Energy Orchestration: Transforming the Role of Customers in the Energy Transition

[MUSIC] Welcome to Electric Perspectives, a podcast that explores how America's electric companies are working to deliver the reliable, affordable, secure, and clean energy that powers our economy and our everyday lives. This show was brought to you by EEI, the Edison Electric Institute, which represents all US investor-owned electric companies. I'm your host, Brian Reel. [MUSIC] Puget Sound Energy, also called PSE, is empowering customers to take an active role in managing their energy use while integrating distributed resources. On today's episode, Aaron August, Senior Vice President and Chief Customer and Transformation Officer for PSE, will dive into how the company is leveraging cutting-edge technology, balancing growing demand and working toward clean energy goals, while placing customers at the heart of the company's energy vision. Aaron, thanks for making some time today to chat with us. Thanks, Brian. Appreciate the time. Happy to be here. Before we dive into PSE's customer-centric model and its energy orchestration concept, I'm interested to hear a bit about the customers and communities. PSE serves, especially for listeners who may not be familiar with the service territory. And also really the challenges and opportunities that you as a company are facing these days. Many of them probably are universal for the industry here, but how are you addressing what works for your company and really the work that you're doing. And you can do the job of the new, the evolving expectation of customers. Yeah, good job. Great question. Good one to start with. So I'll first say that PSE is Washington State's largest and oldest utility. We are very proud to serve over 1.5 million Washingtonians and 10 counties. And this is a little bit biased, but I think it is the most beautiful service territory in the industry up in the Pacific Northwest. As a company, and this gets to your question here, we're in the middle of one of the largest transformations in our history. We are striving to hit some of the most ambitious statutory clean energy goals that are amidst the country. And maybe I'll just double click into that to say there's something known as CEDA. It stands for the Clean Energy Transformation Act. It's been out for a number of years. This act, this work is something we're very excited about, but at the same time, it is incredibly ambitious. We have got to add 6,700 megawatts of new renewable and non-emitting resources by 2030. And so you say 6,700 megawatts, what does that mean to PSE or to the utility? A utility. For instance, a scale that essentially requires us to double our current generating capacity. At a time when load growth is at an all time high, at a time when weather-driven events are happening more frequently, and at a time when customer expectations are increasing while at the same time the demand for lowering overall race is coming out of every day and something top of mind. To take it a step further by 2045, we then need to double that again or more than double it again, really, to over 15,000 megawatts of new renewable and non-emitting resources. So it's a territory-wise, a beautiful place, which is really the epicenter of some of the most innovative companies on the globe. But as we think about what's in front of us and this steep climate ahead, we've got some amazing people and teams in place that are literally transforming our company to ensure that we can serve our customer needs, hit these ambitious goals, and do in a way that does not sacrifice safety or reliability and attempts to keep cost affordable for everybody. And you mentioned public policy as a course as a driver of some of this change, but really customer expectations. So as you think about whether you're talking about residential customers or some of the big corporations you alluded to, how are these customer expectations evolving? And as you work to meet these needs and expectations, I assume that's a kind of informing the strategy for all the other goals you're trying to achieve. Absolutely. And maybe I'll take a moment just to set the stage across the industry. So as you think about the utility industry, we're facing growing expectations both to drive the decarbonization of the energy system, right? Everyone's on this pursuit of clean and different different states and different areas have different timelines on when they want to get there. But everyone's aligned on how do we continue to decarbonize our energy system? While at the same time, we have got to keep affordability in mind. We have got to keep prices low. You push that up against the speed of innovation that's happening. I mean, it is only getting faster. It's compounding. It's incredibly exciting, but that's bumping into the pace of how the industry is regulated. And so you take those kind of dual sets of expectations and tensions, and it's creating some of the most challenging environments for utility to make strategic decisions. I think for us, we look at all of these challenges and you said it. We are putting the customer at the center of our transformation strategy. And in a place in time when you've got regulated companies that are doing their very best to be safe, reliable, affordable, and then injecting clean into how they operate, we are doubling down on customers and actually trying to come and book more like a competitive business to say, how do we continue to pool customers into new products and solutions and create things for them that are meeting them where they are with the needs that they have? And PSC provides demand-side management and distributed energy resource programs for residential customers. Really, some of these opportunities that customers have that they may not have had five, 10 years ago, how are these types of programming or how are these types of programs changing the role of customers? And are you actually seeing customers move from being passive consumers of energy to really active managers and in some cases even producers? Yeah, gosh, it's a great question. And I think it's something that we've spent a lot of time thinking through and are creating our own internally at PSC, it's called PSC 2030. It is a long journey that we have in front of us, but there's a ton of intentionality throughout. I guess, again, I think I'd