The Energy Question Episode 35 –  Adrienne Lotto, Senior Vice President of Grid Security – APPA

 

David Blackmon [00:00:09] Hey, welcome to the energy question with David Blackmon, I’m your host, David Blackmon. And my special guest today is Adrienne Lotto. He’s the senior vice president of Grid Security, Technical, and Operations Services for a great trade association, the American Public Power Association. Adrian, thank you for doing the podcast with me today.

Adrienne Lotto [00:00:27] Thank you so much, David, for having me on this morning.

David Blackmon [00:00:30] Before we go into our questions about we’re going to talk today about Grid Resilience and Security, which is a very, very pressing issue that needs to be paid more attention to, frankly, in my view. But before we do that, I want to give you a few minutes to just talk about APPA, Who your members are, what your mission is, and your role there at the association.

Adrienne Lotto [00:00:54] Sure Thank you so much. So as the Senior Vice President of Grid Security, Technical, and Operations, I have the privilege of working for APPA. We represent about 1435 members across 49 states. I always say the one state that we don’t have a member in, unfortunately, is Hawaii. So, David, if you’re ever hosting a speaking engagement in Hawaii, please feel free to reach out because it’s the one place I don’t get to visit.

Adrienne Lotto [00:01:27] And it includes we even have members in several of the territories, including Guam, Puerto Rico. So our members are public power utilities throughout all of the states. And we’re really a community-owned, very reliable form of electric power.

Adrienne Lotto [00:01:46] So, you know, it’s a privilege and an honor to get to work with those members every single day, representing them in a belt in the Beltway on a variety of issues at the national level. And hopefully, we’ll get into some of those issues here today. I’m looking forward to it.

David Blackmon [00:01:58] Well, I am just sure our audience includes someone who works for a utility in Hawaii. And if you’re listening or watching today, put in a good word with your company to join  APPA so Adrian can make a trip out there, to speak to your group. Absolutely.

David Blackmon [00:02:17] Listen, so, you know, I want to talk about Grid Resilience and Security. It tends to get short shrift amid all these ongoing discussions about energy. It’s frustrating. It’s something that’s frustrated me for quite a while. You know, given the vulnerabilities we know exist on our power grid. And it’s really hard for me to think of a more critical issue that’s facing the country. Why do you think there’s so little public and policymakers attention paid to these issues?

Adrienne Lotto [00:02:46] I think the American way of life relies on electricity. Most Americans are We are very fortunate and blessed in this country to be able to hit a light switch and the lights come on. You know, in other countries, that’s not the case.

Adrienne Lotto [00:03:00] I think more and more public power, public policymakers, including at the federal and state level, are starting to pay more and more attention to critical infrastructures, including the electric sector, and starting to understand the critical dependencies that we have and why it’s so important to protect critical infrastructure.

Adrienne Lotto [00:03:21] So I do think that the conversation is starting to become more and more interviews like today, for example, you know, having the opportunity to chat about why it’s important. You see state policy officers beginning to discuss the issue, even funding from the IIGIA, which the recent Biden administration passed. You know, you see funding going out for things like grid infrastructure, grid security. So I think I do think it is starting to change and policymakers are becoming more and more educated about some of the issues and raising the alarm on why there needs to be increased focus.

David Blackmon [00:03:56] But when we talk about, you know, resilience is a big word that can mean, I think several things. But when we talk about Grid Resilience in this context, talk about what that actually just means to the average person on the street. What are we talking about there?

Adrienne Lotto [00:04:11] That’s a great question and I can’t agree with you more. And resilience does have many definitions, and I think it’s important. I tend personally to define resilience utilizing PPD 21 or Presidential Policy Directive 21.

Adrienne Lotto [00:04:27] So fundamentally, the ability to prepare for and respond to various events, threats, incidents impacting the grid, and then having the ability to as quickly as possible restore and if not bounce forward from that event. That’s generally how resilience has been defined at the national level.

Adrienne Lotto [00:04:50] As you said, the word has been studied many times by people far smarter than I, including the Dewey National Labs. And there’s always a little bit of a tweak here and there. But, you know, our members spend a ton of time and effort of we at APPA, along with our members, prepare for resilience in terms of things like emergency planning, cyber incident response planning, hurricane events, making sure that there are policies, procedures, mutual aid is available.

