Blackhorn Ventures is proud to announce our latest investment in ThinkLabs, which is accelerating the energy transition with an AI-powered co-pilot for grid operators. We’re proud to co-invest in their Series Seed alongside GE Vernova, PowerHouse Ventures, Active Impact Capital, Mercuria Energy, and Amplify Ventures. Blackhorn Partner Micah Kotch will join the company’s board of directors.

Our focus at Blackhorn Ventures is on founders who are transforming how we build, power, and move our world.  As part of that focus, we’re thrilled to support ThinkLabs efforts to empower grid operators to leverage the power of AI to decarbonize the grid and make it more resilient.

Utilities around the world are struggling with a combination of growing loads, decarbonization commitments, a tidal wave of intermittent generation coming online, public pressure to limit rate increases, and workforce shortages. ThinkLabs solution has the potential to simplify grid operations, reduce outages, and shorten the interconnection queue for renewables and energy storage, which aligns with our mission, vision and values. We’re confident the support from our corporate strategic Limited Partners will help accelerate new deployments, and contribute to ThinkLabs emergence as a leader in the energy industry.

Grids Under Historic Pressures

Workforce Empowerment

The backbone of the energy transition is the electric grid, and arguably, the most critical individuals who operate our most critical infrastructure are grid operators. After more than a century of advancements, the grid is evolving to connect to a surge in data volume via a jump in renewable energy generation, data center growth driven by AI adoption, distributed energy resource expansion ( including via solar, EVs and energy storage), and new data inputs including smart meters. At the same time, utilities are staring down the ‘Silver Tsunami’; the average age in the utility industry is 50 and more than 50% of the utility workforce is set to retire over the next five years. New grid operators are in short-supply, and those that do exist are being asked to manage today’s grid with yesterday’s tools.

Shortening the Interconnection Queue

The shift from centralized to distributed generators requires accommodating unpredictable bi-directional electricity flows, while the integration of grid-connected devices, like EV charging stations and distributed solar and storage, add complexity. Delayed and inadequate investments in transmission and distribution infrastructure and grid upgrades have resulted in a total capacity of energy projects in U.S. interconnection queues that grew 40% year-over-year in 2022, with more than 1,350 GW of generation and 680 GW of storage waiting for approval to connect, according to a recent report from Lawrence Berkeley National Laboratory. Permitting reform, infrastructure investments, and software upgrades are required to move the needle: the typical energy project completed in 2022 spent five years in queue for interconnection approval compared to three years in 2015 and fewer than two years in 2008. Queue lengths are expected to grow as the Inflation Reduction Act spurs even greater interest in renewable energy among developers.

The Double-Edged Sword of Artificial Intelligence

Power systems are rapidly evolving due to increasing electricity demand and decarbonization efforts (Grid Strategies recently predicted an 81% jump in US load growth forecasts primarily due to demand from data centers, and the manufacturing boom). While artificial intelligence (AI) advancements are creating new power demands, they’re also part of the solution to meet this demand: AI models, doubling in computational power every five to six months since 2010, now excel in task automation. The energy sector recognizes this potential and is just beginning to use AI to boost efficiency amid the growth of smart grids and the surge in data generation. Across the global workforce, Artificial Intelligence and machine learning specialists are the profession experiencing the fastest growth in demand, creating a recruitment bottleneck. In June 2022, there were only 22 000 AI specialists globally across all industries, and 61% of large firms surveyed in the United Kingdom and United States reported lacking staff with sufficient AI experience. The energy industry will need to compete to recruit the best data scientists and programmers. ThinkLabs helps address this gap by productizing the data science and machine learning the industry needs.

A Solution Grid Operators Love

ThinkLabs is building AI native software for the energy industry; digital infrastructure that takes an AI-first perspective to improve electric grid performance. Their autonomous energy system (AES) will enable and accelerate the grid’s role as the electron and intelligence platform of the energy transition. Like autonomous driving for vehicles, autonomous energy systems provide successive levels of autonomy, from operator assistance, to ‘human in the loop’ copilots in the near term, and eventually full autonomy of grid and energy operations from the network to the edge.

