 Thank you Basel and again first of all good afternoon or good evening or good morning because I don't know where I am right now My time zone is all messed up. So but it's a pleasure being here. It is my Probably my ninth visit to New Zealand over the last decade and My second visit to the University of Oakland The last time I was here. I give a little talk to a group of students who were doing some work with professor boys and We had some good conversations and discussions and I was one of those who ventured to disagree with the professor Which you shouldn't do But I did and nonetheless not in a negative way. Just I just had my own thoughts on a couple of things But it's a pleasure being here and I really want to thank Basel I think my being here is a testament to the fact that we're in a very Hyper-connected word world because when I got the invitation the email that came first. I was kind of like New Zealand University of Oakland. It's not professor boys So who is this guy? But it turned out that we were connected through a connect a connection I had from my time when I was doing some work in France Working very closely with folks at IEA and it turned out that one of a professor shops student Steve Hymer who's here was the one who got me into this trouble if you may by suggesting that I Basel invite me and we went back and forth to make it work And we chose perhaps the most interesting month to do this thing, which is the month of November October going to November, which means everything I'm about to say here is my view and no one else's view because I may have To make sure I find my way back into the US after November 8 depending on how things go But no no offense, but it's great to be here and and I love New Zealand I come here like I said quite a bit Spend a lot of time in Wellington for obvious reasons because that's where you have there your seat of government And so I've spent some good moments there having discussions about the electricity market and all that good stuff so today what I'd like to do is to talk about what I call the future of electricity and Generation and consumption and you notice that I left the part in between out of this conversation for a second Which is the the infrastructure the grid that connects both sides Because that would take maybe 10 trips in New Zealand first to sort of a get through that discussion about what it means In terms of the future of the infrastructure But want to talk about the generation and consumption side of things because I think as we look forward to the the future Those are the two aspects of electricity that will shape how the grid evolves I always tell people that technology with regards to the grid is not an issue We can build any sophisticated grid you want the question is what do you do with the grid and what you do with? The grid is determined by what happens on the generation side and on the consumption side And I want to do it in the context of three words Three words that I think will define the future of electricity one is centralized Decentralized and hyperconnectivity and as I go through my presentation you will see why and typically when I do these kinds of talks I Kind of know the audience very well in the sense that it's either very hyper academic or is a hyper non-academic This is a mixed audience And so I will try to not veer too much into the the physics that Basel talked about the physics of the grid But bear with me if I do get there. It's just by nature what I do, but I'll try to keep it at a high level and Want to sort of a make this more of an interactive conversation So I know I have about a next 40 minutes to talk But if there's a burning question that comes up if I say something that really gets you disagreeing with what I'm saying Or you're very happy about it. You can stand up clap But don't throw anything at me because I can't see right now. I'm so too tired So we got a lot of changes in front of us And I think as we talk about this issue of the future of electricity change is something that we will be grappling with as we go forward and Before I get into that just one or two slides about the Edison Electric Institute We are an institute that was founded about a hundred years ago And basically focus on the investor on utilities in terms of the domestic program working on policy working on Technology working on business models everything that makes investor utilities work if you may We also have an international program, which I run the program has about 70 members in about 60 countries Hence hence my time zone is always messed up because I'm always going to one of those countries And we have quite a few members in this part of the world both in New Zealand and Australia And now you can see a pretty much sort of a global overview of where we have our membership And the interesting thing is most of the members around the world are not just investor on utilities and one of the things EI prides itself about is making sure that access to the work of EI is not just constrained to investor on utilities So the international membership consists of both municipalities Government-owned state-owned utilities as well as private utilities. So that's sort of a two slides about EI So as we talk about the future One and one thing that is interesting is it's all relative to your time horizon Some people have a very short time horizon If you think about the business cycles and you talk to people on the stock market their time horizon is pretty much the next day With regards to investments and making sure that you're turning around Investments you're making But when we start thinking about something like energy the time horizon discussion becomes interesting Because if you take a long time horizon like a 50 year horizon to a hundred year horizon It's very easy because then you can make all kinds of bold predictions for one reason Hundred years from now most of us in this room will not be around so we can speculate anything We want about the future. No one cares because we won't be here but the closer we get to where we live now in terms of 30 years 20 years 15 years 20 years 10 years Then it gets a little bit more difficult Because if I make a prediction today five years from now someone in this room is going to say Lawrence you said this and you were wrong So what we do when it comes to predicting the future? We're very very very cautious when it comes to the near-term prediction because we know we don't get we don't want to get it wrong So we are cautious. We don't want to take risks. We want to