00:00:01
I'd like to welcome read hunt to knowledge at Wharton today read is the CEO of a company called Coalition for
00:00:08
green capital that's a nonprofit corporation and I think the title suggests what it's about but he's also
00:00:14
formerly a chairman of the FCC the Federal Communications Commission that was in the mid 90s under President
00:00:23
Clinton so I'd like to start out asking you about your ebook which is titled
00:00:30
zero hour time to build the clean power platform and you right in there you have
00:00:35
an interesting provocative first sentence I thought which is that modern life rests on two electromagnetic wave
00:00:41
platforms knowledge and power the power platform is where the knowledge platform
00:00:46
was in 1993 would you explain the thinking behind that so you're suggesting that where we were with
00:00:53
computer technology in that sort of thing back in the early 90s is where we are with the power platform or green
00:01:00
energy perhaps that's exactly right let's go on a little time travel trip at
00:01:06
least in our imagination take with you on this trip you're of phone or your computer or your television set and go
00:01:16
back 20 years and it won't work and that's because the communications platform of 20 years ago has been
00:01:23
completely overhauled I don't want to digital everything that was analog is not digital that's true for television
00:01:30
that's true for cellular phones all the standards for all the communications
00:01:36
equipment everything is completely different how did that happen one trillion dollars of investment in the
00:01:42
United States in about 10 years roughly 1995 the 2005 we completely rebuilt as an economy and as a society the
00:01:52
knowledge platform who made those investments oh those investments were made by lots of different people some of
00:01:58
them became very very rich some of them lost all their money one thing we know is that that tremendous wave of
00:02:06
investment increased the average income for every quintile in the an economy it's the only decade since
00:02:13
the 1950s in which every quintile in the American economic ladder has seen its income go up so economically was a very
00:02:22
good thing and of course for productivity gains and for changing life as we know it was very very good what
00:02:30
I'm saying is that it we're at the exact same starting point with respect to the
00:02:35
other electromagnetic waves those that give us electricity so this is very interesting and provocative and I think
00:02:45
that one of the key things that that you talk about in the book and one of the key idea is about how to get from here
00:02:51
to there is that this idea of a green bank is that right yes uh you know what is a bank a bank takes deposits and it
00:03:00
makes loans a green bank would be a bank that gets money from somebody and then loans money out to clean energy projects
00:03:08
who's that somebody well uh in the case of the states where our nonprofit is now
00:03:14
working the state of Connecticut the state of New York the state of California the state of Vermont the
00:03:20
state is contributing capital or planning to contribute capital to a green bank and then the money is being
00:03:26
loaned out in the state of New York they just loaned out several hundred million
00:03:30
dollars to private investors who are putting in even more money for a total of about a billion dollars of capital to
00:03:38
go into clean energy markets so the idea is that the state which I guess could be
00:03:43
on the federal level contrite now we're talking on a state level would invest
00:03:47
money and it would either make money or break even in this bank presumably so there's really at least over the long
00:03:56
term though cost to taxpayers perhaps something initially but that that money would be paid back that's exactly right
00:04:02
okay so but it takes the government to participate because why there's no profits at first and so there's no
00:04:09
interest by any company to do something like this is that the idea i'm not quite
00:04:13
but here the reasons reason number one is a most clean energy projects are unfamiliar to most commercial banks
00:04:22
they're not in the business already of loaning to people for putting solar panels on their roof they're not in the
00:04:31
business of loaning to a community to build a community solar farm that maybe isn't very big but would serve a town or
00:04:41
or or a small city so they're not adept at evaluating what the risks might be
00:04:46
and they don't know how they just don't have anyone on staff that does risk
00:04:49
analysis and number two since the great recession began in 2008 2009 many many banks have worried a great deal about
00:05:00
their own balance sheet and they've been averse to taking on risks in lending so
00:05:07
that's further inhibited their willingness to get into clean energy lending as a as a category a third
00:05:14
problem is that many clean energy projects are kind of small you want to put solar on your roof and maybe is a
00:05:20
twenty-thousand-dollar project a big commercial bank would say you know that's a home improvement loan that's
00:05:26
not the kind of loans we make go somewhere for a home improvement loan but when you go somewhere for a home
00:05:32
improvement loan they don't consider solar on the roof to be a home improvement loan all this can change but
00:05:38
if we want to get the clean energy markets growing quickly and we do if we want to deal with climate change then
00:05:45
the state wants to step in and say well I'll just kind of nudge it here at the
00:05:48
beginning but I'm not going to do anything unless the private sector is going to join up with me and provide a
00:05:55
lot of the money to so think of the state or the government is being the leader but not leading to much just
00:06:02
getting in basically getting in the water and saying to the commercial lenders the water is fine come on in
00:06:08
that's what we've seen happen in Connecticut which is the oldest state greenbank it's three years old and we
00:06:15
have found that for every dollar of state lending we attract about ten dollars of private sector lending and
00:06:21
