Building the 21st Century Grid


Uploaded by whitehouse on 13.06.2011

Transcript:
Jason Bordoff: My name is Jason Bordoff with the White House Council
on Environmental Quality and the National Economic Council.
I want to thank you all for joining us for this morning's
White House Grid Modernization Event.
Modernizing our nation's electric infrastructure,
encouraging innovation in the electric grid,
promoting a clean energy economy,
these are all key priorities for the Administration.
And that's why we're so excited to have you with us here today
for a dialogue about how we can address the challenges that face
our electric infrastructure going forward and what steps
the Administration has taken and will be taking to help us
achieve that goal.
And before I turn the program over to the President's
distinguished science advisor, I just want to take a moment to
thank just a few of the people -- I apologize,
I probably won't capture them all -- who really helped make
today's event possible as well as the policy framework that
is being released today.
I, in particular, want to acknowledge my White House
colleagues, Phil Weiser and Annese Chopra who worked with
me to spearhead this effort here in the White House.
George Arnold of NIST and Pat Hoffman of the Department of
Energy who chaired the Smart Grid Subcommittee of the
National Science and Technology Council.
And then the dedicated and infatigueable and incredibly
talented staff who have done such extraordinary work to help
pull this all together, particularly Daniel Kilduff,
Nick Sinai, Katrina Pielli, Rob Letzler, Doug McKeel,
Michelle Dallafior, as well as many of those from a range of
agencies who participated in this effort.
This has really been a true team effort.
And I'm sure I'm forgetting some.
Again, I apologize for that.
So again, thank you for coming.
And it's my pleasure to welcome to the lectern the Director of
the Office of Science and Technology Policy,
Dr. John Holdren.
(applause)
Dr. Holdren: Well, thank you, Jason.
And good morning, everybody.
And let me add to Jason Bordoff's welcome,
the welcome from President Obama and myself to this
quite extraordinary event.
Clearly we can see we've got lights.
We can hear; we've got audio.
I know everybody's pockets and belt holsters are stuffed with
the electronic devices that we all charged overnight.
So the grid is well represented here; it's functioning.
But we're here today really to consider more closely how
valuable and indeed how crucial the grid is.
It's a creation like so many of the creations of technology that
we really tend to underappreciate until
we lose it.
We can lose it, of course, as we did in snowmageddon a little
more than a year ago in Washington, D.C.,
we can lose it from a hurricane,
we can lose it from a geomagnetic storm,
and when we lose it we come to understand really more
graphically how important it is.
But we're also here to consider how much more valuable the grid
could be with the additional benefits that modernization
could bring to it.
Thinking just how important the grid is as a baseline,
when the National Academy of Engineering convened in 2003
to rank the top engineering achievements of the 20th
century, all the products of human ingenuity and engineering
acumen that have transformed our lives,
electrification ranked as the number 1 achievement
above the computer.
Above the telephone, above the automobile,
and every other modern convenience, electrification,
that is, the grid, was the first-ranked engineering
achievement of the 20th century according to the NAE.
Now, a lot has changed obviously since of day 125 years ago when
the city of Great Barrington, Massachusetts,
installed a 1Kv alternating current distribution system,
be coming and doing that the first city to switch over from
the then state of the art direct current system and thus free
itself from the need to install multiple generators all across
town each tethered closely to its particular load.
In those days, the headliner for a gathering like this might have
been Nikola Tesla who is smart enough that he might not have
laughed if you had told him then that a hundred thousand dollar
vehicle would some day bear his name.
(laughter)
He might not also have laughed if you told him that the lower
rates one might enjoy by plugging in that vehicle at
night would be one of the countless good reasons why the
grid he helped develop would in the year 2011 find itself on the
brink of a revolution.
But that's exactly what's happening today,
not just Tesla's but also Volts and Leafs and other members of
a new generation of electric vehicles are helping to inspire
us to re-imagine the grid.
And it's not just the devices that consume electricity that
are transforming our ideas about what the grid can be.
New ways of generating electricity from the largest
wind turbines to the smallest rooftop panels are demanding
a new degree of flexibility and adaptability in the grid.
We know it's possible to get that flexibility and
adaptability and greater efficiency and reliability, too,
by calling on the capabilities of contemporary information
technology to create a more integrated, more responsive,
yes, a smarter grid.
That task is big but it certainly is doable and
indeed it's already begun.
The Obama Administration in partnership with a wide array of
private companies and utilities, many of which are represented in
this room today, is in fact making it happen.
A 21st century grid, one endowed with interoperable digital and
communications technologies is going to better accommodate and
integrate renewable sources of electricity and it's going to
facilitate the greater use of electric vehicles and
electricity storage.
Smart grid technologies are also going to help utilities manage
stresses on the grid such as the peak demands that this last
week's heat wave imposed, to minimize blackouts,
and to shorten the time that it takes to restore power when
it does go out.
And, of course, a smarter grid means an empowered consumer.
A household or small business not only with greater and more
reliable access to power, but a consumer with unprecedented
knowledge about his or her energy use and a consumer
able to use that knowledge to modify use patterns to enhance
efficiency and shrink energy bills.
As many of the players in this room appreciate in addition a
smart grid is smart for business in other ways.
It provides a fertile technical and economic environment in
which a whole new eco system of products and services can evolve
and thrive bringing benefits to consumers while providing new
high quality jobs and helping to ensure that this nation is
the leader in the clean energy economy.
Now I said we've already started, and we have.
Already the Obama Administration is making historic investments
in smart grid technologies including $4 and a half billion
of Recovery Act investments in 140 projects across the country
matched by over $5.5 billion in private funding to modernize
America's electricity infrastructure.
And as you will hear soon from others in our distinguished
lineup of speakers this morning, those investments
are just the beginning.
But it's important that we not hurdle down this path without
a plan and clear priorities.
And that's why I want to mention in closing an important report
that is being released this morning created by the White
House-led National Science and Technology Council which is a
cabinet-level interagency group, the report entitled "A Policy
Framework for the 21st Century Grid,"
charts a path forward and highlights the opportunities
that a modernized electric system will provide for America.
Specifically the report says we are going to enable
cost-effective smart grid investments by scaling what
works, working with partners to better align market incentives
and learning from the Recovery Act smart grid investment so
that every dollar we spend upgrading the grid gets the
maximum return for consumers.
We're going to unlock the potential of innovation in
the electricity sector with a continued focus on open
standards that will help create national markets and promote
plug-and-play operability for devices like appliances that
can use energy when it's the lowest cost and thereby help
reduce peak demand.
We're going to empower consumers and enable informed decision
making by giving consumers access to their own energy
use information in consumer and computer friendly formats
so they can take advantage of new tools and services
to manage that use.
With proper privacy safeguards and consumer protections a
smarter electricity system can benefit everyone.
And we're going to secure the grid by making sure
grid operators have access to actionable threat information.
By supporting research and development for improved cyber
security measures.
And by working with private sector stakeholders to establish
accountability for meeting cyber security standards.
I hope that you are as excited as I am by the opportunities we
now have to turn today's grid into a far more powerful,
flexible and more consumer and business-friendly tool.
One that can help our nation achieve important goals in
the domains of clean energy, innovation, economic growth,
and resilience.
To tell you a little more about the many benefits linked to
where this Administration is going with the grid,
I'd now like to introduce my close colleague,
good friend and the White House's environmental steward
in chief, Nancy Sutley, Chair of the Council on
Environmental Quality.
(applause)
Nancy Sutley: Thank you, John.
And good morning and welcome to the White House!
And we're really excited to have you all here as we talk about
some incredibly important issues in our country's transition to a
clean energy economy.
