Episode 188: The Importance of Rapid Electrification to Address Climate Change with Rewiring America's Co-Founder, Alex Laskey
Today's guest is Alex Laskey, Co-Founder and Executive Chair of Rewiring America. Alex explains his climate journey and Rewiring America’s work. We also dive into his time at Opower, the unique idea that utilities can be customers and Alex's career as a climate entrepreneur.
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Let’s take it from the top can you walk us through your climate journey?
From my perspective, I spent 10 years at Opower which were almost exclusively fantastically fun and exciting, but I also spent 160, 170 nights a year away from home for those 10 consecutive years. They were the first 10 years of my marriage. And at the end of those 10 years, we had two young daughters and I decided to take a break and focus on being a human being and a dad and a husband and stop checking email for a year. And I came back from that experience rejuvenated and rested and with a good sense of what I wanted, at least at the time.
And I really wanted to focus on climate and on economic inequality and dove into a bunch of projects, including joining the Arcadia board. And I came close to taking a job in New York State and working on the decarbonization of the economy of New York. And in that process, worked on trying to get passed comprehensive and ambitious climate legislation which passed in 2019. And I started thinking through how would you implement either as a policymaker, as an entrepreneur, or if you were king or emperor, what would you do to decarbonize the state of New York, and what would be hardest?
I had 10 years of working with utilities and I know that working with utilities isn't always easy and without its friction, but utilities are motivated and effective at doing what the public interest demands, and that's been the case for over a hundred years at this point. And the public is demanding a move to decarbonize electricity. And so utilities are moving in that direction fairly aggressively, perhaps not as quickly as any of us would like, but still with reasonable speed. On vehicles, it's very clear to me or was clear to me four years ago, remains even clearer now that electric vehicles are just better than internal combustion engine vehicles.
Maybe talk a bit about what Rewiring America does. And before we get too far down the path into tactics, then we can go on the way back machine and talk about some of the history leading up to that.
We're a nonprofit. We are focused on making the case for the electrification of the economy, we're ultimately in the business of transforming these markets. By our calculation, there are a billion electric machines that need to be installed in people's homes. And you know, 90% of emissions come from energy, of that 42% are tied to the home, the car you drive, what heats your home, what electricity you use. And our goal is that when your fossil burning machine clunks out, whether it's the vehicle in your driveway or the furnace in your basement, that the cheapest and easiest thing to replace those machines with electric.
And so how do we get there? Well, we're getting there through federal advocacy. So we proposed a notion that there should be rebates for household electrification because the upfront cost of buying the- the heat pump and the heat pump hot water heater and the induction stove is higher than the upfront cost of buying a new efficient fossil machine. And Senator Heinrich New Mexico took that idea and ran with it and proposed legislation called ZEHA, Zero Emissions Home Act which has now been folded into the Build Back Better plan.
So there's roughly $7 billion that pass the house in rebates available. If the Senate passes it, there'll be $7 billion in rebates available for people to install heat pumps, heat pump hot water heaters, induction stoves, electric dryers, and breaker boxes which are necessary to be upgraded. There's also money in that bill for low-cost financing for these devices and also tax credits. So we're trying to reduce the upfront cost and increase the affordability of these electric machines.
And then the next piece of our focus will be on moving local regulation and local permitting and rules to make it easier and cheaper for these things to be installed. And ultimately these are not consumer devices. You're not waiting around at this time of year reading the Christmas catalog from train to figure out what kind of heat pump you want to get. These are installed by contractors and we wanna move the contractor market also.
So we have a big and ambitious agenda. We're producing a lot of great papers, go to rewiringamerica.org. There's great data, there's great analysis, and importantly, there's a bunch of job openings. So we started as sort of a bootstrap thing that I funded with a couple out of my pockets and with a couple of small foundations in 2020. We got enough traction, enough attention from the incoming administration that we decided to hire Ari Matusiak to be our CEO who's been out of this world fantastic. And he's built a bit of a team and is- the team is growing. And we've raised more money and we have a lot of ambition. There are 120 million homes, there are a billion machines and we're eager to be a big force to rapidly electrify those machines and those homes.
A lot of people are skeptical to this day, investors for example, about selling software to utilities or selling to utilities in general, and yet Opower built its business on doing that. So maybe talk about that decision process to have utilities as customers and how that went. And then it'd be interesting to understand from where you sit today, you know, whether you do that or invest in other companies doing that again, given all the experience that you now have under your belts.
I'm sympathetic to investor and entrepreneur skepticism about this. I mean, just to give you like a flesh out a little bit more of the founding story because I think it speaks to this. Dan and I we were going to Palo Alto to meet with an entrepreneur who had a solo concentrator- solar concentrator idea, we were meeting him at Stanford. And we were in Palo Alto an hour and a half early, which to this day is boggling to me because neither Dan nor I are early for anything.
