Good morning. Welcome to our briefing this morning. My name is Carol Werner. I'm the executive director of the Environmental and Energy Study Institute. We are very pleased to be hosting this briefing this morning with the German Marshall Fund of the United States. Both of our organizations have a long time interest and and work underway in terms of bringing together people from the policy community, from the private sector, and also with experts from academia and interested parties. And we both feel very, very strongly that as we look for solutions in a very, very fast changing world, the most important thing is to bring thoughtful people together to ask ourselves probing questions, to make sure that we listen to each other as we really search for solutions that can really make sense. This briefing comes as the follow-up to a forum that or a dialogue that has been underway over the past day, day and a half, that the German Marshall Fund of the United States has been sponsoring. And I might mention that the German Marshall Fund, its energy and society program aims to advance transatlantic leadership on scalable and innovative policy and business solutions to achieve a secure, affordable and low-carbon energy future to reduce the risk of climate change and to conserve natural resources, all very important values that are also shared by the Environmental and Energy Study Institute. And the German Marshall Fund was established in 1972 as a nonpartisan, non-profit organization through a gift from Germany as a permanent memorial to the Marshall Plan and the assistance that it provided. And so the German Marshall Fund has had a very, very strong presence in the United States as well as in Europe. And these dialogues in terms of very, very key issues that are important to both sides of the Atlantic have been a very, very important piece of their work over the last few decades. And so this morning's briefing is in terms of thinking about energy infrastructure and those power pathways and how they are being confronted with new challenges, some very, very interesting changes and changes that are happening quite rapidly. And how is it that we should best handle this change from an industry perspective? What does this mean for policy makers and how should we go about it? And so you will be hearing more about the dialogue that has been underway. We are very, very privileged this morning that we are going to hear from the co-chairs of that dialogue. And I want to right now turn to our co-moderator for this morning's briefing, Neil Brown, who is part of this dialogue looking at the transformation of the energy power sector. And what does that mean? What direction shall we go? What are the questions that are being asked? And Neil, I have known for a number of years because of all of the years he has served and been a senior staffer here in the Senate where he worked for many years with Senator Dickelooker and worked on energy security on the staff of the Senate Foreign Relations Committee and was the co-lead for nonproliferation through the Nunn-Looker Global Program. Neil served as a senior advisor to Senator Looker of Indiana and was the director of his energy initiative. And I have to tell you, when Senator Looker left the Senate this last session, I had an email as did many of us who had known Neil and it simply said, well, I'm leaving the Senate. I don't know exactly where I'm going, but I'm going out traveling. And so you'll hear from me at some point. And he did exactly that. Neil is now serving on the board of directors of the Looker Center. He is also senior advisor at Goldwyn Global Strategies and is a non-resident fellow at the German Marshall Fund's Energy Transmission Transition Forum as well as serving with the Looker Institute for Diplomacy in Congress. So at this time, I'm going to turn to Neil who will introduce our speakers this morning. But we're going to handle this in a little bit different way in that Neil will be moderating a discussion with our speakers and he will also be introducing them so that we will have a chance to hear from them in as they have a conversation about some of the key issues that were coming up in the dialogue and how they might be approached. It is a chance to really probe to understand more. And then we will also, after we have that kind of informal discussion, then we will also open it up for Q&A with all of you because that is such an important piece of the programs that we do. Neil? Thank you, Carol. I'm impressed that you read my email. And someday I'll tell you where I went. But it involved a lot of hiking and a little bit of tear gas. You know, I want to thank ESI for co-hosting us. After eight years working down the hall, every day you receive a number of invitations to various events. And I would always open Carol's emails because I knew ESI would bring really top quality people. I don't include myself in that today. But certainly our two discussants who are really real leaders. I am just a word on the German Marshall Fund of the United States Energy Transition Forum. There's a lot of energy activities in Washington and around the U.S. And I was really drawn to the ETF after leaving the Senate because they recognize that the current path we're on isn't working. We see incremental change, but it's really not sufficient for the security concerns we face, for the environmental concerns we face. And as I really learned yesterday within the power sector for our economic concerns in terms of the rate models that we've become accustomed to throughout this country and in Europe. And so the Energy Transition Forum really operates off two premises. One is that the energy world is increasingly complex. That may seem obvious, but when you really dig into what that complexity is in terms of the players involved, the economics involved, the time spans involved, it's something that is a challenge for anybody. To deal with, let alone when you're sitting in offices around here trying to deal with different constituent issues every day and different interest groups that appear and bring in their issues.  You have to think through the entire range of implications. And when you push the lever here then something up over there is going to pop up that you have to deal with. The second premise is that in this environment the solutions will take very diverse coalitions. I'm not just talking about political coalitions to move a particular policy proposal. I'm talking about inclusion of a number of players, of industry players, civil society players that are directly impacting how the system is going to hold up in terms of reliability, in terms of sustainability, in terms of cost. And so yesterday I was pleased to join a group of really experts from both sides of the Atlantic coming from these diverse pieces led by our distinguished two chairman here. And some of them are in the room and so I invite them to participate in the discussion at any point. Certainly correct me when I overstep. Let me introduce you. I think you all have a biography of our two speakers. So I just want to make a couple highlights. First is Daniel Dobany who I want you all to help me welcome to the Hill because this is his first time here. And I guess with what you usually see in the news about the Hill I'm impressed that you wanted to come. So thank you very much for coming. Thank you. Daniel has a background training as an engineer but has also led for decades private sector concerns on energy, particularly energy transmission in Europe building up one company to eventually be the fifth largest TSO in Europe. And he also is the first leader of, correct me if I say the name wrong, the European network of transmission systems operators for electricity. So now if you think that dealing with states is difficult, U.S. states try 41 TSOs in 30 sovereign countries. 