It’s a Catalyst first-of-a-kind: our very first live event! We hosted it last Wednesday at San Francisco Climate week. In this episode, Shayle talks to Mike Schroepfer, co-founder and partner at Gigascale Capital and former CTO of Meta, and Nick Chaset, CEO of Octopus Energy US. Together they cover:
- Lessons on building products that consumers love
- Over and under hyped trends, including data center load growth, carbon removal, and fusion
- What areas will benefit most from the current administration
- The most important, least appreciated category of climate tech
- The craziest idea that just might work
Recommended resources
- Catalyst: A skeptic’s take on AI electricity load growth
- Catalyst: The geopolitics of rare earth elements
Credits: Hosted by Shayle Kann. Produced and edited by Daniel Woldorff. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor.
This special Catalyst Live was sponsored by JP Morgan Chase and DLA Piper.
Catalyst is brought to you by Anza, a platform enabling solar and storage developers and buyers to save time, reduce risk, & increase profits in their equipment selection process. Anza gives clients access to pricing, technical, and risk data and tools that they’ve never had access to before. Learn more at go.anzarenewables.com/latitude.
Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com.
Transcript
Tag: Latitude Media: podcasts at the frontier of climate technology.
Shayle Kann: I’m Shayle Kann and this is Catalyst.
Okay, audience, carbon removal, overhyped, reasonable votes there. Carbon removal, under hyped. I feel like that was less people, but with stronger opinions, which I respect. Carbon removal, hyped, just right. Okay. Not a lot of moderates in this audience, which I appreciate.
Coming up: We’re live or we were live, anyway.
I’m Shayle Kann. I lead the Frontier strategy at Energy Impact Partners. Welcome. All right, this was a fun one. Our friends at JP Morgan and DLA Piper offered to sponsor a live recording of the Catalyst podcast last week at San Francisco Climate Week, which I’m sure many of you were at or heard about. We haven’t done a lot of live episodes on this show in the past, not for any particular reason except that we just haven’t done it. So we decided to make this one a little bit more fun. I had two great guests and we did a little bit of a normal panel type conversation, albeit less panel-y and then we spent some time playing some games. Hopefully you’ll enjoy it.
Hello everyone.
So before I introduce my venerated guests here, we do have to prove to the listeners of the podcast that this is actually live and real. So I’m going to ask you to make some noise for just two seconds to prove that we are actually live. Welcome to Catalyst. Alright. All right. So I’ve got two great guests with me today. The first one used to cost me a lot of money. That is Nick Chaset. Nick was previously the CEO of Ava Community Energy. Ava is the community choice aggregator, the California specific phenomenon that allows you to select your own retail electricity provider in a non-retail choice market. He was the CEO of the CA in the East Bay, which is where I live. I live in Berkeley. So Nick used to sell me really expensive power. I’m sure he will blame pg e for that. But nonetheless, nowadays Nick is the CEO of Octopus Energy.
Us. I’m sure many of you have heard of Octopus. Octopus is a behemoth climate tech company based in the uk. Nick runs the US operation there. They do lots of different things and they have really cute pink octopus as their spokesman. Another guest today is Mike Schroepfere. Mike used to cost me a lot of my time. Mike had a long career successful entrepreneur in the tech industry, but then spent a really long time as the CTO of a little company you might’ve heard of called Meta, née Facebook. And then I guess three years ago, Mike, when did you leave? Three years ago. Left Meta and decided to dedicate himself to climate tech for reasons unbeknownst to any of us, and started a firm called Giga Scale Capital, which is an early stage venture capital firm that has become a great partner to me and energy impact partners where I work. So Nick, Schrep, welcome to both of you.
Mike Schroepfer: Thank you. Glad to be here.
Nick Chaset: Yeah.
Shayle Kann: Okay, so here’s the topic I want to talk about with both of you before we get into games. I was thinking about this. One of the things that I think is a knock on the climate tech world is that there just are not that many examples of big generational success stories from a startup perspective. There just aren’t that many of ’em. From an investor perspective, there aren’t that many fund returners, right? But to the extent that there are proven ones, I think that a disproportionate share of them to date have been consumer products, consumer companies. So the obvious examples of this being like Tesla obviously, or you could say Nest, maybe Octopus is going to be one of these as well. That is interesting because I find that in climate tech world, actually it’s the minority share of companies today, but maybe the majority share of historical big outcomes. And both of you have different and interesting experience selling or building consumer products. So I don’t think we talk enough about that. Schrep, I guess I’m going to ask you this first. What are the lessons from all your time at Meta building, Facebook and Instagram and WhatsApp and so on, what are the lessons that you think apply in the world of climate tech?
