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In the US, clean energy tends to get bogged down in red tape, but there’s one category that you can install immediately, with no one’s permission, because it plugs right into your wall outlet. This week, I chat with James McGinniss of David Energy about plug-in DERs — specifically, small batteries that commercial tenants can install without permits or landlord sign-offs. We explore the economics behind these micro-projects, look at how they aggregate into virtual power plants, and break down why this hyper-local approach could eventually outcompete massive utility infrastructure.
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David Roberts
Hello everyone. Greetings and salutations. This is Volts for June 3, 2026: “Are plug-in DERs going to spark a grid revolution?” I’m your host, David Roberts.
As Volts listeners have heard many times now, large utility-scale renewable energy and battery projects are being slowed to a crawl by a tangle of red tape, from glacial interconnection queues to permitting hassles to environmental review, and on and on.
Smaller-scale customer-side renewable energy and battery projects, collectively known as distributed energy resources, or DERs, move somewhat more quickly … but, unfortunately, not by much. They too have interconnection and permitting hassles, alongside the various and sundry soft costs that have been discussed on this pod so many times.
But there’s a new class of DERs emerging that are even smaller and that you can simply plug into a normal wall outlet without getting any kind of permit, interconnection, or regulatory approval. This includes so-called “plug-in solar,” which we covered on a previous Volts pod, but also small-scale batteries.
Plug-in DERs might seem, at first blush, like a kind of cute novelty item, fun but irrelevant to the larger energy picture. But my guest today — James McGinnis, CEO of David Energy and co-founder of the DER Task Force community and podcast — believes that take is wrong. Dramatically, fatefully wrong. He believes that plug-in DERs are eventually going to scale to a cumulative size larger than bigger DERs, that they are going to put a rocket boost under the small-d democratic revolution in energy that DERs have long promised.
McGinnis has been selling plug-in batteries to small businesses in New York City, who are using them not for any high-minded green reasons, not even for resilience like the more expensive home batteries, but simply to reduce their electricity rates. And business is booming. We’re going to talk all about the merits of plug-in DERs, the market for them, and why he thinks they are going to spark a grid revolution.
With no further ado, James McGinniss, welcome to Volts. Thank you so much for coming.
James McGinniss
Thanks so much for having me. I’m super excited to be here.
David Roberts
I listen to your podcast, I’ve heard a lot of your talks, and you are deep in DER world. DERs, as you affectionately refer to DERs. That’s right, yes, DER world, DER-pilled, etc. For those in the audience who are not fully DER-pilled and who are not totally familiar with distributed energy resources, let’s just do some definitions. As I understand it, there’s DERs, and then within that there’s a smaller class of what we call permissionless DERs, and then within that there’s a smaller class of plug-in DERs, which is what we’re talking about today.
Let’s start by defining our terms. Start by defining what DERs are. This is, I think, a deceptively complicated question. What is your personal definition of DERs?
James McGinniss
I’m going to attempt to give you a definition. I also think as time has gone on, I’ve continued to get surprised about what a DER is. I reserve the right to change my mind later. It’s a bit of “you know it when you see it.” Most famously, Kiran from Arcadia told me an induction stove was a DER and I laughed him out of the room. Then I learned about Impulse Labs and copper and battery-embedded devices, which kicked off this whole permissionless conversation. I ended up eating my words that that was in fact a DER.
But I would just say that the property or the principle that is true across DERs, or most exciting, is that you are essentially siting supply or capacity next to demand. That capacity could even be the demand itself. You could have a programmable thermostat or electric vehicles that you shift load with. At the end of the day, it is supply or capacity located where the customer is consuming power. That property of locating supply next to demand is what I think makes DER so powerful.
David Roberts
In your mind, whether it is behind the meter or in front of the meter, there are DERs in both cases. You’re not a behind-the-meter guy?
James McGinniss
No, I think if you look at a lot of what some of the current frameworks have started to do, like VDER or avoided costs or non-wires alternatives, placing solar and storage on distribution feeders, like community solar, it could be a 5-megawatt system — that’s a DER because it’s helping reduce transmission and distribution costs, or could potentially if you deploy them in the right way.
On the other side of things, you can have gigawatt-scale DERs. You have large data center-sited solar, storage, and gas primarily. Duncan on the DER Task Force wrote that awesome off-grid white paper, which isn’t only about being off-grid. You can have fully off-grid, you can have grid-connected systems. You can have them front of the meter, located next to a data center, all that stuff. If you’re augmenting how you’re distributing power on the grid, those are DERs in our mind. We look at DERs as everything from one of these small 400-watt plug-in solar systems that we may talk about all the way up to a gigawatt-scale system behind the meter at a data center.
David Roberts
Interesting. It’s mainly about locations, which makes sense since the word distributed —
James McGinniss
Colocation. That’s the sort of property that excited me a decade ago. I would say, though, that I love all DERs. I get more and more bullish on distributed solar and storage every year and think that the lion’s share of what we think of as distributed capacity and supply will be solar and storage.
David Roberts
Amen, brother. That is the thesis of this podcast. Within DERs, there’s this class of permissionless DERs, which is distributed energy resources that you can just install without getting permission from any sort of regulatory body. What is included in that class? What all falls in there?
James McGinniss
It’s funny, I think Duncan coined permissionless on one of our podcasts a few years ago. At the time, we were thinking about two applications in particular. One was Impulse Labs’ battery-embedded stove, where that is a plug-in DER. Then Electric Era’s DC fast chargers that have batteries that keep you from needing to upsize an interconnection to site a DC fast charger — that’s Quincy at Electric Era. We said, “Oh cool, you can deploy more DC fast chargers without interconnection upgrades or permission to interconnect.” You may need an interconnection there. I’m not entirely sure, but at the time, in the early days of this, we thought anything that skirted the need for complex, expensive, and permissioned utility upgrades was permissionless.
David Roberts
Along the lines of the Impulse stove, what Jigar Shah is very excited about is Carrier is going to start embedding batteries in air conditioning units.
James McGinniss
That’s right.
David Roberts
And they sell kajillions of those a year.
James McGinniss
Yeah.
David Roberts
And you do not need a permit to plug your AC in.
James McGinniss
That’s right.
David Roberts
I think you could add some of this off-grid, like for data centers, but not just for data centers — like a microgrid or whatever. You can put more and more batteries on your microgrid and as long as your interconnection point stays stable, you don’t need additional permission to do that.
James McGinniss
That’s right. I was going to joke that I even think xAI, their data center was maybe, as I’ve read about it since, maybe too permissionless but —
David Roberts
You can also just do it even if you’re supposed to get permission. You could just do it illegally. I suppose that is a subcategory.
James McGinniss
I appreciate the impulse to just build something more than waiting six years for an interconnection. As long as it is being done safely and it makes sense ultimately.
David Roberts
I like the wild and woolly approach. It would just be nice if it were being done in service of renewables and batteries instead of a bunch of —
James McGinniss
Yes, I definitely agree with that.
David Roberts
— jet engines on tractor-trailer beds.
James McGinniss
Yeah.
David Roberts
That’s permissionless. Within permissionless there’s plug-in, which is what we’re talking about today. Plug-in solar — we covered that pretty extensively on the pod the other day. It’s just these small-scale, usually single panel or two. Then there’s also plug-in batteries, which is what you are mainly doing. What counts as a plug-in battery? If you’re going to put a Tesla Powerwall in, you have to get permission for that. That’s a scale of battery that triggers some regulatory oversight. How small of a battery do you have to get before you are avoiding these regulations — when you can just do it? What size of battery can you just plug in at will?
James McGinniss
It’s interesting because during your intro I wanted to make an objection to calling plug-in small. I would have said the same months ago, but I don’t think plug-in is small necessarily. I’ll expand on that in a moment. Plug-in to me is just you plug it directly into a 120 or 240-volt outlet or any type of outlet. But it’s using existing grid infrastructure and interconnection points we have, which is most commonly the 120-volt outlet.
David Roberts
The insight here, which I guess is controversial but is the core insight — all this agita about finding usable interconnection points. The point here with plug-in stuff is we’re surrounded by already permitted interconnection points. They are called outlets.
James McGinniss
That’s right. Through this plug-in journey over the last year, I’ve had multiple points during it that have blown my mind or re-DER-pilled me to an extent, gotten me even more bullish on this stuff. The first one was just that idea that outlets are preexisting bidirectional interconnection points. Bidirectional is the key here. You can push power back into a circuit. That is totally allowed. That’s some placement point to the grid.
David Roberts
It’s allowed in some places. We’re going to get to that in a minute. Before we get too far in, let’s back up a little bit and just tell us what David Energy is. Tell us what your company does. Tell us what you’ve been doing since 2020 and what is different that you’re doing since January of this year. January of this year, you launched this plug-in part of things pretty recently. Just give us a smidge of background on what David Energy does.
James McGinniss
Maybe I’ll give you the overarching — what the mission has been from day one, which is to run the grid 24/7 on clean energy. By that we mean we are a licensed electricity provider. We can choose our own sources of supply. Our goal is to prove that it’s possible to run our book 100% on clean energy in real time, physically time-aligning supply and demand, not offsets or anything like that. The reason for that is we think clean electrons are the cheapest electrons by far. If we can do that, we’re going to be the cheapest commodity supplier. If you’re the cheapest commodity supplier, you can grow incredibly fast and build a big business.
David Roberts
You’re a retail energy provider, in other words. A home or a business in a place that has retail competition, which is not everywhere, but in a place that has retail competition and people can choose their energy suppliers, you are an energy supplier and your distinction is you’re the clean one and the cheap one — or that’s the idea.
James McGinniss
Something confounded me early on in the journey, which is solar and storage were becoming the cheapest electrons. If you go and buy a “green product,” which is basically a REC product, it was a premium product. We’re like, why is this the cheapest source of power? If you want to buy it from a supplier, it’s more expensive than the alternative.
We think clean is cheap if you’re not doing offsets, if you’re doing it on the real-time demand-supply matching basis day in and day out. This is where the problem that has fascinated me since 2015 probably is everyone talking about intermittency and how do you manage lots of solar and storage or wind on grids? How do you actually run grids with very high penetration to these? That problem has been what we want to solve through just doing it as a licensed supplier.
David Roberts
Are all your offerings 100% clean? All your customers are getting 100% clean power today?
James McGinniss
Today, no. That’s the goal. We could talk about what we’re doing now. Over the last few years, we launched a software product to our customer base, which is small businesses, which we’ve viewed as very underserved in this market. Think multi-locations, restaurants, gyms, cafes, laundromats, stuff like that, whereby they get access to great features — like thermostat management and bill auditing and community solar. That product is free to them if they’re buying their energy through us. The reason we did this is as early as we started, there was not a lot of solar and storage to go out and get. The path to powering our entire book on clean supply was daunting.
David Roberts
Because in some sense you’re buying wholesale power and selling it to customers. You’re dependent on who’s producing the wholesale power, for the most part, right?
James McGinniss
We get to choose who we go and buy that power from. What has changed recently is we see a much stronger path in the near term to get to very meaningful penetrations of clean energy supply within our own book over even the next year because of our ability to deploy plug-in batteries and the proliferation of solar and community solar. You can think of it as up until last year all of our supply was not clean. This year we’re starting to get some clean, and every year that goes on, our percentage is going to increase towards 100.
That’s our goal. The more solar and storage we get under management, the cheaper our power is going to be and the more we’re going to be able to grow. The way that expresses itself, and you mentioned this, what we’re doing today is we go to customers and we say, because there’s so much value in these plug-in batteries, if you let us install plug-in batteries and take over your energy supply, we guarantee that we will beat the utility month over month — you will pay less to, in this case, Con Edison than you would have without David Energy, where we’re taking over the supply side of that bill.
David Roberts
And they’re not paying for the batteries? The batteries are effectively free for the customer?
James McGinniss
Yes. There’s no CapEx for them. There’s not even long-term lockup, which is one of those other “aha” moments, remarkable properties for us, which is you can unplug the battery and move it very easily, meaning you don’t need to get the customer to agree to a 20-year mortgage-like lease on their home or the land they own or something like that. There’s not even a long-term lockup for this. If we come in and install these plug-in batteries, you’re going to save money every month relative to what you would have paid the utility.
David Roberts
I have a bunch of questions about that, a bunch of questions about the economics and various other things. Let’s start with the batteries that you’re selling today. How big are they and what do they look like?
James McGinniss
We’ll work backward to my small objection at some point.
David Roberts
Yeah, we’ll get there.
James McGinniss
The batteries we are deploying right now you could classify as small. They’re just under 2 kilowatt-hours. You can configure them as a 2-hour battery. We can do multiple of those in sequence. Our standard install will put a few of those in series and sum up to something closer to a Powerwall.
David Roberts
I was looking at the pictures — they look like a toaster. The size of a big toaster.
James McGinniss
That’s right.
David Roberts
We’re heading toward big here. Let’s not dis on small. Which means that you can tuck them anywhere in a business. You can put them in a basement, you can put them on the bottom shelf, you can tuck them up above the cabinet. Almost any business will have room for a couple of these, right?
James McGinniss
Yeah. The first objection we always hear from a New York City restaurateur is, “There’s no way I’m going to have space for that.” We have a 98% success rate on installs. You can always find space, which is great. That’s something that’s nice about the current form factor.
David Roberts
It’s interesting in particular that you’re doing this in New York City because New York City is legendarily highly regulated. You can’t even install a Tesla Powerwall in New York City, can you? Because of the fire risk. There are regulations on energy storage systems in New York City right now. It seems like your batteries are too small to trigger those regulations. But I was looking into this and it looks like New York City has issued some new rules that lower the threshold down to 1 kilowatt-hour and yours are bigger than that. I’m curious, how are you sneaking past regulations here in New York City?
James McGinniss
It’s interesting. One thing that’s important to recognize is that it’s not that you can’t install, it’s that there is so much red tape often in even getting something approved that a lot of folks have chosen not to do that and just take their efforts elsewhere. There are a few different companies out there, from Every Electric or Copper Stoves, that are doing batteries in this way.
There are a few aspects to it. One is that UL9540 and 9540A historically were not certifications that these consumer-level batteries were going after. That is the gold standard that FDNY and other jurisdictions take as what is necessary in order to be able to get a COA and do these installations. The other thing, and you had a recent podcast with Cora from Bright Saver, I think that’s what you were mentioning before, is that the way that rules are being written in many parts of the country, it’s clear that a lot of these use cases are not even being contemplated and that there’s a certain amount of gray area in what can and cannot be done.
David Roberts
That’s what I was trying to get at. This is a “let’s do it and if we have to, ask forgiveness later rather than ask permission up front.” There’s a bit of “let’s just put a bunch of these out there and get them working” rather than waiting for these regulations to resolve themselves completely.
James McGinniss
We don’t think the regulations here or in a lot of places are clear for this type of application in particular. On top of that, the gold standard that these jurisdictions care about are UL9540 and 9540A, which the products we’re using do have. What we focus on above all else is that what we’re doing is compliant with NEC, UL-certified products. It’s completely safe the way that we’re doing it. We think as those gray areas are worked through, the intent behind the rules is driving towards that over time.
David Roberts
These batteries that you’re putting in small businesses — it doesn’t seem like they’re big enough that if the power went out you could run your business on them. That’s not the pitch here. The pitch is mainly reducing peak demand charges. Maybe just explain briefly, what is the peak demand charge and why is it helpful to shave a restaurant’s peak in order to avoid it?
James McGinniss
There are certainly some customers that we get into that level of detail. Primarily, customers don’t get into that level of detail. The pitch is, “We are going to save you money against Con Ed,” and that’s enough.
David Roberts
The pitch to me, a podcaster — yes, great,
James McGinniss
But we do get into the demand and supply side of the bill, where on the demand side or the delivery side, they’re still being billed by Con Edison. They’re assessed a charge by their 15-minute interval peak every month — the single 15-minute interval where they have their highest instantaneous draw from the grid. We predict those peaks and we discharge the batteries during those. That allows us to say, “If you didn’t have us, your peak demand would have been 12 kilowatts instead of 10 kilowatts,” or something like that.
The other side of it is a little more complicated. Because we’re the energy supplier, there is responding to real-time prices, there is responding to peak capacity tag events, which is a whole other can of worms that we can get into, but sets how much they have to pay into the capacity market. There are demand response programs at the utility level and at the ISO level and the customer does not need to think about any of that. We take care of all that complexity on the back end and just say, “This is the supply rate you would have paid Con Edison and it’s lower because of some aggregate pool of money that we’ve generated with the battery and are giving them a discount on the supply rate to do that.”
David Roberts
In a sense, lots of batteries are doing this and I think this is a familiar concept to listeners. It’s just arbitrage. You charge the battery when power’s cheap and you discharge the battery when power is expensive. You’re doing that arbitrage on a micro scale within the premises, within the business. It’s micro arbitrage. The principle is the same. You’re shaving peaks, you’re responding to demand charges, you’re enrolling in demand response programs. It’s all the same thing bigger batteries do, just on a micro scale within the premises of a customer business. Is that fair?
James McGinniss
Yeah, and by micro I just take it to mean — I’m going to continue talking about small and micro stuff. I take it to mean that we’re doing it through the demand. An important note here is we are not exporting through these batteries at all.
David Roberts
We’re going to get to that for sure.
James McGinniss
You could, and that is a lot of the great work that BrightSaver is doing, and I think it is particularly relevant for the smaller consumer applications in which they are talking about.
David Roberts
But you’re not currently exporting any power into the grid. All this arbitrage is within the premises itself, just moving power around within the customer side?
James McGinniss
That’s right. Because we’re the supplier, we pay that customer’s energy obligation on their behalf. If we lower that energy obligation during high prices, we can generate savings by doing that, which you can only do if you are the energy retailer.
David Roberts
There is some CapEx involved. You’re buying these batteries. How long does a customer relationship need to last for you to pay off that CapEx of buying the battery yourself and eating the cost of the battery yourself?
James McGinniss
We think about it as the non-CapEx expenses — traditional CAC, or even there are some minor setup costs for the installations that we’re doing, but they’re only 10% of system costs instead of 50-plus percent, which is what you typically see. That doesn’t necessarily have to be true. We do send a licensed electrician on site and create our own dedicated outlets for the batteries, which is the gold standard of doing this very safely, which is the main focus that we have in doing this.
David Roberts
That’s some cost and the batteries themselves are some cost. Then there are savings over time. Is this a loss leader in order to acquire customers or do those costs get paid back to you? If so, how long does that take?
James McGinniss
Without ITC or anything or providing any savings to the customers? Just the raw value of the battery is something like three years and as we optimize that, we think that drops even more. The cost that we want to recover are the cost of acquiring that customer and the minor cost of installation, which may be a much shorter amount of time — like a year. If that customer were to churn, we can go pick that battery up and move it to the next location.
David Roberts
It’s your battery?
James McGinniss
That’s right. We could do that in a day. Think of the density in metropolitan areas. I unplug it, I pick it up at one restaurant and then I move it to our next interior installation, of which we have a big queue. Then you start running the meter on that side of things. The cost that we focus on recovering — there are even contractual things you can do around this — is the initial setup cost and the cost of customer acquisition. We only need a customer for a couple of years for that to make sense, which would be the life of a traditional software or SaaS customer.
Because we’re able to move the battery, we have the full useful life — it’s reported as 15 years, but it could be even longer — to recover the costs, to pay off the CapEx of that battery. It’s just an asset that we own that we can place where we want.
David Roberts
One of the really cool, maybe even one of the coolest aspects of all this is that you can strike these deals with tenants rather than landlords. You don’t have to get the owner of the building involved in this. It is a tenant relationship, which is cool because, as you say, that’s an underserved — this is a problem in multifamily housing too, which we will touch on in a minute. But what if landlords do butt in? Do they ever object to having batteries on site? People are very paranoid about batteries for a lot of different reasons.
Or if there is a fire in the business, even if the batteries are not involved, is insurance going to come in and see a battery and freak out? The tenant can do this, but are there risks from landlords and insurance companies and that kind of thing?
James McGinniss
Yeah, and I think this even goes back to your question around regulations. We don’t think as much about the regulatory framework that BrightSaver does because we don’t export and are not currently. When I said you’re allowed to do this currently under code, I’m thinking NEC, UL, not requiring an interconnection agreement, things like that, because you’re not exporting. Certainly, yes, batteries — the most likely scenario is they could become a scapegoat for other problems that happen on site, which we expect to happen over time. Any new technology is going to encounter that.
David Roberts
New York City has had some negative experiences with battery fires. Some paranoia is not completely unfounded.
James McGinniss
But if you’re going to buy a non-UL-certified product from China and then plug 20 different e-bikes into it with 40 surge protectors, that can probably be an issue. That’s what we mean about this application not being contemplated really and how safe it truly is. We think deploying in the way we are is incredibly safe. It’s possible that a local jurisdiction or a landlord says, “Hey, not in my building or not in this region,” or something. But when you look at the broad scope of where this stuff is headed over time, I think of those as minor speed bumps because —
David Roberts
Have you run into that yet? Has anyone?
James McGinniss
We have not, no. All that said, I want to emphasize your point that this being accessible to tenants is one of those other “aha” moments — a remarkable property of plug-in technologies. It also gets into the tenure thing I mentioned. You can equipment finance this stuff. You don’t need a 20-year asset-backed securitized loan with a creditworthy offtaker. You can look more at, “Hey, what is this unit? Can it be redeployable? What is the resale value of this?” That property, on top of not needing a permit, on top of not needing landlord approval, is what removes all the friction from deploying these.
David Roberts
Yeah, and vastly expands the customer pool. Another thing — I was trying to think about risks to the unit economics here. As you say, this is not customer-facing. All you’re really telling the customer is you’ll save money. But this is dependent on arbitrage behind the scenes. If Con Ed changes its tariff structure or reduces peak demand charges, is that going to hurt you? How dependent are your economics on the existing tariff structure?
James McGinniss
Not on the supply side because that would be a much more substantial change — deregulation at the state level, at the PSC level. What deregulation means is we are allowed to enroll that meter. It is our meter with the New York ISO and the interval data financially settles to the ISO data and we have that financial obligation. There is nothing on the supply side that you could change the tariff or something. Con Ed can offer their own tariff for their own supply products.
In our minds, they would simply compete with the products that we’re able to offer. They typically don’t spend much time on it because they’re not allowed to make money on it. They can only make money on deploying infrastructure.
We do benefit from peak demand charges. I suppose it’s conceivable that could always change. It’s so far flung that it’s not really a risk that we think about. In residential customer classes, for example, they’ll have volumetric delivery charges, not peak demand delivery charges. That can impact your ability to recover it. If you have solar, though, it can enhance it because it means if you’re pushing volume in, you’re avoiding those charges.
All of this is — there are more elegant designs around tariffs and prices than others. We think the base level framework in all the major ISOs like PJM, New England, New York, ERCOT, where we’re focused over time, give us the framework to deploy and have really solid unit economics.
David Roberts
You think you’ll be able to beat Con Ed for the indefinite future?
James McGinniss
Yes, and we should beat it more and more over time because as we get closer to 100% clean. One thing we didn’t talk about in the unit economics is we are starting now to deploy our own solar or aiming to this year.
David Roberts
The plug-in variety?
James McGinniss
That’s something that we’re starting to explore, but we would also do the traditional front-of-the-meter stuff as well as our own supply source. As we get more and more of that, we beat the utility by more and more, and that can lead to more savings for customers or more margin for us.
David Roberts
Another question about the cleanliness of all this. You’re just shifting around. The cleanliness of it to some extent depends on what’s on the grid, what’s available on the wholesale level. As I understand it, most of the nighttime power in New York is gas. Is this necessarily cleaner — it’s cheaper, for the reasons we’ve discussed. But is it necessarily cleaner? In some sense you’re dependent on what’s on the grid, are you not? Less so over time as you install more of your own, say, community solar or whatever, but currently.
James McGinniss
I would say two things. One is the point you just hit, which is deploying storage gives us an ability to manage solar in our book — manage the exposure that the intermittency brings.
Even if the solar is not on site, we’re effectively storing our own solar in our on-site batteries. At the end of the day, ISOs are just big financial markets. You have pluses and minuses. You have sources and sinks exporting power or pulling power, producing or consuming. That’s one big piece of it — this storage will allow us to deploy solar.
The other part of it is that we use some very dirty peak sources in New York. We use fuel oil, we use nasty stuff when things get really bad. If we’re discharging during these peak times, we’re avoiding some of the dirtiest and most expensive resources out there.
David Roberts
Almost always the customer will be getting cheaper power than they would on Con Ed’s plan, but also cleaner power.
James McGinniss
That’s right. We don’t talk a ton about the clean now because how clean it’s getting is going to strengthen over time.
David Roberts
This is a good place to pause and emphasize this because I’m not sure we emphasize it enough up front. You’re just going to a customer and saying, “Hey, I’ll give you cheaper power. From the day you sign up, you’ll get cheaper power.” That is a pitch that is sufficient unto itself and requires no additional motivations. You don’t have to be green, you don’t have to care about anything else. This is why this is intriguing to me — for a long time trying to sell DERs, you need people who care about cleanness. You need people to care about resilience. You need these other motivations to overcome the financial premium. Here it’s just a pure cost play. Cheaper power, period, full stop.
James McGinniss
Yes. You don’t even have to mention that it’s going to get even cheaper the cleaner you get, which is what we’re doing. Psyched about that. I would love to emphasize that resilience and sustainability have been marketed as premium products and that has been where DERs have had the most success.
Of course there are savings pitches out there, but it’s unclear in many cases whether those customers did save money because it’s a 20-year agreement they’re signing to and there’s some forward projection of power and you have to believe in inflation, escalators, and all this stuff. We just say, “In a single month, if we do not save you money, you can leave and we will come pick up these batteries.” I think that’s something very new as well.
David Roberts
Let’s now talk about feeding back into the grid. You are not feeding power into the grid through these outlets because although you say it is possible, it is in fact illegal to do so in most places. In the plug-in solar pod, we discussed how Utah has pioneered allowing a little bit of feedback into the grid. How much of a restriction is it on you — on the size and number of batteries that you can install on one of these premises — that you can’t currently legally feed back into the grid?
Were you allowed to feed back into the grid, how much would that improve the systems that you are able to install? How much of a restriction is it that you cannot currently?
James McGinniss
We think more about the AHJ — like DOB or FDNY or those types of regulations — more so than the exporting one. The reality is, our customer peak demands are quite large as commercial. They range from 10 kilowatts if you’re a small cafe up to north of 100 kilowatts, and you’d have to deploy a lot of storage in order to be exporting. Even with no constraints at all, that physical reality — it’s unlikely that we’ll export unless we’re doing something to your point earlier about plug-in solar, which also does not need to be small. We can talk about that in a bit.
What we’ve found is — this is another mind-blown moment for me — when you look at the National Electric Code and UL certification and how, outside of whatever jurisdiction that you’re in, just what is safe physically to do, you can do hundreds of kilowatt-hours in buildings because there’ll be multiple 200- to 400-amp panels. Each of those — there’s the 120 rule — and you can push a lot more power into them than you think, not just these little batteries. We’re keeping things small because of the current environment that we live in.
The physical, safe way to do it — I see paths to having, imagine in every panel on a commercial building you have a stack of these batteries like a server rack, and they are all plug-in based. You are not just doing one giant system on the roof, which has totally different safety and weight considerations and needs permits, etc. When you think about these metropolitan areas, you could imagine solar on every balcony, solar on the roof, storage on every panel, and they are all plugged in.
You’re talking about megawatt-scale deployments. From that perspective, I don’t think it’s small, but we’re not doing that right now. The bigger constraint is not necessarily the exporting because the peak demand on these buildings can be quite large.
David Roberts
You’re saying you don’t need to export back into the grid to scale these systems up a lot?
James McGinniss
For this commercial application that we’re focused on, that’s right. Obviously the original — you think back to Impulse, they were like, “Okay, let’s plug a battery into a stove and now I don’t need electrical work.” Now we’re looking at this whole balcony solar movement. David Energy is in this new category of commercial plug-in deployments. This is also where you start bleeding into plug-in versus permissionless — it may not be a 120 or 240-volt outlet, but the idea of deploying solar and storage, we don’t understand all the form factors yet.
The reason I’ve been harping on this small thing is you can do pretty large installations that are not exporting and are plug-in.
David Roberts
In a big customer? In a large size customer?
James McGinniss
Yes. Big customers — plug-in can be a superior means of deploying storage than a traditional system from the techno-economic physical layer and what is currently allowed under National Electric Code and the UL certifications.
David Roberts
When you say big, you think for an individual customer you can reach the same scale that they would get by having a full-on permitted rooftop solar installation and a full-on permitted large-scale battery. You think you can reach that same scale with plug-in legos?
James McGinniss
The solar one seems a little more unlikely. At some point you should just do a proper install and make sure it’s wind-rated and interconnected and all this stuff. Solar is producing so much during the day, it’s probably going to be exporting too. The point of the plug-in rule is if you’re only exporting a little, you don’t need an interconnection agreement. If you’re exporting a lot, you should probably have an interconnection agreement. I think there’s a limit there. When I think of floors on buildings and how many panels are currently available and these preexisting interconnection agreements, I think it’s very possible you get to a bigger installation doing that.
All regulatory questions aside, physically that’s better than a rooftop or ground-mount storage system. If not bigger than the traditional way, certainly quite big. I think that’s even true of the solar side. Raya Power out there is doing really cool stuff where it’s not quite balcony — it’s its own self-ballasted system that could be a couple kW and I could totally see that being on New York City roofs.
David Roberts
I find the subject slightly vexing because when I talk to Cora, when I talk to the plug-in solar people, talk to you, everybody’s a little, “Backfeed into the grid is no big deal. Let’s just permit this.” I know there are people out there crusading to change state laws on this to allow this. But then I hear from electricians, master electricians, and they’re like, “Hold on now. There are all these risks from backfeed.” I’m sure you’ve heard the whole litany of risks. How are we, electromechanically ignorant onlookers, to assess this question?
Who’s got the right of that? How do you think about the safety of backfeeding?
James McGinniss
I’d say there are two components and I’m not an expert on this. I would definitely defer to the BrightSaver folks. One real concern I’ve heard from utilities is that if there’s a grid outage and there’s a line worker out working and because of backfeeding, a line is energized that they don’t know or expect because from the utility’s perspective, that line is down. That’s a danger. I think that’s quite manageable. For example, even in the batteries we deploy, if the grid goes down, they trip off. There are ways you can do this with any sort of — the way you’re configuring these systems.
The other one would be, I understand the utility desire to understand how much supply and capacity is being deployed on a given feeder, for example. If you were to raise that limit from 1.2 kW up to 50 per home, and everyone was doing it, you could be pushing a lot of power onto a distribution feeder just in normal operation. I think that’s a reasonable concern as well. That gets into, up to a certain amount of capacity deployed, do we need interconnection per system or could it be more of an application where you’re like, “Hey, just so you know, I’m doing this thing.”
We’re just starting to ask those questions. There are folks out there who know a lot more than I do, but those are the two big ones, as I understand, legitimate safety concerns. There might be others.
David Roberts
This is a bit of a crude heuristic, but they have run this experiment in Germany. There were a lot of concerns up front. A lot of electricians objecting to this, a lot of apocalyptic predictions, but they have legalized a little bit of feed-in with their plug-in solar and they have installed now gigawatts and gigawatts of these plug-in solar systems. As far as I know, there has been no problem. The fears have not come to pass in Germany at least.
James McGinniss
Yeah, and again I think that comes down to — when I say allowed, I mean at the physical electrical code, what are we actually doing to the grid? Safety is very important and these systems are very safe. That’s why that has played out. Interestingly enough, the bridge between those two things, at least as I understand it, is the choice to say 1.2 kW is mostly so that hobbyists and consumers who are going to self-install these systems don’t overload at the circuit level. 1.2 kilowatts or 1.9 kilowatts even points at the 120 rule of a 20-amp breaker, for example, or I think 1.2 may be how much power you can push onto a 15-amp circuit potentially.
If you made the rule 20 kilowatts, someone may just start plugging tons and tons of solar into their home and overloading at the circuit level. The bridge between how much you can export without an interconnection agreement ties back to circuit level — physically what’s safe, what do we want to make allowed so that when customers are self-deploying and when products are being offered, they’re being done so in a way that is safe naturally at the physical level.
David Roberts
I’ll wave my hands at this to say that I think in the future these distribution-level circuits are going to be much smarter. Lots more sensors, lots more software-governed, lots more ability to see where power is and distribute it as you need it, rather than relying on physical circuit breakers and that type of thing. I’m guessing it will get safer and you will be able to do more over time.
James McGinniss
This is such a good point and why I think that having real conversations between people in the industry and utility folks and regulators is so important. When you think back, a lot of the safety standards of the utility, and rightfully so, are very mechanical in nature. It’s literally metal flipping. In talking at DERvos, I won’t name names, with a utility exec, I was like, “Hey, if we could demonstrably prove that we were incapable of exporting not through a mechanical switch, but through software in a way that was demonstrated, you believed that this was safe?”
He said, “Yes, that would not require an interconnection agreement because of the export limit, like when the grid is down and things like that, if it handled the safety concern.” I would just put it this way. I think as an industry we need to ask the question, what is interconnection? We have all of these feeders — they’re bidirectional physically, you could export safely physically, under certain conditions, the same amount as you’re drawing in. Why do you need an interconnection to push out? I could put batteries behind the meter and discharge and take that whole home offline.
That doesn’t need an interconnection — or does it? There are different opinions around this, around the industry, of what does and does not require an interconnection at all.
David Roberts
It’s all going to get smarter.
James McGinniss
Yes.
David Roberts
The pieces are all coming together. You are in New York City selling to small businesses, franchises, laundromats, and similar. Who is next? What is the potential customer base here? What other customer classes or types are you going to expand to as time goes on? Where is this possible? You require retail competition, at least. What is the potential customer base and geography base here?
James McGinniss
We haven’t gone too deep on other geos, but based on what we know, we can expand across PJM and New England for the most part. You can think of really any storefront or even direct-metered commercial tenant space, an office, potentially, a legal office or something like that.
David Roberts
What about multifamily? If I just have a condo, can I do some version of this? Do I even have enough power? Am I even using enough power? Have you thought at all about multifamily, or is that not a potential?
James McGinniss
Yes, we have. We definitely aspire to launch a product — a retail energy product — that would cater to the type of people who are going out and will be buying and self-installing solar and batteries because of all the awesome work that BrightSaver is doing. We’re just starting in this lane of self-deploying for now. Once solar and batteries are getting connected, there are ways to optimize them where, without a counterparty like David Energy aggregating them up, offering them into grid services, doing arbitrage, all that stuff, your average multifamily renter is not going to be doing.
We don’t have any near-term plans to do that, but we certainly aspire to over time. I would say we definitely have our hands full now on the storefront perspective. We’ve been in cafes, restaurants, gyms for a while, but we’re starting to get laundromats and salons and grocery stores. You can think of that whole commercial space — commercial tenants across all the major states in PJM, New England, and New York — as areas that we want to expand into in the coming years, standalone. Then separately there’s new products like multifamily renters.
David Roberts
You’re installing all these batteries and you’re the provider for all these — you’re the retail provider for all these businesses. Are you doing any aggregation into VPPs? Is that part of the play? Aggregating to provide grid services, all the VPP stuff? Are you into that?
James McGinniss
Yeah. We aggregate our customers and dispatch them as an aggregation.
David Roberts
How big of a piece of the revenue is that?
James McGinniss
The VPP side? I would say it’s a meaningful amount. In New York you can drive a lot of value just through peak shaving on the delivery side. That’s all value that goes to the customer. All of our revenue is the VPP side. We dispatch it as one thing. Against our demand obligation with the New York ISO and at the grid services program level, all of that we think of as an aggregation and that is where all of our value comes from. It expands over time.
As you start layering in things like solar, the whole becomes greater than the sum of the parts.
David Roberts
I heard you talking with Shayle Kann on his pod, and you were — one of the hot subjects these days, which I’ve covered on the pod many times, everybody’s talking about is these data centers desperately need capacity. The fastest way to get capacity is DERs, in my opinion. Do you think that these — I know you’re going to yell at me for saying small, but relative to data center needs, any one of these installations is tiny. Are you going to be able to aggregate to a meaningful scale that it would matter to a data center? You think you’re going to get big enough to play in that pool?
James McGinniss
I think the white paper that you discussed with Cora is great — looking at Germany, how much of this stuff is going to get deployed in the coming years. I think that’s because we’re only just beginning to understand that’s the one form factor of this stuff. If, again, and I’m talking theoretically about these larger-scale plug-in installations, imagine something like that would be allowed under the varying regulatory environments — that could lead to far greater numbers of this stuff than we could imagine currently. What I would say, and again, I’ve not done the analysis or made a real projection here, but I think in terms of gigawatts and tens of gigawatts in the near term, and I don’t see anything stopping us and other players in the market from doing that.
Let me say it again. In contrast to the current way we’re deploying DERs, there’s too much friction for the current permitted, interconnected way to scale to something meaningful enough in my mind. Plug-in at least offers a path. Imagine if every time you bought an iPhone or went and bought a laptop, you needed a permit and an interconnection and an inspection. The Internet never would have scaled. In order for this thing to really happen, people need to be able to go out and buy and deploy these things without as much friction as there is today.
When I look at that property and knowing that we are probably quite naive right now and not understanding all the ways in which this stuff is going to express itself, I think plug-in, at least on a first-principles level, offers the DERs industry the promise that got me excited about DERs 10 years ago. I do not think that promise has been able to deliver until now. I really do see this as the dawn of a totally different way of deploying that I am incredibly excited about. That is the worst way to answer this, I know.
David Roberts
Let me nail you down on one thing.
James McGinniss
Yes, please.
David Roberts
Just take New York State. Do you think that plug-in capacity cumulatively will exceed traditional DER capacity? If so, when? I know there is a level of arbitrariness to this. Approximately how are you thinking about this?
James McGinniss
I think, definitely for storage. When I look at the whole commercial landscape, plug-in batteries just seem to make more sense to me. In multifamily buildings, I don’t know the extent to which balcony solar versus a traditional system — we’re still in the early innings of exploring that, but I would say 100% yes for storage.
David Roberts
Do you ever worry that the reason this is all going off so smoothly is that it has not yet reached a scale where people are noticing and that if you start to get to really substantial scale, the US’s red tape-prone regulators and legislators are going to start biting at your ankles and trying to get in and regulate this more? Are you trying to race to a certain scale before you draw the eye of Sauron, as it were? Is that how you think about it?
James McGinniss
Yes and no. In the long arc of things, I trust that if our system is working, this stuff makes sense, it is safe, it is cheaper to deploy, it is good in many ways. There are real safety questions and real aspects of deployment that are unanswered but certainly answerable and that we will answer over time. It is not that there should not be regulations. We should create the right frameworks around this radically new technology and I trust we will grind through the mechanics of that over time.
David Roberts
You are creating constituents, right? Every one of these little businesses who are getting cheaper power now are, in some sense, a constituent for this.
James McGinniss
Yes. It’s safe to do so. What are we going to say? “No, they shouldn’t get access to this new technology,” which would be a very politically challenging position to hold, I think. Clean, cheap energy for renters and tenants — that seems like anyone on either side of the aisle will support.
David Roberts
We do lots of dumb stuff, though.
James McGinniss
Yes. The short answer is, certainly with anything new, there will be jurisdictions or certain regulators or certain utility members that don’t like this and some of their concerns are even going to be valid. The best way to have those conversations is to show that it can scale and that it’s something that must be contended with because people are going to go out and do this. It’s good to do, and we should catch the ball as a system — as a society — not try and close Pandora’s box, which I don’t think is going to happen. That’s the myth. It can’t happen. It’s open. Here we are. We have to deal with it now.
David Roberts
We’ve been talking about your business and David Energy. Talk a little bit about who else is in this plug-in — it is nascent, it is early, as you say, early days in this. Who are the others — and what are they doing?
James McGinniss
Impulse Labs has the battery-embedded stove so that you don’t need to upgrade your standard 120-volt outlet, which I think is awesome. Copper —
David Roberts
I interviewed them three years ago. I was hyped about those battery-embedded stoves early on.
James McGinniss
That’s another one. EcoFlow is currently the battery that we’re using, which is making some really incredible products in this category. Pela is another newer startup. BrightSaver, Every Electric is here in New York City, who I mentioned.
David Roberts
I just saw someone trying to raise funds on Kickstarter for something they’re pitching as a fridge battery. It’s literally a battery you put next to your refrigerator to ensure that if the power goes out, your refrigerator stays on. My first thought was, how long until refrigerator manufacturers just integrate that? Just put the battery in the fridge?
James McGinniss
Impulse and Copper may be at the front end of a whole wave of battery-embedded products — like the heat pump or the fridge. I don’t know that company in particular, but Pela, a big part of their value prop upfront is resilience for something like a fridge.
David Roberts
Speaking of the legality, I’ve seen probably a half dozen products like this just floating by on Kickstarter. Little batteries for various things. You can feel people groping around, around just the right way to market them, just the right way to present them to customers. Is it backup? Is it cheaper power? Is it keeping your fridge on? It’s interesting to watch this take shape.
James McGinniss
I’ll admit that we don’t fully understand that yet. People love savings. One thing I was going to mention before that has really warmed my DERs-loving heart is how much just the average customer thinks batteries are cool. If you went to a customer — and a lot of retailers have done this — and said, “I’m going to save you 5% on your power bill,” you’re going to get a lot of skepticism. But you say, “I’m going to do it with a battery,” they immediately are like, “Oh, that makes sense. And that’s cool and I want it.”
David Roberts
You’re not running into, “Oh, battery fires and leaching chemicals into this,” all this misinformation about batteries flying around these days. You’re not running into any of that?
James McGinniss
No. I think people are smarter than that. How many hours have they walked around with a phone in their pocket and a laptop and not had any?
David Roberts
People are pretty familiar with batteries.
James McGinniss
All of these things are myths from a prior era. We literally scoured the Internet trying to find — there are people out there who literally try to start fires with these batteries and cannot. They’re using power drills, they’re using water, all sorts of crazy setups, and they can’t do it. Obviously there are still safety concerns. We care a lot about safety, but I think we’re in this era, especially with LFP, where we know that they’re safe. I think the average person does too.
David Roberts
I really think you can’t understate how much the spread of electric vehicles has got people thinking about batteries, just foregrounded batteries in general.
As I said, the reason you can offer customers cheaper power is that you’re doing a little arbitrage. In some future scenario, say in PJM they install a lot of utility-scale battery installations or they do a ton of what Minnesota is doing, which is putting these mid-scale batteries on commercial and industrial land. The grid in general gets a lot more batteries on it.
That is perforce going to flatten things out and reduce the amount of arbitrage available, which will diminish the appeal of your current economic pitch, will it not? Is that something that you worry about? We’d love to have that problem. Is that something you think about?
James McGinniss
It’s not for two reasons. One is our whole purpose for vertically integrating across supply and demand is the same as in any market environment or any commodity player — if we are self-supplying the consumption of our customers, we are not exposed to price. We can earn stable margins in many different market environments. If prices are low, we’re still just buying from our own solar and storage. If they’re high, there may be some upside there. Our goal on running 100% on clean energy is also a statement of what is viable about the business — if you look at NRG and Vistra, they own all the gen and that gives them their market power.
The second reason is that what I love about distributed energy is that because of that colocation element that we talked about, distributed outcompetes utility scale. There’s a remarkable property of DERs that I think originally DER-pilled me 10 years ago, which is it’s the same cost to build on a small scale as on a large scale. That’s increasingly becoming true with plug-in because you don’t need thermodynamic efficiencies of scale. If I want to go build a coal plant, I should go build a big gigawatt.
David Roberts
Same with nuclear.
James McGinniss
Same with nuclear. If I’m deploying utility-scale solar, it’s all the same components. There are some efficiencies but not as much as you think. The panels may even be similarly sized as a rooftop install. When you’re manufacturing these things off the line, that’s where your efficiencies of scale come from. What that means is if I place a battery or solar on the grid, the closer I place it to demand, the less I need to rely on wires and the more there’s an economic benefit of doing so. If the cost is equivalent roughly and there’s a greater benefit from being connected to demand, it’s going to connect to demand.
You also get resilience benefit and stuff like that. I’ll throw out this one stat that I always come back to — in Australia, utility-scale solar is $1,100 a kilowatt and rooftop is $1,200. In California, utility-scale is $1,200 a kilowatt and rooftop is $4,200. The difference is soft costs. It’s not the physical properties of this stuff. I always come back to that.
What that means is, if anything, the grid edge stuff — and this is also why I’m going to continue harping on small. When you place that next to demand, I’d worry about the wholesale stuff being outcompeted. Because their only value is wholesale, they don’t have a T&D benefit there. They lose all their revenue potential. At the end of the day, when you think about — on the smallness point — every meter, every home, building should have some amount of solar and storage.
David Roberts
Amen.
James McGinniss
That’s the most economic place to put it. That will sum up to a lot over time.
David Roberts
You’re not in the manufacturing, you’re not designing your own batteries, I presume you’re probably not going to get into that. In some sense you’re dependent on the form factor of batteries that other people are producing. Is there any form factor you’d like to see that you’re not seeing now? Are there — literally just the shape and size of these small batteries that you’re leggoing into installations — is there a form factor you would like some manufacturer to get into?
James McGinniss
100%. We are already in conversation with a variety of suppliers about that form factor. The rule in these partnerships is that they have their competencies, which is building this stuff, we have ours, which is doing all the commodity and energy market stuff. If we’re buying in sufficient volumes, we have seen suppliers be very open to creating a form factor, not just for us, but that they think if we’re deploying them in a given way that someone else will come along and want to do it, so there will be some other customer for them.
David Roberts
But what form factor — taller, skinnier, lighter? What would you like to see?
James McGinniss
I would say more stackable. Not just how they stand up. The batteries we’re currently using, I think a higher energy-to-power ratio, so you don’t need so many of them. We haven’t really gotten into the other voltages stuff, but that is something we may want to do — 240 or 208 or something — but right now it just means we’re using a few plugs if we want to do a bigger install. There are ways to consolidate the number of plugs you need and also how many inverters that means you need. You can get much more efficient over time.
David Roberts
And you’re using LFP — less fire prone, slightly less energy dense, but safer is supposed to be the tradeoff with lithium-ion. Is there a chemistry that would help? Do you think about that at all? Are there any other chemistries on the horizon that you think would be good for these applications, or is LFP just fine?
James McGinniss
I think it’s great. I’ve been thinking a lot about spectrum boxes. You don’t think about your spectrum box as this expensive CapEx or something. There may be a $100 charge if you don’t return it or something. I don’t think batteries ever get there.
