There aren't many grid strategies that increase reliability, resiliency, affordability, and sustainability. While many strategies may address one or two of these factors – perhaps even three – distributed energy resources uniquely check all four boxes. After Hurricane Beryl, Texans, including policymakers, were left questioning how such a disaster could happen again, especially so soon after Winter Storm Uri. The pain, suffering, and even loss of life were profound and, tragically, avoidable.

My guest this week is Arushi Sharma Frank. Arushi is one of the smartest people on energy and energy policy, with a particularly deep expertise in distributed energy resources and virtual power plants. She brings a holistic view of energy systems, energy law, and how distributed solutions fit in with the whole.

Arushi is the founder of Luminary Strategies, a DC-based firm advising US and international electric service companies and energy system technology providers. Beyond her national work, Arushi has deep ties to Texas over several energy career positions. She led Tesla's strategic market entry in Texas, when the company launched its first US wholesale and retail energy businesses here from 2020 to 2024. She pioneered various ERCOT frameworks for grid integrated virtual power plants and Tesla Megapack. And she was a key architect in the creation of the PUC’s Texas ADER or Aggregated Distributed Energy Resource pilot in her former role as Task Force Vice Chair.

In this episode, Arushi and I explored the rapidly changing landscape of energy storage and its impact on the ERCOT grid. We dove into the nuances of regulatory work and discussed how to meet the resiliency challenges caused by severe storms. Arushi shared her thoughts on how different regulatory structures shape the deployment of distributed solar and energy solutions. And we also got into the expanding role of community solar and storage.

I hope you enjoy the episode. Timestamps, show notes, details on events where you can find Arushi this fall, and the transcript are below.

Please don’t forget to like, share, subscribe, and leave a five-star review wherever you get your podcasts.

The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Timestamps

3:00 - Arushi’s background and her connection to Texas

6:00 - Arushi’s mindset for working in regulatory spaces

10:00 - How is storage changing the dynamic in the ERCOT grid

14:00 - CenterPoint’s response to Beryl; Storm Protection Plans and cross state comparisons

21:00 - Vertically integrated utilities vs competitive energy-only market and their relationship to distributed storage and energy being deployed

25:30 - Purpose of different plans and their different goals; importance of integrated, grid modernization and distribution infrastructure investment plans

34:00 - Continuity of service and passive survivability; top priorities in disaster planning

37:30 - How mobile solar and batteries are being implemented as resilience solutions in other places in the US

40:20 - Community solar and storage; retail wheeling; PUNs

44:00 - Effectiveness of solar plus storage vs diesel or gas generator backups

48:30 - Texas Power Promise and the efficacy of requiring a mix of solar, storage, and natural gas for microgrids

52:00 - Economic value of resilience and the work of Texas’ ADER Task Force

58:00 - Texas is way behind on DERs but there is hope; how underinvestment in distribution grids can be overcome

Show Notes

ADER filing from Arushi Sharma Frank

Craig Moreau, Chief of Emergency Management and Homeland Security, Fayette County, speaking at Clean Energy States Alliance, speaking on his experience with mobile resilient power systems.

Teaching Substack:

Luminary Strategies Substack:

Luminary Strategies: Powering Everywhere with DERs Newsletter; Powering Texas with DERs Newsletter

@ArushiSF on Twitter / X

Places Arushi will be speaking this fall:

Houston Energy & Climate Week 2024 - Sponsored by Greentown Labs: Climatetech Innovation Festival (September 11, 2024 9:30a - Register Here).

Houston Energy & Climate Week 2024 - Sponsored by Abundance Institute, Edge Zero: Cleantech Office Hours: VPPs & Distribution Grids (September 11, 2 pm, Register Here).

University of Texas: Kay Bailey Hutchinson Energy Center: Power Up Series, Seminar 1, Behind the Scenes at ERCOT, Sept. 17, 2024, Register Here (UT Students).

New York Climate Week 2024 - Sponsored by EcoSuite and Mission:Data: Overcoming Clean Energy Friction September 26, 2024 5 pm - Request to Join Here.)

DERVOS 2024:

Thanks for reading The Texas Energy and Power Newsletter! This post is public so feel free to share it.

Transcript:

Doug Lewin

Arushi Sharma Frank, welcome to the Energy Capital Podcast. So great to have you.

Arushi Sharma Frank

Thank you, thrilled to be here.

Doug Lewin

We've been talking about this for a while. Glad we made it happen. You have such a great perspective on the things going on in Texas. You've been deeply involved in a lot of the good things happening in Texas. Why don't we just start, just share with our audience just briefly, if you would, kind of who you are, background, your career, your work in advocacy, and specifically the connection to Texas.

Arushi Sharma Frank

Yeah, absolutely. So I started my energy career right out of law school, actually during law school at the American Gas Association (AGA) in Washington, DC. And one of the most important and fabulous elements of starting your energy career in a trade association is that instead of inheriting the knowledge base for one company, you inherit the capacity from that experience of learning a whole system. You learn the production, the distribution, the transmission, the rate design, the cost recovery, the safety, the regulation, all of those aspects. And doing so for instead of one or two companies, but for a couple hundred companies. It really opens your mind and it opened my mind to be very intentional about having a diverse career so that I could be the best at anything I could possibly do to create sustainable and positive change and innovation for our industry.

So I've been coming to Texas since that job. I was in charge at AGA among other things for creating the Knowledge Center and DC, Washington DC advocacy platform for responsible horizontal drilling and hydraulic fracturing, which are the two technologies that enabled the shale gas boom. And I started coming to Texas at that point. Spent a lot of time in Fort Worth, Dallas, and moving on in my career, moving from representing gas utilities to the IPPs, the independent power producers, the generators. And then going in-house to Exelon. This is before the spin-off in 2016 to 2019. And working very directly with generation operations providers. So the folks who actually operate the nuclear and the conventional thermal power fleet, the folks who actually are out there on the wind operation sites, the folks trying to figure out net power in Texas. I'm actually the person that filed Net Power's, power generation company, filing at the PUC. It's my name on the bottom. So I've got a weird connection to a lot of things in Texas.

