Leah Stokes and Tim Hade on Climate Resilience in California — Episode 217 of Local Energy Rules

Tim Hade:

High level, long-term, the reason distributed energy is going to play such an outsized role in our energy economy moving forward is because climate change is very, very, very real and it’s happening everywhere. And distributed energy resources are a better way to build a more reliable, resilient, affordable, sustainable, and just grid over time than the way we’ve traditionally built electricity infrastructure.

John Farrell:

The Goleta Load Pocket is in an area of southern Santa Barbara County in California that is served by a single set of transmission lines in an area highly vulnerable to wildfires. In 2017, the Thomas Fire, California’s largest to date, came near to severing this community’s only connection to the wider grid. To run a second set of power lines into the community would require overcoming massive financial and geographical hurdles. So locals have instead put their energy into a combination virtual power plant and community microgrid that will provide backup power to commercial industrial customers and provide community resilience centers that could assist residents should the vulnerable power line go dark. Joining me in April, 2024 to discuss the project were Tim Hade, Co-founder and Chief Development Officer at Scale Microgrids, and Leah Stokes, who is the Anton Vonk Associate Professor of Environmental Politics in the Department of Political Science at UC Santa Barbara, and a Radcliffe Fellow at Harvard University. You’ve likely also heard of Leah’s book, Short Circuiting Policy, which examines the role that utilities have played in promoting climate denial and rolling back clean energy laws and which I highly recommend. We had a great discussion of how this virtual power plant project and others like it can address the challenges of resilience, clean energy, and affordability. I’m John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system.

John Farrell:

Tim, I want to start with you. How did you get into this work? What motivated you to work on climate issues or even virtual power plants?

Tim Hade:

Yeah, so I guess in a bit of a roundabout way, I mean my first exposure to distributed energy was when I was in the military. I was in the military for 10 years, and when I was in the military, one of the worst jobs was driving fuel convoys across Iraq and Afghanistan to forward operating bases. And so for those of you who don’t remember this, we used to have a lot of forward operating bases in Iraq and Afghanistan. They all ran on diesel generators. Somebody had to drive diesel fuel from the main base to those forward operating bases, and that wasn’t that fun experience. And so this is back in 2006, 2007, the Department of Defense started looking into, hey, is there a way to do this with solar panels and batteries? I got really interested in that, and that was kind of my first foray in the distributed energy.

And then look, I think the climate thing built on top of that, when I came out of the military, that was when Admiral Mike Mullen was the chairman, the joint chiefs of staff. They had identified climate change as the number one national security threat over the long term, which by the way, it remains in the DOD’s assessment. And so understanding that the technology was getting there to be able to really solve this problem, and it was a really massive problem, really inspired me to get involved. And that happened in 2011 is when I jumped into this industry and I’ve been doing it ever since.

John Farrell:

Awesome. Leah, how about you? How did you get into climate change and then become a world famous author about the politics of climate change?

Leah Stokes:

I don’t think selling an academic book makes you a world famous author, but maybe amongst your niche audience —

Tim Hade:

She’s definitely world famous.

Leah Stokes:

Maybe amongst your niche audience I’m world famous. For an academic book, my book did do very well. How did I get into climate change? Well, when I was an undergrad, I started an energy behavior change campaign. I was studying psychology and environment and Buddhism actually. And we tried to get people to sort of turn off the lights, take the stairs, shut down their computers, save energy, and hilariously enough, it was called rewire, this campaign that we ran, which is funny because now I work at Rewiring America, so it’s all sort of the same thing decades later. So yeah, I just got really concerned about climate change. Around 2005, hurricane Katrina happened. Then in the next year, an Inconvenient Truth, the Al Gore documentary came out and pretty much for 20 years, this is what I’ve been doing, and I just feel like you just get deeper and deeper into the issue over time. I think I understand climate change a lot more personally now. Santa Barbara really has been on the front lines of climate change in many ways, but it’s a challenging issue to work on because it can feel really hard sometimes, but we are beginning to make progress. Hallelujah.

John Farrell:

So could you talk Leah really quick about to set the stage for this conversation about the microgrid slash virtual power plant project in Santa Barbara. What is going on with electric utilities generally right now in terms of the issues they’re facing from climate and the pressures we’re facing to electrify things?

Leah Stokes:

Yeah, electric utilities have not been great allies over the long haul for climate action. I actually did this academic paper looking at American electric utilities role in climate denial, doubt, and delay. And we went back decades, I think our first document went back to the 1960s and looked at what were electric utilities saying about climate change, sort of like how Naomi Oreskes and Geoffrey Supran have done that for Exxon and other fossil fuel companies. We did it for electric utilities, and what we found is that electric utilities were very central to pushing climate denial. That includes organizations like the Edison Electric Institute, even the Epri, their sort of research partner. And there’s lots of great people who work at those organizations today, but I think that the electric utility industry really has to reckon with their role in climate denial and begin to rectify that by actually building clean energy at the pace and scale that’s necessary.