Mike Schroepfer: Well, in the consumer space, I’d say the lesson is it is really, really hard to build a great consumer product. And I think anyone who hasn’t built it will really underestimate how difficult it is. Your average consumer is quite a demanding customer. The flip side of that coin is if you can cross that chasm and build a product that people love, then you have just a runaway success business. And I think that’s the thing you’re seeing in the climate tech space. I think the up and comer there is mill. They make a home composting device that sort of makes your trash not stink. But the thing that really caught my attention is when I looked at their net promoter scores, when they shared with how much do our customers it, it’s in the zone of you’ll know if your friend has one because they will tell you about it six times. Have I told you about my mail? Do you want to see my mill? That’s how much people love this product. And once you get a product like that, you get consumer word of mouth and you get influencers and you get a whole bunch of other things that just steal, reinforce, and then you have just a runaway success business.
Shayle Kann: So the lesson there is high bar, super high bar. It’s difficult because consumers are discerning, but when you cross the bar, the rewards are enormous. The rewards are awesome.
Mike Schroepfer: Yes.
Shayle Kann: And how do you think about getting the attention of the consumer in the first place, right? There’s one thing which is, I guess this is your point on net promoter score, which is it word of mouth that drives, are we looking for viral adoption of climate tech products driven by word of mouth? Is that the path to glory here?
Mike Schroepfer: Yeah, I mean it needs to cross two chasms actually. One is it has to be something people love and it’s like solves a problem that people really care about and then that problem in that class of people has to be big enough to build a great business. I built an awesome consumer hardware product that people loved that wasn’t a big enough business. We built this thing at Meta or Facebook at the time called the Portal and it was a video chat device and it was amazing. It was basically center stage before you had it. You could stick it in the corner and video chat with your kids and it would follow you around. If you talk to people who love this bought this product, they love it and they tell all their friends about it, but a dedicated video chat device just wasn’t a big enough market.
Everyone’s like, well, I can use my iPad, it’s good enough. So that cost one but not the other. But if you can get both of them and say, is this a problem? Literally every consumer has and it’s a top three problem that they really care about. This is when I first was looking at joining Facebook, it was just the basic process. I went through my head of what problem is this company solving at the time? It was keeping in touch with my friends and family. It’s like, well who on earth cares about that? It’s like, well basically everyone. So this is a universal product. It’s the most extreme version of that. I think that’s hard to find in climate tech, but I think who here likes taking out their trash? Anyone you yet to get a hand raised on that one and who likes to have their trash be stinky and smelly? Nobody. And so mill sort of solves that problem. It’s pretty high up and people’s like, taking the trash out. It sort of sucks and you do it every day. So I think you’ve got to get into that zone if you love it and it’s a big enough problem.
Shayle Kann: That’s a good bridge to talking about consumer products and energy where Nick, you have an interesting experience there because I can make an argument I think of either thing one, one, which is people really do care about it a lot. I mean certainly we see rising rates all over the place. All three of us live in the Bay area and pg e territory, not to keep knocking on pg e, but the rates are crazy. So people care about it, it affects, it’s a decent chunk of their monthly spend in their house. On the other hand, notoriously, nobody cares about it at the same time and it’s invisible to everybody. So Nick, you used to sell retail electricity, but also you were getting involved in a bunch of behind the meter solar and storage and EV charging and all that kind of stuff. How do you think about that question of getting above that threshold? Is it a big enough thing that people care enough about that you can actually get adoption?
Nick Chaset: I think you actually actually solve a real problem. So some of the most successful true climate tech companies have been rooftop solar companies that obviously are sort of on the down slope perhaps now, but have had some quite high highs. And it’s because they were solving that problem. My bill is too damn high, I can save 25% on my electric bill that I feel is too high by signing on an iPad. Some construction crew will come put some panels on our roof. Cool. I don’t have to think about it, I just save money. So I think the challenge in energy is that largely energy is invisible. You don’t interact with it. So the mill is a great example. Great product solves a tangible problem that I interact with on a daily basis. I for instance, am really when I was at Ava, less interaction now, but was really excited about some of these really interesting induction cooktop technologies, right?
