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Conversation On A Smooth Transition: Mainstreaming Renewables

Updated: May 24, 2023

His Excellency, Mr. Brian Mc Feeters, US Ambassador to Malaysia, in his brief welcome remarks highlighted the objectives of US Foreign policy on Climate Change, noting, in particular, the presence of a dedicated climate team at the US Embassy in Kuala Lumpur that was prepared to engage at any of three levels:

1. Government to Government - the US would be happy to bring in experts to provide advice on key climate change issues including climate law;

2. Business to Business - the US has technical expertise in the private sector that it would be willing to share with Malaysian private sector counterparts, and,

3. People to People – the US government was facilitating civil society engagement to expose and build awareness and capacity among young Malaysians, to the risks and opportunities associated with climate change.

The featured speaker, Mr. Arthur Haubenstock, Vice President for Regulatory Law at Bloom Energy then took the floor to share his experiences, noting that in the US, the term clean energy was preferred, which encompassed renewable energy.

He began by explaining how energy policies were developed in response to both the National US and California energy crises, which resulted in the growth of Solar and Wind, which with other renewables and clean energy sources, served to open up grid. He noted that the largest investments in clean energy have come in response to the most recent policy, the Inflation Reduction Act and the Bipartisan Infrastructure Law (commonly referred to as ‘Ira and Bil’)

Mr. Haubenstock then provided a history on the growth of clean energy in the US. He explained how, after a late start for solar policy, by 2050, solar energy was outpacing all other energy sources in US, and how concerns about intermittency, over time, were solved through energy diversification. He next explained how the so-called ‘duck curve’, the graph of power production over the course of a day that shows the timing imbalance between peak demand and solar power generation, resulted in California being on the verge of a major blackout on numerous occasions due to customer demands for energy in response to excessive heat. He then clarified how these blackouts were prevented by pro-active, real time energy demand management, facilitated by the linkage of the California grid to the Washington State Grid, which resulted in mutual ‘seasonal storage’ benefits to both states.

Mr. Haubenstock then continued into a discussion of the problems and challenges encountered in the implementation of clean energy in the US. He noted that greenhouse gas emissions had continued to increase, as had the cost of energy. At the same time, energy supply reliability had decreased, with the discovery of so-called renewable droughts, periods when solar energy and wind were noticeably reduced. He attributed the increase in emissions to a somewhat disorderly transition which did not include the phase-out of fossil fuels in the energy sector. The increase in rates was attributed to deferred maintenance and the resulting inefficiencies, which in more recent times, has benefitted from the implementation of smart, two-way generation.

The decrease in energy supply reliability was attributed to technological shortcomings associated with energy management given the timing difference between peak demand and supply, the ‘renewable droughts’, and inadequate preparation to dispatch from clean base load and storage during peak demand. In his view, an essential part of managing energy demand was the provision of government incentives (including through Ira and Bil) to leverage the private sector to reduce demand when necessary.

While intimating that his visit was not intended to promote his company, Bloom Energy, Mr. Haubenstock nevertheless felt compelled to mention the comparative advantages of Hydrogen as an energy storage and transportation medium to address the time gap between peak supply and peak demand. He pointed out that most renewable energy sources, including bioenergy, refuse-derived fuels, and methane could readily be converted into hydrogen (or ammonia) or (in the case of methane and some sources) used directly to generate energy in fuel cells. In doing so, he expressed the very strong view that a diverse energy portfolio (compared to only wind and solar) would contribute significantly to grid stability and reliability. He concluded by alluding to emerging technologies (including long-term storage using iron oxides), and new and innovative concepts such as CarbonFree Energy (CFE) and time-based energy attribute certificates (T-EACs) which would further enhance energy sustainability.

In summary, according to Mr. Haubenstock, climate change brings tremendous challenges, but also tremendous opportunities. No single initiative or technology will provide the solution. On the other hand, strategies that integrate multiple and diverse resources and locations have been shown to reduce emissions and cost while addressing the concerns of intermittence and reliability, even as new approaches and technologies are being tested and piloted.

Datin Seri Sunita Rajakumar then joined Mr. Haubenstock on the stage and began the Question-and-Answer session by recognizing and thanking the US Embassy, the US State Dept and PETRONAS for their support in organizing the event.

She opened by requesting an explanation on what happens when electricity grids are stressed.

Mr. Haubenstock, in response, explained how the value of Energy is determined by the time of day during which it is generated. He clarified how small changes by consumers (commercial and residential) compounded over large areas, could help balance supply and demand and support grid stability. In particular, he noted how companies were willing and able to change energy demand on the fly, effectively serving as voluntary virtual powerplants.

To the question by Datin Seri Sunita regarding the 2021 Texas power grid failure, and what the utility company of the future would look like, Mr. Haubenstock responded by first describing the typical energy consumer as prioritizing sufficient and reliable energy, while not really caring how it is to be generated or dispatched. He then reiterated the concept of utilities being regarded as a service provider rather than a product purveyor, citing an example from Hawaii where payments are based on performance. He then explained how the grid failure in Texas was, firstly, predictable due to the lack of continued investment in the energy infrastructure, and secondly, was the result of the utility failing to winterize their gas supply in anticipation of cold weather. He then opined how the dearth of investment now actually represented an opportunity for smarter investments.

