The Goldilocks effect in geothermal HVAC systems
From installing small solar lights in India out of college to now facilitating $1b of distributed renewables assets across five continents, Emily McAteer has truly been on a life-long odyssey with a singular journey home: accelerating the clean energy transition in emerging markets. Having proven the model for an integrated end-to-end energy financing and development platform, Odyssey found a shared wavelength with Equal Ventures’ thesis, and this week, announced their $5.3m Seed raise.
Your new lead investor, Rick Zullo at Equal Ventures described you as “the best kept secret in climate tech”. Let us in on the secret! What’s Odyssey’s founding story?
That’s a bit of a veiled compliment - and it’s true! We’ve been hard at work for a long time, along with other early leaders in the space, pushing forward the distributed energy market in challenging emerging markets. We’re now in a place where our company is ready to scale with the launch of a full platform to truly accelerate the clean energy transition in emerging markets.
My background in climate goes all the way back to undergrad, when I was an Environmental Studies major at Brown. Since then, I've dedicated my whole career to clean tech - now climate tech - and specifically in emerging markets distributed solar for more than a decade. Early on as a Fulbright scholar in India, we focused on small solar lights - which was a great first step. Today, we’re addressing head-on the real challenge of delivering high quality, reliable power to communities and businesses that don't have access to a reliable grid.
After my Fulbright, I came back to the US and did a dual policy and business degree at Harvard and Stanford. Then, I helped launch Frontier Power, SunEdison’s microgrid development business in India and East Africa. We were tasked with building a plan to develop thousands of microgrids per year in emerging markets. It became clear that the project development utility-scale paradigm that SunEdison was used to didn't apply to building a large portfolio of small 100kW project assets.
We were meeting friction at every stage of the process from financing to operation. Investors with a mandate to write $50-100m tickets for single utility-scale projects were not ready to underwrite hundreds of small project assets. Similarly, during diligence it was difficult to efficiently understand every asset in the portfolio. On the procurement front, the distributed renewable energy sector paid up to 50% more for key capex items simply because the smaller project developers had lower volumes and worked in hard-to-reach markets. And there wasn’t good, affordable technology to efficiently manage a fleet of, say, 500 distributed renewable assets in remote areas in Nigeria. That's where the idea for Odyssey came from - we sought to solve these frictions with an end-to-end platform.
What’s the potential for distributed energy in emerging markets? How is the opportunity different from developed markets like in the US?
In the US, the whole country has been electrified through utility-scale power, and are now adding distributed renewables into the grid. But there are many places in the world that either have an extremely weak grid or no access to power at all. In Nigeria, for example, the grid may be out 50% of the time. Meanwhile, the cost of solar and storage has come down so much that often the lowest-cost option for providing reliable power to businesses and homes is a distributed renewable energy source, like a microgrid, minigrid, or C&I (Commercial and Industrial) installation. There’s enormous market potential in developing countries; about $170T will be invested in energy infrastructure in the coming decades, with potential for much of that to be deployed towards distributed renewables to close this energy gap.
Today, three and a half billion people don't have access to reliable power. Around 600 million don't have access to any power at all. Bringing reliable power to the billions without is our core mission. This is a massive challenge to figure out, but a huge opportunity too. Billions of lives could be transformed if we are able to successfully leapfrog the grid with distributed renewable energy.
Yet, there's not enough capital flowing into the sector to help it meet its potential. There are a few reasons for that: a) this is a relatively new asset class in markets with a long tail of project developers, b) there isn't enough standardization - and therefore aggregation - in the market and c) there isn’t great data on the assets. Again, if you're an infrastructure fund used to writing $50-100M checks, you need to standardize the way you're looking at the 200 assets that you’re financing. How do they perform (compared to underwriting forecasts)? What's their track record? We're aiming to provide the standardization and data that will get capital flowing into this new asset class and into these new markets.
