Duke University Energy Conference 2020: Panel: Energy in a Year of Disruption
- Hello, everyone. Welcome to Energy and a Year of Disruption, A look at 2020 and Beyond. One of the two afternoon breakout sessions here at the 2020, Duke University energy conference.
I'm Emily Perry, a second year MBA, Master of Environmental Management, joint degree graduate student here at Duke. In this session, we'll reflect upon a year about people and we'll be discussing the large-scale shocks, impacts and permanent changes in the energy market. As far as the format of this session goes, our moderator Sandy Hull, will introduce and kick off discussion with our panelists. We will reserve 15 minutes at the end of this session to respond to audience questions. If you would like to live tweet during the session, we encourage you to use the hashtag #DUEC20. I'd now like to introduce the moderator for today's panel, Sandy Hull.
Sandy is a Director of the Asset Valuation Group at Energy and Environmental Economics an energy consulting firm. A more detailed bio for Sandy, along with each of today's panelists can be found in the link I've shared in the Chat. Thank you Sandy, for being here today.
Now I'll turn it over to you. - Thanks, Emily. I'm very excited to be here today and I think we've got a great lineup of panelists. So I'm very much looking forward to the discussion here. I think just to kick off, we'll go through and let each panelist do a quick introduction and maybe give a summary of where they're calling in from and who they're representing. So I'll kick off and then maybe we can go left to right across the top of the screen here.
As Emily mentioned, my name's Sandy Hull, I'm a Director in the Asset Valuation Group at E3, as an energy consulting firm that works a lot with policy makers, utilities, regulators, and also energy project developers and investors. And I'm sitting in San Francisco today and I'll hand it off to Lauren Campbell first to sort of give an introduction. - Thanks.
Hi, I'm Lauren Campbell. I'm a Manager at the Federal Energy Regulatory Commission. My connection to Duke is that I was in MEM at the Nicholas school.
I graduated in 2011 with a focus on Economics and Policy. After I left Duke, I moved to DC, I worked with the USDA for two years and have been at FERC for about seven. Been in a few offices at FERC, currently in the Office of Energy, Policy and Innovation, which we call the Policy Office or OEPI.
And I said, I'm a manager there and I'm looking forward to the discussion. - Great, thanks Lauren. It looks like the next step going across the screen here is Sarah, maybe we'll pass it over to you. - Great, good afternoon, everyone. Happy Veterans Day.
I know that frequently, many of business school attendees that have first served in the military. So thank you for your service. I'm Sarah Salati, I'm the VP and Chief Commercial Officer at the New York Power Authority.
The New York Power Authority is the largest State owned utility in the country. We provide about 25% of the energy to New York State. 75% of which is from hydroelectric power, predominantly from our Niagara falls generation plant and our St. Lawrence River Generation plant.
We also own and operate a third of the transmission grid. You'd like to say that it's the backbone of New York State, which runs North, South and East West. I have been at NYPA now for two years, having been in the private sector up until that point. My responsibilities cover contracting our generation assets, embedding them into the wholesale market, our grid scale development, which is predominantly transmission, as well as energy storage and large scale renewable for chairmen. And then all of our behind the meter services that range from electric vehicle charging infrastructure to traditional energy efficiency projects to our DDR advisory services.
And my connection to Duke is that we have a wonderful summer internship program. And one of the gentlemen that was in the Comm Pps group that I run attended Duke and recommended and put me in touch with Emily when this panel was being put together. So unfortunately due to COVID, we weren't able to have our internship program this past summer, but I would definitely recommend that for those of you that are interested, it's an incredibly well structured program.
And we have typically about 70 people annually working in different parts of our organization, so happy to be here. And because there are great questions and I'm really interested to hear what the other panelists have to say about them. - Great, thanks Sarah.
Let's see, maybe Tom, can you give a quick introduction next? - Sure, thanks for having me, firstly. So my name is Tom Rowlands-Rees. I'm the Head of Analysis for North America at Bloomberg NEF.
Bloomberg NEF is a division of Bloomberg that's focused on market research, specifically around energy and the environment and sustainability. I've been with NEF for about 11 years, which prior to that, I was studying Physics. I'm actually based in London right now, as you can probably tell from my accent, I am British. I actually transferred into this role at the start of March and was supposed to move to New York on the April, April the 15th was the date and we all know what happened there. So, I'm stranded in London doing my job from London focused on North America. I'm a bit of a newcomer to the continent.
All of my analysis prior to this was based in Europe, but for me, it's very fascinating coming into a new market with fresh eyes and plenty to learn. - Great, thanks Tom. And last but not least, we'll pass it over to Eric.
- Thanks very much, Sandy. So I am Eric Toon, and I am the Executive Managing Director of Breakthrough Energy Ventures. The now $2 billion plus bill Gates led effort to invest in early stage technologies that impact the production of anthropogenic greenhouse gases. So, at Breakthrough, I head up the Science Technology Engineering side in the organization and I am half of the Investment Committee. So the other half of the Investment Committee is my colleague Carmichael Roberts, who I believe is speaking later this afternoon. So you get both halves of Breakthrough today.
My connection to Duke is I was a member of the faculty in the Department of Chemistry at Duke for almost 30 years. So I came to Duke as an Assistant Professor in 1990, pretty fundamental biophysical, physical, organic chemist. I did a number of startup companies all in the pharma space during my time at Duke. I got involved in energy for the first time at the beginning of the Obama Administration in spring of 2009, when I went to be the first employee, the Advanced Research Projects Agency for Energy or rather the new sort of Durban equivalent for the Department of Energy.
I was there for four years and during that time, I was a Program Director, Deputy Director for Technology. And for the last year I was there, I was the Director of the Organization. I came back to Duke at the beginning of 2013 and started Duke's initiative entrepreneurship. So hopefully a number of the folks listening today had been down in the Bullpen downtown. We opened that space with the help of Dave Rubinstein, who of course was the Chair of the Board of Trustees at that point.
