The Exchanges

Q The latest mantra in clean energy is electrify everything, and most people associate that term with electrifying homes and commercial buildings, but you think that electrification of industrial thermal loads is an important way to utilize this cheap, ubiquitous, high-capacity renewable electricity. What about thermal loads is so attractive as a use case?

A Well, you know, industrial thermal loads have a property that I, you know, I, I like a lot, which is just scalability, right? You've got 20% of global carbon emissions that come from essentially boiling water to do things like make, you know, everything from consumer packaged goods and, you know, uh, uh, cardboard packaging to, you know, drying food. And, you know, when we first started getting into this, I looked at it and I said, oh man, you know, that's a really hard problem because you've got things like cement, Or steel that require incredibly high temperatures, right? So we started segmenting the market, and what you find is that, well, it's interesting. There's a lot of that. There's a lot of steel, and there's a lot of cement, but there's also an enormous amount of relatively low quality, low heat steam that is out there that could easily be addressed with even today's electrification technologies. We're going to go after these large, centralized, multi-gigaton opportunities where we can use this high-capacity factor, low-cost Clean electricity to get the most leverage on carbon emission reduction, and that is, in my mind, targeting these 20% of, you know, global emissions with electric boiler systems and things of that nature.

AI assessment note: “industrial thermal loads have a property that I, you know, I, I like a lot, which is just scalability”

Q What are the second order impacts on the industries that you could serve? Like, how is this shift in the way clean energy is delivered? How would it change the economics of the industries that you'd be serving?

A You know, I'll take the data center example. I think the data center industry, energy has been a commodity to them for a very long time, right? You know, in fact, in the early days of Intersect, we actually didn't even do business with, with most of the data center customers, even though we knew them well, and I have a lot of respect for those companies. They're, you know, some of the, you know, companies that have defined the last, you know, hundred years of American history. Um, but, but it just wasn't worth it, right? Because they viewed us as a commodity and They had plenty of competition for the supply of that commodity, and they had other reasons for doing their business the way they did, right? They needed it to be in a certain location because it was closer to their offices or closer to their other data centers, or they had a labor pool. But now, increasingly, many of these industries, as they pursue their decarbonization goals, but not even their decarbonization goals, some of them are just looking around and going, man, I can go talk to 10 utilities and Less than half of them probably even want me on their grid. It used to be you'd show up and say, I got a 200 megawatt load, you know, who wants it? And people would jump up and down, but now they can't, some of them are starting to see like, you can, the grid can't even support my loads in certain places, right? And le…

AI assessment note: “binding constraint may be different than what they thought... may be energy”

Q What's changed the most in terms of how you actually develop projects?

A You know, that I think is actually a really interesting question because it also goes to the heart of some of the questions that were being discussed when we first put the company together. When you're trying to scale a development business, you oftentimes wind up chasing, like, the small but very profitable project. And the problem with those is even if, you know, you tell yourself, ah, but there's, there's a scalable opportunity here because there are 10, 20, 50 of these things. You go in there and you usually find out that there are less than you thought there were. And by the time you're done staffing to put together, to, to go attack that, those 10 carports, you know, 10, five megawatt carports in upstate New York, they're not as profitable as you thought they were either. This company is really built around focus and scale, right? We are a small team relative to the size of what we're doing. It doesn't mean we're 10 people. It could mean we're 200 people, but We're going to be 200 people when most of our competitors are 2000 people, right? The people that are doing the same level of megawatts and gigawatts that we're doing. So we're a small team. We don't do very many projects at the same time. And we do projects that are the largest in the country. So, you know, our average project size is, you know, 300 to 500 megawatts, which are some of the largest projects out there.…

AI assessment note: “our average project size is, you know, 300 to 500 megawatts”

Q So in hydrogen, what has changed today? What is happening with electrolyzers that is leading you to believe that the cost is going to continue to come down, and that cheap renewable electricity is the key to a hydrogen economy?

A What we learned in solar and in other technologies, including, you know, even battery tech, is that there's not actually change, a radical transformative change in the technology that is required sometimes. Sometimes what you need is some genesis point, some tipping point that encourages mass deployment, and then what happens is, instead of the technology finding some sort of, you know, new catalyst or new, you know, new scientific breakthrough, You just simply build these things at greater and greater scale, right? And so anything that really triggers a build out of some of these technologies, these existing technologies that we know how to do at greater and greater scale, uh, really winds up pushing them down the cost curve. And so electrolyzers, for instance, while they're off, they're very clearly some great tech out there and, and there may be some breakthrough tech out there, it's not required, right? You can take technology that has been around for quite a while and with some incremental changes and With these low costs of input power, really begin to roll it out at scale, and then as you do so, what happens is you provide these manufacturing companies with the chance to really begin to optimize and change the design and, you know, learn as they go, right? That's exactly what happened in solar panels, right? It's what you see when you see, um, folks like the two former C…

AI assessment note: “You just simply build these things at greater and greater scale”

Q And so what does this mean for finding new off takers, uh, new sectors, new ways of developing projects? You're, you're calling for developers to think outside the grid. So what does that mean for a business model shift away from what you just described?

