LoginPG&E tries to prove that a big utility can innovate
PG&E, California's notoriously troubled utility, is trying to prove it can innovate, so I invited Quinn Nakayama, head of its new GRiD program, to explain how. We discuss its strategy of publicly outlining its problems to attract partners and its shift toward faster, more flexible interconnection for new loads like EVs and data centers.
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Text transcript:
David Roberts
Hello, everyone. This is Volts for July 4, 2025, "PG&E tries to prove that a big utility can innovate." I'm your host, David Roberts. Lots of people in the clean energy world, ( me, for instance) spend lots of their time criticizing electric utilities, which they accuse of slow-walking the energy transition due to corruption, industry capture, or a simple lack of imagination and courage.
Few utilities have faced more of that kind of criticism than PG&E, California's largest. Back in 2022, I did a pod with author Katharine Blunt, whose book California Burning documents PG&E's long, rich history of catastrophically screwing up, getting caught and punished, promising to do better, briefly improving, and then a few years later, catastrophically screwing up again.
In the late 2010s, with wildfires raging and rolling power outages, criticism of PG&E once again reached a crescendo. It was once again punished (to the tune of a $1.9 billion fine from the CPUC in 2020), and it once again vowed to do better.
So, how's that going? Somewhat improbably, several people have mentioned to me in separate conversations in the last few months that PG&E is doing cool stuff these days. And they all told me to talk to Quinn Nakayama.
Nakayama, a longtime utility veteran, is leading the Grid Research, Innovation, and Development program, GRiD for short, PG&E's new initiative to move faster, experiment more, partner more, and embrace new technology. His job now is to look into virtual power plants, autonomous fire-detecting drones, smart EV chargers, and other gizmos that can reduce rates, reduce emissions, and improve service. I am very excited to have him here today to talk through all this new stuff and, more broadly, whether a big utility can actually learn to be nimble.
All right then, with no further ado, Quinn Nakayama. Welcome to Volts. Thank you so much for coming.
Quinn Nakayama
Hey, thanks for having me. Appreciate you inviting me on here.
David Roberts
There's a lot to talk about here. Turns out, once I dug into it, PG&E is involved in all kinds of stuff, more stuff than we could possibly cover here. But I want to start with just a little bit of background here. So, I think a lot of people remember the fires, they remember the planned blackouts, they remember the fuss, the controversy, all that stuff that happened in 2020. You got a new CEO in 2020, Patti — How do you say her name?
Quinn Nakayama
Poppe.
David Roberts
Poppe. Patti Poppe, that's delightful. You got a new CEO, Patti Poppe. Just tell us a little bit about post-2020 PG&E history. What has been, what did that episode galvanize?
Quinn Nakayama
Yeah, you know, I think we'll start even before if we think about what was going on in the industry prior to 2017 when a lot of the major wildfires were starting. A lot of our innovation and DER integration is a big hot topic across the industry. Then 2017 rolled around and we had the October wildfires as well as the campfires, and our whole organization then just pivoted toward how do we innovate towards reducing and eliminating wildfire-related risk? So, you know, a lot of the things that the whole company was working on, including the former iteration of my organization, was really driving towards how do we eliminate this risk?
And you know, we knew that we would have to shut off customers as a part of that and that would really hurt their reliability and start to look in some places of our service territory that it looks like, you know, almost third-world type of reliability on our grid. So how do we go ahead and innovate around that while we eliminate our risks? So the company at that point pivoted a lot of its resources toward drone technologies, towards something called "enhanced power line safety shut off" to really try to eliminate the ignitions that happen when vegetation comes to our lines and even on microgrid related stuff. So during that period of time, you saw a lot of focus around AI, ML, data sciences, identification of where our risks were on our system and how we would go about eliminating that risk.
David Roberts
So then, what was sort of your... When you were given the reins of this organization, what was your remit? So, like, what was you, what are you assigned to do? What's your job now that you've taken the reins of this GRiD program?
Quinn Nakayama
Well, you know, I had the previous incarnation right prior to this where our remit was around wildfires. So, we were looking at things like the remote grid program, which was, how do I put, you know, solar and energy storage and maybe sprinkle in a little bit of propane out to these places where you had these three, four-mile overhead distribution wires going to a small ranger station? You know, 10 years ago that was appropriate grid construction. Now, you know, you just can't do that with our climate change impacts, we're saying. So, we did these microgrids that were basically completely off of the grid, but still created utility-level reliability and service.
And so, that was one of the big projects that we had worked on in my organization, as well as, you know, how do we think about the dispatch of temporary generating resources out there that could quickly isolate a particular area and create two days' worth or three days' worth of resilience. That was a temporary microgrid-related program that we had stood up. So, a lot of cool things that we had been able to execute and lift up during that period of time. You know, after 2020, 2021, the company had taken significant amounts of risk off the system with modeling, with hardening, with EPSS (Enhanced Powerline Safety Settings), with PSPS (Public Safety Power Shutoffs), and all these types of various acronyms to just basically really reduce our risk and wildfire-related risk.
The work is never done, obviously, but you know, when Patti came on board, we knew that we needed to be a company that wasn't just about wildfire-related risk. It needed to do that, but it needed to be an "and". We needed to look at electric vehicles, we needed to look at electrification, we needed to look at decarbonization, we needed to look at how do we get to a position where we can start lowering our rates and focus on customer affordability? So, when we took and created the GRiD organization, its remit was to take a look broadly across our energy system.
And at this time, we created something that was called the True North Strategy. That was done by the strategy organization, and we attached our innovation and research and development that was really tied to that True North strategy that says, "Hey, electric vehicles, integrated grid planning, transmission asset strategy, wildfire, undergrounding, all these different types of energy system initiatives, how do we go ahead and create the right R&D and innovation that can tackle some of the biggest needs in those areas?"
David Roberts
Just remind us what kind of targets you're operating under, state targets, and then PG&E has some of its own, right?
Quinn Nakayama
Right. And again, some of this, you know, we'll see how this sticks in the next four years. But like, you know, our current targets are 100% net zero by 2045.
David Roberts
That's California.
Quinn Nakayama
That's California. And that's from an energy perspective. Right. And then you have other types of targets where 100% of sales of vehicles have to be electric by 2035, with these ambitious goals to be able to reduce million metric tons of carbon emissions from both the automobile sector as well as the electrical sector by over 60%, and then figuring out how to reduce the total cost of energy wallet. If you were to include gasoline as a part of people's total cost of energy, reduce that entire thing by 30% or greater. So these are some of the areas that we are really focused on, on trying to figure out how to achieve from a very high level.
David Roberts
So, you have to completely decarbonize the California electricity system by 2045.
Quinn Nakayama
Yeah, no problem, right?
David Roberts
That is not very far away. So, I mean, basically at this point, it's a crash decarbonization program for the next 20 years, isn't it? I mean, it can't be — there's no hope of hitting that target unless you're like going for it basically from now till then.
