FREEING ENERGY

Podcast 068: Karl Rábago – Does adding local distributed energy defy conventional wisdom and save money for everyone?

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A soldier, lawyer, teacher, judge, and 25 year veteran leader in the energy world as an appointed regulator, utility executive and leading clean energy thinker and advocate, our guest, Karl Rábago shares with host Bill Nussey powerful insights into a new roadmap for the lowest cost, reliable electric grid and why local solar costs less as a part of his solution. Listen too as Rábago summarily dismisses prevailing arguments by cost shifting advocates that local energy is hurting our communities. 

Here are a few of the insights from Karl…

“…we could save one and a half trillion dollars in electricity costs, eliminate carbon, electrify the economy, and lower electric rates for everyone if we take advantage of right sizing our resources to meet our energy needs.”


“…we now understand [that] distributed solar adds more value than its cost. [So, it] can help all kinds of people get access to clean energy. It is going from … a few people who had a lot of money to becoming now widely available to the middle-class. And if we work it out, even low-income customers can have access to this.”


“Economies of scale had attenuated: bigger things are no longer less expensive”


“You can better utilize wind farms and utility scale solar farms because distributed resources [local energy] are shaping the load”


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Transcript

Bill Nussey:

Hello, everyone in the Freeing Energy world. This is Bill Nussey, your host for today’s podcast. As always, we deeply appreciate the time that you take to listen in and share your comments and feedback. This is a labor of love and we are so excited whenever we’re able to bring one of our esteemed guests, their great thinking and vision to share with all of you. And today is going to be a truly memorable discussion.

Bill Nussey:

Our guest today is Karl Rábago. He is the head of Rábago Energy. He didn’t start in energy, he actually started in the army. He served as an armored calvary officer and a member of the Judge Advocate Gener’s course and is airborne and ranger qualified. So that’s just where he got started. Currently, he serves on the Solar United Neighbors board. He also does a lot of work helping out groups like the Audubon’s Client Program, the Coalition for Community Solar Access.

Bill Nussey:

And as you’ll hear from him today, he is an expert, expert. And he provides that service to groups like Earthjustice, the Southern Environmental Law Center, and many others. But this is just what he does in the beginning and what he does now. The in between is even crazier. He was a commissioner of the Texas Public Utility Commission. So he’s actually been on the regulating side, but he also worked on the utility side being regulated as the vice-president of Distributed Energy Services at Austin Energy, which is the municipal utility for the City of Austin, Texas.

Bill Nussey:

He served as the deputy assistant secretary of the U.S. Department of Energy. He was the energy program manager for the Environmental Defense Fund. And as so many of our listeners know, we love Rocky Mountain Institute, and he was a managing director and a principal there. So he’s going to bring all this experience and perspective.

Bill Nussey:

And one preview, a lot of what he’s done in the last couple of years and for a large part of his career is the small-scale stuff. And so I don’t know of many people that have had more experience in the policy and the thinking and the economics of what we lovingly call local energy than Karl.

Karl Rábago:

Greetings, Bill. It’s great to join you and all the audience for Freeing Energy.

Bill Nussey:

So you have such a diverse background, lawyer, soldier, teacher, judge, energy leader. Tell us very briefly about that path. I mean, how do you condense that down to a minute or two?

Karl Rábago:

My wife says I bore easily, but that’s not probably adequately descriptive. I am blessed with a great deal of curiosity. And I come from a large family. There were six of us kids. Dad’s Mexican American from the Texas border by upbringing. My mom is German. So you can imagine the dinner tables, the loudest and the longest won the fight.

Karl Rábago:

We valued argument, not in the bad sense, but as a way of solving problems and resolving issues, and learning, and using our brains. So I grew up with that. I was destined, I think, to be an advocate in the proudest sense of the word. And of course that led me to law school. The army provided me with this fantastic opportunity. My first four years in just leadership in a combat arms and working with all kinds of people and leading soldiers of all kinds of backgrounds to accomplish a mission. I learned that there that you can learn leadership and that it’s one of the things I learned later on that’s most lacking oftentimes in business discourse and business.

Karl Rábago:

But I also learned to stand up on my own two feet as a JAG. They threw me in. I got to do a lot of criminal work. And I also got to start teaching. I had a chance to teach at the U.S Military Academy and I decided then that I was going to pivot my career, leave the army and pursue a career in the electric utility space, taking with me two big things. Number one, an understanding that utilities really work hard to satisfy and enrich their shareholders, but getting them to do other things is harder, like energy efficiency.

