Transcribe your podcast
[00:00:00]

In August of 2003, more than 50 million people across nine states and Canada lost power in the span of only a few hours.

[00:00:10]

Much of the northeastern United States is without power. Tonight, millions and millions of people from New York to Detroit and in Canada were caught by surprise when the electrical grid suddenly crashed.

[00:00:25]

A handful of overloaded power lines in Ohio failed after sagging into some trees. It was the failure that normally triggers an alarm inside the local utilities control room, a warning for operators to redistribute the transmission load. But on that day, the alarm system failed. What followed was a cascading loss of transmission that led to the largest blackout in North American history at the time. It's massive grid lock.

[00:00:48]

The telephone's not working.

[00:00:50]

Telephone's not working.

[00:00:51]

It's like you're in the wilderness.

[00:00:52]

And this is New York City. Some areas remained without power for four days. In the years that followed, the US government codified grid reliability standards that had previously been voluntary. The Energy Policy Act of 2005 gave the Federal Energy Regulatory Commission, or FERC, the power to solicit and enforce those standards. As the economic advisor to FERC's chairman, Rob Gramlich was in the middle of all that change, and the agency had a lot on his plate beyond improving reliability.

[00:01:20]

Twenty years ago, it was all about creating competitive markets for electricity generation. We were doing some pretty significant and ambitious policy changes at the federal level to enable competition, where you have hundreds, if not thousands of generators competing with each other. We really had to reinvent how the bulk power system worked.

[00:01:42]

Today, Rob's focusing on a bigger problem for the US electric grid. His consulting firm, Grid Strategies, released a report last year called The Era of Flat Power Demand is Over. And the big takeaway? A wave of new demand from data centers, clean energy manufacturing plans, and AI infrastructure. It's all coming. And regional transmission planning entities, they just aren't ready for it.

[00:02:05]

We did a review of whether they were actually planning for the future, like looking at the anticipated future generation additions and retirements, which is just the basic of what you would assume a planner does. And it turns out that almost none of them were actually doing that.

[00:02:28]

This lack of planning has a lot of people worried, but the Department of Energy and FERC are making moves to better support the grid. This spring, the agency is set to finalize a big transmission planning rule that could force transmission owners to up their planning game.

[00:02:42]

Yeah, this could be the biggest energy policy in the country right now. It is, in my opinion.

[00:02:51]

This is With Great Power, a show about the people building the future grid today. I'm Brad Lengley. Some people say utilities are slow to change. They don't innovate fast enough. And while it might not always seem like the most cutting edge industry, there are lots of really smart people working really hard to make the grid cleaner, more reliable, and customer-centric. This week, I'm speaking with Rob Gramlik, founder founder and President of the consulting firm, Grid Strategies. Rob is an energy policy veteran who's had a front row seat to more than 20 years of growth and change in the bulk power system. Early on, he worked as a transmission planner, and then economic advisor to FURC chairman, Pat Wood. From there, he moved to renewables, overseeing transmission and power market policy for the American Wind Energy Association. Today, he's studying a new set of forces that are putting pressure on the grid. I started out by asking Rob how grid strategies conducted his recent load forecast study.

[00:03:45]

Well, we were hearing about this a lot from large energy buyers who are very active in constructing data centers for their computing needs. Then in the middle of 2023, We hearing about AI driving those numbers up, the need for calculations in data centers. If you think about it for a minute, you can see why just computers are churning constantly to learn. The machines are learning by cranking. So We were thinking, oh, my, we already had enough grid challenges already. We better factor in these load growth numbers and looked around and saw that really not many utilities or regional transmission organizations were changing changing their load forecast numbers. So we felt like somebody needed to say this. So we went to John Wilson's credit. John is on my team as a vice president, and he's aware of a lot of data sets and load information. He thought there's a particular FERC form that would be useful. We checked there, there was a noticeable uptick in low growth, and then in combination with 100 other anecdotal factors that we've been finding and that we did some research about. It looked like we had enough evidence to basically support the title of that paper, which is that the era of flat power demand is over.

[00:05:11]

Why do you think there has been such a strong reaction to the report?

[00:05:15]

Well, it is pretty big news just in the history of the electric industry. We used to have 4, 5, 6% annual growth in the '70s, and then it was a little more tamer in the '80s and '90s. But now, from For the last 20 years, we were in this one mode of basically flat, less than 1% per year growth. And now it is different. It's structurally different. It's a whole another... It's another whole era. And again, we don't know the answer, but I think that's why that got so much attention, probably because a lot of other people were noticing this, but nobody had put it all together yet in one place to put a marker down nationally that things are different now.

