FREEING ENERGY

Podcast 067: Peter Kelly-Detwiler – What does a reimagined electric grid look like and what does it mean for all of us?

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Peter Kelly-Detwiler podcast

The way humans produce, distribute and consume electricity will be cleaner, cheaper, and infinitely more complex in the very near future. But how do we get there? Freeing Energy Hosts Sam Easterby and Bill Nussey catch up with leading energy industry expert Peter Kelly-Detwiler to talk about his recently published book, The Energy Swtich. Peter delves into different aspects of the transformation: how we got here, where we are going, and the implications for all of us in our daily lives.

Here are a few of the insights from Peter…

“So now, the utility now gets thrust into this role of being … the entity that helps to move information. [It becomes a] distributed service organization which … provides both pricing and signals to potentially millions of devices making billions of transactions on an annual basis across the country.”


“….if we can start taking advantage of the customer side of the meter, making those assets more flexible and adding value to the distribution grid to the bulk power grid, we can actually do a lot to integrate more renewables into the system.”  


“….in [Grid] 3.0, you have to bring in a lot of distributed energy resources. It’s going to be electric vehicle chargers. It will be behind-the-meter batteries. And then, there is a ton of energy embodied in water heaters. There are terawatt hours in water heaters because they’re designed to store.”


You can also listen to this podcast and others in our series on these platforms:

Listen on Apple Podcasts
Listen on Spotify
Listen on Google Podcasts

Useful Links

Amazon link to Peter’s new book, “Energy Switch”

Northbridge Energy Partners (Peter Kelly-Detwiler’s firm)

Ida Power Outage

Freeing Energy article, “Grid Failures and Hurricane Ida”

Transcript

Sam Easterby:

Welcome to the Freeing Energy podcast. I’m Sam Easterby. I’m producer and cohost for the podcast. And today, I’m joined by my trusty sidekick, Bill Nussey, who happens to be the founder of the Freeing Energy Project. And he’s going to join in today as we talk to our special guests. So Bill, say hello.

Bill Nussey:

Hey, thanks for having me, man. This is going to be a great discussion.

Sam Easterby:

Well, the world is in the early stages of a multitrillion dollar transition in the ways that we generate and transmit and consume electricity. And our guest today has been in the thick of this transition with some of the biggest energy companies around.

Sam Easterby:

And our special guest today is Peter Kelly-Detwiler. He is cofounder of NorthBridge Energy Partners which is a consulting firm helping companies develop strategies for rapidly evolving power markets. And he is also a former senior VP of Energy Technology Services for Constellation NewEnergy.

Sam Easterby:

Peter, welcome to the Freeing Energy podcast.

Peter Kelly-Detwiler:

Thank you. It’s a pleasure to be here.

Bill Nussey:

Peter, I hear that you wrote 320 articles for Forbes. Is that right?

Peter Kelly-Detwiler:

Yeah, it is. In fact, the first year after I left Constellation, I took severance so I had 48 weeks paid for. And all I did was row and fish and I wrote for Forbes. I wrote sometimes two articles a day because I wanted to know where all this was heading.

Peter Kelly-Detwiler:

I didn’t know it but that was setting the groundwork for all my contacts within this week because I interviewed the CEOs of all the incipient storage companies, some of the solar companies when they were getting started. And so yeah, I was writing like mad especially the first couple of years.

Bill Nussey:

Wow. Well, I thought there for a second, you said the insidious battery companies because sometimes we’ll have to … anyway, Thomas Edison was famous for saying that the battery companies bringing out the scoundrels and people. But so far, all the battery companies we’re reading about are excellent.

Sam Easterby:

Well, before you tell us about the fishing tails, I want to go a little bit further back into your background. And when you were in college, I’ve read that you served as an intern in places like Ghana and other parts of Africa, as well as India for Catholic Relief Services. How did that journey come about?

Peter Kelly-Detwiler:

Yeah. So, out of college, actually, I hitchhiked through Africa. And I was applying to get a Master’s in International Relations at the Fletcher School of Law and Diplomacy. And that trip impressed me so much that I actually changed from European Studies to African Studies.

Peter Kelly-Detwiler:

And then as I was at the Fletcher School, I got an internship in Mogadishu, Somalia with US Agency for International Development, and then got hired on as a contractor in Wasaaradda Maaliyadda which is Somali for Ministry of Finance. So I was flying all around the country working on different projects.

Peter Kelly-Detwiler:

And then, with Catholic Relief Services, I got another internship where I was also in their Finance Department and flew to 10 different countries. Well, flew to nine and then took a motorcycle from Rwanda to Burundi. And again, I was counting sacks of grain and looking at bookkeeping and that sort of thing for years in intern.

Bill Nussey:

I think that’s the first time anyone’s ever been in a podcast who said, “I took a motorcycle from Burundi to Rwanda.” That’s pretty amazing.

Peter Kelly-Detwiler:

Cheaper than flying.

Bill Nussey:

That’s a definite plus there, yeah. Scenery might be better, too.

Sam Easterby:

Well, then there was another part of your journey, too. You spent a couple of years in Santiago, Chile working on energy efficiency programs. Tell us about that.

Peter Kelly-Detwiler:

Yeah. This was in the early Conference of the Parties like CoP 2. I think it wasn’t here. We are coming into 26. And the idea back then was that it would be cheaper to harvest carbon in less efficient economies. So I was working for the International Institute for Energy Conservation, having not known any Spanish when I got there. And now, I can read Game of Thrones in Spanish if I want to but it took me a while.

Peter Kelly-Detwiler:

And nonetheless, I was working down there on efficiency projects with the University of Santiago, with the municipality of Santiago, and with a few other entities, the Copper Institute down there to see what it would cost to get the same efficiency gains there and the same carbon savings or more, depending upon our carbon intensity grid was.

Peter Kelly-Detwiler:

So, it’s all about economies of scale and trading carbon on a global basis, if you will.