Karl Rábago:

The second thing I learned about was externalities, the idea that the environmental and social damage that comes from the way we make and use electricity is not accounted for in the price of electricity. And as a consequence, we are inefficient in using it. Most of it is because of a bias towards very large systems, very large investments. And I decided to go back to Texas where I heard they weren’t doing much of any of that.

Bill Nussey:

Let’s talk about Texas. You sat on both sides of the table there. So you were both a commissioner and working for the utility. So which one did you start with and what did you learn seeing both sides of that discussion?

Karl Rábago:

I was really lucky. I was 34 years old. I got a chance to be a public utility commissioner who regulate 20 billion in annual revenues coming from our telephone and electric utilities. When I was a commissioner, we regulated the co-ops and the municipal utilities as well. So we had eight-

Bill Nussey:

Okay. That’s always the case.

Karl Rábago:

Yeah. No, it’s not. 84 different electric utility companies. And I got to see the entire pattern. We also had some of the legends, Houston Light & power, Texas Utilities, just giant utilities that had been running their own little experiment in ERCOT, the Texas Interconnection, for many decades. And it was at the time I arrived in Texas, the seventh large, if it had been a country, it would’ve been the seventh largest CO2 emitter in the world.

Bill Nussey:

Whoa.

Karl Rábago:

Yeah. It was also when Texas became a net energy importer. So this is the Texas of the movie Giant. This is the Texas of oil wells everywhere. And in 1990, 1992, it became a net energy importer. It was so dependent on imported fossil fuels, including not just petroleum from the Middle East, but coal from Wyoming and Montana, that it was no longer self sufficient in oil. It was also the Texas that a few years earlier had been dependent on methane gas for 95% of their power plants.

Bill Nussey:

Whoa.

Karl Rábago:

Meaning huge exposure to market risk associated with gas. This was the Texas that when the Gas Bubble happened shortly before I arrived there, some of the big gas companies were actually shutting off cities and saying we’re not sending you anymore because even though our contract says you only have to pay a certain price, we can’t afford to send it to you. This was the Texas that had a giant freeze in 1989 with gas being locked into wells just like this year.

Bill Nussey:

You mean the same thing? I did not realize the February had happened previously. Wow.

Karl Rábago:

It happened several times in Texas. It’s like the Far Side Cartoon of the dinosaur smoking cigarettes, right? Really killed them, was not their size, but they’re stupid habits. This was a Texas that was trying to do energy efficiency, but which the utilities poo pooed and the commission was doing nothing about.

Karl Rábago:

This was a Texas that when, I arrived there, a woman named Ann Richards had become governor. There had never been a Hispanic or Latinx commissioner. And I got a chance to do it. I served with this amazing guy who was the chair, Bob Gi, the first Asian-American commissioner. And it was… We called it a new Texas, and we tried this stuff out. We pushed for energy efficiency. We got the first distributed energy facilities cited, the first wind farms using creative approaches to regulation and encouraging the utilities.

Karl Rábago:

It was a new Texas. It was a new day. And it was an opportunity to explore self-sufficiency. And not only that, but growth. The most exciting thing that happened to me in Texas when I was a commissioner was that a group of us got together and we went to Governor Richards and we said, we believe that Texas can run on its sustainable energy resources. And we would like you to convene a stakeholder council composed of 16 people from advocates, utilities, the state industry, and we think we can write a plan for Texas to run on its sustainable energy resources.

Karl Rábago:

And we called it the Texas Sustainable Energy Development Council. And we did the homework. We hired the contractors. We did the analysis. And we showed that there was plenty of wind, and there was plenty of sun, and there was plenty of biomass, energy, and huge amounts of energy efficiency. And this was even before popularization of electric vehicles. And we wrote a roadmap for Texas to run on sustainable energy. This is back in 19… I think it was finally published in 1995, just around the time I pivoted over to the Department of Energy with the first Clinton administration.

Karl Rábago:

We got the report done. We had more work to do in getting the word out there. We made some really cool video, got narrated by Dan Rather. And the new governor, George Bush, vetoed the entire project and killed it.

Bill Nussey:

I was expecting a happy ending with that kind of a lead up. Wow.

