Climate justice with microgrids
Real Conversations podcast | S5 E7 | April 06, 2023
An investor and writer, Marilyn leads the Climate Finance Fund, an organization that funds solutions designed to reduce human impact on the planet. She is the author of Sustainability at Work, a book about building careers that make a difference to the environment, economy, society, and future generations, and has contributed writing to publishers such as the Financial Times, Forbes, and GreenBiz, where she currently serves as editor-at-large.
Fuel poverty is rife around the world, but for Marilyn Waite who leads the Climate Finance Fund, microgrids could be a real differentiator for communities.
Below is a transcript of this podcast. Some parts have been edited for clarity.
Michael Hainsworth: Science fiction author William Gibson once wrote that "the future is here, it's just not evenly distributed." Nowhere is that more evident than in impoverished parts of the world which pay heavily for the energy the rest of us take for granted. Microgrids have the potential to lift a community out of poverty by lessening its reliance on outside sources of fuel, increase its independence and autonomy, and ultimately shrink its carbon footprint. The Climate Finance Fund's Marilyn Waite calls it Climate Justice. We began by defining the term.
Marilyn Waite: I define climate justice as pursuing climate solutions in a way that centers the communities most impacted by climate change.
MH: And what are those communities that are most impacted?
MW: So those would be the communities generally who are already experiencing disparities, are vulnerable. For example, in the global south. Also, if you are in a place that is vulnerable to extreme heat, waves to floods. If you live in a flood plain for example, then those are also going to be some of the most impacted communities. That includes, for example, small island developing states, which have for a long time advocated at the United Nations for more climate action and more support to help with climate resiliency.
MH: And many of those communities also suffer from what is referred to as fuel poverty. Let's do that second definition and then let's combine the two. So how do you define fuel poverty?
MW: Definitions vary, but energy or fuel poverty can mean either you do not have access to reliable energy or fuel, or you have access, but you are spending too much of your income on that fuel. And so, for example, over 34 million people in the European Union are experiencing some level of energy or fuel poverty right now.
MH: So how do we alleviate fuel poverty through climate justice?
MW: Right. By providing reliable, safe, green, clean, local energy to local communities that do not have to rely on expensive fuels that they can't really control the cost over. That is one way of providing a form of climate justice in a way that helps alleviate fuel poverty. Also, by creating those systems in a way where those communities can benefit from the returns of that energy. That's another way of helping to alleviate and building wealth from those energy systems.
MH: That's a fascinating point. Wealth building is a critical component to lifting any community out of any kind of poverty.
MW: Right. Absolutely. One can consider energy or fuel poverty strictly from that perspective, but when it comes to an overall household bill, for example, there are many constraints on that household bill. There are many things that need to be paid for. And so, if we can provide an energy system that reduces the costs of those household bills, then that's going to be not only a way of providing energy, which is a critical, of course, source and resource, but also a way of building the wealth and reducing the costs and improving the bottom line for that household so that they can have more resiliency over time. We've seen, for example, with the global health pandemics that one of the best ways of managing them is community wealth, is wealth in terms of resiliency. We can't really divorce or separate an energy system that seeks to address fuel poverty and general wealth building.
MH: What role do microgrids play in that?
MW: There are three components of microgrids that are important. One is of course the supply of that energy, which should be preferably renewable for the reasons we just discussed. The storage of that energy for future use. And then the consumption that's optimized for the use. And so, with all three components, there are opportunities to optimize energy production consumption in a way that is helpful for the end user, let's say a household that's experiencing this fuel poverty. And in a way that's climate just by using the renewable energy so that the energy system is not contributing to climate change. There's not that vicious cycle of both producing an energy source that is then causing harm to the community through the extreme climate related weather events and helping with the cost of that energy source.
MH: So, a consumption that's optimized for the usage patterns of a given community that uses a microgrid, you're essentially optimizing the cost and the savings at that local level and energy's not being wasted.
MW: Right. And it's that digital connectivity is the glue among those three components because you need those three things to communicate to optimize the costs.
MH: Let's talk about the five weeks in which you worked with Liana Ault of Nokia, Dr. Thomas Hillig of TH Energy, Leslie Labruto of the Marshall Impact Accelerator to develop a decision guide from microgrid implementation. Who is this for?
MW: This decision guide is really for anyone that is interested in sustainable, reliable, affordable, green energy for their business or community.
MH: Are we talking about me in my community because I've got an old electrical grid and it goes down all the time, which is why I got battery backup systems in the home office, or is this more for those island communities who are looking to extricate themselves from the issue of fuel poverty?
MW: We start the guide with a blank page, and so one can start from just having a curiosity or having any kind of issue around reliability or affordability or both of an energy system. And then we walk the user of the guide through whether the microgrid system makes sense for them. And so you will definitely find that if you are a remote community that does not have access to a reliable grid, then microgrid very well could be for your community.
