I personally like Sun Tzu's The Art of War. After all, I am an energy executive in the US, so the reality is that just about everything I deal with day-to-day is a form of war.
The US energy industry has become a series of battlegrounds and skirmishes that are part of an overall war between the old guard — regulated, monopolistic utilities (the “Redcoats,” to represent a bulky, once impressive army that failed to adapt) and the rebels (who are just about everyone else who earns their customers from distributed energy to independent power producers to competitive retail providers).
Sun Tzu said: “In the midst of chaos, there is also opportunity.” When it comes to energy, there is chaos in federal, state, and local policy right now.
That chaos is exactly what the Redcoats want. They’re going to lose, and they know it. Their once-great business model no longer makes sense, and their long-term systematic failings are snowballing into a reality where many Californians can’t even count on their grid to properly function.
I believe the Redcoats are going through the five stages of grief: denial, anger, bargaining, depression, and acceptance. I also believe that as more Redcoats enter the bargaining phase, shenanigans (ie, “secret or dishonest activity and maneuvering”) will abound, and chaos will be the standard.
I’m talking about shenanigans like the nuclear bailout polices and bills we’ve seen from both the Department of Energy and then from New York, Illinois, New Jersey, Connecticut, and Ohio.
I’m talking about shenanigans like FERC (Federal Energy Regulatory Commission) rules modifying PURPA (Public Utility Regulatory Policies Act) to give Redcoats the ability to disincentivise and predatorily challenge distributed generation.
I’m talking about shenanigans like decoupling tariffs, where Redcoats’ profits are no longer tied to anything rational they are simply guaranteed.
I’m talking about shenanigans like highly engineered bankruptcies designed to disadvantage the general public to the benefit of capital markets, all while hiding under the cloak of public good.
These are all highly crafted, intentionally-orchestrated shenanigans designed by the Redcoats to protect their way of life, at the cost of the public they supposedly serve. These shenanigans range from completely legal to questionable, to — in cases like Ohio House Bill 6 (see below) or Commonwealth Edison, where a senior executive was charged with bribery — the downright criminal. All of us should expect much, much more.
Think about it.
If you are a Redcoat, you know the following:
- Your equipment is old, and you have not taken care of it.
- Your company was never built to adapt quickly, and you cannot change fast enough to survive.
- You cannot win in a fair fight because your costs are too high and your service too poor.
- Your customers really don’t like you.
- You are well-entrenched.
- You have very deep pockets.
- You can always fall back on the “we’re too important to fail” argument with regulators.
Given these facts, if I were a Redcoat, I’d use deception, create massive bureaucratic chaos, invest big in crushing the competition, and try to change the rules to buy time to adapt. And that is exactly what the Redcoats are doing.
Proof of these tactics lies in Ohio House Bill 6. HB6 was a nuclear bailout bill that was marketed as a carbon reduction bill, that at one point included renewables, then ultimately excluded almost all renewables (apparently the wrong type of carbon reduction), killed the state renewable portfolio standard, added a coal plant subsidy to gain favor with other Redcoats, and then added tariff decoupling at the last minute for one special Redcoat that orchestrated the whole thing.
HB6 was a Redcoat shenanigan masterpiece that resulted from more than $60m in questionable funds coming from First Energy and has now led to a federal investigation, criminal charges, and a new Speaker of the House in Ohio. On top of all of that, HB6 was such a complicated “pile on” energy bill that it’s nearly impossible to easily undo.
Sun Tzu would say it was a brilliant Redcoat move. If I was a Redcoat, I would admire it (and probably try to duplicate it).
Thankfully, I am not a Redcoat. I am the CEO of an energy company that installs on-site wind energy projects for large factories. In this analogy, I am one of the hundreds of rebels forced to navigate utilities’ myriad of shenanigans so I can serve my customers, who work with me by choice. The challenge we face as rebels is that, when compared to the Redcoats, we are small, new and undercapitalised.
