BlocPower raises $155M to speed up its all-electric building retrofits
BlocPower CEO Donnel Baird wants to convert buildings in low- and moderate-income neighborhoods across the country from burning fossil fuels to using lower-carbon electricity for heating. He also wants to make that conversion process a money-saving and money-making enterprise for tenants, building owners and project financiers alike.
That’s a tough proposition today. But BlocPower’s software and services business model, backed by about $100 million in financing, has made it happen for more than 5,000 homes, apartments, houses of worship and commercial buildings across the country.
On Wednesday, the New York City–based startup announced more than $150 million in new debt and equity financing to expand its electrification business. That’s enough money to serve between 1,000 and 5,000 buildings, or between 1,000 and 10,000 families, Baird said in a Wednesday interview.
BlocPower also expects this work will require the hiring and training of about 3,000 new employees, he said. Those workers will include formerly incarcerated people and residents of the lower-income neighborhoods the company serves, through its Civilian Climate Corps program in New York and planned expansions of this training program in other cities.
With the new funding, BlocPower has raised a total of just under $250 million. Baird, a child of immigrants from Guyana who had to heat their one-bedroom Brooklyn apartment with their gas stove during cold winter nights, said this scale of financing is more than he ever dreamed of when he first launched BlocPower in 2014.
But at the same time, “this is a drop in the bucket,” he said. “This is a $4 trillion problem.” That’s an estimate of how much it will cost to retrofit all 125 million buildings in America with electric heat pumps, new insulation and windows, solar panels on rooftops suited for them, and the other features of a carbon-free U.S. building stock.
Burning fossil fuels to heat buildings accounts for about one-tenth of U.S. carbon emissions, making building electrification key to fighting climate change, not to mention an important step in reducing the harm to human health caused by indoor fossil fuel use.
“We’re going to have to raise significant capital to electrify the whole country,” Baird said. The billions of dollars directed at home efficiency and electrification from last year’s Inflation Reduction Act are important, he said — but it’s just a beginning.
Financing, technology and workforce development
BlocPower’s new funding includes $130 million in debt financing led by Goldman Sachs, which also led a $55 million debt financing in BlocPower in 2021. BlocPower uses debt financing to back up its building-electrification business model, which offers low- or no-cost replacement of fossil-fueled furnaces, boilers and water heaters with electric heat pumps and other efficiency upgrades in exchange for monthly payments from building owners.
These monthly payments are structured to be lower than the energy bill savings that BlocPower’s projects deliver to building owners and tenants to ensure they save money over the long term. That’s not always easy, given the higher upfront cost for heat pumps compared to fossil-fired heating. BlocPower works with utilities, municipal governments and state and federal agencies to line up the rebates, incentives, utility-bill credits and other financial adders needed to make these complex and expensive projects pencil out economically.
“That has to be part of the package,” Baird said. “Where we don’t have [those partnerships], that isn’t a core market for us.” So far, the startup has undertaken large-scale projects in Atlanta, Buffalo, Denver and New York City, as well as Oakland, San Jose and San Luis Obispo in California. It has also inked ambitious citywide electrification plans with Menlo Park, California and Ithaca, New York.
One of BlocPower’s key goals has been to squeeze out the “soft costs” of building electrification retrofit projects, Baird added. That term encompasses a range of costs not tied directly to equipment or its installation, including identifying which buildings are well suited for different types of electrification projects, acquiring customers and managing the lengthy and complex inspection and permitting process with government agencies.
Those expenses can add up to tens of thousands of dollars before any work can be completed, he noted. That’s a major barrier preventing lower-income communities from even getting started on electrification. Similarly, many of the hundreds of thousands of contractors across the U.S. struggle to absorb the high upfront costs of building electrification.
BlocPower’s BlocMaps platform, which the startup sells as a software-as-a-service to the cities and community energy providers it partners with, was designed to solve those kinds of problems, Baird said. Drawing on research conducted by U.S. Department of Energy labs, the software has constructed a “digital twin” of every building in the country.
“Our algorithm tells us what [new appliances] should be installed in each building” and serves as a record-keeping system for project design and implementation for the contractors, lenders, inspectors and other parties involved in the process, he said.
Similar software platforms are being rolled out by energy-efficiency and building-electrification companies across the country to address soft costs. So far, BlocMaps has driven an 80 percent reduction in soft costs for BlocPower’s New York City projects, Baird said.
“We don’t think soft costs should be a barrier to fighting the climate crisis. That cannot be why the planet burns. So let’s give away the software damn near for free and eliminate a lot of the soft costs.”
BlocPower’s new funding includes just under $25 million in equity financing led by VoLo Earth with participation from investors including Microsoft Climate Innovation Fund, Credit Suisse, Builders Vision and basketball star Russell Westbrook. Much of that equity financing will be directed to developing its BlocMaps software, as well as expanding its financing, administrative and workforce-development capacity.
Both equity and debt financing will also be flowing to BlocPower’s workforce-development efforts, Baird said. The company’s Civilian Climate Corps has won $145 million in grants from New York City to train 3,000 city residents as technicians and installers, with a particular focus on providing well-paid job opportunities to previously incarcerated people and residents of disadvantaged communities threatened by gun violence.
“We’re exploring expanding the workforce model to Colorado and New Jersey, and hopefully we’ll have an exciting announcement soon,” Baird said.
With the Inflation Reduction Act providing billions of dollars of tax credits and incentives, and states and utilities increasing the scope of funding and regulatory support for building electrification, a shortage of electricians, plumbers, HVAC installers and other skilled workers is “going to be the bottleneck” in scaling up retrofits quickly enough to make a dent in carbon emissions, he said.