 Good afternoon. This is Guillermo Salvatieri, your host for today's episode of Perspectives on Energy. Today we're going to talk about grid reliability concerns when it comes to installing solar, wind, and how that can pose a risk to the grid, to the overall electric grid. Earlier this week, I was listening to a podcast on the NRECA, which is the National Rural Electrical Co-op's administration. And one of the things that they were definitely discussing was the fact that raising the alarm specifically for electric co-ops that from generally their size aren't as large as most investors on utilities. So one of the things that they're concerned with is that as the industry commissioned a growing number of utility-scale solar and wind projects, these larger entities have the ability to manage and absorb and mitigate that output variability or intermittency that you see in those resources. And again, it's usually they are installing those resources to pretty much replace the premature or forced retirement of some of these older coal or even fossil-fueled baseload plants. They still manage to have some other resources that they can redispatch to accommodate that variability, but when it comes to co-ops, that's not quite as simple or as easy. For the most part, a lot of co-ops are forced to buy power from these larger utilities because they don't have a lot of the same generating resources that are available dispatchable or even part of the portfolio. A lot of times these co-ops aren't even power generators. They may own transmission, they own distribution, and that is pretty much all they are. So in a lot of cases now they're subject to the availability of resources out of these larger utilities that are generator operators, balancing authorities or generator owners. So again, they are definitely raising the alarm. They are seeing challenges coming up and we'll break it down today into maybe five different segments as to why or how we can best describe this, right? So number one, you know, we're looking at the more the grid essentially has become more fragile. So a lot less reliable. And there's a number of reasons for that. So that's number one. And why is that right? Number two, part of that is the disorderly energy transition, right? We all agree we need to proceed with the energy transition. Problem is we've been doing it in this early fashion. A lot of that comes into the form of premature or early retirement of generating units that are well within their useful life. So now this asset, for whatever reason, we'll discuss that a little further. So number three, there's a lot more demand. We have a really great right for the industry in a way, but at the same time, there isn't the infrastructure in place to supply that demand. There's a lot greater level of electrification, not just in residential but also industrial commercial agriculture, for example, manufacturing. A lot more demand that just simply is we're having trouble meeting in this case, right? The other interesting thing that we see here is there's number four, there's really no government agency that is in charge solely in charge of grid reliability. You have FERC, you have NERC, you have the Department of Energy, but they're not really in charge of reliability, right? And that's something that they have pointed out time and time again to see where does the buck stop in that case. The last one, of course, is five, is that the U.S. alone cannot change the climate of the environment, right? While we work really hard and do a great job at this transition, many other countries are not doing that. In fact, they're putting more of these carbon emitting resources online and they did plenty last year and they're going to continue to do so. And some of these emerging economies all throughout the world are doing the same, so we'll discuss that as well. All right, so let's go back to the first one, right? Our grid is more fragile, less reliable, and there was one example of the effects of that. So we had those winter storms back in Christmas Eve of 2022, where you had eight different utilities in the Atlantic States doing rotating blackouts. Feeder rotation, brownouts, and simply because they just did not have the generation to meet the demand of the load. So that in itself presents a problem, but it's a clear evidence of what's happening regarding our generating resources and having that ability to supply base load in the face of this viral renewable resources, which in a lot of cases are not sufficient during these peak or winter months, right? They tend to do better in the summer, but they don't do quite as well in the winter. And the other has to do with the fact that, and even NERC itself, right, they do seasonal studies. So NERC is the National Electrical Liability Corporation. And again, they are an industry entity, which they have a delegation from the FERC, the Federal Energy Regulatory Commission, which, you know, they are basically applying reliability standards. But ultimately, they are not the government agency that's in charge of maintaining the liability. NERC does a great job, right? But again, it's an industry organization. So one of the things that they've been, I guess, well, one of the things that they always report on, they do capacity assessments. Every year, they do one for the winter, they do one for the summer. That's usually when you have your peaks. And one of the things that they are, they pointed out is the fact that we are, we are, we are really, they've seen like a really steady downward trend and greater