Episode 64: Shayle Kann, Energy Impact Partners
Today’s guest is Shayle Kann, Managing Director for Energy Impact Partners.
EIP is an investment firm that invests in companies shaping the energy landscape of the future. It's backed by a broad coalition of some of the world's largest and most innovative utilities that collectively span the globe, access millions of households, and spend more than 20 billion annually on new technologies and procurement. Shayle leads research & strategy at Energy Impact Partners.
Previously, Shayle spent over eight years building and running GTM Research, the market intelligence arm of Greentech Media, where he led a 30-person team tracking and forecasting the evolution of the electricity sector. Shayle oversaw this business through and beyond GTM’s successful 2016 acquisition by Verisk Analytics.
Shayle is a renowned expert on the energy transition. He has spoken at conferences around the world, testified in front of U.S. Congress, and is regularly cited in outlets including the New York Times, Wall St. Journal, Washington Post, Economist, and Bloomberg. His writing has been featured in publications such as Foreign Affairs, Nature Energy and Public Utilities Fortnightly.
Shayle is also Senior Advisor to Wood Mackenzie Power & Renewables and a Non-Resident Fellow at the Columbia University Center on Global Energy Policy. Prior to GTM, Shayle was a U.S. Fulbright Scholar, researching renewable energy project finance in Australia. He also worked at Conservation Services Group (acquired by ClearResult) and the California Public Utilities Commission. He graduated cum laude, phi beta kappa from Pomona College.
Enjoy the show!
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
In today's episode, we cover:
Overview of Energy Impact Partners
Areas they invest in
Shayle’s role with the firm
How the utilities that are LPs engage, and what they are hoping to get out of their involvement
Shayle’s history, and what led him to EIP
When and why he started caring about climate change
Shayle’s throughs on the nature of the problem and the best ways to solve
Role of policy vs innovation
Future of capitalism
How Shayle would allocate a big pot of money to maximize its impact in the climate fight
Shayle’s advice for how you and I can help
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Jason Jacobs: 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.
Jason Jacobs: Today's guest is Shayle Kann, Managing Director at Energy Impact Partners. EIP is an investment firm that invests in companies shaping the energy landscape of the future. It's backed by a broad coalition of some of the world's largest and most innovative utilities that collectively span the globe, access millions of households, and spend more than 20 billion annually on new technologies and procurement. Previously, Shayle spent over eight years building and running GTM Research, the market intelligence arm of Greentech Media, where he led a 30 person team tracking and forecasting the evolution of the electricity sector. Shayle's a renowned expert on the energy transition. He's spoken at lots of conferences around the world, testified in front of U.S. Congress, and is regularly cited in several tier one media outlets. He also has a podcast of his own, along with his cohost Stephen Lacey, called the Interchange.
Jason Jacobs: We have a great discussion here, including Shayle's career, and how he's made the decisions that he's made along the way. We talk about the energy industry and being climate focused, and the overlap, as well as the differences between the two. We talk about the role of innovation, and within that innovation, the role of startups versus the big incumbents, like the utilities. We talk about the capital sources to fund this innovation, as well as the role of policy and other major levers in the climate fight. I think it's a great discussion, and I hope you will as well. So, let's bring him out here. Shayle Kann, welcome to the show.
Shayle Kann: Thank you. Great to be here.
Jason Jacobs: Great to have you. This is a little weird because it's like it's a host interviewing a host, so it's intimidating, to be honest with you. You are an a lot more experienced podcaster than I am.
Shayle Kann: It's funny. I don't know if you ... Do you consider yourself a podcaster now?
Jason Jacobs: No.
Shayle Kann: Yeah, I don't either. Stephen Lacey, my cohost on the podcast that I'm on, he's a podcaster. He's legitimately a podcaster. He's been doing it for, I don't know, 13, 14 years, something like that. I just show up and talk for an hour once a week, so I ... My identity hasn't assumed podcaster yet.
Jason Jacobs: No judgment. There's nothing wrong with being a podcaster. It's a terrific profession, but I joke with my wife. If someone asks her, "What does your husband do?" She says, "He's a podcaster," and I say, "No, I'm not." She's like, "Well, how do you spend all day every day?"
Shayle Kann: You're like, "I am one who podcasts, but it does not-"
Jason Jacobs: Yeah, exactly.
Shayle Kann: " ... define me." Yeah.
Jason Jacobs: Yeah. So, I'm an entrepreneur who's looking to transition into the climate fight, and I'm using the podcast as an entry point to better understand the problem, to get to know everybody, and to build an audience and brand while I'm figuring it out.
Shayle Kann: Yeah. I mean, I think that ended up being really clever for you. I don't know how you had the foresight about it, but what a cool way to, one, learn in public and have other people learn along with you, but also then, by virtue of just the podcast gaining followers and stuff, you can get more people on it. You can build all these relationships. It's a cool way to make a career transition of a sort.
Jason Jacobs: It's been amazing. I mean, there were some role models like ... I don't know if you know Bret Kugelmass from Titans of Nuclear, but he followed a very similar playbook, but specific to Nuclear. I came across him pretty early in the journey, and actually, later, after I had already started down this path, but Bill Nussey, who I did an episode with recently, his book was my podcast, essentially. So, he started writing a book and interview lots of people for the book, but it is aggregating the stories as a way to get to know the experts and the subject matter, and then make that information shareable for those that come after you. That playbook I highly recommend.
Shayle Kann: Yeah, no. Totally. I think it's great. I'd like to see more people doing it, and especially the way that you're sort of doing it all out in the open, right? Everything is an open book. This is what I'm learning. This is what I know and don't know. This is what I'm looking for next. It's just cool to see.
Jason Jacobs: Well, to my wife's chagrin, I live my life that way. She's more of a private person, but what you see is what you get. If I didn't share, it didn't happen.
Shayle Kann: Right, right.
Jason Jacobs: I mean, I have lots of questions for you. This could go in a number of directions, but why don't we talk about your current? What's EIP?