make bold predictions But this evening we're going to be very bullish We're going to speculate above the short term and the long term and some of the things I will see it tonight may Sit well with some of you In fact, let me just make the normal disclaimer I'm about to say things that are only my view and not Edison Electric Institute's view No, I did the views of any of my member companies. So now I'm free to see what I want to say But but that's something to think about the time horizon And as we talk about the time horizon, there are a couple of challenges. We're facing as a global You know world energy water Climate population increase So these are just four. I mean sure you can come up with a whole bunch of others, right? So these are sort of a grand challenges that as we think about the future of electricity We have to think about it in terms of these challenges and the interesting thing about these four challenges is that they're interrelated and What's even more interesting is that their interrelationship is Dependent on one another in the sense that if one goes up the other goes up The more people you have on the planet the more water they consume the more water they consume the more energy they need So there's a very bad equation in the mathematician year So you hear about these sort of a non-solve NP problems Well, there is a non-solvable problem because everything is moving in the same direction So it makes for chaos because everything is increasing. There's no decrease increase energy increase population increase Impact on the climate increase need for water So how do you design a system when everything is increasing? The only way things might decrease in this con in this construct is if something begins to go down But the driver for those things going up Me and I want them to go down and the drivers actually are you me because we all want things to keep going up You know this constant thing about growth everything has to keep growing and growing and growing So you have this dependency You need electricity to have electricity you need water Right Well, you need water to get water. You need electricity So I'm supposed to balance an equation That will look at these two things both going up and down But for one to go up the other has to go up if one goes down the other goes down if both go down Well, we have an issue because in the economy doesn't go up So how do you balance that system? How do you predict a future when everything is supposed to go up? But if everything goes up we end up in chaos Because everything cannot be petually go up So creatures are characterized by what they eat Creatures are characterized by what they eat and I'm sure you know some of these you know carnivore omnivore Mesco carnivore mesocarnivore hyper carnivore herpivore Pissivore and the list goes on I have to stop because there's so many wars But the interesting thing is creatures are characterized by what they eat And so meet the newest creatures They're three They're anivores They're infivores and they're aquavores. These are the 21st century humans and the problem with these new creatures that kind of have all three characteristics is that Energy consumption water consumption information consumption. That's the hyperconnectivity. They're all connected And so as we look at designing electricity systems for the future those three things those three creatures have to be managed Now think about this this evening. You are one of those three In fact, you're all of them. You're both an inivore a word I came up with a couple of years ago when I was so frustrated in trying to understand why humans are so crazy With regards to energy consumption. I made up this word in a vor which is actually not a word But now it's become a word because I've used it for the past five years and an infivores right now We have our cell phones. We suck. We consume me like information beyond our own imagination We don't even know what we're consuming. We're probably like fat over information I call it the information fat the obesity of information I mean you all sitting here and Information-wise we're all obese Why I don't know try having an information diet for a day You go crazy you walk around like you're crazy. Your cell phone is not ringing. Oh my god No one loves me and you keep asking for it not realizing that every time you get a message on your cell phone There is an energy consumption going on and The data centers that will serve your information those data centers are way in Iceland sitting somewhere Where it's supposed to be cool? Well, they need a lot of energy So you're sitting in New Zealand as an infavor not realizing that every time you download your email You're sucking energy from the planet And by the way that energy is also sucking water So that's us the 21st century humans and you're asking me as an engineer and other engineers to build an electricity system That will feed you energy feed your information and by the way make sure you can buy clean water whenever you need it That's a challenge But the interesting thing is humans are not so dumb so we've realized that we have to fix this issue of consuming information water and energy In a way that will make this planet sustainable in the long run So we all have these common goals. We go to these meetings like Paris and enjoy Kavya and eat You know Farghar and drink wine and enjoy and come back and we have a common goal But then we all have different pathways So again, you're asking me as an engineer and other engineers here to build the electricity system for the future But we all have different ways to get there So how do we get to that future? How do we transition from a world of overconsumption of energy water and information? To a world that will make the future livable for those to come after us So that brings us to a dilemma the dilemma and we can have a dilemma discussion for all three of these different vores information Water and energy Let's focus on energy because that's closer to real electricity and the dilemma we have is that Today, there are about 1.3 billion people in the world who lack access to electricity And we're asking those people to help to keep us under a certain temperature To avoid climate catastrophe But then we're telling those people they should also develop their standard of living So the dilemma is develop get out of poverty But you can only use what we consider to be clean energy You can use dirty energy because it's not good for the rest of us, but the rest of us have it pretty good So we can afford