We all know that climate tech startups, especially hard tech, cross multiple valleys of death and therefore need not only more capital, but different types of financing to scale. In the diversification of your startup’s capital stack, project finance can be an invaluable tool.

At its most basic, project finance is the financing of a project based on its projected cash flows, rather than the balance sheet of its sponsors. Project finance has been used for validated technologies such as wind and solar, but we’re beginning to see new types of proven technologies leverage project finance as they scale.

Who better to tell us about these developments than the startups who have learned to leverage this tool through trial and error? Our program in New York, The Clean Fight, hosted a webinar with the founders of Sealed, Kelvin (formerly Radiator Labs), and Perl Street to hear their stories, critical advice, and lessons learned from leveraging project finance to deploy solutions and scale their businesses. Here are five major takeaways:

1. Determine if and when project finance is suitable for your company

When thinking about pursuing project finance, it’s important to consider your solution’s product market fit and the degree of risk your technology bears.

Andy Frank, President and Founder of Sealed, shared that a startup should think about the tiers of assumptions being made in product market fit and in being successful. If you’re trying to demonstrate that a new technology is viable, project finance is probably not the right vehicle because that’s the wrong kind of risk. Equity investments and government grants are more suitable for financing pure technology risks. However, once you get to the stage of deployment risks and performance risk, project finance may start to make sense.

To sum up Andy’s advice: “Use as little equity capital as you need to deploy projects. Use project finance and debt to fund actual projects in your field, and use any corporate equity capital you raise to fund R&D, growth, and overhead of the business.”

2. Figure out where project finance is best put to work

Once you establish that you’re ready for project financing, set about determining the best use case for these funds. Assess a prominent need or hurdle to overcome in your project’s execution and think creatively about the path to take when deploying these funds.

Kelvin used their project finance loan from NYCEEC to cover the upfront cost of installations for a sizeable project with NYSERDA:

“We had this portion of the project that was going to be paid by NYSERDA at the end of the project, which wasn’t a fixed term so we needed the cash upfront,” says Dr. Marshall Cox, CEO and Co-Founder of Kelvin. “We talked to NYCEEC and they were able to give us a large pay-out that would ultimately get reimbursed by NYSERDA. We had a small interest fee per month until then. That let us pay for everything; we bought all the systems and installed them. We were able to charge the customer far less because it was subsidized, which was essential because we were so early-stage.”

Dr. Cox also warned that: “You really have to make sure you’re ready for it before you do it. If we tried to sell this project 6 months ago and it only worked on a razor thin low-interest rate margin, we would have to abandon it now. So you have to work hard to make sure it’s flexible for different interest rates.”

3. Explore how project finance can shape your business model and offerings

In addition to working out how to deploy project finance, it is worthwhile taking a step back to determine how project finance could shape your business model, and how it might help to strategically mitigate risk.

For example, Sealed leverages project finance to offer zero upfront costs to customers: “The story of Sealed’s growth is the story of our project finance strategy”, says Andy Frank. “We coordinate with local contractors to get a specific project installed, we provide the capital for that installation, and get paid back over time from the overall energy reduction of the project. This addresses the upfront cost issue and builds trust with the customer.”

Tooraj Arvajeh, CEO and Co-Founder of Perl Street, also noted that structuring your startup as a high-credit standalone entity can make it easier to get financing for your projects. This means creating a separate company to own your assets, which reduces the risk for lenders. By doing this, the borrower that owns the assets is seen as a separate and independent entity, making it more likely for lenders to provide financing.

4. Manage your costs well

Effective cost management is also fundamental to de-risking project finance. This can include lowering fixed-costs.

“The project finance process is lengthy and expensive”, says Tooraj Arvajeh. “Startups need to be careful here because if they build up too much capacity in-house themselves, then they are racking up a lot of fixed costs. What that does is move away the break-even point for these projects, which makes the financing harder.”

There are a number of underlying costs that will surface during the execution of any given project. Lofty legal fees are an example of a significant cost that must be appropriately budgeted when attempting to get debt facilities in place for a new deal.

Andy Frank shares that, “Going down the project finance path is not something you should take lightly. There are a lot of costs, both hard and soft, in getting it done. You should do your diligence with your lenders to understand what those costs are going to be. And very importantly, align with your equity investors or other sources of capital.”

5. Diversify your capital stack

Exploring non-dilutive funding options, such as project finance, is a great way to diversify your capital stack, and there are plenty of other resources that can open the door to alternative sources of funding.

