Energy Capital Podcast

This episode was recorded just three days after the U.S. presidential election. My guest, UT Law Professor David Spence, recently published an exceptional book Climate of Contempt: How to Rescue the U.S. Energy Transition from Voter Partisanship. I believe this book is perfect for this moment and one of the best I’ve read on climate policy—and I read a lot on climate policy.

David and I dove into the roots and contributors of America’s current partisan and ideological divides which have grown rapidly over the past few decades. We discussed not only the challenges this divide presents — though we talked about those extensively — but also some possible solutions. David shows how we can bridge these divides, re-establish trust, and find common ground. We also talked about the Inflation Reduction Act and why energy policy could, maybe, be a unifying area in an increasingly polarized landscape.

I found this conversation both important and thought-provoking, and I hope you will too. I highly recommend David’s book; it’s a remarkable piece that is particularly relevant now. If you’re interested in the energy transition, the history of energy-related regulations, or want a deeper understanding of our current political landscape, especially as it relates to climate and energy, I think you’ll enjoy this episode as much as I did.

As always, please like, share, and leave a five star review wherever you listen to podcasts. Thank you for being a listener. 

Timestamps

2:31 - The major ideas in Climate of Contempt

4:06 - How the thesis of the book connects to the outcome of the US presidential election

5:54 - Discontent with the status quo in the US

8:09 - The depth of the ideological divide in the US

13:27 - How to bridge ideological divides and actively listen (and why it’s so challenging)

17:51 - Effectiveness of deliberative polling and in-person, offline interactions. The role of media and social media in driving polarization.

23:52 - The importance of active listening, education over persuasion, and not being too sure you are right.

29:05 - Is energy a place we can find more common ground? Challenges and opportunities.

37:54 - The future of the Inflation Reduction Act

43:31 - Regulatory uncertainty… what happens next?

Show Notes

Climate of Contempt: How to Rescue the U.S. Energy Transition from Voter Partisanship by David B. Spence

David’s website and blog

EnergyTradeoffs.com

Works from Katharine Hayhoe

”Spirit of Liberty” – speech from Judge Learned Hand

Advanced Manufacturing Production tax credit

Transcript

Doug Lewin

David Spence, welcome to the Energy Capital Podcast.

David Spence 

Happy to be here, Doug.

Doug Lewin

It's great to have you here today. You have written what I think is a really remarkable book and I hope it is read widely. I think it is really illuminating for the moment we're in. We'll of course put a link in the show notes so people can find it easily, but it's called Climate of Contempt, the subtitle, How to Rescue the U.S. Energy Transition from Voter Partisanship. We're recording on Friday, November 8th, the Friday just after the reelection of Donald Trump. So I think that this book is even, I thought it was incredibly relevant before the election, I think it's even more so now. Can we just start David with you just explaining the thesis of the book generally, but also in light of the political earthquake that happened this week?

David Spence

Sure, happy to. So the main point of the book is to try and reintroduce into the popular debate and also parts of the scholarly debate what I think are some underappreciated forces that are driving regulatory politics and, in the case of what we're both interested in, energy transition politics. And that missing element is what I would call the bottom-up forces that are driving what particularly members of Congress, but all elected politicians do. We hear a lot about the top down forces, about how elites are controlling the regulatory process or the policymaking process. And that's part of the story and not an unimportant part of the story, but a really neglected part of the story is how receptive and sensitive elected politicians are to what voters want or more particularly what they don't want. And so politicians work hard to avoid the kind of mistakes that might lose them the next election. And those forces I think are much more important than most people realize. And that's what the book explores and applies to the energy transition.

Doug Lewin

Yeah, and so talk about that a little bit in light of this week.

David Spence

Sure, sure. So we've all seen probably 40 or 50 takes on what happened the other day in the election. In fact, the New York Times alone has had at least 10 different takes depending upon who's doing the writing. And voters' decisions are complicated. They only get to choose one of two choices, but they're motives and reasons for making those choices are varied and complex. And so among the takes we're seeing are takes crediting fears about inflation, racism, sexism, Harris being too progressive, Harris being not progressive enough, other worries about all kinds of other issues.

And again, these tend to be the kinds of things that pundits look at, but among the takes that the New York Times had was one today in which a writer said that what Trump was betting on was that he could make a majority of voters believe that the situation that they face is miserable and getting worse under Democratic administrations. And that's the take that probably comes closest to the way I analyze politics in my book, which focuses on how the changes in the modern media environment make it harder for the truth to win out. And so I analyze that in the pre-election environment, but we can see that same sort of dynamic at work in understanding the results of the election the other day.

Doug Lewin

Yeah. And I think, to that latest take, there's also some really good data floating around on the internet now about anti-incumbency globally. This is, I believe, one thing I saw was this is the only time in recorded history, which for this particular metric goes back to 1905, that every incumbent party lost voter share in developing countries. That's never happened before. That every single, whether they were right, left, moderate, that the incumbent party lost voter share. So if Trump's strategy was to lean into the anti-incumbent sentiment, he was definitely picking something up in the zeitgeist here and globally. And sometimes we forget here that we do exist in a global context and media is very global at this point too.

David Spence 

Yeah, and on that, you meant developed countries, right? You said developing, but you meant developed.

Doug Lewin

Developed, excuse me, developed, you’re absolutely right.

David Spence

Yeah, and there's no doubt that the disruption of the pandemic had a huge effect on people's perceptions of where the economy is and where it's going. If you look at charts comparing inflation in the United States, coming out of the pandemic with inflation in other countries. It went up everywhere because of the supply chain disruptions. While we were able to get it under control right before the election, that doesn't mean that voters weren't sincerely shaken by the influence of inflation on their everyday lives. So I'm not meaning to discount economic forces entirely here. But clearly there was a belief that all sorts of conditions of daily life were a lot worse than they actually are heading into the election. We can see that in the exit polling.

Doug Lewin

Yeah, I think we all feel it to a certain extent. Like every time I go to a grocery store I'm still kind of shocked at what the prices are. There's obviously some truth to all that and I think that that's why the anti-incumbency sentiment is there. 

But here's what I wanna zero in on a little bit, David, from your book that I think is so striking. And this has been written about obviously other places, but I think you do a great job applying it to how we deal with energy and climate issues. The ideological divide has gotten so strong. You summarize some of that research. Can you talk a little bit about just how bad it's gotten? And I know people have probably heard this before. Where I want to go with it is really where you go in the book, which is how we actually have conversations across these ideological divides. So let's do both of those things. Part A, the ideological divide itself and how strong is it, sort of this partisan, almost like tribal partisanship. And part B, what is at least part of the recipe for dealing with that fundamental problem.

David Spence

Sure, so I break that divide into sort of two main parts. One is the familiar ideological polarization, which has been getting worse since the mid to late 1980s. And we measure that as political scientists. And the book summarizes those measurements. But both in the electorate and in Congress, we have seen a steady divergence ideologically between the parties.

It started with the Republican Party moving to the right after the Reagan administration. And a couple of decades later, the Democratic Party started moving to the left. And we are now as measured by political scientists, at least in Congress, further apart than at any time since before the Civil War. So those philosophical ideological differences have gotten very sharp, which makes it harder for voters to find the ability to talk to one another across these partisan divides, particularly difficult for members of Congress to reach across the aisle and get things done when there's not somebody in the other party with whom you share at least a little bit of a policy framework. We used to see ideological overlap in both houses of Congress as recently as 25 years ago. There's none in either now. And so that's half the story in terms of how voters have changed. 

The other half is really what you referred to as tribalism and what I do as well in the book. And this is really what political scientists would call affective partisanship or negative partisanship. This is animosity or even in some cases hatred of the other party that we're also seeing in the data. And we see this in a number of polls that are administered by Pew Research and by the University of Michigan under their national election study. But they show sharp increases in the 21st century, so this is a little bit more recently, we've seen sharp increases in dislike of the other party by members of each party. And those, the levels of animosity that respondents are showing is getting extremely concerning. And so these two things together give members of Congress and other elected politicians the incentive to not cooperate with the other party and to express their contempt for what the other party stands for and what it wants. Hence the first part of the title of my book. And so, reaching across the aisle, working together, talking to one another has gotten very difficult. And I argue that the modern media environment, that is the replacement of traditional daily newspapers, daily news, network news, or the displacement of that in today's information flows by much more fragmented sources of information, a lot of its ideological media, along with bots and press releases and all this other stuff that's trying to persuade us more than it's trying to educate us. This exacerbates both the ideological polarization and the partisan tribalism. And as we start talking to each other more online and less offline, we end up in these echo chambers that amplify these effects even further. And so that's the problem, that's the part A, as you put it in your question. 

The part B is about breaking down those barriers of communication and talking to one another more. After this election this week, I'm seeing more people emphasizing that, which is really encouraging. In my book, in the final chapter, that's the prescription I offer. It's not quick. It's not a magic bullet. It's not the only thing that will get us back from the sort of decline in our democratic institutions and norms that we're seeing. But I think it's an important part of the solution. And I can go into that in more detail if you'd like.

Doug Lewin

Yeah, yeah, I do want to talk more about that, but I just, first of all, yeah, I want to give you a quick break, but also just kind of add in a couple other notes from your book that I think are just spot on in this particular situation. You talk about, I'm not sure this is in the book. I may have actually heard you speak about this when you're lecturing or when I've heard you speak other places, and you just said it now, education, not persuasion. I think part of that too is that really active listening component, really trying to understand where somebody else is coming from. You have two quotes in your book that I particularly love. You might be the only person to quote both Ted Lasso and Learned Hand in your book. Congratulations. I should have written down the whole Learned at Hand quote. We'll put it in the show notes. I don't know if you've memorized it, but it's the spirit that is not too sure, right? That like we enter a conversation not thinking I have the right answer and my job is to get you to adopt the same answer I already have. And building on that, you quote Ted Lasso saying, be curious, not judgmental. Because if you do enter a conversation with like, hey, I'm right, you're wrong. If the other person doesn't end that conversation with your same belief, you're going to end up being judgmental. And there is so much of that going on across the partisan divide right now. So the spirit that is not too sure it is right, this openness, this willingness to listen to others, I think is really fundamental to this. And so you can, I want you to elaborate on that, but I am also curious about, I wanna hear more about what you go into in that last chapter of the book of how, what are the actual mechanics? Because I agree with you, I'm hearing that sentiment a lot this week. But what I don't see a lot is the how, and you get into that in your book.

David Spence

Yeah, so the Learned Hand quote that you reference is from a 1944 speech he gave back in the days when a judge who's not a Supreme Court justice could be famous and a public figure. He was asked to give a speech on Constitution Day 1944. So we're coming to the end of World War II, fighting against fascism in Europe and worrying about another authoritarian type of regime, communism in the Soviet Union and ultimately, a few years later, the Eastern Bloc of Europe. So he had those two things in mind when he talked about what he called the spirit of liberty. And that's the name of the speech. It's a short speech and I consider it a brilliant speech, but he says the spirit of liberty is the spirit that is not quite sure that it is right, that weighs the other person's view. These are not precise quotes, I'm paraphrasing. Weighs the other person's view without bias, at least to the extent you can. And that is something that sort of modern psychologists might call actively open-minded thinking, or we might call it fallibilism. The idea that I might be wrong and I can learn by having other people audit my beliefs. That's the spirit or the idea or the mental state that I think is really hard to sustain in today's political environment and the modern sort of information environment, particularly social media and ideological media makes it even harder to sustain. And I explain in chapter four of the book, the sort of structural reasons why that is. It's not that people are lazy or people have become less tolerant. It's that the incentives they face are pushing them toward premature certainty about things, which makes it harder to entertain the possibility that we might be wrong about this or that or this aspect of our beliefs. 

And so recovering that actively open-minded thinking, being curious, more curious and less judgmental, in Ted Lasso speak, means that we have to find places where we can talk across ideological and political boundaries with people in ways that can be productive. And that sounds really difficult to modern audiences because we are fed a steady diet of the most unreasonable representations of those on the other side of the political divide. And it seems futile. If you're watching Jordan Klepper interview people at a Trump rally, and that's your conception of the Trump voter, it probably feels like a futile thing to try and talk to people across the political divide. But there are ways to do it. And so as you say the last chapter of the book gets into what a lot of the research suggests about how to be influential and how to maintain that actively open-minded thinking mindset while having dialogue with people who think about politics differently than you do. And I'm happy to go into that in more detail unless you want to sort of steer me in a different direction.

Doug Lewin

I do want to talk about that at least a little bit. I do obviously encourage the audience to get the book. And again, we'll have a link for how to find it. But I would like to get into that a little bit. I have been thinking a lot about, and I've talked about this on the podcast before, there were in the 1990s as Texas was looking to restructure the electricity market, a series of meetings in Texas. I believe according to Pat Wood, the chairman of the Public Utility Commission under George W. Bush at the time, 16 different meetings, 16 different cities. They were one- or two-day long meetings. They had 100 to 200 people at each of them chose randomly across a broad cross section of Texas. They paid them for their time to come. They gave them some education. It was education, not persuasion, right?  You have a chapter on energy trade-offs. It was exactly that kind of thing, right? Here's the benefits of this kind of generation and the pros and cons of each one. And this was an extraordinary process. And Pat Wood says it was one of the reasons they were able to pass the restructuring bill with near unanimous votes in both the House and Senate. It's almost hard to imagine such a massive piece of legislation passing with that kind of support. But people understood, the legislators understood, that the people of Texas had a chance to learn about this, voice their opinion about it. I've been thinking about that a lot. That was a system developed by Professor Fishkin at University of Texas called deliberative polling. Maybe we need something like that these days. Cause where else are we going to have an opportunity for people from around the state of totally different ideological backgrounds, like you said, to not see each other as a caricature.  But to actually… and we don't, David, like I coach my kids' baseball team. I don't know what the politics of the different coaches are, but I love all those guys. They're great. They would do anything for those kids. I don't ask them what their, there's no litmus test out there. They're good people and they probably have, many of them have very different political beliefs than me.

But again, like to your example of the Jordan Klepper interview, and this happens, whether it's left looking at right or right looking at left, and I do think we wanna be careful about equivalency, we should talk about that. But there is at least a large part of that going on on the left and the right. So I'm interested in your thoughts on deliberative polling, like is there maybe the potential to get people together to have a chance to actually talk about policy in an environment where the temperature is turned down in exactly in that Learned Hand ‘the spirit which is not too sure that it's right,’ where people can actually listen to each other and actually find solutions. Cause I'm just worried at this point, when you see those charts of how far apart we have gone, that we are further apart ideologically, thinking lower of people that are different than us, politically than at any time since the Civil War. That's terrifying. Like we need to have structures where we get together and talk to each other and realize we're Americans and Texans first and fill in the blank with whatever adjective, conservative, liberal, Republican, Democrat, left, right, progressive, conservative, et cetera. Like that is second, third or fourth. So that's one I'm curious about your thoughts on deliberative polling. And then what are some of  these other mechanisms where we can actually get people together and learn from each other and talk to each other across the ideological divides.

David Spence

So a couple of reactions to that. So those meetings were probably, what 2000, 2001? 

Doug Lewin

A little earlier 90s. Yeah. You're close, 96, 97, 98 right in there.

David Spence

Yeah, the full effect of the modern media environment hadn't kicked in, at least on politicians at that point. But you're right that those were face-to-face meetings. That's sort of a key factor here. We're talking to people face-to-face. The way we talk to each other face-to-face is different than the way we talk to each other online. In a face-to-face conversation, you are more respectful, you're more civil, you're more cautious, you're exploring each other's views. You probably in many cases want to maintain the relationship you have with that other person. If it's you and the other coaches, you don't want to alienate them if you talk about politics. But it's important that we do talk face-to-face about politics across these divides because it's virtually impossible to sustain productive conversations online.

So the benefit of those meetings and the benefit of deliberative polling is that people see each other face-to-face. And the second benefit is that they have a common source of information. What Professor Fishkin did in those experiments was he took people who disagreed on a subject and gave them what experts on both sides of that issue agreed were the sort of common facts that they both shared, the truth. The stuff that they could both agree was the truth. And we found that when presented with that information and given the opportunity to talk across perspectives about it, that their views came closer together. So we can work out problems, we're more likely to work out problems face-to-face. 

The difference, the reason I asked you about the timing of the Texas meetings was that in Congress, the people who get together and talk about things face to face have to face the voters later. And the voters that are driving their futures are the voters who vote in primaries in most cases, because most members of Congress represent safe seats. And so these are the most ideologically extreme members of their own party and the most negatively partisan members of their own party. So whatever action they take, even if they can sort of privately agree with people on the other side about what a constructive solution to a problem is, they're gonna have to answer those voters. And right now, anyway, those voters seem to punish cooperation and punish working across the aisle with the other party. And that's what we have to change. We have to change that voting behavior, which is a lot, you know, it's a slow process. We have to talk to one another more productively across these boundaries. 

And I don't know if this is the point you want to get into how that happens, but there are bodies of research out there from a number of different disciplines that all seem to point in the same direction about how to sort of put into practice that Learned Hand/Ted Lasso advice. And it really involves stuff that we do instinctively when we talk face to face with family and friends. And that is essentially starting a difficult conversation, one we expect to be difficult, with questions. Asking the other person what they believe and why they believe it. And then really hearing, you use the phrase active listening. Another quote I have is from a friend of mine who's in the communications business who says that active listening is more than waiting for your turn to talk. It means actually hearing what the other person is saying, considering it, giving it some respect and formulating a follow-up, question usually, based on what you hear. And so it might be something as simple as well. Okay, I can see why you'd be concerned about that. What if that wasn't true? Or what if we could change that? Would you still feel the same way about this issue? So that's just one example. And I give lots of examples in Chapter 6.

But those kind of iterated, careful, respectful conversations, I think, can be successful with a significant subset of voters on the other side of an issue. And the size of that subset is debated by scholars. We talked the other day when I was visiting your class about Katharine Hayhoe, who's a climate scientist who specializes in climate communication. She's very optimistic that these methods can work on most people. The polling data that I cite in the book suggests that they ought to be able to work on about a third of the people out there, but that may be enough to make a difference for the climate future. And so I think this is a necessary part of regaining our democracy, the least functioning democracy, the way it functioned when you and I were young.

Doug Lewin 

I agree. Actually, I found the quote from your book from Learned Hand and we will include a link to the full speech, but I do want to just read the part that is in your book. This is the quote from Learned Hand in his Constitution Day speech. “What then is the spirit of liberty? I cannot define it. I can only tell you my own faith. The spirit of liberty is the spirit which is not too sure that it is right. The spirit of liberty is the spirit which seeks to understand the mind of other men and women. The spirit of liberty is the spirit which weighs their interests alongside its own without bias.” 

It's just an incredible quote and I think one that we all, regardless of background, really need to think about, the language you emphasize in the very next paragraph in your book: not too sure, seeks to understand. The fact that he included men and women in a speech in 1944 is pretty remarkable as well.

David Spence

Yeah, he was a brilliant jurist. He was widely considered the most brilliant jurist, even though he served in a circuit court of appeals, not the Supreme Court at the time. There is a wonderful biography of him that sort of gets into his judicial and political philosophies. And he's a really admirable person because he lived out or tried to live out that ambition that he articulates there.

And that was at a time when the specter of authoritarianism was looming large. And as you know from reading my book, there are a number of historians that see that specter looming large again. And so it seems like an appropriate reminder about the norms of political communication that we need to maintain in order for our democracy to function well.

Doug Lewin 

Yeah. Well, and really when you talk about that one-third, and I really hope it's bigger. I want to believe it's bigger. I want to look at the data you're referencing and get really familiar with this because I would definitely want it to be bigger, but let's say it was a third. I mean, really what you're talking about is the center, right? And there is this, this is one of the biggest problems here is when you do move to the poles, you know, to the extremes on either side and there's not equivalency there and it'd be interesting to hear you talk about that too, cause there is some really good empirical data on this, that the right has moved further to the extreme, although the left is moving further in that direction actively as well. When that happens, there's not enough left in the center. And I think what really starts to happen too, is we get into this situation where it's a very zero sum thinking kind of an environment where somebody's like, I'm winning, you're losing, rather than, and I think this is part of that Spirit of Liberty too. If I may expand on Judge Learned Hand's brilliant concepts here, it's not just that spirit, which is not too sure that it's right, it's also that spirit that is willing to give something. It is the same spirit, I think, right? Because I may not be exactly right, the things that I exactly want may not be the full gamut. 

And this is a place, and this is where I want to go next. You can comment on any of that you want, obviously, but where I want to kind of go next is I really do think that energy and climate, though climate is so partisan coded at this point, but let's stick with energy for a minute.  Energy is one of those places where I think we can find common ground. If we can get people to a place where they are in-person and they are active listening and they are not too sure they are right. And they are willing to compromise. We can make major progress because fundamentally, I think most people want the same things. They want a reliable grid. They want lower costs. Many people, and this is true right and left, like you have a very strong group on the right that really wants solar and storage wherever they live because, I don't want to be so reductive as to call it prepper, cause that has like a very negative connotation for some people. But if you think of it in terms of like, take the baggage away from the term prepper, like they want to be prepared. Like whatever happens, a winter storm, a heat wave, God knows what. They want to be ready for it. And having power at their house is one of those things. The imperative at this point for the United States to be globally competitive, to not cede industries of the future to China. That was one of the rare places where Biden sort of continued a lot of Trump's policies that were pretty tough on China and really trying to incubate and grow energy industries here in the United States. I'm curious of your thoughts on that, the opportunity maybe for energy, if folks can get out of the persuasion mindset and into the more listening mindset, like there might be a whole lot more common ground on energy than we're acknowledging.

David Spence

You're right that there is an empirical literature measuring the spread of misinformation and false belief and negative emotional messages online. There's an entire set of scholars that study that, and I link many of them at the website for the book. Those scholars document more misinformation flowing, more right-leaning messages that are false messages spreading around the web than left-leaning messages. And that's probably an artifact of the fact that right-wing media, ideological media, has grown quicker and is much more popular than at least so far, than ideological left-wing media.  So the history of Fox News, Fox sort of pioneered an approach to broadcast cable news and punditry that MSNBC and other left-leaning outlets have followed to a certain extent, but Fox is much more popular. It has twice the audience of MSNBC and three times the audience of CNN.

So you're just gonna see more of this kind of messaging sort of floating around and more sort of online and radio sources that sort of follow that same model. More of those exist on the right or at least the more popular ones are on the right than on the left. And that could change, again, the right got started on this unfortunate project before the left did.  And so it may be that Democrats and liberals are catching up on that. So that's one point. 

And in terms of sort of putting this open-minded thinking, this Learned Hand philosophy into practice in the energy space, I think you're absolutely right. And people who follow your podcast and your Twitter, you know, will learn about the particulars of this. This will resonate with them because they understand the particulars of Texas energy better than the people who don't follow your work. But yeah, there's lots of common ground in the energy space if we're focused on trying to solve problems. And the right-left divide doesn't map that neatly onto energy arguments right now anyway. So if we go beyond Texas, there are people on the left that are sort of really strong proponents of the energy transition who would like to see competitive markets in their state and they don't have them. And there are other people who are strong advocates of the transition who think that it should be led by investor-owned utilities that are traditionally regulated or, and there's another set of people who think that it should be public power and there's another set of people. So these ideological divides don't fit the energy sector's problems all that neatly. On the other hand, the intense partisan tribalism does seem to be creating a national Republican brand that can be hostile to anything that mentions climate change, as you noted in your question, and increasingly anyway, to utility scale renewables as well. 

And so we saw this week, one of the Trump advisors sending a note to the FERC chairman telling him to stop doing controversial things, by which I think he meant, you know, pro-renewable energy, pro-clean energy things. Trump has sort of himself famously opposed wind energy. And so we have these two forces butting up against each other, the idea that there are probably practical solutions that have common ground associated with them if we just get together and talk about solving these problems. But we also have the fear of voter punishment for sort of cooperating. And we'll see how it all plays out. I think you know that there are some Republicans in the House that would like to preserve the Inflation Reduction Act and the incentives it provides for energy transition technologies, how many they are and whether their expressions of that preference will translate into votes against repealing it. We may find out if the Republicans take the house. So I share your optimism about the possibility of bipartisan solutions and of finding common ground if we can get away from these political election forces that sort of distort that process.

Doug Lewin

Yeah, and I think it's important to acknowledge and this again, to a large extent, because there was that whole process of deliberative polling, when Texas was restructured, it was really a conservative policy that put in place, a market structure and energy-only market as it's often called, which means that only that energy that's producing gets paid. It's highly competitive. But it is, it has been very, very good for clean energy because clean energy is incredibly low cost. It has, according to a colleague at UT, Josh Rhodes, you know, $31 billion from 2010 to 2022. And that was because of a conservative policy that sometimes will drive the left or liberals sort of in general crazy when they look at Texas and they're like, wait a minute, how do you guys have more wind, solar, storage than any other place? But you didn't have a policy adopted by a Democratic governor and Democratic legislature. Important to note that in the nineties, there was a Democratic house, right? It was Speaker Laney at the time. So it was divided government. And that is a really important point, but there was compromise across the chambers. Then Governor Bush wanted to run for president and talk about renewables, he actually would talk about renewables as one of the things he was for, but those conservative policies really did lead to more clean energy, which again, it was a different time, but, and maybe I'm just grasping at straws, but I want to at least think that there's the potential of something to build on there.

David Spence 

No, I think you're absolutely right. Part of it's conservative, most of it's conservative. We have very few barriers to entry at the generation stage here in ERCOT. So it's easy to build. We happen to have good wind and solar resources, and we happen to have hungry cities that are growing that want those resources. But let's not forget, and I know you know this and have said it before, that we also socialize the cost of building big transmission lines out to those windy and sunny areas which also were part of the story of how at least the wind grew so fast, to sort of dwarf wind generation in other states. And I think that's why there are strong energy transition and climate advocates who look to Texas as a model, or at least to competitive markets as a model, for building more wind and solar because they see traditional investor owned utilities as obstacles to that kind of progress.

Doug Lewin

Let me just also ask you about the Inflation Reduction Act. You referenced, I think this is really important and I think will get a whole lot of coverage in the coming months and really over the year, because where they would, where Congress would sort of dismantle the IRA, if they choose to do so, assuming the House is Republican, which it looks like it will be. We’re recording on Friday, November 8th. So when you're listening to this, you probably already know whether the US House is going to be led by Democrats or Republicans, David and I do not. But it looks like it will be Republican. And if that's the case, it would be through budget reconciliation. So this project is going to this, this process rather, will play out over the course of a year. 

But as much as anything is clear to me right now, and not a lot is very clear, I don't think the entire thing will be taken apart. There will be elements of it that survive. You mentioned the 18 Republicans who sent a letter to Speaker Johnson saying while it was flawed. And so it wasn't like a full throated endorsement of the IRA and they didn't vote for it when it came through. They did say that there were aspects of it that they wanted to preserve. Can you kind of look into the crystal ball a little bit, not asking you to make predictions, but sort of based on probabilities and you're smart on this stuff and follow this stuff. What are some of the areas where you think the IRA might be able to continue? One of those that I think is really interesting is what is called the 45X. It's the manufacturing incentives, right? And we've seen a lot of manufacturing in Texas, but even more so in South Carolina, Georgia, Tennessee, a lot of states, obviously with Republican governors that are very, very excited to have that manufacturing there. And frankly, like President Trump could go around the country cutting ribbons and take credit for what – I mean, it would be bizarre and weird, but it could happen, right? They could take credit for a lot of the things that were passed if they don't dismantle it, in which case, if they don't dismantle it, they might deserve a little credit. So maybe the manufacturing, are there other elements that you're looking at? Like, hey, heading into this new era, whatever it is, here's some areas where there might be some potential.

David Spence

Yeah, I will be actually posting a blog on the book website. I do blog regularly, but one of the posts that will be coming up in a couple of days looks at those 18 letter signers and their electoral circumstances heading into the election. And to the extent that there are results, most of them have, their race has been certified by the AP by now, but four or five have not. 14 of the 18 were from districts that Cook Political Report would call relatively competitive. They were either toss-ups or lean one way or the other. Those are the relatively competitive districts under their taxonomy. So these were people that probably had to worry about the other party, Democrats in this case, since all the signatories were Republicans, had to worry a little bit about gaining some votes from the other party. And four were not, four were from very strong Republican districts. And they happened to be people who were getting a lot of IRA or infrastructure bill money. And so you can sort of see this as a contest, or we can look at these 18 letter signers and say, this is sort of the struggle between bringing home the bacon to their district, the economic sort of incentive to make their constituents happy that way versus the sort of partisan side of things. Those four that were in solidly red districts, are they gonna be punished at the next primary for cooperating or for expressing preferences for something that the Freedom Caucus doesn't like? They want to see the entire IRA repealed and they objected to the letter that the 18 sent. And so that'll be interesting. It'll be interesting to watch their futures. Most of them won or look like they're going to win. A few probably will lose. But that'll be interesting to see where they end up. In terms of the kinds of things that could survive in a partial repeal, I share your sentiment that it's probably the things that look more industrial or likely to create permanent high paying jobs. That's another way of looking at it, right?