to talk about clean energy because we are no longer poor But if I'm poor in one of those regions of the world and I'm looking at the rest of the world that's lit up I'm like this makes no sense You guys share in New Zealand, where's New Zealand always lost on my map, but anyway But you guys in New Zealand have it pretty good it's easier to sit in New Zealand and tell these folks in Africa or in India or in parts of Latin America You can't you've got to use clean energy because it has to be sustainable But is it economically feasible? And if it's not again, you're asking me you're asking engineers You're asking us to build an electricity system that will provide electricity To the entire world in a way that's sustainable But what does that do with generation? what fuel source do we use to electrify the world and In fact to be a bit provocative. Is it even realistic to do? So the transition we're going to on the go To be able to electrify the world to build the next generation electricity system Always phase two questions One is it going to be evolutionary or two? Is it going to be disruptive? Now economists like you know Professor Christensen Has this disruptive technology theory and I think it's great. It makes sense But then you have the need for stability So some disruptions are good But imagine if you disrupted the electricity system because of a transition and that disruption led to all kinds of chaos in terms of how the grid works in terms of More people having access to electricity that is not clean or a few people having access to electricity because it's too expensive So you have all these interdependences So the question is do we want the disruption or you want the transition to be disruptive or you want it to be evolutionary Now the system is designed by engineers is used by consumers and It's controlled and it's mine perhaps one of my only provocative thing I will say that may get some people upset. So it's my view to say it's controlled by regulation code word for politics so While the citizenry want this disruption to be very very minimal We don't want the lights to go off. We want it to be nice So we want a slow evolutionary glide over to this Transition of clean energy low-carbon economy. There are others there who wanted to be disruptive Break it up You know get rid of all these monopolies get rid of all these things that are standing in the way Let's just disrupt the whole system. Well, if the disruption affects the average consumer He's not gonna be happy So this transition is more driven by technology is not is it's driven by technology, but for the most part there is the Political dimension and social dimension and human dimension So when you ask me to design the grid of the future, I have to ask myself Who's the consumer? What's the fuel source and who's gonna control it? Because the physics is not a problem Again, we can design any grid we want given today's technology or even tomorrow's technology But the constraints around being able to optimize The consumption I talk about between these inner wars aqua wars and infovores The constraints around the objective function Sorry my only mathematical concept concept here is posed by policies regulation societal needs society expectation and That's our problem So oftentimes when I travel around the world people say they're doing it in New Zealand Why can't we do it in America or we're doing it in America? Why can't you do it in New Zealand? Well, we have to understand that although this transition is global Everyone is talking about it. Everyone is thinking about it. Everyone is concerned about climate change. These are global concepts at the end of the day The implementation has to be seen from a local context because everything is local Everything is local So I'm not one of those who love to sort of I just take from one country and bring it to another country And so you're saying like well, why don't everyone in Africa just leapfrog to the next generation technology? Well, how they're going to leapfrog if they don't have some of the basic infrastructure to create leapfrog and Don't get me started with the comparison of electricity and telecom as Though they're the same kind of product because everyone will tell you what we did it with telecom. Why not leapfrog with electricity? But they're not the same different context So the transition we're dealing with is very very localized although the discussions around it might be global So there are two shifts that are gonna occur the first shift is when I talked about the political the social the societal This list shows you most of the countries in the world that consume or Release the most CO2 emissions the US China India European Union Japan Korea Brazil if you feel unhappy you want to put New Zealand there feel free added to the list I didn't want to offend you so I didn't put it there because I don't think you emit that much But I could be wrong but in any case What has happened over the last five years? This list they're changing roles because now the US has actually reduced its CO2 emission over the last couple of years In fact China has reduced its CO2 emissions Now let's look at India 320 million people in poverty and you're telling India You should not use coal Okay But from a political standpoint, I have 320 million people who need to be fed Who need to live the same as you do in New Zealand? So what do they do in India? And the list goes on and on Japan Fukushima shut down nuclear Okay, let's go to using solar. Oh, well. No, it's not useful useful. Let's step back and let's go back to nuclear Korea we don't have a lot of resources. We have to input a lot of resources to fuel our economies Get to the Middle East Get to Africa So the first phase shift is not so much of technology is more of a political as a societal The mindset has to change in terms of what we're asking people to do with regards to electricity So we have to shift and the shift will bring about some of these changes Then the second shift, which is perhaps the most difficult one is shifting how we fuel our economies Coal is what we've used for decades and according to the IEA will continue to use coal Good or bad again if you're looking at a five-year horizon a hundred-year horizon You may have a different perspective, but the fact of the matter is if you're in a country that only has coal And you have 300 million people who are poor Well, you have to get them out of poverty Natural gas we have an abundance in North America now Thanks to something that mostly but doing like we