 Guillermo Salatier, Director of International Services for HSI and the Health and Safety Institute, and welcome to the show, Perspectives on Energy. We have quite a bit to talk about today, a lot going on, not just in the U.S., but also in Europe, given the latest issues with meeting supply and demand, and different types of energy crisis that we're seeing in California versus the West Coast, and then of course not comparing that to Western Europe and their constraints on natural gas. So today I want to discuss some of the things that got us here, what the nomenclature is for the energy emergency alerts that they're using in California, and what got us here in a way, right? I'll try not to go into a rant, but some of the reasons that we are in this place is because legislation that was done way ahead of all the key stakeholders, right? Finally, we're seeing the grid operators, the engineers, the SMEs that have the technical background invited to the table, and having part in the conversation on how to bring about this renewable, this push towards mostly renewables. We just can't have 100% renewables, not feasible, and we're seeing that happen this week. So let's start off with California and what's happening with that particular part of the world at this time, and it's not a lot of fun to be there. They're now on their, I believe, ninth day of what they call flex alerts. Normally what happens there is this is common to see in an energy emergency alert level two, an EEA two. So what is an EEA? An EEA alert has different levels of energy emergency alerts. The acronym is EEA, and they go from one to two to three, and then all the way to zero, which is a cancellation of the alert. EEA one basically says that you are now have every available resource online, and you have, you're just about meeting, you are meeting your load, you're meeting your demand, right? As long as you don't lose any power plants or there's no unexpected change in the forecast, you should be able to meet that load, right? And that is what an EEA one is about. Usually that's issued in the mornings, long before you approach the afternoon peak, especially now given that it's summer and we're in the middle of the heat. And according to NERC, it's using the real-time analysis. It tells you every resource you have available has been committed. That means generation, that means purchases, that means any plant that was on a reserve shutdown has been brought online and you've got plenty of fuel to make it. But if you have an example, a 10,000 megawatt peak load expected and you only have a 10,000 megawatt total supply, and that's it, including all your reserves, you are issuing an EEA level one. At this point, right, you can actually make it through that day. Unfortunately, right, if you happen to lose a generator or you haven't had a problem with one of your transmission lines or your corridors, well that could easily put you into an EEA too, right? Say you have lost a generator, well now you are no longer able to supply the load by the amount of your loss. So usually in the mornings as well, if your expectation is that you're getting to the point where you have every available resource running and now you're getting to the point where you're issuing the flex alerts just like California has, well, this is an example of an EEA too, where in this case you're asking for, you're appealing for load reduction, whether you're asking them to, whether it's voluntary or involuntary in some cases, whether you're asking them to reduce their consumption, turn off lights that don't need to be on, set the thermostat up to 78 degrees Fahrenheit, essentially is reducing the amount of consumption, right? So in this case, right, consumers are urged to conserve energy. There's different applications as well. They may have an on-call or on-demand program in which our customers pay a monthly fee to take part in this, and what they'll do is that they will shut down water heaters or pool pumps for a certain period of time, and then eventually they may even shut down air conditioners involuntarily at this point. Usually once that happens, you're getting pretty close to actually having to rotate feeders. So that is an EEA too. You're still able to meet the load, but it's going to have to happen with the help of the customers by cutting down or curating their own consumption, right? Or by activating your on-demand systems where you're shutting off ACs, pool pumps, usually water heaters first, then pool pumps, and then at the very last resort is air conditioners. In some other cases, they even have a commercial industrial load control where they'll notify the commercial customers that take part in this program that they're going to shut them off for maybe one or two hours, right, during that peak, and then these customers get ready at that point, whether it's a production line or they have something that consumes a lot of energy, whether it's a factory or some big industrial facility, they will, of course, curtail and then shut down for a few hours and then they're compensated for that the time that they're off. So that's an EEA too in a nutshell. And EEA 3 is really a place you don't want to be. That ISO or that balancing authority is unable to meet their minimum contingency reserves, right? Meaning that they are not able to meet their load. If they simply are going to have to start rotating feeders, they're about to rotate feeders or they are already in the process of rotating feeders and what does that mean, right? So you have feeders one