Green Giants – Episode 21

The Catalyst for Change: Gabe Phillips on Transforming Commercial Energy with Catalyst Power

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Transcript

Wes Ashworth (00:24)

Welcome to another episode of Green Giants, Titans of Renewable Energy. Today, I’m excited to be joined by Gabe Phillips, founder and CEO of Catalyst Power. Gabe brings a wealth of experience in the energy sector, having started his career trading electricity and gas at Sempra Energy before founding and eventually selling GP Energy Management, a comprehensive platform for energy and risk management. Now through Catalyst Power, Gabe is transforming the way commercial and industrial customers access renewable energy delivering premium solutions with no upfront costs. Gabe, welcome to the show.

Gabe (00:56)

Thank you so much for having me, Wes.

Wes Ashworth (00:58)

Yeah, it’s a pleasure. So we’ll start out with a little bit of origin. Can you give us just a brief overview of how you got into the renewable energy industry and then what really led you to start Catalyst Power?

Gabe (01:08)

Sure. So, beginning of my career, I traded all of the organized power markets in North America from Canada to Mexico at one time or another. That gave me a very broad exposure into how our physical and financial power markets operate. And towards the end of my tenure as a trader, we were getting approached on our desk to provide hedging solutions for different new natural market participants throughout the energy complex. On the upstream side, generators were asking for long-term power purchase agreements with unit contingency and variability associated with it, and clearly they didn’t know how to use the market to meet their new financing needs.

And on the downstream side, retail energy providers were popping up in new markets as deregulation was lifting rate caps that you could charge a residential and small commercial consumer throughout mostly the northeastern markets but also in ERCOT. And those folks, you know, were mostly marketing and sales organizations who knew how to sell things but not necessarily how to buy them, including a kilowatt hour. And so was clear to me that there was a whole new business to help these market participants use the market to meet their various business needs. And so that’s what I set out to do.

Initially, the GP energy management was to provide a market access service, which blossomed into a broader scope of work depending upon the customer segment. But I really wanted to have a brown power business that kept the lights on while I was able to spend additional amounts of time on the chunkier power marketing and renewable energy attribute marketing for renewable developers throughout the country. I knew that that was where my passion was and I wanted to use the intimate knowledge of our markets for good, not just for profit, and it’s great when those two things can intersect. And so that’s what I tried to do at GP Energy Management and I was able to affect the building of about 2000 megawatts of renewable generation throughout North America due to that power marketing. On the downstream side, I supported 50 different retail energy providers in their risk management and physical procurement for brown power and gas, but also helped to design a whole host of renewable backed products. And I saw that they were offering those with consistent innovation to the bookends of the market, residential consumers on the small side and extremely large and sophisticated end users on the upper end of the market, and the middle was completely ignored. They were hard to get to. They had sort of the sophistication level of a residential consumer, but the complication of a larger end user. And so that just meant it was not economic for most single solution providers, whether they be just a retail solution provider or a solar solution provider or something else for that matter, to get to that customer economically and suggest things that they would then implement that were either decarbonizing, renewable, energy efficient in some way or another, and that was a huge opportunity that I stumbled upon there in my last business.

You mentioned at the top I sold it and I got out of there as quickly as I could so I could focus on this gap and get back to the principal side of the market and find a way to shoot that gap by combining retail supply with the provision of these other measures in one menu from one entity, simplifying that process and the decision making for the customer who’s got about two seconds of attention span for their energy consumption.

Wes Ashworth (04:12)

Yeah, now that’s awesome. And to dig into that a little bit further, so Catalyst Power has taken on that challenge of helping the C&I sector adopt clean energy solutions. And you touch on it there, but if you can expand on what was the motivation behind tackling that difficult problem, and how does your approach differ from others in the industry?

Gabe (04:31)

The motivation is multifaceted, I mean, the overarching North Star still is, you know, help to decarbonize the world, period. I had to find a way to do that profitably. You know, I didn’t want to get into the nonprofit sector, so I needed to have a for-profit business to do this, and it’s like I said before, it’s always great when those motivations intersect and overlap. And I wanted to occupy a space where there was, you know, little competition. And my background in wholesale and retail market as well as in asset development and ownership, because I had owned solar, I’ve owned cogeneration, I’ve different types of energy production assets as a principal participant as well as a consultant.

