#38: Sustainable hydropower



Gia Schneider, co-founder and CEO, Natel Energy



Climate change is water change. Hydropower thus sits at this intersection of climate, energy, and water. We have to evolve our water infrastructure fundamentally to deal with more extreme precipitation events—floods, droughts, et cetera—and all hydropower projects are also water projects.

Gia Schneider: I’m Gia Schneider, co-founder and CEO of Natel Energy.

JS: Hi Gia, welcome to the show.

GS: It’s really a pleasure to be here, thank you.

JS: We’re going to get into your company and all about hydropower, but first I want to talk about your time at MIT. Can you talk about what you did there and how you ended up there?

GS: This is a while back now, in 1995. I’d applied to a couple different schools. When I was accepted to MIT, it was clearly the school of choice. At that point in time, which probably sounds a little strange for young folks today, I literally had never visited the campus before I showed up there for orientation. I literally arrived in September or August and was thrown right in.

I really enjoyed my time there. It was an amazing place for learning and for meeting people who really broadened… the exposure to people who were, frankly, so much smarter than me was just great. There’s just so much you get from being able to interact with people with these creative, amazing minds. I really enjoyed my time.

JS: What did you study?

GS: I studied chemical engineering. The driver, it was trying to pick a major. For me, the chemical engineering choice was really driven by the fact that chemical engineering is a process-oriented engineering discipline. A lot of the themes of things that I’ve been focused on for a long time are process. Particularly climate change is really driven by understanding processes and how we can influence process outcomes by taking certain actions.

JS: When you came to MIT, were you interested in climate?

GS: I’ve been interested in climate and climate change issues probably going back to middle school for me. That really came out of the fact that it was a key issue of concern, actually, for my father. We grew up learning about climate change. My dad has this little saying where he said, “Climate change is basically hotter, wetter, colder, drier.” Because it’s all driven by the water cycle—heat drives our water cycle—then that has a whole host of impacts across the Earth.

JS: Did he work in climate too?

GS: No, he was a physician, actually, by training. Public health was his profession. But public health, to a certain extent, is also systems and process problem, with complex interactions with human behavior and regulations. It actually shares a lot of things, in some ways, with the challenges that we face in terms of addressing climate. Those were his two passions, public health and environment and climate change. How do we achieve some sustainable balance in how we live with the rest of the biosphere around us?

JS: That makes sense. You were really lucky to have that kind of influence growing up.

GS: It has definitely shaped my life, obviously, for my entire life. It’s funny. I remember when I was, probably back in elementary and middle school, I remember thinking that I lived in a really boring time because all of the big adventures and new worlds to explore had already been explored. Actually, of course, with a little bit more wisdom coming from age and perspective, in some ways actually, we live in what is, I think, some of the most interesting times. In terms of the magnitude of the decision-making in front of us and the impact that has on, not just our own individual lives, but all of humanity and all of the Earth.  It’s cool.

JS: You were at MIT, you were studying chemical engineering, and you were interested in climate. Did you come out of MIT ready to go into climate or was there ever a time when you were thinking about other paths?

GS: By no means did I have this linear predestined vision of exactly what I was going to do at exactly every point in time, that was definitely not the case. It was more of a guiding passion and interest in it. Actually, I was fortunate to overlap with, I think, in my last year MIT was when there was the some of the first classes, multidisciplinary classes that were launched pulling together energy and engineering and climate, more focused probably on the energy engineering element with a bit of climate injected.

What came out of that was I decided I really wanted to work in the energy industry coming out of school so that I would start to gain an understanding of more of the practical nuts and bolts. How and why our energy system is the way it is. I did a very preliminary business plan, competition, effort looking at an energy plan that actually roughly has informed what we’re doing today with Natel. I remember trying to research, how is power sold and marketed? Now, you can get that information at the drop of a hat. But at that point, this was 1999, I was literally going to Sloan and looking up wholesale power market prices and project finance models. It was not straightforward to get information. Coming out of that, I was basically like, I’m going to go into the energy industry and start to learn a bit more specifically about what actually drives decision making by utilities, et cetera.

JS: Is that what you did, you went to work in the energy industry?

GS: I first went to Accenture, actually. Their consulting firm is part of their utility practice. That gave me exposure to work at a couple of different utilities on a couple of different projects for those utilities. Most of it—because this was 1999, early 2000s—most of this was focused on dealing with the upheaval within the utility industry of that second wave of deregulation that occurred in the late 90s. So worked on a couple of interesting projects associated with that at several different utilities.

