Making Carbon Zero Profitable

On a crisp, bright winter day atop a four-story building in downtown Palo Alto, Brenden Millstein pauses for a moment to point to a tall apartment building a few blocks away.

“That’s Sergey Brin’s home,” he said.

Like the Google co-founder, Millstein, 28, came to Palo Alto to develop a technology and mission that will change the world. That mission—making it profitable for buildings to be carbon neutral—continues today here, on the flat, silver rooftop of 125 University Avenue.

Millstein, who has an MBA and MS from Stanford, is joined by Raphael Rosen, 27, the co-founder of their company, Carbon Lighthouse. Senior Engineer Francisco Isenberg, 27, is also here to help. The three young backpack-clad men traverse a thin walkway and come to a massive, loud, rusty machine that controls the building’s heating and cooling.

It is a beastly, inefficient monstrosity, and is comparable to those found on nearly every like building in the world. The deafening whirring of a massive fan greets the team as they enter the shielded room that blocks the noise from escaping the roof.

Units like this, as well as antiquated pumping systems, are in large part what makes buildings responsible for 38 percent of carbon dioxide emissions in the United States, according to the EPA. Buildings account for nearly 32 percent of all energy usage in the U.S., including all oil used for transportation.

The men fan out, pulling laptops out of their bags, and Millstein reaches for a small electronic data collector, or “logger”, which he had placed inside a circuit breaker on a previous visit. During the interim month, this logger and a handful of others in the building have been tracking power usage and motion activity.

Today the loggers are being collected, the data is dumped into laptops, and soon a custom application developed by Carbon Lighthouse will reveal the exact dollar amount they’ll be able to save the building’s owner after a number of improvements.

This is phase one of Carbon Lighthouse’s service. The hundreds of thousands of data points collected by loggers throughout a building tell Millstein and team exactly where there are inefficiencies to be fixed. They are so confident in their ability to predict savings that they charge nothing up front, and only profit from a percentage of what a building owner saves on the electric bill.

In the case of 125 University Ave, there are nearly 40 heat pumps cycling water through a big loop running throughout the building. There's also a massive pump on the roof which, according to Millstein, runs on alternating current, or A/C, and therefore can’t throttle down easily, so it is simply left on all the time. It would be like driving a car with a brick on the accelerator pedal, and using the brake to control your speed, he says.

“We’re taking the brake off of the gas pedal,” said Millstein. “We can add what’s called a variable frequency drive. It’s a new silicon-based piece of equipment and you just put it in front of the motor driving the pump and it lets you then turn the motor down.”

The drive is just one of a multitude of tools Carbon Lighthouse employs to increase efficiencies. Their solutions include solar panels, simple motion-activated light switches, and sophisticated units that control select circuits in a building. They don’t really care what technology a building ends up with, per se, as long as it yields big savings.

After Carbon Lighthouse has lowered electricity consumption as much as possible, they tally up the remaining power used, calculate the carbon emissions, and use the money saved on the electric bill to pay for carbon credits to get the rest of the way to net zero.

KEEPING THE MONEY CLEAN

Along the way, Millstein and Rosen have been careful not to accept money from angels or venture capitalists.

“The idea was, let’s not raise capital from any sources that would ever ask us to sacrifice any part of the environmental mission for money,” he said.

In order to do that, however, they’ve had to rely entirely on customer revenues and grant money. Their efforts finally began paying off earlier this year, when they won a prestigious $90,000 Echoing Green grant, a Stanford Social Innovation Fellowship, and selection into StartX, a student accelerator (based in the Palo Alto AOL building).

“We make it profitable for companies, schools—any organization really—to entirely eliminate its carbon footprint,” he said. “The way we do this is by combining every alternative energy technology under the sun. We do energy efficiency, we do solar, we do something called demand-response and retro commissioning. We compete with power plants for pollution permits. We do a million different things, but we combine it into one package that’s really, really simple, and is profitable for customers.”

Ted Hesser, an analyst with Bloomberg’s Energy Smart Technologies Group—part of Bloomberg New Energy Finance, said Carbon Lighthouse may have a very bright future.

“It’s enticing because it’s a clear value proposition: We will give you a zero carbon building, basically.”

Hesser said Carbon Lighthouse is essentially combining energy efficiency, distributed generation, carbon market credits, and demand response into one zero-carbon solution.

“It’s really complicated to find the cheapest path towards zero carbon,” said Hesser, “so Carbon Lighthouse comes in and says, we’ll take care of all that complexity for you.”

More importantly, says Millstein, is the environmental solution they're offering.

"Roughly 30 percent of US environmental degradation would be avoided if every commercial and industrial building in the country adopted our system," said Millstein.

SACRAMENTO CALLING

Their first customer, who owns a Sacramento building, came recommended by a “friend of a friend of a friend of a friend.” The owner had received a bid from a company offering $15,000 in annual savings after an up-front cost of $100,000 for new equipment.  Carbon Lighthouse came in a started analyzing the eight-floor building’s electrical system with their logging devices.

They discovered that the building had 40 horsepower worth of pumps running all the time, circulating the water through the entire building all year round.

“Imagine one quarter of a VW bug sitting up on the roof pumping water all the time,” he said. “You have to keep it running because if there is ever just one of these pumps on at one time, then you have to have the [roof] pump on.”

The team figured out how to turn off half the pumps 96 percent of the year.

“Turns out you don’t need all the pumping all the time,” he said. “You only need half the pumping all the time and all the pumping four percent of the year.”

Their solution saved the building owner $12,000 a year with no new equipment installed. Also, crucially, their solution is pulling 1.73 pounds of C02 a minute out of the air,, or the equivalent of four and a half large garbage bags.

“And so instead of paying $100,000 over time, they’ll pay $40,000, and it was cash flow positive for them immediately,” said Millstein.

The greatest pleasure, he said, was being able to see firsthand what had until that point only existed in theory.

“It didn’t just work in our heads, and it didn’t just work on paper, but the customer is actually saving thousands and thousands of dollars a year and has done a good thing for the environment. It was just really, really exciting.”

MAKING GREEN

Hesser cautions that Carbon Lighthouse has a very long way to go in order to take on powerful energy servicing companies like Noresco or Ameresco.

“I think they will likely grow within a very specific marketplace at first, and that is building owners that want a zero-carbon solution,” said Hesser. “Some of the time Carbon Lighthouse will offer a solution that is profitable for that entity—but there will be other clients of theirs that are ok with it not being profitable---or at least not profitable within a realistic payback period. And those clients will likely be doing it for a lot of reasons—markets, social consciousness, or because it fits within the broader mandate for the business owner to be zero carbon.”

In the meantime, however, Hesser says Carbon Lighthouse will continue to benefit from offering a “a turnkey, zero-carbon solution.”

“There isn’t anybody that really does that,” he said.