Journalist Markham Hislop interviews leading energy experts from around the world about the energy transition and climate change.
Welcome to episode 273 of the Energy Talks podcast. I'm energy and climate journalist, Markham Hislop. 2023 was a rough year for the global wind industry. Wind, particularly offshore farms, face significant headwinds due to inflation and higher costs, supply chain issues, and rising interest rates. What can be done?
Markham:Are there technical solutions available to drive down costs and make wind more competitive? For insights into wind's future, I'm joined by Josh Reidy, CEO and founder of THREAD, a pioneer of enterprise scale autonomous data collection for inspection insights and utility management. So welcome to the interview, Josh.
Josh:Thank you. Glad to be here.
Markham:Well, I'm always glad to discuss this topic because, yes, we're going to be talking about wind, but really the broader context here is the modernization of the North American power grid. And it's not all creaky and old, but a lot of it in the US is for sure. And one of the things that, a theme that we try to pound home here at Energy Media is that, inverter based resources, intermittent sources of generation like wind and solar are not drop in replacements for coal and gas. They just aren't. The the coal and gas required one type of grid, and we developed that, and it is an amazing machine, and it's reliable and all of that.
Markham:But as soon as you move to lower cost intermittent sources, now you have to reengineer that grid to work reliably and cost effectively, with the new technologies. And your company is on is is part of that technical solution to the grid. So let's start our discussion with an overview of wind, if you don't mind.
Josh:Absolutely. Happy to do so. And if I could give a little context for the conversation, 1, thread originated and is headquartered in North Dakota, which is a unique environment. And during the cold climate or a cold season, which we're in, what you mentioned at the onset has especially, significant relevance. 2nd, we have worked closely with Xcel Energy going back to 2018.
Josh:And Xcel Energy, most don't understand was the first, major investor owned utility to declare carbon free by 2050. So we've been able to observe and and participate in a journey with Xcel Energy as they pivot, from fossils to a renewable grid. But there is a modernization process that is compelling, and I hope to share with you today.
Markham:Yeah. I I can't emphasize that enough. We did an excellent interview, last week with, Gerhard Schlage, who is the vice pres is chief technology officer for Hitachi Energy. This guy works all over the world on on power grids, and he made that point is that the new technology that's coming in, including generation technology, but that's not that's not the 100% of the story. But the new technology is actually, in many ways, better than what we're replacing, and and, we can get to a place where we not only have an electric future, but we also can have it lower cost, cleaner, and and more reliable.
Markham:Well, maybe not more. We're pretty reliable as as it stands. So but but certainly cleaner and and lower cost. So maybe, you provided some a little bit of context, but let's talk about wind. Where is wind today and particularly versus solar?
Josh:Yeah. Absolutely. So so if we step back and and you think there's a compelling reason this change is being made, and I and I think there's compelling reasons, that really come down to business decisions. Those are environmental. Those are cost as you make reference to.
Josh:There's sustainability. So if you think about the the driving factors, that's one part of this. I think the second part of this is think about, basically unraveling a large organization, such as an investor owned utility. There are finances. There are people.
Josh:There are resources and facilities that have to both be brought online and be retired. And what I've had the the pleasure of doing is being able to see that holistically. And when you see it holistically, you begin to understand, the thematic implications for the organization. And so when you look at wind as an example, wind is a a very unique industry in as much that if you think about it from an in, a investor owned utility perspective, you had to feed fossils or nuclear, with coal constantly. There is a always an OPEX component to that.
Josh:When you begin to build out win sites, whether they're new sites or they're repowered, there's a regulatory aspect, there's a financial aspect, there's a logistical aspect, and what most don't realize is the huge shift to that being a massive capital expenditure. Once that capital expenditure is made, really the work has just begun because in the wind industry, what I have seen, which which is a change over the last 8 years, is the view of those assets as 20 to 30 year durations of life in order for the business model to work. And so if you think about it in that context, you have to retool the people. You have to retool the thought process. You have to begin to take care of those assets in a way that historically had not been done.
Josh:And so that to me is an overlooked aspect, but very critical to ensuring the efficacy of wind.
