Megawords, not Megawatts: Introducing my New Monthly Podcast

This month I will begin podcasting conversations with leading professionals in energy, climate, and sustainability (tentative title for the series: Power Talk).  My aim is for Charlie Rose-style interviews that offer lively and informed discussion of key issues.   Unlike Charlie Rose, however, I hope to open up the conversation to include anyone eager to participate via phone, email, blog comment, or Twitter.

ImageMy first guest will be Eric Maltzer, formerly of the U.S. State Department’s Office of Global Change (i.e., America’s international climate negotiations team).  From 2005-2009 Eric served as a clean energy negotiator for this 20-person team and advised U.S. diplomats and foreign counterparts on energy and climate issues.  He also managed the U.S.-China climate portfolio through the EcoPartnerships forum and other initiatives.  Eric and I will be discussing the outlook for UN climate negotiations, the political landscape for climate policy in the US, and where China is headed on energy and climate issues.

Please share your questions for Eric via comments to this post, emails to Reid.Capalino@gmail.com, or tweets to @RCapalino.  Details to come on the exact broadcast date.  We look forward to hearing from you!

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Eric Maltzer, currently an MBA student at MIT’s Sloan School of Management, was until August a Foreign Affairs Officer in the Office of Global Change (i.e., America’s international climate negotiations team) at the State Department. In this role, he served as a clean energy negotiator for the 20-person team and an expert resource on energy and climate change for U.S. diplomats and foreign counterparts.  Eric also managed the U.S.-China climate portfolio and the sub-national engagement portfolio in that office from 2010-2013.  Before joining the State Department, Eric was an environmental strategist in the Boston office of Esty Environmental Partners. Eric has a Master’s in Public Policy (M.P.P.) from Harvard’s John F. Kennedy School of Government and a B.A. from Yale University.

“Sometimes you don’t get to pick the perfect fight” – Comments on the Politics of Keystone XL

This week’s New Yorker profiles the movement prevailing on President Obama to oppose construction of the proposed Keystone XL oil pipeline.  To this excellent article, I’ll merely note the following: whatever the Administration’s conclusion as to whether this pipeline will “significantly exacerbate the problem of carbon pollution,” there remains a clear political rationale for opposing it as part of a larger climate strategy.  Withholding approval for Keystone XL could make it a bargaining chip in future negotiations over comprehensive climate legislation – thereby giving the President (or whoever succeeds him) sorely needed leverage with members of Congress from oil-and-gas states.

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In his June climate speech the President reaffirmed his support for a “bipartisan, market-based solution to climate change, like the one that Republican and Democratic senators worked on together a few years ago.”  As detailed in another New Yorker piece from 2010, the last major effort to enact a “bipartisan, market-based solution” died in the Senate amid near-complete opposition from Republicans and weak support from Democrats in coal/oil-and-gas states.  Securing 60 votes for any future such legislation is likely to require every conceivable source of leverage; recall that the beginning efforts to court Republican and industry support for the 2010 Kerry-Graham-Lieberman bill included promises to, among other things, vastly expand offshore oil drilling along the East and Gulf Coasts and pre-empt the EPA’s approval to regulate greenhouse gas emissions under the Clean Air Act.

Unseemly (and, in the case of Kerry-Graham-Lieberman, futile) as this political horse-trading may be, it will be essential to shepherding any “bipartisan, market-based solution” to climate change through Congress (just as backroom deals were key to passing the Affordable Care Act).  The Administration ought therefore to be stock-piling every possible source of leverage to be used in future climate negotiations.  Continuing Republican efforts to force the President’s hand on the Keystone XL decision suggest the approval permit for this pipeline to be a potentially valuable chip indeed.  Even if credible climate legislation does not surface for a few years, the Administration could help lay the groundwork for its success by withholding approval for the Keystone XL pipeline.

Preserving Keystone XL as a bargaining chip in future climate negotiations will enable the Administration to compensate for some of its previous gaffes in this area.   During the 2010 push for the Kerry-Graham-Lieberman bill, the Administration repeatedly rolled out energy/climate policies favored by Republicans and moderate Democrats – expanded offshore drilling,delayed implementation of EPA carbon regulations, billions in nuclear loan guarantees – without extracting any cooperation in return.  This effectively squandered the inducements that Kerry-Graham-Lieberman could have used to solicit votes.  Approving the Keystone XL pipeline risks repeating that same mistake.  When comprehensive climate legislation again reemerges in the US Congress – a development that, however distant it may now seem, is the President’s own avowed goal – climate advocates will be in a stronger position if they can use pipeline approval as a means to bring reluctant colleagues to the table.

