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I'd like to welcome read hunt to
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knowledge at Wharton today read is the
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CEO of a company called Coalition for
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green capital that's a nonprofit
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corporation and I think the title
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suggests what it's about but he's also
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formerly a chairman of the FCC the
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Federal Communications Commission that
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was in the mid 90s under President
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Clinton so I'd like to start out asking
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you about your ebook which is titled
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zero hour time to build the clean power
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platform and you right in there you have
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an interesting provocative first
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sentence I thought which is that modern
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life rests on two electromagnetic wave
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platforms knowledge and power the power
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platform is where the knowledge platform
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was in 1993 would you explain the
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thinking behind that so you're
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suggesting that where we were with
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computer technology in that sort of
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thing back in the early 90s is where we
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are with the power platform or green
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energy perhaps that's exactly right
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let's go on a little time travel trip at
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least in our imagination take with you
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on this trip you're of phone or your
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computer or your television set and go
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back 20 years and it won't work and
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that's because the communications
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platform of 20 years ago has been
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completely overhauled I don't want to
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digital everything that was analog is
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not digital that's true for television
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that's true for cellular phones all the
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standards for all the communications
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equipment everything is completely
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different how did that happen one
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trillion dollars of investment in the
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United States in about 10 years roughly
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1995 the 2005 we completely rebuilt as
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an economy and as a society the
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knowledge platform who made those
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investments oh those investments were
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made by lots of different people some of
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them became very very rich some of them
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lost all their money one thing we know
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is that that tremendous wave of
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investment increased the average income
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for every quintile in the
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an economy it's the only decade since
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the 1950s in which every quintile in the
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American economic ladder has seen its
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income go up so economically was a very
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good thing and of course for
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productivity gains and for changing life
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as we know it was very very good what
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I'm saying is that it we're at the exact
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same starting point with respect to the
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other electromagnetic waves those that
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give us electricity so this is very
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interesting and provocative and I think
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that one of the key things that that you
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talk about in the book and one of the
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key idea is about how to get from here
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to there is that this idea of a green
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bank is that right yes uh you know what
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is a bank a bank takes deposits and it
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makes loans a green bank would be a bank
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that gets money from somebody and then
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loans money out to clean energy projects
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who's that somebody well uh in the case
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of the states where our nonprofit is now
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working the state of Connecticut the
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state of New York the state of
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California the state of Vermont the
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state is contributing capital or
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planning to contribute capital to a
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green bank and then the money is being
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loaned out in the state of New York they
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just loaned out several hundred million
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dollars to private investors who are
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putting in even more money for a total
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of about a billion dollars of capital to
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go into clean energy markets so the idea
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is that the state which I guess could be
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on the federal level contrite now we're
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talking on a state level would invest
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money and it would either make money or
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break even in this bank presumably so
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there's really at least over the long
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term though cost to taxpayers perhaps
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something initially but that that money
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would be paid back that's exactly right
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okay so but it takes the government to
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participate because why there's no
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profits at first and so there's no
