Corporate demand for clean energy continues to grow across the globe, particularly in the United States. Apex Clean Energy, a developer of commercial-scale wind, solar and battery storage projects, is a key player in this growth. With a diversified portfolio of 60 gigawatts and more than $2B in assets under management across the United States, Apex has a range of corporate offtakers including Google, IKEA, Cargill, and Meta. 

On this episode of the Decarbonization Race, VP of Energy Marketing for Apex Clean Energy, Erik Haug joins our new co-host, Cleartrace Head of Customer Growth Zach Livingston, to discuss Apex’s role in the evolution of the renewable energy space, how environmental, social, and governance (ESG) considerations are shaping decisions around clean energy purchasing, and the complexities of educating consumers and communities to accelerate the growth of renewable power projects. He gets candid about the growing role of battery storage and other forms of dispatchability in Apex’s portfolio as well as how they’re prioritizing looking “beyond the megawatt”.

Key Takeaways

1. Aggregation is playing a crucial role in driving renewable energy projects, enabling smaller customers to pool demand to access larger-scale projects at competitive prices. There are challenges and benefits in both self-aggregation and advisor-led aggregation within the evolving landscape of renewable energy finance and procurement.
2. Apex works to empower customers through education. Renewable energy advisors play a pivotal role in educating and guiding customers toward making informed decisions. By helping customers understand the potential of renewable energy solutions and how they align with their goals, these advisors facilitate the transition to a low-carbon future.
3. The Investment Tax Credit was extended to standalone energy storage in the Inflation Reduction Act, which will bring more storage and resulting flexibility onto electric grids around the U.S. However, a mechanism is still needed to compensate battery storage projects to maximize how much decarbonization impact they deliver for the grid. An incentive rewarding energy storage for delivering net carbon emission reduction could significantly accelerate the already fast-growing market for energy storage.

Transcript

Narrator: On this episode of The Decarbonization Race.

Erik Haug: There’s a natural alignment of interest between corporates with ESG goals wanting to have renewable energy or low carbon energy, but also the fact that any project we do is, by definition, going to have a positive impact in the community that it is built in. So we’ve taken a really, what I think is a proactive approach to setting up ways that we can do things “beyond the megawatt” where we’re not just building a project and getting through the basics of what a tax abatement or what a community will require as a license to operate.

Narrator: Corporate demand for clean energy is at an all-time high as companies race to decarbonize their operations and supply chains. Apex Clean Energy is a key player in deployment of commercial scale wind and solar energy and battery-based energy storage across the United States. With a diversified renewables portfolio spanning 60 gigawatts and more than $2 billion in assets under management in the US, Apex has a range of corporate off-takers, including Google, IKEA, Cargill, and Meta.

Helping lead that charge is Erik Haug, vice president of Energy Marketing for Apex Clean Energy. Erik previously worked as a senior petroleum geologist, exploration geologist, and commercial business intelligence advisor at ExxonMobil. In his current role, Erik focuses on commercial negotiations and transactions with corporate and industrial customers seeking renewable energy.

On this episode, new co-host Zach Livingston speaks with Erik about Apex’ role in the evolution of the renewable energy space, how environmental, social and governance, or ESG, considerations are shaping decisions around clean energy, purchasing and the complexities of educating consumers and communities to accelerate the growth of renewable power projects.

Zach Livingston: Hello listeners, and welcome to another installment of The Decarbonization Race. I’m your new host today Zach Livingston, and I’m the head of customer growth at Cleartrace. It’s my absolute pleasure to welcome Erik Haug, the VP of Energy Marketing at Apex Clean Energy, to the show. Welcome, Erik.

Erik Haug: Hi Zach, and thanks for inviting me on the podcast.

Zach Livingston: Yeah, for sure. So firstly, you’re calling us from Charlottesville, Virginia, correct, Erik?

Erik Haug: That’s right, here in Central Virginia, home of UVA and a college town that we love to call home.

Zach Livingston: Awesome. It placed near and dear to me as my father actually lives in Crozet right outside Charlottesville, Virginia. First question for you to kick things off, what are your favorite things about Central Virginia and the Charlottesville area?

