By Richard Stubbe, BloombergNEF. This article first appeared on the Bloomberg Terminal.
The Covid-19 pandemic is hurting the clean energy industry now but may bring about a boom similar to the effect of the 2008 recession, Jeff Hamel, Google’s head of industry partnerships, said in an interview with BloombergNEF.
“The opportunity is there to direct policy and set strategy that would accelerate the trajectory we’re on now,” Hamel said. “The whole renewable scenario has been moved up as a result of the efforts of the past couple of years.”
The clean energy funding boom followed the recession “and out of that came great companies like Opower,” Hamel said. “There was a big shift there, and I think a lot of that stimulus effort can be credited for the change that we’ve seen in the last decade.”
Hamel was head of industry partnerships for Google’s Nest unit from 2015 to 2018. Google bought Nest Labs, which introduced the Nest smart thermostat in 2011, for $3.2 billion in 2014. Now Nest is at the center of Google’s push for cleaner, more efficient energy. He answered questions from BNEF in a June interview. The interview has been edited for clarity and brevity.
Q: Google is doing more work with Distributed Energy Resource Management systems and moving away from work with utilities. What’s the rationale for that?
A: I wouldn’t say that we’re moving away from utilities; they’re still a key part of the equation. We’re moving to a model that’s going to be more efficient long-term for us and for the utilities. When smart thermostats were being introduced, the utilities were wanting to try demonstration programs to ensure that it worked with their systems.
Now an element of scale is coming into play. The utilities are looking to grow those programs, and more technologies are coming into the home, such as EV charging. I think you’re seeing an approach that’s going to be much more scalable with these platforms.
Q: What are the other pieces besides the Nest thermostat that are part of this program?
A: On our side it’s the Nest thermostat. For a company like EnergyHub, they’re not just aggregating thermostats. They’re aggregating other loads like EV charging to start to bring more of a portfolio to the utility. If you’re a utility operator who’s hoping to defer investment on a power plant or a substation or a line upgrade and you’re able to aggregate the load in a reliable way, you want to do it in a way that’s going to accommodate not only today’s technology but also tomorrow’s technology.
Q: What is that going to look like?
A: Smart thermostats are core for us. We look at the number of smart thermostats broadly over time and we want all of those thermostats enrolled in demand response. The impact that could have on the grid if done right and done to scale can be pretty incredible for our transition to renewables and carbon-free systems.
Q: What’s the scale right now?
A: We don’t share numbers of thermostats, but I would say that the smart thermostat category is still in an early mass phase. In 2018, 1.1 million customers enrolled in utility smart thermostat programs, and 14.4 million households with broadband own a smart thermostat. We’re starting to see some mass-market traction as a category, and that is what opens utilities’ eyes toward basically introducing a new resource into the equation.
Q: That’s enough to get their attention?
A: It’s an eye-opener for a lot of big electric and gas utilities, and they want to know how they can use that resource in their distribution system. We just launched a large program with Consumers Energy. It’s 100,000 Nest thermostats as part of their demand-response strategy, which is going to help them accelerate their transition.
Q: What are the next steps for Nest?
A: Our product was designed for the single-family home. We are working now to bring our technology into multifamily and apartment units so that we can reach that one-third of the US market.
Q: Is it easier to get them into new-build projects?
A: It’s easier to adopt for a new building, but the opportunity for cost savings is probably greater on retrofit, especially when you have buildings that are turning over quite a bit in terms of ownership.
Q: New topic: What about Google’s corporate sustainability initiatives?
A: The company continues to prioritize everything: our data center strategy, and the technology that goes into the data centers, and making sure that we have enough renewable supply offsetting all our demand across the company.
Q: BNEF recently reported on Google’s hourly carbon offset plan. Where did that idea come from?
A: All supply sources are not created equal, so that capacity factor piece becomes a really important piece to solve. As we look to not only offset our usage across the company, we’re also looking to take that down to the next level and figure out how to be smarter about matching our supply with our demand on a semi-near-time basis from a clean energy perspective.
Q: Google has also been one of the largest buyers of PPAs. Is that going to continue?
A: Our strategy is to continue to develop that and ensure that our demand is offset at the right times with the best sources we can find, and have the least environmental impact. Our demand is not unique; you’re seeing more and more companies line up for this type of supply. You’re then seeing the market respond to that. I think we’re seeing a lot of indicators moving in the right direction and hopefully accelerating.
Q: That sounds like a virtuous cycle. How far along is it, and how far can it go?
A: The industry is at a critical cross in the road here, especially as we look at the impact Covid has been having. The clean energy labor market has been severely impacted as a result of this downturn. I think we have an opportunity as a society to come out of this in a way that those are our priorities.
Q: Since 2008, we’ve seen dramatic change in oil and gas and tremendous growth in solar and wind. Are you saying you see similarities between what happened then and what’s happening now?
A: It’s absolutely there and it’s in front of us. There’s an opportunity there to shape that future, for both business and government.
Q: What direct effects are you seeing from the pandemic?
A: The clean energy industry has seen a significant downturn. We work with a lot of the energy efficiency companies and implementers and programs on the utility side that for the most part have taken a significant hit. A lot of programs rely on professionals entering people’s homes, and that obviously isn’t as possible. We’ve taken the opportunity to train people while they’re not able to do that.
Q: Any bright spots?
A: There have been. Some utilities have focused on e-commerce and been able to provide drop-ship type of solutions to consumers and give them do-it-yourself technology such as thermostats. That’s how the Consumers Energy program in Michigan is performing. They’ve leaned into a digital-first e-commerce experience and are doing very well.
Q: What lasting effects might we see out of the pandemic?
A: There’s a big question mark around commercial load. Utilities are doubling and tripling down on their efforts to aggregate residential load because commercial load has been significantly reduced. They’re trying to diversify their load control strategies and positions so that they have flexibility.
Q: What else is on your plate that we haven’t discussed?
A: We spend time thinking about the equitability piece of this equation, making sure people at all income levels are able to obtain the technology that lets them reduce their energy use and save money. We have a program called the Power Project that launched about two years ago — it’s a multiyear effort to get over a million Next thermostats into low- and moderate-income homes. We’re working with partners in electric and gas utilities to do that, through programs like LIHEAP (the Low-Income Home Energy Assistance Program). We’re really trying to democratize efficiency.