He’s right. And it’s not just happening in California. It’s happening in New Jersey, New York, Massachusetts and elsewhere.
When governors like Arnold Schwarzenegger in California and George Pataki in New York, created renewable portfolio standards in the last decade they triggered the development of thousands of megawatts of wind and solar development in their states. So far, California has outstripped the rest of the country, building some of the largest solar and wind farms in the world.
All good, right? Not exactly. Stay with me while I explain what is bugging this Wall Street banker because it’s complicated.
States with renewable portfolio standards subsidize clean energy development by taking a slice of everyone’s electric bills, called a societal benefit charge, because it helps fund clean power instead of coal-burning and natural gas-burning power plants. These societal benefit charges also pay for things like safety nets for poor people who fall behind on their bills so they don’t freeze in the winter.
My socially concerned investment banker, a conservative Republican, who by the way doesn’t have a problem with the societal benefit charge, doesn’t like the fact that everyone pays their electric bills, subsidizing some to lower their costs.
A handful of enterprising San Francisco Bay area start-ups, including Elon Musk’s SolarCity, which recently became the first company of its kind to go public, have come up with a business model that is supported by state renewable portfolio standards and a temporary federal tax break. The incentives help them offer people a way to lower their monthly bills by leasing solar equipment, overcoming the sticker shock of buying an expensive solar system outright.
It turns out that poor people really can’t do this. For one thing, you need to own a home and you need a good credit history. But when poor people pay their electric bills, their societal benefit charges help pay for investment bankers in Silicon Valley to lower their electric bills by installing solar panels.
In my job as a business reporter I have been following SolarCity and their ilk, and admiring their pluck and ingenuity. They are the fresh new blood in the energy industry which is shaking up the old guard. The issue here isn’t their business models, they are just being entrepreneurial.
Great minds at another San Francisco area company, Google, are on this. While they haven’t answered my investment banker’s specific concern, they have made tremendous inroads in some of the fundamental issues behind fairness in paying for green energy.
Last week Google proposed a totally new way for large energy users, like their data farms, to pay for clean electricity that is fair to other ratepayers at the same time that it will spur the development of utility-scale renewable energy projects. This is the kind of rethink we need to be doing at every level of energy use. The impact of this new model could be enormous, but Google, can’t do this alone. They need politicians to lean on regulators to set the framework for a new tariff.
They need us too, because without pressure, politicians don’t do anything. Happily, clean energy turns out to be a big tent. It includes my investment banker, and Republican governors like Schwarzenegger and Pataki and smart engineers in Mountain View, California, as well as the stalwart environmentalists who got this ball rolling. This new Google plan is something I think we all could get behind.