 I wanted to just say we're here today to discuss changes in the U.S. electricity distribution system as I said as part of this ongoing series that we've dedicated to talking about electricity and transition. The purpose of that series is to provide a platform for discussing all the ways in which the electric power sector is changing from policy to market to technology dynamics. In preparation for today I found an excerpt from a Rocky Mountain Institute study that encapsulated a little bit of what we were trying to get at with today's event about the changing distribution system. And it says, the electricity industry is evolving from a traditional value chain to a highly participatory network or constellation of interconnected business models at the distribution edge where retail customers interface with that distribution grid. Ultimately customers that are playing a larger role in producing and managing their energy may also help to provide electricity services to the grid to enable better economic optimization of resource use across the entire system. And I just thought that was a really simple statement of a vision of a more elegant and effective electric power system, but one that is clearly by no means simple to achieve and that's what we're going to talk a little bit about today. Today we're going to talk about one particular part of the country that's taking a very aggressive approach to changing the nature of its electric system by enabling a more animated retail distribution market. To help us do this we're very pleased to welcome Commissioner Diane Berman from the New York Public Service Commission to discuss a proceeding titled reforming the energy vision. For some of you this is very, very familiar in something that's part of your day to day work. For others of you this might be something you've heard about but don't completely understand. It opened in April 2014 and it was designed to examine the regulatory and policy reforms for the retail distribution market in New York and it's part of a broader vision for New York being able to achieve some of its reliability, affordability and carbon emission reduction goals. The Rev is a fundamental rethinking of the way that the electricity is distributed in the state and as I said aims to build a cleaner, more efficient, reliable and affordable energy system. Commissioner Berman is going to share a little bit of an update, an overview of Rev and an update on the proceedings and then offer her views on how it fits into the overarching process underway in New York to meet these energy goals. And then after Commissioner Berman speaks we're going to take some questions and then we will invite two experts to discuss separate aspects of what's involved in making changes to the distribution system like as is being carried out in New York. Rich Zidano from the regulatory assistance project is going to discuss some of the regulatory and market aspects and Brian Hanigan from the National Renewable Energy Laboratory will discuss some technological challenges as well. I'll introduce them a little bit further as we get to the panel discussion. So I think it's going to be a fantastic discussion. It is being webcast, everything is on the record so please conduct yourself accordingly and without further delay I'd like to welcome Commissioner Berman. Hello. Thank you very much. Before we get started I just want to let you know that we do have an open docket so I have to restrict my remarks to things that I've already said publicly at our sessions or factually in what's going on with REV but I am not able to talk about things that I may decide and I am weighing those things with the commission. I am actually as a full disclosure today is my birthday. Thank you. Thank you. And as full disclosure I took a 6 a.m. flight and told my husband when I opened the card this morning which I thought was very nice that he has until I get home tonight to actually get me a present because when I said that he didn't need to get me anything I really expected something in the card. So be that as it may. So I am one of five commissioners at the public service commission. We actually have a vacancy there's only four of us right now and at the commission anything that we do we need three to hold a quorum and three to vote yes or no on an item. So really it's been very great for me to have my other commissioners to bounce off ideas with and talk about and I consider myself a critical optimist or optimistic critic depending on the day and really think it's important to have a variety of opinions and really ask the hard questions and I like people to say this is why you totally don't get it and we can debate that. So it's very important and what I love about our reforming energy vision is that we really are trying to be very collaborative and to get the best ideas and to help formulate something very great not only for New York but for the nation. There is no one size fits all even within the state what might work in one part of our state doesn't work necessarily in another and it's the same thing with going across the country there are different things and internationally the different things that may work but depending on what's going on in your locality it may or may not and trying to keep that in mind. New York is very focused on safe reliable and clean energy system we've always been and now more than ever we're focused on all three prongs fitting together but to me it's important to let you know my personal opinion which I've been clear about from the beginning is that reliability is paramount over everything and I can't stress that enough not just in what we're doing but also in my personal life and I'm going to give you two examples that really weighs on me as I go through the entire process and the change that we're doing in New York. So I have an 18 year old and a soon to be 12 year old in two days and in August of 2003 I had my 12 year old was just a you know two months old and I had just gone back to work it's my first week back at work everything was set and then the northeast blackout happened. I rounded up my older son and got my younger son from daycare got home and my worst nightmare happened had no electricity at all but it wasn't just that I had no electricity and had two small kids is that I had a freezer full of breast milk that was completely wiped out that really struck me as just how important it was that I had a system that wasn't reliable for me and I could not have that happen but it did and I had to deal with it and you know if you've ever smelt spoiled milk breast milk is even worse. So the other prong for me with reliability is I also had a few years ago brain surgery and I have a stimulator in my brain and it requires me to charge it every 24 hours I need to charge it and if I don't have that system everything crashes but because of the way it is set up and because of cyber security issues I can't have it on an app to charge I have to plug myself in every night and I have to make sure that I have a reliable electric system and coordinate the brain stimulator with the electricity and charge it and do all kinds of things and it takes a lot of work I really worry when something happens if I get stuck overnight somewhere without all my systems if I you know if something happens if another storm happens I need to figure out where I can go quickly and have the backup system that I need so for me when I look at the reforming energy vision I personalize it very much in that this is dramatically important not only to the quality of my life but into everyone else's reliability system that I may or may not know about and I really do need to drill down and figure it out so that's why I really am very very excited to be a part of this system so what is the reforming energy system in a nutshell it's an ability to take an energy modernization initiative and fundamentally transform the way electricity is distributed and used in New York State we're looking to help build a bridge to a cleaner more efficient and affordable energy system we want to protect the environment we want to keep energy costs low and we want to create opportunities for economic growth so we really are looking at how do we do that why are we doing that not only because we need reliability but we have an aging infrastructure we're going to have to spend money for our aging infrastructure for upgrades and transmissions so when we're looking at doing that we want to be able to say are we are we doing what we need to do to keep costs as low as we can and build something not just for the now but for our future and how can we do that how can we I like to say everything should fit we should figure out how things fit together and try to anticipate some of the short term needs and some of the long term needs and if we can help figure that out and then help build things to make it that much better it should really hopefully work for us and hopefully work for everyone else and we don't you know I I like to think of myself as I am not able to figure out things from an innovative perspective there are other people who can do that I know you know things that are out there that people are thinking about things that they're not even thinking about and just the ability to figure out things and be open to allowing things to fit together not just for the now but for the future is very very important so we started this in April of 2014 a proceeding where we opened a docket at the commission and we looked at what would we would do to change the way we're doing business now in New York and we call it we have a track one and a track two track one people think of as sort of the big vision giving us the direction that we need and then track two is the what I call the meat and potatoes the how are we gonna do this what are the costs gonna be and help with people understanding where things fit so track one on February 26th of this year was an order that the commission did which set the vision and said these are the things that we're going to be doing from a policy perspective and we're now going to be looking at changing the dynamics of the way we do business and then we set and the order was 328 pages that does come with you know different attachments etc to me the most important thing out of that order was a one-page part of that order which had the timeline of different things that either staff was supposed to do the commission would be revisiting or other parties were supposed to do and that really set some benchmarks and set some definite so you know when you look at everything if you just go to that page I think that's probably the most important thing some of those deadlines have been extended and there's been some criticism well there's a delay I wouldn't call it a delay I would call it really trying to make sure that we're fitting everything and that when folks have seen that there's a need to make sure that before they submit something that they have a little bit more time or flush out more things that they're working together to collaborate but it is something that is helpful to keep track of and to sort of push and the commission will also be looking at that in terms of whether those deadlines are being met etc so one of the things at the at the February 26 order that was looked at was what are we going to do with this new system we have a distributed system platform well then I have to find my notes to make sure I get it all right so and this distributed system platform is one of the central components of rev and it's envisioning that the DSP will create a flexible platform for new energy products and services to improve overall system efficiency and to better serve customer needs and the DSP is really what I call sort of the the train conductor or the the the one who's going to help sort of make sure that we're going along and liaison to all the different things out there and the DSP the commission in the February 26 order said that the