Adrienne Lotto [00:05:20] Things of that nature so that when an event or disruptive event occurs, irrespective of what the cause is, irrespective of if it’s a hurricane or a wildfire, our members are ready to respond and restore power as quickly as possible.

David Blackmon [00:05:36] Yeah, you know, it’s kind of hard. I know it’s really almost impossible to protect against every circumstance. You mentioned wildfires and hurricanes. You know, the hurricanes in Texas have been so unpredictable.

David Blackmon [00:05:51] You don’t know whether the damage is going to come from winds, wind, or floods and it just it’s so hard to deal with all these things. But one thing that we’ve had going on in recent months in the United States has been, you know, people attacking substations in five different states now. Right. At least and maybe more than that. Is there some sort of organized effort going on here or is it just the increased frequency of these kinds of attacks? Is that more of just kind of a coincidence?

Adrienne Lotto [00:06:22] Unfortunately, you are right that there has been an uptick in physical security incidents on the grid in 2023, as you’ve mentioned, and toward the tail end of 22, we have seen a number of incidents across the United States.

Adrienne Lotto [00:06:38] Most of the time did disrupt we have seen and that kind of is, by the way, from a variety of different causes. Right? We’ve seen a handful. We’ve seen in, for example, firearms. Sometimes substations are located out in remote areas and people in, you know, different areas tend to hunt and we’ve seen ballistic damage as a result of that we’ve seen things like theft.

Adrienne Lotto [00:07:09] But unfortunately, we have, as you just indicated, seen recent incidents where perpetrators have, as reported by police and others, wanted to take down the grid so that they could rob a convenience store in a local neighborhood.

Adrienne Lotto [00:07:29] Again, the grid is the utilities that do a very good job of using a risk-based approach to protect critical grid assets. I mean, we can’t they can’t protect everything. It would be exceedingly cost prohibitive and, you know, I don’t think customers would want to take on that type of expense.

Adrienne Lotto [00:07:51] But utilizing a risk-based approach, the utilities do have a number of different methods that they use to protect critical parts of the grid. You know, and I do think that in understanding and working with law enforcement, FBI, DOJ, even your local law enforcement, so that when they’re, you know, even driving by, if they see something that maybe will, why are those people there? Right?

Adrienne Lotto [00:08:16] Having a good education, having that awareness for local law enforcement to stop, to inquire, to understand that these assets do control the grid and it is important for them to investigate and prosecute with local DAs.

Adrienne Lotto [00:08:29] You know, we’ve been working a lot with our partners at the ISAC, The Electricity, ISAC, as well as DOE, FBI to get that message out to make sure that local law enforcement is receiving the training and the resources they need to protect physical infrastructure.

David Blackmon [00:08:45] Well, so yeah, and as you say, there are so many of those kinds of installations, you couldn’t possibly harden those facilities they’re thousands and thousands. I live out in the countryside in north Texas, well, really just outside of the city and there are three big substations within a mile of my home. And just right here in the little area I live in. So they’re just everywhere.

David Blackmon [00:09:09] And yeah, you have to have to be smart about what you do but, you know, with the crazy people out there, you just can’t anticipate everything that’s going to happen, you know? And then we also have cyber you mentioned cyber attacks a minute ago, and there’s this is another growing threat. Talk about some of the measures your member companies take to protect their facilities and systems against cyber attacks.

Adrienne Lotto [00:09:34] Sure. So, unfortunately, the cyber landscape continues to become more complex. But I do we work very closely with our members, with the federal government, and with state agencies in a number of different ways to help the utilities.

Adrienne Lotto [00:09:52] First, we try to disseminate as much information as possible without overwhelming any no threats, with no vulnerabilities. Right. So that the grid operators can then take the steps that they need to ensure that if there is a. Vulnerability or a patch or something needs to be changed on their system they can do so as quickly as possible. And again, we use our EISAC and MSISAC partners to really disseminate that type of information.

