Podcast 057: John Farrell – Monopoly utilities and consumers are headed for a collision over local energy. The rules must change, but how?

In this second of a two-part series, John Farrell, Director of Energy Democracy at the Institute for Local Self Reliance, walks us through how the power and influence of investor-owned utilities is trampling customers and how necessary changes in that relationship can benefit all parties.

Here are a few of the insights from John…

“We want decision-making power to be democratized. We want people to be able to have a way individually and collectively to make decisions about their energy system. So it’s not just about, can I put solar on my own roof, but can I, as a member of my city or my community invest in clean energy, can my city say, we want to make decisions on behalf of all the residents of our city, where we’re going to buy energy? Can we use our buying power? You know, can we make public Costcos of the energy system if you will, in order to drive down the price and to get better access to the clean energy we want.”


“We need a utility that can see making money along side their customers…not making money by opposing their customers.”


“I am a firm believer without knowing any of the details that that local energy model is probably going to be cheaper; you dont have to spend all that capital on 100 MW of solar your customers are going to do that for you…”


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Transcript

John Farrell:

We need a utility that can see themselves making money alongside their customers, not making money by opposing their customers.

Sam Easterby:

Monopoly utilities and consumers are headed for a collision over local energy. The rules must change, but how? In this second of a two-part series, John Farrell, Director of Energy Democracy at the Institute for Local Self-Reliance, walks us through how the power and influence of investor-owned utilities is trampling customers and how necessary changes in that relationship can benefit all parties.

Sam Easterby:

This is the Freeing Energy podcast, and these are the personal stories from local energy champions and leaders in the world of renewable energy that are shaping our future.

Bill Nussey:

Welcome every one to the Freeing Energy universe. I have the great honor and I’m very excited today to be talking to John Farrell of the Institute for Local Self-Reliance. What you’re hearing now is the second part of what’s going to be a two-part series. In the first part, we talked a lot about the programs that he and his organization are coming up with that are changing perspectives and changing momentum towards local energy, which is obviously the core mission of the Freeing Energy Project. This time, we’re going to go a little deeper into what I love to call first principles, what’s actually going on, what’s the context that makes this stuff so important, and why is now the time.

Bill Nussey:

John, welcome, again, to our second part of our two-part series today.

John Farrell:

I’m so glad that we still have so much to talk about.

Bill Nussey:

We do, man. There’s a lot here, a lot here. We’re going to cover a couple of topics here, some of them are pretty juicy and I’m really anxious to get your thoughts on it. Omnipresent in all of these conversations is the electric utilities. You and I couldn’t be having this conversation if the utilities hadn’t perfected, over a hundred years, the ability to deliver electricity affordably and largely reliably, notable exceptions, but is much a foundation of modern society as anything. I think if we were to go back and ask Sam Insull, who invented the modern utility model, I’m not sure he’d be in 100% agreement with where it’s come, but he was as much a free market guy as there ever was.

Bill Nussey:

Anyhow, so I want to start talking a little bit about the role of utilities and how that interplays with our mutual vision of a very strong, robust, local energy world. So advocates tell us that electric monopolies, they’re the obvious solution to electrification. That was the reason we have the utilities and the monopolies they have today because the larger we built the power plants, the cheaper the electricity got, and it became expensive to finance these giant projects so the idea was to grant these people monopolies so that they could finance these without worrying about going bankrupt because some competitor came in and threw more money at it.

Bill Nussey:

One utility executive explained to me, knowing that I was from the computer industry, he told me that, “We’re just like your cloud computing. Nobody wants to be Google. You just want to dial in in your smartphone to Google. You don’t want to do all that work yourself. And we’re the same thing as Google, we’re a central authority that just takes all the trouble and all the technical stuff off your plate and we just do it for you.” Nobody wants to be their own Google and nobody, except for some folks that are super environmentally minded, don’t really want to be their own power companies, but clearly this model has some shortcomings. You guys have written some really good reports, and we’re going to link to them, and people should certainly scan them if not read them word for word. Both of them are relatively recent, how big utilities are impeding clean energy and what we can do about it, and should we be paying for the utility’s bad choices.

