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⚡Accelerating Renewable Energy through Insurance

My Climate Journey

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Table of Contents

Host: Jason Jacobs
Guest: Jeff McAuley | Co-Founder & CEO | Energetic Insurance
Category: ⚡ Renewable Energy

Podcast’s Essential Bites:

[4:09] “We founded Energetic Insurance to accelerate deployment of renewable energy globally, and invent new risk management products to help get those deals financed.

[4:41] “Me and my co-founder […] lived the problem of trying to develop solar projects for businesses. And we kept banging our heads into this wall of trying to get those deals financed. And when you get below the big fortune one 100 fortune 500 companies, […] it's a lot harder to finance projects on most of the businesses in this country. And the dream of distributed energy is actually that it's distributed, it's not concentrated on only the wealthiest companies. So we invented a new kind of insurance product to backstop the risk of those buyers of electricity.”

[8:17] “We're seeing more and more businesses are trying to make renewable energy commitments for a number of reasons. One, the cost savings. […] Still the primary driver, in many cases, is an economic savings opportunity. Two, there's definitely increasing goals for environmental sustainability, CO2, ESG reporting and that can also translate to customer value. The reason businesses are pushing for those goals is because their customers want to see that sustainability metric when they're buying products and services. And then lastly, I'd say the third level is resiliency. And as we're seeing more and more issues, increasingly today, but even back over the last decade, through natural disasters, blackouts, grid events, like we've seen in Texas and California, there's a real value of resiliency that businesses are seeing, and want alternatives to diesel backup, or ways to reduce the amount of diesel that they have to hold on site. And solar and storage on sort of on site backup, can provide value there as well.”

[11:53] “Our main customer is a solar developer. And we're selling […] the product that we wanted to buy. So when Jim and I were out there trying to develop projects, we just wanted to find an off taker who you believe is good and then all of a sudden, maybe sometimes later, in the development process, you find out that their credit isn't good enough, or it deteriorates, and then the deal falls apart. So every developer that we talked to had the story of the one that got away, or they spent all this time, and then the deal wasn't able to go through because it fell apart at the last minute, or they hit snags due to credit. So we're really selling to those commercial solar developers who are out there doing the hard work of educating customers and signing up PPAs. And our goal is to help them accelerate their business to be able to do more deals and to lower the cost of customer acquisition, because they can go knock on more doors.”

[12:59] “What we sell is a financial product, it's a form of trade credit insurance. And that basically covers a certain level of cash flow in the event of offtake default. And so the benefit there is it really makes it easier for the project to get financed. Because this is one of the key risks that finances whether that's debt or tax equity are worried about and getting the deal done. So the benefits are […] deal velocity, levered IRR, overall access to customers, and then it allows the freedom to not request other more cumbersome elements like parent guarantee, or sometimes there's huge letter of credit requirements in these transactions that slow down the transaction or make it more expensive for customers. So we alleviate some of those requirements.”

[15:53] “When we're selling this product, we're not selling to the end business, we're selling to a solo developer who's already buying other forms of insurance who's doing these complex financial models. And so we're dealing with very, very sophisticated customers. […] Our website, all of our communication materials are in the language of our customers, which is this project finance lingo. […] So it's a form of trade credit insurance. And the insured is typically a project SPV. So the project itself is typically its own entity. And the way we're able to offer this as a startup is we're partnered with one of the largest reinsurers in the world. And they provide the balance sheet behind the product. And we're doing the technical development in terms of the software and actuarial modeling to price the risk. And then we're doing the distribution and customer education and negotiation around how to structure the product and each of these transactions.”

[17:35] “We're happy to work with developers at any stage of the process. Definitely, we get a lot of those, [where] something, something went wrong in the process, or they're encountering more difficulty. So we get late stage deals that already have PPA signed. But we're happy to engage anywhere in that process from first prospecting, all the way to a deal that's already been done and operating for three years and they want to refinance, because they just found out that with our product, there might be a way to get better all in cost of capital. So we're happy to engage at any step in the development process, definitely earlier is helpful.”

[44:08] “We started this company specifically to say, how do we move more renewable energy into the world? And so that's what we're doing every single day. The closest thing to a conflict is some of the credits that have deteriorated in the last year are oil and gas. And so multiple times we've had upstream, exploration and production, oil and gas companies come to us. And we generally decline those out of mission alignment. And that's not just us. That's with our reinsurers as well. The whole point of this business is to help the reinsurance world move out of oil and gas and into renewables.”

Rating: ⚡⚡⚡

🎙️ Full Episode: Apple | Spotify (Original Title: "Startup Series: Energetic Insurance")
🕰️ 48 min | 🗓️ 08/05/2021
✅ Time saved: 46 min

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