And the good news is that if they do that, it’s actually cheaper than keeping open coal plants or building new gas plants. And a lot of electric utilities are starting to see the writing on the wall. They’re starting to recognize that they want to be part of the solution, not the problem. And that’s awesome. And then there’s other utilities like Duke and Southern and the Tennessee Valley Authority that are proposing massive amounts of new gas plants and that’s not great. So we have a bit of variation in the electric utility sector. And for the companies that are beginning to move ahead, why are they doing that? In part because they start to realize that actually turning towards clean electricity is an opportunity for their sector that they can have load growth for the first time really in decades. And that’s through electrification. If we use electricity to run our homes and our cars and even parts of heavy industry, what it means is that we’re not using fossil fuels, right?

We’re not putting oil in our cars or gas in our furnaces. We’re using a heat pump instead. And so the electric utility industry actually has a huge opportunity. We could see a doubling of the amount of electricity that we have in this country. Sometimes people think it could be even bigger than that. There’s a lot of uncertainty depending on the efficiency of various equipment. So I think that that visionary leadership is what we need to see out of the electric utility industry, A vision that hey, we can be not only part of the solution, but the core of the solution because clean electricity plus electrification can actually solve about three quarters of our carbon pollution in this country. That’s the reality. So electric utilities need to be at the heart of this solution in many ways, and just every day that they don’t wake up to that reality is a day squandered not just for our planet, but really for their industry as well.

John Farrell:

Leah, I’m curious, how optimistic do you feel that utilities are going to wake up to this opportunity? Because I have to confess, of all the things that I’m optimistic about our future because of the technology change, because of the innovation that I’m seeing by small businesses, entrepreneurs in this electricity space, I look at how utilities behave and I’m like, man, they are not getting there.

Leah Stokes:

Yeah, I wrote about this a lot in my book, short Circuiting Policy, which for listeners of your podcast is actually probably interesting. It’s a nerdy academic book, but it goes into the history of the electric utility sector. And the reality is these are not the most cutting edge companies. They’re really old companies. They’re often more than a hundred years old. They’re monopoly corporations who have guaranteed profits. They tend to put more money into capturing their regulators, things like public utility commissions, than they put into innovation, which is a bummer. But that doesn’t mean that everybody who works in the utility industry isn’t talented. There’s lots of really smart good people who want to move us towards the clean energy future, who feel an obligation to their children and grandchildren and see the path forward. And I think there’s more and more people stepping up within the industry to do that.

It’s certainly not everybody, and sometimes the incentives are just really bad. I think about the Tennessee Valley Authority right now. The fact is that the executives in that organization make more money if they build a new gas plant, then if they build, for example, solar battery storage, which is cheaper, they would save money for their customers if they built the cheaper, cleaner thing, but they wouldn’t make as much money. So we also have some incentive alignment issues, and it’s actually pretty common across the industry, which is that a lot of utilities know how to build a gas plant, but they don’t know how to build as well the stuff that Tim’s company builds, these virtual power plants, the solar storage microgrids. And so they don’t necessarily own those assets at the same rate, whether that’s wind energy or solar. And when they don’t own it, it’s harder for them to profit off of it. So we have to really think about what are the incentives of these companies and how do we get their incentives in line with what the planet needs, with what rate payers need? And that’s really the work of, for example, the federal government and the TVA board in the case of the Tennessee Valley Authority. And it’s the case of public utility commissions for companies like Duke and Southern. So it’s a definitely thorny problem, but we’re in a better place today than when I was researching and writing my book a decade ago.

John Farrell:

That’s great. I may want to come back to that a little bit in the context of this particular project. Let’s go right into this idea about virtual power plants and about a particular community, Santa Barbara that has been both vulnerable to changes brought by climate change as well as looking for a cleaner, more affordable energy future. So we have this thing called the Goleta Load Pocket. What is it about Santa Barbara and about this area that makes it vulnerable and how does that tie in with this broader conversation about climate and clean energy?

Tim Hade:

Yeah, so look, I think building on what Leah just said, right, the great news, and ultimately the reason I’m optimistic about our ability to address the climate crisis, is that we know what we have to do. And so Leah just articulately explained that the answer is electrify everything. I think now as a society, for the most part, we’ve moved on from the what to do to the how. And the question now is how do we figure out how to build electrical infrastructure that provides sustainable, affordable, reliable, resilient, and just power to people who need it throughout the country? And how do we do that in an era where we’re probably going to double, maybe triple load? And it’s a really challenging technical problem, but I think we’re making a ton of progress. And so my particular angle on this is there’s now a mountain of evidence that suggests the cheapest way that we can add capacity to the grid is through virtual power plants.

