Matthew Satterwhite is Senior Vice President at AEP. Former NARUC President Paul Kjellander, also former Idaho PUC President, is Senior Advisor at Public Utilities Fortnightly.
The Inflation Reduction Act's $370 billion in clean energy investments, effective August 2022, are designed to accelerate private investment in clean energy solutions in all sectors of the economy. That includes strengthening supply chains from critical minerals to efficient electric appliances, and ensuring the U.S. leads the way in climate change efforts.Public Utilities Fortnightly's Paul Kjellander examines the federal funds coming into the energy and utilities space and how State Energy Offices are playing a role. Listen in as he talks to the experts who are already dealing with the big funding issues, for there is much to learn.
PUF's Paul Kjellander: As a utility that operates in eleven states, what are the challenges from this unprecedented level of federal funding and tax incentives for a company like yours?
Matthew Satterwhite: You want to keep things as local as possible, even when funding comes from the federal government. You want to make sure, first, that you are partnering with your local public utility commission to understand what they want, so what you're bringing to them fulfills their energy policy objectives and needs.
Since we're in eleven states, it's eleven different processes. Part of the issue for a large company is the administrative cost of looking at it so many ways, through so many lenses.
A lot of funding the federal government has made available has specialized, unique requirements for certain areas of the country. We're in Appalachia, we serve Native American lands, we have different areas that we have to make sure we're specialists on as we move forward.
It's not easier because we're bigger. It's more difficult because we can't assume one thing and move on. We must look closely at everything, but we also have more opportunities.
PUF: What are you doing that's a bit different now as you're navigating through this new scenario with more federal funding, programs, and tax incentives?
Matthew Satterwhite: We've established teams to make sure we're focused on this. We're busy with all the headwinds facing the industry overall. Just like others in the industry, absent all of this availability of federal support, there's still a lot of attention needed to stay focused on our core work that we normally do.
We stood up a team that was focused on this to make sure we could take advantage of these opportunities. A lot of the deadlines come quickly in this space. The portal opens, you've got to act, and you've got limited time to get something in.
Trying to find consultants who can help you is difficult too, because everybody in the country is applying for the same funding. It's not just utilities. Others are trying to get their noses in to say, "Hey, we could be a part of this and provide this to utilities." When this much money is on the table, it sparks a lot of interest.
I lead our regulatory team. I make sure that, even though there's a team focused on this, what does that mean for the regulatory side? What are we saying to the federal government that maybe would not put our state or request in the best light?
When we're trying to get a grant, we make sure we're reviewing these over a short period of time because we want to be consistent with what our commissions and our states' leaders want to achieve with their energy policies.
PUF: Are there some federal programs that are starting to rise to the top, which seem to make a little more sense for a large utility like yours?
Matthew Satterwhite: There're a lot. It's so broad. It depends on which state you're looking at. With assistance for emerging clean generation technologies, we have a lot of territory in the Appalachian region in the east, and there're some special items in there that allow us to explore these opportunities and make sure the region remains a part of our energy future.
We're looking at all of those to make sure that we can keep our communities strong. Most utilities, when they have plants or generation facilities, have built them in areas where the plant becomes the backbone of the community. You can't just walk away from that and leave the community behind.
You look at that as you move forward, not just the core function of making sure you have capacity for generation, but what are you doing to make sure you're building that community, bringing jobs, adding reliability, or extending technology to the region, all making sure it can be strong overall. Because a healthy community means you have a healthy utility, so you want to make sure they go hand in hand.
PUF: Some commissions around the country have opened dockets. Is that something that's been beneficial as you look at moving forward?
Matthew Satterwhite: Yes. Any communication is good. So, we have a better idea of where we stand. It also provides a venue to make sure that everybody's at the table.
Sometimes when there are official proceedings in front of a commission, people go to their corners and think it's time to fight over something. This isn't what that is. This is about consumer groups, commissions, utilities, all being on the same page to make sure you can leverage as much of the federal funding to help customers in your territories.
Our approach is: "Hey, here's what we want to do. If we can get this, how fast can we move so that we have a better chance?"
A lot of the federal grants and loans are based on your move to the top of the stack essentially, if you can show you're going to be able to use the funds quickly.
If you're lined up within your state, and your consumer advocates, commission, and everybody else are saying, "Yes, if you get X, we will move to Y, and then Z can happen," you have a much better chance of getting that funding and being successful for customers.
