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– Good morning (audience chattering) If I can have everyone’s attention, I think we’re gonna start a few minutes behind schedule Thank you So, good morning My name is Danielle Spiegel-Feld I’m the Executive Director of the Guarini Center on Environmental, Energy, and Land Use Law here at the law school On behalf of the Guarini Center, our affiliated faculty, Professor Katrina Wyman, Professor Dick Stewart will be joining us shortly And our co-host the Ecologic Institute with a particular shout out to Max Gruenig I wanted to welcome you to this event on the German Energy Transition and its implications for New York State We’re really delighted to be able to put on this event and are very much indebted to the support of the German embassy Thank you very much and the Transatlantic Climate (static) My phone is not here My phone’s not here All right so, and the Transatlantic Climate Bridge for making the event possible The mission of the Guarini Center is to advance market oriented, energy and environmental policies for an efficient and sustainable economy And to that we’ve been following very keenly the energy transition underway in Germany to move away from fossil and nuclear energy The energy transition that has been noted by New York’s Energy Czar Richard Kauffman to be, and I’ll quote, “a model to show that quite a lot of renewable energy can be brought online in a short period of time.” I think in 2014, Germany received approximately 30% of its electricity from renewable energy resources, which is quite extraordinary And the ramp up has been really at a breakneck speed But the energy transition, or Energiewende, as I believe it is known in German if you’ll forgive my pronunciation, has able attracted its fair share of criticism Critics tend to point to the allegedly soaring retail electricity rates and declining utility market share as evidence that the Energiewende has failed, or at least, should be a cautionary note for energy reform advocates here who would like to hasten the transition to a more distributive, renewable energy future So our task today is to begin to sort through these competing narratives, and we’re very fortunate to have an incredibly talented and knowledgeable group of experts to help us with that task I will just provide very brief introductions, but you have more elaborate bios in the printed materials of the speakers First we’re joined by Georg Maue, who is the First Secretary for Climate and Energy Issues at the German Embassy in Washington DC In order that they are seated, next we have Andreas Kraemer who’s the Founder & Director Emeritus at the Ecologic Institute in Berlin Beside him we have Chris King who’s Global Chief Regulatory Officer for Smart Grid Services at Siemens Next to him we have Michael Mehling Executive Director of the Center for Energy and Environmental Policy Research at MIT Beside him we have Eleanor Stein, Advisor for Special Projects at the Department of Public Service And finally we are very lucky to have Justin Gillis here, reporter at The New York Times to moderate the discussion So thank you very much I’ll hand it off to Georg who’s gonna say a few short remarks – Good morning and welcome everybody I’m really excited to be here and have this wonderful this event starting soon Let me just steal one minute of your time to explain a little bit of what the Transatlantic Climate Bridge actually stands for You’re all wondering what this nice little logo stands for Actually it’s a project platform which was founded in 2008 by the Foreign Ministry in Germany and the Ministry for Environmental Affairs And the idea was to strengthen the cooperation between the United States and Germany, particularly in the year 2018 when Copenhagen was coming and find energy and climate solutions That was the idea actually And I think we did all kinds of efforts and projects since then in the field of energy efficient water treatment, renewable energy, energy efficient in general, and of course all the issues related with a smart and sustainable energy supply And actually last year we started the cooperation between New York state and Germany, and we asked Ecologic and Susan Hand to provide an expert group from New York state which visited Germany on a very exciting energy trip So this was you could say the first step in the cooperation between our two states, and today is a second step And we’re looking for energy solutions And I think we have a common vision so that we are moving towards energy transitions, the Energiewende a word we call it in Germany,

and I’m absolutely aware that New York state is also moving towards that direction, and it’s relative to hear what experts say where our cooperation can make progress So with no further ado, thank you all for being here, and didn’t stay outside at this wonderful and beautiful weather and made it to the center room and participate in this fantastic event, so thank you very much for being here (crowd applauding) – Thank you everybody for coming and sitting as Georg said in a windowless room on a beautiful Spring day in New York We live in a remarkable time We are dealing with an urgent global environmental crisis It’s been urgent for a long time, but we have finally reached the point where a lot of the public seems to be understanding that on both sides of the Atlantic We also live in a time when the tools that just might conceivably allow us to solve or at least mitigate that problem are coming into existence and prices are falling to the point that you could begin to think about doing something truly ambitious I work at The New York Times, and we’ve been among few newspapers in the world sort of on this for a long, long time A year ago I wanted to do a piece asking the question, “Where do we go given these technology trends, given the urgency of the problem?” And of course the idea came up immediately, let’s go look at Germany One of the things you do in this kind of situation is look for models around the world Who’s ahead of us? So I flew to Germany a year ago in April, basically with the idea in my head that, boy it’s remarkable that they’ve gotten to sort of 30%, or they’re approaching 30% renewable in their electricity system I spent two weeks there and came back saying to myself, “Boy, there’s a lot of blood on the floor.” The market valuations of the utilities, the big German utilities have been cut in half as the energy transition and Energiewende has taken hold The pace of the change has exceeded the government’s own expectations In fact it pretty clearly got ahead of them as they kept the prices, the sort of subsidies fairly high and the prices of, particularly solar power fell, it became so economic to do that there was this mad rush And the amount of renewables on the grid sort of got well ahead of German planning and expectation So we’re gonna talk about all that today, and I think the question, you know I’m not interested in either of these sort of dug in ideological positions The Greens sort`of only want to see this as a success story The climate denialists and people like that want to see it as a sort of debacle I think the real question is, “How do we make this a success, and how do we and the United States,” who have maybe at this point the fortune to be a little behind the Germans, look at what they’ve done and say, “Let’s gain the benefits of that but without the problems.” “How do we go where they’re going in terms of climate policy without destroying our utility industry in the process?” The state of New York as it happens is in the middle of thinking deeply about that right now, and one of my folks up on stage here is going to talk to us about that New York may be behind California in terms of actual roll our and deployment, but I would argue that right now New York is ahead of California in thinking about what the future electricity markets ought to look like So we’re fortunate to have a fabulous panel up here to talk about all this I’m going to start with Michael Mehling of MIT He’s also got an association with Andreas’s Institute, the Ecologic Institute I think, one of the world’s major environmental think tanks Michel tell us what the Energiewende is What are the Germans trying to do? – Justin, thank you, absolutely, and if I go slightly over five minutes, I’ll make sure I use it or I deduct it from my subsequent comments So Energiewende– – Can you pull your, – Does it work? Can you hear me? – Closer – Closer, yeah You gotta really, yeah – That’s my notes, which I can hardly read anymore So Energiewende as a term is probably best translated as energy turnaround, so a very nice way of, not a very catchy phrase,

