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Speaker 1 (00:00):
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Welcome to the Power Bytes podcast, brought to you by Caterpillar Electric Power, with your host, John Thomas. Each month, we deliver the latest insights, trends, and cutting edge tools to keep you ahead in the dynamic energy industry. Whether you're streamlining operations, embracing new technologies, or staying informed, Power Bytes is your go-to source. Join us as we explore innovations shaping the future and the resources you need to succeed. Welcome to Power Bytes, where energy meets innovation.
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Steve Gupman (00:29):
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So, welcome. We're gonna attempt to answer a relatively simple question. Is the current model that utilities use capable of taking us where we need to go over the next five to 10 years? We all know the growth in demand, so there's electrification, would be remiss if I didn't mention AI data centers, right? That's what every panel here has to talk about a little bit. That demand growth is coming. We've got extreme weather events. We know Winter Storm Fern. There's still a situation in the Carolinas, right? So, more and more that's hitting. There's a constraint on our ability to add capacity, and all of those things adding together feel like the things are getting stretched very thin. So what I'm gonna ask the panel today to examine is maybe challenge the traditional way that utilities think and offer some insights into how we might add some innovation, how we might better prepare for the next 10 years. So what do we need to do to make sure that the grid in 2035 suits us all and, and is where it needs to be?
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(01:21):
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So my name's Steve Gupman. I'm the director of grid and energy services at Caterpillar, and I'm joined by a, an excellent panel today. I'm excited because we've got a range of perspectives, I think, to address this problem. So David Ellis has worked in utilities. He's got the, the traditional utilities perspective. Scott Ungerer is a venture capitalist with a specialization in energy technology. And then Dean Musser has been an entrepreneur and technology leader for the last 35 years. So why don't we kick it off, David, you wanna introduce yourself?
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David Ellis (01:51):
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Sure. Thanks, Steve. My name's David Ellis. I've spent time as CEO of a regulated utility, Entergy New Orleans, and also as their first Chief Customer Officer in the Gulf South. And I'm working as an independent consultant today. Good to be here.
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Scott Ungerer (02:05):
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Good afternoon. I'm Scott Ungerer, founder and a managing partner at EnterTech Capital, a venture capital firm that's been doing what we do for 30 years. And it's investing along the value chain from downhole sensing to energy consuming devices. We stay away from large CapEx, but it's mostly technology which translates to a lot of software. My first 16 years in industry was with an electric utility. So I made the transition very successfully, and I was happy I did. And, uh, I'm still trying to figure out what we do and how it can be most impactful for utilities and the customers.
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Dean Musser (02:41):
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Good afternoon, everybody. My name's Dean Musser. I am the director of long-term strategy for energy services for Caterpillar. Prior to that, I spent, uh, my career really in kind of the energy tech space and, uh, really, a concentration in demand response.
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Steve Gupman (02:53):
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Great. Thank you.
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Dean Musser (02:54):
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So let's get going.
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Steve Gupman (02:55):
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I'm gonna have the opportunity to ask a lot of questions to our panel, but I really wanna hear what you're thinking in the room. So I don't know if it's a softball for you, David, but why is the Power Through program that Entergy did different than a typical demand response one?
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David Ellis (03:08):
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It's different in that when you think about demand response programs, they're either hosted by, you know, through rules that are stakeholder-developed, through regional transmission organizations or independent system operators. This was a regulated filing with a specific regulator and not a super-regional program to address very specific problems. So it gave the utility the opportunity to address its customers' problems, but also probably, you know, earn a, a fair rate of return on, you know, their investment, their capital investment in putting these things in place. And then it made it very easy for the customers to pay for these services without it being disruptive to their business models, as well. And that's the biggest difference. Uh, you know, you're not responding to, uh, you know, a price signal from the market, you're not losing money, and you're not obligated to do things that you, you shouldn't be doing or can't afford to do.
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Dean Musser (04:02):
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You know, I, I ... When I look at it from afar, one of the things that I thought was really interesting about that program, and Scott hit on it earlier. Two of the things that, you know, utilities have dear to their heart is safety and reliability. And because it was in front of the meter, and you built the assets, you controlled the assets, you built it to your standards, that's a big difference than taking over somebody's, you know, asset behind and y- that you didn't build, you don't know that you dispatched to their standards, it's a safety net, you controlled all that. And that, it's one of the first times that I've really seen that across the country be able to scale.