Because you’re actually solving problems. It is better to cook with induction than gas. Once you do it, you’re like, this is easier. I come home, my kids are hungry, it takes me seven minutes to boil water for pasta with my typical not super crazy BTU gas stove induction. It’s three minutes. So that five minute period that I get food on the table faster is the five minute period. That’s the difference between me having a pleasant evening with my family or an evening where my kids are like, I’m hungry, I’m screaming and I’ve crossed that threshold of no return. And so I think in energy or electricity specifically, there are not too many of the climate tech products are not really products that people interact with in their daily life that solve daily life problems. So the companies that have done really well, Tesla, they made a product that was just better than internal combustion.
The car is better now we’re at a place where lots of EVs are better. Once you drive an ev, you don’t go back to driving an ice car mill. As people, I would be interested to see what the stats for mill are. Once you actually have a mill will, you’re like, I don’t want this anymore. I’m going to go back to having compost. I open the bin and it smells. And I think that is probably one of the fundamental challenges is the consumer sentiment of is this making my life better? There’s a lot of products that don’t really make people’s lives better in a tangible way day to day.
Shayle Kann: What’s interesting is there’s two archetypes that you’ve described there and I guess success stories in both. One I think of as being like you are delivering a delightful consumer experience. It’s better than whatever other thing is. I’m boiling my water in three minutes or I get to throw my thing in. What would’ve gone to a compost and it just eats it up and turns it into dust, which is basically what mill does. Or I get to drive a Tesla. That’s the delightful consumer experience. The rooftop solar example is a different one, right? It’s not a delightful consumer experience. It’s basically no consumer experience. What it is is an economic experience. It’s a savings. And the thing that unlocked residential solar was the introduction of the lease in the PPA model where at that time, solar City and Sunrun and Sun Jevity and the companies that were pioneering that were able to offer you basically savings on day one.
So you could just save money on your bill, you get solar on your roof and you feel good about it. But the question that I have, I think there’s a trope in climate tech, which is if you’re developing a consumer product, you shouldn’t sell the climate benefit. That shouldn’t be at least not your primary sales pitch. It should be something else. And if it happens to be good for climate, great nest didn’t sell that you are saving energy. Nest sold the experience of it. I guess I’ll ask Shrep first, do you believe that to be true? Should you not put climate at the or environment energy at the front and center?
Mike Schroepfer: I would actually say it even slightly stronger, which is we use this word climate tech, like it’s an actual good definition of a market segment. When we just talked about, I sell products to consumers that save them money. I’ll sell products to consumers that make their life better in the kitchen, trash or peeing water. I sell products to businesses that save them money, sell products to businesses that help them grow. Those are businesses and be tech, hard tech or others. So I think that adding the word climate on it actually confuses the equation because at the end of the day, somebody is paying you for this and they have to pay you for it because they really want it because it saves them money, makes them lives easier, solves a problem for them. You can put whatever word you want in front of it, but it’s a business. And so I think that that is the thing that you just can’t lose the threat on is that at the end of the day, you have to deliver that value, otherwise people aren’t going to pay for it.
Shayle Kann: Nick, when you were out there shilling, residential solar batteries or whatever it might be, what’s the pitch?
Nick Chaset: Resilience. So if you live in the East Bay and you’re out in Dublin or Pleasanton and you live on a feeder line where you’re getting 15 times a year, the power’s going out because of a shutoff. You’re like, I don’t like that. I just lost $200 worth of food in my fridge. I lost power for two days. So how do I solve that problem? Well, if I can put solar and storage on, great, I solve that problem. So it’s resilience and it’s bill savings. The number of consumers we would engage with who are really focused first and foremost on why I want to be green was actually pretty low. That’s a side benefit and they want to talk about it, but really they’re talking about as long as it does this first two things, the hierarchy of needs, then I’m happy for it to be green and maybe being green is why I might do it relative to putting a diesel gen set or a gas gen set. If the price is about to say,
Mike Schroepfer: Yeah, I would just throw out the very simple, if you go back and do it, if the Tesla Roadster and Model S were ugly and slow, would they have been so successful?
Shayle Kann: Right? It’s got to be a delightful consumer experience or save you money. Something you
Nick Chaset: Got to ask, right? If we just had the Nissan Leaf and that was sort of what introduced people to EVs, I think we’d all be driving.
Mike Schroepfer: I had one, the first one I could buy. I test drove it here in San Francisco. Fair enough. And I almost didn’t make it back and forth to a giant game. So I definitely have range anxiety on that one, but I’m a very special snowflake.
Shayle Kann: This segment’s sponsored by Nissan. Alright, let’s get to a game. We’re going to play a game of over-hyped. Under hyped or hyped, just right. So I’m going to name some, this is a Goldilocks game. I’m going to name some trends, categories, sectors, get prizes.