The idea of maintaining the Keystone XL as a politically controversial energy issue (similar to the status of oil drilling in the Alaska National Wildlife Refuge) is open to criticism.  Perhaps the Canadians will instead ship oil to the Gulf Coast by rail and/or build pipelines to export oil from their coasts (though a pipeline to the Gulf will always be more cost-effective than rail, and new pipelines within Canada will take years to build).  Perhaps the strategy will backfire and diminish support for action on climate change (though a grassroots “build Keystone” movement has yet to materialize).  Perhaps, after bowing to popular pressure to oppose the pipeline, it is unrealistic to expect President Obama (or any Democratic successor) to reverse the decision (though, as noted, past negotiations over comprehensive climate legislation have effectively put everything on the table).  Or, perhaps Republicans – though eager to torment the President over Keystone now – will simply never care about building a pipeline to Canada enough to endure the blow-back from climate deniers in their own party.  In my view, the need for all available leverage to pass future climate legislation justifies accepting these risks.

The grassroots anti-Keystone movement has succeeded at forcing President Obama to reconsider what had seemed a foregone conclusion.  At the end of the New Yorker piece, billionaire environmentalist Tom Steyer observes that: “Sometimes you don’t get to pick the perfect fight.  Sometimes, someone punches you in the face and you’re in the fight.”  As President Obama decides whether to approve Keystone XL, he ought to favor a decision that will strengthen his hand in the fight he does want – the fight in Congress for a market-based solution to climate change.  The demands of that fight suggest withholding approval for Keystone XL to be the politically smart move.

Yes to Efficiency, Resilience, and Renewables, No to a “War on Coal”: DOE Secretary Moniz Speaks at Columbia

Yesterday afternoon Secretary of Energy (and my former professor) Ernie Moniz addressed a packed house at Columbia University’s new Center on Global Energy Policy.  Moniz’s remarks demonstrated to me that (1) given the inaction of Congress, the Administration’s “Climate Action Plan” is about as comprehensive a “Plan B” as one can expect to reduce carbon pollution and prepare for the impacts of climate change; and (2) his combination of technical and political savvy are already making Moniz an extremely effective DOE head.  Notes on the key points of Moniz’s talk are below.

REUTERS/Kevin Lamarque

REUTERS/Kevin Lamarque

Resilient infrastructure (“not just about building sea walls”): Noting the coming one-year anniversary of Hurricane Sandy, Moniz emphasized the vulnerability of our energy infrastructure to super-storms, water scarcity, and other climate-driven trends.  Examples of this vulnerability include:

  • Hurricanes destroying (or forcing temporary closure of) oil and gas production and refining facilities around the Gulf of Mexico – a trend that has caused $8 billion in economic losses over the past few years.
  • Droughts diminishing the supply of cooling water for thermoelectric power plants and flowing water for hydroelectric plants (hence causing plant shutdowns).
  • Power lines and other electrical grid equipment being damaged by storms (as in Sandy) or wildfires (as is currently happening around San Francisco)

To counter these growing threats to US infrastructure, Moniz described the Administration’s Climate Action Plan as including a “step change” improvement in adapting the built environment to better withstand the physical impacts of a warmer climate.  To wit, prior to his talk Moniz had been in New Jersey signing a Memorandum of Understanding with Gov. Christie to build a micro-grid for New Jersey’s transit system that – in the event of a larger system will failure – will keep the trains and buses running.  Impressively, Moniz described the proposed NJ Transit micro-grid as including 50 Megawatts (MW) of distributed generation technologies such as batteries and solar panels (50 MW being capable of powering roughly 16,000 homes).  Moniz touted the New Jersey project as a harbinger of increased federal collaboration with states and localities to build smarter and more resilient infrastructure (or, as the Secretary put it, moving climate adaptation beyond “building sea walls”). 