Basically thinking about virtual power plants, a suite of technologies that sit at the distribution system level that essentially allow the grid to operate with demand dexterity. So you can not only control how much load supply is on the grid, but you can also control how much demand is on the grid. And if you do that, you can use our existing infrastructure in a much, much, much more efficient way. So you can essentially double or triple the amount of electricity we’re using as a society without having to invest an insane amount of money in upgrading traditional grid infrastructure. And so what I set out to do kind of once I realized this a few years ago was I wanted to try to build the best virtual power plant that’s ever been built. That was kind of my north star and what I set out to do.

And at the time I was living in Denver, Colorado. And so I started looking at communities around the country and I really evaluated ’em on four criteria. So the first one was I wanted to find a community that was on the front lines of climate change where the community itself had experienced the climate crisis firsthand and understood that this wasn’t something that was going to go away. This wasn’t something that was a once in a hundred year type thing. It was something that was continuing to happen. And that’s certainly true in Santa Barbara County, whether it’s wildfires or debris flow or more extreme storms, we experience all of it on a regular basis, and it’s something that’s really, I think dinner table conversation for a lot of folks in Santa Barbara County. So the first criteria was finding a community that’s on the front lines of climate change.

The second thing was we were looking for the right utility. And when I say the right utility, it was kind of a combination of two things. The first is we wanted to find a utility where rates were really high. Obviously for anyone who’s doing distributed energy work, your ability to deliver economic value to your customer is dependent on utility rates. And the higher those utility rates are, the easier it is to develop a good economic outcome for your customer. But in addition to having high utility rates, we’re also looking for utilities that were forward thinking. And I think in southern Santa Barbara County, we’re served by Southern California Edison. Again, we can spend a lot of time talking about all the flaws of the regulated utility business model and natural monopolies and all those types of things. But in the ecosystem of utilities, Southern California Edison is definitely a leader, definitely on the more progressive end of the spectrum, is definitely doing more innovative stuff than a lot of their peer companies.

So right utility, we wanted to find a place that has a high resilience challenge. And the really unique thing about Santa Barbara, because there are a lot of places in California that are served by SEE and on the front lines of climate change, the really unique thing about Santa Barbara is it’s located on an area of the grid called the Goleta Load Pocket, which essentially means there’s one set of transmission lines that serve 220,000 people, that one set of transmission lines runs through 40 miles of high threat wildfire district on the backside of a mountain. If that transmission line fails, Southern Santa Barbara County doesn’t have power. And so we definitely have a unique resilience challenge in Santa Barbara County. And then look, I think the last thing about this was knowing this was going to take years, we had to find a place that my wife wanted to live. Santa Barbara checked all those boxes and moved out here a few years ago and started to work on this concept. And one of the huge benefits of being in Santa Barbara County is it’s the home of UCSB, which is home to some of the smartest environmental voices in the world, including Dr. Stokes here.

Leah Stokes:

The problem with working with Tim is that he praises me too much. It gets awkward.

Tim Hade:

It’s impossible to do, but there’s a really, really good ecosystem of people who are smart and committed to addressing the climate crisis. And I think you kind of put those four things together and we think we have the ingredients to make something really special and then the work begins.

John Farrell:

This is great. I have to stay as an aside, Leah, for someone who says to an audience of mostly energy nerds that your book is probably interesting, I think it’s good that somebody’s out here boosting you up a little bit.

Leah Stokes:

I have a hype man who follow me around. His name is Tim Hade. It gets awkward.

Tim Hade:

I’m very good at it.

John Farrell:

So with this project, thanks first of all for the overview of how you chose this area and highlighted both the issues of resilience and cost and whatnot, and the partnership opportunity with the utility. A utility might traditionally try to solve this problem by building another set of transmission lines to give some redundancy to the community that’s not really economically viable. In this case, you’re on a mountain or you’re on the ocean, you don’t have a lot of places that you could put power lines, and it would obviously be incredibly expensive and time consuming. So doing something like this, trying to solve the problem locally is a great way to do it. So could you talk about how this virtual power plant, maybe give a little bit more color to what things are part of a virtual power plant? Is it solar, is it batteries, is it other things? And how does it address this vulnerability that’s presented by that single point of failure on a transmission?

Tim Hade:

Yeah, for sure. So look, there are multiple phases to this project. The first phase of this project is loosely put rooftop solar and batteries everywhere we could possibly put them. I think you identified the crux of the technical issue very succinctly, which is we need more power and there’s not a good way to get it. And so in Santa Barbara County, it is very, very, very difficult to do anything in nature, any greenfield sites. So the opportunity to build community solar or utility scale solar plants or offshore wind or any of that kind of stuff is very, very limited. We’re working on sort of improving the permitting process and trying to get more of that stuff done. But the easiest place to put generation is on our rooftops and our parking lots. And with the technology advancements that have come in both the solar space and the storage space over the last decade, we think there’s a very, very, very viable pathway to making about 50% of the power that we consume inside Santa Barbara County locally on our rooftops and in our parking lots.

