April 24, 2019 - From the April, 2019 issue

CPUC Pres. Picker, Asm. Holden, & Energy Industry Leaders on Creating Climate Resilient Economies

The future of Califoria's electric utility industry was just one of many pressing questions facing regulators and legislators at a recent LABC Sustainability Summit. As the state continues to meet renewable energy targets, how will PG&E’s bankruptcy proceedings impact that progress? In a panel moderated by Pete Holland of AECOM, CPUC President Michael Picker (pictured) provided an update to the bankruptcy proceedings and regulatory efforts to bolster wildfire prevention technology. The below excerpt of the panel also includes remarks by Assemblymember Chris Holden, Chair of Utilities & Energy Committee; Chris Thompson of Southern California Edison; Lynn Jurich of Sunrun; and Chris King of Siemens.


Michael Picker

"Renewables are done. We fixed that. Let’s declare success and move onto the real task: using renewables as a tool to drive down carbon in California industries." —Michael Picker

Pete Holland: President Picker, you’ve publicly expressed that the CPUC did not want PG&E, or any utility, to file for bankruptcy. What role can the CPUC play in mitigating the impact of this bankruptcy on ratepayers and on our climate and renewable energy targets?

Michael Picker: Over the last 10 years trying to build up technologies in California to reduce the impacts of climate change, I think that I, and many people working on this issue, have practiced a different kind of climate denial. We focus on getting greenhouse gas emissions out of California industry. But we ignore the fact that we have slid into very dramatic effects of climate change. Anything that we do to fix PG&E—which is being described as one of the first true business victims of climate change—has to be done with the realization that there may not be simple technology fixes to our fire risks.

Remember that electric utilities are responsible for only one in 10 electric fires in California. Our challenges are bigger than the utilities—but we need them. They are the vehicles we invest in to meet social goals and to string electric wires to people moving to wildfire zones far from the cities. That’s an artifact of housing policy more than electric policy; we have laws that require the utilities to serve people who settle out there.

The utilities are fully aware that this is not a pattern that is going to be arrested quickly by any single thing that they can do. PG&E made the decision to go into bankruptcy in part because they were facing strong claims from fire victims that they didn’t think they could settle while continuing to build the infrastructure and renewables projects to decarbonize our transportation and electricity supply. Their move also put pressure on the Governor and the Legislature to help settle the amount of money they have to put out for the much larger challenges they’re facing.

In the laborious, expensive process of bankruptcy, we estimate that almost $1 billion will be spent just on fees for all the different lawyers representing the victims and the various creditors, including renewable power contracts, bondholders, and equity holders. The CPUC’s job is to project the ratepayers and to make sure that not all the costs pass on to customers. Everybody will take a haircut, but our job is to make sure that the ratepayers take the smallest.

It important to have an investible utility to build large amounts of electric transformation infrastructure, to provide clean electric fuels, to help finance new technologies, and to do the other sundry things that we expect from an electric utility. Now, it’s not clear to me that at the end of this, PG&E will be buying and selling electricity; they may be a platform to transmit it, or they may make other types of investments. But at this point, clean, renewable electrons are cheap and easy to get. What’s hard to get is a durable way of getting those electrons into homes. And I fear that many proposed solutions to do that simply move the point of ignition around.

During Hurricane Sandy, for example, undergrounding didn’t prove to be an actual solution for reliability. It’s easier to repair aboveground lines from ice storm damage than to dig up a whole system to replace underground lines that have been flooded. The parts of Long Island with undergrounding took as long as three months to get back online, while parts with aboveground infrastructure were back in service within a week.

As another example, we learned from our experience in the Tubbs Fire—which was found not to be caused by PG&E’s negligence, but by a backyard microgrid—that microgrids just move the point of ignition.

Resiliency, in this era of extreme fire danger, may not be a simple task easily solved by technology. It may include larger questions such as where it’s appropriate for people to build homes, and what kinds of infrastructure other ratepayers should pay for to serve them. These issues are part of the discussion of PG&E’s bankruptcy. 

Pete Holland: Has our march toward the future of energy been slowed down by the PG&E bankruptcy?

Michael Picker: We need to go faster to clean up our energy generation. But in my mind, the task isn’t just cleaning up the electric industry; it’s also how using clean electric fuels to take the carbon out of buildings. Where can we cost-effectively compete with natural gas in buildings and homes? How do we get every new home in California to be built with geothermal heat pump rather than natural gas service? We are at that point of inflection, but it’s going to take more investment to get that to market scale. Every bit is difficult, and there are more parties involved than there were when we were just trying to get the electric utilities to feel comfortable buying variable and intermittent resources like renewables. 

Pete Holland: How do you see the CPUC’s role in encouraging entrepreneurs to develop those new technologies?

Michael Picker: We are not really good at innovation, but we can take innovation and bring it to scale.

What we did with the renewable portfolio standards—bringing wind and solar into the fleet of generation and creating a cadre of developers who were good at building here in California—was tell the utilities to go out and procure renewables as part of their portfolio of generation. That worked.

