How Renewables Are Powering Heavy Industry and Data Centers

Wade Gungoll, CEO of Industrial Sun, and Christine Larson, the Head of Strategy and Operations at Modern Energy, stop by the show to discuss the role of renewables in heavy industries like chemical processing, manufacturing, and oil and gas. Petrochemical refineries might not be first thing that comes to your mind when you think of the facilities that powered by renewables, but it’s happening -- and Wade and Christine are here to tell us more about it.

They highlight the unique approach of Industrial Sun, which focuses on industrial net-metered solar for heavy industries, offering significant cost savings and green attributes. They discuss the challenges and opportunities in the data center market and outline why Big Tech's race for computing power means renewables might actually have to wait to capture a larger share of the market. Christine predicts a rise in battery storage, while Wade predicts more than $100 billion in green hydrogen investment in ERCOT by 2030.

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Transcript

(Note: This transcript was created using artificial intelligence. It has not been edited verbatim.)

Sean McMahon 00:09

What’s up everyone and welcome to the Renewable Energy SmartPod. I’m your host Sean McMahon and in a minute I’m going to be joined by a pair of guests - Wade Gungoll and Christine Larson. Wade is the CEO at Industrial Sun, while Christine is the Head of Strategy and Operations at Modern Energy. The three of us are gonna have a discussion about the role renewables are playing when it comes to heavy industrials … And when I say heavy industrials, I’m talking about chemical processing … manufacturing … oil and gas facilities. I don’t know about you, but petrochemical plants aren’t exactly the first thing that comes to my mind when I think of the facilities that powered by renewables, but it’s happening. And Wade and Christine are gonna tell us more about it.  Christine also shares her insights about the future of battery storage and Wade wraps up the show with a very bold prediction about the footprint that green hydrogen stands poised to establish in Texas. And of course… We are also gonna spend a fair amount of time chatting about how renewables might actually have to wait a bit to capture a larger share of the market when it comes to meeting the boom in energy demand from data centers.  

Speaking of data centers … that market has been a hot topic on recent episodes of this show, when I talked to Jason Peart from Sage Geosystems and Roger Miksad from Battery Council International. Those episodes are full of insights on how geothermal energy and batteries will be a part of not only the data center, but the wider renewable energy landscape.

Later this month, we are gonna shift our focus to Offshore Wind. The American Cleanpower Association’s big Offshore windpower event is coming up, so we are going to take inventory on where that sector stands as it evolves to cope with shifting market fundamentals. 

So lots of great episodes in the library and on the way, but right now… let’s get things rolling with Christine Larson and Wade Gungoll. Christine…. How are you doing today? 

Christine Larson  02:17

Doing great. How are you? Sean,

Sean McMahon  02:19

I'm doing excellent. Wade, how about you? How's your day going? 

Wade Gungoll  02:23

I'm hanging in there. Supposed to be 100 today in Austin, but hopefully fall approaches,

Sean McMahon  02:28

Excellent. Yeah, things should cool down as soon as possible. I hope. Well, hey, I'm excited to talk to both of you. Your two companies, industrial sun and Modern Energy, have a pretty interesting dynamic, and how you all are kind of linked up. So let's walk through that real quick before we get into some of into some of the questions about data centers and hydrogen and things like that. So Christine, tell me, what is the relationship like between industrial sun and Modern Energy? How did you two kind of come together? 

Christine Larson  02:52

Yeah, sure. So Modern Energy invests in early stage energy asset developers with a combination of capital and then capabilities in back in middle office functions, and we invested in industrial sun. Co founded with Wade back in 2021 and partnering ever since. So I sit on the board of industrial sun and work with them on a number of strategy and business growth initiatives. And it's a as Wade will tell you a very close and productive partnership.

Sean McMahon  03:23

Wade, what was that like for you? What made you want to partner with Modern Energy.

Wade Gungoll  03:28

Right. Yeah, that's well said. Christine, you know, when we were fundraising for the company and thinking about different options that we had in terms of investment that we take on, one of the things that stood out with Modern Energy was truly kind of collaborative, thought partner esque type approach to the business. And so they don't just advise on general business, strategic matters. It's beyond that. They handle our marketing, our back office, our accounting, all of these functions that can be, you know, quite time consuming and resource intensive for for a new startup, they help take those matters on. So you can kind of supercharge the trajectory in time to market for, for a new business startup. So, yeah, it's been a really great relationship from the start. We got funded back in November of 2021. Is when this all began. 