but that’s really the literal meaning Usually it’s translated as energy transition or energy transformation, but it gives you sort of a sense of what it means The term itself goes back to a book which came out in 1980 which Andreas has here on the table (audience laughing) Interestingly, and this is a narrative that kind of goes through sort of the history of many instruments and many policies in Germany Most of the ideas in that book were sort of already captured and framed by Amory Lovins here in the US in 1976 in an article on the road not taken in energy policy in which he kind of contrasts the hard path of energy policy and a soft path Let me take you back to the late 80’s in Germany In fact, a very conservative legislator from Bavaria, my home state, the Christian Social Union, CSU, at the end of his legislative term, not necessarily very friendly with environmental policies, but his family had owned a hydro-generation plant for over a hundred years And he had time and again faced the battle with the local utility about the prices that he would get for the power he was selling to that utility He would typically get a few cents only per kilowatt hour, lower than the generation costs of the utility itself actually There was just no framework to give him a fair negotiating position So he this idea partly based on the writings and discussions that had been happening in Germany at the time that there should be something that makes it fairer and gives more certainty to all those distributed generators be it hydropower or other forms of distributed electricity generation And he teamed up with a Greens member of Parliament at the time that worked out a very short, very, very, let’s say simple law of two pages, five provisions which essentially said that those who feed in electricity to the grid should have a guarantee that that electricity would be purchased and the prices should be transparently fixed based on a percentage share of the average retail price the utilities can charge, and the cost for that would be laid over to all the rate payers That’s the concept of a feed-in tariff Interesting now, the feed-in tariff also can be traced back to the United States The 1978 PURPA Act in a way contains a mechanism Carter had this idea of promoting domestic energies that also is very, very similar to a feed-in tariff So again, you can kind of trace an intellectual history to the United States So 1990 when this act passed, Germany was distracted by the reunification, by the massive challenge of getting Eastern Germany underway again Of course the big utilities were also very much distracted by that Nobody really thought that this was going to be very consequential In fact a Social Democrat in Parliament said, “This is wiggling your small toes What is this really going to achieve?” In 1991 there were about 1,000 wind turbines in Germany By 1999 with the Simple Act, it reached 10,000 The act wasn’t particularly powerful in promoting some technologies like PV, and so when the government changed and the Red and Green Coalition came to power in ’98, one of their big projects was also to strengthen the legislation that promotes renewables At the time there were again distractions that sort of prevented maybe utilities from fully capturing the magnitude of what this could eventually lead to and anticipating the challenges that Justin has eluded to One thing was the coalition was also introducing, an ecological tax reform, so on a tax for electricity for the first time, but there was also nuclear phaseout that had been agreed– – Is the mic turned off? – It’s your cell phone – I turned off the signal, so it’s in airplane mode It shouldn’t do that – Comes and goes – Seems okay (mic static noise) (everyone laughing) Sorry folks – And this act introduced a few tweaks It based the feed-tariff, that which generators receive for their electricity that they feed in, on the technology costs plus sort of a surplus It extended the guaranteed rate that was fixed in the legislation for 20 years, and it also insured that every new installation that would start getting, you now for 20 years, the same rate year after year would be getting less so that a new installation in 2001 got less than one in 2000, and 2002 less than in 2001, but whenever you installed, whenever you added renewable generation, you’ve got the rate for 20 years that didn’t change It’s just the subsequent generations of your neighbor that might have been a bit later got less Very importantly this is not a public subsidy This is a price support scheme Some lawyers would argue that it still works as a subsidy, but it did not go through the public budget It’s not funded by taxpayers Now you’ve seen sort of what that has achieved by now You have the materials with the chart of the growth of renewables I think it’s very important also to highlight that even though it went from 10% to 30% in the last decade, the real change, the real growth is in the variable renewable solar and wind and also in dispatchable biomass

Hydro has remained largely unchanged, and in areas like solar, the growth has been much, much more It’s been many, many, many times, so it’s multiple It’s literally, you see it’s an exponential growth Where do we stand now with our policy? There’s been many changes to the law, initially to strengthen it, early amendments Later to actually start dealing with the fact of the problem that it may have been too effective in some areas, especially technology costs for photovoltaics fell So that was also say for instance to curb the growth a little bit The laws, the recent, the latest amendments push sort of incentives more towards direct marketing in competition with other energy sources Large producers will enter auctioning, bidding for auction, so it is changing the whole model somewhat, but the principle is still the same Right now rate pairs, households pay 6.17 cents per kilowatt hour in addition to what they would pay without the feed-in tariff, so that’s the surcharge that they’re bearing so that those who feed in renewable electricity receive their guaranteed tariffs And that adds about 250 euros per household per year It’s relevant, but it’s not breaking the bank completely Interestingly industry in larger commercial endeavors are exempted which has its own effects, and I think Andreas will talk about that somewhat and Chris perhaps has well There’s a green book on electricity market reform that was published last year, and a white book should be published this year which will discuss the major sort of paradigm shift, do we continue with the energy only market in which economic dispatch is based purely on, or payments are based purely on energy delivered, or do we also have to start funding, paying for capacity So just providing capacity rather than actually selling energy, lots of controversy about that I think a majority of people agree that a more flexible, improved energy only market is the way forward But that’s sort of the history and where we stand with the Energiewende in Germany – Okay, thank you very much, and Andreas, give us your assessment of how this policy is working Why is it that we’ve seen the utilities lose half their value? How could they not have seen this coming? What are the pros and cons of the policy as its played out so far? – Great, thank you Justin First of all I would like to thank the United States, not only for the points that Michael has already raised, the soft path and the hard path, but also when I was beginning to work in this sector in the 1980’s, I was citing papers from the University of California at Davis up and down in my own work because California was at the time the place to be when you were interested in wind power We took that from the US and built on it The Germans went through Denmark for a while The same with photovoltaics, it was developed by NASA for powering satellites It developed in Japan when the US dropped the ball, and then later on it went to Germany, and now it is in China Those are international technologies, and I think the world owes a lot to the United States on those technologies, and we also have a number of regulatory philosophies, sectory four models, that were developed in the 1970’s and 80’s in the United States And they washed over the Atlantic, and they created a new competitive framework that allowed the Energiewende to succeed and at the same time resulted in competitive pressures reducing the profitability and the room for maneuver for the big fossil and nuclear utilities that we still have the incumbence (microphone static) Another thing I want to say is Germany’s not an outlier Germany doesn’t have the highest share of renewables in the power supply We do not have the largest, the fastest growth of renewable electricity in our sector We have not outlawed nuclear power as some other European countries have done Wherever you are, whether it is economically or legally and even physically, Germany is more at the center and the mainstream of Europe rather than an outlier The effect of the policy so far has been, and that is in response to your question, the creation of a new business, renewable electricity production that is worth about 40 billion euros per year The sector employees just under 400,000 staff members, employees These businesses and these people working in the industry, they all pay taxes They all pay social security charges, and it washes literally billions of euros every year into the public treasury and into the social security systems They would be poorer without it It’s sometimes forgotten, and people who criticize the Energiewende and its policy like to point out that they’re subsidies involved in stimulating these uneconomic renewable energies,

and its simply wrong They’re not subsidies because they’re not paid for by the public purse So they do not put a stress on taxpayers As a result of Germany producing electricity internally, on its own territory, every kilowatt hour that we generate is a kilowatt hour that we have to buy less fossil fuel for So we’ve reduced our import of fossil energy And that has helped our balances of trade and of payment If Germany is successful, economically successful today, it’s in part because we’ve been pursuing Energiewende policies continuously for 35 years with accelerating speed So rather than being a drain on the national economy, the Energiewende is actually largely beneficial In addition to also avoiding the uninsurably high risks of nuclear accidents and the legacy costs that have not been funded so far, we have a number of additional benefits that are non-economic in terms of soft power people like Germany addressing this issue in that way The total cost of this policy is negligible When you look at the total cost of power supply in Germany as a percentage of GDP, it was about 2% in 1990 It went down about 1.8% in 2000, and we’re now back to 2.1% So basically it’s flat over time When you look at the national economy as a whole, the Energiewende actually doesn’t cost anything beyond business as usual And that is with a starting point that Germany had When we started this policy, electricity from photovoltaic panels was very expensive, on shore and off shore was very expensive Today the starting point in New York state is much, much better The technology’s, renewable electricity is much, much cheaper across the board, and all the technologies and the price for the alternatives has gone up What’s the effect? The winners and the losers of this my final point The losers are the old utilities, and you heard about the collapse in their market capitalization and their total shareholder value That’s the price for not seeing the writing on the wall and insisting on investing in fossil and nuclear assets well beyond the time when it made sense to do so And the punishment, in an economy based on competition, punishment for making wrong decisions is that eventually you can go bankrupt If we do not allow that penalty to be there then we would end up like the Soviet Union where the beneficial impacts of competition could not play out The other losers are the households because they have to pay through the renewable electricity charge the cost of the policy As a result electricity prices for retail customers, for household customers have gone up, but not as much as the price for fuel for the car, gas for the car, or fuel for the heating bill So it’s not an outrageous increase in electricity prices, but it is within the range that we have for other retail functions as well The big winners apart from the tax man that I already indicated New utilities, we have a number of new utilities that owe their business model their existence to this policy and whenever people complain about the capitalization of the old utilities going down, you should also set against that the gain in capital value of the new utilities that have been created And the biggest winner is German industry You can now buy electricity in Germany at 33.4 euro cents per kilowatt hour on the electricity market, and if you think that this is an outlier, you can lock in the prices to the end of 2017 already in the futures markets So German industry, we now get inward investment into Germany because of the low electricity prices and the expectation that electricity prices for industry will remain low for a very long time Thank you – Michael, do you want to give a quick response to that, and what did Andreas not point out that maybe ought to be pointed out to our audience before we shift into a discussion of what the Americans can learn from all this – Justin, I would never dare to suggest that Andreas did not mention something that he should of No I wanted to actually, see I’m Texan One half of me is Texan The other half of me is Bavarian, so one interest of mine as you might understand has always been trying to make sense of these fairly different trajectories that the two jurisdictions, that the two regions have undergone especially in energy and environmental policy And even though as I suggested and Andreas also confirmed, there’s been a lot of interesting transfers and very useful transfers especially for Europe Right now we’d agree probably that the differences are quite stark So my attempt here would be very briefly just to think about what’s transferable and what not