Bill Nussey:

So, John, what’s your perspective on the role of utilities? Where do you think maybe, since their inception or even from their inception, they’ve gone a little off track from what’s ultimately best for the people they serve?

John Farrell:

Sometimes I sort of joke because I wouldn’t carry this to its natural end, but Grover Norquist, the famously anti-tax advocate, once said he wanted to shrink government down to the size where you could drown it in a bathtub. I have a similar sort of perspective about how I think the idea of monopoly utility markets should work. So I don’t necessarily want to get rid of the utility, we still need someone to make sure that that distribution infrastructure that brings the electrons from power plants to homes exists and is maintained, and somebody has to do the billing.

John Farrell:

But there’s really nothing in either the history of how we’ve done electricity, there’s plenty of counterexamples to the monopoly model, or nothing in sort of the history of American market rules and organization that suggests that we have any need for monopolies in electricity the way that we have kept them for so many years. It really is an anachronism that we still have these vertically integrated utilities in so many states where they are controlling everything from the meter on your house, to the distribution line in your alley, to the substation, to the transmission line along the highway, to the giant power plant.

John Farrell:

If nothing else it’s in part because the economies of scale that they always used to justify doing stuff at utility scale evaporated for fossil fuel power plants 50 years ago. They actually got too technically complex that the requirements of the boilers, and the heating and all this kind of stuff required parts that were exponentially expensive to maintain and to acquire. So it actually became more expensive to build bigger, at some point in the ’70s, than it was smaller.

John Farrell:

Also, it has to do with the timescale to react too, that if a utility takes 10 years to build a power plant, like a nuclear power plant for example, inflation has a really big impact on building that power plant because your costs keep going up every year even though you’re still trying to build it. There’s a lot of utilities, like Georgia Power, can tell you, “Oh, that can get pretty out of hand pretty quickly.”

John Farrell:

I guess what I’d say to just sort of dial this back to the problem of monopolies, we have several issues here, and I think the foundational one for ILSR is that when we allow any sector of the economy to monopolize, when we power to concentrate on the economic side of things, like for one company to control so much of an industry, whether it’s a Google, or a Facebook, or a American Electric Power or an Exelon, the problem is that when they aggregate all of that wealth to control that sector of the economy, they get political power. Because in our economy, unfortunately, and in our political system, money is equal to power and it allows you to buy access to politicians, to send them on free junkets, to try to get them gifts, to do all of the things to have all of that influence.

John Farrell:

So the biggest problem about monopolies and monopoly utilities is that they have too much political power to write the rules of the system in which they operate. I mean, no business should be writing its own rules. The same way we complain about gerrymandering and politicians picking their own voters, both are anti-democratic, that kind of thing. One is anti-democratic, I guess, and then one is anti-market, but they’re both foundationally the same problem of having control over the rules that you’re supposed to be following along with everybody else.

John Farrell:

But it also has really significant impacts then in the way that we actually deliver and receive the services. So most of the ways that we regulate monopoly utilities in this country, with the, I think, sole exception of Hawaii, which just passed rules about two months ago, is called a cost plus model. It says the utility builds something at a certain cost, let’s just say it’s a billion dollar, and then the plus is the return on investment they get for spending our money to build something, and it’s usually about 10%. So we spend a billion on a transmission line or on a power plant, they use our money to spend that billion and then they get a hundred million dollars for their shareholders. So we’ve built this system in which the incentive for the utility is to control as absolutely as much of the system as possible and to always use their own capital and have their own ownership of the system in order to maximize the return to their shareholders.

John Farrell:

It has put them at tension with their customers over environmental impacts, which they still get to write off because they are not charged for those environmental impacts of their power generation, over the ownership of the utility systems, so power generation or power lines or anything else, because of course they’re always biased toward owning them and building them big. And many other things like conservation and energy efficiency, clean energy. I mean, all of the things really that when you ask people what would they want from an energy system. Even affordability, utilities continue to keep running coal plants or nuclear plants that are absolutely proven to be more expensive than things they could buy or build now like for wind and solar. They continue to run them because they still have some of their capital invested in them and they want to squeeze every last dime out.

