by Stephen Lacey
January 11, 2018

Stephen Lacey: Welcome to the show, folks. Stephen here. I just stepped off the plane from San Francisco, where we closed out our last shindig of the year, GTM Storage Summit. I'll tell you, we've been doing this conference for only three years, but it feels like an eternity. In fact, the last 12 months felt like an eternity. Partly it's because every week in the news cycle these days feels like a year itself, but apparently it's because there's so much more activity in the energy storage space to keep up with.

This year brought record-breaking battery projects, acquisitions, seemingly every other week, and over a dozen utility plans to integrate storage. We just spent the last two days dissecting the market, and that brings us to our episode. Shayle Kann and I hopped on stage to record a live version of The Interchange to kick off the conference. In this conversation, we opened up our vault of data and tried to give a clear picture of where things stand for storage, which sectors are dominating, how utilities are thinking about the technology, where the economics stand and what to look for in 2018. I hope after listening you'll have a more complete view of the state of the market.

After we wrapped that conversation up, I invited Green Mountain Power CEO Mary Powell on stage to share her thoughts on storage adoption and how that fits into this broader culture shift and tech shift within the Vermont utility. Mary is famously a disruptor of sorts. Since taking over at Green Mountain Power in 2008, she's tried to run her business like a startup, not a traditional utility. As a result, GMP is ahead of the curve in thinking about behind-the-meter storage and the role of customers.

If you're listening to this on the Energy Gang feed and you're not yet a subscriber to The Interchange, go to your podcast app right now and subscribe. It's a weekly interview and analysis show that goes deep on the forces shaping the global energy transformation, and it's a perfect complement to your Energy Gang listening.

Now, onto our conversation, recorded live at GTM's Storage Summit this week in San Francisco.

Stephen Lacey: If you could pick any movie that represented the year for energy storage in 2017, what do you think it'd be?

Shayle Kann: A movie that represents the market for energy storage in 2017? Did you ever see that movie, Duplicity? Michael Keaton was in it. It was from the nineties, I think, and the premise is he discovers how to make clones of himself. At first there's just one Michael Keaton, and then all of a sudden there are two, and then are more and more. Then the clones keep cloning themselves. Then all of a sudden there's a ton of Michael Keatons.

If you imagine that Michael Keaton is an energy storage project, we're just starting to clone ... We're having these first big, iconic projects now, and we're just starting to clone them and repeat them. Then they're going to clone themselves. All of a sudden we'll have a ton of Michael Keaton storage projects.

Stephen Lacey: That's pretty good, but if I recall correctly, those clones got glitchier and glitchier over time. Let's hope that that is not representative of energy storage.

Shayle Kann: Yep, that's no good. Okay.

This is a bad movie admittedly. Scarlett Johansson was in a movie a couple years ago called Lucy, where the premise is she accidentally ingests some designer drug that allows her to start using more and more of her brain. We all use only 10 percent of our brain's capacity. As time goes on, she develops the capacity to use more and more of her brain, get smarter and smarter, and becomes more and more powerful.

Maybe we're just at the 10 percent of our brain mark with storage, where we're just using these pretty basic applications now, but as time goes on ... I guess we've already ingested the drug in this horrible metaphor, and we'll be increasing as time goes on, as storage gets smarter.

Stephen Lacey: That's good. There's still a lot to talk about in that 10 percent, and we'll see if we can inch closer to the 20, 30, 40, 50 percent.

Shayle Kann: Right. Do you have one?

Stephen Lacey: Yeah. I thought a lot about this this morning. This one scene from Jurassic Park came to mind, and it was when they've explained how to incubate baby dinosaurs. They go into the lab, and the baby velociraptor emerges from the eggshell, and it looks so cute, and it's this beautiful creation of science, but you know that in a year this thing is going to be ferocious and destroy everything in its path. I think we are at a moment right now where that baby velociraptor is popping out of its shell.

Shayle Kann: Yeah, that one works. I like it.

Stephen Lacey: All right. This movie's just getting started, and so are we. This is The Interchange, conversations on the global energy transformation, from Greentech Media, and we're live in downtown San Francisco at GTM's third annual U.S. Energy Storage Summit.

How you doing, San Francisco?

This week the plot thickens for energy storage in 2017. Shayle Kann and I will detail that plot, the rising action, the climax and the denouement. Plus, we'll preview what's ahead for 2018. Let's get into it.

Shayle, set the scene. What are we installing right now and where?

Shayle Kann: Right. It's always useful to start by level setting with what's actually happening, what are we deploying in terms of energy storage in the U.S. right now. Then we can talk about what we think might be coming next.

Snapshot of 2017 is that we think that by the end of this year we will have deployed close to 700 megawatt-hours. That's close to 300 megawatts of grid-connected and off-grid energy storage. This is battery storage in the U.S. There are a couple different ways you could look at that. That's 55 percent growth over the last year, so it's a rapidly growing market. That's fantastic. It's also still a very small market by most standards. That's roughly one-thirtieth the size of the solar market in the U.S. this year.

It's a pretty classic market, where we have big growth expectations. That's why we have so many people in the room here, and yet a market where the projects can be counted in the utility scale sector on a couple of hands and in the hundreds or thousands in commercial and residential. It's small but it is growing at the rate that you would hope.

With energy storage, it's I think always important not just to talk about how big is this market in general or even how big is it by sector, residential, commercial, utility scale, but by applications, because the thing that is unique about energy storage amongst technologies on the grid today is that it's a simple thing. It just charges and discharges energy, but the way that you utilize that charging and discharging can then create a bunch of different values on the grid.

We like to break down the market according to the primary application that any given project is utilizing. Admittedly, there are lots of projects, an increasing number, that have multiple use cases. This is value stacking, which is a term that people have used in energy storage forever. It's not actually that many projects are stacking yet, but the ones that are doing so are proliferating. That said, I think it's still interesting to look at what the first application is.

Stephen Lacey: I saw someone on Twitter last night talking, presumably about a different storage conference, and they said, "If you hear someone repeatedly use the words, 'Value stacking,' run from the conference room."

Shayle Kann: I just used it once, which means I hit my limit.

Stephen Lacey: The crowd is still here.

Shayle Kann: All right, I'm going to attempt to not say it again.

If you look at the primary applications, there's a way you can build up how did we get to this 715 megawatt-hours that we're going to deploy this year. First, we are utilizing a lot of the applications that energy storage has theoretically. Many of you have probably seen these studies that say, "Okay, there are 13 different values that energy storage can have on the grid." Most of them we do have examples of today, but the reality is that the vast majority of the market still is comprised of basically three applications.

In the residential sector, most of what we're installing, over half of the residential energy storage that's being deployed, is being used for backup purposes. This is backup on grid energy storage, meaning it's not customers going off grid. It's not necessarily rural areas. It's also not necessarily economic. It is for the purpose of resilience. This is backup energy storage that is going head-to-head against a backup diesel generator. That's still most of the residential market.

