We Study Billionaires - The Investor’s Podcast Network - TIP202: Renewable Energy Investing w/ Bryan Birsic (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. On today's show, we talk to the founder of Wonder Capital, Mr. Brian Bersick. Brian's forte is renewable energy. As you'll quickly see in this conversation, there are many things about renewable energy that are drastically different than fossil fuels and other types of businesses that we typically talk about. So if you're interested in solar, wind, or other forms of energy, you'll find this discussion quite interesting.

Starting point is 00:00:26 For example, you'll learn about energy, sometimes having a negative, price where the producer actually has to pay someone to remove the power off the grid. You'll learn whether renewables are a decent investment during recessions. You'll also learn about what might happen if subsidies were diminished in the marketplace. So without further delay, we hope you enjoy this very thoughtful conversation from the talented Brian Bersick. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most.

Starting point is 00:01:00 We keep you informed and prepared for the unexpected. All right. Welcome to the Investors podcast. We are thrilled to have everyone with us today. And like we said in the introduction, we have Brian Bersick with us today. So, Brian, how are you doing? I'm doing great this morning. That's fantastic.

Starting point is 00:01:26 Well, we are thrilled to have you here with us. And I want to start off by setting the foundation of what you've accomplished in a very short amount of time. you've been in business for five years and in that short amount of time you have rapidly grown your business and you just recently raised $112 million in venture capital. So talk to us about the struggles. Talk to us about the passion that you have for renewable and we're just, this is going to be really fascinating. So lay it on us.

Starting point is 00:02:00 More than a few struggles along the way as always. Yeah, so, you know, it's interesting that you started, you know, the interview around the topic of passion because Wonder actually was birthed from three serial founders in the technology startup space that all were looking for something that took what they believed in, changes they wanted to see, problems they were excited about solving and combined it with a background in technology startups and how to build them and how to raise capital. and how to build scalable software and attract teams and all of those good things. And so Wonder was really an outgrowth of us trying to take our backgrounds and combine it with our passions. And we really feel as though, A, as people that are, of course, a part of the company and have to go out and build the startup, the ability to throw yourself into it and get up on a hard day or do that extra leg of travel or get another no from a venture capitalist with a smile and go right back to work is so much easier, frankly, for us.

Starting point is 00:03:09 And just comparing this company to some previous companies that I've been involved in, we think it's just a lot easier when you're making these hard sacrifices to know exactly why you're doing it and be really excited about the impact you can have if you solve the problem you're going after. And then, you know, from a purely kind of Machiavellian standpoint, And I tell this to VC sometimes when they're worried about us being a nonprofit in disguise, that today, across hiring, across marketing, having an authentic and compelling story about why what you're doing above and beyond the economics is exciting and enduring and impactful,

Starting point is 00:03:50 we think is a huge advantage, irrespective of how you feel about those things just from a pure, as I say, a Machiavellian standpoint. And it's not why we do it, but I do think there's a good argument to be made. It's actually a huge economic advantage as well. So yeah, in a lot of ways, Wonder was us, as I say, taking that passion, combining it with things we knew about in the case of our CTO solar, in the case of me, software-enabled commercial lending and putting it together with our background and technology startups. And that's basically where Wonder came from. So do you think that you could have been successful about I wonder if you didn't have the passion for renewable energy.

Starting point is 00:04:28 You hear a lot of these CEOs. And some of them are saying, you know, it doesn't really matter if it's, you know, a dishwasher or if it's, say, solar or waterballs, whatever it is because it's about building a business. So how do you see that? I think that that's really authentic and true for them. And I applaud their focus on, you know, really. really not the products that the engine creates, but the engine itself, right, to use that analogy. And I think there's some examples of wonderful companies doing a lot of good that

Starting point is 00:05:04 whose product really has very little to do with that impact. You know, I think what I worry about is what happens when that market commoditizes and your profit margins don't support a bunch of things that actually aren't core to what you do, right? Or what happens when, you know, to choose one of my favorite companies and entrepreneurs when Yvonne-Shanard, God forbid, eventually passes like we all will. You know, does Patagonia continue to spend on things that do they have to if they were maximizing profit margin? I'm not sure. So what I like about what we do, frankly, relative to some of those things is inherently in our business. We, you know, do something that I think we all believe is positive. So, you know, we finance solar projects. If more solar gets built, because we have

Starting point is 00:05:48 great financing packages, that is a positive. And there's really no way to divorce that. Whoever's running wonder, you know, Warren Buffett has that great quote about, you know, build a company or invest as if monkeys are running it because eventually they will or something. Maybe that's Munger. That sounds a little, it's a little ornery. That sounds more like Munger, maybe. But there's a great Berkshire Hathaway founder quote anyway along those lines. And I think companies that inherently by what they do do do something positive, just are a little more sustainable in the sense that, you know, like I said, as long as we're financing solar, we think that's positive. There's not really any way to get around that.