Sean McMahon  04:24

Yeah, it sounds like a, definitely a strategic alliance, if you will. Because I know tons of startups, part of the problems they have, and all the headaches with growth is, is, yeah, some of the back office stuff. So it kind of makes sense to find a partner that specializes in that definitely. Now I want to switch to kind of where you all are in the marketplace. So, industrial sun, you know, what is your project portfolio look like, right now,

Wade Gungoll  04:44

Right. So I like to tell people that we're a very literal company. Industrial Sun is a renewable energy development company that serves heavy industry, right? So that is our exclusive focus. And you know. Focusing on customer centric development is definitely a differentiator in the marketplace. Currently, we've got a number of assets under development in ERCOT focusing on that petrochemical, oil and gas, green hydrogen, data center type of customer, basically, any heavy end user of energy, would be a good fit for the solution that we deliver. 

Sean McMahon  05:23

So I gotta say your customer base is part of the reason I want to talk to you. Wait, because it's, I'll confess, it's not something that comes to mind when people think of renewables and stuff like that. They don't think of some of the heavy industrials, oil and gas and things like that. So I think it's a fascinating niche. What are some of those conversations like when you when you start to talk to some of those companies,

Wade Gungoll  05:41

Right. So what what we do.We call it industrial net metered solar, and you can think of this as residential net metering, but at Mega scale in serving industry, right? And so there are many virtues of of the solution that are a true win, win, win. It's a win for from the customer's perspective, because they're able to net that generated energy against their retail electric power bills. So they they save real money, they enjoy the green attributes associated with the energy, and they also reduce their load exposure as a result of that solar product. So this is one of those cases where, you know, bringing renewable energy online has no downside from the customer's perspective. 

Sean McMahon  06:29

And then Christine, obviously, industrial Sun is kind of one of a handful of companies that Modern Energy is involved with. So, so where else are you what other companies you have, or kind of, what other sectors are you in?

Christine Larson  06:40

Yeah, absolutely. I mean, the key kind of theme across is renewable energy asset developer. So we're in solar utility scale with industrial sun. We have a distributed solar CNI type level company down in Brazil. We're also in a fleet electrification infrastructure company looking at kind of delivery fleets, and how do you solve that challenge, and then also a green hydrogen developer? And so what we found at modern was there's a lot of challenges in early stage energy asset development, of thinking about, how do you build that sales pipeline and build get projects through the first stage of development so you can get larger capital providers to come in for the projects themselves. And you see a lot of those same challenges across these different asset classes. And so there's a lot of similarities in terms of the business building and growth stage of those companies. And so we've, we're kind of looking across the across the industry, across sectors, but more thematically at like, where the business is in its growth stage,

Sean McMahon  07:44

All right. And then, so when you look at the overall large scale corporate renewables procurement market, how has that changed? I think we're a lot of folks are aware that Amazon and Apple and Google, like they they buy up a lot of gigawatts, right? But Have things changed at all recently, and where do you see that heading? 

Christine Larson  08:02

Yeah, so I think the way we see it most directly on the industrial Sun side, is in the hyperscaler growth, and I'll say the it's at stop and go of the types of progress that we're seeing there. So yes, you have really strong announcements by all of those large tech companies on their renewable targets that said, you know, this past year, many of them missed their emissions goals, and, in fact, their emissions increased. You're seeing large announcements, Microsoft, Brookfield announcement to build out renewables, to back their data centers, AI, hyperscale growth. But you're also seeing a lot of players that I think are are solving for the current challenge of just, let's build things as quickly as possible, and then I think we'll, we'll end up seeing a lot of catch up. You know, in our experience with the tech buyer, data center type market right now, at least, people are solving for speed. They're solving for speed to market. They're solving for access to power, which is not as easy as it used to be across the country. And then renewable energy and price are kind of later priorities. So I do think that they will, those things will get built out over time. I think that a lot of the tech buyers will continue to have their commitments to renewable power procurement. I think it's just becoming more challenging for them, you know, particularly in a world in which carbon credits carbon offsets also have had the experience and the reception that they've had in the last year or so. So I think it's more of a question of, as these tech facilities get built up, when do renewables catch up to serve them? 

