Freeing Energy: An Interview with Bill Nussey (Part 1)

 

Hi, this is Chris O'Connor, your IEEE Newsletter Editor. Today I’m with Bill Nussey, CEO of Freeing Energy and CEO of Solar Inventions. We are focused in this conversation on the phenomenon of local energy, what it is, what it means and how it has become something we all should be aware of for our local environment, our local communities, and most importantly how Local Energy is a part of how we think about power and power generation for the future.

In the following, Chris and Bill’s words will be marked with C: and B: placeholders, respectively.

C: Bill, thank you for joining us today.

B: It's great to be here Chris, I'm excited to chat with you about one of my favorite topics.

C: Let's just start with the basic definition, what is local energy.

B: Local Energy is an old idea that I'm trying to wrap a new term around. For people in the power generation industry, it's a DER, distributed energy resource, or better said a source of power that is located behind the meter. It goes by a variety of different names in the industry where often the name reflects a particular special interest group in the Utility Industry. I didn't make the term Local Energy up, I knew one was needed, so I adopted this term to be a term that talks specifically about the people that benefit, that’s the communities and families. Local energy is broad enough a term to really reflect every interest. Local Energy was popularized by a group called the Institute for Local Self-Reliance, by a guy named John Farrell. I found that out after I’d already adopted the term. John had done a good job with making the term Local Energy popular. The term really refers not just to technology of local solar and battery, small scale community solar, and things like that but it also includes the communities, and the families that benefit from it. So to me local energy can be distilled down to two concepts, one is that the electricity is generated near the people who are benefiting from it and two, I think the more radical part is that it's owned by the people who are generating it and benefiting from it. And that's a really big deal!

C: You used the term “behind the meter”, behind the meter implies there is something in front of the meter, so who is in front of the meter?

B: The term “behind the meter” is used by all the major electric utilities. It's a very common term in the industry. Behind the meter is the part of an electrical connection to a home or a business that Utilities can't control any longer. In general, once you get behind the meter and into a structure, we all rely on safety regulations and building codes for how sockets, devices, and appliances are wired. This means that there's very little variation of what happens behind the meter. Mostly for good reasons such as for safety, you don't want fires or accidents. People forget how much energy is in electricity, it will kill you dead quickly! It just doesn’t happen very often in the United States as the codes and regulations are well thought out. While regulated, behind the meter is a gray area that is not managed from the perspective of the utility. I remember I was interviewing the CEO of a giant utility years ago, I said “what is the future for your firm?” and he said “well we really want to get behind the meter” and I started getting sweaty. He said “you know right now we just sell Kilowatt hours, what we want is to get into people's homes and sell them security, and sell them video, and sell them Internet, and we want to really be behind the meter for the first time”. I said “Oh interesting” and I felt very uncomfortable because what this CEO probably wasn't thinking about was that the Electric Utilities have some of the lowest net promoter scores of any industry in the United States that consumers buy from. The trust with utilities from consumers is in the confidence the electricity will stay on. But consumers don’t trust their businesses for anything else.

C: So Utilities don’t have brand permission to sell you other things?

B: That’s correct, and for good reason. I can’t buy electricity from any other firm where I live in Georgia, as is most of the United States. I have one power company and that’s it. I can’t pick another company if I have a complaint, there are no choices. I cannot go to another Firm.

C: So you have opened up this discussion tremendously right now, because you're not only just talking to me about the technology of something behind the meter, you are talking about the business model behind the meter as well. That says you are advocating that consumers want to be in charge of their generation and consumption. Do consumers want to be the source of their own consumption or generation? This implies that local energy means that over time you could be self-sufficient behind the meter. Is this the discussion?

B: When I started the research for the book on Local Energy, I had this notion, aspirational almost, that there would be a path to everyone being off grid. Everyone generates all their own electricity and is not dependent on the utility. I concluded to my surprise that it didn’t make any sense to eliminate Utilities. I came around to these thoughts with the assistance of smarter, wiser folks, that Utilities are a really good thing. We really need them, we want them, we do not want them to go bankrupt, we do not want them to go away and they have a very vital role to play today. More importantly they have a vital role to play in the future, although most of them struggle so hard fighting the future they will be replaced by other people and businesses playing a similar role. The benefit to us all of being connected to a central grid is very, very high, even if the business model that has been around for centuries needs to change dramatically. The service of having a centrally run grid is actually quite useful in any future scenario. But, what I jokingly say, there are only three industries in the United States that are government granted monopolies; alcohol, gambling, and electricity. Every other industry I'm familiar with and have researched, has been set on a path to become somewhat competitive, because generally speaking competition creates better goods, services and prices for consumers.

