Reinventing Venture Capital for the Energy Transition with Evan Caron (Montauk Climate)

Welcome back to Transmission. Today, Q sits down with Evan Caron. In this conversation, you'll hear how Montauk's venture studio approach has spun out ten companies in just two years, tackling everything from power quality insurance to grid enhancing technologies. Evan also shares a story behind ElectronX x and explains why our aging power grids are struggling to keep up with AI demands and renewable energy integration. It's an eye opening discussion about the intersection of energy and venture capital. Want the latest news, analysis, and price indices from power markets around the globe delivered to your inbox every week? Subscribe to the weekly dispatch, Moda Energy's email newsletter.

Now, let's jump into the conversation.

Evan, welcome to the podcast.

Thanks for having me.

So let's let's get stuck in then. So Montauk Capital, what is it?

We're a venture studio, and we build, platforms, and we build platforms around ideas that we think need to exist in the kind of combination of the electron economy, which is, the the the the the term that we coined was really around the convergence of all things, electricity, all things energy infrastructure.

And, fundamentally, those there was a lot of businesses that were disparate, and now they're all coming and converging. So it's the convergence of all things around in and around electricity.

And just so our audience, understand, you you've got a a bit of a different approach to building companies on Montauk Climate. So, rather than a typical incubator where entrepreneurs apply to be part of the incubator and you fund them and you help them get off the ground, it's the it's almost the other way around that you come up with the ideas and build the companies very successfully and build the management teams and go and take markets. Right?

Yes.

So can you just talk a little bit about that?

Yeah. We thought that there was a a kind of a break in the traditional venture model where, you know, founders show up. They grind for a year or two. They try to find cofounders. They try to go raise money. We saw a break in, this category because electricity, energy, commodity, infrastructure is extremely nuanced. It requires subject matter expertise.

And, we felt like there was a better way to build businesses in this in this category, in this in this sector.

By way of background, I worked at Sidewalk Infrastructure Partners for a while for about a year. They do their model is based on these thematic sprints where they go very deep on an idea. They build conviction in that idea. They build a management team, and they go spin that up.

At at Riverstone where where I was a venture investor, the original idea for Riverstone was Riverstone Ventures or Riverstone Studio where we would come up with ideas that would disrupt the Riverstone portfolio, and Riverstone employees would basically run those run those businesses. Wow. And so that was the original concept. I always had this model kind of in the back of my head, and I was lucky enough to meet Phil Crim, who started, Casper, who has a a ton of experience in scaling and launching venture businesses, is a very successful investor.

For our European friends, Casper is the pretty much the number one direct to customer mattress company in the US. So if you if you, yeah, your mattress in a box, the whole thing was pretty much started by Casper.

Yes.

And, yeah, if you're you're European, that's what an Emma mattress is in the US. And they're really popular for dog beds as well. My my dog's got a Casper bed that he loves.

And, yeah, through that process, he learned everything from, you know, the you know, how to operate high functioning teams, how to operate through adversity, how to take companies public, how to take them private, m and a, venture. And so he brings a really, nuanced approach and a different approach to this this this category. And so venture studio, you know, we go very deep on ideas. We do deep exploration, deep research. We underwrite core themes in in in this market, whether it's compute, whether it's digital infrastructure, whether it's accounting systems, ERP, AI, physical infrastructure, moving away from hydrocarbons into elect into the electron economy.

And, we recruit custom teams and cofounders to lead those businesses that have deep subject matter expertise. We fund those companies as long as they need to be funded. We build the platforms, and we we scale them up and roll them off the balance sheet. And we've done that now ten times over the last two years. We've hired ten CEOs, probably twenty, thirty executives, have raised capital for almost, half of those companies already, and the other half are coming to market pretty soon. And it spans everything from insurance to space to data centers to cryptography to AI to digital infrastructure, to ERP systems, and everything else in between.

But before we talk about that, because there's so much to talk about, if you wouldn't mind, many of our listeners will know Elektronix.

Of course, you founded Elektronix.

Could you just talk about that and that journey for a few minutes?

Yeah. Absolutely.

Because, very impressive company and, has come a long, long way.

Absolutely. Yeah. So I've been in the energy markets for since two thousand three. I started my career at Morgan Stanley managing power plants. I got obsessed with electricity because it was such a complex asset class. I didn't even know coming into that job day one, I didn't know that you could trade power. Like, I didn't think it was a you know, I I grew up watching Wall Street and trading places and, you know, I knew, you know, pork bellies and frozen concentrated oranges.

I think Just by the way, that film has not aged well, has it?

I just it's still hilarious, but I cannot believe just different just a different time, wasn't it?

Wow. But a classic.

I I bought a classic.

Don't get me wrong.

It's still a classic. But I put it on, I know. I found it on a DVD in a Airbnb that we stayed in about five years ago. We put it on, and it was just so funny, but I just can't believe they got away with it.

They did for sure. And, again, I mean, the cast is amazing. Right? And, and, and and so growing up, I always I always loved the trading world.

And so I found myself in a in a in a weird role at Morgan Stanley. I was in the middle office and back office, and it's really hard to make the jump from a back office, middle office person that's doing debits and credits on the accounting, you know, on the in the accounting group to a trader. And so I spent about two or three years figuring out how to get to the front office, and, I got bit by that bug and and haven't turned back. Right?

And learning about electricity derivatives, learning about complex power flows and, congestion and transmission and power assets was just an it turned into an obsession. And, for ten years, I sat on Wall Street, trading complex electricity books mainly in ERCOT. I I was early an early user of ICE. I was an early user of Nodal exchange.

I was a early user of NGX, which was, an exchange managing physical commodities. I was involved in everything from credit to trading to counterparty novations. We did a lot of structuring and transactions. And so end to end, the trading the trading business was known soup to nuts.

