HST CEO Discusses Future of Clean Energy on NRF’s Currents Podcast

This week, Todd Alexander interviews HST CEO Rudy Roy on The Currents Podcast Episode 141 from Norton Rose Fulbright.

Show Notes

Rudy talks about HST’s mission to improve lives by scaling clean energy to 1 billion people through software innovation and cloud technology. He elaborates on how HST scaled its View® and Cue® software platforms to thousands of projects in more than 100 countries, who the company’s dedicated customers are, and how HST uses metasearch to accelerate development and access to clean energy.

In the second half, Rudy explains how HST can reduce two gigatons of carbon emissions through cloud software applications, and finally, Rudy and Todd discuss the challenges and opportunities for global cooperation in the buildout and future of clean energy.

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Listen to the full episode and drop your questions in the feed below.

About Currents

From Norton Rose Fulbright: The Currents Podcast features in-depth discussions on the latest developments in project finance. The podcast is hosted by partner Todd Alexander, who interviews key business leaders and policy makers to investigate important trends affecting the energy and infrastructure space.

You can also listen to Ep141: Leveraging Technology to Scale Clean Energy on the NRF website.

Transcript – Currents – EPISODE 141

TODD ALEXANDER: Welcome to Currents, a Norton Rose Fulbright podcast.  I’m Todd Alexander, your host, and a partner at Norton Rose Fulbright’s New York office.  Today, our guest is Rudy Roy, CEO of HST.   HST is a cloud-based clean energy software provider.  One of its goals is to allow companies to directly purchase renewable energy through a marketplace that it sets up online.  Rudy, welcome to the podcast.

RUDY ROY: Thanks for having me, appreciate it.

Mr. Alexander: You know, I gave a little intro there, but, just so people can understand it, including me, what is the mission at HST and what are you guys actually up to here?  What does this mean, having an online marketplace for matching buyers and sellers of energy?

Mr. Roy: Our mission is to bring clean energy to a billion people, and to really change the world by enhancing the amount of sustainability and sustainability products that are out there.  The way we do that is we deploy a technology ecosystem; as you mentioned, it begins with a marketplace that allows energy users on one side to match with energy producers…these are project developers, typically of large scale energy projects; and by doing so, we want to create that link between supply and demand; create a lot more actual implemented and executed projects that are on the electric grid.

And finally, a really big value add that we bring is search technology.  So using the ability to use algorithmic, AI-based, search to improve the optimization yield of a certain clean energy project, and to improve the ability for an energy buyer, whether that’s corporate or muni or some kind of other energy buyer, to access cheaper clean energy.

Mr. Alexander: So I know you are active outside the US as well, how do you both make people aware of your platform and also how do you get the platform to work across all different countries?  I know it is hard enough even in different ISOs in the US, or for that matter, even different technologies in the US.  How does this really work in practice?

Mr. Roy: Typically…so we have about 600 gigawatts (GW) of different clean energy projects on the supply side of our platform.  So that is where project developers are inputting project parcels.  They are figuring out what kinds of equipment that they want to use to go build out a project, what types of labor rates they want to model and so on, and all of those things are different for different countries, and certainly for different regions and for different ISOs, as you said, in the US.  But at the end of the day, a lot of where we’ve gotten scale of having 600 GW in 100 countries comes from a group of “super” developers, if you want to call them that; the majors in the space.  They will have a project pipeline in 30 different countries, or 20 different countries, what have you.

That’s usually how we have gotten the scale, by helping the software and development teams, within the headquarters of very, very large developers and having them scale the ability to enter projects in-whether they are doing so in Spain, in Italy, in the UK or in the US.  They’re operating on projects that span a global reach. So being able to model projects in different regions is not too difficult, because at the end of the day you are dealing with the same types of equations; but when you are dealing with matching corporate load to these projects, or matching government load to these projects, those do require intricacies for each region.  Our main value add is to create those matches, to create the optimization of the pricing between project seller and buyer and ultimately, a lot of the other manual work that is bespoke, is done by advisors, by partners: legal firms like yourself that can really help with getting the transaction done.

Mr. Alexander: So what is the value proposition for everybody who is involved?  Why would a generator want to work through you?  And why would a corporate customer want to work through you?  Is there some benefit in terms of——you mentioned matching your load, lowering your costs, for that matter, lowering your carbon footprint.

