Nathan Hunt: This is the essential podcast from S&P Global. My name is Nathan Hunt. The West Coast is burning. Air quality has degraded to levels that are defined as unhealthy or even hazardous to breathe. The federal government has declared the air in Oregon to be a public health emergency and orange smoky haze has descended over the Western United States and the pollution from the fires is now reaching Europe. Five million acres have burned. Tens of thousands are displaced and people are talking seriously about climate change refugees in the United States of America. Today on the podcast, I am joined by Esther Whieldon, senior climate and energy reporter at S&P Global Market Intelligence, cohost of the immensely popular ESG Insider podcast, and coauthor of a recent article entitled U.S. West confronts new era of climate driven disasters and grid instability. Esther, thank you for joining me.

Esther Whieldon: Thank you for having me.

Nathan Hunt: Let's dive right in. I used to live in California back in the nineties. My impression at the time was that forest fires and brush fires and grass fires were just a fact of life. What makes these fires different? Is it the scale, the intensity, the frequency?

Esther Whieldon: You know, Nathan, I think it's really all of the above. We're seeing more destructive fires happen more often. And even earlier in the season, and that means just more people are being displaced and larger swaths of land are being destroyed. I looked up a statistic this morning, six of the 10 costliest wildfires in the U.S. Since the 1930s have happened within the last three years alone. And those three were in California. In fact, I think all 10 were in California, but what's different now is it's not just California where we're seeing these problems happen. These massive destructive fires in early September of this year, there were about 40 fires raging in Oregon, California, and Washington. And I think you did a really good job of setting the scene, sort of, of what that has looked like for the people on the ground there, out here, where I am and in College Park, Maryland we've even had, you know, I was wondering why I wasn't seeing the sun like getting the last of my tomatoes to grow. And then I looked online and I found out, well, we're having some haze because the smoke has actually been carried over by the jet stream. Right. Even here on the East Coast, we're seeing the impacts, which I've just never in my lifetime seen. One of my colleagues who coauthored the article, you just mentioned the wildfire grid, instability story, Garrett Hering, he was in Oregon and experiencing the smoke firsthand. And even as we were writing this story last week, his phone was blowing up. He was like having to pause, to take phone calls from family members who were, who were being evacuated. So it just really hit home for me, I guess, in the reality of just, it all kind of what I've been reporting on for years about climate change, kind of being seen first happen.

Nathan Hunt: So what are the underlying causes for the fires we see in the Western United States this year?

Esther Whieldon: Wildfires are being caused by a variety of factors. There's lightning strikes that are accompanied by high winds that drive the fires to go faster and further and make it harder to be contained by firefighters. And then there's also been incidents where the grid has been to blame, like the Camp Fire in 2018 that was caused by Pacific Gas and Electric's power grid. We even heard this year of a fire that was started by someone's pyrotechnics at a gender reveal party. I have yet to find out what they found out the gender was by the way. According to California's forestry and fire prevention department, seven of the 20 most destructive wildfires in California were due to power lines. So hopefully that puts that in context. But more broadly, these wildfires are as bad as they are, particularly the ones that happen in the summer months in the West, according to scientists. And it's because of climate change, it's driving all of this to get worse.

Nathan Hunt: Why would climate change make wildfires more likely?

