[Scott] Next on "Energy Switch," we'll hear more from two of the leading voices in US electricity.

- Our grid is changing in rather dramatic ways.

It used to be a large generation facility transmitting through all these lines down to the distribution to a home, and now it comes from both directions.

- Why not just have a solar panel on every roof and call it good?

You know, do we even need a grid?

- There's value beyond just that home or just that business.

To get that value, that's where the grid comes in.

It's connecting everybody in society.

[Scott] Coming up on "Energy Switch," Understanding the Electric Grid Part Two.

[Announcer] 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.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.

- 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."

In part one of this episode, we talked about the generation mix that supplies the grid with electricity.

Now we'll look at how the grid gets it to you.

The transmission system that carries power long distances the distribution system that directs it through neighborhoods and the utilities and independent system operators that make it happen.

In part two, we'll hear again from my expert guests.

Steve Powell is the president and CEO of Southern California Edison, the utility that provides electricity to 15 million consumers in one of the most dynamic power markets in the country.

Brad Jones, at the time of this interview, he was acting CEO of ERCOT, who operates the Texas grid to bring electricity to 25 million people.

Before that, he led the electricity operator for New York State.

Next on "Energy Switch," Understanding the Electric Grid Part Two.

How does electricity actually go from where it's generated, whether it's a wind turbine or a power plant to me?

You know, do we even need a grid?

- Absolutely, the generators are all over the state, wherever you're at.

They might be out in the desert, they might be up in the hills, they're all over.

And so, from the generation, you transmit it first by high voltage power lines.

These are the really big towers that people see, kind of if they, - 345 Kilovolt.

- Yeah, 500 KV, 345 kilovolt, that carries it the long distances.

And then it gets to a substation that transforms it to a lower voltage, and that's where the distribution system takes over.

And the distribution system, you might see these are the wooden poles in a lot of cases.

Some have other type, but the wooden poles that then go through neighborhoods and that's at a lower voltage and it comes through those distribution lines.

And then ultimately it gets into the neighborhood and there's transformers that bring it down to the homes and businesses.

- Okay, so almost like a interstate highway and then a state highway and then a county road and then my gravel road and my driveway.

- You make it sound so simple.

- Yeah, it is, it's so easy.

Why not just have a solar panel on every roof and call it good?

- Well, solar's only available during the day.

Well then why couldn't I add a battery?

Because the size of the battery you would need to ride through a week, you know, of no solar is cost prohibitive.

- Yeah, the size of your garage.

- As you start putting those resources on, there's value beyond just that home or just that business.

To get that value, that's where the grid comes in.

It's connecting everybody in society and you get value by then, if you've got some extra resource, you can sell it into that market.

We've gotta build out the capability to be able to sell all of that and orchestrate that.

That's when I talk about the reimagined grid and grid modernization, that's what it's really about.

And the value that we'll be able to extract.

- That's a great description.

I have my own vegetable garden, but it doesn't mean I don't need a store.

Right?

- Exactly.

- So, who controls the grid?

- So in Texas it's ERCOT, which is an independent system operator.

I'd say 75% of the country is covered by an independent system operator.

And the idea behind an ISO is simply to take the decision-making out of the hands of those parties that are interested in making money.

Having an independent authority that will make a decision which generator is the cheapest to use at any one time and to make those decisions and select those generators.

And by separating them in an independent organization, it creates that non-biased and fair opportunity for all.

- Interesting.

- And when you say who really controls the grid?

Brad, your answer was the bulk system, the transmission level system.

But the grid is not just the transmission system, It's the distribution system as well.

Today, the utilities own the distribution and we operate the distribution.

It's getting more complex.

And to be able to integrate the solar and the storage and manage electric vehicle charging, you need better visibility into the system than we've ever had before.

Which means that we're investing in sensors so that we can see what's happening more locally than we were able to see before.

You need really high speed communications because you've gotta take that information to places where it can be processed.