Mr. Roy: One of the benefits that we bring is…we’ve got this proprietary search algorithm.  What that really helps us do is take any specific plot of land that a project developer would have…any specific combination of equipment that they are considering… and it allows us to search through about 180 billion possibilities for how that land can be utilized to reduce the price of energy, to really optimally find the project IRR and the optimal levelized cost of electricity.  So that is one of the things.  When you have got cheaper energy coming off of a project, you’ve got a more competitive project bid, a more likely PPA closing, and ultimately a happier corporate client that is procuring energy and reaching their sustainability roadmap in a way that is really achieving financial targets.

So that is one of the key value adds: using search optimization to enhance both how much in project IRR a developer can achieve as well as what kinds of cost-effective purchasing a procurer, an energy user, can achieve.

Another aspect of what’s different between what we do and what other intermediaries do is ultimately being able to use aggregation to be able to have algorithms figure out which projects are best, or which combinations of projects are best fit to an energy user’s load…  or vice versa, how many different energy users can ultimately subscribe to one specific clean energy project.  So we are not the inventors of clean energy aggregation, but we love the idea of seeing it happen in the industry before and we really want to help create the largest number of clean energy transactions.

So if we can help provide access to, for example, businesses that may have only been able subscribe to 3 or 4 megawatts but they want to be a part of a 50 or 100 megawatt PPA, having software that really provides that access through aggregation and provides access to one and a half (1 ½) to three (3) cent per kilowatt-hour (kW h) energy, as we are dealing with utility-scale optimized energy,  really that may be a first in the industry.  We really are using technology to take the industry forward that way.

Mr. Alexander: So when someone, a buyer that is matched up using your system, would they deal directly with the seller and would they deal with only one seller?  Or is it that you blindly, from their perspective, match them up and tell them if you are interested in this many megawatt hours at these times of day, I’ll get it for you.  Leave it up to me to source it for you.  But this is how much it is going to cost you and you are going to get a bill and that is it.  Or do you tell them XYZ Projects looks the most optimal for you, here is how you get in touch with them and set up your contract?

Mr. Roy: It is a lot more of helping them by acting as their buyer’s agent.  Helping figure out how they can look and evaluate Project A, Project B, and Project C.  Really meeting the project originator who’s posted that project on the other side of the platform, and helping them figure out do I want a combination of these projects or which specific developer do I want to deal with.

Sometimes those developers will already have that relationship with the buyer.  In that case, our value-add isn’t the introduction, but again it is in the optimization search and in the aggregation.  The abilities for technology to really increase the offerings so that what may have been a 2.8 cents per kWh PPA for 10 years can become a PPA for 2.4 cents, just as an example.

It is an ability for the energy buyer to provide us their various building loads and various building locations, and for us to scan and evaluate what types of regulatory systems those are in: if those are in regulated states or deregulated states and so on, and then figure out what types of contracts, whether that’s a virtual PPA, an insured virtual PPA, or a physical PPA would be best for that off-taker to actually engage with that energy user.

It’s really a service that uses technology but at the end of the day, as I mentioned earlier, it does really require advisors and other manual processes to continue… at least in these early days.

Mr. Alexander: All of you technology guys are eventually going to get rid of us lawyers.  (Laughing)  Hopefully, I will be retired by then though.  I know one of the differences in your software from maybe some of your competitors out there is this Meta Search function.  What is it and how does it apply to clean energy?

Mr. Roy: Sure.  Meta Search in general is being able to search on another search engine’s results.  But it can also apply to the ability of applying a search process to another search process.  So in the context of clean energy procurement, what it means and what it can really become is taking a group of results of projects that a broker or consultant that’s going out there to do an RFP for utility scale clean energy…taking those results and applying one of our search engines to it, to actually figure out from the actual bids that they have received, how can they ultimately provide a more competitive offering?

How can that developer optimize their offerings to be able to ultimately pass on to the consultant or broker’s client, the energy user, the most competitive form of energy?  So Meta Search is really the ability to search on another existing search process’ data and really create a more competitive marketplace.

Mr. Alexander: Now that we have got, kind of, the mechanics at least on the table, let’s talk the bigger macro picture in terms of how the process is actually going.  First, giving that this pandemic has lasted so long and unfortunately it seems like it’s still going for a while, how has impacted either the accuracy of the matches that you have made in terms of the forecasts and the interests of your customers?

Mr. Roy: It has really affected all of us, hasn’t it?  We see some delays in developers as far as their project timelines and project permitting.  There has been a natural sense of, “we can’t get projects through permitting agencies as fast as we would have wanted to.”  That having been said, we do provide cloud software that really fits well with people who are working from home.  We have seen huge amounts of traction, just in March to April we had 300% increase in usage from developers posting new projects.