DSP would be the utilities except for some exceptions and looking at that and one of the things is is that the utilities are made to under this order work with others so that they bring third-party providers distributed energy resources to this new platform and they work to fit together so that they take not just their sort of you know utility focus but they look to expand and animate the market through other resources and they're going to do this in demonstration projects that's going to be the first prong of what we're doing and the demonstration projects when I first heard demonstration projects and I think I did say this publicly so when I first are demonstration projects I thought all right here we go another pilot project you know they're going to do it and it's not going to really delve into anything afterwards and it's just going to be the same old but the demonstration projects are not expected to be the same old it really is an opportunity and there are certain directives that are done in the order that help to make sure that the demonstration projects are not same old what they're really doing is sort of I call it sort of like the launching pad the test pilot where they're really going to be working with people working with others working with the Commission staff working with the New York State Research and Development Authority to make sure that we're bringing all the resources that we have ideas from others from the private sector into the demonstration projects and figure out what fits what works what might work and then test that and see is does it animate the market is it helping is it doing what the vision expected and then looking at that as sort of launching pad to other things that might be able to be done and we have even before the February 26th order we have what we call the BQDM project in ConEd territory where this is something that was looking with ConEd to work with the third-party providers to help bring distributed energy resources to the ConEd territory rather than building you know initially a one billion dollar super station this was going to help that community and so far people are really working and very animated in that and there's a separate docket and there's a lot that's going on in the BQDM project so when you look to the rev demonstration projects the BQDM to me is the super project so a lot of the rev demonstration projects may not be as super as the BQDM but if you look and you can Google it and you'll see different things that are going on with that and I think that helps to add some perspective to the demonstration projects and demonstration projects are going to be submitted July 1st and there's a timetable in the rev order where in short order there's going to be an analysis done many different folks weighing in on it and looking to see what demonstration projects will work what what should we focus on with them and then helping to make adjustments if necessary and looking at the different things that are going on and is already even before the July 1st order there's already a number of different folks and utilities who have been publicly talking and submitting things on their different demonstration projects now the Commission is one entity in New York there and and while I like to think that you know where the be all and end all because I'm a commissioner we're not there are other aspects that are going on with the rev project and it really started even before the Commission in Governor Cuomo when he first came into office talked about an energy highway and an energy vision and reforming what was the same old there so we are looking at a lots of different fits we have a New York Prize program which is looking at giving out awards to different microgrid entities and looking at communities that would work with that we have the community choice aggregation which is looking at electricity working with municipalities to have choices in their communities and a lot of other things and then there's also different entities looking and partnering together with those things now the meat and potatoes is track 2 that comes with the and there'll be a store proposal that staff will put out and that comes with the benefit what's going to come with the benefit cost analysis how are we going to be able to pay for this what are the benefits and I call it the sort of the wants and the needs when I first when my oldest son was going to middle school I decided that he you know I got told the list he needs a laptop and he needs state-of-the-art laptop and you know in my mind if I got him the best laptop ever he would you know get all A's and go to Harvard and it would be wonderful on a full scholarship so I went to the Apple Store and you know I had my checklist of everything that they say because you know I was a neurotic mother with the first and had my checklist of everything that he needed and I went through it and you know of course the person who was selling it to me thought it was just made his day because you know this is the greatest thing I said first thing I said was money is no object so I went through you know again my father-in-law was paying for it so you know in my minds so we went through and we went through the checklist of all the things that he would need and he said yep you can do that yep yep yep yep went through and then came time to buy it and the cost and I thought I don't think that that's what my father-in-law meant when he said don't worry about it so I had to negotiate then my wants versus my needs and figure out what did we really need how would this really benefit and you know maybe full scholarship Harvard wasn't necessarily going to be for the first child but we went through the whole different scenarios and we came out with sort of after collaborating what really would work and so when I look at this I'm very cognizant of the fact that we do have a vision in the track one and we do need to figure out when we get to track two but we can't wait and we also have to start working through some of these different issues and that's where the collaboration and the next panel will talk about some of the issues that are confronting us with a distributed system so the distributed platform it's not without its criticisms let me just pull up my own criticisms you know one of the biggest questions is the role of renewable energy in the state energy plan in the in the reforming energy vision and the focus on on that and are we going to a hundred percent renewable and I want to emphasize that this is not anti everything other than renewable that everything does fit and that you know there may be debate on what's an appropriate energy source but that this isn't sort of siloed and that there's a recognition that there needs to be coordination New York it's important that we have fuel diversity and that we really have conversations about the different fits you know whether it's the gas and electric whether it's nuclear whatever it is we need to have those conversations and that especially with you know with upgrading our system there's a recognition that we need transmission electric and gas transmission and that we have to work through those issues as well so I know there's a lot of debate out there and I try to focus on again how does everything fit and what works you know when we're going through this process and understand the passion on both sides of the issue and welcome that because I do think it's it's important for us to go through that and then you know some of the other things is is we in New York have made it very clear that we want to animate the markets that we think that it should not just be you know a silo from government directive and so there is some tension that folks have raised on what does it mean to animate the market what does it truly mean to work in partnership the private and the public sector and are we placing too much confidence and reliance on the markets and now I look at our history in New York and we have done a an incredible history where the markets have worked and I don't foresee that what we're doing is trying to get away from the markets but making sure that we are helping New York to continue the robust history that it has and our New York independent system operator put out recently a anniversary 15 year anniversary report I think it's well worth reading you can Google it and why ISO and that report I think is really makes the case on just how much you know they've been focused on reliability and working with the different markets and government and I think it's important to look at that another tension with us is we have had numerous programs whether it's rps whether it's our energy efficiency portfolio standard system benefit charge and other programs subsidies that have helped with with what we're doing and so there's been a recognition that we in New York want to try to reduce subsidies and so the question is when we go about doing that how do we properly transition away and reduce the subsidies without causing Ajita for lack of a better word and how do we do it that makes sense and so those are some of the tensions that we're currently going through in New York and you know I would say that it's very important that people carefully look at the transition and carefully look at in my mind and I've said this at our sessions it's my mind it's very important that we look at what the programs were and are what worked what didn't work and look to see why are we changing things and what are the programs going to do and you know there's there's a pending proceeding on our clean energy fund so I can't comment on some of the drill down but I can comment on the clean energy fund petition is to to take all of the resources the subsidies and to put it into one big fund and then try to fit that so my question that I said at session when we commence the proceeding for the clean energy fund is really needing to make sure that we're not just putting it into one bucket for the sake of putting it into one bucket but to really understand what we're doing and to walk through all of those different things and so NYSERDA who made the petition for the clean energy fund is working through those things and parties are submitting comments on the clean energy fund and that will be a significant piece of the rev in the decision factors the next time we do that so from my perspective I look at this and I say okay so we have track one we've made some checkpoints with that we're going through track two we also have in part of this what's our large scale renewables and staff just to shoot a store proposal on that and that's also important and the utilities in their distributed system platform provider will also be submitting implementation plans for the I don't know why everything has to be acronyms but for the desyps so DSIP and those implementation plans are also another way of us gauging if we're all speaking the same language because sometimes we don't and to make sure that the way we have envisioned it and the way things are going doesn't mean that we have to stick to the vision what it means is we have to make sure that we're all connecting the pieces so it shouldn't be that the implementation plans have to just match up with what we said the vision wise however the implementation plans should make sense and explain sort of how this is going to work and you know from my perspective it's very daunting because the biggest thing for folks is you just want to know right you want to know what the certainty is like and so it's kind of like just like my husband says just tell me what you want me to say and I'll say it and you know he's got to know right that's just not gonna work so from my perspective it's the same thing it's like I can feel the stress of needing we need regulatory certainty people need to make business decisions customers need to have certainty and so when we go through this process I'm very cognizant of the fact of saying are we getting to where we