Bill Nussey:

I think you make a really important point. I want to repeat it because I want to make sure everybody heard it very clearly, which is that the rules that we have created for monopoly utilities are resulting in exactly the behavior that we’re getting, and that is we pay them, with the exception of Hawai and their performance-based rate making, we pay them to build large things.

Bill Nussey:

I live in Georgia, we’re building a nuclear power plant, the first one in 20 or so years, and the only one being built in the United States. Our electricity consumption is decreasing in this state, but the utility is going to… They might’ve made a lot of money. It’s interesting to see where they’ve had so many delays and overages, how that’ll all net out. I’m not even sure that the transparency of that project will ever really let us know the answer to the question. It is what we, in the business world, would call perverse incentives. If you tell someone you’re going to pay them more to build stuff, what do you think they’re going to do? They’re going to build stuff. That’s, I think, at the root of the challenge and why distributed generation in the hands… And owned by people like the ones that you and I want to see, the communities and individuals, the utilities don’t get to build those. They don’t make the money. So it’s a very fundamental, should-be-no-surprises outcomes that we’re getting.

John Farrell:

Yeah. I just have to say too, to emphasize, I think this issue of if I’m a utility executive today, I would absolutely do what utility executives are doing. I mean, they are behaving in a perfectly rational manner and they are squeezing every last dime out of a system that is going to die under their feet, eventually because of distributed energy. But they’re going to hold off that reckoning as long as they can by trying to fight the rules or create new rules and new barriers to that competition for as long as is humanly possible.

John Farrell:

If you just need an example, just check out Ohio and House Bill 6. If you Google it, you’ll learn everything about you need to know about how utilities are using the power and the influence that they have garnered using our publicly-granted monopoly in order to influence legislators and to literally bribe them to prop up their inefficient and expensive methods of generating power and profit.

Bill Nussey:

It’s easy to point and justify the appointed utilities that are playing these dastardly games that nobody, including the executives at the utility, would ever want to own up to. But certainly there are utilities that are leaning into this, that understand that distributed generation is happening. Do you have any stories where you think that utilities are realizing the future is coming? Any examples that we should be pointed to that might give us hope that there’s a path forward?

John Farrell:

Yeah. There’s not a lot, unfortunately, but there are a few. Green Mountain Power is one that we’ve talked about a few times at ILSR. We’ve done some research talking about some of the ways in which they are investing in local energy, so they’re helping their customers get solar, they’re helping their customers get Tesla power walls, they’re integrating in that into their grid operations so they can tap into those batteries and solar panels to help them when they have high demand across their entire network. So they’re doing it in a way that profits the utility company by financing these things for customers, but it also benefits everybody because they’re helping to reduce the utility’s need to buy power at expensive times when a lot of people are using it. Just look at Texas for a good example of how a utility having that capability could be really useful, to have that kind of reserve power but through your customers.

John Farrell:

We’re also seeing some pretty cool innovation from a few cooperative utilities, so Kauai Island in Hawaii is a cooperative, it actually is a newer cooperative compared to most of them. It was created in the 1990s when the investor-owned utility voluntarily decided to exit the electricity business and they decided to buy it up, residents of Kauai, and to make their own utility. 70% of their electricity is going to come from renewables by the end of this year, and they are doing it on that same economic argument that most utilities ought to be doing on behalf of their customers. But because this utility is a nonprofit and it’s owned by its customers, it really actually is delivering on that. And there are probably some other reasons, and we covered this in a report we wrote back in 2014, why this particular cooperative is doing a little bit more than other rural electric cooperatives in terms of not being tied down by some contracts that make it more challenging.

John Farrell:

But there are other co-ops that are good examples too, Farmers Electric Cooperative in Northeast Iowa, Kit Carson Electric Cooperative serving Northern New Mexico, all of these utilities have found ways to make pretty significant investments in local energy in order to reduce costs and reduce their reliance on external sources and to make them more resilient and more insulated from fuel costs fluctuation in the longterm. So it’s a win-win-win, really, for these utility companies, and for their customers and for the environment.

