Today, coordinating a whole-home retrofit — or even just getting a heat pump — involves confusing research, a parade of contractors, and wildly varying quotes. It’s a broken system that practically pushes people to just buy another gas furnace. In this episode, I’m joined by Zero Homes CEO Grant Gunnison to discuss ways to improve this system for both customers and contractors.

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David Roberts

Hello, everyone. Greetings. This is Volts for May 6, 2026: “Streamlining the difficult work of whole home retrofits.” I am your host, David Roberts.

If you listen to Volts, own a home, and (like nearly 60 percent of Americans) heat your home with fossil fuels, you’re probably thinking that you should do something about that. And you’re probably dreading the gauntlet you keep hearing about: dozens of hours of research, a parade of contractors, quotes that vary wildly and that you have no way to evaluate or compare, weeks of scheduling, and an eye-popping bill at the end of it.

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Lots of people, especially the kind of unlucky saps who don’t listen to Volts, just give up and replace their gas furnace with another gas furnace. It’s the path of least resistance.

We have something like 80 million single-family homes in this country, most of them running on fossil fuels, and we need to transition basically all of them to clean electricity (or thermal energy networks). It’s not going very well! The pace is glacial.

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Grant Gunnison is the founder and CEO of Zero Homes, a Denver-based company that’s trying to fix this — not just for homeowners but for the contractors who do this work and are dealing with their own version of the same broken process. His bet is that smartphones and software can take most of the friction out. We’re going to talk all about that.

Grant Gunnison, welcome to Volts. Thank you so much for coming.

Grant Gunnison

David, great to see you.

David Roberts

You come from a family of contractors, you’ve seen this from that side of things. Most of the people I talk to are coming into this from the homeowner perspective, this is good. What I want to do is walk through the process as it exists now with all its difficulties, then we’ll pivot to what you’re bringing to your solution. I know you are coming at this from the contractor angle, but let’s start with the homeowners and then we’ll talk about it from the contractor’s perspective. We’ll talk about the dismal results of the current process and then we’ll talk about what you’re doing.

Walk us through the typical homeowner experience when they’re trying to do something like this. I think you did some research at DOE about the customer experience in this, or am I —

Grant Gunnison

That’s right. I’ve been very fortunate to both work on this problem academically as well as be in the middle of it myself —

David Roberts

Which is to say your knowledge of the customer experience is not merely through working in the industry. There has been more formal looking at it.

Grant Gunnison

That’s right, for sure. Both through the industry group lens, through work with the DOE and some implementers, well before I jumped into building the business I’m working on today. That perspective is helpful and maybe required in order to solve a number of problems, to really raise the customer experience bar. We’ll talk about this later. The contractor experience and many of the other stakeholders involved in delivering these projects.

David Roberts

Starting from the homeowner, then. What is the typical homeowner experience?

Grant Gunnison

The most common circumstance is one of their pieces of equipment breaks. For sake of argument, let’s call it their air conditioning system. They’re going to go, “Oh, no, it’s hot outside. I want this fixed. I’m going to be uncomfortable quickly. I need to get a human to my house to look at this as fast as possible.” If they have owned their home for a while and had to do a few projects, they probably have some friends that might be able to refer someone. Or they’re going to go to one of the search engines — Google, Yelp, Angie’s, and so forth — trying to find someone that can get to their house.

Often they’re going to have one person come by, that person’s going to quickly tell them one of two things: “Hey, great, I can fix it and it costs X amount of money,” or, “This needs to be replaced and it’s going to cost probably 10 to 20 times what it would cost to just fix it.”

If a homeowner’s in the latter category, they’re going to go, “Ooh, okay, I need to hit the brakes here because now we’re talking about a $10,000 or $20,000 expense and I need to feel confident that that’s the right path to take.” That generally starts with, “Let me have two or three more folks come by to give me a second or third opinion,” much like you would if you’re meeting a doctor and you have to make a really consequential decision. You want to get a few opinions, and that’s where we start. That’s the high urgency and high complexity situation they find themselves in.

David Roberts

It’s almost every contractor who’s dealing with a homeowner is dealing with a homeowner who is facing a huge project and uncomfortable at the lack of their appliance — so universally irritated customers. One of the things you found was that quotes, even on the same job in the same area from local contractors, can vary 30% quote to quote.

Grant Gunnison

That’s right.

David Roberts

I’m a homeowner. What do I know about a contractor who says 20% more than another one? Do I just go with the cheap one? Do I have any way of comparison? I don’t. As a homeowner, you feel helpless, and then if you pick one, it can take a while to make it all happen.

Grant Gunnison

Part of the challenge is homeowners are choosing between three things. We often call this the iron triangle of decision making — speed, quality, and cost. If you want the fastest solution, you’re going to give up on quality, and you’re probably going to give up on price a lot. Often people care about quality. They want to feel like they’re making a high-value decision. They’re probably most willing to give up on speed and cost because you’re making a decision that’s going to impact the comfort and cost of your home for a decade or maybe two decades. That’s not everybody. It depends on what the homeowner’s appetite across those three dimensions is, in addition to what their home needs.

David Roberts

Or even if you want quality. As a homeowner, I can’t directly assess the quality of different heat pumps or whatever. I’m using these proxies, these terrible heuristics — “Do I like the contractor’s vibe?” or “How close is this price to another price?” Just these terrible heuristics. I feel I’m wallowing around in a mire of uncertainty.

Grant Gunnison

The quality advice around which products and how to solve the problem that a homeowner is articulating, which can be one of many things — my home’s uncomfortable, my utility bills are high, I have a broken piece of equipment, on and on. Depending on who comes to your house, it’s the opinion of solution that you’re going to get.

That becomes very challenging for a homeowner if they don’t have any experience. They’re trying to come up an experience curve, and it’s very challenging to get good information. You have to have multiple experts come by, that costs a lot of money and a lot of time. That makes a lot of folks feel very uncomfortable about going through one of these processes.

David Roberts

It really strikes me as weirdly parallel to trying to access healthcare in the United States. Very similarly, you’re going to experts, you have no knowledge of your own, no basis to decide between them. You’re struggling to work with vibes. I know they have perverse incentives. It’s very similar.

Grant Gunnison

Healthcare is even worse, because you are gated by your insurer to who you can see. We don’t need to run down that rabbit hole. It’s challenging, being a customer in this space.

David Roberts

It sounds like it is not that fun for contractors either, the current process. Maybe talk us through it from that angle, because that is something most of us are less familiar with. What are the frictions from a contractor’s point of view?

Grant Gunnison

Maybe just looking into what are all the functions inside of a contractor, only one of them generates revenue for them, which is getting the work done on someone’s home. In order to get there, they have to do sales and marketing. They have to have staff that are going out to meet with homeowners. They have to spec, design, purchase equipment. They have to deal with cash flow. They have warehouses, they hold equipment. They have to package all that stuff and get it out into the field.

David Roberts

Usually a couple of visits before the actual work visit, too.

Grant Gunnison

That’s right. Depending on how complex the project is, you might have one sales visit and then a couple of what we might call pre-construction visits. You’re spending a ton of time on site to make sure that when you’re ready to get the project done, you can do it effectively in the field. All of that costs a lot of money. The challenge is I want to deliver a good customer experience. Raising the customer experience bar is expensive, and I’m trying to make money as a business owner.

What’s the right trade-off there? Most customers’ proxies for quality are the customer experience. How responsive are they? Do they show up in a nice, clean, white-collared shirt?

Are they on time?

David Roberts

Are they saying “Sir” and “Ma’am”?

Grant Gunnison

Exactly. You see this interesting dynamic in the industry where the folks that can afford an excellent customer experience are also the most expensive. Those typically end up being PE-backed large contractors, or you have these small guys — might be a team of one to five people running a contracting business — the customer experience is going to suffer and the price is going to come down a lot. There are clear trade-offs in that. When I was doing this work, when I was in the field running a small business, often I was the person in the truck driving to someone’s home, meeting with them, all the while trying to be on the phone and run the business as I’m going between appointments.

You quickly find that the economics of these businesses are mostly fixed. If you want to have a larger year end, you have to raise your price. The overhead in the middle between your gross profit number and your year end number grows over time. You’d call that negative operating leverage as opposed to what almost every other industry sees — as you get bigger, your cost to deliver lowers. That is one of the fundamental problems in this space — we haven’t been able to innovate away any of the overhead because all the work is done in the physical world and we’re all just muscling through it, and it’s hard for everybody.

David Roberts

One question related to this is how many of those sales visits or assessment visits end up translating into jobs and work. I would imagine there is also a lot of just driving around and visiting where you are blowing hundreds of dollars per and not getting jobs.

Grant Gunnison

It depends on what that appointment is for and who is running it. I’ll give you a couple of examples. In the largest HVAC businesses, they want sales folks that can close 50% of their leads. That’s an exceptional salesperson. Generally, the floor of what is acceptable is probably in the low 20s, but they are typically fully commission-based roles. The most conversion you can get lowers the driving around for folks, but it does not limit the cost of that salesperson to an individual project. That keeps the project economics fixed, which is helpful for planning, but it does not help you lower the cost to deliver as you grow revenues.

This is part of the challenging dynamic. For what it’s worth, some of these sales folks are getting paid 8 to 12% of the project cost to get that sale closed. Some of these folks are making $300,000 to $500,000 a year selling HVAC projects to homeowners. Or it doesn’t have to just be HVAC, but some of these folks are very well compensated for generating revenue or bookings.

David Roberts

One other question about contractors is, you have all these soft costs — the talking and the driving around and the visiting and the form filling, etc. What I’ve heard is that trying to sell a heat pump in the middle of all that, rather than just, “Hey, look, I’ve got a furnace just like the one you just lost in my garage, and I can have it installed in 24 hours,” it seems like trying to sell a heat pump just adds to the complexity, adds to the difficulty, adds to the general service involved in all this. Is that accurate?

Grant Gunnison

The outcome of that, typically, is that the conversion rates for these businesses are lower. Conversion rates meaning the number of homeowners that opt in versus an alternate solution for heat pump businesses specifically. That’s right. This is one of the cruxes of the overall problem, which is that it takes more time to properly design a heat pump system for a home. By default, they are just more complex than looking at a 60,000 BTU furnace and going, “Great, I can give you another 60,000 BTU furnace, and that is going to cost you $8,000.”

You have to spend more time sharpening your pencil and making sure that what you design is going to deliver the outcomes that homeowners want. That cost has to be put at the worst part of a contractor’s business. They are shoveling a lot of dollars out the door to quote heat pumps versus an alternative solution, which is not good for business. There is a lot of disincentive for contractors to adopt this technology, even though the technology by default is much better. It is just harder to run a business doing this work than the alternative.

David Roberts

It’s more soft cost, more talking, more persuasion, more explanation. If you persuade them, it’s more measuring and fitting and sizing. The outcome is better, but there is more going into the front end.

Grant Gunnison

It can be. Part of the challenge is because there is a lot of complexity there. A lot of folks do not sharpen their pencils and really make sure they have dialed in everything, which is largely why there is this undertone for heat pumps that, “Well, they do not really keep my house warm,” or, “I had a bad outcome.”

David Roberts

This is my segue into my next question, which is that 70 to 90% of existing US residential heat pump and central air systems have efficiency losses of 20% plus due to improper installation. It sounds like not being quite dialed in is more common than not in the heat pump market, which is not great when you are trying to boost uptake of heat pumps.

Grant Gunnison

Here’s the practical reason why that has happened. Very simply, sizing a furnace can be done very quickly. You can look at the existing system, ask the homeowner if they’re comfortable, and go, “Great, I’ll give you the same system.”

David Roberts

Are most furnaces overblasting for the space they are in? Is that normal?

Grant Gunnison

By a very large margin, but it glosses over a lot of the challenges that have to be overcome when you’re designing a heat pump properly. The reason simply is that if a homeowner says, “It’s cold, time to time,” “Okay, great, I’m going to upsize you to 80,000 BTU furnace.” That might have a cost impact on the quote of $500. A homeowner is probably willing to spend an extra 500 bucks. But in heat pump world, going from a 15,000 BTU system to a 30,000 BTU system might be measured in $10,000 or $20,000.

The point there is to say the design — and there are many points in the process that are critical to get dialed in — but the design really impacts whether a homeowner is going to opt into a heat pump. It takes a lot of time today. The design tools to support that work are not ubiquitous and they are not easy to use. People often go, “This is probably close enough.”

That dynamic — it is human nature. You do not want to spend a lot of time. If you can spend less time on something and get a contract signed with a homeowner, that salesperson has done their job and they can move on to the next thing. This dynamic is quite challenging. That is one of the key problems to solve ultimately.

David Roberts

Is this problem of poorly sized and installed heat pumps that then yield unsatisfying results — either it’s cold or the bills are higher than people expect — is this common enough that you’re starting to really see anti-heat pump sentiment floating around? Have we screwed up the installation part of this process badly enough to date that we’ve generated real public resistance or not?

Grant Gunnison

I don’t think it’s in front of everybody’s face that the sentiment is, “Definitely don’t get a heat pump.” If you go on the Internet, you’ll see plenty of material. Homeowners are going, “I had a really bad outcome with this,” or, “Man, this thing is a pain in the butt,” or, “I had to have someone come redo the work.” These are outcomes that people have had, and it’s the result of many failures throughout the process. It’s not just in design. You’ve mentioned install as well, and there are others involved in that. This is the symptom of process and design failure throughout the life cycle.

David Roberts

Which brings us back to the homeowner’s perspective, which is, if you’re unsatisfied with the result, who of all the people you talk to is accountable? Who do you talk to? Who pays up if it’s not working?

Grant Gunnison

Generally the contractor should be standing behind their work to deliver a better outcome. It doesn’t mean that they necessarily will.

David Roberts

I hear a lot of horror stories about them.

Grant Gunnison

To be clear, I don’t want to vilify contractors by any means. Most are great actors. I would simply point at the fact that this is a hard problem to solve and it is not business as usual for them.

David Roberts

Can I press on that? This is what I’ve heard over and over again — they’re very used to one thing and now they’re being asked to shift to another thing. Of course, there are some frictions, but heat pumps have been around for a long time, and they’ve been quite common in Europe for a long time. Is it really the case that the US contractor community is still just getting to know heat pumps?

Grant Gunnison

Getting to know the technology set specifically?

David Roberts

Yeah, the technology and the practices and how to get the size right, all this stuff. It’s crazy to me that it’s still new to them.

Grant Gunnison

The technology is evolving a lot, I think, is part of the challenge. Also, unlike in the furnace world, every 60,000 BTU furnace pretty much operates the same. If I pulled out five different brands of three-ton heat pumps, the reality is they perform five different ways. That creates a lot of challenges where you have to really spend some time making sure that you’ve sized things correctly. Maybe you’ve had to add backup heat or done the other things that are not just heating and cooling related in the design to make sure that folks have comfortable outcomes.

Add that complexity on top of the fact that in the US we have many different climate zones and completely different utility dynamics, maybe by the mile. There is just a lot to handle there.

David Roberts

Building codes vary from place to place. Is that a factor too?

Grant Gunnison

Big factor, and HOAs. There are a lot of challenges. Maybe the most practical point is that we have not been able to make this work easy and foolproof, and therefore we have had some challenging outcomes. In a lot of ways, folks then point to the practitioners, folks in the field, saying, “Hey, it is your fault.” I do not take that perspective. I think this is a hard problem and that in order for us to solve the symptoms, we have to make the problem easier.

David Roberts

People who have listened to this pod for a long time will have noticed a theme — almost everybody I talk to, they are trying to make their product or process cheaper, and it is almost always by modularizing or standardizing steps, making off-the-shelf steps. You are describing a business that is very difficult on its face to standardize and modularize. It has bespoke at every step. We are about to pivot now to what you are trying to do to standardize and modularize. I wanted to put all this up front to make it clear that this is hands-on and bespoke.

Grant Gunnison

You got to be in the trenches to solve this problem, I think is both our perspective and what we have seen in the market.

David Roberts

Maybe this is the time to introduce Manual J, just as a concept, just to tell us what it is, because it’s going to come up later and —

Grant Gunnison

We can talk about that —

David Roberts

What is Manual J?

Grant Gunnison

The recipe to success. Maybe one point quickly on here, which is before I jumped into starting the business I run today, I spent a lot of time in an academic way looking at what has been done in this space, who’s set up for success, who’s set up to innovate. What I really found is there’s a pretty big dislocation in that the people that are in the trenches and understand these problems and have a lot of good ideas on how to solve some of these problems don’t have the means or the skills to solve some of those problems. Conversely, the folks that are well capitalized, have the skills to build software products to solve some of these challenges, don’t have the boots-on-the-ground knowledge to properly solve them.

There’s this real challenge in that those folks need to come together to have really great outcomes. There haven’t been organizations that have put those brains together under one roof in an effective way to solve some of these deep, challenging problems.

David Roberts

Some of that cultural — the capitalized people with the software expertise tend to live on the coasts, have money, educated Dems, typical, and the contractor community is, these are small town dudes. These are not groups of people that naturally mix and mingle. You’d have to set up something if you want them to talk to each other.

Grant Gunnison

That is right. It is deeply blue collar and it is deeply white collar and there are mutually exclusive groups of people. In a lot of ways, the ecosystem is not set up to appropriately solve the problems. It is not to point the finger at either of those groups and say, “You’re both bad.” There is just a structural challenge here to solving what is a highly complex problem across many dimensions. In order to navigate through that, you really have to know what’s going on, boots on the ground inside of these businesses in addition to what technology is available to solve some of those challenges. To take your segue, we have done that internally to help solve some of these deep problems.

David Roberts

Let’s talk about the Zero Homes solution then. You have from a family of contractors, you have some familiarity with that side of things, naturally. Then you spent some time academically looking at this process and getting some numbers and getting an overview and then you’re like, “I’m going to jump in and do something.” What is it that you’re doing? Where are you finding opportunities in this messy process for some standardization?

Grant Gunnison

There are a few different perspectives, but to say it quickly, we are building the digital backbone and operating system to transform the way this work is accomplished. From a customer’s perspective, it is simply to say we’re going to remove an on-site visit so that we don’t have to burden you with one or maybe 20 in-home visits, depending on how many projects and scopes you’re looking at. Another way to say that is we really want to raise the customer experience bar, but not by sacrificing cost. Can we remove all those visits, which fundamentally strips out a lot of cost?

David Roberts

All the visits, except for the fix-it visit. Just the one.

Grant Gunnison

That’s right. When someone shows up at your house, they are solving the problem, not just talking about it. That’s a critical first thing — we want to unburden the amount of time it takes to make good decisions. When it’s a highly urgent challenge, you want good decision making as fast as possible. That’s something that is really important for us. Then make that accessible everywhere. If you want to have really high levels of expertise available at a moment’s notice anywhere, you are forcing yourself into a software solution. I recognized that several years ago.

Fundamentally what we do is we enable homeowners to digitize their home, provide that information to us, so that we can engage them in a high quality way around solving their problem and identifying what the home’s needs are without having to go to the house.

David Roberts

This is the core of it. What you are having homeowners do is take photos and videos of their own home, which you then can, with software, stitch together into a 3D model of the home. Contractors can use that 3D model to do the sizing and assessment and all the things that would have had to be done on site previously. Is that accurate?

Grant Gunnison

Close. The first half of that was correct. We’re asking homeowners to do a little bit of work to help us understand what’s going on in their house. We do not then push that information to contractors to then design and “sell these projects.” We are doing that internally to remove the cost centers from contractors. Our internal team of advisors looks at that information, leverages our software to appropriately design solutions.

David Roberts

You’re doing the sizing and designing, so that by the time a contractor gets it, they’re just getting a described and defined job.

Grant Gunnison

That’s right. Our partnership with contractors — this is a really important thing for us — we don’t want to burden them with additional work. What we want to do is strip out all the cost centers of their businesses and help them focus on revenue-generating work, the part that they’re uniquely capable of doing. In a lot of ways, put a cape on who I would call the superheroes in this whole industry, the folks that are in the home delivering the projects, and say, “Let’s help you make more money by just delivering projects every day.”

Let’s remove all of the communication requirements, the design, the purchasing follow-up, etc., so that the customer can have an exceptional experience as well. That partnership enables us to both raise the experience for homeowners and then raise the experience for contractors.

David Roberts

Let’s talk a little bit about the 3D model because I’m very curious about that. What all does it capture? If I’m a homeowner, am I literally just walking around my house taking pictures? What all gets captured? How complicated and difficult of a process is that for the homeowner?

Grant Gunnison

It takes 15 to 20 minutes, you’re probably going to take 5 to 10 of those minutes walking around your house. It’s a video scan of your home and depending on the type of device you have, you might see a wire mesh show up inside of your house and you can see the scan in real time. If you have a lower-end device, it looks like you’re just taking a video and then we turn that into a 3D model. It’s extremely accurate down to one or two inches. That enables us to not only understand what size and spec of a heat pump you might need, but also the practicalities of what needs to be done in order to do the work.

Those are mutually exclusive problems in a lot of ways. The second one is the most important in that you can get pretty close in sizing to convince a homeowner that this is probably the right solution for you and this is roughly the right cost. If you then push downstream to a contractor a mess of a project, that is not going to go very well.

Our perspective is simply to say we have to set up contractors for success. If we do that, then the homeowners win in that if the first time they’re showing up they can execute on that project successfully, then that’s an incredible experience for homeowners and fundamentally reduces the cost and helps those contractors make a lot more money than if they’re having to do multiple visits.

David Roberts

From a contractor’s perspective, if my choice is the laborious finding customers, talking to them 12 times, sizing, designing, and then doing the job versus just doing the job, it is pretty clear why contractors are going to prefer this. If I’m the homeowner, am I interacting with you? Who am I interacting with? Who am I sending these videos to? Is that you or the contractor?

Grant Gunnison

We’re the point of contact, end to end. We are doing the design. Typically, that’s live. I sent you some images of some of our internal software, but we’re screen sharing with homeowners and talking through what those solutions are in real time. They get to be a part of that design process together.

That’s a unique experience. Very different than getting a quote that says “heat pump,” maybe a couple other line items and $20,000 next to it. You’re going, “Is that the right thing for me?” We’re almost co-creating this stuff together. Bringing homeowners along through the journey is enabling them to feel confident about what it is that they’re getting, why that’s the right solution.

David Roberts

That’s so rare. As a homeowner, I’ve often joked with people that when I buy an attachment for my phone or a portable battery, I know more about those devices. I know those devices intimately. I can find intimate reviews of all those devices and test them, but when I’m buying my house, literally the house itself, I had 30 minutes to walk through it.

When I’m buying a furnace, what do I know about furnaces? I can’t go to Wirecutter and find intimate reviews of different furnaces. Being a homeowner is feeling ignorant and helpless so often. The idea of someone saying to me, “Here’s what it looks like, here’s what I’m going to do, and here’s why.” That alone is an improvement of the homeowner experience, just to feel like you know what’s going on and why it’s happening.

Grant Gunnison

It also opens the door to ask a lot of the what-if questions in real time. People are inviting multiple contractors over to their house to get different opinions. We open that door at the very beginning of the process to say, “We could talk about this kind of solution,” meaning a ducted dual fuel system or a multi-split system or an air-to-water system. We can talk through all these different technology options in addition to all the other optional things you can do in these projects — adding humidification or dehumidification or indoor air quality or backup heat or air filtration or insulation.

That bucket can get pretty big quickly and rightfully so. Homeowners have a lot of questions. We can show them a lot of different information across multiple dimensions. What are the cost impacts of these, both CapEx side and OpEx side of doing a project one way versus a different way? How does that impact rebates and financing and timelines?

David Roberts

It seems that ducts are a big part of HVAC systems and not something that I would be able to straightforwardly take a video of. I guess I could crawl down my crawl space, but I don’t know that the average homeowner is going to know exactly how to find and video ducts. Is that an issue?

Grant Gunnison

No one wants to army crawl through their crawl space and deal with the cobwebs. I will caveat what I said earlier, which is that there are some exclusions where we will send someone to the house to do a site assessment. That depends on the structure of the home.

David Roberts

That’s not all ducted homes because a lot of homes are ducted.

Grant Gunnison

Often we don’t need to see all of the ductwork, but there are some obvious areas where we do need to send someone to the home. We do another thing in our design process — we calibrate the house utility bills. That gives us a few interesting insights. One around the insulation levels in a home and tells us, “If we’re going to do insulation on this house, we need to send someone out.” We might learn something about the electrical system and we need to go take a closer look. We also might need to go look at the ducts as well.

A small percentage of our homes, we are dispatching someone to go look at that because we’re really trying to set up contractors for success at the back end of our process. If we leave them high and dry not knowing some of the information, these details matter and they can really impact the outcomes of the project. We’re pretty careful about that. It’s a small percentage of homes that we have to do that with.

David Roberts

Now, I’m going to make you tell us what Manual J is.

Grant Gunnison

It’s industry lingo that is the process for defining what we would call the problem or how much heating and cooling the house needs. It doesn’t solve for — it will tell you about the humidity requirements or the lack of humidity in the home as well. It is one way to say, “this is the North Star” to then design a solution around so that we know that we’re going to give a homeowner an outcome or a system that is going to keep them comfortable in their house.

David Roberts

You’re confident because I threw this out on Bluesky and a couple people who are knowledgeable about this space came back. One said that most Manual J calculations are, and here I’m quoting, “mostly awful, divorced from reality and no better than simple rules of thumb.” I take it you disagree.

Grant Gunnison

No, I would agree with that. This is an algorithm that produces numbers only to the quality of the inputs that it’s given. If you give it a bunch of crap, you’re going to get a bunch of crap back. This is one of the challenges for contractors. If you look at what’s required to produce a heat load number, it’s a bottoms-up calculation, which is to say you need to understand a hundred different parameters of the home. Who has the time for that?

This is a practical reality. Some do, but very few people are going to go around with a laser and measure all the dimensions, look at all the materials and window types, and so on. In most tools, you have to draw out the house. It’s a ton of work. Most people don’t, is the short of that.

David Roberts

This is making the process of producing a Manual J calculation easier and more reliable.

Grant Gunnison

It’s two things. One is removing the requirement that you have to go to the house to do it. We spent a bunch of time with the Department of Energy validating our scanning process.

David Roberts

Once again, you’re segueing me. Excellent guest work. Let’s talk a little bit about this, because this is not just something that you’re claiming — you went to the DOE and did some validation of it. Tell us what that process was.

Grant Gunnison

Let me take one step back, which is to say that in order to deliver good outcomes, you have to have really good information about what the house is. You need to do analysis that’s going to deliver good outcomes. Then you need to make some really good decisions on the back end of that with the homeowner’s needs in mind. All three of those are required. You have one of two options. You can go to the house and spend a bunch of time collecting information. Our thesis here is simply, we already have a person in the house. They don’t have the expertise to do step two and three, but they do have the expertise to walk around their house.

David Roberts

They all have phones.

Grant Gunnison

That’s right. Can we convince them to spend 20 minutes to send us that information? Then we internally have the expertise to do steps two and three. I spent a year with the Department of Energy going through a study with them to say, “We have a new process to do this. We don’t need to go to the home.” What a wonderful opportunity that would create if we can show that we can do that accurately and consistently. We went through a big study with them and the outcome of that was that they wrote us a nice letter that says, “Not only can you be accurate enough, but in fact you’re more consistently accurate than the person that went to the house to do a similar assessment.”

First time that has been accomplished and was critical for us. We haven’t talked about our business model, but we have some enterprise partners, and rightfully so. A lot of the academics in this space are skeptical that you can get the kind of accuracy and fidelity that we can without going to the house. It was important to us and the business to be able to have a third party validate that.

That’s another way to say we’re getting really good inputs to the analysis that we’re doing. If you can do that, and then you validate the algorithm as well and make sure you’re doing the math right, then what comes out of that on the other end is a high-quality assessment of what the heating and cooling needs are of the house.

David Roberts

Did you have to get any official regulatory certification for this? Did this require DOE to actively do something to enable you?

Grant Gunnison

There wasn’t a process. We co-created it. The Home Energy Score Office is probably the only organization in the country that has some level of scrutiny on what is done in homes for assessments and the quality of the information that is required in order to deliver some kind of insight. We worked with them. They have done hundreds of thousands of assessments of homes. We leveraged some of that information and our process to then go through and validate our approach and technology. That is not a fundamental requirement for operating in the industry, largely because no one has ever tried to operate this way.

Everyone’s going to the homes. There’s no body of folks saying, “We need to regulate a totally digital process.” I forced the issue to say, “We need to be able to stand behind a third party to say, ‘This does really work,’” because there was a fair amount of skepticism, or was a fair amount of skepticism at the beginning.

David Roberts

Let’s talk a little bit about who you’re targeting as your customer base. The company pitch deck is explicit that in 2026 you’re targeting people who are reasonably affluent, reasonably comfortable with technology. The 20-minute process — my experience has always been asking people to do anything, people won’t do anything. Who are the people who will do this? Who are you targeting first? Who are the initial customers?

Grant Gunnison

We have two different customer bases. We do a lot of low-income work. I’ll talk a little more about that. Most of the homeowners that I would call market-rate homeowners are folks that are planners. They’re typically not in a high urgency, “My furnace is broken and I need a replacement today.” They’re being more proactive about that and want to get good value. They might be willing to pay up, they might be willing to pay $20,000 or $30,000 for a new system, but they want to be confident that that’s the right investment for their home.

Those are the two classes, and I didn’t know this going in, but the United States collectively spends about $2 billion through utility programs a year on energy efficiency work. A lot of that is funneled into the residential space, and a substantial portion of that is funneled into helping improve the efficiency of low- to moderate-income homes. We’ve been fortunate to now run a couple marquee programs in that space. It comes with substantial challenges, but it is work worth doing.

David Roberts

What kind of challenges?

Grant Gunnison

Everything is more complex. I’ll paint a picture. We have a contract with the city of Chicago. We’re working on the south side of Chicago where there are very dangerous areas. Contractors refuse to go to some of these homes. We’ve had police cars in front of homes for protection while we’re doing work. We’ve worked with homeowners who are blind, deaf, immobile, don’t speak English, or really struggle to communicate at all, have mental challenges.

There’s a lot of complexity in the people that we’re working with. We need to be successful despite all of that. We need to do that without going to these homes so that we can prove that we can be successful.

David Roberts

How do you get someone to do 20 minutes of videoing of the intimate parts of their home if you can’t communicate with them or if they’re not speaking your language or if they’re blind?

Grant Gunnison

The technology doesn’t solve all the problems. They might have a friend come over to help us with some of that. They might have another person in the home that can help with some of that. There are some process-related items that help us be successful, but there is still a decision maker we need to get confident about this being the right thing for their house. In addition to that, because these are low- to moderate-income homes, they need a lot more work than someone who has more free cash flow and can maintain the property.

It’s a more challenging homeowner, it’s a more challenging asset. There are complications both with them not paying for this work. There is another financier for it. Just a lot of additional complexity around that. It’s really cool that we get to go do it. There is a lot more work to do.

We have this unique opportunity in that the folks at the city or many of these other utilities around the country don’t have someone in their backyard that has the expertise to go do this work and do it quickly and affordably. We have this unique ability to go help folks all across the country to do this work. I didn’t realize that that was going to be an opportunity for us at the beginning of building this business. We now have multiple eight-figure contracts with folks to go do this work. It’s one of the coolest things we get to go do.

David Roberts

By hooking up with these programs, you are hooking into a funnel of customers — you are hooking into big groups of customers, meaning that allows you to bypass the customer acquisition step, which I always hear from everybody in the trades is the most painful part of the whole thing. How dependent are your economics on having a bunch of customers packaged for you on the front end?

Grant Gunnison

We haven’t done consumer-grade marketing to date here, and our economics work in that pathway as well. It is advantageous to us to not have to be acquiring customers one at a time, but rather acquiring a bucket of customers 100 at a time. We’ve had to do a lot of hard things as an early business. We built a novel software platform to solve a highly complex problem. We are doing the delivery of these projects through a third party, which is its own challenge — a very real challenge. We’re working with large B2B institutions as well. To not have to also do marketing and some of the other things on top of that has been a blessing.

David Roberts

Does that also create some vulnerability? In some sense you are exposed to politics because these are policies that are grouping these customers. Do you worry about that?

Grant Gunnison

No, I think is the short answer. It’s a lot less volatile than consumer demand. Multiple billions of dollars are spent across the country through these energy efficiency programs that are largely controlled by the public utility commissions. Regardless of what’s happening in Washington, and generally regardless of what’s happening at the state legislature level, this has maintained its pressure on utilities for the last 50 years. Yes, there’s lots of regulation around this stuff that will keep it stable and sometimes that’s moving. It has been a consistent channel for us.

Our value proposition to these programs is extremely strong. That helps as well. We are going to start doing things more outside of these programs. We haven’t actively done any marketing in this business, but organically the —

David Roberts

It’s been all through these programs thus far?

Grant Gunnison

Pretty much. Organically, folks are hearing about, “I had a good experience with Zero,” and our referral basis is remarkably strong.

David Roberts

You are open to customers coming to you, you are just not out marketing.

Grant Gunnison

That’s right. We’re not trying to capture them, and that will change over time. We’ve focused on the most important things.

David Roberts

One of the red flags around all this, at least when I talk about it with people, is we have this long history with solar companies working with third-party contractors to do their work and a lot of that work being done poorly. There are a lot of nightmare stories about poorly installed solar systems floating around. How do you think about that whole side of things, maintaining the quality of your contractor base? Do you vet the contractors? Do you assess their work afterward? How do you — because if the customer experience is great right up until the job and then the job sucks, you blow it all. How do you maintain that?

Grant Gunnison

The perspective is that we want to help these guys build their businesses and we want to be great partners with them. There are some key differences in the solar space where there is this dealer and EPC division in that an independent salesperson can just go sell solar projects and hand those contracts to a contractor. It is just paperwork saying, “This person wants solar and it is eight panels and they are going to spend 20 grand and good luck.” That is not what we are doing. We are going through incredible lengths to really spec out exactly what is going to happen on the property and then handing that to a contractor so they can go execute on that successfully.

We’re really doing our homework early in the process because I want to help those contractors build their businesses. We’re doing work in incredibly remote areas where it takes 90 minutes to drive one way to a homeowner’s house. They’re going to spend another hour there and then drive an hour and a half back for work that they may not get. Instead, we’re saying, “I’m going to go virtually meet with that homeowner, I’m going to schedule the work, and then you’re going to show up and you’re going to do it and you’re going to get paid really well to do that.”

We have shadow P&Ls for our contractors because we want to be careful about how much money they’re making, meaning that we have a threshold. They need to make at least 50% on their time or they’re not going to want to work with us. The model only is going to be successful if these guys love it.

I didn’t share some of the reviews of our contractors, but I will share one moment with you because it was special. End of last year, we had a big party, invited a bunch of our partners in, and one of our contracting partners walked into the room, caught eyes with me and ran over and gave me this massive bear hug and said, “I’m so thankful that I get to be a part of this. Thank you so much for what you’re doing for my business.” That is the magic moment. That’s what we’re trying to do — help these guys build their businesses.

David Roberts

This just seems all gravy for a consultant. The contractors, the business model is presumably you get a little cut of everything. The contractor pays you for doing this, the homeowner pays you a little bit for doing this. Presumably the amount of money the contractor is paying you is worth it to eliminate all those steps other than the jobs themselves. Is that the business model?

Grant Gunnison

Almost. Dollars only go one way. Contractors don’t pay us, and they never will.

David Roberts

They don’t?

Grant Gunnison

That’s right. We’re one of the only entities in the market not trying to pull dollars out of their pockets. When I was a small contractor, owner-operator, everybody was trying to sell me something. We have a different perspective in that we just want to help these guys build their businesses. Dollars only go one way. That does mean the homeowners pay us to get the work done, and we backstop everything. We take on the risk of these projects. We’re accountable to change orders, we’re accountable to the success of the project, and we’re accountable for the warranty over the long haul of the work as well. That puts the pressure on us to make sure we get it done correctly and puts us in the trenches to make sure we really understand how to get it done well.

David Roberts

That’s how you make money. You’re getting more from the homeowner than you’re giving to the contractor, because otherwise you wouldn’t make any money and there would be no reason to do this.

Grant Gunnison

That’s right. But it’s important to note that this is not a cost-plus experience for homeowners. We talked earlier about how if you want to have a better customer experience, generally you’re going to pay more in this industry. We’ve figured out that that doesn’t have to be the dynamic. The largest contractors operate their businesses at about 50 to 55% gross margin. Their year end is somewhere in the 10 to 15%. That roughly 40% of the overall project cost is overhead throughout their business.

That margin is our opportunity. We’re building software to eliminate the truck rolls and specking out the systems and doing rebate paperwork, and so on. Our goal as a business is to take that 40% of cost and crush it so that we can make some money. The homeowner gets a lower project cost and the contractor gets to make more money by being busy doing work every day.

David Roberts

You’re confident in saying that a homeowner going through your process rather than the typical process will get as low or lower prices.

Grant Gunnison

Let me say it to you this way: some of our contractors have called us saying, “How is it possible that you can deliver a quote for $20,000 and it cost me $23,000 to get this work done?” Same homeowners have tried to go around us and gotten quotes from the contractors we send out to the house, and they call us going, “This makes no sense. How do you guys make money?” The simple point is that we’ve innovated and been able to reduce a lot of the costs so that we can deliver more value. That’s critical to this whole thing. If this was a cost-plus experience, we wouldn’t be able to grow this business to do the things that we want to accomplish.

David Roberts

It’s not costing homeowners more and it’s not costing contractors more. From both of their sides, they’re getting a better experience for the same price, and you’re getting a little money.

Grant Gunnison

A little nuance on the contractor side, which is that they make less absolute dollars per project, and that is because they are doing less. They are not selling the project, marketing, and doing all these other things, but relative to the time they are spending, they are making more money.

David Roberts

Honestly, I don’t — I’m projecting a little bit here — but I’m guessing as a contractor, losing that particular part of the work, I doubt anybody’s lamenting.

Grant Gunnison

A dream come true.

David Roberts

Even if they’re losing some money, just losing that part of things, I would imagine is a blessing.

Grant Gunnison

The name of the game for contractors is utilization. If they have technicians that they’re spinning and not out on a job, that’s pure cost. The way that we partner with these guys is to book your calendar so it’s full all the time, and here’s how much we can provide to you on a margin basis per job. It’s right in line with how they normally charge. It’s roughly about 50%. That’s amazing for them. They’re getting the utilization they need to have a profitable business with a lot less of the overhead.

David Roberts

Are all your projects electrification-based or are you agnostic on what happens to the customer’s home?

Grant Gunnison

If you’re asking, do we put any gas in a house, the answer is yes, we will do dual fuel systems. We did an emergency replacement furnace for a homeowner and she needed it done immediately. We didn’t add a heat pump to that, but we’re going to come back and get the heat pump put in later. The technology that we put in a house depends on those local dynamics.

We’re not stuck in our way saying, “It has to be electrification or nothing.” That’s not practical. It’s not just about heat pumps. We do water heaters and electrical upgrades and weatherization work. That gets wrapped into, “I want my home to be comfortable, affordable,” and so on. That’s our lane. Over time we will expand that, and we have some large ambitions there. It’s a lot to bite off to do four different trades in a home.

David Roberts

Your advice — because I think it’s accurate — you think heat pumps are generally better solutions for homes, for comfort?

Grant Gunnison

Absolutely.

David Roberts

If you’re advising a homeowner for a cold decision, generally, you’re going to go heat pump?

Grant Gunnison

Our perspective is this is a much better technology class. It’s just difficult for homeowners to purchase and get installed properly. We’re doing innovation to make all of that possible, but it doesn’t mean that it’s 100% heat pumps.

David Roberts

Final question, and I’m curious about this. A lot of businesses I talk to are taking advantage of — what you’re doing is the innovation equivalent of a video meeting. Why go somewhere when we have phones and videos now? Why go somewhere? It’s simple, even though it’s making a big effect. Consequently, the homeowner then has a 3D model of their home now out there on the Internet somewhere in somebody’s hands. I immediately started thinking about the privacy aspects of this, the data protection aspects of this. How do you think about the sensitivity of this information and who gets to see it and who shares it, and how do you think about that whole side of things?

Grant Gunnison

My personal perspective is that there are a lot of businesses that have done questionable things with people’s data, and we’re not going to be one of those organizations. We simply want to enable folks to have an easier process. 95% of our software is not seen by homeowners today. It’s all internal, but that will grow over time. We want to provide a dashboard so folks can make that really usable. If they want to do other projects, they could share that with folks if they want. They can use that as a system of record for their house, for all the products and services, and maybe eventually financial products.

David Roberts

Once they have the 3D model, it is useful on an ongoing basis.

Grant Gunnison

It’s incredibly useful and valuable. We haven’t pushed that part of our product feature set out quite yet. We’re getting there, but we’re building a model so that we can help make heat pumps a much easier project to get done. We think that’s incredibly important. This is opening the door to a wealth of opportunities. If you don’t handle that appropriately, there is some very serious risk in that.

At the end of the day, we just want to enable homeowners to be successful. We’re not going to go sell that data. To say it explicitly, we are not going to go sell that data to people. That’s not where our hearts are at. It’s really around making the energy transition easier.

David Roberts

Do the contractors see the data? Presumably they have to have access to the model to do the work.

Grant Gunnison

They get a subset of that in pre-construction. When we send them a scope to sign, they get the information that is required to make sure that they can be set up for success. They don’t have all of it for sure. We try to limit visibility on the things that are required. There is a fair amount of data that we collect. We have to be careful with that for sure.

David Roberts

For now, most of your business model is these programs are bundling homeowners for you and handing them to you and you are doing work to upgrade their stuff. As an individual homeowner, if I wanted to go make use of your services, can I go do that now? Are you open for business for individuals or is that coming later? If so, how do people —

Grant Gunnison

There’s no gate. If you want to download our app, you can scan your house and have a quote.

David Roberts

You go to Zero Homes, download the app and it will walk you through how to do this video thing.

Grant Gunnison

That’s right. You can get a quote for a heat pump system same day or maybe next day. Our operational footprint is in Colorado, Minnesota, Illinois, greater Boston area, and some of the Bay Area. Through the end of the year it will roughly be those geographies. We have a few more product goals to knock down and then we are going to rapidly expand. Our ambition is to be nationwide and to make this experience accessible to everyone, not just the homeowners, but also the local contracting businesses. If you would like some help, we are happy to help in those geos today.

David Roberts

Is there any reason why the same principle couldn’t be extended to commercial properties? Are you sticking to residential?

Grant Gunnison

We are sticking with residential for a couple of reasons. The technology is applicable — absolutely. The purchasing process is much more challenging. There are many stakeholders that manage commercial properties and the design of these solutions is much more complex. We are sticking with a simpler asset type. Typically it’s a single or maybe a couple of decision makers in a house that are pretty aligned, as opposed to having different incentives holistically. Importantly, there are a lot of homes.

You started the podcast saying there are 60 million homes that individual homeowners have to go through a process to upgrade their house. Really focus on helping those folks go through this process in the easiest possible way. That saves them money and helps the contracting partners that are in their area deliver these projects successfully.

David Roberts

I’ve talked to many people who are doing lots of different things technologically to standardize processes and to do this. The retrofit process is a little bit of gristle in this decarbonization meal. It seems so difficult to make it easier. This is really cool to stumble across — people are working on trying to bring some tech to smooth this out somewhat. Really fascinating. Thanks for coming on.

Grant Gunnison

Hey, thanks, David. 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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

Historically, investing in energy infrastructure has been the exclusive province of wealthy individuals and large institutions. But that’s changing, and my guest today is part of it. I’m joined by Energea co-founder Mike Silvestrini to discuss how his platform allows retail investors to back international solar projects with buy-in as low as $100. We talk about the unique risks and rewards of building microgrids in emerging markets and why an unapologetic, yield-driven approach might be the best way to do real good in the world.

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David Roberts

Hello, everyone. This is Volts for April 29, 2026: “Enabling ordinary people to invest in renewable energy projects.” I’m your host, David Roberts.

Investing in energy infrastructure has generally required a lot of money, which has made it the province of wealthy individuals and large institutions. But that’s starting to change, at least a little bit.

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A handful of companies have been using a corner of US securities law called Regulation A to let ordinary people invest directly in solar projects — not stocks in solar companies, but the actual projects themselves — with minimums as low as a hundred bucks.

One of the more interesting versions of this is a company called Energea, which has a specific twist: rather than focusing on domestic projects, it goes where institutional capital tends not to — rural areas in Brazil, South Africa, and, as of a few weeks ago, Colombia — on the theory that the best solar returns are in markets where capital is scarce but sun is plentiful. As a bonus, the projects extend access to reliable electricity to some of the people in the world who need it most.

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Since launching in 2020, Energea has grown to hundreds of millions of dollars in assets across nearly 200 projects in six countries. Mike Silvestrini is its co-founder and managing partner. Today we're going to talk about how this model works, whether it delivers what it promises, and whether it can ever matter at scale.

With no further ado, Mike Silvestrini. Welcome to Volts. Thank you so much for coming.

Mike Silvestrini

Hey, Dave, thanks for having me. Appreciate it.

David Roberts

Earlier in this century, you were in the conventional renewable energy biz. You’d say you were a renewable energy developer working on big-scale projects with big-scale investors doing the normal thing. Then in 2020, you pivoted to this, which is allowing what they call retail investors, small investors, to get involved. What was your experience there in the 2010s that led you to this? What was the dream here?

Mike Silvestrini

I think that in a lot of ways, Energea has been in the works my whole life. It really brings together my love of travel, my fearlessness to go into other countries and explore them and talk to people and meet people and see what makes them tick, but also my profession, which is renewable energy.

In 2017, I had sold that first company. It was called Green Skies. My partners and I exited. For the first time in a long time, I didn’t have any solar panels or engineers or capabilities or accountants. My whole company was gone with a swipe of the pen. But I did have some capital. What we decided to do as a family was to travel. Packed up our bags and my wife and at the time two kids, now three, we hit the road and traveled. I couldn’t help myself but to stop and meet with solar energy companies in the countries that we visited in Asia and Africa and Europe, South America.

I kept hearing the same story, that there were these perfectly capable solar developers, sophisticated guys who had real projects and could not find access to capital. Having just come fresh off an exit, I kept thinking to myself, “Geez, I would buy this. I’d rather own this project with Unilever in Singapore than some stock.” Maybe that was, in retrospect, not the greatest vision because the stock market has done pretty damn well since then. But at the time, it’s just an asset class that I know. I know how to underwrite it. I know if it’s likely going to make any electricity or not. I know if the customer is likely going to pay us or not. It just seems like it’s the comfortable place for me to park my own capital.

At the same time, my lifelong buddy Chris Sattler had just sold his energy company as well. We were at a board meeting in Kenya for some wildlife conservation work that we did during that time period, still do. He was in the same situation. We said, “Why don’t we invest together?” Energea was really born as an opportunity for Chris and me to invest in the asset class that we know best in lieu of other investment options. Having come off these exits, that quickly grew into a friends and family type of opportunity because we discovered what was going on in Brazil and it was just a white-hot solar energy market.

Because we’re used to this industry, it didn’t take us long to accumulate a couple hundred megawatts worth of inventory to invest in. We had outkicked our own capabilities and called in some friends and family, mostly people who were part of our first enterprises and who had done well by us in the past — the low-hanging fruit, if you will. We really enjoyed it. I really liked communicating with them about the projects that we were investing in. I would go and visit the projects and make little videos and show them, “Here I am. This is the project, this is its location. Here’s the town nearby in Brazil,” trying to show them that it’s not as wild as it sounds to park some capital in this place.

While that was going on and I was falling in love with servicing individual investors, we did bite the forbidden fruit once again in pursuit of some institutional capital. When you have a couple hundred megawatts of inventory, you dial for dollars and you call some of the big boys and you bring home some capital to make these projects real.

We did that. We did a couple of deals. We did a deal with Brookfield. We did a deal with a listed trust called Victory Hill on the UK Stock Exchange. We did a deal with BTG Pactual, which is a big private equity company based in Brazil. The usual suspects for that particular market. It didn’t take long for me to realize that I really preferred serving my friends and family and the individual clients that we had directly than I did working with the large institutions. Not only did I like it more, but it was getting better results.

These institutional dollars come with all sorts of restrictions and strings attached. Especially in emerging markets, you have to be quick on your feet. They are just not quick on their feet, Dave. It took us only a couple of years of seeing these two forms of capital directly in competition with one another to realize that the direct-to-consumer investments were outperforming the institutional investments. We liked it better.

David Roberts

It was outperforming. We’ll get into this later. But outperforming because of the lack of restrictions. I’m trying to figure out why one pool of money is going to do better than another pool of money. It’s just you are able to use it more freely.

Mike Silvestrini

Exactly. If a decision needed to be made — I need to fire a guy, I need to hire a guy, I need to buy a different module, whatever it is — I just do it. That’s what you need to do to move in these types of emerging markets, especially. But really it’s also the same in the US — that flexibility to be the manager, what we would now call a general partner. In the days we just looked at it as we’re solar guys, we know what we have to do here and we know more than the sources of capital that we were using.

I go to Brazil, Chris moved to Brazil. He stood up our Rio-based office. We had a 35-person, at the time, Brazilian team. We knew Brazil and we knew these projects and the capital over in the UK didn’t. That made the difference in the performance of the portfolios that we managed without restrictions and the portfolios that we managed with restrictions.

David Roberts

Interesting.

Mike Silvestrini

It came down to dollars and cents, but it is also a quality of life thing. I love communicating how cool these projects are and how they work. Completely transparent — the goal is absolute transparency. Not in a Ray Dalio kind of way, but explaining to an investor what the heck it is that they just bought.

David Roberts

That answer raised a million questions for me. Before we get into some of the political and economic questions, let’s just start with the basic model, which is one of these retail investors. You opened it up from friends and family to any small investor?

Mike Silvestrini

Not at first. First we did a Regulation D offering for friends and family because the friends and family that we selected were all investors, they had the means to be qualified. When you do that, you do a Regulation D. This is the way a group of guys would get together and buy a piece of real estate or really any private investment ever has generally been done under Regulation D. That worked. But I had a bunch of friends that I’d known for many years who I wanted to bring along on this ride.

Maybe they couldn’t stroke a check for 100 grand, but they wanted to come in for 1,000 bucks. I think of some of my friends back from high school who I just wanted to work for in this asset class that I know well, I knew was a good investment for them. How do I let those guys in? There’s one form of Reg D that allows you to have up to 35 non-accredited investors. We went with that one first, but that just wasn’t going to cut it because there were so many more people that had interest.

Then we discovered Regulation A and now we do in parallel Regulation A offerings and Regulation D offerings so that there is a place for sophisticated investors and family offices and registered investment advisors. They can come in through the door they are most used to seeing, which is a Regulation D offering with a private placement memorandum, which is a fancy word for a business plan. Then I take that same exact document, I cross off “private placement memorandum” and call it an “offering circular.” Now it is the same exact device but in the Regulation A context. We run those in parallel. Really anybody can come and invest through Energea.com.

David Roberts

If I invest with you through Regulation D versus I invest with you through Regulation A, am I, the customer, getting anything different? Are you using my money differently? Is there anything, in other words, but a bureaucratic distinction here?

Mike Silvestrini

The distinction is how did I find you? There’s a cost to that. When I sell, the securities are for the same underlying portfolio of assets. When you buy through a Reg D offering or Reg A offering, you buy our Brazil product, for example, you’re buying participation in a portfolio of projects in Brazil exactly the same way — same cash flows, same everything, same reporting. But the difference is that if you’re a Regulation D investor and I found you because you went to your registered investment advisor and your registered investment advisor told you about us, the registered investment advisor has to get paid a fee and that fee will change the overall economics of the purchase of stock from Energea.

Whereas if you came from Regulation A, I had to run a Google Ad or some sort of ad spend in order to find you. They have different costs to discover them. There is also a Regulation D share class that we offer — if you’re rich, you’re qualified, and you found us, there’s no reason to pay anybody, so you get fee-less access to the product. It really just depends on how our clients discover us and matching them to the appropriate fee-paying category.

David Roberts

If I’m one of these little guys, coming in through the retail investment, coming in through the Reg A side, I give you $1,000 and I tell you I want to invest it in the Brazil portfolio. What exactly am I getting and where is the return coming from?

Mike Silvestrini

You’re buying a share of a company in Delaware called Energea Portfolio II Brazil LP, that’s the name of the company. Now you have a share of that company. The company issued you a share in exchange for the cash. Now the company has your cash and thousands of other people have done the same thing. There’s cash sitting in the bank account and it’s owned by thousands of individuals, proportionally, depending on how big the check size you decided to invest. Then Energea takes that cash and we go and invest it in a solar power plant.

When we first started in Brazil, there wasn’t operational inventory that we wanted to buy, so we constructed a lot of it ourselves. But now as the market has matured, more often than not we are buying operating assets.

David Roberts

Oh, interesting.

Mike Silvestrini

We’re just stepping right into that cash flow. As those projects sell electricity, we collect the money. We pay for the project’s operating expenses — your insurance, landscaping, module cleaning, and all those types of things. Then the money goes back up to that Delaware company that you own. The Delaware company has some expenses — mostly regulatory fees and legal fees that it pays for existing — and then it pays Energea a management fee that we charge for our services. Whatever is left after all the fees have been paid gets distributed to the shareholders pro rata, and we drain the account every month.

David Roberts

That account makes it sound like the sole source of income for investors is the selling of electricity from the solar power.

Mike Silvestrini

That’s right.

David Roberts

That’s the source of the returns?

Mike Silvestrini

That’s it. The sale of electricity and rental fees from batteries. In some portfolios we have issued debt on projects, so the collection of principal and interest payments on debt. Even those debt payments are ultimately paid for by the sale of electricity too. It’s all about the assets — the underlying steel in the ground that sells electricity under long-term contracts. Then getting that back up to my clients.

David Roberts

That’s interesting. The revenue that’s going back to clients then is tied to economic fluctuations, fluctuations in the price of power, fluctuations in power markets — in other words, tied to electricity markets and whatever volatility they may contain. Is that right?

Mike Silvestrini

It depends. All of our projects have long-term contracts. Before we buy an asset, it is already pre-sold its energy for an agreed-upon rate for an extended period of time, usually 20 years.

David Roberts

I see.

Mike Silvestrini

We know if we make the power, we already know it’s sold and we already know it’s sold at X price. That price, more often than not, escalates, at least with consumer price index. It’s escalating every year, which helps us keep up with inflation. Those revenues rise as inflation occurs. There are some contracts, like in Brazil for example, a lot of our community solar assets will sell energy instead at a discount off of the then-applicable energy rate. You wind up saying, “The energy rate this year is 10 cents, I’m giving you a 20% discount and charge you 8 cents. Next year it’s 12 cents and apply the same discount,” and so on and so forth.

The reason why we like that is because we’re trying to give our customers the lowest risk action at the highest yield. To get the risk mitigated, you want to diversify it. We want some of our contracts to escalate with CPI automatically. We want some of our other contracts to escalate with the fluctuations in energy prices. It’s like hedging. You take a little bit of both flavors and in some years energy out-inflates CPI almost always. In some years CPI out-inflates energy — depends on the year. Either way we’re going to have some winners in there, we’re going to have some losers in there, but it’ll net out to have a nice consistent dividend yield.

David Roberts

What about appreciation of the assets themselves — does that bring in money?

Mike Silvestrini

They depreciate. When you have a solar project, it’s most valuable on its first day. When it still has 20 years remaining on that initial contract, it’s as valuable as the future cash flow anticipated from that contract. That’s the NAV or net asset value. The value of the project is all that future cash flow brought back to today’s dollars. As time marches on, that contract is getting shorter and shorter. Now you’ve gotten cash already, you’ve pulled cash out, that’s great. But the value of the asset is shrinking and it shrinks until the last month of that contract period, at which time it’s essentially worth zero.

David Roberts

Maybe this is a complete tangent and maybe you haven’t been invested in any of these things long enough to know, but I’m curious. The new solar field in Brazil signs a 20-year PPA, sells power for 20 years, then what happens to old solar fields? Are there 30- and 40-year-old solar fields somewhere and what are they doing and is anybody paying anything for them?

Mike Silvestrini

I just bought a 17-year-old solar power plant from Macquarie in California and we took the panels off. We recycled about half and half of them were pretty good. We sent them to Africa to be reused for schools, powering schools.

David Roberts

Oh, interesting.

Mike Silvestrini

We took the site — it’s at an airport, the Fresno Yosemite airport — and we repowered it with new equipment. Solar has changed a lot since it was installed in 2007. Better panels, different voltage, new inverters. A lot of the gear had to be swapped out but there were still some years left on the original PPA. We went ahead and are taking advantage of that PPA with a new set of gear. The reality is that the interconnection point, these capillaries along the grid, there are only so many places to insert solar energy.

David Roberts

That’s the valuable thing for that solar field. That’s an asset.

Mike Silvestrini

I think that there will always be a solar plant at many of these locations at least for 50 years. That’s our position. But I don’t know that for certain and I don’t want to promise things to my clients that I don’t know. We just call it zero. But I hope one day to have some great news for my clients when we figure out how to realize that second life of the asset value. I think that will happen. A lot of investors are bolder than us and they will go ahead and call it a 40-year asset and say, “It’s not these panels and it’s not this contract per se, but we’ll make some assumptions about that and then we’re just going to call it this super long tenured asset.” I’m uncomfortable with that. We don’t assume exits, we don’t assume repowerings. We just look at it for what it is in the ground and give it evaluation based off that method.

David Roberts

But it is the land and the interconnection — that somebody paid a lot. The panels are relatively cheap. Why wouldn’t you just keep throwing new panels at that spot?

Mike Silvestrini

Plus they last a long time. Those panels came off Fresno Airport. I sent them over to Birakani, Kenya, installed them on a school, and they are outperforming P50 over there, just cranking away.

David Roberts

This brings up — there are other companies doing this, taking advantage of regulation.

Mike Silvestrini

Nah, not really.

David Roberts

Maybe we can talk later about the comparison. Why overseas? Why emerging markets?

Mike Silvestrini

To get my clients the highest return on investment. A lot of these solar plants, you have seen some lousy financial products come out of the solar energy industry before. A lot of these yieldcos were really crap. They had really low returns that did not do much for anybody. They were exposed to market manipulation and buy-sell pricing. I do not think there are too many investors out there who can say that they are really ecstatic about their yieldco position.

We wanted to create a product that was better than that. It started off by thinking, what would a perfect solar portfolio be if we look backwards? It would have some of that New Jersey stuff from the 2010 timeframe. It would have some Japan feed-in tariffs. Remember Ontario had a killer feed-in tariff. Couple of those in there. It’d be easy to imagine this rock star portfolio looking backwards. That’s pretty easy being a Monday morning quarterback. But how do you do that looking forwards? That’s what we try to do at Energea. Where are we going to make the most money? I think we’re going to make the most money in Brazil round the clock, back five years ago. I think we hit that square on the head.

David Roberts

What are the qualities of a place that tell you that you can make a lot of money there? Is there some formula?

Mike Silvestrini

Absolutely. We publish the rationale behind our market selection to all of our clients, and then we publish the rationale behind each project selection to all of our clients. A market analysis takes about three years. It is a long process of getting to know a country. I’ll go there 20, 30 times. I’ll meet with the accountants and the tax folks and the lawyers that I need in order to even think about a market. I’ll start to get to know what types of assets and policies exist, where the opportunities are, whether there are any good developers out there that I can really bank on.

David Roberts

I’m really curious how much of that process that you’re discussing right there is talking to business types and financial types versus interacting with the political class?

Mike Silvestrini

Zero political class, zero.

David Roberts

Really?

Mike Silvestrini

Zero.

David Roberts

I want to ask about that later too, because I have questions about the politics in these places. The idea is — for instance, now you’re starting in Colombia. The idea in Colombia is there’s big demand for solar, a lot of solar going up, but it’s still hard to fund solar projects. That’s your sweet spot. Rising demand, difficulty structuring capital.

Mike Silvestrini

It’s worse than that for Colombians currently because not only is there a rise in demand as they want more electrical devices and more technology in their economy, but they have an extremely hydrocentric energy grid. There are El Niño factors and La Niña factors. These are big cycles and they are not very friendly to businesses that want to run 24/7 being attached to a grid that is primarily fed from hydroelectricity.

David Roberts

People think of hydro as stable. People think of hydro as the iconically stable baseload source. But it is really true that it is —

Mike Silvestrini

It’s not stable at all.

David Roberts

— quite variable with weather? I don’t know if people appreciate that.

Mike Silvestrini

It’s completely variable. Your price can go up 800% overnight.

David Roberts

Yeesh.

Mike Silvestrini

They need solar and solar is quick to deploy and it’s cheap. Solar is a super technology as far as energy infrastructure goes. I may have gotten in this industry at a time when it was very environmentally driven and that’s how I made my career. The reality is that as you get older and you understand the way the world works a little bit more, I’m here now because this is the finest asset class for energy infrastructure and we need tons more energy all over the world. It does not emit carbon dioxide the way some other fuel types do. Even if it did, it would still be the best technology in energy on a cost and deployability basis.

David Roberts

The reason, and I’m sure this is the question on a lot of listeners’ minds, which is the reason institutional capital is hesitant to go in these places, is that there are risks. There’s the risk of political instability, there’s currency risk. For instance, Brazil, paying you in the real, but the real has been volatile. Then there’s regulatory risk. There are unique risks to these kinds of markets. I’m curious about your attitude toward risk management, how you think about those risks?

Mike Silvestrini

In the way you phrase that question, it made it seem like those are considerations when working overseas.

David Roberts

The minute I said political instability, I was like, “Oh, right.”

Mike Silvestrini

These are risks that every market can be measured by and needs to be measured by. Political risk affects every single solar project no matter where it is, including the United States as we know it. Currency risk affects every single project in every single market no matter where you go. It’s not a question of are we entering the fray and exposing ourselves to these new risks. It’s about measuring those risks and diversifying exposure to those risks so that we have the highest probability of making our money as projected for our clients.

The reality is where I’ve dealt with the most political instability has been the United States. The project that gets robbed the most is in the United States. There are a lot of security-related issues that we have here. The dollar has weakened against foreign currencies. The country that we work in that has the most geopolitical, foreign exchange, and security-related risks thus far at Energea in the last five years has been the United States.

I’m not saying it’s going to be like that forever. That’s why we have a position in the United States. Ultimately we believe the United States is the gold standard for low financial volatility, low political volatility, and security. That’s not been the case. Diversify. Diversify. In this asset class, I think that we’re bringing to our clients the best concoction of solar energy investment strategies.

David Roberts

I wanted to dwell on the politics for one more second. You say you don’t go talk to the politician. I’m curious how you think about, for instance, Colombia. In this new venture in Colombia, you are working with a government agency that has been created specifically to spread solar and battery systems to small households. You got a big policy and public money tailwind. What happens if Colombia elects a very different kind of government? How do you think about political risk? I know this is embarrassing to ask from the US right now for reasons you just laid out, but how do you think about those countries? How do you think about political risk?

Mike Silvestrini

First of all, you have to understand that the United States built our solar energy industry in the most complex and unnecessary way of any country. We had tariffs. We have tariffs on one side and tax credits on the other.

Make any sense? Then we have every single state has its own strategy and it’s a nightmare. Other countries aren’t like that. In Brazil, there’s no government intervention. The only time I call upon the government is if the utility company isn’t upholding its end of its obligations and I need to compel them to through a regulator. Other than that, it’s without government intervention. I buy the solar panels, I import them, I install them, I sell the energy to my customers, I collect the money, I send the money back up to the US — there’s no government involved. I don’t need a tax credit. I don’t pay any tariffs.

David Roberts

Are they subsidizing at all? Are they doing anything to —

Mike Silvestrini

No, it’s not needed in Brazil.

David Roberts

It’s just purely happening based on money.

Mike Silvestrini

It’s every market except for the United States, where you unadulterate the energy markets. Solar energy is extremely competitive. I feel I could go to any country in the world and figure out how to pencil a solar energy deal without any government subsidies. We only believe we need government subsidies because we have electricians that make $500 an hour and we have these types of issues. The cost basis for our projects is so blown out. The reason why they’re so blown out is because of the presence of artificial capital.

You’re starting off on the basis that solar energy is cheaper to install without any government. That’s why I have such a light touch point with government agencies when I do most of my business. You brought up the Latin America portfolio, where in this portfolio, one of our investments is a loan to a company called Helios.

David Roberts

Which is different. Just to underline this, in Brazil, you are investing in projects?

Mike Silvestrini

Right.

David Roberts

In Colombia, you are loaning money to this agency which is doing the projects?

Mike Silvestrini

Yeah, they’re a utility company. This utility company has become particularly good at providing solar energy to folks that are disconnected from the grid. We call this rural electrification. In Colombia, the entire architecture of their grid rate structure is geared towards enabling Helios to do what Helios does. It’s not like a policy. It is the architecture of it.

What I mean by that is they take the entire society and they divide them into six baskets by zip code. There’s the wealthiest, down to the poorest. The folks that Helios are serving are in the lowest basket. The people in the wealthiest baskets — this is beachfront property in Cartagena — pay the highest energy price, and it goes all the way down through the four wealthiest layers. The two poorest groups don’t really pay much or anything at all for energy.

David Roberts

That’s interesting. Their electricity rates are progressively structured.

Mike Silvestrini

Yes, exactly.

David Roberts

What a thought. What a novel and interesting thought.

Mike Silvestrini

I can’t make commentary as to whether or not it works on a societal level, but that’s the way they do it. The money from these wealthier groups goes into a fund. The only time I met with the Colombian government was to go meet with the administrator of that fund and confirm that the money was cash sitting there, and that was truly and exclusively used for its stated purpose, which is constitutional. It’s beyond law. It’s the strongest format of law.

David Roberts

Oh, interesting.

Mike Silvestrini

I wanted to verify that this wasn’t all smoke and mirrors. I see the money coming into Helios’s bank account. I’m checking their bank statements. I know that they’re telling me how the law works. That’s all well and good, but I want to go shake hands with the guy and make sure that it works the way everybody says it works, and it turns out it does.

We felt really comfortable loaning money to Helios so they could expand more energy services to these rural communities and have confidence that as they perform their service, which I think they are the best in class at doing this, they should be doing this around the world. They are amazing.

David Roberts

Service meaning literally going to these little places, installing a solar and battery —

Mike Silvestrini

Yes.

David Roberts

A functional solar and battery system —

Mike Silvestrini

And then keeping it on. There are so many of these projects and free projects that just don’t work. It’s a crisis among do-gooders throughout the world, especially in places like Africa. I see it all the time.

David Roberts

Do they do maintenance?

Mike Silvestrini

Yes.

David Roberts

They do follow-up maintenance. Yeah, that’s so important.

Mike Silvestrini

Yes, they monitor them. They use radio networks to keep the cost of monitoring down so they can see the performance of every asset. Really smart guys, and it works. I would love to see this whole thing copied and pasted in certain African countries and other South American countries.

David Roberts

Helios has around 20,000 subscribers.

Mike Silvestrini

Yeah, you have done your homework, Dave. Nice.

David Roberts

Depending on which angle you look at that from, it’s either big or small. I’m wondering —

Mike Silvestrini

To put it into perspective, there are about 280,000 households remaining with no access to electricity whatsoever. We believe that the loan architecture that we put in place with Helios, back to back with the capital origination architecture we have at Energea, can aggregate capital from American investors, serve that up as debt to Helios, and knock out the remaining homes that need electricity in that country.

David Roberts

No kidding. 280,000 more. Presumably one constraint is —

Mike Silvestrini

About 100 million bucks.

David Roberts

Capital is one constraint, but presumably there is workforce.

Mike Silvestrini

Yeah, but these guys, that’s what they do. They have hundreds of offices, these little offices. You have a community leader. That leader helps communicate directly to the homeowners. When the homeowners have an issue with their system, they can go to that community leader. There’s somebody they can speak with.

David Roberts

What a cool model.

Mike Silvestrini

They have this whole thing set up. It’s awesome and it really works. Then you have all these unanticipated things happen. When people start getting electricity who never had electricity before, what are they going to do with this electricity?

David Roberts

I’m so fascinated by that question. What are they doing? I’m so interested in what happens.

Mike Silvestrini

There are a lot of really cool stories out of this and we tell them at Energea as best we can. One of my favorites is that they make these bags called Mochila, which is a bag that you hang across your chest and put stuff in it. Boys and girls both wear these types of Mochila bags. It’s a craft made by the Wayuu communities, which is the people of La Guajira, which is where one of the groups of 20,000 installations that have been done is.

They took the inside of a dryer — a clothes dryer — which has a spinning capability, and they powered it with this new solar array that they had. They used that to become a thread spinner so they could make more yarn. They’re using a dryer, repurposing a dryer with this new solar array to dramatically increase their production of Mochila bags. Who knows what they’re going to do with it.

David Roberts

I’m such a sucker for those stories. I could listen to that all day. Giving electricity to people who have not had it. I know we talk about that a lot, but I still don’t think we talk about it enough. I am excited to see what 280,000 people are going to do when they have power — pump water. Imagine all the creativity you’re bringing on board, that you’re enabling. You’re enabling creativity and innovation.

I want to talk a little bit about Regulation A, about the structure of this thing. Regulation A does come with some restrictions. It’s a lighter weight version. You don’t have to do a full IPO, but you do, when you’re doing Regulation A, have certain disclosure and reporting requirements, really tight disclosure and reporting requirements. I’m curious if those requirements, if the requirements bounding what you can do with Reg A, if you experience those as a constraint at all. It also has a $75 million a year cap for what you can do under Regulation A. I’m curious whether Regulation A is giving you the freedom of movement you want or if you’re looking around for other things, other ways around it.

Mike Silvestrini

First, with regards to disclosures, we think that what is required of us to disclose is nowhere near enough. We want to disclose everything. We want to show people exactly what it is. There is no obligation for us to go down and make a video of the Wayuu people and show the installations and then demonstrate through a mini documentary how this thing really works. But that is what we want to do. We want the people to understand this. There are some financial requirements that we have to report on. We would do that anyway. From a regulated communications standpoint, it falls short of Energea’s goals. It is not an impediment at all.

The $75 million a year is also not an impediment because, number one, it’s $75 million a year per Reg A. We have four Reg A’s right now. That multiplies it a little bit. We’ve only raised — we’re just rounding the corner on half a billion. We’re at $470 million. That’s over several years. This is every 12 months, you can raise that $75 million. We have a lot of growth that we can handle before we would start bumping up to that, but we really opened up that parallel Reg D. The larger check writers are coming in through a different channel that does not bump up against that regulation limit. For all those reasons, we think that we can scale this puppy as big as we can get it.

David Roberts

You can imagine a scenario down the road where you have maxed out the capability of retail investment. That would be a good problem to have.

Mike Silvestrini

I haven’t dropped my Italian portfolio in there yet in our $75 million. Then I got my Southeast Asia portfolios in our $75 million. You stack different products out of this and then you pipe your biggest checks through the Regulation A offering. I think that this can work at multibillion dollar scale without a problem.

David Roberts

As you said earlier, the solar business in its early days was filled with do-gooders, mostly top to bottom. That ratio has been steadily changing over time as it grows and scales. I’m guessing the institutional investors coming in through Reg D are probably mostly unromantic yield chasers. I’m curious about the retail side. Are you getting a bunch of do-gooders or are those just people wanting to make money too? What is the do-gooder ratio? Maybe you don’t know for sure.

Mike Silvestrini

When somebody decides that they want to be a client of Energea, they come to Energea.com and we only ask them for the minimum amount of information that we need in order to satisfy our regulatory obligations. There’s some know your customer type stuff that we need to ask. With the exception of one question from the very first day we set up on the onboarding process a meter that ranges from all the way left — “I’m here to save the world” — and all the way to the right is “I’m here to make money.” We ask our clients to set that, that best describes what brought them to Energea.

It’s been interesting, but it’s been very consistent and it’s about 60% pegged towards making money. Slightly leaning towards “I’m here for the yield.” It makes sense. This is money that people may be saving for their whole lives. This could be grandma’s retirement, this could be your kid’s college money. This money has a purpose for you and your family and it is sacred stuff. We treat it, we operate this all the way pinned to the right. We have an exclusively capitalistic — do not lose money, it’s a sin — type of approach to running this business.

We do want to know how our clients feel about our product. Some clients will come in and say, “This is disposable income and I’m going to go ahead and do this because I think it’s cool to power these rural communities and community solar in Brazil and African businesses and stuff,” and they’ll move that needle to the left, but it averages leaning towards the financial returns.

David Roberts

Do you in the operation of Energea ever encounter tension between the make money side and the save the world side?

Mike Silvestrini

No.

David Roberts

Are there tensions or do you think you have a lot of runway where you are just getting both?

Mike Silvestrini

There are so many beautiful — it just turns out that impactful projects are also projects that are commonly overlooked by institutional capital. That’s where we make our money. It just naturally aligns itself with impact because that’s where our capital is most useful.

David Roberts

The places you’re building, maybe it varies on your different portfolios, but are you — in Colombia or in Brazil, when you build a solar field, are you introducing a community to electricity or are you bolstering an electricity system typically?

Mike Silvestrini

It ranges all the way to one side. You have the story we just told about rural electrification in Colombia where it is brand new energy infrastructure for people who have never had power, all the way to the right. You have utility-scale projects like we are developing a project in Texas to sell all the power to a big tech company to power an AI data center.

In between you have things like South Africa where they have access to a grid. Most of our customers, all of our customers have access to a grid but the grid is unreliable. We’re providing them what we call microgrids. They have solar plus batteries to depend on for a consistent flow of energy. When the solar and batteries are unavailable, then they pull energy in from Eskom. It’s a little bit of a tweener, but the full range is fair game for us.

David Roberts

The fact sheet you sent me, the risk disclosures — I think this is boilerplate — but it says suitable only for investors who can afford the loss of their entire investment. I’m guessing that is boilerplate, but I’m curious.

Mike Silvestrini

I think it’s every investment.

David Roberts

Is there anyone who should not do this?

Mike Silvestrini

No.

David Roberts

Is there anyone you would warn away from it?

Mike Silvestrini

I don’t know what my regulatory restrictions are on answering this. But I’m going to answer you how I feel, which is that I search far and wide for places to park my personal capital and I keep ditching alternatives and going back to an asset class that I know best. For Mike Silvestrini, I can wrap my head around steel in the ground that produces power that’s sold under contract to an underwritten client on a long-term basis to make a dividend yield. That makes sense to me and I’ve been doing this now for 20 years. I’ve never made a dollar doing anything other than this. This is my expertise.

For me this is a wonderful asset class. There are years where the stock market will beat the crap out of solar energy yields. We’ve averaged a little bit — 12.03% return on investment since the day we opened our doors. Not a bad investment return for energy infrastructure. In fact, I think we’re a top quartile at the very least across anything you can invest in in energy infrastructure.

But we have underperformed versus the S&P 500 during that same time period. We’ve overperformed versus real estate during that same time period. We’re one of the best asset classes in the private markets. I would say that we’re competitive and complementary to public market investments.

