 So before I introduce our distinguished guest, I'd like to welcome Marguerite Serres, who's the managing director of ESB Networks, to give just some introductory remarks. You'll be aware that this breakfast briefing is part of the ESB's Powering the Future lecture series and we're always enormously happy to have an opportunity to have ESB address us here and to be present and their huge supporters for this series of lectures. I want to thank the ESB again for that and welcome Marguerite. Thank you Chairman. Good morning everyone and as the Chairman says it's great to see so many people here so early this morning. We're a little bit later starting than we thought but I'm sure people were here very promptly. On behalf of ESB I'd love to really welcome first of all our guest of honour Julia Ham, who's come here today to speak to us. I'm sure he's going to give us a lot of food for thought but also to thank yourselves for coming here this morning as well. It's a great pleasure to have this Powering the Future lecture on behalf of ESB. My day job is to manage ESB networks and that means I suppose among other things one of our licenses is to be the distribution system operator in the Republic of Ireland and traditionally that role was fairly easy to explain if not always easy to execute and it effectively meant that our job was to connect up new customers and then to keep the lights on and to do that as economically as possible. Now the network has grown because of that organically over the last 90 years and you know it has built up in line with demand and I think largely has served us very very well but it was built for a particular set of circumstances and was built in a particular time and that has all changed now so typically in the past I suppose what we had were quite high voltage lines leaving a small number of generating stations effectively big wires be conductors and then that would taper its way down through the various voltage levels until it reached customer premises where it entered at obviously much lower voltages and much smaller lines so a lot of tapering from big down to little we typically had currents flowing in only one direction and we typically also had very predictable loads so we knew based on yesterday or based on last month or based on the same time last year typically what load levels would look like so it's very predictable now as you know that's all changing and generators can effectively pop up anywhere and tend to they actually tend to be more at the more remote ends of our network at the very end of those tapered networks and that gives us an awful lot of challenges to system operators because now what we have are unpredictable load flows we don't can't predict today what's going to happen versus what happened yesterday we have to remote the network that is very remote we have to reinforce and that's not particularly popular as goes with landowners and customers at times and while we're trying to do that and connect up the new generators we also need to make sure that we don't adversely affect existing customers so there's a lot of challenges in there and it's a complex mix and really again what we have to do despite all those new challenges obviously is to keep the lights on so it's not an easy balance I suppose and it's getting more complex but because of that in ESB networks and in ESB in general we have been investing heavily in both the transmission and the distribution grids over the last two decades to make sure that we can accommodate the increasing levels of renewable generation and it is quite significant I think we were just talking over breakfast there and the peak in the Republic of Ireland last year was just under 5000 megawatts and by the end of 2017 we'll have about 4000 megawatts of renewables connected and we have a queue of lots more wind and about three and a half gigawatts of solar so there's a lot of interest in renewables and a lot of demands for it but for the next hour or so I suppose we can forget all about those realities that I've been talking about and I suppose maybe indulge in the luxury of a blank page and what we would do if we could start now unencumbered totally by our history in our case 90 years of it and consider how we would design a network from scratch and indeed how we would design legacy or ignore our legacy market systems and how we would design market systems Julia's organization she just told me to change the name of it I had the solar electric power lines but I think now it's the smart electric power lines or SIPA it's an educational non-profit organization and it helps utilities to deploy and integrate solar storage demand response and other distributed energy resources several years ago SIPA kicked off the 51st state initiative in the US I think sometimes we think of ourselves as the 51st state but this is the real version and it was a unique project which asked people the question what would you do if you could create the perfect energy market from scratch if you could not have to deal with legacy infrastructure and you were unhindered by the existing market design the idea of a 51st state is very liberating so considering what we would do with a clean sheet of paper it gives us the freedom to look beyond the here and now beyond the current constraints and realities towards a broader vision of the future and the real strength in the exercise is that it allows us to define where we would like to get to and gives us a path to planning the future and particularly how solar and utility industry transactions could look in that future I'm really delighted to welcome Julia here she's the president and CEO of SIPA and is gracing us here today I know she's on vacation as well but she's coming here today to talk to us as part of the CSB power in the future lecture series she has more than 15 years experience advising and collaborating with utilities manufacturers government agencies etc on renewable energy and energy efficiency strategy and programs she's one of the world's foremost experts on the nexus between utilities and distributed energy resources she has expertise on the business models and solar programs for more than 400 utilities in the US