 Energy in America, Lu Putirisi, keeping the lights on in California. That's what we have, uh, and Energy in America this afternoon at the Wednesday three o'clock block. Welcome, Lu. Nice to see your smiling face along the towpath. Yeah. Actually, that's good to see you, Jay, and, uh, I think this is a great topic for this evening or for this afternoon for, uh, our friends in Hawaii. Um, and actually, as a matter of, uh, sort of, uh, a little advertisement here on April on September 23rd, which will be too early in Hawaii, I suspect from 11 to 12 30, we're going to be doing a webinar on this very topic open to the public, any interested parties, and, uh, it will include the, uh, former, uh, well-known, uh, regulator of the Dutch power system, the Indian power system. I'm hoping that Ed Randolph from the California Public Utility Commission, who's the director of their energy analysis division will join us, uh, uh, Mack Pazier from Eprank and Ash Shostri, one of our fellows. So I think it's going to be a great session. We're going to explore the kind of intersection of the regulatory framework and the policy framework for bringing renewables into the power sector in a less disrupted fashion, so to say. Oh, this is kind of preliminary on that. And that sounds very interesting. So if I do the math, 11 30 Washington time means 5 30 here in Honolulu. Yeah, but you're an early riser. It's not a problem for you, but. Well, what's the, how do I find it? How do I get there? How do I sign up? I'm pretty sure they sent you an invitation, but if not, I will make sure we'll send you one. Uh, first thing in the morning, you can circulate it to your audience, if you like, or just to go on to the outbreak website, they can find the invitation. Okay. Well, thank you for that. And a great program. It's a great idea for discussion today, especially given all the trouble that the West Coast has had lately. Yeah. And before we get started, I wanted to divide this. I don't really want to talk a lot about fire management, but we need to talk a little bit about this. And I'll give you a little bit of my, but we could talk a little bit about this part of this is not just incorporating renewables into the utility system. It's also about the grid and fire management problems that places like Texas don't have, they have hurricanes and things like that, but they don't have, they don't have this particular problem. I do have an underlying hypothesis, which I can, I don't know how to test, but I believe that when society gets obsessed with a specific issue, let's say like climate, and they pour all their intellectual and financial resources into this one issue, and they tend to forget about other things that are very important, like fire management or infectious diseases and things like that. So I think that public policy needs a lot more balance and thoughtfulness on how we spend our money and our intellectual resources, brain power especially. We're not referring to the issue about the obligations of the Western States to sweep the leaves out from under the trees, are you? Well, yeah, I mean, I think fire management, actually a colleague of mine, the late Bob Nelson, he and I were in the Interior Department, wrote a very well-known book called A Burning Issue, in which he made the, not just a claim, he had a lot of data that if you, and we'll look at this a little, let's go to the first picture. That's, I think it's a night time to do it. If you, this is US, if you look at the next picture, this is the US forest area burned 1926 to 2017. If you were to listen to Governor Newsom or candidate Joe Biden or John Carey, endless number of people, in this case mostly on the left, the real problem, the fires are burning California to the ground is because of climate. So I have two questions. This one is they've known about this climate problem for 20 or 30 years, right? They know about it. So if it's climate and they were spending all their time on renewable fuels, someone should have said, well, you know, if it's getting hot, maybe we should spend some money keeping an eye on these forest fires. The other interesting thing is, is that we are not in a period of massive forest fires that we have, that we have not experienced in the past. In fact, if you go here and look back into the 1920s, 30s and 40s, you can see that the forest area burned, US forest area burned were massive amounts, right? In fact, if you go to California to turn of the 19th century or the 20th century, 1900, you can see pictures of Yosemite and some of the national parks in which the vegetation is quite low. You're quite shocked. Where's all the, you know, all the vegetation? Well, massive fires used to roll through those areas on a routine basis. So we have a lot of issues here. One is, is that we move sometime in the 1930s, 40s to, instead of controlled burns or letting the forest burn to try to conserve the forest. We began to limit logging and we did not spend frankly, particularly in California and the West, enough money, enough resources on forest management. And we also had a couple of things happening. One is, we do have a lot of, a larger percentage of the population began to come into this interface between, you know, housing in the woodland community, you might say, or the near wilderness community. And then we decided that although we wouldn't have these controlled burns, we also would not clear out the underbrush. We would limit logging. And so we have a problem, we have the problem of poor forest management. Who's we? I mean, there's been a whole discussion in the media lately about these burning