Karl Rábago:

There is a happy ending. This is a hilarious thing about this. There is a happy ending. Texas decided to transition towards deregulation. And in doing so… A step on to that was this thing called integrated resource planning. Texas had never done any planning. And we thought with all this information we had, and at an advocacy position, we could get that information from the Texas sustainable energy development council and get the roadmap and get it into the record and get utilities to do something different.

Karl Rábago:

One of the main vehicles we were going use, because we knew clean energy, sustainable energy, is immensely popular with people, was that integrated resource planning always requires this public engagement. And I got to be a part of those workshops. I got to sit with people. Okay. There was one time, in Corpus Christi… I admit that at lunch, we were at this small junior college, I think, venue or someplace like that. I admit that at lunch, I went into my pickup truck, because I have a pickup truck because I’m from Texas, and I got my kite and I sat on the lawn at lunch and flew my kite. And when everybody came back to the workshops, they said, geez, it’s windy here in Corpus Christi. Yes it is.

Bill Nussey:

Well, that sounds like the makings of a children’s children’s book that you read with a happy ending to your young kids. Gets them to realize that it actually does work if you go through the process. That’s great story.

Karl Rábago:

There’s another part of the creation of this story, the creation of Karl’s story that I will tell because I talked about externalities and I decided to research this one topic. It turns out that these big fossil and nuclear plants work on heat. And that heat has… You got to get rid of that heat if you’re going to keep a power plant running.

Karl Rábago:

This is not a problem that wind turbines have, this is not a problem that solar farms have, but it’s a big problem when you’re burning stuff or you’re detonating uranium in efficient reaction. And the overwhelming course in the United States during last century was that you would just put a power plant near a river. You would stick a pipe in the river or lake or the ocean. And you would suck that water in and cool off the power plant.

Karl Rábago:

What you sucked along with water were millions and billions and trillions of pieces of aquatic life. You would kill them all. You would create this slurry in there, the fine slurry. You’d put it back out as hot water. It would attract more fish, which you’d also suck in on the intake side. And the cost of this was devastating to some of our most valuable aquatic habitats. And it had made the power plants vulnerable to hurricanes and clogging and all kinds of other problems. And it was done just because dumping the heat or sucking in the water from the environment was cheap and relatively easy. It was an externality cost.

Karl Rábago:

Here’s the takeaway lesson. I did the research. I wrote a lawsuit. We won the lawsuit very quickly. It took the EPA over a dozen years to finally write the regulations they needed to write. Today, nobody would build a power plant with what they call once-through cooling anymore. In the end, the Supreme Court heard the case 17 years after I wrote the complaint. But we finally got it, locked into the law, and we ended this externality. Industry learned how to do it, saved money doing it, saved environmental damage doing it.

Karl Rábago:

And in a little way, with those costs of trying to retrofit or not retrofit, showing up this also helped nudge the needle towards the resources, like I said, wind and solar, that don’t need to suck life out of our waterways in order to make energy. They don’t need to kill millions and billions of aquatic organisms in order for me to get electricity for my light bulb. And that’s the kind of system we should have.

Bill Nussey:

One of the statistics that blew me away when I started in this industry was that the legacy of those power plants, they pull more water through those power plants, even though they haven’t been built recently, but the total water being pulled through every year is more water the than we use for farming in the United States.

Bill Nussey:

Just get your head around that the power industry has more water flowing through it than the agriculture industry does and you start to get a sense. And for the most part, and you can perhaps confirm this, but I don’t believe they pay much of anything for the water, those legacy plants. So they’re getting this increased in a classic externality. And that means if you [crosstalk 00:16:55].

Karl Rábago:

Yeah. If you forget about the fish, if you forget about the fact… And it’s not like physical fish, you can see it’s like fish, eggs, and little tiny things like that, right? That’s what gets sucked in there. And you’re right. If you don’t think about them, as like, hey, I’m just running the water through my plant and then I’m going to put it out the other end, no big deal. But it was in the Clean Water Act because it was a problem.

Karl Rábago:

And the shaping effect of that experience for me was that we don’t have a complete understanding. And most of what we don’t understand works in favor of one side of the argument or the other. Externalities make electricity less expensive, which means if you’re selling electricity, you get to sell more. There’s a direct policy connection between what we hide about the costs of the way we make and use energy and who profits most from it. And I’m a little bit of a person who wants to see sort of who’s gaining and who’s losing, who’s paying who’s receiving in understanding this big system because that’s where the opportunities for improvements are.

