Ep12: How Smarter Energy Project Execution Accelerates Data Center Development

(upbeat music) This is UptimeNow, a Norton Rose Fulbright podcast dedicated to conversations about data centers from development and construction to cutting edge technology and operational breakthroughs and the people driving it all. Joining us today is Daniel Duss, CEO of Clean Tech Industry Resources, where he leads a platform focused on commoditizing energy project development and engineering through a development as a service model. He brings nearly two decades of experience across renewable energy development, operations and capital execution, including senior leadership roles at a dining group, Marty Fressuller, and dynamic energy. CIR is supporting more than $22 billion worth of clean energy projects globally, spending solar, storage, and grid connected infrastructure, including the first ever community solar project ever built in the US. Daniel is a frequent industry commentator on execution risk, speed to market, and structural bottlenecks in energy development. Daniel, welcome to the show. Good to be talking to you, my friend. Yes, Samir, it's great to see you again. Thanks for having me. So I want to start just by giving folks who are listening just a little bit about you and your background. Can you talk a little bit about your path to being CEO of CIR and what that's looked like? Yeah, of course, it's actually directly related to the ultimate outcome, which is CIR and our model. My first solar platform, I launched out of the Drexel Business Incubator. I think I was about 28, this is 18 years ago, and was developing large utility projects, was developing a 40 megawatt project in Colorado, which would have been the largest solar project in the world if it was operating at the time. So that was the scale of the space at the time. And my plan to finance that platform was I signed up to acquire a publicly traded shell company. I was going to do a reverse stock swap right around October 2008, about two weeks after Lehman collapsed. So that didn't happen, Samir. And I developed a solid case of entrepreneurship, PTSD, frankly. After that, I worked for a series of platforms filling each of the roles necessary to gain deep understanding in each of the verticals, necessary to advance projects. So first, as CFO of a top 10 global platform called Martopher Solar, and then as CFO of that platform to work on construction and engineering execution, then I became CSO at Safari Energy, which is now sold to PPL and now under Aspen before becoming Chief Development Officer of Dynamic Energy now under pattern. Because I really wanted to gain sort of broad, but very deep experience in each of those verticals before taking on my next entrepreneurial endeavor. But that really informed the turnkey development and delivery service, which is essentially CIR. So it was not a very straight path, but that's the background. I like to get deep and do it right at the start of the show. So if you had to share one lesson with folks who are listening, one lesson that you've learned from your career so far, what would the lesson be? I would say that I think what differentiated my career path was acting like an owner the entire time, whether it was my own platform or working for others, understanding what the key stakeholders needed and wanted to succeed and working accordingly. Because in infrastructure, really ultimately, every single thing you do is for the benefit of the long-term owner operator of those assets. And so if you come to the table with that mindset, I feel like you ultimately end up delivering extreme value by delivering project success in that way. If that makes sense. Complete makes sense, totally resonate with that. I think somebody very early on in my career gave me that same advice and complete changes the way that you look at whether it's a transaction or an issue that you're client stealing with or a number of other types of things you've seen or did a day. How do you think that lesson shaped your career? Personally, when you take literal ownership of the outcomes of your work product, you are taking ownership of delivering results. And ultimately, that's all that matters. And I think interestingly, over the last few years, as we've really accelerated on the software, AI journey, it's more important than ever, right? The results are actually where we end up, adding value as humans is delivering the results versus creating activity along the way or delivering work product that ultimately misses the mark in some way, whether it's bankability, quality, et cetera. So I think it's very translatable to what's required to win an infrastructure. Well, I appreciate you sharing those lessons with us. Let's talk a bit about CIR. Where did the concept for CIR come from? We, I guess it's certainly a scratch my own itch platform. I will never forget coming out of the cash grant days, having built my first large solar development construction finance platform, having to lay off a huge section of the team as the market corrected and adjusted. And I will never forget thinking, boy, I wish there was a way to execute on a flexible bandwidth method because project work is lumpy, right? Sometimes you have more than you could ever tackle as