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Are you interested in why energy is the foundation of all opportunities and challenges?

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Our debate today works with the book titled The Energy Foundation – Why Affordable, Reliable Energy Is the Key to Jobs, Cost of Living, and Resilience from 2026, by AJ Perkins with yours truly, Fanni Melles.

This is a great preparation to our next interview with AJ Perkins in episode 426 talking about why energy is the foundation of every challenge and opportunity. The book is currently still in development so the published version will be available later in the year.

Since we are investigating the future of cities, I thought it would be interesting to see why high utility costs act as a compounding tax that inflates the price of all goods and services. This book presents the SOUND energy foundation that creates true resilience for communities and businesses with margins to absorb shocks and disasters.

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Welcome to today’s What is The Future For Cities podcast and its Research episode; my name is Fanni, and today we will introduce a research by summarising it. The episode really is just a short summary of the original investigation, and, in case it is interesting enough, I would encourage everyone to check out the whole documentation. This conversation was produced and generated with Notebook LM as two hosts dissecting the whole research.

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Speaker 1: Usually when we look at a community struggling with the cost of living. Families moving away, businesses closing down rent, just spiking entirely out of control. We tend to treat it like a leaking roof,

Speaker 2: right? We just run around putting buckets under the leaks.

Speaker 1: Exactly. We offer a rent relief program, or we push for a minimum wage increases or hand out food subsidies. But what if the problem isn’t the roof at all? What if the actual issue is the foundation of the house cracking and well shifting every single thing built above it?

Speaker 2: It’s a really interesting premise, how the physical stability of energy systems dictates the cost of living, job creation, and overall community resilience.

Speaker 1: And the research focuses heavily on island economies like Hawaii, which really act as this pressure cooker giving us a preview of what the rest of the world is basically gonna face.

Speaker 2: It is a phenomenal case study, and it brings us to a really clear fork in the road regarding how we actually fix these economies. The central question is essentially, this is the physical energy system, the absolute foundational prerequisite from which all other economic outcomes flow, or, and this is the crux of it, does treating energy as the single strict root cause oversimplify how intertwined and well messy real human economic behaviour actually is.

Speaker 1: I look at this research and I see energy as the undeniable bedrock. My perspective is that without a fundamentally sound energy system, one that has built in stability and crucially physical margin, everything else you try to do, like driving job growth or making housing affordable. It’s just mathematically impossible to sustain.

Speaker 2: I hear that, but if you step back, the reality is a lot more complicated. My perspective is that while energy is deeply woven into the economy, treating it as a strict step one prerequisite creates a sort of tunnel vision. It completely underestimates how systems like water, food, and energy rely on each other simultaneously. Frankly, it ignores the massive immediate financial burden of building out that perfect energy foundation you’re talking about.

Speaker 1: Let’s start with how energy actually behaves in an economy, because it isn’t just a utility sector, right? It is an underlying condition. There’s this diagnostic framework in the research called sound. It evaluates an economy based on stability, operating cost, upstream risk, normal life and development.

Speaker 2: The sound acronym.

Speaker 1: Yeah, but taking that out of academic speak, it’s really asking a simple question, can a regular person reliably plan their life? Because energy acts as an invisible multiplier when a business doesn’t know what its power Bill will be next month. Frankly, if the grid will even stay on, it shortens its planning horizon. It holds back capital to hedge against uncertainty, and that defensive posture suppresses wages and limits job quality across the board.

Speaker 2: Sure. Uncertainty causes defensive behaviour.

Speaker 1: Exactly. So when a city introduces a surface level fix rent relief, it ultimately fails. It fails because it completely ignores the compounding base cost of energy that is actively propagating through the entire supply chain.

Speaker 2: I agree that unpredictable costs create a defensive posture, obviously, but I really challenge the strictly linear sequence you’re laying out here. This idea that energy stability automatically creates jobs in some perfect sequential vacuum. That just isn’t how civic infrastructure works.

Speaker 1: It creates the conditions for it, though

Speaker 2: yes, a fragile grid is a massive problem, but fixing it requires what the research calls shared redundancy, essentially building extra capacity into the system. We have to be honest, that is a massive upfront capital burden on the exact communities we are trying to protect. Furthermore, in complex real world systems, energy, water, and food all fail and recover together. Isolating energy as the singular foundation really risks ignoring how deeply coupled these systems actually are.

Speaker 1: Hold on. Let me stop you right there. Are you saying we shouldn’t prioritize the grid because it’s too expensive upfront, or just that we need to somehow prioritize everything all at once?