Energy Efficiency (3 billion tons of “low-hanging fruit”) : Flush with Recovery Act dollars, Secretary Chu (Moniz’s predecessor at DOE) often began his speeches by detailing recent investments by ARPA-E, the Loan Guarantee Program Office, and other new DOE initiatives to fund clean energy innovation.   Moniz praised those programs but – in a nod to leaner fiscal times – chose instead to emphasize DOE’s role in setting standards for the energy efficiency of buildings and appliances.  For example, the Department will soon propose new, national standards for the energy efficiency of walk-in coolers and freezers, metal halide lamps, commercial refrigeration equipment, and electric motors.  The American Council for an Energy-Efficient Economy projects that, by 2035, stricter standards for these appliances could reduce energy bills by $3.8 billion annually and CO2 emissions by 26 million metric tons annually.

Moniz emphasized that although reducing CO2 emissions by “a few million tons annually” can seem insignificant – 2012 US CO2 emissions from energy demand were 5,3 billion tons- the collective impact of energy efficiency standards across the entire economy yields very significant reductions in both CO2 emissions and consumer energy bills.   Hence the Administration’s pursuit of a suite of new standards that (when combined with standards enacted during President Obama’s first term) will by 2030 reduce CO2 pollution by 3 billion tons annually (i.e. an amount equal to 56% of total 2012 energy-related CO2 emissions).  If energy efficiency is the “low-hanging fruit” of climate change policy, 3 billion tons of avoided CO2 would indeed be quite a bounty.  (For more on energy efficiency, see my Addendum below.)

Obama energy policy NOT a “war on coal”: Critics in Congress and industry attack President Obama’s Climate Action Plan as a “war on coal.”  As evidence critics point to EPA proposals to regulate greenhouse gas (GHG) pollution from new and existing power plants – the latter of which, they claim, will precipitate closure of 285 coal-fired plants in 32 states.  Moniz deftly rejected the “war on coal” charge, noting that DOE”s Loan Guarantee Program has recently set aside $8 billion to support innovative fossil energy projects such as carbon capture and storage (CCS) systems.  The risks of climate change demand action to move America toward a less carbon-intensive energy mix (hence the EPA regulations); at the same time, the Administration is supporting development of technologies that will enable all of America’s energy sources – including coal – to compete in a carbon-constrained marketplace.  Though unlikely to mollify Obama’s most strident critics, Moniz’ explanation of the Administration’s energy policy is to me quite persuasive.

A sensible, science-based approach to fracking: Questions from the audience focused predominantly on hydraulic fracturing (“fracking”) and the related issue of fugitive methane emissions from unconventional natural gas production.  Amid sporadic heckling from one audience member, Moniz articulated three points:

  • Worse than coal?  Probably not: Contrary to the findings of some researchers that gas from shale wells is over its life-cycle worse for the climate than coal, Moniz referenced newer findings that shale gas has not substantially changed the overall GHG intensity of natural gas production (i.e. that shale gas is still less GHG-intensive, hence better for the climate, than coal).  While this topic is complex and justifies a longer post, Moniz’s emphasis on actual data – as opposed to blind assertions – is comforting.
  • “Manageable” does not mean “being managed”: Some in industry dismiss environmental concerns about fracking by insisting that any issues are manageable through sound engineering.  Moniz rightly noted, however, that a solution (i.e. sound well-casing) being available is different from a solution being implemented.  He then stressed the importance of ensuring consistent application of best practices (though declined to offer or endorse any specific ideas on how to do this).
  • Focus on the system (not just the well): Finally, beyond preventing leaky wells, Moniz noted the importance of also reducing leakage of methane from pipelines, compressor stations, and other aspects of the natural gas system.  This ought to be a focus of the Administration’s new “comprehensive, interagency methane strategy.”

Particularly given the potential for unconventional gas production to spread to other countries (the Secretary specifically mentioned China, Argentina, and Eastern Europe), one hopes Moniz will use his perch at DOE to help ensure that the environmental issues around fracking are in fact “being managed.”

Wait-and-see on nuclear: Echoing some of my points in last week’s post, Moniz articulated a “wait-and-see” approach toward investment in new US nuclear reactors.  The most pressing issue is for the four new reactors being constructed in Georgia and South Carolina to reach completion on-time and on-budget (which, at this early stage, still looks feasible).  A second issue is to implement a new long-term solution for storing nuclear waste (a topic on which Moniz has helped to formulate recommendations).  Progress on both those fronts (and, I’ll add, higher natural gas prices) seem prerequisite for any significant, sustained investment in new nuclear power plants.

