[Scott] Coming up on "Energy Switch," a look at electric grid reliability.

- There is nothing in the electric system that is not subsidized.

One of the popular things that people complain about in this business is, I just want a level playing field.

We will never have a level playing field.

And the problem is that subsidies beget subsidies.

- And subsidies do affect reliability in the sense that they throw off the market.

Subsidies distort the market.

But if we always keep as our focus what is best for consumers in getting them reliable power at the least cost, then I think that's the main guidepost we ought to follow.

[Scott] Next on "Energy Switch," different solutions for reliability of the electric grid.

[Narrator] Funding for "Energy Switch" was provided in part by The University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.

[upbeat music] - I'm Scott Tinker, and I'm an energy scientist.

I work in the field, lead research, speak around the world, write articles, and make films about energy.

This show brings together leading experts on vital topics in energy and climate.

They may have different perspectives, but my goal is to learn, and illuminate, and bring diverging views together towards solutions.

Welcome to the "Energy Switch."

Everything in the modern world relies on the electric grid.

To keep the grid reliable, system operators call on electricity from dispatchable generation, like coal, gas, hydro, and nuclear, to balance intermittent generation from non-dispatchable sources, like wind and solar.

Together, these meet our enormous electricity demand, which varies second to second.

It's a hugely complicated task and it's facing real challenges.

We'll talk about this and more with Mark Christie.

He's a member of the Federal Energy Regulatory Commission, which regulates America's grids, and the former chairman of Virginia's regulatory body over utilities.

Alison Silverstein is a consultant for the American Council for an Energy-Efficient Economy, and formerly for FERC, the Department of Energy, and the Texas Public Utility Commission.

Next on "Energy Switch," we'll hear competing visions of how to make the grid more reliable.

Why is it important?

I mean, why does grid reliability matter?

- Everything that we do as American society and around the world depends on the constant reliable flow of electricity.

When the electricity doesn't flow, there is extraordinary harm to people and to the economy.

- Yep.

Yeah, it's so vital.

Things to add to that?

- Yeah, I mean, I would define reliability as a system where the electrical power is on 24 hours a day, seven days a week, 365 days a year.

You cannot imagine modern life, modern civilization, really, as we know it in America, you cannot imagine it without regular power supply.

There's parts of the world where the electric power comes on maybe two or three hours in the afternoon, and then people build their lives around that and build their lives around the fact that they're not gonna have electric power for the other 21 hours.

Americans expect 24/7, 365.

Now, we're not gonna hit 24/7, 365, but from a policy standpoint and a regulatory standpoint, that's what we have to aim at.

- Let's talk about this thing called the demand curve.

What is that?

- Well, of course the term we use in the electricity business is load, which is how much power is being consumed at any given second.

Think of the grid as a huge lake that's exactly six inches deep everywhere, and it has to stay six inches deep at all times.

But on one end you've got streams flowing into it, and on the other end you have streams flowing out of it.

So the electric grid is the same way.

The power being used, it's got to be kept at the same quantity at all times.

It has to be balanced.

When it gets out of balance, either because too much power flows in on one end or too much power is consumed on the other end, you have exactly what happened in 2003, which is you have a system overload somewhere that trips off the rest of the grid.

- So demand curve is the amount of electricity we pull out of that system every day.

Does that vary throughout the day?

What does that look like?

- It varies a lot.

We use very little electricity early morning and overnight.

And then as everybody's waking up and turning stuff on, you get increasing demand.

And then it goes up in the afternoon, kind of peaks at about 4:00 to 8:00 PM, and then it starts going down again at night.

- Right.

So there's the daily, and then there's also the annual.

High demand in the summer, kind of shouldering down in the fall, some demand coming back in the winter for heat.

So you see kind of embedded curves in demand as we go through this.

And that's challenging to manage.

How does our electricity currently meet that variable demand?

- The grid operator has to work the resources that you have at that moment in time.

Nuclear plants, natural gas plants, coal plants, wind and solar, batteries, and all of those are generating at different points in time.

The electricity goes from the power plants through transmission, down to distribution into your home or business.

And so there are opportunities for failure and breakage.

[Mark] [chuckles] Many.

- And miscommunication at every possible step of that.