And I think one’s tempted to first look at the geophysical differences Obviously the United States is vastly larger than Germany, much, much less densely populated which has incredible ramifications in terms of building infrastructure, building efficiency, public transport opportunities, et cetera There’s no doubt about that It may also make it harder to have let’s say a very well integrated transmission grid across long distances perhaps in some parts of the country, but at the same time the United States is so much more endowed with natural resources including renewable resources Only Alaska has about as much sun as Germany Every other state would have much, much more efficient solar panels would just create so much more electricity with the same capacity, with the same technology that I can’t explain it purely on geophysical limits Some people might point to shale gas Of course that is potentially a competitor in some ways, but, and people rightly pointed out, if you think of it as a bridge, it’s the perfect ally for a certain amount of time to couple it to compliment renewables because of the ability of ramping up and down and dispatching natural gas turbines So I think the geophysics is not the explanation per se And that’s good because that’s something that can’t change easily and certainly not in short time obviously So it must be somewhere in the social, cultural, political realm, and of course many people will then say, “Well Germans are just, you know, they’re so much more environmentally conscious Why is that? Of course there’s always interesting stories behind that, and they’re willing to pay so much more for environmental policy et cetera, et cetera, et cetera They trust public authority They trust science more All those things we don’t have across the board in the US perhaps, and so it’ll be harder for everyone.” You know, I think that’s not necessarily the case I think the narratives may be different I think in the US another narrative has been very successful, the do-it-yourself, hands on energy independence narrative of having your own solar panel and being independent from the big corporate grid or the big corporate utilities for instance So I think maybe different narratives, but I still think it’s not going to be the cultural aspect alone So that leaves us perhaps with the legal and institutional structures, and there I fear that that is perhaps one of the most important explanations of these divergent paths and that could be also an obstacle to replicating some of the successes and trying to avoid let’s say some of the challenges that have been encountered in Germany Clearly the fact that sort of the legislative authority, federal and state is somewhat reversed in Germany makes it easier The multi-party system, party discipline has been a factor I think in Germany as well And historical opportunities, the fact that in 1990 there were distractions in the east of Germany In 2000 other things had happened We didn’t have at that time an Economics Minister of, so it was a Social Democrat-Green coalition, the Economics Minister was independent at the time We know for a fact that the later Social Democrat appointed Economics Minister Wolfgang Clement would have been much, much, let’s say harder to convince about the reform of the renewable energy act at the time So yes historical opportunity, chance plays a role too, but all in all I think what’s important is these things can change Legislation can change Institutional structures can change This is where I would hand over to Eleanor because I think New York is showing how those things can happen It takes time, but it happens – Okay, so we’ve started jumping the Atlantic Let’s go all the way and talk about New York state The New York Public Service Commission, which Eleanor is here representing, is running a proceeding right now called “Reforming the Energy Vision,” in which their stated goal is to sort of get us to the future and figure out what these markets ought to look like and what kind of reform is needed Eleanor tell us about that What are you guys doing? Where are you going, and how far along are we on that road? – Thank you very much Okay, so I’m delighted to be here I came here for the discussion with representatives from the UK talking about the Rio project and REV, and that was wonderful, and this is a wonderful opportunity for New York And it’s of course not only an academic discussion We’re here in an academic institution, but it also has tremendous practical implications, and the urgency as Justin opened with, is the climate change challenge, and today we are in a very desperate situation where for the first time in human history, in February of this year, the concentration of CO2 in the atmosphere exceeded 400 parts per million, and for the first time in 800,000 years for the planet And so these measures that are done by cities and states and countries and hopefully globally in Paris in December, are of tremendous importance And that’s the framing, for me that’s a frame and context for all of this discussion I’m gonna just briefly look at three things: the challenges that New York faces,

the vision that the state is putting forward and working to implement, and finally a little bit about implementation since I noticed that my topic is, “What is the current state of REV?,” so I need to sort of bring you up to date So first let me say that the REV proceeding and the REV process at the State Public Service Commission is just part of a statewide initiative which is indicated throughout government, has been strongly supported and advocated for by Governor Cuomo and is seen in the New York Green Bank, KSOLAR, New York Sun and many other programs to increase the penetration of renewable energy in New York and other aspects of REV And I would say that there’s a few factors that compelled the commission to look at the need for some serious change And I think many of these are similar to the ones that were described in Germany, but I’ll just list a few Obviously I started with climate and so just to follow that on We’ve had programs to bring renewable energy into the system in New York for over 10 years, and they’ve had some successes, but we’re in a situation now where we need, I would say, an order of magnitude, different level of investment in these technologies to fully integrate renewable energy into the lifeblood of the grid, and we can no longer just look to the ratepayers in New York, the electric customers, the gas customers, to shoulder that burden We need other sources of investment, and REV is an attempt to integrate private investment into renewables and create a system that will allow that investment to bear fruit So that would be the first challenge, the need for huge infusion of renewable energy, and that’s one of the main reasons we’re looking to the German model and looking at all the lessons of the German model to see how that might apply for us But New York also has several other challenges which I think some may be the same, some may be different First of all, although we have a very reliable energy system, it’s also very inefficient kind of as a mechanism A huge amount of energy or a huge amount of our infrastructure for energy is dedicated to providing energy in a few hours in the year where New York’s energy demand peaks at a level of twice the normal usage So you know when that is, that’s the hottest days of summer when everybody in New York ramps up their air conditioning at the same time, and an energy system has to be able to meet those peaks, but that does create a real inefficiency in design, and peak load is growing in New York five times faster than base load So it’s a problem that is increasingly severe, and we think there’s things we can do about it The second is New York has an aging infrastructure so much so that our state independent system operator has estimated that we need to invest over $30 billion in just replacement of infrastructure over the next 10 years That’s twice as much as we invested in the last 10 years So again we have an escalating problem, and that clearly leads to the problem of the cost of electricity for New Yorkers These potential investments mean a substantial, will mean a substantial increase in the prices that customers pay for electricity, and we are committed to affordability of electricity You know you can’t participate in modern society without access to a reliable, high grade source of power all the time We’re all here wired up, so much so that our devices are interfering with each other and preventing this transmission from going on So that’s a constraint on, and here it is– – On cue – I conjured it up, sorry So that’s constraint here in New York almost 60% of New Yorkers are more than 90 days past due in paying their electricity bills That’s a very substantial problem And finally, and I could list others, but there’s one other one which is that the ability of New York customers to take an active role in controlling their energy usage and having strategies for how to reduce their bills is limited by the fact that their communications with their utility are one way and usually take the form of getting a bill in the mail once a month or maybe online once month, or maybe it’s once every two months So the whole realm of information technology which runs so many of our decisions as consumers is really not available in the electric sector where you would think it’s kind of a natural fit So the commission looked at these challenges and considered you could meet them by kind of clinging to a traditional model, delaying change,