Wind and solar jobs tend to be construction jobs. Building a carbon sequestration facility probably creates more, at that facility, probably creates more permanent jobs. Same thing with a hydrogen production plant or even a geothermal plant, all those kinds of things, or manufacturing, solar manufacturing and so on. Those are permanent jobs. And I imagine they'd be the kind of things that Republicans might be more comfortable with. See them as serving the people they see as their main constituents and their needs, even in a solid red district. And as you know, and probably have said already on your podcast, most of the money is going to red districts. And so it'll be interesting to see how they respond to that. If they repeal popular parts of the IRA, it'll be interesting to see what happens in the 2026 elections to see if they pay for that.

Doug Lewin

Yeah, and a lot of the things you just mentioned,you know, geothermal uses a lot of the same skills for oil and gas workers. A lot of oil and gas execs are leading the most prominent geothermal companies. Fervo, Sage, headquartered here in Texas, are two very prominent examples. Hydrogen, carbon capture, even solar to an extent, right? We're seeing oil and gas companies in Texas really wanting to connect to the grid because the power is cheaper from renewables than from diesel generation. So I think that's going to be an interesting dynamic too is how does the business community and particularly some of the industrial players, the oil and gas players. You know, Trump keeps talking about drill, baby drill, the CEO of Exxon, before the election gave an interview on CNBC. And he said, I don't know how drill, baby drill translates into policy because we're already at record levels of drilling. We drilled more in the United States last year than any country has ever drilled in the history of the world, including Saudi Arabia in any year. And if you do end up finding a policy that causes more drilling, guess what happens to prices, right? They go lower and now your oil and gas companies are going out of business. So how does that business voice exist in a second Trump administration is going to be interesting. Happy for you to comment on that if you want. I am going to turn that into a question because you are a professor of law. One thing that companies of any kind really sort of universally disdain is regulatory uncertainty. We are heading into a time of, I think, extraordinary regulatory uncertainty, both because of the election, but also because of some of the things the Supreme Court has done. Can you talk a little bit, I mean, in your book you spend a lot of time on regulations and how they've evolved, just a little bit on kind of where we are with that, some of the things the courts have done recently and how you see that changing in the new political environment?

David Spence

Yeah, it depends on how far back we go. Certainly when there was more common ground, there was more policy stability. And the historical part of my book talks about those eras when there was common ground and there was sort of more policy stability. But ever since the sort of end of the 20th century, we've started to see, at least in terms of executive branch policies, fairly sharp pivots, what one scholar calls regulatory oscillation, in energy and environmental policy generally, not just climate, but all sorts of environmental policies and energy policies have flip-flopped back and forth, depending upon which party is in control of the White House. 

Now, there are limits to this that are mostly right now about the attention span of the executive or what they tend to prioritize, because the executive branch produces a whole lot of policy. And so it's impossible really for a president to prioritize everything and to sort of change everything they might want to change. They have to invest resources in changing rules, which require new rule makings, which require following the Administrative Procedures Act, publishing the proposed rule, listening to comments, getting through judicial review. So there's a lot of transaction costs associated with reversing federal policy. But nevertheless, we've seen Democrat and Republican presidents prioritizing environmental issues and climate issues recently enough to want to do that. And so we will see a repeal of the Biden power plant rule and we'll see a repeal of the vehicle standards and other sort of climate initiatives from the Biden administration. Chances are, if the previous Trump administration is any indication, chances are there'll be a lot of litigation associated with that. Presumably, his advisors have learned from some of the failed litigation they had. But now, I would expect to see more and more regulatory oscillation for as long as the negative partisanship and polarization continues to increase. And which is why I spend so much of the focus of the book on trying to change that through promotion of more productive forms of dialogue across party lines.

Doug Lewin

Yeah, it really would make a big difference, not only for our society, like first and foremost for our society and the continuation of that spirit of liberty and democracy itself. That's the sort of  first order thing, but there is a second order thing there that I think the policy outcomes on energy and climate would be a lot better there too. 

This is great. I really love your book. I think anybody that particularly for those that want to understand energy policy and energy regulation at a deeper level. Obviously there are things in the book that I already knew, but in the spirit of Learned Hand, there were quite a few that I didn't. As people who listen to this know, I'm kind of a nerd on this stuff. And I pride myself on knowing a lot of things, but I learned a lot from your book, there were many different aspects of the regulatory history I was not familiar with. So I really can't endorse the book more strongly. I hope folks give it a read. Tell us where they can find you. We've mentioned a few and we'll put them in the show notes. You've mentioned your website where you blog, which is climateofcontempt.com, right? Where else can folks find you?

David Spence 

Well, I'm on the University of Texas Law School faculty pages, which advertise some of my work. I have another website that I am just getting going again after going dormant in the pandemic called energytradeoffs.com. And otherwise, I'm around Austin. 

I appreciate the kind words about the book and right back at you. I've learned a lot from your podcast and especially about Texas markets. I think we all depend on you among a few, very few others to sort of really get the sort of nitty gritty about Texas electricity markets. And so I appreciate that.

Doug Lewin

Thanks, David. Anything I should have asked you that I didn't, anything else you want to just say in closing?

David Spence

No, I really enjoyed the conversation and I appreciate the opportunity to get a little bit deeper into this sort of philosophy of actively open-minded thinking. Not everybody asks me as much about that as you did and I think that's really a crucial part of the book. So yeah, I've enjoyed it.

Doug Lewin

I mean it is the way out of this mess, like, if this experiment in democracy is going to work, we have to get better at that. I firmly believe that. And I think your book is a contribution on that and on the other stuff, which people probably ask you more of, and I think is incredibly important too, obviously, but I really do think that piece is foundational. Hey, thanks for being on the podcast. Thanks for writing this book. The last thing I'll say is I'm going to need to have you back at some point as these different legal processes start playing out. I mean, it's going to be, there's going be a lot to unpack, in the next year or two. And I'll look forward to having you help us do that, David, if you're willing.

David Spence

It's been my pleasure, Doug, and I'm happy to come back anytime you want.

Doug Lewin

Thanks so much. 

My guest this week is Ram Narayanamurthy, the Deputy Director of the Building Technologies Office at the Department of Energy (DOE) for the last two years. Before joining DOE, he led the buildings program at the Electric Power Research Institute, or EPRI, for a decade. He has 27 patents to his name and has worked extensively with builders, developers, and utilities to scale new technologies that can increase grid reliability, reduce emissions, improve human health, and lower costs.

I spoke to Ram about his work on DOE’s Connected Communities program which funds projects to advance grid-interactive, energy-efficient buildings and communities across the nation. Ram and the Building Technologies Office are doing cutting edge research and deployment to increase demand flexibility, a key component to strengthening the grid. We talked about the role AI plays to optimize demand and shift loads to times of day with an abundance of power and use less at peak times. We talked about the importance of building technologies that improve energy efficiency and demand response, particularly in an environment of rapid load growth. 

I enjoyed learning what this important Office within the Department of Energy is up to and how the technologies they’re piloting with utilities around the country could impact Texas in future years.

I hope you enjoy the episode. Timestamps, show notes, and the transcript below. Please don’t forget to like, share, subscribe, and leave a five-star review wherever you get your podcasts.

Timestamps

2:05 - About the Building Technologies Office

3:28 - What does demand flexibility mean in buildings

6:41 - Energy optimization and flexibility as energy efficiency

9:03 - AI

11:55 - The grid edge

15:28 - What are Connected Communities? What is the Connected Communities program?

17:25 - Examples of Connected Communities; results and lessons learned so far

25:27 - Who should orchestrate all these distributed energy resources

28:36 - Importance of distribution planning; examples of successful strategies

32:38 - Replacing resistance heat

36:18 - How do we make sure these technologies and the benefits are actually accessible and affordable to everybody; trickle up vs trickle down strategies for technology access

42:51 - How do we make demand flexibility and grid edge more understandable and desirable to the public

46:29 - Resilience benefits of Connected Communities

Show Notes

Building Technologies Office

Connected Communities Program

FERC and NERC report on Winter Storm Uri

Information on HOMES and HEARs (or HEEHRA) programs

Seattle City Light Electrification Assessment

EPRI Study Examines Impacts Of Electrification For Seattle City Light | American Public Power Association

Electrification Strategy - City Light

Transcript

Doug Lewin

Ram Narayanamurthy. Welcome to the Energy Capital Podcast.

Ram Narayanamurthy

Thank you, Doug, and it's my honor to be here. Thank you for inviting us over.

Doug Lewin

Yeah. Thanks so much for taking time, Ram. Obviously the Building Technologies Office where you sit, is doing some really phenomenal work. Can we just start with kind of a little bit about BTO and its mission? Obviously DOE is a great big agency. There's lots of different areas of endeavor, but tell us a little about the Building Technologies Office.

Ram Narayanamurthy

So the Building Technologies Office, we are about creating healthy, comfortable, efficient, affordable, resilient, and decarbonized environments for people to live in. We spend 90% of our time in buildings, whether it's for work, whether it's for living, it's our home. We shop in buildings, we learn in buildings. So they're all over us and all around us. Part of the mission of our office is to achieve our long-term energy goals while still making sure that we are providing those healthy and resilient environments for people to live in and work in.

Doug Lewin

Perfect. And looking over the website, you guys kind of break it down into research and development, market stimulation, and codes and standards. And while I don't think you work, and you can correct me in a minute if I'm wrong, you don't work on codes and standards. I do want to make sure the audience understands how important those are. Because we're obviously in an environment, we're on just about every podcast run, we're talking about load growth, right? And having these standards in place, bringing the use of refrigerators and air conditioners and lights down, that makes a big, big difference. But what we want to talk about today is the part of the mission, and I'm reading this little phrase from your website, “enable high performing, energy efficient, and demand flexible residential and commercial buildings.” Can you talk for a minute about what you mean by this demand flexibility?

Ram Narayanamurthy

Perfect, yeah. So at the Building Technologies Office, we just recently released our national blueprint for decarbonizing the building stock by 2050. When we look at our goals to achieve a net zero economy by 2050, buildings contribute about 38% of emissions, overall emissions when you count the energy use, the electricity use in buildings. 

So for achieving those goals, we have four main pillars. One is around reducing emissions at the building. We have a second pillar, around energy efficiency, which has been core to both affordability and decarbonization over many years. We are working on demand flexibility and we are working on what's called embodied carbon. 

And demand flexibility for us is the place where the buildings are integrally tied into the overall energy system, especially the electricity system, but also to some extent to the gas system. And demand flexibility means that you are now able to move the energy use. Buildings use about 75% of all electricity that's generated. So the capability and the ability to move that energy use to times when you have more clean power or more clean power generation being able to have that flexibility so that even within a building you are able to run your air conditioner while still charging your electric vehicle, while still charging your battery or discharging your battery, making all of those different elements work together so that you are optimizing at the building level, but you're also optimizing at the overall system level and helping the overall energy grid become more cleaner and efficient. That's really what demand flexibility is about. And we have different ways of achieving it. Traditionally demand flexibility on the utility side has been around demand response, but now we are going to a new era where we have not just the traditional on/off switches, but we have much more flexible technologies, whether it's batteries, EVs, smart term stats, building energy management systems that can provide the demand flexibility. It's a concept that is transition.

Doug Lewin

Yeah. And so it's actually, I like to talk to people about this a lot. I've been working in and around energy efficiency for 20 years or so. And we all have to kind of update our priors here because we're rapidly moving into an era. In many ways we're in that era now where energy efficiency actually means using more power at certain times, right? You talked about there's low emission power, that's basically the same as cheaper power, right? So if we can actually get into, you were talking about electric vehicles, charge the vehicles when power prices are low and the power is cleaner and then, stop the charging or even you get into some of these vehicles-to-home, vehicle-to-load, vehicle-to-grid, these kinds of things. But even a more fundamental basic use case would be, and this is where the connection to energy efficiency and demand response come together, right, is with air conditioning. So if you can, particularly with some of the heat pumps, right, they can take a signal. So like you said, the old versions of demand response, direct load control, right. Turn it off and people kind of sweating inside their homes. Now you can actually pre-cool when you have a lot of solar power and then use less during that period when the sun's going down. Are you guys looking at those kinds of things as well?

Ram Narayanamurthy

Absolutely, yeah. And like you mentioned, right, technology has evolved a lot in the last 10 years. We have way more tools than we ever did in our tool belt. So, when we think about what we can do today, you take a smart thermostat, like a Nest or Ecobee, and now you have the capability to remotely change the set points. Of course, you're working with the people who live in the homes to make sure they're still comfortable with what you're doing. Butyou can do things now where you can pre-cool a building much more easily than you ever could. You didn't have those capabilities 10 years ago. You could pre-cool a building, make the building comfortable at just the set points so that you're still sitting within a comfort range for the occupants of the building, whether it's commercial building, residential building. But what it does is, you're using energy at a different point of time. And that means that if you're pre-cooling the building, you're using the energy when there's a lot more solar available in the middle of the day. And then you're able to reduce the energy use around 4pm, 5pm, 6pm, when your demands on the grid are much higher, your solar is starting to wane off. This is the kind of flexibility that we are now able to get from the technologies that have evolved in the last 10 years. 

And I think energy efficiency comes from the fact that if you're cooling your building when it's cooler outside than during the hottest part of the day, then your air conditioner is actually running more efficiently. So now there are more capabilities where we can do both energy efficiency and demand management. And one of the terms we have come up with, Doug, is we call it power efficiency, because I think we are transitioning to an era where you're going to have ample energy available, especially as we get more clean generation on the grid. But power is going to be your currency going forward. So demand flexibility helps us with that power efficiency.

Doug Lewin

I want to ask you a question about this as well on AI. There's so much discussion again, probably at least every other episode of the Energy Capital Pod, we're talking about artificial intelligence and how much. Usually it's in the context-realm of we're going to be adding a lot of load to the grid and are we going to have enough power to serve that? But I think there's the other side of the coin there, which is if people have the opportunity to say, here's my comfort band, right? I don't want it ever hotter than 78, 79 in my house. I never wanted any colder than 70, 71 in my house, whatever. It's up to that person's preference or their family's preference or their business's preference or whatever. Then within that AI can actually kind of move that load around. Does that kind of come into your work at BTO or is it still a little far off?

Ram Narayanamurthy

It's a great point, Doug. Yes, it has come into our work. It is something that we have been looking into. We have worked with multiple utilities and even prior to my time at DOE, I'd worked with a lot of utilities looking at the capability to do that kind of adaptive, smart energy management. So, you can imagine a world where, and I don't think we are very far from that world where you can just talk to your smart speaker and say, hey, keep my home between 70 degrees and 76 degrees and let it take care of everything. And those are the capabilities I think we are getting with the evolution of computing, with the evolution of data and how we are able to now interact with our homes and our devices. So it's a great thought and I think we'll get there soon. Sooner rather than we think.

Doug Lewin

Yeah, I could even, yeah, I could even envision like we might not even be far away from where, yeah, you say this is your comfort band. And then on certain days, things are getting really dicey on the grid.You  maybe get a message from the smart speaker or it pops up on your phone. I know you don't want it hotter than 76 in your house. Power prices are really high. Would you take a $10 bill credit to let it go to 77. And you can say, nope, I'm having people over. I'm having a party at my house. You know, my elderly mother's visiting. And don't touch my thermostat. And you just say no, or you can say, know what? I'm just about to leave the house. I'll take the 10 bucks. That's great. You know, right? I mean, I don't think we're that far away from that.

Ram Narayanamurthy

No, we're not. And if you go back to 2020 when California had the power emergency in August. And what's great was a text message, a reverse amber alert that meant people were responsive and they saved two and a half gigawatts, which kept the grid on, right? So when people can do that manually, automating something like that would probably give us incredible amount of resources for demand flexibility.

Doug Lewin

So all of this demand flexibility is happening at what y'all call, and obviously people have been talking about this for a decade or so, but again, I think the technology and the discussions are advancing . The term, a term I really like, grid edge. And I think it's very interesting that, in my view, and I think in the episode with Hala Ballouz of EPE, we talked about this where on her company's website, it's a firm of electrical engineers and they have this image where like, you're sort of have this circle that was the grid and what was inside the home or building was kind of outside that circle until fairly recently. And now the circle is widening and we're recognizing that these devices, all the things we've been talking about so far and a lot more actually can be considered as part of the grid. So the grid edge, you know, was sort of like outside the grid, the edge was sort of outside and now the edge is being brought in. Can you talk a little bit about how you guys think about the grid edge and maybe what are some of the other things that might actually become part of the grid that we haven't even talked about yet?

Ram Narayanamurthy

So, we've been kind of thinking about how the edge is blending, right? As we think about, and there's been a lot of discussion on new loads, as you think about how we are getting more technologies and more integration, whether it's with EVs in the home and trying to balance your EV load with your batteries, for example, right?

What it comes down to is that whatever you do inside the home or the building is going to impact what you do on the utility side, what it means for the size of the wires, what it means for the size of the transformers, what it means for the size of the feeders. And so we are taking an expansive definition of the grid edge going from what we call, we are now defining it as going from the feeder on the utility side to the plug on the customer side. 

And why does that matter? As we look at homes today, many homes have 200 amp panels. You can either go up to a 400 amp panel to get your electric vehicle charging installed and your battery installed, or you can implement technologies. One of the technologies you're working on is what's called low power heat pumps. Heat pumps that can run on 120 volts, so you're not having to upsize your breaker. Technologies that we're working on include splitters so that you can actually manage the load within the home. Smart panels. There's all these technologies that help you manage the energy use so that you're not triggering upgrades on the utility side. There's been many stories where people want to put an EV charger and then they have to wait eight months, pay $10,000 because their distribution line has to be upgraded right there. Their grid edge has to be upgraded there. Meter has to be upgraded. By looking at this as an integrated whole we are now optimizing end-to-end all the way from the plug to the feeder. And what that does is it helps us reduce the time to adopt clean energy, and it substantially reduces the cost to adopt clean energy. So that's why our definition of the grid edge is much more expensive. What it does, it brings in people who haven't worked together before, together. And we are trying to enable that matchmaking to happen. We are trying to enable utilities and grid operators and distribution planners to understand what people on the customer side are doing and vice versa. So that people on this side, like battery installers or EV charger manufacturers can understand how they can help the grid on the other side.

Doug Lewin

Yeah, so, so important, such an important mission and work. Let's talk about sort of how the rubber meets the road here. You guys are doing something called the Connected Communities Program and you're personally involved with that. Can you tell us about the Connected Communities Program and how it's connected to everything we've just been talking about?

Ram Narayanamurthy

Yeah, the word connected is in it, right? What I think is happening is a confluence. Which is Connected Communities is about the fact that your good edge is where your electric vehicles, your rooftop solar, your battery installs, your heat pumps, they all come together. So for us, Connected Communities is about understanding how a community of buildings that employ all these different clean energy resources can optimize and work together to right size the grid on the other side. The whole thing is the big discussion has been we have new loads coming. People in utilities haven't seen this kind of or projected this kind of load growth in like 50 years. And the load growth is not just about how much we have to generate. It's actually hitting at the edge of the grid.

As we get more electrification, more EVs, it's hitting at the edge of the grid. Upgrading existing distribution lines is very expensive because we already built out our communities, our cities on top of it. So for us, a Connected Community is about how we are going to manage all these new loads and how we are going to right size the grid to manage the load growth. And this way you're optimizing for the entire system, not just a single element of the system.

Doug Lewin

Yeah, I love some of the language you guys have on your website, I think is really quite descriptive of this. So the goal of the program you have on there is to “validate grid edge technology innovations in real world situations and provide new tools for utilities, grid planners and operators, automakers and smart charge management service providers and the communities they serve.” Can you talk a little bit about some of the early results of connected communities? You could talk about anything you want. One of the things I'm really interested in though, Ram, is, and you sort of alluded to it, what you were just saying, and it's in that statement that I just read there. There's different levels, different places. And I know you're an expert in grid edge and in demand flexibility, not necessarily in Texas, but in Texas we have this where we've got the transmission system operator ERCOT, right. And then you've got distribution utilities. And sometimes there's not a whole lot of communication between those, right? And I know that happens in other places too. So you can talk about examples from other parts of the country. And then, to say the least, the transmission system operator rarely understands at the plug level. They might understand customers that are really big ones. They talk to the factories, the Bitcoin miners, the data centers, but not necessarily a residential customer. So what you've got in that statement that I just read is trying to kind of, again, connect is in the name, connect those different layers that seems incredibly difficult, incredibly worthwhile as well. How has it gone so far?

Ram Narayanamurthy

Yeah, great question, Doug. Yes, it is incredibly difficult, right? And we're not going to solve everything in one go. But what we're trying to do is take pieces of it and solve for the pieces. One of the unique things we have done, Connected Communities, what we just released is what we call the Connected Communities 2.0, which is focused on load growth. Connected Communities 1.0 came out about four years ago. So, part of what we have done is we have looked at those projects, not as projects by themselves, but as a cohort of efforts. A couple of those projects are working with affordable housing properties, looking at how do you decarbonize affordable housing while still being able to integrate with the grid. So projects in New York, for example, with New York City Housing Authority, where New York City Housing Authority has 182,000 units. They're like the size of a city. And what we're working with them is the fact that, you know, they are sitting on infrastructure that is completely not sized for them to add EV charging for affordable housing communities or for putting heat pumps in. So we're looking at how do you actually structure these, whether it's geothermal, whether it's low power heat pumps, whether it's modifying your steam systems. How do you do all of that so that at that scale, you can actually decarbonize their building stock?

Now, with regards to others, we are working with Ohio State, for example. Ohio State is one of those examples where it's a whole campus in itself. And there, they're working with the PJM market. It's a little bit similar to the Texas market, right? In that they are a large scale aggregator. They're working directly at the market. And they're looking at how they can apply demand flexibility within the campus, so that they can minimize their inflow and outflow to the grid. 

And there's another example where we are working with Rocky Mountain Power, which is a utility in itself. And what Rocky Mountain Power is doing is they are looking, they are implementing demand flexibility in different places in Salt Lake City. They're working with affordable housing, where they have designed affordable housing, put in EV charging and manage the load of that building. They're working with new home developers to have aggregated batteries. They're working with the City of Salt Lake's transit center looking at bus electrification. But what they're also doing is because they are the utility, they are taking the demand flexibility from all these very disparate resources and aggregating it to help them with their system. Whether it's for resiliency, whether it's for resource adequacy, whether it's for avoiding generation, they're taking all these different elements and putting it together for their system. So if you apply it in the Texas context, right? Texas, as you mentioned, is a unique, very unique marketplace in the US. Your distribution and your transmission operators have very little connection, and your distribution operators are not allowed to work with the retail or the end customers, right? So you have these little, what I call silos that they operate in. And so, part of what we would love to see is that we can take lessons learned on how the customer side is able to provide the flexibility and maybe that enables your retailer to work with your distribution operator to actually put those two together and provide a more efficient, better coordinated resource back to your transmission operator. It could also be seen applying for Austin Energy or CPS San Antonio because they are both the retail and the distribution operator. So they could directly apply some of these lessons learned. 

So that's what we are trying to do with the Connected Communities. There's a whole cohort of 10 projects around the country. Unfortunately, none of them are in Texas, maybe looking into the future, maybe some of the version two, we could have more projects in Texas. But each of them is taking a different example of how to optimize for the grid. There's one in Southern California with KB Homes and SunPower, where they're looking at community microgrid and looking to provide resilience at the community scale and having one neighborhood with batteries inside every home, another neighborhood with a community microgrid, having V-to-G, actually it's V-to-B to provide resilience for those homes. So there's multiple examples and our hope is that we can take the lessons learned from each of those examples and apply it across the country for different utility structures.

Doug Lewin

With that last example, Southern California, you said it's not V-to-G, it's V to what?

Ram Narayanamurthy

V-to-B, sorry, vehicle-to-building. 

Doug Lewin

Vehicle-to-building. Okay, okay. Got it. Got it. So that could be a home or it could be an apartment building. The idea is you don't necessarily need to inject the power into the grid, but if it's going to the home, that's reducing the demand that the grid needs to provide to that home. 

Ram Narayanamurthy

Yeah. And it also does provide resilience. So most of the stationary batteries are going in because people want backup power. And if you can provide your backup power to your vehicle, then you don't probably need a stationary battery to provide that resource.

Doug Lewin

Yeah, you know, it's interesting. So Texas does have this, aggregated distributed energy resource pilot. And the way it's structured is either, well, so a load serving entity in the Texas parlance has to provide it. So that'd be a retail electric provider or a muni or a co-op. The first one to inject power from this pilot into the grid was Tesla. The second was actually Bandera Electric Co-op.

There is a task force working on these issues. So should there be a Connected Communities 2.0 project in Texas, excuse me, we'd want to bring that project into the task force to be talking about what's going on there. But just what you were talking about, like there is, that is a barrier that in Texas, stakeholders are working to overcome is that ERCOT is so used to that transmission level, right? Really, really large loads over 700 kilowatts you know, and so now you're getting down to a customer premise and, and it's one thing for batteries cause you can kind of measure that directly, but then you start getting into aggregations of thermostats and that's not really something they understand. So I would imagine some of these lessons learned actually might be applicable, to the folks that are involved in this pilot and on that, on that task force. Do you think that's probably right?

Ram Narayanamurthy

That's probably right, yeah, because getting those pilots, getting the data, and knowing how the data can be transferable to your particular situation. So if it's the electric co-op, yeah, they can adopt those results.

Doug Lewin

And it's probably, I guess it's different for each of these areas you're talking about. One of the things I like to think about and talk about and try to understand more basically, cause I think it has really big implications and I don't think anybody's actually sort of figured it out yet is how do you actually like manage, what is the model for managing all those distributed resources? Right, Ram? You hear a lot about a distribution system operator kind of a model where somebody's sort of like, there needs to be some orchestration of all of that. That could be a market and a market signal. It could be a DSO that's sort of just like a transmission system operator is matching supply and demand. I could even envision markets on sort of a small level, particularly though, like behind a really congested area, right? Where power prices are really high and maybe just like in the bulk power market, you have some kind of an auction where big power plants come and offer their power in and then it goes up a bit stack. Maybe you could do that on the distribution side. Does any of that come into this project or is that maybe a little a little further afield than where you guys are going with this?

Ram Narayanamurthy

Actually one of our other offices, Solar Energy Technologies Office is actually looking at a distribution system operator, what I call a test bed, through another effort called Strives. What we are trying to do is, I think of the DSO model as something that's maybe five years down the line, right? And there's some business model implications that have to be worked out that have to be worked out in the regulatory context. So it's a little bit more challenging. But what we're looking at is independent of whether you have a DSO, or it could even be the regulated utility who's actually managing all these resources. How do you actually, we are working on how do you actually get these resources aggregated so that it can provide your distribution services or bulk services. And so for us, it's almost agnostic of having a DSO model but looking more at the technical feasibility. 

The other thing we are looking at is distribution planning practices, because today a lot of the distribution planning practices,As an industry, we have never really focused on distribution planning. You just added up the loads, you put a transformer and you just walked away, right? Now we are getting to the point where we need a lot of these additional loads on the distribution side of the network. And looking at these new technologies and how the stochastic nature of these technologies, because with controls, you can go up, down, etc. That has never been a part of distribution planning. Now, can you actually use controls, validate with field data, and use that to revise your distribution planning so that you are not oversizing the grid? So that's an area that we are focused on a lot.

Doug Lewin

I think that's really, really smart. And I will often do that. I want to jump ahead to that DSO thing, which is kind of the shiny object. And I do think it'll be relevant in the longer term, but it's a bit of a crawl-walk-run, isn't it? And like the, the crawl or even the walk, if you will, is really doing some of that distribution resource planning where you're really looking at the distribution grid. And like you said, obviously there's some of that that has happened. It's usually internal to a utility. There's usually not a whole lot of, hey, maybe there's a provider out there that could bring this solution at the grid edge that would obviate the need for this transformer or substation upgrade. Now we're very much at the point where if we're not actively doing that work, I'm using sort of the royal we here, but anybody involved in the power industry isn't involved in doing that work. We're just going to see costs pile up so high that the system could potentially break. Right?

Ram Narayanamurthy

Yep, absolutely. I think that's the bigger concern, right? Because you look at the projections for load, whether it's for data centers, whether it's for EVs, whether it's for building electrification, the load projections are pretty, I mean, it's pretty significant. So being able to look at non-wires alternatives, do we really need this transformer, right? And we were meeting with some home builders and it's not just the how many transformers do you need, but also the availability, right? So getting all of these optimized using better planning methods would really enable all of us because it keeps your costs down for the power. It makes sure we are not completely overbuilding the grid because we don't have enough data. That's part of what we're trying to do. We're trying to get enough data at the grid edge so that the distribution utilities can do better planning and optimization of the distribution curve.

Doug Lewin

Yeah, I had a meeting recently with a lot of folks that are utilities reps. It’s just a great group to think and plan with. And one of the things that really emerged from this particular meeting was that intersection between planning and operations and how we really need to get better at that and create that kind of loop where there's planning and then you're operating and getting the data and then you're doing better planning, which leads to better operations. And it's like this virtuous cycle. Can you give an example Ram, just pick one of the examples form Connected Communities, where the distribution planning function that is so critical maybe is happening exceptionally well?

Ram Narayanamurthy

I will take one of the examples, which is in Seattle. There is a project that's going on in Seattle working with a number of the affordable housing developments. And what they're doing is, Seattle is unique in that there's a lot of electric resistance heating. But what we're doing with this project is replacing those electric resistance heating with heat pumps, and then using that extra power that's been released, because now you have extra capacity in the building, right? Because your resistance versus heat pumps, like, you need about a third of the power requirement to actually power the building? Now, how do you use that extra capacity? What do we do with it? Add EV charging, for example, right? But it's also going beyond the building itself. What can you do to relieve congestion on those lines? And that means that you're looking at the loading on that feeder line, and then looking at how you can optimize at the building level to help the overall distribution system. 

