Welcome to Plugged In, the full conversation brought to you by Energy Sage. I'm your host, Christina, and this is the show where we dive deeper with the experts featured on Pluggedin. On this episode, I'm joined by my colleague Emily Walker for an insightful conversation with Jigar Shah. For those of you who may not know, he was formerly the director of the Loan Programs Office at the US Department of Energy. He's now an entrepreneur, one of the hosts of the Open Circuit Podcast, and a true thought leader in the clean energy space. Our conversation dives into some big questions like why electricity bills are rising so fast, how grid infrastructure and virtual power plants factor in, and why he thinks it's the residential solar industry that needs to step up to fix our unaffordable electricity crisis. It's a candid conversation about where energy infrastructure is today and where it needs to go. So, let's jump right in. Here's Jigar Shah.
So, we have a couple of different topics here. The first one is on just electricity. Obviously, right now it's through the roof, pretty crazy. Everyone's really feeling the pinch there. You recently said on an episode of your Open Circuit podcast, we have the technology to make electricity more affordable, but you said it's more of like a cultural issue, I believe you called it, with utilities wanting to stick to the old way of doing things. Can you talk a little bit more about what you meant by that?
Yeah. First of all, it's just such a pleasure to talk about these topics. I think that we're in this very unique situation where people understand generation, right? They understand that you either get power from coal or nuclear or natural gas or rooftop solar or central station solar, etc. What they don't understand is that those kilowatt hours generally have to be transported via your transmission grid to your local distribution grid and then from your distribution grid to your home, right? And when you look at your electricity bill, which is what most people care about, right? It's not the generation part that's been going haywire. It's the distribution part that's been going haywire, right? And so distribution used to be 20% of your bill. Today, it's 50% of your bill, right? And so for all of the cost increases that we talk about on the generation side of things, those cost increases really, you know, haven't been material in terms of why your bill is higher, right? And so now the question is, why is your distribution cost going up so much? And it's because people are buying all sorts of things that use electricity, whether it's hair dryers or electric vehicles or heat pumps or electric water heaters or whatever it is. And every time you do that, the utility says, "We need to be able to upgrade the distribution grid so that you can do whatever you want. You can turn every single thing on in your house at the same time, and we have to be able to serve you." Well, that bargain is getting way too expensive, right? Can't keep upgrading the distribution grid. And so now what they need to do is to figure out how to help work with customers to say, "Hey, we need you to opt into load flexibility so that in a way that isn't noticeable to you, we can figure out a way to keep the entire load on your circuit below the rating of the circuit so that we don't blow a transformer, right? But we still give you reliable power." And that requires cultural change.
Well said. With that, you know, it seems like home electrification, you know, while being a very positive thing, definitely is putting more of a strain on things. We've also seen a lot of utilities, particularly some in California, who sort of blame the increase in electricity costs, especially residential bills, on clean energy. We've seen like the cost shift myth with people going solar. Is there any justification for utilities saying clean energy is the reason for the increase?
Well, I definitely agree that there is some cost shift. I think it's far smaller than what people are suggesting. But I think the bigger problem is that, you know, it feels bad when your bills are going up and a bunch of people that have the means to put solar on their roof are getting a good deal and all of your neighbors are not getting a good deal. And so you can imagine part of this is just the feels or the vibes or whatever it is that we're talking about these days. And so part of what we need to do is to make sure that we are intentionally helping our neighbors, right? And so we need the battery attachment rate for solar to be 100%. We just do, right? And we need those batteries to be actually controlled by the utility company or an aggregator so that those batteries can help with this situation of reducing the cost of rampant distribution system upgrades, right? And that is something that is a cultural shift on the part of residential solar, right? And you know, I think that a lot of people argue that, well, but like we don't need to do that and the utility doesn't even use the battery. I get it. But the fact that people don't even have batteries, right, and we're generating way too much power in the middle of the day at this point from solar just because there's so much of it. And the fact that if they did have batteries, the utility is not yet, you know, flexing it doesn't mean that we don't have a responsibility to be better neighbors because today solar is a mature technology, right? Like it's not in the startup phase anymore. We're in the, you know, deploy it at scale phase. And so that means that we have to be a good partner to the rest of the grid so that we are solving problems for the grid and solving problems for neighbors that don't have solar.
How can we encourage more utility companies to use the batteries?
Yeah, it's, you know, we're in this interesting spot where we have been piloting the way in which we should do this for 30 years, right? And you know, when I was at the US Department of Energy, we wrote a liftoff report for virtual power plants and the latest version of them had 75 case studies in the liftoff report. So everything from what Green Mountain Power has been doing with backup batteries to Rocky Mountain Power, and Rocky Mountain Power is generally not accused of being pro-residential solar, right? But they are pro-residential batteries and they dispatch those batteries up to six times a day instead of dispatching their natural gas peaker plant, right? And I think when you think about all of the things the National Grid has been doing and others have been doing, there are lots of pilots there. But the question becomes, when you find that, you know, you have to upgrade a substation, is your first thought process, hey, we might be able to do this for one-tenth the cost if we just add residential batteries on that circuit? Or is your first thought process, well, I know how we do this, we just like get in the waiting list and wait four years for that new transformer and then upgrade it to a level that we don't really need but it's what we're comfortable with? And right now it's the latter, but we're getting to the point where electricity is becoming unaffordable. And so we need to shift to the former. But the thing is that the residential solar industry is waiting for that shift before they show enthusiasm. And right now they need to show enthusiasm first. They need to start getting trained on how to do this work. They need to start figuring out all these advanced features because they're complicated, as we all know. And they need to do that process now so that two years from now when the utilities hit their breaking point and they start moving in this direction, we're ready.