MH: I'd be curious about some of those communities like the Gull Bay First Nation microgrid project. It's Canada's first fully integrated remote renewable energy storage microgrid. How does that project address fuel poverty?
MW: Yes. The Gull Bay First Nation microgrid project was Canada's first fully integrated remote renewable energy microgrid system. It is solar based, and it is designed to help the indigenous community reduce the reliance on diesel generators. Diesel generators being a huge cost and one that they cannot control locally because that's determined by far away markets and speculators and other systems. However, the solar resources there, it's reliable, and that is helping them save at least 25% of their diesel fuel costs each year. It is a success story, and it is helping provide a pathway, an example for other communities globally.
MH: Why solar? Why not say wind? What are some of the decisions that a community would need to make for whichever sort of, I guess energy generation system would be most appropriate?
MW: Wind is good too. I think one of the first steps is to determine what is the optimal renewable energy source for that location. So solar is very reliable. And the thing about solar, it's not about the warmth of the air, it's about the sunlight itself. You have abundant sunlight in places like Germany, even if the air is cold. And of course, wind resources are available, especially powerful off grid offshore wind sources. And so, it just depends on the actual location and your renewable energy resources. I think it's also important not to overlook ground source heat, geothermal resources, instream hydro, all of these should be considered based on the actual physical location.
MH: I'm punching in the "Gull Bay First Nation" to find out where exactly it is. It is a 16-and-a-half-hour drive north of Toronto. So definitely a little chilly, but certainly very bright with sunlight.
MW: Right, right. Exactly.
MH: The next component, of course is how are you storing this energy when it isn't sunny or when the wind isn't blowing?
MW: There are several storage types. One of the most popular, of course, being lithium ion-based battery storage, but there's also pumped hydro and other types, compressed air, other types of storage. And so that is critical to store it when there isn't the sunlight so that we can still have access to that energy source.
MH: If alleviating fuel poverty is the intent, poverty is an issue itself. So where does the money come from for a project like this?
MW: That's a great question. So how do you finance a project like this if the off takers do not have the means to pay? And that is where public finance and partnerships come in. There can be a subsidy from public finance, of course, but there can also be energy sharing with another off taker, say a local business, local commercial industrial activities. And so that can help diversify the revenue for that local green energy microgrid so that the project can pencil out. I think both of those are important components to consider. When the off-taker may be already experiencing energy poverty, it may not have the means to pay, especially for the upfront capital costs.
MH: If you've got say, public budgets, which is government support or revenue-based financing, a loan from a financial institution or an investor, who would be an ESG minded investor? Because typically investors expect a return on investment within a few years, but you don't get that ROI on a microgrid right away.
MW: Right. Let's break this down a little bit in terms of ESG minded investors. It is hard to be an investor today in general, whether you are a bank lender or an equity investor, if you do not incorporate environmental, social, or governance metrics and factors. It's just really good due diligence. And so, I think it's important to make a distinction between an investor that's incorporating ESG risk, let's say, and an ESG impact first investor. An investor that's going out and wants to see a positive impact on the environment on society in additional to having a return.
Now, there are other kinds of investors, no matter where you sit on along that spectrum in terms of what you were mentioning in terms of time horizon. There are longer term investors, pension funds, for example, retail retirement funds. If I'm saving for my retirement, that's 20, 30 years from now, that's a longer-term horizon. And so perhaps several investors that are more short-term outnumber the longer-term ones. But it is important to recognize the longer-term investors do exist and they're plentiful, and all the while encouraging those that tend to be more shorter-term minded to push out the time horizon. And for that, of course, there needs to be some incentive. If I'm going to wait for that capital return, what am I getting in return? And that's where, of course, all kinds of tax benefits, for example, tax breaks or benefits can really help with more shorter-term minded investors.
MH: I wonder if this is a chicken and the egg situation, or maybe I'm just putting the cart before the horse, whichever metaphor we want to use here. When a community wants a microgrid to address whatever the issue is whether it's reliability or affordability, do you go for the funding first or do you design the grid first and then go looking to fund it?
MW: I think you need to have the basics designed before looking for funding. You need to know the basics of the system. So how big is it? What's the capacity? What is the need? Who are the off-takers? Getting an idea of the cost, because ultimately the financier is going to need to know that information. If you're not able to provide it, it's very hard to give you a response. For example, if you're going out and you want an auto loan, you need to tell the bank or the car loan company how much it is.
MH: Right. What car you want to buy?
MW: What car you want to buy? Right, exactly. So, I think it's same thing could be said for a mortgage. So, understanding the system is definitely a first step.
MH: So then if the first step in determining a microgrid is which one is appropriate to install and operate, and if you establish that based on whether or not it's a problem of reliability or a problem of affordability, does the grid look different depending on what the answer is? Is it a reliability issue or an affordability issue?
