Welcome

Katherine Radeka (00:03):
Welcome to Accelerate Net Zero, the podcast dedicated to the acceleration of the technologies we need to address climate change. My name is Katherine Radeka, and I've been accelerating innovation for a long time in a number of different industries. And nowhere is that acceleration more important today than in the renewable energy, materials, food production, transportation, and other programs to limit carbon emissions so that we can stabilize our climate. So if you are working on these programs as a technologist, as a manager, as an investor, a public policy maker, an activist, or just a concerned citizen, then you have come to the right place to learn how we can eliminate obstacles and put more momentum into these programs so that they can begin delivering the impact on carbon emissions sooner. And we can reach a Net Zero faster.

Introduction

Katherine Radeka (01:01):
In our last episode, Will Harrison talked about the challenges of bringing sustainability to a product, , pretty much any product, because eventually everything is going to have to at least consider sustainable goals as part of the requirements for a product. And I talked about the fact that as consumers, investors, and policymakers, we have the ability to send signals to people like Wiill and his team to let them know that sustainability was important to us.

My guest this week, Lauren Rosenblatt has a different challenge. She has a business model innovation that she needs to demonstrate in order to attract investors to show that, yes, it will indeed generate the level of return that these investors need in order to fund the programs. Lauren Rosenblatt is executive director of Barrio electric co, and also Chief Executive of Uplift Solar Corporation. Her background is as an attorney who has specialized for more than a decade in the electricity industry. And she's worked in that industry from a variety of perspectives from governments to vertically integrated utilities, to emerging technology.

Today she's directing her efforts to bring forth new business models, to promote affordable power for homes and for areas in economic development. Through her work at Uplift Solar, she is seeking to open up new markets via a unique combination of energy tech and financial tech that will broaden access to financial solar. And then as a Co-Founder and Executive Director of Barrio Eléctrico, she's leading the development of a transformational electricity market that will bring community-based distributed solar to the people of Puerto Rico. She has a BSC from Rice University and a law degree from the University of Texas in Austin.

In this interview, Lauren is going to share some of the challenges she's faced in demonstrating that this is a viable business model for investors who will receive adequate returns to make it worthwhile for them to invest and that it will deliver robust, resilient power that is adequately serviced, maintained, and supported to generate the renewable energy to power these communities. Tell me a little bit about the importance of resiliency and why that idea is so central to what you're doing with Barrio electrical.

Interview with Lauren Rosenblatt

Lauren Rosenblatt (03:30):
Well, there's a couple of reasons why we're focused on this particular aspect of distributed energy. One is that it's become increasingly apparent just through recent events that natural disasters are going to be more frequent and more severe. And most of this in some way, ties back to the climate issues that we're experiencing and how it's driving changes and the weather patterns and drought and the underlying factors that cause these catastrophic events that wipe out our grid.

The other issue with resiliency is it's a little bit more embedded in the way that we buy and sell electricity because we all have one central provider. And when we have a central provider, then we're subject to the rules that that central provider makes. And the central provider of electricity has a lot of clout when it comes to the rules of how we buy and sell. And it's apparent in places where the grid does not reach all of the population that needs electricity.

It's very difficult for the forces that drive those central providers, which is really making money. Even for government owned utilities, they work at the grid as a way to make revenue. And that business model is not providing services to people. And so the way that it attaches to resilience is that the power services, the electric services that are provided to people are not reliable and mostly they're just not there. And so when we think about distributed energy, what we really think about is being able to serve yourself in a way that is resilient against Mother Nature and also resilient against the economic and the business drivers that'right now inform the way we receive things like electric service.

Katherine Radeka (05:33):
So a community adopts the model that you're proposing for solar energy. What does that look like for them? Tell us a little bit more about the model.