Starting point is 00:06:28 Whereas, you know, I do think some of those things are luxury items, so to speak, for a corporation that you can afford when you're growing or you have a defensible moat. But, you know, if you're in a cutthroat commodity business, which, you know, you kind of have to assume at some point, you know, some markets might look like that. Can you support a lot of these extra expenditures? I don't know. I don't know. I worry about that pressure. So that's how I think about it. But I love what those folks do. And I think, like I said, they're really authentic and making that the focus of where they find purpose, not the thing that they make. You know, we're more than 200 episodes and that's four years here on the podcast. And I think this is the first time we talked about

Starting point is 00:07:05 investing in renewables. And we should probably be a shame because we talk a lot about fossil fuels. We talk about Tesla more from the fan perspective, but really we are value investors. That's kind of like our basics, you know, Warren Buffett, Chalamanga that you mentioned before. So if this is our starting point, we primarily talk about stocks and bonds. Now, how is investing in solar projects different? Yeah, I mean, I think folks are probably familiar with some of the solar stories, the positive ones and the negative ones in the public markets. And if they're not, there's plenty written about it. So this is a market, of course, that you can go out in the public equity

Starting point is 00:07:48 markets and the public debt markets in some cases and participate as an investor. The analogy that we like to use is akin to real estate. And the reason we use real estate is both real estate and solar projects or solar assets generate cash flow as long as there's a customer to consume them. And they also don't have a lot of complexity, not a lot of moving parts, not a lot of breaking, and therefore they tend to last a really long time. Good solar panels being put up now have 25-year 80% production warranties, which means they're warranty to produce 80% of their headline number on day one on year 25, which is, I think, kind of amazing. So anyway, the analogy that we like to make is think of betting on the solar cities, the Vivins, et cetera,

Starting point is 00:08:34 of the world, of course, sort of the city is now Tesla Energy, excuse me. You know, think of those folks as who's going to build those homes, right? That's the Ryan homes or whoever the comp is and the residential home space. Whereas what we're trying to do is figure out how to invest in that ongoing cash flow that is the rent that that house could generate, right? And the solar project equivalent of that is, you know, taking as your collateral when you're doing your lending, basically the electricity generation, and therefore the cash flow, like I say, if you can go sell it,

Starting point is 00:09:08 that's associated with that system. And so basically we are betting on things like, will they continue to pay? And then will that system continue to hold value because they can produce power that's cheaper than the utility power in that area? So basically, that is, we're not betting on,

Starting point is 00:09:26 or our investors aren't in our portfolios, who's going to take market share, right? Or who's, you know, which hardware is going to win? out. This is really just about who's on the other side of this, you know, contract, who's purchasing this power from the start? And then is that a solid kind of both asset and economic situation, right, a place where power is kind of expensive, such as it solar can offer a discount, let's say. And so those are the sorts of things we're analyzing. So it just has a very, very different

Starting point is 00:09:51 risk profile than betting on, as we say, which technology is going to win out or which installer is going to take market share. So, Brian, I'm curious, what risk profile can we compare your investments to. Are the cash flows variable? Are they fairly consistent? For instance, are the investments more like fixed income bonds where you have a steady cash flow or is it more equity like? It's structured a lot of different ways is the long answer. The shorter answer is that there are people structuring it in such a way in most cases whereby if those systems, however their finance, continue to pay, there is some cash flow stream or waterfall such that people are getting paid out on the other side. So it's generally not this kind of corporate

Starting point is 00:10:36 guarantee at some holding company level. It's generally tied to what is the performance of a given portfolio of projects, whether they're huge ones out in the desert or lots of small ones that are homes. Now again, that manifests in lots of ways. But I think the reason that we get excited about, I think the comparisons to real estate, which is obviously a really big and liquid financing market compared to solar, you have this dynamic whereby almost irrespective of who's on the other side of the transaction, you have some kind of asset that if you did your work well across the portfolio, you should have some nice dynamics as it relates to in real estate. You're getting a lot more projected yield than you would get in real estate because solar is a relatively novel asset class.

