason Jacobs: The three letter domains, but for real estate for fleet charging infrastructure [laughing].
Neha Palmer: Yeah, yeah, exactly. So they knew that this need was coming, but it wasn't really clear at the time when these vehicles were coming to market. So they kind of kept the course, uh, and continued to build out the portfolio over time. And about this time last year, or maybe a little bit earlier now, they realized, okay, it's here, we've had lots of announcements from big manufacturers about different vehicle classes, you know, even the class eight semis coming out now, and that it seemed like the adoption for these vehicles, the will was there to you from the corporate side, that a lot of companies were making commitments to start to electrify their fleets. And so they decided it was time to finally put in place the operational team to build out this business. And so that's when I met up with them, but it really was this vision well, before there was a clear light of sight about when the electrification would happen, that they had kind of started slowly figuring out what the base of the business needed to be and building that out over time.
Jason Jacobs: So if I'm, if I'm hearing right, the thought was that as there's more vehicles, there'll need to be more charging infrastructure, the infrastructure is insufficient, so let's go out and secure the land and sites. And as we do that in parallel, we'll start getting the gears in motion to figure out how to get charging infrastructure on these sites that we will own and manage and service ongoing.
Neha Palmer: Correct. And again, it's really easy right now, sitting here with seeing, you know, semi-trucks rolling off lines and all these announcements to say, we know exactly what we need, but they did realize that there were a couple of basic components, right? The site, there has to be the ability to interconnect to the grid. And then obviously even some of the technology we're talking about on site, some of these chargers haven't been built yet, they're just developing what they call the one megawatt charging standard, which is what you'll probably need for some of these class eight semi vehicles. Some of the chargers of the size that you would want to charge a semi-truck quickly haven't even been designed and built yet, or they're kind of in the R&D phase. And so certainly it's, you know, the first few kind of components that you need for charging, but yeah, I think they were really thinking very long term about what the long term use of the industry would be.
Jason Jacobs: And can you talk a little bit, and, and maybe it'd be interesting to talk about this, both for fleets, but also just EV charging infrastructure in general, about how you think about public versus private and how you think about open versus proprietary, not necessarily from a TeraWatt standpoint, but just like what should be and what is in terms of EV infrastructure overall?
Neha Palmer: Yeah, I think stepping back a bit, I just... What gets me super excited about this industry and one of the reasons why I made the transition over is just the scale. And I will say, you know, one thing that I learned at Google was really how to think at scale, it's a very large company. We had, you know, very large data centers and very large energy needs. And I was forced to learn how to think, you know, 10X all the time. And I really think what we need to be thinking about for charging for all of the vehicles that are coming to market is not even 10X, it's 1,000X in terms of what we have in infrastructure in the ground today, and what we're gonna need, you know, 24, 36 months from now, You know, public charging has been truly focused on the passenger vehicle market, right? And it, you know, it really is, you know, how do I get from point A to point B and keep my car charged, it hasn't been thinking about how do we have everyone who is running a fleet and that is their core business, they need to deliver things on time. They need to make sure their supply chains remain, you know, as they are, they need to... Time is money when it comes to trucking, they need to keep their business running quickly. You know, they can't have, uh, vehicles sitting there for hours and hours.
How do you address all of those needs of fleets, which are very different than passenger vehicles that are, you know, trying to get from San Francisco to lake Tahoe? How do you address all that? And so I think the scale is just mind boggling when you think about electrification of the entire vast sector or the economy that transport that is, that is fleets. So public charging, I think is a very necessary thing. Especially if you have more and more vehicles that are gonna be electrified, it certainly is something that will continue to be built out at significant scale as well. But when you look at fleets and their specific needs, and the fact that that is their core business. You know, they don't have a garage they go to every night, they go to wherever their business is, and that is their place where they need to charge. So that also happens to be in a fleet configuration. So many vehicles charging at once. If that's, you know, the cycle that they run on, you know, out during the day and, and at night.
