Needham Seeks Impact Beyond the Organization
Commonwealth Fusion Systems Working Toward Zero-Carbon Power, Heat
Throughout the month of November 2022, I was lucky enough to host amazing conversations amongst founders, investors, and industry leaders in the TDK Ventures network for panels and 1:1 discussions about the future of the energy transition. This piece is a summary of the key insights from a wide ranging discussion I shared with Rick Needham, Chief Commercial Officer at Commonwealth Fusion Systems. The full conversation on video is available on YouTube. Thanks for taking the time to read, and do reach out if you are building or investing in this sector — I’m always open to brainstorm!
Rick Needham’s career has come full circle. As Commonwealth Fusion Systems’ (CFS) new chief commercial officer, he has fulfilled his quest to “have an impact well beyond what the firm is doing,” he told virtual attendees at TDK Ventures’ Energy Week 2022. “I joined Google (in 2008) because it was a company that had changed the world. I figured if it focuses its efforts on climate and sustainability, renewable energy, it could change the world again for the better. It was the reason I joined TPG (in 2017) — to show capital providers, our investors, that they can make the same return through sustainable investing And (with a capital A) show all this impact.”
And it’s a big part of why he came to CFS in October.
“There are few other companies I can think of that could have such an enormous knock-on benefit,” he explained. “There’s the direct benefit of zero-carbon base load power available anywhere. But this power can be the basis of many other sustainable applications such as electric transport, direct air capture, electric fuels like green hydrogen, and desalination. Fusion also generates clean heat, critical for some of the industrial sectors that are harder to decarbonize. And finally, it has energy justice implications in that it can be substituted in for dirtier baseload power and can be sited really anywhere. ”
CFS is driven to becoming the first fusion company to generate net-positive energy and to commercialize zero-carbon energy and heat from its process. And while Needham acknowledges that will be “a moment marked in human history, as we gain control over star power in a commercially relevant device,” the real accomplishment will be realized in the endless applications that use fusion power to transform industries, technologies, environmental stewardship, and energy justice around the world.
Helping Google become a More Sustainable and Climate Positive Company
During his fireside chat with TDK Ventures Associate Marc Bouchet, Needham discussed the three major phases of his career, beginning with his work to shrink Google’s footprint and accelerate climate solutions as director of energy and sustainability at Google from 2008 to 2016. Following stints as a Navy submarine officer and head of business development with DEKA, he signed on as Google’s director of energy and sustainability. He came onboard just as the company was ramping up its RE<C (renewable energy less than coal) project to generate clean power more cheaply than coal-generated electricity. Google deployed what was at the time the largest corporate solar array on its rooftops — about 1.7 megawatts. While modest by today’s standards, the company demonstrated that clean power was viable and could be even more economical at large scale.
“Google had a big balance sheet and the ability to monetize renewable energy tax credits on investments. The investments we made showed that if you have capital and appetite, you can help make these highly impactful things happen,” Needham said. “We wanted to deploy larger-scale renewable energy projects, but the uber-goal was to show that it can be done profitably and show ourselves and other players that you can make good money doing this while actually putting significant amounts of clean energy onto the grid. We were excited about participating not just as an ‘off-taker,’ which Google has driven further down the path to include commitment to 24/7 clean power, but in investing, too. We tried to encourage companies like us to do similar investing. 2010 was a time when, if you a had a good idea and a team that could execute, where other companies might balk because it wasn’t core to their business, Google would say, ‘If we can do it, it makes financial sense, and it’s an example for others, why not?’”
He said not many corporate entities followed Google’s lead, as all this was happening in the wake of the 2007–2008 financial crisis, “today, many corporates are being very aggressive about maintaining their efforts and commitments to net-zero. Corporate off-take of renewable energy has grown dramatically. It’s now at multi-gigawatt scale.” Although Rick’s efforts at Google, as well as those leading the renewable energy power procurement, were ahead of their time, with corporate PPAs truly taking off in the 2017–18 timeframe, this work led him to explore even bigger questions about the future of renewable energy in the global energy ecosystem.