In the commercial market, most of what we are installing is for demand charge reduction. Within that even you could just said demand charge reduction in California thanks largely to the SGIP program in this state, which provides incentives. That's commercial, mostly demand charge management today.

Utility scale, we are a little bit more diverse right now, and admittedly, the definitions here are a bit murkier. It's harder to pick the specific primary application for utility scale projects, but this year we're installing a lot of energy storage. We have installed a lot of energy storage for peaking capacity.

What we mean there more than anything else is Aliso Canyon, which was this gas leak that led to rapid procurement of a bunch of energy storage in Southern California, pretty much all of which came online this year. That procurement alone represented a quarter of the energy storage that we are deploying the country this year.

Those three applications, despite there being many more out there, those three are what are dominating the market today.

Stephen Lacey: It is common to talk about value stacking and the many use cases for storage, but really what we're talking about are the three dominant applications that are making up for the majority of deployments here in the U.S.

Shayle Kann: Yeah. That's true again today. I think what's interesting to talk about is do we think that that's going to remain the case, or do we think that there's going to be a shift either toward just a broader array of applications or just to different applications as the market evolves.

Stephen Lacey: That market evolution, as we look toward the next order of magnitude and we think about 17-and-a-half gigawatt hours yearly in deployments, what's that going to look like, and how might that get more diverse?

Shayle Kann: Yeah. We've been spending a bunch of time modeling out what we think the storage market might look like in the U.S. in 10 years. We do think that there is a realistic, in fact, not super-aggressive scenario, where on an annual basis in 2027 we could be installing 17-and-a-half gigawatt hours, so that's 25 times the size of the market this year annually. It's 25 times growth over 10 years. It works out to the market has to be growing I think 38 percent a year consistently for 10 years. That's rapid growth for an extended period of time, but we do think it is realistic and possible.

Within that, we also think that there is going to be a shift in what applications are driving that market, and underlying that forecast there are also some assumptions that are worth talking about, because nothing is guaranteed in energy storage today. As exciting as it is, I don't think you can bank on all this growth.

The way that we build it up, if you look at where we see the big growth coming from, and this is obviously debatable; we could be wrong about any of it. As a heuristic, if you think about where do we think that we're going to be seeing all this growth -- how we get to a market that is 25 times the size of the current market -- it is a different set of applications from the ones that we were just talking about.

In the residential sector, for example, I said everything that we're installing now, or a lot of what we're installing now, is for backup purposes. I don't think that that is the market long-term. It's not that big a market in the U.S. today in general, backup power for residential. It's a billion or two-billion-dollar market, mostly dominated by this one company, Generac, that does backup diesel. I don't see that market expanding 25 times over the next 10 years. Not that many more people are going to need backups. It will always be there, but residential energy storage over the long-term, to be a sustainable market, I think there has to be an economic value proposition for it.

For me, that means that rate structures have to change more than anything else. You have to have some economic incentive for customers to charge and discharge. Here's a crazy statistic in my mind. We've done a really good job in the U.S. over the last, since basically the recession, at deploying smart meters. We have about 60 million residential smart meters in the U.S. right now, but we only have 6 million customers who are on any kind of dynamic rate, meaning any kind of rate structure that has a time-based element to it at all. Even of those 6 million, the vast majority are what I would call dumb smart rates, meaning you have a critical peak price perhaps, but it's certainly not daily-time-of-use pricing, and it's definitely not real-time pricing. That number is in the hundreds of thousands of customers.

We have the capacity to introduce smart rates to half of the country overnight basically from a technological standpoint, but we haven't done it yet. Part of the result of that is that there isn't an incentive to do residential energy storage but for backup at the moment.

Stephen Lacey: What's striking here is that the areas that we potentially see the most growth are the areas that require improvements to rate design. In this projection, you are assuming a pretty progressive and quick rate of change in rate design. One part of me is kind of skeptical if that happens quickly enough to allow these residential and non-commercial sectors to grow so fast.

Shayle Kann: I think that's right. There is evidence of it happening today. We're in California. There are mandatory time-of-use rates coming in California, and California is a big market. I do think that the long arc of history is going to bend toward smarter rates, which to me means ultimately rate structures, this is for residential or commercial customers alike, that are time-based, ideally that are location-based, and arguably that are differential. You can imagine sometime in the future where you could pay more for a higher level of reliability, pay less for a lower level of reliability.

Stephen Lacey: 500 years from now when there's a museum enshrining battery stores, your quote is going to be above the door, "The long arc of history bends toward smart rates."

Shayle Kann: Yeah. I have that tattooed on my back, actually.

Yeah, it's totally true. I think that's the thing about energy storage that people don't often, at least on the outside, I'm sure everybody in this room recognizes that it's not good enough to just make energy storage cheaper. It's not good enough to just make the technology better. The market has to support energy storage. This will be a theme we'll come back to a number of different ways, which is the energy storage has the capacity to offer all this value, but that value has to be monetizable, and that's a question of market design and regulatory structures and things like that.

With energy storage, more than anything else, more than any other technology, it is equally reliant on the technology improving and the cost falling, as it is on the regulatory structure evolving along with the technology.

Stephen Lacey: Without really mentioning, you've also blown up a narrative that has taken over battery storage in the last four years, and that is grid defection or load defection. We don't see off-grid batteries in the residential sector or grid-independent backup being important at all really.

Shayle Kann: Yeah. Again, I think it will be a market that, this isn't saying it disappears. This is saying this is not where the growth comes from, and it's true. I'm a skeptic of grid defection. I don't think it's ever going to make sense for customers to defect en masse.

I have talked about it sometimes in the past, that I think it could happen if restructures don't evolve but the technology does. There's a point where if it gets cheap enough to go off grid, and it's actually cheaper than staying on the system, utilities and regulators don't keep up, you could have that happen. I don't think that's where we're going to go. I think that we will, we'll always have regulation and markets design and rate structures as a laggard to technology, but I don't think it will fall so far behind that you end up with this wave of grid defection.

Stephen Lacey: Yeah, which is why "load defection" I think is a more accurate term.

We're going to see greater growth rates in residential and non-residential, but that growth is obviously coming from a much lower base.

Shayle Kann: Right.

Stephen Lacey: We will still continue to see sizable activity in the utility scale space, but utilities have to sign those contracts. What's their interest, and what are the deployment trends on the utility side?

Shayle Kann: Right. To be clear, we do expect that grid scale is going to remain the biggest market. It's certainly the biggest market today. It's a lower growth rate from a higher base but still pretty aggressive growth. Thirty, 40 percent a year for what's already a bigger market is not insubstantial to retain for a decade. There we think that there's a bit more even opportunity amongst the three of the four big categories that we look at.

T&D deferral is a new one that we're testing out in certain places. You have non-wire alternatives in some places. In California you've got some T&D deferral examples, not widespread yet but I think just starting to be considered. Peaking capacity we'll talk about more. It has a lower growth rate only because it was the biggest segment this year. We are very bullish on energy storage as a peaking resource for the next couple of decades.

