 For Live, it's Energy in America. It's Wednesday afternoon at 3 p.m. Hawaii time, and we have Lou Pudirisi. He's the president of the E-Pring, the Energy Policy Research Institute, in Washington, D.C. He joins us today by remote, and we have a very special discussion, very timely discussion, which we have entitled, What are utilities, electrical utilities, energy utilities, can learn from the California fires. And the subtitle to that is lessons from failures to maintain the grid. This is really important. So we need to examine what's going on with the fires that are happening right now, and Lou can tell us what we learned from that. Hi, Lou. Hi. How are you doing, Jay? Yeah. Very exciting discussion, very important discussion. I mean, nothing like, you know, it's like, when anything like this happens, it's kind of catastrophe. We have to really bear down and learn from it, so we can ameliorate the next time. Yeah, absolutely, absolutely. And you know, I have a certain point of view on this. I'm sure you can challenge some aspects of it, but let's look at some of the conditions as they say in the ground, or sort of the objective conditions. First, there are a lot of fires in California, okay? And this is not that uncommon. Let's go, why don't we go and just see typically what these things look like. We'll put the first picture up here. Well, there's, yeah, okay, we can start with this one. So you can, if you look at this map, which provides the size and location of wildfires in California for a hundred years, and you look at the, it's a very interesting map that what it does is it examines where the fire is located at bid, and then, when you look at the, let's say the darker, let's say the deeper the color of the red, those are indicate fires closer to the present year. So you can sort of see, one of the things that is very important to understand is that California is an arid climate. It has a long history of cycles of seasonality in which you can have wet winters. And then we could occasionally have a lot of material that are very well suited for fires, and then followed by dry, arid climate in the summers, and igniting fires. In fact, if you go to very old photos of Yosemite and the major kind of national parks at the turn of the 20th century, like 1901 to 1910, you'll be quite shocked to see places like Yosemite and Clear Lake and some of these wonderful places in California are not as green as they are today. Well, we have a picture in the background, Lou. That's the contrast. Maybe the engineer can show this picture. Yeah, there it is. Yeah, it's a beautiful photo. This is Sonoma in Napa Valley, that sort of thing. It's really beautiful, and it doesn't look like a place where a fire could grow. And yet, that's exactly what happens. Exactly. Now, what happens is, historically in California, this huge amount of fires would race through the California forests and parts of the terrain and just wipe out lots of trees and underbrush, but that was the fuel for future fires. And so fire is and fire management in California for many years went through a period of suppressing all fires, right? Fires was a natural part of the ecology of the California system, right? So we went through a long period where we suppressed fires. And I think that result in a huge amount of fuel. Next, the state of California used to have a very active forest management program in which they had either controlled burns or lots of logging or some logging, some clearing out of underbrush. And this became just a management style that was not favored by the environmental movement, ecologists, all the people that live along the coast who think they have a good feel for what the nature of nature should be. So these two things, and then this combined by the fact that a great number of the California population grew, you have more and more housing moving into the deep forest or the edge of the forest. And California always had a policy of hooking everybody up to the grid. So that's that's the kind of basic framework. Some the notion that fires. And I think one of the interesting things in this whole discussion in California, the state said, well, you know, it's not our fault. It's the climate, but actually it is their fault. Climate climate, the cycle of wet winters and drought and arid conditions is a fundamental condition of the climate terrain and the ecological life sale of California. There's nothing you can do about it. It's been there for millennia. Well, this reminds me of eruptions in Hawaii. You know, you have eruptions such as we had a year ago now. And the eruptions were predictable that someday they would happen. They had happened before and it will go on for millennia. We'll have eruptions in that area. It's easy for a scientist to be able to say that. But at the same time, the state of Hawaii and the county of the Big Island, you know, was giving permits and thus encouraging people to live in the rift zone right there, knowing that there would be an eruption. So I wonder, you know, and you don't have to talk about it now, but sometime in our discussion here today, we should talk about whether the same kind of analysis applies to the California fires. If you know there are going to be fires in a certain area, you really want to encourage people to build up, build right up to the line where you know the fire will be. Yeah. And maybe you can remember 11, 12 years ago in California, they had these rolling blackouts having to do with their very poorly formed experiment of moving California to a more market oriented power system. And that resulted in a recall of the governor in the election of Arnold Schwarzenegger as the governor of California. So, so there is a political dimension to this. So if we go to the next picture, you can see that the California Department of Forestry and Fire Protection spends a lot of money on suppression. Now, some of the suppression is putting out fires and some of it is a kind of preventative work, but you know, they are spending a lot of money on suppression. So