I'm joined by Alon Levy of NYU's Transit Costs Project, whose work documents how expensive it is to build transit in the US relative to the rest of the world. We discuss how countries like Spain and Italy build cheaply by relying on in-house public expertise and standardized designs, while the Anglosphere is captured by a costly ideology of privatization. Levy explains how applying these lessons could make ambitious projects like high-speed rail in the Northeast not just possible but affordable.

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David Roberts

Hello everyone, this is Volts for July 30, 2025, "US transit costs and how to tame them." I'm your host, David Roberts. The US has a problem — and it's not just an economic problem, but a social, political, health, and climate problem. It's just this: it is extremely expensive to build public transit here. And it is simply impossible to have sustainable modern cities without public transit. It’s not a moral question but a matter of geometry: it's the only way to fit all the people.

Anyone who has traveled to a European or Asian city knows that a better way is possible. There are plenty of countries and transit agencies in the world that build quickly, competently, and, relative to us, cheaply.

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It is precisely this disparity between the US and the rest of the world that is the focus of the Transit Costs Project at New York University's Marron Institute. For several years, scholars there have compiled a comprehensive database of international transit construction costs. In 2022, the project issued an influential report summarizing what had been learned about why costs escalate and how to contain them.

That report was followed by a series of reports attempting to apply the lessons to model how projects in the US could be done faster and at reasonable cost. Most recently, there was a report on how to do high-speed rail in the US Northeast and a refreshed version of a report on how to enhance US rail service elsewhere without going full high-speed rail.

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To discuss US transit woes and how to solve them, I am thrilled to have with me today the co-founder of the Transit Costs Project, author of the reports in question, and something of a fixation for transit nerds in recent years: Alon Levy. We are going to dig into how the US got into this mess and how to get it out.

Alon Levy, welcome to Volts. Thank you so much for coming.

Alon Levy

Thank you for having me on.

David Roberts

I've been looking forward to this for ages. You know, the more I've dug into urbanism stuff and transit stuff, the more your name keeps popping up. And then I saw the report on high-speed rail, so that seemed like all the excuse I need. But before we get into that, maybe let's just have a minute or two on your personal background. You were getting a PhD in math, as I understand it. How did you go from there to where you are now?

Alon Levy

I mean, I can talk about how you can use chaos theory to model bus delays, but this is something I only figured out many years later. So I went to Columbia for grad school, and I was socializing with various political bloggers in my first year of grad school. So I was trying to get from Morningside Heights, which is kind of tucked into the northwestern corner of the city on the 1 train, to events that were all over, disproportionately in places in Brooklyn and Queens, which are poorly connected with the 1. I constantly went by subway. I constantly had to think about the system, and a lot of it comes from having to think of it as a user.

The other thing is, also, this was 2006, 2007, and Ezra Klein had just released the Health of Nations. Now, at the time, it was just two-pagers on healthcare and how very basic things about healthcare worked in the US versus a bunch of peer countries.

David Roberts

Yeah, I remember that.

Alon Levy

Yeah, that was what introduced the efficiency argument for universal healthcare into American discourse. And the important thing is not that he did that. I mean, I knew the numbers about American costs already, and so he became a superstar on this. It's the notion that Americans actually are interested in this. This was well before the Chinese explosion in subway systems was still under construction at the time. So, at the time, New York was still one of the maybe top five, top ten subway systems in the world. But I was just curious how the others worked.

And somehow I got into looking at the construction costs and the biggest one in Tokyo. And then somehow I started falling down the rabbit hole of looking at construction costs while Second Avenue Subway was happening. And years later, I made that a career, essentially.

David Roberts

Yeah, the contrast between Tokyo and New York is bracing on this subject.

Alon Levy

Yeah. And the thing is, Tokyo does not build particularly cheaply. I only compared New York with Tokyo in maybe 2009, 2010, because I wanted to look at the biggest. But Tokyo actually has above-average construction costs and is not building very much.

David Roberts

Oh, really?

Alon Levy

Yeah, yeah. They have a lot of difficulties acquiring property. This is a very Japanese thing. And it's not how high costs, where high costs are elsewhere, but in Japan, the property law is atypically difficult. So, for example, the subway extensions have to go under streets because you need to buy the easements if you're going under buildings. These are expensive. It's also why Tokyo is so rail-oriented, because all of these things that raise the cost of property acquisition and make subways more expensive to build — I mean, a subway is a two-track line. The right of way is, with ancillary, with platform rocking, 15 or 18 meters.

Now imagine how much right of way you need for an urban freeway. And the result is that the Tokyo urban freeway network is underbuilt relative to its size. Because it's not that they don't have motorways — they have motorways, they have freeways. But if they don't have a lot of them, there may be two or three lanes in each direction and not four or five because it would be prohibitively expensive to acquire the property to build massive urban freeways. So in Japan's case, the property rights law in Japan that makes it more difficult to build infrastructure happens to make it even more difficult to build urban freeways, which is one of the reasons why the biggest Japanese cities are so rail-oriented.

David Roberts

So you got interested in these comparative questions and then started basically a project within the Marron Institute specifically to study these disparities — why they exist and what explains them, what are the factors involved. I'm sort of curious before we jump in. Just like you say Tokyo is a little above average construction costs. Who is, when you talk to people, sort of your golden standard, like, based on all this comparative work, who, what country is hitting the golden mean in your eyes, like, getting it right?

Alon Levy

So the one that's probably most recognized as building inexpensively is Spain. Spain has very low construction costs, but honestly, it's generally true of Southern Europe. So Portugal is identical to Spain on this. Italy probably very similar as well. Turkey is very cheap. And unfortunately, because Turkey is maybe, let's call it a 1.5th world country, not a first-world country, what we found is that people kind of ignore it. So when we talk about how Turkey works really efficiently, people assume it's just because the wages in Istanbul are much lower. But it really isn't. No, they really are very good at this.

Greece is good. The Nordic countries used to be amazing. They no longer are, but they're still fairly good. And Latin America runs the gamut. There are some places in Latin America that approach Spain in how efficient they are. For example, the Dominican Republic, the Santo Domingo Metro, is rather cheap to build. I don't know anything about it, except that I know that the idea of building it was inspired by New York, just because there's such a big Dominican community in New York that politicians go there to do a lot of fundraising. So there's that kind of soft power.

David Roberts

Is the US the worst or just close to the worst? Is it literally the worst?

Alon Levy

So New York is unambiguously the most expensive.

David Roberts

In the world?

Alon Levy

Yes, and it's not particularly close. Who is number two? There are a bunch of American cities, but also some non-US ones. Generally, when you think of the worst, you should be thinking of places that work in English. So that would be the US. Canada was, up until about 25 years ago, pretty normal and has gone nuts in the last 25 years. And at this point, Toronto has a very solid claim to being the second worst in the world. Hong Kong, really bad. Singapore, also pretty bad.

David Roberts

Hong Kong, interesting.

Alon Levy

Yeah, nobody believes me when I talk about how expensive, because people say, "Oh right, they have a government that could do whatever it wants so they don't have NIMBYs, their unions are completely defanged." All this is true. And yet Singapore and Hong Kong both build really expensively. I think Hong Kong is worse than Singapore, but I don't have enough data to be confident in that claim. And kind of through learning of bad ideas between British Thatcherites and Singapore and Hong Kong, they've kind of exported these bad ideas throughout the English-speaking world. This is what's going on with Canada, Australia, New Zealand, same issue.

The Gulf states obviously don't work in English. Technically, they're all Arab countries. But they're marinating in so much of this kind of international starchitecture, and they're maybe bringing in international consultants to buy some kind of prestige. And the result is that they too are really bad.

David Roberts

Well, let's get into it — so you've got this original report, sort of the original point of the project.

Alon Levy

Yeah, the 2023 one.

David Roberts

Yeah, yeah, just to lay out, sort of like "What are the big reasons?" So I want to kind of go through some of the big reasons why the US is so expensive and then talk about, you know, because you've got these two reports that I really found interesting. One is on how to build high-speed rail in the Northeast at a reasonable cost. And the other one is just how to sort of not build high-speed rail, but improve US rail, at least boost it up to medium speed. Faster than it is.

Alon Levy

Yeah. There are different claims for it. I mean, so Nolan Hicks, the author of the — let's call it Medium Speed Rail report, Momentum — uses different terminology. I like using the expression medium speed, but I am also aggressively not a marketer. And so the American terms for that is higher speed rail, which I really hate because higher connotes faster than high speed, which is the exact opposite.

David Roberts

Medium does not inspire anyone.

Alon Levy

I used to call it low-speed rail, but I mean, it's fine. I mean, not everything needs to be made of gold with diamonds in there.

David Roberts

So I want to go through some of the big reasons why US transit is so expensive and then sort of try to apply them to like this New York high-speed rail project. Sort of like, how do you solve this problem in practice? And the place to start, I feel like the main problem, if you had to identify one, is basically institutional failures. Governance issues, basically. And to me, one of the most intriguing things that you found, and I'd love to hear you talk about this a little bit, but basically, like when you find someone doing this well, you find them doing it in-house, in government. Government owns it, government experts are analyzing it, government departments are building it.

Like it's so funny in the US, you know, there's this mythology that government is inevitably inefficient, but you've found basically the opposite on transit costs. So just talk a little bit about that.

Alon Levy

Sure. And I will point out, by the way, that this myth of inefficient government and efficient private sector consultancies, this is exactly the set of institutions that have been adopted in, let's call it the English-speaking world minus the US — the US have slightly different institutional failures. It's specifically people who are — and previewing to something slightly because we're starting to do a London case. And the origin of all this is becoming a lot clearer because I only saw kind of what they were looking at this, how they were looking at this in the Nordic countries, which are — they are influenced by English-speaking ideologies.

When I was researching this, as I said, the Nordic countries used to build as cheaply as Spain. They no longer do, but they still build at below-average costs. And I've been reading what they're doing with procurement, and they essentially take it for granted that better privatization equals better projects. So what they were doing is they were looking at different countries, and all of the countries that they were looking at were in northern Europe. They don't deign to learn from southern Europeans or Eastern Europeans, let alone non-Europeans in Scandinavia. And so they were comparing various Nordic countries with the UK, the Netherlands, Germany, and Switzerland.

And they were just taking it for granted that there was more involvement of private consultants in early project decision making in the UK and the Netherlands as, "Oh, this is more advanced." And in Germany and Switzerland they don't do any of that, so that's less advanced. It was not taken as a point that one needs to argue. It was taken as something that's obvious, like economic growth is good is not something that people feel the need to justify. Or unless you're specifically writing for Thatcherite publications, you will say lower inequality is good. And you will not need to justify that.

And it's the same. They were treating more privatization of project delivery as obviously good. And they weren't even noticing how in the 1970s, the construction costs for the London Underground and the construction costs for the U-Bahn in, let's say, Berlin or Frankfurt or Munich were the same. And by the 2000s, which is when that report that I'm referencing right now is written, British costs were about twice the German costs. And looking at London right now, it might at this point be three or four x.

David Roberts

Well, I mean, I don't want to get off into sociology here, but what you're describing here is very bizarre to me. Like I say, economic growth is good, and I don't have to argue for it, but if I did have to argue for it, I'd have a ton of evidence. Whereas if I did want to argue that privatization works better and produces lower-cost projects, there's almost no evidence for that. Like, almost all the evidence is the opposite. Like you have this myth that has a total iron grip on national leaders across the world that is based on almost nothing as far as I can tell.

Am I exaggerating?

Alon Levy

Only slightly, because there is some evidence that privatization improves certain things. And from there they assume privatization improves everything, even things that aren't actually privatized. What I mean by not actually privatized: if it's something where you can have a lot of private competition and very loose government involvement, for example, let's say private airlines versus a state-owned national airline, then that is something that privatization is better at. But project delivery always involves the state. And one of the issues is: what is the problem you're trying to solve with privatization? So if the problem is that government doesn't work, then the issue is that privatization itself is a government program.

Now you may be able — no, I'm serious — so often the positive examples that are cited in Washington Consensus for privatization, these are examples of the government handcuffing itself. Something like saying, "We are currently in a reform mode, but we know that we will not be able to deal with lobbyists who will want special protections for their own industries. So we're going to, in the next few years, disempower ourselves because this is our window to disempower the lobbyists." And you see this a lot with, for example, tariffs.

This is why the Washington Consensus is so pro free trade, because — and you see this right now with the Trump tariffs — tariffs are so discretionary that they tell industries, "Don't buy better plants, don't invest in productivity, buy politicians, make sure to lobby to be one of the winner industries." So, for example, a government program that disempowers a future president from wielding this kind of weaponized tariff system, maybe returning it to Congress, or at the very least not giving the president this kind of absolute discretion. That would be a way of disempowering the government, saying, "Okay, right now we're in a reform window and we can disempower ourselves in the future so that we do not succumb to lobbyists."

None of that is the case where you're privatizing project delivery for infrastructure. That is the difference.

David Roberts

Why is that different? What is it about project delivery that escapes the magic of privatization?

Alon Levy

It's always public. The decision, "Do you build a subway? is public." You can be extremely privatized, which is, for example, what's going on in Canada. Again, they like doing a lot of privatization of project delivery, or in Gulf States, the UK, and so on. But the decision, "Do we build a subway in the city under these streets?" that is a public sector decision. The funds are always provided public sector. There may be some kind of private financing model, which is often just a way of having off-book debt at very high interest rates. So in Italy, the project delivery is overall not at all privatized.

But some of the extensions that they were building in the Great Recession, they chose to have some kind of public-private partnership, some P3 for financing, in order to keep the debt off books. And in the debt crisis, and then you look at the contracts, and I think it was in Milan, for how much they were paying the concessionaire and how it was structured — payments per rider. And so the bottom line of this was that based on the expected ridership, it boiled down to the state borrowing off books at 8%. Now, Italy was never Greece; Italy was never at a point where 8% was better than just having a slight deficit for this.

Nobody would ever question a deficit for long-term infrastructure. The troika are not morons. The troika understand where most debt comes from, and it is not from infrastructure investments. If you're saying, "this is for infrastructure," people understand in the same way that, for example, if there's a war or a crisis that might lead to war, like right now with Ukraine, people are very understanding, or they're saying, "Okay, we need to increase military spending off of debt," because it's understood that this is not politicians trying to buy votes or anything. This is about a war that none of the European politicians started.

David Roberts

Isn't it also the case, like if you're building a private, you know, private airline or whatever, you really only have to please your customers. But when you're building public projects, there are certain service obligations you have to the public that would not make sense in a free market context.

Alon Levy

Correct. So you could always find corner cases where you could maybe even make a profit on, for example, a subway line. But they exist, they are rare. My standard example is in San Francisco. This could be done under Geary Boulevard just because the bus ridership there on a parallel street is very high. A subway there would just be extremely justified, and I hope that the city is capable of building that. But it's so justified that with good enough cost control, the private sector could make a profit on it. But it's not going to be a very large profit.

Every person there with money can probably make a better profit investing in tech.

David Roberts

But also, insofar as the public has to spend more to meet these service obligations — you know what I mean — more than a private developer would have to pay in some cases. It seems like in those other cases where there's value to be had, the public should get that to offset the former. Do you know what I mean? Like, why should we decide that any time there's profit available we should assign some private entity to skim that off? Like, why not?

Alon Levy

Yeah, exactly. It's a huge problem with, I don't know what to call it, maybe hybrid systems where there may be bus shuttles that can make a profit in core markets. You live in Seattle, right?

David Roberts

Yeah, yeah.

Alon Levy

So I don't know Seattle buses well enough. I don't know how well you know Vancouver, but Vancouver has a bunch of core buses where you look at the operating cost per rider and it is, I'm not sure if it is still less than a Canadian dollar per ride, but 10 years ago it was less than a dollar and already then the fare was two-something. So there are situations where you have maybe a jitney, these street-hailing jitneys that just go on the busiest routes and essentially skim off all of their profits. Tel Aviv has a lot of that.

Or inner New Jersey, the suburbs, the densest New York City suburbs in New Jersey have that. And in Jersey they've kind of bullied New Jersey Transit off of these routes. For example, they do things like they block bus stops or they make sure to always, instead of arrive exactly in the middle between two regular buses for maximum frequency, they arrive just ahead of the bus.

David Roberts

That's so annoying.

Alon Levy

Yeah. So, yeah, these are things that, when it's possible, you do need to regulate that so that they don't skim off the profits and weaken the network effects that you're getting out of all of this.

David Roberts

So one of the pieces of the governance critique is this is farming stuff out to private consultants and stuff to no obvious savings. The other sort of big governance critique is just fragmentation. And I think this is particularly bad in the US, which is just in any given setting you've got city authorities, county, state, municipal, federal, and no one is clear exactly who's in charge. And no one's clear exactly where the buck stops.

Alon Levy

Yeah, exactly. And it's not just American, it's also in the US and UK. The UK is much less fractionalized. But the kind of the mentality in both cases is that agencies aren't really empowered, unless, in the US it has to be a political appointee who tells them do it. In the UK it's either a very senior civil servant, one who's a generalist and didn't come from the department, or the minister. So often it has to be a ministerial approval, which is just a crapshoot whether you get a good minister for something.

David Roberts

Yes.

Alon Levy

And even that can only build very big projects, and it's harder to do small ones unless you empower the civil servants.

David Roberts

So I'm guessing the people who do this well and cheaply empower the civil servants who have their hands on these systems to make decisions about which small lines — you know what I mean? They're not waiting on political permission.

Alon Levy

I mean, to an extent. So the decision to build a subway extension in Stockholm or in Milan is political. Now there are mechanisms that inform the politicians. So the advice of various organizations. There's going to be a benefit-cost analysis, which is not done in the United States. It is in the United Kingdom. So I think the US should be doing benefit-cost analyses, but it's not going to solve the problem, it's just going to lead to better project selection. But if it's a megaproject, then the politicians have to make decisions.

And often these projects are good enough that they're, let's call them bipartisan. So, for example, Crossrail and High Speed 2 in the UK were bipartisan. Labour, the Conservatives both supported them in the early 2010s. And the expansion of the subway in Stockholm was called Nya Tunnelbanan, New Subway. That was something that was decided in the mid-2000s. The center-left coalition was obviously for it. The center-right coalition was a little bit skeptical, but they approved it because the benefits were very clearly very good.

David Roberts

So this is the main thing I wanted to talk to you about because at once the governance problem seems to me the biggest and most obvious. There are others obviously, but these are the core to me — the US obsession with consultants and privatization is the original sin. And a lot of the other problems you list are sort of downstream of that.

Alon Levy

I will say "Yes, but..." So the obsession with consultants is unambiguously the biggest problem in English-speaking countries that are not the United States. In the United States it is a problem, but it is not the only problem. The US in general just has very little empowerment of public sector engineers, for example, to the point that when they are empowered, they're empowered to say no. And then it's on the politicals to say, "No. I know you said no, we're going to do this anyway." And that's where you get fractionalized situations where in Bellevue, Washington, the fire department refused to certify a light rail station that did comply with the state fire mandate because they wanted overcompliance.

So it's this kind of thing, and it can be done even when it's not — the fire department could be a municipality trying to extort betterment.

David Roberts

Everybody's empowered to say no. Almost no one is empowered to say yes. And almost everyone is empowered to say no.

Alon Levy

No, a lot of people are empowered to say yes, just as these people are the governor. Or if it's a big enough city like New York, it can sometimes be the mayor. And this requires taking responsibility. These are not people who take responsibility for anything.

David Roberts

Yes, right, right.

Alon Levy

And, but yeah, no, it's this kind of constant scourging of the civil service that civil service needs to have some kind of maybe political commissars or some kind of DOGE overseers. And nothing good ever comes out of it because at the end of the day someone's going to need to make all these decisions. And when they try to use the consultants as a maybe more politically pliant second civil service, the results are awful. Not because the consultants are bad at their jobs, they're not. The consultants are just mismanaged. They are told things like "study everything." So, okay, so that means that they're going to study even rather stupid alternatives because they're told to study everything, and it's easier to do extra work than not to do the extra work or to push back against the client.

And it's everything else involved with that, it's things like a project delivery that maximizes conflict.

David Roberts

Wait, wait, hang on, before we get past the governance things, because I want to talk about this in reference to your proposal for —

Alon Levy

For high-speed rail.

David Roberts

Yeah, high-speed rail in the Northeast. Because, you know, insofar as you've identified these problems, you're trying to show how they could be solved in proposing these projects. And this is why I want to dwell on this governance problem, because it seems to me both the most difficult and the most difficult to solve. So sort of your proposal is to centralize decision-making about Northeast rail. And just to be clear, like the Northeast high-speed rail in the way you're describing it involves, I don't know, like, I didn't count, but like 10 states. There's a lot of states involved and thus there will be a lot of agencies involved, a lot of actors involved.

And you are proposing to basically create an agency that will coordinate construction and scheduling and et cetera. But I just, like, stumble on that because I wonder, like, it makes sense from a 30,000-foot point of view. It makes sense from a total, like if you want to do the total project as cheaply as possible, it makes all the sense in the world. But if I'm one of those agencies, if I'm one of those states, I jealously guard my power. I'm often more interested in my power over a little corner of the thing than I am in the total cost of the larger project. Do you know what I mean? So, like, yes, political economy-wise, how do you pry control out of the hands of these agencies? I mean, how is that supposed to happen?

Alon Levy

So there was this spiel I just gave you about empowering the civil servants, and that is more for urban transit. And for the Northeast Corridor, there're kind of two opposing forces pulling on this. The first force is that mainline rail in the United States has awful systems. And when I say systems, I mean mainline rail is managed really poorly. There are all these things that all of the insiders know that are just wrong. In Toronto, they tried to modernize their commuter rail just now, and they're doing quarter measures essentially because the old-timers at GO Transit/Metrolinx just don't think of commuter rail as a form of public transit.

They think of it as something very weird that can only be understood by people in North American railroading. And the result is that the Berlin S-Bahn, the commuter rail in Berlin, has approximately the same ridership as every American commuter rail system combined. The idea in the United States that people can learn anything from German commuter rail is anathema, at least within these agencies, including Amtrak.

David Roberts

Yeah, I should just say, like one of the problems you identify is the US's complete refusal to learn anything from the great examples that surround it in the world.

Alon Levy

Exactly. This is especially bad in railroading just because it's kind of its own thing. And they're convinced that the US is the best freight rail system in the world — Russia and China are better, but democratic Europe west of Ukraine genuinely does not have very good freight except for a handful of landlocked or very mining-oriented countries. So Switzerland, Austria are good. Sweden and Finland, and the Americans refuse to learn from these as well. And no, a lot of it is refusal to learn. So often what I found when selling this report is that the insiders of the agencies keep telling me that certain things are impossible that happen thousands of times a day on this side of the pond.

David Roberts

I mean, that is US politics in a nutshell right there: being told that things are impossible that other countries do routinely.

Alon Levy

Yeah, but it's often much more extreme than that. It's not like it's impossible to have universal healthcare. I think it's understood in the United States that there's universal healthcare in basically every other first-world democracy. And the question is how to get there. But this is not, "Oh, they have this, but it's hard to get there." It's things like, "Oh, we can't use these kinds of switches on these kinds of tracks," or "We can't run these kinds of timetables," or "We can't coordinate bus and commuter rail timetables." And the answer to basically all of these things is "Yes, it's possible."

So that's kind of a negative factor. As I mentioned, there are two kind of veiling forces there. This is the negative one. The positive one, when you were asking about the state and agency turf issues — that they prefer to own a small fief to being part of something bigger and more successful. The positive thing is that the commuter trains in the United States are so poorly run, so poorly used, that there is a lot of surplus that can be produced just by running them better to the point that it even betters the service within the state for the kind of riders that they care about, which in this case is nine-to-fivers, people who kind of like Don Draper or Pete Campbell in the seasons of Mad Men when they are shown taking the trains that are today Metro-North (at the time were not yet called Metro-North) from the suburbs to Grand Central.

And Pete Campbell takes the same train every day and sits at the same time, seats, and gets to know the same four people. So just very traditional, that commuter rail mentality that thinks it's still the 1950s and 60s, that people still travel like that. That's the only service that they care about. And the problem is the service they provide is so terrible that you can get into a situation where Greenwich, Connecticut, for example, could get faster service to Grand Central on an all-local train than it gets today on an express train because the timetables are so fragile, the way they're being written, the way they're not being coordinated with infrastructure at all, the way that each train is its own thing, that they need to add something like 25% or 30% to the timetable of every train and professionals add 7%.

Seriously, there are a bunch of things that can be done that are either free or inexpensive that will make local trains faster than non-stops on Metro-North today. And so there is surplus even for the riders who are currently the most privileged. And I don't mean the most privileged in the sense of being rich, although they are, but in the sense that they are considered the core service for the commuter rail.

David Roberts

So your promise to states here is that by participating in this larger project, you will also get local commuter rail improvements by coordinating things at a higher level.

Alon Levy

Exactly.

David Roberts

Things will work more smoothly even in your local corner.

Alon Levy

Exactly. For example, in both Maryland and Massachusetts, they run diesel trains under the catenary on the Northeast Corridor. And in Massachusetts, what's going on is they're aware that they should probably electrify, but they have never run electric trains on the MBTA. And this is really important because maybe you think of electric trains as less polluting than diesel trains, and they are. But electric trains have a very long slew of benefits over diesels and no drawbacks whatsoever, except that you need to pay two strings of wires. And this is a line that is already fully wired. So electric trains are cheaper than diesel trains to buy and maintain.

They're just not used to them. So they don't know how to spec them out correctly. And they come up with these compromises because, again, they're institutionally not very familiar with how to run good service. And yeah, there are outsiders like TransitMatters in Massachusetts who are screaming at them about this, but again, they're not used to it.

David Roberts

Well, I'll just say that I'm a little skeptical that even the promise of local benefits is going to move bureaucrats.

Alon Levy

I will say that it is moving them in Massachusetts and in Pennsylvania. The issue in Massachusetts and Rhode Island is not the quality of the tracks. The tracks are largely already built to high-speed rail standards. The extra work that needs to be done to them ranges from none whatsoever to extremely cheap. And the main issue is that there's heavy traction with commuter rail north of Providence. These are slow diesel trains. They do Boston to Providence in well over an hour.

It's an hour 10, maybe. The intercities do that in 35, 36 minutes. And if they wanted, they could do it in 25 if they made fewer stops and if they used better equipment. And so they need to timetable them together. They need to have the fast trains overtake the slow trains. And the best way to do that is to speed up the slow trains. So this is where the thing that improves intercity service is literally just speeding up the commuter trains.

David Roberts

So it's making local service better that serves making the larger system work better.

Alon Levy

Exactly. And again, this is a Massachusetts thing. And a Maryland thing. In Maryland, I will say it's Amtrak's fault for how it was scoring MARC (Maryland Transit Administration) over on electricity. Not entirely, but it is predominantly Amtrak's fault. In Massachusetts, Amtrak was trying to be accommodating. The MBTA just doesn't care. And it's not exactly a turf issue. The MBTA is interested in a lot of other aspects of modernization that are within its history or within what it's used to. So the other thing you need to do is to not just electrify the trains, but also raise all the platforms so that you could get on the train without climbing steps.

David Roberts

If you have this unified control and procurement. One of the things you talk about is how terrible procurement is currently. And basically, long story short, US transit agencies end up with very expensive, not particularly well-performing equipment. And part of what you're talking about doing to get around that is allowing this centralized authority to open up bidding on equipment internationally to allow all these international firms who do this much more often and much better to come sell their equipment in the US, which, again, like makes all the sense in the world to me in terms of getting better equipment and better service and a better system, but is also extremely counter to the political tenor of the times.

Alon Levy

No, you don't need to. So for better equipment on commuter rail, you don't need to centralize, you just need the agencies to know how to write an RFP. And the problem is they kind of don't. So they maybe hire a consultant. So I saw SEPTA (Southeastern Pennsylvania Transportation Authority) write an RFP for new train sets. That was how many hundreds of pages? Maybe 500. Amtrak wrote one that's a thousand pages. Just to put it in perspective, a Spanish RFP for the same thing is 70. So they just overspecify. They try to define what a train is instead of trusting that the vendors know what a train is and just say, "We need the following things. This is the service we're trying to run. These are the dimensions of the train." — so that they manufacture them to the right specs.

And then that makes it much easier for—I won't say the international vendors, but international in this context means European. The American regulations were realigned in 2018 within European regulations effectively and maybe also Korean. But Japanese and Chinese regulations are very different. So Japanese vendors that want to do business in this situation have to essentially Europeanize, like Hitachi essentially bought European plants and European patents and is effectively a European train vendor. The same way that the Ford Focus — yeah, it's called Ford, but it's a European car made in the United States.

David Roberts

So just better procurement, more professional and effective.

Alon Levy

More willingness to — if you're not getting federal funding, you're not subject to Buy America, just buy foreign. If you're getting federal funding and you're under Buy America, you can still handle it because these vendors do have American plants. But be very standard. And by standard I mean standard European, non-standard American with your RFPs and make use of these modernized regulations, which the commuter agencies have not so far because they're just very conservative. They're used to — they believe what works for their grandparents works for them. And the thing is, fewer people today, and I don't mean today, 2025, because of cars.

Fewer people in 2019 entered the business district of Manhattan between 8 to 9 in the morning than did in 1960. Way more people entered the business district on the 24-hour scale, but all the gains were off-peak.

David Roberts

It's just not a 9-to-5 commuting world anymore.

Alon Levy

It's just like, yeah, the 9 to 5 commuting world was in a multi-generational decline. The New York City subway was busier at rush hour. The trade for a more crowded rush hour in the 1970s where the system was collapsing and ridership was not much more than a billion a year than it was in the 2010s, where the ridership hit 1.5, 1.6 billion a year. The gains in subway ridership in the 90s and 2000s were entirely off-peak. And the subway to an extent recognizes that. With the commuter rail system in the United States, it doesn't.

It's just very traditional. And this is where a lot of the problems come from. Again, not all of them. There are others. There are construction costs. There are issues with just raw construction costs building bypasses. The result is that kind of the good way to modernize your infrastructure is to understand that sometimes you need to build a tunnel here or there, or to build a bypass here or there, or to grade-separate a junction in an urban area here or there, and then timetable in conjunction with that. And when you're too mortified of building anything, you will not coordinate.

You will assume that these are prohibitively expensive, and maybe you will build them later for capacity, but you will not really think of them as timetable enhancers.

David Roberts

Well, if you have an entity that has the whole system in its view, then you can understand those trade-offs better. You can understand where spending money here might save more money elsewhere in the system. If you have a larger view, you're better at making those trade-offs. I guess the second big sort of family of problems going beyond governance is just overdoing it. Overbuilding, overdesigning, overgilding, too much bespoke, you know, one-off projects, too much gold-plating, et cetera, et cetera. And part of how you're trying to sort of counter that with the Northeast rail project is just making maximum use of existing infrastructure, doing the minimal amount of tunneling that you have to do, ordering standardized trains, standardized designs, standardized designs of stations.

Talk a little bit about all that. Why is it in the US context that we are so prone to — we can't build the basic block and tackle basic transit systems, but when we do turn our attention to actually trying to build something, we wildly overbuild it? Why is that?

Alon Levy

There isn't a lot of willingness to iterate on things. Everything needs to be new and shiny. This is especially true for megaprojects, because megaprojects are by definition mega, by which I mean they are uniquely big for what you're doing. Building an extension of the Metro with two stations in Paris is not a megaproject; in New York, it is. In Paris, building an extension with 50 stations, yeah, that's a megaproject. But the result is that politicians want signature stations. There's demand for that, often bottom-up, where a community says, "We want something special, we want placemaking."

And it is possible to say no. But governors and so on, or agencies or mayors, choose not to say no. Or the way they divvy up the project. Maybe they try to do each station run by autonomous subcontractors. And maybe the subcontractors don't pick the same elevator design. Or in Second Avenue Subway they got different vendors to do the escalators at different stations. And again, it's all these things because all the things that they're trying to not look like the Washington Metro, where every station kind of looks the same and it's brutalist. And everyone thinks that that is very cost effective, and it absolutely isn't.

What actually is cost effective is — the art is free by the standards of the cost of building a station cavern. I mean, making it look good is essentially free. The problem is, again, it's things like the design of the electrical and mechanical rooms or the escalators and elevators. I mean, you could decorate the same cake in so many different interesting ways with all these, you know, the cake decoration YouTubers that I'm talking about?

David Roberts

So you could just make a simple standard station and spruce it up to look nice relatively cheaply.

Alon Levy

Yeah, exactly. Stockholm does this very well. In Stockholm, it's easier because they have very hard rock which forms natural arches. So that by itself is kind of artistic. And then you put statues in the stations. And I don't want to judge, but the cost of procuring paintings and sculptures for stations is a rounding error in a rounding error in budget. And then, so yeah, people sometimes demand special things and then agencies don't say no. Or sometimes it's other kinds of creep, like parking creep at commuter rail stations or especially big overpasses instead of doing simpler underpasses.

I was talking about this years ago with MBTA people about the cost of, as I said, high platforms at the commuter rail stations, which at the time, they were not expensive projects. They were maybe 20, 25 million each. They could have gone a little bit under 20 if they'd had standardized designs. But they didn't. And the reason they didn't was that the governor wanted — Governor Baker — wanted to do everything with the private sector, so they couldn't come up with their own standardized designs, and they had to wait for a consultant to come up with standardized designs for the stations of South Coast Rail.

And they were hoping to piggyback. Often it's just people don't think of it as important and nobody tells them that it is. And so anyway, 20 million or so, 25 million, and maybe you up that for inflation it's 30. And you look at New Jersey Transit, and New Jersey Transit, when it takes an existing station with low platforms and puts high platforms there so people—so, for example, so wheelchair users can get on and ADA doors.

David Roberts

Wait, can we pause on this? Because this is a theme that comes up over and over again, and so I'd love to talk about it a little bit. When you're talking about commuter rail stations, you say they should standardize around high-level stations. What is a high-level station, and why is it superior?

Alon Levy

Okay, so the important thing is that the height of the platform and the height of the floor of the train are identical to within —

David Roberts

Ah, right. So you just walk on.

Alon Levy

So you just walk on or roll on or roll your luggage on, or roll your walker on or roll your stroller on. And even if everyone there is able-bodied, it will generally halve your boarding time, and with other things that you can do in addition to this, it can even be a factor of four difference.

David Roberts

And this is as opposed to, like, having to step up?

Alon Levy

Yes, exactly.

David Roberts

It's that simple?

Alon Levy

Yes. And this is especially important in an American context. The reason is that the European context is they've kind of picked compromise heights that when you do have steps and on intercity trains here, unfortunately you always have steps. It's maybe one step up or two. In the United States it's at least three. Because the way it works, the eastern US, the big urban stations all have high platforms. The platform height is 4 ft. This is also the standard high-speed rail boarding height in China and Japan. And nearly all high-speed rail ridership is in China and Japan, and the European high-speed rail, as I said, the platforms are kind of middle height, but the floors are essentially the same height as they're still about four feet.

David Roberts

It's such a simple thing. And it's wild how central it is to these reform plans and how big of a plan.

Alon Levy

Yeah, exactly.

David Roberts

And the effect it has. If you have a station that isn't level, how big of a project is it to make it level? Or is this just something you have to build new stations to do?

Alon Levy

You need to build a high-level platform. And as I said, the MBTA — I'm not sure about now, but it used to be able — and by used to, I mean five years ago — used to be able to do it for, in today's money, 25, 30 million. New Jersey Transit is still doing it for about 30 million, and SEPTA is doing it for less. But SEPTA's platforms are shorter, and if you pro-rate, it ends up being about the same or maybe a bit cheaper. 20 maybe.

David Roberts

So wait, that's to redesign an existing station or to build a new one?

Alon Levy

Redesign existing station.

David Roberts

Got it.

Alon Levy

Now building a new station — and this is what the thing with the sort of thing before about overdesign. I was talking to MBTA planners, I don't remember how many years ago, maybe five or six. And they told me that the work involved in building high platforms is fundamentally the same as building an infill station. If the infill station is more expensive, it's because you're doing other things. For example, maybe you insist on also putting a parking garage there or some kind of overpass over the tracks. And the result is that — and New Jersey Transit, I started saying, has this program to convert low-level platforms to high-level platforms.

And again, it's, forgetting, it's about 30 million per station. But whenever it builds an infill station, it's not 30 million, it's not 30 million and change, it's 250 because they're —

David Roberts

Jesus!

Alon Levy

There's no reason for it to cost 250. They're just loading it with parking garages and overpasses, and especially big overpasses, and maybe an entry hall that nobody needs, and just a lot of overdesign because they're supposed to be signatures or something, as opposed to "This is a commuter rail station. Your budget for it is 30 million. Go."

David Roberts

Right. Well, there's so — I mean, commuter stations are so rare here. It's like we want to make everyone special. Maybe if we just had more of them, we would be more accustomed to just seeing a normal one.

Alon Levy

In central Jersey, they're used to commuter rail stations. They just think constantly in terms of parking. So they keep building parking and they call it building trains as part of — it's not the biggest problem, but it is for commuter rail in Jersey one of the bigger ones.

David Roberts

Same in Seattle. I mean, another one of the problems, sort of the broad-scale problems you identify in the US cost-wise is just sort of, I guess what you would call weak political discipline or civic discipline. Like no one can say no to anyone.

Alon Levy

They can. They absolutely can say no. They just choose not to.

David Roberts

Wait, no one says no to anyone.

Alon Levy

It's like saying that the Supreme Court can't strike down something that Trump does. Yes, it can. They choose not to because six justices agree with him.

David Roberts

I mean, you can just say you should let the technocrats lead this and be in charge. They know what to do. But like all the political force is pushing the other way. Do you know what I mean? Like, I just don't know how you, how do you get—

Alon Levy

There's, I mean, I will say that there's way more prestige on civil service in continental Europe, southern Europe especially. I think there's just a lot of engineer prestige there, especially public sector engineer. And the US can do better. The US needs to let go of the idea that the civil servants are all petty tyrants and instead treat them as professionals.

David Roberts

We're heading in the other direction, I'm afraid. Like we're having a very populist moment.

Alon Levy

Yeah. So that means things like — and again, commuter rail is somewhat different, just because the internal way mainline rail works in the United States genuinely needs to de-Americanize and Europeanize or Sinicize or Russify or —

David Roberts

I don't think Russify is going to sell very well.

Alon Levy

For freight, you will be surprised. Or Japan. Japan is — I'm not sure what the verb is. But elsewhere you want to, for example, not have these six-month or one-year hiring pipelines. You want an interview and then the person gets hired within two weeks to one month. It's kind of interesting that everyone talks about privatization as in shoving the civil servants aside and putting private consultants in their stead, as opposed to, let's call it private sectorization, where you're just treating the civil servants like Google treats the programmers.

Which means you hire them in a process that doesn't take years. You pay them well in cash, not pensions.

David Roberts

And you can fire them if they don't —

Alon Levy

And you can fire them if they don't perform well. Correct. And you can fire them not necessarily at will, but over months and not decades. And the sad thing is you can actually fire civil servants in the United States very quickly if they piss off a politician. You just can't lay them off or you can't have the manager fire them. It has to be political intervention from above. And it means things like moving pay from pensions to cash. Ambitious people don't choose a job based on a promise of a pension in 25 years — I'm sorry.

David Roberts

Yeah, yeah. I mean, it's funny you're saying like hire good people and value them and pay them well. Which in the private sector is like, "duh." It's so weird that we don't think of the public sector in this way.

Alon Levy

And invest in them. Because one of the things that I have been hearing is that in the United States, agencies will not pay for any professional development conference or any kind of conferences outside the US or maybe Canada. The only way an American transit planner can go for a conference in Europe is — is if it's called Donut Vacation. I don't know if you've seen that term. What it means is you take some days off on both sides of the conference. You get days off, you're out to go on vacation, you pay the flight tickets because it's your own vacation.

And for the three days or however long the conference is, the agency will cover the conference tickets. But I'm not even sure if they cover the hotel. They certainly will not cover the flights. And here's the thing. The cost for an American to attend Innotrans, Innotrans being the big rail conference, it's in Berlin every two years, is on the order of about 1 to 1.5k — flight, hotel in Berlin for a couple of nights.

David Roberts

And again, we do not pay our civil servants particularly well. So they're not like, you know, positioned well to take business trips like this that they can pay on their own dime.

Alon Levy

Exactly. And if you're really unlucky with flight prices and hotel prices, and if you have expensive taste for restaurants, you might scratch 2K. Might. And here's the thing. These are people who are paid at this point, six figures. The entry-level salary for, let's say, a transit planning engineer is very high five figures these days. So someone who is, let's say, 28, that's not entry level, that is six years out of college, probably high five, maybe very low six. I doubt it's going to be very low. So it's probably 80, 90 with public sector union benefits.

So this is someone whose existence costs the state of, let's say, New York or Massachusetts, probably $160,000 a year. $170,000. And they will not pay the extra $1,500 to send this person to a conference outside North America. It's just a lot of it is that petty. It's not even that they don't spend enough on the civil servants. I mean, they could use a raise, but mostly they could use — again, I believe the private sector norm in the US is every dollar that you earn in salary, you earn about 30 cents in benefits. And in the public sector unions, it's more like 80 or 90.

So it's maybe even more than 2x if you count overheads. But obviously the private sector also has overheads. So a lot of it is just people being very petty and not investing in this kind of basic expertise. Instead, they go for superstars. And you see this with Andy Byford.

David Roberts

Andy Byford is who?

Alon Levy

So Andy Byford is a transit manager who has managed the transit agencies in Toronto, New York, and London, and was subsequently hired by Amtrak to be VP of High-Speed Rail Development.

David Roberts

Yeah, I think I remember all this now.

Alon Levy

Yeah. In New York, so when he was head of New York City Transit, people called him Train Daddy because they saw in him finally a competent professional civil servant hired from within the industry rather than from within the good old boy network. And here's the thing, in the UK, nobody called him Train Daddy when he ran Transport for London. No, he was just a good civil servant who ran the agency, and there were many like him.

David Roberts

Imagine just thinking that you should just expect good from civil servants and not celebrate every individual instance of it.

Alon Levy

Yeah, exactly. And so it's kind of being misused in the United States right now, unfortunately, because what they should be using him for is as a pipeline because he supervised a lot of very good people who were not at the top, but reported directly to the top in Toronto and in London. I don't know how good his continental European connections are. He is said to speak French and German, but I haven't seen connections to Paris or to anywhere in Germany from him — but who knows. And essentially use him to hire people who are like him. Instead, they put him in charge of high-speed rail, which is a very flashy project but is not within his past experience.

And I'm sure, I mean people are very hopeful that he was going to do good things. They put him on Penn Station improvements, and the main improvement you need to do to Penn Station is to shut down Penn Expansion and shut down reconstruction. These are two projects that are probably 25 billion between them, and they're worth more or less zero. So we didn't really go into it in the construction cost report in 2023. But there are two separate problems. We only tackle the problem of "The projects that are built are too expensive." There's a separate problem which is "Are you building the right project?"

As I said, there's an American problem and there's a rest of the English-speaking world problem. The rest of the English-speaking world largely does not have that problem. London is building lines in largely the correct order. The problem is it's too expensive. New York, I should add, same thing on the subway. The subway is building the right things. Second Avenue Subway, phases one and two, once people realized they could build the Interborough Express or IBX, that's the line that connects middle neighborhoods — so not very inner, but also not core-oriented outer neighborhoods — of Brooklyn and Queens directly with each other.

That's a very good project. And from time to time mayors or governors test the waters with some other project that they're considering. And the things that they talk about are always good priorities. So Governor Hochul was testing the waters and unfortunately nothing has come of it of a 125th Street subway extension of Second Avenue Subway. Really good idea. Mayor de Blasio was saying something about the subway extension under Utica Avenue, also really good idea. So in New York, the priorities are right on the subway. The construction costs are just so high they can't build any of them.

But in much of the rest of America, the priorities are also very bad. Like in Los Angeles, on the subway they're constantly building the wrong projects. And as with what we're seeing in privatization, the problem in Los Angeles is right-wing anti-government ideology tried to make it harder to waste money and instead made sure money would be wasted, because they need a supermajority of 2/3 to raise any taxes.

And if you're San Francisco, you could do it and it's fine. In San Francisco you say, "We're progressive, we like trains." You can't say it in LA. LA is not that liberal. In LA you say, "We're progressive, we like taxes for trains," you get 60%, you need 2/3. So instead you need to make deals with apolitical actors. Let's call them swing voters. But don't think of them as swing voters as people who are really in favor of tax cuts, but also really in favor of abortion rights. Think of them as neighborhood-scale leaders who don't care about anything except being seen as having brought home the bacon.

They are never going to take the train. They just want a train to each subregion, no matter how stupid. So to get their approval they need to — of course they think they need to — come up with a worse network design while underinvesting in core capacity areas where they actually are going to get ridership on the train. But that might be the second line in a neighborhood.

David Roberts

This gets back to the lack of civic discipline too. And also I wanted to bring up this last — one of the last sort of major things you identify in the 2023 report for high costs is just in the US the legal and regulatory environment in general is just — there's review upon review, environmental review, this review, that review, there's community input and then there are NIMBYs at every stage. And then at every stage there's also this constant risk of litigation, which I think is just a uniquely bad problem in the US, and all of this sort of just like a lot of the other problems we're discussing I think are also affected by this.

Just everybody's acting very defensively, everybody's worried they're going to get sued. Everybody's kind of doing things for the wrong reasons. Everybody's doing things defensively because of this larger environment. And I don't know what you do about that.

Alon Levy

You actually follow the law. It's the same thing that we're signing in the High-Speed Rail report where doing things in the, let's call it, standard European way with the understanding that France, Germany, Italy, Spain, Sweden, the Netherlands are not the same country and have different legal and political systems is entirely legal in the United States.

David Roberts

Yeah, I wanted to pull that out because I saw this sentence and I flagged it in my mind. It says in your high-speed rail project, we "...dialogue with European vendors and employ European technical standards, which are generally legal in America." That's like — they are?

Alon Levy

Yes. The FRA made changes throughout the 2010s. They worked because the political appointees under Obama didn't even know that they were happening. And then under Trump, the first time they were delayed by 18 months because technically it counted as a new regulation. And then it took them time to explain to the politicals, "No, no, no, yes, technically it's a new regulation, but it's a regulation that all of the industry favors because it has negative cost to the industry. If you want, you can think of it as a deregulation. It's just written as if it's a new regulation."

And so yeah, they made it legal. It's just that the agencies aren't making use of it because they're not used to it. And a lot of it is also true with things involving construction costs where it's completely legal to do project delivery in a more flexible way. Where, for example, instead of buying the lowest bidder, you hire a small team of in-house engineers — we're talking single-digit number of people — who will review every proposal for technical merit and give it a score. And then you do it by a weighted average of the technical score and the cost.

David Roberts

Oh, interesting.

Alon Levy

It's legal. It's done in California, except they don't trust their technical scoring enough, so they end up hiring the lowest bidder for the most part. But that weighting exists in California. The American contracting law permits that. It's called lowest responsible bid. You are not obligated to pick the lowest bid. It's just that everyone thinks you're obligated to pick the lowest bid, and that's what they're used to.

David Roberts

Interesting.

Alon Levy

You're allowed to be flexible about liability, which means you're allowed to itemize the costs. So the issue with liability here is that the good way to do it — it's something that Italy kind of discovered in the 1990s when they put half of parliament under indictment over corruption that also involved infrastructure. So they passed a lot of very toothy anti-corruption laws. It's kind of like American racism, right? Because the US in the 1950s is an apartheid state. So in the 60s the US passes civil rights laws and by the, for example, 80s, 90s, I don't think the US is any more racist than the average Western European country, which I mean, still insanely racist, but not something that the French or the British, for example, or the Dutch can point to and say, "At least we didn't do that."

So it's kind of the same with Italy and corruption at this point. The level of political corruption in Italy isn't any worse than in any other Western European country.

David Roberts

Oh, interesting.

Alon Levy

But nobody recognizes that. So in the same way that if you tell French people that "No, there actually is less job discrimination in the US than in France," they won't believe you. So the result is that one of the things that they do in Italy is contracts are not allowed to be fixed price. They're required to be itemized so that people can see what the state is paying for or the region or the city is paying for. And the thing is in the US to figure out what things should cost, agencies itemize, by which it means they hire independent cost estimators and everything is under NDAs so that the bidders don't see that. It's completely legal for them to disclose all of this to the vendors.

It is completely legal for a state to require — and think what, for example, a state like New York needs to do to require that agencies disclose itemization to the bidders and that they base project change orders on these items. This is really important because the itemization means that you don't need to fight over change orders because everything is priced in. And in the 2023 report, we find references to this cutting costs on power plants, actually both renewable and non-renewable in India, for example, or road repair in Massachusetts. It cuts the cost by 15 to 20% just by being better at itemization.

David Roberts

Wow. A lot of these seem so simple.

Alon Levy

Itemization is really boring. Okay. I mean, trains may be exciting or the noses on the Shinkansen. That's exciting. Itemization of public procurement is almost the most boring thing in this ever. 15, 20% cost reduction. It's these kinds of procurement improvements where you need to kind of unlearn everything that either Thatcherite and third-way people trying to reconcile that with still not having all the poor people die of hunger, but still privatize the government. They kind of unlearn how they think good governance works because these things cause costs to mushroom again. 1970s UK, Germany, Italy, roughly the same costs of subway construction. 2020s Germany has risen by maybe 25 or 30% since then.

In real terms, Italy has fallen by maybe 25 or 30% just because there is less corruption now, and then the UK is up by a factor of maybe three since then. It's really bad. And you want to adopt this kind of system of procurement that is — I mean, I won't say more flexible, but people in the United States think design-build is more flexible, which it really isn't. It just hides the inflexibility behind private sector NDAs.

David Roberts

One of the big reforms you talk about is going from design-build to what's called design-bid-build. Can you just briefly explain what that means?

Alon Levy

Sure. The traditional system is design-bid-build. Quite a lot of awful projects were built like this, like Second Avenue Subway phase one. It means you hire someone to design the project, maybe design a subway station, then you own the design, and then you bid it out to someone else who will build it. As opposed to design-build, which is —

David Roberts

Whoever designs it just goes on to build it.

Alon Levy

Yeah, usually it's called design-build. In New York, for some reason they call that progressive design-build. But design-build is said within the English-speaking world to be more flexible. And magically, whenever a city or a country adopts that, their costs explode.

David Roberts

Like, why would you think that would work better? I guess I don't understand. Like, why would you want to—

Alon Levy

Because if you're bad at governing, design-bid-build doesn't work well because, for example, you're dealing with liability. So who has the liability? The designer or the builder? And the correct answer in all cases is the public sector. But if you're trying to privatize risk, then who you privatize risk to is a question. And often what happens, and for example, it in Norway — in Norway, some of the systems they came up with while privatizing risk was if the builder is allowed to make changes to the design. But if the builder makes changes to the design, the builder is liable.

If the builder makes no changes to the design, the designer is liable. The result is the builder will never make changes to the design. The designer knows that and will design defensively. So this leads to overbuilding. Because, for example, if you're building anywhere where you might have water problems, you may need to grout in order to waterproof the tunnel. Here's the thing: unless you're building in an area with maybe a very high water table, you don't know in advance that you need to grout. And the result is that ideally, you want to delay that decision till the last possible moment.

Grouting is not hard. It costs extra money. But you don't need to redesign everything if you need to grout. What this means is you design for the possibility of grouting, but you don't design the grouting. And if once you start doing the actual digging, you discover that you're going to get water intrusion, then you grout. So you only grout where you absolutely have to. But that requires the flexibility for the builder to vary from the design. This is a really important principle of all these places I told you that are very low cost — the Southern European places or Turkey.

David Roberts

You just give the builder some discretion to adjust things as they do.

Alon Levy

The New York law on this is rather rigid. And instead of doing the right reforms, they did the wrong reforms, which are in design-build. And often this also means taking the liability into the public sector instead of privatizing the liability. So design-build allows you to short-circuit all of that by privatizing the liability and not having to worry about any of this. The problem is the conflict between the designer and the builder will still be there, just hidden behind the general contractor or whoever, or the design-builder. There might even be a psychological issue that the designer won't want to make changes.

And here's the thing. The design-build contract means that it's a bigger contract, so you're getting fewer companies that can bid on it. The decisions on who to hire will be made at a higher level, by which I mean by political appointees, which is why political appointees love that. Politicians love that. They are really bad at making these decisions. As far as possible, you want to shrink the contract sizing. This is something very important in, let's call them, upper-middle-income, 1.5 world countries. In Chile, it's something they do, they break the contracts into small pieces. And Turkey is capable of doing that as well because these are countries that have not a lot of consolidation in the construction market.

So if the contract sizing is $50 million, then you're getting a lot of local bidders. This is not as available to richer countries. The Nordic countries have had difficulties with this. Or Italy has so few local contractors that when two of the top four merged, I think the state — I don't know if the state intended to or actually did it — the state bought a stake in the combined company. Or in the EU. They can do it through this kind of Europeanization where you can just hire people from the rest of Europe more easily. But often you do need to maybe go to somewhat bigger contracts.

We're talking 150 to 100, 300 million. And the problem is in the United States, they've gone nuts on this. There are $1 billion contract sizes for Second Avenue Subway phase two, and you're just not getting enough competition. So yeah, if there's less competition, and maybe you're not good at hiring the best people because you don't technically score — I mean, all these 20% extras for various ways you score procurement, they add up.

David Roberts

Yeah. Let me ask you about the trains themselves. I should have asked about this earlier, but in the Momentum report, which is talking about how to just sort of improve rail service, generally not going full high-speed, but just going medium speed, one of the things you emphasize, sort of like that report, is in two halves. The first half is about station design, which we talked a little bit about, just making them high-level, optimizing boarding and alighting, etc. The second half is about the train sets themselves, the trains. And the main thing in that part of the report is just get rid of diesel.

Replace with what you call electrical multiple unit trains, EMUs. So, explain why diesel is so problematic, what these EMUs are, and why they work better?

Alon Levy

I mean, you rode an EMU to work today if you took the light rail. Every subway in the world. Every light rail system and every subway system in the world is on EMUs. EMUs really mean two things. The first is the trains are powered by electricity, and electricity, in this case, does not mean batteries. I mean, you are allowed to buy battery trains. You shouldn't, but these exist. But people don't call them EMU, but BEMU — B for battery.

David Roberts

Oh, so you're talking about catenary. These are, for purposes of this report, you're talking mostly about catenary.

Alon Levy

Yeah, I mean, occasionally third rail for legacy purposes. But one of the things that Nolan was pointing out in Momentum is that third rail costs so much extra that even on lines that are currently third rail, he wanted extensions to be done with catenary.

David Roberts

Oh, interesting. And catenary —

Alon Levy

It just means overhead wires with a pantograph that collects the current from the wire.

David Roberts

Right. There's a little arm from the train attached to the wire. I'm sure everybody has seen these. And that's the cheapest way to electrify. So what are the multiple electrical — multiple unit — what are the units in question?

Alon Levy

It means that you don't have a separate locomotive. So when you take an Amtrak train on the Northeast Corridor, it's electric. But this means that instead of a diesel locomotive towing unpowered cars, you have an electric locomotive towing unpowered cars. This was how electrification was invented for mainline trains in 1890. It is also inefficient and, at this point in passenger service, completely obsolete. The way it is done is multiple units, which means either all of the cars or some of the cars in the train set will have motors. If it's a high-floor, high-platform train, it means the motor will be underneath the easiest — you can have low-floor trains, and then it's more complex where you're putting the motors. But it means that the cars are both motored and carrying passengers. Again, doesn't have to be every — the American way is usually that every car is motorized, or the Shinkansen way. But often maybe only half the cars will be motorized and the others will house some equipment for the adjacent car's motorization, but there will be trailers.

David Roberts

I'm guessing this is more efficient use of the electricity just because you're spreading out the —

Alon Levy

It's more efficient in a lot of ways. For example, the acceleration rate at high speed is just a matter of power, but at low speed, it's a matter of overcoming rolling friction. And the quantity that you care about is what proportion of the train's weight is supported on driven axles. So if you have one locomotive and a lot of cars, then only a small fraction of the train's mass will be on driven axles. So the acceleration at low speeds will be very low. And, separately, electricity also gives you more power, so you accelerate much better than a diesel.

And an electric locomotive is kind of a half measure. Literally, an electric locomotive and a diesel multiple unit or diesel DMU each provide about half the acceleration rate advantage of an EMU over a diesel locomotive. And of course I'm talking about acceleration. This is the most important on lines where you have a lot of acceleration cycles. So that would be local lines, a lot of stops.

So this would be not just subways because you need the electricity for ventilation, but also on elevated trains. This is how EMUs were invented. And it's also kind of a recent invention. The subway, for example, in New York was EMUs from day one. And it was just that, literally just the first metro electrification in the world was on the Northern Main Line, and it was with locomotives. But very rapidly they also transitioned to EMUs for this reason. So these are cheaper to procure, cheaper to maintain. Again, the only reason not 100% of the world is on EMUs is that you need to put up the catenary.

And that costs money. And this is especially important to do on busy lines because the catenary and the substitutes cost the same regardless, largely, of how busy the line is.

David Roberts

But won't you save that back on maintenance and fuel costs pretty quickly?

Alon Levy

Yes, their return on investment is high. I mean, I can tell you what I computed, but I'm worried it was too optimistic about this. But a German study on this found that roughly the breakeven point in terms of traffic, because again, the cost of wire is fixed and the benefits depend on how much service you're running. Because we're talking maintenance costs, just the trains are faster, so passengers get better service, things like that. They're more reliable as well. The breakeven point is if you are running two-car trains every half hour at rush hour. So if you have a four-car train every hour, that's about your breakeven point. And, for example, commuter lines in Boston, they run seven- or eight-car trains several times an hour. So we're talking massive, massive benefit-cost.

David Roberts

So this is just mustering the political will to make investments.

Alon Levy

To make investments at scales that they already are making just in things that they are more used to. So there would be things like high platforms. As I said, the northeastern commuter agencies are much more familiar with that. But with electrification, the US is atypically unelectrified. The only electrification project this century has been Caltrain. And Caltrain was so extremely poorly run, we're talking factor of seven cost premium over comparable electrification projects. And it's scaring everyone else. They are only bankrupting themselves to Caltrain, maybe possibly to Toronto, which is a good claim for being the second most mismanaged electrification project in the world.

They're never going to benchmark themselves to the ongoing Danish electrification project, or German or Italian.

David Roberts

So I'm guessing that in developed countries, electrifying all your trains is just — there's no one who's not doing that. Everyone's doing that on some timetable.

Alon Levy

They're doing it slowly because Europe specifically has a lot of legacy lines that are never going to get a lot of traffic. Just maybe it's not a line that connects a city to somewhere else. Maybe it's connecting to suburbs without passing through the city, and some of them are left with batteries increasingly. I mean, I honestly think that a lot of these need to be wired as well. But Europe is majority electrified, but only a small majority are electrified. And again, it should be a larger majority. But I at some level understand why it's not 100%. India is 100% electrified.

China is getting there soon because these are maybe newer rail networks that never were in this situation where maybe in 1902 they built a line between what were at the time significant towns, and there were no cars. And at this point, these towns don't have as much independent economic existence. And there are cars. So that's not where people want to travel.

David Roberts

But one of the things you say in the high-speed rail report is there are lots of these existing tracks that could accommodate high-speed service. Like they're physically capable if you just string the wire. It's possible to upgrade existing lines to be fast and electric. You don't have to build all new.

Alon Levy

Yeah, if the trains are — but it depends on the specific line. So, for example, you can do it to an extent between New York and Albany, but forget about it between Albany and Buffalo because the tracks are too curvy. Whereas the Northeast Corridor only has one really curvy part of it, which is Connecticut. But in Massachusetts and Rhode Island, it is rather fast. In New Jersey, Pennsylvania, same.

David Roberts

So does your proposal just slow down briefly in Connecticut, like —

Alon Levy

Yes, unfortunately.

David Roberts

That's the way to deal with curvy tracks. You just have to slow down.

Alon Levy

New Haven to the Rhode Island state line. I keep saying that they need to build a bypass, just build new high-speed tracks north of I-95 because that is the least dense part of the Northeast. But that's also a point where I-95 only has four and not six lanes because it's the least densely populated part. So they can do it while keeping the takings to a reasonable level. It's not no takings or anything, but they don't need tunnels. The takings are moderate. A lot of them are not residential because it's things like a small business by the side of the highway, a small business at the exit or the junction of I-95.

And these are people who care about their businesses. But they will go for a couple million dollars and open a new business, you know, 100 yards away. That's not a big deal. And that bypass, I think, should cost about $5 billion or so. And that's based on European costs. But it's not the easiest thing to build. Chicago to Cleveland or Chicago to Detroit is the easiest thing to build. But it is on the easy side to build, and it saves half an hour.

David Roberts

Just to hit this theme one more time. Like, if you have a central authority that's got its eyes on the whole system, then you can make these calculations. Like, is $5 billion at this spot going to produce more value for the whole system than the cost?

Alon Levy

And one of the things I am trying to tell people in Connecticut is they need to support that. There are not a lot of neighbors in there, but there are some. And the state needs to support that it gives better intercity service to points north from New Haven, for example. And I will say west of New Haven, it's different. The population is much higher. If you try to build the bypass, the cost, you wish it were only 5, maybe 50 if you want to be sufficiently fast. So instead I'm talking about, yeah, the trains would slow down somewhat.

They can still run a lot faster than Amtrak and Metro-North do today. Just the design standards today are not very good. And Metro-North slows down the trains due to using 1950s standards for how trains that were kind of garbage even then could run on a curve. So a lot of it is this kind of coordination. The Metro-North — so Connecticut, west of New Haven, is a rare place where it's literally a state exploiting Amtrak and not the reverse. And here's the thing, you do it right — as I said, I mean, Greenwich would be able to get local trains that are faster than today's expresses.

Today, most trains up to New York to New Haven on Metro-North do it in about two hours. They could do it — the commuter trains, I mean, they'd make all the stops. New Haven to Stamford could probably do it in an hour if they do things. There are substantial benefits to the state. A lot of it is just the traditional railroaders have kind of gotten into a habit of if it is not part of the tradition handed down continuously from the 1950s or even before then, they don't believe it. Which, again, it's a different issue from construction costs for project delivery.

But maybe if there's a common theme of refusing to learn from other parts of the world, especially ones that speak English with an accent.

David Roberts

Maybe this is outside your remit, but have you or anyone else done a sort of study of if your vision of high-speed rail in the Northeast Corridor was implemented, what sort of knock-on economic growth effects would be? I mean, is it safe to assume they're large? Like I'm just assuming they're large?

Alon Levy

I can try to give you first-order estimates, but there are people who do this for a living who can come up with something that's much better than something that is only true to within a factor of two to three in each direction. No, but you're right. I mean, high-speed rail always produces these economic benefits that are simultaneously very large and very small. And what I mean by very small is it's difficult to see them in the GDP of, let's say, Japan or France or China. That said, the construction costs are also not that visible to GDP.

This is not — I mean, the US military is, I believe, $850 billion a year. Now, I'm talking about something—

David Roberts

Yes, we have the money.

Alon Levy

No, no, not necessarily have the money. Just, I mean, that is called a big priority. Our Social Security — I'm trying to remember what the Social Security outlays are. And the problem is I last looked at them 15 years ago in the United States. I've gotten older since, but I believe we're talking well north of a trillion dollars a year at this point. So obviously big changes for that would be visible in federal budgets and GDP and things like that. And high-speed rail — I'm talking about something that should cost $17 billion to do between Boston and Washington.

If you want to do a US-wide network, like you've seen the map by Alfred Twu or these various maps that have high-speed lines that go from north of Boston all the way to Texas, to Florida, to Texas, through to the Great Plains. That is probably something that is doable in $400, $500 billion, not per year, but one time. And if it takes 20 years to build, it's extremely aggressive and it's still maybe 1/15th or something of the military spending or 1/30th or less of that of Social Security. So it's something that would generate benefits.

It can be visible and will be large compared with the upfront cost of the system. It's just that the United States is, what, it's a $25 trillion economy every per year, one time. Things that are measured in the tens of billions are invisible at that scale. So it's not like I can say, "Oh, this will raise American economic growth." It will not. It's too small. But it will be visible in—

David Roberts

You could say it would raise regional economic growth. I think you could safely say—

Alon Levy

No, I mean, the Northeast is like one sixth of America. I mean, if it's not visible to America, it's probably not visible to the Northeast. But it will have positive benefits. It's just the measurement would be things like companies have better ties across the Northeast or academia will have better ties to the Northeast. I told you, I went to Columbia for math. And at the time we had a joint seminar — Columbia, CUNY, NYU — because they were tied together by the subway. And in Cambridge, Massachusetts, likewise, Harvard and MIT don't do joint seminars, but people from each go to seminars at the other.

It's fine, it's normal. And if the commuter trains were better in the Boston area, it would also include things like Brown, Brandeis, Tufts, things like that. And if the intercity trains were better, it would be much easier for people to, to do this northeast-wide for things like Penn and the New York system, things like that. Or Hopkins and Penn or Hopkins and the D.C. unis. And Paris, by the way —

David Roberts

It's difficult to put a number on that kind of thing. But I just think like connectivity produces emergent benefits. That's a matter of faith.

Alon Levy

Yeah, exactly. It's not just a matter of faith. I mean, I'm talking — so if we're talking about math academia, you have exact examples of how it's happening in Germany, where German math academia is excellent. Not in the sense that there's a Harvard in Germany — there isn't — but it's just research institutes that are very well connected. Or in France, it's just all centralized in and around Paris. And yeah, people go to seminars between Paris and the suburbs bound by commuter train systems that all the Parisians hate but are actually very good. The Parisians hate them because they're not the metro.

So maybe the trains don't come as often as the metro, and often there's also sometimes an element of racism. The suburbs, not the ones with these universities, but the ones at the other end, are legendarily poor and non-white. So there is that kind of prejudice. But the trains are, objectively speaking, very good, and people in the Paris region constantly use them. And Paris has truly excellent academia. Again, I know this in math better than in other things. Paris is possibly the most important mathematical center in the world outside of Boston.

David Roberts

Interesting.

Alon Levy

They do excellent research there. And I hate a lot of, by the way, I hate a lot of what they do. They're just—the way they talk at seminars is — and I don't mean it because they have an accent. I mean they just — I will say they prefer the American style of how to give a math talk than the French style. But objectively speaking, very good mathematics is done in this way. And I imagine this is no different if we're trying to talk about, I know, biotech tying New York and Boston and also Central Jersey. These are probably the most important centers of biotech in the US. I mean, Moderna is in Cambridge.

A lot of the firms are headquartered in New York and a lot of the research is done in Central Jersey. So yeah, to be things that make it much easier to get rid of these places so that instead of having to pay very high fares on a train that still takes four hours, you pay more reasonable fares on a train that doesn't.

David Roberts

Yeah, that's inevitably going to make a difference.

Alon Levy

Yeah.

David Roberts

Okay. Well, we are way over time now. This is all super fascinating to me. I mean, one of the things that really becomes clear when you dig into this is that these types of plans are not the type of things that can be done at a high level of abstraction. Like, there's a lot of detailed, rich knowledge about the actual details of actual stations and routes and cities. It's all very fine-grained. I've been sort of like keeping a high-level perspective on it in this discussion. But people who are interested in the region should dive into the report because it gets very granular.

But just sort of thematically to wrap up, I think the themes of your work here, if I could pull them out, are if we want better transit in the US we need to bulk up civil service, take it seriously, pay it well, train it well, support what it does, trust its recommendations and plans, and to have a little bit more political and civic discipline to just allow transit planners to do things in a standardized way that's not necessarily flashy or it's not going to show up in some Architectural Digest, but just standardized stations, standardized trains. You know, I've sort of left like on the one hand all of that makes immense sense to me and the high-speed rail plan sort of shows what that would look like in practice. But on the other hand, just like it's so counter to so many very deep forces in US politics, you know what I mean?

It's pushing against some very fundamental forces of US politics. So, like, how serious are you about seeing some of this actually happen? Or do you just think of this as kind of a thought experiment?

Alon Levy

Yeah. So just to add one last thing to your summary, it's also important for the builders to be curious because you can't just stick to the US — not on, you can stick to the US on things that the US is generally good at. We're talking software, finance, biotech, things like that. You can't do it in places where you're already behind. I don't know, I'm reading a lot of things and I always feel a little askance that none of them really tries to engage with poor democracy, anti-backsliding, anti-authoritarian movements in other places. We're talking things like —

David Roberts

I know this has all happened before. It's like we're walking through a script that's played out a dozen times, and we refuse to read the other —

Alon Levy

Yeah. So it is kind of important that the civil service be, as you said, empowered, trained well, developed better. But it's also really important to keep them curious rather than think that it's still 1960s America. It is not.

David Roberts

Yeah. And so somehow that will involve shielding them a little bit from the perpetual threat of lawsuits and reviews and NIMBYs, and just to everybody, every entity having a chance to come along and impede them, like, somehow we need to insulate that a little bit.

Alon Levy

I don't want to sound like Nancy Reagan, but sometimes you can just say no to them.

David Roberts

All right, well, we'll leave it there. I mean, there's so much more in all of this, but this has been super fascinating. Alon, I really appreciate it. Appreciate your work, and thanks for walking us through it.

Alon Levy

Yeah, thanks for sure.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

I’m joined by Missy Stults, the architect behind Ann Arbor's audacious plan to achieve carbon neutrality, to discuss the city's wild new strategy: creating a second, parallel utility. This "sustainable energy utility" will supplement the incumbent, DTE, offering residents clean, local power without the multi-year legal slog of a full takeover. We explore how this model bypasses the traditional utility monopoly, the surprisingly muted reaction from DTE, and whether this could be the key for other ambitious cities to take control of their energy future.

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Text transcript:

David Roberts

Hey, hey, hey, hello, everyone. This is Volts for July 23, 2025, "Ann Arbor's experiment with a new kind of utility." I'm your host, David Roberts. Little noticed amidst the otherwise dismal election results of 2024, the 120,000 or so residents of Ann Arbor, Michigan, voted overwhelmingly to create what the city is calling a "sustainable energy utility" (SEU).

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It is not a municipal utility, meaning it will not replace investor-owned DTE as the sole power provider for the city. Rather, it will work alongside DTE and provide services supplemental to DTE's, mostly distributed solar energy and storage, perhaps one day linked into microgrids, perhaps one day supplemented by networked geothermal heating systems. Customers who choose to subscribe — the service is entirely opt-in — will receive two separate bills each month, one from DTE, the other from SEU.

This is, to my knowledge, a novel setup. It’s intriguing for several reasons, not least of which is that it captures many of the envisioned benefits of a municipal utility quickly, without the years-long legal battles and enormous legacy infrastructure costs that come with full municipalization.

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Where did this idea come from? Where does the SEU currently stand? What exactly will it offer residents once it is fully up and running? To explore these questions and more, I am talking today with Missy Stults, Ann Arbor’s director of sustainability & innovations. She is responsible for the A²ZERO plan, aimed at achieving carbon neutrality in the city by 2030, a goal that can only be described as crazypants. The SEU is a part of that audacious goal, and I'm excited to dig into it.

With no further ado: Missy Stults, welcome to Volts. Thank you so much for coming.

Missy Stults

Hey, thanks for having me, David. Glad to be here.

David Roberts

This is so cool. I'm so fascinated by this thing, just this little thing tucked off in the corner of the Midwest, which is like neither fish nor fowl — what is this thing? So let's just start — like, legally, this is a utility. So does that mean it is regulated by the Michigan Public Service Commission like a utility?

Missy Stults

Sorta is the answer. So just one clarifier. It actually is a municipal utility because it is a utility and it was voted on by the electorate, and so they authorized us in creating it. But it also is everything you said: supplemental, opt-in.

David Roberts

So it is a municipal utility, just kind of a new kind of municipal utility?

Missy Stults

Yeah, that's right.

David Roberts

What is the relationship of municipal utilities with the Michigan PSC? Are municipal utilities governed solely by the city, or are they also subject to state regulators?

Missy Stults

It's both there. Largely, they're governed by the locality itself. Whether that's the board — it depends on how they were authorized, right? Do they have a third-party board? Are they outside the government, is it a co-op, etc.? But there are certain things they have to do, like renewable energy plans here in Michigan or energy waste reduction filings. So there are things that we have to do, and we're actually figuring this out in real time with our wonderful staff at the Public Service Commission. Because do you have to file a renewable energy plan when the only energy you're authorized to produce is renewable energy?

I don't know. We're trying to figure that out.

David Roberts

The PSC presumably doesn't know either, because that is a new thing.

Missy Stults

Correct.

David Roberts

So where did this come from? Where did this idea come from? I mean, this is your baby, is it not? I mean, where did you catch this fever?

Missy Stults

Well, I have a human baby and then I have lots of little, like, brain babies. And this was a brain baby. Yeah. So I was sitting — you mentioned A²ZERO. And that's our community's plan, framework, actions, goals, all the things. It's our brand for how we're going to hit this audacious goal of carbon neutrality. And in that plan, one of the seven strategies — those are sort of the foundations — was we have to figure out how we're going to power the city with 100% renewable electricity. It's a big ask. It's a big one. And so we looked at lots of different options.

We brought in experts across the space, and we were really excited, and still are, about community choice aggregation — womp womp, not legal in Michigan.

David Roberts

So that would have had to wait for presumably some long campaign to pass legislation, and then you establish one. That would have been another years-long fight.

Missy Stults

Yeah, well, we're working on it, believe it or not, because we still think it's a worthwhile endeavor. And we're really interested in CCA 3.0, right? This idea of local generation and value, and it's a more resilient sort of vision of your energy system. So that still is something our office is working on.

David Roberts

Could you —

Missy Stults

Yes.

David Roberts

Could you be or do both?

Missy Stults

Yeah, you could.

David Roberts

So the SEU could be operating in the context of a CCA, potentially at some point.

Missy Stults

Sure could, if we get it legal in Michigan, CCA, yeah.

David Roberts

Interesting.

Missy Stults

I know. We're hedging our bets, like we're putting a lot of cards on the table.

David Roberts

Can I ask — we're getting too nerdy, too early. But I want to know, what can you not do with this sustainable energy utility that you could do as a CCA, as a community choice aggregator?

Missy Stults

Yeah. So one of the values in our work is transferability and scalability. And so an SEU really has to be the limits of your franchise, which in most cases is the city. Well, for us, it is explicitly the city. Whereas if I get CCA legislation in Michigan, it gives everybody in Michigan the chance to participate. So it's a fix in scale.

David Roberts

Right. But it wouldn't change Ann Arbor's situation.

Missy Stults

No, we would probably just buy in a CCA. We would just, like, go get more renewables in addition to what we can generate with the SEU.

David Roberts

Right, right. So again, like, where'd you come up with this? As far as I can tell, this thing does not exist out in the world.

Missy Stults

Thinking about a CCA and realizing, like, "Dang it, this is not moving fast enough." And we did have residents, and we still do, a small group that really wants to municipalize, more from the standpoint of, like, "take down big corporate, giant capitalism bad." Right. And that's understandable. And I was like, "Oh, gosh, if we do that, I'm saddled with a failing system."

David Roberts

I mean, best-case scenario, you win the legal battle to do it at all, your prize is billions of dollars in debt.

Missy Stults

A failing system. Well, and our system really is old. We're on largely a 4.8 kV system. We're electrifying fastest in the state. The grid can't keep up with it. And my goal is not owning distribution. My goal is clean electrons on the system. So owning distribution, I haven't changed a single electron. Right. So you do all of this work to own, sort of like the clunker. And I was like, "No, but the clunker is not the future. Right. The future is distributed. The future is resilient. The future's clean." And so in these conversations, like, they kind of hit a head.

And I was like, "Wait a minute, what?" What if we don't, like, what if we don't invest in either of these unilaterally? What if we actually start thinking about the future we want? Which really is the four values we talk about: clean, resilient, reliable, and affordable energy. Can we do it? And that's what started the SEU thinking in our minds.

David Roberts

Okay, so later on, I want to come back to this relationship you have to the distribution grid. But first of all, so you've come up with this entirely new, second utility operating alongside DTE. And I was reading this very, by the way, elaborate and informative Frequently Asked Questions document on your website, and I came across a sentence, like many, many pages in, that made my jaw drop, which is, and I quote, "The city has not received any communications from DTE regarding the proposed SEU." And like in my notes, in several spots I had, "What does DTE think about this?"

Missy Stults

Sure.

David Roberts

And I'm to believe that we have no idea. They've said nothing. Is that still true?

Missy Stults

No. We've of course had many conversations with them, but the basic narrative here is I don't think this is "a warm and fuzzy," but it is not an existential threat to them — for the reasons you've sort of alluded to, and I did too — which is this isn't a takeover of their assets. So they still have the ability to operate. Secondarily, we broadcast our goals really openly. We're moving faster than everyone else in Michigan. We got to get to clean. They know our residents want it, and our system's old, right? It's going to cost them potentially billions to invest in upgrading.

And so what we're doing is actually a little bit of a release valve, if you will, for the pressure. Because we're generating new things that buy them time so they can upgrade the system to what it needs to be, as opposed to Band-Aid it, and spend lots and lots and lots and lots and lots of money. So I think it's — in truth, our conversations with them have been all the things you can probably imagine. Generally, though, I tell people — of course, I'm in Public Service Commission cases, right? Like, I'm actively challenging their rate case, their IRP.

And they did write letters of support for us for some of the funding we sought for the SEU because they were curious how it could take strain off the central grid. And maybe there was VPP potential there, virtual power plant potential. So, you know, we've really approached this from there's opportunity for collaboration, but what there's not opportunity is to negotiate the goals we have.