Then increasingly, I think the one that's most interesting to me is energy storage as a provider of flexibility on the grid. This one's worth talking about just briefly in the context of the political environment today, which is that our underlying assumption here, and indeed I think actually the underlying assumption of much of the energy storage industry, is that as time goes on, electricity is going to become less and less valuable. Selling kilowatt hours is going to become less and less valuable, because we're adding more and more resources to the grid that are going to have low or zero marginal cost, wind and solar, in particular.

The value on the grid is going to not come from selling kilowatt hours anymore. It's going to be coming from providing the flexibility that is required to integrate and manage all those variable non-dispatchable resources. The markets have to again evolve to provide incentives for that flexibility, to be able to monetize it. That I think has been the clear trend on the grid. That's where we are heading. The question is how fast. It runs directly counter to what the current Federal administration is trying to do, which is a focus on base load, basically the opposite of flexibility.

Whether or not that turns the tide entirely and makes it such that flexibility no longer has value, I think it's hard to make that argument, but it certainly can delay it by long enough that a lot of the companies in the energy storage market and all these other flexibility markets that are reliant on that transition are going to have a hard time if they get pushed back five years by an administration that wants to basically just retain as much base-load as possible.

Stephen Lacey: You're saying there's a reality that's different from what this administration says?

Shayle Kann: I would never, I would never say such a thing.

Stephen Lacey: Okay. Show me the evidence then.

Shayle Kann: It's easy to sit up here on stage and say the markets going to grow 25 times in 10 years. We're all going to agree it's going to grow a whole lot. What we're often looking for as we're trying to build that forward is evidence that the wave is actually building. What can we point to today that is tangible and is happening right now? It's not a deployment that got done this year, but it is evidence that we can see this kind of growth over the next 10 years.

One that I'm particularly fond of right now, because I think it happened mostly in 2017 and it's just starting, is utilities beginning to incorporate energy storage into their long-term integrated resource plans. As utilities are doing long-term planning, historically, they didn't even really think about energy storage. They were figuring out how much demand they expected in their territory and thus how much generation, how much capacity, was going to be required, and then of course what was required on the distribution grid in order to manage that.

Energy storage just didn't play into that for the most part, and so it's a relatively new phenomenon that utilities are actually incorporating energy storage even into just that calculation of what do we need on the grid. In other words, giving energy storage an opportunity to play is a relatively new thing. I think it's good timing that it's starting to happen now, because the metaphor that I've been using is energy storage is like this technology that's been, it's been on the bench basically, hasn't been incorporated into this planning, but it's been shooting free throws in its parents' backyard nonstop nights and weekends and turns out to be really capable of being a great player.

Stephen Lacey: We love metaphors here.

Shayle Kann: Yeah. Now it's finally getting put in the game.

We, along with the SA, have been tracking places where this is happening, either utilities saying they're going to include energy storage in their IRPs, being mandated to do so. There's legislation in some states. There are more than are just on this list, but at a minimum there are at least 19 utilities that are either incorporating a specific amount or up to a certain amount of energy storage within their IRPs across at least 15 states. I know there's at least a couple that aren't on here, like Vermont.

Just those alone, depending on how this all plays out and how much energy storage can take up, that looks like something like a five gigawatt opportunity, again, just from those IRPs, so that's not all you're going to see in those utility territories and just in those 19 utilities. That is, to contextualize it, that's five times the amount of energy storage we have in the US cumulatively today.

It's a gigantic opportunity, and all it takes is just consideration. We are starting to see that happen now, which lends me some confidence in the idea that this growth is real.

Stephen Lacey: Storage is like the Rudy of energy technologies?

Shayle Kann: What's the words? Rudy or Duplicity. All right. Fine.

Stephen Lacey: We're done with those. We're done with those.

Storage is going to be a winner in many of these IRPs, but someone's going to be a loser, and it's probably going to be gas peaker plants who are the disruptees in this process.

Shayle Kann: Yes. I think if energy storage is a disruptive technology, who is it going to disrupt, and I think it's actually not going to disrupt utilities in my mind. It's a resource for utilities.

Stephen Lacey: They've got a better tool in the toolkit now.

Shayle Kann: Yeah, exactly. Who does get disrupted? It is definitely at a minimum, it is gas peakers. We've been looking at that as well and trying to figure out how much of a market there is for energy storage to displace gas peakers. Peaking is kind of a sweet spot for what batteries should be able to do.

We think that there are about 20 gigawatts of gas peak- ... Sorry. There are 20 gigawatts of peaking capacity that is going to be required on the grid over the next decade in the US. That's either already planned projects that are in the early stages or just a requirement based on retirements. Of that 20 gigawatts, a lot of it comes from a small number of states. You have 75 percent, three-quarters of that 20 gigawatts, is coming from 10 states.

Interestingly, more of that requirement comes in the second half of the next decade as opposed to in the next five years. That's a good thing for energy storage, because, as we'll talk about in a minute, it means that more of the requirement, when all this peaking capacity is going to have to come online, comes from the point at which energy storage is going to be cost-competitive.

This is an important point. If you think about how energy storage starts to take over the world on the grid, peaking is, especially for utility scale, peaking is your first big market, because they're expensive. Energy storage should be really good at displacing a peaker, and also you can use multiple values. There's a term for that.

You can get additional benefit out of the storage, but not even incorporating the multiple values, energy storage is starting to get really close to the point where it can just beat a gas peaker, head-to-head, purely on an economic basis, setting aside all the other reasons why you might want to build storage instead of a peaker. There are local air pollution reasons. There's time to build and get up and running, which was part of the reason why the Aliso Canyon projects worked. Energy storage has all these benefits in addition to, but if you set aside all of those and just look at the economics, it's getting very close.

We've been looking at that, and we looked across those 10 states at the cost of a gas peaker and the cost of what we expect in our base case, the energy storage costs to be, incorporating what we expect the utilization rate to be, how much those peakers are actually called upon. Broadly speaking, it looks like a grid parity chart if you're used to looking at solar. There's one curve that goes down, which is the cost of energy storage, and one that sort of slowly incrementally increases, which is a cost of a gas peaker.

The time-frame to be thinking about, at least in that context, is within the next four years or so, meaning by the beginning of next decade, in places where energy storage is cheaper with the right utilization requirements and where gas is a little more expensive, energy storage can start to compete again just head-to-head on pure economics.

More interestingly, by a decade from now, energy storage always wins, which is to say, I can't see a reason ... I'm willing to be debated on this. I can't see a reason why we should ever build a gas peaker again in the US after, say, 2025. I don't see a reason why that should ever have to happen.

Stephen Lacey: Yeah. That's the question that people are asking now, and the most acute example of this was the NRG planned Puente Gas Project. When regulators went back and looked at the data, they realized they were using outdated numbers on storage technology costs, and they have gone and reevaluated that project. It looks like it probably will not go forward. This is a long contested natural gas plant that looks to be the first victim to this trend that you just outlined.

Shayle Kann: Yeah. I guess we'll find out. It's a good example of an opportunity. Storage is going to get a chance to play, because it looks like they're going to put this back out to bid, and storage is going to have an opportunity to say, "Yeah, I can be cheaper," or, "I can be better than what that 262 megawatt gas plant was going to be." We'll see if it wins.