You need automation as well as the-the optimization tools, because you're gonna have to start providing price signals and know who's ramping up and down their charging and how are they using their batteries.

All of that has to be built out at the distribution level to enable the use of these resources to get the most value out of them.

- It's solar panels on rooftops, but it's beyond that.

In Texas, there's a lot of natural gas-driven backup generation for a Walmart or a large big box store.

They'll often have a backup generator behind their facility that is able to produce for the grid.

And so to the degree that we can utilize those assets as well, better, that creates more resources for the overall grid.

[Scott] Yeah, Yeah.

- So our grid is changing in rather dramatic ways in that in the past it used to be a large generation facility transmitting through all these lines down to distribution to a home.

And now it comes from both directions.

- Both ways, yeah.

That's great.

- Our change in our operational techniques has been significant though.

Because to be able to see all those distributed generators, to know where they're operating, at what level of operation and to know the capability of what they can offer into our grid is something that we are still expanding upon.

- Sure.

You know, how do we price electricity?

What actually drives the price I pay?

- In California, for a utility like us, all of the generation and the energy that we pay for is a straight pass through.

No markup, customers just pay the cost of that.

On the grid side, that's how we as a utility can earn our revenue or earn our profits.

There's a certain amount that we invest of capital and to maintain and grow and expand the grid.

And then we are able to earn a, you know, have the right to earn a return on that.

And so pay for the grid, pay for the generation, a little bit of margin.

And for us it's then regulated by our public utilities commission.

- So is that what's called a capacity market or is it kind of a hybrid, what is that?

- It's not a pure capacity market like they have in other parts of the nation.

Utilities are required to go and get a certain amount of capacity to ensure that we have enough supply to meet our demand.

And then we go procure contracts and sign up contracts for the resources that are out there.

- Okay, how about Texas pricing?

- Quite a bit different, in fact.

From the customer side of things, 75% of Texas is fully competitive.

Meaning that they can shop around for their provider.

And those deals are based upon how that retailer will acquire their generation, pay for their transmission and whatever additional markup that they have in that offer.

The other 25% of the state though, is in a couple of large utilities that are run by a municipality.

So Austin and San Antonio and Denton and a few others have a municipal electric system that will establish their rates based upon their own individual rules.

The energy itself though in Texas is fully competitive.

So all energy fights with one another to get the lowest price.

As wind and solar have come in, they have been able to lower that price, which means that other generators that used to operate, say a natural gas generator, are able to operate less because wind and solar have now displaced them.

We have had an energy-only market for a number of years, which means a generator only gets paid if they're producing energy.

If they're not producing energy, they don't get paid anything.

And I heard a professor from the University of Houston put it best, he said, on that day that the Houston Astros were playing that evening, "An energy-only market is you only pay the people that get on the field, you don't pay anybody in the dugout."

Right?

Well, you know that eventually you won't have anybody left on the bench.

- Right.

- And so, we have to address that issue.

As we invite more wind and solar into our market, we know energy prices should arguably come down because of those additional resources.

But we have to make sure that we retain those other resources and attract new ones for our growing market that can meet our loads whenever it's both dark and still.. - You know, we hear a lot about LCOE, the levelized cost of electricity or energy.

My understanding is that's at the plant gate.

That's the bus bar.

To get it from there to me, I have to have these other things.

The batteries, the power, the natural gas load followers, maybe hydro.

Those cost money 'cause they're hanging out.

I mean, who's gonna build the gas plant that runs 5% or 10% of the year?

You better pay them a lot to do that, right?

Doesn't that add cost to me, the consumer?

- So the question really is whether the cost reduction that we're receiving from these renewables, fairly low cost in our fleet, is more than the cost to retain some of that other type of generation.

My personal belief is the cost reduction from renewables is greater than the cost addition necessary to retain some of that other fleet.

- We do subsidize these things.

Governments make choices about it.

Renewable portfolio standards, direct subsidies.

How do you see it playing out in subsidies?

Let's get different perspectives.

- In Texas, federal subsidies are driving a lot of our renewables.

