Extreme Heat & The US Electricity Shortage: Exploring Solutions

The sustainability business podcast features conversations shaping the future of energy. Every episode includes a conversation between energy professionals on the topics and questions that are at the forefront of the global energy market.

Electricity blackouts have been affecting significant portions of the United States amid this summer's heat wave, keeping the topic of electricity costs, demand, and resilience top of mind for us.

This episode features a special panel discussion between Sourcing and Risk Management representatives from the Sustainability Business and leaders from the US Microgrid team to discuss the issue from a variety of viewpoints, including options to consider now and for the future.

Jana Gerber:

Welcome to our special panel discussion about a topic of top of mind for all of us with regards to trends and forecasts of electricity costs, demand and resilience. This summer in Texas it's already been a real hot one all across the south. I personally live in Dallas, Texas and since early May we've already been seeing warnings about potential grid outages with the warm temperatures and the grid and stability and maintenance. For those of us who weathered Winter Storm Uri and its effects last year in 2021, we truly understand our dependence on our utility infrastructure.

              Also as a transplant from the Northwest, I do keep in contact with friends and families about their regional weather. As of early June, they had only seen five hours this year of temperatures above 70 degrees Fahrenheit. Odd times already as it comes to summer temperatures for sure. Then we also need to mention the effects of the hot summer temperatures on wildfires. This paradigm has affected California especially over the last few years. In fact, over the weekend, I was reading an article about a three day power outage in Northern California that also affected Stanford University. This outage was due to one of the main utility transmission lines feeding the campus being down from the Edgewood fire.

              Point being, we are seeing more and more news and impacts related to extreme heat caused by climate change and complicated by the limitations of our electric grid. I am excited to be joined here by this esteemed panel to provide their expertise and experience on the topic. So Brian, as a member of Schneider Electric's risk management team, you've been watching this development for several months. Can you give us some background and your thoughts on what's coming due to the cost and reliability of electricity?

Brian Burgin:

Yeah, definitely seeing some trends as I talk to clients. You've mentioned Winter Storm Uri and the impacts there. It's definitely drawn awareness for our clients, particularly in the reliability side. Extreme cold and heat, and ultimately the fires that we saw out West last year and have seen for multiple years, as well as flood threats for hurricanes. I know Texas has been hit by those a couple times here over the past five years or so.

              Companies are really having to focus on a couple key business risks, number one is reliability. What assurances do they have that the lights are going to be on and can they operate as usual?

Developing contingency plans should outages occur and do they have the ability to shift production from one facility to another? Ultimately what is the financial impact of that outage and how does it impact budgets in the bottom line for them? So they're definitely concerned about that.

              The other piece is more traditional around price risk and they're sort of connected in some ways. When you have reliability risk, it typically becomes at a very high price and so that means the grid is strained in some way. So Texas is a great example of that. You mentioned again, or I mentioned Winter Storm Uri and the price impacts that we saw there. Many budgets were blown just from that particular two week period or even less than that. So companies are looking to manage price risk and ultimately trying to figure out ways to manage reliability risk as well.

Jana Gerber:

It's a odd time for sure and there's a lot of pressure across the energy and electricity market. With that Melanie, you're part of our source of teams. When you talk to customers and when you think about advice you're giving, what should we and our corporations be looking at in terms of how and when to procure energy moving forward?

Melanie Hash:

Yeah, well and that's a really good question because you're piggybacking off of what Brian said. You're seeing all these changes. The grid is slowly changing. Gone from the traditional fossil fuels where coal plants are constantly closing down. Yes, we have more natural gas fire generation. That increases some of that volatility, particularly with where gas prices are and in addition to that, we have so many more renewables that are coming onto the grid and that's only expected to increase.

              So with those natural solar and wind generation that is not going to be running 24/7, you increase that volatility. You increase that instability in that grid and if you have a market area where maybe that renewable is coming on too fast, or they're shutting down fossil fuels too quickly, you are just increasing that over and over again. So the main thing that you have to tell customers to do, or that we're asking our clients to look at, is you want to have a plan and you want to be looking long term.

              Just trying to short term look for three months, four months, maybe even up to 12 you're leaving yourself fairly vulnerable to the way the market's going to change up or down.

Having that longer term view, being able to layer appropriately, or actually just enact a plan over time is really going to allow you to take as much advantage of opportunities and dips in that commodity market as you can.

              Because unfortunately if you're in a market area that's going to have a shutdown, or a blackout or a brownout, a traditional energy contract is not going to help you. You're still going to shut down no matter what, but you will have been able to manage the cost of your commodity around that and been able to shield yourself as much as possible from where those prices could go if you see an extreme event such as Uri.

Jana Gerber:

Absolutely. Drew, as we think about these challenges around risk management and sourcing, are there options that can be addressed at the utility level or even more so by organizations? Whether they have large campuses, universities, basis, corporate campuses, or by single sites, what options do companies have around energy production and resiliency?