areas in the Pacific Northwest, where most of it, two thirds of it is federal land. Yes. So it isn't really the states, although the state, the states would be the area where these residential, residential homes are, you know, bordering on the forest. But in the large forest areas that are burning now, that's mostly federal land. I think a big percentage of is federal land. And this has to do with the philosophy of the forest service and the pressure from large numbers of the environmental community, including the Congress, to limit logging, to limit the management growth, you know, limit the management of the forest in a productive way. You know, so in a way that would limit these fires. I mean, I think it was very short-sighted. Now, is that chart that you showed, which I assume is from some economic or commercial? No, that is from the United States Forest Service. Okay, it shows huge acreage burn back to what turn of this, I can't see the numbers, but it's some years ago. 1926, 1930s, 20s, and 30s. Right. And I'll bet in those days, that would be for, well, before the WPA and all that, you know, the infrastructure organizations that Roosevelt created. Yes. And they had nobody to go out and fight the fire. Exactly. They just let them burn and there weren't a lot of people living there, right? So let them burn. But does the chart also include what's happening now? Because what's happening now is, what is it within the last 45 or 60 days? Well, yes. But if you look at 2014, 15, 16, 2017, you can see it's about one-fifth of the record. We might be up a bit now, but we're nowhere near the levels we have. I mean, you can argue that climate is contributing to this. Let's say you're the king of California, right? And you decide you're going to take care of all the climate problems or you're going to have all these renewable fuels. It's curious that everything we've spoken about this many times, it doesn't matter what California does. They are not going to affect the temperature in California, right? It's a wonderful demonstration project. So policymakers should have also been, if they believed temperatures were rising, why did policymakers not encourage the public or build coalitions or make the case to deal with these issues of warmer temperatures, more underbrush, or how we deal with it? Of course, that also includes the federal government, which has... I'm not excusing the federal government from this, but many of the problems in California are on, in California particularly, are on state forest lanes. I think you should distinguish between the, and I know some of your charts include the origins of the fires. It's very interesting to see that and Smoky the Bear would like to see that too, because that's what he wants to get in on that and stop the fires from starting. However, what I understand from all the coverage lately is that it doesn't much matter how the fires started, but climate change has an effect on making it dry tender and making the fire worse. That may be the case, but the question is, if you were engaged in a program to deal with climate and you did not, I'm sorry, you did not take some measures of adaption. You put all your eggs into some wonderful experiment of renewables and you pretended that the adaption wasn't necessary. I'm sorry, you made a mistake as a policymaker. You should have been talking about adaption. You should have been talking about measures to protect the population. What's happening in California and what's having all, you know how politicians are, and this is left and right. I'm not, this is not, this is a bipartisan. They want to blame PG&E, which is fine, but PG&E is a regulated utility. It is a regulated utility. It has very old grid lines, right? Why did they not invest in the grid? Why should PG&E have any responsibility about forests? Absolutely, they have none, they have none. But some of the, if you can see from the sources of wildfires here, right, if you look to the next chart here, sources of wildfires, let's pull that up for a second. You can see here that in fact, about 8% of the fires are caused by electrical power, 11% by lightning. I love this one, debris burning. Some guys out in the backyard, you know. Yeah. Two fires, playing with fires, smoking. In fact, it's funny, smoking the bears only where 1%. So how much would you attribute in the way of fire starters to PG&E or utilities on this chart? Well, if you look at this chart, now this is for the whole, that's the state of California, right? In 2015, yeah, the electrical powers are part of it. But you know, what's happening in California also is because in some regions, they are now having, we'll get to that in a minute, they're having rolling blackouts. Some of the blackouts are because they are nervous that their utility poles, transformers, you know, the stations may, because they're old, may have sparks or failures which would create a fire. But very recently, some of the blackouts are occurring because they don't have enough power when the sun is no longer shining and the wind stops blowing, right? Yeah, well, if you, but if you have a wildfire and you have a transmission line, you know, going through that area and the fire burns the transmission line, you don't have any power going through that line. Right. I mean, you, but look, we live in a neighborhood where we have big storms occasionally and they, poles get taken out and lightning or big storm blows a bunch of trees down, you know, the crews come out and repair them or they reroute the power. It's not, it's when it happens on a larger scale, I think. But I think the point of this is