Overall a very encouraging afternoon.  With any luck Moniz will return to NYC a few years from now to share DOE’s many accomplishments under his leadership.

Addendum for the wonks among you (energy efficiency and the Social Cost of Carbon): Moniz reported increased DOE engagement with OMB’s Office of Information and Regulatory Analysis (OIRA) to expedite approval of new energy efficiency standards.  Encouragingly, he noted that – in calculating the costs and benefits of proposed regulations – OIRA has begun to use a revised Social Cost of Carbon estimate of $36/ton.  The new higher figure reflects, in part, more explicit representation of economic damages due to sea level rise.  May better accounting for the costs of carbon pollution enable pollution-reduction policies such as energy efficiency standards to pass regulatory scrutiny more quickly!

Tough Economics and Loose Nukes, not Environmentalists, Are Biggest Obstacles to Growth of Nuclear Power: Comment on Eduardo Porter NYT Column

In yesterday’s Times, Eduardo Porter makes the case for nuclear power as a means to combat climate change.  Though Porter is right to emphasize the potential role for nuclear power in reducing greenhouse gas emissions, he both misdiagnoses the causes of nuclear power’s current woes and overlooks legitimate risks associated with its scale-up.

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Getting the story straight: Prospects for new nuclear power plants vary considerably across the globe.  The future for nuclear is bleakest in Germany and other European nations that have made political commitments to ban construction of new reactors and phase out existing programs (post-Fukushima, Japan may ultimately join this category as well).  The future for nuclear is brightest in China and other Asian economies in search of new (non-polluting, energy secure) sources of base-load power; through 2035, the IEA projects that developing Asian economies will add 147 GW of new nuclear capacity (an amount equal to nearly 40% of current installed nuclear capacity).  Somewhere in between Continental Europe and Asia is the United States, where the politics permit new nuclear development – Southern Company recently began construction on the first new US nuclear plant in three decades – but the challenging economics of nuclear have so far deterred investment in new reactors.

Bane of US nuclear industry is economics, not environmentalists:  Porter suggests that the US nuclear industry essentially never recovered from the public backlash following Three Mile Island and Chernobyl; one could label this the “Ralph Nader and Carly Simon killed the atom” thesis.  Regrettably, this does not correspond to reality.  Through 2009 the combination of high natural gas prices and concern about climate regulation led to talk of a “nuclear renaissance,” with utilities across the country planning dozens of new projects; what has done in (or delayed) nearly all of these projects is not a groundswell of environmentalist opposition, but a nosedive in natural gas prices – from $13/MMBtu in 2008 to $3.55/MMBtu today.

Current gas prices in the US make the cost of electricity from a new nuclear plant more than 60% more expensive than electricity from a new natural gas combined-cycle plant.  By depressing wholesale power prices, cheap natural gas is making it uneconomic to even maintain existing nuclear plants, let alone invest in new ones.  To wit,  the Department of Energy has yet to find any takers for the remaining $10 billion in loan guarantees it has set aside for nuclear projects.  Getting this money out the door – and two to three new reactors in the ground – would strengthen confidence that new US reactors can (with some level of government assistance, in at least some markets) be a sensible investment.

Can nuclear power be decoupled from nuclear weapons?:  Porter rightly emphasizes that the “merciless arithmetic” of climate change will be averted only through rapid global deployment of low-carbon energy sources.  Yet he overlooks how building new nuclear plants on the scale and time-frame necessary to affect climate change may increase proliferation of nuclear weapons.  The current technologies of civilian nuclear energy (enrichment of uranium and, in some cases, reprocessing of spent plutonium) and framework of governance over the nuclear fuel cycle (each country sets its own rules) do far too little to separate the virtues of nuclear power from the dangers of nuclear weapons.