can be so that people can say okay it makes sense that aha moment it's working the way it should and if it's not we've got to be comfortable enough to say listen it's not working so let's figure out what's going on here that does not mean you know and I've heard people say this that well if we don't get it right we can always fix it that doesn't cut it for me we have to try to get it right and we have to be open to people telling us why it's not right and figuring it out before we get to the end and then have to fix I don't want to get to the end and have to fix I want to be able to be partners in this because for me it is going back to the reliability it's personal so when we go through this you know I people come in and they talk about the different you know technologies and things that it really kind of blows my mind in the sense that these things can actually have reality and that people have this sort of desire to make it happen and it's all of our jobs to kind of work through it and poke holes at it and make sure that we're doing what's right not changing everything there's a lot of things that are going to be the same but we also when we need to make changes where this is what we're doing this is supposed to be you know it's kind of like until this job I had a flip phone the only reason I didn't change was because it was the first phone I had I never and the only reason I had to change was because the plug stopped working to charge it so but I still have it as a reminder of that meant something to me and the scary thing of when I went to my iPhone and I had to bring my 16 year old with me to figure it out it literally not embarrassed to say this 10 trips to the store because I had to get used to the idea of somehow this was gonna you know I just wanted my old flip phone back because that's what I was comfortable with and it's not that I still you know I have my iPhone and it's great and I don't use all the gadgets and gizmos but I do use some and it works for me and you know from my perspective that's kind of what we're doing we're letting go of some things that you know are no longer that we need to upgrade but we're also figuring out what works and what do we really need and don't need and again the wants and the needs are different depending on who you are and we have to be as regulators we have to be cognizant that we need to move away from over regulating when we're we're stopping things that need to happen but being there to make sure that what should happen and being there is a bridge to help in making things that need to be I don't know if I made any sense but that's kind of my perspective and in life as a regulator and just the excitement for rev it's still you know it's very hard to talk about because it's also a lot of conceptual things and you know I know a lot of you come from different perspectives so I welcome any questions or specifics so we'll take a couple of questions the only thing I wanted to say is you had we known about your birthday in the mess up with the present we would have started the hashtag you know by present ideas or something like that and really made your trip here useful we could sing happy birthday mark if you would like to you don't have a microphone in front of your very tone deaf face so yeah so one of the things I wanted to ask and something that you highlighted in your comments but I want to maybe put a little bit of a finer point on and then we'll take some questions from the audience is is sort of the juxtaposition of timing and outreach right so so there's a bunch of tension as you quite rightly identified in the process that you're going through and some of it is from people who would like you to move faster and other people that think it's going too fast and it's too much change all at once and where do we find this certainty and the second is about sort of all this outreach you do a wonderful job of connecting with people and allowing them to know that this is a real issue for you do you ever worry about sort of the sequencing of activity in that you won't be able to give enough of that regulatory certainty to folks in convincing enough way to execute on some of these you know goals right so for example it's not just sort of what's going on in the track to process but it's changing a lot of the other sort of New York policies and programs that were underway even before you you know sort of started this and is there is there something is it the demonstration projects is it the stakeholder outreach is it sort of the the the trying to get things right and not go back and fix it that you think is sort of key to being able to pull this off in an effective way so that people can make the investment I think for me is the importance of making sure that we don't get caught up with ourselves and we are trying to take things sort of invite size pieces when we can and that's really for me the demonstration projects will be key in terms of looking at them and seeing what gets off the ground what's having trouble getting off the ground why and really drilling down you know there's a lot I mean if you go on our website and it's every public service commission website so this is not going to be sound this is gonna sound like a criticism but it's really not it is very hard to follow we've got a lot of proceedings I have you know cheat sheets upon cheat sheets from my own internal processing and so I understand you know at the end of the day I live and breathe or proceedings but not everybody does you you know most people you want you want it hot when you know when you're cold and you want it you want to be able to have the heat and and the air conditioner when when it's hot so you know and you want it you know you want not to have to spend a lot of money and then there are people who can't spend a lot of money you know so we need to kind of figure out from our perspective you know are we really doing what's necessary for the customer and for the good of New York and it's our job I think to really make sure at the Commission that we are having you know important benchmarks the small ones and the big ones you know the meat and potatoes of what we do at the Commission you know we have a couple of dockets when we have if we have a Commission session once a month and we have the the the dockets where we talk about it session and vote and then we have a consent agenda a lot of that stuff you know maybe it's not sexy but somebody cares about that however small however big it is and it's my job as a commissioner to make sure that we take seriously all of that and we're making sure that we're moving along things in an appropriate way and looking at all of it and knowing that people care and you know we need to be cognizant of that so all the different things we have to follow and it all does fit together and my benchmark you know for me is are there things that aren't happening because we're tied up in you know what we're doing at such a high level that we're not actually having you know the the sustainable drill down things that you could at the end of the day you know sound off on these are the different things and this is how it worked and there are things that were going on before the rev proceeding but that because of it I think is now helping and making things fit and you know we're seeing you know optimism and we're seeing people who are interested in coming to New York and it's our job to make sure that that doesn't go away because we're you know not having the drill down that we need to I want to make sure we've got time for all the questions I see a lot of hands please wait for the mic name and affiliation and question in the form of a question if you can we'll start way in the back first thank you first of all happy birthday thank you I think all of us happy birthday to you anyway I did a lot of work my PhD thesis I'm like with power liability and I have to say that I was never oh my name is Mike Telsen I'm with General Atomics now and I have to say that in all my work I didn't come across as poignant an example of the need for reliability is yours it's quite impressive you know say the least in my work I realize that the time lags between the signal of scarcity in the market let me back up the problem is that reliability costs money and the question is who's going to pay for it and if you rely on a system that is purely market run it'll it'll take care of itself but the lags in the system are such between investment between the price and the need and the investment that you're going to have a commodity cycle kind of situation this has been studied since the 30s and agriculture economists have done a whole theory of pork you know belly cycles and so on I maintain that that's not acceptable in our society and the first time the stuff hit the fan you'd have some radical re-regulation so installing a system that will sort of take care of that reliability unfortunately requires a market system and a heavy hand heavy involvement of regulatory policy so my question is to what extent has the Commission done or will do to sort of try to figure out how do you how do you set a system such that the someone's paying for that reliability you do it sufficiently in advance so you don't have that problem hitting you know because it'll hit the issue is as a hit a year after you set your rules or six months or and in the short term you can always curtail demand you can do some pricing of capacity you know pricing of service and get the lower value load to go off so is that a clear enough question yeah and I think it's an excellent observation and question I'll explain because that is something that we have to contend with you know I mean it's it's really a three-pronged sort of balancing act right balance for the industry that wants to take advantage of these things you know balance for the customer who wants to have safe clean reliable electricity or energy at reasonable costs and really balance for the regulator that has to look at all of those things and figure out how this is going to work especially because you know we are focused on safe clean reliable and affordable so those things and and not just for the short term but for the long term so that I have a particular policy perspective that I live and breathe with which is that events drive policy and policy drive actions to fit you know the actions to fit those policies and those three things are like a wheel I'm a biker so it's all about making sure that the events don't drive the policy to go out of whack certain policies or have to be reasonable and then those actions to fit the policy need to be able to be done and if the actions can't be done to fit the policy maybe there's the policies out of whack so it's that it's that bike the events and the policies and the actions and keeping to make sure you know things happen and we react right you know I've never met a regulator who doesn't want to like do something when something happens or you want to react to it but you've got to make sure that the policy that you're implementing for the event that drove this policy is reasonable and then are you going to be able to have that action and in rev case it's about the technology and the different things that are come to fruition and so again it keeps going like that and so those are sort of the drivers and those are the things that we're looking at and those are things that we'll have to explore and also you know the vision that we set out for track one we have to look at from the benefit in the vision you know there was some article that came out May 6th that I forget the headline but it was kind of taking a shot at the PSC I didn't really mind it but it basically said in a nutshell a lot of vision no real details right and in some ways that's fair but in other ways it's set the vision and in that February 26th order you know that one pager which listed out sort of the deliverables and the timetable we're trying to get to the details and getting to