WORKWEEK

For the following Q&A, we had the chance to speak with Michael Sachse, the CEO of Dandelion Energy. Dandelion Energy makes geothermal heating and cooling systems accessible and affordable for modern homeowners. These systems can help reduce dependencies on natural gas and / or fuel oil for heating, reducing CO2 emissions by up to 80% by making home heating and cooling more efficient and cheaper. 

Considering electricity bills are skyrocketing in the U.S., especially in the Northeast, when I saw Dandelion Energy raised a $70M series B-1 this week, I could imagine they’d had a good year. Still, I jumped at the opportunity to get info straight from the source, and to ask about other tailwinds like the Inflation Reduction Act, too. If you want to learn more about the business and its founding story, you can start here. Otherwise, let’s jump into the Q&A:

Thank you for taking the time to chat again – it’s been almost a year since we first discussed the business. What’s been the most significant change over that period?

The biggest change is that people are much more aware of heat pumps in general and geothermal in particular. Some of that has been because of prices and inflation going up at home here in the U.S. and the constant news coverage of the war in Ukraine. The general consumer’s awareness of the Inflation Reduction Act has also contributed positively.

Has your geographic footprint expanded beyond New York?

It has expanded, but it’s all still in the Northeast. We now operate in New York, Connecticut, and Massachusetts.

Installing one of Dandelion Energy’s heat pumps (Photo courtesy of the company)

How has the IRA changed the landscape for sales and installations? What other regulatory developments this year have been important tailwinds (or headwinds)?

The IRA has been immensely helpful for Dandelion, making heating and cooling with geothermal more affordable than ever. It extends the Energy Investment Tax Credit for clean energy home improvements, providing a 30 percent credit for geothermal heat pump projects installed before January 1, 2033. 

The IRA also provides state energy offices with $8.8 billion to distribute to homeowners retrofitting their homes with energy performance improvements like heat pump heating and cooling. In addition to the tax credits, all homeowners will be eligible for rebates of up to $4,000 for energy efficiency improvements, including geothermal heat pumps. For homeowners earning less than 150% of the Area Median Income, their rebates could be even higher – up to $8,000. It also offers a tax credit for energy-efficiency home improvements, increasing the limit to $2,000 for heat pumps and heat pump water heaters.

Overall the IRA gives our customers and us a lot of certainty going forward. 

What are the biggest constraints to getting more of your heat pumps into homes and buildings across the U.S.? Have these changed this year? 

Our current service areas include New York, Connecticut, and Massachusetts. Local requirements add complexity to the business, and we would love it if permits and licenses were uniform everywhere we operate. That said, complexity can also help a business, and we have gotten pretty good at managing this stuff. It would be hard for another company to come in and deal with all the local variations we have gotten used to. 

What was the pitch like to investors for the Series B-1? How will this capital be deployed versus, say, the Series B funds from earlier in 2021? 

The pitch is that we want to be the Tesla for heating and cooling. We want to help every home have a sustainable heating and cooling source. We’re getting started with geothermal in the Northeast, but our ambitions are much broader; we want to have a product for every home in every part of the country. That is the crux of our vision. 

Our latest fundraise reflects the size of our potential as more and more consumers look for sustainable and cost-saving ways to heat and cool their homes. We more than tripled our commercial operations in 2022, and this funding will continue that expansion in retrofit and new construction markets. In addition, as heat pumps move into the mainstream, Dandelion will use the capital to invest in a broader range of products capable of serving more customers and geographies. 

The net-net

Nick here again. The fact that Dandelion Energy’s commercial operations tripled in scale this year before the impacts of the Inflation Reduction Act really kick in is striking to me. The next few years should see a renaissance in home electrification. As we wrote on Tuesday, this won’t all come from supply-side innovations like Dandelion Energy’s. Rather, a combination of switching fuel and energy sources (e.g., installing one of Dandelion’s heat pumps) with building energy efficiency upgrades is the holy grail of cutting building emissions and electricity bills. 

Many supporting pillars are helpful to companies like Dandelion Energy that contribute positively to the energy transition. Public spending (the IRA) and private capital (Dandelion’s Series B-1) are two of them. Lest we forget, though, there are a lot of other critical, often undersung components needed to make everything work. One example? The HVAC technicians and construction workers who do the actual ‘dirty work’ of digging a hole and installing a heat pump in your backyard (Dandelion Energy is hiring). The U.S. is already short 80,000 HVAC technicians; that number will probably eclipse six figures soon. All of which is to say, you don’t need to be a software engineer or environmental scientist to make an impact in climate tech!