Quinn Nakayama
I think California is probably best positioned based upon the work that we've already done. I mean, our energy procurement folks have just done a marvelous job on getting solar and energy storage procured on our systems to try to reach that 2045 goal, you know. And then you also have our various load management programs that enable us just to procure a little bit less than maybe what we would need to procure.
David Roberts
But just on the, on the general organization. You put out this document last year, an R&D roadmap, I guess you'd call it, in which you are sort of laying out and you sort of. You've described this as somewhat counter to previous utility practice in that you are kind of in this R&D document exposing your weaknesses, sort of exposing like where you need help to accomplish these extremely ambitious targets that you just laid out. Is that the idea here? Like, "Here's where we need help, come help us" type of thing?
Quinn Nakayama
You know, I am greatly inspired by TV shows that I watch. And I am a huge Aaron Sorkin fan since the days of like West Wing, right? Like, it kind of drives a lot of my thinking. And one of the things that I really loved when I was watching back in the day was a show called Newsroom. And not a lot of people have watched this Aaron Sorkin show.
David Roberts
It's legendary among journalists, believe me. Not necessarily in a good way.
Quinn Nakayama
Not necessarily in a good way. You know, it had this one spiel where, you know, the main character goes off on why America is not the greatest country in the world anymore. One of the pieces that he says is, "The first step to solving a problem is realizing that you have one." And I apologize, I'm butchering that quote.
David Roberts
But at the end of the day, what we wanted to do is, "Hey, listen, we know that there are problem statements out there for innovation that is needed." At utilities, we know about because we live it every single day. But those conversations happen all internally. And how do you ask the industry, how do you ask these vendors to know what you need until you tell them? You know, so many times I go to places that are great, like these DistribuTECHs of the World and IEEE PES's of the World. And you know, you get a lot of these vendors who come up to you and try to sell you a particular product.
Quinn Nakayama
And it's kind of like, well, here's a technology in search of a problem. And we wanted to flip that conversation. We wanted to say, "Hey, listen, vendors, here's the problem I need you to go out and solve for me and give me a technology that solves a problem." And now we're getting into this mode where somebody will come up to me and be like, "Hey, listen, we want to talk to you about particular partnerships." I'll say, "Great. Have you gone through our R&D strategy report? Which problem statements do you think you can create 10x returns? And let's start that conversation from there." And it's been really, really helpful.
David Roberts
And you say you've been signing these deals, partnerships basically, with third parties. I mean, that's not new as a practice, is it? But it seems like maybe you're doing more of it than traditionally.
Quinn Nakayama
The things that we're doing with these vendors are not new, but at the same time, it's much more focused. And so, there's a couple of things. You got the institutional vendors that we've always worked with, the Schneiders of the world, the Eatons, the GE Vernovas. And those conversations happen all the time. We have conversations with them all the time. But this enables the broader technology ecosystem to understand what we need. And even for the vendors, institutional vendors that are with us, it even gives them a greater appreciation. Because our R&D strategy report just doesn't talk about the problem statements, it talks about the themes.
It talks about the Energy Systems Initiative and our strategy. So, it gives a little bit of a flavor of both what our strategic approach is and what the problem statements are that we need to solve in order to hit those strategic approaches.
David Roberts
Right. And this is just to align everybody to help you. So, I want to dive into several of the individual areas you identified. But just sort of starting at the general level, I'm just kind of curious, like, what you see as your big weaknesses. As long as we're being candid here, and I'm curious also, are they PG&E specific weaknesses or are there weaknesses you identified that are sort of like endemic to utilities, if you know what I mean.
Quinn Nakayama
Okay, well, you know, when it comes to weaknesses — I mean, that laundry list is very, very long.
David Roberts
Maybe, you could give me like a top three.
Quinn Nakayama
Yeah, absolutely. I think one of them is internal and then the other one is a little bit more external. We'll talk about the internal one first. I think, you know, when it comes to actually executing on innovation, utilities hire particular people that have really amazing skill sets in engineering or in project management and construction. And if you think about this, at the core of what a utility is, it's a lot of engineering resources and project management resources to support our construction resources to make sure that the construction pipeline is filled with the right things and moving along the timeline that you need it to move along with to get things done.
But if you think about innovation as a process, what you start to realize is that product development and project management are two completely separate skill sets. And if you think about the type of people utilities tend to hire, we don't hire people who have a significant amount of entrepreneurial backgrounds, right? They haven't really started their own companies, they haven't gone through a venture-related process, they haven't had to get Series A or Series B funding. That's just not the type of people that we typically hire. So the real question then becomes, what is the process of innovation?
And then, what are the types of skill sets that you need to bring into the company in order to help these folks who are very smart, very well-intended, to give them the right tools and processes to accelerate innovation very quickly? This has been done very well in Silicon Valley. I mean, it's just right in our backyard. And you would expect that a utility that has Silicon Valley would be really good at this. But obviously, it's a challenge.
David Roberts
Well, I mean, utilities are notoriously conservative and for good and obvious reasons. I'm sort of curious, like when you approach people like that. I think people like that probably view utilities as — I'll just say you probably have to persuade someone like that to come on to a utility, right? Because the public image of utilities is, you know, that they squash innovation, they're slow and etcetera. So people like that who want to move fast, etcetera, maybe are not particularly attracted to utilities. So I'm sort of curious, like what you tell them, you know, what you can promise them.
Can you promise them some freedom? Can you promise them a little, you know, room to move?
Quinn Nakayama
You know, actually, you'd be surprised, it hasn't been hard. And I think some of the work that we've done has really helped get the external market understanding that we're serious about innovation and we're serious about R&D and we're serious about decarbonization electrification. I'll give you an example. We did our R&D strategy report; this is our second year doing it. You know, we'll do a quick refresh this year. And then we did an innovation summit for two years in a row. And, you know, it was a pretty big deal to be able to expose out just the things that we were looking for.
And it really put PG&E back onto the public space, regarding just how innovative we needed to be in order to achieve these targets. And you get these individuals who have done this related work elsewhere, but maybe not in the energy space, or maybe peripherally in the energy space, but had a significant amount of expertise in starting up companies, starting up ventures, and they are driven by this innate desire to make the planet a better place and solve climate change. And do that in an area and a state that is progressive, with a utility that is progressive. I believe that we've been able to prove that PG&E is looking to be very, very progressive in a state like California that is truly supportive of a progressive agenda. And so, you get these people who are very, very excited about taking their skill set and applying it to a goal of, "Hey, if we can do it here in California, we can get it to scale across the entire nation and potentially the entire world and be able to make the planet a better place for our kids and our grandkids." That resonates with people.
David Roberts
Yeah, if you want reach, I guess, if you want, you know, some power, like institutionally, it's hard to get better than the biggest utility in the biggest state, you know. With the fastest energy transition, etc., I mean, it is right in the center of the action.