a team and then teams get overworked. And then other times you're waiting for tariffs to get resolved or financial closings. And so if you staffed your peak need, then if you're in a valley that SGNA becomes very painful very quickly. And I think we've seen a lot of industry failures accordingly. And whereas if you could have access to flexible bandwidth, you become completely operationally efficient. And that's the core, one of the core challenges that CIR solves, allowing our clients to hire for their core strategic need instead of that max bandwidth need. So I think it was a lot of scratching my own itch. - Cool, can you talk about, 'cause I'm not sure if everyone let's listening, we'll understand what development as a service means. Can you talk about what that means? - Absolutely, I think we've coined the term effectively for the space in that we have commoditized or standardized the vast majority of items to develop and deliver projects. You can think of us as a turnkey developer. We just don't develop for our own balance sheet or our own projects. We develop on behalf of others, on behalf of the industry. And what's interesting is not only do we act in as a turnkey development engine for some of our clients, but we also execute any one of the unique actions necessary to advance a project forward within that turnkey development ecosystem. And we're agnostic to engagement model. We execute both of them, but that's what development as a service is. - Can you talk about what some of those unique aspects of a project are where you guys get involved? - Yeah, when I say we do everything for 10 to 20% of our clients, they'll come to us with a project site and we will bring that all the way to COD and operation and through warranty periods and asset management even. We'll manage that entire process, execute that entire process beginning to end, we'll obtain permitting interconnection, we'll do all of the civil electrical, structural engineering all internally. We'll manage all of the procurement, but what's different is we do all of those activities at cost. So we're a turnkey developer, but we don't charge development margins. We charge for the time our team spends on those projects and executing those projects at cost. We deliver all the procurement, et cetera, in highly competitive solicitations, but at cost to our clients. And so we touch every element of project delivery. - And so you call yourselves the only commoditized project to delivery platform. Can you talk about what that means and why that matters? - Yes, so commoditization allows for faster deployment, better outcomes through standardization and much lower cost project development and delivery. Commoditization, of course, means we have a fixed low price that applies to, we estimate about 95% of the unique actions necessary to advance a project from site visits all the way through construction management. So that is commoditization and why it matters, better lower cost, faster project delivery. - And I'm curious to like, how do you guys interface with the other contractors and folks that people are, you know, that are going to come and provide all this work to these projects? - Yes, so I think a common misconception of us as a platform is that we're like an Amazon web services store where we're coordinating all these vendors to do injection studies, power system studies, the pyramid applications, et cetera. We actually do all of those activities internally. What we coordinate and execute externally includes boots on the site geotech, the boots on the site portion of the environmental assessment. And of course, all of the OEMs, the equipment for each of these projects, which for all of those items, we scope them. We have 63,000 qualified vendor contacts in our process. And we go out to broad-based requests for proposals and we provide all of the market data supply chain data to our clients. can work together with them to pick the best resource for the project and then deliver and execute those activities or get those materials to the job site all at cost, no markups of any kind. So really helping de-scope the projects and dramatically lower project delivery costs. And I guess on the topic of costs based on the customers that you are talking to and what you're seeing out there in the field, where do you think power developers are overpaying the most? We see pretty deeply inside our client organizations. We have over 250 clients across developers, builders, financiers. And a couple of things are very top of mind. One is the procurement and delivery of product sites. On average our clients internal teams will go to three to five bidders for a component. We go to on average about 150. So that's a dramatic difference in terms of supply chain efficiency, market feedback for that specific project site, DDP to that project site, delivered there, full duties paid. And that alone can result in a three to five percent overall capex savings by having a broader procurement market supply chain strategy. We also happen to operate the largest renewable non-profit fundraising event in the world solar fight night. So we had 2,400 industry leaders at our last event. So we have got great reach into industry leading organizations to support the community to