Latest / Financial Survival Network / America's Multi-Trillion Dollar Energy Opportunity with CEO Todd Michaels

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America's Multi-Trillion Dollar Energy Opportunity with CEO Todd Michaels · Financial Survival Network

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If you think about what happened in telecommunications, you went from a landline to
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a cell phone, and like all of a sudden, your phone would just
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go with you everywhere, enabled people to do business differently. It changed how
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things ran and worked, and then it just went from there soon as you
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got data capabilities beyond just dialed tone. And so there's this same disruption,
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the same empowerment that's happening at the individual consumer level where you're really doing.
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With something like take solar, you're pre buying your energy for twenty years,
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and in most markets you might buy this system and your quote unquote payback if
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you bought it with cash would be like five years, and you don't have
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an energy built for the next, you know, twenty thirty years. The
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Financial Survival Network now more than ever, the Financial Survival Network, and welcome
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you are watching listening to the Financial Survival Network. I'm your host, Carrie
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Lutz. Eight. We've got a new sponsor, are coming on for the
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first time, Correlate Energy ticker symbol CIPI, and CEO Todd Michaels is with
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us and taught great to have you on board. It's great to be investing
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in the company of them watching what obviously in the US and the world is
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a dramatic energy transition. And you've been an alternative energy for over a decade
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now you and your team, can you just share with us how you got
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into alternative energy and where you see this whole thing going. It was about
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two thousand and seven. I'm originally from the Midwest. I've lived over all
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over the world. Initially in the late nineties and my telecom career, so
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I was building out data infrastructure metropolitan networks sort of like you know, that
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was the emerging infrastructure technology at the time that was really changing thing. Information
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technology stuff like that was my first career and through that I was in Silicon
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Valley and at that point it was like the clean tech boom one, which
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was the people that were in the silicon business were like, hey, you
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know, that's how you make solar panels. So there was this huge spool
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up of the technology businesses in California looking to get into the hardware to make
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solar and I watched that closely. Wasn't quite interested into the market then,
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but as that market started to take off, I saw the opportunity for different
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business models to deform and that was around how do you finance these projects?
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How do you develop these projects at scale? And so around two thousand and
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seven I started a business that was called Solar Power Partners. That took us
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to start a developer owner operator. So, how would you remove that first
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cost barrier to like that million dollars solar project. How could you basically just
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provide the value of that opportunity by selling people discounted clean solar power at a
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fixed price over time. So that was my first entry into the space was
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starting that business. We did about five hundred million dollars over about five years,
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raising various types of capital for that, and ended up selling that business
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to NRG, which is one of the largest traditional power providers in the country,
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primarily in coal and natural gas. They were looking to get into renewables
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and that's where my career essentially started to grow and expand from there. We're
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in the beginning phases of this transition. To torture the analogy a little bit,
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if we're in a baseball game, what inning would we be in?
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Really the first ending just getting them ended bad? Huh? Exactly. There's
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it has been ten years of developing the technology and the business models and proving
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that this stuff is competitive and it works, and it's just that it's a
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natural competitor to supply reliable, clean power to the sector. But you know,
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the adoption rate we're talking typically as sub four percent, you know,
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globally, so it's got a long ways to go. I like the fact
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that it's a merger of the energy space and information technology, so you've worked
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on both, so you've kind of got the bird's eye perspective of this correct.
