The managing, trading, and financing of more and more distributed renewable projects, such as rooftop solar and EV charging stations, is becoming exponentially more complicated. Current energy systems and financing models are increasingly no longer fit for purpose, but this is creating new opportunities for climate fintech startups.

Blockchain technology, for instance, can help solve some of these problems given its transparency and immutability. Power grids, energy providers, and end users can use distributed ledgers via blockchain to track electricity generation and transaction records without a centralized organization in the middle. Financial institutions can also use blockchain to verify the operational data of the distributed renewable energy projects they have financed and decide their credit line, while minimizing the risks of operating miss and fraud.

So, how can startups best exploit this opportunity?

To answer this question, we first need to look at the ecosystem. Take a rooftop solar project, for example: there are many stakeholders in the value chain, including project owner, equipment supplier, financiers, and other service providers with different bargaining powers. As the end users, project owners usually have the greatest bargaining powers, but for distributed project owners, their bargaining powers aren’t as great as utility scale project owners.

Major equipment manufacturers have strong bargaining power as well, since the market is now dominated by just a few players. Among all solar equipment, the most relevant and important one that connects the physical world and the digital world is the inverter, a device that converts DC (direct current) to AC (alternating current), while recording electricity generation data. Top inverter manufacturers, such as Huawei and Sungrow, controlled 44% of the market share in 2021. Therefore, it’s natural for inverter manufacturers to develop blockchain solutions for downstream clients. Financial institutions are also key stakeholders in the value chain. However, they lack the adequate industry resources and knowhow, and rely on industry players as intermediaries, usually equipment suppliers, to develop businesses.

Given this competition landscape, what are the implications for climate fintech startups?

1. Startups need to define their value proposition in competing and cooperating with dominant equipment suppliers.

Even though inverter manufacturers might have some aspiration to develop blockchain technology by themselves, startups that focus on blockchain still hold a technological comparative advantage. Expanding their business to cover inverter suppliers is easier than inverter companies starting from zero. If startups can define themselves as an enabler and help inverter manufacturers complement their current business lines, they may avoid direct competition with these dominant equipment suppliers.

Dipole uses blockchain to make renewable energy more easily accessible across in Asia.

2. Target small and medium-size markets as an alternative strategy.

These markets are usually served by scattered small players who don’t have the right technology, abundant capital, or enough incentive to develop blockchain applications on their own. This gap could be filled by climate fintech startups. For instance, Dipole, a startup in New Energy Nexus China’s Excel Cohort, develops blockchain technologies and applications for distributed renewable energy projects, and has secured an investment from Jolywood, a medium-size solar equipment manufacturer. This has enabled this startup to access its investor’s market.

However, those with the most need sometimes cannot afford expensive technological solutions. The key for startups is to develop standardized products that are cost-efficient to attract small-size clients.

3. Partnering with financial institutions could be a long-term winning strategy for climate fintech startups.

Ready-to-use blockchain-based products from climate fintech startups will allow banks to enhance their due diligence and credit management processes. Compared with taking a one-time deal with assembly or inverter companies, long-term partnership with banks and other financial institutions is considered a superior choice. New Energy Nexus is actively helping climate finch startups, partner with leading green banks, such as China Industrial Bank.

4. Startups can leverage their position in other more fundamental and influential public blockchain projects.

Proactively joining public blockchain projects like the state backed Bit Factory project will entrench startups’ positions. Startups, especially for those at the scaling stage, should  make themselves the base (or a brick of the base) of the whole industry supply chain, instead of narrowing down to a single point. For example, by participating in the Bit Factory project, Rivtower, another startup supported by New Energy Nexus China, was able to attract investment from China Merchants Bank, and further extended its business into other climate finance projects.

Yafu Zhao is the Climate Fintech Lead at New Energy Nexus and is based in Shanghai, China.