should call fracking well Not all fracking is always bad and I was interviewed in New Zealand a couple of years ago And I was asked a question and I see my old friend my good friend Kevin Hart here He was in in the studio being interviewed by Mr. Chris Ladlor and and we started to interview very nicely and Chris kind of pull a fast one on me because we're supposed to talk About renewables and Chris said oh dr. Jones tell us what do you think of fracking and I could see Kevin through the window because we're working for the same companion at The time he was like But knowing how dumb I was I did answer the question and And Chris didn't like my answer because what I said to Chris was I said well every time you try to extract something from From the earth Things can go wrong, but sometimes things don't go wrong at all And so when we're done he looked at me and said you're not an engineer more or less your politician And I said you asked me a political question So I gave you a political answer because clearly asking me what I think of fracking wasn't supposed to be part of the conversation but today because of You know hydraulic fracking America has an abundance now has there been a few incidents. I don't know has there been nothing? Maybe not what I do know is that that technology change has changed the dynamics of energy in the United States Nuclear oh my god Why should I use the word nuclear in New Zealand? But I'm using it yet because China is building 50 new nuclear power plants as we speak We want them to not use coal But if they don't use coal and they have a billion people to provide energy to what options do they have? So again the choices the shift Can't just happen in a vacuum Because these things have consequences Hydro Brazil Africa don't touch your hydro resources because it's not good for the environment. Okay fine I only have hydro. What else am I supposed to do? I have a billion people who need electricity Should I not develop my hydro? Wind Wind is great try landing in Wellington. You realize how wind is great Or even leaving Wellington because I've been stuck there a couple of times can't get out of the place because of the wind Wind is great Subsidies for wind was great But do you keep it perpetually or do you remove subsidy and let wind Fend for itself like they've done in Denmark solar Well, it's this thing that's supposed to revolutionize the world And I was born and grew up in West Africa and I must tell you I believe that the Sun shines quite a bit in West Africa But I can also tell you that if you're going to industrialize West Africa No amount of rooftop solar is going to industrialize West Africa So I have a problem if I use only solar and I'm supposed to build factories in Africa to become competitive with folks in New Zealand How do I do it? So none of these things here are the panacea to our problem we're going to need a Sort of a grouping a collection of different solutions but picking one and saying this is the only thing in my view is a mistake and Trying to dictate to the world that this is the one that we should all use is also a mistake So we can't place all our bets as we transition to a clean energy economy on one We need a group of multiple of these different things. We need a mixture. We need a sort of a diversity of Solutions to be able to get us where you want to get to So what are some trends that will shape Given that the the supply mix we just talked about What are some of the things that are affecting how as I look into the future and look at electricity things that I think about urbanization a very good thing Perhaps but explained to me from planet Mars. Why are you people on this earth? Believe it's best and it's the most resilient solution for all of you to live on the coast For all of you to live in these very congested places called cities when God has given you this vast land All over the planet, but for some reason we must just all live in these very congested places called cities Not that it's bad. I know economists hate when I talk about this because they say well cities will drive the development because Economist of skill. Yeah, I understand that but cities also have a lot of risk in fact, one of the reasons why Decentralized solutions will not work is because you have these huge urban cities that cannot be supplied electricity from decentralized sources finding a rooftop solution in Paris in Mumbai in Lagos But you're telling me I should just decentralized. Okay. I will decentralized But if I do how do I feel these large mega urban cities? Digitization hyper connectivity We're living longer a great thing. I'm so happy. My mom is gonna be hundred one of these days I'll be so fantastically glad when she turns hundred But not everyone will be because some people realize that the longer people live Our economic system wasn't designed for people to live long Sad to say but as a reality The assumption around pension plans where the people will live until they reach a certain age and then they will die Well, guess what? Technology has extended the lifespan of people. So now the system is in shock because before The amount of consumers were supposed to stop at a certain point. Well, they're now extending They're crossing over so the more people are consuming is because few people Dying compared to what we had expected, which is a great thing But that was a challenge. We've already talked about consumption And by the way, we do not have infinite resource Perhaps when one will say the Sun is the most infinite resource we have and I don't disagree But how do you harness it in a way that will bring about the developments we've talked about? global governance structure Why does that affect electricity systems? Well, you realize it like I already said It's not the technology that drives how we design electricity systems How we run them is oftentimes constrained by the political realities and which wouldn't wish we operate And then I call this cyber insecurity because everybody talks about cyber security. I prefer cyber insecurity Because we're all cyber insecure. How many people you have a cell phone right now that is on Great. So you all have just been hacked by my question because the reality is We're insecure Hyper connectivity is great, but with that comes a lot of risk and until we learn how to harness that risk We are we're gonna be insecure So centralization Has a lot of benefits urbanization smart cities. That's why we centralized Data platforms Google Facebook those are centralized platforms. No one complained about it