From Where I Sit: Season 2, Episode 13 With Gareth Evans, CEO & Co-Founder, VECKTA, Transcript

Tom McGee:

Welcome to From Where I Sit, the podcast where we explore the forces shaping America's built economy. I'm your host, Tom McGee, president and CEO of ICSC. In discussion with prominent leaders and innovators, we cut through the noise to explore the trends and innovations influencing the future of our communities.

Technology has become an increasingly important part of the commercial real estate industry. Although real estate has historically been a slower adopter of new tech, the proptech sector is growing rapidly every day and has become a large driver of growth across the industry, leading to higher quality buildings, faster decision making, and increased revenue for companies adapting to the more tech-forward era. Gareth Evans is the Co-Founder and CEO of VECKTA. With more than twenty years in the environmental science and energy space, Gareth built VECKTA to simplify offsite energy deployment.

Energy cost and reliability have become a consistent strain for many building owners across the real estate industry. VECKTA helps mitigate this problem by analyzing facilities to identify opportunities for solar, battery storage, microgrids, and efficiency upgrades, and connecting customers with vetted suppliers through its integrated marketplace. VECKTA was also an inaugural recipient of ICSC's Tech Innovator Award at ICSC LAS VEGAS.

I had the pleasure of hearing Gareth speak at our inaugural ICSC+PROPTECH event in Las Vegas. And I'm delighted to have him on the show today to discuss VECKTA, technology for the built world and energy. Gareth, welcome to the show. And I should also say you and I met each other about a year ago in London at a different proptech show. And that led to a great relationship between you and I and also ICSC and VECKTA. So thanks again for being on the show.

Gareth Evans:

Thanks for having me, Tom.

Tom:

You know, there's a lot of topics I want to cover today. I think this whole conversation around energy, the use of energy, challenges with the electricity grid, climate change and the impact that has upon energy. But let's start first at the foundational level. Just explain VECKTA. Explain the service, the offering, the company for our listeners.

Gareth:

Yeah. At its core, we are supporting commercial industrial businesses to take control of their energy. And that can come in many forms, but ultimately, it's transitioning from being a passive consumer of energy from the grid where you have no control over if you get it, how much it should cost, how clean it is, to being able to assess your options to generate and store energy at your facilities. So one, lower operating costs, two, increase resilience, three, reduce emissions. And I think what we're going to get into today increasingly more and more is how do we actually use this as a revenue generating opportunity as well, because energy is becoming such a constrained resource. And so we simplify and modernize how businesses go about buying these systems. So we have an intelligence layer that tells you where you should consider this across your portfolio facilities, how you should build it, what system you should consider, because there's many technology options, what the financial business case for doing that is. And we provide that single source of truth for all the stakeholders in the company that are interested, finance, ops, real estate, sustainability. And then we've got a marketplace of over 4,000 pre-vetted suppliers who we then support you to take your project to market, get competitive quotes, buy the right system, and then we'll monitor it and optimize it over the life of the asset. So it's really an end-to-end solution to outsource your energy strategy and outcomes.

Tom:

Thank you for that. I think one of the things that's quite interesting is you're not necessarily advocating for a particular solution. You're really advocating for evaluating the options that are available to you to reduce cost, perhaps monetize and increase revenue, but also improve predictability of supply.

Gareth:

I'd just say Tom on that, it's super important you bring that up because we are tech-agnostic, and that's for a very important reason is every facility, every site in your portfolio, regardless of how similar they are in design and size, their energy consumption profile, their utility tariffs, their renewables potential, the incentives available are completely different at every facility. Outage risks vary across the country. And so if you need to be able to ride through a three-day power outage in Texas, you're not going to be installing the same system as someone who wants to reduce operating costs in California. And so it's very important to actually consider what is the desired outcome, what combination of technologies will help me achieve that. And what are the financial and technical trade-offs based on site constraints, space, utility support. So yeah, it's that's the position we take is putting the buyer in a position of strength and understanding. And giving them the confidence to act versus being frozen in this sort of analysis paralysis.

