Episode 38: Gretchen Bakke
This week, Thomas Byrne sits down with Gretchen Bakke, cultural anthropology professor at McGill University. They discuss her most recent book “The Grid: The Fraying Wires Between Americans and Our Energy Future”. Gretchen shares insights from her book on the electrification of America, the development of the modern grid, and her thoughts on the future of utilities. In the past century, America’s electrical supply has evolved from smaller distributed energy sources to mostly monopolized large utility companies.
Gretchen is a cultural anthropologist, author, and electrical grid expert. She is an Assistant Professor of Anthropology at McGill University and currently holds a position as a Guest Professor at the Integrative Research Institute on Transformations of Human-Environment Systems, at Humboldt University in Berlin, Germany.
Jon Powers: Welcome to Experts Only Podcast, sponsored by CleanCapital. You can learn more at cleancapital.com. I’m your host Jon Powers. Each week we explore the intersection of energy, innovation, and finance with leaders across the industry. Thank you so much for joining us.
Thomas Byrne: Thank you for joining the Experts Only podcast. My name is Thomas Byrne. I’m guest hosting this week’s podcast. Today I welcome Gretchen Bakke the author of an amazing book, The Grid, one of Bill Gates’ top five books 2016. We discuss the fascinating origins of the grid in the United States and the challenges it now faces. The book is a must-read for all energy professionals. It’s a great discussion we know you’ll enjoy.
Thomas Byrne: Gretchen Bakke, author of The Grid, welcome to CleanCapital’s Experts Only podcast.
Gretchen: Thank you so much.
Thomas Byrne: You are the first anthropologist on the podcast, so welcome.
Gretchen: That’s an honest honor.
Thomas Byrne: I came about your book the way I assume many other folks did, which is when Bill Gates listed it as one of the top five books of 2016. What was your thoughts when you heard that he put that list out?
Gretchen: You know, it’s interesting because I have great gratitude toward him for that. He’s well-read, but my gratitude is actually that all of the other people on the list that year were people who were already famous. And I was the one person who nobody had ever heard of who had taken this big chance to write this book as an anthropologist about energy and electrical engineering and just trying to explain how the whole grid system and electricity system and storage and how all of it actually works to an audience who had the kind of knowledge when I actually started doing research, which is just like everybody, and not very much.
Gretchen: And so I thought that it was very … I mean I think he did it because he liked the book, he likes those kinds of books, as he said. But he also, he tends to kind of every once in a while there will be a kind of how this thing works or how this thing came about on his list. But at the same time it felt like sort of not a risk for him, but had I been in his shoes it would’ve been sort of risky to say like, “Look here’s this book by someone you’ve never heard of, go read it.”
Gretchen: The problem was the book immediately sold out because the press was also-
Thomas Byrne: As I know.
Gretchen: Quite surprised so it took I think three weeks for them to actually get to print it again and get it back out onto the shelves.
Thomas Byrne: I was in the backlog. I remember ordering a book and The Gene, which was one of the other books on that list.
Gretchen: Yeah, exactly.
Thomas Byrne: I couldn’t get either one of them for a month.
Gretchen: Okay, good. I’m glad that I wasn’t … It wasn’t only my book that that happened to.
Thomas Byrne: Good.
Gretchen: It has a tremendous effect.
Thomas Byrne: Indeed. I mean it’s –
Gretchen: it’s recommended.
Thomas Byrne: Short of Oprah, I think it’s the big recommendation, right?
Gretchen: And I’ve been trying to get the book read, I mean Oprah would be also great because I’ve been trying to get the book read by women. Time and again it comes back to the fact that actually it’s mostly being read by men. But when I wrote it I was really like women are half the population and I wrote it to be this kind of tale of adventure that would be … I think the excitement, one of the things that this book rode upon was this growing excitement and as I was doing the research about actually working in electrical systems engineering as I … As the grid began to change, as solar became more and more prevalent, as generation became something that was private, people could invest in it like suddenly there was just this whole generation of people who would’ve gone into computers or IT or some other sort of engineering that was kind of cooler, suddenly were being drawn into electrical engineering and power systems engineering. That was really exciting to watch.
Gretchen: I had all these undergraduates coming to me and being like I want to make solar panels.
Thomas Byrne: You make it exciting in your book, that’s for sure.
Gretchen: Exactly, it is exciting, it is actually exciting.
Thomas Byrne: Right.
Gretchen: But I do my best to reflect that outward or make that obvious to people.
Thomas Byrne: So let’s do a little history on you and how you ended up getting into the grid. Where’d you grow up?
