Stopping the Spread of Monopolies — Episode 195 of Local Energy Rules

Podcast: Local Energy Rules
Source: whisper-base
Language: en
Duration: 3016s
URL: https://media.blubrry.com/localenergyrules/content.blubrry.com/localenergyrules/2023-10-ler195-kiesling-ev-charger.mp3
Fetched: 2026-03-03 04:22:17

So if you think that we have gotten to the like superior end of state, final, be all end all, fabulous, best ever, EV chargers that are ever going to exist on the planet, then having the utility be the owner and operator is not going to have as much of a cost. But if you think that there's going to be more innovation and you think that we have not come to the be all end all end state of EV charging technologies, having utility ownership and operation of EV charging will slow down the innovation processes. Even if solar and wind make the electricity system cleaner and more affordable, electric vehicles and expanding communications technologies are expanding their reach and management of electricity in homes, cars and appliances. Many incumbent utilities see this expansion as a reason to expand their monopoly power beyond electricity into car charging or energy management. Lin Kiesling says we have to push back and quote, quarantine the monopoly away from services that can be provided by competitive markets. She's the director of the Institute for Regulatory Law and Economics at Northwestern University and a research professor at the University of Colorado Denver. And she joined me in September 2023 to explain why EV charging, rooftop solar and other innovative grid services, ought not to be the purview of the incumbent monopolies. I'm John Farrell, director of the Energy Democracy Initiative at the Institute for Local Self-Reliance and this is Local Energy Rules, a podcast about monopoly power, energy democracy and how communities can take charge to transform the energy system. Lin, welcome to Local Energy Rules. Thanks, John. I'm glad to be here. Thank you for inviting me. You're welcome. I have love to ask people when I get started here about how you got into this work. So you know, what brought you to issues of competition in the electricity sector? It's funny. I've been temperamentally an economist ever since I was a kid. But in terms of kind of the career and academic stuff, I started working on electricity on my senior honor thesis as an undergrad. So it's been a minute that I've been thinking about the electricity industry and regulation. And I've always been interested in the field and economics. It's called industrial organization. I've always been interested in industrial organization questions. How do firms compete? What makes firms competitive? What's the role of government? How should regulation be structured? What can we expect from these real world institutions compared to the kind of blackboard model of quote unquote perfect competition? And how do we evaluate the behavior of firms and the conduct of firms and the behavior and conduct of regulation and regulatory tours? Given that that blackboard model is really just a theoretical construct. And that we should not take it too seriously nor too literally. But then when I went off to graduate school, I worked in industrial organization mechanism design and economic history. And so I worked on some other topics still relating to technology. And then came back to electricity ironically enough in 2000, 2001, right when all the California stuff was kicking off. And I was working in a public policy job at the time. And I called in on day one, I'm like, okay, what do you want me to work on? And my colleague says, you know anything about electricity? Well, it's a matter of fact. Yeah. Oh, that's amazing. What timing? Yeah. And it was all that market design and regulation and taking the perfectly competitive benchmark, both too literally and too seriously and using that to inform the flawed market. And then of course, the political economy of the, you know, what we found out after the fact about the influence from Enron. Yeah. So it was, it was kind of going right, right into the fire or just skipping the frying pan, going right into the fire. And of course, at the time was also in economics, in this particular area of economics, there was a lot of really cool interesting work going on because of the federal communications commission move in the late 90s towards auctions for spectrum licenses, right, to build out wireless networks. And that was really a catalyst for a bunch of really, really good economic thinking and market design thinking. So there was a lot of interesting stuff going on then. And I, I think there are some good parallels between telecom and electricity in terms of market design and competition policy that I suspect we're going to get into in a few minutes. I definitely want to go big and broad. But what I want to start with if you don't mind is a really specific question and sort of what catalyzed me to reach out to you was a proposal in Minnesota by Excel Energy, which is an incumbent monopoly shareholder owned utility. They have been providing electricity service in a monopoly fashion. They're vertically integrated monopoly. They own generation, they own the wires, they own the meters, they sell the electricity. And in alignment with the state's clean energy goals, they decided to make a proposal to provide electric vehicle charging in a broad public network. And they would have spent I think something on the order of $750 million of money that would be paid by all utility customers to support the development of this network. And I was really blown away because there are some dockets. You know, I've said someone who follows the Public Utilities Commission in Minnesota. There are some dockets that have a little bit of engagement and some that have a medium amount of engagement. But this one had a lot of engagement. And I was reading names of play things like like the independent service stations or national federation of independent businesses. And I was like, wow, this is really attracting a lot of interest. What's going on here? And so I guess my first question is why would it be problematic? Why is it drawing so much attention that a big electric utility is proposing to own a whole bunch of public electric vehicle charging infrastructure? One reason