The Power System of the Future- Innovations, Trends, and Signposts

Bryan Hannegan: Good afternoon, everybody. Thanks for taking your time out of your day, your busy day, to come here and share a little knowledge and insight for the next hour or so on where we at ___ see the future of the power system evolving to. As Ben mentioned, my names Bryan Hannegan. So lots of different things to talk about. Were gonna talk about politics. We can do that. Want to talk about the weather, we can do that. Want to talk about the environment; we can do that as well. But what Ill do in the next 20, 25 minutes or so is walk you quickly through how the viewpoint from the C suite within the utility industry is really changing and changing rapidly. I would say that what Im gonna portray here is very different than what a lot of the leaders of the power sector were thinking 18 months, 24 months ago. And so youre getting kind of a real-time snapshot of whats inside their heads. Im also gonna give you a few things to watch, a few signposts, a few trends to watch because as we move from the power system of today to this power system of the future that Ill describe in a moment, one of the real questions is how fast are we gonna move that cause that matters for investments, that matters for R and D, that matters for business model. So how fast are we gonna move there? Which pieces are gonna move first? Whats gonna be driving it? And how are people gonna continue to make money in this brave new world? Because ultimately, thats what the businesses of the future are gonna have to develop a lot of that. So hopefully by the end of the hour, youll walk away maybe looking a few things differently, but certainly with a better sense of what the utility folks are thinking these days. First, let me say a bit about EPRI. For those of you who dont know who we are, founded in 1972. Were past our 40th year now. A non-profit research collaborative organization. Think of EPRI as the pool that all of the R and D funds from the individual utility companies are put into so that instead of everybody paying 100 percent of the cost to do the same project 50 times, they pay 2 percent of the cost to do this large project once. Our annual budget is on the order of about $380 million. A lot of that is in our nuclear area; about a half of that is in our nuclear area. Weve got a strong sector in power delivery and utilization, which is where a lot of the smart grid, energy efficiency, electric vehicles, et cetera, is from. We have a fossil generation division that focuses on coal and gas, but also includes carbon capture and storage. And then weve got my area, which includes basically everything else that doesnt fit into one of those three buckets. We have over 450 participants. These could be power companies. These could be universities. They could be NGOs.

They are located in over 30 different countries on nearly every continent. I dont think weve gone to Antarctica yet, but were working on it. And here in the United States, our members represent about 90 percent of the ____ flowing on the system. And as you see on the last one, $1.00 in every $4.00 is actually coming in from outside the U.S. So as you think of working perhaps with EPRI in the future, were a great partner to help you gain international perspective that you may not get directly sitting here at a DOE going to national lab. So I mentioned the three key aspects of EPRI, what makes us different from a contractor or a consultancy. One is that were independent. I like to joke with our advisors that you get what you get and you dont get upset. For those of you with little kids, you may recognize where that we can talk later. Ive got a seven-year-old girl and a four-year-old girl and theyre always throwing a fit about something. Were independent, objective, scientificallybased research. I think we enjoy a really unique position in that we can provide a lot of unbiased and actual truth to power. When it comes to environmental data that goes into the EPA rulemaking docket, when its testimony in front of Congress, whether its interacting with the headquarter staff of DOE or the folks in the various other agencies or even the White House itself, you know that when youre interacting with EPRI, youre getting solid, clear, transparent work. Its also non-profit, so everything that we do has to have a public focus to it and we try to put as much of our research into the public domain as possible. And then we really focus on collaboration. We dont do one-offs. Everything that we do has got a group of individuals from across the industry, various and different types of individuals, and if we dont have the best available knowledge in-house, were more than willing to go out and find it. In some cases, were coming here, particularly on renewable energy, and hopefully soon on energy integration as well. I mentioned our four areas of research programs: the power delivery and utilization, and you can see some of the topics that we focus. Of interest ___ is grid operations and planning, how are we gonna operate this power system in the future with the reliability that our customers have come to expect. Weve got a big area of work in nuclear. Nearly every ___ civilized world nuclear operator is in this program and it sets a lot of the R and D basis for the NRC, and by extension, all throughout the world, so its a great collaborative there. I mentioned the fossil generation group. Increasing work on combustion turbines and materials and chemistry as were looking at moving fossil units from base load operation into more recycling or load-following mode. So that puts stresses and strains on the materials. And a big focus there also on water, which I know is a critical issue in the minds of those of you here at Enron. And then my area, environment and renewable. Im gonna focus today on the renewable energy piece. But Im certainly happy to answer questions about any of the other stuff. So all of this work ___ ___ and this sort of bubbles up to the three parts that challenge us that going all the way back to the early stirrings under Edison. This was the goal of the electricity energy was to provide reliable service at an affordable price, and increasingly now as we