In a 2009 paper titled “Balancing Risks: Nuclear Energy & Climate Change,” Princeton professors Robert Socolow and Alexander Glaser examine the tradeoffs surrounding a large-scale expansion of nuclear power.  To craft a scenario where new nuclear plants contribute significantly to reducing CO2 emissions (i.e. where nuclear becomes a “stabilization wedge“), the authors contemplate increasing global nuclear generating capacity four-fold over the next four decades – from 394 GWe in 2010 to 1,500 GWe in 2050.  A nuclear build of this magnitude will necessarily involve developing nuclear plants “in regions that are politically unstable today” – thereby, in the judgment of these two experts, creating “significant” additional risks of nuclear terrorism or even regional nuclear war.   Such perils underpin the authors’ conviction that – despite its potential to mitigate climate change – “the world is not now safe for a rapid global expansion of nuclear energy.”

As to what would make the world safer for a rapid global nuclear build-up, Socolow and Glaser recommend:

  • Greater progress toward nuclear disarmament: As of today there are still more than 20,000 nuclear weapons in the world.  Nuclear powers have been reluctant to trim their arsenals, and many countries without such weapons see getting them as the key to status and long-term security.  This logic reinforces the unfortunate relationship between civilian nuclear power and nuclear armaments.  Continuing the efforts of the Obama administration and others to rid the world of nuclear weapons will help build momentum for changes (discussed below) necessary to reduce the link between nuclear power plants and nuclear weapons.
  • An end to fuel reprocessing to separate plutonium: In order to ensure a reliable supply of nuclear fuel, six countries (chiefly France, India, Japan, and Russia) reprocess their commercial spent fuel in order to separate fissionable plutonium.   Separated plutonium, however, a critical ingredient for the production of nuclear weapons – hence vulnerable to being diverted to military uses  or acquired by terrorists.   Given that global uranium reserves are sufficient to enable a major expansion of nuclear power without the need for plutonium, Socolow and Glaser recommend phasing out reprocessing and moving all countries toward the “once-through” fuel cycle.
  • Uranium enrichment plants under multinational ownership and control:  Nuclear reactors need enriched uranium – that is, uranium with a sufficiently high content of the U-235 isotope.  While nuclear fuel from a commercial enrichment facility cannot form the basis of a weapon, the same facility can in principle manufacture weapons-grade “highly-enriched uranium.”  To reduce the risk of rogue enrichment facilities (such as Iran’s Natanz plant), Socolow and Glaser urge bringing all enrichment facilities under multinational ownership and control.  How to motivate countries to cede national ownership of the nuclear fuel cycle is a thorny issue.  That said, any strategy for scaling up nuclear power must include a plan to safeguard uranium enrichment plants.

Socolow and Glaser’s reminder that “nuclear war is a terrible trade for slowing the pace of climate change” is a necessary addendum to Porter’s conclusion that “if nuclear power is to play a leading role combating climate change, it should start now.”  Making nuclear power a part of the solution to climate change should start now – but, in addition to breaking ground on new plants (such as those needed to at least maintain the current 19% nuclear share of the US power supply), these efforts must include new technology choices and structures of governance that disconnect the growth of nuclear power from the spread of nuclear weapons.

Addendum for true energy nerds (more on the economics of nuclear):

What of Porter’s reference to the 2010 International Energy Agency (IEA) finding that, with a $30/ton price on CO2, “a new generation of nuclear power… is potentially the cheapest energy source of all”?  Though the IEA’s projections for Europe and Asia may be sound, note that the assumed natural gas price for North America ($7.78/MMBtu) appears high relative to both current and projected future prices; for example, the latest Energy Information Administration reference case for the US electricity sector does not see a natural gas price above $7/MMBtu until 2036.  Because fuel costs account for 75% or more of the levelized cost of electricity from gas turbines, the IEA’s gas price assumption for North America disadvantages the projected costs of gas-fired plants relative to nuclear plants.

Assuming instead a North American gas price around $4-5/MMBtu, then even with a $30/ton price on CO2, gas-fired plants with carbon capture and storage (CCS) are likely to be competitive with new nuclear plants.  My point here is not to dismiss new nuclear plants as a potentially cost-effective source of low-carbon energy (delays at projects such as Finland’s Olkiluoto 3 nuclear plant notwithstanding); rather, it is merely to qualify Porter’s enthusiasm about the projected costs of nuclear relative to other technologies (notably, gas-fired plants with CCS).  Rather than tout the competitiveness of nuclear in a world with a $30/ton CO2 price, the focus should be on legislative and regulatory efforts to actually make that $30/ton CO2 price a reality.

