Catalyst with Shayle Kann - With Great Power: What other industries can teach utilities about innovation

Episode Date: August 4, 2023

This week we’re bringing you a special crossover episode from With Great Power. It’s a show about one of the most complex machines ever built – the power grid. It’s a machine that’s changing faster than ever. With Great Power is about the people driving that change: A third of the world's largest companies now have net-zero targets in place for carbon emissions. Google was ahead of the curve. Back in 2007, it had already achieved its goal of going carbon neutral across all of its offices and data centers around the globe. But as demand for Google's services expanded, it knew that it had to overhaul its energy goals. At the time, Raiford Smith served as Google's global head of energy and location strategy. And part of his job was jump-starting this massive effort. In 2021, Google launched one of the most ambitious corporate energy strategies ever. And Raiford and his team made it possible. After a career spanning more than 30 years at utilities like Duke Energy, CPS, Entergy, and Southern company, and two years at Google, Raiford knows firsthand that change is possible at power companies. This week, Brad talked with Raiford, now the chief innovation officer at AES, about what's needed to spur tech innovation at utilities, and the technologies that will be integral to the energy transition. This podcast is produced by GridX. GridX is the Enterprise Rate Platform that modern utilities rely on to usher in our clean energy future. Catalyst is a co-production of Post Script Media and Canary Media. Catalyst is supported by Antenna Group. For 25 years, Antenna has partnered with leading clean-economy innovators to build their brands and accelerate business growth. If you're a startup, investor, enterprise, or innovation ecosystem that's creating positive change, Antenna is ready to power your impact. Visit antennagroup.com to learn more. Catalyst is supported by RE+. RE+ is more than just the largest clean energy event, it’s a catalyst for industry innovation designed to supercharge business growth in the clean energy economy. Learn more: re-plus.com. 

Hey everyone, it's Daniel Waldorf. I work with Shale as a producer on Catalyst. This week, we're bringing you a special crossover episode from With Great Power, a show produced in partnership with Post-Grip media and GridX. It's a show about one of the most complex machines ever built, the power grid. It's a machine that's changing faster than ever, and With Great Power is about the people driving that change. On Catalyst, we talk a lot about the technologies that could radically transform our power systems. But of course, change is not just technology. It's the ways of doing business, its regulation, it's even the culture inside utilities, the organizations that are most responsible for how we actually generate, deliver, and consume electricity.

This episode is about someone who's trying to help utilities change from the inside. His name is Rayford Smith. He comes from Google, where he played a critical role in jump-starting the company's 24-7 clean energy effort, working as the global head of energy and location strategy. Now Rayford is the chief innovation officer at the utility AES. He's helping the company figure out how to deal with AI and machine learning, distributed analytics, and the new skills that utilities need to manage this changing landscape. He thinks that utilities should be less like conservative railroad giants and more like inventive telecoms companies. So can utilities become more innovative, more nimble to change? Not things that utilities are generally known for,

but Rayford thinks that they could be. We think you'll like this one, and if you do, go over to Apple, Spotify, or wherever you get your podcast. find With Great Power and hit subscribe. We'll be back next week with another Catalyst episode, but for now, here's With Great Power. A third of the world's largest companies now have net zero targets in place for carbon emissions. In today's TechBites, Apple's going completely green.

100% of its buildings now run on clean energy. Today, we are announcing the climate pledge. Amazon becomes the first signatory. We want to use our scale and our scope to lead the way. Google was ahead of the way. the curve. Back in 2007, it had already achieved its goal of going carbon neutral across all of its offices and data centers around the world. But as demand for Google's services expanded, it knew it had to overhaul its energy goals. And so that's really where Google stepped it up to say,

hey, we want to be 24 by 7 carbon-free energy, which is different than the 100% renewable strategy. At the time, Rayford Smith served as Google's global head of energy and location strategy, and part of his job was jump-starting this massive effort. It was. We want to be. We want to carbon-free energy, we wanted everywhere, every hour, every day, at every data center, every facility globally. This is a fundamental sea change in how we do it, and it is considerably harder than what we had been accomplished up to that date. Hitting Google's carbon-free energy target by 2030 meant operating much differently and procuring projects in an entirely new way. So it involves a lot of analytics, it involves a lot of flexibility in terms of your assets.