politicians now are either pointing the finger at climate, but are pointing the finger at PG&E, but they are not pointing the finger at themselves. Right. And they, they need, I'm glad you said politicians, because when Trump went out there, he said, Oh, this is a matter of managing the forest floor, which is, I mean, maybe I'm young and naive, but I never heard that one. And I think he's trying, he's trying to, he's trying to point the blame at, at those three states. But in fact, if it's all, or most of it, is federal land, it's the federal government who failed to manage the forest floor. Well, I think we have a long policy of poor management by the Forest Service, but I'm almost sure many of these fires, most of them are on state forest lands or even private lands, but state lands. I don't know, except what I've heard. The main areas where people live are not in the forest lands. You cannot build homes in the forest lands. That's true. The Forest Service. You could only build them in wooded areas next to state parks or in the state parks, or some areas are integrated among the state parks. So, Right. But that's not to say that the far, the fires here, the wildfires are limited to the areas in which people live. I mean, I think there are vast swatches of land that are not residential, which are federal, which are where the fires are burning. Right. But if a forest fire occurs in forest land and there's nobody living there, it's okay. It's bad. It's a lot of smoke, but it's not unusual, as you can see by the previous chart. Right. We used to have a lot of fires. In fact- Do you happen to know, Lou, whether the federal government has put more or less money into forest, you know, forest management in the last few years? The Forest Service has been putting more money into forest management, but the one federal policy problem, one that really is more than Congress than anyone else, is the limited logging and the environmental movement has been against wide-scale logging, cutting of trees. And I think they're changing. Many of the environmental groups at the Sierra Club and others are saying, well, you know, we've overdone it on this stuff. We have to get in there and manage these forests better. These fires are not, they're more of a natural outcome. We need to have more controlled burn. You know, the Native American tribes used to have controlled burns all the time. On the logging, you know, remember my wife and I did a thing on bicycles called bike Centennial back in the late 70s. We went to the West Coast a couple of times doing that. And in Oregon especially, they had these logging trucks, huge lumbering. They were just huge with chains dancing along the pavement, you know, very threatening to people on bikes. I haven't been there really since. I haven't ridden the highways, but query, are you saying that all that logging activity that we saw in the late 70s is gone or seriously diminished? It's diminished. And yeah, I mean, there's all endangered species spotted out, lots of different environmental constraints have limited the amount of logging in the West on federal lands. I don't know that much about state lands, you know, how much logging is taking place. But I do think there has been a movement even in the environmental community saying, oh, we overdid it. We lobbied, you know, we had the wrong model of the forest. We need a different model. We need a more, you know, full cycle model of how you have a healthy forest. And you can see that we used to have very big fires in the forest. They weren't necessarily all bad. And there's been a lot written about this. I just think the policy hasn't connected up with it. But I do think, you know, my main question here, my main point is that if policymakers get fixated on a specific solution and they can't step back because of the lobbying groups and the virtue signaling they need to do, we've talked about this with Hawaii, right? If you think about Hawaii, what should they, if they really think climate is a number one issue, how should they allocate their budget? Renewables versus adaption. And, you know, if you're Hawaii, you should be spending at least half your money, you know, some big percentage of your climate budget on adaption. What's adaption? Sea walls, setbacks for homes, dealing with larger, you know, capacity to deal with larger storms. If you're buying into all this stuff, you should have a program for that. I totally agree. I totally agree. And frankly, you don't see any money going there at all. Exactly, because it's not sexy. It's not sexy. Okay. It's hard work and it's not, you know, no one says, why are you doing that? You know, I don't understand that. Well, you wait until something terrible happens and then you play the blame game. You're right. So now I want to talk a little bit about what's going on in California, a little bit of what right now, because we talked about the forest management, but they are dropping low in California. And about the 2017, then Secretary of Energy Perry sent a note, sent a proposed rulemaking to the Federal Energy Regulatory Commission saying that the commission should give extra weight in the management of utility systems and the rulemaking, however they do these things, to generating facilities which have reserve capacity. You know, it was a very ham-handed way. He said, well, they should have 90 days worth of fuel. He was trying to save coal plants and some nuclear plants, things like that. But in fact, Perry, although his approach to this rule, as the chairman of FERC said, well, the Secretary's approach is really not appropriate. He did say we