Entrepreneurs, Innovators, and Roadblocks in the Rooftop Revolution — Episode 132 of Local Energy Rules

Danny Kennedy:

I think America needs a different attitude, whatever we call it in our political language, Green New Deal, I don’t care. It’s industrial policy is what I know it as. And it needs to understand that the private sector is backed by the public sector and the public sectors goals. And society’s goals can be in part created by proactive private sector players aligned and supported in those interests.

John Farrell:

When I published a report called Rooftop Revolution about the potential for distributed solar in the U.S., I had no idea it would be only the second most popular publication by that name in 2012. Danny Kennedy, author of the book Rooftop Revolution also published in 2012, co-founder of Sungevity and Chief Energy Officer of New Energy Nexus joined me in March 2021 to talk about his history advocating for distributed solar, the barriers Americans have set for themselves, and the strategies for entrepreneurs and advocates to help us finally achieve the promise of the solar rooftop revolution. 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. So Danny, welcome to Local Energy Rules.

Danny Kennedy:

Great to be on your program, John, and wonderful to be speaking with you because likewise, it’s been a longstanding mutual admiration society here. And I recall when rooftop revolution, the report came out and my publisher was like, what? And I said, it’s good. It’s the universe doing something resonating synchronicity, because it’s it, it was, we were right, weren’t we? The rooftop revolution swept the decade and is now changing the world.

John Farrell:

Absolutely. And I think that it’s probably safe to say that there were not a lot of readers who would have mistaken my chart-crammed report for a more coherent discussion of the narrative of the potential for rooftop solar.

Danny Kennedy:

I enjoyed your report greatly. And, and, you know, I think my rave was a bit of a ramble, but some readers definitely got something out of it. And, and that’s good. Uh, I think we need to refresh our perspective these days, because as I say, you know, much of the world doesn’t realize, but the decade was won by solar in particular. The greatest number of new gigawatts added to the generating capacity of the global grids was solar. It wasn’t predominantly rooftop, that’s one area where we may have overestimated the distributed ‘local energy rules’ in the early innings of this game, but watch this space because the rooftop revolution has only just begun.

John Farrell:

Oh, we’ll definitely get more into that. I want to start off with a sort of obscure question though, because I thought it was really interesting in reading some of your background that you met one of your Sungevity co-founders when he was protesting in a penguin suit. And I was curious if there were any other large avians involved in your entrepreneurial activities.

Danny Kennedy:

I, I tried to think of some large avians that were, I can’t think of large ones, but I can think of a flock of them. One of my aha moments as we call them with entrepreneurs, you know, the sort of Eureka insight that you get that you want to take all the way to exit as a business builder, was when I was involved in a policy campaigning effort that resulted in solar deployed at T and T park in San Francisco, the ballpark down there by the bay. And one of the funny things that happened, this is sort of two thousands, uh, soon after they installed it, it was covered in bird s***. Like, you know, the seagulls are just sort of settled on it and just decided to put guano all over it. And it was a real problem because you know, this sort of flagship demonstration of this new technology and how it’s going to make sense for sporting arenas around the country was mal performing because there was too much blocking the sun, as it were. And the aha was there’s a service business in this industry. There’s going to be an enormous post-sales cleaning and O&M industry that is actually yet to really come to pass. And I think that’s true. I mean, they worked out their own way to squeegee that stuff off. But when I, I saw your question about the birds, that was what came to mind. Other than that, no albatrosses around my neck that I can think of, mostly good things. And solar is lifted.

John Farrell:

I feel like your example is great because in some ways it serves as a metaphor for the fight for rooftop solar, against some of the incumbents that we have across the world, uh, that they’re always pooping on the parade. And they’re, we’re always trying to clean up and make a brighter future for solar. Let’s talk a little bit more about some of your work with energy entrepreneurs. So you’re, you’re currently the Chief Energy Officer at New Energy Nexus. It’s a nonprofit that supports energy entrepreneurs. You have a background working in both developing and developed countries on energy issues. I was kind of curious, like, what does that look like? Are there ideas that you’ve supported a developing country that are very distinct from what you do in developed countries? Maybe just an example or two of some of the things that you’ve supported.

Danny Kennedy:

Sure. You know, so I have the great privilege of running this organization that is that really a network platform organization for ecosystem support organizations in countries that do entrepreneur support. So that’s a lot of support, but basically we train entrepreneurs. We give them accelerated curriculum and connections and capital where we can. So we run funds in about five different markets and teams in about 10, and last year, we probably touched 200 companies around the world and yes, quite different experiences. If you’re in New York, trying to bring energy efficiency businesses to the built environment of New York to meet their decarbonization goals. Or if you’re trying to do a prototype bio mimicking new wind turbine blade material, based on the mantis prawn’s claw, which you might’ve seen on national geographic, versus selling solar in the Philippines or solar home systems in Uganda, you know, wildly different at some levels. But there’s also interesting crossovers, you know, to the built environment case in New York, which we call the clean five. We have an accelerated day, you can check out the claim site.com. We brought nine companies to bear on that big decarb strategy in the empire state. And one of them is a Malaysian business who have a better boiler, basically, you know, the New York real estate market hasn’t sort of innovated around the business in the basement for a century and lo and behold, someone in Malaysia has, so we’re helping sell their wares and hook them up with corporate and real estate landlord type partners and providing capital working capital for them and stuff like that. So that’s a, that’s one case.