All of that really set me up for the job that I most recently did before starting my own firm. And that was to create an energy advocacy presence for Tesla when they moved their headquarters to Texas in 2020. So that's the cycle. And it's taken me through what I like to call the chakra of energy systems. And all the advocacy work that goes on top of that is very, very much fundamentally grounded in figuring out, these are the first principles of how the technologies work in our life. How do you build the solutions on top of them that enable us to get the best value out of them?

Doug Lewin

So your work at Tesla, when we'll talk about this in the course of the conversation, led to some really groundbreaking work at the PUC with the Aggregated Distributed Energy Resource Task Force. So we'll get into that. You and Tesla really played a very leading role there along with a lot of other folks in the market.

But before we get into those kinds of details, I just want to kind of start though with a little bit of what sort of forms your mindset as an advocate when you come into these kinds of regulatory spaces. You have all these different competing interests. You have sort of an asymmetry of information and there's so much going on. What sort of shapes your approach? I think you've had a lot of success and I know a lot of people that are listening to this are folks that, in many cases, young professionals are wanting to learn more about these arenas, which are so challenging and tricky. So yeah, talk a little bit about your mindset entering those spaces.

Arushi Sharma Frank

So I guess the first thing I tell both the students I work with now and the mentees I've had over the years is success in an energy career comes from being able to take integrated problem solving or integrated thinking from whatever it is that you do in your life and applying it in the context of energy. And for me, that's been music and dance. Both of them are things that I've grown up with or are part of my family. And when I think of energy advocacy, I've always thought of it as orchestrating. Orchestrating various instruments, which if you put them together and they don't quite sound right, there are ways to fine tune and refine each one. Each one has its own timbre, each one has its own tenor, it has its own purpose, and they all fit together. You don't take the oboe out just because the oboe is a little too loud. You modulate the oboe and you might introduce a different second string.

And the same goes with how we speak in energy. One of the things that's helped me be successful in how I communicate advocacy needs and transition needs and transformation needs is to think about speaking not at your audience, but with your audience. That's a skill that I learned growing up and even today as a classically trained dancer. When you do a performance in dance, your job is not to go and dance at your audience and just do something abstract and then they just kind of stare at you and wonder what you said or what you did. It's to be able to communicate. It's expressive and it invites the return and the engagement from the perspective and also the feeling that the audience gets from what you're saying.

That's really important to me because I get asked all the time, like, well, how could you have had a role at a company like Tesla and also have represented the gas industry? And I just stare at people for a moment and I say, well, do you remember what our country was primarily powered on in 2011 and what the natural gas evolution did for us? And what it did for us was the transition from coal.

And now we're in a system where we have hurtled through coal retirements, primarily on the backs of the abundant natural gas resource in the United States. And the same sorts of logical, economic, integrated, problem-solving tools have to be used in how we communicate the next goal, the next objective, without losing sight of the journey we've already been on. So in that way, whether it's music or dance or it's just, you know, reading or it's math or it's you doing your garden outside. Like if you plant hostas, you're going to plant something else next to them. They're going to have to live together. You have to design your strategy for how you speak, think, write, advocate for change and for reform, really. To make everything more efficient, everything a little bit better. And in none of those conversations is should your goal ever be to try and shut everyone else down. If that's your goal, you're not going to succeed.

Doug Lewin

Right. I really like this metaphor of the orchestra. I know, for instance, the Texas Advanced Energy Business Alliance, a good trade group focused on Texas grid matters, uses that a lot to talk about these different resources and how they all work together. And we obviously do have a lot of gas on the ERCOT system. And part of what's happening right now is trying to figure out with these newer resources like storage. Where do they really excel? Where do they play a role? And in some cases, it'll displace technologies and in some cases, it'll complement technologies. Do you want to talk a little bit about that? You obviously spent a lot of time working on storage. Where do you see storage really sort of changing the dynamic in ERCOT? And if you would talk both about the utility scale, the really big stuff, but also the smaller stuff.

Arushi Sharma Frank

You know, one thing that we will get absolutely in the next few years because of the falling cost of storage generally, the availability of the IRA ITC incentives, you know, residential batteries in particular, and even small C&I batteries. I think they're going to be sort of the foundation for the growth that we thought was coming a few years ago and didn't quite get as fast enough, but it was really faster.

And I say that because for all front-of-the-meter technologies, whether it's storage or whether it's new gas fired plants, renewables, et cetera. Transmission and large interconnection infrastructure. So load site connection of the system. Just what do you need to sustain large loads and large generation? All of that is very costly right now and it's taking a long time to get things out of the queue. So what's going to happen in the meantime is that storage as the cost goes down, my view it truly is that just how when we have something new in our lives like a value proposition and we want to capture it as quickly as possible, we'll capture it as quickly as possible by investing on it on the distribution system. Whether that's going to be community microgrids powered with batteries, whether it is the next evolution of standby generation for hurricane resistant resilience, which is already happening, right? We're going to talk about it. Or whether it's residential backup. Batteries are clearly very useful. It's about where they're going to show up first and next.

On the front of the meter side, one of the things that's going to impact battery investment in Texas in general, of course, is real-time co-optimization, right? The streamlining of the day-ahead market with the real-time energy market, which creates a ton of liquidity. And we all know that when there's more liquidity, we get closer and closer to perfect competition, which means that there are less opportunities for consumer and producer surplus, and there's less deadweight loss. And that means that there's less profit for any one entity. So liquidity will change how people think about batteries, how they build batteries, the duration, the location, etc. But all of that is going to be preceded absolutely by more lower-cost storage resources showing up on the system where it's easier for them to show up faster.

And that's clear everywhere, that it is easier for me to go out right now and take some of my kids college fund and put it on a couple of battery purchases, right, than it is for me to wait to see if my utility service might improve in six years. The thing is that most people can't do that yet. But that's the thing that needs to change and I think it will change. I think there's going to be massive investment in community resiliency with storage, whether it comes from incenting individuals to procure those resources or whether it's creating community microgrids with smaller size batteries that are distribution connected.

