One of the world’s largest installers of solar + storage energy systems has a groundbreaking and industry changing proposal to build a neighborhood that runs on local energy. Their proposal is currently in front of the California Public Utility Commission, but naysayers are trying to squelch the conversation. Join host Bill Nussey as he talks with Sunnova’s CEO, John Berger and CMO, Michael Grasso. They share the background on what the clean tech leader is proposing and why; how it will benefit consumers; and what critics are saying and doing to sideline the effort.
Here are a few of the insights from John and Michael…
“…. our [solution] allows the consumer to get a better rate. There’s no diminishment in their safety. ….we provide more choice and greater reliability… [we offer] a really meaningful advancement toward the state’s own environmental goals. Yet the CPUC’S public advocates office is trying to squelch us and prevent us from being heard. And we don’t know why.”
“…. But when you look at what a microgrid means to people and push on it just a little bit, it really means that they have choice.”
“…That’s what we’re trying to say: look, we will make sure that everybody is served [fairly]. We’ll play by the same rules as as everybody else. We just want people to have access to these new technologies, these new services… where they can get a better energy service at a better price.”
“……:we have almost 40,000 customers, On Puerto Rico, over 30,000, which have battery storage alongside their solar systems. And if you look at what happened in the 10 days behind the hurricane, only 59 of our systems, our storage systems didn’t perform to the expectation that we had for ’em and required some level of servicing.
You can also listen to this podcast and others in our series on these platforms:
Useful Links
- www.sunnova.com
- Utility Dive Article: Major utilities oppose Sunnova’s ‘micro-utility’ microgrid proposal at California PUC
- Book: California Burning by Katherine Blunt
Transcript
Bill Nussey:
Welcome everybody to the latest episode of the Freeing Energy podcast. I am Bill Nussey, the host and the co-founder of the podcast. Really excited to dive in today on, I think, one of the most interesting and news breaking stories that’s going on, because in the industry that we’re in, news breaking tends to happen over months. Super exciting though. But as always, I want to start out by thanking everyone who’s investing a few minutes of their incredibly busy schedules to listen in and learn and be part of what we call the local energy revolution.
And as you’re going to learn today, some really big things are happening. This world that we’ve been talking about for a few years is starting to catch on. We are the precipice of substantial change and it’s exciting. And our guests today are the center of one of the most exciting changes that’s being raised and discussed since this industry started a 100 years ago. So our guests today are John Berger, who is the CEO of Sunnova, and Michael Grasso, who’s the chief marketing officer.
And most of you know who they are, but if you’re not familiar with Sunnova, they’re one of the leading solar installers in the world, certainly in the United States. They have pioneered countless innovations. They are working in some of the most important parts of the country, the California, which we’re going to talk about today. For those of you who’ve read the book, I talked about Sunnova’s groundbreaking work in Puerto Rico, putting solar plus battery throughout that island faster than just about anybody.
And they are up to something so big and so new. A lot of you already know what it is. But before we jump into this incredible story that they’re helping tell for this industry, I want to take a few minutes just to start off with a little background on Michael, because most of you remember if you’ve been listening for a long time, that John has been on the podcast about two and a half, three years ago. And so we’re going to just pick on Michael today.
And wanted to get a quick sense of your background. You started down the path in telecommunications owning a master’s of science in telecommunications management. So I think your parents are probably expecting you to be the CEO of AT&T. Where did you go wrong and how did you end up being one of the leading voices in the new world of clean energy?
Michael Grasso:
That’s a great question. I totally enjoyed my time in telecommunications about 15 years working across the country with a lot of brands that eventually became the AT&T brand at the end of the day, building great services across that industry. But what brought me into energy is the idea that everything that we do in our society is based on energy. You can have the best cell phone in the world, but if you don’t have the energy to power, it doesn’t do you much good.
At the end of the day, I think what’s really driving our economy and driving our growth as a population and building on our ability to be humans and deliver great innovation is energy. It’s really the core. And the idea that we can be a part of that and especially in the clean and distributed space, be supplying energy and energy security to consumers is a motivator that helps me get out of bed every day and drive me through everything that I do.
Bill Nussey:
I think everyone who listens into this feels the same way. And we’re all incredibly glad that you made the switch as so many people who listen into our podcast are doing as well. So before we get into today’s hot topic, let’s do a little catch up. So John, you were on the podcast a few years ago and you talked a little bit about the vision that you were casting for Sunnova. And you guys are based in Houston, which is, you talked a little bit about, what an interesting place it was to build a solar company.
And Texas having decades, a century of being the center of energy for the United States became somewhat infamous for its grid struggling a winter ago. And we were all thinking of you and Sunnova and all of your customers. So how did that experience changed the views of people in Texas and around the country when the grid stumbled so badly?