Now as John said the President has been talking to Americans
about what we need to do to win the future and compete for the
jobs and industries of our age.
And he's laid out a plan to out-innovate,
out-educate and out-build the rest of the world by investing
in the creativity and imagination of our people
to secure our nation's clean energy future.
And the smart grid plays a critical role in this clean
energy transformation.
And the President has discussed on a number of occasions how a
smart grid will modernize America's ability to generate,
store and manage energy use.
And he reaffirmed this in the blueprint for a secure energy
future that he released in April when he called for an expanded
and modernized grid that will integrate renewable energy and
improve reliability.
Now, the smart grid empowers homeowners and businesses to
make smarter energy choices and that will translate into energy
savings and cost savings for businesses and consumers.
And a modern grid can also help utilities avoid blackouts and
reduce the demand that creates a demand for new power plants.
And it will help us reach our vision for a 21st century energy
economy by bringing clean energy like wind and solar to where the
demand is in accommodating electric vehicles as a greater
part of our national fleet.
Modernizing our grid will also create jobs in the U.S.
because many of these products, technologies and services that
will help consumers reap the benefits of a smarter grid are
being conceived and made right here at home.
The President has made the growth of clean energy and
electric vehicles, jobs and the economy, a national priority.
And a more modern grid will help bring this vision to life.
The Administration, as John said,
has invested billions of dollars in smart grid demonstration and
development which has already attracted billions more in
private sector investment.
And we remain committed to building on this progress and
working with states, cities and regions to support the necessary
electricity infrastructure and help design policies that's
moved the transition to a clean energy economy.
Now, my last job before I got here was as a deputy mayor in
Los Angeles and working with the largest municipal utility
in the U.S.
And we understood how important new grid technologies are to
help keep the lights on, to improve operational and energy
efficiency and to help consumers and small businesses better
manage their energy use and save money.
And I know that grid modernization goes
beyond smart grid technologies.
It also includes the need for new transmission to integrate
renewables and to increase reliability.
And different states and different regions across the
country have very different transmission needs.
In the Administration we're trying to address this need
through a variety of measures.
Most recently we've created a ten agency renewable energy
rapid response team.
This rapid response team will help to achieve the
Administration's goal of doubling renewable energy
by 2012, by ensuring close coordination among
key federal agencies on the citing and permitting
of renewable energy projects and the transmission to support them.
This team builds on our previous efforts to improve the process
for citing transmission on federal lands.
Now, these efforts are vital and important but we know that we
have to win this clean energy race together.
We need your ingenuity and your leadership if we're going to
modernize the grid and turn the United States into the clean
energy leader in the 21st century.
And we know that leaders in this area come from every corner of
our country and every walk of life.
And I am very pleased to tell you a little bit about a couple
of students who are joining us here today from the Harker
School in San Jose, California, who are already generating
positive change in their community and for America's
clean energy future.
By using off-the-shelve smart metering technologies,
these students were able to reduce their high school's
energy consumption by 13% and saved their
school more than $20,000.
And they've inspired others in their area to do the same.
So it is my great pleasure, and I think the best job of the day,
to introduce you to these very interesting and exciting young
women here who are joining us today,
please welcome Sharjah Indocurie and Daniela Lapidus from the
Harker School in San Jose, California.
(applause)
Sharjah Indocurie: Good morning, everyone.
And thank you for having us here.
I'm Sharjah Indocurie.
Daniela Lapidus: And I'm Daniela Lapidus.
Sharyah Indocurie: We're two high school seniors from the Harker
School in San Jose, California.
Daniela Lapidus: And we're here to talk about a simple solution
to two problems that will continue to effect us for the
rest of our lives: Climate change and education.
Sharyah Indocurie: Two years ago we saw a presentation by The Alliance
for Climate Education, a national nonprofit,
educating students on climate and energy.
You can check them out at www.AceFace.org.
We applied for a grant from Ace to reduce our school's carbon
footprint and we installed an organic garden,
window insulating film, and a smart energy system.
Daniela Lapidus: The smart energy project was our favorite and most impactful
element, because it gives the school superintendent
the knowledge of where energy is being used by the installation
of smart submeterring devices on a per building basis.
The superintendent can access the information in carbon tons,
kilowatts or dollars on an informative
online energy dashboard.
Sharyah Indocurie: Knowledge truly is power.
No pun intended!
Within the first week of installation the dashboard
brought several anomalies to light.
Daniela Lapidus: For example, they found out there is excess energy
use in the gym.
It turns out that the air conditioning had been running
all weekend and no one knew about it,
so when they became aware and just flipped a switch we were
able to save our school several thousand dollars
on their energy bill.
Sharyah Indocurie: The results at our school were simply phenomenal.
From February 2010 to February 2011,
we saw 13% savings on our energy bill and a
250% return on investment.
Daniela Lapidus: In fact, the problem is not ours alone.
EPA statistics show that 30% of an average building's energy use
is used inefficiently.
Sharyah Indocurie: We figured our school was not the only one
that could benefit from such a project.
We co-founded SmartPowerEd.org in November 2009 and since then
have worked with six schools in the Bay Area.
Daniela Lapidus: Take Saratoga and Los Gatos high schools,
they are very close to Harker.
One student heard of our project and she immediately contacted
her superintendent and set up a meeting and with our guidance
she convinced her school board to pass money for the smart
meter project into the next year's school budget.
Sharyah Indocurie: We lead passionate students through this project and let
them take it above and beyond what we could have imagined.
The four simple steps are: Taking an energy benchmark with
the EPA's online portfolio manager;
presenting to the administration; finding funding;
and installing the devices.
Daniela Lapidus: It's a great opportunity because of it's low barrier to entry.
It only costs about 10 to $20,000 per school with an
18-month payback period.
Even if you're not an environmentalist,
it's pretty hard to argue with a 250% ROI.
Sharyah Indocurie: Beyond just the numbers, it's a ripple effect of energy awareness.
Our superintendent observes the dashboard to reduce energy use.
Student leaders can educate the student body about smart energy
and inspire behavioral change on campus.
Daniela Lapidus: We have seen students use social media tools such as Facebook and
Twitter to spread the news.
Rival schools have created Facebook pages to compete with
each other just like football rivalries.
One high school got over 300 likes on their smart meter
fan page in less than 12 hours.
Sharyah Indocurie: Needless to say, it's always better to invest money into
students rather than wasted energy.
Daniela Lapidus: Just as Secretary Chu said a few weeks ago on NPR,
we would love to see a March Madness of schools
competing for energy efficiency.
Sharyah Indocurie: Through SmartPowerEd we aim to spark a dialogue for students
who care about energy use because contrary to popular
opinion, they are definitely out there and ready to take action.
Daniela Lapidus: We, though, as two people represent only a very,
very small fraction of the potential of youth and students
to help solve our nation's energy problems so we want
to know how are you going to harness that potential
to its fullest?
How are you going to prioritize energy education and inspire
students to act just like The Alliance of Climate Education
did for us?
Sharyah Indocurie: So in your amazing complicated lives and work,
remember the power of simplicity and the
willingness of young people to get involved.
We're here and we are listening.
Daniela Lapidus: Thank you so much for listening to us today
and we're excited to learn from at the rest of this event and
hopefully answer some of these questions together.
Sharyah Indocurie: Thank you.
Daniela Lapidus: Thanks.
(applause)
Secretary Vilsack: Well, Nancy Sutley may have had the best job today.
I think I've got the worst job having to follow that.
(laughter)
I'm Tom Vilsack, USDA Secretary.
And, young ladies, that was a very impressive presentation.
I was thinking back to when I was a junior,
almost a senior in high school, no way could I have done that.
That's extraordinarily impressive.
(laughter)
And these young ladies represent the future.