Shayle Kann: Ah, okay. So, I work at this firm called Energy Impact Partners, or EIP for short. EIP is, as far as I can tell, totally unique. It's a really interesting place, but the short version of the story is that we're a venture capital fund that is backed by a coalition of utility companies. So, in the first fund, it's a 530 million dollar equity fund. We also have a debt fund that sits alongside it, and backing that fund, most of the capital comes from 14 electric and gas utilities. In the first fund, 10 out of the 14 are based in North America, ranging from small utilities like Avista, which is the utility in Spokane, Washington, or Madison Gas and Electric, which is near and dear to me because I grew up in Madison, Wisconsin. So, that was my hometown utility. Up through some of the largest utilities in North America, like Southern Company and Xcel Energy, and then a bunch of international ones as well. So, outside of North America, we have partners from Australia, Thailand, Japan, the UK, the Caribbean.
Shayle Kann: Because the basic idea is that this coalition of utilities got together, provided this big pool of capital for us to go off and invest in companies that will be strategic to their future. That can mean a whole bunch of different things, but what they're looking to get out of the fund, in addition to, hopefully, a return, and in fact more importantly than a return, for many of them, is insight into what's coming next in their sector, and then opportunities to innovate, whether to drive new revenue or to reduce their costs or to clean up the grid. They have a variety of different goals, but ultimately, it is using venture capital as a means to see further into the future and to bring bits of that future further into the present.
Jason Jacobs: This concept of utilities dipping their toe into the early stage innovation pond, is that a common occurrence historically, or is this new?
Shayle Kann: There've been waves of it historically, not quite in the way that EIP does it, but utilities have periodically been investors in venture capital funds. We didn't invent that. A few of them have also created their own corporate venture capital arms over the years, and continue to do so. So, the idea of utilities using venture capital as a means of delivering innovation isn't new.
Shayle Kann: One of the things that is new about EIP's take on it is that we have this coalition of utilities together, so it's not just one utility looking to innovate on its own. It's all these utilities who ... The nice thing about utilities is because they're territory limited, they're non-competitive, so they can collaborate with each other. So, they can learn from what each other are doing. That gives us lots of leverage because we've got a whole bunch of utilities that can deliver value to any given portfolio company, and so we do a lot to facilitate that kind of collaboration and information sharing and things like that. So, it goes well beyond, from their perspective, it goes well beyond just deploying a bunch of capital into a fund.
Shayle Kann: So, I think what's sort of unique about EIP's model is not just having utilities as investors, but the way in which we work with those utilities to try to drive value, both to them and to the companies that we ultimately invest in.
Jason Jacobs: Is it only utilities, or are there more traditional institutional LPs that are part of the fund as well?
Shayle Kann: There are both. So, the majority of the capital comes from this coalition of utilities. We do have traditional institutional money as well, purely financial investors in the fund, and then in addition, we have a few others who are sort of utility adjacent, so Burns & McDonnell is a good example. They're a large EPC. They do construction, stuff like that in the utility sector, but they themselves are not a utility. They're an investor in the fund, and they provide a totally different viewpoint, which has been actually enormously valuable for us to have. So, we try to get a little bit of diversity as well.
Jason Jacobs: Maybe just talk a little bit about your role, but also just some housekeeping stuff about stage and check size and sectors and stuff like that.
Shayle Kann: I guess I'll tackle the housekeeping first. So, we like to invest in things where there's already a product, it is commercial and there is some revenue attached to it. So, we're not investing super, super early stage in like two guys and a PowerPoint kind of thing, but beyond that, we can be relatively flexible. We've invested in stuff that's still pretty early in the commercialization path, all the way up through pre-IPO rounds.
Shayle Kann: We like to write somewhat larger checks for this sector, so 10 to 30 million dollar checks would be the sweet spot for us. We've made exceptions, but that's the sort of target range. So, that generally tends to mean that we're investing in companies that are a little bit more mature, but if you'll just look at, stage wise, we've done everything from series A through series ... I don't know, D or E or something like that for companies that are pretty late in their journey. So, we can be pretty flexible there. The one thing we don't do is just invest in something that hasn't been created yet.
Jason Jacobs: What about sectors?
Shayle Kann: So, sector wise, the mandate is invest in things that are going to be strategic to utilities, and they help us to define what they means. We do a bunch of surveying of all of our partners to figure out what are their strategic priorities, where are the pain points, and where can innovation and technology provide solutions?
Shayle Kann: If you look across the portfolio that we amassed in the first fund, I would say, broadly speaking, it falls into five categories. The first would be in intelligent operations, so this is like technologies that you can use to improve the operations if you're a utility. So, an example would be we invest in a company called eSmart, which is based in Norway. They do computer vision and AI using primarily drone data, but could be data from other places, to try to do things like predicting failure on transformers. So, rather than having a person have to drive out and roll a truck every single time, you fly a drone. Reduces costs. You can automate some of the image processing and make it a lot cheaper. So, that's sort of in the intelligent operations camp.
Shayle Kann: The second camp would be distributed energy resources. We've done a whole bunch of investments in the world of DERs, ranging from companies like AutoGrid, which can help orchestrate lots of DERs on behalf of a utility, to Mosaic, which finances residential solar, to ecobee, which is a smart thermostat provider-
Jason Jacobs: I have one.
Shayle Kann: ... that acts as a DER. Do you? How do you like it?
Jason Jacobs: Several, actually, in the house. Yeah, it's great.
Shayle Kann: Great. So, the thermostat controls somewhere around half the load in the home, so that's a really powerful distributed energy resource that people sometimes don't account for. So, a bunch of stuff in the distributed energy world. That's category two.
Shayle Kann: Category three would be in mobility, particularly around vehicle electrification, which, as you can imagine, is extraordinarily highly prioritized for utilities. It's like the biggest opportunity for them in decades, but even more broadly, they're starting to look beyond just electrification, into the broader mobility landscape because, as all these other changes come in the way that we move around the world, a lot of them are going to ultimately affect the demand for electricity, assuming that they all become electrified over time.