David Roberts

I see. So you don't view this as really hostile to DTE, and as far as you can tell, they don't necessarily view it as hostile either.

Missy Stults

I think that's right.

David Roberts

They're not up there plotting your destruction, as far as you know.

Missy Stults

I mean, I'm pretty sure they do have voodoo dolls of me in the office. I'm pretty confident that's true. But I do know — no, this is, put another way, when we released the very first report on this, and we were like, hey, we've got something here, we had a conversation about who was going to call DTE and tell them. And I drew the short stick. I did. And so I did have to make that call. And it was not confrontational, it wasn't joyful, but they asked, like, "Why are you doing this?" And my response was, "Well, are you going to provide 100% renewable energy? And are you going to allow my residents to interconnect to the grid without a premium?" And their answer was "no." And I was like, "Well, there's your answer."

David Roberts

Yeah. I mean, this is the thing is, like, if cities want to do things, they're all trapped in larger utility territories and the tools they have to control the larger utility territory are limited. So it's one reason this is so interesting. So you did a lot of talking to residents and surveys and whatnot in the run-up to this. What is the sort of main selling point here in the eyes of the residents of Ann Arbor? What is the main selling point?

Missy Stults

Yeah, it's the four things I named. And we know this because we did a statistical and representative analysis of residents to figure this out. It's true across demographics, and they might be in different order depending on the demographic, but over 80% across all demographics say they want reliable power. So, "Hey, it's sunny. Why is my power going out?"

David Roberts

Yeah.

Missy Stults

They want resilient power because we have — Ann Arbor's got this wonderful award we've won many years in a row: we are the most educated city in America. We do not have conversations about whether the climate is changing. Right. People know it is, and that is just a given. So people acknowledge that extreme weather is disrupting the system and they want to have critical load when that happens.

David Roberts

What about blackouts? Do you get a lot of those relative to —

Missy Stults

I mean, we don't. We get more brownouts, like a surge here and there. We've got resilient, reliable power. Our electricity is the highest in the Midwest, rate-wise. And so we want affordable power. And people are struggling with that. And then, of course, clean — Ann Arborites do want to see the transition happen. The very first Earth Day in America was celebrated in Ann Arbor. I don't know if you know this. Ann Arbor voted, we became, I think, the sixth community in North America to tax ourselves to fund climate work. Right. You know, and that didn't just happen.

It wasn't magical. Like, there was a lot of real intentionality and engagement with stakeholders to get to that point. But people really see this as "I have the right to clean energy, I should have the right to clean energy."

David Roberts

This is sort of my question because I can see people supporting this because they think it's going to be cheaper than DTE power, which is probably not a wildly unreasonable thing to think — we'll talk about that later — or because they prioritize clean, and mostly cynics will say, "Oh, people just ultimately care about price."

Missy Stults

Sure.

David Roberts

Do they really prioritize clean? I guess it is a little bit of a — you are kind of in a blue bubble.

Missy Stults

I mean, we are.

David Roberts

People really do care there.

Missy Stults

Yeah. But we also have this beautiful river that runs through, and we've got 163 parks. And people are, like, in nature in a way that I think is — I mean, I was out walking with my husband the other night and we were just talking about how wonderful it is that we can get in this gorgeous park within three minutes of our house. Right. And so I think there's a different connection to our place that's really strong. So co-benefits — they're true whether or not — it doesn't matter why you come in, right? Like, you could come in because it's affordable and you get clean.

But we also have, like, the My Green Power program is our VGP — voluntary green pricing — program that a lot of states have. It's a premium product. We're the highest subscribers in all of DTE's territory.

David Roberts

Oh, that's a DTE offering with a higher, higher green content?

Missy Stults

Yep. You pay more and you get to help invest in the next renewable energy system. Right. And so that is my counter when people say "It's all about money." I say, "Well, that's interesting that I have residents who are paying a premium to help invest in new renewables."

David Roberts

I mean, one can imagine all sorts of things a sustainable energy utility might do in a municipality, you know, but it's always — our eyes are bigger than our stomachs, as they say. Is it up and running yet?

Missy Stults

A very good question.

David Roberts

And when it is up and running, what are going to be sort of like the introductory, the first things you offer?

Missy Stults

Yeah. We're telling everyone it's 18 to 24 months from January 1st of 2025. Because you got to start a utility, right? You got to have billing, you have to have customer service, you have to have contracts, you have to have easements, you have to have all the things.

David Roberts

So this is basically going to — like, you have a city sewer utility. It's just going to be another city utility, basically?

Missy Stults

Like, we have water utility, we have stormwater utility, right. We have water recovery. So, yeah, exactly.

David Roberts

And so this is not going to be run by you as some sort of boutique green thing. It's going to be run by a city employee who thinks of themselves as working for a utility. In other words, it's like not a — I don't know if that question made sense.

Missy Stults

Well, so here, let me tell you how it's governed. This is what we have done: When the voters authorized it in November, that gave us permission to change the city charter and to create its governing ordinance. And when we created the governing ordinance and it was adopted, the utility was officially born, if you will. And that was April 17th. So it exists. And the way that it is structured is it will run as a department of the city to start and maybe forever, maybe not. You may be familiar, many municipal utilities are either in a department or they spin off and have their own governing board.

For us, it doesn't exist. And so it needs the warm embrace, if you will, of the city. Like, it needs customer service and legal support. So we're starting it as a department. We've made an offer for our first executive director. We're waiting on them to get back to us. So we will have an executive director who runs this utility, who has utility experience, and then it will grow. It will be — this person is like my partner in crime on work, but it won't be me.

David Roberts

Now I want to know who it is.

Missy Stults

I can't tell you.

David Roberts

I know. We'll have to wait for them to —

Missy Stults

They gotta accept.

David Roberts

So do you know — I mean, maybe it's too early to know. Like, so no one in Ann Arbor can get anything from the SEU yet, right? It's not, like, up and offering products yet, is it? Do you know yet, sort of what the initial offerings will be, like, what it's gonna launch with?

Missy Stults

Yeah, we sure do. We are gonna launch with solar and storage, for sure. That's kind of bread and butter. We are looking — I mean, this is going to get us, like, dipping our toe into the weeds. So I'll pull back. Or we can go back in. What we're looking at to start is, as you can imagine, there's no revenue yet.

David Roberts

Right.

Missy Stults

Right. So that's like — it's hard to get a revenue bond when you don't have revenue.

David Roberts

Well, can we skip to that? Because this is one of the central mysteries: how is the thing going to be funded? Because if it's just ratepayers funding it entirely, you don't have any money yet until you start offering the service to the ratepayers. It seems like you need — are you going to be drawing on some tax revenue? Are there donations? Are you borrowing money? Is the idea that it will eventually run on ratepayer money?

Missy Stults

Yeah, that's exactly right. And that's a requirement. In Michigan, we have a specific case that indicates kind of the terms of how utilities have to operate. So what we've done, and I'm really thankful for federal support, previously, we were pretty successful — yeah, we'll just end there — in securing some notable grant funding. So we have, we have kind of the ramp, if you will, to get to rate base.

David Roberts

Grant funding that you have as cash money in your pocket?

Missy Stults

Some of it, yes. And some of it that is incumbent. Yeah, we signed those things real fast, just let you know, we were like, "Lock this down."

David Roberts

So you have some seed money. But the idea is eventually this will be paid for by rates?

Missy Stults

Yeah, yeah, yeah.

David Roberts

So when it comes to something like — I mean, I'm skipping ahead a little bit — but when it comes to something, when you're thinking bigger, you know, like a networked geothermal heating system — we've done several pods on that here at Volts, we love those — but those are big, big infrastructure projects. How do you get the money to do that before you are selling anything from that to ratepayers? Do you know what I mean? Like, how do you get money in advance up front?

Missy Stults

Yeah. So let's dive into this. And then I want to actually go into the network geo because that is an area of work for us too. So the funding I've secured is — think of it like startup capital. It's the funding to hire our executive director and a few other staff. It's the funding to get a billing system. It's the funding for your rate firm to help, you know, like, it's that kind of stuff. It's not the funding to go build the systems. So what we're looking to do in the first tranche is to buy existing systems from big users.

David Roberts

So, rooftop system?

Missy Stults

Or ground mount. Yeah. So the city, right. My job, I have a team member who's—we've gotten a bunch of solar installed at city facilities. What if the SEU acquires all of those right out the gate? And so, you know, day one, it offers a price, and it's got revenue coming in day two, because they already exist.

David Roberts

So wait, buys the solar systems from the city?

Missy Stults

Yep. And buys them from Ann Arbor Public Schools, who have a bunch of solar systems, and our housing commission because we partner to make sure affordable housing is sustainable. So we have somewhere between, I'm going to guess, 6 to 10 megawatts of solar already deployed in the community. And if we bought that first, we don't have to wait to build it. It already exists.

David Roberts

So if I'm a private homeowner with solar on my roof, why would I sell to you? What's my incentive to sell to you?

Missy Stults

Yeah, so we're not going to likely start with individual privates because it takes a lot of — we will eventually offer to buy those, but we want to start with big users. Think about it this way. I just gave you a lot of solar. Let's just, for math, say it's 10 megawatts, but only three clients, right? So your billing system goes to three people. You know, like, you figure things out, you kind of build your muscle a little bit pretty easily before you go to 10,000 households and you're like, "Uh oh, our billing system broke." Right. You don't want to do that.

So that's why we want to start with big users who have a lot of assets, quick. In terms of your value proposition, what you just asked, there's a few things. One, you may not ever have to worry about maintenance, right? Like, it's all the utility. Now, these systems don't really need a lot of maintenance, but for something like a school, you can't go down. You know, like, you got to have continuity. And these are more complex systems than a res system. Two, capital. I mean, if you spend 10 million on projects and it's depreciated today to 7, and I can walk in and cut you a check for $7 million — you got flex funding to do teacher salaries, whatever might be needed, right? And if your rates monthly are lower than your DTE rates for that portion, you can kind of have both things work. Something like a school, they're not in session when it's the sunniest, so it's not really doing much for them.

David Roberts

And they get nothing from owning — I mean, you know what I mean? As long as they're getting the cheap power, that's the benefit. Like, there's no additional benefit to having the deed to the solar panel.

Missy Stults

Other than the green attributes, but you still have them. Because we're not selling the RECs, like, for us, because our goals are tied. They get to say that they're still renewable. Because the RECs are theirs. So it meets a value goal of, like, financial value and perhaps of moral values. They get to check, check. It's educational. Students get to engage in it. So it's an easier win-win, I think, in that scenario, yeah.

David Roberts

School solar is such an obvious win for everyone. I can't believe there's not more attention on it. So you're going to start by buying up some existing solar, rooftop solar installations, maybe some ground mounts.

Missy Stults

We're working on that right now.

David Roberts

And then basically at that point, you will have supply available, and then people can subscribe and basically buy that solar.

Missy Stults

Not yet. So these are all behind-the-meter systems so far. So the idea is you start with behind-the-meter. So the idea of buying existing assets is more about getting the SEU up and operational. Because just like a water system — I mean, think if you're doing a water main replacement, that's a lot of capital you got to go get from the market to replace lots and lots of lines. But we do this all the time. And what they say is, "Okay, great, you've got revenue locked in. Yeah, we'll give you 50 million at a 2% interest rate, go forward."

It's the exact same thing. So once we have revenue, the markets know we're a utility. They understand that. And then you go to normal markets to get your future capital so I can deploy more.

David Roberts

I see. So you're trying to ladder up. And the vision when this is, you know, more fully up and running is that I'm a citizen of Ann Arbor. I can either buy a solar system myself for my roof and sell you my excess power — sell the SEU my excess power — or SEU will come to my house, install, own, and maintain the system, and I will just buy the power from SEU. Those are my two options. And that's going to be the bulk of the sort of initial offering.

There's also this energy waste reduction. I'm assuming that means just like retrofit type of stuff. I mean, does DTE not offer — I thought even the dumb investor-owned utilities, they all have some kind of efficiency program.

Missy Stults

They do, yeah. This is an area where we are exploring a lot of collaboration with DTE because our markets can — some markets are easier to tap into and others are complicated. Ann Arbor is 55% rental.

David Roberts

Yeah.

Missy Stults

And rentals are real hard to get into with EWR. And so we're working with them right now to figure out — we also just passed a green rental policy that's going to require landlords to either do educational work and make some, like, perfunctory kind of changes or actually get a home energy rating score and show performance, so they have some flexibility. But we're working with DTE to say if we get some bad performers in here — we've got houses that have zero insulation — I can get you EWR, like, checkboxes. We can help make sure people are in safe, healthy, affordable homes.

Win-win. So we are looking at collaboration. The idea for us, though, is we can go further, faster. Right. So if we get stacked with DTE —

David Roberts

So as a customer, I check a box, "Yes, I would like XYZ." SEU sends someone to my house, and it's like — how do I pay for that? How does a ratepayer pay for that? Is that free for the ratepayer?

Missy Stults

So basic process, and then I'll tell you EWR. Right now, we have an expression of interest form because there isn't a service, right? So we have about a thousand households that are on this, like, "I want to know more." And we send them about biweekly updates on how things are progressing. Once we're ready to do intakes, we'll then follow up and have them do an intake form where they're telling us, what are you most looking to solve for? Is it cost? Is it resilience? Do you have a health issue? Maybe your grid goes down a lot?

Like, what are your pain points? What are your goals here? And then we'll come out and we'll do an assessment. We'll sit down with them. We, our office, the Office of Sustainability, already runs a free home energy assessment. That is, it's not really like — people are probably assuming a home energy assessment is really just looking at energy. We actually have — it's a decarbonization assessment. So it looks at everything you would have to do to get that home to zero greenhouse gas emissions. Like, it's pretty sweet. So we think we're going to use that assessment and then sit down with them and say, let's say you want solar. "Well, you're real leaky. We really think you should be doing some insulation, air sealing, whatever it is, first. Here are the rebates that are available. Here's the residual. We would on-bill finance that through the utility, right?" So you could stack — assuming there are federal programs and state programs and utility programs.

David Roberts

We say on-bill, we mean on SEU bill, right? You can't, you cannot mess with DTE's bills or billing systems?

Missy Stults

Yes. And DTE does not offer on-bill finance, so that's part of the perks here of us being able to offer it.

David Roberts

Interesting, interesting. So there will be some customer-owned — in your sort of vision here, there's some customer-owned solar, there's some SEU-owned solar, there's some community solar. And the idea eventually is that you want to keep that energy local so that people will be able to sell their excess solar within the community.

Missy Stults

Literally to their neighbors.

David Roberts

That is what SEU is for, basically, is to do that. Let's then talk about, like, if I'm a DTE customer — they're all DTE customers.

Missy Stults

Yeah, everyone is.

David Roberts

And I install a solar system, and currently I'm selling my excess solar to DTE, and you come along and say, "Hey, sell it to SEU instead." This is one of those things where I was like, well, it seems to me like DTE might have something to say about that.

Missy Stults

Well, you know, we got a few things going for us here. One, they have been pushing to have a cap on how much renewables you can sell back in their service territory.

David Roberts

Kidding. I've heard of lowering the price they'll pay you for it.

Missy Stults

Oh, they do that too.

David Roberts

But capping it?

Missy Stults

So we already do have a cap, and we lobbied pretty successfully to get that raised because Ann Arbor blew through the cap itself. Yay. So they're, you know, they would be talking out of both sides of their mouth.

David Roberts

The cap is at a household level or the city level?

Missy Stults

All of the above, actually. You can only generate 110% of your total usage on-site and be connected to DTE's system.

David Roberts

It's crazy pants.

Missy Stults

Exactly. And it gets complicated when someone's electrifying, right? Like if an EV is in your future, what do you do?

David Roberts

Yeah, yeah.

Missy Stults

So that's tricky. So you've got that cap, and then there's a service-wide cap, and I think it's 6% right now of their last year's generation, they cap at what they'll receive. And then they moved from net metering in 20 — I think 18 — to inflow/outflow. So our average rates, we have time-of-use rate, so that messes everything up. But, like, let's just say it's 19 cents. So that's what you're paying. When you overgenerate and you're pushing to the grid, you're getting about seven and a half to eight cents. So yeah, there's no incentive.

David Roberts

This is not like DTE is jealously hoarding the excess solar energy. They don't care and don't seem to want it. Don't even seem to want anyone to build it.

Missy Stults

So we'll take it.

David Roberts

Part of what — yeah, part of what SEU is doing is basically like removing that cap, right?

Missy Stults

That's exactly right.

David Roberts

You can install as much as you want, and we'll take it.

Missy Stults

And even if the economics don't let me, for some reason, get to net metering, I can do better than seven and a half to eight cents, right?

David Roberts

But you don't know yet how much you're going to pay for that.

Missy Stults

That's right. So we did a preliminary rate analysis with Strategy and Consulting where we looked at the variables in the ecosystem and we were testing the sensitivities to figure out, you know, like, "Great, can this work?" Like, can this economically work? Right. Like, really, really, really. And all of those analyses came back that, "Yes, it certainly can. And it can be cost parity, if not cheaper." Now, of course, the federal administration's got some shenanigans afoot, and we're working through that, too.

David Roberts

So if I have solar on my roof and I'm making excess solar, I would likely have every incentive to sell it to you instead of DTE. And you have no reason to believe that DTE is going to stick their beak in that or object to that or mess with that in any way?

Missy Stults

Maybe. You know, we have some really good lawyers at the city, and they're right beside us on this. I mean, it's possible at any point. But, you know, the utility hasn't shown a strong proclivity to want this energy.

David Roberts

Right. So starting up, you'll have a solar offering, solar on roofs with battery storage, obviously. I mean, I'm assuming that, like, the storage is optional.

Missy Stults

That's right.

David Roberts

Because I would kind of think if your goal is resilience, batteries are the thing. Batteries are the magic sauce that make grids better. So I would think that you would be pushing storage everywhere you could.

Missy Stults

This is sort of the kick. I mean, from a sustainability director standpoint, yes. But from a ratepayer standpoint, and if your primary motivation is affordability, you know, if I was in a low-income neighborhood. Right. Like, I can get you solar, no questions asked, for cheaper. Because solar already has an ROI over the life of the asset. So that's not a question. The battery is really when we're talking about resilience or health issues or, or, or. And so that's what we're trying to — at least when the behind-the-meter systems are our start, we've got to really be responsive to what the end users are looking for in their system.

David Roberts

Yeah. And if you don't have a ton of blackouts, like, that's the main customer motivation.

Missy Stults

I mean, we lose power a lot. We just — for short periods of time, and the utility is getting its hand slapped. Like, we're in a performance-based rate-making case right now where we're pushing because of the amount of outages we've had too.

David Roberts

So interesting.

Missy Stults

Like, we're playing both sides.

David Roberts

But you could theoretically fund and build a community battery installation. Theoretically, yes?

Missy Stults

Yeah. As long as I have — I mean, I'd have to build parallel distribution.

David Roberts

I want to get there in a second. I am going to get there in a second. I want to go back to this thing about networked geothermal because, like, financially it makes sense to me, laddering up with solar because those are relatively small increments, small rungs that you can climb. But when you're talking about doing something like networked geothermal, for that you need a big, big, big chunk of capital up front. And ratepayers are not going to advance you money. So again, like, when you run into these big chunks of money that you need, these upfront capital expenditures that you need, where do you get that?

Is it just like you just borrow it like other utilities do?

Missy Stults

That's exactly right. Yeah, exactly right. And for us, we were lucky enough to be one of the communities that won the geothermal, both planning grant and implementation grant. Yeah. So we won $10 million from the US Department of Energy to actually build a networked geothermal system in a neighborhood that we've been working for about four years to make America's first carbon-neutral existing neighborhood.

David Roberts

Oh, interesting.

Missy Stults

Yeah. So that one is one we're waiting on the funds to be released for. But that'll be our first. It's going to happen. It's going to happen. This girl's optimistic.

David Roberts

How confident do you feel about that $10 million?

Missy Stults

Right now, 92% confidence it's coming. It's going to come. We're going to fight.

David Roberts

Knocking on wood. Okay, so, but you think once you have revenue and you're sort of, you know, you've taken your baby steps and you're up and walking, that you will have access to cheap capital in the way that utilities do?

Missy Stults

Yeah, I think that more than that, we have a few things that the utilities don't. We're a triple bond-A-rated city. Investors really like those words. We have no shareholders. So more of the money goes directly back to assets. So our cost of capital is generally notably lower than the utilities.

David Roberts

Really interesting.

So this brings us then to the wires. And this is another main question I have. Love me some wires. Love a distribution grid. But running the distribution grid is sort of definitionally what the investor-owned utility is doing, what DTE is doing.

So you say that's fine. We're not interested in the grid. We're just interested in more clean energy being generated and sent to these households. But if you want to network these solar systems together, that requires wires.

Missy Stults

Yeah, it does.

David Roberts

And it requires wires going across property lines. And traditionally, distributed energy developers bang their heads against this wall everywhere, as I'm sure you know. They can't link their own projects together because only the utility is allowed to string wires across property lines. So what is the legal status there? Are you allowed legally to run your own distribution lines?

Missy Stults

You remember when I led, and I told you we were a municipal utility?

David Roberts

Yeah.

Missy Stults

Who's allowed to run wires? Utilities are. So we win. That's it, right?

David Roberts

But, like, the core — the whole point of the utility franchise, like, literally the whole origin of the utility franchise is that this is a natural monopoly, that wires are a natural monopoly. So if, like, somebody decided, hey, maybe we can just have two [entities] doing wires, that seems like a notable new chapter in the utility story.

Missy Stults

This is unequivocally the story, right? That no one has thought about this because of exactly what you just said. The idea that one side of the street has one, like, line running down it and the other side has another line — well, basically you are taking, you're doubling your cost but halving your rate base. Like, it makes zero sense, right? Like, economics won't work.

But when what you're talking about is, "I'm not running big-scale distribution. I'm connecting 20 homes together in a microgrid." And microgrid is a weird term because I'm not — we haven't figured out what this really is because microgrids always backfeed, or historically do backfeed, to the grid.

So we're trying to figure it out. But work with me here. So you have small-scale distribution such that I have 100 neighborhoods that are their own little grids. That's it, right? I don't have a big-scale grid because, again, the grid's not the goal. That's a pretty expensive proposition. It's also, in every case I've seen, the most vulnerable part of our electric system is the grid.

David Roberts

Sure. I mean, I'm all for the resilience benefits of microgrids. I love a microgrid. I'm just like, it's the legal status of all this that is baffling to me. So you have in Ann Arbor, as far as I know, alone in the United States, two entities that are legally allowed to build distribution infrastructure.

Missy Stults

It is, like, signed, sealed, and delivered in November, when the voters authorized it.

David Roberts

Wild.

Missy Stults

We clearly got permission to become an electric utility. So, we are a municipal utility. We have just chosen for it to be supplemental as to a full replacement.

David Roberts

So your restraint here — we're just going to link houses together, we're not going to try to build any sort of real distribution infrastructure, that's just —

Missy Stults

It's still real. It's just different.

David Roberts

I mean, it's still real. Yeah, it's different. But that's just voluntary restraint. You could, legally, you could build all the distribution infrastructure you want. And here again in my notes, I have, "What does DTE think about this?" Like, I can imagine them making peace with you owning solar systems, but once you're building a competing distribution system, I can see conflicts cropping up there. Are you worried about that at all?

Missy Stults

I mean, a bit. This is, in fact, where we talked about kind of going in on a grant together to really understand these dynamics. Because, if you will, you could imagine that the microgrid really comes into play when the central grid is not operating effectively. And so then you have, from a utility perspective, less crisis. So the way I have conceptualized and thought about this is it's unlikely in most cases that we're providing 100% of someone's electrical usage minute of every day through the SEU, right? I mean, that's not how we're going to start.

We've really thought a lot about starting with critical load. You know, like, my kid doesn't need to have an electric toothbrush going when the power's out, right? We need our refrigerator to not lose all of the items in it. So if we can size the system to do kind of critical-load-plus, that means that it's kind of a win-win for everyone in the ecosystem. DTE is not having to do huge payouts, they're not having to harden in certain ways yet, there's just — all of this is a kind of convoluted way of saying we think that this is actually a value proposition for most stakeholders in the ecosystem that's pretty unique and small-scale distribution.

David Roberts

Including for DTE?

Missy Stults

Yeah. Which is, like, bonkers, eh?

David Roberts

Yeah, it is a little, it is a little bonkers. And again, I would love to hear the words, "I agree with that," out of the mouth of someone at DTE before I, you know, before I take that to the bank. But I mean, that would be nice if it was happy and cooperative.

Missy Stults

I mean, we're not singing kumbaya around a campfire. I do want to be clear about that, like, that there are things that are true. For example, we just signed on Earth Day this year the first heating franchise, traditionally known as gas franchises, in the country that has a climate commitment with DTE. They have agreed if we build network geothermal systems, they will bid and bring the capital to make those systems happen because they see the value as they're trying to figure out their own decarbonization goals on the gas side. This gives them real low-risk opportunity to learn, understand the economics.

Right. So, like, we are trying to find win-wins because of what we started with, this idea of transferability. If I solve this in Ann Arbor, good for me, give me a high five. But, like, we didn't transform the world. If we help an IOU figure out how to become a heating utility — holy crap, right? Like, good job. That's notable.

David Roberts

In a sane world —

Missy Stults

I don't even know where to go with that, but okay.

David Roberts

Immediately you've got to project your mind far away from our current circumstances.

In a sane world, DTE would be doing all this, right? I mean, in a sane world, this is stuff that we want utilities doing everywhere. The only reason you have to do this is that they're not, basically. I mean, we can agree on that, right? Like, theoretically, all of this is, like, absolutely in a utility's remit and makes sense for them to do it, just, like, they'd have to be led straight up to the trough, I guess.

But in a perfect world, DTE would be doing this.

Missy Stults

Exactly. And you know what? I will even throw them an olive branch and say, it's not just DTE. Why isn't every manufacturer doing, like, take back? Why are we responsible for end of life when they're making profit on it? We have people who dump contaminants into our rivers, and then we have to clean it up. They should be — like, "polluter pays" should be rules. If folks are choosing to take the commons and use them in ways that are hurting our health, our safety, and our vitality and viability for future life, they should be held accountable, right?

And so this is an option where we're sort of saying, "We are going to hold you accountable, and we are going to help you get to the level of accountability we want, if you want to come beside us."

David Roberts

Well, obviously you're going to start small, ladder up with small increments. This is a big thing to take on. It will take some time to get it up and running, but in the fullness of time, how much of Ann Arbor's electricity do you aspire to provide? Can you imagine a world where you eventually provide all of it?

Missy Stults

That's a good question. So the math is what I can give you, and then I can — I'll go from — I am known in the office, my team often says, "She's got that look, she's got a Missy-ism." So I will give you the Missy-ism after that. Our analysis shows that we can generate about 400 megawatts of power locally if we use all viable roof space that we have, garages, parking garages, etc. We use around 440, 450 megawatts. Now, to be clear, not every ounce of that 400 is really good. You know, it includes my neighbor's roof, which is like, it's questionable if the economics pencil.

They pencil at scale. They may not pencil individually. But we're doing efficiency, right? So we're trying to drive that number down. But I'm electrifying.

David Roberts

But you're in the same order of magnitude. You're in the ballpark.

Missy Stults

For sure. And then if I, like, gosh, if I start moving heating to geo, that efficiency, like, we're playing ball. Like, we're real close.

David Roberts

That is interesting. And then again, like, again, in my notes, "What would DTE think if, like, eventually a competing utility took all its customers?" More or less, or, like, you know, it'll still have the customers, I guess, but they'll just be sending in, like, what, like a nominal grid fee in the end?

Missy Stults

Yes, if they're still connected. I mean, that's right.

David Roberts

I wonder how they think about that.

Missy Stults

I mean, I'm sure they're not like, "High five, great job, Missy." But the other thing is, the way this works is it's our franchise footprint, so we can only ever be the City of Ann Arbor.

David Roberts

In the actual literal city boundary.

Missy Stults

So worst case, they're losing the city of Ann Arbor.

David Roberts

Right. And they serve millions.

Missy Stults

I think we're like 4% of their usage, maybe 5%. So, yeah, it's not great.

David Roberts

But of course, like — and this brings us to something else I want to talk about, which is, like, you're not just you.

Missy Stults

Exactly. Yeah.

David Roberts

People know what you're doing. It's right there in the newspaper. And plenty of other — you know, I can't imagine that other municipal leaders are not watching this with immense curiosity. Are you hearing from other people?

Missy Stults

Sure am. I spend a lot of time with my peers. Yeah, you betcha. Yeah.

David Roberts

I mean, it's really crazy to me that this is legal —

Missy Stults

Why not?

David Roberts

but never been done.

Missy Stults

I think it wouldn't have been done but for the advancements in distributed energy, right? Because you would have had to have that big centralized system. And so it's only been probably, like, from an economic perspective, only really possible the last 10, maybe 15 years.

David Roberts

And you have no aspirations of going beyond, like, what could you imagine, like, what's the biggest — within the city boundaries you could build, you know, community solar. Is there room for anything big, you know, like wind or, like, a bigger solar plant? Is there any — is there room for anything utility-scale in the city boundaries or are we strictly talking distributed here?

Missy Stults

Yeah, we're pretty built out, and we are doing right now a comprehensive land use plan and exploring things like almost a doubling of population through smart density. So parcels of land are not going to be — I guess this gets to the sustainability director portion. Like, I get to work on energy, but I also have to think about mobility and economic development that's smart in line, right?

So yeah, the connection here is, is how do I get all new developments to have geothermal as opposed to gas connections? How am I getting them to subscribe to the SEU? I'm thinking about those things in terms of development, and how do I bring mixed-use housing so that I can get my next project?

I'm going to speak truth to it because it's going to happen: We're going to launch the largest returnable container program in the country. We're working on it. We don't know how we're going to fund it. We're going to figure it out. But that's going to need a cleaning station, right? And so, how do I have good-paying, family-sustaining jobs but in the city? So I'm not outsourcing sustainability to surrounding areas.

So, like, that's the kind of discussion that I get to have, in addition.

David Roberts

Well, this is, of course, if you talk to people who — local energy proponents, I guess I would say, like, I had Lorenzo Kristov on the pod last year from California, big into this. Precisely what they're advocating, precisely what Lorenzo Kristov is advocating, is having an entity at the local level doing utility work, basically like doing the equivalent of regional planning at the local level: A DSO, a Distribution System Operator, like they have in the UK now, I think.

It sounds like this SEU is in the neighborhood of a DSO, a Distribution System Operator. Although, as we said, you're not technically — you're not operating the wires, but, like, it's in the neighborhood.

But part of the value proposition is that you can integrate local energy planning with local transportation planning and local housing planning and local economic growth planning. Like, you can make all these things work together.

Missy Stults

Yeah. Even local food production, right? Because you need — well, I mean, we need shade in certain areas, but we also have energy intensity of certain things. I mean, here, this one's random: marijuana, right? Like, and as we have data centers that are popping up in the country, these are huge energy hogs, right? Marijuana is actually a shockingly huge energy hog.

David Roberts

I know, I know. It comes up in more and more of the pods.

Missy Stults

That's funny.

David Roberts

Are there things you're not legally allowed to do? Like, what are the limits here? Like, what can you legally not do? You can't operate anything outside of the boundaries of the city.

Missy Stults

That's the franchise. Yeah, there's that. What else? I don't know. I'm sure the lawyers don't want me to answer this question.

David Roberts

Yeah, you probably shouldn't speculate wildly on a podcast about that. But I'm just sort of curious, like, what are the, you know, what are the limits?

Missy Stults

Well, I think we're probably figuring some of them out because just like you were head-scratching as you were reading materials like this. What, what about this? When we talk to our friends at the Public Service Commission, they're like, "Is this even a utility?" We're like, "Yes, here's utility law." They're also trying to think through, "Well, what would we regulate and how would this look?" And, you know, we do energy waste reduction in Michigan is paid by the meter, but households in Ann Arbor will have two meters. So, do they have to pay twice?

We think that's silly. So, what would we do? You know, those are the kinds of questions we've actually submitted filings to the Public Service Commission saying, help us think through it.

David Roberts

Presumably, you have to do a rate case, right? You have rates you want to charge.

Missy Stults

So that we don't have to. Rate cases do not have to, for municipal utilities, go through the Public Service Commission.

David Roberts

Ah, interesting. Do they go through something? City council?

Missy Stults

Yeah, city council.

David Roberts

Interesting. And I was wondering, are there any of these laws in Michigan that prohibit local areas from, like, banning gas and stuff like that? You know, these laws in various states around the country because local people are starting to do the kinds of things you're doing. And state-level people don't always love it.

Missy Stults

We have that dynamic. Yes, they have not passed anything, but also this is an opt-in, so they would have to — one, the Michigan Constitution preserves this right. So they'd have to have a constitutional amendment to take away choice from everyone. That seems like a hard sell. Our franchise — a franchise is a contract. So I did not give you this history, but this is important: Ann Arbor, our electric franchise is so old and there's a wonkiness in Michigan that it's been ruled in perpetuity. So I can't negotiate. Like, Minneapolis is in negotiations right now with Xcel, or they might have just finished them on their franchise — the terms, the conditions, they get a franchise fee, all these great things. I don't get to negotiate. I can't change DTE, like, it is, the courts have ruled time and again it's in perpetuity.

But that is not true on the gas side. So we negotiated that franchise, and we signaled we see an end to gas. A franchise is a contract. So our legislature would have to take away the right of us to contract, right? And goodness gracious, can you imagine the disaster that would be?

David Roberts

I mean, I can imagine a lot of things that I couldn't imagine —

Missy Stults

I guess that's true.

David Roberts

a few years ago.

Missy Stults

That's true. You couldn't do a road contract. You couldn't do a union contract, right? Like, what? So it's, you know, what we're saying here is we believe people have the right to have choice in their system, and most people don't have that right today.

David Roberts

What is, concretely, the GOP murder budget that they just passed — concretely, how does that hurt you? Are there specific grants you're losing or are there regulations? Does it materially affect you?

Missy Stults

I think we're all figuring out the specifics. I can say what we know now in this moment: most of our grants are encumbered. They're signed, we're working on them. They are pretty safe. And the budget didn't take away money that was encumbered. It was unencumbered funds, largely, at least for the things we have. So we're staying the course there. The ITC is not great, you know, losing the tax credits.

David Roberts

Yes. So that's the tax credit for rooftop solar, right? So you're gonna, as of a year from now or whatever, the final deadline — I think it was a year — you're gonna be paying full freight for these rooftop solar. That's a 30% boost in the price. That seems material.

Missy Stults

Yeah. But the thing that we're figuring out is that's true for everyone, right? And our utilities also have renewable portfolio standards and requirements. And so we're trying to understand what's it going to do to energy, period, right? Pricing across the board. So how much it impacts the SEU, we don't know, right? It will obviously be an impact, but will that impact be equal to what the rest of the industry feels? Will it be disproportionately high? Will it be modestly high? So we're still running that one to ground.

David Roberts

I mean, they did specifically go after renewable energy, and you are specifically a renewable energy-only utility. So it would be shocking if you got away completely unscathed.

Missy Stults

Oh, we won't get away unscathed. I just think the reality of the bill is everyone's scathed. I mean, like, we're all injured from it. So it's the question of how deep is our wound in comparison to my brother who's losing his medical insurance, right?

David Roberts

Yes, I know. Or, you know, people getting rounded up. Trouble's all over.

You mentioned renters, that Ann Arbor is 52% renters. I meant to ask this earlier, but just—let's just briefly touch on how renters can benefit from the SEU. Obviously, they can't buy or install solar systems on buildings they don't own. You have some city laws that basically prod rental owners into doing this stuff. What else can renters sort of get out of this? What's the value proposition for renters?

Missy Stults

I think this might be one of the things about the SEU that's — maybe it's one of the top five things that I'm excited about.

David Roberts

Renters always get left behind. They always get screwed by energy policy.

Missy Stults

Right. But we have this split incentive that you clearly know of, right? A landlord's not going to make these investments because, in most cases, they're not paying the utility bills. The tenant's not going to make them because they don't own the property.

Well, the SEU pays all the upfront capital, so the landlord has to expend nothing. The tenants pay those utility bills. That landlord gets to state that their apartment, their home, whatever it is they're renting, now has more resilient power and — ta da.

David Roberts

So you're basically boosting the value of their building for no upfront cost to them.

Missy Stults

And giving the tenants safe, affordable, like, locked-in power.

David Roberts

So why wouldn't they, why wouldn't they all just do it?

Missy Stults

Okay, well, I know that's rhetorical, but I will tell you the number one reason we've heard, and this passed with about 78.78% —

David Roberts

78.78% to form this thing?

Missy Stults

Yeah, it was 78.9% of the voters authorized it. So that tells you 21% were like, "No, thank you." And we talked to them and their answer—it was one of two things. They were confused that this was a full municipalization effort. And so they were like, "I don't want you buying the grid. The grid's not working." And we were like, "Well, that's not it." They're like, "Thank goodness." Or it was, "I don't trust my government to fix the roads. I'm not going to trust it to run a utility."

David Roberts

Yeah, but like, who else is?

Missy Stults

Well, but that said, so, like, there's going to be that landlord, right, who is just going to choose not to do it. And so it doesn't solve it. Like, it doesn't give the tenant full autonomy to go move forward. But it does solve a lot of the problems we see in the system.

David Roberts

Yeah. Interesting. I'll be really curious to see how that plays out.

Missy Stults

Me too.

David Roberts

I find that class of people difficult to predict. I don't totally understand them.

Well, we're short on time. But I did want to get to and let you say a few words about the equity angle on all this. I'm guessing that is not something that DTE excels at, taking care of low-income ratepayers. So what is — how are you integrating that into this setup?

Missy Stults

Yeah, well, this is core to the work that we're doing. In A²ZERO, we have three values: it's sustainability in all of its facets, it's equity, and it's transformation. And transforming our system means doing things like this. It's really questioning why we operate the way we operate and if there's a better way to do it. So equity for us can't be like a lens that I choose to look at problems because that's privileged, right? I happen to be wearing glasses right now; I can take them off and not see the problem if I don't want to.

So we're trying to figure out how it's centered in the work that we do. And so we worked with residents to ask these questions to really understand: What are the pain points in the energy system? What are the barriers to accessing renewables?

David Roberts

Can I ask about Ann Arbor's economic makeup? Like, what is the population we're talking about here?

Missy Stults

Yeah. So we are a pretty darn diverse community. We've grown more diverse over the years, largely thanks to the University of Michigan and the retention of — I think we're, I forget the actual colloquial term they use. It's like the Silicon Valley of the Midwest, because we have just a lot of startups, right, that, like, spun off from the U. So we are, I think, 65-ish percent white, Asian, Black, Latinx, sort of, like, break across the other demographic profiles, or that remaining 35% kind of splits. Income-wise, pretty affluent. Poverty hides really well in Ann Arbor. There's a lot of poverty.

David Roberts

Yeah. Is this one of those situations where urban housing has gotten very expensive, and so a lot of the low-income people end up being driven out to the suburbs, outside city limits type of thing?

Missy Stults

Or what happened is housing has gone up so much that people are aging. So they're house-rich but, like, income poor.

David Roberts

Yes, yes. Classic NIMBYs, those folks.

Missy Stults

It's tough, man. It's rough. So we do say we have a climate crisis and an affordability crisis in Ann Arbor, which is why sometimes, like, this one makes me bristle when people say, "We either can build more housing or we can work on sustainability." And I was like, "Wrong answer." Like, that's a lose-lose proposition.

David Roberts

They are one and the same, are they not? More housing is sustainable.

Missy Stults

Yeah. And building crap housing that is not safe and healthy for people is a terrible solution. Plus, like, I don't know, the climate crisis is real, we're living it. So I work really closely with the head of our affordable housing. We actually fund them to do fully carbon-neutral buildings. We just installed geothermal at a new build. We're working with them on geo at another building, right? Because you got — another image I talk about a lot is when you're in a flood, the first thing you do is turn off the spigot. Yeah, right. Like, you got to stop.

David Roberts

Well, speaking of the spigot, do you have city-level laws on new construction? Like, is new construction required to be geothermal hooked up?

Missy Stults

That'd be nice.

David Roberts

Solar-ready, electric, all-electric, etc.?

Missy Stults

Nah. So here's where I get to, like, be in envy of everyone else. Michigan's building code and energy code are at the state level. They're the floor and the ceiling. So I have no authority. I can only incent people. I cannot require.

David Roberts

Interesting.

Missy Stults

Yay.

David Roberts

I mean, but at a certain point, like, if the whole city is set up to reward renewable energy, you got to think that, like, it would just be perverse at some point to go in there and build a — I mean, presumably you're going to be winding down your gas.

Missy Stults

I mean, the hope is — we are doing a study right now with Stantec of other locations to do our next network geothermal deploys. So we've just done a desktop analysis looking at demographics and variables and heating loads. And now we're getting ready to go put drills in the ground to understand thermal connectivity at three different sites. So we can actually build what comes next, right? Like, what system are we going to move and move and move? We can't take away something without giving someone a really viable alternative. So we're trying to figure out what does this look like?

What's the time horizon, what's the cost? All those things are in play.

David Roberts

And the networked geothermal system, once it's up and running, because DTE has a gas side, which would be the natural or would be the sort of obvious people to be in charge of that — would SEU own and run it, or would you hand it off to DTE in some way at some point?

Missy Stults

No, SEU would own. What we talked to DTE about is we will need someone to bid in, right? We don't know how to run networked geo yet. We haven't done it yet.

David Roberts

I mean, nobody, right? Everybody's figuring that out.

Missy Stults

Exactly. So we would — we're going to have someone who runs that system, and we've encouraged them to really explore if they want to be beside us as that unfolds, to understand the nuances of how they operate, how they could scale it, etc.

David Roberts

Interesting, interesting, interesting. What a fun job you have.

Missy Stults

Well, I spend some time, like, crying.

David Roberts

I know. When you're not feeling traumatized, I bet you feel lucky.

Missy Stults

It's a gift, actually. What a great place to be. It truly is a gift.

David Roberts

Yeah, you're right in the center of so many systems. Well, like, I have to believe that if this works —

Missy Stults

When it works.

David Roberts

when this works, when you pull this off, it's such an obvious thing for other cities to do. I mean, it seems obvious to me if it works, if it's financially viable. Because this is, like, one of the central dilemmas that this pod and that people in clean energy run into again and again and again is: the utility is big and you're small, your city is small, your neighborhood, your house. You have limited power over the utility.

So the idea that it was like, "Well, if you're not going to do it, we're just going to build a second utility and do it." That's a very new thing in the world. And if it catches on, seems like it might be one of the things that, like, spurs utilities to get with it, lest they sit back and watch local utilities pop up all over their territory. You know what I mean? I just wonder how much this is going to spread, whether it's going to spread.

Missy Stults

Well, you know, game on. I would say the highest form of flattery is, you know, obviously, replicating. So the other thing we have in our office a lot right now is "Light shines the brightest in the dark." And so we don't have an option. There is no Planet B, right? Like, we've got to solve for this.

Local governments in the US have always led on climate. We just had an anomaly in the last president, that we had a supporter. I mean, that's the anomaly here. And so, it sucks to be in this position. I really wish we weren't.

We're the places that flood. We're the places that have the extreme heat. We're the places where you shop at the grocery store with your elected leaders. Like, we are the places that will find solutions.

David Roberts

Beautiful and inspiring. Thank you. Thanks for coming on and talking through this, and thanks for — geez — running this fascinating experiment for the rest of us to learn from and maybe copy someday.

Missy Stults

Game on. I appreciate it.

David Roberts

Thank you.

Missy Stults

Yeah, thanks for having me.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

David’s Notes

1. ❤️ Last week I was at a family reunion in Tennessee. My mom’s side of the family has gathered in the same state park every two years since 1974, when I was two years old. My cousins — with whom I played in the mud, rode bikes, snuck shots of Jack Daniels behind our parents’ backs — now have kids of their own. And we’re right on the verge of some of those kids having kids of their own, which would be generation five! In a world where everything seems shaky and impermanent, having this in my life has been incredibly grounding and sustaining. Everyone should set up these regular traditions. They require a lot of work, some pushing and organizing, but it is so, so worth it.

2. 🎤 If you’re not sick of hearing my voice, I was a guest on a few great pods this last month or so. First up is The Climate Pod, where I discussed the Republican murder budget and how it will affect clean energy:

And then there was Supercool, a pod by Josh Dorfman, where I got all big-picture and philosophical, as is my wont unless I am restrained.

3. 🏙️ The researchers at the Economist Intelligence Unit (EIU) recently issued their annual ranking of the world’s most livable cities, based on a variety of criteria like infrastructure, education, sustainability, health, and happiness. The big news this year is that Vienna, the No. 1 seed for several years running, has been dethroned by Copenhagen.

Only one North American city (Vancouver, BC) made the top ten, and the first US cities (Portland and Miami) don’t show up until the 40s. In terms of urbanity, the US is basically an embarrassment, especially given its immense wealth.

If there’s one thing I wish I could convey to the entire US populace, it is: we don’t have to live like this. We know how to design cities that are pleasant and healthy to inhabit. We could make our cities like that! We just don’t.

4. ✊ Is Al Gore underrated? At a time when most members of the US elite — politicians, civic leaders, business figures — are cringing in the face of fascism, Al Gore is fired up and fighting, picking up Jimmy Carter’s mantle as the Democratic elder statesmen.

5. 🤝 Saul Griffith — one of the smartest people I’ve ever met and a repeat guest on Volts (one, two) — has started his own newsletter, to which you should obviously subscribe:

Energy & Stuff

Energy and Stuff looks at global and local flows of energy, and of materials — "stuff" — which I connect to decarbonization, politics, and your life.

By Saul Griffith

6. ✅ Community comment of the month: Elaine chimes in with healthy skepticism regarding increased demand induced by more efficient data centers:

Monthly Thread — How It Works

This is your monthly opportunity to share! Use the comments section in this community thread to:

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

• SHARE WORK, ASK FOR HELP, FIND COLLABORATORS: Share your climate-related work, ask for help, or find collaborators

• CLIMATE EVENTS & MEETUPS: Share climate-related events and meetups

• EVERYTHING ELSE: Discuss David’s Notes or anything else climate-related

• QUESTIONS: Ask a question to the community or for an upcoming bonus episode (anyone can ask a question but bonus episodes are a paid-sub-only perk). Don’t be afraid to answer one another’s questions!

🚨 To keep organized, please only “REPLY” directly under one of Sam’s headline comments. Anything inappropriate, spammy, etc may be deleted. Be nice! Check out our Community Guidelines.

In this episode, Arc CEO Mitch Lee explains why the jump from gas-powered boats to electric boats is even bigger, in terms of quality and user experience, than the jump from gas-powered cars to EVs. EBs are strikingly quieter, have greater torque, and require much less maintenance. Oh, and despite what Trump says, they are also much safer and less likely to strand their occupants.

(PDF transcript)
(Active transcript)

Text transcript:

David Roberts

Okay. Hello everyone, this is Volts for July 18, 2025, "What's going on with electric boats?" I'm your host, David Roberts. Cars get all the attention, but there are plenty of other types of vehicles for which electrification makes as much or more sense. One example: boats!

Most boats leave from and return to the same place every day, so they have a natural spot for charging and fewer range worries. As anyone who has driven an EV knows, electric motors have crazy torque, so they accelerate quickly, which makes a difference when you're dragging people around a lake.

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Also, anyone familiar with lake sports knows that gas and diesel engines are extremely loud. It is impossible to have a conversation if you're going more than five or ten miles an hour. Electric motors can be much quieter. Also, they don't spew toxic fumes in the faces of swimmers and wakeboarders. It just makes sense.

Several companies have jumped into the electric boat game, seemingly more every day. The one that has gotten the most attention is Arc, a VC-backed team of rocket scientists — or at least, rocket engineers — that have designed and manufactured a high-end wake-sports boat, the Arc Sport. A fishing boat, the Arc Coast, will be available next year. The boats are nice. But they are expensive. Let’s get into it.

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I'm excited today to have with me Mitch Lee, the co-founder and CEO of Arc, to talk all about electric boats: the design challenges, the economic logic, the performance advantages, and how he plans to bring down costs and just how much of the marine sector can be electrified.

With no further ado, Mitch Lee, welcome to Volts. Thank you so much for coming.

Mitch Lee

Thank you for having me. I'm excited to share more about what we're doing at Arc and the mission that we're on.

David Roberts

So let's go back to the very beginning, four or five years ago. I think you had been in software for a while. I think you sold your software business. Your friend Ryan was designing rockets for SpaceX, and you guys were thinking, "Hey, let's start a company," and you looked around and you settled on electric boats. So I'm just curious, like, what went into that? I'm sure there was some market analysis. I'm sure a little bit of it was following your heart. I'm sure some of it was sustainability. What was the mix?

Mitch Lee

Yeah, it breaks down to three things. The first is that Arc is a pursuit of personal passion. I grew up in the Bay Area to parents that loved being out on the water and had our family out on the water all the time. A lot of that was skiing behind our 1986 MasterCraft ProStar, where I learned how to kneeboard, wakeboard, double ski, slalom ski, you name it. But we also spent a bunch of time out there on the river fishing and generally just enjoying the water. Fast forward; I get a degree in mechanical engineering. I spend a while as a mechanical engineer.

I then pivot over to software and jump around some software startups, including starting one of my own that was later acquired. At that point, I started thinking about what do I want to go do with my career in this next phase? And I had always had this idea, as I'm sure a million other people in the US have had, that electric boats make a lot of sense.

David Roberts

Right. As I said, it seems like it's just sitting right there.

Mitch Lee

It's one of those very obvious ideas that is dominated by execution risk rather than market risk or technology risk. I mean, electric boats just make way more sense than gas boats. You could talk to somebody driving an F-350 and they'd still say, "Yeah, electric boats make more sense." Because gas boats are a nightmare to maintain, a nightmare to keep running reliably. They're super expensive to operate. They're loud. You can't hear yourself think, much less hear the person surfing behind you.

David Roberts

I mean, they're sort of legendarily a misery to own. Right. There's a whole kind of mythology around it.

Mitch Lee

Absolutely. There are all these phrases in the industry, like, "The best days of a boat owner's life are the day they buy it and the day they sell it."

David Roberts

Yes, yes.

Mitch Lee

I really think the analogy to automotive undersells the opportunity because gas cars are pretty good at what they do. They are quiet, they're reliable, they're fuel efficient, they're inexpensive. They are the benefactors of 100 years of these giant automotive companies pouring money into R&D and refining that machine. That is not the marine industry today.

David Roberts

You know, there are companies out there doing this, and there have been for a good while. What did you find when you looked out at the market, what did you find lacking?

Mitch Lee

The way that the industry has evolved looks different than automotive. Pretty much anyone can make a boat. You have hobbyists that make boats in their garages and kind of strap on an outboard, and you have yourself a boat.

David Roberts

Right. I guess there are not the same legal hurdles to get it, you know, out on the road or out on the water, I guess.

Mitch Lee

Exactly. So it's a low barrier to entry. And what that ends up translating to is a lot of different boat builders out there. You almost get this commodity market where a lot of people are using the same sorts of outboards or the same sorts of motors, the same sorts of components off the shelf. And what that means is that in a commodity market like that, or a market that's differentiated largely by brand rather than technology, you don't have a lot of spare money to pour back into R&D to make all of this stuff better.

What happened in the past, call it eight years or so, is that there's been a paradigm shift. Something that was not previously possible is now possible thanks to the automotive industry. So the automotive industry has been reaching incredible scale with the electrification of cars. And that has established supply chains for things like batteries and high-voltage power electronics and all the different things that you need to go make an electric vehicle possible, you can in some respects buy off the shelf. Now, there's a giant asterisk around that, but the supply chains now exist that as a boat company, you don't necessarily need to go pour tens of millions of dollars into R&D to get a product to market.

David Roberts

I see, so you're drafting a little bit off automotive spending on innovation.

Mitch Lee

Exactly. So going back to how did we end up at Arc? Well, one was the personal passion. It's kind of this obvious idea that I personally feel a lot of passion for. The other is a compelling mission. Even setting aside global warming, gas boats are, you know, most people can agree that you don't want fuel getting dumped into the water. You probably don't want black carbon burning in our ports.

David Roberts

I mean, and there are specifically people breathing in very close proximity to all these things.

Mitch Lee

Every gas boat comes with a sticker on the back that warns about carbon monoxide poisoning and, you know, like, you've got kids on your boat. So I think that there's a lot to like about the mission side of this. And then the execution part is maybe the most compelling. And maybe what tipped myself and Ryan, my co-founder, into doing Arc. The technology was there, thanks to the automotive industry. And the hard part was actually putting it all together into a product. And that's where a lot of his expertise comes into play. He had worked at SpaceX building complex products there and had a network of other super talented engineers that he could tap into when it came to helping build Arc.

So when we looked at it, we're like, all right, compelling product. It's a compelling mission. The timing is right. And the hard part is figuring out how to actually get these pieces to fit together in a way that's competitive with what's already in the market. So our job is fundamentally to solve the power challenge: How do you build battery packs that are big enough to sustain the amount of power that boats need moving through water, which is a thousand times more dense than air? Then, how do you bring the cost of those packs down low enough to be price competitive?

How do you compensate for the weight and the size of the packs, and, you know, how do you prepare them?

David Roberts

Is it safe to say that you are the first company to just sit down with a blank sheet of paper, as opposed to trying to sort of electrify current offerings and current technology?

Mitch Lee

I don't know that we're the first. I think many people have experimented with this. I think we have taken it the furthest.

David Roberts

I'm very curious, like, when you sit down with a blank sheet of paper, you're going to design a boat, you're going to design an electric boat. I'm guessing that, like, design consideration number one is the battery. It's big, it's heavy. So the physics of it and the layout of it. How did you think about the relationship of the battery to the vessel as a whole, to the hull? Like, what were those design considerations around the battery?

Mitch Lee

Yeah, pretty much everything about Arc you can derive from the basic premise of: we're solving the power problem in maritime. That in order to go electric, you need to overcome the fact that boats consume a lot of power moving through water. So the natural consequence there is you need to store a lot of energy on board, which means big battery packs. That was definitely where we started. And then that creates second-order problems. You can't just buy a big battery pack off the shelf. So you need the team that can go a level deeper to be able to build those size of battery packs in house.

David Roberts

So your battery pack is 226 kilowatt-hours. Just to help listeners out, how does that compare with a car battery? Like, what is the —

Mitch Lee

Yeah, you could think of it being roughly three times the size of an electric sedan.

David Roberts

No shit. Oh, excuse — pardon my French. Really? Three times bigger than an auto battery. And auto batteries are big.

Mitch Lee

Right. And boats consume a lot of power. I mean, boats are closer to semi-trucks than they are to sedans.

David Roberts

That's really interesting. So that really is a design problem then. A 226-kilowatt-hour battery, three times the size of a car battery. You have to integrate that into the vehicle.

Mitch Lee

Yeah. So that brings you to one of the problems, which is, that thing is big, it's heavy, it's expensive. How do you compensate for those things? Well, it really boils down to you need to build the vessel around the battery pack. You need to integrate these things intelligently. In the same way, if you look back at the early automotive industry, electric cars didn't get that compelling until Tesla came along and built the car around the battery pack. And suddenly you get the frunk, and you get the low center of gravity, and the great cornering, and you get all these other benefits by rethinking the vehicle around the electric powertrain.

We're doing that same thing at Arc for boats.

David Roberts

So for a normal boat, the engine is in the back. That's the big chunk of weight, I'm assuming. Like, where is the battery in the boat? How should we think of the layout of the battery?

Mitch Lee

It depends on the product, and it looks different on every product. You know, our wakesport boat has the battery positioned differently than our center console boat, which has the battery positioned differently than that luxury cruiser that we started with, the Arc One.

David Roberts

And this is all going to depend on how the boat is intended to move around.

Mitch Lee

Exactly. And the purpose of it. So the Arc One had a unique layout to it. It was very spacious for the size of boat, because everything was packaged below the floor. In those cases, it was two flat packs, a total battery capacity of 220 kilowatt hours, and everything packaged below the floor. The battery packs were actually structural to the boat, so they were supporting the floor directly. In the Arc Sport, your goal is to throw an incredible wake. So the battery pack position shifts, and it's actually a single pack that's 226 kilowatt hours. And it's located near the back of the boat.

And in the Arc Coast, you're going for range and how much distance can you cover? And that battery pack shifts forward a little bit also because of the motor position on the boat; on the Arc Coast, it shifts to the back of the boat, whereas on the Arc Sport, the motor's located further forward. So it's all to say that we are building the vessels around the electric powertrain and optimizing them for what their purpose is.

David Roberts

One of the actually more recent Tesla innovations is literally integrating the battery pack into the frame of the vehicle such that, like, it is, as you say, load-bearing, like part of the frame of the vehicle, which, you know, people have debated about. This gets you efficiency, right? Gets you more out of your battery, but it also means you can't swap out the battery. The battery is not very, like, sort of modular, replaceable, or recyclable, et cetera. Like, are you thinking about those considerations? Like, how integrated is integrated?

Mitch Lee

What Tesla is doing in the industry is special. They have accumulated intellectual property over a long period of time that allows them to push the limits of what electrification looks like in a vehicle. And they operate at a scale where those marginal benefits make a lot of sense to invest in. For us, we are not actually trying to push the limits of where the industry is at today from an electrification perspective. So we are happy to be downstream of automotive R&D, say, "Look, we're going to do something that we know works. It's a proven formula. And how do we make this as serviceable or maintainable as possible for us and for our customers?" Which involves, you know, not directly integrating cells into the structure.

David Roberts

So you can switch, like, when, if the battery, like, theoretically, if one of these things is driven around for whatever, 10 years — I don't know what the warranty on a battery is — you can replace the battery?

Mitch Lee

You can. I will immediately volunteer that we do not expect anyone to be constrained by battery cycles. What I mean by that is, automotive, these battery packs are designed for, say, five years or 10,000 cycles, 5,000 cycles, which you might hit if you're driving your car 360 days a year. Boats are used less frequently, and so your useful life on the battery pack before you see some amount of degradation is so much longer in terms of calendar years.

David Roberts

I want to get back to the battery. But the hull, the Arc Sport hull, is aluminum.

Mitch Lee

It's actually composite.

David Roberts

Composite. Is that different from the industry standard in some way that is related to this design challenge?

Mitch Lee

Yes. So when we started with the Arc One, we made it out of aluminum, and that really supported our ability to make modifications to the hull as we went. It was conducive to the R&D process. As our ability to design hulls matured, we have switched over to composite because that's where the industry is at today. And there are many benefits to that. However, we use a different form of composites. So a lot of boat builders today in the sport industry — and everything I say is specific to the specific segment that we're in — so if you look at wake sport boats, most boats are made out of chop-sprayed fiberglass.

It's a low-skill form of manufacturing that involves basically taking fiber, putting it in a blender with some resin, blending it up, and spraying it out. The downside is that it's bad for the people doing it, it's bad for the environment, and it has pretty bad material qualities — but again, it's cheap. What we have switched over to is, if you think about what are we trying to accomplish; well, we've got this big heavy battery pack and we need to compensate for the weight of that battery pack somehow. The way that we're doing that is by taking weight out of the hull and giving that back to the battery pack.

So we want our hull to be stronger and lighter than boats that exist in the industry today because we have this big battery pack. The way that we do that is by using vacuum resin infusion. So it's still, you know, fiberglass hull, but it is using a different manufacturing technique that allows us to get a lot more strength for a given unit of weight.

David Roberts

Interesting. And I'm curious, like, with the lighter hull, do you net out at a comparable weight to other boats in this category?

Mitch Lee

That's the goal. We are a little heavy relative to other boats of this size. We're certainly within the realm of what wakesport boats weigh. But if you look at another, you know, 23-foot wakesport boat, we'll be a little heavier than that. However, that is not necessarily a bad thing. Everyone in this industry wants to have a heavy boat because it's what displaces water and allows you to throw a great wake. So, in a lot of respects, that's actually an advantage.

David Roberts

So the weight, you don't have to be as worried about weight as you would with, I don't know, like a rocket for SpaceX or something like that. A little extra weight is not that big of a deal.

Mitch Lee

We still want to get close because of trailering loads. So, you want to be able to use the truck that you already have.

David Roberts

Right.

Mitch Lee

But outside of that, you're not really concerned with weight. Especially when you consider how much power we pack into the boat that you don't really feel the weight. It still handles like a jet boat because of the amount of torque that we have, the amount of power that we have.

David Roberts

What is the battery chemistry?

Mitch Lee

We use NMC.

David Roberts

Right. Kind of old school. Is that just the most power-dense? Is that for power density?

Mitch Lee

Right, exactly. There are a variety of trade-offs here. And one thing that I will call out, kind of harkening back to, you know, Tesla's making certain design decisions. Those design decisions are optimized for automotive, and we are making a different set of design decisions that are very much optimized for the marine industry for how boats are used. An example, we are not cycle constrained. So trading to chemistry that gets you a much higher cycle count doesn't actually benefit us.

David Roberts

Right. Which is LFP, just to throw that in there, trading to LFP gives you lower density, lower power density, but more cycles. But you don't need more cycles.

Mitch Lee

Exactly. That's a good example. You know, some of the things that automotive is really sensitive to, like cooling, we are less sensitive to because automotive has this challenge of your car has a very high peak power, meaning when you are accelerating onto the highway, you are consuming a lot of power over a short period of time. And relative to the size of your battery pack — this is known as the C-rate — that power consumption is significant relative to the size of your battery pack. And that can really heat things up. On a boat, it's actually quite hard to have a high peak power because you're limited by your propeller.

The propeller can only put so much power into the water. So you can think of a propeller kind of like a tire, and a boat has basically a really bad tire on it because—

David Roberts

Yeah, I was going to ask this later. Like, would there be any point in getting a more powerful battery at a certain point? Because I feel like you're limited by other physical things. The amount you can accelerate in a boat is not unlimited. Even if you had, you know—

Mitch Lee

Exactly. You start being limited by your propeller. Now, we could increase the size of the propeller, and we have. But you are still bumping up against the limits of—

David Roberts

Well, like, physical comfort at a certain point. You're scaring the crap out of your passengers at a certain point.

Mitch Lee

Right.

David Roberts

So everybody wants to know also, I mean, NMC is in the flammable category of battery. And it's funny, everybody, the first thing they want to know when they hear the term "electric boats" is about safety. I'm sure at this point you've heard all the Trump jokes. You've heard the Trump — getting shocked versus sharks. I'm assuming that if for whatever catastrophic reason you hit a rock and were sinking, that you would not get electrified by this boat, but just maybe say a word about, like, it is electricity out in water. So how do you think about that safety?

Mitch Lee

I have many different ways to answer this. I will start by saying cars also get wet. So a car goes through a car wash, they go through rainstorms, they ford rivers. And the automotive industry has already kind of developed the technology necessary to waterproof these battery packs, and they need to be waterproofed. Our boat batteries are not sitting in water. In fact, they're sitting quite far off of the water. They're, you know, feet above the bottom of the hull where water might collect. So we're already leveraging technology that exists, and then we take that several steps further.

You know, we put a lot more emphasis on the sealing of our battery packs to make sure that they are — I mean, we essentially strive to be IP67 rated, which means you could submerge a battery pack under a meter of water for 30 minutes and it not leak. And that's kind of an insane standard for a battery pack of this size. That's like a lot of water pressure on it.

David Roberts

Yes.

Mitch Lee

So we take that obviously several steps further, and then we think about redundancy at every level. It's like, okay, now let's assume that our IP67 battery has some sort of leak in it. How long can you go before it becomes an actual issue? And so we do a bunch of testing on that. And the way we've designed the battery pack is tolerant to water sloshing around on the inside of that pack. We have sensors that are monitoring for all of this and alert you. And, you know, the analogy I would draw here is, like, in cars, the safety — yeah, you should definitely be concerned about that. You could get in an accident, you could be immobilized, and, like, you definitely want time to be rescued. On a boat, you know, if you crash that boat and it's sinking, you put on a life jacket, you are good to go.

David Roberts

You're not hanging out on the boat for long.

Mitch Lee

Right. It's unlikely that you — I mean, boats are inherently pretty safe in part because you can control your own safety by putting on a life jacket and exit the boat. You're not going, you know, insane speeds or anything like that.

David Roberts

So there's no sort of, like, wreck or accident you could envision that would be traumatic enough to the hull to make electricity and water a problem.

Mitch Lee

Not where the battery pack is positioned. Now, you could hit a rock and sink your boat, and eventually that battery pack will go underwater. That is true. But the thing — I mean, we just talked about electric vehicle safety. I want to take a second to talk about gas vehicle safety, which is very bad. So, gas boats are pretty notorious for catching fire because one of the biggest problems that you have is you have this hull, which is a big pocket of air, and when you run that engine, it creates fumes. And if you don't blow those fumes out and then you go ignite the engine, it can cause a fire.

The engines are also not typically designed to run at very high continuous power, which is what boats generally do, and can catch fire, like overheat. So you end up with a status quo of gas boats catching fire more often than most people think. If you have spent enough time at a marina, you have seen a boat catch fire. Electric boats are much safer than that. And so you are starting out from a way better place than you are with your gas boat in terms of safety. We've got a ton of sensors on board to warn you if there's any sort of anomaly with the vehicle.

Gas boats do not have that.

David Roberts

Interesting. And what about charging? I mean, one of the things I think that's relevant here and this is sort of like, you know, sort of obvious once people are reminded of it, but they don't necessarily think of, which is that there are batteries on almost all boats these days, on almost all modern boats. Like, electricity on boats is not a novel problem. And similarly, because there are batteries on almost all modern boats, there's charging available on many modern docks and marinas. But I'm sort of curious, like, how many boats go electric before you max that out?

Do you know what I mean? How prepared is marine infrastructure for electrification at scale?

Mitch Lee

This is one of those areas where the more you dig into this idea, the more obvious it becomes: I will argue that gas boats make way more sense to go electric than gas cars. I'm glad that cars have gone electric. But when you look at the opportunity or the percent improvement in your experience, it is dramatically higher in going from gas boat to electric boat.

David Roberts

I should have said this earlier. My parents co-owned — you know, we were sort of like classic lower middle class Tennessee — we co-owned a boat that we parked at this lake. You know, Tennessee is full of lakes, and so I can testify on a personal basis that gassing up a boat is an unpleasant experience. Gassing up a car is unpleasant, but gassing up a boat is even more unpleasant.

Mitch Lee

Yeah. A lot of people lug gas cans down to the dock or they've got to go 30 minutes to the one marina on that dock or trailer through a gas station. There aren't great solutions out there compared to plugging your boat in and every morning it is ready to go. So to get back to your question about infrastructure, the awesome part about boats—take the wake sport boats that we're producing today — a big day out on the water might be three, maybe five hours, call it four to six to be conservative. That means that you have 18 to 20 hours to recharge before you're using that again.

David Roberts

Yeah.

Mitch Lee

Which means that Level 2 charging, which most marinas already have, you could easily get down to your dock. If you already have a boat lift, then that runs 240. The infrastructure is a very tractable problem here. It's not doing anything crazy there. So they are already wired for this sort of power, and you charge it overnight, and the next morning it is ready to go. And when you take it out on the water, you have perfect precision over how much battery you have left. So range anxiety is solved.

David Roberts

Yeah, I wanted to ask about range, and then as I was thinking about it, I was like, well, is that really the — like, people do not take out their boat intending to go far generally, or like, you know what I mean? Like, that's generally not the purpose. Sort of like, what is the right unit? What units do you use when you're telling people about the capacity of the battery, what they can expect from it? What are the right units here?

Mitch Lee

So we tailor it to the market, and for the wakesport market that we're in today, we say four to six hours of active usage time. I have grown up on wakesport boats my whole life. I could not tell you their range in miles because that's not how you use the boat. You take it out, you basically go in circles, and then you bring it back. Four to six hours is the target there. The reason that it's hard to even estimate, you know, more precisely than that is it very much depends on how you use the boat.

So at low speeds, you are consuming almost no power. At five miles an hour, you could go for tens of hours, you know, well in excess of, call it, 200 miles. You would have a really hard time running out of battery at low speeds. At high speeds, you consume a lot of power because power draw starts to go cubic once you're up on top of the water, cubic with your speed. So 40 miles an hour is very consumptive. What that means, though, is if you think about the typical wake sport profile, you go through a no-wake zone at five miles an hour, that burns no battery.

You put somebody in the water, they go surf for 30 seconds, they fall because they were trying a trick, you go pick them back up, you're at five miles an hour, again, not consuming battery. You go do that a handful of times, you stop for lunch, again, not consuming battery. And when you blend these things together, what you realize is actually a lot of time out on the water is with the boat not necessarily in motion or at least at slow speeds, and that translates into unexpectedly high amounts of time you could be out there before running out of battery.

David Roberts

But there's no real, like, you can't sort of guarantee anything just because usage is so variable that, like, the amount of time one boat could be on the water—

Mitch Lee

We have collected a lot of data on this. So we collect data from all of our own boats. Each of our boats is streaming thousands of data points a second that we can then run analytics against. We've also gone and looked at diagnostic data from typical wakesport boat gas engines that we've pulled off and have looked at. You know, we've done data logging exercises where we put little data loggers on boats to really understand the amount of time people tend to spend at different speeds. And that is what allowed us to size the battery pack.

Now, when we size the battery pack, we want to make sure that we meet the needs of the majority of the market without oversizing it, because then you're paying for battery that you're never going to use. It's kind of like if you think about your phone, you don't want your phone battery to just get bigger and bigger and bigger because now you're carrying around something that's heavier. You don't really need it. All you need it to do is last you through the day. You're going to plug it in overnight, and you know, it's good to go again.

David Roberts

So the idea here is you can say confidently you're not going to run out of battery if you go out for the day. Basically, yes.

Mitch Lee

That's the goal. Full day of usage is the goal.

David Roberts

Right, right, right.

Mitch Lee

The thing that I will say with confidence is you will not get stranded because you ran out of battery. This is a really compelling point that I hope resonates with people that have been stranded on gas boats, myself included. You could go straight offshore at top speed, run the battery down to 5%, turn around, and make it all the way back. Because at low speeds you're consuming so little power. So the boat actually essentially safes itself and says, "If you get low enough, you can only draw a low amount of power and you will make it back to shore."

It's not a question of if you make it back to shore, it's how long it takes you. You'd be pretty annoyed because you would have covered a lot of distance and now have to go back at slow speeds. But you will make it back.

David Roberts

But sort of this mental image of, like, running out of battery and being stranded in the water, effectively, it cannot happen.

Mitch Lee

Correct.

David Roberts

That is an interesting point. It's not really totally analogous to a car. Right. There are differences.

Mitch Lee

Well, because in a car you can't really go — you can't be on a highway going two miles an hour.

David Roberts

Exactly. Did you guys mess with the motor at all, or did you just buy a big motor off the shelf?

Mitch Lee

Our goal is to use as many components off the shelf as we can, because what you get by doing that is reliability and certainty around the performance profile. There are cases where we have had to make modifications to off-the-shelf parts or bring something entirely in house. The motor is an example of something actually on the Arc One that we had to modify to suit our needs because the motors run at such high continuous power that they need extra cooling that they might not otherwise need. We solved that problem so that we could use an off-the-shelf automotive motor for the Arc Sport, and we're happy with the result.

That motor is, I mean, knock on wood, bulletproof. It's over-designed for the vessel, and we're happy about it.

David Roberts

Yeah, 425 kilowatts for anyone out there who's listening and cares. So just in terms of the experience, I mean, you've referenced this a couple of times, but you know, anybody who's driven an electric car, I think almost universally finds like, "Whoa, this rules because it's so peppy." Like, I have a Chevy Bolt, which is, you know, the dumpy hatchback version of the EV world, and it is the zippiest, fastest off-the-line car I've ever driven in my life. Is the difference in performance as striking with an electric boat?

Mitch Lee

It is as striking, but in different ways. So it is exciting to punch the throttle for two reasons. The first is the responsiveness is so much higher. Imagine going from an old gas Suburban where you punch the pedal and you have to wait for the car to realize you did, compared to your electric car where it's responsive. Like, that's a really great feeling as a driver. And it does launch in the way that we have a bunch of torque from our motor. And we've paired it with a larger-than-average propeller, which means that you could dump more of that power into the water.

So you definitely do feel that exhilarating punch when you hit the throttle. It's not as extreme as you might see going from, I don't know, like a Honda Civic over to Model S because we're limited by the propeller. But it is way more striking in other ways. The most notable one is how quiet it is. Yes, gas cars are — you are in a shell, and they do a really good job of dampening sound. So it's quiet and, you know, you could hop in a Mercedes and it's whisper quiet in there. Gas boats are the exact opposite.

There is nothing kind of covering you. There's no sound dampening, and it is deafening. So as soon as that boat's in motion, all that you could hear is the engine. You are yelling at each other to talk, or most often you just stop conversation while the boat's in motion and you resume it when it stops. The experience of being on a boat, even just going five miles an hour, and all you hear is the water is incredible and striking and leaves people with this imprint of what boating should be like.

David Roberts

Maintenance, I'm guessing, similar to EV, similar to cars, is much less simply because there are fewer moving parts.

Mitch Lee

I'd say even better.

David Roberts

You're not controlling thousands of explosions every second.

Mitch Lee

Yeah.

David Roberts

Is that a bigger difference than in the automotive world?

Mitch Lee

It's a bigger difference than in automotive because your electric sedan still has windshield wipers, still has actuating trunks, still has lights, like all these other components that can break — the AC unit. You know, when you strip away the complexity of a combustion engine from a boat, you are left with a very simple vehicle. There's not a lot else going on outside of the complexity of that motor. And you're in a highly corrosive environment — water — that really does damage when you've got thousands of little parts on an engine. When you then, you know, seal this all in a battery pack and it's just a very simple structure, your maintenance burden goes down by quite a lot.

David Roberts

And is there any concern, you know, sometimes you hear like, you don't want to leave a battery half-charged for long periods of time. You know, boats are all going to be parked for long periods of time. Is there any worry about battery degradation or battery quality or, like, is there any problem with storing these for a long period of time?

Mitch Lee

No, is the short answer. Ideally, you leave the boat plugged in. If it's in storage for a long period of time, the software, the firmware will handle the rest for you. The reality is, a lot of that talk is optimization on the margin where you're dealing with a vehicle or a device — think about your phone or your laptop — that gets cycled so much that that becomes a concern. How do you extend that? Again, you go back to boats, they're just not cycled that much, so you don't have that same sensitivity to, like, how do you eke out that next 10 or 100 cycles from it?

Yeah, it's just not the same concern that you have in these other industries or applications.

David Roberts

And so maintenance is less. But one other maintenance question is, are there people who know how to fix these things? I mean, if something does go wrong, is there the knowledge out there yet? Can you call a mechanic and he'll be able to work on this? I'm just curious, like, from the mechanic's perspective, how much is left for them to do and how unfamiliar will it be? What's the deal there?

Mitch Lee

We are still building boats and there are still very basic boat parts on these boats. If you ding a prop, anyone can go help you replace that. If you tear upholstery, there are upholstery people all over the country. If you scratch your paint or your gel coat, you know, there are people that can fix that. That's kind of that first tier. And the most likely type of maintenance that you will run into — people are familiar with that today. The next level down are things that we could fix with software. We have the ability to update our boats over the air, and we do so regularly.

And you can solve a surprising number of things through software. When you have a boat that is primarily driven by software, it's throttle-by-wire, it's steer-by-wire, it's all controlled by a PCBA, like a compute engine on board.

David Roberts

So you could fix problems over the air?

Mitch Lee

Theoretically, yes, absolutely. And we have.

David Roberts

Interesting. Can you add functionality over the air? Sorry, we're off the maintenance thing for a bit, but, like, the over-the-air thing has captured me. Can you add new features and functionalities like Tesla sometimes says they do?

Mitch Lee

Absolutely. We have been doing this at a steady clip, some might even call it a frenetic clip, over the past year that every week or two the boat's getting better, it's getting smarter, it has new functionality, new features. And that's not just about updating what the touchscreen display looks like. It's giving you more advanced control over the thrusters that are on board, giving you different steering profiles, different throttle profiles, the ability to record surfers and play that video back, the ability to hit a button and have the boat stay exactly where it's currently at, like anchorless anchoring.

There's so much you can do when every part of that boat is controlled by software.

David Roberts

Oh, that's really interesting. There's one more thing you wanted to say about maintenance. I have another question about software. But if you want to complete your maintenance point.

Mitch Lee

Maybe to tie a ribbon on the software part of this. This is atypical. The degree to which we can improve our boats over the air looks a lot more like what you would find in automotive compared to marine. That is an ability that, to my knowledge, no one else in the marine industry truly has.

David Roberts

Well, not just that. I mean, let's talk about software then. It's not just that you can improve it, it's just that a lot of it just exists. It doesn't even exist on other boats. You know, this is because electric sort of comes with digital, you know, smart, connected, you know, online. So I wanted to ask a couple of questions about that. Just like, what is, you know, like, when I think about my parents' boat, it's all very manual, all very analog. Once you add that software layer, what are you programming? Like, what sort of things can this boat do that an analog boat couldn't?

You know what I mean? I'm thinking of, like, you know, like my car will park itself and it'll beep if something else is close. All this kind of stuff. Like, is all that stuff being ported over to a boat?

Mitch Lee

A lot of it is, yes. It's being ported over to our boats to be clear, you need the foundation, the hardware foundation, in order to enable this. Our boats are steer-by-wire and they're throttle-by-wire. And that enables a lot. We have pretty much every component speaking to each other over software, you know, communicating via software. And that gives you so much potential that you could tap into. And then you need to pair that with the software team, with a firmware team, with teams that actually can take that potential and turn it into real features.