go forward in time, its gotta be environmentally-sustainable or environmentallyresponsible. And keeping in mind that were doing it not just for ourselves, but for a wide variety of stakeholders throughout the world ___ ___. And we have to take this challenge on, preserve that reliability, preserve that affordability, extend the sustainability of our work, even as were moving a power system that looked somewhat like this, a sort of a huband-spoke model where you had large generations, a one-way transmission and distribution system, and relatively passive customers in the way that you had a very simple equation for keeping the lights on. You had base load generation. You had generation that was dedicated and load following and intermediate or peaking. You had some bulk energy storage, pumped hydro, you had compressed air in some places, and all of that was against a pretty predictable customer demand. And largely at the commercial and industrial level, some interruptible that you could use for peak shaving and you can sort of prearrange the deal with your large consumers in the area. Very simple, very straight-forward. Not too hard to operate. We kind of new what was coming. And so it was a pretty linear system from an engineering standpoint. Well, whats happening? Were now seeing the onset of centralized wind and solar, largely on the great technology work thats been done here in your partners around the world that have been driving down the costs of wind and solar. Weve got favorable policies now that are helping deploy those. So were bringing on those resources and the variability that they come with. Were also seeing a lot of interest in distributed generation. Ill come back to that in a moment. Not just solar PV. I live in Northern California. My average rate is $0.18 per kilowatt hour. Most everybody I know is seeing solar coming in well below that unsubsidized. And then you add in all the state and Federal supports and its a great deal. I dont know why anybody wouldnt do it. Weve got lots of distributed generation coming in, gas micro turbines at $3.00 or $4.00 per MMBtu, starting to look like a great deal, particularly if youre concerned around your own energy security. Lets say youve got a high technology fab line and you want ___ ___ of reliability, this is a pretty easy way to guarantee that and a lot of innovation in these spaces. So youve got variability on the upstream side, on the generation side. Youve got variability coming on now on the downstream end from the customer side, much of which the utility is blind to, so youve got a whole different equation for your generation. And then you add all the changes that were seeing in the customer base, whether its new pricing systems that allow for consumers to respond to time-of-use pricing or the tiered pricing structures peak, super peak, and off-peak demand response. Youve got electric vehicles starting to proliferate, 100,000 vehicles so far, on its way to 1 million a more in the next few years at current gasoline prices. And then new customer-side demands, folks that have been using coal or natural gas facing maybe emissions limits in the ____ region or in California starting to think about

how do I source my energy from cleaner sources of electricity and can I start to use my industrial processes on electricity bringing spiky megawatt type loads onto the grid where they werent there before. So theres a whole set of variabilities coming in on the customer side as well, and thats leading to a much more variable system and one that frankly looks more like an optimized delivery network rather than a simple linear pipe. In fact, when you look at what the power system of the future graphically starts to behave and appear on paper, youve now got your large wind and solar coming in on the generation side. Youve got all sorts of data and analytics to come along your various generation controls. Youve got your coal and perhaps even your nuclear assets starting to run to follow the load, as opposed to being base-loaded with everything on top of it. On the customer side, you now see two-way power flow, both from the point of creation back up the grid, as well as down the grid in the traditional sense. Youve got consumers with PV on their rooftops. Youve got community and residential-scale power generation, energy storage, both in the bulk and in the distributed lens. Youve got new uses from electric vehicles. And sort of in the middle of this, youve got a grid operator thats now dealing with trillions of data points of variability on seconds, minutes, hours of time scale because solar, as you know, when the clouds move over, its a very different time mode of variability than a cold front moving through and shutting down some of the wind. So youve got a much more dynamic distributed and decentralized power system, and a lot of these technologies by themselves are here today. You hear about the Nest Thermostat. You hear about solar city and the success that theyre having coming in behind the meter. And you hear about the utility smart meter installations and all of the building energy management analytics that folks like SAP and Schneider Electric are starting to put forth. The bits and pieces are coming together. But how fast are we going to be moving towards this power system of the future, this optimized delivery network, this highlyvariable generation mix, this highly-variable customer demand, how soon as we gonna move there? How fast? Could it be that we get there first on the basis of customers and the generation is slow to respond? Or is it the other way around? And are both of them gonna get there before our grid capability is ready to absorb? And what does that mean for the technology and the rates of penetration of that technology? And then at the end of the day, people are gonna be in this business to make money. Lets be honest about that. So what are the business models that are gonna accompany this transformation, the power system of the future? The operation of the grid system may continue on the old monopoly franchise model because nobodys gonna go right out and build another incremental mile of transmission to serve given the costs of the permitting itself. Theyre gonna want a predictable rate of return. So maybe the traditional utility compact la Con Edison in New York is we become a wires company.