Adrienne Lotto [00:10:22] The utilities themselves use what we would call cyber layer defenses, right? So that can be as simple as good cyber hygiene using things like firewalls, and things of that nature too much more complex cyber tools that are out there and point detection, knowing sort of exactly what using the NEST framework or the might or attack framework having layered defenses for each one of the pathways.

Adrienne Lotto [00:10:54] So we try to offer our members, whether it’s policy tools as we have on our website, a cyber incident response playbook to try to help members all the way through to different tools that they may be interested in utilizing as well and then, as I said, access to information. So we try to use, you know, people process and technology, layering those across the threat landscape and really working with our federal partners to help the great of our operators stay ahead of the threat.

David Blackmon [00:11:31] So I assume this is an increasing piece of the cost picture for public utilities that probably increases every year, right? And ends up flowing into people’s electricity bills also. So, you know, I assume the cost of that grows every year, doesn’t it?

Adrienne Lotto [00:11:48] Unfortunately, the cost of cyber defenses is becoming more and more an expense than utilities are. I mean, frankly, they already are taking it on. We have seen recently some of our members are also talking to us about the increase of even cyber security insurance policies of going up 15 to 20%. That was quite expensive.

Adrienne Lotto [00:12:19] And we’re also hearing from our members that not only is the cost increasing, but the coverage is decreasing. So they are paying more for less. And then anecdotally, we’ve also heard from our members that the cyber insurance companies back to what we were just talking about before, are requiring more and more and more controls. In other words, if you want the policy, you must do X and Y, and Z.

Adrienne Lotto [00:12:50] So, you know, I think this is an area that unfortunately, you know, the alarm has been ringing in this area for quite some time. It’s a shift of a paradigm because in traditional, traditional times of warfare or back during World War Two, Era you would think of, you know, guns and guards. Well, now that the warfare or the landscape, the threat landscape, cyberspace.

Adrienne Lotto [00:13:17] And member utility companies are the ones who are actually defending against the nation-state actors as opposed to, you know, your traditional U.S. government. So it has been a significant shift. But I think continuing again, the conversation is layered defenses, deploying tools and education are really some of the key steps that we’re working on with our members to continue to defend against that crap.

David Blackmon [00:13:41] You talk about alarm bells and of course, some of the more sensational security threats we hear about in the media quite often are like things like mass coronal ejection from the sun or an explosion of a state actor like North Korea launching, you know, a nuclear atmospheric nuclear explosion that could knock out the grid. How real are threats like that? And if they are real, you know, what steps does EPA recommend governments take to try to deal with it?

Adrienne Lotto [00:14:14] So the threats you mentioned geomagnetic disturbance or GMD or EMP electromagnetic pulse are threats that have long been researched and known by the electric sector. You know, several years ago when I was at the US Department of Energy with John, they have done and continue to do with EPRI the Electric Power Research Institute.

Adrienne Lotto [00:14:41] A lot of the work in this area on the threat of EMP and GMD and respected grid hardening. So there’s certainly I think you know there are there is a chance of that type of a threat. But I think it’s important that we think of that in the context of some of the other threats we’re talking about today. Right? The threat of physical or the threat of cyber.

Adrienne Lotto [00:15:06] I mean, for us most recently the threat that has become more and more of the greatest concern to our members is the supply chain. So we are hearing from our members that they are and by the way, this is across the board.

Adrienne Lotto [00:15:23] So not just public power members, but we’re also partnering with our colleagues at EEI as well as in RCA, because their members, the IOUs, and the rural cooperatives are also experiencing severe supply chain constraints.

Adrienne Lotto [00:15:40] We’re not able to get distribution transformers, and we’ve been sounding the alarm with the federal government because hurricane season two, another threat we talked about is around the corner.

Adrienne Lotto [00:15:52] And so our members and and other and their members are very concerned about having supplies on hand. Should a hurricane come or should there be an event to be able to respond and repair and restore the grid as quickly as possible? The supplies are dwindling and we’re seeing longer a long time in terms of getting our orders fulfilled.

Adrienne Lotto [00:16:18] So, you know, again, I think these threats are all relevant but I think and, you know, the grid operators and our members are well aware of them. But I think we have to take it in the context of sort of what the reliability right now is the greatest concern in terms of our supply chain.