So it is demonstrations at a smaller scale, but data at a larger scale that can then be used for better planning. I think one of the analyses that Seattle City Light has done is that if you have unmitigated expansion of EVs and heat pumps, etc., that they might need maybe one and a half times more power than they have right now. But if you can actually implement energy efficiency and demand flexibility, you could maybe get it down to maybe a 50% increase. What they're looking at is: we don't have infinite amount of power that we can bring into a region. How do we optimize what we have? And then how do you optimize it all the way from the bottom to the top?

Doug Lewin

I'm so glad you brought up an example that uses resistance heat. We have a whole lot of resistance heat in Texas and that was one of the problems FERC and NERC cited in their report post Winter Storm Uri. We have something like four million homes and homes includes, of course, single family and multifamily units. And there are a lot of multifamily units. I've been talking to a lot of people that are working in multifamily on energy efficiency projects. That there are some that it's not even the backup heat. I don't know if this is how it was in Seattle. It's the primary heat. And so it's just insanely, massively inefficient, which is, that's the negative side of it. The positive side of it, as you just described is, hey, if you could actually fix that problem, now you're going to have lower bills for the residents that live there. And you've got more capacity on that feeder that now you don't have to go and expand and add cost to everybody. Really interesting example.

Ram Narayanamurthy

Right. Yes, absolutely. I think one of things with Seattle and it's similar in Texas, right, is that when your electric rates are low, then you get a lot more electric resistance heat. But being able to drive efficiency, and I think it's going to be the same in Texas, if you can drive more efficiency, you're going to free up a lot of capacity on your distribution grid, which, who knows, I don't know what the number will be, but it could even be enough to help you with resource adequacy on the bulk grid.

Doug Lewin

Oh, in Texas, I have 100% confidence it would help a lot with resource adequacy, right? Because resource adequacy is, do you have enough to supply to meet the demand, right? And Texas has just taken $5 billion of taxpayer money in order to subsidize new gas plants. You can also, and whether or not that's gonna be enough, we don't know, but what they're doing is focusing on one side where they're increasing supply. The other side of that coring is how do you reduce demand through energy efficiency and in Winter Storm Uri, you know, we don't know exactly what it was, but it was probably somewhere on the order of 20 to 30 gigawatts. I've written about this before. We'll put a link in the show notes to the data on this. And again, it actually appears in the FERC and NERC report. 

Great stuff there. Do you guys have any sort of case studies published on Seattle? If you have anything on that, send it to us and we'll add it to the show notes. 

Ram Narayanamurthy

The project is still in development because all these projects are in the phase of trying to get things installed. But I think if you have any analysis, we can send it over to you.

Doug Lewin

That's brilliant. Okay, great. And I meant to say earlier, Ram, I'll just say now, and we will put links in the show notes to this, that the Connected Communities is not only at the Building Technologies Office, but is a collaboration. Correct me if I've got this wrong, but I think this is what I saw, with the Solar Energy Technologies Office, you mentioned some of the work they're doing earlier, Vehicle Technologies Office and Office of Electricity. It's really great to see there's great work going on in each of those places. Good to see you guys sort of collaborating across those different areas of DOE.

Ram Narayanamurthy

I think that's the future, Doug, which is that we have to look at this in an integrated manner. If we don't, I think we're going to end up investing more than we have to and increasing costs more than we have to. So I think it's great that we were able to work with all these offices. In fact, we're also working with other offices like the industrial office, which is working on data centers. We are working with a geothermal office. We are working with potential partnerships with the Hydrogen Fuel Cell Office because that's also an element of providing the resilience.

Doug Lewin

Absolutely. Yeah, not only will cost be higher if we don't have that collaboration, I think that the outcomes in terms of reliability and resiliency, not even to mention sustainability, will be worse without that. 

Okay, let me ask you, you've touched on this a couple times because you've been talking about affordable housing, but I wanna just dive a little bit deeper into this point is, how do we actually ensure, because there's all this technology coming we're talking about, electric vehicles and heat pumps and thermostats. Obviously all these things have a cost associated with them and there's unfortunately a very large percentage of the population that is just struggling to pay the next bill and isn't really necessarily thinking about getting a heat pump or an electric vehicle. How do we make sure these technologies and the benefits are actually accessible and affordable to everybody, not just those with enough disposable income?

Ram Narayanamurthy

It's a great point. So I'll go back to an initiative we launched last year. It's called the Affordable Homes Earthshot. And so DOE launched eight Earthshots. This was the last one that we launched. And the focus there was we said we are going to look at this concept of what we call trickle up of technologies versus trickle down. Traditionally, technologies go to the people who can afford it. And then it becomes more mass produced and commoditized and hopefully it reaches everybody. But what we wanted to do was focus on technologies that can be specifically applied to manufactured homes and multifamily homes. That we can make that happen, especially in an era where we have these great rebates and incentives through the IRA and some of the other utility programs around the country and state incentives in many parts of the country. Can we now have technology specifically addressed to low and moderate income customers that can help us achieve those goals? You don't want to saddle them with the first cost, right? But if we can make these technologies more compact, more efficient, but also a smaller form factor, for example, so that you can actually fit into closets in apartments, for example, right?

So how do you actually build these technologies that are unique, that are a unique application, make it cost effective, and then use the rebates and the incentives to offset those costs so that you can get into the buildings. Another area is trying to figure out creative financing for affordable housing, for example, how do you use things like tax credits and use that as part of your financing strategy to get these technologies in. Because if you can get the technologies in, a great example is electric strip heat, right? Getting a heat pump into those homes is expensive. But if you can figure out a way by which, make those heat pumps more cost effective, less cost, and find a financing model that can get those heat pumps into those homes, those people are, everybody's going to have lower bills because of the efficiency, right? So for us, that's a core of what we are trying to do, which is focus on those building segments so that we can get more of these technologies into people's homes and reduce their bills. And once you get those in, then you have the flexibility, additional capacity, all of those benefits accrue.

Doug Lewin

Yeah, and I think, and you alluded to this with the Inflation Reduction Act rebates, so the HOMES and sometimes it's called HEARs, sometimes it's called HEEHRA, it has these different names, but these rebates that are coming that are specifically intended for low and middle income and if folks are listening that are of higher income, you don't have to miss out, you can get the tax credits, right? So there's tax credits, but you have to have a tax burden to get the tax credits. So for those that don't have that tax burden, you have HOMES and HEAR.

And then I think the next place, Ram, you mentioned financing. So, people are having to pay their electric bill anyway. So if you picture somebody with a, you know, two, three, I mean, in Texas, sometimes it's not uncommon for people to have 400 and $500 bills. And you're basically saying that the heat pump can actually bring that electric bill down by X number of dollars, call it 100, $150 a month. And then they're paying less than that in monthly, you know, payments, whether that's through the bill or through some other mechanism. So that financing piece is really key because while the vast majority of the population doesn't have enough upfront capital, or even if they did, just aren't going to choose that may not be the place they want to put their capital. But if you could spread it out and then reduce the bill, that makes it much more attractive.

Ram Narayanamurthy

Even for people who can afford it, $5,000 or $10,000 is not an easy thing to put out of pocket.

Doug Lewin

And do some of the pilots have that financing piece as part of their… Are there any examples from the pilots that might be worth highlighting there?

Ram Narayanamurthy

There's a couple of pilots that are looking at the financing as an integral part of the pilot, but more of it is actually financing the property owners. So one of the projects in Boston is with the WinnCompanies, which owns around 120 affordable housing properties around the City of Boston. And what they're looking at is can they buy all this energy efficient equipment, put it in and finance it. But because they're a property owner, they don't pay the bill, right? So they want to look and can they use demand flexibility and revenues from the market to be able to finance, to pay the financing on these measures, right? So how do you actually make the numbers work out? And can we use the market, the electricity markets as a way of making all these split incentives and the numbers work out. So again, it's all exploratory, right? We have to explore this to figure out if there are models that we can make to work.

Doug Lewin

Amazing. Yeah, no, that's great stuff. I mean a lot of this is going to emerge, you know, whatever somebody had in their plan, they'll get into it and do some learning and find that, actually this thing is going to work better. So yeah, that's kind of the way innovation happens. Right? 

Ram Narayanamurthy

Yes. And I tell people, a no answer is actually a very valuable answer when you're doing R&D because that means that you're avoided a whole lot of investments in a direction and you can go invest in a different direction.

Doug Lewin

Exactly right. So one more thing I want to ask you, then I'll see if there's anything else you want to add before we end. But I think this is really key. I mean, I'm trying through this podcast to expand the number of folks… the number of folks who are interested in the grid was expanded by Winter Storm Uri and then by Hurricane Beryl. And I think unfortunately, there's going to be more events like this as we get more and more climate extremes. But trying to talk about these things on a level that folks that are in the industry understand, but also folks that just had a tough time during Uri or just even worse than a tough time, just sometimes just tragic or horrific, whatever word you want to put on there. And now they want to know more about the grid. They're not grid experts. So can we talk just a little bit about the communication side of this? Like how does this vision of demand flexibility and grid edge, how do we make this kind of understandable and even desirable to a much broader range of people.

Ram Narayanamurthy

I'll answer in two parts. So first is: how do we communicate this, right? So when we look at what people want, this goes back to where I started my discussion. People want healthy, comfortable, affordable and resilient homes. So if we can communicate this in terms of, hey, we are going to make your homes healthier. I'll give you an example. When we did work with Southern California Edison, and we retrofitted affordable housing, and you took out single-pane windows, leaky single-pane windows and put in double-pane windows. The biggest thing that people noticed was not all the heat pumps that got put in, but the fact that now they didn't have a dirt ring around their window because they were close to a freeway with high diesel pollution. And now they felt their indoor environment was more healthier. So you have to be able to communicate those. We have to be able to communicate the fact that by doing some of these upgrades, you're actually gonna be more resilient. I go back to some of the tragedy that we heard about during Uri, right? People didn't have great insulation in their homes, which means their homes are now more prone to get colder and create health impacts. So if you're able to insulate the home, right, now you are able to protect that home and protect the people in those homes from getting as cold as they did. And creating, and now you have a real health benefit. You have a real benefit of providing better resilience and maybe avoiding some of the tragedy. 

So that's, I think, we don't want a disaster to be able to communicate the benefits, but we want to be able to communicate the benefits of better indoor air quality, more comfortable homes, lower asthma rates if you are able to keep the homes better protected. So those are the things I think we can actually communicate and say, hey, this is going to make your home better. And of course, if you're able to get demand flexibility, they're able to get $25 or $50 every month from the utility, that goes into their pocket too. So that's where we have to really work on our communications of these energy benefits. 

We call it non-energy benefits, but they're actually benefits of energy that are not related to just money. There's so many more benefits and we need to do a better job of communicating them.

Doug Lewin

That's right. That's right. And it is tricky because people's motivations are different. Some folks are, you know, they've got somebody in the home with asthma and that's really the thing that motivates them. Others, it's that bill and they really don't, they don't want the bill as high. I think control is another piece of this. Cause you've got a lot of like the gadget geeks out there that just wanna, they want to have the app and they want to be able to see there's, there's just, you know, just like you know, humanity is diverse and there's a lot of different entry points to this kind of thing. We have to be able to communicate with them and then connect with people where it's valuable to them.

Ram Narayanamurthy

That's where the community organizations come in because the community organizations work in their local communities and they understand what the needs of the community are. So if we can work with the community organizations, understand what the problem is and be able to frame the benefits of what we're doing as solutions to the problems in those specific communities, I think we can do a great job of communication.

Doug Lewin

I think that's exactly right. Ram, is there anything I didn't ask you that I should have? Anything else you'd like to add in closing?

Ram Narayanamurthy

Yeah, one thing I wanted to add is also the resilience aspect. So when we talk about Connected Communities, yes, it benefits the grid, but we are also very focused on customer resilience. And customer resilience for us is not just making sure there's a microgrid and you are able to provide power. It's about every little piece that you do in a home. Whether it's having one of the innovations that we have fostered is a 120 volt induction cooktop that can run for three days and power a fridge for three days. All those little pieces add up together. A better insulated home with the ability to cook and store food for three days means that you actually have a huge amount of customer resilience. So I want to add that we are very focused not just on the bigger policy picture, not just on the bigger goals for the grid, but we want to make sure that we also improve customer resilience as we go through this energy transition.

Doug Lewin

Does that 120 volt induction cooktop that powers the fridge, does that exist now or is that in R&D?

Ram Narayanamurthy

No, it actually exists. It's on pilot runs. So we funded it through one of our funding opportunities in 2020. It came on the market in 2022. It's a company called Channing Cooper that developed this. So, it's essentially an induction cooked up with a battery inside it. So you can even provide good services if you want.

Doug Lewin

You might've just sold an induction cooktop for Channing Cooper. Cause we're kind of in the market for once. I'm going to go look that up. If I can't find it, I'll ask you afterwards. That's amazing. I have not heard of that yet. There's more out there than any of us could know.

Hey, this has been great. And yes, the resilience piece. Look, I mean, you're talking to somebody in Texas, right? We're recording just a couple months after Hurricane Beryl happened. You know, we also had the largest wildfire the state has ever seen earlier this year. And I think we're rapidly heading towards, you know, times when people will lose power in advance of a wildfire. When there's wildfire conditions to hopefully prevent that wildfire, but that means people without power, so that passive survivability by increasing insulation, but then also having the power sources there on site, that is obviously extremely important to Texas. So glad to know about your work. Thanks for taking some time to tell us about it, Ram.

Ram Narayanamurthy

Yeah, and Doug, and one thing I'll finish off with is to say finding these solutions is going to require every entity across the board to work together, whether it's public utility commissions, the grid operators, the utilities, the customers, we have to create these collaborative efforts where all of them are able to work together understand what each other is doing and that will help us build a better energy future for ourselves.

Doug Lewin

100%. Thanks so much, Ram. Appreciate it. 

Ram Narayanamurthy

Thanks, Doug. Thank you for your time.

Texas is number one in the United States for many energy-related achievements: wind and solar generation, oil and gas production. But Texas is also the number one state for weather related outages, with nearly 50% more outages over the last 25 years than California. Just within the last four years Texans experienced Winter Storm Uri (2021), an ice storm in Central Texas (2023), and a derecho and Hurricane Beryl (2024). But the frequency and duration of power outages can be managed and reduced through many strategies. 

One of the quickest and most effective ways to lessen the impact of outages is to have widespread onsite backup power, also called microgrids: interconnected resources like solar panels, gas generators, and batteries that connect directly to homes, facilities, and other sites, allowing them to operate independently from the main grid.

My guest this week is Jana Gerber, President of Microgrid North America at Schneider Electric. Schneider Electric is a massive company with over 150,000 employees. Odds are, you’ve got one of their products in your home, but you probably don’t even know it. They make all sorts of electrical equipment and they are a leader in microgrids. 

Jana has been with Schneider for 20 years and understands the business of backup power as well as anyone out there. During the interview, Jana explained how Schneider’s microgrids work, how the role of the consumer on the grid is evolving away from merely being passive recipient. We talked about the financing methods to get these backup power projects off the ground, challenges in bringing microgrids to scale, the value of resilience, and much more.  

I hope you enjoy this interview. As always, please like, share, and leave a five star review wherever you listen to podcasts. Thank you for being a listener. 

Timestamps

0:18 - About Schneider Electric and Jana’s background

2:14 - What is a microgrid? 

6:16 - Where Schneider has deployed and the mix of technologies used for their microgrids

11:11 - State of the microgrid market in Texas

13:35 - What is a prosumer

15:00 - The role of EVs in microgrids

17:02 - Schneider Home

20:23 - How significant are distributed resource solutions to Schneider’s business now and moving forward

22:04 - Financing options

26:16 - The challenge of accounting for and valuing resilience

30:06 - Small commercial enterprises and microgrids; reducing costs through standardization

33:39 - Additional options for tax credits and financing 

36:13 - Financing options and tax credits for the residential sector

38:03 - Standardization, islanding, and interconnection

42:46 - The role of microgrids in managing load growth

45:33 - Fuel cells

46:42 - Upcoming microgrid conference in Texas

Show Notes

Schneider Electric

About Schneider Home

Microgrid Knowledge Conference, Dallas, April 15-17, 2025

Special Episode with the Chairman of the Texas PUC, Thomas Gleeson (includes discussion of funding for microgrids at critical facilities)

LoanSTAR Revolving Loan Program

Home energy tax credits (including the Energy Efficient Home Improvement Credit and Residential Clean Energy Credit)

Microgrid interconnection and cost recovery docket

When Hurricane Beryl hit, residents all across Harris County, from every economic status, educational attainment, and racial and ethnic background lost power. But even as the storm destabilized life for almost everyone in the region, the impacts of the storm — and the safety and wellbeing of Houstonians during and after it — have not impacted everyone the same. But it doesn’t have to be this way. The inequities in our disaster response – and our efforts to make communities and infrastructure more resilient to extreme weather – are the result of policy, regulatory, and business choices that can, and should, be changed. 

To better understand why these inequities persist, and what can be done about them I spoke to Dr. Sergio Castellanos, an Assistant Professor in Civil, Architectural and Environmental Engineering at the University of Texas at Austin and the Primary Investigator at the Rapid, Equitable and Sustainable Energy Transitions, or RESET, Lab. Sergio and the RESET Lab have done extensive research on natural disaster responses in Texas, including a major report, “Enhancing power system resilience to extreme weather events: A qualitative assessment of winter storm Uri”. 

Timestamps

3:20 - About the RESET Lab 

4:49 - An overview of RESET’s research into Winter Storm Uri 

8:21 - Utilities’ communication challenge during and after extreme weather events

14:28 - Strategies for effective communications during outages and mapping social capital

17:51 - Are utilities incorporating public feedback? 

23:10 - Inequities in both natural disaster responses and deploying resilience solutions; racial divide in residential solar

30:53 - Impact of current policies and programs in reducing racial and economic inequities in access to distributed energy resources

35:26 - What’s next for the RESET Lab

38:38 - Mexico’s incoming president and Sergio’s outlook on energy and climate action in Mexico

Show Notes

RESET Lab

Enhancing power system resilience to extreme weather events: A qualitative assessment of winter storm Uri. International Journal of Disaster Risk Reduction (March 2024).

A Synthesis and Review of Exacerbated Inequities from the February 2021 Winter Storm and The Risks Moving Forward. Progress in Energy (March 2023).

Today's episode is a special one: an interview with Thomas Gleeson, the Chairman of the Public Utility Commission (PUC) of Texas, recorded live on September 20th at the SPEER Industry and Policy Workshop. 

The PUC oversees ERCOT and the transmission grid, fully regulates the monopoly transmission distribution utilities, and has power and authority over just about every part of the power grid. Chairman Gleeson was appointed Chairman in January; before that, he worked at the PUC for over 15 years, including as the Executive Director for about four years.

I enjoyed talking with the Chairman, he’s thoughtful, self effacing, and open to new ideas. As you know, I don’t agree with everything the Commission prioritizes or does and I am sometimes critical of their decisions. So I give Chair Gleeson a lot of credit for agreeing to do this. And, as often happens when people talk, it turns out we agree on a whole lot as well.

Chair Gleeson and I spoke about his vision for the grid in 5-10 years, the technologies he’s most excited about, and whether changes are needed in the utility business model. We talked about Winter Storm Uri and what remains to be done to increase reliability and resilience. We also talked about affordability; Gleeson worked on low income assistance programs as a staffer at the PUC a decade ago. Of course, given we were at the SPEER conference, we talked about the importance of demand response and energy efficiency.

We also talked about communications and public engagement. The Chairman is focused on making the PUC more accessible to Texans. In fact, the PUC will be in Houston on October 5 for the first PUC meeting with all the commissioners outside of Austin in over a quarter century.

 We also dug into the Texas Energy Fund and I asked the Chair if the PUC plans to allocate the funding, approved by Texas voters last year, to fund microgrids at critical facilities, an issue that’s become more and more pressing after Hurricane Beryl led to deaths at nursing homes that could’ve benefited from the voter approved funds.

This interview was recorded at South-central Partnership for Energy Efficiency as a Resource’s, or SPEER’s, sold-out Industry and Policy Workshop, an annual conference that, if you haven’t been, I highly encourage you to attend next year. You can keep up-to-date about this event, and SPEER’s other work, at their website and on their social media, which we link to in the show notes. 

I’m trying to keep as many of these podcasts as possible free. To do that, I need your support. If you’re not yet a paid subscriber to the Texas Energy and Power Newsletter and the Energy Capital Podcast, please become one today!

Timestamps

5:00 - Chair Gleeson’s outlook on the grid for the next 5 to 10 years

7:45 - Technologies Chair Gleeson is most enthusiastic about and emphasis on Texas’ “energy expansion”

9:30 - Extra High Voltage (EHV) transmission, changes in planning with load growth

14:00 - Winter Storm Uri: diagnosis of what went wrong; mistakes after 2011 winter storm outages; and the state’s progress for addressing these issues

19:30 - Replacing resistance heat in Texas; heat pumps and energy efficiency

26:35 - Targeting energy efficiency programs for low-income Texans; failure of past bill assistance programs and ways to ensure we don’t repeat those failures

30:45 - Does Texas need to report utility shut-offs?

34:52 - After Hurricane Beryl, does the PUC need to change the way it regulates monopoly utilities? 

40:00 - How do you align utility incentives with the financial interests of their customers?

43:45 - Texas Energy Fund and whether the promised 18% will be spent on Backup Power Packages for critical facilities

50:26 - Upcoming public hearing in Houston and efforts to make the PUC more publicly accessible

54:31 - Audience question: How to get ongoing and expected load growth under control, especially related to crypto mining and data centers 

57:37 - Audience question: Integrated resource planning for non-ERCOT utilities

1:05:58 - Audience question: Interconnecting ERCOT with other systems

Show Notes

SPEER (South-central Partnership for Energy Efficiency as a Resource) website

SPEER Twitter, Facebook, and LinkedIn

Office of Public of Engagement at the Texas Public Utility Commission

His 93-year-old mom died from heat after Beryl. Her death was preventable. - Houston Chronicle

How to Restructure Utility Incentives: The Four Pillars of Comprehensive Performance-Based Regulation - RMI

The February 2021 Cold Weather Outages in Texas and the South Central United States – FERC, NERC and Regional Entity Staff Report

This new organization wants to remake PUCs for the energy transition - Charles Hua on the Volts Podcast

Texas’ Energy Expansion - Texas 2036

Transcript

Doug Lewin

He's worked at the commission for 15 years, really understands the commission, understands the ins and outs of policy, and really excited to dig into all of that today. Anything else you want to say by way of introduction Chairman?

Chair Gleeson

No, I'm excited to be here. You know, as I was saying to you, we don't get to interact too often. So I'm excited to kind of have a conversation, get your thoughts on some of this. I will say I initially, when I came up the stairs, ended up at the beer distributors. And so…

Doug Lewin

You almost stayed over there?

Chair Gleeson

Almost. And I may mosey on back over there after this just to see if they're sampling anything or if I can join that association as well. 

Doug Lewin

An energy efficiency crowd or beer distributors? It's a tough call. Before we jump in, I also just want to thank SPEER. We're obviously, for those that are listening on the podcast, we are recording this live at the SPEER Industry Conference. If you were not here live with us, you should make sure you're here next year. It's been, it was great yesterday. It's going to be great today. And, of course, thanks, Chairman Gleeson, for doing this. I think it's really important for you to be here, for folks to hear from you, and for you to hear from them in this really important industry, sort of sub-industry within the energy industry focused on energy efficiency.

So I just want to start with kind of a general question. And if you could kind of describe for us, I do this sometimes on the podcast. I think it's kind of a good way to jump into this. If you think of the grid in like five to ten years. And I'm hoping you could kind of describe this like you've got energy people in the room. There's energy people listening to the podcast, but also listening to the podcast are some folks that just, because of Winter Storm Uri or Hurricane Beryl or just rising costs or climate change or whatever it is that kind of brings them to that. There's folks that are not experts as well. So both in kind of, f you can kind of a technical way, but also to a consumer that's not super into industry jargon and all of that. What is your vision for what the grid will look like in five to ten years?

Chair Gleeson

Yeah. So, you know, one of the things I speak about often and I try to tell people in every speaking engagement I have is we hear often about an energy transition, which implies we are somewhere and we're transitioning from where we are to where we're going. And that may work in other parts of the country or in other parts of the globe. But in Texas, with the load growth that we see, I don't see it as a transition at this point. I see it as an expansion. And so we don't have the luxury of deciding we only want renewables or we only want gas fire generation or nuclear is going to be the end all, be the panacea that fixes everything. I don't think we have that luxury based on the load that I see coming to this state, which is a good thing, right? The governor, the elected leadership of the state want Texas to remain an economic engine for the country. So with that comes a lot of people and a lot of businesses. And so I don't think we have that luxury. I see the grid continuing to try, I see us trying to continue to incent as many different types of generation resources as we can. I see us trying to look at extra high voltage lines. As we talk about the transmission needs of the state, which I think are great. 

I think, again, it's an expansion of everything. You know, I had a conversation out in the hallway earlier about something I just really became aware of, the idea of looking at our system as far as reconductoring a lot of it. I saw a report yesterday that said some estimates are saying that if you look at the entire grid in the United States, some 65 terawatts of energy could be captured through reconducting the system. So, we got to look at sustainability, affordability, reliability, and the intersection of all those three from a policy standpoint, I think, are where we get the biggest wins and the biggest impact. And that's what we need to be looking for. 

Doug Lewin

So for that, kind of moving towards reliability, affordability, sustainability, you touched on a couple of them there with extra high voltage lines. But what are some of the technologies that you're most excited about? And I'll do the disclaimer for you. You can't say every one. So if somebody's favorite technology is on this list, it's not that the chairman doesn't like it. But what are a few that you are particularly excited about?

Chair Gleeson

Yeah, so you know, definitely I think one thing that everyone seems excited about that if you've heard me speak before watching any of our open meetings I've talked about, I think nuclear is something when I talk in the Capitol to folks, it may be the one resource that everyone seems to be in favor of looking more into analyzing and seeing how it could benefit the state. I was just telling Doug, when I was driving in this morning, I was listening to CNBC and Constellation just announced that they are gonna look to recommission Three Mile Island in Pennsylvania, which is something we never would have thought. And when I looked at the report when I got here, the reason they're looking to do that is because Microsoft is gonna be an offtaker of that energy for their data centers, for their AI data centers. And so, you know, we haven't really had discussions in this state about large-scale nuclear. You know, it's more been around small modular reactors. But I would say that's the technology that's probably, you know, I think if you talk to most people and Commissioner Glotfelty’s kind of sphere of influence around nuclear and his working group would say is, you know, 8 to 10 to 12 years away. I think the governor would like to see that sooner here. He wants us to be a leader in nuclear but that's one place I think everyone is really excited about. 

The other thing which we've talked about a lot recently at the commission is looking at the need for extra high voltage lines. I think it's something I know you when we have spoken have talked about the need for additional transmission and the lack of efficiency and the cost that we bear that the market bears because of transmission constraints around the system. And I think to Commissioner Glotfelty and Commissioner Cobos's credit they've led on the transmission issue and you know I think we're in a place now where there's real analysis being done on transmission, on what we need to do, how we need to change our planning process going forward. You know one of the crazy things that's happened in the last year I would say that at least has come to my attention is ,you know, we recently brought Lubbock's load into the ERCOT region I want to say, don't hold me to this, I want to say it was somewhere around 700 to 800 megawatts. My chief of staff and I went and visited an AI data center site that's going to have three buildings. They're talking about that site alone being 1,400 megawatts, which is just wild. 

Doug Lewin

And it could come on the grid in like a year. 

Chair Gleeson

It can come on, and they want to know that they're going to be able to receive power yesterday. They don't wanna wait. And so, that's just such a new paradigm for our planning process, that that's another thing, extra high voltage lines. 

And then, I know this is a discussion, a conference about energy efficiency and demand response. Not necessarily a technology, but one of the things I think we've been thinking a lot about at the commission is how you empower customers and not just large industrial and commercial customers, but residential customers. I've had a lot of conversations with ERCOT CEO Pablo Vegas. This is something that he's really big on trying to find ways to provide incentives and a structure so that residential customers can participate meaningfully in demand response programs that there's access to energy efficiency money. 

My heart in that is really in the low-income realm. One of the jobs I had early in my career at the PUC was overseeing the staff that used to administer the Lite-Up program, which you all may be familiar with. It was a low-income discount for electric customers that was discontinued in, I want to say, 2016. You know affordability is really important. And I think you hear a lot about affordability at the Capitol. I don't know if it's always focused on the most vulnerable folks. And so, you know, I think looking at ways we can leverage public money to help in technology, to help customers with affordability, to help with research on emerging technologies. I think those are all discussions that I'm excited to continue to have. 