Karl Rábago:

And when you start looking at the complete pattern of that, if you’re not led to small right-size distributed resources, then you’re not thinking.

Speaker 1:

Does the price of electricity today truly reflect the costs to society and the environment? Our guest, Karl, talks a lot about externalities, but what are they? Economists described them as the cost of doing business born, not by the company, but by the environment and society as an example. In his soon to be released book freeing energy, author, Bill Nussey, shares this insight into externalities.

Speaker 1:

You can think of them as unintended consequences of what are often called the tragedy of the commons. This is where individuals or companies, acting in their own interest, cut corners and create a growing burden or cost for everyone else. And in the fossil fuel world of electricity, there are many examples of externalities, particularly negative externalities. We hear that coal and natural gas are cheap, but that is because utilities are only covering a portion of the true cost to operate these plants.

Speaker 1:

Mining for raw materials often causes water pollution, habitat destruction, and socio-economic harm. Burning coal and natural gas pollutes the air, sickening and killing people, and introduces toxic mercury into the aquatic food chain. Centuries of fossil fuel use have released billions of tons of carbon dioxide and other greenhouse gases affecting global climate.

Speaker 1:

Consider the true cost of coal. Every year, one million tons of toxic coal ash is left over from burning coal in power plants. This is the largest industrial waste stream in the U.S. Rather than paying to dispose of it, nearly all of it is mixed with water and dumped in online ponds sitting outside of the plants. As Bill Nussey covers in his upcoming book, this seeps into the water tables with growing impacts on human health.

Speaker 1:

Based on the cost where utilities were forced to clean up their ponds, Bill estimates that it will cost well over $100 billion to clean up the 700 ponds across the United States. There is a much larger, but even more indirect costs. Burning fossil fuels of all kinds releases pollution and particulate matter into the air. The aggregate impact on human health is devastating.

Speaker 1:

Bill’s book sites a study showing the health costs caused by fossil fuel pollution as more than 100 billion per year. If unchecked, it will amplify the damage to infrastructure and businesses, threatening global food security and undermining political stability. As you look more closely at how we generate, distribute, and consume electricity today, and how we shape solutions for tomorrow, these impacts will begin to take on an increasingly important role in our discussions for all of us, regulators and utility executives, elected officials, and everyday consumers. Now back to Bill and Karl for more insights.

Bill Nussey:

So let’s change gears and jump into some of the work you’ve done. There is a paper last year that I have posted and shared and written about. Title of which is, Why Local Solar For All Costs Less: A New Roadmap For The Lowest Cost Grid. You make some claims in that, and your co-authors make some claims in that, that if we more aggressively build small scale systems, we obviously need the large scale systems and the big grid components. But if we focus more on those small scale systems, what I call local energy, your paper suggests it creates two million more jobs and would save people almost $500 billion by 2050 as compared to just doing what we do today and not making any changes. And this creates some, I mean, that’s a heck of a claim. What did you discover or uncover that the mainstream folks who don’t necessarily see this? What are they missing?

Karl Rábago:

Yeah. What they’re missing is focus. What they’re missing is resolution. Right? Let’s just start with the way the world works today, right? The world works today that we get our electricity from a system focused on bigness. It was premised on the economic and engineering principle that bigger is always less expensive. As a result, we are thirsty for a sip of water, but our choice is to drink it out of a fire hose. There’s going to be a lot of spillage. There’s going to be a lot of waste.

Karl Rábago:

And you ask yourself, why would I tolerate a system that may electricity in the gigawatts, a thousand megawatts a million kilowatts when I just need about five to 10 kilowatts from my house. And the answer is because the waste actually makes money for someone. We created a system in which waste earns profit. And so we then reinforced the benefits of that system, which is focused on biggering by assuming that bigger things cost less than smaller things in terms of the output they can produce.

Karl Rábago:

And once upon a time, as we pointed out in the book we wrote at Rocky Mountain Institute based on Amory’s genius was that the economies of scale have attenuated. Bigger things are no longer, less expensive, as Amory likes to say. They economics of cathedrals. But smaller resources run on the economics of cars. Mass production never hit the utility business in the same way because they thought if we had the bigger, bigger power plant we could make kilowatts cheaper and cheaper.