Gretchen: So I grew up in rural Oregon.
Thomas Byrne: There’s some huge wind farms in Oregon these days.
Gretchen: Exactly. What I was drawn into, I mean there’s a lot of Oregon actually in the book, sometimes explicitly and sometimes between the lines. But there were two things that happened in Oregon that actually drew me into the project. The first was this massive explosion of wind farm development in the Columbia River Gorge.
Thomas Byrne: Yeah.
Gretchen: And that makes up the first chapter, the discussion about that. How wind is a variable source or power generation. It affects the grid, which was designed to run on much more stable, controlled sources of power like a coal-Byrneing power plant or even a hydroelectric dam. So that sort of conflict that was happening very early, already in the 2000’s in the Columbia River Gorge makes up the first chapter of the book.
Gretchen: Then, later on in the book, I talk about this moment at which there was this very big storm and kind of decimated the Pacific Northwest coast, where there’s essentially no people live. But it was all the way from Northern California up to Canada. And nobody’s ever heard of this storm, but it was in my hometown was sort of in the swath that was wiped out by the storm and that was in 2007. I really started to see people losing faith in the electricity system. That to me seemed also, it was one of those things that sort of piqued my interest of like okay, as an anthropologist what I pay attention to is people, or what people do, and how people organize their lives and talk about their lives and take action in relationship to their lives. This to me seemed something really, really new for just regular, not-radical people at all to say I just don’t believe in this infrastructure anymore.
Thomas Byrne: That’s so interesting.
Gretchen: So I’m going to put my money out there and try to figure out something else. What they figured out or what they did was not what you would assume from the outside. It wasn’t like they were like we’re going to put solar panels up and we’re going to make all our own electricity and we’re going to be off the grid, we’re going away from this whole system. It was much more, and I’ve seen this over and over since, we’re going to use this system when it works, but when it’s not working we’re going to have some sort of backup. That has been in the US, been a big driver of the change. Especially coming out of rural communities.
Thomas Byrne: That’s amazing. So let’s set it up. Let’s take it way back to the dawn of the grid. What did the grid look like in the early days before 1900?
Gretchen: So the grid … Grids originally, the very, very, very first one that you could really call a grid was in San Francisco. It was what are called arc lights which are very, very intensely bright light. We use them now for the IMAX theater projectors. That’s the only place we still them, but they’re crazy bright lights and you can’t run very many of them off the generator but you can run about seven. And they all have to be on or they all have to be off. So the San Francisco Chronicle had one of these put into their newsroom and then there were also some street lighting that went in in New York City.
Gretchen: So these were not at all related to the grid that we have now except that there was a power source, there were some wires, and there was some light. Then, what Edison did, and we think of Edison as the father of the grid, which also isn’t quite true. Because the grid, these arc light grids predated him but also because there were changes that happened to the grid after him. But Edison put in a grid in lower Manhattan that was a mile square. And the thing that was really revolutionary about it at the time and the thing we still have is that he had all of these very dim lights. And he had it, he made it so that you could turn one light off without turning off the whole system. And both of these things were really revolutionary.
Gretchen: But the idea, again, went into the New York Times office. Their newspaper men, they needed to have light. Clerks, they needed to have light. This is right around Wall Street. Edison actually electrified his lawyer’s office. He wanted the press to be excited. He wanted his lawyer to work harder. You know JP Morgan also got electric light at that point.
Gretchen: It was also at this beginning of the America that we know now was in the process of trying to figure out how to work more. Because at time with gas lighting, basically it was really hard on your eyes. It made your eyes really itchy and you couldn’t see that well. There was just this sort of need for a better quality light so that there could be longer working hours, especially in the winter time.
Thomas Byrne: So the initial grid is started distributed very much and local.
Gretchen: Right there is … This was sort of a sort of municipal grid, but it was … The grids that Edison made only could go about a mile before you actually had to build a whole new system.
Thomas Byrne: Yeah.
Gretchen: So he had this great plan that he would have a power plant at every square mile of Manhattan, which Manhattan did not think was a very good plan. They had all these … This coal was brought in by horses you know to fuel these generators. There were these very small municipal grids that did go in. There were small grids that people put into factories. There grids that were running street cars. There were grids that some rich people had in their homes. But essentially it was a device that powered something like the size of a college campus today.