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interest by any company to do something
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like this is that the idea i'm not quite
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but here the reasons reason number one
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is a most clean energy projects are
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unfamiliar to most commercial banks
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they're not in the business already of
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loaning to people for putting solar
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panels on their roof they're not in the
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business of loaning to a community to
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build a community solar farm that maybe
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isn't very big but would serve a town or
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or or a small city so they're not adept
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at evaluating what the risks might be
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and they don't know how they just don't
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have anyone on staff that does risk
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analysis and number two since the great
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recession began in 2008 2009 many many
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banks have worried a great deal about
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their own balance sheet and they've been
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averse to taking on risks in lending so
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that's further inhibited their
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willingness to get into clean energy
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lending as a as a category a third
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problem is that many clean energy
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projects are kind of small you want to
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put solar on your roof and maybe is a
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twenty-thousand-dollar project a big
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commercial bank would say you know
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that's a home improvement loan that's
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not the kind of loans we make go
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somewhere for a home improvement loan
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but when you go somewhere for a home
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improvement loan they don't consider
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solar on the roof to be a home
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improvement loan all this can change but
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if we want to get the clean energy
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markets growing quickly and we do if we
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want to deal with climate change then
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the state wants to step in and say well
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I'll just kind of nudge it here at the
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beginning but I'm not going to do
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anything unless the private sector is
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going to join up with me and provide a
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lot of the money to so think of the
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state or the government is being the
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leader but not leading to much just
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getting in basically getting in the
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water and saying to the commercial
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lenders the water is fine come on in
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that's what we've seen happen in
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Connecticut which is the oldest state
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greenbank it's three years old and we
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have found that for every dollar of
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state lending we attract about ten
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dollars of private sector lending and
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how many dollars in projects have been
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committed so far in Connecticut which is
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not a very big stage right it's about
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it's almost three hundred million
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dollars and that's 43 million people in
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the state and what kinds of projects is
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this green bank funding what is this 300
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million funding two things in particular
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one is what we call the whole building
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overhaul that might be a strip mall
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where they put solar on the roof and
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they exchange the windows single paint
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windows for double pane windows and
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maybe there's a fuel oil boiler that's
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replaced in you know some central
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location so it's a whole building
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overhaul and then that lending is put on
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the tax bill by provision in the state
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statute and as I said the Connecticut
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green bank will make the initial loan
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but later the private sector will come
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in and be part of the lending structure
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so the building becomes more valuable
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and the occupants pay a lower amount for
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electricity and eventually the taxpayers
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are made whole what's what's the break
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even on something like that in other
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words at what point you know how many
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years the idea do you pay back the loan
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and then after that you're actually
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quote-unquote making money bit by saving
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money on energy well the Connecticut
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green bank doesn't make any loan unless
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the net present value of the savings is
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greater than the amount of money
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invested everybody wharton knows what
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that means right it means you have a net
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present value positive number at the
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very beginning otherwise we don't put
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the money in at the beginning at the
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very beginning its net present value
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positive now the payback will vary
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between four and seven years meaning the
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cash shot will have come back in that