And, in twenty seventeen, I helped, Sean Kelly and Abe start Amperon, which is, like, the large load forecasting business, an AI company. Another awesome business. Yeah. I mean, Sean's been a friend for fifteen, twenty years.

And so I was in the room when they came up with the idea. I was asked to be cofounder. I was a I was already CEO of another platform and kinda had to see that thing through, which was a platform called ClearTrace.

And I always had this idea that ICE the ICE, platform was just it's a, exchange for the big the big institutional traders.

Large Yeah. You can't sit at the table without serious caps on anything.

And when we first started, it was very easy to get an FCM. It was easy to start a, you know, a book.

What's an FCM?

FCM is like a financial clearing merchant.

There so you can't be an exchange member. FCMs are the exchange member. And so if you trade on ICE, you're not actually an ICE member. You're you go through an FCM.

FCM is your agent. And they provide credit. They provide clearing. They provide accounting. They're like a prime broker.

And at the time, the power volatility was not very high, and so it was very cheap to get an ICE account. Like, you you you posted a couple hundred thousand dollars, and you can start trading. After, two two thousand eleven in ERCOT when prices exploded and after twenty eighteen, the price the the entry ticket to get an FCM went from a couple hundred thousand to, like, fifty million.

And so it cut out every so every and and we and I was running Trailstone's trading business on their electricity side for years, and we created services businesses to help, renewables that have no balance sheet and smaller, CNI customers access the market. We were kind of the the agent, and we were taking a fee. We were taking anywhere between one and six dollars a megawatt hour for every transaction that we that we facilitated. And that's how the banks made money on their mid marketing business and their origination business.

And so we so the the thesis for ElectronX was we need more democratization of this market, and that was just the original concept, democratization of electricity markets. It just so happens that the electricity markets were also going through a massive once in a generation transformation. We went from, spinning reserves and power plants that had inertia to renewables and inverter based grid. At the time, we were retiring assets.

Coal plants were going away every day. We were losing natural gas assets. The nuclear fleet was gone. Right?

Everyone was talking about retiring nuclear. And power volatility was still, in its kind of, like, we'll call its infancy, but we weren't seeing a ton of volatility. Then the world changed. Right?

We've got we've got gigawatts of batteries. We've got tens of thousands of megawatts of solar, intermittent resources, demand response, demand side management, natural gas pricing, and data centers. The data centers is kind of like the big moment. High performance compute changed everything.

And we saw we started seeing, like, little bits and pieces of this market emerge. We saw Voltus and Eneronoc on their demand response side. We saw what Caruso was doing on Bitcoin mining and curtailing loads during high peak periods. We saw what m p two was doing.

We saw what Ampere was doing around four CP management. And we said we should build an exchange that focuses on everyone else, not Vistra and NRG. Of course, they'll hopefully participate, but it's really around the renewables Smaller players.

The smaller players, the renewable providers, the battery operators. And so we said, why don't we actually build the CFTC exchange? CFTC regulated derivatives exchange that enabled access to the market democratized access to the market with a fully KYC compliant way. And so Philip and I, had the idea originally.

We always knew we weren't gonna run the business, because we always wanted to be kind of the advisers and board members and investors functionally. And so we spent about six months, trying to find a CEO that shared our vision, understood high high frequency trading, understood the market dynamics, could run a business. And we met Sam, who's the CEO now and is running the show, and he's doing an incredible job. And he's been able to get great partners and great investors.

And, you know, once the CFTC, approves the exchange, it's, you know, hopefully gonna fundamentally change how electricity is managed, how it's traded, how it's settled, and it should usher in kind of, like, the the next phase of of commodity, exposures for electricity markets.

And is the vision for Electronix to move liquidity to Electronix from existing exchanges, or is it to create a new pool of liquidity for the folks who, yeah, didn't couldn't couldn't afford the buy in?

Yeah. And, again, just for for, like, full disclosure, I'm out on the board. I'm I'm I'm a helpful adviser and a and a meaningful shareholder. I think in general, it's an abundance opportunity.

It's not it's I think the goal is to not necessarily, try to take market share from ICE or or Nodal exchange, but really around there's so many new there's so many market participants that need to go through a middleman. They need to go through a retail energy provider. They need to go through a EMA desk. I think that's where you see some significant growth and growth in in in customers that don't hedge at all.

Right? They just take whatever the whatever the market gives them. They're they they're, index customers, and they don't know their exposure. I think that's where we see just a a a an incredible amount of new market and new flow and new liquidity, that didn't exist before.

So let's switch lanes then to go back to Montauk Climate where you have an entity that is creating ten plus ideas at the moment that you're hiring a management team to go and build businesses in. And you you covered a broad range there across, you know, power renewables, but also space and data and infrastructure.

Could you just give a couple of examples of the the companies that are being set up as part of that? And then I really wanna ask you about, the grid infrastructure theme because you went pretty hard at the grid infrastructure theme.

Yeah. I I would say that we initially started with grid infrastructure as being one of the biggest challenges that we're that the US was gonna face over the next ten years, and it's because of all of the the data points. Right? We have aging transmission infrastructure.

We have new load profiles. We have dynamic load profiles. We have high performance compute. We have wind and solar.

We have inverter based systems. We have new SMRs showing up. We have repowering of of old assets. We have load growth in areas we never had load growth before.

We have extreme weather events. And so all that kind of culminated in this thesis around, it's not just about power quantity, it's about power quality. And the first company we incubated was a platform called Adaptive Insurance. And the idea around Adaptive Insurance was to create insurance for small and medium sized businesses that were negatively impacted by, climate related events, so like severe weather.

And the first product we launched, and it's a first of its kind, was a power outage protection policy, where if your power goes out for any reason, whether somebody, you know, hits a transmission line or there's a weather event and it goes out for a period of time, you get paid. It's a policy that pays you out. And so if you're a bar or restaurant, if you've got spoilage, if your refrigerator goes down, and it's a data driven platform. They use data.