At the heart of AES is an AI-augmented digital twin of the grid. This digital twin leverages the up-and-coming field of physics-informed AI, which overcomes data quality and computation constraints of traditional physics-only digital twins, as well as sparse data and “black box” effects of AI models. The result is transparent, trusted, robust, and high-performance operational analytics that are pre-trained and prepared for real-life conditions, while continuously learning and improving with field experience. ThinkLabs has a unique ability to yield actionable insights with imperfect data quality, rather than spending millions of dollars and countless hours to clean static data sets that will never be perfect enough for mathematical optimization (i.e. garbage-in-garbage-out).  The deep diligence we’ve conducted with our network of grid operators and utility customers suggests ThinkLabs is building a solution that has real market pull.

Partnering with GE Vernova

The genesis of ThinkLabs comes from within GE Vernova; the new GE spinout on a mission to electrify the planet while simultaneously working to decarbonize it. GE’s significant utility relationships and access to grid data from utilities around the world provided fertile ground for the ThinkLabs team to design highly scalable grid power flow analytics in operational real-time, capable of managing fast-changing and flexible grid dynamics. The ThinkLabs platform has been trained with 50K+ scenarios and pretrained solutions to handle various generation, load, storage, and switching combinations, rather than relying on a handful of week/day ahead worst-case planning studies.

Initially, GE Vernova will serve as a primary channel for go-to-market, with GE Digital sales teams upselling the ThinkLabs solutions to existing GE Vernova utility customers (40% of global grid operators run GE systems). Given the challenge of the traditionally slow utility sales cycle, we see this as a massive competitive advantage, and a way to get to scale quickly. With average contract sizes that could range from $1-10M annually, ThinkLabs is partenring with Tier 1 Investor-Owned Utilities that have the ability to scale and grow over time (unlike some of their competitors, which are primarily focused on smaller electrical co-ops and municipally owned-utilities). The team already has 70+ utilities it has qualified and is pursuing channel relationships with cloud providers, consultants, and systems integrators who serve the utility sector, as GE Vernova does not have an exclusive on the ThinkLabs product.

Founders with domain expertise, exits, and experience scaling product

ThinkLabs CEO and Founder Josh Wong has spent his career in energy innovation. He was the former Head of Smart Grid at electric utility Toronto Hydro, and founded and exited Opus One (which built a enterprise-grade Distributed Energy Resource Management Solutions) to GE. Josh has over 15 years experience building hardware and software for smart grids and most recently led the Grid Orchestration team at GE. Neal Vali, Head of Engineering, has 15+ years of experience leading software engineering teams at Sirius XM Connected Vehicles and Omnitracs where he built products for heavily-regulated industries including Aerospace and Automotive. George Zheng has a grid data and power modeling background — he has also led technical teams, with over 13 years of experience modeling and analyzing power systems at GE Digital and PowerTech Labs. He also has experience applying generative AI to grid modeling. George previously led the design and development of advanced engineering analytics across the GE Vernova product platform. We believe deep subject-matter expertise around industry-specific data is the most important success factor for applying Generative AI to specific industries. Collectively, the team has excellent utility/grid data experience and strong industry networks: critical for getting to scale quickly. The team is currently hiring for ML software and data engineers – interested applicants should apply at thinklabs.ai

Blackhorn Ventures is proud to announce our latest investment in Buzz Solutions, which uses  AI-powered visual data insights and predictive analytics to safeguard critical infrastructure.  Blackhorn previously invested in Buzz’s 2022 Seed Round, and we’re proud to co-invest in their Series A alongside GoPoint Ventures and MaC Venture Capital . 

The electric grid is the backbone of the energy transition. For the past two decades, demand for electricity across the United States was flat. However, this is dramatically changing. The combination of accelerating growth in electricity use by data centers mining cryptocurrency and delivering AI, plus longer-term electrification of manufacturing, electric vehicles and building heating has upended that status quo. All told, grid planners across the U.S. forecast an increase of 38 gigawatts of peak demand by 2028, according to data reported to federal regulators.  As the Washington Post recently reported, “Vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology factories proliferate around the country, leaving utilities and regulators grasping for credible plans to expand the nation’s creaking power grid.”