Sam Easterby:

So, energy efficiency is actually a big theme in your book. Was that work in Santiago and in South America, was that the genesis of your interest in the business of energy?

Peter Kelly-Detwiler:

I got into that a little bit earlier because I will … I actually started in the business working for the Cree Indians of Northern Quebec, coming back from a year in Ghana where my wife and I were both working overseas. And then, we had a difficult pregnancy which worked out fine, but I was catapulted back here without a job and a friend was in the energy space.

Peter Kelly-Detwiler:

And I had been focusing on energy environmental issues in my spare time. And I ended up very quickly getting hired by a startup consultancy group working for the Cree Indians. Hydro-Quebec, the state-owned utility up there had started its first projects, run bulldozers on the Cree’s land with the Crees not even knowing about it.

Peter Kelly-Detwiler:

And so, they get some money in settlements and HQ wanted to keep on building. Hydro-Quebec now had some resources to fight those additional dams which they didn’t want on their land. And a lot of that power is going to be exported to the US.

Peter Kelly-Detwiler:

So we were engaged as consultants to try and make the argument that efficiency, and at that time, natural gas combined-cycle plants were cheaper for US markets than imports from HQ. So I ended up doing that for five years. And after we won all those cases for the Quebec of Cree, the Quebec of Manitoba in a separate case … I’m sorry, Cree of Manitoba, the Cree of Ontario and the Nishnawbe Aski in another case.

Peter Kelly-Detwiler:

We won all the cases. And suddenly, we had nothing left to do. And then this job popped up in Santiago, Chile. So, my wife and I and our five-year-old and three-year-old flew down there and made about 30% as much money as we made in the US. But boy, did we have fun for those two years.

Sam Easterby:

That’s an awesome story. Well, let’s shift gears a little bit. I want to talk today more about energy switch and some of the themes that run through the book. And so, let’s start off with this, Peter. Give us the elevator pitch on your book. In a few words, tell us what the book is about, who should read it and why.

Peter Kelly-Detwiler:

It’s about the three Ds that you often hear, decarbonisation, decentralization and digitalization, these forces that are helping to transform the grid. The main driver right now being that we must decarbonize the grid. The IPCC report that just came out is probably nothing short of terrifying in terms of its message to all of us that climate change is happening faster than was originally projected.

Peter Kelly-Detwiler:

So, faced with that imperative at the same time we see all these evolving technologies and declining cost curves, then the question is how are all these forces going to combine and converge to create the grid of the future which is going to touch all of us? I mean most of us, we flip on that switch and we don’t really think about what’s happening.

Peter Kelly-Detwiler:

And I’ve been an expert, if you can call it that, in demand response running the second largest DR group in the world for five or six years. The VP next to me was selling solar, another guy was working on efficiency, and so on and so forth. And after I left Constellation and started writing for Forbes, the reason I did that was I wanted to know how all the pieces were going to fit together.

Peter Kelly-Detwiler:

And frankly, I couldn’t find a book that explained how a turbine was going to have to change the way it operated to incorporate more variable renewable energy, or what was happening with the cost curve, or even how bigger turbines going to get, how fast can the wind blow before they have to cut out and stop operating. All these things I had questions about, I couldn’t find it all in one place.

Peter Kelly-Detwiler:

So stupidly, I decided I’d go and write it.

Bill Nussey:

That’s familiar.

Peter Kelly-Detwiler:

It’s not there so we’re going to go do it.

Bill Nussey:

And you were kind enough to let me read an early chapter or two to give you some feedback as it was developing. And I appreciated that a lot and I enjoyed it. And I should mention with complete sincerity that I learned a ton from reading this book.

Bill Nussey:

I have been very focused on the smaller scale stuff in the startup side of this. There’s so much to understand about the macroscale grid. And like you said, I’ve read every book I can get my hands on. And this is one of the few that’s written for people that actually aren’t sitting at the table defining policy every day. But at the same time, more to understand the overall perspective of how all these pieces interlock.

Bill Nussey:

So, on behalf of all of us that have read it and many, many more that will thank you for putting it together.

Peter Kelly-Detwiler:

Thanks. It was my pleasure. And it was so wonderful to have your feedback because as you know, I’m sure you’ve been in this. You’re in the middle of thing. You’re typing at the keyboard. And at some point, it occurs to you, “Who the hell am I to be trying to write this thing?” I mean, that thought occurred to me more than once.

Peter Kelly-Detwiler:

And I first looked around and said, “Well, I don’t see anyone else doing it that I’m aware of.” And then the second thing is I got feedback from your response, for example, to that chapter saying, “You got some interesting thoughts here, you’re on the right track.”

Peter Kelly-Detwiler:

And when people like you are telling me that, that gives me the confidence that, “Okay, first of all, I’m not a complete [inaudible 00:10:38]. There’s a capability here. And second, this is an endeavor worth pursuing. And ultimately, you and I think about another 30 people who helped me, subject matter expert edit all of the chapters, all 15. So that I had a fair degree of confidence that if I was going to step in a cow patty, it was one that not only I miss but somebody else as well.

Peter Kelly-Detwiler:

So, if there’s an error in the solar work, it’s on you, Bill.

Sam Easterby:

Boy, here we go. To hear you talk about the process of pulling all this together. I mean, this certainly wasn’t done in a couple of weeks. This is over several years. What were some of the most meaningful stories that came to you out of this and that had an impact on how you shaped the story?

Peter Kelly-Detwiler:

Yeah, it’s a great question because each chapter … and somebody said what they liked about the book was it wasn’t just a technical book although there’s 50 pages of footnotes, but each chapter had an individual that I wrote in on.

Peter Kelly-Detwiler:

And so, I had for example a gray conversation with the engineers at GE in Schenectady. They gave me 10 people for seven hours and set me straight on a lot of stuff there where I walked out with pages of notes and a PowerPoint presentation they gave me, and my head is swimming.

