Startup Series: Rhizome's Resilience Planning for Utilities
Mish Thadani is the CEO and Co-founder of Rhizome. Rhizome helps utilities plan for resilience. It's an AI-powered software platform that helps electric utilities identify vulnerabilities from climate threats to quantify risk and to measure the economic and social benefits of grid enhancing investments.
In our discussion, we delve into how utilities address vulnerabilities arising from extreme weather and other climate change impacts. We also explore how they balance preventive investments to avoid disaster-related outages with strategies to rapidly recover after incidents.
Episode recorded on May 23, 2024 (Published on June 27, 2024)
In this episode, we cover:
[2:42] Exploring the definition of resilience
[6:26] Vulnerabilities of utilities to climate and weather extremes
[10:02] Data-driven balancing of utility investments
[14:15] Enhancing decision-making in utilities with Rhizome's software
[16:43] Comparing physical asset and capacity risks
[18:07] Reconductor technology as a resilience strategy
[22:53] Regulatory challenges in resilience investments
[25:50] The impact of proactive resilience investments
[29:42] Inside look at Rhizome's software platform
[33:35] Rhizome's market strategy and achievements
[36:07] Federal initiatives on resilience: expectations and realities
[39:53] AI in resilience: challenges and opportunities
[42:34] Where Rhizome needs help
-
Cody Simms (00:00):
Today on MCJ's Startup Series, our guest is Mish Thadani, CEO and co-founder of Rhizome. Rhizome helps utilities plan for resilience. It's an AI-powered software platform that helps electric utilities identify vulnerabilities from climate threats to quantify risk and to measure the economic and social benefits of grid enhancing investments. I was eager to learn from Mish how utilities think about the different vulnerabilities they may have from extreme weather and other impacts of climate change. I was also interested to hear how utilities balance investments they might make to avoid disaster related outages as well as investments they make to help them get up and running as quickly as possible after an event occurs. And I think he and I covered most of this in our conversation. But before we start, I'm Cody Simms.
Yin Lu (00:52):
I'm Yin Lu.
Jason Jacobs (00:53):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (00:59):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:04):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help. Mish, welcome to the show.
Mishal Thadani (01:19):
Cody, thank you for the invite. Glad to be here.
Cody Simms (01:21):
I'm excited for this conversation. And I'll tell you, I feel like I've been trying to get smarter in the space broadly of resilience. And the main reason why is I feel like sadly we, as a society, are on pace to not achieve most of the goals of the Paris Climate Accords, the maintaining temperatures to 1.5 CE by 2030. And with that, means, obviously, we should all continue to invest in solutions to mitigate emissions and solutions to curb future climate change problems. But there's also a reality that we likely are going to need to start to think about increasing the amount of investments we do in helping the world deal with the effects of climate change, which are already real and becoming all the more real in front of us. And so with that, when you and I first met, I was intrigued to hear what you're building, and I thought it would make for a good conversation to bring you on here and really dive into this topic of resiliency, particularly around our energy systems. So there's your setup.
Mishal Thadani (02:37):
I think there's a lot to cover. So excited to dive in, and hit me with it.
Cody Simms (02:42):
Well, the first question I'll ask is a broad one, but one that helps us maybe set the stage, which is, I feel like with all that setup I just gave, the word resiliency is starting to resemble the word sustainability in my mind in that it's maybe overused, overgeneralized, doesn't actually really mean anything anymore because it's used to try to be a cover for so much stuff. So with that framing, I'm curious how you define resiliency.
Mishal Thadani (03:12):
And used quite often without actually saying much.
Cody Simms (03:15):
Yeah.
Mishal Thadani (03:16):
And so we've been diving deep into all of the different entities that exist that help plan for and quantify resilience. There are lots of different organizations, whether it's EPRI R&D arm of the electric utility industry or the national labs, even IEEE is developing standards around reliability and resilience. And they've all come up with various definitions that overlap in some way and intersect. But the way that I would really categorize them and qualify them is in two distinct buckets. Number one is around the ability to recover from an incident that does occur, whether it's the time or the energy that required to get a system back up and running. And so if you can actually measure that, quantify it, and reduce that time, then you're, by nature, increasing resilience.
