Energy Round Table with Melanie Kenderdine and Karen Wayland

Last summer, Energy Secretary Ernest Moniz announced a reorganization of the DOE’s management structure to help it achieve the department’s—and the president’s—key objectives, including the implementation of the Climate Action Plan.

One area Secretary Moniz called out was the DOE’s energy policy and analysis capabilities, saying consolidation would enable the department to take a better systems approach to policy analysis. Thus, he created the Office of Energy Policy and Systems Analysis (EPSA) to deliver unbiased analysis of energy systems to the DOE’s leadership.

Melanie A. Kenderdine is the director of EPSA and the primary domestic energy policy advisor to the secretary of energy. Prior to joining the DOE in May 2013, Kenderdine worked as the executive director and associate director of the MIT Energy Initiative (MITEI). During the Clinton administration, she served in multiple roles at the DOE, including senior policy advisor to the secretary, director of the office of policy, and deputy assistant secretary for congressional and intergovernmental affairs.

Karen Wayland, EPSA’s deputy director for state and local cooperation, is a former senior advisor to Nancy Pelosi and was legislative director for the Natural Resources Defense Council.

PARTICIPANTS

Susan Brown, Deputy Administrator, Division of Energy Services, Wisconsin State Energy Office

Vaughn Clark, Chair, National Association of State Energy Officials (NASEO); and Director of Energy Programs for the State of Oklahoma

Charles Gray, Executive Director, National Association of Regulatory Utility Commissioners

Jeff Genzer, Legal Counsel, NASEO and NEADA

Larry Dawson, Deputy Director, Office of Energy Assistance, Illinois Department of Commerce and Economic Development

Brad Penney, General Counsel, National Association for State Community Services Programs

Susan Brown, Deputy Administrator, Division of Energy Services, Wisconsin State Energy Office: What were Secretary Moniz’s goals in setting up the new policy shop?

Melanie A. Kenderdine, Director, Office of Energy Policy and Systems Analysis, U.S. Department of Energy: He and I discussed this, actually, even before he was the nominee. When he was the Undersecretary, there was an Office of Policy and an Office of International Affairs. I ran the Office of Policy when he was the Undersecretary here before. And so his experience at the Department had been that there was a separate policy shop. That wasn’t his reason, although I think he thought it functioned well. I think it was either SEAB [the Secretary of Energy’s Advisory Board] or PCAP [President’s Climate Action Plan], or both, recommended that there be an energy policy and systems analysis shop in the 2010–11 time frame. He thought that that was a very well-supported idea. It had comported with his experience before. When he was at MIT and I was at MIT with him, we did “Future of” studies—major studies to inform policymakers. They were multiyear, multi-faculty, multidisciplinary studies, very often with a policy focus and policy recommendations coming out of those. So he also had that experience in very rigorous, analytically data-based, data-driven policy analysis. And that’s what he wanted at the Department of Energy when he became the Secretary. So several things came together—his experience at PCAP and SEAB, and his experience running the Energy Initiative at MIT—and he felt that was a good way to go.

Vaughn Clark, Chair, National Association of State Energy Officials (NASEO); and Director of Energy Programs for the State of Oklahoma: This may be a question more for Karen, but we really would like to know specifically how you want state and local officials to interact with your policy group.

Kenderdine: I’m going to turn this over to Karen and just give a setup for the Secretary’s focus as well—and this is both for the energy policy and systems analysis as well as for the quadrennial energy review—that he feels very strongly that we need to up our game in working with the states and localities because, quite frankly, that’s where a lot of the innovative, creative policies are being made at this point in time, just because the Congress hasn’t passed an energy bill since 2007, I think. That was the last major piece of energy legislation. And not many things are coming out of them right now. In the states, they’re just doing an enormous number of creative things. Also, the states are on the firing line from a regulatory perspective. Many of these regulations that we’re dealing with that affect the energy and environment space, they’re not federal, they’re state and local. And I’d say one more thing before I turn it over to Karen—that many of the energy issues that we’re dealing with in EPSA and that we will deal with in the QER are very much regional. And, often, national recommendations affect regions very, very differently. So we’d like to probe this more. And I’m going to turn that over to Karen.