Doug Lewin

Yeah, obviously really happy to hear you say that. And I think as you're talking about energy expansion, there's expansion of generation sources, there's expansion of transmission that's going to be needed to your point about load growth. And we don't know how quickly, the load growth could be materializing very quickly. But I think certainly as you're looking through the 2030s and, you know, extra high voltage. I think a lot of folks don't understand. I don't think I fully understand this yet. I'm trying to learn more about it. But even, I was doing, I do these, quick little plug, these little live chats during some of the PUC meetings. And Commissioner Glotfelty had said that extra high voltage gives you four times the capacity through the lines. There was somebody on the chat that was saying it's actually closer to six is what they're seeing in the real world. So I think when people think about this, they need to understand that if you're just trying to do three, four, five years out, okay, like maybe the 345 kV is okay. But if you're planning, as I hope you're thinking, and I hope everybody in the state's thinking about, 10 years out as well, you need that extra high voltage. 

And on the demand side, there's an expansion to happen there too, right? There are a whole lot of customers out there that would like the opportunity to save on their energy bills. And they're across lots of, a lot of times you hear this repeated over and over. I've heard it very recently that low income customers can't participate. They just can't do this. They can't participate in DR. I want to challenge that assumption. I think that there's absolutely ways for people to save on their energy bills. So, and I'll just give a quick shout out on energy expansion to our friends at Texas 2036. They've done a lot of really good work, folks that want to sort of learn more about that concept. I think they deserve a lot of credit for kind of getting that out there.

All right. So I want to ask you, you know, I don't think it would be right to have a conversation on something called the Energy Capital Podcast focused on Texas with the Chairman of the PUC if I didn't ask you at least a little bit about Winter Storm Uri. I do think we are in better shape than we were. And I tend, I like to be very data-driven. We saw during the winter cold snap in January, which I think they called Heather, we saw less thermal plant outages than we did during Elliott or Uri. There's critical infrastructure mapped. There are some things that, we have a lot more solar in the state, which right, people forget this, but like during Winter Storm Uri, it was actually quite sunny during the power outages, right? So there's a lot of things that would make things better.  But you have said and I'm quoting you here…

Chair Gleeson

That’s always dangerous.

Doug Lewin

I mean, I just think this is just common sense, right? “We're not done improving the grid. We are continuously looking for ways to strengthen reliability and meet the needs of our fast growing state.” So I just want to, what is your diagnosis of what happened during Uri and what are those improvements you're looking at next?

Chair Gleeson

Yeah, so one of the things I think was really a failing of the commission and the industry after kind of the rotating outages of 2011, is it wasn't a large penetration event. It was pretty contained. And because of that, we got through that 2011 session, we made some changes. And I think, at least at the commission, there was definitely a, I'm not gonna say mission accomplished banner hung behind us, but I will say a thought of like, okay, we did what we needed to do to address that issue. And there wasn't really much forethought given to what is this grid gonna look like going forward and what may we need to do in order to ensure reliability going forward.

And so I think the biggest takeaway from Uri is we've implemented, like you said, a map for critical infrastructure, which has proven extremely helpful the last couple of winters, particularly if gas is having an issue or electricity isn't receiving gas, gas isn't receiving electricity, because we have a way to connect those parties. so we can get that addressed quickly. I think that the other thing is we pass those rules on weatherization but we don't stop there this has to be a continuous loop of iterating improvements and so you know as our resource mix is changing as our load is increasing we are going to have to continue to look to make changes to ensure reliability on the system. The other thing I would say that, where the pendulum has started to swing back the other way, I would argue post Uri in the trade-off between affordability and reliability, the pendulum swung all the way to reliability. And I think that was needed because for a long time, I think that pendulum had swung towards affordability. We were operating on the edge all the time to keep costs down. I think now three years out from the winter storm, I think you see this at the commission, you definitely see it at the legislature, discussions about affordability have started to swing that pendulum back towards what I would argue is probably its rightful place, somewhere in the middle, depending on, you know, kind of the dynamic actions that are going on at any given time, where that trade-off needs to be between affordability and reliability. And so I don't think you'll continue to hear discussions about reliability with also an eye towards affordability and what those trade-offs are. 

You know, the other big thing I will say is the establishment of the Texas Energy Reliability Council, TERC, that's headed up by Chief Nim Kidd. You know, we used to have an informal process between industry, the Railroad Commission, TETM, the PUC, but formalizing that process, having those folks get together in a room, talk about changes, talk about what they're seeing in the different industries and their regulatory environments has been really helpful. And I think you've seen a lot of success and a lot of good policy come out of areas where there was alignment from all those groups. Obviously, there's not going to always be alignment between the gas and electric industry on a lot of different issues. But I think where there is alignment and congruence and our goals are all kind of in the same direction, I think we've made a lot of really good policies that have helped this grid stay reliable. And hopefully, you know, those groups will continue to help inform our policy going forward so we can, like I said, iterate on an ongoing basis to make sure that the mistakes we made leading up to and during Uri don't ever happen again.

Doug Lewin

Yeah, I appreciate that. And I think, you know, during Winter Storm Heather, the recent one, while things were better than during Elliott. They weren't perfect. There were outages. And it's not, it’s not ever going to be perfect? I think that spirit of continuous improvement is really, really key. 

Chair Gleeson

And I think that's important, right? Because Heather ended up being a different type of event, right? 

Doug Lewin

Yeah, it wasn't Uri.

Chair Gleeson

That's right. And you end up having distribution issues or it's never going to be exactly the same. There's not a one size fits all, you know, here's the playbook for in a winter storm. This is the checklist of what you need to do. And at the end of that success, that's not how this is going to work. And with each passing season, summer and winter, we're learning more and more and we can adapt to what we're seeing and the information we're getting so that we can be better prepared going forward.

Doug Lewin

Yeah, so my diagnosis of Uri, and obviously I've thought about this a lot and talked about it a lot, listened a lot about this, read a lot about it. And you can agree or disagree with this, obviously. I think it was three things, weatherization, weatherization, weatherization. Weatherization of the gas supply system was not adequate. Weatherization of power plants weren't adequate and weatherization of our homes and buildings were not adequate. We had a spike in demand, much of that caused by resistance heat. This was talked about a lot yesterday. There was a whole panel on advanced heat pumps. So I guess, first of all, I can ask, do you kind of agree with that diagnosis that demand and sort of wasted energy, inefficient use of energy, sort of inefficient heat in poorly insulated homes was sort of one of the main things? And if so, how do we address that?

Chair Gleeson

Yeah, so I definitely do. I'd say the other part of that that kind of encompasses everything and encircles it is poor communication. I think a lot of those issues on the residential side could have been, the situation could have been ameliorated had we communicated better about what we thought was going to happen because people could have made preparations. You know, I think what you saw, at least in the data that I've seen, is when people would get their power back on for, you know, an hour or two hours in that five day stretch, they would just crank up their heat and it set it to 90 and would just constantly run because they were afraid that their homes were going to lose power again and they wanted to heat it. And then if that didn't happen, because they never knew if it would happen, they just kept their thermostats where they were. And yes, I think it is fair to say that if we had had, if everyone was receiving electricity during that time period, the amount of load that would have been on that we've tried to estimate would have been outrageous.

I agree, you know, as with most kind of retrofitting or any discussions around that, the question, you know, to move away from resistance heating is going to be who's going to pay for that. This group may know better than me. I've seen estimates, for retrofitting a standard house that uses 1200 megawatts on average throughout the year to install pumps would cost anywhere for some models between 1500 all the way up. I've seen some systems can cost $35,000. And so, you know, as by experience and education, I have an economics background, so I think about vertical and horizontal equity and most things on the policy side that I think about. And finding ways to ensure that everyone can participate in that and receive the benefits, I think is something that the state needs to be talking about, that groups like this need to be talking about. Because, yeah, I think it would help. It helps on bills, helps on the affordability side. I think it helps on the environmental side and sustainability side and obviously would help us if you can see a reduction in heating up to 65% by switching away to pumps from resistance heating. That's obviously a benefit to the system, which is something we need because as we're seeing this expansion, that's not just an expansion when I talk about it of resources, the megawatt we're not using is just as valuable as the megawatt we're generating. And so I think it's incumbent on us to have those discussions on both sides of the equation. 

And one of the things I'm excited about recently, we've set up. And I think you all heard from Ramya Ramaswamy yesterday, you know, a Division of Energy Efficiency. And she's going to be working with Commissioner Jackson on our energy efficiency initiatives and our demand response initiatives. And so I think that will definitely help. You know, there was a bill, which I'm sure you're familiar with, Doug, last session to kind of put together an advisory council on these things. I think we probably got started a little too late in the process. And a lot of folks had a lot of ideas. So I think that just kind of died on the vine. I'm hopeful that if we start earlier going into this session, we'll have a much broader and deeper conversation about energy efficiency and demand response at the legislature.

Doug Lewin

I do think it's a really big step to have an energy efficiency division. I mean, in some ways it's disappointing it took this long, but you can only deal with what you got and deal with where you are and go forward from there. And I think setting up the division is a huge step.

Chair Gleeson

Yeah. And, you know, and I think you're right. It is unfortunate. And most of the time, I don't know if many of you have ever worked in government or state government. You know, we're resourced in a way typically where what you focus on is subject to kind of an acute onset issue that is in front of you. Right?  And so, you know, I think often to my 15, 16 years at the commission. For most of that up until Uri we focused on regulated utilities and rate cases. You know our former executive directors have gotten involved, you know, in those types of issues not really involved in market issues. If you ever saw uh one of our open meetings pre-Uri there were not constant discussions about ERCOT and market design 

Doug Lewin

They were like 30 minutes.

Chair Gleeson

Yeah and so  it took that event to really refocus us and I think as we've done a lot on the, you know, market design side on trying to incent generation. I think it's just natural that now we have to pivot to the other side of that equation and start to focus, you know, on the demand side as well. And I think we will do that.

Doug Lewin

When we were talking before we came up here, you said you wanted this to be a conversation and not just me asking you questions. So I'm going to use that license you gave me and just talk about energy efficiency for just a minute. And I'll say again, we're at the SPEER Industry Conference. There are exhibitors here from Daikin and Mitsubishi that make heat pumps. And I will say the costs are coming down. We're not seeing a cost decline like solar and batteries. It's not 90% over 10 years. But there are cost declines happening. They are happening pretty rapidly as heat pumps are scaling around the world. The International Energy Agency is putting out reports on heat pumps like this is a global phenomenon and we are starting to see those costs come down.

You know, you talked about 2011 after that Winter Storm, and I agree, I don't think the state did a lot of the things it should have done. One of the recommendations from FERC and NERC following Winter Storm Uri was to implement more energy efficiency. And I understand you guys are taking steps, there's an energy efficiency division, but that's not the same as actually getting the savings.

And what we see with resistance heat, and this is in the FERC and NERC report, there was a UT study on this, a home that has resistance heat, They have a scatter plot, right? So there's a range, but we'll use two to four times as much power at 14 degrees. And of course, Uri was far colder than 14 degrees. Then that same home at 100 degrees, two to four times as much. So you're talking about an extra 5, 10 kW per home. And there's 4 million homes in Texas.

So ERCOT had estimated during Uri 77 gigawatts of demand. There's an A&M research team that had 82 as their estimate. There's a UT estimate that's somewhere between the range of 87 to 92 gigawatts of load during Winter Storm Uri driven by resistance heat. You don't have to respond to all that. I just think it's really important and I hope that you'll have a chance to talk to the Daikin and Mitsubishi and all these companies that are, I've left some out Carrier, Trane, I love them all i'm not trying to play favorites here there's but the technology is advancing very fast there's a lot of options in the market

And I just want to – just one last thing, and then I'm going to turn it back to you because I think your point about equity is very important. We have to make sure that as we have these incentive programs, it's not only people that are making 6 figures that can access them. Of course, the PUC has low-income programs. Maybe that's an area where we could really look at talking about an energy expansion, expanding what we're doing for folks that are, according to the Federal Reserve Bank of Dallas, 57% of Texans are choosing between food, medicine, and paying their power bill. 57. That's just a shocking number. So maybe that's an area to look at is really kind of expanding those low-income programs. 

Commissioner Gleeson

Yeah, no, I think so. If you'll remember back, the low-income discount and the system benefit fund that funded that kind of always became kind of a political issue because that was a dedicated fund in the Treasury, which in lean times in the state budget, the corpus of that fund was used to balance the budget. And so I think that was one of the kind of failures of that ultimately was the legislature had an incentive to not spend all that money and for the purposes it was being collected for. So as I've had conversations about this, I've talked about, you know, the way you would want to do it is set it up outside the treasury so there's no incentive from on the state side if we ever run into budget issues again to not spend all that money for what's being collected on.

The other thing is, you know, in this environment, the chances of a new assessment being tacked on the bills, as we're talking about affordability, is probably not one that's realistic. But we do have surpluses. We run surpluses. We have a lot of money in the economic stabilization fund. This is a direct way for the state to get behind affordability is to allocate some of that money to a fund outside the treasury that we can then look at how to best spend it. And I think obviously bill credits is one. You know, one of the big impediments I hear often from the retail electric providers is we have to get smart thermostats in everyone's home. They're not excited about doing that because they don't want to put in that cost on the front end just to have someone leave them. Well if the state funded that we wouldn't have to worry about that. And everyone benefits from having  low income customers be able to participate in programs like that. And so, yeah, I think you're right. A broadening in all senses. 

You know, as far as resistance heating, I think it's something we need to deal with. I would say from the commission side. And this is why I'm hopeful that we'll get a broader coalition to support an advisory committee on this. We have just our small slice of that policy. We don't deal with building codes on energy efficiency. We don't deal with the litany of other issues. So I think it's important to get buy-in for something that I think is this important from a broad coalition of folks from a lot of different industries and a lot of different regulatory partners that have different regulatory oversight of the areas around energy efficiency that can be most beneficial.

Doug Lewin

Yeah, and yesterday, this audience heard from EddyTrevino from the State Energy Conservation Office. They're about to have some dollars through the HOMES and HEAR program to spend on low-income energy efficiency. So yeah, coordination is key. There's obviously, though, some that could be done through the efficiency programs that you guys have right now, right?

Chair Gleeson

Absolutely, yeah. We have existing programs, and you can always increase those. I would say, though, similar to what my feelings are on market design a lot of times, we look at kind of one knob and either dial it up or dial it down without really looking at what the total impact could be if we looked at all the different knobs together and how the interplay between those would most effectively and efficiently be utilized.

So I would argue just from a policy standpoint, it's probably better to get a comprehensive view and then funnel down into which knob you need to turn based on the full litany of options in front of you, as opposed to just focusing on what one regulatory body can do in a vacuum.

Doug Lewin

That makes a lot of sense. I'm all for the bigger view. You were talking about planning earlier. You have to have that view if you're going to have effective planning. 

Just on this vein, I do want to shift gears and ask you about some other things, but Texas is one of a minority of states that does not track utility shut offs. Well, maybe tracks, doesn't report utility shut offs. I wonder if that's not a you know, when I hear numbers like the 57% from the Federal Reserve, I think the census puts the number at 45%. But like, somewhere around half fail to pay their bills. And yet we don't know how many are being shut up. I wonder if that's a way to connect those dots to solve multiple problems. You're dealing with the reliability piece. If you're switching out resistance heat, you're dealing with the affordability piece if yes, sometimes people just need a bill credit just to get to the next month. But then they're going to be back in that position a couple months down the road unless there's some energy efficiency done. I wonder if a first step isn't simply tracking and reporting the shutoffs and then trying to connect people before they're shut off to some kind of aid, both short term and longer term in terms of energy efficiency.

Chair Gleeson

No, I think that's absolutely right. I think data around that needs to be measured so you can see what the actual impact is. One of the things we hear quite often, obviously in our rules, we have moratoriums on disconnect during certain extreme weather periods. We'll hear from customers and get complaints that they weren't disconnected. They continue to rack up bills, and then they can't afford now this giant bill that they have on the back end of that.

And so I think you're right. Simply not disconnecting people is not the answer because it doesn't address the affordability aspect of that. 

Doug Lewin

The bill is still there. 

Chair Gleeson

That's right. And they won't be able to switch, and it can become a problem, and you're just digging a hole you can't get out of more and more. And so, no, I think you're right. I think as we look at affordability, whether it's bill credits, whether it's weatherization of residential homes for low-income folks or for all folks, in all honesty, I mean, I think, you know, like I said, my heart is focusing on low-income folks because I cut my teeth in a lot of these programs on the low income side.

But I think in order for the system to benefit to the maximum extent it can, we have to make those types of programs something that everyone is focused on. So just because low income folks may be able to get a discount doesn't solve the problem that I don't know that a lot of folks in different socioeconomic situations think about the benefit of upgrading their windows so that they keep more heat or air conditioning in. Think about the seals around their windows, their doors. Think about the insulation in their attics. I don't know that there's necessarily always a direct connection in people's minds that they see in the summer, a $600 bill, and they go, I need to use less energy. And they think about turning their thermostat up and down as opposed to saying, I'm using too much energy. How can I keep my house where I'm comfortable but – 

Doug Lewin

Or be more comfortable.

Chair Gleeson

– and not pay the bill that I'm paying. And I think, you know, a lot of that's around education. As you know, we've started a division of public outreach at the commission. And that's one of the things that Mike Hoke, who used to be our governmental relations director, does when he goes out into communities is talk to folks about these kind of issues that I don't think are front of mind. You know, we're in the industry. I talk about this all the time. We probably talk about it all the time. I don't think communities out there, especially the smaller ones, really think about the benefits that are out there to making changes to their homes. And so I think that's one of our goals is to just educate folks on what they can do on the affordability side anywhere that the state can help out. I think it should.

Doug Lewin

Yeah, you guys have an important role there. I'm glad to hear that's part of the mission. And I'll just say before, I do want to shift gears a little bit, but you're right. There's a lot of energy efficiency potential in some of the higher socioeconomic strata as well. There are tax credits available there, and I believe it's capped at, you know, this is not tax advice. Please check with your tax attorney or your accountant, whatever. But you can get, I believe, $2,000 per year. So, you know, we're recording here in September. People hear this in the fall. You can do 2000 this calendar year, another 2000 beginning of next year, whether it's windows or a heat pump or insulation. But of course, you have to have a tax burden for that to be meaningful. So the low income programs are very important. 

I do want to shift gears a little bit. Obviously, Hurricane Beryl happened a couple of months ago. It’s had a whole lot of attention. There's a lot of different things we could talk about related to that. And I'm happy for you to say whatever you want to say on that. But the question I want to ask you, you had a really interesting exchange with the, I believe it was I believe it was actually the special committee. I was going to say it was Business and Commerce, but there was a special committee on hurricane response and preparedness. And Senator Kolkhorst was talking to you about this. She said, looking at incentives, do the incentives of utilities align with their customers? And she added, “I'm just going to tell you, it does not. I don't really feel like we have a performance-based system.” You responded, “I don't either. While there is statutory language that says we can reduce return based on their performance,” you said, “that power has only been used once.” 

So obviously, I heard this quote recently. I'll give credit where it comes from. It was the Volts podcast. Dave Roberts with Charles Hua was talking about utility regulation. And I think it was Charles that had said something like the regulatory system might be even more outdated than the infrastructure we're trying to update. But that was a great quote. I mean, it's a regulatory model that comes from 100 years ago that was at a time where they were trying to attract capital just to electrify. And so you have this sort of guaranteed return on equity. So my question for you is, does that need to change? Do we need to be looking at some system that is more geared towards the outcomes we want to see on the distribution grid? Or can that old model actually kind of work? And we don't need to look at that as much.

Chair Gleeson

Yeah, you know, I think it can work. I don't know if it can work well. And so, you know, one of the things I talked to through that special committee, we ended up interacting, particularly on the health side, with a number of members who we normally don't interact with. And, you know, I actually went through the exercise with one house member of this is how a rate is made. We spent probably 90 minutes in the PUC offices going through this, and that member was surprised at kind of how revenues flowed to transmission distribution utilities. You know, one of the eye-opening things in particular was, we talk a lot about vegetation management coming out of Beryl. I think that has proven, will continue to prove, to be the major issue that we had was vegetation management was just suboptimal. The utility has an incentive post-rate case to reduce O&M costs because they earn a recovery of those costs but not a return on those costs. So if they're looking to maximize the amount of money that they spend on the capital, you know, the capital side of the rate equation so that their shareholders can earn a return on that, they're going to cut from O&M expense, which is where, in a rate case, vegetation management is. But, and if you've seen any of the discussion about this or any of the articles. What we'll now see is a contested case go through the commission where those costs related to Beryl can be securitized and paid out over 30 years for the restoration costs. The vegetation management through that case, it's considered capital. So you have this odd incentive of to decrease your vegetation management on the front end in the rate case, because if you have to do restoration on the back end that includes vegetation management, you earn a return on that. And so that's just one example.

I don't think anyone you know, I don't think that was done on purpose, I'm sure those things were done, you know, not synchronously. And so one statute was done and then another one. But, you know, that's just one of those areas where I think about that's probably not the incentive that we want. We want the incentives to line up, do everything you need to do on the front end. So you don't have to do it on the back end because the ratepayers are paying for it one way or another. And they're paying for it a lot more on the back end. So we need to provide incentives and set up an incentive framework that gives them the, that sets forth what our goal is, which is do this on the front end so we're not having to do restoration and the economic incentives need to be lined up that way. 

Doug Lewin

Yeah, there's a great paper I'll put in the show notes and for anybody in the room I can I can help you find it later if you can't find it, but it's RMI does this. It's called like their four pillars, I think, of utility regulation or performance-based regulation reform. And one of those is what they call TotEx, that like instead of earning a return on CapEx, you're earning a return on the combined CapEx and O&M. So you remove that disincentive. Vegetation management is one of them, and it's a really big one, obviously, in terms of Hurricane Beryl. But I also think there's some misaligned incentive for helping customers to get their own generation, whether that's solar or storage or a gas generator, be more energy efficient, all that stuff. Just like you said, I don't think it's like utilities sitting around saying, we don't want people to get that. It's more, how do you make the incentive so they wake up every day saying, my customer's interest is my interest?

Chair Gleeson

Yeah, right. Because I mean, those transmission and distribution companies make money by customers taking power off the grid. So yeah, there's definitely not the incentive to, you know, on the utility side to have customers, you know, need less energy. And so, you know, I think you're right, I think, and that takes a broad discussion, I'm not going to claim to be well versed enough or smart enough to know what what changes, whether they're, you know, very big changes, or maybe they're just marginal changes that that we can look at. One of the unfortunate parts about this is the resiliency plans that are getting filed after the legislation from last session were not filed and nothing had been really decided prior to Beryl. 

I'll say the other thing that we kind of have to change is, I think if any of you have participated in a rate case at the commission, you typically at the beginning, you're trying to decide how big the pie is, right? What the revenue requirement is then and you typically have everyone against the utility, right? All of the people that are going to pay the rates want to shrink that pie. The utility wants to make it as big as possible. Then the second part of that is the allocation. The utility at that point doesn't care, right? They know they're going to get their revenue. It's everyone else now fighting to lessen their share of that pie. I think what this has shown is constantly having parties in these cases take the stance of ‘we have to reduce rates’ is also probably not pragmatic because one of the things that gets cut a lot in those rate cases is O&M expense related to vegetation management. And again, if you take a city, for instance, who may argue that we need to reduce rates, well, this is an outflow of that stance sometimes that proper vegetation management isn't done. And I think if you could go back now, you know, in any of these restoration cases, not just Beryl, and ask customers, would we have been willing to pay a little more through O&M on vegetation management to not deal with these long outages? I think they would say yes. And so I think that's another area that there needs to be a pivot on. Not everyone just trying to shrink that pie to the lowest number it can be.

Doug Lewin

Yeah, and that probably to come back to where we started, we were talking about planning. You were talking about planning at the very beginning. Do we need some different kind of a distribution resource planning? You know, a lot of states have what are called integrated resource plans. We don't have those here because we have a competitive generation market. So you as a regulator aren't picking what kind of generation goes where. Competitive forces determine that. The distribution system still very much centrally planned with a regulator overseeing it. Do we need to do planning differently on the distribution side?

Chair Gleeson

I think we do. I think we need to look at a broader horizon more than anything. I think there's a, you know, in every kind of plan and rate case, there's a focus just on the kind of immediate needs of the system. And again, no one, you know, we're concerned about affordability. So no one wants, what, you know, in industry terms, gold plating of systems or things like that. But again, if you're not looking at the interplay between everything that you're doing, I think it's just not going to work as well. I think you have to take a holistic view of what you're doing. And I think a resource plan like that would be helpful. I think one of the things we'll see in the resiliency plans that are filed. That is forcing the companies that follow those resiliency plans to think comprehensively about their entire system, where the vulnerabilities may be, and how to harden that so that their entire system is resilient. 

Doug Lewin

I want to leave about 10 or 15 minutes for questions. If you have a question, be thinking of that now.  Get yourself ready. I'm not ready for questions yet. I'm going to ask you two more, if that's all right, and then we'll do questions for the audience. 

Chair Gleeson

Yeah, and just so you know, my chief of staff is here. She'll be taking names of everyone. So, you know… 

Doug Lewin

So ask nice questions. So I want to ask you also about the Texas Energy Fund. So the Texas Energy Fund for folks who don't know, the legislature passed in Senate Bill 2627. A bill that puts 10 billion dollars towards three things, it's really four, but let's just call it three, in ERCOT generation, out of ERCOT generation, and then what is called the Texas Power Promise or the Backup Power Package. The legislature appropriated five of that ten. And so far, y'all have, and I know you had statutory deadlines to do this, you guys have focused on the in ERCOT large central station gas plant piece of that. 

My question is, you know, after Hurricane Beryl, where, you know, what the Backup Power Package specifically focuses on, for folks that aren't following this, is microgrids at critical facilities. Backup Power Packages that are a mix of solar, storage, and gas at places like nursing homes, assisted living facilities, fire departments, hospitals, right? Places that need to have fully reliable power. There literally was people that died in nursing homes, Barbara Sturgis, 93 years old in Houston, she lived through so many things in her life and didn't make it through Hurricane Beryl. And I take that, and I hope we all do in the industry, as a personal failure. That should not happen. And that means we collectively as a community aren't doing the right things. That should never happen again. Are you going to, with that $5 billion, spend some on the microgrids, or is it all going towards gas plants? How are you sort of staging that? My worry, just to put my cards on the table here, Chairman, is that we don't know what the next legislature is going to do. There might be $5 billion more, there might not. But there's $5 billion there now, and my concern is that these Backup Power Packages are not going to get to nursing homes and hospitals and the next hurricane hits and there's going to be more people losing their life needlessly.

Chair Gleeson

Yeah. So I'll say that decision hasn't been made yet. We approved a suite of projects, initially 17, now 16, that you're right, would eat up all of that 5 billion plus the interest we expect to accrue over the short period. We're going to have to make that decision depending on how discussions go around the remaining $5 billion that could be appropriated to us, that decision probably has to be made in February, whether or not we're going to pull projects back to fund these other programs, or we're going to move forward. I'm hopeful, you know, I'm sure you all have seen or are aware of what happened the last couple of weeks with the insider account loan piece. If you saw my testimony to State Affairs, I implored that, I'm sorry, not State Affairs, Senate Finance. I implored the finance committee to give us that other 5 billion, you know, and one of the main reasons is because the backup power package, I think, is something that will be extremely helpful to your list of critical infrastructure. I'd probably add Buc-ee's. Maybe H-E-B.

Doug Lewin

Well people laugh but like during, and it is kind of funny, but like but during, but it's not also because during Winter Storm Uri right they're the famous 4 minutes 37 seconds from an actual blackout, right? The difference in the industry between rolling outages and I'm well aware they didn't roll, but the whole grid didn't go down. And if the whole grid had gone down, it might have taken weeks, maybe in a month to bring it back up. And that means, by the way, fueling stations don't work. So people can't get out of the state. There's no power and you don't have gas in your car. You can't go anywhere. Right. So like Buc-ee's actually do need fully reliable power.

Chair Gleeson

That's right. And, you know, a lot of Buc-ee's and H-E-B's have backup power, thankfully. But yeah, I mean, I think those types of facilities, you know, in local communities that would be helped and help the community to ensure that they had power for 48 hours, which is, I think, what we're going to ask for the Backup Power Package to allow for. The benefit of the Backup Power Package, you're talking about the next hurricane, once those funds are allocated, that can be done really quickly. I think of all of the three programs, the funds spent in the Backup Power Package can be effectively spent sooner than any of the other programs. And so what we're waiting on right now, there's an advisory committee. They plan to have a report to us, I think early October, October 1st. We also per statute were required to hire a research entity to help inform our decisions about who to give loans to and what characteristics are. They've submitted a preliminary report. We're still waiting on their final report. I think that's probably mid to late October. And once that's done, we'll start the rulemaking process. I think on staff's timeline, they hope to have the rule for that to be published and in front of us sometime in December, which would then kick off our six months to come to a decision. And so now I'm, you know, I will continue to implore the legislature to give us that other $5 billion so that we can fulfill the promise of the entire legislation of Senate Bill 2627, and particularly on the Backup Power Piece, because that money can pay dividends almost immediately and much sooner than the other programs.

Doug Lewin

Yeah, and I'll just say, you know, I'm critical of the PUC a lot. Some of you sitting there might be going, we need to spend this money. I do want to just convey, and I understand this. I hope everybody understands this. There was a statutory deadline put in there for the larger gas plants that you had to comply with. You guys also are not a particularly large agency. You're very small relative to like TCEQ or Railroad Commission. You guys are given a lot on your plate. You're stretched too thin. So I just want to recognize that. But I also think there's the potential here with, there were 17 projects now there's 16, to do some kind of competition within there where the top three quarters make it and then there's some money left for Backup Power but, my two cents.