keeping the same regulatory structure and market structure, or you could look for a way to create new value for customers to engage markets in renewable production and to embrace technological changes And the commission decided, and they said in its decision at the end of February, we decisively take the latter approach So I’ll just spend a couple of minutes on what this energy vision is, how we intend to meet the challenges The first is viewing the grid as an integrated single machine, or I like to think of it as an organism because each customer can play an active role in the workings of the grid Every customer premise is every customer electric device or piece of electronics is potentially a producer of electricity or a reducer of demand, and if we can genuinely integrate the reduction of demand into the way we do energy, we can level out that peak, so it doesn’t drive so much of our investment We can have a far more efficient system And customers can be empowered to really make decisions and activate those decisions with their own technologies And by doing so we can recognize that the value of demand reduction and renewable generation, all the values that those technologies bring to the grid and assign them values and monetize them And that’s one of the goals of REV, and it sounds abstract, so I’ll just give you a concrete example In the Brownsville area of Brooklyn, Con Edison about a year and a half ago had identified a need for additional electricity in the area, additional capacity, and so they made a proposal as they generally do traditionally, to build some more of their infrastructure And they proposed to build a new substation in the Brownsville area for a cost of about $1.3 billion And many of the parties involved in that proceeding and the commission and New York city, many people who’d been involved, many of you I think were involved in the examination of Con Edison’s resilient strategies following super storm Sandy, came in with some different proposals and looked at this as a possible opportunity to try something different, and instead of simply building another supply center, why not use this as an opportunity to put out a request for information to the community and to the industry and say, “What else is out there? Are there some possibilities that could be used to meet this need other than the traditional one which is essentially bringing in more fossil fuel generation through the traditional infrastructure?” And that’s an ongoing project, but I understand that it’s been very productive, that there’ve been many, many responses, and I’ll just give you, this is not a project which was actually a response to it, but it’s something else that’s being developed by people in the Brownsville community looking at the idea of organizing tenants in public housing to come together as a cooperative to reduce their electric usage in a concerted way in such a form that the utility can rely on it, so that they would actually be selling back to Con Edison this demand reduction asset or resource And this is a whole other way to look at how to run a system, and I don’t know if that project will come to life or not, but it’s a very challenging way to think about how you could run the grid very differently, and of course these assets are in addition to the central generation, the central grid, our transmission systems and the assets of the utility They’re not a replacement So the other thing I would just mention is, why would we think it’s possible to do this and to make these changes, and I just will cite two examples that I think you’ll find interesting One is that when the commission began this proceeding, we held a series of working groups, convened working groups to do a data gathering exercise to find out what was out there in the market The first meeting, 400 people showed up, and actually, you can’t give a party in REV without 400 people showing up It’s actually a problem And they were, I’d say two thirds of them were distributed energy resource providers from all over the country and some from Europe who were coming here saying, “If you open up this market and create the kind of grid where we can play a role, we will be here We’re looking for a way to play.” And Siemens, I will say is one of them, has been very involved in the development of the case The second reason why I think this is doable is that I was part of a team that went out on a public statement hearing tour I think of it as our road show We went to eight cities in February, so come with me to Buffalo and Syracuse and Rochester in February, and you will see some dedicated customers

We spoke to over a thousand people on this tour, and it was a real eye opener Mainly people said, “We’re very excited in the potential of this We want to participate Our communities want to take on for ourselves directing our energy future We as customers want to take this on We want more renewables We want more energy efficiency, and we’re concerned about climate.” Those were key responses, very heartening So I’ll just close by just giving you a couple of updates on implementation, kind of where we are now It’s beginning to be something that’s not just on paper So we have the Brownsville project, and all the utilities are now doing what we’re calling demonstration projects So they are finding alternative ways to meet their energy requirements of their service territories, and we are going to be gathering that data and learning from each of these demonstrations and see what works the best Some of them are coming from communities like this Brooklyn project I told you about, and some are coming from market participants and businesses that are aggregating demand or building solar farms and so on And we convened a working group to design those market protocols and looks at what kind of platform technology will be needed to truly make this an interactive and distributed grid And that group is going to be publishing its report in July All of this is available on the commissions website, all this information Our staff is also developing a way to look at costs and benefits for REV, looking out to the future, and they will soon be filing a proposal on the rate making aspects How does the commissions rate setting practices encourage utilities to open up the market and reward them for doing so rather than as they traditionally have done reward them for putting more infrastructure into the ground Finally in January of next year, utilities will each be filing a distributed system implementation plan, and we’ll begin to see the utilities each having their own business plans to make this all happen So that’s where we are today Thank you – Thank you Eleanor Last but definitely not least we have with us Chris King from Siemens, one of the major company’s in the world, and I’d point out a major competitor to General Electric and New York & Co, selling generation assets both conventional and renewable assets They also sell and consult on I think smart grid services and developments Chris I’m going to give you the task today of sort of representing all of industry in the world (panel laughing) Talk to us about what you’ve just heard and where industry sees all this going I believe we’ve reached the point already where more than half of the new generation investment going on on the planet is renewable Where are we heading, and what are guys like you worried about? – Thank you Justin I don’t know if it mentions in my bio that I’m a serial entrepreneur, and actually my company was bought by Siemens, so I’m here sitting representing Siemens but coming from a small company just a couple of years ago But as an entrepreneur and as Siemens, we tend to be very pragmatic in looking at the world, and we kinda look at two different things We look at what are the challenges out there and therefore what opportunities do those challenges create? So let me bring that perspective to this, and I’m going to list three of each at a high level and hopefully we’ll discuss whatever’s of interest So on the challenges side, when we look at electricity three fundamental challenges, the first is the physics of electricity It has to be balanced in real time If I turn on a switch here, there has to be generator somewhere on the grid connected that provides the electrons that makes the light go on At the same time it’s all interconnected So if I have a solar panel on my roof that’s gonna affect the grid If I have it California, it’s gonna affect the grid here in New York in a very tiny way, but you add up all those rooftops and you actually have a significant effect So it’s all interconnected which sort of leads to regulation And another key thing that’s driven by those physics is storage Sometimes you hear that storage is the holy grail of solving some of these issues Wind and solar energy are fantastic, but they’re not there all the time You can’t turn ’em on and off when you need them You sort of have to accept them, and then you have to have other resources to back them up So physics is a key area we look at in terms of challenges Second area of challenges is regulatory complexity, and I’ll give you a couple of examples of that The interconnectedness of electricity leads to