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And for me, I think a lot of people like to focus on
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the solar panels and the technology behind how this works, but for me,
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this is all about the energy markets and the business model. And if you
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think about what happened in telecommunications, you went from a landline to a cell
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phone, and like all of a sudden, your phone would just go with
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you everywhere. It enable people to do business differently. It changed how things
4:38
ran and worked, and then it just went from there as soon as you
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got data capabilities beyond just dial tone. And so there's this same disruption,
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the same empowerment that's happening at the individual consumer level, where you know what
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you're really doing with something like you take solar you're pre buying your energy for
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twenty years. And in most markets, you might buy this system and your
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quote unquote payback if you bought it with cash would be like five years,
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and you don't have an energy belt for the next you know, twenty thirty
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years. These are these are at least twenty year plus systems, and so
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it's a very very You cannot go to your local utility and get a fixed
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price of energy or work a deal where you're not going to have rising rates
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in the future. So this, this is really fundamental of how people can
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you know, change something that is core to their daily life. Food,
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water, energy, it's everything that you need to get up and you know,
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have a happy life in the day. So for us, this this
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is on the same technology curve, and this is as or more disruptive in
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terms of its relevance to people's daily life. Hey, when you talk about
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unpredictable energy rates, I'm here in Florida. Last year they put in two
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or three rate increases. This year they're putting in two or three rate decreases
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as the price that gas has gone down. It's it's really unpredictable, isn't
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it. It's it is so there are people that there are major industrial users
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who have a multimillion dollars annual bills that are seeing you know, twenty to
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thirty percent price bikes and markets like Texas. Yeah, they call these things
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like the polar vortex that happened up in the Northeast. It put businesses,
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you know, that put you know, certain industries out of business. And
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so the volatility of energy is a huge issue for the stability of the economy,
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and so the the aging grid, the billions of dollars that have to
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be put into it that has to then get recaptured through what they call rate
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basing. So the local utilities with the wires who provide energy are given a
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guaranteed return by their usually regulatory bodies for those investments. So of course they
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would't they they are when the more that they have to start investing money that
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you take the guarantee of return, there's a natural increase in rates, and
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so the age of the grid has exacerbating those rate increases. You do have
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the input risk like gas, or you do have the regulation that's taking certain
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sources of offline, and so it's this giant mix of just chaos and then
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Frankly, you just have you know, increased weather issues that are bringing the
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grid down. So those two things, unreliability and increased costs, you know,
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creates uncertainty for both residential and commercial customers. And that's you know,
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that's one of the key things that our technologies and our solutions solve. And
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obviously it's going to cost trillions of dollars, probably to at least a couple
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of decades for this transition to take place. I got a question for you,
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if not for the government's generous incentives to get business is homeowners to transfer
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over to change their energy mix. If you will, would you still be
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in this business. I've been in it before we had these amazing incentives we've
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had every This is what a lot of people don't know. Every form of
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energy in our US economy is subsidized by the government. Fossil fuels, add
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it for years, renewables, got it. You can pull up reports and
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find out what the mix has been. The mix has been shifting, you
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know, from where the subsidies for fossil have been shifting slowly to renewals,
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but it's not been dramatic, and there's still from the actual volume we still
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get a very small piece in the renewables phase. And so yes, any
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new technology, anything that the society needs to sort of make a pivot,
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is going to require some form of government intervention. So organically the original tax
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insteadis even state incentives got this industry going in markets like California, New Jersey
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where there was more state subsidy to make things happen. Those went away,
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like the state level subsidies went away like five plus years ago, and now
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the federal government has just simply said, we're going to maintain this tax credit
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to give the runway for the ballance of these things to scale up. And
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of course now they're incentivizing things like on shoring of the technologies. We're going
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to set up factories to build all these batteries, EV chargers. You know
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that that infrastructure push is creating hundreds of billions of dollars investment to create the
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manufacturing, which you know is a couple of things. It's job creation,
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but it's also like we have real supply chain risk with you know, certain
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markets like Asia which is political times where you know it's good to have these
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things on shore. They've been doing this city and in other industries like chip
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manufacturing where you know, not having chips and being relied upon chips out of
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China is a real problem right now, correlate, it's got three avenues to
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capitalize on the trend. Can you just go over the for us, explain
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how each one works and its profit potential. Correct. So, you know,
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for us, the O our current anchor is is solar technologies. You
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know, we're organically out there's enough demand. We're organically originating those projects,
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developing those projects, and we're taking fees development fees that we get really quickly.
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You know, these projects take about a year and we're giving those fees
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over you know that year horizon over time, and we're talking our average transactions,
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you know, two million dollars. But on a portfolio basis, we've
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got tens of millions of dollars and projects you know, usually in some form
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of construction phase. And that's that's that's the beachhead. That's what pays the
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bills, keeps the business growing. Secondly, works, you know, we
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are expanding and adding batteries, we're adding an electric vehicle infrastructure. You know,
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there's new sources that demand, which are these cars that need to be
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charged that are swapping fuel sources and so that's driving up electrical use. And
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to facilitate putting that infrastructure in, we're doing these things called microgrids which combine
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these technologies and so that and what that, what that effectively means is that
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those transactions are now getting you know, two, three, four x and
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size. So instead of it being a two million dollar project, the average
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deal size of a microgrid is ten to one hundred billion dollars. So our
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average job and frankly, the efforts to develop a ten million dollar project is
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not technically a lot of different than the complexity of of developing one hundred billion
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dollars projects. So you get these huge accounts of scales from a from a
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revenue and margin perspective. And then three, there's a huge opportunity to work
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with decade old businesses that are doing good work but don't have sophisticated systems and
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processes, ability to raise capital project finance team to help fund their projects.