I wanted to find a way to use all of that background in one business. And again, stumbling upon a market segment that was completely ignored was the key for me, because it was ignored by all of those various solutions providers, and to me that was like an obvious gap that if I could provide retail power to a customer under a brown power construct, you know, using that to keep the lights on while I, you know, work towards the more chunky and, you know, difficult to ascertain renewable opportunity with that customer, then it was very similar to what I did in my last business. It felt familiar and it was a way to move capital into a space that others weren’t finding a way to do and to do it profitably and efficiently. You know, we come to the customer already armed with knowing everything that there is to know about what they consume, when they consume it, and how much it costs and that gives us this tremendous leg up.

Now that doesn’t mean that our customers are actually adopting behind the meter resources, they generally aren’t, because once they get into the complexities of it, they realize that paying for something for 20 years is a lot harder to get their head wrapped around than getting something for 20 years. But at least the conversation starter is readily there, and it’s easy for us to get involved with the customer’s discussion around their energy consumption and how they’re building their roof, their land, their resources can provide a solution to the renewable energy industry that they get paid for.

Wes Ashworth (06:21)

Yeah. And as you hit on, that focus on middle market commercial entities were and probably are still overlooked, right? What are those unique challenges that those customers face and then how is Catalyst Power helping them overcome those hurdles?

Gabe (06:36)

So an independent business owner is just a person, just like you and me. And they have to make decisions that cover a whole host of topics in their business. And in general, they don’t have a massive support staff behind them to assist with that decision making. They can’t hire like a 12 person energy procurement team to help them to ascertain the best way to buy, the best way to be supportive of their environmental goals if they have any, and still impact their pocketbook the appropriate way.

That’s part of the suite of challenges associated with the independent commercial sector. They have the level of sophistication that’s typically used to characterize a residential consumer, but they have big energy problems to solve. They have big dollars associated with it, they have complex building systems typically. In some industries it’s a huge part of their cost of goods and they don’t have the depth and time to be able to figure out the optimal solution for them.

And so, again, having been an entrepreneur now for going on 14 years, like I never signed an office lease for longer than 18 months. So I get why it’s complicated for somebody to adopt a renewable solution that involves buying something or a payback for some investment that is an extremely long tail associated with it. 10 years for solar, a 20 year power purchase agreement for solar, just a long-term payback period is hard for an independent business owner whose, you know, the landscape is constantly shifting right under their feet. And so we found that that’s just one of the many challenges.

The way to solve that was to find a way to monetize the asset outside of that customer’s fence under some sort of like a leasing arrangement when they’re going to be receiving money from us for a long period of time. But we can’t even get them to that point of the conversation without being their trusted energy partner first, and we use that brown power provision of retail supply relationship to get there first. The other complexities associated with it are credit risk, even if we are, you know, they are our landlord and we are a tenant on their roof, we still have exposure to their balance sheet and therefore we have to do some analysis around that. And that’s not always easy to do. Residential consumer credit analysis is simple. Fico scores are transparent and easy to ascertain what that means. The second you’re getting into like a privately held corporate entity, that simplicity is gone. That’s one major challenge.

The other is that, you know, in some cases there’s a fixed cost associated with  implementing a physical piece of equipment like a solar array or like a cogen facility or like a battery. And if you can’t find some way of subsidizing that fixed cost via another revenue stream that you may have, you know, i.e. like a retail power provider has, you know, then it’s not economic to go down market with C&I customers to deploy solutions. You’re stuck going towards the upper end of the distributed resources like the larger scale community solar farms or jumping up to the utility scale markets for other types of resources.

And so only like having multiple revenue streams with a customer, can you then finally find a way to like, overcome those fixed costs because they’re sunk already. Like I sunk my fixed cost in becoming relevant to the customer for retail power. I sunk my fixed cost already by, you know, being their community solar partner, and now all of a sudden, you know, having another suite of solutions I can offer them, those fixed costs start to get amortized over like a lot of different revenue streams. And you can’t do that as a single solution provider.