CalSEED’s Prototype Award winners represent the next generation of clean tech entrepreneurs… 

The seven newest awardees – Startups Tolo, ALD Solutions, RePurpose, Gridware, Hago Energetics, Parthian Energy, and Leap Photovoltaics – were selected this year to receive CalSEED’s Prototype award of $450,000 to continue to develop their breakthrough innovations for batteries, storage, energy efficiency, and renewable generation.

Not only are they solving critical energy issues in California and beyond, but they are also positioning themselves to take advantage of the Inflation Reduction Act. As one the most significant climate related bill in US history, this could be a game changer for clean energy startups across the country.

Find out what these early stage startups think about the IRA.

RePurpose Energy makes lithium ion batteries a sustainable solution.

REPURPOSE ENERGY

RePurpose Energy is creating a circular economy for EV batteries by creating reliable, low-cost “second-life” energy storage systems. Their turnkey solution involves testing, reassembling and redeploying used electric vehicle batteries for use as storage for solar energy. The repurposing of used EV batteries safely gives them 7-10 years in “second-life” as energy storage systems at around half the cost of new battery alternatives.

“In our view, the IRA is the single most important piece of climate legislation in US history, and it presents a myriad of opportunities for clean tech startups such as RePurpose Energy. Especially exciting are the investment and production tax credits. These incentives will reduce the capital costs of scaling our EV battery repurposing facilities, enhance the profitability of our second-life battery products, and augment our customers’ demand for solar PV + second-life battery systems. In addition, the bill will accelerate EV adoption, which will in turn increase available supplies of retired EV batteries.“ Joseph Lacap, CTO Repurpose Energy

Founders Thomas Karagianes (left) and Iain McClatchie (right) at TOLO

TOLO

Tolo is making in-person inspection of utility infrastructure a thing of the past with their remote inspection platform. Tolo pairs state-of-the-art cameras with unmanned aerial

vehicles (UAVs) and collects thousands of detailed photos from every angle of a utility tower, capturing images at greater detail than what is visible to an inspector in the field at a lower cost. Inspectors can view these images through a novel software application custom-built for utility inspection which provides them  with advanced tools and greater inspection freedom and flexibility than field inspection, resulting in more accurate, shareable, monitorable inspections that drive better maintenance decisions and enhanced grid reliability. Remote inspection creates unique benefits impossible through traditional approaches, like inspection review by regulators, machine learning-assisted inspection, and year-over-year comparison.

“Tolo applauds the Inflation Reduction Act as a much-needed first step in the fight against climate change and a long-overdue investment in modernizing our aging energy infrastructure. Working in utility inspection, we know first hand the damage that inadequately maintained infrastructure can cause, and we look forward to helping support the newly created transmission infrastructure resulting from this bill. Many of the most innovative climate change solutions in clean energy have come from our startup peers, and we hope the IRA will help provide the investment these technologies and companies need to shine.” Thomas Karagianes, CEO Tolo

Wilson Hago, CEO at Hago Energetics looking down the line of cattle.

HAGO ENERGETICS

Hago Energetics is working to convert agricultural waste from dairy farms in the Central Valley of California into green hydrogen that can be used for long-haul trucking and industrial applications. Their technology works by processing biogas generated from cow manure waste in a novel chemical reactor to ultimately convert the biogas into hydrogen. Using just renewable energy as well as waste wood as a catalyst for this chemical conversion, makes their  innovative process distinctly unique.

“It is encouraging to see the Federal government incentivize the production of clean hydrogen with the recently passed Inflation Reduction Act of 2022. The IRA allows us to obtain a Production Tax Credit of $3 per kg of hydrogen or an Investment Tax Credit of 30% given our expected negative carbon footprint. These incentives will enable us to attract investors quicker to our projects, for a faster deployment of our technology.” Wilson Hago, CEO Hago Energetics

Mahshid Roumi, Co-founder and Vice President at Parthian Energy.

PARTHIAN ENERGY

Parthian Energy is dedicated to reducing the cost of battery manufacturing with an intelligent screening technology.

