Making Pivotal Energy Investments with Terry Kellogg, SOM/YSE '00, Yale Clean Energy Conference speaker

Written by: Shira Lyss-Loren, MEM '27

Terry Kellogg, SOM/YSE ’00, is a Managing Director at Helios Climate Ventures, where he leads investments in climate technologies across clean energy sectors. With decades of experience spanning energy finance, environmental stewardship, and philanthropy, Kellogg will speak on the Yale Clean Energy Conference keynote panel on Investing in Clean Energy Innovation.

 

At Helios, you're looking for opportunities that "reshape industries, sustain planetary health, and offer outsized returns. What does a company need to demonstrate for you to believe it can actually deliver on all three?

 

It always and forever has to do with the problem that they're trying to address. And how big is the problem? Is it a systemic problem? The hope is that in all cases [when we invest in a company] we're helping our investors to fundamentally solve these systemic problems. Once you convince yourself that this team has got a solution for solving systemic problems, then it becomes a question of do they have a business model that is actually going to work, and can it be sustainable? In order to be sustainable, it's got to be economically viable. And it's got to have a moat [moat is a term for a company’s competitive advantage]. They have to have a means of doing something unique over the long term. With a lot of these companies that we see, there's very often the China risk factor that we need to take into account which very often has to do with moat questions, and sometimes even IP theft questions. The third big pillar is always the team. A lot of people would say that's the first and only question, because so much can change over the life of an investment. But are there world-class people in the organization? Hopefully founders or leaders of the organization are truly up for the task.

Typically, we think along the lines of a traditional venture investor, which is typically a 7-10 year hold. Ultimately, our investors probably have more patience than the typical VC investor, and they may be willing to take on a little bit more risk because they do have a values-based motivation for putting money to work. Maybe the way that manifests is they're willing to have a slightly longer hold period, but from our perspective, we don't want to take advantage of those predilections, right? Because, fundamentally, the faster we can get out and recycle capital the more we have to put into the next opportunity. We've never seen a dichotomy between doing the right thing and having outsized financial performance, because if you have financial performance, then you are, just by definition, able to do more of the right thing. It's in these downside cases where things get a little muddy, or gray. The way that can often play out for us is, okay, they're not making the milestones that we thought they would. They're still looking for their big first purchase order. They're still pre-revenue. Are we willing to put more capital to work to see if they can get there? Probably our investors are a little bit more willing to give them a little bit more runway to play that out.

 

Looking back at the last 30-ish years in the climate investment space and the corporate sustainability space, what's one thing that you believed early in your career that you've totally changed your mind about, and what caused that shift?

 

The thing that comes to mind for me most starkly has to do with some recent statistics that are just incredibly compelling. One is that in 2024, 94% of all new generating capacity added in the United States was renewable. And closely related to that statistic is that solar in particular is the lowest cost means of adding new generating capacity to pretty much any grid, in most scenarios around the world today. The stark change that I think is noteworthy is if you had told me 25 years ago when I graduated from the joint degree that this would be the case in 25 years I would have thought ‘that is unbelievable.’ I could not have imagined progress to be as significant as that, and [given that progress] I would have then assumed that we would be in a place where we're really fundamentally solving the climate problem. I would have thought those things would go directly hand-in-hand. But instead, despite the fact that those statistics are true, what is also true is that we have such a tremendously long way to go in really getting our hands around the issue of climate change and driving down emissions on a scale that is commensurate with the problem.

 

What were some pivotal moments over the last several decades that made sustainability and business go together? At what point did climate investing become a commercially viable thing to do?

 

Let me start at a high level, and I'm going to focus especially on the 25 years since I graduated. You had Kyoto in 2005, and I think you can poke holes at what it did and what it didn't do, but one of the things that it certainly did was be a significant enough milestone that it generated a lot of press and a lot of awareness. I remember when I had my sustainability hat on at Timberland, we used to have these quarterly employee rallies. Never had there been a question from the audience about our environmental footprint or actions until there was discussion about Kyoto in public discourse, and someone stood up at the rally and said, ‘well what are we gonna do about Kyoto?’ I point to that as one pivotal moment.

And then when Al Gore released Inconvenient Truth in 2006 that was another major event. It had a huge impact on just bringing more notable players on the side of "we need to do something about this climate issue." The film gave a lot of people permission to stake their own beliefs, convictions, and actions around something that they knew to be true.

Then unfortunately, you had 2008, which was a bloodbath for a lot of the cleantech 1.0 wave. But, looking back on it, it was a significant moment [for the sustainable business climate investment space] because, ultimately, it imposed a lot more discipline on the industry, especially in the investing space. It obviously wasn't the case where this was going to be the next arena where unicorns were going to be printed one after another like in the dot-com sector.

And then the Paris Agreement in 2015 was super significant because you had the scale of that many countries committing so deeply to this notion of net zero. Out of that, I think it gave that many more institutional investors permission to say, yeah, this is real and we should be getting behind this in a more significant way.