Lauren Rosenblatt (05:41):
Yeah, this is the exciting part because there is a humanizing element of Barrio Eléctrico that I think you don't really get in your utility service or for that matter in the distributed solar market that exists today. Today, what we see is financiers provide sources of money and they will front the cost of equipment. Then somebody like an equipment supplier and installer, or maybe it's just an installe who's procuring the equipment will come to your house and put the solar on and be paid for it and pay back the investor. The model seems to be emphasizing the sale of equipment over the customer. So what we do is we bring in community partnerships, we build a community organization around an existing community organization around the mission of clean energy, resilient, energy, equitable energy, energy, independence. We might even start a community organization in communities that are smaller or don't have an existing organization to talk to.

And we educate the community organization on the benefits of solar, get them excited about it. They will sign an agreement with us to host some events and do some customer outreach. We look for leaders in that community organization who we train as what we call community coordinators. And they help us spread the word about the equipment that we're offering and why it's sized right, and affordable and financed for people who, who need that kind of financial support in order to procure the system. And we train them and the community coordinator. In particular we'll walk the potential customer through the lease, which is a 20 year lease to keep costs down and also walk the potential customer through the services that come after the lease, which includes the community coordinator or some community coordinators being on call for service calls. One of the biggest issues that comes from the current business model for distributed solar is that people want to install or have the system installed on their house and something will go wrong.

And they don't understand that they haven't been using the battery correctly, or they don't understand they have to clean their panels. And they're just not getting enough energy out of it, whatever the case. And many times they'll find that they can't find the service they need, or if they do it's expensive, they've got to pay somebody a few hundred dollars to come out and help them troubleshoot. So not only do we give them individualized attention and assistance in buying the unit or leasing the unit, but we make sure that they have somebody they can call ,somebody in their neighborhood is close at hand on the phone to stop by and help them troubleshoot. If the equipment really does need some serious repair, there's a warranty service. And that's when we come back in and provide the warranty service, we also use local services like credit unions for billing and payment.

It's a very localized economy around solar. And what we hope is that the community organizations who continue to do events to recruit more customers and keep those who have adopted solar educated on technology and where policies are going with distributed energy is that they will also become the locus for these new owners of distributed energy to connect together and create microgrids, which we believe is the future of energy services, but will require some new rules around how we buy and sell energy in those microgrids. And the community organizations will essentially become the institutions that create those rules.

Katherine Radeka (09:38):
So tell me a little bit more about these microgrids.

Lauren Rosenblatt (09:40):
Microgrids have multiple definitions, but at bottom, when people refer to a microgrid, what they mean is a generating source and a load like a house or a business. And the wires in between. A Microgrid can be a Pico grid, which is just a portable battery attached to a light and a solar panel, or it can be what we call minigrids, which is a whole neighborhood or distribution system of homes and businesses with maybe a few megawatts of generation and all the wires and the technology that keeps the system balanced between load and supply.

So microgrids are interesting because they are isolatable, which means that if you have a set of microgrids that are attached to each other and maybe several neighborhoods that are next door to each other, and each has their own microgrid, if something happens to the grid at large, that they make up, then one neighborhood might go down, but the next neighborhood might not. So it's good for resiliency, but it also allows for people to share excess power or buy power from their neighbor when they need it.

Katherine Radeka (11:02):
Yeah. I'm imagining an environment where you've got some homes that have really good rooftops for solar and homes that don't, and having the ability for them to have a neighborhood power generation system, instead of having to rely on the big scale generating power system, which could be hundreds of miles away.

Lauren Rosenblatt (11:17):
That's right. And there are some progressive utilities out there, distribution utilities, so utilities that operate the wires that are closer to home and what they've done in areas that are somewhat remote and don't have as many lines is they try to put an anchoring generation station somewhere in the vicinity of those wires where the people are spread out. And that way if a storm happens, or if for some reason they have a problem getting power to that line, the line itself has a source of power that can provide for a certain number of hours, or maybe just at a certain level, some basic service.

