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RICHARD SCHMALENSEE:
What I want to do today

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is look ahead and
talk a little bit

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about where the grid's going.

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This is going to
be based largely

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on that future of the electric
grid study that a bunch of us

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did.

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You'll see in the Joskow
paper a fair amount of overlap

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and an awful lot of agreement,
although his emphasis is

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a bit different.

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00:00:50,250 --> 00:00:55,370
So let me start with what
the system looks like now.

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That's a picture of line
losses in transmission

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and distribution.

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That's heat,
basically waste heat.

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And that's gone down
sharply over time.

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It floats around 6-7%.

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These appear to be
in line with line

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losses in other
developed countries,

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if you make allowance
for density.

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They're higher in
Canada and Australia.

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They're lower in
Germany and France

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because it's more
compact countries.

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But you can put us all
more or less on a line.

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Reliability is a little tougher.

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You might ask the
question, is the US system

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more or less reliable
than systems elsewhere?

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And the answer is we
don't know because data

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on reliability and other
aspects of performance

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00:01:43,100 --> 00:01:47,440
are terrible in the US.

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00:01:47,440 --> 00:01:51,070
You might ask why that is?

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I'll suggest an answer.

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And it has to do with the
structure of regulation.

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00:01:56,710 --> 00:02:03,580
If I measure-- if I use
a standard definition

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00:02:03,580 --> 00:02:08,590
of an outage, and I measure how
often my customers don't have

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power, how many
outages, how long

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they last, and you do the same,
and I'm above you in outages,

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people yell at me.

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00:02:18,760 --> 00:02:22,960
If nobody knows,
nobody yells at me.

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These things are just
not measured in the US.

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I mean, they're
measured in some states.

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They're not reported in some
states where they're measured.

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And different definitions are
used all over the country.

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There is now a standard
IEEE definition for outages.

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And it's spreading slowly.

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But even then, it's not
reported in lots of places.

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So we cannot tell if the system
is more or less reliable than

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it was in 1930,
which is bizarre.

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But there's more.

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So I'm going to talk about
most of the terrain we covered

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in the future of the grid.

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We focused on 2030 because
of the speed at which things

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change, the grid in
2030 will be dominated

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by technologies we know today.

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Not necessarily
technologies in widespread

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use, but stuff we know.

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Stuff we don't know,
that's invented tomorrow,

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is unlikely to
penetrate by then.

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So we said, what are the big
challenges and opportunities?

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And these are the
ones we focused on.

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There are a bunch
of new technologies.

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Will they get developed
and used properly?

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There will be more
large-scale wind and solar.

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We'll talk about the
issues that raises.

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There'll be more
electric vehicles.

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How many more, nobody knows.

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But more, and in some
places a fair amount.

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There'll be more distributed
generation, rooftop solar,

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on various kinds of roofs,
and some distributed wind.

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And the system will be more
reliant on communications

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and computation,
which means there'll

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be more of an issue
of cybersecurity

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and an issue of
information privacy.

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People will know every 15
minutes how much electricity

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you're using.

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And you might not want
everybody to know that.

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So to remind you of
some of the constraints,

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I talked last time--

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last Wednesday-- about
the state/federal divide.

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States are important.

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There's not much evidence--
not much appetite after

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the California debacle and
after the Lehman crisis--

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00:04:41,945 --> 00:04:46,880
the whole crisis-- not
much appetite for reform.

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00:04:46,880 --> 00:04:51,290
Very diverse system--
municipal utilities, co-ops,

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00:04:51,290 --> 00:04:54,380
big utilities, little
utilities; vertically

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00:04:54,380 --> 00:04:56,810
integrated in some
places, federally owned

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in other places.

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There's not much
growth expected.

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00:05:02,320 --> 00:05:04,990
7/10 of a percentage
point a year

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00:05:04,990 --> 00:05:10,630
is the standard case
forecast out to 2035.

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And very durable assets.

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00:05:12,430 --> 00:05:14,200
This is actually a number.

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00:05:14,200 --> 00:05:15,160
I had it last year.

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The forecast number has
doubled since last year,

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00:05:17,770 --> 00:05:19,090
but it's still low.

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00:05:22,900 --> 00:05:27,250
Anybody care to guess
what fraction of 2000--

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00:05:27,250 --> 00:05:28,480
what fraction of--

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let's say 2010 capacity
will be retired by 2035?

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00:05:34,360 --> 00:05:35,860
AUDIENCE: 1%.

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RICHARD SCHMALENSEE:
Well, now you're reaching.

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No.

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It's higher than that.

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It's higher.

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00:05:40,660 --> 00:05:42,580
It's almost 7%.

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00:05:42,580 --> 00:05:43,810
Last year, it was 3.5%.

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Last year, the
estimate was 3.5%.

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00:05:45,625 --> 00:05:48,310
The difference is mainly
environmental retirements

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00:05:48,310 --> 00:05:50,710
and really cheap gas.

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00:05:50,710 --> 00:05:53,560
So the notion is, because of
really cheap gas and tighter

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00:05:53,560 --> 00:05:57,700
environmental policy, 7% of
capacity will be retired.

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00:05:57,700 --> 00:06:01,830
That's not a lot of
turnover in 25 years.

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00:06:01,830 --> 00:06:03,670
That's not a lot of turnover.

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00:06:03,670 --> 00:06:07,570
So the generating fleet is going
to look a lot like it does now,

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a lot like it does now.

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00:06:08,800 --> 00:06:09,700
Andrew?

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00:06:09,700 --> 00:06:12,640
AUDIENCE: This is for a base
case assumption, like the--

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00:06:12,640 --> 00:06:13,723
RICHARD SCHMALENSEE: Yeah.

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00:06:13,723 --> 00:06:15,098
AUDIENCE: So it
has no assumption

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00:06:15,098 --> 00:06:17,650
about environmental regulations
or something like that?

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00:06:17,650 --> 00:06:18,650
RICHARD SCHMALENSEE: No.

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00:06:18,650 --> 00:06:20,950
This is EIA, the Energy
Information Administration.

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00:06:20,950 --> 00:06:26,060
And their base case assumes
no change in current policy.

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00:06:26,060 --> 00:06:29,380
So one of the things
that it used to assume--

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00:06:29,380 --> 00:06:30,940
in fact, it does assume--

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00:06:30,940 --> 00:06:34,540
it assumes that current
renewable subsidies,

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00:06:34,540 --> 00:06:35,670
which have--

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00:06:35,670 --> 00:06:38,540
you don't-- laws don't
have infinite lifetimes.

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00:06:38,540 --> 00:06:40,640
The law expires at some point.

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00:06:40,640 --> 00:06:42,740
It assumes that expires.

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00:06:42,740 --> 00:06:45,100
So it'll be a little
light on renewables.

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00:06:45,100 --> 00:06:48,880
They'll run some other
cases-- they're not out yet--

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00:06:48,880 --> 00:06:50,710
assuming more
renewables, assuming

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higher prices and lower prices.

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00:06:52,240 --> 00:06:54,910
But that's the base case.

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00:06:54,910 --> 00:06:56,950
OK, so not much turnover.

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00:06:56,950 --> 00:07:00,040
the argument is--
that we have made--

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is that the grid does have these
challenges and opportunities,

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the turnover is slow.

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00:07:06,440 --> 00:07:08,530
If you want to get
anything done in 2035,

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00:07:08,530 --> 00:07:11,140
you've got to start now.

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A little bit about
the smart grid.

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And it's not a term
I like because it

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00:07:16,360 --> 00:07:19,480
means different things
to different people.

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00:07:19,480 --> 00:07:22,270
And here are four examples.

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This is the National Institute
of Standards and Technologies'

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favorite diagram because--

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and it stresses that
the grid in the future

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00:07:30,430 --> 00:07:33,250
will have this flow
of power, of course--

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but lots of flows of data.

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And why do they
stress that view?

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Because they're doing
this interface standards.

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They're doing standard setting
for all of those flows.

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That's a big deal.

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This is EPRI over here,
the Electric Power Research

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Institute.

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00:07:51,100 --> 00:07:54,580
EPRI's view of the smart grid
has to do with things that go--

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that happen around the user.

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So there's some focus--

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some automation of the
distribution system,

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00:08:02,170 --> 00:08:07,330
and plug-in hybrids, and smart
refrigerators, and rooftop

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00:08:07,330 --> 00:08:07,900
solar.

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They focus on your house.

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This is somebody in nature.

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And in nature, they
focus on microgrids.

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Or in this picture, they
focus on microgrids, which we

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can talk about if you want to.

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00:08:23,260 --> 00:08:25,360
But it's not something
that we think

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is going to be a big deal.

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And this is the Department
of Energy, which

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has it all, which has it all.

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So as the title says, I guess--

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my view is that "smart"
is a means, not an end.

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00:08:40,318 --> 00:08:41,860
You don't care how
smart the grid is.

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What you care is,
what's its performance

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00:08:44,440 --> 00:08:45,970
and what's its cost?

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It will get smarter.

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But that's not the objective.

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That's the means.

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So I went through some of the
challenges and constraints.

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We focused on a bunch
of policy areas.

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So let me talk first
about technology.

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Here I immediately
get out of my depth,

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00:09:05,290 --> 00:09:09,010
but I will do what I can.

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00:09:09,010 --> 00:09:12,670
There's really a lot
of interesting stuff.

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00:09:12,670 --> 00:09:14,620
I'm going to talk about
phasor measurement

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00:09:14,620 --> 00:09:18,520
units in a few minutes.

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00:09:18,520 --> 00:09:22,210
Flexible AC
transmission systems let

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you vary the
characteristics of lines

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so that you can to some
extent control flows.

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00:09:29,710 --> 00:09:32,440
I told you last time that
electric power networks are not

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00:09:32,440 --> 00:09:37,810
really like sort of old-style
telephone systems or water

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00:09:37,810 --> 00:09:38,350
systems.

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00:09:38,350 --> 00:09:40,420
You don't do valves.

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00:09:40,420 --> 00:09:42,310
You can sort of do valves.

200
00:09:42,310 --> 00:09:46,450
New sensor technologies lets
you know the state of the lines.

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00:09:46,450 --> 00:09:49,720
So that on a hot day, you put
less electricity through them

202
00:09:49,720 --> 00:09:51,370
because you can see
they're sagging.

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00:09:51,370 --> 00:09:54,700
And there are a bunch of-- well,
dynamic line rating systems

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00:09:54,700 --> 00:09:58,840
deal with automating the
readings from these sensors.

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00:09:58,840 --> 00:10:02,320
Energy storage, I'll
talk about, and a bunch

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00:10:02,320 --> 00:10:06,070
of other technologies.

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00:10:06,070 --> 00:10:09,730
Farther on down, toward the
customers, the low voltage

208
00:10:09,730 --> 00:10:11,650
stuff, there's a
lot of automation

209
00:10:11,650 --> 00:10:13,900
at the substation
that's possible,

210
00:10:13,900 --> 00:10:20,270
quicker detection of outages,
optimization of-- the Volt/VAR

211
00:10:20,270 --> 00:10:23,330
optimization
controls-- enables you

212
00:10:23,330 --> 00:10:26,450
to control voltage levels,
particularly on long lines,

213
00:10:26,450 --> 00:10:29,630
more accurately.

214
00:10:29,630 --> 00:10:31,910
Conservation voltage
reduction lets

215
00:10:31,910 --> 00:10:35,630
you reduce voltage on the
whole system just a little bit,

216
00:10:35,630 --> 00:10:37,033
to save a lot of energy.

217
00:10:37,033 --> 00:10:38,450
There are places
where the voltage

218
00:10:38,450 --> 00:10:41,750
is above the requirement because
you can't properly control it.

219
00:10:41,750 --> 00:10:44,630
So it ends-- and you
have to keep it above--

220
00:10:44,630 --> 00:10:47,480
you have to keep it within
a certain bound everywhere.

221
00:10:47,480 --> 00:10:51,080
If you can control better,
you can reduce it everywhere.

222
00:10:51,080 --> 00:10:55,880
Automated fault detection
is really quite interesting.

223
00:10:55,880 --> 00:10:59,000
The interesting part is
automatic restoration.

224
00:10:59,000 --> 00:11:01,230
Advanced metering systems
are very important.

225
00:11:01,230 --> 00:11:02,940
And I will talk about those.

226
00:11:02,940 --> 00:11:05,570
And, of course, this
all comes together

227
00:11:05,570 --> 00:11:08,000
where you control the grid.

228
00:11:08,000 --> 00:11:11,600
And I'm going to talk
about particularly using

229
00:11:11,600 --> 00:11:16,910
these meters in a little
while, and right now making

230
00:11:16,910 --> 00:11:19,110
the control center work.

231
00:11:19,110 --> 00:11:22,995
So here's-- if it
works, if it works--

232
00:11:25,670 --> 00:11:26,780
my favorite movie.

233
00:11:31,420 --> 00:11:31,960
All right.

234
00:11:37,220 --> 00:11:40,550
I've played this a million
times in a million places.

235
00:11:40,550 --> 00:11:42,370
And it's never been this bad.

236
00:11:42,370 --> 00:11:44,870
Let me tell you what you would
have seen if this had worked.

237
00:11:50,450 --> 00:11:54,620
What you would--
this is the result

238
00:11:54,620 --> 00:12:00,950
of an outage in southern
Florida in 2008.

239
00:12:00,950 --> 00:12:05,150
And what you're seeing-- those
red dots are phasor measurement

240
00:12:05,150 --> 00:12:06,620
units that describe--

241
00:12:06,620 --> 00:12:09,740
that pick up the state
of the system in terms

242
00:12:09,740 --> 00:12:16,750
of frequency and phase angle of
voltage and current, many times

243
00:12:16,750 --> 00:12:19,180
a second, time stamped.