Quinn Nakayama
Yep. And then the rest of it just comes from passion. Right? I mean, I think if you hear Patti speak, if you hear Jason Glickman speak, our EVP of Engineering, Planning and Strategy, if you hear Carla, our EVP of Regulatory Affairs and Federal Affairs, if you hear even myself speak on stage, or Mike Delaney, all these people that are core leaders to the company speak about the passion and the energy they have for a decarbonized, electrified environment on the utility side, it's hard not to get caught up in the energy and the passion and the desire and that drives resonance.
And I think in this day and age, people want to feel resonated against. They want to feel like when they wake up in the morning, they're working on really important, really meaty stuff. And this is where it's at. It's in the energy markets here.
David Roberts
You need something to offset the avalanche of terrible news that greets you every morning. You need something to direct yourself at.
Quinn Nakayama
That's right.
David Roberts
So, that's one weakness: maybe not an entrepreneurial culture inside utilities. And then, you said there was another one external.
Quinn Nakayama
Yeah, and so this is one where I think, you know, I am a huge fan of this book that's out there, recently published, called Abundance. It's by Ezra Klein and Derek Thomas.
David Roberts
Oh yes, it comes up a lot.
Quinn Nakayama
Comes up a lot, I'm sure. And it strikes California right at the core. Right. I mean, it uses California as a huge example of what not to do. But also, you know, what is the potential. And you know, there is a portion of the book that really talks about research and development and some of the issues that we've had in research and development broadly and where do we need to go. And I think this is a major opportunity for especially the utility in the energy sector to have a voice in the types of maybe longer-term R&D needs that we have — that we may not be able to execute ourselves. Like as a utility, it's too hard, hard to actually do true research and development where we're going to create a brand new product from scratch. We're not well situated for that.
David Roberts
Well, part of creating something brand new is, you have to have a pretty high tolerance for failure. And, like if you're spending rate payer money, there's a limited degree of freedom you have, I think.
Quinn Nakayama
And the type of people that you need are like scientists, right? That type of, you know, and obviously, a utility is not going to carry a huge bankroll of these type of individuals.
David Roberts
You need a lot of capacity.
Quinn Nakayama
You need a lot of capacity, and it's just not a very effective use of maybe ratepayers' resources. But at the federal and state level, there's billions of dollars that can be spent on R&D, and it's not necessarily like, "Oh well, let's go after new clean energy solutions." There's already a ton of money there. But if you think about just general grid architecture, you've got these old overhead lines that have been constructed, architected, and designed a hundred years ago, and we haven't had any type of breakthrough innovations that have occurred on overhead design or substation-related design to be able to handle all of this new capacity that's coming onto our grid.
There's been some, don't get me wrong, but how do we as a utility industry come together? And again in a similar way we did the R&D problem statements, talk about some of these more 6 to 10 year development cycle needs that we could like if we were to put some home runs in place and really drive kind of blue sky thinking in this area, what would some of those ideas be?
David Roberts
It's probably true that a utility doesn't have the capacity to be like an incubator, like actually starting companies and starting brand new things. But it is also the case that a lot of new things, a lot of new companies in the energy world fail after they've already gone through R&D, you know, and first-of-a-kind kind of stuff because they bump up against outdated infrastructure and outdated utility practices. So, one thing you do have your hand on is you can ease their passage into the world, you know what I mean? Like, you can change the infrastructure so that they can be deployed, or you can change interconnection processes so that they can get online faster, whatever.
Like, you can make life easier for the young energy startups, I guess is what I'm trying to get around to.
Quinn Nakayama
Yeah, and I think what it is, is about us signaling what we want. Right? And so, being very clear on what are some of those home run related items that we would want to see. And then they would know that, "Hey, if I were able to successfully develop something in this particular home run space, that's a billion dollars market valuation" — across however many utilities, because we're not the only ones buying that product. PG&E is just one of very many large IOUs that have billions of dollars of bankroll that would take a look at maybe some of these, you know, 6-10 year development cycles and be like, "Yeah, I would buy a billion dollars of that. You make me something like that. Yeah, you have my attention."
David Roberts
But you're not like funding, you're not like doing like VC style funding of these?
Quinn Nakayama
No, no. And this is where we would need something like, you know, ARPA-E. Kind of like the DARPA concept, with ARPA-E and what they're doing, you know, working with a lot of the national labs, you'd need to work with, you know, private institutes like Breakthrough Energy and some of these other areas to say, "Well, we might not have the bankroll to be able to do this, but you do and you have a vested interest in being able to do this. Can you help us do this for us?" And that's where the partnerships with these type of entities are so critical.
David Roberts
Or LPO, the Loan Programs Office, which was doing exactly that kind of stuff.
Quinn Nakayama
Yeah, that's right. That's right.
David Roberts
R.I.P., I guess.
Quinn Nakayama
Yeah, and you know what? It doesn't necessarily have to be like on clean energy if that's not really the sexy thing that's happening on the federal side. But like even things that enable new types of grid assets to come online that enhance capacity to build faster, to build more, you know, because I think generally, I mean, Abundance talks about this. Right? The ability to bring in new industries starts with energy. So how do we create abundant energy that is cheap? And if you think about our general rate structure, 40% of our rates go to generation. Okay, great. You know, work on the clean energy and the energy portion of that for generation and battery storage and all that type of stuff. But 60% plus comes from transmission and distribution. So let's all focus. I think we can all get our arms behind a significant amount of R&D that would need to happen on transmission and distribution and substation that drastically brings down those costs.
And that's 60 plus percent on your bill.
David Roberts
And that kind of stuff is difficult for private companies to innovate on unless they have some sort of agreement with the utility. I mean, they need some sort of utility alignment to do meaningful work on that stuff.
Quinn Nakayama
Absolutely. And I think one great place, you know, as an example, is advanced conductors on transmission lines.
David Roberts
Yeah, yeah, right.
Quinn Nakayama
You got 3M, you got Southwire, you got TS Conductor, you have all these.
David Roberts
Now, vendors did a pod with TS Conductor last year. Great stuff.
Quinn Nakayama
Totally. And you know, that is one where, "Oh, you mean I can just reconductor my lines? I don't have to have any significant upgrades on my tower infrastructure for weight-related issues, and I can get 30 to 40% more from my transmission? Dude, I'll sign up for that any day of the week."
David Roberts
Well, yes, but like I had them on the pod and they listed all these benefits and then they also said, "Given all the benefits we offer, why aren't more utilities lining up at our door? Right? Like, why is it so difficult to get utilities to use this stuff when it's just like a win, win, win, win, win?" And the reason, you know, the reason lines haven't been upgraded more all across the country is that utilities are not operating under competitive pressure. You know what I mean? They just spend money at their discretion. So a lot of them just don't, they just don't spend the money upgrading these lines.
Quinn Nakayama
I wouldn't agree with that statement. I think utilities are. But there's more than one vendor out there, right? So, CTC Global is one company, 3M is a company, Southwire is a company. TS Conductor is another company, all of which have similar sorts of products.
David Roberts
So you think the utility industry in general is moving in this direction at a sufficient pace, upgrading its lines?
