Jon Powers: Welcome to Experts Only Podcast sponsored by Clean Capital. Learn more at cleancapital.com. I’m your host, Jon Powers. Each week, we explore the intersection of energy, innovation, and finance with leaders across the industry. Thank you so much for joining us. Jon Powers: Welcome to Experts Only, our podcast that focuses on the intersection of energy, innovation, and finance. We’re actually live here at Solar Power International in Anaheim. We’re here today having a fascinated conversation about the economics of microgrids, really defining the business opportunity. We’re going to introduce our speakers here in a second. If you’ve not been to Solar Power International, next year, the show will be in Salt Lake City and it’s well worth attending to see some of the most innovative conversations of what’s happening in the space. Thanks. We’re going to have audience participation. This is a little bit different than our normal podcast. It’s about a 90-minute run compared to our normal sort of 20-minute show, so just warning for those listeners. Thank you so much for joining us. Jon Powers: As I mentioned, my name’s Jon Powers. I’m the co-founder of Clean Capital. My background is more broadly in energy security. I served as the first special advisor on energy to the Army and helped stand up the Army’s clean energy programs, and later on, went to the White House where I served as President Obama’s chief sustainability officer. Worked a lot on energy security, including before launching Clean Capital with Bloom Energy, where I oversaw the public sector business development, so microgrids, which is what I’m going to talk about here in a second. Jon Powers: Why we think this space is so important today, and while are we talking about it here at Solar Power International, we’re all witnessing a time that our grid is transforming. We had a very sophisticated 20th century grid that has 3,300 utilities, 5,000 substations, 5 million miles of utility wire, distribution wire, but that is now at risk. There’s multiple threats, which we’ll talk about that’s driving corporate America to move to the concept of distributed energy. I think being here at Solar Power International, you probably recognize that, so we won’t talk too much of the 101 version of that, but this transformation is happening in real time. The question comes down to how do we start to really grow and scale that transformation, which is critical to both finance and the business models of these deals. Jon Powers: Some of the things that are driving those changes, if you flash back to Superstorm Sandy that came through the northeast and caused over $50 billion in damage, shut down New York City, Wall Street, parts of New Jersey, Connecticut, you had major corporations who had strategies to back their power up through diesel generation, for instance. The reality of that storm is the diesel that was being provided to the area at the time wasn’t going to the big-box stores, it was going to the first responders, it was going to the military bases, it was going to the hospitals. You had facilities in downtown Manhattan that had their generators in their basements, which became useless when they got flooded. Jon Powers: Companies really started to look at the idea of distributed generation, but so did the policy makers and places like New York and Connecticut and New Jersey started putting in test pilots around things like microgrids. One of the things we did when I was at Bloom Energy is we worked in hand in hand with the City of Hartford and developed the first of its kind fuel cell driven microgrid that could island a gas station, a community center, and a grocery store in case of a need of another Superstorm Sandy. Jon Powers: The challenge of that was not the technology. The technology’s there. The software for the most part has come along and is there. The business model though was a major struggle. How are we going to set this up? For instance, in this case, we ended up having multiple contracts. Let me give you an example. The pilot money provided by the state went to the development of the microgrid, but not for the management of the microgrid or the acquisition of the power that was going to flow through the microgrid. Jon Powers: We had to have a series of contracts, power purchase agreements between the generation and the offtaker, an agreement between the generation and the microgrid manager that defined when the power from that generation became the responsibility of the microgrid, and then a variety of contracts for the management of that microgrid. Someone who sits in the finance side now, that is a mess to try to finance, something that’s not scalable. We have to think through these business models as we’re seeing pilots grow through the policies like the REV proceedings in New York, or here in California, there’s significant microgrid efforts going on. Jon Powers: Those different business models I think will get tackled and as they get tackled, we’ll begin to see some efficiencies and those efficiencies will drive more and more scale, but our experts here have way more experience in this than I do. I want to introduce them one by one, through their sort of introductory statements and in their introduction, I’m going to have them introduce a little bit about themselves. We’re going to start with David Rubin, who serves as the Director of Strategy Formulation for PG&E. David’s got deep experience working across some of the challenges facing microgrids today. Those facing the utilities are very complicated solutions. David, what sort of led to your interest, first of all, in the energy space and then later on, into the microgrid space? David Rubin: Well, thank you, Jon. Good afternoon, everybody. For those of you that are listening in and not in the room, we have a tremendous turnout of people here. It’s standing room only. It’s the biggest audience I’ve ever seen. The numbers are phenomenal. Thank you for showing up. I’ve worked for PG&E since 1985 and really started working in energy prior to joining PG&E. I worked with the City of San Francisco for several years. Prior to that, in the DC area with the consulting firm, and then I was in the Peace Corps, and I noticed Sachu and I have that in common. I’ve always been interested in energy and renewable energy in particular. Moving fast forward to microgrids back in around the 2002-2003 timeframe, and I think Sachu might have been at the Public Utilities Commission around that time. Sachu Constantine: Just after that. David Rubin: We started administering a program called the Self-Gen Incentive Program that came about in order to offer financial incentives for customers to put in clean energy devices on their side of the meter, which eventually sort of grew both in scale as well as it splintered off the California Solar Initiative in the 2006-2007 timeframe. My experience at PG&E has been on working with customers on various types of clean energy solutions for their facilities. I developed our community solar program back in the 2000 plus or minus 12 timeframe. It just seemed natural that when microgrids looked like they were becoming a thing, and I think we would say they are now a thing, it was an opportunity again for us to expand the way that we serve our customers and respond to specific customer needs for, in this case, resiliency. Jon Powers: Interesting. Was the leadership, the utility, sounds like you’re working on some very innovative problems within the utility, they see a role like yours addressing that next innovative leap? David Rubin: Yeah. I mean, there are a number of people within the company that work hard every day in order to meet the needs of our customers and manage a variety of different types of programs to do that. This seemed a little bit more out on the edge and for better or for worse, usually for me, the things that were more edgy. Jon Powers: It’s good. It’s a good place to be. My next question is to Miranda Ballentine. I’ve known Miranda for quite some time. She’s the CEO of Constant Power. Miranda has served in a few organizations you might have heard of, Walmart, the Air Force. She served as the Assistant Secretary to the Air Force for energy. I want to talk more about the military later. We’ve got a lot of military experience in the panel, but you have a really deep background in energy assurity, resiliency, security, as well as procurement there. First of all, what got you interested in this space? Then, how do you see sort of the microgrid market affecting the issues that you care about? Miranda Ballentine: Hi, everybody. Nice to be here. I’m Miranda Ballentine. My very first work on microgrids was in the early 2000s, maybe 2001, 2002 when I worked for a small NGO called the Solar Electric Light Fund, that brings microgrids to remote parts of the developing world that have no access to power, really as a way to solve economic health and educational challenges, actually. That’s when I first was sort of exposed to the concept of microgrids and not being connected to a centralized power plant. Miranda Ballentine: Fast forward a number of years, at Walmart, where I was in charge of global renewable energy strategy and sustainable facility strategy, Walmart U.S. Had a very active, distributed generation program. Probably, most folks know that Walmart set a goal in 2004 to be supplied by 100% renewable energy, a pretty audacious goal certainly at that time, one of the first, if not the first 100% renewable energy goals, and we had some very intentional discussions around how do we get there. Miranda Ballentine: Obviously, the fastest way to get there is to procure large scale utility scale, wind, solar, hydro that’s offsite. And so, we could have done that and we do do that, or they do that. I should say that they, at this point, I guess. It has been a number of years since I worked there, but we had some very, very intentional discussions around the role of distributed generation and were very intentional about choosing a DER strategy. It frankly was for resilience purposes. Now, in that setting, the resilience is much more focused on mother nature as the adversary. I know we’ll talk about the range of adversaries that we think about today that can perpetrate attacks against power grid, but in those days, sort of 2005 to 2010 timeframe really was how do we protect fresh and frozen food stock from a storm? The only way to really do that is what I would call almost a nanogrid. Miranda Ballentine: Walmart, very early on, was not only doing rooftop