244
00:12:19,180 --> 00:12:21,550
So that, in principle,
they give a picture

245
00:12:21,550 --> 00:12:24,040
of the state of the
whole system instant

246
00:12:24,040 --> 00:12:26,620
by instant, which
we do not now have.

247
00:12:26,620 --> 00:12:30,100
The red dots are where
the measurements are made.

248
00:12:30,100 --> 00:12:32,770
The spaghetti chart on
the left is the readings

249
00:12:32,770 --> 00:12:34,000
from individual ones.

250
00:12:34,000 --> 00:12:36,550
And the folks at Virginia Tech,
who invented the measuring

251
00:12:36,550 --> 00:12:42,610
systems, have basically
interpolated and extrapolated

252
00:12:42,610 --> 00:12:46,607
to put together a picture
of the whole system.

253
00:12:46,607 --> 00:12:48,440
What's interesting
here-- there are a couple

254
00:12:48,440 --> 00:12:50,890
of things interesting here.

255
00:12:50,890 --> 00:12:56,080
First of all-- and I won't hurt
your eyes by playing it again--

256
00:12:56,080 --> 00:13:01,480
what's interesting here is,
one, the geographic extent.

257
00:13:01,480 --> 00:13:04,000
So if something
happens in Florida--

258
00:13:04,000 --> 00:13:09,040
and the frequency
distortion most durably

259
00:13:09,040 --> 00:13:12,670
is in northern
Minnesota or Canada.

260
00:13:12,670 --> 00:13:14,140
You may be able to see that.

261
00:13:14,140 --> 00:13:17,500
The second is, it happens fast.

262
00:13:17,500 --> 00:13:18,890
This is 25 seconds.

263
00:13:18,890 --> 00:13:20,260
So here's where it goes out.

264
00:13:20,260 --> 00:13:21,460
Boom.

265
00:13:21,460 --> 00:13:23,320
It is happening--
there are things

266
00:13:23,320 --> 00:13:25,960
all around the country,
all around the Eastern

267
00:13:25,960 --> 00:13:31,600
Interconnect, and most durably
up there in northern Minnesota.

268
00:13:34,420 --> 00:13:36,280
So it's fast.

269
00:13:36,280 --> 00:13:39,070
There's a lot of data.

270
00:13:39,070 --> 00:13:42,760
You couldn't react
to it as a human.

271
00:13:42,760 --> 00:13:43,734
Yeah?

272
00:13:43,734 --> 00:13:45,970
AUDIENCE: Does the setting move?

273
00:13:45,970 --> 00:13:48,754
RICHARD SCHMALENSEE: Well,
let me see if I can freeze it.

274
00:13:48,754 --> 00:13:52,200
AUDIENCE: [INAUDIBLE]

275
00:13:52,200 --> 00:13:54,910
RICHARD SCHMALENSEE: It's
the extent of the departure.

276
00:13:54,910 --> 00:14:03,510
Let me just-- it
doesn't want to stop.

277
00:14:03,510 --> 00:14:07,950
Red-- red means, I
think, that it's--

278
00:14:07,950 --> 00:14:08,460
yeah.

279
00:14:08,460 --> 00:14:10,890
It means it's faster
than 60 cycles a second.

280
00:14:10,890 --> 00:14:13,800
The frequency locally is higher.

281
00:14:13,800 --> 00:14:15,490
Blue means it's slower.

282
00:14:15,490 --> 00:14:17,350
So you're getting
a-- you're getting

283
00:14:17,350 --> 00:14:20,550
a pattern a distortion--
slight distortion-- in system

284
00:14:20,550 --> 00:14:21,900
frequency.

285
00:14:21,900 --> 00:14:28,040
Now, in this case,
nothing terrible happened.

286
00:14:28,040 --> 00:14:29,360
Blackout happened in Florida.

287
00:14:29,360 --> 00:14:30,050
Boom.

288
00:14:30,050 --> 00:14:32,300
Disturbance propagates
throughout the whole Eastern

289
00:14:32,300 --> 00:14:35,370
Interconnect within
a matter of seconds.

290
00:14:35,370 --> 00:14:39,080
So, A, nobody could
respond to that.

291
00:14:39,080 --> 00:14:43,130
And nobody looking at the data
on-- the graph on the left

292
00:14:43,130 --> 00:14:48,920
or the map on the
right could think

293
00:14:48,920 --> 00:14:50,990
through what to do in time.

294
00:14:50,990 --> 00:14:53,540
If there were something
serious, that's just

295
00:14:53,540 --> 00:14:56,300
too fast with so much data.

296
00:14:56,300 --> 00:14:59,390
So the great thing
about these units

297
00:14:59,390 --> 00:15:02,270
is they give control systems--

298
00:15:02,270 --> 00:15:08,000
control centers-- a picture of
the grid over a wide scale that

299
00:15:08,000 --> 00:15:11,000
has never existed before
in real time, lots of data.

300
00:15:11,000 --> 00:15:16,490
This is just one aspect of
it, frequency distortion.

301
00:15:16,490 --> 00:15:21,680
But nobody knows
what to do with it.

302
00:15:21,680 --> 00:15:24,130
There's another picture that
is in the movie, which says

303
00:15:24,130 --> 00:15:26,560
if you look before the 2000--

304
00:15:26,560 --> 00:15:31,180
when was the last
big blackout, 2008--

305
00:15:31,180 --> 00:15:37,270
you see a phase angle
change near Cleveland

306
00:15:37,270 --> 00:15:41,270
over a period of about 30
seconds and then it breaks.

307
00:15:41,270 --> 00:15:44,170
So if you actually knew
what that angle should be,

308
00:15:44,170 --> 00:15:48,880
and measured it, and
had a monitoring system,

309
00:15:48,880 --> 00:15:51,250
you might have been able
to tell that the system was

310
00:15:51,250 --> 00:15:54,160
about to break.

311
00:15:54,160 --> 00:15:59,380
But not everybody that
has one of these units

312
00:15:59,380 --> 00:16:01,810
actually shares
data in real time.

313
00:16:01,810 --> 00:16:05,548
We don't have control systems
to use the data in real time.

314
00:16:05,548 --> 00:16:07,090
The federal government
has subsidized

315
00:16:07,090 --> 00:16:10,120
putting these boxes out
there to measure the system.

316
00:16:10,120 --> 00:16:15,182
But we don't have the
ability to respond.

317
00:16:15,182 --> 00:16:17,140
I mean, you're sitting
there in a control room.

318
00:16:17,140 --> 00:16:18,220
You see this thing.

319
00:16:18,220 --> 00:16:20,233
Is this a problem,
is it not a problem?

320
00:16:20,233 --> 00:16:22,900
All of a sudden, frequencies are
changing throughout the Eastern

321
00:16:22,900 --> 00:16:23,442
Interconnect.

322
00:16:23,442 --> 00:16:28,070
Do I need to isolate New England
to avoid a blackout up here?

323
00:16:28,070 --> 00:16:31,120
Well, the answer,
it turns out was no.

324
00:16:31,120 --> 00:16:34,510
But without a lot
of automation, you

325
00:16:34,510 --> 00:16:36,970
wouldn't be-- and a good
model of the system,

326
00:16:36,970 --> 00:16:40,070
you wouldn't be
able to know that.

327
00:16:40,070 --> 00:16:47,040
So moving right along.

328
00:16:49,990 --> 00:16:55,320
So you see the issue that we've
got this incredible source

329
00:16:55,320 --> 00:16:58,200
of real-time data,
with no ability

330
00:16:58,200 --> 00:17:00,240
to use it and not much sharing.

331
00:17:00,240 --> 00:17:01,920
And your tax dollars
have produced it.

332
00:17:01,920 --> 00:17:02,590
It's terrific.

333
00:17:02,590 --> 00:17:07,380
But we don't know how to use it.

334
00:17:07,380 --> 00:17:11,700
I mentioned these devices that
control the transmission system

335
00:17:11,700 --> 00:17:13,050
and enhance capacity.

336
00:17:13,050 --> 00:17:14,910
They're expensive.

337
00:17:14,910 --> 00:17:16,680
The ideal way to
use them would be

338
00:17:16,680 --> 00:17:19,170
to use this data from
phasor measurement units

339
00:17:19,170 --> 00:17:21,450
through an automated
control system

340
00:17:21,450 --> 00:17:26,069
to modify line characteristics.

341
00:17:26,069 --> 00:17:29,020
We've got the fax devices.

342
00:17:29,020 --> 00:17:30,700
We've got the phasor
measurement units.

343
00:17:30,700 --> 00:17:33,900
We do not have any
system to link them.

344
00:17:33,900 --> 00:17:37,230
So we think that's
sort of a useful thing

345
00:17:37,230 --> 00:17:40,480
to do since the
boxes are out there.

346
00:17:40,480 --> 00:17:42,090
It's also the case
that there are

347
00:17:42,090 --> 00:17:45,750
a lot of so-called smart
grid technologies going in

348
00:17:45,750 --> 00:17:47,880
at the distribution level.

349
00:17:47,880 --> 00:17:50,190
Your tax dollars, or
rather the deficits

350
00:17:50,190 --> 00:17:54,120
you will fund later
on, have funded

351
00:17:54,120 --> 00:17:58,710
putting out a lot of very smart
boxes in distribution systems.

352
00:17:58,710 --> 00:18:02,110
But what they do hasn't
yet been published.

353
00:18:02,110 --> 00:18:03,750
So it's a little unclear.

354
00:18:03,750 --> 00:18:09,240
AARA is the stimulus
legislation.

355
00:18:09,240 --> 00:18:13,160
So we need more
R&D, pretty cheap

356
00:18:13,160 --> 00:18:19,820
R&D. We need computational
tools to use all this data.

357
00:18:19,820 --> 00:18:21,950
It should have impressed
you with how closely

358
00:18:21,950 --> 00:18:24,470
coupled that whole
Eastern Interconnect is.

359
00:18:24,470 --> 00:18:27,890
That from Florida to Minnesota,
very quickly a disturbance

360
00:18:27,890 --> 00:18:28,910
propagates.

361
00:18:28,910 --> 00:18:32,540
That means, if you think about
it, particularly if you think

362
00:18:32,540 --> 00:18:34,910
about renewables, which
I'll come to in a second,

363
00:18:34,910 --> 00:18:37,850
you need to be able to
plan at the level of--

364
00:18:37,850 --> 00:18:41,520
at that level, at the level
of the Eastern system.

365
00:18:41,520 --> 00:18:42,770
The Western system is simpler.

366
00:18:42,770 --> 00:18:43,940
Texas is simpler.

367
00:18:43,940 --> 00:18:46,400
The Eastern system
is the big one.

368
00:18:46,400 --> 00:18:49,760
We can't begin to plan that.

369
00:18:49,760 --> 00:18:53,900
The dimensionality is too
high for current techniques.

370
00:18:53,900 --> 00:18:59,180
And just to get to things I
will come to in a little while,

371
00:18:59,180 --> 00:19:01,490
there's a lot of focus on
preventing cyber attacks.

372
00:19:01,490 --> 00:19:02,907
There's very little
effort on what

373
00:19:02,907 --> 00:19:04,700
do you do when you
get one, one succeeds.

374
00:19:04,700 --> 00:19:07,010
But one will succeed.

375
00:19:07,010 --> 00:19:13,790
And we need to understand
more about automated--

376
00:19:13,790 --> 00:19:15,680
about dynamic pricing.

377
00:19:15,680 --> 00:19:17,930
I'll come to it.

378
00:19:17,930 --> 00:19:20,670
This is a troublesome thing.

379
00:19:20,670 --> 00:19:23,690
There are technologies that have
been standard in Scandinavia

380
00:19:23,690 --> 00:19:25,730
for 20 years, that are
required in India, that

381
00:19:25,730 --> 00:19:28,580
can't be sold in this country
because no utility has ever

382
00:19:28,580 --> 00:19:30,710
seen it work.

383
00:19:30,710 --> 00:19:33,860
The level of risk aversion
is kind of breathtaking.

384
00:19:33,860 --> 00:19:37,070
And it's like, why
don't we measure things?

385
00:19:37,070 --> 00:19:40,400
Because if we put it in, and
it's new, and it doesn't work,

386
00:19:40,400 --> 00:19:42,110
the utility gets hammered.

387
00:19:42,110 --> 00:19:44,030
The utility management
gets hammered.

388
00:19:44,030 --> 00:19:45,500
The stockholders get punished.

389
00:19:45,500 --> 00:19:47,150
And the regulator gets punished.

390
00:19:47,150 --> 00:19:50,570
If you put it in and it
works, everybody yawns.

391
00:19:50,570 --> 00:19:53,450
So the regulatory system
here in particular

392
00:19:53,450 --> 00:19:56,780
is biased against
innovation in a way

393
00:19:56,780 --> 00:20:01,320
that's hard to fix
because it's political.

394
00:20:01,320 --> 00:20:02,160
It's not technical.

395
00:20:02,160 --> 00:20:03,590
It's political.

396
00:20:03,590 --> 00:20:06,263
OK, what about renewables?

397
00:20:06,263 --> 00:20:08,180
Well, there's going to
be more wind and solar.

398
00:20:08,180 --> 00:20:12,530
This is renewable generation
in the US, up to 2007.

399
00:20:12,530 --> 00:20:15,140
You see the big story is--

400
00:20:15,140 --> 00:20:17,510
the big growth story is wind.

401
00:20:17,510 --> 00:20:20,160
Wood is very important.