Quinn Nakayama
Yeah, and I think, you know, especially in California, coming to a theater near you because of data centers, all utilities are looking at significant amounts of load growth. So, you know, I would say 10 years ago a lot of the utilities were facing 0 to 2% load growth. They wouldn't be all that interested. Right. Like, "Okay, great." Most of those companies were focused on growing rate base.
California has more rate base, more capital than we could ever dream about. Our goal now is how do we do all of that capital need at the lowest cost possible to bring down rates, and now it's no longer, "Oh well, I need more capital. More capital." No, it's actually, "I need to be able to do all this capital for cheaper so that our rates can go down." And now I'm operating more like a traditional business where I have a P&L, where load growth versus cost actually makes a difference. It's just how a standard company works.
You have your revenue versus your cost. I mean, now we're operating much more like a private industry.
David Roberts
That's interesting. Well, let's look at some of these areas that you sort of identified as needs. There are too many for us to go through in any detail, but there are some that I am particularly interested in. The first one is electric vehicles, which I guess is another area where over the years I have said over and over again it seems like a flood of new load onto the grid via EVs — furthermore, new load that can, with a little bit of technology, be controllable — seems like a gift to utilities from the heavens. Like, you're worried about a death spiral?
"Oh, here's a giant bunch of new load that can help stabilize your grid." And yet, like utilities, have not been at the front of the line. They've been resistant, if anything, which is very peculiar. It's good to see a utility finally sort of embracing this face forward, like embracing this electric vehicle future. So, talk a little bit about what you need to make EVs an asset rather than a threat.
Quinn Nakayama
Yeah, I think from our perspective, EVs are a huge asset because of beneficial load. A beneficial load, in the way that we define it, is any loads that come onto our system that reduce rates. So, the revenue that we get from these types of loads exceeds the cost that it takes to put them onto the system. And so, that actually benefits all rate payers because now it actually has a rate depressionary type of effect.
David Roberts
And is it fair to say that it pushes down rates insofar as those loads are flexible? I mean, is it flexibility that makes a load an asset versus a burden?
Quinn Nakayama
Yes, I would say that that needs to be a part of the equation. But really for us, it's about how much faster can we bring on that load ahead of any type of capacity investments that we need to do that. And so, I'll give you an example. When a new load needs to come on like a, let's say it's a fast charger that's sitting on the Interstate 5, which goes from Northern California to Southern California, it connects the backbone.
David Roberts
Potentially huge load.
Quinn Nakayama
Totally. And some of these places, they want 4 megawatts of load, 6 megawatts of load in an area that basically supports a Denny's and a gas station. If you think about these areas where you want these fast chargers, they never historically had that much load out there to begin with.
David Roberts
Right. So, they don't have the infrastructure to carry the power to and from.
Quinn Nakayama
Totally. So now, our planners will take a look at it and they're trying to protect all customers around that area. So, they'll look at the summer and they'll be like, "Well, for the summertime, I can only give you like a megawatt to 2 megawatts of your 4 megawatt request. And in order for me to upgrade the system by putting a new substation and new lines, well, that's going to take four years." Okay, well if you squint at it, if you really squint at it, what you'll realize is, you know where we are over capacity happens for like a few hours, for a few days during the peak of the summer.
Okay, so let me ask you, high-speed fast charger, "If I ask you to obey some sort of signal from me that says I'll tell you tomorrow how much you have available from my distribution system at any given hourly time period and if you can follow that signal, I'll get you interconnected with 96% of what you want tomorrow. Could we work out something?" And what we find is EV fast chargers are like, "Yes, absolutely!"
David Roberts
They're all like, "If the alternative is not connecting to the grid, then yes."
Quinn Nakayama
If the alternative is not connecting to the grid or getting like one megawatt out of four megawatts for a six-month period, you would jump all over this. And for us, we're going to do the capacity upgrade anyways. It may take us three years to do that capacity upgrade, but in the meanwhile, I'll give you 96% of what you want. That brings more revenue in for us. It creates fast chargers out there faster. And, you know, this is where the triple bottom line really comes into play. It's good for the environment, it's good for our ratepayers, it's good for the customer.
And this is the type of solutions we're putting together. And that's where DERMS comes into play. And using that as a use case for that.
David Roberts
I'm guessing, and this is just kind of an intuition, but I'm guessing that most loads like that fast charger find that, like, if it's a 4-megawatt fast charger, I bet most of them find that it turns out they don't actually need the full 4 megawatts very often. In other words, that, like, you know what I mean? Like, you saw the paper, I'm sure, on flexible data centers that came out from the Nicholas Institute recently, and I think the thrust of that was just a little bit of flexibility, like hours a year, transforms the ability to put these things on the grid. Like, you can get a ton out of just a little flexibility.
And I'm sort of guessing that, like, you know, big loads have not necessarily felt the pressure to be flexible consistently in the past. I'm just guessing that a lot of big loads like these chargers are going to find out, "Oh, being flexible is easier than we thought and less costly than we thought."
Quinn Nakayama
That's right.
David Roberts
Proving out so far?
Quinn Nakayama
Well, I mean, just think about it this way. When you're rolling your Tesla or whatever EV up to a fast charger and it says 230 on it, or, you know, some really fast charging type of speed, and you plug it in and then you look at your actual monitor and you're looking at how fast your EV is actually charging, it's nowhere near that maximum rate. And then it starts diminishing over time as your battery gets more and more charged. So this whole concept of like, "Well, you know, I am going to ask this EV charger to maybe limit itself to 30% of its nameplate capacity for these two hours in a couple of days in a particular month." You start to wonder how much our customers are really going to be able to tell. And so I think that's where, like, all of us are kind of learning into this. And we're starting to see, "Oh, well, this is actually not that big of a deal."
David Roberts
Yes, this is my intuition. It's just that there's a lot more flexibility once you start looking. There's just a lot more flexibility than you think there's going to be.
Quinn Nakayama
That's right. That's right. So, this is like, for example, Pepsi. This is a great story. We were able to do this exact thing for Pepsi and we got their electric trucks on 18 months ahead of schedule. Right. And because just in that short timeline, by getting their trucks connected 18 months ahead of time, we were able to reduce by 8,000 tons of CO2 emissions and a savings of about a million dollars in fuel costs.
David Roberts
Oh, wow. And how much during that 18 months did they actually have to curtail output to be flexible?
Quinn Nakayama
We'll find out this summer, right? Like, you know, as the loads start to go up. But, you know, we did the calculation and we're not seeing that they need to be curtailed all that much.
David Roberts
I mean, I'm sure for them, like getting that additional revenue, the additional 18 months of revenue, all those savings, I mean, I'm sure that just wipes out whatever the cost of flexibility might be.
Quinn Nakayama
And we need to work with Pepsi to make sure that this is working out for them too. You know, and that's where the whole, "Let's implement this, fine. Let's have this agreement with the customers. Great." And then let's continue to touch base to see if this is working out for you, are there any problems, how can we adjust and things like that. So it's about working on these solutions together.