But I think it is instructive as we talk about smart grid
technology today to also reflect on the past.
Seventy-five years ago this country was going through a
tough economic time.
And we could have walked away from economic opportunity.
We could have suggested that there were many reasons why
this was not the right time to make investments.
But indeed we did not shrink as a nation from the challenge.
We used this as an opportunity to bring electricity to rural America.
And what a difference that has made to agriculture,
to small town life, and to activities that are taking
place now in the bread basket of the United States.
We find ourselves today in a similarly economically
challenging time.
And again we have that opportunity to make a
fundamental difference for this country, and particularly,
in rural America.
We can, instead of having to bring electricity to rural
America, we now have the opportunity to create a
more modern, more efficient, cleaner and smarter system.
Why is that important?
Well, rural America represents 75% of the land mass of the
United States, and 42 million people call
rural America their home.
That's one of the reasons why USDA has been heavily engaged
and involved in investing in rural utilities.
Last year alone, Jonathan Aldstein and his group at RUS,
invested $7.1 billion in new infrastructure at no
cost to the taxpayers.
Those loans and resources provided additional
opportunities for 4 million people living in rural America
and helped to improve 4600 miles of lines.
We work with 600 rural electric systems.
REC's, publicly owned and investor-owned utilities.
As part of that 7.1 billion, we committed $152 million in loans
for smartmeters.
This was in addition to the over $300 million that was invested
during the Recovery Act in smart grid improvements.
We want to build on the opportunity that they present.
As has been mentioned earlier, this is about consumers saving
money; it's about responding to shortages and outages more
quickly; and improving the recovery time.
For that reason, we're announcing today our
intent through our U.S. to continue our investments in
smart grid technology and to increase that commitment.
We're committing a minimum of $250 million this year in
commitments towards a smart grid.
In addition, an additional $106 million will be made available
for additional upgrades.
As we saw with these young ladies from California,
the future is bright for this country.
There is no question about it.
We want to make sure that as it brightens,
it brightens for all Americans regardless of where they may
live, work or raise their families.
One of the individuals who is probably more responsible than
just about anyone in this Administration for focusing
our attention on the future is Secretary Chu.
There are many ways to introduce Secretary Chu to you.
Most everyone knows who he is as the Secretary of Energy.
Most know about his accomplishments professionally.
But I'd just simply like to introduce him as someone I've
gotten to know in the last couple of years.
One, he is an extraordinary problem solver; and, two,
he has a very clear vision for the future of this country.
A vision that is compelling, inspiring and exciting.
And so with that, I give you Steve Chu.
(applause)
Good luck, I apologize for leaving.
Secretary Chu: Thank you, Tom, for a very generous introduction.
I, too, want to speak with admiration about what you just
heard from the two high school soon-to-be-seniors.
I have to say that in the Department of Energy,
we submetered our building into four sections.
We'd like to submeter every part of our building.
We, too, discovered that the energy use over the weekend
is anomalously high.
The only difference is they did it for about a quarter
of the cost.
(laughter)
So I will be talking to you later about where you
buy your stuff!
(laughter)
I'm here to talk about the grid.
But I want to emphasize that the grid is just not the smart
meters and it's just not the electrical transmission
distribution system.
It is really the integration of transmission and distribution
with power generation.
John Holdren mentioned Tesla and it was Tesla and Westinghouse
who finally won the AC/DC war against Edison.
Edison wanted DC; Tesla and Westinghouse wanted AC.
And they won.
But Edison actually was the first to introduce
electricity generation and distribution in a New York
City power-generating station.
Edison, of course, invented many, many other things;
the lightbulb and the phonograph, among others.
Now, let's assume that you can transport through a time machine
both Tesla and Edison and Westinghouse from the late
1800s until today, to today.
And Edison would be amazed at the progress in lighting and
sound recording.
He wouldn't understand how an LED works.
He wouldn't understand how MP-3 compression works or
how an iPod works.
But on the other hand, he would feel really at home with most of
today's power-generating system.
(laughter)
And that's in the last half of the 19th century.
And here we are at the beginning of the 21st century and we do
need a modernized electrical grid for
this 21st century economy.
So let me give you a couple of examples are how other countries
are moving now.
Ireland and Spain have integrated their renewable
energy with fossil.
Ireland, for example, is 20% wind.
What that means is time average, 20% of its energy comes from
wind; it has a very small interconnection with the
British Isles so it's essentially an island.
And when you're 20% wind, that means you're up to
40% peak wind.
And yet in their system of integration,
they claim they are not losing much of the value
of the investments made on the conventional power
supply systems.
They have an automatic system that immediately ramps up gas
generation to compensate for wind when wind dies down.
So there's no power demand-side management in Ireland.
They think they can go to 40% wind which means 70% peak wind
without demand-side management.
Spain is about 25% similarly.
They feel that they are not losing much of their return on
investment in fossil fuel but they have an automated system.
China has the highest voltage transmission distribution system
around the world.
Their DC lines of 800,000 kilovolts, they can,
with that they can transmit renewable energy from the
western part of China to the eastern part.
1,200 miles lose less than 7% of the energy.
I looked up what the specifications of the U.S.
lines at 765 kilovolt lines that we use today are.
If we had to transmit that amount of energy over that
distance, this is the distance, that's also multi-gigawatts,
I think it's 6 or 7 gigawatts for this line,
if we had to transmit electricity over 1,200
miles we would lose 80% of the energy.
So that just gives you a sample of where we are.
And so what do we need to do?
We need to modernize the grid.
We first, of course, we need to improve the reliability,
especially as we face the new complexities, for example,
increase two-way flows and the cyber security.
We need to increase the overall efficiency of
regeneration transmission distribution system.
It loses about 6-8% of the energy even though we're not
transmitting over long distances.
We need, the grid has to facilitate the growth of
renewable energies.
And enable electric vehicles and disburse generation.
And we need to develop methods to synchronize the electrical
systems so that in addition to the market bidding that's an
hour or 30 minutes, actually automatic responses that go
down to a few minutes and phase control.
So and the modern grid needs to support both distributed
and central generation.
The transmission distribution control systems have to keep
pace with renewable energy.
And, you know, in the President's call for
generating 80% of electricity from clean energy sources by
2035, and putting a million vehicles on the road by 2015
and we actually appear to be on schedule.
As you may know, GM's Volt has had huge consumer response.
They have gone up in production for next year by 50% and they're
planning to go up even faster, I believe.
But they see the response.
So we need all of these things.
We see them coming.
And yet we also need to look very -- take a hard,
sober look at the transmission distribution planning for
states, regions and national entities.
And you need to understand the options and tradeoffs.
For example, there's a big debate between wind from the
Midwest and does it get transported,
this is the northern states like North Dakota, South Dakota,
other states of that.
Do you transmit that energy to Chicago, to St. Louis,
to the East Coast, or do you develop sources local
to your state?
You know, this is a very deep question.
And people need to understand most states will say, well,
we want jobs in our states, we want the generation in
our state.
But sometimes if you take that stand it actually drives up the
cost of electricity.
And I think going forward, and we fully understand that it
creates jobs in a local state, but I think you have to make
that tradeoff with the fact that if you're allowed to transmit
energy across regions, the overall costs can be less.
And I think you should have an eyes wide open approach to
deciding what's the cost and what's the benefit.
And above all, all the things we do to modernize the grid should
be affordable, they should promote overall efficiency.
And to use the sophisticated words of our high schoolers,
a better ROI, something I learned when I was about 50.
(laughter)
But in any case, these are incredible challenges,
but they're incredible opportunities.
What's the opportunity?