solar, but pairing rooftop solar with energy storage, working with Bloom, Tesla, before Tesla’s Powerwall was even a thing, we were doing experiments on stores here in California, really for the purpose of resilience. Then, fast forward to my time in the Pentagon and that’s where I really started to focus on microgrids from a national security, grid security, and grid resilience perspective. I became convinced that the DER movement, if properly executed, planned, thought out, could be a significant benefit to our national security, to our energy security, to our grid resilience. Miranda Ballentine: However, conversely, if the companies that were deploying microgrids, DERs, storage, and distributed generation were not thinking about security, cybersecurity, resilience, that in fact, we could have the opposite impact on our grid by expanding the attacks base, essentially, particularly for cyber threats against the grid. That’s when I came to the supply side of the equation, now work for a very small startup in Ontario doing behind-the-meter storage as a service with a very strong emphasis with our suppliers on understanding how they are integrating cybersecurity and physical security into their assets and systems. Jon Powers: For those who don’t know, Ontario is sort of on the leading edge right now in the storage space, doing really interesting work. My next question is to Sachu Constantine, who first and foremost, I learned last night is a phenomenal dancer. He’s also the managing director for regulatory Vote Solar. If you don’t know Vote Solar for a second, I want to step back and give a quick Vote Solar commercial. There’s an earlier episode at Experts Only where we interviewed the CEO of Vote Solar, Adam Browning. Jon Powers: Vote Solar is an incredibly powerful nonprofit that is out advocating for the policies that we all think are important to help drive our industry forward. It’s critical for us as business leaders, as policy leaders and others, to support the efforts of groups like Vote Solar to make sure that the policies we need at the state level are being championed. I sort of challenge you all to go to their website and see the work they’re doing. But back to the topic at hand, he’s served in many diverse environments to include Ghana with the Peace Corps. We got two Peace Corps folks now on the stage, as well as Berkeley. Miranda Ballentine: Two Peace Corps and three DOD. What does that say about our panel? Jon Powers: It’s a public service stage. Talk a little bit about your experiences. How this led you to an interest in sustainable energy and then in resiliency as well? Sachu Constantine: All right. Well, thank you. I’m pretty sure I used up all of my remaining dance mojo last night. Miranda Ballentine: So don’t ask tonight. Sachu Constantine: Don’t ask again. Jon Powers: It’s a podcast. They can’t see it anyways. Sachu Constantine: I was actually noticing that same thing as we were going through the introductions here, some of our early experiences were very similar. We got to see sort of stripped down to its barest, most essential elements. Why do we build electricity grids? Why do we deliver energy the way that we do? It’s to provide services to people. When I was in the Peace Corps, of course, most of my environment was unserved or at the very best, underserved by the sort of national grid. And so, we were actually already trying to develop microgrids in a very rudimentary sense. But I think the frame that that gave me was that if you strip everything down, this great machine that we’ve built, the grid, probably the greatest machine that we’ve ever built, ultimately, it started as microgrids. Sachu Constantine: It started as an accretion of microgrids and we built the long line transmission then to start to connect those things. We’re really getting back to core principles and I think that’s what I took away from that Peace Corps experience. Also, obviously, if you work in Sub-Saharan Africa, maybe not so much Ghana because it has a fairly sophisticated infrastructure, but in parts of Kenya and I worked in Uganda and South Africa, you had large pockets of populations that simply had no transmission grid. The leapfrogging opportunity for the microgrid was huge. The ability to kind of jump over this stage of developing a very extensive long line transmission out to distribution feeders and so on, you could just go right to a microgrid. This is all happening at a time when solar and storage and other technologies are finally kind of coming into their own. Sachu Constantine: Now, you have multiple options for how to power that microgrid. I think that sort of fascination and that recognition of what that need was and how we could serve that need sort of carried over into my career here. I did spend time in DC, long after Peace Corps, working overseas in Sub-Saharan Africa and Asia and microgrids. Most of the countries that I worked in were a real opportunity. They stayed with me in that sense. I’ve been in solar actually, as David mentioned, I started at the PUC specifically on solar working on the CSI and some of the other self-generation programs that we had there. I moved on from that really formative experience in terms of solar policy over to the Center for Sustainable Energy, which happened to implement some of those programs that we were overseeing at the PUC and parallel with PG&E and Southern California Edison. Sachu Constantine: I have been, throughout my career, now looking at what the barriers are to solar, trying to figure out is it incentives, is it policy, is it some combination or lack thereof that we need to put out there? One of the things, again, coming back to microgrids, one of the things that’s nice about it is that it really starkly illustrates what and why we’re doing this. Microgrids have the ability to incorporate more renewables in a contained way, but they can continue to operate in blue sky operations with the grid and perhaps provide services. I think we’ll touch on that as we go through this conversation, but I think microgrids are really just an extension of the desire to provide good, quality, clean, modern service to customers out there. Jon Powers: Then, the regulatory side with Vote Solar, what are you seeing today that you’re sort of pushing forward on a policy side? Sachu Constantine: No secret that Vote Solar has historically worked to expand and defend, things like net metering, policies compensation, packages for solar. We’re going to continue to do that. We’re at a stage where some states with high penetration are thinking about modifications and alternatives to the traditional net metering, but effectively that customer tariff, that’s one thing we’re going to be looking at. Particularly here in California, we’ve got the follow-on successor tariff proceeding. We’re also really interested in developing this stack of values for solar, which I think includes microgrids. What are all the services that solar plus smart inverters plus storage plus DR and plus energy efficiency, what can it provide to the grid? Again, core principles, the grid of the future is likely to be a lot of, in essence, microgrids or large microgrids or nanogrids, all tied together some way, all able to function in smart and sometimes independent ways. Jon Powers: Excellent. Sachu Constantine: We’re going to be working on those policies. Jon Powers: Exciting. Lastly, Mike Wu is the Principal of Convert Strategies. Mike served as a special advisor on energy to the Air Force. He really saw an opportunity to engage stakeholders in helping them sort of understand the need for developing microgrids. At lunch today, Mike and I were talking, he told me a story about some of the work they’re doing right now with some installations where they’re going in and actually working with the facility team to show them what it means if they had, for instance, their utilities knocked out for 10, 20, 30 days and what it meant for their operations and helping them think through the needs to address this. Mike, first of all, how did you get interested in clean energy? Then, with that other peace in mind, what do you see as some of the driving threats that’s causing folks to really get an interest in distributed generation and microgrids? Mike Wu: Thanks, Jon. It’s awesome to be able to share the stage with two of my closest professional mentors, my old boss. Jon, your question about how did I get interested in clean energy was really- Miranda Ballentine: Former boss. Mike Wu: Yeah, sorry. Jon Powers: Former. Mike Wu: … was really you. My first job in energy was helping run a coalition of military veterans who advocate for clean energy from a national security perspective called Operation Free. That was founded by none other than Jon Powers. From there, I met Miranda Ballentine at a conference and said, “Oh, I want to work for her.” I got everybody who I knew who knew her to barrage her with emails to convince her that she needed to hire somebody and it should be me. Miranda Ballentine: He’s not kidding. Mike Wu: Including Jon. I in that work. Working for Miranda, amazing taking on the Air Force, which is one of the world’s largest consumer of energy, and thinking about how they would apply new technologies to maintain critical operations during times of disruption. Leaving the Air Force, we started a company called Converge Strategies, which is a consulting firm focused on the intersection of advanced energy resilience and national security, so getting an opportunity not only to work outside the Air Force, but with the Department of Defense and the rest of the military services, so really seeing how our military is considering the threat and increasingly concerned about the risk of long-term widespread regional disruptions, but also seeing how other stakeholders, commercial players, state governments are starting to confront that threat as well. Mike Wu: I mean, I think one of the things that we saw recently was an extraordinary series of webinars that the Department of Homeland Security held, which detail in forensic precision how Russian hackers have access to operational controls of centralized power plants. This is one example of determined adversaries that had access to our critical infrastructure. It’s not the only example, it’s I think DHS and FBI should be commended for articulating this threat in an unclassified way, but it is just one example of capabilities that our adversaries have. I think- Jon Powers: Can I ask you a question? Mike Wu: Yeah. Jon Powers: Why do you think they did… I