They use intelligence. They're able to validate that the power went out for the the specific period of time, and they pay you immediately. There's no claims process. It's a parametric insurance policy.

And the first of the first policy basically a derivative.

Right? Every everything is a you oh.

Well, this is it's a derivative, but in in the in the in the eyes of the regulator, it's a it's a non admitted insurance product. And it has to be sold through insurance brokers and insurance agents, and it's an insurance product. It's not a it's not a there's no it's not a driven in the fact that, like, you put on a trade and it's regulated by the CFTC or it's regulated by, you know, a trading organization because it's a at risk product. It's a risk reducing product, and it's so it's classified as an insurance product.

And so if the power goes out and you're in and you have and you have coverage, you get paid. And if you lose if you lose income because you're a restaurant owner and the power's out and you can't pay your employees and you your food goes bad, we cover that. If you're if you're a a beer garden in Austin and it rains all week, we're gonna be covering that. If it's, we're gonna be looking at all climate perils from flood to fire to hail to snow.

Power outages is is probably the most complicated because it's kind of the, it's there's a ton of covariance risk and weather to power, but the idea was power quality was was a problem across the US. Power outages cost, small and medium sized businesses fifty, a hundred billion dollars a year in losses. And so huge huge market, huge opportunity, underwrites the thesis around power quality, underwrites the the thesis that we had around resiliency, and allows it to express a view in a CapEx light way.

Very, very cool.

And the CEO of that platform was the first ten employees at Hippo. So understood high growth InsurTech solutions. The platform just got reinsurance capacity, launched in July, already got customers. It it's off to the races. We think that's one it's gonna be hopefully a really big platform. It's Austin based as well.

Shout out to Austin, of course.

Let's do another one then. Tell us about another one of those businesses in the in the in the group.

So we have a, again, speaking to the theme around power quality, one of the biggest Power quality is one of my favorite subjects, for always.

I this is a very niche and and very important thing.

Yes.

And, yeah, you have anything to do with inverter systems. Spend a lot of time thinking about it.

So we, strangely enough, through research or some some stumble like, you know, there used to be a website called StumbleUpon where you just, like, just like Yeah.

That's such a such a good website. There's obviously no need for it anymore. Yeah. No.

But It was like a Chrome plug in that had this little thing.

If you didn't it was a yeah. Chrome plug in where you press if you're ever bored on the Internet before, the search was around, but it was kind of rubbish.

Yes.

You just press stumble upon it. It would take you to this, like, magnificent website about, I don't know, anime and forests or, like Yes. I know how a bridge is constructed. It was just it's just it was great.

So through some stumble upon inspiration, we stumble upon an article that Quinn Brook Infrastructure Partners, which is, an investment platform here in the US, they were developing, a synchronous condenser in in the UK. And it's like, wait. They're spec developing a synchronous condenser? Like, what what are they what why?

Like, what what's the point? Like, why don't you just put a battery in? And and, at the time, I was scratching my head. I'm like, they're, clearly, they they're thinking about power a power quality problem.

They're they're gonna sell an ancillary service, or they're gonna sell a a, grid stability service to the utility because there's clearly a problem. And, like, I guess, like, one piece of copper wire up there. It's it's a slightly different model. But we we started to see the, like, cracks in the in the, react in issues around reactive power flow, voltage, droop, and and I've been a power trader for a long time.

What the ISOs used to do in the T and D companies is they would say, oh, we've got a problem here. Let's just derate the lines. Let's, like, actually, like, we know there's gonna be a voltage issue here because of some grid topology issue, an outage, a generator outage, a transmission outage, some construction, etcetera. So we'll just derate the line.

We don't wanna work we don't have to worry about it. And so they created these generic transmission constraints. They created, remedial action plans. And they said, like, if we get a voltage problem, we'll just derate the line and and it makes the grid really inefficient.

Right? Because you've got all this fixed infrastructure. You've got all this n minus one contingency everywhere, and all they do is just derate the line. And it and it's a cost to consumers because it causes congestion.

And so there's a there's a a whole, like, you know, cost issue around, like, consumers are paying more for the the infrastructure.

But we also saw, through the last couple months, we've seen, issues in Virginia around data centers tripping offline or potentially causing cascading issues. And then the big moment was the Portugal, and, and Spain blackout.

And we said to ourselves that the the transmission grid has been focused too much on power quantity and not enough on power quality. And so what are the technologies that exist today and what technologies needed to be be developed to support grid enhancing technology, called GETs? And these are devices like fax, like synchronous condensers, like static compensators.

Some people are working on solid state transformers. But the the whole comp the whole idea is that the power grid was designed for a completely different set of assets than exist today. So we had a power grid that was inertia based, spinning reserve based, where power was generated at the transmission level and delivered to the distribution level. And, it was on demand.

It was dispatchable. You hit a button, it went up. You hit a button, it goes down. And the load and the demand side was predictable.

It was hot. Load goes up. It's cold. Load goes down in the wind in the summer and vice versa in the winter.

And it was and the the way that the grids were operating, you could operate with, debits and credits, and it worked. That's not the case anymore. And so we, are quietly, launching a platform that is, with the intent on helping grid operators, trans T and D companies, renewable developers, data center developers enhance their voltage characteristics, reactive power flow characteristics so that they can operate as better actors on the transmission grid. Rather than the utility saying we're we're gonna have to constrain everything, we're basically bringing our own MBARS to the equation.

And so if we can do that, the assets become much more grid aware, much more grid integrated or or or and and the utility companies, the transmission companies won't have to push back on saying, you know what? We can't handle your asset because of one reason or another.

And so this is on at the load.

So this is at a data center or this is you know, how how in front of the meter.

It could be behind the meter, but it's really around identifying the right types of resources that will support new load or new generation in the existing transmission, system rather than a utility coming back and saying, you know what? We'll be able to interconnect you in seven years because we need to build a new substation, new capacitor banks, new transformers, new infrastructure. It's how do we leverage the existing infrastructure to make your asset compatible with your location. That's kind of the big the big idea around power quality.