David Roberts
This is your cable box, right?
James McGinniss
That’s right. I think plug-in batteries will approach something closer to that than we can imagine right now. Just on the lithium-ion and lithium iron phosphate cost curve, why would I not have batteries plugged in at the grid edge and my provider help facilitate that for me?
David Roberts
If they’re embedded in every appliance, you’re going to be doing it whether you want to or even know you’re doing it at all.
James McGinniss
That’s right.
David Roberts
Final question, real final question. If I’m a state legislator listening to all this, I’m intrigued, I’m excited. God knows New York City, New York in particular, has a lot of congestion problems, a lot of cost problems with deploying their clean energy. They’re rolling back their laws now and their regulations. If I’m a state legislator hearing this, do you need or want any particular regulatory or legislative help, or do you just want them to leave you alone while you cook? Is there anything that would be helpful?
James McGinniss
The work BrightSaver is doing is incredible. Those laws are incredibly important for the particular class of deployments that — for the multifamily renter, for example. In this plug-in conversation, what we are doing, our application is not really being contemplated necessarily from a regulatory standpoint. For our case, it leans closer to let us cook because we have the National Electric Code and UL certification and these things are incredibly safe. There are interesting questions around interconnection and how much should be exported, but I think what BrightSaver is doing is all you need to do there for now, at least until we understand more.
I would speak directly to them and say the customers that now have DERs available to them, like multifamily renters and small businesses, are not happy about rising electric prices and these are tools that they now have access to that we should help them get access to however we can. Especially if you’re a clean energy advocate. The two things that everyone has always used is one is “only rich people buy these,” which honestly is true to a lot of degree — they’re creditworthy offtakers — and two, you need incentives like the ITC or what have you. If you just look at it from a “we’re getting access to people who are feeling the pain and who need more affordable solutions and you don’t really need any complicated incentives or regulatory regimes to do that,” it’s kind of a no-brainer to support it however we can. In our application I don’t think there is that much support that we actually need.
David Roberts
Let you cook!
James McGinniss
Yeah, I’ll take it.
David Roberts
Super interesting, James. T hank you so much for coming on. This is really super intriguing stuff. I can’t wait to see where all this goes. Thanks for coming on and walking us through it.
James McGinniss
Thanks so much, David. It was a lot of 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.
Why is clean electrification, the most exciting, dynamic, hopeful sector of the US economy, still such a 98-pound weakling in DC backroom fights? In this episode, I talk with investor and entrepreneur Steve McBee about Amped, his new effort to boost the industry’s political influence and give it a little swagger — by telling a more compelling story, getting better information to lawmakers, and pulling hundreds of billions of dollars in stranded capital off the sidelines.
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David Roberts
Greetings, salutations. This is Volts for May 29, 2026: “Giving clean electricity a political voice of its own.” I’m your host, David Roberts.
If you are the kind of person who listens to Volts, you know that we are living through an industrial miracle. Over and over and over again, clean electrification technologies have outstripped even the most optimistic predictions. Solar sets new records every year. Solar and wind comprise the vast majority of what is being built today in power systems worldwide, and almost the entirety of what developers want to build in the future. Virtually every country is moving toward clean electrification, even petrostates like Saudi Arabia. Every day the technologies involved become cheaper and more sophisticated, opening up even larger potential horizons.
It is wild — and if you simply trace the projections forward a decade or two, the implications are so enormous and overwhelming as to defy understanding.
This ought to be political dynamite. It’s economic growth! It’s lower costs for consumers! It’s cleaner air! It’s geopolitical advantage! It’s a win-win-win in an age where everything around us feels like losing.
And yet most Americans don’t know about it. Most economic and cultural elites don’t know about it. Most politicians don’t really know about it. Even the most powerful politicians, the ones most directly involved with these subjects, do not really get it, not the full extent of it.
Why is that? There are lots of things you could point to, including a diseased information environment, but the core reason, in my opinion, is that the clean electrification industry has simply amounted to less than the sum of its parts, politically and culturally. It has miserably failed to tell its own story. It has failed to wield political power to protect its interests. The main trade group representing it — the American Clean Power Association — has a membership almost half composed of fossil gas and spends its time scolding environmentalists and simpering about “all of the above.”
It’s pathetic. Clean electrification, the most dynamic and optimistic thing happening in the world today—and yes, I’ve heard about AI—is somehow a 98-pound weakling in the great American high school when it ought to be prom king.
I was recently approached by some folks who say they want to build something better. It is called Amped, and it is a somewhat disparate set of efforts designed to improve clean electricity’s ability to tell its story, improve relations with lawmakers, and speed deployment. After looking at what they sent me, I have my doubts about whether it is what I wish it were — but I feel pretty confident that it will be better than the status quo.
Today I'm talking with the guy at the center of it, Steve McBee. Currently he runs Huck Capital, a clean energy investment platform. But he has also managed large-scale clean energy businesses and served as a legislative aide in D.C., so he has a pretty broad view of this landscape and has witnessed clean energy’s political failures up close. I can’t wait to get into it with him.
With no further ado, Steve McBee, welcome to Volts. Thank you so much for coming.
Steve McBee
Dave, thank you so much for having me. And I look forward to quelling all your doubts.
David Roberts
That would be a first. Truly, truly a first.
Steve McBee
We have to be ambitious.
David Roberts
I think you might underestimate the vast universe of doubts with which I struggle. Before we get into what you’re doing, let’s start with a little diagnosis here. Tell us in your own words. Describe to us as you see it the failure of this industry to, I guess I don’t even want to say punch above its weight, to even punch at its weight. It is punching well below its weight. Tell us why.
Steve McBee
Look, I thought the way that you opened up this podcast, you ran a perfect marketing and commercial message for where the industry is and where the industry is going. I’ve been in the industry for 12 years as a company CEO, as an organizer of capital, and it’s a difficult moment. I am more optimistic about the energy transition and these markets than I have been at any time since I came into the market.
Our products and technologies, they’re awesome and they’re getting cheaper every day. They’re flying down the cost curve. We have incredible talent that has come into this industry doing capital formation and business building. There’s tons of innovation in this sector happening not just in the US but globally. And while there has been capital that has rotated out of this sector primarily because of the volatility and uncertainty, politically, there is plenty of capital in this space to do what needs to be done to get to the next phase of the energy transition. From a commercial perspective, I’m incredibly optimistic.
That optimism is tempered by the fact that I think we have not done a very good job as an industry of taking care of a couple of really important non-commercial responsibilities.
Responsibility number one is we are obviously not organized for power. I think the limits of our political infrastructure as an industry, particularly in Washington, have been badly exposed over the past year plus. Connected to that, Dave, given how important our industry is to the US economy, given how important it is to meeting power demand, not to mention how important it is to the planet, our social license should be locked in, but it’s not.
Our cultural identity is wobbly. And I think that is a function of us not doing a good job as an industry in talking to the people that we most need to be with us in ways that are landing. We talk down to people, we talk around people, we don’t speak to people based on their own lived experience or around a common set of values. As a result, we have really allowed the fossil fuel industry to easily appropriate the energy narrative in the United States.
David Roberts
Let me just insert here. They did have a century head start, and all the good news we’re talking about has really flourished in the last three years, five years. You can forgive us, you can forgive them for having more infrastructure in place.
Steve McBee
That’s a fair point. It’s also an excuse. We need to be excellent and we need to be urgent about it. We have not built infrastructure that has made their job very difficult. In fact, they have pushed us outside the cultural zeitgeist and we’re on the outside looking in, which is not a place where you want to be in a world where the number one most important political signal is cultural, and the most important market signals, unfortunately, are political.
I think it’s not enough as an industry to say, “Hey, we’re just going to keep our head down, we’re going to build great companies, we’re going to build great products, and we’re going to shut the noise off.” That’s not how it works. The way it works is you have to be commercially excellent, you have to organize and take care of your political power, and you have to fight it out every day for narrative and for your identity.
In a perfect world, we’d not only be excellent at those three things, but we would organize them in a cohesive way to create a flywheel for the industry. But we have not done that. I think this topic that we’re discussing today is so important.
In fact, I think the most important priority, the very top priority of our industry, needs to be being fiercely urgent about getting our political power organized and getting our cultural identity reestablished. If we do those things, these energy markets are going to transition themselves. For all the reasons that you talked about at the top of the show. The fundamentals are great, but if we don’t take care of those things, it is going to be lumpy.
David Roberts
I have my own thoughts about this. Obviously, before we started, I took a solemn vow to myself to remain calm throughout this, as from our previous discussions.
Steve McBee
Let’s see how that works.
David Roberts
I get worked up about this stuff. Tell us from your inside view, what lesson do you think these industries, the clean electrification industry — and I just want to, I should have clarified this up front, but I also want to say this. People have in their head energy as a big lump. I would like to distinguish from that. Clean energy, but that’s also a big lump. I would like to further distinguish from that. Clean electrification. Electrons, not molecules. Solar, wind, batteries, EVs, etc. That’s what I’m talking about. That is the industry that I would like to have a distinct voice of its own in that industry. What lesson do you think it took from the 2024 election and how has it chosen to respond?
Steve McBee
I would go back to your opening comments at the top of the podcast. You talked about electrification exactly the way we should be talking about it. That is a way to talk about it that happens to represent the facts of where the industry is today. It also is a way to talk about it that will allow us to reach a broader cross section of people. When I think about people —
David Roberts
Before we get to how we should talk, I want to hear about what the industry is doing, what people are saying as a response to the 2024 election, what they learned in these back rooms, what strategies they are adopting?
Steve McBee
I think you might be giving the back rooms too much credit. One of the things that I have found surprising and that I’m very frustrated by is we obviously have a capabilities deficit in the clean energy influence ecosystem. The scoreboard would tell you, we’re down 53 to zip. We’re getting smoked. But we also have a cultural problem, I believe, in that ecosystem. The lessons that have been taken seem to be that we just need to keep doing what we’re doing and maybe do it a little better or spend a little more money or whatever.
I don’t see any — there is no meaningful conversation within the incumbent group of trade associations and associated firms in Washington about the need for a reboot, about a really critical look back. There is a lot of time spent resisting new ideas. There is a lot of time spent being territorial to new ideas. There is a huge amount of time spent by the people who have been charged with protecting and promoting the interests of the industry trying to convince, I guess, first themselves, but also the rest of it that the situation is much better than people like me and I think people like you think it is. I think survival, relevance, digging in, that’s what I’m seeing.
David Roberts
Here’s how I would put it, Steve. The election was Trump smacking the industry on the nose with a rolled-up newspaper. The response has been to whine and cringe and beg for scraps. “Let’s keep our head down, let’s be safe, let’s not fight, let’s see if we can chisel away a little bit of extras on the side here. Let’s see if we can sneak our way onto the wagon with the rest of everybody.” I never see any self-confidence, any bravado. It just strikes me as an industry that’s so used to being on the rump that it has just accepted it and now decided to beg for table scraps. That is the much less flattering way that I would put it.
Steve McBee
That’s exactly what it is. When we talk about the cultural problem that this industry has, we have an identity problem. When I was trying to figure out after the IRA wipeout, what’s happening, what can I do, who can I help be better?
What I found, number one, is I couldn’t find anybody that I thought had the potential to be significantly better. The way that they were structured or the way they were being led or the way that they had identified their mission.
The other thing, equally alarming, getting to the point that you just made, is whether you’re talking to lawmakers, congressional staff, industry leaders, people in the capital markets, people in climate influence, there’s this defeatist attitude, this idea that we’re used to losing, we’re used to taking table scraps. We show up prepared to lose. When we do lose, we really talk about how unfair it is that the fossil fuel industry spends so much money and tells so many lies and they just don’t play fair and whatever. And we still show up and talk about ourselves like alternative energy —
David Roberts
Yes, it is so characteristic of our side to talk as though there is a referee listening who is going to blow his whistle and intervene. There is no referee.
Steve McBee
Nobody’s coming to help us. We have to help ourselves. The thing about it is we are the — when we talk about being the future, the alternative energy that will power the future — the future is fucking here — and we are the power source that’s going to power the US economy and hopefully a whole bunch of the world going forward. We need to show —
David Roberts
Yes, not 2050.
Steve McBee
No.
David Roberts
Not 2030.
Steve McBee
No.
David Roberts
It’s happening now.
Steve McBee
Yeah. Where is our swagger? Where is our presumptuousness? We need to figure out what we need to do politically, and we need to do whatever it takes to go take it, and we need to stop asking for permission to do that.
David Roberts
Yes. Here’s a point I would make just about human psychology. If you want to attract people to your side, there are two ways you can do it. You can go to them and flatter whatever it is they already think and try to weasel your way into that and get a little bit on the side. Or you can have some swagger, have some charisma, and attract them — make them come to you because you’re the thing. “Make them have to come to you because you’ve got all the rizz, you’ve got the aura, they want to come be part of your thing.”
No one in the industry, no one on our side, that doesn’t even seem to occur to them that that is a possibility, that that is even out there in the universe, that you could just swagger a little bit and then people would be attracted to someone who thinks they’re hot shit. That’s kind of how it works.
Steve McBee
That’s how it goes.
David Roberts
It’s something you said I want to follow up on. The space is full of groups. There are many acronyms. There’s the ACP, there’s SEIA, the Solar Trade Association, there’s ACORE, I forget what that stands for, there’s SEEC. There are an alphabet soup of groups in this space. You say you couldn’t find any of them that had the swagger that you’re looking for. What hole are you trying to fill here? What’s missing from all that alphabet soup?
Steve McBee
I think there are two things that need to be done. There are the things that we’re doing right now that need to be done way better, and then there are the things we’re not doing at all. What I’ve tried to do is focus on the gaps, the things that we’re not doing at all. Every day that goes by that we don’t start doing them, we’re taking deeper losses. We can talk more about that in this conversation. My priorities are better digital communication infrastructure and way better communication narrative and way more cohesion around how we do that.
Number two is your point on all this great stuff that’s happening in the clean energy industry. Nobody knows about it in Washington. What I see every day as an operator in the commercial marketplace and the perspectives that members of Congress have and senators have, even the ones that are way forward on our issues, there’s a huge gap in information and knowledge and context about what’s actually going on in the commercial market.
Third, very practically, we got to get more political money in the system because I spent a lot of time in Washington. Washington has always been very transactional. I’ve been gone for 12 years. I’m dipping my toe back in. One of the things —
David Roberts
It hasn’t gotten less transactional, Steve.
Steve McBee
So much more transactional. We’re not playing that game at all. Those are things that aren’t being meaningfully done in any kind of aggressive, disruptive, or intentional way. We also have to do the basic things that we are doing, that the trade associations are doing, that the green groups are doing. We gotta be better. But there’s so much that is not being done. There’s plenty of work to do there as a starting point. I hope that by bringing better solutions to those gaps in the market, we actually can help the trade associations and those other firms that you mentioned be better because we’re creating a better on-the-ground environment for them to do the things they do.
David Roberts
You make a point that I think is good to establish here at the outset too, which is that for all the investment that is flooding into this space, there is a lot more out there that is hesitant or waiting or uncertain about entering. Talk a little bit about that dynamic. What is out there and why is it waiting?
Steve McBee
I’m glad you brought that up. This is a thing that I get up in the middle of the night thinking about, unfortunately. Speaking from an investor perspective, there are hundreds of billions of dollars of capital that want to come into this space that is not coming into this space because it cannot price political volatility, it cannot price electoral uncertainty. That capital does not feel like the policy signals that are in place at any given time are going to be reliably in place through the hold period of their invested assets.
As a result, that money is just stranded. One of the things that we need to do is we need not just better policies, but we need to make sure that when these rules get written, they stay written. If that happens, a lot of capital is going to come into this space. We are close, per your comments at the top of this podcast, to real domination in this industry. If we get a massive new infusion of capital that is deployed against a set of rules that can be counted on, we’re going to rip.
David Roberts
I try not to dwell on this, but I do think periodically about that capital and about what it would have done if the IRA had been in place for four more years. We would have seen wonders, I think. There’s a bunch of pieces of this, and I want to take them on one at a time, but I want to start — maybe one of the things you want to set up is a rapid response kind of media operation.
Before we talk about what that would look like, I want to talk about what it would say. I want to talk about the messaging and the polling, because this, I think, is where my doubts are concentrated.
Steve McBee
Okay, we go number one.
David Roberts
This is where I sometimes feel I’m going crazy because I rarely see my perspective on this reflected out there in the world. Let’s talk about it. You have this polling, some polling you’ve done about these issues. Before I shut up, just tell us what the polling says about the message, about what people are hearing, about what they want to hear, about their preferences, that kind of thing.
Steve McBee
You and I might disagree with the findings of this work that we’ve done. The way I read the research is that people are not against clean energy. People are quite a bit more supportive of clean energy than even I expected. But what people don’t like are binary choices put in front of them where they’re being forced to pick one thing versus the other thing or forced to take a side. That’s thing number one.
Thing number two is I wake up every morning and work as hard as I can on the things I’m working on because I am existentially concerned about a climate crisis. That is my motivation, and that is my North Star. I learned that that is not true of a lot of people. This research bears that out. People are not — it would be too severe to say that they are indifferent to climate change, but it just isn’t something that ever hits the top 10 things they wake up every day thinking about.
The way we talk about this, it was interesting. I was having dinner about a month and a half ago with four US Senators who are really awesome on these issues, and we were having this conversation, exactly what’s our message? In the room, there was a little bit of a different view between certain members who felt we should be climate forward and we should not give up talking about the moral imperative of climate change and the need to build this industry out to address that.
Then there were members who were saying, “We should never talk about climate again. It’s all about affordability.” This is a debate that is being had here inside the climate influence ecosystem. I think it’s a false choice. We have all of a sudden so many ways to talk about this issue separate from climate that can appeal to lots of different people.
Talk about it on the basis of price, talk about it on the basis of affordability, talk about it on the basis of reliability. Talk about it in terms of, “Hey, clean energy isn’t getting blocked, barricaded, or embargoed in the Middle East.”
David Roberts
Or how about as a solution to inflation?
Steve McBee
As a solution to inflation and high energy prices, 100%. As an industry and maybe as a movement, the facts on the ground have not caught up to the messages that we are communicating. I’ll be honest with you here. When I came into this industry 12 years ago, I came in as CEO of a company called NRG Home. It’s a big company, $6 billion company. We had 3 million customers, all on the residential side. About 2.5 million of those customers were retail energy customers. The other half of those customers were buying some combination of our green growth products.
As we were looking about how to drive out market share, how to build a customer funnel that could actually convert, the thing we were really left with 12 years ago is we gotta go target climate-forward homeowners who care about climate change and who are willing to pay a premium for our products because at the time they weren’t cheaper for the most part. They also didn’t always work as well as we wish that they would. There was really limited grid services and VPP programs in place that would allow you to go to a customer and say, “We can install these products in your home, we can flex those with grid operators and we create a shared savings model for you.” None of that stuff really existed then, so we went after climate-forward homeowners.
We are in a totally different place today where we have an abundance — almost an embarrassment — of riches about how we can talk about this industry. We should be able to touch every single human in the United States with a message that lands. Whether that human is sitting in the commercial marketplace as a consumer or sitting in the public square as a voter. We have something for everyone that is a feature. That’s not a bug, that’s an opportunity, that’s not a problem.
David Roberts
I think you have misidentified the source of my doubts, as many people do. I don’t give a damn whether anyone says the word climate or not. It’s absolutely not my thing. I’m not one of these people who insist on putting climate forward. I think this is quite obviously true that if your superiority as a product, as a solution is overdetermined — it’s economic superiority, it’s security superiority, it’s clean air superiority, it’s inflation —obviously you use whichever one of those arguments is compelling to the current audience you’re talking to. That seems obvious to me.
What bugs me is this idea that we poll and we find out that if you pose this as a choice, “Do you want these technologies to replace fossil fuels?” people get nervous because they aren’t certain whether these technologies are strong enough, big enough, manly enough to really do the full job. They like addition, they don’t like replacement. That’s what they tell you on polls. That’s the lesson.
The question is what you do with that, what you do with that fact. As someone who has followed issue polls for decades now, I feel people really misuse them. I’m fine using them for political purposes, but once you start taking them too seriously, I think you get misled because on any issue, if you just ask people, “Do you want more stuff?” they’ll say yes. If you say, “Do you want fewer things?” they’ll say no. They don’t know anything about anything. They don’t know any of the details, any of the technologies. They don’t have any idea. They’re just intuitively — more sounds better than less. More choices sound better than fewer choices. That’s what you’re going to get, but that is just puddle deep.
The question is, what do you do with that information? This is the analogy I was thinking about before we got on the call. If you work for Coca-Cola and you do polling and you find out, “Oh, the public thinks that both Pepsi and Coke are part of a balanced diet,” that’s fine. But you’re advertising Coke. Your job is to sell Coke. You don’t go out and in your commercial for Coke, start by saying, “Don’t worry, we’re not replacing Pepsi. Don’t worry, you can still have your Pepsi.”
Even if that’s true, that’s not your job to say that. Your job is to brag about how good Coke is. You’re supposed to make people want to come to Coke and leave Pepsi behind, not because they have to, but because they want to. To take this messaging and take the lesson to be, “We need to talk about all of the above. We need to be sure not to threaten fossil fuels. We need to say, ‘We can all fit on this wagon.’” That comes off as weak. I don’t think it cuts through. I don’t think it creates the kind of conflict that draws attention these days. I just don’t think it is effective. This, “Let us be a junior partner on your bandwagon” message. Never mind whether it’s accurate. I just don’t think it works. I don’t think it’s a good way of interpreting these findings.
Steve McBee
That’s a great analogy. We want to be Coke, right? At least I want to be Coke. I don’t want to be Pepsi.
David Roberts
Amen.
Steve McBee
First of all, I want to say one thing to the point you made at the top of this question. It’s obvious to you that we should be organizing our message to match certain audience cohorts. It may be obvious, but we’re not doing it. We’re not doing it. That’s thing number one. On your point, here’s how I look at the research. I look at the research saying that public sentiment doesn’t want to have binary choices, doesn’t want to be forced to choose between this versus that, doesn’t want to be doing things to demonize one side versus the other. They just want it to be easy, they want it to be cheap, they want it to be reliable, whatever.
The other thing that you see in that research and some other research that we have done, which specifically targeted consumers of energy, is they do not have a lot of information about our industry and about our products and why they are in fact cheaper, more reliable, and create more energy security for them and their families. The public opinion right now is not in a great place for clean energy and that is on us.
David Roberts
Again, fossil fuels have been spending billions of dollars for many decades, quite sophisticated operation, convincing people that fossil fuels are strong, manly, tough, steady, reliable, and that clean energy is flittery, kind of nice, kind of cute. “Sure, we’ll let some in, sure, we’ll put some on the edge, but it can’t be the main thing.” I guess what I would just say is you either accommodate your message to that or you try to change that. The way to change that is by convincing people that clean energy is strong and is reliable and is powerful and can do the job.
You don’t accommodate yourself to their misconceptions, you try to change their opinion. This is what never seems to occur to the whole Democratic side of the aisle, including the clean energy industry. Why don’t you try to change this? Rather than accommodating yourself to this current state of public opinion, why don’t you try to change it?
Steve McBee
Exactly right. One of the things I want to make sure as I try to quell your doubts is that you understand how I read this research. Our job is, in my view, not to look at where public sentiment is and just say, “Well, there’s only a certain level of tolerance for our stuff or whatever, so we just have to accept that and do the best we can.” Our job is to change the composition of public sentiment.
What the research tried to do was to say, “Where are people right now? Where are the opportunities and where are the barriers?” Because I see this as a two-step. On the Coke, Pepsi thing, I think step number one is we need to talk about Coke and its reliability and its affordability and the fact that it can get hooked up to the grid faster and the fact that it can allow consumers to have more agency over their power. We need to talk about Coke over and over every single day on these terms.
Once we have level set public sentiment, then we need to start drawing a really stark contrast with Pepsi and we need to be throwing them under the bus every single day in a very intentional, coordinated, cohesive way. The only thing maybe we differ about is I think we have to define Coke before we can define Coke versus Pepsi. We have not done a good job on that.
David Roberts
Yeah, I totally get that. Totally understand that. The reason my hackles are always up about this is because I have heard this, “Do XYZ and then we’ll fight,” message from this industry, from the political — and the fight never seems to come.
Steve McBee
We need some new leadership here because the people who are paid to fight have not fought.
David Roberts
They seem to define fighting — not just that they won’t fight, it’s that they are constantly filling the newspapers with scoldy op-eds telling everybody else not to fight. They seem to treat fighting as though it’s “you’re farting at the cocktail party” or something. It’s gauche, it’s in D.C. it’s just not done, it’s wild to me.
Steve McBee
That is 100% true in our industry and in the climate influence space. It’s true across the whole progressive movement. Not to be too obnoxious about this, but the people I’m working with on this and the way I’m thinking about it, not only do I hope that we can build a better playbook to go and take the fight to the fossil fuel industry and take the message to the people in ways that are going to land, but I hope that by doing that maybe we can hand that playbook over to some different parts of the progressive movement that could probably take a couple pages out of a more aggressive, intentional, and tenacious strategy to take on all the bullshit coming from the other side.
David Roberts
I would just like to see a plan that doesn’t have step one, publicly talk about your own weaknesses and shortcomings, acknowledge all your, concede all your opponents’ arguments, step one, step two, beg for scraps. Let’s talk about then one of the initiatives that’s coming out of this, called Signal — which is rapid response media. Anybody who listens to Volts or has ever read anything I’ve written for 20 plus years now knows that this is my personal obsession. The media imbalance, the toxic information environment, and the absolute passivity about it on the progressive side, on the side of clean energy, just this refusal to acknowledge the centrality of media in the information space in all of this.
I can’t tell you how many — give me a billion dollars and I’m just going to hire — never mind that, give me $100,000, I can hire an army of young people to go out on TikTok and YouTube and just say, “Clean electricity fricking rules. Look at this, look at how awesome this is.” That would be like a buck fifty for any of these philanthropists, any of these green groups, any of these investors. As you say, there’s money all over the place in this area, but they’re not spending on media. It drives me crazy. I was very happy to see this. What do you envision here?
Steve McBee
The only thing I would quarrel with is to say we are spending money on media, but we are spending money on the wrong media. You mentioned a scolding op-ed in the New York Times. There should be no op-ed in the New York Times. All of this centralized TV buying that the existing groups are doing — this is not — we are not talking to people in the places that they increasingly get their information in. We are not talking through the voices they trust to deliver it.
The thing that inspired this idea initially was — we could probably do a whole separate podcast on this. I have spent 10 years trying to blow up the residential clean energy model, which solar proxies for, which I think has been a disaster for consumers and trust and the industry and all the rest. In looking at different ways to reorganize those markets, one of the things in our research that we see is that, first of all, if you’re going to sell somebody solar, you shouldn’t be knocking on their door during dinner to sell it. But that’s how we sell it. When you knock on the door of most people, they are not even showing up open and neutral. That’s the best case scenario.
David Roberts
If I hear a knock on my door and I see somebody I don’t know at it, immediately I’m angry, resentful, and I want them to go away. It is unfathomable to me that this is not just a way of selling solar. It’s the way — the primary, the only way we have of selling solar. It’s like the 1950s called.
Steve McBee
It’s frustrating. That’s a whole separate topic. The point I was making to your question was when consumers are engaged in a selling moment with our industry, they either show up with no information, but more typically they show up with biases against our products.
Part of that is on us. We have made a difficult product to sell more difficult by the way that we have organized the market. The other thing, we started doing some more work on why people are showing up with all this misinformation about what this is.
What we realized is that there are at least — this was about 15 months ago — there are at least three, I call them air wars, being financed and prosecuted by the fossil fuel industry and their allies that are getting way up the funnel with customers into their digital and social channels with subtle and not so subtle messages about clean energy being weird and expensive and dangerous and unreliable.
David Roberts
And the chemicals, Steve. The chemicals and the spyware.
Steve McBee
Yeah. The panels are Chinese spyware. The fossil fuel industry, you have to give them credit because they are getting it done.
David Roberts
Yeah.
Steve McBee
Nobody is showing up going, “I’m really glad you’re at my door because I’ve heard solar is this incredible price and reliability driver and I’m really interested in talking about how I can put these on my home.” Said almost nobody that answers the door ever. The fossil fuel industry is playing the game.
I find it ironic and despairing that we are the cool kids in the energy industry, we’re the tech-forward part of the energy industry. Somehow the fossil fuel industry is smoking us in the new media environment and they’re smoking us as it relates to incepting consumers and they’re smoking us as it relates to incepting voters. We got to go take that on. Now we have no presence, not as an industry and not really as a climate movement in the digital space.
David Roberts
Concretely then, what does it look like to build this? Is it literally just giving money to people and telling them to go out and fight these? Practically, how do you build this?
Steve McBee
What I’m trying to do with this is fill gaps. I think there are three gaps here that Signal is trying to fill. Gap number one is the gap we’ve been talking about. We have no position in the digital and social media ecosystem. Number two, the industry voice is not meaningfully in the contest for narrative and facts anywhere. It’s not unified in any meaningful way when it does engage. Number three, the industry efforts to communicate its story, to the extent that they exist, are siloed from the messages and communications being run by our political allies about the policy advantages or the policy choices or the policy ideas to advance the industry. We’re not in the game, we’re not in the game digitally, and we’re not coordinating with our best allies.
What I’m trying to do — my partner on this, maybe a lot of your listeners know this group, it’s a C3 called Good Power. When I was looking for an execution partner for this, I looked at all the for-profit and all the nonprofit entities and I thought, Good Power is really getting it done. What I was most impressed by with them is the way they’ve used their portfolio of influencers to go into rural red parts of the United States where renewables projects were being held up because there was no community support for those projects or there was a lot of disinformation in those communities that was making it hard to get those projects approved.
They went out and they put influencers into those markets that looked like and sounded like and felt authentic to those communities. Teachers, priests, farmers, moms, whatever. They have really moved the needle. The way this is going to work — I won’t geek out too much on this — but we’re using an AI-enabled technology platform which, the best way to think about it is a little micro network that’s being dropped into this campaign. That network unifies and connects all of its participants on a common platform.
At the beginning of every week we’re going to find one or two things where we’re like, that’s a defining moment and we need to show up and show up on time and show up unified or this is a thing we’d like to make a defining moment, whatever.
David Roberts
Let me just emphasize both those — being opportunistic. This is the thing. I remember when I first heard about this, I was like, I’ve heard about these communications efforts. You remember, We Can Solve It. That was, I think, Al Gore’s, or Climate Power. We’ve had these narrative efforts before, but they tend to be so technocratic and top down and, as you say, mainstream media centered and just feel like they’re from a previous century. The main thing they’re missing is just being opportunistic, being there when things happen. That is what the right is really good at. Anything that happens, they can twist it and put it into their narrative overnight, everywhere, overnight. That’s the main thing.
The other thing is creating opportunities. This is to get back to our previous discussion. What many people in our world are nervous and frightened and timid about is creating conflict that draws attention. That is the coin of the realm these days. That is how you get attention. To have as a premise of your effort, “We’re not going to offend anybody or bother anybody or counteract or contradict anyone,” no one cares, no one listens, no one pays attention. On both those sides, the rapid response and the, “Where can we create fruitful conflict that will serve an educational purpose?” Both those we have been falling so far down on.
Steve McBee
Yeah. This is another one of those things that wakes me up and pisses me off in the middle of the night. The way we booted the IRA fight. We deserve to be in Siberia for 10 years. It could not have been executed any worse. Here we are with a huge do-over in the form of these defining opportunities that seem to show up every single week —
David Roberts
I know.
Steve McBee
— to message around. Yet, all our messaging is, again, to the extent it exists, siloed. It’s disparate. We take forever to pull it together —
David Roberts
And it’s cringy and it’s “ all of the above” and it’s “please give us table scraps.”
Steve McBee
Right?
David Roberts
Here’s another analogy. I had the Coke-Pepsi analogy, Steve. Then I had one other one I thought that I’m going to run by you. On immigration, Trump gets elected, all the elites on the left conclude, “Oh, no, immigration’s bad. Now we got to retreat, retreat, retreat.” On immigration, the public is not with us on immigration. Run, run. Let’s chase the right. We’ll be tough, too. We’ll be tough on the border, too. Chase, chase, chase. Instead of looking forward, just look up a little bit at the horizon. Look forward a few years to the very, very predictable thermostatic public opinion backlash against Trump.
Now, sure enough, immigration is polling better than it has in years. Support for immigration is higher than it has been in years. Our side could have gone to where the puck was going. We could have just stuck to our guns and then think how good we’d look now. We are serious about our values. We stuck with them. Now here you are, public, coming back to us, and we look good. Instead, we look like chiseling little weenies who have no courage of our convictions. We chase the right — and now we’re going to what, chase back left again? Now we just look like we have no spine.
I see the analogy here, too, which is Trump got elected. “Oh, no, climate and clean energy is bad. Now we got to cringe, we got to run away. We got to talk about all of the above. We got to talk about anything but what we are and our value advantages.” Here comes the Iran war, very predictably, Trump’s messing it all up and the public is, especially in other countries, but even here is like, “Gosh, it seems like fossil fuels cause lots of problems,” and they’re coming back our way.
If we had just stood here and not moved in the first place, we would be here to meet them. But instead, we’re chasing public opinion every time we get a new poll. It’s framed by DC consultants and the DC types and think tank types as that’s savvy. That’s smart politics. “You hippies have your head in the clouds. We’re the smart, savvy politics knowers.” But instead, if you follow their advice, you just constantly look like a weakling. You constantly look like you have no center, you have no spine. We should have just stuck with our guns in the first place, because, as you say, the world is now serving up one example after another that is telling our story for us.
Where are we? Where are we out spiking the ball? Where are we out saying, “We told you so.” Thank you for coming back. Here we are, we’re ready to go. That’s what worries me about the poll chasing. Always.
Steve McBee
Yeah.
David Roberts
It’s not even that savvy.
Steve McBee
We’re not spiking the ball. We’re not even getting to the line of scrimmage. I think it really hurts when you think about the jillions of words that have been written about Iran since this thing started, how few of those words have been devoted to crystallizing a choice. “We’re about to dial up a trillion and a half dollar defense budget. A 40% increase over last year’s defense budget, riding alongside a $200 billion supplemental to protect our interests in the Middle East, which is energy.”
Has anybody thought about taking 15% of that money and investing it in domestically sourced, low-cost, reliable energy that will allow us to compete against China? It’s not even in the conversation and that’s on us. I think your point is a really — I think you and I share snowboarding as a thing we do. You say you gotta go to where the puck is. When you’re snowboarding, you gotta pick a line. You pick a line, and then you go and you rip your line. You don’t come off of it because you hit a mogul or whatever. You hit your line.
David Roberts
I think that’s way better, that’s way cooler.
Steve McBee
At some point, we have to decide as an industry, what do we believe about ourselves and what do we stand for? We have to go out and articulate that. We need to do that. Again, I think we have to understand public opinion and understand the fight we are in and understand where our strengths and weaknesses are. We have to maneuver through that in the right way. I don’t see a difference between being smart and sophisticated about how we do that and being assertive in making the case for our stuff.
David Roberts
Let me ask a concrete question then about just that. Say you have this digital rapid response Signal, you’re calling it, set up. It’s running, and an IOU comes along, utility comes along and announces it’s building 2 gigawatts of new gas to serve data centers in its territory. Does Signal —
We dial it up.
— go for it, does it go after that? Does it fight against gas in that instance?
Steve McBee
Yeah, we dial it up. The thing about Signal that’s cool is it’s going to unite a bunch of different industry leaders onto this micro network and practically get to the speed and agility and velocity comments you made about how the digital media ecosystem works. This platform generates content for its users and, in the voice of their social media narratives, pushes it onto their channels. We push all that out in a unified way around the same message, and then we dip into an influencer pool of about 8,500 creators and validators, and we pick the validators and creators that are best suited to amplify that message, and they amplify it outside the media audiences of the participants. That’s how this works.
Not every industry in the scenario that you just laid out, not everybody on the channel is going to be down for a fight on gas. Part of what we’re doing, and look, everybody should just — what do you stand for? What do you believe? On the one hand, I’ve been a CEO. I understand fiduciary obligation. We don’t want these companies that are great to put them in a situation unnecessarily where they’re exposing themselves to a bunch of political bullshit.
But in any given messaging opportunity, I’m expecting we’ll get 70% participation from the industry participants on the platform. What we’re also going to do is we’re going to coordinate what we’re doing with what our elected representatives are doing separately. We’re going to try to both amplify their messages and also try to surround what they’re doing with our messages. It’s more cohesive because, right now, if we ever are in the game on a narrative contest or a defining moment, it’s like we have just cats and dogs running around all over the place doing little bits and bites. It doesn’t add up to anything.
The fossil fuel industry, those guys know how to line up and go get it done. We got to build permanent institutional capability that is equal to what we’re up against. We’re not going to build that in six months. This isn’t a Mars landing. We can build this in 18 months. We can build this so that it’s scaling and accelerating way before the next presidential election. Way before.
David Roberts
This is a good segue to the next thing I want to talk about, which is the capital table — the going after elites version of this. Here’s how I would preface this. I was debating where to say this, but I’ll just say it here. The fact of the matter is that fossil gas and clean electrification are alternatives to one another. If you are going to cleanly electrify everything, you are going to drive gas out of heating and cooling, you are going to drive gas out of industry, you are going to drive gas out of electricity generation. It is, in the end, a choice. You got to do one or the other.
The idea that the main trade association of which these companies are part is half gas causes me to lose consciousness when I think about it too much. It is the most ludicrous — I can’t believe it’s real. It is unbelievable to me that when we go approach lawmakers, when we go send people to testify before Congress, they can’t present that alternative. They are prevented by their own trade association, by their own institutional commitments. They’re prevented from saying, “Coke rules and it’s better than Pepsi, choose it instead of Pepsi.”
They literally can’t say that. In fact, they’re writing scoldy op-eds telling us not to say it. Talk about the capital table. Just the idea that clean electrification can just go speak for itself for once is, I think, a huge piece of this. Talk about how that’s structured and what it is.
Steve McBee
Yeah, man. First of all, I think it’s probably worth a minute on what you just raised. It’s very dispiriting. This isn’t personal against anybody. There’s a lot of people who are working really hard and trying to get things done. But there are structural challenges with some of the most important infrastructure we have in place that is prohibiting them from delivering and from getting what we need to get done, done.
I think there are two things. There’s the thing you raised, which is, look, ACP decided that — and look, I said this at the top of the podcast. One thing I am really focused on is building a broader base of support for our products and for our policy agenda so that we have the durability, particularly when it comes to the regulatory signals that we need to draw in the capital that’s required to scale these markets. I’m 100% for, I think it’s essential, building bipartisan support for the industry.
One of the really exciting things that I found over the past six months is there are some groups on the center-right that are really doing good work, that are really practical and that are really on it. I think that there is a moment here where we might be able to take the political toxicity out of this issue.
But I don’t believe the way to get bipartisan support is by adding a bunch of utilities and legacy energy companies so that you can get access to those members. The way you do it is by changing the way you talk about your product so that it draws those members and their constituents in. A really big challenge we have is the Trump administration. They have established a playing field where it’s a knife fight in a phone booth between gas and renewables, and the outcomes are binary. You have to pick a jersey. A reversible jersey does not work in this environment. The strategic and structural choices that have been made have compromised our ability to go pick the fights we need to pick and win the fights we need to win, and we have to deal with that.
The second thing is, trade associations — and this is not unique to ours necessarily, although I think ours certainly are not, we are not at an A plus, even relative to —
David Roberts
Steve, SEIA just elected Tim Pawlenty as their president. A paste, boring Republican who is not going to ruffle any feathers, not going to sell Coke, is going to lead with an “I’m friendly to Pepsi. I’m here from Coke, and I want to say, first of all, that I’m friendly to Pepsi.” It is unbelievably pathetic to me, our trade associations. I know you don’t want to say this and won’t say it and maybe even don’t think about it, but I just think they are pathetic. It is unbelievable how pathetic they are, failing the people in these companies. They’re failing the people who are on the ground fighting for this stuff.
Steve McBee
I think there is a structural problem we talked about in how you build your membership. But there is also a business model problem, which is, these trade associations generate most of their revenue from conferences. They hold a lot of conferences and white papers.
David Roberts
Maybe one more white paper?
Steve McBee
They put out a lot of white papers. They do fly-ins. It’s not that these things aren’t important, but putting all of the juice of your organization into holding conferences where you invite members out to sit on panels where they talk to each other and tell everybody that’s already converted what a great job we’re all doing and then go post it on their socials and go home and feel great about that. The conferences are valuable, the white papers can be valuable. The fly-ins can help. But those are things that are distinct and different from building political power.
David Roberts
Yes.
Steve McBee
And establishing cultural identity. In fact, I would say, and this is why I’m in the gaps here, I’m focused on political power and cultural identity. I think if we make those things better, all the things that those trade associations are trying to do will be easier for them because their success depends on our political power and our cultural buy-in.
David Roberts
But it would be helpful if they didn’t lead with the message, “Don’t worry, don’t be alarmed at us. We’re not trying to build any political power. We’re no threat to you. Everybody just calm down. We’re no threat.” That just, again, misreads what works, I think.
Steve McBee
Yeah. We can have an honest conversation here within this community about what’s working and what’s not working. We don’t have to make it personal, but we need to be honest about what’s working and what’s not working. We need to be urgent about disrupting or replacing the things that aren’t working with solutions that will work. We need not only some different organizations, but we need different business models, we need different revenue models, we need a different set of parameters that are tied to building our power, locking in our cultural identity.
That’s what needs to be done. I think we’re struggling to have that conversation because I think people aren’t being real about what we need to do here. Our goal as an industry, at least my goal as a person in the industry, is to replace fossil fuels with renewable power, if not entirely, heavy majority within 10 years. That is a really ambitious goal. That is one of the most ambitious things you could possibly dream up to do. It’s doable. But if we’re going to do that, we need to have the tools and capabilities in place that are equal to that objective.
If we’re not going to be willing to build what needs to be built to enable that goal, we should change it because we’re not going to hit it with what we have now. We’re not.
David Roberts
Okay, this capital table, the problem that you’ve diagnosed is that lawmakers, even the lawmakers who are friendly, are getting their information about what’s happening in this space via intermediaries who are not doing a very good job. One of those intermediaries, while we’re throwing elbows all over the place, is the big green groups. The default, I think, for a US Senator, if they’re saying, “What’s going on with solar and batteries these days?” is they call one of the big green groups or they call one of these weak-kneed trade associations. You want to solve that problem by getting them information direct. Talk about how that’s going to work.
Steve McBee
On the green groups, I’m sure there are things they could do better. There are things I’m sure they think they can do better. But I don’t really fault the green groups. I fault us, the industry, for forcing the green groups to pick up slack that really should be our responsibility.
David Roberts
Yes. They’re supposed to solve climate change, they’re supposed to advance this industry, they’re supposed to change public opinion. Maybe we could just let them just defend the environment and maybe have other groups do the other stuff.
Steve McBee
I think the green groups have a hugely important role to play here. There is a ton of stuff that they do that they just are excellent at. But in the IRA fight, we had green groups running around and talking to members of Congress about why batteries and solar and PJM make — that should not be their job. Because we have not done our job, they have had to pick it up.
What I am trying to do here with Amped is to say, “Hey, we as an industry need to own our lane.” We need to own it. We need to own the responsibility. We need to be excellent at it. We need to let the green groups go back into their lane where they’re excellent. Then these two lanes can coordinate and they can run concurrently and merge onto a superhighway that’ll propel the industry forward. I really don’t fault the green groups for this. I really put that on us, on the industry, on the people that represent the industry. We have to do better. The capital table is one way to do that.
The thing that motivated this is I had a group of investors, 10 or 12 investors or so, in New York at Climate Week with half a dozen members of Congress. It was a one-hour meeting. No intermediaries, no Washington people, no lobbyists. It was just principals talking to principals in an off-the-record Chatham House rules conversation.
I opened up the meeting and said, “We’ve got the people in this room that are setting the policy signals and we have the people in this room that are underwriting investments and allocating capital against those rules. We’re all trying to achieve the same thing here, which is a fast and orderly energy transition, but we’re in different lanes and we need to understand each other better so that we can work together more efficiently.” I just let the conversation roll. First of all, it was a one-hour meeting that went almost three hours —
David Roberts
Which is not — speaking of principals, these are busy people. They do not sit around for three-hour meetings unless they care.
Steve McBee
Yeah. Honestly, a lot of my investment friends I brought into this, I had to drag them in and then I had to drag them out, because it was rich. The thing that kept happening in that discussion was members kept saying, “I had no idea about that,” or “I did not know that. If I had known that, maybe we would have done this,” or “Maybe now knowing that I might go do that.” At one point one of the members of Congress who will go unnamed stood up and said, “Guys, where the fuck has all this information been?” He wasn’t critical, he was like, “We’re not getting this.”
David Roberts
That’s when the investors said, “Sir, have you heard of Volts?”
Steve McBee
That’s exactly right. That’s exactly right. Why aren’t you listening to Volts? It’s a bit of a light bulb moment. This is, again, on us. We have not done — and look, I spent 10 years on Capitol Hill. I started and built one of the biggest lobbying firms in Washington. I understand as a person who has made policy and influenced policy that policy gets made all the time with insufficient information. That is, that’s how it goes —
David Roberts
To say the least.
Steve McBee
But I have been really alarmed at how thin the intelligence layer is, particularly in Washington when it comes to on-the-ground commercial dynamics in a marketplace, in our industry.
David Roberts
You know what I think is evidence of that. I wanted to make this point too. I think we’ve got a bunch of Democrats to say the words now that clean energy is cheaper. They’ll say the words. But as you say, their level of understanding and depth of knowledge is so shallow that if they run into any political backlash or any barrier, they immediately resort to stuff like freezing the gas tax or freezing electricity rates or just these sort of gimmicky, sloppy solutions that clearly reveal that they don’t really believe it. They don’t really know it in their gut. They don’t really believe it in their gut because they can be scared off it at the slightest rustle in the bushes.
Steve McBee
Part of that is because they’re not getting consistent, complete, comprehensive, data-driven information on the regular that can build that conviction in their gut. Maybe I’m just Pollyanna-ish about this. I know Washington is a very cynical place. It’s a very transactional place. But I believe ideas still matter and information still matters and has currency. It is not okay for us to complain about members being squishy on our issues or being opposed to our issues or whatever if we haven’t supplied them with the full complement of information. If we give them all the information and they look the other way, then we should be going after them in a very muscular way.