Stephen Lacey: What if we're wrong? What if storage costs actually fall faster than we think?

Shayle Kann: Right. The other point to make when we're doing all these forecasts and looking to the future is time and time again we've seen in adjacent sectors like solar and even in energy storage that technology costs have the capacity to fall faster than almost anybody expects, including us. We also wanted to look at how much of this gas peaking capacity could be displaced by storage over the next decade both under our base case scenario for how much energy storage costs are going to fall but also under a more aggressive scenario where storage costs fall faster than we expect.

We looked at both of those scenarios, and in each one we looked at when those peakers are going to be required and the point at which the energy storage projects should win head-to-head. I want to be clear on the word, "Should," because the Puente example is actually a really good one of, that wasn't necessarily going to happen. That gas plant was moving forward. If it weren't for the fact that the California Energy Commission realized that outdated storage cost numbers were being incorporated, then the gas project would have happened. I don't think that's going to happen in ever case.

Even if energy storage does make more sense, it doesn't mean that it's going to win. Again, this is a challenge for working with regulators and working with utilities to make sure that they constantly understand what the actual costs of energy storage and the capabilities of energy storage are, because if they don't get that right, they're just not going to pick it.

Anyway, what you end up finding is it's a pretty significant portion of the gas peaking capacity over the next decade that could be just eliminated because of energy storage on an economic basis. We have less than a gigawatt of energy storage operating in the US today. In our base case scenario, about a third of the peakers in the next decade should be displaced by energy storage. In an aggressive cost decline scenario for storage, then that should be about half of those peakers, so 10 out of the 20 gigawatts should be taken up by storage.

I just want to note, this is an inauspicious time for this to happen to the gas peaking market. If you're a gas company, if you're in the business of supplying gas, you don't supply that much to peakers, because they're not used all that often, so it's probably not the biggest deal to you if that happens, but if you're in the business of building peaking gas turbines, this does matter.

It's already a pretty rough market for those companies. We've actually just seen over the past, I don't know, couple of weeks, major layoffs announced at both GE and Siemens in their power businesses. It's an aggregate of 20,000 layoffs, largely because of lower than expected demand for gas more than anything else. That's not because of energy storage yet. It's mostly because of renewables at this point. This could add fuel to that fire.

To both of these companies' credit, they are going full bore at energy storage as well, which seems to me to be the right call, but if you are overexposed to the gas peaking market, this is not going to be a good place to be.

Stephen Lacey: If we think about where storage costs may ahead under an accelerated scenario, it's actually not the battery or that the pack or cell costs. It's the balance of systems that will play a greater role, just as it has in Solar Photovoltaics.

Shayle Kann: Yeah. That's always important to note, because there's a lot of attention paid to the cost of batteries falling very fast. As I'm sure everybody in this room knows, that is true. Battery costs are falling incredibly fast. That does not translate one-to-one to the cost of energy storage falling very fast on the same pace on the grid, because it is harder to drive down all of the other costs in the system, both the hard costs and the soft costs.

We think it's important to look at system costs rather than just battery costs. Otherwise, you might miss out on places where it is actually harder to see a rapid cost reduction.

Stephen Lacey: Let's turn our attention now to some of the other bigger storylines that we're following that we think will flow into 2018. There are some really important political and economic ones, and also we'll provide some predictions for 2018.

I think the first one that we talked a lot about was this land grab, this surge in mergers and acquisitions in the storage industry, that started about two years ago. Our Director of Energy Storage, Ravi Manghani, who you're going to hear from in just a little bit, put together a handy list of all the acquisitions and partnerships that have happened just in the storage space over the last year. There are multiple deals every month. It is a regular calendar full. You could do an energy storage calendar just for mergers and acquisitions. There are some pretty important ones.

Of course, Enel's acquisition of Demand Energy earlier on in the year and then later its acquisition of EnerNOC, and it seems like they're trying to blend those two businesses together, and we're hearing from Enel X that possible other acquisitions are on the horizon.

Mitsui Capital acquired SunEdison's C&I assets, which it's mostly solar but does include some storage assets.

EDF Renewable Energy announced a new business unit based on distributed electricity and storage.

Sungrow and Samsung had a joint venture, and they announced their US market entry.

We reported, we tallied together all of the potential gigafactories to serve mostly EVs but also the stationary storage market, and there are at least 10 new gigafactories planned around the world. This is increasingly important as a lot of countries outside of the US look to phase out internal combustion vehicles and ramp up EV targets.

GE announced this batteries and controls package that integrates with gas and steam turbines, and it's looking at deploying batteries with almost everything.

Wartsila announced its acquisition of Greensmith.

Mercedes Benz and Vivant Solar announced their partnership.

We saw a lot of projects with partners putting together large solar-plus storage developments at housing units.

I could go on with this list, but I think it's very clear that the storage land grab is probably the most interesting story of 2017.

Shayle Kann: Yeah. I think from the perspective of big companies that are either industrial manufacturers or utility affiliates or something like that, almost everybody ... and in this sector one way or another. They sell industrial equipment or they manage grids or they're independent power producers. Everybody knows they need an energy storage strategy now. The reality is there aren't that many companies in this space yet, especially ones that have achieved anything of scale.

That's why there's been so much of an M&A land grab, which is to say, if you're out there right now and you're big and you need something that is either at scale or can be at scale, and you are saying, "I need to get into storage," when you look around the room, there aren't that many players out there, and so you are rapidly trying to get involved with the few that there are.

Stephen Lacey: It begs this bigger question. If you are one of these large industrial companies or a multi-national utility, do you need a storage strategy? Should you wait till the market evolves, or is now the right time to be grabbing this land share?

Shayle Kann: I think you have to be working on it now, whether it's through an acquisition or organically. I think energy storage is not one of these sectors that's going to be really easy to enter once it hits scale. You can make a bigger acquisition later. I'm sure this is true of ... Total bought Saft, but a lot of the other oil and gas companies probably are looking at this and saying, "All right. I'm going to wait until it hits the billions, not the millions, and then I'll get involved." That might work for a few of them, but I do think energy storage is complicated, requires a lot of development of capacity and understanding and learning. Those that are in it early will benefit.

Stephen Lacey: Our other important storyline was not just the positive benefits of storage but the unintended consequences of deploying storage, which is not an inherent good. It really depends on how you use it and how you develop a market around it. What are those unintended consequences? We have two.

Shayle Kann: Yeah. I have two things that I would extol everyone in this room to think about a lot. The first one is impact on greenhouse gas emissions. Energy storage we think of as something that can usher in a decarbonized future on the grid, and I believe that, but it doesn't inherently do so. There is evidence of the way that we are using energy storage already today that sometimes has an unintended negative effect, meaning it increases greenhouse gas emissions.