that gives me one of the things to keep in mind, though, as you look at these blackouts in California, less than 10% of the fires have been estimated to be caused by power lines, right, lightning. You can have lots of features for power lines. And I'm just horrified by the fact that as they do these rolling blockouts throughout California, what what is the natural thing for the homeowner to do, drive down to Home Depot and get yourself a gasoline-fired power generator, right? And so it's unclear to me that they're really making a big difference, but how do they get into this problem? California has the highest electricity prices in the country, except for one, one large-scale island communities, which is the Hawaiian Islands, right? And at least the Hawaiian Islands have an excuse. There are long ways from fuel supplies. They don't have economies of scales where they can put very large power systems in. But California now has the highest power costs in the country. Well, what would you attribute that to? What are the causes? Because California can click into other grids. California has lots of resources. The California, and I've shown you these slides before, these graphs on this before, this can be entirely attributed to the California Renewable Fuel Portfolio Standards, the commitment to so-called cheap wind and solar, all of which have created a very high-cost mix. And so here is the interesting question. And so at some point, some politician is going to figure this out. Some competitive politician is going to say, and I don't understand, we spent all this money for reducing our climate footprint. We are considerably less than 1% of worldwide emissions. We have the highest electricity prices in the continental US. Why didn't we put more money into sustaining and strengthening the grid? Clearly, even from a climate point of view, adaption and looking at the, if you were to believe that fires are going to be more frequent, that they're going to be driven by a higher frequency of arid conditions or hotter conditions, why didn't this money go into substantial, let's say, reinforcement and resiliency of the grid? Let me stop there for a minute, Luke. Why is a more resilient, reinforced grid, a stronger grid, even a more high-tech grid? Why does that prevent fires? Why do we care? So the first thing is, if you have newer equipment, it's not going to spark, it's just not going to spark. Second, it's not going to fall down. It's not, second, you could think about in some high critical areas, even putting the lines and the power systems underground. That's not, I mean, California has something like 85,000 miles of above-ground wires. Yes, it's been estimated that would cost probably $250 billion to put it all underground. But you really have to ask yourself a more fundamental question. They spent a ton of money, a ton of money, billions and billions of dollars to implement a climate-friendly grid, but they didn't spend the money on making the grid more resilient, looking at different kinds of strategies. And by the way, this is not just money, this is a brainpower problem. If you put all your smart people working on a problem with very marginal return, they're not working on these other problems. And I really think this is going to be a big political problem at some point. Right now, it's just everyone's angry and they're saying, well, this is the fault of PGD, Pacific Gas and Electric, because they must be greedy. They've put money into paying their bond dividends, but here's the story that no one likes to talk about. Pacific Gas and Electric Company is a regulated utility. It has a board. It has a board of commissioners. Those commissioners decide what the priorities are, what should be looked at, what should not be looked at. And as the Wall Street Journal reported today, the PG&E can give you a very precise estimate of how many employees or members of a large array of minorities. It cannot give you a good estimate of where it needs to deal with its failing infrastructure. And I think that that is a kind of sort of watchword or kind of insight that says, what were these guys looking at? And I think the politicians can effectively say, well, it's not us. It's PG&E. They're incompetent. We should take them over, but nobody's going to take over PG&E. No government's going to take it over. It's much too expensive. They have themselves in a really hard position now. And I want to go, we don't have to look at all of these pictures here, but let's take a look at the, first let's take a look at the next picture, the number of acres burned in wildland fires. Yes, if you look from 1980, now, if you look over a hundred years, you get a picture that's a little more balanced, but you can see that the number of acres burned in wildland fires from 1980, 2018 has been on the rise, has increased. And then let's go to the next slide. All right. I think this is the most interesting picture. This shows the percentage of towers. At least a lot, you know, if you drive to the California countryside on three ways, you see these large tire, these large towers, they're either 115 or these big 230 volt kilowatt tires. I mean, towers. Now, these towers are in operation now. And if you take all the towers installed between 1900 and 1930, OK, I'm not saying that is over 35% of the total electrical towers installed in California. Now, are you telling me that we have not replaced over 35% of the towers in California, which are nearly a hundred years old? This is very outdated technology. In some cases, the transformers have been upgraded and there's other things. But in fact, this to me is a kind of negligent investment in the grid. It's a terrible problem. And it's because, frankly, our political leaders in California focused on the wrong problem. They will put it off and push it on to PG&E as much like I suspect happens with HIKO in Hawaii. But it is a regulated utility. Well, it strikes me as a matter of American history. Back in, say, 1900, California was feeling its oats. There was a lot of development