Tom:

This is kind of a silly example, but this morning I walked into my bathroom and I flipped on the light switch and it wasn't working. Now I had to change the light bulb, but I was laughing to myself because I knew we were having this conversation today. And the thing about energy and particularly electricity is that it's something that you just presume will always work. And if my electricity was out, it would have hampered my ability to get ready for work and get ready for the day, Internet access, figuring out what's going on in the news, and when I watch the business news every morning to get up to speed, all those things would be impacted if I didn't have electricity, which is magnified from the perspective of a large property, a large shopping center, a large retail center. Why now? So what makes this so important now in your mind, Gareth, as opposed to the conversation around sustainability, climate change that's been ongoing for a period of time. But it has different importance today and increased importance than it ever has. And why is that in your mind?

Gareth:

There's actually a confluence of factors. The first being the incumbent solution that we've all come to rely on is now starting to fail us. So we all rely on hundred-year-old, fifty- to hundred-year-old infrastructure. This is utility developed grid infrastructure. Back in the day, we didn't want ten different utilities building ten parallel transmission lines. So we gave them the ability to have control over their own territory. But what that's led to is an industry that has got very good at building mega projects, but these mega projects take ten to fifteen years to develop, gas plants, coal facilities, transmission lines. And so what we're facing is aging infrastructure, which hasn't been invested in from an operations and maintenance perspective. So it's starting to fail us. We need new energy capacity and we can talk about that in minute, which means we now need to build new infrastructure, but it takes us too long to build.

And then the capital structure is designed to incentivize the utility for every dollar they spend, they get a guaranteed rate of return. So 10% to 15% profits on that. So they're incentivized to spend a billion dollars to get fifteen percent of a billion versus let's say five million on a small microgrid. And so there's a complete disparity between what we need moving forwards versus the system we've come to rely on. And so we need to transition instead of being passive consumers of energy, we can now take control of that. And we often say, you know, for many of our businesses, twenty-five years ago, 3% of companies had Wi-Fi. And, you know, we didn't think we needed it. And now you would struggle to your point before on electricity, you'd struggle to operate without Wi-Fi. And we believe the same is true for energy. We will all have energy generation storage assets at our properties. And today 3% of companies do. And over the next twenty-five years, we will all have it. And the reason why that's now possible is the cost of solar, storage, control technologies have reduced so significantly. We've got more efficient gas turbines and engines, fuel cells. So those technologies now compete with the rates that we pay the utility. And often we can cut our energy costs by ten to seventy percent by generating our own. And so we've got failing incumbent solutions.

Technology has improved for on-site generation. And now I think what we're really going to start seeing is as energy becomes constrained because of data centers, the electrification of everything, whether that be fleets, heating, cooling, we are exceeding what the grid can sustain. And we can't keep up with that. And so and the grid actually got a D+ rating from the Society of Civil Engineers. So this isn't something that we want to really build the future of our industry on the basis of. And so this is why now is we can reduce cost, increase resilience, reduce emissions, create profit generating assets, and we can really position our businesses to have control of their own destiny versus outsourcing the most precious commodity that we've all come to rely on.

Tom:

You're right. I mean, it is a little bit of a confluence of a lot of things coming together at one time that are creating a perfect storm. You kind of have the infrastructure that's in place today would is already challenged based upon even historical demand. And then you have this incredible amount of demand that's being generated just from data centers, but economic growth itself, right? And just the increasing demands placed on capacity. You've mentioned the phrase on-site generation a few times. So break that down for me. What does that mean? Let's get tactical. So I'm an owner developer of a portfolio of shopping centers across the United States. What does on-site generation look like? What does that mean?

