How to Build a Local Energy Economy

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

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.

Q: What caused such a big shift?

DM: Wall Street came in. We had oil going for 60 to 70 dollars a barrel, and we had a mandate for ethanol at a national level. Wall Street found out it could earn 30 to 40 percent turnaround on its investments, and they flooded in and began building 100 million gallon-a-year plants rather than 30 or 40 million gallon-a-year plants. If that becomes your basic size template, that's too large for any local equity to get control of. So that's a serious problem.

Q: What about the issue of taking land away from food production by growing corn for ethanol instead of for human consumption? Or the issue of horrible working conditions for sugarcane workers in Brazil?

DM: Previously, the majority of sugarcane in Brazil was family owned. Now, with the ethanol market taking off, they're getting Japanese capital, Chinese capital, American capital pouring in there, and they have to deal with the absentee ownership in terms of bad working conditions. In terms of the food vs. fuel issue, the point is that if you want to go to a renewable sustainable future, then the question is: "What materials do you rely on?" And when it comes to energy, you can say, "Well, let's rely on direct sunlight," and "Let's rely on wind." And that's fine, as long as you don't need storage.

But if you need storage, you need matter, you need molecules -- and where is the material for that going to come from? Furthermore, where are the molecules going to come from for everything else? For desks and for cars and so forth, where's that going to come from?

You have two alternatives: vegetables or minerals. So if you want minerals, with recycling you can do a lot, but in the longer term you want to shift to vegetables. I wrote a book in 1992 called The Carbohydrate Economy and I will stand by the fact that it has to be a piece of the renewable materials puzzle.

Then the question becomes, what do you use that biomatter for, aside from food and feed -- it's an interesting question. It's a challenge to design public policy correctly because obviously, nutrition should be the highest priority. But when you get below food and medicine, what should it be: should it be liquid fuels, electricity, heat, biochemicals, construction materials, what should it be? That's the real challenge in designing these policies.

Right now, corn farmers without government subsidies are earning more than the cost of production of corn for the first time since the drought year in 1996. Since the 1930s we've had a federal policy whereby the taxpayer pays 20 to 35 percent of the cost of production and in return the grain is artificially low-priced.

We find now that the corn is priced slightly higher than it probably should be, and people are screaming that everyone's going to starve to death should they have to pay the real costs of growing these things. It would be laughable if it weren't so sad. Farmers in other parts of the world have been complaining for many years about the U.S. dumping our cheap, subsidized grain on the world market and driving them out of business.

Q: You've written about energizing rural America through the farm bill and trade policy. Can you talk about the link between increased rural prosperity and energy security?

DM: Rural areas have a competitive advantage in only a few things. The primary one is that they're got a lot of land and relatively few people. It also turns out that the wind blows better and more consistently in rural areas. So that's their competitive advantage: plant matter and wind. Right now those are national priorities, and I'm saying, let's do it right this time. The federal government favors quantitative goals. They want more and I want better.

We did it wrong last time. We should have learned from that experience, and the best way to do it right this time is to let the farmers and local owners control the process so they're not 100 percent dependent on a commodity price they don't control.

Q: Can you talk about green-energy pricing programs?

DM: We're opposed to green pricing programs and I've always been opposed to them. There is a difference between green pricing and green citizenship. Green citizenship says that if the majority supports renewable energy, then the majority should pay for it through the utility bills that go to everyone. Standards are mandates that the majority imposes on themselves, and if there are any increased costs, they are spread out over all the ratepayers.

Green pricing, on the other hand, says that I, in return for taking a moral stand, I will pay a significantly higher price for my electricity because I want renewable sources. This punishes ratepayers who want renewable energy-making them pay 10-25 percent more for their electricity -- while those who don't choose renewable sources pay less. If we want green electricity then we should demand it and everyone should pay for it.


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