34 sovereign countries. Well I forget about some of them. They all blend together the further east you go. Thank you for joining us today. I wanted to point out that in your honor because this is the first time you're on the Hill that the Senate leadership canceled the resolution on military strike in Syria and instead is dealing with an energy efficiency bill specifically for your interests. Now Chairman Wellinghoff, people in Washington know him very well. There are a few people who are as influential in the power system in the entire country. So I want to just say two things that I've learned about him. One is that he's not afraid to get his hands dirty. When he in his previous position in Nevada wrote RPS that I think is very well regarded among advocates of renewables. But when he took over a chairmanship of FERC, there's a couple ways to do that sort of position. One is to kind of do what your predecessors have done and kind of maintain the status quo, move with inertia. But he decided that he would take on some very big issues. Integration of renewables in wholesale markets, aggressive demand response mechanisms, infrastructure efficiency. We usually think about efficiency in your washing machines and these sorts of appliances on the demand side. But he's looking at the entire network and infrastructure in it. The second thing I would say about Chairman Wellinghoff is that he's extremely courageous because he essentially at this point has a free pass from the hill but he voluntarily chose to come back up to this room. So we thank you for that. I don't want to talk too much. I want you two to talk together. Let me just start out with a question if I can and ask you both to respond and to respond to each other. If you read a energy bill coming out of Congress, granted we don't do that many of these days, but if you read one it tends to look a little bit like here's a title for solar and for wind and for coal and for natural gas and for batteries, for vehicles, and basically it's a very siloed approach. Let's take this technology we like. Let's push it for various reasons and very good reasons by and large. But that's not sufficient. If we think about efficiency, we want to push efficiency, one of the themes of our discussion yesterday was you really need to think about what that does to how rates are determined as just one example. So I wonder if you think about our audience today and online, what would be for each of you the couple top systemic challenges that we face when it comes to the electric grid? And feel free to pose solutions too if you'd like. Thank you. I first want to thank you for that introduction, although on the courage part I knew I was going to be on this side of the table so it's a lot easier to come up today than it is sometimes, although I do enjoy providing Congress with the information when they're when they do request it and don't mind that. And I first also want to thank EESI for hosting this, a great organization that puts on tremendous informational programs for Congress and it really is an organization that I appreciate very much because it makes our job easier of helping to educate the Hill about some of the critical issues that we do. And I also want to thank the German Marshall Fund for the opportunity that they've provided to FERC and to me to be able to interact with our European counterparts which is a very important undertaking because we're learning a lot. I learned a lot yesterday from Daniel in the workshop that we were in and we'll continue to do so because I think we have a lot to learn from each other. But with respect to your specific question and those systemic issues that we really need to look at, first I think it is important for us to look at the grid as a system. The grid really grew up as a very disaggregated in this country anyway and I think it's been somewhat different in Europe and I'll let Danielle talk to that but the grid in this country did grow up as a very disparate collection of isolated pockets where you had a load in New York and there were growing up around it a number of resources, traditional central station generators whether it be coal or gas or a little later on nuclear really started out with hydro power actually in the New York area. But in each different community they had those resources grow up to serve those communities and then the communities decided okay we want to start interconnecting and exchanging with our neighbors so they put in sort of weak ties between each one of their neighboring entities and then you know this grew up a little bit more and a little bit more and we finally you know knitted together the grid that we had but it really wasn't planned as an overall integrated system. So we have to look at it from that standpoint of how you know it's early roots grew up whereas today we have a much different situation and I compared and contrasted to the natural gas system. Natural gas system in this country grew up much differently whereas in natural gas we had one area of primary resource back in the 30s and 40s and that was the Permian Basin in the Oklahoma, Texas fines for natural gas. We had tremendous amounts of gas in one very specific location and we had a need for the ability to distribute that gas all over the United States and so as a result Congress decided that they empowered FERC with the authority to actually cite natural gas transmission lines and permit those lines and so we were the sole authority to determine how those lines got built and oversaw those lines. Unlike transmission lines were today still today FERC has no citing authority or it's actually very limited under one provision of 2005 Energy Policy Act in very specific narrow circumstances determined by the Department of Energy in congested corridors that are very few and far between but ultimately very little citing authority that is primarily still retained by the state. So very interesting contrast there between you know how we got a natural gas very robust and very complete networked natural gas pipeline system in this country that virtually can get natural gas from Louisiana to Montana and from the Canadian border to Arizona at a price that's all very uniform unlike our system of electricity in the electric grid where we have prices that vary by a factor of two or three 150 miles away from each other in places in this country based upon congestion based upon the inability to move power efficiently. So from a systemic standpoint you know one thing that I look at is you know how we can make the grid more efficient more efficient from a standpoint that we can ensure that prices can be more uniform throughout the country and we can deliver lower prices to those places in the country that now have higher priced electricity through providing more efficient grid system overall that's that's one systemic issue that I think is is is probably the largest one the most critical one. A second one is is just like the natural gas situation that we had in the 30s and 40s where we had natural gas in one location of course that's change now we now have natural gas almost everywhere we have with shale gas we have natural gas shale gas in in pennsylvania in new york and ohio i heard the other day there's a huge shale plane or georgia there's a huge shale plane california there's you know there's there's natural gas everywhere so so from a transportation and resource development standpoint that now has changed but from the standpoint of electricity and electricity resource deliverability we now have a different situation where there are emerging technologies that is wind and and wind really isn't that much emerging it's becoming very mainstream and solar and certainly central plant solar is being developed and the cost of those two resources is falling with the advancements in technology but the highest quality of those resources are located largely in one one one area of the country wind mean primarily the the highest quality wind is in the middle portion of the country midwest from the dakotas all the way down through texas and that strip of the country there's a tremendous amount of wind and some over in a little bit farther west in montana wyoming and down in new mexico as well but that wind area again can be developed very economically but the problem is there's not a lot of people there or at least that's not where the majority the population is the majority population this country of course is on the two coasts so you have to figure out how you can deliver that very low cost effective resource to those people while you need transmission to do that and so we're looking now then like we looked at natural gas back in the 30s at a situation with electric resources where we have it all located in a in a fairly narrow area and it needs to be distributed across the country to provide lower cost more affordable energy and of course solar it's the highest resources in the southwest area in in my state nevada in arizona southern california and those areas and again how to how can you develop it and then deliver it to the portions of the country so you know that's another challenge is just is stemically is to is to look at the changing grid and then the third systemic challenge i see is a very interesting one just for this allocation standpoint and a standpoint of of how you finance new transmission projects and there's actually two components to this systemic issue one component is the fact that we're seeing many many more people moving towards distributed generation you're seeing lots of people who are very interested in putting in solar pv solar photovoltaic systems large installations in california large installations in arizona and other areas in southwest and there's even areas where there are state incentives outside of the southwest new jersey is a one of the leading states in solar pv for example and to the extent that we have people that are