David Roberts
Yeah, and the second thing I wanted to ask about is the interconnection practice you are describing is what Texas uses, as I understand it, or some close facsimile thereof, but only Texas, as far as I know. So, does this indicate a broader change in interconnection policy? Just a little background for listeners who might not be up on this, but like typical interconnection policy is a load steps up, says, "I want to connect." The utility does often a very long study of "Can we accommodate you, and if we need upgrades to accommodate you? And that means accommodate your full peak, your full advertised peak of power you need. And if we can't muster that infrastructure, you have to pay for it."
And that just daunts a lot of people, sends a lot of people away, makes interconnection difficult. And what Texas does is just says, "Yes, you can interconnect if we can curtail you when we need to." And it turns out that gets people online much faster. And it turns out that nobody ends up in practice getting curtailed all that much. Like, so everybody, you know, there's a lot of praise for Texas's interconnection practices in this world. Does this mean that like PG&E's interconnection practices have officially sort of shifted?
Quinn Nakayama
That's where this Flex Connect comes into play. Exactly. And it's the, "Hey, as long as you're able to flex and obey our signals, right, where we set the limits, because we can see a day ahead what those limits are going to get approached to, then you can interconnect and get as much as we will allow you through these signals." Now, we want to eliminate that constraint, right?
David Roberts
Sure, eventually. But this is all about speed, right?
Quinn Nakayama
It's all about speed. Because, you know, I mean, eventually, we're going to want to do that upgrade anyway because it's not just that one customer that wants to grow. There's a whole bunch of other customers that want to access energy. So, it makes sense for us to want to, you know, be able to build that capacity. And then that also enables them to get off this Flex Connect program. Now, they can use whatever they want, however they want. But in the meanwhile, let's get these guys on faster, let's get them to use more capacity because that's revenue and we collect more revenue, it reduces rates and that's key.
David Roberts
"I mean, honestly, this alone seems like it's worthy of celebration, probably worthy of its own pod. Just like interconnection, this is the biggest, you know, for all the speaking of Abundance, you know, Abundance makes such a big deal of NEPA and the environmental laws slowing things down. But if you ask practitioners, if you ask developers what's the main slowdown, they all point to interconnection. They all point to slow interconnection routines. So, you know, one of the biggest electricity markets, shifting interconnection to make it substantially faster, just to me, is a big deal."
Quinn Nakayama
Yeah, and I would say though, like, not to diminish the need of our ability to build. So sure, this is a bridge solution and a very powerful bridge solution, but it's still a bridge. I still need to build and I need to build quickly and the interconnection processes could be a lot faster if I could build a lot faster. So, Abundance really strikes the chord forward in a lot of this. How do we enable, unlock these types of folks to be able to build quickly? And there are going to be winners and there are going to be losers.
There's no such thing as a golden type of solution where everybody wins everything, right? Like, there will be people that are inconvenienced and suffer through some of that. But, for the greater California needs, what is the right answer to this? And you know, Abundance really makes a case that building and the ease to be able to build is for the greater good of California.
David Roberts
For sure. Well, on the building and where to build and what to build question, let's talk a little bit about one of the categories of your R&D that you're looking into, integrated grid planning and transmission strategy. So, you know, PG&E has lots of big, long-distance transmission lines legendarily going out through the forests. They're a pain in the ass to maintain. The vegetation grows up around them. That's a whole thing. And it also has distribution areas, a bunch of distribution grids. And I think one of the things you're setting out to do is think a little bit more about how those work together and how you plan around those together.
So, just talk a little bit about what you mean by integrated grid planning and transmission.
Quinn Nakayama
Okay, so I think first off, integrated grid planning has a couple of different flavors. One of them is not as sexy. It's more like, "How do we take all of the work that we have in a given area, bundle it all together, and be able to execute it all at once?" And so, that's the core of integrated planning, so that we don't have to keep on going back to a place and doing more construction for a maintenance program, then a veg program, and then a capacity program, and hit that same location 17 times.
How do we only do that once, even if it means bringing in some plan that we may have looked at and need three years from now? Well, we're all going to do it this year because, hey, it's all in the same location.
David Roberts
I'm guessing that's something that AI is going to help with. You know, I should mention, AI is all through this R&D document. But anytime when you're like, "We need to wrangle a giant body of disparate information and get patterns out of it," that's always, that's AI.
Quinn Nakayama
That's AI. So, the other piece about transmission strategy and integrated planning is this: Where does it make sense for distributed energy resources to be able to help with constraints that are there for distribution and transmission and this whole concept of value stacking? And I think, you know, let me tell you kind of what I hear a lot and then let me tell you what I actually see. You'll take a look at the system and everybody looks at this concept called a duck curve. And the duck curve is all about "Lots of solar in the middle of the day, we should be able to use all that solar to charge all these EVs and we'll be all better for it."
David Roberts
And batteries.
Quinn Nakayama
Yep, and batteries. The issue is that that curve is what the system overall looks like. But when I take a look at a local area, like I live in Moraga, or if you live in Calistoga, or if you live in San Francisco or Humboldt, what you'll notice is on distribution at noon, you're not at this really big trough. You're somewhere around mid-peak. And I think the peaks will definitely ramp up around the 4 to 6 pm area on distribution because a lot of people come home at that time from work. The air conditioners are all running and yes, the solar starts to ramp down.
But I hate to say this, there's not a lot of solar on distribution as there is on the system. And so, if you start saying, "Everybody charge your cars at noon," unfortunately, you'll have the opposite impact of overloading the distribution system. And so, what we have to be, what we really have to look at is where does value stacking actually make sense? Because you want to make sure that if you're going to be paying somebody to do something, it's actually economically affordable for our customers. I think about it this way: You know, we have various interchanges on the freeway here in Northern California.
David Roberts
That's an understatement.
Quinn Nakayama
Right, right. And we have this place called the MacArthur Maze. It's where Oakland and San Francisco kind of meet from a traffic perspective. So, Berkeley, Oakland, it's a mess. Right. It would be like, "Oh, well, if I took cars off the road and I took them off the road in, you know, I don't know, someplace else like Kern or Bakersfield, how the heck is that going to help the traffic in the MacArthur Maze at that particular time?"
David Roberts
Right.
Quinn Nakayama
And so what you need to do is figure out how do you take the appropriate amount of cars at the appropriate time at the appropriate location?
David Roberts
So, you need a more granular view. Like the duck curve gives you the system view, but it looks different at a granular level. If you're actually going to try to fix it, you need to operate at a more granular level.
Quinn Nakayama
That's right. And so, that's why people talk a lot about VPPs and there's going to be value in VPP, don't get me wrong. But I always ask the secondary question, "VPPs for what and for where?" And that is a much more nuanced question than a much more complicated question. And that is something that we, I think, from an integrated grid planning perspective, really need to dive into.