But until we have provided them with all of the data, it’s not fair to criticize them for not being with us. We gotta help them be with us by giving them the data and the information that builds conviction. We’re not doing that right now. This capital table, it’s designed to do that and it’s going to be bipartisan. We’re going to meet with both sides of the aisle. We’re going to meet with members of the House and the Senate. This is not lobbying. This will not be registered to lobby. There will be no lobbying done in these meetings.
This is about filling up the information bucket and getting the right framework and the right supporting information into the hands of the people that have to make these calls, policy-wise.
David Roberts
Who’s in that room? Is it CEOs, is it investors? Who’s at this table?
Steve McBee
It’s a mix, but I’m organizing it in a way that over-indexes to the capital markets, to the investors. I think the investor perspective here is really valuable and I think it’s been missing from the conversation. An investor who’s investing across the clean energy economy is going to have one — if you’re investing big green pools of capital, you’re investing in residential solar and you’re investing in green steel and you’re investing in climate SaaS. You have the benefit of looking across the whole market and it gives you incredible pattern recognition that allows you to provide a perspective that is different from a company CEO who’s sitting in one lane of one market.
Similarly, that CEO in one lane of one market, they’re going to come to Washington and they’re going to talk to members of Congress about the thing that impacts their business because that’s their job. If you’re an investor, back to what we talked about, what you really want is stability, predictability, consistency so that you can allocate capital and feel like you’ve got the political volatility and the regulatory variability properly risk-managed. That perspective is something that can be very enriching to this conversation. That voice has not really shown up so far.
We’re going to try to make sure we have a lot of that represented in the room, but we are going to have company CEOs as well.
David Roberts
I think you could probably understand how some people on the grassroots level, some clean energy activists, etc., can look slightly askance at the notion that capital is going to lead the communication effort with lawmakers because they can obviously give market information to lawmakers, but there are a lot of perspectives that they are not going to share.
One question is who gets in this room and are they paying to do so? Are there membership fees? Who is funding all this?
Steve McBee
Right now we’re just trying to open up the conversation. This isn’t the only conversation on these topics that are going to be held. Again, I’m looking at gaps. I just see a gap in the market. Investors and private equity guys are not the most sympathetic figures right now for really good reasons.
The people I work with in the capital markets who are building the energy transition marketplace, they’re trying to put a lot of capital to work. They’re trying to have conversations that get things structured in a way where they can deploy a lot of capital. We should be doing everything we can to make that as achievable for them as possible. It’s not a — maybe this is where it’s, to use the term you hate so much, all of the above. It’s all of the above. We need all the voices from the different parts of the market in the conversation. That’s business people, that’s investors, that’s Washington people. We all need to be supplying information and making sure people have what they need to make good decisions. This is really just designed to do that and to try to do that better.
David Roberts
Having gotten a little bit of a close-up look, as you say, the background level of knowledge among lawmakers about the burgeoning clean electrification market’s efforts is pretty low. Is it high anywhere? Is there anyone up there who is listening to Volts or the equivalent, who is tapped in to the day-to-day, who is communicating with their peers maybe in a helpful way? Are there champions?
Steve McBee
Yeah, there are. I’m not trying to —
David Roberts
Do you want to name some names?
Steve McBee
I know that you know Sean Casten very well and Sean Casten is excellent. I think Senator Heinrich is excellent. I think Senators Schatz and Whitehouse are excellent. I think Pete Welch is excellent. These are people who are very forward on our issues and they’re very tuned in. The thing about it is though, they have a lot of knowledge. They have more knowledge than most. They want more knowledge and more information.
That’s why I think there’s a gap here. As an industry, we have to play the cards that are available to us. We’re not going to build political power like crypto does because we don’t have $200 million to go drop into political races. We don’t have that and we’re not going to have that for a while.
David Roberts
But do we spend the money we do have —
Steve McBee
No, we don’t.
David Roberts
- on races? We could do more than we’re doing.
Steve McBee
We don’t need as much, but we just need enough. The point I was making is let’s lead with our strengths. One of our strengths is we can’t control the fact that we’re going to get outspent 30 to 1 or whatever. We can control how we spend the 1, but we can’t control what they’re going to spend. We can’t control what the other side’s going to say and the lies they’re going to tell and the distortions they’re going to put out there. But we can control how we respond to them and we can control being excellent at the things that we have big advantages on.
Going all the way back to the top of this conversation, one of our advantages is the facts.
David Roberts
Reality.
Steve McBee
Yes. The opportunities and the facts and the way our stuff solves for a lot of things that are politically vexing, like affordability, that are important for our country from a competitive perspective. We should be 100% A students in supplying those facts, that information, that perspective, that data to the people who we need to have it. We’re not 100%, we’re like 62%, so we should go be excellent at that. That’s the thing that we have a big advantage on and we’re not optimizing it.
David Roberts
There’s still one bucket we haven’t even touched on yet. This is the bucket — it raised my eyebrow a little bit. Don’t totally get how this fits with everything else, but maybe you can explain it. This is the finance play, the finance piece of this. Maybe I’ll just let you explain. What is that?
Steve McBee
One of the things that is frustrating to me, as an industry we have about a trillion dollars of capacity that’s either installed or that’s sitting in the queue waiting to be installed. That’s a lot of capacity, but we are not leveraging, we’re not organizing and leveraging the throw weight of our industry in ways that not only could be better deployed to build our political power, but I think could be brought in to solve market bottlenecks that are holding back the energy transition. One thing I’m trying — I’m really trying to think about, again, I don’t mean to keep coming back to our trade associations. They have a lot of members in those trade associations, they’re organizing them for their conferences and their fly-ins.
I think we could organize the industry on a whole range of public-private initiatives that happen outside of Washington that could really help speed things up. Transmission is the first area I’m starting on this. Everybody wants to build more transmission and everybody knows we’re not building transmission nearly fast enough. I’ve tried to do a lot of those deals and there are lots of problems with them. A common problem in every one of these projects is that the borrowing costs for transmission developers are super high because utilities cannot buy transmission capacity until those lines are energized.
It’s not like going and buying a 20-year PPA on a utility-scale solar project or whatever. The lines have to be energized before utilities can purchase the capacity on them. For developers, you’re holding all that merchant risk through the period of building those lines. Your borrowing costs are really high and it’s hard to make the cost of capital work through the project period.
David Roberts
There’s the risk — not to tell you something you already know and the audience probably already knows too — but there’s also the risk that there are 5,000 veto points. Every community, every state, every utility, anybody practically can sink the whole thing. That’s just an enormous amount of risk if you are deploying large amounts of capital.
Steve McBee
Yeah, that’s — it’s funny. I’m out here in Washington today. Just before I jumped on this podcast, I did a panel with Citi and Macquarie Capital and some other folks at the CRES annual conference on this exact topic. We were all just up there pleading for certainty and a fixed set of rules so that those things that you just mentioned wouldn’t happen. What I think is there are some cool things that could be done to help mitigate some of this. I have talked to some large green infrastructure funds about this idea.
We could go to a state that’s trying to build transmission and we could sit down with the governor and we could sit down with the utility leaders and we could bring in the capital providers and the transmission developer and say, “This capital provider is going to buy a billion dollars of capacity and it’s going to hold that capacity while the lines are being built and then it will sell that capacity at a markup to the hyperscalers and the utilities that want to buy it once the project is concluded,” which will allow you to get a cost of capital that makes these projects work and we can start building this stuff, really.
David Roberts
That sounds a little bit like the advanced market commitment that everybody’s —
Steve McBee
Yeah, Jane Flegal has a derivative of this idea that I think is really cool. At least my derivative of this idea is you say to those local officials, “The capital wants to do this, but holding that merchant risk starts to strain their investment parameters from a risk perspective. Help us just offset that risk a little bit.” The state could take 20% of the first-loss exposure.
The utilities could say, “All of the wires that are financed by this pool of capital, we’re going to give it a fast-track approval process so these projects get built as quickly as possible.” The utilities could also say, “We can’t contractually obligate ourselves to buying this capacity, but we can put an option on it that shows intent.” Then you start squeezing the risk down to a place where those infrastructure funds can play. If you did that, you’d lower the borrowing cost for the developers. The stuff would get built. The hyperscalers and the utilities that need it would get their power. You would create a new asset class for green infrastructure because you could replicate that across the country. For the local political leaders that helped cut that deal, they’re printing political equity because they’ve got fast, cheap, reliable green power flowing through the state or flowing through that region.
I think these are things — we have to get creative about how we put policy structures in place that can help this stuff move faster. Getting the industry organized to post up, because you could only cut that deal — and the reason I think Amped could cut that deal is it’s a nonprofit.
David Roberts
Yeah, I was going to ask, what’s — there are green infrastructure funds all over the place. There’s a lot of entities around in this space, what is the value add for —
Steve McBee
It’s hard to do the deal. I couldn’t go in there as Huck Capital. I could convene everybody. But because Huck Capital has a profit motive, it would be hard to do the deal. If you don’t have a profit motive and you’re just trying to get the deal done, you can get the deal done. In addition to having the right structure, you also need to have the industry standing behind you.
If I were to build a trade association, the models I would use? I like the NFL’s commissioner’s office, which until six or seven years ago was a C6 trade association. Those 32 NFL teams, they organized behind the commissioner’s office. Roger Goodell had the throw weight to sit down across the table and cut those TV deals, cut the branding and licensing deals. You look at AARP, an amazingly effective trade association. They have a commercial arm called AARP Commercial Services, which cuts all the deals for all those services that their members get at a discount. It generates billions of dollars for that trade association and it funds most of their operating capital.
There are really cool and innovative things that you can do if you can get the industry consolidated in a way that provides you a viable counterparty to make things like the transmission example happen. I’m excited about that. I think those are real opportunities. Given how dysfunctional the policymaking process is in Washington and how uncertain it is, we have to try to find ways to be more creative outside of Washington to use public mechanisms to get rid of some of these bottlenecks. I think there are a lot of different things you could do. The transmission example is just one of them.
David Roberts
Okay, those are the main pieces. There’s digital rapid response, there’s this elite-to-elite play, this capital table so that lawmakers can get intel directly from the source. Then there’s this effort to structure public-private partnerships to de-risk some of these big investments so that capital can get cheaper and more capital can come in. Is that the landscape thus far? That’s what Amped is doing thus far?
Steve McBee
Yeah, I think you’re not only a great marketer for the clean energy industry, but you’ve got the Amped talking points down here. That’s exactly right. That’s what it is. Those are the three areas we’re starting. Amped is — we have an LLC, we have a C3, we have a C6, we’re waiting on a C4. One of the things that I think is challenging about the way things are structured currently is, you lock into one of those things or the other and those are the things you can do or the things you want to do, you have to do in the construct of what one structure versus another allows. I think we need to be mission-forward, problem-solving focused first and then make sure that we have a structure that works best to go solve that problem as fast as possible.
David Roberts
Yes, I think what you’re implying here, but I’ll just surface, is that the standard here in the advocacy community is C3, which creates all kinds of, I think, perverse incentives and limitations, among other things. Among the things C3 can’t do is lawmaker comes along and says, “Screw you, clean electrification industry. I’m voting against you.” A C3 can’t then say, “All right, we’re going to come take your head off, we’re going to come beat you in a primary, we’re going to come make an example of you and scare the crap out of the other lawmakers.”
That very basic piece of political power and influence is just utterly missing from this space. I don’t think any lawmaker in any state, or federally, is scared of this industry.
Steve McBee
Yeah.
David Roberts
Are you going to try to make them scared? That’s what I’m —
Steve McBee
No fear is no respect, no respect is no leverage, and no leverage is no outcome. That’s another thing that is not being done well. To the point of what you were saying about the C3 and the limitations, I think you need the right tool. There are a lot of jobs, and you need the right tool for the job. You don’t want to be job-limited because you only have one tool.
One of the things that the fossil fuel industry does well, unfortunately, is they operate with an incredible amount of cohesion. They dial in their communications, they dial in their politics and their political power. They make themselves commercially felt, and then they organize those things in a way that is so well coordinated that you just feel like you’re sitting in surround sound from all the stuff that they’re doing. We need — the reason I’m building Amped this way is we need those kinds of flywheels that can coordinate across activities and get the leverage that comes from a more integrated approach to these things. That’s really missing from the market. I hope we have a better mousetrap here because we definitely need some better mousetraps.
David Roberts
Your model is, we need to build support for Coke before we explicitly go out and try to kill Pepsi. I guess I just want to know, when? Because this fight between clean electrification and gas, I feel like the ACP is out selling the notion that there is no such conflict. We can all win. We can all win together. It’s all growth, it’s all extra. No one has to fight, no one has to choose. But if you look at the physics of it, if you look at the market of it, if you want to decarbonize, yes, you do eventually have to choose.
Maybe it is the case that clean electrification does not currently have the political juice to take that fight on directly. But when will it? If you want to replace most gas in 10 years, 10 years is not a long time. When will we be able to really join that fight?
Steve McBee
I’ll answer that question and then ask you one back because I’d be interested when you think about this. This is a non-consensus view, I’m sure, and it could be wrong. I’m wrong all the time. What I feel here, in talking to lots of people in Washington, including, like I said at the top, some groups that are doing really good work from the center-right, what I feel is that at a moment that feels on the one hand like the most hyper-partisan and political moment ever on energy and where we’ve got the administration doing everything they can to wreck this industry and bury it, outside of the administration, I feel like there is maybe the best chance we’ve had in a decade.
David Roberts
As you say, the world is —
Steve McBee
Yeah.
David Roberts
— We’re not trying to tell our story, but the world is trying to do it for us.
Steve McBee
These members, they’re going home and they’re getting beaten on affordability and they’re getting beaten on affordability the grid being backed up. They’re getting beaten on Iran and all this stuff. The point I would make here is I think it would be a mistake to squander a moment, if we think that moment exists, to establish a center political coalition for these issues. I think the best way to do that, to take that shot, is to really hammer the benefits of Coke. If we come out and we start just talking about Coke versus Pepsi, people that want to come home, we might make it really hard for them to come home.
I’d like to leave a lot of green grass to bring conservatives to us on this issue. I think talking about Coke is the way to do that. If we are successful in doing that, Pepsi is going to flip out and they’re going to do the things they do. They’re going to spend money, they’re going to tell lies, they’re going to distort and all the rest, and we will have to really be on our shit if that happens, because that’s where the fight will be.
I really think we have such a great story to tell about this industry. I think it can appeal to a broader cross section of people who currently support this industry. If we could achieve that, it would be the most important thing we could do because we could get policies in place where the rules are fixed, they transcend our electoral volatility, we get the capital off the sidelines and we build the shit out of the energy transition. If we see a window to do that, I think we should take it. I see that window. I said, I could be wrong. I’d love to know what you think about that. But I think we get there by talking about Coke and then once we’ve got a broader coalition, we drop the Pepsi hammer.
David Roberts
I love that we’ve taken my analogy this far. I think that’s probably right. As much as the denizens of D.C. would like to dismiss all clean energy partisans like me as woolly-headed, unrealistic, unsavvy hippies, I’m not dumb. I get that most lawmakers, most centers of power currently do not get this, do not have confidence that clean electrification can do the job on its own. Not only that it could be as powerful and reliable, but that this is an upgrade to the grid. That’s the story. This is better, it is more reliable, it is cheaper. It’s better on every metric.
I do think, yes, we need swagger, we need people to want — instead of clutching their Pepsi to their chest out of fear that someone is going to take it from them, we need people to be voluntarily setting down the Pepsi and going to pick up a Coke because, “Damn, look how good Coke looks.”
Steve McBee
That was my — you articulated it much better than I could. That was my question. I was going to ask you, I have this view that we can widen the coalition. I have this view that we can do that by talking about our products on the basis of the facts about them and their price advantage, the reliability.
David Roberts
But I would say, we need to also be able — the things they’re doing on energy, this Iran war, even critics of the administration, I don’t think — it is genuinely difficult to wrap your head around how stupid it is. Even establishment Democrats, I think on some level are trying to generate justifications for this because they can’t wrap their head around how arbitrary and stupid it is. All the way down. It’s all negative effects all the way down. No one’s winning this except China. No one is benefiting from this.
But they are not paying the price they ought to be paying for that. They’re not. They’re still out on TV talking about — Doug Burgum’s still in front of Congress talking about — somebody, it’s a lawmaker challenged him, “China’s building 500 gigawatts of this, this and this.” He’s saying, “Well, baseload or variable?” It’s still the sun goes down at night stuff. Just the crudest sort of — they ought to be paying a price for that. They ought to be mocked in public.
People ought to be making the point that they are violating their own goals, they’re making things less reliable, more expensive, etc. They’re just not paying that price. In addition to boasting about Coke, somebody needs to be out with a shiv hurting people who do stuff like this. There’s got to be an enforcement arm. We need some thugs. We need some people who are going out and whacking people over the head. I don’t know if it’s all got to be the same group of people, but we need that side of things.
Steve McBee
Yeah. Maybe this is just too precious. You can call me on it, but I think you can do that 100%. This situation in Iran is a huge opportunity for us to redefine the stakes, and we’re not doing it. What was in that big, beautiful bill? It was the inverse of the policies that you would put in place if you were trying to achieve the goals the administration had laid out for it.
We were taking all of the cheapest, most ready power that’s sitting in the queue, ready to go. Instead of hooking that up, we took all the incentives away. We gave all these new incentives to gas and fossil fuels. We pushed that stuff to the back of the line. We cut the line with gas and, I guess, coal. All of a sudden, you’re not getting power that’s cheap or reliable or ready. There needs to be accountability for those choices. I think you can enforce accountability by contextualizing the case for Coke and not get it into a situation where it’s so overtly — it’s just the facts. The goals are not aligned to the policies.
We have an alternative with the policy. We all agree with the goals — more energy, faster energy, cheaper energy, energy for AI, energy to beat China — but we have to have policies that are synchronized to the goals and we don’t. That is not only something that is fair game, I think it is pretty essential that we just make the case. In the IRA fight, the thing that was really frustrating to me, we have three times as many batteries in the queue as we do gas projects.
David Roberts
I know, it’s wild.
Steve McBee
If we were organized, what we should have said, what we would have done in the IRA battle is to say, “Hey, this isn’t a tax — we’re not making tax policy, we’re making energy policy. We are resetting energy policy in ways that are going to make it harder to get cheap, reliable, and fast power onto the grid by these choices.” We never made that case. We never forced people to have a real choice there on, “Geez, do we really want policies that do this?” Maybe we need to think about this in a different way. We never presented an alternative. Never.
David Roberts
Okay, as I said, we could talk forever, but I should probably wrap it up. Think we tested people’s patience, maybe just — is this effort the kind of thing that the public can engage with at all? Or is this mostly an elite play? Which I don’t mean negatively at all, we desperately need elite plays. But I just wonder, is there a public participation? Can people follow along? Is there a public-facing part?
Steve McBee
There’s going to be. One of the things that I’m really aware of is back to what we talked about at the beginning, there’s a lot of resistance to new things. If you’re going to bring something new in, you need to make sure you can rock it. You got to make sure that you can prove it. I want to do things that get traction, to get proof points that create confidence. Then we’re going to — we have a very ambitious plan to scale this platform into something that I think can stand up and be heads up to API and the fossil fuel industry juggernaut. We’re going to do that in a linear way and not come in and get totally over our skis on day one and open ourselves up to all kinds of crazy criticism.
These things we’re doing on communications, on market making, on strengthening the intelligence layer — these things to me are super critical. We had our hands full doing that for the next four or five months. Yeah, there’s going to be a way for the public to engage on this in lots of different ways going forward. We’re going to try to start out here and try to be successful on the things that we think are really important right now and where we can do something about, and then we’ll go from there.
David Roberts
All right. Above all, thank you for recognizing the smoldering, embarrassing failure around you and not blowing smoke. If I hear another clean energy person try to tell me that the OBBB wasn’t really so bad because there’s this one tax credit on page 12 that didn’t totally get nuked, I’m just like, “Let’s be real with ourselves.” Thank you for being real and thank you for trying to build something and maybe we’ll reconvene in a year or two and see how it’s going.
Steve McBee
I hope so. I hope I quelled some of your doubts and I would just say, because you got a lot of really influential people that listen to your podcast, I want people to feel like we can be excellent and not settle. We can’t settle for a C. We need an A. We have everything we need to go do that. Let’s go be great. Let’s go be great.
David Roberts
Yeah, that’s when I’ll call my dad — if you go do it. All right.
Steve McBee
Thanks for having me on. I really appreciate it and I would say thanks to you. This is such a killer podcast. You do just a ton of good on this podcast and it’s really a privilege to be on, I appreciate you 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. 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.
Conventional punditry loves the narrative that woolly-headed progressive standards over-burdened federal climate spending and slowed everything to a crawl. In this episode, I talk with Betony Jones about her time designing labor policies at the DOE and what she learned from interviewing dozens of companies that received federal funding. We explore the difference between bad rules and weak administrative capacity, how the DOE successfully streamlined century-old Davis-Bacon compliance, and why creating high-quality jobs is essential for global competitiveness.
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David Roberts
Hello and greetings, everyone. This is Volts for May 27, 2026: “A limited defense of Biden’s Everything Bagel Industrial Policy.” I’m your host, David Roberts.
Last year, in their book Abundance, Ezra Klein and Derek Thompson popularized an argument about the Biden administration’s industrial policy that has since become something like conventional wisdom. It goes like this: by attaching so many well-meaning progressive requirements to every tax break or grant—labor standards, community benefit standards, local hiring standards, domestic content standards—they overburdened the policy and made it slow and bureaucratic. Consequently, the money didn’t get out the door fast enough, so voters’ lives were not changed quickly enough, so Biden did not get any public or electoral credit for his policies, so Trump won. That’s the official line.
Betony Jones ran labor and jobs policy at the Department of Energy under Biden and was responsible for developing those labor standards, which applied to thousands of projects totaling over $100 billion. You will not be surprised to hear that she has a rather different take on the subject.
And she’s not just drawing from her personal experience. She has spent the past year interviewing executives at a dozen-plus companies that received federal clean energy funding to find out what happened. What really did slow things down? What she found was that the labor and community conditions were more welcomed than burdensome. The real bottlenecks were in implementation — permitting delays and contracting timelines.
She wrote up her findings in a report called “The Receipts,” which I find very amusing. I am excited to talk with her today about what we should and shouldn’t be learning from the Biden industrial policy experience.
With no further ado, Betony Jones, welcome back to Volts. Thank you so much for coming.
Betony Jones
Thank you. It’s great to be here.
David Roberts
I want to start with the abundance critique. Despite my somewhat provocative title for this episode, you are not here to defend the whole bagel, the whole everything bagel. We’re mainly here to focus on labor standards and community benefit standards, the workforce side of things. The question is whether these and other workforce standards are getting in the way of the speed and scale of industrial policy that we want.
There are two questions you could ask about these standards. One is the empirical question: do they in fact slow things down? Did they in fact slow things down? Are they in fact burdensome? Then there is the political question: does attaching these kinds of standards make the policy, make the bill look more explicitly progressive, thereby polarizing it, thereby making it more difficult to pass? There is a substantive critique and a political critique. I want to take those one at a time.
But before we jump into any of that, maybe let’s just back up and I want to ask you, what was Biden’s approach on workforce issues? This general family of issues goes way back in the Democratic coalition. Obama spent a bunch of money and talked about green jobs all the time and had policies that he called green jobs policies. I’m curious, what was Biden’s innovation? What was new about the Biden administration’s approach to workforce issues? How would you characterize that approach?
Betony Jones
We can talk about Biden’s approach to workforce issues. I tend to see these things through the lens of climate policy. We tried for decades — I’ve been working on climate policy since the Clinton administration — and there have been many efforts to advance climate policy through regulation, through Waxman-Markey, a lot of different efforts, a lot of thoughts around carbon taxes. Nothing got across the finish line until we had a climate policy that had a broad agenda and a broad political coalition advancing it that included left-behind communities, environmental justice communities, the labor movement, and climate advocates.
By design, this climate policy — the set of policies, the Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act, a suite of three policies to address the climate crisis — was intended to deliver to those constituents who lent their political muscle to getting that across the finish line. In some ways, to go back and critique those very things that were baked in by design and the whole reason that we have these policies to implement in the first place as responsible for some failure never made sense to me.
David Roberts
When the green movement tried to be surgical and clean and only go after carbon emissions in the way that was approved by economists and didn’t have any of this everything bagel stuff, it failed. Everybody yelled at the green movement: “What’s this technocratic blah blah? What about the movement? What about the people? What about all these co-benefits?” Then greens go back and, as always, they’re A students, they say, “Okay, we’ll work up a big elaborate policy that has all that stuff.” It involves everybody, it includes everybody. Then people say, “Why did you include all this stuff? Why don’t you be surgical and just go?” There’s a real “you just can’t win” vibe around all this.
Betony Jones
People pretend that politics don’t exist. A lot of people aren’t in the weeds or paying attention to power or what moves it or how it plays out in how policies get crafted. The Biden administration was implementing what was passed. We were implementing what there was political will to execute on. It doesn’t make sense to say, “All of those efforts slowed down this one aspect of the goal.” First of all, the arguments saying that aren’t backed up by any reporting or data, they’re just ideas. That’s what I was trying to correct for.
Second, what was the assignment? Let’s grade ourselves based on the assignment, not based on some other idea of what we think the world should be like.
David Roberts
We should say, and I wanted to say this too, the critique that greens are woolly-headed and naive and want paradise and all these goodies, and we, the level-headed, reasonable centrists, need to come in and discipline them and tell them how silly they are — any critique that fits that basic mold, people love it, people buy it. They don’t ask for any reporting, they don’t ask for any data. They don’t say, “Prove it.” They’re just like, “Oh yeah, that sounds right.” That sounds right to me. That’s the kind of critique that in D.C. just sounds right to everyone.
Betony Jones
It’s unfortunately a bit deeper than that. It’s a critique that aligns with a particular paradigm. It happens to align with this kind of deregulation, let’s drive lowest-cost solutions, this free trade globalization wherever we can get the markets to move — neoliberal paradigm, it fits into that. That’s something that people are very comfortable with. Then they like it. You see that with abundance. Not necessarily exactly what the authors intended, but certainly the people who’ve picked it up and run with it and redefined it or co-opted it in some cases to push for deregulation.
David Roberts
Let’s get back to Biden’s... how did you try to accomplish the assignment?
Betony Jones
You were asking what was different about Biden, because certainly Obama had a green jobs strategy. What was fundamentally different about Biden’s approach is that it was more by design and by necessity. It was more a demand-driven approach to pulling workers into jobs. In the Obama administration, there was a lot of funding for training, workforce education and training to push workers into jobs that we hoped would manifest. The train-and-pray model: “Let’s train everybody in solar and hope they find their way into the industry.”
That just didn’t work out. In the Biden administration, the proposals around investing in workforce development and Build Back Better were gutted. What we finally got across the finish line were investments in projects, and we had to then ensure that those projects were making the investments in workforce development and labor standards and had the strategies to attract, retain, and train the workers they needed to get the job done.
David Roberts
Can I briefly ask, what were some of the tools that got stripped out? People critique the way you do it and say, “We had tons of better ways.” Talk to Joe Manchin. “We had all kinds of ideas about how to do this better.”
Betony Jones
All of those social infrastructure things — childcare, money for training, expanding registered apprenticeships and pre-apprenticeships, on-the-job training. All of the funding for the supportive services, barrier reduction side of the workforce equation, side of the labor market, those things were stripped out —
David Roberts
Which meant that the only tool, the only lever you had to implement the things they were telling you to do was on the project side. That was the reason these things got attached to project agreements — because that is what ended up in the legislation.
Betony Jones
It’s a good model. It happened because it happened. But it’s also a good model because it ensured that the workers who were trained were trained to work on actual projects. They weren’t just engaging in training to pull them out of the labor market.
David Roberts
It’s a long-standing critique of job training programs going back decades. Aside from clean energy, people have always had this idea of job training as an answer to economic woes. They’ve never really worked out the way people want. The main critique has always been you’re just training them and sending them out into the wilderness. What you need is a complementary demand-side policy that creates the jobs, that pulls them in so that when they get trained, they have jobs. That was what you were trying to do.
Betony Jones
That’s what we did, both with the grants and loans. That’s also how the IRA was designed — through the prevailing wage and apprenticeship tax credit. You got a much larger tax credit if you were using registered apprentices. That means you got a larger tax credit if your project was investing in training the next generation. There was an incentive to tie those things together.
David Roberts
Maybe it’s worth detailing the family of tools we’re talking about here — these workforce standards — because they do all get lumped together. It’s worth distinguishing. There’s Davis-Bacon, which we’ll talk about a little later, which is old, goes way back, which just says you have to pay prevailing wages. Then there’s the IRA tax credit stuff, where you get a bigger tax credit, as you say, if you do prevailing wage and apprenticeship stuff. Then there was the Department of Energy community benefits plans, which was a separate thing. That was unique to the Biden administration. It’s not all the same thing.
Betony Jones
I love talking to you because you’re such a good reader. I did break it down. We had these different levers that we were using to advance these goals, and I was looking at what those different levers accomplished. You said, the base, the standard on all federally supported construction is Davis-Bacon, which sets a wage floor so that federally funded money isn’t undercutting local labor markets. That’s important because it helps support stability in a volatile and seasonal industry. It helps retain workers.
David Roberts
That goes back to the 30s.
Betony Jones
It’s a century old, and it’s worked very effectively. People complain quite a lot about compliance. One of my goals at DOE was to streamline that to make that a lot less painful, and we were really successful in doing that.
David Roberts
I want to return to that whole subject in a minute and talk about that in more depth.
Betony Jones
Just as a further summary, with the tax credits you got five times more. Your tax credit went up from 6% to 30% if you paid prevailing wage and you registered. It’s so big, and it’s so much more than any cost of paying more or cost of managing the record keeping. It was really treated as a requirement because nobody wants to give up that level of increase. These are $100 million, multiple hundred billion dollar projects. It’s a lot of money. The cost of prevailing wage relative to market wages in a tight labor market isn’t that game changing.
The community benefits plan was a real policy innovation. Huge thanks to not just the colleagues that I, we put our heads together, but also Secretary Granholm who saw the value of doing this. We were trying to get this money out quickly and deploy these first-of-a-kind and large demonstration projects and scale this market at a time when the labor market was really constrained. Unemployment was at some of the lowest levels we have ever seen. Workforce constraints, labor strife, community opposition — these are real execution risks.
There were the policy priorities of the administration, but there were also the practical on-the-ground constraints of getting these projects built quickly. The community benefits plan was designed to get firms to think practically up front about how they were going to think about those execution risks and mitigate them, and aligned around labor standards and benefits to communities.
Also DEI, which got politicized, is really just a critical strategy for getting the workers you need in a tight labor market. That approach of requiring these community benefits plans on all of the projects seeking funding from DOE, both grants and loans, was really novel. It’s conditions on federal funding intended to distribute benefits of these taxpayer dollars more broadly, but also designed to advance projects.
David Roberts
To spell it out for people who may not be familiar with this stuff, community benefits just means if you’re a big developer and you want to build a big new project, instead of just saying you’re going to do it and then stirring up community opposition and then fighting the community and having the lawsuits, etc., you go in early, you talk to community leaders, you work out some way that the community will benefit from the project. You send some money to schools, you help pay for some infrastructure, or you promise to employ within the community, all these kinds of things.
The idea with this — and this is something I want to ask you about a little bit later too — the theory of the case on this stuff is that that does not slow things down, but in fact speeds things up. If you go in early and work out a community agreement, you skip the whole community fight part of things and thus get faster. That was explicitly an effort to make things faster, not to slow things down.
Betony Jones
One caveat to that, because what you’re saying is true. It’s about community opposition. It’s also about securing a workforce that you need. That’s a little bit different — saying, “What are we going to need to build this project on time and on budget? Who can we work with to make sure that we have those workers and that we’re investing in the training early, or that they’re investing in the trainings, so that in two years when we’re ready to break ground, we have the workers we need?”
Collective bargaining agreements, project labor agreements help provide that assurance — they reduce that particular risk. That’s not just about mitigating community backlash or opposition. It’s also a critical supply chain issue to build your project.
David Roberts
You developed these standards, you implemented this stuff. It all got wiped away with OBBB. Since then there has been this abundance critique, etc. You did what I think of as a very characteristically Democratic thing, which is, “I’m going to go study this, I’m going to go figure it out, I’m going to go ask people.” Very A student behavior. I love it.
You went and talked to the companies in question, the ones who are receiving the grants and loans, to ask them from the horse’s mouth what happened. What did and didn’t slow things down? It’s a little maddening to me that you, sitting at a think tank, did this, and none of the dozens of journalists who dutifully replicated this abundance critique went to talk to the people who got the money to find out from the horse’s mouth. They all just passed it on.
Here you go, you’re obliged to go do the reporting, which is crazy to me. Anyway, you went and talked to these people. I would love to hear what they told you. What are their impressions? I rarely hear from them. It’s all punditry.
Betony Jones
I was genuinely curious. In the interest of learning to do better next time, I was interested in what the other side was experiencing. When I was at DOE, I heard many comments in passing that were appreciative and thankful, even from unexpected entities. I was with some southern utilities and they were raving about the community benefits plan and how it changed how they were thinking about community engagement to make it more upfront and less of a tack-on exercise, and how that completely made their project implementation more efficient.
I was hearing those kinds of comments all the time. I was surprised by this critique. It’s not to say that you can’t find people to say the opposite, but it wasn’t just the chorus of people who have already been implementing some of these practices who were appreciative that some of their efforts mattered or were scored favorably, the things they have been doing all along. There were also a lot of converts and people who were saying, “I was really skeptical about working with the steelworkers, but they have improved our productivity and our production efficiency so much. The next location I open, I’m going to work with them from the beginning.”
A lot of comments, especially around working with labor, where firms initially were saying “I don’t know why I’m supposed to avoid unions at all costs. That’s just always what I’ve been told. But you’re telling me maybe there’s some benefits of those partnerships, so let’s explore it.”
David Roberts
You said a lot of them were “labor curious,” which is a phrase I love.
Betony Jones
Not everybody, but there was a lot of that. When we went out to more formally interview people, I wasn’t going to the companies that have always been supportive. It was really trying to capture some of the other firms that I hadn’t heard from and just understand their experience generally. What were the pain points? What could we have done better? A lot of what I heard was how damaging the volatility is with the second Trump administration and how costly that is. A lot of people wanted to talk about that, but when we went back and —
David Roberts
It is on a lot of people’s minds.
Betony Jones
That’s the big thing. But when we went back and I said, “What about these community benefits plans?” it was either, “We had no idea how to do that. That was a steep learning curve, but we figured it out. That made a lot of sense and it wasn’t a problem. We brought in some people who knew how to do that kind of thing. It was interesting.” Or, “That upfront engagement and thinking about the risks and the workforce we needed up front, that was so helpful. We’re doing that on all of these other projects.”
Nobody said anything about it being an insurmountable obstacle that slowed them down. In some cases it was, “Our project is stalled now because we don’t know what the Trump administration is doing to renegotiate it. We’ll see how much those things get implemented.” Many said, “The Trump administration has told us we don’t have to do this stuff anymore, but it’s baked into our project. We’re going to keep doing it. That’s why we don’t want to be on the record. We don’t want to get ourselves into trouble, but these are just smart, practical things to do, so we’re doing them anyway.”
David Roberts
You’re talking specifically about the community benefits stuff. They just go to a community beforehand and do the work. That’s what you’re saying. They found that helped and they’re going to keep doing it.
Betony Jones
Under that umbrella, I include the labor partnerships and the labor agreements. At DOE, it was all part of the same umbrella, but it was those community partnerships. At DOE, what we were really pushing for is not just ideas, but real plans leading to real partnerships formalized by enforceable agreements — community benefits agreements or collective bargaining agreements — things that would really ensure that the plan was implemented as designed with those community partners. A lot of those partnerships are intact.
David Roberts
You say a lot of these companies told you this community benefit approach worked for them and they are going to keep doing it even though they no longer have to.
Betony Jones
We’ve seen that. It’s not just the projects that we touched. There’s spillover. They’re saying they’re going to do it on other projects. States have adopted similar conditions on funding opportunities. The system that we designed was pragmatic. It made sense. It reduced project risks, it ensures some distribution of benefits to beneficiaries beyond the companies and their investors. There’s nothing else to say. It just is working.
David Roberts
What did they complain about that you all did? What did they say? Obviously, Trump messed everything up. Republicans have messed everything up since then. But before that, where were they finding friction, what was slowing them down, what did they have to complain about?
Betony Jones
The inside and the outside have such different perspectives. The laws didn’t pass early enough in the administration. To put out hundreds of billions of dollars in competitive grants across nearly 100 different programs, many of which had to be set up through new offices that had to be set up. DOE had to hire some 3,000 staff. The execution on the inside felt like a race. When the infrastructure law was passed in 2021, the IRA in 2022, in any case, two and a half years or less to execute this. We were trying to follow the law, designing the terms, getting public input.
David Roberts
But this idea that you were slow and pokey was not your experience.
Betony Jones
The idea that we were obsessed with process instead of execution doesn’t resonate with anything that I saw on the inside. I’ve heard Jigar Shah say this, I’ve heard other people say this: the federal government was much faster, more nimble, and less bureaucratic than any of us could have anticipated or anything we’ve experienced in any other sector. That critique just doesn’t match the experience on the inside. It was less bureaucratic than my son’s preschool co-op.
David Roberts
That’s not a fair comparison. There’s very little that is more bureaucratic than that.
Betony Jones
That’s true.
David Roberts
This is what I meant earlier when I said this notion that it’s slow, process-obsessed bureaucrats just resonates with people’s priors so much that they don’t really ask for evidence. They don’t need it. They’re just like, “That sounds...” Because that just resonates with cliches that have been bouncing around in our society since Reagan. Everybody’s like, “Yeah, that makes sense.” But really, nobody I’ve talked to on the inside who is trying to implement these things ever felt anything like sanguine or slow or content. Everybody I’ve ever talked to felt like they were at a full sprint from the minute they entered the federal bureaucracy to the minute they exited. No one. I’ve never talked to anyone who fits the cliche.
There are other parts of the abundance critique. I don’t want to throw the whole abundance critique overboard here. There’s a lot in there and a lot to say about it. Some of the problems in implementation, like with permitting, really are problems and really did slow some of these projects down. In the implementation side, those critiques do land. There is a lot of friction on that side. Do you agree?
Betony Jones
I found it interesting talking to these people about, in a bigger context than just the community benefits plans, because a lot of these are multinational corporations. They do business in a lot of countries and they had perspectives of how things work in Germany — for example, how Germany invests in the commercialization of technology and how it is bureaucratic and politically durable. It is not subject to these political winds.
Some commentary was we had this big industrial policy, in a lot of ways it was comprehensive in this whole-of-government, integrated approach. On the other hand, it wasn’t integrated enough to deploy as quickly as we could have. Things that companies thought would have worked better: if you get through the due diligence for a grant or a loan, can you automatically get fast-tracked permitting? That’s a whole different agency. There wasn’t a big pot of workforce development dollars, but it would have worked better if you got funding for your project — then there’s other funding to support some of the workforce development. Especially things like on-the-job training or new apprenticeship programs, things that companies haven’t had experience with before, a little bit of funding to help them do that.
There is a way you could imagine an even more comprehensive and even more all-of-government approach to unstick some of these things or move them forward. Another thing was around the domestic content and it is this chicken-and-egg thing. You have these requirements even if the supply chain isn’t there. The process for getting an exemption was necessary because if you don’t set the standard, then you don’t have that signal that drives the development of the domestic supply chains.
I understand that this waiver process is necessary, but that was head-scratching for a lot of firms where the timelines were so aggressive in meeting these domestic content standards and not every product even knows what its inputs are. There is a lot of infrastructure needed to make that kind of thing work that just wasn’t yet in place. But again, if you don’t have this signal, you never get there. How do you build the infrastructure as you are also trying to support the productive capacity of the US for these supply chains?
David Roberts
Every conversation I have about this, about IRA, about trying to pull things together and implement IRA, brings me back to the heartbreaking thought of how much could have gotten done in the subsequent four years. The people implementing it had their eyes on these choke points. They knew what was slowing things down. You could have taken more legislative action, more regulatory action to ease these barriers, could have done permitting reform. The whole thing could have gotten running so quickly.
This is what bugs me a little bit about the critique. I don’t think the critique is totally wrong, but it’s more complicated than it’s made out to be. This thing really was, relative to big federal programs passed, moving quickly. There really were a lot of people moving quickly. There were a lot of things just about to happen.
Betony Jones
We all had our 2025 strategies.
David Roberts
Let me ask you about a specific question. You’ve had this exchange going with Mike Schmidt. He was running the CHIPS program at the Department of Commerce, trying to get chips factories built. He writes this Substack called Factory Settings — really interesting, worth checking out. He has said that Davis-Bacon slowed him down. He has complained about Davis-Bacon, which is, he’d approach these chip makers, try to lure them to the US to build factories, and then suddenly they were confronted with complicated US construction requirements and laws, and it baffled them, and it took them time to do compliance, it slowed the whole thing down, etc.
Your response to this was, over at the Department of Energy, we also faced Davis-Bacon requirements, but they didn’t slow us down. Tell us why they didn’t slow you down. You built a system to do it. Tell us a little about the specifics of that system.
Betony Jones
I felt bad for Mike. There was a point when the White House chief of staff called us both in for me to school him on how DOE was doing it. He was saying, “But we didn’t set any of this.” I know Davis-Bacon is a challenge to implement, and I knew that it was going to be part of these bills, so I was proactive. But that was insight that I have.
David Roberts
Just to be clear, it’s been on the books since 1930. No one did not know that they were going to be subject to these requirements. Nothing stopping everybody else in every other department from preparing in advance. Not a surprise to anyone.
Betony Jones
That’s true. Except that I’m a real wonk. I had unique insight into exactly what could work better. When I went to DOE, when I decided to take the job, I had five goals that I thought were audacious. One of them was to streamline and simplify Davis-Bacon compliance. I thought it was probably the most audacious.
David Roberts
What did you do? Tell us.
Betony Jones
It was hard, and I’ll tell you what I did, but I felt for CHIPS, just because they didn’t have that foresight, which was this unicorn foresight, it was challenging to implement. I’m not critical of them. What I was hoping at DOE is that we could demonstrate how to do better, and if we could demonstrate it at DOE, that going forward, other federal agencies implementing Davis-Bacon could also do that. It’s easier to do something when a different agency pioneered it. That was my goal. But that wasn’t in place at the time of CHIPS.
David Roberts
Yes, but again, on the books since 1930. Why is it only after this thing has been on the books for a century that it has occurred to someone to find a way to do it more quickly and easily? Maybe not the other Biden appointees. They just inherited what they inherited. But it is a little crazy that this thing has been around for a century and the federal government has still not accommodated itself to it.
Betony Jones
There’s an interesting story there. The private sector has figured out ways to help firms meet the requirements. There are tools out there that we ended up contracting with. The federal government was also trying to develop — GSA was trying to develop a more streamlined inside-of-government system. They finally, after wanting money to do that for a long time, in partnership with DOL, finally, in this period, either through BIL or IRA or something else, got funding to develop that. It’s not that there wasn’t the will or the interest or the talent to do it. It’s just that it’s one of those super wonky, boring bureaucratic things that is never going to look like a win — nobody cares.
David Roberts
Tell us the system you made in a way that non-deep-inside-the-bureaucracy wonks can understand.
Betony Jones
What Davis-Bacon requires is, and this has been in the books for 95 years, a couple things. One, there is a wage requirement, but it is not a single wage. There are thousands of different wage determinations based on geography, based on craft and classification of the worker. You have to first figure out what is the correct wage determination. The Department of Labor publishes these, but on different timelines and they are published in PDFs. That is the definitive wage determination — PDFs in SAM.gov that are binary text that are — it is tedious.
First you have to figure out the right wage determination. The other thing that it requires is that you have to pay workers weekly. That’s in the law. You have to pay them on a weekly cadence. The third thing is that you have to report those weekly payroll records weekly to the funding agency, to the compliance agency, and in our case, DOE is responsible for making sure that all of that is correct, even in some cases doing site visits to make sure every worker is getting reported and their wage classification is correct.
It’s onerous. As a researcher, what I’ve always wanted is that weekly payroll data, because you have this data that has to be reported every single week for every single hour worked on a federally funded construction project.
That gives you real-time access to job creation. What jobs are we creating? Where are they going? Who’s getting them? The problem is that data has never been usable because it comes in by mail, by email, by PDF, by Excel. It comes in every different way to every different person managing a grant or a contract.
That data is coming in, it’s compliance data, but it’s completely unusable in terms of metrics or tracking what’s going on. My interest was how can we get this data in a usable format to both help us with compliance, but also give us a running sense of how we’re doing on project implementation. The data part was Betony’s interest, that doesn’t have anything to do with reducing the compliance burden. But if we could get the data in one centralized electronic system that integrates with payroll systems, then it’s reducing the burden on the outside for people to figure out what is the right wage classification and hiring their own Davis-Bacon compliance entity to help them track it, because DOE is procuring that tool on their behalf.
It helps on the inside because instead of charging thousands of staff who are managing these grants or these contracts with Davis-Bacon compliance — something they have no idea how to do or what it is — it would allow us to centralize that compliance and have real experts reviewing the data and ensuring that workers are actually paid what they’re due. What worked on the inside, because this required a massive collaboration across all of the program offices and agencies at DOE to all chip in to create this centralized system and centralized staffing. The value proposition was that it would relieve them of staff burnout or more FTEs. It’s just more efficient.
Once they realized how much it would help them on the inside, they were sold. In terms of our efforts to streamline, we are sensitive to the burden of doing business with the federal government. We were all sensitive to that. Anything that we could do to make it less painful on the other side for the firms that we were working with to comply and comply effectively, we were always trying to do that. It was a real win — win.
It’s not that there weren’t other issues that arose with Davis-Bacon. One of them, for example, was with our grid grants, a lot of which went to utilities. Some utilities have bespoke payroll systems and they pay on a biweekly basis. Paying a certain set of workers on a weekly basis is a huge change management undertaking, or so they said. That’s written into the law, it’s just a requirement. Navigating those things and trying to figure out ways to deal with those, we spent time on that. It’s not that it was, but that’s the only thing we had to spend time on. We didn’t have to spend time on the supposed burden of reporting.
David Roberts
I want to pound the table about this because this is a very important, illustrative example of a broader point that I wanted to make in our discussion, which is how much burden a particular requirement, a particular bit of everything bagel, will place on the government and the private sector is not a fixed quantity. You can make it less of a burden for the federal government with thoughtful, well-funded administrative capacity. You can build the administrative capacity to do it well, such that it is not a burden, or you can do it in a dumb way where it is a burden.