Doug Lewin

Yeah, we're going to dive even deeper into this as we go through because while you're obviously right, there will be these batteries showing up as like you said, the capital for people to invest isn't always there, isn't always prioritized. And so we are seeing right now a lot more of the large batteries, the utility scale batteries than we are distributed. I think we're up to seven or eight gigawatts of the front of the meter, the large scale sort of utility scale storage versus I think we're at somewhere like 500 megawatts or something like that. Correct me if I'm wrong, but something like that, behind-the-meter.

But I do think and what I want to talk about next is that the, you know, Hurricane Beryl response and just what a horrible and devastating and tragic and unfortunately in a lot of cases deadly, sort of lack of, you know, restoration, the long time it took to get power restored was yet another traumatic experience for the Houston area. And I think it is going to drive a lot more investment in storage and backup generators of all different kinds, which you get, of course, when you have storage, particularly if it's coupled with solar, is the ability to use it throughout the year and in recovery.

So let me turn this into a question. Let's actually just start with, we'll get into storage and all that, but let's just start with CenterPoint's response. You've been in the industry for a long time. What are sort of your major takeaways from the response and from the plan and what you've heard from them about where they're looking to improve?

Arushi Sharma Frank

So I guess the first thing I'll say is that these sorts of improvements really take a long time. And that's not an opinion. That is straight fact from how we have seen utilities who have experienced, that have experienced similar hurricane specific crises. Their journey of improvement is not a couple months. What will be a couple months is the initial phase of what is called in a science experiment, your first hypothesis that these initial things that we'll do, we think will give us these particular short-term returns to solve the most immediate crisis. And along the way, we'll learn a bunch of other things and we'll talk to our communities and our first responders. And then we'll realize that maybe some of the things that they thought were going to help them aren't really there. And so we need to substitute and we need to go back and need to pivot.

I'll give you an example of this. So Florida and Puerto Rico are great examples of where between hurricanes, a lot happened over a fairly long period of time to create better outcomes on total numbers of outage failures, total numbers of downed wires, poles, et cetera. But it took years in between those things to kind of create the metrics, implement the metrics, actually start doing the preventative maintenance and then be ready and then be able to kind of benchmark what we did with the second hurricane versus the first one.

I'll give you an example of this. So with Florida, it was Hurricane Wilma in 2005. And then they had benchmarked the performance to respond to Irma against Wilma. And Irma was in 2017. In 2016/2017, that time period, the Florida regulators started requiring FPL, at that point, to start filing storm protection plans. And they are to be filed as SPPs on a minimum of a three year cycle. And in those SPPs, the utilities are required to continually benchmark its performance in subsequent weather events prior events among other things. And in similar support…

Doug Lewin

Arushi, SPP is like a performance plan or what's that?

Arushi Sharma Frank

It's a Storm Prevention Plan.

Doug Lewin

Thank you, okay.

Arushi Sharma Frank

And so SPPs or Storm Protection Plans. Sorry, rewind, rewind. It would be nice as prevention, but it's really protection, right? It's mitigation and resilience.

Doug Lewin

We can't really prevent the storm. We could protect against the impacts of it.

Arushi Sharma Frank

That's mine and everyone else in the world's wish that we could just stop these dark rings. But all we can do is do our best to recover from them.

And so actually, the most recent FPL storm protection plan was actually filed in November 14, 2022, which covers the next decade. So the point of these plans is that you file them on a cycle and then they cover a period on that cycle. There's another, a couple examples like this that I had for you…

Doug Lewin

And yeah as you're looking that up, what you were saying there is really interesting. They're benchmarking them against a previous storm. In your experience, that isn't happening in Texas. That is happening in Florida, but not in Texas.

Arushi Sharma Frank

Correct. Yes. I haven't seen a storm to storm benchmark from a public utility program, a commission program of any kind. Certainly internally you have to have some way of understanding where your money's going.

Doug Lewin

Well, and I did see, yeah, I saw a comparison they did to Ike, which was 2008. But I think the key here is, and tell me if I'm getting this wrong, in Florida, they're not just benchmarking and doing these performance metrics. They're actually signaling to the utility that your ability to earn, right, is going to be based on. There's at least an upside. I don't know if they do a downside in Florida, right? But if they're actually more successful, they actually see their profits go up. Is that correct?

Arushi Sharma Frank

Yeah, I mean, because at the end of the day, if you're going to be filing in your revenue requirement for CapEx upgrades to your T&D system, and on the other side, you have a very detailed filing that goes, and I'm looking at the FPL requirements. They have to cover, and this is going to go to the integrated concepts that we keep talking about. They have to cover distribution and transmission inspections, feeder and lateral hardening for the distribution system, vegetation management for T&D, and substation storm surge and flood mitigation.

So in one area, in one filing, one reporting structure, you have to be able to show the least cost, highest value investment of your CapEx. So it's an accountability metric. And I know there's been a lot in the news about PBR, performance-based rate making is a tool to do that. But I think one of the points of doing this sort of benchmarking work is to understand that like, you can drive really smart investment strategies tomorrow. You don't need to create a brand new rate design to see immediate results in terms of how utilities as planners are looking at where they spend their money today, where the marginal dollar should go tomorrow, and what work have they done in the middle to understand the opportunity cost of where they spent that dollar.

And we'll talk about it a little bit more, but the concept I'm getting to there, the thing that Florida now does, FPL does, as an outgrowth of having this storm prevention plan requirement is integrated system planning. TND being studied together, impact of TND on G being studied together. And it's to the very point that modernization and resiliency, all of the things you hear about in the news that are happening at various utilities, that they happen in a system now that is being increasingly recognized as the only true way to understand accountability around where the next rate payer dollar is set.