Esther Whieldon: People talk about climate change as if it's the thing that creates new things. Really, with exception to, like, sea level rise, which we know is really just a climate change related thing, most events are kind of exacerbated by climate change. So as you were saying earlier, right, wildfires have happened in the West for a long time, but now climate change is exacerbating those. The West itself has faced a string of dry years since 2000. So now that they're 20 years in, they're officially in a mega drought, which was previously a very rare occurrence. And on top of the drought, the average temperature in the West has increased. So we're seeing hotter drier summers. For example. And I'm gonna say quite a few states here, Arizona, California, Colorado, Nevada, New Mexico, and Utah this year each had their warmest August on record. So that's pretty much a lot. That's half of the 11 States of the West, right. And the trees and vegetation as a result had been weakened from the lack of water and are drying out. And are dying either on their own or due to a massive infestation. I'm sure you've heard of the Pine Bark Beetles in the West. That's been a thing for a few years. So basically they catch fire much easier than in the past. And we're even hearing of some fire resistant tree species that are succumbing to fires. We also know that hotter temperatures often correlate with large Western wildfires,.Eight of the 10 years on record with the most fires have all been on years with warmer than average temperatures. And yet even you'd think like, Oh, it's snows or in the mountains, we get a lot of rain. Wet winters don't help because what happens is the brush grows when it's nice and wet and in the summer when there's not enough water and it's super hot, they dry up and they're basically just kindling for the fire, right. They just help it spread faster. And one other factor, that's not specifically tied to what we're talking about here, but I think it's worth noting is that the housing prices in California and the West  in general are just really expensive in the cities. I think what San Francisco is like right after New York, maybe even above it on housing costs. And so people are moving further away from cities and into areas that previously people just didn't live and their fire prone area. So human migration is to blame a little bit for this as well.

Nathan Hunt: Esther, we started the year with Australia burning out of control. Now we have the Western United States doing the same. Is this just the way of things now, do you think we have more of these massive fires on the horizon?

Esther Whieldon: Unfortunately, I think these past few years are a part of the new normal for the West. Now with nature, you always see some fluctuations. You may see some years that aren't quite as bad as others, but if you look at the overall trend of last decade and as we go forward, this is going to be an increasing problem. It's not going away anytime soon.

Nathan Hunt: Your recent article focuses on threats to the electrical grid. Why should the electrical grid be uniquely exposed to danger from forest fires?

Esther Whieldon: I grew up in rural, Maryland. Our house was between two dairy farms and we lived very close to some major high power lines. I mean, we were close enough that at night I could hear them crackle sometimes. Every year, the utility would come out and clear out the trees. We'd see the helicopters coming to look at the maintenance of the lines, but they clear out the trees and the big brush that was growing. And they took out, I mean, I was a kid, so I don't know the exact measurements, but probably like a 20 foot corridor, even wider. And when I started reporting on the power grid, about 15 years ago, I found out they were doing it because basically. You have to have a good amount of space between where the power lines are and the tree line is. If the tree branches touch the power lines, it very well could cause fires. This is less specific to this, but even like in the winter, right, you might have trees falling on power lines. It can also take them out. So it's just a general like safety and good practice issue. But in fact, there is a federal requirement for utilities to maintain what's called a vegetation management standard. And that means a certain amount of space has to be between the trees or the vegetation and large power lines. When I'm talking about power lines, I'm talking about big towers, right? The big ones that are probably 50 to 80 feet tall and not the smaller ones that, you know, go from your corner to your house, right, that provide you the electricity. In California though. There's really two problems. In addition to the ones I was talking about earlier for the drought and climate change. One is that one of the biggest utilities in the state, I mentioned them earlier, PG&E has come under investigation for really not keeping good records of their infrastructure and maintenance practices. And for knowing that part of their 18,500 miles of transmission lines had reached the end of useful life. For example, the 2018 Camp Fire caused widespread injuries, deaths, and property loss in PG&E's territory. And it has officially been tied to malfunctioning utility equipment. And in fact, the campfire played a huge part in the utility and its parent company, PG&E Corp filing a Chapter 11 bankruptcy. And that proceeding ended in July, I'm looking at my numbers here, with a 58 billion restructuring deal that included 25.5 billion in settlements with wildfire victims, insurance companies, and cities. So as you can tell, this really is a fiscal issue for companies as well, like PG&E. I'll add here though, that California is a little bit unique to other states in the U.S, and that there's this law that holds utilities liable for any damages caused by wildfire, if their power lines are found to have been the cause, and what's different about the California law from anywhere else, which that requirement does exist is that in California utilities are liable for those classes even if they aren't found to have been negligent.

Nathan Hunt: So, is this a situation where an out of date grid caused the fires as we saw in 2018?