402
00:20:20,160 --> 00:20:23,900
A lot of that is waste
from lumber mills,

403
00:20:23,900 --> 00:20:25,700
that they just use
it to generate power.

404
00:20:25,700 --> 00:20:28,820
Some of them sell to the
grid, some of them don't.

405
00:20:28,820 --> 00:20:32,030
Maine, a few years ago,
passed a requirement

406
00:20:32,030 --> 00:20:34,040
for renewable generation.

407
00:20:34,040 --> 00:20:34,880
Did the numbers.

408
00:20:34,880 --> 00:20:38,390
Realized they had already
met the requirement because

409
00:20:38,390 --> 00:20:40,400
of all the lumber mills.

410
00:20:40,400 --> 00:20:43,085
You'll see solar here.

411
00:20:43,085 --> 00:20:44,120
Solar is in the data.

412
00:20:44,120 --> 00:20:47,990
But it's too small to
see in the picture.

413
00:20:47,990 --> 00:20:51,740
Since 2007, you see this peaks
at about-- what do you figure--

414
00:20:51,740 --> 00:20:52,850
100,000.

415
00:20:52,850 --> 00:20:57,230
It's 173,000 in 2010.

416
00:20:57,230 --> 00:20:59,730
Over half of that was wind.

417
00:20:59,730 --> 00:21:01,840
So you see the wind--

418
00:21:01,840 --> 00:21:06,080
wind has continued to drive
the growth through 2010.

419
00:21:06,080 --> 00:21:08,330
So that's renewables in the US.

420
00:21:08,330 --> 00:21:10,160
There are a lot of policies.

421
00:21:10,160 --> 00:21:12,500
That's Europe.

422
00:21:12,500 --> 00:21:15,470
This is putting aside hydro.

423
00:21:15,470 --> 00:21:18,840
We were way ahead of
Europe around 1990.

424
00:21:18,840 --> 00:21:20,960
We've stayed pretty
constant as a percentage

425
00:21:20,960 --> 00:21:22,280
of total generation.

426
00:21:22,280 --> 00:21:24,500
Europe has shot up.

427
00:21:24,500 --> 00:21:26,120
And the European goal--

428
00:21:26,120 --> 00:21:28,190
the EU goal is--

429
00:21:28,190 --> 00:21:30,530
well, 20% of all
energy from renewables.

430
00:21:30,530 --> 00:21:35,540
So 35% of electricity
from renewables by 2020--

431
00:21:35,540 --> 00:21:38,510
very, very ambitious.

432
00:21:38,510 --> 00:21:41,000
There is-- well, you see Maine.

433
00:21:41,000 --> 00:21:44,840
This is 2007, non-hydro
renewable generation

434
00:21:44,840 --> 00:21:47,150
as a percentage of
the state total.

435
00:21:47,150 --> 00:21:51,140
Maine leads because
of all the wood.

436
00:21:51,140 --> 00:21:55,190
California, pretty high;
mostly geothermal, but wind

437
00:21:55,190 --> 00:21:56,450
and solar coming.

438
00:21:56,450 --> 00:22:03,340
And Texas, just an absolute
generation, with a lot of wind,

439
00:22:03,340 --> 00:22:06,502
a lot of wind.

440
00:22:06,502 --> 00:22:09,930
This is a policy map.

441
00:22:09,930 --> 00:22:13,930
It shows you the 29 states
and the District of Columbia

442
00:22:13,930 --> 00:22:17,830
have renewable
portfolio standards.

443
00:22:17,830 --> 00:22:20,500
Those are state
laws that require--

444
00:22:20,500 --> 00:22:24,130
generally, that require
if you sell electricity

445
00:22:24,130 --> 00:22:28,990
at retail, x percent of
that has to be renewable.

446
00:22:28,990 --> 00:22:30,880
Usually much more detail--

447
00:22:30,880 --> 00:22:32,890
you know.

448
00:22:32,890 --> 00:22:37,600
New Jersey has a requirement
for off-shore, in-state wind.

449
00:22:37,600 --> 00:22:43,040
North Carolina has a requirement
for electricity produced from--

450
00:22:43,040 --> 00:22:45,820
I think it's
poultry waste, maybe

451
00:22:45,820 --> 00:22:47,410
a separate one for swine waste.

452
00:22:50,410 --> 00:22:51,910
And they all vary.

453
00:22:51,910 --> 00:22:55,610
Rhode Island has three
different levels of requirement.

454
00:22:55,610 --> 00:23:02,200
So there's a lot of
push for renewables.

455
00:23:02,200 --> 00:23:04,660
They're called renewable
portfolio standards

456
00:23:04,660 --> 00:23:08,260
because the notion is, in
your portfolio of generation

457
00:23:08,260 --> 00:23:12,010
so much of it has
to be renewable.

458
00:23:12,010 --> 00:23:15,640
And we could talk
about how these work.

459
00:23:15,640 --> 00:23:20,050
But-- well, they're
all different.

460
00:23:20,050 --> 00:23:25,930
But you don't necessarily have
to be physically connected

461
00:23:25,930 --> 00:23:27,880
to a renewable generator.

462
00:23:27,880 --> 00:23:30,250
But you have to
make a purchase that

463
00:23:30,250 --> 00:23:32,650
amounts to encouraging
that much generation.

464
00:23:36,400 --> 00:23:39,910
I used to be able to say
that every state but Arkansas

465
00:23:39,910 --> 00:23:41,350
subsidized renewables.

466
00:23:41,350 --> 00:23:45,010
But Arkansas put in
a subsidy in 2010.

467
00:23:45,010 --> 00:23:48,090
So every state subsidizes
renewables now.

468
00:23:50,710 --> 00:23:53,320
Now, here's issue one.

469
00:23:53,320 --> 00:23:55,270
Issue one is, here's
where the wind is.

470
00:23:55,270 --> 00:23:59,290
There's a lot of good wind
offshore, in the Great Lakes.

471
00:23:59,290 --> 00:24:03,910
But offshore is expensive.

472
00:24:03,910 --> 00:24:06,880
The good onshore
wind tends to be

473
00:24:06,880 --> 00:24:09,280
in the middle of the country.

474
00:24:09,280 --> 00:24:12,287
People tend not to be in
the middle of the country.

475
00:24:12,287 --> 00:24:13,870
So if you're going
to use that, you're

476
00:24:13,870 --> 00:24:15,970
going to have to
build transmission.

477
00:24:15,970 --> 00:24:21,290
And that transmission is going
to have to cross state lines.

478
00:24:21,290 --> 00:24:23,305
I mean, there's a lot
of wind in North Dakota.

479
00:24:23,305 --> 00:24:25,180
There are not a lot of
people in North Dakota

480
00:24:25,180 --> 00:24:27,105
despite the shale boom.

481
00:24:27,105 --> 00:24:28,480
If you're going
to use that wind,

482
00:24:28,480 --> 00:24:31,180
you're probably going to have
to go from North Dakota, oh,

483
00:24:31,180 --> 00:24:34,940
at least to Minneapolis,
and maybe down to Chicago,

484
00:24:34,940 --> 00:24:37,690
which is a problem.

485
00:24:37,690 --> 00:24:39,770
Even in New England--

486
00:24:39,770 --> 00:24:41,560
this is an impossible map.

487
00:24:41,560 --> 00:24:46,840
But it shows you where the wind
is in New England, up here.

488
00:24:46,840 --> 00:24:48,370
That's offshore.

489
00:24:48,370 --> 00:24:53,740
This is where the load is
in Massachusetts, and Rhode

490
00:24:53,740 --> 00:24:55,930
Island, and Connecticut.

491
00:24:55,930 --> 00:24:58,300
To get wind from Northern
Maine, down here,

492
00:24:58,300 --> 00:25:01,660
you've got across state lines.

493
00:25:01,660 --> 00:25:08,780
The problem is, states
approve power lines.

494
00:25:08,780 --> 00:25:11,910
And states can
block power lines.

495
00:25:11,910 --> 00:25:17,810
So my favorite is there was
a proposal from Southern

496
00:25:17,810 --> 00:25:20,540
California Edison to
build a line into Arizona,

497
00:25:20,540 --> 00:25:22,970
to connect to some
cheap generation,

498
00:25:22,970 --> 00:25:25,250
and take the power
to Los Angeles.

499
00:25:25,250 --> 00:25:28,430
And the Arizona
Commission vetoed it.

500
00:25:28,430 --> 00:25:31,505
And one commissioner
said, that's a 230,000--

501
00:25:31,505 --> 00:25:36,320
a 230-mile straw sucking
energy out of Arizona.

502
00:25:36,320 --> 00:25:39,260
We won't do it.

503
00:25:39,260 --> 00:25:42,380
OK, each state
can block it if it

504
00:25:42,380 --> 00:25:44,283
crosses federally
owned land, which

505
00:25:44,283 --> 00:25:46,200
is I think a third of
the land in the country.

506
00:25:46,200 --> 00:25:48,620
The federal agency can block it.

507
00:25:48,620 --> 00:25:51,450
Nobody can say, yes.

508
00:25:51,450 --> 00:25:55,010
We can build gas pipelines
because those are federally--

509
00:25:55,010 --> 00:25:57,770
federally done.

510
00:25:57,770 --> 00:26:00,440
The FERC approves gas pipelines.

511
00:26:00,440 --> 00:26:03,680
There is no such
approval for power lines.

512
00:26:03,680 --> 00:26:07,670
Well, if you're going to do
renewables, there has to be.

513
00:26:07,670 --> 00:26:10,580
So one of our recommendations
is to change that law.

514
00:26:13,410 --> 00:26:17,040
This is not necessarily
popular at the state level.

515
00:26:17,040 --> 00:26:19,260
Because as I said,
there's a lot of holding

516
00:26:19,260 --> 00:26:21,480
of power by the states.

517
00:26:21,480 --> 00:26:24,180
But if you want to build renew--
you want to use renewables that

518
00:26:24,180 --> 00:26:33,240
come from remote
areas, you need to have

519
00:26:33,240 --> 00:26:36,690
somebody who can say yes.

520
00:26:36,690 --> 00:26:38,480
OK so far?

521
00:26:38,480 --> 00:26:41,140
Questions on any of this?

522
00:26:41,140 --> 00:26:45,180
OK, that's one issue
with renewables.

523
00:26:45,180 --> 00:26:49,800
The other issue with
renewables is the fact

524
00:26:49,800 --> 00:26:51,630
that you can't dispatch them.

525
00:26:51,630 --> 00:26:53,670
You can't control them.

526
00:26:53,670 --> 00:27:01,710
This is-- that's the output
from a photovoltaic plant,

527
00:27:01,710 --> 00:27:06,570
solar cells, on a
partly cloudy day.

528
00:27:06,570 --> 00:27:09,390
The output can
change very rapidly,

529
00:27:09,390 --> 00:27:10,620
in a matter of seconds.

530
00:27:10,620 --> 00:27:13,740
There is no inertia
in the system,

531
00:27:13,740 --> 00:27:15,290
no inertia in the system.

532
00:27:15,290 --> 00:27:18,210
Now, if you a bunch of them,
spread out geographically,

533
00:27:18,210 --> 00:27:24,502
this problem is reduced, but
not eliminated because sometimes

534
00:27:24,502 --> 00:27:25,710
a whole state will be cloudy.

535
00:27:29,590 --> 00:27:30,890
So that's a real issue.

536
00:27:30,890 --> 00:27:33,170
And the no inertia means--

537
00:27:33,170 --> 00:27:39,750
you think about the way power
systems currently operate,

538
00:27:39,750 --> 00:27:43,290
there's a lot of rotating metal
in generators, and turbines,

539
00:27:43,290 --> 00:27:45,660
and such, but particularly
in generators.

540
00:27:45,660 --> 00:27:50,700
So if all of a sudden, 5,000
people turn on the lights,

541
00:27:50,700 --> 00:27:52,530
that's a big increase in load.

542
00:27:52,530 --> 00:27:56,220
But the system has what you
call ride through capability.

543
00:27:56,220 --> 00:27:57,900
You know, you've
got all this inertia

544
00:27:57,900 --> 00:27:59,760
going through-- going
in the generators.

545
00:27:59,760 --> 00:28:02,960
It just carries
you through bumps.

546
00:28:02,960 --> 00:28:04,290
Well, there's no inertia here.

547
00:28:04,290 --> 00:28:06,082
There's nothing carrying
you through bumps.

548
00:28:06,082 --> 00:28:09,480
And there's no real
inertia in wind turbines.

549
00:28:09,480 --> 00:28:12,000
Not a serious
problem at all, yet.

550
00:28:12,000 --> 00:28:15,360
But as you look down the road to
a lot of it, potentially it is.

551
00:28:15,360 --> 00:28:20,750
Wind-- this is total output
of wind in California.

552
00:28:20,750 --> 00:28:25,770
The top line and the bottom
line are individual facilities.

553
00:28:25,770 --> 00:28:30,780
And the access-- these are--

554
00:28:30,780 --> 00:28:32,160
well, this is a
whole day, right.

555
00:28:32,160 --> 00:28:33,300
So it's 10 seconds--

556
00:28:33,300 --> 00:28:34,650
10-second second sampling.

557
00:28:34,650 --> 00:28:36,390
These are hours.

558
00:28:36,390 --> 00:28:38,730
And this is sort of
characteristic of wind.

559
00:28:38,730 --> 00:28:42,300
Wind-- wind ramps,
not minutes or seconds

560
00:28:42,300 --> 00:28:46,500
really, except for maybe
some individual windmill

561
00:28:46,500 --> 00:28:47,520
that gets a gust.