And so that’s the first phase of this thing. Building on top of that, the next phase of this is really the demand side of the equation. So how do we think about getting as many smart thermostats as we possibly can? How do we figure out how to get advanced building management systems into commercial and industrial facilities? How do we figure out how to network that all together and sort of make sure that the generation and the demand side is working well together? This whole process is going to be a five to 10 year journey. We’re in year two of it right now, and there’s a lot of moving parts, but I think for most people who are thinking about this in terms of where’s the right starting place, to me the most obvious place to start is with distributed solar and storage, which I think in many areas of the country has a very compelling value proposition today if it’s executed properly. So that’s where we’re starting. That also happens to be what I know how to do best. And so I think the combination of those two factors kind of led us in that direction is like that’s a good phase one, and then we’re going to build on top of it from there.

Leah Stokes:

And just to add to what Tim was saying, these technologies exist today. My house is already doing this, so I have a solar array, I have a battery, and then I have switch gear, which means that if the power goes out, I can basically island and still have power in my home. And increasingly, companies like Tesla, which have these batteries all over the place, you can see this in Texas, it’s also starting in California. They are aggregating people with batteries at their home to basically respond when the grid has shortages over the last few weeks in August in California, we’ve had these hours between 6:00 PM and 8:00 PM when people are home, they’re using a bunch of energy, and the solar has gone offline because it’s getting dark at night. And these are opportunities where people can basically supply electricity to the grid from their battery and get compensated a little bit for that.

And so what we’re doing is that at a much bigger scale, and of course the inflation reduction act included for the first time incentives, not just to get 30% off your solar panels, but also off the switch gear and the batteries. And so that means that we can actually start to make the economics work in a much better way. I wish we’d gotten more, for example, for heat pumps because heat pumps, as Tim was saying, can do some of the demand side stuff too, right? Where there’s, Ohm Connect, for example, is doing a project right now in Santa Barbara where my smart heat pump water heater can turn off during those peak hours too as sort of like a demand shaving exercise. So we needed more money for that. You only get $2,000 off those machines. But the point is that we are starting to actually have incentives in place that make it make sense to deploy these technologies.

And what Tim’s company scale is so good at doing is doing it at scale, hence the brand, hence the title. So doing it in really big ways, not just like my little tiny house, which offsets about half of my power, but parking lots, large scale rooftops. And ideally what we’d also like to be doing is partnering with governments and environmental justice groups and community groups to making sure that this isn’t just happening at big commercial facilities, but also happening in places like libraries and community centers so that there are cooling centers, for example, so that there are resilience hubs if the power goes out. Because we saw what almost happened in 2017 where with the Thomas fire where we almost lost that entire line, that would’ve been devastating for our community, especially for low income people. So how can we get this at scale, not just for companies, but also for everyday people in low income communities.

John Farrell:

I just want to note for the record, Tim, that she praised your company, and I don’t think you seemed at all embarrassed about it. So Leah, if you could just use Tim as a model here, it’s okay to accept praise for the things you think are great.

Leah Stokes:

I’m actually really good at accepting praise, just not from Tim because he does it so much. I don’t think you understand. There was this profile written about me that Tina Smith wrote, the Senator, and Tim just likes to read it all the time. And I love Senator Smith, treasure to the Earth, and anytime her words can be spoken is a great day, but Tim just follows me around reading this out loud to me. So it’s a Tim specific problem, not a me specific problem.

John Farrell:

Fair enough.

Tim Hade:

I mean, just to clarify, that particular essay was written in Time Magazine’s Next 100 Most Important People in the World Issue. So I think there are a lot of people who overly praise Leah, but I am definitely one of ’em and I’m a proud fan.

John Farrell:

All right. Well, we can link to that on the show page just in case people wanted to make sure they can find it.

Leah Stokes:

Great. Just blast that from the speakers. Absolutely.

Tim Hade:

It’s very well said.

Leah Stokes:

I’m Canadian, right? This makes us uncomfortable. We’re basically like the Minnesota of another country, right?

John Farrell:

Oh, I’m from Minnesota. I feel a little bit embarrassed on your behalf, right? But it’s also really fun.

Leah Stokes:

Right? Thank you, John, please. Exactly.

John Farrell:

We’re going to take a short break. When we come back, I ask my guests about the potential savings for customers from the clean energy investments being made as part of the virtual power plant. We discuss flexible demand with electrification and we talk about how this kind of project can happen when the utility has a monopoly over electricity distribution. You are listening to a Local Energy Rules podcast with Leah Stokes and Tim Hade about the virtual power plant and community microgrids aimed at serving Santa Barbara County in Southern California.

