Latest / Clean Power Hour / Why Industrial Real Estate is the KEY to Unlocking a Cleaner Future

Transcript

Why Industrial Real Estate is the KEY to Unlocking a Cleaner Future · Clean Power Hour

• 0:52
  Tim Montague: Tim, welcome to the Clean Power Hour live. I'm Tim Montague, your co host.
• 0:54
  Tim Montague: Today is October 24 and I'm joined today by none other than the commercial solar guys. Use your usual bringing you the greatest and latest solar, wind and battery News. Welcome to the show, John.
• 1:09
  John Weaver: Hello. Tim. Hello.
• 1:09
  John Weaver: Tim, like my cool shirt, full bridge rectifier.
• 1:15
  Tim Montague: I have no idea what that is. It's
• 1:17
  John Weaver: it's an important thing in the YouTube electrocute yourself. Have you heard of electro boom, an insane person who sets himself on fire occasionally on YouTube, and he's really entertaining.
• 1:31
  Tim Montague: Well, I have a new goal in life, to set myself on fire on YouTube that that sounds awesome.
• 1:38
  John Weaver: Bridge rectifier, that's, that's, that's, that's the accent. And we're also here with Dr. Wes herch Hirsch, who's cool and knows a whole bunch of stuff.
• 1:48
  Tim Montague: We have a special guest. Welcome. Wes Hersh of Prologis. Yeah, Prologis, excuse me,
• 1:54
  Wes Hersche: yeah. Thanks, John.
• 1:56
  John Weaver: And it's Dr Wes Hirsch, who my favorite part of his career is that he worked, is it Arizona State University?
• 2:03
  Wes Hersche: That's right, yeah, there, and worked there for quite a while. Very
• 2:07
  John Weaver: cool. And the cool thing is that, like, the PhD and work and everything is, like, in depth, hardcore soar, that's maybe the most advanced solar university in the United States.
• 2:18
  John Weaver: I mean, it makes sense down there in Arizona, yeah. But it's like, all the cool stuff, seem not all the cool stuff, a whole bunch of the cool
• 2:26
  Tim Montague: stuff, okay, but, but all of our listeners are not you, John. So for our listeners, we need, Wes to explain, yes, what are you doing and why are you on the show?
• 2:37
  Wes Hersche: Yeah, sure, yeah.
• 2:37
  Wes Hersche: So I'm director of enterprise sustainability at Prologis. Been here about a year now, so start at the beginning of the year.
• 2:45
  Wes Hersche: What I do is, so we have, we can get into sort of how the company set up and under our chief Energy and Sustainability Officer. But we have a lot of key accounts who are our largest accounts, for our real estate side of our business, right, which is the core of the business. And then we have several verticals, essentially in on site, solar on site, battery storage, EV charging infrastructure, micro grids. We also have a data center business, and we do some parameter storage. We do a lot of stuff, but if you think about a lot of the larger customers, so I'll name a few that are in our 10k and over public that our customers. So like Amazon or Walmart or Maersk, they have a lot of different things that they're looking at with this right that might be interesting in terms of those verticals and sustainability. And so I manage those sort of transversely at the account level, and then we have a lot of different teams, both on the sales, development, execution side, for each one of those things, I mentioned that they didn't go very deep in how we deliver. But so that's me to pull back a bit for what the company does, more generally is we have 1.3 billion square feet of real estate across 20 countries. So we're the largest logistics real estate company in the world. We're so we're quite big, if you think about the way our chief Energy and Sustainability Officer puts this, Susan attack Amar, is, how do you further optimize those assets? Right? Because that's 1.3 billion square feet of rooftop space. That's adjacent parking lots. That's opportunity, right? If you're thinking about it from a sort of enterprise sustainability or energy services or energy solutions point of view. So with that, that's all the teams that she has underneath her and her organization are thinking about, hey, our customers need this, and it sort of fits with we're not, sort of, I think it directly fits with Hamid, our CEO, who's going to step down, actually become chair, and then that's going to happen imminently. That's been publicly announced, but he had this from the beginning with the company, where, with logistics real estate companies, typically they're triple net leases. So you say, hey, you know, pay the rent on time. Kind of don't beat up the building, lock up when you leave, kind of thing. But he had an insight. Was like, Well, wait a minute, what are those companies doing in the in can we help them? So we have other business lines that are outside of sustainability, like we have a group called essentials that sells things like racking for warehouses or LED lighting or forklifts or move in, move out services, and then we're kind of an extension of that, right? Or we're fitting that same theme where you say, hey, customers want reliable, clean on site energy. Customers are electrifying their fleets and need to be able to charge where they're doing trans loading for for class eight vehicles all the way down to employee vehicles.
• 5:26
  Wes Hersche: Customers need resilience. They need backup. They need battery, energy storage, the micro grids.
• 5:33
  Wes Hersche: So that's sort of the the why, of like, why those things are set up. And again, my role is, I have some of those key accounts where we're managing because we've got a lot of stuff in flight, or a lot of stuff that there's interest. And then I'll try to sort of air traffic control, I guess, across those different
• 5:49
  Tim Montague: Yeah, and to set.
• 5:49
  Tim Montague: Table a little more, you know.
• 5:52
  Tim Montague: So first, Prologis is the largest industrial real estate developer in the world. And you know, You quickly learn in the CNI solar industry that third party owned real estate is is a challenging vertical to develop solar on, because the the tenant isn't necessarily incentivized to invest in the building.
• 6:12
  Tim Montague: They're leasing the space, but Prologis also you become, you become aware of Prologis in the space, because you are busy solarizing your facilities around the country like no other real estate company. And that's kind of how I know of Prologis.
• 6:30
  Tim Montague: What about you, John.
• 6:32
  John Weaver: I know of it because Wes, I know the name as a high level because it's just a brand name in the world. What I now know is that, you know, I've, you have a billion square feet, 1.3 Yeah, point three, yeah. But you know, does that billion? Is that like rooftop space, or is that like multiple floors of space. Because
• 6:52
  Wes Hersche: I just, yeah, that's, that's, uh, the floor surface area, but mostly stuff is single story. So yeah, that's pretty close.