As both the transmission network and the electrical distribution network are increasingly strained, utilities are looking to build ‘digital twins’ to streamline asset maintenance and repair. Utilities face three large and growing problems that require immediate behavior change: 1) the growing cost of extreme storms, wildfires, unexpected blackouts and preventable failures, 2) the need to rapidly modernize the grid given a jump in renewable energy generation and distributed energy resources (including EVs and energy storage), and 3) an aging workforce and severe labor shortages as more than 50% of the utility’s workforce is set to retire over the next decade.

At the center of these three challenges sits Buzz Solutions. Their AI-powered visual data insights and predictive analytics platform is designed to provide fault detection, monitoring, and management for utility power infrastructure and renewable energy assets. Buzz Solutions’s 100,000+ image-to-image source of record acts as a foundational data asset that is core to training their best-in-class AI model. The company is quickly becoming the go-to solution for visualizing data sets to enable resilience – and real savings for utilities.

The world of grid inspections is plagued with inefficiencies

When it comes to speed, accuracy and expense, grid inspections are far behind the standards of other critical infrastructure. Electrical utilities suffer losses of $170B annually due to network failures, forced shutdowns, and natural disasters. On average, grid inspection takes six to eight weeks for an engineer to conduct manually. This work comes at a great cost to utility workers: power line repairmen rank in the top 20 most dangerous jobs in the US and account for 24.2 deaths per 100,000 workers according to the US Bureau of Labor Statistics.

Compounding this historic challenge for the energy industry, utilities have faced a record number of thefts (e.g., copper and other raw materials), break-ins and vandalism at substations (including several high-profile incidents resulting in blackouts). These events have spurred calls for new regulatory mandates for greater monitoring and autonomous operations, given that many substations are in highly remote areas. The utility industry is urgently looking for new solutions to help avoid these costly and high-risk incidents and their associated negative publicity and potential for lawsuits.

Buzz Solutions offers an AI platform to efficiently inspect, monitor and manage power infrastructure 

Buzz Solutions provides a multi-product visual data digitization and analytics platform to address utilities’ inspection and monitoring analytics needs via two solutions: PowerAI and PowerGUARD.  Unlike other solutions on the market, Buzz does not need to bear the expense of collecting raw data.  Instead, they partner with drone, helicopter, and ground-based providers and existing utility sub-contractors.

PowerAI is a cloud-based AI software analyzing visual transmission and distribution data.  It does this faster, cheaper, more accurately, and safer than current manual processes. With its human-in-the-loop algorithm, PowerAI generates materially higher accuracy, at 60% of the cost, and 5X faster than manual processes, saving Buzz’s customers~$5M daily in reduced outage risk (assuming analysis of roughly 2M images per year). PowerAI ingests aerial visual data collected via third-party drone partners or a utilities in-house drone inspection team. It processes these images through their data management and AI fueled smart algorithms. It stores the analytics and reporting on a utility’s IT/OT systems to address cybersecurity considerations; and then integrates the insights into the utility’s GIS or work order systems via APIs to ensure the necessary actions tie into workflow and maintenance prioritization systems. In 2024, Buzz plans to expand PowerAI functionality to include smart analytics of solar and hydro assets. For PowerAI, Buzz’s extensive field inspection data volume source acts as a foundational data asset that is core to their competitive advantage.

In 2023, Buzz launched its second platform solution, PowerGUARD, as an edge AI monitoring platform providing 24/7 visual monitoring for utility substations. PowerGUARD analyzes visual data and thermal imagery via fixed on-site cameras; and provides intrusion, worker safety, and equipment condition monitoring as well as fire, smoke and arcing detection with their AI-powered alerting algorithm. It then delivers these alerts to the relevant utility teams, such as the substation operators or security teams. In 2024, Buzz plans to expand PowerGUARD’s product coverage to include monitoring and analytics of wind infrastructure assets.

It’s there but we can make it more explicit about how it has influenced our conviction. The primary piece is adding on the Substation product and evolving to a full platform solution that captures, digitizes, analyzes and builds actions into the utility workflow system for all visual data assets. The other piece is the significant uptick in utility customer “readiness to act”. Thanks for that input.

The transmission inspection market is massive and becoming more connected 

Globally, the transmission inspection market accounts for over $40B. The market is expected to double over the next decade as voluntary and mandated inspections increase. New transmission builds, for example, now require an initial and post-construction inspection. As inspections transition from manual processes to more autonomous drone and robotic data collection, it is expected that utilities will capture 10x more images for each monitored structure. With more data comes the need for better prioritization and actionable insights – exactly where Buzz is positioned to win.  Additionally, the growth of renewable energy assets creates a large and growing market opportunity for solar, wind, and hydro inspection analysis, which PowerAI could service with minimal product updates.

