How to Socialize America’s Energy
How to Socialize America’s Energy
No amount of private-sector innovation will expand renewables’ use to anywhere near the scale needed to avert climate catastrophe, let alone advance a just transition. Here are some alternatives.
To hear Lyndon Rive tell it, there is a war brewing between the private-sector innovators building the clean energy economy and the utility bureaucrats standing in its way. Rive is the cofounder and CEO of SolarCity, one of the country’s largest solar providers. In late December, the company came under sudden assault from Nevada regulators when the state’s Public Utilities Commission (PUC) unanimously passed a law allowing it to raise the monthly fees charged to solar panel owners by 40 percent. The measure also reduced the amount customers could be paid for excess electricity they sell back to the state’s energy grid. PUC staffers say the move was a defense against an existential threat posed by private solar to the traditional utility model. If solar customers could take advantage of utility grids without paying for it, who would pay for upkeep on power lines and generators? Homeowners installing solar panels on their roofs, generating their own electricity, and selling the excess back to the utility at a profit, the PUC argued, were leading into a “death spiral.”
Solar companies saw the move in life-and-death terms, too. SolarCity retaliated against the PUC’s decision by announcing that it would withdraw from Nevada entirely, laying off 550 staff in the process. Another major solar company, Sunrun Inc., followed suit, cutting hundreds of jobs statewide. The PUC’s decision, SolarCity’s Rive warned Fortune, would “damage the state’s economy, and jeopardize thousands of jobs.” Similarly, he told ThinkProgress, “These jobs can be lost if you have a person [read: regulator] who doesn’t look at the future and only looks at supporting the monopolies of the utilities.”
Whose side to take in Nevada is far from clear. The state’s primary utility company, NV Energy, is owned by Warren Buffett. Two of the governor’s advisers work as lobbyists for the company, and their involvement in the December law’s passage remains unclear. Monopolistic, fossil fuel–based utility companies (which provide about two-thirds of the country’s power) are no friend of the people.
What about the solar companies? Rive is joined on the SolarCity’s management team by Silicon Valley icon Elon Musk, whose vision of the renewable energy future carries a strong libertarian streak. Entrusting the market to achieve the “best solution,” Musk has advocated swapping environmental regulations for a revenue-neutral carbon tax, and sees the disruptive power of private green innovation as the key to averting climate catastrophe. No doubt net metering—what allows solar customers to sell surplus power back to utilities at retail price—is a necessary step for a transition to renewables. But the coverage of the fight in Nevada, stacked unanimously against the PUC, would suggest there’s only one option for a low-carbon future: a free-market paradise for corporate solar.
What other possibilities are there? Beyond Big Solar are a range of ownership and profit structures that complicate the renewables landscape, and could ensure that an economy powered by something other than fossil fuels will be more equitable and democratic than today’s. Energy cooperatives and publicly owned utilities are two promising models that allow for stripping dirty energy from our power grids without doubling down on profit-hungry development. The alternative to a corporate-controlled fuel transition is simple: socialize America’s energy economy.
The Federal Role in a Just Transition
Coming out of last December’s landmark climate negotiations in Paris, the question is no longer if societies will shift toward renewables, but when and how. For all the limitations of the deal—that it is largely unenforceable, contains only passing reference to human and indigenous rights, and treats historical polluters with kid gloves—its clearest and most redeeming feature is that it signals an end to the fossil fuel era.
Will the private sector lead the way out? Within the first days of the Paris talks, billionaires including Bill Gates, Mark Zuckerberg, and Richard Branson launched a private-public partnership called the Breakthrough Energy Coalition, with Zuckerberg arguing that “progress towards a sustainable energy system is too slow, and the current system doesn’t encourage the kind of innovation that will get us there faster.” Goldman Sachs had already announced it would quadruple its investments in renewables this year to $150 billion. In the wake of the agreement’s passage on December 12, wind and solar stocks soared; coupled with tanking oil markets and an extension to key tax credits for U.S. renewable providers, the post-Paris landscape spells good business for domestic wind and solar companies.