Well, if utility companies, merchant generators,
market operators, regulators get together and realize what are
the technologies and open up a little bit,
you will want to open it up so that you don't leave investments
stranded and you don't get a return on those initial
investments, but if you do that, you can get a much better return
on your investments in the transmission,
in the distribution, in the generation of energy.
And this is what it's all about.
There is money being left on the table,
and so my line to you is I'm from the federal government,
I'm here to help you make money.
In any case, President Obama is committed to creating the
21st century electric grid.
And in the Recovery Act, we've invested $4.5 billion
to upgrade the grid.
As you may know, we have installed today more than
500 Smart -- sorry, 5 million Smart meters and 140,000
programmable communication thermosets nationwide.
We've -- through the Recovery Act,
we've deployed a number of Smart Grid technologies,
supporting research and demonstration projects and
workforce development, and so it goes.
As one example, we are also trying to improve the
reliability and efficiency in customer service.
For example, the Western Electric coordinating council
and its partners are installing single phaser technology across
the western interconnection, real-time information and
automated controls from the single phaser technology would
permit grid operators to eventually raise the power
flow operating limits of the California/Oregon intertie and
allow an additional hundred megawatts of operational
capability, a small example of a better return on investment.
But I go back to the fact that we need to look to ourselves and
promote innovative business models that reward efficiency
and improve performance.
And for that we need to better understand the
consumer behavior.
We need to actually have honest discussions and dialogue
incorporation, and stress that partnerships between
the power generators, the RTO's, the regulators,
the market operators, there is really something to be done,
I've been told over and over again that this is
very contentious.
Certainly if the federal government tries to force
you to do something, your backs bristle.
I understand that.
So -- but I -- so here's the good news.
We have no authority.
(laughter)
It's kind of like I had no authority over what was
happening in deep waters in the Gulf of Mexico.
But we can facilitate solutions in the Department of Energy,
and we are very serious about trying to facilitate these
discussions and brainstorming sessions so that cooperation
among these various stakeholders will really increase the return
on investments in our electrical system.
And so in addition to that, we see incredible opportunities for
technology development.
For FY budget 12 requests, we've asked for an energy
innovation HUD on Smart Grid technologies and systems.
In ARPA-E, for example, we see wide spaces in wide band-gap
semiconductor materials.
We still shift voltages up and down at 60-hertz, you know,
the same as we did 120 years ago.
We can actually do much better than that.
And we can develop those technologies.
And I can go on and on.
But I just want to say that we're investing into the
research, we also want to help facilitate discussions,
to -- so all of you can get a better return on your
investments, and we look forward to working with you all here
today to build a smarter, stronger and more secure grid,
and help us seize the opportunity to once again
make the American electrical distribution transmission
generation system the leader in the world.
This is our opportunity and, in fact, we have to do this,
because if we don't, we will be disadvantaged relative to all
the other economies of the world.
So with that, I thank you.
And I guess I can take questions.
(applause)
Audience Member: Thanks, Tom Turner with Plats Newsletters.
A question addressing cyber security.
There's, as everybody's mentioned, it's a progress,
a work in progress that's been in place for years.
There's been private investment, there's stimulus funding going
in place, yet the cyber security element of a policy framework is
just now coming out.
And I know NIST is working on standards and whatnot,
but that's a year's long progress or at
least a long-term effort.
Can you address the concern about cyber security being
addressed mid stream so to speak.
Secretary Chu: Well, I think it is -- you know, this is one part which
is -- justifiably has a lot of concern.
I think it's no secret that if our grid system,
and as you go to even more automatic controls,
that if this is not really made and designed and put in a secure
place, there could be really some serious
consequences of this.
And we know of examples of other countries monkeying with another
country's grid because of some dispute regarding a bill,
for example.
And so this is something very serious.
We in the Department of Energy do think this is very serious
and we are trying to cooperate with all the other agencies in
doing this.
I mean, we do have some experience in the Department
of Energy on keeping secure networks.
This is a very different situation,
because in many instances you keep a secure network by
actually physically putting in physical firewalls.
This is something very different,
because by its very nature it has to be interconnected.
But it is a very big deal.
We are doing what we can do.
There's continuing -- but this is not something that is put on
the back burner, this is very much on the front burner.
And that's all I can say at the moment.
And we are looking at everything we can do and discussing with
all the other agencies.
Audience Member: Mr. Secretary, thank you very much.
Tom Catania with Whirlpool Corporation.
I want to make sure I understand the example you gave of Ireland
and their use of I assume natural gas
peakers or something to sort of instantaneously respond.
Would you still advocate that maybe a more elegant solution
is demand response through smarter products, for example,
on the grid, as opposed to bringing on peaker plants?
Secretary Chu: I actually think it's going to be a mixture of both.
Certainly demand response is something which makes a lot of
sense, it distributes the loads so that when your refrigerator,
for example, when it heats -- when it goes into the defrost
cycle, you don't want it to go into the defrost cycle,
as you well know, at 3:00 p.m. in the afternoon on a hot summer
day where it's blowing in hot air and has to cool it down,
you might as well do it at 3:00 a.m. where energy is very cheap.
So those automatic demand response things are a natural
and a no-brainer.
But in addition to that, there are -- right now we keep
spinning hot reserves going.
We -- there are technologies being developed today,
for example, General Electric just announced, as one example,
a combined cycle generator, this is over 55% electrical
generation, that has an incredibly fast ramp-up speed,
I mean, megawatts per minute ramp-up.
So that's from cold, not from hot.
So there are technologies being developed today,
it's going to require all of these things.
So while we want the air-conditioning systems
-- here's another example.
Since energy is much cheaper at night,
you can actually think of storing a thermal inertial
system at night that you can then use to cool your building
during the peak of the day.
Okay?
These are all demand shifts that make it better to have a better
return on investment of all our power generation and
distribution systems, all these things.
So I think that it's not either/or,
you want to do all these things.
And, you know, I see the day, it's debatable whether it's
going to be ten years or 15 years from today,
maybe as long as 20, but that's the time scale where solar,
for example, will cost in terms of levelized cost of electricity
somewhere around six, maybe seven cents a kilowatt hour.
So, you know, there's a 50/50 chance it will occur
within this decade.
So imagine what happens when it is six or seven cents a kilowatt
hour, it goes on a lot of rooftops,
especially in warehouses.
And so, again, you're going to need a grid that can handle
that, that will do a lot of peak shaving.
So there are many, many things.
But our grid right now cannot handle the fact that when
renewable energy gets to be the same price as fossil energy
without subsidy, which will happen,
we need to concurrently develop this grid.
And it's going to happen over the next 20 years.
Otherwise we will be, you know, staying at 20, 30,
at maximum 40, but say 20 or 30% renewables,
because it's intermittent.
I also didn't mention the fact that when you can lower the cost
of energy storage at the megawatt and megawatt hour
or tens of megawatt hour, that will have a profound effect on
how we use our electrical system.
You know, just do stabilize the voltage,
those very short-term things, can have -- you can save a
couple percent right off the bat of energy loss.
What we do now, as you well know,
is we overfill and we just throw the energy away because it's
overfilled, and it just sloshes away if someone doesn't use it.
So with a factor of two or three decrease in what I call this
10-megawatt, one-megawatt energy source,
you could have a profound impact on the cost structures as well.
There's many, many things that will happen within --
within this decade.
And yet we don't seem to be anticipating these technological
changes and building -- start to build it into
the planning process.
And I see significantly more, quite frankly,
in Europe and in Asia.
So I'm just saying, hey, there's opportunities.
These technologies, these prices and these technologies of the
ones closest to this know very well how rapidly they're coming
down, energy storage, for example.
So huge opportunities.
Speaker: We have time for one more question.