Gretchen: It couldn’t expand beyond that because of the actual physical nature of the current that was being made. It was running what’s called direct current and direct current you can’t change it. So a street car company had to run to a much higher voltage on their direct current system than somebody who was running light bulbs. So you needed separate systems for all of these things. And can’t even imagine that today where you would like have a refrigerator and you would have to have a different grid if you wanted to run your fridge versus running your light bulb. That’s the change that came in the late 1880s, early 1990s is where alternating current that Nikola Tesla the famous, and George Westinghouse businessman actually managed to put that, make that grid a viable, marketable thing.
Thomas Byrne: So it’s distributed at that point and then along Edison’s protégé or second fiddle, whatever you want to call this gentleman –
Gretchen: Secretary, yeah.
Thomas Byrne: This gentleman named Samuel Insull. So tell everyone about Samuel Insull and his importance.
Gretchen: So Samuel Insull I think gets largely forgotten. Now we talk so much about Tesla because he was this kind of quirky idiosyncratic inventor. And we talk a lot about Edison because he just made so much stuff that are familiar with today. Samuel Insull was just, just, he was a fantastic businessman. So he was English by birth and he was Thomas Edison’s secretary and he didn’t want to be second. So when he got the chance he took over Chicago Edison. I think that’s what it was called then. It changed names like 15 different times over the century but I think back then that’s what it was called.
Gretchen: Again, like we can’t appreciate at the current moment where people are used to having just one big electricity provider. You’re in PG&E territory, you pay your bill to PG&E and that’s what it is. But at that particular time, there were 18 grids, 18 power companies in the loop in Chicago. So taking over Chicago Edison was not like suddenly becoming the king of an empire. It was like becoming the king of I don’t know, a couple square blocks.
Thomas Byrne: Yeah.
Gretchen: Essentially. But what he figured out was that all of the grids that were in use were being … They were underutilized essentially because they were supplying power at their full capacity only for little pieces of the day. I talk about this a lot in the book is that the kind of way of doing business right around 1900 was to monopolize. That was just when people thought about how you ran a business they thought how you make monopoly out of this business. So he didn’t have a thing, Samuel Insull, he didn’t have a thing. He had this force, which is quite different than US steel. You can’t stock pile electricity. So he had this problem that he wanted to make a monopoly like everyone else was but out of this thing that he couldn’t store or control really the production of and he had a huge amount of competition.
Gretchen: So you put people out of business the regular way, by buying them or buying their suppliers or like bad-mouthing their name or underselling them or all of these sort of normal ways. But he also very slowly figured out how to run a monopoly in the electricity business. The way to do that wasn’t to control a market in a city, so to say, to control Chicago and all that electricity market it was to think about how you could get people to use electricity 24 hours a day. So that you didn’t have to turn your power plant down.
Gretchen: And this is just phenomenal because he was thinking in time. He was a businessman who was thinking about how to provide a product temporarily as opposed to over a space. And nobody else has done that. And even today as we begin to reform our grid, and I’m sure we’ll come to that, there’s a real breakdown where people still want to run an electricity business like any other business. And yet they have this product which is not like any other product.
Gretchen: Insull was the one person who kind of figured out how to do that. So he made sure that he got the business of the streetcar companies who were in the morning and the evening. Street light companies who were at night. Domestic electricity use was also an evening but tend to turn off around midnight. Then factories who could be encouraged to run at night for essentially free electricity and also who would run during the day and the office buildings to have light in the evenings. So before people were getting home. So he was just looking at who would use power and how they would use it. He just kept convincing them mostly by lowering the price just inordinately to buy into his system instead of producing electricity for themselves.
Thomas Byrne: So this when the modern utilities really sort of takes shape. It’s a centralized place that-
Gretchen: Yeah, as soon as he figured that out then there were sort of utility monopolists who just followed that pattern and all over the country.
Thomas Byrne: Then there’s this dance between among the utilities to actually get regulated to enhance their monopoly.
Gretchen: Right, exactly. So they again, there’s this sort of idea that regulation is this thing that sort of comes from the government and controls a particular industry to keep that industry from getting out of … Say about mining for example. How do you make sure that mines aren’t collapsing on people. Well there’s some sort of regulation that goes in and monitors how well they’re being built and blah, blah, blah, blah, blah. Right? So with the electricity industry it was actually Insull went to the government and said we would like you to regulate us.
Gretchen: At that particular moment in time, there was sort of democratic party apparatus. So people would kind of hook the wagon of their interest to a particular politician. And that politician was sort of a big boss and ran the racket of local politics, especially in places like Chicago and Boston. Right? But what Insull said was this is a very risky thing because the infrastructure that we’re building is going to last so long. When you build a power plant you’re thinking, at that time, they’re thinking 15-20 years. Now we’re thinking 50 years, even longer. So that politician will be gone. So it’s very risky to sort of hook your fortunes to a particular person. So he said to the government, to the federal government we would really like to have a bureaucracy which is devoted to regulating us and what we promise is that we will not overcharge the customers. So we’ll be sort of hand and glove with this regulatory apparatus. There’ll be no competition because we can’t have competition.