Power quantity, you still gotta find those electrons. But it's how do you how how can we make your asset perform better and and be less of a strain or less of a of a, a drain on the utility resources. And so you're already starting to see this happen in the software side. Obviously, Google, Emerald dot AI, which is a company that launched, was talking about throttling data center load, to make it more utility aware.

This is really around pulling through data and awareness on what's going on on the transmission system. So this this, overlays into dynamic line ratings. This overlays into companies like Splite, which are doing more AI based, algorithm algorithmic line management or, transparency and what's actually going on in the transmission grid, it's very much a play on on on that theme.

Yeah. I I think actually one of on my bingo card for the next few years, because I I think the world is underestimating the amount of flexibility that's gonna come from data centers. There's an assumption that because they're critical infrastructure and they needed a lot of uptime, that they are, uncontainable. Yep. But that's not the truth. That's not that's not really how it works. And, there there's a lot of flexibility available in these data centers, which I know, you you spend a lot of time thinking about.

We're actually working on a company, that that is, also coming out of stealth that is very well positioned to manage that flexibility. And it's doing it in a way that is not on the hardware side. It's it's doing the way on how jobs are are routed to the data centers and what what hardware should be should it's basically I I I don't wanna over underestimate the complexity, but the idea is not every job is is positioned for every piece of hardware. And if you can control how hardware is is provisioned and spooled up and managed, you can you can it's you can increase the level of flexibility of those data centers. Not on the design side, so not about HVAC and liquid cooling and and PUE, but really around around managing inference and managing training workloads and managing Kubernetes clusters and figuring out how to do it before it gets to the data center. That's kind of the idea. More of an orc a, MCP orchestration layer for, for AI.

Yeah. Because not all compute is real time. Not all compute is required now.

A lot of it can be batched or done overnight or, you know, it tends to be There's a company called Run dot ai, which was acquired by NVIDIA, and they're they're a scheduler.

They're a compute scheduler. We're building an intelligent compute scheduler. And, we hired an amazing CEO.

We should be in market. We're we're in piloting with a number of customers now. They love it. They say it's saving them money.

It's saving them time. It's a hybrid ML ops, scheduler platform. And, again, it it plays into like, you say you're a climate company. You're Montauk Climate.

Why are you building an AI auto scheduler? It's all touch like, that's why the the it it all plays into this theme as a catchall of electron economies.

It impacts how you manage your resources. So if you can build a more aware data center, then you could build a less, energy intensive data center. You might be able to build in a different place. So you you you think about you you're reframing everything from a, from, and you basically take a commons approach to everything.

Everything has if you think about everything might be resource constrained, and you and you use it in the lens of Electron, you rethink PUE profiles. You you rethink how you manage compute, how you build a data center. We launched a platform called GridFree that's building off grid data centers. Again, same same reason.

We think that the grid is challenged. We think time to market is important. We think data centers historically were managed as a real estate manage real estate business and a land business. It's a real data centers are power plants now.

They're utilities. You have to rethink how you build a data center, how you design a data center, how you optimize a data center, how you operate a data center. And there's tons of companies that are building, you know, picks and shovels across the the landscape. You've got compute marketplaces now.

You've got platforms like Emerald AI. You've got platforms like Tapestry. You've got platforms like Recurve. They're all trying to figure out how to, like, build software to connect to hardware, connect to business models.

It it it's it's such an exciting time, and it's like now it's we wanna we wanna build winners in that space too.

Let me ask you about the word climate because it's in your name, Montauk Climate, but Climate's had a bit of a rough ride the last few years. So what do you think about that?

I think it's a backlash against e against, like, ESG mandates and and specific, you know, ESG was a catchall. Like, it's, you know, environmental, social, and governance. And so, you know, yes, there was an o overallocation in rigid frameworks that overallocated capital to potentially bad ideas because they had an ESG lens to them or they had an ESG, positioning.

When I think of climate, I don't think of climate change. I think, like, we're like, everything I I guess we can call it Montauk Earth. We can call it Montauk, you know, resources. You know?

I mean, it it's really it it's how you view the word climate. I think most investors who invested in climate were ESG investors. They were fill there's a lot of philanthropic capital that went through it, and there's a lot of clean tech. We're not necessarily a clean tech business.

We're not necessarily a business that is focused on a specific target for carbon reduction. I think the things that we think about is related to, if I probably had the ability to rename the company, we would have probably started as ModTalk Commons, which is, like, thinking about everything in a commons, mindset. Right? Like, Elinor Ostrom style. I think we probably would have done that, but it might have been a bit too no one really understands it, like, unless you've studied economics and studied, you know, what what commonses are and tragedy of commons. I think, you know, there are still a lot of investors that care about, sustainability, that care about rethinking how we manage resources.

And so climate at the time, you know, was, was not as so polarizing.

I'm glad we didn't call it Montauk Carbon. Right? Or, but we like we like the name. It it it's kinda still catchy. It still rolls over. Like, we haven't seen we're we're building businesses of real consequence, and I think, you know, we could call ourselves, you know, Montauk Sewer, and I think we're we're in a we're we're fine.

You know, sewers are sexy again now. That's right.

Yeah. Waste management.

Yeah. Waste management.

Waste. I think, you know, again, there's a political there's a political lens to climate because it's got that negative connotation with ESG. I think there's, again, a lot of very lot of businesses didn't survive because they required concessionary capital, which which is, you know, money that just is pouring in whether there's it's a good business model or not. And I think for us, we're not attached to requiring concessionary capital or philanthropic venture to make these business models work. What Philip says and the way that he coined it was, pragmatic companies of consequence.

And so these are businesses that are stand alone businesses that can make money. The fact that it does have a climate angle to it allows us to operate with a broader aperture. So we're we're you we're incubating something in the water space around water scarcity and atmospheric water generators. We think that that's a technology that has a distribution problem, not a technology problem.