I mean, you know, then at the other extreme, at what we call the base of the pyramid, you know, this huge opportunity space for bringing power to the 800 million or so that don’t have it at all – electricity that is, and the three plus billion who kind of have s****y electricity, the intermittent unreliable high cost diesel based stuff that powers Nigeria, for example. So we do everything from training women entrepreneurs at the last mile in, in Uganda, I mentioned we we’ve done about a hundred companies there. We micro finance them to sell solar home systems, solar lamps, better cookstoves, and energy efficient water filters, so that they don’t have to burn wood to boil water, to drink it. And create little marginal social enterprises, by which I mean margin positive social enterprises largely. But you know, this is selling to people who live on two and three dollars a day. And so the tickets are $20 at max and we finance those because we need to. So the microfinancing is actually key, sort of secret sauce in that system, that ecosystem of support for those social enterprises.

In the Philippines, we’ve got a company that actually was inspired in part by the rooftop revolution and has built the largest manufacturing and vertically integrated solar developer in the country. It’s now got hundreds of megawatts on grounds, mostly some rooftop, megawatts, many megawatts rooftop, and has a pipeline of probably three plus gigawatts in the works. And that’s led by a 28 year old entrepreneur who we’ve been supporting for a number of years. And we just had a great result today, John, not to brag, but, um, a battery business we backed with our California programs – We run the Cal Seed fund, which has actually a grant, but it looks a bit like equity. Like we put them through due diligence and make them feel as an entrepreneur, like they’re going through a VC like experience. We gave them their first 150 back in 2017, from memory, a company called Qberg. About the same time Boeing Ventures got involved with them. They’ve got a better battery, It’s got Silicon metal story that replaces the graphite. So it’s lighter weight. So it could be used for electric aviation, hence the Boeing investment. We then proved that out last year at the molecular Foundry at Lawrence Berkeley National Lab, through a program we run called Cal test bed, where we pay for them to do measurement and testing exercises with scientists and such. And they just got acquired by North Fault, which is this enormous European battery player that’s sort of come up with European Union support to try to compete on the battery supply chain side. So one of our darlings has just had a big exit. That’s our grist, that’s what we do, our daily bread. I run around, virtually around the world these days, which is nice, supporting the staff that deliver those training programs and, and bring that capital to bear to those entrepreneurs, to help them succeed.

John Farrell:

Thank you so much for sharing about all of these different kinds of projects. It’s really cool to hear about the breadth of different technologies and, and, and folks in, uh, across the country, across the world that are, that you’re supporting. Do you see any similarities? And I think where I’m going with this a little bit is in terms of, you know, we face in a developed country like the United States, there are a lot of incumbent players and sort of incumbent ways of doing things. Do you find that it is more challenging to work in an environment like that, where there are folks who have money and political connections and a certain way of doing things, or harder in a place you mentioned like those 800 million folks who have no infrastructure for energy, to overcome that barrier of sort of the lack of any existing infrastructure in place to support them?

Danny Kennedy:

Yeah. Look, I, I think there’s pros and cons to both. I mean, if, if the question behind the question is, you know, how do we make the energy transition happen harder, faster sort of thing, probably the Greenfield leapfrog opportunities is where we’re going to see rapid pace. I mean, I truly believe this decade we’re going to surprise ourselves just like we did last decade with how quickly this will happen. And that will be demonstrated in African countries that currently don’t have power systems to speak of and will suddenly, in 2030, popup and have some substantial level of AC electricity service. And that will be largely delivered around solar assets. It’s in storage assets, which have been sort of scaled in the Western China, but deployed there for those markets. I think that’s probably true, but there’s also big challenges that may make that not true.

And that’s where we have to do this work. We do. And other work in the policy setting and market-making side of the business, which I know your listeners do for American markets and the other places too. And then the pros and cons of the existing markets and the inertia created by incumbency is, is a real challenge, but it can also be with a bit of judo technique, turned to our advantage. If we can make the greed glands of the incumbents recognize that that’s not a light at the end of the tunnel, that’s a train coming to run them over called solar and storage. Then they might just get out of their own way, get off the tracks and join the train kind of thing and come with us with their half the capital. And a lot of the programs we design and build just to support entrepreneurs, try to leverage incumbents to their advantage.

So for example, last year, we stood up something called third derivative, which you might’ve seen meteor about with Rocky Mountain Institute. It’s a joint venture between Your Energy Nexus and RMI. And it’s a great team of people doing the hard stuff, you know, real hard, tech, climate tech accelerator at scale. So our experiment is can we do this with 50 companies and a hundred companies, not five and 10, which is kind of where accelerators tend to cap out just in terms of capacity and so forth. But to do that, we’ve built a real ecosystem approach with big corporates, Berkshire Hathaway, energy, Wells Fargo, Microsoft, you name it, the sort of blue ribbon set and the theory of the cases, not only that they can help with the operating costs of this, but more importantly, they’re critical to the transition as buyers, as off-takers, as partners to the startups, as places to do demos, to prove out concepts, to learn how to go in and sell to other big corporates and partners and off-takers.

