You are listening to Redefining Energy. Your co hosts from Berlin Gerard Reed and from London Laurent Segalin today on Redefining Energy, we're going to talk about the crazy growth in particular in solar and batteries in Texas and California. Yeah, it's absolutely insane this year. So California as twenty four gig of solar, nine gigaworth of batteries, and Texas goes even faster they get thirty one gig
of solar and then geworth of batteries. And listen, by the way, what's for me the most amazing is the fact that when the sun goes down at night for like two hour periods, what you're getting is battery being the major provider of power in California. Sure, the same will happen in Texas too, exactly. But first of all, from our partner DNA, Piper's leading energy transition practice some more deals and projects than any other law firm in
the world. They advise clients across the entire value chain over a project's full life cycle globally, John, when it comes to the energy transition, you can make the following analogy. The public policies are the land. The financial
markets are the rain, but the seeds are but are than entrepreneurs. That's great, Loron, and I agree with you, and that's why it's brilliant to actually have one of those entrepreneurs in and really, Shelton kimber CEO of Intersect Power, I mean, listen to one of the top developers in the US. Let's bring them on the show. Sheldon, welcome to the show. Thanks for having me. Well, Shandon, when we prepared our conversation, you said you would talk about Taylor Swift private jet, and I'm eager
to know what you're going to talk about. But first probably let's talk about the last eight years because Intersect Power it's pretty phenomenally How did you do it? We've not yet handled Taylor's private jet, and we'll talk about that, but in terms of what we have done, it's been a pretty wild ride. Since about twenty sixteen when I founded the company and really twenty seventeen when we staffed up and got going. We've actually developed about four gigawatts of generation
and two and a half gigwat ours batteries. We only owned two point two gigs of generation and the two and a half of batteries because the first sort of wave of projects, the first vintage as we call them, were sold off to SoftBank because Intersect at the time was only capitalized to be a build and flip developer. So we actually developed that first just shy at two gigs for soft Bank with about a team of twenty three people, and we did
that in less than three years. So we really cranked on that portfolio and then started scaling the business to operate the next portfolio, which we're now running in California and Texas. When when we look at the secret to our success,
it's really pretty simple. We came out of my last company, which is Recurrent Energy, pulled a good chunk of those folks out of the company, and ultimately we came away with an understanding of what was wrong with the power development business, and we tried to really articulate how we could do things differently. If you look at it, the power development business has effectively recruited a bunch of infrastructure finance folks like myself and ex utility execs, and we
sort of put the fate of the world in that group's hands. Well, there's a lot of good things about that group a lot of good qualifications, but creativity and innovation is probably not high on the list. What we tried to do was figure out how we do things differently, and what we did was focus on efficiency, scalability and innovation. And so we can talk more about innovation maybe around Taylor's Jet, but the efficiency and scalability side of things
were really kind of the secret to our success so far. We like to say we go to market with a small team, big projects and very few of them. Sheldon, can you dig into that, because I was laughing when I heard what you said there, which is, you know, the typical developers full of utility executives and finance people, what have you done differently? Creative and hardworking? And it's a combination of the staffing and the culture
that we build. But again, really about go to market strategy that focuses on a small team relative to what we're doing, big projects and not very many of them. That focus of less projects and the focus on scalable projects. All of our projects are some of the largest in the country. That's really how we've delivered on the growth of intersect power. When you look at how a lot of other developers have done it. There is this concept of
pipeline in our industry, which I think is a cancer. It's everything that is wrong with the industry, and it's rewarded by the capital markets. Todate, It's been rewarded by the private capital markets. You could see it in the frenzy of late twenty twenty one where companies were trading off of kind of like a multiply the number of slides of sunny land that we call pipeline by a certain sense, per wat get to multiple billions of dollars of valuation and
some major strategic or financial will buy you for that. That reward of building pipeline has broken interconnection cues. It's clogged up land that is developable for developers who can actually execute, and so intersect doesn't do that. We've actually sort of outlawed the use of the word pipeline. Internally, we talk in terms of our business plan, and our business plan again is around clearly identified, focused strategy on the most scalable assets in the country, executed by an incredibly
lean and efficient team. Sheldon I laughed again, because I'm a finance guy, right, and the finance guy I look at trying to measure stuff. I also do a lot of work with developers or whatever. The pipeline is actually quite important. And if actually looking what's going on in Europe, we're seen a whole pile of private equity guys going in and paying I would say, pretty enormous multiples for public companies that are taking private and it's all about
pipeline. I don't know what to say. I think some of the most spectacular failures of capital stewardship of the last several years have been in our industry, and they're primarily based on the overvaluing of pipeline and the undervaluing of execution. So if you put pipeline in the hands of the right people, I think it can be very potent. I think you can have people who deliver
on it. But right now there's no dearth of identified pieces of dirt that have gotten lease options on them, or interconnections that have been filed, at least in North America. What there is a dearth of is talented developers that have built gigawatts of assets in the course of the last couple of years, financed them, brought them to market, and have an actual strategy for putting
them into long term operation, and there's a dearth of that expertise. There's a dearth of people who have put the time and capital into securing their supply chain. And there's also a dearth of just capital providers that are willing to back players in the space based primarily on their growth and not their sort of dividend potential. And so capital providers that have a growth mentality versus a dividend
mentality also are a very short supply in the industry. So when you put those things together, I think those are the things that intersect tries to bring our backers. In terms of Climate Adaptive Infrastructure TPG, TPG's more of a rias climate has actually got a real growth orientation. Our supply chain strategy is hugely differentiated, and then our execution track record is what makes it different.
