 My name is Sarah Ladisly, I direct the Energy and National Security Program here at CSIS. Thank you all so very much for being here today. Today is the first in a new series that we're launching called Electricity and Transition. And about a year ago, we were taking a look around the electricity space and saying, geez, there's a lot of things happening, whether it's sort of the amount of natural gas that we've got in this country, sort of making its way into the electricity system, a sort of active and robust sort of decarbonization agenda, ongoing concerns about cybersecurity, increased concerns about resiliency of the infrastructure, a whole host of things that we saw lots and lots of people doing really, really great work on, but from specific vantage points, either from their sort of advocacy or sort of particular interest vantage point, we're just sort of dealing with one subsection of these larger challenges. And so what we decided to do was in the interest of sort of furthering public education and having a robust dialogue about the electricity sector was to launch a speaker series. And so today is sort of the introduction of that series, and we are very, very pleased to have with us a great group of folks, including Melanie Kinderdine, our keynote speaker, to talk about some of those issues. So we'll have a discussion about the Quadrennial Energy Review, and then also then a panel about some of the core tensions within the electricity sector. I don't have the honor of being able to introduce Melanie today, but I do have the privilege to introduce Charlie Curtis. Charlie is a wonderful friend of CSIS, but also someone who's been involved in these issues for a very long time from a wide variety of vantage points, whether it's at the Federal Energy Regulatory Commission, as Deputy Secretary of Energy, and his various appointments on the Hill or at the Nuclear Threat Initiative. Charlie's been doing all of this work for a very long time, and we're very pleased to announce that he is a resident fellow here now at CSIS and helping us to guide this work. So I'd like to invite Charlie up here to introduce Melanie. Thank you. Thank you very much. We begin this project to look at what I call the most critical of our critical infrastructures, and the Department of Energy's Quadrennial Energy Review work. I say work because the QER is actually under the supervision of the President's Science Advisor at the Office of OSTP and the Domestic Policy Advisor in the White House. The challenge of the QER, which relies on the Department of Energy for the Secretariat role, is that it must interact with named 22 agencies, I counter to Melanie, and plus two regulatory commissions and, quote, such other agencies as the President might decide. Happily we have Melanie Kenderdine here who's the Director of the Office of Energy Policy and System Analysis. That's a new office that was created by Secretary Moniz to provide a sharp focus on energy policy and a sharp focus on systems analysis, which is really kind of a unique thing for the Department of Energy to do and a very important and essential thing if the QER has any chance of success. As Sarah indicated, I've been, I countered it up, I've been engaged in the energy swamp for over 40 years now and have a great appreciation for how difficult energy policy is. We always refer to it as a derivative policy that derives from our security, our environmental and our economic overarching goals. Today, energy is providing a increasingly important role in our economy in fueling a rebirth of the industrial sector, talk about the United States as the largest combined oil and gas producer was unheard of during the periods that I was walking the energy policy halls. So things are changing and things are changing in the electric utility industry as well. Fortunately, Melanie brings to this task a wealth of experience. It's rich and deep. Her bio is in the materials that have been distributed to you. I just want to point out that she was the Executive Director or Associate Director at MIT's Energy Initiative that did a series of very well respected studies of the various fuels present and future assessments. She spent seven years, I think, at GRI six and she can, I assure you, spell both Adam and BTU, which is unusual for a policy person at the Department of Energy to tell you the truth and it mirrors her boss, Ernie Moniz, who I can say unqualifiedly is the most qualified Secretary that has ever served in that office and I say that with the greatest respect to Jim Schlesinger, who knew much about security, knew not much about Adams, but he did not have the depth of, because the Department was new and he was coming to it new, the depth of experience that Ernie brings to this job in this challing period. Ernie Melody's greatest role, though, is she is the, capitalized the energy counselor to the Secretary. That puts her in a dominant policy position. Last thing I want to say, she's home alone. She came back from Rome yesterday. She's going to New York right after this speech and so anybody in this room that has any influence on the Senate of the United States, please urge them to move the nominees that have been sitting, I think there's six of them, sitting before nine, sitting before the Senate. And I'm very serious about that unless people who know about the stakes involved here get on the Senate, this won't happen, so please do that. And with that, Melanie, thank you very much. Thank you, Charlie. As Charlie said, I just got back from the G7 Energy Ministerial in Rome late last night and it was a very, I think, fruitful meeting. The communique speaks about the need to act on collective energy security and has a very broad definition of energy security, which is what we were very interested in seeing as we went into the meeting. And I think the Secretary certainly views this as a success and a starting point to launch a larger effort on energy security with the Europeans and with the G7 and Japan and Canada and we're looking forward to the days ahead working with them while we were there and going through the various elements in the communique and in bilaterals with the ministers that we met with. Infrastructure figured very heavily into those conversations and meetings and at one point I said to the Secretary that we needed a QER for Europe and I'll say a little bit about why. I think there are only about three or four people in this room who have heard this talk before and so everyone else will laugh at the same jokes. I haven't had time to write any new ones. We've been flying around. And also, I would say one that Charlie didn't read my education, I had a strong focus in Russian history and because of Ukraine, I for the first time in my professional life have actually gotten to use my education and it's been great. Any rate, I'm going to skip over the slides I took out on the presidential memorandum and how the QER came about. The President put out a memorandum on January 9th directing us to do the federal government to do the QER. The Department of Energy is one of 22 agencies. I thought there were less than that and every time I hear about what we have to do, I feel like I don't have time to give a speech. And there are 22 agencies, but DOE has a couple of special roles in that. One is we are the Executive Secretariat for managing that interagency process, which is very, very substantial. We right now are deeply into that process of forming up teams within DOE and across the government on a range of issues. And so that was in the presidential memorandum. The President instructed us to focus on energy infrastructure and I'll tell you why with a focus on infrastructure in just a second. I would say that the Secretary, then the Director of the MIT Energy Initiative and a member of PCAST was on a study group that recommended a quadrennial energy review. And so he, as he says, was there to throw the baseball and then is now on the other side to catch it as well. And he's excited about actually being able to do something that he recommended in PCAST. And one thing before I go into why focus on infrastructure, I'm going to tell you, as Charlie said, the Energy Policy and Systems Analysis is a new office at DOE. Since I started in May of last year, we got the office up and running and are deeply into the QER. But to tell you a little bit about how that office is organized, because you will understand from that organization how we are looking at the QER, and I would mention one other thing. Executive Secretariat, but it's also providing the analytical support for the QER. So we're doing a lot of the analysis, almost all of the analysis work right now. We will engage other agencies and are doing so right as we speak. But so we're responsible for pulling that analysis together. And so we have two unique functions within the Federal Government, but we are one of many and actually are quite excited about it. Why focus on infrastructure? And a lot of people have asked me why did you start at infrastructure? Why didn't you start in the traditional supply and demand mode, which we tend to do? And why we focused on infrastructure, you can look at it, periods of sustained American economic development have been associated with major infrastructure improvements and build-outs, canals, railroads, dams and highways. Energy infrastructure plays an essential role in American prosperity and creates competitive advantage. The longevity and high costs of energy infrastructure mean that decisions made today will strongly influence our energy mix for much of the 21st century. Our vulnerabilities are increasing. I will go into those in a minute. And these are significant changes and we believe warrants, Federal policy, the analysis will tell us what policies. The QER is a four-year roadmap and this is where I will tell you how we are organized to support this. Year one, we are even narrowing it further from energy infrastructure to TSND infrastructure and that is transmission storage and distribution writ large. It is not only electricity. Electricity will be one of the major work streams, but that is a broad definition. The networks deliver these fuels, electricity, et cetera, to 300 million customers. These infrastructures tend to set supply and demand patterns for decades. And one thing about how we are organized as I go into the infrastructures we are going to be looking at, I have, I am sure you know these people, many of you do, Judy Greenwald is the deputy director for climate efficiency and environment. Carmine DeFilio is the deputy director for energy security. Bill Hederman is the deputy director for infrastructure integration and systems analysis. So a lot of the modeling work is going to be done in Bill's shop. Hugh Chen is doing energy finance. These infrastructures are largely in the hands of the private sector. So finance incentives and budget are really important. As we get further downstream in our analysis, that is going to rise in importance. And Karen Wayland is the deputy director for states, tribal and local governments. And we have a significant amount of outreach, which I will talk about in a minute as well. This slide is one of several in here you cannot read, but this is, you only need to pay attention to the blue bars. As I said, we are going to have a major, major work stream focus on electricity, a major work stream on oil and petroleum products, a major focus on natural gas infrastructure, and then others coal transport, biofuels, solar, wind, nuclear, and CO2, which we are still not certain whether we are going to go deeply into CO2. Those are all, by and large, with the exception of biofuels, electricity related. And so there are some specific issues related to those infrastructures. But most of those are electricity, and we will have an electricity focus. This is how we are organizing our analysis. We have started out looking at limitations of the current systems. And those limitations start with age. These are things that are baked into the existing systems that will be with us right now and for years to come because they are already there. The age, and you can see there over 50 percent of our gas transmission and gathering pipelines were built in the 40s, 50s, and 60s. The pipeline that blew up in New York, blew up the apartment buildings in New York City was over 100 years old. I think you are going to find a lot more stories like that in the older cities in the East and Midwest. Bio-age is a serious problem, replacement of that, the cost of replacement of those, or just maintaining them and managing the degradation of those existing infrastructures is extremely costly. And then finally, the workforce. I didn't anticipate that we were going to be looking at workforce when I started this, but I have heard it everywhere I have gone that workforce is a serious issue. It is a factoid over 60 percent of the workers in electric and gas utility areas are expected to retire in the next decade. And I would note that when we were at MIT, we started an energy minor. The MIT Energy Initiative started an energy minor. We couldn't find an organizational home for it. We didn't want to put it in one department because energy is so cross-cutting and multidisciplinary. And so we ended up having to create a governance structure that we ran out of the MIT Energy Initiative. And it rapidly became one of the largest minors at MIT. Within a couple of years, it was one of the largest minors. And my son is graduating from MIT on June 6th. And he's working on an energy minor, actually wants to be a petroleum engineer. I told him he would live in the worst places on the planet. And if he was doing that, but his major now is material science. His minor is Chinese, and he has visions of producing shale gas in China. And so it's pretty hard from what I hear. But so he took advantage of the energy minor. A lot of students have. It is very, very important that we create the intellectual pipeline and infrastructure that we need for the next generation of technologies. And quite frankly, for oil and gas. The students that I worked with, one of whom was sitting in the audience here today, when they first started coming to me, I was there for six and a half years. And we had a symposium series. They all wanted to work on renewables. My last two years there, they wanted to work on natural gas. So there was a shift in interest. You could see it, it's just a hugely important issue. So those are the limitations of the current system. And we are doing baseline work to look at those limitations for the range of infrastructures that I showed you on the previous slide. We're also looking at some near and long term infrastructure vulnerabilities that are growing. Climate change, you can see them coming up there faster than I thought. Climate change, I'll say a little bit more about this in a minute. I have another slide. You saw a whole lot about that in the last couple of days with a climate change report that was rolled out. And it is, climate change has serious impacts on our energy infrastructures. We need to be mindful of that. Cybersecurity, you can go to the Department of Homeland Security's web page, homepage, and what you see there is 53% of all cyber attacks between October and May of 2013. Those were on energy installations. You look at that pie chart. The next highest percentage is a low single digit number, and all the rest are in single digits. So cyber security and energy installations are a huge target of attack for cyber when I started at DOE, I don't think