should study this issue because it is true that as you put more intermittent power into the grid, you impose other costs and constraints on it that are not well appreciated. And I'm going to take you through a couple of pictures here where we can talk about that. The first one is what, I think we've seen this before, but let's just look at it quickly. You can see what's happened to electricity prices in California between 2011 and 2017. You can see the next picture here. And as you can see here, even though California has adopted and brought into their utility system, lots of a low-cost wind and solar, right? Because we know it's low cost, right? The price of power in California has risen much faster than the average price of power to the rest of the US, right? Exclude Hawaii because we're really not on that chart. We're above that chart. You're an island community and you don't really have a lot of choice on what you do. We're a smaller player than anything on the lower curve. But how do you explain the increase in California? Okay, so let's go to the next picture. So as you, the case is the California independent system operator. And the system operator is supposed to integrate different kinds of power generation system to optimize the performance and guarantee its reliability. And you can see here what's called this famous duck curve, right? And as they put more... That's because it looks like a duck. And you know what they say about that. If it walks like a duck and talks like a duck, then it must be a duck. This is not a duck because it doesn't walk like one. And you can see here that the, what happens is as you enter a lot of wind and solar, particularly solar into the California system, the base load requirements begin to fall when the sun comes out and the wind blows. But what happens when the sun goes down? Well, the need for large amounts of power are very, very high. But California was very reluctant to either maintain their base load, you know, they've closed down one of their nuclear plants, their gas plants and even the peaking plants. They had a vision of going to net zero carbon by 2050, right? And it's very funny because how they were going to do that is that they would just buy the power from out of state. Sometimes it's hydro, sometimes it's gas. I think if they were in the state, you know, we're not burning any. We're not burning it, right? I love that. The problem with this is that... Of course, if they bought it from New Mexico, that might be safe. But the problems you can see is that when you get to around 5.30 p.m., you have a huge requirement for power. So one of the things I have been talking to people, and we're going to talk about this on the webinar with some of the regulators is, maybe the answer to this is if I am auctioning, and a lot of this is done with auctions where people bid into the system, right? They make a bid to provide power, right? But perhaps what we should do to the renewable fuels like solar and wind is say they must bid firm power. So it's important that if you're going to bid your solar number, which is like one tenth of a cent, whatever, very low or even negative sometimes, right? You have to bid firm power. So you need to deliver that power in the middle of the night. And that way, you say, well, how can do that? I have a solar farm. Well, then you go get the batteries. Are you get a backup gas? But at least we get to see what the real, what we call price discovery. We get to see what the price is. Sure. That makes a lot of sense. It's apples and apples. Right. If everybody's bidding firm power. Now, I don't know. I asked the chairman of the FERC about this. He said they were studying it. But I do think this is a thing we're going to talk about in our webinar with some of the regulators because this imbalance is a problem because when I'm selling you power from solar, it's not the same as when I'm selling you power from a nuclear plant. Because that power from the nuclear plant is not intermittent. It's not variable. It's 24-7. That power from solar is variable. So it's not the same product. That's all we're saying. So I mean, the study is how are we doing on batteries in terms of price, efficiency and whether they can be integrated with solar? We don't have enough battery power now to move up this ducker more than about 30 minutes. Okay. Well, it's true. I mean, if you look, for example, in Kauai, there's a huge solar farmer on Kauai, but the batteries are a small part of it and they can't, they can't carry overnight, not yet. And so ultimately, these solar farms are going to have to have bigger batteries or more efficient batteries. Right. But the main thing for our viewers here is just because something, just because someone says, oh, we have solar power and it's really cheap. Well, it's only cheap when the sun's shining. So they're not, we need to get this power system on an apples for apples basis in comparison. What about, now wind, what would be a better proposition? Well, the wind stops blowing also. Sometimes when the sun goes down, often when the sun goes down. Well, yeah, I mean, I don't think it stops completely, but it slows down. And part of the problem is if you were, see, one of the things we could get if people were bidding firm power is that we would get some creative ideas out of the solar and the wind guys, they would say, okay, I'm going to extend the grid from here to there. I'm going to grab us power farther away. And here's my bid, which includes all these other costs. At what's point then, it gets more interesting because we have real price discovery. And we might not