And so we’re really trying to test that thesis with a derivative and, and grow. But in many markets, we run programs where we’re matchmaking the innovative entrepreneurial startup with the big company. We also run the battery challenge for LG Kim, as an example, you know, largest battery manufacturer, one of the top three, at least in the world. And we bring them all these tiny little chemistry experiments and, and help the chemistry experiment is realized, how do they develop a manufacturable, scalable, repeatable product out of their insights? And they work that out with LG cam because they’re the best partner in the world to work that out with. So it’s a long winded way of saying both. And it’s, it’s, the work it’s not easy. None of it’s simple. Incumbents don’t historically make great disruptions happen nor survive them. If you think about, like, the media giants of the late 20th century and how they’re still, with a few exceptions, reeling from the digitization of that market, the music companies, the record businesses and labels and so on, or you name it, the other disruptive elements, how they’ve completely shattered many incumbencies, but in electricity and mobility service, you know, given the speed and scale with which we have to do this, maybe we have to do both ends and maybe it’s not zero sum stuff. And it’s, it’s, we’ve got to do I have it all because that’s the only way we’re going to get to 2030 and have done most of the energy transformation agenda by then, which is what I believe we need to do per the climate science.

John Farrell:

I was curious, you know, thinking about this challenge of how we approach incumbency, but also in those Greenfield spaces, you spent some time in a Houston jail after a stunt protesting oil companies. You had a banner that you got hoisted up “Houston, we have a problem.” I was curious if that experience and that work that you did opposing oil companies or calling them out has helped you in the way that you support energy entrepreneurs and, and to, to build that ecosystem for alternatives.

Danny Kennedy:

Yeah, sure. You know, and, and just to explain to the listeners, why the hell I was hanging up banner off a crane in Houston? I did many years in nonprofits in the 20th century and into the 21st working on human rights issues and environmental issues related, particularly to oil exploration and production in Nigeria and Columbia and the U.S. on Native America. And we were then in 1997, when that incident happened, you know, trying to raise the specter of what the conversation has become 20 plus years later, that’s spending money upstream on things, fields that should not be developed because of the carbon budget is, is a crime of a client, you know, because it causes so much pain and damage at the points of extraction and the struggles around those hotspots that we know like the Niger Delta. And so we were trying to elevate that then with the “Houston, we have a problem, no new oil exploration” was that the second half of the banner, and that’s now become a Fay, right. You know, 23 years later, we’re realizing those assets would be stranded if they were to develop them upstream projects and are priced by the debt providers in the market at 23 cent percent rent on the money, which is why Shell and BP and others are pulling back from new field development and just trying to focus in on the existing and so on.

And so what does that teach me, to your question, John, about incumbents and the work we do with entrepreneurs is one, one lesson is they’re not right. In fact, they’ve been wrong. The oil giants in particular have been egregious at dragging the chain and obfuscating the truth about energy transitions and climate. You know, the case that they made in the late nineties and in the noughties about digitalization will be ruined. If we don’t extract every drop of oil under the ground and use the energy density of a barrel of oil, blah, blah, blah. Solar is too small to ever be significant, you know, all nonsense. And we knew it then, and we know it now. And so we have to hold them to account to the fact that they’ve misled the market. They’ve raised billions of dollars. They’ve caused pension funds to hock themselves to what will be standard assets. And only just in the last three, five years, have they gotten serious about turning the corner and maybe that seriousness is real, or maybe it’s fake, and maybe it’s enough, and maybe it’s not, but less than one is do your due diligence and do your own thinking. And don’t believe just because the status quo powers that be say one thing means that is the fate of nations. And in fact, as you know, the financial times finally came around to reporting just about a month ago, as we speak, the fact is Petro states are rapidly being replaced by electro states and the geopolitics of the globe is going to be transformed by this transition that we’re part of with the solar and storage rooftop revolution.

So, yeah, we’ve got to get real about that. That said, entrepreneurs generating new ways of moving people and goods around getting into the game of mobility service provision have to contend with the fact that still not sure if it is going to be provided by oil based internal combustion engine, transport platforms and the like for awhile. And how do we work with that industry as it plateaus and declines in, in some sort of managed decline, hopefully rather than crashing and causing the upset of whole communities. You know, like this is the grist of our times. I think, you know, the, the, the issue of the century is that huge economies, like then as well as, we’ll go that way, you know, Russia potentially as a Petro state, the Saudi Arabian family and their five done parts of America, refinery towns, Singapore is a refinery town, 30% of its GDP depending on its refineries, Richmond, California, you name it. These places have to contemplate the fact that internal combustion engine cars probably peaked in 2017, oil consumption probably peaked in 2019. It may last at about the same level as it is now bumping along for a decade or so, but there’s no growth left in it. And it will only in the longterm go down to be replaced by the wonder of electric transportation. And that’s, that’s a huge challenge and a huge opportunity space. So anyway, the end of the lesson I have from that experience, aside from a bunch of funny jail stories, I can tell you, because I spent three days in a Houston jail as a, as a result of that… the, the, the, the crane in question was owned by Kellogg Brown and Roots, which was a subsidiary of Halliburton, which was at the time run by Dick Cheney. So we’d unintentionally kind of gone up against the incumbency, shall we say? And so we had, the book fined us, the bond they wanted us to pay was greater than that of a Houston murderer at the time. Uh, for civil disobedience. Yeah.