• 7:03
  John Weaver: Sure, billion square feet of usable space, 20 watts per square foot. That's 20 billion watts. That's 20 gigawatts. Is that positive? Am I doing my math right? 20 billion Watts is 20 gigawatts.
• 7:18
  John Weaver: And if it's 20 gigawatts, which just doesn't sound right, now, it can't be right. Whatever it is, it's a massive volume like the United States could power itself with, like, four? Was it four terawatts of solar? I mean, huge capacity of capacity, of of generation. Man, it's just massive roofs.
• 7:47
  Wes Hersche: We're trying to get the first gigawatt. So you got to start there. We're close.
• 7:49
  Wes Hersche: Yeah, we're still tracking towards that. When we set that goal several years ago, was a bit of a stretch goal. Was pretty ambitious, but I think we got a good shot at it. I mean, we'll, I have full confidence we'll never get there. The idea would be to get there by the end of this year or early into next year. So yeah. So yeah, to your point, yes. Huge, huge upside opportunity. Want to get the first gigawatt done across the different projects that we've done, and I think, but you're nailing it on like the opportunity space is still huge, right? That's a little tricky, as I think you two know really well, because you're also super deep in the space. We started with just our own properties, and then the tenants that are in there, because they're the off takers, right? And so they need to be able to agree to that and set a price, etc. We do have, what we call out, a platform which will look at real estate that's not owned by us, and there we typically like to prefer the first sort of place to go is where the customer that we already have, they own their own real estate. So that can be good, because it's still only two parties. But then we've looked at third party as well, so and so. Then maybe it's even beyond that 1 billion ish rooftop space. Because again, you can just think about, you have all this when you start putting on your sort of opportunity hat, right? And you're thinking less about, like, yes, there's a carbon challenge. We're tackling that.
• 9:14
  Wes Hersche: But you say, hey, there's just, there's just an opportunity to start generating, like, where you're consuming, and then you could use that for other uses, if you said other parts of the electrification, which is sort of that handshake on the EV side, or other side
• 9:26
  John Weaver: transportation, wait for you. Yeah, I'm waiting for you to start talking about the big trucks, because these are the biggest vehicles with 234, 100 shipping lanes going out of them. I used to load Lowe's trucks when I was in college. So I just used to walk down the shipping dock and just this massive thing, you couldn't see the other end, and they had weather effects inside of the building. And just trying to comprehend the opportunity, I was trying to, you know, you got the first one? Okay, great. 20 gigawatts, but how much transportation opportunity? How many trucks go in and out? Yeah, it's just, it sounds like layers, and that's even before you get to the energy storage.
• 10:01
  John Weaver: Yeah,
• 10:04
  Wes Hersche: I'll tell you two things that we've announced somewhat recently. One, really recently, but I think it hits at this so that that that team are sort of a mobility team that's building out all that AB infrastructure. We did one that was really interesting was called the dinker site, D, E and K, E, R, that's the name of the street it's on. It's in Torrance, California. Company called performance team, which is a subsidiary of Maersk, is the customer for that. That's for their
• 10:32
  John Weaver: that's the big, giant shipping company. Yeah, yeah.
• 10:34
  Wes Hersche: And so Port of Long Beach and Port of LA are the two biggest ports, number one and number two, and number one, I guess, in all of the Americas, North and South America. So there's by container volume.
• 10:44
  Wes Hersche: There's just a huge amount. So we set that up with them on their drayage runs. It's. So because we know those are fixed runs, are still class eight, so semi trucks electric, obviously, but you don't have these challenges where it's like, well, what if I want to go 1000 miles non stop, and I'm not even going to stop to go the restroom or whatever, uphill in the cold or whatever, right? You might have more challenges with that.
• 11:07
  Wes Hersche: And so we'll start with, you know, most of the runs aren't actually these sort of crazy long haul runs, and there's a lot of opportunity for stuff that is known, and shorter, relatively shorter distances, maybe it's 100 miles or so. So you start by electrifying there.
• 11:22
  Wes Hersche: So that was one, but what was unique about that, or what is unique about that side, is that's a micro grid as well. And so there's, there's backup storage. It's 18 megawatt hours of backup storage. You could do nine megawatts, peak three megawatts on average. And you could charge 96 trucks concurrently. And then they you can run hundreds through, right?
• 11:41
  Wes Hersche: Because they're sort of swapping in and out. So that's one and then that's what we call our depot product. So that's like within the fence of some real estate asset that's being leased from us. We also have a new model that we're rolling out, and this is sort of a we're looking we'd partner and do other stuff as well. That's a hub model where it's like, in theory, you could pull your own personal Tesla in there and charge it if you want. But you set up these hubs, typically for commercial vehicles or busses, or doesn't have to be just Class A it could be box trucks, so in a couple different classes in between, and saying, Okay, you got a public hub. You can come in and you can charge. And to your point, John, the the real thing you have to unlock there.
• 12:19
  Wes Hersche: This is why partners are so important for that is every company will have, they call them lanes, but a shipping route, right? Like I know I need to run from here to here every day, four days a week, you know, every every week, or whatever.
• 12:31
  Wes Hersche: And they have so many past or truck miles that go on that lane. If you can get the charging infrastructure across those lanes where it's sufficient, where it's like, okay, now you can convert that lane to EV. You need the OEMs.
• 12:43
  Wes Hersche: You need a lot of other stuff, right? But we only build out the EV charging infrastructure, so that's sort of our play there.