So their responsibility is to have contingency plans and always have enough in reserve.

What is the grid that I'm operating today and what's the next thing that could go wrong?

What if I lose this nuclear plant?

What if I lose that transmission line?

And be ready with a plan to step in.

- A really dynamic system.

[Alison] A really dynamic system.

- Let's get down to some of the thoughts on supply.

What does dispatchable mean?

What is dispatchable generation?

- To a grid operator, dispatchable means I can flip a switch and turn it on, or turn a dial and increase or move up or down the amount of output.

- Okay.

- But not all plants have the same characteristics and capabilities.

Some plants are very slow.

Like a coal plant or a nuclear plant, you can't move particularly fast.

- Takes me a while to cook over charcoal, but I can fire up my gas grill pretty fast.

- Exactly.

And you can ramp it quickly in terms of its heat output.

- Yeah.

- And that is extraordinarily valuable in times when the grid conditions are changing very quickly as when the sun is setting or when you lose a transmission line and you have to make up for that by rearranging everything else on the grid.

- So do we need more of it, less of it, dispatchability?

- We need enough of it.

[Scott] Okay.

- That's the bottom line.

And Alison's right.

Dispatchable is under the control of the grid operator, and it makes them extremely valuable.

And they all have different characteristics.

Nuclear, you don't flip a switch and turn on the nuclear plant tomorrow.

So nuclear is best suited to run all the time.

I mean, for months, literally months.

So it makes it great for what's called baseload generation.

- Okay, and it's meeting some base of demand that's always there?

- Yes.

You're always running it because you always know you're gonna have some level of demand.

So as you start building your supply stack, you start with those resources that can run all the time.

Coal generation can run all the time.

It can run for weeks, for weeks on end.

Gas is in combined-cycle form, is good for baseload.

You can run it all the time.

And then, of course, gas peakers, what we call, which are generally combustion turbine gas peakers, you can turn them on and off, literally, with a switch.

And that's what you're typically only going to use to meet that peak.

So we have to have sufficient dispatchable because in contrast to intermittent, the characteristic of intermittent, wind and solar, is they're not correlated to demand.

You know, solar comes on the grid when the sun shines, right?

- Right.

- Whatever the demand is, that's when it's gonna produce.

So the challenge is in trying to manage those kind of resources.

So once again- - It's not judgment, it's physics.

It's just what happens.

- It's physics.

Yeah, it's not an opinion, it's physics.

- Okay.

- And so you get back to the need for a balanced portfolio.

I mean, I think all this argues for a balanced portfolio, that you've gotta have sufficient dispatchable resources.

You can work in intermittent resources.

You can work in the demand-side resources.

All this has to be balanced.

- I will point out that one of the great things about solar, particularly for those of us who live in hot climates, is that generally the sun is shining when it's freaking hottest out and when you're running your air conditioner the hardest.

- Right, and matches demand, yeah.

- And very closely matches daytime demand and summer peak.

And the broader the area you cover geographically, with wind and solar that you're drawing from, the more stable and predictable the cumulative output is of each.

- Okay.

- Well, the challenge is, I mean, NERC, North American Electric Reliability Organization, which are the experts on reliability, they say the most dangerous time in Texas for reliability is 8:00 PM.

- True.

- Because solar disappears.

So what comes on to keep the lights on in Texas?

Dispatchable resources, primarily gas.

We love solar and wind because it's, number one, emissions-free and, number two, there's no fuel cost.

So two really nice attributes.

But you cannot avoid the reality that we cannot keep the lights on with 100% wind and solar.

You cannot do it, not under current technology.

- I mean, one of the big challenges is big events.

Of course, if you have a long period of wind doldrums or a long, big regional cloud, then we have an issue.

So how would we improve situations like that?

Or even on the more daily, the intermittency of solar and wind, what are some of the options for that?

- The thing about solar and wind is they are highly predictable.

Given the satellite and radar data and even the TV weather channel, you know when a front is coming in.

You can predict with all of your meteorological data.

So there aren't a ton of surprises, but you know when you are going to have that overcast.

And as the grid operator, you can bring on additional resources in advance to meet that.

- Batteries, big batteries, good backup.

Are there issues with batteries, though, or?