Karen Wayland, Deputy Director, Office of Energy Policy and Systems Analysis, U.S. Department of Energy: We are really looking forward to being able to work much more closely with state and local officials both in the QER and the other work that we’ll be doing. We are the policy arm of the Department, so what we’re really interested in are understanding the difference between what’s happening at the federal level, what’s happening at the regional level, what’s happening at the state and local level. And my team is starting to look at, within the QER … the first round of the QER is going to be on transition-distribution energy infrastructure, and we’ve got an inventory of all of the pieces of that system. We’re looking at how the federal, the regional entity roles, the state and local roles, play with each other in terms of regulating and managing that infrastructure. We would love to spend a lot of time talking to state and local officials about the challenges that they face in dealing with energy infrastructure, dealing with the increased interdependency, dealing with the new vulnerabilities with climate change, dealing with issues of cost allocation as you try to integrate new technologies into your systems, and how we might develop case studies around some of the barriers and challenges—and opportunities and innovations—that we’re seeing happening at the state level. We’d like to find ways to help you address the barriers, to help replicate some of the really innovative solutions that the states are finding to other states, and to really understand from an analytical point of view what policies have what results, and develop and provide tools for states to do that kind of thinking about the effects of policy. We can’t do that without working directly with the state officials who are responsible for actually doing that work.

Charles Gray, Executive Director, National Association of Regulatory Utility Commissioners: Just to continue with the QER, can you give sort of a brief overview of what the larger goals are with the QER process, and how it will affect the operations structure of the Department going forward?

Kenderdine: As you all may know, the QER was a recommendation from PCAP as well. It fundamentally, in a nutshell, recommended that we needed a four-year planning horizon for energy policy investments, et cetera. And that horizon—that document, that roadmap—needed to be very rigorously prepared and analytically based. So this is another recommendation that we take very seriously, the Secretary does, from PCAP. He was the cochair of PCAP when they put out that report. So he strongly believed in it, and is very committed to it, and just happened to have the opportunity to implement that coming in as the Secretary of Energy. So that’s kind of the high-level reason for a quadrennial energy review.

I’m sure you all are very familiar with other agencies—the quadrennial defense review: they put out a document that has a four-year planning horizon. The intelligence communities do; Homeland Security does. So we are following in the footsteps of other agencies that do quadrennial review. The four-year planning horizon, however, I think, is the shared feature of those reviews. We are very, very different because the energy systems in the United States are, by and large, not owned by the federal government. The regulations are not owned by the Department of Energy. The equities cross all of the agencies, and so a QER is very, very different than, say, a quadrennial defense review, which is an inward-focused document and focused on how that agency itself is structured and funded and strategically organized in order to meet defense objectives. This is not precisely about how the Department of Energy will be structured to meet strategic energy objectives. It’s a much broader focus than that. And so the president, when he directed us to do a quadrennial energy review, the direction … that it will be run by the White House. There will be a task force co-chaired by the DPC [Domestic Policy Council] and OSTP [Office of Science and Technology Policy]. DOE will provide the secretariat for that in order to ensure a lot of interagency contact and consistent stakeholder outreach. So our secretariat and our deputies like Karen will be working on those functions, but we will also provide the analytical framework and support for the final QER document, and with agency concurrent, we will write and publish the QER document. So it’s a very different animal than what you might have expected from other agencies.

Having said that, our office, EPSA, has been working since we were formed. I think we were official on October 20—we were officially stood up as an office and we have been developing detailed draft scoping documents for the QER, which we will send out when they have the first task force meeting. That should be in the next couple of weeks, the first task force meeting at the White House on the QER. So we will provide the straw person documents for that meeting, and then with some tweaks from the advice we received from the other agencies, start moving forward.
And what I can tell you about what we recommend—and the caveat is that we have not yet had this task force meeting and it may very well change—but what we have recommended … the White House has accepted the focus on energy infrastructure. The Secretary believed very strongly when he came in, given the time frames that we were looking at, that we needed to have a narrower rather than broader—not a comprehensive—energy plan, but let’s take discrete segments of our energy systems. The White House directed us to do infrastructure. And we are this year going to focus with a four-year planning horizon on T&D [transmission and distribution]. That’s T&D writ large—that’s not just grid, but it’s pikes, rail, and increasingly barge, processing, and import/export, and even that is pretty broad.

And so we have gone through and identified kind of a vision for 2030 as to what we think our energy infrastructures—what characteristics they should have. We are going to require a lot more flexibility, for example. They need to be affordable, minimal environmental footprint. They need to be scalable. A lot of features that we would like our infrastructures to have in 2030. Because, I’m sure you all know, the infrastructures we put in place are going to be with us for a long time. And so if we’re going to modernize, harden, et cetera, our energy infrastructures by 2030, we need to start incentivizing that now. And by and large, that has to be incentives because we don’t own the infrastructure. We just have to provide policies and incentives that will likely get us in the places we think we need to be.