mean, in many cases, having some national security background, they would never talk about that, right? Mike Wu: That’s right. Jon Powers: They made an effort to get out. I mean, it was even in the New York Times and Wall Street Journal. They declassified it and made an effort to educate folks. What was driving that from the DHS? Mike Wu: I think there’s an increasing awareness that they have to, that there’s no question whether this access exists and that if they didn’t make this public and they did things like anonymize the information so you couldn’t tell what utility or who the exact actor was. Things that protected sources and methods for our intelligence community, they did do that. I think they were thoughtful about it. But I think it’s becoming too important to ignore or to wait for an incident. It’s something that we need to get left of boom to really consider. It’s just one of the fundamental threats that we’re facing now that are different than they have been before. Mike Wu: In 2017, we had the largest power outage in U.S. history in Puerto Rico and The U.S. Virgin Islands were seen, obviously once in a hundred year storms, more frequently and more severely. We’re seeing a lot of long-term threats to particularly the military readiness, but everybody else too. One of the things we’re working at Converge and sort of having a broader view than just the Air Force is questions that everybody should be asking themselves are, what are your critical requirements? What do you need to maintain whatever it is you do that’s most important and achieve your mission? What are your capabilities of achieving those requirements across a range of disruption scenarios and what are the current gaps that exist between those things? I think that’s the framework that we’ve tried to apply definitely within the military, but I think is going to be applicable increasingly throughout. Mike Wu: I thought Sachu made a really good articulation of how the grid of the future really needs to look. Last thing is the approach of the current administration appears to not be in that vein. It appears to be focusing on how do we maintain generation for what they are calling fuel secure generation, which is really code for coal and nuclear plants, when the vast majority, the overwhelming majority of disruptions don’t occur at the generation level, they occur at the transition and even more overwhelmingly at the distribution level. That’s a conversation that maybe we can get into more, but it’s disrupting the distributed energy revolution that I think we’re all invested in. Jon Powers: Interesting. As we’ve talked, the threats are real. There’s action being taken. I want to talk for a second a little bit about the evolving market for microgrids. Miranda, when you and I first met, you were at Walmart and you’ve really been working at some really innovative procurement efforts at Walmart to help lead the way for them to go out and make the business decision to buy clean energy and distributed generation. As we’ve talked about companies like Walmart, Apple, for the data centers, the military, are committed to these strategies of behind-the-meter generation and putting generation under their control or in partnership with utilities. But to do that, we’ve had some real innovation on the procurement side of that. Jon Powers: If you really flash the early parts of the 2000s, most large corporations would just pay their utility bill. They didn’t have internal energy procurement shops. I mean, the work that Apple’s doing, eBay’s doing, of course Walmart’s doing is cutting edge from an energy procurement perspective, not everyone has those resources to put forward, but because they’ve done that, you’ve got some really innovative procurement strategies that have developed. Can you talk about the development of those strategies and maybe how those could tie into where we’re headed with microgrids? Miranda Ballentine: Sure. It’s sort of funny that you say that because nowadays, we think of renewable energy PPAs as the norm. It doesn’t feel particularly innovative. We just do renewable energy PPAs, whether it’s a VPPA for offsite or a straight up PPA for onsite, but certainly in 2004, 2005, really through 2010, it was very new and something that Walmart certainly pioneered in those early days. Now, what we’re seeing is more and more innovation around aggregation, but really all of that’s still focused on utility scale offsite stuff. I think the place where we’re going to need innovation for microgrids really comes back to what Mike was saying, which is the buyers need to determine what their requirements are if there’s an outage. They need to understand the threat environment and the balance between high risk but low impact outages, brownouts that happen, I don’t know, every six months or so. Miranda Ballentine: I have some clients right now that are so impacted by brownouts every year that all they really want are UPS systems. Then you’ve got the high impact, low risk scenarios and understanding a company or an organization’s risk tolerance for those different types of outages. Then, how do you value keeping your power up? If you’re Walmart, it’s kind of easy. You look at what’s the value of your fresh and frozen food stock in a particular store. Is it $10 million? Is it half a million dollars? If you do the analysis and say, “Oh, the next time a storm comes through, we’re going to be out for three days and we’re going to lose $10 million of fresh and frozen food stock,” suddenly investing in a Bloom fuel cell or the additional cost to add battery to your on onsite solar starts to look economical. Miranda Ballentine: If you are the Air force and you look at a low risk, but high impact scenario and you start to say, “Okay, well, what is the value of keeping remotely piloted vehicles flying over the Middle East? What’s the value of that and how do we build that into the economics of how we do these deals?” It gets really complicated and there is no clear answer. It depends on who the offtaker is. Jon Powers: Do you find offtakers really beginning to educate themselves? I mean, they’re really sophisticated once making these decisions. Data centers may be an easy way to do it, but once you get beyond that, whether you’ve got a warehouse doing distributions or what does it mean for sort of a mid-tier big-box store, how do they make those decisions? Miranda Ballentine: I would say that in the offtaker community, the idea of resilience and security and using microgrids to solve that problem, in particular using renewably powered microgrids, it’s not common. It’s not an everyday part of the conversation. Still with major C&I offtakers, the conversation is more around getting to zero carbon, lowering energy bills, future price risk hedging, that kind of thing. You’re seeing more and more conversation about it. But again, coming to the point of why was it important for DHS and FBI to declassify the information, I was on a panel an hour ago where one of my fellow panelists, I hope he’s not here, quite literally said, “Well, there’s never been an attack against a grid.” I about fell off the stage, about fell off the stage. I said, “We had a 2015 attack in Ukraine that took the whole grid down.” Miranda Ballentine: Every single day, our grid is being attacked in this country. It’s declassified and it’s being disseminated in about the most public ways that it can be, but there is, to actually give him some credit, I think there is a false sense of security because our colleagues at the utilities have done such a darn good job in keeping us up 98% of the time. They are so resilient against mother nature as an adversary that we have been lulled into a false sense of complacency in my view. In general, even the C&I customers who don’t have security clearances are not thinking about these additional threats to the grid and what it may mean for their business. Jon Powers: I’m going to come back to utilities in a second, David. Before we do that, the business drivers are key, but some of the policy drivers, there’s a lot happening in the policy space, Sachu, that is helping to really drive the distributed generation market. Right here in California, the state’s been a leader in establishing renewable goals, storage programs, so much more. You’ve got really interesting proceedings happening in New York, around the REV policies. You’ve got pilot programs in Connecticut around microgrids, a lot being driven by the Superstorm Sandy effects, but as policies mature to address this evolution, what are you seeing sort of in the energy markets and sort of where do you see this going from a policy perspective? Sachu Constantine: Well, it’s a great question. I mean, we’ve long had this adage in the solar industry that it’s a policy driven market. I think that unfortunately still remains true. I mean, the ideal, of course, would be to move from a policy driven market to a market driven market, but we’re not quite there yet. You mentioned a couple of programs, and actually, you referred to the Hartford project that you work on, which came under this Connecticut microgrid program. New York has a microgrid program. We are seeing sort of small versions of that crop up. The interesting thing about a lot of those microgrids, particularly in Connecticut, they’re not 100% renewably powered. The motivation for them was a sort of defensive motivation. It was because of Superstorm Sandy and other kinds of risks and threats. And so, that’s great. That is a policy driver, a policy of the state governments in those cases, and I’ll talk about California in a second, but a policy to try to mitigate or avoid the risk caused by those things. Sachu Constantine: I think from a policy sense, what’s missing there is a more positive reason to build microgrids. What can they do? What services could they provide? Right now, if you look at most of those projects, if you look at the offtaker contracts that they have, they’re essentially, the only service that they really seem to be providing to the grid is energy and some black start functions, but they’re essentially, they can generate energy, they can island, so they can provide this backup function. Then, in blue sky operations, they can provide some energy back or reduce load, but what about other kinds of services that these microgrids could provide? Sachu Constantine: They are, in effect, a microcosm of the larger grid. They should be able to provide all the services that a larger grid could provide and could want. And so, policy, I think, has