But my perspective is that if the federal government wants to send a $1.25 to Texas when we pay only $1 in Texas, I'll take that 'cause that's gonna lower our energy cost.

And so bringing in these low cost renewables, I believe we need to make sure that we can do that as quickly as possible so that we can utilize those load subsidies to really drive a lower price of power in Texas.

Now in order to do that, we have to make other accommodations.

We have to make sure that there's ways to retain and attract that other type of dispatchable resource.

But as long as we're doing that, I want to see as much of these renewables come in because with the subsidies, they're very economic in our market.

[Scott] Are they economic without them?

- They are close, they're very economic, they're very low cost.

- Right, federal government has the capacity to borrow money from our kids.

We do it all the time, we call it a deficit.

Does that make sense, does it work?

- I'd say subsidies play a critical role in advancing technologies that we need for the future.

Without those technologies, the other costs we're gonna have to pay in the future because we didn't reduce carbon.

Because we didn't harden the grid, because the other costs we're gonna face in damages and economic harm are likely much higher.

So I believe that the subsidies are important.

It's appropriate to pull from the future sometimes to pay for them.

We have to be cognizant about how much, you can't do too much and that's where the dial is at that everybody has to figure out.

And frankly, we don't have time always to let the markets figure it all out.

I think it's gonna require people to make some decisions and say this is the path, this is where we're putting our dollars and this is what's gonna happen.

And I think that's part of what has to happen.

- Yeah, that's interesting.

I think it's confusing when people hear solar and wind are cheaper than everything else today.

And then other people say, well let's quit subsidizing them.

Well, are you cheaper or do you need the subsidies?

How do we explain that, what's the logic?

- Over time the subsidies have to come down.

You gotta begin to pull it away and monitor it.

You don't turn them off all of a sudden and hope and pray that nothing goes awry.

You've gotta find ways to transition off of them.

- Right.

- One of the interesting impacts in Texas is that much of the wind generation is funded from subsidies in terms of a production tax credit.

Meaning they get a tax credit whenever they produce a megawatt hour and only when they produce.

And one of the interesting things that occurs in Texas is quite often we have significantly negative prices.

Several hundred, if not a few thousand hours a year, We'll have negative prices throughout all of ERCOT.

More than that, we'll have negative prices in the western part of our state.

And those prices mean that consumers, it's hard to wrap your head around it, but consumers get paid to consume because there's so much wind that wants to generate to get the tax credit, they're willing to pay to generate.

- Yeah, that's when you make Bitcoin.

- And that's really where Bitcoin is coming to Texas.

They see that opportunity out in the western part of our state.

- Let's talk a little bit about wildfires and some of the safety challenges with the grid.

What are some of the things going on that you're doing to help make that grid safer?

- In our high fire areas, what we're doing is we're installing insulated wire.

So we've got about 10,000 line-miles of distribution lines that are overhead in our high fire areas.

A third of beyond that is already undergrounded.

Instead of that bare wire, we're installing this what we call cover conductor.

And that's because most of the ignitions that happen from our system are from something coming into contact with the line.

We've already covered about a third of the lines in high fire areas.

We expect to be two-thirds done over the next two to three years.

And just that, plus the other things we've done around tighter inspections, vegetation management, use of what we call our public safety power shutoff.

When the conditions get really rough, we may proactively turn the power off.

We have to educate customers, work with them.

But that portfolio, we believe we've already reduced the risk of major fires coming from our system by two-thirds since 2018.

- But you like that insulation compared to burying, which is like?

- Yeah, undergrounding can be an expensive approach.

It can make sense in some places.

We don't necessarily need to do a lot of it in our territory, that bare wire's very effective.

We can get it installed relatively quickly at a much lower price point.

- What are some of the big safety concerns in Texas with our grid and what are we doing?

- So, one of the areas that we are most concerned about is resilience along the Gulf Coast.

About every three years we have a major hurricane and there's been some effort to harden some of those facilities, distribution lines.

