The following is a transcript of the Nov. 18, 2024, episode of Public Power Now. Learn more about subscribing to Public Power Now at Publicpower.org/Podcasts. Some quotes may have been edited for clarity.
Paul Ciampoli
Welcome to the latest episode of Public Power Now. I'm Paul Ciampoli, APPA's news director. Our guest on this episode is Paul Lau, CEO and General Manager of Sacramento, California public power utility SMUD. Paul previously joined us as a guest on the podcast in late 2023. Paul, thanks for returning as a guest.
Paul Lau
Thank you for inviting me again.
Paul Ciampoli
Paul, just to get our conversation started, I wanted to talk about some recent news involving SMUD and Rep. Doris Matsui, D-Calif. You guys recently announced $3 million in funding for expansion of a clean energy project aimed at electrifying up to 300 homes in the Meadowview neighborhood of Sacramento. Can you provide additional details on this project and discuss how SMUD customers will benefit from the project?
Paul Lau
This project is really a key part of SMUD’s 2030 clean energy vision -- our zero carbon plan -- which is really aimed to eliminate all carbon emissions from the power supply by 2030 while supporting the electrification of homes, businesses and transportation. So this is $3 million in funding secured by our beloved Congresswoman Doris Matsui and SMUD’s matching investments to electrify up to 300 homes in the Meadowview neighborhood. Now, when we adopted our zero carbon plan, we made the commitment that no community would be left behind. And our goal is to ensure that everyone has the opportunity to benefit from a zero carbon economy and that we provide equitable access, which is so important to our community and our board and our customers. Now an equity focused approach by bringing clean energy upgrades to a historically underserved community is really important to us.
And it’s important to us because oftentimes underserved communities are disproportionately impacted by the impact of climate change and the benefit [for] the Meadowview residents are substantial. They will see lower utility bills, improved indoor and outdoor air quality and increased property value as a result of the home energy upgrades. Now to support this SMUD is partnering with local workforce development organizations to train and hire residents from Meadowview and other disadvantaged communities to work on this project. And we really believe this really helps create a high quality clean energy job right in the community. And this is kind of holding up a promise that no community is left behind. So this is something that I think....SMUD and the whole segment of our partners are fully embracing.
Paul Ciampoli
You mentioned the 2030 zero carbon plan. Part of your answer is a nice segue into my second question for you, which is I want to give you the opportunity to perhaps further describe that plan as well as detail the progress the utility’s made since developing the plan in 2021.
Paul Lau
SMUD has set a really incredibly ambitious goal to eliminate all carbon emissions from our power supply by 2030. I think this is one of the most aggressive [targets] of any large utility in the country. Now, since unveiling the plan in 2021, we have made substantial progress, securing key grants, launching major clean energy projects and rolling out [an] initiative [with] customer programs to support the transition. Now this comprehensive approach goes beyond just reimagining the technology powering the grid. SMUD is also focused on empowering the community we serve. Ensuring the economics and workforce benefit of the clean energy transitions are felt equitably across the region. For example, SMUD’s clean energy initiatives are creating good paying jobs and training opportunities in the fast growing green economy. Now this is a central part of the utility’s vision -- not just to provide clean electricity, but also building a more substantial and profitable future for all. Now other recent milestones that we just had is, for example, our Solano 4 wind project -- we replaced 23 of the old turbines, the old Vestas turbines, with 19 advanced Vestas V-150 turbines and this increases the project capacity to 85 megawatts -- enough clean, renewable energy to power about 40,000 homes. Now, with this addition, the combined Solano wind project would generate about 300 megawatts and 830 gigawatt hours per year, a 48% increase in the annual energy generation.
We also celebrated our local economic and workforce development milestones with the opening of Sparkz, the new lithium ion battery manufacturing facility. We're working with the United Auto Workers Center for manufacturing a Green Economy, the California Mobility Center and local nonprofits to enroll people from underserved communities in a unique battery manufacturing training program. So we're going to be the hiring arm of Sparkz to make sure that they have the workforce they need to power up the factory. But we are also making sure that those come from local under-resourced communities.