Gareth:

So it can be for us an on-site system. Some people refer to them as distributed energy assets or microgrids. They're all somewhat interchangeable. They mean different things if you want to get really technical. But ultimately what it is is instead of me solely consuming energy from the grid, I will generate and store a certain amount, maybe all of my energy, maybe a portion of it. And the real like opportunity here is how do you design a system to maximize that opportunity? When can you be buying utility power when it's cheapest, cleanest, most reliable? When can you be generating and storing your own to provide the flexibility in your business to achieve your desired outcomes? And so this can be solar on the roof or in the car park. It can be a 40-foot shift container with batteries in it. It can be a gas generator. It can be a fuel cell. In some cases, it can be wind turbines if you're a massive, say, industrial facility. And historically, it was all about controlling energy costs because energy costs have gone up very significantly, especially in the last few years, because of now the investment needed to prop up the grid. I think what's very exciting for the real estate industry is there is a massive need for energy and there is opportunities to sell energy either to the grid or to private off takers and all of your partners, our listeners today are sitting on real estate with space to generate and store energy and monetize that in lots of different ways. And so those commercial structures can vary massively. And we can talk about the different risk profiles if you want between leasing something versus owning something and the trade offs.

Tom:

Do you envision a future where, let's take shopping centers? You can have examples for other types of commercial real estate in general, but shopping centers in particular, they have a lot of rooftop. So you have a lot of parking lot space for solar generation, EV charging, those types of things. Long-term ownership, you know, so making multi-year investments perhaps a little bit easier to justify. Do you see a scenario where shopping centers could become a net provider of energy at some point in the future as opposed to a user of energy, that it really does become a net revenue generator, a profit generator?

Gareth:

Yeah. So like the basic form of that up until now has been I sit on this grocery anchored retail center and I've got all this spare roof space, but my tenants are triple net lease. So why am I bothered about saving energy costs? You know, some people would argue if you do it, you can offer shared savings with your tenants and then you can retain them, you can offer them lower energy costs. That's very exciting for retention for providing a good partnership. So that's one scenario is you generate energy, you sell it to your tenants, or you share in those savings. The easiest method was just to lease your roof or your car park and let someone else come in and develop the energy system and then they'll sell the energy. You don't have to get involved at all. It's the lowest revenue potential, but you know, we just supported a large grocery anchored retail customer to do that across thirty-six sites across the U.S. And they unlocked two million dollars of extra revenue through that leasing mechanism. But I think what you're describing in the future and what we're already starting to facilitate contracts through our marketplace is we're now in this mode of data centers having gone through the learning curve and now we're moving more towards inference. The inference guys want to put compute power in distributed ways all across the country, but they need access to real estate to put the computers. And they need access to energy. And so the real estate industry has an opportunity right now to offer up their land to develop on site energy assets to sell energy to those off takers or to sell it to the grid in some cases. There's some very lucrative models. So this is the evolution of the market is for me, the people who shift and start investing in these assets will be active participants in the market. And then the future will be prosumers where they'll be buying, selling, trading, energy credits in real time. And that's the journey that we're all on.

Tom:

I intellectually get that from a practical standpoint. I do want to go back a little bit to VECKTA and the solution that you're offering, the platform that you're offering. Talk a little bit about how because what you just walked through at a ten-thousand-foot level makes sense for sure, but then the actual execution of it can get quite complicated because you got to your point earlier, Texas versus California versus New York versus other parts of the country are very different in a whole lot of ways, both cost, risk, regulatory environments. So how does the VECKTA platform how do you use it to provide that scenario that's optimal for your portfolio?

Gareth:

Yeah. So our customers will—all we need is a site address to begin with. And this is the power of the platform is you as a customer come to us, you say I've got this portfolio of facilities across the country or across the world. We ingest the addresses of all those properties. And then the tech pulls about five thousand different data points for each of those sites. And this is utility costs, energy use profiles, emission profiles of the grid, outage risks. And then because we run a marketplace, we know the real time cost of equipment, construction, financing. We aggregate all of that information and then run an analysis to say for every single one of your properties, what would be the optimal energy system for your desired outcomes? And that can be revenue, it can be cost savings, whatever your priority is, and it'll design the systems accordingly. And then it creates a technical solution and a financial business case. For the leadership to then review, approve. And the power of this is you go from not knowing where to start, what system to build, what technologies are right for you, is it even worth it? To now having a prioritized overview and a strategy for I need to do these projects this year, these projects next year. And we just did this process for a large car rental company. You know, we looked at nineteen hundred sites across the country. We showed them that there's a little under a billion dollars of cost savings over the next twenty-five years. And then they've now taken 30 projects to market through our marketplace. So once you've approved the sites that you like the look of, we then have a very formulaic way to structure a request for proposal. What am I building? Why am I building it? Here's my data room of all my utility bills, low profiles, here's the contract terms I'm willing to accept. I either want to finance it or I want someone else to finance it and sell me the energy. And then here's how I'm going to assess the quotes. And then our platform then sends it out to suppliers that match the opportunity in terms of location, size, scale, financing needs. But it's a very local centric, fragmented market. And so it's very important that you go to the right suppliers with the right ask to get their attention. Then you receive quotes and then the technology and our team help our customers assess compare, contrast, negotiate, and then ultimately award the contract. So that's really the workflow. And then once the system's built, we'll monitor it and we'll main make sure that what you are promised by the supplier is what you get. And if not, why not? How do you fix it? And then how do you actually optimize this system over the next thirty years to play the market?

Tom:

Now, what you've described as more than just a technology platform, there's a level of consulting and advisory work that's going along with this. For our listeners who might be interested in VECKTA, are you a subscription model? Is it a fee model? How does that work?

Gareth:

Yeah, we've really refined this. So the way it works is the customer, like our real estate customer or commercial industrial customers pays a small subscription. And then when a supplier wins work in our marketplace, we take a success fee. So we really subsidize the subscription because we want customers to have access to this intelligence in a really low cost, affordable, simple way. And then we want to win when they win because they're buying an energy system. And then everyone wins. The supplier gets access to a high-quality project with a low cost of sale. Customer gets the right solution. And then that's when we win. But we we've found that if we don't charge that upfront subscription while nominal, we don't then get proper buy in and commitment from the customer. So it becomes a really good vetting tool for us and we provide millions of dollars of essentially automated consulting expertise through that process. You know, as a consultant, it literally takes me two years for now what we can do in two to five minutes. And so this is the opportunity to compress all of those soft costs, the consulting, the engineering, the procurement, the contracts, all of that heavy lifting that would be manual work into a tech enabled solution.

Tom:

Thank you. And I would acknowledge when you give something away for free that oftentimes you just don't get the buy in. I think there's a general consensus that's a wise strategy what you described. Gareth, you mentioned coming from a consulting background, so let's talk about you. So you have demonstrated a lot of knowledge about the energy industry and about how it works. And I know that you have a long history in this industry, including even working in the Middle East at some point, I think in Iraq, which is I think part of what generated your interest in getting to founding VECKTA. Talk a little bit about your background in consulting and energy.

Gareth:

Yeah, I actually started like I studied environmental science and it's amazing how many people I meet who have gone that route. And at the time it feels very broad and very generic and you don't know where it's going to lead. For me, I actually ended up leading to after travelling around the world, I cleaned up oil and gas well sites up in Canada. And it really tapped me into the oil and gas industry. And to your point, that that created an opportunity for me to go to the Middle East. And I really didn't know what to expect, but I was asked to support the oil and gas industry to move into Iraq right at the end of the Gulf War. So this was 2009 to 2011. And so the conflict had just ended. I was living on the U.S. Army base in Basra for two years. And our job was to essentially assess the liability associated with U.S. companies taking over the oil fields. So we're having to sweep for unexploded ordnance everywhere we went. We're having to do social studies with the communities, environmental assessments. But I think this was the real catalyst for me, Tom, is like I'd never thought about where energy came from ever. And here we were sat on the biggest oil and gas reserves in the world. And yet the country was surviving on two hours of power a day. And it just made no sense to me. And here we were then extracting hundreds of thousands of barrels of oil a day, shipping it to a port to send it around the world to the U.S. to then burn in a power plant. And I was like, it feels like something's broken here. And we're seeing it now, real time, with the Strait of Hormuz, like it's playing out all over again. It is we are reliant on a energy supply chain that is extremely complex, extremely challenging. And if we want energy sovereignty, energy security, if we want to have control of our own economy and our own outcomes, the resources are right there. Every day wind generates. We’ve now got batteries that are incredible in technology. We can still use gas if we want to for backup reasons. But it's all about how do we do this in a very strategic and thoughtful way. And so after Iraq, I ended up going off to Australia, I supported the mining industry and the LNG industry to build facilities over there. And then I came back and ran the global power consulting practice for Worley, one of the largest energy and resource engineering consulting firms in the world and it just became very apparent to me that customers were increasingly wanting an outcome but didn't know where to start. Suppliers were increasingly frustrated that they had these incredible capabilities, but they didn't know how to originate deal flow efficiently. And so we incubated the idea of Vector for about three years in the corporation and then realized that it needed to be standalone, independent. It needed to be technology enabled. And so started this in 2019 and it’s been a wild ride.