David Roberts

Have you ever invested in a project and lost it or lost money or lost the project? Have you had a big disaster or have you had a money loser? A lemon?

Mike Silvestrini

I’ve had two in my career, but neither of them were complete losses. One of them was in Connecticut, where I’m from. This is my first company. We did a project for a marijuana growing company and it was a new law. Seemed like a cool idea. Seemed like these guys had a lot of capital to roll around.

David Roberts

I remember that hype cycle.

Mike Silvestrini

We finished the project and then sent an invoice and they never paid it. “Guys, I don’t know if you’re high over there, but you have to pay this bill.” Eventually they did, but it was after I had sold the company. There’s one project at Energea that did not affect our clients at all because I knew it was exceptionally high risk. I wrote the check myself and it was only 20,000 bucks. I put 20 grand into a project in Zimbabwe, which you do not have to be a rocket scientist to not invest in Zimbabwe.

I was working with a company. We had bought maybe 15 or 20 great assets from this company called Sun Exchange, and they wanted to do it. I said, “That’s too risky for my clients, but let me give it a go.” I pulled up with some other investors and bought into a project. After the installation of the solar plus battery project for a farm somewhere in Zimbabwe, the police came and said that they’re pretty sure it belongs to them and they just took the array.

David Roberts

As I was saying about the risks earlier, that’s what I was referring to.

Mike Silvestrini

Zimbabwe is a risk, but South Africa, where all of our Africa-related portfolio has been concentrated thus far — I just came back, I was there for the last two months. What a spectacular country that is. It has issues. So do we. I think it’s a fantastic place to do business. There are some really intelligent people doing some great things there.

David Roberts

Can you briefly review — you have four portfolios. Just briefly tell us where they are and what rate of return you have gotten on them, because that is different from portfolio to portfolio.

Mike Silvestrini

Yes, that’s true. Our first portfolio we launched was Brazil, and that has been squarely around a 14% return since the day we opened our doors, in dollars.

David Roberts

That’s real good.

Mike Silvestrini

That’s after our fees. In dollars. It’s a good return because when we first got there, everything looked like a 22, and then you deal with the realities of Brazil. Brazil is a really hard place to do business. I think the hardest, in my opinion, the hardest place in the world to do business has got to be Brazil. Even after taking our lumps, we managed to hit our target, which was a 14. We’ve been right on that the entire time. We’re really proud of that. It takes a lot of work and a lot of grit to accomplish that.

Our second product that same year in 2020 was the Solarize Africa portfolio. Our goal has been a 10. We’re at a 9.8. We’re fighting to get that extra couple basis points up there. We will. I know exactly where it’s going to come from. That market is just so exciting. It’s become the easiest market for me to manage because there’s so much investable inventory there. There are good debt markets, you can buy and leverage projects.

David Roberts

Investable inventory, meaning solar fields already built? I would think that would be the iconic “there’s nothing there” market.

Mike Silvestrini

What happened was there’s a bit of a contraction of the South African industry and when that happens, a lot of stuff goes up for sale. The South African grid only worked for 60% of the day for years. It’s called load shedding. You get an email in the morning and say, “You’re not going to have power from 6 pm till midnight.” Great, thanks. They solved that mysteriously right around the time of the last election. It just went away like a fart in the wind. Everybody had power 24/7. When that happened, a lot of solar companies were really banking on that to sell their products.

They hadn’t really taken the time to get more cost efficient because they didn’t need to. Everybody wanted solar and batteries at any price. The bad companies all tanked when load shedding went away. That threw up a bunch of inventory onto the marketplace, which we’ve acquired some of. Now the energy markets are really improving very rapidly in South Africa. They were scarred by this load shedding stuff. They almost had a political blowout about this. It nearly killed the country, this load shedding. They’re paranoid about energy availability now, rightfully so.

Finally they’re starting to do stuff about it. This huge onslaught of new renewable energy is going to make sure that that never happens again. They’re putting in place some policies that they should have had a long time ago that allow us to do what we want to do, which is buy huge chunks of land, put big chunks of solar on it, and then sell that power to whoever I want. As long as I’m willing to pay for the transmission and delivery of that, who cares?

Now we’re at a place where you have to string together a couple licenses and then you can do that. That’s what we’re building a lot of right now. It’s insatiable. I love the African market and it’s one of — it’s 400 basis points lower than Brazil, but it’s less risky. South Africa is a less risky country than Brazil, period. End of story.

David Roberts

That’s interesting. Why are the returns lower? Is it just the price of electricity is lower?

Mike Silvestrini

It’s less risky, it’s appropriately priced. I thought it was off. I went over there and was hooting and hollering saying, “This isn’t priced right. This market is riskier than you guys think it is. The Rand is riskier than you guys think it is. Stop treating these deals like I’m in Manhattan.” I was proven wrong over a number of years and having this great vantage point of working in the US and Africa and Colombia and Brazil, I get to really compare them in my mind as to what the real risk is of these places.

South Africa is a wonderful country and it has poverty, extreme poverty in a lot of places. They need to deal with a lot of their demons. But it also has robust public markets, robust business class, great wine regions and luxury restaurants and scalable companies and telecoms. They are the Manhattan of the African continent. It’s a cool place to do business and it’s not as risky as I had initially anticipated.

David Roberts

That’s Brazil averaging around 14%.

Mike Silvestrini

Yep.

David Roberts

South Africa averaging around 10%.

Mike Silvestrini

Yeah, 9.8. LatAm, which we just launched. After three grueling years of research, due diligence, we finally picked some investments that I feel really great about. One of them being that Helios investment, and we have some others coming that we’ll disclose once we put pen to paper.

David Roberts

These are in what countries?

Mike Silvestrini

We’re starting off in Colombia because Colombia is the hot hand right now. Colombia is where Brazil was four years ago. It’s such an obvious thing that this country needs tons more solar. We’re excited to be there. There are a couple competitors, but it’s a small market. Believe it or not, even though it’s the third largest economy in Latin America, it is still a fairly small market and overlooked by large players because who wants to learn everything there is to learn about Colombia only so you could do a couple hundred megawatts. We do.

David Roberts

That’s three. Is there a fourth?

Mike Silvestrini

The US.

David Roberts

Right.

Mike Silvestrini

Yep. Which is a 7.1% return realized over the last, I think about four and a half years. Its dividend yield last year was like a nine for a good chunk of the year. Its actual cash distributions have exceeded its IRR at certain points because the portfolio is very stabilized. All of our off-takers in that portfolio are either municipalities or utility companies. It’s a good investment grade product. We get paid on time almost all the time. Eversource in the Northeast doesn’t pay on time, but everybody else does. You can count on that portfolio to deliver. It’s why it’s a little bit lower yield.

David Roberts

Are you expanding that portfolio? Are you pursuing projects in the US as aggressively as you are in these other —

Mike Silvestrini

Yeah, I’m in the process of buying 15 megawatts up in Maine’s community solar program, which took a shot in the jaw — change of policy risk. We’re buying it after that change in policy, so we’re really comfortable with where that’s landed. We’re also developing that project in West Texas I mentioned, with the tech giant off-taker.

David Roberts

In none of these cases, in all four of these portfolios, do you lose sleep about political winds shifting and yanking the rug out from under you?

Mike Silvestrini

I’m appropriately paranoid about every characteristic of every project in every portfolio, and I drive that into my team. We have to be on our toes. We have to be ahead of the curve, and we have to make our money fast. Things do change. A lot of our clients come in, they see the 14 in Brazil and they pump all the money into Brazil. Brazil raises $2 out of every $5 that we raise. It is a big number.

But Brazil is Brazil, and you should diversify. We made it really easy. We made this thing called the Core, which you can say, “I want to put 100 bucks in.” Then you can move some toggles. “How much LatAm versus how much South Africa versus USA?” I really do believe that we built this intentionally to be a cocktail. The ice in the drink is the US and these other countries are the flavorful booze. You mix it all together and you have the best thing.

David Roberts

Towards the end of time here, but I’m curious about the scale. I think probably the reason big institutional investors don’t do this is, I’m guessing, just these soft costs. If an investor comes to you with several million dollars, it’s one set of conversations and then you’ve got a million dollars. You now are raising a million dollars from 50, 100 people, 200 people. How do you keep those transaction costs in line? There’s a reason big investors are not doing this.

Mike Silvestrini

What transaction costs?

David Roberts

I guess I don’t know. I’m asking you, are there more transaction costs?

Mike Silvestrini

No, we’ve gotten rid of most of the costs. That’s why this product overperforms — because there’s not as much BS between you and the asset. The only BS you have is paying us. But we’re providing service. We originate the deal, we manage the deal, we do everything for the deal. That’s a service worth paying for. All those returns I stated are after our fees. We pay for ourselves by finding the right investment opportunities, I believe. We have investors that range from 100 bucks to 63 million bucks. Anybody can come in and participate on the platform.

Our hope is that over the next few years, you start to see more family offices and professional investors engaging Energea. I’ve managed solar energy projects for Goldman Sachs, US Bank, and Rabobank, and you name a big bank, I’ve probably done business with them in my career.

Now we’re taking that same level of professional integrity and making it into a product fit for any investor. I hope that we’re giving people who don’t normally have access to the types of investment strategies that I’ve been doing for the last 20 years the chance to come directly to the source and participate at Energea.com.

David Roberts

It’s $100 —

Mike Silvestrini

$100 minimum.

David Roberts

There are — I meant to ask this earlier — other companies out there raising small amounts from retail investors and investing them. You said no one is doing what you are doing. I’m curious about this.

Mike Silvestrini

Not even close.

David Roberts

I’m curious about this landscape. What are those other people doing and how is what you are doing different?

Mike Silvestrini

I won’t name names or talk down to my competition. I think there’s enough room in this world for multiple successful retail energy infrastructure companies. I just don’t see anybody that even comes close to the services that we’re providing. I think it’s because we didn’t come up with this idea in a college dorm room thinking, “We could build a website and everybody can invest in solar.” We came at this as solar professionals and experts first — developers, having serviced customers like Amazon and Target and Walmart for my career — and then learning in the crucible of sophisticated financial institutions, kicking my ass to get me to do things correctly.

I did that first. Then we decided to open up our services to the broader retail market. I see a lot of companies in this who aren’t truly solar energy experts. They have a good idea. It’s such a good idea that we did the same thing, but it’s just a different approach. I think that we’re head and shoulders above anybody else out there.

David Roberts

This is a dumb question, but just to make clear, Joe Schmo, who is listening right now, can go to Energea, choose a portfolio, put their credit card number in, bada bing, bada boom. You do not need lawyers or any institutional anything.

Mike Silvestrini

You should read, watch the videos we’ve given you, different levels of due diligence. We hope that everybody reads the offering circular. That’s the main document that describes what we’re going to do with your money. It also describes how our fees are charged. It describes all the risk factors that we can think of exhaustively so you know what you’re getting into. They come in, they drop 100 bucks in. We take that 100 bucks, we’re going to park that in a solar energy asset amongst other solar energy assets in a portfolio.

That’s another thing. You’re not buying one project, which would be a concentration risk. You’re getting access to a thematic approach to a niche solar energy market somewhere in the world. You can even diversify that across all portfolios. Put $25 into each one. You really spread those dollars around and minimize your exposure to catastrophe. I think we’ve made it really easy to invest. On Energea.com, we’ve got a great CTO named Gray who does a phenomenal job with the user experience. With a couple clicks, I don’t think there’s anything on the Internet that you can open up a retirement plan and invest tax efficiently the way you can at Energea.com through our IRA product.

David Roberts

It’s really cool because I get this question all the time, Mike. Tons of people contact me. Either, “I can’t get solar in my house,” or “I already have solar on my house. I’ve done what I can in my personal life. I still want to do more good in the world. I still want to invest in this. I’m not a millionaire.”

Mike Silvestrini

We made this for that guy.

David Roberts

As a final question, scale — as you say, you’re not solely retail. You’ve got a mix of investors. You got some big ones, some small ones. I’m curious about the retail side of it. Let’s say you’re up to 500 million. That’s not what retail investors have given you. I think that’s more like 120 million or something. That’s all the money you’re managing. You’re up to 500 million, which is — if I’m a poor farmer in Colombia, looks plenty big and exciting — but from a global perspective, is pretty tiny. It’s a rounding error.

What is the scale possible for retail investing? Do you think this could be more than a niche pocket of the investment landscape?

Mike Silvestrini

The answer is, who knows? But here is what the data looks like. How much money does the average guy walking around have in America? This is just talking about the American general public. The savings accounts of Americans — just savings accounts — is about $18 trillion. Private investments, when you pick up and make an investment through an app on your phone, are $67 trillion. The workers of America have $45 trillion of retirement accounts, which we can accept. That is $130 trillion being wielded by guys like you and me and your neighbor and the people who we live amongst here in our country.

A very small fraction of that is being won over by consistently delivering on financial promises backed by real assets, adjusted for inflation, diversified. If people can find room for renewable energy infrastructure in their investment purview, then I think that the sky is the limit for Energea.

David Roberts

I’m sure you would be happy with just one of those trillions.

Mike Silvestrini

That’s right, just a trillion. That’s all. We’ll see where this goes. I do think that we play a role in the long-term architecture of the energy grid because most investors buy these projects with the intention to eventually sell them or they’re being bought with a time-limited fund. They have to eventually trade and we don’t. Our plan is to hold them forever to create the dividend yield which can be reinvested each month, creating a compounded return for our clients, which 90% of our clients do. That is what we’re here for.

We’re the last stop of many projects’ long journey. We think we can continue to gobble up stuff and consolidate some of these markets and be a useful drop-down option for people looking to move on and exit a project position.

David Roberts

Absolutely fascinating, Mike. This is all just Energea.com if people want to go look, read more, look at videos. Thank you for sitting with us today, walking us through this fascinating little corner of things that I had not really looked into. It’s booming — like everything else in solar. Thanks for coming on.

Mike Silvestrini

Dave, real pleasure. I remember meeting you over at Yale one day, maybe a couple years ago. I don’t know if you remember that.

David Roberts

Yeah, we talked about doing this someday and I’m still going to take you up on your offer to come hang out in Brazil and look at some solar panels up close.

Mike Silvestrini

I’m heading down there in a couple weeks. Invitation’s open.

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

In this episode, I sit down with financier Tom Steyer to discuss his 2026 run for governor of California. We dig into his pledge to cut the state’s notoriously high electricity bills by 25 percent, how he plans to break the stranglehold of investor-owned utilities through local competition and smarter grid utilization, and the delicate politics of pushing a climate-forward agenda when voters are primarily focused on the immediate cost of living.

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David Roberts

Greetings, everyone. This is Volts for April 27, 2026: “Tom Steyer wants to be California’s climate governor.” I’m your host, David Roberts.

Today’s guest is billionaire financier and longtime climate crusader Tom Steyer, who — thanks to the Eric Swalwell campaign’s recent implosion amid sexual misconduct allegations — is now narrowly leading the Democratic field in California’s 2026 race for governor. He has edged out Xavier Becerra and Katie Porter in the most recent post-Swalwell polling, though the three of them are bunched together within the margin of error.

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The June 2 primary is about six weeks away. Steyer is self-funding to the tune of over $100 million, and the interests he has picked fights with — the investor-owned utilities, the oil companies, the realtors — are going equally big against him.

I have not endorsed anyone in this race and I’m not about to, but Steyer is the climate-forward candidate in the country’s biggest climate-forward state, at a moment when climate policy is at a crossroads and climate as a political issue is visibly in retreat. That seemed worth an hour.

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We talked about his pledge to cut electricity bills by 25 percent — what it means for utilities and how the math adds up. I asked him about the YIMBY fight, wildfire costs, refinery closures, the Iran war, transit’s fiscal cliff, and his take on where the climate cause stands now, fifteen years after he first jumped into it.

Here’s my conversation with Tom Steyer.

With no further ado — Tom Steyer, welcome to Volts. Thank you so much for coming.

Tom Steyer

Thank you very much for having me, Dave.

David Roberts

Tom, I’ve spent the last few days reading and researching this, and the main conclusion I’ve come to is that you would have to be crazy to want this job. Let’s start there. There’s a baseline of crazy you must have to be pursuing this. Many issues we could touch on. I’m trying to prioritize a little bit.

I want to start with electricity, my beloved topic, the main subject of my podcast. Currently, California has the second highest electrical bills in the nation. They have risen sharply, at least since 2019. Now, when you see polls, a majority of Californians are saying this is a top issue, a big issue.

You have pledged to bring utility bills down by 25%. That is a bold claim. I want to dig into that a little bit. Let’s start with utilities. You said in some of your campaign ads that you’re going to break up the monopolistic utilities. But then in a press conference a few weeks ago, you walked that back or clarified that you do not literally mean that you want to break up PG&E. I’m just curious, what do you mean, what do you want to do to and about utilities?

Tom Steyer

Let’s start with a little discussion of the investor-owned utilities in California, of which there are three. They are all legal monopolies. You are not allowed to compete with them. They charge twice as much as the average in the United States. That is a punitive situation, but entirely predictable given the fact that they are a legal monopoly that has legally no competition.

They also have, Dave, very distorted and unhelpful incentives from the utility system where they get a 10% guaranteed return to their equity for every capital expenditure that the Public Utilities Commission allows into the rate base. That’s how they make money. Most people don’t understand that. I’m sure you do. But that gives them an incentive. If you have a choice between a $100 million plant and a $200 million plant — “If we do the $100 million plant, we’ll make $10 million. If we do the $200 million plant, we’ll make $20 million. Boys, let’s do the $200 million plant.” It’s a huge distorting incentive. What I’ve said is, would I like to break them up?

It turns out there are two big municipal utilities in California, one in L.A., one in Sacramento. They both charge about half what the big monopoly electric companies charge.

How am I going to do that? Part of it is by different oversight from the Public Utilities Commission where we’re incenting different behavior and insisting that they’re obeying it. Also, the idea that they need a 10% return on equity in a guaranteed form with about a 50/50 debt-to-equity ratio makes no sense as well. Dropping that number will make a dramatic difference. But the big thing is I also want to be able to enable local competition because if you look at how this is happening, the cost of electricity — you say “you love electricity” — me too. There’s an electricity revolution going on in the world. The cost of clean energy is plummeting and the cost of batteries is plummeting and everyone around the world is taking advantage of it except us.

If we allow local competition, it costs between solar and batteries or wind and batteries — that’s 3 or 4 cents a kilowatt hour. Just to put that on the table. We’re getting charged somewhere between 30 and 40 cents a kilowatt hour. Is it going to be necessary if we’re going to do community choice aggregators, to do the local grids, are we going to rebuild everything? No. Are we going to use their poles and their wires? Yes. Is that worth 37 cents? No.

We’re going to be able to produce energy and distribute it locally much cheaper, which is going to force these big monopolies to reduce their costs or lose customers. It’s going to be competition that drives down the price of electricity. To say 25% — let’s be clear. If we drive down the cost of electricity by 25%, we will still be 50% more expensive than the average in the United States of America at a time when electricity prices around the world are plummeting. When everyone’s saying, “Oh, that sounds impossible,” it’s — really? Let’s put it in a context. Does that even sound like a fantastic outcome? That sounds like a better outcome, but not a fantastic outcome.

David Roberts

Let’s talk about this. What you are talking about is retail competition. I think Volts listeners mostly know there is wholesale and retail, and retail is just the last mile serving the electricity to the customers. There have been some analyses that show that only about 15 to 20% of bills are really on the generation side, the side that you could get at with retail competition. Most of the cost is in the poles and wires themselves, in maintaining, in transmission and distribution, which you are not going to get at with retail competition.

Tom Steyer

But we are going to get at, Dave, on the first half of this. I agree with you. Let’s talk about how we drop the costs in terms of how the overall system works. If you look at what’s going on, and I know this because I’ve spent a lot of time looking at some of the new technology that lets you, for instance, take a 35% efficient grid up to 60%. You don’t have to rebuild your —

David Roberts

Utilization. I saw this in your plan. It made my heart all aflutter. I’ve done a couple of pods on grid utilization. Say a little bit about that. What would you want? How could utilities increase utilization or how do you push them to do it?

Tom Steyer

They’re very slow to let people onto the grid. 73% of the time, they don’t make it in time. They want to rebuild the grid because we’re capacity constrained at 35%. I should mention to people, there is this thing called information technology. There’s this other thing called artificial intelligence. They’re now able to be used to take that 35% efficiency up to at least 60, so you don’t have to rebuild the grid to almost double the capacity of the grid. We’ve seen this at a lower level in Iowa where the cost to use information technology and sensors, as opposed to rebuilding the grid, was a fraction, and you could do it without putting the grid down while you rebuilt the whole thing.

This is an easy thing to do. Let me say this. This is not something that works well for the bottom line of electric monopolies. Therefore, they are not really interested in this. This is not the kind of thing they want to do because for them, if they rebuild the grid, that all goes into the rate base and they get a 10% guaranteed return on that. But for ratepayers, for the people of California, that saves them a gigantic cost and allows a whole bunch more utilization of the grid, which also drives down the overall cost to every single user. It is a big difference when you talk about the poles and wires and all that stuff. The truth is this is a much more efficient grid and therefore the overhead for every single user is lower.

David Roberts

But in terms of how to change their incentives to push them to do that, you are not talking about new legislation or even new regulations. You are mainly talking about appointments to the CPUC that would —

Tom Steyer

That is the first thing.

David Roberts

Jawbone them, bully them into doing it.

Tom Steyer

No, we’re going to give them different incentives. We absolutely have to. We’ve got to change this structure because you can’t be mad at executives that you give incentives to do uneconomic things, things that will drive up rates and then go, “You drove up rates.” It’s — yeah, you paid them to drive up rates and then you were mad at them when they did. We’ve got to have a different PUC and we’ve got to have different incentives because these are perverse and they’re definitely paid to gold-plate everything, to make everything as expensive as possible and, honestly, without fear of competition.

That’s where we are, and that’s why we are where we are. I’ll give you one other, Dave, which you probably know in some version. In Silicon Valley, if you have a new technology, your customer base, the median customer — the 50th percentile customer — adopts it in 18 months. Traditionally, in the electric utility business, the median customer adopts a new technology in 35 years. There is no incentive. Everybody’s sitting here going, “We can’t do better, we can’t do better, we can’t do better. You’re talking about something that’s impossible to do, Tom.”

35 years. It’s a seven-year vetting cycle. Seven years. That’s where we are. They come from a different world. It’s not a tech world, it’s not an innovation world. You know if you love electricity, we’re in a revolutionary world — we’re dramatically changing it based on new technologies. Their desire is to keep gold-plating everything and driving up the rate base and therefore their profits.

David Roberts

Another big cost center that has been identified specifically in terms of California rates is wildfire prevention and remediation. Huge and growing problem, obviously. A lot of people lately have been raising the idea that wildfire prevention and remediation help the whole state, and thus the whole state ought to be paying for it, not just ratepayers.

In other words, there’s been talk about moving these costs out of rates into the tax base because, as I’m sure you know, putting things in electricity rates is the most regressive conceivable way to pay for something, whereas the state income tax is much more progressive. Plus, the same people say, “we would like to keep electricity prices as low as possible if we want to encourage electrification.” All of that said, have you thought about this idea?

Tom Steyer

I’ve thought about it, but I want to — I want to be such a one-note Charlie, I want to go back to a previous point I was making about this, though. What the public utilities are choosing to do is to underground all the wires. They are paying $3 million a mile to underground those wires, and that goes into the rate base. Do I think that that’s the cheapest way to do this? I know that’s not even close. I know that they’ve got the PUC to agree to it, but the fact of the matter is there are technologies on this that would do this for a fraction. What they are doing is exactly what I said to you. They are gold-plating the system so they can drive up the rate base and get a guaranteed return.

David Roberts

But even so, don’t you think it would reduce rates?

Tom Steyer

I know. Everything you said is true. But the way this is going, they have a perverse incentive to do this, and it is very bad for ratepayers. Your point of should they be paying for everybody in the state or should we be keeping electricity rates low and letting the taxpayers pay for it has a lot of validity. The legislature made a different decision a while ago. Do I agree with you? I got your point.

Get my point, which is they’re not using technology to solve this problem. They’re not using the cheap things they could do to solve this problem. They have chosen to do the most expensive platinum gold-lining that they could think of and the PUC let them do it.

David Roberts

A final question on that. Governor Newsom signed SB 254, which put this big flat charge on electricity rates going forward, I think nine years or 10 years or something like that. He did the opposite of what these people are talking about. He definitely put these costs squarely in electricity rates. Would you have signed that bill? I guess that is my question.

Tom Steyer

That is not the way that I would have solved this problem. I think that the governor has done a lot of good things about wildfire prevention in terms of controlled burns, getting rid of a lot of the dry timber around the state up in the Sierra, and a number of things of that nature. But I have a very different opinion about the electric monopolies that are driving electric rates in our state. They are spending millions and millions of dollars to prevent me from getting elected governor.

David Roberts

Yeah, I heard they are funding a PAC.

Tom Steyer

They are funding an anti-Tom Steyer PAC because they are worried that I will do exactly what I am saying, which is I will give them different incentives. I will have different people in the PUC and we will promote local competition, and that is very real and therefore their monopoly. Every monopolist loves their monopoly. Every monopoly will explain to you — “The world will end if you get rid of my monopoly.”

That’s what AT&T said. They said, “If you get rid of our monopoly, there will never again be a phone call completed in the United States of America.” But when they broke it up, if you will remember, the explosion of creativity in telephony blew everyone’s mind. The truth is we’re seeing that in the energy world in terms of new ways to generate electricity, new ways to store it, new ways to use it, new ways to conserve it, new ways to send it back and forth. There is an absolute explosion of new ideas and new technology. This system is stifling that in the State of California.

David Roberts

If you think 10% rate of return is too high, do you have a rate of return in mind that you would push your CPUC to target? Do you have a specific number in mind?

Tom Steyer

Look, I think the whole question in this, as someone who is an investor, is — okay, what is the risk involved? A 10% rate of return guaranteed to a 48/52 balance sheet guaranteed by the state of California is way too high. Are you kidding me? The question is, what is the risk to that? What is the thing that would make that not come true?

David Roberts

Do you have a number in mind or would you want to see some analysis?

Tom Steyer

I would like it to be a couple percent lower. But, Dave, in this stuff, I know God’s in the details, I really do. I think that the way this will work is for us to have a vision of where we want to go and then make sure that the details work, not trying to put these people out of business. I’m representing the ratepayers and citizens of California who have a monopoly that is taking advantage of them. That is very clear. People in California, if you go around California and talk to people, I can tell you there’s a deep, deep anger about what’s going on.

The people of this state are very stretched between housing costs and health care costs and electricity costs. The idea that we’re not going to address those problems is a gigantic mistake. I’m the person in this race who’s pushing for change. The people who are profiting from the status quo are pushing back at me very hard. But the truth is the people of California are at their wits’ end.

David Roberts

Let’s talk about transportation a little, because speaking of affordability, California now has the highest average gasoline price in the nation at $5.30. I think the national average is up to four. This is a vexed and difficult subject in California. Right now you have a big refinery closed at the end of 2025. There’s another big refinery that is set to close this month.

On the one hand, climate-wise, it might seem like a good idea. On the other hand, forecasts are that those two refineries closing will raise California gasoline prices, which are already the nation’s highest, by an additional more than a dollar to the point that Newsom spent the last year in office trying to shovel money at this refinery to keep it open. This is not a great look, but also you don’t want gas prices going up even further.

You have been asked about this before and your response a few months ago was, “We should import more from Asia,” which made sense at the time, but since then circumstances have changed quite a bit and importing oil now looks much more vexed and much more slow and much more expensive than it did. A rock and a hard place here. How do you offer short-term relief to California drivers and then long-term, what do you do about transportation affordability more generally in the long term?

Tom Steyer

I agree. Dave, let me say this. The price of oil has gone up $1.50 in the state of California because of this failed war in Iran declared by Donald Trump, which is putting $70 billion more into the pockets of the oil companies who got them elected in the first place. Are their costs going up? Is this somehow a cost-based problem that American oil companies suddenly have? Their costs go up because they have closed the Straits of Hormuz? No, this is a straight windfall profit to the oil and gas companies.

In the short run we should have a windfall profits test the way that we did in the 70s. It’s on the books in California. We’re not enforcing it —

David Roberts

On California oil companies?

Tom Steyer

On the oil companies who are selling oil in California. That windfall profit, which is totally a result of this war in Iran and nothing to do with their costs, should be delivered right back to Californian consumers, not to the government of California, but directly to the people of California to pay them back for that dollar and a half.

David Roberts

Before we go long term, let’s talk about the refineries. Do you think it is worth your effort to try to keep this refinery open to hold down gas prices, or are you going to let it close?

Tom Steyer

I understand that we are beholden to a very small number of refineries because of the position that we’ve put ourselves in. Therefore, it’s important for the people who are still driving — which is most Californians — internal combustion cars. It is important for us to make sure that those refineries stay open or to get oil from overseas at a competitive price. As you point out, what was true is less true because of the blocking of these straits and therefore the blocking of oil and gas to Asia. Understood? Yes. Do they have us over a —

David Roberts

You’re going to do it. You’re going to make a pun.

Tom Steyer

— have us over an oil barrel. I got it. The answer here is to get off oil. As I say, solar and wind don’t go through the Straits of Hormuz. The cost of electricity is plummeting. You said you’re in love with electricity. It’s plummeting around the world. The cost of electric vehicles is plummeting around the world. An electric vehicle is a battery with a car stuck around it. The cost of batteries is going to go down 80% this decade. The cost of EVs is going to go down enormously along with the cost of that battery.

We know already that the most efficient electric vehicle manufacturers in the world, in China, for $26,000, can deliver an EV with a 400-mile range. We know the game is over. We know it’s cheap. The point is, EVs are more expensive to buy. They’re more expensive to buy here. The truth is, I would triple the tax credit to move people to EVs.

David Roberts

This is my question because the Republicans federally have gone after a lot of things, among which the California waiver, which allowed California to set its own fuel economy standards. That’s being fought legally now, but there’s at least a decent chance that that’s going to go away. Where does that leave you? What are you going to do to make up for the loss of that waiver?

Tom Steyer

We need to move off internal combustion engines, period. That’s why I would triple the credit to move people to EVs. The upfront cost of an EV is cheaper. It’s already cheaper to maintain, it’s cheaper to fuel up. By the way, if I drop electricity prices by a quarter, that will make it that much cheaper to fuel up. We need to move there. The idea that we should be allowing more gas guzzlers because the actual pollution isn’t harming anyone — I want you to call the people in Pacific Palisades, in Altadena, and explain their houses didn’t burn down.

The Trump administration literally said they want to go back to the 1950s with Woody station wagons. Gas guzzling is good if you’re an oil and gas company. But if you follow the reason that clean electricity is so important, it is to drive down costs. It is cheaper. It is important that we move to that so that people who are strapped at the end of the month have lower bills. It’s also important that we don’t burn down cities in California.

It’s also important that we don’t have high electric bills, we don’t have high house insurance bills. All the other things that are happening in terms of food bills. The idea that anything that the Trump administration is talking about, about allowing more gas guzzling — “Let’s prevent us doing a sensible thing that is cheaper in terms of electricity and energy” — is insane. California should be going the exact opposite way.

David Roberts

You think through boosting tax credits, you can make up the gap that is left by the loss of the waiver?

Tom Steyer

No, I think that that is something that can — I know that not everyone’s going to sell their car today. I know that the speed with which people are buying solar panels in Europe doubled over this war. I know that the move to an EV — now it’s cheaper in the life of an EV to own an EV if you include the cost to fuel it and the cost to maintain it. Now, EVs are cheaper. Upfront isn’t cheaper.

David Roberts

I just heard in the UK upfront just got cheaper. Putting aside savings over time, even the upfront cost is cheaper in the UK now, not in America.

Tom Steyer

There is no question where we’re going in terms of costs. Battery costs are what drive an EV and they’re going down 80% this decade. It’s over. I know you’ve read my book, Cheaper, Faster, Better: How We Win the Climate War. What I want to provide people in California is something that is cheaper. EVs are faster if you’ve driven one, and it’s better. That’s the whole point. Let’s get people to make the smart decisions that also have the second-order effects that help us and let’s stop subsidizing.

Do I think oil and gas is cheaper? By the way, why do you think we are spending $200 billion in a war in Iran? Do you think that has anything to do with oil and gas? I do.

David Roberts

Can we talk about transit then? The other way to reduce transportation costs is to make more and better transit alternatives. Transit systems across the state, across the country really, but especially across California, are facing this fiscal cliff. This is extremely acute in California right now. There’s a bill, it’s going to be on the same ballot you are — SB63 — that would raise a little bit of sales tax revenue to fund Bay Area transit agencies. I’m curious whether you support that, but beyond that, do you have a plan for rescuing transit in California?

Tom Steyer

I am in favor of that bill, Dave. I don’t know whether you know this, but last year I was also a strong proponent publicly, both in terms of talking to people, but also writing an op-ed of a rezoning proposal in the legislature.

David Roberts

We’re going to get to the housing stuff.

Tom Steyer

No, housing and transportation are the same thing for sure. If you have dense housing where people can take public transportation to where they need to get to, then people use public transportation. The issue is that bill was about dense housing near public transportation. When you talk about why there would be a fiscal cliff, it’s because there isn’t enough ridership. Over time, what we need to do in California is build more densely for a whole bunch of reasons.

David Roberts

That’s a long-term thing. Do you have a short-term fix for the cliff? Because it is a cliff.

Tom Steyer

It depends how long-term is long-term. I’m talking about building a million houses in the first four years around public transportation in dense places. Is that the fix of all fixes? I think we need to do a lot more than that, but it’s a pretty good down payment. When we’re really talking about public transportation, we need to have dense urban environments around public transportation where people can get around. They don’t drive an hour and a half to work. They don’t have to be the Uber driver for their kids.

They can live in a place which is a walkable neighborhood and where people take public transportation to get places. That is something that works all over the world. That is the move we have to make. Much of California is built around the car. No one loves an hour-and-a-half commute. No one loves sitting in traffic. We’re going to have to make it possible for people to avoid both those things.

David Roberts

A common criticism in California — this was a part of the Abundance book, I’m sure you have heard it talked about — and that transit agencies in California spend on a per capita basis way more to build than they do almost anywhere else. There are more employees per rider. The employees are paid more. This is part of the larger critique of just how expensive it is to build anything in the US. Do you have concrete ideas about how to bring down the average cost of building transit in California? Obviously that is a piece of the puzzle too.

Tom Steyer

It is a huge piece. I’m a big fan of public transportation and I’m not a big fan of spending enormous amounts of money for very little output in public transportation. Dave, let me say this. I’ve spent a lot of time thinking about how to build houses in California. I’ve spent a lot more time on that than I have specifically. I’ve said to the transit organizations, “I’m a huge fan of public transportation, but you need to come back to me with a plan that works from a financial basis.” I’m willing to go through that line by line with you. But don’t come back and say we’re doing it because we’re not doing it at any price.

David Roberts

What about high-speed rail? Speaking of any price, $1 billion a year is going from cap and invest currently to the high-speed rail, and yet it’s proving to be not nearly enough. Meanwhile, all these other transit agencies are starving. How do you think about that? Do you want to double down and make high-speed rail work competently, or do you think that money should be going toward more proximate transit?

Tom Steyer

Of course I want high-speed rail, but I don’t want high-speed rail at any price. That is what I said to those people — look, I’m a big fan of public transportation, but not at any price. You’ve got to come back to me and let’s go through how this could possibly work. It’s not going to be just one thing. I always say about building houses — no silver bullet, silver buckshot. We have a multivariate problem. We’ve got to deal with urgency with every one of these issues and we’ve got to be smart and we’ve got to use new technology and there’s no choice about it because people can’t afford to buy the houses that you can build in California. How are we going to get the cost down to a place where people can afford it so that people can go back to buying houses and affording their rent?

David Roberts

Let’s talk about housing then. You would be coming in on the tail of a pretty extraordinary five-year period of legislative activity around housing. YIMBY stuff — generally a lot of victories. There’s SB131, which exempts infill housing from CEQA, which is a very big deal. There’s SB79, which is about density around transit stops. A lot of the laws are in place and there are a bunch of smaller reforms that came before. But there’s been this report from the YIMBY Law Report — looked at all these previous reforms and said what’s happened is they haven’t had much effect on the ground because local opposition, locals are passing local ordinances to block these state laws.

Now you’ve escalated. Now there’s a law in place that says the attorney general can come in and start fining these cities per unit they’re not building per year. I’m curious how you think about that in terms of enforcing. How do you envision enforcing these things locally?

Tom Steyer

Everybody thinks it’s just about NIMBYism, that in fact it’s just — we like the way things are and we’re not willing to change. I think there’s been a sense over time that not building a new housing development is a victimless crime. “There was a vacant lot here before, there’s a vacant lot here afterwards. Nobody got hurt. What’s the big problem?” The big problem is we’re not building anything. That means that tens of millions of Californians are suffering urgently because they can’t make rent or are leaving California.

David Roberts

And moving to Texas.

Tom Steyer

Yes. This is not a victimless crime. Let’s talk about the legitimate reasons that a city or a county would push back against permitting and try to do everything they can to block it besides just NIMBYism, and that is this: they feel that every unit, every dwelling unit that is added is an unfunded mandate to them to provide education services and healthcare services. They do not have the money to do it. That is why you see fees to build a house that go up to as high as 20% of the cost of a house because they are trying to front-load the cost that they expect to see going forward. That is why they push back.

I have said that on the first day of me being governor, I will call a special election to close a corporate real estate tax loophole that’s been there since the 70s, that’s worth over $20 billion to the state of California, the city and county level, for health care and for education. The idea that they have an unfunded mandate will no longer be true. They will have a funded mandate. Is that important? It is important. Is that the only thing? Because that will give us a lever to say to them, “We are going to push you hard to get this done and if you don’t, then there’s going to be a carrot and a stick.” We’re going to provide you this money in order to do it.

If you don’t do it, there’s something called the pro-housing designation program where you reward people who pay. We’re going to have to use the money of the state to say, “Your legitimate reason for not doing it is gone. Now there’s going to be a carrot and a stick here in terms of money.” We’re also going to have to modernize the Surplus Lands Act. There’s a whole bunch of things the state can do to get over the issue you’re talking about. The NIMBYism itself? That can’t be okay.

David Roberts

Governor Newsom just, I think this month or last month, sent out notices to I think 15 cities saying, “Get on the stick or I’m going to pull this AG thing on you. I’m going to refer you to the attorney general and you’re going to start getting fines.” Will you refer them to the attorney general if they don’t do what they need to do?

Tom Steyer

That will be one of the tools in the toolbox. I want to go back to this point about victimless crimes. It’s not a victimless crime. I’ll give you an example of this. The number one population that is growing in terms of homelessness is people over 65 who can’t make rent or lose their house. Think about that. That is not a victimless crime. That is something where something really serious is happening to people who are really at the end of their rope.

We’ve been endorsed by some of the people who work for the University of California as custodians, as dining hall workers, in a variety of — not professors. I talked to one of those guys who’d worked for the UC as a custodian for 20 years, living in his car, fully employed, never been unemployed, fully employed, living in his car. I talked to somebody who is 30 — I talked to his mom — 35 years old, lives in Salinas with his mother and commutes an hour and a half each way to Apple Computer. Not a poor company. My point being, this is not a victimless crime. Do we need to push to build what I’m saying we’re going to build, which is a million units in four years? We really do.

It is about permitting, it is about zoning, it is about overcoming the resistance of cities and counties, some of it legitimate, but it is also about building cheaper because there are tens of thousands of units in California that are permitted and zoned and not being built because we cannot build them cheap enough. We have got to use — I was saying to you, we have got to use new technologies to make the grid more efficient. It is really infinitely cheaper, infinitely faster, infinitely better. The point is, we can build houses in a different way where we are doing industrial construction off-site and then assembling them on-site. They are new technologies. They are much cheaper. They need revenues and demand for it to happen. The state of California can provide that consistent demand. We can drive down the cost per square foot by at least a third.

David Roberts

Let me ask more about the tax loophole you’re talking about. Californians, I’m sure, will be familiar with this. I’m not sure if the national audience is, but way back in 1978, the people of California, in their wisdom, voted for what’s called Prop 13, which had the effect of freezing — your property tax couldn’t go up more than 2% a year until you sold the property. This has had the effect of rooting people into their homes and buildings, not selling and wildly underpaying property tax revenue.

This is why California is resorting to sales taxes and impact fees and all these other places to get revenue, because they are not getting the property tax revenue that they ought to be getting. This has been crippling California state governance now for decades. What you are after is not repealing the whole thing. It applied to residential and commercial. You are talking about repealing on the commercial side.

Tom Steyer

Yes, I am.

David Roberts

Commercial properties should pay the market rate — they should pay their actual property tax.

Tom Steyer

Yeah.

David Roberts

My question to you is, a ballot initiative with exactly that on it failed in 2020. 2020 was a pretty big Democratic year. It was a Biden year. It was a lot of optimism, et cetera. Why do you think — you can’t, as a governor, just repeal this. It’s got to be either a supermajority of the legislature or a ballot initiative. What makes you think it can get through this time when it failed in 2020?

Tom Steyer

Dave, I don’t know how much you know about my history, but I’ve run three ballot initiatives against oil companies, tobacco companies, and out-of-state companies that weren’t paying fair state taxes in California. Every time people said exactly what you just said to me — “Are you insane? Don’t you know this is impossible?” And I won three times. I did watch the proposition, the ballot proposition in 2020, I did contribute to it. I know we can win this. It’s very clear. We’re going to have to make our case to the voters.

But you know what? We had to make our case to the voters against the oil companies. No one thought we could possibly win. We got 70% of the vote. The original idea behind what was Prop 13 in 1978 was — “We can’t kick Granny out of her house because her house used to be worth $20,000, and now it’s worth $200,000. She could pay the property tax at $20,000. She literally will have to sell her house to pay the property tax, given how much her house has gone up.” That is a lot of unintended consequences, as you pointed out. But Disney is not Granny. Disney is paying their property tax on Disneyland as if they were Granny, and they are very far from Granny.

David Roberts

Yes. All these corporate lawyers have figured out ways of transferring property to one another without ever upselling, without selling it. They’re still paying property tax rates from decades ago.

Tom Steyer

Maybe I could be right about this, Dave. Who knows?

David Roberts

We’ll see if you can persuade the people.

Tom Steyer

I’ve never gotten less than 60% of the vote. This is a very clear — absolutely unfair, unjust — loophole that corporations are taking advantage of and we have to close it. By the way, we need the money. I’m not doing anything unfair. I am closing an egregious loophole that got in there because Granny shouldn’t be thrown out of her house. This is anything but Granny.

David Roberts

All right, got 15 minutes left. I’d love to talk to you about climate change. In your book in 2024 —

Tom Steyer

Thank you. Look at that. My book. That is so good of you.

David Roberts

And I quote, “Climate is what matters most right now. Nothing else comes close.” Then your campaign launch video didn’t say anything about climate. It’s all about affordability, all about energy affordability. This mirrors a larger pivot in, I would say, the Democratic Party — climate has been pushed off the headline into the background and affordability is now on the forefront. I’m curious what you think about that pivot. What do you think about the status of climate change as a live issue right now? Do you agree with the general thrust of the pivot? In other words, do you think it’s appropriate now to talk about affordability instead of climate? How do you think about the relationship of those?

Tom Steyer

You say I’m not using the word climate, but I’m talking about climate change. When I’m talking about breaking the electric monopolies, I’m talking about people putting solar on the roof and batteries in the basement. When I’m talking about getting people off gasoline and tripling the credit for EVs, I’m talking about getting people off fossil fuels and on clean electricity. When I’m talking about housing, I’m talking about cutting down on miles driven. I’m talking about a completely different impact on the world. I’m also talking about getting away from sprawl and leaving natural lands that we need if we are going to have any animals and birds and all kinds of living creatures left on this planet.

I’m not using the word. I’m talking about why this — my book, as you know, was called Cheaper, Faster, Better: How We Win the Climate War. I’m talking about Cheaper, Faster, Better, not about the colon — How We Win the Climate War.

David Roberts

Yeah, I get it.

Tom Steyer

In 2010, we ran — we were No on 23, fighting oil companies to preserve the cap-and-trade system. I ran that with George Shultz. We got 70% of the vote. I told everybody on that campaign, which was about climate at some level, “We’re never using the word climate. If you use the word climate, I’m going to fire you.” They said, “Please, can we use it?” I said, “No. We’re going to talk about the impacts of doing this, the job creation, the health enhancement, getting kids with asthma to be able to breathe clearly, the fact that we have business, half the chambers of commerce supporting us.” We’re doing something that’s good for the people of California right now.

We’re not talking about something 30 years off or 10 years off. The truth is, Dave, people who can’t make rent can’t think about what’s going to happen in five years. “I can’t make rent this month, I can’t make my health care payment this month. My kid is sick. What do you want me to do? I don’t want to think about five years off.”

What I’m doing is I’m talking about climate. I’m talking about climate in the ways that people can hear it, in the ways where we’re giving them something that is good for them right now, but which also has the benefit of moving us to a clean energy economy, including creating incredible jobs and incredible industries and incredible companies that will use new technology to get things done, including what I’m — I’m talking about it all over the place. I’m just not using the word climate.

David Roberts

Let me put a little point on it then, because the cap-and-invest program is California’s big high-profile headline policy. Climate policy used to be cap-and-trade. Now it’s cap-and-invest, just got reauthorized. There are a lot of critiques of cap-and-invest from a lot of different angles. But one of the angles is as a tool for addressing climate change. This operates by raising prices on fossil fuels. It does invest in other things, but it does raise prices on fossil fuels. In other words, it reduces emissions through taxes, which is not very popular right now, especially at a time of affordability crisis.

I wonder if you think that the relative emphasis of the carbon price versus the other tools, if that balance is right right now in this current circumstance. How do you feel about how cap-and-invest came out?

Tom Steyer

I don’t think there’s any choice but to charge polluters. I think that’s absolutely critical. I said I would triple the credit for people to move to EVs. I will drive down electricity prices by pushing for local clean energy alternatives. I want to make sure people’s bills are lower. That’s absolutely true. I think it’s critical. There is always going to be the incentive, as long as there’s one person driving a car, to say, “If we make the oil companies actually pay for the full cost of the oil, that is going to hurt that person.”

I did say this to you, but I’m not sure I really said it in any way that was understandable. I’ll say it very clearly. We are spending $200 billion to protect our oil industry. That’s why we’re in this war in Iran. That’s why the president asked for $1.5 trillion, because we’re now fighting wars. That is money that is going to oil and gas to protect them. That is not in the cost at the pump, last I checked. When I say to you we are subsidizing oil and gas, it’s brutal how much we’re subsidizing and that is our money. That money could go to the education and health care of people in California.

David Roberts

One of the left critiques of cap-and-invest, the way it came out, is that a bunch of oil subsidies — a bunch of oil and refinery subsidies — ended up in cap-and-invest.

Tom Steyer

That was supposed to burn off over time. Let’s talk about climate. As the saying goes, Mother Nature does not care about American politics. The laws of physics are not going to change because of American politics.

The truth is, if you look at the data from the natural world, it’s terrible. It’s incredibly terrible. If you look at the data from the technical world and our ability to get off oil and gas, it’s incredible. What I think is this — we have an absolute issue. We can see it happening. It’s a slow-motion car wreck.

On the other hand, we’ve developed the technologies that are cheaper, faster, and better. But the incumbent political powers are fighting their ass off to keep making money, to keep getting the federal government to protect them with hundreds of billions of dollars a year of military expenditures, not insisting they refuse to pay for the pollution that burns down people’s houses, that raises the cost of home insurance, that causes floods around the United States, that makes the water for farming much more difficult. They don’t want to pay for that. When in fact we have the answers at hand that are cheaper and faster.

David Roberts

Speaking of their political power, there was a big polluter’s pay bill in California just a couple of years ago, and it went down to defeat. Speaking of them fighting their asses off, are you talking about explicitly passing another bill like that, a polluter’s pay bill, a specific charge on —

Tom Steyer

I just want to burn off all the permissions they have to pollute that are part of cap-and-trade. We need to make this transition. The rest of the world is making this transition. No one else in the world is doing what we’re doing. If you look at Africa, Asia, Europe, they’re all burning to make this transition at incredible speed. The costs are going down, the costs are lower. We just happen to have an oil and gas industry that’s got us by the throat and they are fighting like crazy to make sure they can continue to get monopoly rents. Of course, they’re against me.

If you want to wonder who is the person pushing for clean energy, the person pushing against climate change, take a look at the people who are for climate change and who they are opposing. They are opposing me. I am really the only person in this race who has a plan on how to change energy and how to use energy to push us back into the forefront of the fight against climate change while we build big companies, while we drive down costs, and while we assume the kind of leadership that America is always supposed to have, in my opinion.

David Roberts

Final question. You have been involved in the climate fight — good grief, a long time. Now in 2010, as you say, you jumped in with Prop 23, which defended the famous Schwarzenegger climate bill. That started all of everything. In terms of ballot initiatives, that was a hall of famer and that set California in place and dragged the rest of the country along. Back then, you were rolling back the Koch money, you had a quasi-bipartisan coalition behind you. The sense that California was leading.

Today, the waivers are gone, the polluters pay bill died. Everybody’s on the back foot. It just seems a lot grimmer now. I’m curious about your personal reflection on the climate fight. Do you feel we have lost ground, or do you think that is just paying too much attention to US politics?

Tom Steyer

If you look at what the world — what the global action was supposed to be in 2020, we were supposed to reduce emissions by 40%.

David Roberts

Yeah.

Tom Steyer

Do you remember that?

David Roberts

I do.

Tom Steyer

It’s 2026, and the only year that emissions went down was in the COVID year because economic activity went down. We flattened out, but we haven’t gone down. That’s the truth. Therefore, all of the projections about where we were going to be are way off.

If you talk to the scientists, which I’m sure you’ve done, I’m not trying to sound like the font of all wisdom, but if you talk to scientists about when we’re going to hit what the UN described as the upper limit of acceptable — which is 2 degrees Celsius, which no one in the United States even knows what that means, but just for the Americans listening, that’s 3.6 degrees Fahrenheit, the way we think about it. That means the average in the world goes up 3.6% and a lot more in certain places. It pushes us towards tipping points. If you talk to scientists now and you ask, “When do you realistically think we’ll go through 2 degrees?” Before it was 2015. Now it’s probably 15 years earlier.

David Roberts

We’ve fallen behind, and climate change has accelerated.

Tom Steyer

David, in answer to your question, do I feel we’re losing? We’re obviously nowhere near what we said we were going to do, but the technology’s better than anyone ever expected. The world, the climate is worse, the technology is better. Let’s talk about the oil and gas countries. If we want to be like them — we want to be an oil and gas country. We’re the biggest oil and gas producer in the world. We’re Russia plus Saudi Arabia combined, plus some.

Do we want to be like Russia, a very poor country where the people with the guns are very rich? Do we want to be like Venezuela? No. Iraq, Iran? You go through the places, it is the resource curse. The problem with Trump is he thinks that is what riches are.

David Roberts

It seems we do want to be Saudi Arabia. If you pay attention to Trump —

Tom Steyer

Trump thinks — he knows that in those countries, the people with the guns are incredibly rich and everyone else is poor. He doesn’t give a damn because this is a chance for him for real corruption, for real control of energy and therefore real payoffs. No, am I disappointed? That’s what I’m running on, dude, taking on the establishment, the electric monopolies, the realtors who don’t want us to build houses, who don’t want us to work for Californians. I’m the person they’re all going after. Single-payer health care because Californians can’t afford their health care.

Yeah. There’s one person in this race who’s for change and there’s one person in this race who has an actual energy policy that takes climate into account. It’s me. They’re all lining up against me. I ask you, you’re saying, “The climate bill went down and all these things that didn’t work out.” That’s what I’m running for governor for — change. I’m the change agent. The establishment is pushing back — anybody but Tom. Trump posted against me. Elon posted against me.

David Roberts

Did you get a Trump post?

Tom Steyer

Hell yes.

David Roberts

What an amazing break for you.

Tom Steyer

I described it as a love letter. He called me a sleazebag and a loser.

David Roberts

That’s pretty mild.

Tom Steyer

The head of ICE posted against me. I always say in politics, you know who someone is by who their enemies are. That’s a bunch of enemies that I’m glad to have. I’m glad to take on the electric monopolies that are charging us twice as much as everybody else. I’m glad to stick up for working Californians. I can do it. I can take their punches. They’re punching. If I win, everything you say goes the other way.

David Roberts

We will leave it there. Thank you so much for taking the time. Good luck and maybe we will talk again in a few years.

Tom Steyer

Dave, I want you to move down here and vote. Get your ass in gear, dude.

David Roberts

I got problems up here, Tom. We all have things to deal with. All right, thank you so much.

Tom Steyer

Thank you very much, dude.

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much and I’ll see you next time.

The think tank Ember just released its yearly Global Electricity Review. In this episode, I chat with co-authors Nicolas Fulghum & Kostantsa Rangelova about the biggest stories in the global power sector in 2025. We geek out over the record-breaking scale of solar deployment, the game-changing role of batteries in shifting midday power to the evening, and the tantalizing possibility that India will not follow China’s coal-heavy development path and that global fossil fuel generation has finally plateaued.

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David Roberts

Hello. Hi. Greetings, everyone. This is Volts for April 22, 2026: “The big stories from the last year in electricity.” I’m your host, David Roberts.

Every year, the think tank Ember puts out its Global Electricity Review — a comprehensive look at electricity generation around the world, delving into which countries are getting power from which sources, and how those numbers are shifting over time. Last year I talked with them about the 2025 edition, which was fun and enlightening, so when the 2026 review landed, I thought I’d come back for an update.

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This year’s report has some striking findings. Notably, global fossil generation fell in 2025 — a rare event, and the first time it’s happened outside of a recession or an unusually mild weather year. Solar and batteries just keep on booming.

Countries like Australia and Chile are showing what truly green grids can look like, in practice rather than theory. And there’s an interesting argument in the report about India — that it’s unlikely to repeat China’s coal-heavy development path, for structural reasons.

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To dig into all of this, I have two Ember veterans with me today — Nicolas Fulghum and Kostantsa Rangelova, both returning guests, though this is their first time appearing together. I can’t wait to geek out.

With no further ado, Kostantsa Rangelova, Nicolas Fulghum, welcome to Volts. Thank you so much for coming.

Kostantsa Rangelova

Hello and thank you for having us.

Nicolas Fulghum

Thanks so much for having us.

David Roberts

I just want to jump in. Nick, I’ll start with you about some things that haven’t changed. You could just write this report every year and just say, “Hey, look, renewable energy is growing really fast again.” Let’s start, Nick, with that, which is I guess the same as last year. Technically, there are a couple of milestones this year. Wind and solar combined met 99% of demand growth around the world. I want to start with that first thing, because that’s crazy. People need to wrap their head around that. All demand growth is being met by renewables. Solar was 75% of that demand growth and overtook wind in total generation for the first time ever this year.

The other notable thing is that solar, despite several boom years in a row, has hit the highest rate of growth in eight years, despite, of course, having a much larger base it’s working off of. Just tell us about renewables and the ongoing renewables story.

Nicolas Fulghum

As you say, some things never change. It’s difficult when you’re writing these reports to not end up with a headline that says “record solar growth.” Indeed, there is a section in the report that does have that name still.

David Roberts

It keeps breaking records. What can we do?

Nicolas Fulghum

It does keep breaking records. You can’t not say it if it happens. As you pointed out, we had this record-breaking solar growth in quite a few respects, both in terms of the absolute growth — 636 terawatt hours of solar generation was added in 2025. Just to put that into perspective, we’re talking about twice as much as the annual electricity demand in the UK. It’s a huge amount of generation that’s being added there. In relation to the demand growth, it’s 75% of the increase now. That’s way more than any other source grew.

The second largest growth came from wind at 205 terawatt hours, about a third of the increase in solar. Then you go down to nuclear power and to gas, which grew about 36 terawatt hours. That’s then 18 to 20 times smaller than the increase in solar.

David Roberts

Which — I’m very curious — which nuclear and gas, who’s winning there? What are the relative levels there?

Nicolas Fulghum

It’s all within the margin of error. We have an increase in gas generation of 36 terawatt hours and a nuclear increase of 35 terawatt hours.

David Roberts

Oh, roughly the same.

Nicolas Fulghum

Roughly the same.

David Roberts

It’s hard not to say that over and over again because it really takes time, even if you hear that over and over again, to truly absorb the fact that renewables in terms of new power generation have won. They’ve won the game. That’s 99%. 99% is renewables and that is not because the entire world is gripped by concern for the children of Bangladesh. It’s incontestable now that this is the cheapest. Also should mention this, Nick, before we get off this topic — renewables overtook coal, which I was surprised by, because I thought coal had had a resurgence in 2025. Talk about that a little. Is it just — it did have a resurgence and solar’s was just bigger?

Nicolas Fulghum

No, we saw a small decline in coal generation in absolute generation for the first time in a while. A drop of 63 terawatt hours. If you combine that with the minor increase in gas and then another minor fall in other fossil generation, which is mostly oil, we end up with a small decline in fossil generation overall — a 0.2% drop. That’s the result of the trends that we’ve already mentioned of renewables and nuclear power together. Low-carbon sources are growing faster than electricity demand.

David Roberts

All the hype about coal, all the hype about how the war and everything is going to send people running back to coal — all that did not show up in the numbers then.

Nicolas Fulghum

Not yet in 2025. We expect that even if there might be a short-term switching of fuel sources, it wouldn’t be an increase in fossil generation overall. If there is a reaction to the recent conflict in the Middle East, it would be largely a switching from one fuel source — from gas, for example, if it’s too expensive, to coal. But make no mistake there as well, that would be short-lived. Coal prices have also risen. Countries that are importing coal don’t have an amazing option in coal just on the side. It is very much you’re choosing between two poor options.

I think it’s best summarized in the words that Xi Jinping uttered the other day where China was congratulating itself on having taken a renewables-heavy development path in recent years and the benefits of energy security that has brought. To hear that explicitly said from China, I think says everything about whether the future for energy security sits in renewables or it sits in coal.

David Roberts

It was a good idea for all the reasons he says in the first place. Then we go and reinforce what a good idea — just so there’s no remaining doubt. Let’s clear it up that that was the smart thing to do. The last question about renewables is how long could this go on? Where are we on the S curve? Do you think we’re still just heading up on the S curve? Are we close to maturity? Should we expect again in 2026, 27? How long can this surreal boom in renewables go on?

Nicolas Fulghum

As you noted, there is always the expectation that once the technology matures, at least you might stay with high absolute growth numbers. But usually your growth rates come down.

With solar, what we’ve seen is that 2025 had the highest percentage rate — 30%, the highest rate in eight years — which isn’t a common feature among technologies that reach maturity. Even though solar is very much a mature technology in the market, obviously now.

David Roberts

It’s wild. I want more explanations. It seems there’s an element of magic involved. It is a mature technology. It is getting better, but not at the rate it was. It just seems more than the sum of its parts, I guess is what I’m groping toward.

Nicolas Fulghum

We’re still seeing cost declines even in the solar sector in terms of installations, but also just the total installation costs. Not just the panels, but the total cost. Project cost is still coming down. Financing — this is not part of this report, but our colleagues just put out analysis showing that the upfront cost for solar power is now comparable with fossil fuels. That’s not including fuel costs, which are obviously significantly higher. That changes the game, especially for emerging economies where upfront costs are really important. Capital intensity with high interest rates can really make or break a project. Solar now is both competitive upfront and then in the operational cost is the clear winner because it doesn’t have any fuel costs associated with it.

David Roberts

The upfront costs were the last resistance, the last argument against. Again, solar breaking records. Renewables breaking records. Solar and wind together handling all new global electricity demand. Wild. The other side of this happy story is batteries.

Let’s talk about batteries a little bit. Last year, if I was going to characterize the report, the tone was “here they come, they’re on the way.” This year is “here they are.” The report takes a closer look at two case studies — Australia and Chile — with regard to batteries. Tell us what is going on in those countries and why is it striking?

Kostantsa Rangelova

Absolutely. Chile and Australia are two examples where the amount of batteries being built in the country is significantly larger compared to its solar growth. They can shift a lot of that additional solar with batteries to the evening. The reason why this is important is that when you see a headline number saying, “New battery capacity added in 2025 was 45% greater than 2024, it reached 250 gigawatt hours,” it’s very difficult to put in your head — is 250 gigawatt hours a lot? Is this a big number? Should we be happy about it?

The way to think about it is what do batteries solve? This is strongly linked to what Nick was just saying about solar, because solar being the dominant driver of growth in clean power means that with solar alone, there is an inherent limit where you build solar, but that solar generates electricity only during the day. Then there is the question, what do you do when the sun sets? The favorite question of many renewable skeptics saying, “Oh, what do we do when the sun sets?”

Batteries help you bring that electricity into the night. The way we try to explain the size of batteries and that 250 gigawatt hours of battery capacity that was added in 2025 is that when you look at solar growth — as Nick said, solar increased by 636 terawatt hours. This is the electricity generated in 2025 versus 2024 across the year. If you divide that by 365, this is how much more solar was generated on the average day of 2025 compared to last year. That number is 1.7 terawatt hours.

With this battery capacity, you could take 14% of that and shift it to the night. 14% is not that big, but it is big when you compare it. For example, it was 5% in 2022. Batteries are really catching up to solar’s explosive growth. Solar is growing super fast, but batteries are managing to catch up to that and now are at a size that can capture a meaningful percent of that additional solar and shift it to the night.

David Roberts

Just to clarify, you’re saying that globally, batteries are growing faster than solar, catching up?

Kostantsa Rangelova

Yeah, they’re managing to catch up. The reason why we use Chile and Australia as two examples is that this percentage — this 14% on the global level — in Chile it’s 76%, and in Australia, it’s 53%.

David Roberts

Wait, 76% of the solar energy generated in Chile can be moved to nighttime by batteries?

Kostantsa Rangelova

The additional solar. Solar generation grew by 2 terawatt hours in 2025 compared to 2024. This is how much of the solar growth in that year can be captured by the new batteries. It’s not the outright capacity of battery, which is still small, but it’s starting to catch up. When you compare the additions on the battery side and the additions on the solar side — what can the new batteries do with the new solar? More and more of the new solar can be captured with battery and shifted to the night.

Chile and Australia are both above 50%. 50% is a pretty important number, because when you are able to shift 50% of your new solar from the peak during the day to another time of the day, probably the evening, when you have peak demand — if you can shift 50%, this means that your midday peak would not grow. Your solar is not growing at its highest in the middle of the day, it’s growing in the shoulder hours — early morning, afternoon — and then 50% of that growth is happening in the evening or whenever you like it to be, whenever it’s most needed.

Chile and Australia are both at a place where they can shift more than 50% — which means that more and more of that midday solar is moving to the evening where it’s most needed.

David Roberts

It looks like you get pretty striking effects from that, even at relatively low percentages. In other words, just being able to move a little bit of the solar to night gets you quite a bit. Chile has cut curtailment of solar by 80% just with that additional increment of batteries.

Kostantsa Rangelova

Exactly. It was not estimated by us. It was the Renewables and Storage Association of Chile that estimated that the batteries added in Chile managed to avoid 2 terawatt hours of potential curtailment. 2 terawatt hours is equivalent to the growth of solar in Chile in 2025. It’s more than 2% of Chile’s total electricity demand growth. That’s a huge amount of electricity that would have been curtailed but wasn’t, thanks to batteries.

David Roberts

The last time I talked to you, Kostantsa, was about an Ember report that was about solar and batteries and how far they have come and how much they can cover now at a reasonable price. That was mostly in theory. We were just talking about prices and doing the model. The one thing I remember about that is that Las Vegas can get to 90% solar and storage, I think.

Kostantsa Rangelova

More than 90%.

David Roberts

Economically, today. But that was theory. This is reality. Australia and Chile are places where it’s happening in reality. One of the questions I had is — is it going to be possible for any country to get to 100% with solar and batteries? The conventional wisdom is that batteries are too expensive, you can only get four hours, you’re going to have your Dunkelflaute in your gray winter, you need giant thermal storage, or you need firm power in the winter, etc. Is all of that true? Is anybody going to be able to get to 100% on solar and batteries?

Kostantsa Rangelova

I’m happy you’re asking this question because this is something where a lot of the conversation has focused. Let’s take a step back and say globally, in terms of what the solar share in 2025 was — globally it was less than 9%, 8.7%. The top countries in terms of the highest solar shares — at the top of the ranking was Hungary this year with 27%. Chile was second with 25%. These are the leading countries.

What batteries will change for solar now means that it will unlock shares that go beyond these. Let’s say 25, 27% was considered the limit without a lot of additional flexibility resources, and especially shifting solar to the night was a very big problem for accommodating more and more solar growth because there is just so much electricity demand that you can cluster in the middle of the day and so much of the additional sharing across different grids that you can do, especially if you’re thinking about many interconnected markets that all have solar and the sun sets all at the same time for all of these markets and rises at the same time.

What batteries do is that they get from this 20-something percent, which is quite big, to something like 50, 60, 70% — starting to look quite realistic. This means that solar can keep growing at the record-breaking pace that we’ve been seeing for quite a while longer without us really worrying about this. The reason why this is such a big game changer is that even when on the global level we are at 9% in 2025, some months it was 11%. The record high this year for a monthly average was 11%. But on that month, this solar was not delivered equally and solar met a quarter of electricity in the middle of the day. When the solar share is around 10, 11% across the day, it reaches a quarter in the middle of the day.

David Roberts

Interesting. And that’s current?

Kostantsa Rangelova

Yeah, that’s 2025. We estimated that across the world on average in May, when the highest solar share on the monthly level was, solar was meeting a quarter of daily midday electricity across the world. Imagine some countries — like Hungary — was at 90%. For Hungary, the highest month in terms of the highest solar share on a monthly level was June. In that month on average, solar was meeting over 90% of electricity in the middle of the day.

Then you have large systems like Germany, for example, where it was, if I’m not mistaken, more than 60%, more than two thirds. You have Spain and you have the Netherlands, which are also similar level, definitely over 50%. It gets difficult to get beyond that because these countries — Hungary was at 27%, the top country leading the world in terms of solar share in electricity, 27% across the year. But in June, 90% in the middle of the day. I hope people are seeing this limit that batteries can now help us break, because this midday share can stop growing even when 50% of the new solar is being absorbed by batteries. You can stop growing that midday share and increasingly put more and more of that solar in the evening when you need it more.

David Roberts

These first two things that we’ve hit just in our conversation are, to me, the big macro story in the world of energy right now, which is solar for a while now has been the cheapest bulk electricity that you can produce, and that’s just getting more and more so — the lead is growing, not shrinking. The only thing holding back solar has been, “It only shines during the day. You have to be able to shift it.” All of the hope for natural gas with CCS and nuclear and BECCS, space solar, all these ideas are all circling around nighttime. How do you get the power in the nighttime? Along come batteries.

Kostantsa Rangelova

We solved that.

David Roberts

We’re like, “Okay, done.”

Kostantsa Rangelova

Absolutely, we solved that. The remaining challenge is what you mentioned earlier — the Dunkelflaute and the longer periods of lower solar output. The idea is that you’re not supposed to be aiming for powering the whole world 100% on just solar and batteries. You can have a balanced mix — throw in some wind in there. If you look at India, it’s sunny in March, but then when the monsoon comes in July, you have higher wind. There’s a lot of complementarity.

You need to have a balanced approach. Some countries have lots of hydro or even you can use a little bit of gas as backup. If it’s 3% of the electricity across the year, you’re already 90 plus percent clean.

David Roberts

That would be a good problem to have.

Something I heard on another pod the other day, I can’t remember where, apologies to whoever it was. The point was that 90% of the world’s population is within 45 degrees of the equator. The whole Dunkelflaute thing that we all obsess about and talk about all the time is a marginal problem. 90% of the world’s population can do just fine, don’t have Dunkelflaute. It’s out there, it’s a problem, but can we just go ahead and do the 90 that we know how to do?

Let’s just do that.

Kostantsa Rangelova

Most of the electricity demand growth will be happening in these countries that don’t have that problem.

David Roberts

We’re going to come back to that. The final battery fact I’ll drop, then we need to go to the next thing, is that battery pack prices fell 45% in 2025.

Kostantsa Rangelova

To $70 per kilowatt-hour.

David Roberts

Every time I talk to you, we have one of these numbers. Every time it just causes my mouth to drop. It’s not a normal experience for consumer products to drop almost 50% in price a year again and again. In 2025, battery pack prices fell 45%. Whatever your estimate of what batteries could accomplish was a year ago, multiply it by 45% more and then probably again next year. Just to throw that out there. Let’s move on to the plateau issue.

One of the things that gets discussed most around these reports — people are modeling these things all the time. Reports coming out for past 20 years — is “When’s it going to peak? When’s it going to peak?” We’re slowing it down a little bit. Solar and wind are taking more and more of the incremental growth. “When’s it going to peak? Is it peaking now? Oops, we were wrong. It flipped back up again the next year,” etc.

All of which is to say it went down last year. We’ll only know the answer to this question with a little more distance and time. In your estimation, from what you can see today, why did that happen? Is that just structural or was there something about this year that was idiosyncratic?

Nicolas Fulghum

The best peaks are definitely observed when they have already happened. People have been burned too many times on calling various peaks, including in 2020 when we had a drop across all kinds of fossil fuels, not just in the power sector. There were a few pieces saying “that was the peak” and then it wasn’t.

David Roberts

There’s this whole idea that maybe post-Covid we won’t just go back to the way it was. Then we just did.

Nicolas Fulghum

We did. But crucially we didn’t in the power sector. We’ve mentioned this at the beginning — what’s the difference between this year where we’re meeting all the demand growth with clean power to previous years where that’s happened. 2025 was the fifth year in this century where we didn’t have an increase in fossil generation.

In the past when this has happened — think 2020 and we had the recession in the late 2000s. In 2009 we had a decline in fossil generation. Those years, they stick out. The reason that we had a decline in fossil generation in those years is because demand growth was either really low or demand fell.

What makes 2025 so different is that we had really healthy demand growth. Demand went up 2.8%. The 10-year average is 2.7%. Very normal demand growth. That is the big difference.

David Roberts

Global GDP growth was 3.2%, which is normal, not a recession.

Nicolas Fulghum

Very much in line with the 10-year average as well. This is what we’re looking at when we’re saying there’s a structural difference here. When you look at the charts of the increases in solar and other clean power sources, it’s a nice curved line. It just increases and increases. What’s much more volatile is the increase in demand from year to year. That’s what’s going to make calling the specific peak quite difficult, because last year, for example, we had an incredibly hot year and crucially, it was much hotter than in 2023.

We had this acceleration in heat waves and that creates a lot more cooling demand. 2025 was also really hot, but it wasn’t an acceleration. It doesn’t have a net effect on demand necessarily. We are moving back into an El Niño year. In 2026, potentially we might see new temperature records. These fluctuations can affect demand quite a lot from year to year. We’re talking about a whole percentage point, for example, that can happen.

David Roberts

It’s possible that next year fossil generation could go back up. It’s entirely possible.

Nicolas Fulghum

Entirely possible. What’s much more important is when we’re looking at the structural trends. If we look at just over the last few years, how much has clean generation grown every single year? Then we look at the same for electricity demand and we extrapolate those trends out, we see that clean power is now meeting the increases in demand, which leads to a flattening out of fossil generation. No growth. This is what is the potential plateau. There are no certainties in forecasts. I think everyone knows that. The most likely scenario at the minute is that we’ll have a few years with probably some smaller increases, some smaller falls in fossil generation.

Overwhelmingly, as we get towards 2030, 2035, the growth in clean power is going to be much larger than the growth in demand. That’s when we will see fossil generation come down. There are various models out there — some people know from the International Energy Agency, from Bloomberg, there are various scenarios — but generally they land at fossil generation 10% below 2025 levels in 10 years or 20% below 2025 levels. That’s the realm that we’re in now.

Some people might say we need much stronger declines. 10% in 10 years, that’s absolutely nothing. It’s a very fair point. If you come at this from more of a climate perspective, that’s not the reductions that we would expect. But it’s important to say that the power sector is also playing a dual role here. It’s not just about decarbonization in the power sector. Part of what that demand growth is doing — and we’re thinking about demand growth that’s within these projections — demand is not growing at 2.7% like it has done in the last 10 years. It’s growing at 3.5% per year, more than it did this year.

David Roberts

The acceleration in electricity demand driven by data centers, electrifying cars, heating, cooling, etc. — that’s global and enduring, you think?

Nicolas Fulghum

There are very clear signs. We’ve put some of the analysis in the report — electric vehicles make up still single-digit percentages of the demand increase every year, but it’s a substantial amount. There is a flip side, a positive flip side to it. Every terawatt hour of additional electricity demand is offsetting oil demand in the transport sector. This is what I mean with the dual role of the power sector — it’s not just about decarbonizing electricity generation. We’re also moving many processes in the rest of the economy into the power sector, which is a very positive effect.

If we didn’t have electric vehicles, if we didn’t have any data centers, if we didn’t have electric arc furnaces or heat pumps, then fossil generation in the power sector would fall quicker. But the trade-off is worth it because the emissions reductions outside the power sector that we can achieve are higher than purely just cutting emissions as fast as we can.

David Roberts

That’s the whole premise of the podcast you’re on. That is the core premise here. I want to ask another question about the plateau. The way you’re describing this, it’s often called a bumpy plateau. The idea that we’re in a little period here where we’re going to be wiggling back and forth before the enduring declines start. This is something people have been predicting for a while. The way you describe it is it’s like if I’m driving on the interstate going 70, and I’m passing a car going 65, we might waver a little bit as I’m passing, but I’m steadily passing and I’m going to get past.

That’s how you’re describing what solar is doing now to fossil generation. We’re wiggling now, but it’s going to be a few years and then we’re going to be past. There is a theory out there that there’s something sticky about the plateau, that we’re going to be stuck on the plateau. I’ve seen lots of models that say this. I don’t really know why we would be. There’s also this theory out there — Vaclav Smil, I think, is associated with this idea — that we don’t have energy transitions, we only have energy additions.

We’re still burning wood, etc. We’re still using coal. We just add these new sources and these new kinds of energy on top of existing ones. That theory would tell us that we’re not going to get enduring declines. It seems to me, at the very least, if you get a decline, you’re refuting that theory. I’m curious what you think about how long this plateau is and if there is anything to that energy addition point?

Nicolas Fulghum

It’s an interesting theory. The point that’s often made within that is that we’re still using as much biomass as we were 200 years ago and, in theory, that was an energy technology that was surpassed. What I would say is I think it doesn’t hold up with the reality of the energy system because biomass wasn’t surpassed as an energy carrier in a lot of applications because we still have areas that use biomass for cooking because that’s the available fuel there. The reason there has been this consistent energy addition in all of these areas was because other fuel sources were still easier to procure or easier to use in those contexts.

