$2 Trillion Build

June 29, 2015
There could be a lot of stranded investment.

At the American Public Power Association Public Power Expo in June in Minneapolis, The Energy Times gathered together four of the country’s leading lights in public power for a roundtable discussion on issues facing not only public power, but all electric utilities today and in the future. The discussion was sponsored by Burns & McDonnell. What follows are their ideas and commentary, edited for style and length.

Participating were Sue Kelly, American Public Power Association president and chief executive officer; Doug Hunter, Utah Associated Municipal Power Systems chief executive officer and general manager; Scott Miller, City Utilities of Springfield general manager; and Decosta Jenkins, Nashville Electric Services president and chief executive officer.

The Energy Times:  There has been a lot of talk about a $2 trillion grid being built out in the coming decade. How do you see that unfolding, and what is the impact on public power providers?

Doug Hunter: There could be a lot of stranded investment in this concept as we go through it.  We have to be very careful about the stranded investment. We are going to be becoming more distributed. I’ll just use the German model as a perfect example of stranded investment. They built a grid with combined cycle generation and renewables, and the renewable standards came out but they stayed with the same model, building combined cycle and new transmission lines.  Out of four major utilities, one is bankrupt and the other three are on the verge of bankruptcy. We have to
be very careful about the infrastructure and the costs.

Decosta Jenkins: We need to explain to the customers that we provide something. Is it safety?  Is it comfort?  Is it security?  What’s happening in my view is people are looking for a way to have all of these things and not be dependent upon the utility.  Now from a utility executive’s perspective that’s not possible.  You can have pieces of it, but you can’t have all the things that we do.  Let’s say you have distributed generation. You’ve got solar panels and you have a major storm. Who are you going to call for your power?  Are you going to call me?  Those are the types of things that we need to be thinking about. How do we communicate this to the customer? Then we can be facilitators.

Sue Kelly:  It’s really unclear which way the infrastructure of the future is going to go.  You have, as Doug has pointed out, a plan to build massive transmission to support renewables all over the west and into the east and connect all three interconnections. We have the Department of Energy’s Quadrennial Energy Review that just came out that talks about the need to renew our infrastructure and the vast amount of money that’s going to take. This is the same administration that is currently trying to take away taxes and financing from us.  That is the number one tool we use to build infrastructure.  I sometimes wish the federal government was more internally consistent.  We need to consider what I would call a no regrets strategy – we have to look at a lot of different scenarios and figure out what kinds of assets are needed.  Certain transmission will need to be built under any scenario. More distributed generation will likely be needed.  If we just go whole hog right now we may end up making some investments that we regret.  Let’s kind of step through that and see how things develop.
Scott Miller:  We’ve had a system that was designed about serving the customer. You put your generation remotely and you built a wire to the customer and you provided that.  Our grid was not really set up for commerce. But when you talk about the $2 trillion grid I think of it as a commercial grid.  Our customers are going to experience a bit of a sticker shock because they’re going to be the ones that paying for that. It’s a big cost to our customers. 

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