you were there. Yeah, you were the undersecretary then, yeah. When I started at DOE in 1993, we didn't have email. I think we got email in 1994, and I refused to do Google searches for a long time, and cybersecurity was not even thought of at that time. And now it's a very, very serious and growing problem. Physical threats, I know you all have read about this on the front page of the Wall Street Journal, but we had three highly visible attacks on electric substations in the last year. One of those was extremely sophisticated. It was not drunken young men driving around in a pickup truck shooting things up, it was a very sophisticated attack. And so we are very concerned and working with the industry on physical threats. Interdependencies, the interdependencies of the electric and gas systems is growing, you all are very familiar with that. But in Hurricane Sandy, we saw significant interdependencies between the electric infrastructure and the fueling infrastructure. We had some fuel in the region, but we couldn't get the gas pumps to work. And so there were shortages of gasoline in the region. So there are a lot of interdependencies, I'll say a little bit more about some new ones that I didn't anticipate in 1994 either. I'll say more in a minute. And then supply and demand shifts, the Marcellus and the Bakken are very obvious examples of those supply and demand shifts. But we are seeing incredible congestion in some of our infrastructures because of those supply and demand shifts. Don't go back. These are the climatic events that I referred to a minute ago and the impacts on our energy infrastructures. My office put out a study on this in July. What you're seeing is lower water levels that is affecting the availability of hydropower, wildfires. Jerry Brown had to declare an emergency in San Francisco because wildfires were threatening the transmission lines 150 miles away. So there are serious concerns with that. Flooding is having impacts on inland power plants. Water restrictions are limiting shale gas and power production. We've seen a little bit of that recently. Lower river levels are affecting barge traffic, which is a growing infrastructure that we need to deliver oil. I'll say more about that in a minute. Intense storms, Hurricane Sandy was certainly that, the polar vortex. I spent several weeks of my life this year working on the propane crisis in the upper Midwest. And then cooling water intake or discharges too hot. Those are just a few of the examples. We also are going to have a significant regional focus in the quadranial energy review. This is hard to read too, but these are electric generation capacity under construction in 2012. And the bars are regions of the country. The big bar there on the far left is California. And the blue, it almost looks purple here. But the blue at the bottom is natural gas. And what you see across the regions of the country is significant natural gas capacity additions. The green on that California bar is solar. So a lot of solar capacity additions. The little green bar right next to that, that's the Southwest. That's the resource that they have. So you're seeing a lot of solar added in those areas. The red bars in the middle and to the right, that is nuclear. And those capacity additions are exclusively in the southeast. So there is a lot of infrastructure associated with these capacity additions. It just demonstrates the enormous regional differences that we have. And the secretary is very, very firm on this and interested in this. And one reason why he has focused us on energy infrastructure as opposed to a broader comprehensive energy plan is that he would like these to be actionable recommendations. The narrower the focus, the more actionable they will be. And he is very, very cognizant of the regional differences and thinks that if we take those into account, we will have a much better product in the end. This is another one that's impossible to read, but it's a very illustrative of what we are seeing. I mentioned the congestion a minute ago. The far left, upper left is, this is from the EIS for the Keystone Pipeline from the State Department. The upper left is in 2010. And those red dots are the oil onloading facilities onto trains. There were six of them. The map in the far lower right is in 2013. It is three years later. And what you see are over 50 red dots. So, and it looks like when you look at that map, it looks like the workaround of the Keystone Pipeline. I mean, that's fundamentally what it is, moving Bakken oil down to the Gulf of Mexico. And you also, you can't see them, but there are little green triangles on there that are barges that are now moving oil down to the Gulf of Mexico as well. And so you're seeing significant congestion in the Gulf of Mexico because of the change in where we are producing our oil, but not a change in where we are refining our oil or where we are shipping oil products out of the country. And so we, I'm sure most of you know that we announced, we did a test sale of SPR oil about six weeks ago. We did it for precisely this reason, reason is because we need to be able to determine whether with all of this congestion, the SPR can still work as it is envisioned to work. And I don't know the results of that. I know all of the oil will be moved out and paid for by June 20th. And so, and we will do an analysis afterwards, but there is enormous congestion in that area. And one of the pipelines feeding out of the SPR has reversed flows, one of the major pipelines. So it's a significant change. And this is one of the many things that we are looking at. I did testify last week before Senate Energy on the propane crisis and propane is competing for rail with ethanol, grain, fertilizer, oil, et cetera, et cetera. So the train, the rail system is being asked to do a lot of things and there are a lot of competing commodities that are going on to those cars and we're gonna be looking at that. This is another astounding slide that illustrates again that kind of congestion. In 2005, there were 6,100 rail cars transporting oil and in 2013, there were 425,000. And that's, I can guarantee you that between 2014 and now it's gone up even higher. It's just a something, again, I didn't anticipate looking at workforce. I didn't anticipate looking at rail as an infrastructure that we needed to care about and it's a very serious concern. This is our analytical approach. I mentioned the limitations and the vulnerabilities. We have some national energy goals, their economic competitiveness, environmental responsibility and energy security. Those are pretty standard there and a lot of speeches that I've given for many, many years. I took this slide up. I was meeting in Ottawa with the Canadian government and they asked me if they could use this because their goals were exactly the same. But there's a good reason why we always use them. They're important. But we have taken it a little bit beyond that and we are looking at desirable characteristics. We're looking at desirable characteristics for our energy infrastructures in 2030. We picked 2030 because, and this is a true story, Adam Saminsky was doing a speech one day. I went into his office and he had his paper slides all put out on the table in his version of slide sorter. And there were two slides. They were both of China. China's CO2 emissions drop off and starting in 2030 and China's iron production drops off dramatically in 2030. And I asked him what was that about? And he said because they have stopped, they've fundamentally built out their infrastructures and they will be transitioning to a service economy in 2030. So I picked the date 2030 as kind of the timeframe. You wanna go head to head with the Chinese or anyone competing in a global service economy who has first or second generation energy infrastructures when ours is third and fourth and fifth. You wanna go head to head and compete with them. You need to think about modernizing or transforming your infrastructures over that period of time. So these are our desirable characteristics. They would be applied to some infrastructures, not all, and in varying degrees of importance for the various infrastructures that we're looking at. But you want a minimal environmental footprint. You want robustness and within robustness and it's defined there, we have reliability and resiliency as two different characteristics. We had a technical workshop last week on developing resiliency metrics. It is the buzzword of the day is resiliency. We couldn't find good definitions and good metrics for it. We are working on putting those together. And then we want flexibility in our infrastructures and there are sub characteristics of that of extensibility, interoperability and optionality. I don't have my glasses on. The last one's hard to read and from that slide and the next one is scalability and the next one affordability. You can see why we call them our illities. They are almost all illities and we did have environmental responsibility and somebody took that out. But these are by and large engineering terms from not surprisingly an MIT engineering paper. They were readily defined and these are big infrastructure engineering challenges and they seemed appropriate for what we're looking for. So we are in the process of developing metrics for the various infrastructures we were looking at based on these characteristics. The analytical approach, I don't want to go into this. We have policy goals and characteristics that I've described for you. We've gone through and we've developed a whole set series of baselines. We've done physical baselines for electricity, gas and oil and petroleum products. We have also done baselines of a sort for federal and state law and regulation as they apply to those three different sets of infrastructure because they're all very different and we've done a financial baseline where we are looking at the range of tools that we have to incentivize the private sector if the analysis suggests that we need that when we get done with it. So we are deep into the QER baseline systems and scenario analyses. These are the candidate scenarios. I'll just go down to the third green bullet. We're looking at a range of technology scenarios. One obviously will be aggressive carbon. Another is greater direct consumer control of energy and that's gonna have obviously a distributed generation focus. Low cost deployment of renewable energy technologies. We're gonna pick a scenario where you do indeed have very low cost renewables and see what that does to the system. Low new nuclear, low cost for new nuclear and what does it mean if we lose a significant load, if we retire significant plants, what does that mean for greenhouse gas emissions? For example, a low cost natural gas which I think we can probably say is a fair thing for the next 15 years or so according to EIA and then a widespread deployment of CCS. So those are our kind of scenario analysis once we do the baseline analysis which we are deeply into now and then we will do systems analysis and then this scenario analysis, so three products. I mentioned interdependencies before. We are gonna be looking at a range of interdependencies, natural gas and electricity. Electricity and gasoline, oil and natural gas. You're seeing a lot of that changes in the propane market, for example. Used to be mostly oil, now it's mostly natural gas. 70% I believe, water and thermal generation, water and energy transportation. Something like barge traffic would definitely be affected by water and energy and communication systems and then as I mentioned, rail transport there below. A little focus on electricity. These are challenges and opportunities for electricity infrastructures and how we're gonna be looking at electricity. This is coming out of our electricity baseline, looking at the role of transmission and the wholesale market and meeting greenhouse gas objectives, changing paradigms and metrics for planning for resilience. That's the technical workshop we had last week, physical and cyber threats. The cyber threats are certainly more serious for electricity than gas or oil. That's not to minimize the oil and gas concerns there but it's certainly the biggest concern is electricity. Utility, the utility business model, we're seeing a lot of challenges to that business model now. I'm sure you all are familiar with that and then the transact of customer role and what that means for interoperability. This is just a little on that customer role. As you all know, customers are increasingly active participants in power system operation because of distributed generation. We've been having a lot of meetings at the department on how to deal with rooftop solar, what that means for baseload power and for the utility business model, quite frankly, potential and impediments for responsive load and the impact of transact of customer role on the utility business model. This is our outreach and schedule. We're already behind. Phase one, the preliminary work, we were on schedule for that. We have two different phases of analysis. As I mentioned, the baseline analysis that we're working on now and starting to get into the systems analysis and then the second six month period and there is overlap. It's not all the same teams will be doing policy analysis engagement. And then finally, and I think that this is the least realistic, the least realistic, getting something through interagency in two months. And I can hear, it's just due on January 31st, 2015. And December 1st, I will have this off my plate and into a very smooth, coordinated, right? A non hysterical process. But we will make our deadline. While I say that, not so confidently, but it's a lot of work to do, as you can tell. These are agency, the QER stakeholders in the middle is domestic policy council and OSTP. They are chairing the task force within DOE. Our stakeholders are the national labs and CAB and PCAST. Some PCAST members are also members of the Secretary of Energy's advisory board. And so they're giving some overlap and good advice to both organizations and our energy and science programs. The external stakeholders, this is an old slide. The usual suspects, but I know it's an old slide because I do need to add Canada and Mexico. We are going to look at North American infrastructures. We have to three out of eight of our reliability regions depend on substantial imports and exports of electricity from Canada, for example. That's why I was in Ottawa a couple of weeks ago and they are very, very interested in this and didn't ask me about the Keystone Pipeline. It was the first, they knew they couldn't get an answer, but it's the, one of the few, don't ask me about that today, I don't have an answer. But the, if you don't, it will be the first public talk that I've given where I haven't been asked about it. And so that's how we're, that's our universe right now, which is pretty broad and we're getting input, getting, going out and seeking their advice and getting inputs from them. We spent 45 minutes in my office one day trying to figure out something having to do with automobiles and having no idea what we were talking about. And I finally said, you know, I bet the Department of Transportation has that information. So we will be relying on the other agencies for a lot of work and a lot of work that they've already done. And as I said, we're going through that outreach right now. I always have to have two illegible slides. This one you can't read either, but these are the public planned events that we are