Doug Lewin

Yeah. So, and just to, we do like to make sure that this podcast is accessible to folks that aren't as familiar with some of the terms. When Arushi is saying T it's transmission, D is distribution, G is generation. So obviously this is an important distinction actually right between Florida and Texas. So the T&D in both places, fully regulated monopoly. The G generation in Texas, is a competitive function. And this is where some of these problems have come in. And the hearings that have happened post-Beryl and a lot of the press coverage has been around the, and it's a podcast, you can't see my fingers, but I'm doing air quotes, mobile generators that CenterPoint leased for $800 million. And I think what we're looking at when we're talking earlier about distributed energy resources and storage that people are going to purchase at their places. It seems like it should be more straightforward in Texas. This is where Florida has done some really good things on the system hardening side, making the polls more resilient and things like that. Where I still think Florida probably lags and Texas has a chance to go past them is really empowering consumers to have that generation at their premises.

A lot of the legislators at the hearings post-Beryl were talking about emails and texts and phone calls they got from, for instance, restaurant owners in their district that are like, hey, I can't be out for a week. You know, this is killing my business. So CenterPoint's role should be not to, in my, this is my view and you feel free to push back or react or go a different direction or whatever you want. But my view is rather than spending $800 million on a lease for these great big generators, they should be doing what they can to empower and help their consumers, their customers, interconnect to the grid. And this is another place where a performance metric could be put into place, right? What is the speed to interconnection, right? What are you doing to help those restaurant owners that can't have a week's long outage get the generation they need on site?

That's something that isn't really going to, that could happen in Florida, but because it's an integrated utility and they do generation, it's going to be harder there, I think, than in Texas where you have that split up and the utility really should be focused on transmission and distribution, not on quote unquote mobile generation. You want to just react to that?

Arushi Sharma Frank

Yeah, well, so just, okay, so trying to not get too wonky too fast. Most of the places in the US, barring Texas more recently where distributed storage in particular has been assigned the highest value stack that it's actually capable of providing to the system as generation, as a non-wire solution, as a greenhouse gas solution, as a home resiliency solution, is actually vertically integrated utilities. It is not a market like Texas, period.

The first place in the country that had a resiliency program predicated on the utility giving out an incentive that covered the entire upfront process of the battery, a bring-your-own device program and or leasing that battery from the utility system was Green Mountain Power in Vermont. It's a vertically regulated company.

Doug Lewin

Right.

Arushi Sharma Frank

So no, actually, I'm going to completely turn your statement on its head there, because what we're getting to is what we know is the most critical piece of distributed device aggregation and where those aggregations should sit. And we know storage in particular and in generation in particular. It has more value the closer it is to load. So a lot of the natural integrated value tools that are available to an FPL or to a GMP or a PG&E or SDG&E, those tools are naturally there because there's one entity in charge of the value proposition and the avoided cost proposition of that resource in multiple uses. I’ve actually written about this, I've got a great LinkedIn article we can stick in there about an old RMI pie that shows the storage pie.

Now take that to Texas for a minute and think about what that means here. All that means is that in Texas, the VOLL, the value of lost load, value of what a home battery means and what it's worth to a Texan right now. If it's a commercial entity, how much money that business loses because they can't serve customers for the week. All it means is that we need to acknowledge that financially the owners of the responsibility of giving that residential backup and resiliency daily day-to-day resiliency tool. It's full value stack. They're split entities. They have to work together. And an example of that where they can and they will work together is indeed actually a CenterPoint filing.

So in the case of CenterPoint, for example, distribution rates, that's a separate entire section, in a separate entire proceeding, It's the distribution cost recovery factor filing. The battery pilot program is an energy efficiency cost recovery filing. Then you have the mobile generation, which is enabled as a cost recovery mechanism under 39.918, which is the TEEF generation program enabled by that statute that's existed since the last legislative session. And then you have, hold it, hold for it, then you have the resiliency plan from CenterPoint. That's in a separate place.

What you don't have yet is a grid modernization plan or distribution investment plan. Both of those are also two other types of filings that are either being required and mandated in other states or they're being voluntarily proposed and filed by utilities as a place to kind of marry all of these value sets and bring them together.

Doug Lewin

So you said there are two different kinds of plans that don't happen in Texas, but happen in other places, right? One was like, is it a distribution resource plan? Is that what you said?

Arushi Sharma Frank

No, it's called a, let me give you the exact word, a distribution infrastructure investment plan.

Doug Lewin

Okay. So yeah, I mean, that could be a distribution resource. Basically, you're looking at the distribution system and you're trying to figure out where the biggest bang for the buck for a particular objective is going to be. And I think that it is really important, and I'm interested in your experience on this in other jurisdictions, to have that be at least a somewhat, if not a very open process. Because the utility is a monopoly. You need to have other entities. You know, it's been said several times again in these hearings post-Beryl, Chair Gleeson from the PUC will say, Hey, you know, it's a monopoly. The role of the regulator is to kind of simulate competition. Well, sometimes you can not only simulate it, you can actually say, ‘Hey, monopoly utility. There's actually a business entity that can provide better.’ Again, I think not to fixate too much on mobile generation, though it's kind of top of mind because it was $800 million. That’s a lot of money that could have done a lot of good. There's probably competitive providers that could have done that better. So distribution resource plan. I think that one is really key. What was the other one? You said there was another one done..

Arushi Sharma Frank

Yeah, that one is actually the grid modernization plans, right? And so the reason that these plans are all different with different types of names is because they're doing different things. And the reason for a specific type of plan to be required to be filed is typically a goal. Now, in one state, that goal might be we don't want to deprive our low income community residents of the chance to have electric vehicles. So what do we need to do?

We need to ask the utility in this case to file the distribution infrastructure investment plan with a view to reallocate some of those transformer upgrade related rebates specifically to feeders on which we're going to have low income population members who would absolutely benefit from a couple of fast charging stations and benefit from having electric vehicles, either fleet vehicles or vehicles in their home that they can buy and be able to charge in their home circuits. So that's a natural goal. So that's a gold tide plan.

The other kind, the Storm Protection Plan, that's of course a benchmarking plan. That one is, you're asked to file because the utility regulator wants to see what you're doing everywhere and wants to see that you are making consistent continual performance for every dollar you spend on CapEx on T&D and wants to know where it's going and what it's going to do.