Mike Schroepfer: By the way, there’s some prize for this?
Shayle Kann: There may be some prizes.
Mike Schroepfer: Okay, great.
Shayle Kann: Yeah. And you guys each have to decide whether this thing is currently, so this is obviously your subjective determination as to how hyped it is today. But relative to your determination as to the current hype, is it currently over-hyped, currently under hyped or currently hyped? Just right. Alright, we’re going to start with the topic of the year. I guess data center driven load growth, electricity load growth, Nick. Overhyped, underhyped, hyped just right?
Nick Chaset: Overhyped.
Shayle Kann: Overhyped.
Nick Chaset: Overhyped. Yeah. All right.
Shayle Kann: Quick zag.
Nick Chaset: Yeah, so overhyped, because there’s only so much connection capacity in the system and the ability to sort of expand connection capacity is reliant on utilities who are then in turn reliant on their regulatory commissions to give them authority to build new things. And the timescales at which they operate are designed to be slow timescales. It’s not necessarily that the utilities fault. I’m sure the utilities would love to put more capital to work faster, but they just are not allowed to do it by their regulator and they have to go through a rate case. And so the idea that we have tens of gigawatts of capacity, they’re somehow going to bypass these planning processes that have been in place for decades, I think is a reflection of maybe a lack of understanding of how utilities build things and how regulators evaluate how and when things get built
Shayle Kann: You’re saying that the actual amount of new capacity we get is overhyped, right? But you’re not necessarily saying that demand isn’t there, you’re saying we’re just not going to be able to build enough.
Mike Schroepfer: Correct.
Shayle Kann: Okay. Schrep overhyped
Mike Schroepfer: Under hyped. I’m going to be annoying and say it as both, and here’s what I mean. I’m going to qualify. It’s very annoying. So yeah, we’re just getting started. Buckle in. There’s no early exit from this podcast. So overhyped in the sense that people over attribute data center load growth with electricity demand inside the United States. Manufacturing and EVs are a huge portion of that. So people think it’s all data centers, it’s not. So that’s the overhyped part, I would say under hyped in the sense that I respectfully disagree with Nick, which is just look at NVIDIA’s earning calls like people are buying those chips and powering them up. And I think companies are, I spend a lot of time being incredibly creative about finding ways around getting power all across the world and figuring out how to do it. So these are well-resourced companies with lots of money, very smart engineers trying to figure these problems out. So I think that a lot of stuff is going to get built.
Shayle Kann: All right, this is the last time you get to say overhyped and under hyped, you get one. All right. This is your mulligan.
Mike Schroepfer: That was not in the rule book.
Shayle Kann: All right. I’m going to do a quick audience poll on this. You have to clap or shout with this. Who thinks that data center driven load growth and electricity is overhyped. Okay. Respectable showing. How about under hyped less people? How many people think it’s just right? Alright. Hype’s just right I think is a winner there. Surprisingly enough. Okay, we’re going to move on to another one. Over hyped. Under hyped. Hyped, just right. Nuclear fusion. Let’s go, fusion. Schrep, you go first on this one.
Mike Schroepfer: I’m going to say it’s bo– You said one, is that what you said?
Shayle Kann: Just one.
Mike Schroepfer: I’m going to go with under hyped. Under hyped. Make your case. I think the timeframes are hard to define exactly, but the idea that you can give me 40, a hundred acres of land and I can make you gigawatts of power with almost no inputs and outputs and no other sighting requirements, and I can do this right next to a major highway and all the people around me are cool with that because it’s an inherently safe thing, I think is just utterly transformational. And so I think this is a very binary thing that if we can actually hit unit economics that are competitive in fusion, it’ll create the largest companies we’ve ever seen.
Shayle Kann: That was an important and big if at the end of that sentence. So Nick, overhyped, underhyped.
Nick Chaset: I think if you say there’s a 10% chance that it actually works, but if it works, it’s so massively transformational that the 10% is sort of worth the bet. Then I would say maybe I would agree with the under hype because I struggle a little bit with, again, the timescale on which these companies are going to be able to build and deliver and local communities, it may be safe, but I don’t think local communities are necessarily going to buy into the idea that it is safe. It’s going to take a while to get people to sort of be comfortable in the US in other parts of the world, perhaps that’s not as much of an issue, but if it does work, it’s a total sort of game changer. Now I will say I was having a conversation with a fusion founder a month or so ago, and I was sort of saying my biggest concern about fusion is this is really the catalyst for AI to really take over. Once you have fusion and AI, they don’t need the humans anymore because they don’t need to build solar panel factor. He is like, fair enough, we just have to tell the AI that fusion came from us and that’s why they should be treating us well for the foreseeable future. And I was kind of like, is a real bank shot? Yeah. I mean, I’m just there. I’m trying to think about how do we align AI and I think fusion being from our gift to you, is that.
