Stephen Lacey: This is The Interchange, conversations about the global energy transformation from Greentech Media. I'm Stephen Lacey in Boston. Out in Berkeley, California is my co-host, Shayle Kann. How are things in those Berkeley hills treating you, Shayle?
Shayle Kann: They're beautiful as ever, Stephen.
Stephen Lacey: You know, America considers itself to be one of the most advanced countries in the world, but we can't even get the power back on for our citizens. Three months after Hurricane Maria, there are still large swaths of Puerto Rico that don't have power. It took two months to get half the island's residence power again, and hundreds of thousands are still without grid access. After a slow start, there are mainland crews there working day and night to restore electricity, and they've been making progress, even with the geographic and infrastructure challenges that are unique to Puerto Rico.
But let's not mince words. This whole situation is embarrassing, and it's a tragedy. We have the technologies to do something about it. So, out of the outage, we're getting a sense of what a resilient Puerto Rican grid could look like. The Puerto Rican Energy Commission recently asked for some of those ideas. Some of the most forward thinking, heavy hitters in the industry have responded. That's what were discussing today. We're going to talk mostly about one plan from the global energy company, AES, that looks at solar plus storage mini grids as a competitor to gas and coal. We're going to get to that in a minute.
But first, a bit of context about what's going on in Puerto Rico. Shayle, give us the lay of the land with regard to the recovery efforts.
Shayle Kann: Right. So as you mentioned, this is a humanitarian crisis on an order of magnitude that we haven't seen in the U.S., in any recent history. The Rhodium Group put together a breakdown of the largest blackouts in US history, and they estimate that Maria, which is mostly Puerto Rico, but also Virgin Islands, is already twice as large as the next largest blackout we've ever had in the United States, in terms of millions of customer hours of lost electricity demand. It's just huge. As you mentioned, we're 90 days out from it now, so this has been three months. Remember we just had a little freak out in the news earlier this week, because the Atlanta airport lost power for 11 hours. This is 90 days and counting.
At this point, generation is back to about two thirds or around 70 percent. It seems to fluctuate, of maximum. But, that doesn't necessarily mean that that number of customers are actually getting power. There's good reporting by our own Emma Foehringer Merchant on this awhile back about what that actually means, the portion of generation that is online. There is still nine out of the territories, 78 municipalities that don't have any power whatsoever. The ones that do have power, many of them they're using backup generators. A lot of the way the power has been restored, and the places that it has, is by importing generators and burning diesel, which is both expensive, and dirty, and also not sustainable in the long term.
There is an incredible effort. I want to give the larges props that I can possible can to everybody who is working hard there. There are thousands of people who are there every single day, in the Army Corp, in FEMA, in private companies, in philanthropic organizations that are working on this, but it is incredible that we still have so many American citizens who are sitting there without power today. There's also a really good report that just came out today from E&E News, behind a paywall, but I highly recommend that if you can get ahold of it, because it lays out in pretty great detail what's still needed there, and it's a lot.
The latest official estimates are that full power recovery is going to come sometime around May, which will make it eight months after the hurricane struck. Just the magnitude of what they need is amazing. The U.S. Army Corp of Engineers received a shipment of about 2,600 power poles in the last week. They're going to get 5,000 more this week, but they need 36,000 more. They need 2,500 miles of wire. They need 6,000 new transformers. Transformers are in short supply, in part because we also had all these crisis on the mainland. So, there are transformers being delivered to Florida and Texas, and so it's actually hard to get all this stuff.
It's just incredibly saddening to hear about this, though, I think the news has covered it periodically, and there was a really great, kind of heart-wrenching piece in the Washington Post a couple of weeks ago, that was laying out what it's like for all these people in Puerto Rico, without power. Though they're covering that some, it's just not in the news every day, because there's so much else going on, which in some ways is insane, just given what's happening there.
Stephen Lacey: I saw Trevor Houser tweet out that chart from the Rhodium Group looking at where Puerto Rico stacks up with previous outages. Just sit on that for a second. I mean, think about it. The next largest outage behind this Hurricane Maria, Puerto Rico outage, is half the size.
Shayle Kann: Is less than half the size and counting. The point is we haven't achieved full recovery yet, or anywhere close to it. So, this is just going to tick up. It's hard to image we don't end up less than triple the size of the next biggest outage.
Stephen Lacey: So, it's December 20th today. Hurricane Maria hit on September 20th. As of this recording we are 90 days into this crisis. So, finally in November, a couple months in, PREPA and the Puerto Rico Energy Commission, they start soliciting ideas from the industry. They say, okay, how can we rebuild the grid differently? We're still in emergency mode and they're trying to repair many of these transmission lines and the distribution grid, and there are a lot of unique challenges to Puerto Rico, right now. Equipment constraints, land issues, that make it very difficult to repair these lines, but they're starting to think about what comes next.