(03:59):
The other bucket, which is kind of through more the lens that Rhizome looks at things, which is we have a natural state of the way that things exist, and we normally refer to that as blue sky days, days that are right here in DC where I'm at. There are no winds, relatively mild heat day, and very few clouds. And then anything that does come, any sort of extreme weather variable, whether it's precipitation, heavy wind, even ice that does cause an impact on a system that can be quantified, then that is another way to define resilience. That is anything that's not or beyond the status quo that's causing an impact to the system. By the way, that can also go beyond extreme weather events. It could be resilience to cyber threats, resilience to squirrels chewing wires. This concept can apply to many different threats, but obviously when we're thinking about it, we apply it to the extreme weather variables.
Cody Simms (04:52):
Let me pull on that thread a little bit. I just had on the pod the director of the Idaho National Lab, John Wagner. I don't even know if that episode will be live by the time yours ships, but just recorded with him within the last week. They're famous for working on advanced nuclear technologies. But another area that he spoke about as being their focus is around cyber attacks on the grid in particular. We're not going to spend this episode talking largely about cybersecurity, but when you are talking to utilities, how much of their thought on resilience is extreme weather and climate related and how much of it is cyber attack related?
Mishal Thadani (05:29):
I'd say that we get the question about 10 to 20% of the time when we're working with utilities. I think it's pretty clear and obvious what the immediate pain point is that Rhizome is trying to address and solve and that this is a critical pain point for utilities for so many reasons that we'll dive into. But we do get the question of, "Hey, these concepts and frameworks related to modeling and quantifying resilience and then actually taking mitigation strategies to reducing those risks are applicable in the cyber threat space. And can your models or can your framework be applied to actually quantify that, help us make the decisions that are required to improve resilience to those other threats?" And so we do get the question not super often, but the same frameworks. And I think this is representative of the federal government as well, right? You have CSER. They cover both extreme weather resilience and cyber resilience, developing programming research tools and providing funding for organizations that are working on a broad spectrum of resilience topics.
Cody Simms (06:26):
So that cyber topic aside. When it comes to extreme weather and climate change induced resilience needs, it sounds like there are two main categories that you look at. One is about an organization's ability to respond quickly once an event has happened. So how quickly can they deal with the event. And the other is predicting and understanding the potential events, the interruptions to these blue sky events in the first place. Am I following correctly that those are the two areas that folks are asking for help navigating?
Mishal Thadani (07:00):
That really speaks to the different definitions of resilience. But when we think about especially modeling for resilience, it all of a sudden becomes crystal clear from a mathematical perspective. It's all about quantifying the likelihood of a failure happening on the grid and what that consequence is. And as you can imagine, if a utility in particular has a lot of trouble getting a system back up and running, you think of, say, the Winter Storm Uri that happened in Texas where it took three, four, five days to get many millions of customers back online, then that consequence part of the equation really increases.
(07:31):
So from a mathematical perspective, there's pretty clear frameworks on how to quantify value related to resilience. Now, there's a lot of argument about what goes into that bucket of quantification, what valuation categories do you actually include, but from a framework perspective on understanding the likelihood and consequence that applies to really both of those categories. But really the definition of resilience as we get this question all the time from utilities is how do you define resilience? Well, we can point to all these different definitions, but in our view, what matters the most is how are the decisions being made in order to improve a utility's ability to manage and reduce impact on the system and for their customers.
Cody Simms (08:14):
And part of that is also related to the job they're hiring you to do. When it comes to responding quickly from a disaster once it's happened, I mean, that's an operational challenge that is going to be hard for a third party data provider to necessarily help them manage in real time. But understanding the future risk or the vulnerabilities in their system or the likelihood of an event causing one of the vulnerabilities in their system to actually cause issues is certainly where predictive software can come into play, I suppose.
Mishal Thadani (08:44):
That's exactly right. And maybe it's good to take a pretty clear example where last week, you had 100 mile an hour winds in Houston, Texas that knocked out 70% of the power for the customers in the Houston area, and it took a while for it to be restored. But you can think about the 70% at a system-wide scale and then start to peel back what's actually happening on the ground at a higher resolution. So this system is made up of thousands of different circuits. That circuit is then broken down into different protected sections that can go offline and then all of the customers within a protected section up to a protection device experience outages if there's a failure on that part of the system. And then that goes all the way down to the customer where you actually have customers who experience the outage and then are left vulnerable in a lot of different ways, whether it's they don't have access to clean water, they're on health devices, they simply can't be productive at their jobs.
(09:38):
And so going all the way, and this is really where Rhizome tries to unpack, from the system-wide level to more of a bottoms up analysis that gives a better resolution into where are the failures happening and how can you actually quantify that in terms of impacts and give a high resolution risk analysis to utilities to be able to start to make the precise investment decisions on preventing those instances in the future.
