Daimler Trucks NA is Accelerating Sustainability

[VIDEO TRANSCRIPT]

Hi! I want to welcome everyone to the July 21, 2021 edition of the Smart Energy Decisions webinar series. I’m Deborah Channel, Research and Content Director at Smart Energy Decisions. This series has been developed to deliver insights and useful information for executives at large electric power users.

Today’s webinar, brought to us by Metrus Energy, is how Daimler Trucks North America is accelerating scope one, two, and three emissions reductions with sustainable energy services agreements. In order to both avoid upfront costs and accelerate sustainability, Daimler is using an as-a-service model to implement energy improvements. We’ll learn how this model is working for them and how their strategy exemplifies a lot of broader trends that we’re seeing in the corporate ESG world.

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And now let’s get started with today’s presentation: How Daimler Trucks North America is accelerating scope one, two, and three emission reductions with sustainable energy service agreements. Our presenters today are Anastasia Beckett, Senior Vice President of Business and Development at Metrus Energy, Matt Mark Staller, Corporate Real Estate Manager at Daimler Trucks North America, and Crystal Maxwell, Director of Research at Guidehouse. And we want to get started today by finding out a little bit about who our audience is. So we’re going to ask you to take this poll question for us: Choose the one that best describes where your company is at and how far along they are in their journey to reduce scope one, two, and three emissions.

And the choices are: we have not yet started, we’re in the planning stage, we’ve completed some projects to address scope one and two emissions but there’s more to do, or we’ve addressed all of our scope one and two emissions and are now focused on scope three.

So just take a moment, let us know where you’re at in this world, and we’ll see who we have with us today. I’ll just give you a couple more seconds and remind you: submit questions at any time.

All right, well, I’m kind of relieved to see only six percent have not started yet. The majority, a little over half, say they have completed some projects to address scope one and two, but there’s more to do. A little over a quarter (27%) are in the planning stage, and we’ve got 12, let’s say ahead of the curve, they’re done with scope one and two, they’ve addressed it, and now they’re working towards scope three. So, I think no matter where you are on this spectrum, we’ve got something for you in today’s presentation, and I want to introduce Crystal Maxwell of Guidehouse for the next step.

Thank you, Debra. It’s always interesting to see those polls and see where everyone is in the planning stage. I’m going to hand it over to Anastasia to give us a brief introduction first.

Thanks, Crystal. Hi, everybody, I’m Anastasia Beckett. I’m the Senior Vice President of Business Development for Metrus Energy and have a background in all types of sustainable energy projects, including solar energy, storage, energy efficiency, resiliency, and more, and also a background as a banker and financial advisor. So happy to be here today.

Thanks. And Matt, can you give us an introduction as well? Crystal, you said you wouldn’t do that. Putting you on the spot. My name is Matt Markstaller, and I’m the Corporate Real Estate Manager for Daimler Trucks North America, and so part of my job, of course, is managing all the facilities and sustainability, of course, is a big part of that. So we look at all of our processes on the one side, and then on the other side, it’s energy procurement. So really, my department is involved in all of those things, so we’re heavily involved in all of our sustainability goals.

Thanks, Matt. Looking forward to the conversation today with you and Anastasia. And my name is Crystal Maxwell. I’m a Research Director at Guidehouse Insights. I’ve been with Navigant, which was acquired by Guidehouse now for about eight years. I lead our building technologies team, which encompasses our network buildings, lighting efficiency, building automation and control, and building efficiency and decarbonization solutions. I work with clients on strategic engagements around the digital and sustainable transformation of resilient building infrastructure. I support clients in understanding efficient innovations, key market drivers and barriers to adoption, and go-to-market strategies. And today, I’ll be giving an overview of the energy-as-a-service market, some key drivers and barriers to adoptions, and then I’ll help guide the discussion around the as-a-service business models that support sustainability goals, learning about some different offerings in the market and how Metrus provides solutions to clients through these as-a-service business models and the work that Metrus has done to help Daimler Trucks North America work towards their sustainability targets and really what was involved in these projects. So, looking forward to talking with you all today about this.

So, Guidehouse defines energy as a service as a business model innovation that allows solution providers to deliver technologies that have been historically paid for via capex or debt under a service contract with the following characteristics in place. So first, we have the opex-based fee payments that are used rather than capex or debt, resulting in potential off-balance sheet treatment of the transaction. Secondly, the client transfers control of the energy assets covered by the contract and operations of the assets. So, that could be heating, cooling, lighting, resiliency, or other outputs is outsourced to the energy-as-a-service provider. And then third, the vendor provides the client with efficiency, sustainability, energy supply or other guarantees. We really see that Energy as a Service enables customers to meet sustainability goals, reduce flexibility, reduce complexity, and preserve capex for core business needs. So while we see the Energy as a Service market today being nascent, we anticipate significant growth over the next decade due to a number of drivers that I’m going to be touching on on the next slide. Guidehouse Insights estimates the Energy as a Service market was about 1.6 billion last year in 2020 and will be growing at a compound annual growth rate of 36.8% between 2020 and 2029, reaching a global market size of about 27.2 billion in 2029. So, substantial growth over the next decade. That’s why it’s so exciting to actually be here today, talking about some of these projects that are helping to grow this market.

