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Transcript
Today on Still to be Determined. We’re going to talk about something secret. There’s a better way to do the electricity grid. Welcome everybody, to Still to be Determined. This is, of course, the follow up podcast to Undecided with Matt Ferrell. I am not Matt Ferrell. I am his older brother. I’m Sean Ferrell. I’m a writer. I write some sci fi, write some horror. And with me, as always, is the aforementioned Matt. Aforementioned. The aforementioned Matt, who on a recent episode of Undecided with Matt Ferrell, spoke eloquently about changes to how we provide electricity to the grid. And in short, Matt, do you want to give us the quick version?
The quick version is make the grid like the Internet. That’s the quick version.
I was going to say the quick version is get rid of the grid. On Undecided, Matt’s most recent video was a long conversation with Karl Rábago about the Internet of electricity, effectively a model of electricity provision that would resemble the way the Internet works as opposed to the way the 20th century grid model works. So Karl Rábago is an energy policy veteran. He’s been doing this for more than 30 years, and he’s recognized as an innovator in utility regulatory issues. And he refers to himself as the regulatory hitman. So Matt’s conversation with him in full will follow in a few minutes, but for right now, I thought we’d take a look at some of the comments that Matt’s video spawned on. So in the comments of your video, Matt, there were some people jumping in regarding the term prosumer. So I wanted to invite you to lean into a. I won’t call it a dictionary definition, but a bit more definition of that, because there were people like Scott McKay who showed up into the comments saying selling back to the grid at a tenth of what they charge you is hardly a prosumer.
To which some people responded, well, that’s why you get storage and you store your electricity. And other people jumped in to say, hold on, you’re getting wholesale prices. When you sell back, you can’t expect to get the full price back. So prosumer. It’s clearly leaning into the wordplay of pros and cons, and it’s trying to take the angle, yes, you’re a consumer, but you’re doing it with a proactive element which you’re benefiting from in some way, and you’re informed. That’s how I interpret it. As opposed to, now you’re making bank. Do you want to go into a little bit about the use of the term and what you meant by using it in this, in this video?
Well, like when you talk about like quick tangent on prosumer, it’s like a lot of times there’s prosumer electronics and it’s not that you’re going to be making bank, but it’s like you have a consumer grade level piece of equipment like back in the day, a video camera, let’s say. And then you have a prosumer grade camera which is something that’s not quite the stuff that the film studios are using, but it’s way more expensive and sophisticated than one that you’re going to get at like Best Buy. And it’s a higher quality thing that you might actually do for a hobby or that you might try to make something that could make you money. So it’s kind of like this in the middle kind of a thing. And so that’s what this is referring to. It’s the prosumer of, all I do is consume electricity to somebody who actually can generate electricity and contribute a little bit so I can make a little extra money kind of on the side like a, like a little hobby. So you’re a prosumer, you’re not a full on power plant. That’s, that’s all they do. So that’s, you’re in this middle ground. That’s what it’s referring to. And on the comment about, yeah, you’re only getting paid a tenth of what they charge you. It’s a little exaggerated, but I get the point. The whole point is that they’re going to pay you what they would pay the power plant. So if they’re paying the power plant 6 cents a kilowatt hour, they should pay you probably 6 cents a kilowatt hour. Because an electron’s an electron. Who cares where it’s coming from? That’s the going rate. And then of course the utility is the middleman. So they’re going to mark that up and they’re going to sell it back to you. And but then there’s also the supply charge. You know, they, they have to get you those electrons and so there’s a fee to send it to you. So that’s why it’s like only a fraction of what the total cost is at the end of the day. It’s, it’s the way the system works. It’s just the way that the delivery system has been set up. So it, it feels out of balance, but it’s actually kind of a, a fair way to do it.
There were also some people leaning into their personal experiences with discovering the age of the grid itself, such as Heilig, who came into the comments and said of the grid, 25 years old. After the 2012 storms, when I was out of power for 16 days, the crew who finally came to reconnect me told me that there were work tags on the local distribution lines in the rural area of southwest Virginia where I lived in 19 with 1940 dates on them. That’s when that part of Virginia first got electricity. The same wires still carrying electrons. You did not go into this in your video, but part of this is not only the grid model is old, a big part of this is it is wildly uneven across the country. We’re talking about the US context here. This is also true globally. You’re not going to find the same power lines in every place you go. For some localities, there may have been much more recent updating of infrastructure. And other places, none. And that, I believe is part of the previous presidential administration’s effort to improve infrastructure across the board was to address things just like this. But correct me if I’m wrong, the kind of infrastructure development that your video is talking about is a full step beyond simply replacing old wires. It’s a. It’s a redesign of what the model itself, underlying the supply of power would be doing.