Shayle Kann: Yeah, I don’t know what your answer was to the question. So under hyped Oh, you agree I under You’re taking points off, right? So we’re clear. Okay,
Mike Schroepfer: Good.
Shayle Kann: Oh, it’s noted. Okay. Audience gets to vote on this one as well. Nuclear fusion overhyped. Okay. Fairly strong vote for overhyped nuclear fusion under hyped. Just a lot of strong opinions about nuclear fusion. I think nuclear fusion hyped just right. No one thinks that. Wow, that actually kind of makes sense to me. No one thinks that. Okay. Alright. Carbon removal, carbon removal, overhyped under hyped. Hyped. Just right. Nick, you’re up first.
Nick Chaset: I think it’s overhyped. I think it’s overhyped to the conversation we were having about the consumer pull for big investments. Unless you can really drive down costs, such a sort of meaningful point that consumers are sort of comfortable paying for it and consumers having sort of a short-term view. Carbon removal is really a long-term view. I need to remove carbon now so that in 10, 15, 20 years catastrophic things don’t happen. That’s not how most people think. You need governments to be bought in. And I think we’re in a space today where most governments are sort of pivoting away from making those investments. So I would say it’s overhyped, at least for the time being.
Shayle Kann: Schrep?
Mike Schroepfer: I’m going to go under hyped.
Shayle Kann: That was good. Concise.
Mike Schroepfer: Oh, you want some more? Sure. I think we will be shocked at how fast low cost, particularly nature-based carbon removal systems. And when I say nature-based, I don’t mean planting trees. I mean advanced rock weathering. I mean ocean alkalinity enhancement. I mean biochar. These are systems that we can do actual real good MRV, so we know that we’re actually sequestering carbon in a multi hundred year timeframe and we’ll be able to do it sub hundred dollars. And I think once you do that, the market explodes. I don’t think consumers give a crap, but I think governments in the long run actually do. And we have plenty of places. It’s a hundred percent economics problem. You can’t pay three, four, or $500 a ton. People can’t afford that under a hundred ton. You start to get to the place where you can start affording it. And so I think our ability to scale these things out is going to be way faster than people realize.
Shayle Kann: I’ll say one thing that for me gives me some pause about carbon removal at the highest level as a broad category is geoengineering, which look, if things get bad enough that we’re in a situation where we’re doing, we should be doing gigatons a year, tens of gigatons a year, I don’t know of carbon removal. We could probably do the equivalent cooling effect of geoengineering for 1000th. The cost probably. Now it has its own challenges of course, but–
Mike Schroepfer: You need about 10 billion a year to lock in current temperatures.
Shayle Kann: Right. But I mean relative to a hundred dollars a ton, 10 gigatons, we’re talking what’s that? A hundred billion a year. So it’s an order of magnitude at least different. So yeah, it’s an interesting question of, it speaks to, do you believe the world’s governments will get their act together fast enough to do carbon removal instead of waiting too long and needing to do geoengineering, which is cheaper? Okay. Audience, carbon removal, overhyped, reasonable votes there. Carbon removal under hyped. I feel like that was less people, but with stronger opinions, which I respect. Carbon removal, hyped just right. Okay. Not a lot of moderates in this audience, which I appreciate. Okay, we’re going to do one more. We’ll do two more. Alright. Virtual power plants. Virtual power plants. Now this is an interesting one because I would say the hype cycle on virtual power plants has gone through a full hype cycle, certainly as of, I dunno, a decade ago and then came back and now it’s kind of back. So you have to calibrate the current level of hype around virtual power plants here before you give your answer. They’re both deep in thought. All right, Nick. Virtual power plants.
Nick Chaset: Under hype, but I wouldn’t call it a virtual power plant. I would say flexibility as a category. I don’t even know what a virtual power plan is. I talk 10 people to give you 10 slightly different answers. I think load flexibility though is massively under hyped because a lot of the flexibility is free managing when you charge an EV is essentially free. You just go to we at octopus, we, 50% of our customers that have EVs have signed up to allow us to manage when we charge their review in the last 18 months. That’s 250, 300,000 EVs because it doesn’t cost them anything. They say, I plug my car in and by six o’clock in the morning it’s 80, 90, a hundred percent charged. I don’t really care what happens between 9:00 PM and 6:00 AM and as long as the user experience to enroll my car is easy and I get some benefit or I get some cheaper charging, I’ll just give it to you.