Drew Gravitt:

Yeah, I think Brian and Melanie bring up some challenges that we hear about all the time and I'm part of Schneider Electric's microgrid team. So when you think about a lot of the issues that we're seeing, whether it's reliability coming from just the grid aging, or what we're seeing is a lot more of these larger storms and unpredictable events, same with cost challenges with the retirement of a lot of fossil fuels and bringing on renewables. I think one of the most promising solutions is becoming the microgrid. A way to really behind the meter take control of some of your energy.

              So when we think about what a microgrid is, it's generally a local energy system that has some generation. Might be some traditional fossil fuel generation we think about, or some solar. Might have some storage and that's all coupled with advanced automation and control. That allows all those resources to be very flexible and sort of play in some markets, work locally for those customers and have a little bit of predictability in what they can expect for their energy and also during an outage.

              So I think what you're seeing in this space, which is really interesting is that because of significantly improving technology costs, you've got solar panels and batteries dropping. I think there's some blips in the market happening now, but if you look historically these costs are going to continue to come down. You look at the controls and the electrical distribution, another piece of those solutions that have come down dramatically in the complexity and the costs of them and the sort of understanding of them.

              Then you've obviously got a challenge we haven't talked a lot about, which is the sustainability aspect of this. The carbon reduction that a lot of these corporations have as well. So microgrids end up being this killer trifecta of being able to provide customers with reliable power. In a lot of ways giving them predictability on what their energy use is because they're self generating. Then it's in a lot of cases also providing that sustainability aspect that their carbon reduction goals are looking for. So these are still in some ways relatively new concepts, but are for sure being embraced across the US.

              We talked about airports, and municipalities universities, a lot of manufacturing and so as customers think about behind the meter and in front of the meter, the microgrid can be a really good fit. Usually they're pretty simple to understand what it would look like for a site too. I think that the market as a whole is pretty good at understanding customer data, what the pain points are. What that solution would look like behind the meter coupled with something that also considers maybe some offsite sourcing and risk mitigation that builds a really good plan like Brian was talking about for them as they look 3, 4, 5, 10 years into the future.

Jana Gerber:

Absolutely. I think what we've talked a lot about is how do customers, and those folks who are hopefully listening to our session this afternoon, really take on accountability and responsibility and create some energy independence as well as really even sustainability? How they bring that sustainability, not relying just on the greening of the grid, but how do they bring that into their sites and facilities as well? Yeah. So I guess Melanie, Brian and Drew, anything else you would like to add based on your peers' comments?

Melanie Hash:

Well, really the only other thing that when we first started talking about this particular issue that came to mind as ways customers can help or try to mitigate some of these issues on the front end can be you look at the grid and if the demand level continues to increase and there are constraints, or the grid is looking to maybe do a brown out or a blackout because they don't have enough generation to meet that demand. If you are able to reduce your demand, having a little bit more responsibility on paying attention to where those levels are and can you pull it off?

              There are demand response programs out there that should something get to a level where they need to start curtailing demand, you could earn a little bit of money by being able to reduce that load. Obviously that's very customer by customer specific. Do you have the ability to do that? Do you have an amount that is significant enough to take off the grid, but it's just another tool in that warehouse that should you have some additional ability to do that you might make a little bit of extra money and you could help prevent a blackout, should it get to a level where they're really calling on customers to help them lower that demand.

Jana Gerber:

Absolutely. It's a really good point about that energy independence, but then also, how can you take some of that, that you're creating and monetize it in a way that would be actually beneficial for you and your operations as well.

Melanie Hash:

Yep.

Drew Gravitt:

Yep. I think with the advancement of batteries, which we've talked a lot about that flexibility and how you deploy access energy that you've either generated. I think that the programs are also so much better understood, right? These demand response programs used to be just even just sort of live in their own, but now what we call ancillary services, you can provide value to the grid in a lot of other ways. Whether that's frequency regulation, short or long term demand response type activities. We're also seeing time of use rates and demand charges that are having big impacts on customer bills. Again, that's where I think customers can be prosumers as we think about, which are more active energy users without affecting their day to day operations too.

              Most of these solutions really do accommodate what are the customer's primary goals of providing a service or a technology or product, but then having, again, this flexibility behind the meter or in some other fashion where they can not only support their business, but they can also like Melanie was saying there's revenue associated with having that capability. So you can, again, tackle multiple different things that customers are facing with sometimes very common accessible technology like we see today that provides cleaner, more reliable and more cost predictable energy.

Jana Gerber:

Amazing. Well, I want to thank you guys for your time this afternoon and thank those who are joining us. Really the Schneider Electric team, as you've seen on this call has a lot of experience and expertise, and we're ready to help you and provide that guidance as you tackle these challenging questions for your organization. So feel free to reach out and thank you again for your time.

//

Thank you for listening along with us and we hope that you have learned some actionable insights. We invite you to visit our Schneider Electric Perspectives Hub for more information.

Stay tuned for the next episodes and don't forget to subscribe wherever you listen to podcasts.