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news

The Aleinikoff Transcript

by Alex Aleinikoff
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© Getty Images

interviews

How FICO Limits Clean Energy

by Forrest Watkins
February 11, 2019

This interview with Forrest Watkins, a program manager at Solstice, was conducted and condensed by frank news.

How do you, as a company, define energy democracy?

For us, energy democracy is really about giving power over our energy systems back to everyday people. We know that for the whole history of the energy industry, the benefits and the impacts of energy systems have been very unevenly distributed. Low-income communities and communities of color have confronted the worst impacts of pollution from energy and industry – to the extent that a 2017 study showed that the very structure of our cities has been informed by which sectors of the city are downwind, and where the pollution will blow and have the most impact.

At the same time, the same communities that are generally confronting the worst impacts from pollution are also the ones that don't see equal access to the benefits of our energy systems.

To this day, there are millions of people that lack access to electricity. Even in places where we think of our electric grids as robust and well-developed, like in the U.S., low-income households frequently experience energy poverty, where they don't necessarily have the money to adequately heat their homes. And this has real impacts on people’s health and livelihoods, especially those of children and families.

When we're working on energy democracy, we’re trying to ensure that the next iteration of our energy systems can reverse that dynamic, and really put the people that have been marginalized in fossil-fueled energy systems, at the core of the transition to clean energy.

In other words, we want to empower people to have a voice in the energy resources that serve their community, and the energy decisions that have an impact in their community.

On a practical level, that means that when we're building out solar and wind energy infrastructure, we need to make sure that low-income communities, communities of color, are included in the benefits of those energy projects, and equally importantly, that they have a say in the development of those projects. When there's a project going into our communities, whether it's a solar project or a gas pipeline, we really need to make sure they have a say in how that develops, and whether it's developed in the first place.

Finally, it's worth calling out that movements for clean energy and environmental protection have pretty consistently undervalued the needs and objectives of communities of color, low-income communities and other marginalized people. Movements for energy democracy and environmental justice, on the other hand, has been led by these communities, from Afton, North Carolina in 1982 to present-day groups like PUSH Buffalo, Greenlining Institute, and campaigns like the Portland Clean Energy Initiative.

Why do you think there's such a lack of understanding about where our energy comes from and how the grid functions?

I think it’s the same thing with a lot of the really important, complex issues that we’re facing today. I care a lot about energy and have worked really hard over the last few years to do what I can to contribute to equity in the space, but I don't necessarily have the same level of understanding on agriculture, or on health systems.

But I also don't know that in-depth policy and resource understanding is necessary to increasing democratic control. If we build the transition to clean energy on the idea that everyone has to understand regional power markets, or utility resource planning schemes, or different regulatory processes, then I don't know if we're going to get there. But if we can give people an opportunity to say, "Yes, I want the choice to participate in this renewable energy program." Or, "Yes, I think if you have the chance to build out more renewable energy in the coming years, you should include that in your resource planning." There's lots of ways we can take the incredible public support for renewable energy, and translate it into smart policies that shape the future of energy.

How do you engage the unengaged in a conversation about transitioning away from a system they’re used to, and might not mind?

Solstice does a lot of the direct engagement in getting people signed up for local, community-shared solar arrays. We know what people are thinking about when they're making these decisions. What we see is people might have different motivations for supporting renewable energy, but they really, overwhelmingly support clean energy, and they don’t want to wait. For some people, it is a climate motivation, or making a more sustainable energy system. Other people, it's not that. Some people say, "I don't believe in climate change," or, "I don't believe that humans are even having an effect on the climate. But solar just makes sense, because it's less expensive, and it gives us more independence in your energy supply.” For some it's about that, the cost savings of energy independence

I think for us, when we’re thinking about our impact, we really want to engage with everyone in the transition to renewable energy, regardless of their specific motivations for it. When it comes down to it, I think people have heard this is the right way to go economically as well as environmentally. When we get on the phone with them, or are at the town hall events with them, it's not something where we have to do a tremendous amount of convincing.

The real barriers we see are on the policy and finance side of things. 

Energy democracy is really tied to clean energy. But the move towards clean doesn't necessarily have to incorporate the ideals of energy democracy. There is a version of this that's corporate, and the power structures won’t change. Why is discussing power, when talking about energy, important?

Renewable energy is an unprecedented opportunity to bring the energy decisions back to a human scale, and make sure that everyone can get access to affordable and reliable energy service.