Audience Member: Hi, Lillie Coney, the Electronic Privacy Information Center.
Our interest is on the individual customer
energy usage data.
I'd like to hear what more is being done to make sure that the
privacy principles called FAM formation practices are built
into the thinking process for developing the grid so that
consumer's data is protected.
Secretary Chu: I think this is something that is being built in automatically.
The last thing you want to do is to have anybody be able to
broadcast your use of energy, because, for example,
it tells you when you are on vacation.
And so there's a security issue there.
And so I think all the utility companies are very aware that
you need to really make sure that the privacy that someone
can't hack in and start to read, you know,
the daily use of someone's energy,
it's a very important part of the cyber security, for example.
So I think we're all aware of this and want to make sure that
no one can hack it.
Okay? Thank you.
(applause)
Phil Weiser: All right, I'd like to call up with me here my fellow panelists.
Sitting next to me here, David Hayes is the Deputy Secretary at
the Department of the Interior, which has a very important role
in the siting of transmission facilities and will talk about.
Sitting next to him, Bob Shapard from Oncor,
which is a utility located in Texas,
and will talk about a very exciting initiative they're
going to be rolling out.
Cheryl LaFleur is a commissioner on the Federal Energy Regulatory
Commission here in Washington, D.C.
And finally we have from North Dakota the President of NARUC,
Tony Clark who is also joining us.
And this panel represents the challenge and opportunity of
energy policy in the 21st century.
It does cut across different disciplines,
different agencies and different parts of the overall eco-system.
A couple points that the Secretary of Energy just
made are worth underscoring.
There are a number of interacting parts of
the overall grid.
I will mention three, all of which get lumped under Smart
Grid, and it's also worth noting what he mentioned,
that other parts of the eco-system; think about storage,
he had an example there, transmission lines are also
part of the overall fabric of our energy system,
and that's what makes this such an exciting and challenging set
of opportunities.
With respect to the three that we'll focus on today that are
the -- part of the report, one is the local transmission
distribution part of the electricity network, the wires,
if you will, there is energy loss in those wires,
there is vulnerability to them, that's an area where the Smart
Grid opportunity is taking shape,
helping us manage our energy better by real-time visibility
into the grid.
The meters, and it's not just about Smart meters,
even in what I'm calling Smart Grid here,
provide the interface between the network and the user,
be it a business or a consumer.
There is the most modern kind of meters that we talk about in the
report, and my meters is an earlier generation,
AMAR and even the original meters that some are still
actually out there.
All of these are being used.
And there's a huge opportunity that was mentioned about how
energy usage information, and the high school students said
it better than I could, could really change behavior in a
very impactful way, so we appreciate you all bringing
that home to us.
And then finally, and the gentleman from Whirlpool
asked this very question, there are all sorts of applications,
appliances and now even electric vehicles that plug into the
grid, and those can be smarter and can help manage
energy more efficiently.
So let me start off with a broad question about this opportunity
about grid modernization and what it means and why
it's important.
And I'll start with David right here next to me.
As you look at this challenge, how do you
get your arms around it?
Deputy Secretary Hayes: Thank you very much, Phil.
From the Department of the Interior's perspective,
the grid modernization issue is important for
a couple of reasons.
One is that we are playing an increasingly significant role
in generation in facilitating the siting of new renewable
projects, as well as our traditional role in facilitating
conventional energy development.
Just to give you a little flavor for how significant
our attention in this area is, in the last quarter of last year,
we permitted more than 4,000 megawatts of new renewable
energy on our public lands.
The Department of Interior, as you probably know,
manages 25% of the land mass of the United States,
and in addition, has the offshore
permitting responsibility.
Those 4,000 megawatts are mostly in the southwest, mostly solar,
some geothermal, some wind, but this administration and this
President has pushed us very hard to move in this direction.
Prior to the President's election,
there were no commercial solar facilities in the United States
on public lands.
This Friday, Secretary Salazar will be in Blythe, California,
with a groundbreaking of the largest solar facility
in the world.
So we are interested in the grid because in order to bring this
generation to market, we need transmission,
we need the ability to deal with some of the variability of
renewable energy, particularly wind in that respect,
so we're quite interested in that.
The other aspect I will say, and I'm sure we will get into
more of this as we do more discussion,
as a primary land manager in the United States,
in addition to dealing with the opportunities for generation,
we are -- we have a special role to play,
particularly in the west, in terms of hopefully
facilitating the siting of transmission lines.
That's not only the west, but also the Great Plains
and the Midwest.
As you know, there are tremendous stranded generation
opportunities, stranded because of the lack of transmission.
We have been putting on a fast track basis working with the
Department of Energy and our other federal partners the
identification of transmission lines that need to be cited on
our public lands, and working up strategies to facilitate the
permitting of those lines.
Last year we permitted 500 miles of new transmission,
this year we have a fast track goal of another 6,
5 or 600 miles, we have 5,000 miles of identified corridors
that affect our lands that we are working in a
multi-disciplinary way to help site.
So those are some of the areas.
Finally I will mention we also see as one of the enormous
potential resources for our grid the offshore Atlantic,
and we have a new system called Smart From the Start to develop
those enormous resources, which, of course,
are tremendously attractive because they are so close to
the major load centers in the northeast.
And as you know, and apologies to those who live on Cape Cod,
we did permit the Cape Wind Project,
which will be the largest -- one of the largest offshore projects
in the world, offshore wind projects in the world.
So that's our angle, Phil.
Phil Weiser: Well, you've teed up after the Secretary did as well,
Tony from North Dakota, where obviously there is a great deal
of interest in your wind.
How, coming from a wind rich state, does the grid
modernization project look to you?
Tony Clark: Well, thanks, Phil.
And North Dakota does seem to come up an awful lot when they
talk about windy states, so I guess I resemble
that particular remark.
The potential for grid modernization does have
a great impact on states like North Dakota, South Dakota,
geographically remote states, but states that have a very
wind-rich environment, but it's an intermittent resource,
and so you need to be able to modernize the grid to fully tap
the potential of renewable resources.
An example that I like to give is, in North Dakota,
we're one of those still a little bit strange states where
we're a winter-peaking state because of our cold winters.
We have a higher peak in the winter.
It's also, if you look at the wind profile,
wind tends to blow a lot in the winter and in the middle
of the night.
So the type of devices that we're looking at, for example,
are electro thermal storage devices where you can -- you
literally heat up bricks in the middle of the night,
and as long as that furnace basically can interact with
the market in a real-time basis, then it can help load shape so
that it's drawing power off the network at times when we'd like
it economically to draw off the network, store that energy,
and then be able to use it in your home during parts of the
day when you need to.
Similar things can be done with water heaters that act
as thermal storage devices.
And if you can interact with the grid, it's not the only answer,
there are lots of issues with renewables and there's lots of
things that we need to deal with intermittency,
but it's one of those tool sets in certain circumstances that
can have a tremendously beneficial impact,
not only for consumers, but for the grid itself.
Phil Weiser: And electric vehicles would function the same way,
you'd want those being charged at night as well.
Bob, you've seen this, in some sense,
Texas is at the front lines of this grid modernization project.
Maybe you want to give people a little bit of insight into some
of what's happening there, and particularly with your utility.
Bob Shapard: Sure, I'd love to. It's working.
Just to set this up, one statement I'd like to make.
We're going to invest a half trillion dollars in the next
decade in the grid in this country, $500 billion.
So it's not like we're not going to invest a lot of money in the
grid, but we're trying to make sure, I think,
is that we don't look back in ten years and see that
all we've done is replicated the capability we've got today.
There's a big investment ahead of us,
we're simply trying to modernize that and take advantage of these
technologies that exist today.