Yeah, exactly. It’s. It’s not necessarily that you have to replace the power lines that we have today, but the way the power flows around would completely change because of the idea of this energy router system that’s directing energy or walling it off, depending on what’s needed and what’s not needed. That system, the way it’s distributed, would completely upend. But it doesn’t mean that the power lines that are coming to our house would have to change. So it’s like the power lines from the 1940s could theoretically still work. It’s the connection points that would direct energy to where they need to go that would change.
Finally, this one from 81Steph who came into the comments from across the pond. There are experiments on microgrids since about 20 years ago in Belgium, patroned by the University of Liege, also in Belgium, we have the principle of energy communities. You can team up with your neighbors, preferably tied to the same local distribution transformer, and buy and sell electricity between neighbors, skipping the transport costs and getting a serious discount to distribution costs. In our country, roughly your electricity bill is 1/3 for the energy itself, 1/3 for distribution and transport, and 1/3 for taxes. Participating in an energy community allows you to spare some money, Of course, enough prosumers are required in the community. I wanted to share that one because this one is a direct example of exactly what your video seemed to be talking about. And I also wanted to invite you, Matt, to reach out to the university, maybe go to Belgium and see how all this is working, because they’ve been doing this experiment for 20 years. Were you aware of. Not necessarily this one, but were you aware of this kind of model that you were talking about being actively researched in this way when you made the video?
I was aware that it’s being researched in different pockets all over the place. And there are little experiments happening here and there, but none of it’s getting applied to broader applications. It seems to be in tiny pockets. It’s super cool, though. And that’s exactly the point of when I was saying before about being a prosumer and they’re only paying me for that small amount. But then there’s all this stuff on top of it that they’re up charging for. This helps to sidestep a lot of that. So electricity rates would go down and it would become more reliable. It’s like there’s just so much smart about this, about the way it’s handled and what it would mean for our pocketbooks.
I also can’t help but wonder, if you’ve got a community of people that are supplying power to each other, does it have an incremental yet still real reduction in demand that then lowers the prices of electricity for those people who are not in that small community or communities that are selling electricity to each other?
Don’t wanna peel this onion, but in a way, yeah, in a way, yes. And part of the reason for that is energy use is always going up like it doesn’t matter. We’re always consuming more per person. We’re always consuming more, and it’s only gonna get worse and worse and worse. And we have to build more power generation to support all this? Well, the more people that are creating energy communities or putting solar on the roof, for all the people that kind of push back on that and think it’s some kind of wealth transfer, it’s like we’re actually helping to alleviate the overall demand on the grid, which means they have to build out fewer power plants, fewer centralized resources to try to scale up that demand. Of course, AI data centers are completely ruining that right now. It’s like out of control. But if you took a vacuum. Yeah, nothing happens in a vacuum. We’re not doing these things one thing at a time. We’re doing all of them at all the time. All at the same time. All at the same time.
So it’s like I put solar panels on my roof. My power usage went up because I also bought new things that I put in my home. So, yeah, you know, like no one thing is happening, but. So it’s a lot of. It’s hard to parse, but it does seem to me that it’s complicated. If you had a city of a million people, and if 15% of those people were using energy sharing models in their own neighborhood, along these lines, it seems to me like for the other 85%, there’d be a slight lowering of the cost because less demand. So it’s just interesting to think about all the different ways this could have an impact. Which leads us beautifully to Matt’s full conversation with Karl Rábago as they discuss changes to the grid model, which would effectively be not having a grid model.
Well, to kind of kick things off. It’s like you have quite a, I don’t know, storied, massive, like, background. Like you’ve worked on multiple sides of this. You’ve worked on the regulatory side, you’ve worked on the utility side. You have quite a varied history, which gives you. This is why I wanted to speak to you because you have the most, like, interesting perspective on this because you’ve kind of seen it from multiple angles. Like, since you’ve seen the multiple sides, you’ve been a utility executive at Austin Energy, a Texas commercioner, the Department of Energy. You’ve been, you’ve been all over the place. Which of those roles gave you the clearest view of why the grid is stuck?