to evolve and start to express other more positive reasons for building a microgrid in addition to the security resilience and other reasons that we build them. Unfortunately, you do have the REV process in New York, but the REV process, in my opinion, has sort of let the vision of a distributed future sort of fade a little bit and it’s looking a little bit less innovative in that sense. Connecticut doesn’t have the exact same process behind it. Here in California, one of the interesting things about the way you described it is that a lot of what has given rise and potential to microgrids were developed in other streams. Sachu Constantine: It was developing a value stream for behind-the-meter solar. It was in promoting and incenting storage deployment. It was in thinking about DERs really broadly. It just so happens that all of these streams come together in a microgrid. And so, all these different value pieces that we were trying to create, the markets that we were trying to incent and stimulate also work for the microgrid case. I think that to me is really illustrative of how policy has to evolve. If it is still indeed a policy driven market, policy has to start to encompass all of these ideas. Sachu Constantine: We have to do two things with that policy, too. We have to, of course, work within the technical parameters and the economic parameters for the utility and the energy sector, but we’ve got to capture people and make them understand what is good about this vision. They don’t want to know about the duck curve. Duck curve is important for us to think about, but society doesn’t care that much about the duck curve. What they care about is light staying on, food staying fresh, their community being resilient in ways that they can understand and see and feel and walk through. They have confidence that the solar panels up on that roof are going to be able to provide power through thick and thin, or at least the batteries attached to them and maybe there’s wind, maybe there’s other resources attached there. I think when I think of policy, it’s about expressing people’s ideals, ideas, priorities, and policy so far has not, in my view, fully articulated that. We’re getting there. We’re seeing it, but it’s going to be a little bit of a long road. Jon Powers: It’s interesting to see the different almost pilots of policy that are happening around the country, with California and New York’s always held up, but there’s been such an interesting push from so many stakeholders that are affecting it. Then, you have interesting corporations like Apple builds their spaceship up here a little further north here in California, which is an amazing. If you don’t know about the new headquarters at Apple, Google it and check it out. It’s amazing. It’s 100% renewable driven by things like fuel cell and wind and solar, but for the utilities, there’s a massive customer base load that just, demand modes, I should say, that just maybe went away. This has been a challenge for the utilities as policies moving forward, the business case for a lot of the utilities, they’ve sort of struggled to figure out how to address and wrestle with the disruptions that are happening. I think PG&E has been a leader in this, in finding ways to be innovative. Can you talk a little bit about the challenges, David, of the utilities and then how are you looking at sort of addressing this in the future? David Rubin: I think most or all of you in the room are familiar with PG&E. We’re headquartered in San Francisco. We serve a good bit of Northern and Central California. We have about 5.4 million electric customers and 4 million gas customers. About 360,000 of our customers have solar systems either on their roofs or behind the meter, which is a pretty sizable number in aggregate sense, as well as a percentage of our customer base. That’s growing at about maybe 5,000 customers a month. Miranda Ballentine: Wow. David Rubin: About maybe a couple thousand of that 360,000 have storage, so much smaller number, still growing. Of that subset, a very much smaller number actually have put in everything that’s necessary in order to allow their facility to operate as a microgrid, which according to the DOE definition, can operate in both grid connected and grid disconnected mode. A lot of times, when we have conversations like this, we sort of conflate DERs that are usually part of a microgrid with the microgrid or the element that makes it a microgrid. But just to be clear, a lot of customers will, again, install solar and or some other form of renewable and then storage, and then say, I pretty much have what I need for a microgrid. Then, discover it actually is more complicated and expensive to take that next step to enable islanding. David Rubin: Solar costs have gone down dramatically. Storage costs are following the same trend. Controls have gotten less expensive and more sophisticated, but it’s still not quite like saying I’ll take fries with that to go the step from solar and storage to a microgrid. And so, we do have a relative handful of customers that have said, “We value the resilience benefit,” and that’s really the equation that’s in front of them around is the value of having the ability to withstand some type of climatic or other event worth the extra investment that’s necessary in order to be able to allow it to ride through those types of either storms or other natural disasters. David Rubin: Of course, we’re seeing more of them. And so, I think it has become much more of a front and center issue for customers that have critical loads that either for commercial purposes, need to be able to ride through an outage. Again, we strive to do better than 98%. Hopefully, we are. Four or five nines is what we usually target, but there will be outages. For certain types of customers, outages are just not acceptable, so whether you’re a data center, or a company that has a lot of frozen foods, or a military installation, or more and more a facility that is going to be needing to stand up when the grid is down precisely for the purpose of providing important community services like shelter, food, a place to charge your phone, a place to keep warm and have a shower. Those now are becoming community centers, police stations, firehouses, et cetera, is really starting to enter the picture as one of the primary use case drivers for a microgrid. David Rubin: The way that we look at the microgrid, call it, market is really within three different categories. The first one are single customer behind-the-meter types of installations, which we have known for a long time. Even hearkening back to the prior generation, healthcare facilities and other types of buildings have always had some form of backup generation. Usually, it’s break before make, but they can continue to provide whatever services they provide in the event of a grid outage. What’s different today is again a sizable growth in customers adopting clean energy systems and storage and having that be the underpinning of a behind the customer meter type of microgrid. David Rubin: Some of them still need rotating equipment of some form depending on the nature of the load. But again, more and more, these are clean energy driven types of systems and that’s really the sort of primary category of activity that we see. It may well be a campus type installation, so it’s multiple buildings and multiple loads, but it’s a single customer behind a single retail meter. Many of them have been funded through various forms of grant funds. The California Energy Commission has had a number of waves of grant-funded support for customer projects. One that we worked on somewhat recently is the Blue Lake Rancharia up in Humboldt that was the winner of the DISTRIBUTECH Distributed Resource Integration Project of the Year where they put in solar storage, a backup generation. They had a biogas digester, which unfortunately didn’t quite work the way it was intended to, but it was still a noteworthy project and they serve, again, as a collection center in the event of a grid outage. That’s, in many respects, really the predominant form of microgrids that we see and that’s the first major bucket of activity. David Rubin: The second is where PG&E, for its operational purposes, would want to implement a microgrid either because it’s the lowest cost way to serve customers, so in some sense, getting back to, if we had it to do all over again, knowing what we know today, we wouldn’t run a 20-mile umbilical cord line to serve a relatively small load in some remote area. We would serve it through a self-contained type of generation and storage system. And so, as we look across our service territory today, there are a number of cases where we do have relatively small customer loads that are a remote distance from the rest of the grid, but they’re connected through a long line that frankly, once we come up to a need to replace that line, we ought to look at serving that load a different way. David Rubin: One of the opportunities we have is looking at Angel Island, which is in the middle of San Francisco Bay and is currently connected to Tiburon by a sub-bay or bay for cable. At some point in the probably near future, it will fail and it’s a pretty expensive replacement project. We’re working with the state, which is the customer on the island and Marin Clean Energy, which actually happens to be the CCA serving energy supply, to look at how we can come up with a configuration that would actually have the island operate as the island. It may not fit the DOE definition because it would, at that point going forward, not be grid connected, but it would be a standalone microgrid. David Rubin: Another example of the utility operational opportunity is now in the wake of the wildfires that we experienced last year, we’re looking at implementing programs where we would proactively de-energize lines. In those types of situations, again, we would be shutting down segments of customers in advance of potential wildfire conditions. We would look at setting up again, a means of continuing to serve critical loads that might be downstream of a transmission line that runs through a particularly forested area where we need to de-energize that line, but the downstream customers, there would be a way that we could set up what we’re calling a pre-engineered interconnection hub to be able to move generation and quickly in order to continue to keep a line segment with critical customers operating while we’re going through this, what we call Public Safety Power