Peter Kelly-Detwiler:

One of my more interesting visits though was the one I talked about early where they imploded the twin cooling towers down at Brayton Point in Southeastern Massachusetts where these things were in service for only five years. The largest cooling towers in the world that costs $570 million and then boom, within five seconds, they’re gone on a 307-acre site that hopefully will be repurposed to serve as the offshore wind industry, so sort of turning swords into plowshares.

Peter Kelly-Detwiler:

And that really struck home in terms of the risk of making the wrong decisions these days. Stranded assets and fortunes that are going to be made and other ones incinerated by people not, in some cases, fully understanding the dynamics. And it’s difficult to comprehend a lot of them and other people getting it right.

Peter Kelly-Detwiler:

And then, one of my favorite stories was the Texas rancher family, the Davis family that I didn’t get to visit. But I visited them on Zoom. And halfway through right and COVID hit so everything had to go on to the Zoom platform.

Peter Kelly-Detwiler:

And so, I’m sitting down with this family and they’re explaining the hand-to-mouth existence of living on a ranch a couple of 100 miles northwest of Austin, Texas halfway between there in Odessa, Midland and raising Wagyu cattle and Dorper sheep.

Peter Kelly-Detwiler:

And here’s Papi who is the scion of the family. He’s been around forever. And what did he do for a living? He was a land man, getting land for leases for oil and gas in the old days. And here they are trying to hold the ranch together. And one day, a land man comes to them and says, “There’s a new resource on your land and we want it.” And it just happens to be blowing above it.

Peter Kelly-Detwiler:

And as John Davis said, “We struck when.” And then at the end, right when I was finishing the conversation, Papi said, “When the wind blows, it’s money.” And I was like, “And there’s my chapter title right there. Thank you very much.” The goosebumps and the hair rose in my arms when he said that because I had the organizing principle for that old piece.

Sam Easterby:

That’s brilliant. I understand too that you were on a boat watching those water cooler towers coming down.

Peter Kelly-Detwiler:

Yeah. I got invited to actually be on the ferry because I had visited the site a year-and-a-half before they were taking it all down. I actually got to walk inside one of the cooling towers. And it’s perfectly geometrically symmetrical. And I was thinking, “God would I love to hear a quartet be playing in this place,” because the sound was unbelievable in it.

Peter Kelly-Detwiler:

I mean, the whole atmosphere of being inside of a perfectly-shaped 500-foot tall orb is really cool, it’s curved orbit where it have these annular rings all the way up. So, it looks like a shell fish the way they put it all together. That was an experience I will never forget. And so it was sad watching those crumble because I wanted them to be turned into recreational climbing towers or repurposed for something fun, not just landfill.

Sam Easterby:

Well, let’s dive a little bit deeper into the energy switch. And there’s one particular topic that you take readers on a journey through and it’s the iterations of the grid from 1.0 to 4.0. And it’s a metaphor that a lot of people understand in version 102, version whatever.

Sam Easterby:

And in this case, 1.0 is you tell us is the traditional grid that we’ve had in place for a century or so. And we know that that’s powered by fossil fuels. Walk us through the highlights of those iterations from your perspective.

Peter Kelly-Detwiler:

Sure. So the 1.0 is hydrocarbon-based with some hydropower, and zero storage, and very little customer interaction. And then 2.0, you bring in the beginnings of the customer interaction with demand response and some more energy efficiency and that sort of thing.

Peter Kelly-Detwiler:

But the real big change in 2.0 is you start to bring in the wind and the solar, both of these variable resources whose output is shaped really differently. I mean, sun is 8:00 or 9:00 in the morning to 3:00 or 4:00 in the afternoon. It’s fairly predictable. Yes, you have cloud cover and that sort of thing.

Peter Kelly-Detwiler:

But wind can be really seasonally different. And so you integrate those two pieces in and what it means is you can get to about say 30% renewables in the grid like we’re seeing in some balancing authorities. You have to start to cycle your conventional plants, especially gas-fired plants. You have to ramp them up and down a lot more quickly to accommodate what’s going on with the variable output of the renewables.

Peter Kelly-Detwiler:

So that’s 2.0. You get to maybe 30% that way. And we’re moving into 3.0 now even as some places are still in 2.0. Now, you start to add in a healthy dollop of energy storage. And most of that’s lithium ion. Yeah, we’ve had energy storage from the pump storage for a long time, but nothing’s been built since the ’70s for pump storage facilities.

Peter Kelly-Detwiler:

So now, you start to bring in the batteries, almost all those lithium ion batteries from the electric vehicle industry, that’s where it scales. But then people say, “Oh, look at that, we can now put it into the grid.” With four hours of storage, we’re starting to see six, you can probably get to 70%, 60, 70% somewhere in that range. So now, you’re in that 3.0 world.

Peter Kelly-Detwiler:

But ultimately, if you want to decarbonize the grid, you’re going to have to have long duration storage for the fact that you get lots of sunlight in the summer in many places and not so much in the winter. You have different patterns. You have France coming through with a wind don’t blow and the sun don’t shine for five days in a row while you do that.

Peter Kelly-Detwiler:

So that longer duration intraseasonal stuff, probably hydrogen is the last piece that allows you to fully decarbonize. To also in 3.0, you have to bring in a lot of distributed energy resources. And it’s going to be electric vehicle chargers. It will be behind-the-meter batteries. And then, there is a ton of energy embodied in water heaters. There are terawatt hours in water heaters because they’re designed to store.

Peter Kelly-Detwiler:

And so, if we can start taking advantage of the customer side of the meter, making those assets more flexible and adding value to the distribution grid to the bulk power grid, we can actually do a lot to integrate more renewables into the system. In fact, Dan Shugar from Nextracker, he says, “I don’t even think I’m going to need batteries. I think the grid flexible assets are going to create opportunities for me to just keep on adding more solar to the system.

Sam Easterby:

And what does 4.0 look like?

Peter Kelly-Detwiler:

So the 4.0, that’s where you’ve got really healthy long-duration storage, that intraseasonal stuff which probably means taking green energy, solar and wind and electrolyzers and turning water into hydrogen, and finding ways to store that long term. That’s still a ways out.