Karl Rábago:

The ultimate, of course, of that whole idea was nuclear power, right? Big, expensive, tons and tons, and tons of atoms. Wealth was atoms. The more atoms you had in your power plant, the more wealth you had. The ultimate manifestation of that is the nuclear power plant. You’re seeing very big atoms and lots of concrete was going to be wealth. And the thesis was that electricity would be too cheap to meter. [crosstalk 00:24:55]once upon a time.

Bill Nussey:

Famous words.

Karl Rábago:

Yeah.

Bill Nussey:

Very famous words. Infamous.

Karl Rábago:

Right. And not true. And not… Infamous words. That’s a better way to say it. What we realized is that that spillage, that overflow, that accessibility was in and it was wasteful and it profited some people, but it did not end up delivering us the best bargain, the best deal.

Karl Rábago:

It’s fundamental in having this discussion to keep in mind three different words; price, cost, and value. Value leads to, like my work on Value of Solar, which maybe we’ll have time to chat about a little bit. But the price is what you have to pay to get it. The cost is what it took to make, but also some of those other things like those externality impacts. And the value is what you receive off of it.

Karl Rábago:

The analogy and electricity is we buy electricity so we can have cold beer and hot showers, right? That’s what we really prize. We prize the services that come to it. So it’s a question of what is the value of that service. If we can match our energy more elegantly to our load, if we can match our supply to our load, if we can take account of all the system costs, internalized and not internalized, and match, build the resource, serve our load with the right size resource, get us enough, buy just enough, then we will save money.

Karl Rábago:

And what happened with our work with vibrant, clean energy through what we call our local solar for all campaign, is that we knew this worked on the individual level, but what we wanted to find out is, would it work on the entire electric system? So the report you’re talking about, we did an analysis working with these brilliant folks at vibrant clean energy, a gentleman named Dr. Christopher Clark, who created a new kind of model to look at the utility system that was 10,000 times more powerful.

Karl Rábago:

Think the web space telescope versus what Galileo had. It’s the difference between making assumptions and learning a little bit about how our solar system is organized, which is all Galileo could do, versus looking to the actual formation of the entire universe as we know it. Which is what web will enable us to appreciate, because we’ll be able to see it all. We will have resolution, we have focus.

Karl Rábago:

And what the model showed us, if you just bring the least cost resource for every unit of demand and you allow yourself, which the utility models do not do, if you allow yourself to select, as we used to say in small is profitable, the right-sized resources to meet demand, you can avoid waste and generate savings.

Karl Rábago:

And I need to not correct you, but expand on your understanding, Bill. That half of trillion dollars in savings is just to get to 95% reduction carbon by the year 2050. If you add in electrification of our automobiles and other transportation, if you add in electrification of the heat in our homes, the savings compound and the net savings to the lower 48, according to this modeling, which takes account of things that utility models can’t see because their lenses are blurry and their telescopes are short, we could save one and a half trillion dollars in electricity costs, eliminate carbon, electrify economy, and lower electric rates for everyone if we take advantage of right sizing our resources to meet our energy needs.

Bill Nussey:

Well, this is a heck of a vision that you’re crafting here. I’m all in. And my mission truly is to support your mission and to get the rest of the world to realize within the same clarity in precision that what we call local energy is far more helpful to the future of clean energy world than many people currently think it is. So what policies are in the way and what policies do we need to invent that don’t exist today, or at least roll out more broadly?

Karl Rábago:

Policymakers do their best work when they ask good questions. Probably, the best thing that a policy advocate can do is suggest good questions to policy makers. The questions that this modeling enables is questions about resolution. So what should policymakers do? They should ask for more of this information. They should consider it. They should ask what the people who appear in front of them think of it. They should foster a robust debate. When I was at the Department of Energy, I used to say the greatest power of government is the power to convene. Get people together to talk about it.

Karl Rábago:

So now what we’re trying to do is introduce this and say, if you will bring us together, if you will consider these alternative ideas, we trust you with the results. Just honestly ask better questions. The model itself enables you to ask better questions. What if? And you need to ask more about what if> what is coming up in terms of distributed resources? What’s happening to the cost? What are we learning about how they perform? Regulators and policymakers need to understand that by asking those questions and getting those results into the policy that they create.