And so that allows us if we were just Montauk electricity or Montauk energy, we would we would really limit our ability to kinda get out there and do things of that also have that also check, like, the emotional box. So, like, if we can create, reduced water scarcity globally in in either the global south or areas where there's a a a drought stricken or water issues, like, that checks my that, like, pulls on my heartstrings and allows us to still maintain us to be climate positive. We're not gonna do anything climate negative. Like, we're not gonna go drill for coal.

We're not gonna go and and, you know, meaningfully pollute you know, try to, you know, over fish fisheries and destroy ecosystems. And so, like, we're just yes, it's a it's a we're actively thinking about how to leverage the climate angle without without, becoming an you know, without, like, toeing the line of, like, an ESG company or a company that requires concessionary capital.

Quick break. If you listen to this show, then you probably work in energy. And at Modo Energy, we're not just talking about the energy transition. We help our users to actually make it happen. All energy storage, solar, and wind assets on the global balance sheet need to be valued and benchmarked.

And that's where Modo Energy comes in. Our benchmarks and forecasts are transparent, bankable and trusted by the world's leading banks, asset managers, utilities and developers. So if you want to learn more, go to motoenergy dot com. And if you want more content like this, sign up to our weekly dispatch newsletter.

Enjoy the conversation.

So then going back to data centers, which is clearly a core thesis, and it is one of the defining aspects of the the electrification wave right now.

If you're allocating capital to companies, do we have to worry about there being a bubble here? Will will all of these you know, will will will the load that we expect it's a bit of a loaded question because we've spent a lot of time looking into this and thinking about it as well. But what do you think about load growth and data center build out? And do do you think we're at risk of a bubble here?

I think very similar to early, technology transitions, there are bubbles inside of a larger bubble, or there are there are assets that are overpriced relative to the growth in in the market. Do I think we're gonna slow down on the AI of everything? No. I think we're everything's gonna have AI powered.

Whether we're gonna have hardware at the edge in your phone that's gonna be able to do really, like, four bit computation, and your, like, your spell check's not gonna go into the cloud. It's gonna go and your grammar check is gonna be on your phone. And, eventually, like, all the the, the translation services and all the things like your AR is not gonna be cloud. It's gonna be edge.

The inference workloads around IoT and autonomous driving and autonomous, aviation and some of the the high complex workloads that require inference, they're gonna be cloud or fog or edge. And then you have the training workloads and some of the more computationally intensive things like LLMs and training and and the hardware, heterogeneity the hardware mix that we're gonna see is not just gonna be NVIDIA h one hundreds. We're gonna see similar to application specific circuits like Bitcoin miners. We're gonna see hardware that is gonna evolve to not be generalist, but specialist.

The things that cause me pause in the kind of the everything up into the right forever is that we're not gonna be able to build all eleven thousand megawatt hyperscaler sites. Like, Fervoe Energy or Fermi Energy is eleven thousand megawatts.

Star Stargate, five thousand megawatts.

Fed Meta and Facebook, five thousand megawatt hyperclusters in these giant clusters.

I think what we're gonna see is But some of that some of those are committed to build.

Right?

They're committed to build, but not the whole, like, not the whole thing. Like, they everybody talks about the big headline number. They don't talk about the phases to get there. Nope.

If if I told you I've got a hundred percent conviction that I'm gonna build a fifty megawatt data center, that one's that that's not gonna get any headlines at all. Even if I have amazing technology, and I'm using geothermal, and I'm carbon sequestration, and I'm doing all the things, fifty megawatts doesn't move the needle anymore. It's only the everybody's just bragawatts again. I do think that there's a bubble in land, and I think the power land bubble is going to is going to burst.

And the reason is is there's not a lot there's only seven or eight companies that could sign the long term leases that allow you to actually construct, finance, and develop these projects.

That are credit worthy.

That are credit worthy. An AI company that that's scaling to a hundred million of ARR that has five hundred million dollars of cost, they can't sign a twenty year p p twenty year lease. There might only be a dozen, maybe more.

Maybe maybe that.

It's a little bit WeWork y.

That's right. That's right. And so the power I think powered land has has you've got a lot of land banks, and you've got a lot of powered land plays. And I just give you an anecdotal example.

One of my friends, runs procurement for a large data center colo provider. And he's like, hey. I've got seventeen sites that I'm that I'm seventeen locations and markets that I'm looking for. And I call CBRE, and CBRE sent me a list of seventeen thousand megawatts for what they want of two hundred they want two hundred and fifty megawatt site.

They have seventeen thousand powered land assets just in one state in in east in in Pennsylvania.

And they're all say, power available twenty twenty eight, twenty twenty nine, permits, land acquisition, five hundred acres, near substation with water, with fiber. There's too many of those, and I think that the market might have over overestimated the, a, the ability to actually get the power to the to the site, b, the value of that re of that real estate. It's they they can't all be data centers. They before, they were warehouses.

They were three p l facilities. They were Amazon distribution facilities. They were Whole Foods cold storage. If you got a Whole Foods cold storage facility in your in your in your industrial park, you crushed it.

Now everybody's waiting for Amazon, Meta, Facebook, Google, CoreWeave, or, Microsoft to lease that land. And there's just there's not that many like and you've got every market in the country wanting the same thing. So everybody wants to build in the tier one markets. People went nuts.

They went into tier three markets where no nobody lives, and they say, well, I need power. Now they're coming back and saying, you know what? Honestly, I just want the best sites near load areas that have no flood risk and that that that I can get power, I can get gas, I can build behind the meter. And so I think that the bubble is not necessarily in, are we gonna build more data centers?

I think if you look at the number of data center interconnection agreements and you you look at it's the same thing with batteries.

It's the same thing with batteries. Yeah.

Yeah. We saw what how many how many interconnection agreement for batteries are in Erkut? A hundred thousand megawatts?

