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Welcome to the Experts Only Podcast sponsored by Clean Capital, where we explore the intersection of energy, innovation and finance. Our host is Clean Capital’s Co-founder and former Federal Chief Sustainability Officer Jon Powers. Learn how Clean Capital is revolutionizing clean energy finance and find more episodes at 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.

Jon Powers:

On today’s episode of Clean Capital’s Experts Only Podcast, we interview Tom Kiernan, the CEO of the American Wind and Energy Association, AWEA. We’re going to have a great conversation about the largest renewable energy source in America. Wind is expected to be 10% of the grid by 2020, and many are calling it the new base load and how we’re really creating some great American careers in the wind industry. Tom, thanks so much for joining us on Experts Only Podcast, really appreciate the work you’re doing at the American Wind and Energy Association and really want to spend a little bit of time talking about your personal history, how you ended up at AWEA? How you got interested in the wind space? You’ve served in a variety of roles in government. I think saw you worked at one point at Arthur Andersen, you’re the President of the National Parks Conservation Association for 15 years. So what led you into this space? What led you into the wind industry? And obviously how’d you end up becoming the CEO of AWEA?

Tom Kiernan:

Great, Jon. Well, first thank you for having me on the show, wonderful to be with you and spend the time with you. So I guess, quick summary. Yes, I’ve had a number of different positions most recently as the President of National Parks Conservation Association, which was great, very bipartisan. I mean, national parks, you work on both sides of the aisle. Previously, I had been in business, as you said, Arthur Andersen and other ventures. Also, was an appointee in the George Herbert Walker Bush Administration, working the Clean Air Act back in the early 1990s. So through those different efforts, frankly, I’ve learned to, and very much enjoyed working with Republicans, working with Democrats, basically trying to advance good policy, advance good industries, create jobs in America. So when I was at NPCA doing the national parks work, I actually had, and you’ve got to love the journey of each of our lives, but just on the side of my work, I had joined AWEA as just an individual member, as an advocate, getting the emails and doing a few emails as encouraged by AWEA because I loved wind energy.

Tom Kiernan:

I mean, wind energy, we create jobs throughout the country, very much in rural America. So it’s a job creating, growing industry that no doubt we’ll talk about in a few minutes. But I was an individual member doing the advocacy and then when the position opened up as CEO, it was like, “Whoa, all right, this is a super opportunity.” So yes, applied and one thing led to another and so I’ve been here about four years and just love the work. I mean, we are advancing clean energy, we are growing rapidly, we are actually the largest source of renewable energy in the United States right now. And it’s great seeing that growth, we’ll no doubt talk about the reliability of wind energy. So there’s just so many strengths to wind energy, I’m thrilled to be a part of the team and help advance the industry even further.

Jon Powers:

Yeah. It’s an amazing time for the industry, obviously, for wind and clean energy as a whole. But just about the association for a second, talk a little bit about what’s the mission of the American Wind and Energy Association? What are AWEA members? Who are they? How do you engage them?

Tom Kiernan:

Yeah, it’s a great association, about a thousand members. We’ve got all sectors, if you will, of the wind industry. So we’ve got the original equipment manufacturers, so the Vestus or GE or Siemens that make the big turbines or the blades and the towers. And then there’s this huge supply chain behind them, folks that are making the steel, the bolts. And then you also obviously have the financiers, the attorneys, the environmental folks that do the wind assessments or what have you. So there’s this wonderful diversity of members within the wind industry.

Tom Kiernan:

And it’s also fun. One of the other superlatives about the industry, the wind technicians, the men and women out there maintaining the turbines, that’s the fastest growing profession in this country are wind turbine technicians and that’s per of the Department of Labor. And so many of them are members AWEA as well. So we’ve got this wonderful team of members, again, throughout the country, Republicans, Democrats, rural, urban, just throughout. And so it’s great to have all that diversity come together at AWEA, where here we can help craft the policies and do the communications and the education that advances wind energy. Again, we’re growing rapidly, we’re approaching 10% of electric generation in this country is wind energy, we should be there about 2020. So it’s great, AWEA is a really vibrant, fun place because it’s a vibrant, fun industry itself.

