Title: Capacity Crunch Series Continued: Balancing Reliability, Unprecedented Load Growth & Affordability in the Energy Transition (Part 2)
Speakers: Josh Combs and Allison Pryor
Josh Combs (00:07):
Allison, I’m looking forward to chatting today about all the issues affecting our industry as we’re balancing reliability, load growth, affordability amid the energy transition.
Allison Pryor (00:16):
Thanks for having me.
Josh Combs (00:17):
So we talked about many issues — keeping up with the crunch and how utilities, regulators, developers and all stakeholders are balancing reliability, the rapid load growth that we’re seeing amid obviously a transformational period in the industry. And another important factor of that process is obviously the cost. And cost is a real issue that must be balanced by all involved. Could you just speak to that a little bit?
Allison Pryor (00:44):
The issue of affordability is top of mind for regulators, for utilities, and for customers across the country. In a rising cost environment where the cost of energy is going up in addition to the increase in investment that’s needed to mature the grid, to grow the grid, to invest in the transmission infrastructure needed to support all the growing capacity needs — that comes at a cost. But in a rising cost environment, that’s where creativity thrives. And Josh, I think you’re familiar with this. This is one of the things that we’re assisting with our utility clients in coming up with creative solutions to help keep their product affordable while also reliable.
Josh Combs (01:24):
I do think that this is one of the areas where we really have seen creativity thrive in terms of affordability. And it’s something that every utility and every stakeholder, regardless of what case, what jurisdiction — it is top of mind because the cost can be significant. And one of the things that we’ve seen is either through legislation that facilitates a utility’s ability to do certain creative things with affordability, or just by the utility’s own initiative. And so one way in which we see this happening is through energy efficiency. So sometimes helping the end user with mechanisms to understand how they’re using their energy and ways that they can save energy, and providing incentives to do those things, can be a way of bringing those costs down. So that’s something that traditionally you wouldn’t think of energy efficiency as a mechanism or path for addressing affordability.
And I do not think, just like all of the other things that we’ve talked about here, one shoe does not fit all and there’s not one piece of the puzzle that’s gonna resolve everything. I think that there are gonna be different ways to address affordability and costs for customers and the utility. Another thing that we’ve seen from our clients is potentially a bill discount for certain customers. But again, one bill discount for one customer segment is not the entire answer, but it is part of the answer and it is a creative way to have a suite of options for addressing affordability.
Allison Pryor (02:57):
You mentioned energy efficiency, but that also includes customer generation, right? And are you seeing an increase in demand response or distributed energy resource programs or tariffs that utilities are offering their customers not only for affordability, but also for resiliency and reliability purposes?
Josh Combs (03:16):
Absolutely. And I think that helps with the load growth and the rapid demand. Some of these tariffs and these programs are really innovative programs that we’ve never seen — for customers to target a specific need or a specific customer base that has a need for backup generation on site for whatever reason. Allowing through a tariff to assign that cost and have a special cost framework for allocating costs to those customers is very important. And I know that in your space, you see this a lot. Are there particular programs that you’re seeing that come to mind as being relevant and potentially helpful to the affordability challenge?
Allison Pryor (03:55):
Absolutely. Some of those could include community solar programs, rooftop solar programs. Some states are seeing modifications to their net metering and what that includes, because now with the advent of more scalable battery resources, it’s not just limited to rooftop solar. You can also pair it with a battery, which not only expands the ability to generate one’s own power supply, but also elongate it and capitalize on it for longer. So the ability for customers to not only support their own supply and energy efficiency initiatives, but also programs where that same facility on site can help reduce their power bill is also providing reliability and resiliency in the event of backup. And I mentioned scalability — this is something that we’re seeing programs and opportunities afforded to residential and commercial customers, but also to large industrial and government customers.
The federal government has very ambitious goals in meeting their sustainability efforts. And the creativity of the utilities in the jurisdictions where military installations are located is critical. So this is one example of collaboration beyond just the data center discussion. There are also opportunities to collaborate and work with other large customers who have similar goals but have the resiliency component as well.
Josh Combs (05:28):
And that collaboration is important and obviously meets the needs of that specific customer, but it also allows the utilities through these efforts to develop operational experience and knowledge — developing potentially a microgrid on a military base, understanding the cost, the issues that arise, the technical components that might be relevant — so that later on they can deploy a microgrid or some other technology more efficiently and cost effectively for other customers. So there’s that kind of soft benefit that will result from that too. Wouldn’t you agree?
Allison Pryor (06:10):
Oh, definitely. So with electric vehicles, hydrogen, microgrids, long duration storage, we’re seeing pilot programs across the country that are developing real world operational experience that can then be used by others to supply better options and opportunities for their customers.
Josh Combs (06:32):
So we’ve talked about this rapid demand that we’re seeing in load growth and that’s being driven largely by these large data centers and large loads. And when you think about the creative solutions to those problems, intermittent resources seem to not be the only way to address those problems — base load resources are an important component. So when you think about moving to some of those base load resources like natural gas, does that not look as though that’s moving backwards in terms of advancing the clean energy transition that we’ve been talking about?