So you want to value pipeline in our hands, go ahead, You want to value pipeline in the hands of half these other guys that have traded where you just sort of like bolted a couple of ex bankers and a few developers
to large PowerPoint deck and then sold it for a billion dollars. That's what's wrong with the industry, not to get into a diatribe, but just one of the last thing, and that is it's not good for anybody because in North America you overshot the valuations and now you've got a lot of folks who feel burned. I talk to a lot of investors right now who are just not bullish the space because a lot of people torched billions. Sure, don
I like your approach already focusing on a few projects. All your projects on California or Texas. So why because there's land? But I guess California and Texas are also pretty different. What makes them appealing to you and what are the difference between Texas and California. Texas and California are very different markets. We are focused on both of them because they have some similarities from a development perspective that are very attractive. First and foremost, they have a great deal
of available land. That doesn't make it easy. By the way, California has a huge amount of permitting complexity, and Texas, while permits are not as complex, has an enormous amount of complexity around oil and gas rights on the land side. So by no means are they easy. Anybody can lease option at piece of dirt say in Texas, but actually getting it to clean
title and buildable renewable asset is incredibly hard. All that said, though, they have available land at scale, so you can actually build scalable plants of the kind of intersects focused on. They are also deep liquid power markets, so there's liquidity and the wholesale markets to provide hedging and downside protection on the energy. The REX the RA over and above just kind of a regulated markets utility PPA. And then they are also both markets that have a great deal
of demand and they're growing rapidly. They're doing that for very different reasons. Obviously, in California, there's a large compliance market for a noble power but California is also growing as a state and as it electrifies with the addition of electric vehicles, electric trucking, many of the mandates across the rest of it it's economy, there is tremendous demand growth that will come about across that state. And then Texas. Obviously, Texas is just a success story economically from
an industrialization and industrial build out standpoint. Their economy is growing rapidly and the thirst for energy, including electric power, is huge. A lot of commonalities there the questions about the differences are more nuanced. The ability to play in both markets really demonstrates the depth of the understanding that intersect has because they are so different, and so the way we look at both markets is to try to draw similarities between them. I'll take apart batteries for a second. For
instance, in Texas, you make your bread and butter on batteries. Battery is worth essentially the volatility the peak to trough, So you buy low, you sell high. That delta between the low and high in any given hour is what the battery is worth. And so you kind of do that every day, churning along trough to peak, trought to peak, trought to peak, and that gives you kind of your baseline return. But then Texas really rewards you because you're there to sort of ensure the market against some sort of
serious demand spike. You get these huge rewards on two or three or four five big demand spikes that where prices go very very high, and there's almost no price gap. In Texas, it's thousands of dollars in Megawa hour. California does it very differently. The first component is very similar. You've got charge low, sell high, charge low, sell high, and you do that every day and every hour you can, and you make your baseline return.