John Farrell:

You just mentioned about how these communities, you know, whether they’re built around the internal combustion engine or oil extraction, have probably reached their peak in there. They’re going to be in decline. I want to talk a little bit about the energy that you and I have both been talking about for so long that is replacing it. It feels like the vision of your rooftop revolution book is coming true in Australia where something like one in four homes, maybe even a little more have solar panels. And in your 2013 TEDx talk, you mentioned that had a conversation with U.S. utility executives about getting to like 50 million U.S. solar homes by 2018. And incidentally, I’m actually involved in a campaign with ILSR to try to get 30 million solar homes. So, you know, here we’ve downgraded the ambition. I feel like since then, I’m kind of curious if there are some lessons from down under that could help Americans understand why we haven’t achieved the same success that you discussed here almost 10 years ago.

Danny Kennedy:

Um, yeah, plenty and happy to talk about this briefly, if I can be brief, but firstly, to say good on you and keep up the 30 million roof campaign and let’s lift it to 50 and then the 80 million or so that I think is the total addressable market in the states. But why is it not the case that it’s taking off in the U.S. as it has in Australia and elsewhere? I mean, you know, China did 10 gigawatts of rooftop last year, for example, you know, like, and they barely had a rooftop industry to speak out three years earlier. So, um, why is it not working in the states? Well, lo and behold, the United States does not have a free market, just dirty little secret compared to the European socialists and whackjob countries like Australia. We, we actually have competition in electricity markets in these countries through, through thing, through through story.

And the other is, lo and behold, the United States has an insane bureaucracy, balkanized bureaucracy that complicates and confounds things. And, and it’s not to speak against local control. And I know local energy rules, I believe it, but we have a system of patchwork a pastiche. I don’t know what it is in America of the 18,000 authorities having jurisdiction over roof spaces, which means there’s an enormous cost baked into rooftop deployment that doesn’t exist in other markets. So, you know, design engineering, permitting, interconnection standards, all those things in Australia are simply simpler. And so you don’t have a dollar a watt of cost to deploy here in Australia. And don’t think that that means that there are houses burning down everywhere because poorly installed PV arrays or that people are dying and falling off roofs and electrocuting themselves, not, uh, not, not, not the case at all. On the contrary, as, as you mentioned, they’re deploying at a speed and scale, which makes America, even the densest deployments in California, look mild and it’s working great guns, and it’s creating overcapacity and all sorts of new opportunities for just basically shutting down coal.

I mean, you know, the state I’m in right now, as I speak to you, South Wales is, is the home of Newcastle. The biggest export port for coal in the world, big coal dependent economy, is the California of the country if you will. And it’s very conservative government’s energy minister is on record as saying, you know, by mid decade, we’ll be done with the coal pretty much because this renewable stuff works. And that includes the one in three or four houses that you mentioned, which has it on the roof, the distributed as a key asset, you know, you’ve seen the stories in south Australia, which smallest state, but has had its first, you know, hundred percent rooftop solar days as a country, as an economy just last October, early in the sort of spring here. They are doing the VPP [virtual power plant] thing. There they’re stringing together homes with storage beyond the meter, tying them together and causing them to be assets on the grid for grid management and scale because they have a competitive retail market where companies are vying for customers with innovations and ingenious combinations of these tools and technologies and offering better lower cost service constantly. I mean, the churn in the Australian residential market is remarkable. You know, look at a big retailer like Origin or AGL. They lose something like 18, 20% of their customers per annum to some startup that’s like offering them solar and storage behind the meter for less. And the customers are switching and causing origin and AGL to adopt the same business model and offer it themselves on bill finance, whatever the case may be to make it a better customer value proposition. We don’t have that in the states. We would have this po dunk regulated monopoly madness with PUC that don’t understand modern technology and with rules and, and processes and procedures that can’t keep up with that technology is the truth. I mean, CCAs in California, different rules in the Midwest, New York’s rev, all those things are efforts to update the U S rule-setting balkanized business, but it’s still a patchwork approach. So two things: regulated monopoly not working, not causing innovation and competition of ideas in market, neither wholesale, not retail. We didn’t even talk about wholesale. Second, uh, soft costs, the burden of local permitting, killing the enthusiasm for this causing $3 a watt solar still being the standard in the states versus, you know, it’s sub a dollar a watt here, John, like we’ve got 6,000 contractors in Australia knocking out two gigawatts last year at about a buck. Incredible.