Weve got to invest all of our generation and our customer assets. We become a wires company. Were highly regulated. We get a nice steady rate of return. The banks love us. Thats our niche of the business. I can also imagine a future cleantility, to coin a phrase, that specializes in helping the customer bring all this stuff into their homes and into their businesses without the customer having to go to Home Depot, install it themselves, put widget A with widget B, and actually create a value proposition where not unlike what we do with our cell phones today, were buying energy not as a commodity, but were buying it as a service. Were asking who can provide me with more comfort at a lower cost or more mobility at a lower cost. Already we see folks like NRG packaging their electric vehicle charging infrastructure with the sales of the electricity, and its not long before theyll probably ___ the car as well. Why not do it on the basis of total cost of ownership when in fact some of our own research shows that for an EV, the total cost of ownership is about 20 percent less than a convention gasoline vehicle. Why not realize that value proposition and make some of that profit? So theres a whole lot of business models that are out there. Someones gonna specialize in micro grids, going from a large commercial and industrials and helping them do things in a turnkey. Someones gonna reach out to Marin County and say, Fine, if you guys dont want to be with PG&E anymore, heres how we can do it. And perhaps that somebody might well be PG&E. There might be cobranded products. There might be new divisions set up. Already people are starting to think, Gosh, if we see our customers leaving because of aggregation and _____, which is a word that I despise. But if I see these new business models coming along, maybe I should work with my regulators to get a piece of that market so I dont lose my customer. And the regulators are sitting over here, as they were at our meetings earlier this week, and thinking, Wow, to get all that technology innovation, were gonna need some regulatory innovation as well. Weve got to look at our pricing structures. Weve got to look at who can be in our markets and whether competition helps or hinders. So theres a lot of moving pieces going on, and its not straight-forward how soon, how fast, and what business models will arise. What I want to do is give you a few things to watch to give you some guidance into how you might assess each of these questions. And I want to start with the customer side. These are, in my view, five things to keep an eye on. Im not gonna cover em all. But Im gonna give you some examples of signposts that were watching at EPRI to see how fast the markets and the technologies are moving and to see where the emerging research needs are, both from a technology, as well as a policy and a regulatory sense. There is a variety of smart appliances, hyper-efficient appliances. We have tested quite a few of them here. Some of them have deployed in Japan and in Europe and elsewhere.