That’s fine. I actually think the hardest flexibility, at least in the US is a thermostat because you’re actually asking somebody to be less comfortable. But EVs, batteries, water heaters, pool, there’s so many loads that’s just residential. In commercial, it’s the same dynamic. So I think the challenge is the consumer side is that we actually have built up a ton of systems within our utilities to make it really hard for consumers to actually make the decision, to allow their flexibility to be accessible and to have some level of monetization. When you make it easy for the consumer, it is going to scale. So that’s my argument for being under hype because we have some work to do to make it easy.
Shayle Kann: Underhyped. Mike?
Mike Schroepfer: Nick is going to really disagree with me on this one. I’m going to say consumer sort of demand response is overhyped. It’s just so damn hard to get consumers to sign up for these things. And it’s such a fragmented market that getting to reasonable scales is hard. And I think enterprise and commercial demand responses is sort of under hyped. There’s just so much, there’s big money there to be saved. When I’m operating a many hundred megawatt plant, I can save a lot of money. And so it really starts to be relevant also.
Shayle Kann: I mean, there’s so much more at those scales, whether it’s aggregated from residential or commercial, it’s easier to get there with commercial industrial data center, et cetera, but there’s so much more need for it now because the grid is so constrained. But it gets down to this thing of the market mechanisms have to be there, the economics have to be there, and it relies upon your belief about the evolution of the electricity market and the regulatory compact. And that’s always where things tend to get more complicated. I’ll just say though, in Texas,
Nick Chaset: One gigawatt of peak load is attributable to pool pumps. These are pool pumps that don’t have to run during peak periods. It doesn’t affect the consumer experience of the heating and cooling of their pool, but it’s really hard, to your point, it’s really hard to get them engaged. I think the unlock for residential flexibility is the consumer experience at Octopus. We’ve figured out how to make it really easy and as a result, we have built massive low cost flexibility portfolios. The challenge is a lot of utilities don’t have the consumer systems in place to do it.
Mike Schroepfer: I think the one place that I’m optimistic, if large enough consumer demand is EVs, because EV charging is a huge load source and you can integrate at the car level, so it’s a lot easier. Good luck integrating with the pool automation systems.
Shayle Kann: My understanding is that the state motto of Texas is don’t step on my pool pump. Okay. Audience, virtual power plants or whatever you want to call it. Load flexibility if you prefer under hyped. All right, strong vote overhyped. Yes. I love the one. Whoever the one person is brave enough to hate on virtual power plants. Hype. Just right straight. Just a few. All right. A lot of levers of load flexibility here. All right, last one. AI for climate tech. This is applications of AI that will solve big problems in decarbonization. Schrep, this is up your alley.
Mike Schroepfer: Yeah, overhyped.
Shayle Kann: Overhyped! Go on. You should know.
Mike Schroepfer: I think that I, look, I’m a huge believer in AI. It’s going to transform a lot of stuff. Obviously a huge believer in climate tech. I think that you always have to ask yourself a very simple question when we talk about AI for X, which is if you show me a pie chart of the most valuable parts of these problems, the most difficult parts of the problem, and then you overlay another pie chart, which what part of this problem does AI solve? Many climate tech things fail. So AI for material science, great for discovering new materials. The manufacturing scale up is usually the hard part. So great, I’ve got this new MOF, I’ve got to make a lot of it very cheaply. AI doesn’t really help me very much with that in theory. Maybe I make something that’s slightly easier to manufacture, but I’ve still got all these massive scale problems. AI for cancer therapeutics is real hard for me to find the exact right protein that will target something. But once I do the scale up manufacturing is relatively straightforward and I’m producing a very high value molecule per unit made. So I think that it works very well there, but I think it’s massively people just slapping AI on top of something without having a good explanation of why AI is like a state change in the most important part of the problem for whatever they’re trying to solve.
Shayle Kann: Well put. Nick?
Nick Chaset: I’ll go overhyped and I will sort of add limited comment. I think Mike covered a lot of it, but it’s that I don’t see AI as being uniquely suited to solving climate tech problems. These are we’re businesses solving business challenges, be it manufacturing or software development or discovery of molecules. So to the degree that AI is a good fit for this particular business, irrespective of the climate use case, it’s going to be helpful. And to the degree that it’s not useful today for scaling up manufacturing, then it’s not going to be helpful. So I don’t think it’s anything unique to climate that AI is particularly attributable to.