John Berger:
Well, it’s not just Texas but it’s other areas of the country as well that really been seeing a decline in reliability in the centralized system. Most people call that a grid or the grid. There is no grid that goes across the entire country. It is a set of regionalized grid systems. And when you look at Texas, it personifies that regionalization, shall we say, of the grid. We are, for the most part of the state, somewhat isolated intentionally from the other bigger systems, if you will, from the eastern and western interconnects. And that also got a lot of notoriety, shall we say, in that storm.
At the end of the day though, it really wouldn’t have made that much difference because there was a lot of stressing that was on the eastern side in terms of the eastern interconnect. And so they were undergoing their own stresses.
The Texas situation quite simply is that Texas has been growing faster than most other areas of the country for number of years, continues to do so. And really we had put a market based system in place, not unlike in California for instance, where on the wholesale side of things, you had independent generators that would come in, supply power, get paid for it and so forth. But there was not really a mechanism to price reliability. In fact, reliability in the centralized system for over a century has essentially been mandated as what we call a reserve margin of 15%.
And even that, on a system-wide basis, that could be fine if you follow it. Texas was underneath it, that 15%. But when you start getting into individuals, whether they’re businesses or homes, that doesn’t do you a whole lot of good. They say, “Well, the system was fine, but the power line to your house failed for whatever reason.” And so you’re seeing a lot of people over the years get backup generators that run on natural gas and diesel and so forth. And so this has been a long term trend, is my point.
And then when we got into the Winter Storm Uri, finally there’s technology that’s clean and is provided in a service from a company, like a service provider like Sunnova with solar and batteries and now EV charging and load management and yes, generators as well can be a part of the solution, and software that can optimize these homes to essentially have their own power and be able to operate off the grid, so to speak. So that was something that, in terms of the demand for that ability to operate off the Texas system or the ERCOT as we call it, obviously if you had a service from Sunnova or you had something from one of our competitors, you were in great shape. And if you didn’t, you weren’t. And it was pretty much that simple.
So everybody took note of that in Texas and went out right after that and started, “Hey, I’m getting solar and batteries. I’m getting a solar service from Sunnova.” And we’ve also seen a continuation of that, even though it’s been well over a year since that event.
Bill Nussey:
Well you guys had this vision years and years ago. And when I was writing the book and learning about where this mattered the most, I went down to Puerto Rico and delighted to see that Sunnova was the largest provider of solar and battery systems, certainly one of, in Puerto Rico, the largest.
John Berger:
By far.
Bill Nussey:
By far. There you go. So you guys are pioneering this idea and putting thousands and thousands of these systems in place when everyone else was still wondering how important they were. And along comes Hurricane Ian. And did that confirm this vision in your customer’s needs, or what did you guys learn from that? Did it work? Did the vision come true?
Michael Grasso:
Yeah, Bill, the vision absolutely came true, especially after the strike on the island from Hurricane Ian. We have almost 40,000 customers-
Bill Nussey:
40,000. Wow.
Michael Grasso:
… on Puerto Rico. Over 30,000 which have battery storage alongside their solar systems. And if you look at what happened in the 10 days behind the hurricane, only 59 of our systems, our storage systems didn’t perform to the expectation that we had for them and required some level of servicing.
Bill Nussey:
Incredible.
Michael Grasso:
So over 30,000 systems performed fantastic on the island. For those customers that were living on our solar and battery storage, they averaged 5.3 days that they used energy solely from the system. And some of our customers had to live on those systems for up to 10 days or more. It just tells you about both the resiliency that we’re able to provide through Sunnova, and also the frailty of the grid that’s operating on the island, and why it’s so critical that we come up with a better solution for these consumers because they didn’t have access to grid supply. And the customers that were dependent on the centralized grid found themselves in a situation where they did not have power and that power outage extended for such a significant period of time.
Bill Nussey:
It’s a game changer. And what’s so cool about our main conversation today is you guys are taking this, what seems to many to be a visionary, to all of us seems kind of obvious, but this visionary idea and taking it to the next obvious level. And we’re going to jump into that in just a moment. But before we do, let’s lay the groundwork on this. Why change in the grid is hard, particularly in the state of California where we’re going to focus in a moment.
You’ve got an incredible rat’s nest of regulations and regulators and laws. Rat’s nest is not a fair word. Actually, when it works and it has worked for decades, it’s effective. But when you want to drive change and you want to improve things, you don’t want to take the things you’ve learned in Texas and Puerto Rico and you want to take it to the next logical step, it can become an encumbrance. So give us a quick education on what an innovator in local energy is facing when it comes to regulations and jurisdictions and legislations, particularly in California.
John Berger:
So yeah, I think it’d be great, Bill, to go back and just have a quick history of how did we get here with our system and the way that we’ve set up. And if you go back well over a 100 years ago and even go back into the race or war between Edison and Westinghouse/Tesla, with the Niagara Falls, what you’ll find is that, essentially, you have energy sources or BTU and then you’ve got conversion devices that takes that BTU and makes it an electricity, as expressed in megawatt hour, kilowatt hour, whatever.