You bring these into the United States, you start to get these hyper-efficient devices to communicate with one another, and you will begin to realize a variety of efficiency gains and also the ability to optimize. The growth in demand for datacenters, for example, is a huge load on the system. But we also are seeing tremendous improvements in the efficiency of those datacenters and the fact that were now starting to see their demand flattening out, even as the total demand for service increases, and thats kind of a theme. Youll hear me come back to it. Weve got heat pump water heaters, variable refrigerants, low air conditioning, LED street lighting. One of the nice things about LED street lighting is because of the reduced load that the LED provides, you can actually imagine a traffic signal or a streetlight that has a solar panel over the top of it, has enough battery storage to keep going during a blackout. How many times have you been in a neighborhood where the powers been out and the worst problem was not necessarily that you couldnt get phone service, but because nobody knew how to drive? And so if we could take some of the public safety issues out of the way through modern technology, keep the lights on for that very important purpose. So watch these items as they evolve and the rates of deployment as one indicator of how far were moving. Electric vehicles; today, were looking at _______ technologies that get us these advanced lithium ion batteries in the 150 to 200 watt hour per kilogram range. With advanced technologies, were looking at upwards of maybe 400 watt hours per kilogram, twice the effective range for the same size vehicle. So we would take the range, the all-electric range of the Leaf from 50 to 100, and if we take that to 300, our studies of the consumers in the auto market suggest that would be the point at which range anxiety would all but disappear and you can start to see consumers setting that aside as a purchasing consideration for tomorrows vehicle purchase. And that then would lead to proliferation of these batteries on wheels, which have a tremendous impact on what the distribution architectures gonna look like. So were working on lithium sulfur batteries, lithium air chemistries, a variety of things through our energy storage program, intending to kind of keep this curve going up and hopefully move this number somewhere this side of 2030. So keep an eye on battery range as these new vehicles come out; whats the range equivalent? Once we get close to gasoline, thats a good sign maybe were gonna see more and more of these in the marketplace. I mentioned distributed energy resources. Folks, this is the levelized cost of electricity for distributed generation of various types in commercial applications today. Here we are at a $4.00 natural gas price. This is sort of the current market spot, if you will, for where we think natural gas prices will go. In places like Northern California where my marginal rate is actually up here, my average rate is down here, something like a solid oxide fuel cell or I maybe the industrial turbine or a micro turbine start to make a lot of sense, particularly if Im a big box manufacturer or Im a market chain like Whole Foods, this is one of the Connecticut fuel cell energy fuel cells thats been put in there.

Were starting to see more and more of these installed, and the key is even without combining heat and power, were seeing good economics. Now, also use that for space heating, for waste heat process, and youve got a better value proposition. So why do utility folks live in fear of never building a large capital asset ever again? Because between this and distributed solar, its not unreasonable to think that in some parts of the country, you might be able to cover all your incremental growth behind the substation, which is a very different business model than what we usually come to expect. Let me talk a little bit about the networks that are gonna go along. So were moving from the upstream, sorry, I should say the midstream. Smart energy systems go beyond the smart grid; go beyond the smart meter first; go to the smarter grid and then go through the rest of the system. Will there come a day where were thinking more about systems rather than individual components? Thats I think a big hurdle that we have to challenge. But I think here at ESIP, you guys are in a great spot to accelerate that by in effect allowing for plug-and-play of different components in a system that you can change on the fly and test and experiment. I think youd see a really massive improvement in our societys capability to do this. Its not just about the technology, but its about the data. You build supercomputing for a reason. Massive dataflow. Gotta sift through all of that to find intelligence. Its not enough to have the data and the information. Weve got to figure out what to do with it so that it can help us optimize how we run this network and how we deliver those services. And that data has got to be secure from cyber and physical attack because if Im a consumer and Im working with you as a third party and youre saying, Well, were gonna collect all this data and were gonna optimize your building structure and you dont have to worry about a thing. Say, Well, wait a second. Youre gonna know when Im home. Youre gonna know when my lights are on or when my cars out of the garage or when my lights have gone out for the night and Im going to bed. Youre gonna know a lot of things about me as an individual. You may already know that on Facebook. In fact, if youve looked me up, youve learned more than you ever think youd want to know. And that may be okay for some parts of society. But I can imagine other parts that are saying, Hey, if it comes with infringement on my privacy, then I dont want to have anything to do with it, even if Im the greenest person on the planet. So smart energy systems, you hear this phrase, the virtual power plant, CPS Energy in San Antonio likes to talk about how theyre able to peak shave upwards of 10 megawatts on their super peak days in Texas where the demand is hitting the all-time high and they talk about going further and doing 20 and 100 megawatts over time; what you want to see is groups and blocks of different loads sort of acting as one and actually serving as a biddable product so that the California ISO can call up the University of California Davis and say, Gang, we need about five megawatts of demand response and we need it two hours from now. Can you guys do that?