We've seen this in California in the SGIP Program. There's an annual program report for SGIP, the storage incentive in California. Go look at the last one, the 2016 SGIP report. Basically, what it found was that on net, the commercial energy storage projects in the state of California are increasing greenhouse gas emissions in the state. The reason for that is because what they are charging with doesn't always, it's not always the cleanest. When they're discharging, it's not always when it's the dirtiest. Importantly, you also lose some energy to roundtrip efficiency.

The reason why it's not designed right is because, especially because we have non-coincident demand charges, so your demand charge is based on a customer's load profile, not the grid's needs. Basically, if we don't get rate structures right, if we don't send the right price signals to customers, you can have unintended consequences on the grid. That's what's happening in California right now that we need to avoid as we're designing this market moving forward, because the last thing you want is to be deploying a bunch of energy storage that increase emissions.

Stephen Lacey: Yeah, absolutely. There were other studies that came out this year looking at the emissions, the emissions contributions to residential battery storage, if it were not properly paired with solar and effective rate designs.

Shayle Kann: Right.

Stephen Lacey: Something that people are starting to think about. The other one is a supply chain issue that is a lot harder to get our arms around but one that everyone in this room should be thinking about.

Shayle Kann: Yeah. We spent a lot of time focused if we're talking about storage supply chain on lithium. Lithium is important, but the one I wanted to talk about is cobalt. Cobalt is a component in batteries. More than 50 percent of the cobalt in the world is produced in Congo, and there are huge child labor concerns about that. A recent Amnesty International report looked at how all the big battery manufacturers, whether it be EV batteries, stationary storage batteries or consumer electronics batteries, are doing in terms of ensuring that their supply chain avoids human rights abuses in the cobalt supply chain.

The grades were not great. They were okay. Actually, some of the stationary storage or the big battery manufacturers like Tesla and Samsung and LG Chem, they did better than most, but nobody got the highest score.

It's something that if we're serious about energy storage for social good, not just for economic benefit, then not only do we think about how it's used on the grid, but we need to be serious about how it's produced. If the market's going to scale in the way that we all expect, then cobalt, in particular, but I think there are a couple of other minerals as well, that we need to be cautious about where that supply chain is based.

Stephen Lacey: With the few minutes we have left, let's give our predictions for 2018. We've got a few here. The one question that I think is burning in my mind is what crisis will energy storage solve in 2018? We saw the South Australia grid problems and the Aliso Canyon deployments, both of which showed how quickly you can deploy batteries to make up for a shortfall in the grid. What problem will storage solve this year that will make everyone pay attention?

Shayle Kann: This one I guess is kind of scary, but I think there are ways that energy storage could be beneficial in the wake of a cyber attack, which is something I've been spending nights terrified about recently. I think we'll see our first real widespread cyber attack on the grid in the US this year, and I think energy storage will be part of the recovery from that.

Stephen Lacey: I think it's going to be Puerto Rico. Already we've seen two very interesting plans coming out of New York State. In fact, our staff writer, Emma Foehringer Merchant wrote a great story on this this week about under Andrew Cuomo's direction why a bunch of the state's utilities are trying to craft a distributed energy micro grid focused resiliency plan for Puerto Rico, taking what it learned after Superstorm Sandy and helping train workers there and develop a real long-term plan.

Then we of course saw AES Energy Storage submit a pretty serious plan that Chris Shelton has been talking a lot about publicly, to build a network of solar-plus storage micro grids, and I know AES has donated I think about six megawatts of batteries to Puerto Rico. We're only just beginning to touch on the potential for these distributed assets to help out this struggling grid, where you're going to continue to see disastrous, difficult attempts to reconnect these isolated transmission lines. I truly believe that storage will play a much more important role in Puerto Rico going forward.

Shayle Kann: Puerto Rico and any other hurricane- or storm-based crises, especially on island grids. Puerto Rico is the worst case, but there are many others, where there's the same opportunity.

Stephen Lacey: Yep, absolutely.

What hyped-up term will energy storage attach itself to in 2018?

Shayle Kann: Blockchain.

Stephen Lacey: Artificial intelligence.

Shayle Kann: Machine learning. Big data.

Stephen Lacey: That's basically what it's going to sound like at our Grid Edge Innovation Summit.

Shayle Kann: The question was really, what hyped up term will we attach to this industry in the next year.

Stephen Lacey: Yeah. Blockchain and AI are the ones that probably make it into every VC pitch deck now no matter what you're doing.

Shayle Kann: I've actually recently talked to a bunch of people who talk about using machine learning to improve their storage algorithm, their storage control algorithm, so that one's already happening.

Stephen Lacey: Yeah. It can get annoying hearing all these buzzwords. They obviously have real applications, but I'll tell you, I was at the EEI Conference in June, and they had a number of people talking about the future of work and artificial intelligence and blockchain. People are so jazzed up in the utility sector around these terms even though they haven't quite figured out what they mean. If you can go in and talk to a utility and use those terms, chances are you're going to capture their attention.

Shayle Kann: I'm sure that's true, but let's also remember that was true of the term "smart grid" a decade ago, right?

Stephen Lacey: That's a good point.

Shayle Kann: That doesn't mean that nothing happened. I said before we deployed 60 million smart meters in the US. That came out of that hype around the term "smart grid." A term with too much hype can ultimately result in some real deployment of some technology that matters.

Stephen Lacey: Final question. If energy storage had a theme song for 2018, what would it be?

Shayle Kann: This one I was prepared for. I want to give two, a theme song for 2018 and a theme song for 2028.

Stephen Lacey: Okay.

Shayle Kann: My theme song for 2018 is "Don't Stop Believing" by Journey, and my theme song for 2028 is "We Are the Champions" by Queen.

Stephen Lacey: Pretty good.

Shayle Kann: How about you?

Stephen Lacey: I think that 2018 will go to Metallica's "Battery": "Crushing all deceivers, mashing nonbelievers, can't stop a battery."

That's it, folks. Shayle Kann is my co-host. I'm Stephen Lacey. We are The Interchange podcast. We thank you for being here, and there's your song for 2018.

Shayle Kann: Yeah, thanks. That's great. Thank you, everyone.

Stephen Lacey: Now that we've plotted out the story of energy storage in the US, let's talk to one of the protagonists, Mary Powell, the president and CEO of Green Mountain Power. I've had the opportunity to speak with Mary a few times on stage throughout the year, and as you'll hear, she brings something different to this industry. Mary thinks creatively, very creatively. She's constantly judging success based on how creative the utility is in its problem solving and approach to customer satisfaction.

We explore that approach in this interview. We started off by talking about batteries, about the utility's plan to deploy thousands of Tesla Powerwalls to customers, and I asked her when Green Mountain Power got interested in using batteries in the first place.

Mary Powell: It really started with a focus on how do we completely and radically transform the company to one that is obsessed with customers and thinking in a very forward way about a completely different energy delivery model. It started in 2008 with I would say a pretty traditional focus, which is how do we deliver a future for Vermonters that is incredibly renewable, low carbon, reliable and super low-cost. Not an easy task, because a lot of those things in our business are seen as mutually exclusive, and we looked at them as that's our job. It's to figure that out.