Peter Kelly-Detwiler:

Frankly, we’ve got enough ahead of us to get to 3.0. It will keep us busy for a while. Even as they’re over say 300 projects right now, large-scale hydrogen projects worth well over $300 billion on the books right now. So that will evolve pretty quickly but it’s still a problem for tomorrow.

Peter Kelly-Detwiler:

Whereas we can really start moving ahead with the technology hand today, getting us fully into 3.0. We are now looking at some grids though like Maui’s at 50.8% renewables as of June when Hawaiian Electric put out their sustainability report, with 22% of that is solar from behind-the-meter. And they’re just beginning to add storage.

Peter Kelly-Detwiler:

And a place like Hawaii is now at 60%, shooting for 70, with mostly battery storage, a little bit of biomass, a little bit of hydro power. And now, they’re going to add some pump storage to get to like 80%. So you can start to see some of the grids figuring this out. No one’s got to 100 yet unless you’re in a place like Norway or Iceland or Hydro-Quebec where you’re all hydroelectric and always have been.

Sam Easterby:

I love it. I love it. So, you mentioned Hawaii and you mentioned the meter. And that meter sits between utilities in the concept of perhaps 1.0 or maybe more of 2.0. And this brings up the discussion around centralized generation versus distributed generation.

Sam Easterby:

Is one approach better than the other as we drive toward this clean energy economy in your view or should it be a blend of the two?

Peter Kelly-Detwiler:

The answer would be I think both. And if you think about it in terms of where the fuel sets, it’s highly regional. So, if you look at a map of the country in terms of where the wind resources, it’s the spine right down the middle from the Dakotas through Montana, Oklahoma, down through Texas, all red states. That’s where the majority of the wind is, especially if you’re 80 to 100-meter hub height.

Peter Kelly-Detwiler:

If you actually increase the size of the turbines, raise them up higher so they can access better wind currents, now the whole southeast becomes viable for wind economically as well. And then there’s offshore, obviously, which is also coming into play. There’s 30 gigawatts that’s already in the books for offshore wind, just on the East Coast.

Peter Kelly-Detwiler:

Solar, that’s a southwestern phenomenon. You put a panel down in San Diego and the same panel in Western Pennsylvania, you’re going to get twice as much energy from that southwest panel versus the one up in Erie. So, stands to reason that certain areas of the country are going to have much better economics for those renewable assets.

Peter Kelly-Detwiler:

So the question there is how do you integrate as many of those as you can? And how do you build transmission to take what can be dirt cheap electrons and move them to other markets? As the CEO of 8minuteenergy said, “If I’m in Michigan and I want oranges, I don’t plant orange trees in Michigan. I buy oranges in Florida and I truck them up. Same thing with solar power.”

Peter Kelly-Detwiler:

That having been said, there is a great opportunity for behind-the-meter solar. With Hawaii being the poster child where they think that in the future they may ultimately have 50% of their energy coming from the customer side of the meter produced on-site and stored with batteries. Now, almost everything going in in terms of solar has a battery in Hawaii.

Peter Kelly-Detwiler:

So, part of the answer is it’s very, very regional or can be at this point in time as the solar tech gets better, then there are more places where distributed energy makes sense. And you have to overlay what’s happening at the bulk power system level with also what’s happening at the distribution level. In some cases, there’s great value putting more solar and other resources behind-the-meter to forestall expensive investments in the distribution grid or reinforce the grid.

Peter Kelly-Detwiler:

Imagine if we just saw in Entergy, we had a lot more distributed assets there. The fact that we lost eight transmission lines feeding into New Orleans could be less of a problem if you had a really robust distributed energy network. So, it’s not one or the other, it’s a combination of both. And the answer is going to look really different depending upon where you are in the country.

Sam Easterby:

Bill, what’s your take on that?

Bill Nussey:

That’s one of my favorite questions, Sam. The economics, when you look at it top-down at a bulk generation level, solar is a whole lot cheaper in the southwest as an example than it is in the northeast. But the economics are going to drive a tremendous breadth of the small-scale systems or less about how much sun you get and how much it’s going to cost to put solar on your roof of your building or your house compared to what you pay in your electric bill.

Bill Nussey:

And right now, we’re at this tipping point where net metering which is important right now because it really tips the economics one way or the other. If you have it, it makes it appealing. And if you don’t, it’s less appealing. But in all cases, it’s generally cheaper to put solar on your roof than it is to buy it from the grid.

Bill Nussey:

The caveat to that is that they don’t work so good at night. And so, you have to continue to be part of the grid. And as much as people like me have added batteries to my house, that does make it more expensive and takes the economics, the payback period, quite a bit. But this is both the economics of battery and solar at small scale are coming down just as fast as they are large scale.

Bill Nussey:

And so, we’re going to see more and more of what we see in Hawaii today, much cheaper to have solar and batteries than it is to buy it from the grid. And by the way, that helps make the grid cheaper. It’s a one plus one equals three. We’re going to see that same economic effect as solar and batteries get cheaper across the whole United States.

Bill Nussey:

And again, it depends upon not just how much it costs to generate an electron with solar, but how that compares to the rate you pay for your electricity from the grid.

Sam Easterby:

I agree with you. You do run into some really interesting issues. So for example, let’s take what happened in Southern Australia in Q1 of this year where there is so much solar flooding into the system that market prices on average across the whole Q1 were negative $12 Australian, so let’s say $10 US.

Sam Easterby:

And this thing called negative covariance which is if it were beer, my first beer is awesome. My second beer is pretty good. My third beer, I’m relatively indifferent. And by the fifth beer, I shouldn’t be getting into the car and tomorrow is going to hurt. It’s the same thing with solar.

Sam Easterby:

As you add more and more solar into the system from a utility perspective, the net metering construct gets a little bit more painful, A, because they see fewer revenues for the same amount of infrastructure. Bills still have to be produced, customer care, linemen climbing poles, infrastructure replaced. Nobody’s paying for that if it’s on that metered. And so, there’s that piece of the equation plus this issue where at some point, you’re into your fifth beer.

