Welcome to the latest installment of The Curious Capitalist. Brought to you by the Board of Conscious Capitalism in Connecticut. The Curious Capitalist is a series of podcasts where we take the opportunity to not only speak to board members from the Conscious Capitalism Connecticut chapter, but also to business owners, startups, and entrepreneurs.

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Today I'm joined by Conscious Capitalism Connecticut board member, David Reitz. And our special guest today is Fritz Troller. Fritz is the CEO and co founder of Therm Solutions. We're looking forward to finding out more about this innovative company. So without further ado, David and Fritz, welcome to The Curious Capitalist.

Great to be here today, Claire.

Thanks for having me,

Claire. You are so welcome. Now today, David is going to be firing the questions to Fritz in the hot seat. I'm going to be hanging around and lurking. I may well pipe up at some point, I'm sure. But without further ado, I'll hand over to David to fire some questions your

way.

All right, Fritz, good to see you again and to be on the podcast with you. Excited to kind of dive into the world of carbon credits a little bit. I did a little bit of research. I see. It's like a 2 billion market that looks to be a 1 trillion market by 2050. So you got yourself in a kind of big growth area.

And then I also did some reading that shows like prices don't always reflect the quality of the, of the carbon credits. And, you know, so Ready to dive in and learn some more. First off question is big picture. What is a carbon credit and you know, how do they

work? So first of all, thanks David for having me.

I appreciate the opportunity to talk about what we're so passionate about. So a carbon credit is really a, a measured verified reduction or avoidance. that comes from a climate action project, if you will. And a carbon credit is actually equal to a metric ton of carbon dioxide that is, is either again avoided or eliminated from the atmosphere.

They're sold to companies and individuals who are, have a intent to reduce their carbon footprint. And they may lack the capital or the technology in a reasonable time frame to do so expeditiously. The really financial incentives that motivate climate action is kind of the best way to describe them. So you

mentioned avoided or eliminated, and I'm curious, like, what are the different examples of, of ways you can avoid?

Yeah. So in our case, the avoided ton of carbon relates to a action that had an intervention not occurred, for example, a changing of, in our case, for most of our customers, replacing a refrigeration system had that event not occurred to a natural refrigerants, uh, system. system, then it would have kept leaking.

It would have kept emitting these terrible gases into the atmosphere. That's where avoidance comes in. Elimination in the most practical sense is could be carbon capture and sequestration, CCS, where you have some companies today who very limited, but they actually have units that take the carbon dioxide out of the air and sequester it into the earth.

Very interesting. And so I know you, this is a relatively kind of young market and developing market, and you had a prior business, which was, I believe, in refrigeration services. And I just wonder how you made the transition and how did you get involved in the market?

Yeah, great question, David. So we were an energy services company.

We were Groom Energy. And we provided energy reduction projects. We were actually developers and engineers of hardcore projects to commercial and industrial clients. So those clients were concerned both about their environmental footprint, but mostly also for the financial impact. Packed that escalating energy prices had on their bottom line.

So we sold that company in 2016 to the largest utility in the world, EDF out of France. And as I made my transition about three and three and a half years after the acquisition. I had a lot of conversations with those existing customers that we had, which were retail grocers and food distribution companies and, and tried to find where their greatest pain was.

And therein lies the genesis of Therm and what they were really telling me is, is that this change in This sort of sea change in their ability to continue to run their refrigeration systems. The AMAC, which is an allowance based system that stops their traditional refrigerants from being produced over a period of about 14 years.

And they were concerned about that, right? Because these refrigeration systems are super expensive, right? So a traditional synthetic refrigeration system can run well over a million and a half dollars based on the average grocery store. So, and in order to change to ultra low GWP, global warming potential, gases, Those investments would have to be made over what they perceived as a short period of time.

So our role in the market was to help those previous customers provide carbon financing, a way to make that transition less onerous, and to help them become more environmentally conscious, which their constituencies, their shoppers, the folks who they deal with every day. We're demanding that they become more environmentally conscious.

And the last thing is really it really sparked and a passion within myself and and our our team where we're we are passionate about the environment. We're passionate about the climate emergency and we saw it as a way to immediately affect global warming in which time is is of the essence. What's what 2017 book drawdown.

Which was edited by a number of prominent scientists, but Drawdown looked at over a hundred different mitigation strategies and ranked them about their effectiveness in mitigating the climate emergency. And the number one way above things like solar panels, wind turbines, sequestration, was refrigeration gases.