take a step back just to really set some context that for us, as it relates to customer expectations and how to get them to engage in different programs, products, and services that we're working on, like first and foremost, and they'd say as a company, but as an industry, safe and reliable service is paramount to everything that we do. You start to factor in consumers facing historic cost of living challenges. As I mentioned earlier, there are weather driven events that are growing in size and frequency throughout our country in this planet. There's historic requests for new energy load coming at all utilities. It's just load growth in a place where for several decades, we were in a declining load environment suddenly, and I was an intentional staff, or suddenly we're in this place where we are now having to go the other direction. This is all happening on an aging grid that's actively being retooled for our future. So as you start to think through what role can customers play, it is through our products and services. We're looking for energy solutions that can seamlessly integrate into customers' lives, help them keep energy bills low, decrease service interruptions, and then for the major customers, I'll say that are large customers, I tech customers, etc. Business customers are seeking the same, but they have this growing need for speed to power. I need more energy and I need it sooner. But as I think about everything that we have to try to accomplish, I think the bigger thing is really this mindset and cultural shift of evolving what it even means to a utility on this case PSC, like what is a customer? In the beginning of the industry, customers were customers, they were meters, and then they were ratepayers that were today thankfully, I think they're seeing more as customers, and in the future, they're going to get to this place of to your question, prosumers. It's not just a consumer of energy. They are going to be both consuming and producing energy. As EVs, solar, battery storage become more widely adopted, and as prices continue to decline, and accessibility is there as equity programs enable those that need help and support it. It access to that type of clean technology, as that will continue to evolve and grow, we will now have customers that could potentially be producing more energy than they can do. That's going to create a sizable amount of latent capacity on our grid that's going to help us play a role as a conductor or catalyst of what we call energy orchestrations, energy orchestra that's growing every day. And so as I start to think about some of the different strategies and decision making that that we need to make, it is getting closer to our customers. And with getting close to our customers and customers at the core, before we even earn the right to create products and solutions that we think are best for them, we need to get closer. And so for us, we're looking at how do we create and we get to reactively have this underway now. New frameworks on measuring and monitoring customer satisfaction on a daily basis, retooling how we create and measure key customer journeys beyond what the traditional norm looks like. And the traditional norm would be, you know, as you think through, start stock transfer service of a utility account. That's great. That's something that we need to continue to monitor and measure, but that's no longer the beginning and end of our business. We now need are looking more deeply at customer journeys for programs and services that we offer. And you know, there's seven different experience points that we're looking at that within goal is essentially to create an enable and press of experiences for our customers. But as you said, I think these programs and the changing role of how customers are moving from more passive to more kind of active Pro Sumers, we feel is super exciting. The best example I could probably give, maybe just to summarize is if you look at EVs, EVs are a wonderful example of what a Pro Sumer asset could look like. So as we think about in EV today, it can take you from point A to point B. But in the future, it can actually help you put power at point C, B, B and F through bidirectional charging, right? That's power being not only the car is charged, but it can actually discharge that battery's energy the other direction. That technology is still nascent. It's still at a price point that isn't as broad as it needs to be, but again, it's still early. But if you think about the volume of energy and EV battery can store, right? That's like anywhere between eight to 15 residential batteries just sitting in the garage. That becomes a tremendous resource for a customer to be able to provide energy back to the grid, benefits to them that only compound. If you add distributed energy resources like solar panels and energy storage systems into that mix, then it's incumbent on utilities. And again, this is something that we're super passionate about to create programs that enable them to access those devices whether it's price signals, incentives, waste for them to earn and keep their costs low. But we do that at PSE through what are called flex programs, which I won't get into the full portfolio of our programs, but to bottom line this to say, we are extremely bullish on the idea of really tapping into the latent capacity out in our service territory. And we see this as a tremendous opportunity to redefine ourselves and transform our company. And really what you're talking about is a lot of change. And on the customer side, you do have the big corporations that have dedicated whether they're energy buyers or energy experts that are understanding all the new policies and the offerings from companies and knowing where there's opportunities to potentially whether it's self-sightened produce or whether it's energy efficiency investments they can be making. But as you're thinking about them, but also thinking about smaller businesses and individual households, how are you and what is your role in educating customers about these sort of programs and the distributed energy resource, demand side management, there's a lot of options that are available and a lot of them are exciting and new, but just building up the understanding of these offerings definitely needs to be delivered as well. - Yeah, you're pointing to just the overwhelming