Investments based on climate change have really come forward in recent years, driven in part by the Paris Agreement, where governments around the world have committed to limiting global warming below 2 degrees Celsius above pre-industrial levels. Companies are stepping up to offer solutions to help achieve this goal, and AlphaWeek’s Greg Winterton spoke with Chris Tullar, Co-Founder and Managing Partner of venture capital firm VoLo Earth Ventures, to find out. Learn more about what technologies and initiatives they are investing in. .
GW: Chris, solar panels are just one of the solutions available today that provide ‘green energy’ to homes, businesses, and communities. What is happening here that will support the increased adoption of solar power?
CT: The maturity and continued cost compression of the solar industry is an important step in the right direction in terms of its influence on increasing market adoption rates. We see continued strong growth in the global solar market, with 2021 marking the fifth consecutive year of growth, up 30% compared to 2020 with 4.2GW installed . For perspective, just 1 GW of electricity is equivalent to about 100 million LED household bulbs or 750,000 houses. We believe that the main motivation behind the demand is the increase in household electricity bills caused by the pandemic, power outages due to increased natural disasters, and low financial costs.
In addition, continuous cost compression and coupling of energy storage and batteries with solar allows solar energy to be a 24-hour source even when the sun is not shining. This allows renewable energy to become the baseline power of the electric grid to further accelerate the transition.
Looking ahead, we expect that the fluctuation and increase in energy prices from the fossil fuel-based grid will continue to push individuals towards renewable energy solutions, which will only continue to decrease in price. as technology improves and increases.
GW: Spain recently banned air conditioning in public buildings below 27 degrees Celsius to save energy costs and supplies. A recent investment your company made was Blue Frontier. Tell us a little more about what they do.
CT: Blue Frontier is an exciting investment for us. I mean, what’s not exciting about industrial heating, ventilation, and air conditioning (HVAC) systems? Joking aside, Blue Frontier technology is a true game changer in a long-established industry notorious for its inability to evolve over time.
Blue Frontier technology is changing the narrative due to its ability to reduce energy consumption from industrial HVAC and cooling systems by 90%. The Company’s AC units also include a cost-effective “battery” — specific to their proprietary technology– that allows the cooling load to be decoupled from the grid, resulting in significant savings. at cost. To put a finer point on this, commercial and industrial users have the flexibility to purchase energy during peak hours when prices are lower, store that energy for a given period of time, and deploy it when the price of electricity increases, such as during peak demand which usually occurs on hot afternoons.
However, what really excites us at VoLo Earth about Blue Frontier is the business model – the Company will partner with third-party financiers to offer a cooling-as-a-service model, so that anyone commercial and industrial users looking to purchase new HVAC units can access Blue Frontier technology with no upfront capex, resulting in immediate monthly savings due to significant reductions in energy bills.
GW: The impetus from governments around climate change investment has slowed somewhat this year as the war in Ukraine has caused them to focus on making sure their energy taps stay on, even if that means using more fossil fuels to provide it. VoLo Earth Ventures clearly has a longer term view, but what do LPs tell you privately? Are they holding back or do they still want to support these emerging technologies?
CT: The opportunity presented by climate technology solutions is huge. Bigger than most people realize. Energy is a major input in every sector of the global economy, and how energy is produced, transmitted, distributed, and consumed is changing rapidly.
While we did not predict the terrible events in Ukraine, we founded VoLo Earth with the thesis that world events, whether they are natural disasters or man-made, will only increase in intensity and severity in the near future. that term. This naturally disrupts the global energy supply chain and only strengthens the case for local, distributed renewable energy and storage. However, as many scramble to keep the energy taps on, the EU has committed to ending its reliance on Russian fossil fuels. In launching the EU’s REPowerEU plan, they focused on climate change as a present reality rather than a future threat, calling climate change and the need to diversify from Russian imports a “double urgency”.
Many more of VoLo Earth’s LPs are increasing their exposure to “climate solutions” because they understand the fact that we are entering one of the greatest wealth redistributions in history, where there is a huge financial opportunity to take advantage of global change.
GW: A question about fundraising. Much has been written about start-ups facing a more difficult time at the moment in terms of raising additional series of investments, putting some companies at risk. What is the status of climate change based early stage technology? Is everyone having a hard time with it right now or is there some sort of moat here that supports these above average startup companies?
CT: The global macroeconomic environment should certainly be at the forefront of all investment firms’ minds today. At VoLo Earth, we are acutely focused on finding companies that not only offer new climate solutions to decarbonize but also provide economic merit through their products and technology. It can be a tough slog for companies with a great technology that may require additional costs or “green premiums” from customers so to speak. So decarbonization and saving money are paired in lock step, which we believe can lead to superior financial returns.
Against the current decarbonization backdrop, we feel that climate investments in general have some recessionary resistant characteristics. We see a recessionary environment as a potential market adoption for much of our portfolio. Global corporations are always looking for ways to cut costs to maintain profitability in a recession, serving as a reason to look for cost-saving solutions. Any effect on the carbon footprint can be seen as additive. If you have a great idea to save the planet, it better be able to compete on a unit cost basis with what’s out there now.
So, overall, we haven’t seen a big impact on valuations, but we believe it’s probably because of the types of companies in which we invest and the early stage in which we invest in them.
GW: Ending on a more upbeat note: what are some emerging technologies that may not have an impact now, but in 2, 3, 5 years or so, will be mature enough to do so?
CT: We are seeing significant technological advances across the energy space including cost-competitive EVs, advanced heat pumps, ultra-high-density energy storage, and low carbon materials. For us at VoLo earth, the most exciting thing about the next generation of climate solutions is the diversity and quality of the teams that have committed their careers to realizing the potential of the technology, along with the entire pool of capital and strategic partnerships. -others standing behind that generation of work. . It is inspiring to witness this talent migration to climate solutions.
Chris Tular is the Co-Founder and Managing Partner of VoLo Earth Ventures