Chair Gleeson

Yeah and you know we'll have, there's an advisory committee for the TEF and you know we're gonna have a hearing there on October 8th so I'm sure we'll get some feedback. And and again I, you know I can't stress it enough, I think we need the full 10 billion to do everything that was in that bill because you know it was the last bill filed it was filed late May 1st, 2023, maybe the latest in my my time in dealing with the legislature I've ever seen a bill filed.

Doug Lewin

And passed. It was wild.

Chair Gleeson

And passed. It was wild and it passed overwhelmingly with full support. And so I think you know to fulfill the promise of all the provisions of that legislation we need the full 10 billion. You know this went before the voters. The voters authorized this to be spent. So I think it would really not fulfill the promise of the legislation if we didn't have access to and use the full $10 billion.

Doug Lewin

One last thing before we open up to questions. You guys are doing a hearing in Houston on October 5th. I don't know if somebody can put in the comments of this podcast or if you're in the room, you can say when you stand up. I've been asking a lot of people. I have not been able to find somebody that can tell me there's been a Public Utility Commission meeting outside of Austin any time in the last 25 years.

Chair GleesonNot that I can remember. I know they did when we were going through restructuring and opening the market. 

Doug Lewin

Yeah, in the 90s for sure. 

Chair Gleeson

Former chair Pat Wood held, I believe, hearings across the state to get folks engaged on that to educate people and hear their thoughts. But yes, in my time with the PUC since 2008, we've never held a hearing anywhere but Austin. 

Doug Lewin

So I give you a lot of credit for doing that. I want to ask you, what do you hope to accomplish with that hearing? Kind of give people a little sense of what's going to happen there and what they can expect, what you hope to accomplish. And I'm also wondering, is that a one-off or are you going to kind of get around the state a little bit and listen to people more?

Chair Gleeson

So I think it'll be a one off for Beryl related issues. I think what it will probably help inform going forward is when we have issues that are kind of localized issues, what are outreaches to those communities? You know, I don't know that we're going to want to spend the money to have many hearings, you know, outside of Austin, because that's a lot of staff that are traveling that are using state funds, funds for that. But I think where appropriate, it's definitely worth a conversation. The, what I'm trying to get out of this and the reason that we're doing it is, you know, we opened kind of a portal where anyone in the Gulf Coast area that had issues or had thoughts could submit their thoughts, ideas, and complaints to the commission. I want to say we've gotten somewhere between 10,000 and 20,000 responses. 

Doug Lewin

Is it still open? Okay, so people are hearing this and didn't know about it. And they can write on your main page.

Chair Gleeson

It is still open. It is. There's a link. And so we've had so much outreach on this. I think it's in our interest. I think it's in the interest of a good process to allow folks to come and speak to us directly. You know, initially the thought was we do this as a, just a typical open meeting on a Thursday. I advised against that and we're doing it on a Saturday because I want people not to have to take off of work to come do this. It's going to be, we have our facility that the Mayor of Houston, John Whitmire was able to get for us from, I believe, 9am is when we plan to start and we don't have an end time. So we'll hear from as many people as want to speak to us. I believe, you know, a large part of the Houston delegation will be there. CenterPoint will be there. I think we'll have representatives from the Division of Emergency Management and other local entities out there as well. And it's really just a chance to hear from the people that were directly impacted without having them, the need to come all the way to Austin. We can go to them and hear them out. You know, most of the issues that you'd ever see on an open meeting related to Beryl or to CenterPoint will be posted so that we can have a full discussion about everything that's in front of us and not kind of predetermine where that discussion goes. Everything will be kind of up for grabs as to what we talk about, and hopefully we'll leave there better informed as we have to make some critical decisions in the short term around issues related to Beryl.

Doug Lewin

Yeah, I, again, commend you for doing that. I think it's really, really important and hope that even if it's not, you know, full workshops or open meetings or whatever, you know, the late Brad Jones, who was the CEO of ERCOT, was going around the state doing town halls. You're here. You're clearly, like, wanting to do that, and I just think it's so important. You know, there's a bubble around the PUC in Austin, and it's important to kind of…

Chair Gleeson

There is, and like I said, we have our Division of Public Engagement that goes out, but I think it's important for the commissioners to get out as well to hear from folks from our executive staff to get out there and hear from folks who are the ones impacted by the decisions that we're making.

Doug Lewin

All right, let's open it up to questions. Who wants to ask the first one? All right, I see Kaiba and Cyrus. 

Kaiba White

Thank you. Kaiba White with Public Citizen’s Texas office. Thank you, Chairman, for your comments this morning. Really appreciate a lot that I'm hearing from you. As I was brushing my teeth this morning, a friend texted me about crypto mining and AI increasing demand in Texas and elsewhere. And I'll say this friend has very different political views than I do and does not work in energy. So this is just, you know, kind of on his mind outside of anything professional, which I think indicates that it's something that people are becoming aware of and are concerned about. And I know that you're aware of it. A lot of us are, but I have yet to hear that there's any solution on the horizon for how to bring that under control. Because it seems like just building more generation is not going to be the answer because it's just sky high. So wondering what ideas you have for the state of Texas to get that problem under control.

Chair Gleeson

So, no, I appreciate that question. And I think you're right. This is something, as I hope we pivot away from market design dominating legislative sessions, crypto and AI data center loads, I think, and transmission are going to have a lot, take a lot of the oxygen out of the room in the next legislative session. 

The first thing, and I think the easiest thing to do, is to make crypto miners controllable load resources. This is something we've talked to the Bitcoin Council about and to ERCOT. We hear anecdotally when we talk to crypto miners that they're price sensitive, that at a certain point, let's just say $500 a megawatt, that they come off. I can say from the data I've seen that's generally true, but not always true. And you'll see some interesting behavior when you look at it where a lot of that load will come off, but then even at a higher number come back on. I assume a lot of that has to do with the real-time price of Bitcoin and what kind of hedging they're looking at. So I think the first thing is to make those loads controllable resources by ERCOT so that if we see a problem coming, they can be turned down immediately to help the grid.

Beyond that, it's probably going to take a lot of legislative change. One idea I have heard talked about is potentially coming up with a new class in tariffs to treat those loads differently than, say, other large industrial loads because they have different characteristics. I imagine, you know, as the regulator, I never want to say we don't have the authority to do something until someone tells me we don't. I would probably guess even if we have the authority to do that, some other industrial customers would want to ensure that they don't get brought in into any kind of policy change around that and may want to see legislative action on that so we can have a robust discussion during the legislative session. But I think those are two things that are pretty low hanging fruit that we can deal with, making those loads controllable and then seeing if their characteristics necessitate having a different section in the tariff for them so that they're charged differently for their consumption.

Cyrus Reid

Hello. Good to see you.

Chair Gleeson

I will use, Doug told me I get one veto, so I will use it.

Doug Lewin

Next question, please. Next question.This is Cyrus Reid of the Sierra Club for those that are listening to the podcast.

Cyrus Reid

Thank you for what I think was your continued support for the idea of a Texas Energy Efficiency Council. I think I heard that, so that's not my question. I'm getting a nod, so I'll take that as a yes. Second, Doug asked you about the need for planning in the distribution grid. I don't want to talk about ERCOT. I want to talk about outside of ERCOT. Is it time to have integrated resource planning for the vertically integrated utilities like we used to have so that Sierra Club doesn't have to go and make comments every time there's a new tariff that Entergy has, every time they want to build a gas plant or add solar plants? Should we be having a public process to plan for the next 20 years where stakeholders and shareholders and others can have that discussion, and then that can help guide those upcoming tariffs and individual decisions?

Chair Gleeson

So I think there, you know, I'm not going to say whether we should or shouldn't. I think there are definitely benefits to having integrated resource plans. I think if you talk to the vertically integrated utilities outside of ERCOT and how they operate in other jurisdictions, and what the benefits of an IRP are. I think there's definitely a benefit to that. I will say, I don't know if there is an appetite to go back to IRP in Texas. I will, you know, honestly, that wasn't around when you know, when I got involved in this. I've heard both sides of it from folks, kind of the benefits and then, you know, kind of the negative aspects of trying to plan for that long a period of time. And so many things changing that you end up kind of doing the IRP continuously. And so maybe it's not the panacea or the catch all to deal with all the issues that you're talking about. But again, I don't think that, I don't have the ego to say that we shouldn't discuss changes everywhere that people think there is benefit. 

So what I'll say is, if that is something that folks feel there is benefit to doing, we should have that discussion. You know one of the things I've committed to and I know you know Cyrus obviously, all joking aside, you're very active at the commission and we appreciate that. You know one of the things I always ask people is if you have an issue with what we're doing come tell us because the first time I hear something shouldn't be at the legislature during the hearing. And you're great about that. And I appreciate it. You know, so if there is an appetite to have that discussion, I think it's a discussion we should absolutely have. You know, you may not always agree with where we end up in a decision, but I've committed since I took this job. And I think it was also the way I operate as Executive Director, even if you don't agree with where we are or where we got. I will try my damnedest to ensure you understand how we got there. And so if that's a discussion that you think there's value in, I'm absolutely open to having that conversation.

Doug Lewin

All right, next question.

Cliff Braddock

Hi, I'm Cliff Braddock with METCO Engineering. And Doug introduced the Texas Backup Power a moment ago. So really, I'm going to ask, I think it's a simple question, and I may even have the answer, but I'd like for you to confirm it, Doug, Chairman, if you would. So, you know, that legislation, the 2627, is that the bill number?

Chair Gleeson

Yes, sir.

Cliff Braddock

I believe that was all done with the intent to keep the lights on, so to speak. You know, the two parts with the Texas Energy Fund with 100 megawatt and then the Backup Power Package’s kind of behind the meter. And if I'm not mistaken, I think, like I say, it's resiliency was what was in mind. But coming from the industry, which most of the people in here are kind of on the backside of the meter, we're not really power plant type people. You think about the backup power package, it's got solar, it's got battery, it's got a generator, it's got all that working cohesively to keep the lights on behind the meter. So what I'm really pointing out is that legislation does more than just keep the lights on. It's working with sustainability, energy efficiency, decarbonization, and several other benefactors that are in there. Whereas the power plant side of it is just strictly generation on the grid. 

So here's my question, having said all of that. I'm concerned about regulators like the PUC, utilities and policymakers not being fully aware of the impact of some of our legislation like that. This could be very far reaching, having little miniature microgrids and so forth. So here's the question. The question is: how do those of us in the room that are in this industry and we see all these great benefits and potential that is behind some of these bills, be sure that you and the regulators are fully aware of what the impacts are. Like even right now, a couple of people have said that he's definitely an old guy because he's not using a computer. I printed out a FOIA from the DOE. And it's something that we're responding to. And it's got you mentioned in there, really, saying public utility commissions need to be participants in this because what the DOE is interested in seeing is planning at the PUC level would adapt and accommodate these innovations like the backup power packages. So that's a long question.

Doug Lewin

 So the question is really like how can people inform the commission? Like if you're working in industry and you see things going on, how do you best communicate?

Cliff Braddock

I mean, I'd like to read what the DOE is after. We can get passionate about this because it has such far-reaching benefits, efficiency, sustainability, decarbonization, as well as resiliency. So you're in a great position to help be the conduit from behind the meter to the utility to setting policy. So is there any comments you could offer regarding all that? 

Chair Gleeson

Sure, and I think you're right. It is probably a simple answer I have for you, and it's one word, and it's engage. As we hear often from different folks, the P in PUC stands for public. And we don't turn down meetings. If we're heading down a path that you disagree with or you think we are misinformed or not fully informed, if there's an information asymmetry out there, then come tell us. Our staff, our executive staff, Connie Corona and Barksdale English, our executive director and deputy executive director, are always willing to meet with folks. Like I said, Cyrus is heavily engaged and I think would attest to the fact that we meet with folks so we can hear all sides of an issue.

The other thing I would say is engage on the front end. You're talking about legislation. Engage in the process during a legislative session and leading up to one, whether it's your company or an association. Because I think a lot of times we find, and if you ever look at any of our dockets, we get letters quite often from members who pass legislation, we think it means one thing, and we get a letter saying this was my legislative intent because you are not doing what we thought you were supposed to be doing. Anything we can do to avoid that is obviously beneficial to everybody. So my answer would be: engage. Don't wait till the policy is in place and then say we don't like what you did because that's not helpful. Engage throughout the process. Be an active stakeholder if it affects you and that I think produces the best policy outcome. Again we may hear what you have to say and disagree that that's the intent or that's what the policy should be but we will absolutely listen to your perspective and take that into consideration and form our decision.

Doug Lewin

And I'll also just reiterate something you said earlier. There is an Office of Public Engagement at the PUC now as well. So if you are not sure where to plug in, that's a great place to start. Do your initial inquiry there and they can direct you. We'll put a link to that office in our show notes.

Chair Gleeson

Perfect. And, you know, I don't know if you have much experience interacting with agencies. You know, I'm biased, but I would argue our process is extremely transparent. Everything gets filed. It’s in our interchange. Everyone can see it. There's full transparency on what is being filed and what information we're taking in. So engage in that process and we will give your information the same consideration we give to any other party. 

Doug Lewin

Who's getting the last question? Go ahead.

Kyla McNabb

Kyla McNabb, energy consultant with that state to the north that will not be named. 

Doug Lewin

Not ranked number one in football. That one?

Kyla McNabb

Rebuilding, rebuilding!

So going back to a larger picture, I think in my work within the Southwest Power Pool that we see a lot of conversations happening following through Winter Storm Uri, Southwest Power Pool sending down as much energy as we can through the grid. Wondering your thoughts both probably philosophically as well as practically about how we can tie in the grids better and what that means to enable more power to be transferred between the interconnections? 

Chair Gleeson

So, you know, I don't think there's an appetite to interconnect AC lines from other grids. You know, we have about 1300 megawatts of DC connections to other grids. You know, as I've looked at this, there are benefits to being kind of an island. One of them is, you know, post-Uri, We've made a lot of changes that would not have been in effect if we were FERC jurisdictional at this point. In fact, the feds are using what we've done as a framework for what they're pushing out, you know, at the federal level. 

If you look at Uri, especially on the east side of the state, even if we had AC connections to other grids, those grids needed all the energy that they were producing to stay there. So I'm doubtful as to what benefit that actually would have provided to Texas during Winter Storm Uri. You know, there have definitely been discussions about longer lines. We hear about jumper cables, you know, in case of extreme need. And I think we're open to those kinds of discussions.  Any discussion about taking action that would make ERCOT for jurisdictional, I think are non-starters in this state 

Doug Lewin

But there are FERC jurisdictional waivers for some projects, right, that could be DC connections?

Chair Gleeson

That's correct.

Doug Lewin

Asynchronous.

Chair Gleeson

And before anyone moves forward with those, we ensure that we have that waiver so that we are not FERC jurisdictional. 

Doug Lewin

So we're going to end there. I want to just, in closing, thank you, Chairman, for not only doing this and being here among this really important group of stakeholders working on energy efficiency, but the way you're opening up process, trying to change process at ERCOT so that there's more ability for stakeholders to impact things. The public meeting in Houston. I am a firm believer that when you have a better process and more public participation, you get better outcomes and really appreciate that you're moving that way. Anything else you want to say in closing? Anything I should have asked you that I didn't that you want to say in closing?

Chair Gleeson

No, I appreciate this. Like I said you know you and I don't get to interface too often. I see a lot of new faces in here so I’d say come by interface, interact with the commission. If you think it'd be beneficial we're always happy to have those conversations and look forward to increasing engagement. Happy to, you know, Krista, my Chief of Staff, will probably say we do one of these at least every week at this point. And you know as part of the commitment I made to the Governor when I took this job was I would be out talking to everybody, ensuring that people felt they had a voice at the PUC. And so happy to be helpful in any way we can. If there's anything you need to reach out. And Doug, I appreciate you offering this opportunity to me to talk to a new group. And if anyone wants to continue the discussion, I'll be sampling the IPAs down the hallway a little.

Doug Lewin

And I will say there are at least a couple dozen questions I didn't get to on my list, so I'd love to have you back on the podcast at some point.

Chair Gleeson

Absolutely. Anytime.

Doug Lewin

Thanks to SPEER for making this possible.

Today's episode is a special recording of my live interview on September 6th in Austin with Jigar Shah, Director of the Department of Energy’s Loan Programs Office (LPO). Previous to LPO, Jigar founded SunEdison and served as president of Generate Capital. He also wrote a book called “Climate Wealth: Unlocking the Impact Economy,” and many of the book’s themes come up in this interview. Jigar also previously hosted the Energy Gang Podcast, which I learned a lot from, and recommend to folks to this day.

I loved this conversation with one of the leading thinkers and doers for the past several decades. We talked about the work of the LPO, the surge in manufacturing in the United States, the Inflation Reduction Act, load growth, virtual power plants, batteries, EVs, geothermal, nuclear, hydrogen, and even more. It was a packed hour.

This podcast was recorded live at the 2024 Texas Tribune Festival - Texas’ breakout politics and policy event held in downtown Austin. For recaps from this year's recently concluded event and to stay updated on next year's program, visit TribFest.org.

I hope you enjoy the episode. Timestamps, show notes, and the transcript are below. Please don’t forget to like, share, subscribe, and leave a five-star review wherever you get your podcasts.

Timestamps

1:49 About Jigar and Loan Programs Office (LPO)

5:27 - The Inflation Reduction Act as industrial policy; national security benefits of onshoring the energy industry

9:01 - Load growth

17:33 - Virtual Power Plants, batteries, and EVs

28:57 - State of nuclear energy

35:28 - State of geothermal energy

37:47 - Potential for LPO programs in Texas

45:16 - Exporting American energy technologies and  the potential for further economic growth

46:43 - State of vehicle-to-grid and vehicle-to-home technologies

49:34 - State of hydrogen

51:40 - ERCOT interconnection queue

55:33 - What will happen to DOE and EPA programs under a new presidential administration?

58:45 - Deploy24

Show Notes

Department of Energy Loan Programs Office

Pathways to Commercial Liftoff Reports

Deploy24

Nuclear? Perhaps! - A conversation with Jigar Shah, head of DOE's Loan Programs Office - Volts Podcast

Creating Climate Wealth: Unlocking the Impact Economy by Jigar Shah

The Energy Gang Podcast

Transcript

Doug Lewin

Good to see you all. My name is Doug Lewin. I'm the host of the Energy Capital podcast. We are recording this for the Energy Capital podcast. The first time on the Energy Capital pod, we've done a live recording. So very excited for this and particularly thrilled that for the first time for a live recording, my guest is Jigar Shah.

I think probably everybody who's here knows who he is, but let me just give just a quick introduction as to who Jigar is. In case you don't know, he's the Director of the Loan Programs Office at the Department of Energy. He was the founder of SunEdison, president of Generate Capital. He also wrote a book called “Climate Wealth: Unlocking the Impact Economy”, and we'll talk a little bit about that theme. For years and years, Jigar hosted the Energy Gang, and I think those episodes actually hold up super well. I learned a lot, just listening to that podcast was kind of like an education for me, and I think many, many thousands of other people. So Jigar really is just a huge part of the clean energy economy, and in this role now, at the Loan Program Office (LPO), Jigar has a tremendous opportunity and has been using that opportunity over the last couple years to really accelerate the clean energy economy.

So Jigar, if you want to add anything to that by way of introduction, and then maybe let the folks both in the room and for the podcast know just briefly a little history of LPO, and I think most importantly why it matters.

Jigar Shah

Well, first of all, thank you for having me on, and thanks to the Texas Tribune for putting on this fantastic event. I always meet just fascinating people here, so thank you for that.

Look, I think that we in the United States have always been amazing at innovation, right? I mean, DOE is roughly 45 years old. We've got 10,000 engineers, scientists, and experts at work at the national laboratories around the country. And so whether it's solar panels or modern wind turbines or advanced nuclear designs, enhanced geothermal, hydraulic fracturing, all of that stuff really came out of the research mission of the US Department of Energy. And then it sort of happened that the capital markets of the United States just wasn't interested in commercializing much of that. And so a lot of those technologies went overseas to get commercialized, and now we're importing a lot of those technologies back into the country, having someone else make it.

So the Loan Programs Office was conceived of in 2005 in the 2005 Energy Act. And the goal of it initially was to help build nuclear plants in the United States. In 2007, we had an additional mandate around helping with fossil technologies and renewable energy technologies. And from 2009 to 2011, it was super busy and did about $35 billion worth of loans at that moment. I'd say it went dormant after that. And I think when the Secretary came into the Department of Energy, she and President Biden really wanted to bring back the Loan Programs Office. They asked me to join, and it was the right place at the right time. And today we've got almost $300 billion worth of loan applications into the Loan Programs Office. And it's roughly at 50% debt equity, so it's probably $600 billion worth of projects. And so people in America have never been so energized to do big things again in our country, and it's great to see. 

Doug Lewin

It really is great to see, particularly because – and this is something I think, is not – sometimes is lost on the Inflation Reduction Act and the increase for a Loan Program Office, but also for a lot of other programs. You were on Dave Roberts' great podcast, Volts, talking about nuclear. Anybody interested in nuclear – I know a lot of people are interested in nuclear these days – should be listening to – you should listen to that podcast. What Dave Roberts said, I don't think he said it on that podcast, but he said it somewhere else and I really like it, is that the Inflation Reduction Act is really sort of industrial policy masquerading as climate policy. That the point of the Inflation Reduction Act. Yes, there's a lot in there about clean energy and about decarbonization, but it's also about reshoring manufacturing and actually bringing that back. And that has been one of the huge wins we've seen over the last couple years, right, is the increase in manufacturing. Can you talk about that piece, the competitiveness, actually building a stronger supply chain here, right? We saw after COVID, the weakness of the supply chain and all the problems that caused, and having a lot of sort of critical materials, manufacturing everything from chips, and obviously the CHIPS Act is really important too, to solar panels being manufactured somewhere else makes us vulnerable. The inverse is true. Having it manufactured here makes us stronger. Can you talk about that piece a little bit?

Jigar Shah

Yeah, I mean, I think you've covered a lot of the elements of it. I think, you know, in 2009, there was an attempt to pass climate legislation called Waxman and Markey. That climate legislation was really putting a price on carbon. I think that, you know, because of everyone's experience during COVID. But also I think there was a broader narrative that was started around America wanting to build things in our country. My sense is that it's actually industrial strategy that everyone knew they were voting for industrial strategy. And the climate thing is sort of like a branding exercise. 

I mean, I think when you think about all the Senators that voted for that piece of legislation, there's a lot of them in there that are not necessarily climate focused, but are industrial strategy focused. I think, as you suggested on COVID and supply chains, I mean, when you think about what we're trying to do in the United States, where over 75% of everything we've added to the grid every year since roughly 2016 has been clean, right? Has been solar, wind, hydro, geothermal, nuclear. If all of those component parts were imported from China, you could imagine there being less interest from the American public to continue to invest in the energy transition, right?

I mean, you know, I think that, to me, I don't know that you have to, guess too far, to see what the intention of many of the legislature, of the House and Senate members were when they passed this. I think that when you're thinking about something as essential as energy and the energy transition, we want a lot of our batteries to be made here, our critical minerals to come from a diverse set of sources. And I don't think it means that we're not going to do business with China. I think China is still a very large trading partner of the United States. But I think that we're saying in the same way that we managed OPEC. And we didn't want a certain set of countries to have a stranglehold on oil production and oil prices. I think the same thing is true for solar panels and critical minerals and all the other pieces is we want to make sure that whether it's friendshoring or whether it's onshoring here in our country, we want to make sure we have a diversified supply chain, especially if we're going to continue to increase investment from roughly $100 billion a year to closer to $500, $600, $700 billion a year.

Doug Lewin

Yeah, exactly. And I like the way you put that. We'll continue to do business with China, but then it's from a position of strength. It's not from a position of dependence. It's like, no, we can do these things here.

I want to talk about another really hot topic. I mean, you can't have a conversation for more than nine minutes about energy without bringing up load growth. Obviously, a lot of headlines in the energy world about just really rapid load growth. And even just today at ERCOT, there's a meeting going on where they publish updates every month of load growth. I Tweeted this out earlier today. Just in the last month, there are another four and a half gigawatts worth of interconnection requests for large loads just in ERCOT. So just here.  And to put that in perspective, we're recording this obviously in Austin, Austin Energy, the entire Austin Energy service territory is about 3,000 megawatts. So in Austin and a half, just in the last month, entering the queue, now not everything's gonna be built, that puts it at like 57,000 in the queue on a peak demand system of about 85, 86,000. 

So massive load growth coming. We're seeing data centers. What we were just talking about with manufacturing, obviously that means a lot of load growth to support that manufacturing. You have this really fascinating and unique position where you see what's going on all around the country. You get to work with utilities, with manufacturers. What are you seeing related to load growth? Do you think that some of this is maybe a little overhyped and not all of it's actually coming? And can you just talk about sort of how that's playing out within your queue at the Loan Program Office?

Jigar Shah

Yeah, I mean, I started in this industry in the late 90s. And, I think from that period of time all the way to today, we've generally had no load growth, right? And that energy efficiency every single year basically offset load growth that came out of the grid. So you could imagine that all of the CEOs and CFOs in the electric utility industry their entire careers really were in a zero-load growth environment. And so as a result, there was a lot of hostility, right?

You know, when people wanted to put solar panels on their roof and wanted to do net metering, people were like, you're stealing money from my pocket that we could be using for other things. And you talked about cost shifting, talked about lots of things. Even energy efficiency in some ways was frowned upon. Because people were like, well, we don't want, you know, negative stuff. You had public service commissions who said, had entire dockets around, how do we get more load growth? We need the denominator to be larger so that we can keep electricity costs in check, right? 

And so you can imagine that, now that we're in a place, where we're still doing a ton of energy efficiency, right? The Biden administration has really accelerated all of the updates of energy efficiency standards, etc. So I think you're going to see continued energy efficiency. But I think when you see data center load growth, but also electric vehicles, heat pumps, and as you suggested, the onshore and reshoring piece, it does look like we're going to have load growth that exceeds what energy efficiency can support. 

I don't think we're going to be at 70% load growth. I think it's probably more like 2.5% to 3% across the country, just because I feel like there's a lot of noise in the data. I'll give you one example of what that means. So if you build a new house, and that house has 400 amp service with 240 volts, the utility interconnection application for that is 96 kilowatts, right? But in general, your house is going to use two kilowatts. So the numbers sometimes get skewed and people get confused. So I don't know that I love the interconnection queue and looking at that as the way in which you solve it. But I do think the dynamics of the marketplace has changed such that the electric utilities that I talked to today are no longer trying to figure out how to meet shareholder concerns and figure out how to rate base things that are the most expensive way to do things, et cetera.

I think they're realizing that raising rates by 10% a year every single year is not sustainable, right? That like governors are mad at them, the public service commission's mad at them, obviously residents who have to pay higher electricity bills are mad at them. And so they're starting to say, how do we use next generation technology, a lot of which we've been piloting for 20 plus years at DOE, to be able to manage this moment. And so you're starting to see a lot of folks look at grid enhancing technologies, right, reconductoring, where you replace old wire with wire that can handle two times the amount of electricity. You do dynamic line ratings, and so you change the capacity of what can be sent on that transmission line based on the weather outside, et cetera. And then I think you're seeing a huge amount of interest now in virtual power plants where there's a lot of folks who say, well, if 10 people on the block buy electric vehicles, we have to be able to make sure that we supply power if all 10 people want to plug in at the same time and their heat pumps are going and everything else is on. Well, that causes you to overspend on the distribution grid. And so people are realizing, well, maybe we should figure out a way for people to stagger their charging because most people charge their electric vehicles. They plug in at 5:30 or 6 when they get back. They unplug at 7 in the morning. And so it only charges for three and a half hours during that period of time. So most homeowners don't care which three and a half hours it's charging. Maybe we should stagger them, right? 

And so I think you're starting to see all these new concepts being embraced. And part of this is there's some complexity in it, but it's not too bad. When you're building a data center that's 1,000 megawatts, which is what these new data centers might be, it's going to be disruptive to the grid. Let's just be clear. We're into a lot of planning to figure out how to accommodate these 1,000 megawatt data centers. If you're building a manufacturing facility that has 5 megawatts of load, we can figure out how to put it somewhere. If you're figuring out how to deal with electric vehicles and heat pumps, you can very straightforwardly accommodate that within the grid that we've already built.

So each of these things has a different level of complexity. And I think for a lot of people, what they were saying was, let's just use this old toolbox for all of these issues. And that old toolbox is coming in at 10% rate increases. And then when you look at the new toolbox, which the secretary has been quite visionary about, and so we did these liftoff reports. So we've published a lot of DOE's data and a lot of these solutions back in 2022, 2023, because we saw a lot of this coming. So we're ready for the moment and it turns out the rate increases can be right in line with inflation and still meet this moment, right?

And so I think the tools are there, the load growth is real. I don't think it's 7%. It's probably more like 2.5% to 3.5%. 

Doug Lewin

But that's a lot more than it was in the 90s. 

Jigar Shah

That's a lot more. We've averaged load growth of 0.4% a year. And so it's like almost 8x, right, what we're used to. So it's a lot. But if we do it right, it leads to lower bills for everybody over time, right, because we're using the system we've already paid for more efficiently. And if we do it the wrong way, well, then it'll increase rates by a lot.

