Solving Clean Energy Complexity with Verse
Seyed Madaeni is the co-founder and CEO of Verse. Verse develops software that helps organizations understand, plan, and manage clean energy. Their platform simplifies the complex clean energy procurement process, enabling companies to meet their emissions goals in the most economical way possible.
MCJ is proud to be a repeat investor in Verse through our venture capital funds, including participation in their recent Series A round alongside GV and Coatue. To us, Verse embodies the inevitable shift where large companies must integrate clean energy management as a core business capability.
Hyperscalers have led this trend, driven by their insatiable need for electricity to power data centers—a demand that’s only growing with AI. We believe this focus on clean energy will expand across major corporations, much like the widespread adoption of IT and cloud technologies over the past two decades. But enough from us—let’s hear directly from Seyed about what he’s building with Verse.
Episode recorded on Oct 17, 2024 (Published on Jan 2, 2025)
In this episode, we cover:
[1:43] Overview of Verse’s mission and focus
[2:05] How Seyed founded Verse
[4:54] Lessons from Seyed’s time at Fluence
[6:02] Insights into the buyer side of the market
[10:03] Rising demand on the U.S. energy grid
[13:02] Breakdown of Verse’s customer base
[17:44] Challenges corporate buyers face with energy and emissions
[19:14] Overview of virtual PPAs and additionality
[25:14] How Verse helps buyers make energy decisions
[27:28] Importance of data in pricing and forecasting
[30:40] 24/7 carbon-free energy vs. carbon matching
[35:00] The role of batteries in increasing emissions
[38:56] How Verse is expanding its offerings
[41:15] Understanding Verse’s approach
[44:00] Verse’s funding history and goals
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Cody Simms (00:00):
Today on Inevitable, our guest is Seyed Madaeni, co-founder and CEO at Verse. Verse makes software that enables organizations to understand, plan and manage clean energy. Their platform helps companies navigate the complex clean energy procurement process, so that they can meet their emissions goals while at the same time doing so in the most economical way possible. MCJ is proud to be a multiple-time investor in Verse via our venture capital funds, including participation in Verse's most recent Series A, alongside GV and COTU. In my mind, Verse represents the inevitable trend of large companies needing to add clean energy management as a significant capability to their business operations.
(00:50):
Hyperscalers have been early to this trend with an insatiable desire for electricity to power data centers, which is only increasing with AI, but we believe that most major corporations will continue to increase their attention here, much as they did with IT and cloud technologies over the last two decades. But enough for me. Let's hear more from Seyed about what he's building with Verse. From MCJ, I'm Cody Simms and this is Inevitable.
(01:19):
Climate change is inevitable. It's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Seyed, welcome to the show.
Seyed Madaeni (01:40):
Thanks for having me, Cody.
Cody Simms (01:42):
Seyed, what is Verse?
Seyed Madaeni (01:43):
Verse is a startup, to begin with, that me and my co-founder, Matt Penfold, started about two years ago. And really what we're about is helping corporate plan, understand, manage, and operationalize clean energy, which has a lot of important implications both financially and then how they understand decarbonization.
Cody Simms (02:05):
What were the insights that led you to start in the first place? You and Matt, I believe we're working together at your last company, so maybe share a little bit about that pathway.
Seyed Madaeni (02:16):
Yeah. It's a long story, but I'll make it short. So, my background is in energy and particularly software around energy. My academic training was around power systems engineering and electricity market design, and power system operations, and all of those fancy things. But in a nutshell, it was really focused on power markets. So, when I started my career early on here in San Francisco, California, just two blocks away of Pacific Gas and Electric, I was part of this department called Short-term Electric Supply. And our job and mandate was to monetize PG&E's portfolio into California ISO markets. So, you can imagine a lot of those interactions that happened with the market needed to be automated. So, I just grew this passion for building software for market operations on power assets. Long story short, I started scaling that product in different chapters of my career.
(03:06):
I was part of the Tesla team that did it for energy storage for the first time, then went into AMS, which was focusing on, behind the meter energy storage development in what is called it's virtual power plants. I brought this vision of, hey, let's do something different. And that is to scale a software that helps with power market trading for renewables, particular storage. And that's where I met Matt at AMS. And when I became the CEO, we decided to scale the product and scale the company, and then ultimately sold it to Fluence. And Matt and I worked together at Fluence. I was the chief digital officer there. And the product that we sold and grew was essentially helping to increase the economic viability of renewables from the perspective of sellers of power.