And then I left Duke again this time for good at the beginning of 2017 to come to Breakthrough. - Great, thank you Eric. Well, again, very excited to have everyone here today. I think we've got a really diverse set of perspectives.
So I'm looking forward to see everyone's different perspective and take on what's been a truly disruptive year in energy across the board, and we still have a couple of months left. So we'll see what disruptions are yet to come. I think, you know, between States and policy makers, who've really continued to set groundbreaking new goals for clean energy adoption and carbon reductions over the past couple of years, the continued emergence of new technologies like battery storage, offshore wind, hydrogen EVs, and then the obvious disruptions of COVID and then potential for a new administration. I think we're seeing a lot of change in the air in the energy industry and a lot of potential momentum building around the energy transition.
So I think it's a really exciting time in the industry, but also a lot of challenges that are ongoing with everything that's happening and changing seemingly day to day and week to week. So again, very interested to hear what these panelists all have to say about some of these different factors that are influencing them. So again, we'll start off with some general questions and the panelists each give an answer, and we'll hold some time at the end for audience questions. But I think, you know, one of the clear differences this year versus any prior year, when we look at data in the energy industry and what's going on in markets is the impact of COVID, which has shaken up norms, you know, across the board and the reason we can all be in Durham right now. So, I think first I'd like to ask the panelists how COVID has impacted their work personally, and then also how they anticipate COVID either delaying or accelerating some of the trends that we're already seeing underway in the energy industry.
So again, maybe we'll just go kind of across here who I'm seeing at the top of my screen, but I'll maybe put Tom on the spot first here. - Sure, I'm happy to speak to that. So firstly, in terms of how COVID has affected my work, as I mentioned, I was supposed to be in New York by now by quite a long time ago. Unfortunately I'm still in London and we are about to go into a more severe phase of the COVID lockdown. So that's not worked out too well for me. And in terms of how it's affected our work as a whole actually, you know, we're a team of analysts.
We're very lucky that a lot of our work is based at desks. And we've actually found it's been a sort of our highest productivity period in a long time with everyone working from home. Which I don't know what that tells you about our offices because the company does spend a lot of money on them.
In terms of the industry and where we've seen disruption, I think there's two things I'd say to that. One is where we didn't see as much disruption as we expected when the pandemic first started affecting the US is the first thing we did was we downgraded all of our forecasts for 2020 and 2021 on renewables builds in the US. 'Cause we just assumed the disruption to the Supply Chain, you know, getting the projects done, you know, it's gonna be too much, we're gonna see a real impact.
And one of the things we do, that's kind of cool and interesting is we actually take satellite data that looks at turbine manufacturers and looks at the number of blades that just laid out on the ground waiting to be shipped. And we noticed that Vestas' factories, there were blades building up because there was less activity. But actually we're now at a point where there's less than usual blades because the industry has caught up, has worked out how to deal with COVID.
It's actually in terms of building renewables, it's something that you can adapt fairly well. So that industry hasn't been affected as badly as we thought it would be. And we had to then bump it up and meet all of our forecasts up. Where we have seen huge destruction is in Shell. And it's a combination of trends that were already there.
The industry was already under pressure, finding it harder to make money. But the global decrease in oil prices had such a massive impact. And, you know, the typical cost of producing a barrel of oil in the US from fracking is 40 to $45. At the start of the year, the global oil price was 60, it's now around 40. So you can just see what's happened there.
The US was the marginal producer, it's now out of the money. And that's not just gonna affect US oil supply because the us gets about 30 to 40% of its gas as a by-product of oil extraction. So it's almost like free gas coming into the system, which is why US gas is so cheap. I mean, when I came over from Europe and looked to the market, it's like, "Wow is just like so much gas everywhere here." And that's really defined the last decade of US energy and the power system has so much dependence on gas.
And that is now in question, depending on where Shell recovers or not, which is dependent, not so much on what the president wants to do, whoever that may be, but it's really dependent on global oil prices and global oil demand. So I think that's where we're seeing the real disruption and the that's where the big question marks are emerging for us. - Great, thank you.
Maybe I'll go over to Laura next, how have things been looking from the regulator side? - Yeah, so from a personal level, we do a lot of work on Teams and we just like, we're not equipped to have all of these meetings be virtual immediately. And so we do a lot of shifting and just terms of how we work together inside the building to make sure that we have the right software and can have all these meetings virtually and can have the discussions that we need to be having virtually. Someone mentioned internships earlier. You know, we were onboarding interns, right When things started shutting down.
And so we had to figure out how to get them a government laptop and that was challenging. But, once we kind of got all the kinks worked out, I think internally things have been going well. We've been able to get all of our work done and all of the processes to have kind of changed over to remote. And so things have been going a little more smoothly. Pretty much all of our staff is based in DC. So I think a lot of people are still in the area, just working from home.
And in terms of engaging with a regulated community, right, when the pandemic started, the commission set up a pandemic liaison team so that the regulated community had a point of contact. So they could reach out and connect with staff on anything academic related. And we issued a policy statement that said we would be prioritizing, processing filings related to the pandemic.
And, we provided some flexibility on deadlines and just tried to provide as much flexibility as possible 'cause we know. We knew that the regulated industry was going through a lot of people. The commission also held a COVID Tech conference in July to just discuss short and long-term concerns that the industry had. So, overall we've just been trying to be engaged and make sure that industry has what they need from us.
- Thanks, yeah, I think the theme of flexibility is probably gonna be a key one on this panel. So, maybe I'll go to Eric next for his thoughts on this. - Yeah, sure so, obviously what we spend most of our time doing is visiting universities, visiting mason companies, looking at technology, looking to see what people are doing to think about making investment decisions. So in now almost four years that I've been there, we visited something on the order of 5,000 companies.
At least we have files on that many. We've probably looked at a number more. So it's been quite a shock to the system. I think probably mostly to the poor, long suffering in the system because I went from being on the road three weeks a month to I haven't been on an airplane since the last week in February.