That brings us to today. When the utility and the energy commission, they ask for this plan for a more resilient system, AES stepped in. AES is this massive energy company that operates in 17 countries. It's very heavy in gas and coal, but it's expanding quickly into renewables. They're this pioneering company in energy storage. They've built some of the first grid connected battery plants in the U.S., and they're a dominant developer in the space. They've been in Puerto Rico for a couple of decades and they own a 510 megawatt coal plant that provides about 15 percent of electricity. It's just sitting there, with nowhere to send the power.
AES steps up and they say, rather than push more gas and coal, which they still see as valuable in certain markets, they want to build this network system of regional mini grids with just solar and batteries, because they think it's the cheapest and most effective way to build back the grid. Shayle, I think this is pretty remarkable. Do you think it's a remarkable milestone that this company's developing a plan with only solar and storage?
Shayle Kann: I do to an extent. I mean first actually, let me make a side note, which is you pointed out that AES has a coal plant that's just sitting there and can't operate. If only that coal plant had 90 days of fuel supply, then it still wouldn't be able to operate. It just further drives home the point that this DOE plan that Rick Perry proposed to save base load plants, isn't actually a resiliency plan.
Stephen Lacey: Right. For those of you that may not have been paying attention to anything we've been saying over the last few months, that Rick Perry plan would of course incentivized power plants with 90 days of onsite fuel supply, which is basically only piles of coal, or maybe a nuclear power plant with uranium, and sure enough, that coal plants has been sitting there with tons of fuel, ready to go, and it's done nothing.
Shayle Kann: Yeah. So okay, setting that aside. AES has actually been at the forefront of a lot of this stuff for a while. AES is a really interesting company in that regard, because they have regulated utilities in the US. They have their own power plant of all sorts, as you mentioned, in 17 different countries, but they've also been ... They are the early leader in deployment of grid scale energy storage. They acquired to distributed solar company a few years ago. It's no surprise to me that they believe in those technologies. They've been proving those technologies out more than almost anyone else for years.
It's interesting that, and I think this is the key point, and Chris makes this point in the interview, is that they're looking at this from the perspective of, what will be the least cost way to ensure reliability in Puerto Rico? What they did is, they modeled out, how much solar would you need to meet all the generation demands on the grid? How much battery storage would you need to make sure that you can deliver that solar at the right times? And then, at sort of the first level of depth, what would the cost be of that?
So their estimate was, the cost of generation of the solar would be $40 to $50 a megawatt hour, which is consistent with what we're seeing in other island grids and large scale solar. What would the cost of battery storage, would be, and this is on a levelized basis, assuming daily usage, which matters in terms of what the levelized cost of storage is? They assume that will be $55 to $65 per megawatt hour. Again, consistent with what we're seeing in other places. And then the total cost to the system, because you don't end up charging the batteries with all of that solar. Right? Some of the solar just gets delivered into the grid because it is generating at the times when you need it. So, about half of it gets delivered straight into the grid. The other half goes through the battery to get delivered later on when the sun isn't shining. They estimated that the total cost of all of that, on a levelized basis is somewhere between $70 and $80 a megawatt hour. For context, that's about the same price as LNG, liquefied natural gas, which we talked about with Chris as well.
There are other reasons why this is preferable to LNG. But, either this plan with solar and storage or LNG, at $70 or $80 a megawatt hour, far cheaper than the cost of generation on the grid today, which is largely comprised of imported oil. With island grids, there is a real opportunity just from a purely economic basis to install most, if not all solar and storage, and sometimes wind, and actually just lower costs. That was the perspective that I think AES was taking here, which is why it isn't super surprising to me that they ended up with this vision as opposed to another one.
Stephen Lacey: Right. Chris said that they had 10 days to put together this vision. They locked a bunch of engineers in a room and had them model out these cost profiles for each technology, and figure out what technology fit would work best for Puerto Rico's grid. We talked a little bit more about that modeling and then we discussed how it could be applied to other island grids that are seeing similar constraints.
What I like about this plan is that it is unique from other stuff that's been proposed out there. I like to refer to it as the Goldie Locks solution. You have the rebuilding effort today, which is focused basically on the conventional, centralized transmission system that is clearly very difficult to repair. On the other end of the spectrum, you have comments and plans from the Advanced Energy Management Alliance, which my co-host on The Energy Gang, Katherine Hamilton, heads up. She submitted a plan from AEMA that focuses basically on what I refer to as the New York State approach. What they're doing with REV. Basically, remove all third party barriers to DER management. It's very localized and distribution grid focused.
The Smart Electric Power Alliance, in corroboration with the folks from New York who have put together this Energy Resilience working group, have proposed this microgrid plan where they first focus on critical facilities, and then expand microgrids throughout the country in key populated areas. What AES's plan does is tie those plans together into a more regionalized mini grid approach, which we'll talk to Chris about. So, it fits in nicely to the range of plans that have been proposed so far under this solicitation.