John Farrell:

We’re going to take a short break. When we come back, we talk about how the U.S. could accelerate distributed solar and why America needs good industrial and anti-monopoly policy to regain its competitive edge in clean energy. You’re listening to a local energy rules podcast interview with Danny Kennedy, Chief Energy Officer of New Energy Nexus, Co-founder of Sungevity, and profit of distributed solar.

MIDWAY PITCH

John Farrell:

It’s interesting that when you talk about the virtual power plants, cause it’s sort of another interesting facet is that we don’t just have regulated monopoly markets in two thirds of our say our states roughly where there’s one supplier. And so you’re reliant on how far you can push them from the regulatory perspective. Or as you mentioned, there’s not a lot of innovative thinking and understanding of the market, but you also, even in our competitive markets, they’re not really competitive in the sense that the distribution of electricity is still such a monopoly and the rules, like I can’t network with my neighbor to make a virtual power plant. That’s just not allowed. I can’t make a micro grid. And so it is really interesting to find a country like the United States that often thinks of itself as a free market leader, as a laggard in this particular industry, because our rules are so in some ways un-American.

Danny Kennedy:

You said it. But you know, I mean, I think that’s the, the awareness that unfortunately, a lot of policy people and, and champions of the cause in the state houses and the utility commissions and so on in the states don’t understand is that the rest of the world has applied market theory, albeit with a socialized ownership sometimes or control of that market. So that there’s very important, precious thing called electricity is reliable, is affordable, is accessible. All those goods that we have as a society met can be maintained while harnessing the benefit of innovation and competition. We in America have for whatever reasons, historical, like the electoral college in that system, not upgraded anything for decades and it’s causing us great harm. We’re being left behind. As I said, China did 10 gigawatts of rooftop last year where they didn’t have a rooftop business to speak of a few years before. They did 23 gigawatts of solar in December, John, in the month of December. We did 20 gigawatts in the year. This is the technology we invented and pioneered and it’s supposedly championing and like all power to them, of course, fantastic. If China can do 23 gigs in a year, we can re we rewire the world, forget about  rewiring America in a matter of 17 years or something or other. I worked about like, you could literally replace the capacity threefold because you need to, if the capacity factor at that run right in just, you know, some relatively short period, which is what we do need to do. So they’re demonstrating what we need to do. We need to harness that kind of creativity. What is it in China? It’s not president Xi telling people what to do from essentially plan position. It’s a market. It’s, it’s a very competitive set of forces in cities and provinces that are the size of small countries and states outside China, running exercises in, in this competition of ideas and, and opportunity and offerings that customers are taking up because it’s cheaper, better and faster to do it that way. It’s amazing.

John Farrell:

Is there, you know, I keep thinking about in this battle that we have in the United States with ourselves really about the rules, there was this report famously back in 2013, not too long after rooftop revolution where the utility trade group basically said, there’s, there’s a death spiral. We’re all gonna, we’re all gonna fall to pieces because of rooftop solar, those folks doing solar aren’t going to pay into the grid to maintain it. Everyone else is going to pay more. And eventually it’s all going to collapse. I guess, a couple thoughts about this, one is you mentioned in Australia, some of the bigger utilities basically having to respond in this competitive market and say, oh, we need to offer some of the same things. And so I guess one question I have is, you know, do you have any insight or thoughts about why U.S. utilities haven’t tried to take advantage of the fact that rooftop solar is really popular and they could figure out how to get in that game? And I guess the other thing is what, regardless of what the utilities want to do, what are the things that we need to change to make the U S economy more supportive of the kind of clean energy entrepreneurs like you’re supporting in your work to make sure that that stuff can get to market and to give us a cleaner future?

Danny Kennedy:

One of the things we have to do to fix the U.S… good Lord. That’s a big second question. So I’ll take the first book, which is what are the utilities need to do. Um, and I don’t spend too much time thinking about the C-suite and boardrooms of the utilities and how the incumbent is facing down that light that may or not, may not be at the end of the tunnel. It was probably the train coming to kill them… although I would offer it, you know, like NextEra, uh, is one exception to that. I mean, I know the complication with FPL, but it’s kind of interesting that that’s a big U.S. player in the utility space. We, we broadly called utilities. Utilities well, there are many different kinds of companies, but they took a decision to do solar and storage because they got the economics that were unimpeachable as it were, but they didn’t do distributed or rooftop because I believe the, the morass of regulatory red type and permitting problems and soft costs meant that in the U.S. while you could pursue a solar led strategy that become dominant as NextEra it has, and the stock valuations and such that couldn’t do it off the ground.

And so we’ve just got to fix that. And solar app is a great initiative as an example of fixing the soft cost piece and could be an answer to your second question. What do we need to do? We need to just streamline and get out of our own way. To your very good point that we sometimes have a battle with ourselves in the states, but otherwise I really don’t understand why the U S utilities aren’t doing what, you know, the Origins of Australia or the, the NGS of Europe are doing, which is recognizing this transition is a foot and trying at least to move with the times. In, in the case of Sungevity, the company was acquired in Europe, out of the administration in the states that you’ve probably read about, after I left a couple of years later, but in Europe, Sungevity is the largest rooftop solar company it’s owned by OMG it’s big in the Netherlands and Benelux and elsewhere.

