Ithaca Races Against the Clock to Decarbonize All Buildings by 2030 — Episode 144 of Local Energy Rules

John Farrell:

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Luis Aguirre-Torres:

So you start with the outcomes and the outcomes that we are pursuing is a carbon free economy. And we’re looking for climate justice. Those are the two outcomes that we’re looking for, but then there’s the outputs that are the quantifiably measurable outputs that we think of in terms of de-carbonization in terms of electrification, in terms of energy efficiency, in terms of carbon sequestration, you know, those are outputs. So the program is actually an activity that will generate this output. So we are decarbonizing electrifying with idea of delivering in terms of energy efficiency, electrification, and decarbonization, but the outcome, I think we were talking about the same thing here. We’re thinking of a healthier society that is not dependent on fossil fuels.

John Farrell:

One thousand buildings, one thousand electric vehicles, a thousand jobs, one thousand community conversations in just 1,000 days. When Luis Aguirre-Torres took the position of Director of Sustainability for the city of Ithaca, New York, he didn’t lack for ambition. In the few months since he took office, Luis has advanced the program to include full decarbonization of the community’s 6,000 buildings by 2030, putting together a financing and workforce plan to pave the way. We spoke in November, 2021 and the conversation has me wondering, can Ithaca mark a new model for how cities can be at the center of progress toward a clean energy economy? I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a bi-weekly podcast sharing powerful stories about local, renewable energy. Luis, welcome to the program.

Luis Aguirre-Torres:

Thank you. It’s a pleasure to be here.

John Farrell:

I would love to start off just by asking you about your background. So I feel like a lot of sustainability directors come out of school. They have been studying things like environmental policy, environmental economics perhaps, some sort of public policy, but you have a little bit of a different background that I think informs maybe why you were able to push ahead with implementation in a way that a lot of folks spend a lot of time doing planning. Could you just talk a little bit about how you got into being a sustainability director and where you’ve been before this?

Luis Aguirre-Torres:

Sure. I think if I were to send you my resume and you were hiring for this position, you would not hire me. You know, I took the scenic view to get here. You know, I’m really from Mexico. I am an engineer, I studied computer engineering. Then I have a master’s in computer science because I was interested in a more abstract understanding of computer science. And then I had a PhD in electronic engineering, but that PhD really was in entropy. And I was focused on, initially I had this obsession with entropy in the universe and I wanted to do my PhD in that. But then when you work in engineering, it has to be more practical than studying the universe. So I did find another chaotic system, which is the internet, and I modeled the internet using entropy as a measure, you know, in the same way that I would model the continuous expansion of the universe. If you think about it, that’s what the internet is, is a chaotic system and continual expansion. And that changes patterns every so often. So trying to model something like that, it was a passion of mine.

And because of that, I ended up developing some algorithms that eventually were useful to some people in the startup world. I worked in a few startup companies and I’ve been always good at talking about technology. So I was a lot of time focused on trying to sell these technologies to, to governments specifically. Uh, at some point I develop a conscience. I always say it like that because, you know, there was really a moment of reckoning in the mid two thousands when I was like, okay, I need to do something more meaningful. So I started studying on my own, looking at trying to understand better, you know, how solar energy works and in general, you know, clean technologies.

But then I understood that for them to be successful, there has to be policy behind, you know, so I always say that the rules of the game are written in policy. So you want to change the rules, you need to change policies. So I created a think tank that, uh, helped me to, you know, get started in policy and because I was living in California at the time I was able to, you know, the first gig my company had was working with, uh, you know, the very final stages of implementation of AB32 in California, but we’ve managed to work with some people within the Schwarzenegger administration. And then after that, my organization was hired by USAID and state department to assist Latin American countries with a focus on Mexico. But we ended up working with a number of other countries, helping them develop climate change legislation and identifying opportunities for large scale, renewable energy projects. And during that time I was charge of helping them identify ways of financing a project. So for the past 12 years, I’ve been both developing legislation, trying to design large scale renewable energy projects, and also trying to find ways of financing these. Which you would think are not useful skills that you can bring to local government. Because, you know, I was talking about, you know, very, very large nationwide type projects. So coming to Ithaca after COVID wanting to do something different, you know, I was like, okay, yeah, I’m going to give it a try. And I’ve been doing this for the past seven months.

John Farrell:

I saw in an interview with you from June this year is you talked about, as you were starting in Ithaca about having a thousand conversations in the community, as a way of trying to like ground yourself and talk to people and understand what it was that they wanted. Can you share a little bit about like what you have learned so far in those conversations? I mean, you’ve moved very quickly to, we’re going to get to sort of the big policy ambitious stuff that’s already on the table, but what are some of the things that you’ve learned, who have you been talking to and what are, what are the purposes of those conversations?

Luis Aguirre-Torres:

Yeah. I think what we were trying to do was to implement a new model of democratic engagement. For a long time, particularly in communities like ours, you know, we have used public consultations to get a better understanding what the community wants, but you know, the community is also tired of that model and you don’t really get the best possible results and engagement is limited and it’s one-time engagement. So what you really need to do is to promote a way of, of permanently engaging people and assisting you in, in fully understanding the type of policies that are needed, especially now that we are seeing these, the confluence of climate change with social injustice, economic inequality, uh, post COVID economy. When you put all that together, you really need to make an extra effort to understand what’s going on in your community. So we thought about this project: 1,000 conversations about the future. That’s what the program is called. And what we are trying to do is to engage people into having 1,000 conversations about everything that we’re doing. So these 1,000 conversations to start with, for example, me talking to you right now, and then hoping that when you get home, you will talk to people about what we discussed, but very likely the conversation would take a different turn and a different focus. And hopefully if you talk to somebody at home, then this person would go to work or to school or somewhere else and have another conversation.