At that time, obviously no one thought would be dealing with anything longer than 6 to 8 months of a pandemic.  But, from a perspective of the amount of supply of projects that were being posted to both prospect and to originate PPAs from, that had really increased.

On the demand side, energy users who were trying to pre-pandemic accomplish a large or ambitious sustainability plan, we certainly saw a large pause for, on the order of, a quarter or so, at least.  People really wanted to figure out what their priorities were and what was going on with the Pandemic and ultimately how to keep their employees safe, and so on.

I think renewable energy took a little bit of a back seat for the first part of the Pandemic, but Phase Two onwards as people started to see, first of all, we see the opportunity to understand what happens when we reduce Global Emissions by everyone stopping their transport and everyone stopping their industrial activity…that was a real eye-opener, as the renewable energy industry took that as an opportunity to say, “we should build out renewable infrastructure to allow people to see this kind of clean air around the world coming back.”

I think, finally, the other thing that we have seen because of the pandemic, the number of shareholder proposals that are climate oriented, that ask management of publicly traded companies to really take climate action, has increased quite a bit in 2020.  We saw capital markets taking an active role even more so because of the pandemic.  They really said that the next pandemic that we should be addressing really is climate change.

Mr. Alexander: Where do you see pricing going?  Has the pandemic had much of an impact on pricing globally?  We have seen what has happened in the Natural Gas and Petroleum markets, what’s the pricing like for renewable power in both the US and Internationally?  Can you give us a general framework in terms of trends and to the extent you have the numbers at the tip of your tongue, the actual pricing?

Mr. Roy: I think I alluded to a range of renewable pricing earlier in the call: between 1 ½ and 3 cents per KWh, really depending on what scale of projects and where they are located, and things like that.  Ultimately, the very first thing that people saw was that there was a reduction in electricity demand, as the lockdowns created significant reductions in how many, certainly in corporate and office space procurements, of energy in general.

Pricing would obviously have followed trends driven by a reduction in demand.  Long term, obviously people expect recovery as we grow, both economic recovery and also recovery with the energy transition.  We really see clean energy continuously coming down that cost curve, achieving a 1 cent per KWh target.  As of today, we see ultimately something where clean energy is competitive against coal in every market, it’s competitive against Natural Gas in most markets.  It really just depends, we see pricing being in clean energy’s favor today, and over the next ten years.

Mr. Alexander: How about the ways in which either your software or just renewable energy is expanding out beyond just these few corporate buyers that initially underpinned the corporate PPA market?  Do you see a role for people like you and me individually buying power?  There’s Community Solar or Rooftop Solar.  How does either your software product or the way that the market is evolving going to allow other people to access and help promote renewable energy?

Mr. Roy: That’s a really good question.  We definitely see software’s role as being able to provide access to smaller and smaller energy users.  When you think about who defined the initiation of large scale renewable energy procurement, it was utilities, and then it was very large scale corporates.  It was the Facebooks of the world, the Amazons, the Googles and they did recognize the benefits of energy that is 3 cents per kWh or less.  But the average person today may be spending 8 cents, 3 times that for example to pay for energy today… that is provided retail, but it is also provided with fossil fuels mixed in, so there is a legacy set of utility scale projects that have fossil fuel in them that ultimately lead to that increase.  Utilities have to continue to buy from those legacy projects.  I think there has been a bifurcation of what small energy users, whether that is an apartment or house or anyone that is a small company, can access versus what large enterprises can access.

So what software can do is, first of all, is create access to aggregation, so the power of group buying; is a very big aspect of what the software can help with…so a million subscribers of a residential scale can help access a large scale, utility-scale clean energy project.

Community Solar is a step in the right direction, obviously it talks more about 500 kilowatt or 1 megawatt scale projects, where as what we are discussing, and what is typically on our platform, is something that is 20 megawatts to 2 gigawatts… it really just depends on which developer and which site we are discussing, but really seeing the economics of large scale buying from these large projects and remember, these projects are sited where they are optimally able to harvest energy from the site. We really see that ability to reach the economics of 2 to 3 cents per kWh and then to be able to have a large scale mass buying group of individuals: we see that probably in the order of within the next five years being something that is possible.

Mr. Alexander: That is interesting.  I wonder what that would do then to the Community Solar developers or Residential Solar.  Do you think that would be disruptive there?