Our team at Arc looks very different than your traditional marine company. We are a team of software engineers and electrical engineers. And those aren't the types of engineers that you tend to find at your traditional marine company today.

David Roberts

So then I'm just thinking of software stuff now. So if I could tell my boat to maintain a 25 mile an hour or whatever the knots, whatever the knots are, whatever the equivalent is and whatever the marine equivalent is. But like, you know, instead of me eyeballing it and nudging the thruster this way and that, can you just tell it to go 25, adjust the thruster to maintain this steady speed?

Mitch Lee

Absolutely. I mean, you're describing cruise control, and that was one of the very first things we built into the boat. And you can do that, but we take that many steps further. An example is you want to go wakeboard behind the boat. You hit one button, and it fills the ballast system, deploys the control surfaces underneath the boat, sets the cruise control profile. You know, in the future, might cue up the song that you want, your equivalent of a walk-up song. You can do so much more when everything is controlled by the same software system.

And then you've got a video feed that you can hit record on that's all integrated into the same platform. So I'll give you another example that really puts this into perspective. Another very basic feature that is lacking on most wakesport boats today is the ability to steer in reverse. Because these boats are —

David Roberts

Awful, a miserable experience on a boat.

Mitch Lee

So we give you the ability to steer in reverse because we have two lateral thrusters on board paired with the main propeller and the software intelligence to be able to talk to all of those at the same time and the sensors on board to be able to actually control for turning this. We can just do so much more here that even the basics aren't out of reach for the industry today because they're not wired up this way, they're not powered and controlled by software. And you can't update that software over the air.

David Roberts

Right now I'm thinking your other boat is a fishing boat. And my mind's racing about what does fishing software look like? Can you have sensors that can, like, show you underwater? Like, can it help you fish better? I have no idea what fishing software would look like.

Mitch Lee

But we're really limited only by creativity, and our goal coming into the market is to get the right hardware in place and then start unlocking the potential of that hardware through software over the air over time. And I mean, if you were a customer of ours even three months ago, you have seen pretty dramatic improvements in the software system powering this boat. And you know, we're just getting started.

David Roberts

That's fun. That's pretty cool. Well, let's talk about sort of the elephant in the room, which is the other thing that comes up immediately when I toss this out on social media, which is that this thing, the Arc Sport, is close to $300,000 price-wise. So tell us just to begin with, like, how is that comparable to other high-end wake sport boats? What is the sort of class price range?

Mitch Lee

It is directly competitive with other premium wakesport boats.

David Roberts

God, that's expensive as crap, though.

Mitch Lee

They are, they are expensive. This industry has trended towards that more expensive area. And I'll tell you something interesting, or at least something I find interesting. In automotive, you have your Honda Civics and you have your Mercedes S-Classes. There's kind of like this bimodal distribution of a bunch of these lower-cost sedans and then a smaller bump when you get into the more premium end of sedans. Boating has that same sort of distribution in wake sports in particular, except that the premium class is the more popular one. Because if you think about this, this market segment tends to be more of a luxury good, tends to cater to people that have houses on the water, houses on a lake.

And if you're going to enter that market and you've got a nice house on the lake, you're going to get the best boat out there. So these boats are certainly expensive, and our goal is to make a bunch of wake sport boats, but also use that to get into segments where the price of the boats is lower.

David Roberts

Well, I mean, this is my question. This is sort of, again, this is the classic Tesla strategy, right? You sort of create a foothold in the luxury market to establish that your hardware works and establish your brand name, and then work down or out — down and out to other segments. Right. I mean, is that sort of the basic idea?

Mitch Lee

Yes, definitely. Although, again, I would say you take wake sports, for example. Our goal is not necessarily to just drive the price down as much as possible because a lot of the interest and demand is for "What's the best boat money can buy around this price point?"

So we'll continue to improve the boat at that price point, but not necessarily try to drive it down to half the cost it is today or something like that. There are other markets that are a lot more price sensitive where we will care a lot more about the price of the vessel and how do you get that down over time.

David Roberts

Well, I'm sort of curious about that question then, because it seems like if the battery — the battery, again, is the thing. Is the main thing, the biggest physical weight and also the biggest cost, I'm guessing. And so, are you sort of to some extent at the mercy of battery prices, or are there other areas where you think you could substantially cut costs?

Mitch Lee

We will continue to cut costs as we scale because our components factor across every boat that we're building, whether the Arc Sport or the Arc Coast or any future products we introduce. And so we get economies of scale from that. We can also invest in tooling that allows us to manufacture the boats more efficiently as we scale. Having said that, yes, we are downstream of the automotive industry on some of our key components, including batteries. The good news there is—

David Roberts

Well, I mean, as you said earlier, that's not a bad place to be.

Mitch Lee

Right. It's actually quite a great place to be because for very little work on our side, what you tend to see is prices just fall over time because there's so much money and energy going into how do we produce cars for less money? And that's fueling all this R&D that we eventually get to take advantage of. So, we like the position that we're in kind of downstream of that market.

David Roberts

So, yeah. So to some extent, you can reliably forecast that your costs will come down just because of that. Just because you are lashed to the falling prices of batteries.

Mitch Lee

Yeah. Holding all else equal, I would still expect our prices to come down. And again, we're stacking our own efforts on top of that when it comes to the efficiency of manufacturing the boats and the economies of scale we get on other components and—

David Roberts

All of that. In terms of branching out, what's this I hear about tugboats? Tell me a little bit about that. So it's not on your product site, but it's in this LA Times article. So what's the deal there?

Mitch Lee

We have a core thesis at Arc that pretty much everything on the water should be rebuilt around an electric powertrain. On the consumer side, we've already talked at length about all the benefits you unlock by going electric. But on the commercial side, you look at the "Why would somebody want that?" It's because the biggest operating costs of a commercial vessel are fuel and maintenance. And if you want to go cut down on fuel costs, and if you want to go cut down on maintenance costs and increase reliability and uptime, boy, is going electric a good move.

David Roberts

Yes. That is the premise of this entire pod, you might say.

Mitch Lee

So that's kind of one of the core theses here. The kicker is that you still need to solve for range. You still need to solve for, you know, how do you get battery packs that are big enough.

David Roberts

Yeah, I mean, I would think, all things being equal, as the boats get bigger and bigger, it just gets harder and harder because, as you already say, like, even in a small boat, relatively small boat, you have a relatively giant battery pack. So I'm thinking, like, big boats, you know, don't the size of battery packs you need kind of get out of control pretty quickly? I would think big boats would be a much bigger challenge.

Mitch Lee

One of the things that we think about on larger boats is we want to rebuild them around electric powertrains, but that does not mean that they are purely battery electric. We're actually quite big believers in hybrid electric powertrains.

David Roberts

Interesting.

Mitch Lee

You kind of can view this almost like the grid source of energy. By going electric with cars, you push the problem of "Where does the energy come from?" to the grid. You could do that same sort of thing on boats. You could say, "All right, we're going to go electric with this powertrain," which is a lot more efficient — and I'm going to come back to the efficiency piece in a second — it's a lot more efficient. And then you hook it up to some source of energy. Now, in the short term, that might be diesel generators, but in the medium term, that might be, you know, some form of nuclear or any number of other ways to generate electricity in a more sustainable way.

The efficiency that you get, though, is you look at your diesel motors, the efficiency is related to how much power they're putting out, and they're kind of primed to be most efficient when they are putting out a lot of power. So you look at tugboats, for example, they are most efficient when they're pushing or pulling on a larger vessel. However, a lot of these commercial vessels spend a lot of time at low speed, and they are just burning a bunch of fuel because they are running inefficiently at those loitering speeds.

David Roberts

Right. You can't scale energy used to power the way you can with the same precision as you can with a battery.

Mitch Lee

Right. So electric motors are perfectly happy to run at low speeds and have good efficiency across kind of all of that. What that means is that at those loitering speeds you're actually, you know, a lot more efficient, and you're saving a bunch of fuel even if you are backed up by diesel generators. Those diesel generators get to run at their optimum power from an efficiency perspective. So that's still an improvement. Even diesel-electric hybrid is an improvement over pure diesel.

David Roberts

Or you could get — fuel cells are in that conversation too. I talked to the guy who's doing a fuel cell-battery hybrid plane.

Mitch Lee

Right. So our focus is to rebuild the vessels around that electric powertrain, and now you could kind of move the problem to now what other source of energy do you plug into that? Then we also battery buffer them so that you could cover substantially all of your usage through that battery. So you look at tugboats again, we're talking about seven plus megawatt hours battery packs on these boats. And that allows you to run most of your operating profile just on batteries and then charge them back up. And you're now running that hybrid powertrain very infrequently or that other source very infrequently, only as kind of a range extender.

David Roberts

Right. But you are making some tugboats, aren't you? I mean, I was a little surprised at that because when I was thinking, like, pulling a giant vessel is like the most power you could need. So that seems like the biggest battery, you know, like of all the sort of mid-sized vessels to electrify, that intuitively struck me as like one of the hardest, because towing a ship is a lot bigger of a task than towing a person on a wakeboard.

Mitch Lee

When you look at the harbor craft market, they are ideal for going electric because two of the biggest costs are fuel and maintenance. They run these short mission profiles where they won't actually cover that much distance. They will go out to collect and kind of escort a boat back in. They require a lot of torque. So you want, you know, motors that are capable of a lot of torque, and they're in these ports that can install the infrastructure necessary to charge them.

So I know that it might seem crazy, but when you just boil this down to what do operators care about: They care about their operating costs, they care about the fuel and maintenance costs, they care about uptime and reliability. And by going electric, they can accomplish a lot of that. And, oh, by the way, tugboats and harbor craft tend to be some of the worst polluters on the planet. They burn this diesel that's just —

David Roberts

Yeah. Super gross.

Mitch Lee

Yeah. And it's not just about, again, emissions into the air. It's your black carbon, it's your sulfur oxides, it's your carbon oxides. There's a lot of pretty nasty stuff coming out of them, which is why they tend to be subject to some of the highest compliance scrutiny on emissions. And by going electric, you could jump way forward in terms of meeting those compliance needs that you could kind of solve those once and for all.

David Roberts

So you have the one built. Are people buying those? Is that on the market, or is that just a demonstration?

Mitch Lee

You could think of that like our Tesla Roadster. It was a limited run of boats. They've sold out.

David Roberts

It's not ongoing — it's not going to be ongoing.

Mitch Lee

It's not an ongoing project now.

David Roberts

So you've got the Sport, the wake sports boat, and you've got the fishing boat that's coming, the Coast, next year. Can you tell us what are the next steps on the product map? Because as I was thinking about this, it is a little bit of a mind boggler. There are lots of different kinds of small boats. There are jet skis and other kinds of water vehicles. There are bigger boats. Like, you could go in a lot of different directions. Do you have a product map, and if so, can you give us a sneak peek?

Mitch Lee

We do have a product map and, unfortunately, I cannot give you a sneak peek. We have our hands full with ramping production of the Arc Sport to meet the incredible demand we're seeing there and getting the Arc Coast to market and into customer hands early next year. So that's where our focus is both internally and externally. Our aspirations certainly don't stop there, but that's where the focus is today.

David Roberts

Okay, well, by way of taking us out, tell us a little bit about your R&D facility. Because as we mentioned, you know, as you mentioned earlier, a lot of these, you know, these sort of various boat segments have become a bit commoditized, and so there are not big margins, and so there are not a lot of companies that do a lot of R&D. So you are distinguishing yourself in that way. What is the R&D facility? And what are you doing there?

Mitch Lee

Yeah, Arc is headquartered in Los Angeles, California. The reason that we're headquartered there is because it is an incredible hub for engineering talent, particularly on the hardware side.

David Roberts

Hey, before I forget, are your batteries also domestic? Like, how much of your supply chain is domestic?

Mitch Lee

We manufacture our battery packs out of our headquarters in Los Angeles.

David Roberts

I see. So these tariffs, for instance, you're not worried about?

Mitch Lee

We are not immune. If you view the purpose of those tariffs to encourage reshoring manufacturing, we are ahead of the curve there. We are more vertically integrated and more domestic than many manufacturers are today. We are not immune to the tariffs. And again, especially as an electric vehicle company, there are critical supplies that come from overseas that will be impacted. But we are in a pretty good spot as a company because of how much we have already vertically integrated, because of how much we already do domestically, and because we can be nimble as a company. We're pretty flexible and pretty fast moving and so can adapt as the landscape for tariffs shifts.

David Roberts

And this R&D you're doing is, you know, just sort of imagining, like, boat shapes, battery shapes, like the characteristics of vehicles moving through water — is this, am I warm?

Mitch Lee

Yeah, it's all of the above. So our facility in Los Angeles, it's 150,000 square feet.

David Roberts

Oh, wow.

Mitch Lee

All of our engineering, all of our production lives under one roof, which is incredibly important in terms of fast iteration and design loops. So we focus on battery R&D. We focus on manufacturing R&D, software R&D. It touches pretty much every discipline. And that's where work on the Arc Coast is underway. It's where our new commercial efforts are taking shape. It's all happening under one roof with everyone all sharing space, which means that knowledge sharing happens very rapidly.

David Roberts

Very cool. Very cool. All right, well, this is as fascinating as I expected. I love hearing about things being electrified. So, thank you so much for coming on and walking us through this. Super fascinating.

Mitch Lee

Absolutely. It was great talking to you. Thanks for having me.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

I chat with Kostantsa Rangelova and Dave Jones, authors of a new Ember report, who find that solar-plus-storage costs have declined so much that it can now provide baseload-level power in sunny cities for less than the cost of new nuclear or even new gas. We discuss why even energy pros are behind the curve on this, how quickly the technology is improving, and why most of the world doesn't see natural gas as a viable option the way the US does.

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Text transcript:

David Roberts

Greetings, everyone. This is Volts for July 16, 2025, "Solar+storage are so much farther along than you think." I'm your host, David Roberts. As anyone who follows energy debates knows, the biggest and most immediate objection to solar power is always: the sun doesn't shine at night. Here's the thing, though: it is possible to attach batteries to solar panels that will store some of their power during the day and release it at night. If you attach enough batteries to a solar panel, you can spread its output over an entire day.

Voilà: a 24/7 "baseload" source of power. Problem solved, right?

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Well, no, skeptics argue. By the time you've added the cost of batteries to the cost of solar panels, the power plant becomes too expensive to compete.

In their defense, skeptics were correct about this until very recently. But, as I say over and over again on this pod, solar and batteries are both getting cheaper so consistently and so quickly that it is literally difficult to keep up. Even energy professionals have trouble keeping up.

And that brings us to a new white paper from the energy researchers at Ember. It takes the current price of batteries — which is, incidentally, down 40% in the last year alone — and runs the numbers on how costly it would be to power various sunny cities in the world purely on solar+storage.

The results are eye-popping. The sunniest US city, Las Vegas, could get 98% of its power from solar+storage at a price of $104/MWh, which is higher than gas but cheaper than new coal or nuclear. It could get to 60% solar+storage at $65/MWh — cheaper than gas.

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Today I'm excited to discuss these and other jaw-dropping findings with the paper's authors, Kostantsa Rangelova and Dave Jones. We are going to get into just how cheap batteries are now, what it means for gas, and why utilities and policymakers need to catch up with the current reality.

All right then, Kostantsa Rangelova and Dave Jones, welcome to Volts. Thank you so much for coming.

Dave Jones

Thank you, David.

Kostantsa Rangelova

Thank you for inviting us.

David Roberts

So you guys have this new report out about solar+storage. The idea of solar+storage, I think, is well understood now among energy types, the Volts audience. But the reason I wanted to do this, and I suspect the reason you wanted to write this report right now, is that things are changing on the ground quickly.

Kostantsa Rangelova

Oh yes.

David Roberts

In this area like this, you really, like, your analysis is out of date by the time you've done it, practically. So I really don't think even people inside our world fully appreciate what's going on. And I know that people outside our world are just way behind on what's happening. So I want to catch everybody up. So having said that, I'll throw it over to you, Kostantsa. Maybe you can just say what prompted you to write this at this moment.

Kostantsa Rangelova

Absolutely. And you're right in saying our starting point was, "Okay, batteries are getting so incredibly cheap now that this probably changes everything around solar and battery economics." And we wanted to test that in some sort of a thought experiment, saying, "Okay, what if you don't put any limitations on how much solar and batteries you want to combine? And can you do 1 GW constant electricity with solar and battery? How would that work in different places and how much would it cost?" And we were ourselves surprised by really how amazing the results were. And also you were absolutely right to say, like, the prices we were using, like, already, we are probably going to see another huge fall this year already because we were using average 2024 prices.

So, yeah, this is a very fast-changing environment.

David Roberts

I want to get back to that at the end, the moving target of it all. But let's start maybe with just a little general discussion of the merits of solar+storage. Again, I think this is all quite familiar to us, but I'm not sure everybody has thought it through. Let's just go through sort of like why you would combine solar and storage, why you would attach storage to your solar. I think the obvious one that everybody sort of understands is it extends the amount of time that you can be generating, basically. You can save some generation in the middle of the day and let that out at night.

Kostantsa Rangelova

Yeah, absolutely.

David Roberts

And if there's enough storage and enough solar, you can save enough to be generating all day long, which we'll get to later. So I think that's the obvious one that everybody knows. But there's also this phenomenon of maximizing solar penetration at a given grid connection, which I'm not sure people get. So maybe talk through that a little bit.

Kostantsa Rangelova

Yeah. So picture a solar panel, and it usually produces for just a few hours. When the sun is highest, it produces a peak. And then you have a few, like, shoulder hours where you still have some generation, but it's not as high as the peak in the middle of the day, which means that the grid connection that you have should theoretically match that peak production that only happens for a few hours, but then for the rest of the time, you're not using the grid connection. But if you build even more solar panels and flatten the curve in a way that you're not producing just for a few hours, but you're producing constant electricity with enough solar and then the battery capturing that excess and flattening it out.

This means that you can use the grid connection all the time. And instead of 20%, you can go all the way up to 100% utilization and also sell a lot more solar into the grid.

David Roberts

Right. So you add a bunch more solar, and if you didn't add a bunch more batteries with it, that would push your peak up past your grid connection level, but instead you just store that extra and so, as you say, flatten it out throughout the day. So you have the same sized grid connection with basically five times more solar on it by adding batteries. And by doing that, I mean, to state the obvious, you're spending less on your grid, which, as we know right now, is the constraint, is the problem facing solar and clean energy generally — just space on the grid, the ability to hook up to the grid at all.

So this can take those existing grid connections and just max them out.

Kostantsa Rangelova

Exactly. And also, like, if you're displacing fossil generation, like with solar alone, you're displacing fossil generation only in certain hours.

David Roberts

Right.

Kostantsa Rangelova

But with solar and battery, you can displace fossil generation in all hours. And we are already seeing this happening to some degree in California, where you have so many batteries that you already are displacing gas generation not just when the sun is shining, but also in the evening peak when demand is typically higher.

David Roberts

Right. Well, let's talk about how people are using it now, because this is not a theoretical discussion. These prices are coming down, and so people are using it more. So let's talk a little bit about the use cases that people are doing. So, for instance, you cite some examples of big existing solar fields adding more batteries so that they can add more solar. Talk through that a little bit. What's a good example?

Kostantsa Rangelova

I'm sure Dave would agree that what inspired us in doing this kind of analysis was a real-world project that was announced in January this year. It was a project in the United Arab Emirates where Masdar announced a 1 GW 24/365 electricity project. So they're going to have lots and lots of solar, lots of batteries, and they're going to have 1 GW nonstop electricity coming out of that. And this is supposedly going to be online by 2027, so very, very soon.

David Roberts

Yeah, I read about that. And, you know, like, I see so many of these projects coming out of that part of the world that are so ludicrously big. You know, it's like that long city they're always saying they're going to build. I'm never totally sure how seriously to take these announcements.

Kostantsa Rangelova

Yeah, if you're speaking about the Saudi project, you also have another major Saudi project that actually is already online. So they have this mega project there with 16 hotel resorts and all the additional — it's like a mini tourist village with lots of hotels and stuff. And this is entirely powered by solar and batteries, like a small mini-grid. And this has already been online for a year now.

David Roberts

So the idea of the project is to have a gigawatt of continuous power output throughout the day. So give us a sense of how much solar plus how much storage equals a gigawatt of continuous output a day.

Kostantsa Rangelova

Yeah, so what they're building, they have 5.2 GW of solar. That's the DC capacity. And it's actually on tracking. So what we did in our analysis was fixed. So tracking solar panels produce a little bit more and they need a little bit less storage. So 5.2 GW and they have, if I'm not mistaken, about 19 GWh of battery. So that's a lot of battery.

David Roberts

Yeah, huge amount of solar and a huge amount of batteries to get that continuous output. And I think most people sort of intuitively, when they hear that, are just like, surely that can't be cheaper than just building like a gas power plant, you know, or a nuclear plant or something like that has that continuous output built in. But I guess the whole point of this exercise, the whole point of this report, is to say that "Yes, it is now at least in the neighborhood of cost-competitive."

Kostantsa Rangelova

Well, so basically they announced capital costs around $6 billion. And what we have with our configuration, even though I have to, like, specify that our configuration is slightly different, in our modeling, we have 6 GW of fixed panels with 17 GWh of battery. But it's around the same ballpark in terms of CapEx. And then when you produce the LCOE (Levelized Cost of Electricity) of that, it's actually not that expensive. It comes down to around $100 per megawatt-hour, which for 24/7/365 is not a lot.

David Roberts

Yeah, it's crazy. And what about — I mean, this will come up later too — but another thing I think that strikes people when they hear this is if I'm building a nuclear plant, to do that I just need like a couple of acres. But if I'm doing that with 5.2 GW of solar panels and then 19 GW of batteries, the land becomes an issue after a while. Do you know, like, that UAE project, have they said what the land consumption of that is going to be? I mean, they have a lot of big deserts out there, obviously, so it's helpful for them.

Dave Jones

Yeah, the land area is big. That's the case for solar. That's why everyone would always prefer solar on rooftops, to try to take the strain off the land. If you've got low-grade land, that's obviously a different story. Where potentially if you're a country as big as some of the Middle Eastern countries, that land is not a constraint in the same way. What's interesting is also the material footprint to go with it. So that when you look through specifically from a battery side, we talk about the cost of battery, but it's so much in how that battery is now designed that has got a smaller footprint than ever.

So it's got almost all grid batteries, LFP technology, which means that they're not using nickel, they're not using cobalt. They've got a really good lifetime now. So some of the older generation ones were only kind of several years. They didn't have that many life cycles they could go through, charging cycles they could go through. You're now in a position where many of them have 20-year warranties that go alongside them, with an expectation to last even longer than that, doing as much as a cycle a day.

David Roberts

Let me just highlight that point real quick so everybody gets it. So the old batteries used to be what's called NMC. They had nickel and cobalt and stuff in them. Those were the standard. And now, as Volts listeners are familiar, we have this new kind of battery that's iron-based, basically does not have cobalt in it, does not have the nastiest chemicals in it, called LFP. Generally less energy dense, which makes it not great for cars, even though it's being used in cars, but is great for big stationary grid storage because it's made of cheap materials. And the cycle life, as you say, you get a lot more cycles out of it, so you get a lot more life out of it.

All of which just means, like, building 19 GW of energy storage with LFP versus with NMC is materially lighter on the planet, I guess.

Dave Jones

Materially lighter. I think that people would have concerns if you're using an awful lot of nickel and cobalt within that. You're still using lithium within that. What's been interesting is just how, as we started looking for lithium, how much more lithium there seems to be available out there in the world.

David Roberts

It's cheap now.

Dave Jones

It's super cheap. And people are thinking, "Oh, that's just a kind of phase and it will go back up again." But the US Geological Survey doubled the amount of estimated resources out there compared to five years ago. When you start looking for this, you start finding it. Not just in countries and awkward places like in the ecologically sensitive places in Chile. You're finding it in more and more countries where it is accessible. It hasn't got that environmental footprint before, but as we go through the kind of next part of the battery revolution, we could well be using sodium-ion, so-called salt batteries, which then eliminate that need for lithium.

And some of the quality of the batteries that CATL are now producing at scale, the sodium-ion batteries that they've already got at manufacturing, they're coming up with some really good characteristics that are similar or in some ways better than LFP.

David Roberts

They're comparable to LFP, right? Like lower energy density, but more stable materials, cheaper materials, longer life, et cetera.

Dave Jones

Exactly.

David Roberts

And there's actually a — I learned through your report, because I've had sort of like the corner of my eye on sodium-ion for a long time — but I learned from your report there's actually a sodium-ion battery storage facility built now. They actually built one in China, or they're building it, it's underway?

Dave Jones

Yeah, they have commissioned already and it's not small. And some of that manufacturing capacity has started to step up already. I think what's really here, the reason why this is, I guess, just taking a little bit of a pause building up is that lithium has got so cheap unexpectedly that actually it's kind of gone back. And it was certainly a big US developer — I can't remember the name of it now — that withdrew all the R&D out of sodium-ion because you haven't got that price advantage against lithium when lithium is that cheap.

David Roberts

Yeah, this is — I feel like we learned this over and over again — that like it's just not a good idea to bet a lot of money on materials shortages.

Dave Jones

No. But the battery technology progression has been multifaceted. So you've got that footprint side. You've also got the fire risk side that's got two magnitudes better than it was five years ago for grid storage. The other major development in grid storage technologies is the containerization of them, that they've become in some ways almost kind of plug-and-play. So you have these big shipping containers. They've got everything built into them, all the electricity, all the power system technology, the inverters already. So you don't need expensive engineers to install them, to take months doing that. So the speed at which these can be rolled out and the price at which these can be installed really has taken a big shift.

And because the whole of that kind of shipping container of cells has had so much more development over the last, like, one to two years, this is still a very new area in terms of the scale of these batteries coming up.

David Roberts

They're cramming more cells in the containers now, aren't they?

Dave Jones

Yeah. So the ones at the end of last year were all in the range of five to six megawatt-hours in a 20-foot shipping container. And now the ones, there's new models that are coming out this year that are in the 10, pushing towards 12 megawatt-hours. So halving that footprint of what you would need to install battery, which is super good. I think they've probably hit the limit now of how much you can quite fit in. But that's a huge amount of power.

David Roberts

This is funny. This sort of makes the whole point of the pod — just like cutting the physical footprint of batteries in half in the course of one year. Like, how on earth are you supposed to analyze that industry? You know what I mean? Those are like major movements in price and performance.

Dave Jones

And I was speaking to a European utility last week about their projects that they had been working on that came online last year, and they were all installing the frames themselves into buildings. Like, even the whole concept of it being containerized quite like this is fairly new in itself. So the whole speed at which this innovation is coming along, it's just shifted so quickly.

David Roberts

Yeah, yeah. Wild. And so, Kostantsa, just to wrap up the land thing, did you, in calculating these costs and doing your model here, is land cost in there or do you just sort of put those aside?

Kostantsa Rangelova

So land cost would have been very difficult to do on a global average basis. So because for our modeling, we didn't want to do local prices for every specific place, but we just wanted to focus on the solar resource. So what we did is we added a soft cost surplus that is around 10% that we added on top of everything else. And, of course, depending on where you are, these soft costs include the land, but also some of the engineering and labor costs. So basically, this could vary greatly from one location to the next. So it doesn't really make sense to crank it up and focus on it too much.

Dave Jones

When you're looking at how battery prices are being quoted, you get a dollar per kilowatt-hour that normally, when you talk about electric vehicles, is the pack price. And then when you're talking about grid storage, it's quite a bit more than the pack price. And that's the whole containerized unit that includes the inverter and the power system that goes with it. So that when you hear about BNEF, Bloomberg New Energy Finance, and others talking about an energy storage cost, that's the cost they're referring to. And then on top of that, you've got EPC and you've got land costs that then add a little bit more to that.

So that's the way that different prices are being quoted.

David Roberts

Are any policy supports or subsidies built into this model or is that just separate completely?

Kostantsa Rangelova

As said, this doesn't include any specific policy setup in any of the countries. So basically what this takes is how much does it cost to install the solar panels, to have the batteries, all the equipment. Then we did a global average in terms of the EPC, the labor costs, the grid inspection, like all of these mechanical installation, like all of these things are based on global averages. So that we have a relatively good picture in terms of how much would it cost on average across the world. And then, of course, the caveat is that in some places it's going to be cheaper, some places it's going to be more expensive.

David Roberts

Well, before we get into the actual work, one other question about where these are being used, which is one of the things that's most interesting and intriguing to me about this whole area is it's not just power producers who are installing solar+storage for production purposes. Also big customers, big energy consumers. Talk a little bit about what that looks like. Like what sort of big consumer would install this on site and why.

Kostantsa Rangelova

Yeah, so it really depends. So in some of the cases we have, in terms of real-world cases that we found, so we have, for example, some data centers or some utilities that have a PPA with a data center that have a setup like that, or you could even have something big as a titanium smelting furnace that does also have something like solar and batteries in a microgrid kind of setup where it's powering its use through that.

David Roberts

This is, I guess, implicit, but I'll just draw it out. Like, I think people, when they hear solar, even solar+storage, they have, I guess, sort of almost unspoken associations of sort of like weakness and variability. Like it's not strong enough to do something like titanium smelting, you know what I mean? But, like, you generate the power and store it in the batteries, and that power is the same kind of power you'd get from coal. Power is power. So, like—

Kostantsa Rangelova

Exactly.

David Roberts

Yeah, solar+storage is perfectly capable of doing this always-on steady industrial. It's power like any other kind of power, I guess.

Dave Jones

I think people are still getting their head around what you can do with solar just by itself. Last month you had a tenth of the world's electricity on average across the month coming from solar panels. And that produced more electricity across the month than all of the world's nuclear power plants put together. Solar's already reached this scale already and you can see really battery tearing after that quickly. And yeah, there's a definite credibility gap in people's heads about what they can achieve. And it's only just becoming clear now. And that's why, I guess, when we set about writing this report, we were so inspired by this 1 GW baseload plant coming from the United Arab Emirates, which is just the same as a normal thermal baseload power station, but only with the sun.

David Roberts

Yes. And again, if you're in the UAE and you're getting this gigawatt of power output from this plant, it's not like some different kind of power. It's not some different or weaker or variable kind of power. It's power like any other kind of power. So, Kostantsa, let's talk about the actual modeling, the sort of interesting little kind of toy model you built here, which is illustrative, but you start by sort of figuring out, just like for a unit of solar, how much storage do you need to flatten that solar out so that it's a 24-hour supply.

Kostantsa Rangelova

Yes, exactly.

David Roberts

Talk a little bit about how you did that calculation and what you found.

Kostantsa Rangelova

Yeah, absolutely. So let's start with — you want to have 24 GWh across the day or whatever power it is. Like, your solar panel would only have to produce that electricity for, let's say, 12 hours across the day, but most of the time it will actually be a little bit less. So you need around 15 hours across the day in terms of battery to cover the time when the sun is not shining. And these 15 hours across the day that you need to cover with the battery, you need a little bit more in terms of battery capacity just because you can't really charge and discharge at 100%. Like, to maintain the battery's health, you need to have a little bit of a margin. So you, let's say you —

David Roberts

There are losses, right, going back and forth.

Kostantsa Rangelova

Yeah, exactly. So you have some losses, you can't discharge to zero, you can't charge to 100%. So with that in mind, you need around 17 kilowatt-hours of battery to cover these 15 hours of insufficient daylight.

David Roberts

So that's per solar panel?

Kostantsa Rangelova

Well, yeah, it depends on how much you want to scale it, but yeah, the solar panel will produce enough. So you capture those 15 megawatt-hours or kilowatt-hours or however you like it. So you capture these 15 hours from the peak of the day, and you redistribute them through the rest of the day to get 24 hours of constant electricity. So, yeah, the rule of thumb is 17.

David Roberts

So for a given 5-kilowatt solar panel, you need 17 kilowatt-hours of battery storage to make it into a 24-hour power source, basically.

Kostantsa Rangelova

Yeah. The way we want to think about it is if you want 1 kilowatt constant electricity, you need around 17 kilowatt-hours of battery. And then the amount of solar could be a little bit more also because they also have a little bit of losses. But yes, 5 to 6 kilowatts of solar.

David Roberts

Solar, and that relationship, 5 kilowatts of solar to 17 kilowatt-hours of battery storage, that is an average. So obviously that's going to be different from place to place, depending on cost and climate.

Kostantsa Rangelova

Because not every day is average, yeah. And you have cloudy days. And this is actually the big problem because, like, you can make 24-hour solar easily. Like, you just add battery and you can flatten that solar output to 24-hour constant power. The problem is that on a cloudy day you have less solar than on the average day. So you would need a little bit more battery to bridge that. And then the problem becomes that you need a lot more battery to cover several cloudy days if you want to maintain that constant 1 kilowatt of electricity that you want.

So it really depends on the place. And this is why we wanted to model 12 different cities across the world to actually see how much clouds have an impact. And the answer is surprisingly little.

David Roberts

Yeah, it's wild. So you have this sort of relationship in mind: 5-kilowatt solar panel, 17 kilowatt-hours of battery storage—that gets you a sort of steady kilowatt throughout the day. And you just sort of, like, got to multiply those up to the amount of power you need for a given city. So you ran this for several cities. Talk about what you were trying to find out. Basically, like, for this city, how close can solar+storage get to supplying its power needs 24 hours a day throughout a full year? Is that basically what you were—

Kostantsa Rangelova

Yeah, exactly. So basically we were using real-world hourly solar data. So we have access to this really amazing JRC database which has hourly output for solar PV. So you can click on the map and it gives you the hourly data for 18 years back. So from 2005 to 2023, hourly generation—that's lots of data points. And basically, we run those simulations and I just wanted to make a very small clarification: for our modeling we used 6 to 17 just because we wanted to have a little bit more margin on the solar for the cloudy days and what have you.

So we ran that for 12 cities. And the sunny places, think about Muscat in Oman, or Las Vegas in the US or Johannesburg in South Africa. So places like that get more than 90% of the way to 1 GW constant electricity with those cloudy days. In a place like Washington or Madrid, you're in the high 80s. So 88% in Madrid, if I remember correctly. And then for Washington, it would be somewhere there as well.

David Roberts

And then if you have the bad luck to be stuck in Birmingham, in the UK.

Kostantsa Rangelova

That's a cloudy place. And you barely have, like, two very, very sunny months, like in the middle of the year in summer when it's actually, it is actually sunny. Most of the time it's various degrees of cloudy. So even there you have more than 60% of the way to 24/365.

David Roberts

So when you talk, like, take Las Vegas for example, when you say that solar and batteries can get—what was the number for Las Vegas? 97%?

Kostantsa Rangelova

And Muscat in Oman, is 99. And mind you, there is some variability. So on a given year there is plus or minus 2-3 percentage points depending on whether it's like a super sunny or cloudy year. But on average across these 18 years, Muscat is at 99%.

David Roberts

Right. So when we say Las Vegas is 97%, like, physically you could get that to 100. Obviously, like, you could just continue building solar panels and batteries, sure, to infinity until you got to 100. So the point of the research is not that 100 is impossible. It's that you can get to 97% at a reasonable cost, like within some boundaries of cost. And what were the sort of boundaries? Like, where did you draw the line and say, "This is too high"?

Kostantsa Rangelova

So the way the costs evolve is very interesting because you have this very quick progression. If you just build 1 GW of solar with no battery, you have something like 21% in Las Vegas, just because this is just how much your solar produces. If you have 3 GW of solar with 7 GWh of battery, you get to 60%. And the cost is $40 for the 1 GW, $80 for the 3 GW. So $40 is for 20%, and then $80, actually less than $80, is for 60%. And then to get to 97%, you're already around 100.

So you have this, like, gradual progression. But to get from 97 to 99.4, the price jumps to 167. So there is this point where building more solar and more batteries to just fill these, like, last few small gaps just doesn't make sense. And when you think about it, it's quite clear, because if it's just like two, three very, very cloudy days and you're not going to be using your solar and your battery most of the time, like, they don't pay for themselves.

David Roberts

Right, right, right. And one of the things that's wild is sort of that line, you know, where that sort of gradual rise in price kind of hits an L and goes straight up. It's not a gradual thing. Like, it really is — seems like a point where you're like, all of a sudden, costs —

Start skyrocketing. Yeah, exactly.

Yeah. It seems like there is a very distinct point.

Dave Jones

Yeah, that distinct point is really driven by how much electricity you need to carry across days. And lithium is great, you can slightly overbuild it for what you need across 24 hours. But it's not reaching that point, or probably won't reach that point in a long time, that you would want to have a battery sitting there idle, like carrying across just for a few days of a year that energy onto a cloudy day.

David Roberts

Yeah, yeah. At some point, the expense of holding that energy in the battery just becomes—

Dave Jones

And in a way that's okay. You've got other ways to deal with that. Like maybe we talked about, maybe you don't need to have everything running and you can, like, turn your process off. But of course, there's a way to get a gas or an oil generator in there for a short period. Bear in mind that most of these, the average electricity across the day isn't going to zero. So you still got some of that solar coming in. You don't need to — for a GW of baseload, you don't need a GW of fossil backup in there.

You need kind of 200 to 300 megawatts — covers virtually all of that shortfall, in the case of Las Vegas.

David Roberts

You're Las Vegas and you've got to build gas plants that run 3% of the year, like, that's what they call a "champagne problem." So let's talk about the prices then. So Las Vegas, getting to 97%, I think — I don't have it right in front of me — but I think that got you to $104 per megawatt-hour.

Kostantsa Rangelova

Yes. And here comes the big disclaimer again just to make sure that nobody gets confused: this is global average prices for solar and battery, doesn't include local policies, local pricing.

David Roberts

Right. So it could be lower or higher in Las Vegas, depending on the local market and local incentives and whatever else.

Dave Jones

Yeah. Specifically from the CapEx perspective. So when we look through to the CapEx price of what a battery and of what that solar panel costs, the cheapest countries out there are the ones that can access Chinese tech, because that's the cheapest out there. So when we look through and we look through to see the cheapest battery prices out there at the moment that are being installed, they're in India, they're in Saudi Arabia, and they're in China itself, and they're predominantly using Chinese technology. And the prices coming through are eye-watering. And if you don't have access to that Chinese technology, you're going to be in a different price level.

David Roberts

Yeah. And that's a big delta. That's not, that's not like — the cheapest battery prices you found in the world are substantially cheaper than the more expensive ones. This is not a narrow range.

Kostantsa Rangelova

Absolutely. We're talking $50 to $70 per kilowatt-hour in those, like, cheapest regions. And the average, the global average we used is $165.

David Roberts

Right. So half the global average. And that is just access to cheap Chinese batteries. That's all that is. So, like, you have to assume eventually the world is going to gather around that lower point, right? Because eventually the cheaper tech is going to get out there and disperse it.

Dave Jones

Absolutely. And it is for those kinds of key countries that are bringing in a scale today. So really, I guess California, Texas are probably outliers on that when you compare them to the rest of the world.

David Roberts

Right. But $104 a megawatt-hour, you know, if I'm a Las Vegas policymaker — obviously, you know, with all the caveats, this is not precise, you'd have to go actually do the local calculations in Las Vegas to get a real number — but taking this as a ballpark, $104 a megawatt-hour is not crazy. It's less than new coal. It's less than new nuclear. But we all know the real competitor here is gas. And that's more expensive than gas by a decent chunk. Fair? Yes?

Dave Jones

Fair, if you're in the US. If you're not in the US, we don't have the same price as you do for gas, so —

David Roberts

Oh, that's true.

Dave Jones

So many of the world's gas generators have extraordinarily different economics to you and for sure will be economic against those prices when you look at the current LNG prices.

David Roberts

Do you all happen to know off the top of your head what the average price in the US is right now for gas power?

Kostantsa Rangelova

You mean the LCOE for new gas? I think it's around $76, $78.

David Roberts

In the US?

Dave Jones

I think it was around $70 for new gas. It was a weighted US average — from memory, but I might be wrong on that.

David Roberts

Right.

Kostantsa Rangelova

Yeah. I mean, they claim this to be a global LCOE, but they use US-focused data.

David Roberts

Yeah. Because, like you say, it's much more expensive in other countries. We're wallowing in it here, but, you know, if you have to import it, it's more. But just for Las Vegas — I mean, this is all by way of just giving people a sort of general sense of the quantities involved here. So $104 a megawatt-hour to get mostly solar+storage versus $76ish. So, point being, even for a sunny city, to get all the way there would be a substantial price premium over available alternatives. Yes. It's not—you can't get all the way there for cheap.

I don't want to pretend like we're saying that.

Dave Jones

It is, and I guess what we were trying to do with this paper was trying to explore the kind of, like, the barriers of what is possible, of taking it to the extent and being a little bit kind of almost cheeky with that.

David Roberts

Yeah, we should say no one is actually going to try to power their whole city off solar+storage.

Kostantsa Rangelova

Off one technology, period.

Dave Jones

And when you're looking through and you're looking at the solar farms that are being built out in the world today, it's not a question of whether they're built with battery, it's a question of how much battery comes with them. And every day that goes on, there's more and more battery that's being added to them. So it kind of started off at kind of an hour, then it rolled onto two hours. Now a lot of the US ones have got four hours in them. There's some in Australia with eight hours on them. So this is really a thought experiment of just taking that to the limit.

But already you see that that extension, the amount of hours being stored, is getting longer and longer.

David Roberts

I'm highlighting the fact that $104 is a lot more than $70. But you could also turn around and say that, like, powering your whole city with solar and batteries for $104 a megawatt-hour is something that would have sounded like science fiction, you know, five minutes ago.

Dave Jones

Quite. And there are two different models for how this plays out. We've been talking, like, envisaging this as a big 1 GW project, but really when we're thinking about this, it's also probably an industrial user or even a household user. And if you're supplying that just from solar and from battery, from yourself, the economics is relative to the grid price that you pay. And that's substantially more than the kind of numbers that we've got in our head when we're thinking about the wholesale price.

David Roberts

Yes, yes, that's true. It's much more — from the consumer perspective, I think the economics are much easier. And we should say I'm highlighting the $104 number because that's what it takes to get to 97% in Las Vegas. But as you show, getting to like 60%, you can do that cheaper than gas. Cheaper than gas, which again is mind-boggling even relative to a few years ago. So Las Vegas could get to 60% solar and battery power for prices cheaper than new gas, cheaper than any fossil fuel source.

Kostantsa Rangelova

And it's not just that, it's about the direction of travel of these costs.

David Roberts

Let's get into that. So what I wanted to ask about — so there are two sentences that in your report just made my eyes water, so I want to read them. So one is: "In 2024, average global battery prices dropped to $165 a megawatt-hour, down 40% from $275 a megawatt-hour in 2023." So 40% in one year. That's just raw battery prices. So then the LCOE of the whole project, of a whole solar+storage project together, has dropped by 22%.

Kostantsa Rangelova

Yeah. And this is because the CapEx of the battery is such a big part of the whole LCOE.

David Roberts

Yeah, right. In a year. So literally, like, if you had done this analysis last year, the results would be dramatically different. And it sort of follows that if you do this next year — you know, I've almost come to the point where I worry that these, like, snapshots you're taking, because what you're doing here basically is taking a snapshot of a rapidly moving target, right? And so, like, it's effective in that it conveys to people, "Look how cheap this has gotten." But I sort of worry that, like, you just need to emphasize over and over and over again that, like, "Hey, we're going to be back next year. And we're going to blow your mind all over again."

Kostantsa Rangelova

I couldn't have put it better.

Dave Jones

And we know that's going to happen because we can see the prices going through, like I said, Saudi Arabia, India, and China at the moment, and they're just between a third and half of what that price was at the end of last year.

David Roberts

Yeah, these are not small — I mean, like, 40% is like, you know, there are whole consumer product categories that scrabble and fight their entire lives for decades to get, you know, 5% cost drops. So, like, 40% in a year is just mind-boggling. So I sort of wonder, like, did you or would it be easy to just whack another 22% off the LCOE, just assume that what happened last year is going to happen next year, whack 22% off the LCOE, and then run the whole analysis again. Would it be easy to do that?

Dave Jones

It would. And also there's other parameters which have got better as well. It's very strange getting feedback on a report where you're a bit scared, you've done some peer review, some discussion, and then you release it to the world and you're kind of fearing the worst. And every single piece of feedback is, "You've been far too conservative on this, far too conservative on that."

David Roberts

It's genuinely hard to talk about this stuff without sounding crazy. Like, the reality of it is crazy.

Dave Jones

One of the bits that surprised me an awful lot was on the state of charge, where we know that historically people have only used 80% of the battery, kept the top 10, top 20% unused. And we're like, "No, from what we've read, probably you can leave 10% unused." And now I speak to battery developers and they say, "Oh no, no, you can go all the way up to 100%, down to 3%." So you've only got 3% of unusable battery in total. That's how far many of these parameters have got. And the whole technology as a whole has improved.

David Roberts

Right. And solar panel prices are still going down.

Dave Jones

Solar panel prices are still going down. And also I mentioned this earlier, but the cycles within them — so you get a warranty that's then related to the number of cycles, and that can be for two cycles a day, still well over 10 years. So that's the kind of length of time where degradation was such a major issue within batteries that everyone was worried about. But you don't see that happening in the same way now.

David Roberts

Right. I mean, solar panels are coming down, and that's for a commoditized — you know, like, those are largely commoditized now. But in batteries there's still, like, there's still research, there's still, you know, fundamental research going on. There's still, like, new chemistries popping up, there's still whole new — you know what I mean? I feel like we barely even scratched the surface on batteries.

Kostantsa Rangelova

Yeah. And the deployment is just starting to pick up, and this will definitely accelerate that learning curve.

David Roberts

Toward the end here, you mentioned the off-grid opportunity. And this is one of the things that really stimulates the old imagination around this stuff. So I want to just talk about that a little bit — what you mean by the off-grid opportunity and what sort of, like, what sort of vistas does this open up in those terms? Because everybody, you know, the background is every grid everywhere is overburdened. It's hard to get on the grid, it's hard to get connected to the grid everywhere. So anything you can do around the grid is helpful. So just talk about that a little bit.

Dave Jones

There are many different people that would find that there are different cases for this. The primary one that we had in our head was on data centers. You had this massive rise in electricity demand coming through. You can put them anywhere in the world. Why not put them somewhere where there's lots of low-grade land around that you can install the solar panels, the batteries at enough scale that you can power that whole other thing with maybe 97, 98% fulfillment of supply coming through, and you lose a little bit on the side. But if that's the way to get through, to be able to manufacture it that quick, to be able to bring that power source to market for yourself that quickly, that you don't need to worry about grids, then that's the way to do it.

David Roberts

Have you at Ember talked to the data center people? Because I'm sort of puzzled — I mean, this is slightly orthogonal to our whole topic here — but I'm just puzzled by the data center people. So I read that white paper about powering data centers with solar+storage, which lays out the case, saying it's available, it's cheap, it works, and yet the hyperscalers don't seem to be talking about it. Like, they're off having these idle fantasies about building multiple SMRs and taking over nuclear plants, reviving dead nuclear plants, all this sort of, like, wildly expensive stuff they're talking about. And this is sitting right in front of them—and it seems like they are resistant to it for some reason. So I wonder if you have any insight on what's going on there.

Dave Jones

I think it comes back to how much pressure there is on them to do this cleanly. There's a very easy option there at the moment that they don't need to think about, which is to put a gas power plant to run it from the inside. Don't connect to the grid because a gas power plant can do that for you. So, do you go with the easy option that's dirty, or is there another easy option out there as well which is economic and it's clean, and look how much more imagination does that actually need to take? And I think that even for the companies that come out with quite kind of green credentials on that, that's going to be really tested in the coming months as more investments come out on how data centers are actually made.

I can't begin to know exactly what's going on behind the scenes with all of this, but one of the biggest prerequisites obviously is an awful lot of low-grade land with good solar insolation. So I don't know how much that in itself would be holding back, because that is — if you look at the difference between that and gas, that's the big difference that you would need. But what's really exciting is that so much of this new build is happening within the United States at least — is happening in the South, where you do get opportunities for this in that there is so much better solar resource with land available.

David Roberts

Yeah. And once again, like, down in the Middle East somewhere, there's some mega data center project that's running completely on solar, isn't there?

Dave Jones

Yeah. And what is most exciting for us about solar and battery technology is certainly not what's happening in Europe, where we get huge seasonality. There's a real limit to how far solar and battery by itself can take you. In the States it's unlocked quite substantially, especially if you go further south. But you've got, like, whole massive regions across the Middle East, across the whole of Africa and Mexico, where this is a real possibility — that the whole of, like, so much of the energy system, not just the electricity system, but the whole of the energy system as you work towards electrification, can be powered by these two technologies alone.

David Roberts

Yeah. It's amazing. And sort of, like, I want to ask, like, what's the holdup? Why aren't people just herding to this? And I guess part of it is just that literally, like, it dropped 40% last year. So, like, you know.

Dave Jones

That's exactly it. And that's why, that's why I'm really kind of here excited talking to you about it, because I think that people don't realize how much that technology has got cheaper, how much it has improved, how much that footprint has reduced. And when you understand that, you can actually understand how big this potential for solar and battery by itself is going to be.

David Roberts

Yes, it's just like all that historical talk about how far you can get with variable renewables is just like, "Hello, we mostly solved that. Knock, knock. Hello, we solved that. It's on the ground now. Let's do this."

Dave Jones

So long as you don't live in Birmingham in the UK.

David Roberts

And if you live in Birmingham, you've got other problems.

Kostantsa Rangelova

But yeah, it's just so new and I guess it's already out there, but it will quite fast become mainstream.

David Roberts

Yeah, I mean, the numbers are so compelling, and this is — I come back to this on the pod over and over again — it's like, it was one thing when demand was flat and we were out there begging people to swap out existing fossil fuel resources for clean resources, which is where we were for, like, the last 20 years. But now, like, big companies with lots of money need lots of power very quickly, and they are not romantic about fossil fuels. They don't give a crap where the energy comes from.

So I just feel like the logic of the situation is going to pull these hyperscalers in this direction. I mean, it's got to, right?

Kostantsa Rangelova

Yeah. And it's surprising how quick these kinds of projects come online. Like, as we talked about that Masdar project—like, announced in January 2025, online by '27. That's fast.

David Roberts

And that's again, like, 5 GW of solar and whatever, 19 GW of storage.

Kostantsa Rangelova

Somewhere in the desert.

David Roberts

You can't even build a modest-sized gas plant that fast. You can't get a gas plant in service that fast. I mean, one of the things I meant to sort of touch on earlier — maybe we can just touch on it briefly now — is that while solar+storage is rapidly going down in cost, gas is running into problems. Gas is going the other way. So maybe just say a little bit about that. Gas is also a moving target.

Kostantsa Rangelova

Yeah. I mean, when you look at the LCOE for gas, like, it's around $70, but it used to be somewhere around $60, so the trajectory is kind of going up. Like, probably in 2025, 2026, it's going to keep going up. Like, it's not like it's going to start coming down suddenly. While the prices of solar plus battery are going to keep falling very, very fast.

David Roberts

And the supply chain for gas plants too is gummed up right now. So even if you have cheap gas, just getting the equipment for the power plant is difficult.

Kostantsa Rangelova

Oh yeah. In the US, waiting times are like five, six years if I'm not mistaken.

David Roberts

So if you're talking to a giant hyperscaler and you're like, $104 per megawatt-hour versus $70 per megawatt-hour, but I can get you the $104 power in a year and a half, whereas you have to wait five years for the $70 power — I bet every one of them would go for that.

Dave Jones

And I think that globally what's happening on gas is nowhere near as exciting as what's happening in the United States. If you look at China or in India, they got 3% of their total electricity generation from gas.

David Roberts

Well, they're just importing it from us, right? And we're trying to get them to import more. But the funny thing is the more we export, the more prices go up for us. So, like, the last redoubt of cheap gas is going to go away.

Kostantsa Rangelova

And for them, it's not cheap.

Dave Jones

And they don't want it. So it might look like someone somewhere along the way is making a lot of money because when it arrives at the shores of China or India, it's not cheap. So they don't want to be stepping in. This whole idea that China and India were going to be going through a coal-to-gas switch is just complete nonsense. What they're doing is they're building solar and wind and battery at huge amounts of scale, faster than anywhere else in the rest of the world, and they've got no interest in taking gas. When you look at Southeast Asia, you expect a gas boom coming up there.

That's not happening. When you look in Africa in the last eight months, according to our data, we're tracking solar panel exports — which is a really good proxy for how solar is picking up — in the last six to eight months, there's been this huge pickup in so many countries of solar panels being imported within Africa.

David Roberts

Pakistan, I did a pod on Pakistan a couple months ago. Amazing.

Dave Jones

It's amazing. And that's the first step with Pakistan is obviously the solar. You reach that stage where you get saturation during the daytime hours. And what you started to see is a pickup on the battery side from that. So the latest Chinese export data to Pakistan was in the last three months — in March, April, May — was this huge step up in battery exports towards Pakistan, where you can now see that they're going through that stage two, which is to be able to put batteries. So that is really going to make the issue for them so much more palatable than solar alone.

David Roberts

Yeah. Like, if I'm a policymaker and I'm in one of these places where I don't have a lot of abundant domestic gas, I'm looking at this choice: do I want to build a natural gas infrastructure to import this and distribute it and burn it, which would take, you know, 5, 10, 20 years? Meanwhile, the LCOE of its main competitor is dropping 22% a year. Like, it's just insane for anybody to start heading down the gas path. At the very least, you're like, "Well, let's just wait another year and see if it drops another 22%." Like, it's just crazy now to do long-term things in the other direction.

Dave Jones

And it must be so hard within the US to kind of—the economics are skewed both ways. You've got that gas cheaper than anywhere else in the rest of the world, and you've got the solar more expensive than anywhere else in the rest of the world. So it's really hard to then kind of get your head around why other countries are doing this. "Are they being forced to do this? Why the heck would you build solar?"

David Roberts

They've gone woke.

Dave Jones

You're building solar because solar is the cheapest electricity that humans have ever invented.

David Roberts

Yes. And now we have an openly malign administration that is attempting to exacerbate that very problem. So we're just falling farther behind. I mean, it's one thing to look a year ahead at another 22% drop in LCOE, but look five years ahead or 10 years.

Kostantsa Rangelova

It's like giving up.

David Roberts

You know what I mean? These bets that the US is making, there's just no serious person who thinks —

Dave Jones

Yeah. And they're based on the fact that the world wants to buy imported fossil fuels. And I think that if anything, the countries have learned over the last couple of years with the price volatility and the general instability in the world is they don't want to be bequeathed to importing more oil and gas than they are already. That's not what their achievement is. If you look at China, what China's done, it's trying to turn itself into an electric state. And the reason why it's doing that is it doesn't want to build up a big oil and gas reliance. The sales of oil-powered cars peaked back in 2017. They've been falling for almost eight years now. It's insane.

David Roberts

I mean, one of the just basic facts I think that helps to understand the world in general is just that the number of oil exporters is much, much smaller than the number of oil importers. So, the number of countries motivated to escape oil is much larger than the number of countries trying to stick us with it.

Dave Jones

Yeah, and the US used to be an oil importer, so it's kind of like, it used to be kind of like one of the rest of the world. And it used to be that 80% of the world's population lived in oil-importing countries or fossil fuel-importing countries. And then what happened in the last, I think it was three or four years ago when the US turned to be an exporter of fossil fuels. That number has now come down to 75%. But still, 75% of the world's population live as net importers of fossil fuels.

So just with that mindset, you have such a different mindset from what you would be if you were a petrostate wanting to sell your fossil fuels abroad.

David Roberts

Yeah, we really do seem to have embraced our status as sort of a slowly dying petrostate. The last thing I kind of wanted to throw out there, and I don't really know what my question here is, but this is just something I was thinking about. I mean, you are framing this, and a lot of people are framing this as solar+storage, as though that's kind of like a thing, a single thing, a single power plant with, you know, XYZ capabilities. But really what we're talking about is just adding batteries to grids. I mean, all the sort of capabilities you're getting come back to the batteries.

Right. I mean, it is adding storage to a grid that brings you fundamental changes, more so, I think, than solar, because the electrons coming out of solar are just normal electrons. Like, they're cleaner, but, like, batteries are letting you do different things.

Dave Jones

And what you've got is, on one hand, you've got the cheapest electricity you've ever had, but on the other hand, it's not the most valuable electricity you have because it's only there during the day. Like, it's got an inherent floor. If you can actually make that electricity more valuable so that you can store it and use it when you want it, that's how you unlock solar. And I think that when you're looking at how fast the solar rollout can continue, battery really unlocks a whole new way in which you'll use solar that we're only just touching on at the moment.

David Roberts

Yeah, yeah. I mean, you're looking at these sort of confined cases of like a single off-grid installation or a single city, but sort of like in the limit, theoretically in the limit, the endpoint here is a grid with so much storage on it that it basically renders the timing of generation irrelevant across the board. Do you know what I mean?

Dave Jones

Yeah, exactly. And the purpose of the report really is to show that that's not a pipe dream—that's already happening today and it's already economic today.

David Roberts

Yeah, wild. Truly wild. I mean, the difference between an electricity system where timing is literally everything, right, where, like, matching supply to demand is everything, to a grid where you generate power whenever you want, throw it on the grid, and we'll hang onto it until we need it, is just such a fundamental change.

Dave Jones

And one thing we haven't talked about in people's minds as well is about the grid stability underneath that. What's becoming more and more common now is inverters, grid-forming, meaning that they can actually provide that inertia back onto the system and be able to deliver the ancillary services second by second, millisecond by millisecond, to be able to help maintain the stability of that system. And what you're going to come out of this is not a weaker system; you're going to come out with a stronger electricity system.

David Roberts

Yes, I'm going to do a whole — I'm going to do a whole pod on this, Dave, so it's a bit of a spoiler. But, like, people don't get that, like, you can get the inertia and the frequency regulation and voltage regulation and all these services out of inverters, and it's not even that hard. It's like a firmware update for a modern inverter. It's just software. And you're going to go from having a limited number of spinning masses providing those services to every inverter providing those services. Meaning there's going to be, like, hundreds of thousands, millions of inverters spread across your system, all of which are providing stability services.

That's going to be a way, way, way more stable and predictable and reliable grid than the one today. That's an advertisement for a coming pod there.

Kostantsa Rangelova

Looking forward to it.

David Roberts

Well, thank you two for coming on. I feel like the development in this area, in both solar and battery separately, but then, like, deploying them together, is so fast. We literally do need to do, like, a yearly pod, just so people — you know, these are not small changes year to year. It's like a fundamental market-shifting change every single year. So what an exciting time to be following this stuff.

Dave Jones

I'm glad you've now caught battery fever as well.

David Roberts

Oh, and I've had battery fever for a while now. And it's just like seeing all my dreams coming true around me. What a crazy thing. All right, well, thank you, you two, for all your work and this report and talking through this with us, and maybe we'll talk again soon about more fundamental changes.

Dave Jones

Thank you so much, David.

Kostantsa Rangelova

Our pleasure to be here. Thank you.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

In this "What the F is Happening" episode, I'm joined by Jane Flegal and Jesse Jenkins to perform a wake for the Inflation Reduction Act after the passage of the GOP's "Big Beautiful Bill." We sift through the wreckage to see what was saved versus what was buried, analyze the political forces that determined the outcome, and debate the core theory of ch…

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In this episode, I talk with Montana state senators Forrest Mandeville (R) and Ellie Boldman (D) about the bipartisan housing reforms their state has passed over the last two legislative sessions — reforms so sweeping YIMBYs have dubbed them the "Montana miracle." We discuss the unlikely coalition supporting the bills, the impact of the policies, and the generational divide that increasingly separates YIMBYs from NIMBYs. Also: why "housing is the new weed"!

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Text transcript:

David Roberts

All right, everyone. Hello, welcome to Volts for July 9, 2025, "A closer look at Montana's housing 'miracle'." I'm your host, David Roberts. It doesn't get as much attention from national media as coastal states like New York and California. But no state has been harder hit by the national housing crisis than Montana.

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In-migration, already healthy, was turbocharged by Covid and its wake, bringing in tens of thousands of new residents, many of them wealthy buyers looking to work from home or own a second home. Supply did not keep up, so working-class locals rapidly got outbid. The median home price in the state has close to doubled since 2020, and according to the National Association of Realtors, its housing market is now the nation's least affordable on a per capita basis.

However! The good news is that the crisis was so clear and so severe that it spurred a remarkable burst of action. A governor-assembled task force released its report and recommendations in 2022. In 2023, the legislature passed an eye-popping agenda of deep and far-reaching housing reforms. And then earlier this year, it did it again.

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YIMBYs — many of them in blue states where action of this speed and scope sounds like a fairy tale — have dubbed this run of legislation the "Montana miracle." Today, I am thrilled to be joined by two of the architects of that bipartisan miracle: Senator Forrest Mandeville, a Republican representing Columbus, and Senator Ellie Boldman, a Democrat representing Missoula. Both have long experience with housing and land use issues and have sponsored some of the recent legislation. We are going to get into the reforms, how they happened, and what can be learned.

With no further ado, Senator Forrest Mandeville, Senator Ellie Boldman, welcome to Volts. Thank you so much for coming.

Senator Forrest Mandeville

Thank you. It's great to be here.

Senator Ellie Boldman

Thanks for having us.

David Roberts

This is great. I'm very excited about this. I don't get to talk about a lot of good news these days. So, I want to start with just a little bit of background. Senator Mandeville, you've been in Montana politics for a while. You were a representative before you were a senator. So, you have been in state government as this housing crisis has unfolded. You know, I've seen the statistics, so I'm just sort of curious, like how is this housing crisis manifesting to you from the inside? What does it look like?

Senator Forrest Mandeville

Yeah, it's really something that's hit every part of the state. Prior to Covid, I would say it was more of a localized issue where there would be pockets of housing bubbles. Housing issues, you know, during the Bakken, eastern Montana was hit with a housing crisis. The western part of the state would have its issues from time to time. But it really seems that post-Covid, there's kind of this "Zoom boom", this Covid rush, even call it "blue state refugees" coming to Montana to get away from some of the policies they didn't like back where they were from.

And it really caused this housing crunch statewide. And I work in land use planning, so that's my day job. I do planning for local governments.

David Roberts

I should have said this in the introduction, but let me just get it out there as scene setting: The Montana legislature only meets for 90 days every two years. So, you all have day jobs, in other words.

Senator Ellie Boldman

Yeah, they call us a citizen legislature. I think there's only what, four, just a handful of us.

Senator Forrest Mandeville

Yeah, so it really seems like post-Covid, this thing hit us statewide and we were not ready. The state was not ready from a regulatory standpoint. And it was really an "all hands on deck" situation to be able to address this crisis that we were facing. And it became politically salient. You know, usually the land use stuff is kind of in the back corner.

David Roberts

Yeah, it's a little technocratic, normally.

Senator Forrest Mandeville

Yeah, yeah. Stuff that the wonks deal with. And normal people care, but don't really care. So in 2021, 2022, 2023, it really became a statewide issue that everyday people cared about. I do have to say we did a lot of coalition building ahead of time. I'm a member of the Montana Association of Planners, and I know we've been working on reforms probably since 2017. The planners had been kicking around ideas that we wanted to see and had a working group kind of thinking, "If planners were in charge of writing Montana's laws, how would we want the subdivision statute to read? How would we want zoning to work on a statewide level? How should annexation policy be handled?"

And we'd really been working on that for a while, but we had not been able to get good momentum to the point where we could get legislation enacted until the 2023 session. That was leading up to when Governor Gianforte had created his housing task force.

David Roberts

They do say politics is about being ready when your moment comes.

Senator Forrest Mandeville

Absolutely.

David Roberts

Boy, did it come. So, I should just say by way of background — like, no one cares — but I lived in Montana for, I want to say, like six years in the late 1990s and specifically got my master's at the University of Montana. I lived in Missoula.

Senator Ellie Boldman

All right, Go Grizz.

David Roberts

Yeah.

Senator Ellie Boldman

Woo.

David Roberts

Do you know — I worked at McKenzie River Pizza.

Senator Ellie Boldman

Yeah, it's all still there.

David Roberts

Are you familiar with the Old Post? The bar? The Old Post?

Senator Ellie Boldman

Obviously. Obviously, David, yes.

David Roberts

I lived immediately above the Old Post for several years. I got to hear them throw their bottles out at three in the morning every morning for many years. Anyway, that's neither here nor there. That's just by way of letting you both know that Montana has a special place in my heart. But Senator Boldman, so you were on this task force. Tell us a little bit about how that came together and what it did.

Senator Ellie Boldman

Yeah, yeah. So, I'm a lawyer by trade, and I've served in the legislature since 2011. So, it's my seventh term, my third governor. Montana politics has always sort of been thought of as a purple state until quite recently where we have large Republican majorities in the legislature. And then, for the last 16 years before Governor Giaforte, we had actually a Democratic governor. And so, when Governor Giaforte was elected, I certainly was walking into a different dynamic for me politically. But one of the very first phone calls, literally the day after Governor Giaforte was elected, he called me on my cell, to which I said, "Governor, I didn't even know you had my cell number.

And one of the first things we talked about was the housing crisis and whether I'd be interested in working together to try to build coalitions to really address it. That was something he knew I was very interested in, that I had worked on the professional and personal side in housing development. It's something that he wanted to see more attention at the legislature about. What sparked my interest and his passion was the diversity of his conversation. So, he was really dedicated to that, my community — and David, where you were at the University of Montana.

You know, I represent a lot of folks on the left that work in this area. In Montana, I think people think of Montana as if we're all home on the range, but a lot of us actually represent very urban areas and university towns. The housing crisis, from my perspective, of course, involved a lot of working-class folks, a lot of students. But the governor was also really interested in rural housing issues and tribal issues. About 10% of the population of the state of Montana is native, indigenous Montanans. But he also concentrated on different kinds of housing needs, including mental health, addiction, and crisis beds.

That was another area, as an attorney, that I had a particular interest in. And so, let's just say a diverse friendship was formed on that day. After that, the governor created a task force, an appointed mechanism that was able to then work with us in the interim. Because as you noted, the Montana legislature only meets every other year for 90 days, from about January to early May. This allowed us to work in the interim to really talk about policy.

David Roberts

These are politicians and professionals in the field and academics?

Senator Ellie Boldman

Totally. What I liked about it is that I tend to believe, and I know that Senator Mandeville and I have in common, that government often can't and doesn't have all the solutions and certainly shouldn't do it all. The idea that public-private partnerships could work, that we could find incentivizing tools for the private sector, and then of course, policy reform that needed to happen. He brought in a lot of private sector folks, but with a nod, I think, to make sure that public sector housing developments were also present and at the table.

The wonky nerds, like Senator Mandeville, the planning folks, were at the table, and the folks that had money. In Montana, again, a state that's as large as all of New England with just over a million people, we needed out-of-state money. We needed developers to come in and help us solve problems. There wasn't enough money in Montana to build the kind of housing that we needed. Some of those folks were also at the table. Then, of course, over the months and year after that, the first tranche of bills came through the '23 session, dubbed of course, the "Montana miracle."

David Roberts

Yeah, an important bit of background here is that a lot of housing-related bills came up in 2021 and were shot down and lost. Then there was this task force in 2022, and then in 2023, it all came back and passed. To me, that, in addition to the policy miracle, which we're going to get to in just a second, looks like something like a political miracle. I would like to hear more about, I mean, was the task force itself that... Because like, I'll just say, you all have been in government long enough to know that when you hear "I'm going to form a task force to study solutions to this problem," very often that means "I want to avoid dealing with the problem and I want to look like I'm doing something."

But here, there was a task force, and then it worked. I guess I'm baffled by political success, I guess is what I'm saying here. So, like, what changed from 2021 to 2023? Was it really the task force? Was it really that galvanizing?

Senator Forrest Mandeville

I think that a lot of the bills in '21 were not very well thought out. I think everyone realized there was a problem and did not know how to go about solving it. So, '21 was the year I was out of the legislature, so I was kind of watching from afar, but it seemed like there were a lot of well-intentioned bills that just didn't do what I think they were intended to do. That's why I think the task force was important to kind of think through what we want to solve and what's the right way to solve them.

That's what we were able to bring in '23 and get past because, at that point in '23, we weren't a bunch of people trying to solve a problem, not working together. We were a bunch of people trying to solve the same problem, but working together to do it.

Senator Ellie Boldman

Right. Yep.

David Roberts

And working from a common document, a common understanding.

Senator Ellie Boldman

Yeah, and you know, I have to say I agree with you that I tend to find task forces, you know, a little bit of a circle jerk. But in this case, it really didn't operate that way because of the members and the coalition building was so diverse and inclusive, and then it kind of kept the momentum going. I think that's really key to the '21 to '23 to '25 to ongoing. And you know, I saw on whatever we call Twitter now, I saw one of your listeners had a question about "Why even have this podcast?"

Well, it's because, you know, with great hopes, we can see the momentum continue and not just in Montana, but replicated around the nation. And I do have a lot of thoughts on why this worked, why it can continue to work, and why there continues to be a lot of sometimes NIMBY roadblocks that will continue to happen.

David Roberts

I want to get into all that, but first, let's put on record here what happened in 2023. So, literally, there are too many bills to describe them all. But just for listeners, just a couple of the bills. One legalizes multifamily and mixed-use in all commercially zoned districts of cities.

Like that alone is huge. Another one, any lot where a single-family home is allowed, an ADU is allowed. That's huge. And you can't mandate any off-street parking. You can't put any requirements on it. You have to allow an ADU for every single-family home. Boom. Another one says anywhere a single-family home is allowed, you can have attached or detached duplexes. Boom. That's huge. Like, all of those are individually huge. And then we come to Senator Mandeville, SB382, which is, I think, at once kind of the most complicated, but also I think probably in the big picture, the most meaningful reform.

Despite all those others being huge, I think this is probably the hugest. And this is your bill that you sponsored. So, just talk us through what 382 does.

Senator Forrest Mandeville

Sure. So, Senate Bill 382 from '23, that was the Land Use Planning Act (LUPA). This really was the brainchild of a lot of Montana planners working with the Governor's Housing Task Force and the ideas that came out of that. One thing that is unusual for Montana is, the Montana League of Cities and Towns was very involved and supportive of the Land Use Planning Act.

David Roberts

That's unusual — I've been doing a lot of these podcasts lately about these reforms, and it's usually the Association of Cities that is the big opponent.

Senator Forrest Mandeville

This goes back to some of that coalition building we did. And we have a very knowledgeable head of the League of Cities and Towns in Montana who's a land use attorney and a planner, and she sees the big picture on this, saw the need for some reforms, and was very involved in making sure we did this right. So, what we did was we tried to kind of coalesce the major land use statutes in Montana. So, we have the growth policy, which is a master plan statute. We have zoning statutes, we have subdivision statutes, we have annexation statutes.

They all operate independently of each other. They all require repetitive public processes, repetitive public hearings, looking at a different aspect of the development, but looking at the same development as a whole. So, you could have a public hearing on whether or not to change the zoning on something from agriculture to residential or from residential to mixed use, go through that public hearing process, but you also have to have a public hearing process on creating the lots, going through the subdivision review. You have to have a public hearing on the annexation. So, we said, "Let's do our planning up front."

Imagine that, right? Planning before you get to the development.

David Roberts

A bold proposal: Plan up front.

Senator Forrest Mandeville

Yep. So, what the LUPA does is require the master planning process on the front end. And as part of that, that land use plan, you have to do a housing study, a housing needs assessment, and then again, a revolutionary, but should be common sense, is you have to zone to allow the amount of housing that you think you're going to need according to your plan.

David Roberts

So it's each individual city doing this that you're talking about?

Senator Forrest Mandeville

It is, yeah. We targeted this at the largest cities and large counties, which is really where we're having this issue. We have seen other communities opt in because they see the value in this.

David Roberts

It's cities 5,000 and up, at least some of them.

Senator Forrest Mandeville

Cities 5,000 and up in counties of 70,000 and up. Yeah. So, there's about a dozen or so communities statewide that are following this, including some that have opted in. But then we said, "If you're a developer and you're following the plan, you're following the zoning, then you've gone through that public process," to try to target some of that repetitiveness. We also had zoning reforms baked into the Land Use Planning Act, the LUPA. So, we created a menu of options that cities would have to choose from.

David Roberts

Yeah, I saw this. They have to choose five reforms out of the — it didn't say how long the list is.

Senator Forrest Mandeville

5 out of 14.

David Roberts

Interesting. That's really interesting. So, at least five?

Senator Forrest Mandeville

Yes, so it did — and I think this was a big selling point for the League of Cities and Towns — it did keep some of that local control mechanism in there. But it also, and this is where we had a lot of the support from the YIMBY community, was it did have that state-mandated pushing them towards some of these reforms.

David Roberts

So, they have to choose 5 out of the 14. What are some of those? Give us some examples.

Senator Forrest Mandeville

Increasing the amount of lot coverage you can have. A lot of the stuff you had talked about earlier. Allowing more multifamily, allowing up to fourplexes in single-family zones, increasing height limits, just a lot of those common sense reforms that we always try to push and the pushback is always, "This doesn't work for our community." So that's why we said, "Well, pick some, pick five of these. Something has to work for you."

David Roberts

Yeah, that's clever. And do you agree that although this is not probably the easiest to understand, this is probably going to be the biggest practical change in land use? Just simplifying all these processes down. I mean, it's always made sense to me that if you have a plan and some requirements and someone proposes a project that fits the requirements, that should be it.

Senator Forrest Mandeville

That should be what you wanted, right? That should be what you've planned for and what your infrastructure needs, what your community needs, you want in this area. And if you're doing what everyone generally agrees on is desired in an area, then, yeah, go build it. Let's quit talking about it. Go do it.

David Roberts

I live in Seattle, where, my God, the amount of process is maddening. So, I have great sympathy with this. So, that was '23, and that alone, that slate of bills alone, is amazing. And here's — I was reading a summary of all this on Sightline's website and came across this sentence, honestly, of all the stuff I encountered researching, this was the most amazing and baffling thing to me, which is this. "The bills were kept simple. Their final versions clocking in at just four pages each."

Senator Ellie Boldman

Correct. Yeah.

David Roberts

So, again, I come from the West Coast. The idea of legislating anything in four pages is amazing. I mean, these are just like, "You have to allow duplexes." Period. Signature here. There's just not — it's amazing to me. Was that on purpose, like, was that a deliberate choice going into this to try to keep it simple and stripped down?

Senator Forrest Mandeville

Absolutely. Yes. Try to keep it as simple as possible. You know, we talked about the wonky nature of this stuff a little bit earlier. What we wanted to do was keep it simple. It also allowed for a lot of ideas to be moving simultaneously. When you have one idea in a bill, you don't have to worry about stuff that people don't understand getting amended into the bill. So it was definitely a conscious decision.

Senator Ellie Boldman

Yeah, you know, I think one thing that Senator Mandeville and I have seen is that part of the sort of "one subject, one bill," it's easy to understand for the public, but also for our colleagues in the legislature. As we noted, we're a citizen legislature, and so we're walking the aisles with teachers, firemen, and ranchers, a lot of retired folks, and they really do come from all walks of life. And I think that when we're reflecting on, you know, the transitions from '21 and then '23 and then '25, it really did start to become as simple as that.

Right. Like, it wasn't really just about a housing crisis. It started to become a Main Street business crisis. Right. Like in Montana, the chamber got involved because there weren't enough houses for baristas at Starbucks, or you would have, more than anecdotally, school districts where teachers or firemen didn't even live in their own communities. So when we talked about the University of Montana or the city of Missoula, well, everyone wants to live in Missoula. But when my son's 5th-grade teacher can't even afford to live in Missoula anymore, and that's not BS. I mean, that's true.

David Roberts

And that's easy to understand. That's a very potent...

Senator Ellie Boldman

It is really easy to understand. And so then it became a real pragmatic conversation to then talk about, "Well, why the hell then can't I just add another mother-in-law, build an ADU on my garage?" Like that doesn't make any sense to Democrats or Republicans and "Why can't I do this? And why can't I..." And sort of dumbing it down — to be polite about it — subject by subject, bill by bill. One, it allowed folks to really not be walked out. I mean, trying to understand that land use planners is, you know, I'm a lawyer, God bless it. And I don't even know what Forrest is talking about half the time.

Senator Forrest Mandeville

You're not the only one, Ellie.

Senator Ellie Boldman

But I'm really lucky that he explains it to me, you know, but I can understand why we want to have more accessibility to water and sewer. You know, I understand and everyone understands, when you're from Big Sky Country, you understand why we don't want to see more urban sprawl, and we want to save our rural spaces and our ag land. Those are common values. And so then it starts to make sense. All this wonky talk about like multi-family housing and density: "Oh, okay, like that's cool. Like that's why we would want it." And I'm telling you, I used to joke that like in time in the Montana legislature, it's been everything from a felony to be gay.

And then all of a sudden you found enough bipartisan people to not make it a felony. And then marijuana was illegal and now it's legal in Montana. And now to me, housing is the new gay. Because you can find —

David Roberts

That's my pull quote.

Senator Ellie Boldman

There you go. Yeah, we're like marijuana now.

David Roberts

Housing is the new weed.

Senator Ellie Boldman

That's right. And you for sure. And you know why? It's because when the Taco Bell on Reserve Street is closed for part of the day and the owner says it's because there's not enough workforce housing in our urban communities, that is an issue to everyday people. And people see that, you know, on the ground, they know how expensive it is. And when Senator Mandeville talked about the Covid effect and the Zoom boom, that's clear of all of the Rocky Mountain west right post Covid. People learned in real time, "Oh, holy shit, I don't have to live in San Francisco. I can live in Big Sky country and ski and raft and I can still work." And the issue is "And I can still make that San Francisco money." And that had a marked effect on Montana's housing market.