Jon Powers:

Yeah, it is an exciting time. I mean, think about the fact that none of those technician jobs are jobs that can end up getting shipped overseas. They are jobs that are here to stay, they are jobs that everyday Americans can do. When I drive and my family drives from Washington where we live to my hometown up in Buffalo for the holidays, which we’ve done too many times. We drive up through rural Pennsylvania and Western New York and the utility scale projects you see now running some of those ridges, it’s amazing and it’s growing. Can you talk a little bit about the growth of the industry and really looking back over the past decade, what’s helped cause that to happen? And then I do want to talk about the state of the industry today, where we want to go going forward.

Tom Kiernan:

Good. Happy to do that. Let me just go back and say a word, because it’s a wonderful story where I was corrected by one of our members. We were up on Capitol Hill meeting with Kevin McCarthy, majority leader in the house. And this wind worker is a vet, he was managing a wind farm and I was talking to Kevin McCarthy about the jobs that we’re creating. And it was wonderful, he corrected me by saying, “No, Tom, these aren’t jobs, these are careers.” And he went on to explain that when you build a wind farm, it’s obviously a lot of investment to build the wind farm, but once it’s there, you got to maintain it, all the money that you’ve put into it’s got to be maintained.

Tom Kiernan:

He said, “Hey, I’m going to have this job, presuming I do a great job, which I will, but this wind farm is going to need me for the next 20, 30 years at a minimum. I’m building a family around this job, I’m building a house, this is my life. This isn’t a job that’s going to come and go with some boom or bust, this is going to be here the next 20, 30 years.” So this vet, he was talking about how it was such a wonderful, in a way, transition out of the military because he was looking for the strength, the security, he didn’t want a boom bust and that hire, fire, he wanted the strength in the wind industry was given to him that credibility and that the job would be there for the next many years. So just FYI on that wonderful story.

Jon Powers:

Yeah. So let me ask you a quick follow up and then we’ll go back to the original question. So I’m going to Iraq veteran myself and I know in the solar industry, they’ve done some really great work on laying out the incredible influx of military veterans that are getting into that industry. Are you seeing the same thing in wind?

Tom Kiernan:

Oh, very much so. We hire vets at 50%, a faster rate than the average industry here in the United States. And why? Because it’s a growing industry and the vets are finding their skills from the military transition over quite well. Whether it’s working with your hands and somewhat extreme conditions, I mean, you’re up 100 plus meters up in the air, but some of those wind techs just say, “Hey, this is the best office in town,” so to speak. They’re up there, they’re doing great work and they’ve dedicated their lives to this country and to our independence and strengthening America and strengthening our energy independence. And what better way to continue that work than with wind energy that we’re making it here in the United States, majority of all the parts are made here in the United States, it’s helping to get us off of foreign sources of oil or energy or what have you. So wind energy is all about America energy independence and dominance. And so for many of these vets, it’s a perfect fit to the work they have been doing with the military, to now joining the wind industry.

Jon Powers:

Excellent. So let’s go back to that original question. So what has helped really create that growth that we’ve seen in the industry over the last decade that’s gotten us to where we are today?

Tom Kiernan:

The main driver has been the continued reduction in the cost of wind energy. As America’s innovation and manufacturing capability has enabled us to build taller towers, longer blades, improve the efficiency of the wind turbine, so our costs are down two thirds. So it’s two thirds less expensive for wind energy than it was a mere six, seven years ago. So the costs are driving down rapidly. In many parts of the country, we are the cheapest source of new electricity. So we’re the cheapest thing out there and it’s because we make most of the parts here in the United States, this is an American industry and we’ve been able to innovate and have it become more and more effective.

Tom Kiernan:

So that’s frankly, the main driver and why we are growing so rapidly. I will also say that an important part has been in 2015, we finally were able to have a more stable policy environment. All sources of electric generation have different incentives to encourage them. And ours had been on again, off again, on again, off again, and that’s no way to build an industry. And finally, Congress passed a five year, be it a phase down, which we supported, but that five year tax credit, again, phasing it down, but gave us some clarity and certainty and that as well has helped continue the growth and why we are the number one renewable energy source in the country now.

Jon Powers:

So we’re seeing a shift in a lot of the distributed generation sources where the federal policies helped lay the framework to get to the point where those cost reductions have happened and the industries have accelerated. And now the shifts are happening to state level policy to really drive implementation, which I think is exciting. And when a customer, be it a General Motors or Walmart or whoever is buying power, it’s complicated for them to buy across 50 different energy systems. Is wind seeing the same transition from a policy level?