My last client at Accenture was Constellation Energy. Which is actually more of an energy merchant or independent power producer based in Baltimore. I got an offer to join Constellation’s team directly after my consulting project finished. I did that, so then moved to Constellation, and was part of their strategy group for about a year or so. What we did is, we basically created structures that would hedge variable load risk around physical generation assets.

To put it in very practical terms, physical load risk is what just happened in a very extreme way, for example, in ERCOT in Texas several weeks ago. Where when temperatures go either very high or very low, that is when you have your biggest demands for power production. That is also when if a generator is unable to be online, you can end up, as the asset owner, in situations that are financially very unfavorable. Managing variable load risk, driven by temperature, is a critical element and we developed some structures that helped to put some bounds around that. Which just gives a little bit more flexibility to the physical plant operators in how they manage those assets.

Long story, but that was Constellation. Then from there, a couple of us developed these strategies and had a bright idea to go start an energy hedge fund, left, did that and very quickly got an offer to go in-house to Credit Space because all the banks were piling into commodities at that timeframe. Did that for a few years and then left. Then Lehman happened, so everything shut down again in 2007, 2008. Then started Natel in 2009.

JS: What a wild ride.

GS: It’s been interesting to see. The one constant through the entire time, I will say, is the need to tackle climate change and decarbonize our grid has always been there. It’s not that it’s growing or changing. Our range of options and the range of outcomes available to us for certain magnitudes of emissions reductions has narrowed in that timeframe. I’ve been very fortunate. It’s really interesting to be able to evolve and see different aspects of how to tackle transforming our energy infrastructure fundamentally.

JS: It sounds like about 10 years after MIT is when you founded Natel. That 10 years must have been pretty formative in giving you an idea of the energy landscape and so you were set up, I assume, pretty well to then do what you’re doing now.

GS: That’s exactly correct. The interesting thing, of course, is that in terms of transforming our energy landscape, what we’ve focused on with Natel, was hydropower. Which is the world’s oldest source of renewable energy, in terms of we’ve had hydropower facilities that have been producing electricity now going back a century, or more than a century in some cases.

The reason why hydro was interesting to us as we started the company was because going back actually to the thing I mentioned about my father and climate change, climate change is water change. The increased heat that is trapped in our atmosphere as a result of higher concentration of greenhouse gases drives our hydrologic cycle, drives evaporation, precipitation, et cetera. Hydropower thus sits at this intersection of climate, energy, and water in a way that actually makes hydropower solutions able to be both mitigation—so reducing emissions applications—but also adaptation. Because we have to evolve our water infrastructure fundamentally to deal with more extreme precipitation events—floods, droughts, et cetera—and all hydropower projects are also water projects. It’s that intersection that was really interesting to us. It also seemed like a space that was ripe for innovation, in part because it’s been around for a very long time. That was what motivated us to focus in hydro when we started Natel.

JS: For people who might be unfamiliar with hydropower, can you just define it? What is hydropower?

GS: Hydropower is the generation of electricity from moving water. In particular, the most widely deployed form of hydropower is where the energy extracted is from the fact that water that falls from one elevation to a lower elevation. It’s not the velocity, it’s the fact that that water is moving from one elevation to a lower elevation, so it’s a pressure change, effectively.

In conventional hydro, the way that historically we have achieved that is by building large dams. Because a big dam basically creates that height difference. What we realized is that conventional dams, while they have many great characteristics, they also have some important challenges with respect to their environmental footprint, and often their social footprint, as well. Because they take up space, they’ve historically sometimes required relocation of local populations. We started to think about it and say, “Okay, well, is there a way for us to rethink hydropower in ways that would not have these negative environmental and social impacts, where we could maintain or improve river connectivity, where we wouldn’t have the same big footprint of the project?”

The key realization is that if you move to a more distributed approach for hydropower, that becomes possible. An intuitive way to think about it is that a large dam is a bit like jumping off of the roof of a building to get to the ground floor. You take out all that energy in one big step, or that potential energy in one big step. What we do is, we walk down the stairs. It’s the same elevation. You can take out the same elevation change, but you’re able to take it out in individual steps that are now then designed to be in harmony, if you will, or in alignment with the biological requirements of fish and natural river functions, et cetera.

That was the core. If we go to a more distributed approach, then we can unlock new hydro without the historical negative impacts. Then the next piece that drove the innovation was, “How do you make that possible?” Because we need then a turbine, a piece of equipment that is able to be installed cost-effectively, that is able to pass fish safely, that’s high performance, high efficiency. That then set the design constraints for the technology that we’ve worked on and developed.

JS: You mentioned fish a couple times, what’s the big deal about fish?