So we’ve got a 2030 vision. We have picked a set of vulnerabilities that we think are growing for our energy infrastructures. Those are climate change, obviously. We’ve seen a lot of the impacts of severe weather and climate on our infrastructures. Most recently, last week we were anxiously monitoring what was going on in New England because they are on the far end of pipelines, et cetera, and are fairly infrastructure-constrained, and the weather was pretty extreme. So we have climate change as a growing vulnerability; we have a cybersecurity growing vulnerability; physical threats: those are both malevolent and something like electromagnetic pulses. Other vulnerabilities: we had three fairly notable attacks on our electric grid last year alone. Age is another. Our infrastructures are aging and need to be modernized. Cost: replacement or hardening is very expensive. Interdependencies: we certainly saw the interdependencies of our energy infrastructures on each other and, in particular, on electricity is growing. And then we see some vulnerabilities in workforce issues, the availability of workforce.

We have developed baselines. We have a vision for 2030. We have a set of vulnerabilities. And we’re going to cost block all three of those and see what comes out in terms of analysis. So that’s kind of our approach. And we have a year to do it in.

Jeff Genzer, Legal Counsel, NASEO and NEADA: Thanks for your cooperation, thanks for the coordination, thanks for the openness. You actually addressed a lot of what I was planning on asking, but the issue of these interdependencies and the issues across energy, environment, resiliency, and energy security are obviously much more apparent than they were even ten years ago. And I know a big focus of what the two of you and your team are working on is looking at all of these things in ways that really haven’t been looked at before. My interest, at least on this issue, is more related to how the interdependencies piece will be looked at. As you, Melanie, know better than anybody, the history of the Department has, despite your best efforts before, was that stovepipe issue that you spent a lot of time trying to break down. Are you getting enough cooperation there? How do you see that playing out in terms of examining the interdependencies?

Kenderdine: We certainly haven’t finalized our approach, the methodology for a lot of this. We are internally meeting with SEAB. The Secretary of Energy’s Advisory Board has a task force set up, and we’re meeting next week to go over some scoping scenario issues as part of that. We have solicited proposals from the DOE labs who have done a lot of modeling work on infrastructure interdependencies. And that hasn’t necessarily been through all of the vulnerabilities that we’re going to be looking at. So there might very well be different sensitivities and parameters, but we do have resources available that are exclusive of the separate programs here in the Department. Somebody was making a presentation today and quite seriously—it was very funny—said the DOE was often noted for having its “cylinders of excellence.” I hadn’t heard it before; he was surprised I hadn’t heard that before. And I laughed out loud like you just did. So I appreciate the stovepipe problem.

One thing I would say about that is, in part, and we haven’t decided this yet—we meet on these issues in EPSA three or four times a week and I enjoy our meetings. It’s their pure thought meetings as opposed to what I did today. So I love that. Because all of this is very broad, as you can well imagine. I think the biggest vulnerability is the growing reliance of all of our infrastructures on electricity. And so we might start focusing in just on that. And when you look at those interdependencies and their increasing reliance on electricity, you may want to look at things like redundancies. Or do you want everything reliant on electricity? Are there other options? That could be getting in the way of a moving train because all the trends are in the direction of reliance on electricity. But that seems to be the most central thought interdependency issue that we’re going to be talking about. Karen, I don’t know if you….

Wayland: Well, I think this is one place where you certainly can help us because a lot of these interdependencies are playing out and you’re noticing them more than has become apparent at the federal level. I’ll give you a couple of examples. Sandy is the most obvious one where states were really grappling with how do you get gas to people when the electricity goes out? That’s an obvious one. A less obvious one that I wouldn’t have known about unless I had been talking to state officials was the interplay between the Clean Air Act and state areas, city areas of noncompliance, and how you power compressor stations for natural gas. So those compressor stations in some places are being electrified and that creates an even further interdependence, but we would not necessarily have seen that as an issue that we needed to wrap into the interdependency discussions without having been notified of the issue by somebody from a state. So to the extent that you are experiencing those interdependencies and watching places in your infrastructure systems where it’s becoming much more critical, we would love to hear about it.

Genzer: I agree. And part of the challenge of course on that one, the example you just offered, is we have the same stovepipes we’re dealing with in terms of energy industries. We have to get them to think outward as well. So that’s a great point, and we look forward to continuing to work with you both on all that.

Kenderdine: If I can just state, too, you kind of started out with something about “these vulnerabilities are growing,” and all of the vulnerabilities I listed for you, and what we’re going to be looking at, are growing. Something like cybersecurity … I was at the Department fourteen years ago; that wasn’t an issue. It was not something you even thought of. As a matter of fact, and I’m going to date myself here, when I started at the Department we didn’t have email. There was no Internet. So that problem alone is something we never even contemplated even as recently as fourteen years ago on my last tour of duty running the Policy Office. And climate—we weren’t looking at the impact of climate on energy infrastructures fourteen years ago. There are a new range of vulnerabilities.