Erik Haug: Oh, gosh. Well, I play guitar and mandolin and this is kind of Bluegrass Central here at the foothills of the Blue Ridge. You got hiking, you’ve got wine trails and cider making and all that stuff that is right out about 20 minutes from here. We’re at the southern end of the Shenandoah National Park, which keeps me and my wife pretty busy as well. So we absolutely love living in this little community here.

Zach Livingston: Awesome. Well, on a separate occasion, I’d love to see you play some bluegrass mandolin.

Erik Haug: I didn’t say it was good, I just said it was possible.

Zach Livingston: So before we dive in, Erik, let’s talk a little bit about your background. Before moving into the clean energy sector, I saw you spend time in the higher education space and worked as a geologist on oil and gas projects. It also looks like you spent some time working in some very interesting parts of the world. What was the story there and what drew you to transition into clean energy?

Erik Haug: So I have an undergrad degree in geology with an environmental concentration from William & Mary also here in Virginia, and a master’s in geoscience from Virginia Tech. In my master’s program, I studied landscape evolution and the relationship to climate processes. So that was in Northern Chile in the Atacama Desert, which if you ever get the chance to learn about it or go visit, it’s an absolutely stunning landscape where NASA trained a tested Mars rovers. It’s the driest place on earth probably for the last 25 million years. So I thought I would be going into something more environmental and climate related, but it turns out that understanding how sediment moves and how that’s related to long-term processes was something that makes you a candidate for a petroleum geologist.

So I was recruited by ExxonMobil in 2009, and thought that it would be a really interesting way to get some good corporate related experience under my belt. I was fortunate I got to work on a number of really interesting projects over the six years I was there. Those included some offshore Russia exploration and development projects where the longest lateral wells that had ever been drilled globally were done. I worked in the Gulf of Mexico offshore, basically started the week after the BP blowout, which was a really challenging time for oil, and for me to get to see that and to see how industry reacted. One of my jobs in that group was to watch as the relief wells were drilled to prevent the spill from Arc side rather than from the BP side. So I learned a lot in that experience. And then finally, I worked for a number of years exploring offshore Nigeria where I did work on a field that was discovered that was very exciting.

And then from that, my last two years at Exxon really turned into a commercial advisory role. I was tasked with leading our business intelligence for the region and working on offshore lease negotiations. So that was a new set of skills that I developed the last part of Exxon. But ultimately, I saw the emerging risks associated with climate change. I saw the growth in the renewable and the clean energy space and thought I wanted to rethink where we wanted to be and how I wanted to spend my time.

Just quick anecdote about living in Houston. It’s a fantastic food town. It’s a very vibrant community. It’s a very diverse city. There’s a ton to do. But my wife and I, we bought a house in 2011 while we were living down there. And that summer there were some really bad wildfires in Central Texas, I guess west of Houston. And then we went from a period of significant drought, a hundred degrees every day for almost 40 days straight over summer. It sounded biblical. To the year that we decided to move was the year that the first Memorial Day floods happened. In our neighborhood we lived in a place called The Heights, which is a little bit higher elevation, as you may imagine in the city.

Nevertheless, my wife’s brand new car got totally flooded. You probably saw the images online of cars stacked up on the interstate. And we just thought, “Man, we’re seeing these weather events right in our backyard,” and really wanting to be part of the energy transition to hopefully mitigate and reduce those in the future was important to us. So I was able to parlay my commercial experience in those last two years of Exxon into a business development role at Apex. And I’ve been here since 2015, so just closing eight years this month actually.

Zach Livingston: That’s great. Well, congratulations on the eight-year anniversary. So tell us a little bit more about Apex and your specific role there as VP of Energy Marketing,

Erik Haug: The energy marketing team, we’re really tasked with identifying customers for long-term energy offtake and renewable products that we can produce from our various projects we develop. So wind, solar, and storage. And then in the future, green fuels as well. We manage customers, we originate deals, we negotiate those power contracts, rec contracts, and we have a group of about 10 of us that are doing that in various markets throughout the country.

Zach Livingston: Very cool. Before we move on to some of the additional work you’re doing, I’m just curious from your history, really having that personal experience around climate change with some of the flooding as well as your experience in the oil and gas sector, what were the main things you were able to pull from your experience in geology and working in oil and gas that have applied most to your role now at Apex?

