Behind the Meter, Beyond the Grid

Intro (00:00):
Welcome to the Power Bytes Podcast, brought to you by Caterpillar Electric Power with your host, John Thomas. Each month we deliver the latest insights, trends, and cutting edge tools to keep you ahead in the dynamic energy industry. Whether you're streamlining operations, embracing new technologies, or staying informed, Power Bytes is your go-to source. Join us as we explore innovation shaping the future and the resources you need to succeed. Welcome to Power Bytes, where energy meets innovation.

John Thomas (00:28):
Welcome to Power Bytes Podcast. I'm your host, John Thomas from Caterpillar, and I'm excited about this month's topic. We're going to be talking about some of the risks and challenges that are facing the U.S. power sector in 2026 and beyond, and I'm excited to introduce Tim Smith from Black & Veatch. Tim and I have bumped into each other at industry events over the past couple of years, and I thought that Tim would be a great resource to get on the podcast and share this information. So welcome, Tim! How are you today?

Tim Smith (00:53):
Great, John. Thanks for having me. I'm very excited to be here. This is a real great team you've got. I enjoy interacting with them.

John Thomas (00:59):
I'm happy to have you join us. Well, real quick, if you could just tell us a little bit about your role and experience in the power industry…?

Tim Smith (01:05):
Sure. I'm a mechanical engineer by education (Virginia Tech), and when I graduated, my first real job was with Florida Power & Light in Miami, one of the leading utilities in the country. Later I ended up working for Duke Power for a while, and most of my experience has been with engineering and construction and design-build type groups. So I'll bring some personal experience [to this discussion] as well as what I gather at Black & Veatch – and then what I hear from industrial customers and power clients of ours.

John Thomas (01:30):
And tell us a little bit about Black & Veatch, if you would.

Tim Smith (01:33):
Black & Veatch is a global engineering consulting and construction company. Our biggest practice areas are in power generation and transmission of power as well as water, wastewater. My group is a younger, growing group, which is the industrial manufacturing client base. I work with pharmaceutical clients, consumer products, electric vehicles, automotive batteries, and things like that. The company also has an amazing growing data center business and a lot of other areas like federal is a key part of our business.

John Thomas (02:02):
Tim's downplaying his experience a little bit. He actually has shown me a picture of him climbing a utility pole. So what were you doing when you were doing that kind of work, Tim?

Tim Smith (02:11):
Florida Power & Light did a lot of really cool things, and one of them was to ensure that their grid was resilient and the uptime was maximized for our customer base, they did have all of us who were engineers go to a three-week construction familiarization school every two years. And we were physically climbing poles and getting up in bucket trucks and then using excavators, backhoes, things like that for underground work. But we would actually build the lines, and if there was any kind of hurricane, weather-related outage, or labor-related outage, we were going to be out there keeping power going to homes. So you're up 45 feet in the air trying to put a cross arm on (and all the hardware), and you're thinking, “Why could this not have been designed a little better?” I thought FP&L did a great job in making sure that we had a great robust grid and that it was easily maintained.

John Thomas (02:54):
Awesome. We're going to be talking about some of the biggest risks and challenges facing the power sector this year and beyond. And, I'm sure, at Black & Veatch you deal with a lot of consulting engineers, right? So what are some of the common questions that you get from those engineers within your organization?

Tim Smith (03:09):
That's a great question, John. I think some of the bigger things – we were getting more on decarbonization and those initiatives. And Black & Veatch is one of the leaders in sustainable infrastructure worldwide, so we take that very seriously.

(03:20):
I think the other things we're seeing now [are]: how can we have the best backup systems? The most robust? Many clients are looking at bridge power if they're growing and they can't get it off the grid. So that's an area of concern. And I think I've hit some of the key ones. Grid reliability, best battery storage systems – those would be the key ones.

John Thomas (03:37):
Well, talking about battery or energy storage systems, there's been a lot of changes in the economic viability of those products in the last couple of years. What are some of the questions that are coming to you guys about energy storage?

Tim Smith (03:49):
The biggest issues we have, when somebody wants to build a new plant or expand a plant, it's around the labor force, availability, water, and power. And a lot of times now they can't get power for six to eight years from the grid. So they're looking at those solutions they can have, whether it's diesel generation on site, solar turbines, or some mix. And then we're seeing more and more that are looking for battery storage as a way to take advantage of, maybe, the solar fields that they can use. So they need the batteries to offset the times they would have when solar's not available.

John Thomas (04:17):
Can you share with us what one of those recent examples are and what the customers were trying to accomplish with that solution?

Tim Smith (04:22):
We're seeing a significant amount of data centers. Other mission-critical facilities that can't be interrupted are looking at BESS and diesel backup generation, but also we're seeing [that] we have a large potential project right now in the Southwest and they're going to have about 10 gigawatts of power required. And that would be a combination of gas turbines, solar fields, small modular reactor (SMR), nuclear power, and BESS on site for that one massive, many-thousand-acre type project. But BESS was already trying to be part of that solution.

