In Conversation w/ Dan Gross Part 1
In this episode of In Conversation, Fiona Wilson interviews Dan Gross, co-founder of Pivotal180. Dan has had a long and successful career both investing in renewable energy projects and teaching students across the world about energy finance, and in this interview, you’ll hear his career advice for those working in renewable energy and energy finance. This was such a rich conversation we are presenting it in 2 parts. in Part I you will hear about Dan’s background as well as his pointers on the two main skillsets renewable energy professionals (current or aspiring) can delve into to improve their value in the sustainable finance sector.
We’d love to hear your feedback on the interview, so please comment with questions or reflections on our LinkedIn post or the YouTube video itself. Thanks for watching!
If you’d like to learn financial modelling or elevate your energy finance skillset, check out Pivotal180’s courses:
- Renewable Energy Project Finance Modeling
- Tax Equity Modeling
- Introduction to Battery Storage and Financial Modeling
Fiona: Welcome back to In Conversation everyone. We have a really fantastic guest with us today. It’s actually one of Pivotal 180 co-founders, Dan Gross. He is worn many hats in his career, which he will be able to tell you about. But today we’re gonna be talking about skill sets and tips for those who are wanting to enter the energy finance or sustainable energy field, which is a very hot field right now. Lots of jobs, very mission-driven, but also I think can be a little bit intimidating to some folks who are in an adjacent sector or haven’t officially dipped their toes into that pretty broadly defined sector. And there’s basically no one better to talk to than Dan. Fantastic to have you with us today.
Dan: Thank you.
Fiona: I originally met Dan before Pivotal 180 was was even born at the University of Cape Town’s business school where he was teaching in executive education course, also focused on renewable energy projects. So I’m sure he’ll mention that, but the connection goes way back. He’s an incredible teacher. And Dan, would you tell us in your own words, because you know your career best, a little bit about your background and where you are today.
Dan: Sure. And Fiona, it’s great to be reunited and great to see you and thank you for the warm welcome. Sure, I’ve spent my entire career really investing in renewable energy and clean technology. So always as a principal investor, not as an advisor or a project developer. For example, I started my career at GE Capital in the Energy Financial Services business. And I was the weird kid who showed up saying, I wanna build wind and solar at a time when oil and gas and coal were still quite prominent and people thought that it was sort of cute, but we’re not expecting it to be big. And I spent a lot of time and energy in my early first couple of years at GE just becoming really knowledgeable about the sector. And then suddenly GE woke up and realized renewables was going to be big and there was no one who knew anything about it except for me. And so at a very early stage in my career, I was given this incredible opportunity to lead renewable energy investing for GE Energy Financial Services. From there I left and went to Goldman Sachs in the special situations group where I was able to move beyond just investing in projects, investing in wind projects or solar projects, and now investing into manufacturers and into developers. And really thinking more broadly than using project finance, but always that project finance skillset helped inform how to be a good investor in finding a technology or a developer who is well positioned. That mindset, understanding that it’s project finance that builds so much energy was critical. I left Goldman with a couple of my colleagues to raise a private equity fund focused on renewable energy and clean technology, Hudson Clean Energy Partners. I became a co-founder partner there and have had kind of a number of other roles in private equity. In addition, I’m a professor, I teach at Yale, a class called Renewable Energy Project Finance. I do a once a year executive education program at the University of Cape Town where Fiona and I encountered each other first. Also sort of teaching some of the highlights of the class that I teach at Yale in an African context, basically for how do you mobilize, let’s say foreign direct investment or really institutional capital in order to build infrastructure in a region of the world that’s very short infrastructure, particularly power. Currently I work at amazon.com and capacity as director in the Amazon Climate Pledge Fund, which is a corporate venture capital fund. Although today when I’m talking, I’m not speaking in my Amazon capacity and I’m speaking in my Pivotal 180 capacity, professor capacity and guy who caress capacity.
Fiona: The best capacity.
Dan: Thank you.
Fiona: I’m speaking in my opinion. Great, yeah, it’s really fantastic to have you with us. And before I start grilling you about, you know, specific advice for job seekers or professionals wanting to move into sustainable energy finance, I wanna orient us a little bit in terms of the current market just in the years that you’ve described of your career. There’s obviously been massive change in the renewable energy sector and we’re continuing to see that change both globally and you know, domestically for our US viewers, just in the past year, year plus with the inflation reduction act, there’s been an expansion of incentives for renewable energy and infrastructure so much to say. But are there any key kind of trends in the market that you would wanna highlight as being really important for those who are maybe not in the sector yet to understand or be conscious of when they’re thinking about their own career and what moves they’d wanna make within that pretty broad category of energy finance, sustainable energy?