David Blackmon [00:16:36] So all the supply chains for the transformers, which is, as you mention, has been a big issue and growing issue. Do we manufacture transformers domestically in the United States or are they made overseas for the most part?

Adrienne Lotto [00:16:49] So distribution transformers, the ones that are currently having the greatest concern around There are several manufacturers here in the United States in terms of large power transformers, no transmission level transformers. Most of that is unfortunately manufactured outside the U.S.

Adrienne Lotto [00:17:14] We do see constraints and we’ve surveyed our members. We do see constraints, frankly, on and on both at this time. Lead times for domestic transformers, for the distribution, Transformers have grown these are our members used to be able to get them in a couple of weeks. Now that lead time has grown to almost a year and change and in some instances, the manufacturers won’t even take their orders anymore.

David Blackmon [00:17:43] That’s probably because they’re having their own supply chain issues, right?

Adrienne Lotto [00:17:47] There There.

David Blackmon [00:17:48] Using Their Materials?

Adrienne Lotto [00:17:49] That’s exactly it. So the Federal government policies around things like EV things like electrification, there’s some evidence that, you know, the steel rather than going toward basic distribution, transformers are now getting utilized in things more toward the electrification front. And I think that’s because of a lot of the federal policy that’s coming out loud. Right. So, you know, so.

David Blackmon [00:18:23] There are no subsidies in the IRA for Transformers Steel.

Adrienne Lotto [00:18:26] You got I mean, you just got it right. So.

David Blackmon [00:18:31] It seems like an oversight, doesn’t it?

Adrienne Lotto [00:18:32] It’s a bit of an oversight and you bet that EPA is letting the lawmakers know. We’re working with our congressional staff and getting on the Hill, talking to our agency colleagues about that oversight.

Adrienne Lotto [00:18:50] Because, again, as we started this conversation, right, everyone expects the light switch to go on. But distribution transformers are a key critical component to ensure that that happens. So that oversight, you know, we don’t want it leading to reliability issues. So we really need our federal government partners to step back into action here and not let it occur again.

David Blackmon [00:19:14] So I wonder I mean, this has just raised the question in my mind with China reopening its hair society and its economy in recent months, has that helped with the supply chain issues at all or so? Okay, it hasn’t. Well.

Adrienne Lotto [00:19:30] No, I mean, not yet. We were still we started raising the alarm on this issue back in 2022. And we anticipated at that time our members, as we were thinking that in 2023, we would see maybe a little bit of a little maybe of the goods start to flow a bit more.

Adrienne Lotto [00:19:49] And thus far, as we enter Q1, that hasn’t been the case. We actually EPA hosted a supply chain summit recently with all of our members. We had about 70 CEOs in the room and unfortunately, there was no real indication that the supply chain shortage was going to let up any time soon.

David Blackmon [00:20:08] Wow. Okay. So, yeah, hurricane season starts in a month and here we are that’s just lovely. So I know the Republicans just voted out an energy bill, a kind of omnibus kind of thing. Is there any language in that bill that would help with this situation? So I haven’t.

Adrienne Lotto [00:20:24] Read your friends referencing H.R. one. I haven’t read personally H.R. one from end to end. I know probably our party, our government relations team has I’m going to venture a big guess and say, I don’t believe so, because I had if they had, I probably would have heard about it.

Adrienne Lotto [00:20:46] So I know, I know that, you know, H.R. one is definitely something that we’re monitoring in terms of what it would mean from transmission committing sighting and sighting for energy, energy storage projects and things of that nature. But I haven’t heard any sort of indication that that would help eliminate help alleviate the supply chain constraint.

David Blackmon [00:21:11] Well, we’ve talked a lot about tests on federal policy quite a bit here. What about state-level policies that could be helpful? Is there any anything the states can do to help alleviate these kinds of issues?

Adrienne Lotto [00:21:24] So I think first, the most important thing is for state energy offices or state regulators to have become aware of the issue. Right. So having this type of open dialog, I think is certainly step number one. Several more to perhaps consider is understanding.