The T and D business has been kind of sleepy for
three or four decades.
Most of the technology and innovation in this industry
has been in generation.
We've made great strides in generation,
we've dramatically improved coal plants,
we've cut heat rates in half at gas plants.
A lot of investment made, a lot of technology gains,
and we're set up today to make those gains on the grid because
of some of the micro processing capabilities and some of the
communications capabilities that exist today that enable us to do
all these things.
So we're real excited about it.
We think there's tremendous economic and environmental
benefits to doing it.
But what we need to do is engage consumers.
We get a lot of push-back today, there's a lot of questioning of
advances to the grid, specifically the meters.
Questioning by consumers, and therefore, by regulators.
So we've got to first tell the compelling value proposition,
why it's -- why this is a good idea,
why the investments are compelling,
and then engage with consumers and get the
momentum behind that.
So we're announcing a program in Texas and in California actually
called The Biggest Energy Saver.
And both Oncor in Texas and CenterPoint in Texas and San
Diego Gas & Electric and some components of it are announcing
a program today called the biggest energy saver,
and it's a program to really engage consumers and really
see what the benefits are of giving them all this additional
information and the tools to use that.
It's a three-part program that starts with a blog program where
consumers can talk to experts about how to use energy wiser,
how to use less electricity.
They also have an app contest where we're going to encourage
app developers to develop apps for these devices on your belt
and iPhones and those type of things,
where you can manage your energy consumption in your
home from those.
And then an energy savings contest for the months of
August and September, we're going to measure who can reduce
their consumption the most in percentages, percentages,
not absolute dollars, it's not bias towards large consumers.
And we're going to give prizes up to and including plug-in
electric vehicles, a suite of GE electrical appliances.
Tendrils can offer in-home devices to consumers.
We're going to really get the reaction of consumers and we're
going to see what consumers can actually do if they have
the data we plan to give them to reduce their consumption.
You're going to see that result, you extrapolate that across the
country, and the results will be enormous what we
can get from that.
So we're real excited about it.
Again, it's CenterPoint, Oncor and San Diego Gas & Electric,
we have strong support of LAN segment gear and Itron meter
manufacturers, IBM and GE are very strong supporters
of it as well.
So I think we're real excited about the results of that.
And I think then we'll be able to look back and say --
Phil Weiser: Do you have a website yet you can announce?
Not yet, huh?
Bob Shapard: There is and I don't know it.
Phil Weiser: Stay tuned. Stay tuned.
Bob Shapard: Stay tuned, it's coming.
But there will no longer be a question of can consumers
use power smarter.
We are going to -- one last thing and then I'll give it way.
All we've ever done with consumers is send them an
electric bill once a month, and it's high.
They don't know anything about it, it's just high.
We don't give them any details.
It's like going to the grocery store,
packing your cart with groceries, and once a month,
the grocer sends you a big bill.
It doesn't break out steaks from eggs from milk.
You don't know how to cut that bill.
We're trying to give consumers the data to allow them to use
energy smarter.
I hate the response from some people who say they won't use
the data, why are we bothering, why are we spending the money.
That thinking, we wouldn't have this thing on our belts today.
So I think it's just the start, and we're real excited about it.
Phil Weiser: So you've nicely segued to the next question,
which is changing the relationship about how
we think about the grid.
That affects policymakers and regulators who are looking at
regulatory reforms, it affects consumers in ways you've already
adverted to, we'll talk a little more about that.
And if affects businesses, because there's some different
business models.
It's worth saying here that historically;
electric utilities were not thinking first and foremost how
do we enable consumers to save electricity.
The contest you've mentioned is a leadership effort;
we applaud it, to do just that.
From a regulatory perspective, Tony,
I wonder how do you look at this question about what are
the incentives, what are the regulatory models in terms of
the message that we're sending overall to businesses and
consumers alike.
Tony Clark: Sure. The issue of Smart Grid has engaged state commissioners
in a big way, and a lot of it is because we understand that a lot
of the decisions that are going to be made are going to be made
at the state level.
If you look at a recent report by the Electric Power Research
Institute, they indicate about 70% of the costs are on that
distribution side or the state side of where the
costs are going to be coming down.
So we're very keyed into it.
At the same time, we understand that in some ways Smart Grid
challenges some of the old regulatory models
that we've had.
One of the issues that can come up and is sometimes difficult in
a traditional rate-regulated world,
is when you have something like Smart Grid where the costs are
fairly precise, you have a general sense for what
the costs might be to roll some of these out,
but the benefits are more diffuse,
especially in a world where we don't know exactly all of the
things that are going to happen because of this technology,
in that sense, it is a little bit about the wireless world
where you wouldn't have been able to predict today all of
the applications that ride on that wireless network,
that can be a challenging thing to try to incorporate as part of
a regulatory process.
In the wireless world, it was somewhat easier,
because we could just cleave off wireless and say that's
not a part of regulated world really anymore,
but we'll keep plain old telephone service over here
and continue to regulate that.
Much more difficult to do in the electricity space where
it's really a part of that regulated system,
it's harder to break it out.
But nonetheless, I think we do have tools to analyze
some of this data.
The important thing is ensuring that the information gets in
those actual records in front of each of the states,
so states have a good baseline on which to base their decision.
And there are probably opportunities to explore
alternative forms of regulation in this space that may be able
to facilitate some of it.
I've heard some folks talk about the potential for price
cap regulation and how that might work with the Smart Grid.
I've had other folks talk about performance-based regulation,
where you might allow a utility, especially where there are
operational reliability benefits to the grid,
you may allow them cost recovery with some sort of
performance-based principles that would allow rate recovery.
So I'm convinced that we have the tools to do it,
it's just a matter of how do we adopt those tools to this new
reality that we have in Smart Grid.
Phil Weiser: Cheryl, one of the sign posts on the road,
if you will, is looking at some of the bulk industrial users and
others who can buy directly into wholesale market.
And one thing that FERC has tried to do is help look at
that market with an eye towards what's the opportunity
for demand response.
In fact, I think your chair, Wellinghoff,
said demands response is the killer application of
the Smart Grid.
That of course remains to be seen.
But nonetheless, the experience in the wholesale market suggests
there is some opportunity to have people selling back to
the grid on a more dynamic basis.
Maybe you want to tell is little bit about that story.
Cheryl LaFleur: Yeah, at FERC, thank you, at FERC,
we regulate the wholesale and intrastate electricity
and gas markets and the wholesale electric
infrastructure transmission.
And so our job is to help insure that the wholesale markets are
set up fairly for both supply side resources like the new
renewable generation that secretary chew talked about.
In demand side resources like aggregated demand response.
And FERC has been working on making sure that demand response
is paid fairly in the wholesale market so that when it's
beneficial to customers to rely on that rather than on firing up
the generator, the market will work to make that happen.
And, we, I think really have to work closely with the states,
like Tony's and others who are working on demand response in
the retail market and the customer specific applications.
We are more worried about the ones at that are large
aggregated groups of customer who might bid in together almost
like a power plant is particularly as we see more
intermittent resources where you need something to fill in when
wind or solar is not available, demand response has huge
potential there.
So I think we are just really beginning to unlock the power
of how much we'll see on the wholesale level.
Phil Weiser: Another point I want to get to Bob,
for you is this point of is this point about consumers.
You're obviously very passionate about getting consumers access
to the energy data.
I share that passion.
I've also, over the years, and Tony knows this,
talked to say regulators about them,
innovation policy business.
I usually did that from the standpoint of telecommunications
where there was a lot of dynamism going on in the '90's,
in the Telecom Act 1996.