There’s not one fixed answer to that question. It’s not inherent to the requirements that they are burdensome. You can do them in a way such that they aren’t. You implicitly made the same point on the side of the private sector with these community benefit agreements. To a big firm who hasn’t done it, it might be awkward and slow the first couple of times, but again, they can figure out how to do it, set up the capacity, set up the systems, and then it’s not a burden anymore. It’s just a routine part of business.
All of which is just to make the point that you can have better or worse federal agency performance. It’s not a fixed quantity. Tell me if this resonates with you because I know you’ve been arguing with the abundance people. If you read the original Abundance book, to me, the heart of the critique had two halves. One was about some of these excessive rules, but then the other half, the book was all about making government work better. That was the thrust of the book.
Part of that is getting rid of silly or unnecessary rules, but the other half is bulking up your administrative capacity so that you have the muscles to do the things you want to do. That half of abundance, which is implicit in the whole thing and is in the book, has dropped out of the discussion. Half of it is supposed to be fund and adequately staff your federal government.
Betony Jones
You look at something like permitting that everybody complains about, and some of it is overlapping and sometimes contradictory requirements from different permitting agencies. That we should fix. Some of it is just the backlog and the understaffing of people to review it. Why is that not part of the solution here? To augment government, to support government, to do its job more effectively, more efficiently, more innovatively.
David Roberts
I would love to hear more of the abundance people making that point a little more often. “Let’s fund. Let’s celebrate and fund the administrators we’re asking to do this competent governance.” Let’s boost that half of the abundance thing. One other quick thing about Davis-Bacon is it applies to construction workers. If the federal government gives a grant to a developer who is going to construct something, they have to use it. It doesn’t cover factory workers. In some cases you had these problematic instances where you’re paying the people who construct the factory really well and then the people who end up staffing and running it not as well. How do you think about that?
Betony Jones
There was a parallel to Davis-Bacon, Walsh-Healey, that was never repealed. It’s still in the books, but it could be reinvigorated. The wages — eventually federal minimum wage just exceeded the wages that were in there and it was eroded by the courts. There were proposals again that didn’t make it into the final versions of the bills that passed to have some labor standards and wage standards on the manufacturing side. The analysis that some of my friends and colleagues have looked at, back of the envelope, is that the tax credits — take the battery production tax credit — are so generous that more union pattern upper quintile wages could have been accommodated and would have spread the wealth of these really generous incentives to the workers building this.
Whatever happens behind closed doors in the final negotiation of these bills, that did not make the final cut. It’s too bad. I’m proud of the work at DOE to think about those ongoing operations and manufacturing jobs and build that into this community benefits plan framework where firms were asked not just how are you going to secure and retain the workers you need for the construction project, but also what is your long-term plan for operations and what is the quality of jobs that you’re creating there? How are you going to ensure that there is advancement opportunity for workers there?
With some grants, we suggested this upper quartile based on BLS, not just average but above average wages for the industry and occupation to try to nudge wages up because the labor market’s competitive and a lot of these manufacturing companies are paying less than Starbucks in a lot of cases. Then they’re saying, “We have 30, 40% turnover, but we’ll just go back to the fast food industry and see who else we can find.” That’s not a way to build a successful, globally relevant, innovative industry, which is what we need to do. We need firms thinking about their workforce strategy and how to retain workers, give workers a reason to make a career in these nascent and emerging industries like batteries and battery supply chains. Thirty percent turnover isn’t going to get us there.
We need a plan to improve job quality in manufacturing and make sure that this is something that workers and parents see as opportunities for their kids and that we can reinvigorate that workforce. The other thing is we got a lot of firms committing to either neutrality agreements or collective bargaining agreements on the production side.
For a policy that was agency discretion and tied to implementation, we got remarkable results in terms of advancing job quality not just on construction, but also in the long-term operations, because we were asking about it and because we were asking firms to think about it up front.
David Roberts
Out there in the American public and even among politically engaged people, there’s still this lingering idea that the business community is full of ruthless self-interest maximizers and rationalists. If you believe that, then anything the government comes in and tells them to do almost by definition is going to make things worse, because they’ve already optimized — and this is the basic conservative critique. But what you find in practice, what you’re describing, is business people are human like everybody else. There’s a lot of inertia, a lot of old thinking, a lot of path dependence, a lot of busyness, don’t have time to think about stuff. Someone coming in and nudging you to do things better can be helpful and then you can change and do things better enduringly. These things are not all optimized. They can get better and government can help them get better.
Betony Jones
They can get better and the government can help. Just to give one other anecdote in the battery space, we developed at DOE this battery workforce initiative. The idea was, look, there are all of these investments in battery manufacturing in the US, there is no coherent, developed pathway into those jobs. It’s each company for themselves. They’re competing on many things. They’re racing to get these tax credits. They’re not thinking about their medium-term workforce needs. Let’s bring them all together, let’s leverage our convening power to bring all the industry players in this space together to figure out what is the common 85% of skills that they all need.
Not the specialized trade secrets, but how do we capture the 85% of the skills that they are going to need so that we can develop some standardized training and credentials to support this industry where we want to develop some U.S. competitiveness, want to and need to for security purposes, develop this industry. That is a role that is unique to government — the convening power.
Industries were at first tepid because they’re like, “Our thing is special and we don’t want anybody to know what our technology is.” Once they realize a lot of the skills are transferable across the industry, there’s benefit to a more cooperative approach, thinking about workforce development and standardizing that in the US or the federal government, state government. We’re uniquely qualified. We have the technical expertise and the convening power to lean in and help there. It’s one of those things that helps everybody and helps our country and helps develop this productive capacity that we need.
David Roberts
Two political questions coming at this from different sides. One of the critiques you sometimes hear is the phrase you’ve used to describe Biden’s approach is “industry-led, government-enabled,” which really captures the vibe here — that the private companies are out front doing the things, government is doing things to help them structure their workforce, boost their workforce, subsidize their production, whatever. Almost all of that is behind the scenes. Consequently, to the public, it doesn’t look like there’s much government happening at all. This just looks like the market and consequently all these good things you’re doing, which I feel that I and eight other people in the world know about, just didn’t get out and didn’t have any political effect.
Do you think that’s a — because it seems that substantively that works pretty well. But politically there are questions about whether it worked. Do you have an opinion on that?
Betony Jones
By design, our industrial policy in the US depends on relationships with the private sector. It goes back to the forming of the Manhattan Project and the establishment of the national labs, which are public-private partnerships to enlist the innovation and nimbleness of the private sector and maintain our competitive edge as a country, mostly for initially military dominance, but to drive continuous R&D. We have this dependence on the private sector and we need them to be engaged and we need them to be part of the solutions. It’s how our system is set up.
I think we go too far in making government invisible. Part of that might be by political necessity, but then it’s this self-sustaining cycle. In the Biden administration, the attribution, the failure of getting credit for this stuff is the big lesson learned. I think there are a lot of people who are responsible for that. Maybe we didn’t do a good enough job. Maybe we should have sent letters with Biden’s signature to everybody who was working on these projects. Maybe require workplace signage: “Thanks to the Inflation Reduction Act, that’s why we’re here.”
David Roberts
One thing Trump has shown us is you can’t be too crude about it. There’s nothing too crude and obvious. It works.
Betony Jones
The onus is on companies to share the credit. At so many ribbon cuttings they’ll say in private, “This is such a game changer,” but they won’t go up and say it at the podium. All of this work was happening. At the beginning of this call, you talked about how voters’ lives didn’t change. That’s not true. Voters’ lives did change. People were employed at record numbers, wages were up. There are lots of indicators, real valid data that shows that people’s lives were better in communities all across the country. But it wasn’t adding up to something coherent that was part of a coherent federal presidential strategy. That message didn’t get through.
David Roberts
People are fond of blaming Biden for that. They’re like, “He was old, he was weak, he didn’t talk to the press enough, he didn’t give enough speeches.”
He gave speeches. No one paid attention. People in the administration talked about this all the time. No one paid attention. At a certain point, the media has to take some responsibility. You’re asking the government to deliver you a story with a bow tied on it. You’re supposed to be the media. You’re supposed to be out figuring out what’s happening. You’re supposed to tell people what’s happening. You can’t just sit back and say, “Biden didn’t come to me and personally tell me and make me write this story.” Other people need to take some responsibility. A lot of that is pushed on to Biden as a person, as opposed to structural problems.
Betony Jones
The media environment is tough. Even if reporters did cover it more in the New York Times or the Washington Post, that is not where people are getting their news. The lived reality does not necessarily match the headline.
David Roberts
The other political question is from the other side, which is the idea that attaching these well-meaning progressive requirements to what are otherwise fairly bipartisan policies has the effect of coding them as more liberal, polarizing them, destroying the bipartisan, and then thereby — and this is the substance of the critique — making them more vulnerable to being overturned by the next person. This critique also bugs me a little bit. There’s not nothing to it, but I think there’s less to it than is generally made out. Why don’t you tell me your opinion first of this durability critique.
Betony Jones
How did the left lose the billionaires and the working class? Who do we want back?
David Roberts
I would refer us to our previous discussion about the media. That would be my first answer. But apparently I’m alone in that. I’m the only one who wants to talk about that.
Betony Jones
Here’s one thing: with the IRA and the OBBB, the thing that stuck with bipartisan support was the prevailing wage and apprenticeship standards. The underlying credits, the solar tax credits, changed, went away. But the prevailing wage and apprenticeship credits were not repealed. That’s still there. Where is their political support? I don’t think it’s for just climate. I think it’s for economic equity and policies that support that. Can climate fit into that? That’s probably the winning argument. Maybe we have to turn it on its head and look at climate benefits as ancillary and the economic benefits that people feel in their lives as the thing that’s primary.
David Roberts
That is the typical Dem response. Let’s take the critique as though it is made in good faith and come up with a good faith response to the critique. I just don’t think it’s made in good faith. This is the question I would pose to people making this critique: What does it look like to make a policy that is resilient to a nihilist, authoritarian group of morons? Look at that party. What political, what magical policy instrument are you imagining that they would not destroy? Where is this big bipartisan path?
Look at the other side of the bipartisan aisle and tell me what can stop them from destroying things? They destroyed lots of things that they weren’t legally allowed to destroy. They just destroyed them anyway. What could people have done to make those things durable? They were protected by law and they still got destroyed. What do you mean, durability? Look at these people. I’m sure you’re not allowed to say that, but I’m —
Betony Jones
I think a lot about durability and one is the boring bureaucratic fixes are durable. They’re too boring for anybody to care. Look at Davis-Bacon. It’s so boring and it’s been around for 95 years, but it also has power behind it. Some of the problems we run into is we think of these policy solutions — we’re all the A students, like you said, we’re crafting these policies — but they’re detached from any theory of power or how to shift power or how to sustain power or what new political coalitions look like.
I see this in the affordability of, yes, the price of things is too high — affordability is a crisis. Some of the policy responses to affordability are decoupled completely from any path to power. If it is hard to get attribution for direct spending on projects that are improving people’s lives in communities, how on earth do we capture credit for reducing the cost of milk by 10 cents?
David Roberts
Some of the responses to the affordability critique are not only politically inert, some of them are actively politically counterproductive. They concede the premise to their opponents. You see Democratic governors now rolling back energy efficiency programs. We have been arguing for decades that those things lower prices for ratepayers. Now you are conceding that point and rolling them back. If rolling back climate policy is how you do affordability, why bother voting for Democrats? You have got a whole party devoted to rolling back climate policy.
They’re rolling back climate policy, they’re rolling back efficiency policy. The way they want to respond to these critiques is by conceding their opponents’ arguments up front, which will never not drive me insane. I can’t figure this party out.
Betony Jones
It’s this relentless focus on the cost of things and not the equation that affordability is between the cost of things and income to be able to pay for things. That’s short-sighted and dangerous as well, especially for the politics.
David Roberts
A final question: you now have been in the trenches of industrial policy making. The point of your report is to defend a lot of what was done inside the government around Biden industrial policy. But presumably you also saw the problems and the frictions. What advice would you give in the event a friendly administration comes into power and there is a friendly Congress and Democrats work up the will to take another pass at industrial policy? All of those are very large ifs. But if all those ifs line up, what advice would you give them to improve what you did? What did you learn from your experience?
Betony Jones
I hope that we don’t reject this outright. This narrative that it didn’t work is just the foundation for inventing something totally new. We don’t need to invent something totally new. A lot of this is working. The fixes are in, the tweaks.
David Roberts
At this point we’ve tried everything. They keep telling us to try new things and we try the new thing they say to try and it doesn’t work either. If you abandon industrial policy, go back to what —
Betony Jones
The thing is — this did work. We got firms to make irreversible investments in building clean energy supply chains in the US. They did that with hundreds of billions of dollars. Those projects, the vast majority, are moving forward. It did work. We created jobs, we raised wages. Think about climate. We are much better off today than we were six years ago. Still, even with all of the changes, solar is cheaper, clean energy is the norm. The trajectory is more solidified. It did work. Whatever issue you care about, it worked. We can make it work better. But let’s stick with the thing that was working.
It’s not just at this stage, it’s not just for the sake of climate, but also our energy security and our national security, which people are waking up to. We need US industrial policy. The energy system is changing from subsurface molecule combustion to one that is highly manufactured. We need to manufacture those things and get the resources that go into them in the US and with our friends, and secure these supply chains. That is an answer for our economy. It’s an answer for our security, it’s an answer for the climate.
David Roberts
I agree. I understand why liberals are so prone to self-criticism, sometimes edging over into unproductive self-loathing. Of course, when this happened, when the OBBB happened, everybody’s first thought is, “What did we do wrong? God, we screwed up again, we suck,” etc. But maybe the real flaw was they didn’t fight hard enough for themselves and they let Trump win. Maybe the magic policy key to making the industrial policy work was not letting Trump get elected.
That seems the most direct route to making this all work. You don’t need to redo the policy from the ground up. Just don’t let the guy get elected who wants to destroy it all. It seems a much simpler answer, and the way to do that is to be prouder of yourself, to fight harder, to brag more about what you’re doing. Liberals have this idea that if we just lash ourselves and flagellate ourselves in public long enough, we’ll win some sort of sympathy or — what’s the theory?
Betony Jones
It’d be fun to have a whole weekend to just rant, to just continue these rants.
David Roberts
We could go on.
Betony Jones
I’m getting fired up too. Let’s just —
David Roberts
All right, I’ll stop ranting. I wanted to do this pod mainly to make the point that you made eloquently just now, which is that on most fronts, in most respects, the industrial policy of the Biden administration was working. The projects were going in, they were getting built, the workforce was being created, the supply chain was getting stood up. It was working. We shouldn’t just be little scared fawns in the forest who heard gunfire in the distance and are going to go sprint the other direction. Have the courage of your convictions a little bit.
Betony Jones
Hear, hear! Yes. Love it. Thank you.
David Roberts
Thank you for coming on and joining me in this opportunity to rant. I appreciate hearing from the inside and I admire you being like, “Let’s figure out what did happen. Let’s go find out what did happen. Let’s go ask people.” For everyone listening in government or private industry, you should be inspired by this. Go out and find out what’s really happening. Go ask people before you do takes. Go ask. I’ll end there.
Betony Jones
Thank you for doing this, for reading the papers. Love 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.
As affluent homeowners defect to heat pumps, the massive costs of maintaining America’s aging gas pipelines are being concentrated onto a shrinking base of customers who can afford it least. To understand how to prevent an impending utility death spiral, I talk with the Building Decarbonization Coalition’s Kristin George Bagdanov and Panama Bartholomy. We discuss the legal limits of a utility’s “obligation to serve,” the potential for gas companies to transition into geothermal thermal energy networks, and why the US has suddenly become the global leader in heat pump sales.
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David Roberts
Hello. Hi. Greetings, everyone. This is Volts for May 22, 2026: “How to phase out natural gas equitably.” I’m your host, David Roberts.
Some US homeowners might be surprised to learn that approximately two-thirds of the average residential gas bill now goes, not to gas, but to infrastructure costs, ie, maintaining and replacing bits of the sprawling network of pipes that serves natural gas in the US.
Those costs have tripled over the last decade, despite the fact that the total customer base grew just 8.5 percent, per-customer consumption is falling, and heat pumps have outsold gas furnaces for four years running now. All that new infrastructure is designed to last for decades, long past the point by which many states aim to be decarbonized. We’ll either use all those repaired and replaced pipelines for their lifetime or strand them, both of which seem like bad options.
Utilities are — stop me if you’ve heard this one before — incentivized to do more of this kind of spending, since every dollar they spend comes with a guaranteed return. But if electrification really takes hold and affluent homeowners begin defecting from the gas system in numbers, those infrastructure costs will be shared over a shrinking base of the customers who can afford it least.
This is — shout out to Volts guest Emily Grubert — a classic “mid-transition” problem. As electrification grows and the gas network peaks and declines, how can we prevent a stumbling, expensive, and unjust handoff?
My guests today have given that subject a great deal of thought. Kristin George Bagdanov and Panama Bartholomy work for the Building Decarbonization Coalition, an alliance of utilities, businesses, and nonprofits working to get fossil fuels out of American buildings. They have spent the last several years doing the research and policy groundwork, figuring out what a managed transition requires. We’re going to talk all about it.
With no further ado: Kristin George Bagdanov and Panama Bartholomy, welcome to Volts. Thank you so much for coming.
Kristin George Bagdanov
Hey David, it’s great to be here.
Panama Bartholomy
Great to be here, David. Good to see you.
David Roberts
Welcome back, technically, Panama. Kristin, I’ve got a bunch of nerdy specific questions for you, but I want to start with Panama with a bit of a broader framing question, because I want to question the premise of this whole thing that we’re doing here, which is all of this work and guidance is about how to do this transition — how to do it well.
We’re going to talk about the details, some of the details of that, but that presumes that there is a transition — that we’re doing a transition. I look around at the evidence, and I don’t see a ton of evidence that we’re doing that. There is some movement on new construction. That’s why the heat pump numbers are starting to look good.
But the 70 million houses or so that already have gas in them — I don’t see that number changing. Furthermore, politically, insofar as anybody’s tried to get at this issue, it blew up in everyone’s collective face with the gas bans — were not popular. I could imagine if you are, say, a natural gas executive or someone who works at a natural gas utility saying, “Sure, if we do a transition, I will take your counsel into advisement, but no thanks, we don’t want to do one and we’re not doing one.” Convince us that this is actually happening.
Panama Bartholomy
If only major transitions were linear, it would be wonderful. Indeed, we are seeing evidence that a transition is underway. If you look at it from a market perspective, as you said in the introduction, heat pumps have been outselling furnaces for the last four years. We’re seeing heat pump water heaters really accelerate. If you look at things like Forbes magazine — they recently did a survey with kitchen and bath experts looking at what they expect from induction stoves, and it’s the leading technology they expect to be sold over the next few years. Increasingly, the market is showing signs that a transition is underway.
You mentioned politics. We would have expected after the election in 2024, we would have seen a drop-off in pieces of legislation around building decarbonization. But in fact, in 2025, we saw the same number of pieces of legislation introduced at the state level around building decarbonization standards, incentive programs, education programs, as we did in 2024. We now have 14 states that have instituted future-of-gas proceedings at their public utilities commissions or their public service commissions.
These are proceedings where you are designing the energy system of the future. You are trying to balance a state’s climate law with how they manage a gas system. They are trying to align with their electricity system as well. Those 14 states — you have just about 47%. Just under half of all residential gas customers in the country are in those 14 states.
David Roberts
I think this all sounds like we’re gearing up for a transition.
Panama Bartholomy
We are early in the mid — I would say if you look at Dr. Emily Grubert —
Kristin George Bagdanov
The messy middle.
Panama Bartholomy
Signs are pointing in the right direction. The question now is, are we going to continue the momentum and is there the political will to carry out these future of gas proceedings, to continue this program work? Is the market going to continue at the rate that it has been?
David Roberts
Kristin, you’ve been leading this research, been writing these reports. Tell us a little bit about how we got here. Two-thirds of the average gas bill is going to these repair and replace programs. That’s unusually high, as I understand it, in recent history, maybe in all of history. I mentioned the perverse incentives of utilities, a very familiar subject on this show. But those utilities have always had these same perverse incentives, and yet this kind of spending seems to be on a real uptick. What is going on? How did we get to this place where two-thirds of our bill is going to this?
Kristin George Bagdanov
Compared to historical proportions, we look back at the 80s and it’s more like the reverse, where about two-thirds is going to the commodity cost and one-third is going to the infrastructure. If you look at the AGA — the American Gas Association — if you look at their own numbers, which they’re very proud of, they show this uptick in infrastructure building capital expenditures. It’s around 2010 that you see it really take off. Previous to that, it’s pretty stagnant — what I would consider a business-as-usual infrastructure period. We’re in this accelerated spending era where, as you said in your intro, that spending has tripled since 2010.
We’re at about $49 billion a year that gas utilities are spending on their systems, and about $28 billion of that is just on the distribution side system — the pipes, services, and meters essentially. This is an unsustainable trajectory because gas demand is declining in buildings and it’s forecasted to continue to decline.
David Roberts
Let me pause you before we go into the future. Why is it rising? Is it because all this infrastructure is reaching end of life, like with electricity? Same deal?
Kristin George Bagdanov
Yeah. There are a lot of different potential causes. There’s no single reason. One reason that people look to is around that same era when spending took off. We have some high-profile gas incidents such as in San Bruno. Soon after, you have PHMSA, which is the federal entity responsible for monitoring pipeline safety. They put out this call to action a year after that, telling utilities to step it up with checking the safety of their pipes. This gave birth to 44 different programs across the US where utilities were allowed to accelerate their spending and accelerate their cost recovery on pipeline replacements if it was for a safety reason.
This has meant that rather than doing these investments and then getting them checked out at the rate case a few years later and getting those costs approved, utilities can spend and recover costs along the way, typically through surcharges on customer bills. This is at least my leading theory on one of the primary reasons that we saw this uptick.
I also think it’s an interesting coincidence that we also have a lot of climate activity and climate laws and executive orders around that same time. It’s making hay while the sun shines and the ice caps melt. That’s my working theory as one of the primary drivers, as well as what you said — just the stock of turnover of pipelines needing to be replaced at end of life.
David Roberts
Now tell us why it’s unsustainable. This gets to my question, as I was trying to get at with Panama: why couldn’t, if you’re a gas utility executive, just say, “I’m fine with the way things are”? Are there forcing mechanisms that are going to push this into crisis? Because climate concern obviously isn’t going to do it. Why is it that this is unsustainable?
Kristin George Bagdanov
It’s already a crisis for gas customers. Electric bills are grabbing headlines, but if you look at the consumer price index from 2025, we see that gas bills outpaced electric bills by 60%. As noted, most of that is infrastructure. It already is a crisis — and it already is unsustainable.
What we have right now is this top-heavy system. It’s like this spinning top that has started to wobble and it’s the inertia of the past that’s keeping it going. But we have too much investment up top and not enough utilization at the bottom. That’s going to continue to wobble. Once the momentum runs out, the costs aren’t going to disappear. Instead, the people left on the system the longest are going to be shouldering those accelerating costs. That’s the importance of managing the transition so it doesn’t happen that way.
David Roberts
Is there evidence — is it true that, because as I said, we looked into it and the customer base is still growing slowly. As of recently, it grew 8.5% over the last decade. That’s slow, stagnant growth. What evidence do we have that there’s actual shrinkage on the horizon?
Kristin George Bagdanov
The EIA does show that demand — actual use of gas — is declining and forecasted to decline. There is slow customer growth, but the actual use is declining. You are paying more for the pipes, but you are using the product less. It is all packaging, which nobody likes. That is the problem we are trying to solve. It is a basic math problem: people call it gold plating.
They’re gold plating these pipes by making them cost more, but you’re getting the same amount of use out of them and, in fact, people are utilizing them less. The reason that we see customer growth in the residential sector is largely because we still have a lot of incentives — gas utilities can essentially pay people to join the gas system by giving them free gas hookups and charging it to the existing customers.
David Roberts
We’re going to get into those details in a minute. I’m just trying to establish that there is some forcing mechanism here — that gas utilities or gas companies don’t have the option of simply resisting change altogether.
Kristin George Bagdanov
That’s why we regulate them, because monopolies don’t do anything out of the goodness of their hearts, nor do corporations. Most of our over a thousand gas utilities are investor-owned utilities. Every dollar they spend in capital expenditures yields $2 to $3 in customer costs because of those shareholder returns and financing costs. That’s why we have this regulatory framework — which does need to be revised to keep them in check and to force them in the places where they don’t want to act out of the goodness of their hearts.
David Roberts
How much easier is all of this with gas and electric utilities that at least have the option of shifting existing customers from one product to another versus exclusively gas utilities, which are — at least I think from their perspective — just facing being told to shrink and die? Do we see progress faster in places where there are those combined utilities?
Panama Bartholomy
We do. As you would imagine, it is much easier on executives and also the unions that work for those utilities to be able to think about, okay, internally, how do we start to transition more and more of our customers off of our gas system and onto our electric system? How do we start to bring in more electrical workers and fewer pipeline workers over time as well? That makes it easier on the politicians within those states.
For gas-only utilities, it’s a bit more existential. It’s not out of the question. We have conversations with gas utilities about, “Come on, let’s be frank. We all see where this is going. What’s the long-term future for you here?” When we ask them that, they talk about, “We think there are still going to be hard-to-electrify sectors that we’re going to be able to provide fuel for through different kinds of pipes, different kinds of fuels. We think there will still be need for resiliency within certain microgrid opportunities into the future, and we think we’ll still be there for power generation.” It seems like there is some planning. Just by having that conversation, we see that there’s some planning going on in gas-only utilities about what a future could look like.
David Roberts
But they’re not deluded about the macro direction of travel toward electrification, generally speaking? I’m trying to figure out to what extent are they convinced that electrification is an inevitable macro trend.
Panama Bartholomy
The political activity that you described in your intro as far as the backlash to phase-outs of gas in new construction is a good indication of their belief in the danger of this movement and the types of activity that they’re seeing from it. When you talk to the manufacturers of gas appliances, universally, they say this transition is inevitable. If you have such a key part of the gas system — the actual appliances at the end of the pipe — saying that, you know that goes up through the gas companies as well in that sense of inevitability.
David Roberts
Is there an example yet of a gas utility that is planning to become a thermal utility — in other words, an exclusively gas utility that actually has plans or prospects of becoming the manager of a different kind of thermal system? Is there such a case?
Kristin George Bagdanov
I don’t know if any gas utility has yet signed their soul over to the thermal utilities, but we do have a lot of legislation that is helping gas utilities get comfortable with that idea. The way that they get comfortable with that is through thermal energy networks, which I know you have talked about on this show. There are quite a few pilots that are getting off the ground in New York. Obviously, there are some in Massachusetts. California is looking at neighborhood-scale pilots, and one in four states have legislation that is related to thermal energy networks.
David Roberts
Are those existing thermal energy networks happening in places governed by gas-only utilities and being put in the hands of a gas-only utility?
Kristin George Bagdanov
Some definitely are. I think Colorado and Washington — I have to check for sure — have legislation that is having these gas utilities try out thermal energy networks. Some of the utilities in New York, through the Utility Thermal Energy Network and JOBS Act, are developing pilots that are going through the regulatory process, and some of those are gas-only.
David Roberts
This gets to another political economy question. Technologically speaking, if you’re running on gas and you’re contemplating a transition, you have two basic choices. You can go all-electric with air source heat pumps and electric appliances, or you can do these thermal energy networks, which are sort of geothermal. If you’re in an area with a gas-only utility, they might have a strong preference for the latter over the former, since the latter means they still have a job and things to do and the former means they’re going away entirely. Could you end up in a political scenario where gas utilities become advocates for thermal energy networks, or is that too hopeful?
Panama Bartholomy
That is what we’d love to see. I love how so much of your conversation is centered in 2040 right now, as opposed to the late 2020s, where so much of what we are trying to do is begin to really prove out these models. If you look at the full suite of stakeholders here — utilities, unions, customers, ratepayers, politicians, installers — everybody needs it to be proven right now: this neighborhood-scale thermal energy network, prove that it’s cost-effective, prove that it’s functional, prove that it’s safe, all these different proof points. I think we all, particularly as we get older and get deeper and closer to retirement, want this to be done, this transition to be over.
We also have to sit in the reality of where we’re at in the transition and play our role in it. Right now, where the politics are and where the proof points are, we need to have a few hundred really successful projects over the next five years in a bunch of different climate zones and a bunch of different service territories to be able to prove out this model so that as, unfortunately, climate change gets worse into the early 2030s, we’re able to point to this new model to be able to say, “Let’s go to scale. We’ve proved it. The political weight has now come back due to the direness of the climate situation.” Let’s go with it to scale.
David Roberts
One more thing on the death spiral, Kristin — the so-called death spiral, where people defect from the gas system, the costs are shared in a smaller group, that cost pressure then causes more people to defect, etc. One thing I wanted to emphasize, and I picked this up from watching the webinar: I’m not sure people appreciate this. It doesn’t take a high level of defection to trigger this. It does not have to be a mass — it doesn’t have to be a majority. One of the people on the webinar said in her model, about a 2% defection rate causes prices to rise by 50% over a decade.
Kristin George Bagdanov
We have this scattered landscape of utilities and laws and regulations, and we don’t want these utilities to be moving at different paces. If you live in one state, your gas bill is going to be astronomical, while in another state, maybe it’s manageable. That’s part of the need for not only this state regulator-led managed gas transition, but it really needs to be a national effort. That’s the exciting thing that we — I said national, not federal. No, that would be great. We’re not in 2040 right now, as panelists said.
David Roberts
But you guys are awfully optimistic about 2040, I’ll say.
Kristin George Bagdanov
I know. It’s when everyone wrote their climate laws for 2030 and now we’re almost there.
David Roberts
I know. What year is it?
Kristin George Bagdanov
The point I’m trying to make is that a lot of our regulators are looking to each other at different states. That’s what’s cool about the future of gas proceeding. I remember when Illinois opened theirs a couple years ago, they had done their homework. They had checked what was in scope in all the other states and then they had come up with a great scope for themselves. Same with Maryland, which just opened last year. It shows that these regulators and policymakers and communities and advocates are paying attention to what’s happening. We’re not starting at zero in every state. We’re leapfrogging.
David Roberts
Yeah. The way we have tried to decarbonize US residences to date is basically house-by-house. It’s not working very well for a bunch of reasons. Maybe one of you or both of you can get into all of the many reasons it doesn’t work. I’m particularly interested in the experience in California, where they really plowed a bunch of money into this and put a lot of work into this and still are way behind their goals just because persuading one homeowner at a time is not great. Talk about the house-by-house model that’s reigned so far.
Panama Bartholomy
What we’ve done with building decarbonization in this country is we put our values around why we want to decarbonize — clean energy, clean air, dealing with climate — on the back of 200-year-old-plus industries of plumbing and HVAC installations and said, “Please save us, please adopt all of our values and do everything in line with what we as environmental advocates would do as well.” As you can imagine, there are challenges to that. We don’t need to go into a lot of detail about the challenges of getting a heat pump or getting a water heater. There are all sorts of characters out there in that industry.
From a climate perspective, because we’re here on Volts, it’s incredibly hard to plan for reaching your climate goals if you’re just basing it off an appliance-by-appliance or a building-by-building approach. How will you ever know if a neighborhood is ready to be taken off a gas system if you have no visibility into any of the appliances and any of the buildings within that neighborhood at all? You need to have a better way to be able to see inside those buildings, be able to understand, “Okay, this whole neighborhood is ready. We’ve gotten this neighborhood ready to leave the gas system.”
It’s also really expensive the way that we’re doing it right now because of that lack of visibility. When a pipeline’s coming up for replacement, if a utility doesn’t know and a regulator doesn’t know anything about that neighborhood or any of the appliances from a safety perspective, they’re compelled to go ahead and the regulator approve it and the utility would be happy to put it in. As we’re trying to really expand the electric system and upgrade it, we’re also gold-plating the gas system in a seven-year investment in a system we want to be off of in 20 years.
From a societal perspective, it’s one of the most expensive ways we can do building decarbonization. I would push back on your assertion that it’s not going well. Five years ago, America was number three in heat pump sales in the world. We’re now the top market for heat pump sales in the world. Some of it is new construction.
When we started this movement eight years ago with a bunch of others, you had New York Times doing articles about “What’s a heat pump?” Now you have articles from them, AP, and others about how to choose the right heat pump for your house. The vibes have really changed. You look at what’s happened over the last few years — the election, the IRA — you have a whole bunch of headwinds and yet you continue to see the market trends heading in the right direction.
David Roberts
As you alluded to just there, the key move in doing this in a more rational and cost-effective way is some kind of chunking. You need to take groups of buildings off the gas system at roughly the same time, just for all kinds of cost reasons. That should be sort of obvious — for your workforce, for your, you know, on and on.
What does that mean? Who chunks? Who decides the size of the chunk? Who manages that process? What is the entity? Is it the utility? Is it the PUC? Is it the legislature? Who decides the size of the chunk? Who locates and chooses the chunk? Walk us through how this is supposed to work.
Panama Bartholomy
Absolutely. You coined a new term to add into the lexicon: chunky decarbonization. We’ll see if it sticks. This is being called a number of different things right now. You may hear it called zonal electrification, you may hear it called intentional electrification. At our organization, we like to call it neighborhood-scale building decarbonization because it suggests — whether it’s a small neighborhood or a large neighborhood — you’re taking a whole bunch of buildings off of the gas grid at the same time. It provides climate planning, ratepayer protection, and equity protections that just aren’t there from a building-by-building approach.
It allows you to prioritize lower-income or vulnerable communities at the front end of the transition rather than leaving them as some of the last buildings on the gas grid. It also has a real benefit for what you brought up before around educated consumers. The last thing that a consumer wants is to become an expert in air conditioning. When their air conditioner breaks, they just want their air conditioner back. They don’t want to become an expert in efficiency levels and rebates. They just want somebody to come and help them out with it.
They also want to make sure that there’s a good contractor that’s going to make a good installation. This neighborhood-scale approach — besides the climate, equity, and ratepayer backstop — also ensures that we’re going to be able to bring good contractors to provide just enough education to consumers and get them a really good product put in their house. Because you’re taking a programmatic approach, you’re going to have good quality control on the back end and commissioning of all these units. You don’t have a bad HVAC company coming in, making an installation, and then taking off, leaving a customer suffering through it.
David Roberts
Panama, you keep saying “you.” Who is “you”? Is “you” the city government, is “you” the gas utility?
Kristin George Bagdanov
With regard to who chunks and how chunky it is, there are a lot of options. The impetus could even be organic and grassroots. A neighborhood can take themselves off of the gas system, raise their hands, and just do it — cap your gas line. That is the harder route because it requires you to be fronting all the costs.
The way we see this happening right now, and the way that it makes the most rational sense in terms of declining and decommissioning the gas system at the same rate as we’re scaling clean alternatives, is you look at the map of the gas system, which is very hard to do. A lot of commissions don’t even have basic access to the mapping of the gas lines. California just got it, and you need to sign an NDA to see the full set of plans anyway. You need that map. Then you need to know which pipes are set to be retired just according to their age in 10, 15, 20 years.
Then you look at those neighborhoods, you start to educate them about switching off gas to electric alternatives. Instead of paying $2 to $7 million to put in that new gas pipeline, which is the range that we see across the US, you are going to buy everyone the appliances they need with that money and cap that gas main. That is the utility-led approach. That is what is going to be piloted in California, which is required to do 30 of these neighborhood-scale pilots in the near-term future.
David Roberts
To be clear, the utility is buying and installing the electrified equipment in the houses necessary to pull this off?
Kristin George Bagdanov
That’s what’s being discussed and proposed in these pilots. The details are getting ironed out. If you have $50 per customer that would otherwise be going into a new pipeline, that should be used for the transition for this project.
Panama Bartholomy
You asked, “Who? Who’s doing this? Who’s overseeing it?” This should be done at the regulator of a utility. A regulator utility is looking at the overall system in front of them. They know what laws are governing that state — the climate laws, the other energy laws, and other things that they have to take into consideration. They’re the ones that should be setting up the rules for this: what’s the rate of return on a project like this, what kind of labor should be used, should this be union labor, should this be non-union labor, what types of efficiency levels, what sort of consumer protections are going to be put into this as well. This should be done at the regulator level.
Unfortunately, right now in a lot of America, regulators are really afraid to step out without legislative direction. You need legislatures a lot of times to be able to provide direction and provide some of this detail broadly and then give direction to the public service commissions, the public utilities commissions, to then provide the detail to the utilities to then go ahead and carry it out.
David Roberts
Let me ask a direct question about that because this is what breaks my brain over and over again. The logic of chunking, I totally get. But either you persuade everyone — and I’m trying to imagine in America a large chunk of people who come to a unanimous decision and I’m struggling — or someone somewhere has some power to force someone to do it. I can’t imagine in America who is going to come force a homeowner to change their HVAC system without producing weeks of Fox News headlines. How do you get around that dilemma? You either have to push and force some people or you have to wait for unanimity. Both those seem difficult for me, Kristin.
Panama Bartholomy
You want to talk about obligation to spend or obligation to serve? I can talk about some of our experiences in California where this is happening.
Kristin George Bagdanov
For sure. I can zoom out a little bit with the history. We wrote a report on this a few years ago. What you’re referring to, David, is that we have in every state, every public utility code, a law that essentially says “Every public utility shall provide just and reasonable service.”
David Roberts
That’s not what I’m referring to, although I do want to discuss that. I’m saying even if there was no legal obligation to serve —
Kristin George Bagdanov
Yeah?
David Roberts
— going and telling them they have to do it — never mind legally, just PR-wise, optics-wise, every right-wing journalist in the country interviewing that person the next day — that’s the problem. We’ll get to the legal thing in a minute. How do you get around that problem, where you ultimately have to make someone do this?
Panama Bartholomy
At this point in the transition, this is one of the bigger challenges and one of the things that you’re seeing a lot of experimentation around. From a utility perspective, particularly a dual-fuel utility in a state that has climate laws, they’re seeing the writing on the wall. That’s why you have experimentation happening around a bunch of these utilities trying to pilot these projects.
Some of the early ones you’re seeing are outreach that looks like, “Hi there, we have a pipeline replacement coming up in your neighborhood. It’s going to cost this amount of money. We prefer to not do that and instead give you a $35,000 check to make upgrades to your house. Haven’t you ever got a better deal from your utility than a $35,000 offer? As long as you and all your neighbors can agree to take this check, then we’ll be shutting off the gas to this neighborhood in two, three years once we get this done.”
David Roberts
I would feel better if I had a live example of that working to look at.
Panama Bartholomy
It’s happening right now.
David Roberts
You’re getting neighborhood-level unanimity in real-life examples today?
Panama Bartholomy
Yes. Pacific Gas and Electric has the Zonal Electrification Equity Pilot Program. It’s the first public RFP that’s been released by a utility to bring in consultants to help them across their entire service territory go out and do neighborhood-scale electrification. You have individuals doing digital outreach, mailer outreach, and door-to-door knocking to recruit people. You then have analysis of every single home being done, checks being cut out. The very first ones are just going in this month because you had neighborhoods that agreed to have it happen.
Those are the first public ones we know of. This has been happening for years now behind the scenes in PG&E territory as they have been doing onesie-twosies, learning about this and studying it to eventually be ready to release an RFP to expand it across their service territory. I’m not here telling you this is easy. You are dealing with a group of humans. You can imagine. That is why one of the laws that passed in California to set up this pilot program reduced the threshold for approval for a project like this from 100% of building owners down to only two-thirds of building owners within that neighborhood in order to allow it to go forward.
David Roberts
Interesting.
Panama Bartholomy
That’ll make for very interesting Nextdoor conversations.
David Roberts
No kidding. I’m trying to imagine the Nextdoor conversations about jackbooted thugs coming and jamming heat pumps in your house. Damn it, Janet!
Panama Bartholomy
Exactly.
David Roberts
Kristin, let’s talk about the legal stuff. There are two regulatory concepts that are highly relevant here. First is this obligation to serve. That, as I understand it, is just in exchange for getting a monopoly over a territory, the gas utility is obliged to provide service to anyone who wants it, which makes sense on the surface. But then when you’re talking about phasing out gas, you’re imagining, “Oh, there’s one gas user left in the neighborhood, but the utility is legally obligated to maintain the entire gas network to provide for that one.”
You get into weird paradoxical stuff. How do you get around this or how do you address it? How do you reform it? What do you do about it?
Kristin George Bagdanov
The caveat with the obligation to serve is they’re required to provide service if it makes sense economically for them, which is why you don’t have gas lines necessarily going deep into rural areas and why rural customers are on propane.
David Roberts
That seems like a pretty important proviso that you can squeeze a lot through.
Kristin George Bagdanov
They have a backdoor out of it. What’s interesting, as I said, some of these statutes are one short sentence. Some, like California, are four paragraphs. The legal scholars I’ve spoken with about the obligation to serve say, in a lot of these states, the way it’s written, it isn’t saying you have to continue providing gas service, it’s saying you need to provide the service for the end uses that the building wants to use. We know that every residential and commercial building end use can be served now by electricity.
What we have is a regulation written for non-competing monopolies. In reality, what we have are competing monopolies. That’s an issue that we need to address by updating that regulation and making it fuel-neutral — obligation to have all of the energy sources you need to power your iPad and your pool heater.
David Roberts
Do you think in places where it’s already written — maybe accidentally — but already written neutrally, already written without the word “gas” in it, that you could legally get away with just interpreting it as fuel-neutral already?
Kristin George Bagdanov
This is where I want to tell regulators, “You’ve got it, you go regulator, you can do it, I believe in you,” because, as I said, the legal scholars I talked to said there’s nothing legally stopping this other than the fear of litigation.
David Roberts
There would be litigation, you know there would be.
Kristin George Bagdanov
Obviously, you don’t want to be ripping out someone’s gas water heater overnight. But there should already be a pathway. We live in the world we live in. What a lot of states are doing is passing even more legislation to be even more directive. We see this in Massachusetts — they thought that they passed a bill that solved this issue, and now there’s a debate in the —
David Roberts
What did they say? This is the stuff I love. Tell me, what did they put in the bill?
Kristin George Bagdanov
I don’t know the exact language in the bill, but basically it was interpreted as, “This allows the utility to do that swap of gas for electric to serve the end use.” There’s a proceeding open right now debating whether it actually said that. Utilities are pushing back on the supposed clarification. We’re really at a sticking point right now with that.
David Roberts
Ideally, you’d get a state legislature to just say unequivocally, “There’s a fuel-neutral obligation to serve.” That would be the easiest solution.
Panama Bartholomy
That’s what most regulators need nowadays. They need the backing of the legislature to move forward on it.
David Roberts
Is there a real-world case where the obligation to serve in particular is the actual sticking point, is the thing in the way, or is this just a problem we anticipate?
Kristin George Bagdanov
It’s not like customers are citing this statute, but as Panama said, I’m sure with PG&E’s attempts on their own to do this work in California, if they knocked on a house and someone was like, “Get off my lawn, I love my gas stove,” that’s the end of that conversation.
Panama Bartholomy
We just had a series of filings last week at the California Public Utilities Commission around some of these early pilots under this program that was approved by the legislature. A gas-only utility in Southern California very clearly said the obligation to serve needs to be preserved and protected and respected within this program. It is absolutely real-world around the country, continually brought up.
David Roberts
You need clarity on that. That’s one of the two big things. The other is these line extension allowances. I love this because it’s this obscure, wonky little footnotey thing in the regs, but it’s a lever that can change things quite a bit. Kristin, what is a line extension allowance?
Kristin George Bagdanov
A line extension allowance is allowing new customers to join the system for free and charging existing customers for that new gas line.
David Roberts
That means if I don’t have gas service in my house and they come and install a pipe from the main line to my house, that costs money, I don’t have to pay that.
Kristin George Bagdanov
Yeah, the idea is you’re going to pay back that loan that the existing customers gave you over time through your use of the system. That was true at a certain point when the system was growing. What we have is a mature system that is stagnant or declining. There have been a lot of deliberations about the economics of this. Every utility uses a different little formula. Some of them calculate it by feet. New York just got rid of their hundred-foot rule, which was fairly arbitrary — you can get 100 feet of service line for free when you come on.
David Roberts
That’s very arbitrary.
Kristin George Bagdanov
It’s a nice round number. Others use complex formulas to calculate what the payback period and all that is. The point is, why are we luring people onto the sinking ship? Instead, just show them where the other ship is that’s not sinking. It’s making everyone’s gas bills go up that are already on the system. It’s aggravating that cost escalation.
David Roberts
The obvious alternative here is if you want gas service, you have to pay for it. What does that translate to? What is the typical cost — how much would it raise the cost for me to get gas to my house?
Kristin George Bagdanov
Utility math is special and unique to every single utility. I want to say it’s in the thousands, but we looked at how much ratepayers would save if every state in the US stopped giving gas line extension allowances. The range was from $3 to $7 billion a year. It’s such a range because there’s such a lack of transparency about these costs that you have to use a very small data pool and then extrapolate from that. In bulk, it is significant and it varies widely.
David Roberts
I was trying to figure out what level of disincentive we are talking about here.
Kristin George Bagdanov
Enough for a builder to think “Why am I running gas to this new development?” California has gone one step further where they have removed electric line extension allowances. The electric side has these too. They have removed them if it is to a mixed-fuel building. If you say, “I am going to pay for that gas line,” and you are obviously running your electric line as well, then the state of California is going to say, “You do not get the incentive for the electric line because it is a mixed-fuel development.” They really hit it on both sides to disincentivize.
David Roberts
You only get the electric line extension paid if you are doing all-electric development.
Kristin George Bagdanov
Yeah, it’s a carrot —
David Roberts
This is mostly about new build. I would guess this is mostly about trying to nudge developers away from gas for new build.
Kristin George Bagdanov
Yeah. It’s right-sizing the economics. Why are we pretending that we’re still living in the 50s where growth was abundant and sprawling? Instead, let’s contend with the fact that we’ve met the saturation point and we need to start to think about what’s next.
David Roberts
This is not some new thing, and this is not really against gas. You should pay for whatever you get. Whatever service you want, you should pay for it.
Kristin George Bagdanov
People can still have gas. You just have to pay your share properly.
David Roberts
Let’s talk about the political economy of this, because as fair and obvious as it seems to us, for the person who wants new gas, it is going to be a bunch of new costs. New York is a case in point. They got rid of their 100-foot rule, but then a couple months later suspended implementation of that rule through the end of 2027 because they were beset by a giant torrent of industry opposition. Are the gas people aware of this and on it and against it?