We don’t need to be involved in this conversation. We’re asking people that if they are comfortable, they could upload these conversations to our website. So some people have done that and some people got creative and instead of uploading the conversation, they uploaded a video of something they like. Some other people uploaded a poem. So people are finding different ways of expressing what this community means to them. And at the same time, we are not trying to prompt them with, with very specific questions as to like, why do you think about climate change? Because most people probably don’t even care about climate change. And if they do, they cannot define in the same way that you do professionally. So we’re really interested in what matters to people. And then the key to these social experiments, as we call it, is if you talk to somebody about what they care, they could tell you unemployment, you know, it has affected my life and then you can talk to somebody else and they can tell you that access to education or health infrastructure has affected their lives. And then finally, somebody else that can tell you that, you know, because of their age, people don’t take them serious. And each one individually is an issue that you could tackle. But then if you start focusing on the nexus, if you start curating these conversations and then try to identify what connects them, then, then there is this emerging complexity that comes up and, and you know, I’m going to make this up. But for example, the examples I just gave you could be that racism is at the core. So that is the nexus. So even though nobody mentioned racism as the cause, if we do a proper analysis, we can identify those elements. And then that’s when we can think about policies that will actually produce change. So that’s the objective of 1000 conversations is very ambitious, but I think it’s a really cool project.

John Farrell:

One of the things I think is so interesting about your approach around sustainability and Ithaca’s approach is that for a lot of cities, there’s sort of a sequence of, they make a pledge to do something big. I, for example, had a couple dozen conversations with city leaders about a hundred percent renewable electricity pledges. And then usually there’s a couple of years where there’s a plan that’s developed that we’ll look at the different options that they have. And then from there, they start to think about what are the things that they can do. And one of the things I really liked while I was on a call with you last week, and you talked about how with setting an ambitious goal, like carbon neutrality by 2030, I think you said this, you know, I don’t want to put words in your mouth, but essentially we don’t have time to do a climate action plan. 2030 is effectively only like eight years away. We need to start acting right away. Tell me a little bit about how you are approaching this and why you think it’s so important that you have to, like, get moving.

Luis Aguirre-Torres:

Yeah. You know, it all starts with how we came together in Paris and now in Glasgow and the type of pledges and commitments that people are making. And you’re seeing, it’s not that it fails because people are failing. It’s just that, you know, the process and the complexity from going from ambition to implementation are extremely, extremely complicated. So somebody goes to Paris, splits it, something, you know, defines the level of ambition that there is a place and it comes back negotiates with government, the government rejects that. So it becomes a very complicated matter. And then the same thing happens at the state level. It’s just very, very difficult. So I think everybody agrees, there is a renewed sense of urgency and there is a need to take action immediately. So we can actually do something and retake the path towards, you know, 1.5 degrees, but same time it’s been proven to be very difficult, to even consider a different date than, than 2050, you know? And that has to do, I understand, you know, there are economic considerations for, for 2050 being the date that everybody was focusing on, but now at the same time, people think given the most recent announcement from the IPCC, we don’t have that much time. We need to start acting. You add to that that for whatever reason, the city of Ithaca in 2019 committed to implementing a green new deal that mandates full decarbonization of the city by 2030. So even though I joined in 2021, the city didn’t want to change that date. You know, they want to keep that one, which honestly I agree with. I just think it’s a very difficult thing to do.

So when I was hired, for example, I was asked to put together a greenhouse gas inventory to develop a climate action plan. And then after that, you know, we find the different mitigation strategies and then, you know, start. But honestly I believe that all we need at this point is a sense of direction. And then precision is necessary. You do need a baseline, you need to address some very specific and precise things. However, you can get going with a sense of direction where you need to go, it’s full de-carbonization, you know, that it comes from buildings, energy use, you know that it comes from transportation. You know, it comes from the electricity that we use and, and you understand a number of all of these things. And if you’re going for full decarbonization, then, well, let’s think about crosscutting, integrated strategies that will take you there as soon as possible. So we set out to do that. And I had a conversation with, a long conversation with a major, a long conversation with my common council.

And at the end of the day, I explained, you know, there is a real sense of urgency. We need to get behind this idea, that’s the only way we’re going to make any difference. And then I always, you know, let me just add very quickly that also, I believe there is a need to prove that this can be done because when you mentioned this inability to get going, and then they need to follow the steps, because those are the steps recommended and what everybody does, it really means that everybody has to start thinking differently. You know, everybody has to start thinking differently. So we can be that city that proposes a new way of doing things. And we are developing our strategy in such a way that it’s, it’s a series of modules that we are putting together. And I believe most of them are highly replicable in other places. So the objective is not remove the 0.0001% of the emissions that Ithaca produces in relation to the global emissions, the intention is to demonstrate this is doable. This is replicable and rural America doesn’t have to wait for the big cities to implement anything. You know, we can actually lead the charge. So that’s the whole strategy behind.