You had a really great quote on one of the recent episodes saying like you need residential solar and utilities to find a way to make 1 plus 1 to equal 3. Do you think there is a better way for them to start working together now?
Yeah, I mean, we see it all over the place. I mean, whether it's Sparkfund's contract with Xcel Minnesota, where Xcel Minnesota has said that we need to stop saying no to new load growth, right? Because right now they're saying, well, sorry, it's going to be three or four years for us to be able to interconnect you. They're realizing that if they add all these batteries to the circuit, whether it's residential or commercial, that they can say yes in six months, right? Or it could also be, as we've been discussing, right, that we're just at this breaking point. JCP&L in New Jersey just announced that they have realized that they have been overly ambitious with their capital, you know, budgets and as a result been raising rates way too fast. So they're slashing their capital budget by 75% this year, right? And so the question becomes, how do you maintain services while still slashing your budget by 75%? Well, you leverage the assets that the residential solar industry has already put into your territory, assets that you've been ignoring for the better part of 15 years, right? And so I do think that we can make this work now. But the question is, who's demanding it? Who's writing op-eds in their local newspaper? Who's going to city council meetings and saying, "Hey, my company's right here and we know how to do this stuff"? Not the residential solar industry. They're waiting for someone else to do that work and then for them to get the business. And I'm saying that they're not going to get the business unless they start advocating for themselves and their employees.
Very fair. You've spoken a little bit about virtual power plants. Do you think that that is a strong solution when it comes to reducing energy costs?
Yeah, it's the only solution, right? We're at a point where we used to use transmission and distribution infrastructure 75% of the time, right? Today we use that infrastructure less than 45% of the time and for some distribution circuits it's less than 20% of the time, right? So most of the time there's almost no electricity flowing through those circuits. And then when everyone comes home from work or comes home from picking up their kids from school, everything gets turned on at the same time. And the utility is planning for that one hour peak, right? Or after everybody takes a shower, right, their electric water heater turns on, right? And so when you have a virtual power plant, you can shift those loads so they're not all on at the same time, right? People don't really need their water heaters to turn on right after they finish taking a shower. They don't care as long as it's hot when they next need it. The same thing is true with electric vehicles. Most people who plug in electric vehicles keep them plugged in for 13 hours and they're only charging for less than 3 hours of those 13 hours. So they don't care if it charges right when they plug it in or they charge at one in the morning, right? But you need some intelligence and some sensors and some communication protocols, all of which are standard, right? Every time you install an EV charger, now it comes with an app. Every time you install a refrigerator, it comes with an app, right? Those apps let you communicate with your refrigerator or your charger or your water heater or your thermostat, right? And so now all of those ingredients are in even the most basic models that you can buy. And so as you replace stuff, which generally gets replaced every 15 years, so 7% of all appliances are being replaced every year, right? That's a lot. That's a lot, right? And so the question becomes, who is the most intelligent sector to lead this charge and to educate residential consumers? It's clearly residential solar companies.
Do you think part of it too is that like when these, when people are installing these technologies, they need to come pre-programmed with the right solution? Because I, and we've seen time and time again that if we do put the onus at all on residential customers, they often won't actually take the, they won't know enough or they won't take the leap to actually like program it correctly or opt in for the right solution. So, it needs to be almost like an opt-out solution to start.
Yeah. I mean, so I think there's two different pieces to this. One is like when you look at Tesla for instance, right, they always talk about how all of the upgrades to your vehicle software is provided over the air, right? But whenever my Tesla Powerwall has a problem, they send me an email saying, "Here's the 14-step process to reset your Tesla Powerwall by yourself." Well, crap. Why don't you like just send it over the air, you know, like updates and just reset it yourself, right? Why do I have to go over there for a 14-step process, right? So, those are things that everyone from Tesla to Enphase to, you know, like others, SolarEdge and others should be able to just do. I don't understand why anyone needs to ever touch their system unless there's a physical problem with it. And I would say the vast majority of the problems that I see with solar systems is some sort of software glitch or there was a voltage spike or something occurred that actually reset the system. But then, you know, you should be able to just hit a button on your phone and say do a full diagnostic and a reset. Thank you. This will take 2 hours but we will have you up and running in two hours. Fine. Right. So that should definitely happen. Right. Then the question becomes like if someone were to put in information around their rate tariff, right, or what utility that they're in, right? Why doesn't the software just tell you here are the rate tariffs available to you today and here's the one that you would save the most money on and that might change in 6 months. So we'll send you an email if that does. And you can click here and we'll automatically send a notice to your utility saying you're changing your rate tariff, right? All of this stuff can be automated. Like I feel like everyone's constantly barging me with AI except they're not using AI to make my life better, right? And so like I think that everyone when they're thinking about what they're going to show me at RE+ better have a damn solution for this problem.