the next step and cognizant of the fact that those are the things we have to take care of so your question is absolutely appropriate is making sure that we look at those things and and fit and you know New York is not alone you know while you know we're probably getting a lot of the headlines other states are doing things maybe they're not doing it with the vision they're doing things some small some big and it's about us also collaborating with others throughout the country throughout the world in looking at what are we all doing that we could take away and and work on to help you know keep our system you know and make sure that it improves over time we're gonna be on about five minutes left for this part of the program so what I would like to do is take a couple questions and then you can answer them together that's helpful we've got one right here and then one right in front of you well I got to rehearse it once Matt wall nuclear energy Institute New York has fallen pretty much flat on renewables it has not come close to meeting its goals it's picked at oddball approach nobody else is using it hasn't gone very well the rev seems to call for a lot of low efficiency natural gas in in micro grids is the rev combined with New York's failure to meet its renewable goals consistent with meeting carbon goals mark lively utility economic engineers you I was impressed that you said that you wanted to reduce subsidies and I look at residential subsidies as the people who are putting in solar are getting a subsidy on their use of the distribution grid I have a friend here in DC who has put on so much solar that he's a zero net on an annual basis and he says but I'm not paying for the distribution grid I said well one of the ways that that can happen is having a demand charge for residential customers do you see a change in the structure of electric rates retail electric rates as part of this initiative so let me try to wrap it up with the both things we're looking at everything and obviously that's part of some of the things that we're looked at in terms of and my my comments on the clean energy fund public comments at a session focused on needing to look at what worked what didn't what still works what doesn't why are we changing things and if the goal is which it is to reduce subsidies how do we get there in a balanced way and fuel diversity is in is important and you know it's not a silo you know EPA is going to be coming out with some final clean energy clean energy plan and looking at that shows that you know other fuels other than renewables are very very important that includes nuclear and that includes natural gas and you know there are challenges with that different states looking at it whether you're a Reggie state or a non Reggie state and we need to be cognizant of the fact that we have to look at all things and fit it and also talk New Yorkers are very beauty of New York is everybody has an opinion and you know we need to make sure that we are carefully weighing it and making some balanced decisions and you know I you know I have a policy when people come in my office and they tell me everything's good I like you know say really because I want to hear you know the things that they say when they leave my office and you know quietly say it like tell me you know tell me what your issues are you know submit your comments be blunt and don't waste my time with telling me that everything's good if it's not and so those are the things that we really need and you know I tell it internally to staff I tell it to my fellow commissioners and I tell it to the parties we've got to do this together and the only way we could do it is to rip off the band-aid and talk openly about you know what's going on so thank you. Thank you very much Mr. Berman for spending your birthday here with us today and please join me in thanking Commissioner Berman. We're going to transition to our panel discussion now I think we're going to adopt a term that that Commissioner Berman used the meat and the potatoes part of it please come on up Rich and Brian. Clearly there's a lot of technical detail that goes into executing on the reforming energy vision that that Commissioner Berman just sort of overviewed for us in the New York context and we're really delighted to have with us today Rich Zidano from the regulatory assistance project and Brian Hanigan from I'm going to read your title because it's getting longer and longer every time I see you. You'll chew up all the available time. The associate lab director of the energy systems integration at the National Renewable Energy Laboratory. We were joking around backstage before the event I actually went out to see it and and Brian used to be a Washingtonian and it's this amazing facility and if you want to see where you know stimulus dollars can go get spent in impressive ways I'd go out to NREL if you've got some time but but people had asked me you know is Brian ever coming back to Washington and I said no way they gave him a really great toy so he probably won't come back for a good period of time but one of the things and we wanted to go over today was some of the regulatory market and technology issues associated with achieving a more distributed distributed energy system one that incorporates distributed energy resources but that also sort of execute on some of the policy visions and goals that we were just talking about with Commissioner Berman so you each have a presentation maybe we'll go through the presentations and then have a little bit of a discussion if that's okay yeah I think that's that's that's fine and actually if you've got a keyboard yeah I'll do it from here be a little bit more relaxed well good afternoon everyone first to Commissioner Berman thanks very much for setting the stage ably as a former Californian before being a Washingtonian we used to joke amongst ourselves that California always prided itself on leading the way just sometimes we were never quite sure where with with the work that's going on in the rep process I think you guys have laid out a very ambitious vision and one that's challenging the other states in the nation to follow suit so thank you very much to you and your colleagues for leadership one of the things I'm going to talk about is how the federal government is looking at the challenge of modernizing the nation's electric grid and some of the steps that we're taking in the national laboratory system to to execute on that and to help states like New York meet their ambitious energy plans the fiscal year 16 budget that was submitted to Congress several months ago and is now topical discussion here includes a very healthy crosscut activity through the DOE on grid modernization and I encourage you to take a look at the actual budget text I don't recommend that lightly but in this case it's actually a good read of a few pages which describes the department's ambitions to modernize the nation's electricity grid in line with the recommendations that were made in the quadrennial energy review about the need to invest in our nation's infrastructure the basic premise for doing that is quite simple our grid has served us very well over these past 100 years the hub and spoke model that's in place with large generators a one-way distribution system and a relatively passive customer has given us the reliability and the affordability frankly that's the envy of the world the challenge is that everything that we do to try to make that grid cleaner from an environmental standpoint usually impacts negatively either the reliability of the grid or the affordability or both and as we look at emerging technologies in the home and in the building or connected to the grid via the vehicles that are becoming increasingly commonplace we look at the variability coming from wind and solar generation on the supply side this grid which has been fairly stiff and rigid and was built that way now is coping with immense amounts of flexibility on the order of millions and perhaps even billions of data points if you believe the forecast for internet of things and all the devices that will be caring add to that the challenges with more extreme weather events add to that the challenges with reliability being more valuable both at the level of the individual consumer as well as the level of our manufacturing and our economy and you've got yourself a very difficult challenge that is absolutely necessary for our country to meet in order to remain in our position of leadership in the world so the just a sort of underscore we've got this hub and spoke model the conventional wisdom of the grid being on the left-hand side behind me large centralized generation economies of scale yes a diversity of fuels but basically large you know megawatt to gigawatt type chunks moving passively along a one-way transmission and distribution system to a fairly passive customer that takes electricity when we give it to them at the price we give it to them not a whole lot of feedback if you fast forward even five years maybe even less than that it used to be when I showed this in my former job it was ten years away now it's five years away and in some places that's actually even here today you now see this new two-way flow of both information and electrons between the consumer and the producer along a distribution and transmission system which has to be much more agile and flexible and I'll just beat on flexibility for a moment that flexibility is probably the single most defining characteristic of the modernized grid that we don't have today and whether it's energy storage or power electronics or responsive demands there are a number of ways to get at this flexibility flexible gas turbines small modular reactors that respond to market signals to produce electricity in one place hydrogen in another place when the electricity is being provided elsewhere all this framework around flexibility is really I think at the heart of what Rev and what California and what the myso and the PSG am markets are trying to do it's how do we create an incentive for that flexibility to come forward and for the technologies to be developed to provide that and if you don't believe me only look at the rate at which these technologies are penetrating into the market these are four curves from a recent DOE study that showed the penetration rates in green and the cost declines in blue and yes some of that was as a result of investments very targeted on the part of the government but even now if you look at the recent announcements by Tesla around battery storage and some of the other startups in that space you're seeing the similar cost declines and deployment increases so this is the future now we don't have to wait for it for much longer so how the DOE is responding to this as a identified need is to say we've got a lot of activity going on around grid a lot of different research projects labs universities industry consortia but so far we've done it in a very haphazard way we haven't coordinated our research programs we haven't matched our facilities with one another we haven't created the consortia and the networks that really move the needle on this challenge of getting a modernized grid at scale and at a pace that we need to meet our nation's energy and environmental objectives so the DOE announced this year and actually commissioned our laboratory and the these 14 others in the system doing work on grid to get our act together to actually put together a first-ever inventory of what research projects we were doing who we were doing them with what we were planning to deliver and develop a single coordinated work program around this to bring together the roughly 200 million dollars in research that we're already doing related to grid and focus it like a light beam like a laser on these challenges of grid modernization we've also identified some gaps for example sensing and measurement to the grid it's very difficult to see the entire grid we learn