Hey, thanks for listening to Local Energy Rules. We’re so glad you’re here. If you like what you’ve heard, please help other folks find us by giving the show a rating and review on Apple Podcasts or Spotify, five stars if you think we’ve earned it. As a bonus, I’ll gladly read your review aloud on the show if it includes an energy related joke or pun. Now, back to the program.

John Farrell:

Leah, you did a nice job in that conversation already talking about how this project has both a justice component to it and making sure that it is bringing value to folks that are impacted. And Tim, you also did a nice job, I think kind of highlighting the answer to another question I was anticipating asking about how it’s not just replacing the transmission line, well, that it’s not replacing the transmission line, it’s not like building a second set of transmission lines, but it actually serves a lot of different purposes as well that it is able to adjust, like you said, the supply and the demand side with the batteries that can provide resilience when there are outages that might come from somewhere else entirely on the grid or that could be local, and that you have this opportunity to generate a lot of energy locally as well. Is there more that you can say about will this save people money? For example, I think you were saying one of the goals in picking this particular location for this project was that high utility rates might make it an opportunity for the folks who are hosting the solar to save money. And is there more you want to say about how low income folks in particular are able to participate either in a community sense or individually?

Tim Hade:

Yeah, absolutely. So look, I think we’ve defined success in terms of the electrical system we want to build as being measured by sort of five components. We need to produce electricity that’s affordable, reliable, resilient, sustainable, and just. And look, I think the thing that we’ve been struggling with the most over the past, I don’t know, 12 months that we’ve been working on this, is the just component. Look for those of you who are listeners to this podcast or familiar with my company, we’re really good at building these systems for Fortune 500 companies and rich people. We have that down. We understand how to go in, contract, bankability, all that kind of stuff. We can definitely do that. Now, the problem we have in Santa Barbara County is that in the event of a transmission system failure, the people who are going to be most affected are people in low income and disadvantaged communities.

Those are primarily folks that rent homes. They don’t own homes. There’s an awesome program in Santa Barbara that our local CCA is running called the Santa Barbara Home Solar program, which is trying to address getting distributed energy to some of those communities. But the penetration rate’s still really, really small. And so we came up with this idea that we’re calling community resilience hubs. This has been an idea that’s been floated in Santa Barbara County for some time. But the basic idea is that you take public infrastructure like a library or school and you turn it into a microgrid. And during a transmission system outage, that microgrid can then provide services to the entire community. People can go charge their phones, their laptops, medical devices, things like that. It won’t be a perfect solution, but it’ll definitely be better than having no power.

Figuring out how to build community resilience hubs and finance them in a way that makes sense for everyone is really challenging. The biggest issue is that right now today, solar storage microgrids, but microgrids more broadly work really, really well for certain kinds of load profiles. So I dunno, the easiest example is like a data center. So a data center uses a ton of power and it’s got a flat 24/7 load. And so you give me that load profile and I can go in and I can figure out how to put a suite of distributed energy resources in there that are almost certainly going to save you money. That’s pretty easy to do, but a school doesn’t have that load profile. A school has a load profile that’s one place from 9:00 AM to 3:00 PM and a different place from 3:00 PM to 9:00 PM and there’s seasonality impacts and all this type of stuff. And so traditionally schools haven’t been great candidates for microgrids and libraries haven’t been great candidates for microgrids.

And so how do we bridge that gap? And I think the good news about this is we’ve built a coalition of folks, and that’s folks in the nonprofit sector, local government officials at both the city and the county level. We’ve gotten great support from the state of California and the CEC and a lot of help from DOE and the federal government resources. And as Leah mentioned, none of this would be possible without the IRA, specifically the adders on the IRA. So in Santa Barbara County, we benefit from the energy community, 10% adder, and we’re working really hard to make sure we qualify for domestic content as well. And so you stack those on top of it, and the federal government’s paying for 50% of these projects, and yet still the economics are challenging. And so ultimately, I think that’s the key thing that we’re working on right now.

I think the good news is that we have the right people in the room. The hard part is everyone kind of speaks a different language. And so the nonprofits that we’re working with, they have their own policies and procedures. And the government entities that we’re working with, they have their own policies and procedures. And it goes without saying, Scale has some of their own quirks as well. And so I think right now we’ve got everyone in the room, how do we get everyone working together to make this happen? The intent is there, but we haven’t really figured out the how yet. And I think that’s going to be the big challenge for us over the next 12 months.