C:  We’ve seen business transformation happen before. For example with phone service, with cable TV, with the Internet and some other areas that started from a monopolism point of view and now there is open competition. These industries have figured out how to share media, share wires, and share lines. In short, they figured it out. So you are suggesting this is the transformation that’s needed for public utilities?

B: Think about the telephone, you and I are old enough to remember when we rented the telephone, there was a local and long distance service that was charged were the first minute was one fee, the next minute was another. I remember we had charts in the house that you used to arrange a time to talk to people based on charge per minute. AT&T at the time was the largest Monopoly in history of United States, they were granted unique business rights and protected by the government in the same way electric utilities are today. That was a phenomenal business. At their height, AT&T did a great job, they invented the transistor, they invented the solar cell, they invented radar and microwaves. AT & T in their heyday was a great example of what was possible. Somewhere though they lost their way, they became complacent and comfortable. Into the 80s, AT&T spent an increasing amount of business focus, disproportionate to providing better services, on defending them monopoly. What AT&T didn’t realize was that all along they were up against an unstoppable force, which was technology. MCI Corporation ultimately came up with a better approach to long distance and AT&T ultimately lost the battle. If you are even a little bit of a student of technology history like we are, you ask yourself if AT&T had maintained its monopoly hold, and MCI had not broken the back of AT&T's monopoly, and the government hadn't supported change, do you think we would have the Internet today? Do you think we would have the mobile phone of today? If you do some quick history, the answer is absolutely not, under no circumstances would it have happened, you would have data services that cost astronomical amounts.

C: So it's that single opening of the telephony market, that business and government faceoff of AT&T / MCI led to the proliferation of all these different models. We can now just go to our local cell phone store today regardless of the company or carrier, pick up a phone and are able to ubiquitously call across the entire United States, even the world, without any concerns or astronomical cost pressures.

B: Yes, It's important to note that this journey didn’t happen in one step. Along the way we experienced a myriad of business models and technology that emerged from many, many different companies, and types of businesses. But, in my mind when you distill it down, the single thing that fueled change and allowed change in technology in telecom to just explode and proliferate was that for the first time people could participate in the telecom ministry by inventing companies in their garages.

C: A Business Model change.

B: Yes, it was a Business Model change at scale. Previously, the only way you could be in the telecom industry was if you had a few billion dollars, and you had huge support from the government to pull telephone wires. That meant that you could mandate that people must use your telephone wires. Conversely, you could build a factory to make telephones and wire for these big companies, again where the entry level cost was $1 billion. So at that time, the only participants were Wall-Street and the government. Both of which benefited financially from the then current AT&T, as well as all the subsidiaries that they launched. Big business did not want this to change. But once the change started, people dreamed they could do Telecom in their garage. This led to thousands of people, most of them who had ideas that were not practical, and they mostly failed. But a couple of them succeeded, we’ve heard the story of Steve Wozniak and Steve Jobs who built a crappy small computer that nobody needed, and wasn’t solving an immediate problem. They did it on their own self-funded budget by using credit cards and borrowing money. In a regulated world there were no incentives to have done this, but their work and the work of others led to the creation of impactful companies that were more or less directly related to Telecom. These start up companies started an entire ecosystem that needed inexpensive Telecom as a part of its future. All of this is based on the fact that technology moves quickly, and if you can move at speed, you can create competitive solutions in small companies that otherwise didn't exist. And some of them changed the world.

C: So this single change in monopoly status allowed for broad exploration of different models, some of them would work, some would fail, but the permission was now there for these different models to proliferate and for the world to try them all.

B: Yes! Business Darwinism could finally come in and do the magic of business evolution in the Telecom space, which in simple terms is a business-oriented win-lose-fail cycle until it was a success-try-again cycle. The best thing about the new small-scale competition was in the explosion of new ideas and people. Chris, you've been a small company guy. I've been a small company person. The best thing about a small company is that people will lean into their startup company in a way that no one at AT&T or at IBM or at Southern Company ever would. Those people just don't have incentives or upside to be willing to make a difference to do something truly impactful. When you work at those companies, you don’t control your own future. Your ability to control your future to design something you see come to market just doesn't exist. Whereas in the startup explosion of the 90’s you could go in your garage and invent a solar battery system that tomorrow changes the world.

C: So we have now a phenomenon taking place that's allowing us to expand the scope of our thinking and business models. You’ve mentioned things such as batteries, what else is in the scope of things that make this an important moment right now for local energy?