Bill Nussey:

So a lot of people think that utilities have gone further than they need in terms of their expansiveness and the rules built to serve themselves. Let’s say that John Farrell is king of country of energy, and so what do you do to recast this business model? Because you said earlier that there’s real value in having somebody maintain all the wires and the billing, this is a very complicated part of the energy system and one we should not take for granted, where would the ideal utility play in your vision and all the research you’ve done?

John Farrell:

I can’t take credit for one piece of this vision, which Jon Wellinghoff, who’s a former chairman of the Federal Energy Regulatory Commission, often talks about, a distribution system operator. So the idea here is, how do we separate out the incentives? So you mentioned the perverse incentives that utilities often have now, they will make money by doing things that are actively harmful to their customers, and what we want to do is help to better align those incentives. So one of the things that I think is so important is remove any conflicts of interest that the operator of the grid has between the customers who might want to generate their own power and themselves. The best way to do that is to say, “You shouldn’t be a utility that both owns power plants and manages the distribution grid. You also shouldn’t profit from any particular way of managing the distribution grid.”

John Farrell:

So if it turns out that customers want to install 100 megawatts of solar at various places around the grid in Minneapolis, St. Paul, or in Atlanta, the utility should have a way to make money supporting that investment as the same way they would if they were going to add 100 megawatts of capacity through a substation and a wholesale power contract. I’m a firm believer, without knowing any of the details, that that local energy model is probably going to be cheaper. You don’t have to spend all the capital on 100 megawatts of solar, the customers are going to do it for you. You just have to support them in bringing that power to market and helping to manage it on the system in an appropriate fashion.

John Farrell:

So we’re really looking at this opportunity at a time when we know, whether you’re a climate crisis believer or not, we know we’re going to be making huge investments in the electricity system. We should unlock all of that capital that is available out there in the hands of customers who want to do the right thing, who want to benefit from this, who want to install solar and cut their bills, but can do it in a way that’s beneficial to the rest of the grid. So we need a utility that can see themselves making money alongside their customers, not making money by opposing their customers. So that’s, I think, the really key piece of it.

John Farrell:

The other thing is I think we really need to look seriously at reverting back some of the legislation in the 2005 Energy Policy Act at the federal level that allowed utilities to start merging and to create all of these non-adjacent subsidiaries. So you now have these utility companies… For 100 years, a utility company was in a particular geographic place, and in order to expand it could buy up a company that was right next door and naturally grow their territory but they couldn’t leapfrog and what you see now is you’ve got utilities that will span. Xcel Energy in Minnesota has a utility here that covers a lot of our urban areas, it owns a utility in Colorado, it owns a utility in New Mexico, none of which are really related from any business kind of perspective other than they all sell electricity. It doesn’t give them any economies of scale because these are not necessarily interconnected systems. It does give them what I like to call economies of lobbying, which is to say they can keep those lobbyists well-informed about policies in all the different states and just sort of fly them around to make them useful in the public service commission in Colorado and the public utility commission in Minnesota and-

Bill Nussey:

Economies of lobbying. I just want to make sure… That is a golden term, economies of lobbying. Sorry, go ahead. Keep going.

John Farrell:

Yeah. I mean, that’s the outcome of the market structure and the market rules that we’ve created is we’ve given utilities this incentive to lobby up.

John Farrell:

The same thing is happening with the tech industry, if you look at the amount of money the tech industry is putting into lobbying now versus five years ago, they have gotten to the scale where they knew that it is much cheaper for them to lobby the government for something than it is for them to go out and innovate and figure out a solution to it in the market. It is better for them to try to change the rules. There’s actually a great book. I read in college about this it’s called the [Mosclerosis 00:17:55], and it has this story about the sugar industry in particular-

Bill Nussey:

Yes, I’ve heard of this. Go ahead, please.