Shayle Kann: Yeah. I think oftentimes, and we're guilty of this too, we've sort of, when we talk about distributed energy resources and especially when we talk about microgrids, the way that we're contextualizing it is, we're assuming that the basic infrastructure of the grid, the transmission and distribution system, largely remains intact as it currently stands. Then on top of that you add and additional layer, which is a microgrid that can island, to provide resiliency in the event of a blackout, for whatever reason. That's the kind of, keep everything the same, but add an additional layer of resiliency.
Then there are folks that ... We haven't talked to a lot, but who think that the whole thing should be distributed, and that you don't need a centralized grid at all. AES sort of ends up here, somewhere in the middle. They build these regionalized microgrids. They're tied to each other, so there is a transmission system, but it's a lot more limited than what you've had in the past, and the mini grids can island from each other. So, if you have the transmission system going down, partially, which is definitely what happened in Maria, it doesn't send the whole system array.
Stephen Lacey: Well, lets hear more about these mini grids. So, take a listen to our interview with Chris Shelton who is the Chief Technology Officer at AES Corporation. We started off the conversation by asking him about where things stand in Puerto Rico currently, and the company's power operations. And then we started working into the plan itself.
Chris Shelton: Basically, Puerto Rico is in a position of still recovering, and trying to restore electricity, the power generation available is roughly ... I think the last time I saw reported, it was in the 60 percent range. It's been several months now, where you have significant portions of the population not having electricity.
Shayle Kann: And so, one of the things that we're going to talk a lot about is this plan that you and AES have proposed for how to rebuild the grid in Puerto Rico, in a different way. I'm curious, before we talk about that, the recovery efforts that are happening right now, the folks who are on the ground putting poles, and lines, and wires back in place, is the default that they're currently rebuilding exactly the same as the grid was designed before? Or, are they already making big changes to it?
Chris Shelton: I don't think big changes are being made, from what we've heard. There are some sort of smart approaches that are being applied to where you can easily harden or put something back in a better way. I've heard that the FEMA folks and the Army Corp are addressing those that can be done kind of in real time, as you're restoring the original infrastructure. Not a lot of massive change happening at the moment. Honestly, you're trying to recover, so you don't really have a lot of time to re-engineer before you focus on the immediate recovery, so I think that's why the discussions that the Puerto Rico Electric Commission has encouraged, and that DOE, and the New York stakeholders and the Puerto Rico government are encouraging are important, because they inform the next stages. Where the next tranche of dollars will be spent, and how they can be spent to make the second phase a smart recovery.
Stephen Lacey: You've been operating in Puerto Rico for 20 years. What's the makeup of your power assets there? You're on both parts of the spectrum. You've got a massive coal plant there, and you've also developed one of the bigger solar systems there. What are your power operations like in Puerto Rico?
Chris Shelton: Sure. We have a power plant that's been operating there, serving PREPA for the last 15 years. It's a very reliable thermal power plant. It's made up of a couple of units. It's one of the least cost supplies of energy to the island, and one of the most reliable. About five years ago we developed the first grid scale solar project, Solar PV. It's 24 megawatt DC facility there, near our power plant.
Shayle Kann: We're going to talk about this plan that AES has put out for how to redesign the grid. I think it would be useful to start to put that in context of how the grid has been designed, historically in Puerto Rico. Can you just sort of quickly characterize how was the grid designed? And, in what ways did that contribute to the challenge that we're facing right now, in recovery?
Chris Shelton: It is what you see a lot of times in an island context, where you have to bring energy in different forms, through ports, into power facilities, and then those power facilities usually have to sit near the coast. And then those coastal facilities get transmitted across the island. So, that design is in place today in Puerto Rico. And then, a unique aspect of Puerto Rico is that the least cost power plants are on the South part of Puerto Rico, and so you have some of the more expensive power plants on the North side, serving the San Juan area. The cross island inner connection is very important. You need all of the different regions of the island need to be operating in interconnected, to supply energy to a significant portion of the population and to the manufacturing and industry on the island.
Stephen Lacey: Right. So, basically you've got power plants that are sort of a ring around the outside of the island. The cheaper ones being on the south, but more of the population center on the north. And then you've got a transmission system that's sort of the circumference of the island. It runs around the outside. So, does that mean that what happened during Maria in part, is that it knocked down some of those transmission lines around the outside of the island, which then shut off power for basically the entire island, because there was not kind of backup if those transmission lines went down?
Chris Shelton: Yes. Well, you have two crosscutting connection as well, that go over the center of the island through a pretty rough terrain, as well. Those lines sustained a significant amount of damage from the hurricane. That's one of the focuses has been on hey, can we harden those? And that's where the New York vision that came out a few weeks ago, put a lot of focus because of the experience from Sandy, that New York had, had. They wanted to focus on the hardening aspect. I think they did a great job of outlining ways that can be done in the Puerto Rico context, obviously. It's not exactly the same as what New York experienced.