Allison Pryor (07:08):
I certainly understand the perception of why somebody might believe that adding more natural gas units on the system is a step backwards, but those aren’t always being added as base load resources. They’re also being added as peaking resources and natural gas has always had a role in the future transition into a more carbon-free generation system nationwide. Part of that is because by adding more natural gas, it’s supporting the integration of additional renewable resources, and that’s always been the plan. We’re just seeing it come to fruition faster and all at the same time, given the capacity crunch and the higher demand at the moment. It also creates space for other technologies like hydrogen and nuclear resources. Certainly there’s a continued role and excitement around the role that renewable resources will play, but that’s only as good as the reliability and the dispatchability that comes with pairing that with energy storage resources or complementing it with other base load and peaking resources to make that actually happen.
Josh Combs (08:14):
When you talk about peaking resources and how a utility uses natural gas in that way, it’s really kind of a facilitator for the continued transition. It feels like it is an important tool in the toolbox going forward as part of the all-of-the-above strategy for balancing all of these issues and opportunities that we’ve been talking about?
Allison Pryor (08:37):
Absolutely. When you think about utilities that are adding or requesting to add more natural gas units to their systems, those may not be direct additions to the existing capacity they have on their fleet. It could be a replacement. And the technology we have today is cleaner and more efficient. And so the units that are being developed today are so much better for the environment than the equivalent natural gas units that were installed 20, 30 years ago.
Josh Combs (09:04):
Legacy.
Allison Pryor (09:05):
Exactly. Yeah. So it’s definitely a step in the right direction, not a step backwards. While it may not accelerate the transition to renewable resources in the way that some people in the industry had hoped, given the change in load demand, I think it’s definitely still heading in the right direction. No path is linear.
Josh Combs (09:26):
That’s right. And no one shoe fits all. We’ve talked about how utilities and all stakeholders are really bringing creative solutions to the table and coming to the drawing board to find an all-of-the-above strategy for balancing all of these issues that we’ve talked about. In terms of the regulators around the country, how are we seeing that manifest itself there in terms of different ways of examining or deciding issues that we’ve been talking about?
Allison Pryor (09:58):
Regulators across the country are fortunate enough to have more creative solutions being presented to them from the utility, whether that’s from an intervening party, from customers directly, from trade groups — all of these parties are bringing forth their best solutions as part of integrated resource plans or rate cases. But at the same time, it’s also affording the opportunity to collaborate in advance, in the gaps between when these cases get filed, so that the programs and solutions and opportunities that are presented for commission approval are actually fully baked. They are something that everyone has their hands stacked on and they’re ready to go and move forward. So instead of working in the hypothetical, you’re working in something that’s already fully baked, ready to go, hit the ground running as soon as the commissioners give the green light.
Josh Combs (10:51):
And so that’s an example of how that constructive and proactive collaboration — those partnerships on the front end — can help facilitate or result in more positive and constructive regulatory outcomes as an end result, right?
Allison Pryor (11:05):
Absolutely. And it’s also an opportunity because the utilities that are working with their customers to come up with solutions — it’s not just benefiting that one customer at the table. It’s benefiting all customers. Accelerating the transition to more renewable energy or bringing community solar to communities that otherwise couldn’t afford them, or offering to pay for certain portions to buy down the cost of offering these kinds of programs to other customer segments who wouldn’t otherwise be able to afford them — not only achieves the sustainability goals or achieves the resiliency and reliability goals that a customer or the utility are seeking, but also expands the benefit to the full customer base.
Josh Combs (11:50):
And we’ve talked a lot about the utilities and public utilities and the regulators. And we work with a whole host of stakeholders. How do some of these issues — all of these issues and opportunities that we’re talking about balancing — impact other individuals and stakeholders beyond just the utility and the regulator?
Allison Pryor (12:10):
It’s becoming increasingly more important for anybody to pay attention to where their energy’s coming from and the decisions that are being made by the regulators. What it is that a utility is proposing to do and how they plan to meet their customer demand is increasingly important to not only understand, but also for commercial customers to leverage. Energy policy is dictating where companies are deciding to do business, where people are deciding to live. Energy policy is 100% at the forefront of these decisions that people are making on a regular basis, not only for themselves and for their bottom line, but also just for making the world a better place. Transitioning away from carbon and towards renewables is in itself a fantastic goal. But at what cost? And so I think that balance of making sure we’re pursuing sustainable long-term solutions that make sense for the entire customer base — I think that’s what regulators are being faced with right now.
Josh Combs (13:13):
And it’s interesting — when we’ve talked about accelerating the transition and those sustainability goals, they’re not always the entities or companies or stakeholders driving those efforts, because there are a variety of reasons as to why we’re seeing the advance in clean energy. And I think that because there is such a broad, diverse group of stakeholders and interested parties driving the transition, that’s why we’re seeing all of the development that we have seen.
Allison Pryor (13:43):
Thank you for the opportunity to talk about all these great issues today, Josh. I appreciate it.
Josh Combs (13:47):
Well, as always, I know that we will continue talking about these. It’s top of mind for our clients and for us and I look forward to our next discussion.
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