PUF: It appears money alone won't resolve the infrastructure needs of the nation. Are there other considerations, other challenges? Are there potential problems as funding rolls out?
Matthew Satterwhite: Yes, we've got to make sure we have a cohesive policy that lasts through multiple administrations. It's difficult to start and stop and start and stop.
So, clarity, and that's where those dockets can help, with ensuring we are all on the same page. We always joke a bit about the exercise of, "Hey, bring me a rock." Then you take a rock with a new program, and someone says, "That's not the rock I want. Bring me another rock." The utility's left with always saying, "I hope this is the right rock."
If we're talking more about where we want to end up, it's a lot easier to solve problems versus bringing programs that are found inadequate without real guidance on what is needed. We want to be efficient and not hear, "Well, that's not what we want. Go try again."
While the money's great, if we don't have focus, we don't know if we're spending the money in the right way. Getting that cooperation, being on the same page with everyone is vital.
We also need to remember that some of this comes with huge administrative costs. You think it's easy money, but is it really when it takes a lot of work to qualify and to comply once you get that money? You have to consider the administrative costs to operate and maintain the facilities, whatever they may be.
Sometimes you must apply for it, and since it's competitive, you can't be sure you're going to get it. Putting the applications together costs us staff resources, time, and funds to hire experts to help us put together strong applications.
We're trying to move forward and say, "Let us do this to save money for customers, while understanding there's a lot of competition, so this might not come to fruition."
Working together helps create an understanding that, yes, it's worth using these resources and it's worth taking that risk. The stakeholders working together can move forward with confidence.
PUF: One of the unintended potential consequences is increasing that backlog of renewable projects and with a deeper interconnection queue.
Matthew Satterwhite: It's that concept of more players involved because there's more money on the table. Remember, the queue is already five years behind. There are 2017-2018 projects waiting in almost all the queues.
It's not projects that someone decided recently to get involved with and enter into the queue. It takes a while to get through that process. But the federal funding potential puts more focus on what the queue is.
We've got to find a way to take the load-serving entities that have a capacity responsibility and give them some advantage in the queue. AEP has raised that possibility.
If you have the public responsibility and penalties associated with providing that capacity, but can't get access and can't do any self-help, because in 2017, you weren't thinking about the increase in reserve margins and everything else, there's got to be a way to help load-serving entities navigate the queue.
Also, what you see in the queue right now is mostly renewables due to the lack of fuel costs. What aren't renewables, are other resources already promised somewhere, and you can't get access to those. There's a resource adequacy question, of if the state policy is to have some diversity of fuel, but everything in the queue is renewable, how do you bring that diversity in?
Potentially the federal dollars can help, but we've got to have consistency and cohesiveness of policy to make sure we're chasing resource adequacy and not developing tunnel vision. We need to be thinking about the overall picture.
PUF: Are there any recommendations that might help resolve that in terms of a more cohesive policy?
Matthew Satterwhite: Conversation is always good. Queue reform is needed so we can apply the policy in a better manner. I don't think it was contemplated that there would ever be time with so many projects in development at once.
Entities that have capacity responsibility must be given more rights to make sure they're protecting customers at the lowest cost. There're people in the queue who paid their cost to be there and are doing what they're supposed to do, but don't have the penalties and the public responsibility to make sure that capacity is there.
Maybe we can develop different rules to help them through the queue so customers can maintain the lowest cost and get what they're paying for.
PUF: It sounds like transmission is still a key piece of the puzzle, and probably the biggest problem that needs to be resolved.
Matthew Satterwhite: A good transmission system and a policy across the country is going to deliver power more efficiently and cheaply across a broad area. If we can commit to that and all the states can agree on how we're going to run that, that is a way to help customers, lower congestion, and deliver energy from the areas where it's most efficient to put the renewables to the areas that need it most.
IRA-IIJA Funding articles at fortnightly.com:
- AEP Senior Vice President Matthew Satterwhite
- NASEO President David Terry
- Illinois Commerce Commission Commissioner Ann McCabe
- EEI Executive Vice President Phil Moeller
- U.S. DOE Grid Deployment Office Chief of Staff Whitney Muse
- Emera VP of New Energy Markets and Innovation Louise Anne Comeau
- Idaho Office of Energy and Mineral Resources Administrator Rich Stover
- Idaho Power Senior Manager of Operations Support Melissa Boyd