how many dollars in projects have been committed so far in Connecticut which is not a very big stage right it's about
00:06:30
it's almost three hundred million dollars and that's 43 million people in
00:06:34
the state and what kinds of projects is this green bank funding what is this 300
00:06:40
million funding two things in particular one is what we call the whole building overhaul that might be a strip mall
00:06:48
where they put solar on the roof and they exchange the windows single paint windows for double pane windows and
00:06:56
maybe there's a fuel oil boiler that's replaced in you know some central
00:07:01
location so it's a whole building overhaul and then that lending is put on the tax bill by provision in the state
00:07:09
statute and as I said the Connecticut green bank will make the initial loan but later the private sector will come
00:07:17
in and be part of the lending structure so the building becomes more valuable and the occupants pay a lower amount for
00:07:24
electricity and eventually the taxpayers are made whole what's what's the break
00:07:30
even on something like that in other words at what point you know how many years the idea do you pay back the loan
00:07:35
and then after that you're actually quote-unquote making money bit by saving
00:07:39
money on energy well the Connecticut green bank doesn't make any loan unless
00:07:45
the net present value of the savings is greater than the amount of money invested everybody wharton knows what
00:07:52
that means right it means you have a net present value positive number at the very beginning otherwise we don't put
00:07:58
the money in at the beginning at the very beginning its net present value positive now the payback will vary
00:08:05
between four and seven years meaning the cash shot will have come back in that time period and then after that time
00:08:12
period it's all gravy okay I think that's a financial term Frankie you asked me what projects that's it that's
00:08:19
probably our number one example okay the number two example is distributed solar
00:08:23
on residential roof tops did were there any other efforts to promote solar on rooftops taken I'm just familiar with
00:08:33
complaints about in the u.s. in general compared to a place like Jeremy that there's just a lot of regulation that
00:08:39
slows down the ability to get get these things rolling fast which is what you're trying
00:08:44
to do with the funding did they do anything about regulations in Connecticut yeah we have been trying to
00:08:49
slim down the permitting process which can take a long time or it can cost a lot of money yeah and we do that through
00:08:56
a project called solar eyes so the Connecticut green bank goes to a town and it says to the mayor if you promise
00:09:04
that you will expedite the permitting process then we will loan money in bulk to everybody in your town and then the
00:09:12
mayor says that sounds like a pretty good deal if I cut the red tape I get some of the green and we say that's
00:09:18
absolutely right that's interesting because i know in germany a permit can take two or three days i think last time
00:09:23
i looked right here in this country I they'd the averages months Germany shouldn't Merman II was ahead of the
00:09:30
United States and pretty much every other country and in the Western world in terms of expediting permitting but
00:09:37
Germany made I say this with respect for their motives Germany made a big mistake
00:09:42
consoler which is that they decided that the way to grow a solar industry was to
00:09:48
have a guaranteed price that was very very high called a feed-in tariff and the problem with that is your the
00:09:56
government is buying the electricity and then giving it to the consumer at a lower price than the government is
00:10:02
paying that's a buy high sell low strategy that's true in governments and
00:10:08
in business as a way to eventually go out of business so when that's not what
00:10:13
we're talking about in Connecticut we're talking about in Connecticut and in the
00:10:16
other states what you said earlier making the taxpayer whole having the consumer be getting cleaner and cheaper
00:10:25
electricity so this is innovative financing in the positive sense that's right yeah but it's you know not unusual
00:10:33
governments play a big role in financing roads and bridges and public schools and
00:10:39
the host of other facilities in the social landscape so having governments extend their role to a modest degree
00:10:48
into changing the energy platform of the United States from carbon and expensive to clean and
00:10:55
cheaper I don't think it's asking governments to do something unheard of
00:10:59
and I can't help noticing the parallel between what happened in the IT world
00:11:03
which is that it was actually the government jokes notwithstanding that invented the internet and you know
00:11:11
provided the basic research that led to the internet as it does in lots of areas
00:11:17
like medical research pharmaceuticals and all that a lot of the basic research is paid for by the government and then
00:11:23
companies come in and figure out how to commercialize you know in the IT world I
00:11:26
would say that you can credit or blame the government for two big things number one as you said the initial research
00:11:35
into the technologies that ultimately gave birth to the internet as a commercial phenomenon that initial
00:11:42
research was paid for by the taxpayer a long time ago a Defense Department wasn't it yep and when the taxpayer was
00:11:50
paying for that research the taxpayer you mean everybody else we didn't really
00:11:54
have any idea what would happen and neither did the experimenters who were doing the work that's the first of two
00:12:01
things the second thing was done during the Clinton administration and here's
00:12:06
what it was the government decided that the internet could borrow the existing infrastructure the telephone network for
00:12:15
free and so the early days were that you would unplug your telephone line from the back of the device called the
00:12:23
telephone and you'd plug it into your computer at no charge there were a bunch
00:12:29
of other regulatory measures like that but the collective decision in the Clinton administration was let's let the
