Unexpected challenges in energy efficiency

While energy efficiency and renewable resources are incredibly important for the continued growth of business and the economy in the near future, it’s not considered very cost-efficient to take advantage of it. One of the people working to smash the assumption that renewable energy sources provide less bang for your buck is Daron Coates, co-founder of ThinkBox Group.

ABERMAN: What is ThinkBox?

COATES: ThinkBox develops sustainable projects, whether that be infrastructure, technology, or community. Sustainability, to us, is a promise to be here tomorrow. So, your building needs to be here, the people in the building need to function at a higher level. That’s what we’ve been able to do. We lower costs from utilities, and use that savings to finance capital improvements and community benefits.

ABERMAN: In the way that real estate developers develop properties, you’re like an energy conservation development.

COATES: We are. We’re able to go into a building and give them back money that they would ordinarily give to utility and repair companies. We find that very rewarding, and it’s also a lot of fun.

ABERMAN: Fun is important. How did you get into this?

COATES: It’s the only space that I’ve known. I was walking across campus at Morehouse College many years ago, and our legendary career placement director, Benjamin McLaurin, asked me to interview with Honeywell. I got a job there as they were just figuring out the space, got lucky, did really well. I ended up in D.C. running a business unit from Pennsylvania to North Carolina. They sent me to GWU’s business school to make me a better CEO candidate, and halfway through I quit and started this company.

ABERMAN: You’re coming to a theme I think is under-discussed here in town: you mentioned you learned about this field working at a few companies. So, we tend not to think of entrepreneurial people as developing their skills in companies, we tend to think of them as people who just start businesses. But that’s not a view you share.

COATES: I’m on the cusp. I’m a Gen X-er. I started in corporate, and everyone, when I was coming up, wanted to be in corporate. And then the world shifted, and utilities deregulated. So, that gave us a very unique opportunity. My partner is a physicist, who was working down at Night Vision Labs. So, with his help, we were able to see an opportunity and grab it, and get some traction.

ABERMAN: Does it ever frustrate you when you go off to a pitch event, where everyone is saying you have to be an entrepreneur, you need to live on ramen and live the dream? That’s so not how most of us become entrepreneurs. Does that frustrate you?

COATES: I don’t have time to be frustrated by that. I have enough to be frustrated about. But it’s certainly annoying, because I think, while the tech space is different, for us in the non-tech world, where profits and infrastructure still matter, it really helps to have a foundation of how you do things, how corporations are built. There’s a reason that corporations work, and there are some great things in them in terms of organizing and managing and mentoring and growing. And then, you can get a feel for where innovation can take place.

ABERMAN: It’s funny. I get frustrated when I hear people like Peter Thiel say not to go to college, or seeing people saying you don’t have to know anything, you can just figure it out as you go. That’s not been my life experience.

COATES: Again, maybe in tech. But for me, and Paul, my partner, it’s been fun working through the old school of figuring things out, failing, getting back up and putting models, processes and strategies in place to take advantage of market opportunities. And hopefully, do some good.

ABERMAN: Speaking of opportunities, tell me what you’re doing here in town to make a difference.

COATES: We work with the largest utility consumer and the largest landlord in D.C., the D.C. Housing Authority. They had about half a billion to a billion dollars in deferred maintenance they needed capital for. Paul and I were able to find about 130 million of that from their energy bill. So, we’ve been able to put that capital into stuff that’s very important: chillers, and boilers, and pumps, and motors, and fans. We’re working on one of the largest solar projects in the city with the Housing Authority. And their leadership has just been really helpful, from the board to the executive director. Working with them on sustainability for 20 years, being able to put together this groundbreaking project, they’re one of the most sustainable housing authorities in the world, and they’ve been very open to working with us to get there.

ABERMAN: Is this the corporate or development analogue to the companies that had me put solar panels on my roof, and then would reimburse themselves by the money they saved me by putting them on the roof?

COATES: Absolutely, but it goes deeper. What we’ve found is that single-measure contractors are great. Solar guys, and lighting guys, and finance guys. But as you start getting more and more need in terms of capital, you really need to find every dollar. So we look at everything, from pipes to repairs to equipment, and we’re able to bundle that together to get more bang for your savings buck.

ABERMAN: This seems, to me, like one of the biggest no-brainers in history. So, why wouldn’t anybody want to do this? Why isn’t this ubiquitous?

COATES: I’ve been asking that question for thirty years. The market has grown, now it’s annually a multi-billion dollar industry. There’s four trillion dollars of deferred infrastructure investment needed in the United States, and this is a really smart way to do it. Governments, I think, have taken to it a lot more quickly because their budgets are a lot tighter. Private sector folks, commercial real estate guys in particular, they have a lot of money. They know financing. So, we’re still trying to understand why they don’t want free money. Especially if it’s their money, that we’re taking back from utility companies and giving to them. We have been successful, Dantes Partners here locally is a very big, progressive, innovative affordable housing developer.

We’re also working with Vester Corporation, which is another national real estate organization, they’ve been great to work with. So, we think the traction is starting. There’s been a new thing recently called PACE, which is Property-Assessed Clean Energy, where now you can finance these on the asset value of your properties. So, we think that will help real estate guys be able to get in and out of projects more quickly, to have more flexibility in financing, increased asset value, and not have liquidity issues at close. So, we think that PACE will start to take off. It’s only been a few years that PACE has been going, but I think they’re already up to a billion dollars in financing nationally. We think that will break it open, but there’s no reason not to do it. I think it’ll become normal in the next few years, recapturing otherwise lost resources.

ABERMAN: It seems it’s not much different from a leaseback or a finance transaction, you’re capturing costs and rebating them. Is there some possibility that renewables or energy conservation efforts have been so politicized that people are shying away from them?

COATES: It’s interesting. This is the only space I’ve known, and I’ve never sold a project based on the environmental benefits. We’ve been able to take the equivalent of about 12,000 cars off the road since we’ve started here locally, we’ve reduced water use and carbon emissions. But primarily, at the end of the day, we’re saving you money and helping you put capital in your building. That’s how we approach it, and we think if we stay there, capital tends to be apolitical, so we’ll be in a good spot.

ABERMAN: I think that’s right. Capital goes where there’s returns. Money doesn’t create opportunity, it follows opportunity. So, what’s next for you and ThinkBox? It sounds like you have some interesting opportunities in front of you.

COATES: We do. I think capital is starting to find a space now. We have access to 2-3 hundred million dollars in capital this year that we’re trying to get committed by the third quarter, nationally. This is money we’re recapturing from utility and repair costs. So, that’s one of the biggest things. These are complex projects as well, so it takes some time for people to get their head around it. So, we need good people for that. We’re looking for very sharp people who can communicate, who are innovative, who can talk to decision-makers. That’s always challenging to find in our space. And then, I think a lot of our talent has gone to tech. When we were coming up, a lot of smart guys went to engineering and law, but I think now you’re seeing many people going to tech and finance. So, there’s a dearth of talent a little bit in our space, but I think that’s an opportunity for us.

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