Now another big thing that we're doing is the carbon capture and sequestration project at Calpine Sutter Energy Center. For us, this is a game changer because when we put our plan together back in 2021, we had a way to get to 90% of the carbon emissions reductions with existing technology but we need new technologies like the carbon capture and sequestration to make sure that we can get to 100%. And so we're very, very happy that we were able to actually secure a $270 million grant along with Calpine to convert their 550 MW gas fired plant to a 400 MW carbon capture and sequestration plant...so very, very excited about that. And that plant will remove about 95% of the carbon that's emitted from burning the gas actually in that plant.
And we're also very, very happy to report -- very proud -- that our power mix is on average now 78% carbon free and about 45% renewable energy under the renewable portfolio standard, the RPS. Now, in comparison, the previous power content label was 51% carbon free and 24% renewables and that's a 27% increase in our carbon free power. Now since we started our journey in 2021, we've added more than 300 megawatts of renewables and energy storage capacity. And we have about 1,200 megawatts of new renewables online by about [the] 2026/2027 time frame. And we also made some tremendous progress with partnerships and grant funding that are aligned with...[efforts] for achieving zero carbon. So a lot of great things [are] happening...we're really seeing kind of the fruits of our labor. And I can tell you our board couldn't be more happy and so is our community with our progress toward a zero carbon economy.
Paul Ciampoli
You mentioned energy storage and so on that topic I wanted to give you the opportunity to talk about the fact that SMUD’s long duration battery storage project in partnership with ESS Tech over the summer was awarded a $10 million grant from the California Energy Commission to demonstrate a 3.6 MW, eight hour iron flow battery project. A two-part question for you, Paul. First, could you offer additional details on this project and also could you talk about the process for applying for the state grant?
Paul Lau
First of all, a big thank you for the California Energy Commission and ESS for partnering with us. So as you know, SMUD [is] really at the forefront of battery storage technology deployment and integration...leading the way in demonstrating how this technology can transform our grid. Now as we move closer to achieving SMUD’s ambitious zero carbon goal by 2030, this technology is essential for maintaining grid reliability and affordability while eliminating carbon emissions. As mentioned earlier, since unveiling our vision, SMUD has made substantial progress, including securing key grants that offset costs and help reach our goal. Now for the $10 million grant that we just won for the ESS battery storage project, the California Energy Commission awarded that to SMUD as a direct award, which we were very proud of. SMUD’s collaborative process for reviewing and improving grant applications is robust. Our grants team conducts an initial review followed by a structured cadence of subject matter experts and director level reviews to ensure alignment with SMUD’s goals and priorities. Now this multi-stage process leverages various analytical tools to support throughout evaluations and decision making, ultimately positioning SMUD’s grant applications for the best chance of success. With the amount of funding that SMUD and our partner has recently secured -- over $330 million -- we are continuing to accelerate our progress to zero carbon and bringing the maximum amount of benefit to our customers.
This will play a critical role in ensuring we're delivering on our grant commitments and bringing in new dollars that will help us tackle carbon reduction in a way that helps us maintain affordable rates. And this will also ensure that our R&D and partnership pursuits are focused and intentional to maximize our efforts and accelerate our journey to 2030.
This is something that we are very, very proud of. We're also making sure that when you have grant funding it also keeps our rates low. Currently our rates [are] about 52% lower than our surrounding utility and that keeps about $1.8 billion of money in the local economy. Now, by strategically combining our own financial commitment with external grant awards, this really has enabled SMUD to significantly expand the scope and impact of our clean energy transitions.
And so as part of the zero carbon strategies, us partnering with ESS Tech on a pioneering long duration energy storage project...it's really a game changer for us also because along with the California Energy Commission grant, SMUD is committing approximately another $19.5 million in cost sharing for labor and material expenses for the combined 4 MW ESS Tech long duration battery energy storage project, which include the existing 450-kilowatt installations and the newly grant funded 3.6 MW additions.
Beyond the specific projects, we have also been successful in securing other major grants to support this clean energy transition and this includes a $50 million grant from the Department of Energy, what they call a GRIP – Grid Resilience and Innovation Partnership -- to fund advanced smart metering technologies and other grid modernization efforts and also over $10 million in grants from the California Energy Commission to support equitable electric vehicle charging infrastructure in underserved communities across the service territory. Long duration battery [storage]...like this implementation -- is really a good way for us to start having SMUD thinking about expanding wind and solar resources, allowing us to capture excess renewable energy and dispatched strategically to meet customer demands even when the sun is not shining or the wind isn't blowing. So for us, long duration battery [storage] is really a key and it really, really does help us transition and really help us integrate more renewables. Beyond just these technical benefits, this project also sets the stage for future large scale battery deployments and eventually manufacturing in the Sacramento region -- really further cementing SMUD’s role as a leader in the clean energy transition.