Genzer: I agree. I’ll have to put my abacus and my slide rule away, right Melanie?

Kenderdine: Quite frankly, and I think the Secretary has alluded to this in some of his talks around the country, our energy laws are predicated on the notion of scarcity—that our energy supplies were scarce and that demand was always going to increase. And we’re not seeing that. We’re entering an era of energy abundance and demand is flat or declining. And it’s affecting many, many things—from the physical manifestation of that (which is pipeline flows that used to go from south to north are now going from north to south, and the congestion that’s causing) to business models for utilities. And so it’s just a very, very different world, and our laws, our committees, our organizational structures, congressional committees are all predicated on very different ideas about energy.

Larry Dawson, Deputy Director, Office of Energy Assistance, Illinois Department of Commerce and Economic Development: We’re excited, Melanie, about your and Karen’s new roles. Representing LIHEAP directors today, and after fifty years of war on poverty, my question is: What approaches will the policy shop recommend to ensure low-income Americans are included in energy policy?

Kenderdine: Karen and I discuss this issue very, very often. I think it’s a huge issue. And that we need to figure out how to ensure that that gets integrated into our policy recommendations and decisions. We are keenly sensitive to it.

Wayland: I think it goes beyond LIHEAP, obviously. That is a great program for addressing the key issues. A monthly crisis for a lot of people in this country, unfortunately—whether it’s because it’s too cold or because it’s too hot in some places—somebody needs to make a decision about turning an air-conditioner on or paying the rent and food. We are acutely sensitive to that. And I think as we talk about how we address the infrastructure challenges in this country, how we integrate new technologies, we are going to see some of these technologies potentially have costs associated with them. We have to make sure that part of the discussion is not sort of a blind recommendation to adopt new technologies, but to be very aware of the effects that some of these changes might have on costs, and how do we reduce costs, how do we address the rate allocation, and that sort of thing. Melanie’s not kidding when she says we talk about it quite a bit.

Kenderdine: The affordability is one of the characteristics of our 2030 vision for our energy infrastructures. We call those our “-ilities,” most of them are “-ilities”: flexibility, affordability. Not resiliency, it doesn’t quite work. But affordability is one of the “-ilities” that we look at and have defined, and is one of our objectives.

Brad Penney, General Counsel, National Association for State Community Services Programs:Following up on Larry’s question on low income, I’m going to ask you a question regarding the Weatherization Assistance Program. First, our gratitude to the Department for the support for increased funding for weatherization in the just-concluded omnibus process. But let me ask you from your perspective in the policy shop, how do you see the weatherization program as part of DOE’s broader policy agenda? Do you see it as a separate program? Or more as part of a larger effort to retrofit
residential units?

Kenderdine: Well, as I said, I was here before, and it was always my hope that the weatherization program could help reduce the need for LIHEAP. Because if you can weatherize homes and make them more efficient, you’re lowering people’s energy bills. And so that was kind of marrying up those two programs and objectives. The objectives of the two programs, I thought, was important. Now, that is an interagency issue, and God forbid we ever move one from here to the other department, or vice versa. We did have a few spats like that when I was here before. It never happened. But I do think that we should be very, very cognizant of how we could help people—certainly low-income people and all people—lower their energy bills.

We are also considering setting up an energy productivity council, kind of modeled after the national petroleum council and shining an additional spotlight on how we might save energy and conserve energy and make efficiency across the board embedded into all of our end uses, and our supply and generation and distribution as well. And so weatherization is an important program. I think it’s obviously an important program for low-income people, but it has broader policy implications that are important.

Wayland: And I’ll just add, the task of doing the QER is energy infrastructure writ large. As Melanie mentioned, the first installation will be transmission distribution. But we do plan to look at end uses. That’s not just distribution, generation, and smart grid; it is “What are the effects of weatherization programs both at the federal and state levels?,” to look at the effects on overall energy system, and look at innovative policies and programs around weatherization that we might want to highlight as case studies, and look at those programs much more closely.

Kenderdine: I would also say that when I mentioned we’ve gone from a mentality of scarcity to a reality of energy abundance and we have flat or declining demand, those are good things, both of those. And both of them are in part the result of R&D and public-private partnerships across the board. So the fact that we have declining or flat demand is indicative of some of the things that we’ve done to make energy use more efficient. It’s a success story. It’s a little disruptive in business models, for example, so those are some of the things we’re trying to deal with. But it is measures of success in a lot of the work that we’ve done and you’ve done, too.