If you go back to even that Niagara Falls, the very first major centralized plant, you had the BTU, which was the falls, that’s clearly centralized. And then you had the conversion device which was the steam turbine, which was made much more efficient to have large scale. So what did you do? You generated the electricity there at the falls and you wired it out. And that’s exactly what they did. And this got into the whole fight on AC versus DC that we, I think, all know of. We know obviously who won that fight. It wasn’t Edison.
And the reason I offer up that he didn’t win is that he was just too early. Now, it was 130 years plus too early, but he was a bit early. And why was he too early? Because if you look at the other fuel sources, coal, that was definitely something that you would like to see centralized in terms of the BTU and the conversion device, again, the steam turbine. Then you go into oil. You could get, as we have heating oil at the homes. That’s fair. But again, the conversion device was much more efficient on the centralized system.
And then nuclear. Pretty sure we’re not going to have nuclear power plants in our backyard anytime soon. I know some people may have some vision of that, but that’s not going to happen with fission. I think we can all agree. And then you get into gas. Gas is a little interesting. Obviously, we have the fuel and some of our generators run on natural gas, and so you can get that to the end point through a pipeline system. But again, the conversion device, the combined cycle turbine, much more efficient on a large scale centralized basis. Wind is definitely something you have to do on a centralized basis. Right?
Solar and batteries, let’s take that. No, those are inherently distributed technologies. And so, you look at the sunlight, it falls most places on earth, right? Distributed. The technology, the conversion device of the solar module, it clearly is distributed. And the battery, we all probably have one in our pocket right now with the cell phone. That’s clearly distributed. So what that has done, and this is where a lot of people don’t understand, is that for the first time in history, we have a decentralized BTU source, the sun, and we have a decentralized conversion technology which is solar and batteries and now software load management, et cetera, et cetera.
So all that means if you were to take a step back, that you were going to have a fundamental change in the centralized system. Now what we believe, going back to Michael’s telecom roots, is that the future will look something similar to what we saw with the advent of telecommunications revolution in the 1990s and beyond, which is that the centralized system will still exist. It still serves some of the large buildings, like big skyscrapers and so forth very well. And we probably will not see the end of that in our lifetime. But it’s not going to be a 100% of the system for everybody anymore. It’s going to be something quite a bit less than that.
What is that percentage? I don’t know. Nobody knows. 40%, 50%, 60%, 70, 10, who knows? But it’s definitely going to be a lot smaller. And therefore, you’re going to see a drop in the centralized power plants of all types, including, over a period of time, there’ll be more and more limited demand for even things like wind and solar farms, for instance. And so when you’ve got the other side, decentralized, that’s going to grow like crazy. And that’s exactly the pattern that we’ve seen over the last 15 years and we think that that pattern will continue to accelerate in terms of its growth. So that’s how we got here.
Now, the other side of that, the regulatory side is, well, how did we end up with essentially a system of socialism and communism where consumers don’t have any choice? And that was a deal that was done by a robber baron and made a deal and said, “Hey look, let’s have as a social good to go to one wire to go to one home” because there was multiple wires being run, not unlike what happened in the cable industry. And then when you look at the deal that they made, they said, “Okay, we’ll let you do that because we see electricity demand growing as far as the eye can see.” And for over a 100 years, they were right. It did.
And when you look at what’s changed recently, it is that, “Wait a minute, I’ve got these decentralized fuel and conversion technologies that I want in the house. My demand from the utility side, because I have them, because I also have LEDs and other demand side management or technology devices that reduce my demand, you can no longer, as a public utility commissioner or the CEO of a monopoly power like a utility, predict and count on load growth.” And so now the game has changed, because I have all these fixed costs and everything is fixed as a utility, I’ve got interest costs, I’ve got fuel costs, those can vary, but I’ve hedged them out. But I’ve also got a lot of capital costs and I’ve got union contracts and I’ve got all these things that I’m piling on more and more costs as they move forward in time, but I’m selling less and less and my growth rate’s a lot less than I thought.
In the meantime, what happened about 15 years ago was we had a fracking revolution, which was centered here in Houston. And what we decided to do or Wall Street decided to do was fry a trillion dollars in the oil and gas industry because they were so excited about the potential. Those days are now gone. The Wall Street’s decided that they don’t like us frying that kind of money anymore. They finally stopped doing that, took them a long time. But then the oil and gas industry said, “We’re tired of it as well. And so we’d actually like that trillion back plus maybe two or three trillion more because we actually have to make a return on our investment.”
And that’s perfectly reasonable. And when you look at what’s happening right now, that’s exactly what’s happening. So that benefit that the utilities have gotten for the last 15 years is gone. In fact, if you go back 25 years, 60%, 60% of utility rates were made up of interest on the debt that they all hold a great deal of, and fuel cost today or a year ago is 30%. So where do we think it’s all going from here with fuel and interest rates? Way up, right? And that’s indeed what we’re seeing, and the utility rates are responding.