Shayle Kann: So there, we've invested in companies that are in the EV charging space, specifically we have a company called ViriCiti, which is based the Netherlands, that does sort of telematics for mid and heavy duty vehicles, particularly electric vehicles. So, monitoring the state of charge of an electric bus, for example, seeing how driver behavior affects range, those kinds of things.
Shayle Kann: Then there is this sort of world of smart homes, buildings, and cities, all of which has some direct relevance, typically, to utilities, but also some indirect relevance as well. So, investment in companies like Sense, which is based in your native Boston.
Jason Jacobs: It is, right down the street.
Shayle Kann: Yeah, exactly. So, we invest in Sense, and they do energy disaggregation. They allow you to see down the device level in your home exactly what you're consuming, when, and how much, and that gives you a lot more visibility, and also control over energy consumption, and just interesting anecdotes about your home. If you want to see how long your son was playing Xbox in the basement yesterday, a good way to do that is to monitor the energy consumption from the Xbox.
Shayle Kann: So, that's the fourth category, and then the final one is cyber security, which, as you can imagine for utilities, is near the top of their list at all times. They're trying to be as vigilant as they possibly can about being cyber secure, and there's kind of an ever growing list of threats that they have to monitor. So, there's a whole world of technology companies built around trying to help utilities and other large industrials maintain cyber security. So, I would say those are the kind of the five categories in the first fund.
Jason Jacobs: And what about your role with the firm?
Shayle Kann: So, I lead the research and strategy team, which is sort of unique to EIP given the structure of our fund, but our job on our team, fundamentally, is we do a lot of our sectoral analysis. So we say, "I think there is a new sector. This is interesting. It's strategic and important to the utilities. We also think it's investible. There might be a bunch of start ups in it that we think potentially could be a good fit for us. Let's understand everything that we possibly can about that landscape. What's going on in the sector? How to differentiate the technologies and the companies, the competitive analysis. Who's going to win?" Start to predict what we think is going to make for a successful company in the space, and then ideally, hopefully identify and bring in some companies that we think are a good fit.
Shayle Kann: So, we act both as the intelligence provider for the utilities who have invested the fund, and also as the tip of the spear sometimes, from an investing perspective, trying to source new opportunities.
Jason Jacobs: I have bunch of questions about EIP. Maybe I'll just ask one, and then we can switch gears and talk about Shayle, if that's okay. With EIP, what does the information flow look like, if any, between the fund and the utility limited partners? Is there a strict wall, or is that information flowing to, say, the M&A team or the strategy team at some of the parent investors, if you will?
Shayle Kann: No, it's very much about information sharing. The cool thing that I've learned being within EIP that I didn't quite recognize on the outside is that sitting as a venture capitalist, you can learn a ton about new technologies and innovations. Every startup wants to talk to you. It's just a really good perch from which to gain insight that is unique, and that's hard to get from anywhere else, including my former life working as a market intelligence provider.
Shayle Kann: So, that information that we are gathering, and the insights that we're developing off of that, we very much want to share that with the utilities because part of the goal is to help them innovate, help them figure out how to deliver a cleaner, more sustainable, more efficient, more cost effective future for all their customers. In particular, we try to do that to the extent that we can, by virtue of delivering and supporting partnerships between our portfolio, the companies that we've invested in and the utilities themselves. The ideal version of an EIP process starts with us understanding a new sector that is relevant to the utilities and where there's technological innovation, finding the best companies in that sector, investing in them, and then facilitating interactions and ideally business relationships between that company and the utilities so that it accelerates growth for the company. It's good for them. It's good for us as their investors. It's good for the utilities because it's delivering on this promise of innovation.
Jason Jacobs: Is that type of partnership opportunity a prerequisite to evaluating a potential investment?
Shayle Kann: It's not a prerequisite, though it's helpful. I mean, we think of sort of the levels of strategic that a particular company can be to utilities, and I think of it as sort of three separate levels. Level one is like a company that can sell directly to utilities, which utilities can be a customer. There, there's obvious value in being able to leverage these relationships with a bunch of these utilities, figure out which ones have the aligned priorities and budgets and so on, and so trying to sort of smooth out that process that has been notoriously difficult historically, and why a lot of folks have soured on clean tech as a venture capital category.
Shayle Kann: The second would be utilities not necessarily as customer, but as partner or channel. So, a good example there would be ecobee, actually, or smart thermostats, right, where utilities don't necessarily buy smart thermostats, but they are an absolutely key channel for smart thermostats. They can offer rebates. They have their own marketplaces a lot of the time, so they're really important player in the space.
Shayle Kann: Then the third category, which is the most distant, would be utilities as sort of strategically interested parties, but who don't have a direct purchasing or channel role to play. Even there, utilities have a lot of influence. So, if it's a smart city, for example, utilities have really close relationships with the cities in which they operate, as they must. They are the largest owner of infrastructure in those cities, typically, and so they can have a big role to play in what a smart city roll out might be and what technology it should include and so on.
Shayle Kann: So, for us, we're looking to invest in companies where we can deliver meaningful value by virtue of having these relationships with the utilities, but not necessarily where it has to be a pure transactional one.
Jason Jacobs: I have more questions, but maybe we can just switch gears for a moment because it'd be great to just find out how you got here. It looks like you spent your whole career in energy, and most of it on the research side, providing that research to clients. Now you've made the decision to go in house in this different kind of growth investment vehicle, which sounds really cool, but it'd be great to just hear a bit about that journey, and not only the path, but also the why.
Shayle Kann: Well, I haven't told this story publicly a whole lot, but why not? So, I grew up in ... I've mentioned this before. I grew up in Madison, Wisconsin. A slightly odd childhood in that my father, before I was born, he was a college professor. He taught at the University of Wisconsin. He was a education professor, but he didn't like it. He hated academia, so he quit. He quit right before I was born to become instead a children's entertainer.