Shutoff. Again, that second category is really ways in which we would be implementing a microgrid or something like a microgrid in order to allow us to do our job better. David Rubin: Then, the third category, and I’ll just quickly identify this and move on because I’m sure we’ll talk about this more is where you have multiple customers that are sort of geographically proximate that want to be part of a group microgrid. That’s an area where we don’t have any of those today, but again, if you can imagine a fire station, a police station, a community center that would all be kind of very close to each other, maybe on the same circuit, without any other customers or very many other customers between them, and we can figure out a way to put in the appropriate sectionalizing equipment to allow that grouping of customers to separate from the grid when the grid is down, and if there’s, say, solar on one building and storage in another and some other form of generation. David Rubin: Third, you’d actually have a total being more than the sum of the parts type of situation. We do have a project that we’re moving forward with that we’re working with the Schatz Energy Research Center up in Humboldt at the Arcata Airport, which recently received, again, a CEC grant to move forward with a multi customer microgrid that happens to be on an electrical cul-de-sac. It’s the end of a PG&E circuit that serves the airport, the coast guard, a couple of other customers. I think there’s 17 accounts in total, where all the customers would opt in. They would all be part of this microgrid. We would, again, install equipment in order to allow it to sectionalize when the rest of the upstream circuit is down. The work that we have to do is figure out what are the costs, who pays for those costs, what are the benefits, who receives the benefit. We’re planning on working on some form of a tariff that would govern again what amounts to a multi-customer microgrid. Jon Powers: Interesting. David Rubin: Those are the three different ways that we’re viewing the broader microgrid market. Miranda Ballentine: Jon, can I pick up something- Jon Powers: Yeah, please. Miranda Ballentine: … really quick that David said that was really important that was kind of buried in there around the difference between DERs and microgrids and picking up your question around policy and the role of policy. We’d like to talk about these big, sexy federal policies, but the truth of the matter is that in many, I dare say, potentially most jurisdictions, allowing DERs to sever from the grid is still not legal in a lot of the country. When Walmart started doing DERs and rooftop solar back in 2008, in most of those locations, they can’t sever from the grid if the grid goes down. Yes, there is a technical and cost barrier that a lot of customers are like, “Oh, you mean I have to put switches in?” But actually for Walmart, that was not the barrier. It was a policy barrier that we were not allowed to install those switches in systems that would allow the systems. Miranda Ballentine: From a Walmart perspective, we were basically engineering for when the policy caught up to what we wanted to be able to do. We knew that rooftop solar wasn’t actually built giving us resilience when we were installing it. In fact, most of the solar-plus-storage and even the Bloom projects that we were installing weren’t giving us resilience yet, but we were preparing for when the policy environment caught up to our engineering, because it’s really not hard from an engineering perspective. Particularly smaller utilities when we face this now even in Ontario, this struggle with utilities saying, “You can either run in parallel or you can be an islanded system, but you can’t be both.” Miranda Ballentine: And so, working with policy makers and utilities to help them understand and get comfortable because they want nine nine or five nines or whatever it is you want, when suddenly you have a bunch of new little guys installing assets behind-the-meter and how do these guys trust that we’re not just going to knock the whole thing down. There’s a lot of things complicating how we get to systems that give us services in a blue sky environment and resilience in a black sky environment. There are business model challenges. There are policy challenges. I think those are the bigger challenges more actually than technological and engineering. The technology and the engineering is not that complicated actually. David Rubin: Sachu, do you have a comment because I did want to add one other point? Sachu Constantine: Well, I was just going to jump in and say, I think that’s right. It’s not the technology, it’s the policy that’s causing the barriers here. To that point, I mean, California has some very innovative proceedings going on. The Distribution Resources Planning proceeding, the Integrated Distributed Energy Resources proceeding, the IDER proceeding, we’re a wash in alphabet, but what those proceedings are doing is they’re trying to create a policy environment that would allow for these DERs to operate as a value stream for the grid. Once you do that, then you make it possible to also have them island. I mean, I think you need to do both of those things. Sachu Constantine: I don’t think it would be enough from a policy side just to say, “Okay, we can island. You can island.” You have to say, “We can build in the capacity for you to island and the reason for that investment, the reason you would do that is manifold. You have all the security and resilience objectives, but also, you’re trying to add value to the grid.” We’ve got to find a way to value that and that’s what the Distribution Planning proceeding is supposed to be doing. We’ve got hosting capacity analysis as part of that, but it’s also really about getting down into the nitty gritty of planning. The other thing, this is what… Sorry I’m bringing this- Jon Powers: No, this is good. Sachu Constantine: … but if we look out across the country right now, IRPs, Integrated Resource Planning is becoming more often than not something with teeth. We’ve seen some quasi IRP proceedings that are more or less just put in front of the commission, it gets approved and moves on. But now, we’re starting to see these integrated plans, which are trying to take account of the island ability, the functionality, the value to the grid of distributed energy resources, and build up to decide where do you then still need central station resources, where do you need other kinds of resources, because it can’t be provided by other resources. We’re seeing that proliferate. I think that’s a pretty interesting trend. We just got to make those have some teeth. Jon Powers: David, before you comment, just real quickly, I’d like to say we’re about to go to some audience questions after this. If we can grab some mics and if you’ve got a question, be prepared to sort of raise your hand. We’ll come around too. David Rubin: Sure. I’m actually going to provide comments on both sides, which- Jon Powers: Yeah, please. David Rubin: … the first one is how many people have a solar system on the roof? Jon Powers: The audience, there’s a handful of hands up. David Rubin: All right. How many people think that when the grid is down, their system will continue to provide them with power, and you probably have a bimodal inverter, correct? Speaker 6: I’ve got two Teslas in my basement, which the utility can dispatch and it will. David Rubin: You’re an insider. For everybody else, and again, I’ve heard a lot of people say that they’ve gone off grid, they’ve put in a system because it gives them important backup power. Most of them are not- Miranda Ballentine: My husband wouldn’t let me invest in it. I wanted to, in fairness. David Rubin: But just as an observation, again, the vast majority systems have inverters that are single function inverters that once the grid is down, the PV system doesn’t produce power. I think a lot of customers, for better or for worse, are believing that they now have a system that would allow them to operate in an augmented mode. Sachu, I just wanted to pick up on something that you said too, which is consistent, Marina, with your comment, which is, I don’t mean to specifically compartmentalize discussions, but I think it is important when we talk about the types of things that DERs might be able to provide the grid in blue sky mode, that those are conversations that are taking place across a large number of proceedings. You mentioned several of them, those aren’t microgrids necessarily. Sachu Constantine: Correct. David Rubin: They may have the added feature of having all the additional equipment necessary to allow it to island, but they are things that are essentially transactions that can, and we are moving in a direction where they hopefully will be occurring, but specifically when that customer is connected to the grid. And so, it’s in a blue sky operating mode. Jon Powers: Do you see the growth of the storage market affecting those proceedings? Are we going to see more because storage is actually becoming a real thing now? David Rubin: I mean, I do. I think that’s when we talk about DERs providing services to the grid, from a utility perspective, usually that implies a certain amount of dispatch capability. Mike Wu: One thing David mentioned, and it’s funny just because I’ve been on military installations with solar assets where personnel are confused about that as well. And so, I mean, it like- Jon Powers: Meaning, they think they’re secure. Mike Wu: … more frequently believe that they see the panels and they think that that will help them maintain operations during a grid outage. I think we do ourselves real disservice. We’ve all participated in some capacity where we’ve articulated an argument about why this strengthens energy, security, and resilience, when what we mean is it has the potential to strengthen energy, security, and resilience if we can make the investments. I think it gets back to everything that I think we’re all talking about, which is today, it is very hard to pay for an increased level of service from an electric system, at least in my experience. Even if I wanted to pay and even if I had the resources to do it, I don’t know exactly how I would go about that. And so, how do we create products and services that allow for that enhanced level of service? I think that’s something that we’re just at very nascent stages to. I think we may be underplaying the technology challenge of that a little bit in this discussion just because it is a big