So the rate of price increases has increased and we continue to see that that’s going to last for years to come, and it’s all going to feed on itself. It drives more and more people wanting to go and get services like Sunnova to reach out to alternatives. And it also drives them to do what? They want choices. Services changed, their life has changed, they’re working from home, they got these new technologies like we’re talking that depend on electricity. And so their demand for reliability and at a better deal has increased dramatically and will continue to increase to the point where no centralized utility can provide that level of reliability.
And so where we find ourselves is people want a more decentralized, more reliable energy source, a cheaper energy source, and they want to be able to choose who provides them that service. And so now, we have set ourselves up into a situation where we’re at loggerheads with the existing system. We know how we got here, it worked for a while, but there is no other industry in the American economy that is so socialistic, so communistic in the form with these co-ops. And there’s a reason for it. It doesn’t work. Long-term, it doesn’t work.
The fact that it worked this long, we can all debate about that in different time periods, the eighties and nineties, they clearly felt like it wasn’t working then. Again, we got to bail out because of the shale revolution. And no matter what the point of where you think it stopped working in terms of the time is, there is no debate at this point in time it’s not working for people. So no matter what happens, we’re going to see a big change in the system, and we’re going to have that same as just in the 1990s with the Telecommunications Act.
We’re going to need to see some leadership out of the federal Congress and the state legislatures to show consumers that they’re listening to them and that they’re going to give them choice and that they’re going to give them opportunities so technology and innovation and growth and opportunity can enter the power industry for the first time in a long time in American history and really transform our lives for the better.
Speaker 1:
Investor owned electric monopolies have been the predominant business model for delivering electricity to most Americans for over a century. It is a business model that has played an important role in the development of our nation. But the promise of guaranteed returns, the lack of competition in a tidal wave of new technologies have all finally caught up with this model. And the increasing threats of climate change are making the models shortcomings even more apparent. These new technologies are disrupting the old monopolistic model and are providing individuals and communities with greater freedom, more choices and more economic flexibility when it comes to their own energy.
The epic battle taking place between new technologies and freedom of choice versus a century old business model are front and center in the Sunnova micro utility proposal that the California Public Utility Commission must consider. This is a story that might be unfolding in California today but will soon be one we see playing out all across America. For California, the story of how the utilities evolved is long and rich and, in its earliest days, was filled with innovation and bold financing schemes. But over time, that legacy has failed to keep up with evolving technologies, and the cost and consequences are growing every year.
This is a story worth learning about, worth reading about. And one of the best resources for this is a national bestselling book from the reporter and Pulitzer finalist, Katherine Blunt called California Burning: The Fall of Pacific Gas and Electric – and What It Means for America’s Electric Grid. We recommend you consider reading Blunt’s work because this is a story that will become increasingly important to all of us in the very near future. In the meantime, let’s get back to Bill, John and Michael to learn even more about Sunnova’s work in California today.
Bill Nussey:
So through your holy owned California subsidiary Sunnova Community Microgrids in California, you want to be the first solar and storage focused, you call it micro-utility in California. You want to be certified to own and operate energy as a service which you call nano-grids behind the meter, and community assets including the distribution infrastructure which is in front of the meter as part of an integrated microgrid community. So you’re calling this the Sunnova Adaptive Communities.
And today, you just can’t go out and make these. It’s such an obvious idea. So many people love this idea. Such an obvious idea. And you guys are basically, “This is the shot heard round the world,” this is the, “We’re going to try to do this and you’re going to go up against the status quo.” So let’s start with this question. Great vision. You’ve got probably no audience more excited than the Freeing Energy podcast audience that wants to see you do this. This is your best audience ever.
But just to level set, why go do it on your own? Why don’t you go do a CCA and some of the other mechanisms that California has created for some of this independence? Why don’t you work with the utilities and just let them take it over? Why do you guys want to do it this way?
Michael Grasso:
Yeah. So for Sunnova, this is about creating a customer experience through our energy as a services offering that is specific to the needs of a community. We are building the capability so that consumers are in control of their energy, and that that energy that they receive is more resilient, more cost effective, so a lower price, and is obviously cleaner than they would otherwise get if they’re just part of utility own infrastructure.
So why go about it on our own? I mean, it’s really about the fact that in order for the consumers to get the solution that Sunnova is bringing to market, we need to be in a position to provide the full service solution. They need to be able to get access to the Sunnova energy experience, which is Sunnova built, Sunnova managed, right? It’s our technicians taking care of it. It’s ensuring that the capabilities that we’re deploying are holistically supplied.
And if you think about the way that the utilities go to market today, if we were to build a community, for example, and work with the utility, just as we saw happen in southern Florida with some of the work that was going on down there with some of the technologies that they’ve partnered between the utility and other entities that have microgrid technologies, they rate base it. Right? The utility is built on a rate based rate of return as John pointed out. They are going to look to rate base that which means that the local community is not necessarily going to get the economic benefit that you would want them to get from them having a individually customized and designed solution.
I think you also have the fact that utility is holding to certain service level agreements across all of their properties, and are they going to be able to locally treat a singular community in a way that’s different and distinct from how they might have to treat all of their network and facilities? And that’s all assuming that they’re going to make the same level of investment, have the same level of attention that Sunnova would be providing.