having across the country. We had our first stakeholder meeting in Washington. That meeting focused on the vulnerabilities of our infrastructures. I think it was very well attended. We had it in the capital to building. We then had our first two of 15 regional outreach meetings. Secretary Moniz went to both. Those were in New England. Obviously New England is a very, very infrastructure constrained region. They've had a lot of problems for that. We went to Hartford and Providence, Rhode Island. And I'll just read them for you because you can't read them. Infrastructure constraints, we're gonna do that in North Dakota. That'll focus on the Bakken that I talked about a minute ago. Petroleum products and transmission and distribution. That is scheduled for May 27th. Electricity West will be doing that in Portland, Oregon. Rail, barge and truck transportation in Chicago, Illinois. Electricity East will probably go to New Jersey. We haven't scheduled dates for most of the remainder. Finance and incentives and market incentives in New York. Natural gas, T&D, Pittsburgh, PA for obvious reasons. State, local and tribal issues in New Mexico. Gas, electricity, interdependence. Probably do that in Colorado. They've done a lot of work on that in Colorado. There's some very interesting studies about what happened with their renewable portfolio standard in Colorado, et cetera, et cetera. And then infrastructure siting in Wyoming, rural electricity issues in Iowa, business and economic development. We'll look at jobs that too in Atlanta and then wrap up again in Washington. And just staffing these is a major, major job and that's what Karen Moeyland is doing. Anyway, as Charlie said, when he was at the Department of Energy and we were there together for a long time together and I was there for most of the eight years of the Clinton administration have come back. The secretary Moniz calls us recidivists and we have come back to the Department of Energy and the energy space is nothing like it was when I left the government before. And the oil and gas fortunes of the United States have changed very, very dramatically. It has enormous implications for our competitiveness, for our trade deficit, for the climate and for energy infrastructures. And things are changing as we speak. This will be a tough one to write because things are changing constantly in that energy space, but we're looking forward to it and I look forward to questions. Thank you. The day moderator usually starts out by asking a couple of questions but I don't think that's necessary with this audience so I will pass that opportunity. We have microphones around so if you stand to have a question please identify yourself and your affiliation, wait for the microphone please and try to put your comments in the form of a question. So it's novel, I know, but it's important. Melody is actually, this is very close to her one year anniversary of her return to the Department of Energy. The secretaries too. And the secretaries and it's reminiscent of Samuel Johnson's admonition that it's on second marriages that it was a triumph of hope over experience. I'm gonna have to use that. Questions? Sorry, in the middle please. Thank you Melody. I'm John Shaget, Strategic Petroleum Consulting. Some of us are getting concerned about the amount of natural gas that's being flared in the Bakken and the Eagleford. Will the QER address moving that gas? Actually yes, we will be looking at methane emissions and that will be a focus. We have a corresponding, my office doesn't just do the QER, we have a lot of other responsibilities and one of them has been the methane strategy development for as part of the climate action plan that the president put out last June. And so we will be folding some of that into the QER and we'll focus on flaring in the Bakken. I don't know. The, I think that Administrator McCarthy while I was in Rome said that we wouldn't be, they weren't planning on regulatory action on methane emissions. We are DOE right now in the climate action plan is focused on mid and downstream emissions. EPA is focused on upstream emissions. So in that plan that is their focus but we will certainly address it and figure out what precisely can be done. We also, John, we're, this is, we're doing an update of the Quadrennial Technology Review. That's an internal DOE document. I'm sure that they will be looking at technologies for methane emissions reductions as well. Yes, good afternoon, Jose Colucci. Excellent presentation. One month ago I went to a presentation from Germany where they mentioned where they're going for the year, I think 2050, their whole portfolio of energy. And typically they start with the pie chart of, well, this is where we're gonna go and this is the infrastructure that we need. Do you have that pie chart? I mean, like, I know that you were mentioning all the infrastructure work that has to be done but where are we going? I mean, where is the expectations of what is gonna be the mix for that 2030? We, in our scenario analysis, we're looking at, we're using EIA's AO 2014 as their reference case as a base. So we will have those kinds of forecasts that will inform where we're going. And to some degree, that's not to say that we wouldn't, we're certainly modeling policy changes and different scenarios, which are fundamentally the one slide I showed you with the range of scenarios we're gonna be looking at. Those are really just variations in the cost of technologies. But we will be using the AO 2014 as our baseline. John Holmes, National Research Council. So you talked about year one and infrastructure seems to hit a lot of the areas. Where do you go for year two, three and four? Yeah, I realized I forgot to go through my entire slide because I couldn't really, I don't have my glasses on, I couldn't really read it very well. And so I just skipped over that part. The year two, this is White House directed. So obviously the White House will determine where we go in year two. We have talked to them probably next year, we will do a supply and end use infrastructures. Keeping the focus on infrastructures but doing kind of the typical, where you would tend to start in most analyses like this. So I think that that will likely be where we go. Year three, and this is just the world according to me, I've had no discussions with the secretary or the White House on this. I would like to look at energy supply chains. And which I think is a very different way to look at energy. And I think it's an important, would most likely bring some important insights to how we think about energy. What made me start thinking about, excuse me, supply chains was the Metcalf incident and where we don't have, the transformers are all customized and fundamentally take 18 months to build a custom transformer. And I think that that's something that we really, really need to focus some of our attention on. Another big issue on supply chains is critical materials. Very important for the future of renewable technologies, but 97% of those are produced in China. And so just a couple of examples is why I think if we could pick some really serious supply chain issues to look at, I think would provide some insights. And then in year four, we will surely do a wrap up. I didn't mention either that we have changed the definition of quadrennial. Typically when you, when you, the quadrennial defense review is once every four years, we're doing installments and we'll do the wrap up in year four. And, but that's so that we can take two reasons. The quadrennial defense review is an internally focused strategic document that informs the Department of Defense's budget. The Department of Energy doesn't own the energy sector by and large. We have the power marketing administrations, nor do we control the regulations or the laws. And so, or, and our budget doesn't have a whole lot to do with how we might want to change our infrastructures and modernize our infrastructures. So, so our quadrennial review is very, very different than what you see at the Defense Department. And we want to make it actionable and the energy space is huge, which is why we're taking the smaller chunks. So not necessarily, but, but I mean, we can look at supply and demand. If we look at it next year and the White House decides to go in that direction, that's fundamentally an infrastructure question as well. So. Mark Brifogel, I'm with on-logged distributed generation. I developed distributed generation equipment. Kind of a broad question. One hears about peak oil, peak gold, what not. One hears about peak finance as well. Growth of the economy is very arguable. I think we were less than 1%, was it 1-tenth of 1%? I think manufacturing still is going overseas. If I'm incorrect, electric demand is flat or down. You're familiar with the duck curve in California? No. Do you see? The peak demand is maybe at five in the afternoon and all the renewables are available in the early afternoon. And you need to keep a lot of old thermal infrastructure if you want to keep it going. But having looked at all of this, I don't see a big demand for electricity growing, but I see huge manufacturing costs and I see the banks either not being willing or enabled just the shortage of funds to build out the infrastructure. And I don't see a clear economic case. I don't see one-year paybacks. I see 10-year paybacks. So comment on that, please. Who's gonna pay for it? Well, that, as I said, we have a deputy director who's focused on finance incentives and budget. And this is in the hands of the private sector and ultimately those will largely be private sector decisions. But I would take exception to a couple of things you made in your statement. Manufacturing is growing in the United States. $150 billion has moved back into the United States and from manufacturing and that is by and large because of inexpensive natural gas. And so that's what it is attributed to. And flat electricity demand doesn't mean we can't grow. It means that we are more, it could very well mean that our economy is more productive and more efficient. So I'm not sure that all of the things you illustrated, used to illustrate some dire things are necessarily the case. But one of the things that the QER will be looking at is how do you, new utility business models and how to incentivize the build out and modernization of infrastructure based on the analysis and data that we do and data that we have. And we will go where the analysis takes us. So. The only thing I noticed in the plan that you laid out was that it didn't provide for hospital stays. And so. I need that. I think you should think about that. What kind of hospital, Charlie? Let us all thank Melanie. She has a tremendous job ahead of me. Okay, so one of the reasons why we had sort of invited Melanie to come in and talk about the QER process was that when we were starting to think about the project we were undertaking, we thought, gee, we're taking on a lot of topics and it's pretty overwhelming. Let's bring in someone who's actually being way more ambitious than us and make ourselves look reasonable. It certainly is a huge amount of undertaking that the Department of Energy is taking on in pursuing the quadrennial energy review process. But one of the core questions that we have about sort of not only that process but the challenges facing the sector in general is it is, as we all sort of, everyone working in the energy sector knows it's all very well and good to sort of study these issues and find the right academic questions or solutions, it is quite another thing to actually enact them, right? And so energy policy devoid of viewpoints or core tensions is no energy policy that I've ever seen. And so one of the things that we wanted to do to sort of frame the way that we're trying to approach the rest of the series and what we're looking at as far as electricity and transition or the question about an electricity sector and whether it is, in fact, in a transition that is new and or different from where it has been before is what are some of the varying perspectives in the people who invest in, consume or produce or are somehow responsible for the electricity sector that we have today. And so to frame that discussion, we went out and talked to a whole host of people. And we picked four of the most interesting people that we had talked to along the lines of what we were exploring to talk specifically about what those core tensions are in the decision-making process that we've got to go through about some of these issues, these illities, these transitions that Melanie so expertly sort of put forward just a minute ago. And so today, we're very happy to have each of them here. We've got Greg Aliff, who's the vice chairman and senior partner for energy resources at Deloitte. And we've asked Greg to sort of take on the consumer perspective and the core tension of managing the issues of affordability and low cost but also increasing consumer choice among sort of a broad range of consumers. We also have next to him, Kristi Tezak, who's a managing director at Clearview Energy Partners. And we asked Kristi to talk sort of the challenge, to talk about the challenges in the utility industry of utility industry participants and particularly the competing priorities of selling electricity and reducing consumption and what that sort of business model is and means. Next, we've got Miles Keough, who's the director of grants and research at the National Association of the Regulatory Utility Commissioners. And we asked Miles to talk about the regulator perspective in particular, how to deal with some of the competing priorities that regulators are dealing with in sort of managing some of these shifts. And then finally, John Larson, who's a senior analyst at the radium group and actually was just over the Department of Energy not too long ago to talk a little bit about the sort of competing priorities of the decarbonization, low carbon energy agenda with reliability and affordability, right? These are not in any way, shape or form the definitive or conclusive perspectives on these issues. But it's certainly what we hope is a way of sort of getting to some questions about how you manage the interests that are driving those competing tensions and how we might sort of frame some of our thinking around those issues. So I think maybe we'll could start with Greg and then just sort of come down the line this way. Each one will sort of deliver about 10 minutes of comments and then we'll have a little period of discussion. So Greg, did you want to start? Thank you, Sarah. Good afternoon, everyone. I'm just going to share a few perspectives with you on the, as Sarah said, on the issue of affordability of electricity to customers and what may be that kind of the competing goal of customer choice. We'll focus on maybe four areas. First of all, provide a few observations about what I call the changing face of the electricity customer. And when I say customer, I'm thinking both in terms of individual consumers and also businesses consuming electricity. Some of the implications that this, I'll call it this changing face has for electricity prices. I'll chat about that for a moment. And then some of the longer term implications that may be out there as a result of this. So let me start with the changing face of the customer. I've had good privilege over the past four years to be involved in a study that we have conducted. We call it the resources study. We've done it four years in a row and it's allowed us to basically track the