(03:51):
But Matt and I realized there's a bigger portion of the market and those are buyers of energy. So, how do we help them do two main things? One is to stabilize their electricity costs and then help them with decarbonization. And that was a passion that we had and we realized it has a bigger term. And really the tools and processes that are out there are either non-existent or pretty bespoke. So, we started Verse with a passion of helping organizations understand the electricity costs, manage their electricity costs and help them with decarbonization, given our background, which is in software, we bring a software angle to this and that is worked well for us because that's our expertise. And essentially think about software as an enabler for a lot of these great things. But that's how we got into really starting Verse.
Cody Simms (04:42):
Explain a little bit more about Fluence and the role that it plays today in sort of energy buyers and sellers and its role in the energy storage systems, which is where I understand it to be a large player.
Seyed Madaeni (04:54):
Fluence, essentially, is one of the world's largest energy storage providers, pure play, amazing product, and I'm very honored to be part of that team. But essentially, Fluence had and still has a couple of lines of products which are hardcore storage products, services, and digital offerings. So, on the digital offerings, my purview was on building a platform for algorithmically bidding energy assets into markets. And we sold that separately, whether it's for wind and solar and storage, but the buyers, the personas of that product was essentially people who had to interface with electricity markets, sellers of power. If I want to put energy storage in the ground, the returns of that asset is really highly dependent on how can you operate and trade that asset in the market. So, a lot of machine learning, AI and software went into that thing and the team has done a phenomenal job of growing this. But at Verse, what we do is a bit different, and that is, we're essentially helping the buyer side of the equation now and helping them understand what their electricity cost means and how do you stabilize it and decarbonize it.
Cody Simms (06:02):
You've had this sort of aha or insight about the buyer side of the market. Explain a bit more about what the buyer side of the market does today to find power and also how you see that changing.
Seyed Madaeni (06:17):
Yeah. It's a fascinating story because any other economic problem, you have supply and demand. And don't get me wrong, supply has gone through major revolutions in the past 20 years, I'd say. In the early 2000s we had the introduction of electricity markets, which really shifted how the power grid operates. We have ISOs and electricity markets, and then that got followed on by smart grids and digitalizing the grid, and making sure we have advanced metering and infrastructure. And then we started having the renewables boom, which, up until now in 2024, the world has added 4,500 gigawatts of renewable power. And that is very hard to manage on the grid side. And then starting early 2020s, we had the role of energy storage, which is growing phenomenally. But at the same time, on the buyer side of equation, we've also seen some shocks and that has created some interesting problems that the buyers need to solve. And ironically, these buyers are large corporations that their focus is on different products and services. They're not necessarily experts in the power grids.
(07:25):
So, what are these shocks that have happened? One is taking advantage of clean energy. So, starting early 2010s, we see the PPA markets for corporate off takes have grown significantly. To date, big tech has more than 95 gigawatts of contracted clean energy in the form of wind, solar and some storage, and even nuclear and geothermal. So, what we're seeing from the buyer side, what is their main motivation to tap into this is two things. One is, they're very cognizant about their carbon footprint and what does that mean for compliance and scope two emissions and etc. The other one that we're seeing is, because of all these changes that I described that are happening on the grid, electricity market prices are all over the place. So, in order to make sure you can stabilize your optics, you need to think outside the box. And that is investments in clean energy, investments in risk products, and really thinking outside the box to stabilize your costs.
(08:26):
But that is a very complicated process and our mission at Verse is to make it easy as possible for companies to do that. And that's why we introduced our Aria software that helps them navigate this complex web of electricity infrastructure and electricity expertise, and transactions, and operations into one single platform.
Cody Simms (08:50):
So, I heard you say two major changing factors in the world in the last 15, 20 years, and obviously we're way oversimplifying this for the sake of just trying to get our head around the broader space. One is a new wave of buyers coming online who are trying to understand the emissions of the electricity that they buy. They don't just want to plug into the grid and get what the grid gives them. They want to actually have more control over the emissions of their operations, which is a shift because 30 years ago, large computing companies weren't large energy consumers, necessarily. They were just manufacturing companies. The idea of data centers and software is a relatively new phenomenon. And in the past, if you were a large energy consumer, you were likely using on-prem fossil fuels in some way for some kind of industrial process.
(09:40):
And the second thing you mentioned, I heard you say, was because of all the renewables coming on the grid, prices variable, so any company that is using large amounts of electricity just to run the OpEx of their business needs to have better control over the price they're paying for electricity. Those two factors, am I understanding correctly how you're articulating it?
Seyed Madaeni (10:02):
Spot on.
Cody Simms (10:03):
It feels like there's a third factor too, which I keep hearing about, which is, in addition to that, there's increased demand forecasted at least in the US on the grid for the first time in multiple decades. So, not only do you have all of these challenges around what are the emissions profile of the energy I am getting look like and what's the cost variable of the electricity I'm getting look like, but there's more people wanting to jump into that same pool of available electrons and available projects.