Erik Haug: Sure. Well, specifically as a geologist, you’re focused on subsurface, right? What’s going on under the ground? Can you understand where things are, how they’re going to perform? In this case, we’re working above ground. We’re looking at where is the wind resource, where is the solar resource, how do we assess the feasibility of a site from just a totally different perspective. So I think it’s a parallel, it’s not a one-to-one, but having a background in STEM and science for me I think really was helpful because this is, if you think about it, it’s a very STEM focused set of skills that just about everybody at the company has. We’ve got folks that came from forestry backgrounds, from chemical engineering backgrounds, all sorts of different folks that have very frankly impressive degrees that blow me out of the water, but they put them to use in these new applications that I think are really interesting that it brings so many different types of skill sets together in a clean energy company.

Zach Livingston: That’s great. Very interesting and diverse set of skill sets. From what I’ve seen about Apex, most utility scale focused, a lot of wind and solar, some distributed energy. But just give our listeners an idea of the typical portfolio makeup of Apex.

Erik Haug: We have about 60 gigawatts of projects under development, and as you said, it’s mostly utility scale. We do have a team that does distributed energy and primarily is focused on community solar projects in the markets where that’s feasible to do today and where policy may enable it in the future. So on the utility scale side, we’re split about 50/50 between wind and solar. We started out as Apex Wind Energy actually in 2009 and we’re a hundred percent focused on wind. The roots of our company go back actually to 2000, the founder of Apex, Sandy Reisky, started a company called Greenlight Energy, which was wind focused, had several good successful projects, and sold itself to BP in 2006, ’07 timeframe. And then in 2009, apex was launched as a successor company by Sandy.

So, heavily focused in wind. We did some of the largest projects at the time in Oklahoma, largest single phase wind farm called Canadian Hills in 2012. Became I think the biggest producer of wind, if not the first or second. By 2015, we had several successful projects there. After that, started to branch out into solar energy. So we’ve now done projects in just about every power market. If they’re not complete, they’re under construction or they’re about to be. And tend to do around one to two gigawatts of new projects per year at this point as we’ve grown.

Zach Livingston: So in your role at Apex, you lead the team focused on utility scale, renewable energy offtake. I’d like to take some time to focus on the C&I portion of this. As you know, corporate demand for clean energy continues to grow across the globe, and particularly in the US. According to the Clean Energy Buyers Association or CEBA, in 2022 alone, over 17 gigawatts of voluntary clean energy deals represented the equivalent of 70% of all new capacity added here. What is the Apex team seeing as key themes here in corporate renewable energy offtake?

Erik Haug: Yeah, it’s a good set of stats that are really impressive given when I came into the business in 2015 to now. Our evolution in the space, we did some of the first corporate deals in the space back in 2014. They were projects with IKEA, and rather than signed power purchase agreements where IKEA purchases all the output from a project over a long period of time, they actually purchased the entire project from us. So Apex developed them, constructed them, and now we operate those projects for IKEA in Illinois and Texas. But they are the owners and they receive all the benefits of owning wind power plants in the US. So those were our first forays into working with corporates.

Shortly thereafter, we signed our first virtual power purchase agreement or financial power purchase with Steelcase, the furniture company. As of now, we’ve completed nine gigawatts approximately of PPAs since 2012, and about half of them are corporates. So from 2015, on our first one up to now, it’s just been an absolute explosion in terms of the type of demand that we see. We still work with government customers and utility customers, but the significant driver for us is corporates that have set really frankly ambitious goals and they’re executing on those goals through 2025, 2030 or beyond, and then new entrants that are part of CEBA where they’re hearing about these ways to participate in projects and they’re getting educated quickly and entering the market.

Zach Livingston: Got it. One of the interesting things that we see at Cleartrace is the need for energy companies like yourself to align your energy supply and energy offtake opportunities with the corporate sustainability goals of customers. So given this kind of new trend and change, how has Apex and your team been navigating aligning energy projects with the corporate sustainability goals of customers?