Cody Simms (10:02):
When you're looking at that, these utilities have a number of potential investments they can make. How much of what they're trying to do is understanding where they're at risk and how much of it is trying to understand of these different investments that they might make in their system, which ones are likely to deliver the most lowest likelihood of service interruption and or greatest likelihood, I guess, continued value deliverance to their customers?
Mishal Thadani (10:30):
An elaborate way of saying bang for your buck, where are those investments going to mitigate the most amount of risk in terms of fewer power outages, fewer restoration costs, fewer impact customers? And I would say first and foremost, utilities have had a lack of understanding of where their risks actually occur on their system. There's an absence of data both internally. So a lot of the data sets related to their assets, the categories of the outages they have oftentimes have missing fields, relatively unclean data sets. And then at the same time, they also tend to not have as much external information that's really relevant when trying to understand what are some of the causal or correlational variables when an asset on their system does fail and cause power outages.
(11:13):
So that is a fundamental aspect that we bring to the table is going in and working with a utility and telling them, "Hey, at a pretty high resolution, usually at the protected section level, we can offer a projection on how likely extreme weather events on their frequency of occurrence in the future are likely to cause a failure on this part of the system, and here's what the consequences anticipated to be." So giving that layer of insight is the first step in actually designing a resilience plan from that. Once we get to that point, and I'm describing our implementation process here, is you can actually observe previous investments that they've made in history and quantify the benefits from those through some of the AI approaches that we're bringing to the table.
(11:59):
There are also many investments that utilities aren't deploying today that they're considering that they want to deploy in the future. Things like distribution automation, trip saver devices, which basically reroutes power if a section of the grid goes down so that instead of 100 customers losing power, only 10 customers lose power. It basically isolates the power outages that are occurring. And those are devices that are still being deployed at very early stages from any utilities today. It's a huge benefit to be able to project what are the aggregate benefits you're going to get over a 50-year timeframe that these devices are anticipated to be active so that you can then go to the regulator and justify those investments for recovery.
Cody Simms (12:37):
You have a section on your website that lists a few different classes of sort of investments that utilities are needing to make. I'm going to just go through some of these, and love your thoughts about what considerations utilities are having to balance when looking at this stuff. So the first one on the list is vegetation management, which I assume is the likelihood of trees knocking down power lines, seemingly the most low tech probably thing that could be out there, but causes a huge amount of damage, right?
Mishal Thadani (13:06):
Yeah, that's right. I think over 50% of power outages on the systems across the US are caused by tree branches. And most of the time, it's from the high wind events or the storm events that end up causing tree branches to make contact with those power lines. I mean, vegetation has another issue as well. It causes wildfires. Contact with power lines or if there's a fault that causes some sparks on some overhead assets, springing of that sparks on the vegetation could spark a wildfire as well. So vegetation management is a critical tool in the utility tool belt in order to mitigate risk from the highest cause of outages and the largest bucket of risk there is. And that is the chance that some nearby vegetation is actually going to cause an impact on the system or even worse that we're going to start a huge catastrophic event by that proximity of vegetation.
Cody Simms (13:55):
And when they come to you, first step is, do you have a vegetation management plan in place? And if you do and it's showing signs of being problematic, how much should you invest in hiring crews to go clean up vegetation relative to investing in some of these other areas, I guess, that we were talking about? These are the decisions that you're helping these utilities to make. Is that right?
Mishal Thadani (14:15):
These are some of the more operational decisions that other companies like AiDash, Overstory, some of the folks who are trying to identify a higher resolution vegetation data sets and proximity utility assets and actually go trim those trees. Prioritize where you go, trim those trees. We take a bit of a different approach here when thinking about this in the context of long-term planning. So just about every utility has a vegetation management plan. There are massive budgets allocated to vegetation management. What we are trying to help utilities understand is first of all, how much risk are you reducing over the period of time that you are doing this vegetation management? How many outages are being prevented? You can quantify reduction in ignition risk as well, but that's a whole another topic. But really compare this to a lot of the capital investments that utilities are making today as well.
(14:59):
So you mentioned the list of investments that we have on our website. Many utilities are rebuilding lateral lines or insulating conductors. Let's take the insulating conductor example where many of the conductors in this country are just bare wire, kind of the low cost solution to putting up overhead lines. And bear conductors are at very high risk of causing wildfires and failing with vegetation contact. So if you cover those conductors with an insulated layer, then you can dramatically reduce that risk and that's a capital investment that a utility would make for the long term. Now, is it useful to actually trim the trees and do a covered conductor? If you cover the conductor, do you maybe get to peel back the level of vegetation management that you do along that lateral? These are the decisions that utilities currently have no quantified way or at least accurate quantified way of making those decisions. So that's what we're trying to reveal for their planning teams.