Doug Lewin

Yeah, so Jigar just mentioned the liftoff reports. I do want to put a plug in, put a finer point on that. Those liftoff reports are fantastic. I'm a person that reads a lot of reports. They're really well done.

And so, I want to get into, and I should say also, we are going to leave time at the end for questions. So we're going to cover a lot of ground here, but if there's things that we don't cover and you want to ask about at the end, so be thinking of what your questions are.

Your mantra has kind of been deploy, right? People wear T-shirts around with your face on it with the word deploy. I know. 

Jigar Shah

It's weird. We're in Austin, but still it's weird. 

Doug Lewin

Weird in the best sort of way. I love it. So I don't have one yet. I probably should get one.

But speaking of deploy, this has really kind of been the emphasis of the Loan Programs Office. And so these reports you're putting out, they're foundational, they're important to increase people's understanding, but it really kind of comes down to the projects and what's getting done.

So let's, can we kind of, I want to kind of run through some of that, like what you guys are prioritizing. And then if you could maybe give an example or two of where these things are happening so people can kind of get a sense of where they're happening. 

So let's start there with the Virtual Power Plants. So when we think about that load growth coming, we have to remember that, just as you put it, it's not going to be done the old way where you just take that maximum possible peak load, add 15% a generation, and if it happens that way we're going to really hurt consumers. The system's going to kind of break, but there's no reason it has to happen that way. So with Virtual Power Plants, we're talking about adding up lots of little tiny sources into a much bigger whole.

We are actually seeing this in Texas through a really exciting project, the Aggregated Distributed Energy Resource Pilot, A-D-E-R Pilot. Just recorded a podcast with Arushi Sharma Frank about what has gone on with that. Can you talk a little bit more about VPPs? And I think, Jigar, the most important thing is like, how does this impact somebody's life? Are they going to be able to get a bill credit for this? Do they get a payment for this? Does it allow them to increase the control they have over their homes? So one, to kind of make it more real for people, what does this actually mean? And then are there projects you guys are actually funding at DOE right now on VPPs?

Jigar Shah

Yeah, a lot there. Look, I'd start with saying that the underlying technology that we need to unlock these virtual power plants have been added to everything that you buy starting in 2016. So today, if you go out and buy something, whether it's a refrigerator or a water heater or an EV charger or whatever it is a thermostat. There's an app for all of it. I mean, I just bought two humidifiers. There was an app for the humidifiers. I'm not sure what I would do with it, but whatever it is, there's an app for it, right?

And so by definition, when you have an app, that means there's a way to communicate with the device without physically going and touching the device, right? And so that means that this layer by which you can control these devices exists already, right? So now the question becomes, who is that useful for, right? And so it depends on the business model that you're operating in. So in Texas, you have a deregulated market, a lot of people have retail electricity providers, and those providers have to go out into the wholesale market and buy power for you to supply you power. They have to hedge, they have to do all sorts of interesting things. That results in a certain cost, and then that cost is shared with you. There are some retail providers like Octopus Energy or others who've said, hey, if you let us control four of those apps for you, we'll give you a big discount on your bill.

And some folks are saying, great, I would like that discount. And other people are saying, keep your hands off my appliances. Totally fine too, right? But then you don't get the discount, right? And so I think as people start to become aware that these things are available, then they're starting to take advantage of it. Some of them are done via price signals. So when you look at like Duke Energy or Florida Power and Light's territory, they're saying, hey, you know, we want to put in an EV charger, but there are certain hours of the day where those EV chargers are going to generate a lot more complexity for us than other hours. And so if you agree not to charge during those hours, we'll give you a heavily discounted rate for your EV charging. And if you need to charge because it's an emergency, push this little red button and you're going to pay 45 cents a kilowatt hour for those periods of time, right? Which is what it sort of costs you at an EV go station or whatever. And so, again, you know, they're empowering consumers to get much lower costs to power their electric vehicles by showing some flexibility. And if you don't want to show flexibility, you just pay that top rate and you get to do whatever you want, right?

And so I think that all of these things are enabled by pilots that DOE funded for the last 20 years here at Pecan Street in Austin etc., which we started funding, I think, back in 2009. And a lot of that data has been coming forward, right? And so we have this now. Now you go to the next stage, right? The next stage is utilities have to physically make changes to their distribution circuit, right? So people are saying, hey, you know, the peak load that's theoretical might go up because everyone's putting in heat pumps or everyone's putting in a heat pump water heater or people are deciding to get off of natural gas or whatever it is that they're doing, and that load is going up.

And so what the utility is now saying is, like, look, if we have to make this investment, that's $150 million, and we're going to have to charge you that $150 million. Instead, if there's a reliable way for us to give you compensation for you to have enough load flexibility that we feel confident that enough people have opted in that we can actually manage the existing grid the way it is and just use it more productively, then we can avoid the $150 million. And we can put some of that money that we would have spent on the $150 million into your pocket. And that's really what this virtual power plant thing is. And it comes in all shapes and sizes. So clearly what most people think of when they think about it is Tesla Powerwalls and Tesla Electric is a retail provider and there's all these people who get on Twitter and show people their negative $500 bill because they sold power back into the grid when grid prices were $5 a kilowatt hour and whatever else, right? Fine. Kind of cool looking. I don't think that people should rely on that long term. But, you know… 

So you've got batteries, right? Some people put solar with those batteries. Now you've got electric vehicles, right? Like F-150 Lightning has been advertising heavy in Texas and saying, hey, if you hire this provider, we can connect it to your house and we can take your entire house off grid, you know, running off of your F-150 Lightning. A lot of folks are like, this is amazing. I'd love to do that, right? So that's another thing that's happening. You've separately got folks who have thermostats, and they're saying, hey, let's aggregate all these thermostats. Now, the thermostats problem is that it works most of the time, but doesn't work some of the time. Because some of the time it's 110 degrees for an entire week and no one wants their thermostat turned off. And so you're going to override that every single time. So yes, it's less useful and therefore less valuable in certain programs. 

And so each one of the technologies has its own benefits, rewards. And so each one of them has a different compensation profile. But when you think about what happened in Houston with CenterPoint, there's a huge backlog of middle class families now that are signing up for backup generators from Generac. Right? That's real money. Someone's got to spend $8,000 to put that thing in their backyard, and then they got to pay somebody every year to come out and test it to make sure it's still working, because otherwise, two years from now, when you need it, it doesn't work, right?

So that is never going to give you a return on investment, right? Like, that is something that you just spend out of your budget. It makes you feel safer for your family. Now, if you put in a battery… Right? Well, now it could cost you the same $8,000, but now you could actually bid into this virtual power plant market and make a return on it. You might not get a positive return. You might get, you know, like most of your money back over 10 years, but that's better than the Generac system where you would have no chance of getting any of your money back over 10 years, right?

But the question becomes, like, when this event happens in Houston, What are people going to do? Right now, the default position is to call Generac and get a diesel generator. The goal, I think, out of all of our education work and all the work we're doing with the utilities and the public service commissions is to say, hey, how come the default position is not a battery? And from the perspective of the utility company, starting from the beginning of what I was saying, they're not hostile to it anymore. And in fact, they want it because they realize that a battery is part of their system and can be viewed as a grid resource, whereas a diesel generator generally has a shutoff switch. You take your home off grid, you're running it off the diesel, so it's not really a functional part of the system that they're operating every day. And so they actually do want you to install a battery, but I was like, well, where does that say something on your website? Do you ever tell people that you'd rather them do a battery? Oh, no, we forgot to do that. Well, you know, people are not going to read your mind. Why don't you say it out loud? 

And so I think that's where we are right now is folks are getting comfortable with each other. They're a little less hostile towards each other. And they're realizing that all these investments that people are making in appliances, vehicles, backup power can be part of the grid and can help your neighbor and everyone else get better resiliency. 

Doug Lewin

No, it's really, really well put. And actually, it's not, I don't think, a coincidence or mistake that CenterPoint's VP, Jason Ryan, is the chair of that ADER task force I was talking about earlier. I recorded a podcast with him, and he talked about how in Houston, 60%, sometimes 70% of the power that they need, they've got to import. They don't have enough power anymore in their service territory. So to your point, getting that solar in storage on rooftops, the storage in people's garage, that can really make a difference. And on the electric vehicles, and you've been great at talking about this, just the aggregated amount of capacity going around in cars right now is phenomenal.

That F-150 you mentioned has standard 98 kWh battery. That'll power a home for, even a big home in Texas with a large air conditioning load, that's three or four days. I mean, it's a massive amount of power. 

Jigar Shah

Yeah, I mean, I think that people have a really hard time processing what's happening. Like, when you think about a million electric vehicles with an average of, let's say, a 100 kilowatt hour battery, then you're talking about 100 million kilowatt hours, right? So that's 100 gigawatt hours worth of batteries that people are buying every year, and that number is going up from a million to 2 million to 3 million cars a year, right?

And so the president's goal of 50% electric vehicles or plug-in hybrids by 2030, right? And so when you think about where we're headed with all of this, the entire United States uses roughly 14,000 gigawatt hours a day we're going to have 14,000 gigawatt hours worth of batteries in people's garages or their homes or backup batteries, et cetera, probably by 2035. It's right around the corner that you're going to have that much capacity sitting around. Not all of it's plugged in, not all of it's accessible that day, but when you think about the sheer scale of how many batteries we're deploying, it's far larger than people are contemplating.

Doug Lewin

All right, I could talk about that topic all day, but I do want to cover a lot of other things. So some of the other fantastic liftoff reports you guys have done at Loan Program Office. Let's talk about nuclear a little bit. The podcast you were on with Dave Roberts, you went deep into it. We won't go that deep today. Talk a little about the prospects for nuclear. I know you were actually very excited about Vogtle, the plants that were completed in Georgia. Texas actually has two sites with nuclear, South Texas Project and Comanche Peak. They both have two units. They were both designed for four. Maybe there's an opportunity there. And then maybe just a little bit also on small modular reactors, which I think you have said are neither small nor modular, which… Isn't that kind of the issue we need to get to where we're modular on nuclear, that we can really just recreate these things much quicker than we're doing now, which isn't very quick at all?

Jigar Shah

Yeah, I think we start with what's the point, right? I mean, I think that there's a lot of folks who say, well, solar is so cheap. Look how much solar we're adding to the Texas grid every single day. And I obviously love solar, and so I think it's great. I think the batteries that are getting added to the Texas grid are also super important and amazing. But we also have a lot of coal, natural gas, other technologies on the grid today. A lot of those assets are getting old, right? So a lot of the coal plants are retiring, not because of regulation, but just because they're hitting the end of their life and you'd have to spend a billion dollars to just repair it and do all the work to get it back up to speed. And so a lot of folks are choosing to not build new ones. So when you run a grid that's on solar, wind, and battery storage, you can do it. Our friends in Australia have shown it. You can do it. There's other people who have shown you can do it. But it's expensive. Because you've got to build a lot more transmission capacity to move the electrons around than you would if you had a lot of clean, firm power generation sources.

So when you think about geothermal, nuclear, hydro, if we don't figure out a way to make those technologies cost effective and have those technologies provide 40% or so of the grid, then we're choosing a higher cost approach once we go beyond that. And just to put this in perspective, because I think everyone gets fairly hysterical about these things, the solar and wind industry are sort of in that 20% of the grid range and heading that way now, right? So if nuclear and geothermal and hydro and those things are 40% of the grid, then solar and wind can still go from where they are now to 60% of the grid. They have a lot of growth. Do as much solar, wind, and battery storage as you possibly can. No one's telling you to stop, right? But if we're going to be retiring a lot of these coal plants and then some of these natural gas plants over time, then we need clean, firm power generation resources. So that's why we're bothering, right? 

Now the question is, if you're going to build new nuclear, where would you start? Nuclear power plants require a lot of security, safety, other things. And we have 54 campuses around the country, a few more where their plants have been retired. In those places, you have 90% plus approval ratings of the nuclear power plants. The people who live around nuclear power plants love nuclear power plants. People have worked there for 50 years. Their high schools always seem to have a brand new gymnasium. People love nuclear around there. As you suggested, for the Texas nuclear power plants and others, almost all of them were designed to build four reactors at the site. And many of our nuclear campuses only have one reactor. Some have two reactors. One or two have three reactors. And Vogtle's the only place we have four reactors, right? 

And so just going back into our existing nuclear campuses and building lots of new nuclear plants, you could build somewhere in the neighborhood of 35 gigawatts of new nuclear power plants, right? So you can build a lot of nuclear power plants just at those sites where they're already designed to, and it's 30% cheaper to operate a nuclear power plant that has one nuclear power plant there if you added a second one, because you don't have to double the number of employees, you don't have to double the amount of equipment, you can service two of them with the same staff and the same equipment. So it becomes more efficient from that perspective.

The next piece is then, OK, so now what technology do you settle on? We clearly built AP1000s in Georgia with Vogtle Unit 3 and 4. So to the extent that you wanted to do something that we've already figured out how to do, do more AP1000s, right? Fine. But the problem with AP1000s is that they're 1,100 megawatts each. And so there's something on the order of around $11 billion per reactor. And a lot of people are like, that's a lot of money, right? And so when you go to states where there's only 500,000 meters, when you go to utility territories where there's only 1 million meters that they're servicing, It's a lot of nuclear, right? And so you can imagine that there's a lot of folks who are looking for 300 megawatts. And at 300 megawatts, the price tag is $6 billion now. It's probably going to $3 billion once you're building 10 of them. And so $3 billion feels like something where a lot of these utilities can afford $3 billion. Right? And so that's why you do these smaller reactor designs. It's going to be more expensive to operate a 300 megawatt power plant than a 1,000 megawatt power plant. All things considered, same safety, same everything else. You have 300 megawatts instead of 1,000. It's a little more costly, but from a capital markets perspective, like public service commissions feel better, everyone else feels better doing a 300 megawatt. So I think that we're starting to recognize that. 

The last thing I would say is, when you think about these 1,000 megawatt data centers, where do you put them? It is very hard to go to a Greenfield site, put 1,000 megawatts in there, and then have a grid get modified to accommodate that. A lot of folks are looking at existing nuclear sites and building these 1,000 megawatt data centers nearby, not within the nuclear fence line, but let's call it five miles outside. You don't have to use a transmission grid. You can power it directly from the nuclear plant. But then you can tell the data center company you gotta build a new nuclear plant at that same site to get the additionality, right? And so you're starting to see a lot of the data center companies getting very interested in nuclear power, and that's how you're paying for a lot of that stuff. 

Doug Lewin

Another one y'all have put some focus on is geothermal. This is one that I think has huge potential here in Texas. Pretty good geothermal resource, not as good, obviously, as the Western United States, but good. And it leverages the expertise of oil and gas companies. We've got a couple of great companies in Houston, Fervo and Sage, just to name a few. Are you guys doing some loans in geothermal?  Do you think that that's an area of growth, potentially, for the LPO? 

Jigar Shah

Yeah because of the leadership of Texas and many other states, we now have an entire supply chain around hydraulic fracturing and other modern technologies on subsurface. And so as a result, we think we can actually get to really cost-effective geothermal with about $25 billion of investment into the first three to five gigawatts worth of geothermal. Once you get past the first three to five gigawatts, we think the cost curves are going to come down and geothermal might be some of the lowest cost way of producing power in the West. And so we're excited. 

And you start to see the contract that Google signed with Fervo and NV Energy in Nevada. You saw the announcement between Meta and Sage. And so we're excited to see a lot of the leadership that's coming from the private sector to help commercialize those technologies and then Devon Energy invested into Fervo, and so they're bringing some of their subsurface data and some of their risk management practices to the industry. Halliburton's been quite vocal about the fact that they think that drilling geothermal wells is way easier than drilling the other things that they do. And so I think you're starting to see a level of enthusiasm that frankly was probably more on paper before, but now is being made real and you're starting to see real dollars flow and people within these companies saying, hey, I'd like to work in the geothermal division. And so it's very exciting. 

Doug Lewin

I mean, so much of this really is about learning curves, right? And we come down those cost curves. We've seen solar and storage really go down the learning curve. And in Texas, obviously massive deployment of those. And now we kind of get to that question of like, can nuclear get there? Can geothermal get there? What are those clean firm technologies that are going to get there? 

I want you to talk a little bit about the energy infrastructure reinvestment. Did I get that right? EIR, which is, I believe, the biggest pot or category within the Loan Program Office. So can you talk a little bit about, just tell us what EIR is? And I'm trying to think, Jigar, like where does, it's the Energy Capital podcast, you're at the Texas Tribune Tribfest, like where's the overlap between LPO and Texas? Is EIR an area where there's big potential? And what other areas are there potential for Texas to leverage what's happening at LPO to create jobs, lower costs for consumers, all those good things? 

Jigar Shah

Yeah, I think, you know, one of the things that I think Congress realized is that, you know, when you went from, you know, horses to cars, right? There are a lot of people who were put out of work in the horses business, right? And even though it's far better and, you know, you don't have all the downsides of horses, right? You still have a lot of folks who are dislocated, right? And so now that we're in that situation with the energy transition, whether it's around coal and natural gas and oil or whether it's around hydro facilities and, you know, other places around the country. For many of these communities, they got 50% of all of their property taxes paid for by these plants for the better part of 50 years. And so you can imagine them being fairly resistant to the change that's coming because of the huge hole that it puts in their budget. 

But also, for many of these communities, these are the highest paying jobs in that community right and so when you think about who's sponsoring the baseball team and who's figuring out pizza night and all these other things. It's all the folks who are working at these facilities and so I think what Congress said was like look you know like there are benefits from environmental justice standpoint and labor standpoint of reusing these old sites, right? And not just putting all these new facilities in greenfield sites, but actually saying, hey, for this old coal mine, what can we do with it? With this old coal plant site, what can we do with it? And it turns out that there's a lot we can do because the interconnection point's there, right? So if you want to build a big solar farm and a big battery storage farm, actually the best place to put it is right there at the site of the coal plant.

So what Congress said was like, look, the Loan Programs Office, you normally do innovation in greenhouse gas emissions. You still have the greenhouse gas emissions mandate, but we're dropping the innovation mandate if people are willing to do creative cool things at existing sites, right? And so we have folks who have retiring coal plants that are putting solar plus battery storage there. We have folks who have old transmission lines that are 50 years old that they're now restringing with next generation conductors that hold twice as much power. We have folks who are trying to figure out how to take old hydro dams and actually put fish-friendly turbines in there that actually let fish flow through them without any injury and generates about 25% more power at those sites. We have folks who are looking at old tank farms and terminals that are out of use today. We have old refineries that people are converting into sustainable aviation fuel facilities. We have folks who are taking old nuclear plants and completely refurbishing and turning them back on. And so I think when you think about just how much old infrastructure we have in our country, and a lot of folks viewed them as blights. Places where they've been shut down, they no longer generate any property taxes, and now they're a source of economic growth for those communities. People actually are targeting those communities and saying, hey, how do we partner with you to figure out what you want to do with this old site because we get access to this low-cost loan.

Today, we have about $120 billion of loan requests in for this energy infrastructure reinvestment program, which has been super exciting. And we bought 250 billion dollars worth of loan authority in that program and so there's a lot more we can do and so it's super exciting 

Doug Lewin

And Texas has I believe it's 11,000 megawatts of 30 plus year old gas plants that have that access to transmissions, SCADA systems all that stuff there so it's a great place to look for opportunities for clean, firm, solar, storage, all that kind of stuff. G great. One other area, transmission. You guys are funding transmission. You mentioned reconducting. New lines doesn't come into that? Like brand new transmission lines? 

Jigar Shah

We definitely have brand new transmission lines too. So no bias here for a reconducting per se. It's more, we need, you know, right now our transmission system is whatever size it's at. I'd say, as the business as usual case, we'll probably, you know, over the next 20 years, get to like 1.6x our current transmission grid. Just folks building new stuff and doing whatever they do. I think with the Grid Deployment Office and some of the other folks who've done really remarkable work, I think we're probably going to get to like 1.8x our grid instead, which is great.

But I think we need to go farther. And so a lot of the reason why we're looking at reconductoring is, look, it's really hard, right? I mean… you know, when you want to build long lines, a lot of states don't want those lines going through their states. A lot of neighborhoods don't want those new lines going through their states. And so when you think about where Texas is at right now and the load growth that it's facing, taking the existing lines that you have and figuring out how to flow two times more power along those same right-of-ways can often be a lot easier and politically more practical than, you know, stringing new lines. 

Now, you're gonna be stringing a lot of new lines, too, and Texas has led the world in, you know, speed at which you're building more capacity, which has been fantastic. But I think a lot of what DOE is saying is that these tools are pretty amazing, right? And so if we just unleash and deploy all of these tools that we've been researching for so long, you can get way more out of the grid that we've already paid for, right? And so why wouldn't you do that? Why wouldn't you do the thing that is the lowest cost way of meeting this moment? Why would you choose to do the highest cost thing every single time?

Doug Lewin

Yeah, and we're recording on September 6th, that is one year to the day, which to the energy emergency alert that ERCOT made, the only one post-Uri, and it was because there's a double circuit line, they have a single contingency. Long story short, there's constraints on a transmission line that could probably be reconducted to take a lot more power out of South Texas and bring it into the load centers. This is a huge opportunity. And by the way, ERCOT will be having workshops this month on extra high voltage transmission, there's a cost differential there, but there's probably a state federal partnership opportunity there for Texas to find. We don't have any extra high voltage. There's no 765 in the state of Texas.  I'm going to open it up to questions in just a second. If you want to come to the mic, please do that. Jigar, before somebody asks their question, though, there's so many reports you guys have put out, so many projects. Anything else you want to highlight that I didn't ask about?

Jigar Shah

You know, I think that we are so used to thinking about these issues just from the perspective of the cost of our energy bills. So when we think about building a nuclear plant or a solar facility or a battery storage facility or whatever it is, I think what we sometimes have a hard time thinking about is just how awesome American technology is. It really is extraordinary. And we've never bothered to figure out how to make it here and then export it around the world. And people desperately want it. So when you think about the leadership that people show here around building a nuclear plant or building geothermal facilities or building battery storage, et cetera, the battery technologies that we're deploying right now are largely 10-year-old technology.

The new technologies that we have coming down the pipeline over the next 24 months are game changers compared to what we have now. If we deploy them at scale here, the next step is then to export them to allies around the world, right? And so I think when you think about the wealth creation of our country, us actually going first and us actually deploying stuff here then leads to, you know, America projecting its technology power around the world.

Doug Lewin

Yeah, and growing our economy far into the future. We're seeing, and every IEA report that comes out showing the investment globally in clean energy technologies just boggles my mind. It's a pretty steep curve. Yeah. All right. Why don't we start at the front, Luke, and then we'll go to the back.

Audience Member

Hi, Jigar. You talked about all the millions of batteries in people's garages. Most of those are not Ford F-150 Lightnings right now. What are you seeing in terms of automakers producing vehicle-to-grid-enabled EVs? And then what's happening to aggregate all of those a bit into the market, like we're seeing with ADER Pilot and home batteries, etc.?

Jigar Shah

Yeah, no, it's a good question. And it goes to the question that Doug asked before around deploying, right? I mean, one of my big challenges is that the automakers all started energy divisions within their companies back in like 2016, right? So this is not a new thing. All of the apps for your electric vehicles already let you program like when you would charge your car, right? So that's not a new thing either. You've got venture-backed companies like WeaveGrid and others that have actually done the aggregation work and can provide all that data to the utility companies. What's new is that they're open-minded enough now to actually pay WeaveCrit for that service to do this work, right? 

One of the big challenges that we've had for years is that people want to back these companies. And they've received A round and B round investments. And then there were no customers. Nobody gave them a revenue model on either side. And so five years later, they ran out of cash and went out of business. So I think that when I talk to all the automakers, they're all in on this. The last thing they want is to be accused of raising people's electricity prices, et cetera. So all the functionality that they need to add to their cars are there. They'll keep improving them, I'm sure. And all of the players like Sunrun and others have already trained technicians to be able to do it. 

My sense is there's some like architecture issues. So for instance, if you do vehicle-to-home, right, so that means you're really just taking your home off grid with your truck, that is a very safe thing for the utilities to do. If you're saying, no, we want to do vehicle to grid and we want to be able to put the power back into the distribution circuit, well then, the utilities want a lot more data, they want to understand whether this is going to go up the transformer blow their transformer and all those things. And then they're going to want to do an interconnection study probably at each individual home, right?

So that seems unwieldy. So right now, my sense is vehicle-to-home is probably the right way to go. And then we can think about vehicle-to-grid later when maybe we have a little more confidence. But, you know, I think vehicle-to-home is something we could do right now. 

Doug Lewin

And that would make a huge difference, too, because a home on a hot summer day in Texas using five or six KW even just as the sun's going down, if you can take that four, five, six kilowatts offline and add that up times, I think there's 300,000 electric vehicles now. We'll be at a million in a few years. It's a big deal.

Audience Member

Hello. Thank you both. My name is Grayson Cliff. I'm a Ph.D. student in the Weber Energy Group here at UT Austin. I was hoping you could talk a little bit about the role of hydrogen in our clean energy economy and what are some of the barriers, major barriers, that hydrogen faces in becoming more, its widespread adoption, I guess. What are some of the barriers?

Doug Lewin

Thanks for asking that question. It was on my list and I ran out of time, so I appreciate you.

Jigar Shah

Planted. Look, I think, you know, I've never been a part of the hydrogen hype cycle. And so I think, you know, my own point of view on this is that we use a lot of hydrogen in this country. 

Doug Lewin

In Texas. 

Jigar Shah

In Texas and Louisiana for sure. So you have like three pipelines, hydrogen pipelines traversing Louisiana and Texas. And so you're at 10 million tons of hydrogen a year in the United States. All of that should be decarbonized, right? And DOE is generally very colorblind around it. So whether it's blue hydrogen or green hydrogen or pink hydrogen or whatever color it is, what we care about is that it gets decarbonized, right? And so I think we're very excited about the prospects and we agree that we have the best technology in the world and so we'd like to see it deployed at scale. 

I think that there was a lot of feeling that hydrogen was going to grow in our country and basically be used for hydrogen buses and hydrogen transportation and hydrogen decarbonization of the industrial sector. A lot of that is in the demonstration phase at the Department of Energy. So we did the industrial decarb program out of the Office of Clean Energy Demonstrations. They provided a lot of grants to people to build clean steel or clean other processes. 

But my sense is that that technology is still at a pretty significant premium to what it's competing against. And so we'll have to see how the costs come down and how that works before we can count on that to grow hydrogen. But right now, just decarbonizing the 10 million tons of hydrogen that we use every year in this country is a massive business opportunity that I do think you're going to see a huge amount of progress on by 2030. 

Audience Member

Thank you both for being here. I was curious about all the load trying to interconnect in ERCOT. So really since April, we've been seeing all the really scary numbers that ERCOT’s been putting out, like could double peak load by 2030. Why isn't ERCOT more discerning on what the composition of that load is? Like they've looked into the Permian Basin, it's like a lot of oil and gas load, a lot of Bitcoin, electrolyzers, like if all the scary like ERCOT-wide numbers, like a lot of that's Bitcoin and electrolyzers, I'd be less inclined to think that it will actually come to fruition. 

Doug Lewin

Do you mind if I take that one and then let you add in after? So on the ERCOT interconnection queue, and it's a great segue from the last question, because you're absolutely right, 20 gigawatts of what they're tracking in those big numbers I was citing earlier, 20 gigawatts there is hydrogen electrolyzers. And ERCOT is right now assuming that those are going to be 24-7, 365 loads. If you build a hydrogen electrolyzer and you are obviously going to, you know, with an electrolyzer, it's going to be wind and solar powering it. You're going to make hydrogen when power is really cheap and you're not going to be making hydrogen when power is really expensive. So there's like 20 gigawatts right there. You could look out and see that 150 number and like take 20 off it because they're not going to be producing power at peak when it's $5,000 a megawatt hour. It's kind of crazy.

But if you want to go further, you could actually say, well, what are they going to be doing with that hydrogen when it's $5,000 a megawatt hour? Some of them are going to be putting it into a power plant and sending that power back into the grid and actually helping to solve some of that problem. So, you know, and I think data centers we're going to see more and more co-locating with batteries and and you know one thing we didn't talk about also was just long duration energy storage. Hydrogen ends up being a form of long duration energy storage but there's a lot of others as well. Yeah I think the numbers that they're putting out are a little problematic because they're not considering the flexibility of those resources and how they'll actually act in the market.

Jigar Shah

Yeah, I think that's right. Look, I think that the way that the U.S. economy operates,

I don't know that we love saying that your load is more valuable to the economy than this load, right? So part of the way we do that is through permits, let's say, right? So you can imagine a town saying, I don't want a Bitcoin miner here that generates tons of noise pollution locally to 

my house. And so they may not get a permit to be able to operate, right? I think… So I don't know that we discern what's good load and bad load. 

I think as Doug was saying, I think on the electrolyzer side, look, for better or for worse, right now, you know, hydrogen that's made from natural gas with carbon sequestration and storage is looking a lot cheaper than hydrogen that comes from electrolyzers, right? So my sense is that, like, we'll see where this whole market ends up, and it might change again in a year, but, like, a lot of that may or may not show up. He's absolutely right though that there's no reason to run an electrolyzer if power is expensive on the grid. And we've already funded the Delta Asus project out in Utah, which has got the largest electrolyzer bank in the United States. And that is under construction and hopefully should be online next year. And so, you know, we'll see how that performs, but there's a ton of, you know, negatively priced power on the Western grid. And so I think, you know, I think it'll be quite a profitable project and Chevron's a part of that project and others. And so you're starting to see some of our nation's, you know, best and smartest, you know, developers get involved in these things. 