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Steve Gupman (04:33):
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So next question. How do you envision closing the gap between available talent and the enormous amount of incoming execution that will be required to meet the demand?
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Dean Musser (04:43):
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I think this is where we gotta go back to rebrand what we're doing. We are going to have to attract generational talent. And so it's, we gotta rebrand ourselves, because if we just go out there and say, "We're a utility and, you know, we want the best and the brightest," we're not gonna get it. I go back maybe 15 years ago, a gentleman was speaking at a conference and he was sitting on an airplane on his way there, and a kid asked him, "What do you do?" And he said, "Why, I work in the power industry." And the kid kinda just turned away, and he goes, "Well, actually, I work in renewable energy, and I work on solar." And he goes, "Oh, that's cool." And he goes, "It was the first time in my life I've ever been cool." And so I really think we have to get back to that and we have to rebrand.
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(05:21):
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When I came to Caterpillar, uh, a couple years ago, when they acquired our company, I had no idea that Caterpillar was such a technology company, and now that I'm, you know, kinda see under the hood of what's going on, I wish we could really, really brand that. And I see, you see what's going on at CES with Caterpillar and things of that nature, that will attract talent, because people think it's cool.
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David Ellis (05:42):
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Couldn't agree more. I'll just add to that, though, that this young talent is much smarter than I ever was, and they're much more knowledgeable, they have access to information that I never had access to, and they're drawn to technology, they're drawn to the novelty of it and the coolness of it, but they're also drawn to purpose. So if that message is purposeful, if you're doing something that, that matters, that's consequential, they'll come.
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Dean Musser (06:06):
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That's why I think you solve a generational problem, it's, you will drive that purpose.
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Steve Gupman (06:12):
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Okay. So I just wanna be clear that my job is to read these questions and pick the best ones. And I had one coming that's really good, and I'm kinda scared to ask it.
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Scott Ungerer (06:21):
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Uh-oh.
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Steve Gupman (06:22):
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But I think it's a great question and I wanna ask it, so don't hold it against me. But, Scott, what is your ideal regulatory framework?
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Audience (06:30):
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(laughs)-
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Scott Ungerer (06:31):
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The ideal framework needs to be fair to all parties and reflect the current business environment that exists. A regulatory framework needs to, you know, put as much of the decisions, in my opinion, into the hands of the people actually doing the work, and allow new participants to join. It's complicated to unwind, probably more so than it is to design the new one. But, you know, I think that's a good place to start.
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Dean Musser (06:59):
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In some ways, I feel bad because utilities are the ones that are taking the beating, but in many cases, they're doing it with, you know, two hands tied behind their back. You know, they gotta handle the regulatory climate, they have to handle the customer advocate, they have to handle, you know, their internal cost of capital from [inaudible 00:07:15] shareholders. Th- there's so many people they have to take care of along the way that it's hard to solve a problem this big. And so we do need to recognize that we're asking them to solve a problem with limited, uh, abilities.
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David Ellis (07:29):
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And I feel obligated to stand up for the regulator, having been a former utility executive. So for all the regulators in the room, they have difficult jobs to do. They, they really do. And because you're a regulator, it doesn't mean that you, you have this innate ability to understand these very complex engineering and power-related topics. These are complex things that even people that work at utilities and in the tech industry don't fully understand. So it, it's a difficult job, but that's why we need the stakeholders to come together and, and resolve these problems collaboratively.
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Steve Gupman (08:04):
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Great. I might actually take a stab at this one. With backup generators reaching more deeply into built up areas and being called on to support the grid, will this change emissions needs of the gen market? So I know because I am very involved in, in what Caterpillar's doing, at least with, uh, with emissions. So, and there's a, a pretty large collaboration with the EPA, at least in the nor- in North America or the US. We're working with them to understand how we can get more Tier 4. Like, how, how can we upgrade diesel gensets that are out there to meet Tier 4 standards? There's also large investments in things like gas, natural gas gensets that have significantly lower emissions. So, for example, we have what we call fast response gensets. So, so 10 years ago, we would never think of using a natural gas genset as a, as a backup generator, but we've invested a lot to make very, you know, quick-responding natural gas gensets that can stand in for a diesel. So, I do see the, the market shifting.
