Technology, Energy, and Security

FASKIANOS: Good afternoon from New York, and welcome to the Council on Foreign Relations State and Local Conference Call series. I’m Irina Faskianos, vice president for the National Program and Outreach here at CFR. As you know, the CFR State and Local Officials initiative serves as an authoritative, politically independent resource and forum for bipartisan discussion of pressing international issues that affect the priorities and agendas of state and local governments.

Today’s call, the conversation with our speaker Amy Myers Jaffe, will be on the record. But when we go to questions and answers, that will be on a not-for-attribution basis, so that we can have candid and frank discussions. So at that point, we hope that you will make use of the information but not attribute the questions to whomever asks them.

We are delighted to have Amy Myers Jaffe with us today to talk about innovations in technology, energy, and security. Ms. Jaffe is the David Rubenstein senior fellow for energy and the environment, and director of the program on energy security and climate change here at CFR. She’s a leading expert on global energy policy, geopolitical risk, and energy and sustainability. And she previous served as executive director for energy and sustainability at the University of California, Davis, and senior advisor for energy and sustainability at the Office of the Chief Investment Officer of the University of California, regents. She was formerly a global fellow at the Woodrow Wilson International Center for Scholars, and she also served as the founding director of the Energy Forum at Rice University’s James A. Baker III Institute for public policy and was also its Wilson fellow for energy studies. She’s a contributor to numerous books and publications and is the author of the, Energy Realpolitik blog on CFR.org. So I hope that you will go there to follow her.

Amy, thanks very much for being with us. It would be great if you could start us off by talking about how technological advances are reshaping the energy landscape, especially in light of the disruptions that we have been seeing.

JAFFE: So thanks, Irina. And welcome to everybody. I noticed in looking over the participants list that we had a lot of participants from states that I would say have experienced either some kind of disruption in their—in the energy—local energy system, through a variety of different things, some accidental, some weather related, others technology disruptions. So I think that is a great topic for this particular group to think about what’s coming and how technology’s going to reshape the landscape.

So we’ve had a real breakthrough in the United States across the board in key areas, some of which are competitive with each other. So we’ve had this huge disruption in the oil and gas industry that came about from new technologies that allowed us to produce oil and gas from what we call the source rock. So instead of having to explore for oil and look for a reservoir, we’re now able to find structures where the oil and gas is embedded in the rock. And we’re able to, through hydraulic fracturing and horizontal drilling, produce that oil and gas as it’s located, without having to go “look for it,” quote/unquote. And that’s really a big innovation that has really dropped the cost of doing these unconventional resources, and made certainly the price of natural gas, you know, on falling, cascading pathway, because we’re going to have such abundance of natural gas.

Now, at the same time, looking across the international landscape, we’ve also had tremendous reductions in the costs for installing and operating renewable energy. And new innovations in terms of the management systems for integrating renewables into the grid and for coping with the intermediacies of renewable energy supplies, also sort of on the upswing and coming, again, at increasingly lower costs. So it’s really created a very interesting change in the way local government and state government is thinking about that sector.

When you combine that with new risks, whether that is extreme weather risk or other kind of climate risk and cyber risk, you know, understanding what are the technological solutions, how they might change the competitive nature of certain fuels in certain locations, it’s really quite a complex landscape to really navigate. And it’s very regional. So some—I know some of the participants on the call come from state where a heat wave is a bigger threat than perhaps flooding. And the solutions in each of those cases is different. So I want to talk about that a little bit. And then, you know, when we open up to questions, if people are interested in that topic we can discuss that. And I’m going to sort of not talk about the international crises because of geopolitical events. But, again, in the Q&A, please feel free to ask more questions about what the outlook is for oil prices. I know there’s always some interest in that. Everybody’s constituents are always concerned about that. And I can also talk a little bit about the role of ride-hailing in sort of urban sustainability and policy.