in some part the regulatory complexity, but there are specific examples as well So I’m looking Germany, one of the key infrastructures that enables some of this interactive grid is data, smart metering, smart technologies Germany has come out with a 300 page regulation around data privacy and protection around smart meters which is wonderful as far as protecting consumers, but in terms of coming up with a technology that can then be delivered at a low cost to provide the capability is very challenging And the other challenge is that it’s different It’s different in Germany from the UK from New York from California and so on Another example you might think of is your own utility bill And I would, I know I can’t even with all my years in the industry, I cannot reconstruct every element of my bill, and it turns out that the only people who can are the programmers who actually program the billing system because there are so many elements to it So you have this complexity that often happens but not always, and I’ll come back to that And then the third thing that we see out there is unintended or unexpected consequences So we’ve heard about the increase in (mumbles) consumption in Germany that is loosely connected with the renewable energy policy, and when I say loosely, what I mean is that with the large increase in renewable energy on the system, wholesale prices have been driven down Naturally you have a lot more supply, so the price goes down The demand is similar, pretty much unchanged And then what that has done is it has driven natural gas fired power plants pretty much out of the market So they are no longer economic In fact you’ve had brand new natural gas plants in Germany that have been moth balled because they couldn’t operate economically Now this resulted in the wonderful effect for industry of very low prices on the market, but it also is putting these major utilities into bankruptcy Not saying whether of that’s all good or bad It’s just that these are consequences that came about as a result of the policy that were not, perhaps they were expected by some, but certainly not generally Another example is taking a power grid that was designed for one way power flows, then turning it into a two way grid How do we do that? What’s that gonna take? What consequences will that have on the grid and reliability, and that’s where REV is just one example of doing a really good job of saying, “Well we know that it’s going to create some questions if not issues, so let’s take a look at those and understand those.” Another one that we’re starting to see on the unintended consequences is curtailment We’ve had the luxury so far of being able to say, “Let’s take all the solar and wind that’s produced.” Now we’re starting to run into situations where, well we’ve got a little too much solar, a little too much wind at a certain time of day We don’t have the storage as I mentioned So we need to think about how do we curtail that There’ve been a couple of cases, one in the Northwest, do we pour water over dams, or do we turn of wind turbines? Both are terrible results, so how do we solve some of those problems So those are challenges: the physics, the regulatory complexity, and then looking out for unintended consequences So how does industry come back and turn these into opportunities? Well one of them of course is the innovation economy I mean this creates all sorts of opportunities that we have taken advantage We, other companies, Justin mentioned our wind We sell a lot of wind turbines We also sell a lot of energy efficiency, not as well known perhaps by Siemens, but these are great opportunities and technology, providing the IT technologies that Eleanor was referring to to help modernize this grid On the jobs front, it came up earlier, the number of jobs In fact one number I saw for Germany was that they’re two and a half times more jobs in the renewable economy in Germany than in the coal industry, two and a half times I know that the US number is, I don’t know the ratio, but I know it’s much higher for renewable jobs Another area of the innovation economy is something that touches all of us which is home automation, home convenience, Nest, think of Nester smart thermostats So these are all opportunities in innovation Second opportunity is in regulatory policy So I said earlier that complexity is a huge issue, which it is, but on the policy side there’s some real opportunities One of them is lessons learned from other areas

What can we learn from Germany? What can Germany learn from New York? In my job I work globally, and everyone is doing different things Electricity’s the same everywhere, but regulation is actually different everywhere, and there’s much that can be learned looking around So one of the key lessons that I would highlight is simplicity One reason there is so much renewable energy in Germany is a very simple feed-in tariff An investor could look at that They would know exactly how much money they were gonna get over the life of that technology, and they could decide invest, yay or nay? You get into complex regulations, it makes it very difficult to make investment decisions So simplicity’s important, drawing the line California has also a very powerful consumer data protection policy which really boils down to two or three pages and a commission decision as opposed to what I mentioned in Germany as another example Another one is incentives, and this is something that was highlighted in the New York REV track one order that came out Utilities traditionally and for very good reasons have been incentivized or not necessarily incentivized but regulators have given utilities recovery of their operating costs as well as a return of their capital and a return on their capital And this was wonderful when you were getting growth in consumption You needed more power plants And so your main decision there was well how do we invest this money wisely in more power plants? But that of course is now completely different We actually need fewer power plants in many cases, or we need only peaking power plants, or we have that issue to deal with So the result of that system was an incentive to invest in capital, and one of the things that’s being looked at in the track two in New York is well how do we change that? How do we come up with a new incentive structure that recognizes this fact and looks at other things Another example is in IT technology where the incentive has been let’s invest in a big customized software package because that goes into our rate base and return on that capital Well what about cloud systems that are now out there and that can be more efficient? And then my final point, my third point in opportunities, innovation, regulatory policy, the third comes back to something else Eleanor said which is activate the demand side or animate the demand side in the words of New York Get customers, get prosumers involved, and we see that taking three things One is pricing/economic incentives For this housing, this building in Brooklyn that’s gonna respond with demand reductions They have to be paid for that Otherwise it’s not in their interest to do that I mean they might do it once or twice out of social reasons, but on an ongoing reliable basis, they have to be paid for that How do you measure that? How do you compensate that? So pricing is one, the second is technology, make it easy Give ’em smart thermostats so it happens automatically People don’t want to sit and think about it, run around turning things off If you’ve got an automated system to do that, much easier, much preferable And then third is actually first which is information Give customers the information to understand how they’re using energy so that they can manage that So this is the empowerment triad of information, pricing and technology So in sum those would be the key challenges and the key opportunities that we see from all of this – Okay, thank you Chris, and thanks to all my panelists We are getting close to the point where we will take questions from the audience So start sharpening your teeth We also, you will see me sneaking a glance very now and then at my iPad I’m not being rude We have questions coming, I think from the staff of the PSC among others, by email, and so we may take questions that way I want to start out by throwing a couple of big issues open to my panelists and let them comment If you talk to people who are visionaries, who have a track record as visionaries on this issue If you’re lucky enough to have breakfast with Amory Lovins as I was a few months ago, what you hear is the innovation we need right now is not primarily technological The innovation we really need most urgently is innovation in markets, and the innovation in prices and in the way this whole thing is set up We’re dealing with a really bizarre commodity in electricity in the sense that it has to be sort of that it has to be created and sold to you in the same instant We’ve historically thought of that as a sort of a one way problem where you took the demand as given and the problem for industry was to supply

that demand Especially in this era where devices are getting smarter and smarter, you don’t have to necessarily think about it that way anymore I would cite the example of the telecommunications industry Back when I was a kid in the 70’s, we had sort of one giant national phone company, and you could call them up, and you got either a black phone or maybe you got the sort of brand new pink princess phone, and those were sort of your choices And you know some really smart economists started arguing, wait a minute, the only true natural monopoly here, if there’s a natural monopoly at all, is the wires It’s not the phones It’s not the long distance et cetera, et cetera And so we had a ruling in 1984, I believe in which the substantive effect of that ruling was to quarantine the monopoly, to quarantine the wires and open up other aspects of the telecommunications system to innovation And that set off 25 years of innovation, the result of which I can hold in my hand up here And all of you probably have a smartphone as well People will argue, do argue that we need to get there in the electricity business You can imagine very easily a dishwasher that sort of sniffs the grid and says wait a minute, prices are high right now, I’m not gonna turn myself on, but then at four in the morning, prices have dropped I’m gonna turn myself on and wash the dishes Chris eluded to some of this We’ve already got a company called Nest that’s selling a lot of smart thermostats to people Nest is reaching the point where they’re going to be able to bid into what are called demand response markets So let me ask my audience, so when you go talk about this to the regulators and say here’s people like Amory kind of arguing this is where we need to go What you get back, certainly what I got in Germany and to a large extent in the United States is a lot of fear, fear of going there, fear of getting it wrong People know, people like Public Service Commissions know the potential political price of screwing up the electricity markets, and we’ve seen it happen in the United States within the last 20 years a couple times So why is that fear still there, and how do we overcome it, and how do we begin to unlock innovation on both sides of the electric meter and get the rules right? I want to invite any panelist to jump and respond to that – Andreas – To break the ice, thank you, to break the ice, it’s perfectly understandable that people are afraid of change It’s perfectly understandable that with complexity it’s difficult to predict what will happen in the future, and you don’t change a winning team, and something has to be good ten times better before it actually can displace the dominant technological configuration of the day It’s a case that is difficult to make We in Germany, I’m a German engineer I’ve been trained in constructive thinking, and for Germans, they are no problems, there are only challenges You attack them bit by bit, and you learn as you go along The idea is not to design a future perfect system theoretically and then think of a way of putting it in place The idea is to do things that are most likely to work, and to try them out at small scale, learn from the failures, learn from the success, rollout, and repeat what has worked and avoid a repetition of things that went wrong It’s this learning by doing rather than designing the whole thing, and sometimes it is just in the minds of people And just to play a ball back to you Justin, you said, “My dishwasher goes on at four at night.” No, please don’t, not in an apartment building The neighbors won’t like it, and in any case, you’re example reveals that you’re still thinking that time of day pricing is the answer In Germany we know that there are two factors that determine prices One is the seasonal variation and daily variation of the sun peak, and it coincides very nicely with the air conditioning So if New York has an air conditioning peak, there’s a summer peaker, ‘ and it has the air conditioning peak every summer day, and the simple solution is to say nobody can operate an air conditioning plant without having solar panels because the two things will cancel one another out when it comes to the grid impact We know now that the wind systems that are going over Germany are the most determining factor in the electricity prices over days That is what the (mumbles) recyclers look at They look at the forecast of the wind because it explains how much wind power will come into the system and how the price will go down over the next few days The interesting thing we find is, and Chris King said, sometimes we have too much electricity,