amount of choices and information that are out there and it's daunting. And I'll say a very succinct way that we're trying to do this. And I'll start it with saying, I'm a firm believer in any complex change needs simple architect. And so as we think about what is that simple architecture for us on educating customers, there is a really great book that I fell in love with several years ago by an author named James Clear. It's called Atomic Habits. What caught my attention on his book was the subtitle. It was how tiny changes can create remarkable results. And so as we think about this landscape in front of us and all this choice coming at us and all this innovation, where are these tiny changes that we can begin to create to embed and enable remarkable results for all of us? I'm not gonna do a full book review here, but he does call out four things that PSE has begun to fold into how we think about educating customers, how we think about program and product design. We've modified it a little bit, but it is really how do you educate to create a habit? And so there are four must-doosh that we have. Must be number one is it needs to be obvious. Number two, it needs to be easy. Number three, it needs to be relevant and number four, rewarding. Anything that we are doing in working with our customers. If it is not obvious, easy, relevant in their eyes and they cannot see the reward or value at the end, we need to go back to the drawing board and determine where and how it is we can make that more clear. And so like I said, we're taking that same approach or how we design programs today and into the future. And to me, it is so, I mean, I'll say fun for lack of a better word. We get to beat disruptors over our own industry because as a regulated company, perhaps decades ago, utilities really weren't thinking, how do you make something obvious, easy, relevant and rewarding to a customer? But today, we're in the middle of what I think is the most transformative time this industry has seen since the invention of the light bulb. And I don't say that to be dramatic. I mean, it is hyper-change happening and we get to help recreate and reset what the future will be for decades to come. And I think it is through by droopling down on customers and again, making sure it's obvious, easy, relevant, and reward for all of them. - And looking at those fourth themes, is that steer your work towards one size fits all solutions that really are applicable to a large core customers or you're really looking at tailored solutions that are responsive to whatever it is, whatever type of customer is looking for. - Yeah, so we've got, it's definitely not a one size fits all. We are looking at in all of the above approach for what we offer customers, but we also have to do that through the lens of affordability. As we try to begin to get different programs approved or look at different demonstration sites that we would want, or different demonstration projects that we would want to try to scale. We're putting the affordability lens over everything because if we make our bill too expensive, then obviously we're creating a different problem. And so for us, we're using a wide portfolio of programs to make sure that nobody is left behind and that anyone can participate to help make a difference regardless of their comfort level with technology or their access to it. And so, good example would be, we've got within our Flex portfolio, there's more of a behavioral way to participate. So if you're reaching an event where let's say it's a cold winter day or a hot summer day and the grids experiencing peak conditions. And so, we wanna try to lessen the amount of load that's now going across the energy highway, if you will. You don't need a smart thermostat to participate. You don't need an EV to support manage charging. It's, can you just turn off some more lights in your home? Can you think about where it is you put off doing a load of laundry? But it's those types of things, just simple behaviors that you can adjust where we found ways to reward customers monetarily if they enroll in those types of programs and they can beat the baseline that they have. And so that's just one example of many, but again, it's not just meter, ray payer, customer. It's now you start to get into what are the different types of customers we have in the system, what motivates them, and how do we make it obvious and easy so that they can then continue on that path to relevant and rewarding. - So when you take that and you factor in the challenges ahead with growing demand, the priority for customer affordability it kinda makes me think back to that phrase I used in the intro there of energy orchestration. Can you describe a little bit about how you see that or describe in a transformational shift you're seeing underway at PSC and really what does that term mean to you and who's the conductor in all of it? - Yeah, this is probably something that when I think back this entire year, we've spent the most time and energy to really get this dialed into a place where energy orchestration becomes one of the top three things from the customer and transformation organization over my remit, my responsibility, that is a focal. And so if you think about a smart thermostat and eB battery, any connected device that can actually transmit back and forth all of those connected devices think of them as instruments, a musical instrument. And so we'll stick with eBs as just the singular part of the orchestra. If every single eB decided to charge at the same time on a hot summer day, that's gonna create tough conditions for the grid to handle, right? And so however, if we work with customers to send signals, you know, and again, think of an orchestra play that instrument lower at this moment in time for smart thermostats play at this particular tone, but it's just to harmonize all of these devices, we can then begin to reduce the peaks and when there's areas of opportunity where we can fill any valleys, we can do that. And it's charge at this time. And so again, it's dispatching signals back and forth, which by giving them more programs, participate in helping them adopt some of these different customer-sided technologies, our aim would be to empower customer choice and flexibility, enhance their control, help it be seamless through automation, and then optimize