David Roberts
Oh, man. I'm so interested in this. I don't know if you've heard. I mean, you're probably familiar with Pier LaFarge. I did a pod with Pier LaFarge and his whole pitch, which is basically, utilities are the entities that know where distributed energy is needed. They know where it would help relieve congestion. They know where it would help lower rates. So, what we should have is utilities doing procurements, doing distributed capacity procurements, DCPs, deliberately to get DERs built where they need them. Precisely to ease these granular constraints. Is this something that PG&E is going to get into?
Have you thought about doing procurements of DERs in areas where you feel like they're needed?
Quinn Nakayama
We tried this, and the issue comes down to cost-effectiveness. So, I'll give you an example. There is a little bit of math that goes into this.
David Roberts
Oh, I'm going to brace myself.
Quinn Nakayama
But if you think about this, right, a new feeder, a new circuit on our system costs anywhere on average, $6 to $8 million. All right, so if a new feeder costs me $6 to $8 million, what would I procure from an energy storage perspective if I were to go out and procure it per customer home on a DER basis? Well, at $10,000 per install cost for an energy storage asset, like a power wall, for example, it's about $10,000 installed, and I get about 10 kilowatt hours from that battery.
And so, when you do the math, what does $6 to $8 million dollars give you? Well, for energy storage, behind the meter product, you would be able to get 6 megawatts or 12 megawatt hours or 8 megawatts, 16 megawatt hours around for $6 to $8 million dollars. You'd have to do the math behind the scenes, but that's what you would get. If I put a new feeder in the system, let's say it's a 12kV system, I get 12.5 megawatts or 300 megawatt hours. On a 21kV system, I get 21.9 megawatts and 525.6 megawatt hours for the same amount of money.
So, you know, this is kind of the conundrum that you get into when you're procuring DERs. The amount that you get from the DERs for the equivalent amount of spend is significantly less. And so, there are just some questions on whether you can use existing DERs and then what would you need to procure, and is that better when you have such high growth that's happening in that area? Is that really the right tool to use in the toolbox? These are the questions that need to be answered. And where it's really been a struggle for us as a utility because the new feeder gives you so much more capacity than a DER solution, if you were to procure pound for pound.
David Roberts
Right. Obviously, everyone's thinking about data centers. Everyone's talking about data centers. Given California's high electricity rates, are data centers coming? Do they want to come to California, or are they just all going out into the desert? And secondarily, I just recorded a podcast with somebody who's designing a flexible data center. Designing a data center to be flexible, to be able to respond to grid signals. But most of them today are not flexible. So, I'm curious, given rising load, rising rates, all the kind of crunch that PG&E is in, how do you view giant inflexible loads knocking on your door? How are you thinking about data centers?
Quinn Nakayama
Yeah, so there are a couple of things here. The first portion is, we are seeing a significant amount of data centers wanting to come into California and multi-gigawatt related data center. I don't have the exact numbers on the top of my head, but they've been released regarding what we're seeing in terms of the cluster study that's happening in the Santa Clara area. I think it's like 1.8 gigawatts of additional data center related requests that are coming into that area.
David Roberts
Jeez.
Quinn Nakayama
Yeah, so you're going to have to build, right?
David Roberts
Again, to return to a theme.
Quinn Nakayama
But, like when you talk about specific locations of data centers, what you'll find is there may be enough capacity if all the transmission lines are in service in that given pocket. There may be enough capacity to be able to serve that data center. The problem is if I lose one transmission line or I lose two transmission lines, and this is where we are taking a look at overall reliability of the transmission system. Then that entire area will be overloaded. And we're not talking small overloads. We're talking about multiple tens of megawatts and even greater, like you know, close to 100 megawatts of overloads.
David Roberts
I mean, these loads are getting so big that if they trip offline unexpectedly or do something unexpected, it's a big grid event. It's like losing a substantially sized power plant. It's not a small thing.
Quinn Nakayama
It's not a small thing. And you can't just, in some of these types of situations, you may not be able to really flex your way through it. So then the question becomes, "Okay, if you want to interconnect these loads, it's going to take you six years so that I can do the necessary upgrades to avoid these what are called N-1 or N-1-1 contingencies." But if you were to squint at it and let's say your problem on overloads happened, if you had to lose two transmission lines, well, that doesn't happen very often.
And even when it does happen, we, as grid operators, don't allow that situation to persist on our system for very long. It's like emergency repairs, all hands on deck. So, would a data center be comfortable if they can interconnect their loads tomorrow or much faster, let's say three years ahead of time? And all I would need is an agreement that if I ever ran into those types of situations. Can I have permission to kick you offline, have you run off of your backup generators that you probably already have, pound for pound, megawatt for megawatt, for a specific duration of time? But that means that you can be interconnected on my system three years ahead of time. Is there a desire for that? And I don't know the answer to this. Like, we still need to work with our customers.
David Roberts
Well, I mean, everything I've heard, and I'm sure it's the same for you, is just speed, speed, speed, speed, speed. Like all they like, it sounds to me like they'd sacrifice just about anything just to get online a little faster. So, I mean, I've sort of been wondering why more utilities aren't kind of, you know, we're still, I still feel like a lot of areas are still in the mentality of like "We'll pay you to come here." Just like they sort of like to pay a stadium to come. You know, like they view it as economic development.
But, I'm like, " They need you more than you need them." You ought to be extracting things from them, not vice versa. So, this does create pressure on data centers to be flexible. Have you had enough experience yet to know how they respond to that question?
Quinn Nakayama
We think they would be open to flexibility. The big question is, how? So, is that really ramping down their loads, or is there ability for them to utilize these natural gas reciprocating engines out there to be able to offset some of their load? And what is California, how is California going to look at that?
David Roberts
Or just batteries? Like why isn't, why isn't just a giant stack of batteries the cheapest way to get through that?
Quinn Nakayama
In some situations, it could be. Now, if you're thinking about a 100 megawatt, 200 megawatt, 400 megawatt data center that needs to ride through a four-hour type of issue?
David Roberts
It's a pretty big stack.
Quinn Nakayama
Yeah, I mean, you could see Moss Landing from space, which is our major energy storage facility. And so, you know, it really comes down to size and, you know, how much would it cost and how long would it take, which is where a lot of reciprocating engines have a much higher energy density and can go forever. The issue for them is, you know, you have air quality restrictions here in California. And, you know, it's not like our gas pipelines were made for this type of drawdown in mind. And so, how do we make sure that we do these in places where there is available gas throughput?
And then what is California's take on just being able to leverage those?
David Roberts
And you're targeting zero emissions. I mean, let's not forget that. That at some point, that's going to take gas off the table, is it not?
Quinn Nakayama
That's a question that California needs to answer.
David Roberts
To say the least, yeah. So, we're running out of time then. Like, there's so much more in this R&D document. There's lots of stuff on undergrounding which we're not even getting into — I know this is a big push. Just quickly. Like, my sense of the conventional wisdom on undergrounding is just, is that it's wildly expensive and only really makes sense in very, very limited territories. Is that old information? Is there technological advancement happening in undergrounding?