But as Steve has already said, it's very expensive to do so.

And that cost is borne by customers.

So we wanna make sure that we're very prudent in our system about how we underground and how we harden those facilities.

One of the ways that we can improve resilience is making sure there's more redundancy, making sure there's additional lines that carry into that area.

We currently don't have the capability to do that, but we're working with the public utility commission to make sure that we can change our rules, how we design our transmission system, to allow us to factor in hurricanes as one of the reasons why we need to build additional transmission along the Gulf Coast.

- And Brad, when you talk about, you know, that redundancy, we see the same thing in California.

When we talk about climate adaptation, we've done a lot of studies.

When you consider wildfires, west white heat, flooding, redundancy becomes really important.

And it's not in the way that we plan our system today.

You know, when you've got your transmission lines coming through the same corridor, a wildfire can make all of those unavailable and then you lose service to your customers.

And so that's a lot of what we're looking at.

What do we need to do over the next 10 to 20 years to build that redundancy and that extra margin and that's what we call climate adaptation.

- I love it when a Californian and a Texan can agree so vigorously.

[all laugh] We have to put that focus on redundancy in the areas that we see at risk.

- While also considering affordability along the way because it's not, nothing's cheap.

- One thing we didn't talk much about, put it out here.

Once built, an electron from a nuclear power plant is pretty darn cheap.

Why aren't we talking more about nuclear?

- So the US has largely turned away from nuclear.

I don't know that it's in our best interest long term, but I know that the US research part of our country is, DOE, is really focused on how do we reintroduce nuclear in a small modular way.

We all talk about it, it's probably another 10 to 20 years away before we get to a level that that investment can occur, but we're putting a lot of research dollars into the effort.

- The big nuclear plants have been a challenge.

Come in way, way over budget, take way, way longer than anticipated.

Those are some big bets to place.

In the US largely have decided that those aren't the right bets that we wanna make.

Now in California new nuclear is illegal.

You're not allowed to do it until there is a federal solution for the spent fuel.

Right, the fuel that's been used.

Right now it's stored in casks.

You can keep it there safely for a very long time, but ultimately, that stuff has to go somewhere.

And it's a federal issue and problem that has to be resolved.

- And California is an earthquake-prone state, at least part of it.

And I can understand that as opposed to some of the other parts.

- At the same time, it is important that we keep the nuclear plants online that are online today.

It is clean.

It is reliable.

It is a great baseload resource.

You gotta make sure that the economics work, they've been challenged recently, the federal government stepped up in the Bipartisan Infrastructure Act in 2021.

They put together a nuclear fund of about $6 billion to help make sure that we can keep those plants running.

So an important part of keeping those that are safe and reliable running as part of the energy mix, I think the future like growth is really the question.

- So nobody wants more power lines.

And if we're gonna start spreading solar and wind around, I mean, how do we actually make more power lines when nobody wants them?

I'm pushing on this a little bit because it doesn't seem like people want to build anything anymore.

- Not in my backyard.

- Or anywhere ever again, banana.

- Although nobody wants a power line, there are a lot of people that recognize that there's a benefit associated with renewable energy and they recognize that transmission lines are necessary to make that possible.

Wind is not a great resource for an at-home type use.

And so the wind resources need to be transferred from those locations to where the load centers are.

When I was in New York, we recognized that very thing.

And New York had very similar goals for achieving low carbon output.

They knew they had to further develop their renewable industries and they recognized that they had to build transmission to make that a reality.

And they did so.

They had not built transmission for close to 30 years, but they've built transmission now to bring in those renewable resources.

And I think most of New Yorkers recognized that there was value in that.

- Yeah.

- Yeah.

So building transmission-- it is a huge challenge and there's no easy answer to it.

I'm gonna agree with you Brad.

- Nice.

- It's needed.

I know, they're needed.

In California, our independent system operator recently put out their first 20-year outlook.

And they're saying to meet the needs of the system to integrate renewables, load growth, et cetera, they believe we need to spend about $30 billion in transmission over the next 20 years.