challenge. Jon Powers: Please raise your hand if you got any questions. Before I call on you, I’d say one, we are supposed to talk about the economics as well. One of the things is someone who finances projects and all of this uncertainty leads to a higher cost of capital, so who’s willing to take that risk, to do those projects, to spend the money, to do the deals. The higher cost of capital is causing us to have higher project, higher cost within the projects. The more certainty begins to come around and the more these things begin to… Solar’s a great example, early stage solar, very expensive capital. Now, it’s becoming not yet commoditized, but much cheaper deals. Storage in a position today where it’s still relatively high cost of capital, but people are beginning to trust the technology. Policies are in place. Microgrid is still far from that today because of all of the policy answered. Please introduce yourself. Heather Werner: Sure. Hi, guys. I’m Heather Werner from Semper Varia. I have two kind of comments. One, I want to expand a little bit, Jon, on what you’re saying in terms of, okay, so it’s high cost of capital because there’s a whole bunch of uncertainty. If you were going to stack rank, what are the uncertainties you need to see removed to start dropping that cost of capital down? What’s the low hanging fruit? What’s the biggest ROI in terms of uncertainty principles? Heather Werner: The other is I do want to push back a little bit on David in terms of you’re right, there is this conversation about DERs can provide services to the grid, but one of the challenges that we have is stacked DERs in a microgrid can provide a lot more services in one single installation and there isn’t, to Mike’s point, there’s no, I mean, whether you want to consider it value stacking or there’s no single or series of aggregated values of services that a microgrid can do as opposed to a silo, like what can storage do? What can solar do, et cetera? Right now, each of those has worked separately. How do you see the progression in policy and regulation to get to that kind of aggregated values economic proposal? Jon Powers: You want to go first? David Rubin: Sure. Your point is correct. Again, the proceedings that Sachu had mentioned that are underway at the California Public Utilities Commission, by the way, I believe each one of them was supposed to be an umbrella proceeding. Now, there are their own self-standing proceeding. There was discussion around tying a bigger umbrella, exactly. We would be looking for what it is that the customer or end user would be providing across the meter if it’s a result of behind-the-meter resources or in front of the meter. And so, if it’s a composite associated with a number of different DER elements, again, we would want to transact with an entity that would be providing us with defined services depending on what the needs of the particular location are. Yes, if it’s a customer that just simply has one technology versus multiple technologies and the multiple technologies produce a different characteristic of services, it could be provided. We will be looking at that composite. Jon Powers: To your question on the economics, how do we sort of prioritize addressing the risks, I think first of all, the heart of a lot of this just comes down to this is still project finance and this part of it is complicated and very few folks will… People will wrestle with it, but for those that aren’t familiar, the idea, the challenges with just pure project finance is larger institutional capital that is more efficient and less cost of capital than venture capital money or private equity money. They look at project finance and every deal’s different. When you got to spend all those resources to figure out those deals, then there’ll be a higher cost of capital. Jon Powers: Now, why microgrids are challenging is the technology risk is still, it’s getting better. It’s still there though. You’re not just betting on this a system, you’re betting on now a system of systems. Is the software that managing it really proven? Is the solar and the fuel cell and these other pieces that are all combined into the system of systems proven? The reality is we haven’t seen that many of them out there to really have the test case to say, “Yeah, we know this integration of these different systems work.” That technology risk is high. Jon Powers: Then, I think a lot of it has to do with also sort of the risk around the revenue. How are we going to actually see the revenue streams into the folks that are backing this play out? Whether it be around what’s going on with storage, with demand, and other revenue streams, we saw this in the City of Hartford. If the microgrid goes down and the power from the fuel cells could never be actually used, well, would the city be willing to still pay for that power that wasn’t used? In this case, they ended up saying yes, but that’s a complicated thing to solve. When you’re solving that for each and every one of your investments, one, you’re not putting out massive amounts of capital, and so, that capital will be really expensive. Those pieces begin to come together as more and more this is getting defined, but I think those risks are still pretty heavy. David Rubin: By the way, what Jon just said can be shortened into the famous microgrid refrain, which is when you’ve seen one microgrid, you’ve seen one microgrid. Jon Powers: You’ve seen one. Exactly. Another question. I think we have one up here. Wait for the mic, please just because we’re- Speaker 8: When we talk about resiliency and like Mike was saying, well, it’s a promise of resiliency, but in effect and I was expecting California with rolling brownouts, but when every day our solar is going back into the grid and feeding clean energy back into the grid, taking loads off what would otherwise be larger loads, so in my mind, that’s putting resiliency back into the grid that’s making the grid stronger and more resilient to brownouts, for instance, or rolling brownouts or whatever. Has California seen, has PG&E seen the added solar impact that the concept of rolling brownouts or you had solved that long ago? David Rubin: I apologize, I missed the first part of the question you want to know whether our grid is more resilient as a result of the 360,000 customers? Speaker 8: Yeah, the backflow power from solar, as a distributed resource, the whole idea is that at the end of the long string of the umbilical cord, it gets weak and everything in between can affect it. Now when you have solar coming in from all different areas along the umbilical cord that should help offset brownout conditions that would normally have happened, yes or no? David Rubin: It’s a big it depends. I know that we have invested more money in our grid in order to make it more capable of integrating two-way power flows, which we get from rooftop systems fairly, very few of the systems are actually non-export. Most of them actually are NEM systems that have the ability to export and we’ve needed to fortify our system to accommodate that two-way power flow. In some cases, you may get benefits if the solar is being produced at exactly the same time that that circuit peaked, and we have a large number of circuits, 3,000. The system overall though, again, apropos to the duck curve comment is peaking much later in the day, but there are some circuits that are more midday peaking circuits. It depends on what the characteristics of the road are. It’s hard to make a broad generalization other than I would say, generally speaking, we have needed to invest more money in the grid in order to enable it to accommodate customers putting solar on their roofs. Speaker 8: My battery is dispatchable. I’m Green Mountain Power in Vermont. And so, I mean, a microgrid in my house and it’s dispatchable. Why wouldn’t you just go towards straight rules for microgrids that made them dispatchable, as opposed to them just islanding, because obviously, the more work you get out of your battery and your equipment, the more value it has, the more bankability that it could have, et cetera. David Rubin: I’ll just offer a quick response. Jon Powers: Yeah, please. David Rubin: It sounds like it could be a deeper conversation, but again, just to try to separate it would be a battery, whether it’s part of a microgrid or not, that we might be looking for ways in which we could work with the customer to have that project dispatched in a way that helps us manage our grid more effectively, in some cases, potentially help us avoid future investments in infrastructure if we have something that we believe would provide us with equivalent service at a lower cost. That may or may not be part of a microgrid, so that battery could be part of a microgrid or it could just simply be again, a- Jon Powers: The tools exist at the utility level though to actually go into that basement and pull the power from the Tesla battery? David Rubin: We are working on that now. We have a project that’s underway that we have gone out to the market in Oakland called the Oakland Clean Energy Initiative where there’s an aging power plant. We don’t own it. It’s under a reliability must-run contract with the California ISO. It’s getting close to its retirement age and we want to be able to do have it be replaced by clean resources when it does retire. And so, we have gone to the market in order to get bids for entities, whether it’s customers using behind-the-meter resources or developers from the meter resources to provide us with capability that would allow us to essentially keep that area powered up when this power plant retires. We also have a number of pilot projects under the DERMS umbrella, where we are learning how we can actually not only have visibility into the operating characteristics of behind-the-meter resources, but also dispatch capability in order to be able to help support the needs of the grid. Speaker 8: I think the pilot I’m in supposedly does that. Green Mountain Power, that’s my whole contract with them, that they can take it when they need it to cut from buying expensive peak power. Jon Powers: Sachu. Sachu Constantine: I don’t know if this is a question to you David or a response, but I think the technical challenge of backflow, the two-way flow of energy is one piece of this, but another piece is curtailment. I mean, when we get to high penetrations of solar, this is to the duck curve question, when we have a mismatch between load and supply, you need to get that dispatchability, but the issue is not… This