Audience Member

Thank you again for y'all's thoughtful answers on that. It's also my understanding that how effective the EPA is is really down to who's the president. And so if Trump wins in November, how effective, like what does the Loan Programs Office look like for the next four years?

Doug Lewin

So when you said EPA, in this context, you mean DOE or do you mean just all federal agencies?

Audience Member

Oh, yeah, sorry. I guess I meant EPA specifically, but then I guess, yeah, what does the DOE and then specifically the Loan Program Office look like for the next four years of Trump’s elected?

Jigar Shah

Yeah. No, that's a good question. Look, I think there's a tremendous amount of programs that were passed in the Bipartisan Infrastructure Law and Inflation Reduction Act. I think the administration has been racing to get a lot of that stuff implemented, whether it's standards or tax credits or loan programs or other things. You know, we've got almost $300 billion worth of loan requests into the Loan Program Office. I'd say that I don't know, because I haven't, you know, like, asked. But I think a lot of them are probably Republicans and some of them are Democrats. And so, like, my sense is that the program doesn't shut down if, you know, we have a change in party. I think there could be a slight difference in focus in terms of which sectors are being worked on versus other sectors.

But look, I think that when you think about just how important this moment is to governors around the country, Georgia is one of the largest recipients of new battery manufacturing facilities, new solar manufacturing facilities. I think you just saw a letter come out of the House of Representatives where a lot of Republican members of Congress were like, please don't negatively impact the projects that are already under construction in my hometown. This town has not seen this kind of job growth in many, many years. Please keep that coming. So my sense is that while the rhetoric is quite fiery, that what average Americans want is for us to take these technologies that we invented at the Department of Energy and figure out how to commercialize it here. I think people are tired, in both political parties, of us taking all of our technologies, exporting it to other continents, having them commercialize it, and us importing it back into our country, right? And so I think those trend lines are generally bipartisan, and so I'm hopeful that all the tools that we've put into place are gonna continue to be aggressively used to meet what the American people want.

Doug Lewin

Yeah, just a couple other quick points on that. There's a lot of states that have benefited mightily, including Texas, including South Carolina. And these are like really real. I mean, these, to the point of the- 

Jigar Saha

Well, Cell Link in Georgetown, Texas is building their big facility.

Doug Lewin

Yep, exactly. So there's examples all over the place. These investments are quite real. And I think you do get to a point where there's, from some of these programs, some kind of lock-in that starts to happen where the communities need it and want that investment. We're seeing growth of manufacturing like we haven't seen before.

So we're out of time. Before we run out of time, you have 30 seconds. Can you just plug Deploy 24, which will be in December? Regardless of what happens in the November election, it'll be a fascinating meeting. You just want to plug it real quick?

Jigar Shah

Yeah, I think probably actually as an extension of your last question. So what we're finding is that there's all these new tools, right? And the way in which the state government, the local government, the electric utilities, and the entrepreneurs, and the finance community all works together, of course, labor, environmental justice, organizations, et cetera, to really bring about this transformation that we all want is still kind of confusing. And so we have basically created this infrastructure event called Deploy. And it was Deploy 23 last year, it's Deploy 24 this year. The website’s DeployTogether. 

And in general, what we're seeing is that there's a lot of parts of the U.S. government that has to work together. There's a lot of parts of state and local governments, utilities, et cetera, that have worked together. Everyone's excited, but they could still not be well coordinated. And so you're starting to see just huge amounts of CEOs, CFOs, changemakers, others wanting to get together to figure out how we actually work better together to really accelerate the pace of deploying all these tools from the Inflation Reduction Act, and really seizing this leadership opportunity that I think we all see that we're ready to do, and we frankly have already done it.

I think when you think about the example of Texas and the hydraulic fracturing revolution, where we're now the largest producer of oil and gas in the world, and exporter of LNG, I think you see that same potential within nuclear, geothermal, hydro, sustainable aviation fuels. I mean, all these great sectors where we've had technology for years, but now we're boldly deploying it at scale. 

Doug Lewin

All comes down to energy leadership, and I think Texas will be at the center of it one way or another. Please join me in thanking Jigar Shah for being here. Thanks to the Texas Tribune and TribFest for having this important discussion, and thanks to you all for being here. Have a good day. 

Jigar Shah

Thank you.

There aren't many grid strategies that increase reliability, resiliency, affordability, and sustainability. While many strategies may address one or two of these factors – perhaps even three – distributed energy resources uniquely check all four boxes. After Hurricane Beryl, Texans, including policymakers, were left questioning how such a disaster could happen again, especially so soon after Winter Storm Uri. The pain, suffering, and even loss of life were profound and, tragically, avoidable.

My guest this week is Arushi Sharma Frank. Arushi is one of the smartest people on energy and energy policy, with a particularly deep expertise in distributed energy resources and virtual power plants. She brings a holistic view of energy systems, energy law, and how distributed solutions fit in with the whole.

Arushi is the founder of Luminary Strategies, a DC-based firm advising US and international electric service companies and energy system technology providers. Beyond her national work, Arushi has deep ties to Texas over several energy career positions. She led Tesla's strategic market entry in Texas, when the company launched its first  US wholesale and retail energy businesses here from 2020 to 2024. She pioneered various ERCOT frameworks for grid integrated virtual power plants and Tesla Megapack. And she was a key architect in the creation of the PUC’s Texas ADER or Aggregated Distributed Energy Resource pilot in her former role as Task Force Vice Chair. 

In this episode, Arushi and I explored the rapidly changing landscape of energy storage and its impact on the ERCOT grid. We dove into the nuances of regulatory work and discussed how to meet the resiliency challenges caused by severe storms. Arushi shared her thoughts on how different regulatory structures shape the deployment of distributed solar and energy solutions. And we also got into the expanding role of community solar and storage. 

I hope you enjoy the episode. Timestamps, show notes, details on events where you can find Arushi this fall, and the transcript are below.

Please don’t forget to like, share, subscribe, and leave a five-star review wherever you get your podcasts.

The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Timestamps

3:00 - Arushi’s background and her connection to Texas

6:00 - Arushi’s mindset for working in regulatory spaces

10:00 - How is storage changing the dynamic in the ERCOT grid

14:00 - CenterPoint’s response to Beryl; Storm Protection Plans and cross state comparisons

21:00 - Vertically integrated utilities vs competitive energy-only market and their relationship to distributed storage and energy being deployed

25:30 - Purpose of different plans and their different goals; importance of integrated, grid modernization and distribution infrastructure investment plans

34:00 - Continuity of service and passive survivability; top priorities in disaster planning

37:30 - How mobile solar and batteries are being implemented as resilience solutions in other places in the US

40:20 - Community solar and storage; retail wheeling; PUNs

44:00 - Effectiveness of solar plus storage vs diesel or gas generator backups

48:30 - Texas Power Promise and the efficacy of requiring a mix of solar, storage, and natural gas for microgrids

52:00 - Economic value of resilience and the work of Texas’ ADER Task Force

58:00 - Texas is way behind on DERs but there is hope; how underinvestment in distribution grids can be overcome

Show Notes

ADER filing from Arushi Sharma Frank

Craig Moreau, Chief of Emergency Management and Homeland Security, Fayette County, speaking at Clean Energy States Alliance, speaking on his experience with mobile resilient power systems.

Teaching Substack:

Luminary Strategies Substack:

Luminary Strategies: Powering Everywhere with DERs Newsletter; Powering Texas with DERs Newsletter 

@ArushiSF on Twitter / X 

Places Arushi will be speaking this fall: 

Houston Energy & Climate Week 2024 - Sponsored by Greentown Labs: Climatetech Innovation Festival (September 11, 2024 9:30a - Register Here).  

Houston Energy & Climate Week 2024 - Sponsored by Abundance Institute, Edge Zero:  Cleantech Office Hours: VPPs & Distribution Grids (September 11, 2 pm, Register Here). 

University of Texas: Kay Bailey Hutchinson Energy Center: Power Up Series, Seminar 1, Behind the Scenes at ERCOT, Sept. 17, 2024, Register Here (UT Students).  

New York Climate Week 2024 -  Sponsored by EcoSuite and Mission:Data: Overcoming Clean Energy Friction September 26, 2024 5 pm - Request to Join Here.) 

DERVOS 2024:

Thanks for reading The Texas Energy and Power Newsletter! This post is public so feel free to share it.

Transcript:

Doug Lewin

Arushi Sharma Frank, welcome to the Energy Capital Podcast. So great to have you. 

Arushi Sharma Frank

Thank you, thrilled to be here.

Doug Lewin

We've been talking about this for a while. Glad we made it happen. You have such a great perspective on the things going on in Texas. You've been deeply involved in a lot of the good things happening in Texas. Why don't we just start, just share with our audience just briefly, if you would, kind of who you are, background, your career, your work in advocacy, and specifically the connection to Texas.

Arushi Sharma Frank

Yeah, absolutely. So I started my energy career right out of law school, actually during law school at the American Gas Association (AGA) in Washington, DC. And one of the most important and fabulous elements of starting your energy career in a trade association is that instead of inheriting the knowledge base for one company, you inherit the capacity from that experience of learning a whole system. You learn the production, the distribution, the transmission, the rate design, the cost recovery, the safety, the regulation, all of those aspects. And doing so for instead of one or two companies, but for a couple hundred companies. It really opens your mind and it opened my mind to be very intentional about having a diverse career so that I could be the best at anything I could possibly do to create sustainable and positive change and innovation for our industry. 

So I've been coming to Texas since that job. I was in charge at AGA among other things for creating the Knowledge Center and DC, Washington DC advocacy platform for responsible horizontal drilling and hydraulic fracturing, which are the two technologies that enabled the shale gas boom. And I started coming to Texas at that point. Spent a lot of time in Fort Worth, Dallas, and moving on in my career, moving from representing gas utilities to the IPPs, the independent power producers, the generators. And then going in-house to Exelon. This is before the spin-off in 2016 to 2019. And working very directly with generation operations providers. So the folks who actually operate the nuclear and the conventional thermal power fleet, the folks who actually are out there on the wind operation sites, the folks trying to figure out net power in Texas. I'm actually the person that filed Net Power's, power generation company, filing at the PUC. It's my name on the bottom. So I've got a weird connection to a lot of things in Texas. 

All of that really set me up for the job that I most recently did before starting my own firm. And that was to create an energy advocacy presence for Tesla when they moved their headquarters to Texas in 2020. So that's the cycle. And it's taken me through what I like to call the chakra of energy systems. And all the advocacy work that goes on top of that is very, very much fundamentally grounded in figuring out, these are the first principles of how the technologies work in our life. How do you build the solutions on top of them that enable us to get the best value out of them?

Doug Lewin

So your work at Tesla, when we'll talk about this in the course of the conversation, led to some really groundbreaking work at the PUC with the Aggregated Distributed Energy Resource Task Force. So we'll get into that. You and Tesla really played a very leading role there along with a lot of other folks in the market.

But before we get into those kinds of details, I just want to kind of start though with a little bit of what sort of forms your mindset as an advocate when you come into these kinds of regulatory spaces. You have all these different competing interests. You have sort of an asymmetry of information and there's so much going on. What sort of shapes your approach? I think you've had a lot of success and I know a lot of people that are listening to this are folks that, in many cases, young professionals are wanting to learn more about these arenas, which are so challenging and tricky. So yeah, talk a little bit about your mindset entering those spaces.

Arushi Sharma Frank

So I guess the first thing I tell both the students I work with now and the mentees I've had over the years is success in an energy career comes from being able to take integrated problem solving or integrated thinking from whatever it is that you do in your life and applying it in the context of energy. And for me, that's been music and dance. Both of them are things that I've grown up with or are part of my family. And when I think of energy advocacy, I've always thought of it as orchestrating. Orchestrating various instruments, which if you put them together and they don't quite sound right, there are ways to fine tune and refine each one. Each one has its own timbre, each one has its own tenor, it has its own purpose, and they all fit together. You don't take the oboe out just because the oboe is a little too loud. You modulate the oboe and you might introduce a different second string. 

And the same goes with how we speak in energy. One of the things that's helped me be successful in how I communicate advocacy needs and transition needs and transformation needs is to think about speaking not at your audience, but with your audience. That's a skill that I learned growing up and even today as a classically trained dancer. When you do a performance in dance, your job is not to go and dance at your audience and just do something abstract and then they just kind of stare at you and wonder what you said or what you did. It's to be able to communicate. It's expressive and it invites the return and the engagement from the perspective and also the feeling that the audience gets from what you're saying. 

That's really important to me because I get asked all the time, like, well, how could you have had a role at a company like Tesla and also have represented the gas industry? And I just stare at people for a moment and I say, well, do you remember what our country was primarily powered on in 2011 and what the natural gas evolution did for us? And what it did for us was the transition from coal.

And now we're in a system where we have hurtled through coal retirements, primarily on the backs of the abundant natural gas resource in the United States. And the same sorts of logical, economic, integrated, problem-solving tools have to be used in how we communicate the next goal, the next objective, without losing sight of the journey we've already been on. So in that way, whether it's music or dance or it's just, you know, reading or it's math or it's you doing your garden outside. Like if you plant hostas, you're going to plant something else next to them. They're going to have to live together. You have to design your strategy for how you speak, think, write, advocate for change and for reform, really. To make everything more efficient, everything a little bit better. And in none of those conversations is should your goal ever be to try and shut everyone else down. If that's your goal, you're not going to succeed.

Doug Lewin

Right. I really like this metaphor of the orchestra. I know, for instance, the Texas Advanced Energy Business Alliance, a good trade group focused on Texas grid matters, uses that a lot to talk about these different resources and how they all work together. And we obviously do have a lot of gas on the ERCOT system.  And part of what's happening right now is trying to figure out with these newer resources like storage. Where do they really excel? Where do they play a role? And in some cases, it'll displace technologies and in some cases, it'll complement technologies. Do you want to talk a little bit about that? You obviously spent a lot of time working on storage. Where do you see storage really sort of changing the dynamic in ERCOT? And if you would talk both about the utility scale, the really big stuff, but also the smaller stuff.

Arushi Sharma Frank

You know, one thing that we will get absolutely in the next few years because of the falling cost of storage generally, the availability of the IRA ITC incentives, you know, residential batteries in particular, and even small C&I batteries. I think they're going to be sort of the foundation for the growth that we thought was coming a few years ago and didn't quite get as fast enough, but it was really faster.

And I say that because for all front-of-the-meter technologies, whether it's storage or whether it's new gas fired plants, renewables, et cetera. Transmission and large interconnection infrastructure. So load site connection of the system. Just what do you need to sustain large loads and large generation? All of that is very costly right now and it's taking a long time to get things out of the queue. So what's going to happen in the meantime is that storage as the cost goes down, my view it truly is that just how when we have something new in our lives like a value proposition and we want to capture it as quickly as possible, we'll capture it as quickly as possible by investing on it on the distribution system. Whether that's going to be community microgrids powered with batteries, whether it is the next evolution of standby generation for hurricane resistant resilience, which is already happening, right? We're going to talk about it. Or whether it's residential backup. Batteries are clearly very useful. It's about where they're going to show up first and next. 

On the front of the meter side, one of the things that's going to impact battery investment in Texas in general, of course, is real-time co-optimization, right? The streamlining of the day-ahead market with the real-time energy market, which creates a ton of liquidity. And we all know that when there's more liquidity, we get closer and closer to perfect competition, which means that there are less opportunities for consumer and producer surplus, and there's less deadweight loss. And that means that there's less profit for any one entity. So liquidity will change how people think about batteries, how they build batteries, the duration, the location, etc. But all of that is going to be preceded absolutely by more lower-cost storage resources showing up on the system where it's easier for them to show up faster. 

And that's clear everywhere, that it is easier for me to go out right now and take some of my kids college fund and put it on a couple of battery purchases, right, than it is for me to wait to see if my utility service might improve in six years. The thing is that most people can't do that yet. But that's the thing that needs to change and I think it will change. I think there's going to be massive investment in community resiliency with storage, whether it comes from incenting individuals to procure those resources or whether it's creating community microgrids with smaller size batteries that are distribution connected.

Doug Lewin

Yeah, we're going to dive even deeper into this as we go through because while you're obviously right, there will be these batteries showing up as like you said, the capital for people to invest isn't always there, isn't always prioritized. And so we are seeing right now a lot more of the large batteries, the utility scale batteries than we are distributed. I think we're up to seven or eight gigawatts of the front of the meter, the large scale sort of utility scale storage versus I think we're at somewhere like 500 megawatts or something like that. Correct me if I'm wrong, but something like that, behind-the-meter. 

But I do think and what I want to talk about next is that the, you know, Hurricane Beryl response and just what a horrible and devastating and tragic and unfortunately in a lot of cases deadly, sort of lack of, you know, restoration, the long time it took to get power restored was yet another traumatic experience for the Houston area. And I think it is going to drive a lot more investment in storage and backup generators of all different kinds, which you get, of course, when you have storage, particularly if it's coupled with solar, is the ability to use it throughout the year and in recovery.

So let me turn this into a question. Let's actually just start with, we'll get into storage and all that, but let's just start with CenterPoint's response. You've been in the industry for a long time. What are sort of your major takeaways from the response and from the plan and what you've heard from them about where they're looking to improve?

Arushi Sharma Frank

So I guess the first thing I'll say is that these sorts of improvements really take a long time. And that's not an opinion. That is straight fact from how we have seen utilities who have experienced, that have experienced similar hurricane specific crises. Their journey of improvement is not a couple months. What will be a couple months is the initial phase of what is called in a science experiment, your first hypothesis that these initial things that we'll do, we think will give us these particular short-term returns to solve the most immediate crisis. And along the way, we'll learn a bunch of other things and we'll talk to our communities and our first responders. And then we'll realize that maybe some of the things that they thought were going to help them aren't really there. And so we need to substitute and we need to go back and need to pivot. 

I'll give you an example of this. So Florida and Puerto Rico are great examples of where between hurricanes, a lot happened over a fairly long period of time to create better outcomes on total numbers of outage failures, total numbers of downed wires, poles, et cetera. But it took years in between those things to kind of create the metrics, implement the metrics, actually start doing the preventative maintenance and then be ready and then be able to kind of benchmark what we did with the second hurricane versus the first one. 

I'll give you an example of this. So with Florida, it was Hurricane Wilma in 2005. And then they had benchmarked the performance to respond to Irma against Wilma. And Irma was in 2017. In 2016/2017, that time period, the Florida regulators started requiring FPL, at that point, to start filing storm protection plans. And they are to be filed as SPPs on a minimum of a three year cycle. And in those SPPs, the utilities are required to continually benchmark its performance in subsequent weather events prior events among other things. And in similar support…

Doug Lewin

Arushi, SPP is like a performance plan or what's that? 

Arushi Sharma Frank

It's a Storm Prevention Plan. 

Doug Lewin

Thank you, okay.

Arushi Sharma Frank

And so SPPs or Storm Protection Plans. Sorry, rewind, rewind. It would be nice as prevention, but it's really protection, right? It's mitigation and resilience.

Doug Lewin

We can't really prevent the storm. We could protect against the impacts of it.

Arushi Sharma Frank

That's mine and everyone else in the world's wish that we could just stop these dark rings. But all we can do is do our best to recover from them. 

And so actually, the most recent FPL storm protection plan was actually filed in November 14, 2022, which covers the next decade. So the point of these plans is that you file them on a cycle and then they cover a period on that cycle. There's another, a couple examples like this that I had for you… 

Doug Lewin

And yeah as you're looking that up, what you were saying there is really interesting. They're benchmarking them against a previous storm. In your experience, that isn't happening in Texas. That is happening in Florida, but not in Texas.

Arushi Sharma Frank

Correct. Yes. I haven't seen a storm to storm benchmark from a public utility program, a commission program of any kind. Certainly internally you have to have some way of understanding where your money's going.

Doug Lewin

Well, and I did see, yeah, I saw a comparison they did to Ike, which was 2008. But I think the key here is, and tell me if I'm getting this wrong, in Florida, they're not just benchmarking and doing these performance metrics. They're actually signaling to the utility that your ability to earn, right, is going to be based on. There's at least an upside. I don't know if they do a downside in Florida, right? But if they're actually more successful, they actually see their profits go up. Is that correct?

Arushi Sharma Frank

Yeah, I mean, because at the end of the day, if you're going to be filing in your revenue requirement for CapEx upgrades to your T&D system, and on the other side, you have a very detailed filing that goes, and I'm looking at the FPL requirements. They have to cover, and this is going to go to the integrated concepts that we keep talking about. They have to cover distribution and transmission inspections, feeder and lateral hardening for the distribution system, vegetation management for T&D, and substation storm surge and flood mitigation. 

So in one area, in one filing, one reporting structure, you have to be able to show the least cost, highest value investment of your CapEx. So it's an accountability metric. And I know there's been a lot in the news about PBR, performance-based rate making is a tool to do that. But I think one of the points of doing this sort of benchmarking work is to understand that like, you can drive really smart investment strategies tomorrow. You don't need to create a brand new rate design to see immediate results in terms of how utilities as planners are looking at where they spend their money today, where the marginal dollar should go tomorrow, and what work have they done in the middle to understand the opportunity cost of where they spent that dollar. 

And we'll talk about it a little bit more, but the concept I'm getting to there, the thing that Florida now does, FPL does, as an outgrowth of having this storm prevention plan requirement is integrated system planning. TND being studied together, impact of TND on G being studied together. And it's to the very point that modernization and resiliency, all of the things you hear about in the news that are happening at various utilities, that they happen in a system now that is being increasingly recognized as the only true way to understand accountability around where the next rate payer dollar is set.

Doug Lewin

Yeah. So, and just to, we do like to make sure that this podcast is accessible to folks that aren't as familiar with some of the terms. When Arushi is saying T it's transmission, D is distribution, G is generation. So obviously this is an important distinction actually right between Florida and Texas. So the T&D in both places, fully regulated monopoly. The G generation in Texas, is a competitive function. And this is where some of these problems have come in. And the hearings that have happened post-Beryl and a lot of the press coverage has been around the, and it's a podcast, you can't see my fingers, but I'm doing air quotes, mobile generators that CenterPoint leased for $800 million. And I think what we're looking at when we're talking earlier about distributed energy resources and storage that people are going to purchase at their places. It seems like it should be more straightforward in Texas. This is where Florida has done some really good things on the system hardening side, making the polls more resilient and things like that. Where I still think Florida probably lags and Texas has a chance to go past them is really empowering consumers to have that generation at their premises. 

A lot of the legislators at the hearings post-Beryl were talking about emails and texts and phone calls they got from, for instance, restaurant owners in their district that are like, hey, I can't be out for a week. You know, this is killing my business. So CenterPoint's role should be not to, in my, this is my view and you feel free to push back or react or go a different direction or whatever you want. But my view is rather than spending $800 million on a lease for these great big generators, they should be doing what they can to empower and help their consumers, their customers, interconnect to the grid. And this is another place where a performance metric could be put into place, right? What is the speed to interconnection, right? What are you doing to help those restaurant owners that can't have a week's long outage get the generation they need on site? 

That's something that isn't really going to, that could happen in Florida, but because it's an integrated utility and they do generation, it's going to be harder there, I think, than in Texas where you have that split up and the utility really should be focused on transmission and distribution, not on quote unquote mobile generation. You want to just react to that?

Arushi Sharma Frank

Yeah, well, so just, okay, so trying to not get too wonky too fast. Most of the places in the US, barring Texas more recently where distributed storage in particular has been assigned the highest value stack that it's actually capable of providing to the system as generation, as a non-wire solution, as a greenhouse gas solution, as a home resiliency solution, is actually vertically integrated utilities. It is not a market like Texas, period.

The first place in the country that had a resiliency program predicated on the utility giving out an incentive that covered the entire upfront process of the battery, a bring-your-own device program and or leasing that battery from the utility system was Green Mountain Power in Vermont. It's a vertically regulated company.

Doug Lewin

Right.

Arushi Sharma Frank

So no, actually, I'm going to completely turn your statement on its head there, because what we're getting to is what we know is the most critical piece of distributed device aggregation and where those aggregations should sit. And we know storage in particular and in generation in particular. It has more value the closer it is to load. So a lot of the natural integrated value tools that are available to an FPL or to a GMP or a PG&E or SDG&E, those tools are naturally there because there's one entity in charge of the value proposition and the avoided cost proposition of that resource in multiple uses. I’ve actually written about this, I've got a great LinkedIn article we can stick in there about an old RMI pie that shows the storage pie. 

Now take that to Texas for a minute and think about what that means here. All that means is that in Texas, the VOLL, the value of lost load, value of what a home battery means and what it's worth to a Texan right now. If it's a commercial entity, how much money that business loses because they can't serve customers for the week. All it means is that we need to acknowledge that financially the owners of the responsibility of giving that residential backup and resiliency daily day-to-day resiliency tool. It's full value stack. They're split entities. They have to work together. And an example of that where they can and they will work together is indeed actually a CenterPoint filing.

So in the case of CenterPoint, for example, distribution rates, that's a separate entire section, in a separate entire proceeding, It's the distribution cost recovery factor filing. The battery pilot program is an energy efficiency cost recovery filing. Then you have the mobile generation, which is enabled as a cost recovery mechanism under 39.918, which is the TEEF generation program enabled by that statute that's existed since the last legislative session. And then you have, hold it, hold for it, then you have the resiliency plan from CenterPoint. That's in a separate place.

What you don't have yet is a grid modernization plan or distribution investment plan. Both of those are also two other types of filings that are either being required and mandated in other states or they're being voluntarily proposed and filed by utilities as a place to kind of marry all of these value sets and bring them together. 

Doug Lewin

So you said there are two different kinds of plans that don't happen in Texas, but happen in other places, right? One was like, is it a distribution resource plan? Is that what you said? 

Arushi Sharma Frank

No, it's called a, let me give you the exact word, a distribution infrastructure investment plan.

Doug Lewin

Okay. So yeah, I mean, that could be a distribution resource. Basically, you're looking at the distribution system and you're trying to figure out where the biggest bang for the buck for a particular objective is going to be. And I think that it is really important, and I'm interested in your experience on this in other jurisdictions, to have that be at least a somewhat, if not a very open process. Because the utility is a monopoly. You need to have other entities. You know, it's been said several times again in these hearings post-Beryl, Chair Gleeson from the PUC will say, Hey, you know, it's a monopoly. The role of the regulator is to kind of simulate competition. Well, sometimes you can not only simulate it, you can actually say, ‘Hey, monopoly utility. There's actually a business entity that can provide better.’ Again, I think not to fixate too much on mobile generation, though it's kind of top of mind because it was $800 million. That’s a lot of money that could have done a lot of good. There's probably competitive providers that could have done that better. So distribution resource plan. I think that one is really key. What was the other one? You said there was another one done..

Arushi Sharma Frank

Yeah, that one is actually the grid modernization plans, right? And so the reason that these plans are all different with different types of names is because they're doing different things. And the reason for a specific type of plan to be required to be filed is typically a goal. Now, in one state, that goal might be we don't want to deprive our low income community residents of the chance to have electric vehicles. So what do we need to do? 

We need to ask the utility in this case to file the distribution infrastructure investment plan with a view to reallocate some of those transformer upgrade related rebates specifically to feeders on which we're going to have low income population members who would absolutely benefit from a couple of fast charging stations and benefit from having electric vehicles, either fleet vehicles or vehicles in their home that they can buy and be able to charge in their home circuits. So that's a natural goal. So that's a gold tide plan. 

The other kind, the Storm Protection Plan, that's of course a benchmarking plan. That one is, you're asked to file because the utility regulator wants to see what you're doing everywhere and wants to see that you are making consistent continual performance for every dollar you spend on CapEx on T&D and wants to know where it's going and what it's going to do.

In terms of visibility in other states, there was an omnibus distribution system investment related proceeding in Colorado last year, which may still be ongoing for Xcel. And in that proceeding, basically the reason that they had it is also the reason that Xcel and public documents mentioned we're not sure we really need it. And that was that there were already nine other places where Xcel's distribution system investments were being considered in front of their state regulator and at  least one of the points of an omnibus proceeding around that is to do exactly what the SPP item does in Florida, which is, wait a minute, we'd like to see everywhere that you're spending your cash. And we like to see what that strategy means when you put two and two together and does it actually equal four.

So in that regard, Doug, I guess the other thing to mention is that the distribution system as a place to invest is well recognized and well known as being the place where we historically as utilities in the United States, our system operators have spent the least amount of money. And solving for that has been a priority for state regulatory bodies as a group of peer entities that get together for quite some time. And it mirrors the problem we're seeing at the national stage where we have the same issue with transmission planning.

It almost seems like at this point that it can be NARUC, it can be the White House, it can be the interstate committee of RTOs, and it can be the governors of four states. At the end of the day, if everyone isn't coordinated and moving on the same track, you're not going to get the transmission built as fast as you need it either. Distribution and transmission both, because they suffer from a legacy problem of too much happening in little silos. Getting that integrated problem set and putting it in front of a public audience is pretty darn important. So yeah, I want to see a world where we can see, like, all right, you have this program here that's supposed to incent 3,000 customers having batteries. What's that going to do to the avoided cost of upgrading your distribution system in that area? And then can you take that money that you have avoided spending here and throw it on hardening the fears that go to the homes that suffered the most in Beryl?