Stephen Lacey: So, that brings us to these plans that are in the works for Puerto Rico. You mentioned the New York one, which is part of this Energy Resilience working group for Puerto Rico, which includes a bunch of utilities in New York, and advocacy groups, and government agencies that are trying to apply lessons from Super Storm Sandy to grid hardening and resilience efforts in Puerto Rico. There's also in the plan from Advanced Energy Management Alliance, which also looks at broader distributed energy resource management, and from the Smart Electric Power Alliance. AES also submitted its plan, which is what we're going to be talking about today.
But first, I kind of want to put it into context and ask, what Puerto Rico is asking for, when it went out and solicited these ideas. Last month the Puerto Rico Energy Commission goes out and says to stakeholders, we need ideas on how to improve power restoration and the performance of the grid. What exactly were they looking for?
Chris Shelton: Sure. They had a lot of interest in making sure they were getting new idea from all the stakeholders. That was highlighted in their request. In particular, they had been hearing a lot about microgrids and those types of solutions. They wanted to hear transformative ideas from stakeholders. So, at AES we looked at that request and we said, one interesting set of inputs that AES could give, is our experience in energy storage, as being a leader in deploying grid scale storage around the world, and also our experience in solar with the work we are doing at S Power and other markets around the world. We wanted to inform the discussion and put a team together that had about 10 days to come up with an interesting set of transforming solutions and ideas. That team came together with this mini grid vision within those 10 days. There's some surprising outcomes, I think that we want to share with the community here.
Shayle Kann: I found your plan really fascinating. I want to dig into some of the details of it. Before we do, lets put it into context. I think actually you guys layout really well this spectrum of options that Puerto Rico has in front of it. On one end of the spectrum being basically designing more resilient transmission system. So, keep a lot of transmission, in fact, add additional transmission, create redundancy and make it so that system is hardened, but don't make any big structural changes. Don't develop a distributed grid. Don't do a lot of microgrids.
The other end of the spectrum then, that you layout is this fully distributed system, which a lot of folks in the micro community or distributed energy resource providers probably would favor. Which basically is, purely microgrids, or almost entirely microgrids, which are resilient themselves, but are somewhat islanded, or can be islanded. And then what you guys end up proposing is this middle ground that you define as mini grids with hardened critical tie lines. So, can you just kind of walk us through the high level picture of what that mini grid vision looks like, and also what the distinction between a mini grid and a microgrid?
Chris Shelton: Sure. I want to take a step back and talk about what the design criteria were. We put folks in a room. They had 10 days. We had two primary criteria that we used. One, was to focus on the fuel cost on the island, which is very high. You have imported fuel oil driving the majority of production of electricity in very inefficient units. There are a lot of steam units that are burning oil to make steam to make electricity, which is not an efficient combination. We saw that as an issue that's fundamental to the entire economy for Puerto Rico. We wanted to make sure that that was addressed as part of the solution.
The second criteria was maximizing the ability to serve demand on a day two after the next hurricane like Maria. So, if you have another hurricane at this level, and you expect to have some damage to transmission, which solution set would give you the most ability to serve demand on day two? So those were the two criteria. What the team realized was that the grid itself can be very valuable when you're trying to solve that issue. When you introduce the fact that solar ... Or, when you do the comparison, solar is one of the least cost, if not the least cost way to get energy onto the island. Maybe alongside of that, a decent amount of wind as well. You now say, okay, I can distribute energy across this island from renewable sources and I can use the distribution system as kind of the core of that.
If you look at that, that's basically like a microgrid. But the concern that we had is that it wouldn't get across the point of how big these regions would be, and the fact that they would use the existing distribution. We used the term other people had been using, so we did some research and said, let's use the word mini grid. Other people have used this before. It's usually bigger than a microgrid. Here it has the distinction of being built out of the existing utility electric grid. So, you essentially segmented out and use that as the core of these autonomous mini grids that you then interconnect with each other, or federate them into a larger system. This is not a new idea, but we wanted to introduce it into this discussion about mini grids.
Now, there are two ends of the spectrum, that you mentioned, the fully meshed, hardened transmission view, and the more distributed, or almost completely distributed microgrid view. Both of those have, we think, some difficulty. One, on the fully meshed transmission issue, it's hard to imagine hardening a system to a degree where it could have no damage. So, if you have 10, 20 percent damage to a transmission line, you're going to see 100 percent outage usually. If you see 10, 20 percent damage to distribution system, you may only see 30, 40 percent inability to serve out of that system. And so because of this radial, proportional relationship between damage and ability to serve, we think putting the distribution system in focus and building kind of around that with the mini grids made a lot of sense.