And so all those sort of things kind of came to a head at about the same time, David. And so that's what became Therm. And so, yeah, our role is to accelerate all those things and help those grocers become, afford to become more environmentally conscious.

So, so they can use these carbon credits. to invest in low GWP refrigerants or natural refrigerants so that they financially can use those and then not release the refrigerant gases with the high global warming potential.

Just quickly, what, like on an average supermarket, how much CO2 do you avoid putting into the atmosphere? What, what's the impact of an average supermarket when they make this change with the carbon financing?

Yeah, great question. So you'd be, you might be surprised to, to learn this, but the average retail grocer, which is about a 40, 000, 40 to 42, 000 square foot store across the United States and Canada emits upwards of 10, 000 tons of refrigeration gas over a 10 year lifetime of these refrigeration systems.

over a 10 year period, not a lifetime, but a 10 year period of these systems. Now, just to put that in perspective, that's the equivalent based on the EPA equivalency calculator of about 170, 000 trees being planted. That's one grocery store. Wow.

Wow. That really does put it into perspective. That's incredible.

Wow.

Yeah. My goodness. And, and great ability to fund those is a, you know, it's a great way for carbon credits. I want to ask a couple questions about the carbon credit market because there is a kind of a trust issue that I hear out there. And for example, I hear. It's the wild, wild west, the, the carbon credit market, and I'm just curious, and this is around the VCM market, which I think is the voluntary carbon market.

So the question is voluntary carbon market versus the compliance market. And is there truth to this Wild Wild West message that's out

there? Let's start with the difference between the compliance and the voluntary market, because that might help your listeners kind of get a base for what the differences are.

By definition, a compliance market deals with allowances. So certain polluting entities are allowed a certain amount of allowances. They're allowed to produce or to emit a certain amount of CO2 or to produce or other gases. that are detrimental to the environment. Once they go over those allotted allowances, then they're required to buy offsets, right?

To bring their allowances back down to what was allocated to them. So those allowances or those over allocations come in the form of offsets in the compliance market. There's a very tight number of ways that you can. You can buy offsets. There are only two in the United States. There are two compliance markets, one in California and one in the Northeast.

Those compliance markets are very tight and only affect the very, very large ERs of greenhouse gases and other pollutants. The voluntary carbon market, on the other hand, is a over the counter market. It does not have governmental oversight or governmental compliance. What it does have, are, are a lot of different entities that oversee and, and require that carbon credits are credible.

Uh, they're verified and they're validated, and the way that kind of works just quickly is. We have four registries in North America that oversee what are called methodologies and those methodologies are sort of the roadmap that are very extensive, that put requirements on developers and market makers like Therm that we have to follow in order to have a verified ton of carbon, what we call an RCC, a refrigeration carbon credit to be produced.

The other actor. In this whole scheme is the third party validators and verifiers, so they are required to follow, as are we, the ISO standards that are super strict in the way we run algorithms and the way we do the sources and sinks calculations to determine a verified. Ton of avoided or reduced carbon.

So there are many actors in the voluntary carbon market that are doing the check in. The important things to really understand are a couple of things, right? So one is permanence, right? So will that avoided ton of carbon continue to occur, right? Or can it be reversed? In our case, permanence is, is indisputable.

Only because when our customers replace. Equipment and and replace the gas that is used in that equipment to ultra low global warming potential gas, which are natural called naturals. There's no way to reverse that effect. The new gas does not work in the old system, so to speak. So the permanence is is undeniable.

The other part is really important thing is additionality. So it's important that what we're incenting, our customers are not already legally compelled to be able to make this change. And in our case, that additionality is again unquestioned because we're in a pre compliance market and compliance won't happen until at least 2036 by law.

So it's important to, to have additionality. And so those aspects of. Are very tightly monitored and measured within the industry by the registries and the, and the verifiers.

So let me ask this then because when I hear the Wild Wild West and I, you know, I was like kind of looking for examples. The one example that came up is that.

Rainforest carbon offsets are generally now considered worthless. They had some value at some point and now we're considered worthless. And I think it was one of the big airlines, I believe it was Delta. They now have lawsuits because they were using that to get to net zero. They were. Buying those carbon offsets, and now that they're worthless, so how did they get around this permanence and all the, you know, other things to be able to create these offsets that now are not considered, you know, valuable.

