CIBC's Ines Serrao and James Wright discuss the future of solar energy industry with Paul Gaynor, CEO and Co-Founder, and Pete Keel, CFO and Co-Founder of Longroad Energy. They share practical insights on navigating policy changes, capital access, and the evolving demands shaping the clean energy sector.
Intro: Welcome to The Energy Shift, a podcast series focusing on the rapidly evolving energy landscape with hosts Ines Serrao and James Wright.
James Wright: Good morning, Ines. How you doing?
Ines Serrao: Hey James, good morning. I'm doing well, how are you?
James Wright: Good, yeah. So let's get into it. So on today's episode, we're going to shine some light on the opportunities and challenges shaping the future of the solar energy space here in US. So here with us today to discuss that evolving landscape are two of the most experienced development leaders in this space, Paul Gaynor, the CEO and Co-Founder of Longroad Energy, and Pete Keel, his partner, the CFO and also Co-Founder of Longroad. And I'm really pleased to have known them both for a very long time. And their team have kept us very busy in recent years as they've grown Longroad into one of the country's largest renewable energy companies in the US. And Ines, I think you've also known Paul and Pete for a very long time. So it feels like a bit of a mini Friendsgiving today, right?
Ines Serrao: Absolutely. Thank you both for joining us, Paul and Pete. As James was saying, we've all known each other for quite a bit of time. So we've been looking forward to having this conversation with you today. And the solar coaster continues. The industry has had to weather a lot of recent challenges and we're keen to hear from you how you see the current state of the industry and chat about how long it would be as the landscape and opportunities ahead. But before we get into all of that, I wanted to start out by getting to know both of you. Maybe I'll start with you, Paul. Can you introduce Longroad and give us some background on how you ended up in your current role?
Paul Gaynor: Sure, thanks Ines and thanks James. Good to see you both. And thanks for having Pete and I on your podcast. It should be fun. Longroad is nine years old. We are an owner, operator, and developer. And we founded it. Pete Kiel, Michael Alvarez, Charles Spiliotis, and I founded the company back in 2016. And we've had a good run so far. Right now, we've got 5.5 gigawatts operating and under construction. And we're doing mostly solar and solar and storage, but we do also play in the wind space. We're about 250 people now and our plan is to do one and a half gigawatts a year. So by the end of 2028, we'll be at 10 gigawatts and about $700 million of EBITDA. We're owned by Infratil, which is a New Zealand publicly traded infrastructure fund. The New Zealand Superfund, which is the Southern Wealth Fund in New Zealand, MEAG, which is a subsidiary of Munich Re and then the four founders. So that's a quick snapshot of Longroad. I've been in the power and development space since college. I used to work for GE actually selling power plants and then I went to GE Capital and finance power plants and then stumbled into a more entrepreneurial opportunity and that got me into the renewable business back in 2004. And that's been an interesting 21 years since then. A lot of, as you said, Ines, the solar coaster, but also the wind coaster and a lot of other policy coasters along the way.
Ines Serrao: That's great. And it sounds like Longroad will turn 10 years old next year. So I hope there's a big party planned and that all your favorite bankers are invited.
James Wright: I can feel a cake coming.
Ines Serrao: Pete, turning to you, what was your path to renewable energy industry and what led you to co-found Longroad with Paul and the other two co-founders?
Pete Keel: Sure. Again, thanks for having me and Paul here, on your podcast. It's exciting. So I got my start in the Coast Guard, I actually. graduated from the Coast Guard Academy back in 1997. And I was an engineer and an officer, served aboard ship, got out after my service commitment at the fifth year and joined GE, like a lot of former military folks did back then in their power generation business and on the thermal side. I had the opportunity to join the integration of GE Wind. So when GE got into the wind business, that was about 25 years ago, they bought Enron Wind. And I had kind of a front row seat for that. And so that really piqued my interest in terms of renewables. I really liked the idea of, well, my experience at GE was great, working at a smaller company. And I connected with Paul kind of through that GE network, and that was about 20 years ago. Joined in at First Wind. First Wind is a long story, but we built that company, sold it, a lot of kind of ups and downs in between. We kind of got the band back together about 10 years ago or so. After having exited First Wind and started Longroad. And so we're really trying to kind of replicate all the great things that we did at First Wind and maybe avoid some of the mistakes as well. It's been fun. So yeah, we'll have to invite you to our 10 year birthday party next year.