Of course, I might sound like a little too ADD and I’m not trying to offer everything to everyone. You can’t, right? But, you know, picking our lane, meaning geographically and with a particular customer segment and always starting with the provision of retail supply has allowed us to be more targeted. And then further, we refine the customers within our book that we address or that we approach with, you know, with these solutions that we can, you know, potentially implement by trying to find the ones who have the most stackable available economic incentives. I was in a roundtable discussion earlier today and somebody described the financial stack as a lasagna of financing. I thought that was really great and I should credit this guy Jeff Perlman from Bright Power with that particular quote, but it’s true.

Our first project to go live was an upstate New York farm, orchard, cidery, vineyard, etc. There we had the New York Sun Grant program that allowed us to first stack an upfront incentive to deploy solar period that was below 750 kW in the commercial sector. Then we had the 30% ITC base level from the federal government, which was solidified by the IRA. And this particular customer happens to reside within an energy community adjacent into a coal closure. So then we had the extra 10% investment tax credit that we, that was our next layer of noodles in our lasagna of financing, nd then further, they happen to be geographically qualifying for a USDA REAP grant.

So even though they don’t happen to be an agricultural business, we qualified because of their geography in a rural area. And we’re the grant recipient in that case, and that was 50% off all eligible costs. And so then with all of that stacking of incentives, we were able to offer them a power purchase agreement behind the meter, unique, like I mentioned before, in our suite of projects at the moment, but that undercut their current costs and provided them with, although a modest economic value in that industry with thin margins, they’re always looking for any edge that they can find. They happen to be one of our few customers that valued the optics of adopting a solar resource because they felt that their customers would continue to pay a premium for their apples, for their wine, for their cider, if they were continuing to show their commitment to the sustainable environment. And so that was helpful for them, helpful for us, and that sort of put the project over the edge from their perspective and saying yes to hosting it.

But in other cases where we’re just like the lessee or the tenant, involving solar that we’re monetizing through utility programs or community solar programs or some other way outside of the customer’s fence, we still have to stack those incentives. So we have to refine our approach even further. Now, again, the reason we have to do that is because not too many of our customers value the non-monetary benefits of adopting solar significantly. Most independent businesses in the United States don’t have the external pressures that you might have as a public company given like new SEC regulations for carbon reporting, right? Or in the EU, where there’s like a lot of external forces associated with that. Or New York City, where you’ve got an actual tax under the local law 97 that you have to contend with. You know, throughout the rest of the country that doesn’t exist, you know, God bless America, we have relatively cheap power and cheap gas. The economic incentive to undercut those costs is not that significant. And therefore, we’ve got to find another way. And the independent business owner is really appealed to through their wallet. And so that is where we are both stuck focusing, but also represents an opportunity for us because most of the renewable solution providers out there are not coming at it from the economic angle first and foremost. They’re pitching, you know, ESG facilitation, know, carbon accounting, you know, a lot of other approaches that half of our customers don’t want to talk to us about. So that is our unique angle and how we focus on this customer economic.

Wes Ashworth (13:49)

Yeah, I love that, I think it’s so important to meet people where they are. And it’s kind of like, know the goal that we want to accomplish. We know where we want to get to, but we’ve got to meet people where they are that don’t necessarily share those goals. But if you make it financially beneficial and rewarding and make sense, great. We get to the end result So I love that approach and that idea. So one of the other things, so when we talked previously, you’d mentioned a common misconception in the industry is that renewables are at parity with fossil fuels without incentives. I’d love to dig into that. So can you explain why this isn’t necessarily true and what changes are needed to better support renewable energy growth?

Gabe (14:26)

If I read another article from some climate reporter talking about how renewables are at grid parity, I might have to scream from the rooftops because can you show me a renewable project in the United States that does not take advantage of the ITC or the PTC?

I don’t know of one, so, given that backdrop, it’s impossible to say that they’re at grid parity without stripping that out and then looking at the levelized cost of power. And by the way, the levelized cost of energy is sort of a bunk approach to figuring out parity because over what timeframe are you amortizing the investment? The total useful life of the asset, do we even know what that is in all instances? It’s a pretty flawed approach to looking at the relative cost and ongoing costs of assets that in one case have consumable fuel and others that don’t. And so I just think it’s problematic from the public’s perspective for us because in the renewable industry, we want more incentives. We want this to be easier to adopt these solutions economically as we talked about before.