But California has a price cap on the market where they don't allow it to go high because policymakers and politicians don't want to have to deal with the sort of outcry around that kind of what is seen as I guess excess rent
seeking. So instead they create this basically insurance product called capacity, or in California they call it resource adequacy, because no market is good without some sort of strange name, and so that insurance product essentially sort of takes the peaks and kind of peanut butter spreads them across the whole year, and that's what you're paid. Sheldon, can I ask you a little bit about the journey
from being a developer to being an asset owner and a manager. There's assets, but how have you found that on what have been the sort of the biggest challenges you've seen as you've done national It's sort of the ultimate put your money where your mouth is, because as a developer, you spend a lot of your time if you're a build and flip developer, arguing with independent engineers and project buyers about what assumptions go in the model, and then ultimately there
was an old game show in the United States where everybody went they played a game called Name That Tune. Where As a developer now you have deliver on the assumptions in the pro forma. So the transition, I'll be honest,
has not been easy. You can see that in the number of people who in twenty twenty, twenty twenty one, every developer that had ever leased up some land, filed and interconnect and hooked a PPA was telling you that there were going to be an IPP How many of those people have actually made it there. The answer is not very many. By the way, the valley of death between developers and IPPs is wide and it is deep. The things that have helped intersect there are we have a number of people who have been
operators before or worked for operators. We have staffed up with numerous folks from other companies who've got folks that have joined us, from Brookfield, from Cyprus, from gas Fire Generators. I worked at Calpine for many years with an operation's history there there's a familiarity around our team in operations. And then I'll be honest and say the Solar hasn't been tremendously hard. A lot of it's been made easier by the consistency of the equipment that we purchased for Solar's largest
customer. We're one of the largest customers of Tesla. We have all the same transformers and medium voltage transformers, high voltage transformers. Everything is very consistent across our fleet, so that's made it much easier. The thing that has maybe been a little bit surprising is the operation of batteries. We're still kind of learning how they integrate with the systems. Some of the back and forth with like the ISOs about hey, why are you running your battery that way
has been an interesting set of questions. There's been folks trying to understand why we act in certain ways with our battery assets, and that's just sort of an indication of how new they are on the grid. Certainly at the scales
we're talking about kind of the single asset GEGG what our plus scale? You start talking about your supply chain, because for me what we are, it seems that there is a lot of especially Solar, difficulty to get Chinese spanels, import taxes, or a lot of questions, So how did you manage to structure your supply chain. Of course you talk about the slab batteries please. It's been a very, very intentional strategy right from the get go.
We started out with the intention primarily around forced labor. So when we did our first contracts, even before the fleet that we're running now, the two point two gigawatts, when we were doing the just h two gigs we sold to soft Bank, we tried to get our arms around whether or not we wanted to buy Chinese modules, and at the time there were a whole bunch of folks sending me kind of the various human rights reports on Hinjiang and some
of the forced labor issues there. We had a good relationship with First Solar, have a lot of respect for that team. We like their product a lot. There are a lot of advantages to that product in regions of the country that have hail, so there's a lot of technical advantage. And combining all of that with just our view that no matter how hard we tried on supply chain consultants and other things, we just weren't going to get comfortable that
our modules weren't being made with Shinjong polly and labor. That really was kind of a values based judgment, and at the time we actually paid more for the product, but it made us a very large customer first holders, and we went on to buy more of it even before the Inflation Reduction Act and then the IRA came in and effectively was a bit of a windfall for the type of supply chain we were already running in terms of the things and we
had decided to do based on our corporate values. The tariffs are a bit of another story across both modules and a whole bunch of other equipment. The United States is concerned k along three axes of policy. The first is defense and national security, the second is economic development labor industrial policy, and the
third is forced labor. And what they're trying to solve for across all of those policy goals is very different, but it has one common impact, which is in almost every case going to result in less equipment coming from China, less dependency on China in many sectors of the US economy, but renewables, electric vehicles, battery storage is going to be one that is most impacted due
to where most of those pieces of equipment are made. You've already seen UFLPA forced labor actions that have impacted through customs the industry with a lot of holds on modules. And then now you're seeing significant tariff activity with an established base of industry in the United States filing complaints against Chinese dumping and the government largely
agree with that. And finally, people are going to fight, spend millions and millions and millions of dollars fighting customs, fighting tariffs, fighting the government, trying to do all this. But at the end of the day, you got to ask yourself some fundamental questions around is the United States government going