Yeah, yeah, all of them. Right? I mean, it’s like I’m six blind men all in the same person. You know, just approaching this elephant from very, very different direction. I, I’m sort of occupational surfer. I tend. I think I have had pretty good sense of where the waves are breaking and have paddled toward them and had a chance to be right in the midst of it when things were happening. It’s probably that my earliest sensings were the strongest and became rebuttable presumptions that I was able to check on as time went by. I first fell in love with this whole idea of what you could do to make the electric grid better from being introduced to it in a seminar that Dick Ottinger held at Pace where he brought in 13 or 14 of the just most luminary figures, Amory Loveins, and Ralph Cavanaugh and Dick Flynn and Charlie Kamenoff and just all these people in 1990 who were just, 89, they were just breaking them, breaking the waves, making the waves in the business. And first obvious thing is energy efficiency. Something as small as a light bulb can make a profound difference. And utilities weren’t doing anything about it. They were having to be forced, dragged kicking and screaming toward the energy efficiency. And then when I got to be a commissioner soon thereafter, what seemed to be a no brainer. My friends in the solar, they friends with people in the solar business and they said in Texas when you have a few acres and you want to put up a pole barn, you could go to the co op and ask for a line extension. And I had this idea that when the co op did the line extension maybe they could just tell customers that there’s this Solar option in 1992. And they fought us vehemently. No, we shouldn’t have to be able to just provide information. So then you start adding experience and discipline and context in different ways and you see things.
I mean I remember being first introduced to international stuff was in the Department of Energy and the idea that we were going to, you know, somehow parachute in, you know, utility scale power plants in rural Africa in order to electrify those countries and create all the benefits. And that wasn’t going to work. You know, when I was at AES we had managed the distribution utility for Cameroon and we had an obligation that we were going to connect electricity to more customers or whatever. I looked at the hard numbers, you just couldn’t make it pencil if you built the same kind of grid, but you could put the equipment, size it so that it could fit on the back of a motorcycle. The already existing penetration of cellular phones would enable buy what you need electric power with little solar panels on small poles or trees stuck up there and people could subscribe to. So it started with frustration, perhaps awareness, analysis and people just giving me the opportunity to see this thing from very many different sides. The unescapable conclusion is that the distributed architecture for so many things is the most elegant and efficient.
From nature, you know, to communities, to the electric grid.
One of the reasons we reached out to you was because there was a recent paper from Cornell University that is calling it the Internet-ification of the grid. This more distributed model. And this is something that’s been bouncing around in my mind for years now. And it’s like why are we not doing more micro grids and linking them all together in a kind of a smart way? And we reached out to you and then you sent me your paper that you wrote in 1997. And when I, it’s called being virtual. And when I read through that, I was like, oh my God, you wrote this like 30 years ago and it’s basically the same thing. And you were being very prophetic in what you wrote about like where this stuff is going to evolve to and we’re still not there. But could you kind of like boil down the kind of concept as to like what it is like that you’re, you’re talking about?
You know, when I was a, a kid and I first had a chance to work with Amory Lovins, I used to tell people, you know, after having read his Soft Energy Path that, that if you ever get a chance to work with someone who correctly predicts the future 25 years in advance, do it. And I’ve been aspiring to try to be in that position. Maybe it’ll take longer than 25 years for my, for my views to, to be realigned. But what it boiled down to is we built this grid using a model that was perfectly well suited for the time, you know, and as we said in small is profitable. We documented the benefits of right size resources up until the 40s and 50s. It worked because we could amass huge capital. We tried to electrify a nation to convince investors to make all this stuff work, but the economies and Carl Weinberg used to just preach on this so well, these, the economies of scale have attenuated. Again, a bad experience. As a commissioner, I sat on the Comanche Peak nuclear power plant cities and the plant came into rate 17 times the cost that it was approved for. And 20 some years later, and you know, thank God for Vogel in Georgia that they, they actually bested that record. And I’m only joking because it’s a horrible pain and misery on the ratepayers to have to subsidize that central station model, which works perfectly well for, you know, monopolistic utilities with central station ide, you know, ideology. But the features. So can you do it smaller? Can you do it more incrementally? Can you do it in a way that enhances security rather than increasing brittleness? When the Internet phenomenon was booming, which, you know, the whole telephony thing is articulated in that great paper and I actually know two of the authors, so that’s really made me feel good. You know, what we, what we found out was that again, guys like Kevin Kelly wrote that you grow by chunking.