is my question to you. I don’t think it’s so much about managing the backflow. We have to do that. There’s certainly investments to manage the two-way flows, but it’s the lack of ability to prevent curtailment that seems to be giving us a lot of headache right now. Is that fair? David Rubin: In some cases, yeah. It depends on, again, not at the system level, but depending on the characteristics locally, where you might have a large amount of solar that’s actually pushing a sizable amount of energy upstream on the grid where we may need to install more equipment in order to absorb it before it gets to the nearest substation, for example, where it might cause some equipment damage. Curtailment is one other pathway we prefer not to have to engage and curtail in clean energy supplies, but the physics of energy being delivered on a particular line segment depending on how much load is there could, again, creates the need for us to make investments in order to absorb the power somehow. Jon Powers: Our platforms like STEM and AMS helping to address that for you? David Rubin: Yeah, but they’re still in their relatively early stages. Jon Powers: Of course. Absolutely. Mike Wu: But this highlights a really important distinction that I think about the conversation that we’re having, which is I think everything that we’ve talked about in this colloque has been focused on reliability and not resilience, and that those characteristics really need to be delineated as a part of this conversation when we talk about and think about values and business models. And so, David, you’ve mentioned four or five nines and other reliability metrics. I would consider resilience, lots of different definitions of it. Jon articulated one at the White House that had six verbs. Mike Wu: My definition of resilience is the adaptive capacity to maintain critical operations during times of disruption. That is one way of thinking about it. The important characteristic of that is like, well, then you got to ask what’s the disruption, so what do you want to be resilient to and for how long? That opens up a different value path that starts getting into how is solar diversifying your current capability of meeting your critical requirements and helping do things, and this is happening in the military, this is happening in other contexts, how are we using a solar asset to lengthen the amount of fuel storage that we have on a given installation to meet critical operations? I think when you start distinguishing between reliability and resilience, you get to interesting different questions that might get you closer to what we heard before about really stacking it and understanding the complete value proposition of some of these projects. Jon Powers: Any other questions for the audience before I- Elliot Hinds: Yeah. Jon Powers: Sorry. Elliot Hinds: I wanted to ask a question. Jon Powers: Please introduce yourself. Elliot Hinds: Elliot Hinds, I’m a partner at Crowell & Moring. I do energy, project development, and finance. My question is really around the realistic kind of guarantees in putting together these microgrids. As a practical matter, is it going to have to be developed with one party that is essentially wrapping all the technologies in order to really get this financed, Jon? Also, I guess the other part of this to me is when you think about how much has already been deployed in terms of solar and some of these different technologies, is it possible that you can really employ microgrids in a situation where you have assets that have different ages to them? You’ve got a military project that installed solar five years ago, and now, they want a microgrid. How do you see that, again, it’s tied into again the guarantee question, but how do you see that practically being affected in a way that works for the vendors, that works for the customer, and that is financable? Miranda Ballentine: I would say from an offtaker perspective, it’s far preferable to have a single provider that can wrap all of the technologies and systems together. Well, this is where I think the role of the federal government and what the federal government has been doing in microgrids has advanced several companies with expertise in this space. There are already companies that are leading, but there aren’t that many of them and the federal government can sometimes invest more because they’re investing through CRADA or through R&D dollars or other mechanisms to make it work. Miranda Ballentine: We had a summit called the Business Renewable Summit last April, and one of the members of a large chemical company hosted a roundtable. He basically put the problem in the center of the table, which is, I want renewable energy. I want grid servicing during blue sky. I want to be able to sell back services through voltage regulation or peak shaving or whatever the utility wants from my microgrid. I want it to replace my UPS and my diesel genset. Who’s out there that does this? It was a room full of suppliers and literally they all said, “Not us yet.” I mean, there are some, so if you look at who built the nearly 100% renewable energy microgrid at Otis Air Force Base, that was Raytheon. If you look at who built the microgrids that are not necessarily renewable through the SPIDERS program in the Department of Defense. Jon Powers: Explain what the SPIDERS program is. Miranda Ballentine: Sorry? Jon Powers: Explain what the SPIDERS program is. Miranda Ballentine: The SPIDERS program was a program launched by the Department of Defense in maybe 2010, 2011 timeframe to really look at fully resilient microgrids on military installations, not necessarily focused on renewable generation, but a couple of them did incorporate renewable generation that would allow a military installation to be fully self-sufficient for long periods of time in case of an outage. There were a couple of very specific vendors that built those systems. And so, you are now starting to see companies that are building expertise in this space, and there are some others. Mike works with several of them that are now building models. And so, we’re in this just really fascinating sort of dynamic time where customers want something, vendors are trying to build it, financiers are trying to finance it, but we’re all kind of dancing around and trying to get to a place where we can stamp it out in the way that we do rooftop solar PPAs or remote wind VPPAs. We’re not there yet. Jon Powers: I think you almost have to divide the market. There’s the public sector mush market, the federal, municipal, university, states, hospitals, that don’t have the capital themselves to put up and do this work. For instance, there’s system integrators in many cases, or these, what are known as ESCOS, energy service companies, that have the capability of doing this, but really how are those financed? What they’re doing is they’re putting together the structure. They’re putting together, in essence, a special purpose entity. In the federal side or even the mush market side, they’re basically paying off would be really sort of a PPA structure, but it’s not as an energy service structure, but we’re not seeing many of them right now on the federal side because of hamstrings around the federal reality of having to actually save money off your utility bill there. If you could pay a premium for that security that was called the energy security premium, the Office of Management and Budget, and this is way more mucky than you ever want to get. Jon Powers: If you want to know the most powerful organization of the federal government, it’s the Office of Management and Budget. It’s just, it’s a whole different podcast. They pay that premium. On the private sector side, most private sector companies, I don’t know, use Walmart as an example, but they may say, “Look, I can actually borrow money cheaper than you can, so I’m not going to pay you to finance the special purpose entity to do this holistic thing.” That’s where I think we’re struggling right now as an industry to say, how do we put together this system of systems and then finance it in a microgrid PPA that I think has been the sort of holy grail out there. I think the capacity is probably there to do it technically. I think certain policy changes at the state or local level or federal level can make that happen for the mush markets. The private sector still has to wrestle with how they want to do it. Miranda Ballentine: Can I make one more comment on? Elliot Hinds: Mush market? Jon Powers: The comment was for those in the podcast, the mush market has handcuffs on the amount of time that can contract that out. That’s absolutely right. Going back to the Office of Management Budget. Mike Wu: Jon, I would definitely download your OMB scoring podcast. I don’t know how many other people would. Miranda Ballentine: I would make one more quick comment. I agree that energy service companies are well positioned to be leaders in this space if they want to. They’re really the ones that are well positioned there. But the other sector that I think is really well positioned if they want to are the vertically integrated utilities, because they already know how to wrap technologies, they know how to generate, they know how to transmit, they know how to deliver power. And so, it’s about taking that expertise and there are some utilities, yours is one of them, who are really leading in this space, who are really saying, instead of protecting the hub and spoke model, I think yours is one of them too, by the way, rather than protecting the hub and spoke model, how do we actually encourage a distributed system that we can then run? We still run it. Yes, you own it in your house, but we can run it. Miranda Ballentine: There are several others that are really actually taking a leading role in that. Those companies are bankable, they know how to take risk, they know how to invest in technology, they know how to integrate technology. I think the vertically integrated utility space is someplace that we should really be watching and those that are leading in this space can really crack the code for a lot of us. Jon Powers: The policy question around allowing them to do that, allowing that vertically integrated utility to get behind the maintenance- David Rubin: I was going to make that comment, so thank you. Pablo: Hello, I’m Pablo. I’m from Paraguay, South America. I have a question. Thinking of what we can do instead of what the government can do for us, what is the best way, the best method, technology, or product that the private