Look into the crystal ball

If Sacramento focuses on conservation, maximizing energy efficiency and supporting both our grid and also new distributed and democratic power sources, John DiStasio says we can reduce SMUD’s emission levels to 10 percent of today’s levels by mid-millennium. How, you ask? SN&R sat down with the CEO for a look into the crystal ball. The following is an edited version of the conversation.

Look into the proverbial crystal ball—where will SMUD be in 2040?

Well, first of all, I still see SMUD as very vital, because—regardless of what happens with new technologies, new information, with customer choice, with convergence of transportation—until the laws of physics can be changed … there’s going to need to be a grid to support these things. So there has to still be a backbone infrastructure until such time as maybe people can come up with virtual superconductivity, but it’s not on the horizon right now. Unlike telecom, that went from wires to fiber to wireless, that transition for electrical infrastructure doesn’t seem to be there. So I start with the premises that at a minimum, there’s a grid.

But then, secondarily, even out to 2040, I do see a much more distributed environment than today. I do see consumers armed with better information and better technologies, being able to self-generate. So I see the potential for microgrids, where you may end up having instead of one giant SMUD, SMUD may end up being an amalgamation of a lot of small microgrids cobbled together and supported by a large grid. So I see the energy infrastructure becoming more distributed.

The other thing I would see in 2040 is I really do believe we’ll have climate policy at some point. I mean, I think it’s too important of an issue for it not to occur. So, I believe that right now one of the paths I do see clearly is a path for SMUD to reduce our emissions, and out to 2040, 2050, we’ll be at about 10 percent of the emissions of what we are at today.

Wow. Ten percent of today’s emissions?

We want to get to about 85 percent reduction by about 2050, so all of that policy that the board adopted is really informing a lot of our resource decisions and a lot of our choices. We’re already thankful because of recent things we’ve done with renewables and so forth. We’re already about 45 percent carbon-free, so if you count hydro and the renewable, both the stuff we own and the federal hydro that we have, we’re at a very good place to start from.

Is there a relationship between how people think about health care in the United States and how they perceive energy? In health care, we’re doing tremendous cutting-edge stuff, but by far the biggest bang for the buck is in education and prevention. Is there a similar thing with utilities, where there are tremendously smart engineers, but the biggest dollar savings is in the less glamorous things such as duct work, or …

Well, that’s true, but I also think utilities are like the old Maytag repairman commercials: The only relationship consumers historically have had with their utilities has been a passive one. You turn on the lights, and the only time you have an issue is if you have a reliability issue. And that’s been the paradigm for years and years. In fact, one of the things we’re doing right now is looking at some ways to more broadly … educate consumers on where we see things in the future.

I think right now, if you interviewed people and said, “What do you think about SMUD being involved in electrification of transportation?” People would say, “Well that’s a transportation issue.” But I think this convergence is going to happen. So starting to get people to understand what the possibility is if you translate the value today of electricity vs. gasoline, you’re talking about $1 a gallon vs. $4, and you’re also talking about $1 a gallon that’s backed up by a pretty clean portfolio, vs. oil—and in many cases foreign oil. So I think there’s going to be a huge shift; it’s just not hit yet.

The economy is so bad, this would be positive—that is, generating energy over here instead of overseas and having that money circulate through our economy.

We also have abundant supplies of hydroelectric, much of it is untapped. We have 80,000 dams in the United States that are already dammed watersheds, and only 3 percent of them have any generation. So, I mean, there are a lot of opportunities, even with traditional resources in the United States. And then you get to the potential for continuing to build out both wind and solar.

And then, probably most importantly, if you go beyond California and New York, the rest of the country has not adopted very aggressive goals around efficiency or standards. We’re starting to get national standards now, but it’s amazing to me that we have significant numbers of states that have no energy-efficiency standards. But I actually do think that we can get to a point where we can be energy-independent, especially relative to the electricity sector. And if the electricity sector starts to play a much larger role in the transportation sector, then you’re creating an energy independence in that sector as well.

But in terms of residents and business owners, to embrace this vision of energy independence, what should they be doing right now?

Start with the small stuff first. I think a lot of times people want to jump to solar, because that gets sold as doing a lot of great things, but weatherization, duct sealing, programmable thermostats, managing the comfort of your home at the times you’re not there and when you’re there, getting more sophisticated, buying Energy Star appliances, changing your light bulbs, whether you go to CFLs or if you look at the payback even though they’re more expensive LEDs—they’re at the point now that LED bulbs in certain applications are terrific. … I think the best thing people can do is really start with the shell of their home.

What else do you see in your crystal ball?

One of the issues that’s going on with the investor-owned utilities, they’re saying “Wait a minute, if I do too much energy efficiency and I erode my revenues, I’m not getting my fixed-costs recovery, so I want to have an automatic rate increase.” But that’s counterintuitive. If I’m a consumer, what I don’t want to do is invest in energy efficiency and then have my utility raise the bill to compensate for their lost revenues. So I think that we need to recover the fixed costs associated with just the grid being there 24-seven.

How would that work?

We would move to an infrastructure cost that really recovers the cost of the capital investment in the base grid, as well as the maintenance and the capital improvements over time of that base grid. And maybe that’s $20 a month.

So when is that being mulled over?

Well, it will be considered in August. … We’re doing all the public education. I will tell you that just like you, when we go out and talk to the community, people get it. They go, “That makes sense.” So my hope is that the board will adopt it and most of it will go into place in 2012.