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Dean Musser (08:55):
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No, I agree. I think that's gonna be something that's gonna have to happen. And I think the controls, both emissions controls and controls of the genset, are gonna have to change to meet some of these requirements. I mean, it's just, there's no way we're gonna control this size load with our standard controls of the past.
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Steve Gupman (09:10):
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Do you guys see the energy problem pushing regulated energy markets to explore becoming deregulated?
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Dean Musser (09:16):
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That's a huge topic. Um, do I think it's gonna change? No, but is i- ... will become some kind of hybrid? Maybe.
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David Ellis (09:22):
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So there are pros and cons to each. There might be some innovation advantages in a deregulated market, maybe speed to market, that kind of thing, multiple parties. But in a vertically-integrated utility, there are still some potential pricing advantages. You know who the customers are, the customers know who you are, and expectations aren't just, you know, thrown into the wind because you're not the party touching the customer.
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Steve Gupman (09:47):
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So, Scott, how can techs and software companies sell in a way that's profitable for the utility?
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Scott Ungerer (09:53):
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It's the regulatory framework of the treatment of the expenses that are associated with a software purchase. We're in the business of workarounds. We're always dealing with some sort of constraint by somebody. So, you know, how do you make a software SaaS purchase look like a CapEx? If you get that figured out, and there are people that have figured it out, there's regulatory re- environments that acknowledge that, okay, that's the way tech is sold, so that's the way tech needs to be buyed. We want you to buy it, so we're gonna give you a return on it. You know, there is some progression taking place.
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Dean Musser (10:21):
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Can I add something to that? 'Cause I'm somebody that actually sold software to utilities. We, we looked at it from a different value perspective. So, if a s- if a utility was going to spend a tremendous amount of money on an AMI system, then we would try to add value to that AMI system by using our software, so that made it easier for them to deploy the AMI system. So taking that data and using it in a different way is very difficult. If you include it in a big program, then it's a little bit different where they can capitalize it. So there are workarounds, it's just sometimes hard to get to.
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Scott Ungerer (10:51):
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I, I just wanna be crystal clear in case I gave a misrepresentation. I think the utilities should be able to make money. I should think they should be encouraged to make money on things that make sense for, you know, the community, their customer base, you know, society in general.
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Steve Gupman (11:06):
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So who do you think is responsible for balancing the process or maybe changes of the process we talk about with all this demand that's right now? Where does that fall? Who needs to be the one making a change?
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Dean Musser (11:16):
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I think that's stakeholders across the board. That's gonna be FERC, that's gonna be public utility commission folks, that's gonna be the governments. We gotta have all the stakeholders in the room.
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Steve Gupman (11:25):
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One more question, apologize to who I didn't get to, but do you think that the problem that we're faced with today is simply that we under-invested in capacity up till now?
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Dean Musser (11:35):
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That's a big piece of it. I mean, if you look at what's gone on in PJM, we, we built nothing over the last, you know, how many years, b- and mainly it's because the price of capacity wouldn't support building a plant, and now all of a sudden, we need plants and we gotta catch up. You know, it's difficult, and we were fortunate because the price of natural gas was low, electricity prices were low. Now we're getting the, kind of the, the double whammy to the customer of, you know, basically, cost of energy going up, volatility's going up, and capacity going up. So part of it is, is we didn't send the right build signal before.
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David Ellis (12:06):
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And we were told we needed to retire assets because of their emissions and cost to operate those assets, and we needed to add more monitoring, which increased the cost even more, and just made those plants unaffordable. So it's, it's a combination of having under-built and forcing us to retire assets that would be serving us right now.
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Steve Gupman (12:24):
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All right. Well, I wanna thank my panel, um, for the discussion. I wanna thank all of you for spending the hour with us. Thanks very much.
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Speaker 1 (12:31):
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Thanks for tuning in to the Power Bytes Podcast. If you enjoyed the show, head on over to cat.com and check out Electric Power for more exciting content. Let's power tomorrow together.