John Farrell:

Yeah. But basically the sugar industry, we have some sort of tariff on sugar in the United States so that we don’t import it from places like Cuba or other places where it’s far, far cheaper. The sugar industry keeps this tariff on because it basically costs all of us, collectively, a few pennies every time we buy sugar, which is already cheap. I mean, I think about buying like a five pound bag of sugar as like a dollar or something. So it’s just not something I’m going to notice so therefore, I’m not going to lobby the government to get rid of this sugar tariff. But meanwhile, the sugar industry only needs to spend a few million dollars of our surplus money that it’s getting, because the price is inflated artificially high, lobbying a few members of Congress on whatever ag committee would be in charge of this thing, just to get them to not get rid of the tariff. So they can win with a very small investment they can get a huge return on investment for their lobbying dollars. That’s unfortunately the nature of our political system we have and the danger, I think, in both letting companies get too big and giving them the power to have that kind of influence.

John Farrell:

But also in relying on the federal government to solve problems for us related to size and scale, because it’s pretty hard to organize people to get the federal government to do things, especially when the impact to each of us is very small. So we are better off if we use the power of the federal government to break up the big things and make them smaller and manageable so they don’t have economies of lobbying anymore and they have competitors. If Google had more competitors, they’d be too busy fighting those competitors to be hiring lobbyists to try to beat them at the legislature.

John Farrell:

I mean, that’s just really broadly. I know I have now taken a big tangent from where we started this around how would I organize the system, but the key is separating the interests, the business interests of the folks that manage the grid, from the people who generate the power and want to sell services. And the second one is never allowing any of those companies to get so big that they can get an edge, politically speaking, over their competitors in the market.

Bill Nussey:

It’s funny you mentioned the sugar industry because there’s a research paper that came out a few years ago in the JAMA Internal Medicine, and they basically looked back and they found a huge paper trail where the sugar industry had funded all these bogus research projects. They found emails to this, or I guess, letters to this effect that we know sugar is pretty bad but let’s blame it on fat. So there was all this research that came out 50 years ago that no, the problem isn’t sugar, sugar is perfectly fine, fat is what you should be worried about. Even something as straightforward as what’s good for you and healthy for you can be misguided and retold given enough a concerted effort, and I think the energy industry is a victim of that as much as any industry 50 years later.

John Farrell:

I bring for your example of the phrase, cooking with gas, which is a marketing slogan from the ’30s and ’40s to try to get people to convert from electricity to cooking with gas in their home, and completely papering over the health effects of combusting of fossil fuel in your home, in most cases in a non-vented system. How many people can actually afford a really awesome kitchen hood or keep the window open when they’re cooking? I mean, just speaking as someone who lives in Minnesota, no, one’s opening a window in January to vent their kitchen when they’re cooking with a gas stove. We’re having this fight now because the gas industry is now seeing the writing on the wall that we’re going to electrification.

John Farrell:

It’s just funny as people are digging up this history to realize we wouldn’t have even had gas in our kitchens if it wasn’t for some slick marketing by the gas company, not only in saying cooking with gas is something good to do, but also calling it natural gas as though it was something that just happens and it’s beautiful and it’s environmentally friendly. That’s also a made up term. We actually fight that kind of thing at utility commissions where it’s like we try to say, “We want to call it fossil gas or just gas,” and they’re like, “But it’s natural gas.” And it’s like, “No, you just made that up. You made it up a long time ago so we think it’s not made up.” I mean, you really do just keep pulling that thread of the money and the marketing and you find some remarkable things about what people presume to be the default things that we do these days.

Sam Easterby:

The utilities and the big solar companies have the market all sewn up, right? So where are the opportunities to help or see if an idea makes sense for advocates, innovators and entrepreneurs interested in supporting clean local energy or pursuing a business dream? The Institute for Local Self-Reliance Provides invaluable information on where the action is on policy, market growth, emerging models and community efforts designed to achieve greater energy democracy.