Sean McMahon  09:47

So I think basically what you're talking about is AI, right? The growth of AI is kind of people trying to keep up with that. It's it's definitely cut into some of these large tech companies hitting their emissions goals. So, so what you're saying is they just want the data centers now. Now, and it'd be nice if it's sourced by renewables now, but if it's not, we can get there later. Is that what you're kind of saying, 

Christine Larson  10:06

Yeah, that's what our experience has been to date. Is that, you know, I liken this to the tech company space race. They all want to be first. They need to be first. They maybe could be second, but third doesn't get them anything. You can think about it similarly as like search engines, we all use Google, Yahoo, maybe back in the day, who uses Bing, right? And it's a similar there's compounding flywheel effects to AI models, and so speed is what they care about right now. They'll figure out the renewable power aspect later. But I think getting power in and of itself for these facilities is not is not easy. You're seeing, and I think we'll increasingly see the response of utilities around the country and how they're handling some of these challenges. One of my favorite examples is AEP Ohio, which is presented as proposal to require data centers to commit to power procurement for 10 years, because they've said, we don't believe that we're going to build this out, and this isn't going to be a flash in the pan and you're going to be gone a few years from now. So I think there's also a dynamic, not only on our end as renewable generators and developers like industrial sun and the power procurement in the AI and tech space, but also the utilities and how they play into this, and what requirements or guardrails they put on this. 

Sean McMahon  11:28

And then Wade what are you seeing from your perspective, specifically? Let's start with the data center side, right?

Wade Gungoll  11:32

So in ERCOT, the announced growth is explosive, right? We're tracking more than 200 announced data center projects in ERCOT, Texas alone, right? And that announced growth represents roughly 14 gigawatts of additional load growth. You know, 10% of ercot's total load growth could be attributed to data centers. So, you know, the rush is certainly on right, and that does invite a number of questions right from a policy standpoint and procurement of energy standpoint, et cetera. So ERCOT is definitely a great place to be a developer trying to serve these customers, and does present a significant opportunity. It's one of the reasons that we focus here on ERCOT exclusively. 

Sean McMahon  12:23

So I've heard some conversations that, at least in part, some of the hype about, you know, the growth and demand for AI data centers might be kind of overhyped, right, in terms of the efficiency of data centers, we'll catch up and things like that. Have you? Have you heard that conversation? And I guess either have you lend any credence to that? 

Christine Larson  12:40

Yeah, I think I've been following some of this conversation, and I think it's been an interesting point that's been made when you just look at growth of any new technology and how the announcements track to actual future installed growth. And what you tend to see is there, there is a huge burst in announcements. And then, for example, the supply chain, in this case, power generation scurries to frantically to try to catch up. And what you end up with is some of those, you know, announced projects don't end up happening. And so the supply chain is actually able to meet the need, despite the fact that, upon initial look, we didn't think it could the other way, I think about some of the data center growth question is, for all those that know interconnection queues across the country, we do not anticipate that everything in that queue will be built. That said we're looking at these data center growth numbers and acting as if that means 100% of those will be built, you could have the same thing. You know, we're talking about green hydrogen. Likely not all of those facilities will be built. So I think there's definitely some amount of like, modulating the expectations that said, I do think it's a really strong signal. There will be incredible data center growth, power generation will need to like rise to meet it, and we'll end up somewhere in the middle.

Wade Gungoll  14:04

Christine hit on something that certainly has impacted us as developer, all developers, generally, but also our customers, is, is the interconnection queue? Right? You know, when we've created the business, the average interconnection timeline was, was on the order of 14 to 24 months, right? And now it's between 36 and 48 months. And so that, you know that that circumstance certainly depresses the speed to market, you know, for these customers and the and the opportunities and contend to put a put a damper on, you know, some of the enthusiasm about all of the centers to come. 