The other extreme of going all the way with every load having equipment on it, we thought we'd introduce a lot of difficulty in recovery and time to recover. It's sort of this sweet spot in between the two that says, the grid has a decent amount of value. Distributing energy sources is very valuable as well. What's the best place to do that?
Stephen Lacey: So, can you distinguish between this vision of these mini grids that are connected and I guess for ... You mentioned this, but I'll just drive the point home for anybody who is listening and trying to make sense of what a mini grid is, I think the size is the core distinction between a mini grid and a microgrid. microgrid we typically think of as being on a single facility, or a neighborhood, hospital, university campus, something like that. The load on a microgrid will be in the single digit or maybe double digit megawatts. The vision that you proposed has I think, seven mini grids throughout Puerto Rico, each of which basically has a little peak load in the hundreds of megawatts. So, it's big, and it's regional.
Shayle Kann: I like to think of the mini grid as like people talk about the need to spread out the geographic area for renewable energy power plants. It's like a regionalized, a smaller regionalized grid of a lot of microgrids and other assets.
Chris Shelton: Yes. The vision that we spoke about includes microgrids. All the major critical facilities should be able to be autonomous. microgrids make a lot of sense for like a hospital, those types of facilities. This vision and the ideas we're trying to introduce into the dialog with the other stakeholders are not inconsistent with a lot of microgrids in Puerto Rico. All right.
Shayle Kann: You could have a microgrid within this mini grid.
Chris Shelton: Exactly.
Shayle Kann: If there's a hospital within one of the mini grid areas, you might give it the capacity to island itself from the mini grid, if the power goes out. I guess the core question here, and we can get into this in more detail, but just at the high level, I guess is, cost. You talked about improving the cost of generation. So, solar being cheaper than ... Even solar plus storage as you defined it, being cheaper than oil, which I think is generally being proven to be true on islands, sort of worldwide.
I'm curious about the cost of this system of developing these mini grids and the TND infrastructure, I guess, especially the distribution infrastructure to support it. Have you done any work looking at what that cost might be, and how it might compare to the other plans that have been proposed, or the default way of just hardening the grid?
Chris Shelton: Well, we knew that other stakeholders were working on that, and in particular, the experience that New York had. We knew that they would come with the federal folks as well, to bring a set of ideas around hardening that would make a lot of sense. EEI is involved as well. We're a part of EEI. So again, what we focus on here is kind of where we thought people weren't putting as much of a spotlight, which was on the role that solar, wind and storage could play in the transformation. And, how it could reduce the fuel cost and improve the resiliency and power quality. That was where we put our focus, because that's what we thought we brought to the table.
We also could bring the hardening experience. We do have utilities in our company, but clearly when we knew that New York was driving this direction, we thought there would be great ideas coming out of there, and then the New York plan came out. It has very specific recommendations, guidelines, ways to approach this, and estimates of costs. So, I think that's very complimentary to what we're proposing. In some ways these things could be synergistic. There may be ways to overlap these visions and have the net be even less expensive, because the batteries can provide some resiliency that you can't have in other ways. Hopefully that answers the question. We're very focused on the fuel as a way to pay for some of the resiliency. That was the focus. Less on the details of exactly how to harden particular components, although we said they needed to be hardened.
Shayle Kann: So, one of the most interesting parts to me, of the vision that you guys proposed was the actual resources that you estimated would be needed. You looked at the island, which has a peak load of a little less than 3,000 megawatts. It needs about 12,000 gigawatt hours of generation, which is largely coming from fossil fuels right now. Then you estimated the amount of solar and storage that would be required to meet that.
First of all, and this pointed out really well in the paper, you end up saying that we'd need about 10,000 megawatts of solar in DC terms. So that's like way more capacity of course, because solar has a lower capacity factor. That also accounts for over generation because of the volatility of solar production. Basically what you do is, you say, how much solar would it take in order to meet all the generation needs on the island? And then, how much storage would it take to ensure that that solar could be delivered over all the right times? That ends up with you estimating about 2,500 megawatts of ten hour duration energy storage.
I'm interested to hear a little bit more about the storage component there, which is why 10 hours of storage duration? We haven't seen a whole lot of 10 hour duration energy storage in the world yet. We see lots of 30 minute, or four hour duration. 10 hours is sort of a new thing. Why put it at that duration?
Chris Shelton: Sure. Shayle, I appreciate the way you structured that, because its clear that you think about these things all the time. You're able to interpret what's going on there. The 10,000 megawatts, as I mentioned at the opening, we are focused on the fuel cost as a way to make improvements in the recovery. In order to eliminate the fuel cost, you have to bring that much energy onto the island. And so, while it says 10,000 megawatts, we had to put it in terms people think about solar in. They think about it in peak DC terms. So that's where it ends up being 10,000 megawatts in capacity at the peak, but the focus is the energy. We're trying to bring energy onto the island. The energy that's hitting the island every day, we want to capture that energy. And so that just happens to be what it takes to do that in the maximal case, so if you really maximize this. This is up to 10,000 megawatts of solar.