In terms of visibility in other states, there was an omnibus distribution system investment related proceeding in Colorado last year, which may still be ongoing for Xcel. And in that proceeding, basically the reason that they had it is also the reason that Xcel and public documents mentioned we're not sure we really need it. And that was that there were already nine other places where Xcel's distribution system investments were being considered in front of their state regulator and at least one of the points of an omnibus proceeding around that is to do exactly what the SPP item does in Florida, which is, wait a minute, we'd like to see everywhere that you're spending your cash. And we like to see what that strategy means when you put two and two together and does it actually equal four.

So in that regard, Doug, I guess the other thing to mention is that the distribution system as a place to invest is well recognized and well known as being the place where we historically as utilities in the United States, our system operators have spent the least amount of money. And solving for that has been a priority for state regulatory bodies as a group of peer entities that get together for quite some time. And it mirrors the problem we're seeing at the national stage where we have the same issue with transmission planning.

It almost seems like at this point that it can be NARUC, it can be the White House, it can be the interstate committee of RTOs, and it can be the governors of four states. At the end of the day, if everyone isn't coordinated and moving on the same track, you're not going to get the transmission built as fast as you need it either. Distribution and transmission both, because they suffer from a legacy problem of too much happening in little silos. Getting that integrated problem set and putting it in front of a public audience is pretty darn important. So yeah, I want to see a world where we can see, like, all right, you have this program here that's supposed to incent 3,000 customers having batteries. What's that going to do to the avoided cost of upgrading your distribution system in that area? And then can you take that money that you have avoided spending here and throw it on hardening the fears that go to the homes that suffered the most in Beryl?

Doug Lewin

Absolutely. Absolutely. And that kind of integrated look is so hard to get at because just what you described earlier, you have the DCRF and TCRF and EECRF and a rate case and a resilience plan. I'm forgetting a couple. There's just all these different things going on and it's very hard to have that throughline.

And this is really where I think that, and maybe we shouldn't call it performance based regulation because people see that as like, you know, 24 point type and capital P capital B capital R. But it's just as simple as saying what end are we trying to achieve and how do we tie profits and compensation to that goal?

And if you have that then that's a real signal to the utility. And I want to be real clear, I'm often critical of utilities, I'm often critical of ERCOT, I’m often critical of commissioners. I also praise them when they do good things. You mentioned Jason Ryan. I had a podcast interview with him. He's done amazing things as the chair of ADER. It's not that, and this is the post-Bery reaction where you see people in Houston,in some very extreme cases, not many, but in some cases actually threatening line workers and all that. We have to be clear that this isn't personal. These are institutional and structural problems. And this is a for-profit entity that is serving its shareholders. And the key is to align that incentive that will help their shareholders and help the system and their customers. And I think that there's a bit of a mismatch there right now that, again, doesn't have to be the whole massive PBR thing, but just starting with what is the goal. And I think it would be very clear for everybody in Houston right now that reducing the number of outages and the duration of outages is probably going to be as close to a universal goal. Republican, Democrat, independent, you know, race, gender, part of Houston you're in, I think that's going to unite just about everybody at this point. So, is that the way to do that then is to have these kinds of what it's maybe it's a grid modernization docket or something? What in your experience is the best way to actually do that is to have an overarching docket or what’s the mechanics?

Arushi Sharma Frank

I mean, honestly, so the omnibus approach, take it for example, in Colorado would be a great thing to do here. And remember, I mentioned goals and you started just articulating everything in terms of goals as well.

The obvious goals in the case of just CenterPoint for a moment, continuity of service is goal one. And the other second, the second goal has to be because there has been loss of life, passive survivability. This is a word that's a really important phrase and people don't talk about it enough.

I'm going to go on a very non-tangent tangent for a second. I was born in New Delhi, moved here when I was very young, but I went to India every year. And I've lived a life of power outages in hot temperatures. Passive survivability means the ability to maintain habitable conditions in the event of heating and cooling losses. What you didn't have in New Delhi was extreme cold events, which you have in Texas, but you have extreme heat. There are natural mechanisms in the home, in the design of the home. And I'm thinking specifically about my great grandmother's house that made it easier for us to survive heat. And it made it easy for her. She passed at nearly 100. She never once complained during an outage when she had no electricity.

It's because her floors were a composite material, she didn’t have carpets, that generated cool cool temperatures for your body like while you're sitting close to the floor. The furniture was a specific type. The walls had specific you know aerated components that let breezes in and created almost like a natural like circulating like cool air movement through the home. And every single room, even the bathroom, has a ceiling fan that could be operated on a tiny little inverter so you didn't have to have a lot of money to have backup power. You could all go sit in one or two rooms in this house, have a couple of fans on, high powered ones, not like the ones you'll see in the US that are a little more decorative and they tend to not just move as fast, honestly. And small water-based coolers. So these are basically low energy, distributed energy resources almost, but they're part of the mechanism of what you've given people to boost their passive survivability.

So I mean, there's this big market in the US, for example, for portable generators. I was just looking them up before this podcast, and we use them for all sorts of things. Apparently they're on Amazon. And I wonder, like, what is the interim solution right now? Or if you can't get everything done in the next two months, how do you make sure people aren't too hot? How do they survive the next 20 days assuming absolutely nothing can get done in the next month?

That to me seems like number one, number one goal. And then number two, of course, is continuity of service. What was described at the hearings is people just being out for a week and they're losing money, right? They're losing basic, you know, basic needs in their homes and their businesses.

If passive survivability is goal number one, continuity of service is goal number two, the omnibus proceeding that we're talking about should enable the two month, three month plan for how do you achieve all of those things as fast as possible. And what it means is that there'll be incrementality in the resiliency objectives that you have that are like, okay, these are the things I have to do this month. I can't do all things for DERs this month, but this month I can look around me and realize that first responders in Uri in my own state, responders in Puerto Rico, other towns and cities that have experienced the loss of conventional reciprocating engine generators as backup solutions, they all use cabinets with solar and storage, all of them.

And we'll put a link in your podcast to the experience of the emergency management head in Fayette right outside Houston, who got his first one of these mobile cell storage and solar cabinets from Footprint, I think is the name of the company. And the reason he got it is because his other resources were failing.

Doug Lewin

Meaning diesel generators were not working for him?

