Drawing a Roadmap for the Brave New World of Electric Power

The energy economy in California is changing fast. Disruptive technologies and new market players are reshaping the game, even as policymakers up the ante on the state’s clean energy ambitions. Yet gas and electric providers like PG&E remain responsible for the massive infrastructure investment required to deliver on those goals, while also ensuring that the system remains safe, reliable, and affordable.

So how will we make it all work?

That was the topic of a spirited panel discussion at the Renewables Rush conference last week here in San Francisco. The panelists included Steve Malnight, PG&E’s senior vice president for strategy and policy, as well as J. Andrew Murphy, senior vice president for strategy and policy at Edison International, the parent company of our Southern California counterpart.

Steve Malnight at the Renewables Rush conference in San Francisco where he served on a panel discussion.

Over the course of a wide-ranging conversation, the panel agreed on three things:

  • Finding the right role for energy companies to play in “The Brave New World of Electric Power” comes with daunting challenges, but also exciting opportunities;
  • The current regulatory structures will have to evolve in a way that keeps pace with the rapid speed of the change; and
  • Any solution has to put the interests of our customers first, particularly those who might otherwise be left behind.

“It’s critical that we think about: how does every customer, every citizen in California have the chance to participate in this new energy economy that we are building,” Malnight pointed out. “How do we make sure that the industry we lay out for the future serves all Californians? [That] is a really important model for us going forward.”

The panel laid out several problems that the state’s policymakers, energy companies, and other stakeholders will have to navigate.

For example, what effect might the apparent reversal in federal climate and energy policy have in slowing the hard-won progress on renewable sources and greenhouse-gas reductions? How far can we go in replacing thermal plants with solar and wind? And how will a market in which customers can choose their energy supplier affect the proven business model that has sustained electric power companies for most of their history?

On the first question, the panel was unanimous: The decisions being made in Sacramento and other state capitols have a much bigger impact on energy system planning than the direction set in Washington, D.C.

“Ninety percent of what happens on regulation and policy in the electric industry happens at the state level,” said Edison’s Murphy. “California is committed to its path and I don’t see that changing. It’s not something the federal government can stop.”

As for the emphasis on renewables, Malnight pointed out that California has already reached the point where on sunny days in the spring and summer, the state’s independent system operator gets more solar power than it can use. That might sound like a nice problem to have. But it’s not.

“We’re literally paying people not to generate energy,” Malnight said. “There has got to be a better way. The future is here today, and now is the time to really begin addressing these issues.”

On the regulatory and business models, the panel agreed that today’s structures will need to catch up to such emerging realities. But just which model will work best is not yet known. And what works will likely vary widely from state to state, and will depend on whether the primary policy aim is cheap energy, renewable energy, less greenhouse gas, or some combination of the three.

“I haven’t yet seen one model where I say, ‘That’s it! That’s the one California should adopt,’” Malnight said. “We have to learn from the best and decide what’s right for California. But I’m guessing it’s going to be a different model than we’ve seen in other places.”

But he also pointed out that there is one way in which other states would be well advised to follow in The Golden State’s path.

“One of the big benefits we have here in California that we have a policy environment with a high degree of certainty and a high degree of dependability. That means we can forecast into the future and make investments in an environment where we know the policy will be pretty consistent.

“I certainly hope the rest of the nation will look to California, see the direction we are going, and emulate it,” Malnight said. “Not just on carbon policy, but on clear, stable policy goals we can all work to achieve.”

Tim Fitzpatrick is PG&E’s vice president of corporate relations and chief communications officer. Follow Tim on Twitter @PGE_Tim

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