So I certainly think, you know, public charging will continue to grow, but this kind of focus on private charging where vehicles can come in, know that they can charge in a certain period of time, have available chargers, have the size of charger they need. A lot of public charging is still focused on slow charging, right? To top off, to make sure you can get, you know, wherever you need to be when you... Most of charging still happens at home, right? So I think that there is gonna be a parallel need for these more focused charging stations that will be focused for fleets.
Jason Jacobs: And where are we in terms of standards? And I ask because, so I'm, I'm a relatively newish Tesla owner still getting a handle on the whole EV world, but I've noticed for example, that the supercharge infrastructure, you can just pull up and plug in and you don't have to do anything it's super easy. You don't have to even enter your payment information or anything, but if you try to use... And I'm blanking on the name, but there's these services that essentially compete with the supercharges, but in a more open way, you need an adapter, you need a credit card. There's more friction like, compatibility seems to be an issue. So where are we, as it relates to compatibility with fleets, and how do you see that playing out as it relates to standards and open versus closed systems?
Neha Palmer: So certainly I think there is because we've been able to learn from what's happened on the passenger side, a lot more collaboration going on at the fleet side, a lot of OEMs, the vehicle manual manufacturers realize that someone is not gonna just have one kind of vehicle. Most fleets have a mix of vehicles. And so there has to be cross compatibility there. And so they're working already on standards that'll help, you know, make that easier. You don't have to have specific bespoke infrastructure for this vehicle type and then something else across the yard for that vehicle type. So certainly there is already more collaboration going on. And, you know, as you think about the cost of the infrastructure, so the cost of a charger in your garage is, you know, you know this, you probably put one in it's, it's not that, that much, but when you look at the cost of a charger for a semi-truck, it's in the hundreds of thousands of dollars.
And so the requirement for compatibility is significant when you start thinking about that. And I think that the corporations will demand it and they are. And so a lot of the OEMs are realizing that there needs to be collaboration and coordination to have more standardized ways of charging that will, you know, help [inaudible 00:26:03] frankly, and certainly with corporate customers, they can demand a little bit easier. Again, go back to renewable energy. You know me saying, I want solar for my power here. My house in San Francisco is a little bit different than a company like Google or Amazon or Microsoft saying, you know, we are giant energy users and we want renewable energy for our operations. And so I think that the corporate voice can actually translate even into things like charging standards and we're seeing that happen.
Jason Jacobs: And as we talked so far, I know we've not dug deep yet into the TeraWatt offerings specifically, but I mean, you could be a real estate company, you could be a hardware company, you could be a software company, you could be a services company. So can you do that? Can you talk a bit about the, the offering and the, and the business model?
Neha Palmer: You know, what we see here is that this is really a new asset class. It's gonna be a huge asset class, but if you look at things like data centers or cell towers, you have that stack of, of value that we talked about, the site, the infrastructure. And so what we would like to do is offer that stack of, of value. So the location obviously is very important
Jason Jacobs: And you're, you're owning the land at these sites?
Neha Palmer: Correct.
Jason Jacobs: And how's that financed?
Neha Palmer: So we are right now, obviously we have our initial financing of people who are interested in that kind of large scale, new asset class of infrastructures. So again, I think that maybe it's my background that leads me to say this, but it really is quite similar to data centers. You need that... And data centers are structured like this too. You have that site that's owned, you have infrastructure on top of it. And then you're able to have people come in and use those services on that site.
Jason Jacobs: I'm not a finance person, but are you buying those off bound sheet with equity capital or is it a separate vehicle for each site, like a loan or how are you actually funding the purchases?
Neha Palmer: Think of it as a fund that's focused on the infrastructure assets. So we have a fund that is focused on buying properties, developing these sites, developing the infrastructure. So not dissimilar again to, uh, asset class like data centers, where you have a group that will be developing these assets that are then held in kind of a fund.
Jason Jacobs: And that's for the land. So it's almost like the land is a pulled out and separate from the rest of the TeraWatt corporate value and business model?