liability. And that's been going on for the last few years. A lot of that has to do with this disorderly deployment of renewable resources, right? And it's going to be concerning, especially as we enter the, we're already in the summer months here in trying 23. And we're already starting to experience near misses or really approaching the, I mean, we're not even at the peak summer months yet. And we've had a few issues already with the energy emergency alerts in some parts of the country. So that is coming and it's bound to get a little worse. And moving into that, of course, is this disorderly energy transition. That's point number two, right? It's the premature retirement of base load generating assets, right? In other words, some folks call it the disorderly energy transition. And that usually involves just replacing reliable, dependable, dispatchable base load generation with these intermittent variable resources that are great, right? They're renewable. They don't have any emissions. However, they are not as reliable as some of these resources. So when it comes to actually having availability of these resources, I mean, they could be available 24 seven all year. These renewables are not. And they're often built and as available rather than dispatchable some of these resources. And what's happened, of course, we understand, right? They targeted a lot of these core resource called generators. But some of these core generators were less than five years old with where the state were that whether it was by economic reasons, policy, political pressure, or a number of other drivers, you know, they were retired early way before the end of their useful life. So, so again, some of these, you know, they gasify them, turn them to burn natural gas. That's of course not their optimal mode of operation. That's not their optimal efficiency point. A couple of examples are some of these like coal burning plants can produce 800 megawatts a piece. Oh, and they go ahead and burn natural gas in them. And again, that that's quite a process to go ahead and retrofit that to burn gas. You end up with a challenge of you lose like maybe 20, 25% of that output. The unit usually becomes a 600 megawatt unit in that case. So that's one problem right. And then of course the other issue naturally is, is even in the, these winter months that we saw last year. We also notice a problem where even when you have these like combined cycle plan so all these natural gas burning generators. Getting the supply of gas to those sites was becoming a problem you have some of these like a co ops and other smart utilities that they have generating assets, and they had a firm gas contract with these pipelines that essentially they gas wasn't delivered gas was unavailable. There was a lot of demand for gas out throughout the residential sector that in commercial perhaps where the industrial contracts were they were not able to meet. So that presents a problem so now you don't have enough fuel to run some of these generate just some of these generators so you're looking at another problem with having assets so so it's and that part of that was was the force closing of some of these pipelines. So, again, don't want to rely entirely on fossil fuel, but we also need to have everything should be part of a mix and over time right that should be a very measured careful approach to how we make this transition. And rather than proceed ahead at any cost, which of course ultimately puts us at risk from reliability, and it also is greatly greatly makes our operating costs out of control. So because that and that of course will affect everything from the from economics all the way down to the consumer itself themselves when they're trying to buy power. It's something to understand right pretty much everything right now it's pretty hard to build right. One of the other things that they were discussing was the fact that building transmission so so yes say you have a lot of these renewable resources and certain key places you start to get this power to the load centers you got to get this power is that we will So right now is as it stands, we don't have adequate transmission reliability transmission infrastructure be able to move all this new power to all this new demands. So, getting getting a transmission project permitted and commission that takes. There's one project right now in the Cardinal Hickory in the Northwest of the country which is a one gigawatt project. And that thing is has been going on since 2014, and right now it was still in the permitting process. So that just gives you an idea of how long this could take. And again, perhaps some permitting reform would greatly benefit right this this whole process, but building a lot of transmission alone, I mean you, they want to show us the data and see how that would actually work. And what time frame will be the timeline to build all of these transmission assets that would be adequate to meet this growing demands for energy, or at the same time, you know, trying to figure out how to how to use the existing reliable dispatchable resources that we have left, while mixing in with these intermittent renewable resources right. That's definitely a challenge in this case. And the other issue of course is, right, so they're saying replace a lot of these batteries or augment a lot of these batteries. Right now, most batteries only last about four hours, you know, given a discharge, and some of those storms, specifically those winter storms right they they you you have that go on for at least for