[00:05:59]

So the report found that there is significant growth over the past year, that grid planners have nearly doubled their five-year growth forecast, which to your point just now, there's no real precedent for that when you're talking 2-3 % growth previously. Now, the potential Actually, the scary part is that your report also found that in some planning areas, growth may actually be underestimated. So how big a potential problem are these underestimates?

[00:06:24]

Yeah, no, that's right. Well, the main reason reason to do this well and to focus on it is to make sure we have the infrastructure we need. We focus primarily on transmission infrastructure, and it didn't look like anybody was incorporating in their transmission plans these higher load growth estimates. So that's important. But also it affects generation and distribution as well. So basically people need to plan for the infrastructure. And I know from talking to a lot of those large energy buyers, who are perhaps the biggest single contributor, their view is, look, we can only do so much on our own. We go and we talk to utilities and say, here's what we expect our demand to be. But we can't plan the system, and we have no idea what other drivers are on the system. We can't do the utilities job, we can't do the RTOs job. So I think they're looking for some help from the rest of the industry to say, let's do a full forecast of the infrastructure needed so we can plan for all of these needs.

[00:07:34]

So these transmission investments being made, how should utilities be thinking about balancing those with things like virtual power plants, DERs, Are there specific use cases worth calling out here or that you see people really focusing on?

[00:07:50]

I think there's a lot that can be done more from the ground up on local systems to look at EV needs and getting these new electric uses to be more responsive. So I have a new heat pump, water heater. It is a storage tank, right? So If it doesn't need to be pulling energy from the grid at a particular time, it shouldn't. But I don't have a mechanism for the grid to control it in that way. There are so many opportunities for that on electric vehicles and other things, especially when these are some new uses. People don't like as much to have their existing or to be told when to run their dryer or things like that. But some of these new uses, if you build it into the system and EV, just put it in the car somehow. Tesla, I think, can do that. I think people would be more amenable to that. We could certainly reduce the infrastructure needs if we made some of these demand-side uses more flexible and responsive. There are ways do that that are consumer friendly and people don't feel like big brothers telling them what to do. So I think we can do that.

[00:09:06]

One of the challenges is that we have this very awkward state federal jurisdictional split in most of the US electric industry. Where states oversee distribution systems, FERC oversees transmission and generation, or at least trading on the energy markets. And that makes coordination very difficult. It's like one person with their foot on the accelerator and somebody else with their hand on the steering wheel. We're trying to coordinate things. It's human nature for the planners at one level to do what it is they can control and just assume away the other side of it. Well, we really need to somehow get more integrated planning on the local level and the bulk power level.

[00:09:53]

Yeah. The report also calls out specific load drivers. You mentioned a few here namely data centers and AI, new manufacturing plants, obviously electrification EVs and such. It actually highlights the push towards hydrogen fuel plants, which aren't even factored in the load forecast outside of the NY ISO. How can planners better account for new types of load as the country moves towards decarbonization? Isn't it a matter of bringing these entities together to get them on the same page? Is it that integrated planning aspect, or is there more that can and should be done?

[00:10:28]

I think utilities and regional transmission organizations need to take a specific look at each of these major sectors. Let's say there's four or five of these major drivers, and hydrogen certainly would be one if you expect electrolyzers in your footprint. And it's not so much a hire econometricians to do statistical analysis because usually what they're doing is just projecting past trends forward. It's really more a industry-specific a specific qualitative evaluation of how many electrolyzers do we expect here, or what will the data center companies tell us, perhaps on a redacted confidential basis, about how many data centers they expect in this footprint to estimate these very large loads and then add them up. So that's what I'd recommend for utilities and regional planners.

[00:11:25]

Is planning something the industry has been under investing in? And if so, why? Why? And is that starting to change now, in part because of your report and people seeing that this is becoming an increasingly significant issue?

[00:11:38]

Yeah, two separate answers to that. First, on transmission, we have not been planning. There are 10 or 12 regional transmission planning entities designated by FURC order 1,000, and it turns out that they all got bad grades based on standard best practice planning for transmission. Miso in the Midwest and California ISO came out fairly high. They were doing much more than the others. The other answer is on load forecasting. Yeah, it is the case that 20 years ago and 30 years ago, we had a lot of people in utilities and public utility commissions doing forecasting because it was such a big determinant of how much investment was needed and what type. And it would be something that was always debated, and they would compare analysis, and commissions would make decisions. And then when low growth became basically flat for 20 years, that just became a lot less controversial. I mean, you're arguing about 0.6 % growth versus 0.8 and big deal. You don't need to have 20 people debating that question. So now it's no longer 0.6 or 0.8, but it's like 1 to 4 %. What is it? That's a massive difference each year, a delta of 3 %.