renewable electricity We need to curtail That is sometimes true, but on many more days or hours actually, we have negative prices of electricity in Germany Now imagine that somebody is selling electricity at a loss into the market rather than earthing it free of charge You have to think deeply before you understand what drives an operator of a nuclear power plant or of a coal fired or lignite fired power plant to sell electricity at a loss when they alternatively could earth it at no cost because they have the installations anyway Think about it, and suddenly you realize that there are guys in the incumbent utilities who want to drive up the cost of the policy in economic terms but also political terms They benefit from the disruption of having negative prices because it makes people uneasy It adds to the complexity of the issue and the fear we have of moving into an area that is inexplicable – It’s also hard to turn off a nuclear power plant isn’t it? So I might– – I fully understand that you can’t regulate it down quickly enough, but you can earth the power that you cannot sell except at a loss Before you pay somebody to take your electricity, you earth it – Do we have people in the audience yet who are eager to ask questions or? – Justin – Yeah – I have a thought on your question – Sure – And this, I thought about this a lot So this is kind of a seemingly simple recommendation for regulators, but its giving customers choices So when looking at rates for example, and this comes back to the time of use thing The time of the peak is changing The shape of the peak is changing So how do you give customers choices? And there tends to be kind of a one rate fits all kind of approach, and that takes a very long time to figure out By the time its approved after two or three years of litigation, it’s generally sort of out of date anyway But if you have a menu of options, let customers choose them, and actually part of that Well I’ll put this out there, one of the things in the track one decision talked about New York’s policy that says if you’re a low income customer and you choose an alternate supplier, their bill cannot be any higher than their regulated utilities bill So that’s kind of an inherent conflict Are you giving that customer a choice, or are you not giving them a choice? Just think about giving choices, letting people make those choices and then if they don’t like them making other choices – I don’t want to leave the impression that none of this is starting to happen yet I mean it is happening at the edge The largest wholesale power exchange, the PJM interconnection has been running demand response auctions for several years now So we’ve got people already who are sort of big industrial customers for example who are willing to raise our hands and say for a certain price I’ll turn my power plant off when you’ve got a supply problem And in fact we have a huge court battle going on about that that may go all the way to the Supreme Court right now It’s a little unclear if what they’re doing is gonna survive legal scrutiny Eleanor, let me ask you this question How many other states are rushing in right behind New York to really grab this problem by the horns and really deal with it, or do you look out at the landscape and sort of see a lot of fear? – One of my favorite cartoons from the New Yorker was one that showed a long gallery filled with gold picture frames, all of which were empty, and the caption was, “The regulators hall of fame.” So predicting, making predictions, you know our whole business is based on predictions and forecast, I think maybe it was the forecasters hall of fame Anyway, you get the idea So there’s a lot of fear of failure of course, and I think a lot of states are looking at what New York is doing as we are also looking at what they’re doing And a lot of other countries are looking at what New York is doing We had a lot of conversations with Germany, with the UK, with the Netherlands, many other countries and many other states I think that we are looking at, we look at the policies that have been introduced so far, we consider the first steps of REV The first year or two are kind of no regrets policies We know we need far more renewables than we have in the system We know we need to integrate information technology into the system The utilities are completely aware of the problems

of a contracting customer base and contracting opportunities in their traditional lines of business and are certainly actively looking to enter new lines of business So we see really, of course anything can fail, but I think that these are policies that reflect the fact that business as usual is not an attractive option to the utility industry or to the regulators or to governments There are too many big bills coming due that’ll fall on the backs of customers And we need to be proactive in doing something about that And the other thing, I’ll just say two other quick things One is that New York is trying to adopt, and I think this speaks to Chris’s point, kind of the business practice of rapid cycle prototyping, so try something, try in a limited like demonstration project setting Analyze the outcomes Move on if it fails Massify it if it succeeds And the other thing I just can’t resist saying is that we are actually working very closely with Amory Lovins Rocky Mountain Institute, who are working as strategic partners of the commission and have been traveling to New York every two weeks for the last year from Bounder They travel to Albany, God help them, every two weeks, to work with us, and we have really took their expertise and their (mumbles) – Michael let me ask you a question So some of the American utilities are seeing this situation They look at what’s happened to market caps in Germany and Denmark They are terrified, and the political response in some states as been to try to stop this essentially, the sort of telephone company response essentially, let’s fight this as hard as we can So we have states where the utilities are asking for sort of $50 and $100 surcharges on customers that install solar panels We have states where the utilities are trying to repeal net metering How do you see the sort of politics playing out? I think the environmentalists have sort of fought off a lot of that but not all of it How do you see the politics of this beginning to play out in the United States? And is a primary response of the utility industry going to be to sort of stop the future from arriving? – That’s a good question, and not one that I got beforehand, so I’m having to think as I speak But I think that what you just described happening in a few states and we know sort of the lobbying groups that are helping coordinate that across states and sort of some of the tactics of that is really not all too surprising In Germany, it’s by no means so that utilities just watched and ignored and didn’t push back I mean the whole past ten years have been various attempts as Andreas was also mentioning to kind of stop or at least slow down the transition Right now all major utilities are vying very hard for a capacity market which was essentially paid for for incumbent for existing generating capacity The subsidy, for what already exists, which is essentially a way to keep going with the business model that they have for a little bit longer, even though, and this is interesting, a leaked internal paper by RWE, or was it Vattenfall? I think it was Vattenfall, showed that they actually knew that a capacity market was not necessary There was so much surplus capacity in the German market that really for the next 10 years we didn’t need to actually subsidize incumbent capacity as a strategic reserve So the tactics are similar in a way, and I think what it tells me is that is that it’s all just going to perhaps slow down a transformation that’s inevitably happening anyway And this brings me back a little bit to your earlier question where I was thinking sort of of the two sides you were showing I mean I go to work everyday in Kendall Square, and I’m surrounded by innovation, and it’s just awesome You can’t help become an enthusiastic Just a few days ago I was talking with Harvey Michaels, who Chris also knows, who was telling me, “No, no in 10 years internet of things, information communication technologies integrated with the electricity system, your toaster will react when the sun is briefly shaded by clouds, and the solar panels within your cell, your grid cell will have a quick dip, or your heating system will react, or your cooling system The buildings themselves would become an active dynamic partner in power generation and use So I think that’s, the trends there are quite clear I think the big challenge, the big transformation which indeed because its so fundamental for the business model you see various attempts to kind of slow down or avert, but it is simply irreversible We’re going from a way of remunerating power, strategic reserve, insulary services based very much on capics and operating expenditures, to one in the future, and it’s just a matter of time, where its really just a capital expenditure, and the marginal costs of generating electricity is virtually zero