Doug Lewin

Absolutely. Absolutely. And that kind of integrated look is so hard to get at because just what you described earlier, you have the DCRF and TCRF and EECRF and a rate case and a resilience plan. I'm forgetting a couple. There's just all these different things going on and it's very hard to have that throughline. 

And this is really where I think that, and maybe we shouldn't call it performance based regulation because people see that as like, you know, 24 point type and capital P capital B capital R. But it's just as simple as saying what end are we trying to achieve and how do we tie profits and compensation to that goal? 

And if you have that then that's a real signal to the utility. And I want to be real clear, I'm often critical of utilities, I'm often critical of ERCOT, I’m often critical of commissioners. I also praise them when they do good things. You mentioned Jason Ryan. I had a podcast interview with him. He's done amazing things as the chair of ADER. It's not that, and this is the post-Bery reaction where you see people in Houston,in some very extreme cases, not many, but in some cases actually threatening line workers and all that. We have to be clear that this isn't personal. These are institutional and structural problems. And this is a for-profit entity that is serving its shareholders. And the key is to align that incentive that will help their shareholders and help the system and their customers. And I think that there's a bit of a mismatch there right now that, again, doesn't have to be the whole massive PBR thing, but just starting with what is the goal. And I think it would be very clear for everybody in Houston right now that reducing the number of outages and the duration of outages is probably going to be as close to a universal goal. Republican, Democrat, independent, you know, race, gender, part of Houston you're in, I think that's going to unite just about everybody at this point. So, is that the way to do that then is to have these kinds of what it's maybe it's a grid modernization docket or something? What in your experience is the best way to actually do that is to have an overarching docket or what’s the mechanics?

Arushi Sharma Frank

I mean, honestly, so the omnibus approach, take it for example, in Colorado would be a great thing to do here. And remember, I mentioned goals and you started just articulating everything in terms of goals as well. 

The obvious goals in the case of just CenterPoint for a moment, continuity of service is goal one. And the other second, the second goal has to be because there has been loss of life, passive survivability. This is a word that's a really important phrase and people don't talk about it enough. 

I'm going to go on a very non-tangent tangent for a second. I was born in New Delhi, moved here when I was very young, but I went to India every year. And I've lived a life of power outages in hot temperatures. Passive survivability means the ability to maintain habitable conditions in the event of heating and cooling losses. What you didn't have in New Delhi was extreme cold events, which you have in Texas, but you have extreme heat. There are natural mechanisms in the home, in the design of the home. And I'm thinking specifically about my great grandmother's house that made it easier for us to survive heat. And it made it easy for her. She passed at nearly 100. She never once complained during an outage when she had no electricity. 

It's because her floors were a composite material, she didn’t have carpets, that generated cool cool temperatures for your body like while you're sitting close to the floor. The furniture was a specific type. The walls had specific you know aerated components that let breezes in and created almost like a natural like circulating like cool air movement through the home. And every single room, even the bathroom, has a ceiling fan that could be operated on a tiny little inverter so you didn't have to have a lot of money to have backup power. You could all go sit in one or two rooms in this house, have a couple of fans on, high powered ones, not like the ones you'll see in the US that are a little more decorative and they tend to not just move as fast, honestly. And small water-based coolers. So these are basically low energy, distributed energy resources almost, but they're part of the mechanism of what you've given people to boost their passive survivability.

So I mean, there's this big market in the US, for example, for portable generators. I was just looking them up before this podcast, and we use them for all sorts of things. Apparently they're on Amazon. And I wonder, like, what is the interim solution right now? Or if you can't get everything done in the next two months, how do you make sure people aren't too hot? How do they survive the next 20 days assuming absolutely nothing can get done in the next month?

That to me seems like number one, number one goal. And then number two, of course, is continuity of service. What was described at the hearings is people just being out for a week and they're losing money, right? They're losing basic, you know, basic needs in their homes and their businesses. 

If passive survivability is goal number one, continuity of service is goal number two, the omnibus proceeding that we're talking about should enable the two month, three month plan for how do you achieve all of those things as fast as possible. And what it means is that there'll be incrementality in the resiliency objectives that you have that are like, okay, these are the things I have to do this month. I can't do all things for DERs this month, but this month I can look around me and realize that first responders in Uri in my own state, responders in Puerto Rico, other towns and cities that have experienced the loss of conventional reciprocating engine generators as backup solutions, they all use cabinets with solar and storage, all of them.

And we'll put a link in your podcast to the experience of the emergency management head in Fayette right outside Houston, who got his first one of these mobile cell storage and solar cabinets from Footprint, I think is the name of the company. And the reason he got it is because his other resources were failing.

Doug Lewin

Meaning diesel generators were not working for him? 

Arushi Sharma Frank

Mhhmmm. And he also describes in the podcast some of the danger issues because he was also trying to use these in the middle of very hot days. And he's had the unfortunate experience of witnessing accidents related to those generators being mishandled or just becoming too hot and a small leak results in something catastrophic. 

So that is an example. It's like in the next month, we want as many standalone mobile instant start, ready for first responders, ready for low voltage interconnection and reenergizing systems, like hovering around like droids in Star Wars as possible. And to be clear, that as a solution set doesn't come from me thinking about it as someone who is like ex-Tesla, nothing to do with it.

The reason that mobile solar and storage has become so popular so quickly in hurricane scenarios is because of Hurricane Maria and because nothing else worked to get people their power. So you had companies coming in and droves just putting these systems all over the island and first responders just having no power in their home, no power at their jobs, no power to power their power tools that they need to go do their jobs.

It literally is the only thing. And it's interesting. And I say this a lot, but a lot of times it takes us as human beings, for whatever reason, a true forcing function crisis for us to think about the next best solution and implement it, even though our attitude around it is like, we have to do this because it's the last resort. No, mobile storage and solar, just because you think it's a last resort is actually the first thing you should have done, because it's the most resilient, most easy, most reliable tool you had in your toolkit to start and did not rely on a third party to do maintenance testing thrice a month so that it would work when you're ready.

Doug Lewin

And basically you're talking about almost like a little bit of a nested strategy, like layers, right? Where you have smaller ones that are mobile and can be moved. And then you've got bigger, that are permanent, but maybe at smaller locations. And then you've got this really big 200 megawatt solar and 285 storage. With the large one, are they able to, because again, you're going to have problems on distribution. You'd have the smaller ones that help with that.

But are you seeing solutions that are basically like community solar and storage where they're maybe not as big as that 200, maybe they're two megawatts or 10 megawatts or something, but closer to where they're needed so that then the restoration can be quicker, right? But here's my question. So I want you to answer that generally, but I'm also specifically interested, can you island those such that if everything else has gone to hell around it and the grid is just not working, whether because of a Uri scenario or Beryl or whatever, that community solar can then power an entire neighborhood?

Arushi Sharma Frank

Yeah, so that's the plan for Australia. We'll have to look up how far it's come, but the community solar storage program in Australia is taking the idea of the whole virtual power plant, you know, mini microgrid, is you, your house, your battery, your solar. And taking that to the community level and investing in that, you know, what I call the CNI or the commercial and industrial scale battery, the two to five megawatt battery and plopping it down on a distribution circuit and building the infrastructure around it to create the community sharing revenue model.

Now, another example of that, which is not necessarily every utility's favorite, but still an important example, is wheeling power inside a private network of wires and exempting the city or the town or the township from the conventional utility regulation model that requires ownership of those wires by the incumbent utility. Retail wheeling, as it's called, is this notion that you are producing power inside your contained microgrid. And yes, you're asking about the ability for that microgrid to operate in parallel with or islanded from the local system. Batteries already enable both of those things. And so going back to the regulatory cook structure, sure, if you want to dig into retail wheeling and cities operating on private wires networks, there are a lot of those projects. Not all of them have a great political rep because obviously they're exempting themselves from utility charges. But we have to find a way to make some version of this work. It doesn't matter if it does.

Doug Lewin

Are those what in Texas we call Private Use Networks or is that different? Is that a PUN? 

Arushi Sharma Frank

Yeah, PUNs are different in the sense that the private use in the private use network, the entity that has the generation and is using it for their own co-located load without a retail meter in the middle. Those entities are usually legally related to each other. They are indeed part of the same LLC network usually. I really don't think there's so many of them where the entity that's getting the load is contracting with a third party that they don't have a business relationship with. But that's a little different from what we're talking about. We're talking about multiple distribution points, right? And then a single generator and somehow all the distribution points are paying for that generation service and the cost of delivering the power through that system.

Doug Lewin

Through a private or it wouldn't necessarily have to be private, but it would be separate from, for instance, like CenterPoint or whatever the utility is, their lines. That's very interesting. And that was, you're saying that was a plan in Australia. So we'll try to track something down and put something in the show notes about that. I definitely want to get smarter on that particular thing. 

Arushi, what I hear all the time from people, you know, well, yeah, this is something I hear a lot about solar and storage. They'll say, well, it can't be as effective as, for instance, a gas generator. I think it's really important people understand that diesel generators have really been problematic in these various storms. This happened again in Beryl. It'll come out more in the coming months as the investigations happen. But again, I hear anecdotally, as with every storm, Uri, that the diesel generators are a problem. They're really hard to maintain. It's hard to get diesel to them. But even the gas generators, which have a better track record, a lot of what I hear is, the solar and storage, you just can't because obviously you're going to get solar 8, 10, 12, whatever hours a day and not 24. You have to make the battery so big that it's not economic. You've obviously worked in this space a long time and have some detailed knowledge about this. I'm curious what you’re reaction to folks who say solar-storage just can’t work because you have to have so much storage to make it work around the clock. 

Arushi Sharma Frank 

Yeah, no, that's not true. But rather than hear it from me, we're going to put a recording of the gentleman who is the head of emergency management in Fayette, who happily talks about his system charging in the eight hour day in Texas in the middle of Uri. So that's middle winter. And we're in summer right now in Texas and his battery system on his mobile solar storage cabinet lasting the whole night. What I think people miss is that how long the battery lasts you is not just contingent on how much charge it is getting from the sun, but what loads are interconnected to it on the other side. So in that sense, the reason you need multiple sizes of diesel or gas generators on a system is because for them, there is this physical limitation where the generator has to be exactly sized pretty much for the load on the other side.

In a battery system, by contrast, what you have is essentially a large drinking tank, if you will. And how fast you drink from the tank is what determines how long it will last. And that's why bought batteries are so modular and can be used for so many applications. So if you're going to size a system for this cabinet that's going to go and power your local community center, you just pop three of those batteries on the floor of the cabinet. You pop eight solar panels on top of the cabinet. There's a big hole in the middle where you put an electrical outlet and hang out and watch, you know, watch your YouTube videos on break in the middle of your emergency service like ships. That's what people need to do. People need places to rest. That's actually what this gentleman from Texas says is like now he uses on non-emergency days. It's actually the mobile cabinet is used as a relief center for the folks who are actually working in his team to go charge their devices, just go sit down and have a place to have some R&R for a few seconds because also able to provide, you know, a fan, like an outlet to just have a fan and get air while you're doing your job. 

And this notion that the battery is going to run out. The reason people have this notion is not just because it just randomly showed up in a gossip trade publication. It’s because most of the media conversation around batteries is thinking about two hour and four hour batteries in ERCOT. And in that context, we're talking about the full availability and the modeled capacity, the nameplate capacity of how long a battery can run in relation to a market design. In the world that we are living in as human beings, as people in our homes and in our businesses and on the road, how long a battery lasts and how you'll size it is not dependent on how quickly you'll run it out. It’s dependent on which loads are absolutely critical to power and how long you want to power those. So always, batteries have always been larger, for example, the Tesla Powerwall, has always been larger in kilowatt than the actual consumption rate that you expect from the home itself. The point of the battery size initially is not to be able to hit 24 hours, it's to be able to have the oomph it needs to restart the AC, the air conditioner. And so we're talking about current at that point.

And now when we put solar with a battery that say has the, what on paper is a two hour duration, that's two hours times whatever the size of the system is. And that's your total kilowatt hours. So if you're home, if you have an average home in Texas and you're still operating on electric resistance heat pump and your whole home day is 32 kilowatt hours. Absolutely, go by the solar panels and the two Tesla Powerwall 2s or the one new Tesla Powerwall 3 or whatever you want, whatever battery system you want, to continuously get yourself those 24 kilowatt hours. But if I'm you, and I probably am in this scenario because we both want to be able to survive an outage, then I am not actually doing the math for one day for everything in my house. I've turned off my pool pump. It's going to be a 15 day outage. I'm sitting in one room with my kids with one fan or one air conditioner on and that battery is going to last me four times as long. And that is exactly what happened during Uri with folks who had batteries. It's exactly what happened during Beryl.

Doug Lewin

Thank you. It's super helpful. And I do think that's exactly what's going on as people are hearing in the news that these batteries are for one or two hours on the grid and forgetting that they can be configured in many different ways. Yeah, I also, I wanted to get your thoughts just very briefly on the Texas Power Promise, which the law stipulates it has to be a mix of solar, storage, and gas. I think it's generally smart because you get some redundancy there and particularly that the bill is focused on critical facilities like nursing homes and fire departments. And you talked earlier about redundancy. So it kind of makes sense to me, but I'm curious if it does to you as well?

Arushi Sharma Frank

Yeah, and redundancy is always a great idea, right? The whole notion of nesting, it's equally applicable for a single resource type as it is for stacking first and backup use cases for any current facility. You just need to know the value, right? So

The value of losing load at a critical facility is $1 million because that facility serves a specific set of functions that are life-saving. And if that entity lost power, we're stuck then you're going to want to put a lot more redundancy at that site. However, if that one site loses power and its job is to do a secondary function that is not a direct life saving fund function, but it's an ancillary service, then maybe instead of having both gas and solar and storage at that site, you only want mobile solar and storage. So if it turns out that your neighbor next door, which actually has people who are suffering from immediate health conditions and have moved out of nursing homes, you want to be able to wheel something from site A to site B.

And to develop that kind of plan while it's great to have, and actually it's critical, of course, to have the legislation that enables a solution. But to make the solution real on the ground in the middle of a health and welfare crisis, you have to have first responders involved to be telling you the best and most important use cases and where they're going to use these things. And that's what gets you to an economic, integrated way of thinking, where it's like, OK, I don't need a gas generator at every one of these sites, but I need them at these four sites. And then I want solar storage at 90% of these sites. And I want 50% of that, all of that, the gas and the mobile, to bring up all stuff, all to be movable and to be able to serve the next critical facility.

Doug Lewin 

Interesting. Yeah, it really does take having that more comprehensive view. We will almost certainly record a part two of this because I have a long list of questions left to ask. For this particular one, let me just ask before we end about the aggregated distributed energy resource task force for which you've been the Vice Chair working along with Jason Ryan at CenterPoint and 18 other folks on, that task force that I think has made a lot of progress. 

I really want to ask about the connection of the ADER task force to these resiliency conversations we've been having today. So mostly what I perceive is going on and tell me if I'm getting this wrong, but it's really been about trying to make sure that DERs can be compensated in the ERCOT market for ancillary services. When you were talking about value stacking earlier, there certainly is value there. And the ADER task force and the pilot project have gone a long way to realizing that layer of the cake, right, the Regulatory Assistance Project, wrote that great paper a long time ago about value stacking of DERs and energy efficiency and the sort of layers of the cake and all the benefits. 

But this is a place where we've got to figure out somehow with ERCOT, with utilities, with the PUC, with the companies providing the solutions, I interviewed Base Power for this podcast, Tesla, the different, there's so many, there's too many to name, all the different providers of the DERs to figure out how do we actually value that resiliency piece, like literally value, like put the financial layer in there to value that resiliency benefit. Is there the potential with the ADER task force and the pilot to do that kind of work or is that round peg square hole? It needs to be done somewhere else and not through that venue.

Arushi Sharma Frank

So, no, it totally has the potential to be that. It will be. And by that, I mean, so first of all, like you mentioned the value of resiliency. The thing is people have started buying residential batteries after Winter Storm Uri in Texas, and they're very expensive. And at that time, it the impetus for even doing this project was like, wait a minute, if everyone's got 10 kilowatts of power on their home because they're worried about the insurance policy day, but it turns out eight of those 10 kilowatts actually monetizable as you know 8 times 2.5 kilowatt hours to be able to actually send power the other direction is crazy that we're not paying customers for that. It's an equity thing because you spend all the money to have power because the system that you're paying to give you power is not giving you power. Right? That's why you spent the money on the batteries. Now that you spend the money, why is it that you can't turn around and get a price signal from the market for what that power is actually worth. It's dispatchable power, right? It's energy. And it's electricity, actually, I should say. 

And the impetus for it comes from this place as like the whole reason for ADER, like truly, is that resiliency acts on the distribution system at a customer home. It has so much value for everybody else. And unless it is seen and it is compensated for and it is measured, there is no way we could be in the world we are today where we have utilities like CenterPoint putting in proposed incentive designs to say, there's a lot of value in these resources. Let's do it. 

And to me, one of the other pieces, like the success of ADER is it's created the first nexus in the competitive areas of Texas in particular for to see batteries they do not own as system planning assets and risks so that they could invest in the distribution system that sits between them, the customer, and ERCOT. The details of the aggregation form, which is like the critical piece of what enables information sharing about how much capacity we're moving back and forth on a distribution theater based on how many of these devices are in that aggregation in that utility area. The whole point of that form, or at least one of the major points of that is to give this ex post facto visibility to a utility. And it can be used as a predictive tool as the size of those assets grow..

So, you mentioned the market compensation piece. To me, that's sort of the obvious piece, but the non-obvious things that are critical with ADER is that in a model where utilities do not own the G, but they're building the D system to accommodate all of this distributed G that's coming. They have not only just the role, but they have a meaningful nexus to get the data, to have the ideas, to have a shared value proposition with the retailers that might be able to cite more batteries, like all of the stuff that comes down to, oh gee, what is the rationale for investing in the utility distribution system? It's absolutely informed by projects like ADER and ADER specifically. And I've talked to retailers who aren't participating in it today who say, you know, even if we're not in service today because the service today is challenging. We'll cover that in a separate podcast as to why and what we need to do about it.  Now there's like an Apple vision where like, a minute, we've never been able to monetize these the way you can monetize a four-meter battery. So, you know, in the future we'll have more incentive to tell our customers like, yeah, we'll loan you a battery. We'll go buy all of these batteries, release them from whatever company and then we'll put it on your premise. And that's actually quite frankly, like that's the model of at least one of the companies you've interviewed on your podcast. And it comes from like early market design in this space in particular it has to and it will solve for multiple problems, including the stuff that's not even utility adjacent, which is just like municipal city permitting and implementing the National Electric Code.

The one thing that really drives my passion for this particular project is that it is so hard for customers to see and understand the 15 barriers between them and them having a cheaper resilient solution in their home. It's not just a market barrier. It's not just interconnection cost. It's a whole life cycle of all of the things that that installer needs to do to get the product in your home. And a lot of it sits in these little fiefdoms of jurisdiction, which are CD and AHA permitting processes. The filing that I made last week in that ADER Task Force docket actually lays out the map.

Doug Lewin

Which we'll link to as well.

Arushi Sharma Frank

Yeah, but like that map to me is the reason the projects like ADER are so important because there's no other place where we actually genuinely advocate and want to open the doors, open the box all the way to understand like this is the holistic set of challenges between more Texans having resiliency and not. It's not one thing, it's 12 things. We have to solve for them as a team.

Doug Lewin

Yep. Yep. Yeah, we've got to be able to break those challenges down into their component parts. And I was on a podcast with some Australians the other day and we were talking about, you know, all the great success in Texas with wind, with solar, with large storage. But when you look at distributed solar and storage, we're actually way behind. Like Australia has a smaller system than ours and like 10 times as much. And much of that comes down to what you're describing as all these… We're not getting all the value to the person who was putting that solar and storage there. We're not layering those, but we certainly are layering costs, right? So it's tilting the scales against it, and that is making our resiliency outcomes worse. So I'll let you respond to that. And anything else, anything I should have asked you that I didn't, this is a great time to add that in. I know there's like, I don't know, 50 more questions we could cover, we'll do it in a part two. But anything for today you want to add before we end?

Arushi Sharma Frank

Yeah, I think The piece, you know, one of the pieces of ADER which I got a excellent appreciation for while was at Tesla working with the TDSPs in that role, is because distribution systems, just because historically we've under invested in them, that doesn't mean that it's a lost cause. And by that I mean, you know, with transmission projects and the different breakouts of RTOs, the fact that ERCOT is an islanded grid and all of that, like, we're very different, like that's cool.

The distribution grids, they're all completely different, but they're all completely the same for the same reasons too. We have two types of feeders in this country. There's networked and there's radial. That's the two configurations. There's two basic transformer types, one phase and three phase. There's two types of service lines, primary and secondary. There are over 3,300 utility operators in the US and each of them has their own original jurisdiction over their distribution system.

So if there's such a high quantity of systems, like the solutions that we're coming up with around the country to harden distribution grids everywhere and to make them ready for the next step, the evolution that I wish for, and I get to say it on this podcast, is that we have to stop looking at distributed energy penetration as eroding utility rate base. That is a big fat no, no.

It should never have been how we got here. I have my own views on solar, as solar by itself on the system. But I have very powerful views on solar and batteries together. And what we're doing is creating not only dispatch ability and resilience, you're creating for the first time, like a consumer resiliency driven reason to actually invest in the piece of the system, the last mile that has been ignored for so long everywhere.

And if we're doing that, we're enabling all of the other things. And so that's also a moment that I realize, and I say it more, is deeply collaborative and driving, hopefully, distribution grid investment towards this place where us putting the $1 in fixing this particular line or upgrading this transformer solves four issues. And one of them is it makes it easier for customers in my jurisdiction to have that battery.

Doug Lewin

That's a great place to leave it. I'm already looking forward to the part two conversation. Arushi, thank you so much for being on the Energy Capital Podcast.

Arushi Sharma Frank

Thank you. I appreciate the opportunity to be my nerdiest self.

Doug Lewin

It's great. A glorious nerd. Yes. Yes. I love nerding out on this stuff. It's great. I appreciate your time and we'll do it again soon. And I'll encourage listeners to drop questions into the comments because we will record another one and we can bring some of those questions into it. Thanks again, Arushi.

Arushi Sharma Frank

Thank you. Take care, Doug.

What steps do we need to take in Texas to foster growth in this important emerging market? To explore this question, there's no one better than John Berger, founder and CEO of Sunnova Energy. Headquartered in Houston, Sunnova is a leader in residential solar, battery storage and energy management technologies across the US John has been in the industry for about 30 years now, and he understands the value proposition and the barriers to renewable energy and distributed generation as well as anybody. 

I really enjoyed this episode and I hope you do too. This episode is for paid subscribers only and only the free preview will be listed publicly on podcast apps. To become a premium subscriber, please visit www.douglewin.com/subscribe

Timestamps

4:03 - Current trends in the power market and how that’s impacting the value of distributed generation and resilience

7:49 - Bull vs bear market; changes in the power market in the past 30 years and demand growth

12:25 - What policy/regulatory changes needed to grow distributed solar

17:11 - Potential for greater competition in distribution and publicly available distribution resource plans, challenges of central planning

23:30 - Why is Texas lagging in distributed generation?

28:17 - A performance mechanism for microgrids

31:06 - Sunnova’s Adaptive Retail Plan with David Energy

33:51 - Virtual Power Plants

36:05 - Benefits of distributed generation and VPPs to consumers; what’s holding back the growth of VPPs

38:52 - How to make solar available and affordable to all 

42:03 - Sunnova’s Project Hestia with the Department of Energy

44:41 - Impact of Inflation Reduction Act investments on the market 

46:57 - Are solar supply chains shifting to the US / North America

50:07 - EVs and EV charging

Show Notes

Sunnova

Sunnova’s Adaptive Retail Plan with David Energy

Critics Say CenterPoint CEO’s “Relationship” Influenced $818M Deal For Generators - Texas Monthly

CenterPoint spent $800M on mobile generators. Where are they post-Hurricane Beryl? - Houston Chronicle

I spoke with Jeff Goodell, the bestselling author of The Heat Will Kill You First: Life and Death on a Scorched Planet, on the dangers of heat waves, especially when in combination with other natural disasters.

Timestamps

4:12 - Physiological impacts of heat and how to stay safe

9:13  - Scale of heat-related deaths and illness

12:28 - What is a Hurricane Katrina of heat and how is heat a threat multiplier

17:58 - Resilience solutions for heat and extreme weather 

23:52 - Maintaining hope in the face of the realities of climate change

32:43 - What will happen to frontline climate communities like Houston as climate change continues to exacerbate extreme heat and other weather conditions

36:51 - Economic costs of natural disasters

41:49 - Need for corporate and political leadership; reimaging how we structure cities and communities; strategies and technologies for mitigation and adaptation

50:08 - Climate denialism and climate nihilism 

56:51 - Recommended reading and Jeff’s future research

Show Notes

The Heat Will Kill You First: Life and Death on a Scorched Planet by Jeff Goodell

Big Coal: The Dirty Secret Behind America's Energy Future by Jeff Goodell

The Water Will Come: Rising Seas, Sinking Cities, and the Remaking of the Civilized World by Jeff Goodell

The Heat Wave Scenario That Keeps Climate Scientists Up at Night - New York Times Op-Ed by Jeff Goodell

Obama Takes on Climate Change: The Rolling Stone Interview with Jeff Goodell

Beryl was the weakest a hurricane could be. Why does it feel like Houston isn't the same? Article from Sarah Smith, Houston Chronicle

Heat-related mortality in Europe during the summer of 2022 - Nature Magazine

In the wake of Hurricane Beryl, after millions of Houstonians lost power and at least 36 people died, many of them because they didn’t have AC in the heat following the storm, Texans were once again left with many of the same questions we’ve been asking for the past decade. How do we make sure that the power stays on when a storm hits or disaster strikes? How can our state, rich in all its energy resources, have its electric grid so badly pummeled by a Category 1 storm? When we are faced with the next storm, hurricane, or cold snap, how will we make sure things are different? How can we keep critical facilities powered, vulnerable residents safe, and generally ensure a reliable and resilient grid? 

For CenterPoint, the utility serving most of the Houston area, the response so far has been a plan to purchase additional generators. This approach has been met with considerable skepticism, given that CenterPoint had already spent $800 million on generators that proved unusable during Beryl — a cost that continues to be borne by their customers.

However, there are alternative solutions that can enhance community resilience without breaking the bank. One of the most promising is microgrids. Microgrids consist of interconnected resources like solar panels, gas generators, and batteries that connect directly to homes, facilities, and other sites, allowing them to operate independently from the main grid. Microgrids have been deployed across the state, including in Houston, and customers with microgrids during Beryl had drastically different experiences than others in the city and the region.

To learn more about microgrids, and understand how they can help save lives and maintain stability in future storms, I spoke to Allan Schurr, the COO of Enchanted Rock, which has been deploying microgrids for almost 20 years. 100% of Enchanted Rock’s microgrids that were tasked with providing power during the Beryl aftermath were able to do so, including their microgrids at H-E-B stores and distribution centers, which helped ensure many Texans had access to air conditioning, food, and supplies. 

Allan and I dug in how Enchanted Rock’s microgrids work and what types of customers are currently served by them. We talked about how microgrids can and should be deployed at nursing homes, hospitals and other critical facilities; why the company chose to switch to natural gas generators instead of diesel fuel; the impact of state legislation on microgrid deployment; and how utilities can make it easier for all types of customers to get microgrids. 

This one is part of a larger series I am doing on the aftermath of Hurricane Beryl focused on microgrids. In the next few weeks, we’ll be releasing short episodes (like this one) interviewing folks working on solar microgrids and storage, understanding the impact of natural disasters on marginalized communities, the importance of DERs, and more.

Thank you for being a listener and don’t forget to like, share, and leave a five star review wherever you listen to podcasts.

Timestamps

3:48 - How Enchanted Rock got started

6:14 - What is a microgrid? How does it work?

9:12 - Enchanted Rock’s partnership with H-E-B and benefits to the community

12:14 - Nursing homes

13:07 - Other types of clients that benefit from microgrids

14:44 -Generators vs microgrid and Texas Energy Fund legislation for microgrids

22:04 - Benefits of microgrids to the overall grid; microgrids as part of Virtual Power Plants

26:03 - Winter Storm Uri and Enchanted Rock

28:45 - Accessing gas for microgrids during severe winter weather or storms

31:15 - Can you have resilience without microgrids?

33:53 - How can utilities make it easier for customers to get microgrids

35:42 - Enchanted Rock’s Bridge-to-Grid program and microgrids at data centers

Show Notes

Enchanted Rock

Enchanted Rock’s Bridge-to-Grid program

What’s in a name? Preparing for long-duration outages from “anonymous” storms by Allan Schurr

Houston’s post-Beryl outages highlight benefits of distributed energy from Canary Media

After Hurricane Beryl, Microgrid-Equipped Grocery Stores and Homes Weathered Outages for More Than a Week in Houston from Microgrid Knowledge

CenterPoint spent $800M on mobile generators. Where are they post-Hurricane Beryl? - from the Houston Chronicle