How to Push Utilities Toward a Cheaper, Cleaner Future: A Q&A With Jigar Shah

Jack Carroll: You hear about virtual power plants, demand response, demand flexibility, all these different terms. For you, what’s the top reason to pursue these things?

Jigar Shah: The utility is in charge of making sure that you have a worry-free experience. If you want to buy an espresso machine, do it. If you want to convert your gas dryer to an electric dryer, do it. If you want to put an EV in your garage, they’ll take care of it. The whole point of the electric utility company is to make your consumer purchases easy to do.

In order for the utility to make that work, they supply you power in a real-time basis. They spin up a generator, they transmit that power via transmission lines, and then distribute it by distribution lines to your home. That’s a one-directional system. If your home requires more power than that, then you need to upgrade the service of your home. If the neighborhood needs more power, well, then you’ve got to upgrade the entire distribution system.

That has turned out to be the most expensive way to solve the problem. And that is now leading to people feeling powerless over their bills. So that’s one big theme.

The second theme is that you’ve got 30-plus years of electricity innovation that’s occurred here in the United States, and a lot of that technology is now really cheap and affordable. And we don’t really have an ability to deploy that technology at scale.

The last time we had this issue was in the 1990s. We had the 1996 Telecom Act, which basically was saying, ‘Why don't people have access to cell phones?’ It was because the utility company, in that case AT&T, wouldn’t allow the implementation of innovation. It was always, ‘Well, it’s not safe. It’s somebody’s fault. We’re doing a transition as fast as we can.’ But as a result, we were not deploying innovation that we had invented here in the United States. And they ended up having to break up the utility. 

Now, I don't know what the answer is here, but both things are true. One is that the utility business-as-usual model is too expensive. And two is that we have a crapload of innovations. And the utilities are saying, ‘We're doing that as fast as we can, but you guys don't understand physics.’ That, I think, is the foundation of the problem that we're in.

Colin Kinniburgh: You brought up the cost aspect. Something we also hear about constantly these days is reliability. Grid operators are putting out these reports saying there will be shortfalls in supply with all these new loads coming onto the grid. They talk about keeping peaker plants open for longer. To what extent do you think these kinds of solutions can address reliability?

Shah: It’s the same exact argument. On the one hand, you have the business-as-usual way of doing reliability. And then you’ve got 30 years of innovation — ways that can provide reliability that’s 90 percent cheaper than that. Every new water heater that people install now has an app that goes with it. So you can control people’s water heaters and, if you need to spin up a natural gas peaker plant because you need extra power, well, the alternative is you can reduce load. That’s what Rocky Mountain Power has been doing for five years in Salt Lake City. They pay to help you put a battery in your home, and then they run that battery twice a day, and they run it instead of running a peaker plant.

Kinniburgh: Why do you think this hasn’t taken off more? What is the biggest barrier? And specifically in New York?

Shah: We in New York invented the whole REV — Reforming the Energy Vision. And even now, when you look at the five-megawatt battery storage pilot in ConEd territory, ConEd is saying, ‘Oh, too much success. We’ve had too many batteries bid into this program. Now we’re worried about shifting the entire peak. I think we’re going to have to slow this down and reevaluate all of it.’

You go to the governor, and you say, ‘Hey, Governor, you have this problem. Utilities want business as usual. The innovators want to deploy their innovations. What is your opinion on how we get through this?’ And she’s like, ‘I don’t have any expertise in this area. Don’t make me make the decision.’ And you’re like, ‘Great, you’ve got Doreen Harris that runs NYSERDA. Why don’t you outsource it to her? She’s super smart.’ And Doreen is like, ‘We do research and development. We don’t want to make those decisions at NYSERDA.’ And then you’ve got Rory Christian running the Public Service Commission. And Rory is like, ‘I don’t want to make that decision either. I’m going to relegate it to the staff of the New York Public Service Commission. New York Public Service Commission’s like, ‘Well, we think everything should go much more slowly.’

And so there’s no architect for change in New York state. I don’t think any of them are villains. I don’t think the people who run the Public Service Commission or NYSERDA or the governor’s office are bad people, but they certainly don’t trust their own instincts. And so the question is, who should they trust? Because that answer is nobody, they trust the electric utility. Because [the utilities] have been around for a long time, and they’re the ones who are in charge of making sure the lights go on, and they’re the ones that people blame when there’s a power outage or whatever it is. So if they are saying, ‘We think there’s going to be increased power outages because of decisions you’re making, Governor,’ then the governor’s like, ‘Wow, then we should slow this down.’ And as a result, they continue to get the ability to raise rates.

[Asked about this characterization, NYSERDA President Doreen Harris said, “NYSERDA is helping New Yorkers access clean, affordable electricity by researching, commercializing, and deploying innovative technologies that address barriers to renewable energy,” citing the authority’s $65 million Grid Modernization Program.

Public Service Commission chair Rory Christian said, “The Commission has long served as an agent of change for NYS. New York includes some of the oldest and most complicated energy networks in the world, and integrating new technologies while prioritizing safety, reliability, and affordability takes time and responsible coordination.” He cited longstanding programs to rein in energy use from large industrial customers, which open up some 1.4 gigawatts on the grid at peak times.]

Kinniburgh: Is there a role for the legislature here to step in?

Shah: Yeah. Because what the utilities are saying is, ‘We’ll follow the law.’ So if the legislature passes a law that says, ‘We need to make sure we get more out of the stuff we’ve already paid for,’ then there’s two components to that. One component is we have to measure how well we’re using the stuff we’ve already paid for. That data needs to be open sourced, or at least partially open sourced. Maybe you don’t give it to the public, but you give it to the Public Service Commission, or you give it to somebody.

Then, the Public Service Commission has to approve projects based on that number. So if the utility says, ‘Well, this distribution circuit’s used 12 percent of the time,’ they’re like, ‘Great. That number needs to be 14. It needs to go up. And then 16, then 18, then 20, 22.’ And you’re like, ‘How do we do that?’ It might be natural gas. I’m not trying to be specific on the technologies. But most likely it’s going to be batteries or demand flexibility, or virtual power plants or all this other stuff.

But now you actually have a framework. And so I think you’re putting your finger on it. The only way to break this logjam is through the legislature.

Carroll: I’ve heard you say we can cut rates 20 percent by 2030. Do you think that statement applies to New York as well?

Shah: Yeah. There’s two pieces to the equation. One piece is the numerator — expenditure by the utility. And then the second piece is the denominator [electricity demand]. The reason you couldn’t do it five years ago is the denominator wasn’t going up. Today, the denominator is going up. Kilowatt-hour sales are going up. That’s in New York state — that’s everywhere. And then [with] the numerator, the question is, how does that number become more stable? That doesn’t mean that we’re spending less money, to be clear — we’re just spending less money [on our utility bills]. Because consumers are spending lots of money. They’re buying solar panels with battery storage. They’re buying electric vehicles. They’re buying smart water heaters. They’re buying smart thermostats. They’re buying lots of stuff. But none of those features are being paid for by the utility. Consumers continue to pay more and more money for stuff that they believe protects their family. And now those things can do double duty to reduce rates.