B: Now is the key word, why right now? Almost no one asks that question. For example, why did the personal computer come out in the early 90's? The answer is actually really boring, and it’s the same answer for personal computers, as it is for the Internet, as it is for local energy. It became cheap enough!

C: Cheap enough to buy? Cheap enough to make?

B: Everything! I’ve some graphs in my book. 10 years ago if you wanted to put solar on your roof, it would have cost you $150,000. Today the average American home can put the average sized solar system on the roof for about $12,000, and that falls within the range of many Americans. There are loans, incentives and many payment plans today that mean for the first time a wide part of the home owning Americans could put solar on their roof. For these systems, every kilowatt hour generated on the roof is cheaper than a kilowatt hour purchased from the utility grid.

C: And can individuals sell their home generated kilowatt hours back to the grid if they don’t use it?

B: So this is the most contentious and complicated thing going on in an industry today, and the short answer is it varies state by state. Most states will pay you what you pay the electric company. If you are paying $.10 or $.15 a kilowatt hour for your electricity from your monopoly electricity provider, they will pay you the same price back. And this has become the battlefront for the utilities industry right now. State after state, this type of payment plan for solar homes generated electricity from individual homes is now a point of contention. For example, in California right now, they don’t want to pay that amount back, they want to pay you back a small fraction of their kilowatt hour price. What the utilities want to pay is only what they would pay if they were to buy solar from a giant industrial solar farm. This means wholesale prices essentially. It is really a complicated argument where there are strong opinions on both sides and there are a myriad of secondary arguments such as who pays for maintaining the grid after that. Remember, this is an industry where there are literally thousands of PhDs working on electricity pricing, this is a contentious issue currently.

C: Please spin around the globe for me for a second. We have been discussing the United States, have others in different parts of the world solved this? Is anyone ahead in the adoption of local energy?

B: So to be clear, virtually everyone in the world is ahead of the United States. There are many models that have been used to solve the problem, all have their advantages and disadvantages. For example, in Europe, they tend to put a lot of burden on the utilities to cover costs, they tend to be very citizen centric, less business centric. For those reasons they have something called “Energy Communities”. This has just started to take off and gives communities freedom to do whatever they want with self-generated electricity and whatever they don't want to do, the utilities must consume and take care of any power that is provided to them. The European utilities are a big business in Europe and do just fine, and it’s highly regulated so none of them are about to go out of business, it's just not as flexible as we entrepreneurs would like it to be.

Now, if you look at Africa where there's 770 million people today that have no kind of electricity of any type. They have kerosene lanterns, burn a lot of local substances, they have no grid, nothing. These small scale solar systems are both affordable and life changing. Far cheaper than getting a grid as we have here in the United States. I talk a lot about this in my book. I met with the CEO of an African electric utility. I asked, “So what does it cost you to bring the grid to one of your rural customers, typically people making 3 to 5 dollars a day?”. He said “$1200 per small home”, so I asked, “what does it cost for someone to buy a solar home system that has a solar panel to support a television, a flashlight, a radio, just five home lights and charge their phone?'' he answered''$250 ``. I just sat there and stared at him. This CEO continues telling us “We're a poor country and we don't have the money to build our own grid, we rely on support from the World Bank and others. They don't fund the small-scale systems; they only want to fund the Utility type systems that set the pattern in the western world. We are struggling to convince them that these new systems are cheaper, better, faster because it's going to be 10 years at best, before I can get everyone on the grid. Otherwise, I could install a solar home system in every single person's home within a year”.

C: So, you've given us a snapshot into the economics in Africa, let's just translate that back to the United States. Let us stay on this is cheap enough discussion, on one hand economics continue to improve for Local Energy solar solutions, while on the other hand with rising fuel cost of fossil fuels, rising cost of the grid, limited nuclear power represent current supply of the United States that traditional energy sources are going up in price. Do the economics continue to converge towards this idea that local energy behind the meter means someone could sustain themselves today, and even potentially make money by selling power out to other people or back to the utilities?

B: One of the exciting ideas about Local Energy is that you can be in the business of it, not just provide for yourself, that's the business theory. If you go to Japan or Australia or energy communities in Europe, then yes you and I can trade electricity. Someone could put a bunch of batteries in their house and your neighbor could put a bunch of solar on their house. These two individuals could then privately trade electricity to each other, this is called peer to peer electricity trading. Or transactive energy. I joke in a book that there are more people that have climbed Mt Everest to the top, than have traded electricity in the United States. It usually takes years when you do see an example, like the Brooklyn microgrid, or the Green Mountain utility in Vermont running a pilot. There are years of legal setup, it's run as an experiment like this, and then it’s always terminated, and the classic utility model returns.