Sean McMahon  14:47

Is there any chance that, you know, with all this demand for data centers and energy demand growth, is there any chance that just the way we look at the solutions could change, you know, meaning more on site stuff or. Yes, I'm not sure, but just, is it just going to be more of the same? We're just going to power up as we know it?

Wade Gungoll  15:03

I think there's definitely the possibility for novel types of solutions to come online. And of course, tech companies are extremely innovative, and they're very mindful of the fact, right, that the speed to Market's critical, and this is certainly a bottleneck for that to happen. So you could see the emergence of certain strategies to shorten that time and speed to market.

Christine Larson  15:32

I do think we'll see growth of more distributed energy generation. I mean, I think again, in just renewables generally, and thinking about the amount of capacity that needs to be built to support the transition to renewables, and the amount of associated wires that then would be required to connect all of that you are seeing just in general outside of the data center growth dynamic, a push toward more local load balancing right in some regions across the country, and you're also seeing, you know, on the data center side, or large industrial load generally, policies that are starting to encourage or incentivize generation closer to load right? If you're thinking about a new facility in a certain pocket of the country that utility will say, okay, but we need you to also support a generation facility nearby, or we're going to put into place policies that encourage you to make those decisions yourself. So I think you see some of that. I do think there will be breakthroughs in technology. But you know, everyone's looking at nuclear as the path to the future. But, you know, I think that's everybody says nuclear has always been five years out, for the last 30 years, right? It's not a solution right now. It's a experimental solution. There should be more pilot projects built, but it can't be done, I think at scale now, in 10 years, I really hope we are there in three to five. I don't think we will be. I mean, in three to five to Wade's point, the things that are coming online in three to five years are being envisioned and started today. So we have the solutions that we have that will continue to improve over time.

Sean McMahon  17:15

Any other trends you're seeing related to data centers?

Christine Larson  17:17

I think maybe one other point I'd make is we are seeing, you know, I talked about the big hyper scalers that I think are really focused on speed to market. There's a whole other cast of data centers that support all of our cloud ecosystems and everything that we all do every day on the internet, and that is only continuing to grow as fiber access across the United States grows as we continue to use more and more data in our personal lives, in our work lives. And so you are seeing continued growth in data centers for those needs as well, which are very different than the hyper scale type buyers of the Amazon, Microsoft's metas of the world. And there are, you know, industrial Sun is partnering with some, I would say, like forward thinking people who are trying to differentiate themselves as the data center provider by saying, I do have customers that care about renewable energy. I do have customers that have corporate targets, and this is a way that I can not only save money because energy costs are a significant portion of a data center's operating needs, but also provide kind of a renewable component to my product. So we are seeing interest and growth in that market as well. And the challenge there is just, how do you cite a renewable project to serve these data centers? They ideally from a data center purpose. Want to cite closer to kind of urban or suburban areas, not only to be closer to users, but also they basically have network effects between their data centers, right? So that they all the data centers try to be closer to other data centers. You think of it like, you know, the Silicon Valley hub with people and talent, or what Boston has done in the Northeast with talent around you know, health sector and data centers and the data across different companies, their proximity to be able to speak to each other creates kind of a flywheel effect as well. So how do you solve renewable energy in a space constrained and, you know, suburban area. The other thing is that these data centers will try to use as much as the physical land around them as possible. So they'll try to fill as much of their site and get basically maximum efficiency. Makes a lot of sense, but citing renewable projects for that can be challenging. So a team like industrial sun that has a lot of expertise in citing challenging renewable projects can be effective there, but it also takes what we're seeing is just partnership and conversation and commitment from both sides to say we want to make this happen. And how do we collectively cite a data center to have renewable energy behind it?

Wade Gungoll  20:00

Yeah, that's, that's well said, Christine, there's, you know, I think the conventional wisdom of what you see in the media, right kind of lumps data centers together as an amorphous blob. The reality is, they often have very different types of needs for their facilities, and they're not all one of the same. And, you know, certainly, when we have these conversations with customers, to the extent that they're flexible on where they can put the data center, you know our preference as a solar energy developer is to get x urban as you possibly can, so that the solar facility will be able to tie into your facility. 