attitudes and behaviors of individual consumers and businesses toward electricity, toward choice, et cetera. And I'll just kind of highlight for you a couple things that came out of the most recent study that actually will not be published until this June when the report will come out. Well, let me first turn to businesses. What we found over the years is that the businesses are increasingly paying more and more attention to their use of all natural resources, not just electricity, but electricity, natural gas, their transport fleets, et cetera. And they are consistently becoming more sophisticated and more mature in the way they're going about managing energy in their organizations. We're seeing them go much from what I would call a very siloed approach where different pieces of organization would be doing what they thought was the most appropriate thing to do around managing energy consumption to one that's much more holistic, much more driven by overall corporate strategy, et cetera. What's interesting is that along with this maturity is the goals that businesses tend to seem to have. Their goals are quite aggressive. And on average, this is what we found, is that their goals are to reduce their consumption somewhere in the range of the low 20 percentage over approximately a three and a half year period. And if you step back and think about that, if they just achieve 50% of that goal, that's still a substantial reduction in electricity consumption in their business. But we've seen this last year and this most recent year that we've done the study of two very interesting things. One of those is that the length of time that they are expecting to achieve their goals are being lengthened. They're actually going a little bit longer. The reason for that is because the things that they're doing are more complex and involve spending more money than they have previously. The second thing that we noticed is that while the level of on-site generation was hovering right around 23, 24% among businesses, that now they're reporting that they're up to 40, of a 40% of businesses report they have some form of on-site generation for a portion of their electricity for a variety of reasons. Interestingly, the industry sector that leads in that regard is the telecommunications and technology sector. So let me switch quickly to consumers. Well, the first year we did the study we were in the right in the midst of the throes of the recession. And what we saw were what I would call a very panicked consumer. Now we're looking to save money and just about anything they could do and that included any ways they could reduce their electricity consumption and reduce their electricity bill. As we moved out of the recession, we wanted to see how customers consumer's views changed. What's been very interesting is we have labeled the consumer the resourceful consumer because it is overwhelming that consumers have no intention of going back and actually to the consumption levels that they previously had. And in fact, they are looking to continue to reduce. Now they've done the easy things which are turning off lights, turning off electronics when they're not being used, turning the thermostat up down and up to reduce the amount of electricity they're using. What we saw in this most recent study is interesting. Consumers are in general feeling better about their economic situation overall than they have previously. And one of the things that as a result of that is that they're actually starting to consider other actions that they can take beyond the simple things. They're starting to look at things such as insulation, windows, and other things as being something that they plan to do, if they haven't already done it, that they plan to do in the future as a ways to continue to be more energy efficient. So what is all this? That's what we're seeing across the U.S. And so customers want choice. They want the opportunity to be more efficient. They want the opportunity for solar on their roofs. That's moved forward quite a bit. But the thing you have to step back and focus on is the implications of these changes that are taking place because all said and done, they don't come without a level of cost with customer choice. And I know we've all seen lots of numbers out there and the numbers I'm gonna give you here just to put things, I think, in the magnitude of perspective. They just came out from the EIA in April as to the total system cost on $1 per megawatt hour of the various sources. On the low end is advanced combined cycle natural gas today at $64.40. And on the high end is solar PV at $130. And we all know that that difference is shrinking. We all know that we're getting better at solar than we've been and you've got conventional wind in here at $80.30. So we know that it's shrinking, the renewables, the cost differential. But be that as it may, that differential is still there today and we still are dealing with it when we look at customer choice. And the fact that electricity prices and all probability associated with this will have to go up. I also just wanna briefly point out and maybe some of the broader implications that I think of this and it's interesting comes back to, I was very interested to hear Melanie's remarks and the focus on infrastructure. And that is with what we are seeing with customers and customers choice and so forth. As electricity prices rise, the customers have the opportunity to do additional things to be even more efficient in how they use electricity over time. Things that weren't economic before such as insulation and windows become more economic as the cost of electricity goes up to consumers, for example. And so what we see over time and we're starting to see it in a number of states with the issues that are out there today around net metering is this inconsistency between the cost associated with the use of the grid among customers that are fully on the grid and customers that are not fully on the grid. And I have no doubt that this issue of net metering is one that'll be addressed over time. But I think it's an indication as we move more to things such as distributed generation and so forth. It starts to raise serious questions about the existing central power plant or transmission line infrastructure that we have in the United States. Forecasts are that on that traditional infrastructure largely associated with reliability, strengthening of the system, et cetera, that over the next two to four years we'll be investing approximately $90 billion a year in the system. And that is largely for reliability purposes. So you can see we're putting tremendous amount of dollars into a system that is absolutely necessary to do for the reasons that Melanie cited for reliability, resilience, et cetera. And yet we may be putting dollars into a system that's going to be used less and less over time if we indeed move more to a decentralized, more customer choice environment. So those are my comments to share, Sarah. Thanks, Greg. Maybe if we could move on to Christie and talk a little bit about those same issues but from a utility industry player's perspective. There you go, the baton has been passed. Thank you, Michelle, for including me here. One of the things that I'd like to talk through a little bit and for those of you who I know well in this room, forgive me, I know you're here and this discussion is intended to be for some of us who don't live and breathe all of this all the time. And I wanted to sort of lay out some of the components of electricity delivery that I think get lost in the conversation because it's interesting to me that utilities can be vilified to the extent they are in what Charlie refers to as stakeholder positions that never seemed to change or evolve. And we all get sort of entrenched in the rhetoric here in policy circles in Washington. And I think a little discussion of where we are and how we got here is important. Power delivery has three components. We generate it, we transmit it over high voltage power lines and we distribute it through our neighborhoods. And it shows up, God willing, in our houses most days. When you look at what it costs to provide power to a customer, about 70% of it is in generation. And these are averages, you may argue with me about specific distributions, okay, but I'm trying to make a point here. 10% accounts for the transmission system and 20% accounts for those wires that invariably seem to take a hiatus whenever the weather is bad. And I wanted to briefly discuss or provide from my perspective an answer to the question posed earlier as to who pays for this system? We all do. You do, I do. Everybody who consumes power in this room even if they're in a non-meter department pays for it. We pay for it. So the question is, what do we want and what will we eventually agree on? Generation is provided in a variety of ways either through long-lived assets at the utility zone or through power purchase agreements from others or through various mechanisms including increasingly storage or distributed providers. But each kilowatt in many, many service territories still is paid for by the customer on an average system kilowatt basis. In many cases, this was easy and efficient, but it results in the kilowatt that is consumed when it's 90 degrees in Washington being worth the same amount as the kilowatt that is produced in September overnight when half of the generation system may be off for maintenance in the shoulder period because the weather is beautiful for those five days in Washington that we like to call fall. But one of the things and you know, I think that the other speakers will focus a bit more on the characteristics of generation, but policymakers and regulators and customers all need to keep in mind that we are as a resource intelligent consumer realizing that not all kilowatts are created equal, but our bills still treat them often as if they are. Transmission investment carries power between utilities and across distances. How did we get here? It wasn't always like that. Charlie Curtis knows that probably better than anybody, but we realized that not everybody had to build rainy day generation to keep the lights on. We could borrow it from each other leading to high voltage transmission line between the utilities so that we could lean on our neighbors because that was a cheaper alternative than building up to 115% of peak load for every individual system. And our system grew organically, system by system, city by city. We do not have a national grid. We have an interconnected grid that works increasingly as a large integrated machine or actually three of them, one in the East, one in the West and one in the sovereign nation of Texas. But it has allowed us to contemplate doing things that we didn't think of such as moving wind from the Midwest all the way as far as Pittsburgh or to contemplate bringing hydro down into New England. And this is not what we built it for but is increasingly how we want to use it. The distribution side takes it to the system that most of us see most. The wires in our neighborhoods, those same wires and substations most vulnerable to bad weather and those that result in those horrible bucket trucks that defoliate our neighborhoods. But one thing that I think that we can lose sight of or fail to appreciate or always understand is that the electric system we pay for today was built yesterday. In fact, often many yesterdays ago. While some of the assets are older than 40 years and are no longer carried in active rate base, not all of them are. And the rates that the utilities collect today are to cover the assets they built yesterday. So changes in assumed consumption over the 40 year life of an asset make a big difference. Monopoly service is covered by what we refer to as a regulatory compact. Although much of the electricity industry has been restructured. Some use the word deregulated but I would argue that. The utility that brings the power to your door is still a regulated franchise entity. There's assumptions that go into giving that franchise to one company. And that is there are obligations on both sides. That means that there is a guaranteed rate of return for the investor that makes the investments to bring the service to you. And there are responsibilities of that provider to the customers and to the regulators. But it's important to remember it goes on both ways. Utilities have an incentive to do better than the rate case estimated. They risk under recovery if they don't. And if you want a good way to explain to your friends what goes on in the electricity business, the best sort of layman's explanation I found was John Friedman's Hot Flat and Crowded who explains how price times quantity is basically how utilities recover their money. So if you can sell more power, if your load grows, if your economy booms, you will make more money as a utility. If it contracts, if you don't take care of your system you will make less. Difficult weather is often followed by quarterly earnings that have great upside. But energy efficiency is a difficult thing to manage. If you're looking at new investments it's an incredible opportunity. Regulators should challenge a utility. Are you operating as efficiently as you could? Is this the best investment? These cases should be tested. But if you're 20 years into a 40 year recovery as a utility operator I wouldn't want to hear that you'd like to see my revenue drop 20%. That doesn't reward me for cutting costs. That doesn't incentivize me to do a better job. It violates that regulatory compact that we've asked for. And I think that Greg's more resource aware consumer also poses a conundrum for utilities. If we thought 10 years ago we were gonna grow it one way and now we're growing it another that challenges the business model in a way that isn't malicious on the part of the utility or malevolent on the part of customers but it is a reflection of the world changing. When a utility can't recover consistent with the promises made by the regulators customers pay for that too. Although those first dollars may disappear out of the utilities profit lines. As that profitability shrinks that cost of financing goes up and that finds its way into our bills. And that's something that we need to be aware of when we are asking utilities to walk away from long-lived investments before they're fully recovered. Net metering is a huge conundrum and I'll leave time to talk more about this. But I would argue it doesn't compensate solar powered generation fairly on peak for what it's really providing in the market. But I would also say that I do not see how net metering programs that we have in place today are in any way sustainable over the long term. They do not respect as Greg alluded to the fact that we have a grid to maintain that last time I checked folks on distributed generation who do not have complete onsite storage need the grid the other 20 hours a day their system doesn't produce. And net zero consumption is not off grid. And this is something that policymakers I think are gonna increasingly get frustrated with because as these programs grow and solar drops in price the fact that we have a dumb tariff laying along operating alongside of what we hoped would be a much smaller policy will be a very difficult bill to come do. Can the industry change? Sure it can. When I was in college I had a long distance boyfriend. I used to have a $300 phone bill every month. Some of you weren't born then. But we used to pay for long distance. We used to call after nine o'clock