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How West Coast heat waves are straining electrical power grids

Heat waves across the West Coast are straining electrical grids. Enel X North America CEO and President Surya Panditi joins Yahoo Finance Live to discuss.

Video transcript

AKIKO FUJITA: Well, there is some relief in sight out west after scorching temperatures broke records everywhere from Utah to Arizona. And while states like California ducked rolling blackouts this time around, there's a lot of concern with temperatures so high so early in the season about the resilience of the energy grid. To discuss that, let's bring in Surya Panditi, Enel X North America CEO and President.

Surya, you've got a lot of visibility on this front. And I wonder to what extent your phone's been ringing here over the last week, as you've got more and more people saying, well, wait a second. It's only June, and we're already dealing with the type of power surge we're likely to see later on in the hottest months of the summer.

SURYA PANDITI: Well, Akiko, firstly, thank you for inviting me. And just to tell you a little bit about Enel, the holding company, is one of the largest energy companies in the world, with over 65,000 employees. And we are the largest-- probably one of the largest renewables company in the world. What Enel X does is, we work primarily with commercial industrial customers to be able to help them consume, store, utilize energy in a smarter way. And one of the things, as you point out, of course, is that we've seen record temperatures in the west. We've seen weather events in Texas.

And so what we do with our demand response program is we work with, again, commercial, and industrial customers to help them-- to help the grid by decreasing the consumption of energy during these kind of events. And I'm pleased that we were successful. Last year, we got-- we delivered probably between 150 and 200 megawatts a day in California. And likewise, we've done-- we performed 100%-- and over 100% in Texas during the weather events that we've seen there.

AKIKO FUJITA: With that said, where do you see the key vulnerabilities right now? And obviously, your program is being deployed as more and more try to-- more and more of your customers try to add reinforcement in expectation of the hotter summer months. How well equipped is the energy grid right now to be able to handle this kind of level?

SURYA PANDITI: No, we certainly-- on the one hand, we've seen these programs like the ones I talked about curtailing the demand side, so the demand for energy during these hot grid events. I do see two areas that, in my opinion, should be improved. The first thing is both California and Texas have placed some caps on how much demand side resources can participate. And I do believe those are too low. And we'd like to see those caps increased or taken away so that we can have better participation.

And this is-- if you think about it, the beauty of demand response is that you're not needing to generate that energy because it's not being consumed. So you're decreasing the demand. And the second thing is, we'd like to see better price signals or market participation of distributed energy resources, such as battery storage systems that may be sited on the customer's premises.

And in order for those to be financially attractive for a company like ours-- and just to point out, Enel X is willing and able to invest millions, tens of millions, hundreds of millions of dollars into these systems. But obviously, we are looking for financial returns on those. And so, I'd like to see better market constructs so that-- which exists in some regions, but we'd like to see them in places that are experiencing these weather-related events.

ZACK GUZMAN: Yeah, and Surya, I mean, it sounds like that might be a key piece to maybe raise as we're in this flux around the infrastructure debate and why, you know, renewable energy might need kind of a boost when it comes to maybe support from the federal government. When we talk about some of the issues around energy storage, it does sound like a lot of people are kind of talking about storing power from renewable sources, kind of being maybe one of the hiccups in the system, as we have it today. I mean, is that maybe where the biggest problem is when it comes to storing some of these renewable sources?

SURYA PANDITI: I see two things that happen. By the way, just to point out, the federal government, specifically for Federal Energy Regulatory Commission, has been supportive of distributed energy resources. They, in fact, came out with some rulings on that recently last year. But the United States and-- well, the United States tends to be very fragmented when it comes to the system operators and utilities across the country, very different rules and regulations depending on where you are operating.

So the combination of different types of renewables-- so you have wind and solar at different times. That's a very good combination because they tend to be at different-- peaking at different times. And then you add battery storage systems to it. And now you have a quite available energy system.

And the beauty of distributed battery storage tied to some kind of renewables is that you don't have to increase the transmission capacity as much because you're already co-located with where the energy is being consumed. So we see that as very both financially, as well as resiliency wise, good investments to make, provided the market--

AKIKO FUJITA: Yeah--

SURYA PANDITI: --is there.

AKIKO FUJITA: And, Surya, I've talked to-- I've heard you talk about the financials a few times already. If you talk about the battery storage system, how much is the price likely to drop, as more and more adaption or adoption happens?

SURYA PANDITI: So let's talk about the various forms of revenues that can come on a battery storage system. One is to be able to decrease the peak charges when-- peak demand charges for the customer. So think about a battery storage system that can be charged when the energy prices are low and discharged when the energy prices are high so that they're not consuming from the grid.

Second thing is different markets. We talked about demand response. It's something called the capacity market where you can register your assets and get paid for being able to provide that energy. And then, of course, we can also in some markets, for example, in New York City, there's a program called, like Con Ed, called the non-wire solution, where we're sitting and able to provide-- ingest energy into the grid when needed. So there are different forms of providing these revenues. And again, as I said, you know, we're in a position where we are happy to make investments, as long as we get a reasonable return on those investments.

AKIKO FUJITA: Surya Panditi, Enel X North America CEO and President, good to talk to you today. Appreciate the time.