there. It was also a lot of attention paid to the environment, to building in the environment. And I can see Teddy Roosevelt, you know, concerned about infrastructure, concerned about making a new world, concerned about bringing electrical power to every corner of the country and, of course, the state. But then after a while, people sort of take that for granted. It's like Spencer Abram, who was the energy secretary back in the 80s, and there was a big blackout in the Northeast, and they said to him, what's the matter with you, Spencer? You know, how come we had this blackout? He said, maybe you haven't noticed, but nobody's put a dime into infrastructure around the grid in decades. And you have to do that. You have to rebuild it all the time. And this is another example of the same thing. This is another example. And I just think it also, by the way, even PG&E has gone and said, look, this is a high risk area to bring power into. Very high risk fire area. And the state Supreme Court said, that's too bad. Under under California law, you are obligated to bring power to those areas. You have to bring it into those areas. So I do think it's a little bit of a, it's sort of a little bit about the volcanic eruptions you were discussing. The government has to take some responsibility here. They are the ones that set the rules and they can't wiggle out of this as they're doing in California right now. You could argue there are other issues too, right? The lack of low income housing requires people to drive hundreds of miles off and to get to work because zoning laws prevent the construction of more housing in urban areas. I mean, there's a whole list of things that are tied to this. And I'm almost positive the dialogue by California are going to be, look, this is another example of the climate crisis. But it's also an example of a failure to respond to the climate crisis in a cost-effective way. But let me ask you one question. It's just been working on me for the past few months. And that is, so you have a big fire and PG and he decides it's going to cut the power. It's going to cut the power to a given community. And that's going to somehow reduce the possibility that the fire will spread. How does that work? Why do they do that? They do it prospectively. They say, OK, the winds are up. It's hot. It's dry. So here's an area where we have a lot of towers, a lot of power, older infrastructure. So we are going to cut the power there because that will be it will be less likely to create a spark or a set of conditions. So they try to do it as a prophylactic measure. But it's it's quite debatable on how effective that is, as I said earlier, less than 10 percent of the fires can be attributed to a spark or an electrical lightning. Campfires that get out of control, weather conditions. There are lots of other things that cause the fire. Fire is a common condition of the California ecosystem. That's a man has tried to manage it in different ways, probably in very ineffective ways with poor forest management and we're going to see whether there's going to be a reckoning of this. I believe this is a very serious economic problem of California. It's causing more people to think about leaving and moving their businesses. But it's also a serious political problem for the leadership. Well, the financial problem is a financial problem. Huge, huge problem. Which is a utility that affects a lot of people. And if it's not financially healthy and it is not financially healthy, then you have all of the delivery generation and delivery of energy in that whole area at risk. Who is it's too big to fail? But who is going to step in and save it? You can put them through bankruptcy, fire all the corporate leadership. That's fine. You are still left with that capital asset, which has to be managed by somebody. People are going to say, OK, well, let's start over with a new utility. It's not going to work that way. That infrastructure has got to be repaired. And even the most modest estimate suggests it's a 10 year task and it's a very expensive task. And at some point, you're going to have to ask yourself, did the political leadership in California when they spent this tons of money on renewable portfolio standards and all kinds of kind of costly fuel choices and other measures, did they really understand where the return was for that money? Would they not have been better off putting that money into striking the grid, taking a view that, OK, climate's a problem, but let's adapt to it instead of trying an expensive program to reduce emissions, which are less than one percent of world emissions. But that is my lesson also for the Hawaiian electrical system because where are you spending your money in Hawaii on the electrical grid? Let me let me take this moment just just a moment and make you the governor of California. I like I like appointing people in high positions. So just for a moment, let's make you the governor of California. Here we are. The fires are still burning. It's not clear, you know, that PG&E knows what to do or whether, you know, it will have a really big financial problem at the end of the day. I think it will. And all these people, they're being displaced. And the problem in terms of the grid and the towers is not being addressed and solved at all. So we're in this kind of spasm, this crisis or California is anyway, which is going to affect them long term. So here you are, you're the governor. What do you do? So, you know, this is an interesting thing because this is also an income inequality issue. If you go to the wealthy neighborhood of Montecito, you know, where Oprah lives in Santa Barbara, it's a very it's a very fire vulnerable or prone area. But Montecito has a lot of money, so they have enormous brush control, fire breaks. They spend a ton of money and there was a major fire a few years ago that ran through their very few homes were touched. So it is, in my view, it's just like the problem with renewables. The elites say, OK, let's have wind, let's have solar, let's do all