Cody Simms (15:54):
Or even removing the lines from overhead power lines and running them underground, as an example, would be another sort of trade off you would make in that same spectrum, I suppose.
Mishal Thadani (16:03):
I try not to overuse the undergrounding example, but that is one of the investments that many utilities are starting to make.
Cody Simms (16:10):
Why do you not overuse it?
Mishal Thadani (16:11):
Just because I think most people point to undergrounding as a capture all solution. It's really expensive and there are many other options.
Cody Simms (16:19):
Well, let's turn to other types of investments they can make in their power lines, which are heavy capital investments that have been getting a lot of attention in the news lately. Though I'm curious how you would define... Again, back to the definition of resilience, is this a resilience investment, which is the notion of reconductoring, which, as I understand it, is actually enabling the existing transmission lines that you have to just carry more power through them?
Mishal Thadani (16:43):
This is where we're going to get even a layer deeper into risk modeling here, which I wasn't sure if we would, but I think we should. So within resilience or climate risk modeling, there are two major categories of risk that exists for utilities. One category is on the physical asset risk. And that's the storms, winds knocking over power lines, causing vegetation to make contact, creating those outages. And we refer to that as asset risk. And the other type of risk is capacity risk where if you have an increase in frequency or severity of heat events like we've been seeing in the Northwest, for instance, then you're at a real risk of having to perform load shedding on the system or of having transformers blown and many customers losing power, particularly critical in the Pacific Northwest because so many people don't have AC. So during those heat days, there are many vulnerable populations that become severely impacted.
(17:36):
So when you think about both asset risk and capacity risk, utilities need to make decisions related to both, and hopefully any investments that they're making are actually pulling on value streams from both asset risk baseline as well as the capacity risk baseline. So when you are reconductoring, you are increasing the capacity of a line that obviously enables the new connections for customers, increases hosting capacity for distributed generation, but it also increases the capacity of that line to withstand higher temperature days that are becoming more frequent.
Cody Simms (18:07):
That is a point that I had not heard made before, which I think is worth underscoring. When I've heard of the need for reconductoring, it's because, "Hey, we're electrifying the system. We're adding all this more load to the system. Hey, we have these big data centers coming online that are going to chew through so much more load, but we can't get permitting through quickly enough and we can't build transmission lines fast enough. So let's reconduct our existing power lines and just allow them to have more capacity through them," which makes sense, like increased demand due to shifting technologies.
(18:38):
I'm hearing you say, "No, there's also a climate change issue here," which is when it gets really hot, you have a lot more people needing to turn on their air conditioners all at once, which is demanding a lot more power into the system. And so that is also a climate resilience investment that needs to be made to enable the delivery of this power to those people so you don't end up having to do rolling blackouts, for example, on really hot days and causing people who need air conditioner to not be able to have it.
Mishal Thadani (19:04):
That's exactly right. And as the grid changes, as our appliances change, and as weather changes, we have to go about planning the system with a lot more scrutiny given the capital investment levels that utilities have today. So I'll give you an example. In the Northeast, you have lots of heat pumps being installed and you see some areas like Vermont where there are cold chills that are actually getting colder in Vermont, even though the average temperature is rising. Those cold snap events are actually getting colder. So you're now seeing winter peaking in the State of Vermont because of the electrification efforts and those cold snaps. And so now you need to design the system to tolerate a much higher level of winter peaks than you previously needed, and they're actively considering in the New England ISO area load sheds because of these winter peaking issues that they're having.
Cody Simms (19:55):
I assume then that other sorts of capital investments that we hear utilities talking about could also be designated as resilience investments, things like battery storage and increasing the capacity of the grid to manage when and how electrons move through the system. I would think of battery first and foremost as primarily being something that is peanut butter and jelly with intermittent renewables. But I suppose in addition to that, the reason for that is for many of these same use cases that you talked about with respect to why you need to do reconductoring from a capacity risk perspective.
Mishal Thadani (20:34):
That's exactly right. If you see the shift in the utilities interest in distributed energy resources for resilience over the last just three or four years, it's just a huge shift in mentality because now utilities all over the country, not just in California, are actively considering battery deployments as their capital investments to increase the resilience of the grid. And those being the non-wires investments that can pull, again, on even more value streams and provide grid service, especially during those extreme temperature days and be used as back of power by customers if those batteries are cited behind the meter.