Karl Rábago:

They need to not do any harm. They need to… We’ve had people with amazing foresight create policies like net metering, which turns out to have been just inspired with wisdom. Because as we now understand, distributed solar adds more value than its cost. And can help all kinds of people get access to clean energy. And is going from yes to a few people who had a lot of money to becoming now widely available middle-class. And if we work it out, even low-income customers can have access to this.

Karl Rábago:

So don’t do any harm. This is not a time to kill net metering or to kill distributed generation because there’s value there to be harvested. And I know it’s cutting into the profit model of the existing utility. So the next recommendation is, explore different profit models. Samuel and Souls will pay you for building more grid and more power plants model is over a hundred years old. We have a grid. Now we need to pay them to build smarter grids, to reduce the cost, to save us money, to reduce climate change impacts, to serve those who don’t have access to clean energy, change the priorities, change what you reward and pay the utility for, pay them for what we want.

Karl Rábago:

And like I said, don’t do any harm by throwing out the very thing that is offering the seeds of an amazing utility transformation. Don’t kill net metering. Don’t kill distributed generation. Don’t allow monopolies to be unfair in its competition against these up-and-coming businesses. Do account for equity, justice, and for local solutions, empowerment, and resilience. That’s what policy makers need to do.

Bill Nussey:

One of my guests last year was a Peter Fox-Penner, who’s another noted thinker in this space and also quoted a lot in my book. And he points to a technical solution. It’s called performance-based rate making, which is a technical term, which is you’ve probably forgotten more than I’ll ever know about it. But this is instead of building paying the utilities, which are regulated and their profit is determined by regulators like the job you had in Texas and changing the regulations that say how they make their profits from, hey, build more big stuff and we’ll increase your profits, to the, hey, reduce the carbon to the atmosphere, use more renewables, and then we’ll increase your profits. The one that I think, as everyone refers in the industry to the postcard from the future that is Hawaii, they actually have part of their performance-based rate making based on customer satisfaction, which is completely unique in the industry.

Karl Rábago:

You mentioned Hawaii and performance-based rate making, they are… The State of Hawaii working with Eco, the regulator have really been the driver, but Eco is stepping up and doing what they’re being asked. They’re doing amazing things in performance-based rate making. And you can’t just dismiss it as an island. What we learned in New Orleans is that New Orleans is what they call a load pocket. It’s like serving an island. Manhattan is an island.

Karl Rábago:

We have island-type architecture that Hawaii can teach us about. SMUD used to do some great stuff in Green Choice. They’ve deviated a little bit, but some of their oldest hits are our greatest hits. Some of the new stuff, I can’t quite listen to. So the Sacramento Municipal Utility Districts, SMUD. There are others. Commonwealth Edison is really trying to figure out distributed resources and how to integrate it into their monopoly. Not a hundred percent there, but they’re using an analysis basis. And they’re listening to their customers better than a lot of investor_owned utility.

Karl Rábago:

So there are good examples out there. It depends on what issue you’re trying to get ahold of. Oh, I should say electric cooperatives like Holy Cross Energy and the Municipal Georgetown in Texas trying to go a hundred percent renewable. Okay, they learned its tough to do contracting, but these guys are demonstrating what innovation is really about. And that’s fascinating.

Karl Rábago:

I will tell you, we impose a huge burden on our utilities. And we pay them very well for taking that burden. We expect continuous, reliable electricity. We expect them to go out there and fix the transformer no matter what hour of the day or day of the year it blows up. They perform and they deliver. We expect universal service. And they try to serve everyone. And try to serve everyone fairly.

Karl Rábago:

So they’re a good industry and they are generally pointing in the right direction, but they are slow to move. They’re slow to catch up. They’re slow to innovate. That’s where the forces of competition, which regulators are supposed to emulate, that’s where the forces of regulation, therefore can push utilities to make the turns and the changes they need to. And they will be a part of our clean energy future, we just have to decide what part and how much we want served by monopolies and how much we want served by competitive market opportunities. Both will have a role to play in our clean energy future.

Bill Nussey:

I agree. I agree. One last question about utilities. There’s a lot of arguments that come from the utility camp against local energy. I recall listening to your debate and one argument was, hey, everyone has a model. I don’t really care about your model. I’ll find another model that says what I want it to say, and I kind of chuckled. But the argument that seems to stick is that, hey, is we put up these local energy systems, as a wealthy person A put solar on their roof, low-income family B is forced to pay more because the grid costs to operate the grid remain the same, but I’m pushing those costs on the folks that are still buying electricity from the grid versus the wealthy people of solar who are buying less electricity from the grid.