Seyed Madaeni (10:31):
Sometimes we use this analogy that electricity is gold these days, and it's like how oil used to be 67 years ago. Never in my career I have seen load growth projections here for the US jump almost by 100% in one year. That is the forecast. So, the next five-year forecast jumped from 2.6% load growth to 4.7%. That is a phenomenal increase. And what's driving that obviously is electrification of things. We had the EV boom, now we have the AI boom, which is really the data center load growth. And right now, absolutely, one of the most important facets of this problem is to secure power to begin with, which has its own set of issues, which really requires an understanding of how assets and load gets connected to the grid. If you look at it from an interconnection perspective, I think there's over 35,000 applications for clean energy in the queue, as we speak, which again is a phenomenal number.
(11:40):
And that is broken down between ISOs and jurisdictions that are more regulated. I think like in the ISO queue alone, we have about 3,000 gigawatts of renewables in line to get connected to the grid, but at the same time, the amount of load that's getting connected to the grid is phenomenal as well. So, securing power is also a very hard and interesting problem.
Cody Simms (12:02):
It strikes me based on everything you're describing, I think back to the use case of McDonald's and people always say, at the end of the day, McDonald's is actually a real estate company that sells food. And it feels like I'm hearing a trend where a lot of companies need to become power companies in some way, shape, or form. That probably doesn't start with that being their core competency, but it means it becomes a competency they need to add into their own internal operations that maybe they hadn't thought about or they're just starting to think about.
Seyed Madaeni (12:33):
That is a very accurate statement. I won't be surprised if five or six years from now companies need to have a good grasp over energy, electricity costs, risk, volatility, trading, operations, compliance, reporting. And that is a muscle that needs to be built. And quite honestly, at Verse, we saw that happening and that's why we started Verse because tools and software needs to be centerpiece into this journey.
Cody Simms (13:02):
Do you see the interest in doing this differ by size of company, by revenue, by power demand? Some of these companies are building these capabilities in-house. I'm assuming the Googles and Amazons of the world have dozens of employees internally that do this for them, but maybe companies a step-down in size are still feeling it out with one or two employees on the team that are responsible for this really complicated thing. What's that breakdown look like for you from a customer perspective?
Seyed Madaeni (13:36):
Kudos to big tech. They actually started this whole PPA boom here in the US. I think, if I'm mentioning this correctly, they've contracted close to 100 gigawatts between Amazon, Meta, Microsoft and Google. And you could imagine to procure that amount of clean energy, you really need to have a team responsible to do that. And they have staffed up and they've staffed up well. That doesn't mean their entire process is fully automated. As a matter of fact, we have seen big tech companies show an interest in working with companies like Verse because still the operational aspect of it runs on a lot of spreadsheets. And there's opportunity for automation, there's opportunity for optimization, and that's what we bring to the table. But on the procurement side, if you go to jump from big tech to Fortune 500 companies, Fortune 1,000 companies, industrials, manufacturing, yes, the team sizes are very small. In a lot of cases, they're responsible to find consultants that can help them with this journey. And we're here to change that. We're here to bring that mentality of do it yourself with advanced software, and we're very excited about it.
Cody Simms (14:46):
For regular listeners of the show, we did an episode a few months ago with Christina Yagjian, who has that role at Cargill. And she's figuring out how Cargill should be sourcing its power all around the world. And so it may be a good insight into that kind of customer segment that you're talking about, Seyed, which is a very large company, not one that has dozens and dozens of employees dedicated to this problem.
Seyed Madaeni (15:09):
A lot of major brands, major logos, Fortune 500 companies, if your business is sporting goods and coffee, it's not necessarily energy trading. And a lot of CFOs are now getting more involved because they see that variability in their OpEx and they need to stabilize that. They need to hedge that risk. And what better way of doing it with clean energy. It's fast, it's accessible to some degree. You can actually, more importantly help with decarbonization, which has many different interesting aspects all in one place. And that is why the demand for it is booming.
Cody Simms (15:48):
Now, I think of "energy trading" as like buying and selling interday swings of power. At 5 P.M power is worth X. At 3 A.M. power is worth Y. I'm going to arbitrage some of the spreads in here. Are big corporates doing that today already or is this more about securing the next five years of power at a price and emissions level that is relevant to you?
Seyed Madaeni (16:10):
More the latter, but some companies are also doing the former, depending on their business. For example, if you are an organization that runs trading shops and also has investments in large manufacturing, you probably have an in-house team that does that. But when it comes to trading, going back to the fundamentals, you're either long or short. When you're a low consumer, you're short, you need to procure electricity from somewhere. And with the PPAs and investments in clean energy, you get that stable PPA price, but you're also collecting revenue back from the market. It's essentially a lot of these virtual PPAs are fixed to floating swaps. So, how do you optimize that float and how do you cover your open positions with the right risk products? It's something that's necessary.