Bill Nussey:

The phenomenon of solar saturation in the market, there’s another great book, Taming the Sun. They go deeply into that question of what happens when you put too much solar on the grid whether it’s coming from rooftops or giant desert fields. And I think it’s a very valid question.

Bill Nussey:

I’m less concerned about it than many because I think the price of storage is going to come down so quickly, and the variety and types of storage. Plus, I also think we’re inevitably going to see markets evolve where that negative price of electricity which is just silly, it’s a construct. It’s real but it’s silly because there’s good things you can do with extra electrons if you have economies built around it.

Bill Nussey:

But it’s such a new phenomenon. It’s been happening in California for the last three or four years as more and more solar gets built out. And Australia is a great example as well. As that will become 10 times, 20 times, 100 times that problem and we’ll see it not just a few isolated supersonic places.

Bill Nussey:

But I think as it expands, we’ll see new markets emerge, new technologies that can tap into that cheap electricity, not just store it with batteries but maybe create economics to charge vehicles or to somebody. Probably every month, I get a call from someone who’s going to use that to make bitcoin. And I roll my eyes at it.

Bill Nussey:

But the creativity is starting and people will find a way to use it, I think.

Peter Kelly-Detwiler:

Yeah, I think you’re right. We’ll eventually figure out how to do what I call a tummy tuck the duck.

Sam Easterby:

He’s referring to the duck curve if you know how these things work. It’s funny.

Peter Kelly-Detwiler:

But yeah, I think you’re right. We will find a long-term equilibrium where those really low prices will invite business models that don’t exist today.

Sam Easterby:

So in that transition, would we see the benefits accrue to consumers as the costs continue to decline? The cost declines. Does this play a role in the big versus small argument that we often hear about the utility business model?

Peter Kelly-Detwiler:

Yeah. I mean, certainly in theory, it could. If you take, for example, on the small side distributed resources, we look at a power grid today where somewhere between 8 and 9% of all the infrastructure costs are dedicated to serving the last 1% of peak demand. It’s those three or four really hot days that you have to build for or otherwise, you have outages. Those don’t even occur every single year.

Peter Kelly-Detwiler:

So, if we could find ways and if you can reduce the top 10%, you can cut 25% of your infrastructure costs. So by creating more batteries and more flexible assets on the customer side of the equation, feeding those batteries with solar shifting and so on really interacting with enabling the customer side of the equation, we could find a situation where we can make the grid which is 51% capacity factor right now to let’s say it’s 53, 54, 55.

Peter Kelly-Detwiler:

All that reduced waste is economic goodness we can tap into. It’s a resource we can drill into, the same way we can drill into oil. And to give you a really good example of the efficiencies, the most extreme case of that is Brooklyn Queens Demand Management where the whole area shifted because … I’ll overstate it but a bunch of yuppies moved into an area and the evening peak is from around 9:00 to 11:00 or 11:30 because these people know how to party afterwards.

Peter Kelly-Detwiler:

And so, Consolidated Edison, the local utility said, “Oh, we’re going to have to put in new infrastructure to substation and feeder lines.” What’s the cost for that? $1.2 billion estimated. Okay. So what if we put in a combination of some voltage tools, permanent efficiency, efficient lighting, demand response, batteries, fuel cells and some solar behind-the-meter, what would that cost us? And the solar, they shifted essentially. That would cost, well, as of last July, the price tag is $116 million versus $1.2 billion.

Peter Kelly-Detwiler:

So now in New York, when they’re reforming the energy vision model, they’re looking at all utility investments on a go forward basis in infrastructure and saying, “Maybe, there’s a better way to do this by tapping into consuming assets and changing their behavior over a relatively small number of hours.” And in fact, making the grid more efficient in which case that could decrease overall rates to people.

Peter Kelly-Detwiler:

It’s a big question of pricing, communications, networks, vendors getting involved and changing the way utilities are compensated because most of them get paid more when they sell more, not paid more when they create more benefits to society. So we really have to change that construct.

Speaker 3:

2021 seems to be filled with more and more tragic regionwide power outages. California, Texas, Louisiana and New York. With each tragedy, our leaders tell us the same thing. Our electricity grid urgently needs upgrading.

Speaker 3:

Here’s just one example. Hurricane Ida came to shore in Louisiana on August 29th, devastating the electricity infrastructure, including all eight transmission towers that bring electricity into New Orleans. When the storm finally moved on, 30,000 power poles and 5,600 transformers required repair. Ida did more damage to the electric grid than Hurricanes Katrina, Delta and Zeta combined.

Speaker 3:

Catastrophic hurricanes are inevitability on the Gulf Coast. So, how had the New Orleans City Planners and its utility prepared for them? One group called the Alliance for Affordable Energy argued that the best way to ensure a reliable electricity in the face of extreme weather was to fund and build small-scale local energy systems like microgrids, particularly for community centers and operation bases of first responders.

Speaker 3:

Another group led by the regional utility Entergy argued that the best solution was to build a large natural gas plant in New Orleans. The utilities previous CEO Charles Rice urged the City Council to support the big plant saying, “The unit will include black start capability. This will give the company the ability to restore electric service if New Orleans is electrically islanded from the rest of the interconnected transmission grid as was the case after Hurricane Gustav.”

Speaker 3:

His point of view is bolstered by a group of vocal citizens attending the council meeting. Actually, as the City Council will later find out, those citizens were paid actors and this stunt led the city to fine the utility $5 million. But nonetheless, the utility’s plan won out. The $210 million New Orleans power station went live in 2020. No local energy systems were funded.

Speaker 3:

When Hurricane Ida struck the city, the shiny new gas plant failed to come to the rescue. Explanations shifted as each new day found the city without power and the parking lot of the power plant remained empty. The plant did eventually get turned on and played a role in the slow restoration of power.