Erik Haug: A couple of ways. We’re working on our first ESG report. That is something that will come out next year and we’ll be publicly facing. I’ve been a part of helping to develop that along with a large team in Apex that’s across many different business units, environmental permitting folks that manage HR, all the different stakeholders that would want us to do as much as possible to maximize our impact as a company. But by definition, the projects we do also bring with them impacts to local communities and regions where they get done. So there’s a natural alignment of interests between corporates with ESG goals, wanting to have renewable energy or low carbon energy, but also the fact that any project we do is by definition going to have a positive impact in the community that it is built in.

So we’ve taken a really, what I think is a proactive approach to setting up ways that we can do things “beyond the megawatt” where we’re not just building a project and getting through the basics of what a tax abatement or what a community will require as a license to operate. We really want to be long-term operators in these places. So if we’re going to be a 30-year partner, what can we do to make sure these communities are vibrant and grow over time? So that is just kind of in the ethos of how we think about the projects. Specifically, we have some grant programs that we’ve set up and we look for opportunities to do things that are … Beyond the Megawatt really means above and beyond just the energy that’s going to be produced by the project itself.

Zach Livingston: The whole Beyond the Megawatt concept is a super interesting theme. Just by the name and definition, that it’s not just about the quantity of the energy you’re buying, but really the qualitative applications of what makes that energy unique. So we see use cases of environmental justice and social and community benefits focusing on more carbon intensive grids, or focusing on more carbon intensive times, or looking to procure within the same grid region. What are some of the key themes that Apex and your team is seeing that corporates are interested in as far as some of these qualitative beyond the megawatt needs?

Erik Haug: I think emissions is a key one for anyone. It’s, what is going to happen if I put a new wind farm or a new solar farm in this location? So we try to run reports, we try to use the data we have, we partner with third parties to assess the emissions historically in the individual injection point for the new project in the larger regional area. And we look at what power plants nearby potentially will not generate as many emissions as a result of our project. So that’s something that we do as a process of marketing all of our projects, and try to understand how those locations compare to the customer’s locations.

So some of the new buyers in the market might just say, “I need to be as close physically, geographically as possible for where my consumption is, to where my renewable generator is.” Others will say, “Well, I want to have the largest impact on carbon, so let’s go to the grid where you have the project that might have the largest impact if it’s successful.” So those are the types of discussions that we have from time to time. And then I think there’s also an aspect of some corporates that want to match the timing of our renewable generation with the timing of their consumption. So if you’re a data center, you’re using energy 24/7, you need to have a combination, a portfolio of both solar and wind, maybe storage when both are not producing to help benefit that. So that’s a level of sophistication that we assess and work with customers to educate them and to help fit into what they’re looking for. So from an emission standpoint, that’s how we approach it.

From an environmental justice standpoint, we look at the communities where we build projects and think about, are there disadvantaged communities? Are there coal plants that have recently closed, and unemployment has been a result of that? Are there ways that we can look to hire local services to employ people, to support small businesses, to support diverse minority business enterprises, et cetera? So those are increasingly a key part of all sighting and all discussions we have with our corporate customers about what are the environmental justice objectives that you’d like us to consider? Where are places where we’ve identified those and are there opportunities to work together? Perhaps some of the more forward-leaning companies want to provide additional investment above what Apex is willing to do. So we are increasingly having those conversations to figure out how can we do more than just the bare minimum.

Zach Livingston: Do you potentially have an example you can share of where some of these Beyond the Megawatt themes came into play?

Erik Haug: I can talk a little bit about the grant programs that we have. So there are two grants that are our commitments to every project we do as of today. So far we’ve spent over $5 million to date on those initiatives across a number of projects. So there’s a community grant which invests in initiatives that are specific and unique to the community where the project will be located. Those things can be donations to local food banks. It can be trying to eliminate food deserts. It can be investment or addition of community gardens. We have invested in local school programs, robotics, energy that high schools have. And then also, one particular case in Ohio, we are funding a community college program that we’ll train a diverse workforce for renewable energy jobs of the future. There are counties where we’ve purchased EMS vehicles. In one case, it is an ambulance. In one case, it was basically a firetruck that can go and manage if there are wildfires. So these are the types of things that that money has gone to for the community grant.