interested in and increasing the amount of distributed generation that lowers the need for these long distance high voltage transmission lines to move power across different parts of the country and so that really reduces the the push to to move for a more networked grid to get these economical resources of wind out of the midwest i talked about and to make the grid more efficient from a standpoint of moving power from one place to another and the second part of that that also is is disrupting to some degree the push to and the impetus for a bigger stronger grid is the fact that our load growth is decreasing or is actually declining the rate of growth is declining it's not going negative yet but it's it's flattening out in essence we're not seeing the type of load growth that i used to see in nevada back in the 70s and 80s where nevada's load growth was growing at 4 to 5 percent i mean that was you know that's a fantastic growth of course it's nothing like the chinese that are growing it you know we're growing growing at 10 to 12 percent now they're only growing at 7 percent but um but we're growing at virtually 1 percent or less and and projected by eia to grow it at 1 percent uh or less in this country so again you know that so it takes off sort of the impetus for you know building this bigger stronger grid that i talk about um so um you know it really is going to be a huge challenge systemically to determine how to make the investments properly and how to do them in the way that we don't have stranded costs for those investments and to still ensure that we can have the most efficient system possible to deliver low-cost reliable resources energy services in essence to all of our consumers maybe uh everything you said by the way is very close to to what what could be said about europe i will i will highlight maybe some of the differences uh or maybe not differences but different orientations first of all the way the the the power system in europe uh grew and is like it is today is very close to what you said is that you you go back to where you had coal in some locations hydro and then the industry just well was close to that and close to the industry you you could found the first large cities so the system is the same they grow from small locations that were driven by mostly geographical resources and then one of the advantage of electricity is that when when you interconnect two small system you share reserve so there is a win-win situation immediately and this is the way the reason why in europe you saw the interconnection growing pretty fast in the beginning you had a core countries a core number of countries where the interconnection was was sufficiently significant that the the uh incumbent companies decided to even get closer in terms of exchange of of reserve how they do balancing and um i think it's not uh just uh like that that the first association of of transmission and generation in that time operators in europe appeared two years before uh the signing of the treaty creating europe because once you interconnect to power system you oblige to talk to each other because you become of course better cheaper but you are interdependent now if if i position myself in in the middle of the 90s europe decided to move to the next step a fully integrated electricity and gas market and to do so a first directive equivalent of a bill was voted and and progressively translated into national law this objective was exactly to decrease the price you have to put yourself back in the 90s there were sufficient over capacity in generation transmission that by doing this you would expect a decrease in wholesale price and this was also the case but then the idea to move europe towards carbon neutral uh area of of the world induced what would become a game changer and this game changer is not as strong in the us for the time being compared to to europe the game changer was to decide in 2007 that we would have globally for all member states 20 percent of the whole energy consumption that would be delivered by renewable energy sources so when you translate that for electricity it means that roughly by 2020 for all member states of europe we would need something around 33 to 35 percent of renewable energy sources and like it was said yesterday in our dialogue if you would have asked engineers uh of the power industry in europe is it feasible to have 15 percent or 20 percent of renewable energy sources in the network the answer would have been no the fact is that it is it's not all over europe yet but in in some places of europe like in one of the four area in germany we are already above this percentage of renewables so this triggers another phenomenon is that instead of only increasing transmission capacity to increase or to improve the working of the market because the more capacity you have that was your point the more capacity you have between areas the more you can trade you can exchange now the question is how can we increase transmission capacity fast enough to pace with the fact that unfortunately wind is blowing where the industry is not located most of the case and is the same for sun so so we are we are back in a situation where we need a lot of transmission capacity in order to benefit from the fact that you have a lot of wind in the northern part of europe and especially in the northern sea and the Baltic sea and you have a lot of sun in the southern part of europe so we have there a systematic not only problem because we we cannot like that increase transmission capacity i understood from my different trips to the states that they build anything anywhere anytime is is common to the us is common to europe and we are no more in the situation of the early 20s and 30s where it was not difficult to show that if you would interconnect to small area the reliability would improve the reliability in the u.s the reliability in in europe is such that difficult to convince inhabitants that building new transmission lines will do something good for them because it will not change the the reliability so we are we are confronted with that situation and it has significant impacts on on the way the market is is working another element that shows how important it is to look at the whole system and that was your question is that for example and and we can talk hours about that but for example the fact that we have such an important share of renewables in some places of europe and given the fact that we created common markets this means that between for example germany belgium luxembourg netherlands and france we couple the market this means that you have when there is no constraints for exchanging electricity between these countries you have the same price wholesale price for the same hour all over the place you will have two different prices if you cannot move enough energy as as the traders would like to see happening between two countries the consequence of that is that because you have a lot of renewables in the northern part and and mostly in germany you you and this wind and sun is is zero marginal price of course it subsidized but i will i will just look at the part on the fact that it's a zero marginal cost it drives down the the the the wholesale price because it comes of course first in the married order it receives also by law priority and simultaneously the shale gas in the us has been translated in europe in cold prices that have been decreasing systematically for the last two years just to give you an idea cold price in 2011 was something around 125 per ton i think a year later it was 90 okay if you add to that in europe that the price for carbon decreased simultaneously for other reasons from something around 13 i think euro to uh seven six even four you had a strange situation that the more you had renewables and the more you had shale gas in europe less gas became interesting so today gas units are just not running and what are we doing we we run coal plants so it shows how important the the system is because it's not only the european system here it's it's what's happening in the states and what's happening in europe and the two together create some strange situation and um like you were saying john is that the the the second biggest change to my opinion is the fact that we're moving and i know yesterday we could see that there was not really a 100 agreement among among us but we are moving to to to a more hybrid power system we we have contemplated a fantastic success during the last century because i think that we all should agree it's not because i'm an engineer from the power business i'm saying that although maybe a little bit uh we have to recognize that the power system is one of the most beautiful human invention and that it works without major glitch for more than 100 years there are not that many things that human have invented with such a result but it has been