John Thomas (04:52):
And when they're looking at that, what are they expecting that the energy storage is going to do for them, specifically?

Tim Smith (04:57):
When utilities need you to curtail part or all of your power – and maybe there's a financial incentive to be able to come off the grid, or maybe you're incented as the events occurring. And so then you can go to your backup generation, your BESS, to allow you to maintain operations during that event.

John Thomas (05:13):
Gotcha!

Tim Smith (05:14):
So there's a lot of flexibility that [it] can bring to a client that wants to optimize their energy cost usage.

John Thomas (05:19):
So as we think of inflation and policy, how are you seeing those factors impact or shape the industry today?

Tim Smith (05:26):
I think inflation is more of a known issue that companies can deal with and plan for. The bigger issue is policy. So what we're seeing that both manufacturing companies and mission-critical companies are looking for is some kind of stability that they can then come up and make sure their business plans are in alignment – that, as well as their utility cost. But it does help them look at options in a different way. I think most industrial clients will look at – let's say solar panels or BESS much higher than grid power. They're going to go to the grid power every time. We're seeing it being pretty fair across the board as far as inflation goes.

John Thomas (05:58):
Have you seen any policy or regulation changes that would be impactful for manufacturers that are delivering those types of solutions?

Tim Smith (06:05):
Well, certainly! We've all seen a shift away from mandates for EVs, the loosening of other green energy type requirements, which I think is going to allow more flexibility in letting people and companies adopt their most efficient and fastest-to-market type solutions.

John Thomas (06:19):
What are some of the risks and challenges that the industry faces in 2026?

Tim Smith (06:24):
I think a big one is, we're starting to recognize the problem with grid reliability. We need a lot of power and we need a very robust, resilient, flexible grid, and we're much more aware that it's not there and there's a lot of gaps in our grid. So a lot of investments are going to have to be made.

John Thomas (06:40):
Yeah, you can't listen to national or local news without hearing about the development of a data center in different parts of the country. Many of those data centers are challenged and your industrial customers are challenged with that power need and, in many cases, the utilities’ inability to provide them all of the power in a timely fashion, right? I think earlier [you said it] could be six or eight years in some cases. Are you and Black & Veatch talking to your customers more about on-site generation over the long term, or is it more of “until the utility is available”?

Tim Smith (07:11):
Yeah, I think it's a mix of that, John. That's a really complex thing around data centers. And we are seeing some communities where people don't want a data center in their backyard, right? But there's an issue of latency. So they want to be near population centers. At one time, Northern Virginia had 30% of the data centers in the country (or some number like that), and they really can't put any more there right now. The grid will not give them any power for seven to eight years. But they like to be near population centers.

(07:35):
Some of the data centers are now looking at secondary type sites where there is more power availability as one of the key drivers, not just to be close to the population where they have less latency. I was talking to one state that has a lot of natural gas, and they don't have a lot of industrial development, but they're a prime candidate now to put some gas generation in, to be able to attract data centers to that state.

John Thomas (07:55):
Yeah. Or they would be creating their own power on site with that natural gas.

Tim Smith (07:59):
It would be creating their own – and it’s IPP-type (independent power producer) or maybe it's someone else that [that] state is incenting to produce the power. Or maybe it's the data center itself or those developers that want to put power on site.

John Thomas (08:11):
Okay. I know that you mentioned in your intro that you are really focused on the industrial sector. We talked a little bit about some of the challenges the data center folks are facing when it comes to power. Are your industrial clients facing the same challenges, or is there something different for them?

Tim Smith (08:26):
There's a lot of reshoring or onshoring happening right now. We're seeing that in the Southeast. A lot of manufacturing clients are coming, and part of that is because they've got the labor availability and adequate power, but there's a lead-time issue sometimes of getting grid power. So some clients want to go ahead and put in their own generation and maybe sell that back to the grid at a future time in a bridge solution. But we have a lot of clients looking at behind-the-meter type solutions, where they want to have their own micro grid or their own power generation on site.

John Thomas (08:54):
So for those that aren't familiar with a behind-the-meter application, how would you describe that?

Tim Smith (08:59):
If you had a residence and then instead of getting your power from the wire that's coming in from the street (or underground), you would have your own generator or solar panels make power for your residence.

John Thomas (09:09):
Oh, it's basically the customer side of the meter. Alright, Tim. If you had a chance to go back five years and give yourself some information about the upcoming industry changes, what would those be?

Tim Smith (09:19):
So I think the availability of skilled labor should have a lot more traction right now. If people really would've looked at it five years ago with reshoring/onshoring going on and this rapid growth of the grid, rapid growth at data centers. There's a lot of competition for really good people. There's a lot of potential to have a great career with skilled trade.

John Thomas (09:38):
Yeah, I was just hearing some similar language on NPR this morning about that and the skilled trades, and we've all got to make an investment and take a turn there. As Mike Rowe used to say, "Everybody wants to work in the corner office, but if everybody wants to work in the corner office, who's going to build it?" So that, that's interesting.