Most of the American consuming public is coin operated, not necessarily looking at these decisions from an ESG goal that they have personally or as a business. And in order to get new regulatory constructs adopted that provide incentives, it’s going to have to be political and politics are driven by the public opinion of whether a policy is popular or not.

And that means we need ubiquity. We need like a common theme across the whole country where people agree that it’s important for us to subsidize this new generation resource or these generation resources to replace the fossil resources because it represents a public good that we can all get behind. And if people think we don’t need the federal subsidy for that or any increased subsidies on a state level, then no one’s going to get behind an increased level of subsidization.

And we need the political will to get that done. One of the biggest problems that we have also in the incentive structure of the United States, although again, the IRA provided a tremendous value in solidifying the level of the ITC and expanding it and extending it and increasing bonus appreciation and other federal, non-state level, not state specific incentives, but they’re not enough typically to make projects work, and there’s just this crazy patchwork of incentive structures in every state and utility combination throughout the country to get renewables to pencil.

And that is impossible to work with. I’m sorry, not impossible because we’re doing it, but the barrier of entry is so high that our level of adoption is stymied because of that. So like all screaming from the rooftops over and over and over again and I’ll talk to every climate reporter I can who says that we’re at grid parity in the renewables industry, that you’re not helping the cause. We need to standardize renewables’ incentives across the country. We need to make the avoided costs associated with brown power more painful for customers. And we need to continue to make it known that it’s a public good to adopt renewables so that there’s political will to standardize incentives across state lines.

Wes Ashworth (17:19)

Yeah, well said and great points in there. I agree, think, again, to go to where we want to go, that it needs to be more adopted by everyone. And there’s got to be a better draw to that than just, hey, it’s great for the environment. Hey, it’s getting us to the ESG goals or what have you. It’s got to be, as you said, money driven. Like at the end of the day, no matter what side of the fence you sit on, you can agree with that.

Everybody likes either saving money, not spending as much money. So yeah, I agree completely.

Gabe (18:10)

I don’t know if there’s any political will in this country to add cost to the power markets by implementing some sort of cost associated with the carbon intensity of a power plant. I doubt that there’s going to be enough popularity around that idea to get it implemented. certainly figuring out how to articulate to the public that there are other costs associated with our changing climate that are hitting you in the wallet. And it’s not just like the risk that you bear associated with some natural disaster. Like, when’s the last time you renewed your homeowners insurance policy? It’s pretty bananas right now where those markets are. I see that in our insurance policies associated with our assets.

I see that with the commercial real estate customers that we have complaining about their insurance costs. know a lot of coverage of that. One market rising well above the rate of inflation where other markets are being subsidized because the state is not subsidized but is held down because the state is mandating a slower growth in insurance rates. Once that becomes so painful that customers are like, how do we undo this rise in insurance costs? it’s based upon the climate risk.

Maybe they’ll get into rattling around people’s brains and realize that there’s more that they could do in adopting these resources to help with that particular cost. The cost has to show up somewhere.

Wes Ashworth (19:33)

Yeah, agreed. Agreed. So I want to move into a little bit more innovation, thinking about what Catalyst is doing. So you know Catalyst is expanding in areas like EV charging and storage. What innovations are you most excited about? And then how do you see them impacting the future of your company and the renewable energy industry?

Gabe (19:50)

So we set up our business to be like a solutions provider, right? So we are agnostic to the technological solution that we offer. It needs to be relatively simple from an engineering perspective. Therefore, novel technology is not something that we tend to dabble in because it’s got to be easy to finance as well. And there’s a risk premium associated with like brand new types of technology that we just can’t make that work in our economic model for our customers. But that said, like novel structures, being a first mover in sort of leveraging the ATM model for EV charging infrastructure are things that we are attempting and testing and trying to see if we can have, you know, some decent predictive analytics around utilization. For instance, on EV charging, so that we can be one of the first people out there to offer to put these things at our customer sites, commercial real estate owners, strip malls, you know whatever type of use is happening at the premises. But in general like, the novelty, you know, in our business is more you know the fact that we don’t actually care what the world dreams up that makes decarbonizing energy, as long as it’s something that like the financing community can get behind, we’ll figure out how to operate it.