[00:13:13]

So that's a big deal. So that's worth putting time and resources in because you can be expensively wrong.

[00:13:19]

You've called out the massive federal spending packages in the past few years, like the Infrastructure Bill and the Chips Act. These have incentivized manufacturing and clean energy generation, but they don't put nearly enough resources into infrastructure and transmission planning. Are there other newer opportunities to improve investment or at least draw more attention to transmission needs?

[00:13:41]

Yeah. When the Infrastructure Investment and Jobs Act, I IJA came out, and then subsequently, the Inflation Reduction Act, IRA, came out. There was a lot of news about support for the grid, which really bothered me because there wasn't actually much support for transmission per se, and particularly new transmission lines, because we really need to expand new transmission in this country. It could be new rights of way, or it could just be upgrading existing rights of way, and it could be new technologies or standard existing technologies. But the point is we need to expand the capacity. And those laws really did not do barely anything for that. There was probably about $5 billion total between the two for new transmission transmission lines. And in a $370 billion bill, it's a drop in the bucket. And relative to an industry that already spends $25 billion a year on transmission, basically for replacing old lines. That's not really for a new capacity. That's just keeping up with current capacity. I think it was a missed opportunity in both of those acts, and particularly with all the support for wind, solar, hydrogen, as et cetera, that are all electric vehicles, all of which are coming onto the grid and need grid capacity in order to function and be connected.

[00:15:08]

If transmission wasn't already at the top of the energy policy agenda, it absolutely should be now. So it's hard to say here in an election year when the next legislative opportunity would be or what it would look like or which party has more leverage over it. Legislative opportunities do come. Sometimes they surprise you. So I really think both parties need to get together on what transmission policies they can put into the next energy-related legislation or tax-related legislation. If it's an investment tax credit for transmission, that would help a great deal.

[00:15:48]

And what about FURX power to make change? It's supposed to finalize the transmission planning rule this spring. Tell us what that is and why it could be a significant move.

[00:16:00]

What it is, is basically a directive for all transmission owners to do long term planning. So it might be 20 year planning, something like that, to look at the Just look honestly at the anticipated future generation and retirements and load, and then plan the infrastructure that you need for that. Everybody pays the same amount, but they have to make a determination on how those costs are allocated. And that's really what we need to do. As I said before, we've not been doing that. Generally, regional planning has been woefully deficient. And so this order would, I think, in a strong way force that to happen. I think most parties who've participated in the FERC docket said that needs to happen, including most of the utilities themselves. But they need a kick in the rear-end.

[00:16:59]

So I've heard there's over 2 terawatts of energy generation stuck in these interconnection queues, which is leading to some serious frustration and questions about how you overcome that.

[00:17:09]

I'm curious to get your thoughts on that technical challenge.

[00:17:12]

Sure. We have a system that is no longer fit for purpose. It's the interconnection queue system, where if you're a generation developer, you sign up to interconnect with a transmission provider. And what's happened is we've had this proliferation of new projects and new companies trying to connect, and the transmission providers are flooded with these requests, and they've almost stalled out. They're stuck. They can't accept more requests at this point. And in a number of regions, they're not connecting enough to meet either our clean energy goals or just replace the retiring generation so we have enough supply. So that's a real problem. I'd say it's really two separate things. One is, I think the underlying root cause of the problem is our insufficient transmission infrastructure. I think the analysis of connecting the new generation would be pretty simple, quick, and cheap if we had the infrastructure. The current rules were all designed back in 2003 when we had plenty of excess infrastructure. But also we do a very different resource mix. So the rules were also designed when all anybody was building was gas. And these days with wind and solar projects all over of all different sizes because they're modular, There's just so many more projects that we probably need a new system.

[00:18:34]

So there's a lot of process changes. So interconnection queue reform is still important. Furc issued a significant rule last summer called order 2023, but it only went part of the way. There are a lot more reforms in the process and how you model wind and solar and storage generators on the grid. There's a lot of process changes yet to do. Fork has said they're going to start having technical conferences, I think this spring, about some of these further reforms, and We at Grid strategies are doing a report on that, on a set of future reforms. There's going to be a lot of attention, I think, on both these process reforms as well as the infrastructure.

[00:19:18]

Pretty early in your career, you found yourself working with for Pat Wood, who at the time was chairman of FERC.

[00:19:24]

This was following the years in which FERC made a number of policy changes to support inter-regional transmission.

[00:19:29]

What were some of the big wins or losses for FERC in those years?