• 12:50
  Wes Hersche: So as others build charging infrastructure as well, in a way, we're all sort of helping each other, because now it opens up more lanes that puts more demand on the OEMs to build more electric trucks. And then you start to see this. And we're, I think, you know, I know you guys are both familiar with the sort of S curve model of adoption, etc. I think with solar, we're, you know, we're eking up on that curve. But with EV electrification, on the commercial side, we're way at the beginning, right? But you see, sort of, we've seen this playbook before. We see positive signs in that direction. So, yeah, we're still building. And on the depot side, like, yeah, there's a lot we could do. We also have workplace chargers as well, so for employees that they want to come and charge their electric vehicle. So, yeah, the variety of stuff. But again, it all comes back to for us, like we do all this for a couple of reasons. One, because our customers need it, right?
• 13:44
  John Weaver: You want, you want to get better rent. That's really what it comes down to.
• 13:46
  John Weaver: You guys. You guys are real estate leasing company. You want to hire Lois. What is that? Is No, not Lois. What does it represent? Yeah. Now there's a very specific term in the real estate world, the amount of money that a property makes, noi, yes, noi is the match, yeah.
• 14:04
  Wes Hersche: And also additional revenue, right? Top line revenue. And then in the you know, let's not forget the sustainability benefit, right?
• 14:10
  Wes Hersche: Like, why we probably all got in this business to begin with. So you say, oh, okay, great. Those sustainability impacts that you can have as you start to decarbonize, like, across all these different components of the business is is useful. And if I could be a sustainability geek for for just a couple seconds, what's interesting about Prologis is that if you look at our you know you have scope one, two and three admissions for the viewers that don't geek out with this stuff.
• 14:37
  Wes Hersche: Scope one is anything you burn in something you own. So if you burn methane, if you're in fuel, fuel, whatever that is. Scope two is electricity, essentially, like the emissions associated with electricity. Scope three is the entire rest of your value chain, so upstream and downstream. If you look at us as a company, over 99% of our missions are scope three. So because we don't own fleets, you know, we don't own a lot of operating equipment that's all owned by our customers. So now you see our biggest footprint is that scope three of that, 70% of it is the power consumed in our buildings by our tenants. So then if you look even and say, we have a net zero target by 2040 we're a signatory of the climate pledge, which is something that Amazon co founded. So we're part of that.
• 15:15
  Wes Hersche: I think there's 600 signatories to that now. But if you look at like, our path to decarbonization again, like it goes through the route of, how do we help these customers that are in our buildings decarbonize as well? So you sort of this, see this like sort of triple benefit, I guess, right, in terms of what we're trying to do,
• 15:36
  John Weaver: there's lot going on there.
• 15:38
  Wes Hersche: Yeah, there's a lot. It's fun. I don't get bored.
• 15:42
  Tim Montague: I wonder. I wonder, Wes, you know, in the solar industry, we're very familiar with this phenomenon that it is a regional industry the North. East, parts of the southeast, Texas, California, parts of the Midwest, really.
• 15:57
  Tim Montague: Illinois right now are kind of hot spots. But when it comes to this, I think the tripartite for me is EV charging infrastructure, batteries and solar. When it comes to your portfolio and your priorities paint us a little picture of where you are actively developing that tripartite of projects.
• 16:20
  Wes Hersche: Yeah, that's a well, that'd be take a lot to unpack. So the simple answer that, but it's not a very good 1/5 notes, yeah, it's everywhere where there's opportunity, right? So if you take each one of those individually, so you say solar, like, you've already identified where the hot spots are, because those are places like, what
• 16:37
  John Weaver: about all three combined? That's what we're Yeah, we want the hottest spots.
• 16:41
  Wes Hersche: I mean, yeah. I mean, the obvious answer, I think, is California, just to be really blunt, because there's a lot of different incentives, both on the the EV side and the LCFS comes into play. You have typically higher electricity costs than other parts of the country,
• 16:58
  John Weaver: regulatory solar incentives, correct?
• 17:02
  Wes Hersche: No, yeah, this is on the LCFS, but you have higher electricity prices, so sometimes your can look more economically favorable, yeah, so I mean, so the regulatory environment does matter a lot. The incentives have matter a lot. Especially, I think more so on the electrification side, on the EV side, because, again, we're newer in that S curve. A lot of times. On the solar side, I see this more as like, there are those markets where they're already bankable, or they can already see, like, enjoy some type of cost reduction benefit for the customer. And so they're very interested in moving forward. But moving forward with that. Some states and areas, sort of, it depends, right? It's a little more of an edge case, like maybe, maybe not. And then on the micro grid side, everywhere, really, right?
• 17:42
  Wes Hersche: Because that's more determined by what your your sort of, your operational nodes that are like, must be running right at all times where you're looking and saying, like, we've had some customers put it, I won't quote dollar figures, but they're like, hey, look, if this building shut down, we're processing so much freight or goods or services through there.
• 18:02
  Wes Hersche: You know, the millions of dollars that would cost or whatever, even by the day or the hour or whatnot, is so detrimental. Like this. This facility has to run all the time, even if the grid goes down, even if whatever, like, it's so essential their business.
• 18:18
  John Weaver: And you guys use the term vole, there, by any chance? Vol value of loss revenue, there's a term out.
• 18:25
  Wes Hersche: No, yeah. I think it's called vole. Okay. I need to look that up. Yeah.
• 18:29
  John Weaver: So regarding micro grid stuff, do you guys do any sort of vehicle to grid with any of these massive batteries yet that are in these big old trucks?
• 18:37
  Wes Hersche: No, do they have that's No, yeah, bring that to the team so we can look at that.
• 18:42
  Wes Hersche: So far as I know, no, I'm sure someone's been looking at
• 18:47
  John Weaver: it, but I assume demand, charge management and backup, because you have this flow of trucks that if you use them, just little, tiny bits, not really going to slow down their charging. Maybe it will, but, but, you know that's big.
• 19:00
  John Weaver: Those are big units. You know you how to manage those and use them in the holistic manner with your system. You have your solar, you have your storage, you have your EV backup. Now how do you make use of that megawatt hours of EV batteries that are rolling around. So it's just another equation to your another variable in your equation.