The “Parthian Electromagnetic Sensor (PES”) can detect internal defects in lithium-ion battery cells, which enhances safety and enables higher energy density cells to be deployed into EVs and grid storage with much less risk of lithium-ion batteries overheating. With additional CalSEED prototype funding they will develop a scalable prototype, demonstrate the feasibility of reducing the duration and cost of battery quality control, as well as perform pilot testing on a battery cell manufacturing line.

“A large portion of the most valuable businesses in history started as highly technical startups, at the right place and right time. The IRA can help provide the right conditions for the exponential growth of several key industrial sectors, provided that a meaningful portion of the funding reaches small businesses, who are developing groundbreaking new technologies. No amount of funding is enough, if the government stays too conservative and keeps feeding the incremental growth of the traditional technologies by the old businesses, who have not been able to invent new markets for decades.” – Mahshid Roumi, Co-founder and Vice President Parthian Energy

David Needle Berneyman, Founder and CEO at Leap PV in his lab.

LEAP PHOTOVOLTAICS

Leap Photovoltaics is developing a new process to manufacture solar cells. Their unique approach allows crystalline silicon solar cells to be built without wafers, instead directly depositing a layer of silicon microparticles to a surface that absorbs sunlight and converts it to electricity, achieving the same performance and reliability as traditional solar cells at half the cost using entirely local supply chains.

“The passing of the IRA also could not be more timely. The IRA provides strong incentives to manufacture not only solar modules, but also upstream components like solar cells here in the US. Leap is uniquely poised to take advantage of these incentives by linking the parts of the supply chain that already exist in the US and doing so with a manufacturing process that requires dramatically lower capex to bring online and dramatically lower cost in operation.

“Domestic ratepayers who now have easier access to demand-side subsidies through the modifications to the solar ITC and new PTC will also be able to reap the economic benefits of a domestic end-to-end supply chain, while also knowing that all the components in their solar panel were produced to the highest product, labor, and environmental standards.” David Berney Needleman, Founder and CEO Leap PV

Gridware’s wildfire prevention technology powers a grid that is smarter and more reliable.

GRIDWARE

Gridware is working to create a future where suburban wildfires are a thing of the past. Using multi-sensory perception and edge AI, their wildfire prevention technology continuously monitors a grid that is smarter and more reliable than ever before. The system detects faults in the grid early and in real-time to enable inspectors to schedule timely repairs and rapidly respond to ignitions so disastrous wildfires can be avoided. With the CalSEED Prototype award, Gridware will advance analytical tool development and continue to improve fire prevention capabilities.

“Gridware already has established partnerships with co-operative utilities in California and Utah. Our products are well positioned to benefit from section 60201 of the IRA, as they enable these utilities to both adapt and mitigate against the negative impacts of climate change on their critical infrastructure, especially as it relates to wildfire ignition.” Timothy Barat, Co-founder & CEO Gridware

ALD TECHNICAL  SOLUTIONS

ALD Wire Wrap offers innovative advanced composite material and solutions to accelerate penetration of renewable and clean energies.

As our grid infrastructure is aging and becoming more stressed with new electricity generation sources, women-owned, clean-tech company ALD Technical Solutions is commercializing a patented novel technology that will structurally strengthen grid lines by using advanced hybrid composite materials.

ALD’s Composite WiRe Wrap increases ampacity, the power capacity of existing grid lines, and extends lifespan while also addressing thermal sagging, with NO downtime. This is a key requirement for achieving safe, resilient and reliable 100% renewable energy goals.

Utilities are building new lines to increase power capacity of grid lines and placing power lines underground to mitigate utility caused wildfires. Current approach is extremely expensive, and it takes many years. It would cost well over $100 billion to place across PG&E’s entire territory underground. At the current pace, moving all of California’s utility lines underground would take 1,000 years, according to the California Public Utilities Commission. ALD Technical Solutions’ Composite WiRe Wrap is a patented, lightweight, high strength, fast, easy to install, long lasting and cost-effective composite reinforcement system. This technology can withstand high temperatures and can be installed and cured in-place around existing power lines by our robotic installer.