Dr. Cox recommends government programs such as those offered by the DOE and NSF. There’s also GSA Green Proving Grounds for solution deployment in federal buildings, and larger grants like Phase 1 and Phase 2 SBIRs that can fund hardware companies for years. Kelvin received a total of $1M non-dilutive funding over 4 years from the SBIR.

Great resources are also coming out of the Inflation Reduction Act (IRA), which in part provides increased incentives for technologies such as heat pumps and other energy storage solutions, with a focus on low-to-middle income communities. Yet, it’s important for startups to deeply evaluate the most sustainable approach to capitalizing on IRA incentives for the longevity of their businesses.

Andy Frank warns, “While the IRA will be an accelerant, do not build your business around any specific incentive program because you will probably go out of business once that incentive money runs out. Even though the IRA is by far the biggest federal injection of cash into the climate tech market that we’ve ever seen, it’s probably going to run out faster than you think.”

Frank adds: “Specifically around project finance, there are some interesting things to come out of the IRA: The Loan Programs Office has even more fuel on their fire. Most early stage companies won’t qualify for that because you need to ask for enough money to make it worth everyone’s while. But what also got passed is a $27B greenhouse gas reduction fund, which some people call a federal green bank. In practice, it’s going to be funding regional and state green banks, so there will be more green bank money. This is both a big opportunity for the early stage market but also a reason for us to be engaged in defining what the goals of those banks will be.”

Project finance can be a valuable tool for climate tech startups looking to scale their businesses. However, it is important to carefully consider if it’s suitable for your company and at what stage in your product’s development it makes sense to pursue it. It’s also crucial to figure out the best use case for these funds and how that could impact your business model and offerings. Effective cost management and risk mitigation strategies are also essential when utilizing project finance. By learning from the experiences and insights of climate tech founders who have successfully navigated project finance, you too can leverage this financing tool to deploy solutions and scale your business.

Sign up for more insights and program updates from The Clean Fight here

If your interest is piqued, you can watch the full webinar with the founders of Sealed, Perl Street and Kelvin, moderated by The Clean Fight’s director of partnerships, Taylor Rowe.

Written by Semira Rose, Partnerships Officer at The Clean Fight.

Michael Burz, Founder and CEO of Enzinc

Enzinc is leading the charge in the pursuit of better, more sustainable battery technology. Through strategic use of public funds, the company is breaking through the limitations that have held back the use of zinc as a powerful and rechargeable battery material. What makes their innovation unique is that zinc is not only safe and nontoxic, but it is also fully recyclable and affordable for everyone. By prioritizing both innovation and accessibility, Enzinc is helping to pave the way towards a cleaner, brighter future for all.

Private v. Public

As the clean energy industry continues to grow, entrepreneurs require more funding than ever to transform their groundbreaking ideas into reality. Though initial seed investment from private investors is commonly sought after, unproven technologies and startups at an early stage are often deemed too risky by these investors. This lack of funding has hindered the progress of clean tech innovation, prompting the California Energy Commission (CEC) to establish the Electric Program Investment Charge (EPIC) program. Utilizing EPIC funds, the CEC has created an energy innovation pipeline that includes funding and programming to minimize the risks associated with new technologies and to bring clean energy solutions from the laboratory to the market.

Michael Burz, the Founder and CEO of Enzinc, a battery startup based in the Bay Area, never thought that an ARPA-E award to work with the U.S. Naval Research Laboratories (USNRL) would set him on a journey through EPIC’s burgeoning energy innovation pipeline. Several years later, Enzinc has received four out of five of California Energy Commission’s (CEC) Energy Program Investment Charge (EPIC) grants.

These include the CalSEED Concept Award for US$150,000, the CalSEED Prototype Award for US$450,000, a CalTestBed voucher worth US$292,000, and US$1.8 million from the CEC’s BRIDGE program to build its pilot line. Enzinc is now ready to apply for the final grant, RAMP, which will enable them to achieve low-rate initial production.

Enzinc’s remarkable success in leveraging the CEC’s public funding pipeline to develop their zinc-based batteries can serve as a blueprint for other startups looking to follow in their footsteps. During an interview last month, we spoke with Burz to learn how Enzinc navigated the public funding sphere, and we’ve distilled his valuable insights into 5 essential pieces of advice for early-stage cleantech entrepreneurs embarking on their own journey through EPIC’s pipeline of funding.