John Farrell:

In the news article I was reading about the work in June, 2021, it said Ithaca’s current program is going to focus on electrifying a thousand buildings, bringing a thousand electric vehicles to the city, creating a thousand jobs all within a thousand days. So it’s about three years. And then you have this longer term decarbonizing all the buildings by 2030 that the city most recently agreed to and what we’re seeing in the news about this. Can you talk, I guess one of the things I’m curious about is it’s like the level of ambition went up even from June until November? Or, or is it just that, that was sort of like where you were going to start? And I guess how’s that going already? Because you obviously were already trying to start acting on that. And three years was a pretty short time period for something like getting a thousand buildings electrified.

Luis Aguirre-Torres:

Well, we need to set an ambitious goal and I love… there is this bridge in Paris that has this graffiti, actually, this bridge is quite famous though. Uh, and the phrase from the sixties, uh, which is we need to shoot for the impossible in order to be realistic. And that’s what we have to do. We need to set very ambitious goals and I like comparing what we’re trying to do with our very own moonshot at the end of the day. And I always have thought about it this way. You know, I don’t care that we landed on the moon. You know, that’s, that’s not the important thing. What matters is everything that needs to happen so we could land on the moon and same thing for the vaccine, you know, we have a vaccine that’s awesome, but the logistical nightmare that takes to distribute vaccines to 7 billion people and, and you know, what we needed to do to work together and develop something. Those are the really important learnings that can be used to change the world.

So, so I think we need to do this. If we commit ourselves and we try our hardest, we really try to make it happen, it doesn’t matter if we make it or not. You know, as long as we learn how we can actually do it. So, and we have this program it’s called 1000. It’s not very original, but it’s 1000 buildings, 1000 electric vehicles, 1000 jobs, 1000 conversations with the community in 1000 days. And that was, that came from a conversation that I also had, uh, with the mayor of Ithaca, where I was willing to risk my job trying to demonstrate this is physical. We can actually do this. If I don’t deliver, then you can fire me. But you know, like I am absolutely committed to make this happen. And, you know, if I were alone, uh, thinking this way, then I would be worried. But you know, there is an army behind me. There is so many people, so many companies, so many organizations working with me to make this happen, that I’m not worried. I don’t know if we’ll make it, but I believe that we’re going to get really close if we don’t.

John Farrell:

I really love your comparison to the moonshot. Although I did have this moment where I thought, you know, if I’m the astronaut on that flight, I would like it if we made it to the moon. But that being said, I love how you’re talking about sort of helping to build the structure. I think that the comparison to the COVID epidemic and the vaccine is really apt here, right? The technology development was in some ways the easy part, even though it was still remarkable that we had a vaccine as quickly and as effectively as we got, I think about that all the time with like, you know, we have heat pumps that can provide heating and cooling at fairly affordable cost. We have solar energy, we have energy storage, we have electric vehicles, like the technologies are available to us to do the work of decarbonization, to localize energy production and what have you. And it really is this issue of logistics.

So let’s go there into the question of logistics here really quick. I know one of the big things that stymies a lot of cities is this issue of financing. And I was joking with somebody else when I told them that you and I would be talking — a lot of sustainability directors are thinking about, can I get a $20,000 grant from the local foundation to help us do something? And here you’re talking about tens of millions of dollars that you’re trying to line up in order to actually do the implementation of the work that needs to be done, not to do some planning, not to do a pilot. What is it that you’ve put together that will help create the incentives or create the structure to get dollars moving, to get projects moving?

Luis Aguirre-Torres:

Well, I think it all comes from the work that I used to do before coming here, you know, on one hand I would be working with developing countries that it will take a while to convince them that they need to develop climate change legislation, to enable renewable energy, to be part of this transformation. And once you convince them, they will go, okay, we don’t have the money to do this. And you know, the U.S. government was paying my salary, but they were not paying for this project. So it was about, okay, we have the case of somebody who wants to do something at scale, but they don’t have any money. So how do we fix this problem? So for 12 years was fixated like, okay, we need to figure this out. And I ended up developing relationships with a number of, you know, multilateral organizations and, you know, finance facilities that would help developing countries implementing a hundred million dollar projects, for example.

So I feel, you know, we can probably do that here. And a lot of the time when we talk about scaling, people think about scaling the work and that’s kind of the focus, but very often what we need to really, really emphasize is how do we scale impact? That’s what we need to do. Impact scalability is very, very difficult to achieve. And, and you don’t do that when, for example, talking about money, you don’t do that when you have one to one impact of every dollar that comes from the government. You know, the government can come in and pay for heat pumps and that’s cool, but then there is never going to be no money to finance this transformation. What you need to do is to make sure that every dollar that we get from the state or the foundation, it has a one to 20 impact. How do you do that? And that was the key question that we were trying to answer.

Initially, we looked at the different financial alternatives that we had and, you know, one of them was for the city to acquire debt, but you know, this is a small city, $80 million budget. And, you know, back of the envelope analysis led me to believe that everything that we’re doing in Ithaca for full de-carbonization, it’s going to cost $2 billion. So yeah, there is no way we could bond that much money. So that was out of the question. Then we need to look into, can anybody actually take the risk on behalf of the city? And then we help them manage that risk differently. And, you know, there was a possibility, a couple of organizations say, well, private equity issue can a bond for $50 million, as long as we manage risk together. And we guarantee that this is repaid, but then, you know, we understood that there were different alternatives. Then there was this realization that nobody talks about like where the money is anymore, because we know where the money is. We know there is private equity firms. We know that there is insurance companies with money, real estate funds. We know where the money went after the financial crisis of 2009, it all was concentrated in financial institutions, real estate and insurance. So if you know where the money is, you, you, you need to start wondering why is it that the money’s not coming to my community? You know? And it is a matter of risk. And once again, you go back to think, okay, we’re talking about scaling impact one to 20, but the reason we don’t do that, it’s not that nobody thought about it is because the risk is just too high. It’s too much.