What’s happening in Germany already, how do you capture that? How do you attach value? How do you make sure you still have the storage, the strategic reserve capacity, et cetera, the dispatchable power And I think that’s where New York’s model, but also the discussion Germany’s undergoing this year, is looking for entirely new ways of ensuring that revenue goes to the useful service to society So I think we’re heading there, and we can maybe slow it down a little bit, but it can’t be averted – Okay, I know some people want, there’s a bunch of hands up, I think the gentleman in the middle row back there was the first to throw his hand up, so tell us briefly your name and who you’re with, if you would as you ask your question And I’m going to invite sort of short, sharp questions to my panelists – Ken Kramer, Rushdon and Landick, this is for Eleanor I appreciate the fact that PSC people have open process, appeared in the public periodically, frequently in (mumbles) events and you can sort of trace the progress of what’s going on Is there current thinking to the extent that if you believe we have to de-carbonize the system and make sure that the utilities are solvent enough to support the grid? The current business models sell more electrons next to your rate pace everything is not gonna be the utility of the future How close are you guys to a consensus of what the business model of the future is and the regulatory framework that will support an incentive? – If only I had that crystal ball (everyone laughing) Well I think its a work in progress, and its a collaborative work in progress because we could be in this market design group, for example, which is includes the utilities and representatives from various parts of the distributed energy world, academics, other sectors that are involved in the case, and they are working night and day for a very short period of time on a very complex set of questions How do we design rules? What kind of rules have to be designed by government for example, and to what extent are we gonna over design? And we don’t want to have too many 300 page manuals if we could possibly avoid it So definitely a work in progress, and I would really stress that its a collaborative endeavor, and there’s a tremendous amount of wisdom out there from people who’ve been using these kind of technologies in other states and other countries People are visionaries who really can see this internet of things and see a way to bring it to bear, but also from the utility understanding of the grid, we are, you know its all based on the existing grid, we want to open it and expand it, but it a very reliable and critical piece of infrastructure So I’d say its being designed, but it’s being designed by quite a few people, and I think that’s a real strength – Uh, right here – Hi (mumbles) from (mumbles) here, one big difference I detect from listening to you between German and the New York experiences is in Germany you seem to be quite prepared to basically let the utilities dies if necessary whereas in New York seems to me you’re trying to basically get the utilities to transform themselves into a platform, so I guess I’m wondering from the German perspective, how could you see any successful examples of utilities that have, that are starting to transform themselves into the sort of platform that you are I guess trying to spur utilities to become or have you seen any new utilities or new benefactors come in that are playing the role of (mumbles)? Do you have a platform in Germany that is sort of comparable to what New York is envisioning (mumbles)? – We both know what we want to say, so I think you– – There you go man – I think Chris King also wants to say something One is nobody is happy to let utilities die because it destroys value, and it destroys employment, or it disrupts employment An actual fact, the energy transition in Germany does not destroy employment It creates new employment, but within that process, there may be some businesses that lose their right to exist and therefore have to shed labor, but the people who work in the utility sector, they’re very well trained, very well educated, and usually they don’t find it difficult to find a job in the same region, in the same industry elsewhere So the social disruption’s not as great as people sometimes make it out to be, except in the coal mining sector which is a special case There are people on the left of the political spectrum in Germany, and there are people in the municipal administrations who remember how nuclear power was, the central government encouraged the emergence of large utilities in Germany so that there would be able to build nuclear power plants, and the price for making that transformation was

to curtail the rights of municipalities in Germany to set up their own municipally owned utilities There is still an unresolved societal conflict between central state enabling big utilities versus local authorities having local municipal utilities And there are some people who remember that fight from the 1970’s, and they now get their revenge So there are some people who are happy to see the big utilities die There are literally hundreds of new utilities We have about 600, most of them new, rural cooperatives They invest in electricity We have about 800 municipal utilities The number is rising We have a process of re-municipalization As they need cash our big utilities now occasionally sell off distribution grid assets to the municipalities where they sit, simply sell the network back to the utility and let re-municipalizes the energy And we have about 200 virtual utilities They’re lawyers with desks that shuffle contracts but don’t have any physical assets They are important because they provide competition liquidity in the market, choices for consumers And they create options, and they create a competitive pressure on everybody, and when you look at that, there are so many new companies that come in because they’re new business models, new services that are being provided, they employee more people so that on the whole the sector is growing which is not surprising because if you produce electricity on your own territory, you do it with your own business, your own labor And if you import the fuel for generating the electricity, most of that value added will be outside of your territory, so the whole Energiewende, the policy in Germany is actually benefiting German industry, German business, German tax take, German employment So that is why overall the balance is so positive – Chris – (mumbles) Chris – Yeah, there’s a very interesting specific case that I would encourage you to watch This is E.ON which is the largest German utility They are actually splitting So they’re taking all their generation assets in essence and putting those into one business and then putting this, which is very similar to what the New York platform approach, they’re taking the customer oriented functions, the distribution functions and renewable energy functions and putting them, that’s the new E.ON going forward So they’ve just announced this a couple of months ago, and they’re just starting to take the initial steps, but that’s an interesting one to keep an eye on – On Wall Street we call that the good bank, bad bank strategy So I don’t know which is the bad bank actually (Chris laughing) – No comment – It is, that was also the example that sprang to mind, and its interesting or just sort of indicative that by far the majority of jobs remain in E.ON and just something like 30% or so are in the spun off conventional generation company – I will point out when I went to Germany, the thing that the big utilities wanted to show me was off shore wind, and so I led the piece, for those of you that want to read that piece if you just google my name Justin Gillis and Heligoland you will get the story because we started the story in Heligoland And the reason they wanted to show me off shore wind was that its big and capital intensive, and its gonna cost billions and billions of dollars, euros to put these immense turbines in the middle of the North Sea, and so that’s a role that the utilities see for themselves I mean raising huge amounts of capital and building big capital assets is historically what they have done Now we could have that same thing happen here in the United States in theory, particularly if the prices for off shore wind go down I mean there are estimates that we could supply half the East Coast with off shore wind, and we’ve already got an active leasing program going on for offshore sites And I believe Cape Wind it sounds like may be dead, but I believe we will have the first off shore wind facility going in starting this Spring off of Block Island And you could make this same argument I think maybe about large scale distribution lines There may be some sort of capital intensive stuff here that only big utilities can do which is a reason not to sort of drive them into ruin – Right here – Susan Hunt, I wanted to go back to your comment about the politics because I think the politics of this are gonna be dramatically different depending on how much we engage the public And one of the lessons that’s most dramatic from Germany is how much the public has been engaged and how that’s affected the political sustainability