And weirdly enough, like that is novel in our sector. Like almost everybody that I come across or that I compete with is a single solution provider. So I don’t know if that’s good or bad that I have like four competitors with every customer that I serve, but the reality is like we are the only conversation that the customer is having with one group about all of those different solutions. And that’s lonely, but that’s a good thing because we can structure, I think, know, projects that are contracted with better rates of return than the typical single solution provider can.

And that means we’re more likely to get them financed. We’re more likely to figure out how to overcome the customer’s credit exposure and rip their balance sheet or any operational complexities associated with that piece of equipment. We’re more likely to make a deal financeable where others can’t. And I think that that novelty from our approach is where we’re innovating. But that said, I don’t like, go a week without a call with somebody who’s got a brand new piece of equipment that the world hasn’t heard of yet that I’m trying to figure out how to pilot and test in a customer site. I’ve got a guy with a concrete battery that I’m working on, whatever the world can dream up, we are very interested in trying to figure out how to deploy. But what we’re likely to do at scale in our business is stuff that is easier to finance because it’s not as new.

Wes Ashworth (22:08)

Yeah, that makes perfect sense. And I’m sure there are some complexities behind offering multiple solutions. As you said, probably your competitors are one source or maybe two, probably one. I guess, why isn’t everybody doing that? And you are, which is novel and I think there’s value there. So I’m curious, what’s the trade off in terms of your challenge of having those multiple solutions? But then, why doesn’t everybody else do that and how can you do that more effectively?

Gabe (22:53)

The deregulated energy market side of our business where we deliver brown power to customers has a whole host of unique complexities that you don’t tend to find people with the backgrounds and experience in on the contracted asset side of our world and vice versa, they tend to live in silos and I spent a chunk of my career straddling both. And so I realized that although there is a whole unique host of vocabulary associated with both sides of the business, you’re still an energy supplier one way or the other and you’re still trying to figure out how to finance your business one way or the other.

Just these different pockets are out there that have expertise in both, so bridging that is not common for an individual like myself, but also for a team of individuals, so I’ve been able to bring together a group of people that are, they are solution curious. People on the retail side that like, really want to understand the distributed generation world and vice versa, and I think that that is, it gives me hope that more parties out there can do the same in the future. However, that learning curve, that barrier of entry that is simply just knowledge is really, really high. You tend to only see really large entities with deep pockets like Constellation, an Engie and NRG Direct dabbling on both sides of the market, and the independent operators like ourselves, okay, we’re not entirely independent, we’re private equity backed, but the more scrappy upstarts like ourselves tend to be forced to remain as a single solution provider because it’s expensive to get at the expertise that they might need to figure that out. Now we’ve been very fortunate to cobble together a group of partners, a few minority investments that helped us to get access to those partners, to bring that expertise onto our team without that deep-pocketed requirement to hire out an entire solar development division, we made an investment in a solar developer, and they work with us hand in glove, and so we found ways to do it efficiently, where I’ve not found too many other groups attacking the problem that way yet.

But again, I believe in rising tides lift all boats, if somebody hears this and they’re a large retail provider or they’re a large distributed generation provider and you know they’re trying to figure out how to you know occupy more of the customer’s wallet with respect to their energy spend then go copy my idea like by all means you know and give me a shout when you’re ready to invest in Catalyst as well.

Wes Ashworth (25:26)

Yeah, love it. it. So I’ll switch gears a little bit. Something else we touched on, just sort of the lobbying and regulatory involvement. So can you share more about your lobbying efforts, particularly in New York, how they align with Catalyst Power’s mission to maximize the use of commercial rooftops for solar?

Gabe (25:48)

Yeah, I mean, New York was our first beachhead. was our first two retail energy acquisitions.