We learn from our mistakes, let’s try it. Fail if we have to, but everybody can learn from it. So you. So what else you have to do? You make it a learning experience, not a repetition experience. So the guy once told me, we are all, we want to be first, to be second, you know, meaning that somebody else has to do it first. Innovation, not the strong suit in that business model and the people sometimes that it attracts. Although there are good and notable exceptions coming up, what it was was that you had to not look for, you know, like least cost, best fit, but you had to look for many ideas, a learning environment that was tolerant of mistakes, honest mistakes, right? You had to try things at scale. You had to listen to what customers want and understand what they need. Again, an old RMI aphorism. They want cold beer, they want hot showers, they don’t want kilowatt hours. So how do you package the service and think of it as a service as opposed to a commodity. Everybody who wants to be sort of an industrial scion will think of themselves as mass producing kilowatt hours and delivering them out to the public in a generic format. And for some reason, if you’re stuck in that kind of historical view of what it meant to industrialize America, you can take great pride. And certainly if you make enough money, you’ll play in your retirement years at the very best country clubs, you’ll play golf. But electricity has never been anything but service. Anything you’ve ever been anything but, but life empowering and life enabling. And so tuning it to customers needs is another core concept behind distributing resources. There’s also, you know, there’s other things we’ve learned along the way. I was really excited in that paper when they talk about that galvanic isolation or, you know, separation. We ran into that when I was at Austin Energy over 10 years ago.
We wanted, when we first started putting together the idea to bring your own thermostat. We had a really successful thermostat control program at Austin Energy. I think I had 75% of the residential thermostats under my control, about 95,000 of them being able to send out a signal and cycle them off for 20 minutes at a time. A demand response distributed energy resource. First off, I’ll tell the story of my mom. So my mom lived in Austin, and when I was there at Austin Energy, they lived there all their lives. When dad retired from the Air Force, one day I’m over there in the neighborhood and so I stop in for lunch and I’m with her and she goes up to the thermostat and cranks it and it’s summertime and the house is starting to get nearly cold. And I was like, mom, what are you doing? And she said, you’re. I got the word that you’re going to be turning off my electricity this afternoon. You know, like I was doing it personally and, and so the house gets so hot I wanted to turn the air conditioner on. Well, this is, this is just, this is amazing because actually just a few days ago I’ve been talking to the guys in the power system side and they said we’re getting a 22 megawatt snapback when the interruption stops because everybody’s house jumps to cool after warming up a little bit. And the answer was my mom, the answer is send a notice, tell them we’re going to do this, and my mom and people like her will turn up their air conditioners, pre cool the house for you, sell just as much as electricity for the utility, maintain their comfort and continue to participate in the program.
And we had 22 megawatts of, you know, of curtailable demand, which you have to be an electric utility nerd, if that was one of the four coincident peak days of the year, would save money on all year long because those peak hours are what sets your transmission cost from the local transmission provider. And then by the way, just to finish the rest of this story, just this one little technology. So we started the benefits of this thermostat control using the technology platform that we had was starting to. We couldn’t get down long hallways and apartments with this radio system. We needed to transfer to different systems. So the guys on my team started looking at well, what’s the alternative? What technology do we switch to? And if we had been any other utility, I guarantee they would have found a vendor, they would have contracted with that vendor and we would have started warehousing and deploying those thermostat control technologies. But instead we pawn and we said what if we just. And, and I will say Audrey Zimmerman had come by for a visit. She was working with a company that was doing commercial load control. But she had come by and was and was pitching, working with this business about this really cool idea and she had a computer coder with us with her. And it’s like, what are you doing here? Well, she had figured out that if we could create an API, an Internet interface and we could allow them access to that interface, but without entering our system, we could maintain security and tap into the power of customer control. So the next iteration of our thermostat control was bring your own Thermostat. You choose your device, just make sure it’s Austin Energy ready. It won’t breach our firewall.
You’ll maintain a secure system, but you will be able to see the pricing and the notice opportunities by Internet communication that does not violate the security electric grid. And if you demonstrate and record a reduction in your consumption, you can make some money from us because we’ll save even more. You ask, what do you, you know, what do you see that makes you want to do this? Being fleet of foot, being able to make mistakes and learn from them. Maximizing your returns, staying in touch with customers. Working at a smaller scale, but keeping the big picture in mind. These are the attributes of the distributed energy method thinker who I hope helps re architect this platform.