“[The] Inflation Reduction Act will not only drive the acceleration of clean energy growth but also it will boost the economy through clean energy and green jobs. Like the internet boom in the late 1990’s, [the] IRA will  accelerate adaptation of clean energy and green jobs.” Davoud Zamani, CEO & Co-Founder ALD Technical  Solutions

About CalSEED

The CalSEED initiative is the first program in a robust energy innovation pipeline the California Energy Commision (CEC) has created with the Electric Program Investment Charge (EPIC) program. CalSEED provides two levels of funding: a Concept Award of $150,000 and a Prototype Award of $450,000. Each year, winners of CalSEED’s Concept Awards are eligible to compete for a Prototype Award in the annual Business Plan Competition put on in collaboration with national incubator CleanTech Open (CTO). Last fall, 23 CalSEED Concept Awardees participated in CTO, with 7 startups standing out to the judges due to their innovative efforts and solutions for batteries, storage, energy efficiency and renewable generation – areas that are critical to meeting California’s ambitious climate goals.

…because venture capital alone won’t get us out of the climate crisis.

Earlier this year, LACI announced a $6 Million Cleantech Debt Fund to provide loans of up to US$50,000 to help early stage startups serve their first customers, and bridge loans of US$250,000 for later stage startups. To make the financing more accessible to traditionally underserved populations, LACI is not requiring personal collateral or personal credit scores to underwrite the loans. This is a great example of building more equity into the clean energy startup ecosystem.

We’re proud to partner with LACI to grow this innovative debt facility as it created an entirely new pathway to debt capital for Nexus’ early stage portfolio companies in the US.

But it’s just one of several alternative financing vehicles that New Energy Nexus supports around the world, and proof that venture capital is not the only source of capital for climate entrepreneurs.

1. Affordable loans for community-based organizations

Bena and her sister Mystica using the solar light at home for their homework in Arua, Uganda

ENVenture, powered by New Energy Nexus, also provides affordable loans requiring no collateral for local Community Based Organizations in Uganda to start clean energy businesses. Banks typically do not lend to these entrepreneurs, given their low risk tolerance, and collateral requirements. These businesses are also not suitable for equity financing, thus they typically rely on grants and philanthropy to run their businesses. However, debt is appropriate because a loan in of itself, teaches financial literacy – the more timely repayment are, the higher the “credit” score, which gives the missing proof of credit worthiness for institutional lenders. The impact? 154 Community Based Organizations were able to launch clean energy businesses, reaching over 100,000 people with clean energy. Access to affordable loans = climate impact.

2. Bonds that support small distributed energy projects

In India, Nexus also invested $5 Million in cKers Finance’s Sustainable Energy Bond issuance for India. These bonds were a new instrument to allow impact investors to finance sustainable energy assets exclusively, as well as track the impact of their capital ongoing. The proceeds of the bonds scale-up decentralized solar segments, such as pay-as-you-go models for residential and commercial solar systems, solar pumps, and off-grid solar for micro-mini-grids. This financing also catalyzed the creation of over 45 megawatts of distributed solar energy assets across 100+ locations in India by being able to do smaller-ticket sizes, a key to inclusivity.

Supported by New Energy Nexus India, Solar Infra has installed more than 2.5MW of solar products and has reduced ~1.8 tons of GHGs which is equivalent to 1.2 tons of Co2 over the last three years.

3. Mobilizing retail investors in the energy transition

Also in India, New Energy Nexus India, a partnership with the Climate Collective, has launched Climate Seeders Club, which allows retail investors to invest small check sizes (starting at 2 Lakh INR / around US$2500) in Indian climate tech startups. By focusing on retail investors, Indian climate and energy startups get unique access to NRI diaspora investors (non-resident Indians) that may not be able to write large check sizes, but are interested in investing in homeland startups.

So how can investors continue to support local clean energy businesses?