Bill Nussey:

This is the argument that’s practically universal. This is the argument I had the head of CALSEIA on the podcast a few months ago in California in an epic battle. And the forces that want to remove or change net metering are basically saying net metering and local solar are harmful to low-income families.

Bill Nussey:

I loved your answer on that interview and I would love for you to give us a quick answer to that now, because I talk about this a lot in my book, and I have my own answers, which are different than yours, but complimentary to be sure. I’d love for our listeners to hear why that argument does not hold water.

Karl Rábago:

This cost shift argument makes me sad. It makes me sad most especially as a guy growing up from Texas, Hispanic, when I see utilities or others teaming with minority business associations on the basis of an argument that advancing distributed energy creates a cost shift and burdens low-income folks or people of color, communities of color. It’s wrong, it’s false, and it’s misleading, and worse, it’s kind of cynical. It makes the debate unpalatable and no fun. It makes you feel a little dirty to be engaged in it.

Karl Rábago:

Let me unpack this a little bit. When people say that distributed energy causes a cost shift, what they’re saying is that a customer who installs in rooftop solar, subscribes to a community solar project, is shifting a cost to someone else. And implied in that is that it’s a cost they should be bearing. But they’ve sneakily avoided bearing because they went and spent $10,000 to put a solar system in, or they signed up for a 20-year contract to be a community solar subscriber. They were shifty. They were shifty. They shifted their costs. And so-

Bill Nussey:

That’s someone that’s good [crosstalk 00:40:14].

Karl Rábago:

Yes. That’s right. And what really all that happened was they did something, they took an action to reduce their electric bill. Now, who would be interested in saying that’s shifty behavior. If you could finally teach your teenager to shut the refrigerator door and stop staring at their refrigerator trying to figure out what to eat and save a little bit of electricity, is that shifty? If you go to the store and you pinch a few pennies and you buy one of those led light bulbs so you can quit replacing the light bulb on the front porch, gain a little security, but also gain a light bulb that runs on 95% or 85% less electricity, is that shifty?

Karl Rábago:

It’s not shifty. It’s a customer taking control with the assets that they have. And sometimes having to, like I said, pinch few pennies or force that teenager to learn that lesson in order that you can reduce your energy bill. Now, is it something about the way solar customers do it that makes them shifty? They’re investing in addition to their home. They’re joining in a kind of a cooperative model for a community solar facility. Is that shifty? Not in American history. It’s not.

Karl Rábago:

So what’s wrong with it? Well, it turns out that when you peel away all the things it’s not, what you’re left with the cost shift argument is that the utility was counting on collecting money from those customers and now it’s not. They were going to get $10 from you every single month and now they’re only going to get $2. And what’s implicit in the cost shift argument is that damn it, they deserve that other $8. They’re entitled to that other $8. They didn’t do anything for it, they didn’t sell the electricity, but they want that other $8.

Karl Rábago:

And this is where it gets cynical. They say, if I can’t get it from you, I’m going to go find the nearest black, brown, Asian poor, or other person, and I’m going to get it from them. Or maybe they’ll just say, well, I’m not doing that on purpose. It’s the only choice I have. It’s not the only choice. The choice that we should be confronting, the choice that those minority business associations that sign on with the utilities should be actually advocating for is, this looks like a pretty good way to manage your bill, reduce your carbon footprint, grow extra jobs, and contribute to a healthy economy, how can we get in?

Karl Rábago:

How can we overcome the challenges of providing rooftop solar to multifamily housing? And heck, yes, even HUD housing, which we worked on in places like Austin Energy in Austin, Texas. How can we subscribe more people to community solar projects? How can we leverage this powerful economic opportunity that this wisdom model shows us as possible by making sure that everybody gets to enjoy the opportunity of reducing and managing their energy bills?

Karl Rábago:

And how can we finally tell you cost shift advocates that maybe you were counting on making money the wrong way? Maybe your bigger ring philosophy needs to give way to a more sustainable path. And if you’ll sit down with us, instead of just objecting to anybody daring to compete with you, and instead craft a path to a future in which we really do provide these benefits to everyone, I bet we can figure out a business model that makes your shareholders deliriously happy. So why don’t we finish and not fight?