James Wright: We'll be there. And I've actually, I'd forgotten you both had a distant past in the thermal space, which is kind of interesting, right? We could probably have a whole separate conversation about the troubles of getting your hands on a gas turbine right now. But anyway, that's a separate pod. We'll do that another time. So that was great, guys. Good background. So Paul, starting with you, I mean, given all the kind of recent furor around the 03b legislation and just, you know, the noise that created, which included obviously a more aggressive phase out of the tax credits for solar. With that, how have you been thinking about how you've had to evolve your development strategy to accommodate some of those changes in 03b?
Paul Gaynor: Honestly, James, we were really pleasantly surprised by the 03B, the actual terms of it and then the result in guidance. We're thinking it in kind of two pieces. The first is what do you do to comply with the 03B, provisions before the, before the ITC and PTC expire. So that's part one. You actually, though, have to think about what happens after 03B is no longer there and the solar and tax credits are no longer available. So that's part two. So for part one, we've gone ahead and tax qualified about six gigawatts for our 2029 COD deadline and we'll do another batch for our 2030 COD portfolio. That was actually, believe it or not, that's probably the easy part. But that wasn't so easy. Believe it or not, though, we're actively developing projects that have commercial operations dates past 2030. And those are primarily in markets where the differential with gas is pretty small or negative. And we've done a bunch of work in the last six months about rebalancing our portfolio to make sure that we're in markets where that thesis can hold steady. And the final thing I'll say is, you can't have a renewable podcast where you don't talk about data centers. So we've got a bit of activity underway there too. Using our own portfolio, our development portfolio where we have renewable projects and trying to leverage that into an actual data center location and then going out and working with third parties to see if there's a way that we can help data center clients meet their goals.
Ines Serrao: Thanks, Paul. That's very interesting. Maybe shifting a little bit away from the political aspect directly. And Pete, with your CFO hat on, do you have concerns on capital to the space drying up or if there's still a good inbound appetite to get both debt and equity capital into your markets?
Pete Keel: Yeah, happy to speak to that. So I think we never take access to capital for granted in this business. And if you look at our company, we've got about a $2 billion a year CapEx program. We think our ability to source that $2 billion is a real competitive advantage. The debt markets, what we've seen in those over the last 10 years or so, those been really strong, really healthy. We're hopeful they'll continue to be healthy. But from a risk perspective, again, it's always about, whenever we've got a risk, let's clear it. Let's get that financing closed, and let's get on to the next deal. And again, never taking that availability of capital for granted. Tax equity markets are always a challenge in this business. Again, a differentiator among developers is being able to access tax equity. Whenever we do a deal, it's not like there are five different, you know, that you'd send out an RFP and there are five different folks with term sheets and you pick the best one and you tell everybody else, sorry, it's much more bilateral and you're trying to kind of piece deals together with the folks that you know, it's really relationship driven. It continues to be a thin market. We've always tried to look at those challenges as competitive advantages. And if we're good at sourcing tax equity, if we're good at sourcing capital, then those can become, capital in general, those could become really competitive advantages for us. And then I think the last piece of the capital stack that is, of course, really important is just equity. And in our case, we've been really fortunate to have really strong financial backers, New Zealand Superannuation, Infratil, own about 75% of the company. MEAG owns about 10% of the company and the founding group owns the balance. That really impacts the way that we view it. Risk and running the company. But we're really fortunate to have this kind of deep pocketed long term investors behind us. That's really enabled our shift to own these assets after we've developed them, build a balance sheet. We've got about 5.5 gigawatts operating or in construction today, that's net ownership. That's pro forma for a couple of deals that are going to close in the next few weeks. And so having that equity base behind you really allows you to do that, creates a bigger balance sheet, which I think opens up more capital providers coming in the future. Because folks want to do business, folks like yourself, you generally want to do business with people that have a big asset base and are, you know, formidable and you can show the financials to your credit folks and say, no problem with their indemnity and there's going be lots of future business with these guys. So we really think that accessing capital is going to be a little bit easier for the bigger players in the space.
Ines Serrao: That all makes sense. And I do think you've done a fantastic job at bringing all three pieces together. And from the banking side, like what we see is a true partnership in the sense that I think we've recently closed our 10th deal together, CIBC and Longroad, which we’re very thankful for, but not just that continuation, but also in when there are issues, because issues do arise on occasion, we sit together and we talk through it. And you treat banks like partners. And I'm assuming you do that across your capital stack, which the industry appreciates.