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We're bringing these shared resources and either working in partnership with people like us that
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are on smaller scale but need our leverage, and we can basically bring those
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contracts and those pipelines into us and share in those revenues. So it's a
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way to lever up the business, or we acquire those businesses they join us.
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We acquire those that ibatah more traditional roleuplays that you might have seen in
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other industries, but for us, the role up opportunity for businesses unit is
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unique because this is not about just you know, firing people and ringing out
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efficiencies. These are businesses that are growing thirty fifty, one hundred percent per
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year. It's more about how do we really find the efficiencies to maintain the
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right even on margin percentages, but how do we actually double their revenues with
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our fuel and so that's those are the three core ways that we can you
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know, exponentially grow our business the next few years with the opportunity in from
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the bus I want to get into micro grids more. But first, there's
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a lot of companies out there kind of trying to do the same, have
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the same goals as correlate. You know, what do you think your competitive
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advantages? Why? Why are you going to be the one in ten years
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that everybody looks back in and said, gee, it was trading at seventy
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eighty cents a share. Why I knew about it, why didn't I do
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it? There's a lot of people out there, but there's a there's not
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many people who have proven that they can scale a business and at what we
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do at the higher end of things on the Project financis the ability to raise
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institutional capital to know that you have the right you know, team and history
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there. There's there's an extreme amount of tribal knowledge and relationship and trust and
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frankly track record require to attract this capital to go out there and scale the
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business correctly so that this you know, there is a huge fight for talent,
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and the talent that enables us to grow this business reliably and better than
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others wants to be working for our management team that we have done this in
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the past. Like now there's this unprecedented opportunity of growth that's in front of
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us that yes, there's going to be new players that come in that will
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grow, but our ability to do that much more sophisticated and more profitably with
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our technology solutions that help us you know, do things better, faster,
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cheaper, plus attract companies to join us again through that acquisition move is really
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the key is really the key will wait to do this because to be effective
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and this just distenttralized distributed energy world, you have to aggregate the market.
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You're never going to grow doing the onesie twosie deals. It takes, there's
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too much time and money involved in that. You have to know how to
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find efficiencies. And that's what our team has perfected. And now this linear,
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with this this demand in front of us, and with the clear incentives
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and frankly predictability on supply chain, there's nothing going to stop us to grow
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this really quickly. And you know, you look at the multiples were tracked
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by Raymond James. You look at the multiples for the businesses. We have
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large cap stocks, frankly businesses that I started. You look at Clearway,
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you know they're trading at twenty x multiple. You look at the mid cap
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stocks, there's really one or two players that are out there and they're doing
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quite well. We're the only small cap stock that has our pedigree in our
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team, and so our ability to see those types of multiples is very real
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based upon what we have right in front of us. So you really are
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the institutional memory of this industry because you've been at it the longest. So
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yeah, So getting back to microgrids decentralized energy trend. Can you just briefly
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summarize what a microgrid is, why it's important, and why everybody on the
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planet seems to be pursuing them. The microgrid is a series of distributed energy
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technologies that allow you to make a choice to be on the centralized grid or
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not. You can essentially, if the grid goes down because of a weather
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event or because there's price signals that says that's going to be really expensive,
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you can choose to go off the grid to operate your own with your own
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sources of generation and storage and managing your loads. And the reason that this
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is happening at such a rate now is because to the prior points, energy
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rates are going up, the ability and the cost effectiveness that generate your own
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power is here. You know, where else can you take something like solar
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that has no fuel input risk, and so to say, the long term
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cost of that kill one hour, it's three cents. When I'm in the
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grid, it's going to be sohere between, you know, ten to thirty
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cents on a long term basis, like I have no escalation of volatility,
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and so the ability for people to have that hedge. Just from a pure
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operational perspective, if you're a business, it's you know, if this was
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an early adopter thing, now this is like pure economics says, you add
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in the microgrid component to it. Where you now you have markets like huge,
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massive markets like California, fifth largest economy of world, or Texas which
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is just growing leaps and bounds. You know, there you have grid issues.