Neha Palmer: Yeah. So we have the fund that can own all of the assets. So the land, the infrastructure that sits on the land, remember, you know, if you think about the amount of infrastructure required, I think people think like, oh, it's some charging ports, but there's a lot of investment required. There is the interconnect and getting a large amount of power to a site is actually a time consuming and sometimes expensive proposition. You know, that was what I spent a lot of time at Google doing, is working with utilities to bring that large amount of power to those locations. Very similar to that for charging, you're gonna need to work with utilities to bring that large interconnect to the site. So that's another aspect of what can be owned. Then there's all the infrastructure on site. As I mentioned, the charging infrastructure for large, medium duty, heavy duty vehicle is significantly higher than what you see for passenger vehicles.
So a significant investment to the chargers themselves. And then to optimize on the energy side, you really wanna have other degrees of freedom that you can pull. So having onsite storage can help you meet peak demand at a site. Having onsite generation can maybe help you access lower cost of electric or again, help supplement when you have a, a surge peak demand. So all of those things added together are pretty significant chunk of change and require investment. And so we have a fund that can invest into all of that, you know, everywhere from the land, all the way to the energy infrastructure.
Jason Jacobs: Uh-huh [affirmative]. And are there network effects or economies of scale as you have more sites? Or should I think of each site as a, almost like a, like a franchise where it should be assessed as an independent business?
Neha Palmer: I think there certainly are economies of scale, right? So I've described to you the fund and then you have TeraWatt which really is providing services to that fund. So we are developing those sites. We are developing tools to manage those sites, for example. And so the scaling of developing those tools obviously can apply across that entire portfolio. So certainly we think that, and we know that, I know this from my experience developing data centers. When you start to get... You described your business as a flywheel earlier that flywheel going in terms of development, it certainly can be applied to many sites and that kind of knowledge and ability to develop and have a good cadence on developing sites is certainly something that has a network effect.
Jason Jacobs: So then what is the business model on the TeraWatt side?
Neha Palmer: So we are essentially providing services to the fund. We are managing those sites. We are developing them. We are, you know, finding new sites to continue to build out the portfolio. And then we are able to provide the services once they're built out. You know, again, my background is deeply in energy and we know that managing the energy consumption on site is really key to driving the lowest cost of electricity. That's gonna be a key component for fleets, right? They're gonna be very cost sensitive. So to be able to drive down that cost of energy for the consumer, you're gonna have to actively manage that site. So TeraWatt can provide the services to work with the utility, optimize what infrastructure is on site, work with charging management of, you know, how vehicles are charged to basically optimize the site for the lowest cost of electricity.
So TeraWatt can provide those services. There's a whole host of things that go into that. It's obviously collaboration with the utility companies, the grid operators, understanding the wholesale energy markets and places where that's relevant. And then, you know, all of the underlying management it takes for a site. So all of the tools that you would need to effectively do that.
Jason Jacobs: And so the customers that use this infrastructure to charge, who are they paying?
Neha Palmer: It's a great question. So, you know, they will have a contract with TeraWatt, which is then providing them services, but leveraging the infrastructure that we have in the fund.
Jason Jacobs: Got it. And what is the motivation for the fund to pay for these other services versus just stay discipline to real estate specifically and stay away from the services and maybe even enable outsiders to set up shop and provide those services on the land or at the site without getting into that business yourself. Like, was that a tough decision? Was that an inflection point or a crossroads, or what is the advantage of, of doing all of it?
Neha Palmer: It's all really integrated. And I think that's why we think about, again, this is a stack, right? There certainly could be a model where... And again, I go back to data centers where someone owns a land and someone else owns the building, and, you know, there are different structures that are available out there and we're early days in this business. I think there will be different, you know, modifications on what this business model is over time. But we think that a couple things, the location really is important in understanding what the fleets need. So the location has to be in a place where fleets want to be, right? It's not like I can just go decide, this is a great place, I wanna put a charging station here. There has to be customer demand for that specific location. And given that this is transportation, the specific location is driven by their routes, driven by their needs as a customer.
