Wells Fargo's IN2 incubator: a global sustainability journey
Through IN2, Wells Fargo and NREL work to get clean tech startups through the financial ‘valley of death’ in bringing their ideas to market. Energy Digital spoke to Trish Cozart and Ramsay Huntley to find out more.
Wells Fargo has teamed up with NREL (National Renewable Energy Laboratory) to form the Wells Fargo Innovation Incubator (IN2), an incubator for clean tech startups. We caught up with Ramsay Huntley, VP, Clean Technology and Innovation at Wells Fargo, and Trish Cozart, IN2 Program Manager at NREL, to find out how they offer startups much more than just funding.
Wells Fargo, a long-standing US financial institution with $1.9trn in assets with 262,000 staff across 37 countries and territories, has long been committed to sustainability. Its own 2020 goals range from philanthropy to sustainable financing and promoting a recognition that climate change must be addressed. “Right now, we’ve exceeded our own carbon reduction goals,” explains Ramsay Huntley, citing the firm’s 45% reduction achieved more than two years ahead of schedule. “We’re now evaluating what the next steps are.”
Those next steps include broadening the bank’s sector-wide approach, following a commitment in April to provide $200bn in financing to sustainable businesses and projects by 2030 – with 50% focused on clean technology and renewable energy transactions to support the transition to a low carbon economy, as well as investment in agriculture and waste management. “We see that there are a variety of ways to work in this space. You can support existing businesses – our $200bn commitment speaks to that,” says Huntley. “But there’s also an imperative that we innovate, particularly in the clean tech space where companies are dealing with energy related issues and emission reduction.”
Wells Fargo was quick to recognise what Huntley describes as a proverbial ‘valley of death’ between good ideas that are needed in the energy space, and the financing necessary for a viable business to grow and operate at scale. To help bridge this gap, the bank partnered with the federal National Renewable Energy Laboratory (NREL) in 2014 to create the Wells Fargo Innovation Incubator, or IN2, a mammoth $30mn clean tech program funded through the philanthropic Wells Fargo Foundation.
The partnership, according to NREL’s Trish Cozart, was a natural fit. “We had complementary assets and shared goals,” she explains. “Wells Fargo Foundation has a strong focus on sustainability and ambitions of accelerating a greener economy, while NREL has a mission to advance science, and integrate and optimise systems.” IN2 can therefore bring together what Cozart refers to as a ‘unique blend of resources’, from NREL’s world-class facilities and expert researchers to Wells Fargo’s essential capital and sizeable building portfolio, to give early-stage businesses non-dilutive grants, assistance for technology development, design and validation, and networking with various organisations. Thus, it enables clean tech startups to get off the ground and maximise their contribution to energy efficiency in commercial buildings.
A noble goal, but with ‘clean tech’ such a broad term, how does IN2 narrow the focus and develop viable business opportunities? Cozart admits that clean tech can be “anything that reduces negative environmental impact… when I think of clean tech, I think of using resources to their largest potential. From an energy perspective, this can apply to a great many types of technologies, from alternative types of energy production to waste recovery or efficient use of energy sources and storage. We’re looking for companies that fit that mold – not any particular type, but they must fit in with our theme which at the moment is focused on commercial buildings.”
In order to find the most viable companies that can make the most out of all IN2 has to offer, a stringent pipeline process has been developed. Companies are suggested by IN2’s Channel Partners – made up of over 40 cleantech and sustainability-focused incubators, accelerators and universities – which choose the best and brightest business to apply.
Once Channel Partners have referred a number of companies, there follows a three-step board selection process over a number of months. Subsequently, the technical board finds out the needs of the tech companies to ascertain whether IN2would be beneficial to them. After this, the Wells Fargo Board of Directors narrows down its selections and an advisory board made up of external industry experts makes the final choice. “Our selection decisions are focused on looking at the technology gaps, the potential for the biggest energy impact they have, and the ones that have been ignored by the investment community because of that technology barrier to entry,” Cozart explains.
As much as we’d like to believe investors are going to part with hard-earned cash from sheer goodwill, the truth is that projects must be financially viable and visibly beneficial – this is where IN2 comes in, with a keen awareness of the challenges faced by early-stage ventures. “Companies have to find the right industry connections and have to prove their product’s better than what’s being used by current or conventional methods. They have to prove their product will help a customer’s bottom line,” says Cozart.
In addition, the kind of solutions IN2 focuses on – like energy storage – are often hardware-centric. “There’s a perceived bias amongst a lot of investors towards softer tech,” says Huntley. “So, a challenge we’re trying to address at IN2 is how to support the hard tech – particularly when it costs time and money to be able to validate and support that effort and scale up those solutions.”
In bridging the proverbial valley of death, IN2 offers support where it’s needed most. Of the $250,000 in non-diluted funding IN2 awards to successful companies, $200,000 goes toward technical assistance and around $50,000 goes toward cash for the company to cover its own expenses related to their project. More importantly, with this comes a team of experts and facilities offered by NREL. “Are there universities that have that capability? Perhaps,” says Huntley. “But it’s often quite difficult to work with them because their research is already pre-defined.” NREL, meanwhile, has the flexibility to work with companies toward their clean energy goals and business plans.
“We support pre-commercial beta demonstrations on our facilities for technologies that make sense,” Huntley continues. “Companies get real world testing with a commercial entity like ourselves, and we can then provide a potential reference for them to say ‘this is how it worked for Wells Fargo’ when engaging with investors.”