One of the things that was brought up in the concept of the more recent paper is since you’d be going from a centralized AC system to a decentralized kind of software defined DC system with microgrids, you’d be having things like energy routers that would be kind of like helping to orchestrate where the energy’s going. Since you’ve worked in the space, is that a realistic thing that can actually happen or do you think there’s things that would prevent that from happening?
Yes, I think it’s realistic. I think energy routers are already kind of showing up. These new smart circuit breaker panels essentially are performing as at least substantially on the way to an energy router. I recently went through this experience with my home. We decided to add a garage and we were looking at the idea of how do I maintain supply for my Ford Lightning Charger for my Volkswagen ID 4 from. I love my convection range, you know, all on the 200amp panel that is on my house. And we didn’t end up going there because it’s a separate. The garage is separate from the old house and lots of other reasons. This is 140-year-old home. But what I realized was and it was just around the time that energy routers people were starting to float that term. This solid state device that can optimize between loads and supply and do it in the background without me having to interface which is a key element. I love having all this, these features. I just don’t want to have to sit there and switch them all the time. Right. So we can do all that. That heads down toward. I had this conversation with Peter Lilia once but he was doing all this work on microgrids in small countries but bringing it home. I said let’s as a mental experiment, let’s the next time we talk about microgrid. Let’s go to the microgrid of one. I am one generator transfer switch away from doing that in my house. I have a Ford Lightning. I have a couple of solar panels on the new garage. I have intelligent and controllable devices. And the only thing I’m missing right now is the router, which could orchestrate all those pieces for me. So, yes, I think the router is the invention of this decade conceptually, and they’re going to do more and better things with it all the time.
I also really love the idea in that paper that the microgrid of one can sit behind the utility interface and function just fine, but you can also multiply customers with energy routers. And then the routers begin talking to themselves. So now what you have is geometric benefits emerging. You know, hey, Sarah, we’re going to be going off for the weekend. Great. I’m having a party. Maybe I can allocate some of my capacity reservation to you or my capacity production to you. You know, why can’t we have. John Wellinghoff coined the phrase a transactive energy system. And the answer is because we don’t all have routers. So let’s get the router. You’ll get that technology. Like they said in the paper, tier one is your technology component. Tier two is the sort of the architecture of the operating system that goes, that takes advantage of those component. I’m a big fan. Yeah.
Well, you brought up the solar panels in your home. I have solar panels in my home. One of the things that comes up a lot is like, utilities have often framed net metering debate as a fairness issue. Like, the wealthy people who have solar panels on their homes are costing the people who can’t afford solar more money on their electric rates. And I know you’ve pushed back on that in the past. Could you explain why in terms. Because this is a very counterintuitive issue. Because, like, it seems straightforward when it’s described, but it’s, it’s kind of counterintuitive.
It is strange. I’m reminded that according to the Old Testament, the very first power that God gave to humans is the power of the name. And actually that was my very first speech to Sia back in 1992. It was right at the time when Frank Lunson, the other big political, you know, opinion makers, were learning that with Gingrich and others, that name calling was a successful political strategy. You know, I said, we have to, you have to name what we’re doing because other, if we don’t, others will name it for us. Little, little political aside, here we’re all concerned with what would you like me to call you? You know, which is fine and is gracious, but in the court of public opinion, if you don’t name what you’re doing, someone will name it for you. And utilities brilliantly, EEI brilliantly seized on the fairness thing. The implicit unstated assumption being that the socialized grid, controlled by a dominant monopoly utility, was the only fair way to do things. Completely counterintuitive to our sense of American independence, of self sufficiency, even of community, because this was some distant foreign being that was supposed to be taking care of all of us. But it’s stuck on a simple premise. If you don’t pay everything we want you to pay, someone else is going to have you. And that premise is false. It’s inconsistent with the fundamental model itself. But it stuck and it kind of made sense to everybody. Wow. In a sort of a simplistic grade school understanding of how networks work, of how network economies work. Right. That, that everyone has to do exactly this much. And if anyone doesn’t, everyone else will have to fill in the gap because the monopolists have hegemonic control over the economics and the finance and the mechanicals and the, and the engineering and the planning.