David Roberts

But what's interesting is that they didn't bring — I mean, maybe this is like too nerdy for you guys to even care about — but part of the big conversation in the Democratic coalition right now is about abundance and all the various critiques around abundance. And one of the frequent critiques is in blue areas like San Francisco, when you do get a law like this proposed, you get all these interest groups who come along and say, "Yes, you have to allow duplexes, but you have to have union labor and you have to have raw materials that came from the US and you have to do an environmental impact statement," and you place all these requirements on it, all of which may be sort of well-intentioned, but you end up with very complicated and very sort of laborious laws. It's called everything bagel liberalism.

And what you guys did in 2023, these are plain bagels. There are no gee-gaws hanging off these laws. It's very streamlined.

Senator Ellie Boldman

I just want to add to that because — Senator Mandeville and I are really good friends, and I have shared with him that sometimes my frustration is more on the left than the right. What you're describing —

David Roberts

On this issue, yes.

Senator Ellie Boldman

Absolutely. It's like perfect with the Democrats — and, you know, as a long-standing, proud Democrat — perfect gets in the way of the good every time. Instead of talking about these housing issues as an absolute human right and that these are crises for working-class Montanans, for students, for the elderly, and they're being priced out of their homes and, you know, the "put heads in beds" idea, the Democrats get in the way of themselves through all of these other, you know, as you just described very well, and more issues that kill these bills.

But I do think that the way the governor did it, and the way that the coalition has continued to be inclusive, not leaving, for example, me and some of my Democratic colleagues behind as we tout these successes, which certainly they could do. You know, it's a Republican majority. They can pass these bills usually without our help, but not always. You know, there certainly, as Senator Mandeville can share, are a number of Republicans that stand in the way of these bills as well.

David Roberts

So, let's cover quickly what happened in 2025, because one of the things that this shows to me, 2025 came back and passed a bunch more bills. Among them, incredible parking reform. I did a pod on parking reform in Washington a few weeks ago. This parking reform is, I think, equal to or exceeds that. Again, it's very — it just says, "Any home smaller than 1200 square feet, no parking minimums." Period. Very short. To the point. Then there's another one from you, Senator Mandeville, that allows ADUs in parcels outside cities, rural, I guess. Quickly, like, what's up with that?

What was the need for that? What motivated that?

Senator Forrest Mandeville

So, the ADU Bill from 2023 was specific to cities. Just in my day job, I'd run across a couple of issues where there were people that were wanting to build ADUs out in the county. This question came up, "Gee, why didn't that apply to the county? It seems like a missed opportunity." And I said, "You know what? You're right. Let's expand this." And it wasn't too controversial. You know, you just pick up what Senator Hertz did in '23 with his ADU bill and applied it to a different section of the law.

David Roberts

There you go. And one of the others that I have to call out here, because I have a friend who'll be very excited about this, is a bill legalizing single-stair buildings in the state. This is a real nerd — like, it's a very small group of nerds that are very passionate about this issue. But this is like a big and important thing.

Senator Forrest Mandeville

I think what we need to do when we talk about land use is realize that there's a lot of other stuff that goes into the way our land use laws end up working in practice. One of the big ones is the building code. You can strip out all the zoning requirements and regulations and simplify it, make it really user-friendly or permissive if you want, but if the building code doesn't let you do it, you're not going to be able to do it. So, taking a run at some of those building code requirements is maybe one of the next frontiers in land use reform.

David Roberts

Interesting. And the other big one in 2025 is SB243. Very exciting. That's your bill, Senator Boldman, which overrides local height restrictions.

Senator Ellie Boldman

Oh, yeah. The cities really loved me on that one.

David Roberts

I'm so curious. I love this.

Senator Ellie Boldman

But the people like it. Well, you know, listen, I'm a liberal and I like the environment. And so, I would prefer we build up, you know what I mean, and not out. I love the idea.

David Roberts

Well, you don't have to convince me, but a lot of people really, really hate this idea.

Senator Ellie Boldman

I, well, we're well aware, Forrest, and I serve on that committee together. And there were some, let's just say, beyond angry. I mean, you would have thought this was the worst idea. I'm not allowed in some sections of Bozeman at this moment. But they're wrong. Because you know what? You can't afford to live in Bozeman. But yes, the idea of trying to get the coalition to understand that building up is an environmental issue. Right. Like, let's rock and roll. You know, if you want to save your open space and your ag land, then we got to build up.

If you want to be connected to water and sewer that's existing and not build more pipe and expand our footprint everywhere, if you want to be connected to existing transportation options, people loved it. And I wanted to say this. You know, Mandeville and I also — my son's in fifth grade. Forrest's kids are a little bit younger and we're certainly not — Forrest and I started when we were much younger — but you know, we're sort of in that old man market there over in the Capitol. We're in a more of a younger mid area here. And what's great is we actually now serve with legislators even a little younger than us.

And I have to say, I really think that's the unspoken, that it isn't always R versus D. There are some generational issues here.

Senator Forrest Mandeville

Absolutely.

Senator Ellie Boldman

Our colleagues that help fight for these issues together clearly are of a working class, or young parents, or weren't students long ago, or weren't renters long ago ourselves. And so, we have a much more empathetic and maybe realistic understanding of the housing market in the state of Montana.

David Roberts

And also, if you're a young person and you're looking around Bozeman and you have these sort of 50-something wealthy, you know, ranchers in their second home saying, "We would prefer to keep this a small hamlet because it pleases our aesthetic preferences." You know, like, "Screw you, buddy. I need a house."

Senator Ellie Boldman

After the '23 session, the Land Use Planning Act was litigated by largely liberals in Bozeman. I mean, those are talk about, talk about NIMBYs on steroids. I mean, these are people that likely, you know, gave money to me. Right.

David Roberts

I want to ask you specifically about that in a minute, but Senator Mandeville, I just have a couple of political questions I wanted to ask you. I've been reading about people who follow Montana politics. They know that on the Republican side in the Montana legislature right now, there is some agita going on. There's a group of Republican senators that have sort of broken off and are working with Democrats to pass some bills. This has created some divisions on the Republican side of the aisle. Is housing caught up in that? Is it divisive within the Republican caucus?

Senator Forrest Mandeville

So, like Senator Boldman mentioned, the housing issue seems to divide more on a generational issue than a partisan issue. And I think that we've definitely seen that within the Republican caucus that some of these reforms we've pushed are not universally accepted in my caucus. I don't think those have gotten caught up in the bigger issues we've had as far as what you're referencing. But it's definitely not either caucus is 100% in favor of these housing reforms or not. We definitely see that divide generationally on both sides.

David Roberts

Talk a little bit more about what the coalition you mentioned earlier does look like. For instance, the trade unions are on board. Farmers, ranchers, and rural people are involved. I know I saw you had some libertarian think tanks on board. Describe the coalition that got this over the line.

Senator Forrest Mandeville

Yeah, we had, like I mentioned, the League of Cities and Towns was involved in portions of the Montana miracle. The Montana Association of Planners was very involved. The counties were involved. We also had the Chamber of Commerce, as Senator Boldman mentioned, the realtors, the builders, some of those traditionally Republican groups. And then the libertarian think tanks, Americans for Prosperity, the Frontier Institute were very involved in this. But we also did have those environmental groups that recognized, like Senator Boldman mentioned, that the alternative is five-acre ranchettes gobbling up this great farm ground.

David Roberts

Well, this divides the environmental community too. Like, none of our traditional factions really — like, this issue scrambles almost all traditional factions.

Senator Forrest Mandeville

It does. And the ranchers don't want to see 20 acres full of weeds. They want to see — I'm sure ranchers would rather see organized development than sprawl chewing up land. Also, ranchers want to be able to sell a portion of their land, maybe to put a kid through college or to retire, without jumping through a bunch of hoops. There's a lot of groups that are very in favor of these reforms and it has been a very interesting coalition.

David Roberts

Well, Senator Boldman, the flip-side question, who is resisting? Who is the organized resistance? Because a lot of the, like you say, a lot of the sort of traditional groups that might resist don't seem to have fought very hard on this. Who is fighting? Is there organized resistance?

Senator Ellie Boldman

For sure. And so, I think that Senator Mandeville, as a planner, works in a professional space with the cities and towns much more robustly touts their cooperative support, which in some ways, particularly on the big bill in '23. But I feel like their support really came around to a sense that the writing was on the wall that this was going to pass one way or another or some forms of it. And so, it was better to sort of be in the tent than outside of the tent. I will say that they weren't supportive of all of the regulatory reforms from '23 and certainly not of the '25 legislation.

And so, I still see very much a lot of the cities and towns, particularly the bigger urban ones, ones like the Bozemans and the Missoulas, having very strong opposition. In the red versus blue divide in Montana, you know, for the most part, a lot of times the more urban areas where there's a university tend to have more — where we elect Democrats. Right. And so the pressure on then Democrats to vote for local control at all costs, you know, God forbid, then that really puts the pressure on then the Democrats to oppose. I think that there still again is a lot of opposition in some spaces and places in the environmental movement.

There needs to be a lot more education, a lot more robust education about bigger picture connections. Like really connecting with some of the older environmentalists, connecting the dots on why, you know, "Why does housing matter for birds, trees, and fish? Let me explain to you why."

David Roberts

I'm doing what I can.

Senator Ellie Boldman

Yeah, yeah, yeah. No, but it's critical because the pressure on the left and again, I think that I'm really appreciative that we're all acknowledging really what seems to be a bit of a generational understanding of bringing in more middle-aged and younger legislators to talk about this issue. I will say that across the board, 100%, it would have been very difficult for some bills like my height restriction or the parking lot, if there wouldn't have been enough Democrats and Republicans, those bills would not have passed. So, you couldn't have had a coalition in either caucus to make any of those go.

It really took both sides of the aisle working together. But I did want to say that the sort of targeted approach to workforce development or attainable housing, you know, whatever kind of language that we're all trying to use targeting certain types of workers, seemed to work. So we were talking about targeting workers. And so instead of approaching the unions from a space of like, "Well, we'll use union labor to build," we're going to actually approach the unions to say, "We're going to build houses for union laborers." So the idea would be, "This is for teachers, this is for firefighters in our community so they can raise their families in their own communities."

We are targeting the Department of Corrections, for example, in Deer Lodge, and in some of these more rural areas, housing was an issue for them. So, we, the governor, really stayed dedicated to building and focused on tying building developments to certain types of people. And I will add again, that included the tribal nations. We learned that there were a certain number of reservations that had not had — and this is no BS — a new house built on some of our reservations since, like, 1982.

David Roberts

Oh, my God.

Senator Ellie Boldman

I mean, it was really kind of shocking, right? And it's because nobody, there was nobody that was investing in building. And so, I guess I just think that sort of eating around the sides of Democrats, really seeing that they're standing in the way when Republicans, time after time, get the headlines that they're in the front of this issue. This is actually when you knock doors, what people really want. They want affordable housing.

David Roberts

Well, everybody understands high home prices, right? That and gas prices. Those are two things everybody is aware of. So, Senator Mandeville, I'm very familiar with how people on the left discuss these issues with one another and with their politicians. And I'm familiar with all the sort of factions and all the infighting and all the ridiculousness that goes on on the left over housing issues. But, I'll just say up front, I'm not as familiar with how Republicans talk to one another about this. I'm just sort of curious, like, what you are hearing from your constituents about it and how you frame it to them.

Senator Forrest Mandeville

Sure, yeah, that's a good question. So, a lot of the reason we had some of these libertarian groups was looking at it from a right to develop your property in a market-sensible way. So, if the market demands a certain type of development, you should be able to develop it without having local zoning regulations, for example, saying you can't. A good example of that is the duplex bill. If there's a market for duplexes in your community, you have property, you want to develop a duplex. The government shouldn't say, "Well, you can't build a duplex just because you're not zoned for it."

That's not a good reason. So, we really took a free market approach to it. Another thing that I've had success with, kind of pushing for some of these bills, has been speaking to the generational individuals in our communities. "Hey, when your kids grow up, do you want them to be able to live in Montana? Do you want them to be able to afford a place? Do you want them to be able to find a place?"

David Roberts

I think that transcends politics. That particular point right there seems to me to speak to everyone.

Senator Forrest Mandeville

Yep. But that's been a really good talking point for us as well. It's just to make sure that kids can come home. So, I'd say between the free market and the keep kids around, that's kind of the approach on the right.

David Roberts

On the free market point, you can sort of, or I guess, sort of like the freedom point, you could see that playing out in one of two different ways. On the one hand, like "I want to do something with my land. The government shouldn't be able to tell me not to." But then you could also see people saying, "If our community wants XYZ rules, it's not up to the big state government in Montana to tell us otherwise." You know what I mean? Like, there is an element of state power overruling local power here. It's sort of an unavoidable element of that.

I wonder how that, if you, if you run into that?

Senator Forrest Mandeville

So, usually, the right doesn't get into social development ideas. Right? Usually, we shy away from saying, "The community wants this, therefore that's what we need to fight for." That's not typically the way these conversations on my side of the aisle go. A lot of times, it's, "If I want to do this on my property, I should be able to." Now, there's definitely some of that, "If I want to do it on my property, I should be able to, but my neighbor should not be able to do it on his property because I have to look at it."

David Roberts

Yeah, that's the real sentiment.

Senator Forrest Mandeville

Yeah, there is probably some confusion on where property rights start and end, and that probably transcends politics as well. One thing that I like to think of when I think about zoning is zoning should be seen more as a list of what you can do, not a list of what you can't do. Which is why we try to expand those by-right allowances by superseding local zoning in certain places with the accessory dwelling units, with the duplexes. This is what you can do, not a list of what you can't do. And try to expand some rights that way.

Because you don't want the fertilizer plant next to a school, right? You don't want the hog rendering plant right in the middle of town next to a single-family residence, residential neighborhood. One area that's kind of gotten a lot of Republicans in favor of zoning has been marijuana. With marijuana being legalized in the state, recreational marijuana being legalized in the state, there's been a lot of conservative county commissioners, conservative individuals that say, "Hey, how can we control where marijuana dispensaries are located?" And really, the best way to do that is zoning. Again, wind farms, solar farms.

A lot of times on the right, "How do we put sideboards on some of these uses that we're not necessarily in favor of?" Well, zoning. That's how you do that."

Senator Ellie Boldman

I think that on the left, Forrest is right. On the left, he hears me trying to educate my colleagues a little bit more on that topic, which is from my perspective, you know, "Why, why, why, why is this a statewide issue and not a local control issue?" And I think that we've sort of talked about two things. One, I'll share with my colleagues on the left that as I shared earlier in the podcast, developers and investment in larger scale housing projects, or any housing projects, need predictability. And in the state of Montana and everywhere, it was really a patchwork quilt of rules and regulations, and none of them made sense.

And you couldn't build an ADU here, and you had to have this many parking spaces in Kalispell versus in Billings. So, the predictability... But then, I think what's resonated a little bit with the lefties is the idea that a statewide crisis, like a human right, like housing, requires a statewide solution. And so then, that's when I sort of put on my lawyer hat. And in my lawyer hat, I say, "Well, hey, you know, we don't allow our cities and towns to have American with Disability Act differences. We don't allow them to have fire regulations that are different."

And so, at this point, when it does take, like I said, an investment that's going to be out of state or at an out-of-state level, then we're going to have to create this predictability on a statewide basis that requires these statewide solutions. And I think that that starts to get the liberals a little bit more thinking of the power of that, of this truly being almost like a humanitarian crisis and that it needs to be solved. You know, it needs that level of solutions because really, you know, that's how liberals think, frankly.

David Roberts

I don't want to make any assumptions, but I'm guessing, Senator Mandeville, that you don't use a lot of environmental language when selling these reforms to your constituents. I'm guessing climate change is not central to your pitch. But Senator Boldman, how about you? Do you find the environmental arguments —

Senator Ellie Boldman

Yes, 100%.

David Roberts

The pro density environmental arguments work for your constituents?

Senator Ellie Boldman

Correct, yeah. Two, you know, the biggest two things that really, to break it down and have it like, why does it matter is truly that just this idea that housing is a human right, that folks need housing, that working-class people need housing, that students need housing, you know, so there's sort of that argument, period, which doesn't necessarily, you know, obviously translate on the right. You know, sometimes they just — the free market should decide and they just don't care. But on the left, to really bring in a lot of my other colleagues, is this really understanding what it means to be a Montanan, what it means to sort of protect and preserve our way of life and the environmental movement and then really starting to get them to see how that translates in infrastructure, development, planning, density, multifamily housing, I mean, all of these sort of wonky ideas and how it really connects then to fish and trout and open space and ag land and that means that we've got to build in and connection to public transportation or transportation barriers.

So, and then I think that what I mentioned a little earlier too, this sort of third wheel, which is that there are different kinds of housing types. That housing "heads in beds" doesn't always have to include housing. You know, it includes apartments, it includes rentals, it includes crisis beds, it includes addiction. And so, to always continue to make sure that the conversation is that broad and to know that we do, we are lucky, I think, to have a movement here in Montana and a governor that actually does really care about the diversity of those types of housing.

I mean, he really is also invested in mental health and addiction. And so, those sort of working in tandem has been really, I think, useful to keep the Democrats together. And I just kind of, the only other thing is my "marijuana is the new housing" argument is that — I have gotten to see, right, like even in my own gestation these last couple years, my own support on the left of even now that there are these YIMBY movements that they are like active and they're out there and they're organized. I don't remember five years ago being a part of YIMBY groups or anything, you know what I mean?

David Roberts

It's really come on strong.

Senator Ellie Boldman

It's incredible, right? And to have the likes of Kamala Harris or anyone on the left have, I mean, it's an active part of both sides of the aisle. I mean, both Donald Trump and Kamala had housing policy plans, you know what I mean? And so, I think that that organization and that support on the left has really helped me because a lot of times there were only a few of us on the left kind of making these arguments. And when we're buffered more loudly and more organized by free market ALEC libertarian think tanks, it doesn't always curry a lot of trust on my side of the aisle that I'm working for...

David Roberts

So, the YIMBYs have come along and helped you? Basically, the YIMBYs have bolstered your...?

Senator Ellie Boldman

There's no doubt about it. To give it credibility because otherwise, I'm just sort of on an island, you know, working with the Americans for Prosperity, right? And it's a little odd. So, I really appreciate that they kind of have my back and that they help to then develop other lefty YIMBYs. That can really sort of bolster the credibility and then kind of get a few more votes on the left because there still are, God bless it, a number of Democrats that just will not budge on this issue.

They still fundamentally believe in parking garages and parking spaces, and that the mayor —

David Roberts

Oh God.

Senator Ellie Boldman

Oh, yeah, there's no doubt.

David Roberts

Senator Mandeville, if I could ask a slightly nerdy policy question. It looks like the bulk of the policies that you all have passed in Montana are more or less supply-oriented, basically like trying to free up more building, more building of more stuff, which is obviously the main thing. But there is the other flip side of tenant protections, protecting the housed, things like limits on fees or safeguards against eviction, a variety of tenant-side reforms. Are any of those on the radar at all?

Senator Forrest Mandeville

So, it comes up every session. Like you mentioned, there's a lot of landlord and tenant bills that we see. I'm not sure that those have made it into the housing policy side. One thing you have to keep in mind is the demographics of the legislature and what can pass and what won't pass. Montana is not going to pass a law that gets into price caps on rent. You're not going to do that in a Republican legislature because we have taken the supply side, let's get more heads in beds, let's get more units online.

That's been our focus. Not socializing housing. Pushing it more towards the free market.

David Roberts

Right. Senator Boldman, do you have any ideas along those lines brewing in the back of your head?

Senator Ellie Boldman

Well, heck, yeah. Okay, so last session we actually did pass an awesome, awesome bill. And it was one that I had sponsored and Senator Mandeville had co-sponsored with me. This last cycle was passed by a member of the House. And that was that application fees couldn't be predatory. So, in the rental market, the bill, and I'm sort of paraphrasing here, but basically, you pay an application fee once, the landlord can only charge whatever costs were associated. So whether that was the cost of a background check, the remainder of the application fee had to be returned and then you could use that application fee more than once.

So, this idea of this predatory, particularly in Montana, you were hearing that people were spending hundreds of dollars on application fees for rental properties and there was no room at the end anyway. And so, that is a really exciting bill that I hope they duplicate nationwide. I think we can move further in that realm a little bit. But I will say that just the supply side and building more apartments was so desperately needed that it has shown — I mean, we're sort of in the kind of newer days here — but we're starting to see lower rent prices in places like Missoula and Bozeman, more availability.

David Roberts

I just read the big article about Bozeman. Amazing. They built a bunch more apartments, and prices started coming down.

Senator Forrest Mandeville

It's amazing how that works.

David Roberts

The supply and demand works after all, who knew?

Senator Ellie Boldman

Yeah, yeah, it worked. And so, trying to translate, right, like why my silly bill of height restrictions and stairwells and parking and why that all sort of mattered was that it did have the end effect of building more apartments. I do think that as we continue to move forward, I really do think that there'll be more bipartisan interest in maybe not the socialize-y, the feel-good side of rent control type laws, but in this idea of just trying to make a fair playing field for folks that are renting out there. I think the chamber's involvement in that and the side of understanding workforce, economy, right.

Like, that has seemed to work for me with the Republicans. They all have employees and they certainly — but also particularly for the Montana market or the Rocky Mountain west — employ so many tourist-based workers, right? Tourism is our economy. And so, they come in and so trying to sort of dovetail the need of seeing that connection has been really helpful. And so, I would be hopeful that we'll continue the coalition moving forward in that way and not just on the development supply side, and that we can keep that conversation going so that you can have us on again in a year or two with some more wonderful, wonderful miracles.

Senator Forrest Mandeville

Montana miracle Part 3.

Senator Ellie Boldman

That's right.

David Roberts

Senator Mandeville, I'm going to ask you for some speculation and feel free to turn me down if you have nothing to say about it. But I'm sort of pondering the partisan character of the housing issue in various places. Like, it's amazingly bipartisan in Montana. My general observation, tell me whether you think this is right, is that generally, I'm seeing Republicans in the west, the south, and the west be more open to housing reform, whereas Republicans in the Midwest and especially the Northeast, I think, are still very squarely on the NIMBY side. Do you think that's accurate and do you have any thoughts about why that is?

Senator Forrest Mandeville

So, I don't know. I don't think I've seen that. I do think there are some differences state to state. You know, I've been able to get around the country a little bit after working on some of these issues and talk to some people in other states about what roadblocks they're facing in implementing some of these reforms. And I'm not sure there's a nationwide or regionalized breakdown like that, but I do think in states where there are barriers to getting younger people in the legislature, I think that's where you see some of these roadblocks happen.

So, I think it's still generational, but there are definitely probably states where Republicans are older and more against it, and Democrats are younger and more for it, or vice versa, just based on how some of those legislatures are.

David Roberts

And Senator Boldman, a similar question about the National Democratic Party. Democrats seem to have kind of a different problem. I mean, it must be on some level for you to be sitting there as a Democrat and watch a Republican super majority sail through this amazing... I mean, these are things that, like, I know blue state Democrats who have been scrabbling and working themselves to the bone to try to make incremental progress towards these things for decades. And then Montana just comes along, passes it all in two sessions. Does this cause you to reflect on the Democratic Party a little bit?

Senator Ellie Boldman

Oh, my God.

David Roberts

Do you think Democrats can learn a little bit about what's going on?

Senator Ellie Boldman

Oh, my God. Do you have a minute? No, just kidding. You know, Forrest knows how I feel about this. You just continue to change and grow. And you know, obviously both parties right now, I think, have a lot of purity tests that are problematic. And it's getting, obviously, I mean, if anyone has looked at an election lately, it's clearly getting in the way of the shared values we all have. And I think that the party purity test right now, I mean, David, I'll tell you, I think there were Democrats in the Montana legislature that would oppose some of these housing bills just because they were coming from Republicans or just because it was the governor's agenda.

Like being associated with the Montana miracle is kind of like a persona non grata, like, "Oh, Ellie's on the task force," you know, and I think it's a real shame. And again, I'm thankful for the YIMBYs out there, the YIMBYism movement, to continue to shine a light.

David Roberts

It's almost like getting something done right offends their sensibilities on some level.

Senator Ellie Boldman

Listen, I mean, I'm telling you. And so, we're just going to keep sludging ahead and knowing that on the ground, respectfully, I'm more popular than ever. It might not make me as popular all the time with our constituent groups, but I know that at home and folks that care about housing, they certainly know. And I think that again, bringing in what Forrest said about, you know, these other states, if the Democrats can't, it's like if they can't have it completely built by HUD or something, right? Like not all housing can and should be for — and here's the thing I say: my dad worked for the telephone company. We're a working-class family. We never lived in government-sponsored housing and neither do a lot of families.

So, this idea that all working class, you know, or even lower and middle class poor people, not all of them live in government-sponsored housing, I mean, it's just, it's ludicrous. The private sector has to be a part of the solution. Government can't and shouldn't do it all alone and we don't have enough tax dollars out there to do it. You know, and so to try to get, I think the left to understand that the public-private partnerships and that the resources that, you know, forging together with solutions, it's attainable.

I think what is interesting again is more and more people understanding these generational divides on more issues than just housing. I mean, there is just so clearly now to me a movement of, you know, Gen X, millennials, whatever that next group is. What are they called again?

Senator Forrest Mandeville

Gen Z.

David Roberts

The millennials are old now. This is hard for me to keep in mind as a Gen X guy. The millennials are old now.

Senator Ellie Boldman

I gotcha. But my point is that I think that if some of these states, for example, don't have term limits, that's why you're going to find Republican old guys that aren't coming along. Forrest and I and the legislators younger than us, whether or not I like term limits, now that I'm an establishment politician, I don't like term limits. But I see the utility and how important they were because Forrest and I would never have been at the table 10, 15 years ago if they hadn't existed. Right? And they continue to create these opportunities out in the west, out here, that you're going to continue to see these coalitions build in this movement.

But again, that free market idea, those guys, without them continuing to include, they didn't have to include us, but to continue to include us. I guess they did have to, because again, you wouldn't have had the votes on a lot of these issues without the Democrats, even if we were a small coalition. And so, to continue to see us all working together, not with the party labels and the purity tests, but on the value-based labels, has been really kind of fun.

David Roberts

I'm just terrified that the national parties are going to notice and descend on you and crush all this cooperation and progress. Senator Mandeville, you say you travel around and talk to a lot of other states about land use stuff. You've been involved in land use stuff. Do you think Montana can serve as a good model for other states? What do you tell other states about following this model? What sort of tips do you have?

Senator Forrest Mandeville

To do the coalition building, you've got to start early. I mentioned the planners started working on this before anyone else did, and I'll just give a plug for my profession: you've got to have the planners, the people that are going to put this stuff into practice, involved. They're the ones that are going to be able to tell you whether or not it can work logistically and process-wise, and where those pitfalls might be. So, get the practitioners involved, get the coalitions built. It's going to take a while. You're not going to do this overnight.

I know it seems like in Montana we did it really quickly, but a lot of these ideas had been percolating for a while and just hadn't gotten across the finish line for whatever reason. And it took us all pulling in the same direction to get some of these done. Like I think Senator Boldman mentioned, you can't let the perfect be the enemy of the good. You've got to be willing to give and take a little bit. If you don't like parking minimums, and I hate parking minimums, but you're probably not going to get rid of all parking minimums.

So, you can kind of start targeting some of that stuff like Representative Zolnikov's bill did last session. In cities of certain areas, certain types of units cannot require or can only require X amount of parking spaces. That's a good starting spot.

David Roberts

"28-year-old Zolnikov," we should say, speaking of the generational divide. Senator Boldman, is this — I mean, it's only been two years since the first round of bills in 2023, and obviously, the 2025 bills are still fresh — it's a little early to make any judgments, but do we know anything yet about how it's going? Is it working?

Are things happening? And I'm especially curious about whenever you get these state laws that are in some way or another kind of overriding local limitations, you end up with the question of like, how do you enforce it on the locals? You know, because you're going to get towns and cities that are going to try to weasel out of things in various ways. So, I'm just curious like A, is it working? And B, how do you enforce it?

Senator Ellie Boldman

So Senator Mandeville and I talk about this often, right? The developers have been coming to us and saying, "Well, XYZ City basically isn't following the law and our only recourse is to sue." Right? And so we're working through that and we're going to have, I think, some carrot and stick conversations moving forward of how to carrot and how to stick compliance. I think that's going to end up with our great successes. The Montana miracle means now that the next cycle is we are going to probably have to figure out whether now we have to use some enforcement mechanisms to make sure that our communities are complying.

But we do know, right? Like the idea of boots on the ground, you know, houses are being built in our communities across the state. You can literally see developments being built. And we know anecdotally now that there are enough that have been built over the last several years that the rental prices in certain communities now, we know more than anecdotally, there is the data now that they have been going down. So it's working, right? We know it's working. You do build it and they do come. And the more supply that we've created has resulted in more competition and at least rental prices going down is what we know so far.

David Roberts

What about politically, though? Is there, I mean, I can imagine a lot of legislators sort of fearing a public backlash. You know, like if somebody comes to Missoula and proposes building a six-story building above Butterfly Herbs, which I think would be awesome, right? But I'm guessing you would have Missoulans in the streets with torches. I'm curious, has there been any political backlash?

Senator Ellie Boldman

And here's what I do. I shame them, and I shame them by saying, "You know what, we need housing." That's the bottom line, is that going back to sort of those liberal values of that "this is a human right." And we had a true crisis. We still have a crisis, right? I think what, 51,000 people moved here in over two years.

David Roberts

In three years, 50,000 residents came there and 19,000 homes were built during that same time.

Senator Ellie Boldman

And so, you know, you just have to flat out shame them. You know, the reality, as Forrest and I both know, is that the problem on both sides of the aisle, and this is something that no politics can fix, is that Montana's way of life is changing. And that's a fact. And that's really, really hard for a lot of people who've lived here for generations. Right. Their way of life is changing. And so, whether or not we put another few stories on Butterfly Herbs in downtown Missoula or we put it anywhere in the state, that is the truth.

Montana, you know, Colorado, Idaho, it's changing. And so, those are the things that politicians can't fix. And so, how we're going to have it change is hopefully in a way that does require Democrats and Republicans to work together to have safe and healthy communities. Right. And preserve the environment. And to do that is this movement, this sort of very YIMBY movement together.

David Roberts

How about you, Senator Mandeville? Is this, I can imagine, a Republican voter sort of thinking like this, you know, more housing, "I just associate that with Democrats, basically. I associate that with blue cities." You know, are you getting any backlash at all?

Senator Forrest Mandeville

Yes, I have had people tell me that I am "helping the United Nations implement Agenda 2030."

Senator Ellie Boldman

Right, right. And I'm in the back pocket, I'm in the back pocket of rich developers.

David Roberts

Oh, that's a perennial. That's a perennial.

Senator Forrest Mandeville

So, it happens. But a lot of it is, "Well, I don't want high rises in my community." Well, if you don't live — you know, it's not that people are going to be forced to build high rises where they're not marketable, where it's not going to happen. You don't have to worry about someone coming in and the only thing they can build is six-story buildings. That's not what any of these bills require. They don't require duplexes. They just require local governments to allow duplexes in certain situations. I think a lot of times people look at what the bill allows and see they're afraid that that's what the bill mandates.

David Roberts

"Oh, that's very common. The response to parking reform is very much like, "Oh, you're going to make parking illegal."

Senator Forrest Mandeville

Yeah, a lot of times when I do get those calls from my side of the aisle saying, they're worried about what the results are going to be, usually we can talk through it and just explain where I'm coming from, and it works out. So, it's been a good opportunity to be able to nerd out on some planning issues with people that wouldn't normally do it. And, I can nerd out on planning stuff for a long time.

David Roberts

Same. All right, well, I've kept you guys too long. So, by way of wrapping up, you know, this is like the bills from the last two sessions are just, I have to say again, just remarkable in their scope. Like these are a lot of like holy grails for housing reformers that you've just sort of knocked down like a bowling frame. So, I'm curious, what's next? Are there obvious next items on the housing agenda or are you kind of done for now?

Senator Forrest Mandeville

We're never done. I think one thing I'm watching is the Land Use Planning Act. Several of our reforms are being challenged legally.

David Roberts

Oh, I meant to bring that up, but that just got resolved. Right, the judge voted.

Senator Forrest Mandeville

So, it was partially resolved. It's being appealed. From my perspective, from the Land Use Planning Act perspective, some of the stuff that was thrown out was the front-loading, the planning process. Montana does have a strong constitutional right to know and participate, which is great. I mean, it's good to have that for sure. I'm not saying we need to get rid of that or water it down by any means.

David Roberts

Limiting some of these local meetings runs afoul of that?

Senator Forrest Mandeville

That's been what a judge has said. I disagree with that. I mean, I think if you take that out to its logical conclusion, he's saying that the city would have to have a public hearing for every action. I mean, I couldn't care less if my neighbor has an accessory dwelling unit. Right. The most annoying thing is if they have six dogs. But you know what? They don't have a public hearing to get their dog license. So there's just some perspective that I think is needed when we talk about this. But to just make sure that these laws withstand legal scrutiny is a goal of mine.

David Roberts

So, just to clarify, a lower court judge ruled on that, upheld most of the law, struck down a few of the things regarding limiting local participation, and now it's being appealed to a higher court. That's the current correct status.

Senator Forrest Mandeville

Yep.

David Roberts

And do you think that's going to go high? Do you have any idea how high that's going to go?

Senator Forrest Mandeville

I figure the State Supreme Court.

David Roberts

It's quite interesting. It'll be really interesting to see.

Senator Forrest Mandeville

But yeah, you know, if we need to massage some places in law to make sure that we are allowing the proper amount of public participation, that's something that I'm definitely sensitive to and we'll make sure that happens. I think we want to keep working through some of these other requirements like the building code that I mentioned earlier. I think that's going to continue to be an issue. Water is for fighting, whiskey is for drinking in Montana. And we are going to have to continue to work through our water right process and how water is supplied to rural homes, how the expanded place in use is handled through the water right process when cities annex.

Same with wastewater disposal, we're going to have to keep looking at that to make sure that we're both protecting the environment to the extent that we're responsible for, and as required in statute, as well as to make sure that we can provide the housing that's being demanded of us. So, there's still a lot of stuff to work through and frankly, I'm looking forward to the challenge. There are some of these things we definitely have to thread the needle on. You can't throw out all the environmental protections for the sake of housing, but some of these protections aren't necessarily reasonable and we do need to work through them.

Senator Ellie Boldman

Well, that's good to hear.

David Roberts

And Senator Boldman, what's next on your housing agenda?

Senator Ellie Boldman

Yeah, yeah, well, let's not throw out all the environmental protections.

Senator Forrest Mandeville

Now, you sound like a Democrat.

Senator Ellie Boldman

There we go. Let's keep a few of them. Poop in the water is not good.

David Roberts

They just reformed CEQA in California. Democrats did that. They reformed their own environmental law. Miracles can happen.

Senator Ellie Boldman

"We, you know, I think going forward, we're definitely not done. I'm excited that we can continue to do more. I think we want to keep an eye on what type of housing is being built. I think there's going to be a lot of conversations to make sure that we continue to, you know, hear some criticism to make sure that the housing bill isn't just for... We talked about the COVID Zoom boom. But we also have what we call the Yellowstone effect, which is the TV show Yellowstone and Kevin Costner. And every rich person —

And so, they say, people get off of the airplane and they go to the real estate agent and they just say, "I just want to buy a ranch." So, I just think that the Yellowstone effect will be to continue to monitor that all the housing being built is attainable for the workforce. Right. We're not just building for the wealthy. I think there is a real conversation. I'm not always as persuaded against the Airbnb/VRBO thing, but I do think that we want to keep making sure that again, we're a tourist-based economy in the state and so in Whitefish, Kalispell, Bozeman, Missoula, they're not just a bunch of out-of-state hedge funds that are buying all our apartments and turning them into VRBOs.

I think that there could be some legitimate criticism there that we want to watch out for. And, you know, I think that we still have one more term with the current governor and he continues to be really passionate about it. We have a lot of really great partners right now that are coming back. And so, like I said, I hope that we're on your show again in a year or two to talk about Montana miracle number three. And you're always welcome to come out here for a Grizz game.

David Roberts

Well, we do periodically. My wife loves minor league baseball.

Senator Ellie Boldman

There we go.

David Roberts

So, Missoula just has the prettiest baseball field. Well, this has been delightful, you two. Thank you so much for walking us through this and thank you so much for all your work.

Senator Forrest Mandeville

Thanks for having us.

Senator Ellie Boldman

We got to nerd out together. This was a blast.

Senator Forrest Mandeville

Yeah, this was great. I appreciate it.

Senator Ellie Boldman

Thank you so much.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

PG&E, California's notoriously troubled utility, is trying to prove it can innovate, so I invited Quinn Nakayama, head of its new GRiD program, to explain how. We discuss its strategy of publicly outlining its problems to attract partners and its shift toward faster, more flexible interconnection for new loads like EVs and data centers.

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Text transcript:

David Roberts

Hello, everyone. This is Volts for July 4, 2025, "PG&E tries to prove that a big utility can innovate." I'm your host, David Roberts. Lots of people in the clean energy world, ( me, for instance) spend lots of their time criticizing electric utilities, which they accuse of slow-walking the energy transition due to corruption, industry capture, or a simple lack of imagination and courage.

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Few utilities have faced more of that kind of criticism than PG&E, California's largest. Back in 2022, I did a pod with author Katharine Blunt, whose book California Burning documents PG&E's long, rich history of catastrophically screwing up, getting caught and punished, promising to do better, briefly improving, and then a few years later, catastrophically screwing up again.

In the late 2010s, with wildfires raging and rolling power outages, criticism of PG&E once again reached a crescendo. It was once again punished (to the tune of a $1.9 billion fine from the CPUC in 2020), and it once again vowed to do better.

So, how's that going? Somewhat improbably, several people have mentioned to me in separate conversations in the last few months that PG&E is doing cool stuff these days. And they all told me to talk to Quinn Nakayama.

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Nakayama, a longtime utility veteran, is leading the Grid Research, Innovation, and Development program, GRiD for short, PG&E's new initiative to move faster, experiment more, partner more, and embrace new technology. His job now is to look into virtual power plants, autonomous fire-detecting drones, smart EV chargers, and other gizmos that can reduce rates, reduce emissions, and improve service. I am very excited to have him here today to talk through all this new stuff and, more broadly, whether a big utility can actually learn to be nimble.

All right then, with no further ado, Quinn Nakayama. Welcome to Volts. Thank you so much for coming.

Quinn Nakayama

Hey, thanks for having me. Appreciate you inviting me on here.

David Roberts

There's a lot to talk about here. Turns out, once I dug into it, PG&E is involved in all kinds of stuff, more stuff than we could possibly cover here. But I want to start with just a little bit of background here. So, I think a lot of people remember the fires, they remember the planned blackouts, they remember the fuss, the controversy, all that stuff that happened in 2020. You got a new CEO in 2020, Patti — How do you say her name?

Quinn Nakayama

Poppe.

David Roberts

Poppe. Patti Poppe, that's delightful. You got a new CEO, Patti Poppe. Just tell us a little bit about post-2020 PG&E history. What has been, what did that episode galvanize?

Quinn Nakayama

Yeah, you know, I think we'll start even before if we think about what was going on in the industry prior to 2017 when a lot of the major wildfires were starting. A lot of our innovation and DER integration is a big hot topic across the industry. Then 2017 rolled around and we had the October wildfires as well as the campfires, and our whole organization then just pivoted toward how do we innovate towards reducing and eliminating wildfire-related risk? So, you know, a lot of the things that the whole company was working on, including the former iteration of my organization, was really driving towards how do we eliminate this risk?

And you know, we knew that we would have to shut off customers as a part of that and that would really hurt their reliability and start to look in some places of our service territory that it looks like, you know, almost third-world type of reliability on our grid. So how do we go ahead and innovate around that while we eliminate our risks? So the company at that point pivoted a lot of its resources toward drone technologies, towards something called "enhanced power line safety shut off" to really try to eliminate the ignitions that happen when vegetation comes to our lines and even on microgrid related stuff. So during that period of time, you saw a lot of focus around AI, ML, data sciences, identification of where our risks were on our system and how we would go about eliminating that risk.

David Roberts

So then, what was sort of your... When you were given the reins of this organization, what was your remit? So, like, what was you, what are you assigned to do? What's your job now that you've taken the reins of this GRiD program?

Quinn Nakayama

Well, you know, I had the previous incarnation right prior to this where our remit was around wildfires. So, we were looking at things like the remote grid program, which was, how do I put, you know, solar and energy storage and maybe sprinkle in a little bit of propane out to these places where you had these three, four-mile overhead distribution wires going to a small ranger station? You know, 10 years ago that was appropriate grid construction. Now, you know, you just can't do that with our climate change impacts, we're saying. So, we did these microgrids that were basically completely off of the grid, but still created utility-level reliability and service.

And so, that was one of the big projects that we had worked on in my organization, as well as, you know, how do we think about the dispatch of temporary generating resources out there that could quickly isolate a particular area and create two days' worth or three days' worth of resilience. That was a temporary microgrid-related program that we had stood up. So, a lot of cool things that we had been able to execute and lift up during that period of time. You know, after 2020, 2021, the company had taken significant amounts of risk off the system with modeling, with hardening, with EPSS (Enhanced Powerline Safety Settings), with PSPS (Public Safety Power Shutoffs), and all these types of various acronyms to just basically really reduce our risk and wildfire-related risk.

The work is never done, obviously, but you know, when Patti came on board, we knew that we needed to be a company that wasn't just about wildfire-related risk. It needed to do that, but it needed to be an "and". We needed to look at electric vehicles, we needed to look at electrification, we needed to look at decarbonization, we needed to look at how do we get to a position where we can start lowering our rates and focus on customer affordability? So, when we took and created the GRiD organization, its remit was to take a look broadly across our energy system.

And at this time, we created something that was called the True North Strategy. That was done by the strategy organization, and we attached our innovation and research and development that was really tied to that True North strategy that says, "Hey, electric vehicles, integrated grid planning, transmission asset strategy, wildfire, undergrounding, all these different types of energy system initiatives, how do we go ahead and create the right R&D and innovation that can tackle some of the biggest needs in those areas?"

David Roberts

Just remind us what kind of targets you're operating under, state targets, and then PG&E has some of its own, right?

Quinn Nakayama

Right. And again, some of this, you know, we'll see how this sticks in the next four years. But like, you know, our current targets are 100% net zero by 2045.

David Roberts

That's California.

Quinn Nakayama

That's California. And that's from an energy perspective. Right. And then you have other types of targets where 100% of sales of vehicles have to be electric by 2035, with these ambitious goals to be able to reduce million metric tons of carbon emissions from both the automobile sector as well as the electrical sector by over 60%, and then figuring out how to reduce the total cost of energy wallet. If you were to include gasoline as a part of people's total cost of energy, reduce that entire thing by 30% or greater. So these are some of the areas that we are really focused on, on trying to figure out how to achieve from a very high level.

David Roberts

So, you have to completely decarbonize the California electricity system by 2045.

Quinn Nakayama

Yeah, no problem, right?

David Roberts

That is not very far away. So, I mean, basically at this point, it's a crash decarbonization program for the next 20 years, isn't it? I mean, it can't be — there's no hope of hitting that target unless you're like going for it basically from now till then.

Quinn Nakayama

I think California is probably best positioned based upon the work that we've already done. I mean, our energy procurement folks have just done a marvelous job on getting solar and energy storage procured on our systems to try to reach that 2045 goal, you know. And then you also have our various load management programs that enable us just to procure a little bit less than maybe what we would need to procure.

David Roberts

But just on the, on the general organization. You put out this document last year, an R&D roadmap, I guess you'd call it, in which you are sort of laying out and you sort of. You've described this as somewhat counter to previous utility practice in that you are kind of in this R&D document exposing your weaknesses, sort of exposing like where you need help to accomplish these extremely ambitious targets that you just laid out. Is that the idea here? Like, "Here's where we need help, come help us" type of thing?

Quinn Nakayama

You know, I am greatly inspired by TV shows that I watch. And I am a huge Aaron Sorkin fan since the days of like West Wing, right? Like, it kind of drives a lot of my thinking. And one of the things that I really loved when I was watching back in the day was a show called Newsroom. And not a lot of people have watched this Aaron Sorkin show.

David Roberts

It's legendary among journalists, believe me. Not necessarily in a good way.

Quinn Nakayama

Not necessarily in a good way. You know, it had this one spiel where, you know, the main character goes off on why America is not the greatest country in the world anymore. One of the pieces that he says is, "The first step to solving a problem is realizing that you have one." And I apologize, I'm butchering that quote.

David Roberts

But at the end of the day, what we wanted to do is, "Hey, listen, we know that there are problem statements out there for innovation that is needed." At utilities, we know about because we live it every single day. But those conversations happen all internally. And how do you ask the industry, how do you ask these vendors to know what you need until you tell them? You know, so many times I go to places that are great, like these DistribuTECHs of the World and IEEE PES's of the World. And you know, you get a lot of these vendors who come up to you and try to sell you a particular product.

Quinn Nakayama

And it's kind of like, well, here's a technology in search of a problem. And we wanted to flip that conversation. We wanted to say, "Hey, listen, vendors, here's the problem I need you to go out and solve for me and give me a technology that solves a problem." And now we're getting into this mode where somebody will come up to me and be like, "Hey, listen, we want to talk to you about particular partnerships." I'll say, "Great. Have you gone through our R&D strategy report? Which problem statements do you think you can create 10x returns? And let's start that conversation from there." And it's been really, really helpful.

David Roberts

And you say you've been signing these deals, partnerships basically, with third parties. I mean, that's not new as a practice, is it? But it seems like maybe you're doing more of it than traditionally.

Quinn Nakayama

The things that we're doing with these vendors are not new, but at the same time, it's much more focused. And so, there's a couple of things. You got the institutional vendors that we've always worked with, the Schneiders of the world, the Eatons, the GE Vernovas. And those conversations happen all the time. We have conversations with them all the time. But this enables the broader technology ecosystem to understand what we need. And even for the vendors, institutional vendors that are with us, it even gives them a greater appreciation. Because our R&D strategy report just doesn't talk about the problem statements, it talks about the themes.

It talks about the Energy Systems Initiative and our strategy. So, it gives a little bit of a flavor of both what our strategic approach is and what the problem statements are that we need to solve in order to hit those strategic approaches.

David Roberts

Right. And this is just to align everybody to help you. So, I want to dive into several of the individual areas you identified. But just sort of starting at the general level, I'm just kind of curious, like, what you see as your big weaknesses. As long as we're being candid here, and I'm curious also, are they PG&E specific weaknesses or are there weaknesses you identified that are sort of like endemic to utilities, if you know what I mean.

Quinn Nakayama

Okay, well, you know, when it comes to weaknesses — I mean, that laundry list is very, very long.

David Roberts

Maybe, you could give me like a top three.

Quinn Nakayama

Yeah, absolutely. I think one of them is internal and then the other one is a little bit more external. We'll talk about the internal one first. I think, you know, when it comes to actually executing on innovation, utilities hire particular people that have really amazing skill sets in engineering or in project management and construction. And if you think about this, at the core of what a utility is, it's a lot of engineering resources and project management resources to support our construction resources to make sure that the construction pipeline is filled with the right things and moving along the timeline that you need it to move along with to get things done.

But if you think about innovation as a process, what you start to realize is that product development and project management are two completely separate skill sets. And if you think about the type of people utilities tend to hire, we don't hire people who have a significant amount of entrepreneurial backgrounds, right? They haven't really started their own companies, they haven't gone through a venture-related process, they haven't had to get Series A or Series B funding. That's just not the type of people that we typically hire. So the real question then becomes, what is the process of innovation?

And then, what are the types of skill sets that you need to bring into the company in order to help these folks who are very smart, very well-intended, to give them the right tools and processes to accelerate innovation very quickly? This has been done very well in Silicon Valley. I mean, it's just right in our backyard. And you would expect that a utility that has Silicon Valley would be really good at this. But obviously, it's a challenge.

David Roberts

Well, I mean, utilities are notoriously conservative and for good and obvious reasons. I'm sort of curious, like when you approach people like that. I think people like that probably view utilities as — I'll just say you probably have to persuade someone like that to come on to a utility, right? Because the public image of utilities is, you know, that they squash innovation, they're slow and etcetera. So people like that who want to move fast, etcetera, maybe are not particularly attracted to utilities. So I'm sort of curious, like what you tell them, you know, what you can promise them.

Can you promise them some freedom? Can you promise them a little, you know, room to move?

Quinn Nakayama

You know, actually, you'd be surprised, it hasn't been hard. And I think some of the work that we've done has really helped get the external market understanding that we're serious about innovation and we're serious about R&D and we're serious about decarbonization electrification. I'll give you an example. We did our R&D strategy report; this is our second year doing it. You know, we'll do a quick refresh this year. And then we did an innovation summit for two years in a row. And, you know, it was a pretty big deal to be able to expose out just the things that we were looking for.

And it really put PG&E back onto the public space, regarding just how innovative we needed to be in order to achieve these targets. And you get these individuals who have done this related work elsewhere, but maybe not in the energy space, or maybe peripherally in the energy space, but had a significant amount of expertise in starting up companies, starting up ventures, and they are driven by this innate desire to make the planet a better place and solve climate change. And do that in an area and a state that is progressive, with a utility that is progressive. I believe that we've been able to prove that PG&E is looking to be very, very progressive in a state like California that is truly supportive of a progressive agenda. And so, you get these people who are very, very excited about taking their skill set and applying it to a goal of, "Hey, if we can do it here in California, we can get it to scale across the entire nation and potentially the entire world and be able to make the planet a better place for our kids and our grandkids." That resonates with people.

David Roberts

Yeah, if you want reach, I guess, if you want, you know, some power, like institutionally, it's hard to get better than the biggest utility in the biggest state, you know. With the fastest energy transition, etc., I mean, it is right in the center of the action.

Quinn Nakayama

Yep. And then the rest of it just comes from passion. Right? I mean, I think if you hear Patti speak, if you hear Jason Glickman speak, our EVP of Engineering, Planning and Strategy, if you hear Carla, our EVP of Regulatory Affairs and Federal Affairs, if you hear even myself speak on stage, or Mike Delaney, all these people that are core leaders to the company speak about the passion and the energy they have for a decarbonized, electrified environment on the utility side, it's hard not to get caught up in the energy and the passion and the desire and that drives resonance.

And I think in this day and age, people want to feel resonated against. They want to feel like when they wake up in the morning, they're working on really important, really meaty stuff. And this is where it's at. It's in the energy markets here.

David Roberts

You need something to offset the avalanche of terrible news that greets you every morning. You need something to direct yourself at.

Quinn Nakayama

That's right.

David Roberts

So, that's one weakness: maybe not an entrepreneurial culture inside utilities. And then, you said there was another one external.

Quinn Nakayama

Yeah, and so this is one where I think, you know, I am a huge fan of this book that's out there, recently published, called Abundance. It's by Ezra Klein and Derek Thomas.

David Roberts

Oh yes, it comes up a lot.

Quinn Nakayama

Comes up a lot, I'm sure. And it strikes California right at the core. Right. I mean, it uses California as a huge example of what not to do. But also, you know, what is the potential. And you know, there is a portion of the book that really talks about research and development and some of the issues that we've had in research and development broadly and where do we need to go. And I think this is a major opportunity for especially the utility in the energy sector to have a voice in the types of maybe longer-term R&D needs that we have — that we may not be able to execute ourselves. Like as a utility, it's too hard, hard to actually do true research and development where we're going to create a brand new product from scratch. We're not well situated for that.

David Roberts

Well, part of creating something brand new is, you have to have a pretty high tolerance for failure. And, like if you're spending rate payer money, there's a limited degree of freedom you have, I think.

Quinn Nakayama

And the type of people that you need are like scientists, right? That type of, you know, and obviously, a utility is not going to carry a huge bankroll of these type of individuals.

David Roberts

You need a lot of capacity.

Quinn Nakayama

You need a lot of capacity, and it's just not a very effective use of maybe ratepayers' resources. But at the federal and state level, there's billions of dollars that can be spent on R&D, and it's not necessarily like, "Oh well, let's go after new clean energy solutions." There's already a ton of money there. But if you think about just general grid architecture, you've got these old overhead lines that have been constructed, architected, and designed a hundred years ago, and we haven't had any type of breakthrough innovations that have occurred on overhead design or substation-related design to be able to handle all of this new capacity that's coming onto our grid.

There's been some, don't get me wrong, but how do we as a utility industry come together? And again in a similar way we did the R&D problem statements, talk about some of these more 6 to 10 year development cycle needs that we could like if we were to put some home runs in place and really drive kind of blue sky thinking in this area, what would some of those ideas be?

David Roberts

It's probably true that a utility doesn't have the capacity to be like an incubator, like actually starting companies and starting brand new things. But it is also the case that a lot of new things, a lot of new companies in the energy world fail after they've already gone through R&D, you know, and first-of-a-kind kind of stuff because they bump up against outdated infrastructure and outdated utility practices. So, one thing you do have your hand on is you can ease their passage into the world, you know what I mean? Like, you can change the infrastructure so that they can be deployed, or you can change interconnection processes so that they can get online faster, whatever.

Like, you can make life easier for the young energy startups, I guess is what I'm trying to get around to.

Quinn Nakayama

Yeah, and I think what it is, is about us signaling what we want. Right? And so, being very clear on what are some of those home run related items that we would want to see. And then they would know that, "Hey, if I were able to successfully develop something in this particular home run space, that's a billion dollars market valuation" — across however many utilities, because we're not the only ones buying that product. PG&E is just one of very many large IOUs that have billions of dollars of bankroll that would take a look at maybe some of these, you know, 6-10 year development cycles and be like, "Yeah, I would buy a billion dollars of that. You make me something like that. Yeah, you have my attention."

David Roberts

But you're not like funding, you're not like doing like VC style funding of these?

Quinn Nakayama

No, no. And this is where we would need something like, you know, ARPA-E. Kind of like the DARPA concept, with ARPA-E and what they're doing, you know, working with a lot of the national labs, you'd need to work with, you know, private institutes like Breakthrough Energy and some of these other areas to say, "Well, we might not have the bankroll to be able to do this, but you do and you have a vested interest in being able to do this. Can you help us do this for us?" And that's where the partnerships with these type of entities are so critical.

David Roberts

Or LPO, the Loan Programs Office, which was doing exactly that kind of stuff.

Quinn Nakayama

Yeah, that's right. That's right.

David Roberts

R.I.P., I guess.

Quinn Nakayama

Yeah, and you know what? It doesn't necessarily have to be like on clean energy if that's not really the sexy thing that's happening on the federal side. But like even things that enable new types of grid assets to come online that enhance capacity to build faster, to build more, you know, because I think generally, I mean, Abundance talks about this. Right? The ability to bring in new industries starts with energy. So how do we create abundant energy that is cheap? And if you think about our general rate structure, 40% of our rates go to generation. Okay, great. You know, work on the clean energy and the energy portion of that for generation and battery storage and all that type of stuff. But 60% plus comes from transmission and distribution. So let's all focus. I think we can all get our arms behind a significant amount of R&D that would need to happen on transmission and distribution and substation that drastically brings down those costs.

And that's 60 plus percent on your bill.

David Roberts

And that kind of stuff is difficult for private companies to innovate on unless they have some sort of agreement with the utility. I mean, they need some sort of utility alignment to do meaningful work on that stuff.

Quinn Nakayama

Absolutely. And I think one great place, you know, as an example, is advanced conductors on transmission lines.

David Roberts

Yeah, yeah, right.

Quinn Nakayama

You got 3M, you got Southwire, you got TS Conductor, you have all these.

David Roberts

Now, vendors did a pod with TS Conductor last year. Great stuff.

Quinn Nakayama

Totally. And you know, that is one where, "Oh, you mean I can just reconductor my lines? I don't have to have any significant upgrades on my tower infrastructure for weight-related issues, and I can get 30 to 40% more from my transmission? Dude, I'll sign up for that any day of the week."

David Roberts

Well, yes, but like I had them on the pod and they listed all these benefits and then they also said, "Given all the benefits we offer, why aren't more utilities lining up at our door? Right? Like, why is it so difficult to get utilities to use this stuff when it's just like a win, win, win, win, win?" And the reason, you know, the reason lines haven't been upgraded more all across the country is that utilities are not operating under competitive pressure. You know what I mean? They just spend money at their discretion. So a lot of them just don't, they just don't spend the money upgrading these lines.

Quinn Nakayama

I wouldn't agree with that statement. I think utilities are. But there's more than one vendor out there, right? So, CTC Global is one company, 3M is a company, Southwire is a company. TS Conductor is another company, all of which have similar sorts of products.

David Roberts

So you think the utility industry in general is moving in this direction at a sufficient pace, upgrading its lines?

Quinn Nakayama

Yeah, and I think, you know, especially in California, coming to a theater near you because of data centers, all utilities are looking at significant amounts of load growth. So, you know, I would say 10 years ago a lot of the utilities were facing 0 to 2% load growth. They wouldn't be all that interested. Right. Like, "Okay, great." Most of those companies were focused on growing rate base.

California has more rate base, more capital than we could ever dream about. Our goal now is how do we do all of that capital need at the lowest cost possible to bring down rates, and now it's no longer, "Oh well, I need more capital. More capital." No, it's actually, "I need to be able to do all this capital for cheaper so that our rates can go down." And now I'm operating more like a traditional business where I have a P&L, where load growth versus cost actually makes a difference. It's just how a standard company works.

You have your revenue versus your cost. I mean, now we're operating much more like a private industry.

David Roberts

That's interesting. Well, let's look at some of these areas that you sort of identified as needs. There are too many for us to go through in any detail, but there are some that I am particularly interested in. The first one is electric vehicles, which I guess is another area where over the years I have said over and over again it seems like a flood of new load onto the grid via EVs — furthermore, new load that can, with a little bit of technology, be controllable — seems like a gift to utilities from the heavens. Like, you're worried about a death spiral?

"Oh, here's a giant bunch of new load that can help stabilize your grid." And yet, like utilities, have not been at the front of the line. They've been resistant, if anything, which is very peculiar. It's good to see a utility finally sort of embracing this face forward, like embracing this electric vehicle future. So, talk a little bit about what you need to make EVs an asset rather than a threat.

Quinn Nakayama

Yeah, I think from our perspective, EVs are a huge asset because of beneficial load. A beneficial load, in the way that we define it, is any loads that come onto our system that reduce rates. So, the revenue that we get from these types of loads exceeds the cost that it takes to put them onto the system. And so, that actually benefits all rate payers because now it actually has a rate depressionary type of effect.

David Roberts

And is it fair to say that it pushes down rates insofar as those loads are flexible? I mean, is it flexibility that makes a load an asset versus a burden?

Quinn Nakayama

Yes, I would say that that needs to be a part of the equation. But really for us, it's about how much faster can we bring on that load ahead of any type of capacity investments that we need to do that. And so, I'll give you an example. When a new load needs to come on like a, let's say it's a fast charger that's sitting on the Interstate 5, which goes from Northern California to Southern California, it connects the backbone.

David Roberts

Potentially huge load.

Quinn Nakayama

Totally. And some of these places, they want 4 megawatts of load, 6 megawatts of load in an area that basically supports a Denny's and a gas station. If you think about these areas where you want these fast chargers, they never historically had that much load out there to begin with.

David Roberts

Right. So, they don't have the infrastructure to carry the power to and from.

Quinn Nakayama

Totally. So now, our planners will take a look at it and they're trying to protect all customers around that area. So, they'll look at the summer and they'll be like, "Well, for the summertime, I can only give you like a megawatt to 2 megawatts of your 4 megawatt request. And in order for me to upgrade the system by putting a new substation and new lines, well, that's going to take four years." Okay, well if you squint at it, if you really squint at it, what you'll realize is, you know where we are over capacity happens for like a few hours, for a few days during the peak of the summer.

Okay, so let me ask you, high-speed fast charger, "If I ask you to obey some sort of signal from me that says I'll tell you tomorrow how much you have available from my distribution system at any given hourly time period and if you can follow that signal, I'll get you interconnected with 96% of what you want tomorrow. Could we work out something?" And what we find is EV fast chargers are like, "Yes, absolutely!"

David Roberts

They're all like, "If the alternative is not connecting to the grid, then yes."

Quinn Nakayama

If the alternative is not connecting to the grid or getting like one megawatt out of four megawatts for a six-month period, you would jump all over this. And for us, we're going to do the capacity upgrade anyways. It may take us three years to do that capacity upgrade, but in the meanwhile, I'll give you 96% of what you want. That brings more revenue in for us. It creates fast chargers out there faster. And, you know, this is where the triple bottom line really comes into play. It's good for the environment, it's good for our ratepayers, it's good for the customer.

And this is the type of solutions we're putting together. And that's where DERMS comes into play. And using that as a use case for that.

David Roberts

I'm guessing, and this is just kind of an intuition, but I'm guessing that most loads like that fast charger find that, like, if it's a 4-megawatt fast charger, I bet most of them find that it turns out they don't actually need the full 4 megawatts very often. In other words, that, like, you know what I mean? Like, you saw the paper, I'm sure, on flexible data centers that came out from the Nicholas Institute recently, and I think the thrust of that was just a little bit of flexibility, like hours a year, transforms the ability to put these things on the grid. Like, you can get a ton out of just a little flexibility.

And I'm sort of guessing that, like, you know, big loads have not necessarily felt the pressure to be flexible consistently in the past. I'm just guessing that a lot of big loads like these chargers are going to find out, "Oh, being flexible is easier than we thought and less costly than we thought."

Quinn Nakayama

That's right.

David Roberts

Proving out so far?

Quinn Nakayama

Well, I mean, just think about it this way. When you're rolling your Tesla or whatever EV up to a fast charger and it says 230 on it, or, you know, some really fast charging type of speed, and you plug it in and then you look at your actual monitor and you're looking at how fast your EV is actually charging, it's nowhere near that maximum rate. And then it starts diminishing over time as your battery gets more and more charged. So this whole concept of like, "Well, you know, I am going to ask this EV charger to maybe limit itself to 30% of its nameplate capacity for these two hours in a couple of days in a particular month." You start to wonder how much our customers are really going to be able to tell. And so I think that's where, like, all of us are kind of learning into this. And we're starting to see, "Oh, well, this is actually not that big of a deal."

David Roberts

Yes, this is my intuition. It's just that there's a lot more flexibility once you start looking. There's just a lot more flexibility than you think there's going to be.

Quinn Nakayama

That's right. That's right. So, this is like, for example, Pepsi. This is a great story. We were able to do this exact thing for Pepsi and we got their electric trucks on 18 months ahead of schedule. Right. And because just in that short timeline, by getting their trucks connected 18 months ahead of time, we were able to reduce by 8,000 tons of CO2 emissions and a savings of about a million dollars in fuel costs.

David Roberts

Oh, wow. And how much during that 18 months did they actually have to curtail output to be flexible?

Quinn Nakayama

We'll find out this summer, right? Like, you know, as the loads start to go up. But, you know, we did the calculation and we're not seeing that they need to be curtailed all that much.

David Roberts

I mean, I'm sure for them, like getting that additional revenue, the additional 18 months of revenue, all those savings, I mean, I'm sure that just wipes out whatever the cost of flexibility might be.

Quinn Nakayama

And we need to work with Pepsi to make sure that this is working out for them too. You know, and that's where the whole, "Let's implement this, fine. Let's have this agreement with the customers. Great." And then let's continue to touch base to see if this is working out for you, are there any problems, how can we adjust and things like that. So it's about working on these solutions together.

David Roberts

Yeah, and the second thing I wanted to ask about is the interconnection practice you are describing is what Texas uses, as I understand it, or some close facsimile thereof, but only Texas, as far as I know. So, does this indicate a broader change in interconnection policy? Just a little background for listeners who might not be up on this, but like typical interconnection policy is a load steps up, says, "I want to connect." The utility does often a very long study of "Can we accommodate you, and if we need upgrades to accommodate you? And that means accommodate your full peak, your full advertised peak of power you need. And if we can't muster that infrastructure, you have to pay for it."

And that just daunts a lot of people, sends a lot of people away, makes interconnection difficult. And what Texas does is just says, "Yes, you can interconnect if we can curtail you when we need to." And it turns out that gets people online much faster. And it turns out that nobody ends up in practice getting curtailed all that much. Like, so everybody, you know, there's a lot of praise for Texas's interconnection practices in this world. Does this mean that like PG&E's interconnection practices have officially sort of shifted?

Quinn Nakayama

That's where this Flex Connect comes into play. Exactly. And it's the, "Hey, as long as you're able to flex and obey our signals, right, where we set the limits, because we can see a day ahead what those limits are going to get approached to, then you can interconnect and get as much as we will allow you through these signals." Now, we want to eliminate that constraint, right?

David Roberts

Sure, eventually. But this is all about speed, right?

Quinn Nakayama

It's all about speed. Because, you know, I mean, eventually, we're going to want to do that upgrade anyway because it's not just that one customer that wants to grow. There's a whole bunch of other customers that want to access energy. So, it makes sense for us to want to, you know, be able to build that capacity. And then that also enables them to get off this Flex Connect program. Now, they can use whatever they want, however they want. But in the meanwhile, let's get these guys on faster, let's get them to use more capacity because that's revenue and we collect more revenue, it reduces rates and that's key.

David Roberts

"I mean, honestly, this alone seems like it's worthy of celebration, probably worthy of its own pod. Just like interconnection, this is the biggest, you know, for all the speaking of Abundance, you know, Abundance makes such a big deal of NEPA and the environmental laws slowing things down. But if you ask practitioners, if you ask developers what's the main slowdown, they all point to interconnection. They all point to slow interconnection routines. So, you know, one of the biggest electricity markets, shifting interconnection to make it substantially faster, just to me, is a big deal."

Quinn Nakayama

Yeah, and I would say though, like, not to diminish the need of our ability to build. So sure, this is a bridge solution and a very powerful bridge solution, but it's still a bridge. I still need to build and I need to build quickly and the interconnection processes could be a lot faster if I could build a lot faster. So, Abundance really strikes the chord forward in a lot of this. How do we enable, unlock these types of folks to be able to build quickly? And there are going to be winners and there are going to be losers.

There's no such thing as a golden type of solution where everybody wins everything, right? Like, there will be people that are inconvenienced and suffer through some of that. But, for the greater California needs, what is the right answer to this? And you know, Abundance really makes a case that building and the ease to be able to build is for the greater good of California.

David Roberts

For sure. Well, on the building and where to build and what to build question, let's talk a little bit about one of the categories of your R&D that you're looking into, integrated grid planning and transmission strategy. So, you know, PG&E has lots of big, long-distance transmission lines legendarily going out through the forests. They're a pain in the ass to maintain. The vegetation grows up around them. That's a whole thing. And it also has distribution areas, a bunch of distribution grids. And I think one of the things you're setting out to do is think a little bit more about how those work together and how you plan around those together.

So, just talk a little bit about what you mean by integrated grid planning and transmission.

Quinn Nakayama

Okay, so I think first off, integrated grid planning has a couple of different flavors. One of them is not as sexy. It's more like, "How do we take all of the work that we have in a given area, bundle it all together, and be able to execute it all at once?" And so, that's the core of integrated planning, so that we don't have to keep on going back to a place and doing more construction for a maintenance program, then a veg program, and then a capacity program, and hit that same location 17 times.

How do we only do that once, even if it means bringing in some plan that we may have looked at and need three years from now? Well, we're all going to do it this year because, hey, it's all in the same location.

David Roberts

I'm guessing that's something that AI is going to help with. You know, I should mention, AI is all through this R&D document. But anytime when you're like, "We need to wrangle a giant body of disparate information and get patterns out of it," that's always, that's AI.

Quinn Nakayama

That's AI. So, the other piece about transmission strategy and integrated planning is this: Where does it make sense for distributed energy resources to be able to help with constraints that are there for distribution and transmission and this whole concept of value stacking? And I think, you know, let me tell you kind of what I hear a lot and then let me tell you what I actually see. You'll take a look at the system and everybody looks at this concept called a duck curve. And the duck curve is all about "Lots of solar in the middle of the day, we should be able to use all that solar to charge all these EVs and we'll be all better for it."

David Roberts

And batteries.

Quinn Nakayama

Yep, and batteries. The issue is that that curve is what the system overall looks like. But when I take a look at a local area, like I live in Moraga, or if you live in Calistoga, or if you live in San Francisco or Humboldt, what you'll notice is on distribution at noon, you're not at this really big trough. You're somewhere around mid-peak. And I think the peaks will definitely ramp up around the 4 to 6 pm area on distribution because a lot of people come home at that time from work. The air conditioners are all running and yes, the solar starts to ramp down.

But I hate to say this, there's not a lot of solar on distribution as there is on the system. And so, if you start saying, "Everybody charge your cars at noon," unfortunately, you'll have the opposite impact of overloading the distribution system. And so, what we have to be, what we really have to look at is where does value stacking actually make sense? Because you want to make sure that if you're going to be paying somebody to do something, it's actually economically affordable for our customers. I think about it this way: You know, we have various interchanges on the freeway here in Northern California.

David Roberts

That's an understatement.

Quinn Nakayama

Right, right. And we have this place called the MacArthur Maze. It's where Oakland and San Francisco kind of meet from a traffic perspective. So, Berkeley, Oakland, it's a mess. Right. It would be like, "Oh, well, if I took cars off the road and I took them off the road in, you know, I don't know, someplace else like Kern or Bakersfield, how the heck is that going to help the traffic in the MacArthur Maze at that particular time?"

David Roberts

Right.

Quinn Nakayama

And so what you need to do is figure out how do you take the appropriate amount of cars at the appropriate time at the appropriate location?

David Roberts

So, you need a more granular view. Like the duck curve gives you the system view, but it looks different at a granular level. If you're actually going to try to fix it, you need to operate at a more granular level.

Quinn Nakayama

That's right. And so, that's why people talk a lot about VPPs and there's going to be value in VPP, don't get me wrong. But I always ask the secondary question, "VPPs for what and for where?" And that is a much more nuanced question than a much more complicated question. And that is something that we, I think, from an integrated grid planning perspective, really need to dive into.

David Roberts

Oh, man. I'm so interested in this. I don't know if you've heard. I mean, you're probably familiar with Pier LaFarge. I did a pod with Pier LaFarge and his whole pitch, which is basically, utilities are the entities that know where distributed energy is needed. They know where it would help relieve congestion. They know where it would help lower rates. So, what we should have is utilities doing procurements, doing distributed capacity procurements, DCPs, deliberately to get DERs built where they need them. Precisely to ease these granular constraints. Is this something that PG&E is going to get into?

Have you thought about doing procurements of DERs in areas where you feel like they're needed?

Quinn Nakayama

We tried this, and the issue comes down to cost-effectiveness. So, I'll give you an example. There is a little bit of math that goes into this.

David Roberts

Oh, I'm going to brace myself.

Quinn Nakayama

But if you think about this, right, a new feeder, a new circuit on our system costs anywhere on average, $6 to $8 million. All right, so if a new feeder costs me $6 to $8 million, what would I procure from an energy storage perspective if I were to go out and procure it per customer home on a DER basis? Well, at $10,000 per install cost for an energy storage asset, like a power wall, for example, it's about $10,000 installed, and I get about 10 kilowatt hours from that battery.

And so, when you do the math, what does $6 to $8 million dollars give you? Well, for energy storage, behind the meter product, you would be able to get 6 megawatts or 12 megawatt hours or 8 megawatts, 16 megawatt hours around for $6 to $8 million dollars. You'd have to do the math behind the scenes, but that's what you would get. If I put a new feeder in the system, let's say it's a 12kV system, I get 12.5 megawatts or 300 megawatt hours. On a 21kV system, I get 21.9 megawatts and 525.6 megawatt hours for the same amount of money.

So, you know, this is kind of the conundrum that you get into when you're procuring DERs. The amount that you get from the DERs for the equivalent amount of spend is significantly less. And so, there are just some questions on whether you can use existing DERs and then what would you need to procure, and is that better when you have such high growth that's happening in that area? Is that really the right tool to use in the toolbox? These are the questions that need to be answered. And where it's really been a struggle for us as a utility because the new feeder gives you so much more capacity than a DER solution, if you were to procure pound for pound.

David Roberts

Right. Obviously, everyone's thinking about data centers. Everyone's talking about data centers. Given California's high electricity rates, are data centers coming? Do they want to come to California, or are they just all going out into the desert? And secondarily, I just recorded a podcast with somebody who's designing a flexible data center. Designing a data center to be flexible, to be able to respond to grid signals. But most of them today are not flexible. So, I'm curious, given rising load, rising rates, all the kind of crunch that PG&E is in, how do you view giant inflexible loads knocking on your door? How are you thinking about data centers?

Quinn Nakayama

Yeah, so there are a couple of things here. The first portion is, we are seeing a significant amount of data centers wanting to come into California and multi-gigawatt related data center. I don't have the exact numbers on the top of my head, but they've been released regarding what we're seeing in terms of the cluster study that's happening in the Santa Clara area. I think it's like 1.8 gigawatts of additional data center related requests that are coming into that area.

David Roberts

Jeez.

Quinn Nakayama

Yeah, so you're going to have to build, right?

David Roberts

Again, to return to a theme.

Quinn Nakayama

But, like when you talk about specific locations of data centers, what you'll find is there may be enough capacity if all the transmission lines are in service in that given pocket. There may be enough capacity to be able to serve that data center. The problem is if I lose one transmission line or I lose two transmission lines, and this is where we are taking a look at overall reliability of the transmission system. Then that entire area will be overloaded. And we're not talking small overloads. We're talking about multiple tens of megawatts and even greater, like you know, close to 100 megawatts of overloads.

David Roberts

I mean, these loads are getting so big that if they trip offline unexpectedly or do something unexpected, it's a big grid event. It's like losing a substantially sized power plant. It's not a small thing.

Quinn Nakayama

It's not a small thing. And you can't just, in some of these types of situations, you may not be able to really flex your way through it. So then the question becomes, "Okay, if you want to interconnect these loads, it's going to take you six years so that I can do the necessary upgrades to avoid these what are called N-1 or N-1-1 contingencies." But if you were to squint at it and let's say your problem on overloads happened, if you had to lose two transmission lines, well, that doesn't happen very often.

And even when it does happen, we, as grid operators, don't allow that situation to persist on our system for very long. It's like emergency repairs, all hands on deck. So, would a data center be comfortable if they can interconnect their loads tomorrow or much faster, let's say three years ahead of time? And all I would need is an agreement that if I ever ran into those types of situations. Can I have permission to kick you offline, have you run off of your backup generators that you probably already have, pound for pound, megawatt for megawatt, for a specific duration of time? But that means that you can be interconnected on my system three years ahead of time. Is there a desire for that? And I don't know the answer to this. Like, we still need to work with our customers.

David Roberts

Well, I mean, everything I've heard, and I'm sure it's the same for you, is just speed, speed, speed, speed, speed. Like all they like, it sounds to me like they'd sacrifice just about anything just to get online a little faster. So, I mean, I've sort of been wondering why more utilities aren't kind of, you know, we're still, I still feel like a lot of areas are still in the mentality of like "We'll pay you to come here." Just like they sort of like to pay a stadium to come. You know, like they view it as economic development.

But, I'm like, " They need you more than you need them." You ought to be extracting things from them, not vice versa. So, this does create pressure on data centers to be flexible. Have you had enough experience yet to know how they respond to that question?

Quinn Nakayama

We think they would be open to flexibility. The big question is, how? So, is that really ramping down their loads, or is there ability for them to utilize these natural gas reciprocating engines out there to be able to offset some of their load? And what is California, how is California going to look at that?

David Roberts

Or just batteries? Like why isn't, why isn't just a giant stack of batteries the cheapest way to get through that?

Quinn Nakayama

In some situations, it could be. Now, if you're thinking about a 100 megawatt, 200 megawatt, 400 megawatt data center that needs to ride through a four-hour type of issue?

David Roberts

It's a pretty big stack.

Quinn Nakayama

Yeah, I mean, you could see Moss Landing from space, which is our major energy storage facility. And so, you know, it really comes down to size and, you know, how much would it cost and how long would it take, which is where a lot of reciprocating engines have a much higher energy density and can go forever. The issue for them is, you know, you have air quality restrictions here in California. And, you know, it's not like our gas pipelines were made for this type of drawdown in mind. And so, how do we make sure that we do these in places where there is available gas throughput?

And then what is California's take on just being able to leverage those?

David Roberts

And you're targeting zero emissions. I mean, let's not forget that. That at some point, that's going to take gas off the table, is it not?

Quinn Nakayama

That's a question that California needs to answer.

David Roberts

To say the least, yeah. So, we're running out of time then. Like, there's so much more in this R&D document. There's lots of stuff on undergrounding which we're not even getting into — I know this is a big push. Just quickly. Like, my sense of the conventional wisdom on undergrounding is just, is that it's wildly expensive and only really makes sense in very, very limited territories. Is that old information? Is there technological advancement happening in undergrounding?

Quinn Nakayama

There's a lot of technology being moved towards undergrounding because, you know, from our perspective, if we can get undergrounding to be $2.5 million a line mile and lower, you know, this becomes really effective for us, especially in these areas of high wildfire risk, which is in these mountainous conditions. So, yeah, absolutely. You know, different types of boring techniques, you know, different types of even grid design. So, for example, right now you have to trench really deep into the earth, rock, concrete, granite, to be able to put these distribution cables underneath the ground. Well, what about this new concept called ground level distribution system, where maybe you only need to dig just a little bit superficially on the ground, then you fill it with a, you know, composite material.