Open innovation great when you centralize things we can share information Central banks. It's a centralized thing by the nature of the name central bank We need central banks because without central banks. We cannot avoid some of these economic catastrophes If you're gonna scale up renewables and Realist scale it up You need centralized power plants large solar plants large wind plants But they're gonna have to be centralized and large if you're gonna really have an impact and Industrialization you can industrialize a country with decentralized solutions imagine 50 years ago If New Zealand didn't build a single centralized power station if everybody had their own rooftop solar I can guarantee you You will not be where you are today with your GDP Because you need scale you need centralization But you also need decentralization because Centralized systems have an intrinsic property of being not often times resilient you take it out the rest of the system is out So decentralization is great because it adds some resilience it gives some independence It helps innovation because if everything is centralized somehow it's not its time each innovation Sometimes it's good to be the one the wonky guy sitting in the place by yourself thinking and not talking to a bunch of other people It's not a bad thing it reduces system failures, but in the context of electrification Decentralization is very important Because we have about a billion people in the world who live in rural communities who need access to electricity And we shouldn't make the mistake and force them to live in urban communities because that will only exert a bit the problem We should find a way to make what I call de-urbanization Work to centralize the true decentralization It should be okay to live in the rural communities one thing I like up in New Zealand whenever I come here most people I know who may live in the city take a boat to go somewhere live in another little village Even though you know well into this still getting congested. I was walking there yesterday I'm like oh my god, okay, I can't find my way around this place I never dated in the first place, but it's even getting worse now when I when I go there So decentralization is not a bad thing So we are now entering this new age. I call it the age of hybridity again Not a word. It was never a word until I used it So you notice that Lawrence creates words because that's how we innovate We come up with concepts and let those concepts become sort of a the foundation for going forward So there's notion of hybridity hybrid systems what would have both centralized and decentralized That's where I think we're going But the challenge is that the political reality within which these systems most work are Not moving along with the same change because think about a hybrid government Right most governments are either centralized or quasi centralized, but now you're telling them to be hybrid What the heck does a hybrid government do? Well, I can give you one example a hybrid government could be a government where you put a ministry in every city Not in the big city. So you have maybe the minister of finance in Oakland You have the minister of energy in Wellington. You have one in Hamilton. Just Decentralized it's still a centralized government. Why you can do that? It's because of hyper connectivity There's no need to have all the ministries in the same city There's absolutely no need you can pretty much in the next decade You can beam yourself into a city and have a conversation. You can use virtual reality and have a meeting So why do we still need all these centralized government structures? So we're asking politicians we together to create a new reality a hybrid Regulatory system a hybrid political system that will allow us to deal with both centralized and decentralized solutions There is no one-size-fits-all and I say this because Mixing politics Regulation and economics with the laws of physics and I didn't say physics I actually put all these physicists because I like to put their names that it makes me look smart Churchill Voltaire Ampere Moore Metcalf. These are our physicists You take their theories and combine them with policy regulation and economic theory Sometimes you end up with chaos Because when you try to make physics box physics into these regulatory policy and economic theories and they don't work What you do you force engineers to make things work to make politicians economists or lawyers happy? I Have a joke while I was saved take me and put me in a room a bunch of lawyers And I give them one sentence and say this is the sentence to regulate or this is the sentence of a harm Gonna operate a power system When they come back, they would have given me 500 more sentences for that one Sentence I'm a little exaggerating, but you got the point So we need to be careful when we take a physical system like the electricity grid Well, we have transition occurring on the supply side the generation on in the consumption side And then we say let it work within this political framework And so you force engineers to do something with a system that wasn't designed to do these things to support the economic theory or the political theory or the legal framework and That is one of the challenges we have with of course electricity is that we're being asked to do a lot of things with electricity that physics Can not just be defied And we've seen examples around the world where when these things don't match well sometimes it do work Well, I must admit you've gotten it right in New Zealand At times, but again like every one of us you've gotten it wrong at times, too So you can't mix the three and the other thing and and you our friend. Yeah, who's a Electricity market designer. We try to design markets for a commodity that is not a normal commodity Electricity is not like water. I cannot sell you one glass of electricity. I could But I will be fooling you I Can't so if I'm trying to create market for something that's not a real commodity I can't even store it today. So if I can't store it. Well, the economic tier become a little bit tricky So electricity is a peculiar commodity You know and the thing about it is it's only valuable when it's not there So when the lights are off, everybody would do everything to pay to have the lights come back on and once it comes back on The price must go down Now it's weird because if you ask everybody in this room, what's the most important commodity they need every day when they Get home is light. It's electricity. It's power But