• 19:19
  Wes Hersche: No, you put it right the micro grid side of things. It's super interesting because, yeah, you start thinking about, like, the way I think about it as like a set of variables and an optimization stack. So, and you can even get to almost philosophical letter levels around like, are you essentially grid tied and then you have that micro grid system as your backup, or are you running more off of that system?
• 19:43
  Wes Hersche: And then the grid is your backup, right? And then you get to think about like, if I have a time of use utility tariff, like, does that come into a factor where I'm sort of doing that and time arbitrage? Am I optimizing for carbon? Am I optimizing for times of use and operations? That gets to be a really interesting sim Gen system engineering problem. Yes, you're
• 20:04
  John Weaver: optimizing for them all, less every one of your job.
• 20:07
  John Weaver: Yeah,
• 20:08
  Wes Hersche: and it's always a little bit bespoke, at least, right now, right? Like, I imagine that that as an industry will start to normalize over time, as we start to understand, like, how to sort of achieve all these different optimization problems we're trying to solve for but it's a little, I think, a little more complicated than than EVs or solar, which is already complicated to be, to be clear, right? But, yeah, but it's a fun space, right? We're all we all get to figure that out together, which I think is cool, so interesting.
• 20:39
  John Weaver: So I got a question that's slightly outside of Prologis. I don't know if Tim is going to let me he might have other key questions, though, because he also wants to focus on the stuff for CNI people like, how should developers?
• 20:50
  John Weaver: Come to you that have buildings nearby you. How should contractors become a proper vendor? I know, becoming a vendor with a group like Prologis is probably a lot of insurance payment bonds and a lot of documentation, so in history. But still, even that, just being able to fill out paperwork, you guys are probably looking for certain standards that are really high, like small shops probably just like, have a great day. It's nice to know you maybe you can be a sub, but you know that type of stuff matters, and it's hard to even it's intimidating, because you think the amount of work to even become an approved vendor, in and of itself may still not mean you have any work, and you're a little shop with two office people. I'm thinking about myself clearly. You know how to work with groups, and we've worked with a couple with a couple of large asset owners across the US, and you know, you do? You negotiate a contract for three months, and then it's like, yeah, maybe we'll have a project. Yeah?
• 21:42
  Wes Hersche: So typically, for those questions, I'll turn those over to our execution team, because they work with a number of VPCs, and that's a great team. They have quite a few people. Well, we have both a development team and then an execution team, and they work through those processes and vetting those vendors, etc. So, and yeah, we do have really high quality standards in terms of deliberate execution there. So, but yeah, I mean, never hurt. So we'll talk after the show.
• 22:10
  John Weaver: I wasn't explicitly sales pitching me. I was just talking to a broader people, the people that listen to us across the nation that now know that you got a billion square feet.
• 22:20
  John Weaver: Wes, they all know they're gonna quote. So my question that's outside of Prologis, is, what is the coolest piece of research thing that you've had to think about, either via your research, getting your PhDs in the work, because I know some of your cool research, or in your work afterwards that you're allowed to, like, talk about with an NDA. You've worked for a bunch of cool people after school and before Prologis, like I know.
• 22:49
  John Weaver: You've worked for Amazon directly. You've worked for Boston Consulting. You've probably been asked some really cool questions, but include your research too. Sure does just the coolest question that you've ever thought about solar related, solar and storage.
• 23:03
  Wes Hersche: Let me answer the second part of that. Yeah, I have had a, I think, a fun career history, at least. So yeah, to your point, did a PhD at Arizona State University, worked there as a research director with director, was at Boston Consulting Group, and then was at AWS and Amazon for a number of years before coming into the role and now Prologis.
• 23:20
  Wes Hersche: There's a good book, I can't remember his last name. It's called range, that talks a bit about this, about sort of some of the advantages of they're looking at, like kids in sports and other things about, do you specialize really early, right?
• 23:36
  Wes Hersche: Like, if you know your kids is going to play tennis, do you just put them in 24/7 tennis lessons from the time they're five years old? And they were making an argument, I think about Roger Federer and a couple other people, about playing a variety of sports and sort of seeing different things in different aspects of it. That gives you some range. And then when you go to tackle some problem you're in, it often gives you sort of a different framing, or different frames to be able to look at something at so I think, if anything, the for my career history, and sort of the stuff I've done to me, that's the number one benefit, just because I've seen this from a couple different angles, right from an advisory side, from a research side from a operational side with Amazon and provide just now, and, you know, either on the customer side or on the sales side. So that's been interesting. I don't have anything nuggets of wisdom from that, other than, like, I think it helps, like, when, when you come in and you're just trying to, sort of, like, figure out how we could solve these, most of the stuff that I think you all tackle, and that we tackle some a little more straightforward than others, but there's always sort of idiosyncrasies and complications and things that you're trying to think through and work through.
• 24:38
  Wes Hersche: And so I think that background helps a lot on the research side. Something that I'm still trying to work my way through is this report that came out. I actually posted about it on LinkedIn. This report came out from ember. EMB, er, yeah, yep, think tank that I think they're out of the UK on the electro state and sort of what's going on there. I watched the, the sort of YouTube announcement they did is one hour, hour and a half video with that guy's name is done something. Apologies. I have to think of the name. I'll post it in the as a comment in YouTube whenever this video comes out. But he had an amazing breakdown, even for the half hour that he was going over that they called out a couple things that I've been hearing from other sources, and I'm assuming they're the ones that came up with this. So as an example that's related to solar, if you look at the amount of panels that are modules that China's putting out right now that infrastructure like to get to that level where they're at now was about a $50 billion investment, which sounds like a lot of money, but on a national scale, that's nothing like that.
• 25:41
  Wes Hersche: We just to maintain the existing oil and gas industry in the US is about 400 billion for a reference point, right annual.
• 25:48
  Wes Hersche: You look and say, like a $50 billion investment, very concerted, obviously, and sort of top down from that government, but got them to the point where they can now manufacture probably a terawatt every other year. It looks like, once they hit full capacity, maybe more.
