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Terra Alpha Voices | Roger Sant

Roger Sant

Roger Sant is Co-Founder and Chairman Emeritus of The AES Corporation, a Fortune 200 company that generates and distributes electrical power, globally, and is Co-founder and Chair of the Sant Foundation. He served previously as Assistant Administrator for Energy Conservation and the Environment at the Federal Energy Administration, Director of the Energy Research Organization, the Energy Productivity Center, and a lecturer in Finance at Stanford, as well as on numerous boards, including as Regent and Board Chair at the Smithsonian Institution, and Vice Chair of the World Wildlife Fund.

What was it that hooked you on environmental issues and led you to leave finance for a stint at the Federal Energy Administration, and then to found AES?

It was just realizing how critical it was for us to get this right. That it was going to have a lasting effect on civilization. Nixon came in, and on Earth Day 1970 and took on this effort to pass all this environmental legislation and passed the Clean Air Act, the Clean Water Act, the Endangered Species Act, and so on. Just a stunning array of accomplishments. I’d never thought about government before. But I thought, I’d love to be a part of that. That led to being invited to head up energy conservation for the country in 1974 when the energy crisis hit. My title was energy conservation and the environment. And I came out of that two years thinking, My gosh, I can’t spend my time on anything else.

So I focused on what we could do to clean up the energy industry. And tried to prove that energy conservation was the cheapest alternative, too. We did massive computer modeling, trying to prove that an investment in insulation, for instance, was so much more cost-effective than an investment in trying to drill for more oil. And I wrote a book about the least-cost energy strategy, saying this is not about the environment – well, it is, but it really should be driven by the economics. And the economics tell us all of the money we’re spending on the supply side of energy ought to be shifted substantially to the demand side of energy. So that became my passion, and that’s the reason I started my company: to try to prove that worked in the private sector. 

Did you know it would work, or was it just: Fingers crossed, let’s give it a shot?

Well, fortunately, I had had some experience in starting up companies before. And I taught business at Stanford. So I knew something about the whole venture capital world and how businesses are started. And so I wasn’t as afraid as I should have been. Because it was really hard.

My partner and I went out saying we think that if we do co-generation of electricity, it’ll be much more cost-effective than the way we do it now. And people said, That’s great. What experience have you had of building a power plant? Well, you got me there. But, we got the company started and focused on the generation of electricity. We were out to prove that, one, it could be generated in a lot more friendly a manner to the environment. And two, that it was naturally a competitive industry, that the market works. At that point, everything was regulated. So those were our motives in starting the company.

And what was the reaction of the broader industry to your work, to your claims?

They kind of humored us. Fortunately, we had some legislation on our side. Congress had passed a law that said, if you co-generate, you are allowed to sell power into a utility at their avoided cost. We could pretty much go to a utility and say, we’re going to build a power plant. We want to sell you the electricity at your avoided cost. And they had to work with us. 

Were they annoyed? 

Yeah. Of course. You know, Who are you to tell us … Yet, we tried to be collaborative. I mean, we were coming from a Republican administration. We were sort of on the side of business, my experience is teaching business, so we weren’t considered the progressives that we would have been today, I guess. We were considered people working within the system. So we fortunately could get bankers and contractors and people like Bechtel to listen to us. I remember sitting around a table on our first deal – it was in the $250 million range, and we had maybe a million dollars in our bank account. Here were these big players – Morgan Bank and General Electric Credit, and Houston Lighting and Power, and Bechtel – and we are driving this whole project, either stupid or awfully brash. Nonetheless, we pulled it off and got people to go along with it. And, once we got that project, it led to some other projects, and we just kept going. And before long, we had 32,000 people working for us all over the world. 

It was a thrill. We were constantly looking for: How could you do electricity with less of an impact? This was well before climate change, which kind of came up on my radar in 1986, ’87, after we had started the company. And then I began feeling like, Oh my gosh, we are part of the problem.

I was just about to ask about how you balanced involvement with coal power plants – albeit in a more efficient way – with recognizing this big climate change issue?

It was really hard. I can’t tell you that we did it perfectly. I remember coming to the staff and saying, Uh, you know, I’m on the board of this World Resources Institute, and I’m getting a real dose of climate change. This is going to be the environmental issue of our time. What can we do about it? Should we just quit? Because there was no way to generate electricity that was carbon-free at that point because solar, at that point, was 10 times more expensive. And wind was off the charts. And nuclear similarly – and I didn’t want to do nuclear anyway. Gas was less carbon-intensive, but it still had carbon. 

One of my younger staff said that trees really sequester carbon and maybe we could plant enough trees to offset the carbon emissions from a power plant. I said, “Well, how many trees would that take?” She said, “Let me get back to you.” She came back a week later, and for this one small power plant in Connecticut, it was 52 million trees. And I said, “That’s a lot of trees. How much would it cost to plant 52 million trees?” At that point, we were still a small company. I think we made a million dollars that year. And this project was going to cost 2 million. And so, for us to commit twice our profits to plant trees to offset the carbon emissions from one power plant… But we said, we have to do this. Fortunately, we found a great development organization working on a project in Guatemala, and we could kind of piggyback on it. And that started us down a road of trying to do offsets. Which have now become sort of standard practice, but, at that point, we didn’t even know how you calculate this stuff, much less how to do it. 