Cody Simms (16:58):
Let me try to make sure I understand what you just said. So, I've bought a PPA, I have a fixed price for a certain amount of power I need, but at any given point during the day that PPA isn't necessarily delivering power to my operation, so I am still having to bring in power from the grid as well. And that power will have prices above or below my PPA price. Yes?
Seyed Madaeni (17:20):
That is correct. And we actually launched a product called risk management on the Aria suite, which basically estimates, in real time, your open positions, how much PPAs you have, how much loads you have, and what are your open positions, and how do you mitigate that exposure. That's a product that we launch pretty easy to use, and it's helping corporates essentially make hedging decisions.
Cody Simms (17:44):
Now, I assume most corporates probably start with those hedging decisions around price, but what I understand at Verse is, you can help them optimize pricing for those decisions, but you can also help them optimize emissionality for those decisions. How dirty or clean are the electrons I'm presently running my operations on.
Seyed Madaeni (18:03):
Absolutely. So, this has two main buckets of attributes that you need to co-optimize together. One is, everything related to your emissions. Are you thinking about annual matching? Are you thinking about round-the-clock, 24/7 energy? Are you thinking about emissionality? Are you looking at it being additional? Are you thinking about the same jurisdiction? How are you going with temporal matching? So, there's many different facets on the decarbonization side and scope two guidance is evolving. We can jump into that as well. But at the same time, there are financial implications with your decision. What is the PPA price? What is the implied REC price? Essentially, if you're investing in a PPA, you're collecting revenues from the market back. So, how does that really match up? And to the extent that you have exposure, how do you hedge that? So, essentially what we do, which is a pain point for a lot of these organizations, we essentially shed the light on a roadmap and execute, and operationalize dollars in carbon at the same time and make sure this problem goes away for organizations.
Cody Simms (19:14):
Can I ask a clarifying question there? You said when you invest in a PPA, you're seeing revenue come back in. Is that to say that for most PPA buyers, you're not actually just buying electricity straight up, you're actually buying into a project and you're earning a return from that project, and that project is for a contracted amount of electricity?
Seyed Madaeni (19:34):
Correct. And that is called virtual PPAs, which are the bulk of PPAs. Because at the end of the day, electrons flow based on the laws of physics. If Cody from MCJ or Seyed yet from Verse assigned a PPA, electrons are going to do their thing. But what you're doing is essentially, you're financing additional clean power that's being connected to the grid. You're claiming the clean electrons and your asset is going to work for you. It's going to earn revenue in wholesale markets and that revenue is yours.
Cody Simms (20:03):
And so one of the criticisms I hear right now of a lot of these big data center projects is, sure, they may be setting up a data center with as much clean energy, power purchase around the data center as possible, but in a world where getting clean energy onto the grid and getting it interconnected is challenging, if they're taking all of that clean energy to run their data center, that may be clean energy that would have gone to that grid, but is not. Are you seeing that play out in real life for companies?
Seyed Madaeni (20:37):
Yeah. So, basically what you're describing is the concept of additionality. Let's go to basic scope two rules today. So, when you're thinking about decarbonizing your scope two, the GHG protocol doesn't recognize locational matching, doesn't recognize time matching, it's just annual matching. So, if your data center is-
Cody Simms (20:58):
Locational meaning, if you're in Texas and you're buying a PPA in Montana, according to current rules, you're fine.
Seyed Madaeni (21:04):
You're fine. And it's not simply just PPAs, you're fine even if you buy RECs. The regulations today are pretty high level and noted that a lot of corporates are complying with these regulations, and a lot of the work that they've done is voluntarily. Kudos to them for doing something. But the concept that you're describing is additionality. If I am adding a data center in a particular region, am I going to add new clean energy capacity, whether it's nuclear or wind or solar and hopefully storage, is that additional or not? And that has to do with the revisions of GHG protocol scope two, which technical groups have started working on this. And I think by end of 2026, we'll know the results. But that's the type of thing that needs to be clarified because based on today's rules, you're fine. If you're in Texas and you're buying Rex in Virginia, you're fine.
Yin (21:56):
Hey everyone. I'm Yin, a partner at MCJ, here to take a quick minute to tell you about the MCJ Collective membership. Globally, startups are rewriting industries to be cleaner, more profitable and more secure. And at MCJ, we recognize that a rapidly changing business landscape requires a workforce that can adapt. MCJ Collective is a vetted member network for tech and industry leaders who are building, working for or advising on solutions that can address the transition of energy and industry. MCJ Collective connects members with one another with MCJ's portfolio and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system and opportunities to learn from peers and podcast guests. We started in 2019 and have grown to thousands of members globally. If you want to learn more, head over to mcj.vc and click the membership tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (22:58):
You're starting to see companies anticipate changes here or start to recognize that maybe if they're doing something that isn't additional and isn't help greening the grid, they're not living up to their corporate responsibility. What are motivations that you're seeing corporate buyers take with respect to trying to solve for this?
