Democracy In Power: A conversation with Sandeep Vaheesan, part III

The Hill Heat Book Club, with Jordan Haedtler.

This is the final part of my interview with Sandeep Vaheesan, author of Democracy In Power: A History of the Electrification of the United States. In parts one and two, Sandeep and I discussed how the need to fight the Great Depression and World War II paved the way for producing a reliable electricity supply across the United States. In this portion of the interview, we discuss why that history is relevant today, and explain some of the modern tensions around achieving large scale decarbonization.

HILL HEAT: I think that when it comes to dealing with the climate crisis now, there is a big dilemma. And it ties back to something that you mentioned in terms of more conservative parts of the country.

You quote Tennessee Valley Authority (TVA) Chair David Lilienthal at one point saying that he was presenting the agency as an escape from the political dilemma of maintaining individual identity and local control when technical considerations favored scale and business and government. And I was really struck by that when I think about a lot of ‘inclusive abundance’ folks saying, “Well, there’s so much bureaucracy and we just need to weaken the National Environmental Policy Act and that'll take care of everything.” Would you please comment on that?

VAHEESAN: I'm glad you brought up the abundance “movement,” the abundance folks. And I use “movement” in quotation marks. I'm not sure it's a real grassroots movement. But yeah, there's a growing chorus of people, including Ezra Klein, most notably, who say that what's standing between us and abundant energy and affordable housing is a set of laws and regulations that in effect give the public too much power over how land is used.

I think that's what this argument can be boiled down to, whether you're talking about local zoning regulations, or the National Environmental Policy Act (NEPA) that requires federal agencies to study the impacts of their actions. And their solution is either scale back or repeal these laws in their entirety, and private capital will deliver. They will invest.

And I think I see at least two, maybe even three problems with this position. The first is empirical. Scholars who've actually looked at NEPA for instance, have not found evidence supporting the abundance position that NEPA is actually a source of inordinate delays. And if anything, NEPA has been streamlined already. NEPA is not what's really holding up more investment in renewable energy or long distance transmission lines.

Second, this is more of an ideological point. There's a reason we have public participation over land use. Infrastructure is gonna stay in the ground for a long time. And we should actually plan before committing to a 30 or 40 year asset, which can't easily be pulled down or relocated. And we want to figure out where can we develop infrastructure in a way that minimizes adverse impacts on the environment and people. So planning is important. It's not just bureaucracy and red tape. It allows us to build infrastructure in a coherent, rational way.

We have to accept that the public will have valuable input on these things. People will be able to tell government regulators, “Okay, if you build this project here, you're gonna displace all these people, where are they going to live? Who's gonna compensate them for dislocation?”

Similarly, environmentalists might be able to say, “Yeah, you could build a solar farm there, but you're going to threaten this rare plant species or animal species. What if you build this somewhere else where you'll have less impact?”

So I think public participation allows us to evaluate a broader set of considerations. It's not just about more energy, it's about developing energy in a way that reduces adverse impacts on nature, on people, on established settlement patterns.

And third, even if we follow the abundance program, I am skeptical that it will deliver real abundance because private capital doesn't have some sort of animalistic urge to invest. They're not investing in housing or energy for the sake of investing. They are pursuing projects that are based on profit considerations. So they're looking for fairly high rates of return. And if they don't see those returns, and if they're not confident that they'll get those returns, they simply won't invest.

So I think the abundance movement fails to grapple with present financial sector dynamics. And people like Brett Christophers have explained that the private sector on its own under existing institutional arrangements is probably not going to deliver, for example, the level of renewable energy investment that we want because they’re concerned with profits. They're not concerned with larger social good. And that aspect seems completely missing from the abundance discourse.

The idea that simply removing barriers to investment, it might be necessary, but it's by no means sufficient. And so in my book, I'm not directly responding to the abundance argument, but rather I'm saying if you look at the history of electrification, it wasn't delivered magically by the private sector and the removal of regulatory barriers. It was delivered by vigorous public investment and public planning.

HH: There is a section of the book where some of the RFC-TVA coordination was described as using various carrots and sticks to essentially coax manufacturers like GE to make affordable products for this new class of American households that could suddenly afford electricity. And it honestly really reminded me of the intention of the Inflation Reduction Act in a lot of different respects.

VAHEESAN: Yeah, in the mid-1930s, appliance manufacturers, in many cases, thought that they were serving primarily wealthy customers. So they would sell very expensive, high-end goods and wrote off the middle, working class, and poor as unprofitable to serve.

And what David Lilienthal, who was one of the first directors of the TVA, said is, “OK, I want to serve these customers. I think there's actually a market out there.” And he was also part of an organization called the Electric Home and Farm Authority. He said, “if you all don't step up” and start producing what he called a Model T of refrigerators, “I'm prepared to enter the manufacturing business as a federal agency.”

And that put the fear of God in private manufacturers. They started figuring out, “OK, we can actually sell smaller, simpler versions of our goods and cater to this mass market.”

And so that was an example of not so much the federal government entering a particular market, but threatening to enter. And that reoriented private business to think about this market that they had written off until then. And so that public pressure was really instrumental, even though it was ultimately not exercised.

HH: It's an amazing story. It's just incredible how many parallels can be drawn if we just understand that we are in fact, facing a civilizational threat on the scale of World War II. But I wanted to give you another chance to kind of dunk on Ezra Klein. Because your concluding paragraph says “the history of the power industry in this country counsels against small thinking, something that is especially unwise during a time of accelerating global climate change and oligarchical rule.”