The second grant is an environmental conservation grant, and that goes to things like repairing habitat that has been damaged from other uses around rivers, restoring or just committing to protecting and funding protection of certain lands that cannot be developed in the future, preservation of native wildlife and prairie lands. So there’s a number of different things. And then birds and bats are one thing that we do prioritize in a lot of areas where we’re doing wind. So we’ve done a number of those investments and partner with third parties. We run processes to find out, “Hey, we may not know the best place to put this money, but please show us what could be done.” So it’s a very collaborative process, and increasingly, our customers have been interested in getting involved in helping us decide where to put that money. Interestingly, we’ve been able to raise matching funds of about $4.3 million. So when you think about the total funding that’s getting out there, it’s really substantive.

Zach Livingston: It’s very just rewarding to hear about, obviously the energy transition and clean energy is having such an impact just by itself, by offsetting conventional power and helping to mitigate climate change. But all of these kind of additional benefits you can provide and really create these cyclical type approaches with job creation and education to get more people back into the industry, it’s very interesting to hear about and thank Apex for doing such good work in that field.

I’d like to come back to something you said earlier about education, around some of these Beyond the Megawatt and next-generation procurement strategies. Because one thing we see is you have a, let’s say, small percentage of leading corporates that are very aware of a lot of these industry trends and are actively procuring and strategizing to find the correct implementation for them. Most of the market, when you say things like 24/7, carbon-free energy or emission reality, don’t even know what those terms mean. So what is the role that your team plays in properly educating the market to drive impact?

Erik Haug: So about half of our deal flow is through RFPs, request for proposals, from corporates and utilities, and the other 50% is more bilateral in nature where we’re doing outreach to individual companies and utilities. So I would say that if they already know what they want, they may include some of those concepts and be more experienced or sophisticated in the approach, and then we know exactly how to proceed. In cases where it’s maybe a new buyer or a group that’s still figuring out who are the internal stakeholders that they need to arrange so that they can get a deal approved and how is that going to all work, in those cases, we spend a lot of time educating and trying to identify what are the key things that you need and what are the key things that we could incorporate above that and are there any.

So it’s a lot of exploration about the individual customer at that stage, but I would say you don’t have to know what those concepts are to enter the market. You just need to know some real basics and figure out, from a risk perspective, are you able to purchase something for a period of time much longer than most corporates want to purchase anything, first of all? And do you have the governance that would allow you to take some of the risks related to the energy market price over that long period of time? So it’s finance, accounting, treasury, an ESG or a procurement person that’s working on these deals and has to really be in tight coordination throughout their corporate governance and body to be able to get these things approved.

Our role, we see, is trying to make sure that they have the right materials to get to a yes at the end of that, because it doesn’t help anybody if we work on something for six months and then accounting says no. Right? So a lot of this maybe is in the weeds and more technical and less exciting like the initiatives we’re talking about otherwise, but this is the nitty-gritty needed to get a lot of these deals done and over the finish line.

Zach Livingston: So you’ve got a host of impressive C&I customers listed on your website tied to long-term power purchase agreements, the likes of Meta, Starbucks, Walmart, IKEA, Samsung, and more. Can you take us through a typical, if such a thing exists, corporate customers offtake process?

Erik Haug: Yeah, and again, it depends. Some of those big brands that have a lot of experience, transactions can occur very quickly. We’ve done these transactions, we have a form of agreement, we know the ins and outs of what each party needs and wants and how we approach the market, maybe even where all their locations are. We’ve already thought about that with them collaboratively. So I think that it could be as simple as they call us and tell us that they’re going to be looking for something. They send out an RFP, we respond. Within two months, we’re selected, and within a month or two later, we’ve signed a PPA for 15 years. And oh, my gosh, the value of that agreement might be six, $700 million over the life.

In other cases, if it’s a first time buyer, there is more education that can be assumed as part of the deal. So some of them are represented by renewable advisors like Schneider or Coho, LevelTen. These advisors serve an important role in helping to do the first level of education before they get to market so that once they are to market, we know that we have confidence we’ll be able to execute if we’re able to provide the right product solution. If we’re working bilaterally, we try to do some simple tests to make sure we understand that they can, at the end of the day, transact with us and try to help them with materials that we’ve developed to support them internally, as I mentioned earlier. So it could be a range of between, call it six to eight weeks from a sophisticated experienced buyer where we’ve already got forms of agreement all the way to up to a year and a half if it’s a really complicated transaction.