You’ve described Odyssey’s approach as solving for 3 barriers: access, aggregation/ standardization, and data. What’s your unique solution and why is this a good fit for this problem?
We provide a standardized solution across the entire lifecycle of project development. First, we streamline access to finance to the long tail of project developers who do not have access to international capital markets. Once they have financing, we have a procurement platform that aggregates orders across all project developers to put in higher volume orders. This drives better pricing on equipment, which improves unit economics (and reinforces the financing piece). Finally, once projects are up and running, we have a full remote management and control platform for collecting data from the assets. We help make sure that the assets are well-run, and also feed the data back through our asset management platform so we can understand and improve performance. Ultimately, financiers require this level of transparency and data to feed in to the decision to finance projects and then efficiently supervise the portfolio.
How does data enable more projects to get financed?
Right now if you’re an investor and you look at a project, it is difficult to understand if the project contains reasonable assumptions, and that makes it hard to finance. But if you have robust, transparent data, you can say this asset looks like this other batch of 100 projects, and you start to build confidence and bring more investment into the sector. Last year, we acquired a company called FernTech, which has in our view the best remote management and control technology for distributed renewables, and especially in emerging markets. FernTech helps us capture data from assets so we can share it with investors. We then standardize data so that we can streamline all the interactions between suppliers, project developers, and investors - so they can speak the same language and use the same system of record. There’s a ton of data, and we need to be able to benchmark it. We think that’s the last piece of the puzzle – supporting project developers in collecting all the data from their assets, understanding that data, and using it to show investors what the benchmark is, which in turn gives investors confidence in the forecasts they are seeing.
What does the distributed energy financing landscape look like for emerging markets? How did you tackle this two-sided marketplace problem of bringing financiers and project developers into the market?
These markets are extremely complex. We started tackling the problem by working with the entities putting large amounts of money into the sector – namely DFIs. One of our first and largest client engagements was the World Bank and the Rural Electrification Agency in Nigeria. Together they launched a $350m facility (now increased to $550m with contributions from the African Development Bank) to finance mini grids, solar home systems, and standalone solar systems. That initiative taught us a lot about the market and what technology was required to deploy large amounts of capital into projects – and track them over time. Just as importantly, it built up a network of project developers on the Odyssey platform. We got to know many of the project developers, so now we can bring that data back to investors and help them figure out what to invest in. We have a huge portfolio of project developers on the platform, and longitudinal data we’ve accumulated from every step of the project process. We can help investors and financiers deploy capital in markets that would otherwise be hard to navigate.
How does Odyssey’s technology stack specifically enable the end to end project lifecycle?
The platform contains a set of workflows and data tools to support every phase in the project development process. You can prepare projects on the platform, engage financiers, streamline the diligence, and aggregate projects into a portfolio. There’s also a procurement platform which bundles and tracks orders to achieve better pricing from suppliers. The goal is for the procurement platform to bring economies of scale to the project. For active projects, we also offer a remote management platform that can collect data from every single component of the generation system to troubleshoot any issues remotely and use what we call logic loops to automate control of the system components in order to optimize performance. We generate insights that developers and asset owners need to monitor their projects and overall portfolio, but also insights that are critical for reporting back to investors and lenders.
Who are the participants engaged in this value chain that are customers of the platform?
We have three different types of users. Project developers are the core of the platform, and they engage with financiers and suppliers. Our main goal is to standardize their data and give the sector a system of record to use to streamline the end to end lifecycle. We support the development of complicated, disparate assets with a combined large amount of data. So, let’s standardize this data in a system of record that gives investors, project developers, and suppliers the exact same language and platform.
Odyssey is currently facilitating more than $1b of financing for the DRE sector with assets on its platform in five continents! How did you scale customer traction?
