R. Daniel PittmanJournal #1
I have started working at Carbon Credit Capital / CINCS, a group of companies that create and monetize carbon offset projects. Essentially, they invest and advise on renewable energy, energy efficiency and forestry projects that can create ‘positive’ carbon storage or reduction. This can then be offset against the emissions of carbon polluters, e.g. utilities.
Carbon Credit Capital (CCC) carries out projects under the UNFCCC Kyoto Protocol’s Clean Development Mechanism (CDM). This framework allows developed country signatories to offset emissions by creating projects in the developing countries. This, in theory, should prove more cost effective than the equivalent projects in a developed country while providing the added benefit of international development. CCC has been working primarily in India where it has a satellite office.
CINCS is a new venture devoted to advancing forestry specific projects. These project types rely on the principle of bio-sequestration, the storage of carbon by trees and other biomass and include the planting of new trees (afforestation or A/R) as well as the conservation of existing ones (avoided deforestation or REDD). These projects have particular relevance to the conservation of rainforests, which represent between 20 – 30% of annual green house gas (GHG) emissions. The current climate change framework only allows limited use of forestry-based projects. Owing to its large potential, however, the consensus is that these projects will be a key feature of post-Kyoto climate change efforts.
CINCS will put forward a web-based platform of services that will underpin the process of developing forestry offsets.
I will be working with an undergraduate intern to develop the CINCS venture. My role within CINCS is to understand and incorporate industry developments towards furthering the underlying business plan and establishing a methodology standard and associated pilot project.
In the months ahead I will need to pull this learning together and produce the materials necessary to bring CINCS to the next round of its funding and the next stage of its growth.
The office structure reflects its start-up nature. There are two full time staff, the founder and CEO and a carbon finance specialist. While forestry experts, satellite imagery experts, financial investors, standards bodies and government agencies are also on-hand to provide input.
There are a total of nine interns, primarily from CBS and SIPA. Each intern has his or her own project. Interaction is encouraged, with the result being exposure to a broad range of technologies, methodologies and geographies.
Journal #2
The initial few weeks have been focused on getting up to speed in what is both a new and complex industry. It has been an enjoyable, if steep, learning curve, but there is a clear feeling within the company that we are making significant strides in what is proving to be the industry of the moment.
There are a number of sources of information, but few precedents to follow. The UNFCCC as the primary standards setter and overseer of Kyoto protocol based projects is a rich vein of information. Government, NGOs, academia and the private sector all play their part in contributing to fundamental knowledge, while Industry newsfeeds and blogs, such as Climate-L and Carbon Positive News, provide daily updates on policy and industry developments.
The Waxman Markey Bill (American Clean Energy and Security Act) has recently successfully passed through the House and is now on its way through the Senate. This has kept the subject of ‘Green’ in the mainstream press.
Conferences are another source of knowledge, an opportunity to network and a forum to market the company’s expertise and services. CCC/CINCS has presented regularly at events and has mutual promotional arrangements through its own bi-weekly newsletter, Carbon Marketracker.
To date, I have represented CCC/CINCS at a number of industry conferences:
- The Intergovernmental Renewable Energy Organization hosted its Second Renewable Energy Awards and Conference at the United Nations Headquarters in New York. The event was a great opportunity to hear the latest thinking from the renewable energy community. Panels included Sources of Renewable Energy and Investing in Renewable Energy. There was a clear emphasis on solar energy, but other less mature technologies, such as algae and waste, were also covered. A significant message coming from the conference was that large, capital-intensive energy projects would most likely provide the energy solution for developed economies who have legacy infrastructure, whereas small localized sources of energy offered the best energy solution for developing economies.