Thomas Byrne: Yeah, convenient.
Gretchen: Because the nature of this product is that you need 24/7 usage, right? So you won’t … We’ll have competition, we’ll be this so-called natural monopoly and our exchange will be that we won’t price-gauge. So this regulatory sort of infrastructure grew up inside the government that was not then linked to a particular politician but was part of the government bureaucracy.
Gretchen: That’s how all the way to the present in many places there are many kinds of utilities in the US. I think there’s 3,600 of them. Most of us pay a bill to one of these really, really big ones like a Southern company or PG&E. There should be a Pepco there’s a lot them. But there’s also rural cooperatives, there’s municipal utilities, there’s all different kinds of utilities in the US but for 70 years they could not compete with one another. So they had a territory and they got to control all of the customers inside of that territory.
Thomas Byrne: So this starts the relationship between the highly regulated, between the power producers and the bureaucracy and that continues … That becomes the status quo for decades. And I’m glossing over a lot, but then we hit a point in the 1970s where things … I really took from your book a lot of change happened in the 70s that would have repercussions for the decades that followed.
Gretchen: Yeah, absolutely. I think that a lot of those changes were very, very small. So it’s easy to forget that they started in the 1970s because you start to feel them 15 years later or more. I mean so much of what’s happening now was the result of these sort of hairline cracks that were legislated into the system in the 1970s.
Thomas Byrne: And give us some examples.
Gretchen: So there were just many, many things that came to a head in this particular moment. One is that you have to remember that this Samuel Insull he figured out this system for making power and electricity and that lasted for 50 years without any … It never faltered.
Thomas Byrne: Yeah.
Gretchen: So you had a generation of people who had been working in the utilities sector who’d never seen anything else. It was like there as a physical truth to how you ran the electricity business. And that meant that you would have higher plant efficiency, higher power plant efficiency. Every generation of power plant would have a higher efficiency and the price that you would charge would be able to go down because of that. So prices were kept low and would fall actually. Also that America would always use more electricity. So demand would then go up and then you could build a bigger power plant that was more efficient, keep the price down, demand would go up. And this had been going on for 50 years and what happened in the 1970s is all of those things change.
Gretchen: They changed at the same time that the energy crisis happened, which was an oil crisis. We weren’t making very much electricity out of oil. I believe that it was Johnson had said that we should be making more electricity out of oil so there had been some power plant conversions just before the oil crisis happened in the early 1970s, the first of them. But for the most part, we’ve made electricity in the US out of coal. But when the oil prices went up the coal prices went up because everybody who could use coal instead of oil made the transition and drove that market up.
Gretchen: But also plants reached a maximum efficiency. Power plants couldn’t easily be made more efficient than they were at that time and they still to this day run at about that same level of efficiency that was reached in the late 1960s. The environmental movement happened in the 1970s that meant that people began to actually use less electricity. So all of these things sort of came together completely rocked the utilities sector. Yet nobody, there was a lot complaint especially around building nuclear power plants but nobody could actually intervene. It was such a tight hermetically sealed system between the utilities and the government that nobody could actually get in there and say like hey, we’d like to have something change.
Thomas Byrne: Yeah.
Gretchen: So what happened, cut the whole long story short, I know everybody is fascinated by all of the things that happened under Carter in the 1970s is that one very small clause of a huge energy bill that did many, many things. It changed the way that energy is governed in the United States including creating the Department of Energy. One tiny clause said if there is a small electricity producer who can make electricity for more cheaply, it’s called the avoided cost, it would say more cheaply than the utilities then the utilities have to buy that electricity and they have to move it to market.
Thomas Byrne: So interesting.
Gretchen: So this was like … It seems like nothing, right? Complete explosion of like happiness and joy by all different kinds of people.
Thomas Byrne: This is called PURPA.
Gretchen: It was called PURPA, exactly.
Thomas Byrne: What is amazing is PURPA, anyone who’s been in the power industry knows PURPA, the term PURPA and has seen it for years. Yet what I never quite realized is how minuscule it was in the grand scheme of the bill at that point.