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time period and then after that time
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period it's all gravy okay I think
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that's a financial term Frankie you
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asked me what projects that's it that's
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probably our number one example okay the
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number two example is distributed solar
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on residential roof tops did were there
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any other efforts to promote solar on
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rooftops taken I'm just familiar with
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complaints about in the u.s. in general
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compared to a place like Jeremy that
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there's just a lot of regulation that
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slows down
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the ability to get get these things
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rolling fast which is what you're trying
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to do with the funding did they do
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anything about regulations in
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Connecticut yeah we have been trying to
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slim down the permitting process which
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can take a long time or it can cost a
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lot of money yeah and we do that through
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a project called solar eyes so the
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Connecticut green bank goes to a town
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and it says to the mayor if you promise
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that you will expedite the permitting
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process then we will loan money in bulk
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to everybody in your town and then the
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mayor says that sounds like a pretty
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good deal if I cut the red tape I get
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some of the green and we say that's
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absolutely right that's interesting
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because i know in germany a permit can
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take two or three days i think last time
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i looked right here in this country I
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they'd the averages months Germany
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shouldn't Merman II was ahead of the
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United States and pretty much every
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other country and in the Western world
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in terms of expediting permitting but
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Germany made I say this with respect for
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their motives Germany made a big mistake
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consoler which is that they decided that
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the way to grow a solar industry was to
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have a guaranteed price that was very
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very high called a feed-in tariff and
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the problem with that is your the
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government is buying the electricity and
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then giving it to the consumer at a
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lower price than the government is
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paying that's a buy high sell low
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strategy that's true in governments and
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in business as a way to eventually go
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out of business so when that's not what
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we're talking about in Connecticut we're
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talking about in Connecticut and in the
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other states what you said earlier
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making the taxpayer whole having the
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consumer be getting cleaner and cheaper
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electricity so this is innovative
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financing in the positive sense that's
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right yeah but it's you know not unusual
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governments play a big role in financing
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roads and bridges and public schools and
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the host of other facilities in the
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social landscape so having governments
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extend their role to a modest degree
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into changing the energy platform of the
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United States from
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carbon and expensive to clean and
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cheaper I don't think it's asking
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governments to do something unheard of
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and I can't help noticing the parallel
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between what happened in the IT world
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which is that it was actually the
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government jokes notwithstanding that
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invented the internet and you know
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provided the basic research that led to
00:11:15
the internet as it does in lots of areas
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like medical research pharmaceuticals
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and all that a lot of the basic research
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is paid for by the government and then
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companies come in and figure out how to
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commercialize you know in the IT world I
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would say that you can credit or blame
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the government for two big things number
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one as you said the initial research
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into the technologies that ultimately
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gave birth to the internet as a
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commercial phenomenon that initial
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research was paid for by the taxpayer a
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long time ago a Defense Department
00:11:48
wasn't it yep and when the taxpayer was
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paying for that research the taxpayer
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you mean everybody else we didn't really
00:11:54
have any idea what would happen and
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neither did the experimenters who were
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doing the work that's the first of two
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things the second thing was done during
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the Clinton administration and here's
00:12:06
what it was the government decided that