[00:19:34]

Well, we got two major regional transmission organizations set up that didn't exist at all previously. The MISO with the Midcontinent Independent System Operator, and the Southwest Power Pool. Collectively, they cover probably 25 states, 20 states in the middle of the country. For example, Well, SPP at times gets up to 90% of its energy from renewable energy, and they wouldn't be anywhere close if they didn't have that SPP, RTO operating the system and planning the transmission grid, similar dynamic in MISO. We did that. Of course, we were trying to get those RTOs across the entire country, and we didn't in much of the West or the Southeast. But there's work yet to be done.

[00:20:27]

Now, unfortunately, decarbonization has become an incredibly political issue. You mentioned your early work opened your eyes to the politics of energy policy.

[00:20:38]

What has to happen to make policy related to the grid more bipartisan?

[00:20:42]

Yeah, well, that's Very true. It was interesting back in those days. It was really the Bush administration and Chairman Wood, who were leading a lot of the federal transmission initiatives to bolster the grid and things like that. As you may recall, we had the 2003 northeast blackout and then a major push to get more transmission built and respond in other ways. That led to the 2005 Energy Policy Act, a number of Republican members, and then Bush administration DOE officials were very active in that. So it's interesting these days when it's really largely the Democrats pushing for transmission initiatives, many of the same reforms that Republicans were pushing 20 years ago. I'm one of the few people who actually I was involved in both. And so I can say, as I did not long ago, I was a Republican witness in a house energy and commerce hearing, and then the control of the house flipped and Democrats controlled, and they invited me back to be a Democratic witness. Same topic, same committee. And I was able to say the same thing and remind them that these initiatives really are bipartisan and were pushed by the other party previously.

[00:22:00]

So we should get over the silly partisanship and get to work on something that's important for the country for many reasons.

[00:22:07]

And what was the reaction to that? Was there an aha moment amongst those who were presenting to?

[00:22:11]

It was a funny moment. The Republican You know how the hearings work these days. The members generally do not ask questions of the opposing party's witness because you never want to ask the witness a question you don't know the answer to. You don't know what they're going to say. You really don't even have a real discussion. So when I said that, looking in the eye of the Republicans sitting right in front of me, they all chuckled, and they knew it, and their staffs, they all got the joke like, This is silly, isn't it? Aren't we doing a stupid thing here? But yet they didn't ask me a single question, even though a year prior, I had been the Republican witness. So anyway, it's just Washington is silly that way. How How do we get out of this? I don't really know. I mean, this is a macro question about everything's partisan these days. But there are some things that obviously Republicans care about. If they don't care quite so much about the pace of clean energy integration or decarbonization, they do care about economic development, growing manufacturing here, reshoring manufacturing, low growth, generally, to serve all of these economic purposes, and they care about reliability.

[00:23:31]

So it turns out we actually, for all the same public policies, if you characterize it more as a reliability, resilience, and economic development initiative, they do care as they should.

[00:23:47]

One last question for you. We call this show With Great Power, which is a nod to the energy industry. It's also a famous Spider-Man quote, With great power comes great responsibility. So what superpower do you bring to the energy transition?

[00:24:02]

Maybe it's just persistence and keeping at it every day. I do have a lot of energy and passion for this. Every week or month, I think I have the solution, and then I've learned later why it was the wrong solution, so I just keep trying again. I'm an endurance athlete, and I keep at things, and I just keep going, so maybe that's it.

[00:24:27]

I'd say being an endurance athlete is definitely a superpower. Well, Rob, thank you very much for your time. Really enjoyed our conversation.

[00:24:33]

Thanks a lot, Fred.

[00:24:37]

Rob Gramlich is founder and President of Grid Strategies. With Great Power is produced by GridX in partnership with Latitude Studios. Delivering on the clean energy future is complex. Gridx exists to simplify the journey. Gridx is the enterprise rate platform that modern utilities rely on to usher in our clean energy future. We design and implement emerging rate structures, and we increase consumer investment in clean energy, all while managing the complex billing needs of a distributed grid. Our production team includes Aaron Hardik and Mary Katherine O'Connor. Bayly is our Senior Editor. Stephen Lacy is our Executive Editor. The original theme song is from Sean Marquand. Roy Campanella mixed the show. The GridX production team includes Jenny Barber, Samantha McCabe, and me, Brad Langley. If this show is providing value for you, and we really hope it is, please help us spread the word. You can rate the review us at Apple and Spotify, or you can share a link with a friend, colleague, or the energy nerd in your life. As always, thanks for listening. I'm Brad Lengley.