As the Nevada story shows, however, private companies’ obligation to generate profit for their shareholders could prove a stumbling block to expanding renewables’ use to anywhere near the levels necessary to avert climate catastrophe.
Today’s renewable energy sector, while growing rapidly, hardly offers a roadmap to the transition needed. As billionaires battle over the profits promised by the “clean energy revolution,” experts agree that cobbling together private-sector solutions will not be enough. Neither will the boutique solutions on offer from the left. A more radical approach—one commensurate to the scale of the problem—will require state intervention. The problem is that the Reagan-Thatcher revolution tore not only at safety nets in the global North, but at the very idea that public goods and services—from health care to electricity—are the rightful responsibility of the state. Politicians and pundits alike portray the private sector as the inevitable engine of the new, green economy, to be lubricated only at its start with public spending. (In many cases, the taxpayer dollars we do spend on renewables amount to corporate subsidies: New York State paid SolarCity $750 million to erect a factory in Buffalo, and the company has also received $497.5 million from the Treasury Department.)
Traditional forms of public investment, meanwhile, remain elusive. Calls for a Green New Deal or wartime-level mobilization against climate change, to use the oft-invoked metaphors (A “Marshall Plan for the Earth,” in Naomi Klein’s version), each take their cues from an economic ideology antithetical to today’s. The world’s most famous Keynesian, Paul Krugman, has repeatedly made the case for low-cost, high-yield green deficit spending to no avail. In 2014, he wrote, “The U.S. economy is still depressed—and in a depressed economy many of the supposed costs of compliance with energy regulations aren’t costs at all . . . building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost.” Instead, funding for renewables comes largely via tax credits and market-based incentives for private companies, including the recently extended 30 percent Investment Tax Credit (ITC) for solar. Public infrastructure spending and job creation programs remain off the table.
“Public-private partnerships now are almost always skewed toward the private,” says Sean Sweeney, founder and director of the International Program for Labor, Climate, and Environment at CUNY. “All the risk is shouldered by the public, and all the profits are gained by the private. And that’s got to be readjusted.” Outside of his academic work, Sweeney coordinates Trade Unions for Energy Democracy (TUED), which organizes and educates unions and the public around worker-led solutions to the climate crisis. As a baseline, he argues, private-public partnerships should include the right to form a union and the recognition of collective bargaining rights, both ensured through government contracts.
Though collective bargaining is under threat nationwide, today’s largest blocks of union membership remain in the public sector, where labor standards are enshrined in government contracts. Over 35 percent of public-sector workers today are union members, compared with just under 7 percent of their counterparts in private industry. Managed well, the disruption of America’s dirty energy grid can also mean adding to its ranks of unionized workers.
“Very few of the solar companies serving residential markets are union, if any,” he tells me. Asked about the role the private sector might play in an energy transition more broadly, he cautioned against taking a “dogmatic view” of their involvement. While not ruling out a role for corporations entirely, Sweeney is skeptical that they would play a defining part in bringing about a just transition. In place of the current public-private model, Sweeney and his organization advocate for a more expansive vision of what they call energy democracy.
More a set of principles for public and democratic control of energy than a policy slate, per se, energy democracy can refer to any number of measures for renewable generation, transmission, and distribution. TUED argues that a transformation of the energy system should go hand in hand with a transformation of the economy, as well as the protection of workers who currently make their living in carbon-intensive industries.
Energy Democracy: Three Models
Though Sweeney and others within TUED see strong states and a bolstered public sphere as central to moving off fossil fuels, others under the energy democracy umbrella envision smaller-scale transitions, where towns and cities come together to procure and distribute power independently. Few advocating energy democracy would support a “rooftops-only” transition, but debates continue about how best to implement a just transition, revolving largely around questions of scale and state involvement.