driven by several i would say pillars uh one of them is the the merit order this means that you you you you start power plants based on the fact that they are more and more expensive based on the increasing demand uh unfortunately with with zero marginal price energy a viable nature the merit order doesn't work anymore so this is one of the pillar that is gone a second one is that well even if you would have decided to build a power plant a little bit too early compared to your business plan you knew that well demand would grow it would always grow it's been growing for the last century it doesn't grow anymore third pillar the biggest system the biggest power plant the cheapest it would become for the customer we've been living in that situation till i would say mid of the nineties this pillar is gone too because you the advantage of having purely centralized large units because of this inroad from cogeneration units from local pvs that someday don't ask me when we'll we'll have grid parity we'll do not they will not need any subsidy anymore will wind also it gets closer and closer so the third pillar is gone too and and now and i see that is it in bloomberg is it in different newspapers in the states in europe the basic fundamental of the business model of generating companies has gone it's not been replaced by anything else and there again we are facing a systematic issue is that how can we solve that knowing that by definition because we didn't talk about the major part but i'm sure we'll talk about it because i know that you are very care about them the customers the customers they want only cheap energy of course cheaper possible especially those who are in competition worldwide so so we have a lot of constraints around us and the whole system is is is now shaking and we're moving towards hybrid systems thousands and thousands of small generators at home in small companies in large companies some big units a lot of winds and this is a this is this is a mutation it's not only an evolution it's a real mutation the only problem is that we cannot stop the system for the weekend to do an upgrade it's like it's like having several airplanes taking off at the same time from different airports and we are expected to land in the same airplane and passengers didn't notice anything pretty hard to do you ended with with a thought on on customers that's something that we talked a lot about yesterday and um one of the themes seemed to be that customers are have traditionally been treated as kind of a one-way street i mean i think somebody used an example of customers sometimes don't even have names they're just sort of called subscribers or you know they're they're the recipients of power they're not active players but we're seeing something very different now chairman could you talk a little bit about what it means to make customers to put customers first in the electric system how we can do it what the potential is and what what are the lessons that you would you would share with uh with danielle as he goes back well i think customers have taken on a whole new um um level of respect i think from the from the electric industry certainly uh at the point that the demands have started to go down the people uh in the industry have recognized that you know customers can make choices and customers can do things that actually will affect the industry dramatically they're not just a statistic a meter or a rate pair out there uh but customers you know desire services i mean they really want energy services no no customer really wants to buy electrons no one in the room here really wants to have a whole package of electron sitting in your house what you want is you want you know a cold beer and a hot shower basically i mean you want you you want to have you know those types of services that provide you the comforts that you desire and the commercial businesses and the industries want those services that provide those end uses that can allow them to continue to carry on their businesses profitably uh and and make uh you know make their way in the world so ultimately you need to have affordable energy services and they have to be also reliable well it's it's changing dramatically now how they can be delivered as we talked a little bit about uh the sort of revolution in the distributed energy side of things things are becoming much much more cost effective as danielle said it's no longer a matter of economies of scale you can conceive of uh situations where there is grid parity with uh solar photovoltaic systems for example and in places in this country such as hawaii of course with very high rates and very good solar insulation you've got virtually grid parity with respect to putting in solar vote uh solar photovoltaic systems and that you know will happen in other parts of the country where we have higher levels of solar insulation uh california arizona nevada the southwest as as rates go up and prices for solar uh systems come down that's going to continue uh and of course we do have a tremendous amount of natural gas in this country and natural gas is a fuel that can be used at a distributed level as well with code generation and and small micro turbines and fuel cells we're starting to see fuel cells that in every five years are going to be just there in five years that we've seen for the last 20 years that you know that they're going to maybe maybe get there uh just to some point in time so so customers now want to make choices and have control uh much more than they did in the past and other things that are kind of intervening or things like hurricane sandy people you know understand now that gee maybe i shouldn't be depending upon those lines that are you know going down my street maybe i need to ensure that you know when something happens i can generate power for my own house or business in some way and so uh they want that control to be more localized in addition consumers now have the ability through communications and control to interact with the grid they can actually do things that allow them to control their energy costs and their energy prices in ways that they never could before and act as a two-way vehicle between the grid they can act as a grid asset and in fact we have in the mid-atlantic area here our our our grid operator is called PJM which stands for historically pennsylvania jersey maryland but it goes much beyond those states it goes into into uh delaware and dc and virginia and ohio and it goes all the way to chicago and is the grid operator controls the grid for that whole area for wholesale uh grid prices and the wholesale market and in that wholesale market they actually have under FERC authority and FERC approved tariffs tariffs that allow consumers to bid in to that grid to provide capacity they can do that on a three-year forward capacity basis they can bid in what they call demand response which is varying your usage during the day at times that the grid operator determines is appropriate to help the grid be stabilized and they can also bid in energy efficiency which is basically lowering the overall usage as well and they can get paid for it they can also bid in demand response for energy and they can bid in demand response for ancillary services which is a balancing service for the grid as well so there's a whole array of tariffs of of actual on the book items that can allow consumers in that pgm area to actually bid in their variances of their uses in various ways of their end use in their building in their commercial facility in their residential facility to help them control their costs because they actually get payments back from pgm and in fact it goes all the way to us having this discussion last night with a group I was meeting with a gentleman who was developing a new electric car electric vehicle and pgm now has the ability to actually have electric car batteries when they're charging to be used when they're plugged in to the grid to be used to provide regulation service and those automobiles can actually get paid regulation service payments seven to ten dollars a day to in fact provide that regulation service while the car is actually charging so we have a much different world where consumers now are actually interactive can be interactive parts of the grid now that's not everywhere in this country that's only where we have organized markets and there's seven organized wholesale markets in the country mostly in the east northeast Texas in California there's not an organized market in the southeast or in the rest of the west outside of California but that's changing and consumers are understanding that there's value to those organized markets and that value in part is allowing consumers to be part of the system to actually use their loads in ways that can help the system and help them recover some costs as well just maybe to add to a few points