Tom Kiernan:

To some extent we are finding, yes, we’re doing a lot of work in states and state capitals, with public utility commissions. And so yes, we’re in states and regions and we continue to work here in Washington DC to educate Congress and work with the Trump Administration, Department of Energy, Secretary Perry, who’s a good leader and champion for wind energy, et cetera. So we’re working at the local state and federal level to educate folks about the benefits of wind energy. And you did allude to some of the corporate purchasers. Let me go on a quick tangent because it’s really exciting.

Tom Kiernan:

The number and, frankly, diversity of companies that are out there now buying wind energy. Why? Because it’s affordable, it’s reliable, it’s clean. So we’ve got, whether it’s Anheuser-Busch or General Motors or Kimberly-Clark that makes toilet paper, including also then Apple and Facebook and Microsoft, et cetera, all the high tech. But we’ve got this wonderful diversity of companies saying, “Hey, wind energy, it’s affordable, it’s reliable, it’s clean.” They’re asking for it and we’re seeing this throughout the country. So those corporate industrial purchasers are affirming the value proposition of wind energy. They’re not doing it because they’re forced to do it or told to do it, they’re doing it because it makes good business sense for them.

Jon Powers:

Yeah, absolutely. I think it’s an exciting time where it’s not just the Fortune 50s anymore, it’s trickling all the way down into everyday businesses, people are seeing the cost effectiveness of these renewable energy sources. When they’re making these purchases… Let’s talk technically for a second. When a data center’s doing a solar fuel cell project, they’re putting it on site, they’re doing a power purchase agreement, in most cases, to that power, how is GM buying that wind power? And how is that managed?

Tom Kiernan:

Yeah. It’s exciting. One of the innovations in the industry now are different ways, different financial structures, different ways of working with corporate America. So we’re creating new products, different products, whether it’s a virtual PPA or whether it’s a direct connect. So there are a bunch of different options, but let me just give a couple of examples that speak to it. It was exciting, General Motors, I was down at their enormous assembly facility down in Arlington, Texas that builds many or most of their big SUVs. They announced, this was I think last year, but going from 50% wind energy to 100% wind energy powering that facility. And it’s down in Texas, there’s a lot of wind energy and so there was a wind farm that they contracted with nearby. It was connected through the grid, so that wind farm was connected to the grid, the grid connected to General Motors, but they were able to negotiate a PPA and therefore have 100% of their electric needs provided by that nearby wind farm.

Tom Kiernan:

So you’re seeing that type of situation. Also, different tangent, but it’s exciting seeing when companies, whether it’s a Facebook or an Apple or others are looking at a new plant or a new data center, they’re going to the states that have renewable energy or wind energy in particular available. So those states that are making it effective and cost efficient and welcoming for wind energy are getting the benefit of also then attracting these data centers and other manufacturers who want wind energy. So it’s a great partnership and the states are seeing that, “Hey, if we create the opportunity for renewable energy, for wind energy, we’re going to also, not only get the benefits of that wind energy and the jobs that are created by the building and maintenance of that wind farm, we’re also going to likely get some new data centers, there are some new manufacturing facilities that’ll want that clean energy.” So a bit of a tangent, but it’s a really exciting evolution where so many people are seeing the benefits of wind energy.

Jon Powers:

Yeah. It’s interesting that there was a recent comment from the Republican governor of Ohio about the Amazon headquarters, I’m not sure, did you see those? And I’ll paraphrase them here, but he said, “If we don’t have renewable energy here in Ohio, they won’t come.”

Tom Kiernan:

Yeah. It doesn’t get clearer than that. The governor making that direct connect and other CEOs, Apple’s Tim cook, has similarly talked about, they wouldn’t have gone to Iowa, if it weren’t for all the wind energy that’s affordable and clean, et cetera, in Iowa. So it’s CEO after CEO that are saying it. And then at the same time you still have the utilities, Ben Fowke at Xcel, one of the largest utilities in the country talks about buying wind energy. He says, “Hey, wind energy is on sale, I’m going to back up the truck, I want more wind energy.” And he’s just a great advocate because it’s, again, clean, affordable, et cetera. So it’s great, these companies and the traditional utilities, they’re all buying wind energy and we’re thrilled to see that success.

Jon Powers:

So I want to get into the financing part of this in a second. But one of the things that I think is exciting is what we talk about renewables now, it’s not only individual technologies, wind, solar, fuel cells, but people are starting to look at an ecosystem approach to this. And the army at Fort Hood recently did an amazing project with Apex where they’ve got significant wind portion storage, solar, the whole… It’s bigger than a micro grid, it’s a smart grid they’re putting in place there. Can you talk about how the industry’s looking at this integration? And people hear a lot about storage and solar, but not as much about storage and wind.