Speaker 1 (00:00):
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Welcome to the Power Bytes podcast, brought to you by Caterpillar Electric Power, with your host, John Thomas. Each month, we deliver the latest insights, trends, and cutting edge tools to keep you ahead in the dynamic energy industry. Whether you're streamlining operations, embracing new technologies, or staying informed, Power Bytes is your go-to source. Join us as we explore innovations shaping the future and the resources you need to succeed. Welcome to Power Bytes, where energy meets innovation.
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Steve Gupman (00:29):
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So, welcome. We're gonna attempt to answer a relatively simple question. Is the current model that utilities use capable of taking us where we need to go over the next five to 10 years? We all know the growth in demand, so there's electrification, would be remiss if I didn't mention AI data centers, right? That's what every panel here has to talk about a little bit. That demand growth is coming. We've got extreme weather events. We know Winter Storm Fern. There's still a situation in the Carolinas, right? So, more and more that's hitting. There's a constraint on our ability to add capacity, and all of those things adding together feel like the things are getting stretched very thin. So what I'm gonna ask the panel today to examine is maybe challenge the traditional way that utilities think and offer some insights into how we might add some innovation, how we might better prepare for the next 10 years. So what do we need to do to make sure that the grid in 2035 suits us all and, and is where it needs to be?
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(01:21):
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So my name's Steve Gupman. I'm the director of grid and energy services at Caterpillar, and I'm joined by a, an excellent panel today. I'm excited because we've got a range of perspectives, I think, to address this problem. So David Ellis has worked in utilities. He's got the, the traditional utilities perspective. Scott Ungerer is a venture capitalist with a specialization in energy technology. And then Dean Musser has been an entrepreneur and technology leader for the last 35 years. So why don't we kick it off, David, you wanna introduce yourself?
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David Ellis (01:51):
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Sure. Thanks, Steve. My name's David Ellis. I've spent time as CEO of a regulated utility, Entergy New Orleans, and also as their first Chief Customer Officer in the Gulf South. And I'm working as an independent consultant today. Good to be here.
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Scott Ungerer (02:05):
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Good afternoon. I'm Scott Ungerer, founder and a managing partner at EnterTech Capital, a venture capital firm that's been doing what we do for 30 years. And it's investing along the value chain from downhole sensing to energy consuming devices. We stay away from large CapEx, but it's mostly technology which translates to a lot of software. My first 16 years in industry was with an electric utility. So I made the transition very successfully, and I was happy I did. And, uh, I'm still trying to figure out what we do and how it can be most impactful for utilities and the customers.
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Dean Musser (02:41):
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Good afternoon, everybody. My name's Dean Musser. I am the director of long-term strategy for energy services for Caterpillar. Prior to that, I spent, uh, my career really in kind of the energy tech space and, uh, really, a concentration in demand response.
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Steve Gupman (02:53):
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Great. Thank you.
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Dean Musser (02:54):
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So let's get going.
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Steve Gupman (02:55):
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I'm gonna have the opportunity to ask a lot of questions to our panel, but I really wanna hear what you're thinking in the room. So I don't know if it's a softball for you, David, but why is the Power Through program that Entergy did different than a typical demand response one?
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David Ellis (03:08):
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It's different in that when you think about demand response programs, they're either hosted by, you know, through rules that are stakeholder-developed, through regional transmission organizations or independent system operators. This was a regulated filing with a specific regulator and not a super-regional program to address very specific problems. So it gave the utility the opportunity to address its customers' problems, but also probably, you know, earn a, a fair rate of return on, you know, their investment, their capital investment in putting these things in place. And then it made it very easy for the customers to pay for these services without it being disruptive to their business models, as well. And that's the biggest difference. Uh, you know, you're not responding to, uh, you know, a price signal from the market, you're not losing money, and you're not obligated to do things that you, you shouldn't be doing or can't afford to do.
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Dean Musser (04:02):
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You know, I, I ... When I look at it from afar, one of the things that I thought was really interesting about that program, and Scott hit on it earlier. Two of the things that, you know, utilities have dear to their heart is safety and reliability. And because it was in front of the meter, and you built the assets, you controlled the assets, you built it to your standards, that's a big difference than taking over somebody's, you know, asset behind and y- that you didn't build, you don't know that you dispatched to their standards, it's a safety net, you controlled all that. And that, it's one of the first times that I've really seen that across the country be able to scale.