that through the northeast black out we learn that through Katrina and Rita and we still learn that in many ways when you go from control room to control room everybody's got their piece of the puzzle but yet with this increasingly connected system we need to also know what's going on on a more national and perhaps even a hemispheric level with our interconnections across borders so how do we do a better job of sensing and measuring the grid and actually predicting what the grid is going to need in terms of voltage or energy or capacity or any of the quantities that might be out there how do we predict that hours in advance so that now the commissioner can set up markets that will clear in a very liquid way and be open and transparent and deliver the goods and services that we need to keep that grid reliable as we gain that flexibility we need for all these new technologies that's one example of how kind of bringing our work together focusing the activities of the national labs and our partners in the private sector will give a lot of value and I think deliver the outcomes these are the six key areas that we've put our work into I mentioned sensing and measurement as a very important one I started my career as a meteorologist and I know every good weather forecast is based on good observations what we're trying to do is forecast the state of the grid 612 24 hours in advance so that the devices in your home can respond the generators can load follow the markets can clear and so we've got to start there with good data once we've got that then the devices all of these emerging technologies know what to transact with the grid and we can begin to put them together in ones and twos and threes and fours and start to figure out what your connected building or what your electric vehicle connected to your smart home or what the combined heat and power unit in your neighborhood will need to do in a more aggressive way to support cleaner energy objectives we then can use that better data to run our systems closer to the margin so that maybe we don't need to keep as many reserve capacity around and that's a lower cost opportunity that's there while maintaining reliability we can also design and plan with new tools to understand what this mesh network looks like rather than the hub and spoke model that we've used for the past century we can also look at the security and resilience not only of the grid itself but every single device that connects to it because if I can access your home through the smart meter or through the thermostat and your home is connected to the rest of the grid I now have an entry point so how do we make sure that those who are manufacturing the devices and installing them do so in a way that is secure and resilient and on the subject of resilience if I've got many options to get those grid services what do I care if I lose one as long as when the hacker penetrates my device or it fails for whatever reason there's a very easy way to reroute around that and keep the function available for the rest of the people in my community or even the other parts of my home that are not affected and then finally as you heard from the commissioner all this technology stuff is great but it's useless if we don't actually put it in the market and get it to consumers so working with states and industry and local governments and even individual consumers setting up the markets and the regulations and the frame of enabling these technologies to work in a way that we trust that we buy into that we say okay here you can have my flip phone I'm gonna trust you and or in my case my blackberry when I left Washington really this iPhone thing does the same thing you sure building that confidence in that trust is an important part of getting these technologies to market and I think operating through regional demonstrations like the BQDM and other opportunities to work the Pacific Northwest smart grid as another good example where we've had some early adoption of technologies those are all things which are very important and essential to the effort and a big part of the DOE effort is working institutionally so this is it this is the grid modernization laboratory consortium the goal here is to allow you to access any of the resources in the lab system by accessing any one lab so if you're in New York and you work with Brocaven Brocaven can work with NREL and access our technologies as though they were on the Brocaven campus staffed by Brocaven people working functionally as one system as opposed to 14 laboratories that kind of beat each other up for opportunities that's really the good governance model that we're trying to bring forward I'll close by just highlighting my playground and if you're ever in Denver please do take an opportunity to come by and look Sarah wasn't kidding it's a little bit of a Disneyland for for the engineering set but it's also very useful for modeling and simulation of markets and policies and regulations as well the best way to describe this ESA facility is it's an it's a megawatt scale distribution system in a box we have several different high bay laboratories one of which has smart homes another which has commercial and industrial equipment a third which has energy storage a fourth focused on micro grids and so on you get the idea all of these are connected by distribution a distribution system for distribution bus bars that run the length of the facility and allow us to plug and play different combinations of devices and then power them and run them with models and simulations of real markets real environmental data real wind and solar production through our grid simulator or PV simulator so you can actually kind of think of this as a design studio if you will for a future distribution system that will serve your needs it's coupled to a high-performance computer at 1.2 petaflops soon to be twice that it's in the top 30 of the world the thing that makes it really cool is it's liquid water cooled now I remember that dropping my blackberry into water was never a smart idea but somehow we found a way to contain the water and use it to extract the waste heat from the computer and run it right into the laboratory system so that we reduce the heating load and we've got other projects where we're working with a water utility to run their pumps and their treatment cycles on a signal from the power utility that says run when the wind's blowing and don't run when it's not you think about it that gives good clean energy to the utility that allows us to minimize the puts and takes on the grid and it probably gives the utility an opportunity to work at lower cost so those kinds of system integration opportunities that we're focused on in this facility and as I mentioned it's connected to all of the other lab facilities as well so working with your laboratories in your part of the country you can get an opportunity to work with this this was funded by ARRA it's for the national interest we've got 60 different commercial partners in in the first 18 months of operation so it's truly something that whether it's a utility or a third party doing demand response or even a state or a local government it's here at your service and I encourage you to take advantage of it well thanks very much Brian that's a lot of really excellent work and I want to definitely get into some of the details of some of those work streams that you're on but I'm conscious of time so I want to go to Rich and talk a little bit about some of the work that you all are doing thinking about how to execute from a regulatory and a policy perspective on some of these issues as well so let's get that all on the table and then we'll have a good thank you Sarah thanks for inviting me and nice to see you all this afternoon what I wanted to start with is to talk about the consumer and then we'll talk pivot to talking about utilities wrap is focuses on helping regulators around the world with utility policies focusing quite a bit on how government works and so we'll we'll I think start with a consumer focus and the changes that they're creating the opportunities and challenges how that affects utilities and then bring it back to what is what is government what's the government challenge so we have the old-fashioned consumer who's just sitting there thinking about other things but but we then we also have active consumers consumers who are willing to do things willing to change their behavior perhaps for reasons that may involve money may involve other things we have consumers who are producing electricity and these are individual consumers consumers who who have an affinity and might live in a place around where there are a lot of consumers who want to do this we have universities and other folks who want to do combined heat and power we have folks who are thinking about a microgrid orientation perhaps in places like Hawaii where there are strong reasons to to avoid high electric rates and and then we have the idea that that when we as we think about all these things there become lawyers getting involved and perhaps there's some reasons why this is complicated or hard or illegal or at least it seems like you're crossing some sort of a line so these are the kinds of things that we're focusing on at at rap these days and so a couple of ways of of entering this conversation are through what I think of is value and access value is not a very good not very successfully communicated to people in the power sector today with flat rates consumers don't get very good signals and in many other ways we don't signal what the value is to to the grid for customers for investors for people to do anything so we have a value problem the retail rates are off the compensation for distributed generation is is kind of random net metering is a nice infant industry approach to compensating for DG it's been pretty successful in attracting people to it but it's pretty rough we net meter in low-cost states and high cost states in just the same way without really any sense of whether the power is is worth that in these places and one of the problems that that is at the root of this is that distribution system planning largely doesn't exist distribution system planning is largely about capital planning for utility companies and we have to keep the lights on of course but the idea of value about where where where investments would be valuable and what alternatives to traditional investment plans those don't really happen and so we don't have a very good signal for value from the utility system and then when we try to connect retail wholesale markets we also run into failures there too the there are some good connections that have been made in some of the of the organized markets but in fact when you look at the order 745 debacle with demand response what that has revealed really is that states have largely ceded the idea of figuring out what the worth of demand response is to the organized markets and so basically the value of demand response is the value to wholesale markets we don't know in most of these cases what the value of demand response is to the utility and into to retail markets because basically we've decided to let the ISOs and RTOs worry about it so we have some significant failures today for people who have capital to spend whether they're individual customers with $10,000 or $5,000 or whatever or for large customers or for utilities that have millions and billions of dollars to spend the signals for value are not working very well likewise access is a challenge as well we have gateway technology of some of the country has advanced metering infrastructure deployed some not the physical access to the grid for distributed generation is is resolved in some ways in many places and yet we continue even in places within a connection rules and net metering to continue to have some problems with customers getting their generation on the grid and connecting innovation with customers I think this