Kristin George Bagdanov
Yes. My favorite report to read is by the American Gas Association on line extension allowances. They called the act of removing gas line extension allowances “an act of government-imposed inequality” because it was making it harder for new customers to join the gas system. They’re saying, “Oh, it’s inequitable to remove these incentives,” when we’re saying, “No, it’s more equitable because you’re protecting people from these accelerating costs by not letting them walk down that path.”
David Roberts
If you’re going to say getting rid of a subsidy to customers is unfair because we gave the subsidy to previous customers, that is just an argument for all subsidies to customers being permanent. You could never get rid of any subsidy to customers by that logic.
Panama Bartholomy
Election years are tough on candidates and all sorts of decisions are made in election years that suddenly get reversed as soon as the election is over.
It was a torrent of opposition, but it was also a lawsuit that was filed and the delay was in reaction to the lawsuit to let the lawsuit play out before the implementation of it took place. It happened to coincide with an election year, and we will see if anything changes after November.
David Roberts
Kristin, would you say that this line service allowance — is this what you would choose as a first foray, a first shot fired in this battle? It seems a sneaky way because when they did this in California, it really showed up in new builds when they got rid of these line service allowances, it shifted new builds markedly in the direction of electrification. It’s a pretty potent reform. Is this what you would advise people to go after first?
Kristin George Bagdanov
Yeah, I think of it as pretty low-hanging fruit for regulators because it’s well within their purview of debating which costs are prudent and which costs should be recovered. That’s their bread and butter. They don’t have to talk about climate for it. It’s just the formula that the utility is using. It’s punishing existing customers and rewarding new customers. We need to adjust it so the economic signals match across the board.
David Roberts
At least we shouldn’t be actively subsidizing the expansion of the gas system. Seems like a baseline argument there. This is another political economy question. I notice in a lot of the materials you all refer to the thermal workforce, which I think is very clever terminology, trying to convince all these gas workers that they are part of a larger family than they might think. Are they buying it? What is the valence of the workforce — the utilities — toward this stuff? I know we have at least one or two concrete examples of unions supporting these thermal energy networks when they happen, but I don’t know how bespoke or individual that is. What is the larger mood or disposition of labor toward this transition?
Kristin George Bagdanov
I can speak to a couple aspects of that and Panama can as well. We started using this term “thermal workforce” because we got tired of that binary of fossil fuel workers and clean energy workers, which I don’t think is doing anyone any favors. We also were learning from the implementation of things like thermal energy networks that someone today who is spending 90% of their time laying gas pipes, maybe in 2040 or beyond, might spend 90% of their time laying water pipes for a thermal energy network. Why categorize them as one or the other?
When we talk about the workforce, we’re typically thinking of two categories: independent businesses or contractors, and union workers. It varies a lot by state and by local union chapter where their mood is. We wrote a book about the transition with a couple locals in California who were very excited about the possibilities of the transition and wanted to think about where their union showed up in the neighborhood-scale decarb scene. I think there is a lot of goodwill there.
David Roberts
One thing that occurs, and I gestured at this earlier, is that transitioning from laying gas pipe to laying water pipe — plausible. Transitioning from laying gas pipe to being an electrician or installing a heat pump — not really plausible. It seems to really matter what transition you are talking about, where you are transitioning to, in terms of the labor piece of the equation.
Panama Bartholomy
A managed approach to this would be that you change the goals of the gas system. Right now, our entire regulatory structure for these managed monopolies is built on growth and perpetual growth into the future. Once you change that, once you have the political will to follow through with what we need for our climate future, you look at a managed decline. That’s not going to happen in five years. It’s not going to happen in 10 years. This is going to be a process, and many of the current workers that are working on the gas system are going to be going through retirements — just natural retirements — over the next 20 years.
What this should be is really a management of how many people you need to bring in, what is the minimum viable workforce that you need to be able to manage the wind-down of the system, and then you are bringing in folks and training folks based on that approach.
David Roberts
A question a bunch of people have: when people find out that gas companies are coming in and replacing these pipes with new pipes that are built and designed to last for decades, often in a state that explicitly says it is going to decarbonize before that — either you are going to use that through your lifetime and blow through your carbon target or it is going to be stranded. It seems like we are doing this all over the place right now. It seems like we are building up a lot of assets that are going to be stranded.
Part of my question is, right now it seems gas customers — insofar as anyone pays the cost of all those stranded assets — it’s gas customers. Maybe one thing we could do to discourage the building of destined-to-be-stranded assets is putting a little more of the consequence and accountability on executives or shareholders or investors, not customers. Is anybody talking about that?
Panama Bartholomy
They are. There’s a piece of legislation just introduced in the past few weeks in California, again by Senator Stern, that would put in place a retirement fund paid for by shareholders of the utilities in order to force this conversation forward. I think you’re going to see a lot more advocates and legislators across the country looking at this scenario and making shareholders more responsible for the end of life of these systems rather than ratepayers.
David Roberts
If you want to make a bunch of profit off building these things, you also need to know that you are going to pay when we shut them down. It seems a sensible thing to tell people.
We’re near the end of time, I wanted to finish with all these future of gas proceedings that are going on. As we were saying, we’re gearing up for a transition. Fourteen states, I think, or something like that, have these things going on. Are you watching them? What’s happening in them? Is there any consensus, alignment, convergence among the different PUCs about how to do this? Are any of them getting genuinely ambitious, contemplating big things? Are there any spicy future of gas proceedings? Give us a little — what’s going on out there?
Kristin George Bagdanov
Let’s see. How many chili peppers would you rank Massachusetts? I know you had Jamie Van Nostrand on the pod and he told you quite a bit about theirs. It continues to be pretty spicy in terms of — they’re having these debates about obligation to serve, they’re an inch away from hopefully removing gas line extension allowances officially. The closer they get to doing that, you see more pushback.
David Roberts
That’s always the thing about these meetings. Everyone loves a meeting, but this is what I want to know — who is moving into action?
Kristin George Bagdanov
I have faith that a lot is going to happen this year. There are quite a few where line extension allowances are up for debate. Maryland is getting close as well. Minnesota is looking at it, Illinois is looking at it. I think there are about six states and DC that are currently deliberating line extension allowances through these proceedings. We are hopeful there. California is focusing more on this neighborhood-scale solution side in what is their part two of their future of gas proceeding. They have just identified over 150 priority zones — places where the utilities could be piloting these neighborhood-scale projects.
David Roberts
Is that the only state that’s actively chunking, actively currently chunking?
Kristin George Bagdanov
New York is chunking as well. They have, I think right now, 10 thermal energy network pilots led by utilities that are getting close to being greenlit for that construction phase. The engineering plans are still being looked at by regulators and others. They have gone really far in these neighborhood-scale projects there. I think it’s eight states in total working on utility-led thermal energy networks right now. There is a lot of activity there.
In future of gas, we had two new proceedings open last year — Maryland and Maine. Maryland — they had been trying to open it for over two years. They had been petitioning and they are going to hit the ground running because they have been scoping this for a long time and the advocates are ready. That is definitely one to watch in terms of spiciness.
Panama Bartholomy
You can’t run for president on the Democratic ticket without a future of gas proceeding in your pocket.
David Roberts
We declare it so.
In how many of these future of gas proceedings is a state saying explicitly, “Gas is going away, we’re moving off of gas”? I see everybody edging, holding hands and backing slowly to it, looking over their shoulder nervously. Has anyone turned and faced the actual thing and said, “Yes, world, we’re doing this”? Is that part of any of these?
Kristin George Bagdanov
I feel like in regulator speak that looks something like what happened in Massachusetts, which was, they were like, “Okay, when you’re going to evaluate new gas pipeline projects, you have to also evaluate non-pipeline alternatives to see which is the better option, which is the most cost-effective.” That to me is basically saying, “Hey, you can’t just default to the status quo of expansion. You actually have to look at alternatives.”
David Roberts
“You can’t default to the status quo” is still a far cry from, “We’re explicitly —” I just want someone to say it out loud.
Kristin George Bagdanov
Poor regulators.
David Roberts
Everybody knows it.
Kristin George Bagdanov
Maybe if the legislature says that, then the regulators will feel empowered to say it.
David Roberts
Just say it and take the heat. Because it’s always — my pod with Emily Grubert, half the pods I do come back to the basic conclusion that we should plan this and do it on purpose rather than stumbling backward into it. But you can’t do that if you won’t admit what you’re doing, if you won’t acknowledge that that is what you’re doing. Once again, maybe I’m hoping for 2040 here.
Panama Bartholomy
It gets back to — we’re big lovers of Donella Meadows over here, the systems thinker. When you look at her leverage points, it’s the goals of the system. What are the goals of the system? That’s what you’re talking about right there. It’s one of the most powerful leverage points. Until we change that goal by these regulators, we can’t expect to see the wholesale change that we need in order to meet our climate targets.
I would say the hardest and the most important job in this energy transition is that of the Public Utilities Commissioner — what they are going to have to do over the next few years. They are responsible for all of it. They have no precedent and quite often they do not even have the backing of their boss. It is going to take them to really step up for the rest of us to be able to make this possible.
David Roberts
Panama, half of them are just randos that are cousins of the gas exec or whatever.
Panama Bartholomy
That’s also random.
David Roberts
These are not — it is not necessarily the army that one would recruit if one were starting from a blank sheet of paper, but —
Panama Bartholomy
Hey, they get $160,000 a year. What more do you want?
David Roberts
All right, we gotta wrap up. I thought I would just finish since in my mind, this task — specifically getting the 70 million American homes that are heated with natural gas to electrify — is one of the most difficult and thorny: logistically thorny, technologically thorny, politically thorny, regulatorily thorny. Pick your poison. This is some of the hardest work and I love that you guys are out doing it. I thought I’d end on a positive note. Maybe each of you could tell me, in this world of endless struggle, of your Sisyphean struggles, where are you finding optimism? What is surprising you? What do you think is going faster? What’s better? What’s giving you hope?
Panama Bartholomy
We as an industry — I mentioned it before — we’re now the global leader for heat pump sales in the world. There’s not a lot of sectors where America can stand up and say we’re leading on clean energy or the clean energy transition. It’s not happening in electric vehicles. It’s not happening in batteries. It’s not happening in renewable energy. It’s not happening in carbon capture and sequestration. This is an area where it’s not just 51%, we’re talking 63% market share, where we can proudly stand up and say we were third place five years ago, we’re now number one and continuing to move forward. That’s a market transition that you just haven’t seen from many technologies ever. It’s incredibly encouraging, and I think we’re going to see it continue.
David Roberts
Cool.
Kristin George Bagdanov
On the social side of things, we see that people are learning about the threats to their health caused by combusting fuels in your house. Who would have thought? It seems like it’s clicking on a large scale that people are realizing life doesn’t have to be this way. It could be better. It’s like when the pandemic hit and you didn’t have to commute two hours to your job, and you’re saying, “Oh, wait, my life could be different.” It’s “Okay, I could pay less and I could not be aggravating my asthma, and my community could be healthier.”
I see that showing up in different parts of whether it’s pop culture or communities showing up to public utility commission proceedings — these tiny little rooms that are getting packed with people with signs. We’re hitting a level of awareness socially where people want this, a lot of people do, and we just need to make sure it’s accessible to the people who need it most.
David Roberts
Amen to that. Thank you both so much. This has been delightful. I love hearing about this. I love that all this work is going on. Maybe we’ll have you back in 2040 and we’ll check back in and see if all our —
Kristin George Bagdanov
We’ll have nothing to talk about. It’ll be done.
David Roberts
Boring. Electrification got done.
Kristin George Bagdanov
Done and dusted.
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.
Are data centers and electrification going to break the US power grid, or are they the secret to making it cheaper for everyone? In this episode, I talk with Pier LaFarge of Sparkfund about Minnesota’s landmark decision to let Xcel Energy deploy batteries directly into local distribution networks. We look past the politics and map out how a battery-saturated system can socialize the benefits of load growth, ushering in an era of boringly reliable, low-cost energy by 2030.
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(Active transcript)
David Roberts
Greetings, salutations everyone. This is Volts for May 20, 2026: “Sooner than you think, electricity is going to be cheap, abundant, and boring.” I’m your host, David Roberts.
Late last year, up in Minnesota, the power utility Xcel Energy proposed a new program called Capacity*Connect that would have it deploy 200 megawatts of battery storage — not in the form of large utility-scale installations, but in smaller chunks distributed throughout the grid, placed atop commercial and industrial buildings like big box stores. It didn’t draw much attention outside the energy world, but my guest today believes that it augurs a fundamentally new chapter in the history of the US electricity grid, and for the US economy more broadly.
Back in 2024, I talked with Pier LaFarge, the founder and CEO of Sparkfund, about his vision of a utility-led distributed energy expansion. Now he’s back to make an even stronger version of the case: what Minnesota foretells is that utilities are going to start deploying distributed batteries under conventional utility cost-of-service rules and those batteries are going to solve all our grid problems.
They will help utilities better utilize their currently wildly underutilized grids, which will in turn enable the addition of data center load that will reduce, rather than raise, electricity prices. Over time, with the addition of these and other batteries to the system, US electricity will become cheap, abundant, and boringly reliable.
It is, to say the least, a provocative case. Lots of people object strenuously to the notion of utilities owning distributed energy. Lots of people are skeptical that storage can really, in practice, substitute for more long-distance transmission and more generation. Lots of folks think raw materials or geopolitics will impose limitations on the number of batteries we can access. Lots of people think all kinds of things, and I’m going to talk with Pier about all of them today. I’ve been looking forward to this.
With no further ado, Pier LaFarge, welcome back to Volts.
Pier LaFarge
David Roberts, thanks for having me. Great to be here.
David Roberts
I’ve been thinking about this episode for a while, thinking about how to structure it, and I think in my mildly neurodivergent adjacent way, I have come up with a structure for this episode that makes sense to me, may or may not make sense to anyone else, but I’m going to lay it out for you and then we are going to do it.
Pier LaFarge
I can’t wait.
David Roberts
We’re going to start with just the facts of Minnesota, what’s happening in Minnesota, just the structure of it, and then from there we’re going to vault all the way up into the stratosphere and talk about batteries on the grid. What are the benefits of having a crap ton of batteries on the grid during a time of load growth and electrification?
Then I want to back out from that. What are the benefits specifically of distributed batteries? Why might we want those batteries to be distributed throughout distribution networks rather than clumped up in large utility-scale transmission-based facilities?
Thirdly, insofar as we do have some preference for distributed batteries, why is the way Minnesota is doing it the way to do it as opposed to other alternatives? For all of those out there who have objections and complaints about this Minnesota program, we are going to get to them at the end, but I want to work my way backward to it so we understand what we are aiming at. Let us start with Minnesota. Tell us, what is the Capacity*Connect program?
Pier LaFarge
In Minnesota, the largest utility there is Xcel Energy, as many of your listeners know, and what Capacity*Connect was, was a program brought forth by Xcel and filed as part of their Integrated Resource Plan, which is their plan for how they’re going to grow the grid in response to load growth and grid needs. They put an item in there called Capacity*Connect. It’s an idea that Sparkfund helped develop and bring to market broadly as a distributed capacity procurement, which is pretty straightforward. It’s just what it sounds like.
It’s a procurement of a bunch of distributed capacity because in Xcel and the commission’s view, the grid can benefit from several hundred megawatts of batteries that can charge up when there is plenty of energy on the grid, dispatch when there is peak and constraint, and in doing so help operate the grid more efficiently, sell more electrons over that grid, and make the grid stronger, more reliable, more capable of handling intermittent renewables, and also make power cheaper if there is someone to buy it.
Minnesota Capacity*Connect was a 200 megawatt regulatory filing that was approved in a historic 5-0 vote several weeks ago at a commission hearing.
David Roberts
That’s significant. We should pause on that. That’s not taken for granted at all. This was a long discussion and contentious.
Pier LaFarge
No question, and received quite a bit of pushback from, in particular, the distributed solar industry. But at the end of the day, it was exciting to see a commission ultimately evaluate a proposal to make batteries — again, to use your word — a relatively boring part as the next generation of distribution grid infrastructure. They said, “Look, batteries have these properties that the grid really wants. We can use them to benefit every ratepayer. Let Xcel invest in them, operate them to the benefit of the grid.”
Ultimately, that’s no different than transformers or substations or capacity banks. It’s just the next type of distribution grid infrastructure.
David Roberts
This, I think, is a key feature to understand here: these are not Genco. Xcel is a restructured utility. It is only a distribution utility. It does not own generation assets. This filing treats batteries as distribution infrastructure, the same as if they were building transformers or power lines. Xcel is going to own the batteries. This is crucial. Talk about the financial arrangement.
Pier LaFarge
One correction. Xcel is vertically integrated and they source their power through competitive RFPs from the market. They’re part of MISO, which is the regional operator and power market. They are vertically integrated. But it doesn’t change the importance. The reason that this decision is historic is regardless of the regulatory structure or market structure of Minnesota, this is a commission saying, quite simply, that batteries fix many of the problems on the grid. It helps us utilize it better. It makes it more reliable. It makes it better at handling and delivering intermittent renewable power. It makes it cleaner.
Most importantly, this is a commission saying, “Look, putting batteries all over the grid, hosting them at customer locations, paying those customers to rent their land.” There’s another interesting element of Capacity*Connect, which is that instead of a complicated bill savings or a customer taking out debt, this is a model that lets customers and community groups all over Minnesota benefit from the wealth of infrastructure build that’s used to support a growing grid.
David Roberts
To clarify, the utility owns these batteries, so it goes to a facility, a big box store, and says, “Can we rent your roof?” Just treating the roof as a piece of land, just as if it went and put a field of batteries in some greenfield outside of town somewhere. The financial structure is basically the same. You’re just renting a piece of land.
Pier LaFarge
That’s right.
David Roberts
The only financial deal that the big box store owner is involved in is he just gets a check every month, a rent check. He is not involved with the energy, does not own it, does not operate it, does not mess with the batteries. The batteries are owned, operated, and maintained by the utility.
Pier LaFarge
That’s right. We’re renting sides of parking lots, back fields, unused land. It’s a few thousand square feet. Think about a church. One of our first hosts in Minnesota is going to be a local church. That church is going to get real money every month for 20 years to help them run their community programs and operations. Participating in infrastructure wealth is best when it’s unburdened by asking that customer who — look, this is a church. Yes, they do a lot of things well in their community, but they don’t have to think about it.
David Roberts
They probably don’t have an energy division.
Pier LaFarge
They’re not meant to be taking complicated bets on long-term energy arbitrage or regulatory structures or making sure that their price of debt is covered by their revenue. These are people who wake up every day and participate in their community and go to their jobs and focus on what they do best. The utility in this case shows up, rents land, gives them money that improves their core business, and then the grid gets stronger and more capable of supporting growth.
David Roberts
When we talk about chunks of batteries, give the audience some sense of scale here. How big is a typical utility-scale battery field? Where is the line as you go down where you cross into “distributed”? Is there a line? Is there an accepted threshold?
Pier LaFarge
Most utility-scale batteries which are connected to the transmission system and help smooth out the timing of power are, call it, 150 megawatts to 300 megawatts. But even those big utility installations are built out of a lot of the same sized one- to two-megawatt batteries. They’re in shipping containers.
David Roberts
It’s all Legos.
Pier LaFarge
Stacking little Legos in a field and then they inject all at once and they look like a power plant from the perspective of the grid. Utility-scale batteries are fantastic. They are absolutely part of why batteries are going to transform the grid. Utility-scale batteries are the first to scale and a critical part of what I think you’re framing in that. But these distributed batteries, they are one to three megawatts per location as filed. They are shipping container batteries. They are prepackaged, they are engineering templatized, they’re standardized. You get a lot of the critical cost efficiencies that you get from a utility-scale battery. You’ve just broken it into little pieces.
Two hundred megawatts is a substantial utility-scale contribution in aggregate. But it’s put exactly where the grid needs it most at the local level. The utility and Sparkfund are working to determine where on the grid these batteries will provide the best value to ratepayers. When you incorporate them into the grid and operate them 100% for the benefit of the grid, that is just the same as a utility investing in a new substation or transformer that ultimately delivers that value to society. That’s why this commission decision is so historic.
This is the first moment that hundreds of megawatts of distributed batteries are going to be incorporated on the distribution grid as normal grid infrastructure. We believe it’s the largest such deployment and largest such approval. It really is a big step in the entire United States. Last year in 2025, the country installed just shy of 200 megawatts of these middle-sized commercial industrial battery installations, call it 191 megawatts in the entire country. To see one state put a 200 megawatt deployment into play is a huge victory for what batteries can bring to the grid.
David Roberts
That’s Minnesota. There are lots of questions about the model and about different models, but for now we’re going to leave that there and we’re going to rocket up into the stratosphere and then we’ll slowly parachute back down here to Minnesota.
Pier LaFarge
I’m ready.
David Roberts
Let’s jump to the big question, because this is why this all matters. Let’s talk about our shared vision of a grid with crap tons of batteries on it. Let’s put aside for now the question of where the batteries are located, how big the batteries are. Let’s just talk about a grid with cumulatively a crap ton of batteries on it. Why do we want to get there?
Pier LaFarge
The simplest way to put it is batteries are electron time machines. Why does that matter? Why do you need an electron time machine? We built our grid to peak, which means we built the grid to be big enough to handle the tightest, highest demand, 50 to 100 hours of the year. That wasn’t a mistake. A lot of people hear that and they say, “Oh, you overbuilt the grid.” No, you built the grid to be the size that gives us the economy and the society. We have the reliable power, the cheap power. We built the grid to peak.
It’s worth noting that America has the cheapest, most reliable power in the world. It’s easy to forget in these discussions that this thing works on a delivered basis and a reliability basis and a cost basis. We built the grid to peak and by necessity of the technology available. Big centralized generation, transmission, distribution. That meant that for most of the hours of the year you were almost by definition not using much of the grid you just built.
David Roberts
A familiar problem. Same with cars. Same with a lot of big systems. It’s something that you don’t really notice until you start noticing. With cars, you just look around, you’re like, “Oh, most cars are sitting most of the time. Most roads are unoccupied most of the time.”
Pier LaFarge
Exactly. People buy cars so that they can go to the grocery store, but they don’t go to the grocery store every hour. It is very important that when you need to get somewhere, you have effective transportation.
David Roberts
I’ve been thinking about it. It’s interesting. We built electricity to the peak, meaning we have made a social contract saying, “You can use as much as you want and we will provide it, period, full stop.” We don’t do that with highways or healthcare. With highways, we do restrict capacity. There are going to be times when there’s congestion and you can’t get to your destination in your preferred amount of time. We do restrict supply in almost every other system in our society.
This is a unique and interesting and different kind of system where we’ve just pledged, “Use as much as you want whenever you want, and we’ll build a system big enough to make sure it’s there when you want it.” That’s a remarkable thing.
Pier LaFarge
It’s a historic triumph, and I think it’s core to this discussion.
David Roberts
And a populist thing. I think this is what you’re getting at, but an incredibly egalitarian and populist thing.
Pier LaFarge
Absolutely. I think it’s one of the great triumphs of American infrastructure. There are several things in our society that we deem to be, to put it formally, inelastic, which means people deserve to use as much of them as they need and not be limited in that quantity. Water is one of those things. You wouldn’t have a water system that said, “Oh, sorry, it’s hard for you to have drinking water now or you just can’t take showers this time of day, sorry, let’s do pricing to make sure only rich people get the water.” That would be terrible. We would see that as a real political —
David Roberts
Although that is the way it works in many places —
Pier LaFarge
In many places —
David Roberts
Egalitarian, that we don’t do it that way.
Pier LaFarge
Yes, sir. This is again why I count it as a uniquely American infrastructure triumph. We live on a big abundant continent with a lot of resources, and we have, as a society, made some dramatic choices. You can code them however you want, but they are egalitarian choices to say we are going to have enough power, enough water, clean air. We are going to make investments as a society with a cost to deliver things that help human flourishing and keep people safe, happy, and productive so that we can achieve that national goal.
Power was one of the early — it was before we invested nationally in our water system — we did this in the 30s. Even more than the commitment to have enough power for society’s needs and growth to build a great nation, we also made an incredible decision of rural electrification that said you have an obligation to serve. If you build a house or a cabin anywhere in the territory of a US electric utility, that utility is obligated by law, chartered in public purpose, to deliver power to that cabin, string a line, cut down trees, get up the driveway. That is just a staggering and now taken-for-granted part of this conversation that shapes every aspect.
David Roberts
One of the things I always say to people is try to imagine if we had a similar social compact around driving. If you want to drive, you should be able to drive straight to your destination without slowing down whenever you want to go, wherever you want to go. Imagine the scale of highways and roads that we would have to build to accommodate that. If we just told people, “You can do it whenever you want,” and then if you did that, people would immediately start thinking, “Maybe we should figure out ways of persuading people to drive at different times so that we don’t have this enormous peak and we don’t have to build this elaborate roadway structure.”
Segueing back to electricity, we’ve promised everyone electricity whenever they want it. Consequently, we have built a system that will provide the peak — as you say — the most anyone could want at any moment. Within a year, we’ve built that much infrastructure, and now we have a bunch of infrastructure that’s not being utilized. This gets back to the grid utilization discussion. We’re utilizing our grid at a rate of about 50%. Fifty percent of all this money and investment we’ve plowed into this infrastructure is sitting idle because of this social compact. This is where batteries come in.
Pier LaFarge
That’s right. We’ve deemed electricity to be an inelastic good, a natural monopoly, something that we want as much as we need for the purposes of our society. We’ve regulated it to make sure that the way in which that’s done is balancing all of the real tensions between cost and availability as you described.
The job of a utility regulator is to determine, in your metaphor, how many highways are enough to let society have the quantity of this good it wants. One further digression you can remove if you want is driving is in the category of elastic goods. We think it’s okay politically and societally to limit how much people drive. It is not okay to limit how much water they can get out of their faucet or how much electricity they can put into their house.
David Roberts
One final note, this social compact about electricity is incredibly significant and important, but is only going to get more significant and more important as more and more of the services we use in our day-to-day life are run on electricity. Eventually, as our entire economy is run on electricity, then all of a sudden you can have as much as you want, whenever you want. It really starts to seem like a much bigger and more consequential pledge. Then you really have to start worrying about overbuilding. If everything is electric, the amount of overbuilding that you would have to do if you didn’t care about peaks would just be insane. We have to start caring about peaks again. This is where batteries come in.
Pier LaFarge
That’s right. From our daily lives to national security to critical infrastructure, the grid is going to be one of the great foundational inputs of this next chapter of our economy, as it was in the last.
Batteries have this unique superpower which, as I said before, they’re electron time machines, which has one simple function: charge up when there’s plenty. In those periods of underutilization, when the grid is not being stressed, you can charge a battery, you fill it with electrons, and then you can wait and move them in time until the grid cries out for relief and you discharge that battery.
When that battery is in the right place, it, at a physics level, relieves the constraint on that grid. It meets the peak in a more dynamic and locationally valuable way. There you go, you can sell more electrons over the same wires.
David Roberts
Let’s talk about that, because this is something that people break their brains on. It’s really important to understand. With — this is an important caveat — with sufficient batteries in place, added load can reduce rather than raise prices. Furthermore, and I’ll make it more specific and more provocative, we could accommodate all these data centers and they could lower rates. That is a possible world. Explain how and why.
Pier LaFarge
This is why the whole debate, which is now so politically hot around electricity, is going to end up being pretty boring. Cheap batteries and data center demand happening at the same time, plus some normal building out of new transmission and generation — we’re going to need some of that too — but those two things happening at the same time pretty much solve the grid. The cost of electricity is downstream of a pretty simple formula in most places, which is, how much did you spend on your wires to get the power to people? In most cases, that’s 60, 70, or even 80-plus percent of all the cost of power. Generation is just a smaller piece.
It’s the wires. Simply put, you spend money on the wires and then the price of electricity is how many units of your product can you sell across those wires? If you can invest in a technology like batteries that fundamentally at a physics level lets you sell more over the grid, then the only other thing you need, David, is someone to buy those electrons. Which is why data center demand and demand from electric cars and home electrification are such good news. The more we buy over the same wires, the cheaper power gets for everyone.
David Roberts
The premise here is, and I think it’s important to surface this: additional load can bring down average prices, as long as adding the additional load does not require you to add a ton of new infrastructure. If you’re adding more load but using the same fixed infrastructure, you’re spreading the cost out over a wider customer base and thus per-unit costs are lower.
Pier LaFarge
Exactly.
David Roberts
If you add load, and in order to meet that load, you have to build a bunch of new wires and transmission and generators, then you don’t get that effect. This effect only is in places if you’re adding load, but without having to add new infrastructure to carry the load.
Pier LaFarge
Or at least while you are having to, you have to do both.
David Roberts
You’re adding batteries, which are technically the infrastructure, but they’re much cheaper than wires and generators that they’re almost different in kind.
Pier LaFarge
They have the effect of letting you sell more over the grid you have. I think that ultimately we are going to need new transmission, new generation.
David Roberts
I wanted to ask about that. This effect, adding load reduces prices, presumes slack capacity on your system, right? You’re adding load to soak up that slack capacity. That’s what the batteries allow you to do. Whenever you have generation capacity, you just put it in the batteries and then absorb it whenever you need it. New load absorbing slack capacity means that you can add new load and bring down prices, right?
Pier LaFarge
That’s correct.
David Roberts
The question then becomes how much of that slack capacity. I want to give people a sense of scale. How long can you do that before you eventually have squeezed out the slack capacity and are forced to build more generators and more transmission lines? Because you need fundamentally more capacity. How much runway do we have before we need to build new stuff anyway?
Pier LaFarge
It’s an important question to ask for two reasons. To level set, we have a grid that’s about 1,200 gigawatts of nameplate. There are a lot of different ways to approach this and we’ve done some studies on it. Utilize Coalition has done some studies on it, which Sparkfund’s a part of. Horseshoes and hand grenades, it’s 200 to 400 gigawatts that you could get from increased utilization and you’d end up putting a couple hundred billion dollars of downward pressure on rates. It’s significant. It’s more than the very near-term demand from data center growth, but it’s not as much as the long-term growth of electrification, which is now becoming fundamental to every aspect of our daily lives, our economy, our data infrastructure.
David Roberts
This gives us, call it 10 years, call it a decade of runway where we can accommodate all this data center rush and lower prices without building a gigantic amount of brand new infrastructure, which we can’t do in the short term anyway, as we know. But the larger electrification of the economy — never mind data centers, as you say, everything’s coming onto the electrical grid — we are eventually going to squeeze out that slack capacity and we are eventually going to have to build more, more, more. We are going to have to expand.
The reason I’m making this so explicit is that, as you probably are following, there’s a weird very dumb fight happening in the green community between the utilization people and the permitting reform people. The people who say, “Hey, we need to squeeze out this slack capacity,” and the people who say, “Hey, no, we need to build more, more, more.” If you get anyone in a room and sit them down and talk to them reasonably, everyone’s going to agree. You need both. I just want to frame this.
You acknowledge we need both and you’re mostly pushing this as a short- to midterm strategy, right?
Pier LaFarge
That’s right. It’s not just eventually we’ll need to build more. It’s starting right now. We need to build as much transmission and as much new generation from gas to wind to solar to industrial — geothermal. We need as much as we can. The reason we should do that is because, exactly as you said, it is hard and slow to build large centralized infrastructure projects. It takes five, seven, sometimes 10 years or longer for transmission. Utilization is a way to maximize the total energy abundance of the US electric infrastructure today to deliver on near-term growth and to do that in a way that specifically puts downward pressure on rates and makes power cheaper.
Oh, and by the way, invest in a bunch of machines — like batteries and grid flexibility, demand response, grid-enhancing technologies that help the grid be stronger, more reliable, better able to resist weather, and better able to deliver intermittent resources. It’s a good thing to do now, it’s a good thing to do as much of it as we can. But we need to be in parallel building as much new American power infrastructure as we can to win the future.
I’d also like to point out that the standards by which utilities determine the engineering, safety, and requirements of the grid do matter. We do not want the grid to melt. I often say to people, before you cast shade on the safety requirements of our public infrastructure, imagine you’re a parent and you have a car parked under a transformer or you have a house in a neighborhood. If that transformer melts because those standards were not robust enough and that thing turns into liquid metal and drops on a car or on your neighborhood and you hurt people, you start fires. What if your kid was in that car?
Think like a parent, not an energy nerd, and take a breath on this endless optimization of infrastructure. Remember that some of the reasons we build these systems the way we do is because we want to keep people safe and we want a big economy that can grow and invent the future. Energy is for society. It is not just an optimization challenge of a bunch of very bright nerds.
David Roberts
I want to emphasize this point one more time. I know there are people who are concerned that the current focus on affordability among Dems is pushing them toward —
Pier LaFarge
Degrowth and scarcity?
David Roberts
Degrowth and scarcity-coded solutions.
Pier LaFarge
Yeah.
David Roberts
It’s important to surface what you’re saying here: you can shovel all the data centers on the grid you want and bring down rates and serve affordability. These are not in tension as long as you have a crap-ton of batteries.
Pier LaFarge
That’s right, that’s it. Batteries and data center demand solve it. The tragedy, David, is not only that politics of degrowth and scarcity are toxic and tragic, it’s also just wrong on the merits. You have this opportunity to have more and make things cheaper, and we need to take it. It’s responsibly managed growth.
David Roberts
The thing is, the Democratic Party, Pier, it causes me such — they are on the right side of history here, if they would just argue for their side. But you look out at the landscape and everything they are doing is everything they are doing in the name of affordability begins by conceding the premise of Republican attacks. They are rolling back energy efficiency programs now. We have been arguing for decades that those things lower rates and now you are going to concede to Republicans that they are raising consumer prices? That is your savvy affordability play? It just drives me mad.
Pier LaFarge
I can’t get pulled down that road.
David Roberts
To summarize the point you’re making here, when you have a crap ton of batteries on your grid, it solves the affordability problem, allows you to bring in new load in a way that uses slack capacity, doesn’t require a bunch more building, and reduces per unit costs, reduces rates for everyone. This is the future that you’re looking toward: a future where the grid is filled with batteries and consequently it’s boring.
It just works. It’s cheap. You get electricity for pretty cheap. You get as much as you want, it works, it’s reliable. Then, hallelujah, you can stop thinking about it and start thinking about other things you want to do with your life.
Pier LaFarge
Welcome to the age of boring. Cheap batteries, data center demand, and a few other good investments in the US electric grid will bring us back to where we have been for much of the last hundred years, which is the grid is public infrastructure we don’t have to think that much about. We can go about our lives, build our economies, have our infrastructure, and win the future in a way that I think is really compelling.
David Roberts
This is the vision of a grid with a lot of batteries on it, a grid that goes from no storage to a lot of storage. Fundamental change allows accommodation of a new load without raising prices, allows you to bring prices down, solves these reliability issues. With smart inverters, you get your ancillary services, you get your black start, you get your frequency regulation, you have a very safe, electronically software-controlled, stable grid when you have a crapload of batteries.
The second question I want to address then is, are batteries batteries? Is any battery on the grid as good as any other battery on the grid? Or is there any reason to prefer distributed batteries over utility-scale batteries?
Pier LaFarge
That’s a great question and I’ll answer it in two ways. One, it’s important to make the point that my view is that we are going to put batteries everywhere and of all sizes. Big ones in fields, medium-sized ones — which is what Sparkfund does for a living — in parking lots and in fields near churches and Walmarts and stuff like that. Then you’re also going to have residential batteries in the home and garages. You’re going to have embedded batteries in heating and air conditioning, like what Carrier’s working on and others.
David Roberts
Let me put an exclamation point on that because it’s huge and I think a lot of people don’t see it coming, which is that ACs are going to start embedding batteries and there are a lot of AC units out there in the world. Once your HVAC has a battery in it, your stove has a battery in it, your water heater will probably have a battery, and you’re going to have batteries in every device, in every appliance, in every house, in every garage, in every car, in every field, in every parking lot, whatever.
Pier LaFarge
I would point out, David, we already have them in every pocket and on every desk. It’s not like the battery revolution we’re pointing to is some science fiction future. We’re carrying them around.
David Roberts
Let me ask you, why do that? Why not just put them all in utility-scale installations in a big field somewhere and not mess with the rest of it? What performance or social advantage do you get from the distribution of them?
Pier LaFarge
There are two big groups of batteries. One are batteries that are big enough and have specialized telemetry that utilities can see and operate in their control room today as true grid assets. Utilities have an incredible amount of data about power plants, what a power plant is doing every second. Same with utility-scale batteries. Batteries that are, call it, one megawatt and bigger, you can afford to build that telemetry onto them and you can show it and connect it into a utility — they can operate it in their normal course today.
That is a big part of Capacity*Connect in Minnesota. These are utility-controlled assets because they have the data quality and telemetry that allows a utility to integrate them into their control room. When a utility can see a battery that clearly, it can dispatch it and it can accredit it, give it credit for the capacity it is creating on both the distribution and transmission system. It knows that it is not going to trip any thermal limits or voltage.
David Roberts
You can plan around it, you can rely on it.
Pier LaFarge
Yeah.
David Roberts
Because it’s yours.
Pier LaFarge
If you can’t see something, you can’t use it in high critical environments like the grid. Stuff melts, fires get created. That accreditation allows utility-scale batteries and the distributed capacity components — the missing middle — that Sparkfund is helping fill with these distributed capacity procurements. Those batteries will go first because they’re the easiest to bring into the core of grid operations as they stand today.
But the batteries we’re putting near buildings have a particular characteristic. They can be sited on the distribution grid closer to the infrastructure that needs it most. The closer the battery is to the load that it’s serving and the infrastructure it’s using, the more it can directly benefit that customer and that infrastructure. If you have a residential neighborhood filled with houses that have EVs, electric cars, and a bunch of air conditioners that are now Toyota Priuses, they’re hybrids. As they spin up and it gets cold in your house, it’s coming from a battery that charged up while there was plenty.
It’s the same metaphor. They charged up when there was plenty, when no one was using their electric appliances in that neighborhood. When everyone turns them on at once, they all self-serve. The proximity of a battery to load is, in some ways, a direct relationship to the value it has to alleviate that load on the grid. That’s why air conditioners are a great way to think about this because it’s like, put the battery inside the air conditioner and it can directly alleviate the peak stress that that air conditioner puts on the grid.
Same with the Capacity*Connect batteries. You put them in a commercial industrial feeder or a part of the grid that has a bunch of coincident load and needs that stress relief. You put a battery there and when the grid gets crowded and congested, you turn the battery on and alleviate that stress at the level of that distribution node or feeder.
David Roberts
To rephrase this, people talk about the battery stack, the value stack of batteries, the different values they bring, the different benefits they bring.
You could say that utility-scale battery installation in a field somewhere has certain benefits, but if you break them apart and put them on the distribution grid, you get the same benefits and then more benefits stacked on top. You get performance benefits, resilience benefits on top of the basic battery benefits.
Pier LaFarge
That’s right. Something I think our industry needs to get more disciplined about doing, and something we’re working on broadly at Sparkfund, is mapping out the distinct revenue streams or value streams — not all of them are revenue — but value streams that batteries and things like demand response and grid flexibility can provide. There are, depending on how you splice it, seven or eight of them. We need to make a list and just stack up which ones each company or each type of battery thinks they provide.
David Roberts
You’d think that would have been somewhat formalized already.
Pier LaFarge
Even worse, David, I think we’re really suffering from a bunch of companies whose equipment does one, two, three, or four of those things, coming in and just talking about all of them. Then utilities and regulators and legislators get a little confused and sometimes feel a little annoyed when they realize, “Wait, we’ve been spending a year talking about this and it doesn’t do the thing that I need it to do.” They’re like, “Well, no, of course it doesn’t. But if we changed a bunch of variables and had a ton of new software, then it could in the future do it.” People are just disappointed because they’re like, “I have a very urgent problem.”
David Roberts
I did a pod a couple of weeks ago about an attempt to do something like that for VPPs, a rating system — like how close to an actual power plant is it? I think something like that for batteries too. Of the stackable value streams that batteries could potentially bring, how many are manifest in this installation?
Let me ask you then, because Southern Company — listeners will be familiar — big utility down in Georgia, notoriously vertically integrated, jealous of its territory, unenthused by climate activism, etc. They have gotten religion on batteries, but they are not distributing them. They are clumping them up in giant utility-scale installations. But it sounds like they’re getting a lot of the benefits out of them.
As you mentioned, you now can’t sell one of your distributed capacity procurements to Southern because the amount of batteries they’ve already installed has reduced that arbitrage opportunity to the point that you can’t squeeze a lot more out with distributed batteries. Talk a little bit about Southern Company, their experience, and then just tell me, if I’m an IOU executive, a Duke executive or something, and I’m looking at Southern Company and I was like, “Well, they just are building and owning large-scale battery facilities and seem to be getting all the benefits they want out of that. Why should I futz about with distribution when I could just do that?”
Pier LaFarge
To put some numbers to it, in one of their integrated resource plans, they had something like 50, 60 megawatts of batteries over the next bunch of years coming onto their grid.
David Roberts
That was just a few years ago.
Pier LaFarge
In this latest update, they signed a bunch of contracts with large load customers and data centers which will put billions of dollars of downward pressure on rates for everyone who lives in Georgia. They are making power cheaper every time they sign a new data center. That’s the thing. If you just take one thing away from this podcast, every utility, every state who signs a big data center will end up with cheaper power if that load is managed correctly.
David Roberts
If they’ve got a bunch of batteries and they manage the load correctly, which is a substantial if.
Pier LaFarge
To your point, that’s why this example with Southern is so compelling, which is this is a utility who is chartered in the public interest to spend money to invest in the grid to deliver the lowest cost, most reliable way to meet growth. Growth shows up, data center asks for power, utility planners go to work and it turns out right now, based on cost and value, the answer is batteries. The reason they’re all utility-scale is that the grid in the Southeast is most constrained by transmission. It is not very constrained by distribution.
They put the batteries closest to the problem they have and the customer they want to serve. Batteries are just as good at charging up when there is underutilization and charging from a gas plant or a coal plant as they are from wind and solar. Batteries just smooth out electricity and time. That is why I call them time machines. You end up getting more out of the grid you have, dividing the cost of the wires, and you sell it to a data center and everything gets cheaper and better per our age of boring framing. Southern Company is a great example of a utility, a large IOU that basically did this overnight.
David Roberts
Wait, you forgot to give us the numbers. They had a few. I think it was like 2020. They had like 50 megawatts of batteries in their IRP. What is the latest?
Pier LaFarge
It’s 6,500. It’s 6,800 — thousands. 6.8 gigawatts of batteries or so. I forget the exact number.
David Roberts
Not a small — that bespeaks someone inside that utility having a revelation of sorts. You don’t go from 50 to 6,000 with somebody inside the —
Pier LaFarge
Yeah, it’s 100x. We spend so much time in this industry, David, talking about how utility incentives are broken. The thing that was missing is load growth. Utilities have been sitting there the whole time saying, “Thank you very much, I’m incentivized to spend money to build infrastructure for America. My incentive is build things society needs that the regulator says is the lowest cost, most reliable way to do that.” When these machines get cheap enough and when load growth comes back and creates the need, a utility simply does the math and delivers the outcome.
David Roberts
A utility, not all utilities, I guess. Southern Company is the iconic — if people come up with examples of who’s going to be the last to get on something clean or something progressive or whatever, they cite Southern Company. The fact that this revelation has happened inside Southern Company is quite significant. Should we assume that other utilities are going to be like, “Well, if Southern...” This is not Xcel. This is not California. If Southern is doing this, surely it must be the obvious thing to do. Is this going to unlock a similar 10x in other utilities?
Pier LaFarge
Age of boring, David. There are other examples — Indiana Michigan AEP just announced that with data centers and a bunch of flexibility and batteries, they’re going to lower rates for everyone. PG&E said every time we get a new gigawatt of data center load, we’re going to drop power prices by 1 to 2%. The ones we’ve already signed are making power 11% cheaper than it would have been. Now, California, you’ve got a lot of wildfires to pay for, so it may not get actually cheaper, but California’s got its own problems.
David Roberts
Yes, but the data centers are pushing down prices because of the batteries. We can’t say that often enough because it bounces against people’s instincts.
Pier LaFarge
That’s right. We’re getting the politics and the grid discussion of data centers’ impact 100% wrong. We’re getting it backwards. Every state that does not get data center growth is going to have an aging grid they have to pay to replace. The cost of the wires is going to rise. They’re going to be divided over too little new growth and power will get more expensive.
Power prices have been going up mostly because of distribution costs for the last bunch of years. People say that all the time, but they don’t then subset what are the inputs into that distribution cost. A big chunk of it is that some of this stuff was installed in the 60s and 70s and entropy always wins the argument. You got to replace it. It’s old, it’s breaking.
The second piece is that we’ve had a bunch of renewables come onto the grid that are cheap to generate but require the grid to take the shock of intermittent power when it gets very windy or very sunny. We’ve made some investments in things — like capacity banks — to handle that.
David Roberts
Affordable batteries at scale are a new thing.
Pier LaFarge
That’s right.
David Roberts
That is a new category of distribution infrastructure that is now available to utilities.
Pier LaFarge
Batteries, because they are products, because you can put them in shipping containers and standardize the design and build millions of inverters and cathodes and anodes and power electronics and factories, you can drive the cost way, way down. Just like solar panels, the cost of a battery since 1999 has gone down by 99.5%. In the last five years, they have come down another 85%.
David Roberts
Here we are looking at this future of massive load growth. Forget data centers. Beyond that, load growth to the horizon. Transportation, heating and cooling, industry load growth. Load growth, load growth, load growth. Here we have in our hands a tool that renders load growth a mechanism of reducing rates. Here we have load growth and batteries in hand — abundant energy for cheaper.
Pier LaFarge
Amen.
David Roberts
Just going to emphasize that one more time. We’ve discussed the virtues of having a crap ton of batteries on the grid and discussed when and where there are merits in distributing them versus clumping them. Is your congestion problem on your transmission grid or is it in your distribution grids? You want to clump the batteries near the problem, and in many places the problem is distributed and you’ll clump the batteries in a distributed way. Assuming then we want some distributed batteries, let’s talk about the merits of the way it’s happening in Minnesota specifically.
The first thing I’d ask is how committed is Xcel to this approach? I know the PUC told Xcel, “Hey, you should also study the VPP model that they’re doing in Colorado.” This is one approach still, among others. A lot of questions about this, maybe the first one is just compare this to a VPP. Why might this be preferable to a VPP? How do you view this in relation to VPPs?