Don’t Hire the Resume – and Other Team-Building Tips from Cleantech Pros

Following up on yesterday’s post about sales and marketing, today I summarize key takeaways from last week’s Cleantech Open Northeast panel on “Building Your Team.”

  • Don’t “hire the resume”: Panelists uniformly discouraged early stage companies from “hiring the resume” – hiring a candidate based chiefly on her track record/industry expertise, without regard to whether the candidate will thrive in a start-up.  Recognizing that “a start-up is not a smaller version of large company,” executive recruiter Kevin Brown (Hobbes and Towne Inc.) emphasized the need the consider whether a person can transition to the informal and fast-changing environment of an early stage company.
  • Smart, smart, smart – but not an ass!@#*:  In response to a question about the qualities she valued in a team member, entrepreneur Pat Sapinsley (Watt Not and Build Efficiently) replied that the ideal team member would be “smart, smart, smart – but not an ass!@#*.”  More generally, panelists tossed about various phrases – people sense, team smarts, EQ – to underscore the importance of “fit” in a start-up environment.  As to how one best assesses a candidate’s potential “fit”, recruiter Kevin Brown recommended spending ample time with the person; Brown’s hiring process at Hobbes and Towne evidently included five long dinners with one of the firm’s co-founders.  Such conversations can illustrate how a person relates to others far more effectively than a formal interview.

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  • Consult references not supplied by the candidate: In a 2011 NYT “Corner Office” column, Bing Gordon of Kleiner Perkins allowed that – when hiring – he likes “in person meetings for chemistry and references for truth.”  Following on this thread, Pat Sapinsley further emphasized the importance of going beyond references supplied by the candidate.  She advised informing candidates upfront that part of the interview process will involve seeking input from a candidate’s previous colleagues.
  • Formula for team success?: Investor Oliver Guiness (Clearpoint Ventures) described how – in evaluating potential deals – much of his focus will be on understanding whether or not a team can work effectively together.  At a minimum, Guiness endorsed the conclusions of a study by Josh Rogers and Matthew Nordan on “what makes a great cleantech team“; after surveying 37 cleantech businesses (both successes and failures) and 122 executives within these businesses, Rogers and Nordan concluded that “winning cleantech start-up teams are complete at founding, have strong pre-existing relationships, and include the inventor of the core technology.”
  • Have the talk (the dilution talk, that is): As a fellow at Harvard’s Wyss Institute for Biologically Inspired Engineering, Pat Sapinsley helps scientists to bring technologies from the lab to the marketplace.  A critical step in this process is explaining to scientific founders the inevitable dilution that accompanies becoming part of a venture-backed company.  To make the conversation less personal, Sapinsley apparently directs founders to resources such as Hutchinson Law Group’s “University Spinout Founders Handbook.”  Even for companies formed outside the realm of Harvard labs, early and frank conversations about future dilution of founder’s equity are useful to remove a source of potential bitterness.  In addition to the resource above, I would also recommend this helpful note from Marty Zwilling and Matt Nordan’s “cap table template.”
  • Lose the pyschometrics: An executive recruiter in the audience questioned the panelists about the role of pyschometric evaluations (e.g. the Myers-Briggs Type Indicator) in the hiring process; many large corporations (including GE and Bridgewater) favor such testing for its alleged helpfulness in predicting “fit” and reducing employee turnover.  Panelists were generally cool toward the idea of submitting candidates to psychometric tests, preferring the more informal “five dinner” method describe above.  In addition to questioning the predictive ability of such tests, panelists worried that (1) forcing a candidate to complete a battery of tests will potentially sour her view of the firm; and (2) asking only some, but not all, candidates to complete such tests may expose a firm to liability for discriminatory hiring practices.  While investor Oliver Guinness did acknowledge a role for pyschometrics in helping to clarify personality types within an existing team, this panel did not advocate that start-ups begin making Myers-Briggs a mandatory part of the hiring process.

Make it Rain: Recap of Cleantech Open Sales & Marketing Workshop

Last Thursday the Cleantech Open Northeast organized a doubleheader of industry panels on “Go-to-Market/Sales & Marketing” and “Building Your Team.”  The panelists – a group of eight entrepreneurs, investors, and service providers – shared useful insights about how to grow a cleantech business.  Below is a summary of the key takeaways from the “Go-to-Market/Sales & Marketing” panel; tomorrow I’ll post takeaways from the “Building Your Team” panel.