sector can promote to help prevent blackouts or the government to have a high cost of distribution infrastructure as long as the country or the towns or the cities continue growing? Jon Powers: What’s the technology? Pablo: What’s a method… Maybe it’s a practical thing that we just need to change some habits we have or the product, which one would be the best from the private sector you think we can actually do to promote this or to contribute to this? Jon Powers: I’ll add to that and sort of make this a little bit of a speed round and say, is there a technology out there that you think is really going to be game changing to help drive this or is it maybe that’s not a single technology, it’s a system of systems and I’ll start with Mike. Mike Wu: I would actually go back to the question before and focus again on what I would describe as productizing. How do we find ways of assembling different commercial off-the-shelf available technologies in something that’s easy to replicate and scale to the level that we need and how do we find ways to pay for it? That’s a lot of different things, but it is just about, I think, mostly branding, productizing, and finding, connecting that supply with demand. Miranda Ballentine: I’m going to add on to Mike’s by saying it should be regionally specific productizing. I’m not familiar with Paraguay and what their resources are, but one of the beauties in my view of microgrids and distributed resources is that you don’t have to have the same sort type of generation everywhere. Solar-plus-storage works great in a lot of places. Microwind works good in some places. Microhydro works great in some places. Geothermal works well in some places. Miranda Ballentine: One thing that we rarely talk about is biomass and biogas. We have an army base that is fully severable from the grid and has severed for an entire week, 100% renewably powered on biomass. For the Paraguay scenario, I can’t say what’s right, but if you have a particular community that’s getting a lot of rolling brownouts, that community may be rich in a particular resource that makes sense for a microgrid there. That makes productizing even more complex. But if you imagine someday, a brochure that has 15 different types of microgrids depending on what your resources are. Pablo: Paraguay has a very big hydro water dams. The problem is on the generation because we only use 5% of the electricity we generate and we export everything to Brazil, Argentina, and Bolivia. The problem is the distribution inside the country maybe is, I don’t know, 50 or 60 or 100 years old and they never change it so we have a lot of blackouts because of that. Sachu Constantine: I don’t know that I have much to add. Jon Powers: All right. Sachu Constantine: I’m not sure I do either. I’m not really a technologist. I do think if you want the private sector to be involved, to your point, we really have to productize. There’s got to be some plug and play element to this, something that will make the utilities comfortable with that point of interconnection for this microgrid that they’re going to be able to get the flow of information and the flow of services across that interface that makes them comfortable with it. I think, David, and we’re probably not going to get to it, but talking about the Berkeley project, one of the things that was missing was an ability for PG&E to provide a microgrid tariff and to actually provide some of the services that might have been necessary to create that microgrid, which could have been done by the City of Berkeley. But there was no way that we had, no pathway to socialize the cost of moving 12 KVA lines around and adding different transformers. We didn’t have that pathway and policy. Jon Powers: We have a limited time, but we won’t get to both of these, but we do have two great pairs here that worked together on a variety of projects. If you guys want to talk about the microgrid Berkeley for a second. Sachu Constantine: Quick background, City of Berkeley, Northern California, had an opportunity to put in a fairly large solar installation in the downtown grid right in the downtown corridor. They wanted to use that solar capacity to power critical services within the downtown footprint. The problem very quickly came up that those building loads were not contiguous that the map of the 12 KV distribution lines and the location of the transformers wasn’t ideal for a microgrid. Sachu Constantine: PG&E worked with us very closely in mapping all that out. The solar project was going to go ahead. Really, the only question was could they make a microgrid out of it? Could they make an islandable functioning microgrid to serve these critical loads? It turned out that was not feasible and one of the barriers that we ran into was that high cost to moving some of those 12 KVA lines around in order to configure this microgrid. It wasn’t so easy to sectionalize. And so, who was going to bear those costs? That’s what it came down to. The city has got a sort of hybrid version with storage in the critical loads and it will use some sort of netting of that production to help it out, but ultimately, that project did not result in a true functioning microgrid. Jon Powers: David, let me ask you from the utilities perspective, as being part of that pilot, are there lessons that you all learned that you’re sort of taking forward into other opportunities? David Rubin: I had mentioned the Arcata project about a half hour ago and I think some of the things that are associated with the configuration of the Arcata project weren’t present with the Berkeley Sachu had mentioned. In the case of Berkeley, you had four buildings, but they were located a distance away from each other and there were a number of intervening customers. As much as I would like to think the sports bar that’s in between the garage and the city hall would’ve been the load that I would’ve wanted powered up during an outage. Sachu Constantine: The disaster happens on a Sunday. You still have to watch the game. David Rubin: Exactly. We don’t have an easy way to shut off non-critical customers that might be located in between the loads that you actually want powered up. If you want solar surplus from the garage to get to city hall, you can’t count on our… We have a automated metering infrastructure system that can do remote shutoff, but if the grid is down for an earthquake, we can’t count on that remote shutoff capability. You’d have to go knock on each customer’s door and ask them to please turn off their power, which just isn’t a practical way of organizing it. David Rubin: Again, the situation of the loads and the resources relative to each other were just quite a bit different than the situation we have up in Arcata, where we do have more of an economically viable proposition because the customers are all adjacent to each other on a given circuit. And so, I guess the lesson learned in some sense is that the economics are difficult when you have, again, a geographic approximation issue of the customers that you want to be included as part of a multi-customer microgrid who pays for the cost associated with what might be required from an engineering perspective to tie them together on the same circuit. Jon Powers: What we’re saying is it isn’t really easy to do. David Rubin: Snap your fingers- Jon Powers: One final question. We’ve only got a few short minutes. Speaker 11: Sure. Talking about cost, let’s say you have a solar and storage system set up, what is the percent increase in cost to convert that into a microgrid? Then, let’s say you had solar plus storage plus a diesel generator, would that add make it even more costly? Are there other considerations? Jon Powers: What’s that premium, you’re asking? I think it’s probably hard to say. It also depends on the size of the system. Is it a campus? Is it a building? Then, really, I think the ability to judge that premium will really depend on what technologies you’re bringing in across the board. Anything else to say to that? David Rubin: I’ll just add one other quick comment. Again, the answer you’re going to get in almost every circumstance is it depends. One of the key considerations is not just simply how do the solar and storage might be there and or backup generator that might be there interact with the current load, but one of the key questions is what will be your use case for emergency circumstances, because it may well be that you’re going to use that high school gymnasium in a fundamentally different way when you need to use it as a collection site for people to come to when the broader grid is out, so you have to really look at your islanded load requirements relative to the resources that you might have. If you have a backup generator, it gives you more flexibility obviously, but then you need sophisticated controls in order to make sure that you can keep demand and supply and balance in the same tightly configured way that we do as a general matter across all of our grid. Miranda Ballentine: It depends is the right answer. Speaker 11: It depends. Jon Powers: Well, first of all, I’m going to thank the panel for I think a really interesting conversation. I think the tough part about the conversation around the economics and financing of microgrids right now is because, we hit on this many times, it’s it depends. As David said, you’ve seen one microgrid, you’ve seen one microgrid. Until we can figure out a little more of a rinse and repeat mechanism, the cost of capitals will remain high. The technology’s getting there. The policy is getting there. The software is getting there. Now, the question is when does the business model get there to begin to really open up this market. Jon Powers: For those listening to the podcast, please go to Clean Capital’s website, www.cleancapital.com to get more episodes. I specifically want to thank Solar Power International and Energy Storage International for their support and the opportunity to do this and challenge each of you to sign up. For those in the room, come back next year in Salt Lake City. For those that are listening online, please join us in Salt Lake City next year for another event. Thank you, everyone, for being a part of this. David Rubin: Thank you. Jon Powers: Thanks for listening in today’s conversation. Find more episodes on cleancapital.com, iTunes, or wherever you get your podcasts. If you liked what you hear, be sure to subscribe and leave us a five star review. We look forward to continuing our conversation on energy, innovation, and finance with you.