Given the intermittent and unpredictable load profiles of EVs and DERs, implications for the  utility distribution network are still unknown. However, the aging grid is increasingly stressed and strained. The more utilities monitor grid equipment and assets, the better they understand their condition. With this understanding, grid operators will be able to better estimate  load patterns, infrastructure capacity, and speed the pace of electrification and decarbonization. We believe the combined offering of PowerAI and PowerGUARD position Buzz to be the 0nly utility tuned platform that will increasingly capture, digitize, provide superior analytics, and seamlessly build actions into the utility workflows  across all visual data assets. We see this broader visual data analytics platform accelerating customer interest, early adoption and full enterprise deployment in the coming years.

Founders with a customer obsession

Buzz was co-founded by CEO Kaitlyn Albertoli and CTO Vikhyat Chaudhry in 2017. The pair met at Stanford University and started Buzz as part of their coursework. Kaitlyn graduated from Stanford and has a background in finance and sustainability. She leads go to market for the company, and has spent the past seven years working with utility customers and channel partners. While earning his MS in Civil and Environmental Engineering, Vik specialized in energy engineering and AI/ML for smart grid technologies, working as a research assistant focused on ML and computer vision for drone sensing of wind farms. He spent three years as a data scientist at Cisco Systems, and worked as an embedded systems engineer focused on firmware design and Machine Learning based intent prediction algorithms. Since we invested at the seed stage, the team has been laser focused on serving customers like NYPA, Southern California Edison and others monitor their critical infrastructure, achieving best in class performance. They’re currently hiring a Marketing Manager, Sales Specialist and Solutions Engineer to join the team and their mission of safeguarding the world’s energy infrastructure. For more information on open roles at Buzz Solutions, visit their job board here.

As the CEO and co-founder of Buzz Solutions, Kaitlyn Albertoli aspires to safeguard the world’s energy infrastructure. Throughout her career, she has been driven to solve big, challenging problems, and to have a substantial positive impact. Today, she and her team at Buzz have created an AI-powered platform that provides data management and analytics for grid inspections. We caught up with Kaitlyn to learn about her work at Buzz, their differentiated ‘AI-first approach’, and the impact of the bipartisan infrastructure bill on their path forward.

What life experiences brought you here? When did you decide you wanted to be an entrepreneur?

I’ve always been really entrepreneurially-focused. I actually had a jewelry business in high school that was all locally-sourced materials, and it started as a passion project. Then I became really interested in the whole business side of things–the pricing model, the go-to-market strategy, how you can more accurately build margins. That was my first interest on the entrepreneurial side, but later, I became involved in the world of sustainability.

After the jewelry business, I ran a sustainable food non-profit and it sparked an interest in doing something more impactful. That’s what ultimately led me to take the LaunchPad course at Stanford which was focused on entrepreneurship in the world of sustainability and energy. At Stanford I met my co-founder, Vik (n.b. prior to launching Buzz, Vik led machine learning and AI teams at Cisco Systems).We shared mutual interests in the energy space and sustainability, but with very different backgrounds, which were pretty complementary. And so it seemed like we had the makings of a really good team there and that’s ultimately where Buzz started.

Can you describe the problem you’re solving?

In order to talk about the problem we’re solving, it’s important to talk about the problem that was presented to us at the beginning. In 2017, the drone market was really starting to take off and mandates for more frequent powerline inspections were becoming the norm. This was before a lot of the wildfires that put climate change in the national and international spotlight and inspections of utility lines front and  center. At that time, drone data collection use cases started to rise as utilities began collecting and analyzing millions of images.

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Our focus was on the millions of annual images related to our transmission distribution infrastructure. In the current state, our entire process of managing that data, sharing it across teams, and then analyzing that data is still entirely manual. For example, one customer had 200  engineers, spending eight to nine hours a day just analyzing data all day, every day. That’s all they did– just to reduce the lag time from the moment that the image was captured to the time that it was processed. And when there’s that lag time, the data that’s being analyzed may no longer be accurate. In the 2018 timeframe, a major West Coast utility had 3700 unanswered maintenance requests. They were really having a hard time analyzing the data and then prioritizing their path to maintenance.