And Ezra Klein and others have been accusing “the groups” of being responsible for Democrats’ loss in 2024 and counseling against maximalist visions right now. So I wonder if that paragraph in your book was kind of directly aimed at that idea.

VAHEESAN: This “groups” discourse is very frustrating because yes, some groups did want Kamala Harris to go bigger. But her campaign from August until Election Day was the opposite of big. It was playing it safe at every turn saying, “We've done a great job. I wouldn't actually do anything differently than Joe Biden did. I'm popular among the Chinese. My basic disposition is status quo thinking, let's just continue along our current trajectory.”

So if there was anything radical in her campaign and her platform, I certainly didn't see it. So the groups just seemed like a convenient scapegoat for what was a rather uninspired and dull campaign that offered nothing big at all. I don't think there was any excess of radicalism. I think there was an excess of caution and timidity. That's one.

The number two point is I think of the abundance philosophy as a continuation of neoliberalism, basically saying, “Let's tweak land use regulations, but leave everything else intact.”

Well, we've been doing neoliberalism for almost a half-century now. Things have gotten worse for the ordinary person: stagnating wages, greater instability, more precarity. And if you look at the power sector, yes, we have added more renewables to our grid. That's positive. But we’ve also added a lot of natural gas.

And so we actually haven't made all that much progress on climate, even if you're just looking at the power sector. And so continuing along this current trajectory isn't enough. We actually need some sort of stepwise change where we're aggressively decarbonizing rather than decarbonizing in this lackadaisical function. So abundance amounts to more of the same with some regulatory tweaks. And I'm deeply skeptical that that's going to deliver that stepwise change that we need.

HH: Since we just touched on expansion of gas, you wrote about the impact of the Clean Air Act's grandfather provisions, and how they actually ended up enabling retrofits [that extended the life of coal-fired power plants]. And I'm wondering if you think that's relevant again, now that there is so much pressure to build data centers for AI, if utilities are looking to recover investments from upgrading, rather than retiring gas plants?

VAHEESAN: It depends where they're operating. In states with traditional cost of service regulation, typically they can. They can recover the cost of upgrades and then also obtain a rate of return on that. So not just cost, but profits.

In places where you have markets, they're not guaranteed rate recovery. They might actually have to eat the cost of the upgrade. Although what often happens is they will enter long-term contracts for the sale of power. And the power might be priced in such a way that they can actually recover the cost of upgrades. But that's different. It's dependent on customers who are willing to bear some of that risk.

So the short answer to your question is it depends. In some places, they're practically guaranteed to recover the cost. In other places, they aren't.

HH: I think it speaks, though, to the need to have climate factored into these decisions about what's a worthwhile investment and some of these community input decisions that you alluded to.

This is the last question that I'll ask. Earlier you mentioned California, and how having a strong RPS has actually nudged PG&E in the right direction in terms of being on track to meet net zero carbon goals. But you write that PG&E represents two faces of the public utility today because it neglected maintenance of its electric and gas systems and has been really deficient in a lot of ways.

The most glaring example of that perhaps is the mismanagement of its infrastructure that led to the 2018 Camp Fire and the liability that it incurred after that caused it to declare what the Wall Street Journal labeled the “first climate bankruptcy.”

And I'm wondering what tools and policies you see as available to ensure that climate bankruptcies don't increasingly happen in a way that socializes losses and privatizes gains.

VAHEESAN: I think PG&E is fascinating in that outside of California, maybe even in California, people have an overwhelmingly negative view of this company. It's setting wildfires regularly through its transmission lines. It's failing to maintain its lines, make necessary upgrades. We're talking about, in some cases, 50, 60, 70-year-old infrastructure that hasn't been updated. Unsurprisingly, it's falling apart.

That's the infamous side of PG&E. But on climate, PG&E is doing pretty well. They're exceeding what's required of them under California state law, and I think this experience shows that what really needs to happen is we need comprehensive public control of these institutions, where the state of California has made PG&E do the right thing on renewable energy.

They have done it and gone a little bit above and beyond, but on maintenance, the state has largely left PG&E to its own devices and said, “Well, you figure out how much to spend on maintenance.” And unsurprisingly, the executives and boards say, “We'd rather pay out more dividends, increase our year-over-year growth and earnings per share, maintenance can take a backseat to that.”

If we actually had more systematic public control of these institutions, even the infamous PG&E might be doing the right thing today. There's a fascinating line. It's actually from Katherine Blunt’s book California Burning, where on the natural gas side of things, the board and executives are saying, “You know, we have to hit a certain earnings per share growth every year, but you know what is discretionary? Maintenance.” They're basically saying maintenance is subordinate to dividends, which is exactly backward. It could be the other way around.

HH: I mean, there's so many examples of that. You see it certainly in insurance as well, where everything is subordinate to dividends. And if you don't direct [insurers] to change that, they don't.

VAHEESAN: It just shows the New Deal idea was these institutions should exist but they should only be allowed reasonable profits and that has been displaced by the notion that these institutions are entitled to and should pursue maximum profits. And that makes a world of difference to the public.

HH: Absolutely. Well, I will stop there and let you get on with your day. But thanks again for writing such an awesome book. I really enjoyed this conversation.

VAHEESAN: Thank you.