I do think that qualitatively we do have a difference in the transition that we’re seeing here because the substitution is not from cooking with biomass to heating our homes with coal, and then moving on to electricity produced by coal and gas and so on. We’re directly switching from one form of electricity generation to another form of electricity generation. That new form — solar, wind, batteries — is economically more viable and is already displacing it. On a global level, we have this slightly smoother trend.

David Roberts

The fuel source is always accessible to everyone everywhere.

Nicolas Fulghum

Exactly. That’s why we expect emerging economies to at some point travel faster than economies that might still have a huge stock of fossil fuel infrastructure. The parallel to this addition model only holds up so far when you look at the global level and historical trends. In individual countries, we already see that there isn’t addition happening. We see substitution in a number of countries. We see substitution in Brazil this year. We saw some substitution in China. China is so big that you can take it as almost a global number where it will probably plateau, but in the European Union, there’s plenty of substitution happening already.

If the theory is only applicable at the global level, I don’t think it’s necessarily a good theory to predict what’s happening at the country level. What I would describe it as is essentially we are running out of countries that are going to significantly grow their fossil generation.

David Roberts

The final thing on the plateau is just the US in 2025 lurched the other way. Coal generation was up 13%. I don’t think net fossil generation was up in the US. I think we just did gas to coal because gas got more expensive for a bunch of reasons. Is that just a blip? Is there anything to say about that other than that it’s probably just an anomaly?

Nicolas Fulghum

We had a very small increase in fossil generation in the US still, even with that switch back from gas to coal. Even in the US where you had strong demand growth in 2025, really cold winter temperatures at the beginning of the year, which pushed up demand as well. Even in the US, which politically is, if anything, moving away from support for renewables, they still met three-quarters. Solar and wind still met three-quarters of the demand increase.

David Roberts

If you look at the US numbers over time, does Trump policy show up yet in the numbers?

Nicolas Fulghum

I would say not quite yet. What it will likely show up in is that the additions in solar and wind that we could have been seeing in 2027 and beyond will probably be lower, so that we get the unfortunate counterfactual where that disappearance of support and the active, in some cases, canceling of offshore wind projects that are in process is not going to encourage faster deployment. If anything, it says something to the durability and the economic viability of solar and wind that they’re still seeing such huge growth in the US. The most liberalized markets in Texas are choosing solar and wind actively.

David Roberts

The other big topic this year is India, which I think is really interesting. People in our world talk a lot about China for obvious reasons. China is the number one in choose your metric. But India is important. Got a lot of people, quite big, growing quite fast.

The macro worry has always been that emerging economies are going to follow China’s path — that is, develop with coal and then once they’ve achieved some measure of prosperity, slowly transition from coal to renewables. If you run the numbers on that model, if that happens, we’re all screwed. But it looks like maybe it won’t, India being the case in point. Maybe one of you can tell me, what are the signs? Why would we believe that India isn’t going to follow China’s? What are the counter indicators?

Nicolas Fulghum

I’m happy to start with the structural perspective. Then Kostantsa might be able to add something interesting about batteries here as well. A lot of people are familiar with China’s growth story — huge increase in electricity demand, huge economic growth, and as a result there was a huge increase in coal generation as well. A lot of that growth was fueled by coal generation. This isn’t just a China story, this is also the global story. Over the last hundred years when we wanted more electricity, most of that electricity came from fossil fuels.

David Roberts

I shouldn’t blame China. It’s also the US model and the rest of the developed world model.

Nicolas Fulghum

Exactly. Every time there was a huge increase in demand, you had an increase in fossil generation. The reason that happened is because those were the available sources of electricity. You then had nuclear power and hydropower also play a big role, but not a huge amount. For example, if we look at just 20 years back to 2005 to 2009, five-year period, in that time fossil fuels make up 75% of the growth. It was just the environment that China had its big growth spurt in.

Now when we look at India, what we’ve done is we’ve compared the development level — if you just take it as a GDP per capita — and India’s GDP per capita crossed $10,000 in 2025. That’s the same level that China had 15 years ago. Since those 15 years ago, a huge explosion in coal generation in China occurred. We do expect India’s electricity demand to continue growing. The question then was, are we just going to see the same again? The big difference is now wind and solar and batteries are price competitive. They’re already the cheapest forms of new electricity in India. On top of that, India’s economy is significantly more efficient for how much electricity you need for your unit of GDP. That means India’s growth is simply not going to create the same increase in electricity demand that we’ve seen in China.

David Roberts

Is there a simple explanation for that? Why is that?

Nicolas Fulghum

The economy is more service sector focused, it has a growing industrial base, but it’s just not as energy intensive. That means you can grow your GDP per capita without having an enormous increase in demand, even though the demand growth rates themselves are still quite high. We already see the increase in coal generation slow down in India in 2025. We had a fall. That had a few reasons. On the one hand, it was a huge increase in renewables, more than twice as large as the previous record increase. New record for solar, new record for wind as well. 100 terawatt hours of additional renewables generation almost in 2025.

David Roberts

Lots of growth in coal too, though?

Nicolas Fulghum

Not in 2025. In 2025, coal generation fell in India by about 2.9%.

David Roberts

Is that structural?

Nicolas Fulghum

Half of it is the structural part — this renewables record increase which comes from capacity deployment. The other half is that 2025 was an incredibly mild year compared to the previous year, particularly during the monsoon period. That means slow demand growth. As a result, that huge increase in renewables was enough to surpass the increase in demand. We see a fall in fossil generation. That indication still tells us something, and it is that India’s coal generation growth is slowing down already.

David Roberts

The other number to throw in here is coal has grown 46% in India over the last decade. This halt in growth this year is quite notable. It is a very big deal.

Nicolas Fulghum

Very much a reversal of the previous trends.

Kostantsa Rangelova

I have to jump in at this stage because I think this is where we need to really talk about the role of batteries in solar, because India has seen a very big increase in auctions happening for solar and battery projects and for battery standalone projects. The reason is, if you look at 2025, India on the average day, around a quarter of its electricity was coming from solar in the middle of the day. This means that this big increase of solar in the middle of the day kept coal power from increasing during those hours. But outside of daylight hours, coal power kept increasing at pace with demand, which means that it was still around three-quarters of total demand in 2025 in those dark hours.

With batteries, you can now start squeezing solar more and more into those dark hours and meeting a lot of that additional demand with renewable electricity and not just coal, and being able to stop that coal growth not just in the middle of the day when solar is growing, but also in the dark hours, really changes the game and unlocks a different level of growth for renewables as well.

David Roberts

Is India enjoying the cheap solar and batteries that China is producing? They’re not putting tariffs on those things, are they? Is part of the reason that solar and batteries are growing so much in this part of the country that people are just enjoying China’s overproduction?

Kostantsa Rangelova

What we have seen is that the battery prices that developers in India could have access to are probably around $120, $125 per kilowatt hour, which is extremely cheap. That’s for the whole project to get developed. Certainly they do have access to those cheap batteries. They produce, for example, parts of it, especially the energy management system, at quite competitive cost to China as well. They have some homegrown aspect of that as well. It’s not the full system being imported and they are growing that manufacturing base as well.

Nicolas Fulghum

On the solar side, India has actively brought solar manufacturing in country. A lot of the manufacturing for panels is now done directly in India. Projects that use domestically produced cells do have certain incentives to go along with that. It’s really a full energy economy effort to bring that in house. If we just look at what it’s done, we expect that the coal generation per capita — they’re very similarly sized countries on a population basis, China and India — but per capita that coal generation is already stalling out at about a quarter or a third of the level where China has gotten to.

We simply don’t expect India to turn into the next China because that deployment for renewables is already high and already what’s in the pipeline now — projects under construction, not just announced or some future dream — are enough to satisfy two additional years of India’s demand growth. There are certainly more projects that will be added in the near future.

David Roberts

I read a prominent D.C. pundit say today that India should transition from coal to US liquid natural gas because that would be lower carbon intensity. That seems totally crazy to me. Is that in fact totally crazy? If you’re going to build a new power generation plant in India today, is solar and battery already cheaper than natural gas?

Kostantsa Rangelova

Yes, certainly this is not going to be in the Global Electricity Review, but we recently worked on a piece looking exactly at that. It was a thought experiment calculation saying, “What percentage of its electricity demand could India meet with only solar and batteries?” Theoretically. What we saw is that you could get to around 90% and the LCOE of the solar battery configuration that you needed was around $56 per megawatt hour, which is quite cheap. I don’t think LNG could easily compete with that.

Nicolas Fulghum

If anything, the last few weeks have shown that the general advice should be: if you can actively avoid tying yourself to a global energy market, then you should definitely take that risk.

Kostantsa Rangelova

For sure.

David Roberts

That was my first thought when I read that. I was “Really? You’re trying to sell this to India right now?” It seems we’re having a lurid demonstration of what happens when you’re dependent on other countries for fossil fuels. India is then a positive story. What could go wrong? India seems at this point aligned. The economics are working out really well. Policy-wise, not perfect, but they are subsidizing solar and everything seems like it’s moving in the right direction in India. Is there something that could go wrong?

Nicolas Fulghum

I would say not necessarily in India, but if we say globally, China is not just turning, but it is in absolute terms the global leader in clean energy build-out. That used to be the biggest contributor to fossil generation growth globally. Since 2018, outside of China, fossil generation globally has been flat and now it’s flat in China as well. I think those are the two things that people need to remember. That’s why the global trend has now flattened out, because the biggest driver has turned and we have seen the trend switch in India as well.

We’ll still probably see a few years up until 2030 where we’ll see fossil generation increases, but they will be smaller. The question is, if those big countries, the big contributors to the global fossil generation growth, are turning, who is left? Where is fossil generation growth going to come from?

David Roberts

One of the interesting things going on globally — everybody talks about China, everybody talks about America, a lot of talk about India. One of the more interesting stories going on in renewables is a lot of these little countries that you just wouldn’t guess. If you were to stop someone on the street and ask them to guess what country is booming in solar, a lot of these countries are not top of mind.

I did a pod on Pakistan. Everybody’s talking about the Pakistan story. They went from 0 to 20% of their net generation being solar in two years or something. Brazil is surging. Hungary — why? Chile. Before we talk about the countries that haven’t yet lurched in this direction, is there a common thread to those? It just seems like a very random grab bag of countries. Is there some logic there that I’m missing? Why are some emerging economies going gangbusters for solar and some aren’t yet?

Nicolas Fulghum

The most straightforward answer is economics. Solar power is cheap enough or at least significantly cheaper than the cheapest fossil fuel alternative. Especially for countries that either want to meet load growth or have trouble meeting their current electricity demand, it becomes a very obvious option to turn to. Pakistan is certainly the biggest economy example.

David Roberts

But that’s true everywhere. The boom is not everywhere. Why boom in some places and not others? Do we know?

Nicolas Fulghum

Urgency matters as well. In Pakistan, the rates from the grid were so high, coupled with supply issues, that people took it into their own hands. The solar boom that we see in Pakistan is very much one of distributed solar rather than utility-scale installations. There is some utility-scale solar as well, but a large majority of that solar that has come online in the last five years has been from rooftop solar installations that people put down themselves, increasingly aided by battery installations as well. That availability, or this commodity-driven approach to solar where people go out and purchase their own solar panels, does have scaling power. You can’t build your own little gas power plant, so naturally that is not an option. Historically that would have been maybe a diesel generator.

Nigeria is another example. The fuel costs for those in many countries are simply too high. Nigeria tended to be a country with a huge amount of off-grid generation from diesel generators — smaller generator units. The fuel subsidies that people always forget — there are still a huge amount of fossil fuel subsidies out there — were reduced, and oil prices were too high once they weren’t subsidized. People naturally then turned to supply their own electricity with solar panels because they are cheap, easy to install, and readily available.

We’ve seen the same thing in South Africa a few years ago when there was load shedding because coal power units weren’t available. People immediately turned towards faster solar installations. More recent examples — these are countries that people are more familiar with when we’re talking about solar. The drive to install distributed solar in Germany has just picked up again. The interest in rooftop installations has spiked significantly as a result of the second fossil fuel crisis in four years.

David Roberts

I don’t know how many times Germany needs to learn this lesson.

Nicolas Fulghum

Yeah, exactly. The UK is the same. A lot of countries walk through this path at a different pace. Every single time there is a supply crunch, there is a price crunch among fossil fuels. The obvious option, because it is readily available and it is not a solution that you have to implement over 10 years with a huge project — solar is just so readily available.

David Roberts

Is there a story about Hungary — what’s going on in Hungary? This is not a country that politically we tend to take as a model in other respects. Why are they having such a boom?

Kostantsa Rangelova

In the case of Hungary, there was certainly a government subsidy support element to it as well that aided this extreme boom. What also helped was the fact that it is a very interconnected system within Europe, which means that sharing that electricity across the European grid made it easier to reach a very high share without necessarily having, for example, a battery to accommodate that.

David Roberts

They’re not an island, they’re well interconnected.

Kostantsa Rangelova

Exactly. They could share very high midday shares with other countries. It was relatively easy to achieve for a very well-interconnected country in terms of the electricity grid.

David Roberts

The flip side of this, and a really interesting point or argument the report makes, is that the remaining countries that still have really high percentages of fossil generation, that are still stuck on fossils, are almost all in extremely sunny places. What are the implications of that?

Nicolas Fulghum

We’ve looked at countries that have had increases in fossil generation over the last four years, between 2022 and 2025. When you look at their irradiation — how much solar insolation or how much sunlight they get per year — they’re almost exclusively significantly above the world average. There are lots of countries where fossil generation is already declining and they’re more spread out. You have Germany, even though they have a lot of solar. There’s a lot of mixed countries going on there. If you’re looking at countries that have had fossil growth below 3% per year — that includes countries like China, for example — they tend to be already a little bit sunnier.

The ones that have been growing the fastest in fossil generation — more than 3% per year in the last four years — include Indonesia, Saudi Arabia, India, Egypt. Those are countries that are significantly — especially countries like Saudi Arabia and Egypt — higher in terms of their sunshine that they receive every year. Just to pick out Egypt to explain what’s going on here: we have a country like the Netherlands, which isn’t very sunny. Egypt gets about twice as much irradiation per year as the Netherlands. Egypt has 4% as much solar generation per capita as the Netherlands do.

David Roberts

Almost none. Then it sounds like.

Nicolas Fulghum

Almost none. What we are looking at here is potential. Another way to get the scale across is that Australia’s solar generation per capita is higher than Egypt’s electricity demand per capita. If the question is, can solar generation scale to the level of a significantly sized economy? The answer is yes.

The even better answer is that all of those countries still growing their fossil generation because they’re using that to meet their growing demand are in sunny regions. We’re not having to find solutions to the demand growth in the Netherlands. Funnily enough, the Netherlands are now meeting a reasonable amount of their demand with solar. It’s one of the highest solar per capita countries in the world behind Australia. Australia is number one. Then you have the Netherlands in the second spot. Even the countries with low irradiation are turning towards solar. It’s even more of an obvious solution for those that do have all of that sun.

David Roberts

A question about that particular group of countries first. They’re going against the tide here — against the economic tide. Is it just politics? Is there a common thread in those countries or is it, again, bespoke from country to country why they’re still expanding fossil fuels rather than already opting for this cheaper option?

Nicolas Fulghum

It’s definitely slightly different country by country, but we do see, in aggregate, a bigger drive towards solar, especially in the more recent years. One of the ways that we’re tracking this is we’re looking at the exports of solar panels from China. China is responsible for more than 80% of solar panels produced in the world. Looking at the exports tells us a lot about where the next big pickup in solar is. That’s how we spot Pakistan and those stories.

The panel exports went up 48% to Africa from 2024 to 2025. It’s now 19 gigawatts in 2025, which doesn’t sound like a lot, but you have to remember that electricity demand in Africa is also still relatively low. Egypt, for example, imported twice as many panels as they did in 2024. That’s now 2.3 gigawatts.

Some of the countries that have the most fossil generation growth for the last few years — Saudi Arabia, for example — are now countries that are heavily investing in renewables. We have over 10 gigawatts of capacity now in solar, we have huge tenders — another 15 gigawatts of renewables capacity that were tendered in 2025 alone. We are going to see a really rapid turnaround. Oman, United Arab Emirates, Qatar.

David Roberts

Even those countries have gotten the message and are pivoting now. Are there countries left that aren’t pivoting, that aren’t ramping up their solar, that are still doubling down on fossil fuels? Is there any country that is just saying, “Screw all this, we’re sticking with fossil fuels,” that hasn’t started changing course?

Nicolas Fulghum

Before I get to the one really big one that hasn’t, I’m going to say one more positive thing before we get to the big one that just isn’t turning. If we take all the countries where we have growing electricity demand, but all the countries that are meeting less than 50% of that demand with clean power over the last four years — those are the ones where you would say most of that growth is still coming from fossil fuels — that’s only a quarter of growing demand in the world. All the other countries — China, US, Brazil, Pakistan — they’re meeting more than 50% of their demand growth, a lot more. In the case of China, it’s 75%. In the case of the US it’s over 80%. Pakistan is meeting more than its demand growth with clean power sources. Brazil is doing the same. Those remaining countries, only a small part.

David Roberts

In absolute terms, the holdouts are not a huge deal.

Nicolas Fulghum

Exactly.

Kostantsa Rangelova

If anything, this is going to accelerate because with the current gas and oil price crisis, this will only get even more prominent. We saw Indonesia announcing a goal to add 100 gigawatts of new solar capacity within three years, which is huge. Indonesia is one of those very sunny countries with, until recently, growing fossil growth. We can probably expect an acceleration with the current situation.

David Roberts

Nick, to break the suspense, who’s the final scofflaw standing?

Nicolas Fulghum

Indonesia is the one that is just now turning, but Russia is the big holdout.

David Roberts

I should have known. It should have been my first.

Nicolas Fulghum

The one positive thing about — I don’t want to say the positive thing about Russia, but essentially demand growth is relatively muted. The economy is not expanding at a rapid rate for various reasons. In terms of countries that have a huge amount of fossil generation, certainly one of the big holdouts, we have not seen the power system budge any which way over the last two decades. A huge amount of coal and gas generation is still on the grid. They also have nuclear and hydro generation, but it is essentially a huge stock of fossil generation that does not seem to be going away.

Solar and wind still at around 1% of generation, which, if you compare it to other countries that have a similar level of GDP per capita, is one of the lowest values globally. It is being significantly outperformed by Saudi Arabia, which historically people would not necessarily call a renewable state. We are really talking about one of the largest power systems in the world that does not have any signs of turning anytime soon. Luckily, as we said, most of the countries with growing demand are meeting all of that growth with clean power. On a global level, we are definitely running out of countries that could drive fossil generation up.

David Roberts

Still, most of the big oil and gas producers refuse to implement policies to cap or reduce production. But even those countries are pivoting their own consumption to clean energy — Saudi Arabia, Norway, all these examples. I think Russia might literally be the only country that’s saying, “Screw it, we’re going fossil fuel on both sides.” Probably not going to work out great.

As a final question to you both, what are you looking for next year? What do you think next year’s report is going to contain? Probably solar is going to break another record. I’m going to take that prediction off the table. It’s too easy. What are you watching? What trends are you watching? What do you think will be of interest next year? In the next two or three years?

Kostantsa Rangelova

Absolutely. I will definitely be watching the battery space as always. I really think that we are probably going to have a very big pickup in batteries in countries that have had this bump in solar, and batteries will follow — thinking Pakistan or similar countries that have gone that path. Even countries that are very early in their solar journey might also be adding lots and lots of batteries and show that this can meet demand across the day and anytime. I’m definitely looking at this unstoppable force message next.

David Roberts

Tell me if you agree with this. It seems that even relative to solar, there is still technologically a lot of runway left to improve batteries’ performance and price. They are still going to get way, way better and cheaper than they are today.

Kostantsa Rangelova

I wouldn’t bet on a similarly huge — this 45% price drop we saw in 2025 — I would be surprised, but I would be happily surprised if it happens. Considering that we have this lithium price point pressure currently, we might see a slowdown. We might still see a price drop on the battery side because this is not just driven by lower material costs, but also by improving manufacturing efficiency and improving project-level efficiencies and things like that. Probably a milder decrease because we are already at the level where batteries are really quite competitive. I would probably be betting on scaling on the deployment side and a mildly good number on the price side.

David Roberts

Interesting. How about you, Nick?

Nicolas Fulghum

We’re getting to a point where the level of renewables deployed in some countries is now fundamentally changing how those power systems operate. There are some really exciting dynamics that are happening here — obviously the battery story. We’re always watching some of the leading systems like Australia, like California, where we’re now seeing some of the shoulder hours or evening peak demand batteries reaching 40% or more of the demand being met during those hours. I think we’re seeing a completely different way that the power system can operate.

On the very positive effects that that can have during this crisis that we’re seeing now — gas prices are high again, coal prices are high again. The countries that have had the largest build-out of solar and wind power over the last four years are the ones that are suffering the least now in Europe. A big comparison that we’re pointing towards at the minute is between Spain, which has a lot of solar and wind and has installed a lot of solar and wind, and Italy, which hasn’t to quite the same extent and is still relatively reliant on gas. If you look at what wholesale prices for electricity have done over the last four weeks between the two countries — in Italy, they’re at times more than five times higher than in Spain.

That really is almost a non-linear relationship. It’s not like you add 10% more solar and you get 10% lower prices. If countries don’t move towards a system where their energy and electricity is domestically produced — like solar and wind can provide — then you are going to be increasingly reliant again and again on these crisis-ridden fossil fuel markets where if coal goes up, if gas goes up, if oil goes up, your wholesale electricity price is directly on the hook for that. This is a dynamic that has driven countries like Indonesia to say, from a relatively low base. There’s not a lot of solar deployment currently in Indonesia. They’re saying, “We’re going to install 100 gigawatts in three years.”

David Roberts

That’s wild.

Nicolas Fulghum

Note on the 100 gigawatts in three years — that’s a promise that you couldn’t make about any other electricity source even if you wanted to. You couldn’t say, “We’re going to install 100 gigawatts of gas-fired power plants in the next three years.” Or nuclear.

David Roberts

You can say whatever you want about nuclear. Let me tell you, after 20 years of this, you can say a lot of things about nuclear, but you cannot build 100 gigawatts of it in three years.

Nicolas Fulghum

This is what I mean when we were talking about Nigeria, Pakistan, Uzbekistan, South Africa — the availability does make a big difference. We have a lot of technologies converging at the same time. Batteries are solving the flexibility problem. The increased manufacturing of solar panels in India, in China means that the supply of solar panels is relatively secure. Even the US has domestic supply of solar panels still.

Kostantsa Rangelova

And batteries.

Nicolas Fulghum

And batteries, yeah. The convergence of all of these technologies at the same time means that we now see a breakout of solar and a breakout of solar and batteries in a country every other month. That’s a really exciting development to watch, and I’m excited to see what that means in aggregate for next year. It’s definitely going to be another busy year of tracking these trends.

David Roberts

It’s unfortunate that these global convulsions and wars and everything are going on, but they really do seem as if they might as well have been scripted as a warning about fossil fuel addiction. You couldn’t script it any more clearly. The lesson seems quite obvious.

Thank you both. This is always so interesting. I’m struck again and again. All this stuff is moving so much faster than most people understand. It’s wild. Thank you all again for coming and keeping us current.

Nicolas Fulghum

You’re very welcome. Thanks for having us on.

Kostantsa Rangelova

Thank you 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

Heatmap’s Robinson Meyer joins me to unpack the sheer madness of the current news landscape. We discuss the energy implications of the Iran war, the vexed politics of permitting reform, Microsoft’s retreat from carbon dioxide removal, the lessons of the IRA, the lingering pastoralism of the environmental movement, and much more.

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Beth Bafford spent years designing Climate United, a revolving fund meant to push out $7 billion of Greenhouse Gas Reduction Fund money to underserved communities. She had barely begun issuing loans when Trump shut the program down and rescinded all the money. In this episode, I talk with her about that experience, the ongoing legal fight to reclaim some of the money, and the central importance of finance in clean energy policy.

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David Roberts

Hello, everyone. Greetings. This is Volts for April 17, 2026: “Climate finance, interrupted.” I am your host, David Roberts.

Clean energy has a finance problem. The technologies exist and they are increasingly cheap, but capital still doesn’t flow to the places that need it most — low-income communities, rural areas, projects too small to get on the radar of private lenders. Tax credits don’t help if you don’t have tax liability. And grants can rarely scale enough to cover the gap.

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The Biden administration had an ambitious plan to fix that problem: the Greenhouse Gas Reduction Fund, $27 billion seeded into a new ecosystem of revolving funds and community lenders designed to continuously cycle clean energy capital into underserved markets for decades to come. It was one of the most innovative things in the IRA and almost nobody paid attention to it. (If you want the full deep dive, I did an episode back in 2024 with Jahi Wise, the EPA official who designed it.)

Beth Bafford paid attention. As CEO of Climate United — the coalition that won the largest single chunk of GGRF funding, nearly $7 billion — she spent years designing financial structures, assembling lending partnerships, and generally standing up the organization from scratch.

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She got about $400 million out the door before the Trump administration froze the accounts and tried to kill the whole program. She’s been fighting in court ever since.

By the time you hear this, she’ll have left the job — her last day is March 31. So we’re taking the opportunity to talk while she’s still in the thick of it: what Climate United was trying to build, what the freeze felt like from the inside, and what the whole experience taught her about the role of finance in the energy transition.

With no further ado, Beth Bafford, welcome to Volts. Thank you so much for coming.

Beth Bafford

Thank you for having me.

David Roberts

Let’s rewind the tape a little bit and go back. This is not directly germane to our topic at hand, but I was charmed by it. I went back and read this piece of yours, several years old, about you leaving a high-profile Wall Street job to volunteer as an unpaid volunteer for the Obama campaign. You wrote a story about being on the subway going to quit your job, and you hear “Defying Gravity,” the song “Defying Gravity,” on your headphones, and it gives you strength. I have to say that everything about that is literally the most millennial thing I’ve ever encountered in my entire life. I love it.

And it really, I had forgotten because of — waves hands at current events — I had forgotten about that whole thing. There are many people with stories like yours. There’s a whole generation of people who were pulled into public service by Obama. Not just public service, but public service with a smile and some optimism and can-do spirit. That just seems gone now. But there’s a whole generation and I just wonder, who’s pulling the Beths into public service today? Where is that generation now? Do you ever think about that?

Beth Bafford

It’s funny you say that because, yeah, I think about it a lot and I talk about this with friends and colleagues a lot. That’s now my number one criterion for political candidates: their ability to attract and inspire blindly optimistic talent. Because no matter the side of the aisle or your policy preferences or your governance style, it’s really about how you govern, who you surround yourself with, who is interested, excited to come to work every day to solve these problems. And I think of it as what I call the Obama ripple effect. I have so many friends and colleagues from that time.

David Roberts

I interview people every week and they’re everywhere. They’re in state government, they’re running companies now, they’re running NGOs. That Obama diaspora has spread out now and is running things. And it just doesn’t — I don’t see a — maybe I’m wrong, but I don’t know that I see a wave coming in today in the same way.

Beth Bafford

Yeah, hopefully we will be surprised. I do think that training early on in your career — I talk to people about careers all the time — and that experience and training, not in any way that’s overtly political, just the experience of being a part of something, working with really inspired and talented people for a common goal, working your butt off 20 hours a day and existing on — I think I used to get quadruple shot lattes to make it through the day. The bond that we created with my friends and colleagues at that time is one that still exists 15 years later.

David Roberts

Then you worked for Obama for quite a while, ended up in the Obama White House and OMB. Then you went to OMB, then you went to McKinsey, and then you went to this Calvert Fund. This journey has given you this respect for finance — the underappreciated role of finance. Talk a little bit just about your experiences before the GGRF. How you learned and what you came to believe about finance as a tool.

Beth Bafford

Yeah, my eyes were really opened to the importance of finance and credit when I was an organizer on the campaign. Something that really struck me was that no matter where I was in the country, when I went to someone’s doorstep — and we went to thousands of doorsteps, knocking on doors and talking to voters — no matter where they were in the country, urban, rural, suburban, man, woman, race, background, economic status, people all wanted the same thing. They wanted a safe place to live for themselves and their family. They wanted a community around themselves that they felt a part of. They wanted a job with dignity and respect.

Many of the things that underpin those basic desires are things that are enabled or not enabled by access to the credit markets: the ability to buy a home by accessing a mortgage, the ability to buy or own a business by accessing a loan, the ability for businesses to generate and create jobs, the ability for a community to come together and build a community facility or a church or a place to gather or a health clinic. Many of those things — that basic community infrastructure — really rely on access to credit.

David Roberts

You worked in healthcare for most of that time, right? You were focused on healthcare.

Beth Bafford

I was focused on healthcare, yep.

David Roberts

Where finance obviously plays a huge role.

Beth Bafford

Absolutely. With that in mind, I went to business school after working in the White House and used those two years to explore this intersection. I knew that I had this mission in mind and wanted to help people access those basic needs. I knew that I wanted a finance and business toolkit. My mom’s a financial advisor. I’ve always been interested in the markets, and I knew that there was some area that those intersected, but didn’t know where I wanted to be. When I was in business school, I discovered this world of community finance and impact investing and got obsessed with that intersection.

When I landed at Calvert Impact, it was a dream to be in a place that specializes and focuses on understanding and addressing these chronic gaps in the credit markets and works with on-the-ground partners globally to address those gaps in ways that both generate a return, but also importantly, demonstrate that these markets are investable, that these are not things that are only required to be filled by philanthropy. There is a role for the financial markets in building these sectors. We do that across sectors in affordable housing, small business development, education, healthcare, agriculture, sustainability, and clean energy.

It was those building blocks and understanding of the local ecosystem of financial institutions across the country, paired with this centralized infrastructure to really think about market making, that led to our interest in applying for the Greenhouse Gas Reduction Fund.

David Roberts

Tell me a little bit about that. I’d love to hear that story. You’re working at Calvert, doing this work, and you apply for some GGRF money, and you get it. What did it feel like to get $7 billion dropped in your lap? Were you daunted? Did that feel crazy? Did that feel inevitable? Were you just excited? $7 billion blows my mind. I wonder what that felt like when it first landed.

Beth Bafford

Yeah, we were so excited. We were so ready. We had been working on the program specifically for years.

David Roberts

On the GGRF specifically?

Beth Bafford

Yeah, really, since the bill was passed. The IRA was passed in August of 22. We immediately started. We had been following the legislation, and we immediately started looking at partnerships, strategies, pipeline, trying to understand what the EPA was going to do with the program, building coalitions and partnerships and conversations. I probably met with hundreds of organizations that I had known from my job to understand how people were engaging, how people were thinking about leveraging these funds.

David Roberts

Were you leading that effort from the beginning? Did you raise your hand to run this thing from the beginning?

Beth Bafford

No. I was one of hundreds of people that were trying to pick it apart, understand how it was going to be implemented. The legislative text is a page. There was a lot for the EPA to design and interpret, really trying to understand what that was going to look like. We couldn’t interact with the EPA, and it was taking the time to develop our own strategy and said, if we were lucky enough to get access to some of these funds, what would we do with it? How would we put it to good use in a way that optimizes return for taxpayers and really pushes the envelope on the program’s objectives, which were reducing greenhouse gas emissions, providing direct benefits to people’s lives, and activating and transforming the financial markets?

That’s a big mandate. We worked for about a year to put together our strategy even before the applications opened, because once the applications opened, we had only 90 days to put together hundreds and hundreds of pages of an application to throw our hat in the ring.

David Roberts

Let’s talk a little bit then about what Climate United was, because I think one of the things I want to clear up here is I think people have in their heads that it’s just a bucket of money that’s given to you to spend and then when you spend it, it’s gone. That wasn’t quite right. These are supposed to be revolving funds that are set up as institutions, as enduring infrastructure. Talk a little bit about the structure of Climate United. What is it?

Beth Bafford

Yeah, absolutely. That is a common misperception that it was just another one of the IRA grant programs. I think of it as a bridge between a lot of the grant programs that were providing direct assistance to projects and communities and all the tax credits and incentives that were out there for the taking by private actors. We were meant to be the bridge between the two. How do you intentionally create these financial institutions that are going to communities that otherwise would not be benefiting from the tax credits and incentives? Looking at how to braid those resources with access to credit, liquidity, and finance projects and businesses that otherwise would not be financed.

David Roberts

Is a lot of that not just deploying your own capital, but trying to attract private capital too?

Beth Bafford

Absolutely.

David Roberts

Making it safer for private capital.

Beth Bafford

Once we got the requirements from the EPA, that was one of the mandates. Every dollar we invested had to leverage other private capital. These funds really went — and I will just break down for a second — the Greenhouse Gas Reduction Fund had three programs under it: the National Clean Investment Fund, the Clean Communities Investment Accelerator, and the Solar for All program.

The program that we were a part of was the National Clean Investment Fund. That really was the US government seeding three national clean financing entities, including Climate United, by essentially providing the equity on the balance sheet of those institutions that could be leveraged with private capital and do transactions in the market that the market is not doing alone.

David Roberts

But you were — the $7 billion — you weren’t just supposed to spend it down, you were supposed to make it back, like it’s supposed to be renewing itself, right?

Beth Bafford

Absolutely. We took a 30-year time frame with the objective of really trying to drive the US towards its 2050 goals. Those funds in our projections got bigger over time. We invest, we earn income from those.

David Roberts

Your pool you’re working with gets bigger.

Beth Bafford

Exactly.

David Roberts

Interesting. You start with 7 billion. I’m curious, maybe it doesn’t matter now, but at the end of 30 years, what was that 7 billion? How much growth?

Beth Bafford

I don’t remember off the top of my head. It certainly depends on different risks we take in different sectors and expected losses. But even with just the interest earned on the funds right now, it is growing. We did expect to see that grow significantly over the next 30 years.

David Roberts

When I hear about this, I think when ordinary people hear about this, almost everyone has the same question, which is: if there is a project where you could invest some money and have a reasonable expectation of making your money back and a little profit, why aren’t private banks doing it? Why do we need public money? If you are proving that you can make money in these places on these types of projects, why isn’t private money doing it instead?

Beth Bafford

Yeah, it’s a great question and a very common misperception. I will overgeneralize here for a second, but I look at the market for — I’ll say clean tech deployment, adoption of these technologies across sectors — in three main buckets. Bucket one is projects or businesses that require subsidy or they won’t happen. Those are projects or businesses where the math doesn’t work because of things like low cost of electricity, high transaction costs, where there’s significant technical support needed that’s expensive, or very small transaction sizes — solar on churches in a rural community. A lot of those types of deals really don’t pencil unless you have some sort of subsidy, we say “in the stack.”

David Roberts

You did those kinds of deals. You would subsidize. This wasn’t a purely money-making play. You would subsidize some kinds of deals.

Beth Bafford

Yes, but typically in the form of lower cost capital than the market would provide. It’s not subsidy in terms of giving a grant to the project. It is, we are doing a 25-year loan at 4% when the market for that is 12%.

And that’s where some of that is really needed to make the math work in some of these projects. Bucket 2 is projects or businesses that benefit from subsidy but are feasible without it. They’re profit-making but not profit-maximizing. Those tend to be things — reasons because of complex financial structures, high perceived risk, limited amount of data available in that market. People don’t really know what they’re getting.

A good example of that was the trucking program that we were working on where it was a pretty attractive financial profile, if you really understood and got in the weeds of the financial structure. But it was really complex and a lot of people didn’t want to do the brain damage to figure it out. That’s a lot of the market. What I call this bucket two is things that are feasible — they’re just not low-hanging fruit. They’re not on the top of anybody’s list if all you care about is profit maximization.

David Roberts

That’s interesting to think about. In terms of market theory, private markets are supposed to relentlessly exploit all those opportunities. It’s funny to think that there’s a huge tranche at the bottom that’s profitable but ignored because it’s complicated. It’s hard to fit that with my image of market efficiency.

Beth Bafford

It’s why a lot of these specialty green financing organizations have popped up. The trend of the banks and the institutional investors, they have gone so far upmarket because of consolidation and size and transaction costs that it has created this broad opportunity for people to step in who really care about that part of the market and make good money and have strong businesses. But there is a big gap that exists. That is why green banks have stepped in. That is why for-profit specialty finance companies have stepped in.

David Roberts

You go in and absorb the brain damage, and then presumably private money follows after that, correct?

Beth Bafford

That’s right. The private markets really look for standardized structures, things that have worked before and that will work again, or where there is significant data to show what is expected to happen.

David Roberts

And then bucket three?

Beth Bafford

Bucket three is just things that the private markets will do on their own. Utility-scale solar with identified corporate offtake, things that Brookfield or JP Morgan or TPG or any of the large banks or institutions will do.

David Roberts

You aren’t in the business of trying to tip large industrial-scale projects over the threshold into profitability. That’s just a different thing.

Beth Bafford

That was not a part of Climate United’s strategy. Our strategy was how to get bucket one and bucket two done in a way that demonstrated how the market could address these areas, but also in a way that brought some of the — and this is going to sound wonky — but the centralized market infrastructure that’s required to get the large players in, and that is not a small feat. It’s also not something that policy typically allows organizations or grantees to do. It was one of the parts of this program that was unique: it recognized the need for centralized market infrastructure if we are going to get the private markets to engage in this way. That’s things like standardization of lending products that can help with aggregate assets. Mortgage markets exist because we have standardized mortgage products.

David Roberts

Here’s a confusion: you are taking on what a lot of big private banks won’t, which is sifting through a large number of smaller, sometimes marginal projects. There’s a reason the big banks don’t mess with that: there’s a high transaction cost. There’s a lot of thinking and paperwork. Less juice relative to the squeeze, I guess, is how you’d put it. How do you standardize that? You’re specifically in the business of looking for these weird, small, not quite fish — not quite fowl projects that private capital isn’t doing. How do you take these weird bespoke projects and turn them into something fast and standardized?

Beth Bafford

There are two issues at play there: size and the bespoke nature. There are certain things where you could standardize the financial product and then allow for much broader aggregation of those products where you don’t need to do one-off every time.

An example of this: one of our partners in Climate United is Self-Help Credit Union. They do single-family mortgages and have for decades. With the funds from Climate United, they were creating a single-family green mortgage program building off their success in providing first-time home buyers with a low down payment mortgage. They offer a 97% LTV mortgage to first-time home buyers, and they have proven over the last 30 years that those mortgages perform just as well as a typical LTV mortgage.

They were doing the same thing for green mortgages where they were setting certain standards for the home — standards on efficiency, electrification, and on-site generation where possible. If they met those standards, the homeowner would qualify for this green mortgage product. They were using the GGRF funds as a guarantee so that lenders across the country could originate those mortgages, they could purchase and pool them, and they could sell them in the secondary markets backed by this guarantee to prove that these mortgages — offering these affordable mortgages to families to buy into efficient households — would perform even better because of the operational savings of living in a green home.

That’s an example where that’s a small ticket size — individual mortgages for individual homes — a standardized product where when you have that central market maker, you can make a big difference if you are able to bridge between the home buyer and the secondary mortgage markets.

David Roberts

I’m curious, how much of Climate United’s work was directly with projects versus with things like credit unions that were doing the individual project work and you’re just backing the credit union? You’re funding other funders. Is there a split there?

Beth Bafford

Yeah, we were doing all of the above. We were doing some direct projects — like our drayage truck program where we had to do the financial engineering directly ourselves. We were doing a lot of work with other lenders to provide liquidity, so basically loans to other lenders, so they could provide these products in their communities. We were doing some funky stuff, some utilization guarantees for charging infrastructure and various other types of products and programs.

It enabled us to look across all the different market segments that we were trying to serve. Everybody from consumers to small businesses to rural communities, and really figure out what we thought the right mix was based on where there was existing lending infrastructure and where we needed to complement that.

David Roberts

Let’s pretend for a moment that Trump did not come along and steal all your money. Was there a five-year or ten-year vision? Did you have particular plans, particular vision for how this thing was going to evolve?

Beth Bafford

Yes.

David Roberts

Or is it just crank money out the door day by day?

Beth Bafford

No, absolutely. We had an extremely detailed five-year plan that projected out the deployment of the funds. We expected all funds to be deployed in the first five years and then a significant amount of recycling of capital thereafter. Some of the early transactions, we were trying to demonstrate what this was.

That was our initial goal: nobody knows what this program is, nobody knows how it works. Let’s do some deals to show what role we are playing in the market and who benefits from that. We did get some transactions done, but this market transformation goal was always our North Star. How are we looking at the composition of our investments in a way that is bringing the private markets along, that is building the data and infrastructure to get to this overall leverage of private capital which was estimated in the hundreds of billions?

David Roberts

Just underscoring what you just said, because this is a key thing that a lot of people don’t understand. He’s hitting it again and again. But this was meant to be infrastructure. This is not just to spend down the money. You help the projects that get the money, then you’re done. You’re building, you’re paving roads that private capital will then drive down after you. You’re changing things in an enduring way, not just handing out money, you’re bringing private capital into markets and building markets. It’s much more like — I don’t know if people really got that about the GGRF — that it wasn’t just money, it was institution building and infrastructure building, which was so cool about it.

Beth Bafford

It’s certainly why I did the work. I think it is a big issue. I recently wrote a white paper on some of my reflections on how this works —

David Roberts

Yeah, we’re going to get to that in a minute.

Beth Bafford

— and what we need to learn from it. There really was not an understanding of that simple statement that you just made.

David Roberts

February of last year, February 18, word comes down that the whole thing is being frozen. Furthermore, money you had already obligated, money that you had already promised that was just sitting in the bank account getting ready to go out, got seized. I’m curious to hear about that day. What were the hardest phone calls you had to make on that day?

Beth Bafford

There were so many. We first learned about this from a tweet that went out from the EPA.

David Roberts

Oh, my freaking God. Are you serious? You, the CEO of Climate United, learned about this from a tweet?

Beth Bafford

Yes. EPA administrator put out a video that said that he was freezing the program, said that he was investigating issues of fraud, waste, and abuse, and expected criminal activity or criminal structure. I watched that video at about — I think it was about 9 pm — I had just put my kids to bed. I was sitting in bed on my laptop after they went to sleep and watched the video. He named us in the video as the largest recipient.

David Roberts

Really?

Beth Bafford

Needless to say, that was a long night and lots of conversations with my colleagues, our partners, our communications folks, trying to understand what it all meant. First and foremost, like any leader in this scenario, my concern was about the safety of our team.

David Roberts

Apart from the program itself and all the policy merits and everything else, I can only assume when one of these guys says your name in one of these videos, you get a bunch of incoming kooks and threats and stuff. This is a very familiar story at this part. I’m assuming that was part of your experience.

Beth Bafford

That was, unfortunately. It was for many weeks. At that point, this was when all of the DOGE stuff was happening. There was a lot going on, a lot of confusion and fear. That was a big part of the initial response.

David Roberts

At what point are you forced — this is the very first thing I thought of when I heard about all this — at what point were you forced to call these low-income communities, these rural communities, these people who had been celebrating getting some money from the federal government and tell them, “We said we’re giving you money. We said it was a done deal. Now it’s not.” When did you make those phone calls?

Beth Bafford

Those had to happen pretty quickly after we realized that the funds were frozen. Luckily, we have the best community team that is best in the business, managing a lot of those relationships. We just started picking up the phone and calling people and saying, “Here’s what’s happening, here’s what we know, here’s what we don’t know, here’s what we’re expecting to happen.”

We had a program that I haven’t mentioned, but we were doing a pre-development grant program for tribal clean energy projects. We had selected 20 — I think it was 22 — projects to get pre-development grants to help projects do the assessment and feasibility and community engagement work to develop an actual project in their communities. We had told those 22 people that they were receiving grants. We were in the process of finalizing paperwork to get them out the door, and none of those grants got done.

That was and has been the most painful part of this process. Obviously there has been a lot of pain, but the number of organizations across the country that were working with us or one of the other seven awardees who were doing this work — there are hundreds and hundreds of organizations that had done a ton of work to envision what clean technology adoption looked like for them and their communities. Whether it was solar on community health centers or supporting rebuilding of homes after Hurricane Helene, or these amazing tribal sovereignty projects in Alaska. This is work that was underway in every corner of the country with so many community organizations, and they were just as gobsmacked as we were.

David Roberts

It’s hard to describe. It’s a particularly selected group of the most vulnerable, the most hopeful, the most helpless to control what the federal government does. You could not screw a more undeserving class of people. I guess that’s just the story of the last few years.

I have to ask, you put years of your life into building this thing, all this work, trying to do good, trying to spread good in the world. You made all these deals, got all these people’s hopes up, and then it’s yanked out from under you. You are forced to turn around and disappoint all these people now. You’re accused of criminal activity in a video. Having never been contacted, I know you probably don’t have any time, but are you not just pissed off?

Beth Bafford

I will say I’ve had those moments and those days, but obviously, we’ve been out front in a lot of this, but I’m not alone. There are many other leaders and people across organizations that have been going through the same thing, and I found real partnership and solidarity with all of them. What has kept me hopeful is that many of those organizations that you just mentioned, the people in communities across the country doing these projects and planning, they’re forging ahead.

This was a setback. It was a surprise to all of us in terms of its severity. But people aren’t giving up. These technologies we were working on — solar and storage and electric vehicles and building decarbonization — those technologies are better for their health, better for their wallets, better for their communities. In most cases, better customer experience, and people are figuring out how to make it happen.

David Roberts

I can’t tell you how many conversations of exactly this form I’ve had over the past few years. “You took an enormous body blow. Yes, but we’re not dead yet. We’re still limping forward.” I guess that’s glass half full. That’s that Obama optimism coming back out.

Let’s talk a little bit about the legal fight over this. It’s yet another thing that baffles me. This money was obligated, which means it had been granted by the government. It was given to you. You had it in your bank account.

Beth Bafford

We still do.

David Roberts

The federal government coming back and taking back money that it already gave to you is straightforwardly illegal. What is going on here? What is the substance of this case? I tried to do a little digging into the history of the government’s arguments in your case, and it is like trying to pin down a wet bar of soap with your finger. The arguments seem to shift and morph as you’re looking at them. Can you briefly catch us up on the legal fight here?

Beth Bafford

Quickly on the timeline: we went three weeks after the funds were frozen without hearing anything from Citibank, which is where the funds are held, or the EPA.

David Roberts

This video was all you knew or heard about it for three weeks? No one in the government called you or contacted you?

Beth Bafford

Nope.

David Roberts

That is bizarre.

Beth Bafford

All we knew is that we were asking for funds and we were not receiving them. The way the program was structured is that we were only allowed to draw funds for immediate needs in the next 14 business days. We didn’t have reserves that we had drawn out of our accounts that we could use for ongoing operating. After three weeks, we were out of money. We filed suit on March 8 last year and asked the district court to step in. We were successful in that initial —

David Roberts

The first District Court said, yes, this obviously illegal thing is obviously illegal?

Beth Bafford

Yes. That’s a great summary. She initially issued a temporary restraining order to make sure that the funds wouldn’t move. Then she issued a preliminary injunction in April that said this is illegal, the program should be open and the funds should be flowing. The administration immediately appealed that decision and the appeals court put a stay on the preliminary injunction, which meant that the program was not open and the funds could not flow until the appeals court made its decision. The appeals court judges — it was a three-judge panel who was considering the appeal. Two of those judges were Trump appointees, one was an Obama appointee. That appeals court overturned the preliminary injunction. I know I’m getting a lot of legalese here, but overturned —

David Roberts

These are like double, triple negatives at this point.

Beth Bafford

I feel I’ve gotten three law degrees in the last year — but overturned it — not on the basis that the judge was wrong, that it wasn’t an illegal act, but on the basis that the case should be tried in another court.

David Roberts

Why?

Beth Bafford

The very basic legal argument of the government after they realized that there was no legitimate reason to terminate the program was that this was a contractual dispute, not a dispute that deserved to be in the district court.

This is a wonky legal issue. When you are in a contractual dispute with the US government, there is a court that hears those claims called the Court of Federal Claims. It’s contract court for the US government. If you are bringing a pure contractual claim, it is meant to be heard in that court. Our argument is that it was not purely a contractual claim, that there were issues of regulatory — they broke regulation, they broke the law, and they did actions that were against the articles of the Constitution.

David Roberts

They violated a statute. That seems like more than contractual law. What do I know? I’m not a lawyer either.

Beth Bafford

Yes. We argued, and are still arguing, that it violated a statute, it violated the EPA’s own regulations, and it violated the Constitution. Because of that, we do belong in this court, because this is the only court that can hear those claims.

David Roberts

Is that where things are now?

Beth Bafford

We heard from the appeals panel in September. We immediately asked the full appeals court to rehear the case. There is this interesting mechanism where if a panel, a smaller panel of judges, makes a decision that the full court doesn’t agree with, the full court can step in and say, “We don’t agree with what these few judges —”

David Roberts

Is that an —

Beth Bafford

En banc.

David Roberts

En banc. Yes, we are all learning together.

Beth Bafford

I know. Exactly.

David Roberts

The full appeals court — because the small panel made a decision that was obviously crazy — the en banc panel stepped in.

Beth Bafford

Your words, not mine, but yes.

David Roberts

And said what?

Beth Bafford

The panel had said that we did not have jurisdiction in district court, we needed to go to the Court of Federal Claims, and the en banc court — the full court — stepped in and said, “No, we don’t agree.” They are hearing that right now. We heard that they were going to take the case in December. We had a hearing about a month ago.

David Roberts

Wait, they’re going to hear whether to hear the case in their court soon or they’re going to hear the case in their court soon?

Beth Bafford

They are deciding whether or not the district court has jurisdiction to keep this case.

David Roberts

Got it. As I understand it, the argument from the government now has gotten, if anything, more Kafkaesque. The argument now is, as I understand it, every judge who has looked at it says, “Yeah, that was illegal.” It’s not an ambiguous case.

But now the argument is it might have been illegal, but we killed the GGRF by statute with the OBBB. The big beautiful bill killed the GGRF. The argument now is, “Yes, we illegally seized the funds, but because the program is dead now, there’s no remedy, there’s nothing you can do about it. It’s too late, too bad. Suck it up.” Is that basically the government’s argument now?

Beth Bafford

Yes. They’re saying that by terminating the program they broke the law because they’re not running this provision of the IRA. They’re saying, “Now that provision is no longer.” They’re trying to say that the OBBB retroactively repealed that part of the statute, which our lawyers argue is not the case.

David Roberts

Let’s unpack this. If a court says to a political party, “Yeah, you can break the law, as long as you get the law off the books before we hear about it, you’re scot free,” that seems like a terrible precedent. That seems like a terrible thing to say to the government.

Beth Bafford

Yes, there are a lot of tough precedents here and there is a lot of precedent to say that this legislation can and should not be looked at as retroactive. If so, Congress has to explicitly state that. It’s pretty clear from the Congressional Record and all the negotiations that were happening around the passage of the OBBB that that was not the intent — they were trying to rescind the unobligated funds and take the program off the books going forward, but certainly not meant to interfere or interact with the program that was already underway.

David Roberts

Sequence of events: this full en banc is going to hear and decide whether you are going to be heard in district court. If that goes well, then you will be heard in district court. If that goes well, then what is best case scenario here? What amount of money are we talking about? Is this all about the money that was obligated but not yet out the door?

Beth Bafford

It’s all about the money that is currently stuck in our accounts.

David Roberts

How much is that?

Beth Bafford

For us it’s now well over 7 billion because of the interest it’s been earning.

David Roberts

But all that 7 billion wasn’t obligated yet, was it? You had only promised a fraction of it, am I wrong?

Beth Bafford

All of the 7 billion was disbursed into our accounts. Typically, how the government awards grants is that they obligate the funds and then you draw them down as you need them to invest into projects. But because this program was built to capitalize an investment program, we needed those assets to be on our balance sheet so that we could leverage them. We took all the funds out of Treasury, put them in our accounts, and then there were certain rules around how we could use those funds: funds for qualified projects and expenses. The funds were all out of the government, which is why this is even a little bit crazier.

David Roberts

This is the federal government reaching into the bank account of a private non-government organization and stealing money. It’s not theirs anymore. It’s yours now. It just seems like straightforward theft. I’m again baffled. What is even the argument here? I can’t believe this is limping along in the courts, especially since every judge who looks at the merits is like, “Yeah, no, that’s super illegal.” Every one of them.

Beth Bafford

That’s one of my big learnings throughout this process, now that I have a little bit of a benefit of time, is that they did this all very quickly, and we expected that there would be an — as quick of a remedy — we’d be able to break fast, fix fast. What we’re learning, not just in this program, but across —

David Roberts

All of society, you could say.

Beth Bafford

Exactly. That’s not how our system works. It’s not how the system is set up. Unfortunately, you can break things really fast, and it takes significant time to put the pieces back together. I still have hope and a lot of optimism that we will access these funds at some point in the future.

David Roberts

Best case scenario is you get your full 7 billion that’s in your bank account and you get to start doing what you were going to do with it. Best case scenario, you get to run the full planned program that you were planning all along. Is that the best case scenario here?

Beth Bafford

That certainly is the best-case scenario. Although you can’t ignore the fact that this will likely end up in front of the Supreme Court. The Supreme Court is a very uncertain place.

David Roberts

A court where they’re likely to say, “Yeah, it was illegal, but he’s the president, he’s allowed to do illegal things.” You’ll hear district court, maybe they’ll find in your favor. Then it’ll go up to the Supreme Court. We genuinely don’t know. No one really knows what the Supreme Court will do. We don’t have a good sense how they’ll take it one way or the other. Is anybody prognosticating here?

Beth Bafford

If it goes to the Supreme Court, it will still be on this question of jurisdiction. It is not the question of the merit of the case. It is still this question of jurisdiction. There are some inclinations from other cases that have gone through over the last year, some bright spots, some not so bright spots. It really is anyone’s guess at this point.

David Roberts

If you get consigned to the contractual court, what is the best-case scenario there? Could you still win all your money back through that court, or is that a different thing?

Beth Bafford

Yes. If we go to the Court of Federal Claims, which is the contract court, you are suing for damages. At that point, the program itself — you would say the program has been terminated, but we are suing for damages because of contractual breach by the federal government. Depending on which lawyer you ask, we could get access to a significant amount of funds through that process.

David Roberts

Not $7 billion, though, or —

Beth Bafford

Yes, by the pure reading of the contract, we would be owed all 7 billion, plus the accrued interest in what they call expectation damages. There is a case to make that we would be owed all of those funds. That court is not a fast court. That is another — I would say — two to five years.

David Roberts

This is — at the very least, your funds, even best-case scenario, are not going to start getting out the door for years to come.

Beth Bafford

One thing I’ve learned is not to try to predict the twists —

David Roberts

Who knows what video the EPA will put out tomorrow?

Beth Bafford

— of this process. It is a long road. It’s a long road that we as institutions and organizations are committed to walking down. I do think it will be some time before we access funds.

David Roberts

You’re handing off all of this now, presumably to someone else. Where are you going? What is your connection going to be to all this once you are gone?

Beth Bafford

I am leaving Calvert Impact after 12 years, which is bittersweet. The organization has been around for 30-plus years. It will continue to do a lot of amazing work, including shepherding this process alongside our partners at Self-Help and CPC, which are two coalition partners — so that work will continue. I will stay on as a pro bono advisor to the organization to make sure that we get to a good outcome and to ensure continuity in knowledge and experience over the last few years. I had an opportunity that I couldn’t pass up to join my mother as an advisor and support her and her team in the last stage of her career.

David Roberts

Oh, fun.

Beth Bafford

We’ll be going to join her at RBC Wealth Management and trying to get more money invested in the things that we all care about.

David Roberts

Oh, you’re going to go be a rich person whisperer?

Beth Bafford

I’m not sure I’d say that, but I will be —

David Roberts

One of the pods I’ve always wanted to do is have someone in that world, someone who advises wealthy families on what to do with their money, come on the pod anonymously, with a voice disguiser or whatever, and tell me what that world looks like from the inside. So curious.

Beth Bafford

One of the things I’m really excited about is that there is enormous interest among investors and people with wealth in engaging in this world — whatever you want to call it: impact investing, responsible investing, sustainable investing — enormous interest and appetite. There is enormous opportunity on the ground of organizations doing really great work in these spaces, but the infrastructure between the two is still very broken.

The ability to take my last 12 years of understanding how to activate and invest in areas of broken markets, now taking that into a large financial institution and understanding how to pick apart those gaps and how to start to put the pieces together is something I’m really excited about and where I see enormous opportunity. Plus the opportunity to work with my mom is special for me. She has been my professional and personal idol for a long time.

David Roberts

That’s awesome. By way of wrapping up, you made a good case for the important role of finance in this whole world. The federal government is going to be out of that game at least for several years, probably, and who knows, maybe longer. What can cities and states and private institutions do to fill this gap? I always come back to this: the very basic foundational fact that the US federal government can print money, so can spend all it wants and has access to this bottomless well of money, but cities and states don’t. How do non-federal entities step in and try to do some of this work?

Beth Bafford

This is where we learned a lot about the importance of these public-private partnerships and the benefits of what the public sector can and should bring — their unique qualities — and the benefits of what the private sector can and should bring. The public sector, even if they don’t have pure grant dollars, can do a lot in providing liquidity to local financial institutions to do this work.

The ability to create revolving loan fund programs or provide low-cost capital to local — whether it’s a loan fund or a green bank or a credit union — people can take those funds and do amazing things with it to get these projects done that otherwise are not getting done in the traditional markets. They can also help bring convening power and state and local policies that incentivize this activity. They can help provide tax credits and incentives locally.

There are a lot of things that state and local governments can do to activate that financial infrastructure that either existed before the Greenhouse Gas Reduction Fund or has been built since. That’s what we’ve been trying to promote in the ecosystem: there were years and years of planning and pipelines and projects and relationships that have been built.

David Roberts

All that work has created value. Surely a lot of that value is still out there. It’s going to come to something. All these projects that did all this planning, all these communities that did all this planning — surely something is going to come out of all that, even if it’s not federal money.

Beth Bafford

Yes, absolutely. That will be a positive effect that will endure and will get activated once some of these funds are unfrozen or once future policy is set. That is important no matter what. The other thing is really thinking about how to show incremental progress so that people understand what this looks like.

David Roberts

I meant to ask this earlier. One of the critiques of the IRA and the whole Biden administration is that, yes, the legislation was great, but the infrastructure required to implement all of it was rickety and thus didn’t get enough money out the door fast enough to make a big enough impression on the public to make any political difference. From your little corner of the world, do you think you could have gone faster or that the GGRF could have gone faster? Is that a critique that you share or do you think that it was moving as fast as it could have moved?

Beth Bafford

I think it’s a little bit of both. We certainly could have moved faster. The process from the legislation passing to the awards was almost two years. That’s two years lost in terms of showing demonstration of what this is and showing real benefits to people’s lives. The administration needed to take some of that time to make sure they did it right and they did it well. That is not a critique of the administration putting things together.

But every day that funds are not getting out there, that people aren’t seeing the projects, that you don’t see the ribbon cuttings, that you don’t see your lower energy bills because of these investments was a day lost in terms of people really connecting the dots between the policy and their everyday lives. That’s part of the reason why we were building so much while we were waiting for guidance from the administration, because we knew that there was going to be pressure to get things done quickly.

David Roberts

Let’s say Dems take everything in ‘ 28 — the trifecta — and you have a federal government that is eager to get back in the decarbonization game. They came to you and said, “Beth, we want to do something like the GGRF, but bigger. Let’s blow it out this time.” Do you feel you, at this point, with all your work and all your insight, could step in and say, “Yes, I know how to build this thing so it could rock and roll”? Do you feel you would be ready to go at it again?

Beth Bafford

Yes, absolutely. It’s not just me. There are a lot of people who have been involved in building this infrastructure, and we have a lot of lessons learned. We’ve made the mistakes. We’ve learned from them. We’ve figured out where the bodies are buried.

David Roberts

You think you could get it up and running faster this time?

Beth Bafford

Yes.

David Roberts

Interesting. Maybe someday you’ll get the chance. All right. Beth, this is super interesting, super fascinating. I’ve been wondering what it looked like from the inside of that. There are so many things going on these days, so many horrors. Some of the smaller horrors get lost in the news rush. In our world, this is one of the most maddening things, one of the most promising things that was getting built, and one of the most baseless, grossly illegal moves on Trump’s part. I wanted to put a little spotlight on it.

Thank you for coming on and walking us through it, and good luck working with your mom. That sounds fun.

Beth Bafford

Thank you so much, David. I’m a huge fan of the podcast and your work and appreciate the opportunity to talk to 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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

In this episode, I welcome back my old friend Jigar Shah to discuss the current hullabaloo around explosive electricity demand from new data centers. We dig into why its stupid for tech companies to build their own behind-the-meter natural gas plants, how this approach is wrecking equipment and destabilizing the grid, and a better, smarter, faster path forward.

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David Roberts

Hello everyone, this is Volts for April 15, 2026: “Doing data centers the not dumb way.” I’m your host, David Roberts.

Regular listeners will be aware that I have been somewhat obsessed with two related subjects lately. One is the hullabaloo around data centers and their effects on grids and ratepayers. The other is the rising cost of electricity across the country. A great deal of thought is going into the question of how to accommodate explosive growth in electricity demand without sending electricity bills, or greenhouse gas emissions, through the roof.

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As it happens, I know a guy who operates squarely in the center of this world and is deeply involved in all these debates. You know him too, since he has been a Volts guest several times already.

I am talking, of course, about our old friend Jigar Shah. It turns out that, since leaving the Department of Energy’s Loan Programs Office at the start of last year, he has been extremely busy.

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He co-founded Multiplier, an advisory firm helping clean energy startups with financing and exits. He chairs Deploy Action, a nonprofit focused on state-level grid reform. He co-hosts not one but two podcasts. And he recently published a white paper laying out a near-term roadmap for states trying to bring electricity bills down without waiting for the federal government to do anything useful.

He does not sleep, apparently, but he does share his opinions, and today we are going to dig into all kinds of hot controversies.

With no further ado — Jigar Shah, welcome back to Volts.

Jigar Shah

Thanks. I just slept like a baby last night.

David Roberts

You must have exquisite scheduling powers. You must be good at a disciplined calendar. Is that true?

Jigar Shah

It is true. I also am very good at surrounding myself with extraordinary people.

David Roberts

That’s a good trick. Maybe I shouldn’t be such a misanthropist and I would have an easier time of it. But I don’t want to get into all this stuff you are doing because we could talk about it all day. I do want to ask just quickly about Energy Empire. You have this podcast Open Circuit, which is a revival of the old Energy Gang pod, which goes way back to —

Jigar Shah

2013!

David Roberts

2013. Amazing. And you guys are back. That’s fun. But now you’re doing this other pod called Energy Empire. Just tell us briefly, what’s that all about?

Jigar Shah

Everyone is becoming an expert today about the Straits of Hormuz, and it is shocking to me how big our industry is. We did $2.2 trillion of clean energy finance last year. Only $1.1 trillion of fossil fuel finance last year.

David Roberts

That’s global.

Jigar Shah

Global. But we only talk about startups and venture capital all day.

And I just think that when you think about ExxonMobil as a household name, but are the companies doing $2.2 trillion worth of deployment household names? We have to fix that.

David Roberts

You’re profiling big players in the industry.

Jigar Shah

Yeah. But also profiling politicians who are doing extraordinary stuff in the industry, and profiling the fact that you and I both know that now that we have gotten so big, we are national security, we are energy security. People are not talking about our stuff that way. They constantly talk about A rounds and seed stage financing.

David Roberts

Yes. As though we are eager freshmen. There is a need for the industry to put its chest out a little bit.

Let’s get into all the stuff. Let’s start here. Here’s where I want to start with you. Right now, as we’ve discussed many times on the pod, people are hurrying to build data centers. Everybody wants to build data centers. This is all the rage. And right now, whatever people are saying, it appears that what people are doing by and large is building behind-the-meter natural gas plants.

This seems bad to me for obvious greenhouse gas reasons. You argue that it is also bad for many other reasons, including from the data center’s own perspective. I believe your phrase was “a fairy tale concocted on the back of a napkin.” Tell us why this quest to power big data centers with your own natural gas plants, which is what X is doing, which is what Meta is doing — why is that the wrong approach?

Jigar Shah

We want to start with the fact that data centers are providing us load growth for the first time in 20 years. Load growth is good. When you have load growth, whether it’s from EVs or heat pumps or other things, it allows you to lower electricity bills for everybody. I’m not anti-data centers. I’m anti doing data centers in a dumb way. We want to start there.

The second piece is that data centers have been operating for the AI training illegally on the grid. People don’t understand that since the 1950s we have had standards on how loads operate on the grid. You can’t ramp your load from 20% to 80% loading five times a minute.

David Roberts

Is that law or regulation, or where is that?

Jigar Shah

It’s regulation with the utilities. There are ramp rates, there are all of these things that you’re supposed to do to not screw up the grid. Data centers have been in gross violation of that. When you think about what’s wrong with data centers, they have load volatility, which we just talked about, then they decide to power it with behind-the-meter natural gas generators. These natural gas generators, their shaft is supposed to last for seven years. It’s lasting 10 months because of all the cycling.

David Roberts

This is because they’re designed to run steady and they’re being made to fluctuate?

Jigar Shah

Totally, and when they can’t fluctuate, just so you understand, data centers — when a natural gas turbine fluctuates, it fluctuates in seconds, not milliseconds, or it fluctuates in minutes when it comes to a turbine. And it’s not made for this purpose. Then you say, “Why don’t we just put a battery in the middle of it?” Lithium-ion batteries don’t have unlimited cycling. If you cycle them five times a minute, they degrade and they stop working after five or six months.

Now you’ve got interconnection delays. You’ve got the cooling issues, which we all know about in water. Then they have harmonics and frequency destabilization for the entire grid. If you look at some of the press releases out of Crusoe and Oracle, ERCOT is not happy.

David Roberts

Let me just ask you, physically, how are they doing it? As you say, natural gas — these are jet engines, basically modified jet engines being made to do this, which is insane. But as you say, they cycle in seconds, not milliseconds. How are data centers getting reliability out of them? Are they just overbuilding the crap out of them?

Jigar Shah

They’re breaking them early. I think the average data center that’s trying to run off-grid has 50% extra capacity behind the meter so that one third of the turbines can be broken at any one time so that they can run. It’s literally the dumbest thing that human beings have ever attempted to do.

David Roberts

But obviously, when rich people are doing something so evidently dumb, there must be reasons, there must be forces pushing them in that direction. They are not just deciding that out of the blue. Why do they feel they have to resort to this? What is the constraint?

Jigar Shah

This is the conversation I’d love to have with you and your expertise. You and I both know that there are multiple ways of doing this. We wrote the VPP Liftoff Report while I was at the Loan Programs Office. I know we have a disagreement on the word VPP. Then we wrote the Grid Modernization Liftoff Report and we talked about grid-enhancing technologies and advanced conductors and all that stuff. Then we talked about clean firm power technology — think nuclear, etc. We’ve always wanted to build more transmission on the grid.

When this administration came in, the ANOPR that Chris Wright sent to FERC was, “Hey, I would like for you to let all of these folks connect to the grid with a minor grid connection and a whole bunch of BYOG.”

David Roberts

Wright has been actively pushing this strategy then?

Jigar Shah

Yeah. When you talk to the data center companies, and I don’t mean this in any negative way, I really don’t, because these companies really are 53% of the US stock market. But they were looking to the US Department of Energy when we were serving to be their back office for the technical evaluation.

David Roberts

That’s a bummer.

Jigar Shah

Now, who are they turning to?

David Roberts

If you are surrounding your data center with a bunch of jet engines and ramping them up and down constantly such that they run out in under a year rather than lasting their four years or seven years, are you not then also bringing on a massive maintenance and workforce budget? And does that workforce exist? Aren’t they busy maintaining other gas plants?

Jigar Shah

The first question is, have they even thought that far ahead? Second, when you look at the history of the US gas fleet, we built a whole bunch in the 1990s. There’s a firm named Scott Madden. I hired a guy, Chris Vlahoplus, from Scott Madden, who had retired from there to run a lot of our nuclear work. The way he made his claim to fame was the utilities did not know how to maintain these natural gas plants. He figured out how to maintain them in the early 2000s and then spent 15 years training all of the utilities on how to do this. That’s how long it took for them to become experts at maintaining our current gas fleet. I don’t think Meta has thought about this one iota.

David Roberts

I’ve resisted. I’m a grumpy, populist, communist type. I’m naturally hostile towards rich people, so I’ve tried to keep an open mind because really, the vibe I’m getting, Jigar, is that these guys are galumphing forward without knowing what they’re doing or what’s going to happen two months from now or five months from now. They’re just throwing money at things. Is there a level of thought and analysis that I am missing somehow? Are all these guys just — they seem like kids in a soccer game?

Jigar Shah

Let me put you in their mindset a little bit, because I’m not suggesting they shouldn’t be better. I think they should be better, but just to put in their mindset — a 1,000-megawatt data center with Nvidia chips and all the other stuff that goes into a data center can cost up to $50 billion.

David Roberts

That’s wild.

Jigar Shah

They make about $12 billion a year in revenue from that data center.

I don’t think they give two craps about a $200 million problem over here.

David Roberts

Still not very long term, though. Let’s then talk about what you see as a better model. We had — I don’t know if you heard — Astrid and Jesse on.

Jigar Shah

I did.

David Roberts

A couple of weeks ago. From what I can tell — and tell me if you agree that this is the good model, the way we would like to see people do it — data centers bring some of their own capacity to the table, and then on the utility side, they agree to a flexible interconnection. Basically, 10 hours a year or whatever it turns out to be, the data center has to run itself, has to power itself, and this will hasten getting data centers connected and produce a lot of new capacity. Is that roughly how you would like to see things go?

Jigar Shah

That came out of the work we did at DOE, and then it was popularized by an extraordinary paper that Tyler Norris wrote out of Duke University.

David Roberts

I’ve never heard a single paper discussed more in my entire life in this business.

Jigar Shah

I’m a huge fan of Tyler’s, and what Astrid and Jesse are doing is making that real, which I think is fantastic. The part that everyone is missing, and you know this better than anyone, is that for the better part of 40 years, the people around the governors in our country have decided that they do not want to know a damn thing about how electricity works in our country. They’re just like, “This is complicated. All I need to do is just put somebody on the Public Service Commission.” I don’t want to understand any of this or just occasionally come up with targets and mandates and throw them over the wall. Totally hope that the PUC does the best it can.

Now you’ve got Governor Shapiro who’s saying, “This is becoming a political issue. We’re going to put a cap on the capacity market in Pennsylvania.” Then you’ve got Governor Spanberger and Governor Sherrill in New Jersey who had to run on electricity because it became a number two political issue in their governor’s races.

Now the question is, when they have an expert that they put around them, do they understand any of this stuff and do they know how to put leverage onto the utility companies? The utility companies have been investing in local power building for decades, if not a century. That’s a lot of what I’ve been working on since I left office. Everyone is a product of the way in which they get compensated and their rewards. I get it. But at the same time, the group that’s supposed to solve this problem, I think, are governors.

David Roberts

That’s interesting, because I was going to ask you, I like this model too, and it makes sense to me. It seems it would make sense from a data center’s perspective, but what is the lever you pull to put pressure on them to do this? Is it state law? Is it state PUCs? Is it persuasion and white papers from consultants? What is the lever you pull to put pressure on these people to pay attention to this? Because as you say, all things being equal, the data center guys are just going to hurry as fast as they can. The amounts of money we’re dealing with here are so huge, they don’t care. How do you pressure them to think about this and do it more thoughtfully?

Jigar Shah

The first thing is you have to have a narrative that folks can get behind. We have tried a lot of narratives, as you and I have shadow argued about with VPP. The narrative that everyone has gotten comfortable with is a narrative called grid utilization, which is that we used to use our grid around 70% of the time, and today that number is below 50% of the time.

David Roberts

Just in case you don’t know, today, the day we’re recording this, Wednesday, April 1st, I just released an interview with Ian Magruder, who is running the Utilize Coalition. He is very much trying to articulate this narrative.

Jigar Shah

He’s amazing. The initial group of funders of this campaign — that is amazing and I’m really glad that they decided to make it a campaign. It’s a two-year sprint, not a permanent new organization. Now that you’ve created the grid utilization framework, and it really is technology agnostic. If you can figure out a way to utilize the grid better using natural gas turbines, that’s included. It happens to be that the cheapest way to do it is things like grid-enhancing technologies, advanced conductors, VPPs, batteries, etc.

Now you have a framework by which to put all of these ideas. What the utilities have said to us is they have said, “We get it, but we would like to be forced to do this because going to our shareholders and saying we are going to deploy stuff that is 90% cheaper is not generally the way that we like our shareholder meetings to go.”

David Roberts

I want to get to that for sure. But I want to articulate the basic argument that you’re making here to all parties: rather than building a bunch of big new power plants on site, there’s a bunch of unutilized capacity out in the grid at large. If you, data center, could pay to help us exploit that capacity, then you wouldn’t need to build power plants. Is that the pitch to data centers?

Jigar Shah

That’s exactly right. You’ve heard this pitch in various forms in different places. For instance, when you talk to Rob Gramlich and you talk about transmission, part of the reason we need to build so much transmission is we have a large amount of generation. We just can’t get the power to where it needs to go. That’s why grid-enhancing technologies — advanced conductors — are really good around grid utilization because they unlock generation we’ve already paid for but are being curtailed at certain hours or whatever it is. The same thing is true with figuring out batteries on distribution grids or batteries as transmission.

In New York State, for instance, you have all of these renewables and only so much transmission capacity in New York City. If you could build batteries on the upstate part of the transmission line and then batteries in New York City, then you could transport it when there is excess capacity.

David Roberts

This was one of my questions to Ian, which is, when you scrape away everything else, isn’t this just batteries everywhere, all the time? More batteries all the time, everywhere, no matter what?

Jigar Shah

From your lips. We’ve been working on this for a long time, since Katherine Hamilton called batteries the bacon of the grid.

David Roberts

As far as I know, the only hyperscaler that is taking you guys up on this so far, that is gathering the capacity together and bringing it to the utility with the proposed data center and saying, “Hey, we have a data center we want to build and here’s a bunch of capacity we have to compensate for it,” is Google. Tell me what Google’s doing and how far along they are, is it working, and why is no one else following what they’re doing?

Jigar Shah

Let me give you two stories. About the clean transition tariff that they signed with Nevada Power and Fervo.

David Roberts

Vaguely.

Jigar Shah

Remember way back when? Most recently, they announced that deal with a big Form Energy battery in Minnesota.

David Roberts

I want to talk more closely about the Minnesota thing in a minute.

Jigar Shah

Let’s just skip to the Minnesota story then. In Minnesota, Google came in and said, “We want to put in a data center.” Xcel said, “We think that’s awesome. Here’s a big natural gas plant for us to connect your data center.” The local population said, “Over our dead body.”

David Roberts

Oh, interesting. And it wasn’t Google that said, “Over my dead body.” It was the locals.