then you are told That it should be affordable So you prefer to spend a thousand dollars on yourself on bill But you only want to pay a dollar for electricity That's strange But that's the reality and that's the challenge facing the electricity sector is that we have a commodity That is only value but when it's not there and in fact when it's not there we're blamed We're saying it's your guys fault You know the the the regulatory framework the political framework, whatever tells us make this system work a certain way Do this do that? And when things go wrong, it's still your fault. Even though I told you to do it So you create electricity markets, but in fact electricity is not a normal commodity So how do you design a system for the future for something that is not a real commodity? Let's talk briefly about investments as much as electricity is so important Do you know that in the great United States of America? There was a study Sometime ago that showed that there was more investment made in RMD in dog food Then in energy Think about it So we the collective we because I can ask the same question. How much does New Zealand invest in energy R&D? Not much. I would guess because globally it's less than 2% This is the most important thing we need to fix the world to fuel the world to end poverty And we're only investing 2% of whatever is in it now you can blame anybody you can blame the government You can blame the private sector. The fact of the matter is if this thing is so important, why are we not investing in it? My theory is we as engineers are very dumb What we've done is we've designed something so robust That provides so much so great reality reliability 99.99999 That to tell you that we need more money to make it another nine better No, doesn't make sense So we're stuck There's so much that we need to do with the electricity system. There's so much innovation that needs to occur But nobody believes us because the lights are on all the time and if the lights do go off Oh, you guys did on purpose So the innovation that we see coming that will shape the consumption patterns that will shape how we design systems That will shape the generation the supply side material science Sensors everything is sense today. This holds hyperconnectivity is driven by everything being sense. Everything is being controlled I mean you fly the Boeing or Airbus airplane and you realize how things have I mean everything is just great Everything is controlled. In fact, we don't realize we are ourselves. We're controlled You know because you have a cell phone, which means everywhere you go. I can track you You have a TV that's supposed to be smart TV You don't realize that in that TV is a chip that's telling me when you went to sleep. I didn't tell you that but anyway artificial intelligence we're getting to the place where Siri in Google and their equivalent He's sort of a Assistant that will tell you where you're going. You're sick Lawrence. You have 15 minutes left to talk You have all these intelligent artificial intelligence stuff that is really gaining momentum That's gonna really change how we live Computational science now we can test and retest and experiment using Simulation in ways we could have never imagined All of this bodes well For how we design energy systems all of this bodes well for how we do manufacturing We'll start looking at things like 3d printing all of this will bring about change But interestingly enough all of these things also require energy in fact Computational science the faster we compute the more power we need to compute even faster and faster and faster But innovation has to occur And so the hyper connectivity is a topic that is on everyone's mind as we look at innovation There is a chart that's a little bit this this graph a little bit confusing here because what it is is we had a session at EI Few years ago where we brought executives in the room and Said let's talk about connectivity and these are some of the words that came up as we discussed connectivity how we're so connected and I think connectivity is a good thing when we think about electricity But it's also a good thing when we think about how we solve the problems that we're facing in the world This sort of a this is sort of a executive thoughts on how we discuss and talk about connectivity So the other thing about this equation the equation of generation Supply let's forget about the grid for a moment brings us to the supply side when it comes to do with the consumer We've gone from this notion that we had only three types of consumers Commercial residential and industrial that's how we're classified But now because of innovation because of connectivity because of wireless connectivity because of all kinds of things We're not entering the age where everything is individualized And that's one of the reasons why everybody wants their own roof top TV because everyone is thinking I can stand on my own two feet But the day the Sun doesn't shine. I want the utility to be there And by the way, even if I were to buy an energy storage I'll still need to charge that storage device to make it available. So somehow I still need my grid So you have all these new types of customer services emerging Because sometimes we look at what's happening on the telecom side and say why can't we do the same thing on the electricity side And so you have all these needs for these different services, but I go back. I Cannot sell you a glass of electricity So What am I supposed to commoditize? What am I supposed to personalize for you the consumer? well, if I'm an electricity company that I'm selling electricity and I can't commoditize this and you're telling me you want services Then I have to come up with services. Well, if I did come up with services Those services have to be legal within the framework of how the system works So the policy makers and the regulators who have to tell me Lawrence you can now not only sell Electricity you have to offer certain services. So my business model will have to change I will have to come with a whole new way of offering these services and monetizing these services to meet your demands Energy management system in home building management systems. All of these things will mean different kinds of services So I'm moving from selling kilowatt hour to selling kilowatt hour enable services But I'm not allowed to do it today because that's not how the legal framework is set up So I'm going to have to change that to be able to offer these services Transportation electrification Perhaps