At that point, coal was really the least-cost alternative to build a power plant. And so we just were constantly struggling with: How do we offset this? And we got emissions down well below what was required. And we did prove that you could build a really clean coal plant and were really proud of the fact that we introduced new technology to do that. But you’d have people say, Why are you worried about it? It’s not required. No one was going to tell you you had to pay attention to climate change at that point. 

Things have obviously changed over the decades. What do you see as the most promising technologies or strategies?

The happy thing is renewables have now come down so much in cost that they’re very cost-effective. At least for the sporadic energy you get from them. I think we could get up to around 40-50% of the system based on renewables. The harder part of this equation is to find the base load that you can count on if the sun doesn’t shine. Batteries are a possible solution that expands that 40%. But batteries haven’t come down as fast in cost as renewables have. Hopefully there will be a breakthrough on battery technology somewhere. A lot of people are working on it.

Carbon capture from fossil fuel plants still, in my mind – even though the progressives are trying to say should be outlawed – has got to be part of the picture. And so I would imagine we’ll do carbon capture from a gas-fired plant and sequester the carbon as being one of the possibilities. I don’t think nuclear is going to ever be cost-competitive. Although there’s a lot of private money going in to try to prove that.

I think green hydrogen has really got a possibility – green hydrogen being hydrogen through renewables. So renewable electricity. It’s expensive now but coming down and I think it has a real possibility to be a player. And it would be wonderful if it is, because it’s really clean and easy to make. And it’s a great way to use renewable because you could make the hydrogen when the sun shines or the wind blows and store it. And so it’s a nice equivalent to a battery, almost. 

So I’m kind of optimistic that the technology is going in the right direction and the market is driving it in the right direction. But we’ve got to have a carbon tax. Or we’re never going to make it. But even my progressive friends won’t agree. 

Why is that?

It’s an equity issue. They just don’t think you could design a carbon tax that won’t hurt the poor more than hurt the rich. They think it’s regressive. I think all of those things could be fixed. The problem I have with the progressives is not their commitment to solving the problem. It’s that they refuse to use the market. They want to do everything with standards. And standards are good. We did that with auto fuel efficiency. I’m not saying standards aren’t part of the solution, but to ignore the market, we’re just not going to be able to get there. I want to use the market because it’s a powerful tool. And I want to use it because it’s there. And it works. And I want to do anything that works at this point.

You know, originally, it might have been $15 a ton, the carbon price. Now it’s got to be more like $100. Because it’s got to be really something that penalizes pollution so much that people just can’t afford to do it. And in order to force the transition to where it needs to be. I mean, one of the things that I loved about conservation is it was market-driven. Fortunately for us, it was the cheapest alternative. And so you had the wind at your back instead of trying to convince people to do expensive things. 

Do you see an avenue toward productive conversations there?

I do. We have COP26 coming up in November that is going to be really significant. We have incredibly good leadership with John Kerry internationally. The key will be China, and their 27% of all emissions right now. The only part that scares me there is we’re making them out to be the enemy. I don’t mean to say they’re good, but we have to find a way to collaborate on this – we don’t have any choice but to be a global initiative. I’m optimistic that maybe we’ll be able to find a way to work with other countries. And I’ve tried hard to get a Republican audience. I thought, since it started with a Republican environmental record and me as a power plant operator, you know, I can appeal to some of these right-wingers. Because we need them. We got to get them in the tent.

If we could start over again, I wouldn’t call it climate change. I’d call it “climate pollution.” And just say, we need a pollution tax. Because we have to penalize people who are polluting the planet and making it harder for us to live. 

You’ve used “optimism” a few times, but in this horrific year, with floods and droughts and extreme heat all over the world, do you feel as optimistic as you once did?

I’m optimistic that we’re going to do a lot. I’m pessimistic that it’s way too late. That, no matter how much we do, it’s way too late. Therefore, we have to do all that we’re doing, and that’ll make it better. But it won’t be anywhere near enough to keep it at 1.5 degrees centigrade. So we’re going to have to do probably direct carbon capture out of the atmosphere. We’re going to have to do some really, really expensive things – we may even have to do geoengineering – in order to keep us from dying. To keep a large part of the world from dying. Because we just aren’t going to be able to live under conditions that are 2.5 or 3 degrees centigrade warmer. We’re 1.2 degrees warmer now and look at what’s happening. If we triple that, we’re going to have a hard time surviving as a civilization. 

So I’m thrilled, excited, we’re doing something, finally. That we finally have a president who made it one of his top priorities. Even Obama didn’t do that. And obviously Trump was just a disaster. So we got a lot going for us. And there’s a lot happening. But we have to do all of that and then some. 

Terra Alpha Voices highlights thought leaders who inform our investment process and impact work. This series, created in partnership with author and photographer KK Ottesen, seeks to shed light on the subjects’ diverse perspectives rather than their illustrious careers.

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