What we've seen so far in the solar industry, though, is that the early adopters who are able to make these decisions, are generally people with higher income, and the time to shop around and make a good investments decision. In many states, a lot of the wind and solar deployment is being driven by big, investor-owned utilities.

It can be argued that this is the most economically efficient way of rolling out clean energy, but we also know from a few centuries of hard data who benefits from an energy system that’s built that way - and who is marginalized. When we build at a scale that serves a community, and we create spaces for input on the project from the community, that’s how we fit the project to their needs and priorities, and make sure that it’s developed in an equitable way.

When you're building at that scale, it also increases the resiliency of the grid. If you have a more decentralized system with more local power generation, that's a way of reducing the risk for local communities, and making them more resilient to larger impacts. As we're looking at cases like California and Puerto Rico, if our goal is to get the power back on sooner for communities regardless of their economic or racial makeup, inclusive, community-scale solar is a great path to creating an energy system that is resilient not just for the people able to invest in a rooftop array, but also those who aren't.

And how does this all work in practice?

Community solar allows people to enroll in a local solar array and see credits on their energy bill as if they had the array on their own rooftop. Solstice typically uses a subscription model, because it allows people to participate without any upfront payment. So we’ll look at your utility payment history, and how your energy bill has fluctuated over time. That allows us to adjust the allocation size for your energy needs. Once that energy project's turned on, you will start seeing credits on your utility bill. Those credits will more or less zero out your energy bill, and you pay for that energy, but at a discounted rate. The typical discount that we see is about 10%.We advocate for contracts that let the customer pass the subscription on to another customer, should they have to move, or have to cancel their subscription for whatever reason. That just allows for everyone to participate, whether they're renters, or other people that have higher levels of mobility.

At Solstice, we don't develop the projects ourselves. We work with the people that develop and finance the solar projects, we help them get people signed up for the projects, then manage people’s experience, and their allocations, on an ongoing basis. We have a software platform that integrates this with utilities systems to manage the billing process and give people ongoing information about how much they're saving, how much their piece of the solar garden is contributing to carbon reductions, things like that.

We also have invented the EnergyScore, an alternative way of qualifying people for community solar farms that is more accurate in predicting people’s utility bill payment behavior and more inclusive of low-to-moderate income households than the FICO credit scores that are typically used to qualify people for projects. Our goal is really to make it as easy as possible for everyone to participate in these projects, regardless of their background, or how they're coming to the table.

How do you charge people, and decide the value of what that energy is worth?

There's a number of different ways people are approaching this. What we advocate for, is doing a direct percentage discount, because that is really the best way of protecting the customer and making sure they are seeing a discount, no matter what. There are legislated programs of community solar in 18 states, and the 19th, New Mexico, is likely to pass a bill before long. In those 18 states, currently, there is legislative program that allows for automatic bill crediting and the administration of these programs. Under those, people automatically see the utility bill credits that allow them to see savings at the end of the month.

Do you work outside the grid, or through the grid?

We work through the grid. There are definitely some exciting things happening in the microgrid space. At this point, they still have a fairly limited set of use cases because the economics often don’t allow people to save. But in some cases, like with off-grid communities, or organizations like hospitals that really need a high degree of reliability and resiliency, it can make financial sense for them to do that. As far as community solar goes, we’re operating through the traditional grid, and that makes the most financial sense in a lot of ways, not having to reinvent the whole grid system, but just adapting it to meet the new reality.  

As energy storage becomes cheaper over the next decade and demand response technologies become more sophisticated, the line between on-grid community solar and off-grid microgrids will likely start to blur. In many places, this will make it increasingly difficult to restrict the decentralization and democratization of energy.

Can the grid handle a transition away from coal and gas, to wind and solar?

There are a lot of smart people working on that question.

It’s absolutely a huge challenge transitioning from 100%, very centralized generation, to a different model.

But in the long term, we know having a more decentralized grid makes for better resilience, and more reliability. Utilities are not always the most popular among everyday people, or people in the solar industry. But they are really good at keeping the lights on, and managing the grid, which is an incredibly complex system. This is the direction we need to be heading regardless, and a lot of the brainpower going into this transition will happen at that level too.