Gretchen: Yeah, and the bill passed by one vote. It’s amazing. And there were many different kinds and we tend to think of the renewables revolution coming out of this bill in California. Many, many different experiments with how to make electricity from wind, all these kinds of river dams, just small power plants of various source. But one of the great effects was actually the fact that cogeneration … It had been very normal in the early part of the 20th century and it became very normal again. Which is to say if you have a paper mill or any kind of big hot factory, you can make electricity with the excess heat of that factory and sell that back out to the gird. Which is essentially a double use of whatever your fuel source is and it’s an added income for all these industrial concerns.
Gretchen: So that was really … The renewables revolution was … That we have today was a part of was a result of this bill. But also just this idea that it makes sense to be a little bit more efficient about the way that we use resources like coal to smelt fuel you might as well also make electricity and make a buck off of that.
Thomas Byrne: This … So PURPA really gives a boost to distributed generation or cogeneration. Also gives, also validates renewables.
Gretchen: I would say cogeneration is also distributed because it’s not … You know it’s not one solar panel on one person’s house. It’s not so radically distributed. But it’s not … Not a big electricity factory.
Thomas Byrne: Sure.
Gretchen: Right? That’s owned by a utility that’s sitting there and the utility is completely controlling everything that comes out of it. It’s these factories cogeneration plants are sort of scattered around and then, of course, like wind parks begin to become scattered around, all of these things. The thing that was radical about it is that the utilities lost control. At first a very small amount but it was completely boggling to them.
Thomas Byrne: So what started in the 70s and then into the 80s, we start seeing the renewables. This slow trans … I mean in hindsight it’s a fast transition, but it probably felt like a slow transition at that point, then takes us to the 90s and the 2000s where deregulation starts becoming the norm and the grid starts becoming antiquated and its age is starting to reveal itself.
Gretchen: Right, yeah, exactly. I mean that’s again a giant story. But there are so many funny moments in the whole processes. But one of the things that happens is that the savings and loans are deregulated in the early 1990s so all of this money floods into wind turbines. There was some good tax schemes associated with wind in California. So it becomes this kind of wind bubble and there’s just like cash flying around. And that kind of mainstreamed to the financial world that you could invest in renewables. But this wasn’t just a bunch of crazy hippies. It was a bunch of crazy hippies but they also were creating a product and it sort of inserting it into a regulatory tax world that investment could follow. So that was sort of a game changer.
Gretchen: Then what happens in the 1990s, of course, are many things. But the big one that we all talk about is deregulation. And deregulation was not deregulation in the electricity sector. It was just a complete shift of regulation. So the utilities were still all completely regulated. They still didn’t to make any choices but they had to follow a whole different set of rules than had been there previously. The one that has had the greatest impact is the … In many states the utilities, these big utilities were no longer allowed to own power generation.
Thomas Byrne: What was the logic … That’s so strange. What was the logic for that rule?
Gretchen: Well, it became clear that the utilities were not the most efficient. This idea of building giant power plants was actually not the most efficient or the most cost-effective way to produce electricity.
Thomas Byrne: Got it.
Gretchen: So it essentially was there to introduce competition into the market. Nobody wanted to introduce competition in the lines, like you don’t want a bunch of parallel sets of lines, right?
Thomas Byrne: Right.
Gretchen: But and in fact, that is when electricity production became kind of a cool thing to be getting into is when you could build a big wind farm. It’s not that you just build a tiny one because the original PURPA rules I think were under 50 megawatts. You couldn’t make more than that and sell in, but then with deregulation you could build any kind of electricity factory you want. The utility then needs to buy that power from you because they’re not making power anymore.
Gretchen: Now, this wasn’t so pure like a lot of utilities ended up managing, for example, nuclear power plants that they had previously owned. So there’s still a lot of conversation.
Thomas Byrne: And the utilities, I know to this day, a lot of utilities have separate entities that own these assets when the actually highly-regulated utilities is an affiliate but they don’t have any actual ownership over the assets.
Gretchen: Right, exactly. And there still are states where utilities can own the power plants.
Thomas Byrne: Right. So now that the landscape is you have cogeneration and distributed generation in the market, renewables are in the market, and then third-party ownership of power plants has taken … That’s like so think about what Samuel Insull had in mind where it was basically control everything. We’re now into the 2000s and it’s the opposite. It’s actually becoming much more fragmented again.
Gretchen: Exactly. And then you suddenly have the internet.
Thomas Byrne: Right.