GS: Well, fish live in rivers and fish need to move throughout a river system. Fundamentally, when you put a dam or any sort of concrete or civil structure that fully spans the river channel and blocks it, you have created a disconnect in that river system. Which for a fish then all of a sudden means that fish who can normally swim upstream and downstream can no longer do that, unless you create pathways for them to do so. Two things are at play, one is that, then the second element is that obviously water does move downstream still through across the dam and through the powerhouse.

Then the next nuance is where fish would go through the powerhouse and through the turbine, conventional turbines generally aren’t that friendly for fish. As a result, as we have learned that we should protect fish species in rivers over time, that has led to increases in requirements for screening so that we put in fine mesh screens to keep fish out of the powerhouse. Then we direct them around the powerhouse in other ways. Those screens are expensive, basically. They’re quite expensive.

We then approached this design problem from a couple different angles. One is for downstream fish passage, we wanted to have a turbine that would be able to produce power at a high efficiency and do so while passing fish safely up to a certain size. Obviously, size matters in terms of the relative size of the turbine versus the fish. Another important part at play is that all hydropower plants will have some sort of what’s called “trash racks”, because you don’t want huge logs going through your powerhouse, for example. There’s already certain amounts of debris that are going to be screened out. Our design objective was any fish that would get through a normal trash rack could go safely through the turbine, and any fish that would be big enough to not go through the trash rack would be able to go around in a bypass around the plant.

JS: What kind of fish are too big?

GS: You have fish that are over, like 25-30 inches. It depends on the form factor. This is where you can get down in the weeds really quickly, because, for example, on the East Coast, where eel, for example, are a species of prime importance, eel are very long but they’re skinny. In general, most eel will be able to go through most trash racks, so there it’s not as much the length of the fish as it’s a skinny fish, and we want to be able to pass these long, skinny form factors safely through our turbines.

On the West Coast—it’s also on the East Coast as well, we have salmon both in the Atlantic and Pacific—there we want to be able to pass younger fish, juvenile fish, through the turbine safely but larger, more adult fish once they start to get up to generally 30 inches or so. Once you get to a certain size, you’re dealing with fish screens where those fish would generally not be able to go through the trash racks, and then those fish would go around through a bypass.

JS: So turbines have to be customized for their location?

GS: Yes, historically, turbines have been designed very much customized exactly to the location. Our approach was to create standardized designs that come in several standard turbine diameters, so size of the turbines, kind of like what happens in wind, right? You have different sizes of wind turbines, then wind turbine manufacturers make many of those same sizes, then developers choose to deploy certain combinations of those sizes based on what makes sense for their project.

That’s very much the approach we’ve taken. You’re able to create customization based on the site characteristics, but you’re doing so by putting together modular building blocks, where each modular building block has been designed to meet the stringent criteria for both high performance from a power perspective but also high performance for fish.

JS: Right. You have this thing called Restoration Hydro, which seems to be partly this fish passing hardware, and maybe something else. Can you talk about that?

GS: Restoration Hydro is our overall design philosophy that incorporates our fish-safe turbine with some innovative analytics that combines satellite imagery and machine learning and weather data to provide more accurate information about water flow through a watershed. We put these together, those two innovations, more on the technology side, with proven environmental and civil engineering techniques that have been deployed over the last decade and a half in dam removals and river restoration projects.

We put all of that together into a design approach that enables us to now design distributed hydropower projects that have multiple individual plants on a river, where each individual plant maintains or improves the connectivity for fish and sediment and water and people to move upstream and downstream around each plant. We integrate then all of those plants together into a virtual power plant framework leveraging a lot of the amazing work that’s happened on distributed energy resource management.

In some cases, now, we’re also looking at hybridizing in batteries or solar as well. Because, at the end of the day, if you now have energy infrastructure, you’re interconnecting to the grid, you’re managing the whole thing with a computer system that understands, “I’ve got these distributed elements to manage.” If there’s market value, it’s pretty natural to think about, “Okay, I can put a little bit more solar here, I can put some batteries there, and then integrate the whole thing as an integrated VPP,” or virtual power plant.

That overall is Restoration Hydro. The core differentiator, from a hydropower development perspective, is that Restoration Hydro is grounded in a philosophical approach, which is that we prioritize river function along with the reliable, renewable energy generation aspect.

JS: You guys are really focused on the ecological concerns that hydropower has, is that pretty unique or is that a growing concern with all hydro now?

GS: It’s increasingly a growing concern. For example, the International Energy Agency last year called out a couple of points. One is hydropower globally, we’ve been adding about 20 gigawatts a year, on average, roughly each year for the last five years or so. But we really need to double that if we’re going to be able to meet Paris Climate objectives.