So, if that's your starting point, you're focused on the fuel. The derivative of that, the next thing you have to figure out is, how do I capture that energy in a way that I can actually use it to provide the outcomes that I'm seeking, in terms of resilience and just running the entire system? If you just let the math take you where it goes, you have to capture that energy quickly, and then you have to be able to dispatch it with a certain amount of power. The batteries that we're talking about here, 25 megawatt, or 2,500 megawatts for 10 hours, it really is just the store that you need and the way that you're going to dispatch it. The island is 3,000 megawatts.
In our vision, we said the least cost power plants would be part of this picture, so you have about another 1,000 megawatts of power plants out there. And so, that creates a pretty robust system with 2,500 megawatts of dispatchable power, and another 1,000 megawatts of power plants, which obviously can vary their outputs somewhat. So, that was how it all came together. There's tons of detail that you have to dig into here, behind this, that gets really nerdy, that we could go into.
Shayle Kann: So, am I right to just as a heuristic to try to help folks try to understand, basically what you're thinking here. So what you're saying is if the island is at peak, is about 3,000 megawatts of demand. So, you said okay, lets add enough energy storage, let's add enough batteries so that if solar isn't generating on the island at all at that moment, but the batteries are fully charged, and you have an additional 1,000 megawatts of fossil fuel plants that are still operating a bit more flexibly, we could meet peak demand at any given time without solar, if there's no solar generation at that time. We could do so theoretically, for up to 10 hours at a time, if the batteries were fully charged.
Is that enough, based on the sort of load profile in Puerto Rico, that if there were another Maria type event, how far would that get us? Do we think that we would have full recovery?
Chris Shelton: For a typical system design, for an electric system, you have the active part of the system that's producing the energy and doing what's called primary frequency control. But, then you have a second tier of activity ongoing that's like spinning reserve, or secondary frequency regulation. All of those activities are going on as well.
But an important part that we almost talk about is a tertiary system, which is usually offline. This system, and we highlight this in the vision as well, would have offline generation, that you expect to run almost never, that would be there, that would have a low fixed cost to maintain. But, if you ran it all the time, it would be expensive, but given that you're not expecting to run it very frequently, it won't be very expensive. Some of that already exists on the island, and so you would move it to that kind of tertiary, cold reserve that would be present to deal with the tail risk of just relying only on solar, or a combination of solar and wind.
Shayle Kann: And the other thing that I saw in the paper that I just want to verify with you, so the idea with these mini grids ... Often with a microgrid you think of okay, in a resiliency event, in an event where the power goes out, the microgrid islands and depending on how it's designed, either within that microgrid you're operating as normal, or you're operating critical loads exclusively. The one thing that I saw in your piece, is when you think about these mini grids, and again in the context of what happens if another Maria comes and hits Puerto Rico, is that you would design these regional mini grids so that during emergencies you could serve over 70 percent of critical load, and over 50 percent of all loads for kind of weeks on end. Is that sort of how you designed it?
Chris Shelton: Yes. That was the design objective. Again, it was a 10 day process, but that is what the team focused on delivering. And so, in a situation where you had an extreme event and it caused what should be unexpected levels of damage after hardening of the transmission. But if that still were to happen, you would still have the ability to serve more than 50 percent of the load of the island with the solar coming to the island on a rolling average, over however many days, with the combination of the storage.
You could have again, on extreme events where every once in a while, you may have to run some standby generation, but very rarely would you need to do that. Again you then have that resiliency. You have the lower fuel cost and that helps pay for the whole system.
Stephen Lacey: Let's talk about the other side of the equation, natural gas. You own and operate LNG facilities throughout Central America. You understand the costs of liquefied natural gas. You understand what it would cost to develop a new terminal in Puerto Rico. What are the constraints of gas? And, why do those variable fuel costs and infrastructure costs make solar and batteries more competitive with gas, in a place like Puerto Rico, or other island countries, for that matter?
We were talking before this interview and you said, batteries on the mainland, for example are not always a slam dunk, compared to shale gas. It's really project specific. But here, you're talking about a whole set of constraints and added costs on an island country, or an island commonwealth that make batteries and solar much more competitive.
Chris Shelton: I think in the Puerto Rico case, what's important to think about is the resiliency that you're trying to solve for, and where the load exists. In our vision we highlighted that an LNG and combined cycle, and this is consistent with what New York said ... The New York led consortium there. Said, that on the North, if you could have an LNG and combined cycle on the North, to serve the San Juan load, it makes a lot of sense. We don't necessarily disagree with that. But we still think the ability to distribute energy across the island is a unique aspect of the solar renewable storage combination. We think that provides a level of resiliency that just a series of power plants wouldn't be able to introduce without a tremendous amount of spending on transmission, on the system.