It's a good question, David. I'm not specifically intimate with what Delta Airlines did and the lawsuit, the pending litigation with them. I am understanding that there have been, well, we work with it every day, that the, the changes to the voluntary carbon market, since those Carbon credits were issued has been pretty drastic and continues to improve.

We actually are looking forward to the, at the end of this month, the final report from an intergovernmental agency on what are called core carbon principles, which we welcome and we applaud, which will be an extension and an underpinning related to. These ISO standards and the registries that have done a great job, at least to minimize any of these questions, right?

So the core carbon principles, basically the, the 10 principles by which every carbon credit needs to follow and is additional to the ISO standards that are already out there. And so we look forward to that. And I think that will avoid any accusation or any sort of. Actors outside of the industry to have to question the quality.

And we think that's a great thing for the market. That'll increase prices. That'll increase confidence in buying carbon credits. There was a great Trove article, Trove research article, that was out, out recently. It analyzed over 4, 000 companies. And the fact that they came out with something that was really interesting to me, that companies that purchase carbon credits decarbonize.

twice as quickly as those who don't. So it's working, it's working, and it's working in a way that, that we think expedites investing in decarbonization because we don't have time on our side in the climate emergency.

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100% agree with that. I saw a chart the other day that shows, you know, atmospheric CO2 is it had a dip in 2008 with the financial crisis. It had a dip. And then generally went up from there, had a dip in 2020 with, with the COVID crisis and now is still hitting record levels.

So super important work to, to get more companies engaged and empowered to, to make changes. So Fritz, I understand that your company is developing methodologies. For the carbon credit market, kind of in your space and so that there's high quality credits, can you speak to a little bit about what your company's role is in that and what you're doing?

Yeah. Thanks, David. So the methodology is just by definition, again, just to revisit math. What, what is a methodology? A methodology is a very, very detailed map of the process that we have to go through to take an opportunity. to what's called issuance, to actual creation of a refrigeration carbon credit.

And that methodology is very specific about exploring those components I talked about earlier, permanence, additionality, and credibility. And each one of those issues are detailed. For example, for additionality, there are tests of additionality both at the state and the national level and the international level that says, look, are people complied today or compelled today?

To do this action anyway, so those methodologies are sort of the bulwark of in the beginning of our processes. There are lots of existing methodologies and we're using some of those that already exist in order to produce or issue. Carbon credit, refrigeration, carbon credits, and David, we're also working on what I think is really important work in developing and revising some of those existing methodologies.

I'll give you a couple of examples. One that's one that's on my mind. And, you know, you asked what keeps you up at night. This keeps me up at night. There's a substance called SF6 and SF6 is generally ubiquitously used in switchgear and. Transformers, electrical equipment that brings the electricity to our homes, and the insulator used in that SF6 in those transformers and switchgear is a substance called, a fluorinated substance called SF6, and not to get into the chemistry, get into a chemistry experiment here, but SF6 is over 20, 000 times more damaging to To the environment from a global warming standpoint than co2.

I'll say that again. 20, 000 times more damaging and sf6 needs to be taken out of our supply chain. Wow. It needs to be eliminated. So we're working very, very hard. To help that happen. Another example that we're working on, which we think is going to be game changing, is the refrigeration market is an interesting market, but we're all, we're going to apply these same issues.

Now remember, these gases leak from these grocery stores at 25 points, according to the EPA, 25. 6%. Every year. And unfortunately, those refrigerants are also used in HVAC equipment, and they leak at a similar, a little bit less, but a similar rate. So, what we want to do is we want, we're building, we're in the middle of building it, almost out with a new methodology.

That methodology, by the way, has taken about a year and a half to develop. It has to go through public comment. It has to go through peer review. It has to go through a very significant Process in order to become market available, but when the HVAC methodology comes out in the next 90 days, we think that we can help those customers who are looking at things like chillers and rooftop units and AC systems and All the things that we're doing also to help electrification, like heat pumps, that they can use more environmentally sensitive refrigeration gas in order to accomplish their task.

So those are just two examples, David, of things that we're passionate about, but we're focused on the built environment, right? People really don't understand that 30 to 40% of the greenhouse gas equivalent in the United States is directly related. To the built environment that the built environment is all the buildings and homes and commercial institutions that are out there, which doesn't include things like nature based solutions or force those kinds of things.