A We have a thesis that underlies our entire business, and I think this is one of the things that differentiates Intersect from a lot of other companies in the space, right? There's a lot of other companies that'll tell you Here's our growth plan. Here's our strategy. We're going to go to these markets because there's a new RPS in, you know, Tennessee or whatever it is, and we're going to go develop a pipeline there. We try to think a little bit more big picture and a little bit more strategically. So really starting from first principles of our mission is to combat climate change. We landed on kind of what are the really, really big levers that have to happen, right? And we kind of refer to those as kind of the inevitable industries, right? You're going to need some sort of negative carbon You know, technology, like a direct air capture. You're gonna need, you know, some sort of ability to change electrons into, into molecules. So green hydrogen, e-fuels, you know, there'll probably be desalination in there for, you know, adaptation instead of, you know, actually avoiding climate change. So when you start with kind of these new, big, inevitable industries, and then you ask yourself, well, where are these going to locate? Because they're all incredibly energy intensive, right? The one thing you come away from Uh, from that exercise with is that high capacity factor, low cost, cle…

AI assessment note: “we kind of refer to those as kind of the inevitable industries”

Q cost so far is about a thousand dollars a ton, as I understand it, and there are companies out there willing to buy credits at a thousand dollars a ton. That's still very expensive to remove and sequester carbon or use that carbon. If it's so expensive today, what do you think makes it inevitable? How does it follow the, the cost trajectories or deployment trajectories that you've historically seen?

A The reason it's inevitable is first and foremost, maybe less about the costs in some respect, right? We, we have to start from the understanding that the planet is warming and we are going to have to do something about it, right? There, it's not like you get to the IPCC targets and, you know, gosh, we, we, we missed it. Dang, let's try again. You know, it's, it's, At some point we wake up and, you know, it's not 1.5 degrees, it's two, 2.5, et cetera. So this has to be solved at some point. So direct air capture and technologies like it, you really have to start from the viewpoint of negative emission technologies are a must, right? It must happen. And then you add on, you know, the fact that we've been talking about here, which is that energy is increasingly, you know, closer and closer to free in some places at some times. And that it is, you know, an increasingly higher capacity factors in some places and sometimes. When you, when you look at all of that, it really points out, I think, that you're going to have to have these negative emissions technologies and will continue to be enabled by this drastically falling power price that makes me feel like, you know, there is a path here. Now, it is very much early days. Just to be clear, you are spot on. You know, current price points are way too high. But, you know, we're having lots of conversations with technology providers who…

AI assessment note: “The reason it's inevitable is first and foremost, maybe less about the costs”

Q How much can this strategy alleviate bottlenecks in the industry? Like, what does this allow you to do? If you're thinking in this, this PARC model, as you call it, what does that do to accelerate the actual development of a project? Do you have specific examples that you can point to?

A Yeah, absolutely. So we've got places, for instance, in, say, West Texas, where we're building a hydrogen facility, right? Um, and our development work there Has a, a handful of what we refer to as kind of paths home. We know we can build a very, very large renewable facility, right? There's, there's, you know, I, I, I challenge most people who call themselves hydrogen developers, you know, when, when you talk to them to ask them how many, 500 megawatt plus renewable facilities they built, because there, there aren't very many of those, but there's a lot of hydrogen developers. So we know we can build those. We also now know that we can build the electrolysis and the, and the hydrogen production. We've got, you know, Uh, uh, supply agreements, and we've done, you know, a lot of the late-stage engineering, so we're ready to do that on a number of our facilities. Um, but it really is now, we're in the, we're in the phase of kind of playing out the options of what we call the path home, right? How do you get that electron into a molecule or something that can then get to a viable market? And so, you know, we're in negotiation, uh, with a number of pipeline companies on, on actually building out very large hydrogen pipes or ammonia pipes to come and collect Uh, the molecules. So, you know, over the longer term, I think that will be the very, very scalable output here, because the, …

AI assessment note: “So we've got places, for instance, in, say, West Texas, where we're building”