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Steve Gupman (04:33):
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So next question. How do you envision closing the gap between available talent and the enormous amount of incoming execution that will be required to meet the demand?
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Dean Musser (04:43):
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I think this is where we gotta go back to rebrand what we're doing. We are going to have to attract generational talent. And so it's, we gotta rebrand ourselves, because if we just go out there and say, "We're a utility and, you know, we want the best and the brightest," we're not gonna get it. I go back maybe 15 years ago, a gentleman was speaking at a conference and he was sitting on an airplane on his way there, and a kid asked him, "What do you do?" And he said, "Why, I work in the power industry." And the kid kinda just turned away, and he goes, "Well, actually, I work in renewable energy, and I work on solar." And he goes, "Oh, that's cool." And he goes, "It was the first time in my life I've ever been cool." And so I really think we have to get back to that and we have to rebrand.
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(05:21):
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When I came to Caterpillar, uh, a couple years ago, when they acquired our company, I had no idea that Caterpillar was such a technology company, and now that I'm, you know, kinda see under the hood of what's going on, I wish we could really, really brand that. And I see, you see what's going on at CES with Caterpillar and things of that nature, that will attract talent, because people think it's cool.
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David Ellis (05:42):
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Couldn't agree more. I'll just add to that, though, that this young talent is much smarter than I ever was, and they're much more knowledgeable, they have access to information that I never had access to, and they're drawn to technology, they're drawn to the novelty of it and the coolness of it, but they're also drawn to purpose. So if that message is purposeful, if you're doing something that, that matters, that's consequential, they'll come.
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Dean Musser (06:06):
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That's why I think you solve a generational problem, it's, you will drive that purpose.
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Steve Gupman (06:12):
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Okay. So I just wanna be clear that my job is to read these questions and pick the best ones. And I had one coming that's really good, and I'm kinda scared to ask it.
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Scott Ungerer (06:21):
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Uh-oh.
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Steve Gupman (06:22):
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But I think it's a great question and I wanna ask it, so don't hold it against me. But, Scott, what is your ideal regulatory framework?
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Audience (06:30):
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(laughs)-
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Scott Ungerer (06:31):
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The ideal framework needs to be fair to all parties and reflect the current business environment that exists. A regulatory framework needs to, you know, put as much of the decisions, in my opinion, into the hands of the people actually doing the work, and allow new participants to join. It's complicated to unwind, probably more so than it is to design the new one. But, you know, I think that's a good place to start.
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Dean Musser (06:59):
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In some ways, I feel bad because utilities are the ones that are taking the beating, but in many cases, they're doing it with, you know, two hands tied behind their back. You know, they gotta handle the regulatory climate, they have to handle the customer advocate, they have to handle, you know, their internal cost of capital from [inaudible 00:07:15] shareholders. Th- there's so many people they have to take care of along the way that it's hard to solve a problem this big. And so we do need to recognize that we're asking them to solve a problem with limited, uh, abilities.
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David Ellis (07:29):
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And I feel obligated to stand up for the regulator, having been a former utility executive. So for all the regulators in the room, they have difficult jobs to do. They, they really do. And because you're a regulator, it doesn't mean that you, you have this innate ability to understand these very complex engineering and power-related topics. These are complex things that even people that work at utilities and in the tech industry don't fully understand. So it, it's a difficult job, but that's why we need the stakeholders to come together and, and resolve these problems collaboratively.
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Steve Gupman (08:04):
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Great. I might actually take a stab at this one. With backup generators reaching more deeply into built up areas and being called on to support the grid, will this change emissions needs of the gen market? So I know because I am very involved in, in what Caterpillar's doing, at least with, uh, with emissions. So, and there's a, a pretty large collaboration with the EPA, at least in the nor- in North America or the US. We're working with them to understand how we can get more Tier 4. Like, how, how can we upgrade diesel gensets that are out there to meet Tier 4 standards? There's also large investments in things like gas, natural gas gensets that have significantly lower emissions. So, for example, we have what we call fast response gensets. So, so 10 years ago, we would never think of using a natural gas genset as a, as a backup generator, but we've invested a lot to make very, you know, quick-responding natural gas gensets that can stand in for a diesel. So, I do see the, the market shifting.