Tom Kiernan:

It is exciting and this as well is some of the innovation and evolution of the grid and of renewables. It does speak to, and this is something that we’ve been working with Secretary Perry on his recent grid study, that you do need and want a diversity of sources of electricity on the grid. But the reason you want them is you want a diversity of attributes, a diversity of strengths and weaknesses because the grid benefit is more reliable and in the long run, more affordable and cleaner, especially if you have wind and solar and storage and other sources of electricity working well together. So the Fort Hood example, what you’re seeing is first of all, wind tends… Obviously there’s some variability of wind out of one wind farm or another, but you’re seeing when you have a number of wind farms and we’re seeing this on the grid, to some extent, wind self- balances itself. It may not be blowing in Eastern Texas, but it’s ripping in Western Texas or whatever.

Tom Kiernan:

So you’ve got wind that as others have said, it’s kind of a new base load. And then you put some solar on top of that, obviously solar really strong during the daytime. And then some storage that can help smooth out both solar, but also extend the benefits of solar where towards the end of the day, as the sun’s going down, there’s a lot of demand and storage can help shift some of that electric generation, if you will, from solar an hour or two to hit some of the peak demand. So the combination of having wind that spans the day, there’s some variability, but it pretty much spans the day with storage and solar, it’s a heck of a combination.

Tom Kiernan:

We’re seeing it in some examples like Fort Hood, you’re seeing out in California, in many parts of the country where utilities and others are learning how to piece it all together, so to speak, in a really effective way. And you get situations where the largest grid operator, PJM, was referring to wind as the new base load and talking about how reliable it is and how they can add a lot more wind under the grid because they’ve learned how to do it. So it’s exciting seeing that entrepreneurial, creative culture we have in the United States get applied to renewables and show how we can put a lot more renewables on the grid and thus have a cleaner and very affordable grid.

Jon Powers:

Excellent. So let’s dive into the financing of this a little bit. With wind, like a lot of other energy sectors, it relies heavily on project finance. The markets to fund these projects, institutional capital, private equity, tax equity and there’s a lot of other sources that need to get brought into these initiatives to really get the projects out there and running. So what is the state of capital today in wind? And then how can we help recruit more capital to this space?

Tom Kiernan:

It’s wonderful over the last several years to see the increasing diversity of sources of capital coming to wind as investors are hearing about solid returns and reliable returns. So traditionally because of our production tax credit, we had tax equity investors, but we’re seeing more private equity and, as you said, institutional investors and sovereign wealth funds and banks, obviously on the debt side of things. So you’re getting a suite sources of capital to potentially tap into the different wind farms. So just by way of example, in 2016, we had in total $9.7 billion of third party capital invest in the wind industry. And that was up from $8.8 the previous year. So we are seeing-

Jon Powers:

That was ’16 was $9.7 billion?

Tom Kiernan:

Exactly, $9.7 billion in 2016.

Jon Powers:

And here in the US?

Tom Kiernan:

In the US. And that’s again of third party folks and then obviously individual companies, et cetera, are investing significant amount of their own capital as well. But we’re seeing third party investors increasing in the wind space because obviously they’re hearing about good returns, seeing these good returns from the wind farms that have been established here in the United States. Which are, this is a quick side point, but increasingly productive, the net capacity factor of different wind farms is growing. You’ve got some new wind farms that are at high 50% capacity factors, which are really exciting to see as we’re both, getting longer blades, getting improved software. So as a result of that, we’ve got more investors coming forward with more capital at a time, also, when tax equity is seeing the PTC, the production tax credit, phasing down. So it’s a good transition we’re working our way through as we’ve tax reformed ourselves, moving away from the tax equity, or beginning to, to now a lot of these third party investors. So it’s exciting and so far pretty successful transition.

Jon Powers:

So what do you see coming down the pipeline? What are some of the major challenges that are going to maybe handcuff wind? How do we overcome them? And then also in that, what are some of people’s biggest misconceptions of the space?

Tom Kiernan:

And these are both challenges, opportunities, but transmission, clearly we need as a country to have more transmission for any number of reasons. One, grid stability. The more transmission you have, the more stable the grid is, the more able the grid is to be resilient. We have seen case examples, whether it was the polar vortex a couple years ago here on the East Coast or the cold snap in Texas, where wind was really important in powering the grid through some of these weather disruptions, where fossil sources of electricity had forced outages, were not able to keep producing for one reason or another, wind was able to power through it.