So, financed energy solutions are evolving rapidly to meet the changing needs of customers. One of the key drivers that we see today is sustainability, which is a key theme throughout this webinar. Commercial and institutional organizations are increasingly setting sustainability targets to attract tenants, students, and customers. Energy as a Service allows customers to reduce their energy consumption and greenhouse gas emissions, contributing to corporate sustainability goals without the burden of capital investment. This pressure is also being multiplied by the agenda and initiatives of the Biden administration. So, we’re seeing this growth even more supported by government as well. Another key driver is risk transfer and OpEx financing. So, we’re seeing continued growth and demand, especially as a result of the pandemic, for outcome risk transfer and capital or finance avoidance via an Energy as a Service OpEx payment. Technology price reductions and the commoditization of energy efficiency technology is another market driver that we’re seeing today. Technology market changes enable customers to access distributed energy resources known as DER and energy flexibility technologies and encourage vendors to expand beyond just energy efficiency.

The complexity of new technologies is another driver of the Energy as a Service market. So, growth and adoption and affordability of the DER, intelligent building analytics, and other technologies over the past five years have provided customers with really a wealth of opportunity to modernize their facilities, cut costs, and improve sustainability. However, facilities and maintenance staff are often unprepared to take on new technologies. That might be due to skill gaps or the increasing complexity of these new systems. So, Energy as a Service can really allow customers to outsource that selection of the equipment, installation, operation, and maintenance of these technologies, which can help reduce risks while still being able to upgrade these facilities. And then the last driver that I want to touch on today is resilience or resiliency. We’re seeing an increasing demand for combined cost reduction, sustainability, and resilience benefits delivered through on-site energy supply that is also then integrated with building energy conservation investments.

We do think that Energy as a Service will pull customers away from legacy Energy Service Performance Contract solutions (ESPC solutions) and capitalize on increased demand for energy solutions from commercial customers. Energy Service can really provide a more turnkey and flexible solution in terms of technology and embedded guarantees, financing, contract length, and other elements. And we’re going to hear from Anastasia today as well, just about how they’re able to work with customers to meet their individual needs, which is one of these key benefits of these Energy Service as a Service models here.

So while there’s a long list of market drivers, we’re still seeing a number of barriers towards growth today. This growth in the market is really dependent on vendors’ ability to address these key market barriers, and I’m going to touch on two of them today.

So, one of the key barriers that we see in the market is a lack of customer awareness and inconsistent energy as a service scope messaging. Many energies of service vendors pursue segments that have been historically inaccessible to other contracting mechanisms, such as ESPC contracts due to various reasons. So, some of those might include comprehensive cost of capital, having that just the comparison there be tricky to justify. These service models given the low penetration of energy services in these markets. Awareness of energy as a service is very low among a lot of target energy as a service customers. So, energy as a service is just really not well-known among larger clients that already receive products and services from large market players that are then developing energy as a service capabilities.

Additionally, one other piece that we’re seeing is that energy as a service definitions and project scope really can vary from one vendor to another, and this results in inconsistencies and how energy as a service is marketed and presented to customers. Projects are usually built on partnerships between different players in the market. We’ll hear a little bit more about that later today during the webinar as well. Often, few vendors have all the required capabilities in-house. So, depending on the company’s position in the value chain and its size and suite of products and services, energy as a service branded offerings can really range in scope from this more customized comprehensive energy services to maybe just a financed energy solutions to an opex based financing model for energy upgrades.

We expect that the market will eventually converge around a standard energy as a service definition and repeatable partnership and project delivery models. However, we’re still seeing confusion and expect it to persist in the short term, which can stall clear vendor communications and client awareness. And then, another barrier that we’re seeing is that many vendors don’t have the necessary growth capabilities to successfully address complex customer energy infrastructure challenges and needs.

So, while energy as a service can be delivered with just a few technologies such as lighting and HVAC, we’re seeing that customers are increasingly looking for comprehensive energy solutions to meet diverse needs and efficiency, decarbonization, sustainability, and resiliency. Vendors are really expected to offer a diverse technology mix to customers, including mechanical systems, DER, microgrids, analytics, the Internet of Things, and software. In addition, vendors are expected to have expertise in sustainability risk management, operations and maintenance, and administrative functions. So, many vendors partner to provide these some of these capabilities, and others have been growing these capabilities through acquisitions. However, integration of different capabilities can still remain a challenge for players in the market today.