Markham:Yeah. It it I think there's a a a it's become clear to me that there's a fundamental difference between clean energy technology like wind and the other, and that is the difference between CapEx and OpEx. So for instance, in our little, our little bungalow, 2 years ago, we had to replace our HVAC system. And we had a a gas furnace, but we with no air air conditioning. And so our choices were a gas plus air or a heat pump, and, ultimately, we went with the heat pump.
Markham:Now we we had took advantage of some discounts or, you know, subsidies that were available to us. So it brought the the capex down, but still the capex was, probably 2 or $3,000 higher than the the gas and but by spending that spending more money up front, our OpEx declined significantly, and the value that we we attach to that heat pump of having more even comfortable heat at all time you know, during the winter season, having, cooling during the summer season, and and then, of course, you know, knowing that we're it's powered by, like, clean electricity here in BC as opposed to, a fossil fuel. You add it all up, and it's it's it's a a much better shift. But my the point I'm trying to get at here is the difference between focusing on higher OPEX costs or higher, CAPEX costs. That's a fundamental fundamental change in thinking, and I would imagine that that has been a bit of a shift in the in the utility industry.
Josh:It is. It is a huge shift, and consider the workforce that has been loyal and is 20 to 30 years in duration. There is an aging out of 1 generation into the next. And consider the age of some of the structures aren't even taught in school any longer. Right?
Josh:You know, it it's not just new, it's combining new with old, and that takes a lot of attention and care. To your point and to your example, I'll give a very crude example. It's the decision if you think of your automobile. Do I keep repairing the one that I have or do I simply buy a new one? Buying the new one largely eliminates the cost if you take care of it, if you ensure that you give it the care and feeding it needs.
Josh:And that's really a simplified version of the dynamic that wind in particular feeds. These are magnificent, beautiful machines, but they have to have care and feeding and maintenance unlike ever before or they are not going to produce for the duration of their lifespan, which again is 20 to 30 years and is largely unprecedented. I'm proud to have worked with Xcel Energy to give them what I would say is one of the best, if not the best maintenance programs. Why? Because they've made the investment in tooling their workforce, with the types of information that are needed to ensure the uptime of those assets.
Markham:1 consistent theme in interviews is the role of data and the ability of software to crunch that data for predictive maintenance and and for other purposes. And if I understand you correctly, the wind industry, in order to be up and operating as much as possible, to lower maintenance costs as much as possible, requires that data, and it needs to be crunched in a way. And if I under so am I correct in assuming that that's a lot of what your company does?
Josh:Yes. And I start with go back to the frontline worker. Getting the data when you need it, when problems arise isn't an annual inspection. It's an annual inspection plus as needed. So being able to have a choreograph between engineers that may be 100 or 1000 of kilometers or miles away from a site but those that live on-site, that dance, that choreograph is important because engineers see problems.
Josh:They need the frontline workers to help deduce those problems, and the currency is data. Getting data when you need it, understanding data, and then making informed decisions to take problems when they're small and address them before they become large such as an outage or worse yet a a replacement of a major component.
Markham:Yeah. I see this all over the place. We have a client in Germany, and I've interviewed their CEO, doctor Kai Filip, Kari's, it's called a CURE, And and it has a web based platform that monitors batteries. Could be batteries as, you know, like a stationary storage batteries in a utility. It could be buses in Berlin.
Markham:It could be whatever it is. But the point is that their software can detect anomalies, in the battery, you know, like a defect in a cell, and long before it bursts into flames, you know that there's a problem and you can go in and and you can fix it. You can implement a solution. And you see that in the oil and gas industry with their oil wells and their oil sands manufacturing. The importance of of sensors and video cameras and all of that collecting data that then gets sent away up into the cloud off to the headquarters, wherever that might be, and the engineers get to look at it and and do their analyses and and come back with solutions or spot problems and fix them before.
Markham:And the the impact of that, I I've seen in other industries is really significant. So why is it especially important for wind?
Josh:I love the way you describe that. Think of taking the next step. What is the next step to that? And the next step to that is when you see a problem, how do you get more? If you think about going to a physician, you you've twisted your ankle, perhaps you've broken it.
Josh:The physician may order an x-ray, and a technician in another lab is not just gonna take an x-ray of your whole body. They're gonna x-ray the portion of your body the physician wants to make a decision. Wind sites are no different. Engineers may see a problem. We have a wonderful partnership with TRAS in in, vibration sensing or acoustic sensing.
