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Business Voice for the Environment
photo David Miller
Executive Managing Director
Clean Energy Venture Group
David S. Miller, Ph.D. is a founder and Executive Managing Director of Clean Energy Venture Group. An engineer by training, he brings over 20 years of technology startup management experience and over a dozen years of seed stage investing experience. He is on the board of directors or advisory board of several clean energy companies, including Azima DLI, Next Step Living, MyEnergy, and Cambrian Innovation and has mentored many others. He is also a research affiliate at MIT’s Sloan School of Management.  Dave is also an E2 New England Chapter Director.

Earlier this month, we sat down with Dave and had a conversation covering topics ranging from residential energy efficiency to the role of strategic partnerships. Here’s what he had to say:

On residential energy efficiency
“There exists significant room for energy efficiency improvement within the residential sector.  With respect to comfort - heating, cooling, free use of appliances - it’s possible to get the exact same level of performance while cutting energy consumption anywhere from 30-50%.  Much of these improvements are made with simple technology: more efficient lighting, hot water savings, insulation and air sealing are usually where you want to start.  Other options include energy-efficient appliances, HVAC systems, better performing windows, and distributed energy solutions.

A case study is my own house, which is a net-zero-energy building.  My previous home was built, to code, in 2005 – so relatively new.  By focusing heavily on insulation and air sealing, passive solar siting, as well as installing a more efficient HVAC system, we used 88% less energy to heat our new home on a per square foot basis last winter.  We went from paying energy bills to being paid by the utility due to those energy savings and our installed solar.  The take-away here is that a typical home, built to the standards and codes required in 2005, could be using 88% more energy than necessary – a large room for improvement.  Partly, this fact can be attributed to the building codes themselves.  The real key to bridging this gap is continuing innovation in building materials and tech, as well as the introduction of mechanisms to align the interest of builders, owners, and renters.”

On the agency dilemma in construction and retrofits
“The classic principal-agent problem is central to the issue of creating energy efficient buildings – builders and/or owners want to minimize capital costs, while leasers are the ones that pay energy bills.  One way to get around this problem is simply with the introduction of stricter building codes.  Alternatively, energy efficiency could be promoted as a more salient factor in real estate transactions.  The easy analogy here would be to MPG rating for cars, which is a real factor for buyers.  In a rational market, buildings with better (lower) HERS ratings should command a premium since the cost of ownership is lower.

In general, even in retrofit situations, insulation and sealing improvements have a very good payback, so economically its good policy to promote these types of improvements. “

On the different types of plays in the energy efficiency sector
“There exists a significant opportunity in energy efficiency, since so much of our current energy production is essentially wasted – this is an economic opportunity, as well as a social opportunity to reduce unproductive waste of resources.  As an early-stage angel investor, we are typically looking for capital-efficient companies, and energy efficiency companies tend to meet that criteria.

Our portfolio company, “Next Step Living,” has become a leader in residential energy assessments and efficiency retrofits as well as HVAC and solar installations.

Another type of play is the information/data play.  An example is one of our portfolio companies, “MyEnergy.” They provide better information to residential users about their energy usage via their website and emails – this type of service costs their customers relatively little to provide, and costs end users nothing, but provides information that can lead to appreciable energy, and therefore cost, savings. 

There are also innovations being made in hardware systems to collect better information about energy usage, or improve energy usage.  Another one of our portfolio companies, “OutSmart Power Systems,” creates systems for commercial building that allow users to collect very detailed information about energy usage, accessible and usable in real time, while also providing information on the health of equipment within the system and thus smarter preventative maintenance.

There exist opportunity across all sectors: residential, commercial, and industrial.  In industrial applications, decisions really come down to long-term overall energy use, and significant hardware installs are on the table if they make economic sense.  In homes, on the other hand, you really are typically looking for relatively low cost on a per-home basis.”

On the renewables sector
“While our focus is primarily within energy efficiency, we see opportunities across the renewable sector.  For example, while solar is facing significant foreign competition on low-cost plays, there is opportunity in boosting efficiency.  Wind is much more mature, but similar opportunities exist.  Wave/tidal energy, geothermal – it all holds great promise.  One of our portfolio companies, “Purpose Energy,” creates waste-to-energy systems designed to process brewery waste – this technology not only creates energy, but has tremendous value inherent in  its ability to process waste product. Heat-to-energy is another category that shows promise – in fact we have two companies in our portfolio that address this: MTPV and Deltatrec.

Energy storage is important because it will be key to mitigating the intermittency of renewables.  We have two companies that deal in storage, one that creates grid-scale solutions -General Compression - and another that creates distributed storage -VCharge.  The underlying tech behind General Compression is extremely large-scale, cost-effective, compressed-air energy storage, using geologic formations.  VCharge’s underlying storage technology can be very simple – such as bricks heated with electric resistance.  Combined with VCharge’s control algorithms, customers are able to manage this process in a very fine-grain way; for example, at nighttime, or in certain situations when electricity has a negative price on the grid due to overproduction of baseload, these systems will take up that energy, store it as heat, and use the thermal energy at some point in the future when electricity prices are higher.

Clean energy is growing exponentially – while it may look initially small and easy to dismiss to some observers, if this type of growth continues, it will get big quick.  This is coming in the energy sector – it won’t necessarily happen in days, weeks, or even years, but it certainly is one of the biggest and most important opportunities in our lifetime.  Small companies today have the potential to play very significant roles in the future world economy.”

On strategic relationships with existing key players
“Most large companies are looking for ways to reduce their footprint for both social and economic reasons.  It all really just comes down to where the best fits are.

As an example, 3M recently came in as a significant strategic investor for one or our portfolio companies, “7AC Technologies,” which produces high-efficiency commercial AC systems.  These systems use somewhere from 50-70% less energy, creating an extremely good ROI for the end users.  This kind of play is huge when you think about the energy used for commercial sector cooling and this particular partnership between a major player and a startup is a real win-win.

Companies are interested in adopting energy efficiency practices as well –our portfolio company “Practically Green,” which enables users to track all sorts of consumption habits and lead more sustainable lives, works with several companies that are interested in using this type of service to enable their worldwide employee base to become more sustainable and reduce their footprint.”

On international considerations
“The energy industry is enormous.  Clean energy, as a portion of this industry, is growing exponentially, and will eventually overtake fossil fuels as the most important source of energy.  The country with the leadership position in this sector will likely also have the leadership position within the global economy.  Notably, China is making a tremendous play to be that leader.

Today, most companies need to be thinking international from the beginning.  However, our companies are generally very early stage, and typically are not yet addressing international markets in big way.  Especially with energy startups that are focusing on capturing local markets, it will be some time before we start moving beyond our borders.   One exception within our Portfolio is “Solantro,” which builds integrated electronic technology for a wide range of solar solutions – that’s a global market today.

Much of the energy industry is rather local.  For example, in solar, people are talking about China taking over, but really they are only talking about one step of a multi-step value chain: building low cost panels.  Domestic companies are still the ones installing the panels or creating specialized building technology.  While countries such as China are certainly playing a significant role in certain parts of the value chain, the other parts, especially service, can be much more regionally focused.

Moreover, many of the energy services that we work with are very locally tuned and regionally based – they really have to be tailored utility-by-utility.  It would be hard for foreign energy service companies to be competitive unless they decided to fully engage in tailoring their products to local and regional utilities within the US.  On the flipside, I would presume this home-court-advantage benefits comparable companies in China as well.  If an American company wanted to go to China and install panels or provide energy usage information to local users, they’d have a hard time penetrating that system and supplanting local competition.”

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