Dan: God, I don’t wanna say anything. There’s so much I’d wanna say about it. But I’ll try to focus on a couple of things that maybe aren’t discussed as often as they should be or aren’t as readily apparent unless you’re totally in the thick of it. And one of them is, there’s a transition underway in who buys renewable energy and how much they’re going to demand that I think will be really just transformative. And it’s gonna shake up the industry where, you know, early days it was utilities who were buying renewable energy largely to comply with mandates for renewable portfolio standards that were required in the US state by state. And then we saw this kinda incredible growth in corporate power purchase agreements where just commercial and industrial customers were signing power purchase agreements and buying clean energy. And then we really saw the ascendancy of data centers where Google, Microsoft, Amazon, Meta all made very significant decarbonization commitments. And then suddenly we were seeing corporates largely driven by big tech, were buying more renewable energy than utilities. And that’s kind of where it’s been, where it’s about to go in part thanks to the Inflation Reduction Act, and in part, just based on technology innovation is with all of the incentives for hydrogen, those incentives are really for green hydrogen, which means you’re using renewable energy to power electrolyzers in order to split hydrogen out of water, right? So suddenly now you have a whole new industry, those who are producing hydrogen or green hydrogen who are looking to buy renewables. And when you step back and say, okay, who uses green hydrogen or who is using renewable energy for other industrial processes? We are starting to see steel companies, cement and concrete manufacturers like big heavy industry who have not been purchasers of renewable energy at all enter that market. And so I think that we’re going to see like a number of new structures emerge and entirely different competitive tensions. And I think this happens at a time when, boy, you know, there’s been some turmoil in the market in terms of supply. We’ve all, you know, I think experience in our own micro ways and observe the industry face a number of the pandemic related supply chain crunches, but there’s only a finite number of companies that are developing sites. There’s a limited number of sites that actually can obtain transmission rights or an ability to interconnect to the grid sufficient to serve all of this increased demand for renewables. And one of the challenges that we’re beginning to see is in many places, you know, where do you build wind and solar tends to be in places that are windy or sunny next to or near other sources of renewables. And so you start to have these issues where renewables that have been generating into a node delivering power are now finding neighbors who are also renewables delivering into the same node, basically depressing the value of that power. So at precisely the time that you have more people wanting to buy it, the actual value of that power given where it is, is diminished. And that’ll either need to be solved with storage or transmission or a higher willingness to pay for renewables I think. All of that, like clearly industry influx, exciting changes, but a ton of opportunity for people who are thinking about it smartly.
Fiona: Definitely I think that underscores the importance of understanding how the grid works in a technical sense, even if it just at a superficial level, but also some of the economics of how goods are regulated and the commercial agreements that govern them. Yeah, a lot of food for thought there. Thanks Dan. So getting down to the real topic of our conversation today. I think a lot of people again feel mission driven towards the field of renewables and energy finance, sustainable infrastructures quite a large field that encompasses much more than power generation. And a lot of people have been noticing that there is a lot of action, a lot of jobs in this sector. But I think I’ve encountered a lot of people who have incredible skillset and really deep experience and knowledge to draw on, but they feel tentative about moving into those sectors because unlike yourself, and unlike me actually, I also started out in renewable energy, they think they might have missed the boat. And so I wanna ask you what your advice is for job seekers or people wanting to transition into these markets. And I actually think that this question probably falls into two different categories. One is what I was mentioning before, people who might be mid-career or more advanced in their career and they’re wanting to transition into energy finance or clean energy finance. And then maybe part two is actually folks who are earlier on in their career, they don’t have the baggage of thinking, oh, I took the wrong track. But they still are looking for an entry into these fields where they wanna, you know, commit their drive, their passion, their skills, their smarts. So you can take those one at a time if you want, but I do think they’re a little bit of different angles.
Dan: Okay, I’ll try to like focus on what’s common and then see if I can bifurcate a little bit.