We went from about 16 percent renewable to now we're over 60 percent renewable. As of January we're going to be 90 percent carbon-free. We've delivered three rate decreases in the last four years, though we did just file for a modest rate increase. We've been hyper-focused on it and hyper-focused on innovation and transformation.

Our journey really started many years ago through a contact, an intern, a great intern, that we had working for Green Mountain one summer. He went out to work for Tesla, and we heard murmurs of they're using their storage technology for cars in homes, and we said we want to be a part of it. That's really what started us on the path. Now we work with multiple storage partners.

Stephen Lacey: What is it like working with those partners? It's such a nascent industry. We at GTM have been reporting on a lot of the supply issues coming out of Tesla, and so it's very hard for downstream installers to get access to Tesla's storage products. Are you facing any of those challenges with Tesla, and what other challenges might you be facing with other storage providers, because you have a very lofty vision that is difficult to execute, and one of the reasons why it might be difficult is because this industry is so nascent. The business models are just getting started.

Mary Powell: It's funny, I don't actually share that view.

Stephen Lacey: Okay, then what is the view?

Mary Powell: I actually don't even think of it as nascent. I think one of the mistakes we make in this business, in this energy world, is whatever becomes the talk of the day becomes the talk of the day. I actually see a future that is going to include all sorts of things that we can't even envision right now. I look at storage as it has arrived. We are using it. We had a number of huge programs this year that have delivered tremendous value to Vermonters, and like any new technology, sometimes customers have to wait a little bit for it.

I think it's really exciting that we have 1,200 customers signed up for our latest Powerwall program, and they're all enthusiastic. They may be waiting a few months to actually get their device, but they're really excited about it. No, we haven't really seen that as a challenge.

Stephen Lacey: Do you worry about enthusiasm waning if there are delivery issues?

Mary Powell: No. I actually think society's funny. Again, anything could make the utility culture and world, could give them an excuse for delay, because that's really easy. I think the definition of the culture of utilities is generally slow and no. It's slow and no, and we're about fast and yes. From a consumer perspective, I don't see that at all. I actually think there's an interesting phenomenon, having been in so many consumer-facing industries, where they almost want it more when they have to wait. I think it's building a lot of the hype.

Stephen Lacey: How bullish are you on storage in terms of deployments over the next few years? Right now we're seeing a very progressive plan to develop storage, but not a lot has gone into the ground thus far, right?

Mary Powell: Right, right.

Stephen Lacey: Will that change? Do you see the movement, the actual deployments accelerating in GMP's service territory?

Mary Powell: Oh, absolutely in our service territory.

Stephen Lacey: Mostly behind the meter or ...?

Mary Powell: We launched five different behind-the-meter programs in 2017. We're already utilizing storage devices in homes in the context of improving reliability and also improving the cost structure of operating the grid. We were the first in 2017 to use a major storage device in the ISO New England frequency regulation market. Yeah, it's arrived.

Our focus is really to lead in what we see as a consumer-led revolution to distributed technologies. We are actively engaged in how do we move away from a bulk delivery system to one that is home, community and business-based. Storage isn't the only solution in that mix, but it's huge. Yeah, you're going to see a lot more megawatts of storage coming out of Vermont in the next couple of years.

Stephen Lacey: We have a question here. In what cases should utilities own that storage versus having third-party owners and operators? Have you thought about that?

Mary Powell: Yeah, I think about that stuff a lot. Again, our culture change really started with being not just fast, fun and effective for customers but being customer-obsessed. We are I think still the only benefit corporation utility in the world, I think. Being part of a benefit corporation is you change your bylaws, your corporate bylaws, to actually say you exist for the benefit of customers and communities.

I know this is long-winded, but it really is the answer to your question, which is, always come back to the customer. What is in the best interests of the customer? What's in the best interest of the customer and the community? Sometimes I think we could look at it and we could say, "Oh, my gosh, the best interest of the customers is just to sit tight and let us take care of the whole world for you," right? If you expand that lens and you say, "But what's in the interest of the community, in the interest of economic development," then you start to think you want to have other players in the space, and you want to have job creation, and you want to have all these other benefits that can come.

When we structure things, we try to structure them in a way that is as diverse as possible so it's not this monolithic one solution, very, I would say, traditional paternalistic approach.

Stephen Lacey: When you take that sort of diversified approach, how do you evaluate success, because you're evaluating in real time a lot of different ways to work with a customer, deploy pilot programs. It's a speed that a lot of utilities aren't undertaking or are just starting to consider. How do you quickly evaluate whether something works or doesn't work?

Mary Powell: Again, I think in innovation, one of the most important things is sunrise, sunset. Move quickly, sunrise things, put them into action, evaluate them, and don't be afraid to sunset them if they didn't work the way you thought they work.

One of the things I love that we were able to accomplish in Vermont was really, it really came out of the legislature, but it was a structure around a renewable energy statute that encouraged us to file these innovative pilots. The process of doing them is pretty fast, fun and effective. We get the innovative pilots in place, and then we have an evaluation period. Then we go back with a more formal filing if indeed we want to implement that on a going-forward basis. I think it's working very well.

I have to say so far I think our hit ratio has been surprisingly high. Most of the things we've done we've shown have real benefit to customers, not just to the customer that we're serving in the context of that technology but, again, as a benefit corporation, we're looking at stacking benefits, so we're looking at how does that exact same solution that improves your life also lower costs for every other customer that we serve. That's the focus going forward.

Stephen Lacey: You have a lot of hydro plants in your service territory across Vermont. That's your biggest source of renewable energy. What about any plans to start to pair batteries with hydro plants or solar-plus-storage with hydro or wind, any varied combinations of technologies that are interesting on the horizon or at least in the early-stage planning?

Mary Powell: All interesting, some on the horizon. Yes. Again, how do we get to a community home- and business-based energy system? I think the solutions in rural America are going to be very different than urban America. Some of the technologies will be the same, how we deploy them. How we think about them will be different. In a community home- and business-based energy system, yes, small is beautiful.

One of the things I love is our 41 hydro plants are small, and so we think about each and every one of them and are actively engaged with a couple of them of, how do we ... In essence, a part of it is almost a back-to-the-future model, because our company started with one little hydro plant in Vergennes, Vermont, and that's one of the same plants we're taking now and saying, how can we connect it with storage, with solar, and create a whole micro-community around Vergennes, which is basically how we started in 1893, was that kind of model. Storage is huge in that context.

We have three real important community-based solar storage projects that we have already started the process on and hope to start constructing next year. Yeah, we're moving very actively in that direction.

Stephen Lacey: One of the issues that we just talked about earlier on stage was the fact that the technology is changing so quickly, it's difficult for utilities and regulators to keep pace with cost trends. When you do a reevaluation of the data, you realize that there's a greater economic case for storage in certain regions. What are you doing to stay on top of that information and to make sure that you have the best information at your fingertips when you're making these fast-moving decisions?