562
00:28:47,520 --> 00:28:50,430
But over any
reasonable area, it can

563
00:28:50,430 --> 00:28:54,750
ramp in the course of hours,
from nothing to a lot,

564
00:28:54,750 --> 00:28:57,210
or from a lot to nothing.

565
00:28:57,210 --> 00:28:59,670
Both of those are problems.

566
00:28:59,670 --> 00:29:04,200
This is the most discouraging
graph I've seen on wind.

567
00:29:04,200 --> 00:29:08,160
This is a week in
July 2006, when

568
00:29:08,160 --> 00:29:10,590
it was very hot in California.

569
00:29:10,590 --> 00:29:13,410
And the green is
wind generation.

570
00:29:13,410 --> 00:29:16,542
So you'll notice that--

571
00:29:16,542 --> 00:29:19,950
it has wind capacity
of 2,600 megawatts.

572
00:29:19,950 --> 00:29:25,680
That week wind never produced
more than a thousand.

573
00:29:25,680 --> 00:29:29,160
And it varies over the course
of the day, substantially.

574
00:29:29,160 --> 00:29:30,270
But here's the kicker.

575
00:29:30,270 --> 00:29:34,290
The red dots are the
times of the system peak.

576
00:29:34,290 --> 00:29:39,330
The red dots are when the
system really needed power--

577
00:29:39,330 --> 00:29:42,930
late afternoon, in
a very hot week.

578
00:29:42,930 --> 00:29:47,040
When it's really hot, the wind
tends not to blow that much.

579
00:29:47,040 --> 00:29:50,400
So not only is there
a lot of variation

580
00:29:50,400 --> 00:29:55,210
that the system has to respond
to, but at least in this case,

581
00:29:55,210 --> 00:29:57,960
the peak out--
the output at peak

582
00:29:57,960 --> 00:30:01,780
was tiny relative to capacity.

583
00:30:01,780 --> 00:30:06,100
So wind farms tend to have
capacity factors, 20s and 30s.

584
00:30:06,100 --> 00:30:10,660
That is to say, about 20%
to 30% of nominal capacity.

585
00:30:10,660 --> 00:30:15,220
If you ran at 2,600 megawatts,
24 hours a day, you'd get x.

586
00:30:15,220 --> 00:30:18,130
What you actually get over
x is the capacity factor.

587
00:30:18,130 --> 00:30:20,980
And it tends-- they
tend to be 20%, 30%.

588
00:30:20,980 --> 00:30:25,900
Solar, not so much at night.

589
00:30:25,900 --> 00:30:29,920
So that's the other
problem with renewables,

590
00:30:29,920 --> 00:30:33,850
that you can't dispatch them.

591
00:30:33,850 --> 00:30:36,220
They're variable,
variable energy resources,

592
00:30:36,220 --> 00:30:37,420
as the phrase goes.

593
00:30:37,420 --> 00:30:39,070
This is another
terrific picture.

594
00:30:39,070 --> 00:30:40,720
This is Bonneville.

595
00:30:40,720 --> 00:30:43,570
This is the Pacific Northwest.

596
00:30:43,570 --> 00:30:53,020
And this is over the course
of 2009, early December 2009.

597
00:30:53,020 --> 00:30:57,600
Saturday night, wind the
output goes from nothing,

598
00:30:57,600 --> 00:31:00,270
so around 2,000 megawatts.

599
00:31:00,270 --> 00:31:02,310
Holds during the
day Sunday, Sunday

600
00:31:02,310 --> 00:31:04,290
is not a high
demand day, and then

601
00:31:04,290 --> 00:31:06,960
just as you're coming
into Monday, ramps down

602
00:31:06,960 --> 00:31:09,610
to 0 by Monday night.

603
00:31:09,610 --> 00:31:13,830
Now we're told that
Bonneville handled that.

604
00:31:13,830 --> 00:31:16,590
Bonneville handled
that by backing off

605
00:31:16,590 --> 00:31:19,440
everything they could
possibly back off,

606
00:31:19,440 --> 00:31:21,600
and then bringing everything
they could possibly

607
00:31:21,600 --> 00:31:24,810
bring up back online.

608
00:31:24,810 --> 00:31:27,570
Not easy.

609
00:31:27,570 --> 00:31:30,180
Double it, and the
system wouldn't have been

610
00:31:30,180 --> 00:31:33,410
able to handle it, probably.

611
00:31:33,410 --> 00:31:40,900
So wind output, solar output,
are more variable than demand.

612
00:31:40,900 --> 00:31:43,120
And you can't
predict them as well.

613
00:31:43,120 --> 00:31:48,370
There's a lot of work on
predicting these things.

614
00:31:48,370 --> 00:31:49,870
There has not been
a lot of research

615
00:31:49,870 --> 00:31:54,010
on forecasting wind
at 50-meter heights;

616
00:31:54,010 --> 00:31:57,520
has not been a subject of
much interest in meteorology

617
00:31:57,520 --> 00:31:58,690
until recently.

618
00:31:58,690 --> 00:32:01,090
It's very interesting now.

619
00:32:01,090 --> 00:32:06,940
Hard to get data, not a lot of
weather stations at 50 meters.

620
00:32:06,940 --> 00:32:10,480
There are a lot of other
changes and thinking

621
00:32:10,480 --> 00:32:12,220
about how you
reconfigure the system.

622
00:32:12,220 --> 00:32:13,720
The interesting
thing from the point

623
00:32:13,720 --> 00:32:19,210
of view of the market design
is you don't just need capacity

624
00:32:19,210 --> 00:32:21,070
in a power system.

625
00:32:21,070 --> 00:32:25,060
What you need now is
capacity that can ramp,

626
00:32:25,060 --> 00:32:28,720
can go up fast, down fast.

627
00:32:28,720 --> 00:32:33,490
The current market design
doesn't provide incentives

628
00:32:33,490 --> 00:32:36,310
for building that
kind of capacity

629
00:32:36,310 --> 00:32:38,330
or for making it available.

630
00:32:38,330 --> 00:32:41,350
So again, as we go
forward, it's going

631
00:32:41,350 --> 00:32:45,260
to be important to figure
out how to do this.

632
00:32:45,260 --> 00:32:47,650
How do we make the system
more flexible so it

633
00:32:47,650 --> 00:32:54,900
can respond to wind and solar
at higher levels of penetration?

634
00:32:54,900 --> 00:32:58,780
Now, one answer that
everybody has is storage.

635
00:32:58,780 --> 00:33:03,880
And here's from a recent
report on storage technologies.

636
00:33:03,880 --> 00:33:08,810
There are lots of storage
technologies, lots of them.

637
00:33:08,810 --> 00:33:11,860
The ones in widespread
use are pump storage.

638
00:33:14,430 --> 00:33:17,850
And pump storage is
terrific at this, perfect.

639
00:33:17,850 --> 00:33:18,990
There's a round trip loss.

640
00:33:18,990 --> 00:33:20,070
You pump water uphill.

641
00:33:20,070 --> 00:33:21,690
You run it down
through a turbine.

642
00:33:21,690 --> 00:33:23,050
It's great.

643
00:33:23,050 --> 00:33:27,790
You can start it fast, not
seconds, but pretty fast.

644
00:33:27,790 --> 00:33:30,570
You can stop it pretty
fast, not instantly.

645
00:33:30,570 --> 00:33:32,040
You got a lot of rotating metal.

646
00:33:32,040 --> 00:33:35,910
But you can stop it pretty fast.

647
00:33:35,910 --> 00:33:38,605
But you can't build it.

648
00:33:38,605 --> 00:33:39,730
There's one in New England.

649
00:33:39,730 --> 00:33:42,610
Nobody imagines we'll ever
be able to build another one.

650
00:33:42,610 --> 00:33:44,140
It's the problem
of building dams.

651
00:33:44,140 --> 00:33:46,600
You can't build dams.

652
00:33:46,600 --> 00:33:49,620
So this is a technology
that's in some use,

653
00:33:49,620 --> 00:33:50,620
you could build more of.

654
00:33:50,620 --> 00:33:56,230
But this is
compressed air, mostly

655
00:33:56,230 --> 00:33:59,260
in a cavern of one
kind or another.

656
00:33:59,260 --> 00:34:01,540
Put a lot of air
in under pressure,

657
00:34:01,540 --> 00:34:05,560
drive a turbine
when it comes out.

658
00:34:05,560 --> 00:34:06,460
You can do that.

659
00:34:06,460 --> 00:34:09,340
There are about three of
them I think in the world.

660
00:34:09,340 --> 00:34:11,949
And then there are
all these batteries--

661
00:34:11,949 --> 00:34:14,710
and supercapacitors,
which are kind of cute--

662
00:34:14,710 --> 00:34:16,449
and flywheels.

663
00:34:16,449 --> 00:34:19,000
And they work.

664
00:34:19,000 --> 00:34:20,260
These are known technologies.

665
00:34:20,260 --> 00:34:20,964
We can build these.

666
00:34:20,964 --> 00:34:21,922
These are sort of neat.

667
00:34:21,922 --> 00:34:25,593
These are batteries that are--

668
00:34:25,593 --> 00:34:30,550
that basically work off either
liquid cathodes or anodes.

669
00:34:30,550 --> 00:34:31,750
And things flow.

670
00:34:31,750 --> 00:34:32,920
And it's great stuff.

671
00:34:32,920 --> 00:34:39,850
And but they're all
really expensive at scale.

672
00:34:39,850 --> 00:34:42,530
This, you can sort of
afford if you can build it.

673
00:34:42,530 --> 00:34:47,650
This is OK where you
have a suitable site.

674
00:34:47,650 --> 00:34:49,210
Not great, but it's OK.

675
00:34:49,210 --> 00:34:53,020
And all this other
stuff is expensive.

676
00:34:53,020 --> 00:34:54,400
So it's very hard.

677
00:34:58,264 --> 00:35:02,080
This is the Holy Grail in
electric power research.

678
00:35:02,080 --> 00:35:05,800
If you could do cheap
grid level storage,

679
00:35:05,800 --> 00:35:07,450
solar and wind would
not be a problem.

680
00:35:10,370 --> 00:35:16,430
But with technologies
we now know, you can't.

681
00:35:16,430 --> 00:35:18,230
This stuff just does
not look to have

682
00:35:18,230 --> 00:35:20,030
the prospect of
becoming cheap enough

683
00:35:20,030 --> 00:35:24,913
to deploy at scale by 2030.

684
00:35:24,913 --> 00:35:25,580
Could you do it?

685
00:35:25,580 --> 00:35:26,210
Sure.

686
00:35:26,210 --> 00:35:29,380
Could you afford
it, probably not.

687
00:35:29,380 --> 00:35:34,410
OK, questions so far.

688
00:35:34,410 --> 00:35:37,290
It's kind of a downer.

689
00:35:37,290 --> 00:35:38,100
But there we are.

690
00:35:38,100 --> 00:35:39,480
I mean, it is what it is.

691
00:35:43,590 --> 00:35:46,980
And-- now the third thing.

692
00:35:46,980 --> 00:35:47,970
They're remote.

693
00:35:47,970 --> 00:35:49,110
They're intermittent.

694
00:35:49,110 --> 00:35:52,480
And they're expensive.

695
00:35:52,480 --> 00:35:54,420
So what do you do?

696
00:35:54,420 --> 00:35:57,741
You can do R&D. We've done some.

697
00:35:57,741 --> 00:35:59,280
You could do more easily.

698
00:36:02,020 --> 00:36:06,600
There is an interesting
question of, should you

699
00:36:06,600 --> 00:36:10,080
bring renewables on
by subsidizing them

700
00:36:10,080 --> 00:36:12,390
or should you
bring renewables on

701
00:36:12,390 --> 00:36:16,140
by taxing what you
don't like, which

702
00:36:16,140 --> 00:36:20,295
is possibly coal, or carbon,
or oil, or some mixture?

703
00:36:22,830 --> 00:36:25,800
There are carbon taxes in
various places in the world,

704
00:36:25,800 --> 00:36:26,610
not that many.

705
00:36:29,970 --> 00:36:32,730
What the US has done--

706
00:36:32,730 --> 00:36:36,810
at the state level, we've
had these requirements.

707
00:36:36,810 --> 00:36:42,160
What the Europeans have done
is to basically pay prices.

708
00:36:42,160 --> 00:36:44,670
So if you put up a
solar farm in Germany,

709
00:36:44,670 --> 00:36:49,410
your revenue per kilowatt hour
is guaranteed for 20 years.

710
00:36:49,410 --> 00:36:51,720
In the US, you've got
to find a utility that

711
00:36:51,720 --> 00:36:55,431
wants to deal with you, for
the fact that you're renewable.

712
00:36:58,260 --> 00:37:01,170
One argument is, why do we
do it that way in the US?

713
00:37:01,170 --> 00:37:02,760
There are lots of
problems with it.

714
00:37:02,760 --> 00:37:05,960
Because the cost is hidden.

715
00:37:05,960 --> 00:37:08,240
It hides the cost, I
think is the main reason.

716
00:37:08,240 --> 00:37:09,827
It hides the cost.

717
00:37:09,827 --> 00:37:11,660
In Germany, I mean you
know there's a price.

718
00:37:11,660 --> 00:37:12,827
It's posted.

719
00:37:12,827 --> 00:37:13,910
In Spain, there's a price.

720
00:37:13,910 --> 00:37:15,110
It's posted.

721
00:37:15,110 --> 00:37:18,020
In the US, how much
does solar and wind

722
00:37:18,020 --> 00:37:19,490
add to our electric bills?

723
00:37:19,490 --> 00:37:21,550
We don't have a clue.

724
00:37:21,550 --> 00:37:25,510
Because there's--
there are deals done.