why it gets so much attention is because there are a lot of dimensions to this to this question. I think the main question I generally think of is what I call the quarantine the monopoly question. And so I guess I'll say the punchline. And then we can work towards the punchline. Right. So so the quarantine the monopoly punchline is basically when you think about regulated electric utilities ever since their origins in the 1890s, they have been vertically integrated. I mean that from from Thomas Edison Pearl Street 1882 onward, Edison designed the electric grid system as a system as a fully integrated system from generator all the way through to the lighting fixture in your home. So ever since then even though the kind of lighting fixture, what what in telecom they call customer premise equipment that got hived off in the 1890s and became general electric. But ever since then it's been vertically integrated, right? The generators, the transmission wires, the substation, the distribution wires, the service line to the home, the meter, all of that is owned by single firms and regulation basically in the starting in 1907 with state PUCs and then moving forward has kind of enshrined that vertically integrated business model and put legal boundaries, you know, legal territorial boundaries around them all. And the idea is because it this infrastructure is so capital intensive but it also reduces production costs so much that you have what's called economies of scale that for a given market given size that demand the least cost way to produce electricity was to have a single firm do it. And of course from a regulatory perspective and during the populist era in the US that set off the warning bells of but hey then that firm can price like a monopolist and we don't want that so we're going to regulate them. So regulation is trying to hit that sweet spot of getting that regulated rate that that consumers pay to be right at the average cost of the utility. So we start vertically integrated but then of course you know so so think of it as like you kind of set the timer in 1907 and then roll forward and as you roll forward there's technological change that happens. So our origins in this industry are very large scale and very predisposed economically towards having centralized generation large scale wires networks but since like the 1980s with the combined cycle gas turbine and then more recently with rooftop solar and batteries and and other smaller scale innovations technologies are now economical and cost effective and provide different value streams as smaller scales right it is not an apples to oranges comparison right they're very different from the big coal plant the big hydro plant and so you get this this decentralizing smaller scale technological change and then of course in the mid 90s which we started really implementing electricity in the mid 2000s you have the development of digital networks right so digital digital communication networks broadband the internet wireless and so on. So you put all those together and you have these very strong decentralized tendencies and in the case of electricity where do you still have the kind of economies of scale and scope that characterize what we call a natural monopoly in economics it's in the wires network but in generation smaller all these different scales and different value propositions can compete against each other and in retail all these different value propositions can compete against each other. So you want to from a regulatory economic efficiency perspective you want to quarantine the monopoly and not have the incumbent monopolist be able to exert some anti competitive force in upstream or downstream markets and this actually hooks into the reason I mentioned telecom earlier is that this principle showed up in the 1980s in the antitrust lawsuit against AT&T right the bell break the breakup of the bell system and so the assistant attorney general for antitrust at the time they'll backster you know so this is known as backster's law but it's also known as quarantine monopoly and you know he basically said if you have an incumbent regulated firm and it can have an anti competitive effect on an adjacent market don't let the incumbent firm compete in that market and this was one of the main analytical justifications for the AT&T settlement so now let's take that to things like rooftop solar or EV charging you know a few years ago in Florida Florida utilities were like sure we're fine with rooftop solar as long as we own it you know solar city and sun run and Sonnova would like to have a word because there is an existing market that you know if you come in and compete against them as the incumbent that could have very strong anti competitive effects and we've we've seen this in the restructured states in the US you know the states that implemented regulatory restructuring in New England the mid-Atlantic Ohio Illinois and so on that the only state that really has implemented good retail competition is Texas because the other restructured states have retained incumbent default service so you can stay with the incumbent utility or you can go to a competitor and this is a big entry barrier for retail competition so now let's apply that to EV charging where we have a good half dozen growing private innovative entrepreneurs in this industry what effect would it have for Excel or other regulated utilities to come in and build EV charging it's going to have an anti competitive effect on a competitive industry that already exists even though it's it's nascent right it's young it is amazing to me how hard it seems for people to wrap their heads around that and I don't know if it's just because they're so interested in seeing especially with something like EV charging where there is this you know it's kind of like described as a chicken and egg problem right like well people buy EVs if there's not enough public charging do you need to have that first or is it do you need enough EVs to justify doing the public charging and so I think there's a real hunger for letting the utility do this can you talk a little bit more like let's just say Excel got that proposal approved obviously one of the implications is cut out all the customers of the utility have to pay for this including people who don't