Gretchen: Right. So then people begin trading electricity online and the stock market’s developed, futures market develop. And all of these things that don’t really jive with the was electricity is made. Because the thing about electricity is that it’s instantaneous. So you can kind of guess what the price will be, but then the … Or how much electricity might be needed at a particular time of a particular day. Then there’s all of this bidding between all the various power generators to make that power at the lowest possible price. Then there’s the lines, and who owns the access to the lines and you get things like Enron were it’s so complicated that gaming the system becomes part of the fun of being a part of the system.
Thomas Byrne: Right. And you get the, what was it 2001 or 2002 California crisis.
Gretchen: Blackouts, exactly.
Thomas Byrne: Yeah, blackouts.
Gretchen: Then also there are many in the early 2000s there were a lot of blackouts that seemed to be related to over … Too much air conditioner use. So you have these … Then something we haven’t really talked about but because electricity is instantaneous, which is to say it’s made within a minute of when it’s used. The utilities in the old days had about 10 percent of all of their generating power and all of their line space on reserve for this one or two days a year when everyone would turn their air conditioners on. As competition entered the market they had to start running a very, very tight ship. They couldn’t just have all of these resources sitting on the side. So as they … As things started to get slimmer and more streamlined and all things that we believe are good for industries and companies to do, that was great, except for that day, in fact, in August, when all the air conditioners would go on at the same time. So there were a lot of blackouts that were happening in the early 2000s that were simply the result of …
Gretchen: The grid was old and it wasn’t necessarily being kept up, the wire part of it in the way that it should. But also there was all of this chaos in terms of how power was made, where power was made, who was managing that and it became much, much more difficult to maintain a stable system.
Thomas Byrne: And from these various factors that are converging all in less than 15 years ago, how is the grid starting to transform? You have a great story about what Excel, Excel’s failed attempt at … Address the modernization of the grid. They just couldn’t keep up. What does it start looking like in these … After all these factors converge?
Gretchen: Yeah so you have this situation, sort of this landscape that we’ve been talking about and then into that, you drop the renewables revolution.
Thomas Byrne: Yeah.
Gretchen: Right, and it just hits this like. Not that it’s the worst possible moment. In fact, the renewables revolution was caused by or made possible by all of these very small changes over time. But suddenly not only do you have like coal-Byrneing power plants being replaced by 30 smaller, more distributed natural gas combustion power plants but you have wind, which in the early days was all going on in one spot. It sort of acted like a power plant, it was all in one place. But the wind would blow and it would produce more power, and then the wind would still and it would produce no power.
Gretchen: Then, into that you suddenly have solar, which is distributed like there can be a couple of panels on one house and that’s happening all over the southwest. The problem of managing the grid exploded but also the technology for managing the grid began to start to keep up. So what we have now is this … There is a lot of money after the big Northeast blackout. There’s a lot of money that’s gone into the transmission network to make it more stable and there is some money going into the distribution network which is your local low voltage system that is sort of around your house. Not those big wires but the little wires. But a lot of that has to do with digitization. That’s why we have these smart meters.
Gretchen: Just trying to manage all of this information that is coming out some variable electricity production and distributed electricity production much of which is happening not far away but on your neighbor’s house. So power is being made where it’s being used and it’s using all of these sort of smaller wires and flowing in two directions on the line. Not from the power plant to the house but actually from the houses to all the other houses.
Gretchen: Then, the utilities begin … There’s some financing to that, which I can talk about if you want or not. But the utilities fight especially solar. They fight hard and part of the reason is because they have been required by law, again because it’s kind of exciting to have a lot of renewable generation. It makes sense if you’re living in Arizona to produce power from the sun as opposed from coal. But they fight very hard this particular set of shifts. The reason behind it is that the revenue is being stripped from them. They’re now paying retail rates for power instead of buying it wholesale and selling it retail they’re buying and selling it retail so they have no money.
Thomas Byrne: Yeah.
Gretchen: At noon there’s too much electricity on the system. So if you have a ton of solar there’s more electricity than can be used and that, it turns out, for the grid is just as bad as not having enough electricity.
Thomas Byrne: And this is only getting worse.
Gretchen: The last 10 years.
Thomas Byrne: Yeah and this is only getting worse with every passing day, right?
Thomas Byrne: This tension and this sort of imbalance between what the utilities provide and the services they provide and how the energy landscape is becoming more distributed.
Gretchen: Yeah, absolutely. And there are utilities who have been trying to get out in front of it. So the first impulse by many utilities was to say like to just throw everything at stopping this process.
Thomas Byrne: Right.