So if you think the way we tackle climate change in my office and in the city of Ithaca now is just like the Paris Agreement. It is a massive risk mitigation strategy. In the case of the Paris agreement, the risk is extinction, humanity could end if we don’t do something about it. So with that mentality, that it is all about managing risk. Identifying and then managing risk and mitigating risk as much as you can. So we looked at the different sources of capital out there that includes the state, federal government. It includes commercial banks, central capital, private equity, investment bank, you name it, but then you need to look at, you know, which ones are the most flexible. Then it turns out that you have, for example, private equity, which is perhaps one of the most expensive forms of capital that you can go after if you want to do something like what we’re trying to do, but at the same time, it’s very flexible. There is a way you can actually affect the structure of that capital to reduce the actual cost. And then once you have reduced the cost of capital, you implement some financial risk mitigation strategies, and then suddenly you have a very affordable pool of capital that you can use to finance a crazy adventure like the one we’re getting into. Then the question is, okay, so who puts the money for reduces the cost of capital and who manages risk? And the way we did it is private equity brings the money, state and federal government help us reduce the cost of capital by altering the structure of the capital pool. And then the city does risk mitigation. And that combination is enabling us to access money in a very affordable way, and then pass the savings to people. So we can actually all participate on the decarbonization.

John Farrell:

I know this might get into the weeds a little bit, but I’m just feeling like some people might like the weeds on this one. And I’m terribly curious. With the state and federal money, how are they reducing the cost of capital? What is the way they’re doing it? And what are some of the strategies the city has to reduce the risk to make it more likely for these finance partners to want to participate?

Luis Aguirre-Torres:

Yeah, I mean, on one hand, imagine this is probably an oversimplification, but think about it. Like you get a hundred million dollar pool of money that you bring in and put into a financing facility that comes with a 10% cost of capital. So, you know, there is expected return of 10% at a particular time. There is pressure on that capital to return at least 10%. So how do you relieve the pressure? Well, you bring in money and they are never going to invest if there is no possibility for return. So if you guarantee the return, they may invest, but they may also lower the cost of capital. They may willingly reduce this because at the same time you are guaranteeing some, some of their return. So instead of using the money from state and federal government to pay directly for a heat pump, you put it into the same financing facility. So let’s say that before you mentioned it, like every year, the state of New York through NYSERDA spent a ton of money helping low moderate income people to finance heat pumps or retrofitting. And let’s say that all that money together with rebates, financial incentives, EPA, all the different programs out there that we can make use of right now you can probably raise $3 million. So let’s say that you suddenly reduce the pressure from the capital pool. And instead of having to generate 10 million, you’d have to generate 7 million. But what if you were to put some philanthropic contributions towards the same pool of money? Then you are relieving pressure and you are literally altering the structure of the capital. Then the reason that there is these, this cost of capital, it has to do with risk and it has to do with risk at different levels. So the first level is the probability of default. How do you manage that risk? Well, you need a rate enhancement. You know, you need to find a way of providing some sort of loan guarantee, which in the case of the municipality is not possible. It goes against New York state constitution. However, the state can do that. The state can provide a loan loss reserve program that provides some sort of loan guarantee for people in the low to moderate income bracket. So that basically provides certain guarantees. So then they, because the risk has been mitigated to some extent, they may be willing to reduce the cost of capital even further. So now that you’re at that level, then once again, you need to look at where the money is and who the actors in today’s decarbonization effort are. And one of them is the insurance industry. So a loan loss reserve program basically represents the first layer of insurance. If you think about it. So you need is a re-insurance product. So if you get a re-insurance product and this product basically transferred risk from the contractor who is right now, the one stuck with most of the risks and you move it to an insurance company, then you’re probably managing risk in a way that ends up being 50% of the risk with the contractor. 65% with the insurance company, 20% with the state and the city even takes like 3% of the risk if you want. So suddenly you manage risk, reduce the cost of capital, and you alter the way that we had not tried before the structure of capital.

John Farrell:

We’re going to take a short break. When we come back, we talk about the potential economies of scale, the city’s justice 50 commitment to putting half of the resources into climate justice communities, and how to get people to say yes to a retrofit. You’re listening to a Local Energy Rules interview with Luis Aguirre-Torres, Director of Sustainability for the city of Ithaca, New York.

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John Farrell:

I feel like we could have an entire hour and you could do a seminar on risk reduction, but I’ve learned a lot through some of the work with other cities and whatnot about this idea of de-risking capital. And I just think it’s such an important lesson about how you kind of put all these pieces together. Can you talk about another, I think crucial piece of this, which is the workforce. So, you know, you talk about a thousand jobs in a thousand days. One of the things that strikes me even over the longer timeframe of your goal by 2030 is that to do all of this work, you probably need a lot more home retrofit contractors, solar contractors, heat pump installers than you normally would have in the Ithaca area. How do you make sure that you have qualified folks that can do this work and who will do it in a way that has the outcomes you expect, this stuff is installed properly, the weatherization work you do on homes actually pans out the way that you expect?