MW: It has to be both. It has to be both reliable and affordable. The key with affordability is affordable for who? For what purpose? And so, is it a commercial, industrial, residential use? And what is the market rate or the market prices for electricity, for example, for that particular location, for that particular off-taker? I think when it comes to affordability, you still need it to work to be affordable of course. That really will change depending on the use case. On reliable, there's no point of having any kind of grid unless it's reliable. So those two things actually have to come together.
MH: What role does connectivity play? Because we mentioned at the beginning here that you are going to create a microgrid that is smart enough to know when power is needed and when it is not, when to store it, and when to release it. And that I can imagine there's a role for the Internet of Things and all of the connectivity that goes with that. What's the role of connectivity in the microgrid for you?
MW: So, connectivity is the glue making the system work, because microgrids should have what we call island ability, meaning they can disconnect from the larger grid. They really need to have good optimization between supply and demand, even more so than, let's say, a huge macrogrid system because they cannot pull in resources from various parts of the system. This ensures their kind of independence and resiliency, the whole connectivity part. A key component of this is real-time data and not just the theoretical data. And that's where, having this pulse on what exactly is being used. And could that use, for example, be shifted to a different time? Let's say a washing machine. Can that washing machine be shifted to a different time when actually that use can be done differently or at a different time? There's no kind of consequence on a livelihood or anything else. And the supply of energy would better suit that use. And so, these are the kinds of things that only connectivity can bring.
MH: Help me understand how that really would work. My washing machine, when I press the start button will go no matter what time of day. Do we all need to run out and buy new washing machines that say, hey, listen, maybe you should be doing this at three in the morning, not three in the afternoon?
MW: So definitely there are washing machines that are smarter, let's say have different control systems than others.
MH: Oh, no, I just need to buy a new one. I need to upgrade.
MW: No, no. But actually, without upgrading your washing machine, you can have that information through connectivity as well through a kind of smart panel where you have your various devices in your household connected to that kind of panel. The panel will tell you based on the use of that device or that equipment when it's the optimal time. For example, it can happen both ways. You can have your cell phone or what have you. You can have cell phones that are smarter than other cell phones, but you can also have a singular panel that gives you information about what's being connected in the household regardless of if you had the latest and greatest equipment.
MH: And I guess at the very least, just an information campaign to the community saying, maybe you ought not to be doing this at this time of day. It'll be cheaper if you did at this time, and all that kind of stuff as well. I understand you live in a community that's eco-friendly, the first district smart grid in France.
MW: Right. I live in Issy-les-Moulineaux and in particular a place called Fort d'Issy. This was a former fortress for wartime 1870s France that has been converted into an eco-friendly neighborhood. Now, what makes it eco-friendly? It is run by heat pumps. Our heating and cooling come from these heat pumps. Now, [foreign language 00:19:11] grid in itself is a separate project. It ran from 2012 to 2018, and this was yes, a pilot smart grid that served over 10,000 employees locally, over 5,000 residents. It had over 160,000 square meters of office space that was connected. And a lot of learning from what works, what doesn't work that has then been shared with the wider community of smart grid players to replicate and optimize in other applications in other parts of the country and the world. I would say yes Issy-les-Moulineaux, as a city has been pioneering in smart grids and also renewable energy and locally green produced energy.
MH: As a community member, what's been your experience?
MW: I take great pride in knowing that my energy is mostly renewable and it's actually coming from below my feet, quite literally from the grounds and it's being renewably produced. And I think especially given the current energy crisis in Europe, it's good to know that we're also not being a burden on the grid and the other use cases that really rely on that. So, it kind of works both ways. It feels both socially responsible and environmentally sustainable.
MH: What is your personal motivation for getting involved in the world of microgrids?
MW: I had an "a-ha moment". I was working in Madagascar. My first job was in Madagascar with the United Nations, and I was living in the south of the country, which is actually quite drought prone, unlike the very lush rainforest of the northern part of the country. I was in the drought prone region, and the local utility was having financial difficulty. They also, I think, had troubles with their hydroelectric system, so on and so forth, and went for a few months without reliable energy. And I saw the local businesses, for example, at that time there were cybercafes and refrigeration companies and so on that went out of business, really struggled. And of course, just general quality of life and productivity dwindled. And I really shifted. From that time, I was more focused on water resources. I kind of shifted from water resources into energy, reliable, affordable, and green energy. And so that's kind of my personal aha moment.
MH: You think we should be optimistic about a climate future with micro grids?
MW: I do. I think microgrids are a part of the puzzle we need for decarbonization and for what some people call the Just Transition. I like to use the term climate justice, and it is one of the systems that are still, I think overlooked, but yet are critical for what we talked about earlier in terms of climate vulnerable communities.