It's why the switch to make it a broader portfolio of assets from just run. renewable now to carbon-free. This opens the door for much more interesting portfolios, for better use of analytics to manage and match demand and supply, and put together those sorts of products that are necessary to make that happen. So Google launched a plan that is one of the most ambitious corporate energy strategies ever conceived. It was only possible because of Rayford and his team's deep experience in the power sector. And it also taught him a lot about where change is accelerating on the grid. This is With Great Power, a show about the people building the future grid today.

I'm Brad Langley. Some people say utilities are slow to change, they don't innovate fast enough. And while it might not always seem like the most cutting edge industry, there are lots of really smart people working really hard to make the grid cleaner, more reliable, and customer-centric. This week, I'm speaking with Rayford Smith, the chief utility innovation officer at AES. After a career spanning more than 30 years in utilities and tech, including two years of Google, Rayford knows firsthand that change is possible at power companies. Rayford has worked inside all kinds of corporate structures.

Before becoming AES' chief innovation officer, he was a technology leader at Google's Moonshot Factory, X, and he managed Google's location strategy for energy and water. If you get smart people together and then they're creative and you give them the leeway to go flex those creative muscles and go try stuff out, you'll figure it out pretty quick and you'll figure out how to make things work. Today, he's pushing the limits of what's possible at AES, one of the biggest independent power providers in the world. I talk with Rayford about what's needed to spur tech innovation at utilities, and the technologies are integral to the energy transition. Knowing his pass roles at Duke Energy, CPS, Entergy and Southern Company, I started by asking him how the power industry has changed over the decades.

Well, it's changed a ton, and yet it really hasn't changed very much. And I mean that in the most charitable sort of way, which is to say, you know, power still gets to generated. It still gets moved over a transmission and distribution system and ultimately, you know, sold to customers. You know, that part of the business hasn't really changed very much and probably never will. There will always be those kind of fundamentals. On the other hand, you know, I went through that wave of deregulation. I worked at Enron. I worked at Merritt, which became NRG eventually. I worked at Duke Energy. All these places that, you know, we're on the vanguard of all the changes that were happening in our industry.

And here we are now talking about FERC 2222 and, you know, kind of the 24 by 7 carbon-intry energy revolution and like all the things that are coming with technology. And, you know, it's super exciting to be on the vanguard of those sorts of change elements. But on the other hand, it's like, you know, there's always another wave of yet the next change to hit the industry. And, yeah, I just enjoy the change. I enjoy the opportunity to do something cool. So after your time is the global head of energy and location strategy at Google, you actually moved on to their moonshot arm, which is called X, which is a really cool brand and some cool initiatives. What were some of the more innovative solutions you were involved in during your time there?

Yeah, I mean, X, well, just think about Google as a company for a moment. You know, it's this massive behemoth that does incredible things with technology. But on the other hand, as you get to be more mature as a company, one of the things you lose is you lose your ability to take risks. You start to protect your core competencies. X was actually set up to be that innovative edge-based kind of opportunity to really help figure out what's next, what will be the next scalable thing to hit a billion customers. And I got the exciting opportunity to join X and really focus on energy-related challenges. You know, when I was running the energy team on the other side, 24-7 is a carbon-free energy. is a huge initiative, but it's with existing technology,

with existing things. What really could we explore? And in that space, I got to focus on a lot of the things coming on the transmission distribution space. How do we think about the use of AI, ML in that space? There's a lot of work, a lot of math that goes into that space today, and we can scale it. We can make it go a lot faster and we can be a lot more accurate with data.

And how do we build those tools so that utilities everywhere around the world, and their customers get that benefit. And that was the challenge that I got to work on. And it was a blast. It's amazing set of work to do. Seeing a lot more talk of AI and ML. What role do you see technologies like that playing in the energy transition moving forward? Yeah, I mean, there's some really exciting things about AI and ML.