Dan: I’d say my biggest advice to job seekers is when you’re interviewing or when you’re putting yourself out there, step out of your own shoes and thinking about what’s the career I want and why do I wanna transition? And put yourself into the mindset or the seat of the person who you’re interviewing or the person who you’re sending a cold email to about what can this person do for me? Or what can I as a candidate do for this company or this utility or this government entity, whoever it is that you’re interviewing, what can I do to serve, to make their jobs better, easier to contribute value right away? And the key is how do I signal that I as a candidate can do that, right? So you sort of have to turn the conversation away from what do I want as to how can I help you? And I think that that service mentality and that sort of empathy for the person who’s interviewing you can really be game changing in the way that you interview. Then within… you know, I can’t say that renewable energy finance is monolithic, right? I mean, what works in a regulated utility or what works in a government regulator is different than what works in a developer or a manufacturer, all of whom have finance opportunities. But there are some areas of just commonality that I think transcend. And the two one, and I teach this to students at Cape Town and at Yale and anytime I’m offering coaching, is understanding kind of quantitatively what happens. The ability to build all of this infrastructure is predicated on being able to raise money, which is why we care about renewable energy project finance, which is largely about attracting debt and equity. And all of this is rooted in financial forecasts and sort of translating something that is physical and contractual into numbers. And the tool that’s used is really excel. It’s a financial modeling toolkit. And they think, now here’s where I start to bifurcate, most people coming in at an early stage in their career into finance take a role where for some point in time modeling is some element of what they do. I don’t wanna say that that’s true for everyone. Like you can work for a developer and you can be in charge of acquiring land or you know, negotiating with utilities around interconnection, and you don’t need to do a ton of modeling, but you’ll still be interacting with a financial modeling team that’s taking all of the assumptions you’re giving them. And if you don’t know the language they’re using or the implications of what you’re doing or how to sanity check the model or even how to ask for sensitivity analysis, you’re missing out on an opportunity to raise the bar and do it well. And so I feel like everyone should understand some financial modeling, including lawyers who oftentimes are like the most resistant, right? The most afraid of numeracy. But the other area I think that’s critical is understanding legal documentation and contracts. And there’s a very specific set of contracts that are used in energy finance or renewable energy finance. I alluded to power purchase agreements, but we have engineering procurement, construction agreements, operations and maintenance agreements, loan agreements, equity, contribution agreements, like a lot of ’em. But there are some basic rules about how to read them. Some basic vocabulary, some understanding of how documents are structured, you know, what is a preamble and what are covenants, affirmative and negative covenants, what are events of default and remedies? And kind of understanding how all of those fit together is critical. If you are starting out in this career, like one of the things that young associates are asked to do is read the contract and summarize it for management to tell us how it works and what risks I’m taking. And like, it may sound like a not useful exercise, take a document and summarize it. But the number of deals that people are approving requires that to happen, and it really requires a knowledge. And so if you want to signal, I can add value and if you want to interview well, what are the two things that you can do? Signal, I’ve read contracts, I know how it works, I understand the vocabulary and I can navigate financial models, I can even build them, or if I don’t need to build them, I know how to interact with the people who do. Those two things are great. Even if you’re a lawyer coming in and saying, I understand financial modeling because like if you think about it, there’s a contract that exposes you to a risk, and that risk is triggered when something happens quantitatively, below a threshold you’re fine, above that threshold, you’re in default. For a lawyer to write that clause or to read that clause but not understand what it means numerically or not be able to interact with the business team and say, hey, here’s a contractual risk. Can you tell me, do you ever hit that in the numbers, ’cause we need to focus on that, right? That translation, that sensitivity to numbers from the legal side is really important too. And so I’d say if you are a seasoned executive who’s done mergers and acquisitions, who’s done financial deals, I’d say lean into those skills and just go that one step further of learn about PPAs and project loan agreements and say like, my years of history with all of these contracts translates and here’s what I’ve observed is similar and different, but I can navigate them cold. And if you’re a senior in your career and you’ve not been a financial modeler before and you’ve kind of never had to, if you’re going into a world where financial modeling is so important, just bone up enough so that you can speak that language and you have that vocabulary in a organization where that’s really important.
Fiona: Yeah, it makes so much sense. And I completely agree with what you’re saying. I think with both of those skillsets or tips of like understanding the legal structures and contracts and then being able to even just understand the basics of a financial model, even if you aren’t the one building them or owning that model. I actually see so much relation between those two skill sets because it’s about risk allocation and like how you’re quantifying when those risks may or may not occur, or how they then translate into the projects that, excuse me, the contracts that make a project bankable.
Dan: Totally, and Fiona, like I think that part of the reason that careers in clean energy finance are super cool is because they’re so interdisciplinary. That like everyone has to become a little bit a lawyer, a little bit a financial modeler, a little bit an accountant, a little bit of an expert in tax, a little bit of an expert in engineering. ‘Cause you actually have to understand how the physics work in order to figure out how much energy is going to come from the wind in order to put a number into your financial model in order to figure out how much money you can borrow and put that into a loan agreement, like they all tie together. And so kind of the breadth of I’d say technical areas that one encounters every day in this sector is just so broad. And I think there’s always something interesting to learn and obviously some people go deeper into one sector than the other, but everyone has to have at least that basic level that allows them to cover generically all of those areas.