Seyed Madaeni (23:16):
It's a mix of both. Some, what you described, some, they're looking into the financial implications and make a decision. And we are doing a lot of that education. So, our software does that for them. Essentially, the question that is really important is grandfathering. If the rules change, do existing assets, are they going to comply with the previous rules or are they going to follow the new rules? Nobody knows.
Cody Simms (23:39):
We've seen that play out in forestry credits for sure, where people kind of get in trouble for things that seem to have been fine 15 years ago.
Seyed Madaeni (23:48):
Yeah. When you're making a clean energy decision today with some tweaks, you can actually make your decision more robust against possible regulatory changes. Whether those changes are additionality, same grid, location matching, hourly matching, carbon matching, etc. It could be in your favor to make your decisions more robust because these are important financial decisions you're making. One example I use is, let's say, location matching. It's not just about carbon, it's also about your financial exposure. If you have an asset generating in the same grid that you have the load, when electricity market prices go to the roof and your load is spending a lot of money buying that electricity, so is your generation. It's selling power at that high electricity. So, you're hedged.
Cody Simms (24:39):
You're getting return on your PPA investment, while at the same time you're spending more money on electricity yourself.
Seyed Madaeni (24:45):
Exactly. So, that's why this is a very complicated problem that we're trying to simplify as much as possible with Aria and with our software.
Cody Simms (24:54):
And for a buyer using your software, it sounds like they get guidance on which of these things are a priority to them. Do they care more about price? Do they care more about how clean or dirty the power they consume is? Do they care more about how much they're contributing clean electrons back to the grid? Are these the dials that people are turning in the Aria software?
Seyed Madaeni (25:14):
Absolutely. So, we have launched a suite of applications because when you think about the power problem, we talked earlier how complicated it is, you need to understand it from different products coming into play at different times. When it comes to planning and procurement, which is one major category, which we've launched a couple of products, and then operations, which we've launched a couple of products. In the planning and procurement phase, they need to be answering what do they care the most? Is it cost? Is it risk? Is it emissions? Is it emissions by the three pillars of additionality and carbon matching, and location matching or is it something else? We don't necessarily convince them what is right or wrong for them. That is a decision they need to make based on their internal corporate mandates and risk policy and everything else, but we clarify it for them.
(26:04):
What are the implications of the decisions that you're making? Because when you make those decisions, it has downstream effects and we'll operationalize it for you, but let's start with the basic. What is the goal that you're going after? And some companies have already made those goals and some companies are earlier in their journey.
Cody Simms (26:21):
So, is there a sort of consultation component to the work you do? You're mostly a SaaS company, but it sounds like some of these companies may need help even figuring out what dials to turn in the first place.
Seyed Madaeni (26:34):
Yes. If you look at the Aria platform, we have seven or eight different products. When it comes to planning, a lot of the times our competition is consultants because they essentially do these feasibility studies and planning studies. But our software, the way we've designed, it's very easy to use. You can make a long-term planning decisions with all of the attributes that I talked to you about in a matter of minutes. And you can numerate this many times. Like any other SaaS company, sure, we have a very small customer success team that explains answers and makes sure that our accounts are well-served. But the genesis of this is, a lot of this can be done through the software with our internal users and champions.
Cody Simms (27:18):
And how do you get both pricing and emissions data from the grid today because that feels like an important component to your ability to help people make decisions using the software?
Seyed Madaeni (27:28):
Yeah. Data is very important, and one of our products is called the Data Hub, and it's composed of two things, historical looking, what are the electricity market prices have been and emissions, etc. And forward-looking, what the emission forecasts are going to be, what our power prices are going to be? And we have a multifaceted approach. We have partnerships with some vendors. We build our own data models for forecasting. And what's important, we basically crystallize all of that for the customer. But a lot of the times just having data is not necessarily going to solve the problem. It's what you do with that data, the decisions you make with that data become super important.
Cody Simms (28:08):
And then in addition to having the historical and forecasted data, if a customer's coming to you trying to make decisions on specific PPAs that they may want to enter into or whatnot, are they bringing their own potential contracts into play or do you also have visibility into a wide range of available projects that are out there?