Sam Easterby:

For example, one of ILSR’s program trackers keeps tabs on community solar programs around the United States. Rooftop solar on individual homes has been saving consumers money for decades. But what about where that isn’t possible? Community solar picks up where traditional rooftop solar isn’t available and allows a very large base of people to reap the benefits of renewable energy. The ILSR National Community Solar Program offers extensive data, toolkits and insights on what is and what isn’t working. That’s where the opportunity to help locally or size-up your business idea can start to take shape. Check out the resources at ilsr.org and start your journey today. Now back to Bill and John for more on ILSR programs,

Bill Nussey:

Well, let’s talk about why we’re not being best served by the models that exist today. When I first started on this, my thesis was that solar should be cheaper. Then I heard all these people, and a lot of folks I reached out to early into my process were from the big grid and they made the case that, “Well, it’s so much more expensive to build it locally, to build it on your rooftop. It’s so much cheaper to build it at these large gigantic scales. It just only makes sense to do it in the utilities.” And I was a little despondent.

Bill Nussey:

And then I came across a paper written by you that made a really good case why the math isn’t as simple as you think, and I’ve become a real student of that, inspired by original paper. You had a pretty crazy idea that, yeah, it might be a little more expensive just to buy the inverter and the labor to put it on your roof. But when all the costs are said and done, it’s not necessarily the cheapest way to generate electricity. That was a breakthrough idea and something that very few people appreciate. Tip my hat to you for being one of the first to, at least to me, maybe broadly to really make the case. So tell us, how can that not be? Why is it not necessarily always more expensive to put solar on my rooftop than buy it from the utility?

John Farrell:

So it really comes down to this question of the cost of delivery. I just pause it for you, Amazon is a perfect illustration of this. So they offer free shipping for lots of the things that you buy on the site from Amazon directly in contrast to third-party folks who will charge you shipping costs, because they realized that there’s a convenience, there’s something worth paying for in getting free shipping, like for the Prime membership.

John Farrell:

So just as an example, if I order something from Amazon, and they tell me, “You can pick it up 10 miles from your house at our distribution center,” would you find that as worthwhile? Or is shipping worth something to get it delivered to your home?

John Farrell:

Now, we’ve gotten used to the notion that shipping should be free because of Amazon, but it always has a cost, and the same is true in the electricity business. Most electric utilities divide their costs into three parts, generation, so the power plant that creates the electrons, transmission, sending it from that big power plant to the location where most of their customers are because power plants are generally not located very close to consumers because when they were big and dirty, we didn’t want to live by them. And then the third part is distribution. That’s the part from that big substation that steps down the voltage from the transmission lines and it brings it out in the poles and wires that run through our alleys and the meter reading and stuff on our homes and that kind of thing. So it’s about a third, a third, a third for the different costs. So we know that generation is about a third of the cost and we know that the full price or whatever… So let’s just say the full price is $.12 for that kilowatt hour that we pay on our electric bill. It’s about .$04 for the generation of that power.

John Farrell:

So when we talk about comparing large-scale solar to small-scale solar, we’re comparing something that is just generated somewhere without the delivery cost to something that is located literally right where we use the energy. When the solar on my house is generating electricity, it travels a few feet through wires that I paid for, through my meter and then into my house and I’m using it here. No delivery charge. It doesn’t need one because it’s right here. And that large-scale solar array, which by the way we’re going to need a lot of both kinds, but it doesn’t have any delivery associated with it. It has to sometimes have additional transmission infrastructure built just to get connected to the grid. And then it has to have access to that transmission line and compete with other sources of energy on that freeway of electrons to get to our communities and then it has to be distributed.

John Farrell:

So the problem with comparing the cost of generation is that we’re not comparing the same thing. I do that in that report and I even do it in a really stupid way with apple and oranges clip art on the charts to help people understand this is just not the same thing. When we want to compare small scale to large scale, you need to compare how much it costs to get to people, and that’s what retail electricity prices are. The price I pay on my bill is what the energy that’s generated here is worth, roughly speaking. And sure, the solar panel on my roof can’t pay for a transformer fix five miles away on the distribution grid, there’s definitely a good debate to be had about how you pay people for it, but the two are just completely different in terms of the service that they provide. One is Amazon dumping your package, that brand new bathtub you bought at the distribution center and making you go fetch it and strap it to the top of your car and get it home. And the other one is it coming to your doorstep and being delivered for you and probably even being unpacked and installed for you, frankly, if we wanted to compare how these two things actually work for folks.