And so, you know, I think this is an experience that's shared by many people and it's caused us to rethink our investment process, you know, to think about what really goes into Banking and Investment decisions. And I think a lot of folks are sort of re-thinking the nature of work and how things are gonna go. I'm just saying that I've been pleasantly surprised at how a little disruption there has been, the pace of our investing has not gone down at all. We closed the second fund as a matter of fact today. And so things have considered a pace. I would say the impact on our companies has been a little bit more disparate, depending largely on where they were and the regulations imposed both by civil authorities and by universities and things like that.
And so we certainly had companies that fell behind for a time, but I would say that all of our companies are up and running again. We don't have anybody who's dead in the water. And I would say we really don't even have folks that are significantly curtailed at this point. So it took a little while to adjust. But I think all in all, (indistinct) both for us and (indistinct)-- - That's good to hear, I think it's been encouraging to see that, you know, investments are still being made and funding is still coming through to the companies that need it so great to see there hasn't been as much of a slow down there as there might've been. I guess Sarah, New York obviously has been one of the places impacted most directly.
And initially by COVID, we would be curious to hear your thoughts. - Yes, well, from a very personal standpoint, I live in New Rochelle New York, which is like ground zero, the one, and within oddly enough, the one mile containment zone was. So I started working from home, March 10th and only have started going back into the office in the last few weeks. So the spring was a little bit crazy with my kids because there's the issue of it was really more homeschooling than remote learning. But I can say that I've enjoyed being with them in the fall actually.
And I've really enjoyed working from home, then going back to what Eric was saying, you know, the wear and tear of travel, you know, and the time invested in that is huge, right? So I think we definitely have learned that we can conduct business effectively and we don't all have to get into a room. Obviously when you're doing brainstorming or other things, you know, there is that kind of creativity and a dynamic that comes from kind of being in a war room, but, you can still effectively do your business with people articulated. So I didn't see that much disruption either when we shifted, we were quite agile.
And if anything, we're seeing that the digital tools that we have at our disposal can be very effective. Assuming as Lauren said, that you can get them sent to you. But more specifically for NYPA, you know, we're an essential service, right? We're providing energy and running the electricity grid. So, we stood up our ICS or an Incident Command structure already in February, March. We had people immediately, you know, working remotely, we sequestered 85 employees, predominantly Control Room Operators because they're, you know, have highly specific skill sets and needed to be able to go in and not get sick.
We paused all of our O&M and capital projects look to stop the spread as well as to just ensure without knowing the future, what our future liquidity could be. Although I have to say that we were able to still, in March, issue a $1.2 billion bond financing, which included green bonds.
So again, I think that speaks to the strength of NYPA's AA credit rating. And we have wellness screenings, but so our top priority really has been and continues to be the health and the safety of our employees, of our vendors and contractors, and then the communities in which we're working. On a second and then two other things I would flag. One is that we reached out and really worked with our federal and regional agencies and partners and established mutual aid packs.
Where should we have needed to share PPE, spare parts, and most importantly, critical personnel with skillsets, we had those in place and that was very helpful. Just along the lines of what we do when they're major storms in terms of sharing and helping people get back up. It was aligned with that. And then we're an economic driver for the State of New York.
So we provide low cost hydropower to customers who are willing to invest capital in New York State, as well as to create and retain jobs. But the last thing would be customers. Customers and the fact that some of them took advantage of the PPE, the Paycheck Protection Program, but then there were others who didn't. And what we did is we provided an Economic Development Customer Assistance Program, where they could defer paying their bills for six months with no penalty or interest, and then could do a repayment plan for 18 months after that.
And we had about almost half of our customer base, take us up on that. So again, those are just a few of the ways that we had to adjust and react to the pandemic. - Thanks, so I think maybe touching on some of the personal themes that we've heard here, obviously we're all using energy differently now, and we've seen a big shift in energy consumption for transportation and where we're using energy in buildings, whether it's at the home or in businesses.
I'd be curious to open it up to the panel on how we've maybe learn something about energy demand since the start of COVID and whether there are any takeaways from the changes in demand that can help inform how we accomplish our climate goals. Are we on a better path now, or do you think we'll return to a new normal or maybe back to business as usual? And I'll just open it up then maybe anyone who has some thoughts can jump in. - I'll have a stab if you don't mind on that one.
So, actually I'm working on a piece right now where we're estimating US emissions for 2020 and 2021. And a lot of that is based on official data. It's more of a projection than a forecast and just filling in the blanks. And it looks like US emissions for 2020 are gonna wind up being about 10% lower than they were in 2019. Which ironically the sort of me wrapping up the process of writing this and realizing that it pretty much puts the US back on track with what that Paris Agreement commitments would have been was pretty much on the same day that the US formally exited the Paris Agreement.
So it's pretty significant and then in 2021, we don't see emissions immediately bounced back, even if we assume that an economic recovery. Because, you know, we have all learned to adapt. Certain habits have changed. So in a sense, that there's an optimistic takeaway. But if I give maybe a little bit more of a hard-nosed pessimistic takeaway, our lives have gone through unprecedented transformation in the last year. And, although some of it is adaption and we've learned a little bit for a lot of people is pain.
And emissions have gone down by 10%. And in terms of long-term climate goals, 10%, isn't gonna do it. And so my conclusion from that, it's not to be completely negative and pessimistic. Well, it sounds like I am being, but it's not a question of people changing their habits and reducing their demand for energy.
The change that has to happen is on how energy is supplied and investing in new sources of energy. And that's the only really like. The conclusion is that, although this, this in terms of climate goals, 2020 has helped, and we've learned some new things, It's also taught us that the focus shouldn't be on demand.
It has to be on supply of energy and innovation and new sources of cleaner supply. - Oh, this is Sarah. You know, what we saw with our customers, we don't have any distribution.