And so, you know, some utilities do decide to go down this path and try and work it out. American ones, largely haven’t. I think the CCA movement as a procurement force in California is going to change that John and, and really mean behind the meter assets and DER’s and rooftop solar will become a big, a much bigger piece of the California scene, which has slowed down. You know, it was obviously an early leader in the market, but California needs to catch up again to the pace of change that’s happening. And I think the CCAs will drive that, the community choice aggregators that is, which I’m sure you at ILSR are very fond of. Um, what do we need to do in the states? You know, like so many things, to support entrepreneurs. I mean, truth is, this is sort of a game we led and pioneered as, as you know, like so much of the jargon of Silicon valley and sand hill road is sort of penetrated consciousness of the globe about what makes a startup success story. And yet, you know, in many ways we’ve actually lost our mojo on it. And I have a whole rap about this, but I don’t know how much you want me to go into sort of generic startup stuff rather than sort of energy startup stuff.

John Farrell:

Give us a little flavor. I think it’s interesting to understand.

Danny Kennedy:

I’m trying to make it relevant in, in the energy transition audience that you have. The, you know, think about batteries, for example, which is, uh, a technology set that is critical to the electrification of everything. Obviously both energy storage on the grid to balance and do all the things that we, you know, we need to provide the cover when the wind isn’t blowing and the sun’s not shining. And then it’s obviously the path on transportation and mobility services. We’re very good at batteries in America, at least at innovating them, as you probably know, with a bit of UK help, we pioneered the technology just like we did with PD for lithium-ion chemistries that became first commercialized by a Japanese company, Sony in the Walkman, and then has spread to other personal electronics and scaled with those over the course of the few decades to the noughties when they will wire together to be made for the first efforts at electrification vehicles, um, because the energy density of lithium iron chemistry, and most of that manufacturing has now shipped off shore to Korea, China, and other Asian markets. So, you know, American IP licensed to Asian players built out there now, innovated there because the co-location that happens when you manufacture things at scale with R&D, you get a really positive synergy and start to do new things. And, you know, anyone that thinks China is not innovating around battery technologies and same like the things BYD and cattle, and these companies are doing, the money they’re spending on R&D and the way they’re advancing battery technology is awesome. And something we should be grateful for because it makes EVs more possible and better and electrification of everything more possible and climate solutions more possible.

But back to the kind of question in the U.S. if we want to get back in that rice, which we lost four years on with Trump, we need a whole of nation effort. You know, some people call it a war footing of a client. The jargon I was talking about earlier, Silicon Valley, if you think about the very concept of Silicon Valley, what was Silicon Valley? It was an effort by the United States as a polity to beat the Russians at missiles. People don’t remember this history, but in the fifties and sixties, we were worried about missile technology and then being better at it. And the critical factor to that was microchips to control them. And so we flooded a field south of a university called Stanford in California, where a lot of high-tech brains were based, with money from the department of defense. And we replaced orange trees with factories where Fairchild and its children made semiconductors. And that was what Silicon valley was. And it was literally dozens of years of deep spending by DOD, DOC and others on technologies needed to win the missile tech and ICT tech race that resulted in the consolidation of Fairchild, the children into Sun Microsystems and seven other Intel’s and others.

And then the next generation of things that came out of that, which we know today, the web companies, the apples, the Facebooks, the Googles, whatever, all huge value creation story, but all entirely indebted to literally the expenditure of public funds over a long haul period to innovate and incubate entrepreneurs to deliver that massive transition. That was what Silicon valley was. I mean, there’s a great book about this, if you’re ever interested in it, called the entrepreneurial state, in which an economy is called Mariana Mazzucato round trips, the economics on that and points out how terrible things later on like apple taking all of these innovations, touch screen, GPS, Siri, voice control, all that stuff was military grade technology, initially bundles that, added a nice form factor, calls it an iPhone, brands that, sells it, locates their tax entity taxable company in Ireland to avoid repaying the public purse that gave them all the fruits of that labor to actually productize.

