Interview with Lydia Li of Arevon

Interview with Lydia Li of Arevon | $2B in Project Financing, BESS Resiliency Projects, & Senior Women Leaders

Arevon has been all over the news lately with a handful of major announcements, including its $350 million raise from Blackstone for an 800 MWh energy storage project with Southern California Edison, Rosendin & Tesla. In total, Arevon has secured over $2 billion in clean energy project financing over the last 4 months alone. In this Green Light episode, Catherine spoke with Lydia Li, Director of Investments at Arevon, about Arevon’s recent achievements, the significant impact of the transferability provision within the IRA, & the company’s continued growth as a leading independent power producer. Lydia also shared about how she transitioned into renewables from oil & gas, as well as why she thinks it’s necessary to have more senior women leaders in climate finance & how this can be accomplished.


Catherine: Hi, I’m Catherine McLean, Founder and CEO of Dylan Green. And today I have Lydia Li joining me. Lydia is based in New York City and she’s with Arevon as Director of Investments. Welcome Lydia.

Lydia: Catherine. Hi, everybody. My name is Lydia. I’m currently the Director of Investments at Arevon. And we are a leading independent power producer who’s developed and finances, owns and operates solar storage and hybrid projects in North America. We have more than three and a half gigawatts of operating capacity, actively constructing more than a gigawatt of new projects. And we also have a pipeline of over six gigawatts on our development team is primarily responsible for all of the investment activities at revive mergers and acquisitions, capital allocation, strategic partnerships, we decide where we want to allocate capital to support the growth of our development pipeline, as well as our operating fleet.

Catherine: Well, thank you for that. And I didn’t even need to ask you to introduce yourself. Thank you. I know that you double majored in econ and government in college and later received your MBA from MIT. Earlier on in your career, you focus on oil and gas, private equity. How did you eventually transition into renewables?

Lydia: is a long winded story. Investment banking experience at Macquarie really helped me obtain some additional technical skill set that’s required to invest my career in the general Investment Finance field. With McCory I joined commodified capital on their natural resources private equity team, we focused on traditional energy investments, and that’s mostly fossil fuel, upstream exploration, production and oilfield services. I don’t know if you all remember back in 2015 to 2016 there were a large wave of university students who were protesting against their ailments and asking for divest in fossil fuel. Alma fund raised over 90% of their total assets under management from endowments, and foundations. Many of our investors asked us to help them transition capital into a low carbon economy. That’s what I raised my hand to help complete some upfront research and lay the foundation for this new sustainability Investment Program, which was then launched in 2018. During that process, I became really passionate about working on investment opportunities that actually align with my personal values. I decided to transition my own career by obtaining an MBA and the sustainability degree from MIT. While at school I focused a lot of coursework on renewable energy, also tried to build my network into the sector. After graduation, I took a full time position on the investment team at Generate Capital. You may know generate as well. Generators a San Francisco based sustainable energy company, we worked on a lot of different transactions in the energy transition space including renewable generation, clean transportation and hydrogen. And after Generate, I joined a rebound in 2021 as the company spun off from the former capital Dynamics platform into the independent power producers that we are today. Since then, Arevon has grown our platform to more than 240 employees. We also deployed a significant amount of capital into developing, owning and operating renewable energy projects in the US.

Catherine: Great Yeah, it’s really exciting what you all are doing at the moment in the industry. So I want to talk a bit about senior women leaders, something I think we’re both very passionate about. You’ve spoken before about the need for more women in clean energy, specifically in senior leadership roles. Why do you think this is so important?

Lydia: It’s definitely important. I think it’s also not just the women. Overall diversity and equity are important for the sector. I think diverse perspectives and backgrounds allow us to think differently. And that’s important for clean energy finance, given that it’s still a quite nascent sector, analyze the market more comprehensively, we better envision an energy transition that also ensures environmental and social justice with a diverse employee base. And in addition, additionally, I think adding more women in our line of work or like actually, more importantly at senior levels, is quite important. Because women tend to see opportunities and evaluate risks differently. That’s valuable in a traditionally male dominated organization or industry. A more balanced and diverse view allows our overall team and company to grow sustainably.

Catherine: What do you think are some of the best ways we can ensure more women are able to take senior roles so for example, not expecting everyone to come from the same traditional finance background or maybe providing more mentorship opportunities?

Lydia: Yeah, all of the above and there are a couple of the aspects that I want to focus on. Recruiting of course, is important, but retention and career development are equally as important. I think there are a lot of companies in this sector who are currently doing much better at intentionally targeting candidates from diverse backgrounds during recruitment. For example, as we hire more junior members on to our investment and product finance team, we now use a standard technical assessment as a screening tool instead of filtering based on prior experience. So regardless of where you have learned this technical skill set, as long as you can pass the assessment, on average, you know, we don’t necessarily require people to have having worked in investment banking.

Catherine: Oh, that’s interesting. I like that. That’s great.

Lydia: Yeah. And the other thing I’d like to mention is I want to advocate for more companies to focus on employee retention. We need to create a work culture that enables women and minority employees to feel a sense of belonging and also create improved career development opportunities for them to advance into managerial or even executive roles. As a company we have an internal women affinity group and most recently like within our women’s Book Club program. We picked a book for this month. It is titled nice girl don’t get the corner office lady.