So if you look at that and then you look at what specific services are needed there, it's integrated pretty deeply into that specific location. And so really understanding the customer means, understanding the location, understanding what specific services they might need, what their fleet looks like at that location, and then providing, you know, the other ansari services that go on top of that once a site's operational. So we really see that the site selection, the charging services that we can offer in the energy management are all quite integrated. You know, even developing the site, as I mentioned, the interconnect, that is a long process that is really important to make that site viable for charging. And so that starts to kind of translate into that relationship with the utility. And so again, it seems like for us, at least the kind of stack of services is so integrated that it's important to have that knowledge across the board.
Jason Jacobs: What comes first? The contract with the customer or the land purchase?
Neha Palmer: So we have our portfolio, I feel really fortunate that we were able to start with this portfolio of assets.
Jason Jacobs: And how big is that?
Neha Palmer: We're in 18 states. So we have a fairly good portfolio to start with, we continue to acquire sites again, where we know that customers wanna be. We have now had almost a year under our belts where we've been talking with customers and understand whether, you know, looking to have charging locations. So there's a little bit of both, I'd say, going on, there's some customers who are specifically asking for a location, but there's other locations where we know that are gonna be demanded for charging and any of the major kind of urban hubs that you can think of, we know that charging will be required at scale.
Jason Jacobs: And what makes a good profile for a customer today? And how many customers do you have to the extent that you can share?
Neha Palmer: Yeah, we're not public on our, our customers right now, but I think a good customer is someone-
Jason Jacobs: Do you have, do you have customers?
Neha Palmer: We do. We can say, okay, here's the ideal customer. And I think it's really early days, a customer who knows exactly what they want is always a great customer. I think what we're finding is that, you know, there's a lot of things going on simultaneously. And I think this is some of the fun of the business actually for me, is there's these vehicles coming, you know, to market. Some customers are learning how to work with electric vehicles for the very first time. And so they're learning about how that impacts their fleet operations, you know, how that impacts how they might plan their roots or how they might need to top off on charging over time and throughout the day. So we're having a really interesting time of working with most customers who are really just understanding how to integrate those EVs and then defining their charging needs.
And so I think the ideal customer is someone who is willing to learn with us. I don't think there's any customer who's out there who has said, I know exactly what I need in terms of charging because, you know, they're, they're learning alongside us. So I think that, you know, a year, two years from now, there'll be customers who have really well defined needs, but a good customer is someone who really is electrifying aggressively and has a plan to convert their fleet and, you know, knows that they will need a specific amount of charging at a specific point in time.
Jason Jacobs: And if TeraWatt didn't exist, what options would, would be available to them? And then how do you position yourselves relative to those options?
Neha Palmer: Yeah. I mean, it's a great question. I think a lot of customers are thinking about, okay, how can I just kind of buy chargers and put them at my existing site, right? That makes the most sense. I think a lot of them are coming up on the friction that happens when you try to bring a large amount of electricity to a site that didn't anticipate having that in the first place. So that can be tough. Oftentimes also the operations might be needed to modify... Be modified a little bit when they have EVs compared to how they fuel ICE vehicles. And so there may not be enough space on their location. So I think what we're seeing is that the alternatives are in pilot phase to bring a couple of chargers on site, as they're testing these vehicles, but the alternatives as they start to scale may not be there. And again, I think that's why there's a significant opportunity here.
You know, they could build their own sites and some of them will, especially the large users, they could think about electrifying their current sites, but as we know, there's friction there. So there aren't a lot of great solutions I'd say out there today, but I know that there's a lot of really smart people alongside us who are thinking about how to provide those solutions.
Jason Jacobs: It sounds like if I'm just a fleet driver and I need charge that I would not be able to use your infrastructure, unless my company had a contract with you. Why not? Are there limitations for example, or reasons why you would need to be under contract or are you just leaving money on the table? Not having it more generally accessible on an a LA cart basis?
Neha Palmer: So I think one thing to understand with fleets is, you know, it's not always just a gas station, right? There's a lot of things happening where fleets convoy, there are, you know, usually employees coming in and out, there are goods sometimes coming in and out, there's all kinds of other operations happening. And so certainly if, you know, you have a fleet that knows that they a certain amount of charging need, they're gonna want certainty. They're gonna wanna know that when they pull up with their vehicles, they will have the access to the chargers and the power required to charge those vehicles. And so in order to give them the certainty, we need to make sure that there is that capability for them at all times, and that they have the ability to... If they need to domicile a vehicle for a little while, keep it there, they have that space to do that. And then they also have, then again, the charging power.