Josh:They could see a problem. They need more information. Enabling that frontline worker, which you can see from the Canadian to the Mexican border in the middle part of the United States with Xcel Energy, is to give that frontline worker a tool, and and in this case, a drone due to this the order of magnitude of the structure, and have them get very specific information so that what the engineer thinks can be confirmed with visual data, and then a decision can be made to address whatever problem it may be.
Markham:Now I understand the collection of remote data using sensors. That's common. It's been around for, you know, 20, 30 years in manufacturing and other industries. Drones, however, are a new wrinkle, and and please explain to me how drones fit into that process.
Josh:Yes. Again, I'll go back to the medical analogy. Think of an MRI machine or an X-ray. X-ray. A drone is just another sensor that can get very specific visual data that in a way that means that you don't have to repel.
Josh:We used to take a team of 3 people a half day, takes 1 person 20 minutes. Where threat has taken that to the next step is giving the frontline workers the capability that used to be left to professional pilots and annual inspections. Iowa has legislation that being considered to mandate, event driven inspections. Those frontline workers deserve better tools, not only for their own safety, but to have better information to make quicker decisions for the purpose of maintenance. And I'm very delighted to say we're going into year 4 production of watching that very capable work force do that work day in and day out.
Markham:Yeah. This is you we're kinda getting into the the the nuts and bolts of how an energy transition works. You know? We we did it we did the power grid this way for a 100 years. Now we're gonna change and do the power grid this way, and that enables all kinds of new technologies like wind power to come in and give us lower lower cost electricity.
Markham:And if I understand, I was looking at Lazard's, levelized cost of energy estimates for 2023 the other day, and it looks to me like at the bottom of the error bar where it's cheapest is, solar and wind are about the same at $24, a megawatt hour, which is, like, almost half of the next lowest cost, which is natural gas combined cycle at $39 a megawatt hour. And the forecast for solar is, significant cost decreases, driven by the the scaling up of the Chinese manufacturers and the driving down. They're they're down now to 12 cents a watt and will probably be at 9ยข in a year or 2. And are we saying that seeing the same application of Wright's Law in the wind with wind turbines where the as you double manufacturing, you see x percentage of cost decrease?
Josh:You know, I I in my backyard is GE's largest blade manufacturing facility in North America, and I don't know that you see quite the difference in wind. I won't say that I'm an expert there, but what I can say is that you are seeing that on the maintenance side, that those costs are driven down by simply having a far different approach to the maintenance and the care and inspection. And so in one aspect, the answer is a resounding yes. And again, I keep drawing attention to a partner, Xcel Energy, but I watch what they've done, how far they've come, and I marvel it. They they have such a wonderful organization.
Josh:Chris and Russ are a wonderful tandem. And what they're doing for their organization is modeling just what you said. Because if you can't make up for it in manufacturing, then you have to make up for it in operations.
Markham:This is becoming I'm really interested in this conversation because, generally, when we talk about clean energy technologies, we're talking about the manufacture of it. You know, how how we're going are we gonna set something up in North America and compete with the Chinese? You know, those those kinds of questions. Or we're talking about the cost of it, as I just did with the solar and wind versus versus gas. We rarely talk about the maintenance of it and what that means for organizations, and how that it can actually be a competitive advantage.
Markham:If you learn to do it well, you not only lower your maintenance cost, which is a considerable, issue for utilities, but you've also increased your efficiency. Right?
Josh:Exactly. Get better at maintenance. Exactly. Maintaining that output is the name of the game. Doing that for 20 or 30 years requires a substantial investment in maintenance and a change in mindset.
Josh:You're addressing every problem the moment comes up and you're quantifying what is the best case scenario for the organization and the output of any given site and recognizing, take Windblades alone, they don't, age, they don't wear the same. There is uniqueness and even geographic region where you when you can begin to mix in AI into some of that decision making with a local source of information, you can do magnificent things and I've seen it firsthand.
Markham:I can see the skeptics, listening to this interview and saying, well, yeah, that's all well and good, but, I mean, you know, come on. We've had we've had, you know, reliable maintenance of coal plants for, you know, 70, 60, 70, 80 years. We've had reliable maintenance of gas plants for 40, 50 years. This isn't anything new. What's he talking about?