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So that’s how it became very clear that we needed something to help streamline that process. As grid infrastructure continues to age and as we’re trying to onboard all these renewables onto the grid, having a robust grid is so incredibly important, and it’s often overlooked. That’s where we really see ourselves plugging in and bringing the most value.

For people that are less familiar with the process of a customer rollout in this specific realm, what are the steps required to provide actual data to the utility?

It’s a little bit different depending on which utility. There’s not yet a standard process, but right now utilities are contracting helicopter service providers, drone service providers, fixed wing aircrafts, sensor data, ground based imagery, or they’re doing one or many of those pieces in-house. So it’s about a 50/50 split between utilities that contract out to service providers or you know, the teams that are doing this type of data collection in house. And so depending on who the utility is, they could be collecting just general RGB imagery or they’re also collecting LIDAR data or thermal data. There’s a lot of new sensors that are coming into the fold. Now, they’re typically mandated to inspect a certain portion of their lines every year. And then on top of that, they’ll do on demand inspections for hotspot areas, or areas that are known to have higher risk where there may have been a storm or they know there could be some sort of failure to their infrastructure. They collect all that data and store it in the cloud.

Buzz provides an AI-powered Software Platform and Predictive Analytics for detecting faults and anomalies on power line assets. How should energy customers be thinking about the costs associated with fault detection?

It’s a good question. It’s a bit tough to quantify it now because there’s such a huge increase in the amount of data that’s being collected. I mean, these are unprecedented numbers of images and sensor data  that’s being collected today. There’s also this compounding challenge of a big shortage of labor in this space right now. We have seen that our services save a minimum of 50% of direct costs compared to manual analysis. But that doesn’t take into account that there is also this huge shortage of labor and a massive surplus of data being collected.

What excites you most about your progress or traction to date?

The market is growing and expanding so quickly. We want to be on the cutting edge of analytics, AI and take the industry from being reactive to more predictive in its approach. (See: Buzz’s ​EPRI Incubatenergy Labs Case Study).

What is unique about your approach to machine vision and machine learning that your competitors haven’t yet figured out how to do?

We’re an AI first approach. We spent two years building out our commercially viable algorithms based on proprietary data sets we collected over that period of time. It’s very different from how a lot of the other competitors approached the market.

The bipartisan infrastructure bill is rolling out. How are you thinking about taking advantage of the federal dollars?Does that inform your work at all?

There’s so much information that’s constantly evolving and changing and moving quickly. But we’re fortunate to have partners who are long standing players in this space.  For example, Power Engineers are always looking for new R&D opportunities, looking for ways to capitalize on some of the dollars that are coming through.  We’re collaborating with them on how we can capitalize on some of those opportunities.

What is your grand vision if everything goes right?

Our goal is to safeguard the world’s energy infrastructure, not just power energy infrastructure. So we see our technology being applicable far beyond just the transmission and distribution inspection markets. We’ve already had new use cases with substations. We want to be that central brain for analyzing and then creating actionable insights from all of this data that’s being collected across various areas of infrastructure inspections, and so we’re really excited about how much growth there is across various areas of energy infrastructure.

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Were there ever points on that journey where you start to deviate from embracing risk or all the uncertainty that comes with entrepreneurship? 

Yeah, I actually was studying mostly finance at school. Stanford doesn’t have a finance degree for undergrad but I was doing a make your own major that was something economics finance related. I did an internship in finance at JPMorgan and had planned to return there full time after I graduated. But something was just calling me back to the world of entrepreneurship and to the work that we had started at Buzz. Even though I really did enjoy the time that I was in banking, I wanted to be involved in an impact-focused company where I could be boots-on-the-ground in a startup. And so I feel like that’s where my passion is really aligned.

And are there any ways in which that major informs how you’ve approached your work at buzz or approaches your leadership style?

Absolutely. I mean, I think that it’s really great to have a team or we all come from such diverse backgrounds because we’re all able to bring such unique perspectives to the table at our collaborative discussions. That’s been really instrumental for us as we’re looking to build in our current market or as we are trying to be continually flexible and moving reflect the customer’s needs are I think it’s been helpful that we all do have such different backgrounds because we’re each able to bring a different a different hat to the table. Which has been really valuable for us in our small, like company team dynamic.

