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Harvard Business School

Empowering Rural Communities

By April White | January 2, 2020

Chris Riley is bringing affordable, renewable power to small-town America

Chris Riley (MBA 2008) didn’t have any experience with renewable power when he cofounded Guzman Energy in 2013. Riley, who had spent most his career as an officer in the US Navy and then as director of investment banking at Guzman & Company, was more concerned about the type of firm he wanted to launch than the sector in which he would work. “We wanted to start a company that helps people and benefits society,” he says. The energy sector, which was at the beginning of what Riley calls the “renewable power revolution,” seemed ripe for that kind of disruption.

Riley and his cofounders saw an opportunity to create a new kind of energy company—a hybrid of a traditional utility and a financial entity. Guzman Energy, a subsidiary of Guzman & Company, would not be weighed down by the same legacy investments in carbon-based power generation of traditional utilities, nor would it be limited by the financial restrictions that govern nonprofit electrical cooperatives. Instead, it would have both the incentive and the flexibility to bring renewable power to communities that would benefit economically from the change.

“There are parts of the country where—from a purely economic perspective—turning off the carbon-based energy production and building wind farms and solar farms can save people money,” he explains. But he saw that, in many of those places, the transition wasn’t happening. Often, those communities had signed decades-long agreements with a utility and had little leverage to force the company to lower the price of electricity and offer green energy.

“We are ready to take up these fights on behalf of the communities,” Riley says. One of the first was in northern New Mexico, where the local electrical cooperative serving 30,000 people in the region could not negotiate lower prices and increased renewable energy from the utility with which it had signed a 40-year contract. In 2016, 24 years remained on that contract. The only way out of the deal was a $37 million break-up fee, a high price for the small cooperative. Guzman Energy was able to raise money to pay the exit fee and became the cooperative’s new green-energy utility, all while promising about $100 million in energy-cost savings over the next 10 years. Guzman Energy is also helping the community build its own solar-energy facilities, creating jobs, and increasing the local tax base. “They have cheaper energy, cleaner energy, local energy,” Riley notes. “It’s a huge success story.”

Guzman Energy has seen other such successes across the American West, where the company—which has offices in Colorado and Florida—has focused its efforts. The rural communities of that region have been disproportionately affected by the entrenched interests of utilities, Riley observes. The green-energy pitch isn’t always a politically compelling idea in these often more conservative communities, but, he says, “It’s not about ideology; it’s about math. All these communities are paying way more for their power than they should be.”

Riley knows this terrain well. He grew up in one of those rural communities, a tiny coal-mining town about 150 miles south of Salt Lake City. He acknowledges that his business model to provide cheaper green energy will hurt the job prospects in central Utah’s coal country, where three generations of Rileys have mined and where his family still lives. But Riley thinks Guzman Energy has a role to play in that transition. “I’m trying to cultivate a culture inside the [renewable]-energy sector that advocates for these changing communities and helps them find ways to move forward, too.”

View original article here.


January 2, 2020