A ‘Year of 100’ for Local, Renewable Energy in 2018 — Episode 67 of Local Energy Rules Podcast

In this very special New Year’s episode of the Local Energy Rules podcast, John Farrell and I, Marie Donahue, from the Institute for Local Self-Reliance’s Energy Democracy team, sat down to discuss what we’re calling the “Year of 100.” We cover year-end reflections about what we can learn from the numerous 100% renewable energy commitments that were made this year and what’s on the horizon for local renewable energy in 2019.

Welcome, Marie.

It’s been pretty impressive to see both how this has affected the elections, but also how states are really starting to move on this policy.

We were able to put together this map, in California especially, to understand that they might be getting closer to that goal and at a more rapid pace because residential customers are really taking on the responsibility of implementing solar.

We mapped out solar projects that are happening across commercial and residential locations statewide. We see this rapid growth over the years, to close to 800,000 projects in California. That sort of speaks to this momentum of these commitments and just the ways in which I think decisions that are being made on the ground are affecting states’ abilities to be able to make these commitments and hopefully follow through on them.

We have 23 states that we found in this report that are classifying waste incineration as renewable. And therefore in direct incentives or just by virtue of them being subsidized in that way, this dirty form of energy is being supported and bolstered by renewable goals. I guess it’s just a cautionary tale of how we can think about the definitions of renewable and how important it is to get into some of the nitty-gritty details when these commitments are made, holding states and utilities and other leaders accountable to what those definitions of renewable are, and what they’re including, and what isn’t being included, and where we’re directing generally limited resources to support renewable power. In that incineration report we argue, certainly, that solar and wind should be what we’re investing in and not more dirty forms of energy.

It is really monumental to have an investor-owned utility, a shareholder-owned utility make this commitment. It hasn’t happened before. It really, I think, sets the stage for a lot of other utilities to potentially make similar commitments. What I did raise, though, and I think it’s sort of in the same way we have a cautionary tale about 100% renewable commitments by states, is that we also have to have a cautionary tale about 100% carbon-free commitments by utility companies, because sometimes there are some questions that we might want to answer about how that’s going to be reached. I raised three questions, actually, it’s a blog post that we put out right after that announcement, that we need to think about as we’re doing this.

One is who’s gonna carry the risk of these commitments? An investor-owned utility like Xcel has a monopoly in all of the states where it serves its customers. It’s the only utility that’s allowed to sell power to them, which means it has pricing power. It is generally able to charge whatever it wants as long as it can get approval from public regulators. Xcel Energy was at the legislature in Minnesota last year looking for a handout for shareholders and to cover their risk for keeping their nuclear power plants open. Carbon-free is great, but this is a big concern about who’s gonna carry the risk of these investments, and to what degree are those choices and those costs gonna be shifted on to customers instead of on the utility shareholders.

For many legislators, they were fine with that. They don’t have … they are willing to overlook the environmental implications of nuclear power and the waste generation. They’re even willing to overlook the fact that it’s not terribly economical. In fact, Xcel’s nuclear power plants are rated among the least financially sound among those in the country. Now, it’s not in a competitive market, so that doesn’t mean a whole lot necessarily in terms of where they’re at, but it does have implications for … to meet that carbon-free goal, for example, that Xcel is now made this year, are those nuclear plants going to be the most cost-effective tool? I think that’s really the question that we tried to raise.

We sort of had two questions. One is we framed their request and tried to make it clear to people that it was a blank check. They were essentially saying, “Whatever it’s gonna cost for us to do this, this law will give us a blank check to meet those costs and to pass them on to customers.” That’s the biggest danger, is to make sure that customers are not gonna be left holding the bag for investments.

… Investments that are not necessary or that are unnecessarily expensive. That, unfortunately, is like even a bigger danger now. Xcel’s made this very bold carbon-free commitment, for which they should be applauded, and yet now they’re gonna go to the legislature again this year. I would suspect they will introduce a similar bill, and they will now be able to introduce it in the context of we made this landmark climate change related commitment. I’m a little concerned that we’ll see progressive legislators look at that and say, “Well, that’s the price that we have to pay.” Or even other advocacy groups.

For me, what it is, what I think is the most important is that we say we’ve made these carbon-free commitments, which is terrific, what’s the most economical way to get there that really supports our communities, that creates jobs, et cetera? There is plenty of evidence. In fact, we have written about this, Tweeted about a little bit. There’s a smarter grid study that came out this year in Minnesota. What it essentially said was we can definitely lower our costs as we reduce carbon emissions on the grid system, but we can actually create a lot of community wealth and keep costs low by doing it in a local strategy, which is to say to build lots of rooftop solar to generate a lot of our energy within our communities.