1. Catalyze philanthropy

Low risk investors, such as philanthropic capital, can channel money in designing programs like LACI’s Cleantech Debt Fund to grow businesses. Echoing Green and Kiva both have loan facilities that have 0% interest rates to channel philanthropic dollars that support business growth.

2. Seek government partnerships

Governments have a vested interest in small business. Many have programs designed to support small business growth. International development agencies can also work with local nonprofit organizations to channel and create debt funds that are designed with impact in mind.

3. Create instruments to deploy smaller ticket sizes

Retail equity crowdfunding platforms are a great way to democratize investing and allow everyone to participate in supporting the growth of underrepresented founders and their clean energy startups.

Venture capital need not be the be all source of capital for climate entrepreneurs. There are a lot of different financing instruments available, but the availability and scale of capital remains limited.

If you’re a startup considering taking on debt, check out our CFO Christina Borsum’s helpful guide here.

Written by our COO, Aneri Pradhan. 

New Energy Nexus CEO, Danny Kennedy, takes a hands-on look at Azura – a startup in Indonesia opening an ocean of opportunities for marine electrification.

I saw the future last July behind a Circle K near Denpasar in Indonesia. For those of you that have been to Bali any time this century you might know these countless convenience stores. These are fillup shops for the 4 million scooter and moped riders across the island. Not only can you get your expensive gas for your motorbike, but you can also buy all kinds of goodies inside. This includes some crazy coffee boba caramel combo drinks I have not had anywhere else. But I digress.

The future of electrification, behind a Circle K

New Energy Nexus CEO Danny Kennedy at a SWAP station in Bali

The first thing that struck me was the Swap station sitting on the forecourt by the front door. It’s a simple container for batteries to power the growing number of electric scooters in Indonesia. Each Swap station has three bins, two of which have batteries in various states of charge, while the other one is empty. A rider comes in to Circle K to fill up. They take their battery out, put it in the empty bin to charge. This automagically unlocks one of the other two batteries that has 100% charge. They take this “full” battery and put it into their bike, and in less than a minute they’re off to the races!

There are now 400 of these Swap stations in Circle Ks on Bali and Java, and growing. As the electric advantages of motorbike riding become known this company is going to crush it! To reiterate those advantages: e-scooters are better, faster, and cheaper. That’s right they perform better, take off quicker, are clean, quiet and most important cost less to fill and maintain. The Swap story above saves not only time but serious money for the rider.

Enter Azura: the startup electrifying Bali’s fishing craft

So minds blown, my team and I met the company we had come to see inside the Circle K.  Nadea Nabilla and her cofounder,  are electrification entrepreneurs with Azura (and in fact Nadea, just presented her innovation at the One Young World Summit by the Audi Environmental Foundation. These entrepreneurs are taking the same competitive advantage of electric motors to fisherfolk, with product offerings that are better, faster and cheaper than the infernal combustion engines that these folk have used for decades.

The design of the fishing craft is ancient and common across many of the thousands of islands in this archipelago nation. The modern engine was introduced last century and adapted to this design with a long drive shaft to get a propeller into the water over the gunnel. This is the “long tail motor” of many fishing craft, river boats and the like across Asia and Africa. The engine is often a heavy and rusted block of bits that break down a lot. And this connects to an old gas tank that costs a lot to fill.

Not so the electric version!

In Azura’s solution they have taken an off-the-shelf Mitsubishi electric motor. It has similar torque and power specs as the horsepower the engine puts out. It’s small and lightweight. The battery pack required to charge it for 75 miles of boat business fits in a single Pelican case. They can carry this into the compound to charge off the solar panels or older batteries bundled there. No muss no fuss. And the performance is better, faster, and cheaper.

Azura’s secret sauce

Azura’s battery pack case and a widget on the motor.