John Farrell:

So that’s really the important difference in terms of how we do this. As you mentioned before, the marketers for the utilities keep trying to focus on that price at the point of generation as though they are equivalent.

Bill Nussey:

As you say, we need both. This isn’t somebody who needs to win it all, but this is to say that one side shouldn’t win it all. There needs to be an equal and fair balance, and everyone should have a chance to build their own energy if they want.

John Farrell:

It’s a good reminder too when we talk with a utility executive of a monopoly utility that no matter which kind of power we end up with, I will pay for all of it as a customer of that utility. So whether or not it’s going to come from a rooftop solar array that the utility interconnects and then gets some of that power from, or a utility-scale solar array, they aren’t paying for any of it. We are paying for it as customers. And then their shareholders are going to capture whatever profits from the things that they end up owning about it. So we are going to all pay for it, but we’re going to benefit more if we own some of it.

Bill Nussey:

Yeah. I think you referenced in one of your reports that when things are built locally, a much larger percentage of all the money that goes into that project stays within the community than if you build a giant scale system. I think it was only 6% of the money stayed within the community where it was built, so I think it’s a really powerful point and one that I try to explore in the book and really want to use our conversation today to start a rigorous look at how the economics really play out because in there lies the opportunity for entrepreneurs, lies the opportunity for good policymaking and most important, lies the opportunity for communities and individuals to basically take control and save money where they can.

Bill Nussey:

I also said to that utility executives. So if you were able to get solar even a quarter of the price that you get today is my electric bill going to go down?

John Farrell:

Nope.

Bill Nussey:

Nope.

John Farrell:

We all know the answer.

Bill Nussey:

No, but if it goes down a quarter of the price for the one I can put on my roof it’s definitely going to go down for me.

Bill Nussey:

So, what’s going on in Minnesota? So I’ve heard Minnesota over and over again from a policy point of view. One of my earlier guests, Marc Perez was part of a Minnesota Pathways Project, which was doing some, and I’ve cited this work in my book, it’s really amazing, about overbuilding solar and how it changes the economics of the grid. And this was done out of Minnesota, including some of the energy stakeholders in the state. And you guys are clearly very focused on the state, you’re there, but I think from what I understand, it sounds like Minnesota is in some ways a conventional mindset on this, and maybe in other ways they are thinking about a future that might happen. And if they are, how can we get other states to follow suit?

John Farrell:

We do a fair amount of work in Minnesota. We really try to be focused nationally on what’s happening across the country, and I think we do a pretty good job of that, but it’s hard not to be interested in what happens here because so much of it really touches on those same policy questions that we’re trying to answer everywhere.

John Farrell:

We are really blessed with a very robust and exciting nonprofit advocacy community here, more so than in almost any other place that I’ve worked, except for maybe a place like California or New York where you have just so much activity but at a much larger scale of a state, a much bigger population. There’s some private philanthropy that’s behind that and a lot of other things, but I’d say we’re split here, frankly, between the notion of local energy and utility energy. There is definitely a set of folks here who feels like if we can use the same monopoly model and get to the clean energy and environmental and climate outcomes that we want, that’s fine. And then there are some of us who are more focused on we think it actually will be cheaper for everybody if we have a more distributed model and give more power to folks to act locally. So you see that in a lot of our policy, there’s a tension there.

John Farrell:

We have a community solar program that’s the best in the country and the biggest in the country, and that came out of this notion of let’s experiment a little bit, let’s try something different. But you also have Xcel Energy, state’s largest utility having probably the most credible low carbon pledge of any investor-owned utility and promising to do so at a relatively low cost, and a lot of advocates who are pretty supportive of their plan to do so.

John Farrell:

So yeah, it’s a cool place to do this. There are so many innovative and smart people involved in it. I’m blessed to know and work with and compete with sometimes many of them, but we have a lot of different, really interesting things that we are investigating here.