which fascinates me because I'm having trouble with one but as well as utilities in Europe and Asia prior to joining SIPA she worked for ICF international where she supported the implementation of the energy star program she's a graduate of Cornell University and she also walks the talk living in a PV powered energy efficient home in northern Virginia so ladies and gentlemen please welcome Julia how so this year my husband and I both turned 40 and so we decided earlier this year that we were going to go somewhere that we had never been before we've traveled the world throughout her 15 years together but we've never been to Iceland so we decided in May to get on a plane and go to Iceland do something we had never done and we decided we were going to go ice climbing on a glacier and so we spent this day with two guides who took us up onto the glacier and we started you know put on our crampons and our climbing gear and we started going up and down these little ice walls and it was fun we're having a great time we felt like we knew what we were doing it was it's a very repetitive process to just keep sort of keep doing the same thing over and over with your arms and your feet and then sort of the end of the day we're exhausted and then the guides tell us we're going to take you over here and we're going to go down this giant crevasse and you're going to climb out on the other side this is me climbing out but as I was on the top on the other side I froze and I couldn't figure out why and I thought I've been doing this all day I can do this this one's bigger it's deeper there's sort of a hole at the bottom that goes into the middle of earth but I can do this so I climbed down I got across and then I got to the bottom again and I froze again and I really was like literally paralyzed in fear and as I thought about why was I paralyzed in fear I think it was really because it was a long day we were tired and I didn't know what was on the other side of that wall I didn't know whether we're going to get to the other side of the wall and it was going to be an easy walk down and we're going to go back to the bus or I didn't know if there was going to be another crevasse just like this one on the other side that I was going to have to climb again and another one after that another one after that I just didn't know what was on there on the other side of the wall so what does this have to do with what I'm here to talk to you about today well interestingly as we embarked upon this 51st state exercise two years ago I've been traveling the country ever since in the US talking about it and I've been talking the entire time about about the about the bfw the big freaking wall and I now have my own real bfw experience and there is a really a clear parallel in terms of what I've been talking about with the 51st state and the big freaking wall and my own experience and that's as we think about the electric utility industry in the US we've been talking for probably five six years now about the utility of the future but what is the utility of the future there is no clear definition of what that is and so if we think about sort of as utilities in the US who are over here and you think about okay if we make little incremental changes maybe we can get to here but we think we need to be over here either we need to be over here because our regulators or policymakers or our customers are telling us we need to be or we think we need to be the problem is between where you can get with those little incremental changes and to over here to where you need to be there's this big freaking wall in the middle and you don't know what actually is on the other side of that wall so this is really sort of the whole design of the 51st state in terms of how do you first how do you figure out what's on the other side of the wall how do you create a common vision for what obviously there could be multiple visions but how do you define what those might look like and then what are the steps you need to take to get to the wall and then get over the wall under the wall through the wall somehow to get to the other side so I'm going to just play for you a quick video here companies industry and consumers wondering where they fit as we move forward that's why there's the 51st state we start in a new safe space beyond existing paradigms and current market structures it's a platform for innovation building on the best ideas and business models to create multiple road maps for the future this is a structured conversation that includes all stakeholders from the companies that make and install hardware and software to the electricity providers who deliver the power and even the consumers who use it there are multiple solutions for the future and the 51st state champions the premise that everyone can win we've attracted the brightest minds and thought-provoking ideas to the 51st state now it's up to all of us to turn these ideas into realistic functional road maps utilities industry and consumers are all invited to help construct the electricity market of the future it's now up to you for more information visit sepa51.org going back to 2013 in the us in arizona we started to see extremely heated debates between the local utilities and the local and national solar installers really around primarily around break design issues and it it got to the point and honestly continues to be not a constructive conversation in that state people on both sides really have their have had their heels dug in they have their entrenched entrenched interests that they're trying to protect and it's been challenging to to move things forward in a constructive way for anyone in that state in particular so back when those conversations in arizona or I wouldn't even call them conversations when when the that discourse or started in arizona 2013 our organization started talking about what can we do to help we are a neutral unbiased nonprofit organization half of our membership our electric utilities half our technology companies and government agencies and others that have an interest in collaborating with utilities so we said what could we do to help in our organization it's not our nature to go into a