Tim Smith (09:56):
Yeah, I love that guy by the way.

John Thomas (09:57):
Yeah, no, he's great. So we seem to need more and more power over the latest year or two years. Do you see any trends that that's going to tail off, or do you think that that growth in power need is going to continue?

Tim Smith (10:10):
I think it's going to continue, John. And we're all hoping that data centers find smarter, more efficient ways of cooling. Water requirements of a data center are massive and so is power. Both of those things are in short supply, so we're hoping that technology evolves. I don't know if it'll happen fast enough, but certainly we're pleased to see that there's a growing flexibility of power types that can be generated. Our company's working really hard on floating liquid natural gas solutions, hydrogen, green ammonia. It's cool that there's a good mix that you guys have with diesel, natural gas, and electric – and things of that nature.

(10:43):
I think we have a unique time in history too, where we're seeing a real diversity of good energy solutions that we can deploy them where they fit best and where they best serve our short- and long-term needs.

John Thomas (10:53):
Yeah, that's one of the things I think was interesting. You said earlier when we were talking about behind-the-meter applications where you're talking about all the different power solutions, power generating, and storage solutions that can be employed. I would think it would be tough for a customer to wrap their heads around, “What is the right mix of those solutions to solve my need?” And I'm assuming that's something that you guys at Black & Veatch do, is help customers work through that long menu of potential solutions?

Tim Smith (11:20):
We do! We have some really cool companies within the company, and one of them is our infrastructure advisory group. There's a lot of very smart consultants and PhD types in there that look at those things all day long.

(11:29):
And then we have another group that helps bring technologies to market and shepherd these people through the process and upscale their technology. But at one point a lot of eggs were going into wind power and solar and not a lot else. We're seeing everything from molten salt storage and thermal storage, thermal oil. And then we have some clients that are really interested in vegetable oils as a fuel, and that's been looked at for probably 10, 15 years now. Today the cost can exceed the value, and then there's not a certainty of supply. But we're certainly looking at that, and there's clients that are implementing some of those solutions, both on a pilot standpoint and some on a larger standpoint.

John Thomas (12:04):
So when you are helping the customers pick the solutions that they're going to employ from that very diverse menu, what are some of the key things that you need to understand from the customer in order to help them make those choices or those recommendations?

Tim Smith (12:18):
Starting with the basics, what their reliability factors are. Does it need to run 24 hours a day, seven days a week; how much fuel can they keep on site? And some of our clients are really a hundred percent committed to solar, wind, or something of that nature. So for those clients: how long can they afford to be off the grid, or do they need a very robust BESS-type solution as a backup?

John Thomas (12:36):
Gotcha.

Tim Smith (12:37):
So our infrastructure advisory group, they're really brilliant at asking the questions sometimes that clients haven't thought through yet. And then it even comes down to: do they have the skilled force that it's going to take to operate and maintain on-site solution or alternative fuels?

(12:49):
There's a technical part of that solution that has to be looked at. And then there's the business needs and objectives. So it's a [marriage] of the two, really.

John Thomas (12:56):
Well, let's jump back to your industrial customers. If they're depending on the grid for some or all of their power and the grid fails, help our listeners understand what's really at stake for those industrial operations. What does a grid outage translate into for them?

Tim Smith (13:11):
So I had a client once, John, and they were making this type of silicon crystal. And they had a lot of furnaces, and if the furnace had a one-sixtieth of a cycle interruption, the material would freeze up in the furnaces, and, essentially, they'd have to shut the plant down and it would cost them – I think it was $2 million a day. And this was back in 2010! So it could be anything like that. Other clients have a lot more flexibility because of what they're producing or the manner they're producing it. But we do see a lot of clients that cannot be down for even a fraction of a cycle.

John Thomas (13:39):
Yeah! I think of it very similar to the mining industry, right? Think of a gold mine operation that is used to operating 24/7. If the mine wasn't producing, they wouldn't measure that in hours. They'd measure that in minutes! Their cash register would just be ringing into the negative numbers every minute. So I would think that, depending on the industry that you were serving, it would be very similar.

(13:58):
Well, hey, I want to say thank you. We're going to close out this episode with one last question. When you think about the industry today, I want you to tell us a little bit about what technology or what innovation really excites you the most when it comes to energy. What are you seeing that gets you really excited about today's market and the energy sector?

Tim Smith (14:18):
When I started back in the 80s, we got about 30% of our power from nuclear generation. These were the massive nuclear power plants, but they were very reliable, robust. They were our cheapest power supply.

(14:30):
I think SMR (small modular reactors) have the ability to really be something that transforms society. This is a zero-carbon solution, so we should all be happy about that. I think that my kids and grandkids will have probably a cleaner, more robust power source.

John Thomas (14:45):
Yeah! And it's amazing the number of news stories that come out almost weekly about people that are giving that kind of technology a try. Appreciate you spending the time with us and sharing your knowledge. Thanks for listening. We hope you hear us again soon.

Outro (14:58):
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