Just the distinction for anybody who is not following it: these batteries that we are talking about in Minnesota are owned and operated purely by the utility, purely for grid benefit. They are not operated for the benefit of the customer who is hosting them, except insofar as everybody on the grid benefits from grid stability, but they get no specific benefit.
Whereas a VPP is taking behind-the-meter, not in front of the meter, but behind-the-meter resources, and doing this dance where they’re primarily operated for the benefit of the building owner and then secondarily operated for the benefit of the grid. That’s what a VPP is. I’m curious your thoughts about how these two relate and the relative merits in the world we’re talking about.
Pier LaFarge
The best distinction is there are true grid assets that are 100% operated for system benefit. Every value dollar that’s created for the grid gets socialized to everyone. Then there are assets that are paid for by customers, and therefore the customers have a right to get benefit from them. Those assets primarily serve the customer value. But then also if they can be used for the grid, the grid should pay them. That’s the difference between the VPP program in Colorado and the Capacity*Connect program in Minnesota. In both cases, this is Xcel bringing an innovative proposal to their regulator and saying, “Here’s a thing we could try to make the grid more flexible, better utilized.”
David Roberts
It’s Xcel in Colorado too? Somehow I hadn’t put together that it was the same.
Pier LaFarge
Same utility. They’re trying different models to learn which one delivers the best benefit. When utilities — this industry is very quick to point out when utilities don’t do things that they like, but when they do things that are innovative and forward-leaning, they end up attacking them anyway for it. Xcel was attacked in both states for both of these proposals. Then they were attacked, comparing the two to each other, and it just, it’s so bad and everything is broken and people say monopoly and forget to say public purpose, regulated monopoly.
Are utilities perfect? No. But the regulated compact in which they are allowed to invest private capital for public purpose to grow a grid that supports our economy is a pretty good system that really does matter. This is a system operator coming to their regulator in Minnesota’s case and saying, “We now believe that batteries have the price dynamics and technical capabilities at this scale, put in these places to be the lowest cost, most reliable way for us to handle part of our grid’s growth.” Two hundred megawatts is big for distributed batteries, David, but it’s tiny compared to the gigawatts and gigawatts.
David Roberts
That’s a fifth of one giant data center.
Pier LaFarge
Just tiny. We have to remember the scale of the grid. This is a landscape-scale machine. The advantage of the Capacity*Connect program is that it’s asking the question — and hopefully if we in Xcel do our job, it’ll prove the point — that batteries are just the next boring generation of distribution grid infrastructure. They’re no different than substations, transformers, capacity banks. They just have this new superpower which is that they can move electrons through space and time and you can put them next to the problem and deliver the value.
David Roberts
The central objection that people have had to the Capacity*Connect program is that it puts utilities in charge. Utilities own and have a monopoly over these battery installations. That excludes the private model that currently rules where private providers go house to house, sell these things to homeowners, etc. There is a real question about democracy here, about energy democracy, which I would like you to address. I know because we have known each other for a bit I know you to be committed to local community and local democracy specifically.
I know that you value local democracy. A lot of people are coming to this with energy democracy, with local energy democracy in their minds, saying, “Why shouldn’t people own these things? Why shouldn’t communities own these things? Why should we let utilities have a monopoly over these things?” How do you think about the energy democracy question?
Pier LaFarge
Absolutely. It’s a funny part of my life. I spend much of my personal and political time advocating for locally led decentralization solutions in the abundance movement. In energy, I’m advocating for decentralized batteries and people are like, “This guy likes monopolies.” There’s a difference between civic infrastructure for public purpose and just a generic monopoly. At the end of the day, the reality of a grid is that it is public infrastructure in Minnesota. This was very specific to the decision that the commission came down with, David. In this 5-0 vote, they put this intentionally and with great legal specificity. I encourage those among your listeners who are truly the most wonderful nerds to go and look at the transcript, look at the hearing. This is public record. It’s a civic process.
The commission said very particularly, legally speaking, the grid is owned by the ratepayers. Grid operators just take private money, Wall Street’s money, they build the grid and then are given a guaranteed or partially guaranteed return so that everyone can use it. They use it by paying for power.
The legal status of the grid is it is owned by the ratepayers. When a battery is installed on it, the utility compact says if it is used entirely for the benefit of the grid, if it is owned and operated only for that purpose, then the utility should own it. It is also hard to own things that you cannot control. Ultimately, it is just a normal part of the public infrastructure that drives the grid forward.
David Roberts
The word infrastructure or the concept of infrastructure is key here because we have been — the conventional model to date is to treat distributed energy resources as a consumer item, as a consumer market item. We sell to the consumers who want them. That is not how we treat infrastructure financially.
Pier LaFarge
And to your point, I very much support and I think Xcel supports and has a range of programs that are specific to allow third-party ownership. There is a program called Battery Connect where third parties can bring and own batteries and get paid for the value they give to the grid.
But remember, all those batteries are splitting their value between the customer and the grid. This program says these batteries are just 100% dedicated to the grid. Batteries are now so valuable to the grid in the way that we have been talking about on this episode.
The transition you’re seeing is when batteries were more expensive and there was no load growth, customers had to pay into them to have batteries exist at all and the grid could pay for a portion of the value based on its need. That should never stop. This is America. People should be allowed to own things, they should be allowed to invest in things. They should be allowed to participate with their money and time.
David Roberts
To pause here in Minnesota, private distributed energy resource developers still exist, can still sell their wares to customers. The PUC, the utility is not preventing them from doing anything in particular.
Pier LaFarge
No, there are many existing programs that explicitly allow, and not only allow, but are only for third-party ownership and participation. There is a huge community solar industry and law in Minnesota, with almost a gigawatt of third-party owned community solar.
Frankly, one of the opposition points that I found surprising and somewhat disingenuous was that this one program which is designed to test and validate the idea that batteries can become a core part of normal grid operating infrastructure — the boring stuff on the grid — was attacked on that ground by a group of advocates who I think have gotten a little bit lost in whether or not the grid exists to let them invest in and privately profit from the ownership of their assets or whether it’s public infrastructure that under certain conditions of mutual value and coincident need, those private owners can and should be allowed to apply to own assets and take some value if they can provide some value.
I’m all for third-party ownership and I think the trade of value is often good for the grid and good for the private owner. But it is not the point of the grid.
David Roberts
Another objection is if we allow private actors to make these investments, private investors take on the risk. If the demand forecast or the economics business model, whatever it is, doesn’t work out, it’s private investors who lose the money. In this model, the utility takes the risks, but it’s ratepayers who pay if things go poorly. This is another common criticism. How do you think about that?
Pier LaFarge
It comes down to value and risk. When private investors build assets and apply to participate in the grid, they take risk and they also take their opportunity for profit and upside, which is appropriate. The upside they create, they keep. The grid is operated by a regulated system — a civic compact that finds other private owners. The other weird thing about this is utilities are also private owners. It’s always strange when one side says to the other, “You have a capital incentive to deploy more money or have a shareholder incentive to give returns to your shareholders.” Do all companies not have shareholders and an incentive to grow their business? I’ve never quite understood why that’s a ground for debate.
One private owner, the utility, is the regulated grid operator who gets a fixed return. Every dollar of value created above that return is socialized to the benefit of all ratepayers, because, again, legally the ratepayers own the grid that the operator is chartered to deliver. That distinction, I think, is neither one is better or worse. Both should be allowed, both should be celebrated. Think about the beginning of our conversation when we were talking about how one of the foundational inputs into the future of America’s success as a nation is, from our daily lives to our national defense, to have more electric power for more purposes.
We want all of it. This is the grid growth version of all of the above. Let’s go, let’s get this stuff out there.
David Roberts
What about the idea if you’re a private actor, you’re somewhat disciplined by this risk of loss. Whereas if you have a guaranteed high return on investment, as the utilities do, the criticism goes, you’re not going to get spending discipline, you’re going to spend ratepayers’ money profligately and without proper analysis because you’re not disciplined the way the private market is. Do you think that high guaranteed return on investment removes discipline? Do you buy that critique?
Pier LaFarge
The thing it misses is that the regulator exists. Something that bums me out about this is there is this whole group of civic servants and a bunch of staff who spend their whole day with legal power and charter from the state making sure that the way in which these procurements are built and delivered meets a reasonable standard of prudency.
David Roberts
But we know that PUCs are of varying quality, varying levels of knowledge, varying levels of friendliness to industry. These are long-standing critiques of the regulators, too.
Pier LaFarge
They are. One of my other political beliefs is the next chapter of American politics needs to fall back in love with civic engagement and civic compacts. We need to pay regulators more, we need to have more staff.
David Roberts
Administrative capacity! Wish I had a little sound effect machine so I could play some sort of... [plays horn sound]
Pier LaFarge
I’m not just pro-utility, I’m pro-utility regulated compact. That system, you can debate the history and its individual decisions. The point I wanted to make, which is more specific to your challenge of does a regulated system incorporate the dynamics of competitiveness and innovation? The answer is yes. Not because the regulator is perfect or all-knowing or all-powerful, but because the regulator can simply require, as it did in this procurement, that the way in which these assets are procured includes competition.
Sparkfund’s job in this Capacity*Connect program is to build and manage on behalf of Xcel a local competitive ecosystem of vendors, civil, mechanical contractors, including union labor and local contractors. We bid out. This is right in the filing, this is public information. Every time, 80% of the value of this procurement of distributed batteries will be bid competitively in Minnesota. Eighty percent of the value of this procurement will be bid competitively to local businesses in Minnesota.
The reason for that is that regulators and utilities build in market-based competition into these procurements. They do it for utility-scale power with all-source RFPs when they procure wind and solar and gas. You end up with constant rolling market-based competitive price discovery when a utility is incorporating distributed batteries onto its grid for public purpose.
David Roberts
If you’re in the DER business, they’re probably going to yell at me for saying this, but you still get to bid on the job, but what you don’t get to do is go out and find and sign up customers and structure financial deals with them. That just sounds to me like the worst part of the job. The worst and hardest and least rewarding part of the job. It seems like if you’re a DER person and you just get to skip straight to the part where you’re doing the job, it seems better.
Pier LaFarge
A lot of the opposition in Minnesota was downstream of that. Protecting a finance business model that requires that part of your business model. This is again alongside other programs in Minnesota that allow for exactly that.
The exciting part of Capacity*Connect, it is a major utility doing a forward-looking, innovative filing that says we’re going to make these machines part of the normal course of the distribution operations plan of our utility and we’re going to do that because we think everything we said in the first half of this episode is true. They’ll charge up when there’s plenty, they’ll dispatch. They agree that batteries are going to be valuable.
David Roberts
If this model, utility-owned distributed batteries, takes off, works, they like it, they spread it, they expand it, other utilities grab onto it, it will have the effect of squeezing out business models that rely on third parties in between the utility and the customer. That includes VPP aggregators, it includes solar finance people such as Sunrun, and I think it includes Sparkfund.
Do you not think that to the extent this model catches on and becomes standardized and becomes boring, all these third-party business models, all these middleman business models, are going to get squeezed out over time, maybe including your own?
Pier LaFarge
Maybe when things go to scale and become normal. Of course, in big public systems they tend to commodify and the value chain that delivers them changes. I think that’s just true in economic history. Part of what we’re debating here is not really about utilities or this filing or that filing. It’s just about batteries and distributed energy having a moment where they’re going to become a fundamental pillar of how we grow and manage our grid, because our nation needs it.
Will there be change? Absolutely. In particular, consumer finance-based models that initially were about helping customers buy these machines versus the public grid are probably more at risk.
David Roberts
Let’s not rush past that. Sunrun is very large and that is its core business model. I know they were among the entities that opposed this in Minnesota and I will assume they are going to fight you all the way down the line on this, are they not?
Pier LaFarge
They will. They spent more money than anyone fighting this in Minnesota. We were a bit surprised in some ways, but when a grid has more batteries, it is better at handling and delivering solar energy. People defend their business.
David Roberts
They’re pivoting to batteries. They’ve said it a couple of times now. They’re pivoting to batteries and they’re doing this finance model, this finance model of selling batteries is now their core thing. This model that Xcel has adopted, if it became the default, would shrink or eliminate that business model.
Pier LaFarge
That’s right and I think that’s why they oppose it. It is a competition of business models, one in private financing and one in public infrastructure. I also like to come back to VPP as you made an important point. I also don’t want to dodge the question about whether Sparkfund will be necessary to the future of this.
David Roberts
We’ll talk about VPPs first. I’m curious what role you see them playing in this battery-filled future.
Pier LaFarge
Much more durable, because I think most VPPs, as you defined it, which is largely behind-the-meter resources that in one moment serve customer value, in another serve the grid. That is really broadly speaking demand response. I do not mean that dismissively. Demand response assets are critical parts of relieving pressure on the grid in aggregate. Demand response is absolutely one of — we have been talking about batteries today with a lot of focus, but batteries are on a short list of grid flexibility-creating assets, including demand response and grid-enhancing technologies that really drive the future that we are talking about.
David Roberts
I have a pod running. I think it’ll be out by the time people hear this, wherein someone argues that what we ought to be doing is making price-responsive appliances, everything electric. All these embedded batteries, all these electric devices you’re talking about ought to just be price responsive. There ought to be a competitive retail price that is updated every five minutes and is time and location dependent and broadcast such that every device can receive and know the retail price at every moment. Then the devices respond to the price on their own.
The benefit of this is that then all the value of the flexibility is captured automatically by the homeowner, by the owner of the devices, rather than split 50-50 with a VPP, which is just a middleman doing the same function in a slightly cruder way. It’s interesting that there are other ways that you might eliminate the VPP model. If then all the devices are immediately price responsive, then you don’t need a VPP in the middle and they become much more directly grid assets, I think.
Pier LaFarge
What you’re talking about there is really how much does an aggregator get paid as a share of revenue? That sounds like one plausible way that an aggregator could get paid less as the middleman. The more important question, though, is will demand response be a service the grid wants and will it reach into customer devices to do that? Will there be benefits for the customer and the owner and the grid? The answer is yes. Nothing about deploying a bunch of big batteries changes that. They’re just both filling two different parts.
David Roberts
But why not though? If you’ve got enough of these 1, 2, 5 megawatt chunks scattered around your distribution grid, you get your stability, you get your boringness. Why then do you need to go on and tackle the complexity of trying to coordinate consumer-side devices? Is there not some possibility that this could prove so cheap and easy for utilities and so effective that it really just slightly moots the need for consumer-side coordination?
Pier LaFarge
I think there is. The question is how much does it moot it and is it 100% gone? Remember we talked about the value of batteries at every scale and every size being how close you can put them to the problem, and batteries in the home and flexibility devices in the home are closer to and easier to put in and pay for at homes.
David Roberts
But I guess the question is, is the distribution level close enough?
Pier LaFarge
It may be. Someone very wise in this industry once said to me, the reason the centralized planned grid has lasted for 100 years is that many of these questions have been posed. This happened with postwar industrialization, it happened with HVAC and air conditioning. It turns out that often the lowest cost, most reliable way to deliver these solutions is through more centralized assets than not. What we’re talking about is batteries that are slightly less centralized than 200 megawatts in a field, but are still shipping containers filled with batteries that are far beyond the scale of the home.
We have to remember that the grid is not built for individual value to come off of it. In the world in which every homeowner can perfectly participate in these dynamic real-time pricing markets, think about who the citizens are who are likely to buy those smart-enabled devices and get that value. They are going to be richer, they are going to have more time after work to think about that.
One of the reasons we built the grid, going back to our very first history point on this conversation, David, is that there is an egalitarian sort of American infrastructure compact vibe to the US electric grid, which is that you want to plan things to be lowest cost, most reliable, so that you can share the benefits with everyone, whether or not they have the time or money to think about it or not.
I’m not against wealthy, educated people participating in the grid. It’s how we’ve invented some of these devices and scaled them — that is a critical part of an innovation economy. It should never be disallowed, banned, or limited. I don’t want to ban third-party ownership at all, but it is not the point of the grid. We did not build public infrastructure so that enthusiasts can take rents from it.
David Roberts
This brings me back to another point I wanted to make about the energy democracy thing. I understand and am compelled by the merits of local ownership of energy assets, and I’m compelled by them in terms of energy democracy and in terms of local empowerment. But I think if you are measuring that against the benefits of the same community having reliable, cheap, ubiquitous electricity, even on the metric of local empowerment, the latter wins.
Putting cheap, abundant electricity in people’s hands is the most effective economic development tool on the planet. Every bit that you make a community’s electricity cheaper and more ubiquitous and more boring and more cheap, that is economic development, that is local empowerment. That’s not an alternative.
Pier LaFarge
It’s human flourishing. I love that, David, I really do. That’s a beautiful way to say that and I think it needs to be said more. It’s in this important and under-discussed category in our tribe of nerds, which is what is energy for, what is infrastructure for? I think you just articulated exactly what it’s for.
David Roberts
It is for flourishing. Let me ask you about this. One of the things — I had Lorenzo Kristov on the pod, love him. He’s a big fan of local democracy, local action, local community, local resilience, self-sufficiency, all that kind of stuff in electricity too. One of the cases he makes, which I’ve always found compelling, is that there are benefits to local communities being able to plan their power alongside planning local transportation policy and local building policy and local economic development policy. Power should be of a piece with that and should be integrated in that.
There’s something artificial about all that planning being up at the utility level, while all the other planning is happening at the local level. Are you not at all moved by the idea that local community ownership of local energy assets carries some benefits?
Pier LaFarge
First of all, Lorenzo is brilliant and he and I have had some wonderful conversations about this and I think we share a real passion for localism, broadly as a basic idea of subsidiarity, which is — push the planning and the decision making down to the lowest competent level that also can efficiently deliver the outcome.
His point, I think, I’d break between two things: where it’s planned and where it’s owned, which are two different but related questions. Ownership is important, but really about who receives the rents versus the risk. The regulated compact was designed to smooth or socialize both the risk and the rents to all participants at all scales of planning.
The next question is, when you go smaller with infrastructure, do you have the equivalent vehicles of debt financing and capital that allow you to do that at that level of aggregation efficiently?
David Roberts
Let me put a finer point on that. One of the things Lorenzo has envisioned, and I think they have them in the UK now, is what’s called DSOs — the distribution grid equivalent of the transmission system operators, the TSOs at the transmission level. A smaller entity devoted particularly to that community. You get closer touch with the community, you get better knowledge of the community, you get perhaps greater investment in the community. As you, I think, are getting at here, you might lose some of the financing benefits of size and scale.
Pier LaFarge
If you don’t, then I think there’s a lot to like about that model. Lorenzo has an incredible — again, I really like and admire how he talks about this stuff. The question really is that if you zoom back, the utility regulatory compact was designed to pull off a magic trick, which is take Wall Street’s money, private money, give them a 3.5% net dividend every year, every 100 bucks they put in, they get three or four bucks. Let a private operator who has some profit incentive build the grid, which is the foundation for our economy and human flourishing, as we’ve just discussed, and then submit to a civically accountable regulator to control every one of its decisions, actions, and profits.
It’s Wall Street’s money building public infrastructure. That’s easy to say. The reason that’s important, David, is that you don’t have to choose in a public budget, a general fund or a town’s budget between building the next rural hospital or paying teachers or repaving roads and building a substation or a new transmission line.
David Roberts
Because you got the Wall Street money.
Pier LaFarge
We did it. We got private money for public purpose, regulated as best as can be done. Is that system perfect? No. Does that system have flaws and imbalanced incentives? Yes. Can you name me a landscape-scale, public regulated compact and institution that doesn’t? What’s amazing about the utility compact is that it delivers its outcome pretty much 100% of the time. There are grids where the grid is only off 80 or 100 minutes a year.
In most of our state’s economies, at the level of aggregation of debt and planning, the power is pretty cheap, the capital is super efficient. What comes out the other side of that is that in a lot of states, the percentage of the economy that goes to pay for the infrastructure that lets us have as much power as we want, anywhere we want it, all the time, is 3 or 4% of the total state’s economy.
David Roberts
To return to a point I made earlier, you could compare that 3 or 4% to the market value of the assets it has purchased and is deploying. I think that will look pretty favorable.
Pier LaFarge
Incredibly favorable.
David Roberts
But again, the market value of the assets is a small sliver of the value you get from having ubiquitous, reliable, unlimited, cheap power. The second- and third-order benefits of that are vast. They are not captured by the value of the transformers.
Pier LaFarge
Not just vast, they’re the rest of the economy. I think it’s easier to just assume. I’m sure you could do some dumb research paper which is, “What percent of GDP is not enabled by electricity?” Who cares?
David Roberts
That’s growing and growing and growing, as we said.
Pier LaFarge
All of it and more, uncaptured GDP. That’s exactly right. That is what energy is for. The compact we have delivers it with private capital and it powers a whole economy with most people not having to think about it.
David Roberts
Could a CCA do this in California or wherever there are CCAs? I know there are several other states where they —
Pier LaFarge
In terms of distributed batteries?
David Roberts
Yeah, and just implement an Xcel-style program.
Pier LaFarge
Absolutely. We’re having conversations with grid operators across municipal utilities, co-ops.
David Roberts
Munis could do it. Co-ops could do it. If a muni was doing it, you moot some of the energy democracy complaints, at least because then it really is still locally owned. It’s still local.
Pier LaFarge
Batteries are going to win the future and we’re going to put them everywhere because they are time machines for electrons and it’s what the grid needs. What we saw in Minnesota is a simple case of a threatened business model paying money to advocate to protect its business model in a moment of real transition when these assets that used to be in their protected market camp start to become a core part of grid infrastructure, and it freaked them out.
David Roberts
You could also flip that around. People have objections to this that are not just generic, not just business model exceptions, but Xcel specifically. People have reasons specifically not to trust Xcel. There are people who say Xcel has had these distribution resources for a long time. They don’t use them for public benefit. There have been a lot of price events where they could have used them for public benefit and they didn’t. They’ve been dragging their feet on distributed energy resources. They got fined by the PUC for dragging their feet on distributed energy resources.
There are reasons to distrust the utility and why should we believe that this, when they have betrayed the public trust in the past, why should we believe that this program will genuinely be run for public benefit?
Pier LaFarge
Definitely true. We’re in an age of distrust of institutions and the public institution of utilities and the regulators is no exception. The only solution to that is to deliver the value and hope that the future we’re describing, the age of boring, comes true. Cheap batteries and data center demand happening at the same time make power cheaper, the grid more reliable, and we can go on our merry way and work on other things.
David Roberts
That’s not an answer to the question. “I hope they do this right,” I guess, but you can imagine why people who have been burned by Xcel or have been fighting Xcel for years do not just say, “Well, let’s see what happens.” They do not find that particularly adequate. They also say that this first tranche of these distributed batteries are not going to churches and hospitals and civic facilities. They are not being assessed and chosen based on community resilience benefits, at least yet. Right now they are just being placed purely for grid benefit.
Why shouldn’t locals, why shouldn’t they be suspicious, and why shouldn’t they look at what’s happening and say it looks like Xcel is just making the macro grid better and is not doing what we would do with distributed energy — which is specifically local benefits?
Pier LaFarge
Something I think is important to know about this one filing is it did and does have a robust energy justice portion. There is targeting of those resources, categorized by EJ zones. That’s why we got a lot of support from that community and from a bunch of local groups advocating, including advocates like Fresh Energy and CEE and others that really engaged constructively in making sure we got that portion of the filing right. They were part of the hearing, they spoke at length, they offered decision options that were accepted by the commission. They got to directly modify so that the — literally, just to put a point on this — social justice and the energy justice community was at the table helping to write those requirements to their standard.
That’s a commitment that Xcel has, that Sparkfund has, and that the commission required. Maybe we’re going around a little bit in circles here, but the fact that that has been such a common talking point about this and it’s right in the order and the whole section is a bummer.
I don’t know how else to say it. Politics is a dirty game. There’s some real misinformation that has come out around this and it has been a surprising journey. I think it landed in the right place and I think, frankly, the commission and its members — it was genuinely impressive to watch Chair Sieben operate a civic compact under that type of duress and really ask questions and get stuff on the record and challenge Xcel and Sparkfund and advocates to explain and defend their positions and to provide evidence. No civic process is perfect. Minnesota is, Minneapolis is like Norway on the prairie. That civic compact is as strong and robust and chock full of civic nerds as I’ve ever seen.
David Roberts
We’ve all had occasion to celebrate Minnesota recently. You have said, I think maybe being slightly deliberately provocative, but you have said to me, and I think maybe in writing, that you think it is possible that the old-fashioned, vertically integrated utilities might move faster on this and reach that exalted, cheap, abundant, and boring plateau before restructured areas. Why do you think that?
Pier LaFarge
There is a U curve of utility operator and market success. At one end, there are things that are closer to pure markets — like ERCOT in Texas. They work really well. ERCOT added a whole New York worth of electric load in just the last four years.
David Roberts
Right now Basepower is down there in ERCOT operating on the retail energy model. They’re a retail energy provider, but they’re going now to vertically integrated utilities knocking on the door saying, “Hey look, we figured out how to get batteries on the grid faster than any other model. Wouldn’t you like some of this juju?”
Pier LaFarge
That’s right.
David Roberts
Very interesting to see that happen.
Pier LaFarge
What makes Base such an interesting company is that they’re not wedded to one business model. There are put-batteries-everywhere companies —
David Roberts
Put batteries everywhere!
Pier LaFarge
That makes them a durable part of this story and they should bring it to other markets. They’re like a residential version of what we’re doing in the larger batteries. I think it’s great. The answer to your question though is that IOUs, if you’re not going to have a full connect and manage market that also — and this is really critical — Texas’ superpower is very, very permissive local permitting. You can build things really fast.
There are so many details about this, David, that you know better than I do. When you talk about PJM design, all this stuff, if you have bad local permitting that makes it hard to build stuff, it almost doesn’t matter what your ISO rules are. You just can’t build big power plants or even small ones or even batteries. If you are at the bottom of the U curve, a restructured market that has a weird mix of esoteric rules that make it hard to participate in your market and allow rent seeking, auctions that guarantee capacity because not enough people can participate and no one can build things anyway and are also still highly regulated and have lots of rules and lots of laws from states that want a bunch of things — that is the thicket.
David Roberts
Kind of a worst of both worlds.
Pier LaFarge
That’s the worst of both worlds. The heart of the U curve. The thicket of PJM’s discontent, which I should make T-shirts that say, but you’d really know who the nerds in the airport are if you walked through a terminal. IOUs are not perfect. They have this basic advantage in moments of great infrastructure need and build: they can organize capital and conduct their planning at the level of generation, transmission, and distribution as one integrated system.
A lot of the advocacy that you and I and many people in our tribe have been on about for years is ultimately that thinking of the grid as a system, that seeing distributed assets as part in that system will ultimately be a key part of growing the grid.
What we’re seeing in Capacity*Connect and others is that large vertically integrated utilities are doing the math and they’re agreeing. That is not because this was the absolute first moment they could have done that. But it is pretty recent that these batteries got cheaper. I’m not going to pretend that big utilities aren’t slow and for some good reasons in terms of safety, reliability, critical function, also some reasons of bureaucratic inertia and scale and slow regulated proceedings. Good and bad. But it is not very many years ago that batteries were not the cheapest way to do this. I would argue that they’re just barely becoming the cheapest now.
I think we’ve crossed that line permanently, irrevocably. That’s sort of the thesis of this pod. Welcome to the age of boring, because that has happened. But it only — as the Dude said, new shit has come to light.
David Roberts
Are you — this is orthogonal to our whole point here, but I just want to get you on record — are you among those people who predict a return to vertical integration in the US in part or in whole?
Pier LaFarge
Yes.
David Roberts
What time frame? Let’s get a date here — ish. A date range.
Pier LaFarge
It’s important to clarify what vertical integration is today. Most vertically integrated utilities procure generation competitively through big all-source RFPs from private owners and IPPs. This is not your grandfather’s vertical integration where a utility hires a crew and builds a power plant directly and operates it with its own union and its own pension. This is still, like I said, tucking market price discovery, competitive delivered advantage, innovative designs and scaled private capital into a relationship with a public purpose infrastructure compact. There’s a little bit of a distinction without a difference.
Do I think that vertical integration is important to allow for the proper planning of society’s needs over time to deliver infrastructure that is, as we’ve discussed, the critical input into a nation’s success into human flourishing — from our daily lives to our national defense? Yes, I think there are advantages that that type of civic compact has in a planning level that allow us to go faster, go further, and make the sort of leap you saw a Southern Company make with those batteries when those conditions merit.
The rapid scaled adoption of gigawatts and gigawatts of effective utility-scale batteries is a good example of how to meet the moment when the nation needs to build data center infrastructure to fundamentally power the next chapter of the American economy. I don’t think that vertical integration has to be universal.
I think ISOs and interoperable markets that expand the pools. I think IPPs will be a durable and critical part of competitively procuring supply, supplying, and operating power. That private capital is the whole point of the utility compact. It’s Wall Street’s money for public purpose. There is no market in the United States today where a political and societal judgment does not set the rules for how electric power infrastructure forms the foundation of that state’s economy — not Texas — ERCOT has a critical regulatory role. PJM has a critical regulatory and rulemaking role. Every state in PJM has commissions.
We have not thrown societal caution to the wind and just said let markets eat the world boom or bust on electric power. No one would suggest —
David Roberts
No one has ever said that. No one would suggest in any region, in any market, anywhere in the world. I love talking about this for a bunch of reasons. One of them is there are so many things, new possibilities, new opportunities around the world of clean energy where I find myself on the edge of my seat white-knuckling it, thinking, “God, we’ve got to do this right. It would be so easy to do this wrong and screw it up generationally.”
But when it comes to this — batteries — if you put a battery on the grid, it helps. It almost doesn’t matter who puts it or where or why or how they pay for it. It’s almost impossible to do this wrong. Just put the batteries on the effing grid and they’re going to improve the grid. We don’t have to do this exactly right. We just need to do it at scale. We just need to do it big. We don’t have to be precise about it. Every bit of battery helps. You almost can’t screw it up.
Pier LaFarge
Welcome to the age of boring.
David Roberts
The age of boring. Final question then is: right now, I think probably conventional wisdom in our world is that we are currently facing a bit of a gauntlet. A bunch of new demand is showing up on the grid. We’ve got these old sleepy institutions, these old sleepy, not fit for purpose social and financial and political and regulatory arrangements. We’ve got 20 years of no growth that has lulled everybody into hypnosis. We face this gauntlet where prices are going to go up and everything’s going to be shaky and not really work. Then, 20, 30, 40, 50 years from now, once we’ve made it through the gauntlet and we’re able to start building the big transmission lines, we’re able to build whatever big geothermal plants, then we’re going to recover and bring prices back down.
I think you disagree. I think you think — and tell me if I’m right, I want to get a date, another date range from you — I think you think that batteries are going to solve these problems sooner than people think they will and that the grid will get boring and reliable and abundant sooner than people think it will. How soon?
Pier LaFarge
The best way to answer that question is you are already seeing data center announcements, particularly in IOU territory, but not exclusively, directly result in rate cases where the divided cost of energy goes down because you have divided the fixed cost of the wires by more sales and power gets cheaper.
David Roberts
For example, give us a concrete example.
Pier LaFarge
PG&E, in California, one of the hardest places to operate a grid anywhere with wildfires and stuff, said that for every gigawatt of data center load, you get 1 or 2% cheaper power for everyone in their territory. To date, 11% cheaper rates because of the data centers that have come.
David Roberts
Maybe not visible to the people in California because wildfire costs are simultaneously pushing rates up.
Pier LaFarge
Indiana Michigan, AEP, has actually made power cheaper. Southern Company, I believe, has actually made power cheaper. I believe about $100 a year per ratepayer was their public filing number, or maybe it was 80 or something. That’s billions of dollars of cheaper power. All of that was related to exactly this effect of managing the growth of large load customers to public benefit.
It’s also important to say that data centers are the hero of the story. It doesn’t matter how much you invest in batteries or anything else if you can’t sell the extra power. If you don’t have electrification and load growth and data centers, you’re just spending money and you can utilize the grid better, but no one is going to buy the power, so it doesn’t matter.
David Roberts
What about people who would say, “AI is terrible and we should be electrifying transport faster, we should be getting that boost of demand from somewhere else. In some sense, by data centers eating up all the available new capacity, we’re delaying further electrification.” You don’t buy that at all?
Pier LaFarge
I’ll go once more to the Dude and say, “That’s your opinion, man.” That’s way outside the scope. That’s way outside the normative scope and frankly, something I don’t love. There’s a lot of things I think that are wonderful about the community of climate energy nerds that we’re both lucky enough to be a part of. These are system-oriented, normatively engaged, philosophically interesting people. We care and we’ve organized our careers around that. That’s fantastic and it’s a great thing to be a part of.
One of our faults is sometimes we breach the walls of the energy discussion and we imagine the grid is this portal to unlimited social control and power. We’re saying, “Let’s use energy policy to determine, should we have more electric cars or more data centers.” That’s not a job for this. Take a breath. This is me back to my genuine, localist, decentralized, slightly grumpy — make fewer rules and trust that people can figure stuff out. There’s a real chance for an abundant America.
David Roberts
You think this phenomenon whereby data centers are going to create the new load that takes the batteries’ new capacity and thereby reduces rates, all of that is going to happen automatically if they get on the grid. In other words, you don’t need the extra step that a lot of people are talking about of making them pay extra, some extra fee to get on the grid, making them pay for some specific capacity. Maybe you still think that is a good idea, but the effect you are talking about doesn’t depend on that.
Pier LaFarge
That’s right. It’s very important. Brian Janous cleverly beautifully said this in a LinkedIn post around the announcement of, “All data centers will pay their fair way,” which is great. It’s good politics. It’s good to make sure that we’re saying that out loud. It is proper regulation and political governance to say out loud in one of the largest capital events in human history, by the way, that the participants and beneficiaries of that investment must pay into a public system appropriately. That is good and true.
The basic Bonbright principles — took us this long to say Bonbright, by the way — is inherent to utility rate making: all participants should pay their fair share. Is that always perfectly arbitrated? No, it’s also complicated to get right and how you judge which cost was caused by what type of stuff, system growth and then there’s a storm or a fire and then there’s —
David Roberts
What about the idea that a lot of people have, that we need a bunch of spending on the grid, we have a bunch of needs, the public’s grumpy, power prices are high, they don’t want to cough up for it. Along come these wildly wealthy companies that desperately need to hook up quickly. Why not extract more than their fair share? They’ve got money coming out their ears. We need money. Why not extract a little out of them in the process of letting them hook up?
Pier LaFarge
Because it’s no more fair to them than if they didn’t pay their fair share. Fair share means cover the costs. If you manage growth well with batteries and grid flexibility and other stuff, you’ll spread the benefit of their participation to everyone. Just the fact that they’re willing to buy gigawatts and gigawatts of new power over public infrastructure and participate in the grid as good grid citizens is the contribution. You do not need to penalize them, you do not need to tax them.
This is a broader philosophical point, but we’re in this moment politically between moments. We don’t have a political order to guide our shared agreement. Neoliberalism is gone. Before we figure out what the next political order is, there’s this real chaotic risk of villain politics. People are searching for villains. What we’re getting wrong with data centers and utilities is we’re casting them as these satisfying villain characters for the technocratic left. We’re missing the forest for the trees in it. We’re getting the story wrong.
David Roberts
At the least, I think we should separate out. The problem with these villain politics is that once someone gets the scarlet V, people just displace all their complaints onto the villain. We need to distinguish the effects on the grid — the physical, energetic, and economic effects on the grid. We need to be able to separate that in our heads from whatever you think the social impact of AI may or may not be. Those are, at the very least, separable questions.
Pier LaFarge
The T-shirt I’d like to make or the sign I’d like to bring to a town hall where the community is determining whether a data center is right for them — and not all communities want or need a data center, it’s not right, there should be local control and local voices — but the sign I would bring is, “This building is not a witch.” Let’s not create a parasocial category that’s hard to disprove and then imagine all of your worst fears flow through this one thing. Villain politics sucks.
As Americans, we should challenge ourselves to build a politics of abundance. Be curious and kind and empathetic about how — look, society is hard and participation isn’t easy, but we can get this right. We can build American infrastructure, we can grow the grid, we can make it more reliable, more clean, and we can make it cheaper. Maybe it’s the opposite of boring. Maybe we’ve gotten it all wrong. Maybe that’s a really exciting place to end.
David Roberts
Give me my date then. When is US electricity cheap, abundant, and boring? When am I going to look up and say, “I need to figure out something else to pod about?”
Pier LaFarge
2030. Just a few years. I think the narrative will be clear enough by 2030.
David Roberts
Wow!
Pier LaFarge
That this trend is permanent and structural and inside the existing systems and incentives that data centers are driving most of the near-term electrification that makes it possible, that electric vehicles and heat pumps and broader electrification are coming behind it. New manufacturing.
David Roberts
Will average electricity rates in the US be visibly falling by 2030?
Pier LaFarge
Yes, I think so in the states that have substantial data center growth. I will make that my hottest of takes. I think by 2030 in the states where there is substantial data center growth and other electrification, power will become cheaper on a nominal basis. If you have a lot of wildfires, if you have terrible storms, there are other things that can make a landscape-scale machine expensive for unrelated reasons. I’ll give myself one type of contextual hedge. But I do think that in many markets, in many states that can get this growth moment right, power will be cheaper, the grid will be stronger, and we’ll be on our way to a new chapter.
David Roberts
That’s a perfect place to leave it then. That’s a prediction that’s going to come up soon enough that we’ll probably be able to talk about it on my pod.
Pier LaFarge
Ten-year predictions are so boring too, right? It’s like ten years.
David Roberts
I know. Everything’s possible.
Pier LaFarge
The death of accountability bores me in predictions. I want to be clear. I have no particular information. I’m almost certainly wrong in countless ways. But it’s much more fun to say. At least by 2030 we’ll be —
David Roberts
2030 it is. Thank you. As always, Pier. This has been fascinating. Fascinating to see, with all the dysfunction around us in so many other areas, I really think it is important for listeners to absorb and take heart in the fact that electricity does really seem to be on a good path heading to a good place, so at least not 100% of things are awful.
Pier LaFarge
Let it be abundance then. Thanks, David.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super producer Kyle McDonald who makes me and my guests sound smart every week. 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.
1. It feels weird not to share this with Volts listeners, so I’m sharing:
I’m down in Virginia this week for his funeral. (You are not obliged to email your condolences; if you do, I might not be able to thank you individually, so I will just pre-thank you all, here, for your thoughts and prayers. I appreciate all of you.)
The only thing that’s felt weirder than working is not working, so I’m going to send the email below anyway.
2. 🎤 I apologize that there was no community thread last month, but April was kind of crazy here at Volts: 10 episodes, with 11.5 hours of talking. I think that is a record. Is anyone actually listening to all these pods? Is it even possible to do so? Should I make fewer?
3. 🥂 Some of you may remember a 2023 episode with Maryland Delegate Lorig Charkoudian, on the subject of offshore wind. It turns out she remains a listener and a fan, and she recently emailed me with great news:
I appreciate your obsession with data centers using VPP’s as the way to meet their capacity obligation. I wanted to let you know that my bill on data center clean capacity was integrated into the Speaker’s Utility Relief Act and passed this Session. It creates a fast track for data centers that bring their own clean capacity, including VPPs in the load deliverability area. I think we may be the first or second state to put this into statute. I hope others follow.
Thank you to Delegate Charkoudian for her leadership on this issue.
And thank you, subscribers, for supporting this work. Volts is entirely community-funded and I think we’re making a difference.
4. 🔋 Want something to feel optimistic about? In Queensland, Australia, fossil gas power plants have long been kept alive and solvent by the fact that they provide almost all of the energy peaks. Thing is, though, alongside the rapid growth of renewables in the state has come rapid growth in batteries. Now batteries are more cheaply and reliably providing that peak power and gas is on the decline. Look at this amazing graphic:
This change occurred over two years. The same changes are coming to grids everywhere, including ours. The faster we install batteries everywhere, the faster it will happen.
5. ✅ Community comment(s) of the month: Prompted by the retail pricing episode with Bruce Nordman, Don Jackson developed a CA price server that some energy nerds may be interested in:
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.
Volts is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Ben Eidelson and Anay Shah run the Stepchange podcast, which recently put out a magisterial four-hour (!) episode on the history of the US electricity grid. I talk with them about some of the colorful characters and stories involved, the big fights and broad lessons learned, and how the history echoes in today’s political and technological struggles.
📌 …
Boiling water to make steam for industrial processes consumes an enormous amount energy around the globe, yet it has proven remarkably resistant to electrification. In this episode, I talk with Addison Stark of AtmosZero about why replacing the standard fossil-gas boiler requires an entirely new approach to industrial heat pumps. We discuss the engineering behind his high-temperature system, the challenges of scaling up, and the growing imperative to get free of global LNG markets.
📌 Instructions to add paid episodes to your preferred podcast app via mobile / desktop
(PDF transcript)
(Active transcript)
David Roberts
Hello everyone. Greetings. This is Volts for May 13, 2026: “Electrifying industrial steam with heat pumps.” I am your host, David Roberts.
Here on Volts, we have discussed many innovative solutions for decarbonizing high-temperature industrial processes like steel and cement production, which require temperatures of 1500°C and higher. Hot rocks. Liquid tin. Heat so hot it becomes light.
However, as I discussed with Teresa Cheng and Richard Hart last year, the much more common industrial process — used in pharmaceuticals, paper, beer brewing, and hundreds of other workaday industrial applications — is plain old boiling water for steam, which requires only 150°C.
Making steam for industry has not changed much since before the Civil War: you burn something (usually natural gas these days), boil water, and pipe the steam where it needs to go. About 8 percent of all the primary energy used on earth goes to this purpose, producing over two gigatons of greenhouse gases a year. And for the most part, we’ve left it alone.
You might think that “boiling water” would be among the lesser challenges for electrification, but transition has been stubbornly slow in this area, mainly because the economics of the most common alternatives have not yet penciled out.
My guest today, Addison Stark, thinks they never will, which is why he set about to make something new. AtmosZero, the Colorado company he co-founded and runs, makes what he calls Boiler 2.0: an air-source industrial heat pump that drops into an existing boiler room in a matter of days, produces zero on-site emissions, and runs at roughly twice the efficiency of a standard electric boiler.
We are going to talk about why other electric solutions won’t work in this area, what technological advances enabled this new heat pump, whether it really competes with natural gas, and the prospects for finally electrifying the oldest process in the book.
With no further ado, Addison Stark, welcome to Volts. Thank you so much for coming.
Addison Stark
David, I appreciate you having me on.
David Roberts
Addison, you came up as a policy wonk through policy wonk channels. You worked at ARPA-E for many years, worked at the Bipartisan Policy Center for years. You wrote in 2020 a pretty influential paper about the need to electrify heat, which is a beloved topic here on Volts. And then in 2022, you finally pulled the trigger, left academia, and started something of your own. What was it, as you were writing about electrifying heat, that finally pulled you out of academia and into the world of entrepreneurship?
Addison Stark
That’s a good tee up for me. The way that I think back on all of this is back in 2020 I was doing two things. I was baking sourdough, and I was grinding my axe against the idea that industry is hard to decarbonize. When I was at ARPA-E, which was about a decade ago now, I was working in manufacturing efficiency. We didn’t even have the term industrial decarbonization yet. We were focusing on how do we improve efficiency across traditional processes in the industrial facility. At that time, people started to really imagine, “What does it take to go after industry as this last third of climate solutions?”
It gets people thinking about, as you noted already, steel, cement, refining, chemicals, some of these major verticals where you can imagine the necessity to reinvent processes. However, that left me unsatisfied because as you started to look beyond that into food and beverage, into pharmaceuticals, into other materials, you can’t start to imagine being able to find a way to reinvent every single synthesis process in a vertical way.
Once we started to carve and slice the data — and that led to that Joule article that you referenced that I published with my former ARPA-E colleague Greg Thiel, who now leads technology diligence at Energy Impact Partners — we saw that industrial heat, as you noted, is 3/4 of industrial emissions. When you start to slice that a little deeper, you start to see that it’s a question of the scale of what you need to solve. Not everything is as big as a refinery. Not everything’s a 100 megawatt plus installation. It’s the question of the temperature ranges, which you’ve started to explore on this show already.
One of our core insights at that time was it’s also a function of the working fluid by which that heat is delivered — flue gas coming off of combustion, hot air for drying. But the centrality of steam is really what I saw as the kernel of an opportunity to go after the boiler. Half of all industrial heat is steam. That’s really led me to go from this concept of, “Here’s a broader R&D roadmap that we published for the world to start to grapple with industrial heat as an opportunity,” to, “Well, crap, I have an idea, and I might need to quit my job and start a company.”
David Roberts
Low temperature is a different challenge than high temperature in a lot of ways. One of the ways is high temperature are these big giant industries, which means that they can potentially at least grapple with giant solutions. There is a lot of money floating around. Any given steel maker is relatively wealthy and has a lot of money to invest in technology. But these low temperature processes, as you note, just scale in a different way. It’s scale in being a lot of little things, a bunch of little things. No paper manufacturer or whatever has a ton of money to do R&D.
This is a weird different kind of scale. It’s ubiquitous small things rather than a few big things you are going after, which is a different kind of challenge. In a lot of ways, I feel almost more difficult because each one of these industries to some extent has its own internal dynamics and there are dozens and dozens of them.
Addison Stark
Picking up on your train of thought there. One of the core insights that led to what we’re doing here at AtmosZero — focusing on the boiler itself — is recognition that in 1867, Babcock and Wilcox did something fundamental. They productized the boiler. They went from stick-built, brick-by-brick built boilers being built in the early industrial facilities of the beginning of the Industrial Revolution, and then started to build it in a factory and built factory-built standardized boilers that really catalyzed the growth of the Industrial Revolution. What happened then was steam heat became ubiquitous not just for heat application, but also for motive power in industrial facilities.
What has occurred then over the past 160 years is that every other unit operation in the industrial and manufacturing facility has been designed around the availability and ubiquity of centralized steam production. The way we think about that is yes, when you look at all these other smaller manufacturing facilities, distributed light and medium duty industry is the way that I think about it, they still have something in common, which is a centralized boiler room that each of them use built around a common product.
That’s where we really started to see the productization of an electrified solution, of a heat pump solution, could be the thing to help unlock this in a common way that is ubiquitous across all these industries. If you walk into a brewery or you walk into a pharmaceutical facility, or you walk into a paper mill, you’re going to see the same boiler manufacturer’s boilers on site.