You lay the cables inside that composite material, and it's, you know, diamond-hard. Like, you could take a chainsaw to it and it won't cut through it.

David Roberts

Oh, so almost like embedding the lines in, like concrete or something?

Quinn Nakayama

Sort of like that. Something like that. And it kind of rests on the ground, but maybe just a couple inches below. And, you know, is that a new type of architecture and design of undergrounding that could be applicable in some locations? So, you know, there's a lot of innovation happening on undergrounding to be able to achieve a $2.5 million target. And this is where we need the industry to help us try to solve some of these with new technologies.

David Roberts

The other thing I wanted to touch on, obviously, there's a ton of work on wildfire stuff that we can't even get into, but all sorts of interesting, like autonomous drones. That's mostly about detection, I'm guessing, and sensors and stuff like that, which is, you know, technologically reasonably straightforward. But let's talk a little bit about gas because a couple of other states that have set decarbonization targets that are relatively close have taken the step of saying this implies that we gotta get rid of gas. Or at least this implies we have to get rid of unabated gas.

Right. Unless you're going to capture the gas emissions, unless you're going to do CCS. And so they've launched these future of gas utility dockets, you know, which is a long, elaborate process. I think Massachusetts has one going. Are you doing something like that? Like, what is the state of thinking on gas? And I'm sort of curious, like, are the people in charge of PG&E, are the people in charge of California grappling with the fact that their climate targets imply that they have to wind down a very large and elaborate gas infrastructure?

Quinn Nakayama

Absolutely. And some of this has to be taken a look at in steps. The first piece is, how do I get customers to convert from natural gas to electric? And that is an emotional journey for a lot of our customers. But it's also a technical issue on, "Wow, I'm now taking my gas stove or my gas-fired washer and dryer, or I'm taking my gas water heater and I'm moving that to electric." But half of our service territory has a 100-amp panel.

David Roberts

Half?

Quinn Nakayama

Yeah, a 100-amp or 60-amp type of connector.

David Roberts

Right, and upgrading those is pretty expensive to a 220-volt.

Quinn Nakayama

Totally. And you know, then I have to accept that new load on my service transformers and my secondary conductors. And right now, we are putting together innovations as we speak, partnering with some of these major providers on smart panels to be able to eliminate the need for any type of panel upgrade, service transformer upgrade, and secondary upgrade —

David Roberts

Like the SPAN panels, you have a deal with SPAN, right? Are you working with them?

Quinn Nakayama

Yeah, so SPAN is definitely one of the partners who has, in a very intriguing type of design, where they have a meter socket connector that goes to six breakers. And if we can figure out how to partner with companies like that and integrate that into this new AMI 2.0 (Advanced Metering Infrastructure) architecture, you have the ability to eliminate a panel upgrade, eliminate service wire upgrade, eliminate service transformer upgrades just by getting a new meter. And this little SPAN, let's say the SPAN meter collar product. And maybe it's less than a thousand bucks and you can get it tomorrow. I mean, that would be huge.

David Roberts

Yeah, just to be clear to listeners, what these panels do is they distribute your internal load in your house smartly such that it never rises above the 100-volt threshold. It's the same principle as sort of what you need to do within data centers or what you need to do within distribution areas or really like it's fractal, you know what I mean? It's all about managing power flow within a defined environment.

Quinn Nakayama

So, to make this really real for our listeners, I think the best way to think about this is you have an electric vehicle and that EV can charge at Level 2 rates. Right? But at the same time, if you were to traditionally run your air conditioner and your Level 2 charger at the same time at full bore rates, your electrician will take a look at that and say, "You need to get a panel upgrade." But maybe my EV doesn't need to charge as fast when my air conditioning is running. What if my EV charges just a little bit slower when the AC runs and when the AC turns off, then it's all good. And oh, by the way, I'm usually charging my car at midnight, so my air conditioning isn't really running all that often from midnight to 6 a.m. and instead of having my EV charge in an hour and a half, it charges in two hours. Well, okay, so what, it's still fully charged by six in the morning when I need to go.

David Roberts

Like most of these little adjustments, they are just going to completely go unnoticed by the people in the homes.

Quinn Nakayama

Right. And like, think about right now. I'm live streaming on my Internet at home, and I'm sure that my fiber network provider is curtailing me during the periods of times that I'm not using a ton of the Internet. But then, if I have to stream this type of thing and then my kids are playing their PlayStation and their Nintendo Switch, and we're using a high lot of bandwidth, they're increasing it during that period of time and then the rest of the time they're curtailing me. I have no clue, no clue whatsoever.

David Roberts

Yeah, yeah, but all that requires knowledge of who's using bandwidth and where, and the ability to move bandwidth from one place to another. The Internet developed those capacities a long time ago, and they're just sort of just coming to the grid.

Quinn Nakayama

Totally. And that's where AMI 2.0 comes into play. It is going to be a game changer for the utilities across the nation if they can figure out how to get it implemented right.

David Roberts

I know you're doing VPPs, virtual power plants, and you're partnering with aggregators, basically. So, more or less, the aggregators are doing the VPP and you're contracting with the aggregator. And I've been wondering for a long time, why don't utilities just aggregate, act as the aggregator? It seems like an obvious — like they're the ones with their hands on all those advanced meters and all those SPAN panels and they're the ones who know what the distribution grid needs and where it needs it. What is the value of the third party in the middle there?

Quinn Nakayama

Yeah, so for now, right, aggregators are going to be required because we don't have that level of connectivity to every single type of DER out there. We just don't. And technically, we're not equipped yet to be able to do any of that. But if you think about what I just said regarding EV charging, all of that intelligence is happening at the edge. So when I put this brand new meter onto that customer's meter socket, it can in real time identify when you go over 100 amps. And when it does so, it will communicate directly to the EV charger itself, "I need you to go down."

This meter can also communicate to all the other AMI 1.0 meters that I have in that area and calculate the service transformer loading, and then can ask the EV charger right at that customer's home to limit itself so we don't exceed a service transformer limit. And so, it's all happening at the edge. It's all point-to-point connected where these meters are doing the intelligence right at the edge and communicating directly to the devices that are behind the meter. That is a particular model that is starting to emerge in terms of load flexibility.

But we're nowhere near any type of, and most utilities are not in those positions, when you have every single home with an AMI 2.0 meter and this type of architecture. So, you know, it's hard to imagine a world right now where aggregators aren't going to be required during this period of time. What does this look like 10 years down the road? We'll have to see. And when the systems are fully saturated with basically a computer sitting at your meter that can actually connect to all these devices right at the edge, what does that future model look like?

That is a question. But for now, that is not something that exists today.

David Roberts

But I mean, like, 10 years is not that far out. And like, you know, the carbon goals are not that far out. All that stuff is going to have to happen at the exact same time. What a crazy time to be where you are.

Quinn Nakayama

I think what it comes down to is, we, as utilities, owe it to our customers to become trusted advisors. Right now, we're not. Across the board, there's a lot of mistrust between us as a utility and our customer base. And if we want to have this type of environment, again, we're going to need to build a sense of trust. If we can't build that sense of trust, then, you know, obviously the aggregator market is going to continue to operate because they have the trust of the customers where we don't. So, how do we as an industry start to build that relationship with our customers where they see us as partners rather than just a bill? So, that's a bigger piece of the equation that we need to sort through.

David Roberts

Final question is just about capacity and how you do the work. So, like, this work of identifying areas of R&D, you need to identify partners that are credible, you know, and have, like, good business plans. Like, that's a lot of evaluating. You know, like, I used to talk to Jigar Shah a lot about what they did at LPO and just the process of finding these people and evaluating them is quite labor and time intensive. I think you might be sort of unique among maybe US utilities in having the capacity you do have to do this stuff.

But sort of just curious, like, how big is your team and what is the process of finding and vetting and assessing partners?

Quinn Nakayama

Yeah, so a couple of things. This gets into the heart of how we interact with, for example, our institutional vendors that we have a lot of trust in versus new vendors and startups. And so, you know, I think a model that could exist that could help this is, let's say you're evaluating what your institutional vendor could do, or somebody, some small startup, small vendor software company, what they can do. And you're like, "Wow, this startup thing, this thing's awesome."

David Roberts

A familiar situation, a startup comes along saying, "Hey, we can do that 10 times cheaper."

Quinn Nakayama

Totally. But I have my institutional vendor that's already, let's say, fully interconnected into our technology, our APIs, and so on and so forth. Well, is there a model where if we were to marry these institutional vendors with these startups, sprinkle in maybe a venture fund in the mix, bring those parties together, now this startup can go ahead and interface with this institutional vendor, have them take on that type of software integration risk. I get the capability, but then this software vendor and this VC, that's an exit strategy for them. Like that is, you know, if you're a VC and you're looking at a potential exit opportunity for an M&A or a large B2B type of contract that's backed by a utility who says, "Yes, I want this," that could be a 10x multiplier right there and then.

So, one of the things that we will be doing in the next couple of weeks is we're going to be asking the industry for a pitch fest where we're going to be asking the industry for spot solutions to a handful of problem statements with a goal of seeing what our institutional vendors can come up with, seeing what the startup communities can come up with, also bringing in the venture world as a part of this so that we can see if there are those solutions. Now, if it's big enough and we want to go with a startup directly, you know, we can do that. It's harder. But you know, if we can do this marrying together of these technology ecosystems and B2B agreements that we can go ahead and orchestrate behind the scenes, that would be amazing too.

So, I'm really hopeful that during the pitch fest this year, we can do something where — Halliburton Labs does this really well, where they do these types of major labs, types of pitch fest incubations that give seed funding to these types of things. That is something that I'm really looking forward to doing later this year.

David Roberts

Is this for the full list of R&D priorities that you've got in your R&D report or some subset?

Quinn Nakayama

So, to your point earlier, if we were to do it for everything, we'd get inundated. It's just so hard, you know. So, we've learned from the last time we did that and we are really focused on a few number of problem statements that we're going to be publishing later next week or the week after. That really kind of demonstrates these are what we're looking for. So that enables a much more focused area of the technologies that could interact with us on that.

David Roberts

Are we allowed to know in advance what?

Quinn Nakayama

Not quite yet. Not quite yet. We're slimming down everything and making sure that things are firming up. But, coming to a theater near you.

David Roberts

I love this whole setup, but PG&E is very big and I guess very capitalized relative to a lot of other utilities. Is any part of your work thinking about trying to persuade other utilities to do things like this, trying to sort of show that it's worth it to invest in this kind of capacity, that what you get out of it makes the investment worth it? Because you're sort of like in trying to be innovative and sort of cutting edge and work with new technologies and move quickly and fail quickly and all that kind of like very un-utility. So I'm wondering, are you, is there a touch of evangelism here trying to get other utilities to do things like this?

Quinn Nakayama

I don't think the utilities are the problem here. Utilities are drastically trying to figure out ways to innovate. However, what I would say is that we in California happen to have a very, very forward-looking regulatory environment. And so, decades ago, the CPUC required the utilities to have an R&D and innovation program. It was called EPIC. And we are on our fourth EPIC iteration right now. We are currently working on our fifth EPIC, which basically takes funding that can't be used for anything else except for innovation and research into development that helps broadly on these major categories that we and the commission work together to try to identify.

David Roberts

Interesting.

Quinn Nakayama

Most utilities would kill for that type of program, you know, and I think that, you know, regulators can really learn from the California EPIC program to do something very similar for their own utilities that enable them access to untouchable funds that have to be used for innovation. And when you do that, you can create programs that we have been able to do here in California, but without that, it is really hard to do in a lot of these environments.

David Roberts

And I think it's worth emphasizing the untouchable part because the pressure on utilities, all else being equal, is to spend on their rate base so they get their return back. So, any money that's not untouchable is going to get, in the fullness of time, pulled over to that side of things.

Quinn Nakayama

Totally. I mean, listen, I mean it's easy to kind of make utilities villains about going after rate bases, but you know, they're juggling multiple priorities. Winter storm hardening, hurricane hardening, tornado hardening. There's so much going on with various utilities that drag capital to make sure that they're doing the best that they can for their customers. And you know, rate base does become a part of that, but I don't think that's the main driver. The main driver is now, especially with load growth, especially with climate change, especially with all of these hazards, we have to now harden our systems and the amount of rate base is too big.

So now, really, it's about how do we effectively do that and efficiently do that. And I think all utilities struggle with that. Having a protected program for R&D can help make sure that we're not trying to pull money away from other areas that are really needed in a lot of other utilities.

David Roberts

Right. So, you need legislatures and regulators really to get religion on this. They're sort of the targets. They're the ones whose minds you need to change.

Quinn Nakayama

Yeah, because I took a look at utility, my brethren across my sister utilities out there, and I talk to people that are in my space and they're like, "I wish I had a program like yours. Like, how do we get a program like yours?" And that requires their legislators and their regulators to have that type of, you know, abundance mentality where research and development, innovation, and science is the core of where we're going to break through. And I would definitely agree.

David Roberts

All right, well, that's a good note to end on. Quinn Nakayama, thank you so much for coming on, walking us through this. Lots of exciting stuff going on. I can't wait to see where it all goes.

Quinn Nakayama

Thank you so much for having me. It was fun to have a little bit of a conversation on this. So, I appreciate it.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

The frantic buildout of AI data centers is threatening to overwhelm electric grids, but what if they could be part of the solution? I chat with Jeff Bladen of Verrus, a company designing data centers to be "good grid citizens" from the ground up. We discuss how their novel architecture, combining large-scale batteries with a more efficient internal power network, provides flexibility that helps utilities and allows more compute to be built with less grid impact.

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Text transcript:

David Roberts

Greetings, everyone. This is Volts for July 2, 2025, "Can data centers be good grid citizens?" I'm your host, David Roberts. If you have paid attention to the energy news in the last few years, or any news at all, really, you will be familiar with the growing dilemma of data centers. The powers that be have decided that AI is the future and we need an immediate, vast expansion of our computing capacity, so enormous data centers are lining up to connect to grids across the country.

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But data centers are giant power consumers and, at least at the moment, extremely inflexible, which means they impose enormous burdens on the grids to which they are connected. Often, those grids need upgrades, the costs of which generally fall on ordinary ratepayers.

Lots of people are addressing this dilemma from lots of different directions, including new ways to power data centers, new interconnection practices, and special rates for large loads.

One approach is to go after the "inflexible" part. Could data centers be made more flexible so that they can ramp up and down, move on and off the grid as circumstances require? Could they become good grid citizens?

That is what Verrus, a Sidewalk Infrastructure Partners company, is trying to do: develop a flexible data center that can help rather than burden the grid. The company recently partnered with the National Renewable Energy Lab to put a 70MW flexible data center through the paces. You can read the results on NREL's website. Now, Verrus is looking for commercial clients.

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I am excited to talk with Verrus' Head of Energy, Jeff Bladen, about how a flexible data center works, the extent of the flexibility, how much more IT costs, and how these technologies might evolve in the future.

With no further ado, Jeff Bladen, welcome to Volts. Thank you so much for coming.

Jeff Bladen

David, thank you, and it's a pleasure to be here. And I absolutely love the intro, "good grid citizen," it's exactly the way we describe it and certainly in my career dating back to the earliest days designing markets for PJM. It is something that we've been looking for, frankly, across the grid, the ability to have the demand side of the market actually participate and support grid services. It's in some respects the holy grail of the grid for a long time.

David Roberts

This is coming for all large consumers, I think, not just data centers. Eventually, all of industry, I think, is eventually going to face the pressure to be more flexible. But let's, before we jump into the details of the data center you're designing, maybe just say a little bit about, generally speaking, the kinds of pressures and forces facing data centers today. What is the sort of state of play?

Jeff Bladen

It's obviously an extraordinary and transformational time these last two to two and a half years with the emergence of AI and the enormous need to grow our data center capacity to support both training and eventually inference as a key improvement in how the Internet serves all of our day-to-day needs. We're on the precipice of something phenomenal and data centers that really support all of our day-to-day lives are having to grow accordingly. But the strain, as you called out even just in your intro, is real. The power grid hasn't been built out to support anywhere near the growth of the data center capacity that we're talking about.

And it hasn't had to. Mainly because we've had this extraordinary run of gaining efficiency in our electricity consumption over the last 20 years that we've been able to essentially reuse for other growth purposes. There's been plenty of electricity demand growth over the last 20 years, but it's been offset in large part by phenomenal improvements in the efficiency of other parts of our electric economy. Just thinking about lighting as one example, we've all transitioned from incandescent bulbs to LEDs. So, this is a key and extraordinary moment of change for the grid and for the tech world.

David Roberts

I sort of wonder, I mean, right now there's a bunch of data centers jumping on grids anywhere there's room, anywhere there's capacity. They're out looking at the states. But you know, we're seeing more and more sort of grid operators or even legislators in some states kind of saying like, "Whoa, whoa, whoa, hang on, like we need some capacity for ourselves." You know, "The citizens of our state don't necessarily want to take on a bunch more expenses just to accommodate these data centers." So I wonder like, and you know, data centers are now looking around, they're like, "Well, if we can't rely on grids, can we self-generate?"

You know, they're sort of groping for nuclear plants now. They're pretending they're going to build a bunch of nuclear plants really quick. They're like looking around desperately. And I'm sort of just wondering, like, the way things are currently going, are we heading toward a moment where the grid is just going to say "no more"? You know what I mean? Like, is demand for hooking these data centers up going to outstrip the supply of grid available soon? I just wonder if we're coming toward a kind of crisis point.

Jeff Bladen

I think you've hit upon something important, which is to say, it takes a long time to build grid infrastructure, it takes a long time to build power plants, it takes even longer to build high voltage power transmission. But what I think we're finding is that, like in many things, the key to driving innovation is a constraint. And that's actually what we're finding now. And so, the innovation is going to, I think, result in innovation in the way in which we power large customers, but I think even more so, the way in which we more efficiently use our grid.

You know, I like to tell folks that the challenge in front of us isn't how fast we can build the grid — of course, that will be important. But moreover, how are we going to get more out of the grid we have while we're building the grid we need?

David Roberts

People do not appreciate the extent of capacity, slack capacity on the grid today. I think people do not understand just because it's not intuitive. Like, if it's slack capacity, why would we not use it? But it's like, you know, it's like thinking about the auto fleet, kind of the same thing, right? Like, it looks like cars are driving around all the time, but most cars are sitting most of the time.

Jeff Bladen

Indeed, we build our grid to serve everybody's needs at all times. And that means when everybody's using power at the same time, we have to be prepared to meet that need and we have to be prepared to meet it with some room for error. Power plants do go down unexpectedly at times, and so that room for error only adds to the available capacity that's not used nearly as much as it could be. It applies to the transmission network as well. And so, that's really a big chunk of what is driving the Verrus data center business forward.

And you know, in my 25 plus year career in the power industry, the opportunity to be part of this team and to deliver what we're going to be delivering soon is extraordinary. It really is the opportunity to extract far more efficiency out of the grid. But not just the grid. To start with, this new design for data centers actually extracts quite a bit of efficiency out of the data center itself in new and innovative ways.

David Roberts

Right. So, yeah, this, I mean, this is the logic for demand-side stuff in general. Basically, we build the grid to satisfy peaks. So, you can either build more grid to satisfy higher and higher peaks, or you can start moving some demand off the peak. That's sort of the flip side of this and that's what's driving this. And we should say, you haven't said, I haven't said yet, but you were the head of energy for Meta for years, so I take it you have some experience like going out and looking for data centers and looking for places to put data centers. Is that sort of what brought all this to your attention?

Jeff Bladen

You know, it's a real great opportunity to be part of the Verrus data center team and certainly appreciated the chance to support a phenomenal team at Meta for a number of years. My career really has spanned the energy business much more than the technology world though. And that's really in many respects why I'm so excited about being able to be part of what we're delivering at Verrus is that from my time at MISO and PJM, it's certainly been apparent that if we could find a way to activate the demand side of the grid, we would be far more efficient and frankly, more reliable too.

David Roberts

Yeah, yeah. And this is the final question before we get into the actual, the nuts and bolts. But I'm just sort of curious. You've been in the energy side now and a little bit a glimpse into the tech side. One of the things that's on the mind of a lot of energy people as all of this is happening is: Do the people inside these tech companies understand tech? Do they understand the grid and how the grid works and grid constraints, et cetera, in the way that someone like you does, having been in the trenches of MISO, et cetera? What's the level of sort of savvy about the grid in that world?

Jeff Bladen

It's a very well-informed set of organizations. They have deep expertise that they've built on their energy teams. I supported a phenomenal energy team at Meta with lots of folks that came out of the grid world, out of the utility world. They understand the challenges and frankly, it's why they're investing in new ways of approaching these challenges. It's also why they've been investing in clean energy solutions. You're seeing lots of announcements about large technology companies investing in the grid, and I applaud that. What Verrus has the opportunity to do is to really start with a white sheet of paper design that allows us to unlock even more innovation.

And that's really a unique opportunity for a new entrant. It's usually something that comes from new entrants too, frankly.

David Roberts

Yeah, I sort of joke with people. Having been doing this for a long time now, I regularly these days have the experience of just thinking in my head like, "XYZ is a need out there right now. I want someone to come along to my pod and talk to me about it." And it manifests like within days I get an email about it. One of those things is data center flexibility. It's been on my mind a long time. People have been assuming the inflexibility of data centers as they think about this problem. And I have been thinking like, "Why are we assuming that? Why is that a fact of life?"

And so, along you guys come. So very exciting. Let's talk about the data center then. There's not a lot of public information about what you're doing, but I've got this sentence, it's got "a novel grid-aware power flow management system with long-duration battery energy storage systems into a microgrid controlled medium voltage power distribution architecture." So, that is a mouthful. That's three mouthfuls. And I want to talk about all of them in turn. So, as you say, this is a fresh sheet of, you're building a data center out of nothing and you're building it to be flexible.

So, let's start with that first piece, "a novel grid-aware power flow management system." What does that mean?

Jeff Bladen

Well, let me start at the highest level to describe what we're doing. So first and foremost, we are building new data centers. This is not a retrofit to existing data centers. That's important. And, we are going to be building, owning, and operating them ourselves. So we are a service provider to large technology companies. At the most basic level, you can think about us as an outsourced data center capacity solution for big tech companies. They will pay us to lease buildings on our data center campuses. And it's actually a pretty common solution used by tech companies historically as a complement to their self-build sites.

David Roberts

So there are a lot of these third-party owned data centers out there now?

Jeff Bladen

There are, there are, but they generally resemble the self-builds that have historically been put in place by the large technology companies. And the reason for that is, and you alluded to this in one of your descriptions, our grid hasn't really been at a place where we needed to have large customers be as flexible as we're talking about now. And that's because we've had all of this excess capacity that I was describing earlier has come about from a whole bunch of efficiency. So yeah, there are a whole bunch of third-party data center companies out there.

We are stepping into a very well-understood, very well-established business model, but with a new and differentiated product. And so, let me get at what you were asking, which is what is all this jargon and how does it actually, like, work? So, what differentiates us is first, our new design will allow us to unlock maybe as much as 30% more compute capacity inside of a data center campus versus our competitors. And that comes from this medium voltage electrical distribution network that's alluded to in the words you were reading and essentially allows us to move power around more seamlessly within a data center campus. A bit more like a microgrid might.

David Roberts

What are the other ones doing? How else would you run? I mean, you have to distribute power to the servers, to the racks. Something is distributing power. Is this just sort of like sticking in some AI so it's smarter?

Jeff Bladen

No, it's actually more straightforward, and it obviously does have some proprietary elements to it that we have to be careful about. But at its most basic, the way traditional data centers work is that you have a high voltage substation with a utility feed or a couple of utility feeds usually. And that high voltage substation then has low voltage feeds to each of the data halls. And those low voltage feeds are a fairly straightforward and simplistic circuit, much like if you really wanted to boil it down, much like you would find in your basement or garage, which has a bunch of circuit breakers, right?

So, each of those circuits goes back to the high voltage substation. What that means, though, is that within a large data center campus, if one circuit is down, maybe it's down for maintenance, maybe you're replacing servers and upgrading them — there's all kinds of reasons why a circuit might be down. The power on that circuit is essentially unused. It's stranded, in a sense. And so, what we're doing is we're designing a new kind of data center that allows for underutilized power, underused power in certain parts of the data center, to essentially be taken up and used in other parts of the data center.

So, I like to describe it as it's essentially like getting four buildings for the price of three, for our customers. It's a huge benefit.

David Roberts

Is there significance in it being medium voltage rather than low voltage?

Jeff Bladen

It is in the sense that it allows us to efficiently distribute the power to anywhere on the data center campus, to any of the buildings or data halls. Again, very much more like a microgrid would.

David Roberts

Got it. So, you've got power coming into your microgrid and it's controlled and distributed better than traditional?

Jeff Bladen

Better and more efficiently. And so, in super simple terms, our customers will be able to put more servers, AI or traditional cloud servers, in the data center. And then, anytime some part of the data center is using less — which is pretty much all the time, because they're such big campuses with lots of things going on — the power doesn't end up being stranded in the underutilized part of the network.

David Roberts

So, you're making full use of all the power that's coming in, at all times?

Jeff Bladen

Absolutely. That's exactly right. It's also a good thing from the utility standpoint because that actually improves the efficiency of the interconnection. We're getting more use out of the actual interconnect itself.

David Roberts

Right. Okay. And that's different than the power flow management system, or is that both the same thing? You've got "medium voltage power distribution architecture," and "grid aware power flow management system." Are those both referring to the same thing?

Jeff Bladen

They are, in a sense, but there's more to it. So, the second big innovation is that we're also installing utility-scale battery energy storage on our campuses. And what that allows us to do is to first and foremost provide campus-wide backup. So, if there were a disruption in the utility supply of electricity, we have these large batteries available to immediately take up and supply power to the servers on the campus.

David Roberts

Let me ask about this. So, take your 70MW data center that you built for NREL, grid power goes out, you shift to batteries. Like, what is the size of these battery installations? How long can you run your 70MW data center on pure battery power?

Jeff Bladen

On pure battery power, it's about four hours. Although, it depends quite a lot on what's going on at the data center campus. It's probably a bit longer than that.

David Roberts

So, short term outages, basically, you can cover.

Jeff Bladen

It is. But it's important to note that the design that I described earlier, this medium voltage distribution network, actually gives us a huge amount of flexibility to plug any kind of backup technology in and essentially plug it in anywhere on the campus into this network, and then it can supply energy to anywhere else on the campus using that same network. So, we have quite a bit of flexibility in terms of the type of backup we provide. It could be batteries. It could be battery plus some thermal type of generation if the customer needed some longer duration supply.

David Roberts

Yes, I was going to ask about that in a minute. But just on the batteries, this is something else when I encountered it. This is something you come to learn if you study grids long enough; it's just that batteries are magic, they're helpful in all ways everywhere. Like there's scarcely a grid problem you can think of that you could not help solve by just throwing a bunch of batteries at it. So, why aren't data centers already installing big battery banks? That seems like the no-brainer-est of no-brainers for data centers.

It gives them a little bit of flexibility. It vouchsafes their reliability; it just helps in every way. Why are they not doing this? Are they?

Jeff Bladen

I certainly don't want to speak for other data center developers. I think there are probably some that are doing some of this. It really does require, to make full use of them, a different approach to the design of the data center. And that's one of the advantages that we're able to bring with the new white sheet of paper design, is that we can integrate batteries and utilize them more seamlessly and across the entire campus in a way that you can't with a retrofit. Back to the prior description of a legacy data center design, with all of these separate low voltage circuits, you really can't move the backup among the circuits.

David Roberts

Oh, so a backup is attached to a particular circuit?

Jeff Bladen

Yes.

David Roberts

So, you would need, theoretically, if you wanted total backup to have battery installations on every circuit?

Jeff Bladen

It's less efficient; you would need to do quite a bit of retrofitting and re-engineering to the point where you're almost essentially creating something brand new. And the other nice thing about batteries as our primary backup source is that they're actually a lot more reliable than the traditional diesel generators. Diesel generators will have a degree of failure to start. It's not that uncommon for a diesel generator to fail to start.

David Roberts

And I've often wondered, what is like the straightforward cost comparison? Because these backup diesel generators are ubiquitous in data centers. And I've just again so puzzled why they're not using batteries instead. Are batteries just more expensive than cheap diesel backup generators? Is that why they keep using those?

Jeff Bladen

I mean, ultimately, what's important isn't the upfront capital cost, although that plays into it. It's about the total cost of ownership over the life of a 30-year asset, which is what these things are, which is what a data center really is. And ultimately, on a total cost of ownership basis, we are very confident that we are cost competitive with all of the alternatives that someone might look at. And so when they come to us —

David Roberts

You mean on a total data center performance level?

Jeff Bladen

For sure. And so, when we talk to our customers about what it would cost to lease space, lease a building, or the like, we're offering essentially at market prices. We're not asking necessarily for a premium today, although we do think we're delivering a premium product. And so, we think there's real advantages.

David Roberts

So, your idea then is you are selling data centers at comparable costs to other data centers, but with these improved reliability and improved flexibility, basically.

Jeff Bladen

Improved reliability, flexibility, and really importantly, dramatically improved efficiency. Like I said earlier, it's a bit like getting four buildings for the price of three.

David Roberts

And that is because of this power distribution system. This ability to move power between circuits enables you to have sort of a full microgrid, kind of a microgrid network, such that you can plug either generation or storage anywhere on that network and have it serve the whole network, basically.

Jeff Bladen

Yeah, absolutely. And I love that we're nerding out on the energy side of this, by the way, because I'm always stuck in this tech world talking about stuff that I'm only marginally qualified to talk about. But when we talk about the energy side of things, I feel so much more comfortable. But yeah, that's absolutely it. We're getting the most out of the power interconnect in a way that most other data centers simply can't, just because of the physical infrastructure design.

David Roberts

What is the sort of limit on the size of the battery installation? What are the sort of considerations there? Like, from a performance perspective, I sort of suspect that it's just like "more is better," period. But like, presumably, there's some limits of like the efficiency you get with an additional bit of storage. Like, what is the sort of limiting principle on the size of the battery installation?

Jeff Bladen

The key focus for how to size the amount of storage that you put on the data center is really trying to get us to the proverbial five nines of reliability from the power supply. What's not well known is that the data centers at this scale that we're talking about are all connected to the highest voltages of the power grid, and at the highest voltages on the power grid, it's actually extraordinarily reliable. I mean, we're talking about four nines of reliability just by being connected to the grid. And so, what we're looking for is to exceed five nines of reliability by having sufficient battery energy storage on site.

There's also an element of this, and I haven't gotten to it yet, but a big part of what we're doing is we're not just serving the compute customers, we're also serving as a partner to utilities. And so, we want to make sure that we're sizing the batteries so that we can meet the needs of utility partners. What kind of flexibility do they need to drive efficiency and reliability on the grid? Four hours tends to be a sweet spot. The NREL demo that you mentioned earlier, we were partnering with both Xcel Energy and MISO in the design of the testing regimen, such that we were making sure that our flexibility was aimed directly at the flexibility needs of an RTO of a utility that happens to run its own control area. And we proved that out during that demo.

David Roberts

So, to figure out the size of the battery installation, you need to sort of triangulate the data center's needs and the grid's needs. So, like for your 70MW data center that you just built for NREL, what is the battery, what's the size of the battery installation there?

Jeff Bladen

In that case, we're talking about four hours of building-scale, battery energy storage backup.

David Roberts

Do you have any idea what that is on a megawatt?

Jeff Bladen

It's 70MW times four hours. So, it's, you know, you can do the math. It's 280MW hours.

David Roberts

Interesting. And so, one thing I'm really curious about is the role of onsite generation here, if any. So, as you describe, you have basically built a microgrid and in a microgrid, you can just plug generation into it anywhere and serve the whole microgrid. And I'm just kind of wondering if we could walk through, like, what are the considerations for a data center owner contemplating whether to add some generation or not. My intuition is that batteries are doing most of what a data center owner would need unless they want to go fully off grid. Is that right?

So like, what are, like, why would a data center add on site generation? Would they? And if so, why would they?

Jeff Bladen

Well, it's a great question that I think is rightly placed to those that have technology compute workloads that they want to back up. I think it will depend heavily on the kinds of workloads that they're backing up. There are certainly some mission-critical workloads that folks may feel like they need more than four hours of backup. But again, when you look at the likelihood of an outage, you do get to five nines of reliability pretty quickly when you add the amount of backup that we're talking about.

David Roberts

And even if you needed more than that, wouldn't you just add more batteries?

Jeff Bladen

Well, you could add more batteries, or it's actually quite easy for our design to just plug in generators later. Right. There's really nothing that stops us other than reserving some space in the campus for future addition of some kind of thermal generation. Whether it's a fuel-based or a gaseous-based thermal generation, there is nothing that prevents us from adding it later. Again, because we have designed —

David Roberts

Why not solar?

Jeff Bladen

Well, you could add solar as well if you had space for it, if it was efficient to add it. It's usually more efficient to do central stations solar that's grid connected, just from the value of the panels themselves and getting the most out of them, putting them in exactly the right locations with the best solar gain grid connected at the right voltages in the right place. It's generally more efficient from a cost standpoint and an output standpoint to have them have solar grid connected than to put it where you happen to build a data center.

David Roberts

So, do you know, in your experience with data centers, is there any reason for one to want to be fully self-sufficient, to be able to run independently of the grid sort of indefinitely? Because that's what you would get from adding a bunch of generation, basically.

Jeff Bladen

You alluded to this in your opening, and I think it's important to note that one of the key reasons that some are considering this island from the grid approach is simply to get power faster. That is certainly in the equation for some, but that's really the beauty of what we're doing here. You know, we've got an efficiency twofer that gives us the ability to extract a lot more capacity from the data center itself and allows us to go into places on the power grid that utilities can't serve right now because they can't meet a peak need or they have a transmission constraint. And so, we're actually solving that problem as well by partnering with utilities to identify where in the grid they could serve a data center like ours most of the time. But because we're able to be offline during the most extreme periods to solve for both peaking generation and some limited transmission constraints, we can actually solve the speed to power challenge as well.

So, that's really what would drive somebody off the grid: speed to power right now.

David Roberts

Mm, well, let's talk about that a little bit because this is all this goes back to this paper — I think I've referenced it on the podcast before, Tyler Norris, the lead author, it's for the Nicholas Institute over at Duke — but basically just showing that it would not take much flexibility to get a lot more data center capacity online. Like minutes a year of flexibility can get substantially more data center capacity online. So maybe just talk about that. Is that paper part of what kind of sparked this for you? It certainly bolsters the case.

Jeff Bladen

Well, you know, the great thing about the Verrus team and the work that Sidewalk Infrastructure Partners has done is that this is two years in the making. So, I know Tyler and I've talked to them. In fact, they asked me to speak at their conference earlier this year about exactly what we're working on and how it lines up with the report that they issued. But the significance of it is real, that there is this untapped potential for the grid if you can reduce demand by significant amounts dozens of hours of the year. I don't think it's minutes.

It's certainly not a single, single-digit number of hours, but it's, you know, a few hundred hours of the year would be extraordinarily impactful. And that's what we're offering utilities and we've had great success at partnering with a number of utilities so far and exploring and even beginning to focus on where we're going to site our first few data centers.

David Roberts

I could be exaggerating.

Well, one other consideration here, and this is kind of what I keep circling back to, is like when you take that paper into account and you take the needs of the grids into account, really, you just need a few hours of storage attached to your data center to get that amount of flexibility to help grids. But there's one other reason you might want to go further, and this is also something I wanted to ask you about. A lot of these companies, including Meta, Amazon, Google, all of them really, are on record with renewable energy commitments, basically with decarbonization commitments. Lots of those decarbonization commitments were made before all this kicked off really in earnest, before the AI thing kicked off in earnest, before the load growth thing kicked off in earnest, before the new restrictions around grid and energy availability kicked in.

So, one of the things that is on the minds of people like me is just how well are those decarbonization commitments going to hold up in this frantic scrum for power? And so, it seems to me that one of the things that your data center enables is, if the grid cannot provide you clean enough power to satisfy your commitments, you can put some clean power on site and meet those commitments. Is that even a consideration here? How deep are those commitments? How firm are those commitments? Are people really going to make multimillion-dollar CapEx decisions on the basis of those commitments?

Jeff Bladen

Candidly, they have. And so, I think the proof is in what we've seen. Just even recently, Meta made their announcement that they're helping Constellation keep a nuclear power plant online. So, that's exciting news to see. What I think is important to circle back to though, is that the cleanest megawatt is the one we don't use.

David Roberts

Of course.

Jeff Bladen

And it's also important to recognize that, not only are we getting more efficient with this approach to data center design, but the fact that we can build, in theory, fewer data centers with a much more efficient approach like we're taking at, actually dramatically reduces the carbon impact of the data centers themselves. The hidden carbon intensity of data centers and any major construction project, frankly, is the Scope 3 emissions. All the emissions that go into the concrete, that go into the steel that's used, all of those things take energy and take carbon-intense energy in some cases to produce and so, as I said earlier, if we're getting four data halls worth of servers in three, that means one data hall didn't need to get built.

Maybe a whole data center at some point doesn't get built. And so, that allows for a far more carbon-efficient approach to building data centers as well.

David Roberts

Yeah, but don't you think, I mean, this came up before when DeepSeek came out, the Chinese AI came out and it's much less energy intensive. And then a lot of people were saying similar things like, "Oh, look, it looks maybe the AI revolution is not going to take all our power." But you know, then the response is just like, "We're not going to take those efficiencies and just bank them. We're going to just plow them into more data centers." In other words, like, the demand is so high here that any possible efficiencies you get are just going to get swept up in greater demand.

I mean, we're still going to be building data centers as fast as we can for the foreseeable future, right? Even if they're 75% more efficient or whatever, don't you think?

Jeff Bladen

All I know is that a more efficient data center is definitely an improvement over the alternative.

David Roberts

Yeah, well, for sure.

Jeff Bladen

And so, I think suggesting that we might consume efficiency as a result is probably missing the point in that regard. I will say that it's also important to remember that because of the constraints, we're seeing this kind of innovation, right? And this innovation actually maybe does come around or doesn't come around as fast, but for the constraints we're seeing. So, I think there's a number of good things that are coming from this, but really what we're trying to focus on is how can we deliver a better product that's much more efficient in terms of the customer need.

Right? It's the customer getting more for the same price. And how can the grid be better off than it was beforehand? I will tell you that having been in control rooms on hard days, having assets like these, and that's really what we're thinking about these new data centers as is these are grid assets, not grid liabilities. Having them at the disposal of control rooms in places like Carmel, Indiana, or Valley Forge, Pennsylvania, or Folsom, California, would be an extraordinary benefit to running the grid more efficiently and more reliably. It really goes without saying, almost.

David Roberts

I want to ask about the grid benefits, but just to make this point before we move on. The point I was trying to make is, if you're a data center, and you want to be running on clean energy, as a lot of these companies say, and you can't find clean energy, this infrastructure, this power distribution infrastructure that you've created, makes it easier to plug clean generation in directly. If you just want to boost the amount of clean electrons you're using, this data center can help you do that too. It's suited to that goal.

Jeff Bladen

It is suited to that goal quite well. And because of the flexibility we have, we can complement that with shifting some of the consumption from a grid that might be carbon-intensive at times to periods that are less carbon-intensive to the extent that that is a desired outcome of the customer. And most of our customers definitely have these goals.

David Roberts

Right. So, you could bank clean wind power at night in your batteries and then run on that during the day, maybe while the grid is dirtier, etc., so that you could even decarbonize a little bit just with the flexibility.

Jeff Bladen

Yeah, that's exactly right. And it doesn't even need to be moved that much. Obviously, there's quite a bit of solar energy being injected into the grid during the day. So, part of this is also giving the grid operators new tools so that they can manage what is an otherwise intermittent fleet and actually capitalize on the low-cost energy that's coming from wind and solar.

David Roberts

I assume you've been talking to utilities in the process of this. I think listeners can understand intuitively why data centers, as currently constituted, are not good grid citizens, you know what I mean? Anything that needs constant, always-on, extremely high amounts of energy throughout, you know, 24 hours a day, is inflexible and difficult for grids. So this gives them some flexibility, gives them tools. One of the things I'm wondering about is, are there ways for grids or grid operators or grid managers to compensate the data centers for this flexibility? And if so, is that part of your sales pitch here?

That in addition to the benefits, you might also get this secondary income stream of sort of flexibility payments? Is that on the radar?

Jeff Bladen

At some point, it may be on the radar. I think for now, we're focused on ensuring that customers get the services that they're looking for out of data centers. And that looks like more efficiency, higher volume of compute workload for the same megawatts of interconnect, faster availability of power. At some point, it may be a world where we're actually working with the utility to develop new forms of compensation for flexibility. But frankly, there are quite a number of flexibility payment structures out there that have compensated thermal plants in particular for their flexibility for many years. So, it's not new in that regard.

I do want to call out one thing that you said though, and just say, "Look, there's nothing about a data center that makes it a bad grid citizen any more than you or I using our smartphones to live our daily lives makes us bad grid citizens." I think what we're talking about is turning what's today purely a consumed service by you, me, or a data center on our behalf into something that actually turns into a service back to the grid, right? That we're taking what is an obligation to serve and essentially turning it on its head and saying, "We're going to serve the utilities as much as they're going to serve us."

David Roberts

Well, I mean, maybe bad grid citizens, not right, but difficult grid citizens. But like, the size that makes them difficult also, if they can be flexible, makes them extremely powerful assets. Do you know what I mean? This is not a small amount of flexibility. This is not like moving my EV charging from day to night. This is like, this is the ability to move, to ramp down or ramp up, you know, 70MW at a time. And that's like, that is a large, just, it's correspondingly, you know, difficult to supply if it's not flexible.

It is a correspondingly powerful asset if it is flexible.

Jeff Bladen

I couldn't agree more.

David Roberts

In other words, it seems like grids should be very excited about this.

Jeff Bladen

And they are. And that is why when we were standing up the demonstration project at the National Renewable Energy Lab, MISO and Xcel were very excited to support the development of the testing regimen such that we could show that what we were doing, what we were creating the capability to deliver, was actually going to be aimed squarely at meeting the needs of big grid operators. And that's what we showed and we're excited to actually bring it into commercial operations.

David Roberts

And the technological difficulty, is it just like shifting — like once you've built this power distribution architecture, I guess it's easy then to shift what is powering a rack of servers at a given moment, like from the grid to the battery without any interruption in service or glitches or whatever. Is that part of the sort of technological challenge here, how to switch back and forth between power sources?

Jeff Bladen

It is, but it's actually simpler in some respects than depending on a diesel generator firing up and hopefully, switchgear switching over.

David Roberts

Yes, this is true. Batteries are more reliable than diesel generators. This is a good lesson to take out of this.

Jeff Bladen

They are, and the kind of switch gear that you implement for our system, the kind of infrastructure that you implement, is actually designed to be used on a regular basis. That's actually one of the reasons why, in addition to environmental constraints from emissions, traditional data centers aren't able to lean on diesel generation to get off the grid at times. It is not only going to violate emissions permits, which theoretically you could relieve if you didn't care about that sort of thing, but moreover, more importantly, at some level, the infrastructure. Infrastructure just isn't designed to be switched on and off on a regular basis. It's designed for what its purpose is, which is to be a backup, hopefully never, but maybe tested once a month at most.

David Roberts

Right? Yeah. I mean, it's true across applications, across the world, really. Anywhere there's a diesel generator, it seems like a battery would work better. But let me ask you a question. This is not something that Verrus is doing or responsible for, but it's something that I feel like you might have some insight on having worked at Meta and dealt with data centers. I'm sort of wondering — this is something I ask all the hyperscaler tech people when I talk to them — how flexible can the compute load itself get? I get a lot of different answers on this.

You know, if you ask this publicly, what they'll tell you is, "No, it's all crucial. It all needs to be up, you know, five nines all the time. All crucial all the time." But if you do sort of ask them in private, they'll say, "Yeah, we can shift stuff around somewhat." Do you have any insight into that, having worked at Meta, how much compute loads themselves can be ramped up and down or moved back and forth or do you know what I mean, add to the flexibility?

Jeff Bladen

Yeah, I'll just couch my answer in the context of what's sort of out there in the public domain. And that is that it is relatively limited, as you alluded to. And the reason it's relatively limited is that it is somewhat technically complex to move workloads that people are being served. In some cases, you might call them services that are discretionary. But one person's discretionary service is another person's crucial service. I'll add that there are certainly plenty of services that are absolutely mission critical. We have crucial government workloads going on in many of the data centers by the hyperscalers.

And so, there is some amount of flexibility, but it is modest and I don't expect that to change very much. And candidly, to suggest that a tech company's workloads ought to be flexible in that regard is kind of like saying, "Why doesn't everybody subscribe to an air conditioning controls program at their home?" Some people do, some people don't. I think at some level it's a question of why do we have a grid, why do we have power supply? And it's because people are getting real economic utility out of the electricity supply. What we want to try and do, I think, is figure out how to be as efficient as we can in using what we've built.

As we're thinking about what else do we need to build to support continued economic growth?

David Roberts

In some sense, this is one of those things where, when I hear about it, I think, "Well, duh, why didn't we do this a long time ago?" You know what I mean? Like, making the power distribution within your data center more like a microgrid, more sort of controllable and networked, and then adding battery backup just seems obvious on some level. I can't believe everybody's not doing it. But like, does this, does the combination of those two things get you as much flexibility as you think you're going to need? Or is there a tech frontier here? Are there next steps along this line, or are these two tools that you've brought to bear enough to get you the flexibility that you're going to need to get all the data centers you need online?

Jeff Bladen

The short answer is, we already have the solution fully engineered and designed, and we're now in the process of heading towards starting construction on our first couple of hyperscale sites.

David Roberts

Do you have customers yet that you can reveal?

Jeff Bladen

I'm not making any announcements today, but we're excited by what the future is holding. I guess I'll leave it with that. But I think it's important to also say that this is not a science experiment. What we're doing is we're taking well-understood technologies and we're integrating them in somewhat novel ways with a little bit of algorithmic IP sprinkled over the top to actually make it all work together very efficiently and effectively, and in particular to be able to respond very quickly to utility and grid operator calls for flexibility, and even to have that call for flexibility be extended down to our customer servers when they have some of their own flexible compute capabilities that you were suggesting maybe we could have more of.

So all of that together turns into a solution that is relatively straightforward, but it still required a couple of years of design and engineering work to get to the place where we could demonstrate it last month at scale and now get ready to start building it.

David Roberts

So, yeah, I think that's a good note, actually. None of this is particularly, no piece of this is particularly cutting edge. You know, microgrids are well understood. Battery backup is well understood. Shifting loads back and forth is relatively well understood. I guess the new thing here is just applying all this to these data centers. So, you know, obviously you would get benefits if we stopped building inflexible data centers and started building flexible ones, and you'd get sort of incremental benefits building up over time. Is there some hard barrier to retrofitting old ones to be more flexible?

Like, does it just not pencil out? Is that a kind of a fixed thing? Is that ever going to change?

Jeff Bladen

You know, it will depend, I think, on individual circumstances. And I think in general, the innovative design we're bringing forward really lends itself to this kind of solution. Whereas, I think legacy designs are fit for the purpose they were built for. And in some ways, it goes back to the analogy you raised earlier, which is to say that we don't actually need every data center to be flexible any more than we need every car on the road to be a rental car that is used 90% of the time. There are lots of reasons why we need some that are flexible, and then I imagine we will continue to have some that are built for a somewhat different purpose.

In any case, we're excited by the innovative approach. And like I said earlier, we've got this twofer efficiency gain and are gaining dramatic efficiencies inside the data center campus and are able to deliver huge efficiency gains by connecting to parts of the grid that are otherwise underutilized.

David Roberts

Does designing them this way affect in any way the sort of appropriate scale of the thing? Like, does it enable you maybe to build smaller data centers? This is another dynamic around data centers that I'm sort of curious about. On the one hand, you get obvious efficiencies of scale. Like, on the one hand, it seems like the trend is bigger and bigger. You know, you got these 100MW, gigawatt data centers being proposed now. But I sort of wondered, like, especially in a data center like this that is flexible, that has backup, that is sort of like a microgrid, you could see a smaller data center running like that, you know, like integrated into towns or cities.

Like, you know, in downtown Seattle, we have a data center where they use the excess heat, the waste heat, to heat two nearby buildings. And I always thought that, like, "How is that not tons better than spending a bunch of money on heat control technology?" So, I guess my question is, does this affect how big data centers are going to be at all, or is it orthogonal to that question?

Jeff Bladen

I think it's more the latter, that the size of the data center is not really driven by this kind of technology. Although, I will say that as you scale data centers up and up, the need for efficient backup actually increases. And so, our solution probably offers some real benefits at larger scales versus sites that would require gigawatts of diesel generation backup. And so, we're excited by the prospect of delivering all sizes to customers. We'll lease space at a building at a time, so if somebody wants 70MW, they can come to us. If somebody wants multiples of that, they can come to us and they'll be able to get what they need from us and we'll be able to deliver all these benefits to them in any case.

David Roberts

All right, well, interesting stuff. It's not often you get to see sort of like a new industrial category kind of taking shape before your very eyes. It's been very interesting to follow these developments. Lots to come. So, thanks for coming on. Jeff, any final thoughts?

Jeff Bladen

Just really appreciate the chance to talk to you today. I've been a fan of the pod for a long time and many friends have been on this, and so it's nice to finally have a chance to talk to you and share a little bit of what we're working on.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

In this episode, I chat with fellow energy nerd-turned-ag-reporter Michael Grunwald about agriculture’s climate impact. We explore the folly of biofuels, the promise of meat alternatives, and the central importance of increasing yields. While we can imagine a future of energy abundance, land is a zero-sum game — no one’s making more — so the choices here are uniquely difficult and important.

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Text transcript:

David Roberts

Hey everybody, this is Volts for June 27, 2025, "Reducing the climate impacts of food and farming." I'm your host, David Roberts.

A year ago, when I interviewed energy expert Michael Liebreich, we confessed to our mutual climate blindspot: agriculture. It's unquestionably a big contributor to climate change — and getting bigger — but it's just not something we've been able to muster interest in over the years.

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That very exchange appears in the introduction of journalist Michael Grunwald's new book, We Are Eating the Earth. It is used as an example of the lack of attention given to agriculture in the larger climate world. (Guilty as charged!) Grunwald is a fellow energy nerd, but unlike me, about five years ago he steered into his ignorance about agriculture and fell down a rabbit hole, where he has been researching and writing ever since. (You may have seen his Canary Media columns on the subject.)

Grunwald is an old-school journalist, who's been a reporter at the Washington Post, Time, and Politico Magazine. His first book, 2006's The Swamp, was definitive on the subject of the Florida Everglades and its woes. His second book, 2012's The New New Deal, was about Obama's stimulus bill and remains underrated IMO — it was extremely educational to me at the time and looks prescient in retrospect.

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Eating the Earth is his third book, and I figured since he's gone to the trouble of learning about this stuff and I haven't, I should at least ask him about it. So, I'm going to quiz him on the many things he's learned about these last few years, from indoor farming to gene editing, biofuels to veganism. All right, let's go to the farm.

With no further ado, Mike Grunwald. Welcome to Volts at long last. Thank you for coming.

Michael Grunwald

Thanks so much for having me. I've been a fan for so long.

David Roberts

We have been joking that I have avoided this topic pretty assiduously my entire 20-year career. And, having now read through your book and grappled with this a little bit, I'm not sure I've been persuaded to the contrary. But we can discuss some of the reasons for that as we go.

Michael Grunwald

It's been nice talking to you.

David Roberts

Anywho, bye, bye. So, let's start here. Let's start at the highest possible level. Just give me the sort of — by the way, I've got like 400 questions for you. So, we're going to have to move along here. You're going to have to do the sort of elevator pitch version of all these answers. You know, just obviously, listeners can go read your book if they want the full deal. So, let's start here. Just give me the sort of elevator pitch for why climate types need to pay more attention to agriculture.

Michael Grunwald

Well, food and agriculture is a third of the climate problem, right? And it gets about 2% of climate finance. And I think, you know, about like 0.5% of climate conversation. You know, I'll tell a story of how I got into this because I was, like you, an energy dork. Not quite as, you know, not quite as perhaps a committed energy dork. But actually, I was writing a piece for Politico Magazine about my new green life. I think I beat you to solar panels and an electric car.

David Roberts

I still don't have solar panels. I'm a terrible greenie.

Michael Grunwald

But the point was, "Hey, you know, I'm a climate reporter. I care about the climate, but I'm doing this not because I'm an eco-saint, but because I know enough about this that this is going to save me money." And my feeling was that this was about to go mainstream. So, I had this kind of throwaway line about how, "Look, you know, I don't line-dry my laundry, I don't unplug my computer at night. I still eat meat." But when I went back and looked at that, I was like, "Wait a minute, I don't even know if eating meat is bad for the climate?"

I genuinely had no idea. So, I called this guy, Tim Searchinger, who I knew, and he said, "Yes, duh." But I realized, if I didn't know anything about food and climate, then probably other people didn't. And it's just, you know, even putting climate aside, agriculture is the leading driver of deforestation. It's the leading driver of wetland destruction, water pollution, water shortages. It makes a huge mess. So, it's a big deal.

David Roberts

Yeah, like one of the messages that comes through clearly in your book, which constitutes one of the reasons why I find paying attention to this subject dreary, is you're like, "We shouldn't fall into the trap of thinking, as in energy, that there's good energy, you know, there's clean energy and dirty energy, and the dirty energy is the bad guy and the clean energy is the good guy." It's pretty simple on the energy side, it's not that simple on the ag side. As a matter of fact, a farm is bad, ipso facto, for nature. Any kind. The shift from wilderness to farmed land constitutes the bulk of the environmental damage that farming does and that it doesn't matter what kind of farming you're doing on that land. Farming in and of itself is "a necessary evil," you call it.

So, it's just like levels of bad here that we're basically discussing. Unavoidable, necessary levels of bad.

Michael Grunwald

That's exactly right.

David Roberts

How fun is that, Mike?

Michael Grunwald

Well, that is super fun.

David Roberts

But anyway, so agriculture. So there's the sort of tripartite problem here with agriculture that you go over in the first chapter, which is that the population's growing so we need more food. Climate change is happening, so we need lots fewer GHGs from that more food. And biodiversity is dying, you know, land use is a problem. So we need that more food grown using fewer greenhouse gases on less land, basically. Like that is the tripartite agriculture challenge. And it's like, that's insoluble, Mike. Which is basically the conclusion you come to at the end of the book.

Michael Grunwald

Oh no, I don't think I'm that Debbie Downer. I would say I've concluded that we have not yet begun to solve. But I think I have a lot of promising solutions. And look, I do remind you that, you know, you started writing about this stuff, what, in 2004?

David Roberts

Yeah, that's true. Energy was bleak then, too.

Michael Grunwald

There were no alternatives to fossil fuels, right? There was no solar, no wind. The one alternative, and we'll, I'm sure, talk about this, was biofuels, farm-grown fuels which turn out to be, you know, way worse than gasoline. So, I think this is hard, it is. And you're right, you know, I wouldn't say every farm is bad, look, we gotta eat, but I do say that every farm makes a mess. I do say that every farm is a kind of environmental crime scene. Right. It's like this, it's like an echo of whatever nature was cleared to make room for it.

David Roberts

But this is the problem because I want to emphasize this, because this shapes a lot of what you say for the rest of the book, which is that getting more out of less land with fewer GHGs is incredibly, incredibly difficult. And the main lever you have to pull is yields, which we're going to get to, but sort of like the obsession with yields comes out of this tripartite problem. So this is sort of the background problem of agriculture. We need to make it less land-intensive, less GHG intensive, but we need lots more of it.

And that's like, you know, I don't even know what the right analogy is. It's doing something incredibly difficult. Two, three incredibly difficult things, that we've never really done in earnest, at once.

Michael Grunwald

My bad. I know you hate sports ball, but my basketball analogy is that we need to get more offensive rebounds but also do a better job getting back on transition defense.

David Roberts

I'm sure some listeners out there will know what that means.

Michael Grunwald

It's the "more with less." You're right that I do talk about the supply side. We need to make more food with less land. And we also, on the demand side, need to have less land-intensive diets.

David Roberts

Yeah, yeah. I want to go through all the various and sundry solutions that people have. I'm just going to be tossing them to you for you to take swings at them. But before we get there, I just want to start because the book starts with like 100 pages of accounting of the story of biofuels, basically the story of our assessment of biofuels. And obviously, we don't have time for you to recount that whole story, but sort of the main lesson that comes out of it, the main point of contention in all that fighting was, "What is the role of land use?"

Basically, like land, the question of land. Because you know, people were doing the calculation like, "You grow corn, it absorbs the GHGs, then you burn the corn, it releases them, you grow the corn, it absorbs them again. Oh, it's carbon neutral." But, as scientists came along and started pointing out, "If you're using that corn for fuel, they have to grow the corn to eat somewhere else." Right? So if you're doing this with the land, you're not doing that with the land. It's called opportunity cost. So, just talk a little bit about the role of land use in that fight and why it was, why it took 20 years to get people to pay attention to it.

Michael Grunwald

This was the one thing I knew about this area before I dove into this book. It was because I had traveled to Brazil in 2008 and wrote a piece about how essentially corn ethanol in the United States was tearing down the Amazon. Because through this exact mechanism you just described, if you're going to grow fuel, then somewhere else you're going to need to grow more food. And guess what, it's not going to be a parking lot. It's going to come out of nature and it's going to come out of, you know, these forests that are full of carbon and also absorb the carbon that we're pumping into the atmosphere with our fossil fuels.

So, my line is that it's, you know, it's kind of like if you want to fix the climate while you're deforesting, it's like trying to clean your house while blowing your vacuum cleaner to bits in the living room. You just can't do it.

David Roberts

But this seems obvious and intuitive, right?

Michael Grunwald

Right. It seems incredibly obvious. But essentially, you've, I'm sure, done more, you know, looking at life cycle analyses over the last 20 years than, you know, than you want to admit. And we all have, but up until, you know, this wetlands lawyer who's the kind of star of my story, Tim Searchinger, he's the guy who I first called and asked if meat is bad for the climate. You know, he was just this lawyer and he thought that seemed weird. Why don't these climate analyses take land use into account? Because actually, growing ethanol, you know, the actual production of ethanol, he's looking at these studies, it's worse than producing gasoline.

"You use more energy in producing it. You know, so all of the benefits, the supposed benefits, benefits from corn ethanol were from growing the corn. And Tim just looked at this and said, "Well, wait a minute, when that cornfield was just growing food, it was still soaking up that carbon. So what the heck is going on here?" And it sounds, you know — he was at the Environmental Defense Fund at the time and he got into this huge fight at work where, you know, the chief economist there was kind of like, "Are you saying you're the only person who realized this?"

And he was kind of like, "Well, yeah, I mean, nobody else..."

David Roberts

And the fight is that, I mean, the sort of technical basis for the fight is that it is very difficult to pin down a counterfactual. It's just very difficult to say what would have happened if you didn't do X, right?

Michael Grunwald

It's hard to pin it down exactly.

David Roberts

Right. As your hero says, it's obviously not zero.

Michael Grunwald

And it's obviously a lot. You know, these studies were essentially claiming that if you just stopped growing corn in the United States for food and just instead put it all in our fuel tanks, it would have no effect on global deforestation. And that was obviously preposterous. And I do, as a side note, have to mention, look, my hero, even though he was not a scientist, got a piece published about this in Science. It caused a lot — he created this idea of indirect land use change, which is now any life cycle analysis involving biofuels or really just about anything involving land has to account for indirect land use change (ILUC).

And I do have to point out that the House Republican bill, the Big Beautiful Bill that, you know, is getting rid of most of the clean energy stuff in the Inflation Reduction Act, not only does it extend the credit for biofuels, but it specifically has language that, when you do the analysis, you can't look at indirect land use change.

You know, because it comes out with answers that corn growers and soy growers don't like. And that is what's behind all this.

David Roberts

Yeah, there's a huge industry. I mean, anybody who's been in our area for as long as we have knows that this is a huge industry and it is a political third rail. Like, you can't get rid of this stuff. People pop up occasionally. So, I don't want to spend a ton of time on biofuels. I will just say they're bad. And that's across the board. Like, they're bad for sustainable aviation fuels, they're bad to make synthetic natural gas. Like, the math does not work. It doesn't, basically, for anybody. Like, I think if you're capturing methane gases that were otherwise going to be vented into the atmosphere and doing something with them, fine.

But, like, that's to avoid doing them in the atmosphere. It's not like you're going to get a good economical —

Michael Grunwald

Well, I will say, if you're actually using a waste product to make your biofuel, then it's probably okay. But a lot of those anaerobic digesters that are turning manure into biogas, they're terrible too. In fact, WRI looked at like 20 different ways that you can better manage manure. And 19 of them were cost-effective. And of course, all the money is going into these anaerobic digesters because, you know, farmers get paid for them. And that's the one that isn't cost-effective. They're mostly like craft brewing biofuels. So really, anything that uses land — I mean, I know I'm hopefully a broken record because this is my message, but we are eating the earth and it's agriculture that's eating the earth. And biofuels, it turns out, are only eating about a Texas worth of the earth. While for instance, livestock are eating 50 Texas worth of the earth.

David Roberts

Right, right, right. This is the second part of the message about biofuels: they're bad. If you've heard that they're bad, that's correct, they are bad. What about this new other kind? Also bad. But scale-wise, agriculture, whatever damage biofuels may be doing, agriculture is doing the same damage at a vaster, vaster scale. That's sort of the point of that section of the book. It segues into the larger land use dilemma, which is mostly about agriculture.

Michael Grunwald

Exactly. And this is something we all kind of know, right? When you look out the window of a plane, you see all those squares and circles and it's like, holy shit, there's a lot of agriculture out there.

David Roberts

Yeah, the numbers are bracing. Like our settlements — I forget the exact numbers you use in the book — but like our actual physical settlements, cities that we live in, it's like 2 or 3%.

Michael Grunwald

Yeah, I'd say one is at 1% going towards 2% of the land on Earth, while agriculture is about 40%. So, you know, you and I, we've both done a lot of work on the sort of scourge of urban sprawl and the importance of urban density. But just think, like agricultural sprawl, is 30, 40 times as bad. You know, that's what's eating our forests.

David Roberts

Yes, the land use problem, to a first approximation, is the agricultural problem. So, what I want to do here for like the next 30 minutes or so is do a little bit of a speed round because we've got a lot to get through and not a ton of time. I just want to kind of throw familiar solutions at you and I want you to tell me sort of like how to think about them. Having spent five years of your life immersed in this miserable research, you've learned all this stuff. Tell me, sort of like, what scale, what is the scale of this solution?

How should we think about it?

Michael Grunwald

David, it was fun. It was fun research. It was just the writing —

David Roberts

Did you say it was fun to write a book?

Michael Grunwald

No, it was just the "butt in seat" writing part that was hell. But actually, running around the world, talking to people, you know — I'm sure you see this with energy, right? I mean, before we get into the solutions, I should say it's really exciting because I'm a cynic, I'm a grouch. But it's really cool talking to these, you know, scientists and entrepreneurs who are thinking about this really massive problem and are just like, "Hey, let's try to fix it." And they have these unbelievable —

David Roberts

That's my whole job, Mike. That's the only thing that keeps me sane. So, I'm glad you got jazzed out of it. Okay, so I'm going to start with, I think, probably some easier ones to get to the harder ones later. Let's start with indoor farming. People love the idea of indoor farming because you can precisely control conditions. You eliminate insects, you eliminate any pests, any natural threat, you can improve yields, etc.

Michael Grunwald

Right. Not to mention night. And weather.

David Roberts

Yes, you can grow during winter; you can grow year-round. So, there are a lot of obvious advantages.

Michael Grunwald

It's a great place to start because it's, in many ways, the allure of indoor farming. It sort of highlights all the problems with outdoor farming, including that it eats the earth. It uses so much land. So, what if we could just put it in a skyscraper, like in downtown Newark?

David Roberts

Right. If you're trying to make it more intensive, more out of less land, exactly. Stacking up, going vertical, squeezing it all together, it sounds...?

Michael Grunwald

It's amazing, right? Instead of having a harvest, you know, maybe twice a year, you have it every two weeks. I mean, it's just, it's really remarkable. You don't, you know, you control all your inputs so, you're not creating any pollution, the birds aren't pooping on your crops. It's incredible. The long story short is that it doesn't work on any real scale. A friend of mine started one of the indoor farming companies called Bright Farms. He ended up getting fired because he was always complaining that the ambition wasn't big enough. What he was always saying is, "We're gonna solve the lettuce problem, maybe someday we'll solve the strawberry problem, but we're not gonna solve the food problem.

And of course, his board was like —

David Roberts

Because the food problem is grain, mainly a grain problem. And grains don't really... Like, what they're growing in these vertical farms is mostly leafy greens.

Michael Grunwald

Exactly. The high-end stuff. You can grow weed in a vertical farm and make a lot of money. Strawberries are the most, the highest margin, thing in your grocery store. You can do it with that. But it just, the energy costs too much and it's just like the sun is awesome. So the purely vertical farms...

David Roberts

Is it just that then? The energy costs too much?

Michael Grunwald

That's the sort of short-term problem.

David Roberts

But because one of my questions is like a lot of the technologies I cover here on this pod are only really going to work at scale without subsidies if renewable energy gets lots, lots, lots cheaper. So, a lot of solutions are pending that, basically. And so, I'm wondering, if we got to something like energy abundance, trivially cheap renewable energy, would that solve this problem or are there other things?

Michael Grunwald

It would make it a lot better. But right now, it uses so much energy. I think I remember I was doing back-of-the-envelope math with this one guy who had invested in one of these greenhouse type deals, and we calculated that it would take, I think, 30% of all current renewable energy in the United States to grow America's current tomato crop. And you know, tomatoes are not a big part of — you know, again, we use a couple hundred thousand acres for lettuce in the United States, and we have a couple hundred million acres of crops.

So, it's just really tiny. The real problem is that you can't grow these — at least nobody yet has figured out how to grow the big five: corn, soybeans, wheat, rice. This is a big problem. And I will say that I wrote a piece about this back when Plenty, Bowery, and AeroFarms had billion-dollar valuations. I wrote a column saying that the headline was something like "Vertical farming just isn't going to work." It was in Canary Media and I took a lot of crap, and now all three of those companies have gone bankrupt.

David Roberts

Okay, indoor farming is probably good for some nice boutique high-end crops, but it's not a scale solution. Another thing people are obsessed with in this is food waste. You often hear, "We don't have a supply problem. We grow enough food to feed the world. The problem is distribution. It's not getting to the people who need it, we're wasting enormous amounts of it, etcetera, etcetera." So, how should we think about food waste in the solution set?

Michael Grunwald

So, I'd say two things about it. First, I would say that it's true. It's absurd that we waste a quarter of our food, you know, some say a third. I think it's more like a quarter around the world. In the rich world, it's mostly, you know, we just waste it on our plates or at the restaurant. In the poor world, it's more, you know, we waste it close to the fork, they waste it close to the farm because they don't have good ways to store it.

David Roberts

Infrastructure.

Michael Grunwald

Yeah, they, you know, they can't get it to market. They don't have the right harvesting equipment, the processing equipment. And so, the first thing I always say is, "Yes, it's a huge problem, because when you waste a quarter of our food, that means we're wasting a quarter of the land we use to grow the food and the fertilizer and the water."

David Roberts

A quarter of the Amazon.

Michael Grunwald

Yeah, exactly. So, yes, I'm for getting rid of food waste. Everybody is. It's hard. And that's going to be a theme of a lot of these solutions is that, you know, like, I'm sure we'll talk about eating less meat, which is also really hard, but it's especially hard because we love meat. Nobody loves food waste. And yet it's still hard. I just did a piece for Slate about how there's a lot of data that shows, you know, we're all pissed off because food has gotten more expensive. Right. Yeah, I think we just picked a new president because of it.

Right. "Oh, it's terrible. We're paying too much for groceries."

David Roberts

Subsequently, eggs have risen in price almost every day since.

Michael Grunwald

Right. And now the new guy is unpopular, and that's probably why. Not because of fascism or any of that stuff. Everybody hates, you know, paying more for food. Well, we are not wasting less food. And so, it is just, it's hard. That said, there are a lot of things that I'm excited about. You know, there are these technologies where you can better manage inventories if you're a grocery store.

David Roberts

Yeah, that's kind of what I wondered. Is, like, what's at scale? Because whenever I hear about solutions to food waste, it's always these kind of local, incredibly high touch, like "We're employing people to drive to restaurants and gather this and..." You know, it just doesn't sound like stuff that could scale to any appreciable extent.

Michael Grunwald

I mean, I think some of it, I mean, groceries, again, because they have a purely economic motive and they're better at acting on economic motives. You know, these things like Flashfood, where you get the app and when food is ready to expire, they put it on sale automatically. AI puts it on sale for 50% and you come to the store. That's really moving the needle. And actually, groceries are doing a better job with their waste. And I think, you know, there are these like Apeel Sciences which has these kind of biotech invisible peels that you coat avocados and bananas with so they last longer.

I think that's exciting. And there are policy levers you can use too. I just mentioned expiration dates. Well, most of them are bullshit, and certainly the "best buy" dates. But it's sort of whataboutism, right? This idea like, "We don't need more food, we just need to waste less food." And you also hear, "We all just need to go vegan," or, you know, "We just need to reduce population growth." And what it really, you know, to wildly oversimplify the math, is that we kind of need to do all the things. Even if we reduce — the current US goal and global goal is to reduce food waste in half. Even if we do that, even if we eat 50% less meat in the rich world —

David Roberts

Quit skipping to the meat thing, Mike. We're not at that yet. We're getting to that later.

Michael Grunwald

Even if we get rid of biofuels, we stop using them entirely, we're still going to need to grow our agricultural yields even faster over the next 30 years than we have over the last 60. So, we're going to need a lot more food.

David Roberts

Okay, so food waste is important, but it's just one bit of the buckshot here.

Michael Grunwald

Don't waste food!

David Roberts

So, my understanding is that fertilizer is a huge problem here. It's got a bunch of nitrogen in it, it's polluting water, it's messing with the greenhouse. What about now — like, I'm always reading about cool synthesis and electrochemistry and all these abilities we have now to make new materials. Is there any promising attempt to make benign, more benign fertilizers?

Michael Grunwald

Yes, there are some exciting things. The first thing I would say is that half of all — you know, we just talk about food waste. Half of all fertilizer is wasted too.

David Roberts

Just overused, imprecisely?

Michael Grunwald

Overused. And it's annoying because, you know, food waste just ends up in the landfill and it fills up our landfills, creates a little methane. You know, fertilizer waste, we call it pollution, right? It's either, you know, it's nitrates that end up in the, you know, creating the dead zone in the Gulf of Mexico, or the algal blooms in the Great Lakes, or it's nitrous oxide emissions, which —

David Roberts

And that is because of the nitrogen. It all basically comes back to the nitrogen.

Michael Grunwald

Yeah, you know, I mean, nitrogen fertilizer is literally made out of natural gas. So obviously, if you could think of ways to use less of it, that would be really awesome. And right now, you know, this is going to be really shocking to you, Dave, but in the United States, we mostly rely on voluntary measures from our farmers. And this is probably going to be even more shocking: they're not working all that well.

David Roberts

Is fertilizer just so cheap that there's not that economic incentive? Because, I mean, these are like big corporate operations. You'd think they would be cutting costs. You'd think they would be thinking of ways to use less fertilizer on their own. You wouldn't think they would have to be forced to do so.

Michael Grunwald

You would think that. You know, and they are not, they are not idiots, these guys. They run businesses. And it's not just because Koch Industries is selling them the fertilizer, which, you know, has something to do with the lack of, you know, fertilizer regulation. But the fact is, and this is maybe skipping ahead, also the gains they can make by better yields, they so outweigh the costs of buying a little excess fertilizer that they call it "Insurance N." Like insurance nitrogen. And there are exciting technologies with, you know, some of them through precision agriculture, where your tractor basically tells you where on your field needs fertilizer and just drops it there, as well as some of these, you know, actual alternative fertilizers. Right now, there just isn't that much incentive if there's any danger of losing yields.

David Roberts

Well, let's get back to the alternative fertilizers. Is that a big thing? Like, can you fertilize without nitrogen?

Michael Grunwald

It's starting. So, there's a company called Pivot Bio that's backed by Bill Gates that I'm pretty excited about. And look, there are a lot of arguments over how well this stuff works, and we're not entirely sure, but it's on 5 million acres in the United States. 5 million corn acres.

David Roberts

That's a alternative fertilizer? How did they avoid —?

Michael Grunwald

It's cool. So, and this is one general theme, I think, in a lot of agriculture and probably a lot of society, is that the 20th century was chemistry. All these chemical solutions did really cool stuff, but often had these really toxic unintended consequences. The kind of mess that fertilizer makes being a classic example. I tell a story in the book about Norman Borlaug, the founder, father of the Green Revolution. I talked to this guy who has since died, but he was 93 years old when I interviewed him. And he went to Iowa with Norman Borlaug and sort of the punchline is that Norman Borlaug told him like, "Fertilizer is the Achilles heel of the green revolution and makes such a mess."

The 21st century is going to be biology. And so, Pivot Bio has essentially genetically engineered microbes. The original, the holy grail was, "Oh, can we just re-engineer these crops so that they can kind of fertilize themselves?" And that just hasn't worked really well yet. But what they did was they re-engineered these microbes that naturally fix nitrogen from the air and bring it to the soil and feed plants, but have kind of gone dormant because there's already so much fertilizer in the soil, so much nitrogen in the soils. It basically turns off their sense of smell.

So, they keep fetching nitrogen, even though it's already there. They're no longer lazy.

David Roberts

So they fetch the nitrogen from the atmosphere rather than us putting it in there?

Michael Grunwald

Which is what the whole chemical, you know, the Haber-Bosch process, that converts air, the alchemy of turning air into nitrogen. This is doing it biologically. And right now, they say they replace about 40 pounds of nitrogen per acre, which is about one fifth of the fertilizer on a typical US cornfield. The idea is that, you know, as it works, and there's pretty good evidence that it's working at least a little bit and that it isn't harming yields.

David Roberts

I mean, is there a horizon you can see, where that gets better and better and makes a substantial? I mean, obviously, these things are difficult to predict. Like, I have all the faith in the world in electrons, but I don't know enough about biology to know whether to sort of lay all my money, I'll put all my chips on that. But like, is that a solution to the nitrogen problem, or is that just another one of these sort of like trimming it at the margins things?

Michael Grunwald

No, I think that this is like the idea is that this can really take a big bite out of it over time, as with better gene editing. You know, like, technology is cool.

David Roberts

Well, this segues into my next question, which is about genetic modification. I have some criticisms later of the technocratic approach in this book. But this seems like an area where the technocrats have it right and the hippies are just wrong about this. You know, there's been a lot of objections to GMOs and as far as I have heard, no research whatsoever showing physical health harm. This obviously puts aside the politics and power questions, but the crops themselves have not been shown to hurt.

Michael Grunwald

Not in human health. It's like these are the most studied stuff on earth. And I agree, the hippies are wrong. That said, this is, you know, the technophiles have made a lot of big promises about GMO crops. Most of them have been somewhat disappointing in terms of the spectacular yield increases. They've been overhyped somewhat.

David Roberts

Yeah, what's your level of, I mean, what's the sort of appropriate level of hope to put in gene fiddling?

Michael Grunwald

I think, especially on the crop side, there's pretty good reason for hope. On the gene editing, I mean, this seems really cool. I mean, these, you know, the way they did genetic modifications, it was really kind of haphazard. You're just sort of bombing these crops with, you know, and sort of hoping something weird and cool and Spider Man-y happens and it just didn't work that well. But with gene editing, you can be really precise and you know, you combine it with the artificial intelligence and these supercomputers where — you know, I tell this story, I went to the University of Illinois where they are literally trying to re-engineer photosynthesis.

David Roberts

Yes, and the point of the AI and the computing is just that you can run simulations of these things that would have taken weeks or months. You can do dozens in a day.

Michael Grunwald

Right. And it would have taken tens of thousands of dollars. And you can do it for pennies. Like at the University of Illinois, they have set up this supercomputer that models the 170 steps of photosynthesis because it turns out photosynthesis — it's like it's 3 billion years old, and it does a good job of maintaining life on Earth and everything.

David Roberts

Pretty good record established.

Michael Grunwald

Yeah. So, like, give it — But it turns out to be pretty inefficient.

Like, you know, it takes carbon from the air, but it often grabs oxygen by mistake. And it turns out that it doesn't react that well when the sun, like a cloud, blocks the sun for a bit; photosynthesis turns off and then it's really slow to get started again. So, these guys have sort of figured out, "Well, okay, where's the gene that kind of restarts it? And let's have more of that." Anyway, they're doing stuff. It's going to take a long time, but, you know, you could really be looking at like 20, 40, 50% yield increases.

And, on the fertilizer side, you could be looking at replacing 20, 40, 50% of it. Fertilizer has about as much emissions as aviation.

David Roberts

Interesting.

Michael Grunwald

So, probably a little bit more. So, we're talking about big numbers here.

David Roberts

Yeah, yeah. What about another favorite of the hippies? And by the way, I just, I hope listeners know that I refer to hippies out of love and identification. I am, of course, a hippie myself, deep down, as you well know.

Michael Grunwald

I just did a debate at Berkeley where I was sort of debating a hippie professor who is, you know, pushing some of the agro-ecology regenerative stuff we'll talk about later, but Alice Waters was sitting in the third row just glaring at me the whole time.