Katherine Radeka (11:59):
So it sounds like then that the hypothesis that you're testing with Barrio Eléctrico, is the technology, it sounds like you're using is pretty well-proven, you're, you're not really using anything innovative from a technology perspective. The innovation is really in the business model. Is that right? Am I hearing that correctly?

So the hypothesis then is that if we can have these community organizations that are helping people, kind of bound together and supporting each other in generating demand for the panels, in maintaining the systems that that will enable these consumers to have resilient power, at an economical cost, that that is more robust to things like natural disasters. And if they do that, the lease holders will get a stream of cash flows from that over 20 years. Is that, is that a nice summary of what you're trying to do?

Lauren Rosenblatt (12:53):
Let me just clarify. So the Barrio Eléctrico itself aggregates the equipment and also supports the community organizations in the form of training and making sure that they have what they need in terms of soft resources, non-monetary resources to do the outreach and really rally around the mission of clean energy. The customers of Barrio Eléctrico become members of the community organization, the lease payments that they make or if they make an outright purchase, which we don't expect to be common, but it's possible that money goes back to Barrio Eléctrico go to pay the financiers for the equipment. But Barrio also receives a portion of that money for continued training, continued outreach, overseeing the operational services that are provided local providers, and then gives a portion of that money back to the community organization. The organization earns from the lease payments in order to continue to serve the mission, but also for larger communities that are earning more revenue. They, they may have money left over for other community projects, which, which we encourage.

Katherine Radeka (14:04):
So then then the community organizations also benefit from some of the stream of revenue, as well as Barrio Eléctrico itself, receiving some of that funds and then being able to reinvest that in other projects. That's right. Okay. All right. And then, , you're talking and the reason why I bring this up is because you mentioned that getting investors has been a barrier for you. So how do the investors fit into that equation? , Where are they in this ecosystem?

Lauren Rosenblatt (14:29):
Well, the investors are investing in a, an affiliated company that is able to take the dollars for the equipment, buy the equipment and receive a portion of the lease payments back and pass it back to the investors under your traditional tax corporate model. It includes a special purpose vehicle for tax equity investment. As you may know, the US and a few other countries for that matter, have what we call the investment tax credit, which means that instead of paying taxes to Uncle Sam, you can take that money and invest it in renewable energy and get a dollar for dollar reduction in what you owe to the U S government.

So we take advantage of that by finding investors with tax equity appetite, who are willing to put their money towards us, and then receive the credit back, which is part of the reason why we have the commercial vehicles, the non-profit is the community organizing piece of it. And so to get us off the ground the nonprofit is looking for philanthropy to support its community minded mission. But over time as the sale of equipment, the purchase and sale of equipment becomes profitable for the investors. It will also cover the costs of the community.

Katherine Radeka (15:49):
So you need some seed money, some philanthropic seed money to get started with the community organizing piece, and you need investors to get started on the equipment purchasing piece when you're ready.

Lauren Rosenblatt (16:00):
Exactly.

Katherine Radeka (16:01):
Okay. Okay. So so it sounds like there's some interesting assumptions in there to validate. So one is the idea that you can do this through community organizing that you can have a community organization that basically helps form this microgrid in a community. Is that a model that's been demonstrated anywhere? Do you have any success that you can point to?

Lauren Rosenblatt (16:23):
The model to organize communities around a community microgrid has not been demonstrated. What has demonstrated is that it's very hard to organize around a community microgrid. Most microgrids that have happened have happened with large campuses like universities or hospitals and or businesses, businesses that have large operations like a resort or an industrial facility in partnership with the utility who has a grid that can take excess power or supply backup power when needed for the microgrid. So the idea of a community microgrid is something that's discussed at great length and has been for some years now in the electricity industry, but it hasn't been realized yet. We're still working out how that's going to work and balancing the loads and also using the utilities distribution wires to make it happen. What has been proven though, is the community organizing model in general, to achieve a social purpose.