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the internet could borrow the existing
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infrastructure the telephone network for
00:12:15
free and so the early days were that you
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would unplug your telephone line from
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the back of the device called the
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telephone and you'd plug it into your
00:12:25
computer at no charge there were a bunch
00:12:29
of other regulatory measures like that
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but the collective decision in the
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Clinton administration was let's let the
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existing infrastructure be used by the
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usurpation revolutionary change oriented
00:12:43
new technology that's what we need to do
00:12:45
in energy we need to have the grid be
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borrowed for free by the distributed
00:12:50
solar people and the other new
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technologies let's say we did that
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because look at you talked initially
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about how much change has happened in 20
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years so let's fast-forward 10 or 20 or
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30 years ahead with clean energy what
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percentage of US energy do you think
00:13:07
would be delivered via green methods
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whether you know alternative methods
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whether its wind solar water you know
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whatever it might be okay well hold on
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to your hat because actually I've spent
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a lot of time crunching the numbers with
00:13:22
people if the solar distributed solar
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industry today is about one percent
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market share of energy it's reasonable
00:13:31
to think that that can double every 12
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months doubling every three months gets
00:13:38
you to a very big number in 10 or 20
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years very very big number it's also
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reasonable that the wind sector in the
00:13:48
United States can be ultimately about
00:13:50
twenty to twenty-five percent of the
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total energy sector you put those two
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things together and the majority of all
00:13:59
electricity in the United States can be
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made by the Sun and the wind and that's
00:14:06
within how many years um it depends on
00:14:09
how fast growing you actually think it
00:14:14
all could be with the appropriate array
00:14:17
of state where even let's say a
00:14:18
mid-level scenario right oh I would say
00:14:22
a decade a decade the reason the decade
00:14:24
it could be the majority of electricity
00:14:26
is that right an electricity provides
00:14:28
what percentage of our power well well
00:14:32
good way to think about it is the
00:14:33
transportation is about a third and all
00:14:35
the rest is some electricity used in
00:14:38
some particular wank so for example
00:14:41
electricity is used in industrial
00:14:43
processes or it's used in lighting or
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it's used in some cases in heating so
00:14:48
there's lots of ways that electricity
00:14:50
mmm sneaks into the usage patterns but
00:14:54
more or less transportation as a third
00:14:56
or forty percent in the rest is driven
00:14:59
by electricity and even that
00:15:00
transportation could be largely electric
00:15:02
right well what if we if we really
00:15:04
wanted to run you know tell an
00:15:06
optimistic story about electricity which
00:15:08
I think we should want to do then I
00:15:11
think that what the way to think about
00:15:13
it is that in about two and a half years
00:15:16
when the electric vehicles that come
00:15:18
into the mark
00:15:18
will be priced at around 40 thousand
00:15:20
dollars then you'll see a tremendous
00:15:22
increase in the percentage of annual
00:15:25
vehicle sales that is attributable to
00:15:28
electric cars so this is seems so much
00:15:30
more optimistic or quicker than the
00:15:34
kinds of numbers that you usually hear
00:15:36
it's time to be optimistic a lot of
00:15:38
things have changed in the last three or
00:15:39
four years that have given rise to
00:15:41
optimism one is an eighty percent drop
00:15:44
in the cost of solar panels that should
00:15:46
give rise to optimism the other thing is
00:15:49
the innovative business models by solar
00:15:51
installers and by other clean energy
00:15:53
companies I do want to say this there's
00:15:56
one fundamental obstacle which is the
00:16:00
existing energy industry is carbon based
00:16:04
and the existing energy industry is not
00:16:08
going to be a big huge winner if the
00:16:12
clean energy industry substitutes for
00:16:14
its role in the economy that's that's
00:16:17
what happens in business somebody wins
00:16:19
and somebody's place is taken how do how
00:16:24
how would advocates of green energy
00:16:26
overcome that huge obstacle Oh consumer
00:16:29
demand there are two ways to overcome it
00:16:33
one is you get the government to tell
00:16:34
everybody thou must buy clean energy and
00:16:37
if we have to deal with climate change I
00:16:40
guess we might have to imagine that but
00:16:42
there's this easier way in a market
00:16:45
driven economy you delight the consumer
00:16:47
you please the consumer you make the
00:16:49
consumer clamor for the better deal if I
00:16:52
went to anybody in the United States and
00:16:54
said could I just give you electricity
00:16:57
that is cleaner anyone's going to say
00:17:00
yeah but is it cost more suppose I say
00:17:02
it's cleaner and cheaper who's going to
00:17:04
say no to this and this is what's very
00:17:08
doable is what you're saying even on a
00:17:10
large scale it's totally doable on a
00:17:11
large scale it's the secret of SolarCity
00:17:13
just to give you an example of a company
00:17:16
Solar City could you just give us a
00:17:18
brief well solar city is the rocketship
00:17:22
story of solar installers but it's being
00:17:24
emulated by other companies all across
00:17:26
the country and unlike a lot of other
00:17:29
Americans I opened up an envelope
00:17:31
home just last week and it said would
00:17:34
you like to meet somebody from SolarCity
00:17:36
because you know if you have a high
00:17:38
enough credit score will give you a
00:17:40
clean electricity off your roof and
00:17:42
it'll be cheaper than you're paying from
00:17:44
the grid this is not a bad offer could
00:17:47
you give us just a quick idea of what
00:17:52
you thought about the us-china climate
00:17:54
agreement it's a historic agreement in
00:17:58
there are two reasons reason number one
00:18:00
when the president united states and the
00:18:02
leader of China President Obama and she
00:18:05
have a handshake understanding about
00:18:08
reducing carbon emissions 20 by huge
00:18:12
huge numbers in less than will in about
00:18:15
a decade when that happens the two
00:18:18
countries the two economies that are
00:18:20
responsible for forty percent of all
00:18:22
global emissions have taken a step
00:18:26
farther toward the necessary clean
00:18:28
energy future than any other country or
00:18:31
any other region of the world that's a
00:18:33
really big deal now we are leaders with
00:18:36
China and everybody else should step up
00:18:38
in every other country and match our
00:18:41
promises that's reason number one reason
00:18:44
number two what the president said in
00:18:45
Beijing is that the United States would
00:18:48
increase its goal of cutting emissions
00:18:53
by fifty percent over the previous
00:18:55
stated goal in other words he's now
00:18:58
saying that in just 11 years will reduce
00:19:02
emissions by twenty-seven percent
00:19:05
approximately it's a very very big
00:19:08
number it puts us done a very ambitious
00:19:10
path but one in which it actually is
00:19:13
possible for Americans to have cheaper
00:19:17
and cleaner electricity
00:19:35
you