More? How many are actually gonna get built?

Five percent? Maybe ten percent? Maybe?

I just don't think we're gonna see that as and in in this in this way batteries, it's even it's, I did this in inverted inverted commas, but it is simpler for batteries because you don't you don't need As much.

You don't need gas for on-site on-site generation. You don't need water. You don't need fiber. You can get you can get fiber.

But, yeah, it it should be a little bit simpler for for batteries. But then you do have the second order effect that then then the technology becomes the the the bad guy. Right? So in the newspapers, it becomes, you know, the the whole system is clogged with data center applications, or the whole system is clogged with battery applications.

And it's not the asset class itself that's the problem. It is the what if this is the market.

It's the market. Developers. People wanna make money. Right? They and you make a lot of money.

If you if if you take a raw piece of land and just orders of magnitude, you take raw piece of land and you entitle it and you do the work, you make a lot of money. You get rich. I mean, Caruso has got a ten billion dollar value. They're raising a billion dollars and ten billion dollar valuation.

Lansium, they've got they got in early with Bitcoin, and they got a bunch of power land, cloverleaf infrastructure, power land place.

I think that, I do think that not all those projects are gonna pencil. I think a lot of there's gonna be a lot of at risk capital that just gets kinda lit on fire, and I think I think that the land price, is is a bit is bubbly. I think that's the big bubble. And I don't know if it there's no burst because these are these are long term landowners, and so, like, it doesn't create, like, a cascading issue.

Like, if NVIDIA's, you know, if NVIDIA stock dropped fifty percent tomorrow, that would just you know? But you see, like, how sensitive the market is. Like, Sam Altman comes out and says, I think AI might be a little bubbly, or MIT comes out with an article saying, you know, Gen AI has zero r negative ROI. And you see the markets.

They they're so, like, they're so it's everything's on a hair trigger right now.

I think when you look at the Well, we've got we've got NVIDIA earnings today, I think.

I haven't even seen my phone, but they're gonna crush it.

Yeah. I'm sure. I mean, they they have an unlimited demand. Right? I mean, they they are a behemoth, and everyone keeps buying.

I think if you look at some of the older the companies that have been doing this a long time, they are saying themselves, why am I gonna increase supply? Like, I don't know if this is real. I don't know if this is is gonna persist. And when you talk to and they could either be right or completely it's it's a binary outcome.

Like, they're either wrong or they're or it's either they're wrong and they missed it or they're right and they know this is just, like, every other super cycle or every other, you know, cycle of, like, you know if you look at that curve, like, that that you see every time, like, you see that, like, that adoption curve or that s curve or whatever that curve is, where you look you know, they say it every time crypto drops or every time the market drops, it's like you've got this, like, irrational exuberance, the market peaks, and then you have a valley of despair, and then people start capitulating.

Like, it's the same. It's like a it's a there's an there's it's emotional.

It is it's not, a rash it's not rash it's not a rational market right now. It seems irrational. And I think when you look at folks that are really, really smart in this industry, you you can make the the claim that AI is gonna eat everything.

And and if you if you believe that story, then all everything I just said means means nothing. Right?

Because, you know, we're gonna have machines talking to machines and it's gonna be Terminator and, like, the whole thing is gonna you know, humans talking to agents.

To SoftBank about it. We haven't even got started. Right?

Yeah. So they're they're saying we're in first inning.

Yeah. Yeah. Yeah. Yeah.

But but that also flies in the face of, like, the fact that, like, you know, they say, like, Javon's paradox and whatever else is gonna get cheaper and people are just gonna use more of it. What happens and, like, the the, like, the counterargument or the my contrarian view is that what happens if there's a breakthrough in the physics and there's a breakthrough in the in the code, in the software, in the DeepSeek moment, whether DeepSeek's real or not.

If there's a moment where they are able to modify how transformers manage LLMs and neural nets, and they're saying, you know what? We don't need as much compute. Maybe we own maybe we don't need it all. Maybe we only need a quarter of it. Maybe we only need a half of it. If any of that is true, where things are gonna get even more efficient, where you're gonna be able to, have LPUs or, t d TPUs, the tensor processing units like GROC, whether you're gonna move to neuromorphic computing, whether all the really heavy stuff is gonna go quantum, well, then maybe you don't need eleven gigawatts in a hypercluster.

I have the same it's it's an adjacent contrarian view that all that I always come back to, and I'm sure some of our listeners aren't gonna like this. But, I'm not sure I believe the EV charger growth story because you have a similar thing, right, which is that when when cars can only do a hundred miles with a charge, it totally makes sense that you need load of EV chargers on on, you know, motorway or freeway services. But when charges when when when cars can do can do six hundred or seven hundred miles, there is literally no need for them. No.

And do you think it's gonna stop at seven hundred miles in a car? No. We've only just got started. That's right.

We're gonna be beyond a thousand miles in a in a saloon this decade. Right? So why would you ever, ever bother, paying the premium for a service station? And I think the same thing yeah.

You could have this you can make the same argument with, but a friend who always talks about this is really bearish on Bitcoin, and talks about quantum computing basically taking Bitcoin's lunch. I don't really believe it personally.

But I think I think that I have a opinion there. And and so the the algorithm that maintains Bitcoin, is pretty secure from a quantum perspective. The wallets aren't. And so the the biggest risk is, post quantum, post quantum wallets need to be implemented immediately.

So if I was running the Bitcoin Foundation, I would say every wallet from here on out, because it's very easy to build a post post post quantum encrypted wallet. Every wallet from here on out needs to be post quantum. And then all you have to worry about is is Satoshi's, balance, and then everyone else is fine. Move your money from, the existing wallet infrastructure to post wallet encryption, and then the algorithm that, it's a it's basically called, Crystals Dilithium.

It's the NIST approved post quantum encrypted encrypted wallet infrastructure. If you move your coins there, you probably have nothing to worry about.