And we believe that electricity has become a social purpose. And again, I refer back to Puerto Rico because when the grid was flattened by the hurricanes, there was an enormous outpouring of sympathy and money because the idea of all of those households going out without power for as long as they did in our minds was a social inequity. It became a social purpose.

And so what I think the situation in Puerto Rico did is highlight for those of us who have forgotten that electricity service is not a consumer transaction. It has a public and a social purpose, and it's why in the past it's received public funding. We also have that same problem. And it's been seen a little bit in California that the grid can be vulnerable to natural disasters sometimes in other places in Florida, after hurricanes and New Orleans, after hurricane, sometimes after floods and other parts of the country, we haven't seen it at the scale that Puerto Rico has seen it, but it doesn't mean that what happened in Puerto Rico can't happen anywhere. And electricity is too important to do without. If you do without it for an hour, it's an inconvenience — if you do without it for three to 10 months, that's a societal problem.

Katherine Radeka (18:46):
So what do you think you need in order to demonstrate that this model is, is a good one, is one that will work? What are you looking to do to test?

Lauren Rosenblatt (18:57):
Well, we've already started with a website that explains what we're doing, and some outreach with our director of community organizing for the organization. And he has reached out to several different nonprofits and individuals as well in communities around Puerto Rico to discuss what we're trying to accomplish and ask them if they're interested and uniformly, they have come back to him immediately with a handful of houses, 10 houses, 25 houses of people who are interested.

We haven't been able to serve them quite yet because we haven't aggregated the financing for our first project tranche. But the fact that they're already identifying pent-up demand and willing to come to the table and work out exactly how we're going to deliver those systems shows that there's an interest there. And they all understand because we make that clear up front that it's not a matter of these 25 households, just buying a system — that they have to create the community organization and go through the process of committing to the mission of solar energy.

So that's very encouraging. I think what will prove out the model is when we have financed the systems and are able to offer them, that we create the agreements with the community partners and we get people to sign up and we're also able to serve them with leases. One element I didn't mention about this program is that when we come to terms with the community partners, the contract is fairly simple. And then it asks them to aggregate members as customers. And the more members they aggregate, that's the basis for how much revenue returns to them. And they make a commitment to host events and be trained and do some outreach. They also make a commitment to what we call the community reserves. And so everybody who leases or purchases a system and the community organization must contribute to a reserve fund that they manage.

And a piece of the commitment to us is to show us that they've come up with a policy for how they're going to manage that money and administer it. And the money is there for them to determine based on their own criteria, if a household is in need of help qualifying and being credit worthy for the lease, they might guarantee the financing, or they might subsidize for a time monthly payments, or if later on, after installation a household in the community is in distress. And that meets certain criteria, then the administrators of the community reserves might help with some payments for a time or come up with a scheme where they can fund and be paid back. The theory there is that when you're dependent on friends, family, neighbors, in that way, that you are more likely to be attuned to the rights and obligations you have around your energy resource and that it will just make it more manageable for everybody to make the payments and maintain their end.

Katherine Radeka (22:15):
Okay. So as you've talked to investors about this, this model to get the funding to get started, what's some of the feedback that you've heard from them?

Lauren Rosenblatt (22:23):
Just about everybody we've spoken to thinks it's a great idea. We've spoken to mayors who have some municipal funds. We've spoken to development banks. We've spoken to credit unions. We've spoken to private investors. We've spoken to foundations who are interested in giving birth grants and also low interest loans. A lot, a lot of excitement.

What's interesting though, is that they are conservative and that they want to see it work first. And as I mentioned before, these models of selling solar equipment, like you pointed out, there's no tech, no new technology and procuring the equipment, investing in it, and then leasing and selling it that in itself is not new either, but the model does not actually generate returns until you get a little bigger. And even if we're starting with a hundred homes or a few hundred homes up to a thousand homes, the returns don't look generous enough to give people confidence. So they just, they want to see it first, especially investors, but even foundations who are inclined to be a little bit more impact minded, they also want to see demonstratations first as well.