Arushi Sharma Frank

Mhhmmm. And he also describes in the podcast some of the danger issues because he was also trying to use these in the middle of very hot days. And he's had the unfortunate experience of witnessing accidents related to those generators being mishandled or just becoming too hot and a small leak results in something catastrophic.

So that is an example. It's like in the next month, we want as many standalone mobile instant start, ready for first responders, ready for low voltage interconnection and reenergizing systems, like hovering around like droids in Star Wars as possible. And to be clear, that as a solution set doesn't come from me thinking about it as someone who is like ex-Tesla, nothing to do with it.

The reason that mobile solar and storage has become so popular so quickly in hurricane scenarios is because of Hurricane Maria and because nothing else worked to get people their power. So you had companies coming in and droves just putting these systems all over the island and first responders just having no power in their home, no power at their jobs, no power to power their power tools that they need to go do their jobs.

It literally is the only thing. And it's interesting. And I say this a lot, but a lot of times it takes us as human beings, for whatever reason, a true forcing function crisis for us to think about the next best solution and implement it, even though our attitude around it is like, we have to do this because it's the last resort. No, mobile storage and solar, just because you think it's a last resort is actually the first thing you should have done, because it's the most resilient, most easy, most reliable tool you had in your toolkit to start and did not rely on a third party to do maintenance testing thrice a month so that it would work when you're ready.

Doug Lewin

And basically you're talking about almost like a little bit of a nested strategy, like layers, right? Where you have smaller ones that are mobile and can be moved. And then you've got bigger, that are permanent, but maybe at smaller locations. And then you've got this really big 200 megawatt solar and 285 storage. With the large one, are they able to, because again, you're going to have problems on distribution. You'd have the smaller ones that help with that.

But are you seeing solutions that are basically like community solar and storage where they're maybe not as big as that 200, maybe they're two megawatts or 10 megawatts or something, but closer to where they're needed so that then the restoration can be quicker, right? But here's my question. So I want you to answer that generally, but I'm also specifically interested, can you island those such that if everything else has gone to hell around it and the grid is just not working, whether because of a Uri scenario or Beryl or whatever, that community solar can then power an entire neighborhood?

Arushi Sharma Frank

Yeah, so that's the plan for Australia. We'll have to look up how far it's come, but the community solar storage program in Australia is taking the idea of the whole virtual power plant, you know, mini microgrid, is you, your house, your battery, your solar. And taking that to the community level and investing in that, you know, what I call the CNI or the commercial and industrial scale battery, the two to five megawatt battery and plopping it down on a distribution circuit and building the infrastructure around it to create the community sharing revenue model.

Now, another example of that, which is not necessarily every utility's favorite, but still an important example, is wheeling power inside a private network of wires and exempting the city or the town or the township from the conventional utility regulation model that requires ownership of those wires by the incumbent utility. Retail wheeling, as it's called, is this notion that you are producing power inside your contained microgrid. And yes, you're asking about the ability for that microgrid to operate in parallel with or islanded from the local system. Batteries already enable both of those things. And so going back to the regulatory cook structure, sure, if you want to dig into retail wheeling and cities operating on private wires networks, there are a lot of those projects. Not all of them have a great political rep because obviously they're exempting themselves from utility charges. But we have to find a way to make some version of this work. It doesn't matter if it does.

Doug Lewin

Are those what in Texas we call Private Use Networks or is that different? Is that a PUN?

Arushi Sharma Frank

Yeah, PUNs are different in the sense that the private use in the private use network, the entity that has the generation and is using it for their own co-located load without a retail meter in the middle. Those entities are usually legally related to each other. They are indeed part of the same LLC network usually. I really don't think there's so many of them where the entity that's getting the load is contracting with a third party that they don't have a business relationship with. But that's a little different from what we're talking about. We're talking about multiple distribution points, right? And then a single generator and somehow all the distribution points are paying for that generation service and the cost of delivering the power through that system.

Doug Lewin

Through a private or it wouldn't necessarily have to be private, but it would be separate from, for instance, like CenterPoint or whatever the utility is, their lines. That's very interesting. And that was, you're saying that was a plan in Australia. So we'll try to track something down and put something in the show notes about that. I definitely want to get smarter on that particular thing.

Arushi, what I hear all the time from people, you know, well, yeah, this is something I hear a lot about solar and storage. They'll say, well, it can't be as effective as, for instance, a gas generator. I think it's really important people understand that diesel generators have really been problematic in these various storms. This happened again in Beryl. It'll come out more in the coming months as the investigations happen. But again, I hear anecdotally, as with every storm, Uri, that the diesel generators are a problem. They're really hard to maintain. It's hard to get diesel to them. But even the gas generators, which have a better track record, a lot of what I hear is, the solar and storage, you just can't because obviously you're going to get solar 8, 10, 12, whatever hours a day and not 24. You have to make the battery so big that it's not economic. You've obviously worked in this space a long time and have some detailed knowledge about this. I'm curious what you’re reaction to folks who say solar-storage just can’t work because you have to have so much storage to make it work around the clock.

Arushi Sharma Frank

Yeah, no, that's not true. But rather than hear it from me, we're going to put a recording of the gentleman who is the head of emergency management in Fayette, who happily talks about his system charging in the eight hour day in Texas in the middle of Uri. So that's middle winter. And we're in summer right now in Texas and his battery system on his mobile solar storage cabinet lasting the whole night. What I think people miss is that how long the battery lasts you is not just contingent on how much charge it is getting from the sun, but what loads are interconnected to it on the other side. So in that sense, the reason you need multiple sizes of diesel or gas generators on a system is because for them, there is this physical limitation where the generator has to be exactly sized pretty much for the load on the other side.

