Joule Assets: Unearthing Hidden Revenue for Smaller Energy Efficiency Companies

Take heart smaller energy efficiency companies. Good times are coming.

That was the positive message from Mike Gordon, CEO of Joule Assets, as his company recently rolled out news of $90 million in financing being offered to 10 US companies with a $270 million pipeline of projects.

“The contractors, the technology integrators, technology providers, vendors – these guys in the market, they are more powerful, with more opportunities than they perceive,” Gordon said in an interview. “It is only getting better.”

The New York-based firm has carved a niche helping smaller energy efficiency companies with its $100 million fund announced earlier this year.

Lacking the federal contracts of the big ESCOs, smaller energy efficiency companies often find it difficult to secure funding and bring their products and services to scale. Joule Assets provides them with backing, so that they can  finance deals for customers, close on them and build a portfolio.

Wholesale market money

The New York company also helps contractors aggregate savings and tap into revenue streams from wholesale power markets. These markets are complex and risky, so are often avoided by smaller companies.

Smaller energy efficiency companies typically “have no idea about the permanent demand reductions available in New England or Pennsylvania, New Jersey, Maryland,” Gordon said. “If they do know about them, they don’t necessarily know how to register it. Or if they do know how to register it, they don’t necessarily know how much it is going to be worth. If they do know how much it’s going to be worth, they don’t know what vendors they need to engage.”

The same holds true for capacity demand response, spinning reserve demand response, hourly demand response, and even in some cases rebates, he said. Smaller companies are unaware of  these financial opportunities.

“Those are the kinds of things we introduce to these projects to make them more valuable,” he said.

Whiz-bang tech may dominate the headlines, but it was traditional projects that penciled out for Joule Assets in this funding round: lighting, AC, control system upgrades and integration, and energy management software.

For the most part, Joule Assets kept the chosen companies names confidential. But it did highlight one contractor, NorthWrite, an energy information management company that expects to finance 50-100 energy efficiency projects in the next 12 months in schools, restaurants, national chains, offices and other small commercial buildings.

Patrick O’Neill, NorthWrite founder and CEO, said that Joule Assets has “a level of domain knowledge around conditional cash flows that others deeply discount or won’t even consider, which is what makes these projects possible.”

Watching NY, New England and microgrids

Gordon also keeps an eye on how wider market changes might influence the energy efficiency industry.  He’s now watching New York’s Reforming the Energy Vision, or REV, which sets up new rules for the grid to create a distributed energy market  – somewhat akin to the state’s wholesale energy markets.

Gordon sees a lot to like in New York’s vision, but he is  worried about a state recommendation that utilities act as operators of the new, distributed grid.

“I think it is a very exciting vision – New York is exciting. More power to the folks who have begun to formulate it. However, as far as I see it, the devil is in the details,” he said.

In ISO New England, he sees a market with “stark physical need” where prices for peaking products are going up. He doesn’t think a publicly funded roll-out of smart meters is the solution. What will work is a well-designed market with critical peak pricing, no bid limitations on energy nodes, capacity markets, and nodal requirements for “every single product so that you can have some locally based products,” he said.

“If you design your market that way,  you are going to have financiers like us lined up, coming out of the woodwork,” he said, adding, “I don’t think you need state funding. You need well designed markets.”

On microgrids, Gordon says he sees interest in the technology emanating in part from a growing sentiment for “power by the people, not power to the people.”

The key to that market, he says, is support for the  ”multi-stakeholder microgrid,” a configuration beyond the more common university or military microgrid, something more like a neighborhood microgrid with generation, demand response and control infrastructure that can reliably isolate and operate.

A good example of a multi-stakeholder microgrid is New York’s Co-op City, a 330-acre housing cooperative in the Bronx with a 40-MW combined heat and power plant. This kind of microgrid will emerge more and more once microgrids have full access to market cash flows, he said.

“By that I mean if a neighborhood decides it wants to slowly grow into a microgrid construct , it should be able to create its own power supply – maybe not 100 percent of their use but a portion of their use – then they should be able to sell what they don’t use into the more sophisticated electricity market.”

The bottom line for Gordon? Markets, markets, markets. Get them right and the rest will work.

This article is published under a cross licensing agreement with EnergyEfficiencyMarkets.com