One popular model is municipalization, where city governments effectively buy out private utilities and run them in the public interest. This allows progressive city officials to enact ambitious plans for scaling back fossil fuels, and gives residents an accountable outlet for demanding a more dramatic transition. The most famous attempt at this has been in Boulder, Colorado, where residents voted in 2011 for the city to buy out monopoly provider Xcel Energy and create a model utility, aiming to get at least 54 percent of its power from renewables and offer lower rates over a twenty-year timeframe. (Predictably, Xcel has stymied the process in courts, where it remains as of press time.) Municipalization also offers a means of transition independent of austerity-stricken and spending-averse national governments. In Spain, Podemos-affiliated mayor Ada Colau announced a plan to municipalize Barcelona’s power supply and shift toward 100 percent renewables usage starting in 2016.
Community Choice Aggregation (CCA) programs take a slightly different approach, allowing city or county residents to “aggregate” their buying power through their local government and decide together where to get their electricity. City officials, in other words, can use this popular mandate to collectively bargain with utility providers for better rates and alternative energy sourcing. Utilities still own the infrastructure necessary to transmit power from point A (generation) to point B (homes). Under a CCA, they are legally required to maintain it and continue doling out power, even as some residents feed their own power back into the grid at a profit. Marin County, California, for instance, established a CCA giving local residents the option to get either 50 or 100 percent of their energy from renewables. Their utility, PG&E, now sources most of this energy from mid-size wind, solar, geothermal, hydro, and biomass power generators, while also allowing residents to power their own homes with solar panels and collect a surplus through net metering. Similar programs exist in New Jersey, Ohio, New York, Rhode Island, and Illinois, though most CCAs negotiate energy prices rather than renewable sourcing.
Al Weinrub, author of the 2011 report Community Power, sees CCAs as a path toward more decentralized renewable energy production overall, anchored by smaller-scale solar and wind farms close to the places they power. In contrast to central-station systems (think massive desert solar farms), he argues that more localized energy, ideally run on a cooperative model, can bring down costs, prevent disruptions to supply, and come online quickly, hastening the move away from fossil fuels and breaking up utility monopolies in the process:
Decentralized generation means that local residences, business, and communities become electric power producers. Homeowners and small businesses produce the power they need for their own consumption. Rather than paying ever increasing energy bills to finance remote transmission lines and central-station power, consumers become the direct beneficiaries of the power they produce.
Guiding this approach is the principle of decentralization, as well as an aversion to large-scale renewable projects operated by either corporations or the state. As polluting, staid bureaucracies with a profit motive, today’s monopolistic utilities are dangerously outmoded, and will be reimagined—either by law or the market. But there’s nothing inherent to local and diffusely owned energy generation that addresses the need for a managed transition away from fossil fuels at scale, or the upkeep of transmission infrastructure to communities that—for any number of reasons—are unable or unwilling to switch. Private solar companies with weak labor standards could well swoop in with the most competitive prices, even to places that source their energy through a CCA. This mode of decentralization further relies on individual communities to both organize for and then set up said cooperatives independent of state funding. “Who ever told anybody that they want to spend their valuable free time running an electricity cooperative?” Sweeney asks. “Why can’t that be a public service?”
“The generation of power is still a system-wide issue, even with renewables. There are going to be days when the sun doesn’t shine. There are going to be days when the wind doesn’t blow. You need to integrate it through a system, and that’s got to be paid for. Someone’s got to upgrade that system,” Sweeney says. Decentralization will be an essential part of bringing renewables to scale in the United States, but—lacking federal investment that sees clean energy as a basic public right—its spread could be limited to communities that can afford corporate rates, or those blessed with either the progressive politics or friendly regulatory landscapes of Boulder and Marin County.
Sweeney further points out that large-scale state intervention and decentralization may not be mutually exclusive. In fact, an eighty-year-old model bridging the two already operates in forty-seven U.S. states: rural electric cooperatives.
At the start of the 1930s, 90 percent of rural American homes lacked electricity, while in cities the ratio was virtually inverted. The profit motive alone had failed to drive electrification beyond urban centers. A 1934 study from the Mississippi Valley Committee of the Public Works Administration found that, “Unless the Federal Government assumes an active leadership, assisted in particular instances by State and local agencies, only a negligible part of this task can be accomplished within any reasonable time.” Private electricity providers had deemed rural America too costly to cover, requiring sizable injections of capital to build power lines through poor and sparsely populated areas.