And so the fact that we were both early, and this was in the days before the iPhone but I said to Dan, "I, you know, there's this utility in Palo Alto." We had heard a guy on the radio in Palo Alto talking about their green energy program. I said, "I bet the utility's based in the big municipal building in Palo Alto, this tall white 15 story building. Why don't we, while we're here early, why don't we go and see if we can talk to him?" So Dan said—and Dan's not an extrovert, but he's always game—so he's like, "Sure, you figure this out, we'll go."
So we parked in the municipal parking lot. We found the utility, we went up to the 14th floor, whatever floor they're on. We said to the guys at the front desk, "There was a guy on the radio talk on the NP- NPR talking about clean energy. Can we talk to him?" And they said, "Oh, Brian Ward, you certainly can talk to him." So they went back and got Brian, Brian came out and talked to us. And we told them, "Hey, we've got this idea to improve your utility bill and show people how they compare to their neighbors."
And he said, "This is a fantastic idea, I will be your first customer. You start this company, I'm gonna be your customer." And we walk out of the meeting and I high five Dan. And I said, "Dan, it's time to hit the go button. We're gonna start this business." And Dan looked at me and said, "Are you nuts? This is Palo Alto. Like the people's Republic of Palo Alto. I'm not starting a company based on what one potential buyer in Palo Alto says. Like we need to prove that this could work at scale."
I had a friend who was Texan and connected us to political people in Texas, we contacted the appropriate people in Texas, both a guy named Dub Taylor who had been appointed by George Bush to run the energy office, Governor Bush, and a guy named Tom Smith, who went by Smitty, who looked like Willie Nelson whose job was to shut down all the coal plants in Texas. They actually worked well together, but politically very different. And we said, "Hey, we've got this idea. Do you think it would work with the utilities in Texas?"
And they both said, "Well, that sounds interesting." And the legislature is meeting right now to discuss energy efficiency and we meet only once every two years. You guys should come to Austin and meet a bunch of the utilities and meet the legislators and see what you think for yourself. We'll help set up some meetings. So we flew to Austin on a Southwest light. We rented a Priceline, a very cheap motel room, and met with people, ended up writing a clause into legislation. And the fellow who was the author of the legislation said, "This is fine. I'll include it in my legislation on energy efficiency. But if anybody opposes it at all, I'm stripping it out because, you know, I don't want to..."
So together we spent two days, I spent another three or four days like shoe-weathering around Texas, trying to convince people to either support it or be neutral on it, including the utilities. We got some enthusiasm and most people looking at us thinking this is harmless. And it ended up, we testified at 3:00 in the morning, and then Rick Perry signed it into law. And at that point, we said, "Okay, there's a market for our stuff." Certainly, there are the guys in Palo Alto, but they're also all the utilities in Texas now. And so Dan agreed we should hit the go button. We started the business.
We never did business in Texas, Palo Alto became a customer, but I think they were our 15th or 17th utility that we worked with. So all to say that like selling to utilities is not straightforward or easy or at least it's not predictable in the way that you would want to self enterprise clients. But I remain a really big believer certainly in utilities. And I- I think- I think there is something that we accidentally did very right and then something that later we did that I would, I sort of regret doing that made selling easier and harder.
The thing that we did right is that when we started the company, we were selling outcomes. We told the utility, you know, we thought this was gonna save energy, we're gonna run randomized control trials, these communications that show people how they're using compared to their neighbors and give them anal- analytically driven tips about how to save. And we didn't promise a specific amount because we had no idea what that amount was gonna be. But for the first five or six years of the company, seven years of the company, we were laser-focused on delivering, we remained throughout, but we were laser-focused on delivering energy savings for these utilities. And I think when utilities thought about buying our product, they didn't think about buying software, they thought about buying energy savings.
Why did they care about energy savings? I mean, isn't more energy usage more money in their pocket?
Most utilities in the US don't own generators so they don't make money by selling electricity. They earn a rate of return that's regulated and different states do it in different ways. But states including ones that you would think of as very unlikely like Kentucky and Mississippi have all created incentives for utilities to help their customers save energy. And they're very good at procuring energy and energy savings. That's like what utilities do. So when they looked at our program, they didn't look at software, they looked at here's a program that's gonna deliver a certain amount of energy savings.