Another thing we didn’t touch on, but is a way that corporates have been increasingly approaching us is through aggregations. So aggregation meaning multiple buyers align themselves and purchase together from a single project under nearly identical terms and conditions that makes it possible for us to execute multiple PPAs on a single project so that they don’t all have disparate terms, disparate credit, all these different things. They’re all the same. So we can take advantage of them scaling together and collaborating to be able to give customers which may have smaller demands access to these larger projects at competitive pricing.

Zach Livingston: Yeah, it’s great to hear. And that stuff is something we see as well, specifically in the commercial real estate sector, but other sectors, where you have these companies that are interested in project specific procurement but don’t bring the demand profile. And to your point, one of the complexities we’ve heard about aggregation is getting the same terms and conditions across multiple different parties. So how has Apex been able to overcome that hurdle and get multiple parties to agree to the same types of terms?

Erik Haug: Sure, and I guess I should make the distinction. We see two kinds of aggregation. Self-aggregation, meaning we Apex find multiple customers. We need them to all purchase from a single project to complete the offtake for that project. And then advisor-led aggregation or corporate-led aggregation where there’s some entity corralling a number of entities together. Our best example of that, it’s a wind project we developed in Texas called White Mesa. It had eight different PPAs on it. Four of them were with corporates that were in an advisor-led aggregation: Apple, eBay, at the time Sprint, now T-Mobile, and Samsung. So the other part of the project had PPAs that we aggregated ourselves. It was a 500-megawatt project, so it really took a lot of buyers to fill that one up.

So we can do it either way. They each have their challenges and their benefits in terms of resources and how we manage different terms and conditions. But I think when the corporates arranged themselves or with an advisor, there’s things behind the scenes they’re doing to stay marching down the right path because if any of them drop out, it could put all of their purchases at risk of getting done potentially. Whereas if we’re the ones aggregating it, we’re the ones trying to make sure everybody stays on the right path and that we can get it all done together. So like I said, they do introduce new challenges, but they also help to move projects that otherwise would be seeking offtake for a longer period of time.

Zach Livingston: We definitely need to see more of that in the space to enable more companies and more portfolio types and profiles to get this direct access opportunity to clean energy, especially in the markets where it’s most needed. Where I’d like to shift the conversation a bit, Erik, is over to more of the technology type. Now, as you mentioned earlier, your portfolio is mostly made up of large wind and solar facilities. One of the issues we know with wind and solar is the intermittency associated with it. I’m curious how important are things like battery storage and dispatchability into your portfolio today and tomorrow, and what does this mean for the viability of certain projects or deals?

Erik Haug: We just announced our first completed battery project in Texas. This was a project that we developed and built for IKEA. One of the projects I mentioned earlier actually called Cameron Wind in far south Texas. So we operate that for them, but they own it just like the wind farm. So that’s a great example of a corporate who’s taking the step of amplifying the impact of their wind farm. And you’re making use basically of dispatchability and some of these other things you mentioned.

We are also in the process of constructing another battery project in Texas that we will own and operate called Angelo. So we are entering the storage business and in multiple markets as well. It will be interesting to see how it performs across the fleet and in these different markets. These are batteries that, in particular in ERCOT right now, can have a lot of impact on stabilizing the grid and increasing resilience. So we see them as really key parts of the future of the energy transition.

It’s a question of, over time, how do they get rewarded? Batteries don’t generate a renewable product like a wreck. So when they get deployed and where they get deployed will be probably in some ways driven by, are there carbon products or are there ways that batteries can get additional incentives to enter markets where right now they might not be as economic? But we are taking a broad approach to look across the country at where batteries can have the biggest impact, what duration of battery is going to have the longest chance of making the biggest impact. Is it a two-hour battery, a four-hour? Or even, are there technologies looking forward that are long duration storage that are going to be needed and that utilities will be increasingly incentivized to participate in as well?