Jigar Shah

That’s right. Then Google said, “Okay, let’s get to the drawing board and look at this.” Xcel was just paralyzed. They were like, “We’re not going to do anything differently.” Google went back and said, “What if we double the size of the Form Energy battery and do this and do that and whatever else?” It turned out it worked. Then they went to Xcel and said, “Would this work?” Xcel said, “Yeah, I think this would work.” Then Xcel said, “Okay, great, let’s do this.”

David Roberts

But that’s not a done deal. Isn’t there a hearing?

Jigar Shah

No, that’s the Spark Fund thing. The Google thing is a done deal.

David Roberts

Oh, I see.

Jigar Shah

We can talk about the Spark Fund thing later. But I want to make sure that we understand what just happened here. You’ve got a company in Google who has hired everybody who’s super smart from Tyler Norris, to all the people who used to work with me at the Department of Energy, like Lucy Etienne and Campbell Howe and all the folks who wrote the Liftoff Reports. They basically decided as a customer that they would go and solve the problem for the utility and then present it to the utility for their approval.

David Roberts

“You, utility, can’t find capacity? Fine, we’ll find it.” Let’s just put a bookmark here. Crazy. That is literally supposed to be the utility’s job. Maybe we can return to that in a minute.

Jigar Shah

You tell me if Mark Zuckerberg is going to do that.

David Roberts

Exactly. Utilities have to take it up.

Jigar Shah

Now what’s happened is all these companies have started, Astrid being top of the list, which is Camus Energy, but another company is GridCure. That’s Amit Narayan, who started AutoGrid and sold that to Schneider Electric. He partnered with Arun Majumdar, who used to be the head of ARPA-E and the Deputy Secretary under Ernie Moniz and now runs the Stanford energy effort there. They have taken all of the data from the grid and in that case, the data center company again hires them.

They then work with the utility. They did this with Portland General recently. The utility happens to have three data silos that don’t talk to each other. GridCure looks at their data silos, unlocks all that data, then finds a much cheaper way of accommodating the data center load, which is what the data center is hiring them to do, and then gets to yes. In Portland General’s case, it was a four-year interconnection that Portland General was saying, and GridCure figured out how to get it down in nine months.

David Roberts

Again, that seems like it ought to be squarely inside the utility’s skill set and job. Eventually it will be. Once we get past this period, eventually it’s going to be utilities doing this.

Jigar Shah

This is what I’m trying to get your brain power on. Every time I ask you a question, you’re not answering it.

David Roberts

Let’s remember who’s interviewing who.

Jigar Shah

I’m just saying, I’m tired of the definition of insanity of me having higher expectations of the utilities every single year and expecting different results here. What I’m trying to do is to figure things out. What Deploy Action has done in Virginia is pass a bill that is demanding that Dominion share all of their grid utilization data.

David Roberts

We talked about this with Ian. It just says measure it and publicize the measurements. That’s all. It doesn’t require it to do anything about it.

Jigar Shah

Which Astrid at Camus already does for her 40 utility clients. She doesn’t publish it, but she reveals it for those 40 utility clients that she has. It’s not that she can’t do it. Remember, there has been this lawsuit between Xcel Colorado and the PUC there because the PUC keeps asking for this information and Xcel Colorado doesn’t provide it. I think it’s largely because Xcel Colorado can’t collect it.

David Roberts

That’s crazy. What we’re finding here, and this is the take-home lesson for listeners, is that when you start more thoughtfully and carefully looking around for capacity, what you find generally is that demand-side capacity is cheaper, batteries are cheaper. Building a new natural gas plant is about the most expensive conceivable way you could go about this. There are a million cheaper forms of capacity laying around. Is that accurate?

Jigar Shah

For sure. This is complete and utter lizard brain thought process. Remember when the inauguration happened with Trump 2 and we were all talking about Mark Zuckerberg and masculine energy — the natural gas turbine phase is simply a masculine energy effort.

David Roberts

I’m glad you’re saying this rather than me because I’m the communist and when I say this, people dismiss it. But that sure is what it looks like. Mark Zuckerberg feels like a big natural gas plant is more manly than a spreadsheet full of little bits and pieces of distributed capacity.

Jigar Shah

Totally. I took a lot of flack when I served in the Biden administration, being as pro-nuclear as I was. I’m not anti-nuclear, I’m certainly not anti-gas. We have 500 gigawatts of it operating in the United States. I’m not anti anything, but I am pro us taking the 20 years with the venture capital-backed companies and all of their solutions and deploying it, particularly when we’re in a crisis and everyone wants cheaper solutions and we invented them — why not use them?

David Roberts

For listeners who haven’t heard the 38 pods I’ve done on various forms of this, when we talk about distributed capacity, we’re just talking about — you might have a battery in your home, or you might have an electrical connection that you only use 50% or 70% of. There’s just a little bit of spare capacity in your house and in the next house over and the next house over. All over the place there’s slack capacity.

You can do things like what Base Power is doing in Texas, which is go install capacity —

Jigar Shah

That’s right.

David Roberts

— at the residential level. They just put a big battery in your backyard and use all those batteries together as though it was one big battery. A lot of people say, “Economies of scale. Isn’t it cheaper to build one big battery?” Here we come back to all the regulatory problems. It turns out it’s easier and faster to put them in people’s backyards.

Jigar Shah

It’s also more valuable. In Base Power’s case, what they’re doing is saying in Texas, the cost of hedging electricity is 20% of the total cost that you pay just as the hedge. If they’ve got a battery in your house, they don’t have to pay for the hedge because they’ve got a physical hedge. If electricity prices go haywire in Texas, they’ll just take you off grid — run you off your battery. That’s how they give you such big savings.

David Roberts

If you put one big battery somewhere in a field front of the meter, you get some benefits. But if you spread those batteries out to households, you get the same grid benefit, but also spin out benefits to all those households.

Jigar Shah

Totally.

David Roberts

To all those household owners. This is the central point I have been trying to make for the last two years, which is that the things you would do to develop distributed grid capacity — I have been struggling for the right metaphor, but I think of it as caulk in the cracks. You are just firming up your whole grid. You are making the whole thing sturdier.

This is not, and let’s address this too, this is not an alternative to building more. This is not an alternative to expansion or growth. This is not some undercover degrowth attempt to avoid growth. It is necessary for robust growth. Do you agree?

Jigar Shah

Totally. The analogy I would use is, have you ever gone to Ikea?

David Roberts

Not for a while.

Jigar Shah

Where they have those made-up rooms?

David Roberts

Yeah.

Jigar Shah

You’re like, wow, they have done a lot with 400 square feet. You’re like, wow, I really designed my 400 square feet in a crappy way.

David Roberts

Yes.

Jigar Shah

It’s more like that. I’ll give you an example. In PG&E’s territory, they have a one-year wait list right now for upgrading your pole transformer. If you want to put in a new heat pump and it goes above your 80 amp service.

You have to wait a year to put in that heat pump because they will not update your pole transformer for a year.

David Roberts

Transformer backlog, etc.

Jigar Shah

If you use a Span smart panel with a battery, you can install that heat pump right away. Or better yet, you get that new heat pump from Carrier that comes with a 4-kilowatt battery. PG&E has now said if you buy that heat pump, you don’t have to wait for the pole transformer upgrade.

David Roberts

What you’re doing at the residential level is using a battery to spread your usage out more evenly.

Jigar Shah

That’s right.

David Roberts

You’re reducing your peak and making your load level flatter, which makes you easier to serve. That is in miniature exactly what we’re doing at the macro level or at the regional level, or at the city level or at the national — at every level, that’s the game.

Jigar Shah

That is exactly right. The vast majority of the time — and it all started in the 1980s because of air conditioning. When everyone decided to put in air conditioning, we put in all these natural gas peaker plants.

David Roberts

That’s a huge peak — air conditioning. Because it all comes on at once. It’s very power intensive.

Jigar Shah

Exactly. Our grid utilization has been going down since the 1970s, first because of air conditioning, then because we started deindustrializing as a country. We got rid of a lot of the loads that were 24 by 7 and all that stuff. Now we’ve got this really peaky load, where our off-peaks are even lower than they used to be and our peaks are even higher than they used to be. What we’ve said is, the only way we know how to meet that is by building more and more infrastructure.

As a result, you and I both know — I don’t think most of your listeners know — but you and I both know, that generation has been flat since 2010. For all the talk around solar and wind and all the other stuff, we’re paying the exact same price for generation today that we were paying in 2010. In fact, it was about 20% lower five years ago. Because natural gas prices went up, it went back up. Transmission costs have gone from around 1.2 cents a kilowatt hour to about 2 cents a kilowatt hour. It’s gone up, but that’s inflation and it’s not breaking the bank. We could put more transmission and it wouldn’t break the bank. Distribution has gone from about three and a half cents a kilowatt hour to about eight.

David Roberts

Yes, it’s distribution grids. I feel it’s hard to get people to focus on distribution grids. Maybe it’s that masculine energy again, but something about big power plants and big transmission lines. Everybody wants to talk about those and people don’t want to talk about the distribution, but the distribution grid is where all the action is. It’s where all the slack is. It’s where all the spare capacity is. It’s where all the room for improvement is, or most of it, I think.

Jigar Shah

More importantly to the politics of the moment, if you did it right, you could reduce rates for everybody. It’s not even about arresting increases in costs. We could reduce rates for everybody if we used what we paid for already more efficiently.

David Roberts

The way to do that, it is not mysterious. This is a key thing that is very counterintuitive that a lot of people are saying. I think it is hard for the public to understand. I just saw Chris Wright say it.

Jigar Shah

Come on, Dave.

David Roberts

“I need to get on the utilization train too.” More load on the grid can, if deployed effectively, reduce rates. I think that is very counterintuitive to average people. But it is very important to understand because load gives you a tool. If you use the tool to lower the peak, as we discussed, and flatten the load, then you can get lower per unit costs across average with more load.

Jigar Shah

Leaving it to the utilities to do that is not going to happen.

David Roberts

This segues into something I definitely wanted to hit with you hard because I read through the Utilization Coalition stuff and I read through the Brattle report, and they are a lot of great solutions, but they dance around a little bit the question of fundamental utility incentives, I think because the members of that coalition have to deal with utilities every single day. They are in constant negotiations with utilities and perhaps do not want to call utilities names in their big paper.

But it seems to me that utility incentives are at the root of this. If you come to them and say, “Here’s a tool that will let you avoid building new stuff,” they want to build new stuff. That’s how they make money — building new stuff. On its face, all of this utilization stuff seems just squarely diametrically opposed to IOU incentives. Is that not true?

Jigar Shah

It is true. We had this problem back in 2003, 2004, with renewables, and we passed renewable portfolio standards. Now we’re passing grid utilization requirements.

David Roberts

But only measurement. We haven’t forced anyone to increase utilization yet. I would love to pass utilization portfolio standards.

Jigar Shah

Don’t give away my entire plan, Dave.

David Roberts

I heard about that idea a year ago, and I’ve been trying to keep it to myself for a year, but it’s very exciting. I love that idea. Has anyone even proposed that yet in a state legislature? Do you think that’s realistic? For listeners, this would be just like a renewable portfolio standard says to utility, “You got to raise the percentage of clean on your grid.” The utilization portfolio standard would be, “Your grid utilization is currently 50% . Raise it to 60% by X date.”

Jigar Shah

Yeah. We started thinking about this under the REV when we were doing this in 2013 with Audrey Zibelman and Richard Kaufman in New York. It’s been on the brain for a long time for me. Tesla, frankly, was the one who came up with the whole grid utilization thought process back then. The problem with it is that we haven’t really tested it out. For instance, in Virginia, we have to come up with the metrics. There’s a bunch of people working on it and going to go to the Public Service Commission and get them to do that. Maryland and others want to pass the same bill. I think we’ve got eight or nine bills this year that want to pass —

David Roberts

Along the lines of the Virginia bill. Modeled on the Virginia bill?

Jigar Shah

Exactly. There’s a whole bunch of people who are saying “It won’t work because if we build a bunch of new transmission, won’t the transmission be underutilized until it becomes fully utilized?” I was “Let’s run the math. Run the math and tell me whether it will be or won’t be, because I don’t know.” I think we have to go through that process before I know exactly what the law has to say around utilization and whether it’s five different metrics that roll up to one.

David Roberts

Returning to my question, the reason you would have to pass a law forcing utilities to do this by statute is that they don’t want to and it’s counter to their incentives. I run into this again and again. I know I’m not telling you anything, but how many laws can we pass saying utilities ignore your fundamental incentives in this context and in this specific context and in this specific context? Sooner or later, don’t we have to address that question squarely?

Jigar Shah

We do. Right now we are in a place where we have an ability because Wall Street’s on our side. Wall Street wants the utilities to deploy less stuff.

David Roberts

Really? Why is that? Explain that dynamic.

Jigar Shah

In 2003, the total CapEx budget for the electric utility industry was $20 billion. Last year it was $178 billion.

David Roberts

Geez.

Jigar Shah

Many of the utility companies are going to Wall Street and saying, “Over the next five years we will have to raise more money than we have ever raised in the history of our utility.”

David Roberts

Because they are all just looking at this expansion from data centers and saying, “Hell yeah, we will build, build, build.” It is salad days for them.

Jigar Shah

Wall Street is scared they are not investing that money properly.

David Roberts

What’s the possible downside? What is Wall Street scared of?

Jigar Shah

What if rates go up by another 9% a year every year? At some point, one in five households will have at least one energy bill.

David Roberts

But why does Wall Street care about households behind on energy bills?

Jigar Shah

When they’re behind on energy bills, they don’t pay their energy bill. Then it gets spread amongst the people who are left paying. They always have to get their money.

David Roberts

Political backlash. They’re scared of backlash from rising rates.

Jigar Shah

And whether their product is still affordable. Wall Street wants to see them achieve some balance here. It used to be that investor-owned utilities were the same price per kilowatt hour as public power. Now I think it’s about 30% more expensive than public power.

David Roberts

Yeah. That’s profit. That’s profit for the utility executives. Would you support some law, state law, capping utility ROE? That’s been discussed. That’s out in the atmosphere. How would you feel about — or do you think that that’s more of a political crap show than is worth taking on? Do you think it’s worth directly trying to push ROE back down?

Jigar Shah

ROE in general is this sort of thing to latch onto, but not the fundamental base challenge. The bigger challenge is that they’re 50% equity, 50% debt, and no other form of their — if you look at a project finance deal for solar, we would never be 50% equity, 50% debt.

David Roberts

What do you think about Mark Ellis’s more radical proposal, which is just that this whole apparatus is ridiculous? There are a million financial market tools that we have developed since we invented utilities. They should just go out and raise money on markets the same way everybody else does with the same tools everybody else uses. What do you think about that?

Jigar Shah

Meaning that they are no longer regulated.

David Roberts

Yeah. That they are no longer guaranteed any particular rate of return?

Jigar Shah

This is exactly what we did in 1996 in the Telecom Act. But I want to make sure everyone understands.

David Roberts

It seemed to work out well, didn’t it?

Jigar Shah

It did, but it could have not worked out well. We all need to understand. Reed Hundt is an old friend of mine. When he was running the FCC, everyone wanted him to regulate cell phone bills. He said, “No, let them charge whatever they want to charge, but let’s make sure that there’s competition.” You and I both know that your communist ass was not necessarily on board.

David Roberts

I didn’t know my ass from a hole in the ground back then, but you’re probably —

Jigar Shah

I want to make sure that you and I are simpatico about this. If we decide to go in, you can imagine BlackRock, GIP, all these companies are buying utilities and taking them private. You could imagine them saying, “We would like to take this utility private, but in exchange, we’d like to get rid of all regulation.”

David Roberts

Where does the competition to keep rates down come from then in that context?

Jigar Shah

That’s what I’m saying. Then you would have to structure the rest of it. You’d have to go with our good friend Travis Fisher at Cato and put all the Cato stuff in. “Now you can’t ban me from building my own microgrid. You can’t ban me from working with my homeowners association to create my own little mini utility here.” All the things that the utilities do to make things difficult — you can’t do that anymore. I can self-organize and try to get cheaper rates. Sounds like another podcast.

David Roberts

I know. We’re spinning out podcasts with every little section of this, but let’s talk briefly about what Xcel’s doing. What I have been advocating for and preaching on this pod for a long time is I would like data centers to come to utilities with a bunch of distributed capacity — to gather up distributed capacity. Because I think that’s just faster. That’s the fastest way to find the capacity. I don’t know why they don’t find that more compelling. It’s the fastest, it’s probably the cheapest capacity. Every dollar you spend on capacity at the residential level not only benefits you, it also benefits the resident and the grid. Having these moneybag hyperscalers plowing money into distributed capacity in exchange for being able to get online seems to me like a win — win — win.

The closest thing in the world to that happening is in Minnesota with Xcel. Talk about their distributed capacity proposal and how close is it to what I’m envisioning?

Jigar Shah

It is a distant cousin. I want to make sure we start with — there are two halves of this equation. There is the physics half and then the politics half. I want to make sure we focus on the physics half first and then we can move to the politics half. On the physics side, the reason the DCP program was proposed was because Tim Walz was going out there, like every governor does, and saying, “I want to get a whole bunch of economic development in the state of Minnesota.” He was getting so much economic development in the state of Minnesota that Xcel was starting to give people three-year timelines for interconnection.

Tim Walz said, “Hey buddy, you can’t give people a three-year timeline. I’ve given you a monopoly franchise and you have one job — interconnect them, do your job.” Xcel said, “We think we can do this.” Not unlike the FlexConnect programs in PG&E, in Southern California Edison’s territory, where they’re saying, “We really can service them most of the time, but this amount of time, we can’t.” The way that PG&E and Southern California Edison did it was they said, “We just have the right to turn you off for 100 hours a year.” What Xcel decided to do is say, “Instead of turning you off for 100 hours a year, how about we install a battery front of the meter on our circuit to be able to say yes to you for 8,760 hours a year and we’ll take care of the —”

David Roberts

And you pay for the battery?

Jigar Shah

No, in their case, they’re going to pay for the battery and they’re going to rate-base it. But then they get more electricity sales on the circuit so that those increased electricity sales pay for the battery. More than that, what they found was that that battery also can bid into the Midwest Independent System Operator. That battery can do — there’s five different revenue streams they can get for that battery.

But Xcel said, in this case, we really want to own it and dispatch it so that we can fully integrate it into our grid operations software so that we know for sure that this is going to work.

David Roberts

Then the data center has to say, “Okay, we trust you. We trust that you will operate that battery in such a way that we’ll be okay.”

Jigar Shah

None of this was done for data centers, to be clear. This was all done for warehouses who said, “We’re going to do automation. We need an extra 400 kilowatts worth of capacity.” Or, “We’re going to do electric vehicle charging. We need a 1 megawatt charger.” None of this was done for data centers. Now data centers are coming in. Chelle Izzi over at PG&E was just hired over there to be the head of large loads, and she’s doing a lot of this stuff.

In PG&E’s case, you can imagine they’re not getting a lot of 1,000 megawatt data centers, given their electricity prices, but they’re getting a lot of 5 megawatt and 10 megawatt and 20 megawatt data centers. She’s trying to figure this stuff out now there. I want to make sure we’re being careful about the way we talk about this. When she’s doing her job and she wants to get speed to power for those data centers, she needs to get the physics right. Those batteries have to be on the same exact circuit or a circuit nearby that’s fed by the same transmission line.

David Roberts

This is the heart of the question — whether there is such a way to gather distributed capacity together and present it to the utility that the utility will look at it and say, “Yes, we trust this. Yes, we trust that this will act as actual reliable capacity.”

Jigar Shah

That’s the journey that we’re on.

David Roberts

Is there an example where there was a gathering of distributed capacity presented to a utility, the utility said, “Yes, that looks good and solid and reliable,” and then let a data center on? Has anyone done that yet or are we all just groping in that direction?

Jigar Shah

That has never happened to my knowledge. In the case of a Form Energy battery, they’re saying there is a challenge at this particular substation. By having a Form Energy battery there, we can ride through that challenge at the substation. There are a number of people trying to accomplish what you’re suggesting, but they have not yet accomplished it.

Remember, the Lego blocks to getting there are going in place. I want to make sure that we’re all crystal clear about what we have accomplished. When you look at WeaveGrid — before WeaveGrid and they’re managing EV charging loads and now batteries and some other stuff — before WeaveGrid, there was not a single distribution engineer in the country who believed that software could manage the loading of distribution substations.

David Roberts

No kidding. I don’t know why you would not believe that.

Jigar Shah

They just thought that they needed telemetry and there was a timestamp problem because the way that the clocks worked on the load and the clock worked at the thing, maybe off by a millisecond. They needed everything to be synced. WeaveGrid has now proven that in eight utility territories. The CPUC put out a big report, even though the CPUC generally hates VPPs, and said this works and now have doubled the size of their program. That’s one building block. Now they’re effectively a DERMS platform.

Then you’ve got Spark Fund and what they’re doing in Minnesota.

David Roberts

This is Pier LaFarge who was a guest on Volts last year.

Jigar Shah

That is now moving through and Xcel believes that all of those things will work and hopefully that will get approved here in the next 10 days or so. If that gets approved, then we are off to the races there. They have got eight of the utilities who want to copy that program.

David Roberts

That’s a flag that they’ll be waving saying, “Here is distributed capacity that we trust in.” That will show other utilities that there is such a thing as a basket of distributed capacity that is trustworthy.

Jigar Shah

That’s right. Then you move to a company like Voltus, which is not doing the physics part of it. The local utility has to approve the data center going into that particular location and being fully charged. What they’re doing is giving transmission tags to that data center via PJM or via MISO or via other things. Those transmission tags are shared across an entire region. It’s not just on those circuits. That’s the contract that they’ve got with some of the hyperscalers that they’ve announced.

I want to make sure that we’re all being clear that there are these building blocks. Tesla has all their Powerwalls and they have participated in the DSGS program in California. When there was a crisis and the governor said, “Please dispatch,” they all get paid $2 a kilowatt hour to dispatch.

David Roberts

We all saw the graph of California power that’s flying around social media as we speak. Mostly batteries in the afternoons. Wild. Gigawatts worth of batteries on the California grid.

Jigar Shah

Totally.

David Roberts

All in the last five years.

Jigar Shah

Totally. What we’ve accomplished — most of the people that I just mentioned are part of the Utilize Coalition — is each one of these companies has now proven that their Lego block absolutely works and has certain utilities that are backing that Lego block. Now you can put these Lego blocks together, because it’s one thing to do a 100-kilowatt, 500-kilowatt, 2-megawatt, 5-megawatt thing on a distribution circuit. Now you’re asking me for data centers, which — what I think you mean is not the 5-megawatt data center. I think you mean the 1,000-megawatt data center. That’s a lot of Lego blocks.

David Roberts

Yes.

Jigar Shah

We have to put that together.

David Roberts

Say we got all the procedural and process pieces put in place so that we became good at identifying and rounding up distributed capacity and utilities became comfortable with it, and we really went off to the races on this.

What is the scale that we should have in our heads? I think the hyperscaler people, even the ones that are sympathetic, view this as an emergency kludged bridge that will get them through the next few years until they can start building big power plants. But then if you ask a true distributed fan like me, I would say, “I think there’s a lot there. I think once we start looking at —”

Jigar Shah

What am I, chopped liver?

David Roberts

Much of which I’ve gotten from you. I think once we start exploiting distributed capacity, we’re going to find that there’s tons there and it’s cheaper and easier than we thought and it’s going to be at a scale to rival new infrastructure. Where do you come down on that? What do you think is the ultimate scale? Is this just buying us time until we build big power plants? Or could we really do this instead of building big power plants for a while?

Jigar Shah

I want to preface my comment by saying we need a lot more capacity. We need a lot more power plants. We need a lot more transmission lines. We’re building mostly solar and battery storage and wind on the grid every year. We need to keep doing that. Wood Mackenzie put out a report late last year saying we already have 37.5 gigawatts of VPPs registered into programs or registrable in the US — 37 gigs. Some of them are registered into a company like Renew Home, with the thermostats, but without a program to get paid for it. But they’re registered. They have somebody who could dispatch them.

If you read the VPP Liftoff Report from the Department of Energy, it says very clearly, and there are lots of experts at DOE who looked over this and made sure before I put this number out, that we could get to 160 gigawatts of load, which is 20% of our entire grid, that could participate in a VPP easily, safely, reliably. That is an official US Department of Energy number. I do think that some of that is going to shift over time. Initially it can be thermostats, but pretty soon it will be batteries that are up and down. You have got the battery in one of those copper facilities for induction stoves. You have got a battery in a Carrier heat pump.

David Roberts

I talked to Seth —

Jigar Shah

From EnergyHub.

David Roberts

He says we’re evolving towards multi-device variety, basically multiple devices, multiple kinds of devices participating in a VPP and doing a little bit. Some forms of distributed capacity will only be available sometimes and others will only be available other times. But it’s like anything else. If you can put together a portfolio, you can get a full power plant performance.

Jigar Shah

I’d say it differently. I love Seth and I love his paper, but I don’t like the structure he put forward. In general, the way this stuff works is if you have a dispatchable natural gas power plant, you get paid X. Let’s use the PJM numbers — $333 a kilowatt day. If you have a thermostat, there’s no way you get paid that number. It doesn’t provide enough benefit. It gets paid $30 per kilowatt day.

If you go to a Carrier heat pump with a 4 kilowatt battery, you get paid this bigger amount. If you have a Tesla Powerwall, you get paid this much. If you’re doing a vehicle-to-grid thing, you get paid this much. Then there are these multiplication factors around the effective load carrying capacity. How much — if you were to do V2G, how many cars are plugged in at any one time? It’s important to note that this is really less about Huel’s test and more about what each VPP type is worth in the market.

David Roberts

You think it’s less binary — either you’re passing as a power plant or you’re not — and more that there are levels of value that a VPP can provide.

Jigar Shah

Exactly. I could scrape together five different levels of value for certain VPPs and only one type of value for other VPPs.

David Roberts

Is this the kind of thing where, as you say, these Legos are coming together largely out of sight of most people, unless you’re really obsessively following this the way we are? Is this going to be a very slowly and then all at once thing? Do you think once we get the procedures and processes of identifying distributed capacity, rounding it up, certifying it, or whatever it is utilities have to do, saying they trust it, all of those pieces — do you think once they’re in place, this is going to be a cascade thing, or is it going to be slow and difficult the whole way?

Jigar Shah

No, I think it’s going to be a cascade thing. You need a champion. The fact that Governor Spanberger thought that this is going to be her bill — remember, she made this her bill. It wasn’t a bill she supported. This was her bill.

David Roberts

This is maybe neither here nor there, but what’s her level? Does she get it or is she just hiring good people? I’m curious how much the governors themselves get it.

Jigar Shah

I can’t speak for her per se, but I can say that her transition team energy people get it in spades. They convinced her that this was going to be the best way for her to meet her campaign obligations, and she championed it. It went all the way through. Dominion was like, “We’re not going to go against the governor.” But also Dominion really likes LineVision. They really like some of these other solutions. They were like, “Yeah, this is not a bad idea.” In general, you could have a utility who likes the ideas, whether it’s Xcel Minnesota or PG&E or Baltimore Gas Electric and others who’ve been real leaders in this area and have these structural shareholder problems where they make more money by spending money.

Both things can be true. When the legislation was going through, it got through on the consent agenda. In the House, it was unanimous. In the Senate, I think only six people voted against it.

David Roberts

It was a party line —

Jigar Shah

No, it was the only party line in the committee. That was only because they said, “It didn’t go through this other process.” They were protesting the fact that it didn’t go through this other process. When it went to the full Senate, I think only six people voted against it.

David Roberts

That’s interesting. The white paper you wrote is all about how to bring rates down. Everybody’s talking about this. A big part of the toolbox is this utilization stuff that we have been talking about. There are a couple other tools you mentioned. People are talking about trying to limit utility ROE. People are talking about trying to take some obligations and social spending out of utility bills and put them into the tax base instead. There are a lot of ideas floating around about energy affordability. It is a big center of political discussion and fighting.

Here’s my nightmare scenario: it seems to me there are a lot of structural forces pushing power prices up and that there is a real chance the entire Democratic Party could run on energy affordability, win, implement something, and then power prices keep going up and they just get pilloried for it.

In other words, power prices are going to keep going up no matter what. Almost like whoever wins this fight is winning a Pyrrhic victory because they are not going to be able to bring prices down. That is my nightmare political scenario. Do you worry about that?

Jigar Shah

I am worried about that, but I’m not worried about it from the perspective of the physics. I’m worried about it from the perspective of the politics. I think that’s important. In some cases you could say, “No, Jigar, everything’s going up in cost, and it’s impossible for you to even promise that thing because it’s not possible.” That’s not true.

David Roberts

It’s physically possible.

Jigar Shah

It is physically possible with the solutions that we suggested in the paper to reduce rates for everybody while increasing kilowatt-hour sales and getting speed to power for the data centers and all these other people. That is possible, and I want to make sure that everyone understands that.

Now the question becomes, how do you avoid the political challenge? That requires all of us to educate the people who are in those positions around how these measures work and why they work. Here are the trusted experts that you can rely on. If you ever have a question or somebody else gets pissed off about this or somebody gives you a question you can’t answer, here’s the person you should call to get the answer. It’s on us to give them the tools necessary to be able to implement that.

David Roberts

I know you’re as congenitally forward-looking and optimistic as anyone who works in public life has to be, but do —

Jigar Shah

Are you going to make me get that whiskey out?

David Roberts

Do you not ever think the Department of Energy was playing exactly that role up until pretty recently, and it sure would be handy at this time of turmoil and uncertainty and transition to have a steady, expert hand at the wheel that people could come to for just the advice you’re talking about. Wouldn’t that be great?

Jigar Shah

Yes. If I could deliver that, that’d be better because that would have meant that we didn’t have Donald Trump as president the second time. We have a lot of other challenges that have come from that issue. I want to make sure I answer your question in a different way. We were very intentional about publishing the Liftoff Reports and an update to the Liftoff Report, which had 75 case studies in it. The Secretary was very intentional about putting all of this together into a data center playbook. Those documents still exist.

David Roberts

But it sure seems like all these masculine energy tech guys are not reading the technical documents so much as reading X.

Jigar Shah

That part I’m not worried about, Dave. It’s not that they’re building a brand new coal plant which then is going to run for the next 50 years. They’re building a natural gas plant which is most certainly going to fail in 10 months. The fact that they spent a bunch of play money that they believe they have to do dumb things does not preclude them from eventually doing the right thing and then just running those natural gas generators in the same way that Jesse and Astrid suggested for less than 100 hours a year. I’m okay with that. It’s their money, not my money. As long as it’s not ratepayer money.

David Roberts

This is a point I tried to make in my solo pod also. We hit it with Ian on the Utilize pod. Might as well hit it here too, which is that there is an enormous amount of uncertainty in these projections of data center growth, etc. The benefit of exploiting distributed capacity is that it will be beneficial and good to do whether or not the data centers show up. It is a no regrets —

Jigar Shah

It’s like that cartoon you remember from 2013: “What if we make the world better for no reason?”

David Roberts

All this stuff we’re doing to bolster distributed capacity is good for other reasons. It’s good to do regardless. It’s something we ought to be doing anyway. At the very least that ought to be our first step in responding to this — do things we know we would want to do anyway rather than getting way over our skis and running into another bubble popping, etc.

Jigar Shah

That’s exactly right.

David Roberts

Okay, I want to play a little game with you, a little speed round game, Jigar. Here’s what we’re going to do. I’m going to tell you a constituency that is currently involved in energy debates and you’re going to give me a one-sentence assessment. Are they helping? Are they hurting? Are they just confused? I want you to assess the participation of various groups in this debate. Can we do this? One or two sentences.

Let’s start with hyperscaler CEOs. The tech guys, the tech bros.

Jigar Shah

They are not listening to their experts enough and are generally making poorly thought-out decisions as a result.

David Roberts

Hilarious. I can’t obey my own speed round. But these are the richest guys in the world, Jigar. They can hire anyone in the world.

Jigar Shah

They already have.

David Roberts

And have — are they — I don’t get it. Is it political social forces pushing them away from their own experts?

Jigar Shah

I’ll give you an example. I was talking to a tech bro Monday. He was invited to an invite-only thing with a bunch of famous CEOs, by Bezos. They were talking and he said, “Jigar, we were all talking about you and your thing about how for a trillion dollars we could just buy up all the utilities and why wouldn’t we just do that?” I said, “There’s not a single Public Service Commission in the country that would approve you guys buying their utility. They don’t trust you as far as I can throw you.” He said, “What?” I think the level of self-awareness just isn’t there.

David Roberts

They’re high on their own supply, I guess is one way to put it. What about the big establishment green groups? How do you feel their participation in this set of debates is going?

Jigar Shah

They are very interested in working on changing the entire way that utilities are regulated. The grid utilization and these types of topics are too small ball for them.

David Roberts

Do you find that healthy? Good?

Jigar Shah

I don’t care. My thing is, I think everyone has the right to stake out their own claim. Once I understand it, I can work with you on certain things around you and other things. I think it’s fine.

David Roberts

I’ll ask it more directly then. There is a view among certain people in the tech world and in, I would guess, the centrist D.C. world, that the green groups are the problem here in that they resist growth, they’re degrowthers at heart. All their participation is basically fighting and slowing things down and they’re not participating in a constructive way. Do you agree with that critique?

Jigar Shah

No. The clean tech sector has been so lazy as to outsource these important activities to the green groups in a way that no other industry would ever do, and they should just take full responsibility for their own shit.

David Roberts

That was my very next group. Clean energy executives, what’s your assessment there?

Jigar Shah

The clean energy executives continue to believe that they need to be bipartisan in a completely toxic way. What I keep telling people is this is about building real power with Republicans, with Democrats, with libertarians, with progressives, with centrists. It’s about building real power. It’s not about being bipartisan.

David Roberts

I just love that you articulate these things for me. You know I’m going to say that, but no one cares if I say it.

Jigar Shah

They do care.

David Roberts

What’s a one-sentence recommendation for the clean energy industry? Is it just get your shit together, cooperate, and throw elbows, throw your weight around? Is it that simple?

Jigar Shah

Yeah, it’s that. Whether you’re a Republican — and 40 plus percent of all the CEOs that I know of are Republicans — or whether you’re a Democrat, give money to the politicians that matter. When you have your big 200 megawatt solar farm somewhere, make sure you fund everybody on the county council.

David Roberts

What do you think about this effort by a couple of billionaires to take Chip Roy out? Have you seen that?

Jigar Shah

I’m one of the donors, so I’m totally for it. 100%.

David Roberts

That is to be clear, everyone involved in that knows that if Chip Roy loses, it is going to be another terrible Republican who wins. There is no illusion that there is a good alternative here. This is purely spite. “You F’d us, we are going to F you.”

Jigar Shah

No, it’s not spite.

David Roberts

I’m cheering.

Jigar Shah

But there is nothing wrong with power building.

David Roberts

I cheer the spite.

Jigar Shah

No, but it’s power building. It’s not spite. One of the things that they used to say about the NRA was that they didn’t regularly put a lot of money into elections, but when they did, it caused people in the future to fear them. That’s what it is. It’s strategic.

David Roberts

It’s very basic.

Jigar Shah

What I’m saying is a little bit different. Every single project that we have in every single county in the country, the clean energy sector needs to give money to every one of those people, Republican, Democrat, doesn’t matter. Give them a set of asks for what they want.

David Roberts

What about the abundance people? Do you have a take on that?

Jigar Shah

I certainly agree that America should be able to do big things again. I don’t think America’s best days are behind us, although it’s gotten a lot worse with the Straits of Hormuz. We should be able to send this NASA spacecraft up into space and circle the moon that we’re going to do at 6 o’clock tonight. I do think that we should be able to build nuclear if we want to. Maybe we can’t build AP1000, maybe we have to manufacture nuclear plants, the microreactors. There are so many people who think, “We can’t build enough affordable housing, we can’t do these things, we can’t do this, we can’t do that.” That bothers the crap out of me.

David Roberts

The critique is that government in the US has gotten overly bureaucratic and sclerotic and slow moving. You were right there in the middle of it.

Jigar Shah

And I fixed it.

David Roberts

Is that critique true?

Jigar Shah

It is true, but we fixed it. No one pushed back on me. I had 40 full-time staff in the outreach and business development team. They worked with 2,000 companies that were thinking about applying for LPO. Even if they didn’t apply for LPO, if they had a problem with State, we told State, “Hey, this company has a problem with you, can you fix it?” If they had a problem with Commerce, we told them. If it was Interior or whatever, we told them. People said, “Thank you for letting us know. We didn’t know that we were in the way of that project.”

We facilitated a huge number of projects and those projects move forward because we did it. I don’t think the government is sclerotic. The vast majority of the people that they bring into government are folks who largely have been told, “Check with everybody, and if anyone is disagreeing with you, then don’t move forward.” I obviously never operated that way.

David Roberts

I could cite a lot of examples that would justify people’s fear about getting taken out if they stick their head up. I don’t know how you proved so resilient, but there’s a lot.

Jigar Shah

I had Arnab Pal working for me, who runs Deploy Action, who is my political advisor, and he told me when not to stick my head up.

David Roberts

What about utility executives? Obviously they’re not a monolith, but in general —

Jigar Shah

I met with 80 utility CEOs when I was in office, because we ran the 1706 loan program. Many of them wanted to use the 1706 loan program. Every single one of them sees the world the same way I described it to you, which is that Wall Street does not want them to raise more money in the next five years than they have raised in the history of their company, that they have enormous cultural problems with the company which they themselves created because they told people for 20 years to run up the bill and gold plate everything.

David Roberts

They don’t think. They are under the impression that they can respond to this data center rush by just build, build, build, profit, profit, profit.

Jigar Shah

They know for a fact that they will lose their job in the same way that their mentors in 2004–2007 did when natural gas prices hit $8 a million BTU if rates go up dramatically over the next five years. They are having a hell of a time convincing the people that work for them who have gotten a different instruction set for 25 years to get on board with this new instruction set.

David Roberts

There’s a real issue with the culture down inside of utilities.

Jigar Shah

Utilities are government agencies. That’s why I’m frustrated that these people make $20 million a year. If you go to a utility CEO who’s making $20 million a year and you say, “These four people are in your way and they badmouthed you, and here’s a recording,” it’s like that bunny rabbit in Zootopia with their little carrot recorder — they will not fire them. You have a job for life. Those aren’t union employees. You don’t get fired for standing up to the CEO and saying dumb things and not doing your job right. Why would you get paid $20 million a year?

David Roberts

You think it is within the power of those executives to change that if they wanted to?

Jigar Shah

I think so. They should say, “These people are not on board. We’re going to replace you with people who are on board. I appreciate your service and thank you so much. We are in a crisis, and our industry needs to get through this crisis.”

David Roberts

How do I square that — this idea that all the executives get it — with the fact that literally everyone I talk to who’s got a solution is running into utility friction? Almost literally all of it?

Jigar Shah

It is a shocking thing, Dave. I honestly don’t understand it at all. I will go into a utility boardroom — the way utilities work is there are 17 different VPs. Why do you need so many VPs? Every single one of them will go around the table and say, “Here’s why I support this project.” You’ll leave to go to the bathroom, and then they will have voted it down. How did that happen? It happens all the time.

Or they’ll just destroy something. At Baltimore Gas Electric, one of the most amazing, progressive utilities in the country on VPPs, this guy Devesh Gupta has just been extraordinary. Then they decided one day that they were “Maybe we should give this contract to our favorite contractor who doesn’t know anything about this, but maybe they can implement it.” That is where good ideas go to die.

Sometimes they have those kinds of things that happen, but it’s not because they’re bad people. When I worked in the oil industry, the same thing when I worked for BP — the people who work in the oil industry genuinely believe we’re going to run out of energy. If they don’t find that next oil field, if they don’t get oil out of the ground, you will have the challenges that we’re currently having with the Straits of Hormuz. They believe that.

It’s not that they’re anti-climate change or anti-this or anti-that. It’s more just that they’re “This is what runs things. You’re the one who just flew here to meet with me and you used kerosene.” Someone’s got to go find that stuff. People take a lot of pride in their work, but the culture change is really hard.

David Roberts

Let me ask about the next group then, which is state PUCs. If you ask about who’s got a lever in their hand that could potentially force changes in that utility culture, it’s PUCs. Obviously, again, not a monolith. These are the agencies meant to govern utilities. Are they doing it well? What’s your assessment of the state?

Jigar Shah

Obviously the answer is no, they’re not doing it well. I think you know that. But we should go through it all. In Michigan, they just put down a ruling yesterday that basically said that if consumers submit any distribution projects without a VPP evaluation next to it, they will disallow the funding.

David Roberts

Interesting.

Jigar Shah

That’s because Michigan’s PUC is made up of a bunch of badasses. They’re amazing over there. Remember, Marissa is a badass over in Connecticut. She got pushed out. A lot of the PUC commissioners got paid $62,000 a year in the state legislature and their kid is in high school going to college. The PUC job pays double or triple, so that’s why the governor gave them the job.

I don’t think any of these people are bad people, but I would say all of these PUC commissioners — without exception — need to feel like the governors have their back. I don’t think that they believe that they’re part of the judiciary, which is a separate branch of government. Because the governors in general have not spent five seconds becoming an expert on electricity for 40 years, I don’t think the governors really did even send the signal that they had their back.

David Roberts

You’re teeing me up then. The next group I was going to ask about is state legislators and governors. Again, not a monolith. There are good examples — Spanberger, all praise to her for this bill, on both sides of the aisle. What’s your general sense of the level of sophistication of state legislatures and governors? They’re the ones who, as you say, could change the PUC culture, which could then change the utility culture. In the end, we’re in a democracy, it all comes back to our elected representatives. Do they get it?

Jigar Shah

The vast majority of state legislators and governors are the same as the general population, which is what you would expect. They don’t know the difference between DC and AC. They don’t know the difference between distribution and transmission. They don’t understand the difference between a turbine and a recip engine.

David Roberts

Dire.

Jigar Shah

It’s what you would expect. It is on the industry to go in and educate those people. The oil and gas industry has done an extraordinary job of doing that in all 50 state legislatures and the governors, and the clean tech industry has only popped its head out in the last few years saying, “We should really do that.” For a long time we were borrowing the political rails from the big green groups. The big green groups were the ones educating all those legislators on our behalf, which, frankly, they did an extraordinary job for the fact that we outsourced it to them. The fact that they got a few of these little things wrong is our fault, not their fault.

David Roberts

If I could just throw this in, I think outsourcing this to green groups has made all the policy and regulatory requests that they make environmental-coded. Gives them that vibe when they’re justifiable on their own for purely economic and practical reasons. You don’t need that. But all of them have that vibe and they’re all coded as, “Should we give green groups what they want?” That’s how they’re being greeted. That’s not really how they should be thinking about them.

Jigar Shah

That goes to money and politics and all that stuff. Ultimately, the way the green groups create their political rails is they have the League of Conservation Voters, they have all these other things. The clean tech industry goes in and says, “I’d like to educate you just because. Because this is a great idea.” When they ask you for a campaign contribution, you’re like, “Oh, no, I’m bipartisan. I don’t give any campaign contributions because we don’t believe in that kind of stuff.” What are you doing, man?

David Roberts

I’m watching it right now because supposedly Trump hates renewables, but really he only hates wind. There are a bunch of MAGA people trying to sneak solar in, trying to split solar from wind in the MAGA mind. It’s a real test of how the clean energy industry is going to respond to that. Are they going to hang together? Or are the solar people going to be like, “All right, see you suckers.”

Jigar Shah

When you’re $110 billion a year of CapEx, there should be a level of sophistication. Abby Hopper had to scrape together $2.5 million from a $110 billion industry for her PAC.

I just think it’s important for everyone to recognize that that’s a poor showing and we ought to be better. I think we’re working on that right now.

David Roberts

Politicians see that.

Jigar Shah

They do. Of course, they do.

David Roberts

They see that, they clock that.

Jigar Shah

Of course they do.

David Roberts

They feel no sense of threat, basically.

Jigar Shah

No. In the last election cycle, the oil and gas industry, in all public spending, things that you could pick up through the IRS filings, spent $450 million, and we as an industry spent $15 million.

David Roberts

That’s the whole story.

Jigar Shah

That’s the whole story.

David Roberts

You almost don’t need anything else right there. We’ll get you all the results we are getting.

Jigar Shah

That’s right.

David Roberts

Final group — the investment community. We’ve been following this for a while. There was the big early 2000s rush, and then there was famously a bust as they all discovered that energy is different than software. Then there was allegedly a smarter group that came along, but now it looks like they’re all chasing the shiny bauble of AI and they’ve all forgotten about energy. What’s your take on the moneyed community, the investors?

Jigar Shah

That has been a bright spot of our industry. ACORE has done an extraordinary job of putting together this group. They put together a great report in 2009 and then again in 2011, etc., around tax equity and how everything works. They have that conference at the Waldorf in New York every year, the REF conference, which I don’t think ACORE runs anymore.

In this last OBBB — I won’t out anybody in specific — but the reason why solar and wind ended up getting saved and the reason Scott Bessent ended up being more generous than he needed to be in the evaluation is because the right investor groups talked to them and said, “You’re going to do this in a way that doesn’t destroy this industry.”

They have done a fantastic job. Part of the reason for that, as you can imagine, Dave, is that because we put more money — CapEx $110 billion a year — than the oil and gas industry spends in their CapEx every year, we make more money and pay bigger bonuses to lawyers, accountants, investment bankers than any other energy industry. In general, that has been something that the clean energy industry has done very well.

David Roberts

That’s interesting. You think smart investors are driving a lot of this almost in the face of incompetence in every other area?

Jigar Shah

That community has really done a fantastic job and they genuinely give to Republicans and Democrats.

David Roberts

That’s interesting. We’re out of time. That was supposed to be the final thing, but there’s one final thing I wanted you to go out on. It’s my tradition to have at least five final questions. This is the final, final one and it’s not directly related to data centers and electricity and this whole thing, but I’m interested in your thoughts on it anyway, which is just what is the fallout from Iran from all this happening?

There’s a lot of discussion. It seems to me the intuitive response is this is just making it very viscerally obvious that being addicted to fossil fuels is terrible and you don’t want to do that. But for some reason you can’t just say that in US discourse. There’s a lot of unnecessary complication of the thing. From inside the energy industry, what do you think are going to be the mid- to long-term consequences of this supply crisis?

Jigar Shah

I have hours of thoughts about this and I have covered it with James Gutman on the Energy Empire podcast. We have done two episodes with him already, and we have a third one coming out on Thursday.

David Roberts

There is a lot to say.

Jigar Shah

There’s a lot to say. Just to give you a snapshot, number one, it has been shocking to me how good the Trump administration has been on manipulating the paper markets, but the physical markets don’t lie.

David Roberts

Are they good or are the paper markets full of ninnies?

Jigar Shah

It’s probably both, but the physical markets have been disrupted permanently, at least for the next three to four years. It’s going to be bad. We’re going to have gasoline prices above $4 a gallon for sure in the midterms, maybe even $5 a gallon. On the political side, there’s that. The other piece of this is that it is very obvious that this has been literally the worst possible execution of a war ever. When you think about what Iran’s position was before this occurred —

David Roberts

I know, it’s better in every way.

Jigar Shah

Every single country in the world is going to kiss the ring of Iran to get through the Straits of Hormuz. The fact that they might actually own —

David Roberts

That seems a permanent — as far as I can tell, that’s a new permanent situation. Is there any reason to believe that’s going to end at any point?

Jigar Shah

I don’t know. But the fact that they might own the toll booth on the Straits of Hormuz is a shocking thing.

David Roberts

I almost think that gives them geopolitical power almost equal to what they would get if they did have nuclear bombs. That’s almost a better strategic outcome for them than actually getting a bomb.

Jigar Shah

It is just shocking to me that folks don’t see it that way. The last thing I would say, China is going to make out like a bandit on all this. As you may know, I was born in India and I go regularly back to the village that I was born in. It had no real running water or electricity when I was born. The level of humanitarian devastation globally is honestly shocking. I think we are all talking about the Straits of Hormuz like it is a thought experiment. It is not a thought experiment.

David Roberts

We’re relatively insulated here.

Jigar Shah

Natural gas prices have not gone up at all. There are babies in NICUs that will die because there is no power at that hospital. There are restaurants that are not able to cook their entire menu because they do not have LPG. There are people who are going to start raiding forests for wood again because they cannot find cooking fuels.

David Roberts

I was hearing one expert talk about it. He said, “We have to kill 20% of demand for oil globally. What price would be sufficient for Westerners to cut back 20% on oil?” There is no such price.

Jigar Shah

No.

David Roberts

It’s — it’s going to be poor people going without that soak it up.

Jigar Shah

People use these weird words — rationing or whatever else — when they really mean — energy is life. When you think about Michael Grunwald’s book where he takes a side of big ag, this is a big test. We’re not going to have fertilizer. We’re not going to use fertilizer for this planting season for a lot of stuff. Pretty sure that crop yields are going to be 50% lower.

David Roberts

They’re going to get a bunch of subsidies.

Jigar Shah

Maybe, but we physically don’t have the fertilizer. No matter how much you subsidize it.

David Roberts

And helium, too. I know you, like most people, probably have your eye on helium.

Jigar Shah

I do.

David Roberts

This is going to affect —

Jigar Shah

It’s going to affect my kid’s birthday.

David Roberts

Electronic equipment for sure.

Jigar Shah

Of course it will. It affects fabs and chips.

David Roberts

Will this — it seems obvious, but I just want to hear you say it. Do you think this is going to push emerging economies toward electrification and toward China?

Jigar Shah

I think everyone in the world now has common cause with China. The only thing that’s left — James talks about this — is that the Europeans care deeply about Taiwan and if China takes over Taiwan. Other than that, there are no more friction points between all of these governments around the world. They would rather — the only country that’s aligned with us right now, weirdly, is Russia. It is the most shocking level of incompetence I have ever seen.

David Roberts

It is strategically indistinguishable from a deliberate attempt to improve China’s position relative to us in geopolitics.

Someday, Jigar, I would love to have you back on. Instead of talking about all the dumb stuff that’s happening, we can talk about once this madness is behind us, if that ever happens. There’s smoking rubble. Almost everything that Biden tried so hard to build, honestly, that Democrats have built honestly for decades now, most of it is smoking rubble. Just to talk about rebuilding, talk about —

Jigar Shah

We talk about it.

David Roberts

How to do things better next time.

Jigar Shah

And the fact that it’s not smoking rubble — we are going to have 50 cleantech IPOs on Wall Street this year.

David Roberts

In terms of productive government engagement with the process, let’s say that’s smoking rubble. It’ll be interesting to see whether the Democratic Party just fights to rebuild everything that was or whether there’s some real thinking about new things.

Jigar Shah

There’s going to have to be real thinking.

David Roberts

All right. Thanks, Jigar, it’s always fun.

Jigar Shah

Thank you, my friend.

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

There are some circumstances — think disaster recovery zones or forward military bases — that cry out for portable, reliable, resilient power. I talk with Lauren Flanagan about Sesame Solar’s self-contained nanogrids, which use solar PV, batteries, and hydrogen storage to provide energy that works around the clock in remote or inclement environments.

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David Roberts

Hey. Hi, everyone. This is Volts for April 10, 2026, “Ruggedized solar power for the hard places.” I’m your host, David Roberts.

Way back in 2011, roughly 400 years ago, I wrote a piece for Outside Magazine about Marines in Afghanistan’s Helmand province using portable solar panels in the field. The pitch was simple: fuel convoys are targets, liquid fuels are a liability, and solar panels can make soldiers more mobile, quieter, and harder to kill.

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The underlying insight extends beyond the battlefield. There’s a whole category of places — disaster zones, remote clinics, island nations, forward operating bases — where liquid fuels are a cost and logistics nightmare, and where conventional solar systems aren’t quite up to the job. These environments need something more rugged: power systems that can be rapidly deployed, run autonomously for months at a time, and don’t depend on a supply chain that may not show up.

Lauren Flanagan has spent the last decade building something for those times and places. Her company, Sesame Solar, makes mobile nanogrids — self-contained power systems that run on solar, battery storage, and hydrogen — that can be deployed by one person in fifteen minutes and run, with minimal intervention, for months on end. The only fuel supply chain is the sun.

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Today we're going to talk about what it actually takes to deliver clean, reliable power to the places the grid doesn't reach — and who, ultimately, gets access to that kind of power.

With no further ado, Lauren Flanagan, welcome to Volts. Thank you so much for coming.

Lauren Flanagan

Thank you, David. I loved that intro. I didn’t know about that 2011 article, but how prescient of you.

David Roberts

I know, it’s funny that it’s coming back now, 15 years later. It made me wonder, what is the state of that program in the Marines? I haven’t checked up on it in a long time. I guess where I’d want to start is trying to get a sense of what business nerds call the total addressable market here. Who exactly are we after? When I threw this out on social media that I would be talking to you about portable, rugged solar systems, a lot of people said, “Oh, rural Africa,” or, “Oh, I want one for my rural home,” or something like that.

I was trying to explain to people, no, for that you just buy normal solar panels and batteries — that would work fine. This thing is designed to be bombproof, bulletproof. This is an extreme bit of engineering designed for extreme circumstances. I want to start with what are those circumstances? What is the market here? What are the kinds of places where this technology would be useful?

Lauren Flanagan

At Sesame, we’re riding two huge tailwinds. The first one is the increasing severity and frequency of extreme weather events — hurricanes, wildfires, floods, atmospheric rivers — which knock out power, communications, water. The second is it’s increasingly a world of robotic warfare where we need UAS, USV surface vessels, ground vehicles, and we need power everywhere.

As we can see in the Middle East, we have oil supply disruption. Having fuel supply disruption, the need for power everywhere, and all of these cataclysmic events happening worldwide, there is a huge need — it’s a $100 billion plus need — for mobile power that is ruggedized, fast to deploy, easy to use, and can run without a fuel supply. That’s the market we’re at. It’s not Jane Doe prepper or your home solar system. This is really solving fundamental life and death Maslowian survival problems.

David Roberts

Which is important to remember later in the conversation when we talk about costs and price and everything else. Just to give people a little background, talk about the cost of liquid fuels in some of these environments you’re talking about. This is one of the things I remember from that 2011 piece — the mind-blowing final cost. Out in Afghanistan, out on the battlefield, they’re using jet fuel. They’re not importing diesel; they all use jet fuel. The all-in cost of jet fuel, once you make it, buy it, transport it, convoy it to the troops, is mind-boggling. I don’t remember the number, but it knocked my mouth open. What price levels are you competing against?

Lauren Flanagan

It’s not only the astronomical price of transport, whether by land, sea, or air — going higher right now with various blockages in the Middle East — but it’s the cost of life, the life of humans in a fuel convoy who, once you track the convoy, you follow them to the target and blow everybody up with the fuel.

David Roberts

Yes.

Lauren Flanagan

There are really two, and then you can’t always get that fuel when you need it. Increasingly, our military is looking at small teams of specialized war fighters that they can drop in a location for a mission of 30 to 60 days and pick up. They don’t want any fuel supply chain; they want it to be able to endure for the mission. You’ve got a wide open world where the issues are in the Indo-Pacific and the Arctic, where they suffer from what we call the tyranny of distance. It’s such a long way to transport it that not only is that cost per gallon high, but that logistics travel from a C-17 or a C-130 or even a ship or a combination and then on a truck is just massive.

David Roberts

I think in one of the stories I read — they’re all blurring together now — but you were talking about, I think maybe it was in one of these Arctic places, but they’re bringing in diesel by helicopter and it’s coming to something like $400 a gallon.

Lauren Flanagan

Absolutely.

David Roberts

Or something along those lines. Which is good to keep in mind when we talk about the cost of this thing later. The alternative is not diesel at the gas station. The alternative is very hard to get.

Lauren Flanagan

Very hard to get fuel, and an increasingly unfriendly world that might not let us stop at their port to get it.

David Roberts

Yes. Nobody’s really enjoying what’s going on in the world right now, but it’s good for resilience businesses, I guess.

Lauren Flanagan

That’s the irony — this administration doesn’t want to talk about climate change. On the other hand, they’re one of the largest users of fossil fuels. If we can make a dent by having renewable energy when and where needed just to solve operational energy needs, the byproduct will be a dent in CO2 emissions and greenhouse gases. But you can’t talk that way. You’ve got to talk about mission endurance and operational efficiency and logistics being streamlined.

David Roberts

Geopolitics too.

Lauren Flanagan

Oh, yeah.

David Roberts

One of the points I keep making to people is, if nothing else, Trump is showing the world the dangers of being reliant on another country for liquid fuels — showing our enemies and our allies at once how bad that is. No one is enjoying being dependent on someone else for liquid fuel these days.

Lauren Flanagan

We just need to keep our war fighters safe and they need the power when and where they need it — however it can be provided. It’s an all-of-the-above strategy. We’re not going to replace it overnight, but we’re a piece of filling in those missing locations and ability to have it when needed. That’s a massive market, as I mentioned, not only our US but our allies. With all these global catastrophes due to extreme weather.

David Roberts

The two markets you describe in that first answer are very different and we are going to return to that in a minute. Before that, for listeners’ sake, let’s just talk about what is — what are we talking about? What is the technology or what is in the box you are selling — basically a big, roughly a tractor trailer-sized box. What’s in it?

Lauren Flanagan

They’re different sized boxes. We call them nanogrids. They can be a standard Conex or shipping container that’s 20 ft by 8 ft, or they can be a tricon, which is a third of that, or they can be a trailer which could be anywhere from 16 to 40 ft. Typically, they’re in the 10 to 28 ft range. This box has everything it needs to be set up by one person in 15 minutes to generate power. It starts with solar — that’s the primary power. It’s stored in batteries.

David Roberts

Before we move on from the solar, there’s a solar panel on top and then there are two or three other, I guess depending on the size of the box, there are two or four others that can flip up from the side of the box to face the sun. Is that so?

Lauren Flanagan

There are deployable solar arrays. “Open sesame” is where our name comes from, if you remember the caves of Alibaba, the treasures inside.

David Roberts

Yes, yes.

Lauren Flanagan

The treasure inside is the solution we have, whether it’s for emergencies or for the military. It’s a complete self-sustaining, self-generating power solution.

David Roberts

You flip out six, eight solar panels, something like that. Then you have these LFP batteries which you’re charging, or supercapacitors.

Lauren Flanagan

We have a variety of storage units that we have.

David Roberts

If I just go with a contractor to put together a solar and storage system for myself for my house, I’m going to pay, what, $20,000, $30,000. Your boxes are between $100,000 and $300,000.

Lauren Flanagan

Or more.

David Roberts

What is that delta?

Lauren Flanagan

First of all, it’s all integrated and mobile and can be set up by one person in 15 minutes. That’s a hard thing to do. If you’re doing your home thing, you’re going to put it on your roof or your house. This is a mobile box that does it and it has everything — all the electronics, inverter, and then we have backup power in the form of stored hydrogen.

We make hydrogen on board. We store it safely as a low-pressure solid and it acts as an extra fuel source — a battery almost — for the fuel cell. If you’re not getting enough solar power or there’s a peak load, you can have the fuel cell kick in and power the batteries. The combination of those can provide a continuous energy loop.

David Roberts

You’re providing solar when it’s sunny, then you shift to the batteries when it’s not sunny, then you go to the hydrogen when the batteries are out. Is that how it works? Is it a hierarchy?

Lauren Flanagan

No, you’re always pulling from the battery. The battery management system through the inverter manages all the power inside and outside the nanogrid, and the battery is the source. You’re always powering the battery with solar. There’s even some when the sun isn’t shining — great metaphor for life, there’s still power coming, but it’s a low basis. If you have backup power in the form of stored hydrogen, then if the voltage isn’t high enough, and this is all pre-programmed, the fuel cell will kick in and power the battery. To the user, it’s seamless. They’re just plugged in and power happens.

David Roberts

The battery is doing the power output, and the input to the battery is either coming from the solar panels or from the hydrogen fuel cell.

Lauren Flanagan

Or it could be another source, because these can be standalone or daisy-chained or in a microgrid. You could have another source — like wind, or even in the military, a fuel generator backing it up. There’s no religion on it. Whatever power you might need to keep the juice on, we keep the juice on.

David Roberts

For the hydrogen people out there, you have an onboard — you’re gathering ambient moisture from the air and you have an electrolyzer on board. You’re splitting that water to make hydrogen and you’re storing hydrogen as a metal. All of that is crazy and interesting. Just start with, why aren’t solar and batteries enough?

Lauren Flanagan

They are in certain locations. If you’re in a lot of places in the Indo-Pacific, you can have a nice big solar array. We typically have 8 or 10 kilowatts on one of the Conex boxes. You give yourself 120 or 150 kilowatt-hours of battery storage. We have some units like that out for the Marines. It just works day and night without any backup hydrogen. We have all the comms integrated and the power systems and software to manage it.

But if you’re in places like Michigan or Ukraine or 45th parallel locations where you don’t have a lot of sunshine in the winter or north in the Arctic, then you cannot rely on solar. Particularly for the Arctic, hydrogen is ideal because you can get some sustained power from it. The real challenge is that the electrolysis of hydrogen is highly energy consuming.

David Roberts

You’re losing a lot of energy in your conversion there.

Lauren Flanagan

But there are other ways to make it and you can also store it. The concept is if it’s movable but semi-stationary — say it’s up in the Yukon — then in the good weather, you store a lot of hydrogen in our solid-state safe low-pressure tanks and you use the sunshine. Then in the winter, when there’s not a lot of sun, you pull on that stored hydrogen and you can create this asynchronous cycle where you’re not having to make it at the low energy times.

David Roberts

Even in the Arctic with its low sunlight, you can be running year-round?

Lauren Flanagan

You can be with a properly sized unit. If the power draw is matched to the weather and we map it by day through the exact geolocation, you can store enough hydrogen and run that in the winter. We’re not talking huge loads, but we’re talking about the kind of loads necessary for local operations or to back up a small cell tower or things like that. You can put a larger ground-mounted system, but if you want it movable, that you could pack it up, there are limits to how much power a single unit can do. It’s typically going to be 5 kW continuous, but that’s a lot. We put one in White Sands Missile Range for the Army Corps of Engineers. That’s in New Mexico desert — wide range of temperatures, close to zero in winter.

David Roberts

Not a ton of ambient moisture in the air, I would think.

Lauren Flanagan

No, very dry. That’s another thing. We store the deionized water in a large tank. You start with stored water. If it’s in a favorable area, you can do the atmospheric water generation or you can filter water from a water source and deionize it, but you’re typically matching it to how long you’re going to be on that location. How many gallons of DI water do you need to store? What capability of making it atmospherically is there by that season or what local water sources could be filtered to do it? You can potentially make the water out of air or filter it out of a water source to then make the hydrogen gas. We carry a lot on board because there’s room.

David Roberts

I think Volts listeners are familiar with the basic hydrogen technologies, and you have to decide if you want to store hydrogen, how to do it. There are different ways. You can pressurize it. You bought this metal hydride storage company. I wonder if you could talk us through the considerations you had when deciding to opt for hydrogen and to opt specifically for low-temperature metal hydride hydrogen. Very specific.

Lauren Flanagan

Low pressure. Solid state. We were their first customer and we had more business than they did, and we ended up buying them. We had vetted it and worked with the technology, and it’s great. You make the hydrogen, you dry it, it’s pure, and you store it. It’s a proprietary formula of a metal hydride powder, which is introduced in canisters that have a proprietary infrastructure of tubing. When you introduce the hydrogen gas, a chemical absorption happens and the gas is formed as a solid and literally hangs on these tubes.

David Roberts

Which means you don’t need ongoing pressure, and it’s stable as long as you want.

Lauren Flanagan

Correct. It’s non-volatile. It’s at less than 300 psi, which is like a spray paint can. It’s safe to put on an airplane, a ship, or any ground vehicle, as opposed to high-pressure hydrogen, which is highly volatile. There’s a lot of consideration about moving it, which is why hydrogen has been so slow to be adopted in a lot of these environments, because the Hazmat side is even worse than batteries and they all have a Hindenburg fear.

But hydrogen is an ideal fuel. It gives a lot of endurance, for example, for drones, and it goes a lot longer and farther on hydrogen. If you can break that — not needing to have hydrogen be brought to the field, but make it in the field and have it stored — that is a big solution.

David Roberts

One of the big knocks always on these things is their expense. Being able to say to an installation in the Arctic, “A solar and battery box will get you a couple of months, a solar and battery and hydrogen box will get you year-round.” That’s a huge value add. You’re adding a lot of value when you add the hydrogen, but are you not also adding a ton of cost? What is the proportion of the total cost that this hydrogen system is representing?

Lauren Flanagan

It adds cost, but compared to what? Compared to prime to bring in fuels. Let’s take a use case. You take one of our hydrogen-powered drones. We partnered with a company called Heven AeroTech and they have a drone that will fly for 10 plus hours on a canister — one canister, about 400 grams of hydrogen. We can show up with 10 kg of hydrogen already stored, giving it 100 or more hours of flight time without ever stopping. You get somewhere and the thing is just running. You can even have two of them going at the same time and swap the canisters. There’s no fuel supply chain needed. This is giving continuous surveillance and maybe there’s not another alternative like that.

David Roberts

What you’re doing for these drone systems is synthesizing hydrogen fuel for them in the field.

Lauren Flanagan

At the edge.

David Roberts

Yeah, at the edge, such that they don’t need any supply chain and they can operate autonomously indefinitely.

Lauren Flanagan

You have to swap the fuel can, but you’ve still got to swap the canisters. That’s not automated yet.

David Roberts

You have to figure they’re going to automate though, if that’s the last thing the human’s doing. You have to figure they’re going to automate that.

Lauren Flanagan

Our vision is we have a little robot that’s doing that. We’re going to ship it with a robot as a service down the road that’s going to provide a lot of those ancillary services. If you’re talking battery-powered drone, for example, if there’s an operator, you can swap batteries, which is fast, but let’s say it’s unmanned, then it can just land on an induction charger, get charged, and take off again.

David Roberts

Yes.

Lauren Flanagan

Go back to that White Sands Missile Range. We were there 13 months, unmanned, 24/7. AI, hardware, software, zero power outages, zero. You could have had battery drones flying everywhere. They didn’t because it’s a missile range, but you could have — let’s say it’s for homeland defense or for infrastructure. We have so much infrastructure that’s vulnerable right now to bad actor drones. You could have drones up, watching everything, running continuously and landing and charging. That’s the kind of thing we power. Hydrogen adds some cost, but compared to what?

David Roberts

I did an article for Vox a few years ago on different methods of charging batteries at a distance, and they are working on some crazy stuff in the labs. One of the use cases that, if I am to believe all these articles, is already technologically possible is they can charge a drone battery with a laser — with a ground-mounted laser, shoot at the drone battery in the sky, which then would enable the drone to be in the sky forever, to never land.

Lauren Flanagan

There’s going to be all kinds of exciting things in space with focused solar from space. I don’t know if you’ve seen Israel’s laser beam that can shoot a plane or drone right out of the sky with a laser. That’s quite something.

David Roberts

Oh, gee.

Lauren Flanagan

The future is going to be very different with a lot of space engagement and focused energy to certain points. You’ll still have to have receptors that can receive it. We’re looking at how we can be playing in that world down the road.

David Roberts

You mentioned at the beginning these two big headwinds, these two big markets. On the one hand you have the military, which is more and more relying on electronics generally, but drones specifically. This is a use case where you need rugged, you need autonomous, etc. And cost is basically no object.

Lauren Flanagan

Not really. To do it in volume, we could be putting these in every C-17 and C-130. That needs to be modular, plug and play. The cost matters. When you get into volumes, you get the economies of scale.

David Roberts

You’ll acknowledge the US military is not as cost-conscious as some other buyers of technology.

Lauren Flanagan

But in volume they are increasingly. They are and they should be. We should be getting the best value and the best products we can for our military.

David Roberts

When I think about the latter market — you talked about disasters, which are unfortunately more and more common all over the place. A disaster-struck, small rural town can’t afford a $100,000 power box, can they? How is that market supposed to access these things, or do you anticipate them getting cheaper?

Lauren Flanagan

They can share them in communities. We’ve had that happen with cities and counties. Ultimately there will be more of this inventory in the power rentals. Today if you have a hurricane in Louisiana and FEMA comes in, they’re not buying it. They’re renting resources from providers to the utilities, from the power rental companies like United Rentals and Sunbelt. The power rental market ultimately is a source. The big future play for the rural environment is pay as you go — energy as a service for these things where you pay by energy consumed.

That’s a high-volume play. That’s the big market opportunity. Right now we’re selling to cities and counties and utilities who can pay for it, and some tribal nations. They’re looking at how to collaborate with their surrounding communities and engage so that the assets are put to use. Just like a horse, you have to ride it. You don’t want it just sitting around. The more you use it, the better.

David Roberts

For any given county, it’d be nice to have one of these around. But almost by definition, the disaster is the exception.

Lauren Flanagan

Right.

David Roberts

You don’t just want it sitting around. It makes more sense to have one that is traveling to disasters. One of the analogies that occurred to me — and maybe you’ll think this is a silly analogy — is solar panels themselves. One of the very first buyers of solar panels was NASA, because they had operational circumstances where nothing else would work and they didn’t care about cost, they just needed it to work. They needed something that would do power in space so they could pay anything. They helped immensely to buy down that initial cost curve, that initial bringing down the cost of things.

Do you think if the military starts buying these things in bulk, do you envision a cost curve? Do you envision the boxes you’re making coming down in cost, or are they just as cheap as they’re going to get and they cost what they cost? How do you think about that?

Lauren Flanagan

That’s why we have what we call the dual-use focus — these two markets — because the volumes feed each other. There are specific use cases for military and sometimes more broad ones for commercial and local government. It’s still the same product. We’re just making slight differences in them for those use cases. The more use cases and the more plug and play it can be, the more Legos it can be, then that’s easier to have one that can meet a budget price point.

David Roberts

You do envision over time these things falling in cost.

Lauren Flanagan

Not only that, but different ways of buying them — either renting them through providers or power-as-a-service type offerings.

David Roberts

Another question I had is, and maybe this is the same question, but when it comes to the evolution of the product itself, you could imagine going even more hyper-rugged, gold-plated, everything you need integrated in one ultimate box. Or you can imagine going the other way, making budget versions, less gold-plated ones, maybe some that have slightly less hydrogen storage or whatever. Budget versions. Those are two different directions of the product evolution. Do you have a sense of which way you’re going to go?

Lauren Flanagan

We go for increasingly complete, moving towards automated, ultimately as autonomous or unmanned as possible with robotics in there. That tends to go premium, but premium in terms of CapEx. It’s lower operating expense if there are fewer people needed to operate it. I think the total cost will ultimately have a lower trajectory. The integration is going to be increasingly sophisticated — even robots as a service or focused energy from space. There are a lot of things going on that are exciting — solar panels floating in space that can be focused.

There are a lot of exciting new technologies that we would want to integrate. We were asked on one RFP and we were scratching our head, “Could we put it in a rocket, shoot it across the Atlantic, have it land and open up and work?” We said, “Really? I think there might be easier ways.” But that was literally an RFP.

David Roberts

Good grief. Why don’t they just manufacture them closer?

Lauren Flanagan

Exactly.

David Roberts

That would be one way to go other than the rocket.

Lauren Flanagan

Yeah. I was like, really? But there will be different uses than we are thinking about today. Highly mobile, highly modular. The more complete, the more autonomous, the more intelligent, the more AI is integrated. That doesn’t initially lower costs. In time and huge volume, it does, but initially no.

David Roberts

Are there specific automation pieces of that that you’re working on right now? Can you give us a sense of what bits and pieces you can envision automating in the future?

Lauren Flanagan

Right now we already have software that allows for a certain amount of remote operations in the case where a customer will let you do it. The military’s not going to let us manage something in a forward expeditionary — but they would have the ability to do it. We’re thinking a lot about all the sensors and mechatronics you need to set it down from a helicopter and open it up and it runs itself. That’s very expensive.

I’m only half kidding when I say I want R2D2. I want my robot to roll out, set it up, be able to stretch itself up like the Amazon ones, and clean the rooftop panels and run all the localized stuff. No people involved. That’s easier. Robots are coming because you have the problem of getting around, logistics, and the instruction set, but it’s really just running some precise recipes and instruction sets. That’s a perfect thing for a robot to do.

David Roberts

I’m just envisioning you at a base firing these things in rockets all around the world with little robots riding on them. Delightful mental image.

Lauren Flanagan

My one that makes me smile is my R2D2, but obviously more sophisticated than that. Remember how handy he was. He could do everything.

David Roberts

As of 2022, I think the article was, you said you raised about $2 million. You were planning a $10 million round. I don’t know how that turned out or where you stand now. Where is your capital structure now and what is the path to scale? Are you going for traditional VC financing? Are you looking more for government grants and contracts? What’s the current financial situation?

Lauren Flanagan

We have revenues, we’ve had revenues. We haven’t needed to raise a lot of money just to get where we are. We’ve raised about $5 million in capital to date. We will do a larger round to scale manufacturing. We’re waiting to hear some of these pending larger orders that we expect to come from some of these big customers. That will have a combination of strategic investors, defense tech investors. I’m not sure how much traditional VC we’ll have.

Then economic development — there’s state monies, there’s debt to finance large transactions. We’ve had a lot of private equity interested, and we are in an enviable position of having had profitable unit economics from sale one. Now the company is hitting profitability, and we’ve done it the good old-fashioned way by making sales.

David Roberts

Not sure I’ve ever talked to a company in this space that is actually making money, much less from the beginning. You started the company — the origin story of the company is in response to climate disasters, as a response to seeing the devastation that follows these hurricanes and stuff, even in the US, even in an extremely rich country. It’s grim how we respond to these things. That’s a basic humanitarian motivation. As you started growing, you found the defense industry as a client. Now that’s about half your business, I think.

Is defense — has your mission itself shifted or do you just view this as a dual mission? How do you view the relationship between those? Do you feel you’ve drifted from your humanitarian origins or do you view it all as of a piece?

Lauren Flanagan

It’s all of a piece. It wasn’t so much humanitarian as how can we solve these power outage problems without making it worse, without compounding the environmental damage after, say, a hurricane or a wildfire, by putting tons of diesel generators that are further polluting the air and water in the ecosystem. How can we find a better way to do it? I picked that particularly because I thought, that’s a very finite problem.

If we can solve that in a way where there is uptake, there are all kinds of adjacent markets where power is being used in construction and military. We did not think of events, but the entertainment industry came to us and said, “We want to stop using...”

David Roberts

I’ve been meaning to do a pod on that. I hear about that more and more. A lot of solar-powered tours or solar-powered concerts with these boxes. I went to a conference last year, DERVOS, where the final event was a concert powered by a big box much like the one you make. It seems a hot area.

Lauren Flanagan

Some of our cities and counties use it. City of Ann Arbor, its original purpose was to back up a particular fire station to be there for emergencies. Fortunately, in Michigan we don’t have too many extreme weather events, but they have it for events. It becomes the office and workspace for the city personnel and they use it for education and community engagement. You can run a concert on it. You could do a lot of different things to keep it busy. That’s good. It’s reducing, from their perspective of sustainability, it’s helping them hit their greenhouse gas reduction goals.