They were also able to say, without ever having to demonstrate that this alternative thing that was being done was not, could not possibly be as valuable. And therefore the math would always work out against everyone else. That’s why that and the crass concerns of a utility executive who watched his rebates budgets just getting swamped as the price of solar was falling, was why I borrowed the value of solar idea, which had its roots in small is profitable, which was championed in Northern California by Ed Smelawf. And we first applied it onto rate design. He said, okay, you know, this is supposed to be cost of service rate making. What are all the costs and the savings in the value stack? What’s in the parfait glass? Once we did an objective calculation of it, I was able to do something that I wish more utility would do, which is to say I’m going to make the first move. If you put solar on your roof, I will pay you what it’s worth and you will do some things in return for me. And the way we set up the rate, you will pay me for what you use. And we created the value of solar tap through a transparent process, through an objective process that allowed people to see that, wow, it turns out that we can come at this one of two simple ways which we didn’t get. A one simple way is, you know, what’s it worth? The other alternative, which is equally validating and it’s really just the other side of the same coin is ask the utility what would it cost for you to make and deliver a kilowatt hour of solar or solar equivalent electricity? And I guarantee you the answer across this country and for the past 20 years has been retail plus a premium because it’s better than average electricity. Even if they had to do it, you can’t find a green power program out there that isn’t retail plus a premium and dirty little secret. It’s usually about 2 cents.
That’s it.
That’s the number, right? Because that actually 2 cents turns out to be about the social cost of carbon and the avoided environmental damages. A customer preference with solar versus non solar energy, whatever it is, $0.02 is about that number. In the earliest days, it was the willingness to pay value for customers who wanted to switch. So you could do it either way. You could either build it up from the bottom or you could say, just bring me one Mr. Utility. And Mr. Utility’s response will be okay, if the retail rate is $0.15, you’d have to pay lease WP. Well then in a cost of service business model, why isn’t that what it’s worth when a customer brings it? So for me the amazing idea was like retail is a subsidy flowing from solar customers to everyone else because they’re making 17 cent electricity and only getting paid 15. And the truth is when you ask those solar customers, they’ll say that’s fine, I’m part of the network, I’m glad to support what’s going on for everyone else as opposed to using it as a whip like oh, you have to carry your load of paying for the utilities on economic spending. We come at this net metering, self generation, self action thing in many, many ways. When you realize, you know, you think about it. That’s another powerful thing about the paper. He put me in a transactional economy where I don’t have to live by these tariffs negotiated by sometimes captive regulators. And maybe regulators are just too busy to pay attention. And you know, put this in, put this into a context where people can do what they want and non use earns full retail, right? Turning off my light earns me full retail against the base. And the utilities have learned to adjust to that. They can learn to adjust to self generation. I hope plug in solar teaches them a thing or two, mark my words, they will fight it.
Like they fight, you know, dealership requirements, you know, for Tesla, you know, things like that. I mean, it’s anything to become to support the incumbent.
It’s fighting to maintain the monopoly and the way it’s functioned for the past 50, 60 years and not willing to adapt. Which kind of evolves into my next question around this net mirroring debate is like a lot of times the idea of me having solar in my house is somehow anti utility or it’s going to be harmful to the grid and make the grid worse in some fashion. In that debate, I hear that a lot as well. Is there any kernel of truth to that?
You know, I’ve always accepted that there is a penetration level at which the variability of solar would need a remedy in order to be effectively managed at some level. And we used to think it was 5% and unfortunately that actually got solidified into statutes in a lot of places. Even when a lot of states were adopting 5%, 6% caps, North Berkeley Labs was reporting that they couldn’t see empirical evidence before about 15. And every time I look at it, we’ve found ways to manage even higher penetration. And we haven’t even crossed that wonderful frontier articulated in the paper we’ve been discussing. Right. Where you really got intelligent distributed management of the system. We keep coming, we’re going to keep coming back to this and they’re going to keep saying that at some point this is a problem and we have to manage it, but every time we look at it, it finds out that, you know, there’s a state, wow, this state just passed 20%. Wow, this state just passed 25%. Wow. You know, Holy Cross Energy is 85% renewable, 85% variable resourcing, you know, for a rural co op. So there does not.
And how are they doing?