We have wholesale power that we sell, but we did see, you know, in April, May like a drop of our customer lower of 20%, then it kind of settled around about 10% generally. And now just weather normalized going forward. We're about 5% off of what the projections were for the New York Independent System Operator.
Many of the customers that we had continued because there were Essential Services or they were supporting the pandemic response such that their hospitals or other government entities, but then also to manufacturers that were working on building parts for ventilators. So again, it will be interesting to see how quickly. you know, the economy truly picks up again to get, to the level that it was at. But in terms of emissions, I agree with Tom in the end, you know, you can address demand but fundamentally it's about electrifying certain things.
And one of I think the biggest areas that we saw was the emission reduction within the transportation industry or the sector. Where in the end, you know, you weren't having people traveling and you weren't having all the buses. And so, you saw a significant drop in that area. And for New York State in particular, 40% of our emissions comes from that sector. And so that's why specifically at NYPA, we're committed to building out and supporting the development of Public Charging Infrastructure up and down the State. Really, to target that aspect of it.
And that's also too why in New York, we continue to move forward very aggressively with climate goals that we have set out in the Climate Leadership and Community Protection Act that was came into law in 2019. Which is looking at getting the energy supply of New York State to be 70% renewable by 2030 and carbon neutral by 2040. And within that to their goals of nine gigawatts of offshore wind, six gigawatts of distributed energy resources, essentially solar, and then three gigawatts of energy storage.
We haven't slowed down on those commitments at all. And we continue to work towards the timing and the targets related to that. - Really echo John's point about how massive the dislocation this has been to the entire planet and the relatively modest reduction in emissions over that period of time. And I think that's a pretty sunken mutation of what we're talking about in terms of change. That's gonna be necessary to really be impactful in reducing emissions.
You know, one of the things. So, we spend a lot of time looking, trying to understand trends and to see how those are gonna propagate through the economy. One of the ones that we've already think is very interesting is there's business, the people working at home. And it's really interesting to ask questions about what happens when the pandemic ends. We know that about 65% of the Americans that were working during the pandemic work from home, 90% of them Sunday like that, right? So are people gonna go back to work? Are people gonna go back to the office? You know, if they don't, what are the implementations for cities? Do people start to leave the cities? Those kinds of decisions have incredibly profound implications for transportation.
What happens to the public transit systems and things like that? High density modes that reduced the emissions per passenger mile? What happens to those things as people leave the cities for the suburbs or the excerpts or beyond? So I think those are the kinds of things that really could be fairly profound and lasting implications for energy. - Great, I guess maybe looking at how post-COVID, what are some possible scenarios for how we emerge from this? And I know there've been a lot of discussions around, you know, electrification or more ambitious kind of investment in climate and kind of infrastructure that addresses climate change as a way to rebuild the economy. But what are some possible scenarios post-COVID that we might see as we maybe try to adapt to a new normal or address the economic impact of COVID? And are there specific signposts we should be looking out for in the next year, as we maybe eventually emerge post-COVID and, you know, set out into a new path for a new economy? - I think, you know, whatever stimulus comes out of Washington is potentially incredibly powerful, right? The Obama stimulus in the spring of 2009 was incredibly impactful (indistinct).
I'm sure many of you read the new deal. And so I think that there are enormous possibilities and enormous potential in that. Of course, we live in a time and divide in government, and there are very different structural differences between this economic dislocation and the last, which was financial in nature, and took a long time to come back here. You know, once an effective vaccine is deployed, you know, how long the economy is to come back very quickly.
But I think there's no doubt that stimulus activity out of Washington, this is a potentially huge opportunity. - I completely agree, right. President-elect Biden has articulated four priorities.
COVID, the economy, climate change and health care. And you know, if you'd asked this question two weeks ago, I would have maybe had a different answer, but I agree now that it will be very interesting to see what comes out of it. And I'm sure Lauren can talk to it more. But again, having just come from the private sector and the public sector policy makes a massive difference. Right, and you see that very much in New York.
Once you get the legislature and the governor and everybody running in the same direction, I think, you know, a lot can happen. And, so I think that that's true and fundamentally too, I mean, there's, going to what Tom said about Shell, right? I mean, we've seen sub-dollar gas prices that we're putting into our generation assets. I mean, that's crazy, crazy low. But that being said, right, I mean, we're seeing asset turnover in the market, right? Coal is, you know, out of the money. And so in the end, you know, I truly believe just along with the rest of the country of needing to reinvest in infrastructure, be it roads, bridges, et cetera.
That the construction that is needed to support the renewable energy integration is going to be a tremendous driver for job growth. In addition, when you think about energy efficiency, I know we made the comment about, you know, how much can we really reduce on the demand side compared to the supply. But still if you're going and building more efficient homes or doing retrofits in buildings, those are tremendous numbers of jobs that require people. And so I think that also too, can fundamentally help drive it both again on the supply and the demand side.
- Yeah, I agree with that. I'm sorry, I forgot to give my disclaimer at the beginning, but my views are my own and not-- - Pass, don't mind-- - Energy Regulatory Commissions. But yeah, I think as we prepare for the grid of the future, there'll be a lot of investments in new technologies. And I think there's gonna be growth in offshore wind, and that's gonna require build out of new infrastructure. There are some regulatory barriers I think, associated with that, that the commission's working out. But yeah, I think that there will be, as we move to the, the grid of the future, that there will be a lot of investments that will be.
- If I can dive in with something that draws on sort of some of the points that have been raised as well. I think that, you know, this point around stimulus and this also this point around Shell and investment in infrastructure. The way I've been describing it to clients is if we think about the next few years of US energy, the first question you have to ask is what's gonna happen to Shell? Because that's been the defining feature of the last decade. And so, I, like a total geek, look at the West Texas oil price every day. And I look at the Henry Hub Gas price every day, and I see how it's changing.