David Roberts

Well, okay, so there's a lot of hope being put into trapping carbon in the soil. Soil carbon is a big, hyped thing right now. The idea is basically that you can just change your farming practices in such a way as to lock more carbon into the soil where it will stay stable, and as I understand it, will boost yields, will boost the fertility of the soil also. Am I making that up? Tell me what's going on with soil carbon and how big of a deal I should think of it.

Michael Grunwald

So, on the soil carbon stuff, I try to be very measured about a lot of this stuff. And since so much of it is ideological, and a lot of it, the truth is, you know, both really is somewhere in the middle. Carbon farming is bullshit. A lot of the regenerative practices that you see in Kiss the Ground and Common Ground that are being pushed by General Mills, Archer Daniels Midland, PepsiCo, RFK, Joe Rogan, Michael Pollan, and Al Gore.

David Roberts

You know, when I say, wait, so when we're talking about soil carbon, we're just talking about regenerative — are those basically the same kind of the same thing?

Michael Grunwald

Well, well, the thing is, regenerative is more — you know, they would say the regenerative movement would say, "It's about soil health," and it really does help with soil health. They would also say that it, you know, there are kind of societal benefits as you know, when you're creating these regenerative systems as opposed to extractive systems. There's a lot to be said for all of that. But they also say that it stores a lot of carbon in the soil and that basically you can reverse global warming by essentially taking all that carbon that we've pumped into the sky and just farming differently, and it'll come down in the soil.

And that is just not true.

David Roberts

Okay, well, we're going to get more into regenerative later. We're going to argue about that at the end. I'm saving that for our finale here.

Michael Grunwald

I should say, though, that trees are great stores of carbon. Like planting trees, which is part of this movement, right through agroforestry. That's awesome.

David Roberts

Yeah, Reforesting deforested land is like — who could not love that?

Michael Grunwald

Oh, and we should say, remember my first book, which was when I first met Tim Searchinger, was about the Everglades. Tim gave me the first tip that sent me to the Everglades, where I wrote the book, met my wife, and moved to Florida. But restoring wetlands is, like, that's the best bang for the buck. If you can, like, take wetlands, that's like — we're looking for one billionaire who could put in a few billion dollars and literally reduce 1 or 2% of global emissions by restoring wetlands.

David Roberts

All right, let's get to one of the things that everybody wants to talk about. If I am, as an individual, primarily concerned about climate change, what is the best change I can make to my diet? Like, what three foods should I give up if I'm most concerned about climate change?

Michael Grunwald

Beef and lamb. It's, you know, ruminant meat is really the baddie. That's what I've done with my diet. I've cut out beef and lamb. Like, if you can go vegan, that is awesome. That is the best. Beans and lentils are by far better than chicken and pork, but beef and lamb, the ruminant meats, are so much worse than chicken and pork that it turns out that actually vegetarians, also great, are no better than just cutting out beef and lamb, because vegetarians end up eating more dairy. And cows are really the problem because they are eating the earth.

David Roberts

Yeah, I guess you're dodging beef, but if you go to dairy, you're still supporting the cow agriculture.

Michael Grunwald

Right. And dairy isn't as bad because, you know, cows only produce beef once. While they produce dairy on a, like, shockingly constant basis. If you go to one of these industrial dairies.

David Roberts

So, this is like beef and lamb first, and then there's a big gap.

Michael Grunwald

Yeah, exactly. Less beef is really important. I mean, you know, beef, they provide about 3% of our protein or calories, and they use about half of our land. It's just an incredibly inefficient machine of converting animal feed into food. There are lots of cool things about cows, but —

David Roberts

Is there a name for a diet that avoids cows, lamb, and dairy, but not chicken and fish? You know, just like an anti-cow.

Michael Grunwald

Can we call that the Grunwald diet? I don't know exactly.

David Roberts

Somebody needs to put a diet book out.

Michael Grunwald

I mean, it would be a climavore diet to name check my RIP podcast.

David Roberts

But the reason veganism is best is mainly because of dairy. It's cows —

Michael Grunwald

I mean, plants are —

David Roberts

I mean, they're healthy too.

Michael Grunwald

Plants are great. And plants are healthy. Well, you know, look, Doritos aren't healthy. Right? Or, you know, but in general, eating plants is a lot more efficient than eating the, you know, eating plants that have been laundered through an animal. Right. And that's what dairy and beef is, right? It's, you know, the chickens eat soybeans. The cows eat corn and they turn it into beef. And you know, everybody's, I'm sure we're going to get to fake meat too. And people say like, "Oh, it's processed food." But I like to remind people that what goes on inside a cow's stomach, that is a process. It's like, it's crazy. So.

David Roberts

But if my concern is animal welfare, as I understand it, chickens are the number one problem from that point of view.

Michael Grunwald

That is true.

David Roberts

Just because there are so many, their suffering is so extensive.

Michael Grunwald

And they're treated worse. They're treated, I mean, it's horrible.

David Roberts

The cruelty of the chicken game is truly horrific.

Michael Grunwald

It's funny, I talk a lot in the book about how, yes, a big part of the problem is that we are going to need, particularly in the rich world, to eat a lot less beef, but that means that we're also going to need more efficient beef. And it turns out that you can make beef more efficiently. Chickens are already like the 42 days from, you know, egg to broiler is just, it's just like they grow so fat that they can't stand on their legs. It's horrible. And you really can't do it more efficiently.

They've practically reached their biological limits. While cows, there's, you know, for better or for worse, there's still a lot that can be done.

David Roberts

Just, like with cows, you're tweaking their diet so their gut biome works differently or what's the, what's a more efficient cow?

Michael Grunwald

I went to Brazil where I saw these ranches mostly. They have just millions of acres of degraded land and degraded ranches in Brazil where you'll have like one cow on 10 acres. And I saw these incredibly efficient ranches, some of which, by the way, use a lot of regenerative practices, including no-till and cover crops. They let the cows wander around the crops, which is something that the Michael Pollan types love. But they also do a lot of industrial stuff. They have feedlots and they fertilize their pastures, and they can put, you know, seven cows on one acre.

And so, it's like, you know, when you think, when you're like five, six, seven times more efficient in producing beef, that means you're using 1/5, 1/6, 1/7 as much of the Amazon.

David Roberts

Okay, so important marker there. Beef and lamb, absolute climate villains. Unquestioned, unambiguous.

Michael Grunwald

Yeah, and grass-fed is even worse, by the way. It's like, you know, from a climate perspective, not only because of the land, but because of, as many of your listeners know, the burps and farts are a real problem. And if you just, you know, have grass-fed beef, which spends their entire lives in pasture, it can take like twice as long to reach slaughter weight as it does for a feedlot fed. They only spend a couple of months in the feedlot, but that means they get to slaughter weight a lot quicker. So they don't spend the extra time burping and farting and creating methane emissions.

David Roberts

And this is one area where, and I think there are lots of these in agriculture, where a concern for climate and a concern for, let's say, other environmental and social problems don't necessarily point in the same direction. Like, grass-fed beef might be better for the welfare of the cows. It might be better for the biodiversity of the farm. It might be better on other metrics that you care about, but it will be worse strictly on greenhouse gases. Do you agree with that general point that those are different in a lot of cases?

Michael Grunwald

There are definitely trade-offs, but the environmental trade-offs are not always obvious. And I just do want to point out that the eating of the earth that I bang my spoon on my highchair about is not just a climate problem. Remember, this is like, you know, we're destroying the habitat, you know, these habitats for, you know, this is what's creating the sixth mass extinction. Right. It's not like pesticides in the air. It's agriculture taking over the earth. It really is.

David Roberts

Okay, before I talk about engineered meats, which I do want to talk about, let's talk about some of the other possible large-scale protein substitutes that people toss around. Bugs, seaweed, cultivated microorganisms. Are any of these sort of large-scale alternative proteins going anywhere?

Michael Grunwald

Well, they're all off to a slow start, I would say. But look, I think insects could be a solution — I don't think it's like that's what we're all going to eat when we grow up. But I think it can replace a lot of fish feed. I think it can replace, you know, hopefully someday a lot of animal feed. And remember, we use a lot of land for that. So I think it's promising. I think the idea that — you know, these are mostly efficiency questions and, and there are some really efficient animals, you know, that are very tiny, that grow protein pretty quickly.

David Roberts

This is sort of George Monbiot's — is that how you say his name, actually? I don't know. I don't know that I've ever said his name out loud. But that's his whole thing, right? He wants to just wipe out normal farming and replace it basically with microorganisms that are much more efficient in producing protein for energy input.

Michael Grunwald

He fell in love with a couple of potential solutions that I think are very exciting potential solutions. But I think, you know, we should absolutely be letting a thousand flowers bloom. But I would not shut down agriculture until these other... you know, I think that's one of the things that always kind of irritates me. There's this idea, it's like, "Well, let's first start by having lower yield agriculture because we know there are all these other things we can do that can, you know, help us feed the world without frying the world." And I'm always like, "Why don't we make sure that other stuff works and then, you know, maybe we won't need all this agriculture?"

David Roberts

I'm going to flip that around on you in a minute. But we're not there yet. So, of all these alternative proteins, is there one or a set of them that you think are particularly more promising than others? Is seaweed meaningful?

Michael Grunwald

No, I mean, I think seaweed as a feed additive for, you know, to get the cows to burp and fart less methane, has some promise. I don't think as a food source that's — I haven't seen a lot of excitement. But some of the — and this is getting towards the fake meat stuff generally — I do think biomass fermentation, which is essentially, you put fungi into a, you know, a beer brewery and it just grows into something that is kind of shockingly like meat and shockingly nutritious.

David Roberts

So, what's your take on fake meat then? This is one of these things where, like, very few people have had any direct experience with it, but people love to have takes on it. It's a take attractor. What's your take?

Michael Grunwald

I started working on this book. My first reporting trip, I went to the Good Food Institute conference, basically the fake meat conference in 2019. And so this was a few months after Beyond Meat, which does the plant-based meat. Those burgers, they had just gone public and it is still the biggest popping IPO of the 21st century, really. Their stock went up to $250 a share.

David Roberts

It's been a disappointment, though, as I understand it. Like, the plant-based stuff has not taken off like people were hyping it.

Michael Grunwald

Oh, no. Well, at that, you know, in 2019, I literally thought I was going to accidentally raise a series A round on the drinks line. It was like the exuberance was — and people were literally having arguments with, "Are we going to replace meat in 10 years or 15 years?" It was like that kind of thing. And so it was over the top. And now, yes, like Beyond Meat was at $250 a share. Now it's at $2 a share. I went back to the GFI conference in 2023 and it was all doom and gloom. "This is dead." It's the trough of disillusionment.

David Roberts

This is the plant-based stuff or the engineered stuff because those are very different?

Michael Grunwald

Sort of everything. All of the investors who poured billions of dollars into this stuff have, you know, fled for the hills.

David Roberts

Where did they just ban it?

Michael Grunwald

Well, in my state of Florida, Ron DeSantis banned it. It's banned in Alabama, Mississippi, Montana. That's the lab-grown meat or, you know, the cultivated meat. But I will say, look, plant-based meat went onto the market and, you know, my take on it is that it was way better than the kind of veggie burgers of yore, right? Those like hockey pucks that were just for vegans, but they weren't as good as meat and they were more expensive. And so it was kind of like a play for —

David Roberts

The sausages are good. The breakfast sausages are pretty good.

Michael Grunwald

And I think Just Egg does a really nice job with their egg substitutes.

David Roberts

I haven't tried those.

Michael Grunwald

I think Impossible Burgers are pretty good, as is the Impossible Whopper.

David Roberts

My kid went and had an Impossible Whopper, and he gave it a pretty vigorous thumbs down. I was disappointed.

Michael Grunwald

I think those are fine. Actually chicken, like the plant-based chicken nuggets. There's really no reason to have a chicken nugget anymore. The plant-based chicken nuggets are just as good. I mean, who the hell knows what's in the real chicken nuggets anymore?

David Roberts

Yeah, I know. Because normal chicken nuggets are so distant from meat anyway.

Michael Grunwald

All the stuff that these are just vehicles for sauce, and that's fine. But, I think right now, the sort of use case for these alternatives are just for people who are trying to save the climate. And that's what we learned from Tesla, despite all the other stuff. All of these companies said they were going to be the next Tesla, but Tesla had a really awesome product that people thought was cool, and that has not yet happened with plant-based meat.

David Roberts

And I suspect that they're not going to get there with plant-based meat. I mean, it's obviously like there's nothing wrong with it. I love it, it's great. But, as a scale substitute for meat, I'm very skeptical. Whereas, cultivated meat sounds, I mean, you know, on the one hand, the product sounds meatier but on the other hand, the backstory sounds creepier. So, what's your take on how it's going to play out?

Michael Grunwald

I mean, I think on all of these things again, I'm like, I have a lot of faith in technology, particularly when it's supported by government investment. It is only just starting to happen globally with these alternative proteins. Remember, the first solar panel was what, like 1960, and it didn't become a thing for like 50 years. The first real, even plant-based burger that was designed for meat eaters was, you know, basically 2012. And the first lab-grown meat hasn't really hit the market.

There's been a couple, you know, in Singapore you can get, you know, some like 3% cultivated meat.

David Roberts

Have you tried it?

Michael Grunwald

Oh yeah, I've tried it all, and I've tried the chicken.

David Roberts

How is cultivated meat?

Michael Grunwald

It's fantastic because it's —

David Roberts

Is it really indistinguishable from meat?

Michael Grunwald

Well, at 100%, you know, like I had Upside's chicken and it's better than chicken because the chicken we eat today is bred for growth in six weeks. This was like cells from a heritage chicken, the kind of old fancy chicken and it was delicious. It tasted chickenier than chicken.

David Roberts

Interesting.

Michael Grunwald

I've had lab-grown sushi, I've had lab-grown lox, lab-grown burgers and, you know, I will say the meat, there's something, you know, we've been eating this stuff for 2 million years and there is something in our, you know, that when you have the actual meat that sends that it's like 2 million years of evolution saying "hello." Even when it's blended with plants, which I think, you know, as this stuff hits the market and the first us like Mission Barns, they make cultivated fat, pork fat that they're going to mix into a meatball and that's going to be the first product probably that comes to market.

David Roberts

Oh, interesting.

Michael Grunwald

Hopefully, this year. And I think, you know, and that tastes good. It tastes, you know, even just, just fat, even just with maybe 10% cultivated cells, it's a really good product. And I do think, I'm sure you've seen like the New York Times did a big story about the revolution that died on the way to dinner saying, "This lab-grown stuff is never going to work."

David Roberts

Yeah, we've already been through a hype cycle, maybe even two hype cycles, on this stuff when it barely even exists yet.

Michael Grunwald

Exactly. I'm really, again, I'm really optimistic, and I'm working on a story about this. But behind the scenes, there's amazing progress happening. In fact, the big scientific paper that came out that threw cold water on this stuff, the biggest problem with cultivated meat is essentially the feed. They call it the "media." It's like the glop that the cells grow in. It's what they eat. And to oversimplify, this guy said that these companies would never get it below $6.50, you know, and then in the best, best case scenario, maybe they'll get it to $3 a liter.

Well, they're already below a dollar a liter. And I've heard, and I've talked to some firms that are below 50 cents. So, like technology, you know, it moves fast, things happen. And the people who say like, "Oh, you know, you can't do it." I say even on the plant-based side, like, I don't know, I think like, you know, our species is very bad at changing our behavior. We're very bad at being nice to each other, but we're pretty good at inventing stuff, right?

David Roberts

Yes, a lot there. So, we should talk about the main thing here, the main story, which is the reason people in this area are mad at you, this question of what to do about factory farming, basically about industrial-scale farming. So, there's a lot of sentiment out there that industrial farming is bad in a bunch of ways for climate, also for particulate pollution, also crucially, socially, morally, you know, politically bad in a million ways. So, there's a lot of push towards what's called regenerative farming, which is just kinder to the soils, kinder to the more you switch crops, you leave a field fallow for a year, so it regenerates.

There's lots of different techniques that have come up. There's been a lot of hype about this. You know, like, this is one of those things that journalists love to write stories about: "Meet Bob. Bob squinted out over his field." You know, and Bob's beautiful farm where he knows all the animals and everything. Your basic point, and it's not you, you didn't invent it. The point that you make that other people make too, is "Whatever other benefits regenerative agriculture may have, it produces less yield per acre. And if you produce less yield per acre and you're producing the same amount of food, you are using more acres." So in other words, your critique here is by reducing yield, you are accelerating agricultural sprawl.

You are requiring more land to produce the same amount of food. So, even if regenerative farming is better than factory farming, regenerative farming is not better than the wilderness that the regenerative farm replaced. Right? Wilderness is always best. So, insofar as you're driving more land use, you are shooting yourself in the foot; you're doing worse for the climate.

Michael Grunwald

"You are eating the earth," some might say.

David Roberts

You're eating the earth. And the idea that you are pushing — a lot of other people are — is if you increase the yield, the per acre yield, through these factory farming, sort of intensive, highly technological means, you then spare that land. You need less land, you spare land, you spare wilderness. And so, you come out ahead, basically. Is that a fair summary of the sort of argument there?

Michael Grunwald

Well, you don't automatically spare the land, but you have no chance of sparing it if you've already torn it down, that's for sure. And it's like, you know, the classic example is I read a Washington Post piece about Kernza, which is the regenerative grain that they've started growing in Kansas. And it's awesome. It's perennial. So it's really like nature. It's much more like nature than other, you know, other approaches. And the headline was something like, you know, "A recipe for feeding the world and saving the climate." And you get to literally the 38th paragraph, and they say that they've now increased Kernza yields so that it's almost 30% of wheat's yields.

And it's like, "Well, wait a minute. If you're going to need more than three times as much land to grow the same amount of wheat, then you are not feeding the world or saving the climate."

David Roberts

Back to the land use, back to the opportunity cost of land use.

Michael Grunwald

I agree with all of these problems with factory farms, about how they're bad for animals and people.

David Roberts

They concentrate power, political power.

Michael Grunwald

Too many antibiotics, they lobby against the climate. They're probably a pandemic risk, although not necessarily more of a pandemic risk than other forms of raising animals. They're bad, bad, bad. But the thing that factories do well is manufacture a lot of stuff relatively cheap and relatively efficiently. And that is really agriculture's main job over the next 30 years. You know, what I say is that, you know, and some will say that this is unrealistic too, but, you know, all of this is going to be hard. But, you know, there are $600 billion worth of agricultural subsidies around the world.

You know, $300 billion is literally just money handed to farmers. I think we need to have a little bit more of a bargain where it's like, "Okay, if we're going to keep paying you, you've got to at least... You've got to at least be a little less nasty."

David Roberts

Have you ever tried to wrestle a dollar of subsidy out of the hands of a farmer, Mike? Have you ever?

Michael Grunwald

Exactly, I'm saying you can't. So let's at least try to attach, like, "Okay, we're going to give you your money, but here are a couple of things that we can do that will actually, you know, hopefully work out best." You know, for instance, we talked about wasting less fertilizer, right? Like, maybe we can come up with ways and we'll do the research for you. I want your listeners to understand, like, the extent to which people want to think that they can just transform agriculture, like the Rockefeller Foundation and the like —

Remember, these are the guys who initially bankrolled Norman Borlaug to do the work that led to the Green Revolution. They've put out a white paper where — it's a group of philanthropies, because basically, any philanthropy these days, if you say the word "regenerative," money starts pouring out of their pocket.

David Roberts

What if you said AI, regenerative and AI?

Michael Grunwald

That's VCs. That's VCs. But these guys, you know, they want a $4 trillion transition to agroecological systems. And it's not just like, you know, these are the biggest philanthropies, the United Nations, the World Bank, and then these big agribusinesses because they're like, "Oh shoot, you know, we'll push a dollar any way you want it and we'll get our, you know, like, that's fine." So you have like, you know, General Mills and Archer Daniels Midland and Danone. These guys are big on this. You know, "Fine, that's great. We'll have our farmers grow it regeneratively."

The problem is we're going to need a lot more farms.

David Roberts

Well, if you're telling them to do something that will require them to triple their production, obviously they're not going to complain about it. We're going to subsidize you and also thereby force you to triple the amount of land you have in production.

Michael Grunwald

I understand why people get upset at me about this stuff because, you know, industrial agriculture does suck.

David Roberts

Well, let me just throw this at you. I mean, it seems like at the very least, if the premise of focusing on intensifying yields through factory farming, if the whole premise of that is that it spares land, then at the very least, it seems like before you give these dollars to the farmers, you should require them to spare some land. The idea that it theoretically spares land. I mean, this is the thing about corn. If you look at the history of corn biofuels, like when corn yields improved, they didn't reduce the amount of land they devoted to corn.

They just found new uses for corn. That's what ethanol is. So, like, you know, this is Jevon's paradox, or however the hell you're supposed to say that. You know, this is like, "If you make it more efficient, we're just going to use more of it." You have to build the land sparing in legally, not just as a slogan.

Michael Grunwald

And this is the failure of REDD and REDD+ plus and all these other international efforts to protect forests is that you've got to have produce and protect together. They've got to be conditioned in each other and we will help you produce more. But exactly like you said, if you help a farmer increase his yields, the first thing he's going to do is like, "Great, I'm going to cut down more forest and grow more food and like, you know, and get rich." It has to be tied together and not just for that one farmer, but on a sort of jurisdictional basis. For Brazil, right?

You've got to tell Brazil, "We will give you all this money to work on increasing your yields and protecting your forest, but you've got to have the results." And what I will say is that the first Lula administration was really starting to do this. They were promised, "We'll give you a lot of money and we'll help you increase. You work on your yields, but also you work on protecting forests." And they did a lot of this. The international community did not keep its promises and did not provide the money. That's part of what led to Bolsonaro.

Like, people were pissed. So, I do think there it is — it's going to take a shit ton of money. You know, you can't do this stuff on the cheap. And it is going to require that there's going to have to be carrots as well as sticks.

David Roberts

Let me come at you with a critique from a different direction then, which is the argument here is like, we're not going to be able to persuade people to eat less meat. We're not going to be able to persuade these giants. You know what I mean? There are just immovable barriers.

Michael Grunwald

The argument is that we have to do all the things.

David Roberts

The only thing we can move is yields. But, like, that's a socially constructed fact. The idea that we can't move the meat lever, that this is the only lever that's movable, is socially constructed. And if we put, like, what if we diverted all this R&D money away from factory farming into regenerative practices, which has not gotten nearly the amount of, you know, R&D. Are you certain we couldn't improve the yields of regenerative practices if we really doubled down on it and tried?

Michael Grunwald

And as I said, I've seen areas where regenerative practice — I'm not against regenerative practices. I do think the carbon farming part of it is bullshit. But I'm all for regenerative practices, especially on the grazing side. When I talk about intensive grazing, usually that involves regenerative practices. The regenerative practices seem to increase the stocking rates, and you can make more beef than just — a lot of these conventional ranches, they call it the "Columbus" method. You send the cattle out in the fall and you go discover them in the spring, and that's really inefficient. Now, these regenerative practices require a lot more labor.

They're hard. But, I completely agree. And, I got to push back a little bit on this idea that I'm giving up on meat, I'm giving up on food waste. I'm saying we got to do all the things and the government has to be involved on the research side, on the deployment side, just like it was with energy. Food is probably about 25 years behind energy, but we don't really have 25 years to jerk around like we did on this energy stuff.

David Roberts

Here's yet another angle, a political economy angle. And this will sound familiar from the energy world, which is if you allow agriculture to become an oligarchic business like this, if you allow power to concentrate in a few giant, giant corporations and then your solution to the problems that are thereby created is to restrict the corporations through law and regulation. I think the political economy critique here is like you can't create these powerful, selfish entities and then expect to rein them in like that. That horse is out of the barn. You need to break up the concentrated power here if you want to have any hope of positive reform.

Do you buy that at all?

Michael Grunwald

I mean, this is a long discussion, and I would say it's sort of partly true. But remember, like oil companies, they exist to make a product that's inherently bad, and there's really kind of only one way to do it. You know, it's not like there's a lot they can do. They're just going to fight.

David Roberts

No regenerative drilling?

Michael Grunwald

Now, farming, there's a, you know, farming. You can measure emissions and often the big guys have, you know, they can afford efficiency in many ways and they can afford to do things in often climate friendlier ways than, you know, the guys who are just running a few cows or, you know, just, you know, have a few acres. So, I do think it's not insane to think that. And we've seen some examples. You know, the best example is Denmark. Partly because they've done so much on the energy side, they were suddenly realizing like, "Hey, we're on track for by 2030, agriculture is going to be half our emissions and it's only 1% of our economy."

And believe me, in Denmark, you know, they use more land for agriculture than any other nation except for Bangladesh. So, they are like, the agriculture guys are really powerful there. But they realized they were going to have to come to the table, and they came up with a deal where they're putting tons of money into promoting the kind of plant-based alternatives, but they're also putting tons of money into the kind of things that are going to help these farmers increase their yields and reduce their footprint. And then they are also requiring them to essentially turn about one sixth, a million acres of farmland, back to wetlands. You know, it's unbelievable.

They're going to have a carbon tax on emissions from animals. I mean, this is like, you know, they're doing all the things.

David Roberts

Yeah, they got serious about it.

Michael Grunwald

Yeah, it's Denmark. I know they're the model nation. Right. You know, all that. But like, you know, it's like "you never say never." And I do think, like I always say, that the book is kind of about how we're going to feed the world without frying the world. As if, which makes it sound like it's kind of two different challenges. But honestly, we know how to feed the world and if they have to, they're just going to cut down more trees and make more food. So I think there's like, like getting them to do it without frying the world is really, you know, the incentives, believe it or not, are kind of focused in the right way.

Like, there's, you know, JBS is all about efficiency. Tyson Foods, Archer Daniels Midland, Cargill, these guys, they have actually pretty slim margins and they're happy to work towards approaches that can make more food with less land. And I would add for those big guys in particular, the alternative proteins, that's an option for them to make bigger margins. Even as a lot of these venture-funded startups are having incredible trouble, JBS is still going ahead with a cultivated meat factory in Spain. Cargill has invested in Upside Foods and Wild Type, which is doing cultivated seafood.

Tyson has invested in Believer, which has built a factory in North Carolina to do cultivated chicken. They see this as, you know, whether it's the short-term future or the long-term future, they see it as the future because ultimately they see that animal agriculture, and agriculture in general, can't take over the entire world. Right. And, like we all saw in The Martian, that's going to be a tough place to grow crops.

David Roberts

All right, so we're out of time. But as a sort of final way to wrap this up, I mean, the example of Denmark is poignant, as always.

Michael Grunwald

My sense is we're not quite there, politically.

David Roberts

We're not just a little bit shy of the mark.

Michael Grunwald

I haven't been paying as close attention to politics while I was working on this book, but my sense is that it has not progressed in a really climate-friendly direction.

David Roberts

Well, this is my question. Like, in the US, we seem not only so far from where Denmark is in taking this seriously and putting serious restrictions on these companies. A) They seem more sort of brutally powerful here. I'll never forget when they disciplined Oprah. Remember that? Like, to me, that was so telling. I was like, "My God, there's a force in American life more powerful than Oprah that can bring Oprah to heel. That is power." They seem more powerful here. They seem like they're getting more powerful, not less powerful. They seem like they're getting more corrupt.

The administration is more corrupt and in bed with them. Everything's going in the wrong direction here. So, for the individual, you can make dietary changes; you can give up beef and lamb, that's what you ought to do. You could go further and give up dairy as you ought to do. But that's, you know, I'm somewhat skeptical about the prospect of individual behavioral changes amounting to scaled solutions here as in other areas. So, if I'm engaged in this and I care about the problems of agriculture and the climate challenge of agriculture and I want to go beyond personal behavioral change, what do I do?

Like, on energy, I can tell people a lot of ways to get involved. You know, that's more than individual action but short of federal lobbying. You know what I mean? There's a lot of stuff in the middle I can think of. What is the way to politically organize around this problem? Do you know what I mean? Like, how should people engage in more than individual action?

Michael Grunwald

Well, let me at least make the case since I know your listeners are the energy wonks that I considered myself. I was your people before I took this six-year detour. And so, I guess the first thing I would say is that you should give a shit about this stuff because it really matters. Here's the thing, the next four years are going to suck in the United States for all kinds of climate action, right? But actually, there's a real difference, like with energy, you know, thanks to the Dave Roberts' of the world, and actually, there's probably only one.

So, maybe just thanks to you, we know what to do. We got to electrify the economy and run it on clean electricity. And you know, we're sort of even, you know, Trump aside, we're, you know, we're sort of starting to do it, like not fast enough, but it's happening. And this has been like, this is a story that I used to tell. I started telling it back in my Obama book.

David Roberts

It's happening, just not fast enough.

Michael Grunwald

Exactly. Now, with food, we don't even know what to do.

David Roberts

Right. It's not happening. Because we don't even know what it is.

Michael Grunwald

And a lot of the things we think we know are just not so right. So, it's not like, unlike with energy, Trump isn't going to be repealing all this progress that's been made. Right. This is actually a good time for us to start figuring shit out.

David Roberts

"Can't repeal progress if you don't make any," the guy tapping his head meme.

Michael Grunwald

Exactly, precisely. And this is going to be a good time for us to start to figure out what are these, you know, what are the real solutions, what are the fake solutions? You know, this is stuff that philanthropy, which, you know, if it wasn't just going headlong into just giving money to every hippie who says they're doing, you know, they're going to save the soil. And I should say that there's like, Bezos is funding some good stuff on alternative meats, on reducing emissions from cattle. We really ought to be figuring stuff out and we ought to be thinking at the international level about less crappy global policies that essentially work towards this "produce and protect" approach.

David Roberts

And the one thing we can all take out of this with crystal clarity is that ethanol sucks and should be crushed into the dirt now and for all time.

Michael Grunwald

Can I say one more thing about that? Because actually, ethanol is a perfect example. Remember, a lot of the enviros and a lot of the energy people were all excited about ethanol and all these biofuels because they were trying to solve their energy problems. They were like, "Oh, we'll reduce fossil fuels." The land sector was somebody else's problem. Now, I've spent six years, and the land sector is my problem. It has come to my attention that you energy people, of which I guess I used to be one of them, but when you're talking about burning wood for electricity or running our planes on corn and soy, you are dumping your energy problems on the land sector.

And you shouldn't do that. Like, this is something energy needs to solve its own problems. And then, you energy people should start caring about our land problems too.

David Roberts

There is such a thing as energy abundance possible, and even on the horizon, but there is no such thing as land abundance. Land is intrinsically a scarcity issue. And if you're using it for one thing, you're not using it for something else.

Michael Grunwald

There really is no Planet B.

David Roberts

We're going to get through all the cliches before we're done here. Alright, Mike, thank you for taking six years of your life to wade into this and figure out just how depressing and intractable it is. All kinds of solutions are on the horizon in four years —

Michael Grunwald

None of which you give a shit about.

David Roberts

No, I support them in theory, Mike. It's like, you know what I mean? There are all kinds of good things, things that I support that I don't care about, like oceans. Like, you think the ag people are mad at me. The oceans people really hate me because oceans are definitely super important, and I don't care about them either, really.

Michael Grunwald

Well, I hope your readers at least understand. And it's also fun. The book is fun. It's not dreary like David makes it sound.

David Roberts

All right. It is a rollicking read. All right, thank you, Mike. Thanks for your work, and good luck.

Michael Grunwald

Thanks so much, Dave, and thanks for everything you've done.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

In this episode, I'm joined by two of California's leading housing champions, Assemblymember Buffy Wicks and Senator Scott Wiener, to discuss their bills to reform the state's notorious environmental review law, CEQA. We explore how a well-intentioned 1970s environmental protection has become a tool for NIMBYs, unions, and even oil companies to delay or kill housing projects — and why the politics have finally shifted enough to make progress possible.

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Text transcript:

A conversation with Asm. Buffy Wicks and Sen. Scott Wiener.

David Roberts

Okay. All right, everyone. Hello, this is Volts for June 25, 2025, the fight to build faster in California. I'm your host, David Roberts. California has become the poster child for the US housing crisis: it is over 3 million units short of housing demand at this point, and that number is growing by about 100,000 a year. It is also in danger of becoming the poster child for larger blue state governance challenges. One reason California is so far short of the housing it needs is that it is difficult, time-consuming, and expensive to build anything there, and one reason for that is the California Environmental Quality Act, or CEQA, signed into law in 1970.

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That law — at least the way that law has been interpreted and expanded since its passage — effectively gives anyone who can afford a lawyer the ability to delay any project they oppose for years. It has been used to block or delay affordable housing, student housing, bike lanes, and high-speed rail, along with lots of plain old apartment buildings.

This year, real CEQA reform is on the table for the first time in many, many years. In the State Assembly, Oakland Assemblymember Buffy Wicks is sponsoring AB609, which would exempt infill housing from CEQA review. In the State Senate, San Francisco's Scott Wiener is sponsoring SB607, which would follow that with a number of additional reforms.

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This topic is, to say the least, controversial among the state's various interest groups. I cannot wait to get into it! I am happy to have Assemblymember Wicks and Senator Wiener here with me today to discuss why this reform is needed, how they have assembled a coalition to support it, and what they hope for California's housing future.

With no further ado, Assembly Member Buffy Wicks, Senator Scott Wiener, welcome to Volts. Thank you so much for coming.

Assembly Member Buffy Wicks

Thanks for having us.

Senator Scott Wiener

Yeah, thank you.

David Roberts

Excited for this. I've been trying to set this up for a while. I know you two are very busy in general, but particularly right now, so I appreciate you taking the time. So, let's start with you, Assemblymember Wicks.

Assembly Member Buffy Wicks

You can just call me Buffy, by the way. Makes it easier.

David Roberts

Thank goodness. So many syllables. Anybody who follows this, anybody who follows California's housing policy, is painfully, and I use the word painfully advisedly, aware of CEQA and has no doubt been involved in many fights over it. But we have listeners outside of California, so maybe let's just start with a couple of minutes on what is the law and how has it come to be what it is?

Assembly Member Buffy Wicks

Yeah, so you know, this law was passed in 1970. It's become a bit of a sacred cow here in California politics. And it was designed really to protect the environment by ensuring that new projects considered environmental impacts and mitigation, which is a very lofty and important goal, especially at that time when we had like orange skies and very, very limited environmental protections. And so, I think the original genesis of it is one that is very noble. You know, it was to stop harmful development. Right. But the statute's breadth and, you know, depth of it has expanded over years and has really allowed it to become essentially, you know, a blunt instrument to stop, in this case, housing production.

But many other things too. Renewable energy projects, public transportation, climate resiliency projects, all kinds of other things. You know, CEQA is required on all projects, even those, you know, aligned with state and local plans. You have to undergo a pretty lengthy environmental review process at the general plan level for individual projects, for special plans. There's a lot of analysis that goes into our projects. And over time, there's been essentially a cottage industry that's formed around CEQA litigation with law firms that specialize in CEQA challenges to stop projects.

David Roberts

And those challenges are tantamount to saying, "You didn't review enough, you didn't review properly, you didn't follow the letter of the CEQA law." That's what those lawsuits are all about.

Assembly Member Buffy Wicks

Yeah, and the result, the effect is that there are years and years and years of delay on many projects. In some projects, you know, you'll have a plot of land that is perfect for development, say it's transit-oriented housing or a place for multifamily housing, and there'll be a lawsuit that's so involved that the developer will finally just throw in the towel and give up. And then that land won't be bought by another developer to develop it out to a project because they know what they're going to face is years and years of lawsuits.

And so, this is the reality of the millions of homes shy where we need to be here in California.

David Roberts

Yes, and it's not just necessarily the lawsuits, it's also just the threat of the lawsuits. Sort of like preemptive defensiveness against the threat of lawsuits. Maybe Senator Wiener — or I guess I'll call you Scott now.

Senator Scott Wiener

Scott is great.

David Roberts

Maybe you could go into a little bit of detail about what are the groups that are filing these CEQA lawsuits and what are they typically using them for?

Senator Scott Wiener

Yeah, so, and I want to just add the last point you made is incredibly important because sometimes the folks who just reflexively defend CEQA, "CEQA can do no wrong. You know, very little needs to be changed about it." What they will point to is, "Oh, only a tiny percentage of projects get sued in court under CEQA. So therefore, there's not a problem." But what you said is absolutely spot on: it's not just about the actual lawsuits. If you know that X opponent of the project has the ability to hire a lawyer or has a lawyer, you're going to be very conservative and err on the side of more and more environmental review to protect yourself from a lawsuit.

So, it really distorts the entire system, even for projects that never end up in court. And what we've seen is, and just to be clear, there's a chunk of CEQA that is absolutely about the environment. You know, when you talk about building some massive warehouse facility in an area that's going to have mega, mega impacts on the community, or putting a big chemical plant somewhere or something that could lead to toxics. But a lot of CEQA has nothing to do with the environment. And so, we see it play out as really all about leverage.

And that's why it's so hard to change CEQA, because everyone who is using the law to exercise leverage to get what they want on a project doesn't want to give that up. So, for example, recently, maybe a year or two ago, the Los Angeles City Council passed an ordinance to phase out oil extraction in LA. That passed, and the oil industry filed a CEQA lawsuit against the city of LA, saying that the city had not engaged in sufficient environmental review — so using CEQA to try to stop the phasing out of oil extraction. We saw recently in Napa, north of San Francisco, where they only have one childcare slot for every 10 children who need it.

There was a proposed childcare center supported by the city, by the county, broad support. There were neighbors who didn't like it because they didn't want a childcare center nearby. They used CEQA and there was a lawsuit. Ultimately, it was resolved, but it might have inflicted a mortal wound on that childcare center in terms of cost and delay. We saw recently a CEQA lawsuit against a food bank in the city of Alameda in the East Bay, a CEQA lawsuit against a Planned Parenthood health care center in San Mateo County. And the list could go on and on and on about CEQA lawsuits that literally have nothing to do with the environment and that are stopping us or slowing down our ability to create things that we need, like childcare centers, like health centers, like food banks, like moving away from fossil fuels.

David Roberts

This wasn't included in your list of anecdotes, but we should say that often, unions, trade unions will file CEQA lawsuits against projects as leverage to push those projects to offer better labor agreements, basically.

Senator Scott Wiener

You see, the building trades that will use to try to get project labor agreements on a project, the hotel workers union has used it to try to have better wages and working conditions for hotel workers. And in a lot of these cases with labor, at times, their goals are goals that I support. I want better wages and working conditions for workers. My view is we should just legislate that as the standards and not do it through CEQA. They're doing it through CEQA because that's the way they can do it. There is another way. My view is, let's just set up good rules and not have every single project be sort of this bespoke, unpredictable process where CEQA can kill a project or delay it.

David Roberts

Right. It seems like a law that is sporadically and inconsistently enforced via lawsuits is not the best way to solve the problem of labor standards.

Assembly Member Buffy Wicks

No, and also, I think another group that obviously, famously uses CEQA are NIMBY groups. Right. And I have in my district, I represent UC Berkeley. UC Berkeley was trying to build housing on People's Park, a park that obviously has historic importance but has become, you know, essentially an open-air drug market. They tried for decades and decades and decades. You know, the local neighborhood group, homeowner groups used CEQA to say that by building housing there, the student noise would have an environmental impact.

David Roberts

Yes, I remember that one. The noise of students being pollution under CEQA.

Assembly Member Buffy Wicks

So, we had to do a bill that passed with flying colors off the floor of both houses to basically say that student noise couldn't be considered an environmental impact. Now, we are building 1,200 units of housing and housing for our unhoused on that land. But it required literally legislation from the state to ensure that.

David Roberts

That's about as close as you're going to get NIMBYs to come to stating their core philosophy, which is just that people basically are pollution.

Assembly Member Buffy Wicks

That was basically the argument. Yeah.

David Roberts

So, before we get into your bills to reform CEQA, maybe we could just talk a little bit about — this is not the first go at reforming CEQA. It's been a problem for a while and there have been these sort of fitful efforts at reform, but they haven't really amounted to anything. Scott, maybe you can talk a little bit about that. These sort of like exemptions here for this and that.

Senator Scott Wiener

To be clear, there has been good work. And actually, Buffy and I have been part of that work. It's happened in two ways. What we've basically done is we have taken categories of projects and said we're either going to just create an exemption, so it's simply exempt from CEQA, or do something called ministerial approval, which means there's no discretion about whether to approve the project or not approve the project. And that means that it's not just exempt from CEQA. It's not considered a "project" for purposes of CEQA. So it's like, literally as if CEQA didn't exist for that project.

And so, we've done that for big categories of housing, whether accessory dwelling units or duplexes or certain apartment buildings, or commercial conversions to apartment buildings, which Buffy did that law. We've also done exemptions for, I authored an exemption for student on-campus student housing. We did one for certain kinds of public transportation and bike and pedestrian projects. There's been a series of these exemptions. And to be clear, exemptions are extremely powerful. It just knocks an entire category out of CEQA. But what that means is that for everything left behind, which is an awful lot of projects, including some kinds of housing or childcare centers or advanced manufacturing or semiconductor plants — the CHIPS Act basically almost entirely skipped over California because it's too hard to set up shop here.

It's been a legislative failure that we've not been able to muster the ability to fix CEQA itself. And so, we get accused of, "Oh, you're Swiss-cheesing CEQA by doing exemptions." The answer is, "Yes, okay, let's fix CEQA itself, which is what we're trying to do with SB 607."

David Roberts

And one other thing I wanted to mention, also before we get into the laws, is this is a dynamic. Because one of the things I want to talk about later, maybe a little bit, is how this has become politically possible. But one of the dynamics that's going on, and Buffy, maybe you could say a little bit about this, is there's been a series of state laws trying to get housing going. Like, this has been a long fight in California trying to get housing going. And at this point now, you've got kind of a weird situation where you've got state laws telling cities they have to do things, and cities basically using CEQA to tie their own hands.

Doesn't seem like a stable legal situation when you have these conflicting laws, basically.

Assembly Member Buffy Wicks

Yeah, we're sort of coming to a head on it, you know, and it again sort of manifests itself in the current housing crisis that we are in. You know, we've done a lot of good work over the past seven, eight years trying to expedite streamlining. And you know, Scott and I have worked a lot on these bills together to require, bring about more accountability, really more enforcement around state law to ensure that our local municipalities are actually adhering to their regional housing allocation numbers — RHNA is what we call it here in California — and putting some teeth on that enforcement.

We're doing a lot towards that end with some of the exemptions that Scott just laid out. Yet, CEQA remains a loophole or a delay that can derail those very same projects. So, that's really the challenge, which is why the reforms around CEQA are so critical. And I would argue, like I view our housing and transit policy as our environmental policy. Right. So, from an environmental point of view, we need infill housing. We should be incentivizing infill housing. We should be incentivizing our public transportation, not making it harder to do those things. You know, not weaponizing things like CEQA to stop that type of housing and that type of transit.

Which is why, you know, Scott and I are working on his bill and my bill and, you know, the reforms that we're doing in this body of work.

David Roberts

Well, talk about 609 then, AB609.

Assembly Member Buffy Wicks

So, AB609 is my baby for the year, my biggest lift. I've got two girls, a four-year-old and an eight-year-old, who I love dearly. And I have AB609, which is like my third child.

David Roberts

Third child, notoriously the most difficult.

Assembly Member Buffy Wicks

Yeah, totally. I mean, my 4 and 8-year-old do give it a run for its money. But essentially, what this bill does is it says, "If this is infill housing that's environmentally friendly" — so we have something here called the Cortese list, which is a list of, you know, industrial lands and others that you can't build on — but if it's environmentally friendly housing and it's infill, so there's already a footprint there; no CEQA, just no CEQA for housing. Whether it's, you know, market rate, missing middle, you know, low income, affordable, whatever it is, no CEQA.

David Roberts

So, this is like a categorical exemption, rather than a —

Assembly Member Buffy Wicks

It's a pretty big, yeah, carve out here on this, and with the idea being that, in fact, we should be bending over backwards to make it easier to build this type of housing. And as mentioned, there's been so many delays. CEQA gets so weaponized for infill housing and often infill housing because it is on a current footprint, which means there are neighbors who object to having housing, multifamily housing in their community, and they use CEQA to stop that housing. So this basically, you know, if we get it passed, which I'm cautiously optimistic, though I choose to live in a constant state of fear and paranoia until it gets signed into law.

It'll be one of the biggest reforms on CEQA, if we're able to get it done this year, that will, fingers crossed, jumpstart the housing that we need. And again, with the idea around — you know, I believe we should have more protections on our open spaces. Part of why we love California so much is that we have this beautiful open space. We should be very mindful of the environmental impacts on that type of housing. But if you're talking about housing on our current footprint, you know, you look at the example on Stevenson Street in San Francisco. It's literally in downtown San Francisco.

It's a massive housing project right next to a BART stop. You know, CEQA lawsuits are, that was on a parking lot, you know, are being used to stop that housing that would then be exempt from that hurdle.

David Roberts

Yes, and we should say, like the housing that gets blocked this way, it doesn't disappear, it just goes out into the hinterland —

Assembly Member Buffy Wicks

That's exactly right.

David Roberts

where it takes much more sensitive land. Is it clear legally what is and isn't infill?

Assembly Member Buffy Wicks

We have definitions of what that is in the bill. And there's, you know, we're using definitions that have been used in other government code, but it has to have parcels on 75% of it. So it's a pretty clear definition of infill that I think we're pretty comfortable with here in California.

David Roberts

And what about people who worry that you've basically like is too broad a brush here that you're going to inadvertently exempt some stuff that needs review? Do you think that the environmental friendliness checklist — whatever, I forgot the name for it — but you think that's enough to sort of vouchsafe environmental quality?

Assembly Member Buffy Wicks

I think so. And I also think, you know, if we're not building projects like 469 Stevenson, which is 500 units of housing on a BART stop, we're going to have to build it somewhere. So to your point, it's going to go out into our open spaces where we're going to then have to build more freeways and more sprawl. And 41% of our greenhouse gas comes out of our exhaust pipes. Right. So those are our choices here. So I think the adverse is the issue, right, that I would fully support this type of housing development versus the alternative in terms of what's better for the environment.

David Roberts

Okay, that's 609. Big exemption for all, basically all infill housing that fits these basic requirements, which is most of it. The other bill is SB607. That's yours, Scott, your baby. This one is a little bit more — it's funny, it's so technical and freighted with everything. But on the other hand, if you actually, like, read what it does, it's incredibly wonky and technical. It does several things. But there's one main thing I want to focus on, which is about how high a hurdle you have to cross to file a lawsuit, basically. Like what it takes to get in the door for a lawsuit.

Right now, the standard is a fair argument. Is there a fair argument that there might be an environmental impact? And I think anybody listening to this will just be like, "Well, I can make up a fair argument for anything." So, there's effectively no barrier at all. If you can get anyone to write down an argument, you can get a lawsuit going, basically. So, it's at this point trivially easy to file these lawsuits. So, what would the bill make the new standard, and what effect would that have?

Senator Scott Wiener

Yeah, there are actually five pieces to the bill, and any one of those pieces, if it were a bill by itself, would be a big bill. So, we make it easier — right now, there is this gotcha provision in CEQA where if there's a CEQA lawsuit after an environmental impact report, they look at the administrative record, which is right now defined so broadly that you can overturn an environmental impact report in court if they neglected to include some tangential email from some employee three times removed who wasn't involved in the decision. So, we narrow the administrative record to be only what the decision maker actually saw, which makes a lot of sense and is very exciting for a lot of cities that get tormented by this.

There's also a provision if you almost qualify for a CEQA exemption but barely miss it. Right now, you have to do an environmental impact report as if the exemption didn't exist. The bill would say, in that case, you only have the impact report would only apply to the piece that you missed, not to everything. So it'd be much narrower. And there are a couple of other things as well. But the piece you're referring to has to do with the legal standard to defend a CEQA decision in court. So right now, when a city, someone comes forward with a project or if it's a public project, the city makes an initial decision, first of all, is this exempt from CEQA entirely?

And if it is exempt, then, boom, you're done. If it's not exempt, then the city has to determine, is there a significant environmental impact or is there no significant environmental impact from this project? If the city decides there is a significant impact, then they have to do an environmental impact report, an EIR. If the city decides that there is not, right at the outset, there's just not a significant environmental impact, then they issue what's called a negative declaration. It's a declaration saying there's no environmental impact, and then that's the end of it. Right now, if you get sued in court, if you do a full environmental impact report and you get sued, the legal standard to defend it is, "Was there substantial evidence? Was there some credible, good evidence supporting the environmental review that the city did?"

And as long as that good, reasonable, credible evidence exists, even if someone disagrees with it, then the city wins, the environmental impact report is upheld. However, if the city issues a negative declaration, in other words, says at the very beginning, we are just determining there's no significant environmental impact, it's almost impossible to defend it in court because the standard is different. It's what you mentioned, a fair argument. Can anyone make a fair argument that there actually was a significant environmental impact? And so, for example, if you, as the city or the proponent of the project, if you have 10 Nobel laureates in the area saying, "There's no environmental impact," and then the opponent finds a community college student who took a semester course in the area who submits a declaration saying, "There is." Then that negative declaration is now overturned in court because someone made a "fair argument."

So, what that means in reality is that cities that will say, "Hey, I don't think there's an environmental impact, we should do a negative declaration." They have to look around, and if they see that there is an opponent out there who might sue, they're going to say, "You know what? We're going to do an environmental impact report, which will take years and a lot of money, because we can't defend this in court, because it's impossible to defend in court." So, what our bill does is it says, "Regardless of what the city's determination was, whether they said that there was no environmental impact, so therefore a negative declaration or an environmental impact report, it's the same standard."

Was there reasonable, credible, "substantial" evidence to support the city's decision? And, like the other changes, it's a significant change in CEQA, and it's a good change.

David Roberts

And so the effect would be that cities would be more inclined to do these negative declarations because suing against them would be much harder?

Senator Scott Wiener

Right. They would still have to have substantial evidence. And I understand that there are environmentalists and other folks who might say, "Well, you're going to, you have some cities that are bad actors and they're just going to say everything is no environmental impact." But if they can't show substantial evidence, if they're just making it up, they're going to lose in court. It's not like it's impossible to defeat that decision. They still have to come forward and show what their evidence is. And if it's bogus, the city's not going to win.

David Roberts

What do you say to people to give them confidence that serious environmental threats, that CEQA is still going to apply, that this is not going to be used to smuggle serious environmental threats, sort of under the wire?

Senator Scott Wiener

I mean, a couple of things. First of all, outside of CEQA, California has very strong environmental laws, like it's protecting clean air and clean water, endangered species. We have really strong statutes. We have strong agencies that issue strong regulations. We have all sorts of regulations they have to comply with. And again, they still will have CEQA, but cities will still have the ability, if they can show that they have evidence, to not go through a full environmental impact report. So, CEQA will still provide protection. It will not be, it'll be much harder to abuse it. But for real environmental harms, people will still be able to use it in addition to all the other laws that California has.

David Roberts

So, you think all these five changes this law would make. The intent is basically to make it more difficult to do these sort of defensive or frivolous lawsuits.

Senator Scott Wiener

Yeah, and I should also mention, we also, of course, have building codes and other just rules that people have to follow. But yes, it will cut down on frivolous lawsuits. But I think we also, beyond that, when we talk about the concept of abundance, which has been a good topic of discussion, and I think there is a lot of work happening around abundance before the word abundance was even coined, just making it easier for people and for government to deliver good things that make people's lives better, whether that's childcare or public transportation or housing or, you know, advanced manufacturing for jobs, et cetera.

We made it so hard that we're strangling ourselves. And so, when we talk about abundance, one of the things that we want is government capacity, the ability of government to deliver good things and to be able to give permits for other people to do that without having to go through an unending process and litigation. And so, part of this, and this is part of the conflict, is having some level of trust in government and public officials to do their jobs and make these decisions. We elect people to do their job, and let's have some level of trust that they're going to do it in the public interest.

And this goes into — there was a great book that came out earlier this year that got overshadowed a little bit by Abundance, and that is Why Nothing Works.

David Roberts

Why Nothing Works, yeah.

Senator Scott Wiener

That was an amazing book and a great history of progressives. How there was a reaction to the sort of centralized, top-down New Deal with some of the abuses by people like Robert Moses, tearing down neighborhoods. And so, the reaction was decentralization, infinite process, so that no one's in charge, no one can make decisions, and everything gets decided in court. And that definitely ended the era of top-down, centralized progressive governance. But it also was the beginning of the housing crisis. It was the beginning of people losing faith in government's ability to do anything. Which gave us the grift of Donald Trump where he said, "Everything is broken, you're being screwed, and I'm going to fix everything."

David Roberts

I'm not sure if you want to get into this or not, but one of the other, the other side of the abundance critique, is that another effect of that situation is to set up this kind of ecosystem of nonprofit groups who sort of are sustained by these dysfunctions or sustained by these lawsuits. They sort of, you know, have built their funding model around stopping things from happening. That's sort of how they show their members or their donors that they're doing things by stopping things.

Senator Scott Wiener

Well, I'll give you an example, and sometimes it's actually really good intentions. So, for example, on this bill, I was talking to a major environmental leader in California, someone who I adore, who I think like is just walks on water, and we partner with them all the time on important environmental legislation. This is someone who is, I think, a little more open-minded about some of these issues. They talked about how CEQA is often used, particularly around clean energy, where they go through an EIR on the clean energy. So, it's clean energy, which we need, and it has to go through an environmental impact report, so it's delayed and it's more expensive. And then they get something called advanced mitigation funding, which they then use, for example, to do habitat restoration somewhere else or something.

And that, if you limit CEQA, it gets harder to do that. My response to that is, we should just, like, have a fee or something that generates those funds.

David Roberts

Doing that via courts is just not the most efficient way to accomplish it.

Senator Scott Wiener

Right. And I said to her, "I want you to have that funding. That funding is important. Let's figure out a different way to do it that doesn't tie up things like clean energy in ways that are not beneficial to climate action."

David Roberts

Right, right. Well, I want to get into a little bit how the politics of this have changed, like why reforms of this scale seem to be possible now when they weren't all that long ago. Buffy, maybe you could talk about the union side of things. Sort of like, you know, as we said earlier, they can get good working conditions with the threat of CEQA lawsuits.

And that's very rational. Like, you know, from the outside point of view, political economy point of view, like, that's a power they have. It makes all the sense in the world for them to try to preserve that power, even though it's not great for the larger public good. So, what are you telling them? What are they telling you? What's their current disposition toward all this?

Assembly Member Buffy Wicks

Sure. So, yeah, I mean, I think the unions are using the tools in their toolbox. Right. CEQA is the tool in their toolbox for leverage. And that's why they use it. That's why everyone uses it. That's why the NIMBYs use it. It's why, you know, I mean, everyone uses the tool that's available to them. And this blunt force instrument, which then the effect of that is, you know, the obvious deficit of housing that we have. And when I talk to the unions, my message is like, "Wage theft is a problem. We have to address wage theft."

Right. We need stronger enforcement. And you look at the construction industry in particular, there's a lot of nefarious actors out there. As some of my friends in the carpenters say, "It's a crime scene in a lot of these places." And I think that is accurate. Right. You know, the wages need to be higher. Like, all those are very valid conversations that need to be addressed. But right now, everyone's using CEQA for that. You know, the California Environmental Quality Act. Right. As labor law, essentially.

David Roberts

And, I'd rather us go through the front door on the labor conversation, say, "Actually, let's pass wage theft protections. Let's think about what a residential wage rate can be," you know, all those different tools in the toolbox that we do with any other type of labor law. We should have that within the confines of labor law.

But why wouldn't they say — and sort of similarly to, like, what they might say to Scott, the environmentalists might say to Scott, like, "Okay, show us that funding, show us that other legislation, and then we'll back off on CEQA." Do you know what I mean?

Assembly Member Buffy Wicks

Yeah, totally. And I think I will also say the unions are not all monolithic on this. I think you've had unions like the carpenters, who I think are way more willing to come to the table and negotiate on what this can look like and what it means. And you have unions who are more, I think, committed to using CEQA in its current status quo, you know, because it's the tool that has worked for them. And I get that. Right. Like, again, if it's the thing that's working for you, you don't want to get it taken away.

But again, the impact is that a lot of the members of those unions can't afford the roof over their head. And so, we have to reimagine how we're doing this here. I would say, just on the question of politics, to me, I'm a Democrat because I believe in government, and I think government can and should deliver for people. And so, as a Democrat, I think it's important that our government is delivering for people. And when you look at the housing crisis in California and the fact that we have almost 200,000 folks experiencing homelessness every single night, and the fact that, you know, we are two-thirds of the state legislature and every statewide office, like, we have to own the fact that, like, we need to fix this.

And the good news is, we are now in positions of power to fix it, and we should do that. That is what we are going to do. But we have to, I think, recognize and granted, it's taken us decades and decades to get to this point, and those were decisions made long before I was in office or Scott was in office. Right. But we have to fix it.

David Roberts

One of the ways that previous efforts at reform have worked around unions is by offering these exemptions to CEQA, they tie them to labor standards, basically. And this is, you know, getting back to the abundance thing. This is what the abundance people call "everything bagel liberalism," which is you have a policy where you're trying to get housing and you attach all these other goals to it, all of which might be laudable in their own right, but you end up with a policy that's sort of unwieldy and nothing gets built. And we should say your exemption for infill housing 609 has no such requirements. It is a plain bagel.

Assembly Member Buffy Wicks

It is a very plain bagel right now. Yes. And I introduced it that way very intentionally because I essentially just wanted to rip off the band-aid and see where everyone came out, you know.

David Roberts

And I'm assuming that unions are upset about it and still opposing, like they haven't changed, they haven't come around on this, basically?

Assembly Member Buffy Wicks

Building trades are opposed to the bill. I am in conversation with the carpenter's union on what that could look like. I'm getting other pressures too, to say, "Okay, well if we're going to give this exemption, then we need to have it have a certain amount be affordable housing." Right. 15% of a project or whatever it is.

David Roberts

Classic bagel topping.

Assembly Member Buffy Wicks

Yes, and so then there's all these other things that come into play, or we have to do mitigation around, you know, environmental mitigations on certain projects, or we have to do this or we have to do that.

So, all that incoming, I sort of introduced the plainest, cleanest version and then sort of seeing, "Okay, who's going to come out of the woodwork with concerns?" Some of which are very valid, some of which we can address, you know. But my response on, you know, like the inclusionary zoning, which is the percent requirement for affordable in a project, is cities can do that already. They have that in their toolbox. This bill does not touch. Should there be a certain amount of inclusionary? Some of my colleagues are going to push very strongly to have inclusionary in the bill, but you have to look at what's feasible.

David Roberts

Let me actually put a marker here because I think that's actually important. City-level inclusionary zoning codes are not affected by this.

Assembly Member Buffy Wicks

Exactly.

David Roberts

They can all still do all the toppings on the bagel they want at the local level.

Assembly Member Buffy Wicks

Exactly right. They can still have height requirements.

David Roberts

You're not prohibiting that.

Assembly Member Buffy Wicks

Right. This doesn't touch zoning. This doesn't touch height. This doesn't touch, you know, inclusionary. Cities can still do that. What this bill does is it says, "CEQA no longer applies to these projects." Which, by the way, CEQA has already been done on the general plan. When the cities are putting together their planning, they're saying, "We're going to have a zone for this amount of housing here. And this is what it's going to look like. This is what's going to be available to be built out." They do CEQA on that on the general plan. They do CEQA on the special plans.

So, it's already been done. It's just saying, "You don't have to do CEQA on this specific project."

David Roberts

Right. Me, this is just my naivete, but why aren't unions swayed by the prospect of lots more construction work, lots more building? It seems like ipso facto, that would be a good thing for the trades.

Assembly Member Buffy Wicks

Yeah, I mean, I think it's a good question. You know, it's what they've used successfully to fight for the things that they believe in, which again, I share those values. But it means that everyone's then fighting, using CEQA to stop the housing that they don't want in their neighborhood or whatever. And so, because it's such a blunt force instrument, there needs to be reforms around it. But it's just the tool that has been useful for them. I mean, it's how they're getting their project labor agreements done. It's how they're able to get the projects they need.

So, I understand the desire, but I think we have to go about labor law in a different way than utilizing CEQA for that process.

David Roberts

Scott, maybe you can flesh out a little bit more how the politics of this have changed. Why is this proving possible now? I don't want us to get over our skis here. It's not written, not done, and signed yet. But like, why is it seemingly — why is it possible now when it wasn't even quite recently?

Senator Scott Wiener

The politics have shifted dramatically, first around housing, but then around other needs as well. I was elected in 2016. Buffy was elected two years later in 2018. And right before I was elected is when there started to be some work happening in the legislature around housing to say "We can't just let cities do whatever they want" because it became a race to the bottom and it gave us this massive housing deficit. I want to be clear. I think it's important not to demonize cities. And I don't just say that because I'm a former local elected official.

I think that there are cities that try really hard, and cities that don't. There are a lot of local elected officials that get it, but feel paralyzed and they don't know what to do. So, around a decade ago is when the work really started to say, "Let's rebalance this, not to get rid of local control, but to have stronger statewide standards to make sure we're meeting our needs, like, around housing." It was hard at first, but I think one of the reasons why the politics shifted is because the housing disaster that had been playing out in places like San Francisco, Berkeley, Santa Monica, and some other places for years or decades started spreading everywhere.

And to the point where even in the Inland Empire and Central Valley, which historically have been the most affordable parts of the state, people were getting priced out. And so, for our colleagues and others, they started seeing firsthand what happens when you don't build enough housing in terms of homelessness, working-class families being pushed out. And so, it really built momentum. We also assembled an amazing coalition, yes, of housing advocates, but also of environmentalists like AARP and Habitat for Humanity, the UC Students Association. Buffy played an instrumental role in working with the carpenter's union to come in an incredibly positive way.

And that was a game changer. They brought other unions with them, like the laborers, operating engineers. So, we built this coalition and then as we started passing more housing laws, we started focusing on other things and said, "Hey, let's make it easier to do this, that or the other thing as well." And you know, we have more and more colleagues that just totally get it. We also have big city mayors that have been supportive. Governor Newsom has been an incredible ally on this work around CEQA, around housing. He's been just terrific. So, it's been just a growing movement and it's working.

David Roberts

I mean, obviously, local city governments are not a monolith either. But are they coming around on this, or do they still largely want this tool in their toolbox?

Senator Scott Wiener

On CEQA, they have — on my CEQA bill, one of our co-sponsors and probably the lead co-sponsor of the bill is the RCRC, the Rural Counties of California. They're one of the lead local government groups. They represent all the rural counties, which is most counties in California. And we have the support from all of the local government groups, the League of Cities, the Association of Counties, because they understand cities and counties, how CEQA ties them up in a knot. And in another bill that I'm doing this year, Senate Bill 79 that upzones for more density around high-quality public transportation, where we have a lot of local government opposition, we now have the city of San Diego supporting it.

We're actively working with another large city that shall remain nameless. And various small — Santa Monica, West Hollywood, Culver City have all endorsed the bill and a whole bunch of city council members around the state. So, we're seeing a shift at the local level too.

Assembly Member Buffy Wicks

And I think what you'll see, I have cities in my district who have been really good pro-housing cities. So, I definitely think it's, you know, cities sometimes take a bad rap and there are definitely bad actors, but there's good actors out there. But also what happens, and I know Scott hears this sometimes too, when you go around California, you have some city council members who are like, "Yes, please keep doing what you're doing because it sort of takes the control out of their hands so that they're not at the tip of the spear at their Tuesday city council meetings, right?" They can kind of say like, "Oh, the state's making us do it." You know, the big bad state.

David Roberts

I can imagine, having experienced local control up close for several years running, that having a little bit less local control might sound appealing to you.

Senator Scott Wiener

In San Francisco, I tell our local elected officials, "Feel free to use me as —" You know, they want to make me, some people in San Francisco make me the boogeyman. San Francisco is going through a big upzoning pursuant to its required, it's a required upzoning. And Mayor Lurie, our new mayor, is doing a great job advocating for it. There was a big hearing on it yesterday and there were all these NIMBYs who came out and they were like, "This is Scott Wiener's upzoning." And I am happy to absorb that. Happy to absorb it.

David Roberts

That is hilarious. I mean, it's true. Well, I did have one other question about opinion on this. I'm sort of wondering specifically — this is slightly orthogonal to the secret thing, but I'm just curious — among people, I think, who are empirically educated on housing issues, let's say the connection between homelessness and lack of housing is obvious and straightforward. But my impression, generally speaking of the general public, I don't know if they make that leap. You know, there's a lot of weird folk theories about what causes homelessness. So I'm just wondering, like, is that argument starting to land?

Is the public starting to make that connection? We need more homes because we've got all these homeless people?

Assembly Member Buffy Wicks

I think so. I mean, I'd love to know what Scott thinks, but people are starting to connect the dots. I think it's because, and especially in the Bay Area, where we've been at the tip of the spear of the crisis for so long now, that people understand the reason why we have such a crisis of homelessness is because it is too damn expensive to live in California. And it's too expensive because it is too hard to build anything in California. And so, I do think there's a through line there. You also have folks who, you know, are older, who have been in their house for 30 or 40 years, raised their kids, and their kids have gone off to college and now they're coming back and they want to live here and they can't live here anymore and they're going to go somewhere else.

And so, you have folks who maybe would tend to be a little bit more in kind of the NIMBY camp who are saying, "Well, wait a second, I want my kids to come back here." And they can't afford the rent because there are not enough homes. And so, I think the issue has changed a lot over the last, I don't know, 10 or so years because the crisis has metastasized to such a level that it's requiring us to take this kind of political change.

Senator Scott Wiener

Yeah, I totally agree. On homelessness, I think people do get it. Although, you have the debate: is homelessness a housing issue or a mental health issue? And that's a toxic debate. And it is largely a housing issue. And of course, there's a mental health component to it. But I think for me, in my conversations with my constituents, it's about homelessness. But it's also like Buffy said, I had an older couple that came up to me about five years ago at a community meeting to say, "You know what, we always hated your housing work and really didn't want more density in our neighborhood. But now our kids are moving to Chicago with our grandkids and you were right."

For people who will say, "My kid has had three teachers this school year because the teachers keep moving away." Or they just say, "My neighbors, I don't have any working-class neighbors anymore. It's only rich tech people who can afford here." No offense to rich tech people, but it's good to have a mix of different kinds of people and so people see it in different ways that really make it come home for them.

David Roberts

Another, I think, instinctive opinion people have, definitely this is on the left. You hear a lot of this from progressive groups, which is that there's something about housing where the normal laws of supply and demand don't really hold and that when you just require more housing absent other controls, you get gentrification, basically. Like, gentrification is the big — and I should say to steel man this a little bit, like in a situation of severe shortage, it kind of is true that any time you make a decently dense area, a lot of people want to live there and the prices do go up.

So, like, you know, empirically, people see that happen. It's not crazy to think that.

Senator Scott Wiener

This is an issue that I've been dealing with for a long time, actually. My initial entry into true YIMBY politics, I had been doing the work, but my first real public thing was when I published a piece online 10 years ago called "Supply and demand apply to housing. Even in San Francisco." And it sort of went a little viral. So, yeah, you know, it's frustrating because we spent 50 years digging ourselves into a hole, not building very much housing and creating this absolutely massive housing shortage.

And then, we hit a tipping point. And so now, we're starting to dig our way out of it. People have this perception, because we've been talking about this for a while, that an enormous amount of housing is getting built and we're still not building nearly enough housing. It's going to take quite some time to dig ourselves out of the hole. But when you have a massive shortage, that explodes the cost of housing and then you build that first or second tranche to dig out of it, that housing is going to be expensive because you still, you're not going to solve the shortage overnight.

And I also try to remind people, yes, the housing that was built a year ago, you call it luxury housing. Well, it's just expensive. But guess what, the flat that was built in 1942 is also super expensive. And one of the best examples that I really like to talk about is that in 2015, there was a ballot measure in San Francisco to put a moratorium on new housing in the Mission District in San Francisco. Their argument was that housing causes gentrification and that over the last 15 years leading up to then, 8,000 Latino families had left the Mission, which was true.

There was enormous gentrification happening in the Mission. Well, guess what? When you look at actual housing construction, the Mission was one of the lowest production neighborhoods in the city. Almost no new housing had been built for the 15 years leading up to 2015 in the Mission. And people were still being pushed out. So, when you don't build housing, that's what pushes people out. But when people see new housing going up and it looks expensive, they get the opposite perception.

David Roberts

Yes, and one other thing, I don't know why this jumped into my mind, but I read one of these letters in opposition to your Transit-Oriented Development Bill. And of course, Volts listeners will, by the time they hear this podcast, have already heard about Washington's Transit-Oriented Development Bill. So they're very trained up in all those issues. But I read one of these letters in response to your Transit-Oriented Development Bill that was trying to make the argument that somehow building more apartments near the transit stops would reduce transit ridership. I don't remember the causal...

It's one of the craziest paragraphs I've ever read. Some of the arguments you run into from people who are just kind of going off their feelings on this stuff are really, really crazy.

Senator Scott Wiener

Well, what that argument is, is that if you are building anything other than 100% subsidized low-income housing near transit, wealthier people are not going to ride transit. Low-income people are more likely. And yes, low-income people might be more likely to ride. But first of all, as we can see in San Francisco, a lot of middle-class and upper-income people do ride transit. If you provide good transit and people can walk to it, they'll ride it. But second, the idea that that is somehow worse than having it surrounded by single-family homes where only like 10 people are able to actually walk to the transit station is just absurd.

David Roberts

And those people are wealthy too, because no one else can afford those single-family homes.

Senator Scott Wiener

It's called overthinking a problem.

Assembly Member Buffy Wicks

You also hear from the left the idea of, "Well, I support housing, but only 100% affordable because that's what the need is." And I'm like, "Yes, we need 100% affordable housing, but we're not going to subsidize our way out of this problem." We need a missing middle market rate and an "all of the above strategy," like a yes to 100% affordable, but also the missing middle market rate. Because I have teachers in my district in Oakland, you know, they make too much to qualify for subsidized housing, but they can't afford the current market rate. And so the realtors tell them, "Drive until you qualify, drive east, you know, two hours, buy a house there, spend all that time commuting because you want to teach in the district in which you grew up." And that's the choice they have to make.

David Roberts

So, before we get past this, actually, Buffy, maybe you could talk about where these bills, 607, 609, are in the legislative process, because there's some significance to this. We were discussing whether the governor was going to support these, and it seems he has. So, may you explain, like, what's happening with the bills?

Assembly Member Buffy Wicks

He announced in May during what's called the "May Revise," when he's going over his budget goals, that he wanted both these bills in the budget to be voted on imminently.

David Roberts

So that just means they become part of this larger bill?

Assembly Member Buffy Wicks

Exactly. Like, we'll have a housing, what's called, budget trailer bill. So, these would live in that. The nice thing about putting them in the budget is that they go into effect immediately and they have a higher likelihood of success. You know, the governor's basically blessed these bills. So, we're in negotiations now. Separately, we have, you know, I have the bill that's still a policy bill that is sitting over in the Senate. I got it off the floor of the assembly, I think, 67 to 0, which was pretty shocking, actually. Talk about the politics changing on this, which I think, again, just goes to show that there's a real desire to actually kind of fix the problem here.

But, you know, fingers crossed, we got these in the budget here soon and off to the governor's desk.

David Roberts

That means they don't go through the typical committee process, too. Because it's often these committees where these things die.

Assembly Member Buffy Wicks

We have, you know, mine has gone through Scott and my bill has a little bit of a different place where they are right now. But they've gone through committees in their original houses. So mine went through natural resources and housing. Scott's, yours went through... Remind me, again, the committee.

Senator Scott Wiener

It was environmental quality and local government.

Assembly Member Buffy Wicks

Yeah, so they have gone through some committee review process, and then the governor made the announcement that he wanted to see them in the budget. So, we've been, you know, we're both, you know, negotiating on our bills, trying to get them in good places so they can end up in the governor's budget.

David Roberts

And if they're in the budget, the likelihood of passage is high.

Assembly Member Buffy Wicks

Very, very high. Exactly.

David Roberts

You got it. You've got to pass the budget.

Assembly Member Buffy Wicks

That's exactly right.

David Roberts

Okay, so that seems like a good sign, too, that Newsom's on board. So, I'm sort of curious, you know, Scott, you're talking about this coalition that's sort of been building over years and kind of building success upon success. It's very cool to see, really, that happening across the country in the YIMBY movement. I've sort of been wondering, kind of whether layering the abundance thing on top of the YIMBY thing is like, "Do we want that chocolate on our peanut butter? We're doing so well already." Maybe, don't mess with success. I don't know how you feel about it.

Senator Scott Wiener

No. To me, YIMBYism is a subset of abundance. It's one form of abundance, and it was maybe the more original, high prominence version of it. But abundance is taking YIMBYism and just applying it to a bunch of other areas and also talking about government capacity. So to me, the two dovetail beautifully, and I think it's important to have both.

David Roberts

So, this coalition that's been growing now, and as you say, you're moving from these sort of, in some sense, from kind of what, some pretty piecemeal sort of very focused reforms to bigger, bigger things, structural things, CEQA being the obvious example, the sort of like, underlying structural thing that was affecting everything else. I'm curious if you have Scott or Buffy, sort of like, other targets in mind. There's the, of course, the notorious Prop 13, which is, of course, the ultimate structural, you know, problem for California, as far as I've heard. There's no way to get at that.

But, I just wonder if you have other targets after CEQA, these sort of big things that you're trying to think about moving.

Assembly Member Buffy Wicks

You know, I did a select committee on permitting reform last year.

David Roberts

Oh, yeah.

Assembly Member Buffy Wicks

And, you know, it was a bipartisan group. It was bicameral, even though I guess it wasn't supposed to be. I got in trouble for that, but I invited Scott along to be a part of it.

Senator Scott Wiener

Thank you.

Assembly Member Buffy Wicks

Yeah, and we had hearings across the state. We did, I don't know, about 150 stakeholder interviews. And we looked at housing permitting issues, but also renewable energy. You know, I was down in Palm Springs and we did a hearing. We, you know, this is one example, a transmission line 12 years in the making, 11,000 page EIR, 70 permits through 28 agencies for one transmission line.

David Roberts

Good Lord.

Assembly Member Buffy Wicks

You know, and I remember a part of the panel was the solar industry. And I said, "Why are you guys even operating in California?" And they're like, "We don't know. You know, like, Texas is building twice the amount of solar as we are here." You know, so, renewable energy, climate resiliency, we have to do a lot. We're going to compete with and have to contend with sea level rise. And so, even just building the resources for that and addressing that, fire mitigation, and all the forest work that we need to do, all of that stuff requires CEQA and many other permits.

It's not just CEQA, by the way. There's a whole permitting regime on any of these things that take years and years and years. And so, it's really a larger scale issue that we have to fundamentally address. You can't just go in, Elon Musk DOGE, and take a chainsaw and, like, whatever, all high on ketamine, trying to fix the problem. Like, it's like you have to literally, like, you know, have so many different nuanced conversations and understand the processes and how you can stitch together a better process for this to actually serve your constituents and build the modern California that we need.

David Roberts

Yeah, you'd like your deregulation to be thoughtful, just like your regulation.

Assembly Member Buffy Wicks

Right, exactly. And with environmental goals in mind. I mean, I view this as the right environmental policy to actually do the CEQA reforms that we're talking about. You know, it's not antithetical to it. It's to serve that interest of having the environment work for us in a way that is how we live in California in the year 2025 and beyond.

David Roberts

All right, well, just so I don't miss any, are there other bills up right now that are of interest on the housing front? Scott, you mentioned SB79, which would be the Transit-Oriented Development. Are there other big pieces currently floating around?

Senator Scott Wiener

That's the big housing one for me. We're also doing a bunch of work trying to expand and make permanent a big CEQA exemption we gave to light rail, rapid bus service, bike, and pedestrian. We tried to do a permit streamlining bill on heat pumps this year. It faltered, but we're likely going to try again next year. And then, I have a bill to try to expedite permitting on rail and public transportation projects that have to get a million permits from different jurisdictions and utilities and get tripped up, such as high-speed rail, to try to expedite that permitting process so that it doesn't get gummed up.

Assembly Member Buffy Wicks

And I've got a bill to make it easier to do solar on fallowed ag land that no longer has water to resource agricultural needs, which is complicated, but we're working on that to see if we can expedite some more solar. And then, you know, coming out of that select committee, we put together a 22 bill package called the Fast Track Housing Package that includes 609 and 607, but also a bunch of other things like, you know, a universal application that cities have to use for housing projects and things like that to make it easier.

Senator Scott Wiener

And speaking of that work, I actually am late for a very, very big coalition meeting on one of those housing bills.

Assembly Member Buffy Wicks

Good luck, Scott.

David Roberts

Well, we'll wrap it up. I really appreciate you two coming on. I really appreciate this work and I appreciate all the work you've done on housing in California. It's so needed and so important right now. So, thanks for taking the time, you guys.

Senator Scott Wiener

Thank you.

Assembly Member Buffy Wicks

Thanks, David.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

In this episode, Rep. Mike Levin and I discuss the “Big Beautiful Bill” that raises energy bills, kills 830,000 jobs, and gifts China the next industrial revolution. We unpack the fossil-fuel cash behind the carnage, the paradox of red districts cutting their own subsidies, and the optimistic playbook — centered on transmission and real climate economics — for the next Democratic majority.

(PDF transcript)
(Active transcript)

Text transcript:

David Roberts

Hey, hey, hey, everyone. This is Volts for June 20, 2025, "Representative Mike Levin reflects on the Republican budget bill." I'm your host, David Roberts. When I was in DC for the Canary Media event a few weeks ago, I had a chance to stop by the Rayburn House Office Building and chat with Representative Mike Levin, who represents California's 49th district.