(21:10):
So I'm glad that you brought up batteries because that's actually how I got into the resilience space in the first place. Around eight years ago, there was a big proposal in DC where I live to upgrade a substation would cost approximately $250 million. And the conversations around non-wires alternatives were really early in those days. So me and a few other stakeholders in DC actually put together a proposal to deploy $250 million worth of batteries and see if that would solve the problem. Unfortunately, both the regulatory bodies and utilities at that time were not ready for such a proposal. But today I actually think that that would be a reasonable thing to consider as an alternative to, say, upgrading substations and increasing capacity of the system as the wires approach.
Yin Lu (21:52):
Hey, everyone. I'm Yin, a partner at MCJ Collective. Here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast. We started in 2019 and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change.
(22:19):
Some initiatives have come out of the community. A number of founding teams have met, several nonprofits have been established, and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly Women in Climate meetups, Idea Jam sessions for early stage founders, Climate Book Club, our workshops, and more. Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (22:53):
You just set me up perfectly for the next area of topic I wanted to go into, which is regulatory. And I'm curious how you're seeing regulatory environments around utilities adjust in general to the need to requiring greater amounts of these resilience investments.
Mishal Thadani (23:13):
Absolutely. And we could spend probably a whole another episode talking about this, but I'll do my best to really condense and get to the point here. So utilities are actually considered, and regulatory bodies are mainly known for how slow they move. Yet over the last probably just two, three years, you've seen multi-billion dollar resilience plans coming out, again, not just from California, but in Florida, Georgia, North Carolina, New York, Texas, Illinois, plans to really beef up the resilience of the system. And they actually call them resilience plans. So resilience plans that had never been even considered before three years ago now are taking wave. And the regulators are faced with the challenge of how to evaluate the merits of these plans based on their resilience value and the benefits to customers for the costs that are going in.
(24:04):
So naturally, anyone could say, "Extreme weather events are increasing with frequency and intensity. We need to dramatically increase the amount that we spend on the system in order to withstand these events. It's in the best interest of customers." But regulators need more burden of proof than that. So what you're seeing unfold in the regulatory environment is a concerted effort to actually implement resilience regulatory frameworks at the state level so that you can qualify investments under different types of regulations that are created. So for instance, you can require that a utility does a risk assessment on their system, that they do a climate vulnerability study. You can require that a utility compares different scenarios of investments against each other for their cost benefit so that you can demonstrate why you chose the investment path forward. Incorporating equity and social vulnerability is a huge trend in consideration right now related to resilience that's being adopted and then to do ongoing reporting.
(25:00):
The last thing that a regulator wants to see is that they approve billions of dollars of utility spend for resilience, then all of a sudden a storm comes, the utility responds poorly, there are hundreds of thousands of power outages on the system, and we have no idea if those investments actually made a difference or not. So actually understanding more granularly are these investments actually making a difference?
(25:22):
So these are all the things that regulators are starting to think about in their requirements for those utility resilience plans. I work with regulators all across the state to share some of the information that we're learning from other states internally, how national labs are going about thinking about resilience, because the more that we can share the information on what's even reasonable to ask a utility to provide, then we'll all be in a better place on the transparency around those resilience investments and that we actually track to a more resilient system.
Cody Simms (25:50):
It strikes me when it comes to starting to mandate sort of investments or even just regulations that are encouraging utilities to make these investments. As a society, we're not great at investing in things to prevent potential future problems because the investments are successful, it's hard to point at something and say, "Look, nothing happened." People want to be able to take credit for their successes. And it's easy to invest in things that deliver obvious benefit to humans like, "Hey, we made this investment in this new power plant. And look, the cost of electricity is getting cheaper for you." It feels harder to invest in things that, say, "Hey, there was a storm, and you didn't even notice that nothing happened." How are you seeing anyone grapple with investments that are almost politically challenging to make?
Mishal Thadani (26:53):
100%. And you're talking about the proactive nature of these investments as opposed to maybe the reactive nature. And it really manifests itself in the way that utility planning has been done historically, which is using historical data as the informed opinion on which investments to make and where. And now transitioning to a place where utilities are trying to say through climate vulnerability studies, through the design of their resiliency plans and bringing new metrics to the table that things are changing, investments or even design standard. Class 4 poles are not going to be useful, especially around the Gulf region where wind speeds are just getting so high. So a utility and especially utilities around the Coast are saying, "Hey, we need to upgrade to class 2 poles or even upgrade to concrete composite or even steel poles because these wind events are getting worse." And how do you make that case in front of a regulator and have the regulator say, "You know what? We think that's a good idea," based off of especially just consumer interest concerns, making sure that rates aren't increasing for no reason.