David Roberts

The whole question of dealing with the US military is a little more fraught today than it might have been five or ten years ago. You’re probably following this big conflict between the Department of Defense and Anthropic — Department of Defense saying, “You need to enable your tools to kill autonomously,” and Anthropic saying, “No, we have moral objections to that. We’re not going to create an agent that will do that.” The big ongoing fight, which raises the issue that the technological capacities of the military are getting such that they are at least capable of a lot of scary dystopian things.

Are there military applications of your technology that you wouldn’t support or is there a customer that you wouldn’t sell to?

Lauren Flanagan

We’re not making weapons. We’re providing power and surveillance equipment and empowering the war fighters. We want to help empower, defend, and protect our war fighters. On the whole Anthropic issue, where I end up is that Congress needs to legislate the guardrails because you can’t have a contractor telling the Department of Defense how to use the product to do operations. That doesn’t scale if every contractor has a different vision of what you can and can’t do. That said, I don’t want to see it being used for mass surveillance or lethal actions without a human in the kill chain.

That’s up to Congress to set those guardrails and to approve them, or if they’re going to reject them for some reason, get congressional approval. There are dystopian situations where you might have to do it. You have to have that possibility open. We came into this to have power when and where needed in life and death situations. The military is an extension of that. What we’ve had to do is meet the customer where they are and speak to them in the language that they can hear. It still hits our overall power goal and does less harm to the environment. Those are the same missions we’ve always had, but we now have another place to do good in the world, in the way of helping our war fighters.

David Roberts

Can you talk a little bit about the rhetorical shift that you made when you started dealing more with the defense industry?

Lauren Flanagan

I call it schizophrenia. Even our new website that’s coming out, we have it divided into military and commercial. Normally you’d say government and commercial, but local governments have different goals than our federal government does at present under this administration. For example, city of Ann Arbor or Santa Barbara County, they do care about reducing their carbon footprint and reducing CO2 emissions, and they have metrics about that.

Our government is concerned about strengthening our military, protecting our war fighters, having power when and where we need it, and protecting American interests. The only place where that matches up, though, is because I’ve had a general look at me and say, “I don’t care about this climate stuff, but I need power where I need it, when I need it, and I don’t care where it comes from.” I’m like, “Good, if I can make it in the field, you don’t care if it’s made from sun and air?” “No, as long as it works.” You just have to learn to speak to them in the way they can hear, and then we can have a good dual mission — that’s going to help our country, help our war fighters, bring manufacturing back to the US. I’m all pro all those things and at the same time provide some of the research and volume to help us serve more cities, counties, and rural areas.

David Roberts

One final question on the product evolution. As I said at my very first question, I’ve been struggling with what are the boundaries of this market. I think about diesel gensets. Anybody who follows power and sustainability and all these issues knows that the world is just chock-a-block with diesel gensets. They’re all over the place and they’re incredibly dirty. On a per unit basis they’re some of the dirtiest things you can do. But they’re also super cheap. Backup power — all these things where you need portable, self-contained power — diesel gensets are doing most of that work in the world today. The distance between a $100 to $300 diesel generator and a $100,000 power box is a large distance.

How many of those diesel gensets — you’ve got a confined set you’re displacing. The pool, the total pool of diesel gensets, is huge. When your eyes sparkle and you think about 10 years from now, you think about the possibilities. How much of that pool of diesel gensets do you think can ultimately be displaced by portable clean power?

Lauren Flanagan

There are lots of small portable batteries and solar. That’s not our market, but if oil goes to $200 a barrel and potentially up depending on what happens in the world, it’s the cost of fuel and its availability. You can’t even get it in parts of Africa, which is where it’s most used. If fuel becomes scarce and very expensive, which will happen, it’s just a function of time. Batteries and solar get cheaper, that cost delta will change even for the small user. We’re more at a larger organization user versus an individual.

Ultimately, the cost of the batteries and small solar — there are ones in the military, little portable man-portable batteries and flat panels that fold out. Back to your Afghanistan article. They’re using them. They can power small mission devices, even a small battery drone and set it off. It may not go very far, maybe 45 minutes. Maybe it’s got a small payload, but that’s maybe all they needed to do. It’s in wide use in the military.

David Roberts

And it doesn’t make a roaring sound that you can hear from miles away either.

Lauren Flanagan

That’s the huge advantage of hydrogen — the low audio and thermal signature. It’s much lower detection. For example, the vertical takeoff and landing (VTOL) drone that Heaven Aerotech makes — not only can it fly for 10 hours, but it can fly virtually undetected because you cannot hear the thing.

David Roberts

Because it is quiet and there is no combustion.

Lauren Flanagan

No, it’s using a fuel cell. The hydrogen makes electricity to run the fuel cell. It’s silent.

David Roberts

Is it true that you can’t see drones coming unless you visually — there is no way to detect drones?

Lauren Flanagan

They have lots of ways to detect them —

David Roberts

I don’t know how it all works. It all seems vaguely dystopian to me.

Lauren Flanagan

There are lots of ways to detect. Clearly lower signatures, flying at lower altitudes — those are big wins in terms of survivability. Those are the kinds of things we are powering. We’re not powering the kamikaze killer weapon drones. We’re powering for law enforcement or checking a wildfire afterwards. Instead of a plane or surveillance of infrastructure or military surveillance or counter-UAS, we’re doing things that aren’t weapons.

David Roberts

One of the things I study a lot is transmission lines. In California specifically, they have all these old transmission lines that are strung off through wilderness areas. A lot of them were built so long ago they barely even know where they all are, much less can track the vegetation around them or if they’re sagging, all these things. The best they can do is send a person out every 10 years or whatever to fly around.

I kept thinking about one of these boxes sitting out there and a little drone that just parks on it and charges and then goes and monitors those transmission lines and then comes back and recharges and then — bada bing, bada boom. You have real-time monitoring of hundreds of miles of transmission lines. You’re avoiding blackouts, you’re avoiding fires. That would pay for itself. Have you — I don’t know why I’m thinking of new applications for your business, but I guess...

Lauren Flanagan

Should I hire you, David?

David Roberts

Has anyone come to you with that? That seems like an obvious one.

Lauren Flanagan

We’ve thought about both that and wildfire surveillance. Right now they send big planes up. It’s very expensive, all the fuel and the people to do that. This is a perfect case for hydrogen-powered drones to be able to survey and send back the data from a variety of cameras and sensors. Those are perfect applications not only for wildfires, but any natural disaster. You need to get the aerial view and to get it without the whole aviation requirements, and jet fuel is a definite cost saving.

These are additional new markets. I believe that the hydrogen-fueled UAS is going to be a significant breakthrough as we start waking up to our infrastructure vulnerability here in this country.

David Roberts

Or just monitoring or defending transformers or power stations.

Lauren Flanagan

Dams, bridges. These are all places — power, military bases. We have billions of dollars worth of equipment on the ground. This is all stuff that has to be surveyed.

David Roberts

This is your immediate business focus then? Is this drone market? Are there other — we’re talking about fanciful, all kinds of things you can imagine doing with this box. Is there an approximate next market or are you just focused on the drone thing for now?

Lauren Flanagan

The drone is new. Our core bread and butter business is just power, communications, and water. Whether it’s for war fighters at a base or forward expeditionary, a city, a county, a large corporation. We’ve got telco broadbands using it for backing up cell towers. That’s our bread and butter. These are the normal. The drone adds another layer of surveillance, another thing you can do with that power box. We’re not making the drone. They can buy whatever drone they want and we can power it. That’s just another functionality you add to it.

We’re interested in the entertainment market. They couldn’t cross the chasm. They don’t want to own it. The Disneys and Netflixes, they want to rent it and the rental companies are like, “We’ll buy it, but you have to give us enough business that we’re going to get our money back from that inventory.”

That’s the chicken and the egg problem. I think they’ll cross it.

David Roberts

I bet that’s solvable. There’s a lot of will, there’s a lot of impetus in that industry.

Lauren Flanagan

Absolutely. The PR value of being able to say, “This was a completely sustainably made film, no animals were hurt, no CO2 emissions were put in the air.” That’s going to matter to certain studios, not to others.

David Roberts

This is very interesting. Just wrapping up — what is the limiter on your expansion here? Is cost a barrier or is it logistics? Is it just getting people familiar with what you have to offer? What are your bottlenecks?

Lauren Flanagan

Being able to manufacture faster at lower costs.

David Roberts

Where are these manufactured now?

Lauren Flanagan

We have a factory in Jackson, Michigan, 38,000 square feet. We have room to expand and we’re currently one shift, but we can go to three. Expanding manufacturing. We’ve been broadening our supply chain the last year and a half so that we can be ready for some of the larger orders. We’ve been running the gauntlet through various Department of War branches, getting the necessary approvals and test results.

David Roberts

Are there approvals? A bunch of stuff just came out in the OBBB, the big stupid bill they passed. There are a bunch of domestic sourcing requirements to get various tax breaks. Are you making an effort to source most or all of your materials?

Lauren Flanagan

We always have. We’re proudly made in Michigan, made in the USA.

David Roberts

Where are the solar panels coming from?

Lauren Flanagan

We get them in the US. We get as much of it as we can in the US and as much as we can in the Midwest, particularly Michigan. I’m a foodie. I like to cook farm to table. If you get it from Michigan, it’s sourced to manufacturing like farm to table. That’s what we’re trying to do — to source as much locally and to reduce the time and the logistics expense and to create jobs in the communities where we work. That’s part of American reindustrialization. We’re super committed to that. Very proud of that. That’s an exciting part of our mission.

David Roberts

Very cool. I love seeing solar doing things that people said it couldn’t do, which is a frequent occasion. Thank you so much for coming on. This is a really interesting niche that I had never looked into before. Thanks for walking through it with us.

Lauren Flanagan

Thank you for having me. It was a fun conversation. Going back to your first article in 2011 in Outside for Afghanistan, I love that and it feels like it’s full circle.

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much and I’ll see you next time.

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Why do climate funders prefer cutting checks for electric vehicles over fighting for dense, transit-oriented housing? I talk to Ben Holland, who recently interviewed major climate foundations about their anti-urbanism bias, and returning guest Caroline Spears, who is working to pass climate-friendly housing policy at the state level. We discuss why obsessing over easily quantifiable emissions reductions is blinding the movement to massive, tractable wins, and why ignoring zoning reform is no longer an option for serious climate advocates.

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(Active transcript)

Text transcript:

David Roberts

All right. Hello everyone. Greetings. This is Volts for April 8, 2026, “Why climate funders don’t fund housing policy and why they ought to.” I am your host, David Roberts.

Volts listeners know that housing and urban land use have become something of an obsession of mine. Over the past few years I’ve done a series of episodes trying to build a case, not just that dense, walkable urbanism is good (which it obviously is, for a million reasons) — but that it is good climate policy. It belongs on a podcast about decarbonization, not as a nice-to-have or a co-benefit, but a core part of any serious strategy for getting emissions down.

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I talked with experts at RMI about the quantitative case — why meeting our climate goals requires not just electrifying the vehicle fleet but actually reducing how much people drive. I talked with Matthew Lewis of California YIMBY about the increasing political salience of housing and the lack of understanding in the climate movement. I talked with YIMBY activists about how the movement is racking up wins from New York to Texas and learning from itself across geographies. And I talked with Montana state senators about what bipartisan legislative success actually looks like from the inside.

At least from my perspective, the empirical case has been made, the political case has been made, and there’s a growing track record of legislative success. And yet climate funders still largely seem to be sitting this one out.

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Today I want to understand why — and what it would take to change it. My guests are Ben Holland of WRI’s New Urban Mobility Alliance, who has been spending the last several months interviewing climate funders about exactly this question, and (serial Volts guest) Caroline Spears of Climate Cabinet, who just released a major housing-climate policy platform and works with state legislators on this stuff. He is going to talk about what they are thinking, and she is going to talk about what they ought to be doing.

With no further ado: Ben Holland and Caroline Spears, welcome to Volts. Thank you so much for coming.

Ben Holland

Thanks for having us.

David Roberts

Ben, let’s start with you. You have been working on urbanism-related issues in the climate world for several years now. Now you’re at WRI. Before that you were at RMI. I would like to hear about your experiences and specifically how did you find the reception of this work upstairs, up the ladder, at the boss level, let’s say.

Ben Holland

The story I like to tell as far as how I got converted to urbanism goes back to 2017, 2018. I was living in Austin, Texas for a project that the RMI Mobility Team was running down there. It was a direct partnership with the city of Austin and local stakeholders where, like a lot of NGOs in the space at the time, we were trying to advance electric autonomous shared mobility services and really the shiny object of those things — we were very much caught up in all of that. I was the on-the-ground government affairs person for that project and moved to Austin for that work.

Over the course of a couple years there, I became well connected with the urbanism groups there and would find ourselves in conversations about, “What are you doing with regard to urban sprawl? If you think the future is autonomous vehicles, for instance, what is that going to do to vehicle miles traveled? People living farther away from core destinations?” We didn’t have a great answer for it at the time. We would have been, “These will be electric.”

David Roberts

“Did you see how shiny it is?”

Ben Holland

Yeah. It was in my time there where I came to understand the flaws of just that vision and the real need for better housing policy as well as tried and true transportation planning policy. I came back to Colorado, continued working for RMI, and started to build up what we called a climate-aligned urbanism team. Your former guests, Rushad Nanavatty and Heather House, were two of my colleagues at the time, as were Zach Subin and Jackie Lombardi.

The work we were trying to do came from this acknowledgment that there needed to be better data on the actual impacts and benefits of land use reform. It was vibes-based, in my opinion. Everybody intuitively understands compact, connected communities are good. Some people have read the David Owen book “Green Metropolis,” intuitively understanding that these urban centers are, on a per capita basis, lower emissions. But that was about the extent of it. We started to try to put some real analysis together that I think you talked about on that previous podcast with Rashad and Heather.

I’ll say bluntly, and I’ll take transportation as an example: even under the most wildly optimistic electric vehicle adoption scenarios, we are not going to be able to meet our climate goals without addressing the demand side — essentially reducing vehicle miles traveled.

Within that goal of reducing vehicle miles traveled, one of the biggest, if not the biggest, levers is improving the way that we build and where we build and improving our land use. Over time, we started stacking up all these different analyses and putting together these beautiful decks. I think you saw one of the presentations at Climate Week back in September with our event with Gehl Architects, and we finally have the data. We’re showing you the real potential of reducing emissions through land use.

Over the past few years, not just in my recent conversations with climate funders, but over the past few years, I’ve heard a number of universally held beliefs or skepticisms around the viability of land use reform or even mode shift on the transportation side of things as a fundable strategy.

David Roberts

What shocked me is that after that presentation, after all this extraordinary empirical work that RMI did, which I thought was quite impressive and made the case in pretty clear terms, even RMI decided not to expand its urbanism work.

Ben Holland

We’ve also seen a major shift in politics and where funding is going right now. A lot of funding has moved to more international interests given the current political climate. I can get into why that is understandable from their perspective, but it is also much needed to have even a state focus here in the States.

David Roberts

You say it’s understandable. Maybe we can address it later. But I don’t understand it at all. The fascists showed up and our response is, “All right, we’re out. Later. We’re gonna go spend overseas. We’ll be back when the fascism’s gone.” What are you guys for? Sorry, I’m yelling. Caroline, go ahead.

Caroline Spears

I think it’s an impulse to. Sometimes people collapse U.S. policy discussions into just Washington, D.C. and forget that we have 50 other rulemaking bodies here where we can make progress. The “no DC, go international first” impulse collapses a lot of it — oversimplifies a policy discussion. We have states and they have budgetary power. I had a lot of those conversations after, which was really folks asking questions “like that” and reminding people that we have states and their state budgets spend trillions of dollars a year and we have a lot of opportunity.

David Roberts

Is part of it — I don’t want to get too deep into this now — but is part of it like when you said, Ben, that most of the urbanism work before you started digging into it with RMI was mostly vibes-based? I get that. I think it’s worth saying also that the left funding community is full of aspiring technocrats — people who very much fashion themselves smart and empirical, etc. Meaning they want numbers, they want payback periods and —

Ben Holland

Exactly.

David Roberts

— deliverables, etc. Now I think they want that to a fault in ways we can discuss later. Obviously you can see why, at least before all this empirical work was done, why this was a bad fit. That’s one thing — the fuzziness. And then the other thing is what, and this is what Caroline brings up for me, is that I think they also are all — they aspire to big things. They want to be big and important and federal government feels big and important and international feels big and important. To some extent, little state battles and city battles just don’t feel grand enough for them. Is that a piece of it, Caroline, do you think?

Caroline Spears

One thing that always shocks people to that point that I say is that Wisconsin as a state has more greenhouse gas emissions than the country of Norway. How many times have I seen someone, maybe on the Internet, get excited about Norway’s electric vehicle progress or something “like that”? I find that exciting too. But it is smaller than most of the states that we have in America.

David Roberts

The US is very big. Let’s all remember the US is very, very large. Ben, you did this work at RMI. I think RMI decided not to blow this out and follow up on it. You moved to WRI. Now you’re doing this mobility alliance. Now you’re digging into it. You’re out talking to climate funders about this. Is this just an informal thing you’re doing on your own? What is the project you’re working on right now?

Ben Holland

Let me first say that this work did continue at RMI for a bit. I think some of the challenges are universal across the board. What I’m about to get into —

David Roberts

I don’t mean to single out RMI.

Ben Holland

— Most NGOs are, if you talk to people in the land use space or even non-electric vehicle transportation people at NGOs, this is a universal challenge that they’re facing.

David Roberts

Yes.

Ben Holland

But I guess I would say you touched on some of these things. Some of the universal themes I think are —

David Roberts

Wait, before we get into the specific objections, tell me about the project itself. Why are you — is this all on your own, on your own initiative?

Ben Holland

Yeah. I’ve been doing a series of interviews with national and international climate foundations to better understand where they’re coming from on this subject. It’s part of a small project we were funded to do at WRI on the New Urban Mobility Alliance team.

David Roberts

It’s overdue. The thinking of left funders is such an object of discourse. Many people are consumed by trying to figure it out and they’re just up there. You could just go ask them. It’s weird that there’s not more transparency about why they do what they do.

Ben Holland

I should caveat that we are still thinking through how we are going to publish these findings, but nothing I am going to say here is going to be of any great surprise to anybody.

David Roberts

Yes. What we’re going to do is — before all this started, Ben, you emailed me, “I’ve been talking to funders about this, climate funders. Here are the things I hear about why they’re not getting involved in urbanism.” What we’re going to do now is just go through the main objections you heard, and obviously, we don’t have time here to fully address any one of them, much less all of them, but we’re going to at least say a few words about why you and Caroline think they are wrong. Just going to walk through them one at a time, the kinds of things you heard from funders.

It’s funny, I’m not even in the funding world. I’m not trying to raise money for urbanism. I’m just some schmo. Even I’ve heard all of these. To your point, they are universal. These are all very familiar. Let’s go through them.

The first is this notion that when you’re doing energy policy, you have a couple clear constituencies that you’re trying to mobilize who can get you over the finish line. I think they have it in their heads that when it comes to urbanism, the stakeholder landscape is just too complicated. There are too many different groups who want too many different things. There’s too much work trying to get all the constituencies on one page. What do you make of that?

Ben Holland

At first blush, it makes sense that you have a distributed network of policymakers and stakeholders and community advocates, etc., that you have to bring together around one policy — has been the belief. I would go a step further: many in the funder and NGO space worry that you have to do that city to city, across hundreds to thousands of cities across the country.

David Roberts

That’s the thing — these are bespoke and local and geographically specific.

Ben Holland

Bespoke would be the word.

David Roberts

All of these are very understandable. That’s understandable to me to have that objection. To some extent, the battle in Cleveland is unique to Cleveland, and the battle in Austin is somewhat unique to Austin. You have to go in and figure out the landscape and who’s who and who’s fighting for what, and you have to do that city by city. That makes some sense to me. What do you tell them about this?

Ben Holland

At the risk of making it sound like one simple hack, there are 75% of residential land — around 75% across the US — zoned as single family. In most high-demand cities where there is a very high demand for housing, there is significant need for multifamily housing near destinations, near public transit, that is currently illegal to build. Just legalizing apartment buildings in an infill environment near transit, near key destinations, is a universal tool that you see the YIMBY movement using across the country to great success. Caroline is going to get into that.

There are dominoes falling, not just at the city level, but in a very exciting way at the state level as well. The one thing that comes to mind for me is how many initiatives within the climate space do work at the state and city level and require coordination and alignment among many stakeholders. If you’re thinking about passing building electrification strategies.

David Roberts

Once you get in distribution grid stuff —

Ben Holland

Yes.

David Roberts

All of that is somewhat geographic-specific, somewhat bespoke. You say these dominoes are falling. Caroline, maybe you can answer this from the funder’s perspective. Another thing that makes sense to me is when I’m thinking about advocating for apartments or whatever, the big constituency that’s going to benefit from apartments being built doesn’t yet exist. It is the people that will live in the apartments who don’t yet know that they’re part of that constituency. Anybody who’s status quo-biased and fighting against change — they are all concentrated and mobilized. The people who will benefit from change tend to be scattered and not mobilized.

As an a priori fear about this, I can understand funders having that fear, but then look — it’s working, it’s happening. The dominoes are falling. Caroline, my question is, who are the constituencies who are stepping up? It turns out, it’s not as difficult to find and mobilize constituencies as we thought. Who are these people who are turning out to be the constituencies in question?

Caroline Spears

Dave, I don’t know if you have heard about this, but affordability is a key thing.

David Roberts

The word is not ringing a bell.

Caroline Spears

We had this discussion, but because of the affordability and cost of living crisis, which is primarily driven by the cost of housing, policymakers or constituents are approaching land use in a different way than they did 10, 20, or 30 years ago, which I think is when some of these priors are baked in. Costs are skyrocketing. In climate, we have had a long and detailed conversation about electricity.

When you talk to policymakers, the number one cost issue for most of the people living in their district is the cost of housing. It’s the cost of putting a roof over their head. Median American families spend about $2,000 a month on housing. They spend another thousand dollars more on transportation. When you tackle that as a bucket, you can see some big cost of living and affordability wins, but also some big climate wins as well. You have both of those happening at once. This affordability conversation gives us new avenues and opportunities.

David Roberts

I want to think that young people get this —

Caroline Spears

Yes.

David Roberts

— and are rising up. Is that accurate?

Caroline Spears

I think there is a big generational gap between folks who bought their house in the 80s and folks who are trying to buy a house now.

David Roberts

That’s the first one. That’s the constituencies question. The answer to that is just that the cavalry has arrived. The constituency is there, it’s been demonstrated. Ben, tell me if I’m getting out over my skis here, but it seems having pulled those constituencies together and won, each time you do that in a new city, it’s a little easier the next city just because you have a better understanding of what the constituencies are and the dynamics, etc. It’s not proving to be 100% bespoke. 100% start over, right?

Ben Holland

They’ve created a template — California YIMBY has. You’re seeing that adopted state to state around the country right now with major wins happening. Alongside at the state level, you also have many very successful city-level campaigns. Austin, Texas gets a lot of attention in this space. It’s becoming a standard template that I think is fairly adaptable and not bespoke city to city or state to state.

David Roberts

A little bit like what happened with renewable portfolio standards in the 90s and 2000s — the first few were a lot of work and bespoke, and then they just started going once they got established.

Caroline Spears

Just to double down on that, to talk about renewable portfolio standards: it goes state by state. You get people, “Oh, you got to go in each state, each day, each state.” By 2015, half of all renewable energy built in America was built because of a state renewable portfolio standard. We have a track record.

David Roberts

Then you’ve got a case to make at the federal level. Your case at the federal level is much stronger if you’ve got a bunch of states pulling in the right direction. The second objection, this one I almost think has the most bite, is the measurement question. As we said, Ben, all these funders, or at least their officers, the people they have working with them, all fashion themselves technocrats. They all want to be, “How many votes will I get for this dollar of investment in the electoral system?” They want things quantified.

In this area, there’s a pretty long causal chain between mustering the constituencies, passing the policy, having the policy work its magic for a few years, then you see a marginal reduction, a VMT, then you get some carbon benefits. That’s a long chain. It’s very difficult to track, it’s difficult to quantify, it’s difficult to say for certain to a funder, “Invest this dollar, you’ll get X result.” That is understandable to me. I think they take it too far. I think they get obsessive and psychotic about it. A lot of stuff that ought to get money doesn’t get money because of that weird obsession. But at its root, it makes some sense. They want to know, does this stuff work? What is your answer to the measurement question?

Ben Holland

I’m going to combine this with something I think you were going to bring up a little bit later too, around VMT. First of all, yes, that is an understandable skepticism. However, there is interesting evidence coming out around the actual VMT reductions when housing is built close to transit, close to destinations and jobs. I’ll just throw out a couple. Between 2013 and 2024, housing units grew 20% in Minneapolis while overall VMT fell 12% and per capita fell by 18%. Most states, and Minnesota is one of them, that have some kind of VMT reduction goal tend to be around the 20%. They top out at 20% per capita. That’s pretty remarkable that they’re seeing an 8. Obviously there are other factors involved there.

David Roberts

It’s a case in point — Minneapolis has done a bunch of things. Which of those is responsible for how much of that 8%? It is very difficult to figure that out.

Ben Holland

One of the things to simplify, at least from my perspective, is that if you have a suite of housing policies that are being introduced at the state level, there is certainly some questioning around, “If you just do a basic duplex, fourplex, broad upzoning, where is it going to be built and how much is it going to actually reduce VMT?” I don’t want to overestimate how easy it is to quantify those things. There is significant potential to also support more housing near transit, where if you have properties that cannot be developed with multifamily housing in existing low VMT areas, then people are going to build elsewhere.

When you liberalize those properties to be developed, you are making it possible to live in a lower VMT area. There is a lot of work that Terner Center has done looking at the viability of prioritizing new housing in existing low VMT areas.

David Roberts

It’s easy to establish directionally what will happen. If you upzone a bunch of single-family lots around a transit station, people will build on them. That much you can say. Specifying how much they’ll build and then, further from that, deriving how much greenhouse gases they will save by living there — you’re back in fuzzy territory. You can get directionality but not precision.

Ben Holland

I’m going to get some flack from some of my EV friends for this following statement. I used to work in the EV space. There’s a confidence that if we pass this EV policy or these tax credits, there’s a one-for-one replacement in people buying EVs. I’m not saying it’s as fuzzy as land use. However, there are some assumptions that go into play as far as checking that box.

We have this big EV win, but are those vehicles second or third vehicles? That is changing over time. EVs are getting cheaper, they are becoming the primary vehicle for a lot of households. How much VMT is that replacing? How many electrified miles is it creating versus ICE miles? I think simply legalizing multifamily housing in places where it is currently illegal for me is enough of a level of certainty as far as this being a reduction.

David Roberts

What I would ask is — because I think the class of policies for which you can reliably project precise effects is pretty small. Most social and political and economic policy spirals out and has second-order effects. It is very difficult to predict the effects of almost anything. When you talk to funders about this, what would you like to see? Would you like to see more empirical work and measurement and precision in the urbanism world to mollify this concern? Or would you say to funders, “You got to loosen up a little bit about this?” Should funders adjust what they expect? Which side or both?

Ben Holland

I believe that the funders in the climate community writ large in the US right now need to participate in the discussions related to housing policy where they are currently, for the most part, not participating in those discussions. As far as the flows of funding, supporting pro-housing initiatives and pro-housing groups in states and cities across the country would be very valuable. I have heard these numbers thrown around and I apologize if they are not completely accurate, but I think on average there is about $4 billion of funding committed to climate in the US every year. This pro-housing movement up until recently has had a little more than $40 million, I think, across the whole country.

Even just a small amount of investment in this space —

David Roberts

And look at the relative success, the relative results of those two different buckets of spending.

Ben Holland

I know that Caroline has some thoughts on this too as far as playing a role in this conversation related to housing policy.

David Roberts

Let’s get to what I think is one of the other understandable objections. I think this is one that not just funders have in their head, but that a lot of ordinary people have in their head. A lot of people I encounter online, which is this: if you want to decarbonize housing and transportation, just make everything electric and non-carbon, solve it with technology, substitute low- to zero-carbon technologies in there.

If you ask just an ordinary person, “Which is faster: shifting land use policies and thereby shifting development patterns and transportation patterns, or just giving everybody who buys an EV a $10,000 check?” A lot of people will intuitively think it’s just faster to get the electric vehicles out there. It’s just faster to replace a technology than it is to change social and behavioral and long-standing patterns of how we live. A lot of funders think, “We have a technological lever we can pull here that’s clear and easy and we know exactly where to put the money,” in contrast to this fuzziness that you want me to get into. How do you address that objection?

Ben Holland

That’s an understandable sentiment. However, this is going to sound a bit like a cop out, we have to do both. Some of the analysis that my team when I was at RMI did found that to meet 2030 emissions goals we would need something on the order of — for the transportation sector alone — we would need to reduce emissions by 45% by 2030. What that would amount to is 70 million EVs on the road by 2030. Even under that wildly optimistic scenario, we would still need to reduce vehicle miles traveled by 20% per capita.

That’s getting close to that Minneapolis number I mentioned. We have a little over 6 million EVs on the road today and less than 6 years — sorry, less than 4 years till we get to 2030. I know some of the goalposts are moving on this, and as far as timelines out to 2050, the EV market could potentially get there to pick up the slack.

David Roberts

Cars have their life cycle and don’t turn over that often.

Ben Holland

12, 13 years.

David Roberts

There are limited public policy tools that can really hasten that cycle. You are tied to that timeline in that world.

Ben Holland

Meanwhile, sprawl is continuing throughout the US and housing policies are being made that could either improve or worsen those conditions and basically locking in a hundred years of development patterns into perpetuity. Hypothetically, and borne out just in the reduction of battery costs and the adoption of EVs, technology moves fast, but not fast enough for where we need to be.

David Roberts

That’s the main thing and that’s what was established in the RMI episode I did, which is that no matter your feelings about EVs, there’s no model, no prospect of getting where we need to get purely through EVs. You can’t do it. You can’t hasten that cycle enough. There’s also a corresponding intuitive sense of the slowness of urban reform that is belied by events — things are moving pretty quickly. Austin has changed quite a bit pretty quickly. Minneapolis has changed quite a bit pretty quickly. It’s not always slow and incremental.

Caroline Spears

We have specific examples recently about that. Since New York City put in congestion pricing, pollution has dropped 10%. There are other cities — Barcelona — in the last decade and a half, they have reduced their carbon pollution by roughly 20% in 15 years. Name another sector of climate policy where we have been able to get that amount of emissions reduction in that short of a time. Guess what? They did it through a combination. You got EV policy in there, but a lot of it was walkability, bikeability. You should be able to walk to your corner store and make a livable community. That makes that a reality. That is how they did it.

David Roberts

The response there is twofold. One is EVs can’t move as fast as you might think they could. They’re slower than you think. Two, urban reform moves faster than you generally might think it would. Once it gets going, it moves pretty quick. Having that congestion pricing example out there is really helpful. You would be challenged to find a policy that is more evidently beneficial immediately to everyone.

The fifth objection, which I don’t know how often or substantial this one is, but it’s interesting to me, is just as a little background, there’s this abundance thing going on. Anybody who follows Democratic politics is no doubt familiar with this hype around abundance. The abundance people love the YIMBY people. They claim the YIMBY people as part of their own. A lot of how abundance has gotten press and attention is by crapping on green groups. That’s how they’ve levered their way to high profile, which I would imagine makes some people in the green groups and in the green funding world somewhat suspicious of the abundance people, perhaps even hostile to the abundance people, which then might be putting them off YIMBY because they associate it with abundance.

I’m curious what’s going on there. What are funders thinking about that specifically? From a distance, you’d think, “The abundance people love YIMBY. The climate people love YIMBY. Let’s all just support YIMBY and be happy and hold hands and make good things happen.” Of course, that’s not how it works. Instead, everybody’s at each other’s throats. I’m curious what you’ve heard from funders about this.

Ben Holland

I was afraid you were going to bring this one up — step into the whole abundance debate.

David Roberts

Can you hear the stampede in the distance? It’s coming at us.

Caroline Spears

Ben, why don’t you take this one?

Ben Holland

Yeah, sure. There is a concern that, especially with regard to transportation and land use, this enthusiasm about reducing permitting hurdles and eliminating environmental assessments necessary for projects could give rise to, for instance, more highways. The book focuses a great deal on, “Why don’t we have high speed rail in California yet?” There’s a whole myriad of different environmental regulations and processes that have slowed that down, which I’m very sympathetic to that argument.

Many in the climate space would say the abundance movement is, by supporting that, also potentially expanding more highways, getting more fossil fuel interests involved, and things of that nature. It’s interesting to me because the climate space has had nothing to say about highway expansions or highways or transportation investment of that kind to date either.

David Roberts

Now we don’t like it?

Ben Holland

That would be another episode altogether, around just transportation funding.

David Roberts

If I could summarize what you just said, it’s that abundance — the vibe of abundance is “build, build, build everything.” The vibe of climate people is, “Okay, fine, build, but only good stuff.” That is the source of the disagreement between them. Again, I return to the fact that they can both agree on “build, build, build housing.” This seems like it ought to be a site of collaboration and bridge building between these two factions. I don’t know that I’m seeing that happen.

Ben Holland

I would agree with that. There’s still a fair amount of education conversation that needs to be had on the left and within the environmental space around what we mean as far as housing abundance and how they can play a role in influencing more climate-aligned housing development, which is combining building decarbonization goals with pro-housing initiatives in urban centers around the country — could be super powerful. I don’t think that zoning is really even on the radar of most climate groups. If you’ve seen a lot of skepticism online and on Twitter, there are a lot of anti-abundance Twitter accounts. They don’t like to even engage in the zoning discussion. It tends to just focus on corporate interests.

David Roberts

My worry is that the abundance people introducing themselves through crapping on green groups has polarized members of the green groups against things like zoning reform. That to me is just tragic. It’s tragic that it’s happened. I want to stop that trend from happening. How do you navigate this, Ben? I don’t know to what extent you’re trying to be a funder whisperer and change these people’s minds, but what works on this question to get around this sensitivity?

Ben Holland

For me it’s really focusing this subject around the infill and transit-oriented development policies that could be a part of those abundant — if you want to call it abundance — packages. That term, there’s some overlap with the YIMBY movement. I will say that the YIMBY movement’s done an amazing job of creating compelling messaging and fact-based messaging around the climate benefits and in many cases have successfully bridged relationships where they didn’t exist, like with Sierra Club for instance, in California and in Oregon. You’re seeing more and more of this happen at the state level without any meaningful participation from more national groups.

David Roberts

It’s sad. If I was in the YIMBY movement, my attitude toward this would be, “We’re winning. I don’t want your loser coalition grabbing onto me. No thanks. We’ll just remain independent and keep winning.” Has anyone asked the YIMBY people whether they want climate showing up at the door?

Ben Holland

This is a fear of mine and it’s something I talk to some of the YIMBY movement about. I’m a big fan of Matthew Lewis who you interviewed, but in some places — I’ll give you an example of where additional support for pro-housing, in particular infill and transit-oriented development policies, would be really effective: in more purple and just straight-up red states. We have some forthcoming analysis at WRI that finds significant emissions reduction potential in Texas, Arizona, North Carolina, Florida, and places like that because people drive a lot there. There are more sprawling development patterns.

David Roberts

You mean just through basic upzoning and —

Ben Holland

Yeah, something akin to a transit-oriented development bill like you’ve seen in your state of Washington or California or Colorado. However, I think the YIMBY movements in those places understandably would be a little cautious about the climate space coming out very vocal about it.

David Roberts

Would it help for the Sierra Club to show up in Texas and say, “Hey, we love this too”? It’s not clear to me.

Ben Holland

Or would they scuttle the whole thing. I have heard differing opinions on it. The groups we’ve talked to in Texas had to get some Democratic legislators on board to support recent state-level zoning policy wins there — they recently passed legislation that allows, by right, development of housing on commercial lots, which ideally will give rise to more development in some urban centers. There are times when the climate message is really effective. I think it gets to a level of political strategy that I’m not very adept at — to think about how much those discussions are behind closed doors and can the climate funding space support some of these initiatives without derailing the whole thing?

David Roberts

Caroline, let me ask you about this because you are in dialogue with state and city level politicians all the time. If you’re a poster online, it helps you for abundance and climate to be fighting because, oh, the content it generates. But if you are a state politician trying to do things and pass bills, it seems you would look at this and say, “This seems like a natural overlap. I need constituencies. I need popular policies that are going to help multiple goals at once.” This overlap seems rich and attractive to me. I’m curious whether state politicians are maybe ahead of the climate funding community on this question.

Caroline Spears

Just to be clear about where housing policy is in state capitals — state capitals being our only avenue for climate progress for the next three years, state and local. Just to be clear about where housing policy is, housing policy is going to pass most state legislatures. It has already hit most state legislatures the last few years. I will go on this podcast and make a public prediction that almost every state, if not 100% of them, will pass some policy to build more housing in the next session or two.

David Roberts

We’ll see. But we’ll hold you to that.

Caroline Spears

Someone can fact check me on this because it is the number one cost driver for people in America. Housing prices have skyrocketed.

David Roberts

Somewhat miraculously to me anyway, housing seems to be — I’m knocking on wood even as I’m saying these words — but it does seem to me, at least to date, to have avoided the absolutely chronic, crippling polarization that affects literally everything else in American public life. I don’t know why that is or how long it can last, but that’s magic dust in today’s politics.

Caroline Spears

Building more housing has this bipartisan constituency. Absolutely. From a climate perspective, we have two choices. Option A for housing policy, as it passes, spikes transportation pollution. Option B reduces transportation pollution. There are two paths. That’s why get involved. You can either have more costs, more traffic, more time in the car instead of time with your family, or you can create low-pollution communities. That’s the choice that folks are facing. That’s the choice in front of climate right now. Here are the two options.

Everyone’s going to pass more housing policy. You can pick option A or option B. Option B is the one in which climate gets involved a little more.

David Roberts

The pitch here is housing policy is happening regardless. Is it going to be climate-friendly housing policy or climate-negative housing policy?

Caroline Spears

That’s right.

David Roberts

That depends somewhat on whether climate groups are in the room, in the door, engaged in this area.

Caroline Spears

Exactly, absolutely.

David Roberts

Do they buy that? I buy that, but of course I want to buy that. I’m curious whether they buy that. Do they view housing as — it is still, even though it’s happening everywhere, it’s still dangerous, it’s still fraught, there’s still a lot of arguing about what kind is good, etc. Do they buy the idea that this is the train that’s moving, hop on or get run over? Is that working?

Caroline Spears

What’s challenging about it is something you and Ben talked about earlier, which is that it’s a bit of a walk. Transportation pollution is the number one source of climate pollution in America.

David Roberts

Yep.

Caroline Spears

Right now, there has been this — to Ben’s point, the focus of transportation policy for the last at least decade and a half has been electric vehicles and specifically the California electric vehicle standards, and trying to get those into as many states as possible. Then someone by the name of Donald Trump got elected, threw that plan into the bonfire. We’re in a space now where we have to go back to the drawing board on transportation policy. The question then becomes, how many options can we put on the table that are tractable, that are doable, where we can get something done on transportation policy with the avenues that we have and the power that we have. Then housing policy starts looking like a very interesting solution.

David Roberts

One of the reasons why, as I’m thinking about reasons why that hasn’t happened, this raises another question, which is the generational thing. If I’m diagnosing, why is that the case? My suspicion is that older people in general have a much more positive view of driving and cars generally. I think to an older generation they represented freedom and prosperity, etc. This has all been written about to no end.

Old people drive and hate policies that make them drive less. Legendarily, older people are overrepresented in our politics in general and at the municipal level in particular. They are the ones who show up at the meetings, fill out the response cards, and call the legislators. I wonder, if I am a state legislator and think about, “I am going to pass a policy with the explicit goal of having people drive less,” I am in terror of organized old people in my state crucifying me. I wonder how the generational thing is playing out on the ground. Do you or Ben have any thoughts on that?

Caroline Spears

The generational gap is a big part of it. Our goal — EVs are part of the picture. If people love driving, that part of the picture really speaks to that. It’s about transportation choices. Transportation is the second largest monthly expense that the average American family faces. It’s about having options and choices about where you want to put that. About 25% of all of Philadelphia choose to get to work every weekday on SEPTA, the Philadelphia public transit system — a zero carbon transportation system that almost got defunded last year, and it’s still struggling.

David Roberts

A lot of city transit systems are still in that perilous situation.

Caroline Spears

It’s about giving people choices. If I were to tell you, “I have a magic bullet to convert 25% of Philadelphia’s cars to EVs,” I think someone would be really excited about that. When you peel back the curtain a little bit and say, “It’s the bus,” sometimes folks change it. From a climate perspective, the point is the same. It’s about giving people options and choices, and EVs are part of that. But also there is transportation. Zero carbon transit is a part of that as well.

David Roberts

People’s views on this are vibes-based. When people have personal experience with something, empirical analysis goes out the window. You can throw numbers at them all day long. They’re saying, “No, but I got uncomfortable on the bus once.”

Ben, this is perhaps a slightly awkward and uncomfortable question. The funders themselves are those old people. By and large, the funders themselves are from an older generation that had a different attitude towards cars and driving and I think very deep in their bones views like, “You grow up, you get a job, you become independent and you get a car. If you’re still an adult stuck on public transit, it is a sign of failure.”

That is deeply ingrained and it is not coincidence that all the funders are from that generation. Is that accurate on my part and is there any generational overturning, renewal happening in the funding community?

Ben Holland

That generalization is largely accurate. They also tend to be deeply rooted in an anti-developer sentiment that goes back to the 70s. Your classic environmentalist.

David Roberts

Land preservation, all that stuff.

Ben Holland

Land preservation, yeah. I’ve lived in Colorado and Boulder, Colorado for most of the last 20 years. Every time there’s some upzoning or housing development or zoning policy that’s introduced, people come out of the woodwork using climate as their excuse for fighting it. That is rampant.

Caroline Spears

That’s what’s wild to me as someone who also — I love hiking, I love being outside — is I do care about preserving ecosystems and things like that. I don’t want anyone to have to super commute two hours each way to get to a major city. It’s funny that that’s where we are because I think the bridge here is that we have a way into not paving over really nice farmland you could be using to grow food for people. We’re down to our last 5, 10% of wetlands in the state of California. Let’s not go there.

David Roberts

Let me tell you, having run this argument on Nextdoor, they’re not convinced. It doesn’t work.

Caroline Spears

The big generational gap, though, besides the attitudes towards driving, is cost of housing. When I talk to folks who bought a house in the 80s and they tell me, and I do the little inflation adjustment in my head, I’m like, “Are you serious? What was the cost of housing? That’s incredible.” The goal with housing is let’s create a world in which we can do that again.

David Roberts

To the Nextdoor people, if you fight housing here, it is just going to go out and plant itself on the land that you say you want to preserve. You are having perverse effects here by fighting housing. But I have not changed a single mind on Nextdoor yet.

Caroline Spears

On Nextdoor. Godspeed.

Ben Holland

You mentioned the transit piece and I think that’s accurate as well. This is a gross generalization, but there are probably not a lot of heavy transit users as far as the big money environmental —

David Roberts

They live in suburbs and they drive. Wealthy white American people live in suburbs and drive mostly.

Ben Holland

I remember back when we had the whole shared electric autonomous initiative and every other NGO in the space. It was almost this understanding or conventional wisdom that was, “The transition is not effective on a cost basis and the ridership is really weak,” and these were the firmly held beliefs among, in some of those discussions. Some people, their eyes glaze over when you talk about things like transit-oriented development because it’s been a topic and well-worn territory in the planning space for so long but —

David Roberts

It doesn’t feel disruptive. It doesn’t feel techie, it doesn’t feel futuristic. They all want self-driving unmanned drone VTOLs. All these guys, they are all 12-year-old boys, and buses and trains are just boring, reliable, and standard.

Ben Holland

That’s very true. My colleague Justin Huckleberry is running some analysis right now looking at the existing densities along transit lines in 70 different cities. The rule of thumb is you want something north of 15 units per acre to be supportive of transit operations. The land use adjacent to transit lines in a lot of the cities we are looking at on average is abysmal.

David Roberts

It’s wild.

Ben Holland

Five units per acre maybe. I’ve heard you talk about this with regard to Seattle even, which is surprising to a lot of people.

David Roberts

Yes. They built this giant multi-billion dollar light rail system in Seattle, which is great. But there’s a station next to the interstate near my house, and I can stand in the parking lot of that light rail station, throw a rock, and hit a single-family home across the street or a golf course. A golf course caddy-corner to the transit station. We have dozens of golf courses. But you better believe the community rallied to protect that golf course. This is baffling to me, Ben, and Caroline, maybe you have something to say about this too.

Forget climate, forget pollution, forget everything else. Just allowing building along transit routes is a GDP generator, it is a tax revenue generator. It is the most reliable growth generator that you have as an urban politician. It seems in self-interest they would want to do at least that.

Caroline Spears

That’s true. One question that people have around housing and land use is, is it tractable? Y’all talked about, is it too slow, etc. This is a place where just last year Illinois passed this incredible first piece, really cool legislation, the NITA Act, which not only dedicated over $1.5 billion a year to zero carbon transportation — $1.5 billion a year to zero carbon transportation — it also allowed people to build multi-unit near transit stops. By that I don’t just mean trains, I mean buses, I mean walkability. It really built all of this.

Building on that, Illinois is not stopping yet. JB Pritzker has introduced the Build Act Illinois this year. That would legalize ADUs, legalize missing middle homes that are symptomatic of this larger housing affordability problem. It eliminates parking minimums — need to eliminate parking minimums near transit stops. This goes more statewide and this is it. Already passed. I have great news, y’all. All of these ideas that we’re talking about, they’re tractable, they’re moving through states, and we already have a great one out of Illinois. They’re building on it.

David Roberts

If you’re running a climate group in Illinois, wouldn’t you like to be one of those people standing behind the desk when JB Pritzker signs this beautiful victory legislation? Wouldn’t you like to be one of the people ascribed as the person who helped get this done? Wouldn’t you rather be on that train?

Caroline Spears

That was good. That was well done. There’s this great coalition there that got that over the finish line and is working on more. There’s even more in the future. What I really want to see is folks learning from that group that got that bill over the finish line. How do we take this out into — we can keep going.

David Roberts

Yeah. I did a pod on the Illinois climate half. They’re passing all kinds of stuff in Illinois. I did a pod on the climate half, but not on the transit half. The coalition building in Illinois, it’s so germane to everything we’ve been talking about, should be studied. I have to say, because I have not said it yet in this episode and I am going to get scolded by multiple people if I don’t say it on the EV question: it’s worth throwing out there that all the research has come back that electric bicycles are responsible for more oil demand destruction worldwide than EVs.

Caroline Spears

Is that true?

David Roberts

Yes. I will be shot if I don’t at least say in this episode that electric bikes, not just EVs, not just cars — electric bikes are magic in this area. They make your walk shed, your non-car shed, so much larger, so much easier. They’re so good for families, they’re so good for groceries, they’re car replacements, etc. I just have to sing the praises of E-bikes here so I don’t get yelled at.

Ben Holland

I got to give a shout out to my former colleague Bryn Grunwald. RMI has done a lot of great work in this space, developed this fantastic e-bike environment and economics impact assessment tool, has been plugging away at this in the US context for a long time.

Caroline Spears

That’s amazing.

David Roberts

Even if you’re a climate funder jazzed about technology, how about peeling off a little bit of your money and funding some E-bike subsidies? That would be so cheap. It would be so cheap for a city to just do E-bike subsidies. They’re doing them in Colorado, I think a couple other places. Everywhere I’ve seen one pop up, it is immediately oversubscribed. There’s a lot of untapped demand for E-bikes out there. Climate people, hello. Let’s just wrap up by asking what can people do here?

I’m yelling online. I think that has limited efficacy. Lots of other people are yelling online. I’m not certain that even more people yelling online would substantially help things. Perhaps there are other things people could do. Ben, specifically on the question of how to move climate world on this, what would you recommend that people do? Because I have no idea what affects funders. What lever of influence does anyone have over these people? They just seem floating in the clouds — like on Mount Olympus. The money floats down. It is what it is. We get what we get. There doesn’t seem to be any feedback mechanisms. Is there any way to reach these people and affect how they think?

Ben Holland

I think that — and this is not general public — but my peers in the climate advocacy and NGO space just need to continue screaming from the rooftops about this. There has been a lot of momentum and reason to be optimistic on this front. There is a fantastic group called the Clean Rides Network, a coalition of NGOs and funders that are really pushing the mode shift side of things. We just need to keep being louder because ultimately the philanthropy NGOs and the community groups are the ones that are running the analysis and also seeing at the ground level successes. Continuing to get behind this and then informing alliances with some of the climate-aligned pro-housing groups like your Matt Lewis from California YIMBY and folks like — I am just very much in the continuing to scream from the rooftops position at this point.

David Roberts

Caroline, you’re down in state politics. People can call their state legislators and say, “Do something about housing.” You make the point frequently that affordability — everybody’s, as you noted, obsessed with affordability now and particularly the climate energy world has become fixated on electricity affordability. You make the point frequently that housing, on an objective, measurable basis, is a bigger cost center than electricity. Transportation is a bigger cost center than electricity. Electricity is getting more expensive. It is a problem. But if you care about affordability as such, go after the unaffordable bits, the most unaffordable bits first.

Especially if you can get some climate benefit along the way. What do you want people to do and what do you want state legislators to do? I imagine a lot of them are like, “Well, I get this, but what are the support mechanisms, what are the groups, how can they tap into this?”

Caroline Spears

We look at four of the biggest household bills that Americans face on a month-to-month basis — things that climate has a real tangible system solution for reducing costs. We’re about to launch our 2026, 2027 policy platform. This is a preview. It’s for the biggest household bills and when we show up to state capitals. When you work with any type of lawmaker and you say, “I care about affordability,” you got to talk about the largest source of costs for people. Now, that’s housing and transportation. Electricity is absolutely a part of that at about three or four hundred dollars a month for folks, but housing and transportation are about $3,000 a month for folks.

To be able to show up and say, “I have a solution on this, and by the way, it’s going to make housing prices go down. We’re going to help out with transportation prices. By the way, we got an electricity plan as well.” Lawmakers are excited about that. Like I said, it’s already passing in a lot of states and we have an option in front of us. We can push in the climate-friendly direction. But there’s also a risk of some of this going in a spot where we’re building homes in wildfire interfaces, homes with a lot of climate risk. There are two options in front of us and let’s do it.

David Roberts

This is such a good point. The climate train is not chugging along very well these days. It’s not very healthy. The housing thing is happening, the affordability thing is happening. They could either happen in climate-friendly ways or climate-unfriendly ways. Rather than staying off in its own little corner waiting for its perfect climate policy, I feel the climate community and climate funders need to get involved in these other things to make sure they turn out well.

Caroline Spears

I totally agree.

David Roberts

Ben, just to wrap up, tell me about this project you’re working on now and your work now at WRI. Are you working on building this empirical case, trying to build up the — bring some numbers to the game?

Ben Holland

We are. In the next couple months we will be releasing two publications. The first will be in the next couple of weeks, I believe. Maybe by the time this airs, we’ll have a piece that comes out with Pew Charitable Trust that looks at the economics of housing production, the economic benefits and the fiscal benefits of housing production. In particular, infill housing production — the suburban sprawl Ponzi scheme thing that Strong Towns talks about from time to time. We put some numbers behind that. That’ll come out with Pew and then on the heels of that, we will be publishing some analysis of 12 states and the emissions reduction benefits or potential through land use reforms that would allow for more infill and transit-oriented development. The numbers there are really big — 15 million metric tons a year in Texas, for instance.

David Roberts

Do you find that the potential is bigger in red states because they have been more car-friendly in the past or —

Ben Holland

Yeah, largely it is because of that. It’s a lot of people moving there — places like Texas, North Carolina and Florida. I guess it’s unfair to really call North Carolina fully red state, but very sprawling development patterns at times and dirty cars, a lot of SUVs there. Anything we can do to get more people, more housing available in the city centers and close to transit, it’s going to be a benefit emissions-wise there. Those things will come out in the next couple months. Very excited about that.

David Roberts

Awesome. As a final word out there to anyone listening, if you are a climate funder or an officer at a climate fund or one of those family people — the family officers that decide how the family funds spend their money — if you’re someone with your hand on a bunch of money in climate, I would love to talk to you. I’d love to hear what you’re thinking. What are your other funders thinking? How do you cognize all this? Get in touch.

Ben, Caroline, thank you so much. This was delightful.

Caroline Spears

Thanks so much for having us.

Ben Holland

This was fun.

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

It can be stomach-turning, watching the Trump administration torch federal climate policy. But what if some of what's burning wasn't working particularly well to begin with? Hannah Safford and Loren Schulman of the Federation of American Scientists' Center for Regulatory Ingenuity make the case, not for defending or trying to rebuild the status quo regulatory regime, but for imagining something better.

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Text transcript:

David Roberts

Okay. Hello, everyone. Greetings, salutations. This is Volts for April 3, 2026: “Rethinking climate regulation from the ground up.” I’m your host, David Roberts.

The Trump administration is dismantling federal climate policy at dizzying speed. The endangerment finding, the IRA, California’s vehicle standards — it’s all under assault, much of it already dead and gone. If you work in climate, you’re familiar with the sickening feeling of watching years of work get torched in real time.

The instinctive reaction can be to defend what remains and fight to get back what was lost — to try to restore the pre-Trump status quo.

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My guests today think that instinct, while understandable, should be interrogated, not because the rollbacks aren’t bad (they are) but because some of what’s being rolled back wasn’t working particularly well to begin with. The tools we built to fight industrial pollution in the 1970s were never really designed to replace an entire fossil fuel economy with something new. And the mismatch between those tools and the actual task in front of us has been accumulating for decades.

Hannah Safford and Loren Schulman are the co-leads of the Center for Regulatory Ingenuity, a new initiative at the Federation of American Scientists. Their argument, in short, is that the opposite of DOGE isn’t a return to the status quo, it’s something better — a government redesigned to actually deliver the clean energy transition.

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As Volts listeners know, I am a longtime lover of administrative capacity and a well-designed bureaucracy — listen to my episode with political scientist Doug Thompson, defending the deep state — so naturally this effort caught my eye. I have all kinds of questions!

We’re going to get into what’s wrong with existing regulatory design, what a renewed administrative state would look like, and whether any of this is politically viable on our seemingly cursed timeline.

With no further ado, Hannah Safford and Loren Schulman, welcome to Volts. Thank you so much for coming.

Loren Schulman

Thanks for having us.

Hannah Safford

Really glad to be here.

David Roberts

Let’s start with both of you, in turn. There’s a ton I want to cover, but let’s start very briefly at the beginning, just so listeners can get a sense of who they’re hearing from. Maybe each of you can tell us a little bit about your background and the thread of your work that led you to this. Let’s start with you, Hannah.

Hannah Safford

I am trained as a scientist, trained as an engineer. That was where I got my start, but then began working in federal policy at the White House from an early age. Did a stint under the Obama administration from 2014 to 2016, had a great time there, went back, did deeper technical expertise, and then came back and was doing federal policy work again under the Biden admin. In both of those terms of service, in both the Obama administration and the Biden administration, working on climate policy, it was two very different sets of tools that those administrations were working with.

Obama was trying to push forward climate policy through a lot of executive orders because it was running into all kinds of roadblocks on the Hill with appropriations. The Biden administration had more money but ran into implementation challenges and pushed hard on ambitious regulatory standards, only then to see those get reversed in the second Trump administration.

And now the work that I started doing at FAS and trying to think about what the next chapter of climate policy looks like, it is very clear to me that though there was a tremendous amount of ambition and expertise in both the Obama and Biden administrations and motivation to move on climate, the tools that we had to push that forward weren’t getting the job done in any way that was deeply effective and durable and matched to the pace of the challenge. That’s where I come at it from.

David Roberts

How about you, Loren?

Loren Schulman

My background is pretty different. I started my government career in the national security space during the Bush administration, going into the Obama administration, working at the Department of Defense and the National Security Council. This was, listeners may remember, prime counterinsurgency global war on terror era, where we frequently would make announcements about a shift in strategy — a shift in approach about being a more people-centric, people-enabling strategy in Afghanistan and Iraq from the military perspective, and also how the military would work with the State Department, U.S. Agency for International Development, and others.

It would be at best headline-deep, and all the decisions around personnel and funding and decision-making and how they would work together would be assumed — “oh, we’ll figure that out.” People will also recommend we did not figure a lot of that out. I saw the same narrative play over and over again in different spaces as the United States NSC apparatus started moving more towards using sanctions, an incredibly effective national security tool. There were so few people at Treasury or State who were capable of helping identify potential targets for this, but more importantly, possible risks and impacts.

Similarly, I remember years later as we started being able to say the words out loud, industrial policy or technology strategy, people making assumptions around supply chain risk and so on — “these are the policies we need to set” — and me thinking in the back of my head, Department of Commerce has maybe one person who can do that. We need an entire —

David Roberts

You and what army?

Hannah Safford

Yes, exactly.

Loren Schulman

I gradually shifted from being a national security policy person, which I still care deeply about, to somebody who cares about government capacity. Not just in terms of numbers, but in terms of roles, relationships, decision-making, feedback loops. Are we hearing from people about the impacts that we need and the ability to not be so rules-driven and compliance-focused, but more, are we actually able to meet the outcomes that we talked about? I served as a career official in NSC and DoD for about 10 years, left government for a while to work in the national security think tank, but then decided it was important to have this focus on capacity and move it over to the Partnership for Public Service, and spent more recent time in the Biden administration at OMB. My title was so boring: the Associate Director for Personnel and Performance Management.

David Roberts

Unlike most OMB jobs, which are just sexy.

Loren Schulman

Scintillating, yeah. But this one is the engine. My sexy title that I said for myself was, “we are the engine room of democracy.” We are the folks who are making sure you’ve got the people, the measurement, the evidence, all of that. If you’re doing a good job.

I left at the end of the Biden administration. I’ve been working with Hannah since last fall on both this effort and new efforts to think about what is the future of government, both what should it be from a vision perspective. But then also, no matter what vision we have, do we have those building blocks, those Lego pieces to actually get the job done?

David Roberts

You must be — given the character of your critiques of what you saw in the defense apparatus — delighted with what’s going on right now. Whatever remainder of competent implementation you saw when you were there, we’ve wiped that out now. I wonder, did you — this is to both of you, I guess — was it on purpose that you are launching this thing simultaneously with Trump wiping out the endangerment finding, which is the foundation of all federal climate regulation? Is it odd to you to be launching this right now, or do you think it’s perfectly apropos?

Hannah Safford

We started thinking about these questions even before the beginning of this second Trump administration. We started thinking about this: What does the path forward look like for climate policy? How do you marry questions of policy ambition and policy implementation in ways that take insights from climate experts and insights from state capacity experts really seriously? This was towards the tail end of the Biden administration as we were coming into election season and even at that point starting to do a bit of a retrospective of, “how come we weren’t able to move faster on the regs that were a day one priority?”

How come we weren’t able to push even more money out the door with the infrastructure bill and with the IRA than we had intended to? People, including us, were starting to think about these questions. I was thinking about these questions when I was in the White House and I was working on transportation regulations and we were trying to do fuel economy standards for electric vehicles, which don’t use fuel. You have an actual math problem. It’s this divide-by-zero problem when you’re thinking about miles per gallon, when you get infinite miles per gallon because there are no gallons.

Then the administration changed over and all of a sudden, these questions that seemed like they were there, but they could be back burner. The tools weren’t perfect, but we were figuring out how to make them work because at least there was a tremendous amount of political will at 1600 Penn.

All of a sudden it took on tremendously increased valence once there was going to be a reversal in climate priorities. That’s just built on itself. Built on itself. Built on itself. It did end up being serendipitous in some way, that the day that we formally launched the center after doing this year and a half of build-out, ended up being the same day as the endangerment finding rollback.

Loren Schulman

As this is happening, I’m getting all the explainers of, “here’s what this is, why this matters.” While I care deeply about this and I’m trying to bring the capacity lens, climate is not my original subject matter of expertise. We ended up changing our talking points of how we’re announcing this to a tired/wired bit around: Why are you tired? “Well, the entire legal foundation of why I have been doing this work for a long period of time is more or less gone now.” That’s a good reason to be tired.

But the why we’re excited, why we’re wired is, I guess, a nice way to say it. It was proving the point in a very dark and ugly and tremendously impactful way, but also proving the point that we need to think about this differently, apparently quite a bit more rapidly than we had been hoping, but we need to think differently.

David Roberts

It’s like you look at, anytime a terrorist blows up a building, you could always just squint and say, “hey, look, it’s an opportunity to build a new building, guys.” In that sense, he did you a favor, clearing the way for something new. Hannah, I’ve got a couple for you, and then I’m going to come back to you, Loren. Hannah, a central piece of all this is this notion — I thought one of the more striking lines in all the stuff I read was you saying that the regulatory system we’ve got was designed to produce cleaner technologies within the fossil economy, but is simply not set up to replace the fossil economy.

Can you unpack that a little bit? The way that current tools are not fit for purpose. Can you unpack what that means, what you mean by that? And maybe an elegant example.

Hannah Safford

Our nation’s foundational environmental laws and statutes — most of these, almost all of them, were passed back mostly in the 1970s, but certainly 20th century. There was this era of rampant industrial pollution. Factories dumping chemicals into rivers and belching smoke in the air. These were big environmental problems that we needed to solve. We largely did that. We passed a suite of landmark environmental laws: Clean Air Act, Clean Water Act, National Environmental Policy Act. That list goes on, that for the most part, did their job. Rivers got cleaner, air got cleaner, and then you fast forward a few decades in the 21st century and we haven’t fully — that kind of classic environmental pollution is still a problem for sure.

We’re seeing this administration weaken protections — it’s becoming more of a problem. Still, I think anybody in the environmental space would agree that the predominant environmental challenge is no longer industrial pollution, though that’s still an issue. The predominant environmental challenge is climate change, which is a really different problem. It’s a different job managing a massive economic transition to new technologies than motivating the stapling on of cleanup technologies to a few relatively stable sources, because you have very entrenched systems.

Our economy was built on fossil foundations that have been in place for more than 100 years. Figuring out how you transition off that foundation in ways that don’t have negative implications on factory communities, on the people and industries and intertwined systems that have been built up around them — it’s really hard and it requires — I said earlier, I’m an engineer and I think about using the whole toolbox and when we need a modern toolbox and a full toolbox in order to address fiscal, economic, distributive implications as well as the pure technological implications that industrial pollution cleanup problem engendered.

David Roberts

One of the points you make that makes this concrete is you make the point that when it comes to EV standards, Democratic states — Maryland, Massachusetts, Oregon — were rolling back their own EV rules before Congress killed the California rules they were acting under. I would like to hear you unpack what you take from that. What lesson do you draw from that?

Hannah Safford

You had Emily Grubert on your show a few weeks ago and a lot of the research that she’s done around the mid-transition and this messy period where you’re trying to shift from fossil systems to clean systems, and the clean systems are big enough that they’re not just at the margin, but they’re not big enough to fully displace the fossil systems. How you navigate that — that’s what you’re starting to see play out globally, but particularly also in the United States and some states that have been a little more forward-leaning.

In California, where now EVs are at least a quarter of vehicles on the road and are making up a growing percentage of new car shares, this is tricky. You’re trying to figure out how you build out the charging infrastructure at the same time that gas systems — you need them, but you don’t need them as much. Where’s the revenue coming from? Gas tax is taking up less of a share.

Once you start to have those messy questions and deal with the real-world implications of that mid-transition period, it’s real. It’s not just theoretical on paper and you’re saying, “okay, we’re going to get to 100% EV deployment out in the 2030s.” I think that’s a vision that I resonate with and I want to think about our 100% EV future, but I think there was less attention paid to the lived reality of the 40%, 50% EV future. That is a necessary intermediate step.

David Roberts

Here I think you’re making a point, and this is where I want to raise a question. One way to look at that, the fact that these Democratic states were already backing off on their EV standards before Congress killed the California standards — one way to interpret that is, as you say, the tools they had to use were not particularly well suited for the mid-transition. It was the design of the regulations that turned out to be the problem.

Another way of looking at that, you could spin that around and look at it from the other side and say there was a huge sweeping political shift just before that. All these states knew what was coming. They saw the shift, they saw the voting shifts, they saw the polling. You could explain that just through politics, not necessarily through regulatory design. Do you know what I mean? I’m not sure how you pick apart the consequences of poor regulatory design from politics. Do you know what I mean?

Hannah Safford

I do know what you mean. I think there are a couple of different ways to look at this. One, the tools that we have, and then to the extent that you’re using regulatory tools to try and drive climate progress, there is still going to need to be, no matter what policy package you have, regulatory tools and some regulatory levers are going to need to be some portion of that, whether it’s the load-bearing center or whether it’s the scaffolding. That might look different in different economic sectors. It is at least helpful then to have regulatory standards for vehicles that contemplate the existence of electric vehicles, rather than working with fuel economy standards.

That’s an example of where the regulatory tool fundamentally needs to be updated. Then there’s a piece of saying, “okay, but we can’t put all of our eggs in the regulatory basket,” which is what a lot of climate strategy has done to date — has been very heavily focused on regulatory standards, particularly at the federal level. What we started to see in the Biden administration, and Loren talked about this earlier, is this recognition that regulatory is a piece of it, fiscal and economic policy is a piece of it, industrial policy is a piece of it. All of these things have to work fairly seamlessly together.

You can’t advance a highly ambitious regulatory policy package without the complementary policies that can manage those other effects. To put that simply, you can’t say “we’re going to have 100% EV sales and that’s what we’re going to drive to” if you’re not confident or have a clear roadmap for building out the charging infrastructure at the same pace. Alongside those two things, it’s a chicken and egg problem, but you do need both the chicken and egg.

Finally, there is the political problem and how much political will you have to update tools or to put forward a comprehensive policy package. Sometimes where the politics fails is because constituents aren’t feeling the value of these policies in their day-to-day lives. If constituents aren’t going to see the benefits of climate policy, then they’re not going to rank climate high in their voting preferences. This is what Loren will get at a little bit later on — how do you design and implement policies that are much more responsive and visible in people’s day-to-day lives? That solves one piece of the political puzzle.

Then there’s another piece which is about incumbent interests. There’s certainly fossil and gas actors that have a vested interest in slow-walking the transition. That’s there. I would say it’s one of these four different pieces: regulatory design, regulatory coupling with non-regulatory strategies, the consumer responsiveness piece, and then the incumbent and political interests.

David Roberts

A little later, I’m going to dispute the relative weightings of those, let’s just say. But all right, we’ve got all those on the table. This maybe is a question for both of you because I have heard many times that the big problem with IRA is, passed all these big exciting policies — in your paper, you compare it to the garden hose, Olympic size.

Hannah Safford

I think I said trying to get an Olympic swimming pool through a garden hose.

David Roberts

Yes, exactly. The problem was we had all this money, we had all these policies, but literally getting the money out the door was the problem. There’s this gummed-up bureaucracy and I’ve heard that general point many times, but I would like a little specificity here. What went wrong? Who wasn’t acting fast enough? Can one or both of you flesh out what we mean when we say that? Who, what department wasn’t acting fast enough? What mechanisms weren’t working? Why was the garden hose so small?

Hannah Safford

I’ll start a little on that and then would love Loren to come in and do more. First, I should say, there were a lot of dollars to get out the door. A lot of dollars didn’t get out the door. A lot of dollars did get out the door. It’s always very easy to focus on what went wrong versus what went right. But hundreds of millions, billions of dollars went out the door in ways that did materially advance big-C climate policy as well as small-c, building more climate-resilient bridges and roads and other infrastructure, restoring coastal shorelines, these things that are in people’s communities and day-to-day lives. Just to give some credit where credit is due.

With that said, there were a lot of pieces that got stuck and you can zoom in on a bunch of different facets and see different implementation challenges. I will give you an example of one, which is for any very significant new grant funding opportunity, the notice of funding opportunity, the NOFO, gets developed by the agency that’s responsible for implementing the grant. For NOFOs that are over a certain dollar amount, they need to get reviewed by relevant policy councils at the White House.

There’s some reason for doing that. You’re trying to ensure top-level coherence of these different programs and having them work together and also advancing the same objectives. You don’t want one grant program to have these domestic purchasing requirements that another one doesn’t.

Also, there are only so many people who work at the White House. There are physical limitations. You can only put so many people there. It’s not a very big building and some people work remotely, but a lot of people don’t. I had the experience of having lots of NOFOs just pile up with me. Those are the pieces of paper that are the bottlenecks — until those pieces of paper get approved and go online, dollars cannot start flowing out the door. That’s just one very high-level bottleneck. But I know Loren has been thinking a lot about this, of where it translates into institutional design beyond the White House.

Loren Schulman

There’s a whole lot of examples that we could pull out. I’ll start with just some big points. One, this is the largest climate investment ever. An enormous amount of money, huge numbers of programs to start up all at one time. For almost all of those, you did not have the people in place when that legislation was passed to make sure that was possible. You had some of them, but not many. When the average hiring process for the federal government can take 90 days to six months, particularly for harder-to-find roles, you’re already on a delay. You are already on the delay of, I don’t necessarily have the right people there in the seats that I need for those roles. Many of them, as Hannah was saying, are extremely specialized.

There are great examples of, there are maybe two attorneys you can trust at the Department of the Treasury around specific kinds of rebate packages. They are miracle workers. They did incredible work. But even with that, their ability to suddenly not just quadruple, but whatever it would be — 20 times size — their review capacity, that’s not something you can suddenly overnight say, “please do that.”

With that, there’s a whole lot of elements of government that tend to be under-invested in, under-thought of until you suddenly need it. That is around HR, data management, procurement, IT, even though we spent billions and billions of dollars in IT. It’s all to fix old systems, not to modernize to new ones. These are all the things that you needed to be able to work incredibly well, to be able to deliver an IRA, to hire faster, to be able to get contracts out the door better, to be able to move grants faster through this system.

Those are all things that we hoped would stop breaking and kept breaking on a regular basis throughout the bill and IRA process. With that, you get it compounded with states — they are having the same sorts of capacity challenges times 20 as what the federal government was, because at the same time we were trying to get money out the door at the federal level, we were asking states and localities to be able to absorb it.

David Roberts

Here’s a question for you. You cite numerous examples of what you call the mission state, American tradition. There’s the New Deal, there’s the Apollo Project. These climate people are very familiar with all these because they’ve all been used in analogies at one point or another. New Deal, Apollo Project, there was the Operation Warp Speed in response to the pandemic.

The point you’re making, I think, is that there’s a tradition in America of us turning in a direction and focusing our resources on doing something big. The notable thing about all those examples is that all of them were forced by something like a crisis — the Depression, Cold War, the pandemic. Generally, it seems like America won’t do the right thing until forced.

The idea for decades in our world has been that climate change is going to serve that purpose, that climate change is going to be the equivalent of the Depression or the Cold War, that it would force us to get with it and focus and do something mission-driven. It doesn’t seem like that’s happening. It doesn’t seem like it’s working. Insofar as you all are envisioning some project of renewal, some big new project of renewal of the American state, what is supposed to be the forcing mechanism?

Hannah Safford

It’s a really good question. I think the climate community, and which I say as a proud member, is always wanting climate change to get better, because that’s the point. But also always saying, “if it just gets bad enough, then everybody is going to bump it up the priority list.”

David Roberts

That just keeps on not happening.

Hannah Safford

It keeps on not happening. To be honest, I don’t want — if at this point, it gets so bad that people start paying attention, it’s really bad. It’s not a world that I want to be in. You got to start —

David Roberts

In my experience, when things get really bad, people don’t respond with outbursts of rational policy development.

Hannah Safford

There’s a couple of things that I take away from this mission state conception. One, and we talked about this earlier, that’s all the tools in the toolbox and what that is. If you take Warp Speed, the most recent example — Covid truly upended every corner of our society and it was then truly mobilizing every corner of government at the federal and subnational levels to try and respond to that.

I experienced this firsthand. I did my PhD and was working on water research. Then Covid hit, and my lab capabilities at Davis were mobilized to do Covid wastewater detection in sewer systems, so it’s really like —

David Roberts

Don’t you feel that the full federal government response to the pandemic, which produced a vaccine quickly, was amazing. But don’t you feel it was making use of leftover competence, leftover administrative capacity and competence that the Trump administration had not yet gotten around to destroying, which now, could we do it again if it happened today?

Hannah Safford

There are two questions: what tools are you using? This is where, again, I go back to the design and application. You need to be using the right tools and have the capacity to implement them successfully. The first thing I take away from the Mission State conception is, if you’re going to run a whole-of-economy transition, it doesn’t make a priori sense.

If you’re going to design that from scratch, you probably wouldn’t run it through the EPA, to be honest. It just doesn’t have access to the trade policy levers, the economic levers. It’s not a very big agency and it’s got a lot of other stuff to do. That’s thing one that I take away from it — think about, we say this, we say whole of government a lot. That’s classic DC speak.

But what does it mean if we’re really trying to design a next chapter of climate policy that is truly whole of government? You don’t start with EPA and work out from there necessarily. You look at all of the tools and think about where you need to put it. I think this translates down then to states too, which often have much fewer regulatory levers than federal government does. I think they’ve operated in a way of saying, “well, then what are we supposed to do on this problem?”

But now that you have many of the clean technologies that we need as cost-competitive and commercial, there are a lot of creative things that can be done through financing and procurement policy and through market access and market transparency policy that are part of that creative, entrepreneurial, mission-state ethos. That’s one motivating thing that I take away from that principle or vision.

David Roberts

This brings up a question that — and this is really the central question that I kept bumping up against again and again reading your work — is: one way of viewing the federal response to climate change is to say we made a mistake of regulatory design by trying to do this through the EPA rather than a true whole-of-government, mission-driven effort. The response would be the reason we did it that way is not that we were confused about regulatory design. The reason we did it that way is downstream of politics.

The reason we did it that way is because we’re not gripped as a nation, we’re not in a mission mindset. We sloughed it off on EPA precisely because we’re not taking it seriously. I see those — a lot of these regulatory design issues as being downstream of politics. If we took it more seriously we would probably —

Hannah Safford

Update our regulatory tools?

David Roberts

Yes, exactly.

Hannah Safford

Totally. Again, I was part of the last administration and recognized that it didn’t make sense to apply fuel economy standards to EVs, and at the same time trying to do that because that was the tool that we had and trying to get dollars out the door and recognizing that it was silly that a lot of NOFOs were piling up on my desk. At the same time, there wasn’t a lot of — I couldn’t set aside a couple of years to work on a better institutional design structure because it was very pedal to the metal, let’s try and get the dollars out the door with what we have.

Two things. One is that this mismatch has grown over time. If you go back to the Obama administration, yes, there was still a mismatch between — it was still true that these foundational environmental laws had been passed in the 1970s. Now we’re trying to deal with climate change and grappling with the fact that the Clean Air Act doesn’t explicitly mention greenhouse gases. But we’re also still in a world where EV penetration is negligible and solar panels are expensive. There is still a need to drive down costs before you start thinking about very large-scale deployment and the knock-on economic effects that that’s going to have.