We're willing to pay X cents a kilowatt hour for those. This is how that stack ranks in our portfolio of energy savings we can procure, we subsidized the CFL light bulbs, now LED light bulbs, we subsidize efficient HVAC systems, we- we finance home retrofits, those things we all have sort of measured savings for what we're gonna achieve and how much money we're putting into it and we can measure the cost per kilowatt-hour. And this program, we can measure the cost per kilowatt-hour beccause they're running a randomized control trial and we can measure with high accuracy and precision how much energy we're saving and how much money went in. And so...
And the other thing is that when you buy energy or when you buy energy savings, the marginal kilowatt-hour of energy or the marginal kilowatt-hour of energy savings cost more than the average, which is very much unlike software. So that last energy savings is the most expensive energy savings to procure. And so as we grew our programs and our contracts with utilities, we never had a performance guarantee per se, but they were buying energy savings and they were paying what was the market value for those energy savings.
So if we went from a program that was excised and- and they were paying a certain cents per kilowatt-hour and we 10X the size of that program, they were comfortable paying 10X worth or maybe even paying 11X for it because they were buying energy savings. And I think utilities are very efficient and excellent procurement organizations. They do procurement better than anything else that they do, whether it's procuring the equipment that they have on their distribution network, whether it's procuring the- the poles and wires that they are installing and maintaining, or whether it's procuring software.
In our case, we weren't selling them software. I mean, we weren't selling them software, but we were selling it under the guise of energy savings so they were procuring energy savings. At some point, we pivoted. We had pressure from, I don't know pressures one of the wrong words, but guidance from investors that as we've thought about going public especially, that we were gonna be looking to attract software investors into the business. And they wanted us to clearly demonstrate that we had a software business because it was kind of a weird time. There wasn't a lot of money in climate tech in 2009, 2010, 2011. We started in 2007 yet we went public in 2014. During those years we raised very, very little money, roughly 50 million in primary before going public and we raised it from software investors. But they took a lot of time getting to know our business. We raised it from MHS Capital, NEA, Xcel, Clymer, these were all sophisticated investors who spent time. As we thought about going to public markets and attracting software investors who are gonna have far less time to spend with us, we wanted to represent what we were doing much more clearly as enterprise software.
And in doing that, I think we sort of revealed for our customers and we changed the way we like presented to our customers to be much less about outcomes that we were delivering and much more about software that we were delivering. And as we did that, and maybe this was inevitable anyway, but as we did that, our clients kind of got hip to the fact that, oh, when these guys run a program that's 10 times larger than the program they were just running for us, even though we're getting 10 times as much energy savings, we didn't pay 10 times as much because we're buying software.
And when we buy software, which we're very good and proficient at doing, each marginal seat should cost less. And so you had this some debate over Twitter at some point that I observed and didn't chime in on, but about out whether you could sell software to utilities. And I thought a little bit about at the time, I think so long as you're selling outcomes to utilities and you have some way of pricing your software so that you're rewarded for delivering business results, you can have a really great business selling to utilities.
I mean, they are not competitive with one another, they follow one another. So if you establish a better product with better results and better customer service, you can win the entire market in a way that's very difficult to win in other markets. And they're not always without frustration to deal with, but they're very predictable. The people who work there are honest and they do what they say they're gonna do and they're loyal customers.
So as far as like people to work with, I enjoyed it very much and their business interests are very clear. So if you can deliver a result, a business result that they are demanding or interested in and you can somehow tie your pricing to the efficacy of your solution, I think it's a great place to build a big business. If you are just interested in selling software seats, there are easier industries to go into.
Now prior to Opower or heading into the Opower experience, what was your theory of change as it relates to personal behavior change, and where that fits in? And then what's your view on personal behavior change today with the Opower experience under your belt?
Well, one, you asked the question why did you guys work with utilities? It's not like we had any love for utilities particularly in 2007. It was that I had read the data from the political polling perspective and Dan just had a good sense of this. People didn't care about their energy consumption and don't today care about it, even people who are environmentally focused. I bet that neither you nor I could with any real confidence, tell you how much energy was used in our homes yesterday or last week, or last month. And I know you know how many miles you ran in the last week.
So in any case, I also know how many miles I ran last week, which is far fewer than you, at a slower pace too. So we decided if we were gonna have this impact at scale. We were in 2006, 2007, there was a little bit of cleantech interest in the valley but it was all focused on the supply side. And Dan and I thought the demand side is just as important and nobody's focused on it, it's totally unsexy, but it's a big market and we think we can have an impact. So we decided to focus there. I mean, that was part of the, what- what drove us to focus on it.
But the only way to do anything at scale was not to attract consumer interest but was getting the utilities to act as our partners and agents so that's why we started with them. As for behavior change, I mean, look, human behavior is an essential part of solving any problem. And it is critically like getting you to buy the EV, getting you to buy the induction stove, you're overcoming years and generations of behavior so, you know, behavior change is critical and it works at scale.