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Starting point is 00:15:41 until it needs to be consumed. And here in the stock market world, you know, we talk about volatility. and if a stock drops more than a few percentage, you know, it's, it's extremely volatile and you can see a lot of panic. But then whenever you look at the price of power, I used to trade power intraday, so that's even more volatile. You could see like the price changed a thousand percent within 10, 20 minutes. And you can even talk about negative prices on electricity. Can you please explain to us like how can you as a salesperson get a negative price for your good really? Yeah, sure. So California has been experiencing this a little bit recently because of solar

Starting point is 00:16:29 and Texas has it occasionally because of all the wind in West Texas. But effectively, there are costs associated with grounding power. You have to do something with this electricity once you generate it. And so if you have meaningfully more supply of electricity, than demand, then you actually have to pay someone to do something with it. A lot of the time to literally sink it into the ground. So there's a market for that. And when that market kicks in, the price of electricity at the wholesale level goes negative. Back to the conversation we were just having, it's a great way to describe probably in a more clear way,

Starting point is 00:17:09 the difference between avoided cost and sending power back to the grid. Because if you're talking about avoided costs, you're talking about the avoided cost of retail power. And as you know, the retail cost of power is not a liquid market at all. In fact, it is often set on an annual basis between a public utility commission and the utility. So the avoided cost of retail power is incredibly consistent. You'll have a rate card. It might be, you know, an average in the U.S. It might be 10 cents per kilowatt hour.

Starting point is 00:17:38 You might have some kind of demand charge. And that does not change. And so when you're thinking about, you know, the avoided cost of power of that idea of having, hey, I used to pay the utility 100 units. Now I pay them only 20 units for 20 units that I might use at night when my solar isn't producing. To your point, though, if you look at the wholesale price of power, what the utilities are dealing with on the wholesale level, both purchasing power from the grid, which is kind of what you're referring to, but even just the pricing of the hydrocarbon inputs into their natural gas peaking plants, into their coal plants,

Starting point is 00:18:08 etc. That is incredibly volatile. And so when you're sending power back to the grid in the middle of the day, you're actually participating in a wildly different market, then you're participating in when you've avoided power consumption, which as I say is retail. So that's actually a great lens through which to explain why I think investors into solar portfolios, if that's something investors are starting to look into. It's very interesting speaking to investors, not just investors in solar project, but also investors in, say, fossil fuels. And whenever we start talking about what are the impact of renewables. Someone typically says that, oh, you can't store power. I mean, even though we might

Starting point is 00:18:50 walk around with their phone now pocket and we are storing a little solar energy, it's not the effect is very little. And at least the old truth is that storing is hard. It's also hard with the power grid. There's a lot of problems with infrastructure of power. So it's not just a question of we are consuming energy. Now we are also creating energy, say, from, from, from the sun. There seems to be a mismatch there between the two, some structural problems. Could you talk to us like, how far are we from solving that problem? And it's a really good question because obviously we do a lot of things when the sun's not up. And we have never really had cost-effective storage except for the best that we have right now,

Starting point is 00:19:36 anecdotally, is pushing water up very large hills and then releasing it down onto turbans when we need the power. That's our most cost-effective storage option right now, which is interesting, but requires a very unique geography that most places don't have, so it's not very scalable. But the short answer is that you really do need to figure out the storage problem if solar is going to be a complete solution or a near-complete solution. The somewhat longer answer is that wind and solar in a really amazing way complement each other. There's a great kind of heat map that showed through a 24-hour cycle when wind and solar produced. And it's almost perfect in that when solar starts to go down, the wind starts to pick up. When blows more at night,

Starting point is 00:20:22 as the wind starts to die down, the solar picks up. So I do think that wind and solar can complement each other in helpful ways. You can actually do a decent bit with high-voltage transmission lines. Western Europe is the best example of this, but the sun is obviously distributed quite a bit. across Europe and North Africa. And if you can make, kind of allow those markets to talk to each other, so to speak, you can push around when someone's earlier in the day and later in the day and kind of help a little bit with that. But fundamentally, I think that might get you, you know, maybe only to 75% renewables