Shayle Kann: So, he was a ... was and is a storyteller, juggler, and magician for kids. He would perform at schools and libraries and festivals and all that kind of stuff, but fundamentally, what he was doing is mostly storytelling, and I started performing with him starting when I was three. Then I learned to juggle when I was six, and I was performing with him, doing the storytelling and the juggling until, I don't know. I was ... at least through when I was 10, and then I formed my own juggling troupe and went and did that for a bit. Then I retired at 13, so ... because I hit high school and I was like, "This is not cool," and so I quit.
Shayle Kann: The net result of that is that I grew up with my dad being a literal storyteller for a living. I sort of hate overdrawing narratives that don't totally fit, but I do think that it has significantly impacted me in my career, ultimately, because I think of things in terms of narrative a lot of the time. Now I've discovered that I have this real passion for making sense out of complexity.
Shayle Kann: So, anyway, to fast forward, in college, I discovered energy and climate change. I took a couple classes. I read Dan Yergin's original book, and I sort of fell into this obsession with this incredibly complicated system that is ubiquitous and pervasive in our entire lives. Everything is powered by energy. It's amazing that we've created the system that we have. The fact that we have pretty much ubiquitous electricity alone, and that it works almost all the time is just astounding to me still today. Yet, we are in this necessary transition of this whole system that has multiple facets of the economy, from transportation to industry to our homes to our businesses. We have to transform how all that gets powered, and there's all this complexity. It's regulatory. It's financial. It's technological.
Shayle Kann: Anyway, so I discovered all this stuff, and I think in my mode of, "I want to try to make sense out of this chaos and then figure out how to tell myself this story, and then potentially tell other people what's happening in this world," I just grew obsessed with it. So, you're right. It's all I've done in my career is sort of energy related.
Shayle Kann: The first thing that I did was, after I graduated, I went straight to the regulatory side and worked at the California Public Utilities Commission first, and that was somewhat brief, but still actually incredibly valuable experience for me. I spent a few years doing renewable energy credit, origination and trading. I did academic research on wind project finance in Australia. That was an interesting sojourn. Then I got back to the US. This is now early 2009, and ran across this company called Greentech Media, which at the time was, I think, I don't know, eight people, something like that. GTM was a really interesting beast. It was two businesses in one. It's a digital media business on one side, and then it's a market intelligence business on the other side.
Shayle Kann: So, long story short, I discovered that market intelligence and sort of delivering that kind of analysis about what's happening in these sectors, it really suited me well. It allowed me to continue my obsession with this space and explore the parts of it that make me curious, also figure out how to make sense out of complexity and explain it in a manner that is understandable to people, using data to do so.
Shayle Kann: So, it just clicked, and I ended up spending eight and a half years, just about, leading GTM Research, which is the market intelligence arm of Greentech Media, up through GTM's acquisition in 2016 by Wood Mackenzie, and then through a year after that, basically. After that all ended, I left feeling like I had accomplished what I set out to accomplish eight and a half years earlier when I joined GTM, and intended to take a fairly long sabbatical and learn to surf and so on, but met EIP pretty quickly. So, my sabbatical was cut short.
Jason Jacobs: Were you at GTM ... I'm just curious. Were you here on the East Coast, or were you out west all the way through?
Shayle Kann: No, I was in Boston for most of it, actually. GTM's based in Boston, as you may know, and I was there for the first seven out of eight and a half years, I guess. I had lived in California before that, but moved to Boston when my wife started ... my then girlfriend, now wife started grad school. Then, because of GTM, largely, stuck around Boston for most of that time. I ended up moving back to California right after the acquisition when I still had about a year left of my time at GTM. So, I've been back in California for two and a half years now, something like that, but most of the time that I was there, I was in Boston.
Jason Jacobs: Before we talk about the why of what brought you to EIP, one thing that's just been kind of nagging at me is ... So this is called My Climate Journey. I'm specifically looking at how to decarbonize the global economy quickly, efficiently, effectively, and minimize the overshoot, minimize the avoidable suffering, et cetera, just trying to make sense of this thing that the dire drumbeat is getting louder and louder, but there's these labels, right? There's the climate warrior label of someone who ... and you picture the, out in the street, the school walk outs, the sleeping in sleeping bags at Capitol Hill and stuff like that. Then there's just energy entrepreneur, energy investor, and energy, although it's a big driver of emissions, it's an industry, right? It's not ... Climate warrior and energy-fill-in-the-blank are two different things, and there's some overlap in the Venn diagram, but a lot not, right? So I'm curious just given that you spent your whole career in energy, just how think about yourself in that spectrum.
Shayle Kann: I guess I'd like to think that I am in the overlap. I would say that energy is my driving passion, and the fundamental reason that it is my driving passion is that we need to decarbonize the economy, and energy is the majority of that. That is the overarching driver. That's what got me into this in the first place, and everything that I've done has had a climate oriented tie. What I've discovered is that my interest is not exclusively decarbonization. I think that there are a bunch of ways in which we need to and can improve the energy ecosystem. Decarbonization is kind of like this umbrella that sits over most of it, but while we are decarbonizing, we should also be ensuring that, for example, we are more resilient. That's related to climate change. That's related decarbonization. Is it not all about decarbonization.
Shayle Kann: So, I think of myself as I guess being neither just an energy investor or whatever you would call it, nor a pure climate warrior. I'm sort of trying to live in the intersection of those two things.
Jason Jacobs: So, maybe I'll ask a different question then. There's some people that look at the state of the state as it relates to climate change, and they say, "We should be packing up and heading for the hills," and, "We're all screwed," and, "We might as well enjoy a good last meal on the Titanic." Then there's other people that say, "This is way overblown, and we've dealt with way worse as a species. We've dealt with easier. We've dealt with harder. We'll get through this. There's all these balls in motion. We've got this. It's under control and there's no need to panic." So, put aside your work at EIP and put aside you. Just what do you think is going on with the problem? What's your assessment?