Tom Kiernan:

The more transmission we have in the country, the more resilient the grid can be. Also, the more transmission you have from the middle part of the country, where you’ve got a lot of wind energy to load, to demand for electricity, which is a little bit more towards the coasts, then the more opportunity we’ve got to move this affordable, clean wind energy. And also just say, I mean, more transmission is also good for natural gas, for other sources. And a final point on it, there are some that talk about congestion or negative prices is a problem and transmission solves some of those problems. So transmission’s a big one. I will just do a-

Jon Powers:

By the way, for those who are new to the energy space, transmission literally is getting from the source, from the windmill to the turbine, to the end user. So how does that power get from Iowa to maybe Cleveland? So it’s got to move across these transmission wires. And it’s a complicated challenge to put new transmission in because of issues like running those wires through neighborhoods, there’s permitting requirements, and other major initiatives and it’s a constant wrestling match from a policy makers on how to solve that problem.

Tom Kiernan:

Well said, yes. And another different example, but it’s like our highway system, our highway system enables the economic engine of this country to really work, because we’re able to move goods back and forth and around and everybody understands the benefits of our roads and when you have a good, healthy, well maintained highway system. That’s what we need on the grid, is a better, stronger grid that can move electrons instead of cars like our roadways. So transmission’s important. I’ll also just observe offshore wind energy is no longer an idea. We’ve got the first offshore wind farm off of Block Island, Rhode Island, it’s a deep water wind project that’s up and running with five turbines and is going great. We’ve got a number of other projects that are at different planning phases, especially on the East Coast.

Tom Kiernan:

So that industry is getting up and running, it’s partnering well with some of the other offshore oil and gas type companies, they’re saying, “Hey, how can we help? How can we part of the team or the supply chain to build some of these offshore wind farms? So that’s an exciting opportunity as well for the country. So I think for us, we need more transmission, we need to keep driving down costs, we need continued, stable policy, predictable policy, both at the federal and state level. And then with that environment, the men and women in our manufacturing facilities, we’ve got 500 manufacturing facilities, 25,000 men and women in those manufacturing facilities, they’re going to keep driving down costs and getting more efficient. We’ve got over 100,000 employees in the industry, they’re going to keep driving down costs and that’s all to the betterment of consumers throughout the country. So that’s where we’re heading.

Jon Powers:

Well. Excellent. Well, we obviously appreciate it, we as continued leadership in this space and helping to drive the industry forward. I want to end on a final question that just goes back to your personal story for a second. And we end all of our podcasts with this question because I think it’s important to look back and for folks that are thinking of getting in the industry, look for advice from leaders in the industry. So if you could sit down with yourself coming out of high school or college, what advice would you give yourself?

Tom Kiernan:

What I’ll share with you is something I actually share with a lot of younger folks because it has worked for my life and that is, follow your passion. Understand what is it you care a lot about? What really gets you excited? What do you believe in? Why do you believe in it? Understand that and then build your life around that, pursue that, follow your passion. And a career, you’ll figure out a way forward but that’s, I think, the way to add a lot of joy, a lot of meaning to your life.

Tom Kiernan:

And I would also say, to be successful is to care about what you’re doing, have that passion and you’ve got to do a little self-exploration. What do I really value? Who am I? What do I believe in? Where do I get meaning? And I think that can fuel a meaningful life. And I continue to work on it but for me, wind energy, it’s a passion of mine, I love it, I believe in it, I believe I’m helping this country, I’m helping to create jobs, I’m helping to create clean, affordable energy. This is good stuff. So that would be my encouragement to folks in high school or college, follow your passion.

Jon Powers:

Tom, it’s absolutely clear that wind energy is a passion of yours. So thank you so much for taking the time and being part of the Experts Only Podcast.

Tom Kiernan:

Jon, wonderful to join you. Thank you for your good work on this podcast and in other ways.

Jon Powers:

Thanks. What a great conversation, exciting stuff happening in the wind industry. $9.7 billion in capital in 2017 and I think the space will just continue to grow and provide some real opportunity for investors and others. I wanted to thank our producers, Emily Connor and Lauren Glickman for their hard work. And as always, ask you to go to Clean Capital.com and the Experts Only Podcasts and feel free to send us ideas and thoughts and advice. Of course, we always appreciate those five star ratings and you can find our episodes wherever you get your podcasts. Thanks so much and talk to you next.