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Levin is a key figure in the Democratic caucus, often seen in the company of previous Volts guest Sean Casten, with whom he forms a kind of dynamic clean-energy duo. Together they are authors and sponsors of the Clean Electricity and Transmission Acceleration Act, which is the House Democrats’ comprehensive answer to the problem of permitting and building long-distance transmission. (I talked with them about the bill on the pod, early last year.)

They are hoping to reintroduce the bill next session when permitting negotiations start up again in earnest.

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In the meantime, Levin is understandably disappointed by the dismal state of the Republican budget bill, and the cowardice of the many House Republicans who know full well that the bill will hurt their districts and voted for it anyway. We talked over that bill, the grim state of energy politics, and some reasons for optimism looking forward.

Mike Levin

Honored to have you here.

David Roberts

Awesome. Yeah, so I mean, I want to talk about the bill. I mean, in a sense, being in the minority in the House of Republicans is a thankless life, even relative to other democracies, really. The conventional wisdom going into this is: Johnson's got a one-vote majority, there's lots of IRA money flooding into red districts. There will be lots of people who want things, and because there's a one-vote majority, any one of them could sink the thing. So, Johnson will have to — either it'll be very, very difficult to do anything or he'll have to make a bunch of compromises.

That theory of the case turned out to be dramatically wrong. The bill was a total sledgehammer with very little nuance, and they all voted for it. So, I guess my first question is just, what was wrong about the political theory of the case? What did the conventional wisdom get wrong? What did everybody miss?

Mike Levin

Well, I think a lot of what I understood about politics before 2016 has been challenged, and even more so now than ever, because even with Trump 1.0, you did have a modicum of independence of certain members of the House and Senate Republican Conference. And now you have such a fealty among the rank and file members. Whether it's fear or whether it's a natural embrace of the policies, we can debate that — probably some of both. But just like you, I felt that the conventional rules, when you see what $320 billion go out the door and $250 billion of it go to the red districts, you would connect the dots and say, "Surely these members are self-interested enough where they're going to recognize the tremendous damage that gutting the bill would do, gutting the IRA would do."

And that ultimately wasn't enough of an impetus compared to the fear of not being seen as sufficiently loyal to Trump. And so, I would say that there was nothing incorrect in the analysis of the impact of the bill impacted the IRA on the red districts, on the red states, on the normal course of business that members of Congress want to do right by their constituents and their communities. But at the end of the day, they decided not to draw that line. And it's interesting to me, you know, the political oxygen on their side was around Medicaid to a certain degree and SALT.

And I think about, you know, those members that were open-minded and interested in working with us to at least improve the wind down of IRA, the Garbarinos and the Ciscomanis and the rest of them. At the end of the day, they decided to go with Trump, consequences be damned. And I know this has been discussed a lot in the context of Juan's district and Juan is a friend of mine, but he has the Lucid Motors plant out there in Casa Grande, Arizona, and that's a big job creator and a really important EV company and just didn't seem to move the needle enough in his mind to overcome the fear of voting against Trump. And I try not to be too judgmental of my colleagues. You know, I think that in the Senate there are some that are good friends.

John Curtis is a good friend of mine. I was just in touch with him the other day. He wrote, I thought, a very good op-ed in one of the Utah papers. But even in that op-ed, there was no red line. There was no statement to the effect of "I will not vote for the Big Ugly Bill." Big Beautiful, they call it. I say Big Ugly Bill. They will not vote for it unless these more, you know, draconian aspects are removed. Unless it, you know, doesn't kneecap the IRA provisions.

David Roberts

Well, a couple of House guys did say red line. Like a couple of them said the words "red line" in the newspaper and still voted for it. Who was it? One of them, maybe it was even Garbarino said "The EV tax credit is a red line for me," one of them was literally quoted.

Mike Levin

They said "red line?" So interesting. Yeah, we didn't know what happened, decided to be somewhere else.

David Roberts

But the one complication to that theory is that they were, for instance, going to put a provision in there to sell off national parks. And Ryan Zinke stepped forward and said, "I will not vote for this bill unless you take that out." And they took it out. So the dynamics seem to still exist. It seemed like the power was there if they wanted to exercise it.

Mike Levin

I actually give a great deal of credit to folks like Joe Neguse because during that 22-hour rules committee hearing, the knowledge and awareness of that provision were highlighted by Joe and I think there were a lot of members. Frankly, the way the bill was rolled out was disgraceful. But you know, in the dark of night, they are trying to read provision after provision. The Rules Committee gets in at one in the morning and they're trying to do all their homework all at once as they're hearing from members, as they're ultimately listening to members' amendments.

And you know, I give them great credit for highlighting that. I think that's one of the reasons it got fixed. I tried to go in there with an amendment to say "Nothing in this bill will raise your energy costs." Because the President ran — all those House and Senate Republicans ran on the idea last November, the idea that they're going to lower costs and this bill does the opposite of that. So I thought what I had was a fairly benign amendment. Virginia Fox disagreed. But at the end of the day, we do know from all independent analysis that this will raise energy costs substantially.

I think the number is $415 a month by 2035. And then there's a tremendous missed opportunity economically for districts all across this country. 830,000 jobs, a trillion dollars in lost private investment. I think there's something like $522 billion in money to be invested right now, today, that is on hold because of what the Republicans are doing. 62,000 jobs that aren't going to be filled today because of what the Republicans are doing. That's real-world consequences.

David Roberts

And killing the manufacturing tax credit. It's just, this is inexplicable to me. It is an explicit, repeated goal of the administration to stoke domestic manufacturing. It is what they say they want.

Mike Levin

I was shocked by how broad it was across the board. You know, we were hearing, I remember a few days before, phase out in 2031. Transferability, construction not going to impact certain sectors the same way. And it just didn't go down that way. And the way I think things happened is you had a group of people who are completely focused on Medicaid. So they took out FMAP and per capita caps, which were the two big ways they wanted to make even worse cuts to Medicaid. And they focused instead on what they call "work requirements" — it's more onerous than that. And then you had a lot of people that were focused on SALT. And I was in that bipartisan caucus working on trying to increase the SALT cap.

And actually, where they came out was not inconsistent with what I thought was reasonable, which was a forty thousand and a half million dollar income limit. Very consistent with our bipartisan discussions over the last number of years. But they put all their eggs in those two baskets. And that meant that at the end of the day, the House Freedom Caucus had to be able to extract something in return. And they went after the clean energy tax credits as something they could extract in return. They say the "green new scam" tax credits. So they needed a win and Mike Johnson needed a win to sell to the far right.

The clean energy tax credits became the scapegoat.

David Roberts

Yeah, I mean, I guess the lesson is not so much how this or that provision or this or that technology fares over there. It's just that in general, they don't care about that subject as much as we perhaps thought they did.

Mike Levin

They certainly don't care, insofar as wanting to do anything productive. But they do want to show that they're pushing back against what their base perceives as being some sort of, you know, outrageous agenda, when at the end of the day all we're asking for is to be able to accelerate the transition to a cleaner future, a more sustainable future, a more cost-effective future. And that's, I think, the huge disconnect there. The members, a lot of them know based on where the jobs, where the factories, where the economic development is occurring, they know that they're dead wrong when they go out there and say these things.

But it's catnip for their base, and it's sad. And you know, at the end of the day, I look at it as somebody who grew up in an area with smog alerts all the time, dealing with air pollution in Southern California, knowing that when the state took steps, we moved things in the right direction. My kids can now run around the track more than I used to without their lungs burning. I think all this is good; decarbonization, electrification is good, necessary, and important. And it's going to happen regardless of what my Republican friends do over the next couple of years here. Things are moving in that direction.

It's just a matter of whether we are going to make the smart investments so that America leads, or are we going to be using technologies that are developed in India, China, Europe in the coming decades? We're on the precipice of losing this industrial revolution, which I think would be an absolute travesty and totally preventable because we've got such great intellectual capital and all the rest right here.

David Roberts

I guess the disturbing thing is that, you know, they're voting in some way or another to kill jobs in their own district, to make the air dirtier in their own district. And they have to believe that those tangible consequences are not as bad as what they would say on Fox News about them. You know what I mean? That what the Fox News universe is more real to them in some sense politically than the real world.

Mike Levin

It's the Fox News universe, and it's also the fossil fuel industry. During the campaign, this has been discussed a lot, but Trump was at a meeting with all the oil executives and he said, "Give me a billion dollars for the campaign and you can do whatever the hell you want." Of all the promises that he's broken, that promise, he's more or less kept because the fossil fuel industry gave about 550 million to him and to other Republican campaigns. In turn, he really has done whatever the hell they wanted to do. We're now five months into this administration and it's already been the most anti-environment administration that I've seen.

And I'm deeply concerned. He's surpassing only himself, by the way, in being the least environmental president.

David Roberts

It's funny, you know, as you say, they're going after the energy stuff to get revenue, basically to say, "Hey, we're getting all the revenue we can to the Freedom Caucus people" except for they lowered royalty rates so that revenue and they killed the methane fee. So, we can do without that revenue. Medicaid is one thing.

Mike Levin

So, I thought Elon's arguments, by the time this airs, maybe there'll be plenty more developments between Elon and President Trump. But one of Elon's arguments straight through has been, "You can go ahead and end subsidies for electrification, just end it for the fossil fuel world as well." We've been subsidizing fossil fuels for well over a century and we subsidize every gallon of fuel that we buy. We subsidize every time industry extracts — I mean, this is constant subsidization. When I started in Congress, I had a very simple question for the Congressional Research Service. How many billions of dollars is it a year?

And they couldn't tell me with a straight answer, but they told me probably more than $20 billion a year. Realistically, more than that. What we're talking about for the clean energy industry is really a drop in the bucket for the initial capital expenditure that you need to build out the infrastructure to lower costs over time. This isn't rocket science. I know that it can be done cost-effectively because it's been done around the world cost-effectively. A number of us are going to try to go to COP later this year, COP30. We were just meeting with experts from Europe, from Asia, and from the international climate community.

And what they were saying is that today, China manufactures between 70 to 80% of EVs, 70% of wind turbines, 70 to 80% of solar panels. Again, the question for us is whether we want to destroy any opportunity that we have to compete with them, that we had to compete with the rest of the world. I think that President Biden's administration and the idea that you want to shift the manufacturing of clean energy to this country was the right thing to do. A shift in industrial policy was a big, bold initiative, but we were able to do it with the IIJA, the Infrastructure Law, with the IRA.

And in the case of those two laws, I'm proud of what the work product was. And we were so irresponsible to just have the thing funded with red ink. We actually tried to raise the revenues for those efforts. This I've seen a lot in my seven years doing this and a lot before, you know, evaluating, analyzing a lot of policy. And this is the most irresponsible and reckless bill that I think I've ever seen.

David Roberts

Well, it's funny. A lot of the House Republicans who voted for it now subsequently have been quoted in the newspaper saying, basically, "This bill is terrible. I sure hope the Senate fixes it."

Mike Levin

Which is a really lousy way to approach the job.

David Roberts

Well, your own colleague Sean said when I interviewed him a month ago, I'll never forget it, "Nothing gets better in the Senate." That's kind of haunted me ever since.

Mike Levin

Things change in the Senate, but they don't often get better. I will say I'm hopeful that you do have people like John Curtis, and if John is listening, "Man, stand up for what you know to be right. Stand up for all those jobs in Utah. Stand up for a clean environment." Because he's a reasonable and thoughtful person. There are others as well.

David Roberts

Well, Tillis. Tillis is up about the credits. I mean, there's probably like five or six who have said something or other. But, you know, I interviewed Martin Heinrich last week at our event and I was asking about the same thing, and, you know, he's like, "Well, you know, the House members had power and they elected not to use it. You know, the members of the Senate have power, too, but I genuinely don't know if they're going to..." Like, again, we're sort of the same thing. Like, do the laws of politics still apply?

Mike Levin

The basic theory of the case has changed substantially under Trump, but I think Trump is an anomaly. I don't think that the basic fundamentals of members of Congress voting in their own economic interests, or the district's economic interests — maybe some are voting in their own personal economic interests, that's another story. But voting in the interests of their districts, that has held. And that has been, I think, by and large, a good thing for this country for decades. In every nascent industry, our investment in research and development, deployment of every new industrial revolution over the last 250 years, has worked out quite well for this country.

And this would be the first time that this country decides from the top on down — now it's one party making this decision — that we're going to let other countries eat our lunch. And that, to me, would be such a travesty. Of all the dumb things that this administration is doing, that might be the dumbest of them all, that and gutting funding for basic science and research.

David Roberts

Yeah, I talked to a friend whose theory is that the US oil and gas industry has sort of come to terms with the fact that they're on the way out globally, and their strategy now is just to wall off the US and sell as much in the US as they can until the very end. So, keep heat pumps out. So, are you, I mean, I don't know how much influence the House has, House members have over the Senate, but I don't know if you are pushing Senators to make particular changes.

Obviously, like, on the broad strokes, it's bad. It's going to be bad, but there are changes. There are changes in the fiat language, the timing, and the construction date, all that. Are there particular things that you are trying to push senators to change?

Mike Levin

Well, I don't know the internal machinations that my colleagues in the Senate are having. But, you know, they have the same interests, those like John Curtis that know the impact of these policies, they know the different levers and what might be possible. So, I don't want to get in front of any of those discussions. But I will say that it's all about predictability. It's all about the reassurance to the people developing those projects that if they actually expend the capital and start the planning and preparation, they can get shovels in the ground and have that predictable rate of return.

And the tax credits are a big part of that. Also, the transferability of those credits.

David Roberts

Why did they kill that? It seems like sadism. Like, I don't understand what the...

Mike Levin

I think that the Freedom Caucus said, "We want to just end all of it as soon as possible. End it yesterday. Anybody that's thinking about doing one of these projects, kill it in its tracks." It's so wrongheaded and backwards because it benefits their district. As I've said, 70, 80% of that money is going to the red districts. But in some ways, we're sort of in a post-truth Congress right now. And again, I think that this is an anomaly. I have to be able to go to bed at night thinking that it's an anomaly, that we're going to come back to some semblance of common sense and where truth, facts, and evidence actually matter for our institution.

This is a great institution. People come from all over the country. They vote and they voice the interests of their constituents. Then they turn right around, go back, and they listen to those constituents. One would hope that facts, evidence, what we're seeing and hearing from our constituents, still is worth something.

David Roberts

Well, another part of conventional political wisdom is that members of Congress are jealous of their own power and prerogatives. And it just looks to me, and the American people, that the whole institution is just, well, being worn down.

Mike Levin

Yeah, I mean, this is super personal to me as a member of the Appropriations Committee. The big reason I fought to want to be on the Appropriations Committee, which took me six years to get there, is fundamental to the Congress is the power of the purse, the ability for us to not only authorize programs but then appropriate the funds. And that's so important to our districts, it's so important to our constituents that we're able to fully fund the priorities that we have. And I'm on the Energy and Water Subcommittee. So, I have jurisdiction over things like the Department of Energy, the Nuclear Regulatory Commission, the Bureau of Reclamation, the Army Corps of Engineers, all these different agencies.

And we sweat the details over making sure that the funding actually gets to where it needs to go. And I have now seen for the first time in recent history, and I've asked people who've been here a long time, like Marcy Kaptur is the ranking member of that subcommittee, who's been in Congress since the late 80s, longest serving woman in the history of Congress, and she has never seen anything like this either, which is a total abdication of the Appropriations Committee and the majority members of the committee to defer to the Office of Management and Budget and the President to do whatever they want to do, to cut whatever programs, cut whatever funding.

David Roberts

Defer to Elon Musk, who doesn't even have a — who isn't even anything.

Mike Levin

We see how well that worked out. But no, you're absolutely right.

David Roberts

But, you heard members of Congress were complimenting Elon Musk for going in illegally, basically hacking parts of budgets. And I was like, "But that's your job, you're complimenting him for stealing your job."

Mike Levin

Correct. And you know, if we wanted to look at a reasonable way to go about this, the Clinton administration in its first two years had the "Reinventing Government" initiative. That was a reasonable way, in consultation with the Congress, to figure out a path forward to reduce government spending or reduce waste, fraud, and abuse, which we all, I hope, want to reduce waste, fraud, and abuse in this institution. This was a "ready, fire, aim" approach where you put a bunch of 20-somethings in. And I saw it from a couple of angles. One, the National Nuclear Safety Administration going in and firing the people with the expertise built over decades of how to safely handle the nation's nuclear weapons.

David Roberts

Can you imagine, as a 22-year-old, having the — whatever that is — to say, "I think I get this better than you guys."

Mike Levin

It's at 22, you don't know any better. But the reality is, even my Republican friends realized how stupid that was and they went back channel to the Office of Legislative Affairs and said, "Hey, you got to hire these people back." Now, of course, they couldn't find their records, the personnel records, or their emails or their phones to be able to figure out how to contact them. The other is with the VA. It is insane to see what they're doing going after VA and you can really go down every single agency to see what this administration has done.

They canceled scores of contracts, and the 20-something engineer was just quoted as saying, "Well, I wouldn't actually recommend that you follow my code." It's like he brings up the episode of The Office when Steve Carell sees the GPS is going to drive him into the lake. So, he drives into the lake. He said, "Well, the GPS made me do it." So, this young man didn't actually think anybody was going to follow this code, but then they did. Then, they cut all the programs arbitrarily. And of course, the AI had a hallucination into saying programs that were $35,000 were $35 million. It's insane.

David Roberts

Yeah, it's hard to know what's going on. Let me ask you about a couple of energy-specific things. So, one of the big X factors that has entered the energy world recently is AI, the need for data centers, just the need for lots more electricity really quickly. And that's kind of shaken everybody up. It's brought a new voice in that wants new electricity that isn't "greens" or, but I mean, it's companies with big money to bring to the table. One of the things Elon said in his tweets before, he said all the rest of it and the rest of it got all the attention.

But the interesting original thing he said was that if you are killing solar, there's no power source that can grow fast enough to meet AI demand than solar. And I think, like Republicans, have it in their head that there's some essential intrinsic mismatch between solar and wind and data centers. So the one doesn't apply to the latter. So, do you feel like your colleagues have a good understanding of that dynamic? Just the fact that if you want fast power — nuclear's slow, gas is, the gas supply chain is choked out to 2030.

Mike Levin

Coal's not going to get us there.

David Roberts

Like, if you want it fast, it's wind and solar, or virtual power plants, or something like that. Do they get that?

Mike Levin

No, the short answer is no. So, we had every month the Library of Congress, assuming the Library of Congress hasn't been taken over by new people, we do a monthly dinner. And one of the speakers was Eric Schmidt, who wrote a book called Genesis about AI. And he brought up this whole data center point and he made a similar point that you're making. But the Republicans in the room, somebody had asked a question, you know, if we had to undermine our climate goals in order to meet the demand for AI, and you know, Schmidt's answer was, basically, you shouldn't have to undermine your climate goals, but that the trade-off would in fact be worth it because AI will in fact solve the climate crisis in his view.

So, I thought it was a very interesting discussion, but the basic premise that is fed by the American Petroleum Institute, lots of other people, that the only way forward is with good old all-American dirty fossil fuels and all this other stuff is a pipe dream and you're never going to be able to achieve any sort of scale. And the reality is that it's just not so. If you look at any of the independent analyses out there, I lean a lot on Jesse Jenkins' work at Princeton or any of the work out of Stanford and the Doerr School. We desperately need to dramatically increase the amount of wind, solar, and everything else too, by the way.

Maybe not coal, but we need lots and lots of electricity to meet these new demands for things like AI and decentralized finance, which are increasingly becoming a big part of our world. And we also need a major upgrade to our transmission infrastructure.

David Roberts

Yeah, I was going to ask about that too. It is part of the same, kind of, part of the same discussion. And it seems like somehow the Republican Party has found its way into opposing new transmission. How?

Mike Levin

I don't get it.

David Roberts

What's the dynamic there? Do they think that they're defending fossil fuels by doing that?

Mike Levin

Yeah, if you see a transmission line as a threat to your fossil fuel job, that creates a false dichotomy. But that seed has been planted by the fossil fuel executives and by the industry and by the lobbyists, frankly. I think the other dynamic that I worry about, Ezra Klein, Derek Thompson wrote a great book, Abundance. I've read it, I thought it was excellent, and I marked it up. And one of the passages I marked up basically is that we cannot undermine the solutions that we need for climate, that we have to build lots of stuff.

But any trade-off, and a trade-off is very difficult — I'm paraphrasing here — any trade-off here is very difficult, but a trade-off that undermines our progress on climate is not a trade-off worth making. And so their point is, we need to build more transmission and that we have to do it as quickly as we can. But also, and I spoke with them, I said, "My concern is that Republicans will embrace that lexicon and use abundance as an excuse to build a fossil fuel infrastructure."

David Roberts

You're not the only one worried about that.

Mike Levin

It's just the same. I worry when I hear about we need transmission modernization and it's under the guise of permitting reform that we're going to do lots of stuff for the oil and gas industry and maybe throw a bone to transmission when the real problem is transmission. The other premise I reject is that you have to fundamentally undermine decades of bedrock environmental law in order to build transmission. I think we need to streamline, modernize, you can call it all of that. But my experience tells me that there are other factors at play, too. When we've gone and built clean energy projects, there are a whole host of things, everything from your local statutes on the books, your local community opposition, your state interconnection policy.

So, it used to take years and years to get a simple project through in the state of California, but it wasn't because of CEQA or NEPA, often. It was because of the antiquated interconnection queue. So, I was part of a group way back when to try to improve that. But then, I had this crazy idea to run for Congress. So, I'm not boots on the ground there anymore, but for me, that's as big of an issue.

David Roberts

So you don't think the provision in the bill where you just pay, just pay to get past the whole thing, you don't think that's the reform we need?

Mike Levin

You can call it what it is. Well, it's the reform if you just want to, you know, run afoul of our environment and build whatever you want, wherever you want, consequences be damned. And yeah, it'll lead to building stuff, but it'll also lead to a whole lot of problems with public health and safety. And there's got to be a balance.

David Roberts

Did you support the bill in the previous session? People differ about why it didn't make it over the finish line, but the permitting sort of agreement. Were you on board with that?

Mike Levin

If the finished product had come to the House, I would have voted for the compromise. There were certainly parts of it I didn't like, but the transmission provisions that they finally landed on, and you know, we were involved to the extent we could be involved over on this side, I thought were quite good, quite constructed. You know, obviously Barrasso could not come to an agreement with Manchin and the whole thing died just before Senator Manchin left. I hope that we can pick up the pieces of that and move in a constructive way. But that doesn't mean giving away the farm to the fossil fuel industry so we can get, you know, one or two things on transmission.

David Roberts

Well, I think the sort of abundance of take on this is that if you just make everything easier, clean will win.

Mike Levin

Yeah. Okay, well, stop subsidizing fossil fuels. Fossil fuels already have it easier. Right. All we've asked — so I've been here seven years — all I've ever wanted is to level the playing field. To the extent you give clean and renewable a subsidy or a tax credit or whatever it may be, it's still going to be less than what we give to that conventional energy. And that hasn't changed. And in fact, now it's worse than it's ever been. There's no acknowledgment of that, by the way, from many of my Republican colleagues. You know, it's really, it's become so politicized and so polarized and a lot of it has to do with the right-wing media ecosystem as well.

David Roberts

Yeah, I sort of assumed they would demonize EVs eventually, but it was weird how it went down. It was weird to have Elon in there in the middle of their sort of coalition. So, it's kind of scrambled the dynamics a little bit. But it seems like they've gotten there now where they've more or less aligned against EVs.

Mike Levin

"Well, I always refer — so years ago, my neighbor, he replaced a Hummer with a Tesla. And he told me, and he's a very conservative guy. I wouldn't say he's MAGA because I wouldn't criticize him like that. But a very Republican, very conservative guy. And he said, "I just want you to know I got this car because it's fast and it's cool." And I said, "That's huge!" Because I've been following EVs in my lifetime, the EV won. In college, I wrote my senior thesis on the Partnership for the New Generation of Vehicles, which was the Gore effort to try to get the big three to build an 80 mile per gallon car.

And so, I've been at this for a while, thinking about this, and we've been behind for decades. We've been behind. The Prius obviously was a huge advance for hybrid technology and Tesla made a huge leap. But if you look at where we are competitively right now, certainly GM and Ford are not where they need to be. The Ultium platform's out there, but it has significant challenges in both market adoption. And the conversion to NACS charging is really important too. Tesla's won out on that. So in California, the train left the station, right?

David Roberts

They just yanked your waiver.

Mike Levin

Well, let's talk about that. Do you have time for a prop? I have to show you something. Okay, your audience can't see this, but this is a picture of Governor Ronald Reagan and members of the California state legislature from 1967. This is President Reagan or Governor Reagan, then Governor Reagan, creating the California Air Resources Board. It was 1967, preceding the federal Clean Air Act by three years. And then Nixon was president, Reagan was Governor. We wanted a waiver in California because we had massive problems with smog that required us to go further than the federal standards set in the Clean Air Act.

And what you had in the decades since is, you had Republican governors, Schwarzenegger being, I think, most notable. They passed AB 32, the biggest state initiative maybe ever for climate. You had Democratic governors like Brown, Newsom, or Davis, all of them committed to this goal that California was going to clean up its act. And what we did was an incredible success story. You had 35 air districts deal with stationary source pollution, and then you had CARB set very aggressive standards to deal with mobile source pollution. And it worked. When I was in high school and I ran around the track, one lap after I start, my lungs would burn.

Two laps, the lungs would really burn. The point being is that we had smog alerts all the time. You had people with all kinds of respiratory conditions and cancers. Every year, you get the report card from the American Lung Association, and we were really struggling and we're still in non-attainment today. But absent what CARB has done and what the air districts have done, it would have been a complete disaster. And I think we ultimately here in Washington DC should learn from that example, not try to kneecap California. And if you really care about California, you care about our future, you care about children, you care about the type of state, the type of country that they're going to grow up in, you should care that we're not going to just allow polluters to run roughshod so they can make a few extra bucks.

David Roberts

Did you see what the Commerce Committee did? I think today or yesterday in the Senate, they are — I didn't read enough about it to get into the details, but basically, they are trying now to kneecap CAFE standards overall, not even for California, across the board, CAFE standards. So, let me ask you about the car companies because everybody demonizes the oil and gas companies for good reason. But what is up with the car companies? To me, rationally, the global shift to EVs, it's happening. It's obvious. China's ahead, we're behind. And every little bit that we protect ourselves from competition, we just enable ourselves to fall further behind.

And killing CAFE standards and killing the waiver, it all seems designed to shelter an industry that's falling farther and farther behind. Why aren't they better? Why don't they want, you know what I mean? Why are they still like...? Obama saved their bacon. And they turned around and stabbed him in the back. Not a couple of years later, they just over and over again take the worst route. Do you have any analysis of the car companies, why they're so short-sighted?

Mike Levin

Yeah, it's not so homogeneous. I think you have startup companies like Lucid, like Rivian. You know, Lucid of course is backed by the Saudis, but you know, Rivian is Orange County based and production out in Arizona, I think, along with Lucid. But you know, you have a lot of really interesting and innovative companies out there. I think that the legacy automakers are slow to adapt. Whenever I've heard Mary Barra at GM, I think she's trying to operate in good faith and understand where to skate to where the puck is going to be. And if there is a market pull, California being the largest market in the United States, there's a market pull towards EVs, towards plug-in hybrids, whatever it may be, then they're going to follow that direction.

And by and large, they are trying. I thought that I have an old Chevy Volt, which was that original Obama —

David Roberts

I have a Bolt, the full electric one.

Mike Levin

And you know, now you've got the Equinox and the Blazer, and you know there'll be scores more of these vehicles. For, if nothing else, for the California market, we still have roughly 1 in 40 car sales going electric. And we'll see what Governor Newsom decides to do with regard to picking up, if in fact, the EV tax credits are gutted, which is what the Republicans want to do. To what extent would California pick up the slack? And you know, I know Newsom originally said "the whole thing," but that's going to be tough given the budget deficit that we're running in California.

David Roberts

He says a lot of things. Well, this is the demand pull thing. Like, we just also bought an Ioniq. We're now a dual EV household. And my Ioniq was built in Georgia. Built in Buddy Carter's district.

Mike Levin

Yeah.

David Roberts

Do they — they don't seem to get — but I just wonder, like behind the scenes, do they get that it's not just manufacturing subsidies that are going to... You need demand. The demand pulls the other side of the, you know, the consumer side subsidies, the demand pull is what's bringing all that manufacturing to their districts. Do they understand that?

Mike Levin

I think they... Well, I can't speak for everyone, but I think that, you know, Buddy Carter understands that the EV tax credit and the incentives that Kia/Hyundai were given in order to build that plant in Georgia were very important for his district and for his state. Buddy's my friend, so I'm not going to criticize. But I think at the end of the day, everybody has to make that final analysis, that cost-benefit analysis of the benefits to their district, economic and otherwise, versus the costs. And, I had a very cynical political science professor who once said, "The only thing members of Congress care about" — this is way back when I was a student — "is getting elected and reelected."

"Not the most important, not the main thing, the only thing." I don't think that's true. All these years later, I probably wouldn't be so adamant that we decarbonize if that were the case. I would be more willing to just let sleeping dogs lie. But we've incurred millions and millions of dollars in independent expenditure from the fossil fuel industry against me over the years, and we keep on trucking because at the end of the day, I think that clean air, clean water, and the future of our country, and for me, for my kids, your kids, grandkids, everybody, it's so critically important that we just can't give up the fight.

And trying to frame it in economic terms so that the average person can understand, I think, is critically important. And it doesn't always show up on polls. So, if you talk about climate in terms of, you know, the rising sea levels or extreme weather events, that's not going to do as well on polls. But if you talk about it in terms of the economy, I think that's encompassed in our overall importance that we give to the economy. And people knowing that this bill is going to raise their energy prices is pretty bad. It's bad. Just like it's going to take away health care from millions of Americans or take food out of the mouths of people who really need it.

Raising your energy bills at a time when 80 million Americans can't afford their energy bills now is a really bad look.

David Roberts

And while you're also raising the price of all their consumer goods with tariffs.

Mike Levin

Yep.

David Roberts

I want to ask you something, since you're from California. This is a subject that is very near and dear to my heart and a lot of my listeners, but it doesn't get a lot of national attention, which is the overlap between decarbonization and sort of urban land use density, multimodal transportation, etcetera, all this. This is a very hot thing in California. They rarely talk about it at the national level. And insofar as there's anything in this bill, it just nukes everything. All the money that was going to anything other than highways, basically, is getting nuked.

So, like, Republicans are just, I think, aligned more or less officially against density, against all that stuff. But how do you see that connection? Because it's a very heated point of contention in California. There are multiple bills. They just passed a TOD bill and the CEQA reform bill is somewhere getting along. But a) do you also see that connection? Are you interested in those issues?

Mike Levin

Oh, absolutely.

David Roberts

And do you see any dawning awareness, even on the Dem side in Congress, that that's an important piece of the decarbonization puzzle?

Mike Levin

Well, first, shout out to my friend, Buffy Wicks, who is doing a fine job.

David Roberts

Trying to get her on the pod.

Mike Levin

I can help with that. But, you know, the way I see it, it's a red state versus blue state thing, and the blue state Republicans are not willing to stand up and advocate for policies they know will be important for our states. I don't see it as much more complicated than that. So, we're all products of our experience, and in the case of lawmakers, we're products, hopefully, of going back to our districts and listening to a lot of people and doing events and understanding and moving pieces. And for me, that means a major effort around multimodal transportation.

I have the second busiest rail corridor in the United States, connecting San Diego and LA. It's constantly at risk of falling into the ocean. We have, you know, constant discussions around YIMBYism and around Transit Oriented Development. I personally want to see a lot more of our, you know, vacant parking lots that are adjacent to transit become decent, affordable housing units for people.

David Roberts

We just did parking reform in Washington.

Mike Levin

There you go. There you go. I think it can happen. You know, you have to have forethought at the local level and at the state level, and then hope that the feds don't, you know, undermine the effort. But you're right. When we were developing the IIJA, the infrastructure bill, there was a whole lot of effort that we as Californians, because we, you know, we're 42 strong as the Democrats, the California Democratic delegation. So we had lots of discussions with, you know, then Chairman Peter DeFazio and with our friends who were on the TNI committee and with the Biden administration.

I think that resulted in some really good policies and necessary funding. It got politicized. The administration, the Trump administration 2.0, thinks anything the Biden folks did was wrong just by virtue of them having done it. And this is an order of magnitude worse than I experienced during Trump 1.0, where there were still people in Trump 1.0 that acknowledged that things that Obama had done, that the administration had done, made sense. And there is now this blanket rejection, to a degree maybe unprecedented in American history, of a prior — they're literally going after the prior administration saying that they were signing the auto pen.

Right. So, there is just this reflexive disdain for anything that the Biden folks may have done. "Oh, they brought $321 billion of investment, of which 80% went to the red districts. Well, it must be bad because Biden did it."

David Roberts

Or, if you just make a Democrat sad, that in and of itself is a policy.

Mike Levin

It makes me sad when they cut their nose to spite their face. This hurts all of America. Again, you know, 30 years from now we're using Chinese and Indian technology that should have and could have been developed here, but for the fact that we gutted funding for the universities for the research, development, deployment, and gutted all the funding that would have jump-started clean energy.

David Roberts

Well, speaking of clean energy and speaking of oil and gas, their influence, there's been a lot of discussion lately. You know, wind and solar have grown so fast and the whole clean energy industry has grown so fast. My sort of analogy is it's like one of those kids that grows up to be 7ft tall. For the first 12 years of their life, they're just kind of gawky because their limbs are too long. It's almost like they've gotten so big so fast and not quite coordinated yet. What's your sense? Are they throwing their weight around?

Do you know what I mean? Are they exercising the influence that they could or do? Do you think they need to be better organized, better led, better lobby? Like, are they getting stuff out of Congress commensurate with their size and importance?

Mike Levin

Well, I think there's a lot of catch-up that needs to be played for the clean energy industry to try to make up for decades of activity from the fossil fuel industry. It's going to take time and it's going to take a lot of effort, and it really is a nascent industry in a lot of ways. I first knew that I wanted to be in the clean energy industry when I read a book by Ron Pernick and Clint Wilder. And I bring that up because I just saw Clint last week. It's called The Clean Tech Revolution.

And I read it when I graduated from law school in 2005. Here we are 20 years later and we really did see a clean tech revolution in a lot of ways. I was a very minuscule part of it. Along with my friend Sean Casten, we ran, we were the first two to run on that as our actual background. Even though the consultants told us, "Don't run on clean energy, don't do it, say you're a small business person, say anything other than clean energy." But not only did we run, but we won on the topic. And then we got here and we were put in place on that select committee for climate that Speaker Pelosi assembled.

And then, we made a big impact with the biggest climate bill ever, the IRA. And it would have been bigger still, but for Joe Manchin and a handful of others narrowing its scope. I bring all that up because we've done enormously well in 20 years. When I first got to Congress, we were told, "You can't get a climate bill across." And they were still looking at what had happened with Waxman-Markey and with the BTU back in the 90s. So they were saying, "You can't do it. It's impossible." Just like in California. I remember being told, "You want to do a 33% renewable portfolio standard. That's insane. You can't do that!"

But, you know, it's iterative. We build on the progress, we learn from the mistakes, we improve the communication, and we move forward.

David Roberts

I think just you and Sean coming into the House delegation probably raised the average energy literacy of the caucus quite a bit in and of itself. But do you think, like, relative to when you entered Congress, do you feel like the Democratic caucus is more energy literate?

Mike Levin

I think they were more literate than you think before. I think there were a whole lot of people around here who knew quite a lot. I look at my friend Jerry McNerney, for example. He's now in the state legislature. It's tough because there are very few people like you that want to cover what we do. And so, in the general consciousness, a lot of that work gets done, but it doesn't get covered. So, I would say there are very smart people now, but I also would say there are very smart people then, some of whom I knew and some of whom I did not.

But obviously, overall, the effort did not succeed the way that people were hoping until the IRA finally broke through and succeeded. And to a lesser extent, the Infrastructure Law had all sorts of important provisions as well. But you needed the stars to align. You needed a president, you needed a House and a Senate, all of whom were fully invested in tackling this challenge. I give enormous credit to Speaker Pelosi for believing in people like me and Sean, empowering us, putting us on important committees, and, you know, giving us an opportunity to be successful relatively early in our congressional careers.

David Roberts

Well, if Dems retake the house in 2026?

Mike Levin

I like this question.

David Roberts

What if I say "when"?

Mike Levin

Even better. I'm knocking on this table right here.

David Roberts

When Dems retake the House in 2026, it'll still be a divided Congress. What can be done? And are you making plans, thinking about it?

Mike Levin

Well, I think that scenario would offer an opportunity to work on an actual transmission deal, not some giveaway permitting deal.

David Roberts

So, bring permitting reform back. Bipartisan permitting.

Mike Levin

Yeah, I don't think this Congress is the right time to move forward on a deal that's 90% tilted towards the fossil fuel industry. And I think that's probably what it would take to get to "Yes," in this environment. I could be wrong. I'm not a closed-minded person. I try not to be. But I think in this environment.

David Roberts

Well, the recent evidence is —

Mike Levin

Overwhelmingly, everything that we work so hard to achieve on climate energy policy is being gutted left and right. It's a wholesale giveaway of our public lands and pay-to-play. I mean, it's just terrible. So, I don't think right now is very ripe for a deal. But, I do think if we took the House, we would have the leverage necessary to get that 90/10 deal back to a 50/50 reasonable deal. And I think that's a deal we should take because I saw what happened when we had the trifecta. I saw what happened with Manchin-Barrasso.

There is a deal to be had, and I'm one of those pragmatic enough. If Donald Trump signs it into law and wants to take a victory lap, go for it.

David Roberts

Well, let me try to bait you into saying something controversial then. Speaking of the abundance people, one of their critiques is that the groups, the interest groups on the left, are pulling the caucus farther left than the public. And one of the ways this played out was a lot of the left environmental groups oppose that permitting deal and presumably would oppose a similar permitting deal. Would you think the left green groups have become unproductive in their purity tests and whatnot? I mean, do you agree with that critique that they are not — that they're dragging you away from bipartisan deals?

Mike Levin

I would say two things. First of all, the people that you just referenced, who are talking about a lot of these things, are themselves interest groups with their own agendas, their own boards of directors, and funding sources.

David Roberts

No one thinks they're an interest group.

Mike Levin

The other is, I don't think you can just paint that broad brush over "the groups." So, I think that you've got very pragmatic groups that are focused on results and you know, want to make sure that we have good outcomes. You have others that want to impede progress. And I'm interested in partnering with anybody that wants to actually get results that we can be proud of down the road. I hope that would incorporate some of those people that you just referenced to criticize the traditional environmental groups.

But, I'm not going to just be one to advocate for a deal, to say, "we got a deal." That actually increases emissions rather than reduces them. The Manchin-Barrasso bill, before we saw the transmission part of it, I saw it as a way to dramatically increase emissions from things like LNG exports, to dramatically increase oil and gas pipelines. And until I saw the transmission piece was actually there in a way that made sense to me. It was very surprising, to be honest with you, because I think right before seeing the thing, I said, "Well, I don't know if there's anything I could support that is going to come from this.

Then, I saw the finished product and it was better than I expected, and it was maybe worse than Barrasso expected. We couldn't get it across the line, unfortunately. But, we've got to be aiming for a deal that we can be proud of, not just one to say we did it.

David Roberts

Yeah, I mean, if you talk to people who actually struggle with NEPA a lot, one of the things they say that would help a lot is just a lot more state capacity, a lot more people to do those reviews, and somehow that never... Well, like, the Barrassos of the world are never like, "Let's hire a lot more government bureaucrats to hurry this process up."

Mike Levin

Now, it's the opposite. They want to, you know, end the agencies as we know them and replace everybody with AI and, you know, just consequences be damned. But you're absolutely right. Look, if we had, as a strong national agenda item, "Build transmission that we need for the next two centuries," we made that a top national priority. We put a "whole of government" — as we used to like to say, "a whole of government" effort into that. A Manhattan Project for all of us to be focused on. We get it done. We get it done. But there is a massive impediment, and the impediment is the fossil fuel industry and the $550 million.

That's so — I loved Ezra Klein's book. I think the world of him as a journalist. I listened to his podcast just like I listen to yours. I think that I'd like a part two about how we get around the money in politics and also how we get around things like, you know, when it comes to building transmission out, the interconnection, the local community challenges, you know, the NIMBYism, all that stuff. Because that's just as important, in my view, as NEPA or CEQA.

David Roberts

Yeah, I feel like one of the things that both books left out is that a lot of these rules, regulations, and bureaucratic cruft is not just stuff in the abstract. It is that they're under constant, withering attack by giants... you know, so if there's any crack in the law, if there's any loophole, if there's any room, it's going to get exploited. So that's how that stuff gets built over. It's a defensive thing. It's not just because they want to. Well, final question. And this is a broader thing so maybe you want to get into this, maybe you don't.

But one of the things that is, I don't think, actually, Ezra is necessarily taking this tack, but a lot of the people who have glommed on to the abundance thing, your Ritchie Torres and people like that, are saying, "Part of the Dems' road back into power and popularity is moderating on social issues." Basically, they're like, "We need to talk about government, talk about doing good things and basically back down a little, quiet down a little on all these cultural issues" that for some reason they think Democrats have prioritized. I always ask, "Why do you think we're talking about trans girls in high school sports?" Do you think Democrats dreamed that up and put that in the newspaper every day?

You think they're the ones who centered that? Like why do you think you're talking about this? But anyway, do you agree with that critique that a greater focus on government competence should be coupled with backing off somewhat on social issues?

Mike Levin

I think the reality is that the emphasis on social issues is as much a product of the media as it is anybody in Congress deciding actively to talk about those things. There are exceptions. I have colleagues that will talk about social issues all day. I'm not one of those. I'm focused on our economy, I'm focused on our environment. I'm focused on economic development, on winning the future. That's where my personal focus is. And talking a lot about the importance of caring for our veterans and things like that. The reality is that I don't like the fact that climate, energy, environment has sort of been put in that same bucket you should not talk about. So, because I see —

David Roberts

Or, is it that it's a cultural issue? As to whether you like critters or not is...

Mike Levin

Correct. So, we get one planet. Unless Elon figures out or Jeff Bezos figures out this Mars thing. We've got to do all we can to take care of it. And we know from the overwhelming scientific consensus what we need to do. And we've got to be up to the challenge. Our government right now is not up to the challenge. Our government right now is not even willing to acknowledge or accept basic science, whether it's on climate or on anything else for that matter. And that does a tremendous disservice to the entire world. The excuse that my friends on the other side have made, "Well, if China doesn't do it or India doesn't do it, then why should we be forced to do it?"

First of all, we need to lead by example. But second of all, if we continue down the path we're on, China, India, other countries will eat our lunch when it comes to clean energy.

David Roberts

Yeah, they're doing it. Out there doing it now. For years, it was like, "Why should we do it when China isn't?" And now, China just raced past us.

Mike Levin

70 to 80% of electric vehicles, of wind turbines, of solar panels are being manufactured in China. So, I think everybody needs to get their head out of their politics for a second and focus on actually having a livable economy for the next hundred years in this country and trying to actually win this huge industrial revolution that's still up for grabs. If we only have the foresight to embrace that change.

David Roberts

You think we could still catch up? You don't think China's lapped us to the point that it's... Because it feels like part of what the Republican Party is doing is like, "Well, China beat us on this stuff. Let's not do this stuff, let's do something else." You know what I mean? All the talk about the threat of China and "We got to stand up to China" and China beats us on this and they're like, "Well..."

Mike Levin

I am still a perhaps naive optimist in the capacity of this country that has done so well over the last 250 years to keep that spirit of innovation, of creativity. I still think we've got the best universities in the world. I still think we've got the best scientists in the world. I still think we've got the best entrepreneurs in the world. Part of that is also because we welcome people from all over the world because of freedom and opportunity here in this country. And we're losing our way in that regard, too. Those things are directly interrelated. So long as we maintain that "If you have a great idea, you want to start a business" or, you know, "You're that next brilliant Nobel laureate. You want to come to the United States of America because this is where it's at."

So long as that's the case, I think we can continue to lead. I'm not saying we're going to take over overnight. What Trump is doing, it's going to take four years to break a lot of stuff. It could take decades to build it back. But we do have an opportunity, I think, in 2027.

David Roberts

To "Build it back better" you might say.

Mike Levin

Well, I'm not going there. I'm not going there. But what I will say is, find areas of opportunity in the second and final two years of the second Trump term. God willing, we have a divided — we have the opportunity to actually have gavels again and have agency again. Hopefully, Hakeem Jeffries, the Speaker, reconstitutes the Select Committee on Climate and we're able to move the needle and then best position the opportunity for post-2028 and whatever happens there, hopefully with a competent, reasonable person in the White House who gets it, who understands that we've got to own the future. It's not only in our economic self-interest, it's in our national security self-interest as well.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

Washington state just passed one of the strongest transit-oriented development bills in the nation, and in this episode, I talk with Rep. Julia Reed and Alex Brennan from Futurewise about how they got it done. We discuss why building more housing near transit is so important, what this landmark legislation entails for density and affordability, and how it positions Washington as a leader in pro-housing reform.

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Text transcript:

David Roberts

All right, all right, all right. Hello, everyone. This is Volts for June 18, 2025, "A win for transit-oriented development in Washington state." I'm your host, David Roberts. We need significantly more housing almost everywhere in the US, but nowhere cries out for increased housing density more than the areas around transit stops. Proximity to transit is the key enabler of car-free living and where it is possible to live without a car, we should be putting in lots of housing to allow people to do so.

What's more, when a transit stop becomes a node of dense housing, an entire ecosystem of businesses and services grows up around it. It becomes a dynamic hub.

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The notion of using transit stops as anchors for urban micro-communities, known as transit-oriented development, or TOD, dates back decades in the urbanist world. But the recent success of the YIMBY movement has put real legislative reform on the table for the first time in ages.

And here, once again, I find myself bragging about my home state of Washington, where the legislature recently passed one of the strongest TOD bills in the country.

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To talk through that bill and TOD generally, I have two excellent guests. The first is Representative Julia Reed, a key sponsor of and advocate for the legislation. The second is Alex Brennan, who runs Futurewise, a Washington state advocacy organization that was instrumental in pushing the bill across the finish line.

We are going to talk about why TOD is important, what's in the bill, how it passed, how it compares to bills in other states, and the next steps in the housing fight.

All right, with no further ado, Representative Julia Reed and Alex Brennan, welcome to Volts. Thank you for coming.

Representative Julia Reed

Thanks for having us.

Alex Brennan

Yeah, thanks for having us.

David Roberts

Alex, I want to start with you just very quickly. So, you know, for those of us who have followed urbanism, urban issues, etc., for years, the term transit-oriented development is very familiar. TOD is something that has been discussed in this world for a long time. But I suspect lots of people listening are not particularly tuned into those issues and not familiar with the nomenclature, not familiar with the idea. So, maybe just by way of starting off here, maybe just give us like the 2-minute elevator pitch for what is TOD? Why is it important? Why is it an important focus of reform?

Alex Brennan

So, transit-oriented development is, at its core, just allowing development near transit. And why is that a good thing? You alluded to a lot of this in the introduction. Being near transit is something that is really valuable to a lot of people. It means that you're going to be able to get places you need to go. It means that you're going to be able to not have to drive a car as much, which is going to have impacts on your quality of life, on your cost of living, and on the environment, and on your greenhouse gas emissions.

Typically, when we talk about transit-oriented development, we're talking about an area that is a short, easy walk to a high-capacity or frequent transit stop. Different people can define that in different ways, but typically that's between a quarter mile and a half mile, sometimes even three-quarters of a mile from a station. Typically, you're allowing the sort of denser development within that walkshed. The types of transit that you're thinking about are light rail, commuter rail, bus rapid transit, sometimes other types of transportation like a ferry terminal.

David Roberts

Maybe, it's worth saying here that generally, these reforms are not talking about just your average bus stop. Right. Because there are like dozens and dozens of those all around any city with a bus system. And basically, if you did a half mile around every one of those, you would just be basically upzoning everything everywhere.

Alex Brennan

It would just be the whole thing.

Representative Julia Reed

Yes, actually, the original transit-oriented development bill did apply to just regular buses.

Alex Brennan

Yes, that is true.

Representative Julia Reed

But we ran into some trouble both with people saying, "That's too many places." It was both people that were like — there were a bunch of concerns. I mean, cities in our area, in Washington state, especially in the areas where there is the most transit, don't generally operate their own transit systems. So there was sort of a hue and cry from the cities about, "Well, what if Metro moves the bus stop and we've already built up all this zoning and then there is no transit to be oriented around?" And then on the other side, you kind of had an endless barrage of people trying to get their bus stop included, because it was initially buses that come every 10 minutes.

And then someone was like, "What if it was buses that came every 12 minutes? Because then this bus stop could get included." And then someone else would say, "What about buses that come every 17 minutes on weekends and every nine minutes on weekdays?" And then, just in general, there wasn't enough political support to include regular bus stops. It just became too complicated both to fight the opponents and include all the proponents. So, we narrowed that to bus rapid transit stops, which are a particular kind of bus mode.

David Roberts

Interesting. Very interesting background. So, one other part I wanted to say by way of general background too, and maybe, Alex, you're about to get into this, but like you were talking about the merits of living close to transit, the merits for people living in these places. But also, I just always want to say that, like cities need tax revenue, they need development. If you're a city, you're growing or you're dying, and these transit hubs serve as like development triggers. They are little like, they're literally like planting seeds in your city around which development grows. So just like, you know, so often when you're on the Internet, these things are framed as like do-gooders imposing these things on cities, the poor, innocent cities that are fighting back.

But like, transit-oriented development is good for cities and city budgets.

Alex Brennan

And one other point on that, I think, is really important. In Washington state, certainly in a lot of other places, we're investing billions of dollars in building out a transit system. And when we allow development to happen around those stations, then we're taking advantage of those investments and for the building up the tax base, all the benefits I was mentioning for the people there. But so often, we spend all of this money building these systems and then we don't let people be near them to actually be able to use them. And it's, you know, and it ends up being a big kind of inefficient use of all of that.

David Roberts

As a resident of North Seattle, let me just strongly endorse all those comments. We've just spent billions of dollars putting light rail stops in Northern Seattle. And like, there's one that's less than a mile from my house and one whole side of it is just a sleepy, dumpy little single-family neighborhood. Every time I see that, it just drives me insane. The amount of economic potential being wasted just in that square mile is maddening to me. But actually, this bill I think would literally upzone that area near me. So, I'm personally excited about this.

So, Representative Reed, let's talk then about this bill. This is HB 1491. There are kind of three big things about this bill I want to hit. It's the upzoning it requires, it's the affordable housing it requires, and it's the way it pays for the affordable housing. Those, as I understand it, are kind of the three big things about this bill. So first, let's just start with the upzoning. What are the sort of details here?

Representative Julia Reed

Yeah, so this bill uses a form of density called floor area ratio.

David Roberts

Yes, please explain that. I've stumbled across that term a hundred times now.

Representative Julia Reed

It's okay. I really worked hard on, "How are we going to explain this to legislators? Do we have diagrams?" So, basically, the idea of floor area ratio is it's a division problem between the number of floors you have in a building and the amount of developable land you have on a plot. So, if you have a one-story building that takes up the entire area of the plot, all of the land that is possible to be developed on that plot, that's a floor area ratio of one. You could also have a two-story building that takes up half of the land on the plot or a six-story building that takes up a third of the land on the plot.

Does that sort of make sense?

David Roberts

And those are all a FAR of one?

Representative Julia Reed

Yes. So, those are all different types of FARs. So, that's one of the things that people ask a lot about is like, "Well, how many floors specifically does this allow?" And the answer is, "It kind of depends." And we did that on purpose because every plot and lot is going to be a little bit different, and the way that it makes sense to develop that land is going to be a little bit different. So, instead of telling developers, like "Every plot in the TOD zone can have up to a six-story building," you can kind of choose the level of density and development that you want to apply in each area.

David Roberts

So just to clarify, a one-story building covering 100% of the lot is a FAR of one, right? So, does that mean a two-story building covering 100% of the lot would be a FAR of two just because it's two divided by one?

Alex Brennan

Yeah, exactly.

David Roberts

So, let's talk about the FARs that this bill allows.

Representative Julia Reed

Yeah, so within this bill, it has different FAR levels depending on whether you are close to a light rail station or a bus rapid transit station. So, if you are near a light rail station or a rail station, you have to allow a FAR of 3.5 on average. So again, that could be a 3.5-story building — I don't know what you do with that half story that covers a hundred percent of the lot. It could be a six, seven-story building that covers half of a lot. You know, in theory, you could go up and up and up, but there's physics that are going to limit exactly how many floors you can have on a lot.

David Roberts

And so, as you're going up and up, you're shrinking your footprint on the lot to stay within your FAR. So, if you wanted more than six stories, you would be building an extremely narrow building at that point.

Representative Julia Reed

Yeah, exactly. And this, I should say, this is setting a floor that cities are allowed to permit. So, a city has to permit at least 3.5 FAR within a rail station area. So that's within half a mile of a light rail or heavy rail stop or commuter rail stop essentially. Or a density of at least 2.5 FAR within a bus station area, which is within a quarter mile of a stop on bus rapid transit. There are provisions in the bill that allow cities to average that FAR. So, like if within a half mile of the station doesn't really make sense, maybe a city wants to say, "Okay, we're going to actually allow much higher FARs in this area, like on this block and we're going to allow lower FARs on this block. But, across that half-mile around the station area, it's going to be an average of at least 3.5 FAR."

David Roberts

And that's the minimum. And so, 3.5, a FAR of 3.5, is approximately six stories.

Representative Julia Reed

Yeah, we're talking six-story, eight-story buildings. And this bill is really focused on building that really large-scale building that you see around transit. So, if you went to like the Capitol Hill light rail station, I know it happened many years after we actually opened the light rail station, but eventually we did build those like taller, denser buildings right on top of the station. That's what we're talking about here.

David Roberts

Of course, we say a six-story building is some giant, hulking building. But of course, if you go up to like Vancouver. Yeah, we go outside of Vancouver at their rail stops. Yeah, they're building skyscrapers around there.

Representative Julia Reed

So, this is a floor, not a ceiling. So, we could be doing more and then also with a 2.5 FAR. Cities are allowed to exempt some bus rapid transit stops, up to 25% of the stops, from this TOD. But if they do that, then the FAR in the remaining areas, the remaining bus stops, has to be higher. It has to be a 3.0 FAR.

David Roberts

Ah, I see.

Representative Julia Reed

So, it's between a 2.5 and 3.5 FAR, depending on the mode of transit that the area is surrounding.

David Roberts

So, for approximate purposes, this is around four stories within a quarter mile of bus stops. Around six stories within a half mile of rail transit stops.

Representative Julia Reed

Yeah, exactly. And if you do a building that is all affordable, so to people earning an income below 30% of AMI, or what we think of as accessible housing, for example, which is people earning an income below 80% AMI — so that's your kind of teacher, firefighter cohort. If the whole building is tagged as being affordable for one of those groups, you can get an additional 1.5 FAR.

David Roberts

Interesting. So, you can build up even higher.

Representative Julia Reed

Yeah, and you're also, I mean, this is kind of moot because we did end up passing the parking reform bill for the state, but there's no parking minimums allowed within the TOD zones under the bill.

David Roberts

Yeah, I was going to say, it seems like we already did this with parking reform, but honestly, if you have to kill parking minimums twice, you can kill them as many times as you want. And I'm going to cheer every time.

Representative Julia Reed

At the start of the session, we were very unsure if parking reform was going to pass. My first year, I was the prime sponsor of the statewide parking reform bill and it was a rough crash to a fiery landing. So, I think we wanted to be sure, in case we can't do statewide reform, we want to continue to chip away at these places where we can do parking reform.

David Roberts

So, in these walksheds around transit stops, parking minimums have been doubly killed. I know that, like in the course of hashing out legislation, you make compromises that are opportunistic, etc. But like, is there any logic to — well, like for instance, half a mile around rail, quarter mile around bus transit. Is there a logic there?

Representative Julia Reed

There is a logic there. Whether or not it's a logic I personally agree with is a different conversation. But the kind of logic is that rail stops are fixed. They tend to be in areas where cities are already planning for a large amount of density and half a mile felt like a reasonable amount of walking space. The argument was that bus stops tend to be more in neighborhoods. They're not necessarily in the kind of places that cities typically think of as high-density corridors. Some of the bus rapid transit stop examples, some of the cities brought up, were in quite rural parts of their city or like places in between where two cities meet sort of in that unincorporated county area.

And so, there was a thinking that a more gentle form of density would be more appropriate around a bus stop.

David Roberts

But you know, like, if I'm a developer, I'm not going to go build a six-story building next to a rural bus stop. Just because you enable these things with zoning doesn't mean people have to go do them or will do them, against all economic sense.

Representative Julia Reed

Yes, again, I agree with you. But as one vote out of 98 in a legislative body, I have to convince a lot of people who have varying levels of attention and interest in this topic.

David Roberts

Fair enough. Fair enough.

Representative Julia Reed

It's sort of one of the challenges in this is like getting legislators of all stripes, Republicans, Democrats, to say, "The market can drive here" is a very tough sell because, you know, we're sort of here to try to ensure that the markets are well regulated and operating effectively. And sometimes, I think it's funny that only in housing density conversations are progressive Democrats very committed to supply-side theory. So sometimes, you find yourselves in these really weird, roundabout conversations.

David Roberts

Well, let me ask a couple of questions about this upzoning then. So, like when I think of Washington state, I don't necessarily think of it as a particularly transit-rich state. So, I'm sort of curious. Has anyone done the math on, like, what is the total, like how big of a deal is this? What is the total amount of land that's going to get upzoned? How much transit do we really have in this state?

Representative Julia Reed

Futurewise actually did do a study on that last year when we were doing the build. Do you want to talk about that, Alex?

Yeah. So, this was from last year. We were trying to answer that exact question. How much total added residential capacity would this bill create? And it's a lot. We looked at all the station areas, the amount of the current zoning compared to what these new minimums would be, and it added up to 1.8 billion square feet of additional residential capacity.

David Roberts

That must mostly be around bus rapid transit. Because, are there a bunch of light rail systems in our state that I'm not aware of? Like, it's Seattle and who else?

Alex Brennan

Well, I mean, it is mostly in the — actually, I should even caveat this. We only did this analysis for the Seattle metro area. We didn't do the other parts of the state that have bus rapid transit. So, this is just in the Seattle metro. There's more in other parts of the state and a lot of it is bus rapid transit. But, you know, we included not just the light rail stations that are already built, but the ones that are going to come online. We have the second biggest light rail system expansion plan in the country in the Seattle metro area after Los Angeles.

And so, there are a growing number of stations and station areas, and I think a half-mile radius around all of the rail stations, plus the commuter rail stations, which I think people sometimes don't think about as much.

David Roberts

But it's fair to say that the bulk of the effect of this legislation is going to be felt in the Seattle metro area.

Representative Julia Reed

Yeah, kind of in the Puget Sound area. But I think one of the things that was really interesting about the Futurewise study for me was how much this unlocks and development on the east side of Lake Washington. And not just in residential, but like this also applies to — it's residential and mixed-use development. Right. So that's more spaces for childcare centers, more spaces for small businesses.

David Roberts

Oh, wait, wait. You're jumping ahead to one of my future questions.

Representative Julia Reed

Oh, sorry, I will get there. But it's also more housing for people and not just for tech workers, but for all the people that make those businesses run, like the bus drivers, the cafeteria workers, the custodial staff. There are a lot of people who I think, when we think of Eastside technology hubs, worker housing, we think of the folks on sort of the highest end of the spectrum. And I hope this will help them too. But there are a lot of people who work at those companies and support those companies who want to live near transit on the Eastside.

And there's a ton of opportunity to unlock there. And like Alex said, that study didn't even include what we could potentially unlock in Vancouver and Spokane and eventually probably the Bellingham area. I know they're looking into bus rapid transit. And also, you know, it's not just King County, but Snohomish County also has a fair amount of bus rapid transit as well. And there's some opportunities in Pierce County too. So, I would say kind of all across the sort of Puget Sound corridor and then in the major urban areas, south and north and east.

David Roberts

Yes, this gets to a question. This is, I guess, a political question for you, Representative Reed. Which is, you know, there's a lot of fighting over transit. There's a lot of resistance to transit. And now, is it the case that if I go add a bus rapid transit stop, I am also automatically upzoning the area around it?

Representative Julia Reed

Yes.

David Roberts

And if so, do you worry that that's going to increase the already substantial resistance to new transit stops? You know, like this makes accepting a transit stop in your area a bigger deal, I guess I would say.

Representative Julia Reed

Yeah, I think we looked at that as this is a risk that we're willing to take. When we're planning a transit system, it's a long-term plan. You're investing a lot of money into it and there's a lot of demand for transit and a need to kind of meet transit goals that are connected to climate goals that are connected to budget issues that are just connected to what residents themselves are demanding. So, you know, will this, could this potentially like add some of the fuel to a fire? Yeah, but like those folks that are going to oppose transit stops in their neighborhood are going to do it whether or not, like they'll assume that the transit stop is going to lead to more housing and you know, more of "those" people moving in. Insert, you know, whoever "those" people are for whichever community you're in.

And so, you know, and if not moving in there, it's going to be easier for them to get here. I mean, look at all the fights that were had — not to pick on Bellevue, but all the fights that were had with the Kempers and, or, sorry, the Freemans over like bringing light rail to Bellevue Square.

David Roberts

Yes, when you say this opens up a bunch of new opportunities for the east side, that's the first thing I thought of was like, "Have you checked with the wealthy residents of the east side about that?"

Representative Julia Reed

They came to meet with me. Don't worry. Actually, I will say this bill — we had a lot of collaboration from Eastside cities on this. So, I had several meetings and tours. We had a lot of support from Kirkland and did a lot of work with Bellevue. We really worked hard to try to get the cities to a place where at least they could sort of have enthusiastic neutrality about this. And I think that was reflected in some of the give and take we had on the bill.

Alex Brennan

The politics around transit in East King County, I think, has really changed a lot from a decade or more ago when there were those fights about extending light rail in ways that you wouldn't expect. There can actually be more support sometimes in those cities.

Representative Julia Reed

Yeah, people are excited about light rail and bus rapid transit and what it is going to mean for their communities. And you know, I find that if you kind of paint the picture for them, they're like, "Oh yeah, this is something that we want. This is something our businesses support, our cities support." At least on paper. And then it's kind of getting down to like, okay, what are the actual, like, nitty-gritty pieces of this?

David Roberts

Right. Well, this gets to the next question then, which you hinted at a little bit before, which is one of my main questions about all this, which is, you know, you're trying to paint a picture for them and when you're doing that, you're painting a picture of density, the kind of density that you and I like. Right. There's like, there's open spaces, there's parks, there's green space. There's mixed-use communities with shops sprinkled in. People are walking around. You know, we're painting a picture of a nice little European city. But I think like if I live in Seattle — I was just talking with Alex about this before we started recording.

If I live in Seattle, like, well, I do live in Seattle. Up in North Seattle, up on very north, very north Greenwood. And this is one of those areas where Seattle is zoned for density. But it's just a strip. It's just a big stroad with density along either side of the stroad. And then immediately beyond that, you have single-family homes. So you have density. But like, it's not nice. It's not something I would want to paint a picture of. There's nowhere for any of these people to walk. Like, they have access to bus stops.

Yes, but like, it's not nice density. Two questions. One is like, is there anything in the bill that says anything about what kind of density we're going to get here, or is it just more housing? You know what I mean? Like, is there any requirement that you include walkability or shops or mixed use or green space or any of the other parts of density that make density nice?

Representative Julia Reed

Yeah, the bill does apply to an FAR for housing and mixed-use development. I think anytime you're doing statewide housing legislation like this, there is that challenge around how do you guarantee the most positive outcomes given that this is going to apply to very different types of cities and communities. Also, you have to keep in mind that any requirement you layer on is going to cause developers, urbanists, and other folks to point out that meeting that requirement is increasing the cost of building this housing, which could decrease the likelihood the housing gets built at all.

We'll get to that in a minute because we had a lot of rounds on this, on the bill. So, there aren't kind of like specifically like, "Okay, every one of these has to be a courtyard apartment with this much green space." But the idea is that this density is part of your comprehensive plan. So, that's kind of what this is connected to is that in your comprehensive plan, you must plan for this. And then within that kind of broader work of the comprehensive plan is where cities are supposed to be doing that work of thinking about like, "How do we not just meet the requirements but actually like build the kind of community we want and plan for the kind of communities we want?"

David Roberts

I mean, this is my worry about, like, you know, you mentioned this before, but like when you think of this as new housing for "those" people, you know, like you're just going to build it as a bunch of warehouses, right? I'm worried about whether cities are going to do this well. I guess, I mean, it's only partially under your control.

Representative Julia Reed

I mean, that is a worry that I have too. And I think you kind of lightly alluded to this, but I think we have a severe lack of vision within the city of Seattle from both the executive and the city council about creating a city that works and is centered around people and building a city that puts people ahead of parking and ahead of punishment and ahead of other challenges. You can see this in kind of all of the sort of Sturm and Drang on the Seattle Comprehensive Plan. I regret that my city is not showing a level of leadership and vision on this issue that I would like them to see.

Now that being said, you know, I'm a state representative so I can pass statewide laws that provide a kind of container within which this work can happen. But I'm not a member of the city council. I no longer work in the mayor's office. I can't guarantee you that your city is going to create this kind of planning. But that's where organizations like Futurewise are really important as well because they are trying to hold cities accountable to this work. And we are also going to be creating, as part of this bill, the Department of Commerce is required to create model code that cities can adopt just like they have model code for House Bill 1110, the Middle Housing Bill.

And so, in that model code work too, there may be opportunities to kind of bring out more about the quality of the neighborhood and the housing, not just the sheer amount.

David Roberts

Interesting. So, the other pieces are affordability requirements. I'll briefly set the scene. Right. There's a long-standing fight in the urbanist world where I guess what you would call progressives or lefties want to say, "If you're going to build, you are required to include some affordable housing, meet certain environmental standards, use urban labor, etc.," all these sort of requirements they want to put on the zoning. This is called inclusionary zoning. It's sort of, "Yes, you can build density, but we have a lot to say about exactly how you build density."

That's the left. And then you have the sort of kind of more center-left YIMBYs who say, "When you put all these requirements on new building, you make new building more expensive and you get less of it, which is what's happening." So this is a long-standing, very vicious, very heated, endless fight in the urbanism world. And this bill actually includes the first interesting, you know, sort of innovative way of cutting through that Gordian knot that I've heard. So I want to talk about it. So maybe just start, Representative Reed, with what are the affordable housing requirements in this?

Representative Julia Reed

It's a very complicated issue. And, you know, I very much enjoyed when this bill passed, being feted by the very people who, the year before, were calling me a climate arsonist for including affordability measures. It was a lovely lesson on legislative life.

David Roberts

Yes. Can't take anything too seriously.

Representative Julia Reed

No, you just have to keep it moving. Stay focused on the goal. So, basically, what this bill says is that for buildings that are constructed in a station area where it is newly up-zoned for housing. So, this is not all of the land in the station area because some of that land has already been up-zoned to or above this level. So, it is not everywhere.

David Roberts

Oh, so if I have a, like a four-story building that's in one of these areas already when the upzoning happens, these affordability requirements do not retroactively apply to me. So, it's only new building.

Representative Julia Reed

Correct. And if a city has already up-zoned the area around transit and there's just not a building there, but like it's already been up-zoned to and above the level, let's say they're like, "Oh, we already allow 4.0 FAR around our light rail stops." Those buildings aren't required to implement the affordability requirements either. It's new construction in newly up-zoned areas.

David Roberts

Got it.

Representative Julia Reed

So, in those areas, at least 10% of the units, if they're rental housing, have to be affordable to families making 60% AMI or below. Or, at least 20% of the units have to be affordable to households earning 80% AMI or below.

David Roberts

That's Area Median Income.

Representative Julia Reed

Area Median Income. So, just to put that in context, if you have a building with 10 units, that's one unit that's affordable. If you have a building with 200 units, that's 20 units that are affordable.

David Roberts

And when we say you have to offer an affordable unit, that just means for that unit, you're capping the rent at a lower level.

Representative Julia Reed

Yes, at least for 50 years. And so, this was a huge area of contention with the bill. I strongly believe that it is important that people of all income levels be able to take advantage of the transit utopia that we are trying to build. I'm unapologetic about that. I think that yes, that does slightly increase the cost of building, but we're talking about building in the most profitable, most desirable, most in-demand property areas in the entire state of Washington. So, there is room to accommodate a modest amount of affordability to ensure at least some people can either remain in areas that are going to be up zoned or can come to those areas for the first time.

And I think that's especially important because of where we put our transit stops, often on these busy corridors, and because of where we have already pushed low-income people. And there is an element of race to this as well. So, low-income communities and communities of color are closer and closer to these busy, noisy corridors where we also often have transit that we're talking about upzoning. I see that as being different than middle housing, which is really actually about helping more low-income people come into neighborhoods that they have been excluded from because of exclusionary zoning practices.

So, I'm very unapologetic and always have been about having this inclusion exclusionary zoning level. But I've always been flexible about how we do it. I try to be outcomes-oriented in this, about like, how do we guarantee that some of the units built in these new areas are going to be affordable.

David Roberts

But do you concede the premise though that it is possible for inclusionary zoning requirements to slow building?

Representative Julia Reed

It's possible. I will say again, the balance of that is this is a very high-demand building area. So it's possible. I mean, if a developer wants to build in Yelm where they don't have inclusionary zoning requirements, then they're welcome to do so. But I think that it is possible. But I also think that that's what you do in policymaking. We make trade-offs like that all the time. Like, having a minimum wage means it's going to slow down hiring, but we should still have a minimum wage. You know, requiring hospitals to provide emergency care to anyone who comes in the door is going to increase the cost of providing hospital care.

But, I still think we should make sure that emergency departments are open to everyone. So, yeah, inclusionary zoning requirements can slow down production and add some of the cost. But, it can also mean that the neighborhoods we're building are actually the neighborhoods we want. And, I think if we dial those dials appropriately, we can ensure that we're getting there.

David Roberts

Let's talk about our clever solution here.

Representative Julia Reed

Yes, so developers get a lot out of this too. They're not just required to do inclusionary zoning. First of all, let's remind ourselves: developers are getting an upzone, which means there's a ton of areas in these TOD zones where currently, you can only build single-family housing. So, you can't build businesses, you can't build mixed-use, you can't build any type of multifamily housing. So, developers are getting a significant upzone. That's, I think, the first thing that they're getting. They're also going to be getting, in this deal for areas that have this mandatory inclusionary zoning, an extended tax exemption for their building.

So, this is actually work — I want to give credit to the city of Shoreline. They successfully piloted this in their city.

David Roberts

Oh, interesting. I was going to ask, who came up with this?

Representative Julia Reed

Yeah, so it was actually the city of Shoreline. They have a higher inclusionary zoning requirement than what's in the bill they require. I think it's 20%. Well, anyway, it's higher than what we have in the bill. And they came up with this idea that instead of, I believe, it's 12 years that you typically get a multifamily tax exemption. If you're a developer, we're going to give you 20 years. So, you're going to get a longer tax exemption if you build buildings that are in these areas.

David Roberts

So, that means you pay no property tax on that building for 20 years.

Representative Julia Reed

Correct.

David Roberts

That seems like, what do I know? But that seems like a pretty big subsidy to me.

Representative Julia Reed

It's a pretty big deal.

David Roberts

Who did the calculation that that equals the value?

Representative Julia Reed

It's something that developers sat in my office and said, "Like, this is our number one priority." And then we were like, oh, but I think they did that expecting we wouldn't give it to them. And then when we gave it to them, they were like, "Oh, no, we want to veto this whole bill." So, I thought that was kind of funny. And then, in addition, I would note Senator Bateman added this in the Senate version that any property that's claiming this 20-year MFTE, the city also has to provide a 50% reduction for impact fees. So, impact fees we haven't talked about yet.

Typically, when you're building a development in a new city, a city will assess an impact fee to the developer. This is supposed to kind of address the impact that having all these new people move to the neighborhood is going to have on sewers, water, or schools. Now, there is a lively debate about whether or not those impact fees are actually connected to any kind of data.

David Roberts

Yes, and they definitely do slow down development. They definitely do deter development.

Representative Julia Reed

And cities that don't want to have density, but lawmakers who want to look like they're, at least in theory, in favor of density, frequently do things where they say, "Well, we're going to allow upzoning, but we're going to put a huge impact fee on every development." That's going to make it impossible. So then they can say like, "Well, actually we changed the lots. It's the developer's fault that they're not doing it."

David Roberts

Right. So, this is a 20-year tax exemption from property taxes and a 50% reduction in impact fees.

Representative Julia Reed

Yes, if they are providing the affordable units.

David Roberts

Right. I mean, that seems, as you say, they're in your office saying that that's what they wanted. I have a couple of questions about this. One is, do we know from Shoreline's experience whether this is enough to pull developers in? Because part of what I'm wondering is, like, everyone, I've been sort of traumatized recently watching federal policy flail around wildly from one direction to another. So, like, part of what comes to mind is just like, this is a 20-year commitment. Are developers going to trust that this policy is going to stay in place for 20 years? Do you know what I mean?

Representative Julia Reed

Yeah, I mean, I think that's always part of the risk when you're dealing with public policy. There can be changes. I like to say that, you know, they can take my word to the bank. So, as long as I'm still here in 20 years, we can be sure of that. I think that in Shoreline's experience, it did spur development in their areas. So, they had higher inclusionary zoning levels. They combined that with a tax exemption and incentive for developers to build despite those additional costs from the inclusionary zoning, and they saw greater development. I think I also saw a study that similar work had happened in Los Angeles, for example.

So, there's definitely places where this is happening and where we know that it's going to work. And yeah, I mean, I think in my office, we also have developers saying, "Well, it's impossible, it will never pencil." But there's no pro forma to show that. There's no, like, data to back that. And I asked them, you know, again, to be outcomes-oriented. I was like, "If you have a better idea or if you have a suggestion about how we should dial the inclusionary zoning, like, I'm all ears." Like, I'm not saying it has to be this or it has to be that, but you got to come to the table with something.

And there just wasn't a willingness to really engage, even though, as I said, developers are getting like 80% of what they wanted, 90% of what they wanted in this bill. So, it's a little frustrating to feel like you're getting a lot of what you wanted. You're not getting a hundred percent of what you wanted. But I'm not getting 100% of what I wanted. Like, no one's getting 100% of what they wanted. That's not how this policymaking works. And to sort of just continue to kind of fold your arms and say, "Well, we're not going to play ball unless we get 100% of what we want" means that you're going to have policy happen to you, not with you.

David Roberts

They're used to just winning. They're used to just being able to fend this stuff off.

Representative Julia Reed

Well, it's a new day in Olympia.

David Roberts

It's a new day. Alright, okay. So, these are the three big pieces of the bill I wanted to go over. It increases the density around transit stations. It requires 10% affordable units. And somewhat innovatively, basically the community is paying for those affordable units rather than the developer, via a 20-year tax exemption.

Representative Julia Reed

The state is paying.

David Roberts

The state is paying, taxpayers ultimately. So, a couple of other little bells and whistles I wanted to mention before we move on. One, I think we touched on this earlier. It also eliminates off-street parking requirements. A double shot to the head of the —

Representative Julia Reed

Which is just requirements, not eliminating parking.

David Roberts

They can, of course. I said it 50 times: you can still build parking. It's not illegal. Another thing that I think is really cool, multifamily units that have at least three bedrooms are not counted toward the FAR limits. So, this means you can stick a bunch of family-size units in your building without triggering these FAR requirements. Basically, trying to induce developers to build more family-sized units, which I just think is great because every city needs more of those. This is something that I feel like Vancouver has done a really good job on. You know, you go walk around downtown Vancouver, there's schools, there's elementary school kids or kids everywhere.

There's lots of family units there. But, like those, they are hard to find in a lot of other cities.

Representative Julia Reed

So yeah, there's kind of a bias in our area where it's like, "Oh well, single people live in apartments and families live in houses." You know, that's not the reality. Speaking as someone who's 38, like that's not the reality for me and a lot of my peers.

David Roberts

I mean, I would have loved to live in a big flat with my family if I could have ever found one that I could afford. One other bell and whistle, which I thought was really cool, they say you have to allow increased density if you're using all mass timber. I'm sort of curious who stuck that one in. You know, we love mass timber around here.

Representative Julia Reed

That's a great question. I don't actually remember who put in the mass timber piece. Alex, do you remember?

Alex Brennan

I don't remember that either. It's been in there for a while. I mean, I think part of the conversation about the types of buildings we're getting, there's a lot of interest in having more flexibility in — we have a lot of this sort of very standard height, kind of mid-rise buildings. And people wanted an option for slightly taller, more slender buildings with more green space on the lot. And our building code isn't very set up to do that. And so, mass timber is a way to build at that height and to help kind of take advantage of the flexibility that the floor area ratio offers.

David Roberts

Excellent. Love it. The other thing is, this bill exempts cities under 15,000 people. Again, this is true in the parking bill too. I'm assuming there's no substantive rationale for that other than just like a bunch of rural people are upset.

Representative Julia Reed

Oh, never, never make assumptions, Dave. That's what I call the Sumner exemption. The city of Sumner, which has a commuter rail stop, had some very strong feelings about how — but a very small kind of footprint — had some sort of very strong feelings about how much of their city would be impacted by this. And sometimes in legislating, you make compromises in order to bring people on board and bring legislators on board. And that seemed like a fairly small one. So there's a very limited number of cities that are impacted by that because the cities that are impacted by TOD to begin with are mostly large cities.