David Roberts

Also the lift required of your regulations —

Hannah Safford

Yeah.

David Roberts

— is lower if you start earlier. Obviously.

Hannah Safford

Definitely. Yes, of course. The political problem or the mismatch problem that you’re talking about — we could have decided in the early 2000s, “okay, climate change is a problem, and we should update our regulations.” But it wasn’t as much of a challenge as we’re facing right now. Now we’re in this moment where, on the one hand, federal climate policy is being gutted. That’s obvious. We’ve written about it. At the same time, the technologies that we need have never been more advanced or more affordable.

In this period, as we’re starting to think about what’s the next big federal play that we might make, maybe it is starting to think about some of these fundamental institutional design questions or regulatory design questions that the value proposition of interrogating those versus pushing for a really big funding investment is different than it was 10, 15 years ago.

Loren Schulman

Can I jump in on that, Hannah? I think that the creaky bureaucracy problem as the political problem, in some ways I get frustrated by the fact that I have to continue to make this argument — not to you guys, but to different audiences — that we haven’t had a candidate run on the promise and potential of government as a political thing that does good things in a real way in I don’t know how long. At best, you had Clinton come in with a reinventing government narrative, but that was all about cuts. That wasn’t about doing things differently.

David Roberts

That was an apology tour for government.

Loren Schulman

Exactly.

David Roberts

That wasn’t about how good government is. It was like, “we’re sorry government is so big and dumb and gross.”

Loren Schulman

You had Carter and in the 70s under Nixon, you had some institutional imagination that was going on there. But ever since then, it’s been a let’s just try as best we can to make sure that people outside of D.C. don’t know that we’re having to put all these band-aids around all of these institutions. At best, let’s maybe talk neutrally about government and maybe a political way. But the average talking point you see from anyone who’s running for office at any level is “government is not here to help. I’m here to go fix government for you and make sure to get those bureaucrats out of the way.” That has clearly been winning enough that people feel comfortable repeating it.

At the same time, people act shocked when you don’t have the personnel who are capable of executing things quickly and getting money out the door, who don’t have the relationships with states, who don’t understand that there’s one permitting officer in the entire enormous state. That mismatch there tells me, yes, it’s a political problem, but it’s also an incentives problem, short-termism problem, or a total lack of recognition of how government capacity is what gets you the political outcomes that you want.

The fact that we have made government the punching bag for so long is clearly biting us in this space, but is also going to continue to do so in any number of policy areas.

David Roberts

Yes, I have much more to say about that political question. But I’m trying to put it off to the end because I know once I get on it, I’ll never get off.

Loren, I have a question for you. Let’s just bracket for the moment the politics. What is the external forcing mechanism that is going to be equivalent to a depression or the Cold War or something that is going to force America into the crisis mode that it seems to need to be in to do big reforms? I don’t really know what that is, but let’s just say — let’s just say we have an opportunity to reinvent things, to start from scratch, to start with a new vision. Loren, you ran this futures exercise with 50-plus participants, asking a bunch of questions, probing what would you want from government if we were going to renew government? What is your vision for a good government?

What you found is there were eight distinct models with different priorities that people grouped under. For instance, there’s an abundance model which says growth and speed are the priority and we can accept a little fraud and some failures around the edges as the price of that speed. Then there’s the equity model, which is, no, slow down. Let’s have communities involved, community co-governance, which prioritizes that aspect of things.

Point being, it’s not simply we all want better regulation. We have at least partially incommensurate visions of what we want from government. How do you cognize that? How do you — even assuming we’re renewing government, on what lines? Based on whose vision? How do you think about that as you turn to this project of renewal?

Loren Schulman

This relates a lot to the rant that I was just on. I feel strongly that Americans have not been given the opportunity to weigh in on that question in a way that would get to a useful answer. I’ll talk a minute about what those possible models could be.

When we ask people, “Do you trust government?” that’s telling you about their immediate feelings about probably their member of Congress or maybe their city council. It’s not telling you what they want out of it and what they would want out of it. Not just in the boxes that you have today of Social Security or Medicare or IRS, but in terms of what are those pain points or opportunities that you experience most acutely and where is it that you feel as though there should be a societal role — a public role — in grappling with those? That is a big meta topper to what I wanted to say.

What was interesting to me as I was doing these exercises, was anything from people who wanted to focus very much on an abundance approach, who wanted to lean heavily into AI, folks who said that we wanted to lean much more into human dignity.

But as I went through all of the answers everyone had of, “okay, what are the ingredients you need in order to make this possible?” The ingredients were quite similar. You needed to be able to have access to the best talent that you could to deliver on public missions at the time you needed it. You needed to be able to have measures of not only is this working in this moment, but is it being responsive to the problem? Are you learning about this on a decision-making cycle that makes sense? You need to be able to, to Hannah’s point earlier, take on structural — meaty — endless problems that feel unsolvable, while also addressing the more immediate, my rent is too high, I can’t afford food, whatever the immediate thing is.

You also needed to be able to communicate on an iterative basis with the American people, not just on election day, so that you are building a participation process that wasn’t just, “I’m going to ask you on the worst possible website of our time for your feedback on an unintelligible regulation.” I want to build a relationship with you such that we’re able to mutually be conscious of what folks are working on.

What all of those have in common is that they have been things that we have been struggling with and identifying as problems in my community — government capacity — for ages: hiring, procurement, measurement, participation, customer experience. These are all things that we’ve said for a while. They are, as I said earlier, that engine room. To the degree we continue to denigrate that engine room and not prioritize it, it is going to fail you in climate, it’s going to fail you in housing, it’s going to fail you in transportation, it’s even going to fail you in national security. We’ve thrown a ton of money at that problem.

The reforms that you might need in that space, they are hard, but not laws-of-physics hard. They are priority hard. We’ve had political moments when that has been possible before, usually in the wake of a crisis. I think that the crisis moment, whether we wanted it or not, could have come a bit from DOGE and a bit from the Trump administration of putting so starkly on the front page what your taxpayer dollars are paying for or not, where your data is being used, whether or not we care that you are being cut off from a program or not. I don’t know that that’s the urgent crisis that gets Congress to suddenly say, “I’m going to talk about Title V reform,” but it has certainly opened the door to it in a way that was not open five years ago.

David Roberts

The vision here is something better. The vision here is something that works better. The point of this is regulatory ingenuity, that is, thinking anew, thinking in response to modern conditions, et cetera. Before we’re done, I would like to hear from both of you on at least a little bit, what does that look like? What does better look like?

There are two things going on here, two things being mixed up slightly. There’s the administrative capacity part of it, like how is government structured? How are agencies structured? That kind of thing. Who’s hired and how many people? Then there’s the regulatory design question.

Each of you is expert in one of those. I’ll start with you, Loren. I would like to hear, what are some administrative capacity type reforms that would show you evidence of a better government emerging? What types of administrative reforms? Is there a list somewhere? Are there things like better agencies, different agencies, more hiring, different hiring? Give us some substance here.

Loren Schulman

There’s a lot of paths you could go down. I think one of the biggest ones is, how do you take federal, state, and local government — because they all have this problem — away from a checklist, compliance, risk-aversion mindset to one where they’re trying to care about outcomes. There’s lots of angles.

David Roberts

This is — I’ll just note it since this is, of course, the heart of the abundance critique that is now all the rage in Democratic circles. Precisely this, that the Naderite lawsuit-based, risk-based, precautionary-principle-based excess caution has woven us into this web of rules and restrictions that is binding us and making it so that we can’t do what we want to do, and we need to sweep that away and focus on outcomes. This is a familiar critique that’s flying around these days.

Loren Schulman

Totally. One of the things that critique smooths over a little bit, or I sometimes disagree with it, is they — it tends to view people, communities, participation as a problem and a barrier. I think participation is a problem now because it is designed to do everything wrong. It is designed to happen too late. It is designed to make sure that you’re not bringing in people’s insights at the beginning to build in the trust that you needed in order to make large significant changes as well as incremental changes.

When it is not bringing in communities from a co-design perspective, it’s bringing them in as a “hey — we’re good — right” perspective, which gives everyone the opportunity for all kinds of catastrophic delays later on, and it avoids the fact that you’re going to be better off, I think, for many of the kinds of policy changes that Hannah could talk about if you are talking about benefits and risks, not just from an immediate community perspective, but from a broader beneficiary and impact community perspective. Not just in the town or the county locality that you are in, but you’re talking about it from a national angle.

That is a very different model of government than we’re in right now. It’s one that both is more trust-based but recognizes that good governance isn’t just about, “we told you what happened and we gave you the opportunity to input on a bad website,” but rather one where you have smaller, deliberative, relationship-based, trust-based co-design throughout.

David Roberts

This is something I hear a lot, and it’s interesting to hear from you. Your position is that community involvement, properly structured, accelerates rather than slows down big government projects? This is the best of both worlds. I’d love to believe this. I’d love to believe that we could get better on community engagement and get faster. I don’t know. Are there examples? How confident are we in this?

Loren Schulman

It will take some testing and we see some of this happening in California with some of the work that they’re doing. The Possibility Lab in California is doing some awesome work around this, both in small levels around, how do we build a park to bigger, higher-impact ones about, what is the future of California over the next hundred years? You see examples in cities and counties across the country that are testing out different ways to pull in community input that isn’t just, I’m asking you a question and you’re giving immediate answer, but more on a continuous, iterative basis. I think the challenge is going to be getting people to think of this as ultimately risk-mitigating upfront if you have more buy-in, rather than waiting to the end and presuming that everyone will be okay with it.

I agree with you that doing both at the same time seems like we’re just going to be spending more time on stuff, but how much time are we spending? How much cost are we doing based on any number of lawsuits that happen at the end? The overall, the absence of understanding of impact, there’s a trust mismatch element that’s going on here too.

The final piece I’ll note on this is I think we overall need to get better at — I’ve mentioned hiring a couple of times, but it’s not just hiring for the sake of bringing people in. It’s recognizing that federal, state, and localities have to work together in very different ways than they have in the past, where it’s not just, I, federal government, am telling you, state, to absorb this billion dollars, good luck. But having a much more fluid relationship in terms of talent, technical knowledge, capacity, ability to advise one another.

It’s not just a state suddenly meeting with 20 different representatives of the federal government, but much more of a regional approach of thinking through how do we work through this system together. Rather than, I’m overwhelmed, so now I’m going to hand this to you, state, to be overwhelmed. Who’s going to hand it to an implementer to be overwhelmed? That’s not how any smart organization works on problems. We can think of government capacity from a polycentric basis rather than just one — is about how do we redesign the EPA.

David Roberts

Yeah, the polycentric model is interesting. Hannah, let’s hear from you. On the regulatory design question, maybe just give us — it’s all very abstract. Maybe just give us some sense or some examples of what regulatory ingenuity would look like on the ground? What are some — ingenious. Is that a word?

Hannah Safford

Yeah, ingenious. When we started designing this, I kept saying “ongenuity” and I was very confident this is why you need stakeholder input. Because the stakeholders on my team then gently took me aside and said, “that’s not how you say it.” This conception of regulatory ingenuity that we’ve come up with — ingenuity by definition means creative and clever. That’s what we’re trying to get at — anything, any approach to climate policy that’s not blindly rerunning the same plays harder and faster because that’s what we know how to do, or that’s what we’re mandated to do, but instead saying, what is the problem that we’re trying to fix and how can we be responsive to those problems?

This word that you heard Loren say a couple of times — being responsive, responsiveness — it’s a normal word and it is absent from the climate think tank world, it’s astonishing to me. If we say that regulatory ingenuity is about how we update old tools, take laws and processes that were built for one purpose and adapt them for today’s challenge, and say, how can we be responsive to that challenge? That to me is at the heart of it.

Let me give you a more concrete example to take it away from being buzzwordy. If you’re somebody in one of many communities whose electric bill is going up because a data center moved into your utility’s territory — I live in Virginia, so this is happening in communities around me — regulatory ingenuity is when a state like Kentucky, which just did this, says, no, where the Public Utility Commission uses rate-making proceedings, which is a typical regulatory process, but to figure out how you more fairly distribute those costs so that consumers who aren’t reaping the benefits of data center buildout also aren’t footing the bill. This has been talked about a lot.

To be honest, that is a type of regulatory ingenuity because it’s a regulatory process that we have. It’s thinking about a new challenge — data centers and rapid hyperscaler buildout — and how do you be responsive to the impacts that that’s having on people’s lives in other communities. Connecticut is doing this too. They’ve built out a regulatory sandbox to test new grid technologies before they commit billions to grid upgrades in light of rising electricity demand and hyperscaling. Regulatory ingenuity to me also looks like — I keep going back to that fuel economy and EVs example because it’s such a concrete one.

It’s not blindly applying that to cars forever and ever, but going back and saying, okay, we’re in this messy middle of the transition from fossil fuel vehicles to clean vehicles, and what are the regulations? How do we build some flexibility and adaptiveness into them?

One more example — this actually happened — is the EPA also sets standards for vehicles. When we were working on the EPA vehicle emissions standards and this tension between how rapidly EVs are being deployed and how rapidly the charging infrastructure is being built out, we incorporated a provision into those regulations that said the EPA was going to — it created an off-ramp by which the EPA could go back for heavy-duty vehicles, where the charging infrastructure buildout is more expensive and more uncertain.

In a couple of years, if the charging infrastructure buildout was not keeping pace with the rate of heavy-duty zero-emission vehicle deployment, then EPA would be able to, without doing a whole big new rulemaking from scratch, just update some of the targets and some of the standards. Yes, that makes sense because the world is unpredictable and sometimes tech goes faster and sometimes tech goes slower.

David Roberts

You’ve laid out this vision of taking administrative capacity more seriously, building out a real competent government that can achieve the outcomes it lays out, and thinking anew about the problems of today rather than simply falling back on old tools, thinking newly and creatively about regulation. I love all of that.

That said, reading all your work was a very familiar experience to me in that my sense of the two primary driving forces that are causing all the problems that you are describing and trying to solve go unnamed. I will name them here. One is the Republican Party, since Ronald Reagan has been telling the United States that the government is stupid and incompetent and that government’s just going to mess things up and that it’s full of waste and fraud and abuse. They have been beating that message and they have become — the Republican Party has become a nihilist party. It is setting out to destroy the federal government. I don’t think that’s an exaggeration, it’s just a plain description of what they’re doing. They are now very consciously setting out to destroy precisely the administrative capacity that you all are saying we need and is good.

The second is related — the way the right has taken over the information environment. All the things you’re saying require a couple of things. They require social trust. If you want regulatory agencies to have the freedom of action to be creative and responsive, you need a public that gives them a little room and gives them a little room to move, that trusts them. Of course, the information environment that we have today is utterly corrosive to social trust. Second, you need citizens who know what’s happening, who know what the government is doing and what the results are so that they can ask for better things.

Right now we have an information environment which makes that difficult to impossible. If you survey the public, they don’t know what’s going on, they don’t know who’s doing what, and they don’t have any informational basis on which to make coherent requests of their government. In other words, everything you’re saying, particularly you, Loren, with your odes to the power and effectiveness and democratic necessity of a robust administrative state — yes, I’m cheering, I’m clapping, but that is anathema to the current Republican Party. In other words, all of this looks to me like a partisan fight.

The reason Democrats keep falling back on and using these old tools is that Republicans won’t let them pass anything else. They’ve tried a million times. The reason they’re using these old tools is that that’s all we’ve got. It’s become impossible. Republicans have rendered Congress basically moot. It doesn’t pass legislation anymore. It hasn’t passed serious pollution legislation in decades.

It’s not that Democrats went back to EPA standards because they thought, “ooh, this will be the best way to solve climate change.” It’s just there’s nothing else because Republicans have prevented us from developing anything else. I don’t know what I want you to say about this, but what I mean is the problem you’ve identified, we have thoughts about it.

Hannah Safford

We can talk about it, sure.

Loren Schulman

We can try.

David Roberts

Please share it. I know Democrats also suck on this in a lot of ways. I’m not here saying Democrats are great or this seems like a coherent argument and discussion to be having within the Democratic Party, but when it comes to the administrative state, the Republicans hate it and are trying to kill it. That’s the problem. Are you avoiding stating that clearly because you need this to be a nonpartisan project for image purposes? I’m just curious how you think about partisanship. Hannah, do you want —

Hannah Safford

We both have a lot of thoughts.

Loren Schulman

Yeah.

Hannah Safford

I can start and then Loren can take it, but you gave me a lot there, David, I have a lot of different thoughts. One, I would say the project of fully dismantling the administrative state is not going that well. There’s been a lot of — DOE, for instance, right now is having a big rehiring push. The Trump administration is not particularly popular. It’s not like people are applauding the wholesale rampant destruction of the administrative state and saying, “yes, this is what we were going for and this is what we signed up for.”

I think there is appetite on both sides of the political aisle for a substantively superior alternative to either wholesale destruction on the one hand or layers and layers of kludge on the other hand. Once you start to — before we started taping, you and I were talking about DC, and DC can be just such an ecosystem onto itself. Part of what we are trying to do through this center is build greater connectivity between the DC folks and the rest of the country.

Some of the examples that we talked about already on this podcast upend the political dynamics that are so entrenched in DC. We talked about, on the one hand, that blue states that had pushed forward on EV standards are now running into some challenges that they didn’t anticipate with that fossil-meets-clean, messy middle transition and walking some of that back.

At the same time, you’ve got red states like Kentucky that are doing innovative things with rate design as data centers are being built out in ways that will ultimately be beneficial for an energy transition. Another example that’s very capacity meets rate regulation and policy is when we were trying to administer the charging program from the infrastructure bill and all 50 states were excited about building out EV charging networks. Every single state from Wyoming to California developed an EV charging infrastructure plan. They were excited about using federal funds to go forward and build out that network.

It was very surprising to us who were the first movers and who were laggards. The very first state to open a federally funded fast charger was Ohio. One of our slowest moving states was Washington. It turned out that a lot of that boiled down to capacity at the — it wasn’t political will because they all took the money. It turned out it was capacity at the state level where Ohio just had their shit together. Washington had a lot of other state programs and state incentives for EVs.

We were talking about earlier, there’s one or two guys who do it, and they were just super overloaded. A lot of this transcends partisanship without being naive about which is the more climate-forward party and which isn’t. A lot of the things that we’re talking about in terms of responsiveness and delivering outcomes in energy, housing, and transportation, which also account for two-thirds of US emissions, do transcend partisanship in a very genuine way.

Loren Schulman

Yep.

David Roberts

I will say briefly in support of that, I talk to people sometimes off the record, talk to a guy who’s trying to do geothermal stuff and they’re finding that red states don’t want to do much of anything, but when they do want to do something, they just do it. They just do it. When blue states want to do something, they initiate a meeting to plan further meetings on it. It’s the worst of both worlds on both sides. A little competence in the name of doing the good things.

Loren Schulman

Let me say for the record, blue states, good participation isn’t doing more meetings or more meetings better. There are lots of better ways. Hannah made a lot of the point that I wanted to, which is one of the reasons that this isn’t enormously depressing to me right now is looking at states — not just because they’re an alternative to the corrosiveness of some of what we see in Washington right now, but because the work that they are doing, both to set models for others to copy, for them to take collaborative actions together, for them to think about different ways to share talent or contracts or other things, those are exactly the kind of things we needed to happen anyway.

We are better off having had to turn to states and cities to pull that off. It also hopefully gives us models that we can pull from on a national level to say, “Utah is doing an amazing job at regulatory experimentation. Let’s take this model elsewhere.” Or the Kentucky example that Hannah mentioned where, yes, at the national level, for politics, I don’t think you get any politician on television right now who’s in a national profile to say good things about the administrative state.

But at the state level, people want to see things when they’re owning it in that much more visceral, local way. They want to be able to get things done. They need to be able to have the people who are working for them, the systems that are working through them, and the relationships to get that done.

Where I worry, because it’s not just a left or right issue in DC, it’s a whole bunch of different narratives around whether or not the state is working and we can trust it. Again, that I am concerned about, from abundance to the right to, frankly, to the left, I worry about a desire to go back to status quo ante.

What the moment we’re seeing in Washington, to our conversation earlier, allows us to say is, a lot of the chaff has been cleared, for better or for worse. A lot of the talent space is open. A lot of the agencies that we need to rely on are already being remade. Let’s have a proactive vision for that. We, being whomever, is the next to care about this, to think about how we might do this differently.

If the seats and agencies are already empty, let’s rethink who it is that we need to be able to come in those doors and how we want to utilize them and how we want to talk about them and to the American people. That is not a simple thing to do for any party I know to suddenly go from, “let’s not really talk about the federal bureaucrat” to “this is a moment for American renewal to think about what is it we want out of the tax dollars we’re sending into DC every day.”

David Roberts

You understand that that is going directly into the face of six decades of propaganda in the other direction. This is the thing — they’ve repeated the fact that government is incompetent so often in so many venues that it has broken containment from political discourse and become one of these things that just everybody knows. It’s just kind of ambient. It’s just something you automatically — you’re fighting deep primal forces here.

This returns me to something I said earlier, which is something that’s always absent from these discussions, was if the Democratic Party wants to turn and talk differently about the administrative state, like you’re saying, using what information outlets? They bought the Washington Post and the LA Times and all the local newspapers and all the local TV stations and Twitter and Meta and who? Where? How are Democrats supposed to communicate the merits of the administrative state? They have no communication machine. I know that’s not your job, but that just seems upstream of everything else.

Loren Schulman

I think they’ll just listen to the Volts podcast and it’ll be fine.

David Roberts

There’s the solution.

Hannah Safford

Here’s the communication machine. I don’t think it is upstream of everything else. That’s where much of this can be a circular trap of messaging spiral and buzzword chasing. It’s “okay, it’s abundance.” Now we’ve got to go after abundance. Now it’s going to be affordability or it’s going to be efficient.

David Roberts

Wait, Hannah, I just want to make this clear. I’m not talking about the choice of buzzwords. I’m talking about the money and power required to own and dominate media outlets. That’s different from messaging.

Hannah Safford

Yeah, it’s different.

David Roberts

Power.

Hannah Safford

It is power. We talked about this earlier — the incumbents and incumbent actors and systems. This is a really big problem. It goes beyond — we’re trying to solve a lot of things for the Center for Regulatory Ingenuity. This is one where you have to say, the incumbency and big money is a big problem. We can’t ignore that. Also, given where we’re at, I don’t think that you win the hearts and minds of the American people on the administrative state by trying to heavily push a positive counterargument to try and stanch six decades of the opposite. I think it needs to be much more focused on doing.

If you’re going to have one side say government is bad, the administrative state is just a bunch of lazy bureaucrats taking home paychecks that they don’t deserve. Then you have the other side say, “no, they deserve it.” The obvious question is, “why? What are you doing? How is that showing up for me?” Which is why it comes back to the thing that has to be the North Star — responsiveness and outcomes. That’s what the policy agenda needs to be designed around, rather than spending a lot of time just trying to say, “yes, it’s good.”

Loren Schulman

For all that, I think better messaging and more positive messaging about the administrative state is something that I would value and I think needs to happen. It’s absolutely what Hannah just spoke of in terms of being able to show up with more immediate impacts of, “government is bad. It doesn’t do anything for you.” “Government just lowered your electricity payment,” or “government just cleared your snow,” or “DMVs around the country are doing amazing things to be able to speed up people’s experience with that.” Take away all of the tropes as we see happening both in red and blue states across the country.

As those get taken away, it becomes harder to pull on them over and over again. It will not happen overnight, but it will happen more when people’s experience with government feels more like something they would expect from others or at least, at the minimum, does not feel like a Veep episode.

David Roberts

I would question how much American attitudes are connected to the actual reality of their experience. I think that Republicans, because they dominate the information sphere, can maintain the idea that government’s bad, even if government is underneath that, doing good things, just because everyone’s trapped in their own little bubbles now. But I won’t dwell on this. We all are describing this downward spiral we’re in where government fails to deliver. Trust in government erodes. That makes it harder to build the political will to fix the government, which causes government to fail, more and more trust to erode, et cetera.

We are in this downward spiral now. I think it’s fair to say that makes my tummy hurt. Probably makes a lot of listeners’ tummies hurt. I don’t want to just leave people with a bunch of hurt tummies. Let’s talk about what people can do. This is, as you say, a big society-wide problem. These are big problems. But let’s give people a little agency. What can people do? What are the highest-leverage places where people can put their energy and attention in support of better government delivery of good climate outcomes? Give people something to put their energy toward if they want to.

Hannah Safford

There’s one conversation at the federal level and a lot of those vibes, understandably and for very real reason, are not so good. But then there’s a tremendous amount of agency that state and local actors, and that’s government as well as non-governmental actors too, like private sector, local philanthropy, can do a real amount. It’s easy to say, okay, you can do something in your backyard. But I said earlier, now that many clean technologies are commercial, it just opens the door to innovative policy at the state and truly local level that just didn’t exist before.

Local communities in particular are trying really creative things. Chargers are — you’ll often see this narrative, and I keep referencing EVs because I think it’s very concrete to people’s everyday lives and I’m a transportation person in some way by training. You’ll often see this narrative about the charging ecosystem is a patchwork and chargers are just bubbling up, here and there randomly. I think that’s exciting. It’s exciting to me that a strip mall in Oklahoma sees a business case to build out chargers — that’s cool and creative and locally tailored and in a way that’s deeply entrenched into community fabric that you can’t just have a whipsaw come in and take that all away.

You can rip federal chargers out of federal government facilities, but you can’t go into every community on private property and take them out. I’m sure Loren would too, as we’re continuing to build out the Center for Regulatory Ingenuity. Creative and clever ideas — some of them are in Washington, but most of the ideas in Washington are not that creative and clever, but they sure are across the country. I would love to hear what those examples are. What are the cool charging projects that are being built out? Where is there a solar canopy that’s co-located with a new housing development? This stuff is happening and if we bubble it up, we can scale it because it is now, in most cases, the math pencils.

Loren Schulman

My comment on this is a good complement to Hannah’s, where I think some of the best things to do is when something works well, works for the community, works for the cost, works for the goal that you’re trying to do, make it as much as possible replicable and copy-and-pasteable by others, whether you do it collaboratively with the city one town over or whether you share it with states, whether you share with NGA, whatever the mechanism is that is most appropriate based on what you’re talking about, make it possible for others to be able to pick that up.

Second is more from an average listener perspective. When you see government do something ingenious, I guess is the right word to hit. Say positive things about it. Note it. It is rare that we hear people say anything positive. When you see Boston making their home permitting system much more user-friendly about, “I just need a new roof. I don’t care about the 79 lines of the code that I need to care about this. I just need a new roof.” When you see things like that, talk about them positively and get them on the minds of other leaders elsewhere.

The last thing I would say is, from whatever professional angle you’re at, set a demand signal in whatever way makes sense for you of what government can and should be doing better. Not just, “here’s why it sucks” or “here’s why it was slow, here’s what was really annoying to me,” but instead a more positive vision. “I want to see X, I want to see Y.” Leaders rarely hear it. I think that does gradually and slowly start to make a difference in terms of how we change the messaging on government to go from, “here’s why it’s awful” to, “I would expect this from the biggest investment in climate ever. I would expect these sorts of things to change. And why didn’t they?”

David Roberts

Thanks, you two. I think this is such important work. I go back and forth and sometimes it feels a little early to be talking about rebuilding since we’re still extremely in the downward spiral. But I guess we need to be laying the groundwork. We need to be thinking. I will just say, Loren, in response to the last thing you said, I lived through the Biden administration and as you were saying, Hannah, they were shoveling money out the door toward all sorts of great things. They were doing all sorts of B and C level great things.

Loren Schulman

Yep.

David Roberts

I would get press releases about them every couple of days. Here’s this little cool thing. But as far as I could tell, nobody beyond me and a couple of my fellow cultists were tuned in enough to even find out about this stuff and I couldn’t get — I would tweet them out, throw them out, saying, “hey, look, there’s little good things happening. Government is doing good things.” I couldn’t get anyone to join in the chorus.

Even the green groups who are allegedly supposed to be pushing for this stuff and for whom it is being done — even they were mostly just bitching at Biden for approving some Alaska lease or something. Hearing you talk about it, Loren, the more I heard you talk, the more I thought it just really is no one doing that. No one is doing that. If you are on the left broadly and you think government should and could do good things, you can’t just crap on government doing bad things. Somebody’s gotta go sing the song of good government.

Loren Schulman

Yeah.

Hannah Safford

No one wants a wildfire. After a wildfire, the regrowth is astonishing. I think we’re wanting to see — I think that we’re at that point now too. There’s a bit of a fever pitch to get as much done with things that were becoming increasingly brittle. I think you’re right, we don’t run away from all of them. There’s still a defense, particularly legal defense, for many of the programs and policy decisions being litigated right now. At the same time, that clears the landscape for maybe some green shoots.

Loren Schulman

This is a whole other episode for you to go down at some point in time — not with me, but somebody else. The work that is done at NIH and elsewhere and when they managed to think through who are the trusted messengers in order to get people to do things, it’s really great because they start to think about the places where people are getting information that they would act on and care about. Is that their church? Is that Reddit? Is that their barbershop? It’s going to be different elsewhere, but it’s not a press release.

I’ve written many a government press release, but if we thought that that was not a white paper — if they thought that that was telling anybody anything, then that’s really nice. I hope we had a really good day about that. But you got to think about it in terms of the engagement differently.

David Roberts

All right. Thank you two so much. Thank you for walking us through this. Thank you for doing this work. I hope we move in this direction once the wildfire has burned itself out. I’ll just say that.

Thanks for coming on, guys.

Loren Schulman

Thank you.

Hannah Safford

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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

The US power grid runs at about 50% capacity on average — built for its worst day, underutilized every other day. As demand surges from data centers and electrification, utilities are racing to build more infrastructure. But Ian Magruder, who heads the new industry-backed Utilize Coalition, argues there's a cheaper, faster path: better use what we've already built — it will enable faster growth and bring down ratepayer bills, potentially by billions.

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Text transcript:

David Roberts

Hello and greetings, everyone. This is Volts for April 1, 2026: “Using more of the grid we’ve already built.” I’m your host, David Roberts.

The US power grid is built and operated around a simple principle: as long as they’re willing to pay for it, anybody who wants power gets as much as they want, when they want. Unlike highways or broadband lines, where traffic congestion occasionally slows you down, you get your electrons the second you plug in.

Because it must accommodate anyone at any time, the grid must be built big enough to reliably meet the heaviest demands that might conceivably be placed on it. It must be built for its worst day — an August afternoon with 100-plus degree temperatures, everyone running their AC and charging their EV at the same time.

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While the benefits of this kind of system are pretty obvious — it’s quite useful, and conducive to economic growth, to have effectively unlimited power at your fingertips whenever you want — it has a significant downside. If you build the grid big enough to smoothly meet the demands of its worst day, most of that grid, most of those power plants and transformers and substations and wires, will be grossly underutilized most of the time. Most days aren’t worst days.

Across the whole country, on average, we’re using about half the grid’s capacity. That’s low relative to the last 50 years. And now utilities are looking at a surge in new demand from data centers and saying, we need to build more: more power plants and transformers and substations and wires. All of this will be expensive, all of it will be slow to build, and all of it will eventually show up on power bills — which is a big part of why the average American’s electricity costs have risen about 25 percent in the last six years, even as the cost of actually generating power has fallen thanks to renewables. It’s the infrastructure.

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What if, instead of always building more — or at least, before building more — we tried to use what we’ve already built a little more efficiently? My guest today, Ian Magruder, heads the Utilize Coalition, a new industry-backed consortium (including Google, Tesla, and many others) making just that case. We’re going to talk about what boosting grid utilization actually means in practice and what it implies for electricity bills, the clean energy transition, and US politics.

With no further ado, Ian Magruder, welcome to Volts. Thank you so much for coming.

Ian Magruder

Thanks for having me, David. Excited to be here.

David Roberts

Ian, I’m so excited about this. As I was sitting thinking about how to introduce all this, I was thinking of saying something to the audience along the lines of, “I know this sounds super, super technical and nerdy, but it’s really crucially important.” Then I realize I say some version of that before every single one of my pods.

Ian Magruder

Almost every pod.

David Roberts

Flirting with self-parody. I’ll just say this is complicated, but I really think this is a super important, super timely debate to be having, a discussion to be having right now. This hits all the hot issues in the power world, in the energy world right now, so people should just focus up.

Ian Magruder

Yeah, I think we have a chance to make grid utilization sexy, or at least interesting in this moment. For those who are skeptical in the beginning here, I hope we have gotten them juiced and excited by the end of this.

David Roberts

Hang on. The word utilization really is just so unfortunate, but there it is. All right, what do we mean when we are talking about grid utilization? I think when I say that the grid utilization is at 50%, some people might imagine a big power line, “50% of the time it has power running through it and 50% of the time it doesn’t.” But that’s not quite right. Help us understand what we mean when we’re talking about utilization.

Ian Magruder

Sure. I think many of your listeners may be familiar, but we broadly think about the grid in three sections. You have generation — how we make our power; transmission — how we distribute it across long distances, high voltage; and then distribution — how we bring it to our homes, businesses, the last mile, so to speak.

The way we think about grid utilization is holistic. There are different ways of measuring this, but we think of it as the total throughput on the grid. This report that we have just released from Brattle that I think we’re hopefully going to get to outlines one way of measuring that which is pretty straightforward.

David Roberts

Which is just to lay it out plainly: the total throughput that the grid is capable of divided by the electrons actually running through it. How much power is actually running through it relative to how much power it is capable of putting through.

Ian Magruder

Exactly. They define system utilization as a percent as the total energy delivered or produced over available system capacity over the same time period. What’s important here, the number as a whole is important, the percentage. But it’s also important to think about this at a granular level because in any given geography you are going to have parts of the grid that are more utilized and less utilized. That’s where you have interesting opportunities for efficiencies.

David Roberts

This is not evenly smeared. Utilization varies dramatically across geographies. It is 50% on average across the country.

Ian Magruder

Exactly. The simple way to think about this that we talk about is just to make it more real for people. As an analogy, and this ties into the affordability piece, is to think of an airplane. If we build an expensive airplane or a fleet of airplanes and we’re flying them with half the passengers on any given day, those tickets are going to be expensive. If you can fill more of those seats, the prices will come down.

David Roberts

Let’s spell out why they are expensive. In addition to paying for your seat, when you buy a seat on an airplane, you are also paying some small percentage of the fixed costs required to keep that plane running. If you sell more tickets, more people are splitting up those fixed costs of keeping the plane running. The more passengers you cram in, the lower the per passenger price.

Ian Magruder

Exactly. Before someone — I’m sure we’ll have a distribution engineer listening to this or someone who may have an issue with the analogy — it is a slightly oversimplified analogy, of course.

David Roberts

Ian, I ran through so many analogies when I was thinking about this for my intro. I ended up abandoning and not using any analogy because they are all not quite right. Another one I think is vivid for people is, “What if you built highways on the principle that no one should ever have to slow down at all?” Then you are like, “What is the maximum number of people who are ever going to be on this highway? Rush hour, bad weather, busy time of year, whatever.” Let us build a highway wide enough to accommodate all those people so that they do not have to slow down.

Then I think people would intuitively see the vast majority of the time, there wouldn’t be nearly that many cars. All the cars that were on that road would be paying for all that extra asphalt to maintain all that extra asphalt. That is also another analogy. There are like 10. There’s a plumbing analogy we could use.

Ian Magruder

There are many different ones. Just to finish the plane one, though, you could fill a plane. You could fill every seat safely and fly it. The grid is different. You want a little bit of flexibility. Our goal is not 100% utilization here. The important thing to understand is that our grid in America is underutilized. There is extra capacity sitting there. In our view, there is no state in America that has perfectly utilized its grid or optimized it. There is opportunity everywhere.

We can have debates about how far you can push it, etc. We’re going to have technical working groups thinking through these things, etc. But there’s opportunity now and everywhere. Let’s work on that in the medium term.

David Roberts

50% is low, low by historical standards, low relative to even 20, 40, 50 years ago. At no point is it ever 100. The right level is going to depend on a lot of things. But I think it’s safe to say almost every grid has some spare capacity. I think we can also say categorically, and this is the whole point of your effort, that any effort to exploit and make use of already existing capacity is almost by definition going to be cheaper than building new capacity. I think you can say that categorically.

Ian Magruder

That’s right, exactly. That’s a really important point because we’ve historically built our grid to peak. In our view, that is not some grand conspiracy, it’s just how we had to do it. To your point in the intro, we have to ensure that when someone flips the lights on, they’re going to come on, even in the hottest summer day and the coldest winter morning or night. We didn’t have the technology that we do now to enable a more flexible grid, but we have that technology now. Our policies and the way we plan the grid haven’t fully caught up with the capabilities we have now to get more out of the grid we have.

David Roberts

Is there a simple explanation for why grid utilization has been falling on average for 40 or 50 years now? Is there a simple explanation for why the grid is currently so underutilized?

Ian Magruder

I hesitate to weigh in on the exact reasons. There are probably other guests you could bring on, grid anthropologists who may have stronger opinions on this. With our campaign, we’re a little less focused on the why of the past and more on the, “Okay, what do we do about this now and how do we meet the moment?”

David Roberts

Greater utilization has many benefits which we’re going to get into. But I’m curious to start with a comms question, a PR question, which is, you could pitch this as, “We have a plan for getting data centers online faster.” Or you could pitch this, “We have a plan to put some downward pressure on ratepayer bills.” Or you could say, “We have a plan to accelerate the clean energy transition and reduce greenhouse gases.” All of those would be, to some extent, true. What are you leading with? What do you think is the most powerful message? What is the headline message?

Ian Magruder

I love this question because it’s one that we’ve thought about a fair bit. We’re focused on affordability. We think that’s —

David Roberts

You and everybody else.

Ian Magruder

People are throwing the word affordability around a lot and slapping it around their favorite pet project from the last decade or more. But this is really something that is designed at its core to drive affordability. This Brattle study shows that a 10% increase in grid utilization could drive over $100 billion in savings for Americans over the course of the next decade. It’s very significant. This is not a playing on the margins thing.

David Roberts

I want to return to the question of scale later because it is something that vexes me.

Ian Magruder

To get to your point on messaging, there are lots of different reasons why people may care about utilization. One of the things that’s exciting with this campaign is that we can welcome them all to the table. In other words, if you’re someone who believes that America needs to win the AI war with China and we want to bring new domestic manufacturing to our shores, then utilization is your issue. If you’re someone who believes that we need to electrify everything and we need more power for that, utilization is also your issue. There are people across the political spectrum who, for different reasons, care about this and are talking about it. Republican governors, Democratic governors.

We have an opportunity here to do something that I’ve described as cross-partisan. I’m intentionally saying that rather than bipartisan, which is to reach people in different states. The reason I say cross-partisan is, in this country now, we live in such a polarized world. When I think of bipartisanship, I think of the classic, “You have a senior senator from one party and a senior senator from another, and you hash out some compromise solution.” That may be the case in certain places.

But if we run this bill in a state to prioritize grid utilization, and it is a Republican governor, Republican legislature, you may not need a single Democratic vote to get that done. Or you run in a Democratic state with a Democratic governor, you may not need a single Republican vote to get it done. It does not need to be bipartisan per se. It does need to be cross-partisan. It needs to be something that people from different persuasions, backgrounds, and interests can see themselves as a part of. I think affordability is the thing that connects that.

Our tagline, if you go to our website, it says, “America needs more power more affordably.” Most people, policymakers, and the public would acknowledge that we are going to need a lot more electricity in this country in the coming years for all sorts of reasons. I am a little less concerned with what all those reasons are and more about, “Given that we need more power, how can we do this in a way that is not going to break the bank?”

David Roberts

I’m going to return a little to the coalition politics later because they are really interesting and I want to discuss who is against this.

Let’s talk about the grid currently being underutilized and the basic affordability argument is the same as the airplane. You get more passengers in the airplane, you’re splitting the fixed costs over a larger group of people. Same exact thing on the grid. The more you utilize the grid, the more you’re sharing the fixed costs of maintaining the grid across a wider group of people. That’s the affordability argument.

What are the mechanisms whereby we can boost grid utilization? How do we use more of the grid more of the time? The way to frame this, I think, is, and we mentioned this in the intro, the size of the grid is pegged to the size of the peak of the highest peak. That is the size of the grid. When you are thinking about how to use more grid, you are mostly thinking about reducing peaks. I imagine most of the policies are going to circle around that, but I will just throw it open to you. What are the mechanisms for increasing utilization?

Ian Magruder

There’s a wide range of things that can increase grid utilization. Everything from distributed resources, demand response, grid-enhancing technologies, advanced conductoring, large load flexibility, etc. Let me just walk through a few examples from some of the organizations that are coming together to support this effort.

David Roberts

As a preface, there are policies I can imagine increasing utilization on distribution grids. Then there are policies I can imagine increasing utilization of long-distance transmission, like the aforementioned grid-enhancing technologies. From what I can tell from your literature, the coalition is mostly focused on the distribution side, on DERs, VPPs, that kind of thing. Although you do mention transmission and you do mention reconductoring and grid-enhancing technologies in the literature. I’m curious, on the distribution versus transmission thing, is the coalition attacking both sides of that?

Ian Magruder

Yeah, we’re looking at this holistically. Like I said in the beginning, distribution, transmission, generation, we want to look at this as the whole picture. You’re right, there are certain technologies that can help with certain parts of it. I wouldn’t want to over-index on the folks that are supporting the effort because we’re really taking a tech-neutral approach. This actually gets into the policy strategy. Instead of trying to mandate a specific technology, we think that a smarter way to do this is to really prioritize grid utilization as a metric and a guiding principle, and then let the best, lowest-cost technologies win the day.

David Roberts

Get to policy. First I want to help people understand when we say DERs, people are familiar with these: EVs, EV chargers, solar panels, home batteries, all we talk about all the time on Volts. Say a little bit about why using those distributed resources increases utilization. Spell it out a little bit for people so they understand the connection.

Ian Magruder

Let me walk through a handful of examples from the various companies that are involved in this effort to help illustrate some of the technologies that can help with this. Google, they’re building data centers. They just announced a gigawatt of flexibility that they have enabled on the grid. They’re committed to flexibility through different mechanisms. They’re putting batteries on site at their data centers. They are finding new ways to move compute around so that you can ramp up and down data centers within certain limits. It’s not possible everywhere.

Tyler Norris, who is now at Google, wrote this seminal study while he was at Duke that I think a lot of people read and got a lot of buzz, which essentially said that if we can limit the usage of these data centers just a few hours a year, you can bring them online so much faster without meaningful upgrades that are expensive and time-consuming.

David Roberts

The day we’re recording this, which is Wednesday, March 25, I released a podcast with Jesse Jenkins and Astrid Atkinson specifically about data center flexibility, running in some detail through all these options: having a little on-site power of your own, having some flexibility in your compute, and then having flexibility on the utility side, the flexible interconnection arrangement. That’s all on the, I guess what you’d say, the transmission end of things.

Ian Magruder

That’s one example. To further illustrate this point, Google recently announced a new data center in Minnesota. Part of what they’re doing with that is with Form Energy — the largest battery deployment in the world.

David Roberts

Long duration.

Ian Magruder

Long duration, exactly. The other thing they are doing that I think was not picked up quite as much is they are also putting $50 million towards distributed batteries in the community in Minnesota.

David Roberts

As I’ve been preaching for over a year now, they are buying distributed capacity.

Ian Magruder

Exactly.

David Roberts

Which means household-level capacity.

Ian Magruder

Right. What they are doing with that program through SparkFund in this distributed capacity procurement is literally putting batteries in the community. It is front-of-meter batteries, not necessarily in homes in this case, but in church parking lots. You could imagine batteries behind a Walmart or wherever in your community about the size of a shipping container. These are not a giant field of utility-scale batteries the way that California and Texas are doing it.

David Roberts

It’s that underexploited middle. It’s not residential, it’s not utility-scale. It’s whatever your 20-megawatt front-of-the-meter community scale, I guess. I don’t know if we have a technical term for it.

Ian Magruder

Exactly. That is a really interesting and exciting model because it also creates some resiliency in the community. Having batteries spread out as opposed to just located in one... It gets to this question you had around, “How do you enhance utilization?” There are instances where instead of upgrading an entire distribution circuit, you can plop a battery somewhere and manage it more dynamically. That may be more cost-effective. A few other examples, Renew Home has the ungodly number of Nest thermostats that they manage.

David Roberts

We had them on too. I think they run a big VPP mostly composed of thermostats.

Ian Magruder

Exactly. Those are the kinds of things you can preheat or pre-cool your home, depending on when the grid needs that power. In a lot of places they have gigawatts of capacity across the country now that is just waiting to be turned on if we have the right incentives in place. Span has, I think you’ve brought them on your pod as well, smart electrical panels that can dynamically manage the appliances in your home and ensure that you’re using less power when the grid electricity is more expensive and the grid needs it. You shouldn’t have to manage this yourself. It can happen in the background. Carrier is now putting batteries in heat pumps.

David Roberts

Yeah. They are putting them in air conditioners.

Ian Magruder

Air conditioners, exactly.

David Roberts

Air conditioners and heat pumps are going to be battery-enabled. I’m going to do a pod on that for sure. Air conditioners especially are ubiquitous. They’re everywhere. If Carrier put a battery in every AC it sold, that is overnight the biggest VPP on the planet, I think.

Ian Magruder

Absolutely. If you imagine the hottest summer day, which is when peak demand typically occurs in most parts of the country, or the coldest winter morning, in either case, it’s heating and cooling that tends to drive that peak. If you think about if every HVAC unit in America one day was battery-enabled, there are hundreds of gigawatts of capacity that we could enable.

David Roberts

That’s such a big deal.

Ian Magruder

A final example on this, Verrus is building data centers that are totally flexible, battery-enabled, low water usage, etc.

There are multiple solutions here that can help drive affordability and better grid utilization. Our approach is, instead of picking any one of those, although I’m clearly very excited about all of them and there are many more we could mention — advanced conductoring and dynamic line rating, when we think about grid-enhancing technologies — there are so many things we have now. Another important point is that the technology has come a lot further. We’ve been discussing in this country non-wires alternatives for a decade.

David Roberts

Demand response — all this stuff is very old.

Ian Magruder

If you talk to the companies, they get frustrated because they feel they have been in many cases stuck in pilot purgatory and their technology is proven now. We don’t need to keep piloting it. It’s ready for scale.

David Roberts

As Jigar Shah is fond of pointing out, they have been using this stuff in normal operations in Europe for years now. They are well beyond the pilots.

Ian Magruder

Exactly. Now we have an opportunity and a need to scale it up. The question is, from a policy standpoint, there are different ways of accomplishing this. One thing that has been tried in many states is the equivalent of an 80-plus page VPP mandate bill which may be well-intentioned but utilities tend to hate, regulators are skeptical of, and we think in general has not been the most successful policy approach.

Our policy approach is to say, “What if instead of mandating any one given technology, we set utilization as the North Star, let the best lowest-cost solutions win and not set up more individual pilot programs, but really incentivize this at scale and let us really bring these resources to bear?”

David Roberts

You discuss a wide variety of solutions and there are a wide variety. Transmission versus distribution, household versus front-of-the-meter. There are a million different ways of increasing utilization. But in the end, I’m going to ask this question. Isn’t it mostly just putting batteries everywhere?

Ian Magruder

I think that is a big part of it.

David Roberts

Aren’t all grid problems, in the end, just about putting batteries everywhere?

Ian Magruder

That is definitely a big part of it.

David Roberts

They are a piece of every solution you mentioned. You might have noticed every individual solution — the little battery hiding in it.

Ian Magruder

Some people are starting to talk about batteries as the next shale boom. This is something whose time has come. The price of batteries has fallen tremendously and a lot of people haven’t quite wrapped their heads around this. We’re going to need batteries everywhere: businesses, homes, front-of-meter, behind-the-meter, in your vehicles, all over the place. Batteries, thankfully now that they’re so much cheaper and still coming down in cost, have the potential to solve a lot of this.

David Roberts

One aspect of using your existing resources more — the Brattle report raises this — if your existing resources are primarily fossil fuel-based, then utilizing them more means running fossil fuel plants more often, increasing the capacity factor of fossil fuel plants, which means more emissions. There are some cases you can imagine where greater utilization would yield more greenhouse gases, at least to begin with. How do you think about the relationship between utilization and decarbonization?

Ian Magruder

From our perspective, the most juice to squeeze is really on the distribution and transmission side. If you’re looking at this system-wide, that’s where you’re going to find the most savings and the most ability to increase utilization. There may be instances where you end up running your existing generation fleet, whatever that may be, at a higher utilization level if you choose to manage it system-wide. There’s a question, given that we need more power, if a certain state is, if you’re looking at this through a decarbonization lens, going to use an existing plant, let’s say a gas plant for instance, at higher utilization or build a whole new one.

What’s better? Do you want more gas plants or do you want to use the ones that you have a little bit more?

David Roberts

Certainly better than building new fossil fuel plants.

Ian Magruder

For what it’s worth, our campaign is not — we’re not a climate group, we’re not a clean energy org. We’re focused on affordability, capacity, speed to power. If you want to look at it through that lens, I think most environmental groups would much rather not build that additional fossil plant.

David Roberts

Also, the fossil plant is expensive and slow. We forget it sometimes, but we are in an enviable position in that all these problems that all the people with money want to solve, the clean stuff solves faster and better and cheaper. You don’t even need to talk about the cleanness of the clean stuff. It just performs better.

The thing that Brattle says is, and we should say this about the Brattle study, it is highly abstract. Any real-world grid utilization scenario is going to have a lot of idiosyncratic characteristics. This is just a directional study. The Brattle study models, it says 10% improvement in system utilization produces a 3.4% rate reduction. That’s not a small rate reduction. I think it’s meaningful.

What I want to wrap my head around is how big of a deal a 10% improvement in system utilization is. Do we have any sense of how heavy a lift that is? It will obviously vary from grid to grid. Is this the kind of thing where there are a few switches they could flip and boost it 10% tomorrow, or is this the work of years? I want to wrap my head around how big of a task this is for utilities.

Ian Magruder

Just to situate ourselves, the Brattle report we’re talking about is called The Untapped Grid. Those who want to dig in and read the whole 40 pages can —

David Roberts

It’s linked in the show notes, as they say.

Ian Magruder

Fantastic. Dig into it and I think you’ll enjoy it. The 3.4% reduction in rates may seem like a small number, but to my earlier point, extrapolated across a decade that can amount to over 100 billion. They model out 110 to $170 billion of savings. It’s not a small amount when you think about it at the macro level. That 10% increase in utilization is also very significant. You’d have to get a modeler on to quantify all the things that have to happen.

In aggregate, we would have to meaningfully shift the way we manage the grid and the resources we’re using, but it’s achievable. I think a 10% increase is absolutely doable in this country. We could debate 20, 30, 40%. Maybe that’s less likely or realistic. But this is something that we can do as a nation and individual states can act on it, and the technology is here.

David Roberts

Let me push you into an area that you might not be totally comfortable talking about, but I think it’s important, which is the role of utilities. As I’ve been thinking about this, I’ve been thinking, “Who could be against this?” You spent billions of dollars building a bunch of infrastructure. Who’s going to argue against using it more efficiently? What would be the basis for any such argument? I was trying to think about it, who’s against this? Who politically, who are you fighting?

One thing that came to mind is, there are utilities. What people come back to over and over again, something I’ve discussed on this pod a trillion times, is the basic financial incentives of utilities. They have these profit margins that they make from spending on infrastructure. From an IOU’s perspective, an investor-owned utility, they make more money if they spend more money. If you are telling them instead of spending more money, utilize what you’ve got more effectively, you are pretty directly telling them to make less money.

I noticed that the Brattle report and all your literature, you dance around, you don’t talk about utilities and utility incentive structures very directly. I totally understand that since every member of your coalition has to work directly with utilities and you don’t want to stick your thumb in their eye, but is not the incentive structure of investor-owned utilities part of the problem here?

Ian Magruder

I’m glad you asked about this because I’m very comfortable talking about it and I think it’s a really important part of how we get this done. We’ve had some surprisingly productive conversations with utilities around this and I think there are a number of reasons for that. In many parts of the country where we are seeing rates increase, they know affordability is real and they want to do something about it. Their perspective is there are a lot of bad ideas being thrown around. Whether that’s an immediate freeze on all rates or —

David Roberts

Did you see just today Sanders and AOC came out with a bill for a national moratorium on new data center construction?

Ian Magruder

There you go. We should get into that as well, because of new demand on the system. This is worth a quick aside.

David Roberts

Let’s do this here because this is counterintuitive.

Ian Magruder

Anyone who’s taken a high school or college econ class thinks that anytime demand goes up, prices in a supply-constrained environment will inevitably go up. That is the case with most markets. Electricity is different because we have paid for so much of the grid already. You, me, David, all of our listeners. Anyone who’s paid a utility bill has helped pay for the grid. Now that we’ve paid all this and we have all this infrastructure, if we can sell more electrons over the grid we have, or to your point about the airplane analogy, fill more seats for the airplane we’ve already paid for, then prices come down.

Whether it’s new, large load through data centers or manufacturing or electrification or whatever it may be, load does not — and this is a key part of the Brattle study as well — new load coming online can actually decrease electricity prices if we increase utilization. That’s the big decision we have as a country right now in this moment: we know there’s new load coming online. How are we going to handle it?

David Roberts

Just to underscore this, it is not a mechanical reaction that if you add a data center, people are going to be paying more. It is possible that you could add a giant chunk of new demand. If that new demand serves to increase average utilization of the grid, you will lower average per unit costs on that grid. In other words, there are circumstances where adding a data center to your grid could lower your costs. That could happen. That is not inevitable either. Neither effect is inevitable or mechanical, but we can make data centers work for us to increase utilization and thereby lower costs. That is a very important point.

Ian Magruder

Coming back to your question around utilities and how, we are in our early stages of having a lot of these conversations, but our grid is aging. We do need to make upgrades to the grid. We are not a group that is saying, “Don’t build any new generation or stop upgrading the grid.” Those things are going to have to happen.

David Roberts

Can we have an aside about that, too? This is the aside portion of the podcast. I want to address that directly, too. There is a sentiment in some circles in D.C. among, I guess you would say, the abundance-coded bros. They want abundance. They want more, more, more. They say we need to grow, grow, grow. That’s their fixation.

When environmental groups, green groups respond to them, “Hey, instead, let’s increase utilization,” it sounds to them, or they perceive it as a backdoor degrowth strategy, as a way of avoiding building more, as a way of avoiding expanding the grid, as a way of avoiding building, because they think green groups are allergic to building.

Once again, I’ve made this point several times now, but just once again, make the point that the utilization push is not that. You and your colleagues at Google and Tesla are not secret degrowthers. You want a better, bigger, higher-functioning, higher-throughput grid.

Ian Magruder

That’s right, exactly.

David Roberts

I just want to clear that up.

Ian Magruder

Deploying more Powerwalls and Megapacks from Tesla and all the other technology we discussed earlier is not a degrowth strategy. We’re going to need more infrastructure to help us take advantage of the infrastructure we have and use it better and at lower cost.

David Roberts

Even if we push utilization up, and again, we’re not sure how high it can go, but even if we push it up, with data centers plus electrifying all of the transportation sector, plus electrifying all of the heating and cooling sector, we’re still going to need more, more, more. We’re still going to need more generation, more lines. That’s still going to happen. But it just makes economic sense to solidify and bolster what you have already. You don’t want to build a giant edifice on a rickety foundation.

Ian Magruder

Exactly. From the utility standpoint, they know that we need to keep upgrading the grid in certain places, and if we don’t get better at utilization and rates keep going up, they are going to have a hard time doing what they want to do.

David Roberts

The alternative here is just build, build, build, which means higher, higher, higher bills. They know, we know, politicians know, everybody knows right now that’s just not politically tenable. Utilities are going to get burned at the stake if they respond to increasing demand purely through building more.

Ian Magruder

Exactly. We’re coming in and saying, “Let’s do this in a tech-neutral way. Let’s not tell you or mandate specific solutions. Let’s set some metrics that we can all measure this by.” This is what this new legislation in Virginia, which I hope we have a second to talk about, does — incentivize grid utilization by measuring it for the first time and formally putting it in the planning process.

David Roberts

I want to talk about that now. But first I want to push a little bit more on utilities.

Perhaps it is true that utilities recognize that they can’t politically just build, build, build. It’s just not tenable. Perhaps they have some incentive not to just build, build, build. Nonetheless, the basic incentive structure remains. Would you acknowledge that that basic incentive structure pushes in the opposite direction from what you are trying to do?

Ian Magruder

Yes. That’s a really important final point on the utilities question: how can we make this make sense for them from an incentive standpoint as well? There are different ways of achieving that. Some people want to blow up the entire utility regulatory compact. That is not our position. We think that even within the system we have today, which in our view has served us quite well for a long time, there are subtle changes we can make that would better incentivize utilities to move in this direction. We’re having those conversations as a coalition.

David Roberts

One way of doing that is just saying, “Hey, utilization is x. Make it x plus 10 within 10 years.” If you want to give the utility an incentive, passing a law that says it has to do this would be a great incentive.

Ian Magruder

That’s right. There’s also shared savings models, one thing we’re exploring or discussing. You could imagine if a specific policy provides significant savings for end consumers.

David Roberts

Brattle pitches this — that utilities could make more money doing that.

Ian Magruder

Perhaps, depending on how you structure it. Those are things we have to take seriously because this is how a lot of the companies have been thinking about this. They are tired of going to war with utilities, fighting over these things, slow deployments.

David Roberts

Everybody’s exhausted by that. I have to assume the utilities also. Everybody sees what we need to do now, and we’re all saddled with these weird legacy regulatory structures.

Ian Magruder

Exactly. Let’s come up with some better incentives that make sense, that are true win-wins for consumers, for small and large load, and for utilities. We have an opportunity to do that.

David Roberts

Let’s talk about Virginia, because I don’t know if you planned it this way, but it’s quite handy to launch your coalition on the back of a big victory. The Virginia bill is a big and explicit victory — utilization is not a footnote in some larger bill. There is a bill about utilization that passed when some other energy bills didn’t in Virginia. Tell us about how you went about assembling a coalition for this in Virginia. Who is in that coalition?

Ian Magruder

This story starts with the governor because the newly elected governor of Virginia, Abigail Spanberger, decided to put this on her energy affordability agenda.

David Roberts

Affordability is huge there. Virginia data centers. If any state in the union where this is a severe top-line problem, it is Virginia.

Ian Magruder

Exactly. A number of groups, ourselves included, have been talking about grid utilization, trying to plant this idea. There’s a brilliant woman named Molly Knoll who helped write the first draft of this legislation before she was working with us and now she’s helping our effort, which I’m deeply grateful for. The governor decided to propose this bill and we were able to do something that I think is challenging and unique, which is we actually sat down with the utilities and the environmental groups and various stakeholders and got a little bit of their input and there was some back and forth. It’s a one-page bill and anyone can read it. You can look up SB621 in Virginia, which passed through both the House and the Senate and received bipartisan support.

What it does is two things in essence. One, it for the first time requires utilities to provide grid utilization metrics down to the substation and feeder level. Two, it allows these metrics to be used for the first time in the planning process. It rolls it into the IRP and the formal planning process and allows the commission and the utilities to find the best, lowest-cost solutions. It mentions a whole bunch of the solutions we’ve talked about here today as potential contributors towards improving grid utilization, but doesn’t require or mandate any of them. We see this as a really important step in the right direction towards incentivizing utilization. I think the Commission’s excited about it.

David Roberts

Question about this bill, when we talked months back about this all coming together, me and you and Pierre Lafarge discussed possible policy tools to do this. One of the things we discussed was the equivalent of, I know Volts listeners will be familiar with renewable portfolio standards, you tell the utilities in a state, “You have to increase the percentage of clean generation on your grid by X amount by X year.” Very familiar policy. Most states have them.

What we discussed was the equivalent of an RPS, a utilization standard, like grid utilization in your utility area is X. Raise that by X percent by a certain year, the equivalent of an RPS. This is not that. The Virginia bill does not mandate that the utilities increase utilization. I think it works on the assumption that if you make this transparent, if you publish the metrics and then you’ve got a PUC that’s keen to do this, it’s going to happen anyway. But we should make a note, it does not mandate any particular level of utilization.

Ian Magruder

That’s right. For what it’s worth, I’m not sure that an RPS for grid utilization is the right way to think about this. Our perspective is that measuring this is really the key starting point and then finding the right ways to incentivize it so that it is a win for all parties involved. This does admittedly put some of the onus on the commissions to get this right.

David Roberts

Yes.

Ian Magruder

You’ve had other guests on your show talk about utility commissions that regulate utilities —

David Roberts

They vary in quality.

Ian Magruder

And why they’re important. People have described them as the Supreme Court of Energy. We’re putting some of the onus on them to ensure that this works well. There’s going to be important regulatory work from a wide range of stakeholders, consumer advocates, and different interest groups and the utilities themselves to work with commissions to ensure that the right metrics are developed.

David Roberts

But it doesn’t presume at the outset to try to peg some correct level of utilization. It just says more. We’re back to the question of, is there any consensus on what the upper bound of a safe level of utilization is? Do we know?

Ian Magruder

This is one of the things that is exciting about this emerging field: we have yet to reach consensus on that question.

David Roberts

Historically, what’s the highest it’s ever been? Do you know, off the top of your head? I’m springing that question on you. But do you know how high it has gotten in the past?

Ian Magruder

The FRED has some good numbers on this that I can circulate. Maybe you can put in your show notes. It has fluctuated over time and the consensus is we have a lot of extra capacity to unlock here.

David Roberts

I think on the FRED graph you sent, it has gotten as high as 80%. I’m going from memory here, but —

Ian Magruder

Yeah, and it depends on how you measure.

David Roberts

Ballpark, you could at least get there.

Ian Magruder

The FRED measures it differently than, for instance, the Brattle Report does. The point here is we need to look into this and I don’t think it makes sense in the current moment, before we are even measuring these things in any state, to set a target. This is where we are at now and I think it is a really important, meaningful step to measure this and incentivize it at the state level.

David Roberts

Politically, you told a pretty happy story there, but I’m going to rewind and poke at it a little bit. The Virginia bill passed unanimously in the House, very bipartisan. Yay. Awesome. Then it passed on a party-line vote in the Senate, which, what happened? I want to poke a little more at the polarization or the lack of polarization. Some Republicans in the Virginia Senate were against this.

Ian Magruder

It was a priority bill for the new governor. I think they were probably reflecting that. Opposing anything that was —

David Roberts

There’s nothing more than just —

Ian Magruder

There wasn’t substantive debate on this. There weren’t long committee hearings with a wide range of interests discussing this at length. That didn’t happen. The bill thankfully sailed through pretty quickly.

David Roberts

It could get subsumed in polarization just because everything does. But the issue itself, as far as we can tell so far, has a lot of bipartisan potential.

Ian Magruder

We’ve had really good conversations on this topic with Republicans in various states. I’m cautiously optimistic. We’re early days, but I really do think this is an approach that can work in red, blue, and purple states.

David Roberts

That’s a question. Virginia is, as mentioned, absolutely the place you would start for this because they have millions of data centers coming. It’s a big political fight. It was the center of the gubernatorial race. The bills are going up in really dramatic fashion. The whole thing is as boiling there as it gets. That adds a lot of political pressure and impetus and tailwinds. You don’t necessarily have all of that in other states. You don’t necessarily have those tailwinds in other states. I’m curious, what other states are you targeting and why?

What are you looking for in a state? Are you going down the line, who’s the next state getting screwed by data centers, or how are you thinking about what states are ripe here?

Ian Magruder

We have created a spreadsheet which is pretty easy to replicate since you can find this data publicly. We’ve looked at where states where load growth is happening. Demand for electricity is going up and rates are increasing, the price of electricity is going up. Those are places where we think that makes sense and that is happening across a wide range. That’s a lot — red, blue and purple states. Those are some of the states that we will prioritize our thinking with this campaign.

This year, we’re focused on helping get grid utilization out there in the broader public consciousness. Raising it as a bigger topic — like we’re doing today — and getting people to think about it and understand it and see its significance, and then a broader legislative push next year in 2027. We’re early days, we’ll see, but I think there’s a wide range of states that will be interested in this and where there’s enough political will to do something new and different.

David Roberts

I want to believe. I know you don’t want to get ahead of yourself, but is there a red state where there are active discussions happening where we might see this break out soon? Something happen soon in a red state?

Ian Magruder

We haven’t decided all the states that we’ll be focused on. There are Republican leaders who are talking about this across the country, including the governor of Indiana, who has talked about the importance of bringing down utility bills, and the current DOE has been talking about this. Secretary Wright has even said, “We got to get more out of the grid.” We have Catherine Jereza, who oversees the Office of Electricity at DOE, talks about her stabilize, optimize, and grow agenda. That second bullet point, optimize, is really about what we’re talking about here.

David Roberts

It seems to serve everyone’s interests, but I just don’t trust anything these days. A lot of what I’m poking at and trying to get at is, is there — maybe it’s too early in all this to even know — but is there organized opposition to this? Is there a faction or a constituency that has some principled or empirical case to make against this? Is there anyone against it?

Ian Magruder

The biggest barrier to this is the status quo. It’s easy to just throw out there, but let’s break down why that’s the case. We have historically built our grid in America to peak and we’ve had to do it that way. Building our grid less towards peak and more towards system-wide utilization is a shift in how we think about how we build the grid in America. That’s a meaningful shift. Anytime you have a large complex system — like the American electricity grid — change by nature is slow.

Historically that has served us well. Move fast and break things might arguably have worked in Silicon Valley for certain companies at certain times, does not work well for the US grid. We’re trying to be very thoughtful and intentional about this. Anytime you propose a big new idea, it is going to take some time. The fantastic tailwind that we have is that people across the political spectrum want to act on affordability and are looking for new solutions. That opens up the door along with, as we discussed, the technology is changing and being ready for primetime.

We feel we have finally reached a moment in this country which we were not in five, ten years ago, where you have the political, economic and market forces all coming together in a moment where this could really happen.

David Roberts

Think about the coalitional politics. As we said before, this is a win — win — win — win — win — win — win — win — win situation. There are wins to hand out to almost any constituency you want to talk to. What just occurred to me is, I wonder if you’ve gotten green groups on board and I wonder specifically if you’ve gotten environmental justice groups on board because one of the side effects of greater utilization would be, I think, greater resilience. You briefly mentioned this before, but that strikes me as a very important thing in some communities.

Ian Magruder

Absolutely. There’s a wide range of constituents that we need to engage. We are in the early days, and we have certainly not spoken to everyone. We’re going to have to sit down with a lot of different groups. One of the things that will make this easier is that we’re not a trade association. I’m not out representing any of the companies I mentioned on a whole wide range of issues. We’re a campaign coming together to work on one thing — and one thing only. We’re willing to work with a wide range of stakeholders who may disagree vehemently on other things, but who can agree on this one thing.

David Roberts

Question about the state focus. Obviously makes sense to me to start with states here because states, utilities are regulated at the state level, most of the energy action is at the state level. But it seems like there are — I’ll just ask you, are there federal tools here? Is there something FERC, for instance, could do to enhance grid utilization?

Ian Magruder

Yes. We’re primarily a state-focused campaign, but FERC oversees transmission in America and that is a big part of this as well. Members of our coalition have sat down with FERC commissioners and begun discussing this. I think there is interest. There is an argument to be made that FERC theoretically could do this on their own without congressional direction.

David Roberts

Oh really? Do what specifically?

Ian Magruder

Prioritize grid utilization. In other words, require metrics and begin incentivizing an increase in utilization is an action that could be taken. We are going to continue having those conversations as well.

David Roberts

You and I, you come out of Rewiring America, the residential side, the DER side, the VPP side. This is of course my allegiance as well. I’m a fanboy of all that stuff. But it really does seem like the transmission side — there are just such easy solutions and they make such a big difference.

The study you sent about transmission utilization in the West is just wild. We have all these very expensive long-distance, high-voltage lines that are being utilized at, I forget what the exact number is, 18 to 30% on average or something in the West. You could double that pretty easily with existing grid-enhancing technologies, the line ratings, all the things you mentioned. You could double the throughput of the western grid with relatively easy interventions. The potential for this on the transmission side is huge.

Ian Magruder

Absolutely. I’m glad you raised that because the transmission side is equally as important as the distribution side and we have to be thinking about these things holistically. The Stanford study, my understanding, which folks can read, was dropped in December, right before the holidays. I think very few people read this really interesting study on exactly all the things we’re talking about: utilization of the transmission system in the West. I think they’re following up and doing another study in the East, is my understanding.

David Roberts

That’ll be interesting. I want to assume that it’s lower in the West than the East, but I don’t —

Ian Magruder

We’ll find out.

David Roberts

We often get counterintuitive results from grid studies.

Ian Magruder

You’re touching on something really important, which is more research needs to be done in this domain and we’re eager to work with a wide range of partners who continue this research. We think the Brattle study is a great foundational piece. We think that there is more research to be done across the board on grid utilization and how we can improve it.

David Roberts

In terms of what people can do, this seems pretty clear. As complicated as some of the nuts and bolts are of increasing utilization, the concept is pretty easy to grasp and the legislation is one page long. If you’re asking what people can do, just talk to your lawmakers about passing a similar one-page bill. Are there avenues for people to get engaged here?

Ian Magruder

That’s a great one. You have a wide range of listeners, David. Researchers can play a role in this. Policymakers can play a role for this. The technologies and companies that are already working on this can play a role and help us advocate for it. Any individual citizen can talk to their lawmakers and say, “Electricity prices are too high. I paid for a lot of this grid over many years and I want to make sure that we are getting the most out of it for myself and for our country.”

David Roberts

Again, you mentioned this earlier, but it’s worth underscoring. There are a lot of not great ideas about affordability floating around the political world right now. Everybody is getting involved, lots of people are getting involved with, shall we say, a loose grasp of the substance of electricity issues. It’s good, if nothing else, given that the affordability conversation is already underway, it’s happening, that ball is rolling downhill. It’s good to get a good affordability idea in the mix.

Ian Magruder

That’s right. We’re seeding the idea. We think that this is something that is not small ball, has impact at scale, and hopefully can enable a wide variety of solutions to come together all simultaneously.

David Roberts

This is laboratories of democracy. Here we go. This is how it’s supposed to work. It’d be great to see all the states or utilities and PUCs trying different things, getting a little more experimental, getting a little more, just do stuff.

Ian Magruder

Exactly. The path that Massachusetts could take to grid utilization may look different than the path that Utah or Nebraska would take. We think that’s okay. Each state should figure out the right path to increasing its own utilization.

David Roberts

How about a federal award, a grant to the state that hits the highest utilization, the highest grid utilization target, a national contest? Let’s really blow this thing out, Ian.

Ian Magruder

You can pitch that to the 2028 presidential candidates.

David Roberts

I want to finish on a point that I made in my solo pod last year that you have taken up and that is part of all of this — the no regrets aspect of all this. If listeners missed that pod, they should go back and listen to it.

We’re in a situation now where it seems we need a bunch more electricity grid. Got long queues, millions of data centers, whatever. But the fact is, as we’ve said many times, no one really knows how much demand there is for that. No one really knows. The amount of uncertainty about the actual level of demand growth in coming decades is wildly huge. It’s a crazy situation. An entire UK’s worth of demand just beneath the top projection and the lowest projection.

All of which is to say there is a danger here of us seeing this large but uncertain demand coming down the pike, of us freaking out, building, building, building, and then the demand not — the bubble popping, demand not showing up. We have been through this in this country before. With that, I will hand the point to you to make the point.

Ian Magruder

It’s one of the big things that, coming back to these utility commissions and the Supreme Court of Energy, so to speak. If you walk around the halls of NARUC, the National Association of Regulatory Utility Commissioners, where the regulators and the utilities and various interest groups come together, there are a lot of people talking about this and thinking about it. How much of this is real, how fast do we have to move on these things?

There are big questions. We’re going to need more power, we know that. But how much, how fast, etc. These are big questions. You’ve said it really well, which is we see utilization as the no regrets approach — regardless of whether or not you see some sort of bubble or cyclical changes in demand here, getting more out of the grid we have will serve us well for the long term, regardless.

David Roberts

Yes, it would be beneficial in any scenario. That is the definition of a no regrets policy. No matter what happens, it will be better for us if we are utilizing the grid at a higher rate.

Ian Magruder

Exactly.

David Roberts

Also, groping around grid analogies. This is what grid people spend half their lives doing, groping for good analogies. I think about this as the analogy I try to use with people is the DERs and the VPPs are filling in gaps at the distribution level. I think of it as caulk, sealing up the cracks, making the joints firmer, building just a firmer foundation upon which we will go on to build a lot more — more transmission lines, more power plants, etc. No matter what you want, you want that foundation to be as strong as possible, and that higher utilization is a proxy for the strength of the distribution grid.

Ian Magruder

Exactly. If it turns out, five, ten, however many years from now, the breakneck speed at which we are adding new load shifts in this country, and we accidentally just put a bunch of batteries in the grid and made everything work more efficiently, I do not think we are going to regret that outcome.

David Roberts

No one regrets a battery. I like T-shirts. No one ever regrets a battery. All right, Ian, this is delightful. I love this effort. I love that you’re highlighting this. I feel this is long overdue. This is another politically bright spot where everybody wants this, everybody needs this, everybody will benefit from this. Surely we can do this.

Ian Magruder

Thanks, David. We’re excited. It was a great conversation, and we’ll see where things go.

David Roberts

How can people get in touch and follow you?

Ian Magruder

We’ve got a website, utilizecoalition.org. Feel free to join our email list there. Follow us on LinkedIn or other platforms, and we’d love to be in touch. We’re going to need a lot of different folks working on this together.

David Roberts

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

In this episode, Dakota Gruener of Reflective walks me through her organization’s new project, which maps the gaps in our scientific understanding of stratospheric aerosol injection — currently the leading candidate for directly cooling the planet. We get into what we don’t know (including a factor-of-two disagreement on basic aerosol physics), who’s already doing this without oversight, and the unsettling governance question of who controls the Earth’s thermostat once humanity has grabbed it.

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Text transcript:

David Roberts

Hello everyone. Greetings and salutations. This is Volts for March 27, 2026: “Should we block some sunlight to cool the planet?” I’m your host, David Roberts.

For decades, human beings have been running a gigantic, unintentional geoengineering experiment. The combustion of fossil fuels has pumped millions of tons of aerosols (mostly sulfur particles) into the lower atmosphere, a layer called the troposphere.

The particles don’t stay up there long — they react with water and fall as acid rain within days to weeks — but their sheer quantity has served to block quite a bit of sunlight from the surface of the Earth. Though estimates vary widely, our best understanding is that human-generated aerosol particles have suppressed around 0.5°C of warming. In other words, without them, we might already be experiencing the dreaded two degrees of warming.