Speaker 2: I’m saying you literally cannot afford to fix the grid in isolation without starving the rest of the civic infrastructure. If you overcapitalize the energy system, you might not have the municipal budget left to fix a leaking water main,

Speaker 1: but sequence dictates behaviour. Scarcity shapes what people do long before a policy can ever respond to it. Let’s look at Hawaii again. Families are quietly leaving that out-Migration isn’t a mystery. It is a totally rational reaction to an accumulation of pressures.

Speaker 2: It’s undeniably tough there. Yes.

Speaker 1: Imagine a family sitting at their kitchen table on a Tuesday night, right? They’re trying to do the math on a $2,800 median rent alongside a $213 utility bill, which by the way, is the highest in the nation, despite the fact that they use very little electricity, they aren’t leaving because they want to. They are leaving because a system that punishes long-term commitment literally forces them out. The physical instability of the system is the cause. The out migration is just the signal

Speaker 2: Look, the pressure at that kitchen table is very real, but behaviour and system conditions, they act as a feedback loop. Yes, high costs drive people away, which shrinks the tax base, which then makes infrastructure harder to fund

Speaker 1: exactly a downward spiral.

Speaker 2: But if we say we can’t fix the housing crisis or the labour market until we completely overhaul the energy grid, we completely paralyse community development. We leave vulnerable populations exposed today. If we treat energy strictly as step one, we ignore the immediate crises that dictate whether that family can even stay in their home this month.

Speaker 1: But if you skip step one, your solutions for step two and three are just temporary illusions. Think of a business’s local workforce, like a shock absorber on a car. When a business faces incredibly volatile energy operating costs, they cannot easily pass those fluctuating prices onto consumers. If a bakery’s power bill spikes by 40%, they can’t suddenly charge $10 for a loaf of bread,

Speaker 2: or they’ll lose all their customers.

Speaker 1: Exactly. So where does the risk go? They pass it to the workforce, they shifted just in time scheduling. They hire temporary contractors instead of full-time employees because they need labour to be flexible enough to absorb the shock of an unpredictable operating environment.

Speaker 2: That is one factor. Sure.

Speaker 1: How can we expect a business to offer long-term career stability if it’s mechanically forced to use its own labour force as a shock absorber for a fragile power grid?

Speaker 2: It isn’t just a reaction to utility bills. However, I will absolutely concede that a physical lack of margin in a system creates immense, really dangerous fragility.

Speaker 1: It’s not just dangerous, it’s catastrophic. We have spent decades praising modern systems for being efficient, for being optimized, to have exactly what we need and nothing more. But efficiency without margin is just raw exposure,

Speaker 2: which the research points out. Yeah.

Speaker 1: Look at the tragedy of the Le Haena wildfires. That was a grid operating with zero margin. The transmission lines failed. There was no local backup capacity to isolate the affected area or keep localized safety systems online. The system didn’t fail solely because the fire was extraordinary. It failed because there was absolutely no room built into the architecture to absorb. Shock

Speaker 2: Lehane absolutely highlights the danger of a system, stripped of margin. But again, we have to confront the financial reality of what building that margin actually costs,

Speaker 1: which is an investment we have to make.

Speaker 2: Yes, but if you’re listening to this, you might be thinking, I just bought a portable generator for emergencies. Isn’t that enough? But private generators cost anywhere from 800 to $2,500. That is a private resilience tax that disproportionately harms lower income citizens who simply can’t afford it,

Speaker 1: which is why we need shared redundancy,

Speaker 2: but building the shared centralized redundancy, you are advocating for the huge utility scale batteries reinforced microgrids. Taxes the public heavily upfront through massive rate hikes or public debt. You aren’t eliminating the resilience tax. You are just shifting it from an individual burden to a systemic one.

Speaker 1: I actually think that framing misses the mechanical value of what modern redundancy does. We usually think of redundancy as this dormant insurance, like fire extinguisher on the wall.

Speaker 2: You pay for it and hope you never use it.

Speaker 1: Exactly. It just sits there gathering dust until an emergency strikes. The research introduces this concept of anti-fragility and resilience theory. Anti-fragility doesn’t just mean surviving a shock. It means actively extracting value from volatility.

Speaker 2: Okay, but how does that apply to a battery

Speaker 1: local redundancy doesn’t have to sit idle. Look at Kauai’s Community Solar Plus storage, microgrids. Those batteries aren’t just waiting around for a hurricane every single day. They are actively stabilizing the grit. They charge when the sun is shining and power is cheap, and they discharge in the evening to prevent the utility from having to fire up really expensive. Imported diesel generators, they actively generate financial value and lower operations costs during normal operations. So if the insurance policy is actively paying you dividends every Tuesday, doesn’t the argument that margin is too expensive, totally fall apart?