Gretchen: So there’s a beautiful story of somebody put up solar panels on their roof in New York City and then the backup power, the backup fee that they had to pay, so essentially like if something happened and their panel didn’t work and they had to go back onto the grid and take ConEd, so electricity from ConEd. So for the right to do that it was $36,000 a month. So these sorts of things … Somebody actually in Florida this just happened to them as well. So it was sort of this first try of just being like no you can’t do that it’s too complicated and too expensive.
Thomas Byrne: Oh, my gosh.
Gretchen: And that’s done now. I mean ConEd is actually one of the most encouraging sort of excited to actually put together bids and say okay how can all of you, how can this neighborhood or this suburb figure out how to create a more secure grid by producing electricity for yourself? So that’s all in the past. I don’t want to bad-mouth them now because they’re doing really pretty amazing stuff.
Gretchen: Green Mountain Power in Vermont is also, they at one point they had a limit of I think it was 6% of electricity made by solar. They raised it to 15% and within 8 months they were at 15%. Then they stopped again. Every time a utility stops, says we can’t integrate anymore renewables, any more variable renewables they get all of this bad press.
Thomas Byrne: Yeah.
Gretchen: So and in some cases, it’s because they really are trying to not go out of business. So maybe deserve bad press because they should be working hard to figure out how to have a renewable powered electricity system that works. But in many cases they’re trying to figure that out. But they just need … When you increase by that, by 10% in eight months, it’s like okay whoa. Now what? Okay, 45%, go. And Hawaii is also, Hawaii is facing this, southern California is facing this.
Gretchen: When you can see, I mean the big joke is Florida, right? With-
Thomas Byrne: All the sunlight, right.
Gretchen: It has all that sunlight and has no solar power because of this very tight relationship between the utility and the legislature there’s essentially no solar power in Florida. But the utilities are investing in renewables everywhere else in the country.
Thomas Byrne: What is the proper role for utilities? Today you’ve discussed a few who are doing it well like ConEd, Green Mountain Power. I’m glad to hear ConEd because that’s my service provider.
Gretchen: They’re doing well.
Thomas Byrne: Yes.
Gretchen: They were not but they decided it was better to be a leader than a follower on this one and they really changed their philosophy and turned themselves around.
Thomas Byrne: So how do utilities play a role, what is the future utility look like?
Gretchen: I think it’s up for grabs. There are some utilities which have said their job is to facilitate, so to manage the lines. And in fact, when you grid, people immediately think of the lines, they don’t think of the whole … They don’t think of generation, for example, as being part of a grid, or a toaster as being part of a grid. They think just of the lines. It starts to move in the direction of the utility being the one that manages the lines and makes sure that the … There’s enough space on those lines for the electricity which is demanded in one particular place to actually make it to that place.
Gretchen: There are utilities who have tried to figure out how to be service and knowledge providers. So, for example, they’re the ones who you would rent your solar panels from or you would take out a long-term lease. So in many places people don’t buy solar panels and put them up on their house themselves. They actually lease them from a company. This was … I’m going to forget the name of this, it’s one of Elon Musk’s spinoff companies.
Thomas Byrne: Solar City.
Gretchen: Yeah, exactly, the first one that began to do this, like this leasing. They would get all of the tax credits from the federal and state governments for this but then you would simply pay a rate every month like a mortgage to them.
Thomas Byrne: Yeah.
Gretchen: So there are utilities which are now offering that kind of service. So they’re in a way owning generation. But it’s sort of one solar panel at a time. There are utilities that believe that 100% … They have sort of an ethic that says 100% renewable power is actually what we need, so how can we make that happen? That’s what you see with Green Mountain Power.
Thomas Byrne: Yeah.
Gretchen: They’re really trying to figure out how it is that they can make an entirely renewable, which means very variable system, function. Then there are other utilities that are completely uninterested in that. There are utilities who will put in one microgrid because everybody else is doing it.
Thomas Byrne: Right.
Gretchen: You know? So they can see look we have one too.
Thomas Byrne: They needed the headline, exactly.
Gretchen: Exactly, exactly. So again, because there are so many utilities in America, because the cultures of the US are so different in different places, because the natural resources are so different in different places… You just in the south, for example, you just don’t have the hilly terrain that’s going to give you good hydropower.
Thomas Byrne: Right.
Gretchen: So there are other resources, there’s a lot of sun, there are some natural cave structures that would allow for pressurized air storage. So it’s not storing electricity but it’s using electricity to compress air then when that air decompresses it can run through a turbine and produce new electricity. So you can sort of use it like a battery without any chemicals. So that’s you, the south has resources that would allow for that kind of development.