Sean McMahon  20:43

Okay. Now shifting a bit, just away from data centers, right? Wade, I know your team does a lot with heavy industrials, and like I said, that kind of interests me, because I don't think that's front of mind for when a lot of people think of renewables. So, so what are some of the specific challenges that come with partnering with firms from heavy industrials,

Wade Gungoll  21:00

As I mentioned at the outset here, this the solution that we deliver is a true win, win, win, right? And when you engage with these customers, and they're typically, you know, Fortune 500 level, very sophisticated organization, and you talk about the nature of the solution and what it can do, there's a skepticism, right? That this, this sounds too good to be true, you know, we get green attributes, and we're going to save money this. This can't be real, you know, and, and so, you know, fighting through that initial skepticism is always a challenge. One of our projects that's public, that that I can talk about is our Bravo project, and this is down in Matagorda County. It's 50 megawatts, and serving our customer line, delbasell, at their Matagorda petrochemical plant, the solar farm that we're building is going to sit right across the road from the petrochemical facility and serve them the renewable solution. And you know, I think that's the real testament to to this industrial net metered plan that we're rolling out.

Sean McMahon  22:11

So both of you mentioned earlier in the conversation green hydrogen, and I know the industrial net metering actually kind of helps companies check some specific boxes when it comes to the 40 5v tax credit. So, you know, explain that to our listeners.

Wade Gungoll  22:27

So we're very proud to be, you know, in conversation with a number of green hydrogen development companies across ERCOT, the 40 5v regs are still in process, right? They've not been codified. The expectation is that that could happen at any point between today and perhaps into next year. Nobody's really sure when those codified regs are going to roll out. That circumstance has kind of put a pause on some of these opportunities to reach their final investment decisions. But the the renewable component to what they do is it's integral. You have to have the additionality. You have to have the matching. And our industrial net metered solution is, you know, it's the perfect complement to what they're doing. And so we're partnering with the number of these customers throughout ERCOT as they're as they're driving to bring these facilities online. 

Sean McMahon  23:25

Okay, now, one of the things I ask all my guests on this show is for their bold predictions, you know, specific to where they are in the industry. So Do either of you have any bold predictions for the role renewables will play in powering either data centers or heavy industrials in the next three to five years?

Christine Larson  23:43

Yeah, I think one of the things, and we've at modern have been looking at this for years, but I continue to be interested in the role that battery storage and new technologies for storage will play. I think we all acknowledge that it is an important part of the equation. I think, from our experience as an investor, we've seen different levels of uptick, largely driven by, I think, how utilities and RTO ISOs think about storage. And so I think we really, collectively as a industry, need to get smarter about how to value that type of resiliency and drive that product into the market, because I think there's a lot, a lot of opportunity there, and you've seen growth in some pockets, but it's been patchy. And so as I kind of look across that's probably my biggest expectation for growth in the next, you know, three to five years as we wait for some of these more emergent technologies.

Wade Gungoll  24:45

So mine is that by 2030 you'll see more than $100 billion of investment in green hydrogen, in ERCOT, across the facilities themselves and the renewable energy. That's required to bring them online just within ERCOT, just within ERCOT. And that's, you know, that's a consequence of the existing infrastructure that's in place, which is perfect for green hydrogen, the speed to market relative to other ISOs and RTOs, and generally a healthy business climate. So there's your bold prediction,

Sean McMahon  25:22

Yeah, I gotta say 100 billion just within ERCOT in the next, I guess, six years. Yeah, that that qualifies as bold. All right. Well, hey, listen, I've really enjoyed this conversation. Christine, Wade, thank you so much for your time. 

Wade Gungoll  25:38

Really enjoyed being here, Sean, thank you. 

Christine Larson  25:39

Yeah, thanks, Sean, it was great.

Sean McMahon  25:43

Well, that about wraps up our show for today. If you like this show, please follow us on Apple, Spotify, YouTube or wherever you get your podcasts. You can also find us on Twitter, where our handle is @RenewablesPod, and if you want to get a daily dose of renewable energy news delivered directly to your inbox. Head on over to smartbrief.com and sign up for the Renewable Energy SmartBrief.