Adrienne Lotto [00:21:44] Sometimes at the state level, there are procurement requirements, particularly in public power. You know, oftentimes we our members have to get three bids, go with the lowest responsible bidder and, you know, have conversations around, you know, whether or not and what it would mean from a policy perspective to maybe eliminate some of that burden, particularly right now, when by the time, you know, and again, hearing anecdotal stories from our members, by the time you’ve gone from one bid to bid three bids, well, if you go back to the first guy that gave you the bid, well, he already moved on to some other company that was willing to just break.

Adrienne Lotto [00:22:29] So I think working with state energy officials and procurement officers to understand what the restrictions are at the state level that could be potentially eliminated the bureaucracy that could potentially be eliminated is a discussion certainly worthy of having.

Adrienne Lotto [00:22:45] And then as you mentioned right at the beginning of the call, ensuring the resiliency. So, you know, unfortunately, if an event should occur, making sure that the emergency management officials and the state officials are all working together to get the lights back on is critical. You don’t want to do it after an event but certainly want to have those best practices and those exercises in place before.

David Blackmon [00:23:10] So a question this all raises in my mind, and if you don’t want to address that, that’s fine. I didn’t give you any kind of advance notice about this. I’ve just thought of it related to the energy transition we’re talking about.

David Blackmon [00:23:23] I mean, Elon Musk just 18 months ago said we would have to double the current generating capacity on the nation’s grid just to account for recharging electric vehicles over the next decade and to account for all the other growth that’s probably going to require tripling it from current levels.

David Blackmon [00:23:39] That’s going to require the buildout of tens of thousands of miles of new trans transmission and all the substations and, you know, associated with that and all the equipment that has the gummed-up supply chains right now, that has to be a part of that.

David Blackmon [00:23:59] How we can even source the transformers we’re going to need to replace what’s currently on the grid? How are we going to account for that kind of exponential growth in such a short period of time here?

Adrinenne Lotto [00:24:12] So, David, your question has literally been the heart of some of our advocacy conversations here inside the Beltway, which is the administration has very important, important and lofty goals that they want to advance clean energy as quickly as possible and in a responsible way in a short period of time.

Adrienne Lotto [00:24:41] In order to meet both electrification goals, you have to understand the basic level that it takes a generation, transmission, and distribution, any part of that supply chain or ignoring one part of that supply chain, like not putting your attention into distribution transformers is naturally going to impede that progress. Right?

Adrienne Lotto [00:25:07] So you saw the Republicans try to move forward with H.R. one to address to try to address transmission. We’re certainly, again, putting our efforts toward raising the alarm and getting the administration to work with us on distribution transformers.

Adrienne Lotto [00:25:24] But we’ve even a little different of a twist but we’ve even had conversations with manufacturers, because what we’ve also been told is that, unfortunately, the growth sometimes of these neighborhoods and are not able to get the electricity isn’t able to get turned on to whole manufacturing because they can’t get distribution transformers.

Adrienne Lotto [00:25:51] So, you know, it’s whether it’s electrification development in terms of housing, all of it relies on electricity, and that relies on a robust supply chain, which unfortunately is not here at the moment.

David Blackmon [00:26:05] Well. On that note, we’re running up against time. I would really value it if we could make this an ongoing conversation and have you back later in the year to talk about, you know, progress made in the meantime because this is such a crucial issue for our society that really needs to have a more robust discussion in the public domain. So if you don’t mind, I’ll be calling on you later.

Adrienne Lotto [00:26:33] That would be great, David. And I’m going to be I feel like I hope I didn’t scare you. I’m going to stay positive and optimistic and we’re going to hope, as you just said, that I will be able to come back in a couple of months and update you on forward progress.

David Blackmon [00:26:49] Okay. And it’ll be all positive at that time with all these issues. No, seriously, this has been fantastic and it hasn’t been all negative. But, you know, people need to be aware of the issues that are out there so that they can make decisions in their own lives that are intelligent. So that’s what we try to do here. And I really appreciate your time and I’ll be calling again soon. And thank you. And I hope you have a great rest of your day.

Adrienne Lotto [00:27:16] Thank you again. I appreciate your time.

David Blackmon [00:27:17] And thanks to everybody who joined us and watched and listen to our podcast that’s it for episode 35 of the Energy Transition or The Energy Question Podcast. I’m David Blackmon. And that’s all for now.

 

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