own cars that can plug into that network you have as well an issue of the utility is getting paid to build the EV charging infrastructure and maybe doesn't have a lot of operational experience and then I guess I've also heard that there's this issue and I think this is the one raised most prominently by the existing convenience source and gas stations which is we're already where people want to stop and fuel their vehicle where are you going to build this stuff so could you if I've missed anything please fill in but it seems like there are some things sort of unintended consequences if we go down this road that are not just anti-competitive but also perhaps going to impact people's experience being able to access electric vehicle charging yeah and I think that your last point is really important and when I when I was reading you know as this this stock it was developing and reading what the convenience store owners were saying I mean I think that's a really important point that we already have these you know gas station convenience stores as focal points in our transportation lives anyway and so there's a natural I guess you would call it economies of scope right that that you know where the convenience store owners can use the properties and the that they already have and build EV charging whether it's through and I would I would expect it would be through contracting with an EVGO or some other some other company and I think one reason people have difficulty wrapping their heads around this is I think for a lot of people who don't eat sleep and breathe electricity the way you and I do you think in terms of it's the electric company and that if anything's going to be done the electric company should do it and that what we are in the middle of right now because of technological change and economic dynamism is we're in the middle of that shift to being able to ask well should they continue to do that or if there is something new to be done should we just by default expect that they do it or are there other parties who can do it differently or better or more more cost effectively I should say also excel made the same proposal in Colorado and I think they the Colorado PUC approved them building EV charging infrastructure in Colorado recently there's been I think Excel has submitted a revision of their plan that is a bit scaled back and I have not dug into the details there so I can't say more on that but I know that it's an issue that's in play it elsewhere in Excel's territory but if I were to steal man the proposal it's that if the utility builds EV charging then you have this regulatory accountability overlay that would at least in theory regulation is meant to be the voice of quote unquote the public interest and of course that's a deliberately vague concept and has been you know it's been in the common law for centuries but at least in the US it's enshrined in the month versus Illinois 1877 or 1887 losing my dates lawsuit that basically established the justification the legal justification for regulation in the public interest so I think that's one argument there's of course a whole lot of concern and analysis from public choice economics about the independence of regulatory decision-making with respect to utilities and kind of undo utility influence and maybe if not on the regulators then on state legislators right so there are two different potential focal points for industry influence you know kind of public choice setting so I would just say that caveat about the regulatory accountability but one thing that I think would be a reasonable compromise would be because the private EV charging companies are going to want to build out their network in places that are going to be profit maximizing for them right so they want to build in places where there's a lot of traffic there's a lot of circulation lots of people who have cars who have EVs and you know you can already see the way Tesla has built it out where do they they're at like big box stores and hotels and I think that that's a good indication of the kind of places in addition to existing service stations where you would expect to be able to see a build out of a private charging network and it was funny a couple about three years ago the first time somebody raised this question to me and I hadn't really thought about it very deeply and it has I think just developed ever since is the question of kind of equity energy justice questions right that if you're a for-profit firm are you as likely to build EV charging infrastructure in low-income neighborhoods where people may not necessarily yet have EVs but you have the chicken and egg problem of do you build the infrastructure first or do you build or do you have the car ownership first and we had this with the build out of gasoline station in the early 20th century as well right the chicken and egg problem is unavoidable and they they have to they're going to interact and and evolve in in co-interaction so one compromise can be allowing the utility to build EV charging infrastructure and put those assets in their rate base in neighborhoods that are identified as kind of low-income energy justice focus locales and that that seems to me to be in keeping with the regulatory mission of serving the public interest but without without harming competition it's interesting because I was curious if you would have a suggestion about how you could still have competitive provision and serve some of those areas I'm you know I was thinking in particular I think there's a lot of overlap right in terms of like low-income neighborhoods people who are renters people probably don't have access to off-street charging so you know I have an EV but I park it in my driveway and I can plug it into my garage so that's kind of the issue that we're trying to address here do you think there's like an incentive model that would as you put it quarantine them monopoly and but motivate private EV developers to do EV charging in places where it might not otherwise be as profitable or do you really think that this is one of those places to fall back on utility I think it's I guess what I think he about is it's interesting because the way you described it you were like well these for-profit companies are you know going to be profit maximizing and I'm like