725
00:37:25,510 --> 00:37:27,820
But they're not
typically public.

726
00:37:27,820 --> 00:37:28,975
So we don't know.

727
00:37:28,975 --> 00:37:33,010
The fact that-- you may or may
not have followed that onshore

728
00:37:33,010 --> 00:37:36,510
wind was--

729
00:37:36,510 --> 00:37:38,190
that the Cape Wind--
you all remember

730
00:37:38,190 --> 00:37:42,690
Cape Wind, this project to
build a bunch of windmills

731
00:37:42,690 --> 00:37:49,380
off Cape Cod, hugely
controversial, also expensive?

732
00:37:49,380 --> 00:37:52,110
People were shocked
that the price

733
00:37:52,110 --> 00:37:54,600
to be paid for that electricity
was three times the going

734
00:37:54,600 --> 00:37:55,800
wholesale rate.

735
00:37:55,800 --> 00:37:57,240
Shocked.

736
00:37:57,240 --> 00:38:01,530
Well, you're building windmills
offshore, in the ocean,

737
00:38:01,530 --> 00:38:03,480
with transmission.

738
00:38:03,480 --> 00:38:06,960
And gas is really cheap.

739
00:38:06,960 --> 00:38:08,310
People were shocked because--

740
00:38:08,310 --> 00:38:09,727
there were a number
of interviews.

741
00:38:09,727 --> 00:38:12,610
People said, well,
the wind is free.

742
00:38:12,610 --> 00:38:15,060
OK, the wind is free.

743
00:38:15,060 --> 00:38:18,600
So we do this--

744
00:38:18,600 --> 00:38:22,110
the other thing we
do is tax breaks.

745
00:38:22,110 --> 00:38:26,250
And tax breaks give
you this pattern.

746
00:38:26,250 --> 00:38:32,520
This is wind additions
in megawatts over time.

747
00:38:32,520 --> 00:38:37,800
And you might ask, why
it looks like that?

748
00:38:37,800 --> 00:38:40,200
Whenever you see weird
business conduct,

749
00:38:40,200 --> 00:38:43,620
the first thing you might
want to look at is tax policy.

750
00:38:43,620 --> 00:38:48,330
These are the years in which
either the tax subsidy was

751
00:38:48,330 --> 00:38:50,765
absent or in which
it wasn't clear it

752
00:38:50,765 --> 00:38:51,765
was going to be renewed.

753
00:38:54,270 --> 00:38:55,980
And when that
happens, people stop.

754
00:38:55,980 --> 00:38:58,290
And, of course, if you want
to build a wind industry,

755
00:38:58,290 --> 00:39:02,350
that's insane because
it means you can't ever

756
00:39:02,350 --> 00:39:05,410
gear up for production
because next year you

757
00:39:05,410 --> 00:39:07,480
might not have any orders.

758
00:39:07,480 --> 00:39:09,760
It's also a little
problem with using--

759
00:39:09,760 --> 00:39:13,980
we use tax breaks, too,
because that hides the cost.

760
00:39:13,980 --> 00:39:18,000
You can cut revenue and
subsidize renewable power--

761
00:39:18,000 --> 00:39:20,970
or cut taxes and subsidize
renewable power in one

762
00:39:20,970 --> 00:39:22,890
fell swoop.

763
00:39:22,890 --> 00:39:25,410
That's just fabulous.

764
00:39:25,410 --> 00:39:28,050
But, of course, if the firm
doesn't have any profits,

765
00:39:28,050 --> 00:39:31,620
it can't use a
profits tax break.

766
00:39:31,620 --> 00:39:33,680
And a lot of money is
wasted making that work.

767
00:39:38,580 --> 00:39:41,010
We also don't enforce much.

768
00:39:41,010 --> 00:39:46,620
So we have probably the
worst possible policy mix.

769
00:39:46,620 --> 00:39:50,670
And the only explanation
I've ever heard

770
00:39:50,670 --> 00:39:55,020
is that it's perfectly
designed to hide the costs.

771
00:39:55,020 --> 00:39:57,580
The tax breaks-- who
knows how much we spend.

772
00:39:57,580 --> 00:39:59,875
I mean, you can--

773
00:39:59,875 --> 00:40:02,710
it can be found
out, but not easily.

774
00:40:02,710 --> 00:40:04,650
How much does it add
to the cost of power?

775
00:40:04,650 --> 00:40:06,150
Well, it doesn't.

776
00:40:06,150 --> 00:40:09,300
It adds to your income taxes.

777
00:40:09,300 --> 00:40:11,490
What about these
renewable standards,

778
00:40:11,490 --> 00:40:13,080
what do they add to
the cost of power?

779
00:40:13,080 --> 00:40:18,420
Well, hard to know; bunches of
deals, bunches of contracts,

780
00:40:18,420 --> 00:40:21,430
not ever really reported.

781
00:40:21,430 --> 00:40:23,010
So we hide the cost pretty well.

782
00:40:25,740 --> 00:40:27,860
A carbon tax would be
a much better approach.

783
00:40:31,168 --> 00:40:32,710
I should tell you,
this is actually--

784
00:40:32,710 --> 00:40:34,550
I find this fascinating.

785
00:40:34,550 --> 00:40:36,280
But the latest word
from Washington

786
00:40:36,280 --> 00:40:40,250
is that the carbon
tax is coming back.

787
00:40:40,250 --> 00:40:42,607
Remember cap and
trade, the climate bill

788
00:40:42,607 --> 00:40:44,690
that we were going to have
because both candidates

789
00:40:44,690 --> 00:40:46,190
in the last
presidential election

790
00:40:46,190 --> 00:40:50,330
supported having a cap and
trade program, which went down

791
00:40:50,330 --> 00:40:53,300
to defeat as cap and tax?

792
00:40:53,300 --> 00:40:56,270
Well, there now is serious--
serious work going on

793
00:40:56,270 --> 00:40:58,400
in Washington, as
far as I can tell,

794
00:40:58,400 --> 00:41:03,890
on both sides of the aisle,
preparing carbon tax bills.

795
00:41:03,890 --> 00:41:06,940
They don't mention climate.

796
00:41:06,940 --> 00:41:09,560
Turns out, it's OK to tax carbon
if you don't mention climate.

797
00:41:09,560 --> 00:41:14,190
You mention revenue,
energy self-sufficiency.

798
00:41:14,190 --> 00:41:15,960
So we're going to
have a carbon tax--

799
00:41:15,960 --> 00:41:17,970
we may have a carbon
tax to raise revenue

800
00:41:17,970 --> 00:41:21,600
without the word "climate"
being uttered in the debate.

801
00:41:21,600 --> 00:41:22,830
It's fabulous stuff.

802
00:41:22,830 --> 00:41:26,670
Anyway, that's renewables.

803
00:41:26,670 --> 00:41:28,560
Questions, comments, reactions?

804
00:41:33,140 --> 00:41:37,110
You're not terminally
depressed by all that?

805
00:41:37,110 --> 00:41:38,210
OK.

806
00:41:38,210 --> 00:41:40,550
All right, I'll
depress you some more.

807
00:41:40,550 --> 00:41:41,600
Let's talk about prices.

808
00:41:45,440 --> 00:41:50,150
Prices don't reflect the
nature of actual costs.

809
00:41:50,150 --> 00:41:52,010
Demand varies over time.

810
00:41:52,010 --> 00:41:53,690
You saw last time
a supply curve.

811
00:41:53,690 --> 00:41:57,185
That says prices vary over time.

812
00:41:57,185 --> 00:42:01,910
These are average-- these are
daily average prices over 2010,

813
00:42:01,910 --> 00:42:03,890
in the PJM market area.

814
00:42:03,890 --> 00:42:06,470
That began is Pennsylvania,
Jersey, Maryland.

815
00:42:06,470 --> 00:42:07,430
It's now broader.

816
00:42:07,430 --> 00:42:10,280
It's the biggest electricity
market in the country.

817
00:42:10,280 --> 00:42:11,900
And you notice a
bunch of things.

818
00:42:11,900 --> 00:42:13,880
You notice they vary.

819
00:42:13,880 --> 00:42:16,407
You can sort of see
a seasonal pattern.

820
00:42:16,407 --> 00:42:18,740
They tend to be a little
higher in the summer on average

821
00:42:18,740 --> 00:42:21,140
than they are other
times of the year.

822
00:42:21,140 --> 00:42:24,500
Not that much higher, because
other times of the year

823
00:42:24,500 --> 00:42:26,540
you do your maintenance.

824
00:42:26,540 --> 00:42:28,940
So the supply curve
shifts when you take units

825
00:42:28,940 --> 00:42:30,830
off to maintain them.

826
00:42:30,830 --> 00:42:33,230
This must have been a
particularly hot day.

827
00:42:33,230 --> 00:42:36,980
Who knows what happened
here in December?

828
00:42:36,980 --> 00:42:38,810
A unit went off.

829
00:42:38,810 --> 00:42:42,740
So the point here is you'd
have kind of a hard time.

830
00:42:42,740 --> 00:42:47,060
You could predict this
maybe that, yeah, it

831
00:42:47,060 --> 00:42:49,293
tends to be lower in
the spring, and maybe

832
00:42:49,293 --> 00:42:50,210
what the hell is that?

833
00:42:50,210 --> 00:42:54,320
But you'd predict basically
a summer peak in prices.

834
00:42:54,320 --> 00:42:56,270
But you'd miss a lot.

835
00:42:56,270 --> 00:42:58,670
You'd miss a lot
of the variation.

836
00:42:58,670 --> 00:43:05,640
You're talking down from $20
a megawatt hour up to $120.

837
00:43:05,640 --> 00:43:06,740
And this is not--

838
00:43:06,740 --> 00:43:09,470
if we deaveraged and
didn't do daily averages,

839
00:43:09,470 --> 00:43:11,930
you'd get more of
a spread than that.

840
00:43:11,930 --> 00:43:13,880
You can get several
orders of magnitude spread

841
00:43:13,880 --> 00:43:15,980
in marginal cost of electricity.

842
00:43:15,980 --> 00:43:18,140
You do not see that at home.

843
00:43:18,140 --> 00:43:22,370
If you looked at the daily
level, it's even more striking.

844
00:43:22,370 --> 00:43:27,230
This is a couple of
days in 2010 by hour.

845
00:43:27,230 --> 00:43:30,860
And you see on whatever--
whichever of the two days

846
00:43:30,860 --> 00:43:34,070
this is, you had
your morning peak

847
00:43:34,070 --> 00:43:36,650
and you had your afternoon peak.

848
00:43:36,650 --> 00:43:38,780
OK, you could kind
of predict that.

849
00:43:38,780 --> 00:43:41,660
I have no idea what
happened on this day.

850
00:43:41,660 --> 00:43:46,370
This is like 1:00 or 2:00 in the
afternoon, the prices shoot up.

851
00:43:46,370 --> 00:43:47,060
And that's real.

852
00:43:47,060 --> 00:43:49,790
That's the cost of generating
electricity at the margin.

853
00:43:49,790 --> 00:43:51,230
That's a marginal cost.

854
00:43:51,230 --> 00:43:54,470
And it's at $300
a megawatt hour,

855
00:43:54,470 --> 00:43:57,290
they've put up pulled all
the old dirty diesels out

856
00:43:57,290 --> 00:44:01,610
and turned them on
for an hour or two.

857
00:44:01,610 --> 00:44:05,510
So you can't forecast that.

858
00:44:05,510 --> 00:44:07,820
You don't pay that.

859
00:44:07,820 --> 00:44:09,950
Small commercial and
residential users

860
00:44:09,950 --> 00:44:12,770
don't see that
variation in cost.

861
00:44:12,770 --> 00:44:15,620
Oranges get more
expensive at wholesale,

862
00:44:15,620 --> 00:44:17,180
they're more
expensive at retail.

863
00:44:17,180 --> 00:44:21,930
Power gets more expensive,
at wholesale nothing happens.

864
00:44:21,930 --> 00:44:25,730
Now, it could happen.

865
00:44:25,730 --> 00:44:28,520
I mentioned earlier,
advanced meters.

866
00:44:28,520 --> 00:44:33,170
What advanced meters do is
advanced meters basically

867
00:44:33,170 --> 00:44:36,020
record usage at shorter
short intervals,

868
00:44:36,020 --> 00:44:40,310
say 15 minutes; can
receive price signals;

869
00:44:40,310 --> 00:44:44,390
can send 15-minute or even
finer usage information

870
00:44:44,390 --> 00:44:46,440
to the utility.

871
00:44:46,440 --> 00:44:48,067
So you could use these.

872
00:44:48,067 --> 00:44:50,150
And there are millions of
them around the country.

873
00:44:50,150 --> 00:44:53,870
You could use them to
charge those prices.

874
00:44:56,990 --> 00:45:03,512
You can imagine exactly
how popular that would be.

875
00:45:03,512 --> 00:45:05,630
You come home one day.

876
00:45:05,630 --> 00:45:09,440
And, oh, by the way you've
just spent a jillion dollars

877
00:45:09,440 --> 00:45:13,180
for electricity because
something happened.

878
00:45:13,180 --> 00:45:18,190
So these meters, they're
required in California.

879
00:45:18,190 --> 00:45:21,430
They're required in
several other states--

880
00:45:21,430 --> 00:45:24,070
everywhere.

881
00:45:24,070 --> 00:45:26,410
Federal tax dollars--
your federal tax dollars--

882
00:45:26,410 --> 00:45:29,230
have paid for millions of them.

883
00:45:29,230 --> 00:45:31,732
But they're not being used.