I mean, Opower today as a division of Oracle is producing roughly 10 terawatt-hours of energy savings a year. There aren't that many clean energy companies in the country that have that kind of impact at scale even today. Imagine Tesla does, but I'm not sure that there are... You know, I don't know how much- how much clean energy is Sunrun producing every year, I don't know what the number is, but it's not all that different than Opower. And so I think behavior change is a- is a meaningful ingredient but I think there is a risk that we think that the answer is individual behavior and knowing full well that the only reason we had access to run these programs is because of good government.
You know, good regulators of both parties and legislators of both parties at the state level had created these incentives and mandates for utilities to run these kinds of programs. And similarly, yeah, I want you Jason next time when your wife's car dies for you to buy a second EV. But we need the government to step up as it has to drive down the cost of EVs through rebates initially, and those rebates will eventually go away 'cause they'll be time unnecessary, but through infrastructure investments that allow you to drive to your in-laws without range anxiety 'cause you know there's gonna be charges between your home and theirs.
Similarly, we need to change the incentives and the regulation in the building sector. So yes, I want you to buy a heat pump, but I also want to make sure that your town in Massachusetts makes it easier and cheaper for you to install that heat pump and that the federal government steps in and provides manufacturing assistance and rebates to bring down the cost of those. So, you know, I think behavior change is critical. We all need to be a part of the solution, but we need to make it possible, and that's the role that government has, make it possible and not only possible but easy and desirable to decarbonize.
So Rewiring America aside, as you look at the problem or the challenge or whatever word you wanna call it of Rewiring America, what are the biggest levers for change or set another way, what are the biggest bottlenecks that are holding us back?
A lot of it is local. I mean, to use an example that maybe Saul used on your program, has- he's definitely used it elsewhere, but its one that's very like accessible is rooftop solar. Rooftop solar in Australia today is installed at less than 90 cents a watt, which financed works out to less than 5 cents a kilowatt-hour, which is cheaper than the electricity that any one of your listeners in the US is paying for electricity. In the US... So it's less than 90 cents a watt installed. In the US, it's over $3.25 a watt installed, so it's more expensive than grid electricity.
What's the difference? Well, the difference is not equipment cost, 'cause it's not like the Australians have more buying power than we do. It's not labor costs 'cause the Australians are paying $35 an hour prevailing wage to rooftop installers. It's a bunch of permitting and regulation, both federally and primarily locally. So we treat, the sort of like useful construct to think about, is we treat solar installation in this country like a custom home renovation or addition.
So when you put a 200 square foot addition onto your home, you have to get inspectors out from the town and plans in and they gotta weigh in and have their opinions and then the architect has to redraw the plans and go back. In Australia, they treat solar installation as on par with installing a normal appliance. So how do we turn solar installation on your roof outside of Boston and on my roof in the DC area into essentially the same thing as plugging in a new refrigerator? Like that is a big set of problems that need to be resolved.
Because if we can drive the cost of electricity down to 5, 6 cents, or even 10 cents a kilowatt-hour, it'll make it far easier to justify and finance the rest of the transition. Because if you're powering your vehicle with 6, 7, 8 cents per kilowatt-hour electricity, that means you're saving a few hundred dollars every year on fuel cost for your vehicle.
Both from the key leverage points, but also tactically, if your organization was called Rewiring Europe or Rewiring Africa or Rewiring Asia or re- Rewiring the Globe, how much of what you're doing around Rewiring America in terms of priorities and tactics would be the same and how much of it would be completely different as you look region to region?
Largely would be the same. There are different issues in the developed world and in the developing world, but it's largely the same. In fact, we are running a program right now, Rewiring Australia because Saul's Australian and we're about, we have an exciting announcement on the horizon where we're going to do a large demonstration project in the city. And you know, the issues are similar. They are different bottlenecks. They've figured out this regulating and permitting process so that solar is cheap and accessible, but they have a luxury tax on electric vehicles, which makes electric vehicles far more expensive than they need to be.
So the prioritization might be different in different places, but the set of issues remain pretty constant. In some ways it's like looking at drug prices, the drug prices in the US are unconscionably high, much higher than the drug prices in much smaller economies elsewhere in the world. You know, rooftop solar in Australia is 90 cents, in Mexico, it's even less, that's mostly driven by reduced labor costs, but in France, which is not a place where you think of having lax labor standards, it's 1.50 franc. And in the US, we're 3.50.
Like there's just no excuse, we gotta lower those... we have to lower those costs. And so there are different prioritizations in different places. There are different kinds of climate, there's different housing stock, but the issues remain: we're all human beings, we all live our lives relatively the same way and so the only path to decarbonization is electrification.
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