Yeah, yeah. Apparently they’re not all living in caves. You know, it’s like, and, and, and burning tar stoke sticks for light at night. We have not had to go back to the, to the, to the caveman era just because they’re relying on manoeuvre. There are still insanely, I’m sorry to say, stupid or craven regulators and others who say, well, how are we going to power this grid at night, you know, if all we’re doing is solar? And how are we, what are we going to do when the wind doesn’t blow? If all we’re using is wind, you know, surprisingly we’re able to do it. Now, don’t get me wrong, you know, in the early days of inverted this. One of my cutesy sayings is the biggest problem or thing we want to do is anything we’ve done before, right? You know, once upon a time people were putting up windmills on Texas ranchers and they were just simple generators and they, if they connected them to the grid, the linemen could get shocked if they thought the grid was down and they were not careful and didn’t check to make sure that the line was both isolated and non energized, which you think they teach you. So then it’s like, oh my God, I’m literally in hearing rooms in the 1990s with, you know, utility people saying we can’t have self Generation without a $2 million commercial insurance policy on the co op by every customer. You know, okay, then that finally went away, but it took a long time. I won’t say there’s a technological fix for everything, but we seem to be finding them at least in these early stages. Maybe the top of the S curve. There’ll be some problems with just haptic, you know, we’re going to have to limit or back it up. When I was doing rate cases in Virginia and I did a series of integrated resource plans, Dominion Virginia Electric Power started with every kilowatt of solar has to be matched by a kilowatt of disruption gas fire generation.
And then it was every. You need 100 megawatts for every 200 megawatts and there was like 100 megawatts for every 400 megawatts. We really don’t need it. But what game are you playing? They were not playing a game of trying to protect the grid because they were not facing a real threat. They were playing a game of trying to artificially increase the cost of their competition. And we sort that chaff from the wheat. You find out that if you treat this as a resource, it’s worth a lot. That’s one of the reasons why I fell in love with this benefit cost analysis thing that we’re doing through the national standard practice manual, that we can quantify this and we can assess this objectively and inform our decision making about what shall we allow in our rules and practices.
Would it be fair to say that you think as we decentralize the grid and there’s more micro grids that are kind of feeding into everything and they’re being managed, it’s not necessarily going to dethrone a utility or put utilities at risk. It’s just a different way it’s being managed. So if, would it be fair to say if a utility leaned into this, they’d be doing just fine versus fighting it and being super resistant.
I’ve always believed that. I’ve always believed that physical utility could easily morph into the perpetual utility that we’re always going to need. Here’s my metaphor. They’re always going to need a toll road operator, right? There’s somebody who maintains the toll road, enforce the speed limits, collects the fares. There is always a need for a utility to serve markets that are not competitive because that was what we formed them for, right? To serve all, to provide universal service, to exploit those network economies on behalf of everyone, not just on the behalf of shareholders. Until we learn to make certain markets competitive, we need to keep a utility around. That’s not to say that they only get to do a shrinking pie because like I said, they also need to be grid operators and maintainers. They need to charge us a fair price for things. Like if I do want to send my electricity to Sarah next door for her party, you know, or transact that virtual exchange, somebody needed to make sure that there’s a grid in place that allows that and charge me fairly for it. Like the Australian distributed generation tariff where they said, what is, what is the cost of handling your export? That can be discerned, right? What is the cost of handling your export? I pick it up, I take it. Like the fee you pay, you know, or somebody pays if you return something to Amazon or some other mail order house, right? There’s that. That cost is real and it has to be absorbed and the manager of the grid is entitled to collect it. But then it can also. They can also go the other way. So I think it’s an exciting frontier. I think it’s going to be one of the most technologically interesting places to be, the grid of the future.
When I was at Austin Energy, every time we worked on one of our, like our Smart grid initiative or things that were funded in the stimulus act, people from the wires and generation side would sneak over to me and say, can I get appointed to your team? I think this is the future and I want to get this experience now so I’ll be ready for it. They weren’t thinking about not being utility people. They were thinking about what being a utility person in the future would be and that. Right, that’s great. Human nature, right? I’m very, very hopeful for that. Plus some injections of new blood and different thinking.
So from your experiences of what you’ve seen, are there any utilities that are starting to lean into this and not fight it so much?
I mean, bits and pieces. There’s no, I don’t think there’s a perfect one out there. Some of the stuff Green Mountain did was really great. Some of the early kind of, you know, prototype BPP things on storages and storages coupled with solar. I was very proud of Austin Energy, its energy efficiency program. They’re just fully leaning into the ability to, you know, defer large scale capital costs and keep, you know, operating costs low by exploiting the opportunities in more efficient use of electricity. Once upon a time, California utilities were great leaders in energy efficiency. Holy Cross is doing this amazing thing where they said we want to be renewable because that’s what our members want. And we’re fools if we ignore the energy they’ll bring to the system. So while they are having to build some stuff and manage some stuff, they are also recruiting their members. Great spirit of cooperative, you know, utility practice to be a part of the solution. So if you put the pieces together that you’re seeing everywhere, you can start imagining, you know, a unified model emerging. And in this goofy country that thinks we’re 50 independent federal, 51, 52 independent federal states, you know, maybe that’s the way it’s going to be. There’s an innovation benefit from that kind of distributed approach. There is an efficiency penalty from repeating mistakes and not doing it intelligently. My biggest concern is not that. My biggest concern is reactionary grasping at hegemony. Putting aside the crazy stuff, putting aside the retrograde stuff, putting aside the challenges we face with truly ensuring that there are competition and fair competition and innovation and things like our RTOs and ISO, the big infrastructure components of our grid.