Speaker 3:

But even 10 days after Ida, more than a quarter of a million people in New Orleans still had no power. Despite this failure of the big grid, there were some bright lights shining in the darkness. After a quick repair, a not-for-profit-funded solar plus battery local energy system was providing electricity and lights for the residents of an affordable apartment building.

Speaker 3:

Another group called the Footprint Project drove in several mobile solar power-generating stations to bring light and charging for hundreds of people across the city. The tragic power outage in New Orleans is just one more piece of irrefutable evidence that planners, policymakers and politicians need to expand their thinking.

Speaker 3:

Giant power plants and miles of transmission power lines are necessary. But they are by no means sufficient when it comes to cleaner and more resilient energy. Small-scale systems are proven themselves everywhere if only decision-makers would begin to look beyond a century of convenient but outdated answers. The fact is bigger is no longer better.

Speaker 3:

Now, back to Sam, Bill and Peter Kelly-Detwiler to learn even more.

Sam Easterby:

Does the monopoly utility business model still work? And if it’s broken, what changes should be made?

Peter Kelly-Detwiler:

Well, it still has to work in the sense that there are … look, if everybody had unlimited wealth, most people could put solar on the roof and batteries and electric vehicle inside for the three kids with their 100-watt hairdryer, never worry about their own internal peak. And everyone could defect from the grid entirely.

Peter Kelly-Detwiler:

The reality is not everybody can. Many people live in apartments. Many people can’t afford solar and batteries. And there’s this thing called obligation to serve which has been there right from the get go with regulated utilities. And that’s not going anywhere.

Peter Kelly-Detwiler:

So in that sense, there will be one natural monopoly with a set of wires and poles that feeds the majority of society for a long, long time to come. There’s no way around that for some time to come certainly that I can see. So then the question is, “Okay, given that obligation to serve but also given the fact that we do have this mandate to decarbonize which is being forced upon us by atmospheric chemistry, how do we then create the outcomes we need for society?”

Peter Kelly-Detwiler:

It’s no longer just, “Can I get power to you cheaply?” Now, it’s much more than that. The electron, by the way, is going to move into the transportation sector. It’s going to move into industry. It’s going to be a key carrier for energy that helps us decarbonize all sectors of the economy whether it’s in a fuel cell or in electron.

Peter Kelly-Detwiler:

So now, the utility now gets thrust into this role of being as much as anything besides wires and poles, the entity that helps to move information. So you get this concept of this distributed service organization which is going to be some entity that provides both pricing and signals to potentially millions of devices making billions of transactions on an annual basis across the country. Quite easily, you can see those numbers.

Peter Kelly-Detwiler:

It could be that they team up with IT companies because it’s not in their DNA to do this. There will still be regulated utility or monopoly, but they’re going to have to have a whole new set of tools and a whole new set of partners to pull this thing off.

Sam Easterby:

You just mentioned the impact that the EVs may have on how we think about electricity going forward. And the Ford’s new F-150 Lightning was just announced about the time that energy switch came out. And that has stirred a lot of conversation about what we call vehicle to home or vehicle to grid.

Sam Easterby:

So, assuming EV is like this and others really do take off, what does it mean for the stability and the cost to the grid and the cost of the grid?

Peter Kelly-Detwiler:

Yeah. So unfortunately for me and the book that came out right after, I’ve been looking at Ford going, “Okay, GM has got their Ultium platform. They figured this out. They’re moving ahead. Tesla obviously is. Where the heck is Ford in this?” They hadn’t even at that point tied up a battery manufacturer. They had arrangement with SK Innovation for a certain amount, but nothing.

Peter Kelly-Detwiler:

Then all of a sudden, what do they do? Masterstroke, they come out with the American vehicle. There are 17 million cars and light trucks sold in this country, 900,000 on an annual basis are the F-150. So they come with an F 150 with the ability to serve as power tools right from the frunk which is kind of cool, and massive acceleration at a decent price.

Peter Kelly-Detwiler:

And most importantly of all, they’ve got those shots of an illuminated garage with some damage in front of it. And the husband and wife working to clean stuff up and the vehicle is the source of energy. And there have been many people that have said, “Once an American pickup truck electrifies, Katy bar the door, that’s when we know we’re here.”

Peter Kelly-Detwiler:

And so, Ford has to get this right. But the fact that they now have the two models, the 110-kilowatt hour one, that will power a home. Average home is 30 kilowatt hours a day. So that’s three days to the average home assuming they’re powering all the circuits. The big one which can give you 300 miles of range, 150 kilowatt hours, that thing will do five days.

Peter Kelly-Detwiler:

So here, take Texas or take New Orleans. In both of those instances, imagine if you had thousands of people with those vehicles plugged into their home. Do you think the next day Ford wouldn’t have doubled or tripled the volumes? In fact, they’re taking the 40,000 target for 2024 and doubling it to 80,000 because they already have 120,000, reservations.

Peter Kelly-Detwiler:

And the vehicle to G piece, the vehicle to home first but ultimately vehicle to grid, if we were to electrify every light car and truck in the country, that’s 30% more electricity than we consume today.

Peter Kelly-Detwiler:

So assume they’re half full. That’s 15% on wheels all the time that could be used to provide grid stability, that could charge at the right times and tummy tuck that duck absorbing energy from the solar during the middle of the day, lopping the head off potentially by feeding homes at night, not today or tomorrow but sometime in the future. I think V2G is inevitable because there’s so much energy and therefore so much money involved.

Peter Kelly-Detwiler:

And I think within five years, you’re going to see almost every vehicle coming out with what Ford just did because everyone’s going to say, “I want that.”

Sam Easterby:

You talk about bait. So, let me ask this. How secure are we with regard to acts of terrorism on the cyber front and the physical front?

Peter Kelly-Detwiler:

Yeah, that’s a really good and somewhat vexing question. And I actually wrote a white paper for General Wesley Clark and his group that works on grid resilience issues. Because one of my clients had paid me to figure out how I could access or if I could access information on the grid in any way, shape, or form, how I could use the grid logic to destroy itself, which is what they did in the Ukraine and especially in the second attack.