Leah Stokes:

But I think Tim is underplaying how much progress we’ve made because for example, there’s a project in partnership with Santa Barbara City College to build one of these community resilience hubs that they put a grant forward for at the state level. And we had, for example, nonprofit community groups sign on to that as well as environmental justice groups provide a letter of support. So we’re really beginning to see a lot of folks step up. And the reality is people want this to happen in our community, whether it’s scale building, a specific project or not, people really want to have more solar and storage. And it’s not just for resilience, it’s also because there are gas plants in Oxnard, in a nearby low income community, largely of Hispanic people that are really paying the price for electricity that we are consuming in Santa Barbara. And so the more that we can build locally solar and storage, the more that those plants don’t need to operate as much and that they will hopefully shut down by the times that they’re supposed to be because they have a timeline right now.

So there’s a lot of benefits for our community and a lot of people who want to make this happen, whether that’s county officials or staff or city folks who are really at the leading edge with the community choice aggregation that we have here, or environmental justice groups or community groups. There’s so many people who want to make this happen. And as Tim has been talking about, it really is about getting the money to work, right? Because it’s a lot easier to pencil it out if you’re just doing a big parking lot or a rooftop and the load is more stable. But when you’re trying to do a community center, it’s a bit harder to figure it out, but it’s so important. And in Santa Barbara, this isn’t really hypothetical. I’ve lived here during the Thomas fire and the mudslides, and people go to, for example, what’s called the Earl Warren Showgrounds.

When we have these horrible climate impacts, that’s an actual disaster center that people use in our county. So people have experienced a of climate impacts firsthand, whether that’s flooding, we had horrible flooding down in the east side or fires, bad air quality related to those fires, the horrible mudslides, which killed over 20 people in our community, often actually low income people again, and people of color, even though it was in a very rich zip code. And so this is really something that a lot of people can get behind. And as Tim did mention, it also saves money. So why does Santa Barbara City College want to do this? Not just because of the resilience, but also because it saves money. And we don’t just want wealthier people like me putting solar and batteries in their home and being able to keep the power on and the air conditioning on – with my heat pump, I should say, not with a normal air conditioner – if the power goes out, we want everybody to have access to that. And that’s a vision that a lot of people can get behind. And so it’s really hard to make the math, math so to speak, but we’re making progress.

John Farrell:

We talked about the economics obviously, in trying to make that work. And you have some kind of interesting configurations of this idea of how do you serve a community that maybe they don’t own the property, you can’t necessarily put the solar and storage directly on their property, so maybe you’re doing a resilience hub, which sort of changes the economics a little bit in terms of how the money flows and how you put the project together. I’m also kind of curious, do you have technical or legal issues that you gratefully have a utility there? You have a community that’s really bought into what you’re trying to do? I presume you’ve come across some things where it’s like, oh, California law says you can’t do this, or wow, this is a real technical challenge trying to connect maybe multiple buildings across the street. Are there things like that that you have had some success with addressing because you have so many different groups working together?

Tim Hade:

So look, I think our basic philosophy is try to use technology solutions that we know work and we know can be permitted, and we know we can be interconnected to solve the problem in the best way possible. So there’s kind of two approaches to how do you build a community microgrid. There’s actual community microgrids where you’re building generation and storage behind the meter, and then you’re using the utility’s distribution system to wheel that power in the event of an outage. I’m really optimistic about that type of setup over the long term. And in California, we have something called the microgrid incentive Program or the MIP, which has provided a lot of money to utilities to study how that can be done effectively. But look, I think realistically there are a lot of technical challenges and there are a lot of like safety issues around building community microgrids that we haven’t quite figured out yet, although we’re getting a lot closer.

I think ultimately when you think about how to pay for these types of projects, when you go to investors, especially project equity investors, they hate regulatory risk and they hate policy risk. And so it’s really, really hard to get a community microgrid paid for in today’s market. And so ultimately, our approach to it is an alternative to a community microgrid is just build a bunch of independent microgrids at strategically sites around the city and the county that only island behind the meter. So our school microgrid will only provide power to the school. Our library microgrid will only provide power to the library. And look, that’s definitely not the academic optimal in terms of the value proposition we can deliver. If we were able to wheel power around the distribution system, that would be a better solution for us than having to work entirely behind the meter.

But look, I think this speaks more broadly to climate action. Today the most important thing is doing something right. And so I think what we’ve tried to do here in Santa Barbara is figure out what can we get done in the next five years? And then we’ve said, okay, that’s not the best possible thing that we could build, but it’s a lot better than what we have today. And so let’s focus on that. And so I think from a development perspective, that’s really been our approach and we’ve tried to avoid most of the gnarly technical issues that you run into around community microgrids to the maximum extent possible. And so again, I think that’s the approach we’ve taken. Other people in other areas are taking slightly different approaches, and I’m rooting for them as well, but this is how we think we’re going to get it done in Santa Barbara County.