David Roberts

Right. So, whatever, whoever that developer was who was so keen to go build a skyscraper in Sumner...

Representative Julia Reed

To build a skyscraper next to the Sounder commuter rail stop in Sumner, it's just, it's going to have to wait until the trailer bill.

David Roberts

All right, let me ask about enforcement. I generally love this idea that I think has really taken root in the YIMBY world. It makes more sense to move the level of legislating up to the state level because at the local level, you just have disproportionate representation of certain populations, let's say, getting in your way and protesting everything. So, I think there's a good argument to be made that doing things at the state level is not only more effective, it's also more democratic, in a way. You are representing the needs of more people. But when you have a state mandate and you have a bunch of sort of smaller mid-sized cities that are vaguely resentful about it, I feel like you're going to have a lot of efforts to wiggle out of this in various ways or find loopholes. So, what is the mechanism of enforcement?

Alex Brennan

Well, we're one of the mechanisms of enforcement. One of the things Futurewise does is we bring legal appeals when cities and counties don't follow state land use law, you know, and then the courts make sure that those folks come into line. I think the other piece though is that this is just going to go into effect. I guess there's some work to do to figure out exactly the process — Representative Reed might know more about how commerce is going to do this — but with the Middle Housing Bill that we passed a few years ago, if you don't adopt your own zoning code to implement the state requirements, then there's a model state code that just goes into effect that you can permit under.

And I assume that we'll have something like that will happen for this legislation too.

David Roberts

Got it. Okay. Before I leave the bill behind, my last question, Representative Reed, is — and probably worth the whole pod too — but I'm curious a little bit about, you know, when I talk about the parking reform, the sort of sentiment was like, "This was impossible not very long ago." Things have changed quickly and made this possible. I assume that something similar is true of this, that this is a result of big shifts in opinion and power and coalitions, et cetera. So maybe just talk a little bit about, how did you assemble a coalition to get this across the finish line when it was so, so difficult not even very long ago?

Representative Julia Reed

Yeah, I mean, part of this is that housing is a problem now in every community. And it's the number one thing that legislators hear about in most cases. And that's not just Democrats, it's also Republican legislators. So right away, you have a cross-cutting issue that is very important to many different groups of people and that legislators are hearing about. So that automatically kind of increases interest. Futurewise was a huge foundational partner for this. And honestly, the people that every time I was like, "I'm going to give up, this is too hard," kind of kept me going and kept me pushing along.

So, shout out to Alex and your team for their incredible work and research.

David Roberts

Dealing with NIMBYs is life-draining. I can attest to that. So, kudos to you.

Representative Julia Reed

There are a lot of ways to have your life force drained in the legislature. Labor was a really important component of this. This is about building housing for working people and increasing their access to housing and their ability to live near housing.

David Roberts

And so they're on board, they were a force in favor?

Representative Julia Reed

Yeah, they were very supportive. The labor council came and testified this year, especially at all of our committee hearings. They were there at the bill signing. So, I really appreciated the support of organized labor. I would say cities themselves, even though, like, cities are not known to be the most excited about statewide zoning preemption.

David Roberts

That came up in the parking pod, too. What is the organization of cities?

Representative Julia Reed

The Association of Washington Cities.

David Roberts

This was our sole opponent, was this organization of cities, is that true here too?

Representative Julia Reed

And the Association of Washington Cities, we could have a whole other podcast about my thoughts and opinions on them. While the Association of Washington Cities was not supportive of this bill, individual cities who are actually the ones that are impacted by transit-oriented development largely were supportive, or at least we were able to work with them to get to neutral. So, I had a lot of meetings, I went on tours. I really dialed into who are the city proponents and what makes them support this. And then for the opponents, who are the opponents that have, like, real substantive issues that we could try to speak to in the bill, and who are the opponents that are just, you know, never going to be down for any of this.

And so, you know, really working with the cities because legislators listen to their city councils, they listen to their mayors, they listen to their residents. So it was important, especially for suburban legislators, it was important that their cities at least feel heard in this process. So that was an important part of the coalition building. And we were able to work in their changes. The realtors and the business community, again, that was a community where even though if you ask the Washington Association of Realtors, they'll tell you transit-oriented development is one of their top priorities, they were opposed to this bill because they don't like the inclusionary zoning aspects.

And even though, again, they're getting a lot of what they asked for.

David Roberts

Come on.

Representative Julia Reed

It's the same with NAOP, which is like the commercial developer lobbying group. Even though they were getting 85, 90% of what they asked for, they continued right up until that bill was on the governor's desk to push for a veto, the inclusionary zoning requirement.

David Roberts

I mean, this is so obviously better than the status quo.

Representative Julia Reed

But, and I think that being said, sometimes with folks that are like that, where they're just never going to come around, I just try to listen as much as I can to what they need, incorporate as much as I can, and then just keep pushing forward. And, you know, the door's always open, the table's always open. I want everyone to be a part of this conversation. But if you don't want to work collaboratively and fairly, then, you know, we go forward. Like, the work doesn't stop just because some people want to take their toys and go home.

David Roberts

But it's fair to say. And this makes me happy, so I'm suspicious of it. But it's fair to say then that really the motive force for this was housing people. Like the housing people now are organized enough that they are making actual bills happen. This is not some bank shot where you, like, sold it under other cover. It really is a housing thing.

Representative Julia Reed

Yeah, and I think similar to rent stabilization, similar to the Middle Housing Bill, you also have this growing cohort of legislators coming in. You know, my cohort, the cohort that just came in this year, who are people in their 30s and 40s who are directly connected to generations of folks who are trying to buy homes or rent homes, trying to build families and lives here and who are more impacted by the way the housing market is now, as opposed to some of my colleagues who maybe bought their houses in the 90s.

David Roberts

This is such a generation gap on housing specifically; there is such a generation gap.

Representative Julia Reed

And I think the newer folks coming in are more open to different ways of living that are not just like every family in a single-family home in a picket fence neighborhood. And that's been great. I don't want to run down all my colleagues, all of my older colleagues, because we had many supporters, many housing folks, been working on this for a long time. But I think it's both like the constant pressure on legislators to figure out housing solutions that feel big and impactful to constituents and then the kind of growing number of legislators for whom these kind of housing solutions — like, for me, doing this kind of work is the whole reason I decided to run for the legislature.

It's the whole reason that I wanted to come in because I didn't feel like there were enough people in the legislature from my age group and generation — again, I'm 38 — that understand what it's like out there for us and are acting with an urgency to address that issue.

David Roberts

It's funny, the Republican woman in Montana who sponsored a ton of Montana's recent very progressive housing legislation is, I think, 28, like one of the youngest legislators ever in Montana. I think that's definitely no coincidence.

Representative Julia Reed

Yeah, and Republicans care about this issue, too. I mean, I got some Republican votes for this bill out of committee, not on the floor. But then, I tend to be one of the more outspoken members of the caucus. I'm not heavily endeared to the Republican leadership.

David Roberts

They don't want to give you a victory.

Representative Julia Reed

Yeah, they're not so excited about all the dunking that I do on them on Bluesky.

David Roberts

But on the substance, behind the scenes, some of them get it.

Representative Julia Reed

Behind the scenes, I definitely had Republican partners and allies and people who, you know, wanted to be involved in the bill, who had reasonable requests. And you know, I think that's great. I want to work with my Republican colleagues if they have a similar goal as I do on these issues. And so, you know, it wasn't a full-throated "rah rah," but definitely a lot of support behind the scenes. Sometimes it's not even the yes vote you need so much as the like, "Can you just get everybody to chill out a little bit and not make like 50 speeches against the bill?" So this bill eats up a ton of time. Time is always something we're managing in part-time legislatures where we only meet...

David Roberts

Tell me if this resonates: Is another thing you want from your Republican colleagues just like, "Don't go yelling to Fox News. Don't draw the eye of Sauron." Because then, they'll make the whole country full of conservatives hate it.

Representative Julia Reed

I don't want to be written off in the Daily Mail.

David Roberts

If they're just quiet about it, you know, just don't draw a ton of attention. That's maybe their best contribution.

Representative Julia Reed

We like low-drama legislating. That's what this is for.

David Roberts

Alex, I didn't leave a ton of time for this, but I am curious to hear from you. You know, this is like the YIMBY movement has just gone from 0 to 60 in an incredibly short span of time. They're fanning out across the nation, winning all kinds of victories. So, maybe give us a little sense of how this TOD bill in Washington compares to TOD bills either passed or sort of on the table in other states. How well are we doing here?

Alex Brennan

Yeah, I mean, I think the exciting thing is that Washington state is really setting the bar on TOD.

David Roberts

You think this is the best state bill on TOD that's passed anywhere?

Alex Brennan

Yes, yes, I do. And I think it's a credit to Representative Reed's leadership on this and all of the work that she was just describing to make a really impactful, big deal policy happen and that this is something that the rest of the country is going to be looking at. When we look around at other states and what they're doing, a lot of places are trying to do something similar, which is great.

David Roberts

And these are all basically along the basic model of allowing more density around transit stops. Like, they're all versions of that, basically?

Alex Brennan

Yeah, so there are two states that have done something kind of similar, Colorado and Massachusetts. And I think that the big difference is in the amount of density that we're seeing. In Washington state, we're using this wonky metric, floor area ratio. The other states use units per acre. So we tried to do kind of an estimate of how the floor area ratio translated into units per acre so that we could compare these a little bit better. And based on those estimates, we're getting a lot more density than those previous policies that were passed in those states. We estimate it's about 175 homes per acre for the rail stations and about 125 for the bus rapid transit stations.

That compares to, you know, in Massachusetts, we're talking about 15 homes per acre as the minimum around transit.

David Roberts

Wait, on the far side of reform, because, like, what was it before?

Alex Brennan

Yeah, well, so like, a typical single-family neighborhood is maybe five units per acre. So, you're getting an increase.

David Roberts

Yeah, I guess.

Alex Brennan

But it's, you know —

Representative Julia Reed

Hey, those patriots need their space, Dave.

Alex Brennan

And obviously, these are the floors, right? So, I think they're spurring, hopefully, folks, other opportunities to organize around doing more. And then in Colorado, it's 40 units per acre.

David Roberts

So, we're winning — I mean, that's not a small margin. Then, we're quite a bit ahead of the other competitors here.

Alex Brennan

Yeah, it's a big amount more. And I think there were criticisms during the advocacy process. One of the things that we had to do was convince people that this really was a big deal, because I think particularly with the floor area ratio, people hear 3.5 and they think, "Well, that's like three and a half stories. That doesn't sound that big." And they go to Vancouver, B.C., and they see these tall skyscrapers and they think, "Why can't we do that?" So, doing some of this comparison research and the analysis of the overall total capacity we were adding was really important to emphasize, "No, this is a big deal."

David Roberts

You could say, if I just throw this in here as a political economy note, that legislation that appears like no big deal to the casual observer, but is a big deal to the people who know, care, and understand, is really like the ideal political sweet spot for getting your legislation through.

Alex Brennan

Yeah, for sure. But at the same time, we did have a problem where we needed the advocates to keep showing up, and so we had to show that this was a big deal. And it was worth investing time in. So, it's sort of a fine balance. You don't want to energize the other side too much, but you want to make sure that your people are energized, that this is going to be worth putting all the time and energy into. And the other comparison that I think is helpful on this front, California has been working on passing a similar type of policy for a number of years.

David Roberts

They just did?

Alex Brennan

It just passed the Senate and still has to pass the House and get signed by the Governor. But, I've heard from folks in California that they thought the Senate was their biggest hurdle.

David Roberts

That's what I hear too.

Alex Brennan

Fingers crossed that they're able to get their policy across the finish line this year, too. But that is similarly my understanding: around rail stations, a range of 60 to 120 units per acre; bus stations, 60 to 100 units per acre. I hope we can be some motivation to them, too, to bump up some of those density levels as well.

David Roberts

So you said Colorado, Massachusetts, California, anywhere else of note?

Alex Brennan

These are the states that are doing the most specifically connected to transit. I think there's a lot of other places that are doing other types of housing reform that'll make it easier to build apartment buildings. There's a bunch of states that have passed laws that legalize apartments in commercial areas. So, like, you know, allowing, making it legal so that a shopping mall could start building apartments on top of the stores, things like that. That's also going to cover a lot of places. And so, you know, we've seen reforms like that in Montana, Texas, Connecticut, Arizona to different extents. There's some other policies happening in New Hampshire, in Hawaii.

We're seeing city-level changes in New York City, which obviously is bigger than most states in the country. So, there's a lot of places where we're seeing exciting progress kind of on related but slightly different fronts.

David Roberts

Speaking of related but slightly different fronts, I guess now Washington has done middle density. They've sort of enabled a bunch of middle density. They have now killed parking minimums for the most part. We've legalized transit-oriented development now. Is there an obvious next — and Representative Reed, please feel free to hop in here too — is there an obvious next target?

Representative Julia Reed

It is a topic of strong debate. Go ahead, Alex.

Alex Brennan

Well, I mean, I think there's a couple of places that we're kind of digging into. I mean, one thing, a lot of stuff happened this last legislative session and so we're in a good position of getting to think now about what's next. I think some of the stuff that you guys were talking about earlier in terms of how do we not just have the density but create great neighborhoods?

David Roberts

Yes, this is what I'm trying to lead to. Is there a clear, state-level lever that you can pull that affects the quality of the density? I'm not really sure what it would be.

Representative Julia Reed

I'm really interested in that question.

Alex Brennan

Well, no, I mean, I think it's something we're trying to figure out. I think that typically that's where we've done more work at the local level and really thinking about the local context. And so, I think as we've tried to scale up to the state level so that we can have this bigger statewide impact, it's a little harder to figure out how do you scale up those things into state legislation? The one thing that we got a little bit of with the TOD bill this year that I think we're really interested in more of is state investment in the infrastructure for those neighborhoods.

So, bicycle and pedestrian improvements, utility improvements, public space placemaking investments, those kinds of things. And so, I think that's one area for sure.

Representative Julia Reed

Yeah, I think that's an area of big interest. There is a fund that's created within this bill related to capital improvements for cities in TOD zones. And we'd like to see that grow to be a larger investment that cities can tap into. That's obviously something cities are very interested in as well. So, I think that that is an area that we're going to continue to look at. We had some significant budget challenges this year, so there wasn't really a big pool of money we could tap into. But I think that's something where we want to kind of see that continue to grow, especially as the law begins to take effect and these TOD zones and planning zones come online.

David Roberts

I mean, a lot of the objections, a lot of the resistance to bills like this, you get people who live in one of these proposed areas who look around and say, "Well, like, there's a transit stop, yeah, but otherwise we're not really set up for this. We're not really set up for car-free living."

Representative Julia Reed

Yeah, and it's a little bit of a chicken and egg problem, right? Like, cities haven't invested in sidewalks in a particular area because they're not expecting a lot of housing to be in that space. You know, water tables, drainage, sewage, that always comes up a lot. So, some of it is if we never plan for the housing there, we will never have the investment to support the infrastructure. But of course, if you're a city and you're worried about kind of being caught in that crunch, it's obviously a topic of big concern. And I think there's a way that, like the state and cities, can try to partner better on that.

David Roberts

Interesting, interesting stuff. What a great problem to have. Like, we did the big things.

Representative Julia Reed

Yeah, I mean, I think a lot of what we're working on now is implementation. You know, anytime you put a bill together, you're like, "This is how I think this bill is going to play out in real life."

David Roberts

Exactly.

Representative Julia Reed

But as I used to work on the executive side before I switched over or I joined the legislature, and I know having implemented or tried to implement many pieces of legislation, there are always challenges that are unforeseen. So, we're excited about that. I'm excited about kind of the bigger question that you raised too, about enforcement. You know, do we need — I love our folks at Futurewise, they do such incredible work. But do we need a state housing office? Do we need to kind of break some of this housing work and enforcement out of the Department of Commerce?

How do we create more teeth and enforcement for these housing laws? So, there's a lot of work to be done on the enforcement implementation piece now that we've gotten some of these big hits on the books. And then also, kind of dialing those things, like as we start to see middle housing and eventually TOD take hold, is 3.5 FAR too low? You know, once you establish the principle, it's a lot easier to do a bill. Say, "Oh, we're just going to bump the FAR up 0.5."

David Roberts

Yes, we'll get those skyscrapers eventually.

Representative Julia Reed

Yeah, skyscrapers and center one day. But, you know, or maybe not. Maybe it's like, "Oh, that was too much. We gotta, we gotta scale back." So, I'm excited to be a part of those implementation conversations and that legislation going forward.

David Roberts

Awesome. And Alex, that's probably next for Futurewise too. I guess it's just trying to make sure this all goes off well.

Alex Brennan

You know, it's always going to be an iterative process. And I think one of the lessons we've learned is passing the bill is just the first step and seeing things through to actually homes on the ground, neighborhoods for people is the work. And so there's always more to do. But I think this is a huge step to make all of that possible.

David Roberts

Amen. Thank you both. This has been super fascinating, and I really can't wait to see what you come up with next. I can't wait for the next session. What a weird — having these positive feelings about politics is so unnatural. It feels so unnatural to me. What is this feeling? So, thank you. Thank you both for coming on and walking through those.

Representative Julia Reed

Yeah, it was great to be here with you. Thanks for having me.

Alex Brennan

Thanks for having us.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

David’s Notes

1. 🎤 Fewer mailbags, more WTFIH episodes
When I first proposed mailbag episodes, I envisioned answering fun, casual questions like “what’s the best Star Wars movie?” or “what’s your favorite city to visit?” Instead, insofar as people are asking questions, they’re asking thorny, difficult energy questions. But if I’m going to put in the time to research a good answer to a thorny, difficult question, I’m going to make a pod out of it, not put it in a mailbag. I barely have time to research the pods I do make!

The “what the F is happening?” episodes seem more useful and more popular so I’m dialing back the mailbags to free up more space for those and other experiments like them. Mailbags aren’t completely disappearing; you’ll still see one pop up from time to time.

Keep using this thread to ask questions, suggest episode topics, and connect with each other. Great questions might make it into a WTFIH episode, or I may just answer them directly in thread. And for anything outside my wheelhouse, odds are that someone in the Volts community has you covered.

📌 A reminder that paid subscribers can listen to full episodes of bonus content via the Substack website/app or by sending them to their preferred podcast player using these instructions.

2. I haven’t done a transmission episode in a while, but it remains true that we need lots more of it. See this report confirming its incredible benefits for ratepayers:

3. 🔫 The “build in red states so the IRA won’t be repealed” thesis has not proved out, to say the least.

I’ve asked several insider types why. The brutal truth seems simply to be that Republicans care more about keeping Trump happy by giving him his tax cuts than they do about anything else. They care a little bit about Medicare and Medicaid, they might fiddle with those cuts. They might join some Dems in raising a stink about the level of SALT deduction. But energy tax credits just aren’t a particularly high priority for anyone in the GOP. (One weird trick, etc.)

4. ✅ Community comment of the month: Eduardo makes a worthwhile point underneath our episode about CCAs, about PG&E’s ability to process information from smart meters:

The ability of utilities to gather and process distribution-level data is a subject of intense interest to this podcast — see this recent episode, and this one, and this one.

Monthly Thread — How It Works

This is your monthly opportunity to share! Use the comments section in this community thread to:

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

• SHARE WORK, ASK FOR HELP, FIND COLLABORATORS: Share your climate-related work, ask for help, or find collaborators

• CLIMATE EVENTS & MEETUPS: Share climate-related events and meetups

• EVERYTHING ELSE: Discuss David’s Notes or anything else climate-related

• QUESTIONS: Ask a question to the community or for an upcoming bonus episode (anyone can ask a question but bonus episodes are a paid-sub-only perk). Don’t be afraid to answer one another’s questions!

🚨 To keep organized, please only “REPLY” directly under one of Sam’s headline comments. Anything inappropriate, spammy, etc may be deleted. Be nice! Check out our Community Guidelines.

On June 4, at a Canary Media event in Washington, DC, I sat down with Senator Martin Heinrich to dissect the GOP’s so-called “Big Beautiful Bill” — a sledgehammer aimed at the Inflation Reduction Act, public-lands protections, and US science. We talk about the handful of Republican votes that could still save key tax credits, why bipartisan permitting reform isn’t dead yet, and how the bill’s self-inflicted grid squeeze would jack up energy prices right when AI is poised to spike demand.

(PDF transcript)
(Active transcript)

Text transcript:

David Roberts

Hello, my lovelies. This is Volts for June 13, 2025, "Senator Martin Heinrich on the fight over clean energy in the Senate." I'm your host, David Roberts. On June 4, Canary Media held an event in Washington, D.C. that featured several fascinating panels and interviews. (I enjoyed seeing many of you there!) Among them was my interview with Martin Heinrich, the senior senator from New Mexico.

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Heinrich is the ranking member of the Senate Energy and Natural Resources Committee and a leader in the Democratic Caucus on energy issues, so he will be a key figure in Senate negotiations over the Republicans', ahem, "Big Beautiful Bill."

That legislation would decimate energy provisions that Heinrich spent a great deal of time working on, and kneecap clean energy industries that have seen robust growth in his state. Unsurprisingly, he is not a fan.

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We discussed several unworkable provisions in the bill, how it could improve in the Senate, whether his Republican colleagues will have more courage than their counterparts in the House, and the possibility of bipartisan permitting reform, among other things. Enjoy.

David Roberts

Senator Heinrich, thank you for coming. Welcome. I appreciate it. I thought I'd start with, obviously, everybody's thinking about the Big Beautiful Bill — sorry, I've been training to say that with a straight face all week. Conventional wisdom going into this process was the Inflation Reduction Act is dumping a bunch of money into red districts, a bunch of money into red House districts. Mike Johnson has a one-vote majority. Things are very tight. That means every Republican representative has the power to sink the thing, basically. So, I think the conventional wisdom was, "He's going to have to make some big compromises to get this thing through. It's going to be a really delicate process."

No, it was not a scalpel. It was a sledgehammer. Wiped the whole thing out and they all voted for it. Did you expect that and how do you account for it?

Senator Martin Heinrich

Well, I think, under a historical perspective, that's not what would have happened. With a different Republican president, that's not what would have happened. So, what none of us could quite account for when we were putting the Inflation Reduction Act together, is a second Trump presidency where literally the party becomes sort of cultish. You know, the fealty to this president is just like nothing I've ever seen. Right. So, that's hard to plan for. The second thing is, House Republicans just folded. They did not use their power. And we did see what happens when some House Republicans did use their power.

You look at what Ryan Zinke and a few other Republican House members did on the public lands provisions where they were trying to sell off our public lands to pay for portions of the bill. They said, "We're not going to vote for the bill until you take that out." Well, you know what they did? They took it out. So we had all those folks sign a letter and none of them meant it. I mean, that's the reality. They weren't willing to use their political power to say, "I'm not going to vote for the bill until you fix this, this, and this."

David Roberts

Yeah, well, speaking of selling off public lands, Senator Mike Lee has said publicly that he wants to bring that back in. Is that plausible? Like, I no longer have any baseline sense of what's plausible or not anymore. You know what I mean? So, like, is that a thing that could happen?

Senator Martin Heinrich

So, I've spent my entire — I started out as an Outfitter-Guide working on public land. So, this has been part of my life, for all of my adult life. And I really cut my teeth fighting back on a previous effort to sell off our public lands. Would Mike Lee very much like to do that? Sure. The question is going to be, and it's going to be interesting to see what happens here, is we saw what happened in the House: you're inserting risk into an already wobbly kind of legislative effort. You never know when the wheels are going to come off on one of these things.

So, the question is, what do the other Republican senators think about that effort? And given the unpopularity of that kind of approach in a lot of the Intermountain West, where we have Republican senators in places like Wyoming, Montana, Idaho, and other places that understand how unpopular this is and how much risk it's going to create, I don't know if they do it or not.

David Roberts

Can you give us a sense of, like, how many senators is the margin here? Like, how many would have to really make the jump to kill this thing or at least force changes in it?

Senator Martin Heinrich

To force changes, like, if you can put a group of three together, you can probably force changes. Because no one's banking on Ron Johnson being a yes. Like, he seems to have carved out a pretty solid position for himself. You know, Rand Paul, you never quite know where he's going to land. So, you want to build a very solid whip count. And so, I honestly don't think it takes a lot of Republicans to force some changes. And for the sake of this overall industry and all the jobs that we've created and the hundreds of billions of dollars of factory investments, I hope they will use the power that they have because there are a handful of folks that could solve the timeline problems that could clean up the foreign entity of concern and make it functional instead of a mountain of red tape.

There are a lot of things that — setting aside the bigger issues of taking health care away from well over 10 million people — we could fix a lot of the IRA issues and preserve a lot of jobs, and mitigate rising electricity prices if they would use that power.

David Roberts

Well, you said that maybe selling off public lands outright would be a step too far. Another thing in the House bill is an extensive amount of fossil fuel leasing, leasing of public lands. And they sort of go beyond. You know, it's always just like they look around at whatever's around. They're like, "How can we get more extreme than that?" So now they're mandating that we lease public land to fossil fuels, plus opening the Arctic National Wildlife Refuge up, etcetera, etcetera. Public lands in general just become sort of open season. What's the valence of that issue, do you think?

Senator Martin Heinrich

Meanwhile, if you're in the oil and gas industry, you're probably thinking, "Stop helping!" Oil is $65 a barrel. Production, Saudis are increasing production. This cuts both ways for them. It's like, "Yeah, sure, thanks. You're reducing royalties. But by the way, the market is being flooded right now." So, it's kind of a mixed bag for that entire sector right now. And because they made a deal with Trump during the election, they're kind of biting their tongue.

David Roberts

Yeah, I saw someone make a similar point that the tariff on steel is going to jack up fossil fuel drilling.

Senator Martin Heinrich

It is very hard to produce a barrel of oil below $65. You can do that in the Permian Basin. But there are a lot of places where they start shutting off rigs when you get to that price point.

David Roberts

So, the purported drive behind all this is to find revenue. That's, I guess, what surprised me is it turned out that finding revenue to pay for tax cuts for rich people turned out to be number one through five on the priority list. And everything else got bumped, except they want to reduce royalty rates for the leasing of public land. That revenue — you know, Medicaid, one thing — but that revenue they can sacrifice.

Senator Martin Heinrich

That's what pays for our public schools in New Mexico. So, that change alone in my state is likely to cost the state of New Mexico close to $2 billion over the course of the next 10 years. And that will come at the cost of our school kids.

David Roberts

Yikes. So, I was going to say your committee, the Energy Committee, would be the committee where leasing of public lands is discussed and hashed over. But something you mentioned a few minutes ago backstage that hadn't even really occurred to me is that they might not do the committee process.

Senator Martin Heinrich

They might go directly to the floor with a substitute for the House bill.

David Roberts

And this would just be like calling the bluff of all the senators saying, "This or nothing." "Jump or you're dead," or "Jump or Trump will..."

Senator Martin Heinrich

"We all jump together."

David Roberts

What do you think are the chances of that?

Senator Martin Heinrich

I try not to handicap — like, I'm not in that mindset. So, I'm not a good person to predict how they will handle the procedural issues.

David Roberts

And if they did, I mean, this is of course, everybody's just guessing about this. But if they did today, right now, with the bill as is, do you think it gets to 51? Do you think that your colleagues, your Republican colleagues, will use the power in the way that the House Republicans didn't?

Senator Martin Heinrich

I think that's an open question. I think there are a number of Republican senators who recognize that there are big equities here that could be really problematic. I mean, when you have, you take just one example, West Virginia, you've got major factories, companies like Form Energy and others that set up shop there to take advantage of those incentives and to plan for the next 10 years of the future of our economy in storage and clean steel and other things. Are the two senators from West Virginia going to stomach those? You know, they went to those groundbreakings and ribbon cuttings and, you know, it's up to them.

They could force this change. Will they? I haven't seen a lot of profiles in courage, but if they decide to do it, they have the power to change this bill. There's no question about that.

David Roberts

Well, another thing that your committee would deal with, if your committee dealt with something, would be the rescission of all these DOE — I think this is one of the things that really hurts this crowd, all these grants, all this money that was going out the door, some of it they're just pulling back. Some of it they're trying to yank that's already out the door. So, like, what's the — is that legal? What is the legal status?

Senator Martin Heinrich

No. First off, just to clarify, it's not legal, but this is an administration that is willing to break the law and then pay the consequences later if they're held to account by a court. So, they're going to test the bounds of all of this. I have a great deal of sadness around all of this because we are the country that we are because we invested so methodically, over time, in science. And whether you care about NIH or, in my case, NNSA and DOE, we are where we are because of those investments that we've made.

And we are chasing the smartest scientists out of this country right now. The Chinese are recruiting them, the Europeans are recruiting them, and a lot of the people that DOGE got rid of — I'm all for, like, if you can make something more effective or more efficient, we should do that. You don't take the people who just got promoted because they don't have some sort of tenure yet. You fire the highest performing people in the agencies. That's nuts. And that is not how you run a good private sector operation. So it saddens me to see the impact there because I literally moved to New Mexico right out of college because I love the fact that it had two national labs and an active private sector and things like semiconductors.

And I thought, this is a place where a science person can go and have a future.

David Roberts

Yeah, and the funny thing is that the current Republican coalition has this sort of odd split between the MAGA types and these tech guys who have joined more recently with a much more like, "Let's go to Mars, humans will overcome" — that sort of attitude. And they're just standing by watching silently as the American scientific establishment is razed to the ground. They're not making a peep.

Senator Martin Heinrich

And it's unilateral disarmament with respect to the real competition with China because, like, you look at the stuff that they're yanking the money that is designed to make our manufacturing sector make the same kind of changes that our energy sector has already made. That's a competitive issue. There's so much dissonance, cognitive dissonance in all of this. Like, if you don't like China controlling the battery supply chain, maybe you should build batteries in the United States. So, don't get rid of the incentives to build batteries in the United States.

David Roberts

You can't build them here, but you also can't buy the ones that China's making. What's the remainder there? Let's talk a little bit about permitting on two scores. One is there was a lot of discussion of permitting last session. There's a lot of dispute about who exactly is responsible for that not making it over the line. But it was a relatively sophisticated agreement of people with different perspectives. What the Republicans have done left on their own devices is come up with, "Hey, what if people can just pay to bypass environmental review?" Which like, is that as ridiculous as it looks on the surface? Is that a plausible kind of reform?

Will that do good? Is that on your list of good permitting reforms?

Senator Martin Heinrich

No, it's not. You shouldn't do permitting reform and budget reconciliation. You're not supposed to take something that is policy and masquerade it as a budget item so that you can include it in budget reconciliation. The biggest reason for that is we need long-term certainty in the permitting process. So personally, I believe that the Democratic Party needs to be the party that says, "The United States of America can build big things again." So how do you create the certainty where you can do that and do it on a timeframe that actually makes sense? I spent 17 years shepherding one transmission project through the federal, you know, morass.

David Roberts

Did it ever happen?

Senator Martin Heinrich

Two NEPAs. Yeah, SunZia, it's being built right now. Three and a half gigawatts of clean power coming onto the grid right now. But 17 years is not a reasonable timeframe. So, I am very proud of the permitting reform that the Energy and Natural Resources Committee did last Congress. I was deeply involved in those negotiations and we got most of the committee. Yeah, we lost Josh Hawley and we lost Bernie Sanders, but the people in between voted for this. We should pick that up, dust it off, and pass it because we have a coalition and that's a bird in the hand that would actually make a meaningful difference instead of throwing for the sort of dogmatic end zone and saying, "We're going to destroy NEPA completely" or "We're going to let people do pay to play as part of the permitting process."

David Roberts

Yeah, do you anticipate that happening? Like, when this bill is done and off the plate, do you think permitting reform is going to be on the agenda?

Senator Martin Heinrich

I think it will largely be determined as part of the process where we scrub the bill with the Parliamentarian. So, the question is, does it survive what people on the Hill call the "Byrd bath,"after late Senator Byrd? And this is clearly, in my view, this looks an awful lot like policy masquerading as budget. So, if it comes out, that's the most likely place where it comes out.

David Roberts

Well, I want to get back to permitting form, but they have defied the Senate Parliamentarian once now. So, is that just a thing now? Like, I think Thom Tillis has said, he or Thune said he wouldn't overrule the parliamentarian. But, like, I don't know how seriously to take that.

Senator Martin Heinrich

Well, I mean, one data point does not give you a trend. We're going to find out if that was an anomaly or a trend, and if it's a trend — I mean, I try to impress upon my colleagues on the Republican side who get very exercised about certain members in my party. I'm like, "Think through all of this stuff and think through, like, when AOC is in the White House, what's she gonna do?" Like, when you start ignoring the Congress and saying, "You can just take the money from this project and put it in this project instead," even though that's not what our laws say, how are those Air Force bases in Texas going to fare under a President you don't like?

So, we've got to get some guardrails back on all of this where Congress is doing its job. And there are real delineations of power between the administration and Congress.

David Roberts

I think this is part of what freaks a lot of people out. It doesn't seem like giving the President dictatorial powers is the kind of thing you do if you anticipate the other party ever being in that chair again. You know what I mean? But back to permitting reform, never mind democracy, back to permitting reform. I think the sort of conventional wisdom is that the Republicans — this was in the last round — want it to be easier for oil and gas. The Democrats want it to be easier basically for transmission, mainly, and clean energy.

Republicans don't like the transmission part. A lot of Democrats don't like the oil and gas part. We're going to do them together. But now, they have the votes, theoretically, to just bully their way through with their own permitting bill. Do you think there is enough support for the transmission side of things on the Republican side?

Senator Martin Heinrich

There is, and look, the transmission pieces of that largely lived in that Energy and Natural Resources effort. They don't live in the Environment Public Works Committee. That's where a lot of the NEPA stuff would happen. But in terms of having a balanced product, we came up with something that satisfied both sides. John Barrasso is from Wyoming, a conservative Republican, cares about oil and gas production, and he championed that effort. And I, on the other side, have spent my life trying to make transmission work. We came up with something that both sides could agree creates a lot more certainty in the process and a faster path to either yes or no.

I mean, there are lots of times when the answer needs to be no, but you need to get there in a year or two, not in 12. So, I think this is actually doable. And if you want to make some changes to NEPA, you have a chair and ranking member in EPW in the Environment Public Works Committee that work well together too. So, take a crack at that as well. If you put it in reconciliation, it's really a roll of the dice and how long will it last? And in permitting, we want the solutions to be in law and we want them to be durable.

David Roberts

The people on the clean energy side who were advocating in favor of this previous permitting reform effort, there's a lot of division on the left, I'm sure you're aware, but the people who are for it, their basic point was, "If you make everything easier, clean energy wins."

Is that your take? Is that your take?

Senator Martin Heinrich

That's 100% my take.

David Roberts

Is that the Republicans take, like do they know that?

Senator Martin Heinrich

I think they're selective about their data sets. So, I'm not sure that they have quite realized that. Because if you ask them about energy storage, they're like, "Well, it doesn't even work yet." I'm like, "Well, in New Mexico, 15% of our generation mix is storage. Like, what do you mean it doesn't work?" But you never get everything you want in a legislative vehicle. But you can get what you need. And we will continue to make progress. When 95% of what's in line to go on the grid is clean, we're winning. We just need to win faster.

David Roberts

Win faster. You know, the process, as you say, it's not clear what the process is going to be. There's usually sort of a vote-a-rama towards the end of things where people throw out amendments. I'm just curious if there are particular — I mean, maybe you don't want to show your hand exactly what sort of amendments you have in your back pocket, but are there areas... You know, as you said backstage, like, mostly this is just about accountability. It's just about making people vote against things in public so they're on record for it.

Like what, what sort of things would you like to bring up and force your Republican colleagues to vote against?

Senator Martin Heinrich

Well, as you said, there's an awful lot of benefits in specific red states and districts. So, you know, highlighting where people are on those things, if you've got a battery factory, like those are the kind of places where I think we really need to press that accountability. There's no doubt that some of that is going to be determined by what comes out in the Parliamentarian's process and then what's left. And then you have to focus on what's left.

David Roberts

Can you just talk briefly for people who have not been following this debate? Obviously, there's little to no prospect of restoring the tax credits fully, the wind and solar tax credits, or restoring the tech-neutral tax credit. But there are perhaps opportunities to undo a little bit of the damage that was done to them. Can you just go through a few of the sort of specifics?

Senator Martin Heinrich

Yeah, I think the two areas where, if Republican senators choose to lean in, they can see substantial improvements to the predictability of the next few years is one, that the language is all over the map about how to wind up the IRA tax credits. And you never, like, you never want to deal with a situation where you're making a decision about whether you get the credit or don't get it based on when the project goes into service. You need to be able to plan based on when you start building the project.

David Roberts

For the obvious reason that you can't control when your project goes into service, it's dependent on a bunch of factors beyond your control.

Senator Martin Heinrich

Exactly. So, bankability is a problem. They could choose to fix those issues, and that would make a giant difference. I also think the foreign entities of concern language that the House put in is just a big red tape mess and no one can figure out how to comply with it. So, come up with something that actually says, "Okay, there's a real issue here, and we're going to respect that, but we're going to have language that the rules of the road are clear to actual project developers."

David Roberts

Yeah, and as you say, it's a little odd to go so overboard to prohibit anything coming in from China, but then also to kill the domestic manufacturing credit. Like, where do they, where else are they going to come from? Where do they think they're going to come from?

Senator Martin Heinrich

Intellectual consistency is not a strong suit right now in the...

David Roberts

Yeah, well. So, I don't know if they like what's been said privately, but, like, Capito's on the record wanting hydrogen hubs back. Hoeven wants the geothermal thing restored. I think Tillis has been on about the messy FEOC language. So, like, people are taking stands. And I would think intuitively you wouldn't stick your head out and do that if you weren't going to follow it on, because otherwise you'll look like a jerk. But then a bunch of House Republicans just did that. So maybe they will do that. But are you hearing other people more quietly behind the scenes?

Senator Martin Heinrich

There's a constellation of roughly seven or eight senators who are worried about a number of these provisions. All they need to do is get together and agree we're going to support one another and demand some changes, and changes will be made. So, if it doesn't happen, it will be a choice by their choice not to exercise the leverage that they have.

David Roberts

Before we turn to some audience questions, I want to ask a little bit broader political question. So, the political theory of the case with the Inflation Reduction Act, and I think this is also true of the Infrastructure Act and CHIPS too, is if we flood red districts and states with new investment, new factories, new jobs, new opportunities, we will make this irreversible. Basically. Like, this will give it political resiliency. This was sort of like the premise of the Biden administration. And like this, the House vote really seems to cast that whole theory of the case into question.

But if tangible benefits to your district don't sway you, what's left? Like, what does? What world are we living in? What are the political physics of this new world? What sways people anymore?

Senator Martin Heinrich

I mean, I think we'll learn what the political physics are when we see what the impact of these actions is in the next election, which I think will be substantial. I think the problem here is the timeline was too short. And then you have the sort of cultish issue around Donald Trump where he's able to change people's minds in a way that previous presidents were not. And so those things combined in a way that really broke down. I think if we had five years of factories, you know, being ingrained in those communities, it would sway a lot more House members.

David Roberts

Yeah, and I guess sort of the other half of that is, it's a little disturbing that it didn't move more Republicans, but it's also a little disturbing — and this I've heard from people in the Biden administration — they are disturbed that in their view, they didn't get much credit from the left for it either. In their view, they didn't get credit from anybody for anything. It seems like the space whereby a Democratic administration can be successful is just shrinking and shrinking and shrinking. The passage is getting narrower and narrower. You have enemies on all sides. You have no friends. Am I overdoing this?

Senator Martin Heinrich

It's a choice to tell that story. And I don't think we told that story effectively. Now, I mean, I will tell you that my closing ad was built all around the ability to build big clean energy projects, and it was full of IBEW workers and laborers. And, you know, the reality is that I performed very well in my state, higher than, you know, there was a delta between the Senate race and the presidential race. And it was partly because a lot of center-right, skilled tradespeople could see themselves as part of the team in those ads.

And that was not the story that got told by either the Biden or Harris campaigns effectively. I mean, those got caught up in other issues. And so, we didn't tell that story. And if we had told that story on a national scale, I think people would recognize just how much the world has changed as a result of the Inflation Reduction Act.

David Roberts

Okay, final question before audience questions. This is a question that I've asked every public official I've spoken to since the election. Out in Democrat land, I think there's a sentiment that Trump came in and just started steamrolling and has met weirdly little resistance. There was weirdly little — where are the heroes? Where are the people standing up? Where is everybody? You know what I mean? Like, everybody's looking around like, "I thought you were going to stand up to this." So, I think people on the left are like, "Where's the fight?"

So, do you think that's a fair critique? A and B, where is the fight?

Senator Martin Heinrich

I understand the need for that because this is an administration that is behaving in ways that we have not seen in modern American history. I also recognize that you have to look at the tools and the math that you have, and right now, we don't have the math. If you want to constrain this administration, get busy. The biggest opportunity we have to do that is going to be the midterm elections. We will slow things down and we will filibuster and we will do lots of things in the meantime. But right now, you have a situation where they have effective control of both houses of Congress.

They have the White House, and more often than not, they have a friendly Supreme Court and a friendly court electorate, except for the very extreme, clearly outside the box, extralegal things that they have done. And in those cases, the courts have been constraining them and the system is working. But I think it is not going to be any magic person in the House or the Senate. It's going to take all of us, and it's going to be the most powerful thing that is changing our ability to slow them down or change outcomes is actually the things that are going on in red states, in red districts where people who normally would be seen as absolutely friendly are questioning what these Republicans are doing.

So, when you start laying off veterans by the thousands at the VA, and then you go home and you hear about it, that's the stuff that is actually creating the space for us to begin to govern again and begin to limit the impact of this excessive administration.

David Roberts

All right, well, let's take some questions. Do we have a roving mic? Hands up if you have questions.

Audience Question 1

Hi. First of all, thank you guys so much for this talk. It's been really amazing and very informational. I want to push you on the last question. You know, we have a lot of industry, we have NGOs, a lot of maybe former DOE employees in the crowd. And I want to ask what we can do to make your job easier. I mean, is it money? Is it media? Is it new reports or new research? What can we do to help get legislation passed while not being in government?

Senator Martin Heinrich

I think one, it's really helpful when groups are pragmatic and support what is never going to be perfect. Like, this is not a game of the perfect. It requires compromise to get real, durable things done in Congress, no matter who's in charge. And so, being the adult in the room who's willing to take some arrows because things are never going to be perfect, that's an important dynamic. I think in the midst of this current situation where we have the Trump administration really running roughshod over many of our norms and our democratic institutions, I think the most powerful thing that people can do is tell their own stories.

So, when somebody gets online and says, "You know, I spent this many years in the Marine Corps and then I went to work for the Veterans Administration, and I got let go after my promotion because I didn't have a year's worth of service," that resonates with people. And it tends to find its way in front of my colleagues who have sort of stopped listening to the phone calls, the letters, and the emails. It gets in their feed because it's algorithmically based. And the same is true of people's jobs. Like when you attack somebody's job, what they did with Empire Wind, I thought that was absolutely unacceptable.

You take a project that was fully permitted, and you try to do something outside the law to then threaten 2,000 union jobs. Like when those folks get online and say, "This is what they did to me and this is what it meant for my kids and my family," that stuff resonates. And I think we need to urge people, if you've been impacted by some of these extreme abuses of power, tell your story. When I go to the floor, I don't talk about what I think. I oftentimes read from the letters. I tell people's story from my state.

Audience Question 2

I just want to say thank you so much for your plain speak. You started off talking about a brain drain, and I just want to know if you see a road back from that, because that is real, and I don't know how long those consequences will last. So, I'd love you to talk about that.

Senator Martin Heinrich

It is real, and it will take time. The sooner we can start, the better. I mean, we need to change the discourse in this country to one again, where we can argue about our opinions, but facts should be facts. And the way we've allowed the social and other media to be so fractured that people are able to consume the narrative of what's going on in this country through a soda straw instead of having some common understanding of what we are as a nation is really caustic to our ability to lead and to compete with our near-peer competitors.

So, we need different leadership. Elections matter. And then, we are going to have to, like, day by day, show that we value those things. We value how we compensate you, how we talk about you. We have to stop with this dumbing-down approach to the world. It is not in the interest of a great nation to do that.

David Roberts

Yeah, and I'll just add something. I saw on social media a couple of days ago, a letter from a guy who'd been let go from the NIH and had tweeted about it and then followed up saying, "Less than two hours after my tweet, I got a letter from the Chinese authorities with an offer to move my lab to the city of my choice with full funding for 20 years."

Senator Martin Heinrich

And if you don't think that the science that we do has value, I think they understand the true economic value of our scientists and our engineers.

Audience Question 3

Thanks so much for a great conversation. I have a question that's related to a very public departure from the administration last Friday. Elon Musk is no longer leading the DOGE effort.

David Roberts

Let me just clarify. Unclear, maybe.

Audience Question 3

Well, whether he is or isn't, he made some pretty controversial statements about OB3. And my question to you is, are his comments helpful to the Senate, or are they a head-fake?

Senator Martin Heinrich

I have no idea at this point. I mean, we've all been through this with Elon where like, "Oh, he's an interesting guy. He's pro-science, he's into electric cars. Well, we kind of like him." And then he swings and becomes the person we've seen for the last couple of years, and now he's swinging back. So, I try not to obsess about anything that he tweets. I try to pay attention to, you know, what he does. I don't know how it's going to play out. It probably pushes the two factions of Republicans a little further from each other, which is not a terrible dynamic to be able to slow things down and dig deeper into this thing and make people understand that 13 million people are going to lose their healthcare, and kids in a lot of states are not going to have money for their schools and the actual implications of this stuff.

But it could change tomorrow too, as we've seen happen again and again.

David Roberts

And just a quick follow-up, because I meant to ask you about this earlier and we forgot to talk about it. But one thing Elon tweeted about is AI. So maybe just say a quick word about what your colleagues are missing about AI in this bill, just real quickly.

Senator Martin Heinrich

This bill is a direct pathway to much more expensive electricity costs, higher electricity bills, and the inability for us to compete effectively with our competitors on artificial intelligence. The short version of this is simply that the energy they want to build, whether you want to build small modular reactors, or stick a combined cycle natural gas generator on the grid, or old school AP last generation nuclear reactor, all that stuff, great, that takes time. And so all this stuff that is fast and cheap and that we can do immediately is the stuff they're killing in this bill. 95% of the stuff in the queue, over 90% of it is renewables and around 95% of it is clean if you throw nuclear into that bucket. But the stuff that we can build, we've already built on the nuclear side.

It's going to be a few years before the next reactor comes along. If you order a combined cycle natural gas turbine yesterday, you're going to get it in 2030. So, are we going to starve the entire grid at the time of the largest increase in demand since the air conditioner became commonplace? That's what this bill is going to do. And the impact of that, you know, I've warned my colleagues, the impact is going to be prices are going to go up for electricity everywhere, and we're going to make darn sure people understand why that happened.

David Roberts

All right, on that note, thank you, Senator Heinrich.

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.

In this episode, I'm digging into the surprisingly overlooked world of electric motors with Ankit Somani of Conifer, a startup aiming to revolutionize these unsung workhorses of the energy system. We explore their ambitious approach to making motors lighter, more efficient, and cheaper to build, all while ditching problematic rare-earth magnets.

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Text transcript:

David Roberts

All right, hello everyone. This is Volts for June 11, 2025, "Making electric motors better." I'm your host, David Robert. Here on Volts, we have covered all sorts of electrical devices and technologies, from solar panels to batteries, appliances, and EVs. But there is one technology at the very heart of the electricity system that receives strangely little attention from those of us in the clean energy space.

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I'm talking about the humble motor. Electric motors are found everywhere from scooters and leaf blowers to HVAC equipment, water pumps, cars, and planes. Something like 50 percent of the world's electricity flows through them. And if we're going to complete the energy transition, then everything that now runs on a fossil-fueled engine will eventually have to run on an electric motor.

Yet, I have given motors scarcely a passing thought over the years and have seen very little discussion of the subject in clean energy circles. It's been nagging me for the last year or two, and I've been waiting for the right opportunity, so I was pleased when the folks from Conifer got in touch.

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Conifer, which just received its first $20 million in seed funding, is designing electric motors and drivetrains that are lighter, more efficient, more cheaply manufactured, and made without rare-earth magnets. Or so they say! I'm going to talk with co-founder Ankit Somani today about how to improve motors and what the future holds for them.

All right then, with no further ado, Ankit Somani, welcome to Volts. Thank you so much for coming.

Ankit Somani

Thank you, David. It's great to be here.

David Roberts

Let's talk about how you ended up here. So, you're what they call a serial entrepreneur. You've had your hands in a lot of different clean energy businesses over the years. So, you look around for your next big thing. Why motors? Why motors and powertrains? What's the logic that brought you here?

Ankit Somani

You know, just like for most folks, my career has been long and windy as well. I actually first came to the US in about, I think, 2007, right in the middle of the financial crisis to do a master's in data center cooling. Yeah, as you can imagine, it's a hot topic now.

David Roberts

Very prescient. Yeah, well, it was a good call.

Ankit Somani

So, it was a long time ago, but had a really good program around that and then spent years in Oracle and Google designing different cooling and electrical equipment for data centers. It was a very focused R&D team, so had an early background around motors and different aspects of it back then. But then forgot all about it for the longest time. So, the first startup I did that was in conversational AI, a very different space. We had a good opportunity to scale and then eventually sell that company. And then I reconnected with an old friend of mine from undergraduate who has been living and breathing motors since third year college.

So, he did his PhD in electric motors, had recently designed electric powertrains for Apple's secret car project, and then for Lucid. So, lots of deep background there. And we started chatting about the problems across the board in motors all the way from how we choose the supply chain for it, what sort of manufacturing processes exist today, what are challenges from a design and performance standpoint. And the biggest takeaway we had was if we really want to see a lot more electrification and physical automation — you know, we are sort of stuck in the 5 to 10% penetration in that world — and if you really want to see something which goes way above 50% penetration, then you have to think about the electric engine from the ground up.

I use the word engine because, just like fuel tanks, a battery is an energy store. But you got to take that and convert it into a spinning wheel or a spinning fan on the other side. So, everything in the middle is the engine itself. And you have to think about it ground up across all of these three areas. We had a few innovations in mind and one thing led to another, and here we are.

David Roberts

I suspect lots of listeners are roughly like me in this area, which is floundering in near total ignorance of physical engineering. So, you'll have to be patient with me as we walk through this. But a motor is part of a powertrain, which consists of the motor, there's an inverter, a gearbox, and some sort of control software. If you add all those up together, is that sort of the equivalent of a fossil-fueled engine? Like, a fossil-fueled engine has all those bits in it?

Ankit Somani

That's exactly right. You described it perfectly.

David Roberts

So, powertrain is like the electric equivalent of an engine, basically.

Ankit Somani

Correct.

David Roberts

And you are at Conifer, working on motors, but also, as I understand it, working on inverters, gearboxes, and control software. The whole package.

Ankit Somani

That's right, yeah. We are a verticalized electric powertrain company and not only on each of these three or four aspects that you mentioned, which is motor, inverter, gearbox, control software, but also we have experts internally reinventing the manufacturing process and automating it.

David Roberts

So, is it your experience... like, am I right, that this is an odd sort of lacuna? You know, there's so much activity around clean energy these days. So much excitement, so many startups, you know, it's buzzing. I'm not wrong, right, that it's a little weird that the heart of all this, the engine that drives trains at the heart of all this, have had very little attention paid to them by all this wave of entrepreneurs? Like, is there activity in this area that I've just been missing or am I right that like, it's been neglected?

Ankit Somani

No, you're absolutely right. And that was actually an observation we also had when you arrived about two and a half years ago, where if you look at the battery world in the last 15 years, there's been so much investment, so much good talent that has gone in there, so much focus. And around the world, like all the way from battery chemistry to the anode to the cathode to recycling, the whole process. Every different aspect of it. So, batteries got maybe a thousand times more venture capital and maybe a million times more attention.

An electric motor, the humble electric motor that has served us for over 100 years, people had forgotten about it. They thought, "Hey, we think it's a one and done problem," but there's so much to it that was worth solving.

David Roberts

So, as I understand it, and tell me if I'm right about this, Conifer has sort of three big innovations that I would like to walk through one at a time. The first is you're making an axial flux motor rather than a radial flux motor. We'll get to what that means. The second is you are using iron-based magnets rather than rare-earth-based magnets, which has big supply chain implications that we'll get to. And the third is these innovations in the manufacturing process, basically making it easier and cheaper to manufacture these things. Are those roughly the big three?

Is that roughly the menu here?

Ankit Somani

Yeah, that's very close to it. And within the actual flux itself, we have reinvented the core stator itself, which essentially enables all these three things and makes it possible.

David Roberts

Got it. Okay, so let's start with — I spent a couple of nights ago, several hours falling down a YouTube rabbit hole about radial versus axial flux motors. Turns out there's a lot of material out there, a lot of strong feelings, oddly strong feelings about these engineering decisions. So, if I can just describe this very basically and tell me if this is correct, there are two basic parts to the electric motor. There's the stator, which is the static component that contains the copper coils. And then there's the rotor, which is the moving component. That basically is moving magnets past the copper coils, and that's what generates the electricity, is moving magnets past electric coils.

So, in a radial flux motor, the stator, the static bit, is like a cylindrical tube, and the rotor is inserted into that tube. It's like a little cylinder inside a bigger cylinder. That's what radial means. That has to do with the angle of the magnetic field toward the magnets — but I don't know that we need to really get into that. Axial flux is, rather than a tube inserted in another tube, it's like two discs next to each other. Like, think of dinner plates or something right next to each other. One is the stator containing the coils, one is the rotor containing the magnets, and the one spins next to the other one.

That's an axial flux motor. Is that roughly correct?

Ankit Somani

Very good. I feel like within two days itself, you almost became an expert across all of these things. By the way, I'll add a fun fact. Nikola Tesla's first patent on electric motors — this is back in the late 1800s — that was for an axial flux motor.

David Roberts

Interesting.

Ankit Somani

And even though 90, 95% or even higher motors in the world today are radial flux motors, that's where both manufacturability and innovations were over the last century.

David Roberts

Yeah, can we explain that a little bit better? Why did radial, like, as you say, something like 95% of the electric motors around us today, are radial flux motors? Is there an easy-to-understand reason why they came to be so dominant?

Ankit Somani

Yeah, actually, when electric motors first started, they didn't even necessarily have magnets in them. So, your rotor was excited. You basically created an artificial magnet by rotors also having copper coils and current going through them. The connection itself is much simpler when you do that in a radial flux configuration. So, it's easier to get started that way. And then, as you know, these things are always incremental. People build on top of each other. A once forgotten architecture, now with the right permanent magnets or the right coil winding, actually has much better advantages than the typical radial flux motor.

David Roberts

Yeah, yeah. As I understand it, you get a bunch of advantages from going axial flux instead of radial flux. But as I understand it, the thing that's tricky about it is just that it's a little bit more precise and a little bit more difficult to manufacture. That's why there's not been a larger move in that direction. And you guys presumably are tackling that problem. Tell us quickly then, what are the advantages of axial flux over radial flux?

Ankit Somani

In an axial flux motor, or actually any motor, the way you determine how much force that motor is able to generate, which in motor parlance, is called torque. Torque is essentially force over a distance. In a radial flux motor, what happens is your cylinder, as you were talking about, that is inserted, the spinning cylinder, which is inserted in the static cylinder. That's at a much lower radius. And so the force that you have to produce is a lot more so that your torque is still similar because your distance is small, because it's a small cylinder. Small radius cylinder.

David Roberts

So, it's just as simple as, like the spinning part on an axial flux motor is larger, it has a larger radius, and thus it's sort of, you know, swinging around a larger perimeter.

Ankit Somani

Yeah. Think of it as the force generating part, which is where the magnet is in, is right next to it. It's called the air gap in that parlance. But where the magnet is right next to the stator coils itself, that's much further out in an axial flux system. So now, if you can make it further out, but also at the same time generate a higher magnetic field as well as spin it faster, then you can generate a lot more torque as well as power from the same amount of material compared to a radial flux system.

David Roberts

So, the basic and perhaps most key advantage here is that you can make them smaller. You can get more torque out of the same amount of material or alternatively, an equal amount of torque out of a smaller motor.

Ankit Somani

Correct. And the term that's used very often is power or torque density, which technically is power produced over a volume of space that you occupy. But even as power over weight, like kilograms or pounds, even that can be much higher in an axial flux system.

David Roberts

And as you said, you guys did not invent axial flux motors. They've been around for centuries, and they're even around a lot today. How is your sort of torque per volume relative to other axial flux motors? Like, are you pushing the boundaries on that particular metric?

Ankit Somani

Yeah, absolutely. So, there were changes we made in the stator itself, which allowed us to compact a lot more electrical conductors in the same space.

David Roberts

Coils, right? Those are the copper coils, right?

Ankit Somani

That's right. And that's the principle of electromagnetism that a motor is based on, because a current-carrying conductor produces a magnetic field around it. So now, in layman's terms, if you can have a lot more conductor in the same space, while effectively being able to cool them because they run hot as well.

David Roberts

Yes, this is something I ran into as a problem. The heat, dissipating that heat. So, you've crammed in more copper coils and figured out some way to disperse the heat from them.

Ankit Somani

That's right. And cramming it in doing two different things. One, it generates a much stronger magnetic field, but at the same time, cramming it in a way such that the manufacturing process in fact becomes much simpler than a typical radial flux system. So not only have we made axial flux feasible, more feasible rather at scale, but it has become a tenth simpler than a typical radial flux system in terms of winding that coil.

David Roberts

And here, you're just referring literally to the physical manufacturing process of getting the coils into the stator and completing the stator. That process, you've made it easier.

Ankit Somani

That's right. Making the coil, making sure it's in the right place in the stator, and making sure we can do it with the least amount of, or least complicated, manufacturing process that we have invented.

David Roberts

Right. So, you can make these smaller. You can get the same amount of torque out of a smaller motor. So that, I think, explains your business plan, which is starting basically with small motors. The second innovation is in the magnets. Typical electric motors use magnets that are made out of rare earths — neodymium. Did I say that right?

Ankit Somani

Yes, you got it.

David Roberts

Neodymium is the main one, I think. And there are, I think, a couple of others involved. And of course, listeners to Volts know that China completely dominates the mining and even more particularly the processing of rare-earth minerals. So insofar as all electric devices require motors and all electric motors require rare-earths, China has, you know, power over not just our electrical grid. I mean, they have some trade power over, you know, our lawnmowers and cars and everything else that has an engine in it. So there are economic and national security reasons to move away from rare-earths.

Long story short. So, how did you do this? Because my understanding is that the reason you use rare-earth magnets is that they are particularly potent, powerful. You're replacing them with ferrite, which is, as I understand it, basically iron. So, how are you compensating for that loss of power?

Ankit Somani

Yeah, by the way, ferrite magnets are 86% rust. So, it is literally, literally ferrous oxide, 86% rust. And these are the same magnets that you would find in your, you know, the kitchen fridge, stickies that you have which stick well on your kitchen fridge. Those are the ferrite magnets. It's the same. So, there are two key challenges that had to be solved. First, as I was talking about earlier, if you can generate higher magnetic flux from your coils, which we talked about from our state of technology, we can. Then, you can pair it with a weaker magnet.

So, that is the first innovation, and that helps from a torque standpoint. Now, very simply, like the way you think about power. In a typical world, it's force times velocity, and in the motor world, it tends to be torque times how fast you can spin it. So, if you have to increase power density now, if you've gotten torque to a good point, now you have to spin the motor faster to be able to do that. So, one of the challenges you have with ferrite material is it's like ceramic material. You know, if you've ever had something ceramic and it has fallen, slipped out of your hands, you see it breaking very quickly.

David Roberts

Yeah. Brittle.

Ankit Somani

It's the same problem with ferrite magnets. So, we figured out how to structurally save it. When you spin it at much, much higher speeds, structurally strengthen it.

David Roberts

So, it literally just holds together at higher speeds.

Ankit Somani

It holds together much better at higher speeds. Make sure the integrity is good. So, it was partly because we had a better stator and partly because we figured out structural challenges from a ferrite standpoint. That's what allows us to use a weaker magnet. It's not just a weaker magnet, by the way, it's much, much more cost-effective, like, compared to rare-earth magnets —

David Roberts

I mean, iron is, you know, abundant, let's say. Not expensive.

Ankit Somani

It's less than half the cost of copper itself per pound. It's that cheap.

David Roberts

And very easy to get anywhere. You don't need a foreign supply chain. So, by getting more out of your coils and by spinning faster, you've basically compensated for moving from a stronger magnet to a weaker one. And so, this is allowing you to use much cheaper magnets and magnets that don't require foreign supply chains, basically.

Ankit Somani

That's right.

David Roberts

Before we get to the manufacturing part, let's just talk about what you're going to do with this new motor you've got. What is the sort of first step on the business plan?

Ankit Somani

You know, one statistic that blew our minds when we started looking into it more deeply is that there are 1 billion small gas engines that exist in the world.

David Roberts

I know. And they're the dirtiest per weight per unit. The dirtiest fossil fuel technologies. Almost these little like scooters and leaf blowers and all those little things.

Ankit Somani

Exactly. In fact, California has a very interesting acronym for it. It's called SORE. They're literally SORE, small off-road gas engines. And you know, you're right, they're dirty in terms of SOx and NOx emissions. While the world focused on cars and trucks, we sort of forgot about making these better. And just for reference, by the way, when I say 1 billion gas engines, there are about 1.4 billion cars. So it's roughly in the same order of magnitude that exists in the world. And so that's the market we want to target because it's often forgotten but extremely important from an electrification standpoint.

David Roberts

So, where are those motors? Like, those billion motors presumably are clustered in a few big product categories. Where are they?

Ankit Somani

There's so many different applications. I'll name a few. There are two-wheelers, small delivery vehicles, three-wheelers. You have all sorts of power tools and equipment. If you've used a pressure washer, you would see it in that. If you use a commercial lawnmower, you'll see it in that. You have agricultural equipment. Almost all agricultural equipment have that. It's really spread across many, many different applications. The thing we wanted to solve is with a few different SKUs, can you address most of these applications? Because then you can create something standardized. Like let's say you go to a place that sells you gas engines, you can say, "Oh, I need a Honda 5 horsepower gas engine," and they'll give you a standardized unit that comes out.

So, what's the equivalent of that that we can produce, which people can just deploy?

David Roberts

So, that engine can go in a number of different applications. And so, similarly, you're trying to make a motor that can sort of work into all these different applications.

Ankit Somani

Absolutely. And this is a big part of our story, but it's only part of our story. There's a whole set of stationary applications which are, you know, we were talking about data centers earlier, but all sorts of fans, pumps, all the physical industrial automation.

David Roberts

Talk about things people don't think about. We're surrounded by those, and they're practically invisible.

Ankit Somani

There's a reason why 50% of the world's energy goes through these motors. They are everywhere.

David Roberts

Yeah. When I started reading about water pumps, I was like, "Wow, that is wild." You really are surrounded by those. And so, we have electric motors now; you can get an electric leaf blower. So, does your little motor outperform whatever little motors are in today's leaf blowers? What are those motors in today's leaf blowers? What's wrong with the sort of, you know, like why aren't they spreading faster? What's wrong with today's small electric motors?

Ankit Somani

Very good question. So, there are two or three factors that really will matter for us to go from, as we were talking about earlier, the 10% or so electrification to 50, 60, 70% electrification. First is, do they do the job in a way that consumers like, which means low noise. If you think about leaf blowers, I don't want to carry something 10, 20 pounds in my hand all the time. Are they light? At the end of the day, are they cheap enough? Because the next set of consumers, they don't think about being green, they just think about whether it is affordable, reliable, and more cost-effective.

That's what they care about. So, it's those factors that you need to push on. And now, with rare-earth material coming more into the spotlight, you need to solve for supply chain issues. One of the biggest things we see recently is customers coming to us and saying, "Hey, we are not able to get enough of them." And it's like long lead times associated with it because there are some critical parts coming from very supply chain constrained global places. So, it's across all of these factors that you can make an improvement.

David Roberts

One of the things you boast about your stator is that it's much lighter, like your whole motor is lighter than existing motors. How is that? Where are you saving the mass?

Ankit Somani

So, a very common material that is used in electric motors is called silicon steel. And we have eliminated 95% of silicon steel from our stator itself. We also use 20% less copper at the same time. By the way, the reduction in steel is not just in the actual material itself, but the way steel is put into these motors. There's a lot of scrap material generated and we are again, we've innovated on that. In our case, the amount of scrap that is generated is very, very low. So, it's also a much simpler process.

David Roberts

Did you substitute some material in particular for the steel?

Ankit Somani

No. So, there's no switch in bait. There's no, "Oh, we're not talking about some fancy material that we are using that others don't." It is simply the right manufacturing process coupled with the right design. And then that allows us to also use other simpler materials like the rare-earth-free magnets, which are iron magnets on top of it. So, we need to take inspiration from how IC engines were made, where there were simple materials, simple processes made across the world. That's how electric motors and electric engines need to be. Not like complicated materials or complicated processes.

It needs to be as simple as IC engines for it to be prolific.

David Roberts

So, your first two products, just to get back to the business plan here real quickly, the first two products are a motor that is sort of freestanding and can go in pumps and stuff like that. And then what I found very interesting is this in-wheel motor that you're making. Well, I guess, that is technically a drivetrain because in the wheel you have the motor and the gearbox and everything. So, talk a little bit about your innovations outside the motor in the inverter and gearbox and control software and stuff like that. Like, are you also pushing ahead on those?

Ankit Somani

Yeah, absolutely. So, our core product, the product that we started with, is an in-wheel solution. And our vision there is, you actually should not be putting motors in the chassis itself as much as possible.

David Roberts

And that's up to what size, you know, what's the limit on that? You mean even like cars, big trucks?

Ankit Somani

I absolutely believe that cars and trucks are going in the direction of not requiring motors inside the chassis. It'll be all in the wheels.

David Roberts

And this is something like I read a very sort of excitable, futuristic, etc. book about electric vehicles way back in like, I don't know, it was like 2007 or something. And one of the things that the engineers were most excited about were these in-wheel motors. Because that just frees up the design space. Like, design-wise, it's incredible. It just completely opens a blank slate everywhere else. Right. Like, you can put any platform, any structure, any kind of vehicle. Like, if you have the motor in the wheel, you can build anything on top of those.

Like, you know, the sky's the limit.

Ankit Somani

Yeah, exactly. And imagine, as simple as, "I'm going to take this wheel, I'm going to connect this with this chassis, and boom, I have a new kind of platform that I can work with versus custom designing for each vehicle." And you're absolutely right, it's been the dream for electric vehicle makers for the longest time to have a solution like that. So, we are big believers, very long on that. And that required innovation. Not just in the motor, which is very compact for us, and we have this modularity element to like, we can have a single motor or a tandem motor or three motors, like in the same packaging very easily.

David Roberts

Right. Because the axial flux motors, as I said earlier, are like discs next to each other. So, it's really just like stacking discs.

Ankit Somani

The world thinks of them as pancake motors. That is the form factor. And so now we have connected that with a special gearbox that we made internally, which is also very pancakey. And together with both of them, the system just disappears inside the wheel and so nothing sort of juts out and delivers amazing power density. So that's on the gearbox itself, the changes that we had to make.

David Roberts

And I'm just curious, this in-wheel motor, like, because when I think about wheels, there's just, you know, there's a lot of different kinds of wheels, there's a lot of different kinds of vehicles, a lot of different sizes, a lot of different, you know, weights on top of them, etc. Sort of how agnostic is this in-wheel motor? Is it the same basic thing that goes in all these different kinds of wheels or do you have to do like a different design per wheel category? You know what I mean?

Ankit Somani

Yeah, this was a key decision for us and a key value proposition of what we are doing. So, typically, what happens is there have been these products that have existed in the market called hub motors. Now, hub motors live inside the wheel as well, but they tend to spin with the wheel. And every time you change the size or shape of the wheel, you have to basically use a different kind of hub motor. So, that's your least scalable option. What we are doing is something that is in-wheel but is decoupled from the wheel. So, you can basically take the same motor and gearbox and you can put it on a 12-inch wheel, on a 10-inch wheel, on a 16-inch wheel and you can deliver different performance.

So, we are able to get to a wide variety of applications with just two or three SKUs on the motor and gearbox side.

David Roberts

Interesting. So, I'm assuming that the motor that's going to work, you know, across a two-wheeler, a three-wheeler, is not also going to work in a car. Like, presumably, you do have a bigger version of this.

Ankit Somani

That's right.

David Roberts

But are you currently able to make one that could run an actual car or are you working up to that?

Ankit Somani

Yeah, we have some interesting small car customers as well. So, we obviously have to focus in one area and that's a way from a business standpoint we just need to be more focused. But, we have got an interest and have checked out feasibility across a bunch of different applications. And you're right, it's not going to be the same motor across all of it. But within 1 horsepower to 30 horsepower, you can just live with 3 SKUs instead of 30 different SKUs.

David Roberts

I remember reading this book, now how much it got my sort of imagination going. But you know, you can just imagine like you just buy four of these tires with motors in them and you literally can like anyone can design an EV in their garage. You know what I mean? Like this moves most of the complexity into this modular format where everything else is just like Legos, you know. I just feel like it's going to open up an incredible amount of innovation once these things are ubiquitous, you know, once these things are out there.

Ankit Somani

Funny you said that there is. Since we publicly came out a month and a half ago, at least 10% of people who are reaching out are exactly those folks who are making things in their garage. They're making very interesting three-wheel, four-wheel, six-wheel concepts.

David Roberts

Yeah.

Ankit Somani

And so many of them want to upgrade it with just, "Hey, all I need is a wheel. I already have a 72-volt battery pack. I'm going to make it run."

David Roberts

Awesome. Okay, well, let's talk about the manufacturing bit. So, one of the things I read in your materials is that conventional manufacturing is tooled, heavily tooled, and you are working toward a no-tool, software-driven process. But I don't really know what that means. What does that mean? Tooled and not tooled?

Ankit Somani

Very good question. So, typically, how people have done manufacturing is they make a line, a manufacturing line, and they say, "Well, this manufacturing line, let's say, has 100,000 units per year capacity," and they invest in a bunch of machines that are tailor-built for the kind of product you're going to make on that line. So, let's say you're making a 20 horsepower motor. There's a bunch of machines on that line which are "tools" as well that are tailored to that size of the motor that you're building.

David Roberts

And cannot be used to make a 40-horsepower motor.

Ankit Somani

Exactly. They cannot be used. So, what happens in a setup like that is almost never day one, you'll see that capacity. You'd start with, let's say, 10% capacity that's being used or demand that matches that capacity. And then slowly you'll grow. And not only your ROI for the investment that you put in is going to take much longer, you also have these tools that are specific to that motor that also break down and there's less fungibility around it.

David Roberts

Fewer manufacturers of those tools, presumably fewer people who can fix them, etcetera.

Ankit Somani

Correct. Super long lead time. Because it's almost like they're artisan products. These are not large-scale products. There are like 10 people in the world or, five companies in the world who do that and they are in demand, then you are lowest in the run. So our vision was we focused right now on 1 to 30 horsepower motors. And our vision was if we can make a manufacturing process such that on the same line, the exact same line, we can make a 1 horsepower motor, 10 horsepower motor, 30 horsepower across the board without changing the tooling based on the size of the motor that we are building, then that opens up the possibility of when you make an investment in a line you can make across multiple applications, you can have your capacity utilization much higher, which means your ROI for the line is much higher, number one.

And number two, when you go from one geography where you had a manufacturing line to another geography, it's almost the same line that you can replicate versus, "Oh, this other geography needs this other kind of motor. So, I need to think about this from scratch."

So, it allows for this repeatable, automated setup that you can take from one territory to another territory and use the local supply chain of that area to be able to bring up manufacturing.

David Roberts

I see. And so, if your line is cranking out 10 horsepower engines and you want to crank out some 30 horsepower engines, you don't have to replace tools, you just fiddle with software, basically.

Ankit Somani

That's right, yeah.

David Roberts

And I sort of wonder, like, this seems obvious, right? Like why wouldn't you do it this way? So why haven't people done it this way? Like why are people building custom tools? If it is possible to build a tool that's agnostic to size, why haven't people been doing that?

Ankit Somani

I find that the best business ideas in the world are ones that seem very obvious on the surface but have lots of complexity behind the scenes. And that's basically, David, what we have here. So, the whole manufacturing process, the design of the stator and the rest of the motor, the way we integrate different parts together, the way we test them, and the testing infrastructure we built around it, all of these areas under one roof have been working towards making sure that such a line can exist. At the end of the day, we are a manufacturing company, so we got to get that right.

And that's often the biggest challenge for hardware companies. So, the team has been just focused on making that as simple as possible by making changes from a design and process standpoint.

David Roberts

And so, you have one of these, you've built one of these, you have a line now that can crank out anywhere from 1 to 30 horsepower engines or, sorry, motors.

Ankit Somani

Yeah, we have a line in place already. The line is doing smaller volume right now because we are still making sure that it can produce at a sufficient scale, getting the integrity and the veracity of it right. And we're going to be scaling up manufacturing. Part of what we are going to do with the funding is scale up manufacturing. That's where a lot of our focus is. Because we have a lot of demand, we need to get supply to the right point.

David Roberts

Yeah. And when you say a lot of demand, is there a particular, as we say, these small motors are in all sorts of things. Is there a particular product category that is banging down your door that is most hungry for these and most ready to go with them?

Ankit Somani

Yeah. On the small mobility front, we find two-wheelers, small delivery vehicles, as well as AG equipment. We see a lot of interest in that space. And then stationary products, we see fans and pumps. There's a lot of interest in that space. And what we are seeing more recently is around industrial automation as well. But certainly the first two.

David Roberts

How much can 30 horsepower do? Like, what is that? You're not going to get a car out of that. That's sort of like a tractor, you know. How big is 30 horsepower?

Ankit Somani

You'd be surprised. With four wheels of 30 horsepower, you can actually get a decent small size car.

David Roberts

Really.

Ankit Somani

It's not going to be a super powerful car, but one that is fairly affordable and right-sized for most folks that I find myself, you know, hanging out with, especially as a city car. But that's not necessarily the focus. If you look at a 20 horsepower or a 30 horsepower engine for that matter, you can easily run, you know, a decent size, or rather a small size tractor on it. You can run lawnmowers on it. You can run a lot of industrial automation, you know, food processing plant conveyor belts, pumps.

David Roberts

So, you're covering the bulk of the, you think, the motor market with 1 to 30. Like, that hits most of the market?

Ankit Somani

That's where most of the commercial volume is. So, there are residential customers as well. But, and that tends to be super high volume as a product. So, think about, you know, the split AC unit that you may have inside your house that's lower than 1 horsepower, where the volumes are super high, but it's a different class of products. And then you have much bigger than 30, 40, 50 horsepower, but their volumes tend to be much lower. It just tends to be a bigger unit.

David Roberts

Right? Yeah. So, is there any plan to build like a, you know, whatever, 30 to 60 horsepower line? Are you just going to be content with the low end of the market for the time being?

Ankit Somani

Now, we are a powertrain-focused company. We will continue to work across all sizes of powertrains, but we got to have the crawl, walk, run. Where we have sufficient demand, as I said, we have to make sure our manufacturing line continues to perform at scale. Customers are happy with that and then we can expand in both directions on the smaller as well as the bigger end.

David Roberts

So if I was going to build modern luxury car, you know, like a Tesla in the sort of Tesla market segment and I wanted comparable performance, what is that horsepower in those motors, in those wheels?

Ankit Somani

Yeah, and Tesla produces many different cars, but think somewhere between 200 to 500 horsepower, and 400-500 horsepower is like a really luxury PLAID type car. And I think 200 horsepower is a sweet spot for a lot of the medium-duty cars that you would find out there.

David Roberts

So, when I say a 200 horsepower car, does that mean four 50 horsepower motors? Like, they're additive.

Ankit Somani

Exactly. And one of the things, you know, we talked about rare-earth free magnets, but our architecture is such that you could swap out the ferrite-based magnets or the iron-based magnets with rare-earth magnets and significantly boost performance in the same system. So it's kind of rare-earth agnostic, where with ferrite we are able to beat power density in the application classes that we are targeting. But with rare-earth, it could be a lot more and we can easily use that to address the higher end of the market.

David Roberts

Oh, so you think when these things do end up in real full size cars, they're probably going to be using the rare earth magnets?

Ankit Somani

Yeah, I think for trucks it's possible it may continue to use ferrite magnets. But my guess is with cars, the kind of performance expectation people have for the larger cars, it may still need — It doesn't have to be rare-earth magnets, it just needs to be stronger magnets than just purely ferrite magnets that are available today. And there are lots of chemistries that people are working on already. For us, that would be a drop-in replacement.

David Roberts

Ah, so chemistries that avoid the rare-earth, avoid the supply chain struggles.

Ankit Somani

That's right.

David Roberts

And this is like, you know, I feel like I asked this once already, but I keep going back to it, which is like the whole world is electrifying. Certainly, the biggest country in the world by population is the fastest electrifying country. And everybody, everywhere you look, is hurtling toward all sorts of cool electrical innovations and electrical widgets, you know, and electrical systems and wires and just like the whole thing. And yet here, 50% of the world's electricity goes through these motors. And like somehow you're the only company who's like taking a go at making them better.

It seems crazy. Like, surely there are people in your wake. Surely this product category is going to get more active soon, don't you think?

Ankit Somani