specific state and try to solve their problems it's just not what we historically have done so we decided we did not want to get involved specifically in what was happening in arizona but we wanted to do something that would help the conversations in other states be more constructive in nature so we started talking about well okay so arizona is very heated the conversations are ugly what if we went to another state like Mississippi where in 2013 there was essentially zero solar at that point could we pull together all of the stakeholders in Mississippi to have a constructive conversation about what changes could be made in order to optimize distributed energy resources and for us it's about it's not about maximizing it's about optimizing but as our as our team talked about it what we came to realize was it would be extremely difficult to do in Arizona because of the state of the industry but it would still be very hard to do in Mississippi even though there was no solar already in place just because of the hundred years of the electric utility business it would still be very hard to make progress other than very incremental changes so that led us to well what if we just made up a state let's make up a 51st state so that was where the idea of this blank slate 51st state came from and we've designed I'm going to tell you a little bit sort of about the process of the initiative and then we'll talk about some of the takeaways that we've got up until this point and where we're going to go from here but we've designed the initiative in a phased approach the first phase was a year-long process between the fall of 2014 and the fall of 2015 where we went out to the US energy industry and essentially crowd sourced visions for the future so we went out we said if if you had this blank 51st state what would you do with it what would your vision be how would you design things so we gave the industry a few months to develop their visions and put pen to paper and we got about 15 or 16 submissions of what we call cons vision concept papers and they came from a whole variety of perspectives everyone from the trade associations for the municipal utilities and the rural electric co-ops to a former federal regulator to former state regulators to university research centers technology company executives all of these different people thought leaders in the industry with different perspectives all articulated their visions for the future and then we spent six months going around the country convening forums to talk about those variety of visions and really just creating this safe space for people to have what is normally a very contentious and uncomfortable conversation because it was all theoretical we were talking about this theoretical hypothetical 51st state we were not talking about anyone's individual service territory or state so it really created this great environment for people to be comfortable thinking outside the box talking about what could be possible and not getting so focused in on what our current constraints are today so this was the first phase of the initiative and really with the concepts that were submitted we put them into two primary buckets we had a handful that were essentially saying listen today's market there's no one market design in the u.s i'm sure most of you know there are many different designs but people who are saying generally the market designs that we have work we just need to tweak some things in order to be able to optimize der but we don't need this wholesale shift it's just little tweaks to what we've currently got and then we had a whole another set of visions submitted that said no we need a paradigm shift we completely need to have change how we run this industry so it really created this great opportunity to talk about different people's perspectives and and why we had these two very different positions and then so in the fall of 2015 we then launched the second phase and which was also a year-long process so the second phase we went back out to the industry and said we've now spent a year talking about all of these potential visions now let's get more specific and we want people to create road maps for how do we get from where we are today to your vision of the future so similarly it was another crowdsourced effort we had 15 or 16 submissions again of road maps some from people who had submitted visions in the first phase but others were new participants but one of the things that we did that was very critical was creating a framework for the roadmap process because one of the things that we've seen as I as I pointed to in Arizona the conversation has gotten very narrowly focused on rate design and you know our concern is if we're really trying to think long term how this industry is evolving we need to think more holistically about not just rate design but the utility business model how regulation is is handled what IT what IT infrastructure changes are going to be needed what changes need to be made to the retail market to the wholesale market all of these different things need to be taken into consideration holistically and not just narrowly focused in on any one piece of that equation because if you're too focused in on just one piece ultimately you're going to have unintended consequences with those other pieces if you haven't laid them all out again collectively towards your vision so the road mapping process went well similar to the first phase we spent six months following the submission of the road maps going around the country having conversations at various industry forums about the road maps and now we're really to the point of our team spent this summer sort of digesting the past two years of what we've learned what we've heard what we're in the submissions but also what was the dialogue that we've had now with hundreds of thought leaders across the industry in the US and come away with essentially for what we're calling doctrines so we were really looking for the common ground rather than focusing on where people disagree which there's plenty of places people disagree where the places where we can get agreement at a high level that can be served serve as the basis for constructive