Right now, Henry Hub Gas is going up reflecting some of the supply constraints because of the low oil price. See how that dynamic plays out. If the answer to that first question is actually Shell is greatly diminished compared to what it's been in the last decade, then the second question comes in is, is there money for something new, whether that's in the form of stimulus coming from the government, which might well depend on things like the results of any Senate runoffs that happened in Georgia.
It will depend generally on the healthy economy. If we just say yes, there is capital, then a lot of that infrastructure that we invest in that we're talking about can then happen. And that creates huge opportunities for renewables 'cause power prices will be higher. There'll be, you know, gas will be perhaps less competitive in the system. If there isn't stimulus, then that provides an opportunity, a lifeline to coal. Because if gas is more expensive, but there's no money for new things to come in, then in that scenario, which has a sort of a worst for everyone scenario, you could say, except maybe coal suppliers, then you would see a lifeline for coal coming in.
So, it boils down to what happens to the Shell and is there investment for new things? - Not to be too much of a geek here, but I certainly hope that the new administration coming in is able to do some of this work through actual legislation rather than through executive action. I think, you know, we saw when the Trump administration came in and we're gonna see even in the Biden Administration came in that as good as it feels do things by Executive Action is a really, really, really easy to undo it. And you know what we're talking about with all of the things people are talking about, our folks investing trillions of dollars over decades, if they don't have confidence that they understand what the rules are gonna be for the time is criminally irresponsible to commit those kinds of resources. And so I do hope that people are able to do the hard work of actually legislating and writing laws. And then, you know, I'm at least somewhat hardened by the fact that the people running the country for the next four years are gonna be Joe Biden, Mitch McConnell, and Nancy Pelosi.
And these people are not firebrands. They're not ideologues, they're professional legislators. And so, I do hope that there's some possibility to do at least some of this via legislation not Executive Action. - So I think we've already crossed over into the next topic I had, which was policy and the implications of a new administration. But I guess just to frame this a bit, I think it was really heartening to see that as part of the debates, as part of this election cycle, there was actually discussion of climate change, you know, nearly for the first time. I don't even know, four years ago, if there was a single question on climate change.
So I think the discussion of climate change and how it gets addressed, the policy has become a lot more mainstream. And I think we're seeing a lot of very healthy debate, even within the Democratic Party around, what's the best way to address climate change? So I guess now that everyone's acknowledged that their views are their own and not representing their employers, can maybe people share a bit of their perspective on what the election means and what types of policy we should be looking out for over the next few years and what maybe has the best chance of actually getting put in place, kind of given a potential divided government. - I can't comment on the Federal. I mean, I can only reiterate what I said about New York State, right? And I think that, that goes, you know, what Eric said is very interesting. Because again, as I articulated the Climate Leadership and Community Protection Act is legislation.
It is law, it was passed through, you know, the State Assembly. And so that, is encouraging, of course, you know, the devil's in the details in terms of LEA implementation. But again, I think that that was very successful. In addition to that this year in New York, there's always the longest name of the legislation, but it's the Accelerated Renewable Energy Growth and Community Benefit Act. And that also is not just, we already had dealt with the generation, But now this is looking at accelerating transmission, recognizing that that requires significant investment, both at the kind of bulk high-voltage as well at the distribution level, to ensure that we're effectively and cost-effectively integrating the renewables into the system. And, within that articulation NYPA was given some opportunity to receive priority projects and accelerate the in-service date of these.
As well as the opportunity for the Public Utility Commission or PSC in New York Public Service Commission to conduct analysis, and then be able to prioritize what transmission would need to be done across the grid using the New York ISO FERC regulated processes, the PPTNs, of Policy Transmission Need Process, as well as just the local incumbent utilities at the distribution level. And what I'm looking forward to seeing is an acceleration of the permitting process, because that was also something that was looking to be addressed. - I'll add something. And I'm sort of slightly hesitant as someone who's not from the US and is only really just getting to grips with the complexities of US politics. I think we covered, you know, we talked about a lot of the things that happened at the Federal level.
But just to build on what Sarah was saying, the US States and as policy drivers are incredibly important. And, particularly, you know, 2020 globally has been the year of the Net Zero party. All of these different countries announcing with a lot of fanfare and not a lot of detail, then that's zero targets. And a lot of the people I know in the energy industry, you know, the sort of energy geeks around the place, a lot of my colleagues, you know, putting together this list of which countries have a net zero target, and the US is always sitting there, you know, conspicuously, not with a net zero target, and as someone who's now, you know, tied my colors to the US flag, I find myself feeling a little bit like I'm not invited to this feel good party. And tell you then consider that actually 10 US States, the last time I counted, have some form of net zero target for 2050.
If you look at the history of State emissions targets, the actual impact they've had I think has been a little bit hit and miss. And so, for me as an outsider, just looking at it, these basic facts, one of the questions I'm curious about, and maybe Lauren or Sarah or Eric as well, of course, will have maybe more insight is, what relationship can there be between the federal government and the state government in perhaps making these State level targets a little bit more serious, a little bit more achievable. So we see more consistency in compliance with them. - I think it will be remained to be seen again, going back to comments made by Eric and things as to what you know, comes out of Washington and the current political environment, you know, who holds the house, who the Senate, but I can say that it goes beyond just State level, because again, there are also a lot of regional cooperation and I know New York state, right, if you look at offshore wind there's New York, Connecticut, New Jersey all have targets.
And even when it comes to a transmission congestion or not transmission congestion, but transport congestion. And if you look at the history of Reggie, right, there is the opportunity for regional cooperation. And I think that you're, seeing that. Again, that's not always easy and it's been challenging, but I think that that's probably, again, depending on what comes out of Washington, still a trajectory that will, you know, continue to see. - Yeah, and there continues to be enthusiasm at the Federal level for market-based solutions.