(27:53):
So the way really that we are trying to help at Rhizome here is to, within our platform, within our framework, really give an understanding of what would be the impact of a storm, had investments not been made, and through the historical analyses that we can do on systems and understanding the fragility of various assets under different conditions. And if you change that design standard and fragility actually reduces, then you can actually measure if something would have failed or not given the presence of a new storm.
Cody Simms (28:26):
Your software platform in particular helping to try to deliver those counterfactuals of, "If this investment hadn't been made, here are the economic impacts that your rate payers would have seen or that your system would have experienced."
Mishal Thadani (28:40):
That's exactly right. And for utilities to develop counterfactuals on their own is really difficult. In fact, it's so difficult that they've never been able to do it. What typically happens is a storm hits. The regulator says, "But wait, you made a few hundred million dollars of investments, especially in the areas where you had failures. Show me that these investments were worthwhile." And the utility will try to present general information around reduced outages over time, but that doesn't really get to the root of things. It doesn't control for the external variables that is the frequency intensity of extreme weather events. So what we're trying to bring to the table, especially as a utility tries to communicate their storm response efforts and the effectiveness of their ability to withstand those extreme weather events is the ability to say, "Look, we controlled for all of the variables that exist related to extreme weather, the age condition of assets, and the design standard of the assets, and we found that if you hadn't made these investments, you would have experienced X number of outages in the future or related to this storm."
Cody Simms (29:42):
Describe what your software looks like to someone at a utility who's logging into it.
Mishal Thadani (29:46):
So typically our users are asset planners, asset managers or engineers that are really trying to identify what are the needs from either an asset risk perspective where you have old aging infrastructure that might be at risk of failure or capacity risk issues where you might need to expand the capacity of the system or do some customer related energy program work to actually reduce loads or shift peaks. And so the way that we structure this is simply as a planning tool. We refer to it as SimCity for grid resilience where you have a geospatial view of the transmission and the distribution system. You can also see where the utility customers are, their average loads, so on so forth.
(30:24):
And we can layer on different metrics related to resilience. For instance, how frequent are you anticipated to have power outages on this part of the system going out to 2070 with the likelihood of extreme weather events. And by the way, related to extreme weather events, here's the likelihood of a one in 10-year event out into 2050. Now, a lot of the climate science is saying that a one in 10-year storm event is likely going to be a one in two-year event around the 2050 time horizon. And it's one thing to say that in conversation, it's another thing to be able to model it in regard to failure on the system. So when we layer on different pieces of information and we build specifically our asset fragility models, it's always within the context of what's the future return period of different extreme weather events using downscale climate data that we have and what's going to be the anticipated risk in terms of outages and value at risk on that system? And you can see that on a geospatial basis and also see different characteristics of the system as well, right?
(31:23):
Some people would call it a digital twin. Digital twin is a loaded term. So I will stop shy of saying it's a geospatial planning tool that provides a lot of contextual information on vulnerability to the system and actually create investments within the tool itself. So imagine you select the power line that's going down your block. You can see how vulnerable it is and whether it might be worthwhile for covering that conductor, rebuilding the line, replacing the poles, so on and so forth, and actually understand what the value of that investment is and build up your asset plans that way.
Cody Simms (31:57):
And I believe you've gone to market at least initially targeting direct sales to utilities. You have Seattle City Light, for example, as a lighthouse customer. It strikes me that what you described could also be very useful to project developers, project financiers, et cetera. I'm curious how you've thought about the evolution of your go to market in that regard.
Mishal Thadani (32:22):
It makes me think, did you see the tornadoes that ripped through Iowa, took down about five wind turbines? Almost looked like there were matchsticks that came down. And in reality, there are many new energy assets that can be evaluated for their climate risk. What's the likelihood that tornadoes occur, especially in this part of the country where those tornado alleys are shifting East? Do you have assets that are actually going to be vulnerable to those shifting tornadoes, just as an example?