So the interesting opportunities we have today is that in electricity utilities played a very traditional role of making income through their generation assets, and the grid was managed by some very traditional technologies that, you know, were used to stabilize the grid and keep power, and frequency, and voltage constant. And we all know how some of those systems have not worked as well as they have in the past as the grid has gotten more stressed by these different kind of factors I’ve mentioned. So the interesting opportunity now comes from the fact that with battery storage, at least in the short run, in the sort of day-to-day, minute-by-minute timescale, this is a very enabling technology to allow dispatch to be much more precise, much more—much faster. So, you know, in milliseconds instead of—or minutes, instead of in hours. And also to help allow different kinds of participants to assist with stabilizing the grid, without relying 100 percent on the curtailment of services to large users, other kinds of users.

So that’s a really big and interesting sort of area of innovation. The ability to do that and use these new technologies, like smart inverters and in-home smart devices and batteries together, and even introducing at some point maybe, you know, way down the road, some kind of blockchain system that would allow household and other users to trade back their electricity from the grid in a way that didn’t destabilize the grid. There’s a lot of enabling technologies that are coming down the road. But analyzing what the regulatory piece would be to enable those technologies to do their jobs in a way that increases reliability instead of deteriorates reliability would be something that I think we’re having debate on, both at the national level and at the local level. And of course, looking over the list of states and participants in this call there are some states that have very ambitious programs for integrating renewables across the grid or having renewables dominate the grid. And these technologies will be very important for that.

In the cyber area, it’s sort of a double-edged sword. The more we go to these different technologies the harder it is to insure the grid from cyberattack. But then also, the more resilient the grid is from cyberattack. So—and we can talk a little bit about how that—how that would look. And then I think the new concern that I’m seeing across the landscape on the natural gas side—the interesting thing about natural gas, having lived in three of the centers of the country that have experienced extreme outages as a result of weather-related challenges—you know, the interesting thing about having lived in all those locations is if you have natural gas, typically the pipelines system doesn’t get disrupted.

And therefore, you know, you’re able to—if you have a natural gas stove, you’re able to cook. You just don’t have any refrigeration—(laughs)—if your electricity is out. So that also down the road could offer an interesting opportunity, because you could deliver natural gas to households, and that would be equipped with a stationary fuel cell and could produce their own electricity from the natural gas. But then, there’s this increasing question about the safety and reliability of natural gas, because we’ve had some pipeline accidents—both in Massachusetts, also in Colorado—that have—and in California, actually—that have called into question whether we’re having the right amount of regulation, or are we having the right intervention for upgrading of aged equipment and pipeline. So that—I think that’s another area that we’re going to see increasing debate around the energy technology question, and around the competition among these different fuels in local.

And of course, the new challenge that I think is going to come increasingly over time, which has happened in Europe but hasn’t happened yet here in the United States, is that as we have certain locations that have either water scarcity or we have heat waves or warming in the summer—in Europe, for example, they had periods this summer where all nuclear facilities had to be turned off because there was not available cool water to use in the cooling system of the plant. And that’s something that could happen not just in nuclear but could happen in some thermal plants as well. So we haven’t had that yet in the United States. But we have had recently in North Carolina, where plants needed to be turned down—turned off temporarily because of a weather-related event.

So thinking about how to construct a more resilient system, my opinion is that local government is going to play a critical role. And that is because the responses that are going to be needed, and also with the fuel systems—so with, you know, gasoline and other kinds of fuel, and where we increasingly have automotive or trucks go to other fuels like natural gas and electricity, states are going to have to do assessments about—which I know you do as part of the emergency preparedness systems with DOE and the federal government, but understanding individual fuel systems per location and thinking through what the regulatory framework would be to encourage investment that would make those systems more robust is work that some of the states that are on this call are doing and innovating, but is something that I think as a national dialogue we have not focused on enough. And I do believe that the leadership is going to come from the local level.

FASKIANOS: Great. Well, we are out of time, Amy. So I appreciate your sharing your analysis and policy recommendations with us. And we hope that all of you will keep this information and use it. You can follow Amy on Twitter at @AmyJaffeEnergy. And we also welcome your suggestions for topics that you wish we could cover, other ways that we could be helpful to you in your communities. This is—we’re trying to be a resource and want to be a go-to place for all of you. So thank you, again, for being with us, and thank you to Amy Myers Jaffe.