We are thrilled to announce that we have partnered with Renew Energy Partners to create a custom-tailored transportation fleet funding program for fleets to purchase, install and maintain RelGen Hybrid Charging Systems as a service. Renew provides the up-front funding for the units. Each month after installation, during the agreement, a part of the fuel savings goes to Renew and a portion goes back to the fleets! Fleets can use this agreement to reduce fuel costs and their greenhouse gas emissions today without needing to worry about capital concerns. At the end of the agreement, the fleet takes ownership of the hybrid charging units, at no cost or at a small fraction of the cost, and 100% of the savings go back exclusively to your operating budget. RelGen was a perfect match for this program since hybrid charging reduces fuel costs for fleets while decarbonizing transportation today and for decades to come.
Laynie sat down with Michael Savage, the Sales Manager for Renew to talk about Renew's goals, Hardware as a Service and his background in sustainability project financing. The interview has been lightly edited for clarity.
Laynie: How did Renew Energy Partners get started?
Michael: We were founded by Steve Pritchard, Charlie Lord and Doug Foy. Steve and Doug knew each other from the Mitt Romney administration [in Massachusetts]. Steve was the Secretary of Environment and Doug was a Secretary of Commonwealth Development. Doug was head of the conservation law foundation for 25 years. Steve had been developing, owning, operating, and managing power production facility plants for 30 years. Charlie knew Doug from the conservation law foundation as Charlie was a environmental lawyer involved in carbon trading. So these three guys all came from the environmental world from different aspects and they all saw an opportunity to help commercial industrial firms use less energy. They saw there was a need to alleviate capital concerns to alleviate the complexity of these processes [for commercial industrial firms). The model that they started in 2013 is called the Energy Services Agreement. We fund, own and operate energy efficiency systems, LED lights, HVAC systems. And now we are expanding into the transportation world to help with fuel efficiency. All of this is related to reducing carbon. Our goal is to speed acceleration towards a clean environment by making it easier to implement efficiency and sustainability projects. If you work with us, you do not have capital concerns. We take on some of the performance risk as well. It is a very flexible agreement. We are seeing Fortune 500 and 200 companies take advantage of Energy Services Agreements, but even a local YMCA has contracts with us. It a wide-ranging model designed to help corporations meet aggressive sustainability goals.
Tell me more about your climate change commitment and the change Renew has led already.
We believe that climate change is the main issue for the next 10 to 20 years that we need to address. We built a model from an investment level, from a 10K foot level. There were no real opportunities in 2013 for private money to help with climate change. Renew's thesis was that we could bring in private capital to help private firms increase their climate commitments. That’s proven to be true and the market has matured. Over the last several years, we’ve gone from high net-worth individuals to funding us, to family offices. For our latest fund over the summer of 2020, we secured an institutional investor with a climate infrastructure fund which just didn’t exist a short time ago. So the world from a private capital stand point is opening up to the idea that we need to reduce carbon and that there’s an opportunity to make a reasonable financial gain by doing that.
To make if financially compelling, we share savings with end users and share the upside with investors. It’s a win-win. And it allow us to speed carbon reduction a whole lot faster than if people only look at projects that pay for themselves in less than 18 months, 1 year, 2 years, 3 years etc. Those are common benchmarks. But we think that’s leaving a lot on the table. Let us do more to get more carbon savings and share some of those carbon savings with you so that we can all meet our targets a little faster.
How has the support for your program changed since you launched up to now?
The market is still nascent but it’s maturing quickly. There’s a handful of other people that are doing energy efficiency and energy service work. It’s just a huge a trillion-dollar opportunity to implement efficiencies. We are seeing the DOE supporting us, some of the largest telecoms are implementing this program. It used to require us to do a lot of education (for customers), but now we are even seeing RFP’s for efficiency as a service. What we are doing with Blackburn Energy is about expanding this idea from the built environment and transportation sector. We have a pilot program with another technology, that’s in the frozen trailer refrigeration space using solar. We are excited to expand into this sector.
What insights could you share about our space - transportation - and the opportunity from RENEW's perspective? How does Blackburn's RelGen fit into this view?
So this is the third technology that we looked at in the transportation space. One of them sounded like a great idea but it went through a university-based study and the study did not prove the carbon savings, the way Blackburn’s Umass Lowell study proved that RelGen is delivering carbon savings. Diesel emits a lot of carbon. Anything that helps us progress towards a cleaner environment, we are very interested in. Having university level studies prove the technology beyond just theory allows us to bring it to our investors and put it forward. We offer a project finance-based model. We are not a private equity group where we are providing equity to Blackburn Energy to help you guys scale. We are providing capital to implement projects. It’s a different model to help clean tech companies get up to scale. But we think it’s a great opportunity to partner and we are excited about this partnership with Blackburn Energy.
Can you explain how an Energy Service Agreement works in layman's terms?
The energy efficiency as a service model, or in this case a hardware as a service for transportation model works like this: Renew pays for everything involved with getting a project off the ground. So that includes paying for any equipment costs, installation costs, built environment, permits, taxes, and any fees that are associated with the project. Then, we monitor and verify the energy and fuel savings over a set period of time. Then the customer pays us based off those energy savings. For example, if we deliver 100 gallons of diesel savings a month multiplied by the industry average of $3 a gallon, we are creating $300 dollars in fuel savings a month. What we do is sell what we are saving back to the fleet at a lower rate. The customer would then pay us $200 for the service and net $100 dollars every month. That’s a simple explanation of how the payment structure works. There is also a service component. We are also responsible for ongoing maintenance for the term. The term of the agreement can vary widely from 3 to 10 years. Blackburn and Renew will work together to create the best proposal for a customer depending on the end use. But to sum it up, Renew covers all the costs to install, Renew will measure and verify the savings, and then the customer pays us based off the level savings we create but at a discount. Every month they should profit. From day one, the fleet gets new equipment that will upgrade them, make them more efficient and they will see opex savings. We try to make it as compelling as possible and we think delivering operational savings is the best way to do that.