at night because it was cheaper. And then we got cell phones and they were so expensive by the minute now we don't even charge for cell phone minutes now we're charged for data. Yes industries can change even industries that have significant upfront infrastructure commitments. But electricity I'd argue in some ways is bigger and more costly than telecom. But there is a possibility that we can move forward. There's also other policy tensions and this is what I'll conclude with. We talk about the opportunities for wind. We talk about the carbon neutrality of nuclear. And those things that policy makers want to maximize are very inconsistent with a growing discussion around distributed generation. You need big transmission lines to bring Midwest wind into population centers. Well who wants to pay for them if they're sitting on a solar grid. These are things that need to be worked out. We need to look at all of our high minded goals and see how to line them up in a way that's most effective. And we ideally should do it before the next round of infrastructure deployment. Thanks Christy. Maybe we'll move on to Miles who's gotten the regulator perspective. Why don't you use mine? That's better. We'll fight over it later. Yeah honestly giving me the microphone you guys are like why didn't they let him just keep using the one that wasn't turned on. Friends thanks for giving me a few minutes of your time. I'm Miles Keough with Nayrug. And I'm gonna make a little bit of a case for befriending your state regulators. Not just because they signed my paychecks although that probably affects my case somewhat. The electric grid, if you were to try and draw a map of it, you'd actually need to draw a series of maps because it's not one thing. So it looks different depending on what angle you're looking at it from. If you're a kilowatt, if you're an electron that's been generated and put out on the grid, the map looks one way. The map of the United States and actually Canada, a little piece of Mexico. It has three big parts, right? The eastern interconnection, kilowatts flow fairly, relatively freely. The western interconnection and ERCOT, right? So there's three kind of lines that split up the geography there. If you're a dollar, the map looks different. There are different kinds of markets in which if you're a dollar, you can move around. There's RTOs, regional transmission organizations, independent system operators. There are non-RTO regions. The wholesale markets, they have a different set of regionally oriented boundaries to them. If you're a decision maker, there are only two sets of lines that matter, right? The map of the United States, the electrical map of the United States in that case has a federal layer which looks like the map of the United States and it has a state layer which looks like the states in the United States, right? And so you're either a federal regulator or you're a state regulator. And so, jurisdictionally, that is a third map. How many of you guys know what a state public utility commission is? Let me see it, show of hands. How many of you guys would be able to name one of your state public utility commissioners? Raise your hand. You are nerds and I love you for it, thank you. How many of you know how much you pay per kilowatt hour for your electric rate? Nerds, my nerds, thank you for owning up to that. We'll stick together when the bullies show up. With those three maps and with all the changes that folks have been talking about that are coming, we're all gonna have solar panels, we're all gonna decarbonize, we're gonna have a nuclear renaissance, we're gonna do massive investment in gas plants, we're gonna do all these things, it's gonna cost billions or even trillions of dollars. Wouldn't it be great to have a national energy policy with just one simple big plan to just cover everything, right? We got all these changes, but we'll just come up with a national energy plan. We've been waiting for the cavalry to come over the hill with a national energy plan for decades. My assertion is the cavalry ain't coming. We are going to have no one big plan in spite of the fact that change is in fact coming. Change is coming, but it's gonna come differently depending on where you are and when you are. There are three maps of the electric system right now, and if you were to diversify it even further and say what kind of power plants do we have or what kind of customers do we have, what kind of rate designs do we have, what kind of market structures do we have, there's even more and more and more maps, which means that the changes that show up will change different parts of the map, differentially. So change will be uneven, and it'll actually be recognizably uneven. It'll show up in different ways. Based on what region you are and by when things show up. Let me spend a moment talking about how the timing and the time scale that you're trying to plan for makes a big difference. Y'all remember back in 2008, 2008 Halcyon days, it was 123 coal-fired power plants in the permitting pipeline. Natural gas was $14 in MMB to you at the Henry hub. There's no such thing as an electric car, no such thing as smart grid. Climate change legislation, inevitable, right? It was like 4,000 installed megawatts of wind energy. God knows what solar cost back then, right? This is all, we knew what was happening back in 2008. Fast forward seven years, everything wrong. You should see the PowerPoint presentations I was delivering seven years ago. They're hilarious, they're awful, they're completely wrong. My assertion is that six, seven years from now, we are going to be as wrong about everything now as we were back in 2008. It changes. Meanwhile, we're trying to make investments in power plants, transmission lines, things like that, which we pay those off with 40-year mortgages. So they have to be making money for 40 years. That's a minimum of a 40-year investment. And we're making those decisions largely through the wisdom of state regulators who are in office an average of three years, right? So we're wrong about everything six years out. We're making 40-year plus-year decisions with regulators who are in office a very short term. I would say this creates a challenge. I believe change is coming. I think 10, 20 years ago, we basically asked and expected of our utilities, go out there and crush rocks and sell kilowatts. Crush rocks and sell kilowatts, right? Over time, that's changed. But we certainly are not in the situation where we have very dispatchable generation, very predictable load. We're now in a situation where load wants to act as generation where generation is variable and not dispatchable, it's a hot mess out there. And as we move forward, one of the challenges that I spend a lot of time on cybersecurity, not gonna go down that rabbit hole with you guys, but fundamentally, this all of a sudden becomes a big deal because as one of the big changes that we're doing with our system is, we're integrating data and intelligence into everything we buy from now on. Everything that you buy in the electric grid is no longer gonna be a dumb thing anymore. Everything is gonna have a smart component to it, so everything's got a cybersecurity component to it from now on. Eventually, all this data-enabled stuff is going to change what kind of industry this is. Eventually, the data is gonna start having a ton of value, to whom, I don't know, maybe to customers, maybe to big companies, maybe to Google with its self-driving cars, I don't know, but it's gonna have a lot of value and maybe even more value than the kilowatt hours themselves that we're selling. Friends, we are in a situation where good decision-making is happening under conditions of radical uncertainty. Decision-making under conditions of uncertainty, there's a job that helps you do that. There's a discipline that's called risk management. We used to ask the companies to crush rocks and sell kilowatt hours. Now we ask them to be risk managers. Regulators, too, need to be risk managers. Risk management, when you're trying to make good decisions under conditions of uncertainty, it has a lot of different strategies you can employ. You can double down and push for maximizing your benefits under the kind of future that you say must be the case. We're gonna all in on a national energy strategy and we're just gonna push on that until it's right, right? Another strategy is to minimize your regrets. One, six, seven years from now, you are inevitably wrong. There are a bunch of different ways. A lot of different strategies and risk management that you can use. One thing that tends to be a common strategy no matter what you're doing, how many of y'all have a financial portfolio? Raise your hand if you have a financial portfolio. Yeah, my inner 99%er is eyeing you. We got our eyes on you. In financial risk management, diversification is a big deal, right? It's something that folks depend on. And rather than putting my own set of pet rocks for diversification means we should build exactly this kind of power plant because I like it or we should have this kind of tariff because I like it. Instead, I'm gonna suggest maybe a good national energy strategy is to allow for a little bit of diversification in how we make our decisions about our national energy strategy. Say for example, we assemble groups of three to seven really wise decision makers in each of the 50 states and allow them to do some of the decision making about the rates, terms and conditions of the provision of monopoly utility service. Maybe that should be a pretty good first step in figuring out how we construct a policy that works for the entire country. And if you wanna figure out who some good candidates to do that would be, I would commend that you go out and Google your state regulator. Thank you. Thank you very much, Miles. And then finally, we'll go to John Larson who we've asked to, not that we picked any of the illities that Melanie put up earlier, but certainly there is a robust conversation and one that we've engaged with directly with Rodium Group on this question of decarbonization and what it means for reliability, affordability, those other issues and environmental management in general. So we asked John to talk a little bit about those core tensions. Thanks, Sarah. And a lot of folks already have been talking about a lot of the issue. I mean, there's a lot of interconnections through all of this. So I'll focus on basically what decarbonization is and what it means for the power sector and then connect those dots with reliability and affordability. So decarbonization, well, first of all, the electric power sector measures up to about 2 billion tons of greenhouse gas emissions annually right now. That is the single largest greenhouse gas emitting sector in the United States. It accounts for about a third of total greenhouse gas emissions. So that's a good reason to talk about decarbonization with a focus on the power sector. And if you're gonna have any chance of solving the climate change problem and if the US is going to have any chance of playing a leadership role in dealing with that problem, you basically have to deal with electric power and the emissions or we don't have a chance. So that essentially means you gotta get, what that means for decarbonization is you essentially need to shoot for zero emissions at some point in the future and the sooner the better if you're trying to deal with this. It's solely through dealing with climate change lens. The good news is that market trends and like lower electricity demand, like cheap natural gas and drastically reduce cost renewables means we are already reducing our emissions in the power sector considerably. Since 2005, and I agree with Miles, we wouldn't have known this in 2008 either, but since 2005 we've had a 15% reduction in greenhouse gas emissions in the United States from 2005 to 2012. That's translated into an 11% reduction in total economy wide emissions. So you can see that the trends in one sickle sector is already having reverberations in dealing with the total problem. And so one could say, hey great, the market's taking care of everything, but you look at EIA's latest forecast and who knows if they're right, but the gold standard for energy forecast in the US and they essentially project emissions to stay flat into the future, but almost flat all the way up to 2040. I looked at the chart again yesterday, it's kind of striking how it's almost a straight line. So market trends get us part of the way, but there could be a strong case for additional intervention to deal with this problem. Another reason to deal with decarbonization in the power sector is because once you've got this sector on a pathway to zero, it opens up opportunities for pavement in other sectors of the economy. People talk about electrification of the vehicle fleet for energy security reasons and any number of other reasons, but if you get electrification of the vehicle fleet and a zero emitting electric sector, you've all of a sudden doubled down on your emission reductions, because guess what the second largest sector of emissions in the United States is, it's transportation. If you can reduce emissions from buildings and industry through electrification, through a decarbonized grid, you go that much further. And decarbonization doesn't just mean decarbonization of central gen. I think we're seeing the predominant trend on the distributed generation side is already zero emitting. So it's interesting to see how that trend that has so many other disruptive qualities also has an attractive climate change benefit. So if we're not gonna get there through just the market trends alone, and if you just continued, it's about a 2% reduction per year right now is where the path we've been on. If you follow that trend, let's say EIA is wrong and the markets are gonna get us where we need to go on a similar trajectory to what we've been on. We're still looking at 2,100 for full decarbonization of the power center. So policy is probably required to get us there. And ideally that would be a price on carbon, something straightforward, predictable, levels the playing field across all generation options. You just price in carbon and let the market figure it out. Some states have already gone there. We've got California, we've got the Northeast States who have prices on carbon in their generation sectors and you are starting to see changes happen from those policy interventions. Wouldn't it be nice if Congress could also pursue that pathway and provide a uniform federal policy. This is one area where a federal policy in the energy sector might be quite helpful. But instead what we're left with is EPA's Clean Air Act Authority at the moment anyway under section 111D and we'll be expecting EPA's proposal to deal with existing power plants early next month. And as Sarah alluded, Rodeum and CSIS are planning to work together to look very closely at that proposal once it's released. So what does policy intervention mean? Well, not knowing what EPA is gonna propose and knowing that we probably won't have a uniform federal carbon price anytime soon. I will talk in general terms, but policy intervention doesn't mean you have to eliminate fossil fuels tomorrow or anything like that. It does mean that over the long run we need to figure out what to do with fossil fuel emissions. So we've talked about cost and investment in new generation and in the central grid. We need to be thinking about what that means for carbon capture and storage in central gen