Quinn Nakayama
There's a lot of technology being moved towards undergrounding because, you know, from our perspective, if we can get undergrounding to be $2.5 million a line mile and lower, you know, this becomes really effective for us, especially in these areas of high wildfire risk, which is in these mountainous conditions. So, yeah, absolutely. You know, different types of boring techniques, you know, different types of even grid design. So, for example, right now you have to trench really deep into the earth, rock, concrete, granite, to be able to put these distribution cables underneath the ground. Well, what about this new concept called ground level distribution system, where maybe you only need to dig just a little bit superficially on the ground, then you fill it with a, you know, composite material.
You lay the cables inside that composite material, and it's, you know, diamond-hard. Like, you could take a chainsaw to it and it won't cut through it.
David Roberts
Oh, so almost like embedding the lines in, like concrete or something?
Quinn Nakayama
Sort of like that. Something like that. And it kind of rests on the ground, but maybe just a couple inches below. And, you know, is that a new type of architecture and design of undergrounding that could be applicable in some locations? So, you know, there's a lot of innovation happening on undergrounding to be able to achieve a $2.5 million target. And this is where we need the industry to help us try to solve some of these with new technologies.
David Roberts
The other thing I wanted to touch on, obviously, there's a ton of work on wildfire stuff that we can't even get into, but all sorts of interesting, like autonomous drones. That's mostly about detection, I'm guessing, and sensors and stuff like that, which is, you know, technologically reasonably straightforward. But let's talk a little bit about gas because a couple of other states that have set decarbonization targets that are relatively close have taken the step of saying this implies that we gotta get rid of gas. Or at least this implies we have to get rid of unabated gas.
Right. Unless you're going to capture the gas emissions, unless you're going to do CCS. And so they've launched these future of gas utility dockets, you know, which is a long, elaborate process. I think Massachusetts has one going. Are you doing something like that? Like, what is the state of thinking on gas? And I'm sort of curious, like, are the people in charge of PG&E, are the people in charge of California grappling with the fact that their climate targets imply that they have to wind down a very large and elaborate gas infrastructure?
Quinn Nakayama
Absolutely. And some of this has to be taken a look at in steps. The first piece is, how do I get customers to convert from natural gas to electric? And that is an emotional journey for a lot of our customers. But it's also a technical issue on, "Wow, I'm now taking my gas stove or my gas-fired washer and dryer, or I'm taking my gas water heater and I'm moving that to electric." But half of our service territory has a 100-amp panel.
David Roberts
Half?
Quinn Nakayama
Yeah, a 100-amp or 60-amp type of connector.
David Roberts
Right, and upgrading those is pretty expensive to a 220-volt.
Quinn Nakayama
Totally. And you know, then I have to accept that new load on my service transformers and my secondary conductors. And right now, we are putting together innovations as we speak, partnering with some of these major providers on smart panels to be able to eliminate the need for any type of panel upgrade, service transformer upgrade, and secondary upgrade —
David Roberts
Like the SPAN panels, you have a deal with SPAN, right? Are you working with them?
Quinn Nakayama
Yeah, so SPAN is definitely one of the partners who has, in a very intriguing type of design, where they have a meter socket connector that goes to six breakers. And if we can figure out how to partner with companies like that and integrate that into this new AMI 2.0 (Advanced Metering Infrastructure) architecture, you have the ability to eliminate a panel upgrade, eliminate service wire upgrade, eliminate service transformer upgrades just by getting a new meter. And this little SPAN, let's say the SPAN meter collar product. And maybe it's less than a thousand bucks and you can get it tomorrow. I mean, that would be huge.
David Roberts
Yeah, just to be clear to listeners, what these panels do is they distribute your internal load in your house smartly such that it never rises above the 100-volt threshold. It's the same principle as sort of what you need to do within data centers or what you need to do within distribution areas or really like it's fractal, you know what I mean? It's all about managing power flow within a defined environment.
Quinn Nakayama
So, to make this really real for our listeners, I think the best way to think about this is you have an electric vehicle and that EV can charge at Level 2 rates. Right? But at the same time, if you were to traditionally run your air conditioner and your Level 2 charger at the same time at full bore rates, your electrician will take a look at that and say, "You need to get a panel upgrade." But maybe my EV doesn't need to charge as fast when my air conditioning is running. What if my EV charges just a little bit slower when the AC runs and when the AC turns off, then it's all good. And oh, by the way, I'm usually charging my car at midnight, so my air conditioning isn't really running all that often from midnight to 6 a.m. and instead of having my EV charge in an hour and a half, it charges in two hours. Well, okay, so what, it's still fully charged by six in the morning when I need to go.
David Roberts
Like most of these little adjustments, they are just going to completely go unnoticed by the people in the homes.
Quinn Nakayama
Right. And like, think about right now. I'm live streaming on my Internet at home, and I'm sure that my fiber network provider is curtailing me during the periods of times that I'm not using a ton of the Internet. But then, if I have to stream this type of thing and then my kids are playing their PlayStation and their Nintendo Switch, and we're using a high lot of bandwidth, they're increasing it during that period of time and then the rest of the time they're curtailing me. I have no clue, no clue whatsoever.
David Roberts
Yeah, yeah, but all that requires knowledge of who's using bandwidth and where, and the ability to move bandwidth from one place to another. The Internet developed those capacities a long time ago, and they're just sort of just coming to the grid.
Quinn Nakayama
Totally. And that's where AMI 2.0 comes into play. It is going to be a game changer for the utilities across the nation if they can figure out how to get it implemented right.
David Roberts
I know you're doing VPPs, virtual power plants, and you're partnering with aggregators, basically. So, more or less, the aggregators are doing the VPP and you're contracting with the aggregator. And I've been wondering for a long time, why don't utilities just aggregate, act as the aggregator? It seems like an obvious — like they're the ones with their hands on all those advanced meters and all those SPAN panels and they're the ones who know what the distribution grid needs and where it needs it. What is the value of the third party in the middle there?
Quinn Nakayama
Yeah, so for now, right, aggregators are going to be required because we don't have that level of connectivity to every single type of DER out there. We just don't. And technically, we're not equipped yet to be able to do any of that. But if you think about what I just said regarding EV charging, all of that intelligence is happening at the edge. So when I put this brand new meter onto that customer's meter socket, it can in real time identify when you go over 100 amps. And when it does so, it will communicate directly to the EV charger itself, "I need you to go down."
This meter can also communicate to all the other AMI 1.0 meters that I have in that area and calculate the service transformer loading, and then can ask the EV charger right at that customer's home to limit itself so we don't exceed a service transformer limit. And so, it's all happening at the edge. It's all point-to-point connected where these meters are doing the intelligence right at the edge and communicating directly to the devices that are behind the meter. That is a particular model that is starting to emerge in terms of load flexibility.
But we're nowhere near any type of, and most utilities are not in those positions, when you have every single home with an AMI 2.0 meter and this type of architecture. So, you know, it's hard to imagine a world right now where aggregators aren't going to be required during this period of time. What does this look like 10 years down the road? We'll have to see. And when the systems are fully saturated with basically a computer sitting at your meter that can actually connect to all these devices right at the edge, what does that future model look like?