I’m optimistic that we will learn from each other, that we will overcome our internal and external obstacles and we will evolve toward this smarter, more distributed architecture. Like I said, a few billion years worth of evolutionary experience on this earth has taught us that that’s the strategy for success.
So you do have hope that we will achieve this goal of this transition.
Yeah, that. Or just selfish people like me will establish a little microvision one and say, screw you, I’m leaving. You know? Right. I, I mean, and that’s not that much of an alternative. It’s more, it’s much more. You know, and I’m being snarky. It’s much more effective. I found from. I’ve always been a proselytizer on this. Yeah, I used to, when I lived in north Houston, I used to bring my neighbors in to see my compact fluorescent lights in my kitchen. And, you know, I do the cooking at the house and to say, just stand here for a second. How does it feel? I go, oh my God, it’s so much cooler. Yeah. You know, it’s like, where do I buy these light bulbs? Because in a, in a Texas kitchen on a summer day, having heat lamps above you is a miserable experience. You know, that’s, that’s pretty effective. Showing waving an electric bill when you cut that usage, manage that electricity. That’s even more effective than me defecting from the grid. But I have the option.
So the last question I have for you is what do you think is going to. What do you think the grid, the grid in the near future is going to look like for customers like ourselves?
It’s not quite, but it’s almost getting to a confusing array of options as utilities try things out and don’t really have a clear orchestration in mind for what they’re trying to do. If regulators step up and bring some coherence to this, I think that will get better. But you know, just my utility, I have all the various terms and conditions associated with the rooftop solar and what those are and what that means. Then I have the current condition of the grid and the fact that they’ve got an arcade transformer that limits how well that function. I’ve got time, mandatory opt out time of use rates that I need to figure out how that was. I have to. I am taking advantage of a $50 incentive for allowing them to manage recharging on my Ford Lightning have air conditioner interlock control that allow them to use that as demand response. I do have the option, have not yet exercised it for the smart panel. You know, I have more and more devices that are coming along that, that allow me to do things inside. So it is that I’m a little concerned that it’s going to get noisy and it’s. And hopefully not frothy and it’ll be hard to understand and there’s so much bad things going on, so much fear, uncertainty about the economy and stuff that people will shut down because just having electricity is what you need and then you can worry about other problems. But it’d be too confusing for people to really optimize what’s in front of them. You’re just starting to see, looking at North Duke, North Carolina with a. Just starting to realize that if you can encourage customers to pair solar with storage, that can be a dispatchable, selectable resource and integrated resource planning, it’s in the combinations where the power lies and we’re still being hit by this barrage of individual programs, individual opportunities, individual issues.
And I’m a nerd, right? I’m a geek on this stuff and it’s hard for me to even track. So we need conceptual aggregators, we need concierges. We need somebody to perform that function for us like we do in so many other parts of our lives. Utilities could provide a valuable service. By doing that, regulators could allow third party entities to enter the market and provide that function. Goodness knows they’ve tried in the past. You know, yeah, you can have all my devices. Just here are my parameters for comfort and discomfort. You know, you manage it on my behalf. Just put. Organizations like Mission Data are still fighting just to get customers their own data about their use. That’s my concern is an ironic old riddle from the environmental community about when you get into environmental activism is how do you eat a hippopotamus sandwich one bite at a time? Maybe shouldn’t eat a hippopotamus sandwich. That’s maybe what we’re doing. That’s how we can do it. We can do it one bite at a time, one step at a time, and then we can start orchestrating and getting the concerted benefit of multiple efforts. Or you could just do like I did, buy a 140 year old house. And you’re doing everything you can.
That’s really good. Well, I do want to say thank you again for taking the time to talk to me. I really appreciate it.
Well, Matt, it’s, it’s. As you can tell, I kind of like talking about this. It’s been a real pleasure.
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