Bill Nussey:

To me, it boils down to the fact that the cost shifting argument in plies there’s only two people in the room, the low-income family and the wealthy family. There’s a third person in the room who’s actually got more money than all of those families put together. And they’re called the utility. And they have very craftily remove themselves from that equation. And they’ve made it a wealthy versus poor, which is, I think you put it very well, it’s almost a little… It’s very unfortunate that they’re bringing in that kind of an argument to something that doesn’t need to. But it’s been successful for them. I mean, if you look where net metering has been assaulted, it’s almost always using that argument. Anyhow, well, listen, we have filled-

Karl Rábago:

Yeah, just let me you-

Bill Nussey:

Please go ahead.

Karl Rábago:

Let me give you just one real quick code on that. Because in fairness, what we should also recognize is that the clean energy and environmental movements in this country have not been aware and engaged enough with the impacts of energy use and production on low-income people and communities of color. We have overlooked them. We have delayed their full participation because we were tackling what we thought was bigger problems or more systemic issues. And there’s a little bit of a lick on us for not ensuring that the clean energy world we speak for, we advocate for is fully inclusive. So there’s room for everyone to learn about how to make this a better world and how to be freeing our energy for everyone.

Bill Nussey:

Well, Karl, this has been a blast and we have just a few minutes left. And we’re going to hit you with the lightning-round questions. Starting with the first one, what excites you most about being in the clean energy business?

Karl Rábago:

The faces. In this pandemic, we’ve been doing a lot of Zoom calls. And when I look at the people that I get a chance to talk to, they’re younger, they’re diverse, they’re excited, they’re optimistic, it just thrills me to be working with these people, it gives me hope every day.

Bill Nussey:

All right. If you could wave a magic wand and change just one thing to push us into the clean energy future, what would that one thing be?

Karl Rábago:

The traditional rate-making formula.

Bill Nussey:

Bingo. Echo. Exclamation point. All right. Third question. What do you think will be the single most important change in how we generate store and distributed electricity in the next five years?

Karl Rábago:

Responses to, sadly, accelerating and increasingly violent climate change-induced weather affects.

Bill Nussey:

All right. Thank you. The last question, and you alluded to it in your first answer. When you talk to industry outsiders, people that want to get into the industry or maybe they’re just concerned about climate change, and they ask you, what can I do personally to help accelerate this change to a better future? What do you tell them?

Karl Rábago:

Talk about it. Talk about it. Just talk about it. It’s fair game. When I lived in the Woodlands in Texas where we got hit with a hurricane once, I used to invite my neighbors into my house to see my compact fluorescent light bulbs so they could see how, in my kitchen, it wasn’t as hot as their kitchen. We talked about it over barbecue. We talked about it as we were sharing meals or trick or treating with the kids. Talk about it. Ge it into your conversation, which includes asking questions and stating your opinions, but just make this part of your conversation as a citizen. Express your personal views. Learn what the issues are. Just get engaged.

Karl Rábago:

That will lead you to things like pausing at the light bulb aisle at the hardware store. That will lead you to things like staring at that window hat’s cracked or leaky that needs to be repaired. Or feeling the breeze coming in underneath your front door. Talking about it will get you to thinking about it. Thinking about it will get you to acting on it. And everybody’s entitled to be a part of it. So start talking about it.

Bill Nussey:

I can’t imagine a better way to wrap up our conversation today, Karl. This has been incredibly enlightening. Your background, your story, your personal contributions to this industry and particular to the local energy future that the Freeing Energy Projects entirely focused on is incredible. And we are grateful for your time today and grateful for all the work that you and your colleagues are doing to make the world a better place. So thank you so much for your time today. It’s been a true pleasure.

Karl Rábago:

Thank you so much, Bill. And if you ever got any dead air and you want to fill it, I’ll be glad to come back, but count me now as someone who’s going to follow all the other great conversations that you’ve mentioned you’ve had and will be having.

Bill Nussey:

Thank you, sir.

Speaker 1:

Thank you for joining us today. You have been listening to the Freeing Energy Podcast, personal stories from the clean energy movement. To learn more about the Freeing Energy Project, visit our website, freeingenergy.com. Subscribe to the Freeing Energy Podcast on Apple Podcast, Spotify, Google Podcasts, and anywhere podcasts are found. Make sure more people learn about clean local energy by rating and reviewing the show on Apple Podcasts.

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