well the utilities are for-profit company too right so they're going to be profit maximizing but in a different way right so the the private EV provider is going to profit maximize by being somewhere where they can capture as much charging revenue as possible so they're going to want to make sure they build in a good location and that their uptime is really good so that they're available for people to charge the utilities incentives on the other hand are I build it and then I get my rate of return on it and so my concern is yes they would build charging in places we might need it but would those chargers be working how do you deal with some of those kinds of incentives and so few utilities I think are really motivated on the like customer service side I'm glad you mentioned the maintenance question because it's a growing issue to the extent that we think of EV charging as part of the electricity infrastructure more broadly we want to have some reliability you know kind of liability targets for for the EV charging because the last thing you want to do is to like roll up to some EV charger in fruit of Colorado where you need to get all the way back to Denver and you know you got another five-hour drive and and the charger's not working and you're stuck that's that's not good so I think having some quality you know in in in the economics of regulation right we we this would get categorized as having some kind of quality standard and that can apply not just to utilities as part of their regulatory footprint but I think it's it's entirely with justifiable you don't even have to have recourse to regulation to justify this you can just have recourse to common law to say as part of our expectation of of your provision of quality product that you say you're going to provide that you're going to maintain these things and that when I plug in it's going to work that is a really important aspect of of building out the the EV charging network and and doing the investment and planning the investment and thinking about the return on investment that you're going to get one interesting thing to do is to do like international comparisons of this I was recently in the UK and in a large city like London you know everybody parks on the street but basically every other lamp post has a charger in it now and there are quite a few electric vehicles I mean it's it's still in the single digits in terms of percentage of of the market but it's a growing share so I think the maintenance question is really important regardless of of who the provider is and utilities probably have less of an incentive but I I would for me the since I kind of steel man the utility ownership argument now I'm going to go back to to the private market argument which is is where I would argue we should be the biggest argument against utility ownership of EV charging infrastructure or anything else that is around the edge of the distribution network is for me the dynamic innovation argument because if the utility is going to own the asset typically the regulatory process defines the asset defines the quality of the service kind of in cases that in amber and that implements you know the utility has to implement that and they're held accountable for that so if you think that we have gotten to the like superior end state final be all end all fabulous best ever EV chargers that are ever going to exist on the planet then having the utility be the owner and operator is not going to have as much of a cost but if you think that there's going to be more innovation and you think that we have not come to the be all end all end state of EV charging technologies having utility ownership and operation of EV charging will slow down the innovation processes because of the restrictions that regulation puts on them you know it's much easier for a Tesla and an EV go and all of the different companies to be rivals in developing their technologies and trying to figure out what is it that's really useful where can we put these that would be the most useful right because for for them to make a profit from doing it they have to put themselves in the minds in the mindsets of their customers in a way that utilities don't necessarily I want to ask you about rooftop solar and some of the other stuff on the grid edge here you know battery storage things like that what's interesting to me is I just want to highlight like there's a difference right utilities generally aren't trying to own the same scale of clean energy infrastructure they're thinking if we want to do it we want to own it bigger more in keeping with their tradition of doing centralized power generation whereas you have in the market a lot of innovation at the smaller scale like on the customer property it's solar panels on a house or on a business battery storage demand control energy efficiency resources all of that kind of thing do you feel like there's still a parallel even though the utilities not trying to do the same thing that there's a parallel here between the participation of the utility in providing those services in like doing generation for example or demand response and electric vehicle charging where we need to be careful of how the utility has a role yes well and I will say you know just upfront that your question gets us into talking about regulatory restructuring and in a state like Minnesota where you're still fully vertically integrated and sure you know excel participates in the myself also power market but excel still owns generation and I think given what we've seen in terms of technological change and given what we've observed in places like Texas and Alberta and Australia and slightly less the UK that having the vertical and bundling right that wholesale power markets are now competitive and be competitive the technologies exist to make them competitive and so at some level vertical integration from generation to wires to retail is a historical artifact and I think it's a historical artifact that a lot of people don't are cautious to want to change because it feels like having that vertical integration with regulation provides control and that gives you safety reliability affordability but at the same time it also has some implications on the trajectory of innovation and technological change and so I think if you want to