So we're absolutely focused on that category and the methodologies that we're developing. And revising are supportive of our effort to, to decarbonize that sector of the economy. And what a

segment to work on. I made a note of the 20, 000 GWT P for this FX six, which is just incredible. And right now it's about removing a.

bottleneck, the capital bottleneck using carbon credits for FX sys, is there things that can replace it readily replaceable? And it's just the capital that's needed to do it.

Europe has banned a lot of SF6, has it not? And California, they're normally first on these things. What's holding up an alternative to it?

Yeah, great question, Claire. So, SF6 is a 20, 000 GWP gas, and it leaks at an enormous rate out of these very disparate installations across the United States. Two states in the U. S. aren't banning SF6. What they're requiring is that their leak rates be reduced. dramatically, California and Massachusetts.

There are similar plans in the EU to focus on leak rates. And, and again, leak, these gases wouldn't be damaging to the environment had they not leaked, right? So remember, I said that 25. 6% leakage rate for grocers, in some instances, Claire, in the United States, Switchgear and Transformers leak it up to 40% per year.

Wow. Now back to, back to your question about is there an option? Are there opportunities? So, there are, and they are more expensive, and they have not penetrated the market. In the retail grocery side, natural refrigerants have about a 2 3% penetration today. In SF6, there are alternatives and alternatives related to something as simple as compressed air, right?

And there are solutions providers like Siemens and others who are starting to come to market with these kinds of solutions. They come at a premium. And so buyers and back to my analogy with the retail grocers, the average retail grocer is not a super profitable business. They, they net out one to one and a half percent.

And so large CapEx projects for them to invest a million and a half to 2 million per system at a premium of up to 20 to 25% for natural systems. We need to reduce that gap and that's our mission, right? Both for. Folks like, you know, the municipalities and communities and that maintain and install these transformers and corporations that have high electrical uses have.

Large switch gear that utilize equipment that has SF6 in it. Our role is to say, look, we can find market mechanisms, actors who are interested in investing in the, in the voluntary carbon market to help accelerate that change. So there are solution sets. They come at a premium and our role is to reduce, reduce or eliminate that premium.

So, so folks can make good economic decisions. They get the, you know, the double positive, right? Good economic decisions that, that significantly and immediately. It's a big

job, big job.

Makes a lot of sense to me. Now, I've got some kind of rapid fire questions here. We're kind of coming to the, to the close here.

But for people that are curious and want to understand more or for all the doubters out there, which there still are even after listening to the podcast, what books or resources do you recommend a couple to, to understand about carbon credits and to learn about it?

Yeah, so there isn't a lot of literature around the carbon credit market.

There are some research companies, I mentioned Trove, great resource, Trove Research, great company, does great research on the carbon credit market and the effects, that's a great one. As it relates to the environmental impact associated with carbon credits and refrigeration specifically, that we're. We're interested in right now.

We're doing issuance on right now. Again, I'd go back to Paul Hawkins book called Drawdown, and they have a wonderful website. Drawdown is a, is a great resource for, for really understanding what the effect of refrigeration gas is, and what I love about Drawdown is, is they rank everything, right, based on the ability, back to Claire's question, right, are there alternatives, and if there are, what do they cost and how How quickly can they be implemented and they rank those solutions, I think on a, on a very credible basis to your question, David, I think folks might enjoy going to the drawdown website or getting the drawdown book.

They've updated their, you know, their book from the 2017 version recently that I just, I just quoted, but I think that's, that's, those are good resources to draw. There are other things like there's a great. Go

ahead. I'll include that in the show notes, so if you're listening to this on Spotify or Apple or Google Podcasts, I'll make sure that's included in the show notes so that people can click through and take a look at that website.

And I

will be going to, you know, Amazon right after this and, you know, click, clicking the purchase of the Drawdown book. So the latest one. So that's that's my homework. Okay, next question. What's your prediction on carbon credit pricing? And this is for the US, which has been hovering kind of lower, especially the voluntary carbon market.

Will it hit a hundred plus, which I, some people are saying, but I wonder what your view is on

the market. Yeah, it's a great question. There's there's significant diversity in carbon credit pricing, typically are refrigeration, carbon credits, which are valued much higher based on the transactions that we've had.