- Well, batteries are great.

Again, when the sun drops off at eight o'clock and goes from producing a lot to producing nothing, battery is a great way to give you four hours.

And that's the problem with batteries, though, is it's limited to four hours.

That's the best we can do right now.

It's gonna give us a four-hour break until we can bring on, again, dispatchable resources.

- It sounds like redundancy to me, and all that works together to make it reliable.

But redundancy in most situations is expensive.

Does this make it more expensive?

- No, because we don't expect batteries today to provide long-term power, as Mark said.

- Right.

- But batteries are extraordinarily valuable and extraordinarily cost-effective for short-term reliability services to fill in for 30 seconds, 10 minutes, 30 minutes, one hour.

Because they are so much more controllable and fast on a fraction-of-a-second command.

You cannot get that from any other resource what you can get from batteries.

And batteries are perfect and low cost for this purpose.

- Right.

- Batteries are extraordinarily expensive and inappropriate today for long-term storage, but they're getting cheaper.

- Just real specifically, what's subsidized in electricity systems and how does that affect reliability?

- There is nothing in the electric system that is not subsidized.

- Yeah.

- Nothing.

[Scott chuckles] One of the popular things that people complain about in this business is, I just want a level playing field.

It generally doesn't mean I want it to be as fair for everybody.

What it really means is, I want you to give me a break relative to that guy.

[Scott] [chuckles] Special subsidy.

- Or else I want to...

I want you to burden those guys so that I'm better off.

[Scott] Yeah.

- We will never have a level playing field.

And the problem is that subsidies beget subsidies.

- Mmhmm.

- Yeah.

How does that impact reliability of electricity then?

- Yeah, Mark.

[Scott laughing] - Well, not all subsidies are created equal.

Whenever you have a highly regulated construct, and electric industry has been highly regulated from the beginning, you're gonna get rent-seeking.

- Rent-seeking means?

- Seeking- - Governments, or- - Seeking, you know, advantages through regulation that increase your profits above what you'd get in a purely competitive market.

And subsidies do affect reliability in the sense that they throw off the market, subsidies distort the markets, and so it can definitely affect reliability.

But if we always keep as our focus what is best for consumers in getting them reliable power at the least cost, then I think that's the main guidepost we ought to follow.

- I agree with everything he said about let's get stuff to customers at least cost.

We can't let markets alone make all these decisions.

I am a huge believer in markets, but sometimes we need really clear rules.

And those rules should be on things that are critical for safety and reliability.

Like winterize your power plants to this level.

Like wildfire preparations.

We can't give people latitude to decide whether to do this.

We must do this to protect.

- Right.

- Yeah, and I agree.

- I think I'm hearing you both agree that markets and regulation are needed.

You know, some blend.

- Yes.

- Markets have a role.

One thing we can do really, really quick is stop retiring prematurely dispatchable resources that are operating right now that are perfectly functional.

And if the markets are not making that happen, then that's where a regulatory decision should be made, we're gonna step in, because the markets are not keeping them open.

- Right, gotcha.

- PJM came out earlier this year and said we're looking at a loss of 40 gigawatts of predominantly dispatchable resources.

Now gigawatt, it's a lot, okay?

It's a lot of power.

And it's not just PJM.

MISO, which is the Midwestern system operator, you know, the one that runs from Canada to the Gulf of Mexico, they're facing the same thing.

- Why are we doing that?

- Largely because these are coal and gas units, predominantly coal, and they're retiring because in the market structures that they're operating in, they're not getting sufficient revenue to make it worthwhile to stay open.

And so they're saying we can no longer operate economically.

- Interesting.

Thoughts on that?

- Let's be clear that many of those same plants did not show up during Winter Storm Elliot.

The coal belts were frozen up, the coal pile was frozen, sensors on the plant's exterior were frozen up so equipment didn't work.

There is blame to go around for every resource.

- Plenty of blame for everything.

- But the point is, I don't think we can just say the loss of an old coal or gas or nuclear plant is a bad thing.

In point of fact, maybe they are so inefficient or so hard to keep operating that it's not worth keeping them open and we have to find other solutions.

- Interesting.

- Let's talk about reality here.