00:12:37
existing infrastructure be used by the usurpation revolutionary change oriented new technology that's what we need to do
00:12:45
in energy we need to have the grid be borrowed for free by the distributed solar people and the other new
00:12:51
technologies let's say we did that because look at you talked initially about how much change has happened in 20
00:12:59
years so let's fast-forward 10 or 20 or 30 years ahead with clean energy what
00:13:03
percentage of US energy do you think would be delivered via green methods whether you know alternative methods
00:13:13
whether its wind solar water you know whatever it might be okay well hold on to your hat because actually I've spent
00:13:21
a lot of time crunching the numbers with people if the solar distributed solar industry today is about one percent
00:13:29
market share of energy it's reasonable to think that that can double every 12
00:13:34
months doubling every three months gets you to a very big number in 10 or 20 years very very big number it's also
00:13:44
reasonable that the wind sector in the United States can be ultimately about twenty to twenty-five percent of the
00:13:53
total energy sector you put those two things together and the majority of all electricity in the United States can be
00:14:02
made by the Sun and the wind and that's within how many years um it depends on
00:14:09
how fast growing you actually think it all could be with the appropriate array of state where even let's say a
00:14:18
mid-level scenario right oh I would say a decade a decade the reason the decade it could be the majority of electricity
00:14:26
is that right an electricity provides what percentage of our power well well good way to think about it is the
00:14:33
transportation is about a third and all the rest is some electricity used in some particular wank so for example
00:14:41
electricity is used in industrial processes or it's used in lighting or it's used in some cases in heating so
00:14:48
there's lots of ways that electricity mmm sneaks into the usage patterns but
00:14:54
more or less transportation as a third or forty percent in the rest is driven by electricity and even that
00:15:00
transportation could be largely electric right well what if we if we really wanted to run you know tell an
00:15:06
optimistic story about electricity which I think we should want to do then I think that what the way to think about
00:15:13
it is that in about two and a half years when the electric vehicles that come into the mark
00:15:18
will be priced at around 40 thousand dollars then you'll see a tremendous increase in the percentage of annual
00:15:25
vehicle sales that is attributable to electric cars so this is seems so much more optimistic or quicker than the
00:15:34
kinds of numbers that you usually hear it's time to be optimistic a lot of things have changed in the last three or
00:15:39
four years that have given rise to optimism one is an eighty percent drop in the cost of solar panels that should
00:15:46
give rise to optimism the other thing is the innovative business models by solar
00:15:51
installers and by other clean energy companies I do want to say this there's
00:15:56
one fundamental obstacle which is the existing energy industry is carbon based and the existing energy industry is not
00:16:08
going to be a big huge winner if the clean energy industry substitutes for its role in the economy that's that's
00:16:17
what happens in business somebody wins and somebody's place is taken how do how
00:16:24
how would advocates of green energy overcome that huge obstacle Oh consumer demand there are two ways to overcome it
00:16:33
one is you get the government to tell everybody thou must buy clean energy and if we have to deal with climate change I
00:16:40
guess we might have to imagine that but there's this easier way in a market driven economy you delight the consumer
00:16:47
you please the consumer you make the consumer clamor for the better deal if I went to anybody in the United States and
00:16:54
said could I just give you electricity that is cleaner anyone's going to say
00:17:00
yeah but is it cost more suppose I say it's cleaner and cheaper who's going to
00:17:04
say no to this and this is what's very doable is what you're saying even on a
00:17:10
large scale it's totally doable on a large scale it's the secret of SolarCity
00:17:13
just to give you an example of a company Solar City could you just give us a brief well solar city is the rocketship
00:17:22
story of solar installers but it's being emulated by other companies all across
00:17:26
the country and unlike a lot of other Americans I opened up an envelope home just last week and it said would
00:17:34
you like to meet somebody from SolarCity because you know if you have a high enough credit score will give you a
00:17:40
clean electricity off your roof and it'll be cheaper than you're paying from
00:17:44
the grid this is not a bad offer could you give us just a quick idea of what you thought about the us-china climate
00:17:54
agreement it's a historic agreement in there are two reasons reason number one
00:18:00
when the president united states and the leader of China President Obama and she
00:18:05
have a handshake understanding about reducing carbon emissions 20 by huge huge numbers in less than will in about
00:18:15
a decade when that happens the two countries the two economies that are responsible for forty percent of all
00:18:22
global emissions have taken a step farther toward the necessary clean energy future than any other country or
00:18:31
any other region of the world that's a really big deal now we are leaders with
00:18:36
China and everybody else should step up in every other country and match our promises that's reason number one reason
00:18:44
number two what the president said in Beijing is that the United States would increase its goal of cutting emissions
00:18:53
by fifty percent over the previous stated goal in other words he's now saying that in just 11 years will reduce
00:19:02
emissions by twenty-seven percent approximately it's a very very big number it puts us done a very ambitious
00:19:10
path but one in which it actually is possible for Americans to have cheaper and cleaner electricity
00:19:35
you