plants to the degree to which they're playing a significant role in the grid in the future. And EPA's already taken a stab at forcing that technology through its proposed standards on new plants, which actually do require partial carbon capture on new coal plants. But in the meantime, and I would note there's a lot of private sector activity in that space that's leading the way. Southern Company has a first in class plant that's going to be probably commissioned next year. You've got NRG and a few others taking a whack at this problem right now. And if they succeed, they're gonna be leaders not just in the US, but globally and pushing that technology. But in the meantime, we have a whole host of opportunities and options on the shelf that we can use, many of which are being used for other reasons already and many of them have already been named as things that are changing the calculus for the electric power sector. One is energy efficiency, another is renewable energy maintaining and perhaps expanding our nuclear energy capacity in the United States either through upgrades or new builds. You can also get a considerable amount of emission reductions from shifting dispatch of coal generation to gas generation. Very large amounts. And we've already seen some of this through the market trends. Lower gas prices have ultimately been already inducing that kind of change. So I think stay tuned for next month with what EPA has on offer. It's gonna be a tough road to hoe there for them. I think another thing I'd point to in what's kind of interesting about the EPA's approach under the Clean Air Act is it actually relies on the 50 states for implementation of the standards. EPA can only suggest what types of ambition should be required and options for getting there and the states are ultimately the ones that put together plans and standards to regulate those power plants. So that interaction between the federal government and the states can be very important to ultimately showing us what the next decade of decarbonization policy is gonna look like. I would say one thing which is so its long EPA's proposal should be clear to the market about what the intentions are because otherwise you do have run the risk of some serious stranded asset questions. And I don't think anybody, I mean, we've kind of heard that all the way along the panel here and that's a very real possibility and one that the only way around it is being sending clear signals to the market quickly about what the next set of investments should look like within a policy framework. So that's decarbonization. How that connects to reliability. When I think of reliability, I think about Christine's description of kind of you've got generation transmission distribution and reliability is two things to me. One is do you have enough energy to meet demand and do you have enough infrastructure to get that energy where it needs to go? And typically we do a decent job of that on the whole. There's always the lights don't stay on all the time but much better than some countries. And right now with a lot of the changes that have already been mentioned, I'll just mention another one, which is through other EPA regulations and the market trends I mentioned before, we've already started to see a pretty dramatic move in the form of retirements of coal capacity in the United States. And some of these plants have been around for 50 years or longer. You've literally built the grid around them to make the grid work and now you're taking them out of the picture. In 2012 we saw unprecedented the number of capacity retirements in the coal sector over 10 gigawatts got retired. We have for 2015 when the mercury air toxin standard comes into full compliance, 2015, 2016, we had at least 20 gigawatts more planned retirements for that year. EIA projects up to 45 gigawatts of retirements by 2016. So far, the good news is our institutions have been serving as well. You know, the RTOs, the PUCs, the utilities themselves have been managing that transition quite well and the lights are staying on. How that those institutions work going forward when you start to put more pressure on central generation in from a reliability perspective is going to be very important. One thing I'll note with regards to 111D, the EPA rules that are coming up on greenhouse gases is that two things ultimately are going to matter for reliability. One is timing and flexibility. To the degree to which you have a long and well-defined timeline for implementation of those greenhouse gas standards, that gives the market plenty of time to figure out what should be retired or built and when. And it gives regulators plenty of time to figure out how to manage the grid around that. The other is flexibility. One thing, the MAT standard that's getting implemented now is very inflexible. You either meet the standard or you don't. If you don't meet the standard by 2016, you have to shut off. 111D is not, I don't expect it to look like that. I think you're actually going to have opportunities where if you have a unit, a generating unit, that can find other ways to stay around either through capacity markets or through even reliability most run orders from an RTO or something like that, they can buy compliance credits or make a deal with the state and the state implementation plan to stick around and maintain reliability and still the state can meet its overall emission reduction goals. So that flexibility has to be hard coded and clearly defined in the EPA proposal so that regulators can manage that. But that's ultimately a key component to look for with regard to reliability. In the long term, looking beyond just this EPA proposal, we've got other things to deal with with decarbonization. One is greater interconnection of variable resources. Some people say and DOE did a study on this that you can get to 80% wind by 2050 or 80% renewables. Well, that requires some technologies that are not commercially deployed yet to get there. And it may require regulatory actions and frameworks that don't exist yet to get there. And so that's one thing to think about. Another is something Melanie talked about a lot which is the interconnection of natural gas and electricity infrastructure. Getting the gas where you need it to run your gas combined cycle plans when you want them to run. And at the levels you need them to run at. It's just, it's a lot different than having a big pile of coal outside. You can just shovel more in and keep the coal plant running. You need to have gas on demand real time. So that's another key component. Meanwhile, you've got the resiliency issue. You've got heat waves. You've got increased extreme weather. All of this is gonna get harder and more challenging under climate change. You've got cyber threats and I won't go into that rabbit hole either but all of those things are additional challenges beyond dealing with decarbonization. So you've got to be ready to plan around a lot of those things. And I think that opens up discussions not just around carbon policy but around energy electricity regulation and policy. We had an earlier conversation before the panel about capacity markets. And if you have energy markets and or capacity markets that value these generators not just for energy but for all the other resources they provide to the grid including reliability and stability. You can really I think help maintain reliability in ways that we just currently can't. And what I mean by that for example is again you might have a coal plant that on its own from an energy market perspective doesn't isn't profitable under say a 111D framework because it's carbon intensive. But if it runs, climate only cares about the emissions not about the fuel. So if you have that coal plant online for hot days only and you pay for it as such through capacity payments you still get a very large emission reductions if you're only running that coal plant 20% of the time instead of 85% of the time. And you can still maintain reliability because you have it there when you really need it. So there are if you have energy markets that have valued that your reliability problems are much more manageable under a carbon constraint at least in the near to medium term ultimately we get a deal of those emissions for most plants but it matters. Switching over to affordability just briefly I'll talk about a different complementary policy again which is energy efficiency. The energy efficiency helps affordability in two major ways. One is the lower your demand is the less you have to build which means the less you have to finance and the less the repairs have to pay for it. They still have to pay for efficiency. So if you still that's under the assumption that the efficiency you're doing is cost effective but so long as that's the case you are reducing the overall infrastructure investment you need in the power sector to decarbonize. So that's one way energy efficiency policies both federal and state can be useful. The other is from the consumer perspective the lower a customer's bill is the less exposure they have to additional costs from carbon policy itself. So if you did have say a carbon price and that raises electric rates but you're using less electricity because you're more efficient you're gonna have less of a hit on your overall expenditures from that increase in costs from paying for carbon. And there's a whole host of economic literature out there from folks down the street at RFF and elsewhere around how you can use carbon policy to redirect revenues from a carbon price for example to mitigate rate impact on the least on those that can least afford it. And so there's a whole other discussion you can have about how you design the policy in the first place to mitigate impacts to both low income customers, trade exposed, industrial customers, variety of different folks that might have a serious issue with substantially higher electric rates under a decarbonized world. So those are policy doesn't solve all especially when you don't have an omniscient federal government or state PUCs that could handle all of these questions but there are a lot of ideas and options out there for managing these things into the future. So thanks. Thanks. We've got a fair bit of time for discussion but what I thought I would like to do is maybe ask push back a little bit on the panelist to sort of tease out some of the core issues that we've been thinking about within the context of what you've said. And I encourage you guys to chime in on each other and follow up with other questions if you have them. But one of them, Kristi, maybe starting with you and I think we've heard a bit of this from just about everybody on the panel but there are sort of two overarching notions about what is changing or might need to change here, right? One is certainly about market structure and the other is this idea of the regulatory compact, right? I mean, so given the challenges that are out there and the way that they're challenging people who are investing and people who are regulating the industry, are we talking about something that can fundamentally be dealt with with some temporary or innovative or more flexible sort of market structure questions or is it really the sort of regulatory compact question in and of itself that is at the core of what we're deciding these days, right? Is it about whether or not electricity and the service that it is and has been, has that, looks, has less of sort of a strategic bent than what it always has, right? Sort of less of that justifiable sort of monopolistic public good aspect to it. Has anything changed about that or is this really just about a market structure that has to adapt to new capabilities and new trends but that social compact piece is sort of still there? The way I see it, I think that what we've observed is that there is still a political insistence on the benefits of a regulatory compact but there is a political demand to have an iPhone enabled, I can do whatever I want, consumer environment and those are two very difficult things to reconcile and that's one level of it. The other level is is we want the market to solve the problem but we actually don't want the market to operate because we can't stand volatility. You're not allowed to turn anybody off. You're not allowed to stop delivering service except for in very narrow circumstances and you're not allowed to let prices go to $1,000 a megawatt hour and actually show scarcity. The markets we have are markets only because they're called that. So I think what we have is Charlie's laughing and he knows I speak truth. It's a very difficult situation because there's a lot of things we want but I think we've done ourselves a poor service in remembering how we account for them. While it may be a really good idea from a policy perspective to incrementally move towards a more distributed grid, there is likely to be a demand to still have a certain amount of interconnectivity at the high voltage level because it gives us additional resources. What does that look like? How do we phase out those resources? How do we phase down those costs? And so an accounting for achieving our dream I think is the part of the discussion that we're missing. Even Friedman's book, which I loved in a lot of ways because it reduced in an intelligible way for my dad what I do all day, he completely finessed the cost issue. There was really no linkage for how you get there from here. How do you say, okay, we've got a 35 year old power plant that six years ago, no six, three years ago we spent a lot of money to upgrade. So it's not fully depreciated on either the environmental or the rate base but we're gonna kill it next year because it's uneconomic. And even if it could comply with mats because it's coal fired and we probably won't have it survive under the GHG and SPS. There's a cost to that. There's a cost to transitioning the opportunities we wanna have with allowing customers to put solar on their roof at $120 a megawatt hour and benefit from it when it is producing but not pay them $120 a megawatt hour when we should be serving them with $30 power. So it's working those things out and we've talked a lot I think in policy circles about big pictures and ideas and what we can do but we haven't taken the steps to say, okay, if we chose this scenario, how do we pay for it? Yeah, I get to, sweet. Okay, so the regulatory compact gets a bum rap. Basically it says companies, you get a monopoly. No one, the economics work is such that you are able to build a huge power plan and run a bunch of transmission lines and ain't anybody really gonna come in as another company and compete with you because it just makes more sense to have one company build one set of infrastructure rather than run in two sets of power lines to everybody's house, right? So the regulatory compact however, and it basically says you will get cost recovery for prudently incurred expenses serving that monopoly. It doesn't guarantee anything about the future. It talks about cost recovery, usually there's exceptions, there's construction work in progress and pre-approval for certain kinds of blah, blah, blah. There's nuances but fundamentally the regulatory compact says you gotta deliver the most reliable, most affordable service and in return we'll set your rates such that this isn't gonna be a great business to be in. This isn't gonna be, you know, Facebook but it'll be a good business to be in and your shareholders will have a lot of their risks managed. I think as we talk about this balance between