Speaker 2: It only falls apart if the active daily value generated actually offsets the massive initial capital expenditure required to build it. In the short term, that is rarely a clean equation.

Speaker 1: It’s a long-term play.

Speaker 2: Sure, Kauai is a fantastic model, but getting their required significant upfront alignment, community buy-in, and capital that many municipalities simply cannot access right now. And actually that brings us to the broader issue of import dependence. Hawaii is a perfect microcosm for global supply chain vulnerabilities.

Speaker 1: Absolutely.

Speaker 2: Let’s just trace what actually happens when a single fuel shipment is delayed by a week due to a storm.

Speaker 1: Please do, because I really think this makes my point for me,

Speaker 2: the boat is late, so fuel is rationed. Because fuel is rationed, the power plant has to throttle its output because the grid is throttle. The municipal water pumps lose pressure because the water pumps fail. Local farmers can’t run their irrigation crops die. By the end of the month, the price of produce at the local grocery store spikes. My point is this physical chain reaction specifically proves energy isn’t isolated. It is inextricably linked to water and food systems focusing solely on energy independence without simultaneously overhauling the aging water pipes and the agricultural infrastructure won’t actually solve the affordability equation for that family at the kitchen table. The whole system is coupled.

Speaker 1: Look closely at the exact sequence of the chain reaction you just described. The delayed boat didn’t break the water pump directly. It broke the electricity powering the water pump.

Speaker 2: Sure mechanically

Speaker 1: energy is the keystone. Without electricity, you physically cannot pump water. You cannot run the cold storage required to keep that food safe. The dependency flows in one direction. At the base layer. Think of it like a banking system that requires a strict reserve limit. If everyone tries to withdraw their cash at once and there’s no financial margin in the vault, the whole bank collapses. You can’t fix the customer service department if the vault is completely empty. Stabilizing energy physically enables the water and food systems to operate. Making it the unavoidable first step,

Speaker 2: but stabilizing that energy vault costs a premium if you build a state-of-the-art microgrid. But the physical water pipes are so old that they are leaking 50% of their volume into the ground,

Speaker 1: which is a real issue.

Speaker 2: Yeah, it’s a staggering statistic in many municipalities if that’s happening, you haven’t solved the community’s resilience crisis. The systems fail together, and they must be planned together. Treating energy as the singular foundation risks a kind of tunnel vision where we build this bulletproof power grid while the rest of the civic infrastructure literally crumbles around it.

Speaker 1: But if the grid fails, that civic infrastructure is paralysed anyway. That is exactly why we must stop treating energy as just another political sector, a line item to be debated at City Hall alongside parks and recreation. It is the foundation. When systems are designed with physical margin and local capacity, they absorb shocks internally. They stop passing that volatility down to businesses, and businesses stop passing it down to families. They return planning safety to communities. When a business knows its operating costs are stable, it hires permanently

Speaker 2: assuming the market is good. Yes.

Speaker 1: When a family knows its utility, bill won’t randomly double. It invests in its neighbourhood. Stability at the base creates the conditions for development at the top.

Speaker 2: Look, energy is undeniably critical. No one is debating that. But true resilience requires acknowledging that the financial transition to shared redundancy carries its own immediate socioeconomic weight. The friction of that transition is real, and it is felt by the most vulnerable first, because of the deeply interconnected nature of energy, food, and water, we have to approach community resilience as a holistic ecosystem rather than a rigid one step at a time sequence.

Speaker 1: I think both of our perspectives really highlight the immense value of using that sound diagnostic. We talked about evaluating our infrastructure, not just by its peak technological efficiency. By how it mechanically impacts the daily lived experience of an ordinary person.

Speaker 2: Does the physical system provide stability?

Speaker 1: Exactly. Are operating costs predictable? Is upstream risk absorbed before it hits the kitchen table Is normal life actually workable

Speaker 2: systems through that lens reveals that there is honestly so much more to explore regarding how communities can transition from. Simply managing endless overlapping crises to actively building durable, interconnected futures.

Speaker 1: We started today by talking about a leaking roof versus a cracked foundation. Whether you believe the priority is catching the water right now to protect the living room or pouring new concrete from the ground up, the structural integrity of the house is what? Ultimately determines if a community can safely call at home. We leave it to you to consider the resilience of your own community’s foundation.

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What is the future for cities podcast?

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Episode and transcript generated with ⁠⁠Descript⁠⁠ assistance (⁠⁠affiliate link⁠⁠).