Luis Aguirre-Torres:

It has to do with a lot of the elements that come into designing this thing, right. I mean, I’ve been getting a number of emails and comments about whether economies of scale are possible. And it’s a very interesting thing because, you know, that means you are not thinking at scale. Anybody that has had a very large-scale development for housing or anything understands that it is possible to do economies of scale. And you just need to define a program that will be of interest to all the parties involved. So we can actually negotiate these, these economies of scale, we can achieve that. And that goes for labor too. It’s interesting, right now it’s difficult to get people to raise their for these training programs because the market is not quite there. You know, not at the levels that we need that could guarantee long-term employment and people are learning more there for a one time opportunity to do contracting for retrofitting a house, and then having six more months looking for that, for a job.

So what if you were to create a program that very likely is going to exceed the decade? You know, it’s going to go way beyond 2030 because we’re talking about new construction. We’re talking about existing buildings. We’re talking about massive scale for retrofitting and electrification that eventually by the time we’re done, there’s going to be a need to probably further improve on what we have and new technology. So if you define these as a new industry in our community, then you cover one of the aspects. The other one is yeah… We’re 30,000 people living in Ithaca, 50,000 with Cornell and Ithaca College are in session. So, you know, 50,000 people, we don’t have enough workers. We just don’t have enough workers. And that’s part of the reason why we don’t do this at scale, because who’s going to take on the job? But then if you think about just north of us is many municipalities, but then you get all the way to the city of Syracuse. And the city of Syracuse they have a similar issue. They have enough people for certain things, but not enough jobs for them. And then they don’t have enough people with understanding of other areas that they, they wish they could have. So when you start thinking about it altogether, when you start thinking about it, south of Ithaca is Binghamton, and then you think, okay, if you take 81, you connect actually from Binghamton to Syracuse and you go through Ithaca. Okay, so why don’t we create a green jobs corridor? Why don’t we create a way of, uh, I always say it like this, and I find it funny myself, I don’t know how else to say, like, if you manage to  multiplex, you know, the workforce and you manage to achieve the efficiencies that you wouldn’t have, if you do these in isolation, but that you can achieve by having not three, but having 25 municipalities implement this at the same time.

So right now we’re moving forward with electrification. And there is a lot of very qualified people, certified heat pump installers they’ve been done in Syracuse, in Kirkland and in Elmira. So we have something for you guys to do here that’s going to last for a while. And then when Binghamton is going to start their own program and then Syracuse can start their own program. We’re going to develop the experience with the pre-apprenticeship and apprenticeship program, the certifications and micro credentials. We’re going to develop a workforce that is going to help the entire economic region. So we start like this and we get help from these guys. And we are having conversations with people in Binghamton, with people in Syracuse about this green jobs corridor. And then one, once we’re done with these, you know, there’s going to be a need for energy storage, and Binghamton, those guys know energy storage. They have these clusters that they are creating. A lot of the knowledge is concentrated there. So we’re going to need them to help us out. But at some point, because we have Cornell university here, we are developing better understanding of things like hydrogen, let’s say, and there’s going to come a point where hydrogen is going to be mainstream. That’s what we can help. So I believe that that’s the way looking forward, looking ahead, looking at scale and trying to work with other municipalities. We can create this.

John Farrell:

With both financing and with the workforce, we often hear that there’s also this equity component. And you mentioned this a little bit in terms of the financing about how do you make sure that you have financing that can serve low income folks. That part of the issue there is maybe they don’t have good credit. Same thing with the workforce, making sure that folks will have access to the good jobs that will be created. Maybe they haven’t had training before. Maybe they don’t have the relationships to get there. What are some of the things that you’re doing to help to make sure that this is an inclusive effort?

Luis Aguirre-Torres:

People have different ideas on, on how to do this and whether this would work and the City of Ithaca’s developing something that we call Justice 50. And it just sounds that we went further down that road compared to the federal government, but it’s not a competition. It’s just our numbers, the way they work out. For example, you know, we were doing the analysis for full de-carbonization of the building stock. And then we identified that about 23% of our population qualify as low moderate income. Then we started looking at the type of buildings that are representative of them. And it turns out that they are twice as expensive as it’s going to be to retrofit everything else. It turns out that all the money that we have, we need to devote at least 50% to retrofit and electrify 23% of the building stock, which corresponds to this income bracket.

So then you start thinking, okay, so probably we need to redirect 50% of the benefits. And then you start looking at transportation and the type of infrastructure that we need. And then you realize that yeah, about 50% of the investment needs to go to these communities that historically we have never paid attention to. So now you have that. So, so then we identified, okay, there is a need to go beyond Justice 40. Maybe Justice 40 works for the entire country. Maybe the 45% that New York state is proposing works for the state. For our community, we need 50%, so that we have identified.