help deliver these projects most efficiently. So it's a little bit of our secret sauce there. And then the other thing certainly top of mind for us is core engineering services. We often see folks overpay by two to three hundred percent, which on a portfolio basis gets to be a very big number in efficiency versus what's available in the market today and what we can deliver on. So I'm curious, much of the work I do day to day is to help data center developers and power developers work together. And from your perspective, I'm sure you're getting involved on both sides of these projects are the challenges that are different in the power development world than in the data center world. Are the worlds of certainly converged rapidly haven't they? Without electrons, there is no compute. And both have also become cultural issues unbeknownst to us and I think unwanted in many ways. But both renewable energy and data centers have become a cultural and very political issue. And so we're often forced into the same bucket. We see more atoriums on both of these happening concurrently in some cases. So there's certainly a lot of overlap. Of course, both infrastructure assets fundamentally simply with different supply chains. But certainly interwoven at this point in terms of success and failure. Yeah, and a lot of that success and failure right now seems to be around interconnection. You've spoken about fragmentation and energy development. What are your thoughts on the challenges of trying to standardize processes across seven different ICOs and RTOs in more than 50 major utilities around the country? Yeah, I think one of the common misconceptions about what we do is folks assume that commoditization of these complex professional services means they're tailored for a specific authority having jurisdiction or utility, et cetera. But in fact, our process is designed in a way to assess the hyper-local issues as just part of our intake process, step zero, to establish the exact HJ permitting matrices, utility processes, regardless of the ICO, and to execute accordingly, establish the execution plan that execute accordingly. Now the way we've commoditized the pricing and fixed the pricing essentially is we've established the workflows for each of the worst case scenarios for each of those activities. And so we have this ability to fix costs that have never been fixed before but have always been S-GNA and variable costs. So it's an essentially, it's a massive risk transfer from developers, IPPs, and finances to us. And we're able to do that because of our software forward nature, our global team, et cetera. But that's how we deal with, as you're pointing out, the local and site-specific utility-specific elements of these projects. Now, also in sort of combining these diverse workflows, you have, you have, to success, successfully, execute, of course, you have engineering work streams, legal work streams, you have finance work streams, and so on. And that is one of the things that we really, where we really gain a unique advantage is we have all of those subject matter experts internally across all those workflows. So for example, when we have an engineering engagement, we put lawyers and developers and finance associates on engineering engagements, which of course an engineering only firm can't do, dramatically improves outcomes because where you usually see, I'm sure you've seen this on your side, where you usually see things break down, it's usually not in the hardcore technical work or the hardcore legal work, but it's at the interface. It's at the interface of the engineering with the policy work, the engineering with the PPA and the legal work, it's at those interfaces where issues arise. And so that's where we bring a special value is by providing all of those experts, all that expertise in one location to kind of sit across the top of those workflows, but also execute on those individual workflows. So I think both of those are that aggregation of complex, diverse, either site-specific issues or workflows into the related infrastructure projects. So it's pretty interesting. Yeah. And all of this ultimately impacts the investors and there are, as you know, billions and billions of dollars flowing into these projects, you hear these announcements almost on a daily basis at this point. Yes. It is wild. From your perspective, is there a disconnect between investor expectations and the on-the-ground execution? I would say that there is a wide range of experience across investor groups in the space right now. There's certainly a lot of our tried and true blue chip investors, whether it's Brookfield or the primary PE funds, et cetera, and they are very well versed in the challenges of deploying the built environment. There are more recent entrants. I would say the tech companies are used to probably delivering things like software updates and products on the weeks to months time frame versus the years of infrastructure projects. So there's certainly some disconnect there, especially given the state of global supply chains today. But generally, we work with investors that are pretty wide, eyes wide open on the challenges that these projects face in execution. But you're right. There's some interesting anomalies in the