Shayle Kann: All right. I suspect we have some AI climate founders in the audience. So let’s see what you all think. AI applied to climate tech overhyped. All right. Team Schrep under hyped. A few hyped just right. All right. I think overhyped wins it, I must say. I tend to agree with that. It’ll do lots of things in lots of companies and climate tech, right? We all agree there. Okay, we’re done with over-hyped. Under hyped, hyped, just right. We’re going to give out some awards to finish out this conversation. The first award is the climate tech sector or the sector of whatever you want to call this market that we’re in that stands to benefit the most from the current political environment in the United States benefit the most from the current political environment. This is a multiple choice or you can name your own. So multiple choice options are geothermal power, nuclear power, critical minerals, carbon capture, you name any of those four or go off on your own. Mike, I’m going to go with C. Critical minerals, critical minerals.
Mike Schroepfer: Why? I mean, we’re embarking on a trade war. China just banned the export of six major critical minerals. We make none of these in the United States, so that seems like a real big problem.
Shayle Kann: Sure does. One of the challenges I think with critical minerals, one of the challenges with critical minerals is that there’s a real difference in the timeline between when you can impose an import tariff or a ban on the import of something and how long it takes to actually build a new mine or refining project or whatever it might be. And so one of the risks here is like, yeah, we’re going to stop the flow of graphite from China into the US for anode materials, but standing up a new graphite operation in the United States, it’s going to run past Trump’s first, second Jesus current term. So anyway, the point being, I think it is undeniably true that that is a cornerstone of the current geopolitical wars that are underway. The question is, does it actually sufficiently galvanize investment in domestic mining and refining and so on to make the difference?
Mike Schroepfer: Yeah, the timescales here are tough, but sorry Nick, but I’ll let him get it too. But I do think that we’ve seen lots of companies have very creative, fast to deploy ways to make graphite to precision mine copper to refine rare earths in a way that a lot of the problems of these techniques, we wouldn’t actually be able to permit them in the United States. They’re too dirty and messy, and so it’s not just like you need to build exactly what they’re doing there. Here, it’s a real challenge. But I think the opportunity then is if you have new techniques that are both faster, easier to build and cleaner, they might be able to run that window. It is a tight window.
Nick Chaset: So I would say none of them, because they all require large capital investments that require certainty, and we are in a period of massive uncertainty across the board. So I would actually say I’m fairly bearish on all of those in the near term because I think we are going to continue to see sort of a shift one way and then another way, tariffs. Oh, actually fewer tariffs. Oh, actually tariffs, interest rates, they’re going to come down. Oh, they’re not. Yes they are. Yes. No, they’re not. So forth and so forth. So I’m actually much more bullish on this sort of gets the flexibility. We got to squeeze more out of what we have because we’re not going to be able to attract or make big investments or get things permitted because actually we’ve fired all the people who work in the agency that actually do the entitlements for the land. It’s not that we don’t want to permit the thing at Department of Interior. There are no people that actually go through the exercise of approving the permit. So I would say flexibility or resource efficiency, squeezing more out of what we already have in the near term. I think in the long term, I think I generally agree with you because of the geopolitics. So
Shayle Kann: I don’t remember listing Debbie Downer as a option, but I’ll allow it this time.
Mike Schroepfer:
I would say that the retort that I agree with your concerns that the one thing that I think we don’t talk enough about is domestic sourcing from the defense department for critical things. Everyone has figured out that the Ukraine war is a war of drones. And if you want to have US manufactured drones with batteries and electric motors in them from US source materials, there’s some departments in the government who are going to really want to do that. And I think you see similar things in energy with fission and others. So I think there’s an opportunity to start building that infrastructure with a buyer who’s a little bit longer term. I hope you’re right.
Shayle Kann: Says Debbie downer. Okay, so next award that we’re going to-
Mike Schroepfer: This is spicer than I expected. Did you know we were going to be oppositional on all of these things?
Shayle Kann: I planned for it. Next award, most important, least appreciated category of climate tech. What deserves more love than it gets? I’ll list a few, but again, you can name your own or just shit on all of it, like Nick probably will. Alright, most important, least appreciated category of climate, tech, energy efficiency, I guess that’s what you were saying on the last one. Resource efficiency, public transit, natural gas, question mark, forestry and land use or name your own Schrep, you go.
Mike Schroepfer: Wave power.
Shayle Kann: Wave power. Most important, least appreciated. Certainly least appreciated. Go on. Wave power.