We pride ourselves on the fact that we are driving for the highest resiliency of a uptime standard, if you will, for that energy resource. And that the way that we’re bringing the other tools and capabilities to market is in a way that gives that consumer the confidence that there’s going to be someone there to predictively analyze their needs, that we’re going to ensure that the energy supply is being generated, that the energy is going to be delivered, that the load is going to be met, and that we’re going to overall have a situation where the consumer is going to be in control in a way that gets to the outcomes that they’re looking for, which is economics that make sense to them, that are competitive to the local market, and then power resiliency. It’s all about economic control and energy security for that consumer.
And we can’t do that specifically in a relationship with a third party where we’re not in the driver’s seat and able to deliver on the commitments that we’re trying to make.
Bill Nussey:
It’s a great vision. So paint a picture for us, when this neighborhood exists, hopefully very soon, what’s it going to look like to the people that live there? The nerd people that live are like me and they’re going to be poking around saying, “Hey, what are the tech specs on this place I’m moving into?” My significant other might be saying, “Well, what’s the square footage and is there room for the baby?” I’m thinking how many kilowatt hours in the batteries and what’s the size of the solar panels? But generally, if I live in this community you’re thinking about, what’s it going to look like?
Michael Grasso:
Yeah. So first of all, we want to work with a local utility. The idea is that we are connected to the local utility but that we’re in control of the point of connection. So often times called the point of common coupling. So there’s actually a disconnect switch, if you will, between what we build and where we connect with the local utility. And I’ll come back to why that’s important. But inside the community itself, Sunnova is requesting permission to build its own distribution infrastructure. So we want to control the wires that go between the homes and between the energy sources that we’ll provide.
For each of the homes in the community, it would be a combination of services, just like we provide today. So we’re already providing solar on the rooftop, battery storage on the wall, providing load control technologies, potentially even a secondary source of energy, all behind the meter for each of the local residents. Then on the network side, we would be having some centralized resources. This can come in a combination of different types of approaches. So this could be parking structures that go into common space. This could be a ground mount community array. This could be other types of ways that we could bring generation to the community. It would also include centralized storage in the community to compliment what’s behind the meter on each of the premises.
And so working together, we’re creating this organic environment that’s going to be scalable to the size of the homes and the community’s needs. Each home should generate about a 100% of the power it needs on an annual basis. On the front of the meter side, we’d have some of that backup power that we would need for the community so we can operate our own network, excuse me, energy net metering infrastructure between the front of the meter and the behind the meter. And then we can control all of the different ways that the energy is controlled across the entirety of that community.
The reason we want to be connected to the utility locally is because we want to be able to supply the local utility with additional energy when we have an excess generation. And there are likely going to be times where it would be more efficient for us to draw some of our energy from the local utility versus generating it locally or using what we have stored locally. In our application for SCMC, what we said was we expected 80% of the energy that was required from that community to be generated within it and 20% would come from the local utility. We can obviously scale that up. It just requires more land or more technology to deploy.
Bill Nussey:
You can stay connected to the grid in this vision. I think it’s important. So obviously today, you guys are putting in thousands of solar battery systems in California and all over the country. And so now, your big proposal, the shot heard round the world, is you’re just going to connect these up and put a centralized solar storage in some other generation assets potentially. So it seems super obvious that if you are able to put it in someone’s home that you should just build a wire the homes together.
So explain why this is something that’s got the entire country buzzing about this and why normal people that are friends and they’re all for clean energy are having these divisive discussions and debates about what the heck is Sunnova doing? They can’t possibly be building wires to connect houses. That’s just anarchy. I mean, I’m being facetious, but people were really… The galvanizer on your proposal, what’s the big deal of just going from my house to my neighborhood?
Michael Grasso:
I suspect it has something to do with monopolistic control, but I’ll let John start off the response on that.
John Berger:
Well, it absolutely does. And you know what? A microgrid, that’s a term that Michael walked the Sunnova Adaptive Community, and that’s what we think a microgrid is. But if you ask 50 people, they’ll give you 50 different answers. And the interesting thing about it is, then why, if it means something different to almost everybody, not completely, but you get the point, why the fascination with this? Why is everybody, to your point, now just so excited up in arms if you’re opposed to it, which is really the monopolies and their supporters. They’re probably being funded by the rate payers, by the way, through the utilities. That’s another issue that I think is a bit of graft and corruption.
But when you look at what the microgrid means to people and really push on it just a little bit, it means that they have choice. That’s what the way I see it. If I want to do something with my house, I get to do it. And in America, you can do everything you want within the bounds in your house, but you cannot choose your power provider. Think about that. You cannot do that in your own house. If I want to run a wire over to my neighbor, Michael and I were living next door to each other, for instance, and he had a little bit of storage left over because he bought an extra battery. I can’t do that because some monopolist, some bureaucrat tells me I can’t do it.