the interactions to help them achieve, again, high levels of energy resiliency, low levels of cost, and through all of that, we would begin to start to chip into some of the clean energy targets that we have. - And what the phrase again, is this something that's helping to guide the transformation that's going on within PSC, or is it also an analogy that you're utilizing to help policymakers and regulators and customers, and other key stakeholders really wrap their heads around how things are changing and the role you all play and kind of what your goals are. - Yeah, the latter for sure, it is, we wanna be able to use internal language that then allows us to use it. that seem like which externally. And so while I'll say our internal orchestra is playing at a low tone right now, we're getting ready to make that bigger and larger in the years to come. As I think about different programs that I've been a part of, I've been in the industry for over 10 years. And there are different programs that I think are a little bit garage bandy. Like it's great, like they're getting after it in the garage, but it's just a singular thing. How do you get every garage playing together in a way that harmonizes what we're trying to accomplish? And I think the utility industries, it's complicated and it's hard to understand. And there's so many things, inputs and outputs that are adjusting what and how our business works and functions that trying to provide examples that make sense and can land in a way that encourages people to adopt, pulls them to the outcomes. Again, we're trying to do both. And what kind of success have you had with customers already? And I guess in order to answer that, maybe how are you measuring and defining what success looks like as you work to implement this sort of strategy? Yeah. Customer experience is the primary measure. And I know that that might sound kind of obtuse relative to all of these things to try to drive, reduce peaks and just really try to optimize the amount of energy that's out there, again, tapping into the latent capacity on the grid. But in order for the orchestra to work, you have to have an active participant that wants to play and wants to play in a very intentional and subscribed way. So customer experiences are primary measure. And so as I said earlier, we've created a daily customer satisfaction dashboard. It's got seven different dimensions in it that are helping us really harness some of the stick with the analogy here. How we play these notes and how we help customers. And so that's kind of thing one in the foundational piece of all that we do. We do have specific targets tied back to CEDA and something called CEIP. It's our clean energy implementation plan, our integration plan. And so demand response is one slice of different types of program verticals that are out there. Demand response has been in the industry for decades. For PSC, we launched our, we kind of revised. We hadn't been in the demand response business for well over a decade. And so we launched last fall. We've got some goals within it for 2024, 40 megawatts of savings at P and that gets all the way up to 86 megawatts and then over 100 can more longer term out in the out years. I think by our third or fourth event, we had very much exceeded target for this year. We are well above target. So the appetite is there. We have added, and that was just with in smart thermostat programs, something that's been out in the industry for quite some time. So I wouldn't say it's like largely innovative, but you got to be willing to play a note in order to actually get people to get engaged. But since then, we've quickly added a managed charging program. We just recently launched a residential battery program. And so these types of programs all fit within our virtual power plant framework, but they're all active upon within demand response. So long wanted to say we are seeing the participation. We had over 600,000 customers participate in some shape reform in an event. So that's from either taking the behavioral action all the way up to their devices that were enrolled took action. So the potential is there. And I think we're really, really proud and I think excited about the early returns we've seen so far. And to pick up a bit on demand growth, which we touched on earlier, just nationally, that's a story. You have data centers and AI and expanded manufacturing and reshoring of manufacturing and all that. So just looking a little bit at what PSC is projecting and the role that some of these programs can play. I saw that distributed energy and demand side management programs may make up to 20% of the new capacity additions by 2030. And that could rise. I believe it was 25% by 2045. In the scale of what you expect demand to be in the coming years, does that make a dent? Do you think that's enough supply capacity to keep up with demand growth? And what how important is it as you think about your kind of long-term corporate goals being carbon neutral by 2030? It seems like it's a lever that really helps out with a lot of those, I guess, goals that are ahead. So if you think about a utility's rate case and what goes into those rates, those general rate cases and how it is that the costs and the decisions that are made that pass on to customers, utilities are required to support peak demand in a given period. And so if we project that peak demand is going to be on a cold winter day or hot summer day, but let's just go with hot summer day right now, we're coming up summer. So if there's going to be a peak and that's going to be the highest demand for energy for PSC in a given year, but we're only going to touch that peak for maybe four hours of the entire year. We need to make sure that we have enough energy to support those four hours. We can go out and we can make investments and we can build a particular plant. We can procure energy. There's different things that we can do to cover those four hours. We strongly feel like the latent capacity on the system. There's enough there for we actually don't have to make that type of builder, that type of decision. We can put those dollars in other places. I would much rather put those dollars in places that can be used more than four hours a year. And so I think that's one of the benefits here. And so I think the, is it enough? I feel like the demand