Fusion, carbon transformation, grid management and more with Braemar Energy Ventures

Invested in Climate, Episode 73
Hosted by Jason Rissman

October 24, 2023

Today, we're joined by three key members of Braemar Energy Ventures: ESG Head Lori Collins, Partner Don Tappan, and Co-Founder/Managing Partner Bill Lese. With over 20 years of experience investing in energy companies, Braemar has backed pioneers like ChargePoint and Enernoc, offering insights into climate tech opportunities and the lessons learned from the clean tech 1.0 era. We discuss three of their investments, focusing on the carbon transformation market, AI in grid upgrades, and nuclear fusion, as well as exploring their strategic decisions, ESG considerations, and more.

In today’s episode, we cover:

[2:25] Lori’s role & work at Braemar
[3:42] Don’s role & work at Braemar
[4:20] Bill’s story & founding of Braemar
[5:39] How is Braemar different today in talking about the energy transition
[7:29] Learnings from the clean tech 1.0 years
[9:00] Braemar’s investment thesis
[11:13] Learnings over a decade of investing in the space
[12:35] ESG & impact both internally & with a portfolio
[13:30] Helping portfolio companies reduce emissions & remove carbon
[15:03] Profit pools & what spaces are seen as offering the best investment opportunities
[17:54] CarbonFree & why Braemar invested
[19:55] The state of the carbon transformation market & its future
[23:27] Utilidata & why Braemar invested
[26:36] AI for the grid
[30:45] General Fusion
[35:54] The timeframe for fusion
[38:47] Predictions for the climate tech space in 2024 & what needs more attention

How is Braemar different today in talking about the energy transition

Braemar’s approach to the energy transition has evolved over the years. When they first entered the market, terms like “energy transition” and “decarbonization” weren’t as prevalent as they are today. Their focus was on making energy supply chains cleaner and more efficient, along with utilizing cleaner fuels and waste conversion, all aligning with sustainability trends. However, the emphasis on decarbonization significantly surged after the signing of the Paris climate accord in 2016, marking a pivotal shift in the industry’s priorities. While Bill recalls discussing climate change during his days as a student, the proactive measures to address it were not as widespread. In Braemar’s early days, there was a strong emphasis on clean energy, waste management, and leveraging digital capabilities to enhance service delivery, though the extensive focus on decarbonization has truly intensified in the past seven years.

Learnings from the clean tech 1.0 years

Bill highlights the significant lessons gleaned from the initial phase of clean tech development. In contrast to the conventional venture capital approach, where capital efficiency and specific processes like biotech’s FDA approval were the norm, clean tech involved a broader spectrum of industrial companies with higher capital demands, posing challenges for exits and financing. The key takeaway from the first iteration of clean tech was the imperative need for meticulous planning regarding capital allocation, support timelines, and the selection of skilled individuals for different stages of funding, as well as strategic positioning for timely exits. These insights, novel during the era of clean tech 1.0, now inform their strategies in today’s markets, which are characterized by contrarian conditions with elevated interest rates and reduced risk appetite. Braemar diligently safeguards their portfolio companies for unforeseen challenges while striving to optimize investments and attain favorable outcomes.

Braemar’s investment thesis

Don underscores the enduring investment thesis of Braemar, attributed to the vision of pioneers like Bill, Neil, and George, who founded the company two decades ago. This thesis, applicable both then and projecting into the future, centers on the vast energy system, a multi-trillion-dollar infrastructure that governs power generation and distribution. Over the years, this system has witnessed significant evolution, transitioning from a primarily fossil-based and analog setup to a distributed and decarbonized model. This transformation has unlocked a multitude of opportunities across various sectors, with a notable emphasis on electrification, exemplified by Braemar’s early investment in ChargePoint. Don also highlights the broader implications, pondering on how this shift influences industries such as steel production, construction, and residential heating. Particularly, the focus on enhancing the living environment resonates strongly, especially in regions like Boston, where oil traditionally fuels heating systems, prompting a movement towards cleaner alternatives and an overall enhancement in quality of life, in tandem with the imperative of decarbonization.

ESG &impact both internally & with a portfolio

Lori draws on her extensive background in the investment sector, having worked with Fidelity Investments and Bank of America, and later with a successful startup and accelerator. This experience uniquely positions her to understand the challenges faced by growing companies, providing valuable insights into how ESG considerations impact their competitiveness and appeal to investors. Within Braemar’s portfolio, the team not only evaluates the quantifiable impact of each company but also assesses their internal carbon footprint, encompassing scope one and scope two emissions from operations. Additionally, they encourage companies to gauge their indirect emissions (scope three), particularly those stemming from employee travel. Lori emphasizes the broader spectrum of ESG factors, including social impacts like diversity, which she views as an essential aspect of long-term success, aligning a company’s composition with future workforce and customer demographics. She also highlights governance elements, such as board gender ratios, data security, and hazardous waste management, all crucial components in evaluating a company’s ESG performance.