Shayle Kann: It's really interesting. I have a bit of a cognitive dissonance in my own mind when I sort of address this problem, which is kind of day to day, as I'm thinking about what is happening in this sector, I'm pretty optimistic. I see the progression of what's happening with renewable energy on the grid. I see the long term opportunity for vehicle electrification. We're starting to see some interesting activity around the sort of sectors that are harder to decarbonize with carbon capture and sequestration, or direct air capture, or industrial electrification, or emissions reductions from new cement manufacturing processes and things like that. I'm excited about all the mechanisms that are becoming available to us to decarbonize. So, day to day, that's my prevailing feeling.
Shayle Kann: On the other hand, once in a while, I do take a step back and I read some new IPCC report, or I see some new climate reporting, and the situation is really dire. Though we are making all of this progress from a technology perspective and from an adoption perspective, at least in some sectors, I mean, it's clear that we're not doing it fast enough.
Shayle Kann: So, I guess my overarching drive at this point is accelerate the pace of all that stuff. So, I'm definitely not a, "Run for the hills, we've lost the battle already," person. I really think we should all be continuing to fight the good fight here, but we're not there yet, obviously. We have to go faster than we're going.
Jason Jacobs: Well, I have a different question then, and it's a build on that since I feel like this is a fertile area that we've landed on. So, there's different approaches in terms of how to go faster. There's some people that say, "We as a species need to rethink everything. We need to rethink capitalism. We need to rethink our own consumption patterns. We need to rethink our own flight patterns. We need to rethink how we eat. We need to rethink how we live. We need to rethink our social graph, our employment, everything," right? Then, there's others that say, "We should be leading with abundance, and not only is abundance a thing that's going to motivate people most from a psychology standpoint, but there's no need to do anything else because all that stuff is like a drop in the bucket, and the big things are going to be behind the scenes and invisible to you and I," right? How do you think about that?
Shayle Kann: Well, I guess as this seems to be a theme here, but you're describing well two poles of thinking, and I want to be somewhere in between them, I guess, which is to say I think that individual action matters from the perspective of decarbonization. I do not think it is going to be the biggest lever. In fact, I don't think it's going to be one of the three or four biggest levers. So, while I am entirely in favor of all of us changing our behavior, personally, I just am somewhat skeptical. From a pragmatic perspective, I'm somewhat skeptical that that is how we are going to decarbonize the economy.
Shayle Kann: So, I'm more focused on inducing systemic change in the markets and enabling the technologies that are available and will become available to see rapid adoption, which to me is a ... It's a more nuanced question, right? We have to think about the ecosystem of ... Let's just focus on energy, right? Forget agriculture and industrial emissions and things like that, because energy's where I spend most of my time. So, we have to look at the world as it exists today, and then say, "Okay, what is the most effective means of decarbonizing this sector, given the constraints that actually exist in the real world," right? We have political constraints, regulatory constraints, technological constraints. We have economic constraints. So, let's account for all those things, and then push as hard as we can within those bounds.
Shayle Kann: I have a harder time with the deeply theoretical, "We need to rethink capitalism," version of this, both because I don't think I'm necessarily aligned with that philosophically, but also because I just don't see how it happens, and we don't have a lot of time to mess around. So, I really like climate plans that are specific, and it's clear how you can implement them, and you know what it would take. Then you can sort of act upon them immediately. Does that answer your question?
Jason Jacobs: It does. It does bring up a new question, which is that you mentioned that you don't think that changing consumer behavior's in your top three or four. What are your top three or four?
Shayle Kann: I guess top three ... I don't know what the order would be of these three, so let's put them all in a bucket. One is figuring out how to more rapidly adopt available technologies, so say solar and wind, or lithium ion batteries, or a lot of distributed energy resources. All this stuff is available. The economics are pretty good, generally, depending on how you account for it and where you are. So, there is a whole world of questions around just how do we deploy this stuff fast, and how do we not break the grid or cause customers a ton of new expenses as a result? That's for the category one.
Shayle Kann: Category two, technological innovation is still required, I think particularly as you start to think on longer time scales. There are problems we haven't solved yet, and we're going to have to solve those problems. So, category two is bring new technology to market.
Shayle Kann: Category three falls in the policy and regulatory world, I guess, which is not unrelated to these other ones, but how do we rethink the ways in which the incentives are built in this market, such that everyone, or at least as much as possible, everyone is aligned, economically aligned around decarbonization? How do we get everybody on the same page, assuming that they are somewhat rational actors?
Shayle Kann: I would put all three of those things ... Those are sort of where I've dedicated my attention over the convincing people to drive less or turn off their lights or whatever.
Jason Jacobs: One of the things I've been wrestling with is I spent my whole career on the innovation side. I've only worked in small, high growth technology companies, and that's kind of my happy place. As I've tried to venture down this climate path, holding decarbonization as the North Star from which to measure if the things I'm doing are the right things based on their degree of impact on the problem, right, it's like pick any place to sink your teeth in as an entrepreneur, like [Beck's 00:31:47] for example, and you find lots of people saying, "This is amazing and we need more of it and it's going to change the game." Then you find just as many people saying, "It sucks and here's all the reasons it won't work." Renewables, same thing. Nuclear, same thing. Long duration storage, same thing. I mean, literally, you go right down the list and pick a thing, and you don't know what to make of it coming as a generalist. That's number one.
Jason Jacobs: Number two is that it's such a systems problem that everything kind of needs to change in unison. You need the innovation to change and the policy and the filibuster and the different president in office. Who cares about what we do in the US because of what's happening in developing countries? It's like, "Aw man, nothing I do is going to matter." So, how do you think about ... because you seem like an optimist, at least from our discussion so far. So, talk to me, because I'm really struggling, to be honest.
Shayle Kann: I think I agree with everything you said about the complexity of it, and that it's a systems problem, and that all these things need to happen simultaneously, but my conclusion is exactly the opposite, which is that everything matters. The result is we need ... Everything you just described, we're going to need some of. We're going to need some systemic change and some policy change and some technological innovation and some deployment of other stuff. I don't know exactly which solutions are going to be the best, but it sort of feels to me like you can't go wrong trying to solve this problem via one of these avenues, if not multiple of them, because we need every single piece of it.