And the campus building energy manager says, Absolutely. Hits a button on the campus manager system and the lights are dimmed, the AC starts to cycle, and a few other processes go offline and go to variance. And to the grid, its a single prompt. It doesnt matter whether it came from A or B or C, its just five megawatts of DR. Its a virtual power plant. Its as though you had a five megawatt turbine kick in. Thats what were looking for and we havent yet seen that in the real world. But well keep an eye out on whether this concept of the virtual power plant can deliver, basically aggregating all of these things together and not having to manage them individually, but instead managing them as a block. I mentioned data. Each one of these 1.0s on the axis here is 250 million DVDs worth of data and you can see just over the last 10 years, were starting to really peak the curve and move up in our big data challenge when you bring in all of these sensors and new meters and building energy management systems and even things on the TMD system itself to help boost reliability. One of the challenges with feeding power from a customer back up through the distribution system is that in many cases, our distribution feeders were never built for that, number one. And number two, we have no understanding of what that does to the feeder itself from a physical standpoint because we dont have any visibility into its performance. Weve gone out at EPRI and done some studies where weve looked at high penetration of PV on the rooftops and weve gone out and manually measured the voltage of a function of a 24-hour day and the folks in the distribution company were absolutely shocked. He said, Theres no way that distribution feeder shouldve continued to operate because you were three times out of speck with what we expected it to be because of all of the voltage fluctuations coming on and back and forth from the PV. Now, weve since followed behind that and said, What if we paired the PV with a smart inverter that can provide voltage support when you need it and power when you dont and sort of moderate things? And surprisingly, were now seeing better voltage profiles. By better, I mean more stable over the 24-hour day, better with 20 percent PV in the smart inverters that we had, even without the PV to begin. So in effect, by putting PV on the distribution feeder, we made it more reliable. Think about that for a moment cause all you hear about PV is, well, its gonna mess things up. Weve actually gone the other way and showed that thats actually the converse, you actually do improve things. But you could only realize that if you know what to do with the data that youre collecting. So the big data challenge is a huge one. Watch for the Oracles, the SAPs, the IBMs to get into this business more than they already are and once you see them providing turnkey solutions to utilities, then you know weve crafted that. I mentioned cyber and physical attack. Just a few examples recently, things like sleeper agents and impacting remote operations, mass disconnects. You know, somebody gets on the computer, a 17year-old teenager gets on the computer, probably my daughter in 10 years time, gets on the computer and decides to shut off the lights at her friends house just for fun and in so doing manages to take out the entire subdivision.

Its possible. Might not be malicious, but it could happen if we dont have our cyber defenses up and in place and continuously improving as well. Even things like disabling the billing system. You want to hurt a utility? Hit em in the wallet. Take out the billing system. Doesnt affect the consumer; sure creates havoc when it comes time to figuring out how to pay the bills. So lots of opportunities I think for improvements in the cyber security area. Lots of folks having clearances much higher than mine working on this, and I think this is an issue that as we make the transition, there may be some hiccups, but I think over time, weve been able to make the Internet secure, even as each of us now have 20 or 30 devices in our house connecting to it. And I think we can do the same with the electric power system. So keep an eye on the signposts. If you start to see interruptions from whatever cause, and I would say physical attack; it might not be human-induced. It might also be Mother Nature-induced. So if you start to see impacts to a more smarter energy system that has more points of entry, if it turns out that those points of entry actually make it more fragile rather than less, then youre gonna see a slowing down perhaps in the move towards this power system of the future. On the other hand, if were able to show that a more distributed energy system wouldve done better during Hurricane Sandy, or should I say Superstorm Sandy. As a meteorologist, it kind of hurts me because thats not really even a defined term. But well talk about that later. If you were able to demonstrate that a different kind of power system wouldve had greater resilience, then you might see more power companies and more regulators and more government officials moving towards that future. Finally, let me wind up with the story of the upstream side and the power generation system of the future. We tend to overuse this phrase, Weve got to fix the airplane while were flying it. But in every respect, thats what we need to do in order to keep the lights on. Weve got to change the generation fleet even as we continue to operate that generation fleet going forward. And so right at the top of the list is the long-term operations of the existing fleet. And one of the things that its a real concern; its probably overblown by half and under-blown by half; but when you start to run something that was engineered to run at a consistent temperature and pressure, when you start to move that up and down on a regular basis or even on an irregular basis, you start to stress the metal. You start to accelerate the corrosion. You start to have more fatigue. You start to bring your major components to the end of life a lot quicker. This is some thermal-induced cracking in some piping. Weve got it under a microscope here, a remote sensor that allows us to go in and do some non-destructive evaluation of different components. You can see the printout here on the computer screen that tells you sort of what the depth of metal thats available to it so you could do predictive maintenance. You can go into an outage. You can schedule it during a regular outage. All of the things that you would have to do to develop a more flexibly-operating fossil and nuclear fleet. And so keep an eye on nuclear unit cycling; yes, nuclear. They do it in France a little bit. Theyre thinking about doing it a lot more here as those units come to