Peter Kelly-Detwiler:

And so, in the old days, [inaudible 00:39:43] system and a bulk-power system had say 250 assets to protect. Nowadays, we’re going to have millions of assets on the customer side out of the grid edge. And if you could hack into some vendor say a charging network and you could flex those charges up and down, up and down or even attack the vehicles themselves, there is that possibility and NPPL, Northwest … what’s the name? NPPL, the National Lab has done a lot of work on cybersecurity.

Peter Kelly-Detwiler:

SunSpec Alliance is focusing on. As that population grows, the vulnerability definitely increases because every IT connection does represent another attack path. And a lot of startups don’t focus on cyber because it’s a cost to them in their intent on surviving and getting the next dollar and the next round of funding. And so, they don’t spend as much time on cyber hygiene as they probably should.

Sam Easterby:

Bill, do you have any thoughts on that?

Bill Nussey:

I spent most of my career in the IT industry and security was a big deal. And for all of our fans here in Atlanta, Atlanta’s rise into the venture prominence was through security companies. There’s a lot of people to talk about that. And there’s a couple of startups here that focus on utility and power grid and infrastructure security. And I’ve had a chance to talk to those people over the years.

Bill Nussey:

I think that the best answer for security is diversity. And so, if you only had 200 large power plants as we’ve had in the past, that makes it worth the incredible amount of work for a hacker to go crack into a subset of them and wreak havoc. And we’re now heading to the other extreme. And we’re not leaving by the 200 big targets, we’re going to have the 200 or 1,000 big targets. And we’re going to have hundreds of thousands, now tens of millions of new targets.

Bill Nussey:

And I think, Peter, you perfectly highlighted the underbelly. If you have a nanny cam or you have some kind of a drone, you’re already a vector for getting hacked. So there’s a lot of ways to already … and anytime that there’s a big, they call denial of service attack in the grid where they just inundate a website till the point that it crashes, the most popular way to do that now is to take over people’s home cameras, streaming cameras from the houses and other low-grade IT products, and they just hack them.

Bill Nussey:

You don’t even know it but your house is now sending out two or three of these tens of millions of denial service attacks. And so, there’s a very real issue. The benefit I think of this diversity is that in order to create a grid meltdown in most cases, maybe a hacker smarter than me could say otherwise. But you have to get actually a number of dominoes to fall in the right way.

Bill Nussey:

And so, that diversity makes it harder to coordinate a sophisticated attack. You can just wreak havoc. Maybe take someone’s house out. But taking that down, cascading to take down the broader grid I think is going to become more challenging as we diversify. But it will be easier to take down spot locations.

Bill Nussey:

And then, of course, we have this … I think it was a documentary I saw the other day. I think it was called Fast and Furious 7 or 8. And they basically took over all the EVs and they sent them all. It remotely controlled the villain which a lot like Charlize Theron. But anyway, besides that, I think diversity is going to help us.

Peter Kelly-Detwiler:

It’s certainly something we need to pay attention to. And in fact, the first Ukrainian attack, one of the things they did was launched a denial of service against the Customer Care Center so they lost all situational awareness for anything that could have come in from customers telling where the outages were.

Sam Easterby:

Interesting, interesting. So that brings up a question in my mind. And you write a good bit about this in The Energy Switch, the utility planning process. Things are moving so fast and so quickly with regard to new technologies and new business models. Can utilities adapt to that change and what do they need to do to keep pace?

Peter Kelly-Detwiler:

Yeah. It’s really hard because it’s not just them, it’s their bosses. It’s the five people named Tom, Elizabeth, Harry, Dick, and Sam who are the regulators. And that’s not easy. I was commuting home one day and I talked to a guy and I said, “Where are you today?” And he said, “I was in front of the Department of Public Utilities in Massachusetts.” I said, “Why?”

Peter Kelly-Detwiler:

And this is years and years and years ago. He goes, “You know those amphibious boats, the ones that go on land and water that we used in World War 2, the duck boats?” I said, “Yeah.” He goes, “Well, we got to get permits for those. And that’s the famous Boston duck boat that we now use every year because another one of our teams win something that nobody else wins,” he says the arrogant way.

Peter Kelly-Detwiler:

But when he said that, it occurred to me, “Man, not only do these guys have to regulate cable, water, sewage, gas and electricity, they also have to focus on things like duck boats.” And the average pay you see is how many staffers. And so, here we are, Bill and I and you, we deal with this stuff every single day. And we know there’s so much out there that can puncture our frontier of ignorance at any given time.

Peter Kelly-Detwiler:

And so, here are these public utilities commissioners that are charged with making these just an equitable decisions and setting the rules of the sandbox so the players get in and play nice in a world where the pace of change is accelerating. So now, they’ve got to figure it out. And then they have to set the rules for the utilities. The utilities themselves, they’re economic actors. They’ll do what their bosses tell them to do in some way, shape or form.

Peter Kelly-Detwiler:

So really, at the end of the day, it starts with making sure you have the right regulatory body with educated, really competent and motivated people and then flows down to the utility so that they make the right decision accordingly.

Sam Easterby:

So, are the investor-owned utilities though, do they have the incentives to encourage and change and adapt and innovate?

Peter Kelly-Detwiler:

Only if their five bosses at the PUC tell them to do it. Otherwise, they could be in fact accused of harming their investors’ interests and potentially being sued for that. If the utility jumps out there and says, “We’re going to put a whole bunch of efficiency,” and they haven’t been changed or the way they’re compensated is still based on volumes, I as a shareholder say, “Wait a minute, you’re hurting my retirement fund. What you just did is contrary to your responsibility for the shareholders.”

Peter Kelly-Detwiler:

So, it’s all about how they get compensated. That’s just simple. Then whether coops and munis, kind of different because they have different masters. Munis, cities. Coops, their owners. So, in theory, different ways they make decisions based upon who they’re responsible to.