Have you ever thought about how if you weren’t building what you would be doing, and if money and procedure were no object— what is Kaitlyn’s dream alternate path?

I have always just followed, you know, what I’ve been passionate about, which is really solving what the biggest problems are that I’m uncovering. At any point in time. I don’t know that it’s necessarily 100% energy focused, but I do think the impact is a key component of it, because I always want to wake up every day going into work, doing something that I know is going to have a positive impact. And I think that that’s just a mindset that I’d like to take wherever I go in my future endeavors, not necessarily in one particular industry, but that’s definitely a common thread.

Are there any risks or threats that are keeping you up at night?

Absolutely, Always. Always. We’re a startup with limited resources and so figuring out how to balance that at any given time is always our biggest challenge and, and how to continue to grow and evolve and scale our market that utilities are definitely a challenging one. We want to find ways to be innovative, streamline our resources, and be as efficient as possible.

And how are you currently measuring success? What are the metrics that you’re using?

Time savings, cost savings, and reduced risk to the utility as a part of their inspection process are some of the key ways which we measure our success. Ultimately, beyond delivering actionable insights, we aim to help track assets and enable utilities to predict areas most prone to faults and failures.

Are there technological hurdles that you still need to overcome that are tied to any of these risks?

Always. I mean, there’s always things that are coming up as we’re looking at new sensor data and new use cases. As we continue to build new offerings, there are always challenges and hurdles along the way.

Would you be able to share a bit more about your team and its culture?

Absolutely. Our team is incredibly collaborative. And everyone at any level is able to really bring such strong unique ideas and perspectives to the table. I mean, hiring a very diverse team and bringing that into a core part of our culture is incredibly important to us. I think all areas of diversity, you know, diverse backgrounds, diverse thoughts, diverse perspectives and also people that are coming from even different areas of their career path as well. We want everyone to feel included, like they can bring their own ideas and perspectives to the table, and that they can truly contribute to the team culture.We are very interested in having team members join us who want to chase after this vision and are passionate about really being a part of an impactful startup. And so everyone that joins our team, we also want them to share that value as well that impact is at the core of what we’re doing here.

“The most massive public dollar investment we’ll probably see in our lifetime.”

With this week’s passage of the $369B Inflation Reduction Act, and the passage earlier this month of the $52B CHIPS Act, we’ve been getting inbound questions as to how these new policies impact our investment thesis, and underlying portfolio companies.  With unprecedented investments in industrial capacity, manufacturing, clean energy infrastructure and workforce development, these two pieces of policy are shifting the course of our economy: long term, transparent price signals for renewable energy, and historic investments and tax incentives for the electrification of transportation and housing.

For some perspective on how this legislation will impact Blackhorn portfolio companies, and what it means for how Blackhorn approaches opportunities in resource efficiency and digital infrastructure, we turned to Blackhorn Operating Partner Bill Ritter.  Should you have additional questions on what these new rules mean for your organization or for our investment approach, please reach out.  We look forward to hearing from you!

During his four-year term as Governor of Colorado (2006-2010), Bill Ritter established Colorado as a national and international clean energy leader by building a New Energy Economy. After leaving the Governor’s Office, Ritter founded the Center for the New Energy Economy at Colorado State University, which works with state and federal policymakers to create clean energy policy throughout the country. Governor Ritter has authored a book that was published in 2016 entitled, Powering Forward – What Everyone Should Know About America’s Energy Revolution.  Governor Ritter was formerly the chair of the Board of Directors of the Energy Foundation and currently serves on the board of The Climate Group American and the Board of Trustees of The Nature Conservancy.  The following interview has been edited for brevity.

What does the IRA mean for our core investment thesis as far as industrial decarbonization and resource efficiency?

We look at the sectors that are most in need of decarbonization, and these are the same sectors we’re working in – the power sector, the transportation sector, the built environment and our supply chain. The Inflation Reduction Act actually covers all of those sectors as part of decarbonizing the economy and simultaneously growing the economy and reducing inflation.  So if you look at the act, it has a variety of ways of addressing each of those. Some things it addresses with tax credits, and that’s going to spur investment in those areas. Some things it addresses with formula grants or other kinds of grant programs. The thought is that it will spur investment, by providing federal investments for industries that require a big capital outlay. It will cause us to develop platforms to manage the intersections between our supply chain, the built environment, the transportation sector and the power sector.