Tom:

What a fascinating background, both from a industry expertise perspective, but also a life experience perspective, the places you've lived and the experiences that you've gone through being in Iraq at that period of time and then even in Australia working in the industry and substantial growth there too, my memory's correct. So you worked for a fairly large company in a leadership role. Then you made the plunge as a founder and CEO of a startup.

And as you know, ICSC's heavily engaged in the proptech industry, working with a lot of venture capital firms, working a lot of your peers and prop tech founders and CEOs. What was the first moment where you said, my goodness, this is really hard being a founder and CEO of a startup company? What are some of the lessons you've learned in that transition from working for a large established company to now and a lot of people's lives depend on you as you're trying to just start this company from scratch.

Gareth:

I think all of the visions I had of being an entrepreneur and starting the business and sitting around the whiteboard and innovating and ideating and creating this incredible product in collaboration with our customers was immediately evaporated because COVID started. This was like literally weeks after starting the business. And that was that was my realization that actually nothing's going to go to plan and we need to learn to adapt.

And so we've got three core values, challenge limits, adapt purposely, and the power of co-creation. And that has continued ever since. We got through COVID and then SVB had their financial crisis and all our money got frozen for a few weeks. And then we got through that and then the election started and then tariffs and it's just and now it's AI and everyone's talking about AI and that's the shiny object. And so it's super awesome. I wouldn't trade it for anything, but it's very stressful. It's sometimes very frustrating. But I've learned that as long as you surround yourself with good people and that you continue to operate in alignment with the mission and you do right by your customers. And particularly for us, it's all about building trust in the industry. And our customers and our suppliers have to trust us because we run this two sided marketplace. We just have to operate in the best interest of everyone and grind every day.

But I think back to being mortar attacked in Iraq. Like every night we were lying on the floor with mortars landing around us. And so stress comes in different ways and I do endurance races to try and go through all of those emotions in like one-hundred-mile race. I can experience everything I'll experience in a year of running the business in one thirty-six-hour period emotionally, mentally, physically. So I try and balance these concepts to learn a lot about myself and what we can get through.

Tom:

I know I don't look it now, but I've an endurance sport enthusiast as well. I've done quite a few marathons and triathlons. So we're kindred spirits in that. And I would agree that going through those types of things, it's kind of weird. Like when you're going through it, you're saying, What the hell am I doing this for? And then when you're finished, you kind of go, That wasn't that bad and you get confidence from doing those things. And that's on a scale that's so different than what you experienced in Iraq, for example.

Gareth:

I do love that. And from ICSC [LAS VEGAS], one of my favorite talks was Randi Zuckerberg, where you interviewed her about the Cocodona 250. And I loved her references back to business, you know, it forces you to adapt and be resilient and persevere and fight through the tough moments. And yeah, there's so many parallels. I really like it.