what is set by regulators and what is set by the market, people seem to see this as it's an either or proposition. I think in fact that, like they say in politics, money is speech, money is communication, right? So it's okay that we communicate about different things using different mechanisms. Using a market structure is very good at communicating near-term activity. We really want you to do something within a two-year time frame so we're putting a price on it. Companies, go get it, right? We want you to dispatch your power plants in a certain order so we're having a spot market show up and put your plants in the bid stack and run them today, right? Markets are really good at communicating short-term messages and communicating short-term policy priorities. They're not as good or at least unless they're very sophisticated, they're not as good at communicating longer-term messages. I'm a little uncomfortable putting my flag in the ground over the arguments over whether capacity markets are working or not, but basically, yeah, Christy and me are gonna, we're gonna have a beer later about it, I'm sure. But fundamentally I would say that those who criticize capacity markets are saying that the price that you gotta pay to communicate that longer-term signal of this is a good investment, build a power plant. You want, keep your power plant online. That those market mechanisms may be those strictly market mechanisms, may be less well-nuanced than they need to be to communicate a longer-term signal that keeps these plants in the game. And so for that kind of longer-term thinking, you want a different, you maybe want a different tool than an immediate price signal. You want something that relies on a plan. You want something that builds out of something that a regulator's gonna sit there and say, if this is a prudently incurred expense that delivers reliable and affordable power, you're gonna get your money for it. That's why you need a regulator. And I think it's okay that we have both. I think we can do better, but I don't think that fundamentally that's a broken system. The last thing I'll say is that one of the real tensions that we have in terms of a change that's caused by disruptive technologies or a change that's caused by a change in how we provide power to customers or they provide power to themselves is the same problem that we see when you lose power and a big thunderstorm for a few days. It's the same problem. The problem is we're getting a hell of a deal for electricity. We pay much less for electricity than a strict supply-demand valuation would deliver to you, right? Electricity is worth a lot more than we pay for it. And if you don't believe me, try losing power for two weeks and see if you would still pay 8.7 cents a kilowatt hour for that kilowatt hour that's delivered after two weeks of no power or if after a couple weeks you pay a little bit more. My guess is we keep the price lower than it hasn't been there for two weeks value. And the way we've done that is 120 years of cost of service regulation that even if you've restructured your market still has important ramifications for getting you power for a hell of a deal. So when we start messing around with how do we incentivize the appropriate kind of changes in our system, it's not that we should or shouldn't give up this hell of a deal price that we've got on electricity. It's just we should be mindful of the fact that we're really, we're getting a real great deal here. Thank you. Just a couple of comments to kind of add on that. We've alluded to, I think to this earlier, and I think if you look back, you have to acknowledge that the regulatory complex that we've had has worked exceedingly well in this country for many, many years because we have had, for the most part, very safe, very reliable, and very affordable electricity. I think it's worked, so it's worked very well. We're entering into this era, I think, of uncertainty that we've been talking about in quite a few different ways. We've talked about the concept of investing in something that's got a 40 year life, for example. We've all refused to go down to cyber security rat hole or rabbit hole or whatever. But I think, and I think it was Miles that alluded to this, I think kind of a paradigm shift that has to be there in thinking is things have to start to be taught of in terms of risk. And what are you willing to pay to avoid something from happening? And I don't think we here before have had to do that because the system has been safe, affordable, and reliable. And every time you put money into it to make it that way, continue to be that way, you sold more kilowatt hours because demand was constantly growing across the US. And so you weren't in a situation where you were making an investment much more like an insurance policy. And I think we're moving more and more in that direction. So I think as we start to look at some of these questions we're asking about how much something should cost, how much should we should pay for it, whether we should do this, you have to start to look at some of these things more from a risk avoidance and the cost that's associated with that and then the appropriate compensation for whoever's writing that insurance policy. John, did you want to add anything? One of the other things that Miles, you sort of talked about very directly, but is also a huge part of the tension of why people and policymakers and people with policy priorities and illities and prerogatives oftentimes make this a much less direct and simplified conversation than it otherwise could be, is this sort of federal state divide piece, right? Obviously there are priorities that come from sort of a federal nationwide sort of level and there's other things that can be in our managed on sort of your different maps as you talked about. Well, John laid out what is arguably a national priority, right, decarbonization, but it is playing out in lots of different ways all across the country, right? Is there something about that sort of federal state divide that when you look at some of the challenges that we see that we're facing and they are so sort of regionally different, does that mean that there is fundamentally less role for federally coordinated policy prerogatives? Does this mean that, and does that necessarily yield universally better outcomes or is there a problem in that vision as well, right? So if you have a multitude of different approaches to things, does that sort of yield to problems that have to get worked out at a federal level as well? Is there something that fundamentally has to sort of change in that, in sort of the divide between that relationship? No. You know, one of the things that I get to do is I get to take the mic with smart folks like you, but one of the other things that I get to do is I talk to foreign delegations when they come to the United States and they say, explain to us how the power sector in the United States works. And you know, we'll have folks from Mexico or Malaysia where they have one regulator, one grid, one real power company and we'll, you know, I'll explain them, you know, we have these different maps and there's 50 states and the PUCs are setting the distribution rates and we've got, you know, some places where we're paying a nickel for power and some places where we're paying 40 cents for power and all this decision making that's disaggregated in these public processes where everyone gets to come in and argue over the setting of rates and every hat and every truck and every, you know, inch of copper wire, et cetera. And I get done with it. And generally, I would say that the expressions on the faces of the visitors are somewhere between disbelief and kind of, you gotta be kidding. Like why would you do it that way? Why would you set up a system that's such a complex mousetrap Rube Goldberg device of policy making? And the answer is because it works, right? It works. We have reliable and affordable power and we also have, we have some goals that we have in common that, or that we steer towards in common that are national goals. So for example, a molecule of carbon dioxide that is gonna go up and do whatever it's gonna do to the climate does not care if it's emitted in Georgia or if it's emitted in Hawaii or for that matter, Rwanda. Addressing those kinds of national policy questions, international policy questions, setting those kinds of goals. I think it's outside the scope of Georgia's authority to set that for the other 49 states in the District of Columbia. I think if we're gonna set a goal like that, that's, if that's what the country's gonna do, that's something that's a federal responsibility. And the federal responsibility will say, we are all ending up over here in this town, you know, in this location. And we don't care if you get there in a car or plane or train, if you walk, if you hitchhike, if you go north or south, but we're all ending up here and get there how you will. And I think that that's an appropriate role for a federal decision-making authority. But I also think that in the case of decarbonization, we see Georgia's decarbonizing faster in the last few years than most of the Kyoto signatory countries. We're seeing them making big investments in things like nuclear power plants. We're seeing South Carolina doubling down on, you know, the summer plant and Georgia and Vogel. We're seeing Mississippi putting money behind the Kemper IGCC. We're seeing the only long-term CCS rig that's been hooked up to a pulverized coal plant was done at the Mountaineer unit in West Virginia. There are lots of energy efficiency investments and solar investments being made in states like Virginia and other states which don't spring to mind at cocktail parties in Berkeley and Cambridge as the leaders in decarbonization. I don't think that matters. I don't think we all need to be trendy. I think that the end goal that's set by the feds can be met by different states in different approaches. So I think it's natural that there's tension. I think that's good that there's fighting. I think that there's a marketplace of ideas and we should let it work. I don't think that the system that we have, complex as it is, is broken. I think that the other thing we're observing increasingly as we navigate these sort of federal versus state tensions is the sort of organic development of regional collaboration. I mean, regional differences was a neighborhood term that is now part of any lexicon in the energy space. And I remember when it was fighting words in standard market design. And I think that that is what we're gonna continue to see that. I think you're going to see perhaps an orientation in the Pacific Northwest that's not gonna change when it comes to priorities on carbon reductions and what they think their carbon profile per megawatt hour should be. And I think the Northeast will continue to be different than the Southeast in the Midwest. But as Miles alluded, that doesn't mean we won't get there. And I think that the regional nature of electricity markets for good or for ill also lends itself to that efficiency that first started when utilities realized it was more efficient to lean on their neighbors than it was to build up to the reserve margin every time. And I think that that is gonna be something that we're gonna continue to see is actually this informal less structured, less statutorily prescribed collaboration between states whether it's through RTOs, whether it's through Reggie. But when you can find a critical mass of like-minded policymakers setting a direction together I think that's where you're gonna see the action take place. Particularly if we continue to live in a city where there is not 60 votes to agree that today is Thursday. Let me just add one quick comment and that is on this question or subject of where should the federal government be establishing policy? I've heard over and over again from my colleagues across the electricity sector that the most important thing that they can have is certainty. Okay, and that certainty allows them then to go out and figure out how to maximize the opportunities that are out there or minimize the challenges that it might create in their business. And so I think where federal legislation can provide that type of certainty and also can help deal with the thing that we've been talking about here earlier and that is today these investments that people are making still have 40 year lives and should they or should they not be making them? I think there can be a benefit, a significant benefit. Several years ago I did a paper at the World Resources Institute that looked at what we called policy innovation and diffusion from the States to the federal level and we looked at all sorts of different policy issues not just energy and environment but even social policy. We looked at welfare reform, we looked at gun control and just looked at the role of States in trying new things and devising new ways of solving problems that ultimately diffused vertically up to the federal government and the federal government set some sort of floor for all States to follow in the long run. And I think when it comes not just to decarbonization but a lot of the challenges we've talked about today having the 50 state innovation option out there is one way to find solutions faster. Doesn't mean they get adopted widespread in the way that we might want to see them adopted quickly but at least you have more ideas on the table. It gets back to an earlier point, Miles made about diversification. I think he was talking about the context of fuels and options in the power sector but I mean having a diverse set of actors coming at these problems with different circumstances should generate a lot of different ideas that we can use to solve a lot of these challenges. I mean 20 years ago we didn't have RPSs. Now it's a renewable portfolio standards. Now they're a common part of the lexicon but it's still just a state policy. It's still, and that hasn't come up to the federal government yet and I think we're gonna see that we've already seen that in carbon policy. We're going to see in spades after 111D comes out if it stands up because you have to have, every state has to do something and they can do whatever they need to do to meet the EPA rules. So I think there's a lot of value to that. Now one thing you also get is the patchwork, right? So you get all these different policies doing all different things to the same end and if I'm in the business community I probably do want certainty or one set of rules to operate in this country. Now first of all that's a very, in almost any aspect of any type of policy landscape or any kind of issue, business rarely has that kind of uniform certainty but it's a nice thing to shoot for. And so ultimately at least on the decarbonization side I wouldn't be surprised if a patchwork of approaches ultimately does catalyze a new federal congressional discussion on the issue. I would hope that would be the case. I think ultimately to solve this problem from an economy-wide perspective you need that kind of approach. So but in the meantime we've got 50 different ones. I wanted to just make two points on certainty. I don't think there's anyone who's active in a business who actually expects to be able to foretell the future or expects that there would be a policy contrived let alone at a national level that does that. It's not necessarily the specificity of a particular rule. It is bracketing the range of outcomes so that you can get back to a same risk management