Is there one specific policy lever or section of the bill that you think is going to have the largest impact on reducing emissions?

We have seen the use of the investment tax credit and the production tax credits for a significant amount of investment in solar, in storage, and in wind. And we were also seeing those tax credits being tamped down or going away altogether over the next few years. This is going to reinvigorate the clean energy economy. We are going to see significant investments in wind, storage and solar that we might not have seen had the act not passed. It also has a significant ambition toward creating American jobs. It’s fair to say that in particular where solar and batteries are concerned, we lost out to the Chinese over the last decade. This act makes a significant move toward our being able to reclaim a leadership role in the manufacturing sectors that are going to be part of the energy transition economy.

(Credit: Nicole Kelner)

How should Limited Partners be thinking about the tailwinds that this federal policy creates?

Don’t look at the Inflation Reduction Act just in isolation. Look at it also in combination with the Bipartisan Infrastructure Law. Those two taken together are massive investments in the American economy, in places where we badly need those investments. The Infrastructure Act had many parts to it that were favorable for decarbonization, towards clean transportation and things of that nature. And certainly this act does as well. And so limited partners should be looking at this as the most massive public dollar investment we’ll probably see in our lifetime. It is really about trying to spur this transition to a clean energy economy.  And it starts with the public investment, but fits our thesis that this is the place we most need to be to make the impact we need to make regarding decarbonization.

(Image courtesy of Blackhorn Ventures)

Do you see this bill changing Blackhorn’s investment strategy, either for the short or the long term?

I don’t think so. That’s the interesting thing for me – this is the transition that we believed needed to happen. These are the sectors that need to be decarbonized. Our thesis is about the fact that we will have an impact by investing in those companies that are going to manage this energy transition. We are going to invest in companies that say, for example, “This is a massive transition for utilities. How can we do that and do it smoothly?” We have an opportunity to modernize the grid in a way that has both sides of the meter talking to each other, and helping grid managers ensure that they’re living up to all their ambitions with respect to their renewable energy goals and their emissions reduction goals. There’s a great deal of grid modernization that has to go on. We’re investing in companies that are going to facilitate that. And the same goes with the built environment. The built environment is 40% of our emissions, and we really are going to get to the kind of emissions reductions that we promised as part of our participation in the Paris Accords. If we’re going to do that, we have to impact the built environment in a positive way. And so that’s going to be people thinking about building materials, but it’s also going to be people who understand that managing the activities in a building site, or managing the meter inside of a building, or rethinking how you plan to increase the efficiency of the building, is all part of a decarbonized economy .

Is there a particular sector of technology that you think will see a particularly significant uptick thanks to the IRA?

I think we were already at a place where we were going to experience a fairly precipitous change in the electric vehicle market. You can see it building– it felt like we were coming to a tipping point. I think the Inflation Reduction Act provides the tipping point for that. With the level of tax credits that are available both for new and used electric vehicles, I think we’re gonna see something fairly dramatic. And I believe that’s true not just in the light duty vehicle market, but in the medium size and heavy duty as well.

(Image courtesy of Blackhorn Ventures)

What  advice do you have for startups in this space seeking to navigate the IRA and take advantage of the funding coming down the pipe?

Well, startups shouldn’t bend their vision around the Inflation Reduction Act. They should actually ensure that they have a fundamentally sound solution that can be commercialized. It’s not hurtful to have these kinds of public dollars available. But I hope that founders don’t believe that they should try to mold their concept to what the Inflation Reduction Act says, because anytime you have a space like this, you’re using kind of a blunt instrument. I mean, a tax credit is a fairly blunt instrument. And so if I’m a founder, and I have a startup, and I’ve got a new solution, my funding is going to probably start out in a way that’s relatively typical for venture capital funding, and over time, it might be able to take advantage of some byproduct of the Inflation Reduction Act, but probably not in the first instance.

Would you be able to give us a bullish and a bearish scenario for how the IRA affects us?