Then second is how do we promote local jobs? How do we promote wealth building in our community? You need to start looking at the characteristics of our community. And we see, we do not have a lot of minorities, but we have an important number of minorities. We have an important number of people that would qualify as climate justice communities for a number of reasons, for education, for immigration status, that it could be for where they have access to social security, to education, to health. But there are a number of components that will help you to identify who qualifies as a climate justice community. And that could include individuals and, and then you need to reach out to them. But as we were talking about at the beginning with the 1000 conversations, it’s not for me to go and talk to everybody, one because I can’t and two, because people don’t feel comfortable talking to me. I will never recruit them into a workforce development program, but somebody they know and trust may. So it is about identifying community champions and then having those community champions identify – down the road is creating this pyramid scheme to recruit people into workforce development. You know, we have used that to scam people. Why don’t we use it for good? You know, why don’t we use these type of schemes to recruit people into something that is inherently good. And then the thing is we realized that we couldn’t just do that. It’s not about recruiting people. It’s about guaranteeing that they’re going to have a job, guarantee that they’re going to have an opportunity.

So then you need to, you need to set the rules. You need to start thinking, okay, we’re going to hire 80% from the economic region. We wanted to set a number of people that we would hire for this work from our city. But then we realized that we need to go to the county. We need to go to the economic region to create these opportunities. So, you know, we are actually asking the contractor that at least 80% of the people come from the same economic region. So that basically means they have to help with workforce development to make this possible. And then it’s a little bit of defining the rules of these programs, implementation guidelines that are very precise. So you can actually follow this and do that. So, so that’s what we’re trying to do. And we strongly believe that climate justice is a key component of everything that we, that we do and if we’re going to achieve anything it has to be with climate justice at its very core.

John Farrell:

One of the things I wanted to ask you about is, I think I mentioned earlier that I’ve talked to a couple of HVAC contractors and said that I was going to be interviewing you. And they had some specific questions, one of the questions was about economies of scale. And we, this kind of came up earlier. You mentioned about like as folks who do large development know that there are ways to scale things. Can you talk a little bit about this idea of like, how do you scale up? How do you capture economies of scale? One critique that the HVAC contractors were talking about was every home’s a custom job. Every building’s a custom job. You go in, maybe they have a different set of windows, a different kind of wall installation, et cetera.

Luis Aguirre-Torres:

They’re right. They’re absolutely right about that. But you know what they’re saying is not wrong. The problem is that from there you make the jump to say, economies of scale are not possible for that reason. And that is not true. The problem is when you are doing custom jobs, you don’t do, you don’t need to do a lot of modeling. You don’t need to do a lot of forecasting. So when you’re doing something that’s scaled, you model, you simulate, you identify archetypes. So when you start identifying archetype, there’s a finite number of type of windows. Finite number of materials. Finite number of orientations for every house, finite number of configurations for energy use. So then you start thinking, there are not that many categories. So you can identify by archetype, you know, the type of buildings and the type of work. And you can estimate more or less the materials you can estimate based on the age of the buildings based on whether they qualify as a historical property or not. Based on all of those parameters, you create a very finite set of potential configurations. If you were doing 10, having those configurations may not help you to create economies of scale, but doing 6,000, it allows you to do that because we do not have even a hundred different configurations. Given it that observation, we started working with Cornell environmental systems lab that allowed us to develop a 3d energy flow simulation tool that helps us understand based on the archetype, the type of work that may be needed. And based on that, we can identify what are going to be the needs for everything, you know, for materials, for parts, for labor, for heat pumps. Then based on that, and those numbers, you start negotiating with the people that can, that can actually provide those, uh, elements. And then, you know, because of the scale at which are talking about that, you, you can do this.

So every house looks different, everything is designed differently. You paint your walls in a very different way, but you know what I say? And, and let me just say this very quickly, people were telling me, they keep on telling me since the announcement came out. People are telling me that you are not a typical community. This is, you know, Cornell University, highly progressive kind of wealthy community. And it really isn’t. I mean, and it doesn’t matter if we are. Every car looks different, pop up the hood and then you’ll see that it’s, it’s the same, you know, it’s a very similar vehicle once you remove all the nicety. At the end of the day, if, if you look at what’s underneath the progressiveness and the wealth or the access to education that we have in Ithaca, you see that we work, we come back home, we go shopping. We use energy in exactly the same way for heating, for water, for cooking, for drying our clothes. So it is at that level that we are the most typical American city, but that is the only way of looking at this and scaling this is if you look at what’s important.

John Farrell:

One of the things that just boggles my mind about this is this idea that, and I deal with this in the electricity business. So, you know, I work a lot on distributed energy policy. And one of the things I keep trying to emphasize for folks is that we’ve got this paradigm shift happening, where when people do rooftop solar, we have thousands of individual decision-makers all of a sudden in an energy business that used to be relatively monopolized. You obviously can make a commitment as a city to say, we want to decarbonize 6,000 buildings, but you have 6,000 building owners. And presumably you’re going to have some set of folks who are typical technology early adopters are going to be excited about this. They’re going to see the opportunity. Maybe they’re really motivated around climate and environmentalism. What do you see happening after those early adopters are tapped? And like, what are you, how are you going to motivate people to say, yes, I do want to do this?

Luis Aguirre-Torres:

Man. That is the million dollar question. You know, the one that I get every, every so often. And I’m going to give you the most honest answer that I can. On one hand, as you can tell, we are following a very technical approach to this. We have equity considerations, and we know where dealing with people, but in order to understand how you can deal with people and the type of responses that you’re going to get, you need to do some modeling. You basically talked about the early adopters, like diffusion of technology. So if you think about it that way, yeah. In our case, we can say 2.5% of the population. They’re going to say, yes, they’re just waiting for these. You know, these are the crazy guys that would buy an iPhone the moment that comes out, it’s the same people. If they have the means, they will go after this, no matter how much it costs, they want to say they were the first. Then you have 13.5% of people that don’t need a lot of convincing. You know, it’s a little nuts. It’s the availability of the program. It’s a low interest rate loan or, or, or a zero interest loan, something just convenient. So you have 16% of the population. And I believe we got those. I don’t, I am not super worried about those. There is work to be done and you need to offer something that makes sense. But that is just 16%.