So moving on here, Anastasia, I’m hoping that maybe you can start us in this discussion by just giving us an overview of Metrus and the offerings that you provide."

"Sure, thanks Crystal. That was a really good overview. Thank you for that. And I think that the barriers and some of the kind of disjointed offerings in the as a service market were spot on. So, appreciate that, and hopefully today’s webinar will kind of help with some of that and help get everybody on the same page because I do agree that I think standardization around these offerings is something that’s key to the wider adoption.

So, I wanted to talk a little bit about Metrus and who we are and what we do. We develop, finance, own, and pay for performance energy efficiency and renewable energy projects and programs that have a climate-positive impact.

So that’s part of our mission at Metrus, is that you know, we will only work on and finance projects that have, um, you know, a net carbon reduction. Our customers are all large energy users, so it’s anything from, you know, Fortune 500 companies, especially in manufacturing, um, to higher education, healthcare, municipalities, and more. It’s really something that can be utilized by many different types of customers. And then our partners are Eskos, large contractors, lenders, and utilities. And our impact thus far, which I think, you know, is exciting and that we’re proud of, is that we have operational energy and water efficiency projects in 26 different states, um, at more than 490 sites, resulting in savings of over 2 billion kilowatts and 700,000 metric tons of CO2. And so we’re hoping to grow those numbers, uh, exponentially over the next few years to help everybody reach their sustainability targets. Great, thank you. That’s so helpful to hear, and I think it’s also helpful for everyone just to understand that the customers do range. It’s not just one vertical or one type of customer that can benefit from these as-a-service solutions.

Anastasia, I’m wondering if you can describe your Sustainable Energy Services Agreement and the types of projects and programs that Metrus develops and finances, just to help people understand the differences here and what’s available.

Sure, the main component of what we offer is the Sustainable Energy Services Agreement or the SES, and really the way that it works with customers is that it’s an off-balance sheet solution. So, like we kind of described in the beginning of the presentation, there is no debt obligation by the customer. So, there’s no leases, there’s no loans, and so the contract that is between Metrus and the customer looks a lot like a power purchase agreement, which is, you know, important in that FASB and GASB both treat those as off-balance sheet solutions.

And so, the agreement kind of states that Metrus agrees to fund 100% of the project cost. We will own the equipment during the duration of the contract term and provide measurement and verification and operation and maintenance for the project. And then the customer, in turn, pays Metrus a portion of the savings over the term of the contract. And so, the way that it differs from a power purchase agreement is that, you know, in a power purchase agreement for solar energy, you, the customer, would be paying per unit of energy generated, and for the efficiency portion of the contract, the customer is paying per unit of energy saved. But it’s a very similar mechanism, and I kind of think that’s important because, you know, at this point, I think most people are familiar with the power purchase agreement, so it’s a really good way to think about it. And I think it helps people understand what the contract mechanism actually is. A

nd then, in addition to that, Metrus has a contract in place with the ESCO partner, the partner that, you know, will be working on the project to do the design and construction and provide the ongoing services, and that looks a lot like a performance contract, but it’s between Metrus and that company. And for DTNA’s projects, we use Central Coast Business Solutions for their projects, and that’s where we, you know, pay the ESCO milestone payments during construction to complete the work. So, that’s really the kind of key structure of what we offer. We do offer various different forms of this, but this is the main component of what the offering actually looks like.

Great, thank you. I think it’s always so helpful, again, as I had mentioned, customers just not being aware of what these offerings are. So, linking that to a power purchase agreement and how there are still some similarities for people that are familiar with that is really helpful. So, I’m wondering, Anastasia, what are some of the key challenges that you’re seeing from your customers today?

Sure, I mean, I think the main challenges that we’re seeing is that there are very aggressive goals for carbon reduction, and they’re coming from the top down and they have very short timelines associated with them. So, everybody’s kind of in a pinch to, you know, try to accelerate their sustainability programs. But sometimes they’re not met with corporate support in terms of, you know, coming up with the financing for those projects internally. And typically what we see is that there is some appetite for companies or public sector customers to fund some projects, but they’re likely to fund things that have a really short simple payback that’s in line with their requirements for internal funding. But they’re very unlikely to be able to pay for more complex projects, particularly if they are unfamiliar with the technology and they perceive a certain amount of risk