enable technological dynamism that the economics of the regulatory restructuring are the way to go so I would I would say my preferred model is the Texas model where you've quarantined the monopoly in the wires and you've got competition on both sides right so the the wires is the regulated thing sandwiched in I should caveat all of that to say of course the past two years have been fraught for Texas for the mid-Atlantic states with winter storms and then obviously in the plain states and then down into Texas with summer challenges so all of this is not to say that take the Texas the Texas restructuring as implemented in 1999 in case it in Amber that's what we should do no it's take the Texas restructuring that we did in 1999 and recognize the fact that that model itself is all is also not perfect and really needs to the market design and the market rules and the regulation have to be able to evolve to changing conditions and I think with the reliability challenges that we're seeing in markets as well as in vertically integrated states we're seeing that both market designs and regulatory institutions have not evolved to account for some of the reliability challenges associated with more wind and solar on the grid so to answer your question I think you know utility scale solar in my ideal world would not be owned by utilities right it would be like in Texas where you have big independent companies and then they transact in the wholesale market you have retailers who buy from them and a lot of what they do is on long-term contracts and that is what gives you the the assurance and the affordability for the customers of those retailers and so it's a both-hand for me that you can have the large scale but that the rooftop is actually again it's in apples and oranges because a lot of people say well why why are we even having rooftop solar because utility scale is so much cheaper I'm like you know that that least cost mindset is completely the regulatory mindset whereas rooftop is actually giving you something different from a value and preferences perspective right so on the demand side with consumer preferences it's giving you something different and maybe they're willing to pay for it right it's it's the you know the the cost-based argument against rooftop solar is kind of like saying well why do we why do we all have smartphones because you know my princess phone back in 1987 was cheaper it's it's not a direct analog obviously because phones have evolved but the value proposition of distributive resources is different from the centralized resources and that doesn't mean that we only have one or the other it just means that we should draw some pretty clear regulatory lines between them and for me that means vertical and bundling we're going to take a short break when we come back I ask Lynn about the failure of market regulation in Texas and we talk about a shift from asking permission to standards-based interconnection for the electric grid you're listening to a local energy rules podcast with Lynn Keyesling director of the Institute for Regulatory Law and Economics at Northwestern University and a research professor at the University of Colorado Denver hey thanks for listening to local energy rules if you've made it this far you're obviously a fan and we could use your help for just two minutes as you've probably noticed you don't have any corporate sponsors or ads for any of our podcasts 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and what was striking to me as someone who had really not paid much attention to Texas in the like winter storm Yuri and and the other struggles they've had recently is how to me Texas looks like a problem not of like having a market but of having a market that really wasn't regulated very well that you had for example an experience I don't know is that a decade ago with Ocinnabular winter storm impact and they basically decided not to go ahead and require the utilities to insulate infrastructure against it getting cold again and they decided not to because they weren't mandated to and it seems like that would have been a very easy public interest regulation to apply to those companies that would have largely gotten rid of that risk and I think they penciled it out and said just said well you know we prefer not to regulate and I'm curious if you feel like that was ideological or actually like the economics bore that out that it was going to be terribly expensive to do that and if you think that there is like a sort of a role for better market regulation because I think the issue here it's not about a difference and this is one of the things that frustrates me sometimes when we talk about restructuring the first thing utility says is like that's deregulation and it's like no no no we're not saying nobody's watching the market we're saying that actually that we're we're going to watch the market in a different structure so I don't know I'm curious if you have any reflections on that and then I would love to talk to you about the telecom comparison I think in in general we are finding that because regulation has not been evolving with the technologies and with the underlying economic dynamism and so we aren't necessarily regulating the right things we're regulating things that were kind of right 50 60 years ago and that that we need to evolve more and in so that number one but number two with respect to Texas particularly the primary issue there I think and and this is based on kind of expert analysis from the the FERC NERC post event report from some really excellent analysis that has been done by some folks at the University of Texas the a group of former regulators Pat Wood, Alson Silverstein, Robert Gideon, and so on wrote a paper where they basically made this argument that the problem is electric gas interdependence right that when when we built out natural gas infrastructure in the 50 60s and because of because of in my mind excessive regulation natural gas was used primarily for home heating and so it was at a much smaller scale just to residential customers and so on and then with the combined cycle gas turbine invention in the 1980s and some regulatory changes at FERC at the federal level natural gas was now a very economical and appealing fuel for generating electricity and then add