That experience ignited Needham’s interest in energy access and justice, which is part of what he believes will manifest from CFS ’s breakthroughs in fusion development.
“Many parts of the world that will suffer the first and hardest consequences of climate change have had, frankly nothing to do with it. They didn’t put the emissions into the air that are causing droughts, floods, and fires. They are vulnerable populations,” he said. “Since my time at Google, I’ve been taking a close look at energy access. It’s a challenge when you have 600 million people who really never had access to electricity. The bulk of them are in sub-Saharan Africa, which can have more dispersed populations which are better served by solutions like off-grid solar.” But those countries also struggle with how they can power their commercial and industrial businesses with baseload power solutions that are not only zero carbon but can scale rapidly. Questions around this complex issue of climate and energy justice are ones that have reached a critical point through recent international discourse after the 2022 COP in Egypt. Although not a technology-driven solution, resolutions to create a “Loss and Damage” fund that would provide financial support for the world’s most climate-vulnerable nations pave a path for continued deployment of renewables and low carbon baseload power to those regions that Rick identified at Google. And with his new job, fusion energy could be part of the climate justice discussion in time as well.
Aiding Impact Scalers’ Quest through Large-Scale Investment
From helping a large enterprise become a more sustainable and climate positive company, Needham moved to TPG to help entrepreneurs deploy more low carbon products and services. As a partner and the energy sector lead for the company’s Rise Fund, he helped invest over $10 billion to support late-stage growth equity-seeking companies that were focused on generating substantial positive impact. The largest impact fund that had ever been raised at the time, Rick and his team took $50 million to $150 million stakes in promising cleantech companies eager to scale.
TPG is still actively investing, and we asked Rick how today’s climate tech founders should consider where the fund might fit into their fundraising journey. He shared that “there’s a spectrum of sources of investment depending on where companies are on their journey. TPG Rise and Rise Climate are later-stage investors. They’re not the ideal investor if you’re still trying to prove out a product or service, or you don’t yet have customers. But if you’ve already gotten some product-market fit, proved out what you want to build, you’re pulling in revenue, and you need help to scale that, that’s where they can really help a company. That means going into other geographies, extending the product line, further building out the management team, and helping with salesforce effectiveness, even going public.”
He noted that “there’s also an important part of the ecosystem that gets companies from an idea to seed stage to series A. TDK Ventures and others are helping companies do that.” His time at TPG further developed Needham’s interest in energy access for rural and emerging markets. He said that while the fund did not find a suitable role or “a natural fit as far as ticket size and scale where we could help,” he did evaluate opportunities in pay-as-you-go solar, microgrids, and fuel-distribution systems.
Moderator Bouchet noted a “discomfort level” among energy venture capitalists about investing in companies that need to get to the mega stage but are depending on technologies that are not yet proven or would require “first-of-their-kind deployments.”
Needham agreed and this is precisely where he wanted to be positioned — helping companies that have arrived at “inflection points. They may yet have some technical risk. They may not have proven out fully what they’re doing. They may not be profitable or generating EBITDA. Those are companies that would be harder for a private equity fund to invest in. I transitioned to thinking about investing in earlier-stage companies than what TPG was able to consider,” he continued.
He offered advice for companies that find themselves at this juncture in their commercialization journey.
“Bridging the gap is tough,” he conceded. “Not many investors like putting in big dollars when the risk is still high.”
He urged these companies to “de-risk” as much as they can:
- Focus on the thing that is most enabling of the next step. Rick shared, “CFS is a great example of this. We looked at how to actually build a commercial fusion plant . The power output of a fusion plant is proportional to the fourth power of the magnetic field. So, if you have a really high-powered magnet, you could shrink the plant to something commercially relevant and get the same or more power out. So, let’s do that milestone first. If we prove that out, people will see the path to what a commercial fusion plant looks like, and that opened up the series B — $1.8 billion.”