side management programs that we have through the lens of energy orchestration is going to enable us to get the last couple of degrees of difference and put it elsewhere into the system that would be better for our customers. There is a growing amount of DERs coming on the system. I think we have just over 60 megawatts of capacity within our interconnection cues. So again, this is not utility scale, but these are the types of things that more and more and more customers are starting to plug into the grid. And so the potential is out there. There was a study that was done not too long ago. The DOE has put out some really great work on looking at DPPs and just distributed energy resources in general. And I think the stat was something like 500 megawatts of power by 2030. If you could figure out how to leverage these different assets that are out there. And so I think there's just so much potential. And I think the worst thing that we can do is run the business the exact same way. And so we see energy orchestration as a way to actually change which that what that looks like and help us transform. And you mentioned it a couple of times. VPPs are virtual power plants. Certainly are another hot topic. And as you think about aggregating the various programs and levers that you have, you're disposable to meet those one or two days a year when you're dealing with that really high peak. That's also when it's the most important that these resources show up and that they're available. So how are you all thinking about that just to again make sure on the days when customers need you the most that you're fully confident that you have all the tools that you need in place? Yeah, the man responses largely been a vehicle that help do that peak shaving, but it's not considered a part of RA right. You can't you can't count on it because customers can opt in and out. I think that is something that from a how you design programs of the future. We're thinking about how to make sure that those devices show up. We're thinking about is do we want to start looking at does the utility own that device or does the utility provide an incentive that enables use at particular times that match with customers needs or match with the customers authorization to do it. And so we started on our VPP journey in 2021. We partnered with a company called Auto Grid. Now called UBLIGHT right so there's been an acquisition there. Again great partnership great team. It's enabled us to create a centralized application for enrolling dispatching and assessing the performance of a given event period and then just again making sure that we can engage our customers in a way that creates the right result. I think that partnership is going to grow beyond just demand response and as we start to look at your point how do you how do you count on these resources? How do you make it be a part of resource how to proceed? And so that that is certainly a path of thought that we're down right now and it and I think it's something that obviously needs more work but I think as these devices become more adopted throughout the system and depending upon is it bi versus kind of bill did we buy it or a customer did the customer buy it another enrolling in it. Did we build it ourselves and put it in front of the meter. All of those types of decisions will play a role in how and when we access the device but again I cannot stress it enough. It is customer expectations that will be the barometer of whether or not something was successful. And if other electric companies are interested in taking this orchestral view of everything that you have going on what are some of the first steps how how did this all get roll in with you all and I imagine there's a lot of internal teams that really have to work together to bring this sort of vision to life. 100% and I would say first and foremost don't be afraid to play a single note once you start doing that you can bring on another team and you can bring on another team and another and before long you'll have teams of people that are starting to buy in to the belief that we can reshape but it it requires one person. And so have the courage to do that, have the courage to be a disruptor of your own industry. I think it's actually a super fun seat to be in. But you got to do energy orchestration internally before you can do it externally. And does that person need to be a president or CEO or do you think you can get that momentum going otherwise? Obviously that fine is essential at a point. Yeah, I think it helps for sure, but I do think that organic growth, putting the customer at the center, if you're an individual contributor and you've got an idea and you're trying to get something going and you have something within your realm of control that you think helps play that note. Use the customer experience and customer satisfaction as your barometer for success. Use energy affordability as another dimension. And so I think as you start to stack those things up, you can start to begin to make that case because the one thing that is clear to me in any industry before long, the last competitive differentiator is customer experience in any industry. If every utility had to start to compete against one another, again, we're in a regular monopoly. We don't, but if or many are customer experience is the last competitive differentiator lean into that and help start to make cases inside your organization to do it. Thankfully for PSC, we've gotten amazing CEO Mary Kip. She's all in, she grabbed an instrument on day one and she's getting after well. Thank you, Aaron for spending some time with us today and really looking forward to just following the work that you and your team are doing and really just driving innovation and the customer experience makes it a really exciting time to be in this industry. Excellent. Thanks for the time. We really appreciate it. And that's our show for today. Thank you for listening and come back next week to hear more from experts and industry leaders who are talking about the innovative ways electric companies are building a cleaner, smarter, stronger energy future for the customers and communities they serve. You can subscribe to our podcast and Spotify iTunes pod beam or wherever you get your podcasts. Just search electric perspectives on your host Brian Real. Thanks for listening. [Music]