And there's some areas that are really challenging. One of the areas that's challenging is the explainability of it. When you're training these models, you're trying to get them to do what they do, and then they go make decisions, it's really hard to kind of backtrace like why did you make decision X versus why did you make decision Y? In traditional heuristic-driven models,

that's very explainable. Like, you can talk through that. If you had to go to a regulator or you had to show it to some governing body, you could explain it. AI doesn't work that way. It's fundamentally different. That being said, AI,

the opportunities for it, though, are just unbelievable because what they can do is automate and enhance a lot of the TD that people do today. You know, I see, you know, in my own space, I see a lot of system planners who are doing a lot of tedious model development and iterations on models that, frankly,

only could we speed up, we could enhance them by having the AI say like, oh, no, no, this is what's important, this is not what's important. Here's all the scenarios that need to be in there, and they could basically jumpstart and speed up that process considerably. Not only that, they could make the analysis far more accurate, far more insightful than they are today. But there's a lot of work that has to be done in that space to make that kind of capability come about.

The promise is there, and we'll absolutely get there. But there's just some significant challenges technology-wise to make sure that, you know, no, you're not going to throw out your Newton-Raffs and Powerflow model tomorrow. Because we've got this cool AI, there's a whole lot of work that goes into making sure it's believable and that utilities can have the confidence

that they can safely and reliably operate a system for all customers using that technology. Where do you see technology going in the coming years? We've obviously seen a lot of conversation around AMI, smart meters. What's next? Yeah, I mean, I think one of the most exciting things about when I think about all the transformation that's going on, like we know about the decarbonization, we know about digital, we know about distributed, and we know about electrification.

But like, how does that really translate to the grid of the future? Like, what is that grid really going to be? We've talked a lot about Flizer and VVO and kind of these industry stalwart's, you know, ADMS and DERMS, but how does that really all come together? I think one of the most exciting things that we have besides AI and the use of technology and analytics is really how do we start thinking about distributed analytics?

In other words, how do we, what's traditionally a head-in with a human operator system, which is inherently slow, how do we start to think about making that system faster and more resilient and better. And I think the way to do that is really start to distribute the problem-solving, the algorithms, the optimization of the grid. And I think what you're going to start to see is you're going to start to see those

technologies show up at the edge. You're going to start to see a much more intelligent, interactive ecosystem along the lines of IoT. And I think ultimately what that looks like is a far more capable and transactive grid than the way we've traditionally done it. That is a sea change in terms of how operating. work, how our systems work and are designed, how our data is used. And I think that's, to me, that's the next big opportunity in the grid space. How does this impact the types of people

that utilities hire? Like, this feels like a very new and emerging skill set. Like, are they, are they prepared now to do what you just talked about? Or is this going to require, you know, different types of talent being infused in the utility business going forward? Yeah, well, I think just the challenge to get from, like, the traditional, way utilities manage and operate grids to that future I talked about is at least a five-year transformation. And you're right, the talent that we have within utilities are kind of trained and used to doing things the way we traditionally do it. I remember in a past life when I was at Duke, we had an emerging technology team focused on the grid. And we had a few folks who

were power systems folks. But we had to augment that with telecom capabilities, with data science, computer science, the sort of digital capabilities we didn't have, cybersecurity. These things were all not normally part of that discussion and not normally part of that decision-making and solution development. I think we've got to start building systems thinkers, building people with these diverse skill sets. At Google, I could throw a rock and hit 100 data scientists. But when I built data science teams at Intraji at CPS and whatever, like, We had to homegrown them. We had to make them ourselves.

And that's fine. You can do that and you can find incredible people and get very, very impactful results from it. But you've got to start building it yourself. Yeah. And I feel like we're getting to a point where it is cool to work at a utility. AET like DEC, like Duke, they're doing really cool, innovative stuff. I'm seeing a lot more young talent to be interested in joining utilities because of the clean energy revolution and you need to decarb. It's important work and it's exciting work.