Then you’re going to the other side of the spectrum. And you understand that there is about 35% that will not do this no matter what you tell them, there is no way they believe it. They have different political views. They don’t believe in climate change. Even in our community, there is going to be people. I estimate 30% that they will not do this. They’re waiting for legislation. By 2025 is going to be the deadline to adapt to the energy performance standard that we’ll have in the city. So we’re going to have, right now, we have an energy code for new buildings. We’re going to have an energy code for existing buildings in a few years, and people are going to have to comply anyway. But let’s say between now and then you ignore the 30% that will not do it no matter what, because they just don’t believe in you. It’s not that you ignore, but you don’t have to worry too much about that 16% on the other side. What that leaves you is 50% of the population. Okay? So now we have a program that we need to define for 50% of the population, not for everybody.

And in that 50% of the population, you have some that will need a lot of help. The numbers need to make sense. So you need to have a loan guarantee. You need to have a loan loss reserve, a way of enhancing their credit at the same time, the numbers need to make sense. So from those that use propane or fuel oil, or they have baseboard heating systems, it’s easy to demonstrate. This is going to work and I’m going to show you how so the numbers will speak for themselves. And then you talk to the building owner and you tell him, dude, this investment is going to lead to an increase in property value of about 50% in the next three years. So you probably want that. And then you talk to the, to the tenants and it’s like, dude, you are going to pay 50% of what you pay right now in utilities. In our city, that’s not going to be all, that’s going to be another 10%.

And for a bunch of people I estimate, for about 40% of the buildings and the building owners, the numbers are just not going to be there. The numbers are not going to be there because natural gas is so heavily subsidized. And right now the price of electricity and the price of natural gas, you know, makes it really difficult to make the numbers, especially if they just recently upgraded. If they did just add, the depreciation is not there and it’s going to be very difficult. So you need to go to economic incentives. You need to figure out a way of incentivizing people to participate in this. So we created the Ithaca electrification fund and the Ithaca electrification fund is a fund that will actually raise capital from private citizens that will have a philanthropic matching from a number of organizations and then municipal matching on top of that. And that money is going to go to cover a hundred percent of the interest. And if we raise enough money, is going to create an incentive for people to participate in the program. So that’s part of what we’re thinking of doing right now. I believe that between now and 2026, that is the next five years, we’re going to be able to capture about 60%, somehow, 60% of the population. The remaining 10% of the population that would buy into the program, if the conditions are right, probably we need to wait for legislation to be ready and then weighed their options. And then the people that will not do it until the very last minute, I believe that even legislation is going to be, is going to find it hard to convince them, but eventually they will, because if they don’t comply, then it’s going to be fines.

John Farrell:

One other question that I got and sort of my last really in the weeds question was about this idea about electrification as an outcome. I’m asking this in some ways, as a personally, I have a single family home where I live in Minneapolis and an aging gas furnace. And I know that a standard heat pump will be a lot cheaper and could, I could use it in tandem with my furnace versus a cold climate air source heat pump, where I could go all electric. There’s things like panel upgrades and stuff that I have to consider, but there’s also this like societal pressure as well of like, if we mostly decarbonize and people still have a gas hookup to their home or their business or their apartment building, then we all still have to keep paying for the gas network that now has a lot less gas flowing through it. So that cost is basically going to get sticky there. Is the decarbonization plan basically to go fully electric, are you anticipating that there is some savings there? And is that part of why you’re thinking about incentives and kind of nudging people to electrification? Or are you thinking that there might be that option where people could say, oh, well, we do a sort of hybrid heating system and people might not get off of gas entirely as part of this?

Luis Aguirre-Torres:

Look, I’m one of those, I think pragmatic environmentalist that believe that indeed natural gas was designed as a transitional fuel. I believe that we’re way past that transition. It’s time to get rid of natural gas. I also understand that they’ve been laying down infrastructure for the past several years, so it’s not going to depreciate until 2050. So there is an issue that we need to contend with, which is stranded assets, you know, and the potential for stranded assets. And it’s not a very easy question to answer. I mean, you want people to do the right thing because we believe in climate change, we believe carbon emissions come from burning fossil fuels. So you want people to stop doing that at every level. I am hoping that we are going to be able to provide an alternative that is compelling enough so people decide to move away from fossil fuels.

If they have an alternative to do this, we are going to find a way of helping people make that decision, then that transition, but we cannot force them. You know, there’s going to be heavy duty industrials that cannot be electrified. It doesn’t matter what we do and how we want to think about it, they cannot be fully electrified. There’s some industrial processes that because of the energy flow and energy density characteristics that will need hydrogen, perhaps. So until that is viable and affordable, you cannot really expect full de-carbonization, but in terms of buildings, yeah, we are going to eventually require people to comply with, uh, a cap in terms of the emissions, you know, the, the, the grams of CO2 emissions per energy unit. So based on that, when we start with this program, it’s mostly fuel oil that is going to be affected. One year later, it’s mostly propane and a year later is going to be anybody that has natural gas.