Well, if I want to do it, why couldn’t I do it? It’s just a wire. He probably took the power to run his Christmas lights he’s about to put up. So we’re just trading. You can’t do that. That’s crazy. And that’s why it fires people up. They’re like, “It’s my house. This is nuts. I go on to do what I want to do. This is a free country.” And it is a free country unless you start dealing in the power industry in the United States.
Bill Nussey:
You sound like someone from Texas, I have to say that.
John Berger:
So what they’re looking for is free…
Bill Nussey:
But it’s not always what people from Texas and the electricity side of Texas would agree with. So that sounds like a distinctively Texan point of view. And it certainly resonates. And people are shocked to learn that, if you and Michael want to share Christmas light power between your houses, it’s illegal. And so that’s what you guys are trying to change. And so tell us a little bit about the process because I think that… We don’t need to get into the deep details, because boy, I think all of our brains would melt, but who has to approve this? What are you guys in the middle of doing and how do people debate it? If they want to see this go forward, who do they have to tell? What’s this process?
Michael Grasso:
Right. So we filed an application with the California Public Utilities Commission to be able to form our own micro utility. That’s really the mission and the vision of SCMC that we’ve been talking about. And at this stage, we’re really just trying to get a hearing to plead our case, to tell our story about why it is that we think our application should be heard.
Bill Nussey:
Wait a minute. What do you mean just get a hearing? Can you explain what that means?
Michael Grasso:
So with our application, we are requesting permission to move forward to become our own micro utility.
Bill Nussey:
Right.
Michael Grasso:
But what we’re seeing in the marketplace is that the IOUs, so the investor owned utilities, and, believe it or not, the CPUC’s owned Public Advocates Office are trying to silence our application and they’re trying to get it dismissed instead of allowing us to actually go in front of the CPUC and be heard as a real ongoing opportunity.
Bill Nussey:
So I’m confused here Michael. So the people that are paid by the state of California to represent the citizens of California, the advocates, right? So I would think that, at the very least, something that’s going to talk about choice would be something they would demand to hear. And you’re saying otherwise. I just want to make sure I’m hearing that right because it sounds a little crazy if I’m… Is this right?
Michael Grasso:
That’s exactly right. They’ve made multiple filings against our application, a protest and a motion to dismiss the application without any public hearing.
Bill Nussey:
Why?
Michael Grasso:
Exactly. We’d love to have that question answered for us also. Our application allows the consumer to get a better rate. There’s no diminishment in their safety. We provide more choice, greater reliability, and a really meaningful advancement toward the state’s own environmental goals. Yet, the CPUC’s Public Advocates Office is trying to [inaudible 00:36:46] us and prevent us from being heard, and we don’t know why.
Bill Nussey:
Well, I’ve done a little research into this. And one of the feedback we get on our podcasts, a lot of people take time to share, they said we don’t ask hard questions. So I’m going to ask you a hard question here, Michael and John. So some of the folks who don’t like this say that, well, if you guys and the home builders build this really cool neighborhood that, by the way, I would love to live in. I happen to be very fortunate and I’m wealthy enough to afford to live in a nice home like this. And if you guys end up taking over this system, then your customers who live in this neighborhood will not be contributing money back to the greater grid.
And so the grid still needs to be paid for the big one and the money taken out from the revenue not paid will end up pushing the cost of the grid on other families who are not part of the super cool neighborhood and it’s going to raise the rates and some of these people aren’t able to pay. I write about this extensively in the book, so anybody that wants to get my perspective, which I’m sure lines up with Michael and John’s, but why don’t you tell us how you guys address that so that we can hear your perspective on it?
Michael Grasso:
Yeah. So I think it is still a question as to what is the dependency on the larger macrogrid for this local community. If we’re operating a 100% independently, and then at the same time offering to provide energy back to the centralized grid, which obviously we could do in locations which they typically have higher power needs and lower ability to serve, because the new communities are going into areas that are typically harder to reach in California as land continues to get used up, we’re actually doing a service to the grid.
And we welcome conversations to talk about commercial relationships back to the centralized grid and how we can share power and/or provide additional capabilities that they might not be able to provide. But again, it starts with us getting a seat at the table, having an opportunity to have a serious discussion about our application and allowing us to be able to put in a commercial position where we can represent the needs of the community, the needs of builders, the needs of a number of other constituents.
And we have a lot of people that are positive on our application. We have a number of backers that would love to see this at least move forward. And the only people that are opposing us right now, again, are the IOUs, the labor unions who work for the IOUs, and the CPUC who’s being funded by, or the PAO who’s being funded by the CPUC to actually support things like this. So it’s really confusing why we can’t get a seat at the table. And we’re going to continue to fight to get our voice heard and be able to move forward with this application.