So we’ve also lost our way in terms of how we plow the money back in and reap the benefits of it as a society. In the States, with batteries, to go back to the energy transition case, we have the opportunity to be the world’s leader in batteries, advanced manufacturing of lithium-ion batteries, and next gen batteries. We even have the raw materials at a scale that most other countries don’t have it. And the carbon footprint on a domestic supply chain building batteries from lithium derived in the United States deployed in fleets of vehicles and grids across the United States would be about 10x better than the carbon footprint of a supply chain. That’s global. What we need to do to build an advanced battery manufacturing ecosystem. A lithium valley is what I call it, instead of a Silicon Valley, is lots of public R&D and spend and supports and strategies to ensure that the best and brightest brains are deployed to the task and have the entrepreneurial support and the venture funding and all the rest of it that created Silicon Valley in that story that we just did to do the next decades of development of the advents battery space. It should be in California as well. Just to finish the story. We have the lithium ELO, the Salton sea, it’s in an aquifer that bubbles up off the San Andreas fault, the dissolves salts out of the rocks with the hot water, that water is already produced to the surface for geothermal power. It’s a big chunk of the geothermal carve-out in the RPS for California. It could be much bigger and yet fully renewable. And as we extract the steam from it on the surface, we could also be extracting the salts from it. And that lithium supply could then go into an advanced manufacturing vertically integrated supply chain in which American innovators and businesses could be building those batteries rather than importing them from Asia. I’m not just talking about one Gigafactory. I mean, it’s cool that we got one of those and we’re building a couple more, I’m talking about the 60 that are being built in China, the dozen that a building built in Europe, we need to compete at a scale requisite to the challenge of electrification of everything that we think we need and pairing solar on every home with a backup behind the meter in the house. That’s a different order of magnitude, and we need to do that domestically. And, and I’ve given you a long ramble, but hopefully a flavor of what I think America needs a different attitude, whatever we call it in our political language, Green New Deal, I don’t care. It’s industrial policy is what I know it as. And it needs to understand that the private sector is backed by the public sector and the public sectors goals. And society’s goals can be in part created by proactive private sector players aligned and supported in those interests. Make sense?

John Farrell:

Yeah. I just, I love the way that you describe it in terms of this notion of industrial policy, because it, it feels to me that in the same way that we, as you said, that the incumbents don’t originate innovation, that it’s sort of a missing piece of our policy right now is by failing to invest public dollars and have a good industrial policy. We’re saying essentially that we are going to seed that ground to the companies that already occupied that space, who are not innovators, who are not interested in changing the way that they do things. And just has very interesting connections for me to some other work that ISR is doing around antitrust and anti-monopoly and concentration of power, the idea here being that we’re not going to get that ferment of new ideas and the growth of the new industries if the incumbents are allowed too much power to retain control over the system that we have.

Danny Kennedy:

A hundred percent to that. And, and we have, unfortunately in the U.S. got fat and happy or something, complacent about what a dynamic economy looks like. And it is then, part of it is all this rhetoric you hear in DC about, you know, the, the lazy public sector. That’s nonsense, the public sector has delivered for America time and again. I mean, the great example we often talk about are the arsenals of democracy and the war effort of the second world war, but many other cases, including the most recent with COVID has, has been a partnership of these things and, and state governments with their policies and politics can dynamize markets. And they’re not just needed to be gotten out of the way or to crowd in some good actors or crowd out bad actors. They’ve gotta be involved in, in the mix of that. And so I’m glad you’re doing that work. And, and I’m in that we need more of that.

John Farrell:

There’s a question I wanted to ask you about equity that I hadn’t thought about before, but it intersects a little bit with a new book by Heather McGhee called The Sum of Us. I listened to an interview that she did. And one of the things that she ties together here that I think will lead into this question well, is how the distrust of the public sector in the United States actually comes out of like a backlash to the civil rights movement. That folks felt like if we’re going to use the public sector to help black and brown folks, then, then we shouldn’t invest in the public sector. And so I guess maybe to tie that into this question, I wanted to tie it into a question to you in a different way, which is how do you see the entrepreneurial work that you do addressing equity? How are entrepreneurs thinking about racial equity, which I know is still present in the conversations around policy in the United States, right?

Danny Kennedy:

Yeah. Thank you for raising that and elevating that question. Um, because I think that’s critical and that book is very powerful, but Sum of Us have those work, I think, which basically shows that we in America can’t have nice things because we’re racist. Fundamentally. That was sort of my takeaway if you read it. And, and, you know, she does that in chapter and verse through the book. I mean, the story of pools in small towns, did you catch that in the podcast? You listen to the example of, rather than have a public amenity in small towns that is going to be desegregated, we’re going to kill swimming pools and harm all sectors of the economy of the community because we’re racist. And so we really have to tackle this fundamental problem in American life.

And to your question, how does this relate to this moment of transition in the commanding heights of the economy, which is the energy sector, both the power system, uh, which ties very closely to the figurative palace system. Electricity has long been connected to all the oligarchs and kleptocrats and power holders and the establishment, the United States, and then mobility services and transport and stuff going into the 21st century, such big, big sectors of the economy. That it’s, it’s a huge matter for the uplift of all and something we’re very focused on it, New Energy Nexus, like it’s our mission, I didn’t say this up top, but I should have, to support diverse entrepreneurs, to drive innovation, and to build equity into the global pain economy as advisors. So like we have a two-fold statement of purpose. One is driving innovation. Yes, we’ve been talking about that and how you need to do that. But the other is to, to build equity, to, to support people – by equity, we don’t mean shareholder value. We mean just, and, and, um, equitable outcomes for all. And, and firmly believe this can be the case that this is a chance to get it right, because so much of the renewable rooftop revolution, the battery businesses, we talked about these mobility as a service businesses, that are enabled by the electrification of everything and transport fleets so much that can be locally owned and controlled, more democratically managed, decentralized in terms of ownership, through local finance and local banks and the like, credit unions. All these can be players in community solar, which I know you’ve championed that distributed architecture, which is innately where the technology wants to go rather than the central station model of the fossil fuel sector, lends itself to a better, more distributed, decentralized, democratized, social ownership management model. So we have an opportunity here, John, to, to uplift everyone and engage the people who were left behind by fossil fuels. First and foremost, the indigenous communities that were f***** over for centuries for the extraction of coal, oil, gas, you know, and, and have been so harmed by it for so long, the front line communities of color, that where we locate the refineries and the heavy industries and all the rest of it from Louisiana’s toxic cancer alley to, to Richmond, California, to go back to the case we talked about earlier, all those folks can be involved in this exercise is the good news.