I’ll just quickly wrap up by saying, the last question I had for Xcel and for any utility that makes this commitment is, are you serious? Because at the same time Xcel is making this commitment, they’re actually offering to buy a new natural gas power plant with which they will have a relationship, presumably, over the next 30 to 40 years. It’s going to be pretty hard to be 100% carbon-free in 2050 if you have a gas plant you’re still operating, unless you make some pretty generous assumptions about the ability to do carbon capture. That’s not proven very economical, but also then you have the same waste problem that you have with incinerators or with nuclear power plants, such as what do you do with the leftovers? What are you gonna do with that carbon? We don’t really have an answer to that.

At any rate, it is a big commitment. It’s something I think that is worthy of generating a lot of great conversation about how we get to where we get. I think it also, the last thing I would say, is this commitment by Xcel also really highlights what you were talking about first, Marie, about what states were doing, because we’ve kind of mapped out and have published a timeline of the states where Xcel does business, Minnesota, Colorado, New Mexico, were all pretty fast out of the gate more than a decade ago, requiring the utility to invest in renewable energy.

Xcel is taking it further than state law is requiring them to right now, but the thing that got them started was even 20 years ago when Minnesota first told them in exchange for allowing them to store more nuclear waste in this state, start buying wind power. They did that and found out that it was a very good deal. That’s why last year even you heard their CEO saying, “We’re swapping steel for fuel. We’re gonna build renewables instead of fossil fuels,” generally speaking. A noteworthy commitment. Something we hope other utilities emulate, but some good questions to keep in mind as you look at that.

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Thanks again for listening, now, back to the program.

Cities have a range of different tools at their disposal. Cities in different places have different types of strategies. I think through that, through seeing these commitments come out and then really wanting to know what’s next, we were talking with these cities and wanted to dive into those questions of how cities can reach their goals. Will it come from local, more community-scaled investments, or will it just be sort of by buying from big utility-scale models? There are some options and real choices cities can make when they make these commitments.

What I was excited about to take on as a project that ILSR worked on this year is — hopefully our podcast listeners are now aware if they’ve been listening to the series — this “Voices of 100%” podcast that we rolled out to really highlight the voices of leaders in communities that have made commitments. To ask them what they’re thinking about, what their cities are thinking about with these goals, and where they plan to go next. We’ve highlighted a number of these communities.

Yeah, I’m excited to dive into telling those stories, continuing to tell those stories. I think, in addition to just sort of at a high level, what choices cities are making, it’ll be fascinating to see the strategies, what strategies and cities can take to fund initiatives to go renewable. John, I know you’ve written a bit about a really fascinating ballot initiative that was on a city election this fall in Portland [Ore.], for example, and then there are some other strategies that I know you’re very familiar with that cities can take to finance clean energy and renewable energy locally. Could you talk a little bit about that ballot initiative story?

A couple of cities provide really interesting stories around that. One is Minneapolis, which is where Marie and I both work in our Minneapolis-based office, and where the city has raised its utility franchise fee. We’ve actually done some writing about this, and I have included some more lessons learned from this in our community power toolkit which you can find on our website. It’s an interactive toolkit for things that cities can do. We hope that cities that are making these commitments are able to use that tool.

Minneapolis said, “Let’s raise this utility franchise fee by about $2 to $3 million a year and dedicate those funds to helping us reach our climate action goals, to reach our 100% renewable energy commitment.” A lot of focus is on basically how do we help people who have not been able to participate in the clean energy economy, participate. I think the one that you mentioned, though, that was a ballot initiative, so Minneapolis was able to do that just through a city council measure. It was a power that they had negotiated with the utility about five years ago, to allow them to increase this fee, which is a city-based fee on utility bills.

Portland [Ore.] Did something I think even more monumental. We come back to these midterm elections resulting in a lot of clean energy commitments. Portland put in 10 times more money. They’re gonna have a fund of about $30 million a year in order to support clean energy efforts across the city. They’re really saying seriously that they want to make this happen, and they want to use city-based resources in order to make those investments.

I just want to hand it back to you, Marie, because you’ve been studying Portland and other cities that have come up during our “Voices of 100” series. I think what’s really exciting about what Portland is talking about is equity is at the center of this pot of money, that it’s not just about how do we build a solar array on City Hall but about how do we make sure that everybody in Portland can benefit from trying to achieve this commitment.