Pete Keel: What we've seen over the years, you know, Paul and I've been doing this for over 20 years now, is the marketplace evolved to much more relationship, much more repeat business, and you can be really efficient when you approach it that way. And if you need to raise a couple billion dollars a year, and you're trying to keep your overhead costs down so that you're competitive. It's really helpful, right, to work with folks where you understand each other and you can work through all these things efficiently.
Ines Serrao: Totally agree. And now thinking about the day-to-day blocking and tackling you both have to do running a large renewable energy company with presumably hundreds of suppliers, how are you managing to navigate your supply chain? Have tariffs been problematic and to what extent?
Paul Gaynor: Yeah, it's been challenging, to say the least. We actually had a couple of projects mid-flight when Liberation Day was announced, meaning, you know like, we hadn't purchased all of the equipment. We've started building the project. There's a few kind of hanging chads that were left to do on the procurement side. And the team really scrambled to minimize the impact. We shifted a bunch of countries of origin for some, like wiring and things like that. It was a real pain for our procurement team, but we ended up saving a significant amount of money versus the math that we saw on the day after Liberation Day. So it's definitely been challenging. We can validate that. Kind of the components of how we're trying to mitigate most of it. I'd say most importantly, we have a master supply agreement in place with First Solar. So that part of the supply chain has been really straightforward and that relationship actually dates back to 2017 during Trump won. Right when Trump was elected kind of 30 days into the existence of Longroad. So we've been kind of living with this administration for a good chunk of our life. But that master supply agreement really allows us to sleep at night, right? Like we don't have to worry about anything on the panel side. We do a lot of work with Next Tracker, which is now, I guess, called Next Power. They essentially have a 100% domestic product and we've done almost every project with them. And then the rest of the inverters and the rest of the balance of a plant is really pretty manageable. It's not the most straightforward, but it's pretty manageable. I'd say the thing that needs to get solved the quickest is domestic best supply. There's just not enough of it. And given kind of the FIAC constraints of 0B3, and we're still waiting for guidance on FIAC from Treasury. I think, hopefully, given the very strong demand signal that was sent in 0B3 with the ITC on storage going out to 2037, we're optimistic that this supply chain starts to fill in. We just haven't seen much of a sign so far.
James Wright: Yeah, and actually that's a great point, Paul, and you sort of preempted, well, I going to ask Pete about this, which is just as a kind of quick postscript to that point on fear coming, obviously, as Paul said, we're waiting for the Treasury guidance, hopefully, imminently. What are you hoping to see there, Pete? What do you think the industry needs to make that guidance workable when it comes out?
Pete Keel: It needs to be clear. It needs to be workable. We've gotten good guidance over the last couple of iterations here, right? That's workable for the industry where the rules are clear, where there's not a lot of ambiguity. And then, you know, I think it needs to recognize some of the realities of kind of where we are today, what's sort of viable today versus where we could be three or four years from now. Because you've been cultivating this industry for a long time and you need to keep that. You don't want to sort pull the rug out from under it. So we're in a good spot in terms of having been started construction when we look at our own portfolio, a number of different projects. And so we're the FIAC. That guidance is maybe not applicable. But going forward is going to be a big issue. Again, I think guidance that is clear and simple and workable is, maybe that's stating the obvious, is going to be pretty helpful for the industry.
James Wright: No, it's a great point, I fully agree. It's something we're all obviously laser focused on from our side of the table as well. All eyes on the treasury for that one. Okay, so I guess I get to ask the existential question, which is kind of fun. So this is putting you both on the spot a bit guys. What do you both see? I mean, you're both obviously super experienced. You've been in this industry a long time. We've talked about the solar coaster we've all been on the past 10-15 years, but what are you both seeing as the opportunities on the horizon for the industry more broadly in the next, call it 5-10 years? I'm going to keep a count here on the number of times you both mentioned data or AI in your answers.