Starting point is 00:20:52 penetration. I'm not sure if that gets you all the way there. Oh, wow. Thanks for that response. Brian, it's very interesting to hear your take on, you know, setting on the price. We're talking about renewable energy. is something that a lot of us really like to talk about and think about, you know, despite all the problems that we have with meeting demand and supply, which is really

Starting point is 00:21:15 another issue, we do see more and more renewables. Now, a lot of the reasons why we see that, that really also comes from the subsidies that you find in the market. And it seems like there are like two schools whenever we're looking at subsidies. You have the school that's saying, the economic school that is saying that the infant industry argument, right, that you need to support an industry that can't support itself, especially if it's good for the environment, there's typically also a lot of labor involved. So that's great. Then you have the other guys, the other school of economics who is saying, well, if this is not efficient enough, if fossil fuel for the sake argument, it's just cheaper, it's a better product, you can store it better,

Starting point is 00:22:00 or whatever the argument is, if it's economically feasible to use fossil fuels, why would you use anything else? What would happen? And I know this is an ungrateful question, but what would happen to the solar industry today if we just stopped all the subsidies, say, in the US? There are quite a few states that would be cost effective without any subsidy. But I think the broader question is what kind of confidence can you develop that this will be, the solution in the future. And I think where that confidence lies for me is in a curve that looks a lot like Moore's Law and semiconductors. It is on an algorithmic graph incredibly straight from about 1978 to today. And that's the cost of solar modules decreasing in price roughly 10% a year for

Starting point is 00:22:54 45 years. I think the answer to the question about why do we not stick with fossil fuels, partially because we know eventually they're going to go away. And we would prefer not to go back to the dark ages when that painful transition occurs. Hopefully it's not so painful if we can scale up renewables. But I think the shorter term answer is that there's a lot of confidence, and I think a lot of track record to suggest that solar will be in a decade dramatically cheaper. In fact, already you're seeing solar beat out, you know, hydrocarbons. with regularity at the utility scale in places where it's quite sunny.

Starting point is 00:23:34 So that day is already here. And what we see looking forward on that cost curve, going back to your question about subsidy, is that by 2022, which is when the current subsidy at the federal level is set step down meaningfully, not actually expire fully, but step down meaningfully. By that date, we believe that 50 states, all 50 states in the U.S. will be cost-effective. without any subsidy. So we are within five years if you continue that cost curve per our analysis of solar standing on its own two feet. And if that is to occur, I think there's a really fair question to be asked about why we seated our early lead to solar to China, who has done a spectacular

Starting point is 00:24:17 job predicting this growth, getting ahead of it, supporting that industry, and getting to the economies of scale that allow you to win on the cost front. And that Trump's pretty worthless subsidy aside, US manufacturers are very unlikely to get to at this point. We're likely to be simply consumers of this technology, not the manufacturers. So when we talk to oil and coal guys, we hear many of them talk about why renewables are going to take a long time and numerous other bearish factors. But I'm kind of curious, you know, how do you see things progressing as we move forward from this point? I think that there's a lot of power concentrated in not so many hands on the regulatory and on the large utility and large independent power producer front that can

Starting point is 00:25:08 accelerate or decelerate solar. Solar's adoption and growth and more broadly renewables, adoption and growth by keeping what we think is an inevitable transition of the grid from a very fragile, top-down, centralized, unidirectional, network to a multi-modal, flexible, bidirectional network. So, I mean, as a network theorist, if you look at those two models, it's very, very clear, which is more appealing. And the only reason we've had this centralized, incredibly fragile model is because the economies of scale of burning enormous amounts of coal in the middle of a field way outside of town relative to all of us, as funny as it sounds, having little coal facilities on our roofs is pretty compelling,

Starting point is 00:25:57 right, when you look at hydrocarbons. when you look at solar and moreover as you look at batteries, they scale down beautifully. There's actually not a lot of, they actually kind of have dis-economies of scale almost in the sense that a couple of panels that you buy relatively cheap and throw up yourself on your roof because it's a really simple job, can actually be cheaper on a per kilowatt basis than one of the big commercial systems we do. So both of those things scale down beautifully. And if the costs are relatively similar, what you want is lots and lots of places generating power, are lots of places that are capable of storing, lots of trading and information flow between them,

Starting point is 00:26:33 something that looks a lot more like the Internet of Energy. And that is the kind of grid that would accelerate the adoption of renewables and storage. And by the way, blackouts, there's no reason that blackouts. That's insane. That's like a rolling blackout on the internet. Like what? You know, like, are you kidding me? Like, you've one point that if it fails, like 20,000 people don't have power. Like, that's crazy. That's not good. And the kind of grid that we think we're going to have in 2050 would not have those kind of characteristics because of its dynamism and multinatal dynamics. So the question we think is, is that the future that we start seeing in 2020, because folks