884
00:45:31,732 --> 00:45:33,190
They're very smart
meters, that are

885
00:45:33,190 --> 00:45:37,822
going to go slowly insane not
using any of that intelligence.

886
00:45:37,822 --> 00:45:39,280
They're not being
used for pricing.

887
00:45:39,280 --> 00:45:41,980
They're not being used
for measuring every 15

888
00:45:41,980 --> 00:45:44,890
seconds because-- or 15
minutes because who cares?

889
00:45:44,890 --> 00:45:47,900
The price is the same.

890
00:45:47,900 --> 00:45:51,730
So the one thing
everybody is convinced

891
00:45:51,730 --> 00:45:57,400
of is if you just cut people
over to pricing like that,

892
00:45:57,400 --> 00:46:00,010
there would be
riots in the street

893
00:46:00,010 --> 00:46:02,860
because people would
have nasty surprises.

894
00:46:02,860 --> 00:46:05,650
And people don't
like nasty surprises.

895
00:46:05,650 --> 00:46:07,000
You go away for a week.

896
00:46:07,000 --> 00:46:07,708
It's a heat wave.

897
00:46:07,708 --> 00:46:09,583
You forgot to turn off
your air conditioner--

898
00:46:09,583 --> 00:46:11,050
turn down your air conditioner.

899
00:46:11,050 --> 00:46:13,210
Boom, $3,000 electricity bill.

900
00:46:13,210 --> 00:46:15,370
You don't like that too much.

901
00:46:15,370 --> 00:46:22,000
So it seems clear to most of
us that the only way this works

902
00:46:22,000 --> 00:46:26,740
is if you can have simple
automated response,

903
00:46:26,740 --> 00:46:28,720
simple automated response.

904
00:46:32,590 --> 00:46:36,460
The main issue is going to be
air conditioning and heating.

905
00:46:36,460 --> 00:46:40,750
But even so, you
might like some signal

906
00:46:40,750 --> 00:46:48,620
that says don't do your clothes
at 5:00 in the afternoon.

907
00:46:48,620 --> 00:46:50,560
Something that says
to you, electricity

908
00:46:50,560 --> 00:46:52,880
is really expensive right now.

909
00:46:52,880 --> 00:46:55,960
And for some things,
it's got to be automated.

910
00:46:55,960 --> 00:47:01,420
The flip side of all
this price variation

911
00:47:01,420 --> 00:47:07,060
is a change in low
duration curves.

912
00:47:07,060 --> 00:47:11,110
You recall, these curves you
get by stacking the power--

913
00:47:11,110 --> 00:47:13,300
by measuring power
consumption each hour,

914
00:47:13,300 --> 00:47:16,840
and then graphing first the
hour with the highest use, then

915
00:47:16,840 --> 00:47:20,620
second highest, and so
on, down to the lowest.

916
00:47:20,620 --> 00:47:26,320
These are low duration
curves for New York,

917
00:47:26,320 --> 00:47:30,010
rescaled so that the
peak is equal to 1,

918
00:47:30,010 --> 00:47:36,760
and averaged over 1980,
'84, and 2005 to 2009.

919
00:47:36,760 --> 00:47:37,930
You notice they change--

920
00:47:37,930 --> 00:47:39,790
it changes shape.

921
00:47:39,790 --> 00:47:42,370
It changes shape
kind of dramatically.

922
00:47:42,370 --> 00:47:47,000
In '80 to '84, with
this 21% is, if you

923
00:47:47,000 --> 00:47:51,910
adjust size the system to
meet peak demand exactly,

924
00:47:51,910 --> 00:47:56,710
21% of your capacity would
be used fewer than a thousand

925
00:47:56,710 --> 00:48:00,230
of the 8,760 hours in the year.

926
00:48:00,230 --> 00:48:03,010
That's a lot of idle capital.

927
00:48:03,010 --> 00:48:09,370
But it gets worse, 2005 to
2009, that curve is peak year--

928
00:48:09,370 --> 00:48:12,050
technical term.

929
00:48:12,050 --> 00:48:13,510
It has a sharper peak.

930
00:48:13,510 --> 00:48:18,010
And over a third of your
capacity was used only

931
00:48:18,010 --> 00:48:20,530
a thousand hours--

932
00:48:20,530 --> 00:48:23,500
less than a thousand
hours a year.

933
00:48:23,500 --> 00:48:24,670
So why?

934
00:48:24,670 --> 00:48:28,225
Well, the data are
what the data are.

935
00:48:28,225 --> 00:48:31,910
There's two explanations
that people have.

936
00:48:31,910 --> 00:48:34,660
The first is air conditioning.

937
00:48:34,660 --> 00:48:38,650
Because more central air
conditioning in particular

938
00:48:38,650 --> 00:48:41,800
means more load on
hot summer days.

939
00:48:41,800 --> 00:48:44,890
And hot summer days
of the system peaks.

940
00:48:44,890 --> 00:48:49,360
So more air conditioning--
every unit in the state

941
00:48:49,360 --> 00:48:51,070
is on these peak times.

942
00:48:51,070 --> 00:48:54,420
And there are more
units in the state.

943
00:48:54,420 --> 00:48:56,550
The other is that--

944
00:48:56,550 --> 00:48:57,330
it's interesting.

945
00:48:57,330 --> 00:48:59,850
If you look at the
numbers in the '50s,

946
00:48:59,850 --> 00:49:04,080
industrial load was about
half of electricity usage,

947
00:49:04,080 --> 00:49:05,520
about half.

948
00:49:05,520 --> 00:49:07,350
And that tends not
to be seasonal.

949
00:49:07,350 --> 00:49:10,500
And it also tends to
run at night a lot.

950
00:49:10,500 --> 00:49:14,160
It's now down to
about 28% nationally.

951
00:49:14,160 --> 00:49:19,440
So if it's all industrial
load that runs 24 hours a day,

952
00:49:19,440 --> 00:49:22,060
this thing is flat.

953
00:49:22,060 --> 00:49:26,100
But as you get less of that,
this back end falls off

954
00:49:26,100 --> 00:49:30,870
and the top end goes
comparatively higher.

955
00:49:30,870 --> 00:49:35,100
Now, everybody's got
an air conditioner.

956
00:49:35,100 --> 00:49:38,100
But what happens when you
have an appreciable number

957
00:49:38,100 --> 00:49:41,940
of electric vehicles and
everybody comes home from work

958
00:49:41,940 --> 00:49:44,040
and plugs them in?

959
00:49:44,040 --> 00:49:47,100
So a plug-in electric charge
that's sort of high capacity

960
00:49:47,100 --> 00:49:48,840
is a house.

961
00:49:48,840 --> 00:49:52,110
I mean, it's comparable
in terms of load.

962
00:49:54,850 --> 00:49:59,400
So electric vehicles, in
areas where they penetrate,

963
00:49:59,400 --> 00:50:02,558
have the ability to make
this problem a lot worse.

964
00:50:02,558 --> 00:50:04,350
And the reason it's a
problem is you've got

965
00:50:04,350 --> 00:50:07,110
to pay for all that capacity.

966
00:50:07,110 --> 00:50:10,360
That's capital sitting there
that has to get paid for.

967
00:50:10,360 --> 00:50:12,600
So rates go up.

968
00:50:12,600 --> 00:50:15,570
So electric vehicles could
have a disproportionate impact,

969
00:50:15,570 --> 00:50:20,040
if they spread, on rates.

970
00:50:20,040 --> 00:50:21,630
I personally don't
think they're going

971
00:50:21,630 --> 00:50:23,422
to spread that much--
they're going to have

972
00:50:23,422 --> 00:50:24,930
great penetration by 2030.

973
00:50:24,930 --> 00:50:26,910
I'd love to be wrong.

974
00:50:26,910 --> 00:50:28,950
But in some areas--

975
00:50:28,950 --> 00:50:32,520
Southern California,
they expect--

976
00:50:32,520 --> 00:50:33,630
probably Cambridge.

977
00:50:33,630 --> 00:50:34,630
I mean, who knows.

978
00:50:34,630 --> 00:50:37,710
But-- well, except for
batteries and cold weather.

979
00:50:37,710 --> 00:50:42,390
But Southern California
Edison monitors

980
00:50:42,390 --> 00:50:44,790
automobile purchases
in Beverly Hills,

981
00:50:44,790 --> 00:50:47,190
and Brentwood, and
various other rich areas

982
00:50:47,190 --> 00:50:48,810
in Southern California.

983
00:50:48,810 --> 00:50:51,720
In Palo Alto, I'm told you
can see parades of Teslas

984
00:50:51,720 --> 00:50:53,500
every so often.

985
00:50:53,500 --> 00:50:58,440
So there are some
areas that will have

986
00:50:58,440 --> 00:50:59,730
a lot of electric vehicles.

987
00:50:59,730 --> 00:51:01,710
And the obvious thing to do
is if you take it to work,

988
00:51:01,710 --> 00:51:03,127
you plug it in
when you come home.

989
00:51:03,127 --> 00:51:05,838
And that's exactly
when the system peaks.

990
00:51:05,838 --> 00:51:07,380
That's exactly when
the system peaks.

991
00:51:07,380 --> 00:51:09,390
So it could make this worse.

992
00:51:09,390 --> 00:51:12,630
So if you can move
loads off-peak,

993
00:51:12,630 --> 00:51:16,660
move charging to the
middle of the night,

994
00:51:16,660 --> 00:51:18,570
have people dry their
clothes at night--

995
00:51:21,270 --> 00:51:23,760
run the air conditioner,
as I'm told Walmart does,

996
00:51:23,760 --> 00:51:25,770
really hard at 5:00 and
6:00 in the morning,

997
00:51:25,770 --> 00:51:29,010
and then back it off during the
day; and run it hard at noon,

998
00:51:29,010 --> 00:51:32,550
and back it off
in the afternoon,

999
00:51:32,550 --> 00:51:35,670
you could flatten the curve.

1000
00:51:35,670 --> 00:51:39,270
But-- and there are
programs in which demand

1001
00:51:39,270 --> 00:51:41,405
responds to peak conditions.

1002
00:51:41,405 --> 00:51:43,530
There are something like
2 million air conditioners

1003
00:51:43,530 --> 00:51:46,170
in Florida that are
centrally controlled.

1004
00:51:46,170 --> 00:51:50,130
And the utilities are allowed
to basically turn them--

1005
00:51:50,130 --> 00:51:53,070
well, turn them up in
terms of temperature

1006
00:51:53,070 --> 00:52:00,250
in system emergencies or system
stress periods, not every day.

1007
00:52:00,250 --> 00:52:05,160
But in principle, pricing
can take care of this.

1008
00:52:05,160 --> 00:52:07,590
If you can make this
electricity really

1009
00:52:07,590 --> 00:52:10,350
expensive in those hours,
you bring that peak down,

1010
00:52:10,350 --> 00:52:16,470
use capacity more effectively,
deal with electric vehicles.

1011
00:52:16,470 --> 00:52:20,373
I mean, some people have
said, well, you really

1012
00:52:20,373 --> 00:52:23,040
shouldn't allow people to charge
their electric vehicles at 5:00

1013
00:52:23,040 --> 00:52:25,360
in the afternoon.

1014
00:52:25,360 --> 00:52:29,960
That is not
politically possible.

1015
00:52:29,960 --> 00:52:33,840
Can you imagine being told
you can't refuel your vehicle,

1016
00:52:33,840 --> 00:52:35,170
and go out in the evening?

1017
00:52:35,170 --> 00:52:37,350
No, that's not going to happen.

1018
00:52:37,350 --> 00:52:39,540
If you can't make it
a rule, then maybe

1019
00:52:39,540 --> 00:52:40,920
you have to make it expensive.

1020
00:52:40,920 --> 00:52:42,550
Well, how do you
make it expensive?

1021
00:52:42,550 --> 00:52:44,790
Well, you use price.

1022
00:52:44,790 --> 00:52:46,330
The technology is out there.

1023
00:52:46,330 --> 00:52:48,010
You just have to do it.

1024
00:52:48,010 --> 00:52:51,220
So we think this is
actually important.

1025
00:52:51,220 --> 00:52:54,570
We also think this
is going to happen.

1026
00:52:54,570 --> 00:53:00,030
But there has to be some way
to make it easy for households.

1027
00:53:00,030 --> 00:53:04,230
The Department of Energy,
some few years ago,

1028
00:53:04,230 --> 00:53:06,060
put out a brochure
in which you talked

1029
00:53:06,060 --> 00:53:08,610
about new technology will
let every household be

1030
00:53:08,610 --> 00:53:12,190
an active participant in
the electricity market.

1031
00:53:12,190 --> 00:53:16,150
Electricity is about 2% of
the average household budget.

1032
00:53:16,150 --> 00:53:18,410
Milk is probably more important.

1033
00:53:18,410 --> 00:53:19,910
The notion that
people actually want

1034
00:53:19,910 --> 00:53:22,220
to sit around and look at
electricity prices all day,

1035
00:53:22,220 --> 00:53:24,920
that's nutty.

1036
00:53:24,920 --> 00:53:27,740
But you got to-- if you
want to have them respond,

1037
00:53:27,740 --> 00:53:30,170
they have to be able to
automate the response.

1038
00:53:30,170 --> 00:53:31,860
And that technology is just--

1039
00:53:31,860 --> 00:53:33,110
a lot of people playing in it.

1040
00:53:33,110 --> 00:53:35,540
But it's not--
it's not there yet.

1041
00:53:35,540 --> 00:53:39,650
People like Cisco drool at
this, as you can imagine.

1042
00:53:39,650 --> 00:53:41,960
Cisco has hired people
from electric utilities.