That’s associated with them, um, so that’s one of the things that we’re seeing. Um, and we’re also seeing that, you know, there’s a lot of different vendors that supply different solutions. And so what we’re seeing is that a lot of our customers are looking for, you know, one company that can help them with sort of all of their energy needs, and particularly under one contract so that there’s not multiple different contracts that they’re trying to keep track of and multiple different, um, you know, measurement and verification reports that they’re getting. It’s all kind of one package and it’s, you know, repeatable across all of the sites that they have. So what we actually do is, we have a very customized approach to our projects. And so when we engage with a customer, you know, of course we’re listening to what their goals are. Um, sometimes they come to us, um, you know, with something specific, maybe they have some kind of equipment that has failed, and so, um, yeah, we take that. But we also look at the current site conditions. So we’ll go out and look at, you know, what is possible at the site because sometimes there’s things that we’re able to uncover that the customer may not be aware of that would generate a lot of energy savings for them. And so we’re able to bundle all types of energy efficiency measures, really anything, same with water efficiency measures, and then also include, um, on-site solar generation, battery storage in a variety of applications, including resiliency and EV charging infrastructure. And this is all in that same, you know, master terms and conditions, one contract. And we really do customize it for, you know, every customer. You know, not everything fits with every customer, so we work with them to get something that is, you know, of the most benefit to them. Absolutely, I think there’s not one size fits all approach for this. And so, uh, you know, that’s one benefit of these as a service models and having everything under one contract is that you really can customize that for each customer and what their individual needs are. [Music] Um, and I think at this point, I’m going to pass it to Deborah. We have another polling question."

"We sure do. Thanks, Anastasia. And again, uh, we want to know a little bit more about the audience that we have with us today. So, tell us, what is your area of focus? Are you a sustainability management, energy management, facilities management, real estate management, plant manager, or other? And again, we’ll give you a moment to select your answer. And it’s interesting. I’m listening to the presentation, and Anastasia, when you said aggressive goals and short timelines, oh my goodness, is that what we’re seeing? Um, you see our news coverage every day. Another company, another several companies are announcing their goals, and the timelines are getting shorter, and sustainability is a top driver, and it’s coming at them from all angles, internal and external. So you really hit it there, and the answers are still coming in. We’re going to give you another couple of seconds. And let’s see who we have with us today. All right, wow, it’s sustainability management and energy management. Sustainability at about a third, and energy management about 40 percent. A lot of others. That’s interesting. This is a, I mean, there’s broad interest in this topic and in these mechanisms throughout different organizations. So, the other doesn’t surprise me quite so much.

So thank you All for participating in that, and now I want to move us along to the next part of our um presentation today. And Matt, I want to bring you in and have you, uh, talk to us about what’s going on at Daimler. Okay, thank you very much. Um, yeah, for us, this has been a new, uh, opportunity for us starting about a year ago. I guess we’ve really been working on it for a couple of years. You know, for our company, I don’t think it’s probably terribly different than any of the publicly held companies out there. You know, sustainability is a key goal for us, but sustainability means a lot of things, and I guess, uh, first and foremost, uh, we’ve got to be sustainable as a company into the future, you know, before we can worry about any other aspects. So, as we’re held by the shareholders, um, we’ve got financial performance that we have to meet every year. So, we’re challenged a bit in that we’ve got a very massive, uh, manufacturing infrastructure worth billions of dollars that really we depreciate over decades. So, when we look at that, we look at equipment that we’ve been using for three, four, five decades, and then, uh, you know, the investment that that is, and then the upgrades that that requires, you know, to remain financially viable. We simply, you know, can’t make meaningful changes to that manufacturing infrastructure every year. So, it’s been something that we’ve we’ve looked at, we’ve solved in various ways, we’ve solved to a limited degree with our own investment, but when we started looking at this, um, uh, this method, it allows us to really increase our investment about ten-fold or at least our change is tenfold because it simply doesn’t require our investment. So, I think this is fairly common, but with the upgrades that we do will save in energy and maintenance and really the payments are offset those savings, so it’s a net zero, uh, investment or really a savings. And, of course, uh, what Anastasia mentioned about keeping that off the balance sheets, that means everything for us as well. So, it’s simply we have a new expense with the service agreement payment and then we save more than that with the energy and maintenance savings. So, you know, that’s how we do this, and it’s really important, but we’ve got again, we’ve got aggressive, uh, sustainability goals within the company. Um, I think first and foremost, if we look at our energy, you know, we want to be, uh, carbon neutral for sure, but, but really, better than being carbon neutral is not using the energy in the first place. So, that’s what this is all about. We simply reduce uh the energy that we use with these uh with these improvements, which again is is better than, you know, buying buying more energy, uh, that is carbon neutral. So, I think we’ll talk about a couple of these projects next. Yeah, thank you so much, but it sounds