four or five six eight days. So there's no way you're going to be going to be able to rely on these batteries to alone to be able to like make up for this like a base load, the special ability. It's right now it's not it's just not possible at this time given the cost given supply chain given the ability. And, and of course it's it's also sourcing all these things and getting them built on time. One of the other issues you got to remember too is that is that any the utility industry is very capital intensive right so for them. The decisions are it's a long term decision a long term project so it planning all these out usually requires a careful cost analysis and and and has to make sense financially right you're not going to build rely rely mostly on experimental or new technology especially when that technology is costing you a lot to produce a you all that the energy cost eventually ends up being passed down to the consumer, which of course is going to impact everybody's pockets of the negative ways. So going back to what I was saying here so now number three point number three is more demand. So yes we are seeing a lot more electrification from cooking in the kitchens to vehicles to, but then also an industry we're seeing a big departure away from fossil fuels. We're seeing industrial processes toward electrification right one example, for example is agriculture, where they're no longer using diesel to to run a lot of their equipment and they're moving over to electric well. We have a pretty big agriculture industry so in this case that presents another yet added piece of demand and load on the grid so just one example. So we make this transition and build right we're going to see a lot more demand so our so problem is the challenge here is being able to meet this demand with our current generation portfolio in our mix. So it's not always easy to be able to meet that given given given the way we're growing. So, the other challenge that that I've seen is let's go back to the regulation right so government agencies for right now there's no. There's no responsibility for it but they're not really in charge of reliability right something has been delegated to them by by FERC, which is condom from the Department of Energy, but then again narc is an industry and the entity. So, and I can assure you right the EPA, it's not thinking their focus isn't reliability, when they are making policies. So that's another thing right so where is grid reliability, being looked at is a policy and of course that becomes a national security policy. We are at a point where we are putting ourselves in in a in a rather precarious condition by doing what we're doing. Now, granted, that brings me to point number five right the US alone cannot change the climate. We're looking at. We're doing a great job of making this transition and we're making a lot of a lot of a lot of innovation when it comes to this and a lot of investments. The problem is that a large part of the world. I mean, we're not the only ones that that are taking this on but a lot of others are not joining us and they are in fact, building and commissioning fossil fuel plants, some of them coal brand new coal plants China as one example. India is another and there's quite a few others that that are also building these resources and you're not going to get any of them that would build them anytime soon. That that recently built to go ahead and the commission and because they are available they're reliable they're inexpensive and they have a lot of life left in that. So they're not going to the commission those in exchange for renewable resources, and they will already made that investment. So they want to get their return on that investment. The other thing is of course is that you know they they are able to mine their own, their own source of fuel, which is another interesting challenge now China right now of course is importing a lot of that coal from other places, but they still have the capacity to mine their own. Latin America is another example where they're also engaging in the same thing. Africa, of course, India, they're all doing quite a bit of that type of fuel source for their energy needs, which, you know, at the same time they they are, in fact, some of them are decommissioning more coal plants than we are decommissioning so that is a concern right so so there's something needs to be looked at as far as what they are going to be offered a technology that's cost effective and reliable. And at the same time it's dispatchable and then you know doesn't have was a hand this effect on the environment by by having carbon emissions. Well, again, this is something that as a as a nation here for example impacts for national security when you think about it when you discuss reliability. And so how do we address this issue right so so at this time right the, and I spoken about this ad nauseam in some cases of a small modular reactors. The truth is right that the earliest for we may see an SMR commission and put online and be commercially available will be probably 2029 if we don't have any delays. The, if you told if the government says hey let's build 20 nuclear power plants at this time large facilities, if they say like start right now to build them they probably wouldn't be ready until maybe 13 years from now. So, and that's that's the other challenge there right so it takes a long time to release around and 2035, more than likely will be the time when you see those those commission. Quite a timeline to build those and we're not quite getting