The reality is in PJM and MISO both, they were only able to keep those systems from crashing because of the resources that were being fed into the grid by coal and gas.

And in PJMs case, they've got some good nuclear, too.

So that is the meat and potatoes of what the supply source is in PJM right now.

And we can't dismiss when PJM says we're gonna lose 40 gigs of dispatchable and say, "Well, you know, they're not showing up anyway."

Yes, they are.

They kept us from going under during Elliott.

And so it is a tremendously serious problem when PJM and MISO both tell us we're losing dispatchable resources at a pace that we can't sustain and keep the grid open.

- I want to be clear that I was not saying we don't need dispatchable units.

What I'm trying to say is saying that dispatchable resources are super reliable is not a guaranteed thing, as their performance during these significant winter events proved.

- Which is why you need to have a balanced portfolio of different resources.

[Alison] Yes.

- Because every resource has its vulnerabilities, which is why you cannot put all your eggs in one basket.

- Coming into the demand side, how do we improve reliability by demand management?

- So the first step is energy efficiency.

Think of energy efficiency as like a baseload, always-on resource.

Every time we insulate a home and replace inefficient air conditioners, we are pulling back the level of demand and we are creating a buffer so that we don't need to run as many reserve power plants.

- Yep.

So lowering the amplitude of that demand curve through efficiency.

- And reshaping it.

- Yeah, yeah.

- We can in fact use energy efficiency, targeted specifically at demand reduction, so it is no longer just about saving kilowatt hours, it's about reducing and saving kilowatts.

- Run my dryer at three in the morning.

- There you go.

- Instead of- - And that's a demand flexibility play, which is equally valuable for liability.

- You can't just say categorically that anything called an efficiency program either reduces demand or is fair to other consumers.

You can't do it.

[Scott] Right.

- Some of them are, some of them aren't.

I'll give you an example.

So Utility came in to us and wanted to do one of these rebate programs.

We're gonna give you a $250 rate credit if you install a high-efficiency refrigerator.

So a year later, the Utility comes back.

I say, "Well, have you've gone out in the field and see what they do with the old refrigerator?"

She said, "Oh, yeah, I was at a house the other day."

- They put it in the garage.

- "They put the old refrigerator in the garage.

They keep the beer in it."

I think, personally, based on my experience as a state regulator, which regulates retail rates, the most effective efficiency, if you really want to get efficiency that actually reduces demand on a secular basis, is rate design.

- What is rate design?

- Rate design is how you design your rates.

The first 800 hours are the cheapest.

The next 800 kilowatt hours, it goes up.

The next 800, goes up.

So the people charging the Tesla at six o'clock in the afternoon, at peak, pay more.

It's accessible to all consumers because they know this is the rate structure we have.

And so you can reduce consumption or you can shift the time period, so you don't charge the Tesla at five o'clock at peak, you charge the Tesla at midnight.

- Yeah.

- Rate design can do wonderful things to encourage customers to behave and use electricity in different ways.

- Like my gasoline.

I'm watching that happen.

I know what I'm paying.

- But you don't in electricity.

Most regulators will not give customers access to time-of-use rates.

- Right.

- Yes, sure, do rate design, but let's do other stuff first.

- Let me respond, if I could.

- Yeah, yeah, sure.

- So the key to rate design is to keep it simple.

Sacramento Municipal Utility District, SMUD, has got a very simple rate design.

From 5:00 to 8:00 PM they charge more, because that's when they're peaking in California.

And they advertise it.

All their customers know from 5:00 to 8:00 PM it's gonna cost more, so don't run your washing machine, don't run your dishwasher.

But I ask them, "How is this working?

How have your customers accepted it?"

And they said they accept it great, they like it.

So you have to evaluate these programs on a case-by-case basis.

Some of them are good.

Some of them actually reduce consumption.

Some of them actually are fair to consumers.

Some of them are nothing but a gigantic income transfer from the customers who aren't getting the rebate to those who are.

- But a good energy efficiency program and a good suite of energy efficiency programs delivers net benefits to everybody because it is lowering the cost of all of your electricity procurement and delaying the time when you have to build new plants.

- If they're good.

- Yeah.

Gotcha.

- If they're good.

- So let's get to solutions.