Katherine Radeka (23:36):
What kinds of things have you tried to do to overcome that problem? Which is a very common one with anything new, any innovation, right? They want to see it, right. So, you're not building a piece of hardware where you could go 3d print a prototype — something that looks really nice but may not actually do much, but it's pretty impressive. Right. Right. So, what are your thoughts on how you're going to overcome that challenge? That's a big one.

Lauren Rosenblatt (24:01):
The secret has been so far because we have managed to get about half the funding we need for our first project. tranche is to really look deeply at the people who are closest to the problem. And right now we have a development bank and an equity investor and they're in Puerto Rico. So they understand how important this problem is. They understand how significant it could be if we do this and we're successful. And they're willing to take the risk just to create the movement that they think needs to happen in this resilient power space. So I would sum that up by saying, get close to the people who might have resources to solve the problem, but really haven't thought hard about how to apply those resources and then give them an answer to that.

Katherine Radeka (24:50):
Yeah, what you're doing is you're going to the people that experienced the impact, and looking for resources, there among people that might have more empathy for, for the communities, , and can see that if we could demonstrate that this works, then, then this could be a really, really great thing for us.

Lauren Rosenblatt (25:11):
Right. Right. And so we're getting some momentum. The problem is, is that as we get bigger, there's not going to be enough resources on Island to powe what we hope to do. In the summer of 2020, the electric utility (they're the monopoly government owned electric utility PREPA) told its creditors that it needed13.1 billion to rebuild the grid. And so we went back and did our own math and with about the same amount of money, we could build enough distributed energy generation to meet Puerto Rico's energy needs today. We're not going to find 13 billion in Puerto Rico alone. And I do think that we won't even need that much to meet the needs of all Puerto Rican's, but it's going to take a little bit more than packaging.

Katherine Radeka (26:02):
Yeah, exactly. So what's your timeframe like? What's your next major milestone do you think for this project?

Lauren Rosenblatt (26:07):
We hope to do a thousand homes in 2021. We have been able to take advantage of some prior tax credits that we're sitting on. So that should help the investment tax credit that I mentioned earlier. And as I also mentioned, we're about halfway to our funding goal for that first project. So we hope to do the initial run quickly followed by scaling up to 1,000 in 2021. And then every year after that, we double the goal is about 50,000 installations and five years. And jumping up to a total of 350,000 in year 10.

Katherine Radeka (26:52):
Okay, cool. What's going to be the very first step? You're not going to start with a thousand homes. Right. Right. So what are you going to start with?

Lauren Rosenblatt (26:59):
Start with 75. We have a community already on board. We have been building up demand in that community. We have a demonstration installation in that community too. So it really helps for the customers to be able to see that one of their friends and neighbors has a system and it's working for them. And we will finish getting the second half of the funding, I hope by the end of the year. And then we're off to the races. We've already identified the equipment and integrated the system, which is chosen the components and figured out that they work together. So we just need to do the procurement and we have some installers on tap. And the hope is that we can smoothly get the funding in and procure the equipment and get the installers out there in ways that are seamless in terms of scheduling.

Katherine Radeka (27:53):
What have you learned already, just from starting up this small scale project, what's been some of your big takeaways?

Lauren Rosenblatt (27:59):
Oh, I've learned so much about community organizing, about investments, and investors as we've been talking about and also about solar systems. The primary takeaway is if you're meeting a need, then the will to do it will be there to help you. And I mentioned that we've spoken to a lot of people who are excited and they've been reluctant, but everybody we've spoken to has tried to help in small ways, has thought deeply about it, has given us advice, has maybe pointed us to somebody else that might help. And the members of the community are talking with their friends and neighbors. They're talking with us, they're introducing us to other communities that we might be talking to. And the takeaway from that is that if you put out a message that people want to hear, then you can make it go. Maybe not as fast as you want it.