closer to doing that so transmission is another problem as well. But commissioning transmission facilities takes quite a bit of time as well. So those aren't as easy to build either. If I in my experience I've seen those be a little bit more difficult to actually site build and be able to get all the easements. There's a lot of ways to be able to build those facilities then you need for a generating plant. So quite quite a different thing with quite a different challenge and that regard and and I just don't see the show me the data where where you'll be able to build all this transmission have that have all this transmission reliably, hence, stably and then economically move all this power from all these are the sources to all these loads, or whether would sink so that this other problem. A lot of times I hear batteries right batteries would be the answer to all these problems but usually those those suggestions don't come from people that are very well experienced in the industry. So, how do you reliably deploy these batteries, mind you, it's most of them only run for four hours and they have to recharge them. So let's think of supply chain if you decide to actually acquire large amount of these batteries right well where are you going to get them from right. You're going to source them out of China or you're going to try and build them domestically. Again, that's another problem was how long how long would it take to actually have them built. And let's not forget how much they cost right and I exactly get cheapest thing out. And where do you install where will you place them in your system to be able to support your voltage and support your your energy needs right. And the last thing I want to point out here is the fact that I'm not denying that this whole climate change problem is real. It's happening we need to address it, but this transition needs to be done in an orderly fashion and carefully because we're we're engineering ourselves closer and closer to a severe putting ourselves in a very risky position when it comes to greater liability over the next two or three years. And for me, I sometimes worry about how how we're doing this. And I often wonder right now, as far as policymakers or as far as as far as anyone that that's really pushing pushing an agenda towards was moving us towards this energy transition, are the only concerned with just this source of energy, or are they looking at grid reliability as a whole, or are they even looking at grid, or is that something they know that they're not concerned with whatsoever because you know they just but in a lot of cases right I mean when it comes to the industry the electric utility industry were very energy agnostic right when I say we because I was part of that for 30 years. So we don't care what we get the energy from all we want to do is perform perform reliably be available be dispatchable economic and of course you know now that the new requirement hate to be low emission or emission free. So for us it does not matter where we get it from. So we don't care what the source will be as long as it's reliable and it meets those requirements that discussed. So in that case right. I would really hope to see some some innovation happen the next three or four years. Now it's the best transition we could see is converting somebody's cold cold or oil or anything else that burns also fuels that could be maybe convert over natural gas. At some point, and that will be a transition that could be that will run for a good five, 10 years, and then eventually as SMR is already or other resources already we can use that to replace that fossil base load generation that's reliable. And that will be something that I think we may be able to get there but again it's going to be a while before we see those first SMRs come online and be commercially available. All right, so you have any comments questions go ahead and place them in the comments below I'll try and reach out to respond to them and follow up either way. When it comes to all these like challenges of course for the operator. There's a quite a bit of training happening that needs to happen right for a lot of these both operators but more importantly some of these policymakers. I think I've noticed that that usually anytime you're looking at changing environmental policy or or using some kind of legislative vehicles, especially legislators probably need to have a little bit more education as far as how the grid would work, and how the science behind grid reliability is is implemented and that's something that we at HSI pride ourselves in having the trading material the expertise the SMEs to be able to deliver that to anyone that needs it and in this case I think some of these legislators probably benefit from having a little bit more knowledge, as far as what their decisions do and how they impact reliability. And we understand that getting to a carbon free future is very important and we're support you and walk with you along the way we want to help everyone get there. Because because we're part of this but at the same time let's make sure we get there reliably. And we do this in an orderly fashion. Anyway, that's all I have to for today. Again, leave any comments I'll try and respond as soon as I can. And thank you again for watching. Thank you. Thank you so much for watching think tech Hawaii. If you like what we do, please click the like and subscribe button on YouTube. You can also follow us on Facebook, Instagram and LinkedIn. Check out our website think tech Hawaii calm. Mahalo.