But it all it all comes back to this thing, which is the the these where it these this boom and bust is about technology s curves That's right.

And and, GPUs are going through the same thing, and, battery cells are going through the same thing, and elsewhere. And it's very difficult to see where the vertical bit starts and finishes.

That's right.

It can go on a lot longer than you think.

That's right. And they're saying, like, the depreciation cycle on some of these GPUs is like Yeah. It's crazy.

It's like Eight months or something.

Right?

That's right. And so, like, there it's just again, I you you I don't wanna call it top in the market, and I and and everyone else who who has, it's gotten blown through. I just think that if you take a healthy view of skepticism, you can still be long the in the right places, and maybe you miss the next kind of, like, leg up in growth, but you're still gonna be able to take advantage of these opportunities. And that's why we started Montauk Climate.

That's why I'm not a public equities trader. We not all of these things need to be true for us to build real businesses that are gonna take advantage of transition and transition times. And so in periods of high volatility where there's contrarian views of boom and bust cycles, you wanna be in this stage of the business early stage where you're you're not banking on one specific outcome to be true. So for us, it increased, adoption of batteries, great.

We're gonna have a different problem to solve. Aging infrastructure. Again, that's not gonna the assets are not getting any younger. They're getting older.

They're gonna have to be replaced. What are they gonna be replaced with? They're gonna be replaced with natural gas. They're gonna be replaced with storage.

They're gonna be replaced with solar. They're gonna be replaced with nuclear. What happens with nuclear? Okay.

What are we gonna do with the waste? What about new fuels, triso fuels? How are nuclear plants gonna be developed? Who's gonna develop them?

Where's the infrastructure gonna come from? Where's the training gonna come from? When we start picking up the when we start pulling on these threads, anytime we go through a period of rapid change, there's so much opportunity. It's just a massive white space because we don't know what comes after the fold.

And so that's why we're we're betting on a bunch of different plays that all have, high levels of conviction that whether AI is a hundred thousand megawatt market or a forty thousand megawatt market, we still do well. If it's a five hundred thousand dollar five hundred meg thousand megawatt market, we probably should be building chips or getting involved in metals and supply chain because we don't have enough.

So that's that's our view.

Yeah. I mean, just even even those references, you know, even if it's only fifteen, twenty gigs, which is on the low side for what load growth forecast. Even another fifteen gigs in ERCOT, things start to fall apart.

Absolutely. Absolutely.

And and it could get a lot, lot crazier.

And we haven't even talked about LNG. It's I do think LNG is still gonna be a thing. And, I don't think, you know, nat natural gas resources in the US are massively undervalued.

I think, you know, if if I was gonna make a call on where the future of natural gas goes, it should go up. I don't think it should be going down. You can't you there's there's a weird, there's a weird situation in the forward markets when you look at commodity markets in the US. The forward power market is not up into the right in any market. It's still backward. It's basically backwardated.

And natural gas is basically free. So somebody is saying, like, either there's a lot of resources coming or there's the load is not real. Yeah.

Or Or Or that we're coming to the end of the business cycle That's right.

And, there will be a demand Yes. Some source of demand in industrial Reset. Reset. Yeah.

Yeah. And then they're waiting waiting to buy.

Yeah.

I I spoke to an unnamed private equity group couple weeks ago that acquired a pretty large generation portfolio, about year and a half, two years ago, let's say. And all of their all of their revenue projections are massively underperforming, but the value of their fleet is up three hundred percent.

Because the doubt the replacement cost for NewGen from Siemens is two, three twenty five hundred dollars a kilowatt, and they bought it for six hundred. And so they're losing money on the assets. The money the assets are bleeding cash because of, you know, oversupply volatility, no weather volatility, low natural gas prices, all the things. But their assets are worth on their book. The book value of the assets are up size.

They're worried about who they sell it to. Who's gonna buy it? So the markets are in a very weird spot. And, you know, if if I had a crystal ball, you know, I would I would be, you know, raising a bunch of capital and either getting very long or getting very short.

But, I do think that we we talk about data centers. We don't talk enough about industrial onshoring, US manufacturing, and LNG and the growth of LNG. And I think those are, you know, those are still very, very really interesting assets, really interesting opportunities, and, you you know, you're gonna need more infrastructure everywhere. And so you need people, you need equipment, you need gensets, you need transformers.

I think one of the cool the cool stories that we didn't talk about is everybody's looking for the same piece of equipment. They're all looking for high voltage, medium voltage transformers. Well, who's gonna make them? Where where can you get them?

Where are they? I mean, are they one year away? Are they six years away? If you build a new facility here in the US, can you get funding?

Can you build advanced manufacturing? Can you make it happen fast enough?

It's so mad because, you know, only five to ten years ago, so transformer plants were losing money and closing down. Right? In the UK, we lost a couple of huge, structurally important trans transformer manufacturers.

And now, of course, they're the most in demand thing.

And we're still seeing very, like, broken models. Like, we see grain oriented steel steel plants being shuttered and retired, and that's we need that for electrical steel. We need, different coal to make that steel for for transformers. And we we're not seeing like, Cleveland Cliffs is like, you know, a ten dollar stock. Right? They're they're having they're having real trouble.

And so we're not seeing, growth in coal prices. We're not seeing growth in met coal prices. We're seeing retirements in grain oriented steel manufacturers to make critical infrastructure.

You need critical infrastructure to build data centers, build LNG facilities, build transformers, build substations, build transmission lines, build everything, you need where how how do you mobilize all that at once? We've only we don't we even with an executive order around energy emergency, we're not it's not a wartime, you know, all systems go. It's still very much like, well, I'm gonna fight that, and, well, I'm the utility, and I don't really want that.

And we're not getting this is a multi stakeholder Hasn't mobilized at all yet.

At all. And people are are are tinkering with, oh, well, we're gonna change how the FERC queue works, and we're gonna change how the first come first serve. We're gonna change how we're gonna squeeze a couple a couple pieces here. We're gonna put a little pressure on on the NRC.

