Decarbonization on the WattCarbon Marketplace

Hey friends, 

Building owners have many opportunities to decarbonize their own buildings to meet their carbon targets, but sometimes their money can be better spent decarbonizing other people’s buildings. 

That’s WattCarbon’s thesis, and one we believe in too. So much so that we (along with dozens of you) invested in their seed round last year.  

The WattCarbon marketplace has since launched, providing anyone the opportunity to invest in decarbonizing other people’s buildings. The only problem I see (besides cheap, bogus nature-based offsets muddying the waters) is that it’s a bit complex to understand. 

To demystify it, I sat down with a real life buyer on the marketplace, Alan Greenberg, CEO of Minett Capital and Greensoil Ventures. Alan is a seasoned investor, developer, and manager of real estate with a passion and history of incorporating technology and sustainability into his developments. 

Greensoil Ventures is also an investor in WattCarbon. As Alan told me, one of the advantages Greensoil has is that Alan’s skillset is not that of a venture capital investor. His skillset is that of a user of real estate. And that’s the perspective he’s providing for us. 

Why would a real estate investor invest in carbon offsets that decarbonize other peoples’ buildings? 

Greenberg made it simple for me. He said the office building they chose to offset (where their offices are located) had several lease renewals coming up. The team at Minett felt that if they could promote it as a net zero carbon building, those renewals would be safe. 

The problem was that, while this building is efficient, it wasn’t economically or operationally feasible to tear up the mechanical rooms, plenums, and chases to get all the way to net zero. In Alan’s words, it “was pretty close, but we weren’t there.” 

So WattCarbon allowed them to bridge the gap between what they could do by retrofitting and what they needed to do to get to net zero. 

This is exactly the scenario that WattCarbon was built for. McGee Young, CEO, told me, “Like Alan, most building owners haven't chosen to have (fossil fuel burning) equipment in their buildings. It was there when they bought the place. And oftentimes it's running pretty well, so they don't necessarily want to tear it out at the moment. But they do have this aspiration of trying to do their part to reduce emissions (and profit off of it).”

McGee told me there are three main obstacles for building owners like Alan to decarbonize their own assets. First, we don't really have great data systems to measure and manage building emissions. We typically focus on utility bills, but our utilities do a pretty poor job of connecting the dots for us. 

So WattCarbon built a platform that was capable of tracking the hourly carbon emissions for every single building in the United States on demand and in real time to provide the data infrastructure we needed to do something about this problem.

The second obstacle is the way carbon offsets are currently procured. They simply don’t result in real decarbonization. The flawed idea is that we're going to be pumping this carbon out, but if we can just absorb enough of it, we'll be okay. But we can't plant enough trees to solve climate change—we need to stop the emissions at the source.

“If your bathtub was overflowing, sure, you want to put some towels on the floor to mop up the water, but the first thing you want to do is turn off the tap.”
—McGee Young, CEO of WattCarbon

So WattCarbon’s goal was to rebuild the environmental commodity markets with a focus on turning off the tap. How can we eliminate carbon emissions from buildings in the first place? We need to allow the concept of an offset but then pump those funds back into buildings. 

The third obstacle is the capital expense required to retrofit buildings. Financing is an option, but the added costs oftentimes make it impossible to get these projects to pencil out. So McGee says we really need to rebuild the capital stack for investing in buildings by creating a way to recognize the financial value of decarbonizing a building. 

The marketplace launched by WattCarbon in the fall of 2023 is the first step in overcoming these three obstacles. So how does it work? 

First, offset buyers like Alan make an advanced market commitment, which sends a message to the suppliers on the WattCarbon marketplace: “If you can reduce carbon emissions, we'll make a commitment to buy X number of tons of those emissions, but we're only going to pay for what you actually end up reducing.” 

This commitment then allows suppliers to go to their customers knowing that they'll get paid for those emissions reductions. For example, they can reduce the upfront capital expense of the retrofit. 

And when it comes to the types of suppliers on our marketplace, they match up with the two pathways to decarbonizing buildings. One is through the grid (e.g. Solar Installers like Solar Holler in West Virginia or Demand Response providers like Leap) and the other is directly through the building (e.g. Retrofit contractors like Elephant Energy, BlocPower, and QuitCarbon).  

I spoke to one of those suppliers, DR Richardson, who is cofounder and CEO of Elephant Energy. They install heat pumps in homes in Colorado and Massachusetts.

DR again brought up the upfront cost, saying “A heat pump provides about a 25 to 30 percent carbon reduction for an average home here in Colorado, but that comes at a more expensive price. We need to decarbonize 60+ million homes in the US and we have to do that as fast as possible. The only way that happens is if it's a brain dead economic decision every single time.”

DR sees platforms like WattCarbon as a really critical component to be continuing to drive the cost down for people to take advantage of the fact that they are decarbonizing.

Once the supplier completes the project, WattCarbon will quantify those emissions reductions and pay the suppliers per ton of carbon that they're able to reduce. The offset buyer is supplied with an “Energy Attribute Certificate” and associated analytics, allowing them to track & download granular, auditable carbon data from every project they funded.

One final, important role WattCarbon plays as the marketplace platform provider is aggregation. They aggregate offset buyers’ commitments into buckets of funding and match those buckets with portfolios of aggregated decarbonization projects from the suppliers. 

Want to explore this concept further with the team at WattCarbon? Reach out to us and we’ll connect you with them. 

—James and the Nexus Labs team