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The grid goes down in California because there's massive wildfires or there's not enough
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generation to meet capacity, and so people are you know, residences and businesses
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are going to microgrids to have battery backup or solar plus generate plus battery backup
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to keep them going to run their businesses, not to lose their economic opportunity
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or to not be down with power for several days. So there's the need
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to maintain your lifestyle, to remain your digital connectivity, to run your infrastructure,
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to live your normal life. It's frankly, it's a requirement in markets
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like the southeast and the West right now, and occasionally up in the Northeast.
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So if it's cheaper, if it's more reliable, why would not people
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do this? And typically it's been an economic argument. But because this asset
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class has proven itself to lenders and banks, there's financial vehicles for remove all
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the cost. You don't have to come up with, you know, thirty
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thousand dollars for the home, or millions of dollars to convert your plants.
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If you just want to get a twenty percent discount of power at no escalation
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and give a guaranteed reliabilion uptime, that's your offer versus looking at your alternative,
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which is your current grid access, which is unreliable, cost more and
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is very volatile, or you know more than compounding at seven percent per year
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is very rare. Your example of where Florida's rates have gone down, there
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might be times in a cycle of a you know, you look at a
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thirty year period, compounded average um you know, increase on electricity is seven
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percent, right now, that's the compounded you know, that's the kager.
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It might go down one year because of some change, but on a compounded
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basis, it has never gone down since the seventies period. So this fits
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in. Well, I noticed you just entered into a one hundred million dollar
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joint venture with the Edge Renewable, and that's for microgrid development to how does
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that kind of work. So one of the key things that limits local developers
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who basically they know that local industry, They know how to kind of put
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the technical components of a project together. But to the to the point year,
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a lot of people don't want to pay for that up front expense on
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the system, so you have to go get third party capital that's going to
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essentially own an operator. But many times they're the project buyers that are going
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to provide that economic value proposition to that end customer. They want the developer
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to finalize all the engineering, go through all the utility hurdles and agreements.
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They want you to get the project to what they call shovel ready, so
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it's ready to go. This capital enables these local developers to get those uh
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those those projects that are that are conceptual through engineering to a place where they
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can be built and fully financed and then be completed so that you know,
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they can they themselves can get some fees and they can build out their book
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a business for the customers this vehicle. Again, it takes people who've worked
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on the institutional side of managing this capital, managing that risk. We have
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the governance and the processes and the technical acumen to work with those developers to
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understand the customers application, to make sure we build at the right price,
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to make sure that system is going to perform, and frankly, after it
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goes in, how are we going to manage that asset. So there's a
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whole asset management aspect to this. You know when you build your house,
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when you build a brand new house, you don't you don't not paint the
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house, replace the roof in ten years. These are thirty year assets.
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So having people like us in the mix that are that are going to be
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there to make sure that the systems own, operate and work correctly. For
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these long term investors, it's a requirement. So this fund, we'll get
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projects from concept to completion, and that allows us the opportunity to participate to
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sort of say we're going to want to own and operate that project yourself.
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We can help get that project sold to an investor, and that investor is
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going to buy that system because they know that that's what we've been doing for
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the last decade and they know our assets are good. That's the bottom length.
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So it's kind of one stop shopping for a very complicated process that has
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a lot of moving parts that would be very difficult even for the larger,
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more sophisticated companies to kind of pull this off. So they need to bring
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in a third party to make this happen. Absolutely, and we have an
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awful lot of customers who you know, our ideal client typically has one hundred
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plus physical locations across the multiple states, and so you know, even the
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largest sort of internal energy teams for customers might have like two or three people
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managing at one national grocer store chain customer which I will not name my name,
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that has two thousand plus locations, they have three people managing all the
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energy projects across the entire country. You take that amount of time they could
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stand on each location, it's it's never realistic. So we have that national
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infrastructure to help support both the customer and there maybe regional developer to get those
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things done. So it's it's it's you know again, what we've been doing
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in the in the systems and process that we have to meet the opportunity.
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I've become a bit of an electrical utility geek when it comes to looking at
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my bill and going online. The system we have here doesn't work too good.