Azura’s secret sauce is a little widget that fits the electric motor to the propeller shaft. This may not be defensible but their true moat is the first mover advantage in a difficult but enormous market. I mean defensibility when I say moat but this is also to make a pun about Azura’s blue ocean opportunity. Replacing all the shitty engines on boats around Southeast Asia is a many hundred million addressable market and almost no-one is doing it! There is not a lot of blood in the water from cutthroat competition. It might actually be better if there was for Nadea and friends to have a bit of co-opetition to create supply chains and an e-boat ecosystem. For now they are the pioneers offering a better, faster and cheaper service, which should win.

Better and faster are obvious. Silence is golden to fisherfolk. And the process of fitting and fueling with solar is much easier and quicker in the daily routine for fisherfolk. Not to mention the take off speed an electric motor achieves compared to an old putt-putt two stroke! But cheaper it is not upfront. So when I say, these are cheaper it is a “total-cost of ownership” statement. Like many assets in the clean energy transition it comes down to OpEx versus CapEx. This is biz speak for Operating Expense versus Capital Expense.

A solution that pays back in 3 years (at least for now)

Upfront the electric bundle costs a lot – 10 times more than the old motor. As production scales and pieces of the kit get more standardized that cost will drop – like ICE cars and EVs. But for now, it is a lot. Yet over the life of the motor, which has fewer moving parts, needs no oil nor belts and thus little maintenance, it costs less to own and operate. And low to no fuel cost!

They “payback” in about three years. This means the savings make the upfront cost worth it in 36 months. So, what this bundle will need next is finance to speed up adoption. In many categories – like your cell phone – the way we pay for an expensive item is to put it on a monthly or “amortized” schedule. It is also how the car sold to the masses – a modern auto-loan pioneered by General Motors.

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

I expect Nadea and her team will be experimenting soon with financing options. She already has a rental agreement for some boats. And as she scales from 12 systems sold so far to hundreds and thousands and then hundreds of thousands it’ll get easier. The asset class will become better understood. The “performance” of loans and underwriting considerations such as how likely a fisherperson is to default will become known. Competition in debt products will come into the market and more and more boats will go electric!

It was so exciting to see this postcard from the future. Like Chinese cities today where the buses make no noise and spit out no fumes, I know someday soon I’ll be on an island in Asia with no motor noise. May it come soon! Full speed to Azura and their competitors.

Shine on!

Danny Kennedy is CEO of New Energy Nexus

Bonus note: For those of you that think this is more about impact in the lives of the fisherfolk than a decarbonization strategy, think again. These small bite markets for petroleum products (scooters and fishing boats) are one of the last strongholds of growth for big oil. At the end of the day, the climate struggle is about putting fossils out of business. Do you know what the biggest force so far in barrels of oil per day consumption destruction has been in the energy transition? Tesla I hear you say. Perhaps BYD for buses? No. Rikshaws and tuktuks. 

See below for the latest data from BloombergNEF.

The Overlooked Emitter 

The residential water heater – often unsightly and awkwardly installed in garages and closets – is an essential home appliance that is often overlooked when it comes to energy efficiency upgrades. This is despite the fact that gas-powered water heaters are the second largest source of greenhouse gas emissions in California’s building sector. Reaching ambitious greenhouse gas reduction goals will be virtually impossible without reimagining the residential water heater — and CalSEED Concept Awardee ZYD Energy is doing just that.

ZYD Energy’s Technology

The first step in decarbonizing residential water heaters is to replace all gas water heaters currently in use with electric heat pumps. The second — and potentially far more complex — step is to integrate electric heat pumps with the electric grid to ensure electricity from renewable energy sources, e.g. solar and wind, is used to heat water.  This is where ZYD Energy’s innovative LOCUS control technology comes in. LOCUS stands for load optimization control using storage and will enable heat pump water heaters to achieve grid-interactive efficient operations, which reduce customers’ energy bills, maximize renewable energy utilization, and minimize greenhouse gas emissions. ZYD Energy seeks to advance water heater technology through a three prong strategy:

• Integration: using controllable storage configurations to achieve large load flexibility for all heat pump water heater products and system designs, including those not feasible for conventional temperature controls.
• Optimization: using sophisticated computer algorithms to determine operational schedules according to time-dependent electricity supply conditions, including electricity price, demand response signals, renewable energy availability, and electricity carbon intensity.
• Connectivity: using IoT technologies to establish versatile data connection with users, building and grid management.