A New Deal program, the Rural Electrification Administration, set out to correct this, intervening in gaps left by the private market. To do it, the REA set up a slew of cooperatives, requiring that groups of town residents apply together for federal loans to erect power lines and associated infrastructure. After an initial burst of federal funding, the Rural Electric Cooperatives, or RECs, would be entirely owned, operated, and funded by their members, setting rates so as to ensure both affordability and financial solvency. The REA weathered accusations of “creeping socialism” to establish 417 energy distribution cooperatives within three years: a centralized decentralization. Today there are 900, serving 42 million people—12 percent of the country’s electric consumers—in some of its lowest-income and most conservative parts.
A number of cooperatives source their energy through generation and transmission cooperatives (“G&Ts,” colloquially) that either buy power wholesale or operate power plants themselves. Like larger, for-profit utilities, RECs have historically enjoyed monopolies in the areas where they operate, creating something of a closed loop in some areas where distributions coops (RECs) get their power from the G&Ts they own. While the G&Ts are cooperatively owned through RECs and not-for-profit, the vast majority of the 44,000 megawatts they generate are from coal. As a result, a number of RECs even found their way onto the “Greenhouse 100” list of top polluters in the United States, compiled by the Political Economy Research Institute.
In some ways, the task of converting the RECs to renewables should be easy: democratic governance structures have already been established, and the 42 million members of REA-built cooperatives legally own their electricity. And while they were created with federal funds, RECs were designed to be owned entirely by their members; in that sense, they remain relatively immune from the impacts of shrinking state budgets. In other ways, conversion requires starting almost from scratch; most coop boards have grown conservative and reluctant to adapt. Members of some electric cooperatives have reported being denied access to REC bylaws, making reform all the more challenging.
Where others might see a stone wall, Jake Schlachter sees a ladder. As the executive director of the nonprofit We Own It, he works with member-owners to stage democratic coups at wayward cooperatives—starting with RECs. After organizing for fair elections in his home town of Troy, Ohio, he and his wife started a food coop to help revitalize the city’s struggling downtown. Schlachter quickly got involved in the national coop movement, and founded We Own It in the hopes of re-mobilizing the 130 million people who are members of coops nationwide—only a tiny fraction of whom he would encounter at national conferences. “We talked a lot about the cooperative movement, but movements need people,” Schlacter told me.
From decaying infrastructure to an aging workforce, electric cooperatives already face myriad challenges, and things are only going to get tougher in the coming years as private solar providers continue to threaten their once-sacred monopolies. For the first time in their history, RECs are vying for market share. Their dilemma, in a sense, is ours as a species: adapt or die.
That renewables remain difficult for individual REC members to access through their cooperatives isn’t helping. Only around 10 percent of electric cooperatives have programs whereby customers can make energy efficiency improvements to their homes, largely through costly rooftop solar installations that require the majority of participating households to take on debt.
“For the most part,” Schlachter says, “[those programs] systematically leave out renters and people who are low-income and would not qualify for an additional $5,000–10,000 loan.” Conveniently, the Department of Agriculture (USDA) recently allocated $5 billion to help REC members make energy efficiency improvements. Unlike other programs, the Energy Efficiency and Conservation Loan Program (EECLP) operates on a debt-free basis for consumers, with all expenses taken on by the coop. Still, despite its relative ease of entry only a handful of cooperatives have utilized the EECLP.
Between the Investor Tax Credit and EECLP, the key for RECs to take advantage of the solar boom is already in the ignition. By transitioning existing G&Ts and establishing new, renewable sourcing cooperatives for RECs, communities that have them could create thousands of jobs in conversion without relying on the likes of SolarCity or Sunrun. As under the New Deal, injections of federal funds could fill the many gaps now left in the private renewables market: where RECs do not exist, government grants can jumpstart the creation of solar distribution cooperatives and G&Ts, and put people to work updating today’s grids and distribution infrastructure. And because new or converted RECs—renewable energy cooperatives—would be member-owned, all of their revenue would circulate locally, not out to shareholders in New York or Silicon Valley.