Bill Nussey:

It starts with a conversation, a genuine conversation. And you are fortunate that your state is in a position to have an actual conversation, and that’s not always the case. So when the conversation happens, I think the great news about local energy is that it’s a better solution than the vast majority of people realize. You just have to step back a little bit and throw away a century of assumptions, and that is my mission. I’m following in your footsteps.

Bill Nussey:

Well, John, this has been an absolutely stimulating, interesting and extremely fun conversation. I don’t often get a chance to talk to somebody who’s not only as passionate about local energy arguably even more than I am, and I’ve learned a lot. We are all in this cause together, but I think in many ways, the folks in Freeing Energy are really following in some of the early vision that you guys at ILSR cast. We are grateful for that and we will continue to be huge fans and support you in every way that we can. And you are a large part of that, personally.

Bill Nussey:

We love to wrap up our podcasts with a couple of quick questions about your perspective on your role in the industry and the future and all that stuff, so we call them the lightning round and I’m just going to bang them out at you and love your quick thoughts. So the first question we like to ask everybody is what excites you most about being in the clean energy industry?

John Farrell:

It is seeing some of the crazy innovative things that happens with community scale energy, whether it’s the Shiloh Temple, Community Solar Project in North Minneapolis, or the People Power Solar co-op that’s a cooperatively-owned rooftop solar project out in Southern California.

Bill Nussey:

Wow. Well, those are things we should have talked about today because they sound really interesting. We’ll do that another time. Second question is if you could wave a magic wand and see one thing change in the transition to a clean, renewable energy future, what would it be?

John Farrell:

It would be, sadly, to answer a magic wand question with something so weedy and technical, but it would really be restructuring the energy market and so that folks would have the power to act individually and collectively in a way that they see fit. So democratizing our energy market.

Bill Nussey:

Perfect. What do you think will be the single most important change in how we generate, store and distribute electricity in the next five years?

John Farrell:

It’s going to be whatever rules we have that allow people that can generate and store electricity to participate in a broader market.

John Farrell:

I did an interview we haven’t published yet for our podcast with the CEO of OhmConnect Cisco DeVries about their Resi-Station virtual power plant. You can only do that kind of thing in a couple of different states, and we needed to be allowed in every state. If they’d had it in Texas, a lot more people would have had power and also, those people would have made money by participating in a way to save the grid in Texas. So we got to get that market structure right so that people can band together and do amazing things.

Bill Nussey:

That’s a great, great vision and absolutely agree with you. Last question, a lot of the folks who are listening in on Freeing Energy are just getting into the industry, looking for a role they can play in it. When someone says to you, “What can I do to help make the clean energy transition happen more quickly?” What do you tell them?

John Farrell:

It often varies. I get asked this question by folks who are mid career or students or whatever, so I give two answers. One is, personally, just figure out some way to be involved. Don’t let your job get in the way. Don’t let your education get in the way. If you’re interested in it, volunteer somewhere, intern somewhere, just start learning stuff about it if you can.

John Farrell:

And then the second thing is join up with others that are interested in the same thing. Is there a Sierra Club chapter in your community? Could you join Solar United Neighbors and explore cooperatively-owned solar, or just join them in doing advocacy work for solar rights? It feels a lot better to do this stuff when you’re connected to other people so have fun with it.

Bill Nussey:

I love it. Thank you. Well, John, this has been a tremendous long conversation and I really have enjoyed getting to know you. I’ve learned a lot today, as I have from reading all of your stuff for the last couple of years, and really excited to see where you guys continue to build this organization and the vision you continue to build. So thank you so much for taking some time with us today and really appreciate your vision and all the work that you’re doing.

John Farrell:

Thanks for having me, Bill.

Sam Easterby:

Thank you for joining us today. You have been listening to the Freeing Energy podcast, personal stories from the clean energy movement. Visit freeingenergy.com to learn more about clean local energy.

Sam Easterby:

I’m Sam Easterby. Bill Nussey is my cohost and the founder of the Freeing Energy Project. The Freeing Energy podcast is made in partnership with Frequency Media. Subscribe to the Freeing Energy podcast on Apple Podcasts, 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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