SIJ Q&A
The power of Nancy Floyd
BY C ELESTE LE C OMPTE
“I had some interesting opportunities presented
to me, and I pushed myself.”
That’s how Nancy Floyd, co-founder of Nth
Power, a San Francisco-based venture capital
firm specializing in energy technologies,
describes her career.
Floyd discovered her entrepreneurial streak
early on in an unlikely place: the Vermont
Public Utility Commission. While working on
federal legislation that laid the groundwork for
deregulation, Floyd found time to hatch the first
nonprofit to provide home energy audits for
low-income customers.
“Once you’ve figured out you’re an
entrepreneur and a risk-taker, you never go
back,” she says.
Floyd’s first major venture was to help
launch a wind development company at a time
when “wind was so not mainstream,” she
explains.
Under Floyd’s direction, NEC Energy Corp.
constructed $30 million worth of wind turbines
in California’s Altamont Pass in the 1980s.
“Talk about cowboy days…” Floyd muses.
“We created the business model.”
NEC eventually formed the basis for FPL
Energy, which generated 40 percent of U.S.
wind power in 2004.
But Floyd left the wind business when
inconsistent federal tax credits stifled the
industry. Her second experience with a
deregulating market, this time in the
telecommunications industry, turned Floyd
on to the power of innovation brought by
competition and market demand. What Floyd
says interested her most was the role technology
plays in transforming the landscape.
More important was her realization that
this awareness was not being developed in the
traditional telecom companies. “These were
seemingly disruptive technologies funded by
venture capitalists,” she says.
Nth Power grew out of this realization.
Floyd says she believes the time is right for
exponential growth in energy technology.
“We have never in the history of this country
been in the spot we are now related to energy,”
she says. “I’m not going to say its that we’re
running out of oil in 20 years. It’s around global
warming and not being able to produce enough
oil to meet demands.”
Floyd recently took time to talk with
Sustainable Industries Journal about her perspec-
tives on this moment in history.
12 Sustainable Industries Journal
SIJ: You’ve talked about a major shift in
energy use and technology. Before that
happens, are consumers going to have to
understand energy differently?
Floyd: People will start thinking more and
more about energy in terms of their own
reliability needs.
It takes time for people to change the way they
do things. To change the way people do things
you need to find those early-adopter markets that
are ready for change … and then there’s a whole
education process for the rest of the market that
People don’t care enough
and don’t pay enough
to conserve.
When you start paying a
real price instead of a
blended price —
people will start to care
about energy at that point.
Right now energy is too
cheap for people to really
care about saving it.
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leads to more mainstream adoption. … That
allows you to segue to other markets, perhaps the
markets you’re most excited about.
The home computer was marketed as a way to
store home recipes. To many people that seemed
like an immediate market. ... They’ve got to start
somewhere.
Where new technologies start and where
they’re first adopted are the big customers. If you
think about computers and fax machines, it
started with business. And then, as prices came
down and operating systems got easier to work
with, it reached the mainstream population.
The same path will be followed with new energy
technologies. Ten years ago, CFOs of major
companies didn’t think about energy. Every CFO
of every major company in this country, if not this
world, is thinking long and hard about energy. It’s
one of the highest operating costs they face.
SIJ: In 2001, 25 states had deregulated their
electric utilities. What effect has re-regulation in
many of these states had?
Floyd: I think that actually having competi-
tion, just the threat, caused them to wake up. But
re-regulation hasn’t really slowed the traction that
new technologies are getting. There are certainly
long sales cycles. Many of them have just gotten
funded in the last few years and it takes five, six,
maybe seven years for us to see it in the main-
stream market.
Today the market drivers are so much stronger.
Deregulation has been left in the dust. Include
the fact that we have an aging infrastructure in
this country and elsewhere; that there’s increasing
demand for oil and natural gas that now, on a
daily basis, is beginning to outstrip supply; very
significant global warming concerns, terrorism
and national security concerns. As well as, do we
continue to have the architecture of big central
power plants or have more distributed
architecture with clean small generation? All of
these are really driving the opportunities now.
And it’s gotten investors … really interested.
We are at an inflection point. From 1990 to
1998, $300 million in venture capital was invested
in energy technology. From 1999 to 2004, $4.5
billion of venture capital was invested in it. This is
one of the largest industries in the world,
absolutely hungry for change and innovation.
SIJ: There seems to be a lot of interest now
in focusing on how power is supplied to
consumers. Why is there so much attention on
this particular aspect of energy?
O C T O BER 2005
Floyd: There is more pressure on utilities to
provide highly reliable power. Automated
manufacturing costs us a lot of money now if the
power goes out. What’s driving investments in
advanced metering is the ability to use the system
efficiently.
If you have advanced metering, utilities can
send real-time price signals. Right now we pay a
blended rate for energy. It includes the cheapest
cost of energy because you’re using the lowest
cost resources, and as demand increases you have
to turn on the plants that are the most expensive
to run and we end up paying the blended rate for
that. You can measure people’s usage in five
minute — or less — increments. Then you can
begin to charge for what people use.
Real-time pricing sends price signals so people
save energy when it’s most expensive. We’re
optimizing the generation that’s out there. So
balancing the system, getting the most out of the
system is the rationale for advanced metering.
SIJ: If it’s so important, when do you think
real-time pricing is going to happen?
Floyd: It’s starting to happen around the
country. California is going to be mandated to do
real-time pricing starting next year, rolled out over
a number of years. It’s a very big deal. Think
about it: When my teenage boys IM [instant
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message] for fun, why are we sending meter
readers out? It’s unbelievable.
SIJ: It sounds like a lot of the new
technologies take responsibility for managing
energy use away from consumers. Do you think
that’s true?
Floyd: So far, we have found that energy
efficiency alone is a very weak market driver.
People don’t care enough and don’t pay enough to
conserve. When you start paying a real price
instead of a blended price — people will start to
care about saving energy at that point. Right now
energy is too cheap for people to really care about
saving it.
SIJ: Doesn’t that mean asking consumers to
give up quite a bit of control over their
electricity use?
Floyd: It wouldn’t be giving up control at all.
It’s really not even noticeable. We have a company
working with PacifiCorp, and what they do is go
in and install this little device on air conditioners.
They cycle people’s air conditioners on and off,
just a couple of minutes. The compressor is off
and in the couple of minutes where they turn it
off and back on … the temperature in your house
might rise 1 degree.
You’re not even going to notice a change.
There’s a technology to dim lights in office
buildings very slowly over a minute or minute
and a half, by up to 30 and 40 percent, and it’s
almost imperceptible. ... The real driver was
workplace productivity — when you have lighting
appropriate for the task, people are more
productive. … People don’t have to even care
about energy efficiency.
SIJ: In an article about H2Gen, a company
in Nth Power’s portfolio that makes small-scale
hydrogen generators, CEO Barney Rush said he
wants to “avoid the best being the enemy of the
good.” Does that thinking relate to your
investments?
Floyd: Sure. In the case of H2Gen ... maybe
we’ll start with applications that have nothing to
do with fuel cell cars. As venture investors, we
need to make money for our investors, and when
we make an investment we need to think that
there’s an immediate market. There are a lot of
companies that use hydrogen and have it shipped
in — refineries, pharmaceutical companies. And
H2Gen wants to sell into those immediate mar-
kets as a way to generate some volume, which
brings prices down.
I’m looking for initiatives that aren’t
regulatory-driven, that are market-driven. That’s
when you know you’ve got a real industry. G
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