Renew and Blackburn are excited to offer a Hardware as a Service program to fleets, what else will be involved from a maintenance perspective?
Hardware is a service will be very similar to energy efficiency as a service. The maintenance will look a little bit different than the built environment. In this case, we're going to have the mechanics go to the trucks or set up an annual inspection of the truck, make sure all the equipment is still operating the way it should. And then, it's all about those carbon savings, which are going to be immense because as reducing diesel use is a huge opportunity to do that.
Who do you think would be a great target fleet?
I think anybody who has got more than 20 trucks doing long haul or daily distribution. But Renew will leave that to Blackburn to identify the best use cases. And then, from our side, we'll try to build the best service agreements so that we can create the most savings.
What are the advantages of Hardware as a Service? What is the impact of moving this from Capex to Opex for a fleet?
So when you talk about structured finance, which is the world that we live in, there's a lease agreement. So, lease agreement as of 2019 has switched to "on-book", which means it's counted the same as a lien, as debt. So Renew is delivering something as a service, which means we're considered “off-book”, which means that it's just like any other business expense. So for a fleet operator, fuel is a business expense. That goes on the book, and that can get written off against revenue. Where if you're “on-book”, then the actual lease for the truck is a debt. Maybe it’s a 7-year lease on the truck. And that's simply just the cost divided by seven, and that's what you got to pay. And that would be considered not an operational expense but debt. And the value for a business at the end of the day of on-book/off book is you're only allowed so much debt. You have comeuppance around taking on additional debt. So just from a high level, it's a strategic position on how much debt do you want, how much debt can you take? And if you can get a service agreement that will reduce your OpEx, it's a real value proposition because it's like, why not? It's just going to increase your net operating income right from day one. So we think there's a lot of value there.
Tell me about your background in Green Energy, the environment and sustainability.
I run the Business and Development team for Renew Energy Partners. I've been here about three and a half years now. I handle a lot of programs like this: education webinar content, talking directly to the customer, making them understand who Renew is, what we do and why we do it. Before I joined Renew, I was doing some commercial solar development and selling and developing solar projects in the southern New England area to commercial, industrial end users. So if you got a big flat roof, I was looking for you to try to take advantage of the local incentives, the federal incentives, and really just our overall high electric rates. So it's a great value prop. But when I was at that company, I always ran into the issue of, well, people would say, "Well, this is great, but I don't have the money to pay for it.” Or, "This is great, but can you help me get financing?" So when the opportunity presented itself to go work for Renew, which is the holistic solution for all things energy funding, it really aligned well. And before I was doing solar development, I received two degrees from University of Rhode Island, their Environmental and Natural Resource Economics and a General Business degree. So I've been thinking about this energy landscape for a very long time. I grew up in rural Vermont and the green mountains are just one of the aspects of the green lifestyle up there. Everybody is very much into nature. And just sustainability was driven into me at a very early age.
And then, from the trucking standpoint, my father has been a parts manager at an international truck dealer for 30 years now. I certainly spent many Saturdays, many days after school, just sitting in big trucks. And then as I got older in high school just worked in the truck yard, which was fun. I would just drive. Basically, there was two yards, about a half a mile away, and I would just drive, move trucks around, drive big old tractors, school buses, dump trucks, you name it. I was just driving the two-stick, the high/low gear. They just let me move everything. And it was just a great experience in the trucking world.
I think the trucking world is tough because from my view of the parts world, things break and they break all the time. Of course, for my father being a parts manager, they always loved that. They get to sell more parts. But I think, there's lots of opportunities for efficiencies in this market. Just from everything from as simple as idling to the liftgates to the number of batteries, to the diesel exhaust fluid, everything there and in-between. It'll be interesting to see what the electrical vehicle market does to the trucking world. I think it's probably not a good mesh, just for the type of personalities that I'm used to in the trucking world and their lack of willingness for change, if you will.
We've discussed transportation electrification, hybrid charging, sustainability with leading experts in this field. They share our belief that RelGen is part of the solution to decarbonizing transportation as fast as possible. With your background how would you suggest we promote our efforts in both business and regulatory entities?
At the end of the day the numbers are what drive people. The economic value and then making sure that what you're installing is not going to affect operations. And now that you have a commercialized product, I think it's just about finding fleets to really push it. From a regulatory standpoint, I think there's tons of opportunities that we'll see with, in Massachusetts and Rhode Island. Just here in New England, there's major climate bills signed over the last few weeks. And those climate bills will start to address transportation. And hopefully there will be some low carbon fuel credits that will, installing this will allow us to meter and qualify for some of those fuel saving credits.
Even if 60% of the climate infrastructure bill passes, I think we will see huge opportunities for technologies like RelGen that speed the transfer to more efficiencies. RelGen is a great transitional product as we start to decarbonize. It can play a role in a more efficient product for trucks today as and it also can work well in EVs. I think this helps us speed towards that de-carbonization. So I'm very, very pleased to be working with you all and trying to help some fleets become more efficient.
Thanks for reading. If you're interested in learning more about Hardware as a Service for your fleet, please email: firstname.lastname@example.org