Again, it goes back to that kind of, what is the sweet spot? You have a concentration of load in San Juan. If you could get LNG and combine cycle combo in that load center, that would be part of that mini grid. What's the distinction between LNG and a solar storage? I think LNG ... The solar is going to need to take more land. That's a difference. But, the solar and storage can take much less time to develop. Solar storage could be done in a year or less. LNG typically has a pretty long permitting and developing cycle.
Shayle Kann: So I find this plan really fascinating, and exciting to be honest. I guess I'm curious, how and if you think it could be operationalized. So we have this ongoing recovery, day to day, right now in Puerto Rico that is going to last for at least months longer. Meanwhile, there's this concurrent process through which there's a solicitation of ideas. This being one of them. Imagine that your idea was accepted, and everybody wanted to do it. How would it happen? Who would pay for it? Who would operate it? Where would the money come from? What would it take for this to become a reality?
Chris Shelton: Sure. I want to take a step back on that. I'll answer that, but I want to highlight the fact that we want to have dialogs like this, among stakeholders. We think that ideas are powerful and knowledge is just as powerful. Knowing the cost of these things and how they can be deployed and how they can be arranged is important. Those facts, getting out and understood is important to inform many different stakeholders and many constituencies that exist in Puerto Rico and in the federal level.
I think we don't want to miss that. It leads to the answer to your question, which is, there are a lot of activities ongoing, with FEMA and the Army Corp, and eventually HUD at the federal level, that are trying to figure out what combination of spending and within which set of rules makes the most sense. Again, that's why informing the state-of-the-art today, and what's possible with today's solutions and at what cost, is just critical at this time. We've heard folks say, thank you for sharing this. We want to keep incorporating these data points. And a lot of other stakeholders like RMI and others are out there driving towards the same, and saying, look at these data points. Let's think about these and incorporate them.
The nuts and bolts, there will be spending at the federal level, and New York has highlighted that in the recovery after Sandy, there was a way to use block grant programs to get investment in new solutions that solved for the community outcomes that were being sought, that were different than the original infrastructure. That's been a highlighted path, and hopefully that takes root for Puerto Rico. Obviously there's bills on the Hill and all kinds of things going on right now around that, that I'm probably not an expert on. But, I would say that is where and how this can be partially funded.
We think, focus on the fuel cost is another way to fund this. So, as things are being restructured in Puerto Rico, around all the cost structure of the electric system and the Puerto Rico government has been very focused on reducing the cost of electricity and improving the quality not only for manufacturing, but for the communities. I think there's an opportunity to look at this. We estimated in our vision to the Energy Commission, that very large amount of solar and storage that we talked about, could be funded from 10 years of fuel cost.
So, if you could avoid 10 years of the current fuel cost, you could pay for that whole system. So, we don't want to kind of leave that out of the discussion. Yes, you have some federal money that comes from the recovery. Incorporate that into a thinking about the fuel and that becomes a fair amount of dollars to deliver better power quality, better resiliency for the people of Puerto Rico.
Stephen Lacey: I want to contextualize the storage component a bit more. You're well known in storage circles. Anyone who knows the storage industry knows your name. You're Chairman of the Board at the Energy Storage Association. You were the President at AES Energy Storage. You moved on to be VP and Chief Technology Officer of AES, the AES Corporation, but you were leading up the charge on the storage side for a longtime, for more than 8 years. So you know storage inside and out.
We actually just had an episode last week where Shayle and I talked on stage about the state of the energy storage market. AES has obviously always been really crucial in driving that market on the grid scale. One thing Shayle said on stage, and Shayle, please chime in here, if you want to add additional context. But we looked at GTM Research and Wood McKenzie data, and it's pretty clear that in the next four or five years it's going to be really hard to make the cases to build a natural gas peak or power plant in the United States. I wonder what you think about that? How quickly the economics are shifting for battery storage, generally? And, what that says about the future of gas?
Chris Shelton: Well, as I mentioned to you yesterday when we were talking about the show today, combined cycle power plants with low cost, like shale gas driven low cost gas, make a lot of sense when you need to run them a lot. So, if you need a lot of energy and you wanted to come onto the electric system, it's hard to beat that. Right? It's almost as, at the theoretical limit of efficiency that you could expect, and it's very low cost fuel. And on a relative basis, in the thermal realm, it's as clean as you're going to get. I think we have to keep that in context. That's a real thing. It's important that people understand that if you need the base load constantly running electricity, you can find a lot of places where the combined cycle makes a lot of sense, especially with low cost fuel.