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As fossil fuels are replaced with clean energy in coming years, aerosol particles will quickly fall out of the troposphere and the warming they’ve been “hiding” could come back with a vengeance, portending what could be a rapid leap in global temperatures.

It’s pretty grim. But what if we put those sulfur particles into the stratosphere, the layer of atmosphere above the troposphere? There they stay longer, typically 12 to 18 months, and reflect considerably more solar radiation. We could put that sheltering blanket back in place, on purpose.

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That idea — that huge amounts of short-term global warming and all its ill effects could be avoided with reasonably inexpensive technology — is what animates the field of solar radiation management (SRM).

My guest today, Dakota Gruener, runs a non-profit research organization called Reflective that aims to accelerate research into solar radiation management and ensure that it is conducted responsibly and transparently. Her group has just released a new database revealing gaps and uncertainties in the research — today we will discuss that research, those gaps, whether all of this can be done safely, who will coordinate it, and much more.

With no further ado, Dakota Gruener, welcome to Volts. Thank you so much for coming.

Dakota Gruener

Thanks for having me.

David Roberts

Dakota, let’s start. Give us a little background. What is your professional training and background, and why did you feel the need to start this organization?

Dakota Gruener

Yeah, I spent most of my career in global health and development doing vaccine policy with the Gates Foundation, then worked in the CEO’s office at Gavi, the Global Alliance for Vaccines and Immunizations, then switched gears and worked on digital privacy and digital rights.

In that work, we were doing a lot of work with UNHCR, the UN’s refugee agency, and with the government of Bangladesh, and these two projects were happening simultaneously. The work with UNHCR was sobering because it brought me face to face with how many people have already been displaced and how overstretched the international system already is with that displacement. In the work with the government of Bangladesh, we were working with them on forms of digital credentials that would work across institutional and international borders.

The Bangladeshis were, frankly, quite unusual amongst governments in saying that that was a critical requirement. Usually most governments were focused on “How do you prove who someone is within their own borders?” When we pushed them on why, what they would say behind closed doors was, “We expect potentially hundreds of millions of Bangladeshis displaced in the coming century because of warming.”

David Roberts

They’re thinking already about how to just track them?

Dakota Gruener

It was a bit of “How do we ensure that they have continued access to the services that they’re going to need?” It wasn’t even a sense of tracking them, but “We expect these people to be displaced. If you can’t prove who you are, you’re really at a loss to access necessary services.” I just couldn’t square those two conversations. We are already beyond what the limits of the international system could handle, and people are planning for significantly more displacement.

I started waking up every day thinking, “If I’m not working on climate, what am I doing with my time?”

When I shifted then into climate, what really struck me was timelines. Even if we do everything we can and we need to decarbonize with maximum effort, it’s not going to be fast enough to address this. Even if we scale CDR as fast as we possibly can, that’s also going to take a really long time.

David Roberts

That’s carbon dioxide removal.

Dakota Gruener

Yes. With each of those trajectories, the question became, what happens in the near term? Of course, there is important stuff around adaptation. But SAI kept coming up — that stratospheric aerosol injection, one of the most researched forms of sunlight reflection. What was striking there was people were discussing it as a potential tool to buy time, but we do not have the evidence to evaluate that and we are not on a trajectory to learn enough, fast enough. That, to me, felt like it was something worth pursuing.

David Roberts

You looked around. I’m sure you are aware there are all kinds of geoengineering schemes, throwing stuff in the ocean and crushing up rocks. We’ve covered a few of them on the pod. Is the reason you went for stratospheric SAI — shooting the particles up into the sky — that the one that struck you as most promising or just most near to hand, closest to being ready? Most promising. Is it still, do you think, the leader of the pack in terms of the geoengineering possibilities?

Dakota Gruener

Major scientific assessments describe three main atmospheric sunlight reflection approaches: stratospheric aerosol injection, marine cloud brightening (which goes by MCB), and cirrus cloud or mixed-phase cloud thinning (which goes by CCT or MCT), alongside more limited surface albedo modification methods and more speculative space-based concepts. Different sunlight reflection approaches fit different goals. Some of those interventions are best understood as targeted risk reduction tools. Surface albedo modification, for example, could be valuable for reducing urban heat. There is interesting work happening in Australia about marine cloud brightening to protect coral reefs.

David Roberts

Just so all the listeners are keeping up, albedo is the reflectiveness of the surface. The idea is if you replace black or dark surfaces with white or more reflective surfaces, you’ll bounce more radiation out into space.

Dakota Gruener

Exactly.

David Roberts

You can get some local, as you say, local urban cooling with this.

Dakota Gruener

Others are candidates, at least in principle, for meaningful cooling at the global scale. If your objective is global cooling, SAI — stratospheric aerosols — is the leading candidate.

David Roberts

Interesting. I want to get into the research and some of the details and what we do and don’t know. I was going to ask this question later, but I might as well ask it first since I threw this out onto social media, that I would be doing this. You will not be surprised to hear that one question, above all — the top question I get back, I’m sure you have heard it a million times and we should just discuss it right off the bat — which is the moral hazard question. This is what strikes everybody when they hear about this: we have a way to mask the effects of climate change temporarily.

Immediately people’s minds go to, “It seems if you did that it would take the pressure off people decarbonizing.” That it would give people an excuse not to decarbonize or an excuse to delay decarbonization. I’ve had these discussions before. Everybody I’ve talked to who’s involved in SAI research or SRM research generally, or really geoengineering research generally, says the same thing to this, which is, “No, no, no, it’s not a substitute for decarbonization. It’s just to buy time. We still need to decarbonize.” Everybody involved in the research says the right thing. Your website says it very straightforwardly with no caveats.

Dakota Gruener

Yep.

David Roberts

But people still worry, and what the worry is — if I’m trying to articulate concretely what the worry is — is that good-hearted researchers will get it going. But if you good-hearted researchers show that it works, then it will be taken over by national leaders that might not be so good-hearted and that might use it to substitute for or escape the need for decarbonization.

That’s what I worry about — not that you have ill motives or that anybody involved has ill motives now, but what will happen if it proves out. I’m curious how you think about the moral hazard question generally.

Dakota Gruener

Yeah, I think three points on this. The first, and maybe this is me emphasizing what you just said about good-hearted researchers in this for very genuine reasons. I care and I think we all care about decarbonization. The framing is that this is a potential complement, not a substitute. There is a genuine commitment to that across the entire field.

David Roberts

Just to make that clear, I’m sorry, this might be obvious. The reason people are worried is that this will block some heat, but it will still allow greenhouse gases to accumulate. It will still be driving ocean acidification. If the greenhouse gases continue to accumulate, the minute you stop putting these sulfur particles up, all that accumulated warming will just come back. This is literally physically not a substitute for decarbonization. All the warming is still happening. You’re just disguising it.

The analogy that came to my mind as I was thinking about it is a rent freeze — like in New York. They’re doing a rent freeze, which is fine in that it solves the immediate problem. It stops rent from getting worse. But all the structural forces that are causing rents to rise are still operating behind the scenes. The minute you take the cap off, it’s all going to come back. You’re not solving the structural problem. I know this. You know this. I think everybody involved in SAI knows this.

Dakota Gruener

Yeah. There is interesting and somewhat counterintuitive evidence of how SAI lands at an individual level. Public perception studies — and this has now been repeated multiple times — generally find that people, after learning about sunlight reflection, do not on average show a change in their support for policies to cut emissions. Rather than people saying, “Great, we can stop worrying, we’re off the hook,” they say, “If we’re talking about that, things must be worse than I realized.”

David Roberts

That makes sense. If you are not familiar with this discussion, the whole thing sounds crazy.

Dakota Gruener

Yep. That is one piece. The second piece — I found this to be a really compelling case and it is difficult because we will have no counterfactual to evaluate this against — but every climate catastrophe, floods, hurricanes, fires, requires politicians to mobilize enormous funding and political capital to respond. That is money that is diverted from the slow, steady work of decarbonizing. There is an interesting thing to explore around whether measures like sunlight reflection, by averting some of these near-term disasters, could protect the political space and resources needed for the energy transition.

David Roberts

Yes, because there is certainly an argument to be made that the stresses of climate change itself are going to make the political coordination to solve climate change more difficult as you get more disasters, etc. If you can hold some of those disasters off, maybe you create more space. It is really hard to predict these things. Very hard to say what would happen if this —

Dakota Gruener

It’s impossible, and there is no mechanism that can guarantee that this doesn’t allow fossil fuel companies to continue emitting, just as there is no mechanism that can guarantee that carbon removal won’t be used as an excuse to delay cuts. What we think we can do, though, is make the research transparent and the evidence public and ensure that there is good information that is being generated rather than just a flurry of speculation.

David Roberts

If there is any topic in the world that is ripe for misinformation and conspiracy theories, it is a handful of scientists trying to tweak the global atmosphere. You need aggressive, good communication. Along those lines, let’s talk about the database. The idea behind this is injecting these particles, doing this — there are a lot of things we don’t understand about it. Let’s get a map of what we do and don’t understand. Just explain quickly the database and how it’s constructed.

Dakota Gruener

First, on why we built this database. At present, research into sunlight reflection — research into stratospheric aerosols — is fragmented and underfunded. Different groups are chasing their own questions, and those are often really interesting questions. But there isn’t a shared view of what uncertainties really matter for real-world decisions and what it would take to reduce them.

Which means that if you’re a funder thinking about funding work in this area, you have no idea where to place your resources. If you’re a researcher saying, “How do I spend my time?” you’re maybe second-guessing how you choose to spend time. Policymakers are stuck feeling skeptical of whether this can ever deliver actionable guidance.

David Roberts

It’s worth saying up front that your organization says at the top of all this, “We are not currently advocating doing this. We don’t know yet whether it will work or not.” I think this is important for the audience to hear. You’re not out there banging the drum saying, “Do this, do this, do this.” It says on your website, “We just don’t know yet. What we want to do is find out.”

Dakota Gruener

Absolutely. We are genuinely agnostic about whether SAI should ever be deployed. If the science says it’s a bad idea, that clarity would be a good outcome, and if we have to close up shop because the science says this shouldn’t be done, we’d celebrate that. What we are not agnostic about is decisions being made in the dark. The debate often flattens into this pro versus con conversation. The challenge is that we don’t have the evidence for that pro versus con yet. What matters is how fast we can get to a place where decisions on if, when, and how are evidence-based.

David Roberts

You break up the uncertainties — these gaps — into four basic categories. There are dozens, and we can’t possibly go through all of them. Maybe you could just talk about some of the big categories to give people a sense of the things researchers are looking into.

Dakota Gruener

Absolutely. We have broken it up into a few different categories of technical uncertainties. I should stress here that we have only focused on technical uncertainties.

David Roberts

That’s important.

Dakota Gruener

This first version does not try to tackle all of the sociopolitical, big open questions surrounding all of this. For those technical uncertainties, we focused on four categories: aerosol evolution, climate response, Earth system response, and engineering. For each one of those, we have gone through the scientific literature to describe each uncertainty and to place it into a pretty simple matrix which tries to essentially rank things based on how likely we are to be wrong about this uncertainty, and how much decision making on SAI would be impacted if we were wrong about that uncertainty?

David Roberts

The significance of it.

Dakota Gruener

Exactly. There may be some things that we understand pretty well, have reasonably high confidence on, but if we’re wrong even by a little bit, that would make a big difference. There are other things where we might not understand it all that well, but it doesn’t seem like that would change any decisions.

David Roberts

Aerosol evolution, I’m guessing, is just discussion over what particles. Is that an active — is that a big discussion or...

Dakota Gruener

Yeah. One of the examples that I’ll give here, an aerosol evolution uncertainty, is around aerosol size distribution. I apologize, this is going to get wonky quickly. Aerosols — if somebody were to do SAI — would be released from a plane, and a gaseous precursor would be released from a plane, but those aerosols would oxidize and then coagulate. The resulting size of the aerosols themselves really matters because it affects how reflective it is and the lifetime, how quickly it falls out. This is something that we don’t understand all that well because while we have empirical data on aerosols and how they form after a volcanic eruption, nobody’s ever intentionally gone to the stratosphere, released material, and then said, “What happens in that setting and what does that mean for the resulting size distribution?”

And the implications of that, if you use the UK climate model, UKESM, and you use CESM, the Community Earth Systems Model out of NCAR, and in each of them you say, “We want to produce a given amount of cooling. Let’s say we want to hold temperatures flat at 1.5 degrees Celsius,” they produce pretty similar plots of what that looks like. If you’re saying we want to hold temperatures at 1.5 degrees Celsius, that is a global average temperature. You’re going to see some distribution — some places will be a little cooler than that, a little warmer than that — and these two models produce roughly similar maps of temperature. They agree on precipitation to a large extent.

Where they disagree is that they disagree by a factor of two on how much stuff you have to put up there to produce that amount of cooling. This is that aerosol size distribution. They have very different assumptions around the aerosol sizes. That has real implications.

David Roberts

That’s pretty basic. A factor of two is...

Dakota Gruener

If you put up two times as much stuff, two times as much stuff is going to come out. That may have implications for ecosystems, for human health. It certainly has implications for what would be required — the physical infrastructure that would be required to do it.

David Roberts

Or what if you inadvertently get twice the cooling you think you’re going to get?

Dakota Gruener

Exactly. The aerosol size distribution uncertainty — if you look at this database that we’ve released, you’ll see that it is far up and to the right because it is something that we think is very —

David Roberts

Very important and very uncertain.

Dakota Gruener

Exactly.

David Roberts

Got it. Climate response is pretty obvious. What are the other climate systems going to do in response to this? Earth system, I guess, is hydrology and plants and what they do. What is engineering? What is that about?

Dakota Gruener

Yeah, engineering is how would this be done? There’s an interesting thing where, despite people using the term geoengineering to describe this whole field, there has been very little engineering work done. There’s a huge number of assumptions about what is feasible. One oft-quoted and pretty obvious example: most of the scenarios that have been modeled assume that you are flying an aircraft up to 22 km and releasing material at 22 km.

David Roberts

Is that where the troposphere becomes the stratosphere? Around there?

Dakota Gruener

That is a couple kilometers above what is called the tropopause, the zone between the troposphere and the stratosphere. The tropopause is much higher at the tropics or at mid-latitudes than it is at high latitudes. These scenarios have assumed that you are releasing near the tropics at 22 kilometers, which is just over 72,000 ft. For those here who think about aviation, you will know that that is much higher than commercial aircraft fly. It is much higher than really any large payload planes that we have currently. We do not have the aircraft that would be required for the scenario that is most commonly modeled.

David Roberts

We’re talking about building new kinds of planes.

Dakota Gruener

If the goal is to deploy at the tropics, yes, you will have to do new aircraft development. What’s interesting, I just mentioned that the tropopause is much lower at the poles. It is hypothetically possible to loft material in either the northern hemisphere at high latitudes using existing aircraft.

David Roberts

Aha. But then you have to know, are they going to spread all the way down to the tropics? This gets back to Earth system response, but this is an interesting area of research to me, which is that I think people who think about climate change are used to thinking about global effects. Carbon dioxide, famously global. It affects everyone equally. But this is not necessarily global, or rather, we don’t necessarily know how global it is. In other words, if you dump a bunch of these things up by the poles, will they spread down and shelter the tropics?

How regional is this?

Dakota Gruener

How SAI is deployed matters enormously. There are stratospheric circulations that will move material around the stratosphere. What research has shown is that material injected in the tropics essentially is circulated poleward. If you put material into the northern hemisphere, that will get circulated towards the North Pole. If you put material into the southern hemisphere, that gets circulated towards the South Pole. These are pretty well understood large-scale dynamics.

There’s an interesting thing in that, first, as you note, because it moves poleward, we don’t see much crossing of material over the equator. If you put stuff into the northern hemisphere, you can cool the northern hemisphere, and if you put stuff into the southern hemisphere, you can cool the southern hemisphere. But you would need to be putting material into both hemispheres to cool the planet.

David Roberts

Got it. There’s no prospect of a single source of this affecting the entire globe. It’s probably physically impossible.

Dakota Gruener

We think it would affect the entire globe. It wouldn’t cool the entire globe.

David Roberts

I see.

Dakota Gruener

One thing that feels pretty evident looking at modeling — this is not a new topic, this is something that LBJ and his climate advisors were talking about in 1965 — there have been decades of modeling work done and pretty consistently what is shown is if you cool significantly in only one hemisphere, you end up with cooling in that one hemisphere, no cooling in the other. That can lead to really material and I would argue obviously deleterious impacts for precipitation.

David Roberts

Oh, interesting. Can you generalize, like what exactly?

Dakota Gruener

Yeah. If you cool evenly, what you see is you are not resetting the clock to zero. You’re not just turning down the temperature. Relatively even cooling doesn’t seem to lead to any particularly drastic changes in precipitation patterns. I should note that that is looking at it at the 10,000-foot level.

David Roberts

These are the big models.

Dakota Gruener

These are bigger systems models. If you cool in only one hemisphere, there’s this thing called the intertropical convergence zone. You can move the ITCZ up or down based on relative temperatures between the two hemispheres. You could imagine if rainfall shifted significantly north or significantly south, that would threaten food production for hundreds of millions of people. One of the pretty clear things is that even cooling is going to be important if this is ever pursued.

David Roberts

One thing to keep in mind is the things you’re talking about are capable of producing relatively rapid, relatively large changes in climate systems. We just know that human beings are not — we cannot adapt to those things rapidly. I think a lot of people are thinking, “How do you even test this without risking horrors?” People have trouble imagining what are the incremental steps. One of the things you’ve written lays them out really interestingly in an analogy to what they call the three-phase trial framework in pharmaceuticals.

Maybe you could just take us through that analogy and what it would look like to do phased research. What would the phases look like?

Dakota Gruener

We’d argue that SRM research needs a framework. It is unclear at this point what work can proceed under what conditions, who must be consulted. That creates this dangerous catch-22 where responsible researchers are trying to satisfy this amorphous, ever-expanding list of governance demands. Careful, small experiments that might answer really critical uncertainties aren’t moving forward. Meanwhile, the risk grows that less scrupulous actors will bypass these debates altogether.

David Roberts

We’re going to discuss some of those later.

Dakota Gruener

They’ll conduct large experiments or deployment without oversight. Medicine faced a similar dilemma. The introduction of phase clinical trials was a response to that: how do we ensure that there is a way to test incrementally that a drug is safe and effective before we roll it out?

David Roberts

Without potentially sacrificing the lives of the testees.

Dakota Gruener

Exactly. The idea is a disciplined pathway that can minimize undue risk by sequencing experiments and requiring review at each step. This helps to prevent the slippery slope concerns because there are explicit stop or continue criteria, while also producing the evidence that policymakers need to evaluate whether this is a good idea.

David Roberts

What would that first phase be like? How do you do a small experiment on the atmosphere? It’s quite large. What does that look like?

Dakota Gruener

I’d argue phase zero, preclinical, is where we are now. That’s advanced modeling, ensuring that multiple research groups around the world are asking the questions that matter to them about potential impacts, flagging things that might be a concern, and identifying what uncertainties move policy decisions. What we’ve been trying to do with the uncertainty database.

Phase one would be a small experiment designed to address the uncertainties that we were just talking about around aerosol size distribution. The idea would be to observe whether aerosols, when released from a plane, behave as models predict. How do they form and evolve in those first few days after injection?

This would require — best estimates are somewhere in the order of 10 tons of SO2. This is much smaller than something that would affect climate. It is less than 1.5% of what planes, just as part of daily aviation, emit each day. But it would be large enough that you would be able to observe all of this.

David Roberts

That first phase, you’re not even really studying impact, you’re just studying what do the aerosols do when we let them go. You can do that with a relatively small amount of aerosols?

Dakota Gruener

Yeah. Phase two would also not be at the scale of studying impacts. This would be at a scale that is too small to produce any meaningful cooling. It would be smaller than volcanic eruptions. The idea would be to track the distribution of those aerosols over months to see if the aerosols go where models predict they will.

David Roberts

Based on these stratospheric circulations.

Dakota Gruener

Yeah.

David Roberts

How do you track an aerosol particle? It’s quite small and invisible. How are these being tracked?

Dakota Gruener

Nobody is doing this yet, but there are instruments that we can use. There are satellite-based instruments that allow us to detect that there is SO2 and increased concentrations in the atmosphere. You could imagine using in situ observation — a plane with a whole instrument suite that could then fly through the plume from the lofting aircraft in order to sample and collect all of that data.

David Roberts

Phase one is just what do aerosols do immediately upon release — how do they behave? Phase two is tracking the circulation of aerosols, both of which you can do without any particular risk of having any particular effect on the climate. What is phase three?

Dakota Gruener

This is where the analogy breaks down a little bit. This is an imperfect analogy. All analogies are. We don’t at the moment see an obvious phase 3 analog in SRM. Instead, at that point the remaining open questions would be things you could only observe once you had decided you actually wanted to produce a little bit of cooling. In medicine there’s phase four, post-licensure monitoring. They’ve decided the FDA has approved a drug, it’s out there, people can be prescribed it, but there are things you might not detect until it is in a much larger population.

We think there’s a phase one, there’s a phase two, and then there might be that decision to —

David Roberts

Go or no go.

Dakota Gruener

Go or no go. At that point that’s not a “We’re going to start cooling by half a degree tomorrow.” It would be a very gradual increase in injection rate over a decade or longer and during that whole period, continued monitoring to say, “Is there anything that we didn’t expect?”

David Roberts

Because you’re talking about monitoring, which — and I think that’s so vitally important. What are the pieces of a good monitoring system? Among other questions I have is just, who’s doing this?

Dakota Gruener

Who monitors?

David Roberts

Who do all the countries of the world trust to engage in this in a transparent way? Just technologically, what do we have to have in place before we are doing good monitoring?

Dakota Gruener

On the monitoring side, there are existing satellite instruments. We have a handful of valuable instruments for in situ monitoring, but there is a significant gap in our monitoring capabilities and that is only going to get worse. One of the satellites that is used to monitor this — when I say monitor this, I mean to monitor SO2 and study atmospheric composition — is the AURA satellite. This is a microwave limb-sounding instrument. It has been a central piece of all of our SO2 monitoring now for decades.

It was launched in 2004 and was meant to have a five-year lifespan. We are well outside of that window and it will go out of commission soon. There is a very vital piece here around how do we ensure that the monitoring capabilities — and these are not just important for a scenario where SAI is deployed. These are important so that we better understand our atmosphere and the implications of warming.

David Roberts

I just wanted to interject here with a line from one of the papers you wrote that really made my eyes bug out. To give people a little context to all this stuff we have been talking about. The world currently emits 80 million tons of sulfur dioxide and that is all going into the troposphere. If a quarter of that — 20 million tons — went into the stratosphere instead of the troposphere, both the warming since the Industrial Revolution and all the future warming we expect would be balanced out. That is quite striking. If a quarter of existing sulfur emissions were redirected to the stratosphere instead of the troposphere, that wipes out all historical warming.

That is striking. I don’t even have a question. I’m just struck by it.

Dakota Gruener

If we take a step back, the Earth’s warming is dictated by an energy budget and an energy balance. There is bad news on all fronts on this. Earth is becoming less reflective.

David Roberts

Yes, it’s getting worse. I don’t know if people know this.

Dakota Gruener

It is getting worse. We usually think about climate in terms of greenhouse gases trapping more outgoing heat. That is why most of our policy has focused on what we should do on that side of the equation.

There’s an interesting thing where, counterintuitively, the Earth is also radiating more and more energy into space. Earth is becoming less reflective. The main suspected driver of that is declining cloud cover. We would expect to have less heat escape in a world with increasing greenhouse gas concentrations. But the Earth is actually radiating more energy into space.

Outgoing longwave radiation has gone up significantly since 2000. Multiple factors could contribute. Here too, declining cloud cover is potentially a really important contributor. We’re in this position where we’re messing with some of these systems in ways that we don’t understand.

David Roberts

We are geoengineering.

Dakota Gruener

We are certainly geoengineering.

David Roberts

Everybody should understand that.

Dakota Gruener

The challenge is we’ve now seen the significant decline in reflectivity that has real implications for warming. These acronyms are stacking up. I apologize, but we use the term Earth’s energy imbalance (EEI) to talk about that gap between energy coming in and energy going out. Since 2001, there’s been a net increase in energy imbalance of about 1 watt per meter squared. That’s nearly twice the increase predicted by climate models.

David Roberts

Yes.

Dakota Gruener

It’s equivalent to increasing atmospheric CO2 by 86 parts per million, which is a huge amount.

David Roberts

Yes. This is what’s going on right now — the Earth system is responding more dramatically to greenhouse gases than the models say. This is the ongoing mystery in climate science: why are we seeing effects that seem more severe than what we would expect from the models? What you’re saying is that reflectivity is part of this? Cloud cover might be part of this.

Dakota Gruener

Yeah. The net of all of it is what you just led with, which is somewhere on the order of a quarter of today’s annual SO2 emissions, if delivered into the stratosphere, would be in the range needed to counterbalance this.

David Roberts

I know people get this already, but just as a footnote, when we say balance out, we don’t mean wipe out the effects of — you still have ocean acidification, etc. It’s just the heat of it. Although the heat of it is not a small thing.

Dakota Gruener

Yeah, it would not cancel out greenhouse gases, it would not restore a pre-industrial climate. This is admittedly — and I don’t want to say proudly — but this is clearly a band-aid.

David Roberts

Right. I think a lot of people are just intuitively thinking, when we put these particles up here and call them pollution, they are doing all sorts of bad things. Pollution has bad effects. Throwing sulfur up into the air has bad effects. It causes ozone holes and respiratory problems. People think of pollution negatively. If you are talking about deliberately throwing a bunch of pollution up there, people’s minds automatically go to, “Will this not make all that worse? Will this not have all the ill effects that pollution has?”

Will this affect our respiratory health, and will it affect plants? If you are measurably reducing the solar radiation reaching the surface, are you affecting the performance of photosynthesis? Are you affecting the performance of solar panels? What are the possible negative effects of doing this?

Dakota Gruener

Vis-a-vis health, I’ll start there. The tradeoff that people are thinking about — and this is a reductive initial way to try and think about some of the health implications — is if you add a small amount of sulfate to the stratosphere, what will be the effects on respiratory health when that precipitates out versus how will that same amount of sulfur reduce the mortality associated with extreme heat events?

David Roberts

What a macabre cost-benefit analysis.

Dakota Gruener

Absolutely. The hard thing in thinking about the risks and impacts of SAI — and this is true for any sunlight reflection method, and probably true for many of the tradeoffs that we’re considering around climate policy — is that you have to be thinking about this kind of risk versus risk analysis.

David Roberts

There’s no non-risk.

Dakota Gruener

There’s no non-risk. There’s the risks of doing something. There’s the risks of not doing something and having continued unabated warming. On that particular measure, there’s been research showing that for every one additional death that you would see due to those respiratory effects from the sulfate, you would save 100 lives due to heat-related mortality.

David Roberts

Interesting. That’s pretty — maybe not precise, but pretty clear, at least directionally.

Dakota Gruener

Directionally. There’s much more work required to dig into that further. Another thing that people talk about is ozone and potential interactions with ozone-depleting chemicals. Sulfate aerosols do interact with stratospheric ozone chemistry. That’s a known concern. One of the things that people have worried about is we’ve put a lot of work into trying to course-correct from the ozone hole. If this in any way caused a backslide, that would obviously not be good. There are a few interesting pieces here. One is that we’re on track for a super recovery of the ozone hole.

David Roberts

What does that mean?

Dakota Gruener

That we’re going to have more ozone than we did. With that, the sulfate particles would interact with these ozone-depleting chemicals because we have done a really good job of arresting the use of ozone-depleting chemicals. If somebody ever decides to deploy, when that happens, there will be different concentrations of those chemicals in the stratosphere. There are important implications to when deployment might start — and hence what those potential interactions would be. In some of the research, it suggests that because we are on track for a super recovery, all it would do is delay that by a couple years.

David Roberts

Interesting. If I can crudely summarize, maybe we can spare a little ozone.

Dakota Gruener

I want to be careful about saying that, but it is a concern that many researchers feel is overblown.

David Roberts

Interesting.

Dakota Gruener

It is also a reason that alternative particles get discussed, like calcite.

David Roberts

We skipped past that, but I would just ask that now. Is there even the prospect of us being able to custom design particles to do the things we want them to do and not to do the things you don’t want them to do? Is that even a thing?

Dakota Gruener

We focus on sulfates because it has a natural analog. Volcanic eruptions are not a perfect proxy for what an SAI deployment would be, but they do provide real-world constraints on what would happen if you were to release sulfate aerosols. What would those climate effects be? There is work ongoing to explore other natural aerosols. There has been research around alumina and calcite, etc.

There is a group, Stardust, which is a private company. They have not released any science, so it is hard to dig into this. They have been trying to do essentially what you were describing — can we engineer a particle to meet a certain set of desired criteria?

David Roberts

I’m guessing you, as just a nonprofit research organization, are agnostic to this. If a better particle comes along, you’re fine.

Dakota Gruener

Yes, our sense is sulfates make sense to study as a Gen1. There’s finite time and finite resources available until we think decisions about this could be on the table. Given that, prioritization and focus is a necessity. We’d rather understand something well than poorly understand lots of things. Because sulfate has this natural analog, we understand it relatively well. It is the thing that is most commonly discussed. It’s likely to be on that agenda and there’s a pretty clear critical path to producing the decision-relevant evidence. More novel particles may eventually matter, but they do add new unknowns in terms of chemistry or feasibility and monitoring.

David Roberts

Then you have to do your whole phased research all over again.

Dakota Gruener

All over again, yeah.

David Roberts

Just to return to the question before we move past it, would this affect photosynthesis? Are we talking about blocking enough solar radiation to measurably affect photosynthesis or to measurably affect the performance of solar panels?

Dakota Gruener

There’s really interesting evidence on plants and photosynthesis. SAI diffuses some sunlight, it reflects some and it diffuses it. In large-scale crop models, that leads to better crop yields, not less — plants like that more diffuse light.

David Roberts

Interesting.

Dakota Gruener

Counterintuitive, but generally the sense is, you’re in an environment where there is more CO2 and diffuse sunlight.

David Roberts

We understand that dynamic well enough to say with some confidence that this might boost rather than restrain photosynthesis.

Dakota Gruener

That is a gross oversimplification — all of these are. Different plants respond to different things. You’ll see regional differences in the amount of cooling. You’ll see regional differences in precipitation. Those in aggregate need to be studied. We’re at a point in the research where we know big, broad-strokes things, but those specific questions really matter.

David Roberts

Solar panels — has anybody done the research on that or tried to estimate?

Dakota Gruener

I would need to go pull up more research on this, but the Earth naturally reflects about 30% of incoming sunlight. Even in the proposals where people are saying “let’s cool pretty significantly,” they are talking about an increase to reflecting 31% of incoming sunlight. The net effect on solar panels will be modest.

David Roberts

As you say, the officialdom is moving slowly on this stuff. There’s not a structured research program that’s been given a legitimate thumbs up from all the legitimate organizations. Consequently, there’s some cowboy activity happening around the edges.

There’s this private company that’s popped up called Make Sunsets, where you can now literally send them — I think it’s $10 or whatever — and they’ll send a little balloon of particles up for you. That’s ridiculous, but also it’s sinister, I think.

What do you think our collective response should be to those types of things? My instincts, my priors are that we should go overboard to shut that down and to try to channel this into some common, central, transparent, shared thing. Am I overreacting? How do you think about that?

Dakota Gruener

I don’t think you’re overreacting. There are two companies active in the space right now. Make Sunsets, as you just referred to, is one of them. Stardust is another. I would treat them as quite distinct. Make Sunsets is, as you say, you can go and give them $10 and they will release a small weather balloon with a nominal amount of SO2. It is not an amount that will cool the planet — far, far, far from it. They’re also not doing any science. You’re not learning anything in that process.

It is neither improving the quality of our information nor producing cooling. I don’t see a pathway for it to evolve to support either of those goals.

David Roberts

Maybe they would say they’re just doing a stunt to push everybody else to take this more seriously.

Dakota Gruener

I think that’s true. They would say, “The time is nigh and everyone is being too precious about all of this,” and that they are trying to...

David Roberts

Nonetheless, I have the urge to tell them to go to their room.

Dakota Gruener

As do I, as do I.

David Roberts

Go spend some time in your room and think about what you are doing.

Dakota Gruener

There is significant pushback against that very rogue kind of cowboy actor.

David Roberts

I’m curious what you think about Stardust. They seem a little more — at least they’re scientific.

Dakota Gruener

Yeah. They have a different scale of funding. They have a different level of seriousness, and they might be doing good science. Given the pedigrees of the folks on their team, that feels plausible.

David Roberts

I think it’s supposed to be coming out with stuff next year. There’s supposed to be a big release of their early...

Dakota Gruener

Yes. It is impossible to know because they are not releasing any science publicly. In a field where public trust is fragile, that lack of transparency poses a risk not only to them, but to the entire field and to efforts to responsibly learn about sunlight reflection.

David Roberts

It really does seem, especially in this area, you just want to overcorrect in the direction of transparency in these early stages. If you want this to go anywhere, you really need to scrupulously be open about it. That’s my instinct.

Dakota Gruener

I could not agree more. For us, we publish all of our funders on our website. We are publishing all of the research that’s done. We put out the uncertainty database. We’ve released the simulator. All of them are designed to lay bare what we know, what we don’t know, what we think it will take to get to the point of informed decisions. Who’s guiding those decisions, who’s guiding our thinking. The transparency is absolutely critical. There’s another piece, which is with Stardust, the profit motive itself is structurally problematic, not because companies are inherently bad.

David Roberts

Well…

Dakota Gruener

We can have that debate later. Even in a scenario where research exists entirely in the public sector, at some point, if there is a decision to deploy, there will be companies involved. Somebody will have to develop those aircraft, for example.

David Roberts

Yeah.

Dakota Gruener

But in the absence of any independent authority with the capacity to evaluate claims, there is a real risk that Stardust or any other private actors overstate their particle safety or efficacy to cut a deal. That could lead to very real consequences. Going back to the medical analogy, there is no FDA equivalent.

David Roberts

Yeah.

Dakota Gruener

There’s a good reason the FDA exists. Without that, the incentive structure is dangerous.

David Roberts

I want to address what I feel is one of the knottiest and most difficult aspects of all this, which is the who decides, who’s in charge kind of thing. There’s recently a call by governments for a solar geoengineering non-use agreement, and ministers from 54 African nations signed this. There is already a lot of sentiment in the global south that, “Here they go again, the global north presuming to take charge of the temperature of the globe,” without consultation, doing things that affect our countries without asking us.

This is obviously a whole nest of difficult issues about colonialism, etc. This is where my brain breaks on this stuff. How do you even think about trying to get the degree of international cooperation you would need to really have this be fully transparent, fully common, something we’re all involved in? We can’t agree on anything, Dakota. Look at the US right now. Even assuming we get a better regime in the US, how do you get everybody on the same page like that? How do you think about that challenge?

Dakota Gruener

I want to be precise about this because the framing matters. The non-use calls are primarily driven by European NGOs. They are not coming from African scientists, African research institutions, or necessarily originating with African governments. In fact, the opposite is happening. After an article was run suggesting that this was really being driven by researchers and policymakers on the continent, over 30 African climate scientists signed a public statement saying, “Excluding African scientists from global research conversations would be far more colonial.”

David Roberts

We have European NGOs using African countries as tokens or shields for their own ideological preferences. That certainly does not strike me as outlandish.

Dakota Gruener

The point is research needs to be inclusive and decision making needs to be inclusive. There is really important work ongoing to make that real.

David Roberts

What does that look like though? Is it a framework? Is it an organization? Is it a list of principles?

Dakota Gruener

Some of the things that are happening at the moment: there’s a recently launched African Climate Intervention Research Hub that’s stewarding this within the continent. There’s an organization called the Degrees Initiative that we work closely with and love, that funds researchers across the global south to study SRM. We ourselves have funded researchers in six countries outside of the US and soon to be many more. There is a lot of work ongoing to ensure that the evidence base and the people producing the evidence base aren’t exclusively northern.

That doesn’t get you to the point of who is making the decision, but it does improve the quality and the inclusivity of the evidence base itself. In terms of where these decisions should be taken, we see a future in which intergovernmental or multilateral processes take up responsibility for SAI research and deployment decisions as the scenario likeliest to lead to good outcomes.

David Roberts

Do you mean by that the UN or are you deliberately not specifying the UN?

Dakota Gruener

The existing institutions that people look to, whether it is the UN or the Montreal Protocol, I don’t think any of these are credible or desirable answers. They are not designed to sponsor experimentation, nor do they have the mandate or capacity for ongoing management of something that is ethically and technically complex. The question becomes what are models that might be appropriate? We can draw from other sectors because something new will need to be built.

David Roberts

One of the things that climate heads are probably thinking right now is whatever you do, don’t put it in a context where you need unanimity among all the world’s hundreds of countries to do anything, because that’s what —

Dakota Gruener

We’re not in a world where unanimity happens on anything.

David Roberts

That’s what we did for climate change. Consequently, the UN did nothing for decades on end because you can’t get unanimity. There’s no flat answer to this, but you’re on this sort of tradeoff: you’re never going to get total unanimity to do this. What counts as enough unanimity to pull a trigger on something that affects the entire globe?

Dakota Gruener

It is valuable to think about an incremental approach. One of the challenges that you see is there’s this chicken and egg around solving the governance challenges and trying to understand what we are actually governing. There have been attempts to preordain what the governance structure should look like to govern scale deployment. The problem is that might be designed for something that, quickly, the science rules out.

We think about it more as an incremental pathway where you’re developing governance and doing the research in parallel and in lockstep. With that, I could imagine essentially a coalition of the willing — a group of countries. It’s important that it’s countries who pool resources in order to fund research. Part of pooling those resources is then saying, “We’re going to openly debate the priorities and we’re going to work together to define those endpoint criteria for experiments.” In that you get a group of countries who are cooperating in a very open and transparent way before consensus or without consensus.

David Roberts

It would be nice to have that kind of rational organization addressing a variety of problems globally.

Dakota Gruener

I hear you and I don’t think this is unrealistic. The world that I come from — I mentioned earlier, I started my career in vaccine policy and worked for an organization called GAVI. GAVI was launched in 2000 to address fragmented funding and legitimacy gaps in terms of vaccine delivery. It was designed in a way that I think is pretty instructive. No one thinks of it as a governance organization per se, and yet that’s precisely what it is. Their board transparently wrestles with amazingly complex and very consequential questions about “Do we support Japanese encephalitis or do we support malaria?” That has real implications for whether kids are being protected and where kids are being protected.

Their management of their programs is adaptive. This isn’t the set-it-and-forget-it model of a treaty. There’s a secretariat with real technical depth, ensures that the decisions are scientifically grounded. It’s a focal point that discourages duplication and makes cooperative governance easier. That’s important in SRM, because without some type of pooled research fund, the field is likely to splinter into national research programs that may have competing priorities or methodologies.

David Roberts

Beyond that, nations who decide to go for it.

Dakota Gruener

That increases the odds of unilateral or poorly coordinated action. If you have this pooled research alliance, that creates a forum for those tradeoffs to be surfaced and debated in something that is inherently multilateral from the get-go. Probably the last thing to know about GAVI is it at least apocryphally emerged over a dinner. It was not the product of long UN deliberations. It was, “This is a thing that we think should exist. Let’s go create it.”

David Roberts

The last question is about the termination shock, since that seems like a good closing place. One of the sci-fi-esque fears about this is once you start doing it, you’re stuck doing it. You have to keep doing it or else the warming comes back all of a sudden. In addition to thinking about this multilateral incremental way of edging up to it, somebody’s also eventually going to have to think about multilateral incremental ways of undoing it at the end. Presumably this will buy us time. We’ll decarbonize and we’ll need less cooling, and then we’ll ramp down this sulfur injection. That’s the vision, right?. We ramp it up and then we ramp it back down. But then you get into who decides what the right temperature of the world is. It’s way too big a question to throw here, at the very end. But once your collective hand is on the thermometer...

Dakota Gruener

Yeah.

David Roberts

Then you own it. You break it, you own it. Then you own the temperature of the Earth. Some regions would benefit more than others from more or less heat. Once you are already doing it, have you thought through how to deal with those governance challenges or how to decide what the right target is?

Dakota Gruener

Termination shock is a legitimate concern. It’s one of the strongest arguments for doing this research carefully. Maybe not so much in the scenario that you’re talking about — we’ve managed to see the progress we want on decarbonization, we’ve seen CDR scale to the point where it’s meaningful, and we are now carefully considering how and when to start ramping down. The concerns around termination shock are often in the vein of, you start, you deploy at scale, and then you learn something you didn’t want to learn and there’s a very abrupt stop, or it introduces a geopolitical risk that causes an abrupt stop.

On the first of those — you learn something and then there is good reason to stop, and that leads to rapid warming — that’s part of why this clinical trials model, and particularly that phase four, is so important. You’d want to ramp up very slowly and monitor so that if things diverge from predictions at any point in that ramp up, you’d still be at a scale where you could ramp back down pretty easily and without termination effects. In terms of the geopolitics, that is an argument for why multilateralism matters so much. I will just keep banging on about that.

In terms of ramping down, careful, intentional action is needed. I’d like to think that if you have a group who is weighing the really complicated tradeoffs and decisions about how much cooling to do, it is just a continuation of that same set of decision-making criteria.

David Roberts

But that’s a lot of trust you’re asking for there. A lot. “Let us set the Earth’s temperature.” That’s putting a lot of trust in that group.

Dakota Gruener

That’s why it needs to be well-designed.

David Roberts

All right. Dakota, this has been super fascinating and I look forward to seeing this. I hope it moves forward in as multilateral and rational a way as you propose. I’ll just say that.

Dakota Gruener

Thank you so much 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.

The explosive energy demand from data centers is breaking our grid, pushing desperate developers to build their own on-site gas plants just to get online. To figure out how we avoid locking in decades of new fossil fuels, I’m joined by Camus CEO Astrid Atkinson and Princeton’s Jesse Jenkins to break down their proposed alternative. We dig into how adopting flexible grid interconnections and clean, battery-backed “power parks” can meet this massive load growth without abandoning our decarbonization goals.

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Text transcript:

David Roberts

Hello and greetings, everyone. This is Volts for March 25, 2026: “For data centers, a little flexibility goes a long way.” I’m your host, David Roberts.

By now, most Volts listeners are familiar with the crisis facing the electricity sector: after decades of plateau, demand is rising again, quickly. Giant data centers are banging on the door, demanding to be hooked up to the grid. Interconnection queues are clogged and some grids, like PJM’s, are basically maxed out. Everyone — utilities, PUCs, legislators, and the public — is scrambling to figure out how this should work, how the system can grow to accommodate the AI revolution without placing all the costs and risks on ratepayers.

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One solution that is gaining considerable attention is flexibility in data centers. Conventional energy models, including those used by utilities to project demand, assume data centers are always on, always consuming at their rated level, which, in the case of some of these new data centers, is as much as a gigawatt. Guaranteeing a gigawatt of steady service 100 percent of the year, come what may, is no small thing. That’s one reason utilities have been so slow to connect these things.

But what if they didn’t have to guarantee 100% of service 100% of the time? What if, say, 10 to 20% of the time, data centers could survive on their own, running on their own batteries and backup generators?

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That little bit of flexibility could enable utilities to avoid tens of millions of dollars in grid upgrades and connect many more data centers much faster — at least, that is the argument in a new study and white paper on the subject. It’s a team-up among the energy analysts at the Princeton Zero Lab, the energy modelers at encoord, and the flexibility-software startup Camus.

A couple of those names probably sound familiar to you! Indeed, today’s guests have been on Volts before and are some of my all-time favorite guests, and people. I have Astrid Atkinson, the CEO of Camus, and Jesse Jenkins, the head of Princeton’s Zero Lab. We’re going to discuss the model for data center flexibility and the benefits it promises.

With no further ado. Astrid Atkinson, Jesse Jenkins, welcome back to Volts. Thank you so much for coming.

Jesse Jenkins

Thanks, Dave.

Astrid Atkinson

Yeah, thank you.

David Roberts

There’s a lot to talk about here, a lot going on, so much going on in this space. But I want to start before we get to what they ought to be doing, what data center developers ought to be doing, let’s talk briefly about what they are doing. My impression, and tell me if this is wrong. My impression is that everybody involved is in a big old sprint for gas. I look out there, I see data centers scrambling for off-grid gas capacity. I see utilities scrambling to build gas capacity. I see gas companies gearing up for historic demand, no end in sight. This whole thing looks like a gas disaster to me.

Is that wrong, Jesse? Maybe you start. It looks to me like the only way these guys can figure out how to get data centers online at the moment is by surrounding them with a bunch of frickin jet engines. That seems crazy to me. Is that in fact crazy?

Jesse Jenkins

I would say that’s definitely where the zeitgeist is at right now. The default assumption is that you’re just going to build a bunch of gas power, whether it’s a combined cycle plant or a simple cycle open cycle gas turbine, the jet engine you mentioned, or even reciprocating internal combustion engines, basically big diesel gensets that can run on natural gas. Halcyon is tracking 85 gigawatts of gas plant additions currently planned across the US and it is quite a potpourri of different designs. Some of those are grid connected, some of those are utilities. Some are happy to say, “Yep, I’ll build 2 gigawatts of new gas generation if you connect to my transmission grid.”

But a good chunk of those, and a very rapidly growing piece this year, is behind-the-meter projects. Projects where they’re actually just trying to build these generators on site. One emblematic example is the x.AI Training center outside of Memphis, the so-called Colossus facility outside of Memphis, Tennessee. It’s right over the border in Mississippi, parts of it anyway.

They basically rolled up with over a dozen gas turbines on trucks, on the back of a flatbed, plugged those in, and have been running these intended-to-be-temporary generators pretty much nonstop. They initially tried to sidestep air pollution rules, saying that they were not applicable because they were mobile generators. The EPA has since said, “No, we thought about this before. Those count.”

But the Trump administration’s EPA is not enforcing any rules. They are violating the rules but with no enforcement to rein them in. Now they’re asking to build over 20 permanent gas generators on site, to which the public resoundingly said “no” recently at a February open meeting in Mississippi. That’s emblematic.

They are the first ones to get to a gigawatt collective scale training capacity and have been touting that. They did that by building their own small, meant-to-be-temporary gas generators and just running them continuously in order to avoid having to wait for projects to come online on the grid and supply their energy. Once folks saw that and other projects have been announced, that model has started to spread. It seems to be the default stance of many developers right now: the grid process is broken, so forget it. I’m going to go around it and build my own generation on site. Even if that’s not an efficient combined cycle power plant, which is what you would want to do if you were using gas, it doesn’t matter, they’ll pay for it.

David Roberts

Before we move on, I just want to talk about, aside from climate change — there’s a lot of emissions — but I just want to ask about operationally. It’s crazy, isn’t it? This is not how you would run a data center if you were setting up to run data centers in a rational way. These turbines they’re using are not meant to do what they’re doing. Am I wrong about that?

Astrid Atkinson

Yeah. I can offer a little bit of perspective on this because part of my past life was in the reliability organization at Google, which deals a lot with the intersection between software and physical infrastructure. I have some experience working with data center infrastructure. Firstly, there is a real risk of locking in a lot of gas generation to meet this demand growth need. On-site, fully off-grid natural gas generation is not great from a data center perspective. The reliability profile is not great. You need a lot of redundancy to be able to do this on site. Personally, I would be concerned about things like vulnerability to natural gas price fluctuations as well as deliverability challenges.

David Roberts

The more I think about this, the crazier it seems. If one of these big gas generators that’s off grid goes out, these data centers want five nines reliability or whatever it is. If one of these generators goes out, you have to have on site backup generation sufficient to cover that. You are building double the capacity you need in natural gas on site. That seems crazy.

Astrid Atkinson

Yeah. Apart from anything else, they’re not quick to build. It’s not clear to me that this is actually a really fast path to power solution in the way that folks on the tech side are hoping it is.

In practice, what we are seeing is that while there’s a lot of discussion of fully off-grid sites, what I’ve heard from utilities working with a lot of these sites is that what the utilities will say is, “There’s no such thing as a fully off-grid data center.” In practice, there’s still a lot of crosstalk and cross traffic looking at opportunities for grid connection. There may be a gap between exactly what people are hoping for and what’s happening on the ground.

Jesse Jenkins

I think it’s funny how the zeitgeist shifts. If you were talking to somebody in 2024 about whether data centers would go entirely off grid, the answer was absolutely not. Data centers need five nines reliability, and so they have to have grid connections.

David Roberts

That’s crazy, for obvious reasons.

Jesse Jenkins

Now, the reality of actually trying to connect to our grid and all the fragmented and broken processes that entails has started to sink in. Everybody’s searching around for an easy button solution with increasing levels of desperation. Going out and trying to refurbish old jet engines from decommissioned aircraft and get them back into service or use marine diesel engines, things like this. I look at this and I just see things are broken.

This is a sign that we are between a rock and a hard place. The rock is the growing demand, which is very real for 100 plus gigawatts of peak demand growth by 2030, most likely. The hard place is that our grid and its institutions have not been designed to keep up with both general load growth and the scale of these facilities. I always like to stress for folks that a gigawatt is bigger than the entire Pittsburgh metro area or something like that. It’s like plopping down an entire city.

David Roberts

These are like small cities.

Jesse Jenkins

Not even small cities. A gigawatt is a big city. You’re trying to connect a city’s worth of demand in one location on the grid, and that’s not a trivial thing to do even if our institutions were working well, which they’re not. It is a sign of increasing desperation. I don’t think many of those behind-the-meter or largely behind-the-meter projects will actually pan out as intended. The question is, what else could we be doing better than this? Because this seems nuts.

David Roberts

My worry is that while we’re trying to figure out a better way, we’re just locking in a lot of this gas. These are going to be stranded assets. They own all these turbines and jet engines and everything. They’re going to want to use them. I just worry that we’re digging —

Astrid Atkinson

I do think that’s a risk because there are a couple of factors going on here. One is that it’s likely that while there is a lot of real demand out there, the current queues, any individual project has some risk associated with it because not all of them will end up being built. That means we’ll likely build generation in places to support sites that don’t end up happening. Then we do have a lock-in problem. The other thing is that there’s an alternative path which could support a lot more development of grid-connected generation, whether that’s fossil or renewable. It gives us a path toward further decarbonizing our overall energy mix on the grid over time. I don’t want us to miss that opportunity. I see this as a fork in the road.

David Roberts

It does seem like a fork in the road. I was talking with Jesse about this off mic before. This is the rare problem. Most of the problems people in our world have encountered are regarding incumbents who feel no particular need to change. We’re just outside, beating on the doors, yelling at them. Here, everybody recognizes that this is broken, everybody recognizes that this needs to happen, and they’ve got lots of money to spend on solutions. This is a problem space where things are actually happening and everyone wants to solve it, which is not typically the kind of problem we deal with.

Astrid, let’s talk about this model that you are proposing here in this paper. There are two basic parts of it that I want to take in turn. There’s the flexible connection part and then there’s the power park part. There’s the bring your own generation part.

Yep, those are the two parts of this model that you’re proposing. Let’s talk about the flexible connection first because I alluded to that in my intro. Describe the typical connection and then how a flexible connection would be different.

Astrid Atkinson

Yep.

Yeah, so the typical connection for data centers, which has been the industry practice up until the start of last year and in practice is still the only way data centers are really getting built today, is to have an interconnection that supplies you with 100% of your peak power need. It gets you nameplate capacity from the grid. We’ve talked about there being potentially a lot of interest in bringing on-site generation or battery. That is not really something that is accounted for in that traditional interconnection mechanism. We’ve also talked about the fact that there might be a lot of additional capacity available if you’re able to be flexible around the few hours or even up to maybe a day or two a year where the existing grid is otherwise at peak and is full.

If you can avoid those peaks, there is an additional amount of current grid capacity that we can unlock. There are two ideas of what we’re talking about when we talk about flexibility here. Broadly, what we’re saying is that if we could update our interconnection model to allow a site to sometimes use less than their peak capacity, by agreement with the grid operator, whether that’s by going to flexibility or going to local generation or what, we would perhaps be able to interconnect that site more quickly with less transmission system infrastructure required and potentially also with less overall generation capacity required to support that kind of stacked peak demand.

David Roberts

This is, as far as I know, something that only ERCOT is doing currently. That is, they’ll say, “Sure, you can hook up with the proviso that a few hours a year we’re going to cut you off.” It turns out that just that few hours a year unlocks a boatload of more capacity. Is ERCOT’s current practice what you are talking about and basically is what you’re asking for just other utilities to adopt that same model?

Astrid Atkinson

It’s close. Firstly, ERCOT has a connect and manage model for generation, and that’s really what we’re looking at here for load. It’s basically saying —

They don’t have it for load, though?

Not yet.

David Roberts

Interesting.

Astrid Atkinson

It’s in progress. They do have a rule that enables loads to be curtailed as part of the overall security constraint, economic dispatch. What they’re working on is a corresponding set of rules that enables that capability to be taken into account at interconnection time. It’s a work in progress there. But that’s basically the goal.

Jesse Jenkins

It’s worth breaking out. There are two obstacles that have to be overcome in order to get a data center online. One is you have to have sufficient transmission capacity to connect and that’s your local substation. More importantly, it’s also deeper constraints that may be caused throughout the grid when you add a city’s worth of demand at some point and that reconfigures power flows in important ways. That’s a very localized thing. Generally, the approach to accommodating new loads has been, “Let’s run the study and make sure that we upgrade the grid so that that load can always be served and that those constraints are never binding on the load side.”

That is a local transmission owner-driven process on the demand side right now, as opposed to a FERC, federal jurisdictional entity like the regional transmission organizations which do interconnection for generators. There is a proposal to shift that potentially to the federal level that FERC is considering. Right now that’s done differently in every transmission owner jurisdiction around the country. The general rule is, make sure that there’s no issues, no constraints that are going to bind our ability to serve.

David Roberts

Which is an incredibly conservative way of doing things.

Jesse Jenkins

It is, and it’s consistent with this idea that the utilities all have an obligation to serve and that everybody deserves reliability. That’s the traditional thinking. But these are not traditional players. It makes sense not to treat a giant data center the same way that you would treat my EV charger or a commercial office park. They’re not the same thing. That’s the first constraint. The second constraint is that you have enough generation adequacy or accredited capacity so that you can actually supply the data center with power when it needs it.

Traditionally, we rely on the grid for all of that. You have to go to the market and get a supplier to meet your needs. Those suppliers have to show that if you have 100 megawatts of peak demand, they can deliver 100 megawatts of accredited capacity or energy available whenever you need it. You could get some of that from the grid and some of that you could be supplied by your own ability to curtail your demands from the grid.

These two barriers, the transmission constraint and the generation adequacy or capacity constraint, are the two things that every data center has to overcome if it wants to connect to the grid. We need processes that recognize that there are other solutions besides just waiting for the utility to solve the whole problem or doing it entirely off grid, behind the meter with your own gas plant.

David Roberts

The two parts, as I said, this is a two-part plan. The two parts are to address those two constraints. The flexible interconnection thing that we’re talking about now, that’s to address the transmission constraint. If you’re transmission constrained, this makes more use of existing infrastructure.

Astrid Atkinson

The flexibility side can also help to address the generation constraint as well. As Jesse mentioned, that could be either the data center curtailing its own usage, the data center switching to battery, or even the data center procuring accredited capacity from a VPP. There are a few different ways that flexibility can support on the generation side as well as transmission.

David Roberts

When we talk about the generation side, client-side generation resources that can cover for when the grid is not supplying power, what are we talking about? As we said at the beginning, mostly we’re talking about gas. At least existing. At least the ones that are going up right now, they’re talking about gas. What do you envision? What is the solution space there? What kinds of things could they bring?

Astrid Atkinson

This is where we get to our fork in the road, because a lot of the conversation today is centering around gas. But there are alternative models that are live in the market today that look at what you referred to earlier as a power park approach, where you will potentially have a portfolio of resources supporting the data center. That could be solar and storage that’s nearby or on site, that could be renewable development under PPA that’s further away but is accessible via transmission connection to the site. That could be flexibility resources other than generation on site.

David Roberts

Batteries mostly.

Astrid Atkinson

Battery, load reduction, all of the above.

David Roberts

But mostly batteries.

Astrid Atkinson

Yeah.

Jesse Jenkins

Maybe solar. It depends on how much space you have.

Astrid Atkinson

Could be. Collectively, looking at the power challenge as a portfolio approach that uses some grid power and some new generation, which ideally is renewable along with a lot of battery, is the alternative to natural gas. We did look at this in the paper too, and I know Jesse will probably have some perspective on this kind of portfolio approach.

What we did when we put the paper together was for each of the sites, we modeled the flexibility requirement that would be necessary to get it connected to the grid at its target capacity. How often would you have to be flexible, by how much? Then we modeled what would be the stack of resources that would serve that additional need. Where would that flexibility come from?

David Roberts

Where did it come from? Tell, do tell.

Astrid Atkinson

For some of the sites, battery alone, as well as some component of on-site load reduction, was enough. That was true at three or four sites. At a couple of the sites, there is potentially a role for natural gas as a firming resource. That’s up to the developer as to the choices that they want to make about their power mix. We also, at the request of other participants in the study, modeled what it would cost to not do that. To say, “What if we just wanted to build a lot of battery instead of that natural gas plant?” It costs another billion or two dollars.

David Roberts

More to do batteries than to do natural gas?

Astrid Atkinson

A little bit. But the data centers are really expensive, and it still comes out net positive if you connect more quickly. There’s a lot of room for improvement here.

David Roberts

Batteries are going to get cheaper too. They’re getting cheaper and cheaper.

Jesse Jenkins

Yeah, they are, and that’s helpful. At the moment, gas turbines are getting more expensive and gas prices are going up. That helps close that gap a little bit. I wanted to highlight something as we talk about batteries. We typically think about shorter duration, four or six hour kind of dispatch.

David Roberts

Long duration plays a role here.

Jesse Jenkins

It might. I wanted to go back to something you said in your intro, which is, “What if data centers could be flexible 10 or 20% of the time? That would unlock a lot.” It’s actually less than 1% of the time.

David Roberts

You’re jumping ahead, Jesse.

Jesse Jenkins

But this is important to understand the role that batteries can play in relieving these constraints. When we looked at the constraints, encoord, which is one of the three organizations that did this, did actual optimal power flow modeling for a real transmission system that was provided and vetted by a utility looking at six different sites across that system where you could potentially host a 500 megawatt data center nameplate capacity.

What they found was that in two of those sites, there were basically no constraints, and in three of the sites, the annual curtailment in total was 7 hours, 11 hours, 13 hours, and 35 hours. At the highest end, that’s 0.4% of the hours of the year. The longest events at three of the four were five hours long, and the fourth one was 16 hours. There were only three or four of these a year. With the exception of that 16-hour event, those are perfect for batteries. They’re the right duration for a battery to be able to ride through the entire length of the event.

David Roberts

Let me clarify this for listeners. You did the model. The premise of the model is that these data centers are making deals with the utilities saying, “You provide 80% uptime, 20%, we’ll cover ourselves.” But that’s on paper.

Jesse Jenkins

In practice, the concept is actually, “You connect us and you don’t charge us for any transmission upgrades because instead of making those costly and, more importantly, very slow transmission upgrades, you can dispatch us instead to reduce our consumption at the point of interconnection to avoid any of those constraints.” It’s an operational strategy in lieu of a wires upgrade.

David Roberts

The contract says up to 20% of the time. But in practice, when you run the model, they’re actually only called on, they’re actually only curtailed. It’s not even close to 20% of the time. It’s not even close to 10% of the time.

Jesse Jenkins

I don’t think we constrained it.

Astrid Atkinson

But the model that we used was one where there’s a firm capacity allocation and then a flexible capacity allocation. The firm capacity allocation gets served like normal load. You get it 100% of the time. It’s guaranteed. The flexible capacity allocation is a margin on top of that that’s available some of the time.

The reason that we split it that way was that allows the data center side to bound the problem. They can say, “I have 100% of this much, and then this other capacity is contingent on being available in terms of grid capacity.” On the occasion when it’s not, I will fill in the gap on that.

There are some further constraints around that, ideally within an interconnection agreement to say what kinds of contingency events or what kinds of flexibility events might be called. That’s where you get the “maybe up to 20% of the time for the flexible allocation only.” There are a couple of dimensions in here that increase the reliability on both sides of the conversation. That’s important.

David Roberts

The thrust here is that just a few hours of flexibility a year — we’re not talking about a ton of time here. It’s only a few hours a year in practice where you need to bring this flexibility to bear. Those few hours get you so much.

Jesse Jenkins

It’s only a few hours and it’s only a few hours long each time it occurs. At most of these sites, and there’s variability, this is going to be different at every point in the grid, which is why you still are going to have to have an interconnection study. You’re going to have to say, “Where can I connect where there’s headroom?” Traditionally, what data center developers have done is go around looking for places where this isn’t a problem, where there is headroom, where you can sneak on the grid and connect under its existing capacity without causing any upgrades besides the substation you need to connect.

The problem is those sites are not available anymore and the scale of data centers is not… a 50 megawatt data center five years ago was a big data center. Now we’re talking about 500 megawatts, 1,000 megawatts. There’s no gigawatt of headroom lying around in most places. What we’re saying is there may be locations where, if you tried to connect there, you would have to curtail 50% of the time, but maybe just don’t connect there.

There are other locations, and in this case, we found six of them within this one utility’s territory. There’s probably plenty more where with just a few hours of flexibility, you could bypass those kinds of transmission upgrades. Once you do that, now you have access to the broader grid and all of the energy and capacity that it could deliver from all the various options that can flow through that grid as opposed to just what you can build on site. That’s the other big unlock here.

David Roberts

You want the grid as backup.

Jesse Jenkins

There’s a reason we have a grid. We started with little microgrids with every factory having its own diesel generator or its own coal-fired reciprocating engine. It works quite well, but the grid is much better.

Astrid Atkinson

This is where the inefficiencies that are baked into current grid planning become really interesting. The way that we design the grid today is with a significant amount of contingency capacity for being able to continue to serve either during peak time or during outages. That contingency capacity is rarely used. It’s really only called into play during an outage. Because of that, we have pretty low overall utilization of our grid as a whole.

David Roberts

This is a subject we’re going to be talking about here on Volts quite a bit in coming weeks. Say a little bit about what you’re studying because you did a study of this.

Astrid Atkinson

As part of the study that we did, looking at these data center sites and the role that flexibility can play, what we were really looking at is what is the unlock for being able to be flexible some of the time? How much additional capacity could we get? Our back-of-the-envelope calculation is that it’s somewhat on the order of about 30% once you take into account regional variation and the practical considerations of how much flexibility you could really bring and what this looks like from region to region. That’s just a guess. Jesse’s Princeton team did some of the modeling around this.

The other thing that’s worth considering here is that the grid is somewhat over-provisioned for everyday usage. This is not the first time we face the challenge of needing infrastructure to do a lot more work. This idea of oversubscribing physical infrastructure, scheduling a bit more work than it could do at peak, is the foundation of how our other networks work. That’s how the Internet works, it’s how our telecom networks work.

David Roberts

Can you unpack that a little bit? That notion of oversubscribing? I don’t know that my head is totally wrapped around it.

Astrid Atkinson

Absolutely. The way that we capacity plan for the grid today, we’re looking at a strict worst-case scenario.

David Roberts

What’s the peakiest peak?

Astrid Atkinson

At the peakiest peak, how much capacity do we need to serve all of our demand?

Jesse Jenkins

Assuming that a few things fail at that moment. A big transmission line goes out or a nuclear plant goes offline, these contingencies that they also layer on top of that peak, that make it even harder.

Astrid Atkinson

Which means that in practice a lot of resources are sitting idle a lot of the time. This is something that we faced in other contexts as well. A really interesting example on this is actually from within the data center space. I used to work in reliability at Google and a lot of that was around thinking about systems and network and application infrastructure that would allow us to operate systems reliably, but about 50% or more of the work involved was actually looking at resource efficiency. How do you get more usage out of your really expensive capital assets that you can’t get more of in a hurry? Your data centers —

David Roberts

It’s all about flattening peaks. In whatever context, it’s about flattening those peaks.

Astrid Atkinson

It is. A lot of what we worked on in that context was, “Okay, we’ve provisioned N+2 capacity for data center resources.” Let’s say that you’re serving web search. You’ve got maybe 10 web search clusters in different locations. That’s how many you need to serve web search at its peakiest peak. Then you’ve got another two clusters in other data center locations in case you lose one or two. Now you’ve over-provisioned, you’ve got an N+2 capacity situation, which means that you have a lot of very expensive compute resources sitting idle a lot of the time.

The idea of oversubscription is that you could say, “Sometimes I need these resources occasionally, but the rest of the time they’re sitting around idle. That’s really expensive for us. It’s limiting our ability to do work. How can we get extra work out of those resources opportunistically?” The idea of oversubscription says we’ll schedule a bit more work onto those resources than they can do at the peakiest peak. We can do that because we have tools to remove some of that work at the times when the capacity is needed for its primary purpose.

That’s something that sometimes happens within data centers. Not all data centers are operated that way. It’s definitely something that happens within how we operate the Internet. The Internet has a notion of quality of service tiers where when it’s extra busy, it’ll drop the lower tiers in favor of only serving the important ones. It’s also how things like 5G and cellular networks work. They’re heavily oversubscribed. They have tens, maybe hundreds of times more traffic signed up to use them than the network can actually sustain. They cleverly drop load at certain times to make that possible.

Jesse Jenkins

You don’t necessarily notice, but you’re getting throttled back in terms of your bandwidth all the time.

Astrid Atkinson

That’s right.

David Roberts

A couple of questions about this, about BY-ing your own C. You guys didn’t go for the BYONCE, sadly. I guess because you’re trying to make room for gas to bring your own new clean capacity, clean energy?

Jesse Jenkins

Yes.

Astrid Atkinson

I think it was just a failure of imagination.

David Roberts

We use BYONCE around here at Volts. But this model — a couple of questions about it. One is, if you add to the complexity and cost of building a data center the additional complexity and cost of building a power park next to it, are you skewing the market in favor of big players? Are you at risk of wiping out the guys in the pickup truck in the lower end of the market? Should we care about that?

Astrid Atkinson

There’s not a lot of really low end of the data center market.

Jesse Jenkins

Not anymore.

David Roberts

Everybody’s big now.

Astrid Atkinson

I guess everybody’s pretty big.

Jesse Jenkins

In terms of bringing your own capacity, once you’ve solved the local transmission constraints with some amount of flexible interconnection, which is backed by either compute flexibility at the data center itself and or typically some combination of compute flexibility and on-site generation or storage, you have the ability to get around transmission constraints when they’re relevant. The other 99% of hours of the year you have access to the whole grid. You can’t go from Kansas to New Jersey potentially, but you have a much wider catchment that you can draw on.

You don’t need to build a co-located power park right next to your data center. That is an option. It’s really only an option in certain places like West Texas or Oklahoma where you can actually build a gigawatt’s worth of supply in one location. That’s what Intersect Power, which was just acquired near their pipeline, was just acquired by Google, is doing at a few locations. What my company, Firma Power, that I started recently is trying to do is say, once you’ve got that unlock, where are the wind, solar, storage, demand flexibility, VPP resources across the much broader grid that if you assembled them in the right optimized portfolio could deliver all 100% of the accredited capacity, meaning it can get you all the energy you need when you need it, and some fraction as desired by the customer of the energy on an hourly basis that they need as well, and deliver that to the site of the data center using that old-fashioned grid that we’ve built for a reason.

David Roberts

You’re assembling a virtual power park basically.

Jesse Jenkins

You could call it that. But it’s just the grid. This is just how we do power.

David Roberts

This is what you’re calling nearby but not on site. Both those are important. They’re not on site so you don’t have to build everything behind the meter. But you do need, if you’re going to buy capacity resources that are not on site, you do need them to be on the same grid.

Jesse Jenkins

There are differing constraints that utilities apply. There’s what we call the big C capacity, which is the accredited, the formally accredited capacity as designated by PJM or MISO or SPP or whatever the capacity market entity is in the region that you’re in. They each have different formal constraints about how far you can move capacity from one region to another. You can’t necessarily go from one side of their market to the far other side, but you generally can move it at least adjacent to adjacent zones across a fairly wide area.

Then there’s also the little c capacity. What actually is deliverable during operations? What will the utility that has to agree to connect this resource actually trust to show up when they need it? The basic picture is we have to widen our view out from just the constraints caused locally by the data center connection and think, are there important binding transmission constraints between where this wind farm is or this large battery project is and where the data center is? If there are, do those occur at times when we don’t have available resources on the other side of the constraint, when it actually is one of those binding capacity periods?

That’s exactly what our company’s trying to do. That’s not a trivial thing to say definitively. It’s not trivial to identify the right mix of wind, solar, and battery resources that operate collectively to meet your needs. Their capacity accreditation evolves over time because as the mix of resources in the grid changes and as the demand changes from electrification or data centers, the times when the grid is stressed moves around. Solar might be great in the summer afternoon, but it’s not good at night in the winter.

The values of these resources change over time. What we’re trying to do is design optimal portfolios that manage all of those risks for the customer and take care of that complexity. If we can do that, then we can unlock hundreds of gigawatts of resources in the queue already under active development, ready for deployment in 2028-2029, 2030. Exactly in this crunch time when there aren’t a lot of other options. It’s not an easy thing to do.

That’s why we felt like we had to start this company, because outside of Google and a handful of others that are painstakingly assembling these deals, it isn’t the easy button solution. What we want to do is, using optimization software and good commercial efforts from our supply team, actually make it easy for data centers, as easy as contracting with a gas station.

David Roberts

Just to clarify what we’re talking about here, what you’re doing for data centers is you’re saying to them, instead of you having to build everything on site, which can often be the most expensive option, we can put together a portfolio of resources for you that we can guarantee are not going to trigger the need for transmission upgrades. That’s the whole point, to avoid those additional costs of transmission upgrades.

Jesse Jenkins

Or at least that they’re already in the interconnection queue sufficiently far along that the upgrades required to interconnect them can be completed before your online date.That’s not just any portfolio of resources.

That’s not any portfolio of resources. They have specific characteristics and require some digging and research and work.

And some optimization software that we’ve developed based on the research at Zero Lab. It’s the kind of thing that we were doing in a hypothetical way in this white paper: using this mix of on-site compute flexibility, flexible generators that are on site or close to the site that we can use to relieve transmission constraints, and then the broader mix of available resources across the grid region to solve this problem. This is basically how a utility does its planning.

If you think about a vertically integrated utility that has to do generation and transmission planning, maybe has some demand flexibility programs in their portfolio, they’re not turning to one resource to solve the problem. They’re developing a portfolio.

We’re trying to do that wherever the data center needs to show up, because some utilities will do that, but others aren’t capable of it, either because of the structure or the transmission owner doesn’t own generation or because they’re a small rural cooperative that has a peak demand of one and a half gigawatts. Now you’re trying to connect 600 megawatts to their grid or other circumstances like that, which we find pretty broadly across the country.

David Roberts

One piece of that portfolio, Astrid, that we have not dug into at all, but that I’m endlessly curious about, is the compute flexibility itself. The conventional wisdom as I understand it among the data center folks is flexibility via on-site power resources is easier and cheaper than trying to flex our actual compute load. The actual flexing of the compute load itself is going to be relatively marginal. But you included it in this paper pretty prominently.

Of the compute loads that run in these data centers, what percentage of them can be moved around in time or geography in a way that makes a data center more flexible? Is there a set answer to that question? Does anyone know?

Astrid Atkinson

We know a lot about this. It varies a great deal by provider who’s administering the cloud, and it varies a lot by resource type. Part of the reason why we included it in this paper was to take a forward stance on what’s possible. There are some cloud providers today that have the ability to move load around in space and time. Google’s capability to do this is probably the most advanced in the industry.

David Roberts

Google’s been beavering away on this more than anybody else for longer than anybody else.

Jesse Jenkins

Just as an aside on this, the reason they started doing that was actually to help optimize their emissions impacts.

Is that not correct?

Astrid Atkinson

No, this work long predates that. The reason that Google does this is for reliability. Their cloud model was built from the earliest days to be able to move load flexibly between data centers, so that in the event of a network failure or a data center failure or a software failure, you’d be able to pretty much instantaneously move load to another location. They have since used that for emissions optimization, but not really in a large-scale way. It’s a core part of Google’s operating profile.

David Roberts

Can you give us a sense of the scale?

Astrid Atkinson

I could drain a data center in under a second when I was operating large-scale services there. It’s nearly instantaneous and there’s a few different ways. Under a second is probably not true. Couple seconds. Their ability to move load partially between data centers or even completely take a data center out of circulation is very advanced.

David Roberts

Just to give people a sense of scale. Do you think that’s going to be a contribution to flexibility that is commensurate with on-site power resources? Less, more?

Astrid Atkinson

It could be, but only some cloud providers have that capability. For example, Meta has some ability to do this. Microsoft and Amazon both struggle to do this, not from a technical capability perspective, but because a lot of their data center usage is from cloud customers. In those cases, they’ve often made commitments to provide a certain actual set of resources.

Jesse Jenkins

It’s a contractual constraint.

Astrid Atkinson

It’s not a technical problem. It’s a contractual problem. It’s saying, “You got these chunk of servers in this particular data center, you will always have that chunk of servers, those are yours.”

David Roberts

This might be a side question here, but is there anything equivalent to a flexible interconnection in terms of cloud providers? In other words, you can have this amount of cloud 90% of the time, same sort of thing.

Astrid Atkinson

All of the cloud providers do provide that capability, but because a lot of cloud loads are a lift and shift from the older corporate on-site data centers, where it’s like, “I had a server in my office and now I have a server in the cloud,” there’s often a lot of difficulty in moving those types of loads around. You have to build differently for a flexible cloud.

The other thing is an accounting problem and we’ve actually run into this and needed to tackle it for our work with utilities. In some cases you need to be able to name and then depreciate an asset to fit into the accounting construct of the customer. You really need to be tied to a particular location. There are nested business problems in there.

David Roberts

If you’ve got all these hyperscalers, all these data center people that are panicked to get on the grid and they’ve got bags full of money, surely they are all working on this, pushing compute flexibility as far as they can.

Astrid Atkinson

Absolutely. The current ability to do this varies between provider. Typically, hyperscalers who actually operate a very large fleet have more ability to do this just because they have more locations to put things. There are companies that are offering that capability of being able to curtail in place in a single data center as a commercial option. Emerald AI, that I was an advisor for and Jesse currently is, does this as a commercial service.

David Roberts

Compute flexibility specifically?

Jesse Jenkins

They provide this sort of operating system and integration with the data center’s job workload management system so that when they get that signal from the utility to curtail consumption or to respond to one of these flexible interconnection curtailment events, they can then dispatch the compute loads in order of their priority. Just like the data center looks like a non-firm, a portion of its firm and a portion of its non-firm are interruptible for the utility. It’s the same thing going on inside the data center. You have certain jobs that must be served. You have certain jobs in different tiers of reliability expectations.