Now I can do also with an energy side perspective because Smart
Grid is basically innovation policy,
and the issues around access to data get into privacy,
thinking about the cost recovery of this,
whatever technology is necessary and thinking about security,
how do you talk to your regulators and how have
the Texas regulators taken challenge on board?
Bob Shapard: Well, firstly in Texas, by law, the data belongs to the consumer.
So that data can only be provided through a
third-party with their consent.
Now we have a lot of parties, Google and others who want to
help consumers manage their electric bills.
And we love the fact that they are all going to throw their
products at the consumer.
But first and foremost, the consumer owns the data.
Therefore, that's the first point.
We actually believe that's the right model.
Donna is nodding, so she made the rule.
So we believe the consumer should own the data,
and that kind of addresses that issue right up front,
where that belongs.
In terms of security, I know the question was asked of the energy
secretary, we design these systems with firewalls.
It's going to be very difficult for someone to go through a
house and take out a transmission system.
There are other ways to take down a transmission system.
They will --
Phil Weiser: Don't tell here by the way.
Bob Shapard: I would blow up a few substations before I
try to get through your smart meter into the transmission grid.
That's a long path to go to get there.
So we really think we firewall and protect that very well.
But consumer data belongs to the consumer first and foremost.
And then they will provide that to third parties.
I think it's real exciting that there's so many third parties
that want to come in and help them with their energy
consumption and help them manage it.
We are just starting to see the innovation that will come.
When we went from analogue to a digital phone switch,
the brass ring was three-way calling.
And I think we have got a ways to go here.
Let's just give the consumer the information.
Let the market work.
Let people like Tim help, or let others help them.
I don't think we know where it's going.
And then there's the enabling capability.
It's going to enable distributed generation;
it's going to help electric vehicles penetrate much quicker
because you've got the ability to recharge at night.
I just think it's the beginning.
Phil Weiser: So you've set me up nicely for something else that Secretary Chu
talked about.
Even without the formal authority that the states
have respect to overseeing this point;
the federal government has the power of convening.
In the case of George Arnold -- where are you George?
Are you here?
Inpatient convening.
And that's an important role to be played.
The standards being developed under the auspices of EISA,
the Energy Independent Security Act,
are a part of what's going to facilitate interoperability in
this realm.
That's an area that's starting to unfold.
It's an area where ultimately FERC has some oversight.
And there's a FERC policy that talks about it.
Cheryl, I don't know if you want to give people a little
background as to how the role of the federal government,
as on convener and facilitator in this standard setting,
and then I want to talk a little more about the states and the
industry on best practice as well.
Cheryl LaFleur: Yeah, thanks. Under the 2007 law, FERC has the authority
to work with NIST -- George Arnold and others -- and look
at the -- oversee the process by which standards for the Smart Grid,
including the security of the Smart Grid with being developed,
and determine when there's been a sufficient consensus that the
standards can be adopted.
And, we are really a piece of the process to work with
all the people who are working on the standards,
because it's a voluntary standard setting process,
a consensus built process to give them,
increase their utilization through
adoption at the FERC level.
We've had two technical conferences in the last several
months and are working closely on the next step of the first
suite of standards that have come forward.
And then, I think adoption is one more step on the path to
insure that the standards are there to benefit.
We are also very involved in security through our
reliability, direct reliability authority, and the critical
infrastructure standards that are mandatory for the
transmission grid, that are another big part of security.
Phil Weiser: Tony, I'm going to ask you same question.
From the state side, standard setting is not an area where the
states have a lot of experience and yet these standards are
going to impact on them.
How do you take a look at that?
Tony Clark: State commissioner are very interested in it
because as we all know, the technical standards eventually
become a commercial standard which eventually directly
interface with the retail sort of regulation that states do.
But as you mentioned Phil, standard setting itself is
not a core competency of state government.
And states as regulators we are really trying to
focus on the idea of core competencies,
which level of government does what best.
So there's obviously going to be a very large federal role in
standard setting and in Cyber security.
The one issue that I think states are very concerned
about in addition to simply the reliability of the grid
and insuring its security is that we want to make sure that
as part of the processes that we have, those rate cases that we have,
that we have as much information as we can have to make sounds
decisions as we pass those rate cases through.
The one thing that frustrates state commissioners,
we want to be sure that we don't get into are these sort
of blank check operations where the utility comes to
us and says well, this is all very important,
you just have to trust us.
Here's the check and pass it along to consumers.
We want to make sure that we are fully engaged in the process,
so we understand exactly what is being asked of state commissions
to pass through to their consumers.
Phil Weiser: And I should say on the first principle we talked
about of cost effective investments,
to embark new technology, that's what it's getting at.
A shared understanding about scaling what works,
understanding what the ROI is for a particular investment,
and that's something that takes, again ongoing work and there's a
lot going on at DOE.
I know Pat Hoffman is here from the Office of Electricity,
she's done an unbelievable job with her team to help work with
the state on that very point.
Let me go into the federal level on another dimension which is we
talked about this transmission infrastructure that ties it all
together and the necessary cooperation there.
I'm going to start with David on this point.
That's not a small challenge across different regions,
across the federal government.
How are you going about pursuing that?
Deputy Secretary Hayes: That's a -- it has been a big challenge, Phil,
in terms of how to deal with the planning side of
transmission from the federal point of view.
And, there is a -- there's an awkwardness here about the
relative authorities involved.
Shortly after we took office, Secretary Salazar, Chairwoman Chu,
or rather Secretary Chu, Chairwoman Sutley,
Tom Vilsack and the John Wellinghoff,
started having meetings that we participated in
on a monthly basis to basically figure out how can we as part of
the federal family help rationalize where the
investments need to be made from a planning perspective in terms
of new transmission lines.
We all stand ready wanting to facilitate the investment at the
right place, in the right way, at the right scale, and avoid
what we were hearing from any governors that we have
a chaotic situation out there.
Governor Freudenthal of Wyoming was the most famous.
He's probably visited most of you on this subject.
Even now in private life where he complains about the spaghetti
that Wyoming is going to look like because companies A, B, C,
and D all have their own transmission projects.
Often these are smaller projects, right?
And here as we are stewards of our public lands,
we prefer to have one large project running through the
public lands rather than several smaller ones.
But what has evolved out of that are a couple of things.
One is the recovery act.
The DOE invested significant funds in a planning effort
that many of you in this room are engaged in.
And we've been following up our sort of kitchen cabinet
if you will, of cabinet officials who have been following up with
some of you on this.
You've identified foundational lines,
both in the west and the east where we should give
priority attention.
That's a big step forward.
We want to continue to work with you on that.
We are very interested and I know that Cheryl and John and
John and their colleagues at FERC are working at how to
figure out the cost allocation issues associated with bringing
together, consolidating some of these lines, and having fewer,
larger lines.
But it's, frankly it's an ongoing work in progress.
And I think there's some opportunities for more
creativity between government and industry here as we try
to figure this out.
What you have in this administration is a
cabinet that is eager to deliver results in terms of having more
and better transmission.
And obviously, the overlay of a smarter grid is part of that.
But we need that foundation as well if we are going to move
into the next generation of a Smart Grid.
Phil Weiser: Very well said. Cheryl, do you want to (inaudible) that from
the first perspective.
Cheryl LaFleur: Yes, we -- definitely we need to modernize the grid.
We need more high voltage, interstate transmission for
reliability, to replace aging infrastructure, to make markets
work better, reduce cost to consumers and businesses.
To enable all Smart Grid things we've talked about already this
morning and finally to connect new clean energy resources.
There's clean energy requirements already
in 31 states.
I'm talking about them on the federal level and many of our
best opportunities are remotely located from load.