the end of their current commissioning cycle and then look at the outage rates because weve seen instances where not having that enough capacity is just as damaging as having too much demand when it comes to the reliability. So lots of interest in long-term operations. Were also gonna have to continue to operate in particular the coal fleet, but to the lesser extent, all these natural gas assets that are coming on in a world of increasingly tighter environmental statements. Mercury, air toxics, conventional air pollutants, sulfur and nitrogen, particulate matter, these are a variety of technologies that we have under tests in one form or another either at EPRI or one of our facilities. This one in particular, this carbon activation process is kind of interesting. Were actually generating the activated carbon that we use for mercury control out of the coal itself, whereas instead, we have to go and buy it, ship it in, and theres logistics and even though UPS says they know logistics, power plants, theyve got their own troubles with that, why not generate it onsite and in fact generate it onsite at a lower overall cost to meet the new mercury controls that are out there? The difference in these environmental control challenges is that most of these technologies do extremely well within kind of a narrow window, a narrow parameter space, a certain flow rate, a certain temperature. But again, if theyre load-following and not base load, youre doing this. You are all over the map. And if EPA says, Well, youve got to meet your emission standards on a continuous basis now weve got a technology challenge if that continuous basis is moving all over the place. And sometimes were in the sweet spot and sometimes were not. So theres a lot of innovation there as well. And I mentioned natural gas deliberately because our friends in the natural gas community, they might think, Well, you know, we can meet the standards now. Well, what about five years from now when they come up again in the context of the Clean Air Act? What about all the new science that were looking at at EPRI that says its actually the ultra-fine particulate matter that goes way into the respiratory system that causes the most cardiovascular damage and the pulmonary diseases that EPA is trying to minimize in the first place under the Clean Air Act? So looking at particulate matter, control technologies, understanding what were gonna see in a more natural gas-driven world, thats one of those signposts to watch, the timing and the magnitude of future regulations. On natural gas, I have never been either a bull or a bear on natural gas. Ive had a gut feeling for the last five years that were gonna be in a $4.00 range for the near future going up to $6.00 in 2015, 2020. Dont tell me why. Dont ask me why. But its sort of an accumulated reading sense, looking at the marketplace, reading the 10-Ks of the firms that are out there producing in the shales right now and seeing the difficult economics that theyre facing here in $3.00 to $3.00 range, thinking about as you move up this supply curve and you employ some of the best practices for handling things like produced water, induced seismicity and so on, as you start to move into more and more of these new finds, you see the gas prices starting to tickle up.

And also thinking about in an energy system when I have a low commodity and it is the one that is the most favored, Im gonna have people rush to that. Someone once said to me that made me laugh, The surest way to get $8.00 gas is to act like its gonna be $4.00 forever. You get all this demand, the onshoring, the Dow Chemicals, the DuPonts, theyre all bringing their operations back, the ones that were leaving when I was in the Senate. Theyre not coming back because natural gas costs are affordable here. What does that do? Increases the demand, puts pressure on these resources, moves the market up. At some point, theres a correcting factor; its no longer cheaper for a utility to run their natural gas units over their coal, so now the dispatch goes the other way. Demand comes back down, everything settles in a nice equilibrium. $4.00, my guess in the long-term within the next 5 to 10 years, well see that come up $5.00 to $6.00, and thats gonna bring on a lot of technology. Its gonna bring on wind and the best resource areas without subsidy. Its definitely gonna bring on solar in the Southwest and other areas. So youre seeing a world where yes, were in kind of a period now for natural gas that it seems to be thats the most favored and its the easiest thing to do from a utility standpoint. Well, watch the geology. Do we get enough recovery? Do we keep making the new finds? Watch the oil prices. Why? Because all of these red bars are selling their natural gas liquids at the oil price and not at the gas price. So theyre making most of their money on anything but natural gas. This is just a byproduct. And theyre flooding the market with it at a very low price. You want to watch these guys, the Pinedales, the Jonahs, the whats so-called dry plays without natural gas associated with them. When you see them producing, then you know the price supports are gonna be there, and thats something that utility planners can bank on. And then I mentioned regulation and demand as well. Keep an eye on people and their new uses for gas. Do we have more LNG? Do we start to export it? And if so, does that mean we start to link with the global gas price rather than our own here? And keep in mind that in Europe, theyre paying 13. In Japan, theyre paying 18. So that brings price pressure up. I live in California near some of the most fertile farmland in the country, if not the world, yet it costs me more to go two miles to my grocery store to get that strawberry that was produced five miles down the road than if I went to Washington, D.C. and bought it off the shelf at the Whole Foods. Weve created these global networks that dont necessarily keep oversupply in one place. And if we go to a global market with natural gas, the same is likely to be true for us. And that matters when it comes to where the electricity comes from. Finally, renewable energy, you guys know this as well or better than I do. Weve got most PV costs situations now beginning to cross over with the range of the utility electric retail price; retail price, so that as I mentioned, the solar cities of the world are starting to see a viable business opportunity.