Seyed Madaeni (28:32):
Both. Essentially, what we do is, any projects that are out there, in a matter of seconds, essentially the software crunches the numbers, compares it against your overall portfolio and your goals and make sure that you're making sound decisions. One of the recent products that we launched is, essentially, going to the basics. How much load am I consuming? For that, you need to understand every single meter and facility that you have in your operations. What is that data? How you're paying your utility bills? We've launched a utility bill management application, which basically takes all of that data and crystallizes for you for invoice validation, now you have a central repository of your electricity consumption. At the same time, we have a central repository of your supply instruments, whether it's PPA RECs or financial instruments. You can imagine how powerful that repository is. And from there we go all the way from planning and transactions to operation.
Cody Simms (29:31):
So, we talked earlier about these customers who work at large Fortune 500 or Fortune 1,000 companies, but maybe aren't in organizations that have hired dozens of people to do this internally. Most of these folks today, I assume, their primary job is hiring and managing consultants who are sorting through these outcomes on their behalf. Would that be the right way to think about what these roles look like today and you're moving to a world where these teams in-house could actually try to use software to make these decisions?
Seyed Madaeni (30:02):
Yeah. We've seen a wide variety. We've seen companies, don't even have an in-house team, it's just a consultant. We've seen companies that have one FTE with some consultants. We've seen companies that have a smaller analytics team, which we actually help plus some consultants. We have seen some companies that have nothing at all. And you have companies like big tech which have dozens of people, but the bulk of the market is behind. And that's the reason we're investing in Aria and actually close our Series A in May to help pump out products even faster to make sure we serve this sector pretty well.
Cody Simms (30:40):
I want to move into something that frankly is even more confounding to me and complicated than what we've been discussing, which is this idea of PPAs will help you buy power and understand the renewable components of the power that you are contracted to essentially be funding on an annualized basis. But there's now this movement that some companies, notably Google has been pushing around 24/7 matching of clean energy, which means you're running your entire operations all day long on carbon-free electricity and have the ability to prove it. What is this trend? And are many companies starting to work toward this? Because I guess, if you're just buying a PPA, even if you're buying more power than your company ultimately might need, it doesn't mean you're actually running your operations on clean power as we discussed because you might be buying it in a different grid somewhere or time of day may not match up to when you're consuming power.
Seyed Madaeni (31:43):
But based on today's rules, those all match up. So, it's an annual matching scheme. So, meaning that if your generation is at two in the morning because the wind is blowing, and your operations at 5 P.M The next day, those get trued up. But those rules are most likely going to go under change. And the point that you brought up that is essentially what we're seeing at the heart of these debates. There is three main topics that are being discussed, and this is all part of the GHG protocol scope two revisions. One is, if you're contracting something, is it additional? Is it a new capacity? Is it a new project getting connected to the grid, which absence of your involvement would've not been built? That is called additionality. The next one is locational matching, meaning that it has to be in the same jurisdiction or power grid that you're operating.
(32:36):
And the third one is this debate between 24/7 carbon free energy, meaning all of your operations need to be matched with clean energy at the same time or carbon matching, which you basically put these assets where the grid is the dirtiest. You might not have load at that time, but essentially you're calculating the amount of emission reductions and you're claiming that as your contribution. Whether or not which of these are actually going to play out, we'll see. It's part of the global GHG protocol scope two revisions, but there are companies who advocate one or the other.
Cody Simms (33:12):
Describe the carbon matching in a little bit more detail.
Seyed Madaeni (33:15):
Yeah. So, basically, let's say, you decide to buy a PPA and you basically look at the power grid and you say, power grid X is the dirtiest power grid. I want to put my asset over there. I don't care if I have load or not in that region. I don't care if my load is matching the generation at the same time in that region. I'm contributing by putting my asset where the grid is dirtiest. And the amount of emission reductions, that's mine. That's my contribution. So, that's one school of thought. The other one is this 24/7 school of thought. For us, we can analyze, model, operationalize, report on both, and we'll leave it up to folks to debate this, but essentially, your cost of clean power, obviously, would change if you have more stringent requirements compared to annual matching today.
Cody Simms (34:07):
Describe the 24/7 in more detail. Just helpful to have them side by side here.
Seyed Madaeni (34:12):
Yeah. So, 24/7 is basically, like you said, at any moment of time, the amount of load you're consuming on an hourly basis, not a two-minute basis, on an hourly basis, the amount of load that you're consuming from the grid is matched by generation to that amount from clean energy resources. So, let's say 2 P.M today, you're consuming 100 megawatt hours. You need to be showing 100 megawatt hours worth of clean energy generation, whether it's wind and solar. Batteries are still a big bucket that we need to discuss at some point, whether it's nuclear, geothermal, it needs to be matched. It requires pretty stringent understanding of measurements, how much your low consumption was and how much your generation consumption was.
