Stakeholder engagement is a mindset as well as a specific business practice. Energy companies are gradually accepting that their ability to conduct business requires the consent of critical constituencies, including customers, investors, employees, communities, regulators, strategic partners and others.
The term “social license to operate” includes, but is not limited to, stakeholder engagement. Over the next decade, there are hundreds of billions of dollars of proposed energy projects planned in the U.S. that require some degree of stakeholder engagement. Does your energy company want to be forced to go back to the drawing board because a community feels your project is being imposed on them?
WHAT YOU LOSE BY “BAKING” IT INTERNALLY
Energy companies have plenty of opportunities to engage with their stakeholders. Some leaders take a dim view about the benefits of regularly engaging with their stakeholders. They will do what is mandated, often by their regulators, but no more. We can call this the “compliance” approach.
Others, however, take a more expansive view, believing those interactions can improve their operations, lower costs, increase efficiencies, make their brand more trustworthy and so on. Those interactions won’t always be free of friction, but they have the potential to prod each side into rethinking long-held assumptions and practices. Let’s call this second group “expansive,” for its belief that a business runs better when it regularly and authentically connects with its critical constituencies.
When it comes to a specific activity like integrated resource planning (IRP), those in the “compliance” camp likely will bake their plan in house, then share it with the public. I understand the reason for that tendency: Energy companies have a lot of in-house expertise, as well as access to contracted experts like economists, engineering firms and transmission planners. Building a power plant or siting a transmission line are practical matters: what are the low-cost options and what is possible?
I’ve seen a lot of these “bake it internally then sell it externally” plans run into a buzz saw of opposition from community members, forcing energy companies to go back to the drawing board. That drives up costs, delaying projects and eroding trust between a company and its constituencies.
Organizations that fall into the “bake it internally then try to sell it externally” trap find themselves playing a zero-sum game where one side wins and the other side loses. Often, the losing side in one negotiation will find a way to recover its losses in another negotiation. It’s a poisonous cycle that was expertly described in the classic text on negotiations, Getting to Yes: Negotiating Agreements without Giving In.
HOLLAND BPW SELF-CORRECTS, OPTS FOR INCLUSION
In a talk given last October at the American Public Power Association’s Leadership Summit, Dave Koster, general manager of the Holland (Michigan) Board of Public Works (HBPW), described how his organization found itself in exactly the kind of “win/lose” dynamic.
Dave (left) described his organization’s post-coal challenge. It’s one that should sound familiar to a lot of electricity organizations.
The backbone of the HBPW’s generation fleet was the James DeYoung coal-fired power plant, built right after World War II. HBPW’s planners knew the plant needed to be replaced. For years before the plant closed, planners wrestled with their replacement options: Coal? Natural gas? Solar? Purchases? Biofuels? Something else?
HBPW had secured a permit to build a new coal-fired power plant, which triggered a lot of negative press (see below), community opposition and a lawsuit from the Sierra Club.
HBPW’s board even questioned the leadership’s thought process for replacing the plant.
Many leaders might have dug in their collective heels and explained, yet again, the economic or engineering rationale for their choices. But HBPW’s leadership flipped that script: They took a pause in the midst of the controversy and asked themselves if this was the right way to go for a publicly owned energy company.
“We paused to rethink our strategy and our options,” Dave told the attendees at the APPA conference. “We had not communicated with the community about our proposed plant. We had completely overlooked engaging the public. We stopped and reloaded, focusing on engagement.”
“We realized,” he continued, “that while our intentions were good, we had fallen in love with our plan. We needed to be more in love with our intentions.”
PRACTICING INTENTIONAL INCLUSION
Dave said HBPW practiced “intentional inclusion,” a term I love, to build consensus with its community about what could come now that the DeYoung plant was reaching the end of its useful life. “We worked to grow the community’s energy literacy,” the HBPW GM said. “We brought in expert speakers to lead workshops on how we should proceed.”
The engagement effort included creating a microsite summarizing the costs, benefits, and drawbacks of various supply-side and demand-side options. “We are committed to building a reliable power infrastructure for the Holland, MI, community that is socially, economically and environmentally responsible,” the microsite aid.
“We wanted to create a process that was inclusive, comprehensive and transparent,” he continued. This communication process helped frame the challenges and begin a community engagement process. HBPW wanted to show the community the new resource was more than just a power plant. A timeline of the project can be found here.
The 125-megawatt plant was the nation’s first baseload power plant to win an Envision Platinum award from the Institute for Sustainable Infrastructure.
Engaging stakeholders led to better decision-making, including the decision to spend an estimated $1 million to create a visitor’s education center at the gas-fired combined-cycle power plant, the Holland Energy Park.
Because HBPW engaged in an authentic outreach process, rather than lie down at the plant’s gate in an attempt to block construction, community members lined the streets of Holland to welcome the arrival of heat recovery steam generators, Dave recalled.
He recommended getting alignment with employees before approaching regulators about construction. “We wanted the public to feel the decision-making process was inclusive, comprehensive and transparent. None of this was a big lift.”
At least not for energy organizations willing to step back and ask “Why?” questions, and then listen carefully to the answers.
Drastic Measures: Power Shutoffs an Inflection Point for Power & Water Providers
Read John Egan’s latest article in the Winter Edition of California Water & Power magazine here.