• 26:05
  John Weaver: Well, they're beyond a terawatt. They're actually pulling back. They're at like, 1.2 1.3 terawatts.
• 26:10
  John Weaver: They're running 50, 60% capacity factor
• 26:13
  Wes Hersche: right now. So I didn't know that, but that's, it's wild, right? So then you can say, Okay, well, that's not that big of investment. So in terms of, like, you know, what gives me hope there, I think, like, Okay, well, in terms of, you know, industrial policy, or National Industrial Policy, I think there's a lot of other countries that certainly can invest $50 billion or more in order to build out that infrastructure. That infrastructure. There's probably some specifics around like, where you do that at, but that gives great hope. And then you start looking at like, and we'll use them as an example. The case that Ember was trying to make was that they're trying to emerge, to become the first electro state. And they use this new term that keeps getting thrown around on electro tech, as opposed to, like, a Petro state or whatever. I think that's super interesting, right?
• 26:57
  Wes Hersche: Like, in terms of that development, and some of the stuff that we just talked about, I think, is the handshake, because people look at that, and they look at the panel and they say, Okay, well, you know, you can sell it for so much per watt, but you start looking at the generation and get off of that, and then you start looking, as you electrify your economy, particularly around transportation, couple other areas. And you're like, if you stop looking at primary energy inputs, which is typically measured in thermal BTUs, or something that's more on the combustion side, and you just look at the the energy service output, like, to make this vehicle move one kilometer.
• 28:22
  Wes Hersche: Like, what did it take? Right?
• 28:26
  Wes Hersche: And you have so much more efficiency in the chain on the electricity side, right? So now and you say, oh, and we can produce that electricity so much cheaper with a relatively small investment, you know, globally speaking. So anyway, that that whole research I found fascinating, I haven't got the reports quite long and dense, so I haven't worked my way through it entirely yet, but I've been trying to work through it because I found that to be really fascinating, and also, again, sort of hopeful thinking, you know, it's good for China that they did it. I don't live in China, so I'm more interested in the country where I live, or other places that would be making similar investments, and then thinking about like, how they can have that, that operational reach and efficiency. So that's exciting.
• 29:09
  John Weaver: That's neat. I like those Ember reports. They're cool. They have cool website that just looks neat and shiny.
• 29:15
  Tim Montague: My takeaway, yeah, my takeaway from that Ember report was that we could completely solar and battery.
• 29:24
  Tim Montague: Eyes many facilities with a fairly modest amount of rooftop solar, this is more thinking in the resi space, but you know, like, put a five KW solar array and a 30 kilowatt hour battery and boom, you're done. Now, obviously this gets harder as you scale up. And, you know, industrial facilities that are running 24/7 is a whole different animal. But, but Wes, you know, back to this, this question of priorities. I'm very curious how, what is the lens that Prologis? Surely you have some kind of a filter that you're running opportunities through, because you have so many opportunities
• 30:07
  John Weaver: and a billion, a billion,
• 30:10
  Tim Montague: a billion opportunities. But how do you filter and, and, okay, there's this goal of noi, which, which looms large, and I'm going to, I'm going to hopefully show us a bar chart I'm working on here with perplexity, but of how Prologis ranks in the scheme of things compared to other big corporate buyers, because a gigawatt is a is a big number.
• 30:36
  Tim Montague: Oh, sorry, a terawatt, right?
• 30:36
  Tim Montague: You're approach No, are you approaching
• 30:39
  Wes Hersche: it? Not a terawatt?
• 30:39
  Wes Hersche: Yeah,
• 30:42
  Tim Montague: you're approaching a gigawatt, and there's, there's a handful of corporate buyers that are exceeding that. I think Amazon is the largest now
• 30:52
  Wes Hersche: off site, Amazon's, yeah, 30 gigawatts. I think, yeah, oh, 30 for their off site PPA portfolio, they'd have to look but, yeah, I think it's, it's quite a lot. I know it's more than 20. So, okay,
• 31:05
  Tim Montague: yeah, I just have a, I have a statewide bar chart.
• 31:11
  Tim Montague: And you know, these are, we're talking about, some of the usual suspects here, Texas, California, Illinois, Iowa, New York, North Carolina, New Jersey. Is there a state that you're actively involved in that's not on that list? For example,
• 31:30
  Wes Hersche: I'd have to think about that, I mean, so I take a pretty wide filter approach, right? Because there's a couple different factors. So one, you'd have to think about sort of where you're going. To potentially get a break even and or cost savings on the system itself, versus whatever the electric utility price is. Then there's if your customer has an internal cost of carbon. So in thinking about the carbon savings you're getting, is that a nice to have? Do they actually factor that in? Does it matter?
• 31:58
  Wes Hersche: That also tells you a lot about like, if that customer has sort of a willingness to do this purely from a financial reason or a sustainability reason or some kind of combo, etc. And then on top of that, like you have, you have other considerations for us on our side, in terms of, like, what's the remaining lease term for that particular site? So part of, part of our what's not really our secret sauce, I guess, but part of, one of the things we do is we always set up those PPA contracts to be coterminous with the lease. So that's a big one in terms of giving that that customer, in terms of what they sign up for, that off take agreement peace of mind, because they're most of their real estate decisions, unfortunately, like, are not driven on their sustainability or solar, right? Like they have operational concerns about why they need to be in some space and why they might need to move, or maybe they need to expand, etc, so they're thinking through that. So that's part of what we have to take into the mix. But, but those, those filters, end up becoming a somewhat more complex combination of filters, so, but those are some of the big ones, and then from there, like, we start to work with customers to say, okay, hey, here's what we think in terms of you. They may have more than one lease with us, so we'll look at those and see, like, what makes sense.
• 33:12
  Wes Hersche: And, yeah, go from there. So without getting specific, but yeah,
• 33:17
  John Weaver: it really seems you're a lot of the equation is driven by the occupant.
• 33:23
  Wes Hersche: Oh, yeah. I mean, they're the off taker, right?