Cody Simms (35:00):
Super helpful. Let's do batteries, since you just brought it up and since that was your last life at Fluence, spending a lot of time there. I think you were the first one to share with me one of the, maybe, slightly dirty secrets of batteries, which is yes, in general, increasing storage on the grid is necessary for continued deployment of solar, and yet in many geos, batteries may be actually charged up on a dirty grid and released at a time when they're competing with renewables. And so you may end up having times of day where batteries are actually adding emissions onto the grid.
Seyed Madaeni (35:36):
That is certainly possible. And let me talk about batteries. I'm in love with batteries. I think batteries, I spent a big portion of my career building software for batteries. I think early in 2020, we're about one gigawatt of batteries here in the States. I think we're closed this year with 20 gigawatts, and that's just a fascinating amount of growth. Batteries are a true digital, flexible asset. They can provide 18, 20 different services from energy arbitrage to all sorts of grid stability and services, whether it's power reserves, spinning reserves, non-spinning reserves, ramping up and down and flexible ramping.
Cody Simms (36:13):
That 24/7 carbon free energy model feels, basically, impossible to hit without batteries, I would think.
Seyed Madaeni (36:19):
You either have batteries or you overbuild wind power in regions that have wind power. Imagine, your green premium goes up. I think between five to 20 bucks is what the green premium is going to look like depending on your region, over electricity market prices, if you want to be fully 100% carbon-free energy, subject to a lot of different issues and you're load etc., but it is expensive. And batteries, when it comes to operations, they can do anything. They can do whatever you ask itd to do. Whether it's providing stability to the grid, whether it's doing energy arbitrage or whether it's helping a company achieve 24/7 goals. What's not clear is the regulations around batteries and how their contribution is accounted for. When we saw the Treasury was thinking about IRA rules, we actually submitted comments to the Treasury just based on our own experience and what it can do for companies that, hey, the clean energy that a battery can absorb and it's giving back to the grid, let's account for it. Makes sense. It's being charged up by renewable power and it's just giving it back at the right time that's needed.
(37:33):
But unfortunately, in some cases, as you were alluding to earlier, Cody, batteries can actually increase emissions, if you are charging it from when power market prices are the cheapest, where coal is dominant, a lot of coal, you charge from coal and then you discharge at peak periods. When gas is generating, you're essentially replacing gas with coal with a round trip efficiency loss, you added emissions back to the grid. In some jurisdictions where it's only gas and renewables like California in the middle of the day, prices are negative. You charge your batteries with clean power and you displace beaker plants. That works well. But by nature of having a battery, that doesn't mean we check the box of the clean energy story. We really need to be careful around how we operationalize it. And at first, we have the vision of once we tap more and more into operations, we will get into asset operations and we'll show the world how you can operate a clean portfolio to match your goals, whether it's 24/7 or something else.
Cody Simms (38:34):
So, I'm hearing you say, a plan at Verse eventually, to not just help you understand the universe of power options for your business and find them, and build a program around them, but eventually, also to help you manage the day-to-day electricity that's flowing in and out of your operations and where it ultimately came from.
Seyed Madaeni (38:56):
Correct. And the type of operations products that we've launched since our Series A in May, we've launched our risk management product, which is operational. On a day-to-day basis, what type of hedging products I need to buy. We launched our utility bill management, which is in real time, how much electricity I'm consuming, what are the electricity bill statements that I'm paying to. We've launched our invoice validation for PPAs. We're getting more and more into operations, and that's very important for us. But ultimately somebody needs to control and coordinate these assets for the benefit of the corporates. There was a theory that ISOs can do it one day, but we've seen discrepancies in market signals, but we believe Verse will be in that position to play as that coordinator later.
Cody Simms (39:42):
How involved does Verse get into PPA contracting? Are you helping folks go out and actually acquire a PPA and enter into a deal with them?
Seyed Madaeni (39:54):
Correct. Up until the point that automation needs to stop, where it gets to negotiations on terms with a lawyer, that's where we actually stop the journey. But before that, even as part of our services, we actually help our customers with interviewing with developers and understanding the merits of the project. So, there is a little bit handholding in the actual transaction process, but a lot of the analytics and decision-making is purely software.
Cody Simms (40:22):
The marketplace aspect though lives in Verse or not?
Seyed Madaeni (40:25):
We've never built a marketplace and I don't think we'll ever built a marketplace because when you look at marketplaces, you need liquidity. You can go on the New York Stock Exchange and buy Amazon stock in seconds. PPAs are very, very complicated. And by all means talking to many customers, nobody's going to log into a software and say, I want that PPA versus that PPA. They need to understand what it means. What is their portfolio? What are the cost implications? So, really the heart of the problem is the decision-making, not the actual transaction. Because the actual transaction, lawyers can get a good grasp over it, but how do you make the right decisions so that your CFO doesn't scream five years down the road, that's where we help.