Markham:Are is does clean energy technology, the maintenance of it, have to catch up to its fossil fuel equivalent, or is it in fact likely to surpass it?
Josh:You know, that's a great question. It's a perspective I haven't I haven't come at the problem from or with, but I think of coal, which is in my backyard, and I think of wind, which is in my backyard. And I think of those as being such different, machines and such different approaches. Right? I would say that that anything that was that was built in the forties or fifties, you could say is sturdier than what's built now, but it's not near as technically sound or efficient.
Josh:And so it's not to disparage coal, but it's to say wind and solar are entirely different. They have their opportunities, and their upside. Again, this is a business decision. The The maintenance and the technology behind that is obviously more evolved. What it takes to maintain a cold plant and a wind turbine are obviously different as is the tooling.
Josh:And so for me, I like to be able to look at wind and solar, directly and say, I understand what it takes for an organization to maintain those assets, and we provide the tooling to do so. And that to me is a wonderful step in the right direction for the industry as a whole.
Markham:Speaking of the industry as a whole, are we going to see, an expansion of wind industry in North America? We're behind Europe and Asia, and there's a lot of, you know, potential being paid by the Biden administration and the US inflation reduction act to to closing that that gap, but then, you know, 2023 came along and and wasn't kind to the industry. So what's your take over the next 5 or 10 years for the wind industry, on this continent?
Josh:You know, I know my customers. I know what I read in the news, and I can say in the upper Midwest, all you see is proliferation of the of additional renewable generating resources. Sometimes that means that they expense of of the fossil fuel type capacity, but many times it's additive to that. Just last week, another announcement in the state of Minnesota for substantial investments in renewable energy, I don't see any end in sight, quite frankly, because I don't see a world that uses less power. I see a world that uses more power and wants that to become as much of a stable commodity as anything.
Markham:Yeah. It's a it's a you know, switching over from fossil fuel, power generation to, clean energies like wind and solar would be difficult at the best of times. But doing it, while we're also cleaning up the the power grid as a response to climate change, just, doubles or triples the complexity and the difficulty of this. And I've, sat in on US, Energy Association, press briefings where I sit on 1 of the on the journalist panel, and we get a chance to talk to vice presidents and CEOs of utilities and and, you know, people who are on the the pointy end of this stick. And Right.
Markham:You know, they talk about, well, okay. Fine. I mean, we'll replace the coal plant, but, you know, what are we gonna replace it with? We have supply chain issues. We can't get wind turbines, or we can't get solar panels, and and then our fuel mix gets out of whack.
Markham:And next thing you know, we're staring down the barrel of an outage, and our customers don't like that. I mean, these are these are some of the the the practical questions that are are confronting the North American electricity issue. And I think it's fair to say that and this is not true across the board, but for a lot of the industry, it's it's a very fairly tumultuous time. Mhmm.
Josh:I I think you're it's correct. And then you think about the inflation reduction at being fuel poured on top of that plane. And yet, I would say one thing that that we know living in the upper Midwest is we have to take in all of above all of the above approach. Winter be can become quite harsh in Grand Forks, North Dakota and Fargo, North Dakota. And I'm a equal drive from a nuclear plant as a coal plant with renewables in between.
Josh:That's the future that I see. The calibration of that and making that work on the business side, absolutely, that is going to be a very, very deliberate and calculated navigation. But when you see it work, when you are a recipient of that and having the most stable power that I can ever recall in a lifetime, in a very, unfriendly winter environment, you know that you have the right solution. And I'm thankful to see that many of the leaders from the area that that I call home having a voice in this industry, and frankly, the industry's, in some regards, taking their lead. Well, you
Markham:know, the fact that you live in North Dakota, which is right below Manitoba, makes you an honorary Canadian. So we're very pleased to hear all of this going on. I very much appreciate that. Well, look, we maybe we'll wrap up the interview this way, Josh. I mean, this has been a bit of a love in for for wind the wind industry and for, clean energy.
Markham:And I you know, that's fair enough because that's the direction the industry is going. It's the way global, economies are going. We're all we're we're electrifying our economies, and we're cleaning up our the, the, emissions intensity, of all of that electricity. That is just the trend. It can't be stopped.