through 10 out of a station and you have many, many stations and one of the things they're doing is they're going to rotate feeders one, three and five, they're going to turn them off, for example, 15 minutes. And then they'll go ahead and turn off feeders two and four and then they'll restore feeders one and three and then they'll stagger that way for usually five to 15 minutes each and then they'll rotate through those feeders until finally the peak is over and they're able to recover from this. Clearly, they have a huge customer impact and then there has a lot of like reportable events to the Department of Energy and FERC and that of course has a lot greater number of consequences for the entity. So California right now, they're on their ninth day of issuing those EEA twos and they've even issued an EEA three at some point, I believe. So they got pretty close. Nine days, nine days and granted they have unprecedented heat and they have fires and they have issues with the renewables. So they have a lot of renewable resources that sadly they're dependent on and not a lot of flexible base load. A lot of their combustion site and combustion turbines, their simple cycle turbines, their combined cycle turbines are, what they have is running and maxed out and sadly to say is a lot of the generating resources that they had a year ago, two years ago, that of course burn some natural gas, fossil fuel have now been shut down. And what replaces them? Well, what the replacement has been renewable resources. That's well and good and it's great for the environment. However, it's now we see some of the shortfalls when you're dealing with a resource that is highly variable. In this case, for example, they have a lot of solar resources that are being impacted by a cloud coverer mixed with smoke from other fires. And then the output of these solar sites are not expected. Same thing is happening with wind, highly variable resource. So in this case, it's also having an impact on their reliability. Not to mention the fact that there is now constraints and limits on how much power they are able to import from other regions. As even if there was power. So at this time, a lot of the hydroelectric facilities there are neighboring areas are also suffering from an unprecedented level of drought that has not been seen in a long time. So for them, the production of power isn't quite where it was before. So in this case, you're looking at just not enough resources to be able to meet that demand. And a lot of that should, I believe it has been a product or the result of rushing ahead with a lot of this legislation to move towards renewables and highly accelerated in a very aggressive rate. Incentivizing, for example, the construction of solar and wind, but and then while at the same time penalizing the the maintenance and the construction of typical combined cycle or simple cycle combustion turbines that burn natural gas. And now we're seeing the effects of that, right? Where they don't have the flexibility to be able to do this. And things have gotten so so so dire in that in that regard. It's you're seeing an example of Diablo Canyon, which was the last nuclear plant that's remaining in California. And over the last decade, there has been a strong effort to get that plant shut down. And along with the fact that it just became more and more expensive to operate until ultimately, you know, the PGE decided to go ahead and schedule it for shutdown. It got to the point where it's no longer economic to keep it running. So now, apparently, the state has decided to assist PGE with keeping the plant running for a number or more. I mean, I think it's a good five or six years to keep it online just to offset PGE's cost of operating, even though the state spent a considerable amount of money to get that plant shut down. So now they're paying they're paying a lot to keep that plant online, given the the supply of of of megawatts versus the expected load. So that's an example of where we're at just in that state. The other example, of course, is the in the recent news was the mandating proposed legislation. It isn't quite law yet, but the proposal was to make it such that only EVs or electric vehicles will be sold in California after 2035, which is a very great ambitious goal. I mean, hey, my wife is a Tesla. I mean, I I see the benefit. I see the economics behind that. It's great. She has to commute 70 miles a day. I mean, it's a 35 mile round trip. So there's definitely a fraction of the cost that we she would be paying if it were an internal combustion vehicle, right? But here's the issue. It's when you mandate something in that way, you just cannot legislate renewables as imagined. And it's kind of the title of this whole episode, right? It's they they they make these mandates and the infrastructure isn't there. And so much so that they, of course, issue one of the flex alerts where they ask EV drivers not to charge their vehicles during peak hours. So very bad optics on the part of the California government, state government, and that that kind of changes that the view of people are having, right? When it comes to what sort of wisdom is behind this legislation and are they even coordinating this with the utilities, right? Clearly, that needs to be a greater level of investment in infrastructure. And of course, you know, it's it's the need to have a more diversified energy portfolio is rather important. And we're seeing this here. And speaking of diversified energy portfolios, let's jump over to Europe and we're