In a battery system, by contrast, what you have is essentially a large drinking tank, if you will. And how fast you drink from the tank is what determines how long it will last. And that's why bought batteries are so modular and can be used for so many applications. So if you're going to size a system for this cabinet that's going to go and power your local community center, you just pop three of those batteries on the floor of the cabinet. You pop eight solar panels on top of the cabinet. There's a big hole in the middle where you put an electrical outlet and hang out and watch, you know, watch your YouTube videos on break in the middle of your emergency service like ships. That's what people need to do. People need places to rest. That's actually what this gentleman from Texas says is like now he uses on non-emergency days. It's actually the mobile cabinet is used as a relief center for the folks who are actually working in his team to go charge their devices, just go sit down and have a place to have some R&R for a few seconds because also able to provide, you know, a fan, like an outlet to just have a fan and get air while you're doing your job.

And this notion that the battery is going to run out. The reason people have this notion is not just because it just randomly showed up in a gossip trade publication. It’s because most of the media conversation around batteries is thinking about two hour and four hour batteries in ERCOT. And in that context, we're talking about the full availability and the modeled capacity, the nameplate capacity of how long a battery can run in relation to a market design. In the world that we are living in as human beings, as people in our homes and in our businesses and on the road, how long a battery lasts and how you'll size it is not dependent on how quickly you'll run it out. It’s dependent on which loads are absolutely critical to power and how long you want to power those. So always, batteries have always been larger, for example, the Tesla Powerwall, has always been larger in kilowatt than the actual consumption rate that you expect from the home itself. The point of the battery size initially is not to be able to hit 24 hours, it's to be able to have the oomph it needs to restart the AC, the air conditioner. And so we're talking about current at that point.

And now when we put solar with a battery that say has the, what on paper is a two hour duration, that's two hours times whatever the size of the system is. And that's your total kilowatt hours. So if you're home, if you have an average home in Texas and you're still operating on electric resistance heat pump and your whole home day is 32 kilowatt hours. Absolutely, go by the solar panels and the two Tesla Powerwall 2s or the one new Tesla Powerwall 3 or whatever you want, whatever battery system you want, to continuously get yourself those 24 kilowatt hours. But if I'm you, and I probably am in this scenario because we both want to be able to survive an outage, then I am not actually doing the math for one day for everything in my house. I've turned off my pool pump. It's going to be a 15 day outage. I'm sitting in one room with my kids with one fan or one air conditioner on and that battery is going to last me four times as long. And that is exactly what happened during Uri with folks who had batteries. It's exactly what happened during Beryl.

Doug Lewin

Thank you. It's super helpful. And I do think that's exactly what's going on as people are hearing in the news that these batteries are for one or two hours on the grid and forgetting that they can be configured in many different ways. Yeah, I also, I wanted to get your thoughts just very briefly on the Texas Power Promise, which the law stipulates it has to be a mix of solar, storage, and gas. I think it's generally smart because you get some redundancy there and particularly that the bill is focused on critical facilities like nursing homes and fire departments. And you talked earlier about redundancy. So it kind of makes sense to me, but I'm curious if it does to you as well?

Arushi Sharma Frank

Yeah, and redundancy is always a great idea, right? The whole notion of nesting, it's equally applicable for a single resource type as it is for stacking first and backup use cases for any current facility. You just need to know the value, right? So

The value of losing load at a critical facility is $1 million because that facility serves a specific set of functions that are life-saving. And if that entity lost power, we're stuck then you're going to want to put a lot more redundancy at that site. However, if that one site loses power and its job is to do a secondary function that is not a direct life saving fund function, but it's an ancillary service, then maybe instead of having both gas and solar and storage at that site, you only want mobile solar and storage. So if it turns out that your neighbor next door, which actually has people who are suffering from immediate health conditions and have moved out of nursing homes, you want to be able to wheel something from site A to site B.

And to develop that kind of plan while it's great to have, and actually it's critical, of course, to have the legislation that enables a solution. But to make the solution real on the ground in the middle of a health and welfare crisis, you have to have first responders involved to be telling you the best and most important use cases and where they're going to use these things. And that's what gets you to an economic, integrated way of thinking, where it's like, OK, I don't need a gas generator at every one of these sites, but I need them at these four sites. And then I want solar storage at 90% of these sites. And I want 50% of that, all of that, the gas and the mobile, to bring up all stuff, all to be movable and to be able to serve the next critical facility.

Doug Lewin

Interesting. Yeah, it really does take having that more comprehensive view. We will almost certainly record a part two of this because I have a long list of questions left to ask. For this particular one, let me just ask before we end about the aggregated distributed energy resource task force for which you've been the Vice Chair working along with Jason Ryan at CenterPoint and 18 other folks on, that task force that I think has made a lot of progress.

I really want to ask about the connection of the ADER task force to these resiliency conversations we've been having today. So mostly what I perceive is going on and tell me if I'm getting this wrong, but it's really been about trying to make sure that DERs can be compensated in the ERCOT market for ancillary services. When you were talking about value stacking earlier, there certainly is value there. And the ADER task force and the pilot project have gone a long way to realizing that layer of the cake, right, the Regulatory Assistance Project, wrote that great paper a long time ago about value stacking of DERs and energy efficiency and the sort of layers of the cake and all the benefits.

But this is a place where we've got to figure out somehow with ERCOT, with utilities, with the PUC, with the companies providing the solutions, I interviewed Base Power for this podcast, Tesla, the different, there's so many, there's too many to name, all the different providers of the DERs to figure out how do we actually value that resiliency piece, like literally value, like put the financial layer in there to value that resiliency benefit. Is there the potential with the ADER task force and the pilot to do that kind of work or is that round peg square hole? It needs to be done somewhere else and not through that venue.

Arushi Sharma Frank

So, no, it totally has the potential to be that. It will be. And by that, I mean, so first of all, like you mentioned the value of resiliency. The thing is people have started buying residential batteries after Winter Storm Uri in Texas, and they're very expensive. And at that time, it the impetus for even doing this project was like, wait a minute, if everyone's got 10 kilowatts of power on their home because they're worried about the insurance policy day, but it turns out eight of those 10 kilowatts actually monetizable as you know 8 times 2.5 kilowatt hours to be able to actually send power the other direction is crazy that we're not paying customers for that. It's an equity thing because you spend all the money to have power because the system that you're paying to give you power is not giving you power. Right? That's why you spent the money on the batteries. Now that you spend the money, why is it that you can't turn around and get a price signal from the market for what that power is actually worth. It's dispatchable power, right? It's energy. And it's electricity, actually, I should say.