John Berger:
A couple of other points to add on what Michael just said, Bill. First, we’re more than happy and expect to provide microgrids to low income communities. And nobody ever said that somehow we weren’t going to do that or one of our competitors wouldn’t do that. Why would they not? Particularly when you look at some of the provisions and they recently passed IRA law, right? So that’s one. The second is, the reason why utilities, and this is where it gets a couple of things mixed in here that shouldn’t really be mixed and they should be pulled apart and looked at separately, which is, the utilities extend essentially credit and sell power to folks that they know they have a good idea, but they’re not going to pay them.
And by the way, low income and bad credit, there is some overlap, but it’s not one for one. There’s plenty of people who make a lot of money that they can’t find a way to pay their bills. Most of our customers are middle income, middle class, and there’s a lot of customers out there that don’t make a whole lot of money but pay their bills on time every single month. And so I just want to make sure that that’s understood. But when you look at the credit wrap, and that’s what the utilities have in every state, including Texas, it’s all socialized. Right?
The people that pay their bills, pay for the people that don’t pay their bills. Now, I’m not making a point of whether that’s good or bad. It’s just a fact. It’s a fact. But what’s also a fact is that there is not a quality on both sides of the meter. The front of the meter and the behind the meter ought to be equal. We should have a credit wrap extended to us on the behind the meter and really it’s extended to the customers to give them a better option, better services.
And I think that if you look at some of the actions by the federal government through the IRA, some of the IRA provisions and the infrastructure bill provisions, you’re starting to see some of that start to materialize. Individual states have done some of this as well. And so if you could implement that on a large scale basis, state by state, in terms of providing that same credit reps, so equal treatment on both the front and the meter and behind the meter, then suddenly the world looks a lot different. And you see that people aren’t discriminated against because they have poor credit or don’t make a lot of money, and you open up everything.
And that’s what we’re trying to do, is say, “Hey look, we will make sure that everybody is served as well. We’ll play by the same rules as everybody else. We just want people to have access to these new technologies, these new services where they can get a better energy service at a better price.” And if the knock on impact, this is what I’ll finish with, is that the utilities, the monopolies finally, instead of spending money to make money… And that’s real, it’s not hyperbole, it’s real. That’s how the system works. The more money they spend, the more money they make.
If I had that system, Michael and I would be billionaires by the end of this podcast. Okay? We can do that. They may be forced to change that mechanism and actually force the monopolies to figure out ways to cut costs, which all of us are having to do right now as the economy is not doing as well as it could and it has over the last couple of years. Why can’t they figure out how to cut costs? And they’ve never had to. In fact, again, the more money they spend, the more money they make. So if that’s an impact where they actually feel competition to go out there and find more efficient ways of…
Bill Nussey:
Gentlemen, I love it. I love it. I’m going to share, there’s so many patterns in history, and the battle that you guys are mounting against the conventional wisdom that the best way to serve customers is through monopolies and scale economies. I’ll read you a little speech from May, 1976, the CEO of a little company at the time called AT&T, John deButts. He spoke to an audience and he said, and I’m reading from the quote, “Where the telephone companies deprived entirely of the contribution of common costs that revenues from their discretionary services provide, they would face the necessity of increasing the average residents bill for basic service as much as 75%.”
And what that basically means is that, the AT&T as a monopoly was arguing that if you allow competition on our network, it’s going to raise everybody’s costs. And this is an argument from almost 50 years ago. And what ended up happening is that, in this case, the US government decided maybe they’re exaggerating, maybe it isn’t that bad. And so they said AT&T, “No, you’re not going to get to have this absolute monopoly anymore.” And what ended up happening? Well, there’s almost no argument, the internet was created as result of AT&T no longer owning the monopoly of mobile phones. The iPhone, right?
The entirety of Silicon Valley largely emerged because the US government said that monopolies are really valuable in some ways, but just the sweeping, this one company gets total control, maybe not so great. And so there’s echoes of history here. And I’m hoping that you’re filing with the CPUC, and I’m hoping you have a chance to have a public conversation about it where you can put your point of view in the thousands of advocates that want to see you. And we’ll be there in the audience holding our lighters up for you guys to get this hearing and to be able to build this neighborhood. Yes.
I think that this is absolutely unequivocally the future of the grid. It’s a question of how long can it be delayed and put off. But there is no question that you are promising, and I believe you, 100% better service, cleaner for the environment, fairer to all the individuals, and more reliable in a world that’s increasingly unreliable. So I am really excited and we’re cheering for you guys and we’re going to follow you and share your journey with our readers and listeners as you go fight this.
And if there’s anything we can do, please let us know. And in fact, right now, while I have you, because we’re going to wrap up in just a minute, but while I have you, what is it that people could do to help? Because you’ve got an audience here that’s really excited about this. What can people do to help your cause to help you deliver this service to customers of California and the whole country? What can they do?
Michael Grasso:
From my standpoint, it starts with them becoming more of an advocate for distributed energy. If you don’t have, or have not looked into solar and energy storage for your home, you need to get off the couch and do it. If you haven’t done it for your business, you should give us a call. We can help you with that. So I think it starts with doing what is important in your backyard.