As rebels, we must figure out how to take down the Redcoats with alternative strategies and tactics. I respectfully submit that rebels need to stop pretending that our Redcoat opponents are civil, acting in good faith, or are going to stop the shenanigans designed to hurt us and help them. We need to start treating this like the war that it is. As Sun Tzu said, “what is of supreme importance in [this] war is to attack the enemy’s strategy.”
I propose the following tactics, all of which my team is using right now, for all fellow rebels in this war.
Challenge everything. The Redcoats have people in every room where laws and rules are being written. We need to be as well. Intervene. Testify. Show up. Write comments (and have your customers do the same). Follow the formal processes that the Redcoats helped create and bury them in their own process.
If you don’t have a regulatory counsel on staff and a lobbyist that works directly for you, get them, now. Using their own process against them is the most cost-effective way to disrupt and even defeat their shenanigans.
Overcommunicate. Redcoats love the fog of war. In Ohio, they managed to get a nuclear subsidy to save their plant without ever proving that they even needed the subsidy. They even managed to tack on a coal plant subsidy, which is impressive for a nuclear bill.
Redcoats hate public disclosure and engaging with all of their stakeholders. Rebels can adapt and communicate by using social media, videos, guerilla marketing, and transparency as weapons.
Meet your local, state, and federal legislators and regulators. Answer every single question they have. Hide nothing. Show them, in black and white, why you are better than the Redcoats. Then dare them to demand the same transparency from the Redcoats.
Sure, any experienced energy executive understands how the Redcoats are fundamentally failing, but we are not in charge, we are not the policy makers, we are not the voters, and our opinions alone don’t matter.
We need to overcommunicate all the time, especially when we are not fighting the shenanigan of the day. We need to communicate ahead of time so that when the next shenanigan inevitably comes about, we will have already undercut it.
Embrace the shenanigans. You read that right. As much as we’d love to, we cannot change the battlefields. If the Redcoats want a legislature to consider a shenanigan (and they are willing to “invest” $60m), then that is going to be the new battlefield.
However, to work towards winning the war, we can win a little bit on every single battlefield. If you die on principal because “it is a bad bill” that is still going to pass, then you have wasted an opportunity.
We saw Ohio House Bill 6 coming, and we knew it was full of bad policy. But, when we realised there was a freight train of inertia making sure it would pass, we got onboard to try to make it a little less crappy.
We successfully lobbied for a provision that quadrupled the allowable size of on-site wind projects from 5MW to 20MW. That provision is how our team is going to end up building bigger on-site wind projects and further cut away at the Redcoats. Show up for every shenanigan, and make sure every single instance becomes an expensive, time-consuming battleground where the rebels gain ground too.
Stop looking for sympathy. Sure, I wish that all legislators and regulators were passionate about energy policy, the future of the grid, and objectively balancing the long-term sustainable health of our planet and businesses.
But, I can assure you they are not. They have a lot on their plates, most are not energy experts, and they have a hundred other “good” things they could choose to work on.
Don’t show up talking about how it’s renewables’ turn and why they should embrace an expanded renewable portfolio. Instead, talk with hard numbers about how we already save consumers money and could save them even more money if they just changed “x” policy that would cost them nothing.
Instead of asking for more tax credits, ask for permanent tax code changes that match other technologies so we can actually have a fair right with the Redcoats. Don’t ask for handouts or sympathy — we will never compete with the “sympathy” purchased by the Redcoat’s war chests. Ask for a level playing field and policy changes that don’t cost anything, and then perform better than the Redcoats.
If all of us rebels start challenging everything, begin overcommunicating, embrace the shenanigans, and stop looking for sympathy, then we have the opportunity to hasten the Redcoats’ inevitable end. When we win, the result will be a new decentralised, cleaner, better power grid that holds all of us accountable and enables the public consumer.
See you all on the numerous battlefields.
Jereme Kent is CEO of One Energy Enterprises, an Ohio-based company that specialises in wind power for industry.