Yeah, I 100% agree with you. You know, we, AES, we actually have a rather young workforce in the engineering spaces, and that's been incredible to work through. And I think I see a lot of folks energized on college campuses that are like, hey, I want to figure out how to make this thing happen. And I want to go do it. And at a place like AES, like that's what we're doing. So tech companies like Google are pushing the limits of energy

and they're partnering with utilities and helping them push those limits. How would you describe the relationship between tech companies and power companies, and how can they be more innovative together? Yeah, I mean, one of the interesting things about a power grid is that, you know, it is a network and everybody that's connected to it, like we're all in that boat together. The people that operate it, the people that connect to it and use the power off of it, like the people that supply power, like we're all together. And I think one of the opportunities that tech companies have is because they're on the leading edge of technology, they can create capabilities probably faster than any other person that's connected to the. grid. Case and point, when I was at Google, one of the things we did was we created the ability

to basically forecast forward power prices, grid constraints, carbon content, and then dynamically move our load around to take advantage of that. So if there was a storm and there was going to be an outage, you could shift your load away, both in time and in space. If there was an opportunity where low carbon content was or power was being supplied to the grid, we could shift our load to that space. These sorts of digital capabilities in a tech company are much easier to create and do than if you're in a traditional manufacturing company or commercial company because, you know, Googles and Amazon's and whatever, it's a purely digital

infrastructure. It's got a physical infrastructure too, but it's designed to be super flexible. And so what that does is it means that if you look at the tech companies as a power company, you can say, oh, I can see where the leading edge, where all my customers are eventually going to be, and they're developing solutions and technologies that I can adopt that basically can help me bring that about for everyone. And so that's, I think, a great way to partner is to recognize the strengths and inherent capabilities of both sides. You know, Googles and whatever, they don't understand power grids, power companies, they don't understand tech companies. But if they can say, like, hey, each of us can benefit by collectively working on these problems and creating capabilities that are great in our space. applying them to yours,

that's, I think, a great way to partner going forward. Yep. So you obviously had a very successful one that Google, working on some very cool projects. What brought you back to the power industry in your role as chief utility innovation officer at AES? Yeah, I mean, one of the things I missed most

about the utility industry was just that sort of day-to-day impact on customers, right? Where, you know, when you're Google, and this isn't to not Google at all, but you've got billions of customers all over the world, it's really hard to go meet them face to face and see the impact that your solution has. Whereas when you're at a utility, you're inherently rooted to that country, that space, that place. And you can go out and see customers and see the impact that you're a new product,

your new technology, your new capability has on them, and you can hear directly from them. And for me, as I said, I had a very humble background when I started in the industry, and I really missed that. I missed seeing the impact associated with that. on every customer on a day-to-day basis. And so that's why I rejoined the industry and why I came to AES, was AES of all the companies I was looking at seemed to be one of the very few that was really seriously trying to figure out what that capability of the future, that utility of the future really look like and what the technology and the capabilities

needed to be to make it happen. Yeah, I've always been impressed by AES, definitely not surprised to see someone like you end up there. They're doing lots of innovative stuff going big on renewables. I think you recently acquired the two gigawatt bell-filled solar plus storage project, which is under construction in California. It's set to be the largest solar plus storage project in the U.S. once it's complete. Can you talk about how that acquisition fits into AES's clean energy strategy? Yeah, I mean, I think what you see from that acquisition and just generally in the space is there is an overwhelming drive by customers, utilities, regulators, like the whole space to not just decarbonize,

but to transform the energy industry. And I think AES, absolutely not just through that acquisition, but through all of the work that's going on over here, UCS front and center trying to be a leader in every one of those areas, right? We don't just want to be a leader in clean energy. We want to be a leader in the utility space. We want to be a leader in technology because we think you have to bring all of these things together in supply, tech, and the utilities to really make the ecosystem thrive.