In 2016, the three regulated utilities were supplying roughly 30 percent of their electricity from renewable sources—four years in advance of our 2020 goal. They will probably be at 50 percent between 2020 and 2022. If they keep on the same course, they’ll be at 60 percent by 2025. That’s success.

Renewables are done; we fixed that. Let’s declare success and move onto the real task. Remember, renewable technologies were a tool to get clean electricity. So let’s figure out how to use renewables to drive down carbon in California industries.

Gas used in buildings—homes for heating and cooking and in industry—accounts for about 28 percent of all our carbon. Transportation accounts for 40 percent and growing. If we really want to decarbonize California, we need to focus there.

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To reduce carbon emissions, we’re going to have to use utilities as vehicles to help finance technologies in other industries. That is why it is essential to get utilities out of bankruptcy and to think about what it’s going to take—in this dynamic, chaotic fire environment—to decrease their risks and make sure they don’t slide back into bankruptcy again. These are the uncomfortable thoughts I arrive at when I wake up in the middle of the night.

Chris Thompson, SCE: I think of the utilities as being at the intersection of climate adaptation and climate mitigation. California’s policies have been tremendously successful. We’ve made huge strides in cleaning up our electric power sector and greening our generation mix, and we are making strides in electrifying transportation: Half of the electric vehicles in the country are in California. We have been very successful, and we should celebrate it.

We don’t want to slow that success down; we want to speed it up to address the effects that we’re seeing. But financial stress on the utility industry has the potential to significantly slow it down. We’ve seen credit downgrades in both the public and investor-owned utility sectors, which is flowing through to large-scale renewables developers. We’ve seen projects get their credit downgraded. That has the potential to slow things down, too.

Pete Holland: Assemblymember, some have noted that we need to address wildfires more holistically by examining how we develop and build in high-risk areas, and how we attack fire suppression and forest management in these areas. Do you foresee these issues being explored this session in the Legislature and confronting these threats more proactively?

Chris Holden, Assembly Chair of Utilities & Energy: It’s going to be a busy year. With this restructuring, we’re going to have to figure out what PG&E will look like on the other side. A bill from Senator Ben Hueso is looking at the utilities being wires-only. That might mean that CCAs step into that role. There are a lot of issues we’re going to have to figure out.

Once we stabilize the utilities and ensure that the energy and renewable plants are back on track, I personally think we should take a time-out and let some of what’s happened seep in. Sacramento has a desire to see more legislation address a lot of different issues, and rightfully so, but I think we need a cooling off period to let what we’ve done take hold.

Pete Holland: Lynn, you founded one of the largest residential solar and battery companies in the U.S. What role do you believe distributed energy resources can play in creating a more resilient community?

Lynn Jurich, SunRun: I believe that we need to be not only future forward, but also future fast. This is unprecedented—but we have solutions. Sunrun is excited today to offer a proposal for the city of Los Angeles.

We are incredibly impressed with the courage of the mayor and the goal of retiring these gas plants, and we took it upon ourselves to look at the market and see how we could replace these gas plants with rooftop solar and battery. We believe that the city of Los Angeles could create a virtual power plant of rooftop solar and battery, equivalent to one of these gas plants, with about 75,000 homes. To put that in perspective, that is about 10 percent of homes in the city.

Right now in the city of LA, about 2.5 percent of homes have rooftop solar. San Diego is already at 11 percent. So if we could take LA to San Diego’s level, and add battery, we would reach the equivalent of the peak capacity of a gas-powered plant. And it’s already cost-effective to do this.

Pete Holland: Chris, Siemens is an international leader in infrastructure, digitization, and electrification. What are the best practices you’re seeing globally that California can learn from and utilize as we transition to 100 percent renewable energy by 2035?

Chris King, Siemens: One best practice is getting together all the key stakeholders to put together a strategic roadmap, like Germany’s Energiewende. Not everyone may like it, but people now know where they are going. They’re starting with high subsidies for solar and then working their way down to let the market take it from there. In fact, we have Germany to thank for the huge decline in solar panel costs over the years, as well as in wind.

After a roadmap, the second step is modernizing the grid. We can have all these microgrids, but they can’t stand on their own; we still need a central utility grid that can support them and deal with the voltage issues. Modernizing that grid includes communications, automation, data collection, sensors, and so on.

We did a big project in Finland. The transmission grid was running out of capacity, causing a huge bottleneck in one area. That area was home to Sello, the largest shopping mall in the country. They turned the mall into a virtual powerplant that is fully interconnected with the grid. It has rooftop solar, battery storage, electric vehicle charging, and an automated building management system that makes it highly efficient. Now the transmission grid operator, FinGrid, just calls on Sello when they run into capacity problems.

The third practice is at the intersection of policy and technology: open markets and open standards as we deploy this technology. We need this in order to allow companies to come into the market and have processes like rapid interconnection, which has been an issue for battery storage and high-powered EV chargers. The market wants to adopt these vehicles even faster, and companies are ready to install these chargers, but it takes time to do the planning and interconnections. Open standards and standardized processes could really help reduce costs.

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© 2019 The Planning Report | David Abel, Publisher, ABL, Inc.