on top of that the fact that it's got half the carbon footprint of coal and so so compared to coal gases like winter winter chicken dinner on both economics and environment and so you get this this massive investment due to restructuring in the 90s in gas infrastructure but that means that you now have a gas system and an electric system that have more interdependencies than a they were built for in the B they had historically and then you add on top of that in Texas and I'm usually I'm not this frank but I'm going to be frank in this case you have a big case of regulatory capture which is the Texas Railroad Commission and the stated mission of the Texas Railroad Commission is to support and develop the interests of the natural gas industry in Texas so their mission is to do what is good for the natural gas industry and after the 2011 storm weatherizing the gas production and delivery infrastructure was not something that the gas industry wanted to invest in because they you know they it's a boom bust in industry they some years they have very small margins some year they have negative margins the other thing that that there's not a lot of getting natural gas storage in Texas because it's usually you know whenever and anyone wants it we can just pull it out of the ground and send it and so if a gas company and an electric generator have a firm contract for firm delivery it's usually not a problem right so this is we're talking this is really really far out in the in the tail of the distribution but it's a problem and and it's something that I think a lot of there are a lot of policy conversations going on about how to deal with this interdependence especially when you don't have the regulatory oversight in one part of the interdependent systems that the other part of the interdependent systems needs to be able to rely on that's helpful it was interesting to look at some of the early post games the social media post games but it's nice to get kind of a fuller picture of what was going on there I want to talk about telecom really quick so the question I had teed up about wasn't actually about telecom at all was what was about this issue of again that tension between climate advocates who are thinking we'll get faster reductions if we just let incumbent utilities do things and about what the trade-offs might be we already touched on this a little bit because you talked about this issue of innovation right that if you have a lot of technological change a lot of innovation happening the regulatory processes really slow to keep up with that because they'll approve something and the utility will be like well we'll just keep doing something because it's what they've told us that we can do and it sort of locks things in amber it also it just makes me think of you know a few years ago I would talk about how weird it is in telecom like we take it for granted that will let the utility build and own the things that it provides to us and yet when it comes to telecom like it's not AT&T that built me a good smartphone right it was like Apple or Samsung or Google or it was somebody outside the industry that came and it said like this telecom thing is bonkers we could make a way better phone so nobody's buying their phone from Verizon or whatever you know it's those aren't the producers and I feel like that's not translating to the electric sector very well even though I think there's some powerful lessons there so maybe that's not where you're going to go with it but I guess the context for this is those people who are thinking we're going to get to emissions reductions faster if we just rely on the incumbent utility why are they wrong and and what can we learn maybe from other sectors I completely agree that's I think that's exactly the way I think about it and it's definitely a this is a kind of deep foundational piece of economics is of course specialization and where do you draw the line in terms of what what are the boundaries of the firm in terms of what you specialize on and what are the transaction costs the if there's really high transaction costs and it's hard for us to write contracts then sure Verizon should produce the phones but it's really easy for Samsung, Google, Apple to write contracts with a whole bunch of different people for all of the the various tasks that go into building a smartphone that the other piece the biggest conceptual insight that needs more traction in electricity is the idea of standardization of interfaces and interoperability you know the the USB port the standardization of communications on TCP IP protocols all of the all of the kind of nuts and bolts of the communications network and the internet layer on top of it all mean that the digital network is very interoperable it's very modular and so I can plug my phone in and it'll charge obviously I can put on a wireless network that's a standard I can get anywhere on it and I think having more of that thinking and more of that design in the architecture of the grid would help and so one place to start and there's been quite a bit of work on this so we made some progress over the past 15 years but we need more is standard interconnection and one way that you put this was essentially and again this is a telecom analog right that you need permission to connect stuff to the grid and 18 the way the bell system operated was the same way you know that you needed permission to connect stuff to the grid and there were a whole bunch of lawsuits in the 1950s challenging AT&T for basically saying you can't put a cup over the phone handset to to kind of concentrate your voice that's an illegal attachment like what that's crazy and so this idea of a standardized set of interconnections and that if you meet the technical standard for interconnection you don't have to ask permission making the grid more plug-and-play and that's going to be more challenging you know because with digital right bits and it's easier to queue because it's essentially a direct current type system so you can use switches and stuff more readily in an alternating current system that just plug-and-play has some more engineering challenges and I know we can work those out but but that's just going to mean it's going to take some time but small generator interconnection I know it's been a focus for