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