Energy in 30: Pressures are motivating tectonic regulatory shifts

So, I come away from that with some sense of, "Oh, well maybe there are ways to actually convince people, or help identify what the problems are, and work on it together." I think it was Paul De Martini, in one of your earlier episodes, who talked about one of the real limitations of the regulatory process is that it becomes very adjudicated. You present both sides, and you have to build a record, and can only make decisions based on what's there. And it doesn't really allow for the broader design thinking that we might want, to deal with some of the urgent problems that we have. So, I come away with a little bit of hope having been there.

Education and outreach help regulators be engaged and aware

David: I'm glad to hear that there's hope. I'm curious: How can we help regulators keep up with the pace of change that's happening on the consumer side of the meter? What the consumers are doing seems to be leapfrogging with what the regulators are doing, and it seems to be throwing things out of sync. How can we help them stay up with that?

Cameron: It's a great question. And again, I wish that there was just one simple answer. Because it is true that in many situations the regulators and regulatory commissions are bound by some very prescriptive rules and processes. And it makes it hard to step back and look at something from the bigger picture because it can get very narrow very quickly.

Having said that, I would say that one of the things that we do at E9 Insight is make that public record more relevant. And that can come in a few different forms. One way is that we help regulators and other government officials understand what their peers are doing, just to be able to see what's happening in other states. Like all of us, probably, they put their heads down and they're dealing with what's in front of them. And it's hard to lift up and take a look around. So we try to do that for them—to give a 50-state perspective on what's happening [and ask] what are best practices?

The other way is really to get people more engaged. So, we try to support constructive engagement in policy proceedings and other initiatives. And that obviously translates for businesses and other organizations, in terms of thinking about what is the best business development or deployment strategy. I will say, most regulators are coming from some other profession. No one that I know checks all the boxes in their career office and then decides that they want to be a public utility commissioner. It's usually the result of either a long career in the industry, in law, in academia, or in advocacy.

And so, the result of that is that most of them are actually very hungry to learn. They recognize that things are changing quickly, and it's not always going to be the way it has been—and they want to be looking forward. So quite honestly, I think there's a lot of opportunity to do that kind of education and outreach—just to share, not necessarily with a strong advocacy bent. You don't need to go in and say, "This is the way it should be." Just talk about what are companies' different market experiences, what's happening in one state that could be happening in another state—things like that. There is appetite out there to just lift up the hood a little bit and look underneath to try and understand what's going on. That said though, David, I don't know the answer to how you keep up because things are happening pretty quickly.

Regulatory commission actions vary from state to state

Joan: When you're having those discussions, is there this—because I always feel like what you said: Sometimes it's a morass, and that regulators or policymakers—it's a big responsibility for them to come up with, or keep up with the pace. And I am curious: Do they recognize that that impression is out there, or care?

Cameron: Well, like everything, it probably comes down to who those people are.

Joan: Yeah.

Cameron: And what their priorities are. Again, for the most part, I'm a generally pessimistic person. People tend to disappoint me more often than not. That said, I am consistently struck by [the fact that] even if I might have a different opinion from somebody, most of the people who are attending NARUC, or who are involved, are very passionate and genuinely believe, want to learn, and want to get it right.

I think the consequential nature of the decisions that they have to make—that you sort of touched on there, Joan—the decisions have huge implications, potentially, that last for decades. And I think that's not taken lightly by most people. So, that might not always lead to the right outcome. And I suppose, depending on the person, that might mean that some people think they should charge ahead boldly, and others might say, "Well, this is really important. I need to sit back and sharpen my pencil and look at all of it." So, that just gets down to different people's personal style. And I'll say to some degree, each of the state commissions has their own culture and personality, if you will, so it can vary from state to state.

U.S. struggles with electric grid quality and the role of regulators

David: So, I read the vision papers that you launched at NARUC—the State Assessment and Think Microgrid Climate and Vision Report. One of the things that you mentioned in there, which just floored me, is that the grid quality in the U.S. is ranked at 23rd, which is below countries in Asia and Europe, the Middle East, and even South America. And that in 2020, the U.S. experienced 1.3 billion outage hours , which just blew me away. So it seems like not only do we need the regulators to keep up with the pace that customers are moving ahead with putting solar and storage in their houses and businesses, but wow, just pure grid quality itself seems to be struggling. Again, I'll go back to the pace; it seems like we need to pick up the pace, and that the regulators have to be a key in picking up that pace.

Determining the best models for a resilient grid

Cameron: Well, you're absolutely right. Some of the work that we do is to help create and now staff an organization, a coalition, called Think Microgrid that's really focused on trying to highlight the role that microgrids can play—especially around resilience. And a lot of people, if you go to any conference you'll hear about what an engineering marvel the electric grid is. And there's no doubt that's true: There are millions of endpoints and all kinds of resources that are being balanced.