Esther Whieldon: Well, I say we don't officially know the cause of the wildfires yet other than the gender reveal, right. And the main reason we don't know yet is because investigations just take a while to work out and nail down. And we're generally pretty careful not to report things until they are kind of nailed down. But I will say lightning strikes in mid August initially sparked hundreds of fires across the state. Record heat and intense wind later expanded those fires into some of the largest we've seen. And there are investigations ongoing and California and Oregon that are looking into the possible roles of utility power lines in the fires.

Nathan Hunt: How have the utility companies attempted to handle the danger from the wildfires?

Esther Whieldon: Utilities have really had their feet held to the fire over the last couple of years to harden the grid. They're getting it both from the federal courts, as well as the regulator of them, the California Public Utilities Commission. But it could really be years before they finished installing all the insulation they need to own the wires, the monitoring systems and the other, like, grid resiliency improvements they need. I think I read somewhere when I was looking this over yesterday was I think I saw 12 years mentioned somewhere in testimony to the Congress. So we do have movement happening the CPUC, the California public utilities commission in June approved wildfire mitigation plans for the three largest investor-owned utilities, as well as some of the smaller ones. That came with a pretty big price tag, for example, PG&E's plan alone through 2022 has a $9.5 billion price tag. That's no small change. In the meantime, utilities have done some preemptive things like doing outages in areas where they think their power lines could possibly trigger wildfires. And sometimes those outages are for days at a time or just hours. I can tell you, you know, I reported on the power grid for 15 years. Five years ago, even, if a utility had proposed intentional blackouts, that would have been political suicide, but the situation right now is so dire that regulators really, they had no choice, but to approve those plans.

Nathan Hunt: What could be changed to make the grid more resilient?

Esther Whieldon: Well, one of the trends we're seeing, coming out of the increased wildfires in recent years is more focus on something called micro grids. Microgrid is basically imagine like our big grid, right, just make it down to the size of a college campus or maybe your neighborhood, or maybe even like your town in which you have the transmission lines, but then you also have your own battery storage. You have your own rooftop solar, maybe on some of the houses or some of the buildings on the campus. And then you have battery storage. Maybe you have some units in each house's basement, or you have something like that. And so this basically allows those communities to continue having power when the broader grid is SOL, right, when it's, when it's going through big problems. And I think the trend, I mean, even in a, was it in 2018, the state of California actually passed a law, directing wider adoption of micro grids. And I think the commission right now is in the process of adopting that. In the broader sense, yeah, outside of wildfires, there's a lot utilities are doing or need to be doing to make their systems resilient to the physical impacts of climate change. So obviously the West it's wildfires and drought is a big problem, but then you have East coast or just coastal regions in general with hurricanes and sea level rise. And then you have inland areas with flooding or just rain and snow patterns or extreme cold, like polar vortex. There's things like that, that are happening, that utilities are having to pay more attention to like Hurricane Sandy in 2012, that caused real problems for New York and and the states around that area on flooding and things like that. And so we're just seeing utilities take more action. Although there's certainly more they can do and even bigger, bigger sense. One of the biggest things utilities can do to help the grid over the longterm is switching as fast as they can to zero carbon emission power. And tell the world really gets global emissions and check. I'm afraid. We're going to see these events like wildfires and hurricanes and increased tornadoes. They're going to happen more and more and be worse and worse. And many utilities have set aggressive targets like net zero emissions by 2050. Many of the same ones even are also investing, making longterm investments in natural gas plants. So there's some big questions ahead of whether those investments will be economic over the long term, when we have to start adopting more intense climate policies, and whether they'll have stranded assets.

Nathan Hunt: California in particular has always struggled with its electrical winter infrastructure. I remember the blackouts and brownouts manufactured by Enron to boost prices. And then of course the PG&E bankruptcy after the 2018 fires that you mentioned, is there a reason why California seems to the struggle with electricity?