I really like being able to utilize this as a service model. It has helped DTNA implement these changes for these projects more quickly and support these overall sustainability initiatives that you have. It’s always great to see. Absolutely, yeah. You know, I didn’t touch on, we are committed to carbon-neutral production by 2025. So again, reducing the energy is really better than purchasing carbon-neutral energy. Great. So the first project, go ahead. No, I was just gonna say if you could walk us through the actual work that was done for these projects, that would be great. Yeah, absolutely. So the first program that we did was in one of our Cleveland, North Carolina manufacturing plants, and that consisted of a lot of lighting and some chillers and some other equipment. And if anyone’s ever done this, you know that lighting uses a lot of energy, so it pays back fairly quickly. So we went to LED lights through the whole facility. We’d done bits and pieces before, but we did a lot of lights. I don’t remember how many thousands of lights, but a lot of lights. And then, you know, this pays back pretty quickly. And then with that, we were also able to do since those do financially so well, we were able to do some chillers and some other equipment that we would otherwise have to do anyway. So there’s just so many ways that this is helpful for us, you know, as we’re going through this. While it makes sense to the energy folks that work in my group and the real estate folks that work in my group and facilities guys, the financial folks, it’s really strange for them to look at something like this where we’re paying for lighting as a service, for example, you know. So it takes some getting used to and it takes some education internally of the financial folks to get them familiar with it and then understand it and then understand that we’re going to be doing it for 10 or 12 years. But then when I tell them, you know, some of the lighting that it replaces is 30 years old, you know, that makes it easier, but it’s certainly a different way of looking at things, you know, for companies like ours. You know, the other thing that we look at is we were replacing metal halide lights with fluorescent lights until about five years ago. So the technology changes so quickly that, you know, you really have to look at that infrastructure in a different way. But I think the total Metrus investment in Cleveland was about $6.4 million. It saves us $980,000 in energy and maintenance. And then, of course, we pay the service agreement with that savings. And then you can see that the carbon count at 0.45 in the metric CO2 metric tons of CO2 savings each year is 2911 tons. Thanks, Matt. And you touched on something just about educating the finance people at DTNA and other stakeholders just about the lighting as a service and this kind of paying for these solutions with this as a service model, which obviously is something that we see as a kind of a barrier in the market to broader adoption, just having customers really understand the benefits and even being aware that this is a possibility to pay for these solutions with an as-a-service model. Just wondering if you can talk about how you became aware of this as a service model and how that was in educating others at DTNA about these solutions. Well, one of my energy team brought this to us, and in fact, for us, as we were trying to meet numbers a couple of years ago, some of the investment money that we would ordinarily have to make these upgrades went away, just because we were trying to meet our financial numbers for that year. So, at first, it seemed like, you know, this is a real challenge to us, and this will all go away. But it was an opportunity, and that we had to go look for alternate solutions. And again, we had never really had much reason to do that. So, by finding the alternate solution that actually was off our balance sheets, you know, it really opened the doors to accelerate the rate at which we could make these changes and make these improvements. Like I say, we’ve got such a huge footprint. You know, with our annual investments, I felt like we couldn’t really even keep up, let alone get ahead of things.

Great, thank you. That’s very helpful to understand more. And then I’m wondering if you can also just help us understand what the actual work was that went into this project at the Portland headquarters. So our first project was a manufacturing plant there in North Carolina, and then our headquarters here is in Portland, Oregon. It’s, we’ve got 20 buildings here and about 3,000 people that work in office buildings and shop buildings. These are engineering workshops and manufacturing workshops and various different things that are required to develop our products. And we thought it was important to really get this spread not only through the production facilities but also through the non-production facilities. And you know, this is a project you can see that the size of it is quite a bit smaller, but the complication, you know, with office buildings that range from five to fifty years old and in workshops that are five to fifty years old, we really had to go through those facilities with the fine-tooth comb and find those opportunities. So, it was a good challenge in that way, and it gave a lot of exposure to a lot of our employees of what we were doing and why. It’s a good opportunity to get a lot of exposure and get folks on board to the sustainability goals in general with this.

Thank you. I think that’s helpful also just to see two very different types of facilities and how this has worked for both of those headquarters and production facilities, Anastasia. On both of these slides, we see this carbon count 0.31 here, and it was 0.45 for the last one. I’m wondering if you can just help us understand what is driving the differences in these numbers and how Metrus looks at that.

Sure. So, I mean, this is something that we use that was developed by Hannah Armstrong, and it’s part of kind of like our push to standardize the ESG market, both from the perspective of the customers and the perspective of investors. So, what the carbon count is, is it’s a way to measure, you know, per thousand dollars of investment.