In answer to the question whether we could ever achieve a 100% renewable energy grid, or, conversely, if we would always have some residual fossil or nuclear baseload, Mr. Haubenstock cited the Clean Energy Standards as a primary driver that enabled the western US to reach its energy goals. In his view, an 80% to 90% renewable energy grid was already achievable, while technologies currently being piloted could theoretically increase this fraction close to 100%. He was of the view, however, that nuclear energy would be an essential part of the solution, though how large a role nuclear energy would play remains unclear.

Asked what advice he would have for Malaysia about the way forward, Mr. Haubenstock began by reiterating that goal setting should be the first priority, followed by putting in place the correct framework of initiatives. In his experience, private industry not only complied with any deadlines, but frequently achieved the emissions reduction goals well ahead of any imposed deadlines.

He further reiterated the importance of correct planning and sequencing to ensure that initiatives will proceed smoothly and achieve their objectives.

When asked for his views (Pros and Cons) on the possible establishment of a common marketplace in the Region, Mr. Haubenstock explained that it was common for engineers, economists, policymakers, lawyers and regulators to have differing views on policy and implementation. However, he pointed out that from technical and economic perspectives, there was no question that programmes implemented over a broader area would achieve lower cost and greater reliability, once again reiterating that political barriers to regionalization would quickly dissolve when economic benefits are realized.

As an example, he cited the expansion of the California grid, which was initially met with resistance by neighbouring states, but later, found to solve problems related to periods of excesses and shortages by permitting more energy exports and imports on a short-term basis, saving billions of dollars in the process.

Datin Seri Sunita also asked Mr. Haubenstock for his views on possible business models for utilities, should Malaysia mandate rooftop solar for all government buildings including Schools, Hospitals, etc. In response, Mr. Haubenstock pointed out that a distributed energy system was an important part of the solution. He explained that the reason the US was helping the Ukraine develop a distributed grid was to enhance its resilience to military assaults. He further elaborated that because utilities deliver critical services, they form an essential part of the matrix and, in essence, create the marketplace and can draw their income and deliver performance under an agreed regulatory compact.

When questioned regarding the need for proper sequencing should Malaysia decide to quickly ramp up its solar PV programme, particular if the grid was not deemed ready, Mr. Haubenstock cited the example of the operators of a conventional (non-smart) grid who initially pushed back against the rapid deployment of solar PV on the grid, but were convinced when they were shown that the smart micro-inverters associated with the solar PV would actually enhance the amount of electricity that the grid would safely handle. In summary, any complications associated with the ramping up of solar PV would be unlikely to pose insurmountable problems and would very likely be easily solvable.

Datin Seri Sunita next posed a question on Consequence Management, noting the potential for increased incidence of wildfires, extreme heat days, and the potential service disruptions. In response, Mr. Haubenstock cited the case of a US utility that had a disruption rate of three to four disruptions per year, each of which would cost the utility between USD300 to USD400. In this case, the imposition of a well thought out regulatory compact that provided clear economic and regulatory signals was sufficient to encourage the utility to improve their management, eliminate the disruptions and comply with their responsibilities under the regulatory compact.

Datin Seri Sunita’s then posed a final question to Mr. Haubenstock: What were his views on a Just Transition, noting the recent initiation by Indonesia (and a number of leading economies) of a Just Energy Transition Partnership?

Mr. Haubenstock responded by explaining that it would be extremely difficult to ensure a completely level playing field as multilateral frameworks often suffer from leakage. In his experience, virtually all economic activities (to provide goods or services) had real and measurable environmental impacts, and information regarding the impacts and externalities was vital to managing brand risk and ensuring environmentally and socially responsible operation. Standard metrics for all forms of clean energy, he explained, would go a long way to ensuring an equitable outcome for all stakeholders.

Ms. Charlotte Wolff, VP and CSO, Petronas, in her closing remarks, distilled the following five key points from the event:

1. As articulated by Ambassador Mc Feeters, urgency is an imperative and while other regions may have gotten off to a slow start, Malaysia and other vulnerable countries would benefit the most from swift and decisive action.

2. Learning from the US experience, political resistance, if any, to shifts in policy, will usually dissipate once the economic benefits of the change are realised.

3. The regulations and their sequencing must be correct – It will help to visualize the role of utilities as delivering a service as opposed to a product.

a. Develop a diverse range of renewables – silver buckshot vs silver bullet (including intermediaries, agents, etc).

b. Grid management remains vitally important – the potential of smart meters should not be underestimated.

4. The government must set clear goals, which need to be aligned with the above regulations and supported by incentives (and/or disincentives).

5. Incentives must be carefully crafted to drive innovation – economic viability is essential, meaning that regulators need to understand the cost of compliance.

Ms. Wolff ended her closing remarks by noting that Malaysia would benefit greatly from learning from the experiences of other regions to ensure that its energy transition would be an orderly and just transition, providing clean, affordable, and sustainable energy to power the nation’s continued development.

On behalf of Climate Governance Malaysia, I would like to express my gratitude and appreciation to His Excellency, Mr. Brian Mc Feeters, US Ambassador to Malaysia, The US Embassy in Kuala Lumpur and the State Department of the USA, Ms. Charlotte Wolff and PETRONAS for their kind and generous support of this event.

Please find the recording here Please find Arthur's Slide here


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