Pete Keel: Well, I can take a first crack at it, James. Look, I think where things are most exciting, again, kind of reflecting on what has quickly become a long career in the industry. Time flies. For the last 25 years, there really hasn't been demand for electricity in this country. And I saw that when I entered, I left the Coast Guard and entered GE 25 years ago. They talked about there's going to be a soft landing on the sales of gas turbines because there's just not demand. Or we need to make sure there's a soft landing on the gas turbines because there's just not demand. And demand has been flat ever since until now. And so, you the big opportunity now, and of course the demand is there because of electrification, data, AI, all that stuff that's in the news constantly day in, day out. The big opportunity for the industry is to meet that demand and to be one of the actual solutions in terms of providing much needed new electricity that's also clean to satisfy what we're seeing now is a massive shift in the supply demand fundamentals in this country. So think that's really exciting. And I think the challenge is and the opportunity is, can solar and wind and batteries, can they do it? Can they actually provide those megawatt hours? Can they do it competitively? And can they do it without a tax credit, right? And so the tax credit is going to be in place for batteries for quite a while through the end of 2037, if you think about how the start of construction rules work. For wind and solar, not as long. And, the industry has this incredible opportunity to help solve this problem, provide all this much needed supply to satisfy all this demand and doing it without a subsidy in the long term, I think is the opportunity. I want nothing more than to see this industry survive without having to be supported by federal government. It's going to make it a much more viable business in the long run. And I think it's achievable when I look at the numbers. It's maybe not achievable today, but it should be achievable in that time frame.
James Wright: Yeah, very well said. I agree with all that Pete. Paul, anything you want to add?
Paul Gaynor: I just want to kind of slam dunk Pete's comments. I couldn't agree more. I really hope that the leaders in the renewable energy space, if there is a change of administration, let's say in 28, and we get back to maybe a more democratic leaning Congress and White House, that people can actually restrain themselves. We can finally get off of the super partisan. You know, this industry has become such a lightning rod for both sides, right? The Republicans hate it because the Democrats have made it, you know, so maybe just intolerable and so kind of rich for the industry. And, you know, kind of stuffed it down the throat of the Republicans and over the last kind of, you know, five or six years. What's happening now in the Trump administration is just kind of payback for all that, right? I think we all, like Pete said, the numbers are there, you know, gas turbines are expensive, gas is expensive. So when you look at it, kind of all in, I'm hoping that the renewable energy industry can finally lay down its swords and say, we can do it without a subsidy.
James Wright: Yeah, I fully agree. And just, you know, focus on the core economics, as you said, and kind of take some of the rest of the heat out of the debate. Yeah, I'm fully with you. That was great, gentlemen. Thank you so much. We could spend a lot more time on those topics. Now we get to the fun bit. So we try and kind of wrap up each conversation with just a quick take from everyone on what may have shifted their week this week. So can be anything, business, personal, pleasure, whatever you want. Ines, do want to kick us off?
Ines Serrao: We're recording this on Thanksgiving week and the week has been pretty smooth so far. So nothing has shifted materially my week yet. So I'll do a twist on this is what's going to shift my week, hopefully. And so I'm going to go down to Miami to see family and take a few days off. And I'm so looking forward to good weather and cocktails. Definitely shift my week.
James Wright: Sounds amazing, very jealous. Pete, what about you?
Pete Keel: Started girls high school basketball season. So watch out for those Kiel sisters. They're coming.
James Wright: That's a good one. All right. Paul?
Paul Gaynor: I'm going to be a little bit of a homer here. I can't believe the Patriots are doing so well. I'm really happy that they are, but I was not expecting a 10 and 2 record coming out of this squad, so really happy.
James Wright: Great, well said. I'll try and avoid the urge to start talking about English football, it's kind of bore everyone to death. But all right, so think for me, I'll just mention quickly, we had parent-teacher conferences this week for my daughter who's a fifth grader. The teachers had all asked them to do self-researched essays that the parents could take a look at. And low and behold, my daughter chose to do one on the pros and cons of renewable energy. Completely unprompted by me, I should say. So I do feel slightly proud that as a parent she's paying some sort of attention to what I do for a living. And I'll also say folks, like some of the research was better than some of the content we see at renewable conferences. I can tell you it wasn't bad stuff. So anyway, I'm kind of proud about that.
Ines Serrao: What was the conclusion though, James, if we may ask of the essay?
James Wright: I mean, it's beautiful how simple the world of the mind of a fifth grader is, right? Like the general thesis was it's clean, it's cheap, it's easy to build. Why aren't we doing more of it? That was the kind of mind of a fifth grader, which I kind of like, I respect that. So anyway, Paul, Pete, thank you guys both so much. Really great having you on, great content as ever and super excited to hear about all the great stuff you're doing with Long Road and the team. And we'll talk to you both soon. Thank you.
Ines Serrao: Thank you both.
Paul Gaynor: Happy Thanksgiving. Thank you.
James Wright: You too.
Outro: Please join us next time on The Energy Shift as we continue to tackle some of the hottest topics in the US energy transition landscape, providing fresh insights and viewpoints to help you shift your perspective.
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