How much carbon reduction there is associated with that investment? - And so the reason that you would see a difference in the numbers between the different facilities is partially due to project scope being different, but it also takes into consideration how clean the actual grid energy is. So if you were to do a project in, say, California, that has a relatively clean grid versus a project, even the exact same scope project, that was in a state or a country that had a kind of dirtier mix of power that was being fed into their grid, like a state maybe that has a lot of coal power, you would see the difference in the carbon count there reflected. So you would see a higher ratio for the project that was completed in the state that had the dirtier mix of power. And one of the reasons we’re doing that is like we’re trying to provide information that is in line with how companies and investors have to report, so we do provide a lot of this information, and I think I speak to it a little bit on the next slide as well, so I’ll wait until then to finish. Thanks. I was gonna say that’s a perfect segue I think into the next, um, into the next slide, um, and measuring the impact and standardization. So I’m hoping that you can just talk us through how Metrus does measurement and verification for these projects, and really how you’re measuring the impact.

Sure, so all of our projects are required to have measurement and verification, and in fact, that’s actually the basis of our billing to customers. And so the way that that works is that we do [Music] measurement and verification that is in line with IPMVP standards, usually option A or option B, um, and occasionally option D, and it depends on the scope of the project, you know, what’s appropriate for that type of project and then conversations with our customers to determine what their needs are. Um, and so once we do the measurement and verification, if we do that on an annual basis, you know, we, if there is a shortfall at some point and maybe the equipment isn’t working the way that it was intended, it’s not saving as much energy as intended, then we would just adjust our customers’ bill downward to reflect that. Um, so it’s, you know, that’s another way that these projects are de-risked, and particularly with the way that we bill off of the measurement and verification reports. And so it pushes the risk to Metrus, which is good for the customer. Um, and then just kind of around, oh, and then one other thing with that is that we do provide a robust measurement and verification annual report to our customers. We can also do that on a quarterly basis if necessary, um, but the reports are designed to be useful in reporting that customers have to do for their investors or other internal reporting. So that has a lot of information, and we try to stay in line with standards, you know, perhaps that CDP reporting standards or other reporting organizations, and provide all that information to our customers, and particularly in a way that they can actually use it. So we can provide data in spreadsheets so that they can manipulate it themselves if they’d like. We do provide it in a PowerPoint presentation as well so that they can, you know, lift some of the content and put it into their own reporting. So we try to, you know, provide as much information and data on the projects as possible. And another reason that we do that is because we want to show the investor community that these are stable investments over the long term. And so we do actually also put together an annual report for our own portfolio gf projects, and that is available on our website. And the reason that we do that is, again, we’re trying to standardize, you know, the industry as much as possible and provide as much information as possible to the ESG investment community.

So, you know, we look back at, you know, the way that our projects have performed over the last 10 years, um, looking at expected savings versus actual savings. Um, you know, our entire portfolio of projects is overperforming at 103 percent of expected savings. Um, so I think that’s a great number. It shows that it’s a very stable investment, a long period of time, and so that’s what we’re trying to convey, um, which will help our customers too because, you know, the more stable the investment seems to investors, the lower the interest rates are going to be. So, you know, it’s important for us to provide as much of this information as possible, um, to really get the market going. So, we’re a very transparent company, and yeah, like to push out all of the information we can. Great. Thank you for that. I think that’s very helpful to see and for just customer education as they’re considering these types of investments. Yeah, and I guess one other thing too is, you know, right now the Securities Exchange Commission is, uh, considering standards for ESG disclosure, and so that’s another thing that we’re following very closely and we’ll align all of our reporting to conform to those standards once they are solidified and we have a preview of them. So, we’re already, you know, a step ahead, but once that is in place, and I do think it’s very important that those are in place, um, because right now there’s really no standard that describes, you know, how you need to report on these things from an investment perspective. So, it is very important, um, so we’re all looking at the same set of information and people can make informed decisions. Absolutely, I completely agree with that, and how that will be able to help drive this market forward, right? Um, so let’s see, I think at this point I’m going to hand it back over to Debra for some Q&A.

Great, Anastasia. Thank you so much. And thank you, Matt and Crystal, great presentation, lots of good information, and lots of questions coming in from our audience. So, while we’re preparing for that, I just want to remind everybody, take a look at your console, there’s a lot of good information there for you, there’s a from DTNA and from Metrus, and also a way to contract Metrus for some more information. So, click around and make sure you’re taking advantage of all of that.