Mr. Roy: We don’t see that as being disruptive in the sense that it would ruin their business.  We do see them as potential channel partners to those types of business models.  We see them as being able to offer a portfolio of, ultimately, offerings.  If their client is going out there knocking on doors, well not knocking on doors today during the pandemic, but ultimately trying to acquire these residential customers…  if they don’t want the rooftop solar or can’t access it for one reason or another, they could be offered a utility scale subscription, using the software aggregator to access the energy from a 50 Megawatt or a 100 megawatt facility.  So it is really a complimentary model to some of those other rooftop players but they would obviously have to expand it as an offering in their portfolio.

Mr. Alexander: I am listening to you, what I really like is that what you are doing, to me, is you are lowering the cost of information really.

Mr. Roy: That’s right.

Mr. Alexander: So what you are doing is finding a way for people to get the best deal.  You are reducing what is a very tough thing for people to figure out without something like your platform.  And the more people that have access to the information, the lower the friction will be from an economics perspective.  You are bringing down the cost of power and the cost of developing projects, even.  Because from the developer’s side they know someone is there and they know there is a market and from the buyer’s side they can reduce the costs of their own energy.

Things like consumer compliance laws, things like differing standards between ISOs even between States.  Even different ways of people looking at things that are important to them, some people might value reliability over green power.  Some people may only want green power.  So there’re just so many variables that I can see and you trying to put this business together to find a way to match people up better.  I am interested to know where do you see this type of business, whether it is yours or other competitors of yours over the next two or three years?

Mr. Roy: I think it is helpful to frame this from the perspective of the macro challenge.  If we look at the amount of energy, or the amount of emissions, that were actually halted by the initial set of lockdowns that we had in March and April globally, we are talking about 2 gigatons of CO2.  We did a quick analysis, we said if we were to try and lock that in today, that reduction in emissions today, with a certain number of projects being optimized, finding PPAs, having an energy buyer actually match with them, what would that look like?

When we did the numbers it looked something like 12,000 utility-scale solar projects would need to be matched out, for about 1360 gigawatts of generation.  That would be matching by PPA, be optimizing to make sure you get the lowest LCOE, and so on as we move on the energy transition.  That’s to lock in today the amount of carbon benefit that we got from the pandemic lockdown. If we wanted to do that operating over ten years, it is really only 136 gigawatts.  So that opportunity is really, really achievable.  Not only does it represent something that is very investable and something that is achievable, if you look at 2019 numbers the world put on about 173 gigawatts of energy, so 136 gigawatts operating over 10 years is a really achievable number.

Ultimately, if we look at what it’s going to take to get more and more companies to incentivize their management to move forward to make those purchases to actually take those bold steps to decarbonize their footprint…we see one of the largest opportunities (but also somewhat of a challenge)is the ability to get capital markets involved… the ability to get shareholder advocacy internationally to increase on the demand side of the equation.

What we mean by that is, I think Goldman Sachs has said, of the shareholder climate action proposals that were put out in the last year or so, about 30%, only about a third, were targeting companies that were the largest energy users, by extension, emitting the largest amount.  50% were going towards climate action proposals for the oil majors and a lot of the energy producers. So if we could as an industry, and as a company, help create opportunities for shareholders to both track how well their investments are doing from a decarbonization perspective; and also to incentivize more and more of that transition…  I think we would be able to see just from a purely financial interest, we would be able to say, “hey Shareholder X, you should tell your management of the portfolio company you have to ultimately decarbonize 100% in the next five years.”  It is an aggressive target.  Why?  Because you want them to financially outperform their competition because you are a shareholder.”

If we can ultimately, from our perspective, our opportunities are to help those capital markets get involved and play that game of decarbonization.  And really participate in that $16 Trillion opportunity between now and 2035 of decarbonizing our Country and the World.

So that is where we see a lot of the opportunities..to not just think about the PPA market today but to see what the other stakeholders who are involved: in Corporate, in Muni, and other types of energy users decarbonization, how do we get them involved using the largest platform ecosystem approach?

Mr. Alexander: That is a good positive note to end on since we mentioned COVID and the pandemic several times.  (Laughter)  So I want to thank you for being here today and good luck with your future endeavors.

Mr. Roy: Thank You for having me.  I really appreciate it.

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Mr. Alexander: You can find us online at www.projectfinance.law or send us an E-Mail at currents@nortonrosefulbright.com.  Please rate, review, and subscribe on Apple Podcasts, Spotify, or your preferred Podcast App.  Our show today was produced by Emily Rodgers.  Stay ahead of the Currents.

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