But the fact of the matter is it's also very, very brittle. And so, whether it's a storm or a squirrel, local disruptions can cascade or take out huge swaths of cities and service areas. It strikes me as odd how we've become so accustomed to that—that we just seem to accept it with a collective shrug and say, "Well, what are you going to do? This city lost power for days, for millions.” When did that become acceptable as a service quality level?

David: Right.

Cameron: And there's a lot of focus on, I would say, hardening the grid. There's not as much focus on making the grid more resilient, flexible, supple. Unfortunately, I think—well, maybe not unfortunately—I think it touches on, going back to NARUC, there are some—certain—what I think of as—fault lines that run through the industry. (Fault lines) around distributed energy versus more centralized solutions, or private capital being invested into energy technology versus ratepayer capital. Honestly, customer autonomy versus utility command and control models that the history of the industry tends to lean towards more—some of the things that we're familiar with—more of the centralized systems, big infrastructure. And we haven't necessarily figured out the best models for how to incorporate these other solutions that might not be obvious and intuitive from a central planning or a utility business model, the way it's been developed over the last century, but that, I think, are just absolutely critical going forward.

Pressure is leading to innovation

Cameron: I'll say, being a native of California, I don't use the term “fault line” without some trepidation or use it loosely. I'll just expand on that for a minute because I do often think about the regulatory world as being somewhat tectonic. A lot of people translate that as meaning it's really slow, and that can certainly be true. Jim Rogers, the former CEO of Duke, used to tell a joke that I heard him offer a couple of times about a group of despondent utility CEOs who decided they couldn't make it work; regulators were too much and the EPA was coming down on them. So, they decided to give it up and they were going to do a mass suicide—and they went out and laid down in front of a glacier.

David: Ha, ha, ha, ha.

Joan: Ha, ha.

Cameron: But I use it a little differently. It's true that tectonic changes, when you look at them over a longer time span, are very, very slow. But the fact is, when that pressure builds up, when it does shift, it shifts very quickly, and it shifts irreversibly. So those plates move and suddenly we're in a new paradigm.

I feel like those pressures are building up around some of those things. And so distributed energy, microgrids, customer-sided solutions—where, as you point out, a lot of the innovation is happening. I think there is a lot of good pressure that's building that is going to force some changes. Now, of course, it gets into a question of timing because that change could come in five months or five years or 15 years. And the difference for us, in our lifetime, is very significant across all of those. But yeah, there is a lot of attention that I think is going into this question of: What does a resilient grid look like? Not just a reliable grid. And how can we serve most of the people most of the time—not how do we deal with these unfortunate, not always common, but not unpredictable events, like big storms on the Gulf Coast, heat waves, or wildfires?

David: Which only seem to be increasing.

Cameron: Yeah, unfortunately, that's true.

There is never one right answer to public policy decisions

David: So, education certainly plays a role in all of this—educating regulators. But what about advocacy, lobbying? Maybe those are just different forms of education. I think back to the early, old power days, and how they bypassed utilities and went right to regulators. All of a sudden, every utility was being told to do a home-energy report program, which made the regulation side move very quickly. But what's the role of all those different channels?

Cameron: Well, at many levels, public policy is definitely more art than science. There isn't necessarily one right answer. And that's something, again, that just goes back to that human component. There are a lot of decisions that need to be made, and there's not always just one right formula that says "Well, this is how we all agree is the right way to do it." Just to use a very small example: If I build a home up in the mountains, I can generally expect that the utility is going to run power lines up to where my property is so that I can connect, and that those costs are taken to be just costs of operating the system. If, on the other hand, I want to run a commercial facility that's much closer, a lot of those costs are not necessarily borne by everybody. There might be a charge that's applied to my specific facility.

There's not one right answer to that; those are essentially social decisions that we're making. So, the conversation that you allude to—which I think of as between the legislature, the executive branch, and the regulatory agencies in any given state or jurisdiction—is that there is a conversation that happens, and so, the legislature might step forward.

Here in Colorado, there's a proposal being floated around for a bill that would study where microgrids can provide power for critical facilities. So even just laying down that marker to say, "This is a priority for us," I think sends a signal onto the regulatory side of: "Well, we should be looking at this, and we should be thinking about goals that maybe extend just beyond our immediate purview."

I wish there were one simple answer, David, but it really does strike me that there is this constructive tension that exists between the different agencies, the different authorities, and government; and we push and pull our way along. But it does seem to move towards new policies, new programs.

New approaches positively shift mindset and disrupt the status quo

Cameron: I'll also say that I think there's an element that what exists is irrefutable. To pick up on the microgrid example, again—during the Texas blackouts of a year or so ago, there were private businesses that became hubs for local communities because things like grocery stores had decided, "We're going to invest in microgrids because we know what the value of lost inventory is if we lose power." And so, those were places where the lights stayed on during those moments.