Alright, and our first question is for Matt, and we actually had a few questions come in on this topic, something you touched on a little bit, uh, but let’s get some more information. What was the internal conversation and approval process for energy as a service like, and how long did it take, and how painful was it or not? It took a while. I mean, I think there’s a couple of components to that. Number one, it’s, um, you know, such a new thing for people to look at and to try to explain. You know, for years we’ve made investments in our factories and to say, you know, now we’re not gonna buy a light bulb, we’re gonna, we’re gonna pay to have that light, those lumens there. And you know, so that was that was really difficult, um, there was a too good to be true, you know, aspect of it, and I think this is common, you know, for us certainly. When anybody wants something and presents a business case, then everybody’s always looking for holes in that business case or, um, you know, costs that weren’t considered, things like that, you know, and to find something that we could keep off our balance sheet, which is really important, it seemed too good to be true to folks as well. So there are just so many new aspects that I think, um, it was hard to understand to begin with, and then it was hard to trust, and so it just took a lot of conversations with a lot of different levels of people, and really honestly, to get that through, um, you know, the organization, it took probably nine or ten months.

Interesting, so a lot of patience and a lot of education required on all fronts, yeah, yeah, and you really had to believe in the end game to even, you know, persist. There were there are a few people that sort of gave up along the way, but I’ve just been through stuff like this before, so we just persisted until we got it through. Yeah, these programs really need a champion internally to do just what you did to get it through, right? Yes, and a good, very good.

All right, thank you, Matt, and our next question is for Anastasia, and it’s a long one, so let me try to read this through: How should an energy efficiency or sustainability customer think about comparing purchase ECMs via a sustainable energy as a service model versus purchasing via debt, borrowing capital, e-space, operating lease, etc., does the risk transfer of an EaaS outweigh the higher return requirements or effective costs of borrowing and servicing? That was a mouthful and a statement to you, for that I will do my best and try to remember to answer all aspects of that question. Um, let’s see. So, I guess, you know, it is a good question. You know the difference essentially, what I heard is that it’s like how you know what is the difference between financing projects through as a service versus some kind of research loan, um, versus PACE products. So, I guess, and the associated interest rate. So, I guess, um, really I think what we’ve been talking about covers some of it where you know, the as a service projects are off balance sheet, um, and so that’s a key difference between that and how you might look at leases and how you would be looking at C-PACE. I think the off-balance sheet aspect of it is very different, and then of course there’s the ongoing services, and so you don’t get that if you’re you know doing an equipment lease. Maybe you could purchase those additional features from your partner that you’re working with, but in general, the risk transfer is not there, right? So, like, if you own the equipment yourself, you’re ultimately responsible for it no matter what, and if you’re using a lease product, you have hell or high water payments that you have to make regardless of how that product actually works. Um, and so there’s a large risk transfer to a company like Metrus when you’re doing an EaaS type of financing where the risk is all transferred to Metrus, and so we take that on. Um, and if something doesn’t work, you just don’t pay for it, so there’s no debt service payment associated with it, there is no tax assessment associated with it the way that there is with C-PACE, and C-PACE also is structured differently in different states and in different counties because it’s ultimately up to the treasure task collector how those programs actually are structured and function. So, for a widespread application, that is not necessarily the best choice because, in order to administer that, you would have different structures for every location that your company had, and it only works in the United States and not all states participate, um, so it’s just a very distinct product, and I think in terms of the interest rates, I mean, you may be surprised to find out, but the interest rates for as a service are not high. So, we’re not talking about, um, you know, you should, or you certainly should not see high interest rates. So, if you are seeing that, you’re probably talking to the wrong provider. Um, you know, we’re not looking at interest rates that are above 10. There, it should not be in that range. It should be very close to what an actual equipment lease would look like, so there’s not a large difference in pricing, and the pricing differential is because of the risk transfer. So, hopefully, I answered that question. Um, might have been kind of a long answer. It’s a long question. I think you covered it all. Thank you so much.

Alright, you take a rest and let me direct the next question to Matt. And that is, when will the car industry, as a whole, see a shift to widespread adoption of EV fleets? And what must change for that to happen? Um, I can’t speak for the car industry because we’re in the truck industry, but I can, I think the challenges are similar. Um, you know, the car industry is ahead of us in terms of vehicle development, but that’s really one of our main focuses because, uh, that’s certainly our main development focus right now. We understand that that will be the future in terms of widespread adoption. Uh, the cost is not there. You know, every fleet, if you order something on Amazon and they ship it via UPS or FedEx, the customer generally chooses that on price, so you know, FedEx and UPS have to have to compete on that. So, they’re investing in electric vehicles like we are, but they can only do that to a degree where they can remain viable. So, the vehicle cost continues to go down. It’s not down yet. The range of those vehicles, whether it’s a car or a truck, and especially a truck, I should say, or a heavy-duty vehicle, is dependent on range because you simply are limited, you know, with the duty cycle that you can put that vehicle in. And then, finally, the big challenge for everybody is the charging infrastructure, which just simply doesn’t exist to support that yet. So, those are the three hurdles that have to be overcome. Um, you know, the vehicle cost, that’s a pretty linear deal, you can see where that’s gonna, you know, that’s gonna take another five or ten years, and then it then it will be viable. The range, same thing, that goes up just about every day. The infrastructure investment is that’s, uh, that has not yet been solved yet, that’s a question of finances. So, I think the big uh question is, is how much is the federal government and the US going to be involved with that with this infrastructure package? They’re going to be involved to some degree, but it’s going to require some intervention there to speed that along, I think.