John Farrell:

Maybe to wrap up, I’m kind of curious, Tim, you gave a list of I think four key criteria, well, I guess it was five that communities could look for in terms of where’s the opportunity right now to be pursuing this? You’re talking about the cost of electricity, the vulnerability to climate change. There were a couple more, I’ll let you fill in the gap, probably leaving aside where Tim’s wife wants to live. Are there other places in the country that you’re looking around and saying, oh, I do really see an opportunity here where some action could be taken? And I guess the other thing I would just kind of curious about too, casting no aspersions on the individuals that work at utilities, but if we had a different utility model that didn’t require us to restructure incentives or whatnot, do you think that there would be many more places that would sort of check the boxes on that list if there was a lot more open-endedness about front of the meter, behind the meter wheeling power, et cetera?

Tim Hade:

Yeah, so I’ll answer both questions quickly and then I’d love to get Leah’s views on this as well. Look, I think the answer to where, this technology makes sense is loosely everywhere. I think one of the things I would encourage folks to do right, is spend a few hours reading articles about the insurance industry in the United States. And ultimately what you’re seeing in the insurance industry is essentially making the case for distributed energy resources, which is everywhere is experiencing extreme weather, everywhere is dealing with electric reliability issues, everywhere is dealing with disproportionate damage to life and property. And that is the environment in which distributed energy resources are going to thrive high level, long-term. The reason distributed energy is going to play such an outsized role in our energy economy moving forward is because climate change is very, very, very real and it’s happening everywhere.

And distributed energy resources are a better way to build a more reliable, resilient, affordable, sustainable and grid over time than the way we’ve traditionally built electricity infrastructure. And that’s not to say there aren’t going to be a bunch of central utility plants and a bunch of transmission lines and distribution lines, there are, but distributed energy is going to play a much bigger role in the future than it does today. So question one is everywhere. Look, I think world famous author Leah Stokes, her book does a really good job of explaining the issues with the natural monopoly model for utilities. Look, I’ll give you kind of two quick answers. The first is I don’t spend a lot of time thinking about it. I think there are really smart people like you and Leah who have these conversations, and in the long term, we have to have real conversations about how the utility model is going to evolve to deal with the climate crisis and provide a utility to every citizen of the United States regardless of where they come from or what their income looks like.

But look, I’m an operator and so my focus is what can I do in the next five years? And one of those things is not going to be change the utility model. And so what I look for is utilities who understand the situation they’re in and are willing to do things a little bit differently. Look, John, I think you’re probably seeing this in your work as well. I think the defining attribute of sort of the 2023, 2024 timeframe is that we realized that we’re in a load growth environment now. And so to some extent, I think a lot of the friction in the 2000s, 2010s between distributed energy companies and utilities was really centered around the fact that we were fighting over a fixed pie. There was no load growth. So every kilowatt hour I took away from a utility, it was a kilowatt hour that wasn’t getting paid for.

Obviously that paradigm has changed quite a bit, and I think people have really started to recognize that on the back end of the IRA in the last 18 months, we’re now two and a half, three, three and a half percent load growth on an annual basis is very common in utility projections. They’re not equipped to deal with that. And so I think a lot of utilities right now are thinking about, okay, we did a really, really good job maximizing profitability in a no load growth environment. How do we think about this differently in a load growth environment? And that’s where I actually think utilities and distributed energy companies can be really, really aligned with virtual power plants kind of being the table that we can all sit around. Look, if you talk to any utility executive in California and you ask them what their number one thing that keeps them up at night is they’ll all tell you the same thing. And it’s their affordability.

For a lot of Californians over the past 24 months, their utility bills have doubled, which is crazy to think about, but very, very true. And let’s getting to the point where this is becoming dinner table conversation, people are really mad about it. We talked to a lot of people in low income and disadvantaged communities and they just can’t afford electricity and their electric bills. I think I saw a stat the other day that one in four PG&E customers, PG&E is the largest electric utility in the United States, was behind on their bills. And so ultimately, affordability isn’t a nice to have for utilities. It’s a need to have. There’s a mount of evidence that suggests virtual power plants are the cheapest way to add capacity to existing grids. And I think that’s really the common ground that we can start to make progress in having these conversations with utilities. There’s a lot of details that come after that, but I think high level the best utilities in the country, but whether that’s some on the east coast or some out here in California, are all thinking about it the same way. And I think that’s an opportunity for progress.

Leah Stokes:

Yeah, I’ll just add to what Tim said. Affordability is a really big issue because if we’re going to electrify everything, we’re going to use the electricity system and the rates that we have. And in many parts of the country, when you switch from a gas furnace, let’s say, to a heat pump, hvac, you save money but not everywhere. And in many parts of California you don’t. And that’s because the electricity bills are too damn high so to speak, and the gas rates are too low. I mean, they’re not really accounting for all the costs of burning the planet and blowing up houses with methane and putting carcinogens in your body from your gas stove, et cetera. So getting the electricity rates in a good place is really, really important, not just for affordability for everyday people to be able to pay their bills, which is a lifesaving thing. Electricity is a lifesaving technology.