• 33:25
  Wes Hersche: So, yeah, yeah. Because, again, that comes back to, we don't really consume power, right, other than our offices or whatnot. So, and then, then also, too, like a big one is the what the occupant is doing inside that building, right? But take Amazon as example, because they're a known customer, like they have a lot of times people talk about Amazon fulfillment centers, but they actually have a couple different dozen building types, right? Some of them are don't have. They're not quite as full. They could be like a cross dock or an interchange facility, or different facility types that they have. Some of them are the ones that you typically see, like the fulfillment centers you'd see on TV that are full of robots, and, you know, they're running off of AI, like, there's a lot of stuff going on, so they're going to have much higher loads. So that can also, you know, you're thinking about that with your system sizing, etc. Like, it gets pretty complicated, as I imagine, you two can appreciate it.
• 34:17
  Tim Montague: So, so my question is, what should we be asking? I think of you as the supercomputer, and I'm just a lowly solar professional here in the in the weeds, trying to help EPCs get a grip on large CNI solar and batteries. What are the trends? What do they need to know? What do they need to be leaning into? And I guess, where is the puck going? Because, as a large real estate developer, Prologis, sorry, I'm gonna say it wrong. I've just been saying it wrong for so many years. Now, my brain can't recompute that.
• 34:50
  Tim Montague: But Prologis is, you know, thinking far into the future also, what should we be asking?
• 35:02
  Wes Hersche: Oh, man. I mean, I would say
• 35:07
  John Weaver: a combined system.
• 35:07
  John Weaver: What I heard is that we need to come to you with a package of solutions that integrate everything that's looking at that building, look at the trucks, look at the batteries, look at the electricity, look at the demand charge, look at a facility. Be conscious of the use, be conscious of the state laws. We need to be more than just some dudes throwing up some modules and an inverter. We got to take into account your demand charge. We got to know what your real bill is. We got to be conscious of your real estate realities. There's layers there.
• 35:33
  John Weaver: I
• 35:36
  Wes Hersche: think, yeah, I'd agree that definitely some of those layers. There's also, again, I don't work as much on the execution side, but I think that's probably where the EPC conversation would live. I know for this parts of that that I see, or that I'm closer to, there's a lot of considerations, even on the install and making sure you're not disrupting operations like we coordinate, obviously, with the tenant on that, and that's sort of worked out. But EPCs that we can work with that sort of understand that, because, again, the the value, oftentimes, of what's going on in that building, you know, can exceed the cost savings pretty quickly of solar that you would get, even on a very favorable system, right? So taking those precautions, making sure, you know, we don't have thermal events, we don't have roof punctures, etc, which we have a track record on that, preserving that. It's really, really important to us. And then to your point, John, yeah, I think it's a bit more holistic in terms of the different things. Now, some of that, like, again, we do internally already, that's part of what our development execution teams are running. But yeah, it's always good to have partners that we're working with that are cognizant of those
• 36:41
  Tim Montague: things well into John's. Note like I'm familiar with a platform called alexity, E, L, E, X, i, t, y, out of Oregon, which is a building management controls platform.
• 36:55
  Tim Montague: It'll control the chargers, the EV chargers, the HVAC, the lighting, the solar and batteries, and do that in an intelligent way to reduce the charge the energy charges, right? They're attacking demand charges or capacity charges, depending on the market. Yep.
• 37:09
  Tim Montague: And have is Prologis. Prologis getting into this space of building management.
• 37:19
  Wes Hersche: So we have a, one thing I didn't mention, and I think about it, is we also have a ventures team. So Prologis ventures, they do two things, and this is going to be a roundabout answer to your question. In one sense, they operate as a traditional venture capital firm, and but their investment thesis are things that would be helpful to prolagis or to our customers, so that could be physical things in the warehouse, that could be these building management systems, the variety of things.
• 37:47
  Wes Hersche: And then within that, there's a couple different sort of pillars. I guess sustainability is one of those where they're looking at, like, hey, a lot of our customers have sustainability goals related to sort of energy, carbon, etc. So they'll go and look for those investment opportunities for companies. And I'm trying to think offhand. I don't have their full sort of list of Port codes right now, but they look a lot at that on the tech side, especially on the startup tech side, to where they can might better make those investments.
• 38:16
  Wes Hersche: They also help us incubate stuff if we're going to bring something in house. So we're starting up, say something new than the ventures team that oftentimes will come from there, but I think, like that's more in their wheelhouse, where they'll start to look at some of that tech and then think about, is that suitable for us? Is it suitable for our customers? A lot of times, on the I don't know, because I don't know the specifics on this, that particular company, a lot of times, a lot of that tech, that what I see, ends up being more useful for our customers than for us necessarily, because, again, they're, they have all the operations within the building a lot of times on a triple net lease, especially they might be looking for those tools. So that's great, like, if they use those and utilize those, then great. It typically can, then, I think, drive or highlight the value of the verticals we have in terms of EV charging infrastructure, solar, battery storage, etc, because they say, Ah, okay, cool. I have a clear idea of what the benefit will this will be now. Now our teams also help with that, obviously, particularly on our on our account management teams, but yeah, if those other players are in the space and they're sort of trying to get them efficiency gains and then looking for other ways that they can help. Then, what is the expression takes a village, I guess, to do that. So yeah, we're happy to work with partners.
• 39:29
  John Weaver: You have any plans to utilize what might be empty roof space based on on site demand, I assume you probably only need a half or a quarter of your roofs, in a massive number of your cases to offset on site electricity, and so, like, say, in Tim's world, in my world, Massachusetts, if you offset your electricity, so if your roof, yeah, the second half of your roof, you can sell 100% of that and and this isn't to offset pro Logis. Now I don't know what your company's name is anymore. Yeah, it is. It's offset Prologis, but it's, it's to add noi, and maybe you just lease a roof, or maybe you own it as an asset on their ventures. You have Prologis energy resources, and that's a whole separate arm where you just have power plants, straight up, power plants leasing roof space.