Speaker 1: What do we mean when we talk about tax credits for clean energy? In the United States, tax credits come in two primary forms. The investment tax credit, or ITC, is a federal tax incentive aimed at spurring investment in renewable energy projects across the United States, most often apply to solar projects. Essentially, it allows developers to claim a tax credit of a qualified solar projects costs, typically 26%, though this percentage can vary depending on the year and the projects start date. This credit translates into a substantial reduction in federal income tax liability, providing a strong financial incentive for solar development. Moreover, any unused ITC can be carried forward to offset taxes in future years, making it a flexible tool for project financing.

The production tax credit or PTC is another federal incentive that focuses on the actual electricity generation of renewable energy projects, including solar and wind. Renewable energy project developers who meet specific criteria and commence construction by specified deadlines are eligible for the PTC. Rather than an upfront credit, the PTC offers compensation based on the electricity generated by qualified solar projects providing a steady income stream for up to 10 years of project operation. Like the ITC, any unused PTC can be carried forward for future use. The ITC’s upfront benefit and potential ease it creates for project financing contrast with the PTC’s reliable income stream and suitability for larger scale projects. Ultimately, project developers must carefully evaluate which credit aligns best with their specific project goals and circumstances. By understanding the nuances of the ITC and PTC, developers can make informed decisions that have a significant impact on their project’s success. This breakout is brought to you by Cleartrace. For more information on how our platform can help you at your stage of the decarbonization journey, visit cleartrace.io.

Zach Livingston: I’d like to touch on a little bit more, you mentioned creating the proper incentive mechanisms for battery deployment. Both you individually and maybe Apex overall, what would you like to see happen in order to create more transparency or just logic to how you would create proper incentive mechanisms for dispatchable resources like batteries?

Erik Haug: Sure. And I’m not the policy expert. I don’t want to advocate for a policy that maybe wouldn’t be the most effective. But what I can say is I see what customers want, and what a lot of them want is to say, “If I use this battery in a particular way, can I curtail inefficient fossil generators?” So you could think about there’s a marginal emissions rate for any period of time, what units are being dispatched, and it’s some mix of renewables and gas and coal and maybe nuclear and others. And if I use the battery in this location and I dispatch it at this hour, can I partially curtail an inefficient gas peaker at 6:00 PM, 7:00 PM at night in a certain market? If there was an incentive or a reward mechanism for curtailing that carbon, I think that would accelerate this market quite quickly. And without knowing how you put that into place, from a policy perspective at least, that’s what would help from me executing on agreements and incentivizing corporates and others to participate in batteries quickly.

Zach Livingston: Yeah, we’re in agreement with that as well. The grid is this variable beast that is constantly dynamic between conventional to clean power, and that obviously creates a dynamic mechanism for carbon as well, right? So if we’re able to charge a battery with, let’s say, onsite solar when grid emissions are low and discharge it when they’re high, then you’re creating a proper incentive mechanism for optimizing that battery. Same thing can apply to things like when you charge a electric vehicle, or things like demand response. So we’re very interested to see price signals and market signals created to utilize dispatchable resources, ultimately when it’s going to drive the greatest reduction in emissions.

Erik Haug: Absolutely. And capacity payments for batteries as well, making sure that there are incentives to be ready to dispatch, to come up with the power when there are key shortages. In Texas, we’ve seen PJM in the northeast with the winter storms, there are weaknesses in the grid and these technologies can be a solution if proper incentives are in place.

Zach Livingston: That’s right. I’d like to shift the conversation to looking a little bit ahead, Erik. What does the road ahead look like for Apex? What do you see as the biggest drivers of new solar wind and storage projects, corporate demand or clean energy sourcing by utilities, by state or local mandates? What are the key drivers that you think we’re going to see here in the market?

Erik Haug: I think we’re still digesting the IRA, such a huge piece of legislation landmark. Frankly caught a lot of folks by half surprise when it was released. And look, the IRS is still issuing guidance on the number of fronts. So there’s a lot of potential there that’s getting unlocked. It’s dynamic, and the economics of projects are affected by where they’re cited. Energy community incentives, can we get domestic content to support these projects? And if so, when? There’s a lot of excitement about realizing some of the benefits of that legislation, and there’s a lot of investment that can be unlocked through something like that. There’s a lot of ESG interest in the investors directly in the capital markets to participate in these projects. And I think the demand is, it’s just so heavily, as you said, from those CEBA statistics, driven by new corporates entering the market.