one of the hottest topics in the industry today For many reasons whether it's in China in Canada in parts of the US in Europe Electrification of transportation is gaining momentum price of batteries continue to go down and most people see this as one way to address the emissions issues is by electrifying Transportation, which is great But yours again go back to the beginning of one of my slides Where do I get the electricity from do I get it from coal? Do I get it from nuclear? Can I charge my car using my rooftop PV? Or do I need to go and charge somewhere else? So this is great. I think it's gonna happen. I think it's coming. It's gonna be a major trend It's gonna break from being just a trend to be an actual status quo in the next five ten fifteen years But we have to think about how do we fuel these cars? So it's a trade-off. I can have less carbon emissions CO2 emissions from cars But then I can allow a little bit more from My power plants, but I can't do both Right if I'm not gonna use gasoline to fuel my car I'm gonna have to use electricity if I'm gonna use electricity I can't just rely on renewables because I need to have enough to do all of this stuff Energy storage the other night next Topic that everyone is talking about and when you talk to people what I like about talking to people who are not Entrenching all the policy and technical technical issues around electricity They will yell the news energy storage is great. We can do it And then they'll tell you I have this friend who will always say to me learns why we can't do this And like can we do that? Yeah, what do you hear from I heard on the radio? So we hear these things and we actually believe it to be true because if the engineers tell you it Might not be telling you the truth Right, so you don't believe the engineer who actually knows what he's telling you. I Said something the other day. I said doctors are very great doctors. You tell if he tells you you're sick You never asked the doctor why I'm sick. You just say make me cure. He'll meet quickly When an engineer tells you you have a problem you tell him why do I have a problem? It's a problem because I know more than you do because this is my field of specialty Right, so energy storage. Yes, if it will happen. Are we there yet? No Will it take time? Yes, doesn't require more R&D show does But what would that mean for the grid and by the way energy storage is not just what happens in your home If you had to have a little storage device in your home this thing called electricity Everyone here who uses a hairdryer tomorrow morning should realize That if the machine the motor doesn't turn it's probably cause you have a problem because you don't have enough pressure Quote-unquote or we call it voltage on the electricity side That's pushing up the system to give you enough pressure to turn that hairdryer Right now many people realize that when you pay for electricity you oftentimes pay for so-called energy But you don't pay for this energy that's called reactive energy Which is the sort of energy that produces pressure you only pay for what is called good energy or what is called megawatt hour? So in essence the engineers the engineers have designed a system where the thing that is most valuable for your hairdryer You're not paying for it You need voltage to make sure you dry your hair in the morning If there's anything you should remember from this conversation is tell your friend and your husband your spouse If my hairdryer isn't working is because you haven't paid for the voltage to the uterine utility But you do have storage for reactive power. They're called capacitor banks These things that store reactive power But guess what we don't monetize it today because to do that. Oh my goodness. It's gonna be too complicated to design a Monetary system where people pay for reactive power. So we don't today. This is a mistake. We should We we don't so energy storage is not just here. It's along the entire value chain So we see it taking off in the US. We see it taking off here Let me I want to just get to a few slides before we take some questions here. There's issue of modernizing the grid We need the grid. We've talked about generation. We've talked about the supply side, but you have to connect those two Even if you had a microgrid that microgrid needs to have a couple of wires to connect your home to the microgrid so you can't get away from infrastructure and The paradigm here with these eight Blocks if you may are now what we see as the building blocks for how you design and modernize Electricity systems in a way that will deal with the regulation the policy the economics the cyber security the customers The visibility that is needed to keep the lights on how you operate these systems and As we think about designing systems We can no longer take a singular view to the problem where we want to look at the policy We need to take a holistic view of it Which means how we plan future electricity systems will have to look at the pricing model Why are we not pricing electricity reactive power tomorrow? Do me a favor call your utility and Ask them tell them I would like to pay for reactive power And if they ask you why I tell him because if I did I will be guaranteed. I will have more pressure I will have more voltage to support my hairdryer Okay Do that Okay Interoperability make sure that when you talk to your utility or when you talk to your policymaker That all these systems can communicate they can interoperate Because if they don't we're entering a world where cyber security Can creep up and affect us in different ways if we don't think about how you protect interoperable systems So we've talked about this transition We've talked about how you go about dealing with the economics of it looking at the situation where new business models We evolve the customers expectations everybody wants clean energy But not realizing that perhaps clean energy While as it may be good in a local context in one country may not make sense in another country Just because of the practical reality. How do you achieve resilience? So you need to sort of a think holistically about this transition and what it means And that brings me to the last point, which is value Oftentimes when we talk about electricity we always talk about the price the cost Very seldom do we talk about the value Remember I said we have the most important commodity that is only valuable when it's not there So now as we talk about this transition We're facing the situation where Whether it's evolutionary or