These are investments that are going to be around for a long
time, maybe not the ones still from Tesla and Edison may not be
up, but these investments, last 50 or 60 years,
so we need to be sure we put them in the right places,
we plant them carefully, we use the best technology that's
available and we make them as efficient as we can.
And FERC is working really on complimenting the DOE planning
efforts, we are working on a proposed rule that would
strengthen and broaden the requirements that are already
in place for regional transmission planning,
this is mandatory transmission planning.
Also require potentially the proposal was to require regions
to plan with the neighboring regions over to facilitate
projects across regions that are considered by both reasons to be
in their best interest.
And finally to insure that planning doesn't just take into
account reliability which is what utilities have done forever
and done very well, but also new policy requirements that are
being put in place at the state and federal level.
So I think we are hoping that that rule,
it's just a step on the path, but it will be an important
next step because we need to get this planning done right.
Phil Weiser: Tony, from the state side how does this planning of
transmission and siting look to you and why is
this continually such a persistent challenge?
Tony Clark: Well, it's a challenge because you have lots
of different state interests that are out there and we've
seen some of that even through our own regional
planning efforts.
But I think the goal is really to -- it was something that
Secretary Chu said that I think really hit home for me
personally which is this idea that through regional planning
we can have a better sense for what the true costs and benefits
of different options are.
Obviously I have bias coming from North Dakota that I think
it's a pretty good idea to build Great Plains wind and then bring
it to load.
There are other folks who within their own states have said no,
we'd rather have that generation built close to load.
I think Secretary Chu's words were we should go into this with
our eyes wide open.
And I think that's what this planning process will help do
and that's why states have been so involved with it.
Look, if Great Plains wind is more expensive a proposition
for those end-use customers in other parts of the country,
then you shouldn't build.
On the other hand, if the other parts of the country that might
want generation closer to load go into it knowing that they may
in fact be raising their rates to a degree much higher than
they need to be raised, then I think they have a very real
policy choice to make about what that means for their existing
manufacturing base, what that means for their businesses in
those communities and at least all of us are making
those decisions from a point of having information as to point
of ignorance.
Phil Weiser: So Bob, I want to end the panel discussion,
I have a little time for a few questions on this broad point
about cooperation across different disciplines as
we set out with our eyes open, call it a investment agenda with
prioritizations, thoughtful, understanding of what is coast
effective, how to make it work engaging consumers,
the utilities, et cetera.
As you look at that challenge, what are some of your top of
mind principles and reactions in terms of making this next decade
of efforts, successful, so we look back, as you said, say,
we didn't just stay on auto pilot.
We really took a look at what our direction
was and moved the needle.
Bob Shapard: I don't think we can solve this state by state.
I think we have to build momentum nationally.
I'm chairman of Gridwise Alliance,
and we created a 501 C3 called grid 21 which is going to
oversee our customer engagement program.
Also designed to oversee future customer engagement programs
around the country.
I think we have to do this and spread this.
If we get more and more results of consumers that
will drive opinion.
We need to develop a compelling value proposition.
And there is a compelling value proposition.
Investment in the grid will save this country tens of billions of
dollars a year and have great environmental benefits.
We've got to develop that policy so regulators around the country
will get -- frankly air cover from it and be compelled by it,
consumers will be compelled by it.
I think we need to give them a compelling value proposition,
support consumer engagement and let the momentum build.
To go sell this one state by state is enormously painful.
And if we can build that support for it,
I think you'll have consumers and regulators saying we need
to do that.
Phil Weiser: You're nodding your head.
Do you want to jump on that?
Deputy Secretary Hayes: Well, I think that these statements are so true to
be self-evident.
I sound like I'm starting the Declaration of Independence
here, but you know we are talking about enormous change
in this country, about the opportunity for a clean
energy economy, about much more information of consumers about
how they use their energy, you know,
resulting in much more efficient use of energy.
These are enormous changes.
And the -- we do need to find a way to build off the strength of
our state system and the commit the of our federal government
together along with the business community to fine a new paradigm
here because it's frustrating to everyone in this room I think as
status quo, which does -- where the institutional structures are
not well designed for dealing with this challenge
and this opportunity.
And I'm very pleased that we are all here together because
we need to build on this dialogue.
As I mentioned before this administration has such a
forward lean into these issues we want to -- we want to improve
the status quo, provide the opportunities for investment,
modernize our grid situation, help all citizens and all
businesses along the way.
So I welcome these ideas and let's keep this dialogue going.
I was just in a scheduling meeting this morning we have
another meeting on Friday with Chairman Wellinghoff,
Secretary Salazar, with Secretary Chu, with Secretary
Vilsack, with Chair Sutley on this subject.
And we are ready to continue to put our shoulder to the wheel
and we'll look forward to the follow up from this discussion.
Bob Shapard: I just have one comment.
Phil Weiser: Please.
Bob Shapard: One of the nice things is this doesn't take
government money.
If we can get clarity, the utility industry can deploy
all of the capital.
With clarity we can raise all of the capital we need.
So this is up to the government can encourage through rules and
clarity, but doesn't take federal money which is great
in these tight budget times.
Phil Weiser: Tony.
Tony Clark: Well, I think one of the things that we need to make
sure to do is leverage the strengths of each
level of government.
So I've been very pleased.
We've been working closely with DOE and I think we are just in
the infancy of a partnership to work on issues related to
consumer privacy and date.
The key is that that sort of information can then be put into
the records at state commission so that you begin to build sort
of a standard of best practices.
At the same time I do really feel that we need to continue
to have that flexibility at the state level to implement these
in ways that work in those specific regions.
We are going to make very different decisions probably
in places like the upper Great Plains where we have six and
seven cent retail rates in a particular load profile and
generation profile than they might in Texas or southern
California or New York.
And that's okay to have some of those differences.
But to the degree that we can democratize information about
best practices with regard to consumer privacy issues,
how technology can be integrated so you can utilize that in ways
that make sense for your region.
I think the federal government can be a tremendous partner for
states as we are really on the front lines of trying
to implement some of these very powerful technologies.
Phil Weiser: Cheryl.
Cheryl LaFleur: Well, I just want to echo what my colleagues have said.
I think that the solutions for the future are going to come
from really the federal government and the states
and local actors working together in a consensus
building process.
The grid is going to be modernized.
We are going to spend a lot of money on it.
The question is are we going to spend it in the right places.
Are we going to spend it efficiently?
Are we going to do what we really need?
And the best way to get that is to work together,
look at these issues broadly and then act.
And that's what I -- that's the step we have to take.
Phil Weiser: So, in terms of what we'll do next,
we are going to break-up into break out groups and continue
three of the high level themes that have been outlined.
The first is this changing paradigm of how the regulatory
system works, how businesses operate,
and how consumers act within that.
You all should have on your set of sheets which
one you're going to.
The second gets this point about innovation, access to data,
interoperability and how technological changes in
this area will be able to be impacted.
Finally, we are going to hear more about
this regional planning, transmission challenge,
that obviously there's a lot of good shoulder to the wheel.
And what we'll do then is come back to this room and have sent
a report out.
We'll hear from our chief technology officer and my
brother in arms in this, Aneesh Chopra,
about this very point.
This Report and this discussion is more like a revival meeting
than a victory lap.
We are not done.
We are in the midst of reviving our energy level to continue to
take on what is a high level, from the present on down,
commitment to how we can move towards a clean energy economy
and we need the grid in the 21st Century fashion to do that.
So, each room by the way will have a state co-lead
with someone from the federal government.
Tony said the folks in NARUC have worked very closely with
all those involved in this effort, George Arnold.
Pat Hoffman and others.
It's going to continue to work across a number of issues.
So if people don't know where they are going right out here,
someone will help direct you.
For now I want to thank our panelists for really helping
to get us revved up for this.
(applause)