There may be periods of time where maybe depending on the fleet use case that the site might not be quite utilized and there may be opportunity to help open that up to other non-contracted vehicles. But generally speaking, I think again, because fleets do have such specific needs that are tied to their core business, providing those fleet customers a certainty that they need is gonna be paramount for us.
Jason Jacobs: Now is, is, is route planning for fleet optimization part of your value proposition, and if not, do you partner with those that do it, or is it completely separate and distinct?
Neha Palmer: Well, certainly have partners who are expert in that and each individual fleet owner is expert in that for their fleet. The only aspect I think that we think about in partnering with customers on route optimization is, do they need to have charging in specific locations and do we need to provide that for them? But, you know, there are lots of great companies and I will say, no one knows a fleet like that fleet owner, right? They're gonna all have their individual use cases and their individual drivers, and they're gonna optimize. And they're experts in that. And, you know, we want to leverage that expertise to help them from the charging infrastructure perspective, but that's, that's not where we're focused.
Jason Jacobs: Uh-huh [affirmative]. Got it. And, and is it one to one in terms of customer and site, or is that site shared by a portfolio of customers?
Neha Palmer: So there certainly is the ability to share a site. And again, you talked about economies of scale earlier. You think about what it takes to develop a site. You know, there's lots of different size fleets and having access to more locations that where you might have a smaller portion of a site can be very attractive to some fleets. So we certainly see a lot of benefit in providing the capability to have multiple fleets in one location. That said, there may be some fleets that are so large that they want their own dedicated facility. So I think that'll play out over time, but I think that having the shared sites will be something that helps us optimize. And again, all that results in is a lower cost of charging for most customers.
Jason Jacobs: And it sounds like there's two separate entities. There's the, there's the TeraWatt entity that's I presume funded with Equity Capital. And then there's the fund that has limited partners investing specifically in that as a separate asset class.
Neha Palmer: Correct.
Jason Jacobs: And the, the fund, how big is that, if you can say, and what types of investors? Are they LPs? Are they individuals? Are they institutions?
Neha Palmer: Yeah, I don't think we've made public how big the fund is about $100 million has been invested into the platform across both entities and our backers are Keyframe Capital and Cyber Risk Capital.
Jason Jacobs: Got you. They're funding both the fund as well as the equity capital for the parent company?
Neha Palmer: Correct.
Jason Jacobs: Got it. And directionally, if you look out five years, 10 years, what percentage of the upside from TeraWatt comes from the fund versus the equity?
Neha Palmer: It's a great question. [laughs]. I think that there is a significant opportunity in both areas. You know, again, this is a new asset class. If you look at the asset classes that I'm comparing to data centers, cell towers, those have all had significantly great runs over the last decade, last couple of decades. So I think, you know, it depends what kind of investor you are, right? But if a long term investor that likes infrastructure and infrastructure like returns, you know, that asset class is great for you. If you're looking for someone who is growing a platform that can be leveraged across many multiple sites that investing into an operating company could be more interesting from that perspective as well. So that's really something that we see as an advantage with our structure, that we are able to leverage different pools of capital for different types of assets.
I think what you see with a lot of different business models today that it requires... And charging falls into this category, that you have a lot of infrastructure being built with equity dollars and growth equity dollars. And that's somewhat of a mismatch over time that you have investors who are expect equity like returns, and, you know, it's really infrastructure that they're investing into, which has a slightly different profile, a different risk profile as well. So we really see our structure as kind of a advantage to our ability to provide great charging services to our customers.
Jason Jacobs: And what kind of investor is keyframe? I left that out of my prep, and are there comparables in terms of other adjacent categories that are not EV infrastructure that are maybe a similar type of asset class, but apply to a different market?
