WASHINGTON — The way Jigar Shah sees it, if the U.S. is to have any chance of decarbonizing the grid, building out transmission or standing up an energy storage supply chain, the clean energy industry has to stop vilifying the oil and gas industry and start answering some hard questions — like whether decarbonizing the grid by 2035 is even possible.

One of the industry’s most provocative thinkers, Shah is now director of the Department of Energy’s Loan Program Office (LPO), where he is making multimillion-dollar decisions about which clean energy startups and projects to invest the government’s dollars. That kind of money means clean energy is no longer the plucky, small disruptor that only has to advocate for itself, Shah said at the American Clean Power Association’s Energy Storage Policy Forum on Wednesday.

In the course of a 30-minute conversation with Jason Burwen, ACP’s vice president for energy storage, Shah set the industry a series of grown-up challenges.

“What responsibility do we have to actually answer … big tough questions, as opposed to saying, ‘I would like to not piss anybody off, so I’m not going to say anything,’ and I’m going to let people think that we can be at 90% renewable energy, and that it’s only an interconnection problem that’s holding us back, which is patently false,” he said.

“How much [do] you allow an uninformed part of your industry to vilify other parts of the industry? The oil and gas sector shouldn’t be vilified,” Shah said. “They actually have a lot of really valuable talents. We don’t know how to run refineries. If these people lose their jobs, and we can’t get them back, we’re screwed. All of us are screwed because you’re not all running electric vehicles yet for your installation crews.

“So, we all need to figure out how to coexist together as we make this transition occur, and that means a deep understanding of how all of these things interplay with each other,” he said.

“Where does LNG fit in the entire [energy] mix? What is the position of this audience? Do we want people to increase coal consumption by 25% over the next two years?” he said. “Because that’s what’s going to happen unless we figure out a way to give Asia the energy that they need to grow.”

20-year Payback

Shah was equally blunt about the industry’s failure to deal with core issues of transmission, equity and the manufacturing supply chain.

“The only thing harder to build than nuclear in this country is transmission, and so come on, we’re not going to [build] three to five times transmission in this country,” he said. “Who in this room actually thinks that’s going to happen by 2035? The lines that we’re building right now, we started 12 years ago.

“So, unless you know which lines you started 12 years ago that are going to solve the problem by 2035, what do you think is going to happen?”

Another example: “We are disrupting 300 communities across the country with coal plants that are getting retired. You’re telling me that all those communities want solar plus storage to go into that interconnection? No, they don’t, because they’re not getting jobs from solar plus storage, and that coal plant actually pays $2 million a year in property taxes. Which one of you is paying $2 million in property taxes? So, we need to figure that out.”

The LPO recently made a conditional commitment of a $107 million loan to Syrah Vidalia, a graphite manufacturer in Louisiana, to expand its plant to provide graphite for enough lithium-ion batteries to power 2.5 million EVs by 2040.

But Shah sees bigger challenges ahead for clean energy supply chains because “our country has not actually done this level of planning and forethought and what we would call industrial policy. That’s where industrial policy is defined by getting an outcome that’s slightly different than where the market would otherwise set,” he said. “We’ve always just said, ‘We want to get the lowest possible price, and if that’s importing it from other countries and not doing anything here, that will do.

“We haven’t manufactured stuff here in 40 years, and so a lot of the supply chain isn’t here — the training colleges, all that stuff that we need, it’s still atrophying. And so, we need to actually go the other way and strengthen it, and all of that gets tied into the Loan Program because we’re taking a 20-year [payback] on those loans, so they’re not going to pay back unless the ecosystem is supportive of that company for 20 years.”

VPPs and Net Metering

Pointing to growing penetrations of solar and wind on the grid, Shah pushed the energy storage industry to think beyond lithium-ion batteries.

“When you think about what storage really looks like in our country, it is all the natural gas that we store every single day in huge salt caverns across the country, and we store it all year for like, bursts of time, right? And so that’s what hydrogen storage is; that’s what pumped hydro is,” he said.

“And so, the question really becomes, as we move to this modern grid, can we also get away from real time: matching that electricity [supply and demand] in a way that is just stressful for everybody?”

Shah also had some insights on the impact of transport and building electrification and the need for virtual power plants (VPPs).

“When you think about utility-scale battery storage, which is where most people are thinking about things these days, we’re going to have to have 800 GWh of automotive battery manufacturing in this country by 2030 to meet the president’s goal” of 50% of all new cars sold being electric.

“There’s no way to integrate those vehicles into the grid without a VPP. You cannot let anyone just charge whatever they want, however, they want, as often as they want without some management of the distribution rate,” he said.

In addition, VPPs might offer a possible solution for state-level battles over net metering reform,” Shah said.

Instead of incremental reform — currently being debated in California — he said, “Why don’t we just immediately let in VPPs and say, ‘If you want to do solar on your roof, you’re only going to get paid 5 cents/kWh, and then you’ll get paid another 7 cents/kWh for the integration within the grid out of VPP. So, you get paid the full 12 cents that you wanted before, but you get paid only if you become a grid resource.’”