It’s also about how do we electrify affordably with a car, for example? You pretty much save money no matter what, because gasoline is so expensive. And if for example, you’re on oil or propane delivered fuels in many rural parts of the country, that’s 20 million Americans. If you switch to electricity, no matter where you are, pretty much you save money. But when you’re switching from fossil gas, natural gas to electricity, it depends on the place. And a lot of places, about half the time you save money and half the time you don’t. So we’ve got to make sure that the electricity rates stay affordable. And that partially, as Tim was saying, is about not having utilities make terrible decisions, keep open coal plants sink literally $500 million into a 50-year-old coal plant, and then corruptly, for example, bribe the speaker of the house in Ohio to keep that thing open.

There’s these broader dynamics around making bad decisions, like for example, retrofitting coal plants and proposing to build gigawatts of new gas plants. So we need to get the incentives so that utility executives stop making terrible decisions that jack up electricity bills. And then we need to deploy a lot of solar battery storage because not only does it have this amazing ability to island homes and protect people during power outages, it’s also the cheapest thing to do. The Brattle Group says that, the Department of Energy says that, it’s the cheapest thing to do. So that’s really where we have to head.

And when I wrote a whole book about utilities, I went back to the very earliest beginnings of electric utilities, if you’ll see that in the book. And it was very interesting to study that and to write about it. Looking at Thomas Edison, he was a very inventive person and very visionary. He was talking about solar already in 1920 or maybe 1912, a long time ago. It’s very impressive. Anyway, the point is that he had a real vision of what needed to happen, but electric utilities became monopolies and they kind of went after the incentives that they had. So from my perspective, we’ve got 25 years to get to net zero. Okay, we’ve got five years to cut carbon pollution in half. This idea that we’re going to change the electricity system and also solve our carbon problems in the United States, I think is a pretty high bar. Now, what’s happening in the UK, for example, since the labor government took over is pretty exciting and interesting to see. But a parliamentary system works very different than the United States political system. And so I find it hard to believe that we would magically turn all of our utilities into public utilities overnight because I, for example, watched what’s played out in Boulder, Colorado with Excel for literally over a decade.

So I think it’s very understandable that people don’t like electric utilities, that they don’t feel that they’re innovative enough, that they feel that they cut people off from their electricity bills, that they pollute low income, disadvantaged communities of color. Absolutely correct. And I have more to say critically about electric utilities than 99.9% of people. But changing the system is really hard to do. And so from my perspective, let’s get the incentives right for the system that we have today and make as much progress as we can, make as fast as possible. And that could be wrong. People who are kind of revolutionary and say, we got to get rid of the monopoly utility model, et cetera. I can understand why those people feel that way. And I don’t even necessarily disagree, but I think I come at it from this pragmatic perspective, which is that we had these economists for decades with a lot more power saying, we got to restructure the electricity system, and they made a bunch of progress, and it didn’t necessarily solve our underlying problems, for example, on climate change or equity. And so my view is hold these utilities accountable, like for example, the Energy and Policy Institute does — amazing organization — hold their feet to the fire, get the incentives right, get good people and public utility commissions, public service commissions, the board of the TVA, and just make as much progress as fast as we can. So that’s kind of in the weeds question that you were asking John and where I come out on it.

John Farrell:

That was great. I really appreciate the thoughtfulness into how do you deal with this situation. Thank you so much for joining me to talk about this virtual power plant project in Santa Barbara and the way that you’re finding a way to align all of these different interests and work with the utilities and make it work for low income folks and solve this kind of thorny problem of both the resilience and reliability in the era of climate change. It’s really inspiring to hear about this project, and I look forward to getting updates on it as you continue to work on it. Thank you so much, both of you.

Leah Stokes:

Absolutely. And the key thing is to fight the climate crisis and not each other. And if different people have a different strategy, it doesn’t make them your enemy. In fact, it makes them your friend. And so go forth, John, do the good work and let’s see what comes with it.

Tim Hade:

You’re the man buddy. Thank you.

John Farrell:

Thank you so much for listening to this episode of Local Energy Rules with Leah Stokes and Tim Hade about the virtual power plant and community microgrids aimed at providing affordable and resilient electricity to Santa Barbara County in southern California. On the show page, look for a link to the New Yorker article by Bill McKibben that touched off my interest in this project, a link to purchase Short Circuiting Policy from your independent bookstore, and several links to resources about the Goleta Load Pocket. You’ll also find the link to Local Energy Rules episode 203 with Chris Rauscher from Sunrun, where he and I discussed the very real benefits of virtual power plants. 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 how we can take on concentrated power to transform the energy system. Until next time, keep your energy local and thanks for listening.