We're gonna put a little pressure on the EPA. It's not enough. This is this is a multi stakeholder process. You know, it's funny.

I saw somebody comment that it wasn't fair that ERCOT was an open market because it's preventing new nuclear facilities from being built. And and and they don't have any clue what they're talking about. They're they're basically positioning for reregulation of this this industry.

And that's these are tech guys that that make money from deregulation, not reregulation. So they're advocating for, a non non a not a competitive market. They're advocating for a a they they're saying the open market is preventing new technology, and they just don't I just don't think they understand economics. They don't understand how the sit how the system works. But, literally, I wanted to respond on LinkedIn because he said, it's not fair that it's an open market, open access market. It it allows all technologies.

And if we want solar, if we want nuclear, we should close it off and just charge a high price. Like, that that's not how this works. Like, that ship sailed. So you missed you missed the boat on that one. But you're getting a lot of people that are that are nonsophisticated, in this category that think they can just, you know, have a view and and express a view with capital, and and, it it probably doesn't work out so well.

So now I'm gonna go to the last two questions. The first one is, is there anything that you wanna plug for our listeners who tend to be electrification people in US, Europe, and Australia?

It's a kind of an all call for really great entrepreneurs and people who wanna be founders. We're always in the business of looking for partners, and Montauk Climate is is is, in a really great position to go build the next set of, like like, category defining businesses. So, yeah, look us up. Come to our Climate Week event. We're we're having an event in New York, last week of September.

Martha Stewart happens to be the, the keynote speaker for that event.

Awesome.

And, we're doing some really fun things. We've got a great team and, yeah, love to love to meet anyone and, yeah, just kinda nerd out on all things electron economy.

And now for my favorite question. So you did talk about a contrarian view a second ago, and I hope you got another one. So what is your contrarian view? What do you believe that not a lot of other people believe?

I mean, these my my my team would kill me for saying this. I think we can make coal clean.

Okay. Alright. Let's do this. Let's do this.

Yeah. I think that if you look at the if you if you believe the story of requiring unlimited energy, You're looking at a lot of money flowing into new technologies that are unproven, like fusion, new fission, new SMRs, MMRs, you know, new light water reactors, gen four reactors.

I would advocate that you could probably spend a reasonable amount of money figuring out how to do sequestration at existing coal facilities cheaper and bring back a lot of jobs into, like, the mark into, like, you know, basically, you know, blue collar jobs in markets that already have this infrastructure.

And I think you could probably do it for less than what we're spending on advanced advanced, advancements in commercial power generation and unproven technologies. That would be my contrary view. That's my personal view. I'm not a coal bug by any means or a coal what what's not a bug? A coal bull. I don't own any coal assets. I you know, full disclosure, I have no exposure any coal coal in my portfolio.

I can confirm you've walked in very clean today. That's right.

You're not Just the coal silt and Yeah.

Yeah. You know, the, there's a Zoolander, you know, he's in, like, the coal mine, like, you know.

Again, I'm not I'm not advocating to, like, you know, for coal miners to come back to the US. But at the end of the day, I do think you have tens of gigawatts of legacy assets that are very, you know, environmentally destructive and pollutive. I think if we could figure out how to manage the coal ash, and and I think if we can manage the if we can figure out how to do sequestration at sub a hundred dollars a a megawatt, I think you beat new nuke. I think you beat new fusion, and I think you actually, in many cases, could beat new new natural gas.

I've got a bit of a dirty secret, which is that I really like coal plants. As an engineer, I I I hate what they do for the planet, and I I hate how much they pollute and all of that. But as as an engineer, when you go and walk around one of these kinda nineteen sixties, nineteen seventies coal plants, it is just it's so aesthetically pleasing, for for one. And then they are just such complicated bits of equipment that if you are an engineer, you just can't help but be wowed by the amount of technology advancement in coal plants, especially modern coal plants.

You know, essentially burning burning the fuel as if it's a a you burn it like it's a liquid. It was just so cool.

But, yeah, I think I am quite glad that they're they're shutting down. I'm not sure.

I mean, there again, very environmentally, insensitive.

I wrote a op ed called, Make Coal Great Again.

It didn't get published. It's okay. Again, that's my that's kind of my, like, little kind of contrarian view that lots of infrastructure, lots of there's so much The the rail system in the US was built for coal.

The transmission system was built around high density mega coal facilities. If we could figure out there's a there's a company called Mantle, based on MIT, and the the CEO who runs it is, like, one of the most impressive guys I've ever met. His name's Cameron. And I would have loved to invest when I was at Riverston, but we couldn't get there.

He's built a, like, a molten salt, sequestration, platform, that is able to hopefully reduce, carbon, by, like, ninety eight, ninety nine percent and reduce some of the, you know, the the the stack, emissions rates. And I think he's backed by Shell and a bunch of other big investors. But, you know, again, I I don't wanna belabor the point here. But if you could make if you could figure out how to clean the coal stack, you've got gigawatts of assets that are available readily available and and a lot of people ready to work in the in the coal.

So I I think if I could bring coal back in my, like, twisted mind, I could bring coal back, then I would run for governor of, like, Pennsylvania or Virginia or something because I'd be like, listen. I'm the I create all these jobs.

The the coal Jesus.

Yes. That's right. I brought it back. But, no, that's kinda me just joking around. But but, anyway, that's a a bit of a contrarian view.

Alright.

It was so great to have in the podcast. Thanks for taking the time to sit down with us. We talked about a lot of different topics. So if you if you wanna find out more about Evan and, the the company and some of the companies they're investing in and creating, then we're gonna put loads of links in the show notes so you can go check them out. Do come and find, we'll both be here for New York Climate Week, so come and say hello. And, yeah, do if you wanna get in touch with Evan, then you absolutely should do. And so thank you for joining us.

Thank you.