Starting point is 00:27:14 are kind of thoughtful and progressive in a literal sense, not a political sense, about the new resources we have and reimagining the grid for that purpose, or do they stick to what they've always done in a relatively state industry for 100 years. I worry it's the latter. Hmm. Interesting. So, Brian, if you're sitting there as an investor and you're considering to diversifying into renewables one way or the other as a part of your portfolio, now we're sitting here at the top of the market cycle, or at least you think it's the top of the market cycle, we look at stocks are expensive, bonds are expensive. How do renewable correlate with stocks and bonds. And do you have any data on that and what happened during the last financial crisis?

Starting point is 00:28:03 Yeah, totally. One of the unfortunate things about being a relatively new asset class is that a lot of the times, even though there's some data on the last credit cycle, the portfolios and the industry is kind of apples to oranges, you know, relative to nine years ago. So unfortunately, we're one of those asset classes that is young enough that we haven't been through a couple. And like I say, talking back to that 10% per year price decrease, you go back to 2009 and some of the portfolios that they were working on then might have been built in 2006 or 2007. We're talking about literally something like 2 to 3x more expensive solar. So the financial burden on those systems relative to what they were producing was literally 2 to 3x more. And so it's really hard to try to back into and also the volume was literally orders of magnitude less.

Starting point is 00:28:50 So there's not a lot of great data. It's a lot of do you believe this series of positions or pieces of data, and do you believe that will lead to a positive outcome in a credit cycle, I think combined with how much cushion based on adopting a relatively new asset class? Your loss rate math is default percentage multiplied by recovery value equals loss rate, right? and I would not make the argument that solar is somehow special in that we're going to have lower default rates than, you know, you'd see in other places that have assets behind them. Because no one wants to default on something that they've already paid off some principle on, right? So, you know, I do think most of the defaults are going to be not strategic defaults, but actual, I don't have the cash to come up with it kind of defaults. And if that's the case, it should, you know, solar shouldn't have some huge advantage. I think where you want to focus your attention is on those recovery values.

Starting point is 00:29:49 What is the most recent data we have as to when someone defaults on the original contract, whatever form that took? The financing entity has to take ownership of the system. What kind of recovery has been achieved? And Solar City published the first public data that I'm aware of in 2014 in their first public securitization. So they took a, believe it was a 2011 portfolio and securitized it in 2014 and took it out to the market successfully in three different issuances. And they reported on their recovery value. They call it contract reassignment because they have original contract and then

Starting point is 00:30:24 they reassign it to a new homeowner if it's broken the first time. But they reported 81 cents on the dollar recovery with these assets, which is fairly spectacular, in my opinion. If you have 10% default rates, which would be relatively high in any kind of of credit worthy portfolio and you're only seeing 2% loss rates because you're getting 80 cents on the dollar back. That's a very strong place to be, I think, in the next credit cycle. So, you know, this goes back to if you're going to dig into this space, I would suggest that you really understand what these portfolios value is and where it comes from. Is it behind the meter? Is it avoided cost? Did they, you know, think of building this portfolio with that

Starting point is 00:31:04 asset in mind doing things like not putting systems on really old buildings that are crumbling? who someone might not move into, not putting systems on specialty real estate that are a lot harder to fill, i.e. a brewery, than general real estate, i.e. commercial office space that is easy to fill. So I think these are the kinds of questions that investors should be interested in if they're interested in solar, because the reason I think you get excited about solar is because you believe going back to that real estate comp that there's this asset sitting behind it that has some really nice characteristics and some really good early data that in this next credit cycle, we think and project will benefit from a flight to quality not be hurt by it. At least we think that's what

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Starting point is 00:35:31 But if you look at this like in the grand scheme of things, what are the moving parts really on the demand side? And what's happening to the supply side? Say that if we see a crash, then you will also see crash in the oil price that might be more sensitive to this, which will then relative terms make solar more interesting in the renewables. Can you talk us through like your train of thoughts and the demand side and the supply side.