get that cost of power rising so fast because we have a more competitive level playing field. Well, there's another thought here, Lou. And that is granted that it costs more money to treat it as firm power because then you have to spend more money on batteries and, you know, to make it firm. On the other hand, an environmentalist would say, look, we're trying to avoid carbon emissions. So if you're comparing apples with coal or something that emits oil or something like that, we're happy to pay the additional amount because this is a public policy issue. We want to achieve carbon, no carbon emissions. We want to avoid greenhouse gases. And we want to stop climate change, which is not being stopped at all right now. Seems to me that if you had an environmentalist here, he would say, gee, it's not going very well. Trump denies it, rejects it, its whole government denies it and rejects it. And that enters into the public policy in the regulatory environment. So maybe that's why if you had a carbon tax, you could sort of deal with it that way. You could make your bid. Some of your fuel would be taxed because it has fossil. Some would not be. But disturbingly, these kinds of disruptions to the grid are very costly. Think about it for a second. California is the fifth largest economy in the world. It's the home to all the high technology giants. It's a highly prosperous, at least parts of it, highly educated community. And you're telling me they can't keep the lights on? I mean, how do people feel about government if they can't keep the lights on? Absolutely. And that goes for so much infrastructure in the country. Spencer Abrams was an energy czar back in, I guess, in the 90s or so. You must have known him or a number of him. And one time, the Northeast grid went down. I mean, huge geographical area went down all at the same time. And they said, so, Spencer, what happened here? This is terrible. Aren't you watching the store? He says, we built these huge infrastructures years ago when we started highways, bridges, dams, electrical grids, and all that. And we have not attended to them. We have not followed up. We have not spent the money to maintain and expand them, make them more efficient. And I think that goes for all infrastructure in the country. When Trump was elected, he said, I'm going to fix the infrastructure. And that is a noble cause. But we haven't done it. We have a lot of work to head for us. All right. So let's, we have only, well, just seconds to go. Can you try to summarize this and suggest what California can do to get into a better curve? If it truly needs to do that, because, as I said, they under-invested in the grid, safety of the grid. There's no doubt about that. They, I believe that from a public policy point of view, they got narrowly focused on these mandates to hit certain generation targets, and they didn't have a systems approach to this problem. And this systems approach goes all the way back to fire management, to the integrity of the grid, to reducing the probability of dropping low. And it's a kind of shocking that a very rich state like California got into this problem. And I think they got into this problem because a lot of technical issues that they should have addressed were overwhelmed by feel good political goals. That's my, that's my working hypothesis. Okay. Well, let me, let me ask you one last question, which I can't resist asking you. Is this problem you're describing limited to California? Because there are other states which have targets of 100% renewables. The same process is happening elsewhere. I think you should, we are beginning a big study on this issue because clearly some parts of the world or some parts of the US do a much better job of incorporating renewables than others. Texas, for example, has lots of wind and solar, but they're not dropping low, you know, because they've spent money on the grid and other things. So there are lessons for California. I think one of the lessons that you can see the last chart here is that you don't get fixated with a mandate. Your, you know, your operating objective should be to provide power that's as clean as possible, as cheap as possible and as reliable as possible. If you just try to provide power that's as clean as possible, and you forget about those other objectives of the power system, you're going to have some unhappy customers. So one last thing, look, that's the most interesting chart to me, the one you just showed Lou, the most interesting one because it shows not only that there are some states that, you know, have goals to reach renewables by 2045, 2050, whatever, they're the ones in the dark colors. It's really interesting. But the overarching point of interest for me is, A, they're only in the West. The ones that have serious goals. And B, there's differences. There's differences around the country. Lou, shouldn't this be federal? Shouldn't this be a national initiative? Why is it not a national initiative? So I happen to think, Jay, that that is a much longer discussion about the founding fathers and why we have a, why we have a Democratic Republic and not a Democratic Republic. Good answer, man. Well, thank you, Lou. It's a great discussion today. It's always great to see you. Just send me a postcard when I can come and visit you, okay? Ask him if I can come and visit, okay? I'll make a call. Please, I know you know him personally. Thank you. Lou Puyarisi, the CEO, president of EPRINC, and having going to have a great program on this very subject about California and its power grid coming up in October. Thank you so much. Take care. Bye. Aloha.