Shayle Kann: So, I guess it is maybe just a more optimistic resulting feeling from what you're describing, but for me, that's also sort of part of why this has been such a passion for so long, is it is. It's such a complicated problem to solve. Any one thing ... Like you said, you can point to 10 reasons why it's not going to work, and the only way that it works is if you're simultaneously balancing it against something else, or you have to make another change, or who knows what happens when this other sector changes, right? All the stuff we're talking about in electricity is going to be affected significantly by the fact that we're going to simultaneously be electrifying transportation, so there's going to be a whole bunch of new electricity load with a new profile. We're just going to have to manage all of that, so you can't take any other question about electricity in a vacuum.
Shayle Kann: So, I find the fact that it is so complicated to be, in some ways, heartening, because it's hard for me to imagine that you would dig your teeth really deep into something that you think could be a big solution, and it's going to turn out to have no impact at all.
Jason Jacobs: I haven't articulated it quite the way that I'm about to before, either on the podcast or I don't think in general, but I think what I'm feeling is that it's been so beaten into me over the years, the value of extreme focus and discipline. "Don't chase shiny things", and, "It's better to be the best at one small thing that adds real utility, and then build from there, than to be okay at a lot of different things." Yet the answer that I keep hearing, to be honest, the answer that I find coming off my tongue when people ask me is, "All of the above. What we do on the consumer side, it doesn't matter because there's these big things ... "
Jason Jacobs: It's like on the one hand, I think it's rational, sound advice from the ... I mean, I've only spent 10 months, but it's been 10 months working like a [inaudible 00:35:09] hours, and these are the things that ... and talking to hundreds of experts, as I've been feeling so far, but there's another side of me that feels like it's a cop out. It's like, "Oh, we don't need to change any of our behavior because it just doesn't matter in the grand scheme of things." It's basically like, "Oh, we just don't want to change our behavior, so we're going to rationalize it so that we don't need to do anything different." Or to take the "all of the above" thing, it's a cop out in that it's like, "Well, everything's under-resourced, so it doesn't matter." It's like, "Yeah, but it's like if there's only so much resource to go around, then we need to choose wisely. Just saying "all of the above" is not actually distinguishing between this sea of choices." So I'm trying to reconcile the tension between those two ends of the spectrum.
Shayle Kann: I like to think both can be true, that ... Look, first of all, "all of the above" has this political connotation that I don't love, but just as a heuristic for how do we solve climate change, we take every solution we can possibly find and then try to do all of it. I mean, I think that's probably right.
Shayle Kann: On the other hand, that ... You're right. It's not an excuse for inaction. You can't just say, "Well, we need all of it, so we don't have to make any hard decisions." We obviously have to make hard decisions. We have to dedicate resources. We have dedicate our own time and attention. So, I'd like to think that we can simultaneously carry the belief that it's hard to make a wrong decision because we do need all of the above, but then actually make the specific decision of, "This is how I am going to dedicate my time and attention and resources. This is the part of the problem that I think I can impact the most."
Shayle Kann: Then you have to feel good about that decision because you know that, "Look, even if this ... " I think some people get hung up a little bit, and it sort of sounds like you're maybe falling into this camp, about, "Okay, I have limited hours in the world and limited resources, so I need to dedicate those limited hours and resources to the activities that can be measured in the largest number of tons of CO2 reduction," right? You could boil it all down to that single thing.
Jason Jacobs: It's like what was drilled into my head as a young entrepreneur. If you aren't focused on a market that has potential, that starts with a B in terms of the size of what you're going after, then why even bother?
Shayle Kann: Yeah, and I appreciate that, right? I think it's good to have that in your head, right? You want to have a big impact, not a small one.
Jason Jacobs: And in this case, it's not dollars. It's gigatons of CO2, let's say.
Shayle Kann: Right, exactly. You want to have a G in front of it for gigaton. While I think that is important, if you only had people doing that, you would miss out on a lot of the important stuff that also has to happen that is smaller and adds up. The most basic level, if you were only ... Let's just say you had ... Say you were deploying capital, and you were the only funder in the world. Then you were only deploying capital into something that could reduce a gigaton of emissions, or something like that. For example, if Breakthrough Energy Ventures were the only investor in the ecosystem ... They're incredibly value doing what they do, but if they're the only one, we would miss out on a ton of value, right, and necessary stuff.
Shayle Kann: So, I guess what I'm saying is give yourself a break a little bit. Recognize your North Star, but then pick a problem that you think you can help solve. If that pushes in the direction of the North Star, I think you're doing something good.
Jason Jacobs: So, putting you aside and putting me aside, because we're not now talking about skill sets. We're just talking about the problem for a moment. There are the people that say that the freer the markets, the better, and that it should be market based, and that we don't need a price on carbon, and it's just the cheapest thing's going to win. Then there's the people that say that, one, no matter what we do on the innovation side, you have to price the externality, but then, number two, even kind of another step, which is that it's like policy will move the needle in an outsized way, relative to all the innovation put together. If we could just get handful of the right policy things in place, then that's going to swing a bigger bat, and if you're really optimizing for impact, that's what you'll focus on. So, how do you think about it?
Shayle Kann: I do think that, to the extent that it is possible, this is again back to sort of pragmatism, but I think to the extent that it is possible to get a price on carbon in one form or another, that is always going to be important. It's going to be increasingly important as we start to deal with the harder to decarbonize sectors where you really are going to need a price on carbon in order to justify it.
Shayle Kann: A good example of this would be if you really want things like direct air capture or CCS or, in most cases, you want a price on carbon to do that. I think that we do need a price on carbon, but I don't think it's right to say that policy is the only major lever here because, in particular, I think that the intersection of policy regulation in this sector and technology is like an ever evolving balance beam that kind of swings back and forth, depending on what's going on at any given time.
