Goldman Sachs and Shell bet $75M that chain stores can boost grid resiliency

GridPoint, the Reston, Virginia–based company that just closed a $75 million investment led by Goldman Sachs’ Sustainable Investing Group and joined by Shell Ventures, has spent the past decade tackling a tough market: energy management for small and midsized commercial buildings.

These buildings don’t have big budgets or on-site staff to fine-tune their HVAC systems, refrigerators and lighting energy use. That means they need technology like GridPoint’s distributed control platform that can perform that job with minimal hands-on effort and at minimal cost — an equation that leaves tech providers with little wiggle room to make money.

Nationwide chains willing to pay for such services — such as GridPoint customers Walgreens, Wendy’s and Chipotle — also need systems that can match and adapt individual buildings’ energy-efficiency strategies to incentive structures and energy billing and procurement options that vary from state to state and utility to utility.

Handling those regional complexities becomes even more important as customers look beyond using the technology for energy efficiency and toward making money by helping the power grid, as an increasing number of GridPoint’s customers are doing.

But GridPoint CEO Mark Danzenbaker thinks that all of this work installing, managing and optimizing its energy-management platform across more than 15,000 U.S. commercial buildings is set for a big payoff. That’s because it’s a foundation for a whole range of investments customers will need to make in an era of climate change.

“In the last couple of years, what we’ve expected, predicted and modeled and thought was going to happen is upon us,” he said. ​“We’ve got the transition of the utility generation mix toward variable sources” of wind and solar power. ​“We’re increasing demand by electrifying the vehicle fleet. And we’re dealing with the destructive impacts of climate change and extreme weather.”

That means small commercial buildings will need EV chargers to serve customers and corporate fleets, and some owners will want backup generators or batteries to make buildings more resilient in the face of extreme weather and grid emergencies, he said.

Those new devices will need to be integrated into existing building energy operations, and their inherent flexibility will need to be combined with that of remote-control air conditioners, refrigerators and lighting banks to balance both their own energy-consumption patterns and the ups and downs of renewable energy on the grid.

The new $75 million investment will help GridPoint develop its technology and expand into new markets, Danzenbaker said. ​“How can we add more subscription options, add more innovation to the product? How can we better integrate the new assets, monetize those assets, provide better analytics [and] resiliency?”

GridPoint’s history in the small-commercial-building market

This isn’t the first big investment for GridPoint. Since its 2003 founding, it has raised more than $350 million from investors including Squared Capital, TOMS Capital, Twenty First Century Utilities, QVT Financial, Fortress Investment Group and Kensington Capital Partners.

Much of that funding was raised in the first decade of the company’s existence, however, and helped bankroll a series of acquisitions of startups in markets ranging from EV-charging controls to home energy analytics. But in 2010, GridPoint replaced its founding CEO Peter Corsell, laid off staff and refocused on the technology and customer base it gained access to from its acquisition of startup ADMMicro.

ADMMicro’s combination of on-site hardware controllers, cloud-based software and dedicated service staff is at the core of GridPoint’s current business, offered via a subscription model that requires no upfront investment from customers. That ​“makes it easy for customers to adopt today. We meet them where the market is, and then help them adapt to energy storage when they’re ready, to EV charging when they’re ready,” Danzenbaker said.

He declined to disclose how much of the total investment in GridPoint remains on its balance sheet today or whether its subscription-based deployments are currently generating profits.

A number of companies have struggled with the small commercial energy-management business over the past decade. Startups in the field such as Powerhouse Dynamics and Verisae have been acquired and shifted to business models focused more on monitoring and reporting than on active energy controls.

Meanwhile, the building energy controls systems made by global giants Honeywell, Johnson Controls, Siemens, Schneider Electric and Hitachi don’t scale down well to serve the needs of chain restaurants and retail outlets, Danzenbaker said. Nine-tenths of all buildings in the U.S. are less than 50,000 square feet, but ​“that’s not where the focus of the traditional players has been.”

Danzenbaker also differentiated GridPoint’s holistic approach from that of companies focused on tapping the flexibility of technologies such as batteries, EV chargers or controllable loads for grid services.

Those include companies such as EnergyHub and Uplight that primarily work with utilities, as well as the distributed energy arms of European energy giants such as Enel X, Engie, Centrica and Shell (the latter is a GridPoint investor).

Shell Energy — the Dutch oil giant’s distributed and renewable energy arm that’s acquired numerous solar, battery and EV-charging providers — is also a long-time partner of GridPoint. In 2018 the two, along with SparkFund, launched a bundled energy-services offering in parts of the U.S. that allows energy retailers to compete for commercial buildings’ business, with options such as lighting and HVAC retrofits and enrollment in wholesale energy-market demand-response programs.

Danzenbaker cited this as one example of how GridPoint and Shell Energy could collaborate. ​“They’re a channel partner of ours, as well as an investor, and we see a lot of opportunity to work together.”

Blurring the lines between energy efficiency, grid services and distributed energy

GridPoint is already helping its customers bid their energy-reduction capability into grid-serving markets. One notable example came during California’s grid crisis in the summer of 2020, when the company worked with Walgreens drug stores to voluntarily reduce load as the state grid operator struggled to maintain adequate supply during a heat wave. ​“We reduced over 11 megawatts,” Andrew Hammen, GridPoint’s vice president of utility solutions, said in a December interview.

While a typical GridPoint deployment shaves roughly 10 percent of a building’s average energy usage, on-the-spot adjustments can yield additional reductions that, multiplied across hundreds or thousands of sites, can add up to significant levels of relief from grid stress, he said.

“That model really breaks down the silos between traditional energy efficiency and demand response,” Hammen noted. 

As Vikas Agrawal, managing director within Goldman Sachs Asset Management, put it in a prepared statement, ​“GridPoint’s platform provides immediate energy savings to customers and a gateway to integrating additional grid-interactive assets like EV chargers, generators, and storage.”

Of course, it’s important to ensure that these load reductions don’t compromise core business operations such as keeping air conditioning or refrigeration within certain temperature thresholds, he said. ​“The worst thing that can happen during a demand-response event is that a customer knows a demand-response event has been called,” Hammen said.

Danzenbaker says GridPoint is active in more than 20 demand-response markets across the U.S. today, either working directly with utilities or as a partner with retail energy providers and demand-response aggregators. In some markets, it’s doing both simultaneously, as in Texas, where it’s enrolled in programs run by grid operator ERCOT and also partnering with energy marketplace provider Leap and energy retailer NRG Energy.

The grid emergencies that have happened in Texas and California over the past few years have focused customers on the potential for major power disruptions, Danzenbaker noted. ​“They’re very concerned about reliability, they’re very concerned about power costs, and they’re very concerned about going on their own sustainability journey.” While GridPoint hasn’t yet publicly disclosed any projects that involve batteries or backup generators, ​“we think this is going to be a substantial part of our service going forward.”