Cody Simms (41:15):
And from a business model perspective, we talked about it, you're a SaaS platform, is there standard pricing that customers are coming to you and finding?
Seyed Madaeni (41:25):
We absolutely have disrupted the market. So, our operational products, which are real-time software for operations, those are standard SaaS pricing. When it comes to procurement, what you've seen in the market is, a lot of companies charge based on success fees. Hey, I'm going to sign a PPA for you. I'm going to take a buck per megawatt a hour for the life of the project because I help you sign a project. That adds up to millions of dollars. We don't do any of that. Our fees are flat, subscription-based. Our software does a lot of decision-making. Sure, we might be involved in a call or two to help you streamline your transaction process. But as a result, organizations have saved millions in overhead costs by just choosing the Verse business model.
Cody Simms (42:10):
Do you think the complexity of all this is a feature or a bug of the system?
Seyed Madaeni (42:14):
Wow, very good. It paid for my career.
Cody Simms (42:19):
I asked because I had Joe Daniels from RMI on the show a while ago, and he was talking about the non-economic dispatch of coal. And he basically said the complexity of the system, from a legacy energy perspective is good for coal producers, for example, because it makes it hard to understand pure economic transparency and in a pure economic transparency perspective, renewables win.
Seyed Madaeni (42:47):
Yeah. And that was the whole idea behind deregulation when it happened in the early 2000s. Let's bring transparency into markets. Let's bring liquidity into power trading. Let's actually think about investments in generation expansion, although T&D didn't really get deregulated. But at the end of the day, it is a complicated matter because the underlying system that we're dealing with is extremely complicated. Power grids are the most complicated, non-linear system invented by humankind before the age of computers. And it's still running on similar principles. So, when you look at that complicated beast, then obviously understanding it is going to be complicated. But this might sound flashy, but absolutely, AI can help. Absolutely gen AI can help. The more we simplify these complicated problems into easy to use software, we invented the power grid, not me, humankind invented the power grid, so I'm sure we can understand it.
Cody Simms (43:47):
Seyed, this has been great. Tell me a little bit about, I'm blessed to be in the know about it, but maybe share with the rest of listeners a bit about your financing history with the company and how you view growth going forward as well.
Seyed Madaeni (44:00):
Yeah. So, basically, we literally started Verse in late 2022. And by October of 2022, me and Matt, my co-founder, we raised a seed round close to 6 million and COTU, we were blessed COTU to be one of the first seed investments in climate technology. And from there, we basically started doing a lot of product market research, building a small team in late '23, and then launching our product. And I'm blessed to have a very strong team. We're a team of 22 people coming from Google, Meta, Amazon, Tesla, Full Story, a lot of great, Stripe, and we understand both the power systems and the power markets, and clean energy, and also software. And in May of this year, we raised this Series A close to 21 million. Our lead investor was GV with major participation from COTU. Bless for you guys to be part of it as well.
Cody Simms (44:56):
We were in the seed too?
Seyed Madaeni (44:57):
You are in the seed too. Absolutely. And kudos to the level of support that MCJ brings. It's been phenomenal for us from many different aspects. Yeah. We are delivering and growing. Our plans for the future is really get into the heart of the operations aspect for many of our current customers and future customers. And I'm sure that means more growth and more capital at some point, which we're gearing towards and getting ready for it. But we're here to solve this problem and I'm really blessed to be supported by amazing colleagues of ours.
Cody Simms (45:32):
Where do you need help and who do you want to hear from? Both in terms of talent and potential customers.
Seyed Madaeni (45:38):
Like any other startup, as you are scaling your product market fit and your product market journey, the more you talk to potential customers, even the ones that are not going to be your customer, because that's where you learn a lot of lessons, the more you talk to folks, the more dialed in you get in terms of, not just your pitch but what you're building. Because at the end of the day, scaling a startup, there might be some science to it, but it's a lot of art. How do you balance your product and engineering work with go to market, along with your investor interest? If you optimize that, then that's the recipe for success. And part of that means over communication and make sure you understanding what the market needs in being agile and adaptive. So, the more we can talk to folks, the better. If you're listening to this episode, you know where to find us, hello@verse.inc. Shoot us a note. We'd love to show you our product and get to know your challenges and your view of the world when it comes to clean energy.
Cody Simms (46:37):
Seyed, thanks for joining today.
Seyed Madaeni (46:39):
Thank you for having me, Cody. This was a blessing.
Cody Simms (46:41):
Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry, and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc. And subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks and see you next episode.