ZYD Energy’s Pathway to Success

ZYD Energy was founded by Dr. Yanda Zhang after many years of working in energy efficiency and his desire to develop something that could rapidly reduce emissions and energy consumption in the building sector. In 2017, shortly after he conceived LOCUS, Dr. Zhang received a CalSEED Concept award from the California Energy Commission’s EPIC program which supports early-stage clean entrepreneurs with critical seed funding and support. With the CalSEED Concept award he was able to continue to develop LOCUS as well as bring on recent UC Davis graduate Sophia Racke as a Business Development Manager. With Sophia on board, they focused on not only technical development of their product but also understanding the needs of their audience so that they could create a strong value proposition. As Sophia sees it, “Our solution isn’t just optimizing the performance of the heat pump water heaters but also changing the customers perspective to embrace a new paradigm of water heating.”

A key component of the CalSEED program is participating in CleanTech Open (CTO), a national accelerator program aimed at providing early-stage companies with the training and resources they need to launch and grow successful cleantech businesses. Dr. Zhang learned from CTO how to truly understand potential customers, not just focus on the technology,  “CTO encouraged us to conduct a survey with homeowners to understand from their perspective – the why – why do they care? What do they think about water heaters? With that knowledge we were able to develop a product that was oriented around customer-based solutions.”

The HeaterHive by ZYD Energy

ZYD Energy’s main customers are single family homeowners, multifamily building property owners, and building mechanical system designers. For homeowners, “There’s a need for a solution that’s both effective at reducing greenhouse gas emissions from the water heating systems and can also make the transition simple and appealing. By providing customers with additional value, we will make it more exciting and easier for them to adopt new clean energy technologies.”

To address this, ZYD has created an appealing package for single family homes. They’ve combined the LOCUS control technology with a heat pump water heater as well as a unique exterior design that offers home organization and decoration features. “We’re branding the single family package as HeaterHive to provide customers with a refreshing home improvement product and not just another water heater that they’re going to forget about.”

For multifamily buildings, ZYD Energy addresses a different challenge faced by building designers – how to design heat pump based water heating systems to serve multiple dwelling units. This requires a new knowledge of how different equipment and systems can be connected and controlled, as well as take significant efforts and time for the building design and construction industry to familiarize themselves with heat pump water heater based systems in those multifamily buildings. ZYD Energy provides a solution to simplify system design and installation. “The intention is that LOCUS control can function as a central interconnection of the different equipment in the water heating system so building and designing those complicated water heating systems can be simplified by connecting heating and storage equipment through the LOCUS control.”

ZYD Energy’s Next Step

The ZYD Energy team is well on their way to demonstrate the solution, having just received another EPIC Award – Advancing Next-Generation Heating, Cooling and Water Heating Systems – where they will be piloting their LOCUS systems in three low-income multifamily buildings in Northern California. The aim of these projects is to demonstrate the load flexibility for three different types of central heat pump water heating systems in multifamily buildings using ZYD Energy’s LOCUS technology with social and environmental benefits of lowering operating costs, reducing greenhouse gas emissions, improving electricity reliability, and reducing planning uncertainty.

Moving Forward

Dr. Zhang is hopeful that this opportunity will open doors for ZYD Energy to further collaborate with building design firms, expanding their business development opportunities. “I think our success is kind of a testament to California’s drive to achieve a clean energy transition. With support from California research funding like CalSEED or EPIC we have been able to grow our business. It’s also California’s decarbonisation goals that will continue to help support us as more and more areas have to replace their gas appliances with electric ones.”

New regulations covering China’s building sector could open up opportunities for more energy efficiency innovations. The market is ripe for startups to take advantage and accelerate the country’s clean energy transition, writes Yi Luo, a Climate Fintech Program Associate at New Energy Nexus China.