Weirdly, it happens to be the first East Coast power market I ever traded, but that’s beside the point. Due to that, we sort of found ourselves steeped in the New York markets with a lot of opportunities that we were trying to make financeable. Although I commend New York for its adoption of VDER and its approach to compensating power exports from distributed resources in that manner, it wasn’t granular enough, wasn’t supportive enough of what I thought was the best opportunity for renewable energy adoption in the country, let alone in New York State, which was the rooftop solar market. New York has focused on its successes associated with community solar adoption, which is just a construct, not necessarily an asset class, not a particular profile of a project.

We develop community solar resources that are on rooftops, but most of them that New York, you know, applauds itself on, you know, being supportive of their development are open solar fields, you know, that are occupying otherwise useful green space, rather than the stranded real estate that is all over our state, you know, on the roofs. And there are additional incentives that are available in New York state as well as many other markets for brownfields, landfill solar adders, carports, you know, sort of forms of additional incentive for stranded real estate that for some reason doesn’t exist for rooftops. And that seems totally backwards to me because that is also stranded real estate and it should be treated not only with the same level of incentives, but probably a more lucrative one.

We don’t leverage all of that asset that’s sitting there not doing us any good and honestly costing our independent business base in New York rather than acting as an asset for them. And so that was the first lobbying effort we’ve undertaken and probably the most developed of an approach that we’ve had thus far. We participated in the Public Service Commission’s post-10 gigawatt order, comment periods and certainly happy to share in your show notes a link to our comments because I think they were very illustrative for the various bodies involved and I’m hoping our approach gets adopted because it’s a tremendous opportunity and also we’re seeing a lot of pushback against open solar farms in the state as well as just complications around how to make it work. Agri-solar is an opportunity there but it’s not simple and it’s more expensive, I think that there’s a huge opportunity in the state of New York, given this open regulatory proceeding, to get something new adopted that’s more focused than VDER was, and that’s what I’m looking for, is a little bit additional granularity associated with the incentive structure for this particular approach to solar adoption.

Wes Ashworth (28:27)

Yeah, it’s incredible. And what does that look like in terms of when you’re starting something like that? And then are you seeing any success with that so far? Are there any changes or things that you feel hopeful about? Or is it still a long ways out and a long battle to fight?

Gabe (28:56)

Look, I hope that the process moves swiftly in the state of New York on this particular open proceeding, but we got great support from the New York Solar Energy Association from NYSEIA Our comments, they adopted some of our suggestions into their own comments. And so, very hopeful that the New York Sun program will be altered in a way that is supportive of rooftop solar for commercial customers in the state.

That doesn’t change my opinion that federal incentives are really where we could see tremendous uptake here. And I haven’t even figured out how to lobby in Washington, that’s like a problem. It’s too big for me to figure out right now, but that said, that’s what our industry would benefit from, I think, is a unified policy push for increased federal incentives. And I do think that the political will is there right now. I do.

I recognize that incentives for renewables tend to wane during economically difficult or uncertain times. Whether or not you think we’re entering a recession or we have a soft landing or whatever your opinion on that is, obviously things are uncertain, that’s something we could all probably get behind, you know, with rates, with the economy, with global stability, with an election, et cetera. And so, like, it’s tough to see big change happening at a federal level right now, but if we could all encourage our state policymakers to say, hang on a second, like, it’s great that we’re all doing our own thing, but why don’t we get together and pressure the federal government to adopt the best of our solutions that we put together? That would be a tremendous boon for renewable adoption in the United States.

Wes Ashworth (30:34)

Yeah, absolutely. And I want to bring it back to the business owner, maybe that’s your target market, right? That some of these folks may be listening or others that are kind of just staying in tune with that and want to hear about that. So I’m curious, you’ve mentioned some, but any of those other just most common objections that you hear from business owners when trying to sell them on renewable energy solutions and specifically some of those areas, how do you overcome them?

Like the average, if that business owner’s listening to this, what’s going through their head in terms of the objections? And then how do you overcome those?

Gabe (31:08)

So like I mentioned more than once at this point, there’s a patchwork of incentives that are out there and you layer them.