And that became a very clear marker for those people who drove to those stores to use Wi-Fi or to charge their phones and have access—that this is not impossible; these things exist. We can have power during these big, disruptive events.

David: And that they have to be thoughtful.

Cameron: They just have to be thoughtful. And it raises questions of, "How do we plan for that?” as opposed to just thinking that there's nothing we can do and going back to that idea of the collective shrug. We shouldn't be shrugging. We should be angry and energized that it doesn't have to be this way.

Electrification’s growth outpaces its nascent infrastructure

Joan: We haven't even talked about electrification and its impact.

Cameron: Yeah, and there's a lot of questions there. Again, I raised that example of there's not necessarily one right answer. We've been spending a lot of time looking at electrification, especially around fast-charging applications along highway corridors and in urban centers. It's one thing if you have a home and you can plug your car in and you can charge it. But for many moments of the day, for example, when my family was driving down to the Grand Canyon, we would have needed—we don't have an electric vehicle that we took—but we would have needed to know where we can stop to charge conveniently and not need to spend the night.

Right now, a lot of those charging facilities are really hampered by rate design that didn't anticipate electric vehicles and electrification. So there's demand charges that were designed for a different application, but they unfortunately are crude instruments that don't accurately reflect always the real costs of providing service. So they can grossly inflate the charges that are being put on those kinds of applications.

Those are things where I think there's a combination of education as to how those demand rates got put in place and what was the purpose they were trying to serve; but then it also [includes] some real advocacy to participate in the rate-making process in front of a commission or an ALJ [Administrative Law Judge], to say, "This needs to be changed; here's the arguments why. And this is the proposal for how it should be changed." So, it has to be both.

What would you do to change the industry for the better?

Joan: Cameron, there's so much that we could dig into. I can't believe we're already getting towards the end. So, I have to ask you the big question that we try to ask on every one of these, and that's if you could change one thing in the industry—no limits—what would you do?

Cameron: Boy, that is a big question! I guess I'll say, backing up, I got into this industry because of an interest around climate change and environmental protection. And so, that is definitely something that really drives me. So, I kind of have two answers One is a real big vision and one's a little bit more nerdy and immediate.

The bigger vision: I really would like to go back to that question of design thinking that's hard to do in the adjudicated process of this or that proceeding. I would love for our power grid to be designed around the flows of energy, wind, and solar, rather than around the stores of energy, which is really what we have today, of either burning certain fuels or capturing certain fuels.

And the more immediate step to work towards that, in my view, would be—and this is the part that maybe gets a little bit wonky—I want to have open access to the distribution grid in the same way that we have open access to the transmission grid. And what I mean by that is on the transmission grid, if I own a power facility, I can sell my power to that factory over there, or to that data center, and pay a fair rate to transport the electricity across the transmission grid.

We don't have that kind of open-access model for the distribution system, and I think that we should. I think that we should be able to have a community-owned storage facility or solar facility that would allow microgrids to disconnect and serve a small load, whether it's a 911 call center and a hospital, or a group of homes. One piece of that is, I suppose, a commercial rule that needs to change around the open access to the distribution system. But there's also a physical element, which would be to lift restrictions on being able to run power lines from one...across a property line, which exists in almost every state.

David: I love the thought: Open access to distribution systems. Why not? It would open up so much creativity, and accelerate things probably closer to the pace that we need them to be happening at.

Cameron: I certainly think so. There's a lot of discussion. Usually, those discussions come in the form of a conversation around what a distribution system operator model would look like, the same way that we have an independent system operator in a lot of the wholesale markets. There's a lot of discussion around it, but no one has actually moved to implement it; so that would be my big change.

Joan: I like it. And you've left us with a lot to think about, which is always a good thing. So, thank you so much, Cameron, for joining us today.

David: Yes, we really appreciate it; a lot of meaty stuff to dig into. Thank you.

Cameron: Oh, it's my pleasure. And it's great to reconnect. I’m happy to be part of this new series. I've really enjoyed what I've heard so far.

Joan: Oh, thanks, Cameron. And if anybody wants to learn more about E9 Insight, or any of the papers that we talked about, they can go to your website?

Cameron: Sure. E9insight.com, and the coalition that I mentioned is at thinkmicrogrid.org.

Joan: Great. OK. Well, that's a wrap, everybody. If you've enjoyed listening to “Energy in 30,” please subscribe, share, rate the show, and review our podcast if you can.

David: We're really looking forward to that one, Joan. I have to say, I've been pretty surprised with all the optimism that we keep hearing from our guests. Let's hope that continues as we delve into other interesting areas like equitable energy engagement, flexible load management, and electrification.

Joan: I couldn't agree more, David. Here's to our next “Energy in 30.”

David: Bye.