Tom:

You also mentioned COVID and you throw all those plans out the window because nothing's going to go to plan. And that is life. I always think of the line from one of John Lennon's songs, Life is what happens when you're busy making other plans. Stuff just happens. You can have a plan and I think it's good to have a plan, but you know you're going to have to change the plan because stuff's going to happen that you can't anticipate.

Gareth:

It's a wild ride, you know. I think back to you're constantly fundraising essentially as a founder and running a a business. I think back to my first pitches as a founder. I knew nothing about fundraising. I didn't know the terminology as throwing out numbers that had no meaning at all. I didn't even know what the terms seed and series A meant and you just have to learn by doing and take your licks and yeah, kind of continue to persevere and get as much knowledge from those that have been through it as possible, but also understand then you've got to apply it to your own unique situations and circumstances. So it's fun. Yeah, it's great.

Tom:

I can imagine being a founding CEO of a emerging company, you're always under a lot of stress, but I'll tell you, you wear it well because you always have a smile on your face and it's always pleasant to talk to you. One of the questions I was going to ask you about VECKTA and its growth is I know that you've had some success with some pretty large companies. And without naming names and you can name them to any extent you want, how are you building confidence in some of those Fortune 100, 500 type companies that are choosing your platform when you are a still a small company, growing for sure, but small relative to them. How have you built that credibility?

Gareth:

Yeah. I think a few ways. I think first of all, the blessing of the COVID situation was then hiring the best talent wherever they were, all around the world. And so we've got an incredible team who have built thousands of these systems. And so they come with pedigree, they come with experience, they know exactly what to do, why to do it, when to do it. So I think that really helps. We've invested a lot in helping educate the market because one of the biggest challenges is energy to your point, right at the beginning of the conversation is it's always showed up and it's always been affordable. And now it's not. But we don't know what to do about it and we don't understand it. And so we've put a lot of time and energy into educating the market. We just released a book, Powering Profits, just a few weeks ago. That's available on Amazon. We run a podcast called Renewable Rides. We produce a Substack every week. And so, we're trying to educate the market, show what's possible, show where the the landmines are. And then we work hand in hand with our customers. And the beauty of building a technology platform is a customer can say to us, I'd love to see this, this, and this. And then the next week, the button they ask for is there and they feel like they're part of the journey. And so it's been amazing, you know, to your point, we're working with Phillips Edison, Kite, Regency, Enterprise Rental Cars, Lithia Motors, Granger. Now these are incredible businesses, but we've become very good, I think, at who is serious about this? Who wants to make an impact? Who's willing to invest versus who's just wasting our time? That's sometimes hard to walk away from a sales process, but it's the right thing to do, I think, especially at this time in the market where we've shifted from the early inductors and the niche projects to now how do we go and deploy these systems at scale? And that requires a business that's got the leadership to go and realize that if they invest now, they can actually differentiate our business for decades to come. And this is the biggest opportunity of a generation for many businesses. And that's what motivates us.

Tom:

Yeah, it's really looking at energy as a strategic asset. I've heard you say that as opposed to just a utility bill or a cost center. Every conversation about almost any industry, you can't have the discussion without raising AI and the implications of AI and the implications on energy, the broad term of energy is pretty profound, both from a analysis of solutions, approaches pass forward on one end to consumption on the other end, which is, you know, the tremendous appetite for energy with the production of data centers. Talk a little bit about as someone who is so knowledgeable about the energy industry, how is AI reshaping the energy industry in multiple dimensions?

Gareth:

Yep. I think one, it's exposing how slow and how challenging it is to get access to grid power when you're a large energy consumer. So data centers are if they relied on the grid and the current utility model, they'll literally be waiting five to fifteen years to get access to power and interconnection. So I think what's exciting is it's driving more and more emphasis to how do we generate and store our own energy. These are different scales and sizes to most of our listeners. You know, these are hundreds of megawatts to gigawatts. So as a result, they're mostly reverting to gas turbines and things like that.

Tom:

To interject for a second. The data centers that are being built today, and you may or may not know this specifically, but how much of those data centers are powered by their own energy sources versus relying on the grid?