to allow this stuff onto their grid from a national defense standpoint? And some of the more passive equipment maybe, but you start getting into batteries and electrical equipment that touches the grid or has the ability to bring down the grid, and you're going to very quickly find the answer is absolutely not. No matter what goes on in some of those other areas, I'm just not bullish that the United States government is going to get there on the national defense side of
Chinese equipment. So, Sheldon, sorry, just one thing that we hear an awful lot of is that it's really difficult in terms of grid build out in the us, and in particular it's just a shortage of components like transformers and stuff like that. Can you comment a little bit about on that. Yes, the answer is yes, there's a shortage of all of that,
and the cues are very long to get your hands on that. We have data centers and generators and utilities who all need that equipment effectively fighting over a fairly narrow pool of that equipment, and most of it is locked up for three, four five years forward. Luckily, at Intersect Power we realize that quite some time, and we have eighty plus transformers enough for all of our
projects for the next five years. We've got one hundred and forty plus have eliged circuit breakers also enough for all of our projects going forward, and we've got some spares available there for data center customers. So we are not in that position, but the market absolutely is. Sheldon, I'd like to hear your comment on something that we recently saw in California, which is that before the sun comes up on after the sun goes down, the biggest generation is
actually ends up being battery storage. So this whole called duck curve that we've been talking about for years, and you can actually say that the shoulders of the duck have not been broken by batteries. Just talk about that and explain that how that works and how you see it going forward. Actually, it's been a really interesting spring in California. We've had a bunch of first We had the first time, as you say, the battery storage was the marginal
supply during the ramp periods, we're demand ramped. We've had a big first in term of the first time or at least the first time for a significant number of hours where the net load demand net of solar and renewables primarily solar in California went negative. So that means that there was more renewables online or then the total demand of the state for many hours during the middle of the day when the solar was really producing. It's had some really interesting effects on
the marketplace. The predominance of batteries is fantastic right now. You're primarily seeing them kicking gas out of the mix where gas would have been on the margin during those periods. We have yet to see the sort of secondary some might call it the primary impact that we're looking for from batteries, which is to kind the LiPo suction of the belly of the duck. We need to kind of suck the gut in on the duck and begin to impact the shape of
demand in California. Those batteries will then pick up the belly of the duck and dump it into the sort of head of the duck in the evening ramp. That has yet to sort of happen. If you look at the evidence from the spring, you see the whole curve moved down. So you've seen pretty depressed energy prices in California, and you haven't seen batteries built at a
large enough scale yet that the shape is changing. The whole curve has moved sort of vertically down, but the belly of the duck hasn't gone up while the head is dropping. That has not begun to happen yet. So we need a lot more batteries in California to really get at the fundamentals of flattening the duck curve and putting us on a stable path toward semi firm renewables. Just on that. So, if I understand that what you're doing is by
putting in batteries, ultimately you're competing with gas. So it's all about that. So it's all about can I buy power cheap enough and then sell it more expensive enough so that would still be under the marginal cost of gas? Is that the way I should look at it. Yes, that's what you're competing against is gas peakers or in some cases ccgts that are now operating as gas peakers because renewables ate their lunch and have reduced the capacity factors of those
assets dramatically. So you're very much competing against those assets with batteries. Today shudd on, we got to talk about data centels because everybody's talking about data centels. Everybody has his own opinion, and we had the head of Good NLG was his own opinion, So I'm curious, what's your opinion on data centels. Well, what's interesting is the world has gotten pretty worked up about data centers since the advent of AI here in the last twelve months, but
Intersect Power has been working effectively on the same problem for several years. We've talked in the past with you guys about hydrogen, and we won't get into that, but our hydrogen strategy was all about this sort of nexus of deep decarbonization, which I've written about in my blog and talked about a lot, which really just the realization of a couple of quick things, and that is one, there's so much renewable power at the wrong time and at the wrong
place in many parts of the country. And two that the grid is broken and it will never be fixed. And people who are building bit businesses on the basis that the grid is somehow going to magically be fixed will never make
the returns that they think they will. So when you put these two things together, you wind up with the realization that very large loads, in particular new large loads that require industrial scale electrification, will likely wind up locating next to or on the bus bar of large clean generators, and maybe going one step further, those will be large clean generators in parts of the country where the renewables put together, call it the wind and the sun at the same
time, can generate green power at very high capacity factor at sixty seventy percent capacity factor, places like the Panhandle of Texas and so Intersect's been developing in those places for a very long time, and we have some very flexible assets, big behind the meter sites that can produce green power seventy percent of the