And like commission had a technical conference on Carbon Pricing, incorporating a carbon price into the RTO markets in September and issued a proposed policy statement. And so I think that will be something to keep an eye on in the coming year to see where that goes. - Thanks, yeah, I'm personally very interested to see, and it's been encouraging, I think to see the appetite for carbon pricing as a potential tool continue to grow among, you know, a more diverse set of stakeholders. And I think there's a lot of, you know, great building blocks in place at the State level that hopefully federal policy makers can build on and think about how to leverage their efficiencies of programs that are already there. So I'm excited to see what's to come there. Maybe just as one final question, before we turn it over to the audience, what's been the biggest surprise to you in 2020? And are there any kind of pieces of conventional wisdom before this year that you're now rethinking in light of some of these various forms of disruption? - I'll have a go at that.
So, you know, there's this saying, I can't remember exactly who it comes from is, "When the tide goes out, "You find out who hasn't been wearing any trousers," or whatever it is. I don't know when the tide goes out, it exposes things. And I think just to go back to what I said at the start coming into looking at the US, my assumption was based on everything you had, you know, in terms of fossil fuels, US is a land of abundance.
And one of the things that I didn't really understand is actually whether US sits in the global supply curve for oil in particular. And if we think of the changes in the global oil markets that have been caused by COVID-19 as the tide going out, I think the US has been exposed as the oil supplier that wasn't wearing any pants. And, you know, I didn't realize that. And so, I think this assumption of, you know, whatever happens around green energy, the US has abundant fossil fuels. And so there's always gonna be this choice between the two of them.
I think 2020 has actually exposed that to be a little bit of a myth. The cost of producing a barrel of oil from fracking is between 40 and $45, typically. The cost of producing a barrel of oil in Saudi Arabia is about $4. So the US is sort of on the margin. It might be that it's currently the world's leading oil supplier, but that's not necessarily assured and if it ceases to be the world's leading oil supplier, that changes everything right throughout the energy sector. And so that's the biggest thing that has changed for me in 2020.
- I think the disruption that was caused by COVID lay bare in a very painful way the challenges of globalization and global supply chain. I think that it would be a mistake to imagine that COVID is really a black swan. I think that these events are gonna happen over and over again. There's a large reservoir of viruses in all sorts of species and they jumped to humans, pretty remarkable regularity. It's important to remember that humankind has never cured a virus, (indistinct) not one.
And so these things are going to happen again. And I think that some of the challenges that were exposed by this pandemic, we're gonna have to bake into the future and re-think a few of these things. - Yeah, and I'll just add, I think, I've been impressed by how flexible I'm able to get our work done. What we've been able to accomplish at the commission, despite all of this, it's been a challenging year and going remote for, you know, everyone inside the building, I run a group outside has been just a big shift in how we do our work, but we've managed to get through it. And I think it's nice to have a plan now for future events like this, that come up. - And for me, I just think that, you know, we're still in the midst of a pandemic, right? And so I just think that, you know, there's still a credible amount of uncertainty and we are, you know, we can have certain insights or takeaways now about being more productive at work and the role of digital and enhancing that, or, you know, to burry another supply chain.
And what does that mean? Is that gonna have people doubled down vertically integrated within their own countries? And, Tom's comment about gas is fascinating. So I feel to some degree, we're still in a level of suspended animation, right. In terms of really, truly what the pandemic is going to mean for the economy and the future. And so it's less of what, I think that the conventional wisdom question is TBD, in many ways. - All right, well, thanks for everyone's great answers.
I think we're gonna turn it over to questions from the audience now. So, the first one that's called Peers. What role did the panelists think private sector can play in energy transition process and what other private sector commitments need to look like to make a real impact? - Well, obviously I think private sector (Eric laughing) the point here, you know, by providing, valuable, exciting, enticing solutions to the challenges we have here. I think that, you know, the collective, we have to stop trying to scare people with stories of rising sea level and things like that. Everybody, that's it. People don't want to do that.
I think that what we have to do is offer people a hopeful and optimistic view of the future, right? And so one example that I use all the time on this is Elon Musk and Tesla. You know, I have no idea what's gonna happen to Tesla. You know, I think there's a very good chance that when the big boys and girls show up with new models, Tesla's not gonna survive. But that doesn't matter what you can ever take away from what Elon and Tesla did, was show people what electrified transportation could be. It's not a golf cart, it's not a toy, it's not something you're gonna have to jam into with your knees under your chin, right? It's bad-ass car. And you want that because it's the baddest-ass car on the road.
And I think that is the way that we need to approach these problems. By offering people a fundamentally, optimistic and hopeful view of the future. And I think that that rests entirely with the ingenuity and entrepreneurial spirit of the citizens, especially in this country, but certainly it will be after a while. - Well, I think that private sector has a tremendous role to play. On the one hand, I think the question goes to, what are the commitments, the different companies are making in terms of a sustainability compact. You see, you know, with Ari 100, et cetera, your company, after company making commitments to, you know, be greener and be more sustainable.
So it's very exciting. It's aligned with what cities are doing and what States are doing. Going back to the question before, for me to, again, working at NYPA, you know, all of the procurement that we do is really looking to animate the market and to step in where the private sector isn't yet ready to do so.
Recognizing that we have patient capital. Other returns that we expect are arguably lower than you might get from some private sector entities. But again, what's really encouraging to me going back to Eric's comment about EVs, it made me think about it.
You know, the vendor pool that we had in our procurement to install an EV charging infrastructure a couple years ago, to even just 18 months ago was like a quarter of the pool that we have now. So to me, you're seeing it a tremendous progress and more and more companies coming in to help, you know, help drive drive, no pun intended, you know, the future. The other thing is true that, you know, to get to that carbon neutrality and Tom could probably talk to him more, right? There's the break and Eric is investing in these companies, but there's the breakthrough technologies that are gonna be required, right. And so, you know, I'm looking forward to seeing what comes out of RPE and what's coming out of the universities and things. Because again, you know, maybe it will be NASA that came up with something just like they did for TEF, right.