Gareth:

Yeah, I think the latest that I saw was like 30% of data centers now like looking at this. And I think that's going to go up more and more as they realize the limitations. So it it's definitely growing. Most of them actually don't want to do that because they don't want to be their own sort of energy utility at that scale because they risk having billions of dollars of stranded athletes. So that's the first thing. I think so it's really unlocking an innovation around how do we utilize energy. It's exposing that there is real opportunities for us to come together and aggregate distributed energy assets or these onset energy systems to unlock this energy need collectively across a community. I think it's exposing to communities the risk of being the downstream recipient of that upstream pressure. You know, all of our rates are going up, power outages continue to increase. So, you know, we saw the example of the Tahoe community being told that a contract wasn't going to be extended with their utility and they'd have to go and find another source of energy because the energy can be sold to the data center for a lot more money. That was a residential complex if my memory is correct. I found that to be shocking. I didn't even know that was a choice that a utility could make, that we're no longer going to supply power to this residential community.

Yeah, so Liberty Utilities was contracting with Envy Energy to get access to the energy, and Envy Energy has said, well, we can redirect that somewhere else. And it's just like renewing any other contract. You don't have to renew it with the same people. And so it we're seeing all of these kind of competing needs and opportunities. I think for the listeners, what's going to be particularly interesting is especially for sensitive industries that are going to shift more to on prem AI data centers like they'll have their own compute on-site. How much is that going to increase your energy bills? Are you going to be able to power that asset if you need that excess energy? And so these I think are going to be some of the emerging questions is companies are not going to want to rely on open AI and Claude and these other products. They're going to want to create their own and they're going to want to do that on-prem. And that's going to put increasing risks and opportunities into our day-to-day considerations. And so I think these are all things that we want to support the industry to think through and make sure that we are adapting purposefully and not just knee jerk reacting and freaking out about these things and making bad decisions because ultimately these are thirty year assets. And if you buy the wrong asset, you're going to be stuck with it for a long time. And so we need to make sure that we're doing the right things at the right time. So yeah, I think it's interesting times.

Tom:

You mentioned people using their own AI solutions, but also just the further integration of AI into existing kind of smart building technology that's going to just even on that level increase energy needs and it's going to become almost presumed that s buildings can do certain things that they weren't able to do five years ago.

Gareth:

Yeah, exactly. You know, some of our customers are looking into autonomous vehicles and, you know, you need short latency from the data center to kind of manage that. Others are looking at hosting the distributed compute we're talking about before. And so these are all opportunities for the industry to capture. They all come with revenue streams. Ultimately the limiting factor is always how do we permit it and how do we power it? And where is there available land that aligns with the need that we're trying to fulfill.

Tom:

So let's talk about the future a little bit now. Let's start at a basic level, whether it's commercial real estate based or some other industry. What do you think is the one thing you know most executives are kind of missing about the future of the energy industry that they're not thinking about today that they really should be thinking about? It should be much more of a top-of-the-agenda kind of issue than what it is.

Gareth:

Yeah. I think historically energy has just been a line item on the balance sheet or the P&L statement, let's say. I think the opportunity is to see it as that strategic asset and how can you turn energy from this input to your business to it being a real accelerant to you achieving your desired objectives. And that could be generating new profits. You know, we're talking to a self-storage company. Maybe the future for the self-storage companies is not hosting yours and my gear when we're trying to move house. Maybe it's them hosting batteries and data center assets for the malls and the retail stores. How can they host compute for the autonomous vehicles? How can they lease their rooftops for new revenue and NOI increases? So it's really shifting from it just being this faceless input to your business to actually being probably the biggest revenue generating opportunity or cost saving opportunity of your entire infrastructure stack. and we just need to think about our built environment differently. We shouldn't be just thinking about how do we lease the inside of a box. How do we really monetize our entire real estate footprint at scale?

Tom:

And monetization is a positive, but maybe also on-site generation becomes important because of the risk associated with the electric grid. You have mentioned the D+ rating, which is generally back to my academic days, I don't think I would be welcome to bring home a D+ on my report card. How at risk is the U.S. electric grid? Is there a day we could wake up and a big part of the grid just isn't functioning because the demand is in excess of what it's capable of doing?