Skyline in Pudong Shanghai

China’s new General Code for Building Energy Efficiency and Renewable Energy Utilization (建筑节能与可再生能源利用通用规范) was formally implemented in April 2022, representing a big shift in the building and construction sector. It requires that all new, expanded and reconstructed buildings, as well as energy-saving renovations of existing buildings, be designed for energy efficiency. Data specifying the building’s energy consumption and carbon emission are also required.

Currently, there are no specific requirements for energy efficiency in the construction of new buildings, and instead only passive saving strategies like natural lighting and heat insulation are prioritized. Currently only energy efficiency disclosure is compulsory in China, but the industry is expected to evolve in the coming years with the expansion of the country’s energy efficiency regulations.

The new regulations introduced in April 2022 will impact the construction industry in three main ways.

Firstly, it covers the whole process of energy saving and renewable energy systems in newly constructed, existing, and reconstructing buildings. Conventional energy saving measures focus only on either material or construction process, but post-construction management will now receive more attention (source).

Secondly, the regulation enforces disclosure of energy consumption and carbon emissions. The Code specifies a comprehensive measurement and supervision standard, especially for buildings over 20,000m2.

Thirdly, there are more requirements for energy saving efficiency, compared to the 2016 energy efficiency code. The average energy saving efficiency in cold regions of the country will exceed 75%, 65% for other areas and 72% for public infrastructure (source, source).

Based on the “double-carbon” vision proposed by President Xi Jinping and the “Fourteenth Five-year Plan”, we estimate that the disclosure requirement is just a start, and compulsory application of energy saving strategies could come out within the next three years. In that time, we expect the industry to really take off.

How will China’s energy efficiency sector grow?

The value of the construction energy saving industry is estimated to reach around CNY 700 billion (USD 104 billion) in 2022 and the operation stage energy saving would be up to CNY 600 billion yuan (USD 89 billion) (source) (source).

Current energy saving solutions mainly cover the use of new energy, energy storage and batteries, and integrated central systems. As markets and technologies mature, the construction energy saving industry will evolve in some interesting ways.

Yan’an East Road Interchange, Shanghai, China (source)

Here are several ways entrepreneurs can take advantage:

1. Cooperate with residential telecommunication companies

Giants in China like Meidi, Huawei, and Xiaomi are all quite proactive in IoT and intelligent home systems. Start-ups with technologies in this area could cooperate with these companies to offer a bundle service. The energy saving solution system could merge as a core part of the intelligent home system. In addition to higher efficiency, another financial benefit are savings on reconstruction and installation costs.

Home telecommunication companies can also help startups access the market. These giants have gathered sound reputation, so cooperation with them also provides a quality endorsement for start-ups.

2. Cooperate with property management companies

Property companies like Wanda also proposed the idea of “AI + intelligent buildings or neighborhoods” in 2021(source). Supporting a property management company which controls a large neighborhood could create more synergy and efficiency – a win-win deal for each side of the business.

3. GIS and regional geographic measurement projects

An integrated platform could also link to other research and measurement activities. It could further integrate with energy networks based on blockchains and other technology, to help regulate and control the energy industry on a regional or national level.

4. Adopt or cooperate with clean energy, energy storage, and virtual power plants

As these are all ways to save energy, that could work together to construct an energy-saving ecosystem (source).

Yi Luo is a Climate Fintech Program Associate at New Energy Nexus China

_{[1] According to ‘China Construction Energy Consumption and Carbon Emission Report (2021)’ (《中国建筑能耗与碳排放报告（2021）》), in 2019, the construction operation stage consumed 1.03 billion tce (21.2% of total national energy consumption) and emitted 2.13 billion ton of carbon dioxide (21.6% of total national carbon emission). It’s estimated that the energy consumption and carbon emission would reach 1.192 billion ton of coal equivalent (tce) and 2.368 billion ton. The industry could create a potential economic value of 480~600 billion yuan (taking the energy saving efficiency as 25% and the coal price of 1600~2000 yuan per ton).}