And so working with somebody who does that day in and day out is one way to like, you know, overcome that barrier for adopting renewables. However, that means that you’re not going to own equipment that’s on your premises in all likelihood, certainly if you work with Catalyst Power. And that’s another objection that we run into is who are you and are you going to be financially stable when, I don’t know, your solar installation breaks and you get on my roof to do something and something happens. And so the financial stability of the independent business owners counterparty in that arrangement is key.

We are backed by BP Energy Partners. Their financial stability is well known, and I think that that’s important for us to be able to point to. And that’s how we overcome that objection. The fact that there’s a common, either misconception or I guess opinion, that adopting a renewable solution requires paying a premium for something. It’s something that we always have to overcome. We offer economic benefit to a customer. And if we can’t, there’s nothing we can offer you aside from our Brown Power solution, but engage with us. Again, once we’re your supplier, we can, whatever the world dreams up in the future that is suited well for your situation, we will suggest. We would do our job, we will do our job better the more we suggest solutions to you.

And so that is a way in which we deal with that objection. The other is we think that we can produce the most economic value for ourselves and for our customer if they are the buyer of our energy production behind their meter under a power purchase agreement in our configuration that we call our connected microgrid. So it’s a microgrid, a mix of resources on site, even just one resource on site that we keep the customer connected to the grid. So they’ve got a resource for power if ours fails to supplement our supply from our renewable distributed resources. But the customer getting comfortable with committing to buy something for 20 years is a tough sell. So, you know, we say, okay, let’s throttle back the size of this installation so that it only represents 30 or 40% of your consumption.

You’re still exposed to the market with the other 70 or 60% of your consumption to the extent that diversification of supply sources is beneficial to deal with that objection. Okay, but still, committing to buy something, even a small amount of something for 20 years, is difficult to get one’s head wrapped around. Fine, in most of the markets where we operate, there’s a way for us to pay you as our landlord, albeit a lesser economic value, but still a revenue stream to monetize that asset outside of your fence. And so that’s, you know, last but not least at all, like the way that we deal with that objection and, you know, I don’t know, 90 % of the assets that we’ve contracted to build and are now building are under a configuration that’s like that.

Wes Ashworth (34:11)

Yeah, I love it. I love the practicality of that as well too. And I’m curious, that business owner or mid-market type of company, when is the right time for them to come to you? know, at what, right now, anytime? I love it. Yeah, and I think that the power of that, of those…

Those, as you said, like they’re individuals they don’t necessarily understand the complexities, they don’t understand the incentives, they don’t necessarily understand what are the best solutions, how do I get there? So I think getting involved with Catalyst is somebody that you guys know, you’ve been there, you’ve done it, you understand the framework, you understand how to get there and can make it easy for them. I think that’s the magic in it as well.

Yeah, I love it. So we’ll talk a little bit about growth and future plans of the company. So with Catalyst Power’s growing solar portfolio and expansion plans, what are your next big goals and how do you plan to continue scaling your impact in the commercial energy sector?

Gabe (35:10)

Continued geographic expansion to the balance of the deregulated markets throughout the Northeastern Independent System operator footprints is key. We just went live in the state of Maryland and BGE’s territory, but we’re adding Pepco and then Delmarva, Maryland as well. We’ll be operating in Delaware and DC and Illinois between now and the end of the year, expanding into the additional markets in New England outside of Connecticut and Massachusetts where we operate today that are also deregulated, so adding New Hampshire, Rhode Island, and Maine to the mix of our territories where we can address customer concerns is going to be key for us.

Not just expanding our addressable market, but having exposure to different incentive regimes and different market dynamics is important for Catalyst, important for any market participant. You can’t be only a New York solar developer, because if New York solar incentives are depleted for a while, what are you going to do, sit on your hands for a year? And so that’s key for us, we’ll continue to be acquisitive. We did close an acquisition earlier this month on another downstate New York retail energy provider to give us a further penetration into the consolidated Edison markets in Westchester and New York City.

So we’ll continue to be acquisitive on that front and continue to find ways to get to the customer that we want to decarbonize. if it is through acquiring retail suppliers, we’ll do that. Acquiring retail brokers that we did a few years ago, we’ll continue to do that. And then adding menu items, like EV charging that’s hosted at our customer sites, like we did this year by adding co-generation solutions to our menu, which we had to do through a joint venture partner because of that complexity of engineering is going to be key for us. And so those are the ways that we intend to grow and expand in the coming 12 to 15 months, but also just continuing to do what we’re doing. We hit a great stride this year on customers to say yes to adopting our solutions, and we need that to continue to accelerate. Just more of what we’re doing and more of new things are key for our scalability in our business.