of the energy transition And so I wonder if the panel would comment on public engagement and shared ownerships in Germany and what can be done, what fueled it into it, Eleanor that people want it How can we do that better and in a much more significant way, especially there with the, and start the conversation about the democratization of energy especially now that our democracy is being so manipulated by money (panelist laughing) (crowd clapping) – I think, I’ll just take a crack at that It’s interesting When I was on that trip that I was describing to eight cities, one of the issues that people raised at every one of these meetings was the need for energy democracy And I’d never heard of energy democracy, so I went home and did some research, and I found out that this concept actually originated in Germany and came here by some activists and political people maybe five years ago So it definitely is a new concept, and it’s a very exciting concept in terms of the possibilities of empowering local communities to take control over their energy production and usage And it’s beginning to spawn some proposals in all of the utility service territories all around the state by different communities to either propose some aggregated solar or whole other new models So I think it’s going to take hold And communities are also talking to each other who didn’t know about each other They thought they were doing isolated projects, so it’s already spreading – The clock is ticking here, but I think we’re gonna plan to go about five minutes over so we can squeeze in a few more questions I’ve been stuck on this side of the room, so I’m gonna jump over here Let’s see, we’ll start right here – This is for Ms. Scott I heard with the REV– – I’m sorry, could you tell us your name briefly? – My name’s Marjorie Shop I’m speaking personally, but I’m here for (mumbles) Citizens for Sustainability The question I’m asking is that I heard that an example, in Suffolk County that they want to build small natural gas utility plants that (mumbles) for environmental total impact studies Can these things happen with the coming of (mumbles) that the small utilities might include still the same (mumbles) build out of natural gas pipelines? (mumbles) And these small utility plants that will not go through environmental impact studies? – I’m not familiar with this specific project that you’re talking about, but I will say that there is reference in the REV order in February to the hope that the pending regulations by the New York State Department of Environmental Conservation to extend the environmental regulation of energy generating plants down to much smaller levels will be going forward in the near future, and we’re hoping that that will happen And that will take care of some of those problems – There is a 328 page order, I think, that the PSC issued in February I would actually, I can’t claim to have read every single word of it, but I would commend it to people It’s a much more sweeping and visionary document than you would normally expect a 300 page order of the Public Service Commission to be, particularly the opening sections of it are worth people’s time Wasn’t there somebody sort of in the middle? Let’s go up here to the front row – I have a question on wind– – Your name please – My name is Peter Steuben, and I’m from the Rockaways, Queens, New York City Question on wind generation, there is a proposal, a joint Con Ed and LIPA PSEG to build a huge generation project on the shelf off the coast of Rockaway Atlantic Beach, the south shore of Long Island They want to put hundreds of wind turbines I spoke at a city council hearing the other day against it, and for another proposal to build a gas pump 20 miles off shore to import our hugely abundant resources in natural gas to New York And the reason I’m against the– – Could you bring that to a question? Yeah

– It seems to me with the experience in Europe of these off shore wind generation turbines, a total waste of, a huge white elephant that the utilities will regret in (mumbles) years I’m curious if people on the panel have a, what they think of my– – Andreas talk to us about the economics of offshore wind and cost curves and all that if you would (panel laughing) – Bad One thing is the projects are very large so we need to invest billions Second is they’re very difficult to implement because the ships can only operate for a few weeks a year in the territory, and the North Sea is clement compared to the seas around the state of New York Third the environment out there is incredibly corrosive They use the best materials that they have Stainless steel apparently begins to rust within months for reasons they cannot explain properly There seems to be something about electrics in the marine air, salty environment, that means the stuff is not going to last as long as they thought it would be And maintenance intervals are going to be shorter, and the cost of maintaining of them will be higher You’re right Justin, the development of off shore industry was pushed by the big utilities because the size of the projects, the risk management associated with that, the financial engineering that had to go into it, all made that an area where only the big utilities could operate The small community owned utilities simply couldn’t go off shore, and they de-risked those investments in two ways, one is to have a feed-in tariff that is generous enough to recover the costs, and the second one is if there is a delay in the building of the turbines or the connection of the wind park to the grid, they can get their money as if they were generating electricity and bringing to market, and the customer has to pay for it even though he doesn’t get anything And then the utilities also make money by selling electricity from fossil operated plants to replace the electricity that is not coming on shore from the wind turbines It’s absolutely amazing how they’ve rigged the German system Luckily the German politicians have wizened up to it and have put a stop to it So all the projects are already licensed They will be continued, and they will be built And after that Germany will stop that nonsense – I don’t want to argue with you or him, but I will say I think the theory is to capture economies of scale and decline in cost curves in the same way we’ve done with wind I mean that may be wrong, but that is the argument you hear from the big utilities I think we’ve got time for maybe one more question I’m gonna ask Max Gruenig to start sneaking up to the podium ’cause he’s gonna give our final remarks Let’s go with the lady right over here – Thank you, my name’s Tiffany (mumbles), and I’m an associate at Simpson, Thacher and Bartlett, and I’m wondering what financed the projects these projects in Germany? Was it public-private partnerships? Was it from it investment community, and is there something that New York can or plans to follow? – Which projects do you mean specifically? – In general, what sort of money was funding this transition, or who were the participants? What can we look forward to as acting in the community as we look (mumbles)? – Who wants to tackle that? – Okay – I’ll combine it with the leading question that Suzanne Hand asked earlier because it was actually normal people – farmers, dentists in rural areas They clubbed together They invested in the first wind turbines Anybody who wanted to build one had to find a farmer who was willing to give the land, the use of the land, and hat to pass the had around in the local community in order to raise the capital That was in the beginning of the industry when it was relatively cheap When you build small wind turbines, and you build them one by one At that point in time it was possible to build community ownership because everybody actually had a possibility of putting money in $10,000 perhaps at a time So it was a very low entry level to that, and essentially once people in a village have an opportunity to buy a stake in the wind turbine or they had the opportunity and they declined, then that buys off the opposition to it because they’re know that they’re their neighbors, their friends, their family members, they’re earning money from it It changes the equation, and that creates both democracy and a community engagement and a buy in, and it creates acceptance If however you go in now and you pour a big plant wind park into a plain state in the United States, outside investors coming in, large project development company coming in, absolutely no interest in engaging with the local community

because they don’t want to have retail investors in the mix It just makes it too complicated to make it all bankable My advice from the distance from Germany and not knowing the details is that in order to build and maintain community support for these projects is to enable the local communities to benefit from it, not only in terms of employment and tax revenue that they earn but also by allowing them to buy a stake And perhaps community foundations could step in as aggregators They could sign up to a certain percentage of the investment in a wind park, and then peddle that retail to people who live within sort of certain postal districts or whatever else you want to use as that Under which circumstances could a community foundation do that sort of engagement? It is risky How can you de-risk it? What’s the role of regulation, and what’s the role of government funds, of green funds or whatever in order to help community foundations to do that because the technology has moved to the point that you cannot replicate what Germany did in the 1980’s where people passed the hat around to build cheap singular wind turbines? It is the nature of the business that this is multi-billion dollar investment each time So you need different mechanisms for making that happen, and this is just one idea I hope is useful for some people – We could of course have a whole panel on distributed versus centralized generation and probably we should, but today we are out of time Thank you all for your attention I’m gonna ask Max to give some closing remarks – Well thank you very much Justin Yeah, my name is Max Gruenig with the Ecologic Institute, and I want to keep it very short because we’re already over the time, and I don’t want to open a new discussion As Justin just said we could probably start discussions on all these various topics I mean Eleanor, first off all I want to say is that I think really the discerning factor is that what you’ve introduced that you look at it as a system, that considering the energy sector as a system from each and every consumer to the utilities This holistic view on it is I think very different from what we’ve seen in many other states or countries when tackling it, and that doesn’t of course guarantee a perfect outcome, and it’s also something that Andreas said earlier, it’s not about having the perfect plan from first letter to the last page, it’s about designing a breathing plan, a plan that’s able to adapt to reality And I think that’s really important to see that we’re not talking about having a massive plan, communist style five year plan It’s about having the framework setup, the framework for consumers, prosumers very important, also linking to the rooftop solar but also the citizen owned wind parks, citizen owned solar parks, and then of course the utilities as well I think we’ve seen also a little bit the limb or the balance that has to be navigated between keeping it simple as Chris King said, keep it simple That’s a key to success in Germany, but of course having a holistic system perspective is not really keeping it very, very simple And I think that’s really the challenge here, and it’s an opportunity and a challenge to have both perspectives in mind, to keep it simple but having the big picture in mind And of course keeping it simple, you can look at it on various levels going from the consumer perspective, the rate payer perspective, but of course also the entire regulatory framework which is supposed to also then spur innovation and new business models at the utilities perspective So I would like to thank you all for bringing in these various perspectives from the regulatory perspective, from the private sector perspective, from German perspective and American perspectives, and above all I would like to thank Danielle for co-hosting this year with the NYU Guarini Center today, and of course Georg Maue from the German Embassy for making this international exchange of ideas possible And thank you again Justin for moderating so brilliantly Thank you (everyone clapping)

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