We've been closely following the market and providing critical solutions as we’ve developed our reach. We initially focused on supporting governments and development financial institutions like the World Bank, the IFC, the African Development Bank. Helping these key actors move capital into the sector fostered accelerated project development and inflows of more commercial capital in. Now that we have this massive network of developers on our platform, we wanted to scale additional capital sources to catalyze the markets. Three objectives consequently prompted our seed round: first, bringing in more commercial capital. We’d set up systems to help developers access results-based subsidy programs, but we needed to layer on the commercial capital that will finance these assets on top of that. Next, we needed to lower the cost of equipment and bring down CapEx. Higher volume orders helped reduce pricing for project developers. Finally, we wanted to ensure that project developers have the technology they need to monitor, analyze and operate their projects. If you're a developer with just a few operating assets, you might not feel the pain of remote management yet. But our goal is to help developers start collecting data early on to eventually find financing partners to scale.
What does success look like for Odyssey?
We are truly at an inflection point in the market. We're seeing so many developers getting distributed renewables projects off the ground, and our job now is to accelerate that. We want to add to the tailwinds by providing a solution that drives more capital into the sector, unlocks lower costing for equipment, and drives down the cost of operating assets through great remotely monitoring technologies. Our job is to unlock projects - can we go from 30-40 projects per developer to thousands a year? We measure our success by the velocity of projects built.
One question that often comes up is why we don’t become a project developer ourselves given our vantage point across the development lifecycle. The reason is that we want to be the ecosystem-enabling platform for all project developers that need this set of tools. I needed them when I was at SunEdison, my peers needed them - so playing that role in the sector is really important to us. When more developers can enter the playing field and tap into commercial capital thanks to our enabling, the sector wins, and more actors are contributing to its success – more projects, more capital deployment, greater distributed renewable penetration, etc.
What do others get wrong about investing / building climate solutions in emerging markets? Why do traditional investors traditionally shy away from investing in EMs?
Emerging markets aren’t always easy to invest in, but we have to invest in emerging markets to fully address the climate challenge. If we think about the source of GHG emissions growth in the next few decades, it's primarily going to be from emerging markets. We have to figure out what it's going to take to put emerging economies on a low-carbon development path. Even if it's a massive challenge, we don't really have a choice but to focus on this problem.
I would say that the biggest obstacle we've seen is just a fear of these markets. I can't tell you how many times investors that we talked to, even during our own fundraise, who wouldn’t even look at emerging markets because it wasn’t in “their wheelhouse”. In order to unlock the potential of distributed renewables in emerging markets, we need investors ready to take new risks, try something innovative, and learn how to finance a different asset class. Investors need support but there is increasing appetite – even if it's a very different paradigm for investing.
Congratulations on your $5.3m Seed announced earlier this week! Who’s involved, and - most excitingly - what’s next for Odyssey?
We had an amazing meeting of the minds with Equal Ventures, who led our Seed round and actually published a thesis with CTVC about the need for an integrated end-to-end energy financing and development platform. It blew my mind when I read it! Equal’s thesis exactly aligned with ours: rather than create many specialized but small solutions for every project phase, there is a need for a platform that solves frictions across the lifecycle to address the core challenges of project developers. Reading the CTVC & Equal feature was an amazing feeling, realizing that someone else out there also believed in our idea. We’re really excited to partner with Rick and the Equal team to apply this business model to emerging markets. Our other investors, Twelve Below, Founder Collective, and MCJ Collective understand the challenges that we're trying to solve and bring a lot of the networks which will help us expand. Likewise, Abstract Ventures brings some serious fintech chops and relevant learnings into our platform.
As for what’s next - it’s time to tackle the climate challenge by putting money to work financing distributed renewable assets in emerging markets! 3.5 billion people don’t have reliable access to power, and 600 million people do not have any access to power. We’ve got lots to do and lots of projects to greenlight!
Inspired by Emily’s rallying cry? Corporates, infrastructure funds, and investors should drop a line to explore partnership opportunities. On your own professional climate journey? Odyssey’s career page is ripe with new roles (CoS! VP Engineering! Investment Associate!) as they look to expand the team post-fundraise with great people inspired to fight the fight.