(32:49):
And absolutely. We've talked to power generation companies, IPPs, about doing some risk related work that could inform where they cite specific assets. And we haven't gotten too far down that road. We're hyper focused on electric utilities. There's a huge need, huge pain point. And we're seeing a really repeatable challenge across the electric utility industry, which is the need to evaluate risk and actually streamline the climate intelligence within their existing planning workflows. So we're trying to execute really well on that one fairly valuable challenge before we really start to explore other types of assets or really other types of sectors, say, local governments and transportation infrastructure, telecom infrastructure, so on and so forth.
Cody Simms (33:35):
Earlier in our conversation, you mentioned that historically, utilities are relatively slow moving. How has it been going to market with that as your initial target customer?
Mishal Thadani (33:49):
Well, look, timing is everything in large enterprise businesses. And right now, the industry is grappling with major issues related to climate risk. And I think the best way to frame this is that over the last five years, utility downgrades from a credit perspective have outpaced upgrades. And in the history of the utility industry, I don't think that's ever happened before. There's actually one exception, which is PG&E has actually been upgraded. They actually just got upgraded back in April because of their wildfire risk mitigation efforts because they got a favorable approval in their general rate case and a couple of other reasons.
(34:26):
But from a broad industry perspective, the major drivers of these downgrades are the exposure to these extreme weather risks and a relatively constrained capital and cashflow environment to be able to invest in the system. A lot of credit facilities will point to the Texas regulation where they just allowed for the filing of resilience plans on the transmission and distribution system. ANKOR filed a three point something billion dollar plan, CenterPoint filed a $2 billion plan, and pointed to that new regulation and said, "This is the type of regulation that really keep the utility industry financially healthy while providing the risk mitigation benefits to customers."
(35:06):
So that's how I would frame it in a nutshell is this problem is so severe for the entire industry that we've been able to get in front of executive level, C-suite executives, at the utilities and actually pitch a solution that is directly embedded within their existing workflows because that's what a lot of technology companies get wrong is they either don't understand the regulatory environment or they don't understand that even if you have a really cool technology, it needs to coexist with what the utility has already developed internally. And so if you get those two things right, then you can really scale this thing across the industry in a place where ideas are widely shared, utilities aren't competitive with each other, they're extremely collaborative with each other. So if you bring a new practice, new technology to the table and it solves a critical pain point, then that's going to scale. And so whether it's customer referrals showing up to events and really demonstrating what the value is of our platform, how it can integrate with their current systems, that's really how we've been driving success in front of utility customers.
Cody Simms (36:07):
I'm curious, when you look at the big legislation that's passed in the United States in the last few years, there have been significant benefits in the Inflation Reduction Act and the like for increasing battery storage capacity obviously for increasing renewable energy deployment. But some of the other topics that we talked about here, insulating power lines or reconductoring or even vegetation management, correct me if I'm wrong, but I don't think there were provisions around these sort of general pure resilience investments that have been made to date from a tax credit or sort of incentivization perspective. And I'm curious if you think we should expect there to be some of that in the next few years. If you were laying out a legislative agenda for the next presidential term, whomever that may be, Congress, Senate, and president for the next four years, where do you think there should be federal investments being made?
Mishal Thadani (37:10):
Most people point to the IRA as the landmark piece of legislation, especially for clean energy, which it certainly is. But related to resilience, people oftentimes forget, or the IRA oftentimes overshadows the Infrastructure Investment and Jobs Act, IIJA, where we have over a trillion dollars for infrastructure, $11 billion going directly to utility operators or folks that are deploying resilient solutions on the grid. We just submitted our grant proposal for that specific program actually yesterday. And it's an enormous amount of cash, and that goes directly to utilities, states, tribes to beef up the system from a hardening perspective and also deploy things like microgrids and battery storage as well.
Cody Simms (37:51):
Got it. So my entire premise was wrong. There is funding in the infrastructure law for grid resilience and grid hardening.
Mishal Thadani (37:57):
100%.
Cody Simms (37:59):
Great.
Mishal Thadani (37:59):
I actually worked on that bill and I wanted to make sure that a lot of these things got that attention in the utility sector. And of the things I was actually advocating for was that advanced modeling technologies, like we've developed at Rhizome, but also there are plenty others, think of the LiDAR companies or the drone surveying companies that can provide intelligence around vulnerabilities on the grid, those things should also be qualified for federal funding. So it's a really all-encompassing piece of legislation that covers soup to nuts, investing in the hardening of the grid and making sure that we don't have as many severe power failures from these events that are going.
Cody Simms (38:33):
Are there specifics in there that you're seeing utilities already starting to take advantage of that you can share?