Shayle Kann: So, I don't know if this is really answering your question well, but my general attitude has been policy is super important as a driver for innovation and for technology adoption. It's always going to be, and if we're serious about decarbonizing, there's whole swaths of this challenge that we've barely started to address, and so it's going to need a ton of policy support, but it's not a crutch. It shouldn't be a crutch. We, especially in markets where we have more mature, readily available technologies, then you've got a deployment problem. Policy can help there too, but that transitions into a different kind of a challenge, I think. So, if you just say, "Look, all we should do is vote climate," right, if that's all you're going to do, I think that's great that you're voting climate, but I think you're missing out on the ability to be impactful elsewhere as well.
Jason Jacobs: Well, you told me that many days you wake up an optimist given all the innovation and progress that you're seeing on all sides. From your current perch, what's most frustrating to you as you look at the clean energy transition? If there's one thing you wish you could change, what is it and why?
Shayle Kann: I still think that ... I don't have a lot of data to back this up, so maybe I'm wrong, and somebody can tell me if there's data that suggests otherwise. My perception is that most people who are not us, who are not living and breathing this stuff, most people still have pretty significant, outdated misconceptions about the cost of particularly renewable energy. I think that if you ask the average person, particularly in the United States, give them a chart, and you tell them to just put dots on a chart for how expensive different resources are, my guess is that they would get it way wrong, and that they would think that renewables are a lot more expensive than they are.
Shayle Kann: That's a public perception challenge that I think then permeates policy and how people vote. It permeates how people think about climate change and how to address it. It makes people less likely to adopt. So, if I could change one thing, I would just snap my fingers and have everybody in the world know Lazard's LCOE comparison chart, or something like ... and know what it means, right? Just understand the state of the technology, because I think that would be really helpful if we didn't to fight this historically driven, outmoded view of what renewables are and what it would cost to get them deployed.
Jason Jacobs: I'll make sure to go, and I'm sure our listeners will as well, go and look up that chart, and we can link to it in the show notes. In the mean time, can you take a stab at explaining what we would see if we did look at it?
Shayle Kann: I mean, the short version of it is that on a pure levelized cost basis, lifetime cost basis, these days, wind and solar tend to be the cheapest resource available. Natural gas is down there as well. It depends on the cost of natural gas, but they are, at a minimum price, competitive. This plays out in the real world market too. If you are a utility in the United States and you want to put out an open source RFP and say, "I just need X gigawatt hours from any resource," the cheapest bids that you're going to get right now are going to either be wind or solar, depending on the resource profile and your location. So, it is affordable.
Shayle Kann: Now, lots of folks will say, "Well, yes, but it's not dispatchable, so it's not exactly apples to apples," but increasingly now, we're seeing these wind and solar projects get batteries attached to them, shifting the generation from, say, in the case of solar, midday to evening when you have a peak, and it's still cost effective, relative to whatever other resource they could procure. So, the short version of what they would see in the chart is just like, "This stuff is cost competitive, full stop."
Jason Jacobs: I don't claim to be an expert on somebody like, let's say, on Michael Shellenberger's writing, but I know that when someone says the things that you just said, then if Michael Shellenberger, as an example, were to overhear it, he would not only say that nuclear needs a seat at the table, but that the hyper on renewables is way overblown, and that nuclear should run the table. I'm not saying I agree with that perspective, but I guess I'm just asking you, for someone like me who's just coming in off the street and trying to get up to speed on this whole world, what would you say about his writing, for example, and how would you counter it?
Shayle Kann: I haven't read his writing closely enough to counter it specifically, but with that line of reasoning, I would separate out two different things that you said. The first is the "hype around renewables is overblown" thing, and that one I don't have a lot of respect for. Just showing levelized cost of solar versus levelized cost of gas, for example, is not an apples to apples comparison, exactly. So, it is ever so slightly misleading to do so without adding some additional context, which is what I was trying to do by saying, "Look, you can add batteries to that solar and make it somewhat dispatchable, and still have it be cost competitive at this point." You can make an argument that it's still not quite apples to apples. I would counter that no resource is infinitely dispatchable and infinitely flexible. There are minimum capacities for gas and all this kind of stuff too.
Shayle Kann: So, I think the "renewables are cost effective" question, I think, is answered, personally. The answer is yes. Should they be 100% of all of our power? That's a different question, and I'm all for nuclear, personally. I think, great. We should have it as part of the mix. If we could build it cost effectively, if it can win a procurement, it can deliver real, meaningful value, particularly as we get to the higher levels of penetration of renewables.
Shayle Kann: So, that's why, for me, I would separate ... I don't think you have to knock wind and solar in order to prop up nuclear. I think they can coexist in a deeply decarbonized system, and in fact, nuclear is probably one of the four or five potential resources that can be a solution to the seasonal challenges you get when you get to really high penetration renewables.
Jason Jacobs: I mean, to be honest, that's the perspective that seems logical to me as I continue to learn more about these areas, and with the asterisk that I'm very much still in learning mode, but I mean, some of these people are just adamant, on both sides, actually, and just bang the table and ... I'm not equipped to go through surgically and refute point by point, or even assess point by point, but it just ... To me, it doesn't pass the sniff test, that it's got to be all one or all the other, but that's kind of what I have to go on.
Shayle Kann: I get the perspectives that people have ... The folks who say that we shouldn't include nuclear in the mix, they're coming from concerns that are broader than just climate change. They're worried about meltdowns, whether or not that's warranted. They also think that, "Look, realistically, nuclear hasn't proven itself to be cost effective at this point. We have huge cost overruns, and it takes decades to build a plant."
Shayle Kann: I get what they're saying. I don't see any reason why we don't incorporate it into especially long term decarbonization goals, right? Why not give it a shot? If it doesn't succeed, it doesn't succeed. It may be unnecessary, ultimately. If we have massive success building out long duration energy storage, or a whole bunch of new transmission, or if the hydrogen economy takes off and we can do power to gas, we may not need all this dispatchable clean energy, but who knows? You can't be certain of any of that.