What we have to do though, is change our stripes in terms of the entrepreneurship support services we provide so that we bring them into and to the table. You know, you’ve heard the tales that 94% of venture capital goes to white men, how absurd and obscene is that? Venture capitalists are a clearly idiots because they’re missing an enormous opportunity. More than half the human population and their wisdom and genius and inventiveness, but also, you know, that structural racism, that’s a problem as well as gender and equity. So let’s fix that. Let’s make sure that we’re looking at and funding and finding and honing the craft of entrepreneurs of color and women and others. And what we will find as we do that, as Shaquille O’Neil has just recently announced and many other diversity focused funds is that there’s, uh, an upside, which is greater than normal. You know, when you, when you’re looking beyond the, the white guys coming out at Cal and Stanford, you suddenly find new innovation and, and better alpha as they call it. So we’ve got to redesign our systems of innovation support. We do that through outreach on [inaudible], you know, we’ve, we’ve strived really hard. We’ve, we’ve hit the 40% mark in terms of diverse candidates for the hundred companies. Also we’ve put through the program so far over the last four years, as I mentioned, we have similar ecosystems of support, which we’re building in Indonesia, Thailand, Vietnam, Uganda, India. We’ve got a women in energy program we’re launching in India this year, exactly focused on this because you know, the, the giant diversity scenario is that the innovation is not going to come from the United States for how we fix Nigeria’s diesel dependency. It’s gonna come from Nigeria. You know, the disk arms in India are not going to be fixed by an Australian entrepreneur telling state-owned enterprises in India, what to do. It’s going to be fixed by an Indian entrepreneur, right? And she’s just coming through one of our programs now, is my hope, it’s called electron vibe. And you can check it out at electronvibe.com. But yeah, you know, we’ve gotta be very intentional about this and redress the racism that something like this, some of us articulate so well globally, as well as nationally, you know, decenter our kind of efforts, focus on the folk that are hurt first. And when I was by climate, but also who, because of that adversity or coming up with the solutions at a, uh, a speed and scale that’s commensurate with the task.

John Farrell:

That I ask you, uh, you know, you’ve recently had a milestone birthday. Congratulations. What should folks be looking for from Danny Kennedy in the next couple of years?

Danny Kennedy:

Couple of years? Um, I dunno. I mean, I figure I’ve, I’ve just started my second half is the gag that I’m running with. I’m a rugby guy than I with many of you listeners will be, but the second half starts and the first couple of years with some high-impact play that you try to change the dynamic of whatever the first half was. So watch this space. There might be some surprises, some up and unders, some new kicks… more of the same though, John, I mean, you know, this is my life’s work and our society’s work. It will be what the history books, seven generations from now write about whether we stood up to the challenge of the early 21st century to make the transition that the technology made possible. And whether we got out of our own way in the case of America and got on the bandwagon that the rest of the world’s moving on, and I’m going to do my damnedest to make that happen.

So more of this, I mean, I will articulate it in a number. We seek to support a hundred thousand diverse entrepreneurs through New Energy Nexus’s efforts over the next decade, we have a path to do that. It sounds insane. We did 200 last year. We’re doing 500 this year, but you and I both have lived through exponential curves. We know what that’s like, and we think we can do it. So if your listeners are interested, they can get involved New Energy Nexus at our website, sign up for our newsletter, probably best if you’re really active in the space policy-wise or as an entrepreneur or a tinkerer, innovator, inventor, whatever, go to our slack community. There’s about 3,000 peers in this space, kind of collaborating, coming up with ideas, merging, acquiring, joining up, getting on jobs, New Energy Nexus networks. Slack is a great space. So you’ll find me there too. And, um, yeah, I’m not good at saying what I’m going to do, John, but more of the same, I guess, is the answer.

John Farrell:

Sounds like a pretty good project, frankly. So, Danny Kennedy, thank you so much for joining Local Energy Rules and for all the work that you’re doing to support the rooftop revolution and entrepreneurs of all stripes.

Danny Kennedy:

Thank you, John. Thanks for your work too.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with New Energy Nexus Chief Energy Officer and distributed solar profit Danny Kennedy. On the show page, look for links to the New Energy Nexus and its slack channel. Also to Heather McGee’s The Sum of Us and other items that we discussed. On ILSR’s website, you can find our annual States of Distributed Solar report to see how rooftop solar fairs in all 50 states, as well as a series of rooftop revolution reports on the potential for distributed solar to meet our electricity needs. 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.