Catherine: Yeah, I have a corner office. Pretty nice. But I guess a lot of people that would disagree with that maybe.

Lydia: I actually moved into this new corner office. I don’t know what that says but this book, the reason why we picked it is because it’s actually addressing career advancement for women. Overall, what are the things that a company or organization can do to help women get there.

Catherine: The Inflation Reduction Act was passed on your birthday. You are so excited about the IRA that you consider naming your cat Ira! What have you been most excited about when it comes to the IRA and its ability to help deploy clean energy at scale?

Lydia: Yeah, my cat is actually not named Ira but I actually considered doing that. This was the summer, two years ago. And we have gotten quite far from the passing of IRAs actually, you know, executing on it. So my views are more relevant to what we’re seeing today that you know how we felt at that time. And first, like we’re very excited to see of course, the extension and expansion of the tax credits for renewable energy products. That’s not just limited to solar, wind and battery storage, but also include a lot of new asset classes. Especially because we experienced as an industry two years of supply chain are starting to build up. The overall cost of building projects have gone up quite significantly. And in order to offset that we’re now able to utilize that tax incentive from the IRA.
And on top of that, there are some what we call structural flexibilities that the IRA allows us to do, and to help them to mobilize more capital from a wider range of investors who traditionally have not participated in our industry. So these provisions include a couple of things. So first of all, you can now elect the production tax credit for solar instead of just the investment tax credit. Can also be awarded what we call direct pay some new asset classes and certain projects that meet criteria for economic development indicators. Also, last but probably the most important, there is a transferability provision within the IRA that allows us to monetize the tax credits with direct monetary value. This means that you likely can avoid using very complicated and super expensive tax equity partnerships, flip structures to monetize those benefits, but like what we have done for the past 10-20 years. As a quick example, Arevon actually closed on the financing of Vikings project, a 2023, which was the nation’s first the financing dug for a utility scale solar peaker project, and we use the IRA as transferability provision in order to monetize the tax credits.

Catherine: So Arevon has had a few major announcements recently. Can you talk a bit about their $350 million financing package with Blackstone for the 800 megawatt Condor energy storage project to enhance grid reliability during peak demand times in California?

Lydia: Of course, thanks for bringing it up. First of all, I’d like to mention that Arevon has secured more than $2 billion in product financings in the last four months. This is really quite a big accomplishment by the team and this amount of capital would enable us to bring our Vikings Condor and Elon2 products online. And specifically on Condors. It is a 200 megawatt 800 megawatt-hour energy storage product in California. We closed the financing in February of this year and we anticipate the product to start operations in Q2 of this year. Generally as more renewable generation is added to the grid, it will need more battery storage capacity to help shift the load and improve grid reliability. products like Condor will be able to achieve this goal particularly in California where we already see a dark curve caused by the addition of renewable energy generation as a company works with tier one suppliers for our projects. At Condor we are partnering with Tesla to provide mega packs for the utility scale. Battery System and the ongoing Oh nm services. The financing side, Blackstone preferred equity structure is allowing us to simplify the monetization of tax credits that eliminates the need for traditional tax equity financing, which is a lot more expensive and cumbersome to complete. Back leveraged debts also include a commitment from a large group of top tier banks. And we raised a separate lead financing for the product as well. So combining all of that with the support from our partners, we’re able to really pioneer some climate solutions that can promote a sustainable creative future together.

Catherine: So for those who may not know Arevon, you mentioned it in passing in the beginning of the podcast, but they spun off from Capital Dynamics. How has this impacted the business model there?

Lydia: Yeah, so Arevon went on from capital dynamics and 2021. We are still backed by the same investors. They are some of the world’s largest institutional investors. That enables us to continue investing what we call patient capital into renewable energy products. There’s no limit to our time or by the time we have to execute it is a permanent pool and long term equity. And over the past three years, Arevon has seen significant growth in all aspects from product pipeline to increase in our headcount. We have also deployed a large amount of sponsor equity to spin off in our pipeline projects aligned with capital that were raised from financing financing partners. So we are now a vertically integrated IPP independent power producers. And I’m pretty proud that we have developed in-house expertise through various different aspects that a project requires in its lifecycle. That is, you know, from development to construction, origination, the management and you know, of course, our New York team, who cover investment product finance activities, and we’re really excited to continue to do that alongside our partners, vendors, off takers and most importantly the communities that we serve.

Catherine: I really liked that term patient capital. Is that what you call it? patient capital. I’ve never heard that before.

Lydia: I really liked that as a way to describe, you know, an evergreen investment platform that allows you to not have to think about exits upon, you know, five to seven years timeframe, which is traditionally what private equity, equity advisors have been targeting. Because our projects generally have product life somewhere between 20 years for battery storage and 35 to 40 years for solar. If you have to build it and then think about sending it to somebody else. If you’re down the road, you’re solving for different things. You’re optimizing for potential exit the terminal value, because if we keep everything on our balance sheet we’re building over like an evergreen form with patient capital. To make sure that we actually have good projects. He can still benefit from them for years down the road.

Catherine: Well, thank you so much for speaking to us today. Hopefully when this airs it will have stopped raining both in DC and New York. We appreciate all the work that you’re doing for us in our industry as well.

Lydia: Thanks, Catherine. Thanks, everybody.