The bullish side is, I think that because this act covers the sectors that we care about most, because it’s about decarbonization, it fits hand in glove with our narrative. And so, if everything were to go perfectly, this could make just a tremendous difference in our ability to address climate change in the short term, and have a tremendous positive impact on our portfolio companies and the companies we will invest in over the next year or two, because our thesis remains about these sectors. The bearish part of this is that this is all really big. It comes on the heels of the Bipartisan Infrastructure Law, and it requires the federal government to do a great deal that it’s not to date capable of doing. New offices have to be stood up – for the infrastructure act alone, the Department of Energy had to stand up 30 new offices to manage the dollars that are going out the door. And so it’s not to fault the federal government. It’s just that the two came together very quickly. I think it would be fair to say that today, as the Act has just passed, we don’t have either the personnel nor the organizations within federal agencies to get this out the door. Now, we have to build that. the bearish scenario is that we don’t build it right. It takes longer to get out the door. There’s a lag time that impacts investors in a negative way because the returns come later down the road, but it also takes up precious time with addressing environmental issues including climate change. So the most bearish thing, the biggest concern I have about this is whether the federal government is fully equipped to do what’s necessary to make this money as impactful as it needs to be both from an economic perspective in reducing inflation and growing the economy, growing American jobs, but also in a climate/ environmental perspective, and addressing carbon in a timely fashion.

(Credit: Rocky Mountain Institute)

With the recent passage of the CHIPS Act, it seems like America has embraced some bipartisan action regarding industrial policy. Could you speak to the effect of the CHIPS Act, and the importance of good industrial policy in general?

People who feel we lost our leadership role as a manufacturing economy were in part right about that. I think we still manufacture a lot of things in America, our manufacturing economy has played such a significant role in our economic well being. But we’ve also not done as well where things like chips are concerned, in maintaining our lead in high tech manufacturing. Other countries have done well in that – it’s not like we’ve forfeited our position completely, but I think the CHIPS Act is going to allow us to reestablish our leadership position. That’s important for a couple of reasons. Obviously, it helps grow the economy, we’re becoming more and more of a software driven economy. But in addition to that, it would appear that the legislation is going to incentivize jobs to stay on shore. And finally, it hopefully resolves a problem where the supply chain is concerned, because I think there were a lot of different issues around supply chains and chips, and this hopefully will impact our ability to have chips available, and not have to rely on other foreign countries to provide them for us.

(Image courtesy of Blackhorn Ventures)

You’ve been around the block as far as climate legislation is concerned. What is it specifically that makes this time truly historic?

I’d say the first thing is the amount of investment that is involved. When I was Governor of Colorado, we went through the Great Recession, and we had the American Recovery and Reinvestment Act. And the total amount of investment in clean energy was $90 billion. And President Obama was very much a person who believed that we needed to address climate change and clean energy. This time, first of all, it’s 14 years later. The issues that impact us related to climate and the environment are significantly more pronounced than they were 14 years ago. People who are looking at the clock and thinking about the window we have to address this have shortened the timeframe within which we have to act. So there’s far more money, but that money is tied to the urgency that we have to act. It’s also concentrated in places where we’re pretty confident it’s going to cause people to invest at a deeper level on the private side and help us to make that transition from a carbonized economy to a decarbonized one.

I’d like to add that this bill really does more from an environmental justice perspective than any piece of legislation that I can ever remember. The kinds of ways it incentivizes to build out energy efficiency and low income neighborhoods, the things that does to ensure that power delivered to low income neighborhoods is clean power, is remarkable. There are a variety of incentives for transportation to be carbon free, and that transportation be available to low income people and people who live in marginalized communities. This legislation does more than any other thing I’ve ever seen in that regard. And that is also how we should think about our energy economy in transition, that this time, we should leave no one behind.

Is there anything else that you think is important to keep in mind as we’re going forward?

The IRA is being called a climate bill– but there’s nothing in the bill that puts a limit on emissions. There’s nothing that requires a reduction of emissions. Nothing like a clean energy standard, or when there was the Clean Power Plan. Prior legislation had that, this legislation does not. So, you know, we really have to work very hard at ensuring that the incentives work, that American consumers and American workers are fully participating in this and that the parts of this that are about environmental justice also are being fully executed. I think it’s incumbent upon all of us to do that and not just rely on this as legislation that was passed and will now address climate. It actually doesn’t do that without full participation of the American worker, the American consumer.