conversations state by state going forward so for doctrines so the first one is really around market efficiency you know that the primary goal of the market should be to promote efficiencies in the production consumption and investment in energy and related technologies now some of the things that we see or could see happen that support this obviously would be investments in energy efficiency investments in distribution automation a greater focus on distribution system resource planning and that really is becoming a much larger focus in the US just over the past 12 months 12 to 18 months we're now seeing a number of states where either driven by the utility or by policymakers where the expectation is that the distribution utilities need to have a much deeper and sophisticated understanding of the system so whether that's understanding the hosting capacity of every individual feeder in terms of how much distributed energy resources could go on to that feeder sort of without any investments in upgrading the feeder or the system or what what levels would trigger additional investments but really much more sophisticated understanding of the distribution distribution system today we've got about 50% of US households have smart meters but smart so we still have half the country that does not have smart meters but even the half that does we haven't yet fully understood all of the capabilities that advanced metering infrastructure can deliver back to the utility to the entire system and individual customers so we really need to work on continue to work on making sure that we're leveraging those smart meter smart infrastructure assets to deliver value back to both the system level and the end consumer at grid modernization generally is a huge focus in the US right now there's 32 billion dollars in grid modernization investment that's expected by US utilities this year and that is a huge focus of most of the utility or many of the utility filings that are going into commissions this year are requests for investment in grid modernization efforts so the first doctrine really around market efficiency the second is around the the clear definition of roles going forward specifically for utilities but other market players so there is no single agreement on what the utility of the future will look like as we've talked about but we do think that there is agreement amongst stakeholders that that there needs to be an explicit conversation in each state in the United States about what that role will look like the end result may be different in different places but we should be talking about you know in places where the utility in the US is still vertically integrated will it remain vertically integrated or is it going to move to a DSO model a distribution system operator or just a distribution system platform in New York they have a massive proceeding happening called reforming the energy vision rev and that is focused on moving the utilities towards a just a system platform model so essentially they're creating the platform where others can plug and play into the distribution system they also are there's a lot of components to the reforming the energy vision proceeding but but an important piece of it that ties back to this idea of defining the roles is also about defining the business model and the revenue streams for the utility so as part of that they're still working through the details but essentially the utilities in New York will now be able to earn revenue in four different ways one is the traditional cost of service model the second is achievement of alternatives that reduce utility capital spending and return value to customers the third is by the utility creating market facing platforms so creating the platform for those third parties to to engage in the distribution system and then the fourth is moving towards similar to the UK moving towards more outcome based performance measures and so the utility can earn on efficiency investments they can earn on the not quite sure how they're going to do this but the satisfaction of the industry and customers related to interconnection of DER to the system and also they can earn on customer engagement so again I'm not quite sure how they're going to measure this but to really look at customer choice how many customers are engaging in new innovative programs that the utilities are offering so essentially they're really redefining the utility business model and the definition of the role of the utility in New York as one example they are definitely looked at in the United States as on the bleeding edge of all of this transition some states are interest some states and some utilities are interested in following their lead others are maybe not they're looking at them with through a little different lens thinking that they are crazy to be taking on what they're taking but again we'll see how it all plays out over time so the second doctrine was a clear definition of roles the third doctrine is around rate structures and really helping to rethink and this conversation is already happening everywhere in the US everyone is looking to redesign the rate structures but there certainly is not agreement on what the right rate model is in the US the majority of utility rate structures are primarily volumetric at this point and obviously looking to ensure as more and more customers are generating their own power their own electricity ensuring that the rate structures are designed in a way that we can still maintain and upgrade the grid as needed for all customers benefit so a lot of things happening a lot of conversation around our time of use rates the right way to go is it residential demand charges is it fixed charges and most certainly no agreement on that we're seeing some momentum in the US from the UT from utilities going back two years ago most utilities were talking about fixed charges we've seen a little bit of a shift just over the past couple years so more conversation around potentially going to residential demand charges but certainly no no general agreement yet and what direction people are going to go going back to Arizona if you look at Arizona Public Service which is the largest