Jason Jacobs: I got one more question, and then just a couple of kind of stock questions I ask every guest. The Shayle specific question is just, the one other vector that I've been trying to make sense of the innovation side of the equation is you've got these big giants, the utilities and oil and gas. I mean, they're not the same. They're different from each other, but they're kind of the big incumbents. On the utility side, I hear a lot about incentives being screwy and deregulation and things like that. Oil and gas, I hear about interests in trying to milk everything while they can, even though they know the party's ending, and where they might say one thing, but then quietly, behind the scenes have their trade group doing another, and working actively against the thing that they're verbalizing they're a proponent of.
Jason Jacobs: So, I guess when you look at the innovation side, and you're kind of very well situated where you have a leg in both camps with the big utilities and with the early ... Even though you're doing growth investing, I would still call it early innovation. What is the role of the big incumbents in the energy future, and what is the role of startups, and how much of what is there currently will be displaced versus evolving?
Shayle Kann: Look, I mean, I think the first thing for me that I constantly am reminded of is that none of these big organizations are monolithic. They can be multiple things at once. It can both be true that Shell, for example, is deploying more capital into clean energy than basically any other company in the world, and simultaneously part of a trade group that is fighting climate regulations. Both of those things can coexist, and in fact, do coexist with a lot of these companies.
Shayle Kann: The question then for me is how do we deal with that? Because the incumbents, be they the utilities or the oil and gas companies, they have enormous influence, not just political and regulatory influence, but they have the actual capacity to make change in a way that dwarfs what anybody else can do. Shell can spend one or two billion dollars of CapEx a year in their new energies business, and that accounts for whatever it is, five percent of their annual CapEx. So, five percent, great. You want it to be more, but on the other hand, that's one to two billion dollars a year that they're spending on this stuff.
Shayle Kann: So, for me, it's like how do we help these companies make this transition faster? They all have their own incentives, and if you're a utility, you are highly incentivized to maintain reliability and remain equitability and low cost for customers. Your regulators are absolutely focused on all those things, and may additionally be focused on decarbonization, but never at the expense of any of those other things.
Shayle Kann: So, how do you ensure that they can make this transition in a manner that maintains all those other things? If you're an oil and gas company, you do still have a lot of assets that are out in the field, and you're still doing exploration and stuff. So, how do we just push them to move faster, and to take the investment that they're making in these new technologies really seriously over the long term so that there's no risk of them kind of dialing back five years from now? Which is what happened originally. Yeah, to make sure that they don't give up on it after a few years, which is what happened originally. BP was the leader in solar for, I don't know, a couple of decades, and then totally got out of the solar business back, I don't know, a decade ago or so, and then has taken a while to sort of come back around to it. So, let's make sure that doesn't happen this time, and then from my perspective, the more seats at the table who are trying to push decarbonization, the better.
Jason Jacobs: So, if someone gave you, let's say, 100 billion dollars, and they said you could ... The one condition is you need to put it towards whatever you think will maximize its impact in the decarbonization. Where would you put that money, and how would you allocate it?
Shayle Kann: That would be a fun problem to have, to figure out where to deploy all that money. My first thought is that I would split the money roughly correlated with the emissions from any given sector. So, if the power sector is 40% of global emissions ... I don't remember what the numbers are exactly, but if the power sector's 40%, I allocate 40% of the dollars into the power sector, do the equivalent thing in industrial and agriculture and transportation. I don't know if that's actually the right way because we're further along in understanding how to decarbonize some sectors versus others, but it could still make sense from the perspective of, "We just have a lot of tons to reduce in power and transportation."
Shayle Kann: So, I guess I'd start by kind of splitting my dollars by sector, and then in each sector, I'd try to figure out what the most effective thing that I could do would be. For example, the power sector, you need some mix of deployment and innovation capital, obviously, but one of the things that you might try to figure out is how do I enable early retirement of all the remaining coal assets on the planet in a way that doesn't cost rate payers another dime? That would be an enormously impactful thing, if you could do it. If you could buy down, essentially acquire and shut down, or just buy down the cost of every single coal plant in existence, I think that might be one of the biggest levers that you could pull.
Shayle Kann: So, I'd start to think about stuff like that if I've got that much resources to deal with. 100 billion dollars might not do it now that I'm thinking about it. Could I have a trillion?
Jason Jacobs: Yeah, I was going to say, yeah, your first reaction was, "That's a lot." Then once you get into it, it's like, "Eh, given to what we need to spend, gosh, that 100 billion just goes like that."
Jason Jacobs: My last question is just, you mentioned before that all of the above, and you should figure out a lane that works for you, but just maybe speak to the listeners for a moment that are trying to find that lane for themselves. What advice do you have for them in figuring that out?
Shayle Kann: I think that, for me anyway, I like learning broadly, and then seeing where I naturally start to fall down rabbit holes. Read widely. Speak widely to lots of people. Attend events. If you want to get immersed in the ... You're doing a version of this now, right, which is like an extreme version, but there's probably some lesser version of it, which is explore this sector and this transition as widely as you possibly can. Then give yourself the freedom and leeway to basically fall into something where you want to go really deep, if it presents itself to you.
Shayle Kann: Because ultimately, like I said before, I don't think you can perfectly predict what's going to be the single most impactful things you can do from a climate perspective, but I think what you can do is find something that makes you passionate, or at a minimum, passionate is a word that I think gets thrown around in career conversations maybe even too much. Find something that fascinates you, and that you're willing to dedicate a lot of your limited time on earth to thinking about and working on. Then just do that. As long as it falls under this umbrella, then it's a good thing to do.
Jason Jacobs: Should we make that your parting words, or are there anything else that I didn't ask that I should have, or any parting words for listeners, beyond that great sermon that you just ended with?
Shayle Kann: I'm in. I've got nothing else. I'm spent.
Jason Jacobs: Great. Well, other than a couple of technical glitches, I thought this was a great discussion, and I thank you so much, Shayle, for coming on the show.
Shayle Kann: Yeah, thank you for having me. Really fun.
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 .co, not .com. Someday we'll get the .com, but right now, .co.
Jason Jacobs: You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode, or suggestions for future guests 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. (silence)