Yeah, I would agree with that. And it’s a, it’s a hot topic and it’s a quickly changing one, so watch this space, see what comes next. Thanks. Alright, I have another question here for Anastasia. Alright, have your customers encountered challenges in categorizing energy as a service as truly off balance, as viewed by auditors and accounting firms, particularly the big four? Uh, this question relates to commercial, private colleges and universities, and municipalities.

Yes, so far so good. Um, I’ll say, uh, we, we actually, we’ve done a lot of work to ensure that our contracts are off-balance sheet, and so we’ve worked with accounting firms when structuring our contracts in order to make sure that we are adhering to FASB and GASB regulations, and we also do provide a very large write-up associated with that that we provide to our customers so that they can explain it to their own auditors. We do not get involved with our customers’ decision with their auditors on whether or not they think that this is an off-balance sheet product. That’s inappropriate for us to intervene in that relationship, but we do provide information so that the customer is educated and is able to explain it to their auditors and is fully informed. Thus far, we have not had problems with customers deeming it not off-balance sheet, and they have gotten approval from their outside auditors, including the big four, um, and you know, most companies or even, you know, public sector, everybody has to do that, right? They’re all checking with their auditors, so that is, um, something. Yeah, we haven’t had a problem. With a lot of times, there are questions about it. Almost always there are questions about it, but we’ve been able to get through it okay. Thanks for that, and we have more questions coming in. But there’s a few I want to roll this up a little bit, Matt. As the customer on the call, on the webinar, I should say, what do you want to leave your peers with? Um, what’s your last word to them, and what should they be looking at? You know, I think about our company, you know, and we’ve been building vehicles for over a hundred years, and, um, you know, the rate at which those vehicles have changed just gets greater every year, really, uh, astronomically. You know, our product is going to change more in the next 15 years than it has in the first 100 years, you know, by a long ways. So again, I referred to the manufacturing infrastructure that we’ve developed over, you know, that hundred years, and that’s got to change as quickly and the way that we do things half has to change as quickly, you know, so the old model of investing in that infrastructure, the manufacturing infrastructure, just simply won’t work for us anymore. So you know, energy as a service is the revolution that we need in that, uh, in that area to help us do these. So the first couple of projects are really exciting for us. Um, we expect to be able to increase those, uh, you know, as people get familiar with them and as we find new ways to employ that. Okay, good advice, something for everyone to think about, and we are almost out of time, but I want to sort of send that same question, Crystal, what do you think is coming next? What should our attendees be looking at? Thanks, Deborah. Um, yeah, I think just understanding what energy as a service really can provide and beyond just these efficiency projects, so lighting, HVAC, some of the things that we’ve touched on today, but really having buildings be more grid interactive and how energies of service can help address those needs and vendors can provide these full offerings and customized solutions. So just asking the questions to educate yourself on this market. Yeah, a lot of questions, thank you for that, and Anastasia, let me give you the last word. What thought do you want to leave our attendees with today? Sure, you know, I mean, I guess what I’d want to convey is just that there is, you know, help out there for you to be able to, you know, hit your sustainability goals, and I think that having, um, you know, something like, you know, energy as a service is really important in doing that, uh, and you know, we’re very flexible with the way that we work with customers, and I think it’s a really good opportunity to really take a holistic view of your sites and put together a project that makes the most sense for you, and also, you know, energy efficiency has been around forever. It is going to be part of any, um, plan that you put together, so even if you’re in the planning stage of where you’re, you know, heading, you can start with energy efficiency because there is, you know, no way that’s not going to be part of your plan so you may as well get started with that, like while you’re planning. Um, so just wanted to end with that. That’s a great point. Thank you for that. And we are just about at the top of the hour, so um, that is all we have time for today. The team will get back to everybody with their questions. Thanks so much for submitting them. Um, I just want to thank Anastasia Beckett, Matt Marks Dollar, and Crystal Maxwell. Thanks to the team at Metrus Energy for making this session possible today, and we hope you’ll join us again for our next set of webinars starting in August. And thank you all for uh, listening and watching with us today, and enjoy the rest of your day.