disruptive Value is going to somehow be impacted and The question is how do we make sure that the value of the grid? The value of having an infrastructure that connects consumers to suppliers That value is not Destroyed when we go about this transition So we don't want to destroy the value want to create new value But creating new value is tricky because it means Someone is going to have to lose and someone is going to have to win or we can play in the sandbox together Some people win some some people win a little bit more, but no one loses completely And that's our challenge So the last thing here about technology which relates to this thing of value is the Internet of Things Again, one of those things that started in another industry Everyone here is about it is great. Let's have the Internet of Things for the power grid It brings all these benefits observability controllability connectability flexibility all sounds great But how do you make it work in reality? When you connect these different devices for example, I was talking about it yesterday How do you monetize the actions doing that is carried up by these different devices? So there are a couple of examples. It's happening in In the US in California. They're not talking about the grid of things Connectivity is there It doesn't have to be called the Internet of Things wherever little home devices going to be connected to one another We're in it. We've already had a grid of things. We've already had inter-connectivity. This is nothing new So PJD has this lab where they're looking at putting things together Your neighbor Australia they're experimenting with this to where they're looking at You know the idea of Internet of Things connecting different homes and allowing these home switch to sort of a tap into the market and Be part of this ecosystem Lighting system today can be part of this Internet of Things Transportation system all of these things coming together create value. The question is How do you share the value along the value chain in the past you had one company that supply your electricity You still have the same demand now you want 50 companies. So I just asked a simple math Doesn't make sense. I'm not seeing this right or wrong But just look at the equation if you still want one ampere in your home and now instead of getting it from one person You're getting it from 50 people someone is losing money somewhere and Guess who most likely is you So Ergon energy and they're doing some stuff there in Australia This idea of smart functions smart homes. This is the one. I like you know because people say smart homes You know and I come back to my mom. She's almost what I can say that she that's fine She's almost 80. So she'll not be mad at me saying she's 80 when you turn when you turn 80 You're very proud because you've lived such a good life, right? So you say you 80 if I said to my mom she was 40 when she was 40 she would get mad at me But when she's 80, she's just happy to be 80 But people said my mom needs a smart home and she's like no I just want the lights to come on when I want it on I don't need all these gadgets. I want it simple convenient. I don't want all this stuff So what has happened is because a few people a few smart savvy people many of us in this room We like all this technology stuff We then are the ones who want to drive the rest of the consumers to be to think the need smart home Well, in fact, they don't so then you asked me to design a system that will only benefit 10% of the people But the remaining all the people here who are over 60 and 70 and 80. I want to ask you to raise your hands But but all those people who don't need those sophisticated systems. They're still paying for it So how is that fair that I'm going to design a system that will only benefit 10% of the consumers But everyone else has to pay So that thing about grid pricing the structure of the pricing how we price electricity and the services that has to change So ladies and gentlemen the choices we're gonna make Will have consequences for not just the value chain and how value is created along the grid Those five ten fifteen years the choices will make today will shape what happens So their trade-offs we're gonna have to make If we're gonna reach and I say a near zero carbon world because we're never gonna get to a hundred percent Carbon neutral world. It's impossible. I don't think it's feasible in our lifetime Not in my lifetime not in my children's lifetime not even in my grandchildren's lifetime So let's just accept it that we're never going to get to a hundred percent zero carbon world I'm sure there are people here who disagree with me and tomorrow the news paper bastard will say dr. Lawrence You'll say we'll never get to zero carbon world If you can tell me how it works how it's gonna make sense financially Societies from a societal standpoint. I would agree with you, but I just don't see how it's gonna happen We can get to a near zero, but to get to ultimate zero. That's not possible Because we have to make choices and The biggest thing behind that making it work is the lack of trust Because we don't trust each other We don't trust each other in families. We don't trust each other in countries. We don't trust each other in the world We lack trust and until we can fix the trust factor To realize that it's okay for India to use coal Together people are the poverty and it's okay for us in New Zealand to have an electricity bill go up a little bit So we can use some of that money to support research that will benefit people in India and Africa Or that people in India and Africa should leapfrog to clean technology We have to trust that until we do this together collectively as a world We're not gonna solve this problem So in fact you can shut down all the coal fire plans in a country and Buy all the solar technology from China manufacturer with coal fire plans And what you would have done nothing to the ecosystem because guess what is one world and what goes in has to come out So at the end of the day we have to fix the trust factor So I'll end with this quote from Thomas Edison That vision without execution is nothing but hallucination We're very great as a world as a people to have vision All kinds of visions. I've read some innovation statements. I'm gonna I'm losing my head now But the execution is lacking. And so we did pass. We had a Paris Agreement Everybody signed it at least most people did who were there the question is how do we execute? Because if we don't again, we'll still be dreaming. Thank you