How to Build a Local Energy Economy

By Kevin Danaher and Shannon Biggs and Jason Mark, PoliPoint Press. Posted October 30, 2007.

The following conversation with David Morris is an excerpt from the new book Building the Green Economy: Success Stories from the Grassroots (PoliPointPress, 2007) by Kevin Danaher, Shannon Biggs, and Jason Mark. You can read more about the book here.

David Morris is a Co-Founder and Vice President of the Institute for Local Self Reliance in Minneapolis. He is the director of their New Rules Project, an excellent resource on the best practices for getting local control over energy, agriculture, retail development, finance, and other key areas. He is the author of many books and reports, which are available from the New Rules website. His regular articles are featured on AlterNet.org.

Q: Why does local control of energy make sense?

David Morris: Local control of everything makes sense. But local control of energy makes sense for two reasons: one is that ten cents on the local dollar of the community goes directly to pay for fuel, and all of it is imported. Only between ten and fifteen cents on the dollar spent on that fuel stays in the local community. So from an economic development standpoint, it is probably the worst expenditure that you can make in a community. The other reason is that you don't have to. Cities, unless they are high-density cities, can in fact generate much, if not all, of their own energy, either internal to themselves or within 50 to 100 miles.

Q: What has been the federal government's role on these issues? Is it getting better or worse?

DM: The federal government has not been wise on these things, ever. On the issue of decentralization and energy being produced from the bottom up, the federal government's policies undermine it at almost every level. And it doesn't matter whether it's been Democrats or Republicans; there has been no change in that whatsoever. The federal government wants more energy, but they are either indifferent to where the generation occurs, or they encourage large absentee-owned facilities in most of their incentives and regulatory policies.

Q: Could you give us some specifics on how federal government policies undermine local energy production?

DM: Sure, one is that the federal government has preempted a significant amount of state authority on the siting of high-voltage transmission lines. The federal government is doing everything in its power to build these transmission lines like a national highway. They argue that this is "efficient," and I disagree, but that is their argument.

What it does is encourage the generation of energy far away from where people tend to use it. The federal government has also encouraged absentee ownership of energy facilities. For example, in wind, if you have a wind turbine and you only meet your own internal needs, you actually don't qualify for federal incentives. The only time you qualify for them is if you sell the energy into the grid system-then you can qualify for a tax incentive. There are many examples like this, and the federal government would probably admit it. Their feeling is that large is better than small, absentee is better than locally owned, and it's much better to attract the capital of Wall Street and global investment firms than it is to attract local finance.

Q: How does the issue of net metering factor into this?

DM: Net metering was a revolution, a very quiet revolution. It said that the utility companies had to allow you to turn your meter backwards. Since 1979, by federal law, the utility companies had to agree to buy your electricity if you had solar panels, but they could put any conditions they wanted on it, and they put on conditions that made it uneconomical for you to do that. So what net metering says is that the utility can't charge you for a second meter; it has to allow the meter to run backwards, which means you get the retail price for your electricity. So that redefines the electric system as a two-way system, by law.

Q: Is there any state with full net metering, where if I put more into the grid than I take out, they have to pay me for the electricity I put back into the grid?

DM: Yes, there are many states that allow that, but every one is different. There are some that have a carry-over from month to month and at the end of the year you settle up. There are some that have a carry-over from month to month and at the end of the year you lose any surplus you might have. There are some that require them to pay you, but they would pay you for the voided costs, they're not going to pay you the retail price. You could turn your meter backwards, in effect getting the retail price, but when you get a surplus you're getting a voided cost (between a penny-and-a-half to two cents a kilowatt hour) instead of getting the displaced retail price of anywhere from 7 to 15 cents a kilowatt hour.

Q. Can you discuss the biofuels debate?

DM: The key issue is ownership. In 2002 almost 50 percent of all ethanol facilities in this country were majority farmer-owned, and about 80 percent of all the new ones coming on line were majority farmer-owned. By 2007, about 95 percent of all the new ones are absentee-owned. So we've had a big change in the ownership structure of ethanol.

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