But otherwise it's, you know, the entrepreneurs and it's all the scientists, you know, across the country that are going to help us solve this problem. And that it's ultimately gonna get commercialized and it's gonna be in the private sector, so it's exciting. - All right, maybe going onto another question here from the audience. So it's been amazing to see companies adapt their supply chains in under six months to COVID, are there any lessons we can take from how we responded to this disruption that might encourage us to push even more rapidly than pre-COVID towards a renewable energy transition? - I think one of the things that's interesting that we've seen around, if I just give one anecdotal example, the rooftop solar industry, was hit pretty hard when everything went into lockdown. One of their big bottlenecks was permits issuing offices were shut down.
So, they actually just couldn't get permits to put things on roofs. And obviously there's also the issue they face that, you know, people are more concerned about the economic future and might not have money to spend on discretionary things. What the industry and certain companies have done really well is sort of changed, embrace this idea of, of digital marketing, to generate leads for homes that in order to get customers for rooftop solar, particularly in the residential sector. And I think that, you know, for something like that, which traditionally the way you generate leads in the industry, you have people going around knocking on doors, and it's just small example of forced adaptation that's actually made them more efficient, just conducting the business that they are in. - Thanks, so another question, maybe more about grid operations here. So, as the surge on renewable development follows on COVID, how would the existing grid handle incoming, renewable energy projects and how would utilities change their dispatch models to accommodate that growth in variable energy resources? And then maybe as a follow-up question, would COVID provide an opportunity for utilities to retire fossil fuel plants and replace them with renewables because fossil fuel prices are low at the moment.
- In terms of the first part of the question that the Archie has an ISO's are working on, there's just been a variety of different market enhancements that we've seen, and we'll probably be coming to try to increase or help renewables integrate into the grid. For example, Southwest power pool introduced a ramping product earlier this year, that set to be effective in early 2021. So, I think there will be just more market changes along the lines of making sure that resources that provide flexibility and can be there when renewables are not necessarily online can and help balance the grid. - And technology has an important role to play there as well, right? Load following electricity is one of the hardest parts of the whole system to decarbonize.
And, you know, some combination of storage and transmission allows you to take a zero carbon noodles and turn that into a load following electricity. So certainly we need advances in storage and storage, you know, beyond the six or maybe eight hours that let your mind can get to. So fundamentally new approaches to storage and then transmission as well. And, you know, those are gonna be challenging to do right away.
They are hard to come by and loading is a massive problem but transmission is gonna have to be an important part of this problem. - Absolutely, and so I think that, you know, the technology costs are continuing to go down right with the learning curve, right? She's looking at every doubling capacity and produces about an 18, 20% reduction in costs. So you're gonna need to continue to see that with technologies such as storage. In addition to just their robustness for the applications that they're being asked to perform at the grid level. The other thing is, as Lauren was touching on, we've had a very clear delineation between the kind of group, the bulk level and wholesale energy markets with, you know, behind the meter and distributed.
And so a lot of the challenges are that again, the market mechanisms, the compensating mechanisms to ensure that some of these assets that are, you know, on your rooftop or what have you are able to be flexible enough and compensated, and be able to be dealt with just on a pure reliability standpoint by like the independent system operator or the distribution network. It's a tough nut to crack. It's incredibly challenging when you're talking about, you know, 100 kilowatt systems across the State. So again, I mean, it will come from the digital overlay and more to come on that.
- I agree with all of the above, the only thing I would add, just, you know, if we're thinking about how the existing grid handles incoming renewable projects and the changes to dispatch models and the sort of the market dynamics. Is it really, really, to a surprising extent, varies between different markets and regions. So this year in California, we've seen price spikes, people, have seen price spikes in Arco. But the dynamics behind those price spikes has been completely different in each case.
We haven't seen price spikes in PJM and they've got a capacity market. So, it means there's a completely different dynamic that renewables bring in. And having come over from Europe, you know, Germany has a high penetration of renewables that's led to more price suppression than it has to price spikes. So the sort of the challenges that are created are different.
And also the solutions that are available are different by market, depending on where the interconnection is an option, depending on how the market is structured and whether that's conducive for storage. So, one of the things that, you know, we try and do new energy finance as we look at markets that are sort of leading edge in terms of the penetration of renewables and try and learn broader lessons that can be applied to other markets. And, it doesn't ever work quite as well as you'd hope it would. I'm still hoping for, you know, when we'll get to a point and say, "Oh, we saw this in California, "So this is what we expect to see in New Zealand."
But we're very long way from that. - Thanks, I guess, to add a personal data point, I think all these perspectives are very interesting to hear, and currently every market's a bit different. I will say this is a question that's been asked I think time and again, over the last decade. And I know when California set its original goals of 30% renewable, everyone thought, "Well, that's gonna be impossible." And then it went to 50% and we thought that would be impossible. I think, you know, a lot of the realities and modeling we've done is shown that it's actually maybe a cause for optimism.
We've actually been able to achieve higher levels of renewable penetration than we thought was going to be doable. And I think there's a lot of innovation there on market design, on technology. I think we should be confident that we may not know the answer today for all of these challenges, but we've somehow found a way in the past. So, I think there is kind of cost for optimism there. I think we have time for maybe another one or two questions. And I think an important one here is around the need for diversity and inclusion in the energy industry.
And so this is obviously been something top of mind this year. And the question's about how your organizations are addressing this and any specific initiatives or targets. And I think maybe more broadly would open the question up to are there ways the energy industry can maybe reverse its history of not always giving everyone a seat at the table and kind of do a better job at amplifying unheard voices, maybe, as it kind of continues to push ahead on the energy transition. (indistinct) - Half of nights, I've honestly not been in an organization that has been so intentional and considering diversity equity and inclusion. We have a Chief Diversity Equity and Inclusion Officer. She's reporting to the CEO.