- Not trivial.

- That's a significant amount.

But historically it can take more than a decade to get a transmission line designed, sited.

And so we need faster permitting processes.

We need to look at our transmission as well, not just as electric transmission, where can you co-locate it with other utilities, other things that have to get built out?

How do you make the best usage of corridors in the system?

So that you can minimize the amount of, you know, visual obstruction of land use.

So we know the stuff has to get built, we have to do it in the smartest way.

That takes better planning, foresight.

And then you're gonna have to get the resources to help build it.

But the local community engagement, the education, that's a really important part because communities stand in the way of these getting built all the time.

And to be real clear, this big transmission, you can't underground huge swaths of large transmission.

It is extremely cost prohibitive.

It will not work.

- All right, so here's your chance.

The ideal grid of the future, what's it look like?

- Gotta have low emissions.

Absolutely.

Flexible.

And it's gotta be resilient.

And with resiliency comes reliability.

Those are the objective functions.

Clean side, it's gonna depend on where you're at, but a whole lot more renewables, whatever's available.

Combined with storage to back it up.

Demand flexibility from customers.

In the future, figuring out things like carbon capture and sequestration could help have clean with those renewables.

- Carbon capture off of thermal?

- Off of thermal.

- Okay.

- That's right.

The resilient and reliable, we've gotta harden the system.

You gotta balance it with affordability.

But I talked about with wildfires, it's driving us to install covered conductor or insulated wire in parts of our system.

And then the flexibility, right?

That really gets to all of this has to be able to handle intermittent resources at the bulk power level.

Intermittent resources and electrification at the local level.

That's what needs to happen in California and in many parts of the United States.

- Sounds expensive.

- California's decided and we believe carbon neutrality by 2045 needs to happen.

This is the lowest cost way.

And again, you have to look at it not just in the cost of the electricity.

It's electricity, plus gasoline and natural gas.

And you see a lot less gasoline usage.

You know, natural gas usage we expect would come down by 50%.

So when you look at the total energy picture, we believe that it will actually reduce energy costs for customers by the time you get to 2045.

- Good.

- We've used an acronym, which is called CARE, which is clean, affordable, reliable electricity.

All those elements are important.

We've now reordered R to the front.

So reliability, we wanna make sure that we're focused on that.

That's a key to all customers' experience.

We wanna make sure that they have the power they need when they need it.

But once the reliability is solved, we have to keep focused on affordability.

We can't give up on that.

Because that goes to all consumers, but certainly to that consumer group at that last portion of our economy that is already struggling.

We have to keep it affordable.

And we do want to focus on clean and we have done that.

And that's why we're utilizing the wind and solar resources to help us to keep our market clean.

So I don't think it changes in the future.

It may change where the resources come from.

It may change how we allocate some of our investment, but those elements will still be our focus into the future.

- Great conversations.

- It's been a pleasure.

[Scott] Texas and California.

- I love that.

- It's always fun.

- Similarities, differences.

- I keep giving him shots, but nothing, I'm not getting anything back.

- I'm just focused on solutions.

Trying to figure out how to fix stuff.

- So much more we could talk about.

I want to thank you both for being here.

Your candor, your insights.

Thanks for taking the time.

- I appreciate it.

Regarding transmission, everyone needs power lines, but nobody wants them on their property.

This makes it hard to site new ones.

California needs $30 billion in new lines and both states need to make lines that are susceptible to fire and storms, more resilient.

Distribution systems now have to go two ways, taking electricity to the customer and carrying it back from on-home solar systems and commercial gas and diesel backup generators.

Both leaders said the ideal grid of the future would be lower carbon, more affordable and more reliable.

But both agreed that would be expensive.

They'd be happy to take federal subsidies to achieve this.

Though both agreed subsidies should eventually be phased out.

[dramatic music] ♪ ♪ ♪ ♪ [Announcer] 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.

And by EarthX, an international nonprofit working towards a more sustainable future.

See more at earthx.org.