I think it’s interesting to think about the ways the mechanism of that fund that’ll be developed to also put in the lens of some of ILSR’s work on corporate concentration and this growing wealth-gap in the US because it’s the mechanism of the fund is going to be a tax on big corporations that aren’t reinvesting in the communities, that aren’t supporting the communities in Portland. It’s just an interesting case, I think, to dig into more. I’ll point folks to that longer episode.

I think, it just really lends itself at a city level, when we’re having these conversations around energy, to bring equity into the conversation. And yeah, it was great to hear and really dig into how cities are thinking about making 100% renewable commitments and doing so equitably in places like Atlanta and as diverse as Pueblo, Colorado. There are small and large cities, All thinking about equity in really a sort of central sense in these commitments. So, I think it’s both a part of making energy more affordable to communities. Making sure that community groups and as broad coalitions like in Portland are all at the table. So, yeah it’s been exciting to just see some of that follow up in all different types of places.

And so thinking about just the growth in that… We’ve seen — John, you are very aware of Minnesota’s program and do a great job tracking that on a monthly basis — just the growth in community-shared renewables and policies across states that are enabling those models.

But I think it’ll be interesting to see how those programs are funded. Whether there are… I mean we’ve been involved in some regulatory processes where there’s sort of the fine-tuning of of how these programs are being run across different states. I know I’m gonna be looking into both existing financing mechanisms for enabling community solar and then what maybe creative solutions there might be to that local ownership in the states that do allow community solar.

Yeah, so that’s one thing for me. I’m curious on what is on the horizon for you, John, in making you sort of look ahead to 2019 and get excited about what new work we might do.

I just want to emphasize I think that’s what’s so exciting about this is in a utility system, in a grid system, that for over 100 years has really been centrally planned, we are now having this opportunity for people to make individual economic decisions whether by themselves or collectively as you mentioned with community renewable energy, to get their power from a less expensive source. And to coincidentally be doing that from also an environmentally friendly source. And in a way that brings a lot of community wealth and benefits because ti’s now keeping the dollars that would have been spent and sent to the utility company in the community. So you know we previewed in our report as soon as five years from now across many states, as 40 states, that solar and energy storage would be competitive with retail energy prices and so we’re gonna continue to watch that. You know GreenTech Media has already reported that 2018 was a banner year for on site residential energy storage. I expect there to be continued strong growth as long as that remains economical.

The other thing that I’m really interested in is this whole notion of gas for power generation.

What I’m really interested to see is are we gonna see an end to new gas power plant investment? So you know we track and, Marie, you’ve done a quarterly update on new power plant capacity. We’ve been doing that now for the past several years. Generally renewables have been leading, but there’s still a substantial amount of utility investment in gas power plants. And whether it’s the threat of carbon regulation or the fact that the fuel prices could rise very significantly, there’s a big danger I think that these power plant investments don’t pan out the way utilities expect. And so I’m really interested to see if regulators and legislators start paying more attention to the risks inherent in investing in gas at this point in time, especially the cost risks for fuel priced volatility because while prices are low right now the tendency and history of natural gas prices is for a lot of volatility and a lot of really intense rise and fall in costs.

So the partner to that conversation is really about hedge that risk whether it’s continued investment in solar and storage or with electrification, you know? So we use a lot of gas, not just for power generation increasingly, but we use it to heat homes. We use oil, which is sort of the buddy of gas when it comes to extraction, in vehicles and in both these cases we have electric alternatives now. We’re talking about electrification.

So, I’m really interested to see the way in which states start thinking about risk mitigation. You know we can make our economy more resilient to volatile fuel prices by electrifying things because our electricity subsystem is increasingly reliant on resources, solar and wind, that have no fuel costs, that have no volatility. We have a really interesting opportunity there and that’s something that we’re definitely gonna be looking at in 2019 and beyond.

Thank you, everybody, for listening to a little bit longer than ordinary podcast for our Year in Review, but I think we wanted to cover a lot of really exciting things that were happening.

Marie, thanks for joining me.

To learn more we encourage you to check out other episodes in this podcast, including those produced as part of our cities-focused Voices of 100% series. And to explore ILSR’s Interactive Community Power Map, available at ILSR.org. While you’re at our website, you can also find more than 50 past episodes of the Local Energy Rules podcast. You can sign up for one of our newsletters and connect with us on social media.

We encourage you to tune back into the program in 2019 for new podcast episodes every three weeks. Happy New Year, everyone. Until next time, keep your energy local and thanks for listening.