And, you know, that to me is the most exciting opportunity is that you'll see more of those sorts of announcements coming from AES, is that we're absolutely serious about it. We're putting our money behind it. Like, we are full in in terms of the transformation. Yeah, you guys are walking the walk and talking to talk for sure. I think you've said you predict a lot of utilities will opt in to be railroads instead of companies. What do you mean by that? Yeah, I mean, that is something I say a lot in my, my speeches at conferences, which is that, you know, fundamentally, the industry has two choices in front of it.

It can choose to be a railroad, which is that it's largely a given route with no competition and very little innovation, not to knock the industry, but it's just kind of the structural nature of a railroad. Or you could choose to be a telecom, which is to say it's a multi-party transactional, innovative, product-driven, innovation-driven ecosystem. And I think that utilities, like their natural inclination is to be the railroad because that's the safe and it's the consistent thing that they've always done. And it's explainable to regulators. It's explainable to shareholders, to Wall Street.

Like, that's the easy route. I think there are a few mavericks in the field that are trying to be more like the telecom space. And I think those companies, and I would have to be. put AES in that category. I think those companies are saying, you know, we could do that, but we think they're actually better returns, better outcomes for customers, and better capabilities for everyone, for the environment, for our governments, for our customers, for everybody in the ecosystem, if we actually do this thing over here and go this innovation route and really put

money behind what we think are necessary to do the transformation. And I think ultimately, you're going to have people on both sides of that, and I think you're going to have winners and losers on both sides of that. And that's a pretty radical shift. So how will business models in the utility industry need to change to support that? Yeah, I mean, one of the things that has always gotten me most concerned with the utility business model is if you think about how long it takes a utility to update its rates, let's just say it's 18 months to a year, somewhere in that time frame.

But you think about how fast it takes some piece of digital infrastructure like an S thermostat to update its algorithm, right, it's seconds. And you think about the inherent mismatch between what's going on between the consumers and that kind of pricing mechanism, you can see that, like I would say in my old Enron J's, that's an arbitrage, right? Which is to say you've got a mismatch between the rate at which pricing is being done by the utility versus how the system is reacting. And inherently, there's this fundamental problem that if we don't figure out how to make

the system, the business model, the infrastructure, all work at the same, pace, we're inherently going to have problems in the grid. And we can see these things happening today, not just here in the United States, but elsewhere in the world, that you know, you see the times when the infrastructure is going a lot faster than the other, the business and whatnot. We, I fundamentally believe that utilities will have to, and regulators and the technology itself will all have to adapt to this kind of rate change that's very different. Yep.

And how is this strategy impacting 80s? AES, or how are you incorporating this strategy in your role at AES? Yeah, well, I mean, I think it's not just, you see that in the nature of our business, that we have a clean energy business that's one of the leaders in that space. We have AES Next, which is all about inventing the next technologies. Like, since we're deploying so much solar, we have a lot of challenges. The solar panels are quite heavy. They can't be put down rapidly.

So we came up with a, we started a robotics company that can automatically lay those down. We have another one that can basically, it folds out like an accordion to basically speed up those sorts of challenges. We're an investor in one of the leading areas in terms of uplight, and that's a leader in the space for the customer side. And you'll see us start to make investments on the grid side too, which is, you know, we're trying to invest in and invent those sort of things that help us overcome those problems. But now my focus, my remit is primarily on the utility, which is how do we take those learnings, those capabilities, that we have from those other areas of the business, and now embed them deep inside the utility. So it becomes second nature to us that our business model works,

our pricing and regulatory mechanisms are in sync with it, our insights and analytics kind of flow through all that same capability. It's a huge challenge, but it's a huge, amazing opportunity. And that's really what I'm focusing on every day, is taking those capabilities and now putting them into the day-to-day the utility operations and making that work. You mentioned earlier that it can take 18 to 24 months, to implement new rate structures.