investor on utility in the state they actually it's interesting because they're they're the ones in the middle of this controversy more than anyone um especially around rate design and yet they actually have 120 000 of their customers who for a long time have been on a rate structure that is a combination of time of use and demand so they actually have a significant portion of their customers that before these debates even started happening around clean energy about around rooftop solar particularly or or or storage within residential customers homes um already had customer acceptance of this idea of this three part rate structure that included time of use and a demand charge uh but yet the the solar industry and there's no one solar industry in the US there's many factions that have very different perspectives but the the national solar leasing companies that are focused pretty much exclusively on the solar market uh are very opposed to utilities having residential demand charges um at the same time it's interesting because uh they're locally more of the solar installers are beginning to also offer storage in combination with solar and so that part of the industry is saying no no no we like demand charges this makes storage much more appealing so it's this very interesting dialogue happening uh to try and figure out what is the right rate structure and not just focusing on today's technologies but what are the technologies that are coming so we need to be careful that we're in the US that we're not so focused just on rooftop solar because that's the hot thing right now but we know storage is coming very fast and EVs are coming very fast and other things are coming so when you think about all of those things together what is the optimal rate design in order to make sure that the utility has what it needs but customers are also getting what they need so the rate structure uh conversation is sort of the third piece of that the fourth is really around customer choice um as throughout our two years of conversations on these issues clearly customer education and customer choice has been a loud theme that's come through all the conversations and ensuring that customers have choice both in terms of rate designs so not all customers are the same they don't want the same things but that they have choice in terms of rate designs but also program options and you know part of it is thinking about the changing expectations of customers consumers generally today yeah as we see the younger generations who have their smartphone they expect real-time information on their phone and pull up an app on anything in their life at any point in time and that trans and that they want to be able to make choices about that right from their phone and that translates or will translate into expectations from their electric utilities or their energy provider whoever it might be but not every customer is that way so we need to be thinking about this general changing consumer dynamic but also know that there are always going to be people who don't want to think about their energy at all they just want the basic service they just want the standard option and that needs to be available to them so how do you think how do you begin to segment your customers in a way in which you're creating options across the customer base but for those customers who want choice you're also providing them a lot of choice one thing that's interesting in the US we've talked about customer choice for a long time for decades but historically it's really been around retail choice you know the ability of a customer to be able to choose whether they want their electricity provided by the traditional monopoly utility or by some third party so Texas now has complete retail choice as an example customers can choose who they want to provide their electricity to them so we used to talk about that as customer choice but it we're now shifting I think that's part of the conversation but customers want choice even even if they only have their single monopoly utility option they want choice from that utility and so we've seen with the the JD power surveys in the US that utilities that offer their customers choice have much higher customer satisfaction even if the customers don't actually choose any of those choices they stay with whatever the default is they have much higher satisfaction with their utility if the utilities offering offering choices to them and they know they're available so creating this customer choice is the fourth key piece of all of this so in terms of going forward you know we've been digesting these four doctrines as the wrap-up of phase two we're now headed into the third phase of the 51st state and the third phase so in phase one and two it was all theoretical it was all this fictional 51st state phase three is really where the rubber meets the road and we are actively looking for a real state in the US where the stakeholders want to work through the same process that we've been through with the hypothetical 51st state so we're looking for a state where the governor the energy office the utilities the environmental NGOs the entire community is interested in coming together and having a long-term facilitated conversation first to create a collective vision for the state going forward and then to create a roadmap on how they're going to get there so this is this is the exciting part but our hope would be we've created a framework in which we can begin to replicate this either led by us or led by others begin to replicate this in various states throughout the country to really help create some order out of what for many feels like chaos right now there's so much going on it's hard to keep track of all of the pieces but this really sort of putting it into a framework where it's there's a very clear process that people are working through and it's very stakeholder focused making sure that all of the right stakeholders have a part in the conversation because we believe if everybody works together to define the vision of the future and lay out all of the steps then that wall that big freaking wall becomes much less scary and we can all get there easier together thank you