David Roberts
It’s just worth emphasizing that you are describing why it’s difficult to uproot this. Because it’s had over a century of scale and modularization and standardization and bringing all the costs down. This is as standardized and modularized and off the shelf a product as exists anywhere. That is precisely why it’s difficult to get rid of them, because they’re cheap and easy and standard now for everyone.
Addison Stark
Yeah. I think that’s why we’ve seen so far in the market that the thing that has gained market traction, ironically, is straight-up resistive or electrode boilers, which have been growing year over year in the mid-teens, 15 to 16% year-over-year growth, because they are productized and easy to integrate in a CapEx-efficient way. However, there is that ongoing OpEx challenge in electrification with direct resistive solutions. But it does point us to what we really need to be thinking about in terms of steam — you do need to replace the boiler and it needs to operate in the same way that these facilities have always wanted. It would be very difficult to go in and try and replace the heat on a unit operation by unit operation basis because it removes the central operating and control paradigm of all manufacturing facilities.
David Roberts
You’re not going to redesign all these processes. The only other option is to focus on the boiler. We’ve established that boilers are very productized, very standard, and extremely ubiquitous — more so than I think people really appreciate. These things are all over the place. When we talk about trying to decarbonize them, electrify them, before we get to your solution, let’s talk about the two alternatives that have been around for a while and fighting for market share and not really getting much of it. The two other electric alternatives. One is the one you just raised, which is just an old-fashioned electric resistance boiler, which I assume from the term electric resistance we’re just talking about a toaster — heating up coils with electricity that then heat up water. Is that what an electric resistance boiler is?
Addison Stark
Yeah, I would think it’s analogous to your hot water heater at home, if you’re running an electric one or an electric tea kettle, that you have a direct resistive element in contact with water or in terms of an electrode boiler, where the resistance through the water of an electric current is what directly heats it. In both ways, what we’re talking about here is one unit of electricity and one unit of steam out. You’re really focusing on turning electrical energy into thermal energy.
David Roberts
That’s one alternative to the standard boiler. The other alternative to the standard boiler is a heat pump, but it is a heat pump that attempts to make use of the waste heat produced by the manufacturing process itself to run the heat pump. I want to address both those and why you think ultimately they’re not going to be sufficient. The electric resistance boiler has the advantage of being productized and standardized and can just sub directly out. What is the drawback then with an electric resistive boiler?
Addison Stark
The drawback there is on the ongoing fuel economics. When you look at the levelized cost of steam, the LCOS, in general what you’re going to see is with a resistive unit, the CapEx over a 20-year lifetime or something like that is going to be small, it’s going to be in the single digits of percentage, but your fuel costs are going to be tremendous. 80 to 90% of the total levelized cost is going to be driven by the electricity price that you’re paying to be able to generate that heat. Traditionally, the manufacturers are operating with low-cost natural gas that’s being delivered directly to their facility. You run into essentially a spark spread issue there — the spark gap.
David Roberts
Just for every listener. This is a great term for everybody to know — the spark gap, which is the gap between natural gas and electricity prices for electricity.
Addison Stark
It’s unique in the industrial setting. Industrial electricity and gas tariffs are usually defined differently than what you might see at your home. It is a difficult thing to bridge. However, the one thing that technology — the resistive or E boiler technology — has going for it is that it is very low CapEx, very easy to install, and operationally simple.
David Roberts
You can sub that out relatively quickly, straightforwardly. It’s not going to mess with your operations, it’s not going to pause your operations or anything. But you’re going to be paying more on an ongoing basis for electricity than you would have been for the natural gas, mainly because these things use tons of electricity. They’re very power-intensive.
Let’s talk about the other alternative then, which is what if we built a heat pump? Every manufacturing process, as listeners know, generates waste heat. Almost any process generates waste heat. The thought here is, what if you could capture the waste heat and use that to power your heat pump? Then your fuel’s free in theory. Why not do that? You wrote another paper in Joule just last year slandering the name of waste heat in this context, to great outrage among an extremely tiny group of people. Explain to us then, what are the drawbacks of the heat pump powered by waste heat in this setting?
Addison Stark
Yes, I’ve been known to be called a heretic. I have openly and loudly at times claimed that waste heat is a waste of time.
David Roberts
Can I ask you, do you think that’s true just in this specific application, or do you think that’s more general — was your argument more across the board?
Addison Stark
Obviously it’s really hard to have a generality done in seven words or five words. What I think of is generally it’s very difficult to extract value from waste heat at temperatures below 100 Celsius for application in either upgrading through an industrial heat pump or capture and reutilization to generate power. I think that there are certain temperature ranges that it gets down into the second law of thermodynamics. I think that it gets down to, most importantly, the economics of returning capital for these kinds of installations, which are necessarily bespoke. Ultimately, it’s an economic challenge.
David Roberts
The key thing, and this is really the central insight, one of the things that was exciting me as I was reading about this is that we’ve, on Volts, covered learning curves, we’ve talked to people about learning curves, and we’ve talked a lot about what kinds of technologies get on learning curves.
Among other things, it all comes back to this: Is it standardized, productized, built in a factory, modular, the same every time — versus these waste heat recovery projects, which almost by definition are different every time, very bespoke to the facility.
Addison Stark
That gets back to another point where I would put some context or limits on my statement. For large-scale installations — think about 100 megawatt plus refineries, where project finance and optimization across the entire plant is very common — that’s a place for waste heat integration. Makes a lot of sense where you can look at a longer time horizon. You have big sources of it.
But when you’re talking about the small, light, and medium duty manufacturer, and I think one of the core things is most manufacturing facilities have thermal loads below 10 megawatts. That’s where if you’re running bespoke engineering projects, it doesn’t scale down in cost to be able to do all the engineering hours necessary. It just becomes harder to return that.
In the paper that you’re referring to, where I did qualify my statement to “waste heat is mostly a waste of time,” I wanted to point out that what really matters is the incremental value of that waste heat. As you look at the payback period versus a resistive boiler of an air source heat pump that’s been standardized and using ambient air to be able to source heat. Our efficiency is necessarily lower than what a waste heat driven one would be.
David Roberts
Let me emphasize that quickly because that is the question I want you to answer. The disadvantage, as we say, of the waste heat capture is this bespoke engineering often for relatively small amounts of payback. But the heat you are thereby capturing is already relatively hot and thus the work you have to do to upheat it is lower. Your advantage with just the ambient air source heat pump is it’s real easy to find ambient air and it’s a standardized technology, but you’re starting with room temperature air and you have to heat the air up much more. I’d love to hear about that trade-off.
Addison Stark
Exactly. I think the core question then for an end user is by doing a waste heat capture project, does that incremental increase in CapEx get paid back fast enough by your incremental decrease in OpEx? What we have found is, relatively speaking, no. That’s because the sensitivity to the value of the energy in the waste heat is relatively low and the OpEx savings don’t hit the hurdle rates that most industrial customers would think of wanting to achieve — sub five-year payback periods for doing that. Ultimately, that’s the finding.
For us, it brings us back to the question of what is expected of a boiler in an industrial facility anyway. There are additional complexities introduced when you introduce a waste heat capture project — you create circular control dependencies within the facility and it can create other unanticipated challenges and more reasons for an end user to say “no.”
David Roberts
Isn’t one of the other points also that to do this kind of bespoke engineering requires shutting the process down for longer? It turns out those costs are a big chunk too.
Addison Stark
Lost revenue can be a big issue with any industrial facility upgrade. It’s something we’re highly sensitive to in making sure that we have a solution that can be integrated during scheduled downtimes or integrated in the same way that the commissioning of a new combustion boiler would be done. One of the things we were successful in doing in our pilot deployment last year is to be able to validate that we’re able to install and deploy with zero downtime of the facility.
Now, if you are going into a specific manufacturing train and capturing waste heat from a unit operation reactor itself, that oftentimes necessarily requires the integration of a new heat exchanger in the main fluid flow lines and increases the number of touch points into the manufacturing lines and increases the potential of multiple day downtimes, which is direct loss of revenue. That can be a big penalty against your overall return.
David Roberts
That’s the two that are common on the market now: electric resistive heaters, which are easy to buy and install but increase your OpEx generally too much, and waste heat capture-driven heat pumps, which have low fuel costs since you’re using captured heat, but high touch points and generally don’t pencil out.
This brings us to your third alternative, which is just an air source heat pump, which is very familiar to Volts listeners from the residential application that they are all very familiar with. Is this just a big air source heat pump? What is special about this that makes it useful specifically in industrial processes?
Addison Stark
That’s a great way to frame it. We took another approach too, and I think it’s just as worthwhile, based on the conversation we’ve had so far. We didn’t pre-select heat pump technology necessarily. What I looked at is we need to think about the most cost-effective way to replace the combustor inside of a boiler. The rest of the balance of plant of the boiler — having a pressure vessel, having a control that is integrated and controlled by the pressure of the steam header, that centralized distribution of steam throughout a manufacturing facility. That’s what manufacturers buy — a boiler. They’re not buying heat.
It was really thinking about what can cost-effectively provide both a minimized OpEx and a minimized CapEx solution. Or the way we think about it is minimizing the total cost of ownership of an electrified steam boiler over the planned 20-year life cycle. It turns out that a heat pump technology is necessary there. I think that’s why we’ve seen the industrial heat pump, while it still continues to be a nascent industry, 30 years in, is still something that, through what we believe productization, can enable a scaled and manufactured approach.
In order to replace a combustor and to be able to boil water and deliver it at pressures that are industrially relevant, it’s more than just what we see in our residential heat pump at home. I think in Celsius, so I’m going to use that here. Your heat pump at home, if you want to keep your indoor temperature, call it around 25 C room temperature. On average, your heat pump is probably reaching a peak temperature about 10, 15 degrees higher than that. Call it 40 Celsius is what your heat pump needs to be capable of delivering heat at. For industrial processes, it’s 100 degrees higher.
David Roberts
But also we should emphasize it’s the gap — the amount that a residential heat pump has to increase the temperature. If it’s bringing in air at 15 degrees and it has to put it out at 40 degrees, it has to raise the temperature of the air 25 degrees.
Addison Stark
We call that the lift.
David Roberts
Your unit has a much higher lift — same temperature of ambient air, but you have to raise the temperature of the air, as you say, by over 100 degrees. How do you do that?
Addison Stark
You’re exactly right. On the air side, design principle of what we do looks just like what’s done for air source heat pumps. There are ASHRAE standards that have been designed around projecting the annual average temperature, being able to plan for the low temperature in the winter and the high temperatures in the summer, and being able to have a system that can integrate through that. But it’s on the other side, the delivery of heat sufficient to be able to deliver 4 bar saturated steam or 153 Celsius, that requires more internal engineering than what you see in residential systems.
For us, that means a multi-stage heat pump solution. It means having refrigerants optimized for each of those stages, so different ones that are best suited for the certain temperature ranges we’re optimized in. Most importantly, it’s ultra high efficiency compressor technology, which is really our core differentiation as a company — we fully in-house designed our own compressor tech to be able to deliver this.
There are two reasons, and it’s not just about superpower. The first thing is to be able to achieve the lift — call it from the coldest day in the winter to steam temperatures. You need to be able to, if you want to maintain low OpEx cost, have very high efficiency of compression. In heat pump cycles, these are essentially your air conditioner in reverse. It’s a vapor compression cycle, meaning that you’re taking vapor, compressing it, and being able to run this thermodynamic cycle. In order to drive that compression stage, you need to use some sort of compressor technology.
David Roberts
I was going to ask about that. Can you explain to a technical dummy what the compressor is and what its function is in the air source heat pump and why you needed to build a super powered one?
Addison Stark
There are a lot of different kinds out there. You see compression in pistons and engines, screw and scroll in residential and large commercial applications, and then in automotive and other high-efficiency space applications, you see centrifugal compressors. That’s exactly where we’ve focused — the very high efficiency through high-speed rotating centrifugal machines. This enables us to deliver very high efficiencies, but also through our specific designs enables flexible operation.
Ultimately, we don’t want to look like what industrial heat pumps always have looked like. We want to look like a boiler. That means being able to offer turndown, being able to offer high fire, low fire settings, and being able to adapt to the outdoor temperature. One thing that is a different challenge for us than what home heat pumps have required is we need to operate on the hottest day of the year as well as the coldest day in the winter. Being able to go through multiple temperature regimes requires a lot of operational and controls flexibility in the system — someplace we’ve done a lot of focus to integrate.
David Roberts
Do you have a temperature range in which you are effective? Are there limits?
Addison Stark
For market, we’re able to operate from -10 to 40 Celsius. As we’re going to market with our next-gen product, we’re able to operate in an outdoor temperature range of negative 20 Celsius to 40 Celsius.
David Roberts
That pretty much covers everywhere.
Addison Stark
Yes.
David Roberts
Residential heat pump owners will be familiar with the fact that when the air is colder, because the heat pump has to lift the temperature more, the efficiency declines in cold weather. Listeners will be familiar with the term COP, the Coefficient of Performance, the efficiency rating for a heat pump. We know that residential heat pumps are kind of magic. They can get up to a COP of three or four or even five, which means they’re producing 500% more energy as heat than is going into them as electricity. Two questions: one, what is the COP of your machine in standard operating temperature range? How big is the penalty for cold weather?
Addison Stark
On the first question, our product’s long-term goal and our roadmap is to be able to offer something that is a COP 2. The best way to think about that is compared to a resistive boiler, we would be using half the electricity — one unit of electricity and two units of steam out. That’s for under certain assumptions around delivering 150 C from an ambient average year-round temperature of 15 Celsius, which is an ASHRAE standard for North America or for the continental US.
David Roberts
Can I ask why your COP is lower than a residential heat pump? Is it the size, the lift? Why is your COP a little lower than residential?
Addison Stark
It ultimately comes down to the lift. The COP scales as the source temperature divided by the lift. The lower the source temperature, the more the COP decreases; the higher the lift, the more it decreases by increasing the denominator. That ultimately dictates the theoretical maximum you can reach. Then it’s all about engineering to maximize that within constraints. One insight we’ve had is that while there is much concern around the challenge of cold temperatures for home heat pumps, we also operate in the summer. The very high temperature days make up for the decrease in COP in the cold parts of winter.
David Roberts
That’s boosting your yearly average basically.
Addison Stark
Exactly. There’s a lot of consideration about how we operate efficiently in cold temperatures. The core thing that manufacturing customers require is guaranteed uptime.
David Roberts
Before you leave COP behind, how low does the COP get in, say, negative 10, when it’s super cold? What’s the minimum COP?
Addison Stark
We generally see a fluctuation of our COP around our nominal design point of about plus or minus 20% depending on the time of year.
David Roberts
Let’s put aside for the moment OpEx — how much it costs to run the thing, the fuel costs, et cetera — just on a buying it off the shelf sticker price, the CapEx, how costly is your machine relative to a standard boiler?
Addison Stark
In industrial equipment there is generally no sticker price. There is a lot of consideration that goes into the landed CapEx — how much does this cost to install relative to other solutions. It is not best to think about that.
Once you look at a total landed solution, relative to a gas boiler or resistive boiler, we’re probably talking about a heat pump solution — like ours — or a waste heat solution. Just on the base equipment, it is going to be generally running around 3 to 5x increase relative to the traditional solution.
David Roberts
The idea here is you make it up on the OpEx, you make it up on savings over time.
Addison Stark
Make it up on OpEx and make it up on being able to have fuel flexibility integrated into a facility. Particularly if you have been running on gas traditionally and you have four or five boilers there, you replace one of them, you start to be able to do some fuel flexibility and create a hedge for the future and decrease your regulatory risk.
David Roberts
Since you bring it up, I wanted to ask about this. Another one of your competitors, or one of the other solutions in this space, uses the waste heat capture technique, but then just sells heat as a service to the facility. In other words, the company absorbs the CapEx and installation, etc. The idea is, “We’ll install this in your facility. When it is cheaper to run this than your existing boilers, we will run this and sell the heat to you. When it’s cheaper to use your gas boilers, you just switch over to the gas boilers.” That sort of heat as a service. What are your thoughts about that model?
Addison Stark
I think that there is a lot of opportunity for business model innovation. I agree that this is something that can work for certain sets of companies, particularly companies that have a history of operating in larger facilities and have bought steam across the fence from a cogen facility or something like that and have complex contracting mechanisms that they are used to.
I do see at the smaller and distributed application it is a little harder to envision for the brewery down the street or the laundry facility at the edge of town. These are not as sophisticated energy actors and they are used to buying and owning and operating their own asset in their own control loop, and adding an entity there can create some additional friction.
It’s not that we’re not going to consider that with the right ESCO or energy service company partners, but as a startup generally there are only one or two big risky bets you can take at a time. Doing a technology and product development plus a business model innovation was something that we didn’t see necessary for the boiler. We really wanted to make sure we were able to deliver a boiler in the traditional channels that people usually interact with.
David Roberts
This is a silly question, but just in terms of what it looks like, does it look like a boiler? Is it the same size? What does even a boiler look like? I’m groping in the dark here. Maybe you could describe what is the size and appearance of a normal boiler and does your machine look on the surface different than that? Is it a different size or shape or what are the physical qualities here?
Addison Stark
Sure. I think this speaks to a bigger point, David, which is a lot of us just don’t know what the heart of industrial manufacturing looks like.
David Roberts
Yes.
Addison Stark
Boilers generally look traditionally cylindrical. Usually the biggest thing that you see is it looks like a large oil drum-shaped thing. You have a combustor in there, but very thick walls for a pressure vessel. A lot of focus is on the heat exchanger where the flames contact on the other side of the wall, the water where it boils. This has all been highly packaged, very tight. It goes back to the traditional realization in most of energy that the power and energy density of a combustion-driven process can be very, very high. These things are really relatively compact.
Our form factor is different. We look a lot more like what is also an industrial equipment standard — the industrial chiller or refrigeration units. Think about delivering cold to a cold chain or delivering refrigeration to the freezer aisle in a grocery store. We have a large air-sourced heat exchanger. It looks just like anything you might see on the rooftop of a commercial building and then packaged directly with a more traditional packaging of what a refrigeration HVAC system looks like, coupled with one heat exchanger that is like the boiler itself.
Our form factor is a little larger than a traditional combustion boiler. We’ve made a lot of modular design considerations to be able to make our system ready to be deployed on a roof above the boiler room, or deployed outside and run in, or split into different subcomponents. We do see ultimately that it is just a different consideration than a traditional combustion boiler, but a lot more flexibility in how it’s deployed.
David Roberts
It’s possible at least that there are some places, really small operations, where there’s just a boiler tucked somewhere which you couldn’t just drop in just for sheer space considerations.
Addison Stark
Drop into the same location, but it could be dropped in on the roof above that boiler. That boiler could stay on site if it still has 5 years of lifetime left, keep it as N plus 1 redundancy, or be able to create these fuel flexibility opportunities for early adopter customers.
David Roberts
Just flat out, however industry thinks about price, total lifetime costs — you do say this in one of the documents you sent me, a pitch for this to the food and beverage business. You say flat out on a lifetime basis this is cheaper than a gas boiler. How confident are you in that? Is that true and is that true everywhere?
Addison Stark
It’s not true everywhere, but it’s true in an increasing number of geographies and particularly in the global market. When we think about what has occurred and what has shifted in global LNG markets recently, this has been and is now even more true in Europe, in East Asia, and all these other places.
Once you start to factor in other long-term considerations — if I’m a manufacturer right now and I need to replace a combustion boiler, a gas boiler, and I’m exposed to global-priced LNG, I’m going to be asking, “Does it make sense to invest in another 20-year asset here and put in some price assumptions out in the future years?”
That really means that the total cost of ownership of this thing could have some expensive implications, for example, if gas is just not available and then we have an asset that we can’t use anymore, makes it quite expensive.
David Roberts
But on the flip side, gas is super cheap in some parts of the US. In Texas, geopolitics would have to get real crazy for natural gas in Texas next to these fields to get expensive.
Addison Stark
Yes. There are some places where direct electrification is just not going to beat combustion without major policy shifts or focus on other regulatory forcing. Some of the things we see that are driving decision making in the US are not necessarily raw spark spread or total cost of ownership consideration, but other things — NOx limits, point air source considerations — that are going to start to get priced in in different ways.
You are correct. We’re in northern Colorado as a company and within one mile of our facility is oil pumps and gas infrastructure, and it’s a very cheap source for the US. When we think in the global perspective where most manufacturing expansion is not necessarily happening here in the US, they are building out steam systems in places where those considerations are different, the spark spread is different, and therefore TCO calculus is much more attractive for a low-cost electrified solution.
David Roberts
Just in terms of the business plan and your pitch to investors, how nervous are you or how much of a risk is it? How policy dependent are you? As you say, air quality regulations can be a boost to you, carbon regulations can be a boost. Being in Europe and having your natural gas supply controlled by competing lunatics is a huge incentive, obviously. Do you view policy dependence as a risk?
Addison Stark
Here’s how I’ve thought about it. For a long time, industrial heat electrification has been framed as a climate problem. Of course it is. What’s changed over the last few years is that electrification now stands on its own as an economic and risk management decision. In 2022, we learned a hard lesson with the invasion of Ukraine. Global gas markets are more fragile, I think, than anyone assumed before that. What we’re seeing right now is the fact that LNG markets are totally shown to be entirely a tight system with no slack.
When I think about what’s going to happen next, we see that there’s a structural change in supply in the global gas market, which is different than the US one. Prices are not going to clear the market if there’s a very cold winter next year. European governments are going to start to decide whether residential heating or grid stability comes first and then they’re going to curtail industrial manufacturing. That’s essentially a continuity risk.
When I think about what we do, we don’t think of ourselves predominantly as climate tech. We’ve always thought about the value proposition in electrification as electrification, period. We want to be able to focus on a cost-effective and resilient solution no matter which way policy swings. Focusing on resilience right now is a winning narrative. Focusing on something that allows for diversification of manufacturing source is going to be critical for manufacturers. The raw economic competitiveness in West Texas might be the last place that AtmosZero wins.
David Roberts
That’s the highest bar for you.
Addison Stark
There are a lot of places that are certainly — we’re seeing that demand is going to outstrip our capacity to scale up and deliver given these new market realities.
David Roberts
You think you got plenty of runway just with the current trends? Before we move on from the physical thing, I meant to ask this also. Which is louder, your boiler or a gas boiler? Because these compressors, as anyone who has a heat pump knows, it’s the compressors that make the noise. Some of these residential heat pumps are quite loud. There are some complaints about that. I’m just curious if noise has entered your calculations at all.
Addison Stark
This is a consideration, of course. We focus on being able to design for decibel levels necessary for permitting and siting in any industrial facility. We take guidelines from the consideration of how industrial chilling is done. The loudest thing you’ll hear would be the fans that move the air through. Essentially, we need to move a lot of air to source the heat. Those are sounds that are common in industrial cooling and other things that we fit into the normal industrial soundscape and have abilities to insulate and limit the amount of noise coming from things like the compressors themselves.
David Roberts
Let’s talk about where you are right now, or at least as of last year when all these articles about your company came out. You have one full-fledged customer — the New Belgium Brewery, beloved of beer lovers across the country. Also located in Colorado near you, the New Belgium Brewery bought one of your units and it is now producing one third of the steam for the brewery. Where else are you currently and what is the roadmap?
Addison Stark
We’ve done a pilot deployment with New Belgium. We think of that as our first commercial demonstration and we’ve been able to go in and validate operation in an industrial facility and did a tremendous amount of learnings along the way of how do we truly make sure we operate in the loop — be controlled by their facility, not have us controlling it on the side — and making sure that this is really a product integrated into a real environment.
The way that I like to think about it on top of things is we’ve gone from zero to one as a company, from concept to a real deployment in the field and are now prepared for that one to a thousand journey. How I think about that as somebody who’s been in and around hardware commercialization for most of my career is it doesn’t all happen overnight. We need to focus on that 1 to 10, 10 to 100, 100 to 1000 in stages. Each of those scale-up stages is a challenge for hardware manufacturing.
What we’re focused on right now is structuring the commercial partners necessary to be able to move into volume. What we’ve done recently is started to focus on going to market the way the boilers have always gone to market. That’s through boiler reps, it’s through regional service and boiler companies.
For example, earlier this year we partnered with R.F. MacDonald, which is the largest boiler rep in the California market. We have deep working experience with their customers and understand a very complex market in California where regulation is driving in different ways. Similarly, for broader global channel entry is how we’re focused on this.
David Roberts
Do you find that the brokers are genuinely tech agnostic? Generally, you get tangled up in business models when you’re in those roles and you get financial relationships with certain companies. Are they genuinely agnostic?
Addison Stark
Different reps operate differently. One thing we certainly see is there’s an appetite in the boiler market right now for a cost-effective electrified solution. Many players in the market, and a lot of credit to our friends at R.F. MacDonald as first movers here, recognize that the writing is on the wall — needing to be able to offer an electrified solution to stay relevant in certain markets.
I think there’s an existential challenge for manufacturers in California right now. Given the need to move towards zero-emission point source means they need a cost-effective electrified solution. Otherwise, it might just make more sense to move the food processing across the border into Nevada. There’s a lot of these things that are driving sophisticated market players — like the reps in these certain markets — recognizing that electrification is necessary for them to stay relevant too.
David Roberts
What’s your manufacturing situation like? Presumably you have some sort of cap on how much you can crank out at the moment. Are you cranking out your max? Do you have your eye on building factories?
Addison Stark
We’ve established manufacturing here in Loveland, Colorado, which is about an hour north of Denver. We are currently about at capacity on what we are able to build and ship. However, we have the opportunity where we are to continue to expand our footprint and invest in our manufacturing capacity here. It goes back to how I framed it out before, which is we are focused on that 1 to 10 scale-up this year. Being able to get to that ability to ship 10 units.
David Roberts
Is Colorado helping you? Colorado is a very climate-forward, progressive — I assume they’re happy to have you. Are you getting help from the Colorado government?
Addison Stark
We chose Colorado at the very beginning and a lot of it has to do with my co-founder, who is a professor at CSU. He is somebody who I funded when I was at ARPA-E a long time ago on a different project. I saw his capability and his lab to be able to start and move quickly made a lot of sense. It was a little bit of a homecoming for me to a university where kids come here and their first car was a tractor. They learned to weld when they were 10. The ability to really draw from the trades in a rural community was great. The state of Colorado is an incredible place to build hardware.
We have also found that the governor’s office and the Department of Energy here, the Colorado Energy Office, are very interested in being able to be long-term partners of companies that are building here. Not just to build here and ship here, but to build and deploy here. There are different ways that we’re working with them to identify opportunities to help Colorado manufacturers as well. It’s a good home for innovation in industrial hardware.
David Roberts
Interesting. You’re working on that one to 10 right now. That’s the stage you’re on. You’re in a first round of customers.
Addison Stark
That’s exactly right. Being able to iterate continued learning in different environments to make sure that we continue to focus on a spec that is maximally applicable in the same way that combustion boilers always have been. Making sure that we’re learning the right lessons as we deploy these next waves and then focusing on continuing to step up in volume until we ultimately hit where the long-term goal is of having a ubiquitous product in the same way that you wouldn’t buy a combustion boiler today.
David Roberts
A question about that. As you say, part of the philosophy here is modularization. Anybody these days who wants their product to get cheaper is pushing in some way or another for that, trying to make it modular, factory-built.
On the technology itself, just on a purely technological basis, are there particular areas you are focusing on for development? Can the compressor get better? Does the heat exchanger get better? A lot of heat pump technology is pretty well developed already. I’m curious where you see room for technological improvement.
Addison Stark
When we think about technological improvement, it’s always in service of how can we make this look more like a combustion boiler — as in how does it operate more and more in the same way. The core areas that we focus on therefore are, number one, expanding the temperature range that we can deliver. Continuing to walk up past 200 Celsius is an important thing to be able to cover more types of facilities.
David Roberts
Is that mostly the compressor, or other pieces there?
Addison Stark
It’s the compressor. There are some other system-level considerations of how to expand the temperature that’s delivered based on what the refrigerants can capably do. We have a few things we’re working on there. The core thing there is what we focus on to be able to increase temperature range helps to expand meaningfully, drop-in applicability.
The other item, and I think is one of those things that we’ve gotten a lot of insight from customers recently during our focus on what does it mean to be able to drop in and replace in a lot of different applications, is turndown — the ability to turn this thing down to 30% of output.
David Roberts
Let’s grapple with this because this is a technical concept, but it’s really at the core of your value proposition. As I understand it, the basic issue here is that these manufacturing processes are not like a data center where you’re just max power all day long, same level — they go up and down, they vary up and down. You need a boiler — a boiler is capable of turning down. Thus the term turndown, as the process turns down, basically can move up and down quickly. Heat pumps, I think, traditionally have struggled with that. Talk a little bit about why turndown is important and how you’re doing it.
Addison Stark
Traditionally, industrial heat pumps have struggled with this for a couple of reasons. Number one is you don’t have enough capability within the system to enable turndown or to ramp to different levels. A lot of that is ultimately defined by the fact that you are dependent on waste heat. You have a minimum that you can go down to. Otherwise what can occur is you decrease taking that waste heat from that process you’ve plugged into. Your waste heat heat pump is serving as a cooling load for a process that, if you stop cooling that process, it could be really detrimental to your process.
David Roberts
The waste heat will just build up then if you’re not using it?
Addison Stark
That’s exactly right. You are forced into a steady state operation. We have recognized that with our ability to be decoupled from the system, we can focus on offering this as a key differentiation of our heat pump boiler technology. By focusing on this, when you look and spec out a combustion boiler, you often find that solutions are available in a high fire, low fire scenario, meaning that you can be giving 100% out or 70% out or maybe 50% out or whatever.
Similarly, we’re focused on being able to do that because if you’re in a manufacturing facility, the boiler room is like the grid where you have a mix of baseload boiler, you have some load following, and then you have some peakers. When you look at actual operational profiles in boiler rooms, you can’t just assume you’re going to be able to fully deliver it all in a steady state operation. Being able to ramp up and ramp down is better than turning on and turning off just for operational efficiency and for overall durability of systems. That’s a core thing that we’ve developed and we’re offering in the market right now.
David Roberts
As I understand it, traditional heat pumps can turn down to 70% and you can turn all the way down to 30%. Is that roughly — but 30% is your floor. What I’m trying to get at is, is it possible to eliminate natural gas boilers and fully electrify a facility with these things or is there some minimum that you can’t fully sweep up?
Addison Stark
When I think about the boiler room, there are a couple of different places that my mind goes to. Number one is I don’t think we’ll see in the near term a lot of full boiler room electrifications just because there is also the ability to have fuel switching to gas as a strong economic incentive for a lot of manufacturers. If you’re doing some cost-effective electrification plus some gas, you can avoid peak pricing. There is a lot of opportunity there. That points to hybrid deployments continuing to be an important thing whether you’re using natural gas or if you’re using RNG, or if you’re looking at a full electrified solution where you’re using a heat pump plus some sort of a resistive or E boiler where you’re willing to take that efficiency hit, use a resistive solution to be able to deliver those very, very short transient peaks that are necessary sometimes. That is a way where you can imagine hybrid deployments being done to do that.
The other opportunity is the integration of storage. At AtmosZero, me, as somebody who has thought about industrial heat for a long time, I do see heat pumps and thermal storage being very part and parcel in how there are going to be hybrid solutions deployed in the long term. We do think of these as complementary, particularly at larger scale applications. There are a lot of different ways we can think about squaring that circle. I do think it really has to do with hybridization with gas, hybridization with resistive, and integration of storage allows that last 30% of turndown to be solved.
David Roberts
But full electrification in theory is possible. Technologically you could do it if you were willing to spend the money now, with a combination of heat pumps and electric resistance boilers.
Addison Stark
Yes.
David Roberts
But the use of natural gas, just for optionality, is probably going to save most people money for a while. Do you think hybrid is going to be the standard for a while?
Addison Stark
I believe that’s correct, yes.
David Roberts
Forward looking. What is your biggest fear here? What is your biggest challenge? I guess it’s silly to ask that to a hardware company because hardware just is a challenge. But specifically, what is it you are most nervous about going forward?
Addison Stark
You’re right. Hardware is hard and there are a lot of different ways that there are going to be challenges at every stage of scale-up. What we see right now in the market is this fundamental shift in the global gas market. I don’t think it’s been fully internalized across manufacturers around the world, but as they do internalize it, my core challenge in my head right now is how do we scale fast enough? How do we deal with making sure that we’re delivering something truly reliable, dependable, operates as close to the boilers that a customer would expect to receive if they had put in an order for another combustion boiler? Being able to do that in a timeframe that’s relevant to this problem.
I think it is one of those things that a lot of electrification companies, or particularly industrial heat companies, should be thinking about right now. I think the ability to scale quickly to solve this is certainly keeping me up at night. It is definitely a good problem, but it is a hard problem.
David Roberts
I saw you got investment from Mitsubishi recently. That seems like a nice validation. I’m sure that’s helpful.
Addison Stark
Validation is nice, but it is the global reach of a major OEM player who we really see has a pulse on the industrial equipment market, understands what we are doing, and is aligned with our long-term productization vision. It is something we are really excited about and glad to be working with them for sure.
David Roberts
The flip side then, what is your greatest hope? Could you envision a time when you can confidently go anywhere in the country and say this is cheaper on a lifetime basis, or do you think it’s not necessary to get there? Is that your goal? Is that your dream? What’s your dream?
Addison Stark
Certainly, and to reframe your question slightly, I don’t see being able to go anywhere in the continental US and directly compete with natural gas anytime soon on electrification. That is very hard to do. The US is an anomaly.
David Roberts
Yes.
Addison Stark
What I think about is the world has an acute need right now that needs to be solved and has fundamentally global economics tied to natural gas. The marginal price is currently being set by the Strait of Hormuz being closed and the Qatari LNG export being bombed. I know that for the next few years most places we go in the world are going to see an economic opportunity in electrification. I think from a broader climate and electrification long-term arc that this is going to be a really formative and important next five years.
David Roberts
It’s hard to envision global natural gas markets getting calm and stable in the next 10 years. We’ve shown anything can happen, but it doesn’t seem like that’s how things are going.
Addison Stark
What I’m really seeing is that in the next couple of years industrial electrification is going to be moving from the chief sustainability officer to the chief supply chain officer. This is a core question shifting from “How much carbon can we save?” to “Will my plant be allowed to run?”
I think that’s where we get to solve both problems at once. We must solve them because one is existential to the corporate decision-making structure.
David Roberts
Well said. Thank you, Addison Stark, for coming on, walking us through this. Super fascinating stuff.
Addison Stark
I had a great time. 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.
Most people think that coordinating the behavior of thousands of distributed energy resources requires some kind of third-party middleman, like an aggregator managing a VPP. My guest today, veteran research scientist Bruce Nordman, believes there’s a better way: dynamic, time- and location-specific retail prices, communicated directly to consumer devices, which would cut out the middleman and leave more value with customers.
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David Roberts
Hello everyone, this is Volts for May 8, 2026: “The case for using prices rather than VPPs to coordinate distributed energy.” I’m your host, David Roberts.
The electricity grid has more and more participants. There are increasing numbers of small distributed energy resources (DERs) — solar panels, home batteries, EVs, EV chargers, hot water heaters, commercial and residential HVAC systems, and on and on — that need to be coordinated to work as efficiently as possible for the good of the grid as a whole.
But how should they be coordinated? One answer, which I have discussed many times here on Volts, is what are called virtual power plants, or VPPs. This involves a single aggregator, usually but not always a private party, contracting with dozens, hundreds, or thousands of distributed energy device owners, agreeing to control and coordinate their devices’ behavior, monetize the flexibility, and share the value with them.
My guest today, Bruce Nordman, spent nearly four decades as a research scientist at Lawrence Berkeley National Laboratory working at the intersection of network technology and energy systems, and he thinks VPPs are the wrong answer. Not because they don’t work — they do — but because the gap they’re exploiting, between the real-time locational value of electricity and the flat, time-invariant rates actually charged to customers, shouldn’t exist. If retail electricity prices actually reflected real-time value, there would be nothing to arbitrage — the flexibility value currently being split with aggregators would just stay with customers, captured automatically by their own devices, without any private third party reaching into their home to do it.
The technologies needed to do this — basically, a central price server to send the price signal and devices capable of responding to it — have become cost-effective on a mass scale in recent years, and there are limited experiments underway in some places. In this conversation, Nordman and I dig into it pretty deeply. Okay, very deeply. This is an intensely wonky discussion, more technical than most of what happens on Volts, and a pretty punishing two hours, but if you’re a real head and you want to understand how to actually get the most out of DERs, I think it’s worth it.
With no further ado, Bruce Nordman, welcome to Volts. Thank you so much for coming.
Bruce Nordman
Thank you.
David Roberts
This is a lot, Bruce, and I’ve been thinking about how to ease into it. Where I want to start is at the big abstract level. When you first approached me with this, you said, “Hey, let’s use prices instead of VPPs.” I had in mind, “Oh, you’re going to design some novel tariff for PJM or something.” Something like that. But this is much bigger than that. This is a ground-up new vision for how electricity works. It’s a bit more to get into.
Part of the big vision here is similar to Jonas, who we talked to a couple of weeks ago — Jonas Bergerson — in that this is about transitioning the electricity industry from the old unitary model to a networked system. That is what I talked with Jonas about. This is, I think, an excellent adjunct to that or your sequel, or I do not know exactly what you would call it, but you are involved in, broadly speaking, the same project.
You write that the telephone system and the electricity grid were invented at roughly the same time, roughly the same place. They are interesting analogs to track. As listeners know at this point — we covered it a little bit on the Jonas pod — the telephone system has now entirely been transformed into the Internet. This involved, as I said, going from a unitary system to what’s called a networked system.
The electricity grid notably has not. One of the things I want to talk about starting up front is some of the aspects of what it means to go from a unitary to a networked system. Then we can look at how the Internet did it and how the electricity grid has not done it. You have this chart here of qualities of a unitary system and qualities of a network system. A lot of this I think people understand intuitively.
You’re going from a centralized system to a distributed system. You’re going from a largely analog system to a largely distributed digital system. But here’s one that I want to look at because I think it’s important for understanding the electricity grid and why it’s such a problem. One of the things that the telephone system did is go from tightly coupled systems to loosely coupled.
Briefly, and keep in mind briefly because we have a lot of territory to cover, talk about what it means for systems to be tightly coupled or loosely coupled and maybe tell us how the Internet is loosely coupled and then contrast that to tightly coupled systems in the utility grid.
Bruce Nordman
On the telephone system, when I was a child, if I picked up the phone and called my grandmother, a circuit was set up and there was a continuous flow of data at a constant data rate between the two ends of the system over one specific circuit. Even if no one was talking, it was there.
One thing which enables things to be loosely coupled is storage. On the Internet, you can connect links of different communication technologies that run at different speeds because you can store and forward packets, which accounts for the fact that things are running on different technologies and different speeds. For communications, storage changed everything. Data storage was just as essential as digital communications for being able to move to Internet technology.
David Roberts
One of the themes here — and I might as well just put an exclamation point on it now — is normal people, even people who think about electricity, I don’t think anybody has fully absorbed what a big deal it is to go from a system with no storage to a system with storage. It just fundamentally changes the architectural possibilities. It’s more fundamental than people appreciate. Give me an example of a tightly coupled system.
Bruce Nordman
The old phone system was tightly coupled, where everything was interconnected. The old electricity grid was where every customer site was just part of the grid. It didn’t have any functional identity. It couldn’t operate separately. The grid ended at every end-use device.
David Roberts
For every customer to be part of one big pool, that means if I pull on anything in the customer site, it affects everything, because everything is part of the same system. Everybody’s coupled together. Loosely coupled means that you get some distinction — functional distinction — between these systems such that they can operate somewhat in isolation without affecting one another. Is that fair?
Bruce Nordman
Absolutely. Part of this is the AC frequency of 60 Hz, as we use, is part of what enforces this in that things are all very interconnected and all the load affects the frequency.
David Roberts
One advantage of having loosely coupled systems, as opposed to a tightly coupled system, is if you pull on one string, you affect everything. You can’t fiddle with the machine without fiddling with the whole thing. But if you have loosely coupled systems, you can innovate and change and evolve the systems separately and independently.
Bruce Nordman
Exactly.
David Roberts
That enables much faster evolution and expansion and scope. The one underneath that on the list, I think, is similar and related: entangled technologies versus isolated technologies. Similar sort of concept, correct?
Bruce Nordman
Exactly. This is where the Internet technology example is highly informative, where the architecture of the system does this isolating of complexity so that, as you say, systems can evolve separately. Ideally, the technology inside a customer’s site can evolve separately from the technology on the grid and you can minimize the point of interaction between them.
David Roberts
The reason I think that the telephone system was able to make this leap — one of the reasons you point out — is that we were able to build the new system alongside the old system. For a while we had the two systems going, and then we eased our way from the one to the other.
Bruce Nordman
Originally, Internet communications went over phone lines, as with dial-up modems, and then we flipped it so that with Voice over IP, the phone calls went over the Internet lines. There’s a similar transition from where we are to where we want to be.
David Roberts
What I’m trying to get at here is one of the reasons that the electricity system has not been able to make this similar transition is that you can’t really do what you did with the telephones. You cannot build the new system alongside the old system. It is all one big system and you can’t — what’s the analogy? — rebuilding the plane in flight type of thing — that just makes it trickier.
Bruce Nordman
I would push back on that. This gets back to some of the earlier points you made about the podcast with Jonas, about his approach to networking electricity and mine. On the Internet there is the wide area network and there is the local area network. The local area network is what is inside of each customer site, whether it is your house or an office building or a factory. Then you have the modem and router at that boundary. The wide area network is everything else. There are technologies that only exist inside of LANs, and there is technology that only exists inside of the wide area network. Then of course there are things like the Internet protocol and some other ones that exist in both.
David Roberts
We talk about entangled technologies versus isolated technologies. That’s a great example — the WAN and the LAN. You can fiddle with WAN technology, wide area networks, you can fiddle with local area technology, and you don’t implicate the one and the other. You can work on them separately, which enables rapid innovation. As a final thing, transitioning from the unitary to the networked system — and this is, I think, both the most important one and the most difficult for people to wrap their heads around — is going from a deterministic system to a non-deterministic system.
What’s funny is the reason the telephone people didn’t invent the Internet is that they were running a deterministic system and they were convinced that only a deterministic system could work. They could not imagine how a non-deterministic system could do the communications work that telephones did. Of course, they were wrong. People came along, did it, and they faded into history like dinosaurs.
Now we’re in an electricity — the exact same parallel situation, which is right now the people running it are running a deterministic system and they are convinced that only a deterministic system can work and they cannot imagine how a non-deterministic system could work. Just tell us what is a deterministic system and what is a non-deterministic system.
Bruce Nordman
A deterministic system is where you plan out everything in advance and then you operate according to your plan. Airplanes used to do that. They used to file flight plans with the FAA. They said exactly the route they were going to fly and they had to adhere to that unless they got permission to fly differently so that the FAA always knew what they were going to do. Then maybe a decade ago, I don’t remember exactly when, the FAA said, “Other than these military areas where you’re supposed to stay out of, fly wherever you want.” We just transitioned from a deterministic system to a non-deterministic one. It still works.
David Roberts
You can imagine if you ran the old airplane system, why that notion would freak you out. If you are used to working with deterministic systems, the idea that all the planes are going to run themselves their own direction and you’re just going to coordinate on the fly sounds crazy. Yet it works.
Bruce Nordman
Railroads conventionally are quite deterministic, particularly before — where you plan out where the trains are going to be so that they don’t run into each other. That’s certainly quite important. Car traffic is non-deterministic. When you start driving someplace, you don’t tell somebody in advance exactly the route and timing that you’re going to take. You make it up on the fly by observing the traffic, maybe seeing what Google Maps says and such.
David Roberts
To our point here, the communication system, the Internet, has become non-deterministic. As you said, on the telephone system, if I pick up a line, connect to another person, that is a particular physical circuit that the data is traveling to and from. That’s not how the Internet works. I don’t think people necessarily know this. I think this is worth describing briefly. If you send a packet of information out onto the Internet, it is not the same — there’s not a set path that that packet goes along to its destination. What happens and how do we make it work?
Bruce Nordman
Packets for the same chunk of data, whether it’s an email or some streaming video — different packets in that, and there’s going to be an enormous number of these packets — are going to take different paths and arrive at different times and they are reassembled at the end. If any of them don’t arrive, there are ways to retransmit them with TCP to make the whole system work.
To your point about the phone company being blind to this, multiple people went to Bell Labs in the 1950s and said, “Hey, there’s this new thing called packet switching. We think it’s the future of communications.” The smart engineers said, “Yeah, we know that cannot possibly work.” There are people who say it is impossible for a utility to charge a good retail price. Of course, they are wrong also. It is possible for utilities to charge good and better retail prices. They just choose not to.
To your point about deterministic, the wholesale system for electricity has always been deterministic and my guess is always will be because that is how wholesale markets work. But retail electricity has never been deterministic. People are trying to force it to be through things like VPPs, but that is not necessary in general for balancing supply and demand. Deterministic operation is necessary for addressing distribution system capacity issues, which is its own separate topic that I assume will come up later, but that operates at a totally different scale of a few customers at a time versus millions of customers at a time. The two mechanisms operate in parallel.
David Roberts
The idea here is we’re going to go to a non-deterministic electricity system. People get nervous about that because if you don’t get an email, it’s one thing, but power, home and hearth, your medical machines, whatever — electricity is very important. It’s worth emphasizing that despite rubbing our intuitions the wrong way, I’m not sure our brains are naturally wired to think non-deterministically, but we have found through experience that a massive non-deterministic system can in aggregate be as reliable or more reliable than a deterministic system and can scale much faster.
This is all by way of preface. This is all by way of saying that what you’re working on, what you’re thinking about, similarly to what Jonas is thinking about, similarly to what you and other electricity researchers have been beating your heads on for decades now, which is trying to take this unitary deterministic system, transition it to a massively coordinated networked system and thus reap all the benefits in the electricity system that we got by the similar transition from telephone to Internet, airlines, all these other examples. This is all part of that big transition.
Your basic fundamental point and the reason we’re doing this podcast and the core thing here is that your contention, your hypothesis, is that if you’re going to move from a top-down to a networked system, you can’t have top-down coordination anymore. How do you get coordination? How do you make sure all these loosely coupled systems are operating in concert to produce the desired results? How do you coordinate all this stuff? Your contention is that prices are the only mechanism that can do that at every scale and in every context.
Bruce Nordman
Exactly. I’ve been looking for the last 20 years for other mechanisms. I’ve never found another mechanism that can do that at any scale, in any context.