That also is true in markets around the world where they're still thinking about building coal plants and there's an opportunity for them to look at LNG import as we talk about it, that's still transformative. It's still dispatchable. In those growing markets that, that's becoming something that people are looking at. I think putting that out there and moving on to look at peaking power plants. Well, peaking power plants aren't used very often. They're an underused asset class. So, you build these assets and they just don't get used very often. Unlike a combined cycle that I just described that's serving a significant amount of energy, if you're not doing a lot of energy with it, it's a big capital investment that's not doing much. If you look at storage, storage is something that can be synchronized and connected all the time, and serving some form of value, kind of continually.
That's why I think people are making that switch. It paints in an easy picture for folks to say, should I buy this thing? Or, should I buy that thing? It lets people put a price tag on the value of storage. That is the transformative effect I think that it's having. It's something that our energy storage team spent a lot of time focusing on. To say, early on, eight years ago we said, no one buys storage. There's no procurements for storage. Nothing like that out there. So, people would ask us, how big is the storage market? I looked at a report that says that it doesn't exist. We would say, this seems like an issue. So, our team focused a lot on, lets sell something that people buy, and lets solve problems that people are trying to solve. That's why peaking power plants are a great way to eliminate the value storage, because it's something people already buy, and then they can make that purchase decision.
Shayle Kann: My last question is about the applicability of this Puerto Rico plan that you've proposed to other island grids. We estimated at one point, I think, there's something like over 3,000 island grids in the world with peak load over 100 megawatts, so they have some kind of scale to them. Not all of them are at the size of Puerto Rico, but there are others that are at that scale as well. Many of which share a lot of the same problems that Puerto Rico does. Expensive, imported generation coming from oil, rugged, mountainous, rural areas through which you're currently running transmission lines. So there are other grids that look somewhat similar, and presumably susceptible to natural disasters, as well.
Do you think that this vision, of this network of connected mini grids is applicable in general, or even in the specific ways it was designed to other grids? And do you expect to go around and look at other islands and find places where it could work? Or is it Puerto Rico specific?
Chris Shelton: Some of the challenges for Puerto Rico are unique, the hurricane path, the intensity of the hurricanes is a unique element here. But, I think in particular, the solar storage ... That unique element exists for the Caribbean, obviously. But the solar storage combo and what it means to imported fuel for islands, I think is transferrable to most islands. You see the work that AS's team has done, our solar team, working with energy storage has signed a PPA with KIUC for 11 cents per kilowatt-hour, so dispatchable. In that case, a five hour battery.
That's providing a lot of the benefits that we're saying can come to Puerto Rico in terms of savings of costs. They're not importing as much fuel. It's providing resiliency capability to the island. So yes, this exists in most island context where you need to import the fuel. And in the case where they ... If they have older generation and are making decisions about where to invest capital, it creates even more value, because those older plants are typically less efficient.
Stephen Lacey: Chris Shelton is the Chief Technology Officer of AES Corporation. He joined us from the company's headquarters in Virginia. Chris, thanks so much for your time. Really interesting vision, and we really appreciate you exploring this with us.
Chris Shelton: Great. Thank you. Really enjoyed the discussion.
Stephen Lacey: And that does it for this week's show. Thanks everyone for joining us. We're sending our best wishes to the people in Puerto Rico, and of course our best wishes to the crews working there to try to bring power back to people. Shayle, I really enjoyed this conversation. Next week we get another good one with our CEO, Scott Clavenna. You were there for that. What was that all about?
Shayle Kann: That's a fun one. So, if you've been listening to this podcast, or The Energy Gang for that matter, you know that we do this monthly even series called Watt It Takes, in collaboration with Powerhouse, the cleantech incubator, based in Oakland, where we interview founders and entrepreneurs in clean tech. Generally ones who've had a successful exit or sometimes unsuccessful, and they tell us their stories ranging from sort of how they grew up, to how they founded companies and all the ups and downs they went through. This was a fun one because we interviewed our own CEO, Scott Clavenna, who's the founder of GTM. And so, you got a bit about his background, but also a lot about where GTM comes from. So, it was meta. We will admit that, but it was super fun for me.
Stephen Lacey: That's the way we're going to end the year, with a reflection on the journey that GTM has taken from our dear leader, Scott Clavenna. Scott has been such an amazing person to work under. You'll get an inside scoop on how exactly GTM was formed. How it evolved, and what happened during and after the acquisition. We look forward to bringing that to you.
Happy holidays, everyone. We love bringing this podcast to you, and if love it too, then make sure to give us a rating and review on iTunes. It is hugely helpful for us as we try to gather more listeners. So, if you like us, give us a five star rating on iTunes. Go to Apple Podcast and leave us a review, if you so desire. And then, send a link around to your friends. We can be found on every platform that you can imagine. Apple Podcast, SoundCloud, Stitcher, Google Play, you name it. Shayle, good talking to you. We will catch up with you in the new year.
Shayle Kann: Likewise. Have a good holiday.
Stephen Lacey: With Shayle Kann, I'm Stephen Lacey. This is The Interchange, weekly conversations on the global energy transformation from Greentech Media.