I mean, that feels like too long for the time-varying rates that we need. Why do you think it takes so long? And what needs to be true to truncate that down to, like, you know, three to six months as opposed to 18 to 24? Yeah, I mean, there's actually a great set of articles that Doug Hausman, another industry luminary, has written about, like, if you really want to transform, what are the things you need to do? And just the regulatory mechanism, the legal mechanism.

that are around rate-making utility regulations and how they do their code of conduct and standards and whatever. It's a patchwork. It's very slow because it is a legal proceeding. It just does not lend itself to these sorts of capabilities. I think we need to fundamentally start to examine that and rethink what is our approach. Like regulation is there for a very good reason. It's not there for fun. It's there to protect consumers. It's there to protect the utility, and it's mostly

there to make sure that everyone has access to this amazing thing called the grid and the energy supply that comes from it. We've got to fundamentally, I think, rethink that in light of the technology, the third parties, like FERC 2222 is a great opportunity, but I think

there's a lot of gray space in there that needs to be figured out. And frankly, I think we've got a few years worth of debate. argument, trial and error to work through those issues. And we'll get there, but it's going to take some time. There's a lot of momentum right now for grid decarbonization, thanks to continued following cost of renewables, the IRA. How do you think this will shape the grid through 2030? Yeah, I mean, I think right now what we see most that's being shaped by all this is that the grid itself is fundamentally got a backlog that's just enormous of things that want to connect to it. You know, I always think of this

is both a terrible challenge, but it's a terrible opportunity, right? It's an amazing chance to figure out how to scale interconnection. We've been able, down in the residential household, to have a standard plug. How do we think about that logically and physically for much bigger assets? You know, I can tell you, when we were building data centers at Google, you know, in some places it took us seven years to get transmission access. In other places, it took us, you know, 18 months to two years. How do we not just shrink and make that more consistent between seven years and two years, but how do we shrink all of that time scale down? There's just an enormous, enormous backlog of need. And as we see new manufacturing,

electrification, all these things are coming, like this problem just gets way bigger. So that's the challenge. The opportunity is in enabling all of that. And I think that the intent behind not just the IRA and some of these things is to help jumpstart it. I think our challenge is how do we figure out how to do that and do it at scale and at speed. And, you know, like, I've heard people say there's no way to get things on the grid faster than 12 to 18 months. I think fundamentally, like, that we still have a problem. Like, we should be shooting for three months.

We should be shooting for one month. We should be, you know, let's set an audacious goal. Even if we don't get to three months, hell, if we get to nine months, that's a lot better than where we were, right? And the more we can compress that down, the more we can electrify, the more we can enable for customers, like, that's our goal. When you look back on your career, what impact do you want to leave on the energy industry? Well, I think the one thing I'd really hope to do is that, or hopefully people look back and say,

I was helpful in helping the industry transform to become what it could be, right? I think there's just so much incredible opportunity in front of us that we could seize. I just hope we can go do it. So we call this podcast with great power, which is a nod to the energy industry. It's also a famous Spider-Man quote, with great power comes great responsibility. What superpower do you bring to the energy transition? Probably creativity. Due to my very unusual background, I'm never one to look at a problem the same way everyone else says.

And so that's the advantage. The disadvantage means that, you know, I can be a mile wide but an inch deep. So I need a lot of help using that superpower. Because of surround yourself with the right people, right? Exactly, exactly. People that will, you know, prevent me from hurting myself. Yeah, exactly. Cool.

Well, Rayford, thank you very much. That's a fantastic conversation. I really appreciate your time today. Awesome. Thank you for having me. Rayford Smith is the chief utility innovation officer at AES. With Great Power is produced by GridX in partnership with Post-Crit Media. Delivering on our clean energy future is complex.

GridX exists to simplify that journey. GridX is the enterprise rate platform that modern utilities rely on to usher in our clean energy future. We design and implement emerging rate structures, and we increase consumer investment in clean energy, all while managing the complex billing needs of a distributed grid. Our production team includes Aaron Hardick, Stephen Lacey, Dalvin Aboagi, and Camille Stennis, all for PostScript Media. The original theme song and mixing came from Sean Mark Watt, and Bailey is our story editor. The GridX production team includes Jenny Barber and me, Brad Langley. If this show is providing value for you and you're enjoying it, which you really hope you are, please help us spread the word.

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