markets right now. Yeah. And you hit on time, speed to power is everything right now. Where do you see the greatest opportunity for time savings across power delivery? Yes. This is again where we at CIR have some unique superpowers. What we do some year is everything all at once upfront. So what I mean by that is we raise straight at late stage engineering out of the gate rather than waiting for some stage gate process to try to nail down as much as we can as early as we can, exactly where are these roads going to be placed, exactly where are these trenching runs going to go? You really can't define these things until you get to 30% engineering and later in large utility, solar, battery, wind projects that traditionally would cost hundreds and hundreds of thousands of dollars with us. It's tens of thousands of dollars to move further faster. And we apply that across the board. We're immediately establishing project execution plans, detailed financial modeling, deep dive risk assessments on the projects as we work through the permitting the utility processes in the HJ requirements. And this dramatically reduces time. It also dramatically improves outcomes. So a couple of concrete examples. If you go into a utility interconnection process with the typical 10% engineering set, you're going to get a bunch of questions back. If you go in there with 30% or 60% engineering sets with the project highly defined, you get many fewer questions back, same thing with the HJs. If traditionally you may submit with a 30% package, but you're submitting with something closer to issued for construction, then you have more seamless processes, fewer questions. There's just less left on the table to be defined. And so our approach, it's kind of like Jevin's Paradox. It is Jevin's Paradox, okay? If 30% engineering is 70% lower cost, let's do it sooner faster in our portfolio of projects. Let's do more of it to advance projects faster. And that's really where our most sophisticated clients are doubling down and leveraging us to advance projects faster earlier. Interesting. Probably helps a lot as well in terms of getting an earlier and more accurate estimate of what those interconnection costs are going to be. And I'm sure a lot of other costs as well. Yeah. And all the build costs exactly. You don't know what your build costs are. without 30% engineering and detail bills of quantity. You simply do not, right, until you're out in the market, getting that DDP pricing, which is another one of those things that we run out hard fast and early. Yeah, you nailed it. That's exactly right. - And doing our due diligence, we saw that CIR has diligence to over 190 gigawatts of project sites first to have to ask. Is that a correct number? Because that's a lot, even an infrastructure. It is, that's over 15,000 project sites globally. And many of them are very large assets. You may remember that we spun out of an IPP that has, I think, somewhere around 52 gigawatts of projects alone in execution and operation. And recently announced two weeks ago that they commissioned the world's largest battery outside of China 3.4 gigawatt hours. So our team does have a unique specialization in mega-scale projects. And so we often do end up engaged at that multi-gigawatt scale on project delivery. And but that is accurate. One of our internal AI tools, backed by our leading subject matter experts is Energy Project Sighting Assistant or EPSA. And this is a very sophisticated project site analysis diligence tool assessing everything from constraints map issues to operating risks at specific project locations. And that is used by some of the largest developers IPPs in the world. And so that certainly accelerates the data exposure that we have and our tools have to project analysis. - What do you think are the biggest issues that developers should be on look up for today? - Well, across those 15,000 projects, grid access is the number one killer of projects. Community sentiment is now the number two killer of projects and community sentiment is part of our algorithms. Our AI powered algorithms to assess specifically for solar or batteries or data centers. So we will scrape Facebook accounts and comments. We'll scrape zoning board meeting minutes. We will review county local township articles about renewable projects to establish our scoring there and also how it's changed over time. So we can anticipate where it might be headed. And some counties it's improving. And some counties it's eroding. And so that's number two. Number three is just traditional constraints map issues. Floodplains, wetlands conservation easements, et cetera, archeological places. That's still a very common deal killer. And then four I would buck it as operating risks. So hail insurance issues. We acquired Richard Matsui founder of KWH Analytics and who issues the solar risk report every year, which Wall Street really relies on for bankability assessment and deal underwriting. Richard invented the solar actuator table that ensures use to underwrite projects. We acquired his AI tools for data room and project data room analysis and risk analysis. And so the risks I just mentioned come both from our absent analysis as well as our data room analysis and aggregating those red flags that