EPIC Pipeline

Funding for the EPIC program comes from ratepayers, or anyone who pays an electric bill in California. By implementing a tiny charge on monthly bills, the CEC has accumulated funds that can be used to improve the California electric system. This could mean investing in innovative technologies like Enzinc’s new battery, or educating people on how to better manage their energy usage. The result is a cleaner, more efficient energy system that benefits everyone.

Advice #1: Get Started with Early-Stage Programs and Grants

Enzinc, like many startups, struggled to secure investment from private sources in the early stages of developing their novel battery technology. However, Burz found success after enrolling in CleanTech Open (CTO), the world’s largest accelerator program. It was through CTO that they discovered the CalSEED initiative and applied twice before being accepted into the 2019 cohort.

“When we first applied to CalSEED I don’t think that our business plan was fully developed, we were a bit too early, ” said Burz. “That kind of feedback helped us formulate a better business plan rather than just focus on the technical aspects of our innovation, which I think helped us get into the 2019 cohort.”

CalSEED, the first program in the EPIC funding pipeline, offers non-dilutive grants of up to US$600k for clean energy concepts. Enzinc’s participation in both CTO and CalSEED provided them with a platform to work out the complexities of their business model, while also gaining valuable insights, mentorship, and connections from energy innovation clusters and networks.

Advice #2: Public Funding = Credibility

“Luckily, we did get angel funding at the same time that we got CalSEED funding. The attractiveness of course, was that with the CalSEED funding, it’s non-dilutive which of course helped a lot in our pitch to angel investors,” said Burz.

When a business undergoes the long process of applying for public funding it not only exhibits their determination and diligence but also endows them with a level of reliability and credibility that is highly appealing to private investors.

“We have successfully completed four out of the five stages and have used each accomplishment to gain investment and show progress,” said Burz. “The fact that we have received competitive awards from the California Energy Commission adds credibility and validation to potential investors, as it demonstrates that we have passed a rigorous evaluation process and reduces investment risk.”

Advice #3: Rinse and Repeat

To navigate the EPIC pipeline, it’s essential to understand the framework and requirements of the application process. Although you can’t copy and paste from one application to another, you can utilize your company’s narrative, technology, and funding goals to streamline the process. Instead of reinventing the wheel each time, save your templates and build from there to make the application process easier and more efficient.

Advice #4: Get Accounting and Administrative Help

While it might seem like investing in more engineers, scientists, programmers, etc., may be the best decision, in hindsight Enzinc revealed that they should have hired a program manager earlier to help with administrative and accounting tasks.

“After winning BRIDGE, we recognized the need for a program manager to help us navigate the administrative requirements that come with receiving funding from a large government body. As a small company, we were not accustomed to dealing with such paperwork-heavy processes, but we learned from our previous experience with the ARPA-E program. Compared to that, the CEC’s administrative process is less burdensome, but still requires careful attention. The program manager has been instrumental in simplifying these tasks, freeing up valuable executive time to focus on other priorities.”

Advice #5: Tap into the Ecosystem

Enzinc is a prime example of how powerful the EPIC pipeline and ecosystem can be. Thanks to the support and guidance of the CEC, they were able to create an Industry Advisory Group (IAG) that includes 14 companies – several of them multibillion-dollar global energy leaders – with a keen interest in Enzinc’s battery material. This kind of credibility is invaluable and could be the key to taking our business to the next level.

Enzinc’s Technology

Enzinc is not just a master of securing public funding, they are also revolutionizing the world of batteries with their innovative approach. Their secret weapon: zinc – a plentiful and low-cost material that has been largely overlooked by the battery industry.

For years, zinc has been a difficult material to use in batteries due to the formation of dendrites, which are like sharp, short stalactites that can damage the battery and reduce its lifespan. However, Enzinc is leveraging the USNRL’s work to create a zinc microsponge that forms unimpeded pathways for a consistent flow of electrons. This breakthrough means that zinc can finally be used as a powerful and rechargeable battery material, without the limitations of pastes or slurries.

Enzinc’s mobility and stationary batteries made with zinc boast the high energy levels of lithium, the durability and wide temperature range of lead acid, and none of the fire hazards or supply chain limitations associated with those materials. What’s more, Enzinc’s zinc batteries can be produced by lead-acid manufacturers, allowing those companies to compete with lithium battery makers at a fraction of the cost of building new lithium battery factories.