Wes Ashworth (37:04)

Yeah, I love it. And just a more general open question. you as a business leader, you’ve been in the space. I think you’re well connected and know what’s going on. But I am curious, what are your feelings, thoughts going into 2025? What’s your confidence level? What do you anticipate for the year in terms of just growth in the industry and just your overall feelings?

Gabe (37:27)

So I’ll start with the trepidatious side and I’ll end with a positive note. I mean, there’s enough people that I speak to in my business, in my personal life, or that I read talking about entering a recession that I’m nervous that there’s a public sentiment that will be the antithesis of what we need for adopting renewable supply one way or the other. People tend to retrench into their old ways when they’re worried about economic outcomes. I personally don’t share their view; That might be naive, but I just don’t. And I think that on a positive note, we have enough tailwinds from the IRA that we have not even seen the deepest of impacts there yet, it’s going to be a tremendous 2025 in the renewables industry due to the implementation of that landmark Biden administration climate law.

It’s not been stressed enough in the public domain how beneficial that will be for decarbonizing our American energy economy. And you look at stats on how frequently the climate is being mentioned in presidential debates or in public advertising associated with the campaign and it’s scary how little that’s coming up in this cycle versus the last cycle. So that’s a headwind, but…

We’ve got the tailwind here and as long as we continue to use that, then I think 2025 could be a very good year for renewables adoption.

Wes Ashworth (39:07)

Yeah, I agree. And it’s always great just to hear different perspectives instead of just, you know, I think what’s sold out there a lot of times it’s it’s doom and gloom, or what’s going to get the most clicks or otherwise. But I love hearing from real leaders in the industry. What do you feel? What do you think? And so that’s great to hear. As we get close to just wrapping up here, one last question.

So if listeners can take away one or two key messages from this conversation, what would you really want those to be?

Gabe (39:33)

I guess it might depend on the listener, but in general, have hope here. Like, have hope. I mean, there’s costs associated to, continuing to do what we’re doing right now as a country, and as a consuming public that are becoming apparent and real and quantifiable.

There is support from the federal and state governments to make these solutions that combat that risk and those costs economically viable. It’s not everywhere, not for everyone still, but there’s a lot of it. There’s enough customers that are available out there that are hosts of potential solutions that are economically viable that they should reach out to Catalyst, they should reach out to somebody, and they should explore the economic value of adopting something on site. So if you’re a listener who’s got load and you’re in the decision-making seat, give us a call or anyone else for that matter and explore the economic value for you associated with hosting something that you own or that somebody else owns that’s decarbonizing because the benefits are multifaceted.

Wes Ashworth (40:38)

Yeah, said. And I’ll give you one last one. Anything else you want to add, anything else you didn’t get to mention, any other messages you want to get out there?

Gabe (40:47)

I mean for your listeners, I think that it depends on their level of comfort with this topic, but there’s not a lot of information out there that’s clear and concise to help you understand the patchwork and rat’s nest or lasagna of opportunities and incentives that exist. you got to put a little bit of time into it, but I promise there’s a return there and you don’t have to put up CapEx. You don’t have to put up capital. You have to put up time and there’s a good return on time.

And there’s infinity return when somebody else puts up the CapEx. Explore that.

Wes Ashworth (41:24)

Yeah, no, that’s a great way to just conclude it and wrap it up. So that brings us to the end of this insightful conversation with Gabe Phillips, founder and CEO of Catalyst Power. Gabe, thank you so much for sharing your journey and shedding light on the unique challenges and opportunities within the commercial renewable energy space. Your work in making clean energy accessible to more businesses is truly inspiring. And to our listeners out there as always, if you enjoy this episode, make sure to subscribe, share it with your network.

Join us next time on Green Giant’s Titans of Renewable Energy for more inspiring stories from the leaders shaping the future of clean energy. And we will see you then.