- Dr. Daniel Nocera offered a convincing argument for the water as a means of energy storage. Essentially completing the hydrogen fuel-cell loop with a continuous recycling of hydrogen, oxygen and water. This energy storage system would allow for the efficient harnessing of solar energy. He will be featured in upcoming publications proving that a solar-powered home and fuel cell car can continuously run with the aid of the amount of water held in an office water cooler. While investment in solar energy has tapered off in the private equity and venture capital worlds, Dr. Arthur Nozik and Dr. Daniel Nocera supported solar energy as the most promising vehicle for renewable energy and explained that they were very close to harnessing and storing solar energy over longer periods of time. Dr. Bindeshwar Pathak, founder of Sulabh, made a compelling presentation on waste to energy in India. Sulabh (http://www.sulabhinternational.org/) is a non-governmental organization devoted to improving sanitation conditions in India. A recent innovation has seen the organization explore waste-to-energy generation alongside its public sanitation facilities. The methane gas generated provides a source of energy for heating, lighting and cooking for the local community. • The New York Venture Summit was a great opportunity to gauge the state of the venture capital industry with respect to Clean-tech. If I were going to draft a convincing business plan for investors, I would need to understand their current appetite for investing. The opening panel looked at what the venture world could expect over the coming two years. The mood was mixed, but what was certain was there would be no clear exits and capital efficiency was the buzzword. With investors focused on companies already generating revenues, CINCS might have a hard time sourcing funding. The growth of the overall Clean-tech sector was, however, encouraging, with Clean-tech now an established rival to the traditional areas of Tech and Life Science. The majority of the day was devoted to company presentations. This was an interesting and useful window into what ideas were out there, and more importantly, how entrepreneurs successfully market their idea. These ideas included airborne wind turbines, micro nuclear reactors, water recycling and bio-fuel processing. What was clearly evident was the large number of industries and product types that the Clean-tech label embraced. This would mean that investors would have to take a very different approach than with previous investment waves. Finding strategic investors, or those with sufficient niche expertise, would be essential to securing funding.
Journal #3
The complexity of the sector CINCS that the organization works in requires working with partners. These partnerships span the array of expertise needed throughout the project development process and, therefore, allow CINCS to provide a true end-to-end solution. The development of these relationships has been an integral part of the internship experience.
Encouraging CINCS to take the attitude of a platform, and aggregator of services, has created the opportunity to speed up development through using third-party providers and establishing strategic partnerships. In a new industry with such a high degree of uncertainty, there are clear benefits to this sort of collaboration.
CCC / CINCS was invited to present to the summer intern class of UBS as part of the UBS ‘Best and Brightest’ speaker series. I delivered a fifteen-minute presentation, followed by questions. The session gave an opportunity to outline the carbon finance market, the opportunities that it presents, and how CCC / CINCS was intending to exploit it. The audience was responsive and clearly interested, but it was also clear that a great deal of education would be required to promote the CCC/ CINCS business case.
The need to educate both our client base and potential partners has been a key element to the CCC / CINCS experience. The Marketracker, industry primers and speaking appointments have all contributed to building awareness of the CCC / CINCS brand, but equally to creating an informed client base.
As the end of the internship draws near, so does the opportunity to pitch to potential investors. Through the course of the summer, CINCS identified and established contacts with two types of investor (having discounted venture capital), strategic and angel.
The CINCS business relies on the development of a database platform to process carbon projects. This development lends itself to a strategic partnership with an IT developer. CINCS is currently in talks with a number of such developers to not only build the platform but also take an equity stake in the new venture. Much of my work in the last few weeks has been geared toward creating a scope-of-works for the platform development and the pitch materials specific to the strategic partnership.
The founder of CINCS, Olivia Fussell, has an established and powerful network. Leveraging this network, she has gained access to a number of potential angel investors. In pitching to such a discerning group of investors, the challenge will be to develop a robust set of financial forecasts. This is no easy task considering CINCS is pre-revenue and the market is undeveloped and uncertain. Regardless, this step will be necessary if CINCS is to move to its next stage of development.
To help better frame our pitch and to provide advice, Olivia arranged for me to speak with Francis Finlay, a seasoned investor. Once over the awe of the corner office in the Seagram building (my architectural education catching up with me), we moved to discussing the CINCS venture. An informative, if slightly discouraging conversation ensued. The clear focus and investor perspective provided a useful reappraisal of the business plan. There was still work to be done.
With shoulder surgery in the next few weeks, my last month at CCC/CINCS will be intermittent. However, there is still time to get all the materials in order to continue negotiations with CINCS’ investors.
The internship has been an extraordinary learning experience. The start-up environment has given me exposure to a broad range of business situations in which I have made good use of the core classes. The variety of projects flowing through CCC/CINCS has compounded the learning opportunities. Projects have included a landfill waste-to-energy project in Jamaica, a dairy farm biogas project in India, a co-generation corn biogas project in Columbia, a high-efficiency ceramic stove/micro-finance project in India and a Park forestry project in Texas.
I will have the opportunity to continue working part-time during the academic year. It will be interesting to see how things develop in the next few months, both with respect to CINCS and the broader policy environment.