seeing what's happening there. Years ago, this whole this whole change from from there. There they had quite the mix of of generation over there in Europe, of course, France was was was very very think the 70 80 percent of the portfolio was nuclear and it was dispatchable nuclear, which means they could actually move the output of those generators on a daily basis. Whereas here in the U.S. we tend to put a generating unit online as nuclear that comes online and it stays at at a set maximum output for almost 18 months until they have to bring it down for refueling outage. That's the main difference, of course, that that stretches the maintenance cycle whereas in France, the maintenance cycle is a lot shorter because, you know, running a unit up and down and it's almost like cruise control and you keep changing it, right? You to take it off cruise control and you're basically accelerating and decelerating as needed, right? So that's the main example. That's the analogy there. So France, it appears now will be providing will be selling Germany quite a bit of energy. Now, a lot of that comes from nuclear. Germany, I think, did away with all of their coal and all of their nuclear power plants. So, of course, they became highly dependent on natural gas, a lot of combustion turbines or a lot of repowered coal plants that once burned coal. Now they've been repowered to burn natural gas. So what's the effect of that? And where were they getting that gas from? Well, a lot of that gas is coming from Gazaprom, which is the Russian energy company. And of course, once this crisis in the Ukraine started, that was predictably one of the first things that would be impacted, right? Of course, it didn't happen right away. Years ago, as Western Europe moved towards this whole greener energy economy, they had to get the natural gas from somewhere and they became more and more dependent on Russian gas. And this is the issue with, you know, having like a single source in your portfolio or having a single fuel, even if you're getting it from multiple different suppliers, just that single source or the single type of fuel is you're at a greater amount of risk. I mean, their utilities here in the US that again, almost 70% of their portfolio is natural gas. They have a variety of power plants but they all run natural gas and they're highly dependent on these pipelines and there's not a lot of them. So in Europe, now we're seeing the effects of that change as well. So where they had to go ahead and power off some of these coal-fired plants, they had to repower them. And then so now they're changing some of their rules, they're going to bring some of those coal burners back online. The other issue now will be of course sourcing that coal that it's adequate to burn in these plants. So that's gonna be a whole new challenge as well. So Europe may have an interesting winter coming up. Right now they're struggling to work with cooling. Of course, usually their energy needs are quite extensive and as they approach, now they're finally starting to see some cooler days and some parts of Europe and hopefully that'll offer some relief. But the real concern is what's gonna happen this winter. They're highly dependent on that natural gas for heating and certain parts of Europe, it's just not a very comfortable place to live if you don't have adequate heating, especially in Northern Europe. Germany for sure is gonna feel Switzerland and other European countries that of course at one point were highly dependent on Russian gas and are having to find alternatives. I do know that we are shipping them liquefied petroleum gas over there and of course the price of that is much, much higher than they were paying before for the Russian gas. And this is of course another alternative source for them but not very sustainable. So as we approach the end of the summer, it's really interesting to see what's going to happen. But what is the effect of all this, right? I mean, what lessons have we learned that leads from this crisis and all these issues, whether it's here, California, parts of the West, even of course, and then in Europe, right? Well, it's this push towards 100% renewables that has forced its way into effect through legislation is usually a problem when it comes to reliability. Sadly, it's only until recently, they were not including all stakeholders in this process, namely the technical side of those who manage the power grids, those who manage the resources. And now we see the effects of that, right? So ideally as this legislation moves forward and I suspect we're gonna see some changes in the way that they'll write it. There's always gonna be some kind of need to have a diversified portfolio of energy. You cannot have 100% renewable energy and not have these sorts of problems and not at the current state of technology that we're in right now. There's going to be some natural gas. We have plenty of natural gas to burn. And when you compare that to oil or coal, it's fractional. The emissions are just fractional of what oil or coal were. So we have finally moved away, right? As a nation, they used to burn coal, well, we used to burn oil. We still have a lot of coal burning units in the country, but converting those to natural gas is feasible as long as there's a pipeline nearby. The other thing we're going to see, and this is something that we're marching towards as regardless of what's happening, is we're gonna see a comeback of nuclear. We're gonna see a comeback. And it won't be those large, multi-billion dollar