Enzinc’s Future is Electric

Enzinc has three significant projects in progress that they aim to complete by the end of 2023. The first is an electric mobility battery, and the second is a stationary energy storage battery, both of which they are developing in collaboration with industrial partners. The third project aligns with BRIDGE’s philosophy and involves constructing a pilot production line for anode manufacturing. “Currently, we are manually building these anodes, but to bring them into full-scale production, we must automate the process, ” said Burz. “Therefore, we will utilize the funding provided by BRIDGE to build out a 3000 square foot facility with an automated production line. Our goal is to demonstrate the ability to manufacture 1000 anodes per day by the end of 2023, before ramping to full rate production of 1000 per hour by the end of 2024.”

“It’s truly amazing to witness the transformation of our battery technology, from mere PowerPoint slides to a tangible, operational reality. It’s thrilling to see our concept become a practical solution,” said Burz. “Equally exciting is the fact that our testing has confirmed that our technology offers a viable alternative to both lead acid and lithium batteries. This is fantastic news for California, as it provides a more diverse range of options for energy storage. What’s even better is that zinc, the primary component of our batteries, is abundantly available worldwide, eliminating any potential supply chain complications. Plus, our battery is incredibly safe, so you can rest easy knowing that we’ve got you covered on every front.”

About CalSEED

CalSEED is funded through the CEC’s EPIC program which invests approximately US$130 million annually for innovative clean energy technologies and approaches benefiting the ratepayers of California’s three largest electric investor-owned utilities. Through the CalSEED initiative US$48M will be deployed to back over 150 startups in coming years CalSEED is the flagship program of New Energy Nexus.

About New Energy Nexus

New Energy Nexus is the world’s leading ecosystem of funds and accelerators supporting diverse clean energy entrepreneurs to thrive. NEX started in Silicon Valley and now runs programs in Australia, China, India, Indonesia, Nigeria, the Philippines, Singapore, Thailand, Vietnam, Uganda, and the USA. Since 2004, NEX has accelerated over 600 clean energy startups, supported over 3000 entrepreneurs, and mobilized over US$1.5 billion in investment. NEX is also one of three organizations delivering the US Department of Energy’s Lithium Bridge project to accelerate the growth of America’s lithium battery supply chain and industry. For more information, please visit newenergynexus.com

Check out the CalSEED and CalTestBed websites to learn about the programs and sign up for the mailing list to stay up-to-date on funding and voucher opportunities.

Woman in rural Uganda using a solar-powered lamp

International Women’s Day is a time to celebrate the achievements of women and to recognize the challenges that women continue to face around the world. In Uganda, where more than 80 percent of the population lives in rural areas, the lack of access to energy is a major impediment to women’s economic and social empowerment.

Energy poverty in Uganda disproportionately affects women, who often spend hours each day collecting firewood, cooking on open fires, and using kerosene lamps for lighting. This not only puts their health at risk due to exposure to smoke and other pollutants, but it also limits their ability to participate in education, earn a living, and engage in other productive activities.

However, there are efforts underway to improve access to energy in Uganda, particularly through the use of renewable energy sources such as solar power. Distributed solar energy is particularly well-suited to rural areas because it is easy to install, low-maintenance, and does not require a connection to the national power grid. In Uganda, New Energy Nexus supports last mile clean energy entrepreneurs to deliver low cost and high quality entry-level clean energy technologies.

ENVENTURE helps women in northern Uganda to learn how to start a clean energy business.

Supporting woman entrepreneurs in Uganda’s last mile communities.

The majority of entrepreneurs we support at New Energy Nexus Uganda are women and 70% of the jobs created by our entrepreneurs are taken by women. Ultimately, the majority of these women have testified that their quality of live has improved due to access and use of these high-quality energy products in their households,, and those involved in Village Savings and Loan Schemes (VSLS) have increased their financial savings due to lower energy costs.

New Energy Nexus also teaches women entrepreneurs recordkeeping skills as part of its curriculum. We created the ENVision platform, an open-source web-based application to track inventory, sales, and orders in 2G and Edge networks for low-literate sales agents and micro-entrepreneurs. This helps women entrepreneurs to manage their sales and performance more effectively, and allows us to receive real-time product updates to help monitor and measure success. This also ensures that entrepreneurs don’t lose time and information on their businesses through cloud-based storage.

We put justice, equity, diversity, and inclusion at the heart of our work.

Efforts to improve access to energy in Uganda are still in their early stages, but the progress that has been made is encouraging. As we celebrate International Women’s Day, let us recognize the important role that access to energy plays in women’s empowerment and support the organizations and initiatives that are working to improve energy access in Uganda and the Global South. By doing so, we can help to create a more just, equitable and inclusive world for women and girls everywhere which is possible if we work with diverse clean energy entrepreneurs with a focus on women.