Neha Palmer: Yeah. So Keyframe is a private equity firm that was started by John Rappaport, Ben and, and Ethan. And so they are, you know, growth equity investors. Cyrus has been around for a bit longer and has a little bit a wider mandate. You know, I think I keep talking about data centers again, and it's not just because I come from the data center industry, but it really is a very similar asset class. In terms of the types of infrastructure that you... The development cycle, the development process and the types of infrastructure that are required there.
Jason Jacobs: Great. And a more macro question, but TeraWatt aside, if you want... If we want EV infrastructure and fleets to electrify faster, what are the biggest bottlenecks today and what are some of the changes that we could put in place or that our government could put in place or that anyone could put in place that would help accelerate adoption the most?
Neha Palmer: There's so much there. [laughs]. There's lots of things we can do. I think, you know, obviously there's a infrastructure bill being held in the balance right now. There's a lot of great things in there that I think could really help in terms of fleet electrification. What's so interesting about this industry is it really is a confluence of transportation and electricity. And so one thing that's already been put in place, I think that's super exciting is a joint office between the DOE and the DOT. And so I think there's a large recognition now that again, this is the confluence of two different industries that really need to work together. So if you think about where do you put these things, having corridors along highways, where you can put charging infrastructure and bring large scale electricity to that location, that's really important, but requires obviously collaboration between those two entities.
So I think the government can help for sure. I think that one of the longest lead times that we have in our business and one of the bottlenecks we have is getting power to a location. You can take two to three years if you're looking at really large amounts of power. And so having ways to interconnect quicker, I think are gonna be really important. Some of that is being reformed right now, as you see this push for more distributed resources, you can aggregate resources across the grid and then, you know, bid them into markets that are the wholesale level. I think reforms that go further in that area will be really helpful too, to allow us to interconnect quicker. If we have vehicles coming off the line rapidly in 18 months and takes 24 months to build a charging site, based on that amount of interconnection time, we're gonna be really far behind pretty quickly.
So I, I think that's another area. And then investment, it will take dollars. I think, you know, this is an entirely new system of infrastructure that has to be put in place. We think about it sometimes as akin to the highway system. That was a huge infrastructure project that was undertaken across the entire US. That was pretty significant investment at the time, but has allowed us to have the system of transport that we have in the US today. And having this network of charging, whether it's public or private is gonna be critical to having electrified transport system
Jason Jacobs: And Neha, for anyone that's listening, that's inspired by what you're doing. Who do you wanna hear from, and where do you need help?
Neha Palmer: I would love to hear from folks who are, you know, in the industry who are running fleets, those are some of the best conversations I've had, but understanding what their bottlenecks are in terms of getting their fleets electrified, what they're worried about and how, whether it's TeraWatt or other parts of the industry can help them. If there's something that's, you know, pushing a decision out five years, how do we bring that in? So really, I think there's a huge voice. We talk about people who have the energy background or the infrastructure, but the customer, I think, is such an important factor here that we don't really think about as much. And when it comes to electrification, the number of customers is so wide and varied. Understanding that fabric, I think is gonna be really important for us to understand where to go here.
Jason Jacobs: Great. Anything I didn't ask that I should have, or any parting words for listeners?
Neha Palmer: No, I just, you know, it's the beginning of the year, which is always a time of reflection of what we're gonna do in this next year. And I just think there's so much opportunity and just super excited for this industry. There's lots of solutions being developed, and I hope that we can all work together and really kind of push forward and make sure... You know, it's my personal goal to make sure that the charging is never the bottleneck for this transition. And as I think about, you know, why I do this, why I took this job, I wanna make sure that that's the case. And so I just invite others who are out there and interested in that, reach out and figure out how we can collaborate.
Jason Jacobs: Great. Well, Neha, thanks so much for making the time to come on the show and wishing you and the whole TeraWatt Infrastructure team every success.
Neha Palmer: Thanks so much for speaking to me today.
Jason Jacobs: 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 myclimatejourney.co, note that is dot co, not dot com. Someday we'll get to the dot com, but right now dot co. You can also find me on Twitter at JJacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