C: So your option in the United States is just constrained to sell it back to the local public utility?

B: Or put in a battery and use it all yourself.

C: But if you're a large business, is consumption of what you make a viable option?

B: Yes, you can generate power and store it with batteries, which are getting super cheap, and continue to decline in price, it is a viable system. There is an ongoing debate over what the utility pays you, a concept called “net metering”. This debate exists in states where the utilities are pushing back on what is the fair amount to pay for excess electricity. This has created a demand from businesses and individuals who are now rushing towards batteries because they will be able to use 100% of the stored energy during the night.

C: So the opportunity exists economically to eliminate the power bill?

B: Yes, but there's a hitch that’s contrary to what we know the technology can do. Solar power technology fosters the idea of power self-generation, an aspirational dream which is confronted by what I call the Two Nines problem. Essentially two or three or four times a year you're going to have three or four days of snow or rain and your solar cells on those days are going to generate only 10 or 20% of the power of a sunny day and your batteries will be depleted. What do you do? You have only two options today. One is to tap the power on the utilities grid, which is one of the reasons you want to remain with them. The utilities do not like this as your utilization goes from one hundred percent down to 2-5% of the time and they still must pay for the wires and everything. The other option is to fall back to long-term generation which most commonly is a generator. People who do this first and foremost for environmental reasons do not want to fall back on a generator. Plus, a generator costs money, so the economics don't cancel out. This is sort of the gray area we are in right now but there's a lot of things moving to work moving towards solving that. The difference between long-term chemical based battery storage versus the generator is getting smaller. You can use all your solar, but just in case you might have batteries to store your excess power off to the side and it's there only when you need it. Some utilities are starting to realize that there's a much better business model for their future rather than being the retail seller of kilowatt hours. These progressive utilities want to be the platform on which kilowatt hours are bought and sold. The analogy to look at is eBay or Amazon marketplace. It's good business to use eBay or the Amazon marketplace as a business platform. In Europe some utilities do this but here in the United States there is to my knowledge no example of a utility that wants to let people buy and sell electricity on a platform and whose business model is to charge them to do it. Essentially the new model is that if you want to be able to buy and sell electricity whenever you want as a local energy generator, you're going to pay a monthly fee. What this means is that revenues will go down for the public Utilities as they will not make as much electricity, but the profits will go to the roof by providing a trading platform.

C: So we’ve spent a lot of time talking about the different business models so far and what confronts us in the different regions of the world. In our next episode, we will enjoy Bill’s thoughts on the technology advancements critical for Local Energy. We’ll bring both the business discussion and technology breakthroughs together to wrap up our talk.

 

 

Christopher O’Connor is a 30-year software and services technology leader, strategist, and CEO. He received his engineering and computer science degrees from Rutgers University and management certificates from UNC and Harvard. He’s led everything from startup R&D to large company balance sheets as a General Manager of the Internet of Things for the IBM Corporation.  Chris added to his achievements in 2019 a stint as the worldwide CEO of the public company Persistent Systems LTD from Pune, India, where he led a successful turnaround of a declining business.  Chris is an experienced software and services operator, having occupied all C-level chairs from Sales to R&D to CEO throughout his career.   With the pandemic, Chris has focused more on Venture Capital advisory roles by providing strategic leadership in Healthcare, Financial Sector, and Industrial Sector software and services.   This includes extensive work in the field of the Internet of Things and Enterprise Asset Management, where he excels as a thought leader.

 

Bill Nussey is CEO & Founder of Freeing Energy, and CEO & Co-founder of Solar Inventions. He is a 25-year tech CEO with several exits, including an IPO. His companies have created thousands of jobs and billions in shareholder value. Along the way, he also worked at Greylock as a venture capitalist and, after selling his marketing tech company to IBM, he was promoted to VP Corp Strategy to help lead IBM’s global strategy for their CEO and SVPs. In 2017, he jumped into clean energy. It started with a TED talk which grew into 100+ articles, then became a top 10 energy podcast and, as of late 2021, a book called Freeing Energy, which has hit Amazon’s #1 new release in three categories (solar, energy, and energy policy). He also has a startup called Solar Inventions that is commercializing a patented breakthrough in the manufacturing process of silicon PV. He has a degree in electrical engineering from North Carolina State University and an MBA from the Harvard Business School.