of what you said John is that just to give you a sense of the speed of change I think five years ago four five years ago nobody would have talked about capacity markets nobody neither on generation nor on the demand side with one exception of course large industries large industries who can regulate a little bit their demand or stop producing if it doesn't take longer than a few tens or whatever number of minutes with this exception nobody would have talked about that and then suddenly again triggered by the evolution of the power system the energy mix suddenly we needed capacity and in Europe capacity is today a very hot debate about how to organize capacity markets for generation because of course you can organize that different ways and you may be sure that if you are not trying to give a direction each member state will do it differently that's the way human usually have creativity the problem is that if you were doing that in a fully integrated market like we will start in Europe in 2014-15 it can create major disturbances so capacity market is a new kid on the block but we are talking about it as if it exists for the last maybe not century but more than that but it shows how fast it goes the same holds true for capacity market but this time with as producer the demand side and and there is for me and I'm coming to the States quite often there is a major change in in and I'm sure you are you are at the base of that because customers now have the possibility to to bid in the market providing they have the tools providing that business case is the right one of course but but it shows that the the the prosumer approach both being consumer and producer is something that is slowly but surely is going to change completely again the way the power system is is managed we we have we are used to to handle the power system from generation very high voltage going down to your home already today for example in my home country in Belgium at certain moment of the time a distribution company is injecting in the transmission network and and a few hours later we'll be consuming we'll be taking energy out of the network this is a revolution honestly nobody developed the the network ever to be in that situation and again the speed of change is in my view and we agree on that is really exponential now because as soon as you reach at the level of residential consumers then you have millions of people that may or may not up to them decide to to play a role in it and we have again to cope with changing the system at the right time and and this is where you are coming in in the play because very often these changes are only possible if the legislation and the regulation allows it or makes it easy or easier but I'm sure that in in in the US like in Europe in some countries it's pretty hard to be able to to allow that because the regulation the tariff structure has not been made for that and and and this is where I think one of the tension and you pointed out what the system point of view is of concern for me is that the speed of change driven by technology driven by the fact that the consumer is getting more and more informed and wants to do something is going so fast that that legislation most of the time will be trailing the reality and if we want to achieve modern as much as possible co2 neutral power system we have to go fast and and and I'm not sure that it's possible to to to get the whole regulation and legislation moving fast enough that that's a concern I have in just a couple minutes I'd like to turn it over for audience questions and discussion but I want to ask you both to respond to one other thing because you've you've thoroughly confused me I thought I was I mean I was doing really well after yesterday I thought I thought that you had you'd educated me but you seem to be talking about two pretty different things and and I'm a little unsure how to integrate them on the one hand you've both mentioned the need in the U.S. predominantly in the Midwest and mountain states in Europe in northern Europe to pull large amounts of renewable energy to integrate it into the grid you're really what you're doing is talking about a a much more integrated grid than we have today a grid that can move power across jurisdictions very quickly my guess is that we probably you would probably suggest some regulatory changes to enable that but on the other hand you're also talking about the powerful consumer you're talking about the just you're talking about distributed generation you know you know if I you know were to go out and and buy a what is it Nissan Leaf or whatever it is that suddenly I can be my own little power plant driving around and selling when I'm when I'm parked and having my latte so I mean I guess I'm it seems like these are very different things I mean it seems like you're saying well let's have let's have a lot of autonomy but also let's have a lot of integration and you know I'm sort of perplexed by this because I need to know where to place my bets you know when I when I go for online trading this afternoon or whatever it is I'm going to do so help me figure that out you know our is this is the dichotomy that I see wrong nice how do we move forward well I I think they potentially can be complimentary however the the the tension and the fear is that will over invest in one of the other and that that is the concern that I have and I'm not sure how to make those decisions I hope that the markets because I do think that the market is the most efficient arbiter of making those decisions rather than you know certainly FERC shouldn't be making those decisions I think FERC should allow allow the markets to do that and we generally try to do that with respect to setting up structures so that both distributed resources and central resources can all play into the overall grid system we would like to see both types of resources participate as part of that market and hopefully do that with as even a hand as possible not leaning one way or the other I think that's very important but but ultimately you know decisions are going to have to be made as to capital investment in either you know overall large transmission networks to deliver some of these centrally located lower cost renewable resources to loads and or to ensure that we have a grid that's adequate to support the multitude of distributed resources that consumers will choose to put in based upon their own market choices of putting in pvs or buying electric vehicles or putting in co-gen and and fuel cells etc and so how that all will play out and how we optimize those those market decisions is not going to be up to FERC and it's going to be one that hopefully we can set a structure that allows it to all be done fairly openly and transparently in the best most efficient way and if I had the answer I would not be at the table here I would be on my computer you know betting certain companies against others but but but but I don't have the answer as to you know are we going to be predominantly a distributed energy system in this country 10 or 15 years from now or are we going to be you know a much more networked central central system based upon lower lower cost resources that are brought from from long distances I mean I'm not sure which which is going to be the ultimate one and I think there will be certainly a mix of both but I can't tell you the proportions of the mix and hopefully we won't wrongly invest in one to find out that that's not needed anymore because everybody's put in solar pv and you know we built all these big transmission lines that we don't need to use and invest invested the society's money you know unwisely we need to figure out how to make those investments wisely maybe maybe trying to to to bring a little bit the two together but I have I have of course to to say first that what I'm going to say is only valid as long as as the holy grail of the power system is not is not available meaning storage so as long as storage is not available what I'm saying is right otherwise forget about it so as long as we have no storage you still will have necessity to to balance your grid because electricity is a product where unfortunately you have to produce exactly what is consumed at the same moment if not you may have some major problems so the future of when I when I'm looking to Europe you will need very strong very high voltage network to bring wind energy solar energy to the location where you have demand because demand in Europe even more than in us demand doesn't move facilities are where they are the industries where there are the people are where they are so so you you will need that to bring that thereby given the size of Europe if you want to benefit from the fact that it's not going to be windy all over Europe at the same time or sunny all over the same time the more you can benefit from the fact that you have a huge