Gretchen: But, you know, you’re just going to get a different story than you are in Iowa. Iowa being one of the most renewably powered states in the country. But not very many people, but they have huge wind resources and they have huge solar resources. They are trying to figure out how you run a farm on that. So different regions of the country have different priorities, have different natural resources available to them, have different business structures, have different cultures, have different amounts of money. It means that in fact, the grid has always been sort of local, but that’s playing out even more now as decisions, for example, that are being made in the west coast are quite different than those that are being made on the east coast.
Thomas Byrne: And are you confident that as we kind of go through this transition that we’re going to maybe 10 years from now, 5, 10, 20 years from now have the balance right where we can … Where the grid, or whatever we’re defining as the grid can be the foundation where renewables … I think it really is a question of how … Are we ready for renewables to become the primary energy source over the next 10 years, 20 years.
Gretchen: Yeah, so talking to electrical engineers, they are the most excited population anywhere.
Thomas Byrne: Wow.
Gretchen: What they have been set with is a series of extremely good solvable problems. And they’re working very, very hard to figure out how to create a stable electrical system that is running on renewables. And there are many ways to do that and they’re working on all of them.
Gretchen: So one of the things that I really found when I was writing the book is that I would talk to people and they would want this disaster scenario. They would sort of be like when is the moment going to happen when it’s a fire storm and the whole country’s down and the terrorists get us and there’s a … And there’s some sort of like neutron bomb and we don’t have any electricity and blah, blah, blah, blah, blah. Or it just gets so old that the whole thing falls apart and suddenly we’re like Puerto Rico is today.
Thomas Byrne: Right.
Gretchen: Right? But the whole nation. Actually, the story that’s there is not that story. The story that’s there is things are changing and there are some people ahead of that change. So for example the first companies that are putting in wind farms. They weren’t … They didn’t care about what the transmission system was like so the utilities at that point were kind of behind. But now there are new actors who are trying to get ahead of the change. And there’s always this kind of like two steps forward, one step back movement that’s happening. But it’s moving us fairly quickly along toward an extremely diverse electricity system. Which is to say that if we want 100% renewable, and I’m happy that Hawaii and California and Vermont are trying this, but if we want a system that’s 100% renewable that’s quite different than saying that we want a system that is radically diverse.
Thomas Byrne: Right.
Gretchen: That kind of radical diversity, which is to say, it’s not just coal that’s going in and electricity that’s coming out, it’s wind, it’s hydro, it’s solar, it’s tidal power, it’s geothermal, it’s biomass, it’s coal, it’s natural gas. All of these things have become a part of the mix and that’s already true. So I think often when we talk about an energy transition we think okay coal will be gone and it will all be wind power. Like it will be a one to one transition.
Thomas Byrne: Right.
Gretchen: But in fact, both infrastructurally and in terms of fuel it’s going from one thing, we had one big grid that worked, well actually we had four. We had a very big grid system that ran almost entirely upon coal, not totally, but almost entirely upon coal. Now we’re getting much more diversity as microgrids come into play and begin to be networked into each other as particular houses, as we go back to this Edison model where you have a very, very small local grid, but this never the less ties into the big grid. So there’s sort of diversity in infrastructure that we’re trying to figure out how to knit all of that together.
Gretchen: There’s diversity in markets as neighbors being to attempt to sell electricity to their neighbors as opposed to selling it to the utility and then their neighbors have to buy it back from the utility. Then there’s also diversity in the fuel. So what we’re using to make electricity with. That to me seems to be, short of some sort of legislation from on high that says we will no longer have any fossil fuels in the system at all, that seems to be the way that things are going across the board is from kind of a monolithic way with a couple of exceptions way of doing things to an interoperable that radically sort of creative non standardized way of doing things.
Thomas Byrne: Wonderful conversation, Gretchen. This is a fascinating topic and especially today. Wonderful contribution to this space. I want to thank you for joining CleanCapital’s Experts Only podcast.
Gretchen: Yeah, no it’s great. And as you can tell, when people say the grid, they’re like, oh that must be really boring, but it’s really not.
Thomas Byrne: Thank you, Gretchen Bakke, for an amazing conversation. We hope enjoyed it. And thank you to our producers, Lauren Glickman and Emily Connor for supporting the podcast and thank you to the listeners, our growing listener base for joining us each week.
Thomas Byrne: For more information on CleanCapital please visit cleancapital.com.
Jon Powers: Thanks for listening in today’s conversation. Find more episodes on cleancapital.com, iTunes, or wherever you get your podcasts. If you like what you hear, be sure to subscribe and leave us a five-star review. We look forward to continuing our conversation on energy, innovation, and finance with you.