Esther Whieldon: So, as you mentioned, the electricity crisis of 2000, 2001, that wasn't really a supply problem. That was a people holding back their power and hopes they can make more money if they, you know, if they provided it later, but it's an overall California, they're known to be sort of the more environmentally friendly and active state in the, in the U.S. They've always, at least in the years that I've covered it. Been reluctant to site new power plants, especially fossil fuel ones, due to like air quality ecosystem. And then there's the thing that happens everywhere in the U S which is not in my backyard or NIMBY. Like nobody wants to see a power line and they're looking out their window, right? The big emphasis for California is wanting to get rid of carbon and add renewables. And so they've been on the cutting edge of pursuing things, but that also means sometimes they're a little more challenged. So they're adding distributed generation, rooftop solar, embracing renewables. And now, as we talked about micro grids, In combination with that, California gets a lot of its power from outside of the state. Cause like, as I said, they're not building a lot of power plants that are kind of the ones you rely on all day long. When we had the heat wave this year, that drove up demand, not just in California, but in the neighboring States, California, couldn't, you know, they didn't have longterm contracts for these several thousand megawatts of power that they usually rely on from outside. That electricity was being used by the other states that had the increased demand. And so that's why they had to have rolling blackouts. The other thing is they've thrown so much into solar and while they have been building up like battery storage to help balance that out, it just really hasn't gotten to the stage where it's perfectly even yet. So there's just a lot of challenges they're experiencing. They're sort of the test case, right? For the rest of the United States.

Nathan Hunt: Are these issues with the electrical grid unique to the West, or are the wildfires simply exacerbating issues that all of the U.S. grid shares?

Esther Whieldon: I would say that each region and each grid system has its own challenges. Like we were talking earlier about, you know, the challenges that the East Coast face and all of that. All of the systems are aging. And then we also have one other thing I didn't talk about, which is market dynamics. So. The influx of cheap, natural gas, thanks to increased hydraulic fracturing combined with lower costs of wind and solar power has really driven a fundamental shift in the power mix away from coal-fired power plants that are shutting down. And we're even seeing some nuclear plants that, you know, were always the standbys. Some of them are having a hard time keeping up financially and turning to states for incentives to keep them afloat. And to add to that, an increasing number of States are getting clean energy requirements or even setting like New York and California, like net zero goals that are further driving the changes. There's a real discussion being had about the extent to which we need to keep fossil fuels around, to maintain grid reliability, but also like what California is experiencing and how technologies like battery storage can fill that gap. And this is creating a big power struggle between the states and the federal government.

Nathan Hunt: In your article, you used the term apocalyptic to describe the haze covering much of the Western United States. I assume you were speaking metaphorically, but do you believe we are in a moment of transition, not towards the apocalypse, but towards new and unrecognizable patterns of weather and risk?

Esther Whieldon: Well, first of all, I'll say that my colleague, Garrett, who is experiencing the wildfire smoke firsthand was the one that picked that word. And I felt like he had every right to do so since he was seeing it firsthand. I think to your broader question, climate change is definitely creating a new normal of there not being anything normal or static for companies. The wildfires are really just one stark example of the kind of impact we're going to see how climate change threatens nearly every part of our economy. And some of the most extreme effects of global warming are coming decades sooner than scientists expected. Every time I talk to a scientist, they say, we knew this was coming, but we didn't know it was going to happen this fast. And the problem with that is it means we have less time to prepare than some might think. And when you have less time to prepare the costs of adapting and changing, get bigger. And if you don't plan. Bigger and over the long term and think about those risks that are coming. The cost just increased. A major global effort is needed. We're not seeing it happen at the scale that's needed. And scientists have said, you know, we're pretty close to the tipping point in some ways of nature, just not being able to recover. One of the, sort of the myths around climate change is that once you reduce emissions, everything goes back to normal. If you've ever paid attention to anything in nature, nature doesn't change overnight, right. It takes time. And these things that built up over time. And so the sooner we can address this, the sooner nature can start to heal and the sooner things can get closer to normal.

Nathan Hunt: Thank you for listening to the Essential Podcast from S&P Global. To hear more from Esther, please subscribe and listen to the ESG Insider Podcast, available on your favorite podcast platform.

The Essential Podcast is edited and produced by Molly Mintz.