is this is where we have to get generative we we're doing okay not great but okay and getting what is becoming garden variety generation connected but driving innovation is is more complicated and by this you really connect back to value how do we how do we signal value and then to the extent that utilities are the intermediator between the innovators and customers I think there are a few utilities who are who are arguing that they would be very good at that but I don't think any of them would say that they are very good at that now and there are some who aren't even even thinking about it so we were we're interested I think in trying to strike the right balance between regulation and markets I think maybe that's a common thing that you're going to hear from all of us today is striking the right theme of the balance between regulation and markets to get these these balances right so let's talk about utilities for a few minutes the defensive reaction that we sometimes see in in in the United States is they're concerned about customers being too successful at producing their own resources and worried about recovering in their embedded costs and in fact potentially stranding embedded costs and I think that's a very legitimate concern utilities have a very important job to do they should be compensated for it in appropriate ways we need to answer this question we have to be attentive to fairness between participants and nonparticipants the the first house that I showed you the person who's not going to be thinking about this perhaps ever needs to be treated fairly in the midst of all this the advantages that come to the system should be shared fairly as well so attention to fairness is critical if the utility is worried that their business model is under threat well that's something that I think we need to all talk about together if if we're in fact watching an industry in transition I think we have to help that transition and not just protect the old guard so if there's a threat to rate base and the associated return I think we have to recognize how do we help the utilities successfully earn while they do the job that they need to do the Brooklyn Queens demand management project I think is a provisional example of a state and a utility that are working to solve that problem in an affirmative way and I and I think the New York rev process is probably going to discuss it in the in the meat and potatoes port part of the docket some more ways to do that the technology challenges are important Brian talked a lot about the technology that's coming but any any reading of an or recent order from the Hawaii Commission will tell you that some of the the technology challenges are perhaps coming faster than some utilities are able to deal with them reacting to the distribution challenges of heavy renewables penetration is not easy and in fact there are our control room challenges how do we operate the system and there's human factor challenges I don't know what to do I just don't know how to do my new job we have the right people to do the job that's coming I think that these are significant challenges which we have to just name and address now there are some opportunities here for utilities I think one of the things that has come up in the New York rev process and in the 21 process in Minnesota is the idea that performance regulation could actually direct utilities towards outcomes that are important to society things that they can do to to promote good outcomes and to be rewarded for those we need to experiment with that managing upward cost pressure suggests fighting alternatives managing risk suggests that we should certainly be looking at different kinds of scenarios and certainly the environmental imperatives are part of that embracing customers as a resource is a line that my sense is that utilities need to cross some of them have done that and some of them have not done that I think those that have done that are now in the business of thinking about innovation and in terms of resolving all of those defensive challenges that I talked about and steering the organizations into an area where customers really are going to be prompting this mesh approach that Brian talked about and that not just because of resources but because resilience is increasingly and evidently important I live in Rhode Island where people now talk about just as a matter of course having to protect against climate induced events as a more routine matter. One of the nice interesting and provocative things about the New York rev process is suggesting that utilities can earn money in different ways not just from investing not just from showing up but from actually delivering value to customers. So not just a performance regulatory reward but to actually do things that the markets are going to want and earn fees from those so revenues from services is another opportunity for utilities that are is I think here here to be examined. So to close I think that we have we have exponential growth in distributed generation that's what the data are telling us that one of the things about exponential growth is it's surprising we have trouble understanding exponential growth. So we should get our top of that and realize that it's coming and get ahead of where the exponential growth is taking us. The role of government is very important here to call attention to all of these things to address the opportunities. Very often when I talk to regulators these days I'm talking to them because they know there's an opportunity here but they like or prefer or just lapse into talking about the challenges about all the things that they've got to deal with and I have always sometimes have to remind them this is a this is a good thing. This is not this is not a bad thing that we have all these opportunities and they realize that but they sometimes overlook it. There are vulnerable interests to be protected. There are also interests that need to be addressed as well because for example I think in in most of these cases around the around the country where these issues are coming up utilities could just stop everything. They frankly the politics of many of these state capitals indicate that utilities won't necessarily let anything go where they don't want it to go. So to some degree there's a sense of well how are we going to make this right for the utility. But that's only makes sense because we're going to have a delivery utility. They're critical for every infrastructure around the country. So let's try to figure out how to make it right for them. Stimulating innovation is something that governments can do. Everything that Brian has talked about is intended to motivate that. Frankly regulators don't always get rewarded for stimulating innovation. Sometimes we have a do next year. We did last year. That's the safest way to stay out of the papers. But I think we need to figure out how to get past that. I think performance regulation is going to be a way to do that. I think stimulating markets also. One of the things I like about this movement is there's a certain libertarian streak to it. Customers want to do these things on their buildings to produce energy. Why should government be in their way? And if there's no good reason for government to be in their way, then let's take government out of the way and in fact help them have government be helping. One important way for that is to help innovation, excuse me, information be available to customers. So in the end we see that the distribution system right now has been built up for many years by the efforts of the utilities, the advocates, the regulators themselves. There's a strong inertia to keep it the way it is. There's also a strong set of forces that are driving it to change. And government is going to have to manage those forces. I strongly identify with the questions that people like Diane Berman get about why can't we go faster because these forces seem to be coming so fast. And yet I also appreciate those who say we're going too fast because there are so many issues at play and so many concerns that people have that it is important to move forward deliberately, which means forcefully, but yet not too fast. And so government is going to have to strike the right balance there. They're going to be guided by statutes, so legislatures may get involved. They're going to be prompted by politics. I like the framing that the governor of Michigan is using to reduce waste and manage risk. None of that is about wonky electric stuff. Reducing waste and managing risk is something anybody can understand. But from those simple points, they're getting a conversation started about reforming their energy vision in Michigan. So I'll stop there, Sarah, and we can talk about why this is hard. That sounds like a great place to start. Thank you both for those comments. Maybe before we get to Q&A, I just wanted to ask you both a question. Brian, one of the things that's confusing for me and for other folks is that we're having kind of two separate conversations. One is about all of these technologies that are finding their way into the marketplace that people are able to use and folks that manage an electric power system are recipients of the impacts that these things have on the overall system. And then the second is a conversation about envisioning and managing a system of these technologies. So to make this a little bit more concrete, what about a place like New York? Does it have all the technologies it would need to execute on its vision, or how should we think about that outside sort of this demonstration project concept? That is a fantastic question. And one of the reasons that my part of NREL is called energy systems integration is that we're looking at the grid as a system of technologies, but we're also looking at the grid as one part of a larger set of energy systems transportation, the built environment, water and wastewater. If you come back to my central claim that what we really need is flexibility, then anything that provides that flexibility, any device that can do that is welcome. And I think from that respect, we've got the technologies in the box. If you look at the QER, the assessment from the DOE was the component technologies are there. But what we don't have is the integrated set of technologies working in a way to deliver this value to consumers that they're rich, I think spot on. It's about a new value to consumers in a way that is as reliable, as affordable, and more clean than what we've got, more sustainable than what we've got. And by reliability, it's security, resilience, it's the whole, all those different flavors. Affordability may not be in terms of rates. It may be in total expenditure. If I use less of something, it can be a little bit more per unit if I'm also becoming more efficient so that my overall build doesn't change. So think of it kind of like we've got all the instruments in the orchestra, but when they play together, they sound like crap. We need to turn that into a beautiful symphony, and that's the effort that we all need to be engaged in. Rich, in sort of building on that, for your perspective, so this getting to the symphony that Ryan is talking about requires getting people involved in the market that haven't necessarily been before, right? So we talk about it in the New York Rev context. In one of the fundamental jobs, the value creation of utilities and regulators in the past is to ensure service, right? And so there is sort of this fundamental tension between introducing new concepts of value and having that sort of continuation of service. What do you think, and doesn't just have to be in the New York context, is required both to ensure that these new markets, these new systems have consumer protections, but also an appropriate value of sort of the social justice component, right? That innovation doesn't get sort of replaced by, or doesn't replace sort of that fundamental need to make sure that everybody