are binary to project construction and execution. You mentioned bankability if I'm a developer thinking about my projects and my pipeline that are coming up over the next several years, where are these requirements headed, do you think? I think they should hire Norton Rhodes. A dramatic aspect. I appreciate you calling out, right? You teed that one up for me, Samir. That was the perfect opportunity for me to point out that bankability requirements have dramatically escalated over the last 24 months, especially, it's been a pretty consistent climb. But we've, of course, there's been a lot of capital removed from the system and it makes capital pickier. And so we've seen previously project financing closing on 10% engineering as an example. And now 30 is in 60% engineering being required. We've seen project financing closing without definitive EPC offers and construction offers and equipment offers in the data room. And now those things are really required. Long lead items being procured, ideally, already. And so there is a dramatic escalation and how, of course, all of these things fit within the new OB/BBA tax equity framework, which, of course, is where you're a definitive leader and making sure the structuring is compliant. We're working on the supply chain side to make sure and ensure that fiat and domestic content requirements are being met and documented thoroughly. But folks like you are critical in ensuring that these escalated bankability requirements are met. - Besides bankability, when you're looking ahead for the next three to five years, when you think about the projects that will be successful versus the ones that will not, what factors do you think will be the key to success? - You know, I think that projects need to move faster. I think your point earlier, a question earlier, about speed to power is important for multiple reasons. First of all, you have the raw economic opportunity that's available. I think that from electrons to AI tokens, the value of electrons is something like $3,000 to $6,000 per megawatt hour on the conversion rate. So the economic motivation is massive and opportunity is massive for speed to power and project deployment and delivery. Now, on the flip side, time has become risk. We see these moratoriums popping up. We were just talking about the bankability restrictions and we all know what's happening with the tax equity regimes. Time is not our friend. So we know and have seen that projects that move fast get done, right? That's just, I guess we should have added in the bucket of risks we talked about earlier, grid access, community sentiment, et cetera. I think we should put time on that, right? Like time is probably one of those top risks of the longer your project is in development, the greater a chance that something is going to impact it in a severely negative way. This is the world we live in right now. - In the M&A world, we say time is the killer of all deals. Yes, exact. That is true or now than ever. So before I let you go, Daniel, and I really appreciate your time today. What's next for CIR? - So we just issued last week our latest pricing calculator suite, which includes a fixed price to get any solar or battery project to construction and finance readiness anywhere in the world outside of bricks. So we commoditized electrical engineering three years ago, civil and substation engineering and battery storage engineering two years ago, and this year we've commoditized the entire process for from Greenfield to true bankable project finance execution. And that is an absolute game changer in terms of risk allocation from our developer IPP finance partners to us as the service provider. So we're in the best place to deliver on that. And so that is certainly the future of CIR. We've already been executing those projects in our model, but the portion of clients that are using us in that way for Fulsome Project Delivery or Fulsome Project Development Support for their team. So they have all the resources necessary to execute and succeed is certainly where we're headed. To put this numerically for you, the cost for us to do that turnkey project development process for a 100 megawatt DC project with bass is 1.52 cents per watt DC. Traditionally, Samir, our clients would not even be able to get just the engineering portion of the project done 'cause that includes 90% engineering, civil, structural, electrical systems engineering. They wouldn't even be able to get that part alone done for that number. So you can imagine you bolt on the permitting the interconnection process, et cetera. It's game changing in terms of value creation, acceleration, and risk transfer. So we certainly believe that is our future, is doing a whole bunch more of that. - Yes, sounds like you guys are disrupting the industry, which I love to hear and appreciate you being on and wish you continued success and appreciate all the advice. I hope to talk to you soon. Thanks for being on. - Thanks, Samir. Keep up the great work. - You too. - Thank you for listening to Uptime Now. If this episode sparked an idea, pass it along to someone new network and leave a comment. I'd love to hear your thoughts, ideas, and recommendations for guests. 'Til next time, thank you and remember to subscribe.