Top three concrete steps, each of you.

Top three that we could take to ensure and improve grid reliability.

- Three buckets.

Strengthen the distribution grid where most of the outages are taking place.

Harden the distribution grid.

Again, it can be as simple as tree trimming.

Build the transmission that's needed to deliver the power from the generator to the distribution side.

And then I can't emphasize enough, where we are right now in history, we have got to stop the retirements of dispatchable units that are retiring prematurely.

We don't have enough now.

And as the load grows with the electrify-everything, we are gonna be so under-resourced, we're gonna face catastrophic results.

Some people don't want to hear it.

We need those dispatchable resources, and that's gonna include fossil fuels.

It's going to.

There's no way around it.

- Okay.

- Well, you'll probably guess that my first priority is energy efficiency, as much as possible, as fast as possible, and measures that create demand flexibility, such as automated demand response.

And I want to suggest that one of those solutions is, hello, dispatchable demand response.

- What prevents us from doing that?

- Public policy.

The entirety of the systems that we have today were designed around the idea that we must have enough electric supply to be able to follow load wherever.

We can use manageable demand, which didn't exist 40 years ago, to follow and meet more variable supply.

- Gotcha.

- Which includes both the possibility of losing a power plant or a transmission line, as well as the intermittency of wind and solar.

So we don't have to be victims anymore to what the supply side is gonna do and how it might fail.

The second thing that we could do today is requiring significant use of grid-enhancing technologies.

Which is measures like dynamic line ratings, reconductoring with more efficient lines on transmission and distribution, and a bunch of sensing and measurement and analytics technology that lets us, both hardware and software, get a lot more throughput from the transmission and distribution we have today.

- Okay.

- The third thing that I think we need for reliability is a huge emphasis on spare parts and replacements of critical measures like bushings, distribution transformers, transmission transformers.

And a lot of these things need to be standardized so that we are not at risk when this stuff fails.

- Yeah.

- And it fails a lot.

- Look, it's been a wonderful conversation.

Learned a lot from both of you and appreciate what you're sharing.

Final thoughts.

You get a minute or two here just to kind of summarize what you're thinking.

Are you hopeful?

Can we do it?

- We can, but we have to stop thinking this is a supply-only game and we have to commit to doing as much as we can as fast as we can.

Too many of the people in this game just wanna keep plotting along, doing different flavors of what we've always done instead of thinking, you know, maybe that isn't gonna work anymore.

- For sure.

Mark, over to you.

Some final thoughts.

- I'm more realistic than I am hopeful.

I think we have to be realistic first.

We're losing dispatchable resources at a rate that is not sustainable, and we're not replacing them with sufficient generating resources to keep the lights on, particularly when you see the increase in demand that's coming from electrification of transportation and electrification of all aspects of the economy which is being pushed.

So that's gonna increase demand by several orders of magnitude.

At the same time, we're shutting down generating resources?

The numbers don't add up.

The arithmetic doesn't work.

So we're looking at a catastrophic situation and we need to start having a very honest conversation in a way that we haven't had for the last few years about this issue.

- Right.

Thank you both for being with me today.

- Thank you so much for having us.

- Yeah, it's been terrific.

- Enjoyed it.

Thank you.

[Scott] Modern life requires electricity, which requires a reliable electric grid.

For that, grid operators must manage electricity supply from generators to meet variable daily and seasonal electricity demand from consumers.

Intermittent generation from wind and solar is fairly predictable, but often does not correlate to demand.

In some places, batteries can provide short-term backup.

Dispatchable generation sources like coal, natural gas, nuclear, and hydro can reliably meet demand, though with variable fuel costs and emissions.

Subsidies have distorted the market, making solar and wind artificially cheap and some dispatchable generators uneconomic.

Alison sees great promise in improved energy efficiency and demand management.

Mark believes we must strengthen the distribution grid and stop forcing premature retirement of dispatchable generation.

Both agreed that a portfolio of electricity generation sources is vital for grid reliability.

♪ ♪ ♪ ♪ ♪ ♪ [Narrator] Funding for "Energy Switch" was provided in part by The University of Texas at Austin, leading research in energy and the environment for a better tomorrow.

What starts here changes the world.