time. Add batteries, they can go to eighty plus, you know, maybe add a little bit of on site gas to get you to the twenty four to seven, and you can get very very high renewal percentages with firm power without relying on the grid. And so it is actually pretty great value proposition for the AI data centers. And so I don't have any announcements here,
but certainly there's a lot of interest in what we've been doing. The primary feedback, the primary obstacle that I think a lot of generators with renewables of the kind I've described are facing is data center folks are very committed to the existing locations they have, right, They have labor pools, they have certain things about fiber that they like, and the fiber networks. Although most of the places we're developing have plenty of fiber, we've made sure that from
the get go it's a hesitancy, right. But the market is absolutely changing to more of what we'll call a power first siting philosophy when it comes to data centers. And as that happens, as we shift to a power first citing philosophy, you will find many, many more of those pieces of digital infrastructure being located near the high capacity factor low cost clean energy news. Intersect Power has a lot of that, So we're bullish on the data center trend
shed down. We could talk for hours, and unfortunately this time we don't have time to talk about data sweet private jet and your e fuels. You gotta build for her. So that's for the next episode. But more journey speaking, can you share with us what intersect but was going to look like in three to five years. Intersect Power in three to five years is going to be a lot of the same of what you see today, just about three to four times bigger. We have a business plan right now that has
projects that are in either late stage development. In the case of the first wave of projects, we have about three and a half billion dollars worth of assets that are in financing now that will be project financed by the end of the year, but they're pretty much shove already aside from the project financing,
and the construction will start in January next year. That's enough to more than double the size of our company by EBITDA and then we will go from the two hundred million of you but that we have the day to more than triple that by the end of twenty seven and again, that's a group of projects
that's similarly laid stage. A lot of them have permits, a lot of them have interconnection all the land, and as I've said, every single one of them has almost every single major component fully procured at a fixed price.
In that regard, we have some incredibly reliable, stable growth that more than triples the size of the company by the end of twenty seven, and then a similar wave of growth that's a little earlier stage that takes it well beyond that to four x plus as we head into the latter part of the decade.
And I think the key thing to highlight is while I have a lot of fun talking about Taylor swift Jet and e fuels and data centers and other things, the company is quietly putting together one of the largest grid, tide generation and storage portfolios in the country, and we're doing it faster than almost
anybody else out there. So we can have a lot of fun talking about the intricacies of new technologies and the changeover in the entire industry to deep decarbonization of industrials, but at our core, we're building a monster in the power markets, and one that very few others have built. At this scale, at this pace, amazing. I listened, Sheldon. It's been great having you on the show, and I certainly wish you all the best going forward
changing the energy landscape of the USA. Yeah. I thought you would come here and talk a lot about inspiration, but in fact you took a lot about perspiration and that's really what I enjoyed. Thank you, guys, thanks for having me. My question to you, Laron. I loved your analogy at the beginning, which you opened up the whole show up. But I suppose my question is, so we look at California and Texas because they just seem to be so different. Yes, on one hand, the markets are
very different. On the other hand, it's all about Gientano. We had David skin Book on the show with Greig Jackson. Those guys, Sheldon Kimber, those guys are the diamonds. They are the engine of the energy transition. Not the consultants. Those people, they don't build pipelines, they build project No. Man, you criticize my feel very bad and over and I get up every day and consult people, but I'm actually not I agree with
you. Listen, the energy to transition doesn't happen without the entrepreneurship. Yeah, and without those great guys and girls that are out there right. And as I was talking to Daniel Fabsar and the guys spend his time on the roof of people putting panels, and I say, Daniel was your secret and he says, stumph is stromph, which means the brutal, simple repetition is the key of success. Stumph is stromph. And Sheldon does the same.
I was absolutely mesmerized. But the description of his supply chain use first solar, use TESTA batteries, and it's just repeat, repeat, repeat, keep it simpacility and scale fast right exactly exactly, Otherwise why would he have raised six billion in deeth aniquity in AHLs starting from zero? He put four gigel out of solar. I put two point five k what hour of batteries?
It just is grin t It's phenomenal. So I love to do the show to get those type of entrepreneurs and the you know, give them a bit of exposure. Yeah, because actually what they do is they excited us, Laurent and hopefully they help motivate others around the world do the same thing. Absolutely, I only have one regret is. We didn't have time to speak
about Taylor Swift and her private jet, but that's for another episode. We thank Sheldon for coming on the show with thank Jaellly Piper to support this episode and jar I took to you next week. Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple, Podcast, Spotify, or the platform of your choice.