Mishal Thadani (38:39):
The round one investments or rather, decisions have already been made. So back in October, there was about a trillion... Sorry, not a trillion, a billion dollars that were awarded to utilities all over the country that are doing everything from deploying advanced distribution management systems so that they can orchestrate DERs during the peak heat days that are trying to do a whole lot of undergrounding and that are deploying those distribution automation devices like reclosers, switches, so on and so forth that can really help self-heal the grid. So there are many utilities across the industry that have already won that funding and are actively starting to deploy that infrastructure. And actually, we started working with a couple of utilities on figuring out where they should deploy the funds that they got from the federal government.
Cody Simms (39:23):
Mish, what have I not asked? What have we not covered? Seems like there's still much more we could talk about on this topic. I want to make sure you get a chance to share anything else that you feel like we've completely missed.
Mishal Thadani (39:34):
Maybe AI as a topic in the electric utility industry. And I want to make a point that I think it gets so little attention, even though it's deserving of quite a bit of attention. So if you want to ask me about AI, I'm more than happy to go on just a tiny bit of a rabbit hole there.
Cody Simms (39:53):
Tell me about AI in the electric utility world.
Mishal Thadani (39:57):
A lot of people have been talking about AI being a driver for load growth, which is absolutely true. In a lot of areas, they're needing to build out new capacity, even new generation to accommodate the increase in load growth. What's really becoming clear is there's also been legislation related to clean energy deployments. So utilities needing to invest more in clean energy or procure clean energy in some way. So you have capital being allocated for load growth and capacity for AI, and you have capital being allocated for new clean energy generation. When we just heard from a Michigan regulator that was quoted in Utility Dive that these two things are extremely important things to come to a conclusion on how we allocate capital to serve this additional load with clean electricity.
(40:45):
But what we're really struggling with right now in the State of Michigan, and I'm soft quoting Commissioner Katherine Peretick, who's a good friend, on this, is that they're really focused on reliability and making sure that people can actually just have service during extreme weather events that are increasing by nature in Michigan. And so if their main focus is on reliability and, say, "resilience," then how are we going to have the capital to spend on clean energy and the capital to spend on load growth? And so you have this balancing act going on between load growth, reliability, and clean energy. And what it's really coming down to is because these things are going to start causing affordability issues for utility customers that utilities have to be more thoughtful than ever, regulators have to be more thoughtful than ever about what investments are being made at fairly high resolutions that actually serve customers the best and help meet all of these policy goals that we've set out.
(41:45):
So I love the conversation about AI because it speaks to such an important issue and a nexus of challenges that the utility industry is going through and the fact that there are companies like ours and others who are actually leveraging these new technologies to try to address these specific issues. So it's kind of a beautiful mirror there, but it's a huge challenge that I think the whole industry is going to be grappling with for probably a decade, at least.
Cody Simms (42:09):
The summary of what I just heard you say is that it's part of the problem and part of the solution. Part of the problem in that it's forecasting incredible amounts of new load that these utilities are having to manage and part of the solution because AI can help these companies solve where to make investments to deal with these problems in the first place.
Mishal Thadani (42:26):
That's exactly right.
Cody Simms (42:27):
Lastly, where do you need help? For listeners who are listening and interested in what you're doing, who do you want to hear from?
Mishal Thadani (42:34):
So we have a good problem on our hands is that we're growing and stretched thin. So we will be hiring here starting in the next few weeks. We're looking for really cutting edge talent in the machine learning climate data, climate science, and also people who have practical business development and customer success experience. So we're growing core functions of our team. If folks enjoyed this conversation, this is what we're living and breathing every single day and should be a fairly exciting place to work. And then generally, anyone who has ideas on potential partners to connect with, other folks who are focusing on similar issues. What we've been finding is there's major value in engaging with even engineering consulting firms, strategy consulting firms, and other technology companies where we can work collaboratively on providing solutions to the industry in a way that's never been presented before. For anyone listening on this pod, I certainly welcome you to reach out.
Cody Simms (43:27):
Mish, I appreciate you joining us on My Climate Journey. It's been a blast learning more about what you're building at Rhizome.
Mishal Thadani (43:34):
Thanks, Cody. Really appreciate it being here. Enjoyed the discussion.
Jason Jacobs (43:37):
Thanks again for joining us on My Climate Journey Podcast.
Cody Simms (43:41):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (43:50):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter at mcjpod.
Yin Lu (44:03):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ venture funds, be sure to subscribe to our newsletter on our website.
Cody Simms (44:13):
Thanks, and see you next episode.