investment facilities. They're gonna be the smaller, small modular reactors. Usually some that are between 30 to 50 megawatts. And you're gonna see hundreds of those, maybe thousands of those throughout the country. It's going to be interesting to see what kind of opposition they're gonna face. But it's very difficult to be able to meet these climate goals without having this additional resource in there, especially having a dispatchable nuclear power plant that's small, whether it's a small modular reactor or a micro modular reactor. The other thing too, as well, is that is the use of distributed energy resources, right? So that's on the bright side of renewables, right? It's customers that have solar and they have EVs at their home, right? That at some point will be changed and that will be treated as a resource by the utilities. In fact, there's a utility in Florida that's currently offering an incentive where they will pay for the level two EV charger. They will pay for the labor and having an electrician come in and install it, do all the permitting. And on top of all that, give you unlimited off-peak charging for a mere $36 a month, but without tending your commitment, right? So the reason they're doing this and look, for us charging at Tesla, in Florida at least, if you're commuting 70 miles a day, you're looking at about 1,400, maybe 2,000 miles a month, that's about $110 in charging, right? So that's charging the car every day. So imagine charging that same type of charging at $36 a month, where it already covered the expense of a charger. So clearly they're subsidizing something in order to get ahead of this curve. My suspicion is that eventually they're going to start using this as a form of dispatching the actual distributed energy resource, meaning they're going to use their, they'll pay the customer likely for the ability to dispatch those EVs and those inverters or those power walls, for example, or even change the output of those solar panels. And a lot of that's feasible and available. The software is there and that will definitely have a more granular impact and a more precise impact on the power grid at the distribution level. So those are the things that we're seeing, right? And these changes are coming and it'll be fascinating and really exciting times to watch when it comes to our industry and how that technology will develop. One of the last things I think that we have to think about as well, right? Is a lot of these utilities, they were really like to work in partnership with these renewable legislations, right? So up until now they've been largely excluded whenever these mandates were where it's like carbon emission mandates or a certain number of these very ambitious emissions goals that they would set, right? By a certain decade or a certain number of years. So now it seems that they're including the utilities in these conversations, especially the legislators. On the other side as well, legislators themselves are becoming far more educated in how the grid works and what the constraints are for these generating resources and what investment is required in our bulk electric system in the grid throughout the country. So hopefully with this new Build Back Better plan and how the resources are available there to go ahead and make those investments, I think it's gonna be about four or five years before we see significant changes that that will impact our ability to actually meet this new electric vehicle load while at the same time having ample generation. Renewable alone won't be able to do it, right? And I think so small marginal reactors are gonna be the key. A lot of folks won't like to hear that, but it's a technology that really we've fallen behind in compared to the rest of the world. We haven't built it. We've only built one new nuclear reactor since 1979 and that's the vocal of another company. So the technology is there. There's far better a safer technology and use it in other places that they're going to imply and be able to use. So I look forward to seeing that. The other last thing I wanna point out is of course to get involved with your legislative process, right? Just setting a lofty goal. And I've been to political conventions, right? Where a former vice president, a real nice person, right? Was there and a lot of discussion was about passing laws to address climate change. And I remember I introduced myself as an engineer and that, you know, I work in the industry and one of the things was that, no, and one of the things that really shocked me, right? Was the attitude of like, no, we'll pass the laws and then the industry and technology will rise up and catch up to the law and that's not the best approach. So anyway, so that's kind of like a takeaway I have here. If they keep doing that, trying to legislate rather than working with the industry to actually get there with a realistic goal, this will ultimately impact reliability and we're seeing the example of that this week in California. So, and then of course, we're also seeing the impact of that with extraordinary events in Europe and how they're being impacted by the war in Ukraine. So ultimately, again, it's involving the experts in the process, you know, and working together in partnership would be the best way to be able to reach those climate goals when it comes to reducing emissions. And by the way, thank you for tuning in today. That's all I have. And I'll see you again in a couple of weeks. I'll see you again on Twitter and LinkedIn and donate to us at think.kawaii.com. Mahalo.