a huge system you can you can move very quickly from one side to the other and it decrease the cost of course of balancing this is one of the reasons also why the more you have transmission capacity between countries between area the better it is especially in a world where you have a lot of renewables now at the same time you will have much more decentralized generation and and we have seen it the last 20 years in Europe and in the States is the same and this process is not stopping it's going on because advantages if you have a cogeneration unit you can benefit from both electricity produced and the heat so so it's beneficial economically but also for the environment but these two work together nicely you need of course much more it much more electronic much more data whatever but this this is only technology the holy grail of the system is storage the day you have storage as a reasonable equipment then then the world changes again and and it's impossible to tell you where we should go and and this is one of the major problem of this industry is that you take a decision today and in terms of asset infrastructure you will have to live with during the next 20 to 50 60 years depending on the asset so any decision we take it means that two three generations will have to live with and in the fast changing environment in which we are today it's easy when I read the media talking in Europe it's very easy to criticize the the the governments and the energy ministers and the European Commission or they should have known for god's sake how could you know could we know that shale gas would drive the cold price down three years ago nobody would think about that so so you have a whole industry that is moving and at the same time and this is not part of the gene of this industry which was a an industry where you had a business case and most probably this business case would be realized during the next 20 years and you are now in a situation or you come up with a business case the only thing you know is that it's wrong maybe in six months two years and and this makes the job pretty difficult not only for the industry the investors because they would like to have some reasonable return for that but also for policymakers and this is where if you allow me on your first question you were saying when we look at the bill coming out we talk about PV etc this is where I think a major change needs to be done is that you have to look at the system as a whole and and try to to to fix and take the least dangerous approach dangerous in the sense lost investments so in other words keep my cash under the mattress and just add to that just one thing and I think because Dan just made a great point I mean we'd have to look at the whole system and make it as flexible as possible just imagine if you were told you had to make the decision between an iPhone and a Samsung and you had to keep that device for the next 20 years you know I mean it's it's you know you'd say you're crazy but that's really what we're doing in the electric industry it's exactly what we're doing so yeah and now we can feel totally reassured that we're all gonna go crazy right but I'm so glad that storage came up that was an issue that I was hoping that you would also address since it is a game changer and and I I think there are all sorts of questions now that that we've got that we want to begin to address and if you could identify yourself when you ask your question let's start way in the back Angie I wanted to first of all thank Danielle from coming clear from Europe to share his expertise and his knowledge and best practices with us here today thank you for that and for chairman Willinghoff on behalf of our company a proactive energy user in the US and striving towards 100% renewable aspirational goal and a lot of energy I thank you for the things your commission and you have done inspiring customers to do demand response in the markets and participate in DG and allowing us to do solar on a rooftops many things like that my question to you is like you said choice is very important to customers it allows us freedom to innovate create new things my question to you is ISOs and RTOs are wonderful and they serve a wonderful purpose and so do the states that we're involved in but due to the piece piecemeal approach so much of the ISOs and RTOs are totally different in their offerings and I would like to see some collaboration or some kind of information exchange among these how we can get these best practices instituted among all all of these organizations for consistency and growth of Korean technology across the country as well as states we might have to go to one state and say great let's do this the next state we go to we don't have those choices so how do we get together your advice on collaborating and sharing these positive things to move forward thank you that's a great question Angie and it really is a great challenge for a company like Walmart or any company that has facilities and assets all across this country that has to deal with you know 50 different state regulatory entities and then the different RTOs that are under our jurisdiction and the way those RTOs are set up and as I mentioned there's seven of them six of which are under our jurisdiction one is under the jurisdiction of Texas Public Utilities Commission in Texas is those are all voluntary organizations that then through their stakeholders in the organizations sort of decide upon their own rules and and structures although they they they put those rules in a framework that FERC has has has put in place in in rulemaking so there is some structure to it but they're giving a lot of flexibility and and latitude and like Angie from Walmart indicated that they are they are different they do have different rules and so we're trying to to make them bring together the best practices as much as possible in fact there is an RTO ISO council that meets on a periodic basis so the executives of those RTOs do meet but even those executives and the management of the RTOs can't in essence force their stakeholders to enact or adopt a particular uniform rule so it is a matter of a process it's a very painful and slow process I wish there was a better way but you know because we've we do have to bring in all the viewpoints that have interests in those RTOs it continues to be to be slow and interesting that I found out that Europe has a code and maybe Daniel you might want to talk to talk about that where they seem to be quite more advanced than we are trying to get this more uniform throughout a jurisdiction and and their market practices and so you might want to talk to how you did that well in fact that I mentioned that in in in 96 with the first directive the idea was to create a single electricity market we are 2013 so it took some time but but we agreed on the market model the same for all Europe and and and also the the countries that are not part of of the European Union but that are interconnected and this market model is is is treating is dealing with all yearly monthly daily intraday intraday fundamental for renewable and the question of course is how do you implement that because because it doesn't work if if you implemented one country each year you you need to create a single market preferably maybe not in a single day but at least sufficient that that it delivers the added value for for the consumers and so we've the third package in fact with different documents among which the third directive the commission came out the European Commission came out with the idea of of network codes these network codes are not to be compared with with the codes with which you are familiar in the U.S. how to run a power system that are put forward by NERC these are dealing not only with that part but also how the market is going to work and the specificity of these network codes is is that in in the European legislation the it's a whole process that had been described with consultation from all stakeholders both at the level of the association of the of the 41 TSOs who have the with the the great honorous responsibility to draft these documents based on the framework guideline and the framework guideline is written by the association of regulators it's not like FERC but they work together so so we have a guideline then our experts are writing down the codes been discussed with the stakeholders then then the association of regulators of Europe all their own consultation then it goes to the European Commission and finally it's put forward in what is called the cometology process to representative of which member state and when it's voted there the next day it enters into force in all concerned member states and I think that the driver behind that more even than the internal electricity market is the fact that we had this target of 20 percent renewable by 2020 because in order to make