  • Start with Why: Drawing on the work of Simon Sinek, David Droz of Urban Green Energy urged companies to “start with why” –  to begin dialogues with potential customers by emphasizing why the company’s product is relevant to the customer’s needs.  Only after establishing the initial “why” does it make sense to proceed to the how (how the customer’s needs can be met) and what (role of the company’s product in meeting those needs).  H.G. Chissell (Viridity Energy) effectively illustrated this approach by noting the burden of escalating peak power prices – “too many people using electricity at the same time and, increasingly, in the same place” – for large electricity consumers; consumers can minimize this burden reducing their exposure to peak power prices, and this is what Viridity’s price forecasting and demand-response software enables consumers to do.
  • Sell pragmatism, not idealism: Bob Mitchell (Quench USA) advised start-ups to think carefully about which aspects of their value proposition will resonate with customers.  Quench USA sells office water coolers that filter tap water (essentially giant Brita filters), thereby relieving customers of the need to continually purchase 5 gallons jugs of Poland Spring.  As described by Mitchell, Quench’s initial value proposition to customers was “saves money, more convenient, better for the environment.”  It soon realized, however, that office purchasing managers – who are evaluated on their ability to reduce company expenses – cared far more about saving money that they did about improving the environment.  More generally, Mitchell urged any B2B cleantech start-up to recognize that commercial customers generally base buying decisions on pragmatic considerations e.g. money and time saved) rather than idealistic ones.
  • Marketing differs for B2B, B2C (“nobody buys water coolers on Facebook”): Panelists were somewhat divided on the usefulness of building up a strong social media brand.  H.G. Chissell (Viridity Energy) shared various tactics to build up a social media presence – such as the use of HootSuite to synchronize postings to Twitter, LinkedIn, and a company website with one click.  Chissell noted how, in its early days, Viridity had used such tactics to “make a four-person firm look like a forty-person firm.”  Bob Mitchell of Quench USA shared a more cautionary tale – recalling how Quench had invested to nurture its social media cred only to realize that “offices don’t buy water coolers on Facebook.”  Hence, Quench has subsequently transferred its social media budget for use on Google AdWords and various search engine optimization techniques.
  • The customer is always right… except when they’re not: In one of the evening’s more interesting exchanges, H.G. Chissell (Viridity Energy) and David Droz (Urban Green Energy) discussed the wisdom of always listening to one’s customers.   Chissell encouraged responsiveness to customer input as absolutely essential for a company to attract and retain customers.  Droz, however, warned that customer demands can sometimes lead start-ups down a rat-hole.  To wit, he revisited Urban Green Energy’s origin as a manufacturer of small wind turbines (the company now sells distributed energy solutions to telecom customers), and recalled how – tantalized by the prospect of major orders from European turbine producers – the firm toiled for years on what was (in retrospect) an unworkable business model.  Stephen Filler (Joule Assets) agreed that – amid all the pressure for young, revenue-starved companies to satisfy customer demands – entrepreneurs must carefully assess whether a given customer aligns with a viable long-term business model.
  • Bring in a good CFO early on: Whether via a misguided marketing budget or solicitousness toward an overly demanding customer, what sinks most start-ups is simple: running out of money.  Stephen Filler (Joule Assets) thus argued that the most important investment a young company can make is to recruit a good CFO as early as possible.  Among other things, a “good” CFO must be someone the founders respect enough to have question every decision involving use of company money.  Though usually the most expensive hire for a start-up, a CFO can also be the most valuable hire.
  • Make it rain: Noting that “if you don’t make it rain, there won’t be any crops,” H.G. Chissell (Viridity Energy) stressed “a sense of urgency” about attracting customers as the essential ingredient for start-up success.  Each day, employees of start-ups can invest their time and effort in a range of projects – all of which can seem critical, yet only some of which will actually help to get “ink on paper” with customers.  Citing Samuel Johnson’s famous quip (“When a man knows he is to be hanged in a fortnight, it concentrates the mind wonderfully”), Chisselladvised focusing on the entrepreneur’s equivalent of hanging (i.e. losing out on customers) and prioritizing projects around their potential to help avoid this fate.  Grim imagery aside, Viridity’s success with customers and investors ($40 million in financing over the past few years) suggests this is advice worth heeding.