has access. How do you think, is there a place where you think there are certain policies that are really key, or a sequencing of policies that are really key to making sure that that happens? New York is, I think, trying to deal with that by doing everything at once. There is a challenge in how you roll these things out in any other state. It's going to be this way because other states don't have the resources of New York, where they're going to focus on one or two entry points, and these other matters are going to take time to come out. As a former consumer advocate in Vermont, I think that it's always important for government to be thinking about how the vulnerable customers are treated. And as significant changes come to the system, there's going to have to be attention to the rate design that qualifying vulnerable customers are facing. And I know just today, in fact, there is a meeting in Brooklyn to talk about those issues related to REV. So I know that REV is taking, the New York Commission is taking that seriously. It's this balance between regulation and markets, though, ultimately that is going to determine whether the government is focusing on the right things. It just has to. I mean, I think I again appreciate Diane Berman's point that we shouldn't just be lackadaisical about assuming we can fix what fails. We've learned a lot about the relationship between electricity and regulation and markets over the past 20 years as we've thought about retail and wholesale competition. We need to apply all those lessons, as well as what we know about technology now. We may not have realized it, but the last 20 years has really been our preparation for this. And I think we have to take it that way, go to school, learn from history. And so I'm actually confident, but there are a lot of tough issues. And I think this rate design question, the fact that there can be winners and losers in rate design inevitably really are, is going to give some pause to a lot of government officials. And I think if they shrink from that challenge, they're going to, I think, come up short. Extension of that process, too. And Brian, this might be something you guys have done some work on, is learning how to convey to the consumer what the new value proposition is fundamentally, right? I mean, how do you use some of these new technology platforms to tell people that this might not be about their rates anymore. It's about their total expenditure to think on those grounds. I know NREL does think about that a lot, too. Yeah, that's a great point, Sarah. And moreover, I'd add, how do you do it in a way which allows for experimentation, not on an actual system, where the causes, the outcomes of failure are someone, you know, gains the market a la California a few years ago, or the lights go out or what have you. And I think that was one of the reasons why the US DOE funded the laboratory capability that I'm now stewarding is to give both the regulated community and the regulatory community an opportunity to meet in a place where they could just ask, sort of, well, what if we change the rate structure a certain way? How would these devices behave? How would consumers respond and have a form to answer and ask all those questions? Because I think the challenge was about a decade ago, we kind of, you know, bore down on this pathway without really kind of, again, California, not knowing where we were going. And we learned lessons the hard way. And to Rich's point, we now need to harvest all of that, whether it was the move towards deregulation 15 years ago, or whether it was the pilot projects that we funded under the ARRA now that says, hey, you know, there are some value streams out there to be harvested if one wants to look for them. How do we build on that to go to this next level and do it in a way which everyone can feel confident? That's why I come back to this notion of a design studio. What you really want at the end of the day is a place where you can kind of move things around and get all the instruments working. And then you walk away with a blueprint that the utility CEO, the consumer advocate, the regulator, the third party finance organization, all look at that and go, that's how we want to transform our community, our campus, whatever it is. This is now our 10 year roadmap. Let's mobilize the finance. Let's provide the regulatory certainty such as it is so that people will be willing to take those bets. There's a missing piece between where we are today and where we need to be in order to achieve our goals. And I think that the labs and the federal government have a really neat opportunity to provide it if we act agile, if we move at the speed of the market, if we do all the things that historically they haven't done. So we'll see how it goes. Okay, well, we've got a lot of knowledgeable folks in the audience. We have about 15 minutes for questions. Please again, name an affiliation form of a question, a question for in the back. And don't be shy, Brian said. So don't be shy with Brian. I am Varun Sivar from the Council on Foreign Relations. Thanks to all the speakers, I thought it was very helpful. Brian, you just said that a lot of the value is going to come from systems integration advances that component technology is already there. What you need is better orchestration of the instruments. But you and I have spoken previously and I got the sense that another big value adder from ESIF is going to be testing and demonstration of brand new component technologies in the integrated systems environment. So I'm curious to hear how you think about these two goals, whether they're at odds and what is going to be most valuable for utility that comes to visit you? Is it going to be better systems integration? Is it going to be new components that they see demonstrated or both? Yeah, that's a great question. It's both. And when you look at the utility partners that are doing work with us today and with the other labs, some of them are evaluating a particular set of technologies for fit for use. OK, I want to, you know, put some critical power to this customer and, you know, Company X is pitching me on this idea. I want to see it work first before I go that way. That's cool. Don't get me wrong. A lot of that needs to happen. What really fires my rockets is when that system now provides multiple benefits in ways that people kind of sit back and go, wow, I didn't know it could do that. So, you know, right now, the big challenge with net metering and with solar PV on rooftops is the put and take on the grid, right? So as an engineer, I'm like, well, how do I reduce that to zero? How do I maximize the amount of PV that is generated on my rooftop that's used on site? Well, now I've got all the plug loads, all right? So that's my starting point. But how do I go beyond that? How do I, you know, heat and cool the building? How do I fuel my vehicle, be it through electricity or hydrogen or something else? How do I actually recycle and reuse the gray water on my system? So those are all flexible loads now that sop up more and more of that PV on the rooftop and give me some storage capability or the ability to ship the demand and meet the supply. Well, what have I done? I've also probably reduced my natural gas bill for heating and cooling. I've probably reduced my runs to the gas station for the vehicle and I've reduced my water bill because I'm using more of my water several times over before discharging it and I've probably reduced my waste bill as well. So now my value proposition is much bigger than does my PV have the same levelized cost of electricity or not as the grid. Well, no, it doesn't. It's not going to unless we have a massive breakthrough and let's work on that by all means. But in the meantime, let's reduce the need for all of these policies and subsidies and so on by creating a set of value propositions that are much larger than what we're doing today. That's what gets me excited and that's the other half of what we're doing at NREL. We've got Doug and then Michelle up here. Doug Hengel, the German Marshall Fund, what can we learn from other countries on these issues? I'm thinking particular of Germany and the Enriga Venda. We do a lot of work in Germany also and I think we're in relatively good shape in the United States because we have a well connected transmission system. Europe, I think, needs more transmission to connect the different countries together. Nationalism is still an issue in Europe. But what we can learn from them is that distributed generation can be a benefit to the grid. And I think, I say that, that sounds obvious, but my sense is that a lot of places in the United States, the distributed generation is still thought of as a social experiment and that it's not really treated as something that's valuable. I think the net metering debate, for example, if you sort of break it down suggests that, you know, we're giving these customers a break on their electricity. They're not actually doing anything for us. We have to do everything we were going to do anyway because we don't really trust this stuff anyway. And meanwhile, in Europe, we see, I think, significant dependence on customer generation. It's working. We had an eclipse. It was great. So I think that there's a mindset that only in a few of the utilities in the U.S. where customers as a resource become something they actually believe and not just something that is told to regulators because that's the dogma. I think that's one of the maybe the biggest thing, is the customers are a resource that this two-way thing is real and that we can make it work and it can be better. While the mic's coming up, I'll also add there's some really neat systems integration elements coming out of Europe, looking at extra renewable power to synthetic natural gas that can be stored in the pipeline system and moved over seasons, which is a really big issue when you start going to high penetrations of renewables. Kind of the gigawatt day challenge, combined heat and power is much more prevalent in Europe than it is here. There's some great opportunities. Biomass to electricity. We don't talk a whole lot about that in this country, but there's a very well- developed field there. And then we can learn from the grid operations, the TSOs in Europe, where they're already incorporating lots of variable renewables. How are they managing it? How did they represent a postcard for the future for some of these utilities that say, oh, I don't believe you could ever get it up over 10%, 12%? Take them to Europe. Show them it's there. It's 30% to 40% on average, sometimes 80% to 100% instantaneously. We've put together something called the International Institute for Energy Systems Integration, which has a number of European partners and that whole goal behind that is to transmit the best practice, work on training the new workforce, which Rich mentioned is a huge issue. And that's an effort that brings our labs, other nations' labs together, in more of a global version of what I talked about earlier on grid modernization. I think, Brian, the RTOs get it. I mean, I listen to the RTOs a lot. MISO is talking about massive amounts of renewables. ERCOT is transitioning towards valuing flexibility more as well as New England and PJM. So I think the RTOs get it. I don't necessarily think that the governments that represent those states necessarily are listening or understanding carefully what it is that the RTOs are seeing. That's actually a perfect segue for my question. I'm Michelle Melton. I'm with the CSIS Energy Program here. Thank you, Brian and Rich and Commissioner Berman. I think this has been a really fascinating conversation. My question is actually about the interface of the wholesale markets and the retail markets because even though at an engineering level, we may be making minor distinctions. There's still a very large legal and regulatory barrier between them. I was wondering how much of an issue