Starting point is 00:35:57 Sorry, it's as a long-winded question here. No. Yeah, so on the demand side, you know, you're obviously right that there's some distribution through the day. You know, people leave their homes. If there's not, you know, people staying in the home, then that goes down. But then they light up 30 minutes later at their office. And so that kind of bidirectional network that I described before should be able to

Starting point is 00:36:20 fairly easily handle kind of pushing power around to where people are. we all need to be cooled and kind of fed and occasionally wash our hands and all the good stuff, you know, have light, you know, wherever we are. And so they're actually across the whole grid, as I'm sure, you know, from the wholesale markets. There's not a wild amount of variation besides that driven by, you know, kind of weather and, you know, hydrocarbons deal with that as well, right? That's why we have natural gas peaking plants that have to spin up. You know, I think on the demand side, what's interesting and somewhat unprecedented is for the first time ever GDP growth and electricity consumption have been divorced, and this is obviously going to the macro level,

Starting point is 00:36:58 but you have seen energy efficiency take a bit of a cut into the growth of total electricity demand. And we think that'll roughly continue. We do think the low-hanging fruit on energy efficiency has already been had, and therefore each incremental decrease. There's probably some kind of flattening of the returns to those kinds of spends. But the other huge question, and this definitely also gets to what kind of strain there's going to be on the grid at different times of day. Do electric vehicles penetrate in such a way that you see the energy consumption that's currently focused on oil transition to the electricity grid? And if you look at just pure energy units, transportation is roughly the size of the entire electricity grid. So that moving in a

Starting point is 00:37:44 significant way onto the grid would create a need for literally an unprecedented amount of new electricity capacity build that we haven't seen since the early days of the industry and people electrifying various industries. So I think that is a huge lever as to what the grid looks like and the demand side looks like over the next 10 to 20 years. And you mentioned Tesla earlier, but we've seen, I think, some pretty compelling signs the last two to three years from other automakers that they think the industry is going electric over a 10 to 20 year timeframe. So we think there's some real possibility there. And it's also worth pointing out that, you know, these EVs are batteries on wheels. And when they are sitting in different places, you can use them as storage in a way

Starting point is 00:38:30 that incrementally people aren't actually paying for, which is to say if you go and buy a Tesla Model 3 when they finally make the base model for 36 grand, you're not pricing into that, the value of a battery in the grids, you know, midday usage while you're parked at the office, right? And you opt into some program. So there's also this really interesting. way in which EVs might change the dynamics of battery economics because you kind of two for one on the battery. And these batteries kind of show up, so to speak, because people are buying EVs, not because they need to be on the grid, but you can tap them into the grid. So that's the demand side. You know, on the supply side, there are, I think, more and more signs that coal's going away.

Starting point is 00:39:10 You know, natural gas has put a little bit of pricing pressure, but, you know, frankly, even the non-climate change environmental dynamics have gotten kind of more and more challenging. And on price, they're simply not competing. And with an asset that might last 35 or 40 years, I think people are increasingly uncomfortable, including big insurance companies that have recently made announcements to this effect. But they're uncomfortable betting that there won't be some kind of carbon tax or there won't be some kind of additional price on coal in such a way that it's not economically competitive.

Starting point is 00:39:38 So the trend lines on coal are, I think the writing's on the wall, that that's not going to be a huge part of the future. Brian, when we think about the energy market, we have a lot of the energy market. all know it's very cyclical. For big oil, they saw enormous price swings back in the 2008, 2009 time frame, then again in the 2014, 2015 time frame. And from an R&D perspective, this can be really difficult stuff for making investment decisions. So since you're an investor in this space, how do you think through those factors? And just kind of what's your thought process with respect to that. Well, I mean, I think, you know, again, going back to the retail versus the

Starting point is 00:40:20 wholesale dynamic, it's worth understanding that if you're a solar researcher or someone that controls R&D, all of the distributed solar, both the very large residential market and the growing commercial market, their pricing and their competitiveness is going to be based on retail electricity prices, not based on what's going on in the wholesale market. It doesn't matter what's going on with coal, natural gas, oil, you know, it's 12 cents or whatever it might be in Wisconsin. And If you make an investment from an R&D perspective that contributes towards distributed solar, the likelihood that that, and again, it's the most boring graph of all time, retail electricity pricing goes up 2 to 4% a year, the bet you're making that in five years or 10 years, it's not