Gareth:

Every two, three weeks where I live, we're having the power shut off through fear of wildfires. So that's becoming an increasing problem, whether that's hurricanes, whether it's ice storms in Texas, whether it's wildfire risk. You know, the PGE issue in California years ago that started that Paradise fire, that was started by a metal hook failing that was ninety years old. And so yes, there are risks from a natural disaster perspective. If it's vulnerable, because when you rely on a central system, you've got single points of failure that can impact the masses. And we've seen, you know, large-scale outages around the world. I think if you recall, last year alone, the entire country of Chile was out of power for several days. France, Spain were out of power due to grid issues. Heathrow airport was out of power for hours. And so these are, I think, all examples of what's possible. And I think for most businesses, the power going off is someone else's problem. And they don't think about it until it happens. And then there's this knee jerk reaction of now we need to do something about it. And then it doesn't happen for another year or two. And they go back to ignoring it again. So I just start getting serious about it. And we can quantify the cost of an outage per hour for every facility. And that ranges from tens of thousands for a retail store to millions of dollars for a manufacturing facility. We can determine the risk profile in your particular area from a grid constraint and an outage risk perspective. And then we can start factoring that into the system design. Because today most people don't consider that in the financials of these systems. And one outage can pay for the entire system. And then you can make money off it for the next thirty years and so.

This is another way to think about it. But yeah, I'd say I wouldn't be sat there losing sleep over it right now.

Tom:

It is amazing just the concern around the aging infrastructure. My home is in suburban New Jersey, not far outside New York City. So we're talking about the most densely populated state in the country. After one of the hurricanes that we had, it was after Hurricane Irene, I had lost power at our house for almost three weeks. There were just so many power lines that had gone down and by the time they were able to address it, at the time I was just, how is this possible? I'm living in a New York suburb and I'm without power for almost three weeks. It seems incomprehensible, right?

Gareth:

And think about the community opportunity that you can provide, you know, especially for many of your listeners who own retail stores or grocery stores or they can actually be the hub for the community in those moments to provide water and cell phone charging and food, fuel. You know, we don't realize when the power goes off, everything stops. And so how do you ride through that outage and provide that community resilience center for everyone and then that for your brand? That's incredible.

Tom:

Let's end on a high note and a futuristic note. Let's say we're looking ten years from now and it's the shopping center of the future. What do you feel like will be somewhat commonplace that isn't necessarily commonplace today?

Gareth:

Yeah. Well you'll definitely have like a very smart building management system. Some people have done that, some people still haven't, which is optimizing how you consume energy every minute, every hour of the day. It is talking with your EV charges, with your battery, with your solar panels, with your tenants consumption to constantly make sure that is balanced and that you are self-generating as much of that as possible.

And then when you don't need it, it is monetizing it for you. And it is selling it to an off taker or to the grid or it's selling your carbon credits. And all of that will be smart contract enabled. It should be hands off. It should be automated. It should be set and forget. But we have to go on the journey of doing this transition from passive consumption to active to then that prosumer future.

But that is it, is we'll have super efficient properties. We won't be consuming energy when we don't need to. We'll be generating store on our own. And we'll be leveraging our built environment instead of building mega power plants in the middle of the desert or taking up more green space than we need to. Let's use the space we've got. Got lots of rooftops, lots of car parks. Let's minimize our impact on the environment. Let's generate clean energy and let's do that in a really profitable and resilient manner.

Tom:

Well said. Well, Gareth, thank you for the conversation today. Thanks again for being on the podcast. It was a pleasure to talk to you. We could have talked for a lot longer. This is a fascinating topic. And I think it's in a timely topic too. There's a whole lot of things that we didn't touch on either as well today, even just the geopolitical tensions in the world and the impact that's having upon the energy markets. So thank you. I appreciate it. And thank you to all of our listeners.

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