- Scale out. “If you have something that works at some level, there’s a temptation to scale it up in size. Some things aren’t conducive to that. You have to build them to know if they’re going to work. But if you can make 10 of the smaller versions, put them together, and start making product, it will be easier for investors to wrap their heads around. Scaling up has the goal of achieving better unit economics. However, that may introduce changes in the process that can require additional time-consuming innovation.”
- Seek out the niche players. “There are more entities now that can — nominally — help on first-of-a-kind projects and plants to get companies over the hump. Often partnering with investors or sources of capital known for supporting organizations in this position can help to derisk a technology and can send a strong signal to the market that attracts additional funding.”
As he began thinking about his next career adventure, he spent time looking for companies with acceptable risk levels, Needham said, “I kept an eye out for operating roles where I felt the company had high potential to bend the curve on climate, not just by decarbonizing the power sector, which is incredibly important, but enabling decarbonization across many other sectors that depend on affordable, abundant power and heat.”
That goal led him to Commonwealth Fusion Systems.
Bringing Fusion to Fruition
A big part of CFS ’s efforts to commercialize zero-carbon fusion power requires a comprehensive understanding of the product that will get deployed, who the customers are, and which partners will help bring it to reality, Needham said.
“The first thing we’re doing is proving you can get more energy out than you put in, but that doesn’t mean that the next day it’s commercialized. Getting net positive energy out hinges on the high-powered magnets the company is perfecting for use in tokamak-style fusion plants. The magnets are used to control, direct, and contain charged particles in a plasma away from the walls of the fusion chamber, where the particles are free to collide, increasing their temperature to the extent that they overcome their electromagnetic charge, fuse, and release energy.”
Inside a tokamak, the energy produced through the fusion of atoms is absorbed as heat in the walls of the vessel. Just like a conventional power plant, fusion plants use the heat to generate steam to power turbines that create electricity.
Leveraging the power of high-temperature, superconducting magnets paves the way toward shrinking the size requirements for tokamak reactors to make them relevant for commercial installation and deployment.
“People have always said fusion is so far away, but one of the key milestones for fusion to achieve is net-energy gain — basically getting more energy out of a reaction than what is put in,” Needham said. “We intend to get there by 2025. So, it’s short term. Once you cross that threshold, you’re showing that it is a viable path for creating more heat energy, and you can build a power plant based off that.”
Smaller devices increase the applications for fusion and expands the opportunities to make clean power more accessible.
“One of the beauties of fusion power is that you can put it anywhere,” Needham said. “The fuel can come from seawater and in very small quantities. In essence, you are completely disassociated from a fuel chain since the fuel is essentially free and accessible to all. No party, no country, no actor will control your destiny. You’re not dependent on some commodity whose price can swing depending on how the geopolitical forces go. And it doesn’t depend on local sun, wind, or anything to get almost unlimited, affordable (when we get the price down) clean baseload power.”
Needham closed his discussion by expressing his optimism for electrification and decarbonization efforts around the world.
“I have been encouraged that the world has woken up to the massive challenge and opportunity surrounding climate and sustainability. We’re now getting a proliferation of companies working toward solutions. The capital flowing into the space is unprecedented,” he said. “The thing that has gotten me most excited is the talent that is coming into the space. There are always the passionate people coming out of college and grad school who want to work on meaningful projects. But there’s also the people who have been successful in their early careers, people coming from SpaceX and Tesla, who have done really audacious things, proven they can do it, and have a passion for solving huge problems. Seeing that talent come over is invigorating. The companies that focus on big problems can attract the best people.”
TDK Ventures’ second annual Energy Week assembled some of the greatest minds and brightest lights in the fields of renewable energy, materials science, mobility, storage, and more. Over the course of 13 sessions — fireside chats, panel discussions, spotlight interviews, and in-depth reports — TDK Ventures and the expert businesspeople, researchers, academics, and investors presented their opinions and field notes on the world’s progress in solving some of its most pressing problems. Energy Week 2022 fulfilled TDK Ventures’ mission to spotlight the best ideas and most promising technologies to inspire entrepreneurs, inventors, and investors to redouble their efforts to mitigating climate change, hasten electrification, and develop the solutions that will herald a greener, more equitable planet.