like 20 years other device interconnection that I triply has done a lot of work on things like digital inverters plug your rooftop solar into an inverter because the solar panels produce direct current but you have to connect it to the grid which is alternating current so you need an inverter but having a digital inverter that's basically plug-and-play so so we're making progress on those but I think it's the mindset it's the mindset of interoperability and modularity and interconnection that is something that that would really help us make some more progress we talked earlier and you said about in terms of your vision of how you might restructure the industry that vertical integration is really a problem right having utilities that own generation that own wires that provide retail service if we were successful at restructuring right and in some places we some places we have been so we have these wires only utilities do you think they're at a point where they are thinking innovatively about how to move to a standards-based system is there more we need to do you know I argued in a recent piece that actually I think public or independent ownership or nonprofit ownership of that sector would be important to doing that sort of like the way we have with roads not that there's lots of innovation I mean there's innovation and mobility around like scooters and e-bikes and stuff so roads are maybe not the greatest example but at least around transportation infrastructure what more might we need to do to get to that standards-based system certainly I hear I would assume restructuring for vertically integrated utilities but is there more we even need to do with wires only utilities that wouldn't motivate them to be wanting to push this along I think some changes in the regulatory mindset and regulatory practice would probably help retaining that public interest focus and that mission because you know regulators I think view themselves not as policymakers but as policy implementers but they have discretion in how they implement that some discretion some have more than others so having the awareness of this idea of a standards-based interoperable grid and changing the expectations that they set for the utility I think that would that would help one thing that I think to to your point about kind of public power and this is not so much about public power but it made me think that some of the most innovative utilities that we see they're still vertically integrated but they're innovative are some co-ops and I'll call out in particular largely just owning my bias because I have you know working relationships with them have worked on projects with them holy cross energy and Colorado and New Hampshire electric cooperative in New Hampshire both of whom are focused on digitizing their grid and a very active engage consumer focused value proposition New Hampshire electric cooperative has introduced this year a transactive energy tariff that their customers can sign up to and it's a kind of it's a prices two devices transactive tariff so it's a what we call a type one transactive tariff where NHEC will take the kind of ISO New England price and and push it to the people who are on the transactive rate and they can choose what their trigger price what they're willing to respond to I am working with my my co-author at Slack Dave Chesson at Slack National Laboratory and with Post Road Foundation we have a DOE connected communities grant to work with New Hampshire electric cooperative to introduce a kind of type two transactive system where devices can bid in addition to being able to respond to prices that devices can bid in their willingness to pay if they're a consumer or if you're a battery you can set a willingness to pay price and a willingness to sell price and so you can charge and discharge out of your battery to help both to sell energy to other people but also to help with grid services so I think there are a lot of insights you can get from the co-ops some of them are can be extremely innovative because they don't have this additional regulatory layer and so they can be a little more nimble and so that's I guess my my challenge to regulators is to ask yourselves how can you be more nimble and how can you help your utilities be more nimble in the service of the public interest. Those are great examples then I just have to mention that I have interviewed folks from both of those for local energy rules already so just if folks want to hear more about that transactive energy rate and about the stuff that Holy Cross is doing those are both among my favorite interviews and that's been one of the fascinating things about covering this industry as you have some co-ops where it's so high bound and so moving with inertia and locked into long-term contracts and then you have these other co-ops that are just like on the cutting edge of what is happening so I think really powerful illustrations of what happens when we have that ability to innovate and to change well then thank you so much for joining me to talk about all of these different pieces of everywhere from the economic theory to the specific implementation of things like EV charging rooftop solar it's really great to get some perspective on how we should be thinking as folks who work and clean energy to get to outcomes that we want to see and sort of what some of those tumbling blocks maybe. Thanks John I really enjoyed our conversation. Thank you so much for listening to this episode of local energy rules with Lynn Kiesling director of the Institute for Regulatory Law and Economics at Northwestern University and research professor at the University of Colorado Denver. On the show page look for links to the two local energy rules podcasts that were mentioned during the show one with Brian Coleman at the New Hampshire Electric Cooperative and the other with Brian Hanigan at Holy Cross Energy in Colorado. You can also find a link to my commentary in the American prospect describing how private monopolies fuel the climate crisis and public corruption. Local energy rules is produced by myself and Maria McCoy with editing provided by audio engineer Drew Birchbach. Tune back into local energy rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time keep your energy local and thanks for listening.