Creating Climate Wealth


Creating Climate Wealth
by Jigar Shah

Main Points:

  • How do we take the power of capitalism and channel it in a way that is constructive? Capitalism is about getting to a democratized version of it. Some of the utility companies and the coal companies are running as virtual monopolies- secured rail rights and their individual mining rights. Set of companies are selling infrastructure $1 million at a time, not $1 billion- this is democratization of capitalism. In the climate change movement, when you are putting solar on rooftops, putting fleets of EV's in cities, or low tech in agriculture you are selling consumers on projects $1 million/time.  
  • Before SunEdison: Jigar grew up in a small town in rural Illinois. People substitute capital with labor- mow their own lawn, because they don't have the means to pay people $300/week. Jigar's dad was a doctor in Rock Falls, Illinois and went through entrepreneurial ventures- money was tight and tough decisions needed to be made. Jigar went to engineering school in Illinois and wanted to work in renewables, but no renewable companies went to his school job fair. So he and his brother drove to the west coast from one company to another.
  • What is the premise of the book? When we take a look at the analysis that has been done globally (IEA, McKinsey, Carbon War Room), everyone comes to the conclusion that 50% of all carbon emissions can be profitably offset by technologies we have invented since the 1970's. We can stave off the impacts of climate change if we know how to deploy these technologies. Thesis: this is not a technological innovation problem, it is a business model innovation problem- we don't know how to deploy technologies that already work, it isn't that the technologies that already work need to be made better.
  • What do we do to fix this problem? The book lays the solution out through SunEdison. It is the company on the ground that has to make big decisions to let things get into the marketplace. When you take a look at solar power, the cost came down precipitously in 2003 when Jigar started SunEdison. That was the last time we hit a low-point in solar (2013 interview) before prices went back up due to silicon shortages and then went back down again because of technology innovation. But when you ask why solar panels really got deployed, it was because of a business model innovation since 2003: (1) No-Money-Down solar technique through Power Purchase Agreements (PPA) and (2) Banking reforms that the Germans did to get loans into solar. Lessons can be transferred to agriculture/hydroponic through produce purchase agreements (BrightFarms),  or heat agreements (solar power companies), or demand savings agreements (STEM).
  • Who needs to read this book? The first draft was written for Jigar himself- the first audience are entrepreneurs. The second group of people are impact investors. Jigar has a strong point of view on impact investors- they corrupt entrepreneurs by giving them below market interest rates and he gets mixed reviews. You don't want to attract Goldman Sachs without compelling rates of return! The third group is government officials- people who are thinking and praying about getting EV's out into the world and how do we actually create policy that encourages this business model innovation. Current thought process: most politicians think that if the technology doesn't self-replicate into the marketplace, then we need more R&D.
  • Case study on Electric Vehicles: In the electric vehicle we lived through the zero-emission mandate. We also lived through the point during the stimulus bill that the Obama administration gave $100 million in capital to A123. Both policies were bad. The better policy is the electric vehicle credits policy. Tesla was getting 14% of their revenue from EV credits they sell to other automakers. Nissan Leaf has also been doing that. In 2013, the Leaf is about $99/month, one of the cheapest on the market. If this game is about scale, then after you sold your first 200,000 cars then you don't need the credit any longer. Your fixed costs have been paid off- your industry needs to get to scale, we will help you get to scale, and once you do get to scale we will get out of the way. 
  • How do we apply this to other areas? Climate change solutions are a cheaper way of getting the old infrastructure fixed. Many people don't want to use water cogeneration in pipes because they don't know where that money is going to come from. Business model innovation - many of these have higher costs up front and lower operating costs. Private sector capital can help fund the upfront costs, but hopefully the operating costs have a rate of return over time. Companies like Lucid reclaim energy for less than 5 cents/kWh by using excess pressure in pipes that need to be reduced, thus saving companies on electricity costs. 
  • How do you get companies (Big Oil) think differently so that they don't go out and exploit resources? Over the last 30 years we have more people who are willing to go on Facebook but we do not show up and rattle the chains of politicians. People aren't inspired by reducing consumption, they are inspired by climate change business solutions. Today we are bankrupting companies that cannot afford to import diesel fuels. The 1970's Arab Oil Crisis is the reason we have the Department of Energy today- they were tasked with reducing our addiction to oil. 
  • What else is Jigar Shah doing? Jigar tried to sell BP his SunEdison idea. GE, Siemens, etc. are engineering companies and will be part of the solution. How do you get people with business model innovation get necessary capital to prove their thesis? There is a company called Skyline Innovations and Jigar setup a fund called 'CleanFeet' and it is generating 18% returns to investors. He is signing a bunch of solar hot water pay-as-you-go contracts for George Washington University and the local banks did not invest until they get other institutional investors to buy-in. Washington Gas put $20 million into his next project and this is main stream capital (12% interest). If it wasn't for Jigar's first $4 million investment, there wouldn't have been another $20 million. 
Jigar's 2014 TEDx talk:
  • Forty years has been spent to make electricity available to people around the world.
  • In 2030, 1 billion people will be without electricity. 15% of these peoples income which is about $3/day is spent on energy access.
  • Need new technology. But there are 2 flawed ideas:
    • The Grid Fallacy- every single home/community is going to get connected to the grid. But grid power costs have soared- coal and copper prices have gone through the roof. 
    • The Aid Trap- let's say we are going to figure this out with solar. We need to do this with free money (raised through NGO's), but the reality of the situation is that energy is not free and is not free to anyone. Many companies do subsidize the fuel ($80 billion/yr). Less than 15% gets to poor people, and the other 85% is stolen. 
  • Today the world's poorest pay 10% of the world's lighting bill for 1/1000th of the light.
  • How does technology play a role?
    • Solar cost prices have comedown
    • LED costs have also comedown
    • It is cheaper to give people solar and LED's than the current subsidy regime!
  • How affordable is solar?
    • Poor pay more every single year for energy
    • Solar + LED is less than a 2 year pay-back.
  • What is holding this innovation back? Radical affordability. 
    • Need: small, irregular user-defined increments (they pay when they can)
  • Today 543 million people have cell phones with no place to charge them 
    • They go to business owners with diesel generators and spend $10 billion/yr in 5-20 cent increments. And it would only cost $1 billion to solve this for everyone and would add $5 billion in profit for telecom operators. 
  • The Solution:
    • Cost: $100 billion
    • Costs $1/week per person, and saves them $3/week. 
    • Pay when you can exists through Simpa Networks, MKopa, and Econet Energy (companies that provide mobile payment mechanisms and the private sector gets a 40% return under all of these numbers)
Understand the evolving business model of SunEdison by watching this short video!

Watch a two-part interview of Jigar Shah on the EV World: The World of Light Electric Vehicles! 

For a discussion on One Billion Reasons to Change our Approach to Energy Access listen to Jigar Shah's talk at TEDxNJIT!

Watch Jigar Shah's talk at Arizona State University's Global Institute of Sustainability!

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