We've issued and sold over a half million tons. Of carbon avoidance, RCC tons, which is by far the greatest amount in, in our particular industry and the diversity you have to address diversity before you make predictions, right? So that the, there's a standard in the market, not a standard, but a mark to market, so to speak of what's called the geo.

And the geo trades well under a dollar a ton right now. And that's for commodity carbon projects. And you can contrast that to the particular category of the carbon credit market that we play in, which is trading anywhere from 7 to 13 a ton right now. Those are actual transactions that we've. That we've engaged in so predicting where a commodity carbon credit prices is really, it isn't relative, right?

You have to be able to, to ask the question, you know, where will each of those blocks of carbon credits go in the future? And if you believe McKinsey and Bloomberg, the carbon credit market, which is about 2 billion on over the counter today will be in the next six and a half years will be 50 billion. So, and that's because demand is going up, whereas demand coming from is coming from those folks who make carbon neutral pledges, but can't immediately affect those pledges, right?

So they may be in hard to decarbonize sectors like Like manufacturing, like steel, like cement, like airlines that you mentioned before, right? Things like green aviation fuel have great promise, but they aren't practical in the next, let's say, 10 years, 10 to 15 years. And the climate emergency isn't slowing down, as you mentioned, David, it's accelerating.

And there are lots of folks in the industry and we're passionate about the environment like we are that say we don't have that time. So where will carbon prices be? We think they're going up. We see our customers investing more heavily. In carbon credits and demand accelerating, you could look at the difference between issuance, which is production of carbon credits and retirements, which is carbon credits that are taken off the market against some pledge.

And those are running the, the retirements are running way above the issuance today. So that's a good indicator that I'm not sure where it will go in the next, the next five to 10 years, but it feels like that's going to be an upward trend. Well, so

upward trend in pricing and on the issuance side, this will be my second last question, the, if somebody, a supermarket wants to get a hold of therm that has a possibility of generating carbon credits so that they can reduce the amount of global warming, potential refrigerants being released, which, how would they get a hold of, of therm and how would they

work with you?

Yeah, so you can go to our website to learn more, which is therm. cool, C O O L, and that's cool like temperature, or you can email me directly, fritz at therm. cool, and we'd love to talk to you about the, whether there's an opportunity. So yeah, we, we welcome input. We welcome, we welcome people who are passionate like we are about that, about these issues.

Yeah.

Great. Therm. cool. Cool. C O O L. Like I thought I was in high school, but I found out I'm really not. No

comment. I've got to say, I love your strapline, by the way, Fritz. It's stay cool, save money, save the planet, and they're things I can certainly get behind.

So I have one last

question, and this is, if Thurm was on the front page of the New York Times in five years...

What would the headlines great question?

Oh boy. So in five years, yeah, I think that we've accomplished what we're striving to accomplish, which is to help decarbonize the built environment and that we've accomplished that right? So the penetration rates of Things like natural refrigerant, refrigeration systems, instead of being, you know, two to 3% is 20% is 30% in five years that the HVAC decarbonization is in the same category, right?

And that we're making real and measurable and credible. Effort and striving successfully to reduce those emissions. And we've helped our clients accelerate their capital equipment investment in helping that occur.

Beautiful headline. I want to read that too for myself, for my young daughter, for, you know, for, for the world.

So I'm hoping that we'll see that. It's

been fabulous learning a little bit more about you and what you're doing. For people who want to check out more details, please check out the website therm. cool. And of course, there's LinkedIn where you can find Fritz by searching for Fritz Troller. Thank you so much for your time today, guys.

It's been a fabulous insight into this world. And I hope you save the planet, Fritz. Let's do it.

Gosh, thanks, Claire. Thanks, David, for allowing us a little bit of time to talk about our company and this issue that we're so passionate about. I really

appreciate it. Claire, thanks for being a great host. The pleasure is all ours.

Thanks for being a part of the Curious Capitalist podcast. Thank you for taking the time to listen to this episode of the Curious Capitalist. If you would like to find out more about Conscious Capitalism, or if you would like to join the local chapter, visit the website connecticut. consciouscapitalism.

org. The Curious Capitalist is available on all podcast platforms, including Apple Podcasts, Google Podcasts, Amazon Music, and Spotify. If you have enjoyed listening to this episode, subscribe to and share this podcast today. This podcast was created and produced by Red Rock Branding, redrockbranding. com.