Paul Ciampoli
I think it's worth noting that like you said, there's some economic ripple effects, positive ripple effects from this type of project. Would you agree with that?
Paul Lau
Absolutely. I think when you actually start talking about bringing major technologies in and working with partners to bring those technologies to Sacramento and also bringing new jobs and businesses into Sacramento in terms of being like a technology hub...actually has a huge ripple effect for the community in both of what we call economic development, but more importantly, inclusive economic development, but also inclusive workforce development, so it has a huge ripple effect when you bring money and new technology into the area.
Paul Ciampoli
Paul, unfortunately it goes without saying that the utility sector is still facing ongoing supply chain issues. And I know that that's a continuing concern for SMUD and the rest of the electric utility sector these days. So to wrap up our conversation I wanted to give you the chance to talk about how SMUD is addressing these ongoing supply chain issues.
Paul Lau
I think it’s a topic that every utility is grappling with. With SMUD, we really have been pretty proactive and pretty innovative in terms of how we develop our supply chain strategies in terms of enabling our ambitious clean energy transformation. So our supply chain expertise has allowed SMUD to overcome some significant challenges like managing critical component shortages, maintaining reliability through strategic inventory management and supporting the delivery of major projects on time and on budget.
Now, by taking a forward thinking approach to inventory planning and supplier relationships, we really have been able to overcome some of the major supply chain challenges facing the industry in recent years. For example, the team has managed the extended lead times for critical components like transformers, which could stretch up to two or three years in current marketplaces, by really first, through strategic stockpiling of our essential equipment and we also have been able to maintain reliability and avoid costly emergency purchases during severe weather events and other unplanned events. We are proactive in doing the risk management piece, which has paid us big dividends, ensuring that big projects like our Country Acres, which we're building about 374 megawatts of utility scale solar, 174 megawatts of battery storage, [the] Solano wind farm, Sloughhouse Solar, which is 100 megawatts. But on top of that, we are signing what we call strategic partnerships. For example, we just issued out a $250 million forward-looking transformer purchase agreement with our partners to ensure that they know what the next five years -- what our demand will be and making sure that we actually have a place on their production line...making sure that our supply doesn't get cut.
Also, on top of that, we also have just also issued another $250 million to ensure that we have the labor resources and the contracting resources so when those transformers come in for those big projects we have the labor to support it. So I think SMUD’s supply chain innovations extend just supporting infrastructure projects. The team really has also found a pretty creative way to boost sustainability like the warehouse transformation that generated over $1,000,000 in recycling revenues and also by preparing the grid for increased electrification. Our supply chain strategies are generally enabling the utility’s fleet electrification and two electrification initiatives. So I think in addition to the supply chain success, we really have been pretty incredibly effective at securing grant funding to further boost clean energy initiatives and you just heard me talk about earlier now getting the $10 million grant from the California Energy Energy Commission getting the $50 million GRIP grant from DOE, allowing us to actually do some pretty creative, innovative partnerships with our suppliers and also our surrounding neighbors...making sure that we have the equipment that we need for this clean energy transition.
Paul Ciampoli
Great. Thanks, Paul. Well, once again, this has been a really, really informative conversation just as it was when we spoke last time. So given everything that you guys have going on, I'm going to extend an invitation for you to return at some point next year...there were so many interesting topics as I prepared for this interview that I had to kind of whittle it down. I would love to have you come back and talk about these and other topics and activities that SMUD is involved with.
Paul Lau
I think this is great that we can actually share what we're doing with the industry and then at least hopefully give some insights into...how SMUD is tackling some of the same problems that everyone's tackling. And so anytime that you think that a topic is ready and you think the progress is you know it's actually good for the APPA audience to know, I'll be more than happy to come back and actually have another podcast, so thank you so much for having me.
Paul Ciampoli
Sure thing, Paul. Thanks again so much. Thanks for listening to this episode of Public Power Now, which is produced by Julio Guerrero, Graphic and Digital Designer at APPA. I'm Paul Ciampoli and we'll be back next week with more from the world of public power.