it possible you need to be able to trade electricity in intraday as close as possible to real time depending on the weather conditions and if you do so you cannot go from one the one country to the other with different law different regulations you have to harmonize that you have to make them compatible and I think this is this is a real fundamental building block of a good working internal electricity market okay we'll go here first and then we'll go back go ahead some issues thank you in the US we're struggling with a paradox as I see it at the national level it's pretty clear that reliability is desirable and then integrating the grid further and proves reliability and that it's the lowest cost solution overall if you look at the nation as a whole but we're not a nation as a whole we're individual interests very parochial and you see that in the southeast for example there's been a big concern about letting the low cost energy out of the southeast and flow somewhere else and then having to pay more for it with the placement power in the southeast the chairman pointed to the fact that in some places you can be 150 miles apart and pay three times the power well the guy who's paying three times less sometimes wants to keep it that way we have the intermediate states that are moving power from one state to the other who don't necessarily see the benefits of putting in transmission in their states to flow due to the environmental concerns with transmission then we even have had the situation a few years back where 10 or so of the governors in the northeast and the mid-atlantic states with the high cost states wrote in and said we don't want a subsidized national grid to bring us power in from cheaper places we want to build it ourselves because we think we make lots of jobs and it's good for our local economies to build high cost power locally then get low cost power from far so I would imagine those same forces were in Europe and even stronger and yet from what I'm hearing it sounds like you've overcome those so my question is what's different about Europe how did you overcome those parochial concerns or maybe you know to what extent have you overcome them and if so what was the driving factor that you all could pull together and rally around I wouldn't say the issue is solved but at least you are working on it and and and all member states agreed that they need to do something about it and this is already a major step forward I will answer your question in two step the first step is that you were talking about difficulty sometimes to build transmission lines because country a for whatever reason doesn't want to get electricity for country b or doesn't want to be obliged to sell electricity to country b because their rate would be higher than if they remain the same issue you have in Europe so Europe identified the issue and they recently in fact last year voted a new directive where they created the concept of project of common interest so so it's in the making it's really it started last year and we will see what it delivers and and they did two things first the project of common interest they need to deliver they need to be analyzed in terms of welfare for all concerned countries so so a country whatever z for example will not be able to say I don't want to have it because I don't see immediate benefit so so it it goes cross border first thing and the regulators will play a role in that in that decision of course a commission the regulators the second thing is that we absolutely need to accelerate the permitting issue it's it's it we are in a situation where you can build very quickly as I'm sure people would like to see it even more quickly you can build very quickly wind farms somewhere onshore and it takes years before you have enough transmission capacity so in this package also they put results obligation on the member states so that they will deliver a yes or no for permitting in a given number of years in fact three years that's fundamental now I want to see it working okay but but the steps have been taken to tackle these two major issues but but of course proof lies in eating the pudding and and we will see it in the next three to four years but it's recognized as an issue now what was the driver the driver is indeed the fact that we have this 20 target about renewables because the more you have wind and sun the more the systems are interconnected there is not a single member state in Europe that today is able to open the interconnections with neighboring countries sometimes they believe they can do it but it's not true anymore and this is very positive also for the integration of Europe because we are we rely on each other it's the only way to go forward back here first I'm interested I'm interested if you could please discuss the types of risks that in this country as opposed to Europe would come with transcontinental translate transmission of electric power to energy security the types of risks that you'd see the types of risk well I guess a non-security risk the biggest risk I see is financial I mean again on the issue of a stranded stranded asset if we put assets in and determine that the need really wasn't there for the the capacity that's going to be utilizing that line over a period of 30 40 50 years but from a from a if you're talking about from a physical and cybersecurity perspective certainly you know adding any infrastructure adds additional potential cyber nodes and additional potential points of entry to to people that would try to do us harm from a physical standpoint I do think that we if we do start adding large long distance lines in this country we do need to start thinking about having regional disconnects where we can isolate regions of the country so that if in fact there are outages in certain areas that may be because of security risks either natural disasters or actual physical actions against those areas of infrastructure by by certain actors and we need to ensure that the grid can be stabilized and right now we have three interconnects in this country we have the eastern interconnect and the western interconnect in Texas and those three interconnects I think are vulnerable from the standpoint that there are a number of nodes that hold them up those nodes are high voltage transmission substations and those substations are vulnerable ultimately so we need to do what we can to minimize those vulnerabilities by ensuring that we can isolate portions of each one of those interconnects as regions through perhaps DC ring buses and and that's something that people have looked into of putting in DC ring buses in certain areas and and we've got some studies at FERC that show how that might be done I know that there were actually studies done in the Midwest as well Midwest ISO looked at that when they were looking at long distance lines going from the Midwest to the east coast so there are physical security issues that certainly have to be dealt with I think the biggest risk is potentially attacks on the system at those at those critical nodes okay here first hello my name is Phillip Brown with the congressional research service here in Washington I wanted to ask you a question about power markets and what I've observed especially in in Europe and within some countries in Europe is that as the percentage of renewable power mostly wind and solar has increased it's starting to result now in a discussion about the right type of power market design that would incentivize all types of power generation capacity and as you mentioned earlier the the merit order based energy only market when you have zero marginal cost renewables being bit into the system is not feasible in a large renewable penetration environment because even at a hundred percent everybody gets paid zero so there it's not going to work over the long term so taking that into consideration what what do you think would be sort of an ideal market design or market structure that would provide the right incentives that would provide that would result in adequate reliability efficient operations from the perspective of consumer prices and and so on so I'd be interested in your perspective on that if I knew it I wouldn't be here I'm afraid I would be in some nice island enjoying sunshine now I think we what we are sure about is that the the tariff structure we've been used for for the last century doesn't fit anymore but not only for generation also for demand we've been used it's in the states the case in many in many states in Europe mostly to have a very part of the fee if a small part of the fee that is a fixed cost and then you pay by the energy you consume unfortunately if I have pvs on my roof I will reduce my energy consumption but I still use the assets when there is no sun so so you need to include some capacity payment the same old through for generation generation power plants will