Again, this is all a very global analysis. At the end of the day, hydropower has very attractive grid reliability characteristics. It can be co-dispatched or can be dispatched as a load following, load balancing resource, which helps then integrate wind and solar into the grid.

The IEA called out that hydro has these really great characteristics as a generation resource. How do we get more hydro more quickly? At the same time, they also acknowledged in that same report that because of the environmental and social impacts that can come with large dams, we really need to figure out new ways of building hydro in a more distributed manner that don’t require building these massive dams and massive civil infrastructure projects, for several reasons.

One is the environmental impact. Another is the time frame involved. It can take 10 years to undertake a new large dam build. A more distributed approach allows us to build things more quickly. We can build each step in the cascade in a shorter time period so that we’re getting power today, getting power next year, year after that, year after that. We don’t have to wait 10 years for the whole thing to be done. This basically has been identified as an area of need in the hydropower industry by the IEA in a report last year.

JS: You mentioned reliability and the blackouts, how does hydro compare to, maybe, things like fossil fuels and then maybe other renewable technologies like solar and wind in terms of reliability on the grid?

GS: Again, reliability, when you start to dig into the elements of what makes a reliable grid becomes more complex than just the simple word reliability. Hydropower does several things that are very useful. One important characteristic is grid frequency. All of our devices are designed to operate with a frequency at either 50 or 60 hertz, for historical reasons depending on where you are in the world. What that means is that the traditional role that’s played by a grid operator is to balance demand with generation to ensure that we keep the frequency of the overall grid in a narrow band around 50 or 60 hertz.

What happened in ERCOT, for example, a couple of weeks ago, was that we had a bunch of generation offline. Demand started to spike, increased because of the cold. People were turning on their heaters. As that demand spiked, that basically dropped the frequency on the grid. Once that frequency drops below a certain threshold, other generation sources who are connected to the grid will start to be kicked offline. That’s what leads to this case of a rolling blackout, where basically your grid is now not in balance and generators start tripping offline, which makes the problem worse.

What the grid operator does to get ahead of that is, they’ll go and they’ll just start shutting people off, cutting off electricity to a bunch of parts of the grid so that they can get ahead of this and bring things back into balance.

What hydro does is, because hydropower has a generation profile where I know how much water I have in my immediate pond or reservoir and I also know what my flow is going to be coming continuously, because water flow is like fuel for a hydropower facility.

Hydro is, in some ways like, because I have good predictability of what my fuel will be, basically, certainly over the next hour, over the next eight hours, over the next several days, and often, over the next several weeks, that allows every hydropower operator to provide a much more firm estimate of power generation in that time window of the next hour, the next several hours, the next day, the next week, et cetera.

That’s different than wind and solar. I know I have sun every day and, in many cases, we can also predict wind patterns. The forecasting has gotten a lot better for both wind and solar, but the ability to have specificity around that fuel supply over a longer tenure is somewhat unique to hydropower. Then we layer on top of that the ability to store, because with water stored, I can then basically have a battery built into my hydropower facility because I have a bit of stored water at each point, at each hydropower plant. Those are the two ways in which hydro was able to bring more flexibility and dispatch to the grid.

Then, interestingly, now what we’re seeing more and more is that hydro is very well suited to leverage advances, for example, in batteries to put batteries co-located alongside the hydro facility. By doing so, we can then optimize the charge-discharge cycle for the battery to maximize battery life because I have a bit of a battery in the hydro and then I’ve got my chemical battery as well. By optimizing the two together, I can get the best value out of my battery spend, basically, while providing the maximum possible in terms of grid reliability services.

JS: It sounds like they’re all really complimentary and they all work really well together, like these puzzle pieces. What right now is the limiting factor in any of them? Is there some kind of technology that’s maybe missing in batteries that if you just unlocked it would make hydro so much more efficient or cost-effective or something?

GS: I actually think we have a lot of the pieces now in front of us. The challenge is much more about systems integration from a technical perspective and basically finding the lowest cost-optimized integration for different types of applications that put these pieces together in the lowest-cost way.

Then the other challenge, which is constant in all things energy, is policy, frankly. At the end of the day, it’s not enough to have an awesome piece of technology. That technology has to be deployed in projects. Projects require approvals. They have to go through permitting processes. We have to then obviously also finance them.

From where we are today to where we want to go in terms of scaling, a lot of our focus now is, it’s not that we’ve solved every problem possible on the technology front, there’s always more things to refine and evolve and improve. But I think as we look forward over the next several years, it’s really about finding ways to put the elements together, do the systems integration problem as efficiently as possible, and then work with policymakers and regulators to understand where maybe some of our existing regulations might be outdated and not in line with both the impacts and benefits of deploying these solutions.