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Dean Musser (08:55):
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No, I agree. I think that's gonna be something that's gonna have to happen. And I think the controls, both emissions controls and controls of the genset, are gonna have to change to meet some of these requirements. I mean, it's just, there's no way we're gonna control this size load with our standard controls of the past.
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Steve Gupman (09:10):
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Do you guys see the energy problem pushing regulated energy markets to explore becoming deregulated?
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Dean Musser (09:16):
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That's a huge topic. Um, do I think it's gonna change? No, but is i- ... will become some kind of hybrid? Maybe.
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David Ellis (09:22):
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So there are pros and cons to each. There might be some innovation advantages in a deregulated market, maybe speed to market, that kind of thing, multiple parties. But in a vertically-integrated utility, there are still some potential pricing advantages. You know who the customers are, the customers know who you are, and expectations aren't just, you know, thrown into the wind because you're not the party touching the customer.
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Steve Gupman (09:47):
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So, Scott, how can techs and software companies sell in a way that's profitable for the utility?
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Scott Ungerer (09:53):
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It's the regulatory framework of the treatment of the expenses that are associated with a software purchase. We're in the business of workarounds. We're always dealing with some sort of constraint by somebody. So, you know, how do you make a software SaaS purchase look like a CapEx? If you get that figured out, and there are people that have figured it out, there's regulatory re- environments that acknowledge that, okay, that's the way tech is sold, so that's the way tech needs to be buyed. We want you to buy it, so we're gonna give you a return on it. You know, there is some progression taking place.
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Dean Musser (10:21):
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Can I add something to that? 'Cause I'm somebody that actually sold software to utilities. We, we looked at it from a different value perspective. So, if a s- if a utility was going to spend a tremendous amount of money on an AMI system, then we would try to add value to that AMI system by using our software, so that made it easier for them to deploy the AMI system. So taking that data and using it in a different way is very difficult. If you include it in a big program, then it's a little bit different where they can capitalize it. So there are workarounds, it's just sometimes hard to get to.
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Scott Ungerer (10:51):
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I, I just wanna be crystal clear in case I gave a misrepresentation. I think the utilities should be able to make money. I should think they should be encouraged to make money on things that make sense for, you know, the community, their customer base, you know, society in general.
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Steve Gupman (11:06):
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So who do you think is responsible for balancing the process or maybe changes of the process we talk about with all this demand that's right now? Where does that fall? Who needs to be the one making a change?
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Dean Musser (11:16):
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I think that's stakeholders across the board. That's gonna be FERC, that's gonna be public utility commission folks, that's gonna be the governments. We gotta have all the stakeholders in the room.
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Steve Gupman (11:25):
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One more question, apologize to who I didn't get to, but do you think that the problem that we're faced with today is simply that we under-invested in capacity up till now?
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Dean Musser (11:35):
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That's a big piece of it. I mean, if you look at what's gone on in PJM, we, we built nothing over the last, you know, how many years, b- and mainly it's because the price of capacity wouldn't support building a plant, and now all of a sudden, we need plants and we gotta catch up. You know, it's difficult, and we were fortunate because the price of natural gas was low, electricity prices were low. Now we're getting the, kind of the, the double whammy to the customer of, you know, basically, cost of energy going up, volatility's going up, and capacity going up. So part of it is, is we didn't send the right build signal before.
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David Ellis (12:06):
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And we were told we needed to retire assets because of their emissions and cost to operate those assets, and we needed to add more monitoring, which increased the cost even more, and just made those plants unaffordable. So it's, it's a combination of having under-built and forcing us to retire assets that would be serving us right now.
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Steve Gupman (12:24):
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All right. Well, I wanna thank my panel, um, for the discussion. I wanna thank all of you for spending the hour with us. Thanks very much.
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Speaker 1 (12:31):
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Thanks for tuning in to the Power Bytes Podcast. If you enjoyed the show, head on over to cat.com and check out Electric Power for more exciting content. Let's power tomorrow together.