That is a question. But for now, that is not something that exists today.
David Roberts
But I mean, like, 10 years is not that far out. And like, you know, the carbon goals are not that far out. All that stuff is going to have to happen at the exact same time. What a crazy time to be where you are.
Quinn Nakayama
I think what it comes down to is, we, as utilities, owe it to our customers to become trusted advisors. Right now, we're not. Across the board, there's a lot of mistrust between us as a utility and our customer base. And if we want to have this type of environment, again, we're going to need to build a sense of trust. If we can't build that sense of trust, then, you know, obviously the aggregator market is going to continue to operate because they have the trust of the customers where we don't. So, how do we as an industry start to build that relationship with our customers where they see us as partners rather than just a bill? So, that's a bigger piece of the equation that we need to sort through.
David Roberts
Final question is just about capacity and how you do the work. So, like, this work of identifying areas of R&D, you need to identify partners that are credible, you know, and have, like, good business plans. Like, that's a lot of evaluating. You know, like, I used to talk to Jigar Shah a lot about what they did at LPO and just the process of finding these people and evaluating them is quite labor and time intensive. I think you might be sort of unique among maybe US utilities in having the capacity you do have to do this stuff.
But sort of just curious, like, how big is your team and what is the process of finding and vetting and assessing partners?
Quinn Nakayama
Yeah, so a couple of things. This gets into the heart of how we interact with, for example, our institutional vendors that we have a lot of trust in versus new vendors and startups. And so, you know, I think a model that could exist that could help this is, let's say you're evaluating what your institutional vendor could do, or somebody, some small startup, small vendor software company, what they can do. And you're like, "Wow, this startup thing, this thing's awesome."
David Roberts
A familiar situation, a startup comes along saying, "Hey, we can do that 10 times cheaper."
Quinn Nakayama
Totally. But I have my institutional vendor that's already, let's say, fully interconnected into our technology, our APIs, and so on and so forth. Well, is there a model where if we were to marry these institutional vendors with these startups, sprinkle in maybe a venture fund in the mix, bring those parties together, now this startup can go ahead and interface with this institutional vendor, have them take on that type of software integration risk. I get the capability, but then this software vendor and this VC, that's an exit strategy for them. Like that is, you know, if you're a VC and you're looking at a potential exit opportunity for an M&A or a large B2B type of contract that's backed by a utility who says, "Yes, I want this," that could be a 10x multiplier right there and then.
So, one of the things that we will be doing in the next couple of weeks is we're going to be asking the industry for a pitch fest where we're going to be asking the industry for spot solutions to a handful of problem statements with a goal of seeing what our institutional vendors can come up with, seeing what the startup communities can come up with, also bringing in the venture world as a part of this so that we can see if there are those solutions. Now, if it's big enough and we want to go with a startup directly, you know, we can do that. It's harder. But you know, if we can do this marrying together of these technology ecosystems and B2B agreements that we can go ahead and orchestrate behind the scenes, that would be amazing too.
So, I'm really hopeful that during the pitch fest this year, we can do something where — Halliburton Labs does this really well, where they do these types of major labs, types of pitch fest incubations that give seed funding to these types of things. That is something that I'm really looking forward to doing later this year.
David Roberts
Is this for the full list of R&D priorities that you've got in your R&D report or some subset?
Quinn Nakayama
So, to your point earlier, if we were to do it for everything, we'd get inundated. It's just so hard, you know. So, we've learned from the last time we did that and we are really focused on a few number of problem statements that we're going to be publishing later next week or the week after. That really kind of demonstrates these are what we're looking for. So that enables a much more focused area of the technologies that could interact with us on that.
David Roberts
Are we allowed to know in advance what?
Quinn Nakayama
Not quite yet. Not quite yet. We're slimming down everything and making sure that things are firming up. But, coming to a theater near you.
David Roberts
I love this whole setup, but PG&E is very big and I guess very capitalized relative to a lot of other utilities. Is any part of your work thinking about trying to persuade other utilities to do things like this, trying to sort of show that it's worth it to invest in this kind of capacity, that what you get out of it makes the investment worth it? Because you're sort of like in trying to be innovative and sort of cutting edge and work with new technologies and move quickly and fail quickly and all that kind of like very un-utility. So I'm wondering, are you, is there a touch of evangelism here trying to get other utilities to do things like this?
Quinn Nakayama
I don't think the utilities are the problem here. Utilities are drastically trying to figure out ways to innovate. However, what I would say is that we in California happen to have a very, very forward-looking regulatory environment. And so, decades ago, the CPUC required the utilities to have an R&D and innovation program. It was called EPIC. And we are on our fourth EPIC iteration right now. We are currently working on our fifth EPIC, which basically takes funding that can't be used for anything else except for innovation and research into development that helps broadly on these major categories that we and the commission work together to try to identify.
David Roberts
Interesting.
Quinn Nakayama
Most utilities would kill for that type of program, you know, and I think that, you know, regulators can really learn from the California EPIC program to do something very similar for their own utilities that enable them access to untouchable funds that have to be used for innovation. And when you do that, you can create programs that we have been able to do here in California, but without that, it is really hard to do in a lot of these environments.
David Roberts
And I think it's worth emphasizing the untouchable part because the pressure on utilities, all else being equal, is to spend on their rate base so they get their return back. So, any money that's not untouchable is going to get, in the fullness of time, pulled over to that side of things.
Quinn Nakayama
Totally. I mean, listen, I mean it's easy to kind of make utilities villains about going after rate bases, but you know, they're juggling multiple priorities. Winter storm hardening, hurricane hardening, tornado hardening. There's so much going on with various utilities that drag capital to make sure that they're doing the best that they can for their customers. And you know, rate base does become a part of that, but I don't think that's the main driver. The main driver is now, especially with load growth, especially with climate change, especially with all of these hazards, we have to now harden our systems and the amount of rate base is too big.
So now, really, it's about how do we effectively do that and efficiently do that. And I think all utilities struggle with that. Having a protected program for R&D can help make sure that we're not trying to pull money away from other areas that are really needed in a lot of other utilities.
David Roberts
Right. So, you need legislatures and regulators really to get religion on this. They're sort of the targets. They're the ones whose minds you need to change.
Quinn Nakayama
Yeah, because I took a look at utility, my brethren across my sister utilities out there, and I talk to people that are in my space and they're like, "I wish I had a program like yours. Like, how do we get a program like yours?" And that requires their legislators and their regulators to have that type of, you know, abundance mentality where research and development, innovation, and science is the core of where we're going to break through. And I would definitely agree.
David Roberts
All right, well, that's a good note to end on. Quinn Nakayama, thank you so much for coming on, walking us through this. Lots of exciting stuff going on. I can't wait to see where it all goes.
Quinn Nakayama
Thank you so much for having me. It was fun to have a little bit of a conversation on this. So, I appreciate it.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