Mike Schroepfer: There’s a tremend- I mean wave power is basically concentrated wind energy and there’s a tremendous amount of it out there and we’re harnessing very little of it. So it’s probably the largest single untapped energy source on the planet.
Shayle Kann: Okay, there’s the zag. Nick, you’re also going to say wave power I assume.
Nick Chaset: I think we’re sort of down right now in the US on electric vehicles and I think we’re down on Tesla because for a variety of reasons we’re down on,
We’re down on US auto OEM’s ability to scale up manufacturing. And I think getting to the thing that opened this conversation about just better products, consumers wanting better products. I think electric vehicles, Ford is making mach Es that are just better to drive than the alternative. Ford and Hyundai and Kia, they’re just better vehicles. And I think we’re sort of in sort of a view from a down cycle, from a sentiment perspective for EVs. And I just think consumers are going to keep buying them. And when you buy one then you tell your neighbor, this is just so great, the neighbor buys it and you have the referral cycle and suddenly you’re Norway and you have 90% of new vehicles are EVs just because they’re better and there’s a lot of flexibility opportunities. So I actually think that’s, that’s what I’ll say, EVs.
Shayle Kann: Suddenly your Norway is exactly what the other side is worried about happening. All right, so none of my answers resonated with any. That’s fine. That’s fine. I didn’t spend much time, but they were awesome. Thank you. Thank you so much. I appreciate that. Okay, we’re going to do one more craziest idea that just might work. Okay, here’s my list, but of course come up with your own wave power. There’s one, okay. Craziest idea that just might work. Space-based solar power. A lot of these are space related, I found as I was thinking about it. I don’t know why that is. Space-based, solar power data centers, and by the way, I’ll say every one of these has at least one and generally multiple startups doing this. So these are real attempts. Space-based solar power data centers and space deep geothermal. Geothermal anywhere. Let’s call it drill deep enough. You get geothermal power literally anywhere. Deep sea mining of critical minerals, asteroid mining or name your own.
Nick Chaset: I’m going to name my own, I gee, I’d love all of those. I just don’t know very much about them. So while I’m excited, I am going to sort of focus on the lane that I’m in and the company I’m really excited about is a company called Water. I knew it, you texted me about this. Oh, I love these guys last week. So water is, they put two Nvidia GPUs on top of a water heater and creates heat. They suck it into the water, it heats the water and it creates a 10x ratio of compute revenue to electricity costs. So they can actually give water heaters away for free. They monetize the compute and-
Shayle Kann: It’s a Bitcoin mine water heater.
Nick Chaset: But it can be for Bitcoin. Yeah, exactly.
Shayle Kann: Just trying to get concise here.
Nick Chaset: It’s not necessarily Bitcoin only. It’s not necessarily just for Bitcoin. It can be for sort AI workloads as well.
Shayle Kann: Everyone says that.
Nick Chaset: And as a retailer, as a retailer, the idea that I could go to a consumer and say, I’m going to give you fixed price electricity, irrespective of consumption for say $50 a month as long as you install this water heater and then we split the compute revenue. I’m kind of like, this is a real differentiator compared to, Hey, I’m going to give you five bucks to let me manage your thermostat, or I’m going to install a battery. I’m going to lose a bunch of money on that battery that’s being installed and hopefully I’ll figure out how to manufacture batteries and get my costs down. I’ll go with the water eater with the Bitcoin mine in there.
Shayle Kann: I feel like there’s some risk if they give you your two Nvidia GPUs, you’re just going to take those and resell one.
Nick Chaset: But that’s maybe part of the strategy there.
Shayle Kann: Alright, it’s good selection. It’s a real company. You texted me their website. It’s interesting. Alright, Mike, craziest idea that just might work.
Mike Schroepfer: I mean, if I say offshore Open Ocean data centers, is that reusing my answer for the last question? Do you want me to do something different?
Shayle Kann: Yeah, because it’s the wave power.
Mike Schroepfer: Great. So that’s sort of my answer, but then I’ll go with super deep geothermal.
Shayle Kann: Super deep geothermal.
Mike Schroepfer: Yeah.
Shayle Kann: Yeah. Okay. This was a lot of fun. Please everyone join me in thanking my guests, Mike and Nick for-
Nick Chaset is the CEO of Octopus Energy US. Mike Schroepfer is the founder and a partner at Giga Scale Capital. The show is a production of Latitude Media. You can head over to latitude media.com for links to today’s topics. Latitude is supported by Prelude Ventures, prelude backs, visionaries, accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more@preludeventures.com. This episode was produced by Daniel Woldorff. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I’m Shayle Kann and this is Catalyst.