1043
00:53:41,960 --> 00:53:44,120
Cisco is talking to
appliance makers.

1044
00:53:44,120 --> 00:53:47,210
Cisco sees this as a future.

1045
00:53:47,210 --> 00:53:50,570
But we're not there yet.

1046
00:53:50,570 --> 00:53:53,690
As I say, there are a
lot of these meters out.

1047
00:53:53,690 --> 00:53:55,460
Your tax dollars have
paid for millions

1048
00:53:55,460 --> 00:53:58,220
of meters that are
going slowly insane,

1049
00:53:58,220 --> 00:53:59,900
not using their intelligence.

1050
00:53:59,900 --> 00:54:03,800
So we actually think that
it's pretty important

1051
00:54:03,800 --> 00:54:07,820
to begin running sensible
experiments and sharing data,

1052
00:54:07,820 --> 00:54:10,670
so that we can actually
deal with this issue using

1053
00:54:10,670 --> 00:54:11,930
the technology we have.

1054
00:54:15,200 --> 00:54:18,530
Questions here?

1055
00:54:18,530 --> 00:54:19,970
OK.

1056
00:54:19,970 --> 00:54:24,410
Let me talk about
distributed generation.

1057
00:54:24,410 --> 00:54:28,380
This is a pure economic issue.

1058
00:54:28,380 --> 00:54:30,560
And if you think about
it for a little while,

1059
00:54:30,560 --> 00:54:33,230
it's a really easy
economic issue,

1060
00:54:33,230 --> 00:54:36,750
but it's politically impossible.

1061
00:54:36,750 --> 00:54:43,870
So there are subsidies for
distributed generation,

1062
00:54:43,870 --> 00:54:44,800
rooftop, solar.

1063
00:54:44,800 --> 00:54:47,620
California talks about
a million solar roofs.

1064
00:54:47,620 --> 00:54:52,870
Everybody loves it; except,
of course, the utilities.

1065
00:54:52,870 --> 00:54:58,340
And the utilities don't
like it for two reasons.

1066
00:54:58,340 --> 00:55:01,750
One reason is, the
grid isn't designed

1067
00:55:01,750 --> 00:55:06,580
to have power generated out
on the edge, particularly

1068
00:55:06,580 --> 00:55:07,760
the distribution system.

1069
00:55:07,760 --> 00:55:10,810
The simplest example is this.

1070
00:55:10,810 --> 00:55:15,717
Suppose the utility needs to
work on a power line connecting

1071
00:55:15,717 --> 00:55:16,300
to your house.

1072
00:55:16,300 --> 00:55:17,380
So what do they do now?

1073
00:55:17,380 --> 00:55:19,660
They go to the substation
that feeds your house

1074
00:55:19,660 --> 00:55:22,860
and they turn off that circuit.

1075
00:55:22,860 --> 00:55:25,350
OK, suppose every house
in your neighborhood

1076
00:55:25,350 --> 00:55:28,710
has a solar roof,
generating power?

1077
00:55:28,710 --> 00:55:31,680
Well, without those roofs,
you turn off the substation.

1078
00:55:31,680 --> 00:55:33,180
The linemen can go
work on the line.

1079
00:55:33,180 --> 00:55:33,750
It's safe.

1080
00:55:33,750 --> 00:55:35,910
The line's dead.

1081
00:55:35,910 --> 00:55:38,760
If everybody's got
a generator, you

1082
00:55:38,760 --> 00:55:42,440
have to make sure
they're all disconnected.

1083
00:55:42,440 --> 00:55:44,360
And as a former dean
of engineering said,

1084
00:55:44,360 --> 00:55:49,160
let's say-- let's say, there
are 200 of them on the line.

1085
00:55:49,160 --> 00:55:53,560
What's the probability that all
of them disconnect properly?

1086
00:55:53,560 --> 00:55:57,090
Oh, that's zero, close to it.

1087
00:55:57,090 --> 00:56:01,340
So that's an issue
that's troublesome.

1088
00:56:01,340 --> 00:56:02,420
Not impossible.

1089
00:56:02,420 --> 00:56:03,920
There are standards
being developed.

1090
00:56:03,920 --> 00:56:05,900
There are technologies
being developed.

1091
00:56:05,900 --> 00:56:08,180
That requires investment.

1092
00:56:08,180 --> 00:56:11,780
The policy problem is trickier.

1093
00:56:11,780 --> 00:56:13,460
Shouldn't be, but it is.

1094
00:56:13,460 --> 00:56:15,110
So it goes like this.

1095
00:56:15,110 --> 00:56:17,750
I get an electric
bill from Instar.

1096
00:56:17,750 --> 00:56:22,310
The electric bill has two
components, my kilowatt hour

1097
00:56:22,310 --> 00:56:26,690
consumption times an energy
charge, which is roughly

1098
00:56:26,690 --> 00:56:29,930
what they pay for
electricity on the market;

1099
00:56:29,930 --> 00:56:34,550
and the kilowatt hours I
consume times a capacity charge.

1100
00:56:34,550 --> 00:56:36,470
What's that?

1101
00:56:36,470 --> 00:56:38,120
Well, that's the
way they recover

1102
00:56:38,120 --> 00:56:40,145
the fixed cost of the wires.

1103
00:56:42,750 --> 00:56:50,000
So if I put a solar roof on,
I save the energy charge,

1104
00:56:50,000 --> 00:56:55,430
which the utility also saves,
and I save the capacity charge,

1105
00:56:55,430 --> 00:56:58,510
which they don't save.

1106
00:56:58,510 --> 00:57:03,065
So on the one hand, there's
an extra subsidy there.

1107
00:57:03,065 --> 00:57:04,690
In addition to whatever
other subsidies

1108
00:57:04,690 --> 00:57:07,990
I get for putting a solar roof
on, there's an extra subsidy.

1109
00:57:07,990 --> 00:57:12,370
I get this illusory extra
reduction in my electric bill.

1110
00:57:12,370 --> 00:57:15,130
It doesn't correspond to
anybody's cost reductions.

1111
00:57:15,130 --> 00:57:16,240
The costs are still there.

1112
00:57:16,240 --> 00:57:17,650
The wires are still there.

1113
00:57:17,650 --> 00:57:19,730
But I get a cut.

1114
00:57:19,730 --> 00:57:21,700
OK, that gives me
an extra incentive

1115
00:57:21,700 --> 00:57:23,980
to install a solar roof.

1116
00:57:23,980 --> 00:57:26,260
What about the utility?

1117
00:57:26,260 --> 00:57:28,300
Well, it gives the
utility every incentive

1118
00:57:28,300 --> 00:57:30,850
to make it hard for me
to install a solar roof.

1119
00:57:30,850 --> 00:57:33,900
It's money out of their pocket.

1120
00:57:33,900 --> 00:57:36,180
It's money they
don't get to cover

1121
00:57:36,180 --> 00:57:38,620
the fixed cost of the wires.

1122
00:57:38,620 --> 00:57:40,860
So I have a strong incentive--

1123
00:57:40,860 --> 00:57:44,520
a stronger incentive
to put up a solar roof.

1124
00:57:44,520 --> 00:57:47,610
And they have a strong
incentive to resist my

1125
00:57:47,610 --> 00:57:50,160
putting up a solar roof.

1126
00:57:50,160 --> 00:57:52,970
This is not a great policy.

1127
00:57:52,970 --> 00:57:55,580
if you care about solar roofs.

1128
00:57:55,580 --> 00:58:00,980
The fix is straightforward
conceptually.

1129
00:58:03,680 --> 00:58:09,650
That there ought to be a fixed
charge, x dollars a month,

1130
00:58:09,650 --> 00:58:13,400
that doesn't change with how
much electricity I consume.

1131
00:58:13,400 --> 00:58:15,590
And one way to convince
yourself that makes sense

1132
00:58:15,590 --> 00:58:18,770
is, suppose I install,
not a solar roof,

1133
00:58:18,770 --> 00:58:21,590
but I install a diesel
generator in my basement.

1134
00:58:21,590 --> 00:58:24,860
And the diesel generator--
which I vent the exhaust

1135
00:58:24,860 --> 00:58:27,860
into my neighbor's yard,
so that doesn't bother me--

1136
00:58:27,860 --> 00:58:31,190
so the diesel generator covers
all of my electric needs

1137
00:58:31,190 --> 00:58:33,050
when it runs.

1138
00:58:33,050 --> 00:58:36,440
But I still connect to
the grid for backup.

1139
00:58:36,440 --> 00:58:39,530
Now, if you're only charging
me for the kilowatt hours

1140
00:58:39,530 --> 00:58:43,140
I consume, I'm getting
the backup for free.

1141
00:58:43,140 --> 00:58:45,660
That doesn't make sense.

1142
00:58:45,660 --> 00:58:47,300
So there ought to
be a fixed charge.

1143
00:58:47,300 --> 00:58:51,170
It could vary with your
maximum consumption.

1144
00:58:51,170 --> 00:58:53,420
It could vary
with-- in Spain, you

1145
00:58:53,420 --> 00:58:56,360
contract for a certain maximum.

1146
00:58:56,360 --> 00:58:57,800
Your charge varies with that.

1147
00:58:57,800 --> 00:59:01,010
If you ever exceed that
maximum, it cuts you off;

1148
00:59:01,010 --> 00:59:03,260
very clever system.

1149
00:59:03,260 --> 00:59:05,880
So I would contract for backup.

1150
00:59:05,880 --> 00:59:07,430
I'd pay for it.

1151
00:59:07,430 --> 00:59:10,100
If the generator went
out, I pay a charge.

1152
00:59:10,100 --> 00:59:11,450
I'd pay for the power.

1153
00:59:11,450 --> 00:59:13,190
If the generator
doesn't go out, I still

1154
00:59:13,190 --> 00:59:16,610
pay for my share of the wires
that I have to have connecting.

1155
00:59:16,610 --> 00:59:20,090
Now, I will tell you, we
have made this presentation.

1156
00:59:20,090 --> 00:59:21,320
I've made this presentation.

1157
00:59:21,320 --> 00:59:23,090
Others have made
this presentation.

1158
00:59:23,090 --> 00:59:27,650
The state level, the federal
level, utilities, users,

1159
00:59:27,650 --> 00:59:30,440
everybody nods, and
says, yeah, of course,

1160
00:59:30,440 --> 00:59:31,830
but we can't do that.

1161
00:59:31,830 --> 00:59:34,270
How can we do that?

1162
00:59:34,270 --> 00:59:38,012
The usual argument is, well, it
would be unfair to poor people.

1163
00:59:38,012 --> 00:59:40,220
Well, it would be unfair to
poor people for everybody

1164
00:59:40,220 --> 00:59:42,770
to pay the same charge.

1165
00:59:42,770 --> 00:59:44,630
But why would everybody
pay the same charge?

1166
00:59:44,630 --> 00:59:47,210
Oh, but you then
have to discriminate.

1167
00:59:47,210 --> 00:59:49,897
Well, shouldn't people who
have used a lot of electricity,

1168
00:59:49,897 --> 00:59:51,980
and have the capacity to
use a lot of electricity,

1169
00:59:51,980 --> 00:59:53,630
pay more than those who don't?

1170
00:59:53,630 --> 00:59:54,950
Isn't that fair?

1171
00:59:54,950 --> 00:59:56,540
Well, no, that's too hard.

1172
00:59:56,540 --> 01:00:00,290
So this is a recommendation,
that as far as we can tell

1173
01:00:00,290 --> 01:00:03,620
has been floating around
for 20 years and more,

1174
01:00:03,620 --> 01:00:08,090
which may or may not
get adopted anywhere.

1175
01:00:08,090 --> 01:00:09,950
So finally, let me
do cybersecurity--

1176
01:00:12,510 --> 01:00:14,970
no clear authority.

1177
01:00:14,970 --> 01:00:18,870
So here's a picture
from NIST, that

1178
01:00:18,870 --> 01:00:21,180
is sort of what
the grid will look

1179
01:00:21,180 --> 01:00:24,150
like the, road map for the
smart grid interoperability

1180
01:00:24,150 --> 01:00:24,790
standards.

1181
01:00:24,790 --> 01:00:27,450
This is what they're
working off--

1182
01:00:27,450 --> 01:00:30,120
or a cartoon of what
they're working off

1183
01:00:30,120 --> 01:00:31,800
in generating standards.

1184
01:00:31,800 --> 01:00:36,030
And every one of those lines
is a communication line.

1185
01:00:36,030 --> 01:00:37,900
There's computation
in various places.

1186
01:00:37,900 --> 01:00:40,650
There's communication
along those lines.

1187
01:00:40,650 --> 01:00:43,477
And some of them are thousands
of pieces of equipment.

1188
01:00:43,477 --> 01:00:45,060
Some of them, down
here in households,

1189
01:00:45,060 --> 01:00:46,500
are millions of
pieces of equipment.

1190
01:00:46,500 --> 01:00:47,760
They all have to interoperate.

1191
01:00:47,760 --> 01:00:48,510
They all talk.

1192
01:00:51,007 --> 01:00:52,840
The standard setting
problem is hard enough.

1193
01:00:52,840 --> 01:00:56,940
But the fact is,
they're all talking.

1194
01:00:56,940 --> 01:01:00,180
That means there are all these
channels that can be hacked,

1195
01:01:00,180 --> 01:01:04,020
can have failures,
can be sabotaged.

1196
01:01:04,020 --> 01:01:09,720
There was a great demonstration
a couple of years ago,

1197
01:01:09,720 --> 01:01:13,740
done for purposes of a video.

1198
01:01:13,740 --> 01:01:17,200
A small turbine-- oh,
yeah, it was a diesel.