you think that this is both on the legal regulatory side as well as on the engineering side. Because eventually, if you get a very significant penetration of DG resources or of DER resources, you are going to affect wholesale markets, pricing, et cetera. I'm wondering, A, do you think this is an issue? B, when is it an issue? And see what the possible solutions might be. And that latter part is really on the regulatory and legal side. Thank you. So the United States has made it complicated for itself, but not what we're close to impossible with our split jurisdiction. And I think the challenge is really going to rest with the states to sort this out. I think the federal authorities are going to do what they need to do focusing on their jurisdiction. So where I think this is going to have to be resolved is having states learn some new tricks about imputing the values in the... If either we'll have federal values that are going to get brought into the market because Order 745 or something like it will be restored and Order 1000 will promote the kinds of planning practices that we need to have. But even if that doesn't happen, states have always been able to impute the kinds of values that they've needed to in a benefit cost analysis. And this is where, for example, because the benefit cost analysis is so important in the REV process, it's getting top level billing. It's very important that it cover these questions directly so that all that value talk that I gave you at the beginning is actually realized. So this is not a complicated problem in terms of the mechanics. It can be complicated because you seem like you're putting your finger on the scale and you have to make assumptions and then you have to change your assumptions over time so it requires active management. Different political regimes and states can change the way you go about it. So there's all kinds of noise around this. But as a mechanical matter for state utility regulation, this is something that they've done for decades if they want to. Yes, they should. And from an engineering standpoint, this is actually one of the more fascinating areas that I'm seeing. So there are some utilities that are experimenting with distribution, locational, marginal pricing. They're openly questioning whether or not having these DLMPs at the level of a substation would give them some more facility and more flexibility to send signals to their customers and their customers' devices to provide important grid services at times where they're needed. So how do you formulate those DLMPs and how are they tied to the LMPs where they exist in competitive markets? Do they offer some protective value to both the grid and to the consumer? Do they address the lower cost entities? That whole architecture is just fascinating. We're currently working on a project where we're defining the DLMPs in a particular location on a substation or a set of substations by sort of the LMP plus a term for congestion plus a term for capacity plus, plus, plus, plus. And we're kind of playing with it to see, okay, at the level of the consumer in the home, do they actually do anything different or not? Or is this all just a nice theoretical exercise with lots of papers but completely useless for the real world? We'll find out. But that's kind of an interesting take on the engineering challenges in linking wholesale and retail markets. Because if you just send the wholesale signal on a big market all the way through to the consumer, then you get no change, no geographic diversity in response. And that kind of defeats this notion of flexibility that we want to have come onto the system. Sir, I just want to make one more point on this though. This conversation is really about operations, the stuff that's on the field at the moment, trying to operate that better. I think the more profound effects of all this is driving investment in more value-driven ways. And that's where the planning aspects come in and have to deliver all of this in a way that will drive investment so that we're not only making sure today is good, but the next 10 years is good. Yeah, and I hate to pile on, but pity the poor person that makes a million billion dollar investment in energy storage only to find out that the utility next week is implementing a massive demand response program. Now that arbitrage for the energy storage that I built my whole value investment proposition on is evaporated in a moment. So that's where we want regulatory certainty. Well, yeah, you can have it, but it's gonna change because you can't control all the actors in the game. And again, flexibility can be provided in a number of different ways. And we should, for the country's sake, let all those ways flourish and not rule them out a priori. You're sort of channeling the first session that we had. You know, I'm gonna cut myself off. John Jimison, you get the last question. So I want to, John Jimison of the Energy Future Coalition want to follow up on the investment theme and sort of follow the money because in the traditional system, of course, the money came through investors through the utilities for central generation transmission distribution systems and such. And the consumers were the passive ratepayers who put it back in on the other end. In the new system, that's gonna be very different. A lot of the central generation transmission investments aren't gonna be as needed. Instead, a lot of the investments are gonna come in through the new technologies at the consumer end. The utilities have had the low-cost capital and the access to it and the famous widows and orphans shares that provided it. A lot of the consumers may not have any capital at all, much less the upfront capital it takes to get into the new system. So how are we gonna get the money from where it is to where it needs to be and what's the role of the utilities and how are the regulators gonna look at utility investment on the consumer side and can the utilities afford the new system unless they have help from the utilities? Can the consumers afford the new system? Yeah, good afternoon, my name is Rosemary Seguero. I'm the president of an organization called Hope for Tomorrow. I focus in the rural area of Africa, Kenya. My question is, looking at America is putting so much money in Africa on renewable and electricity. But there is no actual electricity, the problem they're having is distribution to get the television to use for cell phones and other things. How can this be done with all the money that is being in and getting up to the rural areas in schools, in clinics? How could this be done into distribution? Could we have some students come from different universities or people or consumers who come for training for just as universal, you know, greater distribution? Thank you. Well, John, I think you did voice something really important and that is more investment coming from customers and that's gonna save general ratepayers money because that's gonna be lower cost to the system because customers are shouldering more of that cost. And I think we don't know a lot about the customers in terms of as a source of capital. It's, you know, millions of different people with different decisions. Some of them have very low discount rates. I mean, you know, the early adopter kind of folks, they may not have a lot of capital but they may have such low discount rates that they're gonna use it. Whereas others have a very high discount rate, they need returns results right away and need. I don't think utilities are necessarily going to be very active in this. I sense that they're gonna be primarily enablers of helping customers find the best use for their capital. Utilities are also gonna be the backstop for making sure that basic priorities like reliability and fairness are served. But I think this is an area where we are gonna have to think harder about what this means for the shift of capital supply coming from utilities nearly 100% to a more interesting split between among those. And to Africa, I simply would say, do it right the first time. There's so many ways to mess up development. And so focusing on eyes open planning, including eyes open alternatives and doing it right the first time so that the money is spent well and is not given to legacy interests which may not have the long-term interests more clearly in mind. I think that's the biggest challenge. And I think there are Americans who are interested in that topic who I'm sure would wanna be helpful. John, to your question about falling the money, I think this is a really fascinating area to watch because we're seeing a lot of convergence. I'll give you a few examples. Arizona Public Service just got its approval to sell solar systems directly, rooftop solar systems directly to its consumers. Solar City and Tesla are partnering on batteries. One in the vehicle, the other in the home is part of an integrated system that's being offered. Solar City's doing work on microgrids that they plan to offer as a service offering beyond the PV panel. And we know that how they're doing that is they're securitizing the leases similar to home mortgages. They're already securitizing their PV product. There's no reason why they couldn't extend that to a battery connected to a Tesla, connected to a tendril system working to provide demand response. So there's that. How are they any different than the utility at a certain level, right? And then Google filed actually to be a utility to participate in markets, to move power around. It's happened now a couple years back, but it's there. So, and then there are a number of other utilities I can think of Duke, I can think of Southern California, Edison, Anderson International that have unregulated pieces, competitive market pieces where they're exploring different bets. So I really see that all the actors are gonna have to align around a variety of service offerings, not just selling kilowatt hours as a commodity anymore, but thinking how do I provide comfort, function, mobility in the way that the consumer wants it. They're gonna end up with, I think, a variety of offerings. They're gonna provide that grid-connected universal service for those that don't want to abandon the flip phone or the Blackberry. I don't blame them, right? It works, keep it working. As long as it's affordable, that's great. There's gonna be a hybrid offering that says some self-generation on-site or some smartness in your home, but you're still connected to the grid. And then for those that are the real libertarians in the bunch, there's the, I don't need a stinking grid, I can do it all myself, thank you very much. And they may want to pay a premium for that for purposes of reliability or security or environmental attributes that they find appealing. And I think all those are gonna co-compete. And the real question for the utility CEO is if I know that that's how my market is exploding and I can't do what I've done before, what's my strategy to keep going the next five, 10 years, and how do I prevent all these billions of dollars of stranded assets from going to waste? How do I get rate recovery? How do I use them more effectively? How do I work with the markets to define products that they can provide? Kind of how do I get that transition path? And that, I mean, that's a huge challenge that I don't envy anyone in the C-suite at this point. And neither of us mentioned the state green banks, which I think can be a constructive gap filler. And I think that's the intent with the New York green bank is to gap fill and to be pretty ruthless about sticking to their knitting and not getting in the way of markets. Right. Well listen, we don't usually do this for anybody, but we went over a little bit. So that's an indication, it's a very rich discussion and we hope that all of you will join us and you guys will come back again for the next installation in our Electricity and Transition series. Please join me in thanking our panelists and for commissure.