When we installed the equipment, of course, we it was good that we did the demonstration installation because we were able to work out a few kinks about how we put it together. And that's important. And we have had the time to develop the relationships we need that give us credibility with our investors. That's also important. So we've got credit unions doing underwriting and a local insurance provider. So I'd say that what I've learned is it really does take a community. You don't build businesses like this by yourself. You've got a lot of stakeholders and it's okay to rely on them.

Reflection

Katherine Radeka (29:35):
I wanted to share Lauren Rosenblatt's story early in Accelerate Net Zero because of two reasons. First, I think that her program has a lot of potential to Accelerate Net Zero, because what she's done is she's got existing technology, well-proven technology. We know how to service and support it. We know how to maintain it. We even know what we're going to do with it at the end of its life. She's putting it into the hands of people that cannot on their own, afford the capital investment to make it happen by doing that. She makes it possible for people in a wider variety of communities to gain access to this. So right now in the United States, solar energy on the roof is primarily the province of well-funded companies and individuals. You see a lot of it in wealthy suburbs, in Silicon Valley and other areas of the West Coast.

And you see almost none of it in the poor areas of the country. That's going to have to change. If we want to accelerate the transition to renewable energy and climate change effects are increasing the need for this in California, with the wildfires and what the wildfires do to the grid and in areas that are vulnerable to tropical storms. We are seeing this today. In fact, Puerto Rico has still not completely recovered from the hurricanes that it experienced. And yet those hurricanes are becoming more frequent and more intense as global warming increases. So all of that points to the fact that we need more resilient, more robust systems for power, and we need to accelerate the adoption of those technologies. And I think that Lauren's model is a big step in that direction.

The second reason why I wanted to introduce her project is because the obstacles she's facing is one that I think we need to figure out how we're going to overcome. And that is, she has a business model innovation, it's not tech. She's using existing technology. She could build a demonstration solar system on a rooftop somewhere to demonstrate the tech works, but nobody would really be all that excited about it because we know it works. We've got lots of examples that the tech works.

What she needs is the financing for enough of a pilot program that is large enough to demonstrate that her financing model will work. And that requires as she said about 75 homes, at least in order to see that she can actually put this rooftop, solar on homes, have a community-based support model to maintain the equipment and then generate the cash flows that investors are going to need to ensure that they get the returns that they're expecting so that they're interested in those investments. In the past, this was something where governments played a big role.

In fact, the only reason why we have power to the extent that we do in the United States is because of a massive effort called the Rural Electrification project that took place in the 1930s. the government provided loans to create a strong demand signal to utilities and other interested groups to form utilities that would provide power in the sparsely populated areas of the United States. And as a result of that, we were able to bring electricity to areas of the country, where it was unprofitable to build out the grid, if the company had to bear the cost of the capital investment required to build out all the power lines.

So we've known that this model works. We have many examples of similar things where critical infrastructure was provided through government funding. And that's not the only possible model here. A Philanthropic organization, like the Gates foundation or a social entrepreneurship, a venture capital firm could look at this as an opportunity to provide renewable energy to a community of 75 homes that provides renewable power for them, and also provides a testing ground for how you can make such power sustainable, robust, and resilient.

Even if the financing model that Lauren is attempting to demonstrate cannot be proven by this pilot program. If you've done nothing else, at least you brought renewable energy to these homes, and at least you've begun to understand what it takes to maintain and support renewable energy in communities like this, which is a problem that we need to begin solving today. If we want to Accelerate Net Zero.

Sponsorship

Katherine Radeka (34:09):
Thank you for listening to Accelerate Net Zero. For resources, transcripts, and additional information about this project, please visit our website, acceleratenetzero.com. The Accelerate Net Zero project is sponsored by the Rapid Learning Cycles Institute. We help innovators change the world faster. To learn more about the Rapid Learning Cycles framework, visit rapidlearningcycles.com.