1199
01:01:17,200 --> 01:01:19,620
A small diesel
generator was run.

1200
01:01:19,620 --> 01:01:24,510
And they purposely
hacked the control system

1201
01:01:24,510 --> 01:01:27,390
and caused the
generator to connect

1202
01:01:27,390 --> 01:01:30,150
to the grid out of phase.

1203
01:01:30,150 --> 01:01:32,350
The generator blew up.

1204
01:01:32,350 --> 01:01:35,860
Now, that's a hack that
can take-- you take out

1205
01:01:35,860 --> 01:01:40,990
a large piece of equipment,
and that's not like days.

1206
01:01:40,990 --> 01:01:44,080
That could be months
to fix, or years.

1207
01:01:44,080 --> 01:01:48,110
So it's a serious issue.

1208
01:01:48,110 --> 01:01:54,560
Most people are aware of it.

1209
01:01:54,560 --> 01:01:57,920
But the response-- the
governmental response

1210
01:01:57,920 --> 01:02:00,650
is quite fragmented.

1211
01:02:00,650 --> 01:02:04,010
At the federal level,
there are standards.

1212
01:02:04,010 --> 01:02:06,650
There are some compliance--
some regulation.

1213
01:02:06,650 --> 01:02:12,110
Each state regulates
cybersecurity in its state.

1214
01:02:12,110 --> 01:02:15,530
And I remember talking to one
of the commissioners from Ohio.

1215
01:02:15,530 --> 01:02:17,240
And he said, oh,
we have workshops.

1216
01:02:17,240 --> 01:02:19,115
We're getting all these
guys to do standards.

1217
01:02:19,115 --> 01:02:19,970
This is fabulous.

1218
01:02:19,970 --> 01:02:23,000
I said, what about the municipal
utilities and the co-ops

1219
01:02:23,000 --> 01:02:24,350
in Ohio?

1220
01:02:24,350 --> 01:02:28,520
Oh, well, we invite
them to come.

1221
01:02:28,520 --> 01:02:30,530
There's no jurisdiction.

1222
01:02:30,530 --> 01:02:32,930
They're connected to the grid.

1223
01:02:32,930 --> 01:02:36,590
So no development
or coordination

1224
01:02:36,590 --> 01:02:38,690
of standards for
distribution systems.

1225
01:02:38,690 --> 01:02:43,980
Those are regulated by
the states or not at all.

1226
01:02:43,980 --> 01:02:49,640
And nobody deals
with the whole grid.

1227
01:02:49,640 --> 01:02:51,680
So it's pretty simple.

1228
01:02:51,680 --> 01:02:57,130
The simple recommendation,
somebody ought to be in charge.

1229
01:02:57,130 --> 01:02:58,840
There are people in
charge of cyber--

1230
01:02:58,840 --> 01:03:01,060
the Department of
Homeland Security

1231
01:03:01,060 --> 01:03:04,000
has a chart that shows
who's in charge of what.

1232
01:03:04,000 --> 01:03:07,240
And it goes industry
by industry, usually

1233
01:03:07,240 --> 01:03:08,320
a match of agencies.

1234
01:03:08,320 --> 01:03:10,120
Nobody's in charge
in electricity.

1235
01:03:10,120 --> 01:03:13,780
The latest-- the
latest statement

1236
01:03:13,780 --> 01:03:16,785
from the administration is, the
Department of Homeland Security

1237
01:03:16,785 --> 01:03:18,160
and the Department
of Energy will

1238
01:03:18,160 --> 01:03:21,030
coordinate on this subject.

1239
01:03:21,030 --> 01:03:24,060
Now, you don't have to spend
too much time in organizations

1240
01:03:24,060 --> 01:03:26,070
to realize that means
nobody's in charge.

1241
01:03:28,810 --> 01:03:30,750
Everybody-- this
is a recommendation

1242
01:03:30,750 --> 01:03:34,180
that everybody agrees with.

1243
01:03:34,180 --> 01:03:38,640
But there's violent
disagreement over who gets it.

1244
01:03:38,640 --> 01:03:40,410
The administration
has said it ought

1245
01:03:40,410 --> 01:03:43,230
to be the Department
of Homeland Security.

1246
01:03:43,230 --> 01:03:44,985
The relevant folks
in Congress say

1247
01:03:44,985 --> 01:03:47,070
it should be the
Department of Energy.

1248
01:03:47,070 --> 01:03:50,490
The current compromise that says
let them play nicely together

1249
01:03:50,490 --> 01:03:53,820
is something that
no one thinks--

1250
01:03:53,820 --> 01:03:57,630
no one outside the Beltway
thinks can possibly work.

1251
01:03:57,630 --> 01:04:02,370
So this is a look at
the future of the grid.

1252
01:04:02,370 --> 01:04:04,780
It's interesting.

1253
01:04:04,780 --> 01:04:08,620
We did this study
for two reasons.

1254
01:04:08,620 --> 01:04:11,130
One, because we got very
tired of hearing that we

1255
01:04:11,130 --> 01:04:12,270
have a third-world grid.

1256
01:04:12,270 --> 01:04:13,200
And it's all broken.

1257
01:04:13,200 --> 01:04:15,930
And we're all going to die.

1258
01:04:15,930 --> 01:04:18,240
That seemed a little extreme.

1259
01:04:18,240 --> 01:04:21,180
And then there's stuff
about how smart grids

1260
01:04:21,180 --> 01:04:22,740
are going to
transform our lives,

1261
01:04:22,740 --> 01:04:24,690
like the internet has
transformed our lives.

1262
01:04:24,690 --> 01:04:27,060
And we're all going to be active
participants in the electricity

1263
01:04:27,060 --> 01:04:27,560
market.

1264
01:04:27,560 --> 01:04:29,460
And that sounded even dumber.

1265
01:04:29,460 --> 01:04:32,100
And we thought it
might be worthwhile

1266
01:04:32,100 --> 01:04:34,350
getting some economists and
engineers to actually look

1267
01:04:34,350 --> 01:04:36,060
at the grid.

1268
01:04:36,060 --> 01:04:38,880
The conclusion we have is,
yeah, I mean, you can--

1269
01:04:38,880 --> 01:04:40,320
there's a way forward.

1270
01:04:42,850 --> 01:04:45,000
We're not in crisis.

1271
01:04:45,000 --> 01:04:46,210
There are real opportunities.

1272
01:04:46,210 --> 01:04:47,335
They're not transformative.

1273
01:04:47,335 --> 01:04:48,990
But they're real opportunities.

1274
01:04:48,990 --> 01:04:51,030
But there are problems.

1275
01:04:51,030 --> 01:04:55,080
We need to do relatively
inexpensive R&D,

1276
01:04:55,080 --> 01:04:58,200
I mean, this is a
software development,

1277
01:04:58,200 --> 01:04:59,250
algorithm development.

1278
01:04:59,250 --> 01:05:02,500
It's not nuclear power.

1279
01:05:02,500 --> 01:05:06,270
We need to be smarter about
siting transmission lines.

1280
01:05:06,270 --> 01:05:11,890
We need to move toward
getting retail prices right.

1281
01:05:11,890 --> 01:05:14,540
We need to deal with
network costs appropriately.

1282
01:05:14,540 --> 01:05:16,710
We need to deal
with cybersecurity.

1283
01:05:16,710 --> 01:05:19,200
If that all happens, you
will live happily ever after.

1284
01:05:19,200 --> 01:05:19,830
Questions?

1285
01:05:23,020 --> 01:05:23,860
Yeah, Matthew?

1286
01:05:23,860 --> 01:05:25,235
AUDIENCE: Earlier
in lecture, you

1287
01:05:25,235 --> 01:05:28,750
talked about how the
bill for the carbon tax

1288
01:05:28,750 --> 01:05:31,030
mentions nothing
about the environment.

1289
01:05:31,030 --> 01:05:33,763
What would happen if
it said, hey, this

1290
01:05:33,763 --> 01:05:35,680
is good for the environment,
too, as part of--

1291
01:05:35,680 --> 01:05:37,930
RICHARD SCHMALENSEE: I think
the environmental-- well,

1292
01:05:37,930 --> 01:05:39,160
it's not a bill yet.

1293
01:05:39,160 --> 01:05:42,650
There's no point in introducing
a bill into this Congress.

1294
01:05:42,650 --> 01:05:45,190
There will be-- it is expected--

1295
01:05:45,190 --> 01:05:51,160
the expectation is that after
the election, when there's

1296
01:05:51,160 --> 01:05:55,720
some hope of people
actually working together,

1297
01:05:55,720 --> 01:05:59,050
a short window, that
proposals for a carbon tax

1298
01:05:59,050 --> 01:06:01,660
are going to come leaping
out of the closet.

1299
01:06:01,660 --> 01:06:05,350
And those proposals
will talk about revenue.

1300
01:06:05,350 --> 01:06:09,520
And the environmentalists
will be relatively quiet

1301
01:06:09,520 --> 01:06:13,000
because if the environmentalists
talk about climate,

1302
01:06:13,000 --> 01:06:14,830
the Republicans,
who have said there

1303
01:06:14,830 --> 01:06:19,210
is no such thing as climate,
will be backed into a corner,

1304
01:06:19,210 --> 01:06:21,820
even though-- some
of them have had

1305
01:06:21,820 --> 01:06:27,220
to deny climate change to be
in line with the leadership,

1306
01:06:27,220 --> 01:06:29,290
even though they actually
are capable of words

1307
01:06:29,290 --> 01:06:30,920
of more than one syllable.

1308
01:06:30,920 --> 01:06:35,860
So some of those folks would
be pushed to opposition.

1309
01:06:35,860 --> 01:06:37,480
If you don't mention
climate, they

1310
01:06:37,480 --> 01:06:39,700
can quietly say, yeah,
it's good for the climate

1311
01:06:39,700 --> 01:06:41,038
and vote for it.

1312
01:06:41,038 --> 01:06:42,580
I don't know if it's
going to happen.

1313
01:06:42,580 --> 01:06:44,962
It's a cocktail
parity conversation.

1314
01:06:44,962 --> 01:06:47,170
But it appears to be a fairly
serious cocktail parity

1315
01:06:47,170 --> 01:06:47,967
conversation.

1316
01:06:47,967 --> 01:06:48,550
Anything else?

1317
01:06:48,550 --> 01:06:49,050
Yeah?

1318
01:06:49,050 --> 01:06:50,717
AUDIENCE: Are you
going to be presenting

1319
01:06:50,717 --> 01:06:51,940
tomorrow [INAUDIBLE]?

1320
01:06:51,940 --> 01:06:53,565
RICHARD SCHMALENSEE:
I'll be presenting

1321
01:06:53,565 --> 01:06:56,140
a longer version of this to a--

1322
01:06:56,140 --> 01:07:00,580
and a somewhat different
version, but close to it--

1323
01:07:00,580 --> 01:07:04,360
a group of large
electricity users.

1324
01:07:04,360 --> 01:07:07,540
And I'm very interested in what
they're going to have to say.

1325
01:07:07,540 --> 01:07:09,040
We've talked to
state commissioners.

1326
01:07:09,040 --> 01:07:12,250
We've talked to the
federal regulators.

1327
01:07:12,250 --> 01:07:16,165
We've talked to
congressional staff.

1328
01:07:16,165 --> 01:07:18,940
This is the first conversation
I've had with consumers.

1329
01:07:18,940 --> 01:07:22,230
So I'm looking forward
to it, big industrials.

1330
01:07:22,230 --> 01:07:23,160
Yeah?

1331
01:07:23,160 --> 01:07:24,360
AUDIENCE: Is the problem
with cybersecurity

1332
01:07:24,360 --> 01:07:26,610
that nobody wants to deal with
it, or everybody wants to?

1333
01:07:26,610 --> 01:07:28,120
RICHARD SCHMALENSEE: Everybody
wants to deal with it.

1334
01:07:28,120 --> 01:07:28,620
Yeah.

1335
01:07:32,040 --> 01:07:35,190
The problem is that the
Department of Homeland Security

1336
01:07:35,190 --> 01:07:37,290
has no expertise
in power systems.

1337
01:07:37,290 --> 01:07:42,030
And the Department of Energy has
no expertise in cybersecurity.

1338
01:07:42,030 --> 01:07:45,600
So whoever gets it
has to staff up.

1339
01:07:45,600 --> 01:07:48,690
Well, staffing up is fun.

1340
01:07:48,690 --> 01:07:49,500
You add headcounts.

1341
01:07:49,500 --> 01:07:50,125
You add people.

1342
01:07:50,125 --> 01:07:51,360
You add payroll.

1343
01:07:51,360 --> 01:07:52,890
You add prestige.

1344
01:07:52,890 --> 01:07:56,880
So whoever does it
gets to staff up.

1345
01:07:56,880 --> 01:08:01,440
If you split it, then you've
got sort of dueling staffs.

1346
01:08:01,440 --> 01:08:03,610
You don't understand
anything about electricity.

1347
01:08:03,610 --> 01:08:04,110
Oh, yeah.

1348
01:08:04,110 --> 01:08:05,850
But you don't understand
about security.

1349
01:08:05,850 --> 01:08:07,630
I mean, come on.

1350
01:08:07,630 --> 01:08:08,760
That doesn't work.

1351
01:08:08,760 --> 01:08:14,370
So everybody wants--
well, both people want it.

1352
01:08:14,370 --> 01:08:16,859
And at some point, I
assume, one of them

1353
01:08:16,859 --> 01:08:20,189
will be declared the
winner, but not soon.

1354
01:08:20,189 --> 01:08:23,029
Anything else?

1355
01:08:23,029 --> 01:08:25,749
OK, see you Wednesday.