discussion which Miles alluded to earlier. It's not so much what the number is going to be on carbon reductions as much as what are the parameters under which you're going to let me phase out the investments I've made or re-inverse me for the ones that you want me to walk away from. What is gonna be the litmus test for what's prudent? Those are the things that are critical to not changing. That's the part of the regulatory compact where there needs to be certainty. If we get a decision under 316b that says thou shalt eliminate all ones through cooling systems which is not our call by the way. We don't think that's gonna happen but some states may elect to do it anyway. Well what's the parameter under which you're gonna help me maintain my nuclear plant now that you've asked me to do a billion dollars worth of plumbing? Okay, do you want the plant? Do you want the carbon free electricity? Okay, the bill is a billion dollars. How do you wanna recover it? You wanna recover it in five years? You wanna recover it in 40? Those are the conversations that are this. That's the certainty investors need. It doesn't need to be how many pounds per megawatt hour by date certain, it's what's gonna be the terms of the deal. And I think that's where we lose perspective. People talk about certainty and they think, well I need to know what the rule looks like and I need to know what every provision is. Now I need to know how to define my risk, how to qualify my decisions, how to rank them. That's what I think that the business community in the energy space is asking for, particularly when it comes to electricity, whether it's an electric utility or whether or not it's a solar company trying to enter the market. They wanna know the rules of engagement, they wanna know the shape of the proverbial football pitch, they wanna know how long the periods are, who's the ref and what the rules are. One more sort of streamlined of questions and then we'll open up for the audience for their discussion. One of the things I'm curious about is low hanging fruit, right? We're in Washington so we like to wring our hands about a whole bunch of different things. And sometimes the ringing of the hands is that we need to do something and sometimes the ringing of the hands is, please, God, don't let anybody do anything about this because they're gonna mess it up. And then there's the issue of, gee, everybody seems to agree on the importance or the preeminence of a certain issue and yet we're still wrapped around a poll about it. So from your perspectives that I, not to say that cybersecurity is an easy issue in any way, shape, or form, but we've all alluded to the fact that everybody understands that it's a major priority and yet I'm not entirely sure that we've nipped that issue in the bud, so to speak and certainly had some big engagements over how to resolve some of that. What is the low hanging fruit? What are things that you think will require some action that will get addressed and what are major areas where there's a little bit more heat than there is light about some of the concern over particular issues that you generally feel the system the way it is will pretty much find resolution to over a period of time and we're worrying unnecessarily. Well, I think you hit on one of them and that is reliability standards. I mean, now we're talking national security with the interconnected nature of our system and I think you've got to have minimum standards that you expect everyone to adhere to and if a particular regulator wants even higher standards then that's fine, but I think reliability standards is one of those areas. If you're contemplating the 101st revision to your capacity market, maybe you should be looking back at your energy price formation in the daily markets for the problem. I almost hate this term because it was used in a not nice way to a colleague of mine but there are some existential threats out there to the economy that come in by way of the electric system. It's a little more, it's easy to agree that solid reliability standards are a great idea. I think there's a lot of nuance to how you actually accomplish that and how you demonstrate that you've accomplished that in a way that's really meaningful and useful, but I will say that there are some things that are things we've been talking about for a long time and some things that we have not been talking that much about thank God that are, again, existential threats that pose risks of long-term widespread outages and putting ourselves in a position to manage those kinds of really significant threats, acknowledging that they're there and really backing the solutions to those. I think that those are things we can unpile, you know, the pile of pet rocks that gets piled up on everybody's idea about what we should all be doing. I think that's probably one of the few places where we can all agree on. I mean, I think in spite of the fact that we have all these renewable portfolio standards out there in the country, point me to the nearest national renewable energy standard in spite of the fact that, you know, plenty of the country is doing stuff on energy efficiency, point me to the nearest federal energy efficiency standard. I mean, we have a hard time agreeing on some stuff that seems very common sense, but the one thing that I think we're more motivated by fear than we are by opportunity and there's some stuff that we should be afraid of and we should take those risks off the table. A bit of a potentially wonkier answer is, you know, everybody says, oh, energy efficiency is low hanging fruit, both from a cost perspective and from a political perspective. Everybody loves it for some reason or another. Yet the Senate still can't get to a vote on a very modest bill, but putting that particular legislative effort aside, even at the state level, you have a vast array of diversity and implementation of these types of policies and sometimes that's a bad thing from a comparability perspective. You don't always, a megawatt hour saved in Massachusetts looks very different than a megawatt hour saved in Georgia or California and so you can't even compare state policies against each other. You don't know who's better because of the very fundamental comparability issues. So a place where the federal government could certainly play a role is setting kind of basic, simple, a comparable sets of guidance on energy efficiency policy so that people can start to get closer. This is very complicated, I won't get into it, but people can start to get closer to saying, well, if I say I'm gonna save X number of megawatt hours by this year, it means the same thing as this other state setting a similar goal and people can compare and learn from each other. I think you'd actually have a greater diffusion, probably a lower cost to energy efficiency deployment if you had more comparability in those standards. We've got a few minutes left for questions. Please just wait for the microphone, state your name and affiliation and then ask your question in the form of a question. We'll start right here and then we'll move over to this side, okay? And actually, we only have about 10 minutes left so why don't I just take all three of the questions and then we'll group them together. Hi, I'm David Hunter with the Electric Power Research Institute and Christine had spoken about the value of electrons, the value of power, having different values, whether it's in the middle of the night when there's an excess power or whether it's occurring at peak and yet it's all priced at the same time. I'm wondering if Miles in the laboratories of democracy, the 50 different groups of very bright state regulators have come up with any particular ideas either being tried out or that you think are worth highlighting for residential consumers to be able to distinguish between those chief electrons and those expensive electrons occurring at different times of the day? Yes. Thank you. Thanks, Sarah. John McCormick with the Institute for Multitrack Diplomacy. I wanna focus on California's electric grid for a second. 2013, 60% of the megawatt hours were generated from gas fire capacity. In a state whose population is increasing, the recent national climate assessment gave some dire predictions about water availability, perhaps even much higher temperatures. The difficulty of even siding large wind and solar in California because of all the regulatory hoops. So the question I ask is, what options does California have as a hedge against natural gas price bikes or even availability for price bikes in perhaps the very near future? Jose Colucci, retired professor of chemical engineering and this one is for you mainly. In your study that you did with businesses on their perspective of cost of electricity, I was surprised because I dealt a lot with chemical companies and pharmaceuticals and medical products. And in the last decade, maybe it disappeared like everything that you said have disappeared. They even had in their mission and vision the sustainability of the world, the future and all this other good stuff to the point that's even some of them would basically do sustainable renewable energy projects with four year payback versus your typical half year, one year for energy efficiency because that's their mission. I was surprised that didn't come up when they look at the cost structure that they didn't even consider the fact that we're here for the long run and sustainability should be included in our business analysis. Good afternoon, my name is Rosmyn Segero. I'm the president of an unprofit and a profit company. My question is to Miles, you talked about people who come from international and from Kenya and I focus on rural electrification in Kenya. Looking at the policies of the United States and comparing those of Africa, do you think one day it will be international policy for electricity? And the other question is what is the best renewable for America to import from China, from Africa and how would it work and what would be the policies think? I'll take a shot at that, California one. I do know what a duck curve is. I know what the camel is too. And that's exactly the problem that California faces. California has a growing capacity for creating, for generating renewable power in the middle of the day or at night and what it's starting to do is create a generation curve that does not track very well with the demand curve. And you get wind dropping off in the morning just as everybody gets out of bed. You have solar dropping off just as everybody gets home from work. How do you get around that? There are ways to get around that and I expect that we're gonna see those. One of those is gonna be when the California ISO starts saying, okay, we're not gonna sell six by 16 blocks anymore. It doesn't make sense to procure natural gas fire generation for six days for 16 hours because we're not using it that way. We are likely gonna see different types of power provisioning and one easy way to do that because you do have the capability with natural gas plants to run them on shorter intervals. Their cost implications is cheaper to run it for 16 hours, okay? But if you really are hell bent on dispatching that renewable power, you can use that incredibly large gas fleet to manage it. You have to accept as policymakers the average cost you wind up with and make everybody whole. The good news in California, a lot of the state has the lowest consumption per capita in the nation. So there's a certain amount of ability to ingest that depending on which part of the state. Some of it's very, very low. So the incremental cost on the bill can probably be managed but I think that's one of the ways they get there because you look at the six by 16 dispatch curve, that's insane. But if you say, okay, now I wanna tell the utilities that they should be buying power in seven, maybe it's seven by eights but the eights are split and it's four in the morning and four in the evening. You're gonna change the products in the market. You're gonna change how you maximize your fleet. You're gonna change your dispatch. So far we've seen the dispatch go from what plants we're using. We're changing the dispatch on our fuel from coal to gas. Now the question will be, if you have a very renewable intensive portfolio, now you're gonna change when you dispatch the gas. That's my hope for California. I don't wanna live through a second California power crisis. My T-shirt from the first one still fits, thank you. I'm dying to answer the question of the young lady from Kenya and I think probably it's a long enough answer that what I'll do is give you my card afterwards and we'll talk afterwards. David, your question about time of use pricing is too juicy to pass on though. Is there stuff out there that is worth highlighting as far as variation in pricing? And I love time of use pricing and I love inclining block rates and I love smart tariff design and I'm gonna instead be a jerk and be provocative. I read something this morning that there are utilities in a state that will go unnamed that are giving away power for free at night. The time of use pricing set up is use all the power you want at night and pay a differential rate for your daytime consumption that's very, so if you are a committed polar bear hugger as I am, you have to wonder what are the power plants that are running in the dead of night? As it turns out, it happens to be a state that has abundant, bountiful, wonderful wind energy resources but that doesn't mean that they're not running their base load coal units all night and dumping the power off and collecting PTC revenues or other kinds of revenues off of their wind units to offset the fact that they're dumping carbon emitting power in the dead of night. And I just think that there can be unintended consequences even with the best intended TOU rate designs or variable differentiating rate designs and that it's worth understanding what you're getting as you design them. That even time of use rates, even different kinds of variation in rate design, you gotta know what you're doing. This stuff isn't for amateurs. So I will answer your question very quickly. As I said earlier, we've done the study over four years and we put this in one of the reports a couple of years ago. We used the tagline green Trump's green. And what that really meant was dollars Trump's sustainability. So most companies in the U.S., and that's not outside of the U.S., it's very different within the U.S., most companies that have strong sustainability programs have strong energy management programs, but they see the benefits of their sustainability programs as being a byproduct of their energy management programs. The energy management comes first that kind of motivates because of the bottom line savings. And then they take appropriate credit for it in their sustainability reports. Well listen, we tend to try and end these things on time so that people will come back, but we are really, really pleased to have had all of you here for this first session that we'll be having. We're gonna be coming up with announcements about what the next session will be, probably along the June, July timeframe. And we hope that this is sort of the beginning of a bigger conversation that we can have. So I just wanna thank everyone for being here today, but also my colleagues, Charlie Curtis and Michelle Melton who were sort of indispensable in putting it together. But mostly thank you all of you for spending your afternoon with us. We very much appreciate it. Thank you. Thank you.