this other stuff. But it is the lower income groups that pay the cost. They have high power prices and they don't have the kind of infrastructure management which can improve the the sort of safety and reliability of the grid. This is a huge political issue. And whether or not the political leaders can dodge a bullet on this, I have no idea. But I keep saying, you know, somebody is going to think of think about this and run for office on it and it's going to resonate with a lot of people. So I do think all my friends and think that climate is the only issue facing America need to step back and say, you know, how can we proceed with something that actually addresses some of the risks of climate rather than feeling good about reducing our emissions in areas that have no effect on the overall number. So what do you do? I mean, I suppose what we could do is we do what Oprah does. We could, you know, build all kinds of defensive resilience measures in the community. We spend a lot of money and we could we could also you know, make houses that all these houses have been burning down. They have to be rebuilt. I hope they will. Yes, you can have a lot of this is these wooden roofs. You can put different kinds of tile file resistant tiles on the roof cost money. Anything they cost money. You have to. And the other question is you could for bid construction in high risk. So yes, just like the eruptions just like the eruptions, there's a lot of intelligent things you can do. But you have to put the brain power on the right problems. If you have the brain power working on things with very low return and very little use for the general public, this is what happens. And the brain power is, of course, the government or it must be over over time. In this case, the government and all their friends in academia who have these great ideas sometimes are not that practical. But let me ask you about the insurance, because I mean, when you when you finish looking at this, this this charred landscape and all these people sitting in soup kitchens, you say, where is the insurance? Do they have insurance? Is insurance required? A lot of people do have insurance, but, you know, some of them are not insurance. These are many, many cases, lower income people. And I think their insurance is inadequate for rebuilding. Probably the insurance costs in some of these zones is going to be just enormous. You know, you're not going to be able to rebuild where you were. So I do think, you know, there's going to be money, PG&E. They expect that the cost to PG&E itself, just their liability cost is somewhere between 15 and 20 billion dollars. So yeah, it's a huge amount of money. There's no surprise. And that could that could, you know, that could cripple PG&E for a long time. And likewise, you know, it can cripple the insurance companies. And, you know, it's a carrier and you were thinking about selling insurance in the state of California, fire insurance. You'd think twice right now, wouldn't you? Oh, I think and you're not going to issue policies at any of these risky zones. You're going to have very hard time getting insurance. Yeah. So I think, you know, there's a lots of let's say second order of facts or unexpected outcomes of things that seemed like you know, if you go talk to people in California, they'll say, well, it seemed like a good idea at the time. It did. But, you know, here's where we are. It's very mellow because, you know, we sit at the TV and we see these horrendous pictures of this fire sweeping across the landscape and the night scape. We see everything inside burning. It's like a bad movie. It's like one of those catastrophe movies. And you realize that it's happening right now today. But yeah, it doesn't affect you at all. If you're in Washington, you know, this is 2,500 miles away. It's a rich beach in California. It doesn't affect you. You're all protected. But you know what, though? I mean, it's just one last point to cover, Lou, and that's this. If you have if you have the state of California burning up this way and losing hundreds of millions, billions of dollars of resources and assets and, you know, and turning everything upside down for a long term financial drag on the state economy, that has got to affect the country in general. That has got to have an effect on other aspects. The misman... I mean, look, you could argue that this is just a disaster, unfortunate, unpredictable. But this is very predictable. Anybody who knows anything about the ecology and the sort of patterns of California could have predicted this with or without a changing climate. So this is going to affect the state. And the only way these things can be, frankly, I think this is partly what happens when you have one party rule and there isn't a counter set of political competition to raise these issues and to get, you know, win or lose to get these issues debated and explained and brought before the for the people of California. This is really partly one party rule, you know? But don't you think it also something that Congress has to look at because it does have a national impact that will happen somewhere else? I think Congress can. But you know, what is Congress is, you know, what there are things that Congress can do in terms of, you know, national parks, federal land and in terms of policy. I do think I do think the regional transmission operators, those who operate these big interconnected grids should come forward and say, look, got all this concern about resilience. OK, let's have some resilience standards with some real teeth in it. If you don't build a resilient grid, you are going to be penalties. They're going to be penalties. I totally agree. Well, thank you. This is a very interesting and timely discussion. Thank you for raising all these issues and making us think about it. I look forward to our next discussion two weeks hence. And I always enjoy, you know, the the explorations and discoveries with you. All right, great. Thank you, Jack. Thank you, Lou. Lou Putirisi, President of Ebrink, Aloha.