Regulators also have an important role in shaping utilities’ incentives to make this energy transition while also maintaining affordability and reliability. Changing utilities’ incentive structures is vital, so they’re not just paid high returns for continuing to build huge, centralized generation plans, and instead paying them to make the changes that serve their constituents, like transitioning to a cleaner, more decentralized generation, and upgrading software systems to maintain grid security and make crediting and billing systems run more smoothly and with less overhead expense.

So it's definitely something that will require transition, but I think is on its way. We're already seeing some utilities really get on board. As I said here are 18 legislated community solar programs. But there are 42 states that have at least one community solar garden. Those states where it’s not legislated are where the utility is taking the initiative, and they're doing this because it's a way for them to control that transition a little bit more. Instead of just having people put up projects wherever they want, or having to manage an increase in energy over their lines - from a neighborhood with a lot of solar, for example - they can choose to site a community solar array right next to their distribution infrastructure. They get to plan it out themselves, and often save on upgrades in the transmission system.

You mentioned the idea of decentralizing the grid, as the thing driving some of this change. Some critics point out decentralizing as a security risk. Is that something that you talk about?

I've heard some of the big utilities make the argument that increasing the number of people who are involved in this system - people like third party generators - may increase some cyber security risks on their end. I definitely trust that they know what they’re talking about, but growing data systems and the risk associated with that is a reality across many industries, and there are certainly ways to mitigate data security concerns. As an organization that is working with large energy companies on software for community solar gardens, I can tell you there are a lot of strict standards around data and software security that we have to deal with.

I think it’s also worth pointing out, though, that at the end of the day, if you end up with a system that is more decentralized, and what they call islandable, where basically, you could take a local energy grid, if the larger grid goes down for whatever reason, and power the local grid in a town, or a county, at a localized level, then you’re actually better off in terms of the resiliency of the overall grid, because it's harder to just hit one large piece of the grid, and take the whole thing down.

What policy needs to exist to make your work sustainable, profitable, compelling, incentivizing, etc.?

We do work at a state and local level because that's where we are seeing a lot of movement and innovation on the policy front. Solstice was founded to get as many people access to clean energy as possible.

We want to make sure that the third of Americans who are renters, and the third of residential buildings that can't install an array that would serve the needs of a typical home, can actually participate.

Community solar addresses some of those needs, but there's also a whole set of barriers on the financial side. There are a lot of people that could theoretically get solar in some way, but who don't have the FICO credit scores, or the upfront savings to be able to participate.

One of the areas we focus on most closely are financial and policy innovations that empower those communities to participate. We are working under funding from the Department of Energy to develop an alternative to FICO, that's more specific to needs of community solar. We talk to people every day to try to get them connected to projects and so many have been paying their energy bill on time for decades, and just don't quite have a FICO credit score of 650 or 700 that they need to sign up. The people who are putting up the money for the projects would rather keep their risk low, and they see people with a FICO score below 650 or 700 as potentially to risky.

The issue is that over half the country doesn’t have a credit score that high, so we’re never going to get to 100% renewable energy that way.

What we need to do is gather the data to show them otherwise, to show that someone who pays their bill on time every month is likely to pay their bill on time every month with a 10% discount. 

We want to make something more accurate in saying, not can we rely on you to pay your mortgage, but will you pay your community solar bill on time? So we’ve come up with the EnergyScore, a machine-learning algorithm based on over half a million customer utility records. As I said, we've taken that aggregate data and made it into something that is both more accurate, in predicting people's future utility bill payment behavior, and more inclusive of low-income communities. We’re now testing it out in pilots in New York, and proving it out in a real-world context and using the data we collect to improve it, and we’ll be scaling it across the country in the coming years.

Screen Shot 2019 02 11 at 10.20.25 AM

Image via Solstice 

On the policy side, we're active in advocating for community solar programs, ones that will allow for third-party participation, for community-led solar projects, but also for policies that really encourage innovation on the inclusion front. Kelly Roache, our Director of Inclusion, has done amazing work building consensus between environmental and energy justice advocates like PUSH Buffalo and the NY Energy Democracy Alliance, as well as people in the solar industry, to push for policies that support financial inclusion, and that directly address the issue of finance. Two victories that Solstice has been a part of advocating for are winning a $21M pool of grant funding and a loan-loss reserve, and both of those went to support pilots innovating on low-income inclusion.

Our hope is that with this in place, we can work with communities in New York to prove that low-income folks can and should be full participants in the transition to clean energy, and scale that approach across the country.