Sam Easterby:

And who they’re responsible to? That brings up another point that you write about in the book, the shift from consumer to prosumer. So, how do innovative companies like Griddy that you write about, how do they change a consumer’s relationship with their electricity supplier?

Peter Kelly-Detwiler:

So Griddy was fascinating. And also because I wrote that book and here’s this guy, prices go negative or really low. He’s an energy trader. So he’s really comfortable with the space. He pays $999 a month. And then he pays spot market in Texas.

Peter Kelly-Detwiler:

So if prices go negative, he’s paid to do his laundry. And so, he would figure that out. And he precools his house. Use the thermal inertia of the home, cool in the morning and then not bother. And he has really low bills. But not everybody has that elastic capability, elasticity being ability to change your behavior in response to price.

Peter Kelly-Detwiler:

And we found out during the storm, Texas storm Uri there, that Griddy had thousands of customers. They try. They warned them, “Get off the system, this thing is coming.” People couldn’t switch because nobody would pick them up. And so, some of them were facing bills over four or five days that costs 3, 4, 5, even more thousand dollars.

Peter Kelly-Detwiler:

So, that approach, arguably, people bought a weather derivative and didn’t know it. Because here’s a market where, look, there’s no other commodity. Imagine if gasoline did this. You show up today at the pump and pay $3. And then you pay $9,000 tomorrow based upon the fact that it just got a lot colder. And you might not have gotten a bill to tell you that you paid the $9,000 for another month.

Peter Kelly-Detwiler:

So arguably, what probably has to happen, you remember that old commercial, the joke, “It’s 11:00, do you know where your cat is?” Well, it’s 11:00, do you know what the price of a kilowatt hour of power is? Nobody wants to waste their time with that. What you want to know is it’s 11:00 at night, if the price is x, my water here is doing nothing right now or it’s charging up fully so I get a hot shower tomorrow at the cheapest price I possibly can.

Peter Kelly-Detwiler:

And my electric vehicle knows when to charge and my other devices do and they’re all secure. I want the cheapest bill for the best services I can possibly get and have reliability as well. But I don’t want to be bothered as a consumer. I got to deal with life insurance, my kid’s tuition, a car payment bill, repairs on something else. Life is too complicated for the average consumer to care about day ahead and spot market prices in the most volatile commodity on the planet.

Peter Kelly-Detwiler:

So, let us take that burden away from them. But let us expose them to the potential upside of having those devices do the right thing at the right time.

Sam Easterby:

Peter, we are moving from consumers who just want the lowest price and want reliability. But what role does energy efficiency play in this whole transition?

Peter Kelly-Detwiler:

Well, just like battery and solar technology and a lot of other things, we’re getting better. So are end user technologies, I mean your classic case is your LED light bulb which uses a fraction of the energy of that old incandescent bulb, it was a heater masquerading as a light bulb. But technology, all the way across, the mini-split heat pumps, keeps getting better each year, the air conditioners.

Peter Kelly-Detwiler:

And so, having the right standards in place and making sure that we’re promulgating … every time, for example, a water heater runs to the end of its life, we’re putting in the most efficient equipment. It’s cheaper on a cents-per-kilowatt-hour basis to put energy efficiency and then almost any new supply option. You should start at square one which is always looking at your end-use equipment. Because among other things, you’re avoiding all the line losses and the inefficiencies in the whole rest of the system that feed that device.

Peter Kelly-Detwiler:

So that’s where you start. And then you look at everything else. And it tends to be overlooked because it’s not sexy.

Sam Easterby:

Well, you do a great job of talking about efficiencies in energy switch and encourage people to take a look at that. But we have really hit the clock here. And Peter, as a distinguished guest and the star of the show, you get to go through what we call the lightning round.

Sam Easterby:

And this is very quick answers to a handful of questions. So, I’m going to throw the questions at you and you give us the top-of-mind answer.

Peter Kelly-Detwiler:

I’m ready.

Sam Easterby:

All right, first question. What excites you most about being in the clean energy business?

Peter Kelly-Detwiler:

The people. Passionate, intelligent, dedicated and super creative.

Sam Easterby:

I love it. I love it. Next question. If you could wave a magic wand and change just one thing to accelerate the shift to clean energy, what would it be?

Peter Kelly-Detwiler:

Educated electorate. Educated electorate. We have too few people in this country and in the world who understand truly both what’s at stake and what’s possible.

Sam Easterby:

Next question. What do you think will be the single most important change in how we generate store and distribute electricity in the next, say, five years?

Peter Kelly-Detwiler:

I think we’re going to see cheaper batteries, new technologies, and the pace of change across the entire system just continuing to accelerate driving cost down.

Sam Easterby:

Perfect. Now, here’s one that we always get asked when we’re out and about, but what do you say to industry outsiders that ask you, “What can I do to help make this transition faster?”

Peter Kelly-Detwiler:

Understand how your company is consuming power because you’ve got a lot of stake here, both in terms of what your costs are and also your social license to operate. Societies beginning to care about what you do, how you consume power, and the impacts thereof.

Sam Easterby:

Social license to operate, I love that. I love that. Peter, this has been a fascinating discussion. We really appreciate your time. Peter is the author of The Energy Switch. I encourage people to take a look at it. And Peter, we will have a link in the show notes for this episode about the book. Thank you, Peter, for your time.

Bill Nussey:

Thank you very much. This has been a lot of fun.

Peter Kelly-Detwiler:

It was my pleasure. I had a blast.

Speaker 3:

Thank you for joining us today. You have been listening to the Freeing Energy Podcast, personal stories from the Clean Energy Movement. To learn more about the Freeing Energy Project, visit our website freeingenergy.com. Subscribe to the Freeing Energy Podcast on Apple podcast, Spotify, Google Podcasts, and anywhere podcasts are found.

Speaker 3:

Make sure more people learn about clean local energy by rating and reviewing the show on Apple podcasts.

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