Starting point is 00:41:00 going to be below 12 cents has historically been a really, really, really good bet. So I think it is worth separating something like wind that only operates at the utility scale level and is enormously impacted by swings really more in coal and natural gas than oil, although there's some correlation between the hydrocarbons, right, from a trading perspective, although that seems to be less coupled than it used to be, I think, partially because of this dynamic I'm describing, which is oil is really a transportation fuel. There's not really oil being used to create electricity, setting aside places like Hawaii, and natural gas and coal are really the prices you're looking to. So something like wind or utility scale solar, right,

Starting point is 00:41:34 the folks going out and building these enormous systems in the desert, they're very much impacted by those prices. You know, the other thing I'll say, and you'll obviously understand this, given your background, but volatility has a cost. And one of the great things about these solar systems, and part of the reason I think they're winning some of these bids is there are not input costs once you build these systems. The sun is going to show up every morning for you, right? And you're not going to have to send any cash for it to get out of bed. Whereas, you know, your input costs with coal and natural gas are obviously, as you say, can very wildly and really change over time. So knowing that, hey, I've got this big upfront cost, I'm going to build

Starting point is 00:42:10 this solar system, but then I have no input costs, and I can model this in a really predictable way, at least as relates to the generation of the electricity. I don't have to worry about spikes in coal costs or violence or political unrest in places that inconveniently have a lot of hydrocarbons, which there's obviously this very inconvenient correlation between not particularly well-run governments and places with hydrocarbons, right, the well-known curse. So I think there are a couple ways to slice that up. But I do think solar benefits enormously from the fact that we get to bet on retail prices being consistent. And at least you know that portion of the market will be there for you, so to speak, if you're a technology investor or an R&D director. So, Brian, you're clearly

Starting point is 00:42:55 wealth of information whenever it comes to not only renewables, but also investing in renewables. What kind of resource can you recommend if the listener sitting out there and they want to to learn more. They might not be interested in the specific investment for them right here and right now, but more to really, really understand the sector as a whole. So whenever they will eventually invest in something, then we'll have a deeper understanding of what is really the underlying mechanisms of what they're investing in. Yeah, absolutely. And I'm always a fan of nerding out and going deep in an industry and developing some instincts of my own and some intuitions before getting there. So thanks for the prompt, because I think it's a great question. I'm a big fan of

Starting point is 00:43:39 podcasts. Green Tech Media actually has a great one called Energy Gang, the guy named Stephen Lacey. A couple of other good ones really like one called. It's called Energy Transition coming out of Rocky Mountain Institute. That's a great one. So I would look to places like Rocky Mountain Institute, NGOs that are leading some of this work. That's kind of the universe of folks that I'd probably get onto a distribution list or subscribe to the podcast. And I don't think you'd miss anything big happening and probably get a really good sense of the industry if you followed all those. All right.

Starting point is 00:44:11 That's definitely noted. And we'll make sure to embed those links in the show notes. But Brian, I would definitely also like to give you a chance to talk a bit more about yourself and where people can learn more about you and your company, Wooner Capital. Sure. Yeah. So, you know, as I mentioned, I'm a repeat founder. I spent four years in venture capital, investing.

Starting point is 00:44:32 into this space of software-enabled lending. You know, what we really think of ourselves as doing at Wonder is bringing a lot of software to an industry that we didn't see a lot of software deployed into, which is getting really compelling financing offers quickly and efficiently to as many businesses, municipality, schools, hospitals as we can around the country. So that's what we do. That's how we try to accelerate the clean energy industry and bend down the carbon curve. I am fairly active on Twitter at Bursik.

Starting point is 00:45:00 You know, we have a lot of ways to get in touch with us on the site. So come check us out at wondercapital.com if you're interested in either putting up solar or, of course, investing in one of our solar funds. And besides that, you know, folks can reach out to me really anywhere they can find me online, you know, on LinkedIn and all the typical places. Brian, thanks so much for taking time out of your day to share your knowledge with our community. I know I learned a ton.

Starting point is 00:45:27 I'm sure other people out there learned a ton. and Stig and I just thoroughly enjoyed this conversation. So thanks so much for coming on the show. Thank you. Really appreciate it. All right, guys. That was all that Presta and I had for this week's episode of The Investors Podcast. We see each other again next week.

Starting point is 00:45:44 Thanks for listening to TIP. To access the show notes, courses, or forums, go to theinvestorspodcast.com. To get your questions played on the show, go to AsktheInvesters.com and win a free subscription to any of our courses on Tee. This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP network. Written permission must be granted before syndication or rebroadcasting.

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