David Roberts
Before we jump into what that means and how you envision it working, I just want to go over what you see as a few of the highest, high-level benefits of doing this. Why would we want to do this? Why is it worth hashing through how it works and hashing through the trouble? What is the point of the trouble? The main thing, which we just mentioned, is that you think it is context- and scale-agnostic — price can work for a distribution grid, can work for a microgrid, can work for an individual building, can work for a nanogrid inside the building. At every level of organization, the coordination is being done by pricing.
Bruce Nordman
Exactly. One important point here is that I’m a buildings person. I’ve worked on energy use in buildings for the last four decades. I am not a utility grid person, so I try to resist telling people how the utility grid should operate internally. But I also like utility grid people to not tell buildings people how buildings should operate internally because that is not their area of expertise.
David Roberts
I appreciate that. Most of the Volts guests are very grid-centric, but your take is, “I got this covered here in my building, don’t mess with me, just give me my power, tell me the price.” You’re not asking much of the grid. The grid needs to tell you what the price is and supply you power. All the other work, all the flexibility work, all the coordination work is done on the consumer side. This is a very consumer-centric, distributed, building-centric view.
Bruce Nordman
I use the word customer to make clear that this is applicable to all customer types, whether you are residential, commercial, industrial, or agricultural.
David Roberts
Another merit of pricing — and this to me is the most compelling reason to use prices for this coordination — is that it allows the customer to accrue all the benefits and the value of flexibility. If you get a VPP in there, an aggregator in there, the aggregator takes a cut — around 50%. Yes, but if the devices are simply acting flexibly on their own in response to price signals, all of that flexibility value stays with the customer. The customer gets all of it.
Bruce Nordman
Exactly.
David Roberts
When people hear pricing, they think, “Oh, capitalism,” they think exploitation, they think poor people are going to get screwed. Pricing brings up all that stuff. It should be emphasized this is a very customer-centric view here. This is a view of the grid where customers get the value, reap the most value. Customers are in the driver’s seat in this vision and are getting a higher proportion of the value than they would in any other system.
Bruce Nordman
Exactly. Yes. This is designed around what’s best for customers and customer devices, in devices that exist today and will even more so in the future. It’s designing the relationship between the grid and the customer around what is best for the customer, but also works for the grid. Remember, we invented the grid to serve customers. We didn’t invent customers to serve the grid. I think a lot of grid people don’t quite understand that the customer is supposed to be always right.
David Roberts
The third benefit of pricing that I want to throw out there is — and I think people are not going to be able to really understand this until we talk a little bit about the model and how it works — this vision of pricing maximizes customer privacy and autonomy and cybersecurity because, and we’ll get into the details, under your model, the customer is not sharing any information with the grid above it. Again, we’ll talk through how that works. The point is, in this model, customer privacy is total. What goes on on the customer site is not known by anyone but the customer, and it is not the business of anyone but the customer.
That is as privacy-maximizing as you could get. There is no grid and third parties can do some work — we will talk about that later — but there does not need to be any third party looking into your customer site. Your devices are doing the work themselves and they are doing it based on your preferences and nobody else needs to know or mess with that.
Bruce Nordman
Yes, but the grid does continue to know what happens at the meter and they should have smart meter readings at whatever time interval, whether it is 15 minutes or five minutes that the grid decides to measure at. The grid absolutely needs to and should have that meter data and needs it to function effectively. But that is the limit of what they need to know. They think they need to know more, but they are wrong.
David Roberts
Just to clarify, you said this before, but just to clarify for everybody, so they know, we’re talking about retail prices here. For the moment, we’re leaving the wholesale system, the wholesale energy market, the transmission system, aside. We’re talking about retail systems coordinating distribution grids.
Let’s talk about the model. The core concept here with your model is that the grid ends at the meter, meaning what goes on on the consumer side of the meter is nobody’s business. The grid consults the meter and two bits of information are exchanged. One, what’s the price? Two, how much energy do you need? That is all the grid knows about a particular customer. How much energy do they need? They don’t know what devices are in there. They don’t know what the devices are doing. The customer is a black box to the grid.
Bruce Nordman
Yes. My physics colleagues at Lawrence Berkeley Lab, where I was until recently, assured me that the electrons are all the same.
David Roberts
This is crucial. The grid extends to the meter and the meter tells the grid, “At this customer site we need X amount of power.” That is all that the grid knows about what goes on on the customer site. The utility is not poking its nose in and controlling your water heater. All the grid knows about it is how much energy it needs.
Bruce Nordman
It’s how much energy you consumed in the last time interval. It’s after the fact, not before the fact.
David Roberts
But it’s a quantity. This is the information being exchanged — quantity, nothing beyond that. Let’s talk about what you have to have in place to make this work. To make any of it work, you need what you call a highly dynamic price. There have been a lot of — people who discuss this a lot are familiar with time-varying prices and real-time prices. A lot of other terms for this. You use the term highly dynamic price. What are the characteristics of a highly dynamic price?
Bruce Nordman
Its essence is hourly prices that are different every day. Specifically, it is prices that have intervals between hourly and five minutes that bracket the range of what is reasonable. You set those prices no farther in advance than the day before, and the prices are different every day.
David Roberts
Let me ask a couple of questions about this. You draw the line at hourly or smaller. Do you get more benefits the smaller that increment is? Or do you think hourly is frequent enough to do the job?
Bruce Nordman
The important reason to start with hourly is that that is very comfortable for people to move into this. The barrier here is not technology for this. We have invented all the technology we need, all the communication protocols, the price responsive algorithms. The barrier here is the human beings who are fearful of using prices, even though they use prices everywhere else in their life constantly.
David Roberts
You make a point of saying that the prices are different every day. You mean that they need to be responsive to conditions every day.
Bruce Nordman
Exactly. The conditions on the grid are different every day. If the prices are not different every day, they are the wrong prices. It is a basic function of any business to set the right price for their product. If they are not competent to do that, they need to let someone else who is competent to run a business run the business.
David Roberts
One other thing is that import and export prices are separate. Explain what that means.
Bruce Nordman
I have solar panels and I have net metering, and I pay almost nothing for electricity, even though I derive huge value from the grid because I overgenerate a huge amount in the summer because there is no air conditioning where I live, and I import lots of electricity in the winter. I derive huge benefit from being connected to the grid, but I pay almost nothing. Other people’s bills are higher because I am not paying enough.
David Roberts
This is the cost shift that everybody’s always talking about.
Bruce Nordman
I don’t have an opinion on what the difference should be between import and export prices, but the principle that they can be different and probably should be different is a very reasonable tool for grid operators to have in their set of tools. It’s something that devices can readily accommodate and use, so that’s not a problem. Having a stream of import prices and, if different, a stream of export prices — if you are an exporting customer — that should be 100% of the financial complexity that devices need to contemplate for deciding how to optimize.
We should not have demand charges, which I would describe as evil. They are pathological to good load optimization and to buildings. They were invented in the 19th century. We have far better tools to address the same issue that demand charges are intended to address. We should just get rid of them. They became obsolete a long time ago.
David Roberts
How geographically granular do you envision highly dynamic pricing being? Is this just a price for a utility area or is it going to get as geographically differentiated as it is temporally differentiated?
Bruce Nordman
From the perspective of any individual customer, they don’t care whether it’s millions of people who pay the same price or dozens. It doesn’t affect the customer technology, the communications, or the automation as to how locational it is. That’s really for the grid operators to decide.
David Roberts
But you need to know that to set a good price. The whole point is that the price is a measure of the value of electricity. The value of electricity changes from time to time and place to place and can change place to place, even relatively proximate places. Theoretically, the value of electricity could be slightly different between two even relatively close places. Getting the geographic scale right seems important to accurately capturing value.
Bruce Nordman
It’s similar to the time interval where there are diminishing returns to getting to smaller, smaller areas and there are diminishing issues about how to treat people equitably. In California, we are planning to have locational prices hopefully as soon as next year. In fact, there are some pilot tariffs from the largest, and soon the second largest, utility in the state that have locational prices today that are hourly and the size of the locations is several hundred thousand people.
David Roberts
Interesting.
Bruce Nordman
These are areas where the distribution system load shape is different and the reasons for wanting to shift load are different in those different locations.
David Roberts
Highly dynamic prices: if you want customer sites to optimize based on highly dynamic prices, you have to transmit the highly dynamic prices to the customer sites. Briefly tell us what a price server is, what role it plays, and why it is necessary.
Bruce Nordman
A price server is like a web server. A web server distributes web pages to computers to show to people. A price server distributes prices to machines to use in their optimization. People are free to look at prices, but we don’t want to encourage them to do so because they have much better things to do with their time and they wouldn’t be good at using them. Maybe three days a year they’ll want to look at the prices, and the other 362 they won’t. They don’t need to.
David Roberts
Let me just blow that out because we need to make this point generally. All of this, all of it, is meant to be automated. The customer is not going to know or care what the hourly variations in prices are. They’re not going to be fiddling with their devices on a day-to-day basis telling their devices what to do. All of this is meant to be automated and happening in the background and you as the customer can just chill out and take your hot showers and drink your cold beers. I think that’s implied, but just to underscore it.
Bruce Nordman
Exactly. People express preferences in advance as to how they want their devices to behave, and they can change those preferences anytime they want to.
David Roberts
To return to the original point, the point of a price server is just that you ping it and it tells you the price.
Bruce Nordman
Or really, it pushes out the data to machines on an ongoing basis. It’s technically even simpler than the machine having to ping it when there’s a new price.
David Roberts
This is the very simple point of this: if you’re going to have dynamic prices, you need to tell people. You need to broadcast those prices, which might seem obvious, but it’s hard to get information out of utilities a lot of times. Who has a price server? Is there one of these running somewhere?
Bruce Nordman
Yes, the state of California set one up several years ago called MIDAS and PG&E, my utility, has one. It uses the OpenADR3 protocol. Southern California Edison, the second largest utility, is going to use the same price server. The state will convert theirs to be using that protocol. The concept of a price server dates back to at least 2006, 20 years ago. It is not a new idea because people recognized early on if you are going to have prices to devices, you have to have a way to communicate them.
The price server is the essential part. Then you need communication protocols to move the price from points A to points B, C, and D over both the wide area network and also inside buildings. Then you need the loads, whether they are loads or batteries or EV chargers, whatever they are, that can use the prices. Those are the three elements.
David Roberts
There has relatively recently been developed what’s called OpenADR3, which is a modern, light, replicable, perfectly functional protocol. We know what a price server is. We have a protocol to communicate these things and we know how to create devices that are responsive to them. As you say in your paper, there’s not yet a place in the world, correct me if I’m wrong, where those three pieces are in place and working together.
Bruce Nordman
In California with Pacific Gas and Electric, we do have that. There is a problem with the tariff structure, which is a huge problem that’s not worth our time in this podcast, that makes it problematic. We have the beginnings of it, but we haven’t, for various reasons, had the ability to scale it yet. We have the glimmers of it. California is poised to be the place where this will first happen.
Practically speaking, you’re correct. In some places, we have the price servers but don’t have really good prices yet. Once you have them, manufacturers will spring up and use them because they can deliver more value to their customers and produce a higher quality product.
David Roberts
Here then we get to, in my mind, the really juicy, interesting stuff. This is what I struggled with and this is what I had a little breakthrough about. Let’s talk about the building side. As we say, the only interface in your system between the grid and the building is just this single point of connection, and the only information being exchanged is quantity and price.
Here you are inside your building, your microgrid controller, your central controller of your building devices, which I guess is like a panel or — I don’t know what the central controller looks like. I imagine it will be different for different buildings. Your central controller receives the grid price. This is what’s interesting to me. The value of electricity for that microgrid controller, for that particular building, might be different than the grid controller price. Why is that? What are the considerations at the building level that would mean the value of electricity differs from the grid price? You call this the value of electricity at the building level — you call this the local price, which could be different than the grid price. What are those considerations that would make the value of electricity different for a building than what it says on the tin at the grid level?
Bruce Nordman
New solar customers in California for the last three or four years may be buying electricity at 50 cents, but if they want to sell it to the grid, they’re getting 8 cents. What price should the water heater be getting to decide whether it should be heating water for the next hour or not? If you’re currently importing, presumably you should be getting 50 cents. If you’re currently exporting, if it turned on, it would be consuming 8-cent electricity. It should be getting that signal so that you consume your low-cost electricity instead of higher-cost electricity.
An asymmetric tariff where the import and export are different is the most obvious and widespread reason to have a different local price. I used local as in local area network as in IT, because we want to emulate IT principles and terminology as appropriate as much as possible.
David Roberts
Whether you’re currently importing or exporting will change the local value of electricity. This is where you could import any values that you want. I as a customer might place a very high premium on avoiding greenhouse gases. I can tell my local microgrid controller to adjust the grid price by X amount to reflect that. The value of the electricity inside my building is slightly different than the grid price.
Bruce Nordman
Exactly. That’s the second reason that can create a local price — taking into account the climate pollution from the greenhouse gases. You simply take that GHG signal, multiply by the dollar per ton value that you, as the customer, believe is appropriate, add that to the retail price because climate change is real, and then have your devices optimize to that price. It doesn’t change what you pay on your bill, but it changes how your devices shift their load.
David Roberts
This is key. The point of determining the local value of electricity is not that anyone’s paying anybody anything inside the building, it’s just to put a value on the electricity. The whole point is to channel power to its highest value spot application within the building and work down from there. The microgrid controller, your building controller, gets a price from the grid and then translates that grid price into a local price. It takes the grid price as an input and then adds whatever local considerations there are and comes up with the local price, and then it sends that local price down to these little individual nanogrids that I was talking about before that are in your building.
This is the fun bit to me. That little nanogrid controller takes the local price that it got from the microgrid controller and does the same thing. It says, based on my hyperlocal considerations — you might have a nanogrid that’s an EV charger, whatever, or in a washing machine. That nanogrid controller will, based on its hyperlocal considerations, come up with another local price, an even more local price, a hyperlocal price. That price will be used to coordinate the behavior of the devices on that particular individual circuit.
This is what I want to emphasize — this cascade that’s happening. The price server is sending a price to a building, a building then recalculates to a local price, sends that down to a nanogrid, which then recalculates that to an even more local price. What your grid controllers are doing — your microgrid controllers, your nanogrid controllers — are assessing the value of electricity at that particular time, literally that particular time and place, and coordinating the devices accordingly. This answers the question — when I threw this out on Bluesky, a lot of people were saying, “How can prices — the price is the same everywhere in the building, so how could that possibly coordinate all these different devices?”
The answer is that the price is not the same throughout the building. In fact, the value of electricity might not, but might, differ from nanogrid to nanogrid. The reason it unlocks something for me is that I was getting hung up on the word price. I just think the word value, at least for my purposes, for my brain, value captures this better. You’re trying to compute what is the real-time, geographic-specific value of electricity at this particular spot. That calculation is happening everywhere, at every level.
At every level, from the very bottom, the most specific device itself, right up to the nanogrid to the microgrid to the larger microgrid, the value of power is being calculated at every point in that microgrid and power is being channeled to the highest value uses. I want to get people thinking about value rather than price, because the whole point of this is to make sure that the power itself goes to the highest value uses.
Bruce Nordman
Price is just the unit of measurement by which we measure value. It’s dollars per kilowatt hour. That’s what you use for any of these, so long as you’re in a country that uses dollars. It’s always that same unit that you’re using, no matter what the scale is. My house, where I already have several price-responsive devices, I don’t yet have a local price because I have net metering and I haven’t set it up to take into account the greenhouse gas. Most customers will start out with this using the straight import retail price. That’s fine, that’s the starting point. The communications and automation technologies facilitate this more rich utilization of it trivially. That’s just part of how it works. You get all that for free.
David Roberts
One thing I think is important to point out here is that your building is calculating the value of electricity to you individually, your considerations, your local considerations, and acting accordingly. That is something that a VPP can’t do. A VPP is going to round up a bunch of devices or a bunch of houses and treat them as a class, as all the same. A VPP can’t by its nature calculate what is optimal for each individual customer. Only prices can do that for you.
Bruce Nordman
Correct. The VPP doesn’t have access to the correct information to make the right decision. But also the VPP is acting first for its own interests, second for the interests of their customer — which is the utility grid — and only thirdly for the actual electricity customer. With price responsiveness, 100% of the value, as you mentioned, goes to the customer and 100% of the control is with the customer and the customer devices. Customers may choose to have a third party optimize, say, their thermostat, and that could be the product manufacturer, it could be someone else, it could be a nonprofit, it could be the electricity retailer, and that’s fine.
They might even pay a small subscription fee for that service. But the customer is always in control. The optimization is 100% for the value of the customer because the customer is engaging that third party for the customer’s benefit. The key is that if we only had VPPs as an option, I would be an enormous fan because they deliver important value.
There are some things that VPPs do that price is not the right tool for and should not be used. For example, emergency load reduction. If a power plant or transmission line fails and the grid needs an immediate, within one to two second drop in load. That is a great use of VPPs, and that is not something you would do with pricing. There are other things around the edge that are great uses of VPP. It is not that we should not use them, we should use the right tool for the job. Part of the right tool is the most cost-effective tool.
David Roberts
Here we come to a key question, which is: the grid comes to my meter, tells me a price. My building microgrid controller takes that price as an input and computes the local price and then optimizes my devices on my site, on my consumer site accordingly. What does it pay? How does it negotiate? If the price is different, if the local prices or local value is different than the grid value, what happens between the grid and the meter? There is presumably some negotiation.
Bruce Nordman
The grid only sees the meter readings and the price that the grid announces and then computes the bill. That is the only involvement of the grid for balancing supply and demand. There is the related topic of capacity. Putting that aside, there is no negotiation. All of this local price stuff is completely invisible to the grid.
David Roberts
The customer side is computing based on the local value of electricity. To me at this moment, here is how much I need and here is how much I am willing to buy at this price.
Bruce Nordman
The optimization could be in the central controller or in the individual device, and most buildings will use both of those or in the cloud.
David Roberts
This is something I wanted to ask: do you need the central controller? If the devices are smart, couldn’t they just do the work? Is it necessary that you have a central controller?
Bruce Nordman
It’s not. If the retail import price is all you need, then you can just send that price directly to devices and they can use them. You do not need it, you will want it over time. The transition from having no infrastructure to infrastructure devices is a common one. With cable TV, originally the cable went directly into the back of the TV and then we moved to have set-top boxes — infrastructure devices that decoupled between the two domains. With dial-up modems, your computer was directly connected to the Internet.
Now we connect to our local area network through some switches and routers to the modem and then that connects to the wide area network. Creating infrastructures is natural, but to your point, you don’t have to have one to start using it, as long as you’re just optimizing to the direct retail price, which with better prices is going to be much better than what occurs today. We can do this transition incrementally and organically. It doesn’t have to be an all-at-once thing.
David Roberts
Say I’m in a neighborhood. By nature, my neighbors will be experiencing the same climate as me, the same temperature. They will probably be roughly comparable to me socioeconomically. Our price comes to our neighborhood and then all the devices, all these customer sites take in that price and then act on it. Presumably they’re all going to be making roughly similar calculations and they’re going to all act roughly the same way.
Say, for instance, a cheap electricity price comes down one hour and then every EV charger in the neighborhood is like, “Hey, cheap electricity, let’s charge our EVs.” They all go start charging EVs, you get a massive surge and you overwhelm your neighborhood transformer. In other words, how can a single price that’s going to a neighborhood cause individuals in that neighborhood to act differently? It seems like they’re going to act as a school of fish and that’s going to cause all kinds of capacity problems.
Bruce Nordman
Several things are going on here. One is that if you have a precipitous change in price, you’re likely to get a precipitous change in demand. Many utilities around the US and around the world see this with TOU timer spikes where, to your point, EV chargers are all set to start charging at midnight. You create this problem not only locally, but also for the macro grid.
The answer is don’t have a precipitous change in price. If you have these more fine-grained hourly or half-hourly prices, then you can have the price change slowly, not dramatically. Even within the EV chargers, different cars will need to charge for different amounts of time and need to be complete at different times of the day.
David Roberts
But will they though? They’re probably all going to work in the morning and they’re probably most of them coming home in the evening. Their behavior is going to be roughly similar.
Bruce Nordman
Maybe one needs to charge for two hours, one for three, one for five, another for three, so that if there’s a trough of low price times, then the utility needs to just set the size and shape of that trough to result in the load shape which is best for the grid. Prices should be set based on the result that they produce for the grid, not based on the state of grid infrastructure.
Utility people commonly assume that you must set retail prices based on cost causation, which is wrong. They don’t know that it’s wrong, but it’s wrong. Prices should be set to produce the right result. That’s what airlines do. They don’t charge prices based on the state of the infrastructure, their airplanes and their staff. They set it based on past experience with how customers buy tickets, by geography and calendar, et cetera, and then set prices to maximize the most benefit for them. Utilities should set prices for all of their considerations — for generation costs, for transmission issues, distribution issues, environmental goals, et cetera — produce the best load shape, both in aggregate and also by these locational areas. That will have a loose relation to things like wholesale energy costs, but will not have a tight relation.
David Roberts
I’m not sure everybody’s going to understand the distinction here. The two separate questions here are how to distribute power and then what happens if particular circuits are overloaded. In other words, the capacity of the circuit to handle. A price signal goes to the devices. Devices act a certain way, they overload the circuit. What tools do you have to keep capacity in safe boundaries? If you charge an EV, it is a large power draw rapidly, a big burst of draw in a way that a stove or an air conditioner or whatever is not going to be.
Especially if you have a DC fast charger with multiple stalls. If three EVs hook up all at once, all of a sudden you get a ginormous demand out of nowhere almost instantly.
Bruce Nordman
Or if you have a pole-mounted transformer with 10 houses, six of them have EV chargers and maybe one of them has two, you can easily get the same thing. For my house on an annual basis, ignoring my PV panels, it uses about a kilowatt on average over the course of the year. The highest single hour was a little over 4 kW for everything before I got an EV. An EV charger can be 7 or even 9 kW all by itself.
David Roberts
Wild. Running your EV charger more than doubles the previously high point of your instantaneous load.
Bruce Nordman
For the highest single hour and it could be like eight times the typical. That’s incredibly bursty.
David Roberts
Which makes it a new kind of thing on the grid. This is also worth emphasizing. It’s not that we have a lot of experience dealing with giant bursty loads. There haven’t been a ton of them.
Bruce Nordman
The first place that this capacity issue showed up was in Australia, which — to a recent podcast of yours on rooftop PV — there, a number of years ago, had an increasing number of circuits where on certain days in the afternoon when solar production was at its peak, the transformers and wires were approaching their capacity. They said, “Okay, nobody else on this circuit gets to install PV, forever, unless we spend lots of money increasing the capacity of the system.”
David Roberts
Or they can curtail. Now they are writing that into the contract that they can curtail your individual solar in these circumstances.
Bruce Nordman
Rather than saying no one else can install solar, when in fact most of the time there is extra capacity — it is only a few hours of the year — what they started doing was broadcasting out interval power limits to each customer, not to how much the PV can produce, but to how much the customer site as a whole can export. This is called dynamic operating envelopes. Then they can fairly allocate the capacity to each customer and it is different for each customer, different every day, to make maximum use of the capacity that is there and guarantee that the system will not be overloaded. That is an incredibly powerful mechanism.
David Roberts
An individual customer site is told, “Here’s how much you can export this hour.”
Bruce Nordman
Correct.
David Roberts
If its solar is running, it might take this and say, “Okay, well then instead of exporting all the solar, I’m going to put it in my battery.” That’s the kind of calculation that’s going on on the consumer side in response to this.
Bruce Nordman
Correct. Anything that you might have been in danger of having to curtail, you instead put into a battery, you run the air conditioner, you heat some water, whatever it is, and we want people to shift loads those times anyway. This mechanism just reinforces what is good for the customer and good for the grid as well. There is no financial aspect to this. It is purely a requirement for operating to make sure that we keep the system safe.
Doing this kind of digital capacity management is not new. USB, which has now been around for more than a third of a century, from day one, has had capacity management. You plug a device into the USB port in your computer, it can’t just take power, it has to first request capacity. There’s a negotiation about the capacity. This is fundamentally different from the pricing, where the communication is one direction. For the capacity management, when you get to things like EVs, there does need to be some negotiation so that the grid can allocate through some dynamic mechanism capacity. Devices are able to reserve capacity when they need it and plan for it and guarantee that the system will not exceed it.
The details of that mechanism are still being determined. People have different theories and we need to do more experimentation on that. Pacific Gas and Electric and Southern California Edison in California are doing experiments with some mechanisms. They are more band-aid rather than permanent ones. The protocol you mentioned, OpenADR3, has two mechanisms for it.
This is an area that needs much more attention, but it can be done in coordination with the customer site as a whole, rather than trying to micromanage individual devices. What happens at the meter is the only thing that affects the grid, it simplifies things so much. If that is the point of interaction rather than trying to work around the meter because you do not have the right arrangement of the meter.
David Roberts
The take home here is you’ve got two separate mechanisms — pricing mechanisms and capacity mechanisms. According to you, once you’ve got those two, you’re mostly done. You need to send out price signals and then you need to send out capacity envelopes that people need to stay inside. With those two bits of information — what is the price and what is the hour, what is the capacity envelope for the hour — that’s all the information customer sites need to do their optimization and to do collective optimization.
Bruce Nordman
Correct. Yes.
David Roberts
This capacity will also be a relatively local thing too. Generally these capacity issues come up on individual transformers or —
Bruce Nordman
It could be the first transformer in front of a house, for example, or it could be a substation or the wire in between. It could occur at different points in the distribution system depending on the details of it. That’s all inside the grid where the constraint is — it doesn’t matter to the customer. The customer only needs to know what’s the mechanism for coordinating with the grid so that things work out the best possible for everybody, which is to use all the capacity that’s there and guarantee that it’s not exceeded.
David Roberts
Here you have — and this I think is what comes up with a lot of people when they first hear this — a system that’s based almost entirely on price. Price — how much does it cost, who can pay? When people hear that, their mind goes immediately to, “What about people who can’t pay? How is this not rapacious capitalism, et cetera, et cetera?” There’s a question of if price and capacity are your two mechanisms and your only two mechanisms, how do you ensure other kinds of social or political goals or guidelines? How do you layer other stuff in?
Bruce Nordman
I care as much about this as anyone else does. When I started thinking about this, I started thinking about it in the context of off-grid systems in developing countries and how to make that work. That’s how I originally came to be using price. Simply changing the price does not increase system costs. In fact, changing the price is a way to reduce system costs and therefore reduce bills. That has to be clear in people’s minds — dynamic pricing is about achieving lower bills. It’s not about achieving higher bills.
In California, what we are doing for the near term and what we should do forever is that you charge an hourly price and you calculate the bill according to that and according to some TOU price. If you would have paid less under the TOU, you pay that to make sure that the people who today are more expensive to serve than others continue to pay the TOU and the people who are less expensive to serve and then also can do additional load shifting, pay the hourly. Over time more and more people will just be doing the hourly and fewer and fewer will be on this TOU backstop. That is easy to understand and easy to implement.
David Roberts
How do you protect low-income ratepayers?
Bruce Nordman
They continue to pay the TOU if they are more expensive to serve. Many low-income people today are less expensive to serve and are paying more than they should because they’re consuming more at the low-price times. Others are the reverse. It’s not that low-income people are some monolith. The current system is not fair. We have to recognize that. Current tariffs are not fair. Absolutely. If we want to make things fair, we can move in that direction and move to it in a way which protects anybody who has non-optimal load shapes. We can help them change their load shapes through acquiring devices, controls, or new appliances as we’ve done with energy efficiency for decades.
David Roberts
Is there any functional distinction between an individual customer site, a building, say, that is its own small microgrid, and a larger microgrid in which that building is a part? To the larger grid, the microgrid is the black box, correct?
Bruce Nordman
That’s absolutely true. This community is essentially a single large customer from the perspective of the utility.
David Roberts
That’s what I’m trying to get at. Theoretically, a whole community could be, from the grid’s point of view, a single customer if they were all on the same microgrid.
Bruce Nordman
Correct.
David Roberts
They could calculate their local price based on their local values.
Bruce Nordman
But that’s the retail price for that community. That would be at best a locational retail price. It’s still not a local price inside of a single customer site. They’re similar, I can see that, but you still have a utility-customer relationship between the community and the final customer. That’s not a problem. That’s just not the same as inside of a customer site.
David Roberts
The whole question is: how do you allocate your power to your highest value? How do you allocate power? The way you want to allocate power is you want to put it where it’s most valuable first and work down from there. To do that, you need to calculate what is the value. The key insight here is that the value from the grid perspective is going to be slightly different than the value from the building perspective. Value is being calculated all the way down, such that when you get to the device level, the actual device optimization is working on extremely local, very specific value information. You are optimizing for value at every level.
Bruce Nordman
Correct.
David Roberts
That, I think, is the point here.
Bruce Nordman
The water heater doesn’t have to know where the price came from or why. It only cares about what the price is. The grid could go down. Your house continues to operate as a microgrid because you have a battery and the price may change. The water heater re-optimizes. You may have a higher price or a lower price, depending on what is going on. The water heater doesn’t care about why, it just cares what the price is. All of this topological complexity in no way affects how devices operate.
David Roberts
Let’s return briefly to the point about non-deterministic systems, because I think now that we have described how this works, how price is being used as a coordination and optimization mechanism down to the device level. In what sense is this system non-deterministic?
Bruce Nordman
Retail customers have always been non-deterministic in their consumption of electricity, with a few niche exceptions. In general, you don’t promise in advance to your utility grid how much electricity you’re going to consume each hour for the next month or the next year. You just consume whenever you want to. That’s always been the case about how electricity works. I’m not changing that at all. We can either charge bad prices or we can charge good prices.
What’s a good price? A good price is a price which results in a better overall situation for the grid, the entity setting the prices — that’s their job, to set the price which produces the best result for them. In the past, the price was just a revenue generation mechanism. That’s all it was. In the present and future, the price is also a control mechanism to shift load. What you need to do to set retail prices in this context is go through two separate calculations.
One calculation occurs today, which is the revenue requirement of the utility. How much revenue do they need to collect at the end of the day, month, or year. This doesn’t change that one bit, except that we will lead to needing less revenue because the system can be more efficient. Secondly, you go through a calculation of what’s the shape of the prices — 24 hourly prices or 48 half-hour prices. The grid, based on past experience, determines what shape for this locality will produce the best result for the grid. Then shift that shape up or down so they collect the right amount of revenue. Those two things happen in parallel so that you meet both objectives: collect the right amount of revenue and charge the right shape so that the right load shifting happens.
In general, the water heater, because you are only shifting load, you are never shedding load with your water heater, only cares about the difference in prices, it does not care about the absolute price. These two things work seamlessly together to shape load and to collect revenue.
David Roberts
I come back again to how this is going to produce a more efficient system. I think one of the advantages of this is that it makes flexibility not something that you try to add on top of the system or that you try to tweak the system afterwards. Flexibility will just be part of normal electricity consumption. In this, the flexibility is part of the operation of the system, not some separate thing.
Bruce Nordman
Precisely. Historically what we do is we sold electricity at the wrong price. Utilities got results that they didn’t like for whatever reasons — too high a generation cost, transmission or distribution issues. Then we created these complicated, expensive mechanisms like VPPs to account for the fact that we charge at the wrong price. Those are expensive bandages on the system or like digital paint on the old analog system. What this is, if you charge the right price to begin with, then you get the result you wanted. You don’t need the band-aid, you don’t have a wound that you need to address because you’re not creating the wound by charging the wrong price.
In other contexts we just charge the right price. Airlines charge the right price. They don’t sell their tickets at a flat price and then have third parties go in and try to convince people to change their flight times to even out the supply and demand of airplane seats. They just charge the right price to begin with.
David Roberts
This is the analogy that finally occurred to me. I was thinking about how to explain this to normal people. This is the analogy that I think works: imagine if airlines sold all seats on all flights for the same flat price. They would get terrible results from that. Some flights would be massively oversubscribed, some undersubscribed. Imagine a third party came along, rounded up all the ticket holders and said, “Hey, the airline’s getting terrible results. There’s some value to the airline of you being flexible. Can you move your flight, individual customers? Can you move your flight?” Then that third party rounded up all the customers, took their flexibility, and sold it to the airlines. That is the VPP model.
Bruce Nordman
Exactly. It’s complicated and it’s expensive.
David Roberts
What you are saying is just don’t charge that dumb flat price in the first place. If you charge prices that reflect temporal and geographic value, you will get the results you want and then you won’t have to do this ad hoc flexibility stuff afterward. Is that fair? The airline analogy — you think that works?
Bruce Nordman
Yeah. The key difference in the last few years is that we now have all of the technologies at very low cost, often free, to make the automatic control highly practical. We have the communication protocol — we had communication protocols for pricing for the last 20 years, but they were old and cumbersome and difficult to deal with. Now we have modern, simple ones. We have pervasive Internet connectivity so that devices can get the prices. We have extremely low-cost computation on integrated circuits. The integrated circuits that go into appliances cost four or five dollars.
David Roberts
This is worth emphasizing. This is all cheap, often free. The benefit of all these electronic developments over the last 30 years is this is all just basic circuits and communication stuff that is trivially cheap. It’s not some big, fancy, complicated stuff we’re talking about. Your water heater just needs to ping the Internet, and that is a solved problem.
Bruce Nordman
And ping your local price server in your central building device to get the price.
David Roberts
Who is then pinging the central price server.
Bruce Nordman
The reason many appliances have Wi-Fi on them today — when you think, “Does my dishwasher need to have Wi-Fi?” — no, it doesn’t, but the microprocessors have Wi-Fi and Bluetooth on the chip whether they are used or not. It is literally free for them to include it. You can’t get much less expensive than free. I will soon have three price-responsive devices today covering my space heat, water heat, and EV charging. Also, my phone optimized it to a GHG, all of it through free software upgrades from the manufacturer for devices that were not grid responsive when I bought them.
David Roberts
No kidding. You bought non-grid responsive appliances and they just had the chips in them that were capable of Wi-Fi communication. Because they included them trivially regardless, a software update from the manufacturer then turned on its ability to communicate with the web.
Bruce Nordman
I should be more specific here. My space heat and hot water come from a heat pump which the heat pump can’t communicate with. But I have a clever controller commercial product. When I bought it, it optimized to time-of-use prices in the manufacturer’s cloud. I then got the free software update where it optimizes to hourly prices in the controller in my house and it receives those prices that were OpenADR3. That was a free software update. The EV charger, when I got it, optimizes to TOU prices in the cloud and they are working on integrating with the PG&E price server to be able to use the hourly prices and optimize in their cloud to it. That PG&E price server uses OpenADR3.
David Roberts
Really most of what you are talking about in this system is software tweaks. There is just not a lot of hardware, certainly not expensive hardware, involved in any of this. Most of this is software, correct?
Bruce Nordman
For any new product or any product that you can get an over-the-air software update, an increasing number, this is pretty trivial. There is this long transition time where lots of people have old water heaters. Maybe it’s an electric resistance water heater. There are commercial products today that will control them and are Internet connected and could readily operate to an hourly price just as well as to the TOU price they’re operating to now.
David Roberts
There’s no barrier to making literally any appliance price responsive. Even if it’s dumb and old, you can get a controller to attach to it to make it —
Bruce Nordman
Well, a dumb device generally only works if you can depower it. For a resistance water heater you can just shut off the power to shift its load. I’m sure there are some devices where that’s not a workable option. Some devices will need replacement. Many devices can have these external controls which do cost something. Doing anything costs something. To have something be part of a VPP, it has to be able to communicate and that’s all you need for the price response. You don’t need anything more for price response than you need for VPPs, you just avoid a whole lot of cost and complexity.
David Roberts
Let’s talk about how to get from here to there, which is part of what’s broken my brain about all this. This is a very wholesale change in the way the electricity system works. Just to review, what we need to make this work is a central price server, a protocol that helps communicate, and price-responsive devices. We have price-responsive devices. That’s a solved technical problem. We have the protocol. That’s a solved technical problem. We know how to make a price server. That’s technologically trivial. Technologically speaking, this is all good to go.
It’s not technology development that is the barrier here. Is the road in this direction — does it start with utilities changing how they charge prices? Just with utilities implementing more dynamic prices? Is that step one here?
Bruce Nordman
That’s step one. It could be either a unitary utility acting on its own, or it could be a utility forced by a regulator, such as in Illinois where the legislature passed a law saying they must offer hourly prices different every day, and they’ve had it for 10 years.
David Roberts
Oh really? Illinois has highly dynamic prices of the type you are talking about.
Bruce Nordman
Yes, but the variation over the course of the day isn’t very much. Your opportunity to save is limited. It’s there, but it’s not that great. They have only very limited automation. They don’t have a price server in the way that we’re talking about. Having the prices is a prerequisite for everything else, the prices and the price server, because it’s not that difficult for manufacturers to put in the ability to be price responsive. In general, they are reluctant to spend time doing so until they have a critical mass of customers who could actually use them.
I’ve had this conversation with many manufacturers over many years and they say, “I’m not going to innovate into a vacuum. I need to have a business case. I need to have the customers and the customers need to be able to pay the prices.” Everything comes down to the prices. It’s not a chicken-and-egg thing. The prices have to come first.
David Roberts
Yeah, but skate to where the puck is going. Everything is going to talk to the Internet eventually. Just go ahead and do it.
Bruce Nordman
Then we also need to get global consensus on the maximum complexity of the tariffs as it affects device optimization. Just to be clear, you can have fixed charges which do not affect device optimization. But the parts of the tariff that affect how devices optimize to reduce bills the most need to be limited to the stream of import prices and stream of export prices. People need to recognize that needs to become the global standard so that a manufacturer in China, shipping products all over the world, can ship products that will work all over the world because everything works the same way.
David Roberts
I see. You want to standardize price format to make this replicable and interoperable across different utilities, different countries —
Bruce Nordman
Everywhere! We’ve done this with IT technology. It’s not that we haven’t done this globally before. We just need to get a critical mass of organizations that operate according to these principles and that other people will see the merit of it and then be consistent with it. The question is how do we get to that initial critical mass? If you take the principles that things should be simple and universal, you’re 80% of the way towards having the right answer. Some utilities will think they’re special and different. You and I know they are special and they aren’t different in this respect.
How you calculate the price can be different everywhere because that doesn’t change the communication. This is like web browsing where you have the web server, HTML, and web browsers, and HTML defines the maximum complexity of the web page. This price structure defines the maximum complexity of how prices should be done on a retail basis.
David Roberts
Got it. It’s a high priority for you to keep this simple, to keep the pricing differentiation as simple as possible.
Bruce Nordman
Exactly.
David Roberts
Import price, export price, but it is going to change hour to hour. It’s not simple in that respect. It’s changing temporally all the time.
Bruce Nordman
It can be a day. The vast majority of people who pay such prices, there are day-ahead prices and that is absolutely the place to start. Once people have the automation, they will realize that you could shift from day-ahead to day-of prices. The communication, the automation do not change and that is going to result in a slightly lower bill. This will happen later on, but we just have to know that the devices do not care if it is day-ahead or day-of.
The key thing here is that we don’t want to put digital paint onto our 19th-century electricity technology. We need electricity technology initially just inside of buildings and then later into the utility grid — which is digitally native and networked — instead of using network technology to manage our 19th-century systems.
David Roberts
This is a very big set of ideas and topics, a very big idea. Do you have a next thing that you are pushing for? You said we can step toward these incrementally. What’s next on your personal list that you would like to see happen moving in this direction?
Bruce Nordman
Aside from every electricity retailer offering hourly prices that are different every day or something that is beyond flexibility?
David Roberts
That’s a big step, Bruce. Much more practically, earthbound — is there a particular utility you’re trying to get a pilot thing started with? Very practically, what needs to happen?
Bruce Nordman
PG&E offers hourly prices different every day to any customer type today and has for more than a year. Southern California Edison is supposed to soon and the state of California’s Energy Commission policy is that every Californian should have access to such prices in less than a year. I don’t think we will make that deadline, but we are trying to get there.
David Roberts
That’s the price server that you’re talking about. Making them available to everyone is just about setting up the price.
Bruce Nordman
It’s about offering the prices and having the price server to communicate them. In some places they have the prices but they don’t have the price server.
David Roberts
Let’s stipulate in our fantasies, two years from now, California has the dynamic prices, has the server. Then what is left to do for Californians, individual consumers, is just to buy the price-responsive devices. Everything will be in place except for the consumers.
Bruce Nordman
In many cases people will get devices that can get software updates to do it or they can acquire a central controller that can do it. When they replace a product, they will replace it with one that does this. Any cloud-connected device can certainly do this and just optimize in the cloud. There are lots of paths for many existing devices to become price responsive very quickly and then it will take time for most of the devices to turn over and get replaced.
David Roberts
Long story short, California is moving in this direction and there is reason to believe that in some amount of time, two years, five years, this is how the California electricity system is going to work.
Bruce Nordman
Yes. We also plan to still have VPPs and use them both. The balance of it should be determined by the market and the need. There’s always going to be some — we will make good use of VPPs for the foreseeable future because we won’t turn everything over instantly, there’ll be just a shift in the balance over time. There are some limited services that VPPs are better at. It’s not that they don’t have a role, it’ll just be changing.
I was thinking the other day that it’s like hybrid cars. Hybrid cars are sort of like VPPs in that they’re kind of a band-aid solution. Hybrid cars are actually growing, as I understand it, even as electric vehicles are also growing. Over time, eventually the EVs will grow and start taking up and the hybrids will decline over time. That’s, I think, a very good way to think about it.
David Roberts
The point I’m trying to make here, and what I want listeners to take away, is that this is not just Bruce’s elaborate fantasy that he’s concocted. This is a thing that’s happening in the world. There are systems moving in this direction, and this is something that could happen within our lifetimes. We could see a system working.
Bruce Nordman
Millions of people in at least 20 countries pay such prices today, unfortunately most without the right automation. The automation is easy to set up. The barriers are all in people’s heads and institutional. They are not technological.
David Roberts
Maybe this is a hard question to answer, but among the nerds who think about stuff like this, the class of nerds in the world who are beavering away investigating electrical systems and thinking about how to reform them, is there a broad consensus behind this basic vision or is it a battle? Is it a debate? Are you an outlier? Are you a minority? What’s the state of opinion in Electricity World about this? Are a lot of people captured by this and want to move this way, or do you feel like you’re fighting the tide?
Bruce Nordman
I feel like I’m fighting the tide, but there are lots of reasons to be optimistic, at least in the long term. More and more places are offering more dynamic prices. The automation of their use — people haven’t figured out that that’s an essential part of this. The desire for privacy and autonomy certainly is only growing. The desire for lower bills is growing. Both of those are facilitated by this.
One problem here is that there’s no group of companies that are making lots of money off of this, that are a trade association lobbying for this, because the customer saves the money. There’s not these companies pulling money out. That’s part of why this is so good. With VPPs you’ve got tons of venture capital, so they can have big PR budgets and get lots of attention to this, whereas there’s no industry behind this for pricing because it’s all about saving money rather than about extracting money from people.
David Roberts
Yes, it is a value shift in the direction of customers and as a cynic, you would expect that not to be hugely popular among the entities who were previously receiving that value. What you really need is consumer groups to get behind this. This gets back to what I was saying earlier — consumer advocates, when they hear “let’s just throw everybody out on the mercy of the market and use nothing but prices,” have negative connotations around that. There is a lot of communications work to be done with the consumer field about this, about why it is consumer friendly.
Bruce Nordman
We’re already at the mercy of the market. We’re already paying all of the revenue requirement for utilities. All this does is reduce how much revenue they need. In a way it’s a path towards lower bills — it’s not a path towards higher bills. That’s the key.
David Roberts
I know that, you know that. But I don’t think ordinary people when they hear pricing necessarily think consumer first. Which is just to say that there’s a lot of translation and communication work to be done here to help people understand why this is a consumer-friendly reform and not rapacious capitalism or whatever.
Bruce Nordman
Internet technology developed from researchers and academics and government labs. It wasn’t in the market where it all developed because it had business backing until it reached scale and then people figured out that they could have businesses around it, but the development wasn’t driven by those business interests. That’s the problem here — we don’t have business interests driving the development of this, even though once it exists people will realize there is lots of opportunity to change existing products or introduce new products.
David Roberts
Obviously, we’ve barely scratched the surface. People can go to your website, got all kinds of papers digging into this further, all the ins and outs. One thing I just leave listeners with is, and this I think is a good provocative question you ask, which is: if not prices, then what? As you say, VPPs are good, but customer sites are going to get very complicated and trying to micromanage 10,000, 50,000 customer sites from a central location is just going to get impractical quickly. We need a coordination and optimization mechanism that can operate locally, that can operate at different scales, that can operate off grid or on grid, et cetera. If not pricing, then what is that going to be?
Bruce Nordman
Exactly. I’ve looked for 20 years and I’ve never found a second mechanism. Let’s suppose that the utility sees their transformers getting overloaded and wants to turn down my EV charger, but I really want to charge my EV and I’ve got a stationary battery I could discharge. They shouldn’t turn down my EV. They should just say, “You can’t import as much power,” in which case I’ll just discharge it from the battery and keep charging my EV. All the decisions need to be made locally because the information to make the right decision is local. The customer’s preferences and economic impacts all occur locally.
David Roberts
The customer is in control here, in the driver’s seat here, getting all the value of flexibility, in control of the preferences, in control of the operation of their devices. One thing I like about this vision is that you have solved the privacy problems at a stroke here and the enshittification problem too. I think this is going to avoid that too, because the utilities are not capturing you, the VPPs are not capturing you. You are running your own stuff.
Bruce Nordman
Because it’s platforms that enshittify, it’s not technologies. You’re not required to be part of any platform. With this, it’s only about technology.
David Roberts
I’ll leave it there. Good Lord. Thank you to any listener who’s still with us. Thank you, Bruce, for walking us through this again. People can go to brucenordman.com and learn a lot more about all this. Thanks, Bruce.
Bruce Nordman
Thank you so much. I would love to hear from other people who have questions or want to help out with this.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Some of you might have noticed that the latest podcast went out at 7pm last night rather than 9am this morning, as is customary. That was our mistake. But! The good news is that the mistake was made in the process of verifying that Substack has finally implemented a change that we (and you) have been requesting for years.
Paid subscribers have frequently, and reasonably, asked me why they have to listen to me nagging at them to become paid subscribers in the middle of every episode. They are already paid subscribers!
I’m very happy to say that, as of today, paid subscribers will have access to a nag-free version of the podcast. Zero interruptions. (It will also be free of any ads or sponsorships that we may be grudgingly forced to take in the name of making this ramshackle affair sturdy enough to fund my dotage.)
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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.
(PDF transcript)
(Active 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.
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.
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.
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