It’s clear that something special is going on at IN2, but how does the team plan to build on their unique platform? In 2017, IN2 held a summit of stakeholders to discuss the future. “What came out of that was that IN2 would like to explore incubating companies in a similar fashion in the areas of food, energy and water, as well as transportation and mobility systems and residential buildings,” says Cozart.
“We’re really excited about this at Wells Fargo,” Huntley adds. “As a major agricultural lender, the food, energy and water space is very relevant to what we do commercially.” More widely, the banking behemoth will continue to strive for sustainability both within and outside its innovation incubator, from deploying ‘green teams’ within its offices to educate staff on environmental issues to releasing regular CSR reports to engage investors.
“Wells Fargo over the past few years has been the investor behind roughly 10% of all the renewable energy developed in the US, so we’re a major player in that space. I see it as really important that we continue to educate companies and partners, and they we’re playing a really important role within the economy in that way,” he concludes.
UK must stop blundering into high carbon choices warns CCC
The UK Government must end a year of climate contradictions and stop blundering on high carbon choices, according to the Climate Change Committee as it released 200 policy recommendations in a progress to Parliament update.
While the rigour of the Climate Change Act helped bring COP26 to the UK, it is not enough for Ministers to point to the Glasgow summit and hope that this will carry the day with the public, the Committee warns. Leadership is required, detail on the steps the UK will take in the coming years, clarity on tax changes and public spending commitments, as well as active engagement with people and businesses across the country.
"It it is hard to discern any comprehensive strategy in the climate plans we have seen in the last 12 months. There are gaps and ambiguities. Climate resilience remains a second-order issue, if it is considered at all. We continue to blunder into high-carbon choices. Our Planning system and other fundamental structures have not been recast to meet our legal and international climate commitments," the update states. "Our message to Government is simple: act quickly – be bold and decisive."
The UK’s record to date is strong in parts, but it has fallen behind on adapting to the changing climate and not yet provided a coherent plan to reduce emissions in the critical decade ahead, according to the Committee.
- Statutory framework for climate The UK has a strong climate framework under the Climate Change Act (2008), with legally-binding emissions targets, a process to integrate climate risks into policy, and a central role for independent evidence-based advice and monitoring. This model has inspired similarclimate legislation across the world.
- Emissions targets The UK has adopted ambitious territorial emissions targets aligned to the Paris Agreement: the Sixth Carbon Budget requires an emissions reduction of 63% from 2019 to 2035, on the way to Net Zero by 2050. These are comprehensive targets covering all greenhouse gases and all sectors, including international aviation and shipping.
- Emissions reduction The UK has a leading record in reducing its own emissions: down by 40% from 1990 to 2019, the largest reduction in the G20, while growing the economy (GDP increased by 78% from 1990 to 2019). The rate of reductions since 2012 (of around 20 MtCO2e annually) is comparable to that needed in the future.
- Climate Risk and Adaptation The UK has undertaken three comprehensive assessments of the climate risks it faces, and the Government has published plans for adapting to those risks. There have been some actions in response, notably in tackling flooding and water scarcity, but overall progress in planning and delivering adaptation is not keeping up with increasing risk. The UK is less prepared for the changing climate now than it was when the previous risk assessment was published five years ago.
- Climate finance The UK has been a strong contributor to international climate finance, having recently doubled its commitment to £11.6 billion in aggregate over 2021/22 to 2025/26. This spend is split between support for cutting emissions and support for adaptation, which is important given significant underfunding of adaptation globally. However, recent cuts to the UK’s overseas aid are undermining these commitments.
In a separate comment, it said the Prime Minister’s Ten-Point Plan was an important statement of ambition, but it has yet to be backed with firm policies.
Baroness Brown, Chair of the Adaptation Committee said: “The UK is leading in diagnosis but lagging in policy and action. This cannot be put off further. We cannot deliver Net Zero without serious action on adaptation. We need action now, followed by a National Adaptation Programme that must be more ambitious; more comprehensive; and better focussed on implementation than its predecessors, to improve national resilience to climate change.”
Priority recommendations for 2021 include setting out capacity and usage requirements for Energy from Waste consistent with plans to improve recycling and waste prevention, and issue guidance to align local authority waste contracts and planning policy to these targets; develop (with DIT) the option of applying either border carbon tariffs or minimum standards to imports of selected embedded-emission-intense industrial and agricultural products and fuels; and implement a public engagement programme about national adaptation objectives, acceptable levels of risk, desired resilience standards, how to address inequalities, and responsibilities across society.
Drax Group CEO Will Gardiner said the report is another reminder that if the UK is to meet its ambitious climate targets there is an urgent need to scale up bioenergy with carbon capture and storage (BECCS).
"As the world’s leading generator and supplier of sustainable bioenergy there is no better place to deliver BECCS at scale than at Drax in the UK. We are ready to invest in and deliver this world-leading green technology, which would support clean growth in the north of England, create tens of thousands of jobs and put the UK at the forefront of combatting climate change."
Drax Group is kickstarting the planning process to build a new underground pumped hydro storage power station – more than doubling the electricity generating capacity at its iconic Cruachan facility in Scotland. The 600MW power station will be located inside Ben Cruachan – Argyll’s highest mountain – and increase the site’s total capacity to 1.04GW (click here).
Lockdown measures led to a record decrease in UK emissions in 2020 of 13% from the previous year. The largest falls were in aviation (-60%), shipping (-24%) and surface transport (-18%). While some of this change could persist (e.g. business travellers accounted for 15-25% of UK air passengers before the pandemic), much is already rebounding with HGV and van travel back to pre-pandemic levels, while car use, which at one point was down by two-thirds, only 20% below pre-pandemic levels.