Mary Powell: Yeah. One of the things that still worries me and worried me when I joined the industry is, analysis is important, but one of the things that really worries me for it going forward is we fall in love with analysis. Our approach has always been, for going on 18 years now, that we are the ones that actually do. We don't spend exorbitant amount of time studying and analyzing. We actually come up with practical, scalable solutions.

We actually will move forward sometimes without permission, knowing that at the end of the day if we have to pay for that ourselves out of our pocket, we will, because we believe in learning by doing. Again, you have to have some information. You have to do some analysis, much like I think most other industries. Most industries move forward and they need data. This one can be obsessive about data and analysis.

We have actually really I think carved out a niche for ourselves in being the implementers. I love the line, "Good ideas are a dime a dozen. It's actually implementation and execution that's rare." We go into, we learn about good ideas by actually implementing and executing. Then, again, not being afraid to sunset it if the economics don't work the way we thought they would.

Stephen Lacey: This is a culture question that I think is really important for many of the utilities in this room. When you took over as President and CEO of Green Mountain Power, you changed the layout of the office. You invited customers in to talk to you. You wanted to hear straight from them what they wanted and what their issues were with the utility. You made sure that the analysts were talking to the linemen and people had access to you. How did that impact the way the utility started thinking about planning and ultimately got you to this place, where you're thinking about the next generation of energy tech?

Mary Powell: To me, it's everything. I can't imagine being where we are if we hadn't started there, because I really do believe in the line that culture eats strategy. It eats it for breakfast, lunch and dinner, and that having a very lean ... We have an incredibly lean organization for this industry space so that there is ... We have very few layers. We really de-layered the organization and really tried to make it around customer obsession, fast, fun and effective, to see it even in that context, we don't lock our doors. We don't lock our doors.

We view ourselves as we're in the business of delivering customer-individualized energy solutions. We want customers to just walk in. We have a very, very different, a more retail thinking approach, I think.

Again, in this world, you have to do all the things to make sure that you're, have all the right protections in place. We basically, yes, we've dramatically changed everything. Everybody operates at the same size workstation. I have the same size workstation as anybody else in the company. I work right out in the open, in the heaviest trafficked part of the company, no matter where I am, usually where customers come in, and always by either the line department or the call center staff.

Stephen Lacey: Let's talk about the use cases for batteries. First off, people are asking about the use of the residential batteries. How does the service work, and the application is for backup, correct, which you're bucking the trend. We noted in our earlier slide that the backup market is going to be very small compared to other applications in the residential sector, so why focus on that in Vermont?

Mary Powell: Part of what I think is so fun about all this stuff and with new technologies is, we think we know what it's going to be used for, and really we're all just clueless, and so we just got to start using it.

One of the things we found is that customers always surprise you. Again, I know with these types of programs in other states, customers may want it for a different reason. In Vermont I think part of the rural America revolution is going to be around energy independence and around reliability and stability. That is one of the things that we have found is really important to our customers.

Again, we have more customers signed up for programs than we can handle in any month. It's going to take us months to catch up with the customer demand, which is a wonderful problem to have.

Stephen Lacey: In terms of risk of working with many of these early stage companies, how do you manage maybe a problem, a technical problem, with a manufacturer product, or a manufacturing insolvency with warranty coverage for these residential batteries? How are you thinking about those potential pitfalls?

Mary Powell: Can I back up and talk a little bit about risk first, because it's one of the things that fascinates me?

Stephen Lacey: Sure.

Mary Powell: Again, I feel like the best line I ever heard about risk was this program I was able to attend at Wharton, where the professor said, "The most important thing you know about risk, you need to know about risk, is, there is no such thing as the elimination of risk. All you're doing when you manage risk is you're moving it from one place to another place." You're just creating a risk. You're just creating a risk somewhere else.

I think that our view is, and in fact I just had this, we had a great dialogue with another utility team that I admire a week or so ago. We were talking about that, because it was like they were trying to handle the risk from one perspective, and I look at the risk from this very different perspective, which is the risk of failing to move fast enough forward in this very disruptive environment.

I thought the talk before was interesting, but I have to say I don't get the point of whether we talk about grid defection or load defection or ... We're talking about technology enabling a completely different kind of future for customers all across America. It's already happening.

Stephen Lacey: In terms of evaluating risk, do you think being left behind in that transition outweighs the risks of potentially ...?

Mary Powell: Thank you. You just summarized me so well. Thank you. I was blabbing on and on. Yes. Yes, absolutely. Yeah, do we take care of that? Absolutely. Do we have things in place? Do we have maybe three-page documents when others might search for 50-page documents? We would go for the three-page document.

Stephen Lacey: What about C&I customers? What are they telling you, and do batteries make sense for those customers that may want new alternatives to grid electricity to manage their energy use?

Mary Powell: I think what we're seeing and what I'm seeing from some other opportunities I have in terms of sitting on some other boards, what I'm seeing is definitely across the country C&I customers are moving rapidly to distributed technologies and rapidly to self-supply approaches.

Stephen Lacey: They're doing that in Vermont?

Mary Powell: Yes. Not as much in Vermont. I would say definitely on the self-supply through solar. We have had huge, huge change. We've had, I think it was about ... Again, it's a very small state, 620,000 people, and we've had over 2,000 C&I customers go to solar. Yes, we're seeing it in a significant way. We have now just started the process of working with some of those on storage to improve reliability as well.

Stephen Lacey: What are the most common concerns that you get from customers? They actually come into your office. What are they telling you? More than any other utility that I've heard of, you're actually directly listening to what these customers are saying. What are some of the most common things that they're requesting of you as an energy delivery company?

Mary Powell: Again, we survey them obsessively. We poll them obsessively. We talk to them obsessively. Probably nothing different than what you hear all over the country is they want you to make their lives better. In essence, I feel like that's what we're in the business of doing, is improving the lives of the Vermonters we serve.

To do that, one of the things I'm so pleased about is we've done things that have really directly gone after the low- and moderate-income Vermonters, to show that energy transformation can also lower costs and improve lives and improve comfort in homes and make them more sustainable, but that is, you boil it all down. I want it super cost-effective.

I think customers are also telling us maybe the 1980's approach of feeling ashamed of using energy isn't working for them as much. They really want the companies that will leapfrog past those old kinds of programs and deliver them transformation that makes their lives simpler, more comfortable, and more economically sustainable. They do care about the environment in Vermont.

Stephen Lacey: Largely, the projects that we're talking about in Vermont are pilot scale. What will it take to get beyond a pilot scale residential deployment or commercial in-front-of-the-meter deployment? What metrics do you need to see to make you expand those use cases?

Mary Powell: I think we're already seeing them. Again, given that this one that we're doing is 2,000 in a small state of 600,000, I actually don't look at that as small at all. I think that is scale. We are doing these at scale. I think that what we're seeing is they are working.

We did a program last year, a Vermod community, again, addressed more to the low, moderate income, where it's 14 different solar storage homes that then are interconnected, and we're using them in terms of operating the grid more cost-effectively.

Yeah, these programs are there. We're fast following in our time period to get them as just regular parts of the energy transformation business that we're in.