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Sometimes it'll tell me what I'm spending per hour or per day. But
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there's nothing more opaque in this universe than an electric bill, and most people
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just look at the number and it looks okay, yepay pay the bill.
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You have to really educate people on what it is they're paying now, because
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for the most part, they're clueless. Sure, I see the challenge there.
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I mean, I try to figure it out myself, and I think
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I'm pretty astute, but I can't. So I guess a lot of what
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you do is education. Well, it's funny. We used to do a
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lot of a hand to hand combat insulting type of education. That was one
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of the barriers to like to getting people to do opportunities to believe the math
22:26
and then proceed in our programs, you know, we diffuse a lot of
22:30
that with providing all the capital and sort of giving them a contract that's really
22:33
clear. You get that essentially almost risk free in terms of the value trade.
22:37
But however, you know, now with things like AI and technology,
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we literally have services where we capture digital information off that digital meter that goes
22:48
into the cloud. AI will read pull all that data out the bills.
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It'll scrub it sort of saying, hey, is this bill right? It
22:56
will look at certain things to determine. We find that thirty percent of bills
23:02
are inaccurate, and so just this like this bill, audit, this bill
23:04
recapture as a service as a starting point to even understand how to like design
23:08
a project. We'll find money that's free money. And a lot of times
23:12
people don't know you can go back years. Somebody can go back and regulations
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sort of that you can go back years and reclaim those bad charges, like
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people maybe build wrong for three years and never knew it. And so we're
23:25
we're oftentimes finding dollars there for the customer and our process, you know,
23:30
related to our deals, and that just becomes more ways that they can invest
23:33
in their infrastructure, you know, raise their income. It sits. It's
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to your point, it's super complicated. You have to use technology to do
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the work efficiently, and uh, you know nowadays it's it's it's an opportunity
23:47
for us to help the customer but also make a little bit of margin through
23:49
those services. One of the things I love is the ability with the micro
23:55
grid using time of use billing, you can sell the battery up. It's
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the cheapest rates at two one thing, and then you go and use it's
24:04
your time shift, whereas here residential it's seven or eight cents per kilo an
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hour at the cheapest time, and it's twenty five cents at peak hours.
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So even if I had the ability to do that, I could cut way
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back on my electric bill. Absolutely, there's there are many opportunities to shift
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when you use things to and really the emerging market this is where you hear
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a lot of storyline around as renewables or these systems go on the grid that
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they actually mess the grid up. It's it's really funny you're getting you can
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put me on record for this five years from now. Like we're already starting
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to see the utilities requesting that more these technologies get deployed in certain ways.
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They are willing to pay top dollar two consumers, not just your net metering,
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and you know typically if you're paying ten cents and you generate back,
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they're gonna give you ten cent. And there's but there's been a push for
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utilities that change how that works because it's it's driving the people more and more
25:06
towards things like solar and batteries, and so in some markets that are that
25:08
are somewhat combative, there's some friction there by. However, there's also these
25:14
emerging markets, like in the northeast Texas where you're seeing as this is.
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You can type this into your Google searchlight. Some Tesla solar battery customers,
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you know, during these heat peaks and texts, they're getting paid one hundred
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and fifty dollars a day type of energy because they need those resources to support
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the GRIDAD it's amazing. It's a it's a money it's a money making opportunity
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for those that understand it. Yeah. I was thinking of installing a system
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myself and getting it, but in Florida you can only it's net meter any
25:45
yeah, and selling energy back. But I say, yeah, when when
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the grid's down and my neighbors don't have any electric, how much will they
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pay me to stick a plug in my Uh? It's accurately there, Yeah,
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it's uh. And there's real stories of that. Our CFO has A
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has a one of those systems in northern California, and there are definitely the
26:07
stories when the grid is down, people are over there utilizing his system and
26:11
willing to come up with some trade for it. It's kind of funny.
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Yeah, well, hey, it's it's really exciting. I'm really happy to
26:18
be working with you and the rest of the company and see unfolds. And
26:23
I suggest everybody go to Correlate Energy, Correlate dot Energy c O R R
26:30
E L A T E dot Energy, find out more, sign up for
26:36
notifications and on the ticker symbol on the OTC markets is c I P I
26:44
taught. Really appreciate you coming on and we'll be talking with you again real
26:47
soon. Excellent, Thank you, Mining Stock, Wealth