So offtake demand, 50% of the market we see didn’t exist 10 years ago. So there’s alignment of wanting to purchase renewable power, wanting to invest in renewable projects, and now a government incentive that is the longest term most stable solution we’ve seen probably ever. It used to be that before I started at Apex, almost every year there was probably a freakout moment at most clean energy companies saying, are the tax credits going to expire? And at the 11th hour, something happens, and that doesn’t happen or it continues, but we have a long runway now. We hope to make use of that and get really smart really fast about getting as much clean energy on the grid as fast as possible.

So I think corporate demand, and I think at the federal level, those incentives are really key. What we don’t want is for corporates to take their foot off the pedal. I’m not going to say off the gas, off the pedal, towards getting towards the goals they’ve set and establishing new even more ambitious goals. I think that’s really key in these markets. And I also think that citing projects is really tough. Sometimes permitting is run by counties that have never seen these projects before. It could be a state level process that is extremely long. Some permits may be discretionary in nature.

So what we want is a way to responsibly develop a project, put it in a community that’s willing to accept it and carry on building it and operating it and being key partners in those communities. What we don’t want is places where permits become a black hole of we don’t know how to get it, there’s no way to get it, or we don’t know what to do. So I think certainty on how to permit in certain places where it’s not already established in a fair, responsible way that includes communities in their decisions. Because if a community truly doesn’t want a project, we probably don’t want to put it there, but if they do, we need a path to get it there.

Zach Livingston: Additionally, what new industry trends, technologies, or innovations are you personally most excited about in the next few years?

Erik Haug: Turbines are getting bigger and bigger. I think 2.3 megawatt turbines was what was standard when I was negotiating PPAs in 2016, ’17. And now we’re looking at projects that are larger than 6 [MW] in some cases. So I think that is really interesting. Taller hub heights in the wind space. Anyway, everything’s getting bigger, and I think that’s fascinating of how you permit those from a FA standpoint and in other cases. So that’s exciting. I think in the storage space, long duration is important, and there are a number of startups and maybe beyond startups that are exploring that space. So I want to see both the types of battery technologies in terms of the chemicals within the batteries, as well as how long they can go and how reliable they are. And then also, there’s a lot of interest in I think either geothermal or geomechanical types of storage projects where you either pump some fluid down in a borehole. So back to my oil and gas days.

Zach Livingston: I was going to say, we’ve gone full circle.

Erik Haug: Exactly. You pump a fluid down into the hot part of the earth and then you extract the energy from that, or you use the pressure that you’re creating by pumping something down, i.e., charging the battery and then withdrawing it, i.e., discharging the battery and turning a turbine. There are a lot of really interesting things of that nature that are being developed right now, in part as it relates to DOE grant money and in part because people say maybe there’s another way to do this beyond lithium-ion and some of the more mature technologies.

Zach Livingston: And how about for you, Erik? What do you see yourself working on in the next five years?

Erik Haug: I often say to the team, it’s a Greek philosopher Heraclitus quote, “Change is the only constant.” And I think in this industry, it’s absolutely fundamental. There’s always two or three things that happen every year that turn the market on its head. So I think in five years we’ll have to continue to be really flexible, look for new different ways to do things, be ready to adjust to some of the policies that we just can’t predict are going to happen between local and federal levels.

By 2028, I guess five years from now, a lot of the customers we work with are rounding third base on all the goals they’ve set towards 2030. And I think, as Apex, we’ll be at the forefront of trying to accelerate and support those goals, which is a little scary, just given the scope of what needs to happen, but it’s also exciting. So I would say it’s like, this transition is probably one of the most complex things that humanity has ever undertaken, is to transition this energy system this rapidly and with this much on the line. So I kind of think of it as the space race of our generation anyway. To answer you, I don’t know what it would look like in five years, but I’m definitely excited about it and our team is ready to get to work.

Zach Livingston: Great. Well, the excitement is mutual. Erik, thank you so much for joining us on The Decarbonization Race.

Erik Haug: Thank you.

Narrator: Thank you for joining us on The Decarbonization Race. For more resources to help you lead the pack in the most important race of our lifetimes, visit cleartrace.io/podcast.