Markham:This is inevitable. 2021 is the is the, the century of the electric economy. That that just is the way it's going, but how we get there and whether we do it successfully and whether we can compete with other regions like Europe and and Asia is is a whole different thing. So while we had a love in on this interview, if I'm gonna be the skeptic, put on my skeptics hat, what are the top couple of challenges that you see for the wind industry that are serious and might put a crimp in the, in the industry's growth over the next 5 or 10 years?
Josh:I think that's a fair question. I I don't even see that as a criticism. 1, the way these utilities are managed, that has to wholesale change. They have to evolve to understand that it is a complex grid with several moving parts or components that need to work in tandem. 2, they face a a aging out of a workforce that needs to be replaced.
Josh:But 3, you have to give those workers, the people that support that, your frontline workers, your engineers, your managers, your executives, they need modern tools. So when I hear you ask and ask that question, my answer is the industry must evolve. It must hold itself to the standard of evolving all of its practices and its toolings, and I'm very thankful to say that in our regard, we can help that because what we are doing with them can still be capitalized. It it can become capex like their physical assets. Those of us in the digital realm, the start up world, working with utilities is the only way to go, not selling to them, but being their partner.
Josh:It may be an odd couple, but we've been able to do some extraordinary things, and I would welcome you to North Dakota and the Midwest for any of you or your listeners who wanna see that in practice day after day.
Markham:Yeah. I might make it out this summer. I'm not going in the winter, Josh. You cannot make me drive on the North American prairies, in the winter when it's 3540 below or minus 57 as it was in Edmonton, here, about a month ago. Nope.
Markham:I'm staying on the coast where it's nice and toasty. Thank you very much. But look, what you've what you've emphasized here and I I put this in the global context because we've done a lot of work on the Chinese electricity system in the last little while. They have been they're just they're adopting extraordinary amounts of renewable energy, and it looks like coal is going to be they're planning for coal to be the peaker plant and the backup plant and, you know, capacity use is going down all the time, and and so things are changing rapidly there. And they have integration problems.
Markham:The it's not smooth in China just because they're leading on on renewables, and but it's a very different economy there. It's more of a command and control economy, and and so the government can say, do this, do that, whereas that's not the case in in North America. I mean, even in Canada where we have, I don't know, 8 or 8 out of the 10 provinces have crown government owned utilities, the government doesn't direct the utility to do this or do that. It just sets policy and regulations, and the utility goes off and and and does its thing. And what that means is that that it change here is a is different.
Markham:The the kind of change, the culture change that you're talking about, is not discussed in Asia the same way. And my takeaway from this conversation is we have a big challenge ahead of us, and it's culture and it's technology and it's, you know, reg regulatory regimes, all of that. And we and some of the sometimes are gonna be successful, but not not every time. You know? We might see some failures.
Markham:We might see some bankruptcies. Who knows? But we're we're adapting. We're making this making the shift that needs to be made, and it's painful right now, and it's not complete, but we can see the trajectory of where we're going. Is that fair?
Josh:That is fair, and and speaking very to the United States, American ingenuity is is alive and well, and you see it on the forefront of this industry and what's happening with it. And I applaud those that that are up for the challenge, because it is a challenge, it is not perfect, and yet it is evolving day after day. And you can see that when we have front row access to an entire organization, you see it across the organization, the people, the approach. It is wonderful to see, and I'm just very proud to have a role in it.
Markham:Yeah. They I I've heard it said that, you know, the US now is behind China in terms of, you know, scaling up, clean energy technology manufacturing and in in other areas. It's it's late to the clean energy game, frankly, and it's already behind it's also behind Europe in many ways. But there is the one thing that United States will always have an advantage in at least in the foreseeable future, and that is innovation. Its innovation ecosystem is second to none.
Markham:Even though the Chinese have gone come a long way, they're still not as efficient and effective as the American innovation ecosystem. And innovation will be a competitive advantage for the US as it struggles to catch up to these other regions, in the energy transition. And one and at the aspect that we talked about today on the maintenance and and operations side of things, I think, is a really interesting insight into how, North America is going to respond. So, look, thank you very much for this. Really appreciate
Josh:it. Thank you. I appreciate the time, and, please do visit North Dakota in the summer. No promises. Alright.