• 40:23
  Wes Hersche: We have launched, especially in the last year, so quite a few community solar projects. I think that's the same thing, yeah, yeah. Because you look and say, like, yeah, the loads not high enough inside that building to sort of soak up all of that generation that you could get. And we're like, well, you're up there already. Why not make better use of that roof?
• 40:43
  Wes Hersche: And a lot of times those programs then can be available to the community. So those are good. Those are popular, particularly in Illinois and couple other places where you can do those. So yeah, we've have to go look, I don't have, I should have brought stats ready.
• 40:55
  Wes Hersche: And for that. I don't remember how many of those we've done, but I know we've done quite a few. We had a, we call them flip the switch event. So we'll do sort of a public event for some of the like, if we're commissioning a new solar site, or, in this case, we did a community solar one earlier this year in Chicago, actually, Chicago area. I should say I wasn't at that one, but yeah, it's, it's another part of our, our business. Because again, if you I'm going to keep doing this, like, if you pull back, I keep coming back to what our what Susan said, our chief Energy and Sustainability Officer, she said, Look, I have all of this space that I can optimize to play with, essentially Right. Like, and figure out, like, how do we get more out of this? She came up with a thesis around power as a platform, and saying, like, in the swim. Which, I think that flips in the minds of the consumers, the partners that we work with, is not so much thinking about like, Well, hey, like, we're not going to be able to do something in this particular state or whatever, because it's really hard and difficult or whatnot. It's like, that's fine. Look at all the opportunity that you do have just start there and say, like, where is it that I have underutilized or under optimized space that I could be getting electrons, I could be getting charging, I could be getting all whatever that service is, right?
• 42:10
  Wes Hersche: And now that sort of flips the switch in the mind of, you're not like how to say this. You're not looking for like, how to have a perfect solution for all problems worldwide. You're pulling from that subset and saying, Hey, I don't know how we're going to get to that last 10% but I do know the first 10% is looking pretty clear in terms of what the value proposition of that is. And then you roll out, start doing that right, and then you get to the next 10% etc. So, but yeah, there's a ton of opportunity. So that's why, too.
• 42:37
  Wes Hersche: When you look at like, Wow, geez, you guys got a lot of different verticals and stuff you're doing across community solar, from the meter, behind the meter, storage, etc, solar, you'd be charging micro grids.
• 42:49
  Wes Hersche: It's like, right? Because once you put on that opportunity mindset, you're like, yeah, there's a lot of different areas where we could be getting more out of this, this asset. So, so
• 42:58
  Tim Montague: if we fast forward to 2030, and bring you back on the show, do you think this conversation would be significantly different
• 43:07
  Wes Hersche: by 2030 Well, is
• 43:09
  John Weaver: there hydrogen? Are there blooms? Are there?
• 43:12
  John Weaver: Probably, I'm hoping
• 43:14
  Wes Hersche: we're at two gigawatts by then. So I'll say that, yeah, I don't know. It's interesting. Like, I think, like a lot of the fundamental technologies that we all use and utilize, there'll be innovation, for sure, but, but I don't, I'm kind of in the, like, no breakthroughs needed camp, I guess, right, like that. I don't know that. Maybe there'll be small medium nuclear reactors.
• 43:36
  Wes Hersche: There might be some other stuff that sort of comes on and incremental, great, like, if that stop by 2030 though, maybe, maybe we'll have one or two, right? Yeah, you might, you might, well. And there's, like, other stuff that doesn't really touch us as much, but it's really cool. So, like, the, I don't know if you guys
• 43:55
  Tim Montague: can't build a nuclear reactor in five years.
• 43:58
  Tim Montague: Can't do it. You guys
• 44:00
  Wes Hersche: see the the news on Rondo the energy, yes, right? So that came online, right? We don't really play in that space too much because
• 44:08
  Tim Montague: we, oh, yeah, I love that. I love the heat battery.
• 44:11
  John Weaver: Yeah, you could, but you could play in the space with Tim, Tim Latimer and geothermal. What's his group?
• 44:20
  Tim Montague: Yeah, but he's, I can't remember what his
• 44:22
  John Weaver: group is right now, but Tim Latimer, he was the he was the big, first advanced geothermal group pumping out electricity. He's meeting critical so you could surround some of your Wichita things, because you got tons of land space out there with these 510, megawatt geothermal
• 44:38
  Tim Montague: is that? Is that shallow or deep? Geo? John, do you know that's like four to
• 44:42
  John Weaver: 15,000 feet? So we're, I think that means deep,
• 44:45
  Tim Montague: I don't know, but you have 10,000 is Jeep, yeah, yeah,
• 44:51
  Wes Hersche: geothermal, for sure. And then the other one that I've been kind of fascinated with lately is geo sourced, or geothermal heat pump as well. Verbo energy. Verbo, I've talked to bedrock energy as well. Their tech is really cool.
• 45:04
  Wes Hersche: So we've been looking at that.
• 45:04
  Wes Hersche: There's a couple different right, where you're like, hey, look again. Just how many different ways can you optimize this? And if you have high heating and cooling loads, and you're like, how do we solve that? It's like, well, the Earth is usually cooler or hotter than what you're building is. And, well, interesting. That's a thermal exchange opportunity.
• 45:21
  Wes Hersche: There's some, some sort of technical components to that around drilling and whatnot.
• 45:28
  Wes Hersche: But, yeah, like, it's, it's interesting, right? It's fascinating. So I don't know. So that's what I was saying. By 2030 maybe we'll be doing more of all of those, and then, ideally, we'd be at two gigawatts of solar by then.
• 45:39
  Wes Hersche: That's a goal we have, or at least to keep pushing on that, I don't know. I'd hope we're we're continuing to do the things that we're already doing. So it's not that far away, right?