Stephen Lacey: I talked to you months ago and kept using the term "demand side management," which you absolutely hated, so I've refrained from using that word, but certainly using customers as a tool, however you would describe it, as assets on the grid, to manage their energy use for the benefit of the broader system in the utility.

Do you see energy use portals or in-home energy services through the utility as being important to engaging the customer? What are some of the things that either you could be providing or you could be working with third parties to get a little bit deeper into the home to improve that customer relationship and interactivity?

Mary Powell: That's how we think of the world, as energy as a service, and so a lot of the work we do, I should have said this repeatedly, is not just about electricity. It's about all fuels. It's about helping homes become lower carbon, lower cost, and dealing with comprehensive energy transformation services.

I think it is so important. I think it is so important as we think about the future from a socioeconomic perspective. One of the things I do worry a lot about for the country is, as we see this transformation happening, it is no doubt in my mind that others are going to move into this energy as a service space with or without the utilities.

If we look at a future that really is ultimately without the utilities at all, that to me just spells a future from a socioeconomic perspective that is going to be very challenging for the economy, because this grid isn't going anywhere in the near future. It's not going to go anywhere for decades and decades. It is how do we make it all work as cost-effectively for the customers that we serve and for society at large.

Again, I look at the risk of not engaging, in terms of maybe not even in my time-frame as a leader in this space, but as worrying about generations to come, I see that risk as huge. I think it's incumbent upon us to lean in hard, to provide new solutions for customers, and, yes, just not ...

None of the kind of old-style approaches, they may all be meaningful in a silo, but I think that really the task is to think as future-oriented as we can and how do we leapfrog past what feels like making customers' lives more inconvenient by saying, "Use it here. Don't use it there," right? There will be a few that want to geek out on that. I think the mass market just wants us to leapfrog past that, and that's where we're focused.

Stephen Lacey: You're describing I think what a lot of utilities are attempting to do, but you're doing it in a way that I think is unique in terms of a broader culture change. What inspiration do you draw from maybe outside the energy sector that influences that approach, and maybe how could that apply to other people at power companies considering this change, which really is a culture change in some ways?

Mary Powell: It is. I, like probably everybody here, I read voraciously. I'm always drawing on experiences of other industries, seeing the disruptive change. I draw on, certainly a lot of what motivates me on a regular basis and motivates us in terms of innovation, is love. The love of our customers.

One of the things I love about our culture is, it's informal, it's personal, and we try to create that same kind of relationship with our customers, which is one where we try to meet them where they're at. We try to embrace a future with as much of a inspired, loving approach to how we can help the state that we serve not just succeed in the future but really prosper.

One of the things I love too is we opened up our space. As I think you know, we opened up our space, not just is it open and collaborative and the rest of it, but we invited innovators to come. We ran a national contest. We said, "We'll give you free space. We'll give you access to data." We've got a ton of innovators now working side-by-side with us.

One of them has become a huge hit in the context of developing this technology where we really can have not just controls of storage devices but controls of the heating and cooling systems and water heating systems, and so we're literally leveraging about 60 different homes from a grid perspective, really utilizing those assets almost the same as you would storage assets.

That came out of just moving quickly, inviting collaborators in, and innovators, and then working together on how we can embrace a very different future.

Stephen Lacey: I don't know if you can make a prediction or not, but how much storage do you think that you'll have deployed by the end of the decade? A lot?

Mary Powell: I hope a lot.

Stephen Lacey: Is it just going to be the few thousand customers who have behind-the-meter systems?

Mary Powell: No, no, no. I think, as you may have heard me speak, one of the things that we're really working on in leading this transformation is being, really dramatically shifting a lot of cost, frankly, a lot of regional cost, which is where a lot of our cost pressure is coming now for Vermonters. It's coming from being part of the New England region and all of the build-out that's been going out in our share of that cost and the fact that loads aren't climbing.

Our goal is, we've said it publicly many times, it's about taking us from carving about probably 20 to 30 percent ... It's not just about hitting peaks. It's actually about flattening it year round by a couple hundred megawatts. If we do that, we will literally shed tens and tens of millions of dollars back to the rest of the region that we're paying for. Yes, hopefully, you're going to see a lot more storage coming out of our work in Vermont.

Stephen Lacey: It sounds like you're evaluating the success of those projects, but in addition to that, your definition of success is not being a poles-and-wires company and not seeing customers as rate payers but about people ...?

Mary Powell: I haven't seen customers as rate payers in a decade. I can't even stand that word. Yeah.

Stephen Lacey: What's your definition of success?

Mary Powell: The definition of success is to build on the momentum we have now with customers. We just got back this latest data that is done by the regulators, an independent surveyor. We have 94 percent trust. We have really high satisfaction, and to leverage that and build on that trusting, loving relationship we have with customers, where we're providing them with the opportunity for Vermont to lead in the nation on moving to a community home and business based energy system.

We will still have the poles and the wires for decades to come to take care of, and the best way to take care of them is, again, we're doing all of this, and I think this is where we are also a contrarian. We are not doing any of this with the focus of how do we do all this to make money for our investor.

We're doing all of this in the context of how do we deliver value back to our customers so that we can keep rates as low as possible for as far as the eye can see on the traditional service while we're innovating and providing new and different remarkable energy solutions for the Vermonters we serve and have all of that be part of the same pie of how we serve Vermonters so all of those new value streams that we're creating go back to benefit all the Vermonters that we serve.

Stephen Lacey: Great. Let's finish up with two quick questions. Many people have spirit animals or spirit colors. What is your spirit energy storage technology?

Mary Powell: I don't have those things. It's all about freedom and independence as far as I'm concerned, and so my spirit storage technology I would say is much more aligned. We're doing grid storage because it's necessary. I am all in on as independent and rebellious as a storage device can be. That's my spirit storage animal.

Stephen Lacey: Great. Last up, finish this sentence. Many people call storage the Swiss Army knife of the grid because it can do so many different things. My podcast co-host, Katherine Hamilton, called it the bacon of the electric grid because it makes everything better. Finish this sentence, "Storage is the blank of the electric grid."

Mary Powell: Oh, it's certainly not the bacon, big old slab of fatty bacon. That sounds too much like the industry. I would say ... Sorry.

Stephen Lacey: No, it's true.

Mary Powell: I would say it's a tofu scramble or the seitan bits, the seitan-flavored bacon bits. I don't know. I hope it's as disruptive as possible. I think that's what we need to be leaning into.

Stephen Lacey: Delicious as well.

Mary Powell is the President and CEO of Green Mountain Power. Let's thank her. This was great.

Mary Powell: Thank you.

Stephen Lacey: We appreciate your time.

Mary Powell: Thanks.

Stephen Lacey: That is the show. Thanks for joining us. It was really great to see everyone at the Storage Summit this week. If you were not there, you got a taste of the event now, so hopefully we'll see you next year or at one of our upcoming conferences.

To our Energy Gang listeners, we'll be back next week with our favorite pieces of energy journalism of the year. To our Interchange listeners, we're going to be looking at a plan to rebuild Puerto Rico with solar storage micro grids.