Then, in 2020, you had BlackRock Larry Fink writing his famous letters, really mainstreaming ESG investing. Then you had the IRA which gets a lot of focus, but I think it's also really important just to look at the pre-IRA COVID relief funding globally. When you do look at that, what you see is there were trillions of dollars going into projects, many of which had a climate-related underpinning, whether it was replacing fleets you were by nature making them more efficient. If you were upgrading buildings, you were doing the same. If you were doing energy projects, they were almost certainly cleaner than the energy that they were displacing. So, you saw sectors across the board booming. Within that funding era, climate tech especially had an outsized peak there. And along with that, you had the first SPAC boom [Special Purpose Acquisition Company] and that really favored a lot of clean and green tech companies. Of course, we had our share of challenges with companies that weren't really real, or technologies that weren't really ready. But at the same time, you had a vehicle that was funneling billions of dollars into these technologies, some of which are now making a difference. As I'm thinking about that 25-year period, it's really been a drumbeat of these key milestones.

 

What do you think the next thing is that needs to happen from any sector in order to take the industry to the next level, or what is that next missing jump that you think isn't going to be done by any singular company, but is going to be probably a regulatory or policy or government-imposed?

 

What's front of mind for me right now is at this very moment, you're going from all these tremendous IRA-funded, or IRA underpinned trends to now, the One Big Beautiful Bill not just rolling back IRA, but in some cases actively pursuing in a punitive way some of the IRA priorities. The big question becomes how long can the solar growth curve hang on in the absence of those subsidies? There are even people, Jigar Shah for example - one of the most well-known prognosticators about the renewable energy space - whose personal belief is that we don't need the support, that it's actually cost competitive enough and we should let the market just duke this out, and, by the way, we're going to be fine. I don't know whether he's right about that or not, but I do think we're certainly not going to be growing at the same rate as we would be if we had the incentives in place. I don't think he would argue that either. So then, what happens without the incentives after a year or two or three? Do you get a lot more discipline in the market when you're not fundamentally chasing subsidies? I do think there's some interesting things that could come out of that.

 

How did the BP $100 million investment in Green Mountain Energy in 1999 come together?

 

I'm so glad you asked about this, because so few people have ever asked me about this, and it's a really fun story, because it's very much a Yale School Management story. This happened during my second internship between my second and third year of grad school. And Yale, at the time, was developing this really interesting relationship with British Petroleum...and at the time British Petroleum had rebranded into Beyond Petroleum. They were really staking out this place within the industry of the company that was going to take climate change seriously and fundamentally change their business model. As part of the relationship with the school, they offered summer internships to go work with BP in London, and I actually interviewed for one of those jobs, and so did my good friend Elise, another SOM student. I ended up going back to Vermont, which was my passion, to keep working with Green Mountain Energy and Elise ended up taking the job at BP. In that same summer, Green Mountain Energy tried to go public, but the IPO was unsuccessful so they really needed a financing solution. I remember there was an all-hands meeting when the leaders of the company said we really need a financing solution, if anybody has any ideas let us know. So, I called up Elise, and basically, this deal originated as a conversation between two Yale SOM interns. Elise was working at a high enough level within BP, and obviously the timing was right, the sector was right, the opportunity was right. It quickly became, obviously, a much bigger conversation between our side and her side. The deal came together fairly quickly, and also, by the way, ended up being a really successful outcome for BP.

 

What were the biggest hurdles in bringing traditional energy into the renewable energy space?

 

I remember the learning curve on both sides. We were each having to learn each other's vocabulary. They talked about upstream and downstream, and I remember we [Green Mountain Energy] were in this conference room with a speakerphone live, and everybody was like ‘wait, which one's up, which one's down?’ Then we had to educate them about the retail electricity markets, which were just beginning to deregulate at the time, and so, frankly, there wasn't a huge amount of data about what would happen in these markets. In hindsight, I think it was a huge leap of faith for BP to make. I remember distinctly a lot of their very pointed questions around things like customer acquisition costs where we didn't have good answers, or the answers that we had just weren't all that compelling. But still we had alignment around all these macro factors and most importantly, BPs commitment to explore verticals outside of simply oil and gas, and with a green perspective. And it was reasonable at that time for people to want to make a bet here. I mean, obviously, these are trillion dollar industries. And so, even a small toehold can end up being significant. And I think it also speaks to the value and importance of being a category leader. If there had been half a dozen other firms like ours doing basically the same thing, that would have been challenging. But Green Mountain Energy spun out of a very well-known regulated utility in Vermont. The leadership was impressive. The amount of capital that the company had already put to work was impressive. So, all those things were helpful.

 

For someone at Yale trying to prepare for a career in climate, what skills or experience do you wish you had developed earlier, and what do you think is overrated?

 

In terms of what I wish I'd developed earlier, I think of patience and really having a willingness to listen a lot more. And maybe not to try as hard to push everything that I thought was critical forward as fast as I did. I think the hard lessons learned have a lot to do with process and buy-in, and how you bring people along. It always felt urgent to me to solve these problems, and so I think that might have been a personal failure of just not realizing earlier the Native American adage of, “if you want to go fast, go alone, but if you want to go far, go together.”

This notion of any one particular discipline taken by itself is overrated. Success at the end of the day, whether you're in a nonprofit setting, a corporate setting, or an investing setting, is so similar. If you break it down to what you're actually doing - you're reading, you're writing, you're speaking, you're engaging, you're analyzing, you're proposing, you're mobilizing. Really, what's critical is your clarity of thought and your presence through all of that. It has a lot less to do with any particular skill or item in your toolkit and more with are you someone that people naturally lean into, and are willing to trust, because fundamentally, you do what you say you're going to do, and you delight them in the product that you create. If you have that set of skills, you're going to be highly valued in whatever setting you end up in.