Then obviously with the finance industry, to understand how these projects… because hydropower projects do look a little different than wind and solar. They’re very long-lived assets. These are assets that can typically live for 40 or 50 years, if not more. There’s some education on that front as well. Those pieces are critical. Unlocking on policy and unlocking on the finance, both are going to be really critical things that help drive scale.

JS: Which countries are really leading in hydro right now?

GS: Europe actually has a very large base of existing installed hydropower and has frankly, I think, been one of the leaders in the world on investing in their existing hydropower fleet over the last decade or so to convert their existing hydropower fleet to be very much a load following and balancing resource. That’s investments in controls, some of it’s in specific upgrades to older turbines. The benefit is that Europe has been able to now achieve very high integration of wind and solar, so intermittent renewables, without much battery, basically. Europe has achieved 40% in some cases, plus integration of wind and solar. It’s all come on the back of hydropower.

The next wave, of course, is now, “Okay, how do we get some additional hydro, how do we integrate batteries more?” I think that’s the next step, really, that we’re looking at in Europe. I think in the U.S., we’re starting to figure that out. There’s a lot of opportunity. We’ve got about 100 gigawatts of existing hydro in the U.S. We could double that, roughly, with new technologies, such as what we’re developing. I think there’s a huge amount of opportunity here now to apply some of those lessons learned, some new tech, and help us move more quickly on a transition to a zero-carbon grid.

JS: These dams, like you said, are long-lived assets. They stick around for a long time. How resilient are they, or adaptable are they, to climate change? What happens when the river flow starts to change because of less water or more water? Can you adapt? Can you move it? What do you do?

GS: That is a core and hard question or challenge to address. In the U.S., for example, we have over 90,000 existing dams across the U.S. A small percentage, something like less than 2% of those, are hydropower facilities. Most of them are just there for purposes of flood control, water storage, navigation. A lot of them are quite old and precisely to the point of, for example, the expectation of what a flood, a 10-year or a 100-year flood looks like changes, structures that used to be perfectly okay and safe are now no longer okay and safe. Because what used to be considered a 100-year flood is now actually happening every couple of years.

When that happens, you really do have to make upgrades in this water infrastructure. The answer is that’s hard to do. It’s not easy. It does require investment in infrastructure. It’s in line with a lot of the things that the Biden administration is talking about right now with respect to the, frankly, massive amount of investment we need to make in all sorts of infrastructure in this country so that we will be prepared to be productive, or enabled to be productive, going forward.

That’s going to involve things like dam removal. There are a lot of dams that are old, outdated, no longer serve their purpose. For those, we’re looking actively at ways in which we can remove those structures or reconfigure those structures, apply some Restoration Hydro so that we’re able to restore the watershed and generate new, reliable, renewable energy.

In other cases, the structures themselves are okay, and we’re looking at them to say, “Okay, can we make some upgrades that would make them more robust for the future?” Particularly for the non-power locks and dams, for example. Let’s put some hydro on them so that they can become part of the generation solution as well. There’s a lot of work to do, that’s for sure.

JS: It sounds like it. On that note, what are you working on now? What are you working on next? What’s coming?

GS: Last year, we’ve spent quite a bit of time in R&D. Probably the first eight years of our existence were deep in R&D on hardware and software. Then, really 2019 for us was a product release year. We got our first projects installed. Then, last year, 2020, was a big step forward for us. We installed our first project using our megawatt-class turbine. We were able to do in-field fish passage testing that showed 100% safe passage, actually, of up to 15-inch rainbow trout through that megawatt-class turbine in the field with some tests run by Pacific Northwest National Lab. That set us up now. We’ve got a couple of projects that we’re working on here in the U.S. that will be coming online over the next 12 to 18 months, on the East Coast primarily.

We just signed our first deal with a utility in Austria, so we’ll have our first project in the EU online by the end of this year. We’re closing in on, actually, our first project deal with a developer who is doing hydro-backed microgrids in a couple of countries in Africa. Pretty cool hybridization, again, battery, solar, and hydro.

If all goes well, they’ll have that first project in, I would say, probably early next year, about 12 months out from now. We got a number of installations all moving over the next 12 to 18 months. We’ll see several more projects come online here in the U.S., in Europe, and hopefully this first one in Africa.

JS: Gia, this has been great. We covered a lot of ground. I really appreciate your time. Thanks for coming on the show.

GS: Absolutely. Thank you for having me. It’s always a pleasure.

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