So we’re hoping that that’s the way we’re going to promote this, this transition to full de-carbonization. And the reason we’re doing it is because we strongly believe fossil fuels are the reason why we have climate change right now. So we, we need to tackle that. It also, I need to say, it doesn’t help to think about the fossil fuel industry as our enemy. These guys are job creators that serve a purpose, and, you know, the economy is what it is because of these companies. But now it’s time to help them see that there are different business models that can be used, that they could migrate. They think that they can. Take the example of Enel for example, in Europe, how it is moving away entirely from fossil fuels. And in the city of Ithaca, we have a company that serves natural gas and electricity. So you can work with them, not against them, help them consolidate their, their business model on the electricity side and moving away from natural gas. And we do have that opportunity compared to other municipalities.

But I believe that there are a number of things that we can do and different contexts in which we can interpret the information that we have available to promote a transition. It’s just not an easy question. And just the last thing I want to say about that is we’re looking at this also from material change, analytical framework, point of view. So, so you start with the outcomes and the outcomes that we are pursuing is a carbon free economy. And we’re looking for climate justice. Those are the two outcomes that we’re looking for, but then there’s the outputs that are the quantifiably measurable outputs that we think of in terms of de-carbonization, in terms of electrification, in terms of energy efficiency, in terms of carbon sequestration, you know, those are outputs. So the program is actually an activity that will generate these outputs. So we are decarbonizing electrifying with idea of deliberate in terms of energy efficiency, electrification, and decarbonization. But the outcome I think we were talking about the same thing here. We’re thinking of a healthier society that is not dependent on fossil fuels.

John Farrell:

You said at the outset that one of the things you’re thinking of as you do this in Ithaca, is that you recognize that Ithaca’s fraction of global emissions is like you said, 0.0001% that you want to create this in, in sort of, I think you used a word module that so that other people can replicate it. What do you think other cities need to do in order to replicate it? I assume it’s helpful to have a sustainability director with a background in venture capital and finance, but is this stuff that folks can figure out in other cities?

Luis Aguirre-Torres:

Yeah, definitely. And one of the things is I am very happy to know and learn that I don’t have to be an expert in all of the stuff that we’re doing. There is people better equipped to deal with these things. You just need to, you know, find the people that you can trust to and consult with. And ask them like, okay, I want to finance this thing. It’s a crazy venture. It’s going to cost me $2 billion. What are my options? Because this is overwhelming. I’ve been working on this for a while and I’ve been working on financing large scale projects. But when I discovered that the Ithaca green new deal was going to cost $2 billion, it was hard to understand, you know, the magnitude of the problem. But, you know, I interviewed with a number of financial experts.

I think before I came up with this program, I really talked to…  I don’t know, man, tens of people with financial expertise who like, and I ran these ideas by them and they were building on top of that. And eventually we came up with this thing and then I talk to people that manage risk for a living. That’s what they do. So I asked them question on – to all of them, I was like, I don’t know anything about what you do, but I want to do this. And I understand I need to do this. So can you explain it to me? And eventually you get a better understanding. So I really think that you don’t need to have a director of sustainability with a background on entropy or finance or anything like that. You just need to have a very committed government that includes the mayor, the town supervisor. That includes the, the, the town council, the city council, that includes people who are committed to this transformation and to hire the right person for the job. It doesn’t matter what the background is and that you, you set up this person to succeed in the job instead of telling them like, we’re doing this, but, you know, be careful because we don’t want you to mortgage the town. For example, once again, for a city that has an $80 million budget, that every year borrows about $5 million, it is mind boggling to start a program that costs a hundred million dollars at the first phase of a program that may cost $2 billion in the next eight years. But it was difficult for them, but they were like, okay, if we’re going to do this. Let’s do it.

So at the end of the day, that’s what you need. You need people truly committed at every level of government to do this, and then help is there, everywhere. For example, very useful conversations with [inaudible]. Those guys know their stuff. They’ve been helpful. They’ve been provided input, advice. And every so often they tell you, dude, that’s wrong. That’s not the way to go. So if you listen, you pay attention and you’re flexible, then you come up with something that works. And having said that, I don’t know if this is going to work. I’m just hoping that it will, and we’re going to do our best to fix everything that breaks and to make sure that we continue making progress.

John Farrell:

Well, Luis, I just want to thank you so much for taking the time to talk with me. It is really inspiring to hear about the ambitious commitment that you’ve made. And I really love that you put it in the context of, we don’t have to land on the moon to still accomplish something. And I think it is great to think about lots of communities learning together as they struggle toward these same goals. So thanks again for taking the time.

Luis Aguirre-Torres:

Thank you very much. Pleasure to be here with you.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules discussing the ambitious building decarbonization plans of Ithaca, New York with its Director of Sustainability, Luis Aguirre-Torres. On the show page, look for links to stories about Ithaca’s bold plan for clean energy deployment, the city’s green new deal resources, and links to ILSR’s interactive community power toolkit that shares action stories from cities across the country. Hey, a quick reminder that you can win a $50 gift card for sharing your thoughts on the show. Head to ilsr.org/podcastsurvey and let us know what you think. That’s ilsr.org/podcastsurvey.

Local Energy Rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birschbach. Tune back into Local Energy Rules every two weeks to hear more powerful stories of communities taking on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.