• 45:54
  Tim Montague: Well, it's four years away. Glad to hear you mentioned bedrock. We had Jocelyn Lai, the co founder of bedrock on the show. Check out episode 260, 260,
• 46:06
  Wes Hersche: and great, that team's great. So, yeah, I think
• 46:09
  Tim Montague: we're gonna see a lot more Geo, but it doesn't.
• 46:13
  Tim Montague: It's not, it's not easy to beat solar and batteries.
• 46:16
  Wes Hersche: That's, yeah, well, that's, that's the other stuff that some of the Ember research is pointing out. I mean, I did research on this too, when I was at ASU. It's, it's really hard to beat the energy source that gives you 100,000 times more energy than what you need on any given day. Yeah, like, that's quite abundant. So there's, there's complications, obviously you have to convert that energy, right? But, yeah, I'm very.
• 46:42
  Wes Hersche: Bullish on that, that fact of physics in the universe. So
• 46:46
  Tim Montague: we're going to wrap up the show here in a few minutes. But when you know we're going through a contraction thanks to what's going on at the federal level, right? The industry is going through a contraction. Does do? How do you see that changing the landscape in the next couple of years?
• 47:05
  Tim Montague: Yeah.
• 47:05
  Wes Hersche: So I think again, like when we look at what we do, like, we're only focused on, how do we address directly, the consumption, electricity consumption at the site, right?
• 47:21
  Wes Hersche: So we're all on site. We're all rooftop. I think, like in my mind, there will always be a place for that, because it's more of a like a prosumer model, right? Where you're looking and saying, Hey, look, I have electric load. I could get that load addressed cost effectively from the, you know, the most abundant resource in the universe. I think it's always going to be compelling, right?
• 47:42
  Wes Hersche: It'll be hard to make a case that that won't be compelling.
• 47:45
  Wes Hersche: So yeah, like, I saw different regulatory changes that certainly will affect us, and sort of we're thinking through what that looks like. But again, on fundamentals, I'm still pretty bullish. And also, there's other ways that we're addressing on site, energy generation, right? So we talked about geothermal, we talked about Denker, which is a linear generator, non combustive methane, so that can help fill in, I think some gaps in different places. There's a lot of different ways. Again, if you start thinking of that power as a platform, I don't think that's going to change. So, yeah, I think we'll deal with regulations as they come. But fundamentals, I think, are still
• 48:28
  Tim Montague: very strong there.
• 48:28
  Tim Montague: The the effluent from non combustive methane is that still CO two effluent?
• 48:34
  Wes Hersche: I don't know. I have to. I'm not a chemist. I do know on that particular site, especially in for mainspring, which is the technology partner we use there. There's no socks and NOx, which is a big one. So if you start looking at co 2e especially because those have much higher greenhouse gas warming potential, yeah, that makes a big difference in terms of what it does to the overall co 2e equation. The other big thing with that particular technology I probably should mention is they're actually fuel agnostic. So you could do ammonia. You could do hydrogen as well. So those today, if performance team wanted to go in and switch that out and say, Actually, we're going to switch all those to hydrogen, and we have a sort of hydrogen fuel source supply that we want to bring in, like they could, it wouldn't the effect operations.
• 49:17
  Wes Hersche: They could switch those over. So all the stuff that we're doing, we caught our on demand solutions. Like we always pick a fuel agnostic technology choice for that reason, because we're like, okay, we don't want to lock in. So like, this works now in a lot of cases, it ends up having a lower overall co 2e mission profile than the grid, depending on what it is for that particular grid, where they're at. But we also say like, Hey, you might want to fully decarbonize this in the future.
• 49:41
  Wes Hersche: So you have to have a technology choice that can flex to that for you, I don't know about the the effluent, though. I'll look into that. I I'm not as strong.
• 49:50
  Tim Montague: I'm glad I could stump the supercomputer.
• 49:54
  John Weaver: Yes, thank you.
• 49:54
  John Weaver: Thank you, doctor.
• 49:58
  Tim Montague: All right, well, I want to thank Wesley Hirsch, sustainability executive, you are the director of enterprise sustainability at Prologis and formerly of Amazon. We didn't talk enough probably about Amazon, but we're going to have you back on the show. Wesley, next time, yep, check out all of our content at clean power hour.com. Please tell a friend about the show. That's probably the best thing you can do for your life, period and John, I want to thank our co host, John Weaver, John, how can our listeners find you
• 50:29
  John Weaver: commercial solar guy. Com is number one.
• 50:32
  John Weaver: LinkedIn. I'm there way too often. You can read about me on PV magazine USA, and I'm on blue sky. I like to share pictures there of construction and all kinds of stuff.
• 50:43
  Wes Hersche: Can I share one thing? Sorry, please know what I didn't get to say, yes. So true, though I've been a longtime listener, first time like guest.
• 50:48
  Wes Hersche: So yes to what Tim said and what John said, everyone should be watching the show. It's good.
• 50:55
  Wes Hersche: I'm subscribed on YouTube. I got the little notifications on LinkedIn. You can also find me on LinkedIn as well. I'm on there way too often, as John said. So yeah,
• 51:03
  John Weaver: all of us. All of us, awesome. Tim, where can we find you?
• 51:06
  Tim Montague: Tim, yeah, in my home studio here in Champaign, Illinois. But I'm active on LinkedIn. That's pretty much the only place I'm super active. And I am going to Tennessee next week, though. I'll be in Nashville. I'll be at re plus Midwest in Chicago in December.
• 51:22
  Tim Montague: So I would love to meet you live, if you would come to Nashville or Chicago, and then it's on to re plus Boston, I think in what is that February?
• 51:33
  Tim Montague: Oh, no, inner solar. Maybe in San Diego. So many good conferences coming up. But alright, well, that's a wrap with the Clean Power Hour live.
• 51:39
  Tim Montague: I want to thank you all for listening. And see you in a week. We're going to do a show in a week because we had to skip last week. So anyway, we'll see you next week. Thank you.
• 51:51
  Wes Hersche: Thanks everyone.
• 51:51
  Wes Hersche: Thanks guys. You.