Leyline Renewable Capital spoke with Mitch Bauer, President of Grid Connected Infrastructure (“GCI”) about his new company, GCI’s short- and long-term plans, and how Leyline’s Growth Capital provided him the financing to make his vision a reality.
I have always been a serial entrepreneur. I co-founded other companies before GCI – two ecommerce marketplaces and a brick-and-mortar textbook buyback chain. These businesses, however, were intangible and had no real positive social impact. An online textbook company, for example, saves money on students’ textbooks but there is no greater societal good. I wanted my next venture to add societal value over the long-term.
So how did I get into the energy industry? More than a decade ago, it was clear that the United States would transition its electric grid from predominantly thermal generation to renewable energy. The electric grid brings power to millions of homes and businesses through transmission and distribution lines and is undoubtedly one of the world’s most expansive infrastructure networks. I wanted to be part of this ambitious plan and that desire led me to graduate school, where I studied energy and environmental issues. I learned that significant renewable energy penetration depended on the ability to match electricity demand with renewable energy production. Unfortunately, it is a particular difficult challenge to address.
Energy storage is the Achilles Heel of the renewable energy transition. Large scale wind and utility scale solar energy need storage to move energy over time and match production with demand – even when the wind does not blow, or the sun does not shine. As the penetration of renewables increases, grid flexibility is reduced because their output is dictated by resource availability and the challenge of balancing energy supply and demand intensifies. The more solar and wind that are added to the grid, the less valuable future additions are, as its ability to effectively carry load decreases. I saw this at NRG in California where our solar projects faced growing curtailment risk.
Energy storage provides operational flexibility by correcting the time mismatch between energy supply and energy demand, thus allowing more renewables on the grid. In this way, energy storage is the lynchpin for the grid and the energy transition. In 2013 while working at NRG developing utility scale energy storage projects, I found myself in the right place at the right time. I gained experience in both thermal and solar energy and supplemented that with boots on the ground as the energy storage industry began to take off.
While I worked in both energy storage and solar, they are very different technologies. Solar is generally developed on rural or agricultural land under long-term lease options, away from population centers, whereas energy storage projects are best sited in highly industrialized areas near load. Our choice to prioritize energy storage before solar is for two reasons: the capex per acre for energy storage is higher than solar and the opportunity to profit from the underlying real estate ownership is truly unique. A 100 MW battery project can deploy over $100 million in capex on a four-acre site. Compared with solar energy, an energy storage owner and operator’s financial model is relatively insensitive to lease rates. Thus, we have an opportunity to purchase a site at $ per acre and lease it at $ per MW, which results in a unique return for GCI.
I wanted to launch my company after graduate school, but as someone transitioning into a new industry, I needed to gain experience. I worked as a Business Development Manager for NRG, a Fortune 500 company that engages in the production, sale, and distribution of energy and energy services. My role at NRG was to develop and execute thermal and energy storage strategy in CAISO, the California market. Next, I worked at Ormat Technologies, leading the company’s strategy, siting, and interconnection for stand-alone energy storage projects. Finally, I worked as a Senior Project Developer for AES Clean Energy developing utility scale energy storage projects across the United States in PJM, NYISO, MISO, and other markets. Collectively, these roles provided the experience and track record of success investors desire. Then, after developing the real-estate focused model, I just needed to find the right company to finance the vision and that is where Leyline Renewable Capital came in.
Two of my main goals in seeking funding were to preserve equity and have the ability to buy real-estate without long-term option agreements. Leyline’s Growth Capital Product was the perfect fit. Their non-dilutive capital means my team can retain all the equity, while Leyline provides the financing for us to get started. We finished the deal at the start of 2023, and that financing has allowed me to build an experienced team and acquire land for energy storage projects without giving away significant equity.
Our business is different from others in two ways. First, we have more than 10 years of experience working with some of the largest independent power producers (IPPs) /asset managers like NRG and AES. We understand what these companies are looking for when they acquire projects, and our role is to create and de-risk large-scale energy projects which will be operated by incumbent IPPs and utilities.
Second, our model has several intrinsic advantages. First is the ability to purchase land directly without a 3-to-5-year option period. Second, because we don’t have to own and operate assets, it opens us up to more markets. We can develop projects in the competitive IPP dominated markets, as well as in the regulated markets where IPPs have less opportunities.
Today, we are 100 percent focused on capturing land and developing a portfolio of de-risked energy storage projects diversified across markets. We have about 1.5 GW of projects in our pipeline now and intend to double this over the next six months. As we build our pipeline, we are also building our team. Having spent a lot of time at large IPPs, we have a sense of what management practices succeed, and which fail, and the pain points of employees. My goal is to build a modern development company that is efficient and a good fit for highly motivated people.
In the long-term, we intend to diversify by developing additional products; this may include solar, heavy duty EV charging, and any other type of grid connected infrastructure that is both highly profitable and contributes positively to the energy transition.
I enjoy this work and am excited Leyline Renewable Capital partnered with me to launch GCI.