build usually depending on the technology for gas for example to run minimum four thousand hours a year we are entering already today in some part of Europe with with power plants running fifteen hundred hours a day so that goes to closing them down basically so there too you need to to pay capacity that's that famous capacity market and and and I heard that in the states in different location different areas we think about rediscussing this this tariff structure but it's a pretty hard problem to solve because of course once you touch that you touch at the basis of this whole industry but I think we all agree that we need to fix that if I knew how to do it quickly fast I think other would have thought about it before me so so it's a hard problem but but like all these problems it's it's now a tipping point and you cannot avoid tackling it and in Europe people are as in the states discussing this more and more at regulatory level as well as at the at the business level by the way there is no ideal situation unfortunately if I can cut in for just a minute I mean we're talking about consumer choice talking about distributed generation real diversification of of the power portfolio integration some security issues have been brought up which I think are very useful but what about what about the environment I mean I think that we're assuming let's just take consumer choice I think we're assuming that consumers will choose cleaner lower carbon energy but if they actually have the choice they may not choose that they may choose the cheapest source around which you know maybe a more conventional type production so how do you one is that a worry two how do you deal with that in terms of setting the the bounds of the market well certainly in this country I mean it is a worry for me personally but from a policy standpoint or perspective with respect to FERC we're really an economic regulator so as a as an economic regulator we do not incorporate into our market structures things that are not now in federal law and or state law and in fact we've we have recognized though for example in our transmission planning rule order 1000 that as part of that planning that the planners which would include state stakeholders as well as generators and transmission owners and consumers distribution utilities that they need to recognize in transmission planning those aspects of public policy that will impact transmission planning and part of that public policy certainly is the 30 or so renewable portfolio standards in the 30 states and jurisdictions that have passed those types of standards around this country so to the extent that there are those public policies that are now incorporated in federal laws which could be federal emissions requirements in our cleaner act or could be state requirements in a state renewable portfolio standard those are to be recognized in the planning for transmission that FERC has jurisdiction over the bulk power system and incorporated in beyond that I mean there is no currently federal law that imposes any costs on carbon for example and so that isn't incorporated into the aspects of the regulations that we issue from FERC again we are primarily an economic regulator that incorporates in you know those those economic general economic principles and principles and requirements that are currently in law Europe is taken there a different approach where it was decided as I said in 2007 to have clear objectives in terms of not only percentage of renewables but also decrease the amount of CO2 produced by 20 percent and to increase energy efficiency by 20 percent with the exception of the energy efficiency two other objectives are mandatory so they the member states were obliged to translate that in their law so by doing so you still have the choice as a consumer but but whatever is your choice there is a clear evolution towards a more let us say environmental friendly energy mix so so it this this is quite a difference between for many years between between the US and and Europe where there is a more let us say public orientation towards a co2 friendly future but but Germany you said is rapidly increasing it's cold yeah each each each member states may decide to do more than than than what is put forward by the European Union as a whole Germany for for many reasons decided to to quit the the the nuclear power of the energy mix and and to do it in in several steps but fairly aggressively in terms of timing by the way my home country did the same this was triggered of course by the the situation in Japan and and it's also an example of of unforeseen even far away that triggers significant impact in Europe these these policies need of course to be fine-tuned in function of the evolution for example PVs of course have the price of PVs have diminished incredibly I'm sure that the governments who decided to support PVs or wind would have done it in a cheaper way they would have known beforehand that PVs would would decrease in price but they didn't know it so so I think it's easy afterwards to criticize and to say we should have done it better unfortunately the future is unknown it doesn't mean that you cannot improve and and I see that that through the media through political contact there is it understood and and Europe will will take act on it that that's the only thing you can do is improve situation okay we have time for one more question if anyone okay go ahead go ahead so I've got some too but when you were talking about the best thing that you looked in land to research that kind of to make it out of the model way for the populations and it seems like Europe has looked offshore and has to think about clean penetration offshore so just what you can kind of on you know the two thoughts on offshore wind is potentially the US and also I've done it with the government by the way it doesn't play the sighting authority off the transmission offshore but that might be the way we of course are creating that area right and as far as sighting what little sighting authority we do we have we have sighting authority with respect to any hydro systems in this country so it's a hydro kinetic system in the ocean we have sighting authority with respect to that system and then of course from a standpoint of of a certain distance offshore there is the department of the interior that would have sighting authority with respect to any lines that would be necessary for wind I think offshore wind has great potential in this country just a matter of cost right now what I was referring to was ultimately the the least expensive resources from a standpoint of capacity factor and overall cost would be the ones currently onshore but I think definitely in Europe has had some tremendous experience with with offshore wind and they continue to improve the technology and continue to reduce the costs I think there will be in our future a great deal of potential for offshore wind I know the Atlantic wind project is one that we've been looking at for a number of years that I know that has some very large backers Google is one of the backers behind that project and I think there's no question that given the the financing support for those projects that they they are going to move forward okay well and as the bells are ringing I want to thank our speakers very very much and also to thank Neil for moderating with me this this important briefing and I think it really tees up a whole number of issues that we really need to do much more in the way a follow-up in terms of them now thinking about what is the role that needs to be taken by policymakers at the national level and in conjunction with state regulators in terms of dealing with some of the inconsistencies are certainly different policies which therefore are really also creating impediments as we look at the fast changing environment with regard to the grid and with regard to the issues around the increased amount of of distributed generation that we're seeing it to really bring that forward and to solve problems it's going to need all of those different policymakers it looks like to to come together so it's another challenge but it's another big opportunity for all of us to to come together and and look for that so I want to thank you all very much for for coming and being part of this discussion please do help yourself to some of the pastries and coffee it looks like we've got quite a lot over here and and thank you again very very much and hopefully we'll see some of you on Monday at our next briefing which is on short-lived climate pollutants taking a look at hydro fluorocarbons black carbon and methane because they have an outsize impact on climate we're looking at low carbon issues and how they affect things in the power sector so we encourage you to come on Monday for that as well thank you so much


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