Organizing around RECs, moreover, presents an exciting opportunity to let rural communities play a driving role in the energy transition, engaging not just in taking over their cooperatives but in shaping federal policy. Combined with aggressive regulations to phase out investor-owned, fossil-fueled utility companies, a Renewable Electrification Administration could proliferate solar power on a scale well beyond the capabilities of piecemeal, market-based incentives.
“Whereas the purpose of an investor-owned company is understood to be the maximization of shareholder profits, the purpose of cooperative businesses is serving their member-owners’ needs. In many communities, members would be much better served by the lower rates that solar offers,” Schlachter says. Cooperative and otherwise, a full 25 percent of the country’s electricity is managed by publicly owned utilities, each with an at least nominal mandate to serve the public good. Whether they do, Schlachter adds, is determined by how much pressure they face from member-owners and constituents.
Of course, none of this will happen without a fight.
At a panel on trade unions and energy democracy in Paris, Sweeney cited a report from the Thatcherite Centre for Policy Studies (CPS) that grasps the contradiction between clean energy and market doctrine. “It is . . . impossible to integrate large amounts of intermittent renewables into a private sector system and still expect it to function as such,” the study’s authors write. “You can have renewables. Or you can have the market. You cannot have both. If renewables are a must-have . . . then nationalisation is the answer.”
Surveying the American energy landscape, it is clear that there will be no silver bullet in the transition to renewables. Shifting away from fossil fuels will involve a range of policies and initiatives; depending on context, centralized (national) and decentralized (local) strategies are each likely to play a role. As Sweeney said, “You don’t necessarily fetishize that it’s big, and you don’t fetishize small. You look at all the options and ask: What is the best way of delivering clean renewable power to ordinary people in order to meet basic needs?” In some cases, that might be community choice aggregation or municipalization; in others, it might be to retrofit old cooperatives or launch new ones. Underlying such practical questions is the larger one of whether this transition will also be one toward an altogether fairer and more democratic economy. Can activists push their towns, cities, states, and, ultimately, the federal government to seize this opportunity for a greater good? Can we replace solar individualism—or techno-utopianism, for that matter—with the principle that clean, reliable power should be a basic right, guaranteed by a democratic state?
Germany’s much-lauded Energiewende hints that we can. Thanks to over three decades of pressure from below, the country’s rapid shift to renewables since 2011 offers an exciting example of what energy democracy in a major world economy might look like. On good days, virtually all of the power Germans consume in their country comes from renewable sources—half of which are community owned. Favorable, movement-driven national policies made it possible to unseat the country’s fossil fuel–powered utility monopolies, generate community wealth through cooperatives, create 400,000 jobs, and put Germany on track to run 80 percent off of renewables by 2050. Though the Energiewende carries its own limitations, it shows that America need not reinvent the wheel.
Whichever forms it may take, the political will to socialize America’s energy economy will need to extend well beyond one sector. Just as the alphabet soup of programs offered under the New Deal addressed everything from electrification to arts funding, they also only arose after Roosevelt’s administration was backed into a corner by the movements that would reshape his party and this country’s political landscape. From today’s movements, we should hope for the same. A twenty-first-century energy transition is only one part of a broader shift away from fossil fuels and toward a fundamentally different economy, where coal, oil, and natural gas kept are kept underground, and already low-carbon services—like care work and education—are expanded and fairly valued. Undergirding all of this is the need for a state that listens to and provides for its people.
Addressing Congress in 1935 to ask for $4 billion in public works programs, Roosevelt raised what might seem like a baffling topic for the time: the environment. “In recent years, little groups of earnest men and women have told us of this havoc . . . of all the evils that we have brought upon ourselves today and the even greater evils that will attend our children unless we act,” he said. “Such is the condition that attends the exploitation of our natural resources if we continue our planless course.” Eighty years later, science is demanding louder than ever that our little, earnest groups come up with plans. In energy democracy, we might just have one.
Kate Aronoff is a Brooklyn-based writer and the communications coordinator for the New Economy Coalition.