And then I think second, you need to make your voice heard. So talk to your local politicians, talk to your representatives, talk to those in your political sphere of influence and let them know that you want a better solution, that it’s important if not for today, then for tomorrow, that you get access to cleaner renewable resources, that those are distributed evenly across the local utility. And that should come from companies like Sunnova, working with the utility, and that those services need to raise the bar because we have more energy demand coming at us faster than we can imagine with electric vehicles and other energy consuming devices.
And we don’t have the supply to meet it. And it’s going to continue to ramp up and impact our day-to-day lives and our ability as Americans to do the things that we want and need to do, as well as the aging grid is going to get more frail over time. It’s already extremely frail, but it’s going to get worse. And the combination of those two things means you’re not going to have energy and you’re not going to have energy security. And that’s not good for anybody. So step up and make your voices heard.
Bill Nussey:
To everyone listening in, these are the people, their colleagues, their supporters are the ones that are pushing for the vanguard of the future of energy. It’s hard to imagine that this is even a fight, but it is. And John and Michael and their teams and all their supporters are putting up a great fight to make what seems to be an obvious solution, obviously available. And so I hope you will take their advice and chime in, let your voice be heard, learn about this. If you live in California, this is a great time to go write some letters. And we’re cheering for you guys. And let us know how we can help further.
So as we wrap up, Michael, we’ve already put John Berger through this. So we’re going to just put you through the lightning round questions, which is the same four questions we’ve asked, I think, almost a 100 of our guests, which just tells us about how you’re wired and gives our listeners an example of how the leaders, the change makers in this space are wired. So the first question for you is, what excites you most about being in the clean energy business?
Michael Grasso:
I think that clean energy is the only business in the world, especially with solar and distributed resources that Sunnova offers, provides a solution that is both good for the customer, good for the investor, and good for the planet. I can’t find a better industry to represent where everybody wins in this industry.
Bill Nussey:
If you could wave a magic wand and change just one thing, what would it be?
Michael Grasso:
That all consumers, residential and commercial, across this country get off their couches and request a solar quote.
Bill Nussey:
Excellent. All right. [inaudible 00:48:59]. Sorry.
Michael Grasso:
From Sunnova.
John Berger:
He said from Sunnova would be ideal.
Bill Nussey:
Yes. Right.
Michael Grasso:
I think that was a pretty, [inaudible 00:49:05].
Bill Nussey:
You’re a marketing officer.
Michael Grasso:
I want to get the ball rolling here. It’s going to flow to us, I know. But I just need to get people moving because they’re apathetic about energy and that’s the challenge we have in this country is, too many people are too apathetic about energy.
Bill Nussey:
I love it.
Michael Grasso:
And that’s why the category’s not growing as fast as it should be. I mean, we’re [inaudible 00:49:23].
Bill Nussey:
The good news, that was not even a remotely thinly veiled pitch, John. So I’m pretty sure everyone’s going to know who they’re supposed to call. All right. So jumping on…
Michael Grasso:
Www.sunnova.com. [inaudible 00:49:36].
Bill Nussey:
I love it.
Michael Grasso:
Call us today.
Bill Nussey:
I love it. All right. What do you think will be the single most important change in how we generate, store and distribute electricity in the next five years?
Michael Grasso:
This doesn’t go against generation, but without a doubt, it’s going to be the electric vehicle. It’s going to change the way that we think about energy in this country, and it’s going to point out and expose all the flaws in the centralized monopoly distribution network. And consumers are going to be told they don’t have energy or can’t get access to energy when they need it. And as an American, we don’t want to hear that. So I think EVs are going to really point out the fact that we need a better distributed grid.
Bill Nussey:
And the final question as we wrap up this incredible discussion today. I’m sure you both get asked from friends, family, neighbors, people that you mentor, what can people do as individuals who aren’t necessarily in the industry like you guys are every day? What can they do to make a difference? And you may have already answered it, but feel free to say it one more time if you like.
Michael Grasso:
If you’re not supporting the solution, you’re supporting the problem. So step up, make your voice heard, get on the bandwagon with distributed energy. It’s cleaner. Let’s leave a better legacy for our children, our grandchildren, for generations to come. Let’s put this country in a position where we can continue to innovate, where we continue to be a global leader. The way that we’re going to do that is being at the forefront of having clean, renewable energy and having enough energy to supply all of our needs. And the best way to do that today is supporting solar.
Bill Nussey:
I love it. I love it. And one of the things that we ask our guests, we didn’t have to ask you guys, you’re pros, but say, don’t pitch your company. But darn it, I’m going to pitch your company. So if you want to do that, go to www.sunnova.com and see what these fine folks can do for you. We are not paid by you guys. We’re just big fans. And I think that your vision is one that I hope everyone takes to heart. So John Berger, Michael Grasso, thank you for spending your incredibly precious time with us today and we wish you tremendous success and God speed with your vision for changing the future of energy.
One Response
It’s so important to learn insights into the industry from experts with years of experience like John Berger and Michael Grasso. Thanks for creating such great content.