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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.