And thats likely only going to continue over time when you think about the utility having operations and maintenance expenses that go up, having infrastructure to support and to repair, having labor costs that are increasing over time, and if you look at the learning rates, lets say that we go back to the standard learning rate for PV and the balance of system, thatll still continue to go down. So youve got more and more of an intersection over time. And as we see those perhaps accelerate, if SunShot is successful bringing down the balance of system costs to the level that weve set as a goal, this becomes a huge crossover, again, to the point where a utility might have to honestly start thinking about how do I engage the customer and become a retailer, like in Australia where theyre already focused on this as a result of their carbon cries, the renewable energy standard, and the structure of their market. Last thing, and I think this is actually the sleeper issue of em all, we spend a lot of time in our industry thinking about carbon and thats well and good. Carbon, climate change, huge concern. We have to get moving on that. But in some respects, we set the carbon cap. We make the decision on how much as a society we want to emit in the environment, what constraints we want to put on the system. When it comes to water, the constraints set for us, theres only so much water in a watershed and its gotta be parceled out between people, food, ecosystem function, and then everybody else. And more people using more water for municipal and industrial needs, eating more food thats gotta be irrigated with agriculture, ecosystems probably using more and more water in a world where its hotter or humid; youve got some impacts of climate variability and change coming. Whos at the end of the line? Users like the power plants. And so weve been actively encouraging our utility members who think about a world in which there is reduced water availability to the energy sector to the point where were looking at perhaps zero liquid discharge requirements, where were looking at desalination or wastewater treatment and reuse. Weve just opened up a multi-million dollar water research center down in the Southeast in Georgia where were working with the Department of Energy to really explore this energy and water access because when you think about all of the advantages that our energy system has, water efficiency isnt one of them. And oh, by the way, lets not rule the possibility that a water utility might start to recover the embedded energy in their waste flows. They might recover the bio solids that are coming in the wastewater streams, use that to drive the energy of their pumps, the clarifiers, their other treatment requirements and actually start to wean themselves off the electric utility system as a customer. And perhaps as in the case of the East Bay Oakland Municipal Utility District, sell the excess power back into the grid, as theyre doing from their seven megawatts of anaerobic digesters where their load is only two megawatts. That other five goes back on the grid and PG&E has to actually pay them for it. So theres a crossover there between energy, waste, water, and if you broaden your concept of the smart energy system to smart energy water and waste system, then the ability that you have to optimize becomes ___ ____ ____.

So Ill wind up by saying I hope that at least Ive convinced you that theres a lot of change out there on the horizon and the power system as we know it is likely to see much more change in the next decade than weve seen in its entire 100-year plus history today. The real question that I find myself asking in boardrooms, in public meetings, with our advisors on research projects, is how are we going to respond. How are we going to respond as consumers? How are we going to respond as technologists? How are we gonna respond as those who talk with policymakers? And how are we gonna respond as leaders? I was an early champion from my EPRI perch of the investment that youve all made in ESIP here because I think that is one of the most important things were gonna have to do is start to actually do these smart energy systems, put them in practice, monitor the heck out of them, learn from those experiments, and then get better and better over time so that when we make this move to a power system of the future like the one that Ive described, we do it in a way which maintains the reliability, it maintains the affordability, and it gives us the environmental virtues that were after. I thank you for your 45 minutes or so and hope that Ive given you a little something to think about as you head home today. Thank you. [Audience claps] [End of Audio]