If you’re in a lower reliability tier, you pay less for that service. There are many jobs in which you don’t need to be 99.9999% reliable. You’re happy to pay less and be curtailed six hours of the year or shifted to a different site if that’s available. Because there’s a broad range of players in the data center space, besides the hyperscalers, the big names that we’re all familiar with, there are all of these other players that build data center shells and then lease out the space inside them to put racks. There are people who lease the GPUs on those racks. There are people who build the entire data center and offer cloud as a service.

There’s a huge range of players here, and it’s growing. Their capacity is all growing. Having the ability to have a standardized way to do that across all of these data centers is what Emerald’s trying to supply to the market. There are other people trying to solve this problem from different angles as well.

Astrid Atkinson

The other thing to think about when we think about the ability to curtail power usage within the data center is that most data centers also operate at a low capacity factor relative to their nameplate requirement. The grid may be 40% utilized on average. The data center is probably 40% utilized on average for the majority of sites.

David Roberts

They’re not running at their full rated capacity all the time, even though that’s what shows up in the planning models. In practice, they’re not actually doing that.

Astrid Atkinson

Depending on the type of data center, but in general, that’s true. For training data centers and also crypto mining facilities, they are peaking to their full power capacity for a period of time and then potentially turning that off for a period of time. For training specifically, they’ll use 100% of their nameplate capacity, and for crypto in general, they will also use all of the resources in that data center. But that’s not by far all of the data centers that are out there. Most of the data centers that are serving anything from inference loads to cloud loads, which is the majority of sites that are out there and the majority of sites that are in queue, have a much more organic variability of the load that they’re serving, and they use less of the resources of the facility on average during their serving period of time. Unlike the training facilities, they don’t just turn off sometimes. In both cases, the average utilization is lower than nameplate. But it does matter what kind of data center it is.

Jesse Jenkins

It’s also worth pointing out that these all have big cooling systems that are a part of that load. If you have, say, 800 megawatts of compute load, you might have 150 to 250 megawatts of cooling system load at peak, depending on how efficient the system is. That cooling use, just like your air conditioning at home, varies with the weather as well. That also contributes to some of the extra headroom that you might have when it’s not the peak, hottest, most humid day of the year. When your chillers are running at their least efficient set point.

That’s also another potential source of flexibility, making use of that extra headroom when the cooling loads are not at peak, but also changing the cooling load. I’m working on a project that the former National Renewable Energy Laboratory, now the National Lab of the Rockies, is leading on using ground source geothermal heat exchange like we have at the Princeton campus here, to shift around the cooling loads and to make them much more efficient when it’s hot out so that you can drop your peak cooling load and make extra headroom for compute.

There are a lot of interesting ideas. There’s trillions of dollars being spent here. They’re all running into the same problem of how do I actually get what I need from the grid. That’s driving a lot of creativity about different ways to squeeze more out of it.

David Roberts

This brings me to perhaps my most beloved question, which you two are probably the best two people in the world to ask about this, even though I’m probably going to do several pods on this general subject in coming months, which is: everybody needs grid capacity. Jesse, you’re involved in a company now that is going out and gathering grid capacity, selling it to data centers.

As you both know, one of the things that I would very much like to see happen is for the spare grid capacity in households and buildings and businesses to be rounded up and to count for capacity that data centers can buy, because then you can get some of that trillions of dollars diverted into the DER distributed energy VPP market, which desperately needs money. I would like some structured way for distributed capacity to count as capacity for data centers so that we can bring some of their resources to bear in developing those distributed resources. This is something I go on and on about.

Jesse, you are now doing this. You’re rounding up capacity, you’re selling it to data centers. Do you have the ability, is it easy, is it something you can do to round up distributed capacity and then on the other side of it, do the data center people and do the utilities you’re working with, are they comfortable with distributed capacity counting as capacity?

Jesse Jenkins

We definitely look at distributed resources and demand response, or you can call them virtual power plants if you want, as a potential part of our portfolios at Firma Power. We don’t go and round those resources up ourselves. But there are a growing number of players in the market who are doing exactly that.

David Roberts

Aggregators, basically.

Jesse Jenkins

There’s Voltus. There’s Basepower, which does this with distributed batteries. There are a bunch of others as well. We would basically go to them and say, “How many megawatts can you give us and what date?” One of the nice things about them is that they can be done in pretty small increments. You can refine as you go. As the load of these data centers ramps up.

That’s another thing to point out to listeners. You don’t turn on a gigawatt data center overnight. You turn it on in stages over the course of probably two or three years. Their demands are ramping up over that period as well. There’s some value to being able to fine-tune and incrementally add capacity.

David Roberts

But you trust that that capacity is real. When you sell it to data centers and utilities, they trust that it’s real?

Jesse Jenkins

I trust it if contractually they say it’s real and there’s liquidated damages if they don’t provide it. That’s the way everybody should be entering business arrangements. On the utility side, this is where it’s important to differentiate between the big C capacity and little c. If you’re talking about PJM’s capacity market or MISO’s capacity secondary market, they recognize demand response as a resource and you can participate in those markets. If we can buy 50 megawatts of accredited capacity from demand response, we can get that accredited and use it in our portfolio and supply a data center.

Where it’s trickier is on the transmission owner side, where the load interconnection happens, where they are under no obligation to accept that as a legitimate solution to their transmission constraints. Traditionally, in most places, they don’t think of those as alternatives.

David Roberts

That’s half the promise. That’s half the whole promise of these resources.

Jesse Jenkins

Exactly. Ideally you’d be getting both value streams. You can use them both to solve transmission constraints and to solve accredited capacity challenges. Right now we’re pretty confident we can do the accredited capacity piece, but there’s still more work to be done to convince utilities that they can count on these operationally to resolve local transmission constraints. There’s a wide range across the industry of some utilities happily embracing this and others that are saying, “If it’s not a gas plant, I don’t trust it.”

Astrid Atkinson

This is also part of where we come in as well.

David Roberts

This is your whole thing. What’s your take on how much utilities trust distributed capacity resources to do the kind of work we’re talking about here?

Astrid Atkinson

The distinction that Jesse drew between using distributed capacity for capacity versus for managing transmission constraints is really important. There’s increasing acceptance of distributed resources as a capacity asset and good track records within the industry of folks packaging and providing that service, whether that’s the utility itself or third-party aggregators. There’s a really good opportunity even in that, to get a lot more money put into the VPP space.

When we look at the bigger picture here, this is a different take on the bigger orchestration problem. The goal of employing all of those little resources was to be able to aggregate up small-scale demand changes, to be able to increase the capacity of the grid and accommodate a lot more demand. When we first started talking about this, we talked about the source of that demand being electrification. The demand in that model is a bit more distributed and the solution is also a bit more distributed.

David Roberts

That’s still coming.

Astrid Atkinson

That is, firstly, that’s still coming, but secondly, the data center itself does present a really interesting larger-scale version of that problem where it can bring some of its own tools to mitigate its impact on the grid in the same way that we long imagined all of the little household devices impact, mitigating the increase in household-level demand. The data center can also choose to pay for capacity resources or other services from local distributed resources. That provides, as you mentioned, a much-needed potential additional revenue stream that makes it financially viable to leverage those. That’s the way that I still think about this as an orchestration problem.

Ultimately, what we need to do is understand what’s happening on the grid and then be able to dispatch resources, demand and supply, in a way that makes the most out of the supply that we have and out of the wires that we have and will build. Connecting this back to our role and what we offer in this space is that understanding of the grid that can translate into signals to folks participating in it, whether that’s distributed resources at the household level or to the data center itself to say, “Here’s how much grid you have, here’s how much you can safely use. Turn it down next Tuesday.”

David Roberts

Seems so simple, but it’s real hard. We’ve been lacking that basic information to do this.

Astrid Atkinson

It’s difficult, but not because of the technology requirement. It’s difficult because the system has to change.

Jesse Jenkins

Dave, I know you love VPPs and I love them as a solution to these problems as well. I want to second everything Astrid said and 100% endorsement. This is a critical piece of the toolkit that’s being neglected right now. I just want to make sure everybody who’s a VPP stan out there is also clear: if you’re relieving transmission constraints 1% of the hours or less of the year, and your vision is that then we make better use of the existing grid, which is great to use the transmission lines, but also the generators. It’s important to remember which generators are sitting there underutilized, ready to ramp up if you can make better use of them. It’s very inefficient and dirty coal and gas plants that are not currently being dispatched because they’re less efficient and more costly than the generators that are being dispatched.

This is why we have to do both things. We have to pair the flexible interconnection and distributed VPPs that solve local targeted transmission constraints and the very needle-peaky generation adequacy events that we might have to deal with. They can contribute to that too with the bring your own new clean energy piece of the puzzle. Because the other 99% of the hours of the year you have to consume a bunch of megawatt hours.

If you’re not directly contracting for new clean energy that can come onto the grid and meet your demand when you’re consuming it in a place that’s deliverable to where you are, the grid is going to ramp up idle resources to meet your demand. That’s going to be inefficient gas and coal plants that are sitting on the sides.

David Roberts

If I can summarize, unless we explicitly design it otherwise, these new data centers are going to get served with gas and coal plants that are currently —

Jesse Jenkins

Not exclusively gas and coal, but the majority is gas and coal. We saw that in our study when we looked at what happens if you don’t require resources, new resources to be brought online.

David Roberts

We should say, I can’t believe we haven’t said this yet, Jesse and Astrid. This is in some sense the whole point of the thing, but part of the advantage of the model you’re describing is that the data centers are paying for the new capacity that they need when they come online. Which means that you and I are not paying. That is —

Jesse Jenkins

— very important to say. A key part of the solution. Putting climate aside, the principal concern most people have right now about data centers is, “Are these going to jack up everybody’s utility bills?” The answer to that is exactly these two pieces of the puzzle. Avoid a bunch of those unnecessary costs and delays through flexible interconnection and make sure that data centers are paying bilaterally through a large load tariff or directly through a retailer arrangement for all of the new energy and capacity that they need. Ideally, that should be clean energy if we care about the emissions and air pollution impacts.

David Roberts

Flexible interconnection plus bring your own capacity. We should at least address the subject of what needs to happen to make this happen. Astrid, maybe you can talk about this. What needs to happen to make this happen? It seems to me as I think about this model, there’s a lot of parties involved in this that are going to have to change the way they do things to make this work. The first and most obvious thing is utilities need to more explicitly offer flexible interconnection. What other regulatory or legal changes or reforms do we need to make this model the default?

Astrid Atkinson

This does vary a lot by location. As we mentioned earlier, there are rules in Texas that support this reasonably well today. There are also new rules and proposed ones in SPP which are called “hills, chills, and spills” if you want to Google it around conditional high impact load additions. There are also a lot of very active conversations in PJM around updating the interconnection model to potentially allow for that idea of firm versus conditional loads. Some version of that is required to make this model work, but it’s not necessarily a huge change from the way that things work today. That’s pretty doable.

The other piece of this is that typically the interconnection agreement for transmission capacity happens somewhat separately. It’s usually between the data center and the grid operator, the local utility, to make an agreement that accounts for deliverability of power and the actual ability to plug into the grid. There you need the utility to be willing to have a conversation about potentially offering contingent capacity or a flexible interconnection model. You also need the data center to be excited about engaging in that conversation.

When we do this now, we often go in with the data center operator who’s interested in doing this work to go talk to the utility that they’re talking to and say, “This is real.” One of the things that we ran into when we started looking in this space and looking at providing flexible interconnection for data centers is if you go to the data center, they’d be like, “We’re interested in that, but will any utility really do it?” Then you go to the utilities, and the utilities are like, “We’re interested in that, but would any data center really do it?” That’s actually a big part of the reason why we released the study that we did, to help move that conversation forward, because it was just like two shy people at a dance. They just wouldn’t talk to each other.

David Roberts

My impression is that the model is pretty sensible. It seems to address everybody’s concerns. Seems like a win-win. Is the major barrier here just introducing these two shy kids who are standing on the side of the dance floor, or is there anyone against this? Are there opponents?

Astrid Atkinson

The opponent is really the status quo.

David Roberts

Always the main opponent of everything.

Astrid Atkinson

It requires making a different sort of interconnection agreement. Most utilities aren’t very well equipped to do that kind of analysis today because you have to, instead of looking at a point in time and a couple of contingencies for an interconnection analysis, you might need to look at thousands or tens of thousands of scenarios. That’s where this is a data and software problem.

David Roberts

That’s what Camus does. That’s what you’re answering.

Astrid Atkinson

There’s a bit of an industry tool evolution that’s required to make this possible. But it’s always the process change that’s hard. You need to actually sit down and work with the planning team at the utility and understand what are their real considerations, how would this fit into their current process? That’s a lot of what we’ve been doing as we’ve been working on making this real.

David Roberts

If there’s anything that can overcome the inertia of the status quo, it is giant corporations with huge bags of money. This actually seems to be happening. It does seem to be shaking loose this incredibly sclerotic industry and sector. It’s super interesting to follow.

One question, Astrid, maybe just quickly, is: I think a lot of people who read about data centers, there are already data centers who are building on-site power. We were just talking about them, they’re building on-site gas. How’s that different from this model you’re requiring? I know the flexible interconnection might be different, but in terms of bringing your own capacity, there are already a bunch of data centers that are not quite completely offline or completely online. They have some of their own capacity. How’s this different?

Astrid Atkinson

The real difference is that we’re talking about incorporating as much of the grid mix as possible into the power footprint for the site.

David Roberts

Your on-site resources are just for contingencies, just for outside events.

Jesse Jenkins

There are two flavors of this. One is yes, all data centers have backup generation for contingencies. Usually those are diesel gensets that are only allowed to run a limited number of hours of the year or they avoid their air pollution permits, etc. Those are really just for backup. They also have uninterruptible power supplies, which are very short duration batteries that can handle little blips in grid service and things like that and keep running through. The kind of gas rush that we’re seeing is often either entirely off grid or it’s in addition to the grid connection. You might get a 200 megawatt firm grid connection and then you have 300 megawatts of gas on site separately.

There’s this large project in Pennsylvania that’s at the site of an old, I think two gigawatt coal plant, and they want to have four and a half gigawatts or something like that of total capacity of combined cycles on site. Most of those are going to be running all the time because you can’t get service from the grid. What we’re talking about is if you got a gigawatt scale data center, you have a gigawatt size substation and grid connection. It’s just that a third of that might be curtailed at some part of the year. The key difference is we need to move between this binary 100% firm or entirely not firm, not supplied at all by the grid kind of world. Remember that those transmission constraints are very rare over the course of the year and they can be managed operationally if the utility is willing to do it and has the capabilities to do that.

David Roberts

Got it. Flexible interconnection and bring your own capacity and quit building stupid on-site gas plants. From what I’m hearing, the pieces of this model are basically in place. The actors have all the motivations they need. It’s more or less just a process of hashing it out at this point, just getting people on board and signed up. It sounds like there’s a lot of open runway here to make this work. I’m curious if there’s been any reaction. I know this thing just came out, but if there’s been any reaction from the industry, it seems like they would welcome this.

Astrid Atkinson

This can be done. We have the tools that we need today. It is more complicated than just going fully off grid. You have to get multiple parties to agree to it and maybe put together a coalition of the willing. That’s where efforts like what Jesse’s company is doing can be really helpful here. I also hope that —

David Roberts

Make it a little easier, just a little more turnkey for everybody.

Astrid Atkinson

Likewise, stepping into that data entity tooling gap with our data center interconnection product also hopefully makes this a little bit easier. We definitely have seen a lot of increasingly serious interest from data centers in pursuing this path. What will really make this happen at scale is proving beyond a shadow of a doubt that it’s definitely going to be quicker, because once that is clear, there will be no debate about which direction to move.

David Roberts

Quick is the trump card.

Jesse Jenkins

The value of getting online a month earlier is so much higher than all of these things we’re talking about. It’ll be a competitive necessity.

Astrid Atkinson

Our number for the opportunity cost or corresponding value of getting a data center online a year earlier is about $7 billion for a gigawatt of capacity per year.

David Roberts

That buys you a lot of capacity.

Astrid Atkinson

It buys a lot of everything.

David Roberts

You could buy a really big VPP for $7 billion.

Astrid Atkinson

When I mentioned that modeling out what it costs to put in batteries instead of a gas plant was just a couple of extra billion dollars, that’s not super important. It’s in the context of that opportunity cost number.

David Roberts

If it shaves a year off —

Astrid Atkinson

— it pays back in under a year.

David Roberts

— for itself a hundred times over. That’s wild. Faster, cleaner, and a more stable grid. An excellent model for data centers. Lots of companies and entrepreneurs springing up to make various parts of this easier. Really cool and interesting area to watch. Thank you two for coming on and walking through it with us.

Jesse Jenkins

Our pleasure. Thanks.

Astrid Atkinson

Yeah, 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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much and I’ll see you next time.

David’s Notes

1. 🙃 We are at war with Iran. Or maybe it’s not a war. Or maybe the war’s over. Maybe the war’s been going on for 47 years and now Trump has ended it by starting a giant bombing campaign that looks strikingly similar to a war. Maybe the true goal of the war is to undo the primary effect of the war. In MAGA world, all these things can be true, and none of them, at once — whatever makes Dear Leader look good in the moment.

In last month’s email, I wrote about masked, armed government thugs kidnapping people off the streets of Minneapolis. This month, I’m writing about a war in Iran. What will I be writing about next month? The mind, it boggles.

Everyone is claiming to know how this is going to turn out and what it means for global energy markets and all the rest. As for me, I have no idea and I don’t think anybody else does either. We won’t know what all this means until we’re looking back on it many years later.

I will say this, though: the case for independence from fossil fuels has never been stronger.

2. 🏂 So there I am, in Bend, OR, visiting a friend for one last attempt at snowboarding. (The snow situation is … dire, friends. Dire.) The house where I was staying at was in one of those suburban-style developments that are all over Bend, with their winding streets, big lot sizes, and big single-family houses. As is my wont, I got chirpy about it on social media.

Yeah. Pretty chirpy. Several Bend residents took up arms to defend the city’s honor, including, uh, the mayor:

It turns out I was in fact wrong! Many such cases.

Thanks again to the Mayor Melanie for extending me more grace than I probably deserved — and for showing up with charts and graphs! (Be still my heart.) Visit Bend if you can, it’s great.

3. ☀️ Another balcony solar update courtesy of Bright Saver’s bill tracker: Virginia’s legislature passed a plug-in solar bill and it’s now awaiting the governor’s signature. That’s a semi-big deal: Virginia is data center ground zero and, like the rest of PJM, has seen electricity rates sharply rising in recent years. Affordability politics FTW?

As the victories pile up, you won’t be shocked to hear that utilities are starting to mobilize against it. Sigh. A bunch of other states still have bills in play, whereas Arizona, Georgia, Indiana, New Mexico, Washington, and Wyoming have kicked the can to 2027.

4. In Dec. 2023, I ran a podcast with a startup called Sublime that was making cement with no carbon emissions, by using electrochemistry in place of combustion. It is, in my 5+ years of doing this, one of the most exciting and promising technologies I’ve come across — one of the techs I most often mention to people to get them excited about the future.

If electrochemical approaches — to cement, to steel, to recycling — can be scaled up and brought down in price, the biggest and most “difficult to decarbonize” sectors will be solved. Heavy industry will be electrified. Smart policy would be plowing money into early-stage companies in this area. So this is just a huge, huge bummer:

And that was after job cuts at Boston Metal (electrochemical steel) just last month. Electrochemistry is having a rough go of it.

It’s all so excruciatingly short-sighted.

5. 🔌 Last month, I ran a podcast with RMI’s Joe Daniel about the increasingly widespread critique that US utilities are taking too much in profits. Here's a new Energy & Policy Institute report about the steadily-rising profits of utility executives, and an EPI calculator that will show you exactly how much of your bill goes to utility profit margins (instead of being invested back into the system):

(EPI’s David Pomerantz is also a past Volts guests — one of our all-time most popular episodes, about utilities lobbying with ratepayer money.)

6. ✅ Community comment(s) of the month: as you could hear in the “how to design a brand-new city” episode, I was rather charmed by Jan Sramek’s plan, and what do you know, he’s answering listener questions in the Volts comments section:

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.

New York Governor Kathy Hochul is trying to delay or roll back the state’s landmark climate law in the name of affordability. I’m joined by activist Pete Sikora to discuss the governor’s claims, what would actually serve affordability, and the larger politics behind this puzzling own-goal of a fight.

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(Active transcript)

Text transcript:

David Roberts

Hi, everyone. This is Volts for March 20, 2026: “The high-stakes battle over energy affordability in New York.” I’m your host, David Roberts.

New York passed its big climate law in 2019: the Climate Leadership and Community Protection Act, or CLCPA. It was, at the time, one of the most ambitious pieces of climate legislation anywhere in the country: it set hard emissions targets, laid out a path to net zero by 2050, and enshrined environmental justice as a core principle rather than an afterthought.

Six years later, Democratic Governor Kathy Hochul wants to roll it back.

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The stated reason is affordability. The administration has pointed to a memo suggesting that complying with the law’s 2030 targets could cost some households upward of $4000 in annual energy costs, a number Hochul has leaned on heavily. Critics argue that the scenario the memo models does not represent the policy anyone is actually pursuing — and that the state was falling behind on implementation long before this supposed crisis.

The legal picture is messy too. A court ruled last year that the state was violating its own climate law, the state appealed, and the whole fight is now tangled up in budget negotiations with a March 31st deadline. About two-thirds of Democratic state senators say they oppose any changes to the law.

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My guest today is Pete Sikora, a senior advisor for the nonprofit New York Communities for Change and a longtime state activist. We’re going to talk about what Hochul is actually proposing, how advocates think about the affordability challenge, and what all of this means for state-level climate ambition at the exact moment the federal government has gone full climate nihilist.

With no further ado, Pete Sikora. Welcome to Volts. Thank you so much for coming.

Pete Sikora

Thank you so much. I listen all the time and this is, for me, like being on the Super Bowl of podcasts. It’s exciting.

David Roberts

I should have some Seattle Super Bowl joke ready to go, but I’m—

Pete Sikora

Oh, God, it’d be lost on me. I barely watch it.

David Roberts

I know exactly. We’re like two illiterates. Pete, before we get to the mishegoss in front of us, let’s do a brief history review here. In 2019, the big New York bills passed the CLCPA. As far as I can tell, from the jump, New York was falling behind, maybe even before stated targets, and has been falling farther and farther behind. Maybe just give us a brief capsule history of what’s happened since the bill was passed. I know they’ve been falling behind, there’s been some fights in the legislature about it. Give us a little potted history here before we talk about the present.

Pete Sikora

Our governor at the time was Andrew Cuomo, and Cuomo was very Machiavellian, power-oriented. He and the legislature shaped this. The legislature wanted to pass a bill like this and the governor wanted to weaken it. That was the fundamental dynamic at the time. You probably remember the Green New Deal was popping, California wildfires, UN report, big activism. There was a lot of pressure to do something. What popped out of the system was the CLCPA, which was based on legislation called the CCPA. Funny thing here, the governor changed the name to put a stamp on it in a very clear way. That’s the kind of guy he was.

David Roberts

Not full Trump, though. It’s not “CLCPA, brought to you by Andrew Cuomo.”

Pete Sikora

No, no, no. Not “gold lacing and marble,” but the Andrew Cuomo equivalent.

David Roberts

Yes.

Pete Sikora

The bill passes, and effectively it’s a bill that sets requirements for the state government to reduce pollution at a pace and speed that matches the Paris Climate Agreement, the “science” here, to avoid global catastrophe, or at least give us a good chance of that, and also sets a process in place and gives the governor a lot of regulatory power.

The process is essentially convening a Climate Action Council with representation set by the governor and the legislature, who then do a lot of deliberation. They create a plan, then the governor is charged to implement that plan and has regulatory discretion to do a great deal of it by regulation.

That’s effectively it. It says, go hit these targets, and they’re not targets, they’re laws. There’s a process set, and it says, do this process to achieve these targets, take into account all these different factors and do it by 2024, and then go hit those metrics.

David Roberts

Why is New York failing? This is probably a whole separate pod, but the distributed solar stuff, for instance, is going very well. As I understand it, the utility-scale renewables are going very slowly. There’s a lot more red tape and difficulty than we thought. Is there a capsule explanation for why New York is so far behind so soon in the process?

Pete Sikora

The governor just took everything that the Climate Action Council came up with—her own appointees—and ignored it. That’s the capsule summary. They didn’t do the policies, they didn’t do the regulations, they didn’t do the things that would have implemented the law. They did a few things here and there, but by and large, nothing that would have implemented the law correctly was done. Little bits and pieces. For example, the state passed ending oil and gas in all new construction. That’s fantastic. That’s really good.

As you pointed out, distributed solar is a real bright spot. The numbers are moving there. It’s good. The CHPE project is about to connect. That’s a big transmission project from Canadian hydropower to New York City. Very cool too. There’s good things happening. But by and large, the long list of things in the climate plan was not done—90% of it not done. The centerpiece was Cap and Invest. The governor pulled that back at the last second the same way she did on congestion pricing. It’s in this weird limbo where it’s paused now.

David Roberts

That’s what she just did.

Pete Sikora

She did that a little while ago.

David Roberts

As I understand, just to give listeners a little background here, New York’s been falling behind on these targets pretty substantially. There was a lawsuit, the judge said yes, in fact New York is falling behind on these statutory standards and they’re statutory, so you have to do it. What the administration has done, because a big piece of the policy, as you say, was Cap and Invest, which they have not yet put in place, they have not yet designed and put in place.

But what the governor’s office is saying is, “Look, if we had to meet this 2030 target, 40% economy-wide reductions by 2030 after having fallen so far behind, we would have to do a bunch of reductions really quick. We would have to design a Cap and Invest program that was quite severe to get these now quite substantial reductions in a very short amount of time. And doing that,” they say—they released this memo—”doing that would jack up household prices at a time when energy is already getting more expensive.”

A couple of questions about that. One question is they haven’t actually designed and released a Cap and Invest program yet. We don’t know what it looks like yet. They’re telling us that it’s going to be very expensive. But what are you supposed to do with that without being able to see the details of the program that they’re talking about? What is going to be expensive?

Pete Sikora

There are so many layers of flimflam here. The governor’s stated rationale is Trumpy. It’s what the Republicans do to try and jury-rig numbers that show the result they’d like to scare people into. Stepping back for a moment. Bills are going up in New York and pollution has been going down a little bit, but not fast enough. Bills are going up because of the legacy costs of the system and oil and gas prices spiking. Distribution costs are going up.

David Roberts

Is there analysis of this? The administration says one thing, the environmental community says another, another community says another thing. Has someone done a report or an analysis or something that explains why New York energy prices are going up, backed by data and analysis? Do we have a good answer to why prices are going up in New York?

Pete Sikora

The New York ISO has an analysis and the climate plan included tons of analysis. In fact, the regulatory analysis was done for Cap and Invest. The state government modeled out all sorts of scenarios, did very thorough analysis as part of its process. Under the CLCPA, the regulatory structure is ready to go. It’s like the cameras being in place for congestion pricing and then at the last second they say, “No, we’re not turning them on.”

That’s where Cap and Invest was at that point. Everybody was ready to go. There were agencies of people high-fiving each other and then weird internal conference calls and agencies where the chamber, the second floor, the governor’s office says, “We’re not doing this right now, it’s going on hold,” and everybody freaks out.

That’s what happened with Cap and Invest. That was ready to go. But in terms of why costs are rising, the ISO, which is a private entity, as you know, the industry has a very heavy influence there, but it regulates a lot of what happens here. It has, by the way, been stalling interconnection. It’s part of the reason that there hasn’t been enough solar and wind interconnection, because the ISO is bad on that process in New York.

David Roberts

The utility-scale renewable energy is moving notably slower than it would need to to hit these targets.

Pete Sikora

It’s moving slower. Although just keep in mind, CHPE is connecting. Trump has been trying to whack the offshore wind projects, but there are two huge projects under construction right now. The Trump stuff has failed. They’re building it and it’s on track to be built. Two huge offshore wind projects are going to turn on just like Revolution Wind did and Vineyard Wind just turned on. That’s happening. Some positive things are happening.

But by and large, the targets aren’t—we’re not at pace to hit those requirements under the law. The analysis that the ISO did pins the blame correctly on the costs of what’s out there already, the need to maintain it, as well as oil and gas costs, and then they pin renewables costs as very minimal, just a few percentage points. If you’re looking at what makes up the costs, it’s mostly the distribution costs, which are going up because of an aging system that needs maintenance, and the costs of the energy itself. As we know, oil and gas—you have to keep digging it up and transporting it and refining it and bringing it here and then using it.

David Roberts

Yes. And it turns out that closing the Strait of Hormuz with an ill-advised military adventure is not an affordability strategy on the oil and gas tip.

Pete Sikora

It’s a moral abomination and will raise prices enormously worldwide. It’s going to manufacture enormous profits for the oil and gas industry at terrible expense.

David Roberts

I find myself somewhat baffled by Hochul.

Pete Sikora

Same.

David Roberts

Generally, but here specifically, the law’s on the books, you have to do something. She’s got a supermajority of Dems in the legislature who don’t want to change the law. It looks like her ability to change the law is quite limited. From outside it looks like nothing’s really going to come of this. Except now we have on the record a prominent Democrat saying climate policy makes energy more expensive. And if you’re worried about affordability, cut back on climate policy. Which just seems like a disastrous thing to say now in the middle of this national fight on that very question.

It doesn’t seem like she’s actually going to get what she wants. She’s just poking her party in the eye to no purpose. What is going on, Pete? Never mind the morality of it or the substance of it, just politically, just from her own perspective, what does she think she’s doing?

Pete Sikora

It is a real puzzle. The governor is not making good decisions here politically or substantively. Say what you will about Governor Cuomo, but he was very politically astute. He is a crazy man, but politically very sharp. He would take credit for the CLCPA and do events promoting it and all of those things. He went away. Hochul came in. He appointed Hochul and to be frank, I don’t think that Andrew Cuomo wanted a rival as Lieutenant Governor. He did not want someone who was going to outshine him. She is governor now and that’s who we have—a person who has a very moderate orientation and has made a lot of baffling political moves in New York politics. This is one of them.

David Roberts

Part of why they’re baffling is that the moderation doesn’t seem coherent. It’s not a coherent policy moderation. It seems more like a tickle, or something like that. Like an itch she wants to scratch. She needs to do something moderate-feeling, seeming. The policy is neither here nor there. She just feels like she needs to periodically make noises that sound moderate. That’s what I can make of her instinct.

Pete Sikora

It’s a weird philosophy where you think that you’re doing the astute thing if both sides are saying, “This is bad.” It’s sort of laughably odd. But that is how she operates.

David Roberts

Do you think she, in her mind, is angling for bigger things and that is why she’s trying to do this, “Hey, I’m more moderate than my party” signaling? Do you think she’s angling to move on, to move up?

Pete Sikora

To take it in good faith, and I’m speculating here, I think that she believes that we need more gas supply in New York to stabilize prices and develop the economy. I think that she probably believes that. She is listening to the industry scare story of blackouts, price rises, wacky environmentalists. That is what she is buying into. There’s a lot of money behind that story. There’s been millions of dollars in ad spending over the years. There’s phony grassroots groups. There’s a complex of organizations and corporate interests who are pushing that kind of a message. There’s both sophisticated lobbying and then there’s just the moderate scare story that comes from the oil and gas industry in the corporate world.

David Roberts

Let me ask this then. Because of the larger forces you might think might be acting on Hochul, there is the industry, obviously, and money people, but there’s also the national party. As I said, right now, one of, if not the central national disputes taking place is over energy affordability. You’ve got Republicans saying this transition is going to make things more expensive. “We have to go back to fossil fuels to make things cheap.” And you’ve got Democrats saying, “No, you have to do the transition faster. The faster you get to renewables, the faster you make things cheap.” Incredibly important, pivotal national argument going on.

Pete Sikora

She’s stepping on it.

David Roberts

Here she pops up saying, “Actually...” Why does the party let her? It’s so destructive. This is what I keep coming back to. It’s so destructive to the Democratic Party. Do they not care? Do they not have any influence over her?

Pete Sikora

I don’t think they care. I don’t think they enforce discipline. The party lets people do what they want. Here she’s running a Republican set of talk points that steps on the obvious message, which is that Trump is shutting down wind and solar. That’s bad. That’s raising our bills. We need to build wind and solar. We need to do that and fight Trump.

David Roberts

If you’re responding to a crisis, come to the press conference and say, “Trump is causing a crisis.”

To respond to the crisis, we need to accelerate the path we’re on. That’s perfectly good politics.

Pete Sikora

It’s obvious and it’s substantively true. Solar is the cheapest form of new energy. Why wouldn’t you push that? She oddly will say some version of what I just said—that is, Trump is bad, he shouldn’t be shutting down the offshore wind projects—and then she’ll pivot to trying to gut the climate law, and it’s like trying to drive a car stepping on the accelerator and the brake at the same time. It’s very confused.

David Roberts

This gets to another question I have, which I’m also baffled about, which is the climate law does not have enforcement mechanisms. New York’s been behind for years and could just continue being behind. If you change the target, you’re not changing anything substantive that’s happening or any of the needs or any of the driving forces. In other words, what substantively comes from weakening the law? You already don’t have to hit the targets. There’s nothing making you hit the targets. Why change targets? I don’t even understand what substantively would come of this if they did what she wanted.

Pete Sikora

A bunch. It’s both the case that it’s a little bit of ado about nothing, but there are very serious policy consequences if the law does get weakened. Let me talk to those for a moment. First thing, this is a very serious fight. If you’re in New York and you agree that the climate law should not be rolled back, pick up the phone right now, call a state legislator that represents you and tell them to reject Hochul’s proposals. That’s really important.

This is a very serious fight. She is coming full force. She has a lot of leverage in the budget process, which happens completely out of public view. That’s why she’s using the budget process. She’s trying to do very complex policy on the fly in the budget where she has leverage and the legislature can’t argue about it publicly. Then it all gets voted on in a big must-pass bill. She has leverage in that process. The political situation in New York is that the state Senate’s leadership is solid on this issue, particularly some of its leaders have been great. The Senate is holding up right now. We want them to stay firm. Call them and say be firm if you’re represented by a Democrat.

David Roberts

Two-thirds of them are on record, their names are on a piece of paper.

Pete Sikora

Two-thirds of the Democratic caucus, which controls things here in deep blue New York. The Assembly is similarly absolutely dominated by Democrats, but it’s not as strong on these issues. It’s better on other liberal causes, but on this area, the leadership in the Assembly is not strongly ruling out changes. They’re really the body that is up for grabs here. Individual Assembly members—we have to move them right now to stand up, go to the Speaker, say we are not doing this.

To go back to your point, this is a big-time fight. Just like on laws, we have a constitution in this country, the state has a constitution. There are laws. Those things should be followed. Laws are there to be laws. They’re not options, they’re not recommendations. You’re supposed to follow them. The reality of government is that laws don’t always get followed and then people can sue to enforce them. That creates pressure or it should create pressure to follow those laws. So should democratic pressure. We all should be invested in following laws. That’s important as a society.

The governor has been disregarding the climate law and blatantly so. There’s a really nice tracker that the Columbia Sabin Center has where it goes through in detail what she’s done out of the plan and what she hasn’t done. It’s all not done. That’s where the lawsuit came from. It’s that you didn’t do what the law says, which is create a plan, then implement the regulations that are then going to achieve those kinds of results. That’s why she’s under the gun right now, because there’s a lawsuit and there’s a lower court that has ordered her to act. She’s appealed that order.

David Roberts

Can I ask about the lawsuit? I think what they’re invoking in their memo—the administration put this memo out showing that the as-yet-unimplemented Cap and Invest program would drive up prices substantially.

I think what they’re saying is that the court is going to tell them, “You have to hit the 2030 target after all.” Right now I think you’re six or seven years behind hitting that target. Hitting that target by 2030 really would require radical catch-up action. Is that a possible outcome of the lawsuit? Is there a chance that a court could tell them, “No excuses, hit the 2030 deadline by 2030?” Because that really would require a disruptive level of action.

Pete Sikora

There’s no chance that a court will say, “You must use Cap and Invest at a ridiculously jacked-up price of pollution to force the change exclusively to achieve those requirements.” There is zero chance of that. That would never—

David Roberts

That’s what the memo models.

Pete Sikora

Yes, it is a contrived scenario that no one supports. The litigants do not support, nobody supports. The governor would oppose. The court would have to go wildly crazy to issue some sort of order like that. It’s just not in the realm of reality.

David Roberts

Let’s talk about this memo and cost a little bit. After this memo came out, a group of green groups came out with their own analysis showing different results. The core of the disagreement is the memo shows the costs if you did all this through the Cap and Invest program and if you ignore the benefits of the money you raise and just model the costs, there are lots of costs. The counter paper from the green groups is saying, “There’s not just costs, there’s also dividends which you are spending and the spending is getting you various benefits.”

But then I wonder—the costs of raising the prices of fossil fuels hit basically everyone. The benefits of this dividend spending, you’re sending it to some households and funding some projects, but not everybody. This is a classic sort of “everybody’s paying and a smaller class of people are benefiting.” How confident are you that the green groups are substantively right on this affordability question?

Pete Sikora

100% confident. That’s backed up by the governor’s own analysis back when they were actually doing an analysis. They modeled Cap and Invest scenarios and at the kind of prices on pollution that they were modeling and the structure that they created and were proposing and modeling, your average New Yorker benefits. The system gets billions of dollars in spending to go towards things like energy efficiency, solar upgrades to homes, stuff that helps people. Part of the money gets back to people in their pockets in order to give them money. Working people getting money out of that—that is popular.

The idea of Cap and Invest is very wonky and nerdy and if you go into the details, you get really lost in it. We can definitely do that. But the overall picture here is that the kind of program that the agencies were on the verge of proposing, that was modeled out and thoroughly ready to go, is a modest Cap and Invest program that moves the needle towards those requirements and hitting those targets, but is not a total solution to it.

David Roberts

Can I raise a flag about this? This seems to me at least one area where the administration has a point. The modeling that New York State did of the Cap and Invest and the sort of counter modeling that the green groups have just done to counter this memo, both of those took place before Trump yanked all the IRA subsidies. Both of those included a lot of subsidies from IRA for residential electrification, EVs, etc. Yanking all that money out means that New York State will have to spend a lot more of its own money to get commensurate results, which means less going back as dividends.

This is part of a larger point that the administration makes, which is the law was passed in one world, but since then we’ve had Covid, supply chain disruptions, Trump, the OBBB, war — things have changed. Including that is no more IRA subsidies. Don’t you think that does change the financial calculations?

Pete Sikora

It does. The law was passed in 2019 in the first Trump term. The modeling began then, the consideration. New York has had these requirements as executive orders for a long time. Yes, losing the IRA subsidies for clean energy is not good. But the governor has the power to make up for that money. She does not want to. They don’t want to put in the money at the state level to backfill the loss of IRA subsidies. Full stop. That they don’t want to do. They don’t want to do it because she doesn’t want to have to raise that funding.

The most obvious way to raise that funding and a giant issue in the budget right now is to raise revenue from very rich people—to tax the rich. That is immensely politically popular and raises truckloads of money. But she’s absolutely opposed to that as well because that’s her philosophy. She does not want to raise taxes, particularly on the rich. She argues that on everybody. But the proposals are on the rich. She does not want to do a high Cap and Invest price either.

But a modest price gets you a long way. The state government can do a lot of things to hit those requirements. Cut utility bills in the process, rather than raise them. Cut them. That’s what you get from good, smart policy. Reduce pollution. We’ve got four years to 2030 where that’s the requirement. Instead of preemptively surrendering, she should go back and do the things that her own administration said we should do. They did thorough analysis on that.

David Roberts

Is the official position of the green groups in New York that Hochul should just do what she was going to do?

Pete Sikora

That is a funny way to put it. Everybody’s all over the map here. There isn’t some unified position.

I’m not speaking for the litigants. We’re not a litigant here, but we are a player in the politics of this issue. From our perspective, the requirements are there and the state should move to achieve them. There’s lots of ways for them to do that. The obvious way, the centerpiece of what was their plan, is a modest Cap and Invest program, which would move the needle enormously. Then there’s lots of other things that are not giant things individually but that add up hugely. Things like faster permitting, better interconnection, subsidies for low-income New Yorkers to go to heat pumps and energy efficiency, implementing Local Law 97. That’s a city thing, but the state can help.

There’s lots of moving parts here in a complex picture that the state can improve on. We’re going to come close to 70% renewable energy by 2030, a lot closer than we are right now because offshore wind is going to turn on. CHPE is going to connect. It’s not going to be completely out of reach. It’s going to be not that far off. The governor’s own energy plan, which frankly was written by the gas industry—I know some might take exception to that, but that’s our take. Even that plan says, “Look, we can move it out to 2033, 2034, on 70% renewables for the grid.”

We’re making progress and there’s no reason to weaken the law right now and roll it back, which would then cause some serious policy consequences, but mostly would be a big political signal to the agencies, to the courts, to everybody—undermine the Democratic Party—that New York State is pulling back because Governor Hochul has decided it. She made the legislature back down. That would be a disaster.

David Roberts

They’re pulling back because, whatever she’s actually saying, and if you parse her words, she’s mostly saying good things, but just in an order or in a way such that they amount to something bad. It’s a weird thing she does.

Pete Sikora

It’s a little baffling, but it is utterly serious. She delayed, for example, implementation of the All-Electric Building Act, which says that all new construction has to go—with some exceptions—but all new construction has to go off fossil fuels and to heat pumps. New York City, we won that law. We passed that in New York. Local Law 154, it’s been in effect for years. No complaints. It’s happening in New York City. But at the state level, Governor Hochul by fiat decided, “I’m just going to delay this a little bit.” Not much, but a little bit.

David Roberts

This is what I’m saying—whatever her actual words and whatever the actual facts in New York, the vibes-based outcome of all this is going to be, “They admitted it.”

That’s what you’re going to read in right-wing media.

Pete Sikora

Look, you’re already reading it.

David Roberts

“They admitted it,” that their climate policy is driving up prices and if you want to control prices, you trim back climate policy. That vibes-based outcome to me is almost worse than any substantive outcome in New York. That’s such a crucial fight right now. It’s such a pivotal fight right now. Let me ask you this, Pete. Here’s my real depressed—this whole issue kind of makes my stomach hurt because I know you’re confident and I know you have to be confident by the virtue of your position, but I don’t feel super confident that I know what would bring down energy prices in New York.

Here’s what I worry about. My worry is that energy prices are going up in New York for many of the same reasons they’re going up in lots of other places, which are large structural forces. The fact is, whether you cut this law off at the knees like Hochul wants to, or pursued it full bore, in either case, it’s probably the case that energy prices are going to continue going up in New York. My worry is who gets pegged with that, who gets saddled with that. My worry here is you have a Democratic administration implementing a climate law and prices are going up. It is trivially easy to tell that story.

If then the governor says, “This is too much, I want to pull back,” and the legislature forces her to not pull back and to go full bore and then prices continue rising, that’s the worst of all worlds. The terrible political story from her, terrible outcome. I almost feel like energy prices are going up regardless. At this point half the game is about who gets blamed for it. Is that too depressed?

Pete Sikora

No, this is a hard subject. It’s no fun and we all get angsty about all of this and rightly so. There’s some really big stuff going on here. Your episode on the mid-transition is instructive on this point. There’s a big problem coming here of increasing energy costs. Democrats should not fall for Republican talking points and start to blame themselves for it. That is incredibly stupid.

David Roberts

That is their nature, Pete. That is their essence. It is the essence of liberaldom to hate and self-loathe.

Pete Sikora

That’s right. We will argue against ourselves really eloquently, but the point here is that we should full force make the right argument, which is that solar and renewables and batteries are rapidly improving. The costs are dropping. They’re already price competitive, if not better. That’s where we should be going, not stopping those things. That’s what Trump is doing. Hochul is arguing the other way in part here, which is really bad.

But I’ll just say that, yes, I do feel confident that solar and batteries are going to be lowering costs. Broad brush, following the climate law tends to lower costs as opposed to increasing dependency on oil and gas and that legacy system. We have to push in that direction to lower prices and to reduce pollution and ward off global catastrophe. We want to create lots of good union jobs. There’s a lot of really good things there for a competent messenger and governor to sell. This is a big fight. What I’m definitely not confident of is us winning on the April 1 budget deadline and turning back the governor’s attack on the law.

David Roberts

This was my next question because it seems like, just from reading around on media, the Democratic legislature is pretty foursquare against Hochul on this. Am I overreading that? Do you think she could actually win this or get something out of this?

Pete Sikora

Yes, I think we’re poised on a knife’s edge right now. This is intense. Make no mistake, the Senate is in a strong position. We want to hold them in that position. The Assembly is more up for grabs. But in the end, the governor has leverage in the budget process and she holds the cards in that process. Three years ago, she made this very same move with six days of intense fighting inside of the budget where she tried to gut the climate law back then. That was a very intense fight. You remember that. That happened. We fought that off.

The royal “we” here—of all the groups, activists, legislature, it wasn’t just our organization, of course—the movement rose up and fought back. The legislature fought back an intense several days and we stopped her from amending the law at that time. Now she’s coming again with a lot more fifes and drums and preparation and advertising and foreshadowing. Now she’s coming intense. We really have to step up again and fight back.

The legislature does seem to be in a strong position writ large, but we need them to stay very strong because a two-on-one dynamic is a bad dynamic for us. If the governor is able to flip the Assembly to her position and it’s the Assembly and the governor versus the Senate, that’s not a good situation. We want it to be the Senate and Assembly standing together saying no. The first thing for them process-wise is, “You’re going to rewrite the law in the budget.” That’s crazy.

David Roberts

Can you even do that? Is that legal?

Pete Sikora

It totally is. They can do whatever they want to attach to the budget and they routinely put stuff in the budget that is really more legislative. The legislature doesn’t like that because it reduces their power because of a lot of boring reasons that we don’t want to go into. The governor has a lot of power here and the legislature doesn’t. The legislature on a process level should not want to do things hurried in the dark because that produces bad substantive results. These are highly caffeinated staffers rewriting policy on the fly. The budget is incredibly complicated. They should not add another incredibly complicated issue.

David Roberts

Do you know? Do they know? Does anyone know what exactly she wants them to do?

Pete Sikora

She has not unveiled that, but we expect that in the next couple of days. As we’re recording this, there’s a little bit of news breaking that she is going to put her proposal out there for what it will be. We don’t yet know what it’ll be, but we have some idea.

However, that’s going to be a proposal that will be in an opaque budget discussion between three leaders of three chambers who make these decisions on the fly in the context of an over $200 billion budget with incredibly complicated items. On a process level, it’s bad for the legislature to do this in the budget and politically it’s very bad for them and for us as well. They should get it out of the budget.

David Roberts

Would you venture a guess as to what she actually wants to do? Would it just be a matter of delaying targets or do you think there’s more substantive—

Pete Sikora

I think the gas industry—

David Roberts

Do you think she wants to go after the guts of the bill or the gas parts?

Pete Sikora

She probably wants to do two things. What she’ll propose, it’s unclear and it might not be what I’m speculating about here, but she may want to change the accounting of how methane is tracked, which would change the accounting to make gas a lot cleaner.

David Roberts

Because New York does things differently than other states, measures climate gases differently than other states in a way that makes its performance look worse, as I understand it. How far are you to the 40% goal—the 2030, 40% goal—depending on how you measure, it’s either like 12% there or 25% there. It’s a pretty big difference, this measuring question.

Pete Sikora

It is. We think that New York has it right and so do other places that use this accounting method. Changing the accounting method now is really just a math trick to make yourself look better. That’s the way she wants to go here—a trick that makes it look like it’s a lot cleaner than it actually is.

New York measures the impact of gas on a 20-year basis rather than 100-year basis methane. It goes away much faster than CO2. If you measure methane on a 20-year basis, it’s very polluting. If you measure it on a longer basis, it’s much less polluting. I don’t know about you, but I’m going to be around in 20 years and I think that’s a good measurement. That’s a lot of time —

David Roberts

But the substantive upshot of that is about gas. Mostly it’s about the gas infrastructure and how much it’s emitting.

Pete Sikora

Correct. That is why the gas industry is so against the law and wants to get out of it and change this accounting because it means that state policy pushes people off of gas. When we talk about gas here—your listeners know this—but we mean gas as in fracked gas or natural gas, the kind in the air, not gasoline as in for your car. That’s oil-based. Gas here is much more polluting under New York law than in other places. That is a very reasonable way to measure things.

What’s unreasonable is to change it on the fly in the budget and rewrite state policy that way. On the fly. They shouldn’t do that. That’s one way she might come after it. The other way would be that she might just change the requirements of the law and say, “We’re not going to hit the 2030 target, so let’s make it 2033 and call it even.”

David Roberts

I cut and pasted this quote from Assembly Member Anna Kelles. She said all they’re trying to do by changing the timeline is to change the psychology, not the reality. She said, “Leave the pressure on. Meet it or fail to meet it, but don’t take the pressure off just because it will make you feel better.” Changing the target to 2033 does not change anything substantively. It literally is just meant to make them feel better about how far behind they are. Doesn’t change anything else.

Pete Sikora

Democrats should not psych themselves out on this issue. Why would you play a weaker hand? Play the hand that you’ve got, which is immensely powerful, which is to lower bills through going to clean energy, energy efficiency, all of those things like distributed networks, demand response, solar—these things are great to go. Do them, do them big time.

David Roberts

About the gas, I wanted to ask you a gas question. This is more of a macro New York state question, but implied in the targets is a phase-out of the gas industry in New York. Nobody in the United States wants to talk about that, even though it is implied in several state laws.

Someone sent me a document from the Netherlands from the Dutch government where the Dutch are like, “Hey, our targets imply the phase-out of the gas industry. We have to do this, let’s do it in a planned, rational way, taking chunk by chunk, neighborhood by neighborhood, so we don’t strand people on the network,” etc. Thoughtful, above board, on purpose, eyes wide open.

I’m not naive enough to think that we can ever get there, but backing into it and just, as the mid-transition episode illustrated, just backing into it and letting the market do it seems like the worst way to get off of gas. It seems like the way to get off of gas that is going to maximize the pain and political difficulty of it. Is there a discussion either in the law or in New York generally about simply phasing out the gas network and how to do that or is everyone still in denial about that or looking away from it or talking around it?

Pete Sikora

No, it’s absolutely front burner in the policy debate in New York and has been the focal point of a fight over a bill called the New York HEAT Act, which we supported and the world of green groups supported as well. We’re a community organization, housing organization, we focus on jobs, we’re a multi-issue organization. We saw the benefit of the New York HEAT Act as exactly what you’re describing—a planned step-down transition of the gas network to benefit everybody involved and not make it an insane death spiral effect where our members in low-income communities of color who cannot afford the upfront costs of going to heat pumps and energy efficiency get stuck on a gas network that is declining in an unplanned way and costs spiral out of control.

David Roberts

Which is 100% what will happen if you just let it happen.

Pete Sikora

That’s right.

David Roberts

It’s not a possible outcome, it’s guaranteed. It’s already happening.

Pete Sikora

It’s already happening. I live in an affluent community and I can see all around me people, my neighbors are installing heat pumps and you can see it’s happening and they can afford the upfront costs of just the nicer equipment. It’s better, it’s nicer, that’s why people are doing it. It also has green benefits, people like that. The point here is that death spiral is starting of the gas network.

A rational society would do what rational societies ought to do, which is plan and think seriously about it. That’s what the New York HEAT Act would have done and the governor wouldn’t support it. That’s why it didn’t pass.

It’s Governor Hochul who is carrying the water for the gas industry to maintain its profits as long as possible. What she’s doing is stymieing things that will damage the gas industry’s profits at everyone else’s expense. That’s what is happening policy-wise and politically. Of course she dresses it up very differently.

David Roberts

As you said, maybe she’s been surrounded by these people and in the group chats with these people and has been convinced that gas is cheaper.

Pete Sikora

That very well may be the case. That’s what I do think has happened—the industry scare stories have gotten to her because that’s her world. She believes serious-minded corporate lobbyists and people that they bring to meetings and they say things like, “You must approve the Williams pipeline or New York City is going to lose power and there will be rampant blackouts.” Us nice green people dispute that, but that is a scare story that someone who is of her political persuasion is going to react to.

I think that she believes that all this green stuff is just moving a little bit too fast. We have to pause it. Everyone’s over-emotional about it, but sober people say we have to just slow the thing down. The reality is no, we don’t have to slow the thing down.

David Roberts

That is such an easy story to tell. It’s such an easy message to convey. The ground is already seeded for that. To have a prominent Democrat just watering that soil is insane. Prognosticating politically, if Dems in the legislature hang together and refuse to make changes in the law in the budget process in 2026, is that it? Or does Hochul have other cards up her sleeve that she could try to use to change the law?

Pete Sikora

She does.

David Roberts

Or do you think if they fight her off this time, will she get the picture?

Pete Sikora

It’ll be an enormous victory for our side if we fight her off. The psychology will be that she got a big rebuke from the legislature on this issue and has been told firmly to go forward. That will be very valuable. Conversely, the opposite happens if we lose.

She wants to continue to fight for the gas industry, she’s opened a Public Service Commission proceeding, or theoretically the PSC has opened it. In reality, the gas interests are attempting to get the PSC to rewrite the electric grid requirements of 70% renewables and push that off through regulation by arguing that the emergency powers that are in the law, that if the ISO and the PSC make reliability determinations, they can change those targets.

That’s going to be a very bad move and presumably will trigger litigation. I’m not an expert on that, but that’s one of the cards that she’s opened up. That would affect the electric grid renewables target, but would not affect the law’s requirements overall. The electric grid is a relatively small proportion compared to everything else of the pollution coming from New York. That’s one card that she can play.

Of course she can continue to stall everything. For example, she would not support the Clean Path transmission project, which would bring renewable energy from upstate New York into New York City where the grid is dirty—that is hugely needed. But she won’t support it.

David Roberts

Because?

Pete Sikora

Because the incumbent gas industry intervened in that process and argued forcefully against it. It also costs a lot of money to build transmission.

David Roberts

She’s not going to say the gas industry didn’t want me to build this. What does she say?

Pete Sikora

She doesn’t say that, but that’s right. She opposed it.

David Roberts

Is there a substantive, even a pretend substantive argument against it?

Pete Sikora

The governor’s people on her behalf on Clean Path will say, “We really need to consider transmission much more carefully and not impose unnecessary costs. We need some more time to model this and think it through. This is moving too fast.”

David Roberts

Transmission moving too fast.

Pete Sikora

That’s it. That’s what they’ll say. They will say costs have increased and therefore we recognize we really need to think this through. The worst thing you can do is slow down. You can’t slow down here. You have to go and actually transform the system to clean energy. That’s where the savings are.

David Roberts

Many things can be said about long-distance high-voltage transmission, but “it’s moving too quickly” is not one of them.

Pete Sikora

That’s right. They argue there’s a complicated proceeding on this. The bottom line is that us, the AFL-CIO, the green groups, the City of New York, lots and lots of entities were in support of Clean Path. It seemed to be on a glide path—no pun intended. Then, like Cap and Invest, the governor just killed it. She paused it.

David Roberts

What is this with congestion pricing too? What is that instinct? With congestion pricing, I was like —

Pete Sikora

It’s baffling.

David Roberts

The thing is already going to happen. You can’t make it not happen. All you can do is insert a bunch of messages that are bad for you and your party and your policy into the discourse and then the policy is going to happen anyway. All bad. Again I come back to, what upside? What is she getting? What is she getting from doing this over and over again? We’ll work out a big policy, she’ll come up to the brink of it and then she’ll panic and try to kill it at the last second. She looks indecisive.

It’s making liberals hate her. It’s making her own party hate her. She’s not successfully stopping any of the things. Republicans don’t love her. Who is this for? Who are you performing for? I come back to that again and again.

Pete Sikora

I don’t know. I think it’s in her head where she believes moderation on these issues is the right way to do it. I’ll just say any Democratic governor is better than any Republican governor. But Hochul is the worst of the Democratic governors.

David Roberts

It’s like she has a Washington Post centrist columnist — in her head.

Pete Sikora

Yes.

David Roberts

Following her around, telling her that the way you appear serious in US national politics, the way to establish seriousness and grown-up-ness is to punch the left. To tell the left they can’t have something that they want. That is a conviction these people carry around that is borderline theological, I think. It’s immune to empirical analysis.

Pete Sikora

That’s right.

Let me add some hard politics also to this. Ron Lauder spent $11 million in a super PAC buy against her in her last governor election. He supported Lee Zeldin. He spent those $11 million—conservative, activist, billionaire type—and he spent them for Zeldin and against Hochul. That damaged her quite a bit. It’s a lot of spending. He did it in large part—and there’s reporting on this—because he was really angry about the South Fork offshore wind project that’s now up and running off Long Island. He has a mansion, there’s some construction that happened near him. He can’t even see the turbines. The cable construction just—

David Roberts

It’s always dumber.

Pete Sikora

It’s always dumber than you think. There’s a nonzero chance here that Kathy Hochul is thinking, “I don’t want Ron Lauder to spend $15 million against me,” number one. Number two, she paused Cap and Invest right after the New York Post got wind of the fact that it was about to happen. They put it on their cover. They lampooned her. She immediately pulled it back after it was the New York Post cover. That’s the right-wing media outlet that’s the strongest in New York. It’s like an unregulated super PAC. That whole world is part of her world in a way that doesn’t make sense for a Democrat, particularly in a blue state. What do you care what the Post says?

David Roberts

I know, it’s crazy. She’s not in a garage in middle Pennsylvania, dealing with the mythical swing voters.

Pete Sikora

She defeated Zeldin by over six points in the end. It wasn’t close. Now Trump’s in office. Democrats are super mobilized. She’s going to annihilate Bruce Blakeman.

David Roberts

Everybody wants someone to fight Trump. Everybody. Here’s a place where you already have the weapons in your belt. You already have the law. He’s jacking up prices. You have the tool to fight that and keep them down. Instead of that obvious fight, the Washington Post columnist in her head is telling her, “Just being a Democrat and fighting for Democrats against Republicans is boring. Nobody cares. That’s the—no one in D.C. cares about that predictable, boring story of just doing a good thing that you were elected to do.” “You have to be counterintuitive,” and it’s all so dumb.

Pete Sikora

That’s right. I think that Democrats win when they show fight and backbone and that’s the way that they ought to fight and present themselves, that’s the best way to go.

David Roberts

The polls on that question—do you want fighters—are unambiguous. Maybe 10 years ago, 20 years ago, but now, that’s what everybody wants.

Pete Sikora

There is no median voter that you somehow get by turning the dial slightly more to the right. Whatever you gain from some mythical median voter who is paying attention to exactly how you’re parsing your beltway speech, you lose because people like you and me are like, “What is going on here? I can’t believe this.”

David Roberts

I’m picturing the rural mechanic swing voter being like, “Oh, well, 2033. Oh, well, yeah, now I’m voting for you. Okay, then, yeah, 2030 was—”

Pete Sikora

What happens is, you don’t actually get Republican votes, even if—and you don’t need them, not in New York—but you don’t actually get those votes by stepping on your own message. They go for the real thing. They’re going to vote for the Republican. They’re not going to vote for Kathy Hochul. They want the real thing. That’s what those people want.

David Roberts

I could yell about this with you for many more hours. Final question. If she fails at this and doesn’t manage to change the law, you’re still in a position where you’re way behind. New York State is way behind its climate targets. Even if you go forward with the law, that’s not a particularly good advertisement for climate policy either. If she’s forced to live with the law, do you think she will finally turn to doing the things that would make the law a reality? The things that she has not been doing? Do you think there’s a prospect of catching up if the law stays intact?

Pete Sikora

Yes. We would be able to catch up because we would avoid the very dark scenario of falling behind even more. I do think that it would be a very strong signal from the political system to the governor that she should get cracking. There’s a court case, and that court case is going to be decided after the legislative session is over. If the legislature amends the law, I can’t imagine that a court wouldn’t see that and start to consider that maybe we should pull back. That will be avoided at a minimum.

The forces that are there for more clean energy: the economics are changing, the politics are fundamentally blue here. She should grab the opportunity that we’re talking about, not join the Republicans. This really is a close fight. People should pick up the phone and call their state legislators right now if you’re in New York and say, “Do not roll back the climate law. We do not want higher utility bills. We do not want more pollution. Turn back the governor’s proposal.”

David Roberts

Also, if you were of a mind to make the argument that fossil fuel dependency is the reason your prices are so high and you want a visceral demonstration of that, lucky for you, the Strait of Hormuz is closed and all of global oil and LNG is about to spike through the roof. If you want to point and say, “Look, look how expensive they are, let’s get off them.”

Pete Sikora

You could even pay for all this.

David Roberts

Never a better time, right?

Pete Sikora

You even could pay for it with a windfall profits tax. Who likes the oil and gas companies? Nobody. Everybody hates them. Go beat up on them, Democrats. They’re not your friends.

David Roberts

We’ll leave it there. Good luck to you. What a frustrating state. What a frustrating Democratic Party you’re dealing with.

Pete Sikora

The fight is great. 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. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at Volts.wtf, leaving a nice review, 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 Kunal Girotra, who helped start and run Tesla’s residential energy business before leaving to start his own company. With Lunar, he has tried to create the most consumer-friendly possible battery and software ecosystem, which can seamlessly plug into solar panels, other devices, or VPPs. We talk about lessons learned and the future of residential electrification.

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Text transcript:

David Roberts

Hello everyone, this is Volts for March 18, 2026: “A Tesla vet tries to master the VPP market.” I’m your host, David Roberts.

Volts listeners will recall that, back in July 2024, I sat down with the founders of Base Power, a startup that sells customers large residential batteries for minimal cost and, in return, manages those batteries as a virtual power plant (VPP). That approach has proven extremely popular with investors, as evidenced by the fact that, roughly a year later, Base Power raised a cool billion dollars in further funding.

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Last month brought news of another splashy fundraise from a company in this space, with California-based startup Lunar Energy raising $232 million in new funding. Lunar’s business model is akin to Base’s — it sells customers battery systems and then operates those systems as a VPP — but there are a few things that set it apart, including a tight focus on hardware/software integration.

One of the most notable things about the six-year-old company is that it was founded and is run by Kunal Girotra. Girotra is well-known in Silicon Valley as a longtime hardware veteran. Among other notable chapters in his career, he helped start and run Tesla’s residential energy business, which he led until he left the company in 2020.

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What did he learn at Tesla that he is taking into this new venture? What sets Lunar’s batteries and VPPs apart from so many others flooding the space? What is the future of the VPP business? I’m thrilled to have Girotra with me today so that we can dig into all of that and more.

With no further ado — Kunal Girotra, welcome to Volts. Thank you so much for coming.

Kunal Girotra

Thank you, David, for having me and thanks for the intro.

David Roberts

Ton to dig into here, but I would love to start at Tesla. I think these days listeners probably have a variety of associations in their head regarding Tesla, but this is about Tesla’s residential energy biz, which I think is viewed in the industry as pretty top notch. You stood that business up early. Those are early days for all this. I’m curious what you learned starting and running that business at Tesla that you are bringing to Lunar. What did you think you could do better on your own?

Kunal Girotra

As you said, Tesla, at least Tesla’s Powerwall product, set the foundation for a product that could be deployed in people’s homes. In some ways, you can credit them for starting that journey where putting batteries in homes became a possibility. That was a good thing, but I think the reason I left Tesla and started Lunar was there are 75 million homes in the US alone. While Tesla was on a path to build their products and deploy, there are a few differences that I saw that Lunar could tap into and create a much bigger impact than Tesla has.

A couple of them are — Lunar’s not a battery company only. We’re an electrification company. Every OEM or company trying to make hardware, Tesla included, was trying to focus on a widget — somebody else would make the battery, a third-party company would make the inverter, a fourth would have a smart panel, somebody else would have a heat pump.

What Lunar saw and what I saw was that the home was going to be electric. Yes, the start of that is generation, solar generation, storage, and control. Then you need a company to make a complete ecosystem of products so customers don’t have to piece together five different apps and installers don’t have to spend a lot of time installing these things in homes. This should become an appliance and something that is really plug and play.

Lunar’s approach was to make a differentiated hardware platform, and I can go into how our product is differentiated from, say, Tesla’s, and take an ecosystem approach. Our first product is the Lunar system, which takes care of generation. We have module-level power electronics that go behind the solar panels to generate more energy from the solar. Then we have storage, which is a modular battery system, not a monolith like Tesla has, which means it can scale in a person’s home.

David Roberts

One of the things that sets you apart here is that you are making your own batteries. You are designing and manufacturing your own batteries. These are not just commodity batteries, but you are also designing software integrated into the home and into VPPs. What’s interesting about Lunar is that you sell the battery and the software as a system, but you also will just sell the battery and also will just sell the software. These are separable products — they come as a package, but you can sell either one. You can just sell software to people who have other hardware installed. You are a both/and.

Kunal Girotra

I was going to get to that difference as well — the hardware is differentiated on the software side. I describe this analogy: think of us on the hardware side as the Apple of the home. We want to build neatly integrated products for the home that consumers can use and enjoy and get benefit from. On the software side, think of us as the Android, where we connect with any battery out there and then we provide this enterprise software platform to customers, who are not homeowners — those are third-party operators like Sunrun or utilities or retailers.

That is a big differentiator to your earlier question of how I do things differently than Tesla or others — very few or no other OEMs to my record do both. Most OEMs either make hardware and say, “You got to control my hardware with my software,” or, “I only do software,” and then they lose the granularity of how they control hardware. I can talk through the differentiator. You nailed it. Our enterprise software is agnostic to devices.

David Roberts

I wonder if you’ve ever had any pushback or questions from investors along the lines of, “It’s really hard to be a good hardware company and it’s really hard to be a good software company and you are trying to be a good one of both. Is that not somewhat crazy?” Have you not had some pushback? “Why not just hone in on the one thing you’re really super good at?”

Kunal Girotra

Yeah, someone told me, “If some investors tell you you’re crazy, that probably means you’re onto something.” That’s a fair point and I’ll tell you why we think we’re good at both and how as a company we approach that. When we started Lunar, it was clear that Lunar had to do both to be successful. Our thesis is working out — people are responding really well to our combined strategy.

The approach we took was hardware will build from the ground up, which is what we did. We hired a great team, a lot of ex-Tesla veterans. We have a full-on R&D lab in Mountain View, California. We design and build everything from the ground up. Every product that we deploy is Lunar IP and differentiated IP. On the hardware, we’re doing on our own.

On the software I had the same choice. But instead of that, instead of striving a team building it, I looked around and found the best company and team to acquire and made them a part of Lunar. That’s what accelerated our software journey. The company we acquired was a company called Moixa out of the UK. They had a platform called Gridshare and as you might know, the markets in the UK, Europe, and Japan are much more advanced and deregulated than the US.

These guys had done all the hard stuff that we could ever imagine with behind-the-meter batteries, controlling 50,000 devices in Japan alone — home batteries — and have 850 million runtime hours of doing this software. We acquired them, and that team sits in London. That software we brought into the US three years ago, and now it’s running across TPOs and energy retailers in California. We’re now going into Texas.

To your point, to build everything from scratch is hard and takes a lot of time. We took this approach of building hardware, because it’s hard to buy a company since nobody except Tesla was building good hardware.

Then on software, we acquired this company. I think now we have a great job managing those two efforts. I’ll pause here because I tend to go into long explanations. Before you let me run off — you want me to pause, I guess.

David Roberts

I think I have an audience uniquely welcome to long rambles, but I’ll cut in anyway. Let’s start with the hardware. You’re selling a system. The first question is this system — it’s a battery system with an inverter that is meant to be attached to a solar system. It’s not freestanding. You can’t just install one of these systems freestanding. You are installing it either with a solar PV array or attaching it to an existing solar PV array. Is that correct?

Kunal Girotra

That is not correct. The way I describe to people is it does what you said and more. It can do freestanding. We have deployed freestanding systems as well. The use cases I describe are: if you go to a home, you don’t have solar, you can use solar and batteries — solar and Lunar. This is how I call it, give people solar and Lunar. If a home has solar already, you can give them a Lunar system, which gets only storage. If you have a solar system in a home and you have an old solar, very small, 2, 3 kilowatts, you want to add more solar and Lunar, you can do that too. Lunar plays really well. Lastly, if you have a home where you have no solar and you don’t want solar, just batteries, you can do that too. It’s the most —

David Roberts

You can do that?

Kunal Girotra

You 100% can do that. We’ve deployed — there’s not a whole lot of demand for that in California, but as you go into —

David Roberts

Yeah, that’s more of a Texas thing.

Kunal Girotra

Yeah, and we are going into Texas now and we are working with energy retailers to deploy that model, to do energy arbitrage and day trading with the wholesale market. There is no limitation. That is the beauty about our hardware platform. It is the most flexible platform. Making the hardware for the first three years was the hard part, but now it is a software product because the hardware exists and I can deploy all sorts of firmware and software to make it do cool things.

The only thing it doesn’t do — that’s intentional — is it doesn’t provide solar only, even though we have an inverter. We have intentionally deprioritized use cases where a customer says, “I only want to do solar only.”

David Roberts

You don’t sell solar, you don’t sell the PV — you have a partner.

Kunal Girotra

I don’t sell the panels, but I make the module-level power electronics, I make the inverter. I could in theory sell solar and say, “Use my inverter for just solar as a grid-tied mechanism with the grid.” But that’s a use case I’ve intentionally deprioritized. The reason being, Lunar was started with the belief that batteries are the foundation for the electric home.

David Roberts

For sure.

Kunal Girotra

Some people think a smart panel is a foundation, some people think solar is a foundation. We believe that home batteries are the foundation for electrifying the home, and that’s why solar pairing was important. But we don’t do anything without batteries. That’s the main message. But we do all use cases.

David Roberts

Your battery, the battery itself is interesting in that, as you say, if you buy a Powerwall from Tesla, you just get the one big unit. You all have designed smaller modules that you can stack so you can create a battery of relatively precise size. How big are those modules?

Kunal Girotra

These modules are 5 kilowatt-hours each. You need two modules to make the system operate. You need a minimum of 10 kilowatt-hours on site, but it also expands to 30 kilowatt-hours, all behind one inverter, which is a 9.6 kilowatt inverter.

David Roberts

30 kilowatt — that’s the max you can get behind one inverter?

Kunal Girotra

Behind one inverter, but then you can stack multiple systems all the way up to 300 kilowatt-hours. We’re targeting small commercial very soon where we can go into offices and buildings and give that. For residences, 20 to 30 behind one is our most popular configuration. We started off with 20, meaning four blocks. Last year, we launched expansion to 30, and now we can do all the way to 300 as well.

Our vision is to continue to expand this into any use case. Homes are snowflakes — is what I call them. Every home has its own unique requirement — what wall do they have? Do they have space outside?

David Roberts

Where are your batteries? Are these meant to be outside, inside, on the wall, or on the ground?

Kunal Girotra

Again, I would use the word the most flexible, although flexibility is used in the VPP aspect. But this is the most flexible battery system you’ll find out there, meaning you can install it in the garage or outdoors. If you install it outdoors and you’re worried about cold temperature, don’t worry. We have heaters inside that can warm the battery up and make sure you can install it in the New England winter. It’s wall-mounted, but you can also floor-mount it. It’s the most flexible system. You can submerge it in a meter of water if it’s flooded, and it’ll still keep operating.

We call it the Beauty and the Beast. It looks pretty awesome because we believe, like Apple, you need to have products that homeowners are proud of. It doesn’t need to be expensive to make it look good. You just need to have a design philosophy. And then the beast, because performance is really high performing. You would never have to worry about this battery going bad or not surviving the extreme environments in various parts of the country.

David Roberts

I saw in an early piece that you were using NMC chemistry. But then when I looked at the spec sheet you all sent me, it says LFP. Did you make that switch? I’m curious when that switch happened and why.

Kunal Girotra

We started off with the NMC chemistry, and you are right. As of late last year, we have now officially switched to LFP chemistry.

David Roberts

For safety or performance?

Kunal Girotra

No, it’s all for cost. Safety is — and there’s a myth in my mind in the market that LFP is safer than NMC. For people like me who have worked on battery systems their entire life, they will all tell you it’s a myth. Safety is a function of chemistry plus system design. If you design your system well — you have millions of cars on the road, parked in garages, all using NMC chemistry, people have 200 kilowatt-hours of electric cars parked in homes. Very safe, and they drive all around — all NMC chemistry. The reason is the system design allows that.

For the ESS makers, nobody wants to prioritize the engineering work it needs to make NMC successful. Lunar did that. Ours is the safest battery with NMC. Unfortunately, the cost was just — LFP prices just went in a direction where, as someone who has asked to deploy a lot of systems and has to be practical about it, cost is where LFP wins hands down.

David Roberts

As I understand it, there is a slight performance hit, though, on energy intensity. Did you lose a little volumetric?

Kunal Girotra

Great question, you know the details of this . There’s a 30% energy density loss on a cell level. But remember that NMC requires a lot of safety design, which takes a lot of space. When you remove that for LFP, we ended up in the same exact 5 kilowatt-hour form factor. For an end customer, they don’t care because it’s literally the same product and the same output of energy. That’s why this nuance — whether it’s NMC, LFP — only certain installers care about. But for the end customer, it’s a 5 kilowatt-hour system. It did not change. Performance is the same, our cost just got better.

David Roberts

Another thing that you boast about your batteries is that the inverter is integrated. Can you explain what that means and why it is significant?

Kunal Girotra

The inverter is the brains of the system. It’s the thing that orchestrates the power control, converts power from DC to AC, has a lot of sophisticated controls in it. We believed making that in house was the first requirement. Most companies try to go to China or somewhere and white label stuff. We were like, “No, we’ve got to make that. That’s the core.” Any power electronics is made by Lunar.

The integrated inverter means that when you install a Lunar system, you go to a wall, you put these mounting brackets first, then you put the 5 kilowatt-hour blocks, like Lego blocks. You install them and then on the top is the inverter module, and then you have these covers that go on top of the system. To a customer it looks like a complete integrated system.

In the past, outside of Tesla, most people were selling these systems as, “Buy a dumb battery from someone else with some DC — DC or BMS. Buy an inverter from a third party,” and there would be two different things on the wall with lots of wire and conduit. What we have done is said, “This is for the end customer.”

If you think about a homeowner, most people don’t know what a kilowatt is, what an inverter or battery is. For them, this is a Lunar system. For the really detailed people — like you and the installers — if you look behind what the Lunar system is, it’s an inverter on the top, which is a DC-coupled system. It takes solar and battery both. Underneath the inverter are 5 kilowatt-hour battery blocks, which have their own integrated DC-DC.

David Roberts

When I saw the picture of the system on a wall, there are two boxes.

Kunal Girotra

Great point.

David Roberts

What is that second box? If the inverter is in the main box with the batteries, what is that second box — and what is it doing?

Kunal Girotra

The second box is the Lunar Bridge. We call it the bridge because it is the bridge between the utility and the home. That box — it is not an inverter. You can call it a circuit breaker panel. It is a circuit breaker panel that we provide.