New Energy Nexus Indonesia officially announces 10 startups that will join the Bali Women Climate Entrepreneur Project. This acceleration and incubation program offers four months of tailored business support for women-led climate entrepreneurs in Bali to enhance their business. With this program, New Energy Nexus Indonesia aims to close the gender gap and increase women’s participation in  clean energy and climate solutions sectors, helping to improve women’s response and adaptation to climate change.

The Bali Women Climate Entrepreneur Project is supported by the ClimateWorks Foundation and is part of the Bali Climate and Development Initiative (initiated by New Energy Nexus Indonesia, WRI Indonesia, and IESR). The project runs in collaboration with Pratisara Bumi Foundation.

“There are undeniably still many challenges women have to face in the climate space, but we hope that these 10 incredible startups with females in leadership positions will inspire the next generation of women to begin their journey toward making a difference.” Rainy Putri, Program Manager at New Energy Nexus Indonesia and  Co-Leader of this project.

Women are paving the way to become leaders in their communities. From early ideas to later-stage, here are the 10 startups selected to be part of the project.

Griya Luhu

Aims to change people’s behaviour and awareness of sustainable waste management using user-friendly and straightforward mobile applications to help improve waste segregation at home. Learn more about Griya Luhu.

Prawita Tasya, Executive Director & Co-founder, Biorock Indonesia

Biorock Indonesia

Engages with local communities and the government to protect and restore coral reefs so these underwater ecosystems can thrive, while also  providing livelihood and economic benefits to  local communities. Learn more about Biorock Indonesia.

PT. Kolaborasi Bumi Pertiwi

Aims to replace coal with “imitation” coal that contains more heat calories than real coal.

GO EV

Offers a digital platform to rent electric vehicles in Bali at affordable prices.

Go Sustainable

Aims to increase public awareness of environmental impact  from food production by encouraging restaurants to add a  ‘climatarian’ menu (ingredients used must be plant-based, locally sourced, unprocessed, minimally packaged, and organic).

Bendega

Aims to empower coastal communities and fishers with knowledge, facilitation, training, and support with IT tools to adopt green-blue habits.

Nadea Nabilla, Co-founder at Azura (right) with local fisherfolk in Bali.

“Seeing the environmental damage worsen especially in coastal areas like Bali, we aim to empower coastal communities and fishers with knowledge, facilitation, training, and support with IT tools to adopt green-blue habits. As the only female leader among my colleagues, I truly believe that an inclusive environment, as well as being surrounded by supportive male allies can significantly improve our business and create a greater impact for the community.” Nungky Adzani, CMO at Bendega. Learn more about Bendega.

Tri Hita Consulting

Encourages and supports their clients to create an impact through sustainable business practices, deployment of green technology, policies to promote the energy transition, and sustainable investment in Southeast Asia’s emerging markets. .

360E.io

Aims to herald a new era of green investments with an intuitive and easy-to-use app that lets you perform all green investment transactions on the go. Learn more about 360E.io.

Gumitri

Acts as an intermediary between organic rice farmers and the market to support organic farming practices and food security in local villages.

Azura Indonesia

Delivers a solution for the coastal community with their MantaOne electric long-tail boat engine – offsetting 345 kilograms  of carbon footprint per month. Learn more about Azura Indonesia.

“Bali is one of the most popular tourist destinations in Indonesia. Considering its potential and emerging opportunities in climate sectors, such as sustainable tourism, we need to make sure that female talents in the sectors are able to fully participate in the shift toward sustainable tourism in Bali.” Diyanto Imam, Program Director, New Energy Nexus Indonesia.

In 2018, Indonesian women made up only 12% of all STEM graduates. In the global energy industry, only 11% of energy startup founders are women – these statistics need to change. As a pioneering clean energy and climate innovation ecosystem builder, New Energy Nexus Indonesia is breaking the status quo. The Bali Women Climate Entrepreneur Project is only the beginning of our efforts to disrupt the rooted beliefs that the clean energy and climate tech sectors are the ‘boys club’.

About New Energy Nexus Indonesia

New Energy Nexus is the world’s leading ecosystem of funds and accelerators supporting diverse clean energy entrepreneurs, from emerging tech through to clean energy deployment and adoption. In Indonesia, New Energy Nexus works to support the development of ecosystems that can support the needs of innovators, startups, entrepreneurs, and other stakeholders in the clean energy and climate solutions sectors.

Learn more: New Energy Nexus Indonesia.