We have a tremendous participation. Our employee resource groups that cover a multicultural, eco, veterans, LBGTQ. I'm Executive sponsor of the Women in Power, which was the first DRG. And then there's a generations one. And that NYPA has committed to a new DEI plan that was shared at our board meeting just a couple of weeks ago. But one of the things that I'm most proud of is that we are working with and agreed to an Alliance with black energy African Americans and black association of kind of executives and AOB, I can't think of the exact acronym, but in any case, again, it's about ensuring that you have the diversity in the organization as well as the inclusion.
So, you know, all of this requires we all have unconscious bias, right? I have unconscious bias. And so it really takes a true discipline to step back and think about, you know, how you're approaching both the people you work with and how you're thinking about hiring, et cetera. So, there's a lot of work to be done, but again, I would really encourage you to look at what NYPA has published, because again, all of this stuff can only be addressed if we do it intentionally, it doesn't happen on its own. - Yeah, thank you for the question. That commission has a number of employee resource groups, similar to the one Sarah listed.
And, as a manager, I try to be thoughtful about hiring and there's many women in leadership at the commission that has been really great to see. And for me to learn from all of our hiring and on three, USA Jobs which can be a somewhat bureaucratic platform. If anyone has any questions and is looking at jobs in the federal government, either at work or beyond, I'm happy to chat, you know, it's something I think once someone explains to you how to use the platform, you can, you know, it's very helpful just to have someone to walk through it with you. - But on a personal level for me, I mean, irrespective of one's political affiliation, party affiliation, it was really encouraging to me to see Kamala Harris be, you know, voted the Vice President-elect, right. A woman, black, Indian, right.
I think it ultimately reflects very much our nation, right. I always use the term e pluribus unum. And I think that it's a great example of that. - When I joined the energy industry, which was about 11 years ago, I think, you know, and I was based in Europe, but I think that this is maybe reflective of global trends.
I would have said that it was, you know, very, very white and very, very, very male. Lacking in diversity, you know, quite severely. I know there was also like mainly engineers as well. So also in terms of the educational background of people, it was very restricted. I think that in the last decade, I've seen more change on gender than we have seen on ethnicity.
Just if I look at the numbers, I can't speak to women's experience in the industry. And, you know, I certainly wouldn't even want to as much as I also can't speak to the experience of minorities. But just in terms of looking at the numbers and also the positions that people are are achieving, I think that we've made less progress in terms of people's ethnic backgrounds and particular around specific groups. And so I think that that's something that is a really pressing issue.
Now, like every company, you know, we do have initiatives, the question is whether those initiatives are going to be effective. And, you know, I hope that they will be, but I think with these things, you know, if your initiatives aren't effective, then you have to try something new. And I would say that, you know, aside from the fact that the sort of moral imperative to get this stuff right, and, you know, on whatever dimension of diversity we're talking about. I also think that it's an existential threat to the industry. Or at least to specific organizations in the industry.
Because, you know, historically engineer, sorry, energy was an engineering game. You didn't have to think about people or how people work together or who your customers are. You know, you sort of hooked up a wire to people's homes, you know, fulfill whatever obligations you had. And that was it.
So, you know, engineers didn't necessarily need to be diverse or understand the people that they're providing service to. Now, with the changes in technology, the advent of renewables, customers are getting a lot more different options presented to them. And that means that people in every part of the system, whether it's the private sector or the regulators or the public sectors, have to understand more about the people that they're serving. And so if your workforce isn't reflective of those people, you're gonna get left behind and other companies are gonna come in and eat your lunch. We've certainly started seeing that as a trend in the UK where I'm from. The big six or the incumbent energy supplies, we have competitive retail, but it wasn't competitive.
But in the last five years, new companies offering new things, new business models, targeting particular kind of consumers, say targeting women, recognizing that women are key decision makers on energy and having women in their workforce better able to target them have come and taken a huge market share from those companies. So I think that the industry, as a whole, apart from needing to do better, it's for moral reasons, if energy doesn't do better on this, someone else will, and we'll come and supplant that position is leading on this. - Like the flip side of that coin is that there's enormous opportunities by recruiting from talent pools that have not historically being an access, right. And, you know, I think that, I've worked in the sort of whitest male-ist industry on the face of the earth Metric Capital. And one of the great things that happened to us is that we were able to recreate Carmichael, you know, to come to Breakthrough. And I had a long relationship with Carmichael.
Carmichael will tell you this afternoon that he is a Duke PhD. I was actually on Carmichael's PhD committee 4 million years ago. And so Carmichael is an African American, and that opened the door to a huge talent pool, you know, that are personally going to Carmichael which is an important way that we all recruit. And I think we've been able to bring a number of people, important people to Breakthrough that we wouldn't have accessed without Carmichael's presence there.
And so, I would say that there is unquestionably an equity issue here. But the flip side of the coin is there's an opportunity issue here if you avail yourself of it. - Thanks, I guess just to wrap, I'll give a quick answer to that question for E3. I think it's another area the firms really focused on in terms of recruiting. And also, I think there's, you know, a great opportunity that we're looking at or how we can really try to focus more on environmental justice as a theme in the work we do.
And I think it's been really encouraging to see all of the kind of growing discussion around that major issue. You know, you look at California and a lot of the biggest sources of emissions are different power plants are in disadvantaged communities. And so I think that's an area where the industry is historically had a pretty bad record. And I think there are a lot of opportunities for us to do better. So it's, I think plenty to discuss here, and I think it's maybe a good point to close on and that it's great to see the momentum and we have a lot of work to do.
So, I wanna say thanks for all the panelists for the great discussion here today. I realize we're a little bit over time, so I want to turn it back over to Emily, but really appreciate everyone's perspectives. And thanks for joining. - Great, thank you for joining us today and thank you to each of our speakers here. As Sandy has said, I really appreciate hearing such unique and insightful perspectives from across the industry.
And as the future of the energy landscape continues to evolve, I'm excited for what lies ahead and truly humbled and inspired by the work that each of you, our panelists do.
2020-12-24 21:50