And the impetus for it comes from this place as like the whole reason for ADER, like truly, is that resiliency acts on the distribution system at a customer home. It has so much value for everybody else. And unless it is seen and it is compensated for and it is measured, there is no way we could be in the world we are today where we have utilities like CenterPoint putting in proposed incentive designs to say, there's a lot of value in these resources. Let's do it.

And to me, one of the other pieces, like the success of ADER is it's created the first nexus in the competitive areas of Texas in particular for to see batteries they do not own as system planning assets and risks so that they could invest in the distribution system that sits between them, the customer, and ERCOT. The details of the aggregation form, which is like the critical piece of what enables information sharing about how much capacity we're moving back and forth on a distribution theater based on how many of these devices are in that aggregation in that utility area. The whole point of that form, or at least one of the major points of that is to give this ex post facto visibility to a utility. And it can be used as a predictive tool as the size of those assets grow..

So, you mentioned the market compensation piece. To me, that's sort of the obvious piece, but the non-obvious things that are critical with ADER is that in a model where utilities do not own the G, but they're building the D system to accommodate all of this distributed G that's coming. They have not only just the role, but they have a meaningful nexus to get the data, to have the ideas, to have a shared value proposition with the retailers that might be able to cite more batteries, like all of the stuff that comes down to, oh gee, what is the rationale for investing in the utility distribution system? It's absolutely informed by projects like ADER and ADER specifically. And I've talked to retailers who aren't participating in it today who say, you know, even if we're not in service today because the service today is challenging. We'll cover that in a separate podcast as to why and what we need to do about it. Now there's like an Apple vision where like, a minute, we've never been able to monetize these the way you can monetize a four-meter battery. So, you know, in the future we'll have more incentive to tell our customers like, yeah, we'll loan you a battery. We'll go buy all of these batteries, release them from whatever company and then we'll put it on your premise. And that's actually quite frankly, like that's the model of at least one of the companies you've interviewed on your podcast. And it comes from like early market design in this space in particular it has to and it will solve for multiple problems, including the stuff that's not even utility adjacent, which is just like municipal city permitting and implementing the National Electric Code.

The one thing that really drives my passion for this particular project is that it is so hard for customers to see and understand the 15 barriers between them and them having a cheaper resilient solution in their home. It's not just a market barrier. It's not just interconnection cost. It's a whole life cycle of all of the things that that installer needs to do to get the product in your home. And a lot of it sits in these little fiefdoms of jurisdiction, which are CD and AHA permitting processes. The filing that I made last week in that ADER Task Force docket actually lays out the map.

Doug Lewin

Which we'll link to as well.

Arushi Sharma Frank

Yeah, but like that map to me is the reason the projects like ADER are so important because there's no other place where we actually genuinely advocate and want to open the doors, open the box all the way to understand like this is the holistic set of challenges between more Texans having resiliency and not. It's not one thing, it's 12 things. We have to solve for them as a team.

Doug Lewin

Yep. Yep. Yeah, we've got to be able to break those challenges down into their component parts. And I was on a podcast with some Australians the other day and we were talking about, you know, all the great success in Texas with wind, with solar, with large storage. But when you look at distributed solar and storage, we're actually way behind. Like Australia has a smaller system than ours and like 10 times as much. And much of that comes down to what you're describing as all these… We're not getting all the value to the person who was putting that solar and storage there. We're not layering those, but we certainly are layering costs, right? So it's tilting the scales against it, and that is making our resiliency outcomes worse. So I'll let you respond to that. And anything else, anything I should have asked you that I didn't, this is a great time to add that in. I know there's like, I don't know, 50 more questions we could cover, we'll do it in a part two. But anything for today you want to add before we end?

Arushi Sharma Frank

Yeah, I think The piece, you know, one of the pieces of ADER which I got a excellent appreciation for while was at Tesla working with the TDSPs in that role, is because distribution systems, just because historically we've under invested in them, that doesn't mean that it's a lost cause. And by that I mean, you know, with transmission projects and the different breakouts of RTOs, the fact that ERCOT is an islanded grid and all of that, like, we're very different, like that's cool.

The distribution grids, they're all completely different, but they're all completely the same for the same reasons too. We have two types of feeders in this country. There's networked and there's radial. That's the two configurations. There's two basic transformer types, one phase and three phase. There's two types of service lines, primary and secondary. There are over 3,300 utility operators in the US and each of them has their own original jurisdiction over their distribution system.

So if there's such a high quantity of systems, like the solutions that we're coming up with around the country to harden distribution grids everywhere and to make them ready for the next step, the evolution that I wish for, and I get to say it on this podcast, is that we have to stop looking at distributed energy penetration as eroding utility rate base. That is a big fat no, no.

It should never have been how we got here. I have my own views on solar, as solar by itself on the system. But I have very powerful views on solar and batteries together. And what we're doing is creating not only dispatch ability and resilience, you're creating for the first time, like a consumer resiliency driven reason to actually invest in the piece of the system, the last mile that has been ignored for so long everywhere.

And if we're doing that, we're enabling all of the other things. And so that's also a moment that I realize, and I say it more, is deeply collaborative and driving, hopefully, distribution grid investment towards this place where us putting the $1 in fixing this particular line or upgrading this transformer solves four issues. And one of them is it makes it easier for customers in my jurisdiction to have that battery.

Doug Lewin

That's a great place to leave it. I'm already looking forward to the part two conversation. Arushi, thank you so much for being on the Energy Capital Podcast.

Arushi Sharma Frank

Thank you. I appreciate the opportunity to be my nerdiest self.

Doug Lewin

It's great. A glorious nerd. Yes. Yes. I love nerding out on this stuff. It's great. I appreciate your time and we'll do it again soon. And I'll encourage listeners to drop questions into the comments because we will record another one and we can bring some of those questions into it. Thanks again, Arushi.

Arushi Sharma Frank

Thank you. Take care, Doug.

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Integrating Distributed Energy Resilience Solutions with Arushi Sharma Frank

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