Nick Devonshire | February 20th, 2019
MIT students love the idea of working in clean energy - an industry that inspires, offers complex problems, and can pay well. But when it comes time to land a job, MIT students can’t seem to see beyond Tesla (seriously, why do we focus so much on Tesla?) As part of the MIT Energy Club’s push into energy career mentorship, I wanted to share some words from my last full-time boss, the incredibly wise Scott Brown of New Energy Capital, who explained that there are three tried-and-true entry points to the clean energy industry: work at a developer, work at a utility, or work as a financier.
I’ll try to explain how you might work in clean energy at each type of company and give a few examples of firms that I have encountered in my career. If you have questions about this, or want to hear the rather a-typical [and inadvisable] path I took to get into clean energy, please join the MIT Energy Club’s Fuel for Thought event on February 22nd from 12pm to 2pm in the Energy Commons (10-063) where I’ll be doing Q&A about these industries (and others) in a casual setting with lunch provided.
A developer is someone who puts all the pieces of a clean energy project together. They secure the land, apply for the permits, arrange the financing, and manage the “EPC” of the system (engineering procurement and construction).
If you work at a development shop, you get an excellent understanding of the various stages and steps involved in taking a clean energy project from idea to reality. At a development shop, your job might be to:
Use GIS tools, wind maps, etc. to find the best pieces of land,
Keep tabs on policy/regulation (from national to county-level policy) to figure out where they should build their next project,
Sit down at a farmer’s kitchen table and talk him through a 30-year land lease contract, or
Interact with capital markets and tax equity partners to finance portfolios of projects (after all, no developer has $10 million to build a 10MW solar farm).
As you can see, developers need a range of skills. If you work with a large/sophisticated developer, you will learn what the capital markets like and don’t like and how to assemble a portfolio of “bankable” projects – that is, projects someone would be willing to buy or finance. Most developers will not do any on-campus recruiting; it’s up to you to network your way into an internship or offer. The exception is with the largest developers in the country, who are often offshoots of major utilities with more structured hiring processes (e.g. NextEra or Iberdrola).
There are few different flavors of developer:
Develop and Sell: some developers focus on finding the best opportunities/land/contracts, getting the project 75% of the way there, and then selling the project before NTP (“notice to proceed” – AKA the start of construction). These shops are usually smaller and value interpersonal skills; could you stand up in a town hall or zoning board and convince a room full of people to let you turn 50 acres of land into a solar farm?
Develop and Hold: Other developers will stay in a project after COD (“commercial operations date” – AKA the date it starts putting power onto the grid). These developers will work with more sophisticated financial and legal components – e.g. offtake contracts and basis risk, project financing, and tax equity considerations. These shops usually value analytical ability and ability to work within a larger organization.
C&I and Residential Developers: Everything above focuses on utility-scale clean energy development, but there are plenty of companies that also focus on developing projects where offtake is not a utility but a business or residence. These companies have all of the above considerations, but often have a larger focus on marketing automation and building out sales channels.
Work at a developer if:
You want to understand how to take a clean energy project from concept to execution
You prefer the idea of building things instead of analyzing them
You’d rather wear jeans to the office than a skirt or slacks
Working at a utility, you get to understand what drives the price of electricity as well as some of the more nuanced ways we compensate energy systems. There are a variety of roles within a utility, but here are a couple that may hire entry level employees and will put you right into the thick of the clean energy economy:
Power Trading: It’s important to remember that utilities buy almost all of the power generated by large-scale clean energy assets. Most solar developers just worry about how to make MWh and sell them to their “offtaker,” but the utility buying this power has to estimate the value of the electricity that will be produced based on where and when it is generated. For those with hyper quantitative minds (way more quantitative than the financiers below), buying clean energy is wrapped up in the larger world of buying energy hedges and will be an invaluable skill in the coming clean energy economy.
Capacity / Ancillary Service Markets: Instead of working with wholesale electricity markets, utilities (and their ISO regulators) also handle the more complicated revenue streams that are critically important for the next generation of energy projects (e.g. generation + storage). From capacity payments and demand response markets to compensation for frequency regulation and ancillary grid services, utilities are the gatekeeper to these technical (but increasingly important) revenue streams.
Utilities are [by necessity] hierarchical and bureaucratic organizations, and the majority of roles at a utility may not deal with clean energy. However, utilities are at the center of the power industry and spending the first part of a career working in certain utility divisions will equip you with a network and knowledge that can be more valuable than any other clean energy role.
Work at a utility if:
You want to dive deep on electricity markets and the more technical aspects of electric power systems
You want to work with batteries someday
You value work-life balance
As I mentioned, no developer of clean energy projects has tens of millions of dollars lying around to build a utility scale clean energy project. Developers lay the groundwork for a project and then use capital from financiers to build these projects. The same also goes for starting companies to build clean energy projects or raising money to prototype a new battery chemistry. I split clean energy financiers into two camps:
Real Assets Investing – (aka infrastructure investing, project finance, etc.)
This involves investing in an actual piece of equipment in the ground, like a wind farm (or a portfolio of wind farms)
The revenue/expenses from these types of investments are often well-understood and they’re viewed as an excellent long-term, low risk investment.
Some financiers take “development risk”, meaning they will start funding a project while it’s still being planned, other investors will only provide capital once the project is operational (investing after “COD”).
Tax equity investing– currently any wind or solar project will involve a tax equity investor. Tax equity investors are large organizations (often banks) that get to make highly preferential investments in large clean energy projects because they are some of the only companies with tax bills high enough to benefit from a 30% tax credit on a $50 million solar farm. This is one of the trickiest parts of clean energy project finance and modeling tax equity investments is some of the best finance experience you can get.
Working in this type of investing will teach you a lot about how large projects are funded and is key to the deployment of large scale renewables.
Corporate Equity Investing – (aka venture capital, private equity, etc.)
This involves investing in a clean energy company, as opposed to the individual projects it builds.
The company could be a new battery startup, which might raise money from a venture capital firm, or it could be a publicly traded fuel cell company that is raising debt to build a new manufacturing facility, which might raise money from the debt capital markets division of a traditional bank.
In addition to just investing in companies which a VC or strategic investor may do, many corporate strategy investing roles also include acquiring companies to enhance a large strategic player.
Work at a financier if:
You’re willing to work long hours over excel spreadsheets and power point presentations
You’d rather be in the room where the handshake is made than on the ground seeing how the steel gets put in the ground
You like working on a new project/deal every three months
You like “networking” and don’t mind wearing slacks or a suit
You’re OK starting your career in investment banking –
Investment banking – it’s like a pledge term for finance: Let’s get one thing out of the way – if you want to invest in clean energy projects or companies, the most reliable thing you can do out of school is go do two years of investment banking, specifically with a team that deals with power, infrastructure, or technology/telecom (note: “energy” teams typically focus on oil & gas).
Two years of investment banking will give you a firm grounding in the fundamentals of finance, teach you the metrics and storylines that investors care about, and serve as a valuable signaling tool to the head hunters and managers in the direct investing world (PE, VC, etc.). Investment banking is ‘advisory’ work, like consulting, and means you will not be making any investments yourself. However, you’ll get to work on a number of deals and you’ll learn to think like an investor.